[Keynote Address “Dynamics of HR-IR: Realigning Skills, Systems and Practices in the Face of Globalization” – Delivered at National HR-IR Conference at XLRI, Jamshedpur on Dec 3, 2016]

Ladies and Gentlemen,

I feel honoured to be invited to deliver this keynote address. I also feel honoured because this institution XLRI, which is the venue of this National Conference, has given several great leaders and thinkers to the industry. The subject of this National Conference ‘Dynamics of HR and IR – Aligning skills, systems and practices in the face of Globalization’ is an important issue which concerns all HR professionals and business leaders.

Globalization has been like a hurricane which destroyed many citadels. It has caused upheavals and it has also brought about many welcome changes in its wake. Ladies and Gentlemen, my own views would have been different if I had not had the free time on hand, a luxury of retired professional, to investigate and witness these changes and their impact. I would like to put forth my thoughts to set the context for the deliberations which will follow.

What’s on? Globalization or Deglobalization?

Much has been written about Brexit and Trump. Ruchir Sharma who is the Chief Strategist at Morgan Stanley Investment Management, and also a widely read author said in a recent article that “Populists are on the march, as evidenced by Donald Trump’s stunning victory. They have already won control of government in Britain and gained momentum in Italy, France and Germany. The new age of deglobalization is on and it is likely to last.”[1] He says in the concluding para “The global movement of goods, money and people is likely to continue slowing. The lesson of the past is that just as night follows day, deglobalization follows globalization.” His article has this by-line: ‘Likely fallout of globalization’s retreat is slower growth, higher inflation and rising prices.’

You will see that the situation is in a flux. Add to that the recent demonetisation and its aftermath. It is expected to have a long term impact on the economy. The current events are going to have a tremendous impact on the industry. It was necessary to allude to these developments before we consider the industrial scenario.

Digitization is in, People are out

L&T retrenched 14000 employees in the last six months, out of 1.2 lakh employees. In other words, they have reduced 11.67 % of their manpower. The statement of CFO is important for our purpose. He said, “We have adopted various initiatives to be competitive. We have tried to introduce digitisation whenever necessary, so in case if we needed 10 people for a job we tried to bring it down to five.”[2]

When it comes to digitisation as a way of doing business, GE leads to show. I would like to quote Jeffrey Immelt, Chairman and CEO of GE. In his interview to McKinsey’s Quarterly he said, “We want to treat analytics like it’s as core to the company over the next 20 years as material science has been over the past 50 years.” Immelt says that GE embraced data and analytics as the driving force transforming its operations globally.

Coming to scenario at home, more than a quarter (27%) of the industrial companies have ‘high’ digitization level which is expected to rise to 65% within the next five years in India, tells a survey by PwC.[3]

So digitisation will be growing, it will make organisations more productive and hopefully it will make them more customer friendly. But it will cause redundancies.

Recently Korn Ferry conducted a study ‘with extensive interactions held with about 800 business leaders on their views on the value of people in the future of work.’ They concluded that ‘Business leaders attach greater importance on technology over the value of the people in their organizations.’[4] We saw evidence in support of this conclusion in L&T and GE cases. You will also recall the statement of Sanjay Behl, the Raymond CEO that Raymond was planning to cut 10,000 jobs in the next three years, replacing them with robots and technology.[5]

If manufacturing industries face redundancies, the problem of start-ups is no different. AskMe closed down recently and 4000 jobs were lost. The Eco Times report ‘Stranded’ in the Sept 11-17 edition notes that 753 startups have closed down in the last five years.[6]

This has serious implications for the HR and IR professional. Not many jobs are getting added, perhaps there is a job loss, and nations like USA and UK are closing borders to job seekers. Globalization is supposed to make countries open their borders, but they are becoming increasingly xenophobic.

Globalization Has Changed Our Outlook: For Good

Ladies and Gentlemen, it is against this backdrop that this discussion on aligning HR practices assumes great importance.

But I would also like to count here some benefits of Globalization. Firstly, customer satisfaction has received the highest attention and priority. Almost every organisation is promoting innovation. Gender equality has received a great impetus. Vishakha judgement was delivered in 1997, but the Lok Sabha did not pass the law preventing sexual harassment of women till September 2012. I believe that globalisation increased awareness of this issue, and thus contributed in generating pressure. Work life balance issues are receiving greater attention. Paternity leave which was scoffed at till recently, is getting increasing acceptance. The bosses used to decide what was good for employees, but things have changed. Performance management systems do not carry paternalistic overtones.

After my retirement in 2009, I have had enough time on hand to visit industries around Mumbai and in some parts of Gujarat. I have met union leaders and workers, and I have met HR Heads. I have blogged about the positive developments on the industrial relations scenario. Unions have accepted the need to improve productivity continuously. One of the militant union leader in Mumbai says that he will accept productivity improvement plan if it is based on MOST [Maynard Operation Sequence Technique]. For decades unions were apprehensive of joining hands to promote productivity. [Pic: At XLRI, the author with Dr ISF Raj, Dr Jerome Joseph, Dr EM Rao. Memorable moments!]

I have written about the innovative and successful experiment of negotiating long term settlement at Automotive Stampings & Assemblies Ltd. And also about unions becoming increasingly proactive – at least three unions have officially declared vision statement, one union is even ISO 9000 certified. While almost all new age industries are focusing on promoting work culture, there are several in the old industries which are taking sure steps to promote it at the workplace partnering with unions. These are very welcome developments. Deep down in their heart, employers and employees have realised that conflicts will destroy both, they have to fight competition.

Globalization: Do We Have Courage to Strike a Balance?

Ladies and Gentlemen, I do not intend to paint a rosy picture, I had consciously tried capturing some positive developments. There is a not-so-happy side to the globalization story. Aspirations of people in the lower strata of the society have sky rocketed. Children of many people in the lower strata of the society have travelled abroad and seen the affluent West. This development by itself is not bad at all. But let us understand this in the context of the benefits of globalisation not reaching the bottom of the pyramid. Several studies have shown that the real wages of people at the bottom of pyramid have not increased at all. The disparity of pay between the highest paid and the lowest paid is very high, in many industries it is 400 times. For HR and IR managers this is an aspect to consider while framing compensation policy.

The British Prime Minister Theresa May is taking a step in this direction. BBC report says “The government has outlined its plans to make companies justify high levels of executive pay. Among the measures under consideration are pay ratios, which would show the gap in earnings between the chief executive and an average employee. Shareholders would be handed more powers to vote against bosses’ pay, but the government will not force companies to put workers on boards.”[7]

When we say we will align HR practices, will HR professionals and Organisations have the will and skill to implement a wealth sharing measure with employees is a question which hopefully will get debated here.

Building Skills: Employability versus Exploitation

I will now turn to building skills. There is a commendable work done within the organisations and also at the level of employers’ organisations. Employability is undoubtedly the biggest insurance against unemployment. While they deserve praise, there are great exploitation stories hidden in these initiatives. There are several organisations in Pune industrial belt where there are more trainees than permanent workers.[8] And there several thousand persons who have done a two year stint as trainee in three or four organisations. This means they have been working as trainees for 6 to 8 years! I have seen this happen in Nashik too. The exploitation is shocking. The Government’s NEEM or National Employability Enhancement Mission is so badly drafted that it can only promote exploitation.[9] Indiscriminate employment of contract labour is another such fallout of the situation today.

Will HR professionals and Business leaders have the courage to declare their Employee Relations policies which cover these aspects? When you declare something on your website, you lay yourself open to scrutiny by people. Volkswagen has done it. They have declared their ER policy. And it is one of the few organisations which does not employ contract labour and trainees indiscriminately. Not to adopt exploitative HR practices is a value based decision. It is also difficult to implement because short term gains are attractive and enticing. HR or IR practices and policies go hand in hand. When you articulate policies you take a stance or position on many issues of importance. In that way, you also define the character of the organisation.

In a nutshell, there are great benefits and equally great threats resulting from the force of globalisation. We see emergence of mercenary organisations and also missionary organisations. We see sharp and wide divides everywhere. HR professionals will have to declare policies before they work on skills, systems and practices. And that will be a bold as well as a welcome step.

The Sailor and His Final Port of Call

Ladies and Gentlemen, The challenge is addressing deep feelings of insecurity while aligning the HR practices. The catchword in the theme of this conference is ‘aligning.’ The meaning of the word align is ‘To move or be adjusted into proper relationship or orientation.’ The HR functionaries have to decide what to choose and what not to choose in aligning the HR practices. He is like a sailor who adjusts the sails to draw force from the gale to steer the ship towards his final port of call. What is the destination or final goal of all HR practices and systems? Alignment with that final goal, like the sailor, can never be out of our sight at any moment.

What is that final goal of HR practices? It will be a statement of purpose. I read a crisp statement of purpose in the Green Paper[10] recently presented by the British Government. It says: “This Government will build an economy that works for everyone, not just the privileged few.”

Can we model our statement on those lines and say “These HR practices will build an organisation that works for everyone, not just the privileged few”? That, to my mind, would be the test of alignment.

Ladies and Gentlemen, with these thoughts I end this keynote address, and wish this conference a big success.

Thanks,

Vivek S Patwardhan

[1] 1914 Revisited: Open World Order Is Breaking Apart. TOI Nov 17, 2016. Mumbai/ Thane Edition

[2] L&T lays off 14,000 employees, calls it a strategic decision  http://www.thehindu.com/business/Industry/LT-lays-off-14000-employees-calls-it-a-strategic-decision/article16686499.ece The Hindu [Mumbai] Nov 23, 2016

[3] Digitisation in Industrial sector in India to grow to 65% in next five yearshttp://www.cioandleader.com/article/2016/08/30/digitisation-industrial-sector-india-grow-65-next-five-years

[4] Robotics, automation and AI to make people ‘largely irrelevant’, feel top CEOs http://economictimes.indiatimes.com/small-biz/hr-leadership/leadership/robotics-automation-and-ai-to-make-people-largely-irrelevant-feel-top-ceos/articleshow/55536120.cms

[5] Raymond to replace 10,000 jobs with robots in next 3 years http://economictimes.indiatimes.com/jobs/raymond-to-replace-10000-jobs-with-robots-in-next-3-years/articleshow/54358700.cms

[6] ‘Stranded’ http://economictimes.indiatimes.com/small-biz/startups/layoffs-in-startups-whats-the-other-side-of-indias-entrepreneurship-story/articleshow/54268511.cms

[7] Executive pay: Companies told to justify rates  http://www.bbc.com/news/business-38138815

[8] Training to Exploit https://vivekvsp.com/2014/01/training-to-exploit/

[9] NEEM Does Not Redeem Confidence  https://vivekvsp.com/2016/09/neem-not-redeem-confidence/

[10] A Green Paper is a tentative government report and consultation document of policy proposals for debate and discussion.