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The Government, concerned by levels of unofficial strikes and wage inflation and by reports of economically damaging " restrictive practices ", set up a Royal Commission under Lord Donovan "to consider relations between managements and employees and the role of trade unions and employers' associations in promoting the interests of their members and in accelerating the social and economic advance of the nation, with particular reference to the Law affecting the activities of these bodies".

The research undertaken for the Commission provided a comprehensive picture of industrial relations practice, and to this day these data provide the starting point for many analyses of institutional change in the industrial relations area.

The Commission's report (published in 1968) presented the famous "two systems" analysis of British industrial relations, identifying the "formal system" involving negotiations at industry level between the official institutions of trade unions and employers' confederations and the "informal system" involving shop floor level bargaining between workers, shop stewards and managers. According to the analysis, industrial conflict could be attributed in part to conflict between these two systems; between the assumptions and norms of the formal system and the practical realities of the informal. The Commission argued that, whether or not it was supposed to exist, shop floor bargaining (see bargaining structure ) existed, and employers had lost control of the workplace because of their refusal to recognise the reality of shop floor bargaining.

The recommendations of the Report can therefore be summed up in the phrase "the formalisation of plant and company-level industrial relations", a process through which management should grant recognition and official status to shop stewards , the elected workplace representatives of workers, and work with them to draw up codified and written agreements at plant and company level. Most researchers argue that the 1970s did indeed witness just such a formalisation, although doubts exist as to what extent this was a direct consequence of the Donovan recommendations, and to what extent it was already in train. The Commission also generally defended the principle of voluntarism and the tradition of legal non-intervention, although they conceded the need for legislative protection of certain individual rights, in particular against unfair dismissal .

Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.

Page last updated: 14 August, 2009