Guidance for a successful social dialogue by businesses

This short guide describes how businesses can successfully engage in social dialogue by linking the context they operate in, to the types of social dialogue that could benefit them. Some examples give very high gains in productivity (see for instance the case of the Maha Oya Group on socialdialogue.org).

Various sources give guidance on the enabling conditions for a successful social dialogue, such as transparent and open communication (ILO n.b.d). In practice, each business context is unique, this means that the type of social dialogue differs per context. As an initial guidance, five different business contexts that can manifest themselves due to internal or external factors are set out below. Note that these are examples and should, therefore, be considered as illustrative and guiding companies in a general way.

Guidance per business context

1. Management needs to implement a new policy on working hours

In this situation, companies face the challenge of maintaining harmonious working relations and preventing conflict whilst implementing a policy change that affects all employees. As this concerns an in-company change in policy, management can engage in bipartite social dialogue with its employees. To ensure a successful implementation of the new policy, it can prove useful to directly engage with employees in a non-institutionalized manner. This can be done through the creation of a bipartite consultative commission specifically for the new policy designs on working hours. Input from the commission can be included in the final policy, which makes it more likely that employees accept the new working hours.

2. A key international buyer requires its suppliers to pay higher wages to employees

When a key international buyer demands higher wages for employees at its suppliers, this poses a dilemma to the management of these suppliers. That is, it is no option to lose a large client, which may be responsible for an important share of their income. However, paying higher wages to employees comes at a cost, which may be too high to uphold competitive advantage with other clients. In this case, it can be beneficial to engage in tripartite social dialogue, as it concerns a topic that is relevant for a sector. In practice, the type of social dialogue entered into is often characterized as institutionalized indirect engagement, with representatives of employees (most likely unions), employers, government and international buyers. Through collective bargaining, it is possible to come to a sectoral agreement on the height of the wages to be paid to employees, which does not reduce the competitive advantage of the sector as a whole.

3. Macroeconomic conditions require a change in business-as-usual

If competition is increasing and financial performance is declining as a result of macroeconomic developments, companies can encounter a crisis situation. This requires drastic strategic changes, which often directly affects employees. Through bipartite social dialogue between the employer and employees in a non-institutionalized manner, employees can have the opportunity to voice their opinion and provide input on proposals for organizational change. As literature indicates that direct and indirect employee engagement are often complementary, both types can be combined. For example, labour unions can play a role in co-determination of strategic decisions, which makes those more likely to gain support from the employees. At the same time, employees can be consulted directly for input on the practical implementation of new policies, which can potentially even lead to innovations. In this way, social dialogue can ultimately enhance the value creation of companies.

4. Employees are not satisfied with their wage payments

In this situation, companies face the challenge of preventing conflict and enhancing employee satisfaction, whilst maintaining profitability. Whether this is a bi- or tripartite issue and whether dialogue needs to be at the factory or sectoral level depends on context; for example, on the existence of sectoral collective bargaining. If this is a one-off conflict concerning a relatively small number of employees, there is no need to institutionalize social dialogue and it is possible to directly engage with affected employees in (a) constructive meeting(s). In the case of a more structural conflict on wage payments, management can consider institutionalizing social dialogue through, for example, indirect engagement in the form of structural meetings with trade union representatives or a employees’ council. As mentioned before, direct and indirect engagements can be complementary. As a relatively sensitive issue, companies may be more successful in enhancing employee satisfaction by engaging in both types of social dialogue.

5. Companies need to implement new international labour laws

In this case, companies face the challenge of implementing new labour policies without compromising financial performance. To prevent costly changes to current management practices, companies can engage in tripartite dialogue with government officials. Since drafting labour laws typically is a lengthy process and affects many companies and their employees in multiple countries, it is most efficient to engage in social dialogue in an institutionalized and indirect fashion. In that way, companies can provide input on law proposals and ensure their financial interest is protected, while unions can ensure the interests of employees are promoted. Ultimately, this will lead to a more effective implementation of new labour laws at the company level.

In all contexts, it is recommended to create a dialogue based on trust and responsiveness. Social partners need to trust each other’s commitment to finding common solutions. Plus, as authors Bryson, Charlwood and Forth (Bryson, A., Charlwood, A., & Forth, J. (2006). Worker Voice, Managerial Response and Labour Productivity: An Empirical Investigation. Industrial Relations Journal, 37(5), 438-455) argue, the effects of employee voice practices like social dialogue depend on managerial responsiveness. Without responsiveness, few policy changes and harmonious relations are likely to ensue.

Source: Social dialogue as Value driver: financial benefits of social dialogue for business. Amsterdam: CNV international & True price, 2017.