master of business administration

What may McDonald's have considered in order to establish their approaches to collective bargaining in both Germany and the UK?

To answer the above question we first need to know about basics of collective bargaining where Collective Bargaining is defined as the process of turning disagreements into agreements in an orderly fashion. Collective bargaining is the process followed to establish a mutually agreed set of rules and decisions between unions and employers for matters relating to employment. This is a regulating process dealing with the regulation of management and conditions of employment. Collective bargaining is used as the negotiation process between employees and employers with unions acting as the representatives of employees. The entire process depends on the bargaining powers of the concerned parties.

In line with the above definition McDonald's may have considered the approach and settings of collective bargains as an important issue of employee relations.

The German setting and approach McDonald's may have considered establishing their approaches to collective bargaining in Germany:

The traditional collective approach to Employee Relations (ER) in German companies is deeply rooted in the particular configuration of the German Industrial Relations (IR) system. This is characterized by a high degree of regulation and a dense, encompassing institutional infrastructure that imposes a uniform set of institutional constraints on companies, but at the same time provides incentives for employers to accept institutional constraints. McDonalds, to establish its approaches to collective bargaining this ER and IR framework may have been considered in first instance. In addition, the institutional structure is highly integrated with strong linkages, not only within the IR system, but also to the wider German businesses system. Key elements of the German model, to which the majority of German companies subscribe, are the centrally co-ordinated sector based collective bargaining system and employee representation at domestic level via the works council system equipped with statutory participation and consultation rights. Food industry in Germany is not beyond this mechanism where McDonald's considerations regarding collective bargaining approach must have encompassed with statutory participation and employee consultation and codetermination rights.

Indeed, German employers have to negotiate a densely structured institutional framework inside and outside the company level. The German approach to collective bargaining is also underwritten by strong labor market legislation and an elaborate welfare system. Despite growing interest in individual bargaining style direct employee involvement mechanisms, their uptake has so far been comparably modest in German companies (Sperling, 1997). Because of the wide ranging rights of information, consultation and co-determination in the German food industry, the use of individual voice mechanisms is relatively unimportant in the German setting where collective bargaining still has the paramount influence. Therefore, in the international context, McDonald's may have considered a propensity to support a collective approach to ER in their international operations by recognizing trade unions, engaging in collective bargaining and establishing strong workplace level employee representation systems.

The UK Setting and the UK Approach to Employee Relations

In contrast to Germany, the contemporary British system of collective bargaining is characterized by a weak regulatory framework and a thin, fragmented institutional infrastructure, which imposes relatively few barriers and constraints on labour relations practices. The fragmentation of the institutional structure goes hand in hand with weak linkages both within the IR system and in connection to the wider national business system which obviously includes food industry in the UK. Because of the relative permissiveness of the contemporary IR context, the UK seems to be a particularly suitable country for McDonald's, as subsidiary, to explore the country of origin effect in international operations, since home country approaches to ER can be transferred relatively unconstrained by host country institutional arrangements. However, to uncover the existence of possible ownership effects it is necessary to establish the differential space between the home and the host country ER approaches. Contrary to the German experience, no distinct stereotypical UK ER approach can be identified. Traditionally the cornerstone of labor relations was the pluralist workplace industrial relations system, which subsequently collapsed in the 1980s in the wake of the neo-liberal labor market policies under the Thatcher government. These reforms are most important issue to be considered in establishing collective bargaining approaches in the UK which have encouraged employers to dispense with collective labour relations and to individualise ER along the lines of US style HRM by end of the 1990s a collective approach to ER is no longer representative of the economy as a whole, but is increasingly confined to the public sector and a dwindling minority of private sector companies. In the private sector, trade union recognition collapsed throughout the 1980s and 1990s and with it the incidence of workplace level trade union representatives. The institution of collective bargaining dramatically declined. By 1998, two-thirds of private sector employees had their pay fixed by management decision without any union involvement. Here, employees are neither represented by collective voice mechanisms, nor do they enjoy a comprehensive individual voice mechanism. In case of establishing McDonald's may have considered those conditions and changing mechanisms to establish their approaches to collective bargaining efficiently.

Factors May have been considered by McDonald's

National Legislation:

National legislation must have been considered by the McDonald's in establishing their approached towards collective bargaining within the industry both in UK and Germany. In the UK legislation there is no specific preference regarding the mode of employee or industrial relationship for MNEs like McDonald's. So McDonald's is well known as anti-union giant in the UK and their approach towards collective bargaining is strictly negative.

In Germany on the other hand, has a highly regulated industrial relations system which, in theory at least, provides considerable constraints on the employee relations practices of MNEs. As a result McDonald had to thing the statutory bindings and regulations constraints regarding approaches to collective bargaining.

Codetermination and collective bargaining rights

The McDonald's in case of both Germany and UK has considered these rights as a different approach. German workers enjoy a dual system of representation, collective bargaining rights and co-determination rights through the institution of the works council and the supervisory board. Together with codetermination and collective bargaining rights, these legally enforceable and constituted rights appear to provide German employees with significant power resources compared to UK employees.

So McDonald's must have considered the issues of the both rights of the employees before establishing their bargaining approach.

Size of Franchise:

The McDonald's corporation established itself in the UK in 1974, in Germany in 1971. The corporation currently has well over 800 stores in Germany amongst approximately 65% outlets are franchisee where in there are a similar number of stores in the UK with some 20% franchisee with approximately 45,000 employees in each country.

In this case being a fast-food market leader in both countries McDonald's have considered the size of franchise. The franchise aspect influence collective bargaining issues through local entity and regulations involvement. So size of franchise is also a factor that may have been considered.

Unioin Membership:

McDonald also may have considered Union membership. German unions are arguably better organized and have retained a position of relative strength compared to those in the UK. Union membership at McDonald's in Germany and in the German fast-food industry is very small at around 5 per cent. However, these low percentages are still higher than the percentage of union membership at McDonald's and the fast-food industry in the UK.

So this issue is an important consideration in establishing Macdonald's collective bargaining approach.

The increasingly anti-union climate:

The increasingly anti-union climate in the 80s and early 90s has encouraged Macdonald's in the UK to withhold or withdraw union recognition, and discouraged employees from joining unions and posed difficulties for recruitment. In Germany, union membership remains at around 5 per cent at McDonald's. The findings suggest that it is only where a works council has been established where still there is better union practice than the UK.

So this consideration may have been involved in planning McDonald's approach towards collective bargaining.

Characteristics of Workforce and Nature of the industry:

McDonald's have considered both the factors in case of both countries to design its approach towards collective bargaining.

Redundancy and employee apathy:

Redundancy and employee apathy amongst part-time, temporary, foreign or young workers undoubtedly play an important role in the low or non-existent levels of union membership. So this factor may have been considered in both UK and Germany.

Strong corporate culture:

Strong corporate cultures are seen as instilling appropriate behaviors and. This is essentially what is argued here with regard to the non-union approach of McDonald's in both the countries.

McDonald's Anti-union belief:

McDonald's is basically a non-union company and intends to stay that way. About unionization in the UK once McDonald's stated that.. unionization has risen its ugly head over the years, but you know, we feel that we offer a good deal to people, all kinds of ways in which we can communicate, so that if there was a problem they can bring it to management, we feel that we don't need unions. But in Germany McDonald's never been outspoken like in UK about union.

Public image

Macdonald's has a big public image and brand reputation which may have been considered both in the UK and Germany to establish collective bargaining approaches.

Employer Associations

Employer associations in Germany are stronger than UK. So the MsDonald'S approach in the UK is different from that of Germany.

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