Negotiation and Collective Bargaining with a workforce


Alan price defines 'negotiation is a form of decision making where two or more parties approach a problem or situation wanting to achieve their own objectives which may or may not turn out to be the same. Negotiation is not simply a matter of splitting the difference so that neither side achieves what it wants. It can produce an out come that meets both sets of goals. In negotiating, both sides must have some goals in common and some that conflict. For example employees and employers will all want the business to survive and expand. However, employers might resist high pay rises to keep costs down, where as the employees want to increase it. Both the side will open negotiations knowing that they will have to move from opening position and that there will be sacrifices on one item to achieve advantage on another'(Alan price,2007).

The international labour organisation (ILO, 1980, cited in Bean, 1985:70) has defined collective bargaining as 'An institutionalised procedure of joint determination of the rules to govern the terms and conditions of employment of the workers concerned and the labour management relationship itself'.

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The concept of collective bargaining can be also referred as the participation of workers in making management decisions. Worker and manager jointly arrive at an amicable solution through negotiations. It gives a industrial democracy to the work .collective bargaining cannot be inflexible as it done through negotiation. The implementation of the collective bargaining can be very easy and voluntary also. As this collective bargaining is influenced by mental makeup of the management and the worker there will be changes in future.

Each party indulged in collective bargaining wants to extract the maximum. This process will compel both the parties to retreat from their original demand and accept less than what is asked for and give more than what is on offer. The people who are participates in the process of collective bargaining do not act for themselves. They are actually the representatives of the company manager or the company labour. So they always try to represent each parties concern.


The main aim of this case study is to find out whether the compensation packages negotiated through collective bargaining are major cause for our inability to compete in many sectors of international market.


To analyse an organisation which has gone through the process of collective bargaining and find out how it affect the organisation in its future business?

TATA tea a case study

Tetley the world's second largest tea brand which is owned by an Indian company called TATA. It has its presence in forty different countries. In the early stages of 2000 the company earned a profit of five hundred million dollars in profit from the production of two hundred million kilo grams of tea. But due to the lack of good management the profit have been completely vanished by the fluctuating global prices. These crises slowly affected the work forces of the estate. The major problem affected area is the Kannan Devan Hills of Kerala, around Munnar in India. In Munnar Tata itself holding a land of 24000 hectares employing 15000 people. Due to the problems occurred in the global pricing s the Tata stopped paying their employees benefits and also tried to cut off the employees from their jobs. This sudden decision made employee union to go on strike. The company was closed for months. At this time the estimated loos of the company was 24 million US dollars.

This lead the company management to take a decision to sell the plantation to a third party to make up their loss in the business. But the strong employee union agitated against this company's decision and stop them from selling the plantation.

The employee union with the support of government went for several negotiation attempts. As a result of this they come to a agreement of buying the company from the TATA group with the help of a big financial organisation. Now about 70% of the share of TATA estate is owned by the employees of newly started company called Kannan Devan Hills Plantations.

As a result of this collective bargaining the new employee owners were not only able to wipe off the cumulative losses but also generate a post tax surplus of 500,000 dollars with in one year. This particular case study of TATA company shows the importance of collective bargaining in a critical situation. Here we can see the collective bargaining helped the employees as well as the employer to sustain in their business by taking a fruitful decision.

Impact of union on Human Resource Management

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Julie Beardwell and Tim Claydon in their book Human Resource Management A Contemporary Approach tells that in situations where workplace ballots are necessary, a trade union is able address the workforce directly as well as mail information to employees . When recognition is won, the trade union acquires a legal right to negotiate terms and conditions to include hours pay and work allocation and discipline.

According to Luis R.Gomez-Mejia, David B.Balkin, Robert L.Cardy the impact of a union on the way a company manages its human resource is significant. Management can expect that the union will affect virtually every major area of Human resource management. In a unionized work place, staffing decisions will be heavily influenced by seniority rather than by merit. Individually focused performance appraisals are severely curtailed. While training programmes are emphasized. Unionized employees tend to receive larger compensation and benefit packages.

More capital per labour hour.

Better quality labour.

Feather bending (high employment than necessary)

Lower quit rates

More rational , professional management

Monopoly wage gains

Restrictive work rules

Voice response interaction



Adapted from Freeman and Medoff (1984)

Advantages and disadvantages of collective bargaining.


'Collective bargaining can create a work atmosphere where both the employee and the employer collectively work in solving the problems. It help in creating a democracy in work place. By the help of collective agreement both the parties' rights will be protected. if the bargaining contract is for more than one year then it will help the employer to budget in future. This will also lead to transparency in case of recruitment, enforcing new policies across the institution. Having a good labour management will help in the development of workforce according to new technology revolution.


When we consider about the negative side of collective bargaining the first problem come is the restriction / limitation to the employee authority. it will create a barrio between the employee and the management. This may also lead to the misuse of power by certain group of employees. Sometimes this collective bargaining may take long time for a proper negotiation. Involvement of out side bodies like government or other organization may drag the issue to extremes. They may oppose the technological innovations and privatization with in the organization. If the employees are not well united it will be difficult to go for a collective bargaining. This will also restrict the power of employer to take decision in matters such as employee wages, bonus and policies. The third party will come as a barrior in between the management and the workforce.


Luis R.,David B ,Robert L in their book 'Managing Human Resources' says that Collective bargaining procedures provide benefits to both the parties .it protect union employees from arbitrary management decisions and provide organizational justices. It helps the management to settle problems very quickly and efficiently otherwise it will end up in work stoppages. Management can use these procedures as a channel to monitor and correct the sources of employee dissatisfaction with the job or the company policies.

From the secondary research done I come to an opinion that compensation packages negotiated through collective bargaining agreements are not always the major cause of our inability to compete in many sectors of the international market.

Inability of competency not only depends on one factor. A failure in good bargaining may result in incompetency.