Are Unions Good or Bad for Organizations? The Moderating Role of Management's Response
| DOI | http://doi.org/10.1111/bjir.12042 |
| Date | 01 September 2015 |
| Author | Dionne Pohler,Andrew Luchak |
| Published date | 01 September 2015 |
doi: 10.1111/bjir.12042
British Journal of Industrial Relations
53:3 September 2015 0007–1080 pp. 423–459
Are Unions Good or Bad for
Organizations? The Moderating Role of
Management’s Response
Dionne Pohler and Andrew Luchak
Abstract
Union impact research has been hindered by an underdeveloped conceptualiza-
tion of management response, contributing to inconclusive empirical findings.
Integrating the collective voice/institutional response model with the appropri-
ateness framework, we propose that an employee-focused business strategy is a
critical moderating variable in the relationship between union density and orga-
nizational outcomes that mitigates the negative effects of unions and enhances
the positive effects by sending a clear signal of management’s intentions to
co-operate. Using a dataset of Canadian organizations over six years, we
provide empirical evidence to support our arguments. Implications for theory
and practice are discussed.
1. Introduction
Notwithstanding the debate surrounding the broader social effects of
unions, all an IR scholar needs to do in order to provoke a lengthy and
contentious discussion is ask the question: are unions good or bad for
organizations? However, the answer may simply depend on whether a com-
petitive or co-operative union–management relationship exists in the orga-
nization, which has numerous implications for scholars and practitioners
alike. The response to the question of union impact is anticipated by the
collective voice/institutional response (CVIR) model, which argues that
unions have two faces, a monopoly and voice face, with negative and posi-
tive effects for organizational outcomes, respectively (Freeman and Medoff
1984).
Dionne Pohler is at the University of Saskatchewan, Johnson-Shoyama Graduate School of
Public Policy. Andrew Luchak is at the University of Alberta School of Business.
© John Wiley & Sons Ltd/London School of Economics 2013. Published by John Wiley & Sons Ltd,
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The monopoly face is most likely to be seen where the union chooses to
compete with management for economic and social resources through its
ability to regulate the supply of labour and work effort made available to
the organization (Kaufman 2004a). Pushed to its limits, monopolistic rent-
seeking by the union can cripple organizational profitability (Doucouliagos
and Laroche 2009; Hirsch 2004), dissuade investment (Hirsch 1991) and
threaten organizational survival (Bryson 2004). By way of contrast, the voice
face is most likely seen where the union chooses to co-operate with manage-
ment by tapping its membership for hard-to-access information about the
work process and their preferences, as well as to co-ordinate their work
efforts and contributions in pro-organizational ways (Addison and Belfield
2004a). The stronger the union presence and solidarity in the organization,
the greater the union’s ability to rally the employees to respond collectively
with either a competitive or co-operative focus.
Empirical research based on CVIR to date has not resolved the two faces
debate (Verma 2005). Although unions have been found to raise wages above
competitive levels (Booth 1995; Hirsch and Addison 1986; Lewis 1986),
negatively impact employment growth (Addison and Belfield 2004b; Long
1993; Walsworth 2010), and increase the likelihood of costly and dysfunc-
tional forms of workplace conflict (Lewin 2001, 2005), they have also shown
the capacity to institutionalize voice and methods of dispute resolution in
the workplace (Kaufman 2004a), generate productivity-enhancing ideas and
reduce costs associated with turnover (Freeman and Medoff 1984). Reflect-
ing these countervailing tendencies, the direct relationship between unions
and measures of organizational performance (e.g. productivity and profit-
ability) has been inconsistent, and recent meta-analyses show that the results
are difficult to generalize across different industries, countries, years and
workplace labour relations practices (Doucouliagos and Laroche 2003, 2009;
Hirsch 2004).
In our view, one of the most important reasons holding back CVIR
research from yielding more conclusive findings about the effect of unions on
organizational outcomes is that the model fails to account for the common
origins of both the monopoly and voice faces in the power or strength of the
union itself (Kaufman 2004a). The duality inherent in the nature of the
union’s power is also critical to understand because it implies that the union’s
voice face is not necessarily always good and that its monopoly face is not
necessarily always bad (Kaufman 2012), but rather that its impact must be
subject to the moderating effect of some third factor. In this article we argue
and show, consistent with Freeman and Medoff (1984), that this third factor
is management’s response to the union.
Although Freeman and Medoff (1984) initially proposed in CVIR that
management’s response would determine whether the monopoly or voice
face of the union would be more dominant, they did not examine the mod-
erating effect of this response in their empirical studies. Nor did they fully
elaborate upon the theoretical mechanisms through which management’s
response would operate, other than to say that co-operation between the
© John Wiley & Sons Ltd/London School of Economics 2013.
424 British Journal of Industrial Relations
union and management should be preferred over competition (Freeman
and Medoff 1984; Kaufman 2004a). But while the decision to co-operate is
self-evident under assumptions of perfect information and actor rationality,
such a luxury is not often accorded the parties in practice who remain
uncertain about the intentions of the other (Weber et al. 2004). For
instance, management that co-operates with a union, which in turn chooses
to compete, risks suboptimal returns on investment and the ire of share-
holders. A union that co-operates with a management that chooses to
compete against it risks the very survival of its rights to bargain on behalf
of employees. Subsequent empirical research on union impact has either
ignored these nuances surrounding the dilemma of co-operation under
conditions of bounded rationality and imperfect information, or has intro-
duced ad hoc moderators of union impact, such as union–management
co-operation, without attempting to theoretically reconcile the challenges
of such co-operation within the CVIR model itself (Black and Lynch
2001; Deery et al. 1999; Deery and Iverson 2005; Metcalfe 2003; Schuster
1983).
We address the aforementioned limitations in CVIR by drawing upon the
appropriateness framework (March 1994; Weber et al. 2004), a decision-
making model that informs actor’s choices in cases of social dilemmas, such
as the dilemma of the union to compete or co-operate with management. In
combination with research on situational strength (Bowen and Ostroff 2004;
Mischel 1973, 1977), we argue that the stronger the union, the greater its
ability to shape a strong and consistent message (Luchak and Pohler 2010) of
competition or co-operation among its membership base. We propose that
where management responds to the union and its members through decisions
that signal a clear intent to co-operate (e.g. through an employee-focused
business strategy that is dedicated to managing the workforce through invest-
ments in employees, encouraging employee involvement and enhancing
labour management co-operation), the union will respond in kind with a
message of co-operation among its membership, lessening the prospect of
observing negative effects and enhancing the prospect of observing positive
effects.
The study draws data from a national sample of Canadian organizations
over six years, thereby providing access to longitudinal, workplace-level
information about union density rates and outcome variables. These data are
unique in that they overcome methodological limitations in previous union
impact research that has utilized industry-level measures as proxies for
establishment-level characteristics, cross-sectional data and simple binary
measures to represent unionization in an organization (Hirsch 2004). Empiri-
cally, we analyse the relationship between union density and measures
of workplace conflict, climate, turnover, dispute resolution, employment
growth and profitability, as moderated by management signals of intention
to co-operate through an employee-focused business strategy for managing
its workforce. The results show fairly strong empirical support across the
different models tested. We conclude with a discussion surrounding the
© John Wiley & Sons Ltd/London School of Economics 2013.
Union Impact and Management’s Response 425
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