Changing Paradigm of Employee Relations

Address delivered at the Tata Group HR Technical Forum on Employee Relations

Friends,
The subject of my talk is ‘Changing Paradigm of Employee Relations.’ As I thought about the subject, I realised four aspects, let me begin by sharing those with you.

See the video of my speech here

Setting the Approach

1.    Firstly ‘Employee Relations’ [ER] is about the relationship between employer and his employee, both individually and collectively. This relationship begins with the contract of employment or what we call the ‘Appointment Letter,’ and usually ends with his resignation letter, or what HR Managers call the ‘Disappointment letter’ in lighter vein. Between the exchanges of these two letters we witness high drama, as in any relationship.

2.    The second aspect is about the word ‘paradigm.’ We know that a paradigm is a mental map or a pattern of something as the Oxford Dictionary defines it. We are going to discuss changes in paradigm.  It does not take great intelligence to understand how difficult it is to identify a change in the paradigm, because it is usually very slow. It is so slow that occasional anomalies are not even noticed. I am reminded of an experiment which Collin Wilson has described. A psychologist asked people to watch as he held a pack of cards and quickly started dropping cards one by one. The interesting aspect was that in his pack of cards there were some red clubs and black diamonds. As dropped cards rapidly nobody noticed the anomaly. As he started dropping them again, but a bit slowly, in the second round people realised that something was wrong but could not say what it was. Then he dropped the pack again even more slowly, many observers realised what was wrong.

3.    We as observers of ER are in the same position. I am going to discuss what, in my opinion, are black diamonds and red clubs – whether they make paradigm change or not is for all of us to discuss here.

4.    Now the third aspect – I would like to pick up here the word ‘relations’ as in Employee Relations. The definition of the verb ‘to relate’ has not changed in the last several decades. So what do we really mean by ‘changing paradigm of ER?’ I believe we are really referring to changing paradigm of building healthy employee relations.

5.    And now I come to the fourth and the last aspect: If the paradigm, which is a pattern, of employee relations is changing, it is because we are behaving differently, and it must be obviously because we see our role differently. So I am going to discuss with you whether the parties to the employee relations think that their roles have changed, and if so, what are the tell-tale signs. Needless to say these are all my impressions.

The Broad Picture:

6.    Let me begin with the broad picture first. I already mentioned earlier that we are really referring to building healthy employee relations. So the next question is ‘What would be the manifestation of healthy employee relations?’ Needless to say that all employees should feel that this is a great place to work, and they should feel a sense of belonging. Let us ask ‘how do we fare as a nation? Where does India stand today?’ This question is relevant because we are trumpeting ‘Make in India.’

7.    Every year The International Trade Union Confederation (ITUC) publishes Global Rights Index. It demonstrates the worst countries in the world for working people, with the erosion of rights and increases in insecure, unsafe and informal work. The protection of fundamental rights of working people, they say, has become more critical than ever. India ranks as one of the worst countries to work, it is placed at level 5 which means that there is ‘no guarantee of rights.’ This is on a six point scale. ‘One’ indicates Irregular violation of rights, ‘Five’ indicates No guarantee of rights. Even in 2014 India was placed at level 5. We have here China and Korea for company!

Role of Government

8.    This brings us to the next question – if we are one of the worst countries to work for in this world, what was the Government doing? Let me share my experience and some thoughts:

a.    We are aware of the extreme partisan stance taken by the Haryana Government in the case of Maruti. Several people have openly criticised the role the Government has played in suppressing the workers’ voice. PUDR [Peoples Union for Democratic Rights] published a report [Driving Force] after investigating the violence at Maruti plant. I would like to read out a short paragraph.

“This report….. reveals how the unrelenting and seamless nature of the nexus between police, the administration, the management and the judiciary is blatantly serving the interests of capital. The absence of any semblance of protection for workers of the automobile industry, the most advanced industrial sector, which is heralded by the neoliberal regime as its hallmark, brings to light the grave challenges before the working class today. The possibilities for justice in this scenario appear very bleak.”

b.    In Toyota Kirloskar’s case, the Government of Karnataka was more an onlooker than a party whose role was to keep the wheels of industry running.

c.    I can cite many instances but I will quote from the report ‘Captured by Cotton.’ It is a report on ‘Sumangali Scheme.’

“This report highlights several labour rights violations faced by girls and young women employed under the Sumangali Scheme in the Tamil Nadu garment industry. The Sumangali Scheme equals bonded labour, on the basis of the fact that employers are unilaterally holding back part of the workers’ wages until three or more years of work have been completed. In addition, workers are severely restricted in their freedom of movement and privacy.”

You have to read the report to understand how draconian the ways of textile industry is in Tamil Nadu.

d.    So we once again ask ourselves ‘What was the Government doing? What is its role?’ HR Managers of my generation will recall that the labour Commissioner’s office used to call the Employers representatives to attend PMS or Personnel Management Services which was a precursor to conciliation proceedings. Those HR Managers will also recall settlements being signed with the intervention of Labour Commissioner at unearthly hours. Mico in Nashik once signed their settlement at 3 am. It was facilitated by the Labour Commissioner. We see no such efforts now, no more such stories.

9.    The Labour Ministry is supposed to intervene in disputes and facilitate a settlement. They have given up this role. They also have another role which is of law making. I will not elaborate on this because we are all witnessing not-so-happy situation on this front.

10.  The problem with the Government’s confused response is that it has made them an onlooker on employee relations scenario, which allows the unscrupulous to get away with murders. How else will you explain the indiscriminate use of contract labour and trainees?

11.  Let us return to paradigm shift: The Government has given up its role to intervene in disputes where they exist or even apprehended. It used to think that they have to protect the weaker party, namely labour, in employee relations. It is now working with a different mind-set. Now the Government seems to think that industry must be promoted by allowing the industry to have its way at any cost

The Employers

12.  Let us now examine if the Employers have also changed their paradigms of employee relations.

13.  Let us first examine the context in which Organisations are placed. There is cut-throat competition. It has led to mergers and acquisitions. It has also led many organisation to rethink strategies. So Pfizer has closed down their Thane unit, but is getting the products made somewhere else. Kotak Mahindra and ING Vysya have merged. I mention these examples only to underscore the fact that the strategies adopted for business have brought forth different sets of concerns on employee relations front for them.

14.  There are two more factors which require our attention. Firstly many Indian organisations have now grown as Indian MNCs. These include giants like Tata Steel, Tata Motors, and also include Godrej, Asian Paints and Marico. I have named just a few.

Automate, Do Not Employ People

15.  The second factor is articulated very well by a report in The Economist.

“The effect of technological change on trade is also changing the basis of tried-and-true methods of economic development in poorer economies. More manufacturing work can be automated, and skilled design work accounts for a larger share of the value of trade, leading to what economists call “premature deindustrialisation” in developing countries.”

Let me also read out a very short conclusion of a research study. This is titled “Where Have All the Workers Gone? Puzzle of Declining Labour Intensity in Organised Indian Manufacturing” and authored by Kunal Sen and Deb Kusum Das. They conclude:

“With declining protection for capital goods over time, the prices of machines fell steadily relative to the price of labour, and increasingly made firms in the organised sector substitute machines for labour. While the fall in the relative price of capital may have led to an increase in the rate of private fixed investment in machines, and consequently, economic growth, it changed the incentive structures of firms to hire labour, and enabled them to quickly adopt machines in their workplaces.”

Employ Indirectly or On Fixed Duration

16.  There is a lot of uncertainty about future due to competition and the employers also do not wish to add to their manpower. This has resulted indiscriminate employment of contract labour and trainees. Not just trainees and contract labour, but there is a huge number of employees who are called retainers and consultants. Add to that fixed term contracts, which are not really so. Their number is shocking, believe me it can be as high as 40% of the workforce. I wrote a blog titled ‘Training to Exploit’ and presented this statistics which has gone unchallenged so far.

Company
Permanent Workers
Trainee Workers
Temporary Workers
Contract workers
Total
Bajaj Auto
884
450
60
550
1994
Bosch
235
400
0
150
785
M&M
1800
700
250
1200
3950
Fiat
330
700
700
800
2530

Promote Culture sans ER Policy

17.   An organisation which employed rather large number of retainers had ‘experienced a threat’ of unionisation. I asked a question to their HR manager: ‘If a union representative asks you ‘Sir, what is your ER policy?’ what would be your answer?’

18.  And that precisely brings us to the next important question. Do we have a policy on union recognition? Do we have a policy on where we will employ and where we will not employ contract labour? Do we have a clear policy on where to employ trainees, retainers? These are the questions which are preventing us from building healthy employee relations. Add to this the fact that most of the unions have either no power to question or they are conniving with the employers in engaging such people as we see rampant in the Auto industry.

19.  I would like to invite you to see the ‘Declaration of social rights and industrial relationships at Volkswagen’ which they signed in 2002 and revised in 2012. Volkswagen stands out in Pune belt mainly because they have refrained from malpractices of engaging contract labour and trainees. What made them different? The answer to my mind is that the Volkswagen managers are accountable for the ER practices to somebody within. The question is if we wish to be an MNC, are we going to adopt practices which help us build healthy employee relationship in every country? This is an area where paradigm shift has not happened but is desirable.

20.  There is an increasing trend to work on the organisation’s culture to promote the right work ethic. ITC has done great job of this, and I have done some work with Tata Steel at two of their plants. Both Tata Steel at Kalinganagar and ITC in Nepal have taken initiative to work on work ethic at the inception stage. This is really laudable. I do not know if they have written ER Policies, but in both these companies a lot of collective thinking has happened. There are many organisations which want to work on work ethic without declaring their ER policies and that is why they are unlikely to succeed. Trying to build culture without declaring to the world what we stand for does not work.

SMEs show the way: Sharing Wealth

21.  I will refer to the settlement of Bajaj Auto with their Pantnagar workmen. The settlement gives a ‘Performance based’ increase. In a nutshell this works as follows: [a] All workmen get uniform increase in allowances, [b] But they get differing increases in Basic salary. Those rated A will get 100% of the agreed increase, B rated will get 80% and C rated will get 50%.

22.  My hope is stands on the experiments in some of the SMEs. Polyhydron sets the example. They have done pioneering work in this area in my opinion. But is it spreading? I searched for answer and I discovered it which I have captured in my latest blog post called ‘When HyTech meets HiTouch.’ HyTech is owned by Mr Mondkar and he implemented Toyota Production System. After achieving great results, he shared the generated wealth with workers. So he shared 25% of the value added with the workers. What Mondkar did is a sure recipe to promote healthy employee relations with a strong sense of belonging.

23.  So we see two paradigms here: One of increasing salary but with a strong sense of control, and the other of sharing wealth with a strong sense of participation. I leave it to you to decide your choice.

24.  I recently read Dan Pink’s outstanding book ‘DRIVE: The surprising truth about what motivates us’ He argues with lot of evidence that three factors play greatest role in motivation of employees. They are Autonomy, Mastery and Purpose. Has anybody tried to redesign jobs of employees employing this approach? I do not know. Some good work was done in this area by Marico and Asian Paints, but it is dated. I have not heard of any other example. Should this be the approach for the future?

The Trade Unions

25.   The adversarial role of trade unions is what we are accustomed to. I have however seen some very positive changes.

26.  I arranged a program for Tata Steel union representatives and managers to witness changes first hand. I have also blogged about it [Trade Unions as Business Partners Emerging Trend] and it has been republished on many sites like Peoplematters and Businessmanager.

TU Leader Profile has changed

27.  There are many changes taking place on the ER scene. This of course is true of the Pune belt which I have studied extensively. I met Pradeep Thakare of Bosch who searched my profile on the internet before meeting me. Thakare has not only launched very imaginative schemes for workers, but he also proposed that the union will own a production line. They carried out several changes systematically to reduce rejection. Prakash Dhavale challenged the Minister Mr Sachin Ahir when M&M wanted to close down Amforge, fought with the management and got workers a benefit higher than what the Minister gave. The young union leaders are tech savvy, full of confidence and assertive too.

Unions are Proactively Building Relations

28.  Here are some proactive changes: Bajaj Auto has defined their policy towards the Company. They have made clear statements like: The union will adhere to quality standards, no short cuts. They will practice transparency in dealings. They will champion multi-skilling. Many representatives are themselves ‘multi-skilled.’ They will practise data based management. The union has data pertaining to all employees, and they often talk with facts and figures.

29.  The Thermax union has a quality policy and is perhaps the first union to be certified under ISO 9000.

30.   But they are under tremendous pressure. Because the profile of workers has also changed. Gone are the days when union leaders decided what was good for workers, now it is the other way round. We have insistent workers who tell the leaders what they want.

31.  Let me read out a letter sent in July recently by the Union to Automotive Stampings & Assemblies Ltd. I am told that Tatas hold 75% stake in this company. I quote:
Before moving forward we expect few words of wisdom and inspiration from you. We would like to place on record that we will create appropriate atmosphere which is conducive to investment and growth.
Sir, we have decided to adopt totally new path which will not create distress, jealousy, enmity, division between management and union, etc. We are in the process of detailing on the above aspects and present to you in due course of time. This time we have decided not to demand wage rise, but to earn wage rise and without your cooperation and support it will not be possible.
We are serious…… and we will show it through our behavior and attitude. We will submit our detailed proposal in terms of productivity improvements not only in labour but also material, energy, capital. We will also propose wastage reduction plan in all these areas so that our Company shall be competitive and sustainable.
[Letter of ASAL Kamgar Sanghatana, Pune]

International interest in Indian ER scene

32.  When Maruti had the infamous violence, a small document was published – called ‘Merchants of Menace.’ Maruti refused to meet the International Commission for Labor Rights so they went ahead with their investigation and published the monograph. They have subsequently also published one more called ‘Shiny Cars, Shattered Dreams.’ This is about precarious working conditions of workers in Auto industry in Chennai belt. ICLR is doing its bit to raise awareness about the labour issues in India.

33.  IndustryAll Union has set up a base in Pune where many big organisations in auto industry are present. IndustryAll has a very high affiliation by local unions. Local unions interestingly are ‘employees union’ but we will now understand that they now have a solid backing.  

34.  The international watchdogs are here to stay – whether we like it or not. It is time to upgrade our practices.

And finally….

35.  Looking back there is enough evidence that paradigms of employee relations are changing. The real question not whether the paradigms of employee relations are changing, the real question is how can we channel them to build healthy employee relations. There are two factors which come in the way – the first is the extremely hierarchical attitude of the managers and the other is the fear of opening out, the fear of disclosure. Unless we act with hope and practise transparency and openness we will not be able to build strong relations.

36.  Finally, what matters in the relationship is the conversation, the depth and openness of it. Conversations where we talk to others as our equal, status has no place there. What matters in developing relationship is how we resolve our conflicts. Unfortunately these skills are not taught in any management school, they are learnt by trial and error, by practice. Collective reflections do not seem to have a place in building relations in our corporate world. My organisation faced a six month long strike, and later employees came back to work totally defeated. I learnt a big lesson when we reflected in a meeting on where we had possibly gone wrong, and if could we have averted the strike.

37.  One concern which is being voiced frequently is that the ER or IR skill is lost. For the last two decades we seem to be doing without it and we have not done particularly badly. Perhaps Darwin’s law is at work. One message from current situation could be that the old adversarial stance is now extinct, it is like the appendix in our body – it is there but it is useless and can be removed. Look at the positive developments we have discussed. The message could be that the organisations of today and tomorrow must be built on ‘unitary’ stance, in other words we have to be demonstrably inclusive. This situation is like reading the Tarot cards, and we are the readers.

38.  Let us understand one critical thing – Relationship is a thing of past, it is history. What matters is ‘Relating’ which is the present, it is the moment which we are living. We need to be shackled by the history of relationship, what matters is the spontaneity and authenticity of response to the situation on hand.

39.  It is my personal view that the last two decades, and the influence of IT industry has made working population more algorithmic. Everything must have SOP, even building relations! Relating is not algorithmic, it is heuristic. We must explore concerns of others first and then explore possibilities of evolving a solution. This is what Steven Covey says, this precisely what Edgar Schein says.

40.  Paradigm is a pattern. Our language discloses the paradigm. Please recall your discussion with a marketing or finance manager. He uses words which indicate conflicting values – like market share and higher profits. He wants both, so the learning is that values are best served in pair.

What are the words which we are associating or listen frequently when we say 'employee relations?' We say 'Control, Indiscipline, Non-compliance, Performance, Welfare, Conflicts, Dispute.' What are the words which we are associating when we say just 'relations'? We say 'empathy, care, togetherness, conversations, reaching out, doing things together.' To summarise, when we talk employee relations we talk words which are either paternalistic or which indicate control, adversarial stances; when we say relations we say words which introduce warmth, greater transparency and openness. Just introduction of the word 'employee' can change the scenario so much is simply shocking! It moves us from interdependence to control.

So as ER manages we must learn to manage both the values – Control and Interdependence. We have to do away with our obsession for control. We have to recognise that every manager is dependent on his junior for success. This is where Edgar Schein’s ‘humble inquiry’ comes in.

If we wish to change paradigm of employee relations, we must change the language and we must practise humble inquiry – that is the formula for changing the language.

Vivek S Patwardhan 

Text Box: Vivek S Patwardhan works as Executive Coach and OD Consultant. He can be reached on vivekvsp@gmail.com. His website www.vivekvsp.com

ITUC Global Rights Index 2015 The World's Worst Countries for Workers http://www.ituc-csi.org/ituc-global-rights-index-2015

Driving Force http://www.pudr.org/?q=content/driving-force-labour-struggles-and-violation-rights-maruti-suzuki-india-limited

Captured by Cotton http://www.somo.nl/publications-en/Publication_3673

Declaration of social rights and industrial relationships at Volkswagen http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2010/07/Verhaltensgrundsaetze_des_Volkswagen_Konzerns.bin.html/binarystorageitem/file/The+Volkswagen+Group+Code+of+Conduct.pdf

Trade Unions as Business Partners Emerging Trend http://hresonance.blogspot.in/2014/09/trade-unions-as-business-partners.html

Merchants of Menace http://www.sacw.net/article4855.html

Shiny Cars Shattered Dreams http://laborcommission.org/news/full/iclr-report-released-shiny-cars-shattered-dreams

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