A Test of an Efficiency Model of Grievance Activity

A TEST OF AN EFFICIENCY MODEL OF GRIEVANCE ACTIVITY

PETER CAPPELLI and KEITH CHAUVIN*

The authors develop a model in whichthe extentof use of a grievance systemis determinedby wage premiumsand alternativejob opportunities. Specifically,they hypothesize that when workers enjoy compara- tivelyhigh wages or are faced with poor alternativejob opportunities, they are less likely to use withdrawalmechanisms that might lead to dismissal (such as shirking or absenteeism) and more likely to use grievance procedures to address workplace problems. The resultsof an analysisof data for the year 1982 froma large manufacturingcompany are consistentwith this hypothesis.

EMPLOYEE grievancesare one of the most Previous Research on Grievances common measures used to evaluate the level of conflictbetween workers and man- Grievancesare chargesby employeesthat agement and the overall state of employee theirrights have been violatedby manage- relations.There has been littleconclusive mentactions or decisions.In mostcases, the research on the causes of grievances,how- rightsin question have been establishedby ever, and none of the published studieson collectivebargaining agreements, although thesubject consider the role thatfactors out- theymay also be rightsestablished by com- side the organization,such as labor market pany policies or by precedent. (See Lewin conditions,might play in determiningthe and Peterson 1988, Chap. 2 fora reviewof rate of grievances.In thispaper we develop theliterature on grievanceprocedures.) The a simplemodel in whichthe extentof use of rateat whichgrievances are filedby employ- the grievance systemto resolve conflictsis ees is an importantmeasure of the stateof determinedby wage premiumsand alterna- employeerelations because itis indicativeof tivejob opportunities.The model is tested the underlying level of conflict between usingdata for1982 takenfrom a large multi- workersand managementand of the mo- plant manufacturingcompany. rale of the work force,factors that can af- fectperformance. There is evidence,for example, that plants with higher grievance * Peter Cappelli is Associate Professorof Manage- rates have lower productivity(Norsworthy ment and Co-Director of the Center for Human Resources at the Wharton School, University of and Zabala 1985; Ichniowski 1986) and Pennsylvania,and Keith Chauvin is AssistantProfes- lowerlevels of outputquality (Katz, Kochan, sor at the School of Business, Universityof Kansas. and Gobeille 1983) because theyhave more The firstauthor thanks the German Marshall Fund workplace conflictsand problems.' This is for financialsupport for this research. The authors also thank Bruce Fallick, David Lewin, and Michael Wachter for helpful comments. The company pro- ' Kleiner,Nickelsburg, and Pilarski(1989) found a viding the informationfor this study prohibits the more complicated, non-linear relationship between release of the data. Other scholars may analyze the grievances and productivity,and Katz, Kochan, and data using the authors' computer systemin order to Gobeille (1988) found no statisticallysignificant reproduce the resultspresented here. relationshipbetween the two.

Industrialand LabbrRelations Review, Vol. 45, No. 1 (October 1991). C by Cornell University. 0019-7939/91/4501$01.00

3 Sage Publications, Inc. is collaborating with JSTOR to digitize, preserve, and extend access to Industrial and Labor Relations Review Downloaded from ilr.sagepub.com at University of Kansas Libraries on May 18, 2015 ® www.jstor.org 4 INDUSTRIAL AND LABOR RELATIONS REVIEW not to suggestthat the grievancesper se are as of behavioral research in general,is that the cause of lower productivity.Rather, the it has looked only at factors within the argumentis thatthey are a proxyfor prob- firm (see Cappelli and Sherer 1990); in lems,not all of whichcan be resolvedcom- particular, no study has investigatedthe pletelythrough the grievanceprocess. The general role that market forces or eco- unresolved problems can have a range of nomic circumstancesmight play in shap- negative effectson employee behavior, as ing the grievance rate.3 A more general we discuss below. model of grievancesbased on a consider- Attemptsto explain the determinantsof ation of factors external to the firm is grievancerates have focused almost exclu- presented below. sivelyon factorsof traditionalinterest to industrialpsychologists, such as the characteristicsof workerswho are likelyto file The Decision to File a Grievance grievances.These studies have focused on The firstpoint of departure from the individual attributessuch as demographic previous literature is to note that the characteristicsand personality traits. As decision to file a grievance involves a one review however, this literature notes, consideration of the alternative methods has produced no clear pattern of results; for dealing withthe perceived inequityor the onlyconsistent finding across studiesis conflictthat occurs when management is thatyounger workersfile more grievances seen as violatinga worker's rights.There than older workers (Murchinsky and is an extensive body of research in Maassarani 1980). Other attempts have psychologyindicating that when employ- looked at the structureof the organization ees perceive inequity that cannot be as a determinantof grievance rates, but rationalized away, theytry to reestablisha here too the results conflict(see Gordon sense of equity either by withdrawing and Miller 1984). Nor do the characteris- from the situation (for example, via ticsof the jobs (Ash 1970) or the styleand absenteeism or quitting) or by reducing characteristicsof leadership-either man- their effortand inputs to the job, what agement or union-play a consistentrole economistsgenerally describe as shirking. in explaining grievance rates (Lewin This argument is generally known as 1983). Indeed, it is not even clear from "equity theory,"and wide-rangingstudies previous research whethergrievance rates in organizationalpsychology over the past are higher in union than in nonunion two decades have found considerable workplaces (for example, Kissler 1977).2 support for it (see Adams 1963 for a In short,the existingliterature offers a description, and Berkowitz and Walster sometimes conflictingand at best incom- 1976 and Weick 1979 for surveys of its plete explanation of grievance rates. Cer- applications). tainlyone characteristicof this literature, The mechanisms of withdrawal and reducing inputs can be exercised unilater- 2 It mightseem apparent thatthe characteristicsof ally and can provide more or less immedi- unions and especially of their shop stewards are an ate satisfaction,two potential advantages importantfactor, since, among other things, shop from the worker's perspective. They stewards counsel the grievant initially about the clearly impose costs on the employer, likelihood that a grievance will be sustained and, therefore,about whether it should be filed at all however, and may lead to costs for the (Dalton and Todor 1979). However, recent develop- employee as well, costs that we examine ments that have made it easier for workers to below. The procedural arrangementsas- successfullysue their union for failing to represent them adequately in grievances cases (the so-called "dutyof fairrepresentation") have made unions very 3One possible exception is Peach and Livernash's reluctant to dissuade a member from filing a 1974 case studyof grievancerates in basic steel. They grievance(see McKelvey 1977). Kleiner,Nickelsburg, considered the indirect relationship between tight and Pilarski (1989) did find, however, that union- labor marketsand turnoverthat, in turn,led to more related events such as strikes and union elections frequent selection and placement decisions and to affectgrievance activity. additional grievances.

Downloaded from ilr.sagepub.com at University of Kansas Libraries on May 18, 2015 A TEST OF AN EFFICIENCY MODEL OF GRIEVANCE ACTIVITY 5 sociated with union representation, as absenteeismand otherforms of shirkingin- Freeman (1980) has argued, add further crease the probability of dismissal; and mechanismsfor dealing withthe problems strikeslead not only to a loss of wages but of individual employees. The most impor- also to the possibilityof losing one's job to tant of these "voice" mechanisms for permanentreplacements or, in the case of addressing the workplace problems of unauthorizedwildcat strikes, by dismissal. workersas individuals is clearly grievance It is important to note the distinction procedures, although in some cases unau- between this position and Freeman's thorized industrial action by a group of (1980) voice argument. Freeman argued workers (wildcat strikes) can also be a that the availabilityof voice mechanisms means of forcing a resolution of these like grievanceprocedures leads to changes problems. And although collective bar- in employee behavior (for example, longer gaining is in general an importantvoice tenure and lower turnover). We argue mechanism,it typicallyfocuses on issues of that use of the "voice" mechanism is itself concern to the work force as a whole an outcome: the extent to which employ- ratherthan on the kind of individual-level ees want to use grievance procedures is a inequities that lead to most grievances. functionof the costs of using alternative The employee's decision to address a mechanisms,costs shaped by the value of problem through grievance procedures one's currentjob relativeto opportunities should involve some comparison of the elsewhere, which in turn varies with cost and effectiveness of the various conditionsin the labor market.Hirschman methods for dealing withworkplace prob- (1970, Chap. 3) drew a similardistinction lems. Although grievants are protected between situations in which voice is an from reprisals by management, and the alternativeto exit and those in whichvoice administrative costs of presenting the mechanismsare used because exit is not a grievance are borne by the union,4 there viable alternative. Freeman's argument may be important psychological costs in corresponds to the former situation, the formof confrontingone's supervisors, whereas ours is closer to the latter.5 being cross-examined as part of the There is evidence fromother studies to proceedings,waiting months or longer for support the general view that the use of the grievance to be resolved, and so on. grievance procedures is a functionof the These costs may vary across individuals, costs and effectivenessof alternativemeth- but they may reasonably be thoughtof as ods for dealing with worker problems. fixedfor the kind of intra-firm,plant-level Kuhn's (1961, Chap. 5) case study of comparisons considered below, not only workplace relations in the tire industry, because the grievance process is the same for example, illustrates how slowdowns for all workersbut also because the kind and wildcat strikes replaced the formal of plant-levelaggregated informationwe grievance process as a means for address- willuse tends to cancel out individual-level ing workplace conflicts.As the bargaining differences. power of the work groups increased, the The costsof using alternativemethods of cost of using the formermethods fell. At problem-solving,however, clearly are not least one experimentalstudy suggests that fixed. For example, where workersreceive grievance procedures are used less and a wage premiumover alternativejobs in the turnoverand strikesare higher when the outside market,they have a greaterincen- grievance process is perceived as being tive to deal with work-related problems more costly to use-slow-moving, inequi- throughgrievance procedures, because the table, and operating poorly (Sulkin and alternativemechanisms might lead to a loss of that premium. Quittingclearly does so; 5Akerlof (1982:550) offered in passing a somewhat similar argument, namely, that unions-and presumably the voice mechanisms associated with 4 The exception is the railroad industry,in which them-are more likelyto formwhere jobs offersome the costs of the grievance system are heavily premium over opportunitieselsewhere, because the subsidized by the government. alternativeof quittingis less attractivein such jobs.

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Pranis 1967). Ichniowski (1986) found grievance procedures varies directlywith that in the absence of a grievance proce- the size of the wage premiums and with dure, productivityis lower, which we the level of unemploymentin the outside would explain as reflectingworkers' use of labor market. (A formal version of this less constructivemeans for dealing with model is outlined in the appendix.) We problems,such as shirkingor quitting. propose to test the argument outlined The argument that a wage premium above withan interestingset of plant-level, may have the effectof increasing the use employee-relations data taken from a of grievance procedures is related to the large manufacturingcompany. The char- general efficiency wage hypothesis in acteristicsof these data help to control for economics, which argues that a wage many of the experimental and statistical premium may change employee behavior problems that could confound tests of a in ways that benefit the firm.6Manage- relationship between grievance activity ment should prefer that conflicts be and economic circumstances. addressed through the grievance proce- Perhaps the most importantproblem is dure rather than through the more costly the need to control for underlyinglevels alternatives noted above, and a wage of conflictand perceived inequity across premium makes the routine use of a plants. Grievance activitymight be higher grievance procedure more likely. Indeed, because a plant has more problems as well this explanation of grievance use is in fact as because labor market circumstancesat a corollary of efficiencywage theories, that plant make it more desirable to use which suggest that wage premiums raise the grievanceprocess for addressing those the cost of shirking(for example, Shapiro problems. Fortunately,the design of our and Stiglitz 1984) and of turnover (for data can control for many of the factors example, Krueger and Summers 1987), that previous research suggests might two important alternatives for dealing influence the underlyinglevel of conflict withconflicts, by raisingthe costs of losing across plants. For example, the plants in one's job. In other words, the wage our studyare all engaged in the same basic premium lowers the relativecost of using type of manufacturing,and we can also the grievance systemby raising the costs identify categories of plants within the associated with alternativemethods.7 firmby theirfunction-either assemblyor components (parts) manufacturing-in the overall production process. The na- Model and Data ture of production work is largely the same across plants with similar functions. From the perspective of workers,their As a result, there are few systematic use of the grievance procedure can be differences in job characteristicsacross thoughtof as a simple optimizationprob- such plants. lem whereby they minimize the costs of Second, because the plants are all within resolving their perceived problems by the same company and are representedby choosing among alternative resolution the same union, there are no basic mechanisms, subject to a given level of differences in management and union perceived conflictsand problems. Condi- policies of the kind that may affectlevels tions in the labor market determine the of conflict and grievance rates in inter- costs of using alternative mechanisms. firmstudies. Further,all of the plants are Specifically,we hypothesizethat the use of covered by the same union contract,which specifies procedures for dealing with 6 See Akerlofand Yellen (1986) and Stiglitz(1986) grievances. The contract also establishes for surveysof the efficiencywage literature. virtuallyidentical termsand conditionsof It is important to remember, however, that employmentacross plants. Finally,a com- because workers cannot be disciplined or dismissed for filing grievances, the threat of losing that pany-wide union-managementcommittee premium should not lead to a reduction in griev- reviews all grievances that are not settled ances. at the plant level and attempts to apply

Downloaded from ilr.sagepub.com at University of Kansas Libraries on May 18, 2015 A TEST OF AN EFFICIENCY MODEL OF GRIEVANCE ACTIVITY 7 consistent solutions to such cases. This prevailing in the plant's Standard Metro- structurehelps standardize practices with politan StatisticalArea (SMSA) for pro- respect to grievances across plants and, duction work, varies from almost zero to more important, helps standardize em- as much as 100%. (Four plants were ploymentpractices across plants. located outside of SMSAs, and the appro- The design of the data also helps ensure priate state-wide gross average hourly that the direction of causation is clear: wage was used in those cases.) Larger because compensation is determined cen- premiums increase the cost of using the trallythrough collective bargaining and is alternative mechanisms for dealing with identical across plants, we know that conflict noted above. We recognize that differencesin grievances and in related this aggregate measure will not accurately aspects of employee relations cannot be capture the labor market alternativesfor causing differencesin relative compensa- all plant workers.The measurementerror tion across plants. that resultsmakes it more difficultto find The variables used in the study are significantrelationships with grievances- reported in Table 1 and are described making for more conservative tests of below. hypotheses-but also may bias the estima- Wage premium.Although wage rates are tor. identical across plants, the extent of the Plant type.There are several reasons for wage premium above the market level believing that workers in assembly plants varies across plants. The plants in this should make greater use of grievance company are distributedwidely across the procedures. First,because assembly work United States and thereforeoperate across is often thought to be more machine- very differentlabor marketswhere rates paced and oppressive than the work in the of pay for productionjobs vary consider- other (parts-manufacturing)plants, work- ably. The wage premium (WPREM), mea- ers in assembly plants may experience a sured as the difference between the higherlevel of underlyingconflict, leading average hourly wage of workers in the in turnto higher grievancelevels (Blauner plant and gross average hourly wages 1964). Further, the wage premium as Table 1. Variable Definitionsand Mean Values. Variable Definition Mean S.D.

GRIEV Grievances divided by average number of workersin plant's 22 15.1 bargaining unit (1st writtenstep grievances) WPREM Plant wage (average hourlywage for plant workers)minus gross $3.02 1.5 average hourlywage for production workersin the SMSA where the plant is locateda

UE Unemploymentrate in the SMSA in which the plant is locateda 12.84 4.0 LAIDOFF Percentage of workersin bargaining unit on layoff 25.71 16.5 cooP Corporate assessmentof cooperative relations/problem-solvingat 3.52 0.8 plant (1 = most cooperative; 7 = least) ASSMBLY Dummy variable for assemblyplants 0.28 0.45

SEN Percentage of workersin bargaining unit withless than ten years 45.2 19.3 of seniority

SKL Percentage of workersin bargainingunit withcraft jobs 18.06 9.9

DISL Number of workersdismissed for disciplinaryreasons divided by 9.68 6.2 number of workersin bargaining unit

ABST Average monthlyunpaid absences divided by number of workers 6.0 4.1 in the plant's bargaining unit GRATE GRIEV/DISL + ABST + GRIEV (all observations>0, <1) 0.23 0.18 a Statewideaverage data were used for four plants thatwere located outside of SMSAs. SMSA data are from U.S. Bureau of Labor StatisticsArea Wage Surveysand fromEmployment and Earnings.All other data are from internalcompany records for 1982.

Downloaded from ilr.sagepub.com at University of Kansas Libraries on May 18, 2015 8 INDUSTRIAL AND LABOR RELATIONS REVIEW measured above may understate the true Seniority.There are at least two conflict- premium for jobs in assembly plants. ing hypotheses concerning the relation- Assemblywork may require less skill than ship between seniorityand grievance use. many jobs in component manufacturing As noted above, previous studies suggest (where machining and other semi-skilled that younger employees and employees work is more common), and the workers with less experience tend to perceive less in assembly jobs should therefore com- equity, have more complaints, and file mand a somewhat lower wage on the more grievances. The reason may be, as outside market. Because the measure of Borjas (1979) suggested, because they wages for production work in the outside have had less time in which to make a labor market does not differentiatebe- good job match and are therefore less tween assemblyand component work, the likely to be satisfied with the job they real wage premium for assembly plant currentlyhold than are older and more jobs may be higher than the measure used experienced workers.On the other hand, here. Workers in these plants appear to the costs of job loss associated with using have more to lose if dismissed and should nongrievance mechanismsare greater for therefore be more inclined to use the older workers with more seniority,be- grievance procedure and less inclined to cause it may be more difficultfor them to pursue alternativemechanisms associated find alternativejobs, and they may lose with job loss than our wage premium seniority-basedentitlements such as pen- measure would suggest. A variable is sion rights. We might therefore expect included to distinguish assembly plants them to make greateruse of the grievance from plants involved in less automated, process to resolve whateverinequities they component manufacturing(ASSMBLY). do perceive. We include a measure of Unemployment.In addition to the wage average company seniority (SEN) across premium, we include a measure of the plants as a measure of job experience and percentage of workers on layoff at each as a rough proxy for average workerage, plant (LAIDOFF) as well as the unemploy- but the sign of the relationship with ment rate in each plant's SMSA (UE). The grievance activityis difficultto predict. former can be thought of as the rate of Craftstatus. There may be some differ- unemploymentfor workersat each plant. ences across plants in the average charac- Both measures suggest something about teristicsof jobs and of workers in them, the opportunitiesfor alternativeemploy- due not only to the plant type but also to ment; where unemployment rates are differencesin the proportion of workers high, it is more difficult(costly) to find a doing traditional craft work (such as new job if one quits or is dismissed for electriciansand plumbers). Craft workers shirking.Similarly, it may be more diffi- are present in every plant, where they cult to find a job where more of one's typicallyperform maintenance functions, fellow workers (whose skills and job but theirpresence across plants varies, for searches are likely to be similar) are laid example, because of differencesin the age off. Therefore, use of the grievance and state of the capital equipment. The system should vary directly with these jobs of craftworkers differ from those of rates. non-craft production workers, and the These variables all serve as proxies for characteristicsof craft workers may be the cost of alternativemethods for resolv- differentas well, since these workerscome ing conflicts, and the model described from skilled labor markets that exist above suggests that they should all be independentlyof the firm. positivelyrelated to grievance rates. We It is not clear a priorior from previous also include other variables to control for research, however,exactly what influence forcesexogenous to the model that might the presence of skilledworkers might have influence'the level of grievances by in- on average grievance rates. One former creasingthe level of perceived conflictand union officialin the industrysuggested to problems across plants. us thatworkers in skilledtrades have more

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complaints because their jobs are less and attitudes expressed by union and defined-possibly raising grievance lev- plant management officials toward each els-but also are more able to get them other as indications of the extent of addressed informally,outside of the griev- cooperative relationsat each plant. ance process, because of their greater Obviously, there may be differencesin individual bargaining power-possibly underlyinglevels of conflictacross plants lowering grievances. Further, workers that are not captured by the control with craft skills may have better job variables above. But for the purposes of alternativesthan other workersand be less the test of the model proposed here, the reluctantto use methods of solving prob- issue is whether unexplained differences lems other than the grievancesystem. Like in levels of conflict across plants are seniority,therefore, the skill variable may positivelycorrelated with the labor market also capture some aspect of job alterna- variables, a relationship that would con- tives. We include a variable for the found the test. percentage of workers with skilled trades If there is any relationship between jobs in each plant (SKL) to capture these levels of conflictand labor market condi- effects. tions as measured by the right-hand-side Cooperation.The final variable (coop) variables, it is likely to be an inverse attemptsto control for differencesin the relationship and to work against our level of conflictacross plants and in the hypothesis.Workers' judgments as to the abilityto solve problems that arise infor- equity of particular management actions mally before they are filed as grievances. thatmight lead to grievancesare not made Officials from the company's corporate in a vacuum, but presumablyare based in staffassessed each plant according to how part on their overall sense of equity and well plant management and the local satisfactionwith the other aspects of their union worked together. Plants in which jobs. One way to thinkof this argumentis management and local union officialshad as an application of compensating differ- good problem-solvingskills and used them entials; if workers feel generally satisfied to solve problems jointly (as opposed to with the other aspects of theirjobs, they plants in which problems were addressed may be less likelyto perceive inequities in through confrontation) were rated as particular management decisions and, in cooperative. (Management officialsstated turn,less likelyto file grievances.Previous that this measure was not based on plant research lends support to this position. grievance rates.) The general ability of For example, the size of the wage pre- unions and management to work well mium above market rates is positively together may reduce the number of associated with aspects of job satisfaction conflictsthat affect individuals and may (Cappelli and Sherer 1988), and higher help to resolve problems informally. unemploymentrates in the external labor Greater cooperation should therefore be market are also associated with higher associated withlower levels of conflictand levels of satisfactionfor those with jobs grievances. (Smith, Kendall, and Hulin 1969). Where Ideally, such measures should be de- levels of satisfactionare higher,one would fined in terms of actual behaviors exhib- expect perceived inequities and conflictto ited by the parties,and the more behaviors be lower, ceterisparibus, and grievances to the better. As is often the case, however, be lower as well. Further, higher wage this measure was more impressionistic, premiums and tighterlabor marketsmay based on the question, "How cooperative allow plant management to hire better- are plant-level labor relations?" and as- quality workers. As Staw, Bell, and sessed on a 1-7 point scale with 1 = most Clausen (1986) found, some workers are cooperative. The corporate staff looked disposed toward lowerjob satisfactionand for the presence of joint union-manage- greater complaints independent of their ment programs, evidence of cooperative jobs, and management may be able to use approaches to solving specific problems, tighterlabor marketsto hire fewerof such

Downloaded from ilr.sagepub.com at University of Kansas Libraries on May 18, 2015 10 INDUSTRIAL AND LABOR RELATIONS REVIEW workers.8Therefore, higher wage premi- (1) ln(GRIEV/1-GRIEV) = ums and greaterunemployment should be a + bWPREM + b2ASSMBLY + b3LAIDOFF associated with lower levels of underlying + b4UE + b5SEN + b6SKL - b7CoOP + e conflictand should, if anything,operate against the relationship suggested by the We can use additional data to further model, making for a more conservative control for the possibilitythat underlying testof our hypothesis. levels of conflictdiffer across plants. The The specification of the model is ideal measure would be one that included straightforward.The measure for griev- all the worker conflictsand problems at ance rates(GRIEV) is thenumber of written the plant thatcould have gone throughthe first-stepgrievances as a proportionof the grievance process-not only those dealt average number of workers during 1982 withthrough the grievancesystem but also in each plant's bargaining unit. The rate those handled through the alternative varies between 0 and 1, and thereforea channels described above. With such a log-odds ratio of the variable is used in the measure it would be possible to identify estimatingequation. Because the depen- the plants in which the grievance process dent variable and several of the indepen- handled a larger percentage of the total dent variables are plant-wide averages workplace problems. based on the characteristicsof all employ- Not surprisingly,no such direct mea- ees at each plant, the estimatesfor plants sure exists, but it is possible for us to with fewer employees will have more constructa rough proxy for it by examin- error. Weighted least squares is used to ing the other mechanismsfor addressing a correct for the heteroscedasticitythat sense of grievance outlined above. We results.And as Amemiyaand Nold (1975) have a direct measure for one of the pointed out, the weightsshould include a alternative mechanisms: unpaid (unex- correction for equation error to prevent cused) absenteeism,expressed as the aver- understating the standard errors of the age number of unpaid days absent divided estimates.9The estimatingequation is as by the number of workersin the bargain- follows: ing unit. (This measure is sometimes referredto as "controllableabsenteeism.") We also have a direct measure for with- 8 There may, however,be exceptionsto this argument.Greater unemployment in the outside drawal of effortassociated with shirking. labormarket and higherplant wage premiumsmay That measure is the rate of disciplinary also give managementmore freedomto tighten layoffs,expressed as the number of such disciplineand to dischargemore employees because layoffsdivided by the number of workers the supplyof replacements,and presumablytheir in the bargaining unit. The collective quality,is greater.Tighter standards may lead to moregrievances. But centralized company personnel bargaining agreement restrictsuse of this policiesand commongrievance standards limit the disciplinaryaction to issues associated with abilityof plant managementto take such actions. shirking, broadly defined (for example, Further,it is not at all obvious that stricter failure to meet production standards, standards-ifthey do occur-would be enough to overcomethe above relationshipsand lead to a net failure to follow instructions,carelessness, increasein grievances.Second, unions may file more and safetyviolations). grievancesin responseto at least certainkinds of One importantwithdrawal mechanism for layoffsin an attempteither to reversethe layoffs or whichwe have no directmeasure is volun- simplyto protestthem. Where this is thecase, there taryturnover. The year in which the data maybe somepositive association between the LAIDOFF variableand grievancelevels. forthis study were collected,however, was a 9 Each observation was weighted by [s015 + recession year (1982), and voluntaryturn- {EMPLOYMENTk * Grievancesk( - Grievancesk)}l 2, over at that time, according to managers, where s21, is an estimate of the variance calculated was virtuallynonexistent, since the union- from the parameters of an OLS estimation of the ized jobs provided by this company were above log odds equation and EMPLOYMENTk is the in number of workersat each of k plants. The log odds betterthan alternativejobs the commu- equation was then estimated again using the nitieswhere the plants were located. Also, weightedobservations. evidence from other studies suggests that

Downloaded from ilr.sagepub.com at University of Kansas Libraries on May 18, 2015 A TEST OF AN EFFICIENCY MODEL OF GRIEVANCE ACTIVITY 11 turnoverand absenteeismtend to be corre- Results lated in cross-sectionaldata (Porter and Steers 1973; Mobley 1979), so some of the The results are presented in Table 2. variance in turnovermay be captured by Beginning with equation (1), the wage the absenteeismvariable. premium (WPREM) is positivelyand signifi- One problem is that these measures cantlyrelated to grievance rates, suggest- might include absences and shirkingthat ing that the use of grievance procedures arise not only fromthe kind of complaints does increase as the wage premium rises against management that could result in because the costs of using alternative grievances but also from other kinds of methods for conflictresolution rise. Simi- problems that cannot be handled through larly,plant-level unemployment (LAIDOFF) the formal grievance procedure, such as personal difficultiesthat are not caused by Table 2. Effectsof Wage Premiumsand the job. There is, however, no a priori AlternativeJob Opportunities on Grievance reason to believe that the proportion of Ratesin a ManufacturingFirm, 1982: nongrievable problems represented by RegressionResults for Log-Odds Grievance these variables should vary systematically MeasuresAcross Plants. across plants and bias the results. (WeightedLeast Squares) Each of the grievance,absenteeism, and Equation1 Equation2 discipline variables identifies individual DependentVariable GRIEV GRATE be manifestationsof a incidentsthat could Intercept - 4.37*** -0.275*** sense of inequity,and all are expressed as (4.60) (1.64) the rate per 100 workers. They were WPREM 0.46*** 0.069*** therefore combined into an index with (4.37) (3.68) equal weights. Grievance rates are then UE 0. 10*** 0.014** expressed as a percentage of that index (2.64) (2.08) (see Table 1). The variable that results LAIDOFF 0.008* 0.008* (GRATE) can be thought of as a rough (1.65) (1.90) proxy for the percentage of potentially cooP -0.13 - 0.0056 grievable workplace problems that were (1.21) (0.28) actually addressed through the grievance ASSMBLY 0.56** 0.096** procedure.'0 This variable is bounded (2.40) (2.36) between 0 and 1 and is therefore ex- SEN 0.008 0.0014 pressed in the form of a log-odds ratio (1.52) (1.55) - GRATE)]. [ln(GRATE)/1 This variable is SKL 0.014 0:0023 then regressed on the same set of inde- (1.25) (1.16) pendent variables used above: R2 = .46 .41 (2) ln(GRATE/I - GRATE) = a + bWPREM R2 = .41 .35 StandardError + b2ASSMBLY + b3LAIDOFF ofEstimate: + b4UE + b5SEN ? b6SKL - b7CoOP + e SSE = 118306.67 3016.02 SSR = 144223.57 4377.07 F = 9.55 7.68 n = 86 86 10No doubt there is covariance among grievances, absenteeism,and disciplinaryactions-for example, Note:T statisticsare in parentheses.All of the many disciplinary actions will be grieved-and valuesfor both dependent variables were between 0 therefore the inclusion of absence and discipline and 1. R2s,F statistics,and SSE and SSR estimates adds less informationthan one might have hoped maynot have the usual interpretationswhen using for. But it is also clear that these three measures are weightedlog-odds regressions and are reportedhere far from identical and that some information is only for illustrativepurposes. Similar results were thereforegained as a resultof includingall of them. otained using other specifications,such as In There were no shop floor or wildcat strikes,an (WPREM), and are availablefrom the authors. alternativemethod for dealing with problems that * Statisticallysignificant at the.10 level: ** at the extend to groups, during the period considered .05 level; ***at the.01 level here.

Downloaded from ilr.sagepub.com at University of Kansas Libraries on May 18, 2015 12 INDUSTRIAL AND LABOR RELATIONS REVIEW and unemploymentin the plant's SMSA the grievancelevel, we examined thisresult (UE) are both positivelyand significantly furtherwith a two-stageleast squares re- related to grievances; where unemploy- gression to generate an instrumentalvari- ment is higher, the costs associated with able forthe denominator.The results,avail- findingalternative work rise,and the costs able on request, are virtuallyidentical to of using the alternativesto the grievance those in Table 2. Separate F tests suggest process (which increase the probabilityof thatthe labor market variables (WPREM, ASSM- dismissal) therefore rise as well. The BLY, LAIDOFF, and UE) when taken together elasticitiesfor these labor marketvariables have a significantrelationship with both de- are large (1.0 for WPREM, 1.01 for UE, and pendent variablesat the one percentlevel. .16 for LAIDOFF), suggesting that these The conflictcontrol variables (SEN, SKL, and relationships are empirically important. coop) arejointly significant at the 10% level. For example, a one percentincrease in the (We recognizethat several variables capture wage premium is associated with a one aspects of both labor marketsand conflict, percentincrease in grievancelevels. These whichmay confound thistest.) measures are essentiallycross-price elastic- The elasticitiesfor the labor marketvari- ities that examine the effects of price ables in equation (2) provide a means for changes for substituteson the demand for examiningthe substitutionacross problem- some alternative. solving mechanisms that results from The variable identifyingassembly plants changes in theirrelative costs. These elas- (ASSMBLY) suggests that workers at those ticitiesrepresent the change in the propor- plants use the grievance procedure more tion of problems dealt with through the extensivelythan those at otherplants (parts- grievance process that is associated with a manufacturingplants), possibly because they change in the relativeprice of alternatives. have moreto lose fromunemployment given They are .83 forWPREM, .74 forUE, and .13 theirgreater wage premiums.The variable forLAIDOFF. Thus, forexample, the results identifyingthe extent of cooperative rela- suggest that doubling the wage premium tionsbetween plant managementand labor will increase the proportion of problems (coop) has the predicted signs but fails to addressed through grievancesby 83%.12 achieveconventional levels of significance.11 The variables for seniority(SEN) and skill (SKL) also failto achieve significantrelation- Conclusions ships. Despite the factthat grievance processes The resultsfor equation (2) are virtually are among the most importantaspects of identicalto those for equation (1). Bearing employmentrelations and grievance rates in mind the limitationsnoted above con- are a standard measure of the state of cerningthe dependent variable,the results employee relations,the previous literature suggestthat a greaterproportion of work- has produced few, if any, sustainable place problems are addressed throughthe explanations about the determinants of grievanceprocedure when the costs associ- grievance activity.In particular,no previ- ated with using alternative methods in- ous research has looked at factorsoutside crease. Because of the possibilitythat the the firm,such as labor marketconditions, component variables in the denominator to explain grievance rates. We have pro- mightbe determined simultaneouslywith

12 Where e = d(QIQ)QIQ/d(PIPa)IPgPa. Be- 1 A reciprocal specification of the variable- cause the equation is in a log-odds form,the elasticity 1/coop-yields a coefficientsignificant at the 10% is computed as (GRATE* - GRATE)/GRATE, where level, suggestingthat cooperative relationsmay have GRATE* = ed/1 + ed and d = (lnGRATE/1 - GRATE) + a nonlinearrelationship with grievance rates. We also (bwPREM(.O1)WPREM). The elasticities also suggest examined other specificationsof the equation, such that the production functionfor equity that relates as one in which absenteeism and discipline were grievances and alternative mechanisms to conflict included as separate R.H.S. variables, and observed resolution may be of the Cobb-Douglas form,given no importanteffects on the results.These resultsare that elasticitiesof substitutionunder that function available on request. are unitary.

Downloaded from ilr.sagepub.com at University of Kansas Libraries on May 18, 2015 A TEST OF AN EFFICIENCY MODEL OF GRIEVANCE ACTIVITY 13 posed a simple model in which workers resolve problems (such as shirking or choose the grievance process fromamong absenteeism), which generally lead to at a set of alternativemethods for addressing least an increased riskof job loss. One way workplace conflicts, and the extent to to think of this result is in terms of a which the grievance process is used de- demand by workers for the use of voice pends on the relative costs of the various mechanisms like grievance procedures methods. that varies with the price of using such Consistentwith our model, our analysis mechanisms.These resultsalso suggest an of data froma large, multi-plantmanufac- extension of the basic efficiency wage turingfirm has shown that the greaterthe argument. The potential gains associated advantages of workers' current jobs, as witha wage premium may include greater indicatedby wage premiumsor high levels use of institutionalizedgrievance proce- of unemploymentin the outside market, dures and a reduction in the use of the greater their use of grievance proce- alternativessuch as quitting,absenteeism, dures-presumably reflectingthe greater and shirking, alternatives that may be costs of using alternative methods to more costlyfor employers.

APPENDIX

Followingis a formalversion of the model used in Ztx = - Q(g, a) = O this study,in which the extent to which workersuse =pg P-~ Pg u 'g - grievanceprocedures is hypothesizedto varydirectly zg with the size of their wage premiums and with the Za = P- UQ = 0. level of unemploymentin the outside labor market. Because the form of the production function is unknown and may not be strictlyquasi-convex, the second-ordercondition requires the followingnega- (A1) MinC=aPg+ bPa tive bordered Hessian: where Pg is the price of using the grievance (A3) H = (QaQ -2QgQQb+QggQ) < 0 procedure, Pa is the price of using alternative where u = marginal cost of production or = PaI/P procedures,and Pg.,Pa > 0. - aQa/Q.gThe outcome of the optimizationshould Subject to a given level of inequity that must be yield: addressed, Qt= Q(ga), the first-ordercondition for minimizingC requires solving the Lagrangian: (A4) QgQ, > 0 and aQIaPa > 0, a2Q/a2Pa < 0 aQglaPg< 0, a2WQa/2Pg< 0. (A2) Z =aPg + bPa + u[Q - Q(g, a)] Testing the hypothesis described above will and the followingfirst-order conditions: amount to testingwhether aQwaPa > 0.

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