Fostering and Building Strong Employee Relations

Fostering and Building Strong Employee Relations

The theme is ‘Fostering and Building Strong Employee Relations.’ I would rather use the words ‘positive or productive employee relations.’ There are many experiments which various organizations have carried out successfully.

There is a vast difference between the employee relations in the pre-liberalization period and post-liberalization. The period before liberalization was marked by powerful unions, active Government intervention and a clear we vs they divide.

That scene changed once the economic policies changed. Unions have lost power; the Government has adopted a hands-off approach. Recent labour reforms have further cemented this situation. This situation puts a great responsibility on the managements to shape employee relations positively. The issue is how to build positive and productive employee relations in this new reality.

The issues faced by organizations in the three phases of their life cycle are different. These three phases are Inception, Growth and Closure. I will discuss how organizations handled issues to create or sustain positive and productive employee relations in every phase. And we will conclude the discussion by identifying the critical skills required, as well as the lessons learnt.

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. 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 in the mid-nineties. They used the inverted pyramid concept for designing their organisation. In it, employees at the lowest level are empowered and take many operational decisions. Employees took part even in the panel which investigated a misconduct. Several aspects of day-to-day operations were decided by employees in a methodical way. This was a unique experiment and the involvement of employees was so high that they did not feel the need to form a union for seven years. Mind you, this was in Kerala where unionisation is very high.

Asian Paints designed the jobs while setting up the Patancheru factory near Hyderabad. The purpose was to reduce monotony, increase variety of operations and allow employees to have more control on their activities. The result was not only high productivity but also highly engaged employees. Contrast this with the jobs of lowest level of employees at Amazon and BPOs. There are reports which say that employees of Amazon who are order pickers walk about ten miles or more in a shift, and their movement is monitored! James Bloodworth’s book ‘Hired – Six Months undercover in low wage Britain’ chronicles how such jobs affect employees and also the society.

Modern day organisations may like to look at Zappos set up by Tony Hsieh. His work was original. He proved to the world that a company focused on happiness be successful. Organisation Culture was the tool to create happiness. The processes at Zappos were simple, and were defined and improved upon by employees. His book ‘Delivering Happiness’ is a great story of his innovative approach to managing an organisation.  

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.

The lessons to be learnt are clear: While setting up the organisation, focus on building a healthy work culture. We have to create policies which will foster it. Marico created the organisation structure which was the foundation of their productive work culture, while Asian Paints created meaningful jobs. The inception stage offers a great opportunity for laying down foundation of a great work environment.

I should make a note here that unfortunately not many cases are available of Indian organisations to study how work culture is built. TISS can possibly take up this as an initiative.

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 conflict of Us vs. Them.

Or it faces restructuring. This creates thick impenetrable walls between SBUs.

In organisations facing downturns of economy, employees face downsizing by the organisation. For them it means loss of jobs, often through 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 was a huge loss and they were 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. (Apparently this report has been pulled down from internet). 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.

But let us also see some good examples. Shri RamKrishna Exports is a billion-dollar diamond cutting 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 Shri RamKrishna Exports, all employees are treated with equal hand, (there are about 6500 of them) 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.

SRK Exports did not lay off employees, not even contract workers during the economic downturn.

Contrast this with the way Maruti managed its contract workers. (I have written six blogs on Maruti, you may like to peruse them). It culminated in violence at their Manesar plant. Maruti as well as employees paid a very heavy price. For organisations like Tesco and Maruti it was also a damage to their reputation.

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 employee 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 practice crisply, I will say that the employees 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 find and own the solution! Simple, though difficult to practise, yet the most effective. 

There are two great examples in the Indian industry of building positive and productive employee relations.

Polyhydron has built a radical model of sharing wealth with employees. It is also a story of how some wrong steps were taken by the founders and then they decided to practise a value-based management. And they created a unique organisation. Fortunately, the entire story is available on their website and it should be studied by all. Their value-based management included sharing wealth with employees. It is shared by a certain formula, and the formula is informed to all employees. They say that our employees do not earn wages but share the wealth of Polyhydron.

Another example of wealth sharing is HyTech Engineers. They implemented Toyota Production System, and implemented it in both the letter and spirit. They also share value added in a systematic way. Again, all employees are aware of the formula of sharing the value-added. There is total transparency. This transparency of accounts and finances is unique. Several organisations refuse to share it with employees, but those who create great organisations have no fear of sharing. Openness and transparency are the hallmarks of both Polyhydron and HyTech Engineers. And that contributes greatly to positive and productive employee relations. I have recorded video of Mr Hemant Mondkar, Chairman and MD of HyTech Engineers and it is available on my YouTube channel.

Growth phase brings many employee relations issues. The lesson to learn here is that four aspects help organisations handle these difficult challenges: Consistency, Inclusion, Openness and Transparency. And these very aspects are the foundation of any productive relationship.

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 closure of its Sewree factory exceptionally well. Incidentally it was adjacent to HUL’s 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. 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. A difficult situation handled with dignity and respect for all.

Godrej Relocates The Factory

Godrej Industries 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 Employees Protesting

Racold decided to outsource manufacturing to China. Racold distributed sweets on Diwali day and asked all employees to enjoy Diwali holidays. It however posted termination letters the next day, which reached the employees almost on the day after Diwali. Many employees got the shocking news of job loss while they were shopping for the festival. Racold had planned the closure ‘exceptionally well’ with the shrewdness of a wolf. The Government and political leaders have been silent spectators and have not bothered to intervene. There cannot 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. Vijay Mallya wrote a personal letter to all employees assuring them of full payment of overdue salaries. This is a classic case of ‘value-extraction! We have seen Polyhydron and HyTech Engineers sharing value-added, and here is diametrically opposite story. Closures deprive livelihood of employees. Some employees or their family members have committed suicide.

Frames of Reference

Underlying such exemplary work by various organizations is the ‘frame of reference’ of Employee Relations which organizations adopt. There are three ways to look at employee relations. Alan Fox called them ‘Frames of References’ and those are Unitarist, Pluralist and Radical. Unitarist view is that organizations have ‘one source of authority and one focus of loyalty’. Very simplistically put it is ‘One Happy Family approach.’  Marico and Zappos adopted it. Shri RamKrishna Exports adopted it.

Pluralism, on the other hand recognizes that ‘conflicting and shared interests can coexist in organizations’ and recognize that there is a place for unions. Asian Paints, Godrej, Colgate and ITC seem to have this view.

Radical frame of reference is the Marxist one – ‘Worker-Management conflict is an inevitable outcome of capitalist social relations.’ Unions are often seen by the management as illegal entities. Unfortunately, several organizations hold such a frame of reference today.

So, we have to decide our frame of reference. That will guide our actions and policies. But we must remember that in the new reality we have no option but to build a vibrant organization with mature HR practices.

Let us discuss creating good relationships:

There are some fundamental characteristics of a good relationship: First, to what extent parties are open to influence. In a stable relationship, employees must have some influence over the managements, just as managements will have influence over employees. In other words, are the decision makers, both in unions and management are listening empathetically to each other?

Second, the characteristic is trust. Osho says that ‘relationship is past, relating is in the present.’ In other words, trust is renewed or destroyed in every interaction. This is a very important insight. It tells us how each interaction must be thoughtfully crafted. This is why conversation skills are very important.

Third, the most productive relationships in the long run are those that benefit both parties rather than those designed to benefit the organization only.

This requires the skill of holding open and meaningful conversations with employees. Since childhood we have learnt speaking, but very few learn holding meaningful and open conversations. It is a skill which must be intentionally learnt. Similarly, we have to learn empathetic listening. These remain the fundamental skills. Managing conflicts and promoting collaborations become easy when we know how to hold critical conversations. Inclusion, consistency of approach, openness and transparency are critical factors. Processes and practices must be created to support such conversations which matter.

And with this, I end my presentation. I wish TISS a very successful conclave. (Talk delivered at the IR Conclave at TISS on Feb 19, 2021) (Pic courtesy Pixabay) (Some contents have been reproduced from my earlier blogs).

Vivek S Patwardhan

​”What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others.

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