Industrial Relations to Human Resources and Beyond: The Evolving Process of Employee Relations Management

The Evolving Process of Employee Relations Management

Bruce E. Kaufman, Richard A. Beaumont, Roy B. Helfgott

• Editorial: Routledge
• Año: 2016
• ISBN:
  9781315498317
• Edición: 1
• Categoría: Business
• Categoría: Business General

This collection examines the evolution of the philosophy and practice of human resource management (HRM) and industrial relations (IR) over the twentieth century. By combining history, contemporary practice, and future trends, these well-known experts present both scholarly and practitioner perspectives. Drawing on in-depth interviews and surveys with HRM executives at leading corporations, the contributors explore key trends and issues facing global companies in such areas as equal opportunity, compensation practices, and expatriation programs. The book also takes an in-depth look at one particular player in the story - Industrial Relations Counselors, Inc., the first non-profit research and consulting organization dedicated to improved HRM/IR practices - which was founded by John D. Rockefeller in 1926, and has played a central role in the development of key labor legislation including the Social Security Act.

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Introduction

Roy B. Helfgott

By the dawn of the twentieth century, the United States had become a major industrial nation and economic power. Technological change brought greater capital intensity of production and economies of scale and, with the expansion of markets, gave birth to giant corporations with hired managers that supplanted small-scale owner-operated businesses. The concepts of laissez-faire and individual initiative, which permeated employer thought and behavior, meant that each business owner should be free to run his enterprise as he saw fit without interference from government or workers. The employer’s authority in the workplace was almost absolute, and labor was treated as just another commodity to be hired and fired as needed and purchased as cheaply as possible. There were no personnel policies, and control of the workforce was left in the hands of foremen, which was supposed to lead to efficiency but instead resulted in labor conflict and poor work performance. Unions tried to organize workers but faced fierce employer resistance.

A handful of employers, such as Filene’s department store in Boston, sought to treat workers differently, but the major captains of industry clung to the laissez-faire model. By the 1920s, however, there had been a break in their ranks, as John D. Rockefeller, Jr., chastened by the “Ludlow Massacre” at a Rockefeller holding, sought to emphasize the mutual interests of employers and employees, treat workers fairly, and provide them with a voice in the workplace. This movement led to the establishment in 1926 of Industrial Relations Counselors, Inc. (IRC), which provided the intellectual underpinnings to management efforts to advance progressive human resource policies and practices within American industry.

A symposium at Princeton University to commemorate the seventy-fifth anniversary of the founding of IRC was scheduled for September 11 and 12, 2001. The opening session was under way when news of the tragic events at the World Trade Center and the Pentagon was received. Under the circumstances, the proceedings were suspended. The symposium would have been a significant event. This book presents what would have been its contents: essays by academic experts that trace developments during the twentieth century in various areas of human resource management, as well as a practitioner view, from staff members of Organization Resources Counselors, Inc. (ORC), of the current state of human resource (HR) policies and practices and the outlook for the future. Before turning to these topics, I first present a brief outline of IRC’s history so that the reader will be better able to appreciate the role of IRC in these developments.

A Brief History of IRC

Although officially born in 1926, IRC’s roots go back to a 1914 violent strike at the Colorado Fuel and Iron Company (CF&I), during which nearly a dozen women and children died. This event, dubbed the “Ludlow Massacre,” brought John D. Rockefeller, Jr., the major stockholder, into disrepute. Rockefeller, who had left company operations to local management, sought the advice of William Lyon Mackenzie King, former minister of labour of Canada, who formulated a plan that granted workers the right to appeal grievances and established a joint industrial council of employees and management. This “employee representation plan” spread among progressive companies both inside and outside the Rockefeller network. In 1919, ten of these companies formed the Special Conference Committee, whose representatives met periodically to discuss labor policies. The group developed what has become known as “welfare capitalism,” which emphasized the stake of workers in the system. These companies also led in the creation of the new field of personnel management.

In 1922, an “industrial relations staff” was established in the office of Rockefeller’s attorney, Raymond B. Fosdick, to provide expert investigation and help to introduce progressive labor policies. It was incorporated in 1926 as a separate nonprofit organization, Industrial Relations Counselors, Inc., to “advance the knowledge and practice of human relationships in industry, commerce, education, and government.”

In 1922, an industrial relations (IR) section also was established within the Economics Department of Princeton University with Rockefeller support. Subsequently, IRC helped to set up additional IR centers at the University of Michigan, California Institute of Technology, Stanford University, Massachusetts Institute of Technology, and Queens University in Canada. Later, IRC established the C. J. Hicks Memorial Fellowships in Industrial Relations at each of these universities. In the 1970s, an IRC professorship in industrial relations existed at the Colgate Darden School, University of Virginia.

Between 1927 and 1932, IRC maintained a branch office at the International Labour Organisation in Geneva and conducted research on social insurance programs in European countries. In the 1930s, IRC’s research unit was on loan to the executive branch of the U.S. government and played a pivotal role in the development of the nation’s social security system.

Rockefeller was IRC’s principal support for a decade, after which it expanded its consulting activities. In the mid-1950s, however, it ceased all consulting activities, which were transferred to a separate for-profit corporation, now called Organization Resources Counselors, Inc., and the ideals and concepts of IRC have become part of ORC’s mission.

With the upsurge of unionism in the 1930s, IRC aided companies in effecting smooth labor-management relations and offered guidance to the nation in terms of labor policy. IRC promoted job evaluation as a means of rationalizing company wage structures and promoting internal equity, and as World War II loomed, it helped to establish compensation structures to support effective operation of the defense effort. During the war, it explored wage stabilization efforts, and as the need for IR competence became a matter of national priority, it began to offer training courses in IR. Over the years, thousands of IR/HR specialists were graduates of these courses, with many of them becoming the HR leaders in major corporations.

Even before the civil rights crusade gained momentum, IRC was working to open economic opportunities to African-Americans, and its 1959 publication, Employing the Negro in American Industry, became a guide to management as it established nondiscriminatory hiring in the 1960s. In that decade, IRC research focused on two areas: (1) the interaction between new technology and progressive human resource management and (2) a balanced national labor policy. It also began a symposium series that explored the significance to HR of the latest developments in the behavioral sciences. For the past decade, it has been issuing IR Concepts, occasional papers on important current issues affecting human resource policy and practice.

Contents of This Book

This book commemorates IRC’s founding. It is divided into three sections: Section I—The Early Stages of Welfare Capitalism and the Birth of IRC and Human Resource Management; Section II—History and Development of Human Resource Management, with chapters by academic experts in the field; and Section III—Human Resource Management in the Twenty-First Century, with essays by practitioners in the field.

Section I. The Early Stages of Welfare Capitalism and the Birth of IRC and Human Resource Management

In Chapter 2, I provide an overview of the political, economic, social, and cultural backdrop of the 1920s, the decade of IRC’s birth. The 1920s witnessed a burst of innovative behavior in the United States that diverged from European and British traditions. The creation of a consumer society was one way we deviated from Europe, where class-riven societies could not envisage the “lower orders” driving automobiles or wearing clothing undistinguishable from their “betters.”

The United States followed a policy of isolationism. It turned away from Europe, not only politically but also culturally, asserting an “American” culture, and it was an incredibly creative period for American literature, music, and the physical and social sciences. Radio, motion pictures, and sports became part of the new consumer society.

Attempts to improve the relationship between a company and its employees symbolized another American effort to turn away from old-world models. John D. Rockefeller, Jr., and his advisor, William Lyon Mackenzie King, tried to steer a course different from that of Europe’s class struggle and American employers’ laissez-faire doctrine. Rockefeller sought to establish a labor-management relationship based on mutual interest and obligations, to curb management’s authoritarian power, to treat workers fairly, and to give them a voice in the determination of the conditions under which they worked. This distinctive American approach envisioned by Rockefeller, however, crumbled in the Great Depression as jobs disappeared, wages were cut, employer pension plans went bankrupt, and the misery of the times made workers psychologically ripe for unionization. In place of the philosophy of mutual interests of employers and employees came an adversarial labor-management system under government aegis.

In Chapter 3, Professor Bruce E. Kaufman explores IRC’s impact on modem HR, which he traces to Rockefeller’s recognition of the need for cooperation between labor and management and a shift from the traditional employer workplace autocracy to representative democracy. King’s employee representation plan, which provided for joint governance, was implemented at CF&I and then at the Bayonne refinery of Standard Oil Company of New Jersey. Jersey Standard adopted one of the most forward-looking industrial relations programs in the nation, a model for the “welfare capitalism” of the 1920s. IRC was established to advance this concept of mutual gain through cooperation between management and employees. Kaufman concludes that the birth and development of IRC over the past three quarters of a century are noteworthy on many counts. Its creation signaled a movement away from disregarding labor questions to a new conceptualization in which the management of labor is considered a matter of strategic importance that requires executive attention and professional administration.

IRC played a crucial role in developing, propagating, and implementing the new progressive IR strategy and counseled companies to see employees as human beings and assets rather than commodities and a short-run expense and as stakeholders rather than “hired hands.” It advocated forms of collective dealing with workers and told employers that they had a social/ethical responsibility toward labor and the community. IRC’s history is a testament to the success it and progressive management have had in transforming American industrial relations to a more scientifically based, professional, humanistic model.

Section II. History and Development of Human Resource Management

In Section II, noted academics chronicle the evolution of the employer-employee relationship and focus on specific areas of IR/HR policies and practices. The section begins with Chapter 4, in which Professor Bruce E. Kaufman examines the concept of a unity of interest between management and employees. Kaufman notes that IRC’s birth was an outgrowth of four decades of effort to find a solution to the “Labor Problem,” the epic struggle between labor and management over control of the processes of production and distribution. Rockefeller, King, and Clarence Hicks broke with the employer laissez-faire autocratic view and promoted one that recognized areas of activity in which the interests of labor and management coincide.

This “employers’ solution” sought not only to preserve capitalism and the employer’s ability to run the enterprise but also to resolve labor problems through a reform program to increase both efficiency and employee satisfaction by fostering workplace cooperation based on promoting identity of interest (goal alignment) between employer and employees. The unity of interest philosophy and associated management practices—articulation of a formal labor policy, setting up an industrial relations department, gain-sharing forms of compensation, provision of employee benefits, employment security, limits on supervisory power, and a nonunion system of employee representation—were propagated by IRC. The ideas behind today’s concepts of high-performance organizations remain remarkably similar to those promoted by IRC and the progressive firms of the 1920s.

Professor Sanford M. Jacoby presents a history of the human resource function in Chapter 5. At first, human resource decisions were left to first-line supervisors, but this led to high turnover rates, and so some companies introduced employment departments to handle these functions. Labor-market tightening, labor unrest, and intrusion of the federal government during World War I led additional companies to establish personnel departments and to have them take over more of the foreman’s domain with central hiring, disciplinary rules, training, performance evaluation, and rationalized wage structures.

The Great Depression led to government regulation and encouragement of trade unions, and personnel management coordinated corporate labor policies. In the 1950s and 1960s, management saw itself as having responsibilities not only to stockholders but also to consumers, the public, and employees, thus boosting the status of the human resource management function (HR). The emergence of the behavioral sciences produced a split between labor and employee relations, narrowing the former’s responsibilities to collective bargaining and contract administration. With the growing importance of the internal labor market, HR concentrated on management development, training, and communications. In the 1970s, HR focused on dealing with worker dissatisfaction and the application of new forms of work organization in nonunion plants, which expanded the organizational development staffs within HR. In the 1980s, HR departments became less influential as enforcement of federal regulations eased, unionism declined further, and the labor market loosened. Corporate restructuring and demands for higher returns led companies to view employees as costs and to allow line managers to assume greater control. To survive in this short-term-oriented organizational milieu, HR moved from an employee focus to a business orientation.

Chapter 6 traces the rise of employee benefits and social insurance. Professor John F. Burton, Jr., with the assistance of Professor Daniel J.B. Mitchell, sees them as an important component of the welfare capitalism that emerged in the 1920s. Their growth has been phenomenal: In 1929, employee benefits paid for by employers and employer contributions to social insurance represented only 1.3 percent of wages and salaries, but by 1999 this had increased to 18.4 percent. The three major forces driving the growth of employee benefits have been government policies, labor unions, and organizations such as IRC that sponsored the idea of a progressive relationship between management and workers.

Rapid industrialization caused a problem of work accidents, and the first form of social insurance to emerge was workers’ compensation. In the 1920s, some progressive employers began to provide employee benefits. The Depression led to the Social Security Act of 1935. Social Security benefits were supplemented by union-negotiated pensions. Unable to obtain national health insurance, unions negotiated health-insurance coverage with employers. Nonunion firms followed suit, and employer-provided health insurance became the norm. Burton and Mitchell end by raising the question of why health insurance should be part of a person’s employment package, as other industrial nations have health insurance funds run through government or quasi-public institutions.

Professor Daniel J.B. Mitchell analyzes twentieth-century pay practices in Chapter 7 and discerns the societal, economic, business, and union influences on industry compensation programs. At the beginning of the century, there were four types of compensation arrangements: (1) time-based wages, (2) social welfare benefits, (3) explicit incentive programs, and (4) those that share organizational risk with the employees. At the end of the century, he finds that the same four categories apply, although with somewhat different emphasis.

In the pre–New Deal period, employers were in a laissez-faire situation with regard to their pay-setting decisions. The Great Depression dramatically altered compensation policy, as unions began to play a major role in pay setting. A concern about the equity of pay structures resulted in job evaluation, with its rating of jobs on the basis of skill, responsibility, and conditions. Over time, however, it has lost favor for many reasons, including its subjectivity in practice, the constraints of finely differentiated job titles and narrowly defined jobs, and the new concept of comparable worth. In recent years, as membership has declined, union influence on compensation has diminished, and in the 1980s, unions even acquiesced to risk-sharing plans. The data show a trend toward more flexible pay arrangements and a shift in compensation toward the pay-for-performance emphasis of the 1920s.

As he reviews trends in equal employment opportunity in Chapter 8, Professor Jonathan S. Leonard notes that the idea that women and minorities might have a right not to be subject to discrimination is of relatively recent vintage. World War II was an anvil for change, with the federal government forging a new role with President Roosevelt’s Executive Order 8802, which barred discrimination by race, creed, color, or national origin in federal employment and defense contracts. Extreme wartime labor shortages also pressured industry to hire those previously excluded.

The campaign against discrimination always has depended upon a balance of commitment bred of goodwill and compulsion based on strong law. In the 1940s, public opinion did not support a law to compel action, but blacks made significant progress through improvement in education and migration to industrial jobs in the North. Progressive managers, who saw themselves as following proper human resource practices, also opened doors to blacks, according to the 1959 IRC monograph, Employing the Negro in American Industry.

Title VII of the Civil Rights Act of 1964, which prohibited discrimination on the basis of race, color, creed, national origin, and sex, was the keystone of the campaign to bar employment discrimination. Black economic progress in the years following passage of Title VII was fostered by the indirect effect of judicial interpretations of Title VII to promote affirmative action, but the term evokes controversy, because it runs up against the deeply held American belief in individual merit. Leonard concludes that discrimination policies will be stronger where they are seen as applying generally rather than being specifically targeted at narrow groups.

In Chapter 9, Professor Daphne G. Taras examines the concept of “voice” in the North American workplace. She sees it as containing two elements: employee representation, which lasted between 1919 and 1935 and sought to give workers collective participation in setting the terms and conditions of their employment, and the newer concept of employee involvement, which recognizes that workers’ creative...