Essential Ingredients Of Industrial Democracy

Workers participation in management is in essential ingredient of industrial democracy. The concept of workers participation in management is based in “Human Relations” approach to management which brought about new set of values to labour and management.

Traditionally, the concept of Workers’ Participation in Management (WPM) refers to participation of non-managerial employees in the decision-making process of the organisation. Workers’ participation in management meets the psychological needs of the workers to a greater extent. That way it may also be treated as the process of delegation of authority in the general areas of managerial functions.

According to one view, workers participation is based on the fundamental concept that the ordinary worker invest his labour in, and ties his fate to, his place of work and, therefore, he has a legitimate right to have a share in influencing the various aspects of company policy”.

To quote the version of British Institute of Management, “Workers’ participation in management is the practice in which employees take part in management decisions and it is based on the assumption of commonality of interest between employer and employee in furthering the long term prospects of the enterprise and those working in it”.

According to G.S. Walpole, participation in management gives the workers a sense of importance, price and accomplishment; it given him the freedom and the opportunity for self-expression; a feeling of belonging to his place of work and a sense of workmanship and creativity. It provides for the integration of his interest with those of the management and makes him a joint partner in the enterprise”.

Dr. Alexander considers a management to be participative, “if it gives scope to the workers to influence its decision making process on any level or sphere or if it shares with them some if its managerial prerogatives”.

Clegg says, “It implies a situation where workers representatives are, to some extent, involved in the process of management decision making, but where the ultimate power is in the hands of the management”.

According to Dr. Davis, “it is a mental and emotional involvement of a person in a group situation which encourages him to contribute to goals and share responsibilities in them”.

According to Dr. Davis, “it is a mental and emotional involvement of a person in a group situation which encourages him to contribute to goals and share responsibilities in them”.

In should be borne in mid that when individuals are provided with opportunities for expression and share in decision-making, they show much initiative and accept responsibility substantially. The rationale of workers’ participation in management lies in that it helps in creation amongst the workers a sense of involvement in their organisation, a better understanding of their role in the smooth functioning of industry and provides them a means of self-realization, thereby, promoting efficiency and increased productivity.

Thus the concept workers’ participation in management encompasses the following:

It provides scope for employees in the decision making of the organisation.

The participation may be at the shop level, departmental level or at the top level.

The participation includes the willingness to share the responsibility by works as they have a commitment to execute their decisions.

The participation is conducted through the mechanism of forums which provide for association of workers representatives.

The basic idea is to develop self control and self discipline among works, so that the management become “Auto Management”.


The scheme has economic, psychological, ethical and political objectives.

Its psychological objective of the scheme is to secure full recognition of the workers. Association of worker with management provides him with a sense of importance, involvement and a feeling of belongingness. He considers himself to be an indispensable constituent of the organisation.

Socially, the need for participation arises because modern industry is a social institution with the interest of employer, the share-holders, the community and the workers equally invested in it.

The ethical objective of participation is to develop workers free personality and to recognize human dignity.

The political objective of participation is to develop workers conscious of their democratic rights on their work place and thus bring about industrial democracy.


Workers’ participation is possible at all levels of management; the only difference is that of degree and nature of application. For instance, it may be vigorous at lower level and faint at top level. Broadly speaking there is following five levels of participation:

Information participation: It ensures that employees are able to receive information and express their views pertaining to the matters of general economic importance.

Consultative participation: Here works are consulted on the matters of employee welfare such as work, safety and health. However, final decision always rests at the option of management and employees’ views are only of advisory nature.

Associative participation: It is extension of consultative participation as management here is under moral obligation to accept and implement the unanimous decisions of employees.

Administrative participation: It ensure greater share of works in discharge of managerial functions. Here, decision already taken by the management come to employees, preferably with alternatives for administration and employees have to select the best from those for implementation.

Decisive participation: Highest level of participation where decisions are jointly taken on the matters relation to production, welfare etc. is called decisive participation.

Three groups of managerial decisions affect the workers of any industrial establishment and hence the workers must have a say in it.

Economic decisions

– Methods of manufacturing, automation, shutdown, lay-offs, and mergers.

Personnel decisions

– Recruitment and selection, promotions, demotions, transfers, grievance settlement, work distribution.

Social decisions

– hours of work, welfare measures, questions affecting work rules and conduct of individual worker’s safety, health, and sanitation and noise control. Participation basically means sharing the decision-making power with the lower ranks of the organization in an appropriate manner.


The concept of WPM is a broad and complex one. Depending on the socio-political environment and cultural conditions, the scope and contents of participation change.

International Institute of Labour Studies:

WPM is the participation resulting from the practices which increase the scope for employees’ share of influence in decision-making at different tiers of organizational hierarchy with concomitant (related) assumption of responsibility.


Workers’ participation, may broadly be taken to cover all terms of association of workers and their representatives with the decision-making process, ranging from exchange of information, consultations, decisions and negotiations, to more institutionalized forms such as the presence of workers’ member on management or supervisory boards or even management by workers themselves (as practiced in Yugoslavia).The main implications of workers’ participation in management as summarized by ILO:

Workers have ideas which can be useful;

Workers may work more intelligently if they are informed about the reasons for and the intention of decisions that are taken in a participative atmosphere.


According to Gosep, workers’ participation may be viewed as:

An instrument for increasing the efficiency of enterprises and establishing harmonious relations;

A device for developing social education for promoting solidarity among workers and for tapping human talents;

A means for achieving industrial peace and harmony which leads to higher productivity and increased production;

A humanitarian act, elevating the status of a worker in the society;

An ideological way of developing self-management and promoting industrial democracy.

Other objectives of WPM can be cited as:

To improve the quality of working life (QWL) by allowing the workers greater influence and involvement in work and satisfaction obtained from work; and

To secure the mutual co-operation of employees and employers in achieving industrial peace; greater efficiency and productivity in the interest of the enterprise, the workers, the consumers and the nation.


Unique motivational power and a great psychological value.

Peace and harmony between workers and management.

Workers get to see how their actions would contribute to the overall growth of the company.

They tend to view the decisions as `their own’ and are more enthusiastic in their implementation.

Participation makes them more responsible.

They become more willing to take initiative and come out with cost-saving suggestions and growth-oriented ideas.

Essential condition for WPM:

The success of workers portion in management depends upon the following conditions.

The attitude and outlook of the parties should be enlightened and impartial so that a free and frank exchange of thoughts and opinions could be possible. Where a right kind of attitude exists and proper atmosphere prevails the process of participation is greatly stimulated.

Both parties should have a genuine faith in the system and in each other and be willing to work together. The management must give the participating institution its right place in the managerial organization of the undertaking and implementing the policies of the undertaking. The labor, on the other hand, must also whole heartedly co-operate with the management through its trade unions. The foremen and supervisory cadre must also lend their full support so that the accepted policies could be implemented without any resentment on either side.

Participation should be real. The issues related to increase in production and productivity, evaluation of costs, development of personnel, and expansion of markets should also be brought under the jurisdiction of the participating bodies. These bodies should meet frequently and their decisions should be timely implemented and strictly adhered to. Further,

Participation must work as complementary body to help collective bargaining, which creates conditions of work and also creates legal relations.

There should be a strong trade union, which has learnt the virtues of unit and self-reliance so that they may effectively take part in collective bargaining or participation.

A peaceful atmosphere should be there wherein there are no strikes and lock-outs, for their presence ruins the employees, harms the interest of the society, and puts the employees to financial losses.

Authority should be centralized through democratic management process. The participation should be at the two or at the most three levels.

Programs for training and education should be developed comprehensively. For this purpose, Labor is to be given education not to the head alone, not to the heart alone, not to the hands alone, but it is dedicated to the three; to make the workers think, feel and act. Labor is to be educated to enable him to think clearly, rationally and logically; to enable him to feel deeply and emotionally; and to enable him to act in a responsible way.


Management should be prepared to give all information connected with the working of the industry and labor should handle that information with full confidence and responsibility. The workers should become aware of their responsibilities. The leaders should initiate this in them. Similarly, the top management should make the lower echelons to show a new attitude in the light of the new relationship.

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Scope and ways of participation (Forms):

One view is that workers or the trade unions should, as equal partners, sit with the management and make joint managerial decisions. The other view is that workers should only be given an opportunity, through their representatives, to influence managerial decisions at various levels. In practice, the participation of workers can take place by one or all the methods listed below:

1. Board level participation

2. Ownership participation

3. Complete control

4. Staff or work councils

5. Joint councils and committees

6. Collective Bargaining

7. Job enlargement and enrichment

8. Suggestion schemes

9. Quality circles

10. Empowered teams

11. TQM

12. Financial participation

1.Participation at the Board level:

This would be the highest form of industrial democracy. The workers’ representative on the Board can play a useful role in safeguarding the interests of workers. He or she can serve as a guide and a control element.

He or she can prevail upon top management not to take measures that would be unpopular with the employees.

He or she can guide the Board members on matters of investment in employee benefit schemes like housing, and so forth. The Government of India took the initiative and appointed workers’ representatives on the Board of Hindustan Antibiotics (Pune), HMT (Bangalore), and even nationalized banks. The Tata, DCM, and a few others have adopted this practice.

Problems associated with this method:

Focus of workers’ representatives is different from the focus of the remaining members of the Board.

Communication and subsequently relations between the workers’ representative and the workers suffers after the former assumes directorship.

He or she tends to become alienated from the workers.

As a result, he or she may be less effective with the other members of the Board in dealing with employee matters.

Because of the differences in the cultural and educational backgrounds, and differences in behaviour and manners, such an employees’ representative may feel inferior to the other members, and he or she may feel suffocated. Hence, his or her role as a director may not be satisfying for either the workers or the management.

Such representatives of workers’ on the Board, places them in a minority. And the decisions of the Board are arrived at on the basis of the majority vote.

2.Participation through ownership:

This involves making the workers’ shareholders of the company by inducing them to buy equity shares.

In many cases, advances and financial assistance in the form of easy repayment options are extended to enable employees to buy equity shares. Examples of this method are available in the manufacturing as well as the service sector.

Advantage: Makes the workers committed to the job and to the organization.

Drawback: Effect on participation is limited because ownership and management are two different things.

3. Participation through complete control:

Workers acquire complete control of the management through elected boards. The system of self-management in Yugoslavia is based on this concept. Self-management gives complete control to workers to manage directly all aspects of industries through their representatives. Advantages:

Ensures identification of the workers with their organization.

Industrial disputes disappear when workers develop loyalty to the organization.

Trade unions welcome this type of participation. Conclusion: Complete control by workers is not an answer to the problem of participation because the workers do not evince interest in management decisions.

4. Participation through Staff and Works Councils:

Staff councils or works councils are bodies on which the representation is entirely of the employees. There may be one council for the entire organization or a hierarchy of councils. The employees of the respective sections elect the members of the councils. Such councils play a varied role.

Their role ranges from seeking information on the management’s intentions to a full share indecision-making. Such councils have not enjoyed too much of success because trade union leaders fear the erosion of their power and prestige if such workers’ bodies were to prevail.

5. Participation through Joint Councils and Committees:

Joint councils are bodies comprising representatives of employers and employees. This method sees a very loose form of participation, as these councils are mostly consultative bodies

Work committees are a legal requirement in industrial establishments employing 100 or more workers. Such committees discuss a wide range of topics connected to labour welfare. Examples of such committees are welfare committee, safety committee, etc. Such committees have not proven to be too effective in promoting industrial democracy, increasing productivity and reducing labour unrest.

6. Participation through Collective Bargaining:

Through the process of CB, management and workers may reach collective agreement regarding rules for the formulation and termination of the contract of employment, as well as conditions of service in an establishment. Even though these agreements are not legally binding, they do have some force. For CB to work, the workers’ and the employers’ representatives need to bargain in the right spirit. But in practice, while bargaining, each party tries to take advantage of the other. This process of CB cannot be called WPM in its strongest sense as in reality; CB is based on the crude concept of exercising power for the benefit of one party. WPM, on the other hand, brings both the parties together and develops appropriate mutual understanding and brings about a mature responsible relationship.

7. Participation through Job Enlargement and Job Enrichment:

Excessive job specialization that is seen as a by-product of mass production in industries, leads to boredom and associated problems in employees. Two methods of job designing – job enlargement and job enrichment – are seen as methods of addressing the problems.

Job enlargement means expanding the job content – adding task elements horizontally.

Job enrichment means adding `motivators’ to the job to make it more rewarding. This is WPM in that it offers freedom and scope to the workers to use their judgment. But this form of participation is very basic as it provides only limited freedom to a worker concerning the method of performing his/her job. The worker has no say in other vital issues of concern to him – issues such as job and income security, welfare schemes and other policy decisions.

8. Participation through Suggestion Schemes:

Employees’ views are invited and reward is given for the best suggestion. With this scheme, the employees’ interest in the problems of the organization is aroused and maintained. Progressive managements increasingly use the suggestion schemes. Suggestions can come from various levels. The ideas could range from changes in inspection procedures to design changes, process simplification, paper-work reduction and the like. Out of various suggestions, those accepted could provide marginal to substantial benefits to the company. The rewards given to the employees are in line with the benefits derived from the suggestions.

9. Participation through Quality Circles:

Concept originated in Japan in the early 1960s and has now spread all over the world. A QC consists of seven to ten people from the same work area who meet regularly to define, analyze, and solve quality and related problems in their area. These circles require a lot of time and commitment on the part of members for regular meetings, analysis, brainstorming, etc. Most QCs have a definite life cycle – one to three years. Few circles survive beyond this limit either because they loose steam or they face simple problems. QCs can be an excellent bridge between participative and non-participative approaches. For QCs to succeed in the long run, the management needs to show its commitment by implementing some of the suggestions of the groups and providing feedback on the disposition of all suggestions. Training in problem-solving techniques is provided to the members. QCs are said to provide quick, concrete, and impressive results when correctly implemented.


Employees become involved in decision-making, acquire communication and analytical skills and improve efficiency of the work place.

Organization gets to enjoy higher savings-to-cost ratios.

Chances of QC members to get promotions are enhanced.

The Indian Scenario:

Tried by BHEL, Mahindra and Mahindra, Godrej and Boyce among others.

Experienced mixed results:

M&M (jeep division) with 76 QCs has experienced favourable results.

Technical problems got solved.

Workers got to get out of their daily routine and do something challenging.

Trade unions look at it as: A way of overburdening workers, and An attempt to undermine their role.

10. Empowered Teams:

Empowerment occurs when authority and responsibility are passed on to the employees who then experience a sense of ownership and control over their jobs. Employees may feel more responsible, may take initiative in their work, may get more work done, and may enjoy the work more. For empowerment to occur, the following approach needs to be followed as compared to the traditional approach:


Organizational structure

Job design

Management role


Information flow


Job process

Traditional Organization

Layered, individual

Narrow single task

Direct control


Controlled limited

Individual, seniority based

Managers plan improve, control,

Empowered Teams

Flat, team

Whole process,

multiple tasks Coach,

facilitate Shared with the team Open,

shared Team-based,

skill-based Teams plan, control, and improve

Features of empowered or self-directed teams:

Empowered to share various management and leadership functions.

Plan, control and improve their work.

Often create their schedules and review their performance as a group.

May prepare their own budgets and co-ordinate their work with other departments.

Usually order materials, keep inventories and deal with suppliers.

Frequently responsible for acquiring any new training they might need.

May hire their own replacement to assume responsibility for the quality of their products or services Titan, Reliance, ABB, GE Plastics (India), Wipro Corporation and Wipro InfoTech are empowering employees – both frontline as well as production staff, and are enjoying positive results.

11. Total Quality Management:

TQM refers to the deep commitment, almost obsession, of an organization to quality. Every step in company’s processes is subjected to intense and regular scrutiny for ways to improve it.

Some traditional beliefs are discarded.

High quality costs more.

Quality can be improved by inspection.

Defects cannot be completely eliminated.

Quality in the job of the QC personnel.

New principles of TQM are:

Meet the customer’s requirement on time, the first time, and 100% of the time.

Strive to do error-free work.

Manage by prevention, not correction.

Measure the cost of quality.

TQM is called participative because it is a formal programme involving every employee in the organization; making each one responsible for improving quality every day.

12. Financial Participation:

This method involves less consultations or even joint decisions. Performance of the organization is linked to the performance of the employee. The logic behind this is that if an employee has a financial stake in the organization, he/she is likely to be more positively motivated and involved.

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Some schemes of financial participation:

Profit-linked pay

Profit sharing and Employees’ Stock Option schemes.

Pension-fund participation.

Pre-requisites for successful participation:

Management and operatives/employees should not work at cross-purposes i.e. they must have clearly defined and complementary objectives.

Free flow of communication and information.

Participation of outside trade union leaders to be avoided

Strong and effective trade unionism.

Workers’ education and training.

Trade unions and government needs to work in this area.

Trust between both the parties.

Workers should be associated at all levels of decision-making.

Employees cannot spend all their time in participation to the exclusion of all other work.


Technology and organizations today are so complex that specialized work-roles are required.

This means employees will not be able to participate effectively in matters beyond their particular environment. Everybody need not want participation.

The role of trade unions in promoting participative management has been far from satisfactory.

Employers are unwilling to share power with the workers’ representatives. Managers consider participative management a fraud.

Reason for Limited Success:

1. Firstly, the fundamental difficulties in the way lie in the concept itself. There is a basic conflict of interests between the workers and the owners of the business enterprise. Participation involves parting with power. Managements have been reluctant to part with their authority and prerogative to manage the enterprises. Similarly trade unions have not been prepared to divest themselves of their power manifested in bargaining and pressure.

2. Secondly, multiplicity of trade unions and factionalism has been a serious obstacle in the way of workers’ participation in management. In view of the claims and counter claims, apathy and willingness, hostility and cooperation displayed by rival unions or their factions, designation of workers’ representatives on the participative forums often becomes a very difficult task.

3. The government with its anxiety of maintaining cordial relations between labour and management, increasing production and productivity, achieving planned targets and accelerating the pace of economic and industrial development, came forward with different schemes of workers’ participation in management. Many employers and trade unions still considers them as imposition from outside. Its enforcement by law or compulsion would thwart the very purpose of scheme and would act as serious constraint on its successful implementation.

4. Fourthly, both managements and trade unions have often complained of a plethora of joint bodies in Indian industries for example, works committees, joint management councils, shop councils, unit councils, plant councils, establishment councils, canteen committees, production committees, safety committees, welfare committees, grievance committees , and so on. Thus, it is natural for them to become bewildered by this multiplicity of joint bodies.

5. Another hurdle has been lack of specific arrangements for sharing the gains of participation. Workers are assured in a vague manner, that they would gain if production increases and quality of products improves as a result of participation, but vague and remote expectations cannot be expected to enthuse the workers. A prior arrangement for sharing the fruits of participation is a necessary condition for the success of the scheme on a lasting basis.6.It is the government in India which is more anxious for the establishment of the schemes of participation than the parties which have to work them out. However, displaying an attitude of cooperation with the government in maintaining industrial harmony, most national organizations of employers and trade unions supported the schemes at the national forums, but they have generally failed to enthuse their affiliates about the usefulness of the schemes.7.Lastly, it has also been realized that lack of education and training with regard to the content, process, utility and other relevant aspects of participation have also proved an impediment to the growth of workers’ participation in the country.

Suggestions for Improvement:

For the successful initiation and functioning of the institutions of workers’ participation in management, serious attention has to be given to the removal of the hurdles (as above). Efforts should be made to stir up the management and workers at the local or enterprise level to understand the schemes and to derive concrete benefits from them. The government efforts should be confined to giving guidelines and to remove the impediments in the way, for example, reducing trade union rivalry by amending trade union laws, regulating procedural aspects of collective bargaining, expanding workers’ education programme and evolving a system of sharing the fruits of participation.

Evolution of participative management in India:

The beginning towards WPM was made with the Industrial Disputes Act, 1947, which made Works Committees mandatory in industrial establishments employing 100 or more workers. The Industrial Policy Resolution adopted by the government in 1956 stated that there should be some joint consultation to ensure industrial peace, and improve employer-employee relations. The functions of both these joint bodies were to be consultative and were not binding on the management. The response to these schemes was encouraging to begin with, but gradually waned.

A study team was appointed in 1962 to report on the working of joint councils and committees. The team identified some reasons for their failure.

No concrete steps were taken to remove the difficulties, or change the pattern of participative management.

During the emergency of 1975-77, the interest in these schemes was revived by the then Prime Minister by including Workers’ Participation in industry in the government’s 20-point programme

The government started persuading large enterprises to set up joint consultative committees and councils at different levels.

The Janata Government who came to power in 1977 carried on this initiative. It was again emphasized by the Congress government who came back in 1979. This continued in a “non-statutory vein” till the late 1980s, and the response from the employers and employees stayed Luke-warm. Then, the 42nd Amendment to the Constitution was made.

Now, Article 43-A reads: The State shall take steps, by suitable legislation, or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organizations engaged in any industry. Thus, participative management is a constitutional commitment in India.

And then, on May 30, 1990, the government introduced the Participation of Workers in Management Bill in the Rajya Sabha.

The bill requires every industrial enterprise to constitute one or more `Shop-Floor Council at the shop floor level, and `Establishment Council’ at the establishment level. These councils will have equal representation of employers and employees. Shop-Floor councils enjoy powers over a wide range of functions from production, wastage control to safety hazards. The Establishment Council enjoys similar powers. The bill provides for the constitution of a Board of Management of every corporate body owning an industrial establishment.

The bill also provides for penalties on individuals who contravene any provision of the bill. In spite of all these efforts, only the government and the academicians have been interested in participative management. But participative management is staging a comeback. The compulsions of emerging competitive environment have made employee involvement more relevant than ever before. Managers and the managed are forced to forget their known stands, break barriers, and work in unison. Managers and workers are partners in the progress of business.

Workers’ Participation at TISCO

Since Tata Iron and Steel Company are the pioneers in establishing joint consultation in India, it is worthwhile to look at workers’ participation at TISCO. Closer association of employees with management at TISCO began in 1919 and was formalized in August 1956. The purpose was to promote increased productivity, provide a better understanding to the employees of their role and importance, and to satisfy the urge for self expression. The scheme as set up at TISCO consist f a three-tiered system with joint department councils (JDCs) constituted at the departmental level. Next, joint works councils (JWC) for the entire work, and at the top the joint consultative council of management (JCCM). The specific functions of these three bodies were as follows: JDCs were “to study operational results and production problems, advice on the steps deemed necessary to promote and rationalize production, improve productivity and discipline and economize cost. Promotion of welfare and safety, encouragement of suggestions and improvement of working conditions also fell within their purview.”JWCs were “to discharge special function of reviewing every month the working of JDCs and other committees such as Suggestion Box Committee, Safety Committee, Canteen Managing Committee, etc.”JCCM was given the task of advising management on production and welfare and also looking at matters referred to by JDCs and JWCs In order to ensure that these committees did not overlap the functions of other committees, separate task groups were formed. Special courses were offered to prepare both management and union representatives to effectively utilize the facility. TISCO’s experience with workers’ participation has been satisfactory. From 1957 to the middle of 1972 JDCs have discussed a total of 14,104 suggestions of which 70.3 per cent have been implemented. These suggestions have covered a wide range of topics and issues, but the most important point to remember, perhaps, is that the councils have been successful in involving workers equally in the process of production.



Collective bargaining is process of joint decision making and basically represents a democratic way of life in industry. It is the process of negotiation between firm’s and workers’ representatives for the purpose of establishing mutually agreeable conditions of employment. It is a technique adopted by two parties to reach an understanding acceptable to both through the process of discussion and negotiation.ILO has defined collective bargaining as, negotiation about working conditions and terms of employment between an employer and a group of employees or one or more employee, organization with a view to reaching an agreement wherein the terms serve as a code of defining the rights and obligations of each party in their employment/industrial relations with one another. Collective bargaining involves discussions and negotiations between two groups as to the terms and conditions of employment. It is called ‘collective’ because both the employer and the employee act as a group rather than as individuals. It is known as ‘bargaining’ because the method of reaching an agreement involves proposals and counter proposals, offers and counter offers and other negotiations. Thus collective bargaining:

Is a collective process in which representatives of both the management and employees participate.

Is a continuous process which aims at establishing stable relationships between the parties involved.

Not only involves the bargaining agreement, but also involves the implementation of such an agreement.

Attempts in achieving discipline in the industry

Is a flexible approach, as the parties involved have to adopt a flexible attitude towards negotiations.


Collective bargaining includes not only negotiations between the employers and unions but also includes the process of resolving labor-management conflicts. Thus, collective bargaining is, essentially, a recognized way of creating a system of industrial jurisprudence. It acts as a method of introducing civil rights in the industry, that is, the management should be conducted by rules rather than arbitrary decision making. It establishes rules which define and restrict the traditional authority exercised by the management.

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Importance to employees

Collective bargaining develops a sense of self respect and responsibility among the employees.

It increases the strength of the workforce, thereby, increasing their bargaining capacity as a group.

Collective bargaining increases the morale and productivity of employees.

It restricts management’s freedom for arbitrary action against the employees. Moreover, unilateral actions by the employer are also discouraged.

Effective collective bargaining machinery strengthens the trade unions movement.

The workers feel motivated as they can approach the management on various matters and bargain for higher benefits.

It helps in securing a prompt and fair settlement of grievances. It provides a flexible means for the adjustment of wages and employment conditions to economic and technological changes in the industry, as a result of which the chances for conflicts are reduced.

Importance to employers

It becomes easier for the management to resolve issues at the bargaining level rather than taking up complaints of individual workers.

Collective bargaining tends to promote a sense of job security among employees and there by tends to reduce the cost of labor turnover to management.

Collective bargaining opens up the channel of communication between the workers and the management and increases worker participation in decision making.

Collective bargaining plays a vital role in settling and preventing industrial disputes.

Importance to society

Collective bargaining leads to industrial peace in the country

It results in establishment of a harmonious industrial climate which supports which helps the pace of a nation’s efforts towards economic and social development since the obstacles to such a development can be reduced considerably.

The discrimination and exploitation of workers is constantly being checked.

It provides a method or the regulation of the conditions of employment of those who are directly concerned about them.

Functions or Type of Activities:

A collective bargaining process generally consists of four types of activities- distributive bargaining, integrative bargaining, attitudinal restructuring and intra-organizational bargaining.

Distributive bargaining:

It involves haggling over the distribution of surplus. Under it, the economic issues like wages, salaries and bonus are discussed. In distributive bargaining, one party’s gain is another party’s loss. This is most commonly explained in terms of a pie. Disputants can work together to make the pie bigger, so there is enough for both of them to have as much as they want, or they can focus on cutting the pie up, trying to get as much as they can for themselves. In general, distributive bargaining tends to be more competitive. This type of bargaining is also known as conjunctive bargaining.

Integrative bargaining:

This involves negotiation of an issue on which both the parties may gain, or at least neither party loses. For example, representatives of employer and employee sides may bargain over the better training programme or a better job evaluation method. Here, both the parties are trying to make more of something. In general, it tends to be more cooperative than distributive bargaining. This type of bargaining is also known as cooperative bargaining.

Attitudinal restructuring:

This involves shaping and reshaping some attitudes like trust or distrust, friendliness or hostility between labor and management. When there is a backlog of bitterness between both the parties, attitudinal restructuring is required to maintain smooth and harmonious industrial relations. It develops a bargaining environment and creates trust and cooperation among the parties.

Intra-organizational bargaining:

It generally aims at resolving internal conflicts. This is a type of maneuvering to achieve consensus with the workers and management. Even within the union, there may be differences between groups. For example, skilled workers may feel that they are neglected or women workers may feel that their interests are not looked after properly. Within the management also, there may be differences. Trade unions maneuver to achieve consensus among the conflicting groups.

Process of Collective Bargaining:

The collective bargaining process comprises of five core steps:


This phase involves composition of a negotiation team. The negotiation team should consist of representatives of both the parties with adequate knowledge and skills for negotiation. In this phase both the employer’s representatives and the union examine their own situation in order to develop the issues that they believe will be most important. The first thing to be done is to determine whether there is actually any reason to negotiate at all. A correct understanding of the main issues to be covered and intimate knowledge of operations, working conditions, production norms and other relevant conditions is required.


Here, the parties decide the ground rules that will guide the negotiations. A process well begun is half done and this is no less true in case of collective bargaining. An environment of mutual trust and understanding is also created so that the collective bargaining agreement would be reached.


This phase involves the initial opening statements and the possible options that exist to resolve them. In a word, this phase could be described as ‘brainstorming’. The exchange of messages takes place and opinion of both the parties is sought.


negotiations are easy if a problem solving attitude is adopted. This stage comprises the time when ‘what ifs’ and ‘supposals’ are set forth and the drafting of agreements take place.


Once the parties are through with the bargaining process, a consensual agreement is reached upon wherein both the parties agree to a common decision regarding the problem or the issue. This stage is described as consisting of effective joint implementation of the agreement through shared visions, strategic planning and negotiated change.

Collective bargaining consists of negotiations between an employer and a group of employees that determine the conditions of employment. Often employees are represented in the bargaining by a union or other labor organization. The result of collective bargaining procedure is called the collective bargaining agreement (CBA). Collective agreements may be in the form of procedural agreements or substantive agreements. Procedural agreements deal with the relationship between workers and management and the procedures to be adopted for resolving individual or group disputes.

Pre-requisites for Collective Bargaining:

Employer’s recognition of the trade union.

Bargaining must precede other measures:

Neither party should take any unilateral action.

Results of bargaining should be awaited.

Employers’ and employees’ attitude calls for a change:

The workers and the employers should be quite clear that they are not looking for third party intervention in the form of litigation and adjudication.

They want to sort out their differences in a peaceful way.

Top priority to plant level bargaining:

The representatives of the employees must have a firm resolution to have an agreed solution to their individual matters.

Negotiations on differences:

Both the parties should negotiate on their points of differences or demands with the sole purpose of making an agreement.

Reliance on facts and figures:

In order to make the negotiations result into success, the workers and the management agents must rely on facts and figures to substantiate their claims.

Giving up unfair labour practices.

Written agreement:

The final decisions should be incorporated in a written agreement.

The agreement should include the validity of the agreed matters as also the frequency of its review.

Progress review:

Agreements should not be signed and forgotten.

During their implementation, regular meetings should be held between the representatives of both the parties to watch the progress of the implementation. This way any changes, adjustments and amendments can be effected.

Respect of agreement:

Both the parties must respect the agreement and see that it is implemented in a fair and justifiable manner.

Arbitration provision:

The agreement must include an arbitration clause.

Whenever the parties have any differences pertaining to the interpretation of the terms and conditions, the arbitration clause can be resorted to.

The Indian Scenario on CB:

In India, trade unions gained prominence much later – only after 1900.

In 1918, Gandhiji – as the leader of the Ahmedabad textile workers – advocated the resolution of conflict through CB agreements. But the idea gathered interest only after the Second World War. The Government of that time took steps like setting up of machinery for negotiations, conciliation and arbitration.

The trade union movement and also CB agreements became popular after Indian independence. Moving from agreements at the plant level, such agreements spread to industries such as chemicals, petroleum, tea, coal, oil and aluminum.

In ports and docks, banking and insurance, collective agreements were arrived at, right at the national level.

Assessment of Collective Bargaining in India:

Other than in Ahmedabad and Mumbai, so far, collective agreements have not made much headway in India. Reasons:

Lack of statutory recognition of unions by the country as a whole.

Lack of provisions requiring employers and workers to bargain in ‘good faith’.

The historical problem of ‘lack of trust’ between the parties

Causes of limited success of CB in India:

Problems with unions:

CB mainly depends on the strength of unions.

Weak trade unions cannot initiate strong arguments during negotiations.

Not many strong unions in India.

Indian unions are bogged down by the problems of: multiplicity, inter and intra-union rivalry, weak financial position and non-recognition. So, unanimous decision is unlikely to be presented at the negotiating table.

Problems from Government:

The Government has not been making any strong efforts for the development of CB. Imposition of many restrictions regarding strikes and lockouts has removed the `edge` of the CB process.

Political interference:

Interference of political leaders in all aspects of union matters has increased over the years. Almost all unions are associating themselves with some political party or the other.

Legal problems:

Now that adjudication is easily accessible, the CB process is losing its importance.

Management attitude:

In India, managements have a negative attitude towards unions.They do not appreciate their workers joining unions.

Suggestions for better functioning of CB:

The Indian Institute of Personnel Management has offered the following suggestions:

A progressive and strong management that is conscious of its obligations and responsibilities to the various stakeholders.

A truly representative – enlightened and strong – trade union should come into being and should function on strictly constitutional lines.

There should be unanimity between labour and management on the basic objectives of the organization and a mutual recognition of their rights and obligations. When there are several units of the company, there should be a delegation of authority to the local management.

A fact-finding approach and a willingness to use new tools should be adopted for the solution of industrial problems.

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