[Address delivered at IndiZen 2019, Pune]
At the outset I thank Kaizen Institute for inviting me to address the IndiZen 2019. Kaizen Institute has been doing outstanding work. What struck me most about Kaizen Institute is that people here not only do impactful work, but they live and breathe their mission ‘Improving the world with everyone, everywhere, everyday – the Kaizen way.’ Mr Grover, I am inspired by the work of Kaizen Institute, and I feel honoured to be invited to IndiZen.
I will present the definition of ‘excellence’, discuss briefly how practice, policy and culture influence one another. Then I will proceed to present cases where certain principles for creating excellence were applied and a few cases where they were not.
The subject is ‘HR Practices for Excellence’. I like the way this subject is defined. HR Practices must have a purpose, and that purpose is achieving excellence. We are not talking here about best HR practices but we are discussing how HR practices can create excellence.
Excellence is Surpassing Ordinary Standards
We should look at what excellence means. One of the definitions is ‘Excellence is a quality which is unusually good and surpasses ordinary standards.’ And we know that the purpose of creating HR practices is to add value to the organisation. We may define it in terms of productivity, profits, engagement of employees. There are several ways to think of what HR practices should achieve. In final analysis, the excellence in HR practices must result in creating an organisation which respects people, which focuses as much on relationships as on the aspects like profits, innovation, productivity etc. That is the test of the success of excellence in HR practices.
Having discussed the purpose of creating HR practices and having understood the meaning of excellence, let us sum up that the focus of this subject is on HR practices which surpass ordinary standards of adding value to the organisation, emphasising the means as much as the ends of the business.
Culture Of The Organisation Shapes HR Practices
The HR practices are shaped and influenced by policies and culture of the organisation. Let me explain. I like to think of the HR Management as a three-layered structure. Think of the top layer as HR practices – these are recruitment, training, development, compensation, performance management, employee engagement. The list is only illustrative. The layer below this is the policy layer. Practices are guided by policies of the organisation.
For example, there are organisations which believe in training, developing their managers for senior leadership roles. You will find that in these organisations almost all their senior level managers have risen from within. When you declare the policy of sourcing your leaders from within, you adopt suitable HR practices for training and developing people from within the organisation.
But the converse is also true. That is to say, when an organisation practises sourcing its talent from within the organisation, although it may not have declared its policy, it invests in the development of its employees.
This is so because there are articulated policies and there are practised policies. Not all policies are defined in any organisation. But HR practices exist for every operation and those are influenced by the HR policies, articulated or practised. I say this only to explain the interactions between
HR Practices, Policies, And Culture
So, we have the top layer as HR practices and the middle layer as policies, the last and bottom layer is culture. Culture influences policy statements, it in turn influences HR practices. This is obvious, yet let me explain. You will find that in a military organisation or an organisation which is engaged in breakthrough research, there are restrictions on sharing data. Contrast this with an NGO working in the rural sector. There is almost free exchange of data between all employees.
You will also find Scandinavian organisations are more inclusive and egalitarian in their approach. They, for instance, recognise the rights of trade unions unlike their Indian counterparts. The Scandinavian culture guides them.
An organisation which has open culture creates forum for interactions, and many organisations with highly hierarchical set ups communicate through circulars and notices, sharing just the bare necessary information.
Life Cycle Stage of The Organisation Impacts HR Practices
The HR practices are created and understood in certain context. When we think of HR practices for excellence, we will benefit by keeping this model in mind. But the organisations are not static entities. They have a life cycle of their own, like any human being. Organisations move from ‘Inception’ to ‘Growth’ stage. The then ‘mature’ to ‘stagnate’ or ‘decline.’ Because organisations move in various stages of life cycle, they present opportunities for adapting and creating HR practices for excellence. We should bear in mind that HR practices are influenced by policies and culture of the organisations and that each stage in the life cycle of the organisation presents different opportunities for creating HR practices for Excellence.
Let us look at some examples of HR practices in each stage of the organisation.
The Inception Stage
What happens when a new establishment is being set up? The project team works hard to ensure that they establish processes which give them higher productivity. They make sure that the manning is lean. They establish metrics to measure productivity. If you had a plant elsewhere, then you study what is not okay there and try to avoid it in the new plant. So right manning, right work practices and learn from past experience to avoid certain practices. People get trained extensively because the Project team wants to institute the right work practices and achieve high productivity levels. Along with this they recognise a unique opportunity to shape the work ethic and culture.
Marico carried out an extra-ordinary experiment while setting up their Kanjikode factory. They used the inverted pyramid concept for designing their organisation. So, workers decided many operational aspects. Workers took part even in the panel which investigated a misconduct. This forced them to take a call on the dilemma of retribution versus reformation for fellow workers. Several aspects of day to day operations were decided by workers in a methodical way.
Asian Paints designed the jobs of production workers while setting up the Patancheru factory near Hyderabad. The purpose was to reduce monotony, increase variety of operations and allow workers to have more control on their activities. The result was not only higher productivity but also more engaged employee.
Both Marico and Asian Paints took measures that defined the work culture.
The Growth Stage
Major events occur in this phase. Here are some: Union comes on the scene! The organisations enter growth phase when the establishment carries out expansion plans. This usually starts a divide between new and old employees. Sometimes the parent organisation decides to set up another unit. The old establishment employees are tacitly asked ‘Why can’t you be like them’ because the new establishment is at the Inception Stage, and its employees appear so receptive. Sometimes the organisation acquires or merges with another unit. This starts a direct or a subtle conflict of Us vs. Them. Or it faces restructuring. It creates thick impenetrable walls between SBUs.
In organisations facing downturns of economy, employees face downsizing of the organisation. For them it means loss of jobs, sometimes called voluntary retirement. In recent times organisations have been experiencing technological obsolescence which again leads to loss of jobs.
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.
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! This incident is so typical of organisations adopting wrong HR practices in the Growth phase.
Let us now see some good examples. ShreeRamKrishna Exports is a billion-dollar company at Surat. The owner is an enlightened person who is also exceptionally deft at connecting with people, and is driven by basic values of respect, acceptance, consideration, listening, openness, and empathy. In ShreeRamKrishna Exports, all employees are treated with equal hand, it is immaterial whether you are a contract employee or a permanent employee. Both have same pay, facilities and benefits. And both, I repeat even contract workers can earn up to Rs one lakh a month in pay depending upon their performance. It is amazing to see how the strong beliefs of the owner have impacted the culture, policies and HR practices which run counter to what the diamond industry practises.
As mentioned earlier, managing conflicts becomes critical in the Growth phase. Let us consider the example of Southwest Airlines. This is the only airline which did not make loss for over thirty years and had exceptionally good industrial relations in spite of having seven unions. The entire story is given in the book The Southwest Way. I pick up one of their unusual practice of resolving conflicts. To summarise the practise crisply, I will say that the managers in conflict are asked to get in the room and come out after resolving it. No arbitration by bosses. You own the problem, you must own the solution! Simple, though difficult to practise, yet the most effective.
The Closure Stage
The ‘End game’ is when the parties decide to [or have to] part ways. Sometimes due to closure, sometimes they part ways because of downsizing, retirements voluntary or otherwise.
Colgate Shows The Way
Colgate managed exceptionally well the closure of its Sewree factory. 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 HUL Union’s action committee, but it was spurned by the employees. The employees exited and the Company hosted a farewell dinner on Dasara day.
Godrej Relocates The Factory
Godrej Industries recently setup their new oleochemicals manufacturing facility at Ambernath in Maharashtra. It is their factory shifted from Vikhroli. We did not hear any protest, no newspaper covered it. Obviously, they did a good job of sitting down with workers and arriving at an understanding.
And The Way Racold Closed The Factory
Racold distributed sweets on Diwali day and asked all employees to enjoy Diwali holidays. It however posted termination letters on Oct 31, just before Diwali, which reached the employees almost on the day after Diwali. Racold had declared a three days holiday from November 1 to 3 for ‘stock checking.’ Nov 5 to 9 were Diwali days!! Racold had planned the closure ‘exceptionally well’ with the shrewdness of a wolf. The employees discovered that they had lost their jobs during Diwali holidays. There can not be a worse example of a closure than Racold’s case.
The Kingfisher Story
And we know how Kingfisher Airlines was closed down without paying the salaries of hundreds of employees. I am not going to repeat the story.
The Walt Disney Company Takes HR Practises to Higher Orbit
The story of HR practices will not be complete without discussing the Disney Story. Walt Disney Company has researched extensively and trains its employees in managing emotions. The language is of creating shows, and everybody is part of the ‘cast.’ They have managed to keep focus on customers all the time and in giving them a great experience. They have studied gestures and typical questions.
HR practices for excellence must result in creating an organisation which focuses as much on relationships as on financial parameters. This is like a person’s health – it must refer to his mental health and not only to physical health. We must take a holistic view.
The foundation of HR practices for excellence is based on human values, which are: Treating employees with respect and dignity, Meaningful dialogue, Resolution of conflicts, Deep base of workplace democracy, and Customer Orientation.
Values, and I am referring to practised values of the organisation, I believe, are a reflection of the leader’s personality. This is why HR practices attain excellence when the leader is in touch with himself, and examines his life.
What we should do in our respective organisations? I suggest we should recognise the stage of the organisation, and begin building HR practices for the critical issues. We should ensure that the HR practices are created with consensus, with clear goal in mind. For example, Asian Paints wanted high productivity and also provide a meaningful job. Colgate wanted to make separation as less painful as possible. In creating the HR practices, we should examine, nay openly deliberate on the underlying beliefs. Otherwise we would be another Tesco excelling in UK and becoming a hated company USA. Meaningful conversations strengthen the values and beliefs and thereby the culture too.
With that, Ladies and Gentlemen, I rest my case.
Vivek S Patwardhan
“What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others.”