Maruti Suzuki Strike: Four Issues

Maruti Suzuki Strike: Four Issues

[This is the fourth anniversary of the Violence and Strike in Maruti Suzuki. I am republishing this article, originally written for and published by SHRM. The issues are relevant today too.]

The last twenty years have seen peace on the Industrial Relations scenario. This is why the bitterly fought Maruti Suzuki strike stands out. It is one of the three strikes that caught the attention of the nation in the last twenty years, after the textile strike, and the other two are the one at Telco, now called Tata Motors in 1989 and the other at Jet Airways in recent times.

There are some striking [pun intended] similarities in the Tata Motors strike and the latest Maruti Suzuki strike. But that is the subject of another article. I would like to highlight the broad issues raised by the Maruti Suzuki strike. Here we go….

  1. The real issue is not just about the contract labour.

Maruti Suzuki is engaging over 50% of its workforce as contract labour, temporary workers etc. There is an allegation that employers in general resort to such measures in order to save cost. The allegation is certainly not without justification. I would however like to discuss other dimensions of the problem which have not received adequate attention.

The big problem is that in a country with very high unemployment, the desire for permanent employment, particularly in a blue chip company like Maruti Suzuki, is very high – and understandably so. Post 1990, the vicissitudes of economy forces some organisations to reduce workforce, and they find it nearly impossible. As a result, the employers are paranoid about the labour laws which are out of sync with times and changing business environment. Although the reduction of workforce or closure is allowed by law, it is only after permission is granted by the Government which often is based on political considerations not germane to the issue.

Discouraging use of contract labour indiscreetly and preventing their exploitation is necessary. So also essential is allowing the employers to resize their organisations. It is necessary to find out why undesirable practices are adopted and corrections made accordingly.

In Pakistan, the permission of the Labour Court is required only if the employer is terminating the employment of more than 50% of the workmen. Now the debate can be about the number, but undoubtedly it makes a better system!

  1. The real issue is about a mature approach to industrial relations

Maruti Suzuki refused to recognise the union at Manesar plant. [The authorities refused to register it too!]. While the right of association is guaranteed by the Constitution of India, there is no concomitant right to represent at the bargaining table. In other words, it is not mandatory for the employers to bargain with a union, except in the State of Maharashtra, where the Court decides the representative status.

There are many reasons why an employer would not like to bargain collectively with a union. Sometimes it has more to do with a personality than principle. At Tata Motors, Tatas who dealt with ‘external’ leader at Jamshedpur were averse to deal with Rajan Nair. He was a dismissed worker whose obstinate stance and resorting to mindless violence subsequently justified the stance Ratan Tata had taken. In another instance, the Managing Director of a foundry resigned and became President of the union when the organisation refused to deal with him.

There were several employers who never wanted to deal with the union led by Dr. Datta Samant. Maruti Suzuki never wanted to deal with a union with any political connection. In the Indian scenario, such a stance is inexplicable which discloses their fear and lack of skill. This in turn led to the belief that the real decision maker was the Suzuki Motor Corp in Japan and not the Indian company. If true, there is a serious question of failure to appreciate the culture of a foreign country.

I have always felt that the most mature statement on an organisation’s stance on unions comes from Toyota. Here it is: [ref The Toyota Culture by Jeffrey Liker and Michael Hoseus, Tata McGraw Hill]:

  1. Managing Toyota Way and establishing a Toyota culture is not negotiable.
  2. The local management should establish a stance toward labour unions, taking into consideration local culture, laws, labour movements and so on.
  3. 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.
  4. 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.

In the ‘Summary’ [page 386] the authors state “In a sense, Toyota agrees with the argument of the union advocates that fair and consistent management is essential and managers of work groups cannot be counted on to always act in a fair and consistent way. There needs to be mechanism for all employees to be heard. Being heard is the foundation of the Toyota culture of continuous improvement. So, Toyota sets up mechanisms through the HR department to allow team members to be heard. We saw that even the HR department can be viewed as biased. The counter measure was to set up a separate “I” team representing a cross section of the plant to investigate employee issues.”

The Maruti Suzuki episode should force organisation to introspect on their stance on the unions. The real question is not whether to deal with a union or deal with which union.

Mr. OP Bhatt, Chairman of the State Bank of India successfully carried out several changes. He was asked in his interview by McKinsey’s Quarterly ‘You also had to bring the message to the trade unions?’ Here is his answer:

These are important stake-holders, and I brought senior representatives from the unions and officers’ associations together in a meeting similar to the management conclaves. I spent four days with 30 leaders from across the country. Some of my best advisers at the bank warned that the leaders weren’t trustworthy and could be disruptive, but by being different and asking them to a conclave—like monks in a cave—I built up huge curiosity. They wanted to know what I was doing. I told them I’d sit with them, but only if they came as friends of the bank. ….The results were fantastic. They had the good of the bank as much at heart as anybody else….” [unquote]. 

The real issue is how to influence workforce who will respond to business imperatives. And there are no easy answers; but who ever said that managing people was a cakewalk?

  1. The real issue is about managing industrial relations proactively.

The young workforce in India is marked by high aspirations and willingness to be flexible in approach. This is an opportunity to share industrial relations proactively. Gone are the days when increasing productivity was resisted tooth and nail. There is, on the contrary, a greater appreciation of the need to increase productivity. That several organisations have productivity linked incentives for the workmen in new industries around Pune is a testimony to the fact that a new era in industrial relations has arrived.

This also presents an opportunity to shape the industrial relations positively and proactively. Not just communication but a dialogue with employees is essential and there are organisations which have been increasingly appreciating this aspect. It calls for willingness to empathetically understand the other point of view and act on it. This is the enlightened practice of industrial democracy.

High level of ‘control’ exercised by managements [which Maruti Suzuki is also accused of] is an anathema to industrial democracy. It is a deterrent to proactive shaping of industrial relations. The irony is that while many tools and techniques developed by Japanese industry to harness the energy and creativity of the workforce are practised by Indian industry, there is no success comparable to what Toyota achieved at the NUMMI plant in USA.

Many industrial organisations have experimented with redesigning jobs of employees to make them meaningful, and allowing greater discretion in their hands. Unfortunately the press covers many stories of industrial strife and rarely any of shaping good industrial relations. Otherwise many stories of organisations like State Bank, Thermax, Asian Paints and Marico should have received greater publicity. There would be some lessons to learn.

So ‘controlling attitude’, ‘do this if you want to get that’ is out; discretion, openness and alignment are in. The soul of proactively managing industrial relations is promoting trust. There is a thought expressed in some research papers that increasing trust between the managers and workforce will lead to strengthening corporate governance.

  1. The real issue is about how you handle a conflict.

The golden rule in resolving conflicts is that even disagreement must be arrived at after an effort to understand the position of the other party. Sometimes those can be irreconcilable. But patience must be shown to talk, negotiate and resolve the dispute.

Any party’s conduct during the strife is indicative of its corporate persona, and a certain brand is created in the minds of people at large. Moreover it also creates a mindset which the employees at various levels tend to follow. It is imperative, therefore, that the leadership knowingly takes the steps to resolve the dispute.

Handling conflict does not end when people return to work. Making employees feel an inclusive culture is important; if the divide between management and workforce is allowed to continue or grow it is only an invitation to another discord. Fostering an inclusive culture after a major breakdown of industrial relations is one of the toughest jobs. It takes years to build. It takes magnanimity of the parties to accept that in a long drawn dispute both share the blames.

Vivek Patwardhan