Relations of Labor Relations and Organizational Performance: Based on Cooke Model

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1 Relations of Labor Relations and Organizational Performance: Based on Cooke Model WANG Junling 1,2, JIANG Wenqin 3, LIU Kun 1,2 1. School of Public Management, Shandong Institute of Business and Technology, P.R.China, School of Business, Nanjing University, P.R.China, School of Business Administration, Shandong Institute of Business and Technology, P.R.China, Abstract: The research on the relations of labor relations and organizational performance has important theoretical and practical significance. It is objective requirement that creates a harmonious labor relation atmosphere to improve organizational performance. This paper systematically reviews the literature on corporate labor relations and organizational performance at home and abroad. This paper analyses the differences of research between domestic and abroad on the basic of literature review. Strategies and measures of promoting labor-management cooperation to improve organizational performance are proposed on the basis of reference of Cooke Model. Keywords: Labor relations, Organizational performance, Cooke model 1 Introduction The research on the relations of labor relations and organizational performance is objective requirement that creates a harmonious labor relation atmosphere to improve organizational performance. Government is coordinating labor relations by carrying out business activities to create harmonious labor relations. But there are still a considerable number of companies which think that paying attention to the importance of labor relations will increase business operating costs and reduce profit margins. In order to achieve profit maximization, the companies want to reduce costs. Their subjective awareness of maintaining harmonious labor relations is not strong. The problems of labor relations in enterprises have become increasingly prominent. The interest of employees is often ignored in labor relations management practice. If a good working relationship management which helps organizations to improve performance is found, it will encourage enterprises to improve labor relations consciously in some extentence. It will contribute to the promotion of sustainable livelihood, social stability and economic development. The study of relationship between labor relations management practices and organizational performance is becoming particularly important. 2 Literature Reviews of Corporate Labor Relations and Organizational Performance The quantitative study of labor relations is the current academic trend in recent years. Some foreign scholars have done some research on the relationship between labor relations indicators and organizational performance. 2.1 The study of foreign scholars The impact of labor relations on economic performance Addison (2001) studied factors that determined organizational performance on the basic of survey data of the UK Department of Labor in The study showed that employee participation, salary and union had influence on organizational performance. Bob Gilson (2006) studied the impact which caused by the rationality of the labor dispute settlement, implementation of labor contract, improvement of work procedures, and system of complaint, democratic participation and the reasonableness of the relevant systems developed on economic performance. 254

2 2.1.2 The relation of labor relations and business strategy Jeffery B. Arthur (1994) regarded the degree of decentralized decision-making rights, employee participation, and the settlement of labor conflicts, salary and structure as the evaluation of labor relations. The study showed that type of labor relations and business strategy had a strong correlation The impact of trade unions on organizational performance Machin (1993) studied economic performance of diversity trade unionism by analyzing the labour relation research data of American workplace in It showed companies that had trade union and collective bargaining paid higher wages. Benson (1994) studied the impact of Japanese manufacturing enterprise on economic performance. The results showed that trade union reduced profit margin and productivity and increased the capital investment. John (2001) studied the relationships between organizational performance and high-performance work practice. It showed that high-performance work practice of trade union resulted in higher organizational performance. 2.2 The study of domestic scholars The measurement of labor relationship status As relation of social economic interests, labor relations are related to the interests of employers, staff union and government. The definition of labor relations itself has differences. The scholars have not come to an agreement when they adopted different indicators to evaluate labor relations. (Wang Hong, 2001; Jiang Ying, 2006; He Sheng, 2007; Zhuzhiwen, 2009; Yu Xin, 2008) Making comments of relation between labor relations and organizational performance Wu Gongde (2005) analyzed the labor relation management has positive impacts on whole enterprise performance from the theory by summarizing empirical study abroad. Xie Haidong (2006) reviewed the foreign scholars theoretical controversies about the problems of labor-capital relationship and organizational performance on the basic of reviewing the literature of domestic research of labor-capital relationship. He also judged the development of empirical study that was about impact of labor-capital relationship on organizational performance and discussed the mechanism of influence between laborcapital relationship and enterprise performance The relationship of labor relations and organizational performance Ding Weimin (2004) explained that cooperative enterprise labor relations were more beneficial to the incensement of productivity and improvement of macro-economic performance. He analyzed that cooperative labor relations was helpful to the incensement of labor productivity. He also analyzed the formation conditions of cooperative labor relations. All his studies are based on the research that western scholar studied enterprise labor relations and change of economic performance of advanced capitalistcountry. Sun Lijun, Li Jishan and Lan Hailin (2008) thought that labor relations harmony needed to be improved. Harmonious labor relations were beneficial to enterprise performance. He regarded perfect management of labor contract and maintenance of labor rights as variabkes to explain enterprise performance. Yan Shuai and Xu Zhegen (2008) thought harmonious labor relations could enhance township enterprise performance by changing the behavior of labor and management and ability of employee. Yang Taofeng (2009) thought ability of employee within the organization, effort level, intention and behavior were the main factors that affected organizational performance. He also discussed the affection that was caused by cooperative labor relations and confrontational labor relations. According to the theory of labor cooperation performance, He Qing (2012) put forward new pattern of labor relations management which was helpful to building harmonious labor relations and enterprise sustainable development. 2.3 The difference between domestic and international research The time of foreign empirical studies of labor relations is Longer. But domestic research is still in its infancy. The evaluation index system of labor relations as an independent empirical research study has become more and more in the last few years. The purpose is to make a quantitative assessment of the status of labor relations. However, quantitative research on domestic labor relations management 255

3 practices and organizational performance are very rare. The quantitative evaluation of labor relations is very different in focus and purpose at home and abroad. Domestic researches are tending to focus on building evaluation system for analysis of the existing labor relations. Foreign scholars tend to study the impact of one or more indicators of labor relations on the organizational performance. Among these studies, empirical research on trade unions is the majority. According to the research from domestic and abroad, scholars did a lot of meaningful and positive exploration from different perspectives in the theoretical and empirical. As two aspects of the performance of labor relations, labor-management cooperation and conflict have important impact on organizational performance (Buchele & Christiansen, 1999; Gordon, David. M, 1996). From the microlevel perspective, labor relations management has a positive impact on organizational performance (Katz, 1983; Morris, 2002; Jody etc, 2004). 3 Cooke Model American scholar William Cooke notes that labor-management cooperation is a model of labor relations. Table1 The potential benefits and costs of labor-management cooperation Management Trade Union Potential benefits 1. Improve labor productivity 2. Improve product and service quality 3. Improve relations with customers 4. Reduce production waste and rework 5. Reduce management costs 6. Enhance communication with employees 7. Improve relations with its employees 8. Reduce complaints and disciplinary 1. Members get affordable 2. Participation in management decision-making 3. Enhancing communication with management 4. Reducing collective consultation controversy 9. Reducing absenteeism, sabotage and employee turnover 10. Enhancing employees' dedication Potential costs 1. Training of labor-management cooperation 2. Loss of rights and authority 3. Exchange manager jobs 4. Regular meeting 1. Assimilated by management 2. Loss of employee support 3. Exchanging employees work 4.Weaken collective bargaining 4 Cooke Theory About Labor Relations and Organizational Performance Labor theory of cooperative performance is built on the goal of greater efficiency which both employers and employees pursue jointly. It emphasizes that both employers and employees should put their efforts into achieving goals instead of mutual antagonism in the process of pursuit. The profit that comes from cooperation of employers and employees is shared by both parties. The earnings of management and unions in labor-management cooperation should be summarized. The relative strength of the union and the company, cooperative structure, organizational constraints are three main factors that influence the intensity of labor-management cooperation. Changes in the relative strength of the union and the company will affect the labor relations. Changes in labor relations will further affect the level of members' effort of the organization to achieve the purpose of enhancing performance. Changes in the labor relations and power of management and organizational constraints will determine an enterprise performance. Labor-management cooperation model which improved organizational performance shows that changes in labor relations has a positive promoting impact on organizational performance. As the theory of labor 256

4 relations strategy, labor-management cooperative performance theory guides how to deal with conflicts of labor relations in microscopic field. It highlights the importance of labor relations management. It is also an important theoretical basis that proves good labor relations is beneficial to promote organizational performance improvement. 5 The Measures of Improving Labor Relations and Enhancing Organizational Performance Firstly, not only in the operation and coordinate labor relations, but also in improving organizational performance, employees who participative management plays an important role. Employees within the organization are mainly employees who are entitled to participate in decision-making related to their work, such as employees or their representatives and employers' representatives together to determine corporate policy and institutional. Its purpose is to promote the harmonious development of labor relations and corporate. Secondly, a sound mechanism of communication should be established to strengthen communication. If the employee's comments or suggestions can be quickly and accurately delivered to the enterprise's management, many contradictions may be resolved. If business decisions and programs are built on the basis of effective communication with employees, the friction between employers and employees will be largely reduced. Thirdly, psychological contract of staff should be met. Only in this way that the psychological contract of staff are well satisfied, will harmonious labor relations and organizational performance be built and enhanced. The psychological contract which is mutual commitment and clear responsibilities can promote the formation of values and culture that is fair and trustful within the enterprise organizational. It can further lead to a corresponding change in staff attitude and behavior. 6 Conclusion The research on the relations of labor relations and organizational performance has important theoretical and practical significance. It is objective requirement that creates a harmonious labor relation atmosphere to improve organizational performance. This paper systematically reviews the literature on corporate labor relations and organizational performance at home and abroad. The quantitative study of labor relations is the current academic trend in recent years. Some foreign scholars have done some research on the relationship between labor relations indicators and organizational performance. This paper analyses the differences of research between domestic and abroad on the basic of literature review. Labor theory of cooperative performance is built on the goal of greater efficiency which both employers and employees pursue jointly. It emphasizes that both employers and employees should put their efforts into achieving goals instead of mutual antagonism in the process of pursuit. Changes in labor relations will further affect the level of members' effort of the organization to achieve the purpose of enhancing performance. Changes in the labor relations and power of management and organizational constraints will determine an enterprise performance. Labor-management cooperation model which improved organizational performance shows that changes in labor relations has a positive promoting impact on organizational performance. As the theory of labor relations strategy, labor-management cooperative performance theory guides how to deal with conflicts of labor relations in microscopic field. It is also an important theoretical basis which proves good labor relations is beneficial to promote organizational performance improvement. Strategies and measures of promoting labor-management cooperation to improve organizational performance are proposed on the basis of reference of Cooke Model. Acknowledgement: This paper is supported by Natural Science Foundation of Shandong Province (Grant No. 257

5 ZR2011GQ003), National Social Science Foundation of China (Grant No. 13CGL071), National Social Science Foundation of China (Grant No. 13BGL147) and Postdoctoral Science Foundation of Jiangsu Province (Grant No C). References [1]. Chang Kai. Labor Relations [M] Beijing: Chinese Labor and Social Security Press, 2005 (in Chinese) [2]. Ding Weimin. Changes in the Corporate Labor Relations and Economic Performance [J]. Fujian Forum (Humanities and Social Sciences), 2004 (7): (in Chinese) [3]. Yang Taofeng. Labor Relations Management and Organizational Performance Improvement [D]. Shanxi Finance and Economics University, 2009 (in Chinese) [4]. He Qin. SME Labor Relations Based on a New Model of Labor Management Cooperation Performance Perspective [J]. Reforms and Strategies, 2012 (9): (in Chinese) [5]. Sun lijun, Li jishan, Lan Hailin. Empirical Analysis of Harmonious Labor Relations and Enterprise Performance [J]. Commercial Times, 2008 (21): (in Chinese) [6]. Yan Shuai, Xu Zhegen. The Relationship Between Harmonious Labor Relations and Township Enterprise Performance [J]. Chinese Township Enterprises Accounting, 2008 (10): (in Chinese) [7]. Barry U Hisch. What Do Unions Do for Economic Performance? Journal of Labor Research, 2004 [8]. Bronars, Stephen G. The Effects of Unions on Firm Behavior: An Empirical Analysis Using Firm-Level Data. Industrial Relations, 1994 [9]. Benson John. The Economic Effects of Unionism on Japanese Manufacturing [10]. Enterprises. British Journal of Industrial Relations, 1994 [11]. Clark Kim. Unionization and Firm Performance: The Impact of Profits, Growth, and Productivity. American Economic Review,

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