[My address at the Second National IR Summit 'Towards Sustainable Industrial Relations' on May 16, 2014]
In this summit, the session theme is “Framework for Responsive Industrial Relations.”
The purpose of any seminar is to examine and
debate some ideas and thoughts which lead to greater understanding and
progress. I am going to present a few for your consideration. And we will move
from ideas and thoughts which are at transactional level to those at
transformational level. My submission is that great possibilities exist to do
work at both transactional and transformational level.
The session theme is ‘Responsive Industrial Relations.’ The catchword is ‘responsive. We will see [a]
how parties are meeting each other’s expectations, [b] how those expectations
are shaped by social and economic circumstances, and [c] How can we create
responsive industrial relations?
Expectations of parties determine employee relationship:
Let us look at the subject. It is industrial relations –
it is not industrial disputes. And in every relationship there are expectations
from each other. Things start getting messy when the expectations are not met.
Organisations expect their employees to show commitment
and dedication, they expect working at high productivity level.
Employees on the other hand expect four things from their
employer; these are: Individual Growth, Bright future, Positive Workplace and
Fair compensation practices.
The problem is that in all relationships there is so much
in the unsaid area. That is what really causes problems, because it is in the
area of fear. What you are afraid of you are reluctant to speak about.
Communication and Influencing is therefore very important aspects of industrial
relations like any other relations. I know of some very renowned companies
which have regular ‘open house’ meetings. Not just with white collar workers
but also with blue collar workers. When Godrej Industries shifted their
well-established factory at Vikhroli in Mumbai to Ambernath, about 50 Km away,
they extensively and used this forum of Open House to communicate with workers.
They shifted their factory without a glitch. This trend is very welcome.
The experience is that with the formation of unions there
is complete breakdown of communication, and influencing happens only thru use
of power, both are so counter-productive for healthy relationship. The recent
strikes in Bajaj Auto are example to cite. Forget what you read in the
newspapers. The real issues are different. The parties are engaged in a power
game. I have blogged about it in my blog post ‘The Snake and the mongoose: The
Story of Bajaj Auto Strike.’
Are expectations getting managed better? I cannot make a
general statement. I can however say that many companies have spotted
opportunity posed by weak unions, or no unions and they are going an extra mile
to listen. The Godrej example is not solitary. There are many organisations
which have instituted practices to understand expectations as well as convey
Expectations and responses are fuelled by social and
economic changes: Employees have higher expectations of quality of life and
Employers have higher expectations of flexibility
Let us look at social changes. The economic policy
changes took place in 1990. When I asked what changes in the lifestyle of
workers we have seen since then, here are the answers I have received:
The education levels have changed for better.
Most of the workers own a two wheeler.
They have a TV at home and also own a mobile.
They wear branded clothes, their children
attend tuition classes
Some of them also take a vacation using tour
operators within India.
I know some workers whose sons are placed
abroad by the IT companies, they have visited USA.
I met a union leader in Pune who researched
my profile on the internet and LinkedIn before meeting me!
Wives are employed; workers have seen the
need to have a double income.
What impact is it having on the aspirations of workers? Higher
wages. The Bajaj Auto Union did a survey very systematically and has launched
an initiative to help employees’ wives to be gainfully employed.
So perhaps higher living standard is the expectation. But
there is a catch here. If you take a look at absolute level, the wages in
reputed organisations might seem good. People who are paid well, experience a
sense of deprivation when they feel that others are getting paid
disproportionately higher. I have been talking to workers and I beg to submit
that this feeling is getting stronger. Remember people want to be paid fairly,
and people’s concept of fairness is based on comparisons. Now let us check what
is the proportion of min to max salary, in other words, the ratio of an
unskilled worker’s salary to that of MD’s.
Today a worker’s CTC is about 3 L pa and MD’s is about Rs
5.50 Cr in a medium size company. That makes it 183 times. So we know that
organisations are sharing prosperity disproportionately.
Peter Drucker said the ratio should be 20. Switzerland
wanted to make a law and it was proposed to have min-max differential at 12. Incidentally,
this proposal never got approved. Our own Bhoothalingam committee recommended a
ratio of 16. Research of David Francis points out that the differential among
top US Corporations was 42 in 1980 and 379 in 2007.
And we have a ratio of over 200! This points out to
increasing inequality. And that is a landmine. Things can explode anytime.
Let me now talk of some developments and some innovative
work in this area.
The settlements at Pune in recent times have given a pay rise of Rs 8
thousand plus to workers. There is a greater recognition that variable pay will
play important part of a worker’s CTC.
And here is the gem: A company called Polyhydron has done wonders. I wish
to quote Polyhydron. I will read out the statement made on their website.
“A transparent system of
wealth generation and a link of compensation to employees ensure that the
employees earn their wages and need not be paid. [My note: That’s a deep
statement:” employees earn their wages and need not be paid”]. This system
makes the employees responsible for their returns and in turn improves wealth
generated per employee. It promotes multiple skill, reduces total manpower
requirement. Polyhydron has established wealth-sharing scheme. It ensures 30%
of the wealth generated gets distributed.”
On the other hand, organisations insist that workmen and unions have to be
sensitive to the changes in the economic scenario because there is now fierce
competition. The competition is also with International players. This means
changes will have to be implemented fast and quick, without much fuss. The
employers have been demanding ‘flexibility’ from workers and unions. If you see
the settlements, we see long clauses not just of multi-skilling but also of
authority of deploying workers on any job. Permit me to read out this clause
from the settlement of Bajaj Auto in Pantnagar. It will convey not just my
point well, but it will also convey the anxiety of the organisations in
“The Representative of the employees recognizes the
following rights of the Management:
(a) The Management has the right to set and revises the
standards for jobs (time standards), production and quality, to effect
technological development, to introduce new or improve products, production,
methods and systems, rationalization, standardization, or improvement of plant
or techniques, which may lead to increase / reduction of manpower including
covenanted employee or to be employed in any occupation / trade / department or
shift. It also has a right to decide upon production, quality and cost target,
recruitment, promotion, deployment, allotments of shifts, working hours, timing
of shifts, holidays, weekly offs, over times (following the statutory norms)
and permanent / temporary transfer of employee from one job / section
/department /division to another as the case may be and from one plant to
another plant situated anywhere in country.
The power is unbridled, but this long all inclusive clause only goes to
show the anxiety of the organisation in ensuring flexibility.
My understanding is that this is partly the response to India’s archaic
labour laws which inhibit introduction of changes. No organisation can survive
today without making quick changes to various aspects of production.
The excessive and indiscriminate use of contract labour in the industry is
the result of this drive for flexibility. In Pune belt, there is indiscriminate
use of trainees as well. Take a look at some statistics.
At Pune, Fiat reportedly employs 330 permanent workers, 700 trainees, 700
temporary workers, and 800 contract workers. Bosch employs 235 permanent
workers, 400 trainees and 150 contract workers. Mahindras employ 1800 permanent
workers, 700 trainees, 250 temporary workers and 1200 contract workers. These
details are already put on my HR blog. See my blog post ‘Training to Exploit.’
I am not making any judgement at this stage; I am just placing facts for
The point I was making is that expectations and responses of parties in
Employee Relations is shaped by social and economic changes. And in healthy
relations you take a note of these expectations, and strike a compromise.
We now move to our next point.
How can we create
responsive industrial relations?
The opportunity today is creating a seamless organisation
where all employees are integrated well. This will create higher quality of
life both at work as well at home and a vibrant organisation sensitive and
willing to adopt itself to challenges of times. That is the challenge and
opportunity. Is this happening? What are the signs and what should be done?
Yes, it is happening. And here are the signs.
The workers, who were more or less regarded as a pair of
hands a few decades ago, are now participating in certain activities that go to
improve not just products but also their experience of working in an
organisation. These activities are common everywhere now – like TPM, TQM,
Quality circles, Small group activity, Kaizen, 5S and so on. The employees are
being managed with HRM practices. The HRM policies and practices are
essentially individualistic, and they focus on integration, worker commitment,
efficiency, innovation and quality.
Do you notice that the nature of ER is changing? The
point I am making is that workers are being managed increasingly as individuals
and not as a part of a collective.
Now they say that HRM provides governance standards to
ER. And this trend is everywhere.
But ER is not entirely individualistic. There is a role
for the Government to play but it is atrophied. So organisations are
substituting. They are declaring policies. You must tell people what you stand
for. And also what you do not stand for.
Volkswagen has come out with ‘Declaration of social
rights and industrial relations.’ The declaration of Volkswagen spells out their IR philosophy clearly. SKF, Nestle have a very well spelt out ER
policy. But nothing beats Toyota [as seen in the book Toyota Culture] and
Southwest Airlines. These are exceptionally mature approaches to employee
This is what Toyota says:
Managing Toyota Way and establishing a Toyota culture is
The local management should establish a stance toward
labour unions, taking into consideration local culture, laws, labour movements
and so on.
If the management of the company does have a union, both
should recognise that the prosperity of the company is the common objective and
both must use thorough communication in order to resolve any differences of
opinions and build a healthy relationship of mutual trust.
The relationship of mutual
trust can ensure the long term prosperity of the company and thereby stabilise
employee lives by maintaining and improving working conditions.
The trend is to take Human Rights approach. That is what
Volkswagen has done. Recently HUL declared that they will take the Human Rights
approach to employee relations. ITC’s policies are similar but they are part of
a bigger statement.
Needless to say, that when you make a policy statement
you declare your own governance standards to the world. You can be held
accountable for it. Volkswagen does not employ contract labour in their
manufacturing process unlike so many others in the auto industry; it does not
come as a surprise. Values and vision which were sorely missing from the ER
scene are returning. That is a healthy trend.
British Petroleum’s step in ER is the transformational
step in every way. The BP Union and BP created a shared vision of ER and signed
a joint statement. That was way back in 1999!
In other words, organisations are telling what rules they
will abide by – and that is a big commitment. If we focus on organisations
which are trying to foster responsive industrial relations, we see that they
are increasingly listening to employees, having dialogue about issues; these
organisations are sensitive about economic and social changes. And against this
background they are articulating their policies and vision. The next step can
only be to practice greater democratic way of managing people. This is
essential for creating responsive industrial relations.
For a visionary leader it is an open canvas today. That
is the big opportunity.
Vivek S Patwardhan
Labels: Contract Labour, Industrial relations, Responsive IR, Volkswagen declaration, Wage disparity, Workers quality of life