Synopsis: Communication For Productivity
Letters written to some 7500 Workers / Managers / Union Leaders, following a period of strike / Go slow / Murders (1979 - 1987), at Mumbai factory of Larsen & Toubro Ltd. This direct / open / honest communication led to a remarkable atmosphere of trust between Workers and Management, which, in turn, increased productivity at 3% per year (ave).
4 Sep 1981
Dear Mr. Grover,
Sub: INDUSTRIAL RELATIONS PERSPECTIVE-PART-II
As far as I can determine violence in industrial situations have occurred due to the following reasons:
1. Apparent conflict of interest between the workmen and the management.
2. Inter-Union rivalry for power to control the workmen and to be in a position to bargain with the Management.
First, we must examine what are the interest of the workmen and the interest of the management. Then, we may examine, if these interests are conflicting in nature. Obviously, the management wants the company to grow and remain profitable. I suppose, this is also what the workers want and therefore, there is no conflict here.
The conflict starts on the issue of the employees share of prosperity of the company. The question that has remained unresolved so far is:
What is the respective contribution of the labour and the management in the prosperity of the company.
Then, there are others who also have a share in the prosperity of the company, i.e.
the share-holders, the society and the consumers.
Through intricate laws on sales-tax, on excise, octroi, corporate taxes, etc. The Govt. representing the society has already determined its own share. In most of the companies neither the workmen nor the management consider it necessary for the company to go beyond these Statutory obligations and share its prosperity with the community or the society at large in terms of health care, education, rural development etc. this is largely a voluntary effort on the part of a few enlightened organisations. Even in this case, how much to share with the society, is largely an unilateral management decision where workers do not have much say.
As regards the society and the shareholder’s there has not been much dis-agreement between the workmen, management and the Government. They are being rewarded according to fairly established traditions for the risk capital they made available for running the organisation.
The consumers, by and large, are a forgotton lot. A very few managements (and none of the Unions) have bothered to protect the interest of the consumer. Under highly protective market condition, most the managements have been able to sell whatever they produce of whatever quality and at whatever cost. In their unholy anxiety not to allow an unit to turn ‘sick’, the Govt. has encouraged inefficiency. Such units, when made to dole out huge wage increase under pressure from the unions, have merrily passed on the burden to the consumer through increased product prices. The Indian consumer has not yet learned to protest and the Union and the Management have not yet learned to care:
If we now examine the workers aspirations (interest) we may find some clues to the causes of the conflict. The worker aspirations can broadly be divided as :
i. Physical needs
ii. Mental needs
Physical needs themselves have two components – i.e. the short-term and the long-term.
The short-term physical needs primarily centre around earning the cost of living for oneself and one’s family. This would include food, clothing, shelter, education, entertainment etc. these needs manifest themselves in demands for better wages and higher bonus.
For the employee himself, the short-term needs at the place of work are better working conditions.
The long-term physical needs comprise of –
i. Improved standard of living
ii. Retirement benefits
Whereas, there can be no dis-agreement on the rights of the workmen to unite and bargain collectively with the management, the fulfillment of their physical needs, the question to be asked is:
- Can a group of individuals be allowed to take more out of society than what they give to the society ?
- If this is allowed to happen, wealth cannot be created. It is only when each section of the society gives more to the society than what it takes away, can the societal wealth increase ? Under any other conditions, only some can live a better life at the cost of impoverishment of the lives of many others.
From the foregoing, it has become clear that any increase in the wealth of the society directly depends upon similar increases in the individual and collective productivity.
What, therefore, a group may be allowed to take our from the Society should be determined exclusively from the increase in productivity of that particular group over a period of time. For the share in the prosperity brought about through increased productivity, must always be after the productivity increase has taken and not before. This is the crucial principle of sharing the prosperity of an organisation by the people involved.
Whereas, productivity-based collective bargaining has become an essential feature all over the indudstrialised world, this has been sadly lacking in our country.
On the one hand, there are thousands of small-scale manufacturing organisations employing 10/20 workmen where gain of all the productivity is cornered by the owner manager. On the other hand there are hundreds of medium and large-scale organisations employing between few hundreds to few thousands workmen where the Unions have been able to extract wage increase far in excess of any increase in the labour productivity and sometimes, even when the labour productivity has actually fallen! And all of this, under the threat of strike and closing down the organisation. These are the ‘high-wage islands’ where exploitation of reverse kind is taking place!
One can apportion some of the blames for this sad situation to the Management, to the Government – the management for having giving in under such threats and the Government for having failed to protect the management against such unreasonable demands.
The system of dearness allowance to neutralise the rising cost of living was first introduced in our country more than 40 years ago. The DA system has taken deep roots in our country and has become an inseparable part of the compensation structure; but, does it have to be element of compensation plans even for completely new undertakings coming up in backward areas of the country with no tradition of industrial employment? Can we not encourage these units to do away with the DA system and instead have an annual wage increase directly linked with the actual increase in the physical productivity of the work force during the preceding year?
As far as the existing manufacturing units are concerned, the least, we could do is to ensure that the long-term wage agreements which are negotiated once in ¾ years are strictly based on the physical productivity improvements achieved during the preceding period. I have particularly chosen to express productivity in terms of ‘physical output per person’ so as not to be mislead by the improvements in ‘sales turnover per person’. This is because any number of companies have managed to substantially raise sales turnover by simply increasing the selling prices of their products even when the real physical productivity of the organisation continued to decline.
To implement the proposal outlined by me above, the Government should ask each manufacturing unit to submit for consideration by the Government as well as the Union, its proposal for the measurement of physical productivity of the unit and the proposed linkage of the future long term wage increases with the improvements in the productivity of its work force. To my mind, it is unimportant whether the Government and the Union accepts the management proposal in toto. What is important is for all the parties concerned to accept the principle of ‘creation of wealth before sharing the same’. It is only thro’ such a scheme that we would be able to come out of the vicious circle of the wages and the prices chasing each other. In a country where once upon a time ‘work was worship’ the situation today is that workmen want to have more and more wages for working less and less. This erosion of work ethics is the most serious matter before the nation today. If productivity linked wage increases can restore some of the work ethics, we would have won a major battle against inflation. If our trade and industry have to survive in the world arena against fierce international competition, we must be willing to reward efficiency and stop worrying about the inefficient units which have to close down. This is because our responsibility as a nation, does not end with worrying about the present work force. We must necessarily worry about the millions of able bodied jobless persons who cannot even secure one square meal per day. What kind of social justice is that where an unskilled worker getting Rs. 800 per month is allowed to agitate militantly for a wage increase of Rs. 200/- p.m. whereas, for every one such person employed, there are 100 outside the factory gate who cannot get a job even for Rs. 200 p.m.
As far as the mental needs of the workmen are concerned, these are primarily in relation to the job satisfaction and the status that participation in the process of management brings. So far, this aspect has not become an issue of collective bargaining – not at least in our country. Managements should however, ignore this at their own peril! If managements do not come forward with satisfactory schemes of worker participation, time will come soon when these items also become matters of collective bargaining. At the same time, I strongly believe that this is not a matter that should be legislated and I would earnestly request the Government to keep away from framing any laws in this regard. A genuine desired for allowing worker participation in the process of management should come voluntarily form the Managements and arising out of a fundamental conviction.
I enclose herewith :
Some slides on the subject which illustrate my own concept of how this model should be built and implemented.
We may discuss this in some more details should you so desire.
The foregoing are my thoughts on the subject of ‘collective bargaining’
As far as ‘Go – slow’ is concerned, I agree that it worse than a strike. Given willingness on the part of the state Labour Commissioner. It should not be difficult for him to establish whether a management’s complaint of go-slow is valid or not. All that he needs is to request the management to furnish daily/weekly production records, of six months preceding the period of go-slow and compare the same with similar figures for the period of go –slow. The Union may be allowed to cross examine the management in the presence of Labour Commissioner with regard to such other inputs as availability of raw materials, electricity, manpower, machinery etc. the outputs for both the periods should be of course, in the physical units only. Once the Labour Commissioner is satisfied that a go-slow has actually taken place, he should be empowered to direct the Union and the workmen concerned to step up the output to an average of the monthly output of the preceding six months and simultaneously authorize the management for a pro-rata reduction of wages for the period of the go-slow, till such time the normal production is restored. I do agree that the solution may not be as simple as I have tried to make out. However, given a desire on the part of the Government to get rid of cancerous disease which is sucking the life of many an industry, it should be possible to find a more acceptable Solution.
In closing, I would only like to add that sooner the Unions, the Managements and the Government realize that ever-increasing labour legislation is not the solution to the problem of strained industrial relations, the better it would be for all concerned. Possibly, we already have more labour laws on our statutes than any other country in the world! If labour laws by themselves could ensure harmonious industrial relations, our industrial society should be the object of envy for the rest of the world! What we find in reality is actually the opposite. All these laws have incessantly talked about the ‘rights’ of the workmen and how to protect these rights. If we must have one more law, it is high time, it is about ‘the duties’ of the workmen.
Whereas, all of the foregoing are my strictly personal views, we at L&T have tried to move in the direction indicated therein. Over the years, we have had a strong internal union of educated workmen.
Under the constructive guidance of Bhartiya Kamgar Sena lead by Shri Dattaji Salvi, the worker-leader have been responsive to some of the thoughts expressed earlier.
I also enclose herewith :
a) A write-up from our internal house journal – powai pageant
b) Translation of an interview with Mr. Dattaji Salvi which appeared in Mumbai Sakal dt. 7.8.81.