Industrial Relations: Definition and System Explained

Industrial relations can be described as a system comprising:
* inputs, derived from the goals, values and power of the actors within the system;
* procedures for converting inputs into outputs;
* outputs, comprising the financial, social and psychological rewards to employees;
* a feedback loop through which outputs flow back into the industrial relations subsystem and also into the environmental subsystems.
These procedures will vary between organisations and industry sectors but there will usually be some form of collective bargaining, unilateral decisions by the employer; decisions imposed by the state, the courts or some other independent body, eg where there is compulsory arbitration for certain categories of employee; or participation.
As the system of industrial relations is an open system rather than a closed one it is affected by external influences. These include the following:
Influences that affect the system of industrial relations
The economy - changes in the government's monetary and fiscal policies can affect bargaining arrangements, as for example when the public sector is restricted in the size of any pay award that can be given; employment levels can affect the bargaining power of employees, with high unemployment and relatively easy acquisition of labour strengthening the employer's position etc.
Technological change - greater mechanisation and computerisation can reduce the organisation's need for and dependence on high numbers of staff, while at the same time requiring a different range of skills and knowledge.
Political decisions - different governments will have different economic policies and views about the balance of power in organisations.
The legal system - legislation will set minimum standards or regulate the basis on which workplace relationships are conducted.
Social and cultural influences - employees and managers are part of the wider society and will bring with them the norms and values of that society. Problems are likely to occur when the two groups have different traditions or where there is a particular constraint on the organisation because of the industry sector.
The environment - changes in the composition or size of the population which can affect such things as demand for goods and services and availability of skilled labour, or in the climate or weather which again can affect demand in certain cases or the ability of the organisation to meet its targets.
Social trends - these will affect attitudes to various aspects of industrial relations.