HR Evaluation

Seven strategies to prevent labour-management disputes overseas

As more and more Japanese companies expand their businesses overseas, cases of labour-management disputes in local areas have been reported occasionally in the mass media. Sometimes these are caused by a gap between Japanese values and local values, and sometimes it is because the local management was unable to cope with worker dissatisfaction.

Overseas labour-management disputes may be reported not only in Japan but also globally, which may seriously damage a company’s image. Let us summarise the current status and causes of labour-management disputes overseas and the strategies for preventing them.

The current status of global labour-management disputes

As Japanese companies expand overseas, the number of labour-management disputes overseas (especially in Asia) is also on the rise. Although there are no accurate statistics on the number of labour-management disputes related to Japanese companies, there have been cases in recent years in which such disputes have become news stories.

For example, a riot occurred in 2012 at a Japanese automaker's Indian subsidiary, leading to the death of the HR Department Head. Many working-level officials and researchers have pointed out the large number of labour-management disputes involving Japanese companies, noting that once a dispute occurs, it tends to be prolonged, lasting several months.

The causes and characteristics of labour-management disputes from the perspective of both Japanese and local companies are as follows:
  • Conflicts tend to be kept secret in the head office because they result in negative evaluations of Japanese managers.
  • Local Japanese managers do not know how to deal with disputes when they are faced with them directly since they have no experience in dealing with such problems.
  • There are many cases in which it is difficult to communicate with young leaders of local labour unions due to generation differences, even if the company tries to appoint a local manager.
  • There are many cases in which the headquarters in Japan leaves the matter up to the local authorities, and when the occurrence of a dispute is discovered, it has already become so complicated that it is difficult to deal with it.
  • Local union leaders also tend to be inexperienced and as such are prone to behaviour which may aggravate the situation.
Socio-economic factors are also at play. In particular, the rapid economic development of China, East and Southeast Asian countries since the 1990s. The improvement in wages and working conditions for local workers as a result of economic development meant higher labour costs for companies. As a result, there were moves to reduce or withdraw from business and to review production plans, causing relations to become tense.

It is also apparent that there is little cooperation between domestic and local labour unions. As per the saying "labour and management as one", it is said that Japanese labour unions have long defended the company's position over that of the workers. As a result, even when labour disputes occur overseas, local labour unions tend to pay more attention to local production conditions than local labour unions.

As described above, while the number of companies seeking overseas business expansion is increasing, it can be inferred that there are many Japanese companies that have not fully developed and prepared for how to manage local workers and what to do to prevent labour-management disputes.

Risk of damaging brand image

Specific actions taken during labour disputes include strikes, sabotage, and picketing. All lead to the stagnation of labour supply caused by workers, which might significantly reduce productivity and impact business conditions significantly. There is the possibility that the situation will spread through mass media or social networking sites, and this may risk damaging the company’s brand image. This applies to both labour-management disputes that occur in Japan and those that occur in Japanese companies overseas.

The noteworthy thing about labour-management disputes that occur overseas is that a company may be criticised by NGOs and consumers around the world, and in some cases excluded from overseas markets. Behind this trend is the globalisation of labour-management relations. The globalisation of companies around the world since the 1990s has led to the creation of a framework to protect workers on a global scale.

For example, in 1998, the International Labour Organization (ILO) adopted the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up which established rules to regulate multinational corporations, including freedom of association, the right to collective bargaining, and the prohibition of forced labour.

In light of the above, the occurrence of labour-management disputes and the failure to respond to them overseas could damage a brand’s image on a global level because it could be reported in the news or spread through social networks in not only Japan, but overseas as well.

What are the seven points to prevent labour-management disputes?

Based on past cases of labour-management disputes, various organisations have proposed strategies for preventing them. These recommendations, if actioned, will affect the Company's approach to local management, resident employees, and seconded employees, as well as to both workers and the working environment.

For local managers and seconded employees, it is required to communicate with the head office. For example:
  • Training on HR knowledge and training on local labour conditions
  • The head office continuously monitors local situations, such as whether local managers entrust HR duties to local staff and lawyers, and whether there are any seeds of conflict
As for the approach to workers and the working environment, it is necessary to consider the overall balance as follows:
  • Regularly share management information with labour unions and employees to avoid making unreasonable demands
  • Avoid hiring workers solely based on limited attributes such as place of birth or attributes
  • In order to avoid complaints, in the case of HR evaluation, give a clear explanation using objective and fair standards
  • Incorporate specific details of illegal or prohibited acts in the rules of employment
  • Create evaluation policies and welfare systems after conducting a survey on local values
Considering the above seven points, we can summarise that it is desirable to treat local workers in a way that respects their values and culture while maintaining communication with the head office.

Strengthening communication and fair evaluation are important

As companies expand into the global market, we cannot just ignore issues which are caused by the improper treatment of local human resources and the differences in culture and values. It is necessary to investigate the local culture and values in advance and to deal with the situation before the issue becomes apparent to local Japanese people, who are communicating with the head office in Japan.

Also, in the case of evaluating local staff, a fair evaluation with easy-to-understand standards is an important strategy to avoid employee complaints. An appropriate evaluation will not only deter labour-management disputes, but will also improve productivity and operational efficiency, thereby contributing to improved business performance.
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