[This is the third and the last in a series of three blog-posts. Links to the two previous blog-posts are given at the end of this blog post].
find metaphors very useful. I have used
the analogy of the game of chess as explained in the previous post in this
series. For the benefit of readers, I am repeating a few paras to explain
before moving on to the Middle Game. Those who have read the previous post may
move to the para ‘Middle game’ directly.
is one peculiarity about a game of chess. It is seen and analysed in three
stages. There is the ‘Opening game’ in which players build positions, then
there is the ‘Middle game’ in which there is lot of give and take and an
immense power game, and then the ‘End game’ when one emerges a victor, he
closes it all.
this to setting up a factory like many companies have done it recently. Why
factory you can take any establishment, even retail chain. Fortunately I have
been associated with both, so I know the problems. There is a lot of planning
that goes for ensuring high productivity and sometimes for setting the right
culture. Some succeed and some fail. This is the ‘Opening game.’
‘Middle game’ is full of drama. Sometimes the unrest among the employees
develops which impacts negatively. Sometimes a union comes on the scene. The
conflict develops, gets escalated very often as a power game. The conflict
‘End game’ is when the parties decide to part ways. Sometimes due to closure,
sometimes they part ways because of heavy downsizing, retirements voluntary or
the metaphor of the game of chess pictures two players pitted against each
other. It is an adversarial relationship, no facades there. In employee
relations, the relationship should not be adversarial, but there are times when
conflict of interest is inevitable. Yet, there is always enough and unexplored
ground of collaboration. In that sense the metaphor of a game of chess does not
fit. I have used it because it helps me put things in context easily.
Nevertheless, I would like to acknowledge this shortcoming of the metaphor and
would request you to bear in mind.
‘End game’ is when the parties decide to part ways. Sometimes due to closure,
sometimes they part ways because of downsizing, retirements voluntary or
very senior industrialist who was known to me called on me and asked me to meet
the owner of a textile mills. The strike was long over. I met him who asked me
to introduce him to certain persons in the Government. I quickly disassociated
myself but I got curious and followed his case for a long time. His mills had
suffered an accident and he wanted to use that ‘opportunity’ to close it down.
I watched with interest and shock how questions raised in assembly are also
scuttled by the bureaucracy. That was my first brush with reality of closures.
technique of closure is well known: First declare Voluntary retirement scheme
for reducing the number of workmen to less than 100. Once this is achieved,
close down the factory or establishment because it can be done so under the
The ‘[step] mother’ of all closures
it is over thirty years the scars of Textile strike, its closure of mills and
unemployment are bleeding. I attended a meeting of Girni Kamgar Sangharsha
Samiti in May this year. Nikhil Wagle, the outspoken editor of MahaNagar and
anchor at IBN Lokmat channel, blamed the negligence of the society and press to
support the cause of the textile workers. And there is a lesson to learn in the
story. Real estate offered just too much money to numb the conscience.
This is what a
shocking report on Phoenix Mills says:
1995: Yet again, the Management moves to declare the mill as
sick and approaches the BIFR. The approved revival scheme allows tax
concessions. Management is directed to upgrade machinery and constitute a
committee accountable to banks and financial institutions to oversee the
modernisation and revival process. Once these tax concessions were approved, no
revival scheme was implemented.
23rd April 1998 – The Management applies to the BMC for adding
recreational facilities such as table tennis, health clubs and – of course -
bowling alleys. On the grounds that its workers are “continuously demanding these
facilities, and went on agitation in Jan-98”. Yes – workers demanding bowling
alleys, sauna steam baths and billiards tables.
April and May 1998 – Management begins to terminate services of staff
across various departments. The processing department is closed abruptly.
Second and third shift at the Mills are stopped.
July 1998 – Labour Court issues an order to the Mill to
restart closed departments and reinstate workers. Workers allege that just
before the orders, Management had introduced a voluntary retirement scheme
(VRS) for retrenched workers. In the meantime Phoenix Towers is constructed
over what unions allege was space reserved for a municipal school and a public
garden. Not a single paisa from these constructions goes to the workers.
Matters: April 19, 2006, ‘Phoenix Mills – ‘Because the story must be told’]
Hindustan Lever shows the door…
economic vicissitudes have made some organisations redundant just as technology
made some organisations redundant. In Mumbai the most remembered closure is
that of the Sewree Factory of Hindustan Unilever [then called Hindustan Lever].
After a very prolonged battle, spanning over three decades, with the union and
employees, and with some decisions not-so-free-of-controversy it finally closed
down. This is what the report of Feb 1, 2010 in Business World says:
“We are happy; the union is
happy,” says Ashok Gupta, HUL’s executive director, legal and secretarial
practice, describing the mood at the send-off given to workers a few days ago.
“We had no alternative but
to sign,” says a subdued Franklin D’Souza, an office bearer of HLEU. “The
workers were tired of waiting. Some even threatened to immolate themselves in
front of the union office if we did not agree to the settlement.”
This was a closure in offing
for over thirty years!
shows the way
As against this, Colgate
managed closure of its Sewree factory which incidentally was adjacent to HLL’s
factory exceptionally well. The talk about closure was not a secret, it was
told openly to employees with reasons. The openness was in stark contrast to
the subterfuges adopted by many employers. A VRS scheme was worked out which
showed flexibility enough to accommodate employees of different age groups – it
was not ‘one rule applies all’ scheme. Reportedly, support was offered by HLL’s
action committee, but it was spurned by the employees. The employees exited and
the Company hosted a farewell dinner on Dasara day.
the city of Thane, where I stay, three units were closed recently. These were:
Raymonds, GSK [erstwhile Glaxo] and Asian Cables which became RPG Cables and
later a part of KEC International Ltd. in that order.
the three present different approach to the end game. Raymond and KEC have one
thing in common – they have shifted production elsewhere – in Gujarat. They
reportedly said that their units were making losses and were unviable. GSK on
the other hand kept that stance, but it is widely believed that their Thane plant
never made losses and was not unviable.
Raymonds - The ‘Incomplete’ Man
was the first to go. Let us go back in history. You will recall that Singhanias
had established a hospital, a very good facility in the sprawling 125 acre area
in which all of Raymonds units were placed. The hospital was set on fire by
Shiv Sena supporters on hearing the death of their popular local leader. It was
then shut down by Singhanias as retaliation to the act of sabotage. This may seem
unconnected event, but this was the proverbial ‘beginning of the beginning.’ In
an era when shutting down an establishment was considered impossible, the
powers that be realised that it was possible to do. Emboldened by this success,
the next to go was JK Files. Interestingly, though some resistance was put up
by the employees and their unions, it quickly waned. The reason? The average
age of employees was 50. Many of them had their children studying in the
Singhania’s School in the adjacent property – it is considered one of the top
ten schools in Mumbai-Thane belt. Their children had been educated well, some
were in Army, and some were doctors, many in IT industry and were placed
abroad. So it was not a bad idea to collect the booty that the VRS offered and
was the turn of Raymonds. With the closure of Raymonds, Singhanias would have
125 acres for development as real estate. They had already built a factory at
Vapi where the same production could be made at lower cost. So 1885 workers
were offered a VRS, but it was only an invitation to the political leaders to
intervene, lured by the value of the real estate, and they are also believed to
be beneficiaries of the final settlement [the result of protracted
negotiations] between workers and management of Raymonds. The union earned in terms
of donations [3% of the package] from workers, a whooping sum of Rs 8 Crores!
Workers received Rs 263 Cr in payment while value of the real estate was
estimated to be more than Rs 2300 Cr. The workers received an average benefit
of Rs 16 Lakhs to Rs 21 Lakhs which was to be paid over two years; 68% of the
total dues immediately and the remaining 32% would be paid in three years`
time. [‘Why in instalments?’ we asked a senior manager of Raymonds – He said
that the official reason given is lack of working capital!]. Many in the city
of Thane believe that they got a raw deal, while political leaders made ‘hay
while the sun was shining!’
most interesting part was the ability of the management to bring Labour
Minister Hasan Mushrif, Labour Secretary Kavita Gupta and Shiv Sena local MLA
Pratap Sarnaik for the one hour function announcing closure. Mushrif was
airlifted from Kolhapur in a Raymond chopper and after the hour-long function
to announce closure, held in the factory premises, he flew back home in the
same chopper! What story does it tell?
is a classic case study of how managers get emboldened by turn of events, and
how external factors play a role in bringing about a settlement in which they
had developed a vested interest. But the Raymonds story leaves a message about
the vulnerability of employees at the hands of many interested parties, and
chaos that precedes the closure.
started a new textile plant in Valsad. It manufactures suiting and shirting. In
March 2013 it received a notice from Gujarat Pollution Control Board for
closure for alleged violation of norms. The newspaper report of March 7, 2013
[Business Standard] says: We have not only
issued the notice but have also cut their power connection. The company will
now have to give us a bank assurance for norm compliance before we revoke the
closure," said KC Mistry, GPCB In-charge Member Secretary.” It has been
since restarted. Perhaps this discloses some uncomfortable management styles of
The Secret Formulations of GSK
case of GSK is diametrically opposite. While it was known that the plant at
Thane was heading for closure, nobody knew the real reason. The company somehow
managed to keep the political leaders away, who have developed tendencies of
the ‘ambulance chasers.’
there are various theories on why the plant was closed down. One version,
unconfirmed, is that there was an accident in the plant that threw up the high
susceptibility of the organisation to Bhopal like mishap. The plant was in the
midst of prime residential locality. It was not so when it was set up, but
later all plum housing complexes were built around it. The fear [presuming that
this is the correct version] was real and justified.
union said [and this is another version] that the company wanted to shift
production to their Scotland factory under pressure from British Government
which wanted to curb unemployment. [One worker said to me about this decision
of the Company: ‘The British have left, but the psyche of slavery continues in
India’]. This brings the effect of the new economic policies. GSK is
headquartered in England. GSK paid an average benefit of Rs 29 Lakhs with
maxima of Rs 45 Lakhs. Although very reasonable compensation, if not generous,
the readers will have to keep in mind that there the average age of employees
was forty years. The plant was closed in April 2012. [There is the third
version which is the official version of GSK that the plant had become unviable
– nobody seems to believe this except management staff, if at all!]
the 35 contract labourers who worked there for several years got nothing! The
end game was well played, but not for all.
Asian Cables also represents more or less the same story of Raymonds. They have
set up a factory at Vadodara in Gujarat.
A few factors deserve our attention:
[a] It reminds all that there is ‘organisational
life cycle.’ Like all living organisms organisations also seem to have a life
cycle, though in the case of human beings it is inevitable, and it need not be
so in the case of organisations. Each phase of ‘life’ has its own set of
problems, but managing change successfully is the only way to stay afloat for
an organisation. Research tells us
of four successive phases in an organisation’s life cycle: [i] the pioneer
phase, [ii] the growth phase, [iii] the consolidation phase, and [iv] the relapse
phase. Each phase has its own characteristics.
plants get outdated if you do not continuously renew it. Even if you do, the
aging work force may not be able to learn the new skills. So sometimes the
‘death’ of a plant is inevitable. But the manner in which it happens leaves
scars. Our laws do not allow easy adoption of new technologies.
Bad town planning schemes can ruin a profitable plant. Like GSK. Nobody wants
to be in Bhopal tragedy like situation.
People in GSK may have received fat benefits, but they are unemployable today!
And they are all middle aged in the age group of 40 – 45. The benefit may not
suffice if they do not get a good job which is very rare to find.
Contract labour can be the biggest sufferer in this end game of closure.
[e] The Government has abdicated its role!
the final analysis it is all about the values and beliefs of the employer which
show. It is also about the employer’s role and social responsibility. The
powerful play of greed and power is usually in full public view. Colgate and
GSK handle it reasonably well; conscious as they are of their internal
governance standards and public image. But image is not a consideration of
those who are greedy. It is unfortunate that the government fails to act often,
and fails to play its role.
is not the theme here that no establishment should be closed. The point which
is being made is that the parting can be respectful and honourable with long
relationship still a happy memory. This is not impossible as two organisations
relations, like any other relationship, is as rewarding and meaningful as the
parties make it by understanding their role, purpose and values. It is a game
that begins in mind and ends there!
Labels: Closure, Colgate, GSK, HLL, HUL, Raymonds, Textile Strike