Grievance procedures are a means of dispute resolution that can be used to address complaints by employees against management or to settle disputes between a company and its suppliers, customers, or competitors. The best-known application of grievance procedures is as a formal process outlined in labor union contracts. "The term grievance as it appears in the written contract refers to a formal complaint by people who believe that they have been wronged by a management decision," Vida Gulbinas Scarpello, James Ledvinka, and Thomas J. Bergmann wrote in their book Human Resource Management: Environments and Functions. In fact, studies show that 95 percent of collective bargaining agreements include procedures for filing and resolving grievances between labor and management, usually through the process of arbitration.
But grievance procedures do not necessarily have to be so formal and elaborate. In small businesses, the procedures may consist of a few lines in an employee manual or the designation of a single ombudsman to deal with problems as they develop. Peer review of employee concerns is another popular way to address grievances. On the other hand, some larger companies may create an entire department dedicated to fielding complaints from employees or customers.
Whatever form they may take, grievance procedures are intended to allow companies to hear and resolve complaints in a timely and cost effective manner, before they result in litigation. Knowing that formal procedures are available often encourages employees to raise concerns or question company policies before major problems develop. It also tends to makes managers less likely to ignore problems, because they know that upper management may become involved through the grievance process. In union settings, grievance procedures help protect employees against arbitrary decisions of management regarding discipline, discharge, promotions, or benefits. They also provide labor unions and employers with a formal process for enforcing the provisions of their contracts.
Although having grievance procedures in place is important in both unionized and non-unionized settings, companies must support their written policies with consistent actions if they hope to maintain good employee relations. "To make the grievance procedure work, management and the union have to approach it with the attitude that it serves the mutual interests of management, employees, and the union," Scarpello, Ledvinka, and Bergmann wrote. "An effective grievance procedure helps management discover and correct problems in operations before they cause serious trouble. It provides a vehicle through which employees and the union can communicate their concerns to upper management."
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Grievance Procedures: Information from Answers.com