Shock Effect

Posted in Human Resource Terms, Total Reads: 670

Definition: Shock Effect

A shock effect mainly occurs when there is a sudden increase of labor cost in the market. When due to such an increase in labor cost the company management is forced to improve labor productivity and increase efficiency of its operations then a shock effect occurs. A shock effect can be felt only if the firm was operating at less than operating efficiency before the shock as after the shock the efficiency increases to a great extent.

The shock effect may start from the workers organizing themselves into a union or from demands of a legislative change by them. In response to such union induced shock management can force the laborers to give better efficiency by making or inducing changes under its direct control like tightening of quality standards and reduction of wastes in which case it is called ‘pure shock’.

In other cases to improve efficiency management needs to implement policies which are not under its exclusive control but involves unions as well such as changes in working conditions of laborers. In such cases unions seize the opportunity to engage in dialogues with the management. They also give their members an opportunity to voice their opinions in such dialogues. This is called the ‘voice effect’. It may result in a fight between the management and the union which is either settled by an agreement based on the relative power of each party or by accommodation of give and take between the two parties. So shock effect is the total of the positive effects from a union shock.

Hence, this concludes the definition of Shock Effect along with its overview.


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