CHAPTER-1

INDUSTRIAL RELATIONS: CONCEPT, SCOPE,

APPROACHES, INDUSTRIAL RELATIONS SYSTEM
Definition of Industrial Relations:

Broadly, the term industrial relations is used to denote the collective relationships
between management and the workers. The two terms, labour-management relations
and employer-employee relations are synonymously used.

Bethel and associates defined Industrial relations is that part of management which is
concerned with the manpower of the enterprise.

By J. Henry Richardson industrial relations is an art, the art of living together for
purposes of production.

H.A. Clegg emphasized the regulation and institutionalization of industrial relations

when he observed: The field of industrial relations includes the study of workers and
their trade unions, management, employers associations, and the State institutions
concerned with the regulation of employment.

According to Casselmans Labour Dictionary, the term industrial relations is defined as

the relations between employers and employees in industry. In the broad sense, the
term also includes the relations between the various unions, between the State and the
unions as well as those between the employers and the State.

The above definition reveals that industrial relations arise out of employer-employee
interaction in modern industries which are regulated by the Government in varying
degrees. The concept of industrial relations has been extended to denote the relations
of the State with employers, workers and their organisations. The subject, therefore,
includes individuals relations and joint consultation between employers and workpeople
at their workplace; collective relations between employers and their organisations and
trade unions and the part played by the State in regulating these relations.

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Nature of Industrial Relations

Industrial Relations are multidimensional in nature and are conditioned with three sets of
determinants, namely,
1. Institutional factors (such as government policy, labour laws, unions of workers and
employers, power structure, community, etc).
2. Economic factors (such as types of economic ownership like capitalist, socialist, company
ownership, nature and composition of labour force, etc).
3. Technological factors (such as techniques of production, capital structure, rationalization,
etc).
Thus, industrial relations are a web of rules formed by the interaction of the government, the
industry and the labour and are influenced by the existing and emerging institutional, economic
and technological factors.

Significance of Good Industrial Relations

Good industrial relations refer to harmonious relations between the labour union and the
management in an organisation.

In other words, in such a situation, there is absence of

industrial disputes between the two parties and presence of understanding and cooperation
between them. Thus, industrial relations in an organisation must be harmonious or cordial.
Such relations will lead to the following benefits:
1.

Industrial Peace:
Cordial industrial relations bring harmony and remove causes of disputes. This leads to
industrial peace which is an ideal situation for an industrial unit to concentrate on
productivity and growth.

2. Higher Productivity:
Due to cordial industrial relations, workers take interest in their jobs and work efficiently.
This leads to higher productivity and production of the enterprise where they are
working. Thus, they will contribute to the economic growth of the nation.
3. Industrial Democracy:
Sound industrial relations are based on consultation between the workers and the
management.

This assists in the establishment of industrial democracy in the

organisation which motivates employees to contribute their best to the success of the
organisation.

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4. Collective Bargaining:
Cordinal industrial relations are extremely helpful for entering into long-term
agreements as regards various issues between labour and management. Such collective
bargaining agreements and association of employees in decision-making process will
bring about cooperation between labour and management.
5. Fair Benefits to Workers:
The workers should get sufficient economic and non-economic benefits to lead a happy
life. It is possible when the relations between workers and management are cordial and
the productivity is high. The employers can afford higher benefits to the workers.
6. Higher Morale:
Good industrial relations imply the existence of an atmosphere of mutual co-operation,
confidence, and respect within the enterprise.

In such an atmosphere, there are

common goals, which motivate all members of the organisation to contribute their best.
7. Facilitation of Change:
Sound industrial relations, by creating a climate of co-operation and confidence, make
the process of change easy. Hence, full advantage of latest inventions, innovations and
other technological advancements can be obtained. The workforce easily adjusts itself
to required changes for betterment.

Two Dominant Aspects of Industrial Relations

According to Douglas McGregor, conflict and cooperation are two states in the continuum
of industrial relations.
i.

Cooperation:
The dynamics of cooperation lie in the recognition of a sphere of common interest.
Cooperation between union and management, the two actors in the industrial relations
drama, differing in economic power, wealth and education, depends primarily on their
ability and willingness to make contacts at points of mutual concern.

ii. Conflict:
Generally, some degree of conflict between the management and the union is taken to
be inevitable. Conflict is essential to survival of both union and management, and is not
always bad and has certain constructive aspects also. But a recurring conflict needs to

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be channelized along the least destructive lines.

And for this, conflict resolution

measures both voluntary and statutory must be taken for good industrial relations to
prevail and industrial harmony to be achieved.

Objectives of Industrial Relations

The primary objectives of industrial relations are improving the economic conditions of
workers, increasing productivity and achieving industrial democracy in industrial enterprises.
The Labour Management Committee of the Asian Regional Conference of the International
Labour Organisation (ILO) has recognised certain fundamental principles as objectives of social
policy in governing industrial relations with a view to establishing harmonious labourmanagement relations. They are:
i.

Good labour-management relations depend on employers and trade unions being

able to deal with their mutual problems freely, independently and responsibly.

ii. The trade unions and employers and their organisations are desirous of resolving
their problems through collective bargaining, though in resolving such problems the
assistance of appropriate government agencies might be necessary in public interest.
iii. To check industrial conflicts and minimize the occurrence of strikes, lockouts and
gheraos.
iv. To minimize labour turnover and absenteeism by providing job satisfaction to the
workers and increasing their morale.
v. To establish and develop industrial democracy based on workers partnership in
management of industry.
vi. To facilitate government control over industries in regulating production and
industrial relations.

Scope of Industrial Relations

Industrial life creates a series of social relationships which regulate the relations and
working together of not only workmen and management but also of community and industry.
Industrial relations are, therefore, inherent in an industrial life.

These include: (i) Labour

management relations, i.e., relations between union and management or employer-employee

relations; (ii) group relations, i.e., relations between various groups of employees; and (iii)
community or public relations, i.e., relations between the industry and the society.

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The two terms, labour management relations and employer-employee relations are used
synonymously.

The major aspects of Industrial Relations are

1. Promotion of healthy labour-management relations.
2. Maintenance of industrial peace and avoidance of industrial strife.
3. Promotion of industrial democracy.

Promotion of Healthy Labour-Management Relations:

The promotion of healthy labour management relations requires the following:
a. Existence of Strong, well organized, Democratic and Responsible Trade Unions
and Associations of the employers in the Industry:
These organisations enhance job security of employees, help in increased workers
participation in

decision making (affecting the terms and conditions of their

employment) and give labour a dignified role in the society).

b. Spirit of Collective Bargaining:
The very feeling of collective bargaining recognises equality of status between the
two opposing and conflicting groups and prepares grounds in an atmosphere of
trust and goodwill, for discussions, consultations and negotiations on matters of
common interest to both industry and labour.

Maintenance of Industrial Peace

a. Machinery for the prevention and Settlement of Industrial Disputes in the Form of:
i.

Legislative and administrative enactment like that of the Trade Unions Act, the
Industrial disputes Act, the Industrial Employment (Standing Orders) Act; (ii) Works
Committees and Joint Management Councils; (iii) Conciliation Officers and Boards of
Conciliation; (iv) Labour Courts, Industrial Tribunals, National Tribunals, Courts of
Enquiry; (v) Provision for voluntary arbitration.

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b. Provision of Bipartite and Tripartite Forums for the Settlement of Disputes:

These forums act through Code of Discipline in Industry, Code of Efficiency and Welfare,
Model Standing Orders, Grievance Procedure and granting of voluntary recognition to trade
unions by the employers.

Promotion of Industrial Democracy

Industrial Democracy connotes that the labour should receive the right to be associated
with the running of the industry. For achieving this objective, following techniques are usually
adopted:
a. Establishment of the Shop Councils and Joint Management Councils at the
Shop Floor and the Plant Levels:
The councils endeavour to improve the working and living conditions of the
employees, improve productivity, to encourage suggestions from employees, assist
in the administration of the laws and agreements, serve as a channel of
communication between management and employees, and create in the employees
a sense of participation in the decision making and a sense of belonging to the
industry.
b. Recognition of Human Rights in Industry:
This implies that labour is no more an article or commodity of commerce which can
be purchased and disposed of according to the sweet whims and caprices of the
employers. The workers are to be treated as human beings, given a sense of selfrespect and better understanding of their role in the organisation and their urge for
self-expression (through closer association with management) is to be satisfied.
c. Increase in Productivity:
Factors that contribute to higher productivity are: (i) improvement in the level of
efforts and skills of workers; (ii) improvement in production design, process, material,
equipment, layout, work methods; (iii) improvement in the output due to capital
intensification within the framework of the same technology; and (iv) improvement in
management practices.

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Factors Affecting Industrial Relations

1. Industrial Factors:
These include items like state policy, labour laws, voluntary codes, collective bargaining
agreements, labour unions, employers organisations / federation etc.
2. Economic Factors:
These include economic organisations (socialist, communist, capitalist) type of
ownership, individual, company whether domestic or MNC, Government, co-operative,
ownership, nature and composition of work force, the source of labour supply, labour
market relative status, disparity of wages between groups, level of unemployment,
economic cycle, the global economic changes and the impact of World Trade
Organisation (WTO).
3. Social Factors:
Social Factors like social group (like caste system or joint family system) creed, social
values, norms, social status etc. influence industrial relations in the early stages of
industrialisation. They give rise to relationships as master and servant, have and havenots, high caste and low caste, etc. but with the acceleration of industrialisation, these
factors gradually lose their entity but one cannot overlook their importance.
4. Technological Factors:
These include methods, type of technology used, rate of technological change, R & D
activities, ability to cope up with emerging trends, etc.

These factors considerably

influence the patterns of industrial relations as they are known to have direct influence
on employment status, wage level, and collective bargaining process in an organisation.
5. Psychological Factors:
Such factors include items pertaining to industrial relations like owners attitude,
perception of workforce, their attitude towards work, their motivation, morale, interest,
alienation, dissatisfaction, occupational stress and boredom resulting from man-machine
interface.

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6. Political Factors:
Political institutions, system of government, political philosophy, attitudes of
government, ruling elite and opposition leaders towards labour problems affect the state
of industrial relations. For instance, in the various communist countries, prior to the
adoption of new political system, the industrial relations environment was very much
controlled by the Government.

Theories of Industrial Relations

I.

Unitary Approach:
The employer and employee work as a harmonious unit and they work for a common goal.
Hence, there is no possibility of conflicts arising between them and they work as a team to
attain the common goal. According to Edwards (2003), Any conflict that may occur is then
seen as the result of misunderstanding or mischief. Thus, conflict is perceived as disruptive.
The concept of loyalty is privileged in the Unitarist Approach because of its paternalist roots.
Since there exist direct relations between the employer and the employee, trade unions are
considered as unnecessary. The orientation and application of rules may be managerial but
employees are expected to be loyal and sincere to the organization.

II. Pluralist Approach:

The pluralist approach was developed in the United States of America by John R
Commons. He considered society as complex due to the presence of multiple interest
groups with their own goals. Hence, conflict is inevitable in the system and there are
possibilities of compromise based on the interaction between different stakeholders.
Collective bargaining was used as a mechanism to sort out the conflict between the
employer and employees. The presence of trade union in an organization can serve as an
interest group to protect the interest of employees. According to Edwards (2003),
pluralism was particularly salient in the approach of management: instead of unitary
denial that there was any rational basis for conflict, managers should recognize the
inevitability of dispute and seek means to regulate them. Employees understood the
basis of conflict and were ready to negotiate with the trade union in the overall interest
of the organization.

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The Pluralistic Theory is based on the premise that the enterprise contains people with a
variety of interests, aims and aspirations; therefore, it is a coalition of different interests.
Arthur Ross argued that we should view an organisation as a plural society containing
many related but separate interests and objectives which must be maintained in some
kind of equilibrium.

III. Classical Approach (Marxist Model)/ Radical Approach:

Karl Marx considered industrial conflict as a part of the broader social conflict between
classes and used it to explain the fundamental historical process of change and
development in human society. He was concerned with certain macro economic processes
and deep-rooted inequalities in society as a whole, and not with specific industries or firms.
Marx divided the society into two classes (i) capitalists, who own the means of production,
and (ii) proletariat, who own nothing but their own labour power.

These classes are

antagonistic groups. Antagonism and conflict are of the very essence of Marxs conception
of class.

The reasons for this fundamental antagonism lie in the capitalist mode of

production.
IV. Human Relations or Neo-Classical Approach:

This approach has its origin in the Hawthorne experiments conducted by Elton Mayo,
Roethilsberger, Whitehead, Whyte and Homans, etc.

According to this theory,

conflict is an aberration and not the natural state of human society. This aberration
occurs when tendency of the industrial society is to treat worker as an isolated
individual, and deprive him of all control over his environment. This loss of mooring and
control is a major source of conflict.

The core of human relations theory consists in the importance attributed to the small
informal social groups as a source of human satisfaction. This satisfaction results from
better human relations through the encouragement in creating informal social groups
and better communication by providing not only downward communication but upward
communication also.

They key to sound industrial relations lies in achieving better

human relations in the organisation. The major criticism of this theory is that it treats
the factory as if it were a self contained and isolated social system. The sources of
conflict lie as much outside the factory as within it, and the argument that all these
strains can be handled by the management through better human relations within the
factory is not convincing.

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V. Social Action Approach:

The Social Action Model has its origins in Weberian Sociology. Under this model, the
actors own definitions of the situations in which they are engaged and these are taken
as an initial basis for the explanation of their social behaviour and relationships.

This model points out the reciprocal nature of the relationship between social structure
and behaviour. Social structure limits social action. Thus, a workers ability to take strike
action or an entrepreneurs ability to invest may be limited by his personal and by more
general economic conditions, and this will help to determine the environment for similar
decisions in future.

One of the most important features of the social action models is the attitude it adopts
towards social theory. The social action approach suggests that general explanations of
social action are not possible simply because of the nature of the subject of social
sciences men do not react to the stimuli in the same way as matter in the natural
sciences.

VI. Systems Approach (developed by John Dunlop):

The systems approach views the industrial relations system as a sub-system of the society or
the total social system. The society is seen as providing certain external influences and
constraints but not as completely dominating industrial relations. An industrial relations
system at any particular time is regarded as comprising of certain actors, certain context and
ideology which bind the industrial relations system together through a body of rules created
to govern the actors at the place of work and work community. The creation of rules is the
central aim of the industrial relations system and Dunlop isolates three groups of actors
Workers, Management and the Government who take part in the rule making process.
Thus,
R = f(a, i, b)
Where R = Industrial relations system
a = actors
i = ideology
b = body of rules

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VII. Gandhian Trusteeship Approach:

Gandhijis views on industrial relations are based on his fundamental principles of truth and
non-violence and non-possession.

Out of these principles evolved the concept of

trusteeship on which his philosophy of industrial relations rests. This philosophy presumes
the peaceful co-existence of capital and labour, which calls for the resolution of conflict by
non-violent, non-cooperation (i.e., Satyagraha), which actually amounts to peaceful strikes in
ordinary parlance. Gandhiji accepted the workers right to strike, but cautioned that this
right is to be exercised in a just cause, and in a peaceful and non-violent manner; and it
should be resorted to only after employers fail to respond to their moral appeals.

Industrial Relations System

An industrial relations system is an integrate system of relationships between employers

and employees and employers which are managed by the means of conflict and cooperation. It can also be understood as the laws dealing with the arrangements that are
made between workers and employers and these laws are developed by governments.

A sound industrial relations system is one in which relationships between management

and employees (and their representatives) on the one hand, and between them and the
State on the other, are more harmonious and cooperative than conflictual and creates an
environment conducive to economic efficiency and the motivation, productivity and
development of the employee and generates employee loyalty and mutual trust.

Main Parts of Industrial Relations System

There are three main parties which are directly involved in industrial relations.
i.

Workers and their Organisations:

The personal characteristics of workers, their culture, educational attainments,
qualifications, skills, attitude, towards work, etc. play an important role in industrial
relations. Workers organisations, known as trade unions, are political institutions. Trade
unions are formed for safeguarding the economic and social interests of the workers.
They put pressure on the management for the achievement of these objectives.

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ii. Employers and their Organisations:

The employers are a very important variable in industrial relations.

They provide

employment to workers and try to regulate their behaviour for getting high productivity
from them. Industrial unrest generally arises when the employers demands from the
workers are very high and they offer low economic and other benefits to the workers. In
order to increase their bargaining power, employers in several industries have organized
employers associations.
iii. Government:
The Government or State exerts an important influence on industrial relations through
such measures as providing employment, intervening in working relationships and
regulating wages, bonus and working conditions through various laws relating to labour.
The Government keeps an eye on both the trade unions and employers organisations to
regulate their behaviours in the interest of the nation.

After Independence, the Indian government laid emphasis on the need for consultation
between the representatives of labour, management, and the Government in tripartite
and bipartite forums.

Moved by the constant pressure of International Labour

Organisation, the Government of India constituted various tripartite bodies like Indian
Labour Conference (ILC), the Standing Labour Committee (SLC) and the industrial
committees to deliberate on various issues relating to labour and management that have
far-reaching impact on the countrys labour policies and legislation.

Inspired by the Gandhian philosophy, the government accepted importance of the

trusteeship concept in the field of industrial relations. The three actors in the industrial
relations system, viz., labour, management and government interact with each other to
yield the basic output.

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Sample Multiple Choice Questions

1. Who are the actors of Industrial Relations?
(a) Workers and their organisations

(b) Employers and their Organisations

(c) Government and the role of the State

(d) All of the above

2. Which is the machinery for settlement of Industrial Disputes?

(a) Industrial Tribunal

(b) National Tribunal

(c) Labour court

(d) All of the above

3. First National Commission on Labour (NCL) submitted its report in the year:
(a) 1969

(b) 1958

(c) 1999

(d) 1947

4. Second National Commission on Labour (NCL) submitted its report in which year and
under whose chairmanship?
(a) 1999, Ravindra Varma

(b) 2000, Ravindra Varma

(c) 1998, B.P. Wadia

(d) None of the above

5. Who among the following advocated the Trusteeship Theory of Industrial Relations?
(a) M.K. Gandhi

(b) N.M. Lokhande

(c) V.V. Giri

(d) Karl Marx

6. Which of the following are approaches to Industrial relations?

(a) System Approach

(b) Sociological Approach

(c) Human Relations Approach

(d) All of the above

7. Which of the following methods are used in Industrial Relations System?

(a) Collective Bargaining

(b) Discipline Procedure

(c) Grievance Redressal Machinery

(d) All of the above.

8. Who has given the systems Theory of Industrial Relation?

(a) Elton Mayo

(b) Karl Marx

(c) John Dunlop

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(d) Roethilsberger

9. Who has coined the term Industrial Democracy?

(a) Karl Marx

(b) Sydney and Beatrice Webbs

(c) Peter F. Drucker

(d) John Dunlop

10. A System of Industrial Relations were social and labour issues are discussed between
Trade Unions and Management at enterprise level is:
(a) Bipartism

(b) Tripartism

(c) Social Dialogue

(d) All of the above

ANSWERS
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