Industrial Relations Glossary - Kaufman's Fundamental Tenets of IR and Strategic Choice
- Maria Pauline Moises
- Nov 12, 2021
- 4 min read
Kaufman emphasizes the need to humanize the industrial relations system in workplaces. Labor, for Kaufman, is not a commodity that can be bought and sold in a market place. Thus, when making policies, Kaufman encourages the usage of the three paradigms of IR namely: science-building, problem-solving, and ethical/ideological.
As modernization thrive, so does the practice of HR. Gone are the days where trade unions and collective bargaining indicates the relations of a company. Now, employers have the upper hand in negotiating with the employees through strategic approaches.
Bounded Rationality - bounded rationality emphasizes that human decisions are not limited by facts and statistics. When making decisions, factors such as the environment and intellectual capability of the person are taken into consideration. Thus, the word bounded rationality signifies that humans, in general, have the capacity to think what is best based on the present situation.
Herbert Simon coined the term Bounded Rationality as a move against neoclassical economics. Simon asserted that human decisions are made depending on several factors and the present situation.
Herbert A. Simon | American social scientist. (n.d.). Encyclopedia Britannica. https://www.britannica.com/biography/Herbert-A-Simon
Campitelli, Guillermo; Gobet, Fernand (2010). "Herbert Simon's Decision-Making Approach: Investigation of Cognitive Processes in iExperts". Review of General Psychology. 14 (4): 354–364. doi:10.1037/a0021256. ISSN 1089-2680. S2CID 6146970
Business Strategy - organizations develop sound business strategies that will allow them to compete in a market with other businesses of the same industry. The goal of a business strategy is to make an organization or a product the market leader amongst others. When making business strategies, upper management, with the guidance of human resources, takes into account the organization’s capital, resources, marketing capabilities, business culture, and economic condition.
Business Strategy | IMD Business School. (n.d.). IMD Business School. https://www.imd.org/imd-reflections/reflection-page/business-strategy/
Contract - it is a written or verbal agreement between two (2) entities that may be comprised of legal and ethical conditions, the scope of responsibilities, social considerations, and honorarium in form of money or in-kind that are beneficial for both parties.
Translex.Org (Law Research) Title II - Contracts http://translex.uni-koeln.de/602450/_/philippines-republic-act-386-/#head_22
Fundamental Theory of Industrial Relations - the fundamental theory of industrial relations seeks to humanize the study of labor and employment. This theory rejects the idea that labor is a commodity with perfect information, perfect contract, and zero transaction. Three criteria are identified to realize the fundamental theory of IR. First, science-building emphasizes bounded rationality, inductive approach, and institutional economics as the basis of theory crafting. Second, problem-solving that advocates union & CBA, labor laws and social protection, and macro-economic policies to promote a pro-labor environment. And last, ethical ideologies that provide a compass to the moral standard in industrial relations
The photo illustrates trade unionism in the Philippines. The Philippines, according to the International Trade Union Confederation, is included among the countries with no guarantee of rights for its workers as of the Global Rights Index for 2018.
Kaufman, B. (2007). The Core Principle and Fundamental Theorem of Industrial Relations. Working Paper 01-01 (March). Andrew Young School of Policy Studies: Georgia State University.
International Trade Union Confederation. (2018, June 6). 2018 ITUC Global Rights Index. https://www.ituc-csi.org/IMG/pdf/ituc-global-rights-index-2018-en-final-2.pdf
Institutional Economics - Walton Hamilton created the word Institutional Economics with a goal that this theory will unite the science of economy by relating the parts of the economic system to a whole. The theory says that economic analysis is made by societal progression, data from other disciplines, cultures, and institutions the individual belongs to.
In a YouTube video titled, Institutional Economics: 5 Minutes Economics: Prof Mushtaq Khan, Prof. Khan of the SOAS University of London further explains the idea of Institutional Economics.
Hamilton, W. H. (1919). The Institutional Approach to Economic Theory. The American Economic Review, 9(1), 309–318. http://www.jstor.org/stable/1814009
Hodgson, G. M. (2000). What Is the Essence of Institutional Economics? Journal of Economic Issues, 34(2), 317–329. http://www.jstor.org/stable/4227559
SOAS University of London. (2018, May 8). Institutional Economics: 5 Minutes Economics: Prof Mushtaq Khan | SOAS University of London. YouTube. https://www.youtube.com/watch?v=YMWR7zw2AZc
Strategic Decision Making - strategic decision making is a crucial technique for achieving short-term to long-term goals that may be influenced by risky internal and external factors. Strategic-decision making is always accompanied by a certain analysis and inspection that are especially used to solve uncertain and high-risk situations. It also gives an organization an idea about future threats and opportunities.
Role of Strategic Analysis in Strategic Decision-Making Papulova, Z & Gazova A. (2016) https://reader.elsevier.com/reader/sd/pii/S221256711630301X?token=A605E32C980BC9671633389EB1B0A41924F47DCB312C06DB7B94CB71C02AFF4065AD29E8F5E0DFF2D8B5742F67AC5D5B&originRegion=us-east-1&originCreation=20211111162145
Photo of interconnected symbols that may affect and influence the question mark (representing solution, challenges, and problems) Photo Credits: BTS Company bts.com
Strategy - strategies are plans taken to deal with situations to achieve long-term goals. It was used in the study of Industrial Relation to identify the phenomenon of the employers getting the upper hand on the act of bargaining with employees. This phenomenon is coined as a strategic approach. When strategies are employed, the employer and employee relationship are generally impacted due to possible organizational changes and decisions made usually by the upper management.
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