Workplace Relations

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Workplace Relations




In 1957 economist Gary Becker, in his seminal work on workplace discrimination, noted that employees may interact, and hence have professional workplace relations, with their managers and coworkers as well as customers of the firm. Workers and managers at a firm typically interact through institutions designed to assist firms in carrying out their objectives. These institutions govern performance evaluation, compensation, and discipline. The design and functioning of these systems is studied by human resource professionals and management scholars to evaluate a range of questions, including whether diverse workers are treated fairly and if a firms compensation practices promote productivity and firm loyalty. In his 2003 work Paul Levy provided a thorough review of this literature. Marketing researchers and practitioners explore the link between customers and representatives of a firm. Their inquires are aimed at identifying the services customers expect from a firms workforce, how they are best provided, and if customers prefer workers based on race, ethnicity, gender, and factors related to workplace efficiency, such as experience. Social scientists following the pioneering 1952 work of the psychologist Kurt Lewin study the nature of associations between persons in small groups to enrich their understanding of how coworkers interact and influence firm performance. This essay provides an overview of this area of inquiry with emphasis placed on the questions being explored and the insights fostered by prior research.


A workers productivity, the output he or she generates per unit of time, depends on the skills and knowledge he or she possesses, called human capital, along with the technological resources available at the work site. Human capital can be acquired through additional schooling, improvements to health, and learning on the job owing to participation in formal job training programs and learning-by-doing through experience. Accumulation of human capital is often a costly and time-consuming process since more highly skilled workers command higher wages, educational materials and instructional time must be paid for, and learning time results in lost production. Nevertheless, firms are willing to finance acquisition of human capital for members of their workforce if the additional knowledge advances worker productivity enough to expand firm profits. However, the breadth of knowledge needed to successfully complete assignments in the workplace has increased since the late twentieth century due to advances in technology and greater globalization along with more complex legal and reporting requirements. Therefore managers have become increasingly uneasy with the prospects that an employee, in isolation, can meet the challenges of the modern workplace.

Managers can organize workers into work groups, also referred to as work teams, that are responsible for completing tasks for the firm rather than assigning duties to an individual. Work groups consist of individuals who are truly interdependent in that they must coordinate their efforts or work together to complete the tasks assigned to the team. Work groups are necessary because of the range of knowledge and talents needed to solve the problems that must be overcome to produce goods and services in a profitable manner. Managers recognize that workers possess different types of skills, talents, backgrounds, and experiences; that they are heterogeneous. The fundamental idea promoting the organization of workers into work groups is that employees with complementary skills can be clustered to enhance the productivity of the firms workforce if they are willing to readily share skills and expertise. Thus the breadth of talents needed to complete work does not need to be embedded in a single worker but can be obtained across the members of a work group. A product development work team might be composed of researchers, market analysts, accountants, sales personnel, legal counsel, secretaries, and communications specialists. However, worker heterogeneity may present obstacles to effective work group functioning.


Managers often construct diverse work groups by selecting members with different demographic characteristics, including race, ethnicity, and gender. They believe that diverse groups will promote better work team performance by incorporating a wider range of ideas and perspectives into the decision-making process. However, when group members are dissimilar, conflicts among them are more likely to arise, weakening group cohesion, which harms skill sharing and productivity (see Patrick L. Masons 1995 article for a discussion of the relationship between workplace diversity and discrimination). Social psychologists attribute this to work group members identifying with a subgroup of workers who share a particular demographic trait to a greater extent than to the entire work team. Social psychologists have developed a number of theories to explain why persons in a particular demographic group form such strong allegiances and engage in prejudiced behavior toward persons outside of their group. The litany of theories includes social identity theory (Tajfel and Turner 1986), realistic conflict theory (Sherif 1966), and group position theory (Blumer 1958). These theories hold that biased perceptions and poor treatment across groups is motivated by a desire to maintain or improve the standing of the group a person is affiliated with relative to other groups. Two decades of experimental research by psychologists reviewed by Marilynn Brewer and Rupert Brown in 1999 reveals that social identification with a group elicits liking, trust, and cooperation toward members of that group that are not extended to persons outside of their group.

In 1906 the anthropologist William Sumner coined the term in-group to describe a subgroup ascribed high social status in a society. In 1985 the Nobel Prizewinning economist Arthur Lewis asserted that high social status groups often maneuver and shape legal, political, and educational institutions to obtain economic status and privilege. He referred to subgroups with both social and economic power as dominant groups, while subaltern groups are composed of persons lacking economic privilege and social standing. Relations between coworkers associated with dominant and subaltern subgroups can be particularly troublesome for firms seeking to establish harmonious, highly productive work groups since dominant group members may feel little pressure to share skills with members of the subaltern group. Meanwhile members of the subaltern group may be compelled by their weak political and economic position to cooperate extensively with persons in the dominant group. Therefore status and power differentials may set in motion behaviors that foster economic inequality and tense workplace relations.

Gordon W. Allports 1954 contact hypothesis theory and Leon Festingers 1957 dissonance theory suggest that bringing diverse groups into greater contact with one another can be an effective way to reduce tensions, alter preconceived perceptions, and ultimately improve crossgroup sharing, leading to better firm performance. Work site policies to improve workplace relations between diverse subgroups are likely to be an expanding presence in the United States due to the growing diversity of the labor force.


Allport, Gordon W. 1954. The Nature of Prejudice. Reading, MA: Addison-Wesley.

Becker, Gary S. 1957. The Economics of Discrimination. Chicago: University of Chicago Press.

Brewer, Marilynn B., and Rupert J. Brown. 1999. Intergroup Relations. In The Handbook of Social Psychology, vol. 2, eds. Daniel T. Gilbert, Susan T. Fiske, and Gardner Lindzey. Boston: McGraw-Hill.

Festinger, Leon. 1957. A Theory of Cognitive Dissonance. Evanston, IL: Row, Peterson.

Levy, Paul E. 2003. Industrial/Organizational Psychology: Understanding the Workplace. Boston: Houghton Mifflin.

Lewin, Kurt. 1952. Field Theory in Social Science. New York: Harper and Row.

Lewis, Arthur W. 1985. Racial Conflict and Economic Development. Cambridge, MA: Harvard University Press.

Mason, Patrick L. 1995. Race, Competition, and Differential Wages. Cambridge Journal of Economics 19 (4): 545568.

Sherif, Muzafer. 1966. Group Conflict and Co-Operation: Their Social Psychology. London: Routledge and Kegan Paul.

Sumner, William. 1906. Folkways. New York: Ginn.

Tajfel, Henri, and John C. Turner. 1986. The Social Identity Theory of Intergroup Behavior. In Psychology of Intergroup Relations, eds. Stephen Worchel and W. G. Austin. Chicago: Nelson.

Arthur H. Goldsmith