Systems Theory and Ethics in Industrial Relations Today

Systems Theory of Industrial Relations: An Overview

According to the systems theory of industrial relations, an industrial relations system is an abstraction comprised of "certain actors, certain contexts, and an ideology" that bind a particular community system together, defined through an agreed-upon "body of rules that govern the actors in the workplace" and "the work community" (Black, 2006, p. 6). For example, the United States might be defined as a capitalist system containing certain actors — such as labor and management — who must come together to negotiate mutually beneficial solutions within a particular industrial context. These actors agree to proceed legally, according to accepted guidelines, and certain principles must be understood as valid even between potentially disputing parties. Labor understands that corporations must make a profit, while corporations understand that workers are entitled to humane working conditions.

The context that gives birth to the system may, of course, change over time, and systems theory in industrial relations allows for this kind of evolution within an industry. The system is therefore not static; it must adapt as the economic, competitive, and social environment shifts around the actors who inhabit it.

Systems Theory in Practice: The GM and NYC Transit Cases

To make the theory concrete, consider General Motors during the height of American prosperity. At that time, GM was able to make very generous agreements with its unionized workers regarding pensions and health benefits for retirees. In a changed competitive context — after arguably poor marketing and manufacturing decisions by GM, combined with the rise of international competition in the car industry — retired employees, through their union representatives, were compelled to give up some of their valued benefits in order to ensure the company's future health and the survival of their pension fund. Before, GM's solvency was taken for granted. As the context changed, the system had to shift toward a new equilibrium that satisfied the needs of workers, management, and the company as a whole.

This contemporary example demonstrates the continued validity of systems theory, with some modifications — notably the need to account for the international and national situation and its impact on a given industry. The system produced a constellation of union demands and management demands located within the context of the American car industry and the culture of the company, all locked into a particular national and international situation. Although competing desires exist within the system, the actors are historically bound by the same circumstances, and agreement remains possible because of their mutual interdependence.

However, more recent examples have shown that when the actors do not agree upon the same basic rules, the system can fail. The New York City transit workers' insistence upon their right to strike — even when their contracts forbade them to do so — is a case in point. Although labor and management shared the same context, both sides interpreted the union's demands in fundamentally different ways. One could argue that this reflects a growing cultural divide between unions and management in America today, particularly in New York City, where the gap between higher- and lower-income workers has widened in ways that affect the system in a non-rational, cultural fashion that is difficult to quantify.

The Nature of Negotiation: Zero-Sum and Beyond

For example, a European worker might expect greater job security and more comprehensive benefits than an American worker, or may place a higher value on union membership. Workers from different cultural backgrounds may respond to the demands of an international management team in very different ways — to the point where their frustrations cannot be clearly defined or resolved through adjustments to the rules of the system alone. Certain industries may even develop their own distinctive cultures, as appears to be the case with government employees in the transit sector. One of the NYC transit workers' central demands was that future union members have equal access to benefits as current members — a matter of union solidarity and pride. Notably, there was also considerable internal dissent and conflict within the transit union itself regarding loyalty to its leadership.

Thus, the systems concept may need to be broadened to include "behavioral as well as structural variables" — that is, the cultural beliefs of workers and managers within a given industry or nation — and "unstructured as well as structured relationships," such as personal attitudes toward leadership or toward the opposing negotiating party, when analyzing job regulation (Black, 2006, p. 7). All of these factors shape how different actors understand what the dispute is truly about, what constitutes "the system," and who has the authority to make the rules.

Negotiating is a bargaining process in which, ideally, both parties should feel they have gained something. However, this is not always achievable. According to classical negotiation theory, in a zero-sum situation it is impossible for one party to advance its position without the other suffering a corresponding loss (Spangler, 2003). In this model, there is one "pie," both sides want all of it, and every gain for one side represents a loss for the other.

This view of negotiating tends to make the process appear inherently unethical, since the losing party is seen as being maneuvered into accepting a less favorable settlement than was initially available. It reflects a classical view of labor and management in which management — possessing greater salary, benefits, and control — is cast as the "haves," while labor representatives compete to reclaim a portion of those advantages in the name of fairness. From this perspective, using legal or strategic sophistication to persuade workers to accept unnecessarily poor wages and conditions is unethical, even if the free market technically permits it.

In a contemporary industrial context, however, the question of winning or losing is often far less clear. Who "wins" when a company cannot remain solvent? Or when management secures an immediately favorable settlement, only to see skilled workers leave for better opportunities elsewhere? In neither scenario does labor or management truly benefit. This suggests that a more ethical and equitable approach to negotiation serves the interests of both parties, and that a more flexible framework than the zero-sum game is necessary. Ideally, a "positive-sum" outcome should be the goal — one in which the sum of gains and losses is greater than zero, or "some other way is devised so everyone gets what they want or need" (Spangler, 2003). Creative negotiating strategies that move beyond traditional competitive bargaining, and that arrive at innovative solutions capable of surprising and satisfying both parties, are both superior and more ethical than a purely adversarial approach.

In the era of corporate and government downsizing, however, the more common scenario is a negative-sum situation, "where the pie is shrinking" (Spangler, 2003). In this context, "the gains and losses will all add up to less than zero" relative to the original position. In the case of General Motors, the entire company required deep cuts across all departments; in the case of the New York City transit workers, budget reductions were necessary across the whole of city government. The challenge in such negotiations is how to distribute the burden of losses as equitably as possible. The unfortunate consequence of this form of negotiation is that no party will ever be fully satisfied with the outcome, which creates a perception of unfairness — even when the settlement is, in fact, as fair as circumstances allow. More on the theory of positive-sum, zero-sum, and negative-sum situations can be found in Spangler's foundational essay.