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Business Studies

The Importance Of Industrial Relations

Industrial relations has evolved from being a near non-existent practice to one of the most important elements in business today, perhaps the most important. Human capital is certainly a determinant of organisation success so the importance of industrial relations cannot be understated. From the dark ages of slave labour, regulation around employment has evolved to exclude sources of labour which were previously abused. Also, employee protection has increased. Developments in industrial relations are linked to the development of the overall economy underscoring the importance of industrial relations.

What Are Industrial Relations?

Industrial relations or employment relations is the multidisciplinary academic field that studies the employment relationship; that is, the complex interrelations between employers and employees, labour/trade unions, employer organizations and the state. The importance of industrial relations is visible in the groups that industrial relations is tasked to deal with as they can not only be large groups (trade unions for example) but also extremely powerful groups such as employers and governments. Industrial relations goal is to facilitate healthy relationships between all parties involved. This will benefit individuals, businesses, industries and economies at large. Let’s see how industrial relations helps to do this, to help us understand the importance of industrial relations.

 

To Help In The Economic Progress Of a Country

The problem of an increase in productivity is essentially the problem of maintaining good industrial relations. For an enterprise to succeed many groups of people come together to contribute to success. While there are investors and other stakeholders the relations that employers maintain with employees is perhaps the biggest contributor to productivity. Hence the importance of industrial relations is its role in promoting mutually beneficial employer and employee relationships. It has long since been proven by many management researchers that people have greater productive capacity when they are in good mental and physical health. This, in turn, boosts business productivity which contributes to the overall productivity in an economy. That is why industrial relations form an important plank of the economic development plan of every civilised nation.

 

To Establish And Maintain True Industrial Democracy

One of the goals of industrial relations is to promote and maintain a socialist approach to industry by creating a system of industrial democracy. Socialism is a system that believes in group ownership of resources and a system of central planning. In an industrial relations context, it refers to a system that recognizes all stakeholders in the industrial value chain and gives all parties a voice in the decision making. This means that the needs of investors, management, employees individually or through unions, customers and communities must all be considered in decisions about business. The importance of industrial relations is in creating a platform that promotes business practices that benefit all stakeholders as much as is possible in a given situation.

 

Formulation And Actualisation Of Informed Labour Relations Policies

On the platform of industrial democracy, individual industries and businesses within industries are better able to create policies that consider all the known issues that are experienced by different stakeholders. The importance of industrial relations is not only in the formulation but also in turning these policies into actions on the ground. Policies are made at the strategic level with input from the stakeholders. The information must travel down the chain of command in individual organisations to management who interpret policies on a tactical level and finally to the shop floor that turns tactical plans into action. Industrial relations policy is complex because businesses vary widely and so do the meaning of things. Workplace health and safety means extremely different things to a bank employee and a mining company employee.

 

Encourage Collective Bargaining And Self-Regulation

The importance of industrial relations is also visible in the strides it has taken in bringing collective bargaining to the forefront. Because of the unfair balance of power in employer/employee relationships, the process of negotiating for work conditions and remuneration would be very unfair and biased towards employers who can come to the negotiating table with a “take it or leave it” approach. Collective bargaining brings individual employees together in the form of trade unions or labour unions that negotiate on behalf of all employees in the union. This balances the power relationship between employers and employees. Collective bargaining also requires employees and their representatives to put forward ideas and recommendations on their part for how they will behave, therefore introducing an element of self-regulation of employees.

 

Assisting In Law-Making

Of course, industrial relations are not just governed by employment contracts. The importance of industrial relations has resulted in the protection of employees and labour through statute such as the Labour Act. Industrial relations over time have had a direct hand in the formulation of policy and the evolution of policy to accommodate new trends into the laws governing industrial relations. The importance of industrial relations is also seen in its hand in helping government formulate laws forbidding unfair practices. Unions also assist in the dissemination of the laws to their members and bring an understanding of what the laws mean to individual employees. This is another importance of industrial relations as it promotes a conscious workforce. One that is cognisant of important issues. A more informed workforce is a stronger partner in industrial growth as they are aware of and can live up to their rights and responsibilities.

 

Boost The Discipline And Morale Of Workers

Industrial relations, by including workers in the formulation and implementation of policy on labour, gives labour a better understanding of how things will work for them. When a workforce know what behaviour is expected of them and the rewards of such behaviour they are better prepared to perform as expected. They know the code of conduct and know how to live up to it hence showing the importance of industrial relations. Lack of discipline can be very costly as it will result in losses through accidents, downtime, insubordination and conflict. A disciplined workforce expends more energy in achieving the goals of the organisation than fighting about the structure of the organisation.

 

The importance of industrial relations is evident through the many ways in which industrial relations has been responsible for a state of a more involved workforce. Labour’s involvement in legislation, planning, implementation and education cannot be overlooked. The importance of industrial relations is its contribution to the modern, organised, productive workforce we see in the world today.

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