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[Human Resource Strategies] BUSS3 - AQA


Understanding HR Objectives and Strategies

Effective human resource management has become more important in recent times. Here are some reasons why: Most businesses now provide services rather than produce goods – people are the

critical resource in the quality and customer service level of any service business Competitiveness requires a business to be efficient and productive – this is difficult

unless the workforce is well motivated, has the right skills and is effectively organised

The move towards fewer layers of management hierarchy (flatter organisational structures) has placed greater emphasis on delegation and communication

As a result, if a business is to be successful and achieve its objectives, then it needs to manage its human resources effectively – ‘human resource management’ (HRM)

HRM - The design, implementation and maintenance of strategies to manage people for optimum business performance

In other words, HRM is about how people are managed by a business in order to meet the strategic objectives of the business. The functional objectives set for HRM need to be consistent with the corporate objectives.

HR ObjectivesHR objectives will be determined by an organisation’s overall corporate objectives, but regardless of these, all organisations are likely to pursue the following:

Matching workforce skills and the size and location of the workforce to the requirements of the business. This will ensure that there is sufficient labour in order to support a business’ needs, and will mean that they do not have the opportunity cost of over/under producing.

Minimising labour costs. This will be a HR objective for all businesses in order to ensure they are operating efficiently, but it will be particularly important for those businesses suffering from financial problems.

Making full use of the workforce’s potential. This will ensure that the productive efficiency of the workforce is maximised, and by improving motivation, it is likely to lead to greater productivity, reduced labour turnover and reduced absenteeism.

Maintaining good employee/employer relations. Without good employee/employer relations, an organisation is unlikely to achieve maximum levels of productivity and will not have a committed, satisfied and motivation workforce.


Internal Influenceso Financial Constraints – these may affect HR objectives relating to the provision of

staff training and development, or the level of pay they can offer employees.o Corporate Culture – the impact of financial constraints may not be seen as sever if

the corporate culture is such that HRM has a high profile in the organisation and HR are recognised as a valuable asset that needs to be trained and developed.

o Organisational Structure – if the organisational structure becomes flatter or if delayering takes place, this may influence HR objectives in relation to motivation and communication

o Trade Unions – may influence HR objectives concerned with introduction of change, such as flexible working practices

o New Technology – this may influence HR objectives by affecting the type and amount of labour required, training requirements and worker’s motivation

o Overall Performance of the Business – how the business develops or expands may mean unprofitable areas are closed down or the focus of the business changes

External Influenceso Political Factors – EU legislation on areas such as maximum working time and

other employment rights impacts directly on workforce planningo Economic Factors – economic downturns will place great pressure on HR

departments to reduce staff costs and improve productivityo Social Factors – the growing number of single person households is increasing ‐

demand from employees for flexible working optionso Technological Factors – the rapid growth of social networking may require changes

to the way the business communicates with employees and customerso Market Changes – a loss of market share to a competitor may require a change in

divisional management or job losses to improve competitivenesso Structure of the Population – factors such as the UK’s ageing population and

future requirement for people to work beyond the traditional retirement age may influence long term HR objectives

Hard and Soft HR ManagementThere are a variety of ways to approach the management of HR in a business. The two broad approaches to HRM are Hard and Soft.

The hard approach to HR is where employees are seen as assets, similar to machinery or premises. It might be expected to result in a more cost effective ‐workforce where decision making is quicker and focused on senior managers. ‐However, such an approach pays relatively little attention to the needs of employees and a business adopting a genuinely hard approach might expect to suffer from higher absenteeism and staff turnover and less successful recruitment.

The soft approach focuses on motivation. It is a long term strategy that looks at the personal development of all staff. It rewards employee performance and motivates staff more effectively. However, the danger of taking too “soft” an approach is that


when all the employee benefits are added up, the cost of the workforce leaves a business at a competitive disadvantage.

Developing and Implementing Workforce Plans

- Workforce Planning is the method by which a business forecasts how many and what type of employees it needs now and future, and matches up the right types of employees to the needs of the business

Workforce Planning is one of the central activities of human resource management and helps organisations to foresee change, to identify trends and implement human resource policies.

Stages in Workforce PlanningWorkforce planning involves a number of stages to ensure that the right people are in the right place at the right time in order to meet the organisation’s objectives:

1. Setting Objectives. This involves setting HR objectives based on the corporate objectives of the organisation and converting these into human resource requirements.

2. Forecasting Future Labour Demand. This should be done for the short term (e.g. to cover sick leave or maternity leave), medium term and long term (e.g. to meet future growth or expansion overseas). Forecasts should constantly be reviewed and updated. It should give an idea of the size and nature of the workforce required, as well as where they are needed.

3. Assessing Current Workforce. This involves identifying how many workers there are, what type (e.g. full/part time, temporary), and their characteristics in relation to age, length of service, qualifications, staff turnover, promotion patterns and retirement rates.

4. Identify the Shortfall/Oversupply in the Workforce. The organisation needs to compare the future demand for skills and staff with the organisations current workforce, and estimate the changes required in the existing supply of labour, taking into account potential labour turnover and retirement.

5. Reviewing Internal/External Supply of Labour. This involves estimating the future state of the market and the availability of staff with the skills and attributes that the firm needs in the short, medium and long term.

6. Develop Strategies to Fill the Gaps. These will form the basis of workforce plans, and will outline how the firm will recruit/retrain to fill skill shortages, or redundancy plans/cut hours to reduce the oversupply of labour.

Workforce Plans are the culmination of the workforce planning process described above. Appropriate plans should be drawn up for the short, medium and long term. Plans should include background analysis involved in the various stages of workforce planning and a detailed plan of action involving recruitment and training, and possibly


redeployment or transfers and redundancies, in order to match the current workforce with the desired one. Internal Influences on Workforce Plans Corporate objectives – it is vital that workforce planning, which ensures that

human resources are sufficient to facilitate the meeting of overall corporate objectives, is recognised as part of the strategic planning process.

Production and marketing objectives – The required production capacity, product quality and delivery timetables are significant to the business demand for labour. For example, innovation and technological developments may require employees with different skills

Financial position – The workforce plan must take account of the financial budgets in place and the cash flow forecasting. Staff remuneration is usually a major operating cost and cash flow

Strength of the current labour supply – The number, skills and experience of existing staff clearly influence workforce planning since the process examines whether the existing supply is sufficient to meet demand

Existing organisational structure – How production is organised (e.g. cells, teams, production lines) and management structure (e.g. flat, matrix) all affect existing internal supply of labour

External Influences on Workforce Plans Labour market trends – These will influence the supply of labour from which an

organisation can recruit staff. The migration of workers from other countries, such as Eastern Europe, may increase the supply of workers who are prepared to work for lower wages than British workers.

Legislation – Workforce plans may also be affected by changes in the law: for example, by legislation requiring an organisation to ensure it meets stringent equal opportunities and health and safety requirements

Economic conditions – Closely linked to market demand. A weak economy may lower wage rages and make it easier to recruit (and vice versa). But poor economic growth is likely to result in lower market demand too

Local factors – Local labour market may be affected by specific factors such as changes in transport links, quality of local schools, major changes in substantial local business employers

Market demand – Demand for the firm’s products determines production output which in turn sets out the requirement for labour. If there is an increase in competition, there is likely to be less output required, leaving the company overstaffed. Also, a unusually large order may come in which leaves them with a sudden shortage of staff


Benefits of Effective Workforce PlanningPerformed effectively, the following are commonly seen as benefits of workforce planning:o An effective workforce plan helps a business achieve its corporate objectives by

ensuring the business has a workforce of the right size, with the right skills, in the right place. Seen like that, you can argue that good workforce planning is a source of competitive advantage

o Workforce planning encourages managers to prepare and plan for changes rather than simply react to them – it places the HRM managers at the heart of strategic decision making

o Businesses going through periods of significant change (e.g. technological change in the industry, environmental change) are better able to handle the workforce implications

o Improved communication is a common benefit – staff feel that they are closer to the decision‐making process, are working for a business that takes HRM seriously etc

Issues with Workforce PlanningThe main issues that need to be addressed in order for workforce planning to be effective can be summarised as follows:o Cost- This is perhaps the most important issue. A workforce plan needs to be

supported by sufficient financial resources for it to be effective. However, the HRM department can’t be given a blank cheque. Every decision made as a result of the plan has a cost implication (e.g. new training, extra recruitment, redundancies). The cost needs to be justified and should be consistent with the corporate objectives.

o Employer / employee relations - Businesses perform best when there are strong working relationships between employers, employees and the business owners (e.g. shareholders). Effective workforce planning involves communication and consultation. This will mean that the final pan is accepted throughout a business and can be implemented successfully.

o Training - Ensuring the successful implementation of a workforce plan usually requires extensive training and development activities, including the induction and training of new staff and the retraining or updating of current staff. This is expensive.

o Corporate Image - A business that has an effective workforce plan that has the support of employees is likely to enjoy a better brand or corporate image than one which is perceived to be poorly managed and uncaring towards its employees. Customers recognise businesses that place HRM as a strategic priority - they see it in the higher quality of customer service and quality that they experience at each


interaction with the business. A plan imposed without consent of employees will give the company a bad corporate image.

Competitive Organisational StructuresThe way in which a business is organised has a direct effect on its competitiveness. For a business to be able to achieve its aims and objectives, it needs to organise its people in a suitable way – that is known as the “organisational structure”.

Factors Determining Organisational StructureSize of the business – Small businesses will tend to have informal or flat hierarchical structures. Larger and more complex businesses will develop more complicated and detailed structures involving more layers of hierarchy, departments and functions

Type of business – Does the business operate from just one or several locations? Is the business in the service or manufacturing sector? Does it have overseas operations or outsource any significant business activities? Is the workforce mainly unskilled, semi‐skilled, highly skilled?

Management and leadership style – Often over looked, but very important. An ‐autocratic leadership style will often result in a very different structure compared with one designed by a leader who prefers to delegate responsibility

The competitive environment – Organisation structures are often influenced and changed by developments in the market – for example changes in the use of distribution channels, suppliers, competitor actions

Accountability and Responsibility- The extent to which a named individual is held responsible for the success or

failure of a particular policy, project or piece of work.

Whatever organisational structure is chosen, it is essential that accountability and responsibility is clear.When a company’s management structure is clear, as shown by an organisational chart, staff should know what authority has been given to them and by whom. According to Herzberg, achievement and recognition of that achievement will produce motivation. Recognition of achievement is more likely when the lines of accountability are clear.


In some instances, clear lines of accountability can be seen as a threat that deters managers from taking decisions in case they turn out badly. This in turn makes them overcautious, to the detriment of the business.

Centralisation vs. DecentralisationOne of the organisational issues that a business needs to address is where decision‐making power resides in the structure. A key question is whether authority should rest with senior management at the centre of a business (centralised), or whether it should be delegated further down the hierarchy, away from the centre (decentralised).

Centralised Structures:Businesses that have a centralised structure keep decision making firmly at the top of ‐the hierarchy (amongst the most senior management). The need to ensure consistency of customer experience and quality at every location, together with a desire to exploit economies of scale, are the main reasons for this type of organisational structure. The main advantages and disadvantages of this approach can be summarised as follows:

Easier to implement common policies and practices for the business as a whole

Prevents other parts of the business from becoming too independent

Easier to co ordinate and control from ‐the centre – e.g. with budgets

Economies of scale and overhead savings easier to achieve

Greater use of specialisation Quicker decision making (usually) – ‐

easier to show strong leadership

More bureaucratic – often extra layers in the hierarchy

Local or junior managers are likely to much closer to customer needs

Lack of authority down the hierarchy may reduce manager motivation

Customer service does not benefit from flexibility and speed in local decision making‐

Decentralised Structures:In a decentralised structure, decision making is spread out to include more junior ‐managers in the hierarchy, as well as individual business units or trading locations. Hotel chains are particularly keen on using decentralised structures so that local hotel managers are empowered to make on the-spot decisions to handle customer problems‐ or complaints. The main advantages and disadvantages of this approach can be summarised as follows:

Decisions are made closer to the customer

Better able to respond to local circumstances

Improved level of customer service Consistent with aiming for a flatter

hierarchy

Decision making is not necessarily ‐“strategic”

More difficult to ensure consistent practices and policies

May be some diseconomies of scale – e.g. duplication of roles

Who provides strong leadership


Good way of training and developing junior management

Should improve staff motivation

when needed (e.g. in a crisis)? Harder to achieve tight financial

control – risk of cost overrunsFunctional vs. Matrix Organisational Structures

Functional StructuresThe traditional organisation structure of a business has focused on the functions, departments and main activities of a business. This structure could be adapted and used for businesses that organise themselves according to geographical location or product brands. A functional organisation is based on a hierarchy in which each department operates separately under the leadership of those above it.

Simple to understand Control is from the top down – gives

business a strong sense of direction Clear lines of communication and

command Allows specialists to manage in their

relevant functional areas Encourages employees to seek

promotion

Decision making can soon become ‐bureaucratic and too slow

Structure is prone to inter departmental‐ conflicts

Not always easy to get co ordinated ‐action across departments or functions

Employees not encouraged to develop an overview of the whole business

Little reward for functions working together

Matrix StructuresThis type of structure combines the traditional departments seen in functional structures with project teams. In a matrix structure, individuals work across teams and projects as well as within their own department or function. For example, a project or task team established to develop a new product might include engineers and design specialists as well as those with marketing, financial, personnel and production skills.These teams can be temporary or permanent depending on the tasks they are asked to complete. Each team member can find himself/herself with two managers their normal functional manager as well as the team leader of the project. ‐

Can help to break down traditional department barriers, improving communication across the entire organisation

Avoid the need for several departments to meet regularly, so reducing costs and improving coordination

Likely to result in greater motivation amongst the team members

A good way of sharing resources across departments – which can

Members of project teams may have divided loyalties as they report to two line managers.

Equally, this scenario can put project team members under a heavy pressure of work.

There may not be a clear line of accountability for project teams given the complex nature of matrix structures.

Difficult to co ordinate‐ It takes time for matrix team

members to get used to working in


make a project more cost effective‐ this kind of structureDelayeringThe traditional way to achieve a flatter organisational structure is through delayering. Delayering involves removing one or more levels of hierarchy from the organisational structure. Frequently, the layers removed are those containing middle managers. Delayering does not necessarily involve cutting jobs and overheads. But it does usually mean increasing the average span of control of senior managers within the business.

Delayering can offer a number of advantages to business: It offers opportunities for better delegation, empowerment and motivation as the

number of managers is reduced and more authority passed down the hierarchy It can improve communication within the business as messages have to pass

through fewer levels of hierarchy It can reduce costs as fewer (expensive) managers are required It brings managers into closer contact with the business’ customers – which should

(in theory) result in better customer service

But disadvantages exist too, making a decision to delayer less clear cut: Delayering can have a negative impact on motivation due to job losses A period of disruption may occur as people take on new responsibilities Those managers remaining will have a wider span of control which, if it is too wide,

can damage communication within the business. There is also a danger of increasing the workload of the remaining managers too much

Delayering may create skills shortages within the business – a danger is that delayering means that the business loses managers and staff with valuable experience

Flexible WorkforcesIn a dynamic business environment, organisations need to have structures that can respond quickly to changes taking place in the external environment. One approach is to introduce more flexible workforce structures that allow organisations to expand/reduce capacity quickly:

Core vs. Peripheral Workers:An example of a flexible workforce approach is to employ a core of permanent, full-time, salaried workers supported by other peripheral, temporary or part-time workers. The activities and responsibilities of core workers are central to the organisation and such workers are likely to be fully committed to the aims and objectives of the organisation. Peripheral workers are likely to be engaged in activities that are additional to the main purpose of the organisation. Their jobs are less secure and they are less likely to be committed to the organisations aims and objectives.

Outsourcing The most usual method of achieving a flexible workforce structure is by sub-contracting work to other firms. Outsourcing gives a firm the opportunity to use expertise not otherwise available in the organisation to offload low-level administrative work, to free employees to undertake more interesting work and to reduce costs.


HomeworkingAdvances in technology and the growing availability of broadband mean that many people can work very effectively from home. There are now increasing opportunities to use audio and video conferencing for meetings and seminars, which all combine to make flexible working increasingly attractive to employers and employees. By working from home, employees remove the need to travel, saving time, making them more productive, less stressed and happier, especially is the have family commitments. This can motivate staff by giving them more independence and responsibility and, at the same time, reducing the impact of Herzberg’s hygiene factors. They are more likely to be committed to the firm and unlikely to take time off work due to sickness or stress. However, some find it difficult to separate work from leisure ad miss the social aspects of working alongside colleagues.

There are good business reasons why businesses are increasingly likely to offer employees one or more flexible working options. For example: Savings on costs. A business can make substantial savings on overheads if it does

not have to provide office and other accommodation for so many employees or if staff can work from home rather than commute into work every day

Helping with recruitment and staff retention. There is lots of evidence that flexible working result in better job satisfaction and higher staff morale

To reflect the changing profile of the UK workforce. There are more women in the labour market and an ageing population – as a result, it is increasingly common for staff to have caring responsibilities outside work

To take advantage of developments in technology. It is now simple and cost‐effective for employees to be able to access their employers online and other networked systems, and to communicate digitally with colleagues

Legislation. Increasingly the law allows certain groups of employees the legal right to request flexible working

Whilst there any many advantages to flexible working, it is not always simple or appropriate to introduce it.Amongst the concerns that employers often raise about flexible working are: Additional administrative work and “red tape” involved in setting up and running ‐

flexible working The potential loss of customers if key employees reduce their working hours Lower employee productivity Inability to substitute for certain skills if certain employees are absent (a common

concern of smaller businesses) Organisations will be dependent upon other organisations and agencies outside

their direct control Managers finding it difficult to manage or administer the flexibility By downsizing and focusing on core activities, there may be less opportunity for

future expansion as worker’s skills and experience will be lost.


Effective Employee/Employer Relations

The successful modern business recognises the need for positive, constructive relationships between employers and employees. The business world is competitive enough without a firm having to grapple with internal disputes – even if they are somewhat inevitable given human nature.

Importance of Communication Implementing Change. It makes it easier to implement change because employees

and other stakeholders understand and recognise the need for it. Taking into account the opinions of employees is likely to encourage greater commitment to the change process.

Motivation. Effective communications encourages a more motivated workforce and develops commitment to the business from employees at all levels of the organisation.

Achieving Objectives. Good communication helps to ensure that the business is well coordinated and that all employees pursue the same corporate objectives. It is important that employees understand how their own job contributes to meeting objectives and how well they are performing their jobs and hence contributing to the success of the business.

Improving Competitiveness. It allows an organisation to be more competitive by improving efficiency and identifying opportunities.

Barriers to Effective Communication Language – The communication message might not use vocabulary that is

understood by the receiver – e.g. too much use of technical or financial jargon Noise – Various things stop a message from getting through or being heard – e.g.

poor connection, background noise, distractions, too many people speaking Overload – Too much information can cause problems e.g. slow down decision

making Emotion – The relationship between the sender and receiver of communication

might adversely affect the message – which could be ignored or misinterpreted Gaps – Too many intermediaries (e.g. too many layers in hierarchy through which

message has to be passed) might prevent or distort the message Inconsistency – If people receive conflicting or inconsistent messages, then they

may ignore or block them

Employee Representation


Employee representation or participating arises when employees are part of a formal structure for involving them in the decision making process of an organisation. Of ‐course all businesses communicate with their employees in some way every day. However, there are some situations when the law requires this communication to take place. The law requires a business to consult with employees on things such as:

Redundancy programmes When employees are transferred from one employer to another (e.g. the sale of

the business) On changes to pension arrangements Proposed changes to working time arrangements

In additional to the mandatory requirements for employee representation, there are several strong reasons why a business should have a formal system of employee representation. For example, to:

Make employees' views known to management Help strengthen both management's and employees' understanding of

workplace issues and other matters affecting the business Help create an atmosphere of mutual trust between employees and

management and therefore improve workplace relations

Increased empowerment and motivation of the workforce

Employees become more committed to the objectives and strategy of the business

Lower risk of industrial disputes

Time consuming – potentially ‐slows decision making

Conflicts between employer and employee interests may be a block to essential change

Managers may feel their authority is being undermined

Types of Employee RepresentationWork CouncilsWork councils are committees of management and workforce representatives that meet to discuss company-wide issues such as training, investment and working practices. Excluded from the agenda is bargaining over issues such as wages, terms of employment and productivity levels, which is generally left to trade unions. The role of the work council is to essentially look at the company’s plans and provide an opportunity to meet and gain ideas or improvements from the shop floor.

Trade Unions


Trade unions are organisations of workers that seek through collective bargaining with employers to:

Protect and improve the real incomes of their members Provide or improve job security Protect workers against unfair dismissal and other issues relating to

employment legislation Lobby for better working conditions Offer a range of other work related services including support for people ‐

claiming compensation for injuries sustained in a jobThe two main functions of a trade union are to represent their members and to negotiate with employers. The basic concept behind a trade union is that of increased bargaining and negotiation power which comes from acting together.

The traditional view of the employer/trade union relationship has been one of confrontation. However, in most cases employers and union representatives have a constructive relationship. Indeed, it is possible to identify several advantages of unionisation from the employers’ point of view:

Negotiating with trade unions (ideally a single union) saves time and cost rather than dealing with all employees individually

Unions are part of the communication process between the business and employees

Employee morale and motivation may be improved if they know that their interests are being protected by a union

The trade union can be a supportive partner in helping a business undergo significant change

Partly as a result of their declining membership, unions now have significantly less power and influence to determine pay and conditions than twenty years ago although in some industries (including postal workers, railway worker, fire fighters and prison officers) unions are still prepared to exert their “industrial muscle”.

Under UK law employers must recognise a trade union in pay and employment discussions when a majority of the workforce want to be represented and has voted for it. But there is little evidence that union members secure any significant wage “mark‐up” or greater job protection than people in non union jobs.‐

Industrial Disputes


Back in the 1970’s and 1980’s the news was often dominated by industrial disputes and action taken by trade unions. However, in the last two decades the incidence of industrial disputes has reduced dramatically. This can largely be attributed to more effective methods of avoiding and resolving industrial disputes. However, industrial disputes and action do arise. The main forms of industrial action are:

Work‐to‐rule. Employees follow the strict conditions of their employment contract - no voluntary overtime, no participation in supporting activities. Staff still get their basic pay.

Overtime ban. Employees refuse to work overtime. Can have a significant effect on production capacity during period of peak demand, but ineffective as a bargaining tool during quieter periods.

Go‐slow. Employees work at the slowest or least productive pace that is allowable ‐under their employment contracts.

Strike. The action of last resort; fraught with danger for both employer and employee ‐and strictly policed by legislation on industrial action.

Damage for the Business Damage for the Employee Lost sales and profits from the lost output Damage to customer satisfaction An internal distraction for management

and the business (worse if competitors are not affected)

Damaged relationship with staff may adversely affect motivation, productivity

Lost pay Potential loss of jobs if the action results

in action to cut costs Possible loss of customer and public

support (depending on the reasons for the action)

Risk that illegal action will result in legal proceedings

Given the costs involved, what can a business do to prevent industrial action in the first place?The priority for management should be to encourage a workplace culture that prevents conflicts from arising. This involves informing and consulting workers and their representatives on employment matters and business developments more widelyDepending on the size of the business, management could set up:

Regular consultations with a recognised trade union an effective working ‐relationship with union officials can pick up problems before they escalate

A staff forum or joint working group to pass on information and collect ideas from workers and consult with workers

An employee consultative body to discuss major issues as they arise Team and group meetings and feedback sessions

Many employers, especially those which recognise trade unions, have written procedures in place to discuss with representatives collective grievances or other significant issues affecting all or part of the workforce. Those procedures are important and can be used to address emerging problems at an early stage.Settling Employee and Industrial Disputes


Most employee and industrial disputes are settled without resorting to industrial action. Where the employer and employee cannot resolve the issue between themselves, it often helps to take the dispute to an independent advisory service. In the UK, the main such organisation is ACAS – the Advisory, Conciliation and Arbitration Service. As suggested by its name, ACAS offers three main services:

(1) Conciliation. Conciliation is used when an employee is making, or could make, a specific complaint against their employer to an employment tribunal. Conciliator has no authority to seek evidence or call witnesses, or make decisions or awards. Conciliator discusses the issues with both parties in order to help them reach a better understanding of each other's position. The conciliator encourages the parties in dispute to come to an agreement between themselves, and so avoid the stress and expense of contesting the issue at an Employment Tribunal

(2) Mediation. Involves an independent, impartial person helping two or more individuals or groups reach a solution that's acceptable to everyone. Aim is to restore and maintain the employment relationship wherever possible – not apportion blame. Best used early on in a dispute. Agreements are not legally binding, but usually carried out

(3) Arbitration. An alternative to a court of law. Held in private rather than in public (court case). Arbitration involves an impartial outsider being asked to make a decision on a dispute. The arbitrator makes a firm decision on a case based on the evidence presented by the parties. Arbitration is voluntary, so both sides must agree to go to arbitration; they should also agree in advance that they will abide by the arbitrator's decision. Often used in disputes between employers and trade unions over collective bargaining issues (e.g. pay awards)

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