CONFLICT MANAGEMENT The Psychology of conflict and conflict ...

12. UNION-MANAGEMENT CONFLICT: HISTORICAL TRENDS AND NEW DIRECTIONS 367
While decentralization is widely acknowledged, researchers have not
reached a general agreement on the forces behind it. One of the most commonly
agreed-upon explanations for bargaining-structure decentralization
is that it results from a relative shift in power toward management,
away from labor (Eaton & Kriesky, 1998; Katz, 1993). While some unions
may prefer decentralization (if they prefer local bargaining or can benefit
from whipsawing—playing one company off another in order to gain better
contracts), unions generally find that negotiating in larger units gives
them more power at the bargaining table. Companies, by contrast, prefer
decentralized bargaining since smaller unions have less leverage over
companies and thus cannot demand as much. Whether decentralization
or centralization prevails depends on the relative power of the two parties
(Eaton & Kriesky, 1998; Hendricks & Kahn, 1982). As union density has
declined in the United States, companies have been able to demand more
decentralized bargaining, amplifying and accelerating the redistribution
of power.
Decentralization may also reflect increasingly competitive product markets
and stronger demands for flexibility by employers. Competition leads
employers to seek more productive work systems and to reduce labor cost
(Voos, 1994). Decentralized bargaining tends to allow for more flexible labor
agreements that include features such as team systems and pay for performance
compensation methods (Katz, 2004; Kochan, Katz, & McKersie,
1994). Decentralization is also driven by diversification in corporate structures
and fragmentation in worker interests (Katz, 1993). It is worthwhile
to note that these factors may have different effects on different industries
or companies. For example, case studies show that competition played
an important role driving decentralization in the auto industry (Katz,
MacDuffie, & Pil, 2002) but was less central to the same trend in the paper
industry (Eaton & Kriesky, 1998).
Interest Arbitration. An alternative way to resolve conflicts in the negotiations
process comes from the public sector, where strikes are illegal
and arbitration is often mandated by statute. Interest arbitration usually
involves the selection of a neutral third party to resolve a bargaining
impasse. The arbitrator hears the positions of both sides, and then makes
a final and binding decision regarding the terms of the contract.
Some claim that interest arbitration plays an important role in encouraging
collective bargaining by balancing the power of the two parties, by clarifying
the bargaining zone, and by providing the parties with incentives to
make reasonable proposals (Farber & Katz, 1979; Feuille, 1979). On the other
hand, there are criticisms of interest arbitration, and the most common fall
into two categories: the “chilling effect” and the “narcotic effect.”
The “chilling effect” of interest arbitration stems from the concern that
the parties will find it difficult to reach an agreement on their own, if either
believes that the other side will make an extreme proposal and then invoke
arbitration in hopes that the arbitrator will “split the difference” and make