The Middle Game: The Inner Game of Industrial Relations

I 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.

There 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.
Liken 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.’

The ‘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 redefines equations. 
The ‘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 otherwise.
Admittedly, 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.

The Middle Game
The Middle game is when you begin to coordinate your primary pieces. The goal is to win primary pieces from your opponent. The Middle Game is a very long period in an organisation’s life. We mostly see organisations in this phase.

The Middle Game is all about Managing Change:
Major events occur in this phase. Here are some:
·   [a] Union comes on the scene! [b] Growth phase when the establishment carries out expansion plans - This can start a divide between new and old workers. [c] When the parent organisation decides to set up another unit - This starts a conflict on the lines of ‘Why can’t you be like them?’ [d] When it acquires or merges with another unit - This starts a direct or a subtle conflict of Us vs. Them. [e]Restructuring - This creates thick impenetrable walls between SBUs. [f] Downsizing - when it faces lay-off or retrenchment. [g] Technological obsolescence which again leads to retrenchment or transfers.

Knock, knock! Union here….
The common factor among all these events is that these are change management situations. Change management situations generate feelings of insecurity among employees.

This means they look up to a union to protect their interests. And then a union knocks on the door. In all probability it is headed by an external, usually a political leader. For the first time, the ER manager is required to be on his toes. In India we can’t wish away unions. ‘Why do you require a union,’ the ER manager asks employees. The issue is not whether an organisation’s employees should have a union – it is how we can retain our influence on employees. Redefining the problem this way opens up a lot of possibilities. Very positive possibilities. When we ask whether we should have a union it essentially leads us to a lot of negative actions. Since right of association is granted by the Constitution, we are banging our head on the wall.

There is a third way – help workers launch a union. Countless establishments have done this; Maruti Suzuki has done this and so also Bajaj Auto. I am not saying this without evidence. If you read the book ‘Maruti Way’ you will find elaborate write up at page 303 on how a union leader known to the MD was recruited from BHEL. The Bajaj Story appears Vikalpa magazine of IIM Ahmedabad. Bajaj Auto encouraged a union at Waluj plant near Aurangabad. The problem with this approach is that what starts as an exercise giving a voice to workers, it quickly degenerates into a controlling exercise. Wasn’t this the case with Maruti? It is well known that Maruti never wanted Manesar plant workers to have a separate union. The issue at stake was the control of the work place; Maruti never wanted to ‘lose’ it to a union.

The Decider - How do you view employment relationship?
Unions are unwanted on the scene because nobody likes to share power. But the issue is deeper than that; we have to decide how we view the employment relationship. To explain this point further, we should take a note of the “frame of reference” introduced by Alan Fox. He argued that it is always possible to conceive the employment relationship in either one of two incompatible ways. [I quote:] “Either it is a relationship of social membership which exists to satisfy common interests (the Unitarist frame of reference), Or it is a negotiated, contractual relationship which exists to satisfy the interests of separate but interdependent groups (the Pluralist frame of reference). He later introduced a third frame of reference, the Radical frame of reference, from the perspective of which the employment relationship is an entirely illegitimate relationship which exists solely to satisfy the interests of the dominant party.” [Unquote]

We have Maruti Suzuki, Bajaj Auto and many others like Nokia, Hyundai cases before us. I leave it to you to decide what their frame of reference is. As a practising manager we have to reflect on what is our frame of reference. Let us remember that what language we speak about unions, about issues in employee relations tell the world what our frame of reference is. At Asian Paints during my tenure it was clearly the ‘pluralist’ frame of reference at work. We felt that we must act within the framework of law. We did not ‘invite’ unions but if workers opted for a union we did not interfere in their right. These organisations engaged in extensive development of leadership from within.  

In post globalisation scene, unions have lost their teeth and there is a clear trend of organisations moving to ‘Unitarist’ frame of reference. Marico leads this pack, but to their credit they had taken this stance much earlier, and as a part of their people philosophy. Many MNCs want to be in this category but avoidance of unions as they do in USA is not possible here. But their Unitarist stance is often a sham; it is obviously the ‘radical’ stance in disguise. A very large number of MNCs belong to this category.

But not all would fall in that category. I have worked with a reputed organisation which adopted Unitarist frame of reference. They had a union knocking at their door soon after they set up the plant. Interesting was their reaction. Now that there is a union, they said, we must learn to strike good and healthy equation with union too. They adopted interventions based on this thinking. Kudos to them, and they saw a very healthy development of relationship.

As for ‘Radical’ frame of reference there are a dime a dozen examples. Since it is obvious, I am not going to dwell on it.

Having a stance is one thing, and having a consistent stance is another. Problem starts with change of leadership, say a new CEO or a new HR Head, within management cadres. When any leader with Pluralist or Unitarist orientation leaves and a new man with a ‘Radical’ orientation or for that matter any other orientation than the previous manager, replaces him, people feel the difference. Unions feel the difference and they react. We see this factor playing role when we see a new Chief Executive or a new SBU head reacts to union demands differently.

What I would like to ask is that we have so much discussion in our organisations about our HR policy, and what is our people philosophy. Do we ever discuss what our approach to employee relations is, particularly to unions? My understanding is that this kind of conversation just does not happen in most of organisations. 

Do you have a declared policy for employee relations? 
We are discussing the middle game and we have seen that in this part of the game primary pieces are co-ordinated to gain advantage. Unfortunately the ‘advantage’ is interpreted as dominance, not healthy respectful relationship. How do you co-ordinate primary pieces? Obvious answer is that you have to have a strategy, a policy.

There are many good organisations which have declared a policy for employee relations. Here are some samples:

Southwest Airlines
·        Southwest accepts the unions as legitimate representatives of employees and as valued partners in the organization
·        Southwest expects the unions to have an intense loyalty to the company and a feeling of ownership
·        Southwest treats the unions as full partners, not like some albatross hanging around their organization’s neck.

S K F
SKF respects the right of all employees to form and join trade unions of their choice and to bargain collectively. SKF will ensure that official representatives of such unions are not subject to discrimination and that such representatives have access to the union members and their work place.

Nestlé [Excerpts, Nestlé’s ER Policy is an eight page document]
Nestlé strives for proactive and continuous improvement of its relationships with internal and external labour stakeholders. The Company accomplishes this approach through organized structures within the Human Resources department at Corporate and local levels and focuses on the implementation of the following strategic areas:
·        Compliance with the social aspects of our Corporate Business Principles, relevant international labour commitments and this Policy.
·        Promotion of the Nestlé Corporate Business Principles, the Nestlé Management and Leadership Principles and the Nestlé Code of Business Conduct.
·        Enhancement of collective dialogue and negotiations with employee unions and other representatives’ associations.
·        Development and upholding of an open dialogue with external stakeholders on labour matters.

What is the advantage of making these clear, unambiguous policy statements? Firstly, it provides clear guidance for managers on how to act in situations. Secondly, it also increases accountability. Not just public, but even the unions can question your actions should you deviate.

Double standards come under scrutiny 
Organisations are known to take short cuts. The most glaring example is that of Tesco. Tesco has excellent relationship with the UK union called Usdaw [Union of Shop, Distributive and Allied Workers]. The Tesco-Usdaw Partnership is the biggest single trade union agreement in the private sector. It has contributed significantly to the good employment practice in Tesco. Senior management recognises that employee involvement and participation in decision-making can contribute to the achievement of strategic goals.
So we are talking about an organisation which is huge in size, exceptionally successful in financial terms and has practised and preached partnership with union.

It entered the US market in 2006 and there was a disaster. The US operations have bombed. There is a huge loss and they are selling it off in US. The union in USA is UFCU or United Food and Commercial Workers International Union. This union has published a report which is called ‘The Two Faces of Tesco.’ This report essentially attacks Tesco for following different policies in UK and USA. Tesco did not accept unions in USA and refused even to meet them! I wonder what defence Tesco had against the allegations of UFCU.

There are many Indian organisations which have adopted such double standards. A Pune based reputed organisation which has done excellent work in Employee Relations and whose employees have formed one of the most progressive union in the industry, established a factory recently near Baroda where almost all workers were contract labour! [To set the record right, I must state that things are changing at Baroda plant for better with some good and quick decisions]. I am stating only one case. I know many. The industrial town of Baddi in Himachal Pradesh and Silvassa in Union Territory is the haven of such double standards. Why this deviation? The only answer is ‘because they can get away with it.’

Fair play is the foundation of good employee relations. And one aspect of ‘Fair Play’ is consistency of approach, consistency of policy. The other aspect is being ‘just.’ The word ‘just’ as in ‘just and fair’ means being morally right and valid in law. Both are important aspects. Employees instinctively understand what is and what is not just and fair.

Lost Opportunity 
After globalisation and liberalisation, the unions lost power and it presented managements of various companies a great opportunity to move towards the ‘Unitarist’ stance on employee relations. This opportunity was wasted or it got wasted mainly because old mind-sets were so difficult to change. One of the hallmarks of the old era of employee relations is ‘we and they’ approach, or what we may call as the ‘non-inclusive’ approach. And the results are there for all to see. We have violence returning to the scene.

The middle game is when you begin to coordinate your primary pieces. The goal is to win primary pieces from your opponent. The primary pieces are in this context really the employee mind-sets. The nineties and thereafter presented a great opportunity.
But not all. There are exceptions like the State Bank of India. Under the leadership of OP Bhatt, their Chairman and MD, a lot of lost ground was covered. [For those interested in some more details please see OP Bhatt’s interview in McKinsey’s quarterly - Remaking a government-owned giant: An interview with the chairman of the State Bank of India - April 2009]

The Middle Game presents Conflicts 
The middle game also brings in its wake several situations of conflict. Growth phase brings in new employees, young employees. As George Orwell said, “Each generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it.” With fast changes in technology, there is a premium on youth. The old and young divide reflects in factions in unions. Even if there is no union, these factions are perceptible. And they cause damage.

A new unit can bring very different kind of threat. It is usually more productive than its older counterpart; it also enjoys, in several cases, tax benefits. This means that the production will be farmed out to the new unit. This is a direct threat – a survival threat. It surely brings a union on the scene. Even if it does not, the older unit does not like to listen to ‘how things work so well in the new unit’ stories. Not just employees, it divides managers too!

Same is the story when the organisation restructures, creates SBUs in which some are more equal than the rest, or when an acquisition takes place. The game of ‘inclusion – exclusion’ is played endlessly. It is in such cases the leadership gets tested. The enemy cannot be within the organisation, inclusiveness decides the cohesiveness and success of the organisations in the middle game.

Let us look back and see what forces operate to develop employee relations positively or otherwise, at the Middle game. Here are four statements which we can make:
[a] Organisations must define their stance on ER. Unitarist or Pluralist or Radical. It has a bearing on employees’ experiencing ‘fair play’ aspect of the game.
[b] Organisations should define their ER strategy clearly. It serves as a guiding beacon. And brings in accountability.
[c] ‘Divergent’ nature of ER issues brings in industrial democracy factor. Those who do not recognise this face turbulence.
[d] The middle game is all about managing change. It is precisely the factor of democracy which is plays a decisive role in success or failure. Inclusive practices hold the key to success. Competition within can be destructive.

What do you think? Coming up next : The End Game.

Vivek

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