MANAGEMENT

OF
INDUSTRIAL RELATIONS
 CONTENTS

No. Description Page

No.

1. Industrial Relations 1
Perspectives, IR in the
Emerging Socio-Economic
Scenario

2. Industrial Relations and the 21

State - Legal Framework

3. Trade Unions - Role and 43

future

4. Discipline and Grievance 64

Management

5. Negotiation and Collective 90

Settlement

6. Participative Management 119

7. Employee Empowerment 152

8. Quality Management: An 167

Introduction

9. Industrial Relations and 199

Technological Change
Lesson No. 1

INDUSTRIAL RELATIONS PERSPECTIVE; IR IN THE EMERGING SOCIO-

ECONOMIC SCENARIO

STRUCTURE

1.0 Objectives

1.1 Introduction

1.2 Presentation of Contents

1.2.1 Nature of IR

1.2.2 Importance of IR

1.2.3 Approaches to IR

1.2.4 Parties to IR

1.2.5 IR strategy

1.2.6 IR Decisions

1.2.7 Industrial Relations and Emerging Socio-economic

scenario
 1.0 OBJECTIVES

The present lesson is an attempt to make students understand:

the nature of industrial relations

the need for the peaceful employer and employee

relations

the different approaches to industrial relations

1.1 INTRODUCTION

Industrial Relations (IR) has traditionally been a fire-fighting function in

our country. The IR man comes into full play only after the crisis erupts. This is
so much the case that some IR men are actually known to have stoked the fire
to reinforce their own relevance to the organization "....... the MD of a large
corporation remarking that his personal manager was so much of a fire fighter
that he felt uneasy when there was no fight", so goes the perception about IR.

Thus, the scenario relating to IR is a mixed one, Sparks between

enlightened managers and motivated workforce coexists with large scale
violence leading to destruction and closures. But the scenario must change.
Unionization, job security, protective legislation and other measures are
loosing there relevance. The catch words now relevant are productivity,
competitiveness, downsizing and union free plans.

1.2 PRESENTATIONS OF CONTENTS

1.2.1 Nature of IR

Essentially, IR is concerned with the relationship between management

and workers and the role of regulatory mechanism in resolving any industrial
dispute. A formal definition is:

" .... concerned with the systems, rules and procedures used by unions
and employers to determine the reward for effort and other conditions of
employment, to protect the interests of the employed and their employers, and
to regulate the ways in which employers treat their employees."
 Specifically, IR covers the following areas:

1. Collective bargaining.

2. Role of management, unions, and government.

3. Machinery for resolution of industrial disputes.

4. Individual grievance and disciplinary policy.

5. Labour legislation.

6. Industrial relations training.

1.2.3 Importance of IR

IR is the key for increased productivity in industrial establishment. For

example, at the Alwar plant of Eicher Tractors, productivity went up from 32%
between 1994 and 1996 to 38% in 1997, the production of Engine cylinders
has gone up from 29390 (in 1995-96) to 32501 (in 1996-97). This increase
has been possible because of peaceful IR. IR has moral dimensions, too. It is
unethical on the part of any management to take advantage of the
helplessness of workers and exploit them. Unemployment compels workers -
particularly illiterate and unskilled - to accept jobs, inhuman working conditions
and wages notwithstanding.

IR assumes relevance in this context. One of its objectives is to protect

workers interest and to improve their economic conditions.

IR seeks to protect the right of managers too. Managers expects

workers to observe code of discipline, not to join illegal strikes, not to indulged
in damaging the companies properties, not to assault supervisors or peers,
and not to come inebriated the workplace. Where workers behaviour deviates
from expected lines. It is management's prerogative to take action.

There is a set procedure for handling any act of indiscipline or

indiscretion on the part of an employee and if the management satisfied the
procedure, it is justified in taking action or even removing the employee from
service.
 Little do all of us realize that it is the people who creates problem
everywhere and it is only who can find solutions too. If there is a problem from
employees, there is a solution also. Viewing every problem seriously and
resorting the manipulative style of IR which emphasis the need the labour is
check by floating stooge unions, buying up unions, and striking clandestine
deals with powerful politicians do no good to managers or to the organization
they represent. The field of IR needs a new look, a look which is free from
suspicion, prejudice and ill will towards workers.

1.2.4 Approaches to IR

The scenario of IR is perceived differently by different people. For

some, IR is related to class conflict, other perceive it in terms of mutual
cooperation and still others understand it in terms of competing interests of
various groups. HR managers are expected to understand these varying
approaches because they provide the theoretical understanding for much of
the role of HRM.

The three popular approaches to IR are unitary approach, pluralistic

approach and Marxist approach.

UNITARY APPROACH

Under unitary approach, IR is grounded in mutual cooperation,

individual treatment, teamwork and shared goals. Workplace conflict is seen
as a temporary aberration, resulting from poor management, from employees
who do not mix well with the organisations culture. Unions cooperate with the
management and the managements rights to manage is accepted because
there is no "we-they" feeling. The underline assumption is that everyone
benefits when the focus is on common interest and promotion of harmony.
Conflict in the form of strikes is not regarded as necessary but destructive.

Advocates of the unitary approach emphasise on a reactive IR strategy.

They seek that negotiations with employees. Participation of government,

tribunals, and unions is not sought or are seen as been necessary
harmonious employee relations.
 The unitary approach is being criticized as a tool for seducing
employees away from unionism and socialism. It is also criticized as
manipulative and exploitative.

PLURALISTIC APPROACH

The pluralistic approach totally departs from the unitary approach. The
pluralistic approach perceives:

1. Organisations as coalition of competing interest, where the

managements role is to mediate amongst the different interest groups.

2. Trade unions as legitimate representatives of employee

interests.

3. Stability in IR as the product of concessions and compromises

between management and unions.

Legitimacy of the management authority is not automatically accepted.

Conflict between the management and workers is understood as inevitable
and in fact, is viewed as conductive for innovation and growth. Employees join
unions to protect their interest and influence decision making by the
management. Unions thus balance the power between the management and
employees. In the pluralistic approach, therefore, a strong union is not only
desirable but necessary. Similarly, society's interests are protected by state
intervention through legislation and industrial tribunals which provide orderly
process for regulation and resolutions of conflict.

The theories on pluralism were evolved in the mid-sixties and early

seventies when England witnessed a resurgence of industrial conflicts.
However, the recent theories of pluralism emanate from British scholars, and
in particular from Flanders and Fox. According to pluralists, industrial conflict
is inevitable and it needs to contain within the social mechanism of collective
bargaining, conciliation and arbitration.

MARXIST APPROACH

Marxist, like the pluralistic, regard conflict between employers and

employees as inevitable. However, pluralists believe that the conflict is
inevitable in all organisations. Marxists see it as a product of the capitalist
society.

Adversarial relations in the workplace are simply one aspect of class

conflict. The Marxist approach focuses on the type of society in which an
organisation functions. Conflict arises not just because of competing interest
within the organisation, but because of the division within society between
those who own or manage the means of production and those who have only
their labour to offer. Industrial conflict is thus seen as being synonymous with
political and social unrest.

Trade unions are seen both as labour reaction to exploitation by capital, as

well as a weapon to bring about a revolutionary social change. Concern with
wage related disputes are secondary. Trade unions focus on improving the
position of workers within the capitalist system and not to overthrow. For the
Marxist, all strikes are political. Besides, Marxists regards state intervention via
legislation and the creation of industrial tribunals as supporting managements
interest rather than insuring a balance between the competing groups. This view
is in contrast to the belief of the pluralists who argue that state intervention is
necessary to protect the overall interest of society. To
Marxists, the pluralists approach is supportive of capitalism, the unitary
approach anathema. Consequently, enterprise bargaining, employee
participation, cooperative work culture, and the like which help ushers in
cordial IR and are not acceptable to Marxists. Such initiatives are regarded as
nothing more than sophisticated management techniques designed to
reinforce management control and the continuation of the capitalist system.

1.2.4 Parties to IR

The major parties to IR are the employees, employees representatives,

employer, associations of employers, government, and courts and tribunals.

EMPLOYEES

There are about 268.19 lakh employees working in the organised

sector in our country. The figure will be a staggering one if the number of the
employees in the unorganized is added. It is, therefore, useful to certain
observation about the Indian workers:

(a) Commitment to Industry

Labour is committed to industrial setting, thus contributing to stable

workforce. True, the worker might have his or her mooring in the villages. But
is it unlikely that he or she would go back to his or her village. He or she is
settled in the industrial city, his or her children are put in school in the city, and
except himself or herself, and no one else in his or her family has any
nostalgic feelings to the village. Besides the present generation of young
workers is mostly born and brought up in the urban areas and has accepted
industrial employment as a way of life. But, commitment is only to industrial
jobs, and not to work. Hence, low productivity of labour.

(b) Protective Legislation

From time to time, the government has enacted a variety of labour Acts,

Perhaps, ours is the only country in world which has so many Acts to protect
workers interests. Thanks to the enormous protective legislation, wages,
benefits, and working conditions, safety and health of workers have improved
considerable.

(c) Status of the worker

The economic and social status of today's workers is vastly improved.

Industrial employment is no longer the undesirable alternative left for those
drive out from villages. Improved skill contents of the jobs and increased
emoluments have made industrial employment the first attraction among
young job aspirants. Industrial is not restricted now to the socially low castes.
The dynamic changes in the industrial sphere have, as the National
Commission on Labour has observed, brought about a "social amalgam". The
status of the industrial worker of today is enhanced as a result of the
readjustment in the value system in favour of industrial employment which is,
in turn, the aggregated effect of his or her improved skills and his or her
enlarged pay packet. The stigma once attached to factory life has
disappeared.
 (d) Employment pattern

Another feature noticed in the industrial labour is the change that has
come about in the employment pattern owing to changes in industrial activity,
which has tremendously expanded and diversified and has undergone a
technical transformation. In the early days unskilled workers predominated in
industrial employment, so long as traditional industries like textiles and mining
were in the forefront. In the process of expansion and diversification, new
avenues of industrial enterprises in engineering, chemical, pharmaceuticals,
and so forth assumed importance and changed the composition of industrial
employment.

The improved technology of these new industries created new jobs with
greater content, raising the minimum standard of education required. Industrial
employment, in spite of being blue collared in nature, is no more looked down
upon as an inferior mode of earning a living. The employment pattern has further
changed in the service industries and electronic wherein the employment has
become more and more white collared and sophisticated.

Now the employees perceive industrial relations in term of the

opportunity to:

1. Improved their conditions of employment

2. Voice any grievance

3. Exchange views and ideas with management

4. Share in decision making

The tendency of managers is to blame the worker whenever a dispute

occurs. While it is true that workers are a party to a conflict, but to hold them
responsible for stocking the fire may not be correct. The role of managers in
igniting a conflict to serve their selfish interests can not be overlooked.
TRADE UNIONS

Unions have a crucial role to play in IR. Unions have broad objectives
which are:

1. To redress the bargaining advantage of the individual worker vis-

-vis the individual employer, by substituting joint or collective action for
individual action.

2. to secure improved terms and conditions of employment for their

member and the maximum degree of security to enjoy these terms and
conditions.

3. to obtained status for the worker in his work.

4. to increase the extent to which unions can exercise democratic

control over decisions that affect their interests by power sharing at the
national, corporate, and plant levels.

The union power is exerted primarily at two levels at the industrial level,
to establish joint regulation on basic wages and hours with an employers
associations or its equivalent; and at the plant level, where the shop stewards
organisations exercise joint control over some aspect of the organisation of
the work and localized terms and conditions of employment. Unions are a
party to national, local and plant procedure agreements which govern their
actions to a greater or lesser extent, depending on their power, and on local
circumstances.

EMPLOYERS

Employers too, are directly involved in any dispute between the

employers and the employees. Employers are endowed with certain
inalienable rights vis--vis labour. The management has the right to hire and
fire any worker, notwithstanding union restrictions. It is not just firing a worker
here of there, but the management's ability to control the economic destiny of
the workers that matters. The management has the right to relocate, close,
merge, takeover or sell a particular plant - these actions affect workers
interests. The management has another powerful weapon - introducing or
threatening to use technological change. Technological change can displace
labour or reduce skills.

Armed with these rights, the management resorts to several tactics to

break a strike, some of them even unethical. The management is known to
adopt dubious mean to forego a strike, all of a strike, or tone down union
demands. The management often break a powerful union, sets one faction
against another, and favour the most satisfied and the less militant workers.
Loyal workers from sister concern are brought in, on the pretext of a factory
visit, and are induced into a plant and advised to break the strike.

Another tactic employed by the management is to gain the loyalty of

employees. The aim of this tactic is to convince the worker that the
management has his or her interests at heart and can provide him or her with
much the same benefit as the union. In part, this tactic is a revival of the
"welfare capitalism" of the 1920s. High wages, pension plans, profit sharing
plans, programmes of stock ownership by workers - all these schemes have been
revived, though often in modernized form, and with considerable effect in the
resistance of the new industries to unionization can be taken as evidence.

Employees loyalty is sought to be gained through another method, a

positive one. The management seeds to find out the sources of dissatisfaction
and eliminates those irritants. Workers are encouraged to form informal small
groups, psycho-therapy is conducted on a plant-wide scale, and interaction
between the management and employees and among the employees are
structured and practiced.

A militant but incorruptible union is co-opted in routine functions of the

organisation. For instance, the union may be used as a channel of information
to the employees. It may be used for meeting certain production problem. In
some plants, the management has even brought union leaders into process of
decision making.

In general, managers tend to see employee relations in term of the

following activities:
 1. Creating and maintaining employee motivation

2. Obtaining commitment from the workforce

3. Establishing mutually beneficial channels of communication

throughout the organisation

4. Achieving of high level of efficiency

5. Negotiating terms and conditions of employment with employee

representatives

6. Sharing decisions making with employees

7. Engaging in a power structure with trade union

EMPLOYERS' ASSOCIATIONS

Employers' associations operate at local, industry and all India levels.

The Confederation of Indian Industries (CII) is a powerful body at the national
level which is doing an admirable fob in protecting and promoting the
legitimate interests owners of industries.

The major objectives of employers' associations include:

1. Representing employers in collective bargaining

2. Developing machinery for the avoidance of disputes

3. Providing information on employee relations and to give

advice

4. Representing members on national issue

The specific objectives of CII are:

1. Identifying and strengthening industry role in the

economic development of the country.

2. Acting as a catalyst in bringing about growth and

development of the Indian industry.
3. Reinforcing industries commitment to society.

4. Working towards globalization of Indian industry and

its
 integration into world economy.

5. Providing upto date information and data to industry and

government.

6. Creating awareness and support industry efforts on

quality, environment and consumer protection.

7. Identifying and addressing special needs of the small

scale sector.

8. Promoting cooperation with counterpart organisations.

The other major all India employers associations are ASSOCHAM,

FICCI, AIMO, WASME, FASSI, and FIEO.

GOVERNMENT

In a sense, government intervention in IR is as old as the industry itself.

However, till the 19th century, governments everywhere followed the laissez
faire policy - they left IR to the managers and workers who were required to
solve the problems themselves. Towards the end of the 19th century, the
attitude of the governments changed. And intervention became a reality. The
state, as of today, regulates the relationship between the management and
the labour and seeks to protect the interest of both the groups. The
government has setup wage boards, labour courts, tribunals, and enacted
laws to lay down norms and to enforce their compliance.

JUDICIARY

The powers of the judiciary are of a dual type:

1. The authority of the Courts to settle legal disputes;

2. Judicial review - the authority of the Court to rule on the
constitutionality of legislation.

As far as second is concerned, the judiciary gets activated when the

legislator passes laws repugnant to the constitution and when the government
implements the enactment improved by the legislature in a manner opposed to
the provision of the legislation. In other word, the courts of justice protect the
citizen from unlawful Acts passed by the legislature and arbitrary Acts done by
the executives.

It is the power of the judiciary to settle the legal disputes, referred to

them, that affect IR considerably. The judicial pronouncements will have a far
reaching impact because:

i. Judicial errors do occur, though infrequent,

ii. Possibility of wrong assessment of penalty, "judges
notoriously vary in the severity of punishment inflicted",
iii. Judges are known for pronouncing conflicting verdicts on
the same or similar disputes, and
iv. Confusion in turn.
v. The role of judiciary in IR has not been always positive.

The result is that indiscipline in the industry has spread like wild fire and
sapped the national production and productivity. The classic case is the textile
industry which has been wrecked by indiscipline. The conflagration is
continuing to engulf various industries one by one.

1.2.5 IR Strategy

It is necessary to have a clear cut strategy for IR, although the

management of IR is essentially a knee jerk reaction to events and problems
and is, therefore, far removed from the world of strategic thinking and
planning. Since employer-employee relations are usually presumed to be
satisfactory until they get out of hand, managers, rarely, feel the need to act
before the trouble breaks out.

But the reactive strategy cannot continue for long. Growing competition,
difficult economic environment, rising labour cost, and low productivity compel
business leaders to think and plan proactive strategies towards IR.
 Where organisations have proactive strategies, the goal should be to
ensure that corporate objective can be achieved by gaining the maximum
amount of cooperation from employees and by minimising the amount of
industrial unrest.

Factors Affecting Employee Relations Strategy

Two sets of factors, internal as well as external influence an IR

strategy. The internal factors are:

1. The attitude of management to employees and unions.

2. The attitude of employees to management.

3. The attitudes of employees to unions.

4. The inevitability of the differences of opinion between

management and union.

5. The extent to which the management can or wants to exercise

absolute authority to enforce decision affecting the interests of
employees.

6. The present and likely future strength of the union.

7. The extent to which there is one dominating union or the

existence of multiple unions leading to inter-union rivalry.

8. The extent to which effective and agreed procedures for

discussing and resolving grievances or handling disputes exists with
in the company.

9. The effectiveness of managers and supervisors in dealing with

problems and disputes related to IR.

10. The prosperity of the company, the degree to which is

expanding, stagnating or running down and the extent to which
technological changes are likely to affect employment conditions
and opportunities.
The external factors affecting IR strategy are:

1. The militancy of unions - nationally or locally.

2. The effectiveness of the union and its officials and the extent to
which the officials can and do control the activities of supervisors within
the company.

3. The authority and effectiveness of the employers association.

4. The extent to which bargaining is carried out at national, local or

plant level.

5. The effectiveness of any national or local procedures,

agreements that may exist.

6. The employment and pay situation - nationally or locally.

7. The legal framework within which the IR exists.

1.2.6 IR Decisions

A proactive IR strategy programme must cover the following decisions:

1. Communication - how best we can convey our philosophy to

employees?

2. Relationship - how well can we improve our relationship with

employees and unions?

3. Competence - how to improve of competence of managers and

supervisors in dealing with IR matters?

4. Discipline and conflict - how shall we deal with it?

Communication

The core of an IR programme is the personnel manual. The manual

sets out the rules and policies within which managers and employees must
operate. The manual tells how the management awards recognition to the
union and offers facilities, how it recognizes the officers associations, how to
handle a grievance, code of discipline in the industry and the like.
 The manual needs frequent updating, must be published to all
employees, and all supervisors must be familiar with it. HAL, Bangalore, has a
well drafted personnel manual running into 94 pages of printed matter. The
manual covers, in addition to aspects of employees relations, other topics like
welfare, medical facilities, and gratuity rules. All employees and supervisors
are fairly familiar with the contents of the manual.

Relations

Relationship with the employee may be improved through joint

consultation. Relationship with union or staff associations may be developed
through collective bargaining and other IR procedures or by improving the
operation of existing procedures.

Competence

Managers and supervisors need to develop competence in handling IR.

Such competence may be developed by training managers and supervisors in
IR. Suffice it is to say that a training programme must be conducted after
assessing the training needs of the managers and supervisors. Each training
programme must have specific objectives and the contents must help the
trainees realise the goals.

Negotiating skills must form a part of the training offered to managers.

Negotiating skills are best acquired by experience, but it is dangerous to allow
inexperienced managers to meddle with negotiations. Training in negotiating
skills is most effective if it is through case analysis. A case study based on an
actual problem of the company may assign to the managers who will be
required to analyse the case and offer remedies.

Training should not be confined to managers and supervisors alone.

Union leaders and employees also must be associated with the programme,
as they are as much a party to a conflict managers or supervisors.
Discipline and conflict

If both employees as well as employers adhere to well laid out norms,

dispute do not occur. Where a conflict occurs, the management must resolve
it. There are set procedures to resolve disputes.

1.2.7 Industrial Relations in Emerging Socio - Economic Scenario

In 1991 with declaration of new economic policy, a series of Industrial,

fiscal and trade reforms were announced by the Government. It was presumed
that these structural changes would arrest growing inertia that has set in the
economy due to its mismanagement and continuance of unrealistic economic
policies for more than our decades. It is heartening to note that the new economic
policy has altogether generated a new business environment, where in the private
sector was liberated from the clutches of excessive Government controls, the
P.S.U's lost their monopolistic position, industries were freed from tariffs and
custom duties, the threshold limit of MRTP remarked FERA was considerably
relaxed, accessibility of foreign capital has become easy etc.

At the same time this N.E.P. has given a serious jolt to the interest of
working class. In fact, the workers are securing the brunt of liberalization - a
situation hard to be adjusted. Which is obvious from the fact that even
presently the employment opportunities of working class has considerably
shrunk and would further squeeze in the years to come, as with the ever
changing methods of work by which employers would be forced to lay off
obsolete employees. So not only employability of additional workforce but
present one would be minimized considerably.

In fact, ever since the declaration of new economic policy, a heated

debate is going on between the various industrial relations participants
regarding the desirability of continuance of such a policy. In this context, every
party has its own perception and apprehensions, but all of them agree on one
basic fact that sustained economic growth cannot take place in a disturbed
industrial relations environment.

The inculcation of harmonious industrial relations requires that all the

participants be motivated to work whole heartedly for making the system to
work. There are various factors pointing towards the emerging socio-
economic scenario.

One of the major factors is the changing image of workers. The modern
worker have come a long way in 54 years from the exploited, illiterate poverty
stricken, rural linked group that once were. The industrial labour of today is no
longer the migrant rural worker of yesterday, shuttling between his village and
the city. It is totally urban in its economic outlook.

Socially, too, workers have changed. They have absorbed the urban
industrial culture. They are capable of handling semi-skilled and highly skilled
industrial operations. Above all, they are usually not the sole supporters of
large joint families. Changes in the worker's life have given rise to a new
attitudinal and behavioural pattern.

There has also been a transformation of Indian society - from a "society

of subjects to that of citizens." The modernisation of economy has brought in
advances in technology, organisational complexities and increasing economic
interdependence. Consequently, the worker is increasingly called upon to rely
on discretion, initiative and self management, instead of waiting for commands
from old style bosses. The traditional culture of being 'looked after' as subjects
has yielded place to one in which industrial labour wants to 'look after' itself.

Yet another change, whose challenges is being evaded instead of

being faced, is the need felt making quicker decisions because of the high
stakes involved in a technologically sophisticated industry. Our industries,
particularly those in the public sector, suffer from the widespread empire of the
owners. Insisting on managing and controlling the system without having the
adequate competence or the freedom to make quick strategic decisions. A
fundamental change in approach is needed if these challenges are to be met.

So far as the dispute settlement machinery is concerned, it is to be

noted that the Industrial Dispute Act, 1947 was enacted by the Central
Government and is based on section 81 and 82 of the Defence of India Rules
framed by the British Indian Government for the management of industry
during war time. The entire process was politicised. Therefore, unless these
provisions of the defence of India Rules are removed, there will be no lasting
solution of industrial unrest. The Industrial Dispute Act have to be amended in
the light of emerging socio-economic scenario. It is obvious that the machinery
of Industrial Relations should tackle disputes within the framework and the
spirit of a dynamic 'partite approach' like husband and wife solving their
problem themselves within the framework of the marriage.

1.3 SUMMARY

IR has always been a fire-fighting function in our country

simultaneously is the key for increased productivity in Industrial establishment.
There are three approaches and strategies to IR. There has been
transformation of Indian society from a society of subjects to that of citizens.
The inculcation of harmonious industrial relations requires that all the
participants be motivated to work whole heartedly for making the system to
work. Industrial relations are highlighted as highly significant from the socio-
economic development of Industry.

1.4 KEYWORDS

Collective bargaining negotiating process between employees and

Employers

Tribunals Industrial tribunal and National tribunal

1.5 SELF ASSESSMENT QUESTIONS

1. What are the emerging trends in industrial relations in the era of

globalisation. Examine significant transition and transformation in
industrial relations in this context.
2. "There is need to redefine industrial relations as in its present
conception it has became too narrow to do justice to the varied factors
and processes which have a direct bearing on its subject matter."
Discuss.
3. Discuss in detail various approaches and parties to industrial
relations.
1.6 REFERENCES/SUGGESTED READINGS

1. Mamoria and Mamoria, "Dynamics of Industrial Relations,"

Himalaya Publishing House, New Delhi, 1999.
2. Manappa Arun, "Industrial Relations," Tata Mcgraw Hill
Publishing company limited, New Delhi, 1996.
3. Dwivedi, R.S., "Managing Human Resources and Industrial
Relations in
Indian Enterprises, Galgotia Publishing Company, New Delhi, 2002.
LESSON NO 2

INDUSTRIAL RELATIONS AND THE STATE; LEGAL FRAMEWORK

STRUCTURE

2.0 Objectives

2.1 Introduction

2.2 Presentation of contents

2.2.1 Changing Role of the State (Government)

2.2.2 Evolution of Labour Policy

2.2.3 National Commission on Labour Recommendations

2.2.4 New Industrial Policy

2.2.5 Legal Framework of Industrial Relations

2.3 Summary

2.4 Key words

2.5 Self Assessment Questions

2.6 References/Suggested Readings

 2.0 OBJECTIVE

The present lesson is an attempt to provide an overview of:

the changing role of Government in Industrial Relations in

India,

the Role of Labour Policy

subsequent objectives and implementation of five year

plans

the legal framework of Industrial Relations.

2.1 INTRODUCTION

In the system of industrial relations, State (Government) acts as a regulator

and judge. Further, not only Central Government but the governments at the
state and regional level do influence the system of industrial relations, also the
other functionaries of the states like the executives and judiciary has a definite
impact on the system. Now let us see how the system of government
intervention evolved.

2.2 PRESENTATION OF CONTENTS

2.2.1 The Changing role of the State (Government)

Historically the Government has played at least six roles in industrial

relations in India. These are:

i. Laissez Faire

ii. Paternalism

iii. Tripartism

iv. Encouragement of voluntarism

v. Interventionism

vi. Employer
(i) Laissez Faire:

During the nineteenth century, the government played a laissez faire

role in industrial relations. It was reluctant to intervene to settle any dispute or
indicate any interest in the welfare of the workers. The workers and employers
were left alone to manage their affairs. Virtually in a socio-economic and
political system where workers were relegated to a very low status with no
organisation of their own, it amounting to taking the side of employers. If the
workers resorted to any work stoppages, they were crushed by the
government machinery.

(ii) Paternalism:

By the end of nineteenth century, the laissez faire role of the

government was replaced by paternalism. Thinkers like Robert Oven, Ruskin
and others attracted the attention of the public and the government towards
the inhuman working conditions in factories, mines and plantations. The
government tended to make several enactments to govern working conditions,
wages & benefits and formation of trade unions. The government had also set
up a Royal Commission on labour (1929-1931) to conduct a study on the
working conditions of Indian Labour and make relevant recommendations.

(iii) Tripartism:

Even prior to independence, there existed tripartite form of consultation

on the model of the ILO conferences. After independence several such forums
were formed. The major tripartite bodies formed included Indian Labour
Conference, Standing Labour Committee, Industrial Committees for specific
Industries, Short lived National Apex body (1975) etc. The government
promotes consultation with concerned parties prior to taking any policy
decision in industrial relations to bring out any legislation.

(iv) Encouragement on Voluntarism:

The government also promotes voluntarism involving a series of codes

to regular labour management relations. These codes include codes of
discipline, code of conduct and code of efficiency and welfare. Specifically the
code of discipline encourages voluntary arbitration and helps in maintaining
discipline at workplace.
 (v) Interventionism:

The government also plays an interventionist role. The intervention is in

the form of conciliation and adjudication. The Industrial Dispute Act, 1947
provides such measures to intervene in industrial disputes.

(vi) Employer:

The government also plays the role of the largest employer. The
performance of this role influences labour policy also. Obviously the
government takes into consideration the interest of public sector while framing
its policy.

2.2.2 Evolution of Labour Policy

The labour policy has been influenced by changing situations of course its
core factors have remained unchanged. In India, labour organisations have
been relatively weak and lacking trust in employers considering them profit
making exploiters. The government visualised that rapid industrial growth and
productivity demanded its major role in evolving a suitable framework to
prevent industrial disputes. The major source documents of Indian Labour
Policy of the government include the following:

i. Directive Principles of State Policy

ii. The Plan Documents

(i) The Directives Principles of State Policy

The article 39, 41, 42, 43, and 43A relate to the governments policy
pertaining to the labour.

The Article 39 asserts as follows:

The state shall in particular direct its policy towards securing:

a) That there is equal pay for equal work for both men and women.
b) That the health and strength of workers, men and women, and
the
 tender age of children are not forced by economic necessity to enter
avocations, unsuited to their age or strength..

The Article 42 specifies as follows:

The state shall make provision for securing just and human conditions
of work and maternity relief. The Article 43 asserts as follows: The state shall
endeavour to secure by suitable legislation or economic organisation or in any
other way, to all workers, agricultural, industrial or otherwise, work, a living
wage, conditions of work ensuring a decent standard of life and full enjoyment
of leisure and social and cultural opportunities and in particular, the state shall
endeavour to promote cottage industries on an individual and cooperative
basis or rural areas.

The Article 43A reads as follows:

The state shall take steps, by suitable legislation or in any other way,
to secure the participation of workers in the management of undertakings,
establishments or other organisations engaged in any industry.

Thus, workers participation in management has become a part of the

Directive Principles.

(ii) The Plan Documents

First Five Year Plan (1951-56)

The first plan recognised the importance of the industrial labour in the
fulfillment of planned targets and in creating an economic organisation in the
country which would best serve the needs of social justice. The plan
envisaged:

a. adequate provision for the basic needs of the workers;

b. securing improved health facilities and wider provision of social

securities;
c. providing access to better educational opportunities;
 d. improving conditions of work to safeguard the health of labour;

e. the right to recognise and to take lawful action in furtherance of

the rights and interests of labour;

f. the right to be treated with consideration by the management

and access to impartial machinery if he fails to get a fair deal.

The plan called for the steps to improve productivity, emphasised the need
for the bilateral settlement of disputes, provide for state intervention in the event
of failure of bilateral processes. The plan document also made a commitment for
full and effective implementation of social security measures as also minimum
wage legislation. The Industrial Dispute Act was amended, in
1950 itself, providing for a three-tier system of Labour Court, Industrial
Tribunals and National Tribunal.

Second Five Year Plan (1956-61)

The second plan recognised that creation of industrial democracy is a

pre- requisite for the establishment of a socialist society. It also emphasised
the importance of industrial peace. A series of voluntary arrangements were
provided through tripartite consultation; code of conduct, code of discipline,
workers committees, joint management councils, voluntary arbitration, etc. It
is a different thing that because these are purely voluntary they were not taken
seriously by the parties.

Apart from emphasising workers participation in management, a

programme of workers education was also started in 1958. The need to
strengthen the trade union movement and living and fair wage, by linking the
wage increase with increases in production were also stressed.

Third Five Year Plan (1961-66)

The third plan emphasised the economic and social aspects of

industrial peace and elaborated the concept that workers and management
were partners in a joint venture to achieve common ends. Adherence to
Codes, not going to courts, was emphasised to regulate union-management
relations. However this was of little avail.
Fourth Five Year Plan (1969-74)

The fourth plan stressed the need to improve legislation concerning

safety and welfare of workers, review of workers participation in management,
workers education programmes, arrangements for skills training, labour
research, etc.

Several new legislation and improvements to existing legislation were

made during the period. The Payment of Bonus Act, 1965, Shops and
Commercial Establishments Act, and Labour Welfare Fund Act were among
the important legislative initiatives during the period. The National Safety
Council was set up in 1966.

Fifth Five Year Plan (1974-79)

The fifth plan called for strengthening professional management

particularly in the public enterprises and also underlined the need to raise
labour productivity. For this, the plan envisaged better food nutrition and
health standards, higher standards of education and training, improvement in
discipline and moral and more productive technology and management
practices. The period also saw the declaration of emergency during which
certain labour rights were curtailed.

Sixth (1980-85) and Seventh (1985-90) Five Year Plans

The sixth and seventh plans reiterated the earlier programmes,

expressed concerns over the shortcomings in realising the important goals of
improving the conditions of working class, workers participation, productivity
improvement, etc. During the period, important legislative amendments were
made to enhance the protection to workers, besides the introduction of a 20-
point programme, new schemes of workers participation in management and
attempted radical overhaul of labour legislation.

Eighth Five Year Plan (1992-97)

The eighth plan echoed concerns raised in the earlier plans with
particular reference to workers participation in management, skills training,
productivity, equitable wage policy, informal sector, etc. It also, for the first
time, expressed concern about the need to rationalize the regulatory
framework with a view to providing reasonable flexibility for workforce
adjustment for effecting technological upgradation and improvement in
efficiency. At the same time, the plan document emphasised the need to
ensure that the quality of employment in the unorganized sector units
improves in terms of earnings, conditions of work and social security.

The major problem with our five year plan is that the intentions are
pious and noble. But, only little guidance or clue are provided as to how these
shall be achieved and measured. The goals being abstract, the inspection and
database being weak the daunting tasks in each of the successive plans left
more to be achieved.

2.2.3 The National Commission on Labour Recommendations

One of the major recommendations of the National Commission on

Labour, 1969 relates to the establishment of the Industrial Relations
Commission. As recommended by the commission it has to be entrusted with
the full work of conciliation, adjudication and certification of the sole bargaining
agent and the reorganization of the tripartite forums ruling out government
overrepresentation in attempting to evolve consensus etc. Implementation of
this recommendation could contribute significantly towards eliminating the
governments intervention in industrial relations. However, since 1969 no effort
has been made to implement it.

The reasons for not implementing the above recommendation are

obvious. There is built-in complexity and contradiction in Indian industrial
relations system. This is highlighted by the Ministry of Labour in its agenda for
the twenty seventh session of the Indian Labour Conference. The more
important recommendations were discussed again at 29th session of the
Standing Labour Committee, held in July 1970. While appropriate action was
being taken to promote legislation in the light of the consensus reached at the
29th session of Standing Labour Committee, representations were received by

government from two central worker organisations, asking for a fresh review of
the entire industrial relations policy. In the context of the major
recommendations of National Commission on Labour, the basic aspects of
governments industrial relations policy were therefore considered separately
at the conference with the representatives of trade unions and employers
organisations. The recognised central workers organisations were requested
to meet among themselves and evolve some broad consensus. The Indian
National Trade Union Congress, All India Trade Union Congress and Hind
Mazdoor Sabha met thrice and agreed to continue discussions and meet
again for this purpose.

National Commission on Labour, at its different sessions, has given

recommendations on various issues of industrial relations such as collective
bargaining, recognition of trade unions, workers education, workers
participation in management, industrial discipline and industrial disputes.

2.2.4 New Industrial Policy

The Industrial Policy of July 1991 has widely been acknowledged as a

departure from several fundamental aspects of the earlier policy regime as
observed by Sawant and Rao. This policy is considered as a package of
reforms initiated by the government with a view to overcome the crisis facing
by the economy and the industry. The basic thrust of the new policy relates to
the opening of the Indian industry to competition from abroad, and in running
public sector along with commercial lines.

The government has repeated claimed that the interests of the workers
will be fully protected. This policy has two main proposals:

i. Workers displaced from their present jobs will be

retrained and deployed on alternative better jobs.
ii. Those who cannot be retrained or redeployed will be
provided a safety net in the form liberal compensation.

For retraining and compensation government has set up the National

Renewal Fund (NRF) with an initial appropriation of Rs. 200 crores.
Government also proposed to increase this corpus from allocations from
foreign contribution and employment generation programmes. It is visualised
that speedier industrial growth will itself generate more jobs in the long run
and employment will keep expanding.

Today with the greater emphasis on liberalisation and privatisation, the

private entrepreneurs are entering in various areas of business consequently
the problems of workers have increased manifold as the system needs highly
skilled workforce and there is no place for the workers in industry with low
technical expertise. It is alleged that the privatisation has raised many
problems, such as lay off, discharge, voluntary retirement, under employment
etc. In fact, it has become difficult for the government to strike a fair balance
between the demand of liberalisation and expectation of its workforce. The
regulatory role of the government has now become more crucial and
demanding than before which is likely to complicate with the passage of time.

Management Perspective

Rajan Mehrotra provided a management perspective on the new

industrial policy. It was mentioned that the Government of India on 24th
July 1991 released the much awaited policy and it is only articles 15,
16, and 17 of the policy objectives which mention the items that will
have a bearing on labour. These are:

Government will ensure that Public Sector Organisation must run on

business line as envisaged in the Industrial Policy Resolution, 1956.

Government will fully protect the interest of labour, enhance their

welfare and equip them in all respects to deal with the inevitability of
the technological change.

Government will ensure that the labour be made an equal partner in

programmes and prosperity.

Workers participation in management will be promoted by government.

Workers Cooperatives will be encouraged by government so as to

participate in packages designed to turn around sick companies.

Intensive training, skill development and upgradation programmes will

be launched by government.
 The pursuit of the objective will be tempered by government by the
need to preserve the environment and ensure the efficient use of
available resources.

As Mehrotra concludes, the policy is framed by government but

interpreted by various levels at macro level. The problem arises at the micro
level of implementation wherein the bureaucracy, the management and trade
unions all tend to interpret it towards their advantage rather than interpreting it
based on the intentions at macro level. The challenge to medium and large
undertakings is to perform in the face of constraints and learn to not only
manage the mismanagement environment but to survive and grow in the
context of mismanaged environment.

Labour Perspective

Duggal analysed historical antecedents, crisis of capitalism, impact on

working class and economic and social impacts. The newness of the present
policy is with regard to the redefinition of the role of the State which is now
tended to be minimised. However, the globalisation dimension is clearly a
radical departure from the earlier policies. The impact on the economy in
general and the working class in particular is going to be of an unprecedented
severity.

The current macro changes, being executed, are component of the

global historical process whereby imperialism seeks to consolidate its position
further under the cover of liberalisation and democratization. For the first time,
India has made a substantial macro changes which has done away with the
protection enjoyed by the Indian workforce. This has now exposed India to the
adverse effects of any global crisis that may precipitate.

There are varied pressures on the working class as a result of these

macro changes being pushed. However, what is discussed in mainstream
debates are issues related to employment, wages and trade union
organisations. The workers perspective in India must necessarily emerge from
the micro experiences of the non formal sector.
 The first direct visible impact of the present policy has been on
employment. Employment in the organised sector has dropped in real terms
during the eighties. The present policy will only accelerate the increase in
unemployment rates. The organised sectors unemployment gets easily
noticed and its impact is more severe because of the lack of the safety net.
Rise in unemployment always depresses wages because of the increase in the
reserve workforce. With employment and wages on the downtrend, the general
social impact becomes a major concern. This is pronounced especially if
unemployment, wage rate decline and inflationary trends become chronic.

2.2.5 Legal Framework of Industrial Relation

The government of India has also given some legislative provisions for
maintaining better industrial relations at workplace. All these labour
legislatives are based on the recommendations of International Labour
Organisation (ILO) to which India is a member country. Thus the role of ILO
has also been explained.

Role of International Labour Organisation:

The International Labour Organisation (ILO) is a tripartite organisation

consisting of representatives of the government, employers and workers of the
member countries. India has been an active member of the ILO since
inception. As one of the ten countries of chief industrial importance India
holds a non-elective seat on ILOs Governing Body. It is a member of five
committees of the Governing Body viz.

i. Programme, Finance and Administrative;

ii. Legal Issues and International Labour Standard;

iii. Employment and Social Policy;

iv. Technical Cooperation; and

v. Sectoral and Technical Meetings and Related Issues.

Purpose and Function of ILO

The purpose of the organisation is to promote the objectives set forth in

the preamble to the constitution and in the Declaration adopted in Philedelphia in
1944. The preamble to the constitution declares that universal that universal and
lasting peace can be established only if it is based upon social justice.
Purpose of the organisation is improvement of conditions urgently required in
varied particulars:

The regulation of hours of work (including the establishment of

maximum working day and week);

The regulation of labour supply;

The prevention of unemployment;

The provision of adequate living wage;

The protection of the worker against sickness, disease and injury

arising out of employment;

The protection of children, young persons and women;

Provision for old age and injury;

Protection of toe interests of workers when employed in countries other

than their own;

Recognition of the principle of equal remuneration for work equal value;

Recognition of the freedom of association and the organisation of

vocational and technical education.

The fundamental principles on which the ILO is based include:

Labour is not a commodity

Freedom of expression and of association are essential to
sustained progress
Poverty any where constitute a danger to prosperity everywhere
The representatives of workers and employers enjoying equal
status with those of governments, join with them in free
discussion and democratic session with a view to the promotion
 of common welfare. The organisation seeks to improve the
working and living conditions through the adoption of the
International Labour Conventions (generally in the form of
recommendations) setting international minimum standards.
These conventions are adopted in the International Labour
Conference which is held every year. Every member country is
expected to adopt these conventions to improve the living and
working conditions of the workers.

Since 1945, the ILO has expanded its work in three major directions:

The establishment of tripartite international committees to deal with the

problems of some of the major industries.
The holding of regional conferences and meetings of experts to study
special regional problems, particularly those of under developed
regions.
The development of operational activities.

ILOs Conventions in India

Till 1994, the ILO prescribed 176 conventions out of which it has ratified
36 conventions. ILO conventions encompass a vast span of subjects which
include basic human rights, employment, social policy, labour administration,
migrant workers etc. In February 1992 the Government of India agreed to
ratify the ILO convention on employment policy, welfare at sea and in ports,
labour administration, minimum wages and protection and facility to Indian
workers. The government has conveyed to ILO that Indian laws and practices
on these subjects are identical to what has been prescribed by ILO.

While addressing the 79th session of ILO in Geneva on June 11, 1992
the Union Minister of State for Labour P A Sangama urged ILO to take up
steps to adopt a flexible convention to protect the interests of workers in case
of insolvency of employers or closure of industry. He said India has initiated a
number of changes in the macro economic policies as a part of the process of
structural adjustment in order to meet the challenges both external and
internal. These included restructuring of industry, trade and budgetary policies
and public sector policy. He emphasised that successful and sustained structural
adjustments called for a sound industrial relations system and commitment to
tripartite negotiations and mentioned that India has established tradition for
tripartite consultation on all the matters having a bearing on the welfare of
workers. He also stressed that government constitute special tripartite committee
at national level to examine the effects of new industrial policy on labour and to
suggest measures to facilitate industrial restructuring.

Labour Legislations in India

The law has a very substantial impact on regulating industrial relations

globally. In India, the law forms the most powerful instruments through which the
government regulates industrial relations between the employers and employees.
The Trade Unions Act, 1926; The Industrial Employment (Standing
Order) Act, 1946; The Industrial Disputes Act, 1947; Payment of Wages Act,
1936, Minimum Wages Act, 1936; Payment of Bonus Act, 1965; The Factories
Act, 1948 with their amendments and modifications constitute the main legal
framework for regulating labour management relationship.

The Trade Unions Act, 1926

The act was enacted with the object of providing for the registration of
trade unions and verification of the membership of trade unions registered so
that they may acquire a legal and corporate status. As soon as a trade union
is registered, it is treated as an artificial person in the eyes of law, capable of
enjoying the rights and discharging liabilities like a natural person. In certain
respects, the Act attempts to define the law relating to the registered trade
unions. The Act, apart from the necessary provisions for administration and
penalties, makes provisions for:

(a) conditions governing the registration of trade unions;

(b) laying down the obligations of a registered trade union;

and

(c) fixing the rights and liabilities of registered trade unions.

The Industrial Employment (Standing Orders) Act, 1946

The preamble of the Act clearly says that the Standing Orders shall
deal with the conditions of employment of workers in an industrial
establishment. It is obligatory upon all employers/covered by this Act to define
precisely the employer and the employees and to make the said conditions
known to the workmen employed by them. The Act provides uniformity of
terms of employment in respect of all employees belonging to the same
category and discharging the same or similar work in an industrial
establishment.

The standing orders bring home to the employers and the employees
as on what terms and conditions the workmen are offering to work and the
employer is offering to engage them. This Act requires the employers to define
the conditions of service in their establishments and to reduce them to writing
and to get them compulsorily certified with a view to avoid unnecessary
industrial disputes. In other words, Standing Orders are intended to be the
nature of shop rules promulgated be employers under statutory obligations.
They may be described as an act of misconduct. In actual practice, they also
represent a form of compulsory collective bargaining agreement with a built- in
device for compulsory arbitration, if any dispute relating to the fairness and
reasonablesness of the rules, as also their application and interpretation
arises.

The aims of the Act have been:

1) To define, with sufficient precision, the principal conditions of

employment in industrial establishments under them and to make the
said conditions known to workmen employed by them.

2) To regulate standards of conduct of the employers and

employees so that labour-management relations could be improved.

3) To maintain proper discipline, harmonious working conditions

and achieve higher productivity by providing satisfactory employment
and working conditions.
 4) To provide for redressal of grievances arising out of employment
or relating to unfair treatment of wrongful exaction on the part of the
employers against the employees.

5) To specify the duties and responsibilities of both the employers

and the employees.

6) To provide statutory sanctity and importance to the Standing

Orders.

In sum, the purpose of Standing Orders is to create an attitude of mind

among both the parties so that industrial harmony is achieved in and industrial
establishment. The Orders form part of the contract between management
and every one of its employees. These are reduced in writing and they are to
be compulsorily certified with a view to avoid unwanted industrial disputes.
Once the Standing Orders come into force, they bind all those presently in
employment of the concerned establishment as well as those who are
appointed thereafter; and also those who were employed previously.

The Act makes provision for certification of Standing Order, which after
certification from competent authority under the Act, constitute the statutory
terms and conditions of employment in industrial undertakings. They specify
duties and responsibilities on the part of both employers and employees. They
make both of them conscious of their limitations. They require, on the one
hand, the employers to follow certain specified rules and regulations as laid
down regarding working hours, pay days, holidays, granting of leave to the
employees, temporary stoppages of work, termination of employment,
supervision of dismissal in certain conditions. On the other hand, they require
that the employees should adhere to rules and regulations mentioned in the
Standing Orders. Standing Orders try to create an attitude among both the
parties which is beneficial for achieving industrial harmony.

The Industrial Disputes Act, 1947

According to the Notification in the Official Gazette of India, 1946, Pt.

V., the Act was enacted to achieve the following object:
Experience of working of the Trade Disputes Act of 1929, has revealed that its
main defect is that while restraints have been imposed on the rights of stride and
lockout in public utility services, no provision has been made to render the
proceedings institutable under the Act for the settlement of an industrial dispute,
either by reference to a Board of Conciliation or to a Court of Inquiry conclusive
and binding on either parties to the dispute. The defect was overcome, during
the war, by empowering under Rule 18-A of the Defence of Indian Rules, the
Central Government to refer industrial disputes to adjudicators and to enforce the
awards. Rule 81-A is being kept in force by the
Emergency Power (Continuancy) Ordinance, 1946, for a further period of six
months, as industrial unrest in checking, which this rule has proved useful, is
gaining momentum due to stress of post-war industrial readjustments, the
need of permanent legislation in replacement of this Rule 81-A which has
proved generally acceptable to both employers and workmen retaining impact
for the most part, the provision of the Trade Disputes Act, 1929.

The Preamble of the Act reads, An Act to make provision for the
investigation and settlement of industrial disputes and for certain other
purposes.

This is a special legislation, which applies to workmen drawing wages

not exceeding a specified amount per month and which governs the service
conditions of such persons. It may be regarded as a supplement to the Indian
Contract Act, 1872, whose aim is to regulate the contractual relationship of
master and servant in ordinary sense. This Act deals with the prevention and
settlement of conflict between the two parties and thereby try to improve
relationship between them. Thus, the purpose of this Act is to harmonize the
relations between the employer and the workmen; and to afford a machinery
to settle disputes that arise between the management and the workmen
which, if not settled, would undermine the industrial peace and cause
dislocation and even collapse of industrial establishments, essential to the life
of the community. This industrial peace is secured through voluntary
negotiations and compulsory adjudication.

On the basis of the judgements given from time to time, by the Supreme

Court, the principal objectives of the Act may be stated as below:

 a) To promote measures for securing and preserving amity and
good relations between the employers and the employees, to minimise
the differences and to get the dispute settled through adjudicatory
authorities

b) To provide a suitable machinery for investigation and settlement

of industrial disputes between employers and employees, between
employers and workmen; or between workmen and workmen with a
right of representation by a registered trade union of by an association
of employers;

c) To prevent illegal strikes and lockouts;

d) To provide relief to workmen in matters of lay-offs, retrenchment,

wrongful dismissals and victimization;

e) To give the workmen the right of collective bargaining and

promote conciliation.

The purpose of the Act, according to Patna High Court, is amelioration

of the conditions of workmen in an industry.

The Payment of Wages of Act, 1936

Prior to the enactment of this Act, the employees/workers suffered

many evils at the hands of the employers, such as

i. the employers determined the mode and manner of wage

payment as they liked;

ii. even when paid in cash, wages were paid in illegal tender and in
the form of depreciated currency;

iii. a large number of arbitrary deductions were made out of the

wages paid to the workers; and

iv. the payment was usually irregular and sometimes there was
non-payment altogether. These grave evils attracted the attention of
the Royal Commission on Labour which recommended for a suitable
legislation to check these evils.
Consequently the Payment of Wages Act was passed on 23rd April 1936. it
came into force from 28th March 1937. It was amended in 1937, 1940, 1957,
1964, 1967, 1972 and 1982 with a view to make it more comprehensive. The
Act seeks to remedy the evils in wage payment:

a) Ensuring regularity of payment;

b) ensuring payment in legal tender;

c) preventing arbitrary deductions;

d) restricting employers right to impose fines; and

e) providing remedy to the workers.

The Minimum Wages Act, 1948

The object of the Act is to secure the welfare of the workers in a

competitive market by providing a minimum rate of wages in certain
employments. In other words, the object is to prevent exploitation of the
workers and for this purpose it aims at fixation of minimum rates of wages
which the employer must pay. This minimum wages must provide not merely
for the bare subsistence life but also for the preservation of the efficiency of
the worker, and so it must provide for some measure of education, medical
requirements and amenities. The capacity of the employer to pay is not a
consideration in fixing wages.

The Payment of Bonus Act, 1965

The Bonus act is the outcome of the recommendation made by the

tripartite commission which was set up by the Government of India way back
in 1961. The commission was asked to consider the question of payment of
bonus based on profit to the employees by the employer. On September 2,
1964 the government implemented the recommendations of the commission
with certain changes. Accordingly the payment of Bonus Ordinance 1965 was
promulgated on May 26, 1965. Subsequently it was accepted by the
parliament and accordingly in the year 1965, the payment of Bonus act was
enacted. The Act was amended in 1968, 1969, 1975, 1976, 1977, 1978, 1980,
1985, and 1995. The main objectives of the Act are as under:

a) To impose statutory obligation on the employer of every

establishment defined in Act to pay bonus to all eligible
employees working in the establishments.

b) To outline the principles of payment of bonus according to

prescribed formula.

c) To provide for payment of minimum and maximum, bonus

and linking the payment of bonus with the scheme of set off
and set on and

d) To provide machinery for enforcement of bonus.

The Factories Act, 1948

The Factories Act came into force on April 1, 1949. It was enacted with
a view to removing a number of defects, revealed in the working of the Act of
1934. The Act of 1948 not only consolidates but also amends the law
regulating labour in Factories. It extends to the whole of India. Section 116
provides that unless otherwise provided, this Act also applies to factories
belonging to the Central or any State Government.

The object of this Act is, to secure health, welfare, proper working
hours, leave and other benefits for workers employed in factories. In other
words, the Act is enacted primarily with the object to regulate the conditions of
work in manufacturing establishments coming within the definition of the term
factory as used in the Act.

2.4 KEYWORDS

Billateral - Involvement of two parties

Lay-off - Temporary refusal for work

Retrenchment - Permanent refusal for work

2.5 SELF ASSESSMENT QUESTIONS

1. Discuss the role of state in industrial relations in India.

2. Write notes on -

(a) the plan documents and industrial labour

(b) New Industrial Policy and Industrial Relations

3. Discuss the legal framework of Industrial Relations.

2.6 REFERENCES/SUGGESTED READINGS

1. Dwivedi, R.S. (2002) Managing Human resources and

Industrial Relations in Indian Enterprises, Galgotia Publishing
company, New
Delhi
2. Manappa, Arun (1996) industrial Relations Tata-McGraw Hill
Publishing Company. Ltd., New Delhi
LESSON - 3

TRADE UNION ROLE AND FUTURE

STRUCTURE

3.0 Objectives

3.1 Introduction

3.2 Presentation of Contents

3.2.1 Definition of trade union

3.2.2 Features of trade unions

3.2.3 Types and structure of trade unions

3.2.4 Employees and trade union

3.2.5 Role of the trade unions

3.2.6 Future of trade unions

3.3 Summary

3.4 Keywords

3.5 Self Assessment Questions

3.6 References/Suggested Reading

 3.0 OBJECTIVES

The objective of this lesson is to make the students aware about:

the meaning, types, role and future of trade unions

how trade union are formed

how they contribute to the well being of employees

functioning of the trade unions

3.1 INTRODUCTION

It is a well known fact that in every industrial community there are two
distinct classes the Employees and the Employers, without whom production
at a large scale is not possible. Both these parties usually have contradictory
motives, which creates many problems. Over the ages, the teeming millions
which constituted a sizeable chunk of industrial society have struggled hard to
achieve a greater measure of protection against inhuman treatment meted out
to them by employers. They have learned to make themselves secure against
ills over which they believed to have little control. In fact individually the
labourers can do little to bring about the kind of reforms they believe desirable.
They are effective only if they act in united ways. The very idea of joint action,
laid down the foundation of the instrument of struggle for security and
advancement Trade Union.

The Trade Union came into existence as an agent of workers and

working class at large. It performed and still performs two functions: one to
work for the redistribution of some of the nations wealth by raising wages and
earning of its members. This enable workers at their own to improve their
living standard and in the process become better equipment to deal with
unfavorable economic conditions. The second objective of union is more
directly related to their security role in esprit of here and now. Through various
types of union welfare funds and later through pressure for employer welfare
programme and the governmental social security measures, the union aim to
obtain greater benefits for its members. In liberalized economic environment
the union is looked upon as a facilitator of change.
3.2 PRESENTATION OF CONTENTS

3.2.1 Definition of trade unions

According to Webb, A trade Union is the continuous association of

wage earners for the purpose of maintaining or improving the conditions of
their working lives.

According to Section 2(h) of Indian Trade Union Act, Trade union

is an combination whether temporary or permanent formed primarily for the
purpose of regulating the relation between workmen & employers workers &
workers or between employers & employers or for imposing restrictive
conditions or conduct of any trade or business and include any federation of
two or more trade unions.

It seems that this definition is very wide in which association of

employers are also included but generally trade unions are referred to
association of workers. Hence, we can say that trade unions are continuous
associations of wage earners for maintaining and improving the condition of
workers life, better health and status in the industry and as well as in society.

The Characteristics of trade unions: -

1. Trade unions have a statement specifying that organization is a

trade union.

2. Trade unions have a statement of its principle objectives.

3. Registration with Registrar of Trade Union.

4. Independence from employer, which may be evident from the

certificate issued by the Registrar of Trade Union.

5. Affiliation with central trade union organization.

All the trade union does not necessarily show these characteristics, yet
many of the large trade unions do.
3.2.2 General features of trade unions

Coming out of a vast definition of the concept, let us put a light on some
features of trade union which are as follows: -

1. The trade union is voluntary association: Trade union is not a

compulsory association but voluntary association of workers, who may
be in one or more industries and occupations.

2. Common interest: There is certain common interest of the

member workers. The leader of the trade union is supposed to pursue
and protect the economic and other interest of the members which
leads to their welfare.

3. Collective action: After thorough discussions in the meeting of

trade union the leader of the union takes collective steps to press their
demand before the management.

4. Permanent & continuous association: A trade union is a

permanent and continuous organization. They persistently pursue their
purpose conceive of their purpose as one, which is not merely
immediate but continuous and long term as well. They do not expect to
attain their purpose in a day because they anticipate and contemplate a
continuing stream of additional objectives to be adopted from time to
time.

5. Association engaged in securing economic benefits: Trade

unions attempts is to secure control of supply of labour in one or more
markets and to maintain that control as a mean of fixing the price of
labour as well as the conditions under which they works.

6. The origin and growth of trade union have been influenced

by a number of ideology: The socio economic and even political
movement have influenced trade union in one or other way

7. Other benefits: Trade union is not only confined to economic

benefits, but other benefits such as cultural, political, social and
psychological are also within their broader preview.
3.2.3 Types and structure of the trade union

Ever since the dawn of industrialization there has emerged a wide

variety of unions across the globe these unions can be classed under two
heads

The purpose for which unions are formed

The variation in the composition of their membership

(A) Union classification according to the purpose

Under this head normally two type of union have been kept.

1) Reformist

2) Revolutionary

Reformist unions

Such unions dont believe in the destruction of economic, social and

management structure of the state or concern but want only to modify them
and to have favorable response for their members through negotiation and
other peaceful manners. The reformist union is subdivided in two parts:

(a) Business unionism: Business unions are those unions that are
maintained primarily to represent the workers in collective bargaining
with the employers. They are distinct form other reformist which try to
bring economic advantage to their members.

(b) Friendly or Uplift unionism: Idealistic in nature and aspires to

elevate the moral, intellectual and social life of the workers and
advocate idealistic plans for social regeneration. They emphasise such
other consideration as education, health, insurance etc.

Revolutionary Unions

Such unions aim at destroying the present structure and replacing it

with the new and different institution according to the ideals that are regarded
as preferable. The revolutionary unionism generally seeks to destroy capitalist
industry to abolish the wage system and substitute it with some other system
generally socialist and communist. These unions are further classified in two
classes:

a) Anarchist unions: The unions which try to destroy the existing

economic system by revolutionary means called anarchist Unions.
Such unions exists no more in presently scenario.

b) Political unions: The unions which gain power through political

action called political unions. The main function of such unions is to
eliminate the power of capital and capitalists, redistributing wealth and
giving effective power to workers.

(B) Union classification on the basis of membership structure

The union can also be classified according to variations in the

composition of the members. On this basis unions have been classified in four
categories:

Craft union: It is an organisation of workers employed in a particular craft and

trade or in a single or few occupations. Such organizations link together those
workers who have similar skills, craft training and specialization, aiming to
safeguard their interest.

Industrial union: It is an organisation of workers which links all craftsmen

and skilled workers in any industry. It is organized upon the industry wise
basis rather than the craft wise basis.

Staff union: The term staff union is popularly used to both craft and industrial
union. It is organized the workers on the basis of craft working in same
industry.

General union: It is an organisation which covers various industries and

labourers having different skills. They have numerical superiority (large
membership), for they are open to all classes of workers and this is the source
of their strength.
3.2.4 Trade union & Employees

Let us discuss now the relationship between the trade unions and the
employees and why employees join the trade union and how the trade union
helps them.

(a) Objectives of trade union

Some important reason as to why workers organize themselves to form

trade union are as follows: -

1) To safeguard their interests: Workers often join trade union in

order to have a stronger voice to resist those actions of the
management which are against their interest. When employers cut
wages or pay low wages; when working conditions are unsafe or too
unpleasant; when management. Interfere in workers personal lives,
workers resist by forming unions. Through the unions they petition
management for change and if dont succeed, they may resort to a
concerted work stoppage a strike.

2) To participate in union activities: Workers may join unions to

obtain certain health or insurance benefits or to participate in educational
program or to learn about their own business and occupation. They may
also join to engage in social and community activities.

3) To exercise leadership: Some workers join union as an outlet

for their own ambitions. They have leadership traits and to explore the
power of the trade union to be a leader they joins the trade unions.

4) To get hike in wage rate : One of the important objective

behind workers joining a union has been their belief that they would
get wages increased and have stronger impact through collective
action.

5) To maintain good relation: Another reason of employees joining

trade unions may be broader realization on their part that trade unions
maintain the employer employee or labour management relation.

6) To maintain adequate working conditions: Employee may

join trade union because of their belief that unions are effective way
to
 secure adequate protection from various hazards and financial
security during situation like accident injury, illness, unemployment
etc.

7) To get a media of communication: The employees may join

the unions because of their feeling that this would enable them to
communicate their views, ideas, feeling and frustrations to the
management and exercise an effective voice to the management
decision on the matter concerning their welfare.

8) To do fair dealing: The employees may join trade union to

ensure a just and fair dealing by management and well planned
actions.
Through collective strength restrain the management from taking any
such action which may be irrational or contrary to their interest.

9) To get employment: Sometimes workers join trade union

because it is a precondition to their getting employment. This is
known as the
closed shop system and was prevalent in America till1947.

10) To get strengthen: Since the employee alone as an individual

feel specially weak in a world of mass production and mass
movement, he prefers to join an organization that may offer him an
opportunity to join other for the achievement of those objectives that
he consider as socially desirable.

(B) Function of Trade Unions

For the attainment of above objectives trade union performs two types of
functions

o Militant functions

o Ministrant or Federal functions

Militant function

One of the main aim of the unions is to secure better conditions of work
and employment and more recently, the trade union have an aim to secure
some share of productivity gains and participation in the management or even
control over industry. When the union fail to accomplish these objectives by
the method of negotiations they adopt aggressive methods and put a fight
with the management in the form of strike, boycott etc.

Federal function

A trade union is also a federal association or a mutual benefit

organization supporting the member out of their own funds during the period
of work stoppage due to strike or lockout. It also provides financial assistance
to the member during the period when they are unfit for their work because of
illness or employment injury or when they are temporary unemployed.

Some another function of the trade unions may be summarized as under:

1) Infra-mural activities: - Such functions of unions leads to the

betterment of employment condition of employees such as adequate
salary, sanitary etc. by collective bargaining, negotiation etc.
2) Extra-mural activities: -Such activities help the employee to
maintain and improve their efficiency such as promote friendly relation,
education and culture among members.
3) Political activities: - That may be related to the function of a
political labour party or those reflecting an attempt to seek influence on
public policy relating to matter connected with the interest of members.

However, one cannot take a static view of the functions that trade
unions perform today in the large interest of the community. In every country
the functions of trade unions have to change depending on the stage of
economic and social development. It also depend on the strength of the trade
union, both organizational as well as financial and up to a great extent on the
institutional set up of the society in which they have to operate.

3.2.5 Role of the trade unions

Trade union performs various roles regarding the various classes of the
society as follows: -
 Role towards the members of union

Role towards the organization

Role towards the union

Role towards the society

Let us explain these roles in details:

(A) Role towards the trade union member

The trade union performs following duties regarding their members

employees:

1) To safeguard the workers against all sort of exploitation by the

employers, by union and by political parties.

2) To protect workers from the unfair labour practices of the

management.

3) To ensure healthy, safe and conducive work conditions.

4) To exert pressure for the enhancement of reward associated

with the work only after making a realistic assessment of its practical
implication.

5) To ensure a desirable standard of living by providing various

type of services such as health, housing, education, recreational, co-
operative etc.

6) To guarantee a fair deal and social justice to workers.

7) To remove the dissatisfaction and redress the day-to-day

grievances and complaints of workers.

8) To encourage the workers participation in the management of

organization.

9) To make the workers aware about their rights and duties.

10) To settle the disputes through negotiation, joint consultation and

voluntary arbitration and through adjudication.
 (B) Role toward the Industrial organization

Trade unions perform following functions for the industrial organization

in which they are working:

1) To highlight the organization as a joint enterprise between

workers and management and to promote identity of interest.

2) To increase production quantitatively as well as qualitatively, by

laying down the norms of production and ensuring their adequate
observance.

3) To help in maintenance of discipline.

4) To help in removal of dissatisfaction and redressal of day-to-day

complaints and grievances and ensure workers loyalty.

5) To create opportunity for workers participation in management

and strengthen the co-operation.

6) To promote harmonic relationship between workers and

management by setting disputes through negotiation, joint
consultation and avoiding litigation.

7) To create favorable opinion of the management towards trade

union and improve their status in industrial organization.

8) To exert pressure on the employers to enforce legislative

provision beneficial to workers, to share the profit equitably and keep
away from various type of unfair labour practice.

9) To facilitate communication with management.

10) To impress upon the management the need to adopt reformative

and not punitive approach towards workers fault.

(C) Role toward the trade union organization

1) To improve financial position of the concern by fixing higher

subscription, by realizing the union dues and by organizing special
fund raising campaigns.
 2) To preserve and strengthen trade union democracy.

3) To train members to assume leadership position.

4) To improve workers network of communication between union

and its members.

5) To promote harmonic relationship between different unions to

create a unified trade union movement.

6) To resolve the problem of factionalism and promote unity within

the union.

7) To prepare and maintain the necessary records.

8) To manage the trade union organization on scientific lines.

9) To publicise the trade union objectives and functions, to know

peoples reaction toward them and make necessary modification.

(D) Role toward society

1) To render all sort of constructive co-operation in the formulation

and implementation of plans and policies relating to national

development.

2) To actively participate in the development of the programs of

national development such as family planning, forestation, national
integration etc.

3) To launch special campaigns against the social evils of

corruption, casteism etc.

4) To enable unorganized sector to organize itself.

5) To create public opinion favorable to governments policies and

plans and to mobilise peoples participation for their effective
implementation.

6) To create public opinion favorable to trade unions thereby raising

their social and public image

7) To exert pressure, after realistically ascertaining its practical

implication on the government to enact legislation conducive to the
development of trade unions and their members.
 So in above way the trade union plays an important role toward the
various concerned parties.

3.2.6 Future of trade union

Before studying the future of trade union it is must to know the present
condition of trade unions. Let us discuss the present condition of trade unions
in India.

Present condition of trade union in India

In India trade unions are regulated by the Indian trade union act 1926.
At present there are about 48000 registered workers unions and 10 central
labour organizations in our country. Some important features of these unions
are as follows:

a) As the National Commission on Labour in India points out the

structure of our unions and their types do not admit of any simple
generalization.
Of the three types of unions (viz., general union, craft union and
industrial union), Industrial union is most prominent in our country. But
workers in India are unionized mostly on the bases of plants rather than
on the basis of industry. Craft unions are found among non-industrial
and professional workers only. Thus we have the unions of taxi-drivers,
tonga-drivers, rickshaw-pullers, journalists, teachers, bank employees,
etc. On the basis of hierarchy we may classify our unions into the
following 3 categories:

i. Primary unions which operate at the plant level,

ii. Regional federations which work at the regional

level, and

iii. Central labour organisatons which operate at the

national level.

b) The extent of unionization in our country has not been uniform in all
industries. Some industries are better unionized than others. Thus in the
cotton textile industry nearly 70% of its workers are unionized whereas this
percentage is only 24 in jute and 21 in chemicals. In fact, our textile
 industry has given rise both to some of the worst strikes in the country
and to some of the best trade union leaders and labour organizations.

c) The State-wise distribution of unions in our country also does not

seem to follow any pattern. In some States there is very heavy
concentration of unions but in some others there are only a few unions.
The following table gives figures of the number of unions and the
estimated average daily number of workers employed on factories, in
respect of some States in the country:

Sr. State Average daily number of Number of workers

No. workers employed in submitting returns
unions factories (000)

1 ASSAM 110 170

2 GUJARAT 695 1025
3 HARYANA 245 356
4 KARNATAKA 752 850
5 MAHARASHTRA 1220 1649
6 ORISSA 138 115
7 PUNJAB 347 476
8 KERALA 283 1882
9 TAMIL NADU 859 2529

Source: Compiled from Pocket Book of Labour Statistics, 1994

(d) There is very close alliance between our trade unions and politics.
This is because in the Pre-Independence days our trade union
movement could not remain aloof from the countrys struggle for
freedom. Motivated by a strong nationalistic sentiment it had close
alliance with the congress. Leaders like C.R. Das, Subhas Bose and
Pandit Jawahar Lal Nehru acted as President of both the Indian
National Congress and the All-India Trade Union Congress. But several
splinter groups have now developed which have weakened the
movement.
 (e) Being of the one shop variety our unions are small in size. The
average membership of a union has come down to 953 from over 1500
nearly 5 decades ago.

(f) With the membership of the unions becoming smaller, their

financial condition has also become more and more weak with the
average annual income per union being under Rs. 4000. Financial
weakness has made several unions militant in their approach to their
problems.
Conscious of their inability to carry on prolonged fights with their
employers, unions become prone to violence.

(g) Our shop unions are loosely affiliated to different central unions.
We have 10 central organizations. As such it still continues to be the
most dominant of the 10 central organizations. Our central
organizations maintain their affiliations with international organizations.
At present there are two such organizations-one communist-dominated
World Federation of Trade Unions with its headquarter in Paris and the
other non-communist dominated International Confederation of Free
Trade Unions with its headquarter in Brussels. Two of our central
organizations (viz., INTUC and HMS) are affiliated with the international
confederation of Free trade Unions. AITUC is affiliated with the World
Federation of Trade Unions.

A few of our national organizations such as All India Bank Employees

Federation , the national federation of Indian railway employees and the
national federation of post and telegraph employees are not affiliated to any of
the above central organization.

Future role

Historically, unions in our country have been playing the role of agitators and
bargainers. The thrust of their activities has been towards the economic well
being of the workers. In future unions should be encouraged to make a thrust
towards the psychological and social well being of the workers. Some
important areas in which they can be asked to participate as follows:
 Name of central union Unverified Percentage of
membership total membership
claim (in lakhs)

1 Indian National Trade Union 54 23.3

Congress

2 Bhartiya Mazdoor Sangh 41 17.7

3 Hind Mazdoor Sabha 44 18.9

4 United Trade Union 12 5.2

5 Congress(L.S.) Center of Indian 24 10.3

Trade Unions

6 All India Trade Union Congress 30 13

7 National Labour Organisation 7 3

8 United Trade Union Congress 8 3.4

9 Trade Union Coordination 5 2.2

Centre

10 National Front of Indian Trade 7 3

Union

232 100

a) Communication: Unions can pass on greater and more varied

information to the workers about themselves and the organization. At
present they only communicate on service conditions and related
issues under the belief that workers are not interested in receiving
information on other issues. This is wrong.

b) Counseling: Union can play a very positive role in providing

counseling services to employees regarding the social evils.
 c) Education and training: Another important area in which unions
can play a development role is education of workers. Unions can help
them acquire new human relations and work-related skills such as skills
of collaboration, empathy, collective action, etc.

d) Welfare: Unions can help management in developing innovative

welfare schemes for employees such as workers cooperatives,
workers banks, nursery schools, etc.

e) Family and vocational guidance: Unions can help workers

families in several ways. For example, they can provide guidance in
respect of the education and career of workers children. They can help
in creating jobs for the wives of workers and so on.

f) Research: Unions can play a very significant role in generation

of data in various dimensions of workers needs aspirations, standard of
living, etc. For this purpose they can launch research projects either
independently or in collaboration with academic institutions.

Obstacles in the future growth of trade unions

Our trade unions are not so developed as in the western countries due
to following reasons:-

1) Outside Leadership: In India Trade unions has been dominated

by outside leadership. It is a notable feature of Trade Union in India.
Now-a-days these leaders are professional political Leaders. Hence,
they exploit the sentiments of people for their political purpose. They
are not generally interested to solve the problems of workers but exploit
them for their political benefits. Most of the negotiations with the
employers fail due to such political leadership. The interests and
welfare of labours are generally ignored. Therefore, outside leadership
is major weakness of Trade Unions in India.

2) Low membership: Though the number of Trade Unions in India

has considerably increased but membership per union has declined.
With the help of these data it can be proved. That in 1927-28 the
average number of members per union was near about 3500. it was
reduced to
about 1400 in 1946-47 and further it decreased to 675 in 1985. The
union having low membership would not be more effective.

3) Uneven growth of Trade Unions:- The degrees of unionization

varies from Industry to industry in coal industry it is 6.1%, cotton textile
56%, tobacco manufacturing 70%, Electricity and gas it is 39% , hence,
it can be said that In India Trade Unison activities are concentrated in
large scale Industries but in small scale industries it is nominal.

4) Multiplicity of Trade Unions: It is also a major problem of Trade Union

in

India. It has been generally seen that there are many Trade Union in
the same Industry. There are sometime as many as 20 unions in the
same plant. As the Trade Union act, 1926 permits that any association
of seven workers can be registered as unions. Multiplicity of unions
instead solving the problems of workers are fighting among
themselves. So, the purpose of Trade Unions Fails.

5) Absence of paid office Bearers: In India, majority of Trade Unions

do not have whole time paid office bearers. Many of them work on
honorary basis. Since, they are not paid. They devote only limited time
and energy to Trade Union activities. In the absence of full time workers
generally political leader dominates unions. Moreover the office bears
are not trained properly.

6) Weak financial position: In India, most of the Trade Unions financial

positions is very weak because their average yearly income is
inadequate, as subscription rates are very low. The reason for weak
financial position is also multiplicity of unions. The leaders of different
unions try to attract workers towards their unions comparatively at low
rate of subscription. It is the wrong notion that the Indian workers
financially are not too good. Over the years the average income of
workers has been on increase hence, it is wrong plea that they cannot
afford higher rate of subscription.

7) Lack of interest: In India a large number of workers have not joined

trade union. About 2/3 of the workers have no link with any union.
Moreover all the members of the trade union do not show interest in their

affairs. Their attendance at the general meeting of the union is very

 low. Under such circumstances trade union cannot be expected to
make such progress. In order to make the trade union movement
succeed the members of trade union have to take keen interest in the
affairs.

8) Lack of public support: As most of the trade union believes in the

pressure tactics such as strike and demonstration and give limited
attention to peaceful methods for the settlement of demands and
disputes. The general public is affected due to strike, go slow policy
and other practices of unions. As a result public support or sympathy is
not available to the unions.

9) Limited stress on welfare: Most of the Trade Unions in India

undertake only limited welfare activities. They feel that their major
activity is to fight with the employer for more wages and allowances.

Corrective measures to improve the Trade Unions

(i) There should be a strong base to develop the Trade Union by

safeguarding the interest of the members and by achieving the target
of production.

(ii) To make effective unionism there should be one union in one

industry.

(iii) As most of the unions are influence by political parties. Hence,

there interference should be eliminated.

(iv) There should be training programmes to develop the internal

leadership.

(v) It will be more effective if office bearers of the Trade Unions are
well paid.

(vi) As most of the Trade Unions in India are financially weak. This
problem can be solved by raising the membership and collecting more
funds for unions.

(vii) Most of the unions are engaged in industrial disputes they do not
undertake economic, social and cultural activities which are equally
important for raising welfare of the working class.
 As a considerable number of Trade Unions are not recognized.
Hence, the proper recognition of unions will make them more effective.

3.3 SUMMARY

Trade unions are the associations of employees working as an agent of

working class. These unions not only safeguarding the financial interest of the
workers but also providing the other benefits such as cultural, political, social
and psychological within their broader preview. Trade unions adopts both the
aggressive as well as federal measures to solve the problems. In India the
trade union activities is regulated by the Trade Union Act 1926. But Indian
trade union movement is suffering from several problems such as low
membership, multiplicity of trade unions and financial crisis etc. If workers
want to strengthen the trade union movement in India and want to ensure
better condition of the labour then they have to take corrective measures
specified in the text.

3.4 KEYWORDS

Trade Unions - Continuous association of wage earners and

employees

Reformist Unions - Who dont believe in the destruction of economy

Revolutionary Unions - who believe in destruction of the present

structure and replace it with the new one.

Multiplicity of Unions - when there are more numbers of unions in the

same unit.

3.5 SELF ASSESSMENT QUESTIONS

1. Define the term Trade Union and its features.

2. What do you mean by Trade Union? Describe the various types

of the trade unions.

3. Why the employees unions the Trade Unions and what functions
a Trade Union performs for their employees?
4. Describe the role of the Trade Unions.

5. Write a note on the current condition of trade union in India? Put

a light on its future.

3.6 REFERENCES/SUGGESTED READINGS

1. Davar R.S., Personnel Management.

2. Tripathi P.C., Personal mgt. and Industrial relation, Sultan Chand

& Sons. New Delhi, 1997.

3. Mamoria C.B., Dynamics of Industrial relations, Himalayas

Publications, Mumbai, 1983.

4. Punekar, Deodhar and Sanskaran, Labour Welfare, Trade

Unionism and Industrial Relation, Himalayas Publications, Mumbai,
1996.

5. Sharma A.M., Industrial Relation: Conceptual and Legal

framework,
Himalayas Publications, Mumbai, 1996

6. Rao P. Subba, Essentials of Human Resource mgt. and

Industrial relations Himalayas Publications, Mumbai, 1996.
LESSON NO. 4

DISCIPLINE AND GRIEVANCE MANAGEMENT

STRUCTURE

4.1 Introduction.

4.2 Presentation of Contents

4.2.1 Code of discipline

4.2.2 Indiscipline, causes, sign and symptoms of misconduct

4.2.3 The remedial measures, prerequisites for indisciplinary

actions.

4.2.4 Approaches, principles and procedure for disciplinary

actions.

4.2.5 Red hot-stove rule

4.2.6 Definition, nature, causes of grievance

4.2.7 Management of grievance, Steps for managing

grievances

4.2.8 Grievance procedure under code

4.2.9 Grievance procedure in India

4.3 Summary

4.4 Keywords

4.5 Self Assessment Questions

4.6 References/Suggested Readings
 4.0 OBJECTIVE

This lesson is intended to impart knowledge about:

the discipline and grievance management.

the process and prerequisites for discipline and grievance

management

principles of management indiscipline and grievance

4.1 INRODUCTION

Discipline is very essential for a healthy industrial atmosphere and the

achievement of organizational goals. An acceptable performance from
subordinates in an organization depends upon their willingness to carry out
instructions and the orders of their superiors, to abide by the rules of conduct
and maintain satisfactory standards of work.

The term discipline can be interpreted. It connotes a state of order in

an organization. It also means compliance with the proper appreciation of the
hierarchical superior-subordinate relationship. The concept of discipline
emerges in a work situation from the interaction of manager and workers in an
organization. Formal and informal rules and regulations govern the
relationship between a manager and workers, the formal rules and regulations
are codified in the companys manual or standing order. Informal rules, on the
other hand, are evolved from convention and culture in the organization.

Websters dictionary has defined discipline as first, it is the training that

corrects, mould, strengthen or perfect individual behaviour. Second, it is
control gained by enforcing obedience, and third it is punishment or
chestisement. According to Bremblett, discipline does not mean a strict and
technical observance of rigid rules and regulations. It simply means working,
co-operating and behaving in a normal and orderly way, as any responsible
person would expect an employee to do. In other words, it may be noted that
discipline is employee self control which prompts him to willing cooperate with
the organizational standards, rules, objectives, etc. It is essentially an attitude
of the mind, a product of culture and environment and requires, along with
legislative sanction, persuasion on a moral plane.
 There are two basic concept of discipline; one of them being negative
while the other is a positive aspect of discipline. The negative approach to
discipline is traditional concept and is identified with ensuring that
subordinates adhere strictly to the rules, and punishment is meted out in the
event of indiscipline. In other word, for the violation of rules strict penalties are
levied and the fear of punishment works as a deterrent in the mind of the
employee. In organizations where workers are unskilled and illiterate, it is
easier to enforce this kind of discipline this concept uses fear as a means to
secure compliance to present norms. While a positive aspect of discipline
implies a sense of duty to observe the rules and regulations. It is also called
self-discipline. It involves creation of an atmosphere in the organisation
whereby employees willingly conform to the established rules and regulations.
Positive discipline can be achieved through rewards and effective leadership.
Positive discipline promotes cooperation and coordination with a minimum of
formal organisation. It reduces the need for personal supervision required to
maintain standards.

The code of discipline defines duties and responsibilities of employers

and employees/workers. The objectives of the code of discipline are:

1. To ensure that employers and employees recognize each others

rights and obligations,

2. To promote constructive cooperation between the parties

concerned at all levels,

3. To secure settlement of disputes and grievances by negotiation,

conciliation, and voluntary arbitration,

4. To eliminate all forms of coercion, intimidation, and violence in

industrial relation,

5. To avoid work stoppages,

6. To facilitate the free growth of trade unions, and

7. To maintain discipline in industry.

 The third five year plan document noted that the code lays down
specific obligations for the management and the worker with the objective of
promoting constructive cooperation between their representatives at all levels,
avoiding stop-pages as well as litigation, securing settlement of grievances by
mutual negotiations and eliminating all forms of coercion and violence in
industrial relation.

4.2 PRESENTATION OF CONTENTS

4.2.1 Code of Discipline

Code of discipline forms the Gandhian approach to industrial relations

to bind employees and trade unions to a moral agreement for promoting
peace and harmony. It was an outcome of the efforts of Guljari Lal Nanda, the
then Union Labour Minister in 1957 to 1958. G.L. Nanda was the true
Gandhian. It was at his instance that code was formulated. It was formally
adopted at the 16th session of the Indian labour conference (1958). National
representatives of both employers and trade unions were parties to it. This
code was a unique formulation to voluntarily regulate labour management
relations. Indian Labour Conference discussed three draft codes including:

1. A code of Conduct to regulate inter-union relations.

2. A code of Discipline to regulate labour management relations.

3. A code of Efficiency and Welfare for laying down norms of

productivity and labour welfare.

The third code was never formally adopted and did not take off. The
inter union code of conduct was voluntarily adopted, after a great deal of
persuasion by G.L. Nanda on may 21, 1958. The four central organisations of
labour then representing on the Indian Labour conference (including INTUC,
AITUC, HMS and UTUC) agreed to comply with the code.

The adoption of the code of Discipline was announced in June, 1958.

All the representative central organizations of employers and labour accepted
it. There were difficulties in persuading the ministries, defense and railways,
employing a large number of industrial workers to accept it in toto. Some
adaptations were later on agreed to here and there.

The main features of this code are:

1. Both employer and employees should recognise the rights and

responsibilities of each other and should willingly discharge their
respective obligations.

2. There should be no strike or lockout without proper notice and

efforts should be made to settle all disputes through existing
machinery.

3. A mutual agreed grievance procedure will be setup and both the

parties will abide by it without taking arbitrary

4. Both employers and trade unions will educate their member

regarding their mutual obligations.

5. Management will not increase workloads without prior

agreement or settlement with the workers.

6. Employer will take prompt for the settlement of grievances and

for the implementation of all awards and agreements.

7. Management will take immediate action against all officers found

guilty of provoking indiscipline among workers

8. Union will avoid demonstrations, rowdyism all form of physical

duress and workers will not indulge in union activity during working
hours.

9. Union will discourage negligence of duty, damage to property,

careless operation, insubordination and other unfair labour practices
on the part of workers.

Thus, the code of discipline consists of three sets of principles, namely

(a) obligation to be observed by management, (b) obligations to be observed
by trade unions, and (c) principles binding on both the parties.

The code of discipline has been helpful in improving industrial relation

in the country. It has focused the attention of employers and workers on their
respective obligations. In 1967 the Central Implementation and Review
Committee of the Union Ministry of Labour and Employment made an
evolution of the code. With the passage of time the spirit of the code has been
lost and the code has not been very effective in ensuring harmonious relations
among employers and employees due to their self-discipline and self-
commitment.

The National Commission on Labour recommended that the following

provisions of the code should be made statutory: (a) recognition of the
representative union as the sole bargaining agent; (b) setting up of a grievance
machinery; (c) prohibition on strikes and lockouts without prior notice; (d)
penalties for unfair labour practices; and (e) provision for voluntary arbitration.

However, the code by itself cannot maintain discipline in industry

unless the parties subscribing to it have full faith in it.

4.2.2 Indiscipline, causes, sign, and symptoms of misconduct

Indiscipline or Misconduct

The term indiscipline can be described as non-conformity to formal

and informal rules and regulations. It is an act or conduct, which is prejudicial
to the interest of the employer or is likely to impair the reputation of the
employee. It is necessary to correct indiscipline in an organization as soon as
it is observed because of its adverse influence on the morale and motivation
of the employee as well as organization. Indiscipline results in chaos,
confusion and diffusion of results. It gives rise to strikes, go-slows, and
absenteeism, leading to loss of production, profits and wages.

Causes of Indiscipline

Basically, indiscipline may arise due to poor management, errors of

judgment by employees about their union leaders or a lack of understanding
of management policy. This problem could also develop when an individual
behaves in indisciplinary manner or as an outcome of the managements
ignorance to his grievance. It can occur due to lack of commitment towards
the work, by an employee in an organization. Various other factors are also
responsible for indiscipline such as: unfair labour practices, victimization by
management, wage differentials, wrong work assignment, defective grievance
procedure, payment of very low wages (giving rise to poverty, frustration and
indebtedness), poor communication, ineffective leadership, result in
indiscipline. Thus, various socio-economic and cultural factors play a role in
creating indiscipline in an organization.

Sign and Symptoms of Misconduct

Every act of indiscipline is called misconduct. The main acts of

misconduct are given as:

1 Disobedience or willful insubordination.

2 Theft, fraud or dishonesty in connection with the employers

business or property.

3 Willful damage or loss of employers goods or property.

4 Taking or giving bribe or any illegal gratification.

5 Habitual absence without leave or absence without leave for

more than ten days.

6 Habitual late attendance.

7 Frequent repetition of any act or omission for which fine may be

imposed.

8 Habitual negligence or neglect of work.

9 Habitual breach of any law applicable to the establishments.

10 Disorderly behaviour during working hours at the

establishment.

11 Striking of work or inciting others to strike in contravention

of the provisions of any law.

These are not exhaustive but illustrative examples of misconduct under

the model standing orders, framed as a part of the rules made under this
Industrial Employment (Standing Orders) Act, 1946.
4.2.3 The remedial measures, prerequisites for indisciplinary actions

Remedial Measures for Indisciplinary Actions

The labour is the most important factor of production. Therefore, an

organisation can prosper only if labour is properly motivated towards the
attainment of specific objectives. A tactful human relations approach becomes
necessary if management wants to extract more and efficient honest work
from its employees. It is therefore, obligatory on the part of management to
analyze and study the causes of indiscipline and then take the necessary
action in the matter.

Each worker as an individual, need a fair or reasonable wage to

maintain him and his family in good health and spirits. Therefore, the wages
should be adequate so that the worker may meet the economic needs of his
family.

When a worker joins an organization, he agrees, under a contract of

employment, to give a certain amount of work and loyalty, and in return
expects suitable economic reward, security of employment, fair treatment and
other kinds of support from his employer. To encourage him to stay in his job
and to allow him the necessary security, amenities and freedom to express his
feelings and sentiments, a human relation approach should be adopted.

The trade union leadership should be developed from with in the rank
and file workers. A leader who comes from within is part of the workmens
associations and is in a better position to know the feelings and reaction of his
follow-workers so that he may be able to put their demands in a right way.
Finally, the various human resource management policies be made more
realistic and progressive.

Prerequisites

The essential prerequisites for using this approach to manage

indiscipline are:

1. Reasonable, legitimate and clear rules and regulations.

 2. Workers should be involved in framing rules and regulations so
that they willingly accept the rules.
3. Prior notice of the consequences of breaking rules.
4. Consistency and uniformity of punishment.
5. Respect for the human personality.
6. Management personnel should set high standards.

Indiscipline could be dealt with using formal and informal systems

through which it is corrected. In case an informal system is being used, either
a transfer, an informal warning, or a non-hierarchical but status demotion are
the remedies to correct indiscipline. Managements, in order to avoid the legal
complexities of the formal system, resort to informal systems.

4.2.4 APPROACHES, PRINCIPLES AND PROCEDURE FOR

DISCIPLINARY ACTION

Approaches

Basically, there are five approaches regarding to manage indiscipline

or misconduct. All these approaches briefly explain here.

1 Judicial Approach:

It is commonly followed in India. The present day manager has to

handle a variety of disciplinary issues. His right to hire and dismiss is
curbed to a great extent, especially where unionized employees are
concerned. The complexity is increasing in this arbitrary managerial
function due to intervention by the government, by providing legislation
for governing terms of employment. The need for legislation arose as
India is faced with a chronic problem of unemployment and illiteracy
among industrial labour. In order to secure security of jobs, the govt.
has tried to ensure protection to industrial labour from likely misuse of
managerial power to hire and fire.

2 The Human Relation Approach:

It calls for treating an employee as a human being and considers the

 totality of his personality and behaviour while correcting faults that
contribute to indiscipline. His total personality is considered, as is his
interaction with his colleagues, his family background, etc. and then
appropriate punishment for misconduct is awarded.

3 The Human Resources Approach:

The approach calls for treating every employee as a resource and an

asset to the organization before punishing the workers, the cause for
indiscipline has to be ascertained. An analysis of the cause is made, to
find out whether indiscipline is due to the failure of his training and
motivating system or the individuals own failure to meet the
requirements, and accordingly corrections are made.

4. The group Discipline Approach:

The management in this approach sets and conveys well established

norms and tries to involve the groups of employees. The group as a
whole control Indiscipline and awards appropriate punishments. The
trade union may also act as a disciplinary agency.

5. The leadership Approach:

In this case, every supervisor or manager has to guide, control, train,

develop, lead a group and administer the rules for discipline.

Principles for Disciplinary Action

Despite, best efforts, acts of indiscipline occur and it becomes

necessary to take a disciplinary action. While taking disciplinary action the
following principles must be considered.

1 Principles of natural justice: This principle must guide all

enquires and actions. This means that no person should be
appointed to conducting an enquiry who himself is interested in the
outcome either as an aggrieved party or because he is hostile to
the person proceeded against, or for any other reason.
 2 Principles of impartiality or consistency: There should be no
marked difference in the action taken under identical situations
where all the factors associated to situations are alike.

3 Principle of impersonality: The disciplinary authority should not

encourage a person who is failing to fulfill his duty. He should be
impartial to every one.

4 Principle of reasonable opportunity to the offender to defend

himself. Article 311 of the constitution of India says: No person
employed by the union or a state govt. shall be dismissed or
remove until he has been given a reasonable opportunity showing
cause against the action proposed to be taken in regard to him.

Procedure for Disciplinary Action

The procedure for taking disciplinary action involves the following steps:

1. Preliminary Investigation

First of all a preliminary enquiry should be held to find out the misconduct
behaviour or situation.

2. Issue of a charge sheet

Once a misconduct or indiscipline is identified, the authority should proceed to

issue of charge sheet to the employee. Charge sheet is merely a notice of the
charge and provides the employee an opportunity to explain his conduct.
Therefore, charge sheet generally called as show cause notice. In the charge
sheet each charge should be clearly defined and specified.

3. Suspension Pending Enquiry

In case the charge is grave a suspension order may be given to the

employee along with the charge sheet. According to the industrial
employment (Standing orders) Act, 1946, the suspended worker is to be
paid a subsistence allowance equal to one-half of the wages for the first 90
days of suspensions and three-fourths of the wages for the remaining
 period of suspension if the delay in the completion of disciplinary
proceedings are not due to the workers conduct.

4. Notice of Enquiry

In case the worker admits the charge, in his reply to the charge sheet,
without any qualification, the employer can go ahead in awarding the
punishment without further enquiry. But if the worker does not admit the
charge and the charge merits major penalty, the employer must hold
enquiry to investigate into the charge. Proper and sufficient advance notice
should be given to the worker of the enquiry.

5. Conduct of Inquiry

The inquiry should be conducted by an impartial and responsible officer.

He should proceed in a proper manner and examine witnesses. Fair
opportunity should be given to the worker to cross- examine the
management witnesses.

6. Recording the findings

The enquiry officer must record all the conclusion and findings. As far as
possible he should refrain from recommending punishment and leave it to
the decision of the appropriate authority.

7. Awarding Punishment

The management should decide the punishment on the basis of finding of

an enquiry, past record of worker and gravity of the misconduct.

8. Communicating Punishment

The punishment awarded to the worker should be communicated to him

quickly. The letter of communication should contain reference to the
charge sheet, the enquiry and the findings. The date from which the
punishment is to be effective should also be mentioned.
4.2.5 RED - HOT STOVE RULE

Douglas McGregor has suggested this rule to guide managers in enforcing

discipline. The rule is based on an analogy between touching a red-hot stove and
violating rules of discipline. When a person touches a hot- stove,

1. The burn is immediate

2. He had warning that he knew that he would get burn if he

touched it.

3. The effect is consistent everybody who touches red-hot stove

would be burned.

4. The effect is impersonal. A person is burned because he

touches the hot stove not because of who he is.

5. The effect is commensurate with the gravity of misconduct. A

person who repeatedly touches the hot stove is burnt more than one
who touched it only once.

The same should be with discipline. The disciplinary process should begin
immediately after the violation of rules/regulations is noticed. It must give a clear
warning that so many penalties would be imposed for a given offence. The same
kind of punishment should be consistently imposed for the same offence.
Punishment should be impersonal i.e. it should be imposed regardless of the
status of the offender. Punishment should be commensurate with the gravity of
the offence. For instance, a worker guilty of minor misconduct e.g. irregular
attendance should be given less punishment than that given to a worker found
guilty of major misconduct like the theft of employers property.

4.2.6 DEFINITION, NATURE, CAUSES OF GRIEVANCE

While working together, some time employees feel uncomfortable,

aggrieved or disappointed about certain managerial decisions, policies and
service conditions. There can be a feeling of ignorance altogether. With this
ignored approach employees remains unhappy and unsatisfied with working
conditions. If this dissatisfaction of employees goes unattended, the increased
irritation of the employees may cause unfavourable attitude towards
supervisors, colleagues and the organisation and ultimately a disturbed
relationship maintain in an organization. To a large extent, the approach will
be governed by several variables such as style of management, size of
enterprise, level of education of the workforce, technology of the plant and the
extent of unionization of the workforce.

In this present setup, especially in democratic system where an

employee can express their frustration, dissatisfaction, whether it is a minor
problem, or a serious problem, or a difference of the opinion with the
supervisor over terms and conditions of employment. In India, the government
has been making a plea for grievance machinery at the plant level ever since
1956-58 when the standing committee of the Indian Labour conference
submitted a draft on the various aspects of grievance procedure. The National
commission of Labour set up by the Government as a tripartite body in 1969
also spelt out the nature of grievance and a model grievance procedure.
However, this remains a recommendation and is not a statute yet.

The grievance procedure is one of the more important instruments

available for employees to express their dissatisfaction. It is also a means
available to management to keep a check on relevant diagnostic data on the
state of organizations health.

Grievance Defined

The term grievance has been defined by different researchers in

different ways. Mondy and Noe defined grievance as employees
dissatisfaction or feeling of personal injustice relating to his or her
employment.

Jucius defines grievance as any discontent or dissatisfaction, whether

expressed or not and whether valid or not, arising out anything connected with
the company which an employee thinks, believes, or even feels, is unfair,
unjust or inequitable. Thus above definitions describes grievance as any
dissatisfaction of an employee which is based on his or her perception about
the situation with in an organization.
 The term grievance varies from company to company, which would
include any discontent, which affects the organizational environment. As such,
grievance can be real or imaginary, written or oral, legitimate or illegitimate.
Keith Davis defines grievance as any real or imagined feeling of personal
injustice which an employee has about the employment relationship. In case
of real grievance, the grievance is genuine which may be due to behaviour of
supervisor, or employments terms and conditions that have been ignored or
violated by management. In case of imaginary grievance, the grievance is not
genuine which may be due to employees his or her own perception that they
have been some what neglected or ignored by supervisors, or their rights
have been violated by management.

There can be formal and informal grievance when an employee put the
cause of dissatisfaction in a written form and present it before appropriate
Authority. This is known as formal or written grievance. On the other hand,
when an employee goes on talking about cause of dissatisfaction, this type of
grievance is called as informal or oral grievance.

In case of legitimate grievance, the employees contractual right with

respect to terms and conditions of employment or spirit of collective bargaining
are violated. On the other hand dissatisfaction over supervisory behaviour, peers
ignorance or any other situation can cause grievance in employee is
illegitimate grievance.

From the above discussion different types of grievance can be known.

But some times grievance can be interchangeably used with complaints.
Several executives of real world distinguish between complaint and grievance.
A complaint is a written or oral dissatisfaction, brought to the attention of the
supervisors and the shop steward.

While differentiating complaints from grievance, Flippo defines a

complaint as a discontent or dissatisfaction, which has not, as yet, assumed
great significance to the individual. It can be converted into grievance when an
individual feels that an injustice has been caused to him. Thus any type of
grievance is not in the interest of employee as well as organization.
Nature of grievance

A grievance may be submitted by workers, or several workers, in

respect of any measure or situation, which directly affects, or is likely to affect,
the conditions of the employment of one or several workers in the
organization. Where a grievance is transformed into a general claim either by
the union or by a large number of workers, it falls outside the grievance
procedure and normally comes under to purview of collective bargaining.

From a study conducted by Chandra, the following areas were causes

of employee grievance:

1. Promotions

2. Amenities,

3. Continuity of Service,

4. Compensation,

5. Disciplinary action,

6. Fines,

7. Increments,

8. Leave,

9. Medical Benefits,

10. Nature of Job,

11. Payment,

12. Acting promotion,

13. Recovery of dues,

14. Safety appliances,

15. Superannuation,

16. Supersession,
17. Transfer Victimization,

18. Condition of work.

 The International Labour Organization (ILO) classifies a grievance as a
complaint of one or more workers with respect to wages and allowances,
condition of work and interpretations of service stipulations, covering such
areas as overtime, leave, transfer, promotion, seniority, job assignment and
termination of service. Chandra found that policy issues relating to hours of
work, incentives, wages, DA, and bonus are beyond the scope of the
grievance procedure-they fall under preview of collective bargaining.

Causes of Grievance

There are several causes, which leads to employee grievance in an

organization.

Management Practices

1. The behaviour of supervisor, peers group can cause grievance.

2. The improper division of work among employees lead to

employee grievance.

3. The negligence of ones efforts towards the organization.

4. The autocratic organizational environment can cause grievance.

5. The implementation of personnel policies is not intended

policies, it well lead to grievance.

6. If task objective is not clearly defined to employee, then also the

employee get frustrated and ultimately grievance arises.

7. Matters such as employee compensation, seniority, overtime

and assignment of personnel to shifts are illustrations of ambiguities
leading to grievance.

8. Poor communication between management and employees is

another cause of grievance.

Union Practices

In firms where there are multiplicities of unions, many of whom may

have political affiliation, there is constant jostling and lobbying for numerical
strength and support. Where unions are not formed on the basis of specialized
craft but are general unions, the pressure to survive is great and, hence there
is a need to gain the support of workers. Under such circumstances the
grievance machinery could be an important vehicle for them to show their
undeniable concern for workers welfare.

The fact that a union can provide a voice for their grievance is an
important factor in motivating employees to join a union. Realizing that
members expect action and only active unions can generate membership,
unions some time incline to encourage the filing of grievance in order to
demonstrate the advantage of union membership. It makes union popular that
it is the force to solve out the grievance with the management.

Individual Personality Trait

Sometimes mental tension, caused perhaps by ill health also

contributes to grievance. Some are basically predisposed to grumble and find
fault with every little matter, seeing and looking out only for faults. On the other
hand, there are employees who are willing to overlook minor issues and
discomforts and get on with the job. A study by Sulkin and Pranis reveals that
poor performer tend to use grievance procedure more often than employees
who are high performance the union activists, highly educated workers,
workers with a high incidence of absenteeism, and worker in lower job
classification tend to file more grievances than other employees.

4.2.7 Management of grievance, steps for managing grievances

Management of Grievance

It has been widely recognized that there should be appropriate

procedure through which the grievance of workers may be submitted and
settled. The main aim to solve out grievance with fairness and justice, so that
workers dissatisfaction about various aspects can be properly examined and
solved out. For this grievance resolution machinery is an urgent need to
manage. Grievance resolution machinery permits employee to express
complaints without affecting their job, and encourages and facilitates the
settlement of misunderstanding between management and labour. The
existence of grievance resolution machinery builds confidence in employees
to express their discontent, enhance their morale, and satisfy them and also
protects them from the injustice, proper and effective communication between
management and workers facilitates review and correction. Thus, presence of
grievance machinery explains the organizational health, projects the shop
floor cultures and shows leadership quality.

Steps for Managing grievances

Flippo describes five steps for managing a grievance. These are

following as:

1. receiving and defining the nature of the dissatisfaction;

2. getting the facts;
3. analyzing the facts and reaching a decision;
4. applying the answer; and
5. follow-up.

1. Receiving and defining the nature of dissatisfaction

The supervisor should receive the grievance in a way which it self is

satisfying to the individual. It involves his leadership style. It has been that
employee-centered supervisors cause fewer grievances than production
centered supervisors.

2. Getting the facts

Efforts should be made to separate facts from the opinions and

impressions. Facts can be obtained easily if proper records are maintained by
supervisors regarding specific grievances and individual attendance, rating
and suggestions.

3 Analyzing the facts and reaching an decision

The supervisor must analyze the facts carefully to reach a specific

decision, so that grievance can be solved out fruitfully.
4 Applying the answer

The supervisor has to effectively communicate the decisions to the

individuals even if they are adverse in nature. The answer to the aggrieved
individuals must be based on legitimate ground.

5. Follow-up

The following of the grievance should be made to determine as to

whether or not clash of interest has been resolved. In situation where follow-
up indicates that the case is not resolved satisfactorily, the former four steps
should be repeated.

The frequent errors in processing of grievance break the whole process.

The management should attempt to avoid these errors. Indeed, effective

handling of grievance facilitates the integration of interests.

In large undertakings, a common type of grievance procedure involves

successive steps at different levels, a workers grievance being first discussed
with the immediate supervisor and then, if no solution is found, with higher
levels of management. The number of levels and steps in the procedure
usually increases with the size of undertakings. Sometime, when an important
question of principle, which would involve a number of workers, is concerned,
the matter may go directly to higher level of management. Under some
procedures, bipartite or joint grievance committees with in the undertaking
hear grievances after they have been considered at lower levels at a number
of earlier stages in the procedure. A settlement reached jointly by workers and
management representatives at any level is generally regarded as final and
binding on both the parties. A grievance is also deemed to be settled if an
appeal is not lodged at the next highest level with in a given time.

4.2.8 The Grievance Procedure under Code

Grievance Machinery

Grievance machinery will be required to set up in each under takings to

administer the grievance procedure. For the purpose of constituting a fresh
grievance machinery, workers in each department (and where a department is
too small, in a group of departments) and each shift, shall elect, from amongst
themselves and for a period of not less then one year at a time, departmental
representatives and forward the list of persons so selected to the
management. Where the union in the undertaking is in a position to submit an
agreed list of names, recourse to election may not be necessary. Similar is the
case, where work committees are functioning satisfactorily, since the work
committee member of a particular constituency shall act as the departmental
representative correspondingly, the management shall designate the persons
for each department who shall be approached at the first stage and the
departmental heads for handling grievances at the second stage. In the case
of appeals against discharges or dismissal, the management shall designate
the authority to whom appeals could be made.

Grievance Procedure

While adaptations have to be made to meet special circumstances

such as those obtaining in the Defense Undertaking, Railways, Plantations
and also small undertakings employing few workmen, the procedure normally
envisaged in the handling of grievances should be as follows:

1. Aggrieved employee shall first present his grievance verbally in

person to the officers designated by management for this purpose. An
answer shall be given with in 48 hours of the presentation of complaint.

2. If the worker is not satisfied with the designated officer, he shall,

either in person or accompanied by his departmental representatives,
present his grievance to the head of the department designated by
management for this purpose. The time allotted to reply with in 3 days.
If the action can not be taken with in that period, the reason for this
delay should be recorded.

3. If the decision by departmental head is unsatisfactory, then the

grievant may request the forwarding of his grievance to the grievance
committee which shall make its recommendations to the managers with
in 7 days of the workers request. The management shall implement
unanimous recommendations of the Grievance Committee.
 Grievant
Stage -I

Grievant-Conveys verbally

Stage-II

Grievant and
representatives

Stage-III

Grievant+

Departmental representatives

Management
Stage-IV

Grievant and
representatives
Officer designated by management to
deal with grievance at this initial stage.
To reply in 48 hours.
Stage-V

Grievant Management may refer to

union

Fig. 4.2.8.1 Grievance Procedure

Not satisfied go to
Head of department (meet at
preallocated time daily
Departmental
grievance handling). Reply in 3 days.

Decision unsatisfactory
Grievance committee to decide in 7
days and report to the manager. If the
decision is unanimous, then it should
be implemented by the management.
Time limit is 3 days.

Decision not in time or not satisfactory

Departmental Appeal to management for revision. A

week for appeal to be considered.

No agreement

Voluntary arbitration within a week after

decision from STAGE-IV.
4. In case of different opinions of the members of Grievance
Committee, the whole episode shall be transferred to the manager for
final decision. In either case time limit for management to accept and
communicate its decision in 3 days.

5. If the decision is not in time and not satisfactory, the grievant

has right to appeal for a revision. And management shall
communicate their decision with in a week of workmens revision
petition.

6. If no agreement is still possible, the union and the

management may refer the grievance to voluntary arbitration with in a
week of receipt by the worker of management decision.

7. Where a worker has taken up a grievance for redressal

under this procedure the formal conciliation machinery shall not
intervene till final step.

8. If a grievance arises out of an order given by management,

the side order shall be complied with before the women concerned
invoke the procedure laid down for redressal of grievance. If,
however, there is time lag between the issue of order nevertheless
must be complied with in the due date, even if all the steps in the
grievance procedure have not been exhausted.

9. Workers representatives on the grievance committee shall

have the right of access to any document connected with the inquiry
mentioned in the department. On the other hand, management
representative shall have right to refuse to show any document which
they consider to be of a confidential nature.

10. In case of any grievance arising out of discharge or dismissal

of a workman, the above mentioned procedure shall not apply.
Instead, a discharged worker shall have right to appeal either to the
dismissing authority or to a senior authority who shall be specified by
the management with in a week from the date of discharge.
4.2.9 Grievance Procedure in India

Till the enactment of Industrial Employment Act, 1946 the settlement of

day-to-day grievances of workers in India did not receive much attention.
Clause 159 Industrial Employment Act, 1946, emphasized to meet
successfully any type of grievance arising out of employment by the
management. They must show their moral honesty towards this. Under the
factories Act, 1948 state government had framed rules requiring Labour
welfare officers to ensure settlement of grievances; but this provision did not
prove substantially helpful because of the dual role of these officers.

In the past, a detailed grievance procedure worked out by mutual

agreement only in a few units. Most of these units did not have any machinery
for redressal of grievances. When day-to-day grievances piled-up, the
industrial disputes.

Davar describes grievance procedure at TELCO and Sandoz (India)

Ltd. The TELCO had developed detailed procedure for handling individual and
collective grievances since its very inception with the involvement of the
recognized union. The union representatives are involved in making decisions
at proper stages.

The company also has a detailed consultative machinery to resolve

problems relating to productivity, safety and welfare activities. There exits an
Industrial Relations Board consisting of equal number of top company
executives and union leaders to make final decisions regarding different
industrial relations issues.

The Sandoz (India) limited also recognized since the beginning that
even unimportant grievance might cause lack of employee interest and make
a individual a problem employee. The company stresses the settlement of
grievances at the foreman level. In the case of grievances against any
supervisory personnel, a higher official has to elaborate procedure for
handling grievances.

The procedure has several steps stated with putting the individual at
ease, listening with sincere interest, avoiding argument during discussion,
getting the story straight, getting all the facts, considering the individual view
point, willingness to admit mistakes, avoiding the passing the buck, providing
the benefits of doubt, avoiding snap judgment, timing decisions and taking
prompt decisions.

4.3 SUMMARY

The various aspects of the complex topic, Discipline, positive and

negative dimensions of discipline have been examined in the present chapter.
However, in a particular situation, it is the manager, who has to apply his mind,
taking into consideration the context and the environment and then decide on
the punishment. The managers prerogative is tempered justice, the holding of
the enquiry following the complete procedure is a very important aspect in
entire process. Enforcement of discipline and the award of a punishment is
very much the responsibility of a manager. Therefore a manager has to be
aware of a variety of approaches and use the appropriate one at the
appropriate time.

While describing the nature of grievances, attempt has been made to

define grievance and indicates its causes and symptoms. The major
determinant of grievance includes the management practices, personal factors
and personality trait of an employees and union strategies and practices.
Management literature provides varied techniques to manage grievances
effectively. There is arrangement for model grievance procedure under the
code of discipline.

4.4 KEYWORDS

Strike - Ceasation of work by employees

Lockout - Lock down the premises of workers

4.5 SELF ASSESSMENT QUESTIOS

1. What is discipline? Describe the various types of discipline.

2. What is meant by discipline? Discuss the objective and

prerequisites
 for discipline.

3. Too often discipline is thought of only in the negative sense. In

reality, positive discipline is more effective and plays a larger role in
business. Discuss the statement and point out the principles to be
borne in mind while taking the disciplinary action.

4. Explain the procedure for taking disciplinary action.

5. Define grievance. Why do grievances arise?

6. Describe the grievance redressal machinery.

7. Write a short note on :

(a) code of discipline

(b) Hot-stove Rule
(c) Principle of natural justice
(d) Grievance
(e) Misconduct

8 What are the major determinants of grievance? How can you

manage grievance in organizational setting?

4.6 REFERENCES/SUGGESTED READINGS

1. Arun Monappa, Industrial Relation in India, Tata McGraw Hill

Publishing

Company Limited

2. Gary Dessler, Human Resource Management, Printice hall of

India

3. R.S. Dwivedi, Managing Human Resource Industrial Relation,

Galgotia Publishing Company

4. K. Aswathapa, Human Resource and personnel Management,

Himalaya Publishing House

5. C.B. Memoria and S. Memorial, Dynamics of Industrial Relation,

Himalaya Publishing House
6. C.B. Gupta, Human Resource Management, Sultan Chand and
Sons
LESSON NO. 5

NEGOTIATION AND COLLECTIVE SETTLEMENT

STRUCTURE

5.0 Objectives

5.1 Introduction

5.2 Presentation of Contents

5.2.1 Scope of collective bargaining.

5.2.2 Characteristics of collective bargaining.

5.2.3 Objectives of Collective Bargaining

5.2.4 Types of Collective Bargaining

5.2.5 Process of Collective Bargaining

5.2.6 Prerequisites for Collective Bargaining

5.2.7 Collective bargaining between developed and developing

countries - A comparison

5.2.8 Collective bargaining in India.

5.2.9 Role of collective bargaining in tea plantations in Tamil

Nadu A case study

5.2.10 Collective bargaining in Indian Railways A case study

5.3 Summary

5.4 Keywords

5.5 Self Assessment Questions

5.6 References/Suggested Readings
 5.0 OBJECTIVE

This lesson is intended to familiarize the student with

the concept of collective bargaining

strategy & tactics of collective bargaining

the process and prerequisites for collective bargaining

explore factors that contribute to successful agreement

5.2.1 INTRODUCTION

Industrial Relations is inherently a bipartite relationship. Parties to this

relationship include union and management, representing workers and the
employers, respectively. Similar to other relationships, the union and
management relationship is also highly fragile and complex. It is because of
the divergence of interests, perspective, expectations, value systems and
goals of the two parties. Consequently, there is a immense possibility of
misunderstanding and conflict at any point of time in organizational setting
over the terms and conditions of employment. As the organization find it
difficult to survive and grow in an environment of conflict and
misunderstanding, it is desirable that both the parties sit together to resolve
their differences and conflicts through mutual discussions and negotiations
without the intervention of the third party. This process of resolving the
differences between union and the management in the absence of any third
party may be called as collective bargaining.

Perhaps, the term Collective Bargaining was identified by Sydney and

Beatrice Webb in 1897. Probably, it means, to bar the gains (of others),
collectively. Collective Bargaining Contract Negotiation and administration
involves the relations between employers operating through their
representatives and the organised labour. It can be defined as the process
through which representatives of management and union meet to negotiate a
labour agreement. This means that both management and labour are required
by law to negotiate wages, hours, and terms and conditions of employment in
good faith. Good faith bargaining is a term that means both parties are
communicating and negotiating and that are being matched with counter
proposals with both parties making every reasonable effort to arrive at
agreements. It does not mean that either party is compelled to agree to a
proposal.

According to Harbinson, collective bargaining is a process of

accommodation between two institutions which have both common and
conflicting interests. The Asian Regional Conference of ILO held in 1953,
asserts that collective agreements are usually the best measures for the
determination and adjustment of wages and that attempt should be made as
early as possible to develop systems of collective negotiations based on free
associations of employers and workers.

In the National labour Relations Act of the United States, collective

bargaining finds a place. The Act, in section 8(d), defines collective bargaining
as the performance of the mutual obligation of the employer and
representative of the employees to meet at a reasonable time and confer in
good faith with respect to wages, hours and other terms and condition of
employment, or the negotiation of an agreement, or any question arising
thereunder, and the execution of the written contract incorporating any
agreement reached if requested by either party, but such obligation does not
compel either party to agree to a proposal or require the making a
concession.

5.2 PRESENTATION OF CONTENTS

5.2.1 Scope of Collective Bargaining

The scope of collective bargaining is quite vast because of the delicacy

of the employer, employee relationship, changing necessity of the
organization and its employees, changes in the business environment and
competition with in the industry and across industry.

According to Monappa, the scope of collective bargaining agreements now

covers issues such as wages, bonus, overtime, paid holidays, paid sick leave,
safety wear, production norms, hours of work, performance appraisal, workers
participation in management, hiring, fixing of job evaluation norms and
modernization. The scope of collective bargaining varies from organization to
organization and industry to industry depending upon existence of strong and
matured union and its leadership trust and confidence between union and
management, past history and present status of organization with respect to
negotiation and their implementation.

5.2.2 Characteristics of Collective Bargaining

Randle observes: A tree is known by its fruit. Collective bargaining

may best be known by its characteristics.

The main characteristics of collective bargaining are:

1. It is a group action as opposed to individual action and is

initiated through the representatives of workers. On the management
side are its delegates at the bargaining table; on the side of workers is
their trade union, which may represent local plant, the industry
membership or nation-wide membership.

2. It is flexible and mobile, and not fixed or static. It has fluidity and
ample scope for a compromise, for a mutual give-and-take before the
final agreement is reached or the final settlement is arrived at.

3. It is a bipartite process. The employers and the employees are

the only parties involved in the bargaining process. There is no third
party intervention. The conditions of employment are regulated by
those directly concerned.

4. It is a continuous process which provides a mechanism for

continuing and organised relationships between management and
trade unions. The heart of collective bargaining is the process for a
continuing joint consideration and adjustment of plant problems.

5. It is industrial democracy at work. Industrial democracy is the

governance of labour with the consent of the governed workers. The
principle of arbitrary unilateralism has given way to that of self-government
in industry. Collective bargaining is not a mere signing of an agreement
granting seniority, vacations and wage increases. It is not
 a mere sitting around a table, discussing grievances. Basically, it is
democratic: it is a joint formulation of company policy on all matters
which directly affect the workers.

6. Collective bargaining is not competitive process but is essentially

a complementary process, i.e. each party needs something that the
other party has, namely, labour can make a greater productive effort
and management has the capacity to pay for the effort and to organize
and guide it for achieving its objectives.

In the words of Davey: Collective bargaining is a complex process. It

involves psychology, politics and power of the work group. It frequently
involves a contest between sovereign institutional entities whose survival
requirements are, in some instances related and in other instances,
independent of, or in conflict with, one another.

5.2.3 Objectives of Collective Bargaining

The objectives of collective bargaining, according to the Guide, include

the recognition of union as an authority in the workplace, improvement of
workers standards of living and enlargement of their share in the profit of the
enterprise, expression of the workers desire in a concrete form to be treated
with due respect and attainment of democratic participation in decision
influencing their working conditions, development of orderly practices for
sharing in these decisions and settlement of disputes which may stem in the
day-to-day working of the enterprises and accomplishment of broad general
objectives including defending and promoting the workers interest through out
the country.

According to DeCenzo and Robbins, the objective of collective

bargaining is to agree upon an acceptable contract to management, union
representative and the union membership. The purpose of collective
bargaining is to attain industrial peace not at any price. Rather, it aims at the
commonly held goals of a free society. In fact, the major function of collective
bargaining is to generate pressures for enhancement of the dignity, worth and
freedom of individual workers.
5.2.4 Types of Collective Bargaining

Collective bargaining can be classified on different basis. It can be

classified in terms of level of work place as plant or work place bargaining
between the shop stewards and the plant management representatives.
Moreover, at the level of enterprise, there may occur company bargaining
between representatives of union(s) and management. Further a national
bargaining may occur at the level of industry between the representative of a
union or a federation of unions and those of employers association or
federation of employers associations.

It may be noted that some times there occurs effort bargaining where
the amount of work to be accomplished for a predetermined wage becomes
negotiable alike the wage itself. In addition, there is also a trend of
productivity bargaining irrespect of financial system involved. Productive
bargaining is a process by which employers minimize or at least or stabilize
unit labour cost by getting more effective work done and by which employees
obtain greater rewards for doing it.

Bargaining can be formal as well as informal forms. Formal

bargaining involves only very limited range of issues including basic wage
rates and basic conditions of work, the informal bargaining may embrace the
wider issues such as financial incentives, disciplines, work practices,
recruitment and redundancy.

5.2.5 Process of Collective Bargaining

Collective bargaining has two facets:

a) The negotiation state; and

b) The stage of contract administration.

The process of collective bargaining involves six major steps (also see
in fig. (5.3.1)
 1. Preparing for negotiations

2. Identifying bargaining issues.

3. Negotiating

4. Settlement and contract agreement

5. Administration of the agreement.

As in the figure (5.3.1), the environment influences the collective

bargaining process. One bargaining environment is the type of bargaining
structure that exists between the union and the company. The four major
types of structures are:

(i) one company dealing with a single union,

(ii) several companies dealing with single union,

(iii) several unions dealing with a single company, and

(iv) several companies dealing with several unions. The

bargaining process is comparatively simple and easy if the
structure is of first type and becomes difficult and complicated
in the remaining.

Negotiation Stage

At the negotiation stage, certain proposals are put forward which

explore the possibility of their acceptance and have the way to mutually
agreed terms after careful deliberation and consideration. The negotiation
stage itself involves three steps namely preparation for negotiation, identifying
bargaining issues and negotiating.

1. Preparation for negotiation

Careful advance preparations by employers and employees are necessary

because of the complexity of the issue and the broad range of topic to be
discussed during negotiations. Effective bargaining means preparing an
orderly and factual case to each side. Today, this requires much more skill and
sophistication than it did in earlier days, when shouting and expression of
strong emotions in smoke filled rooms were frequently the keys to getting
ones proposals accepted.
Source: Adapted from R. Wathe Mondy and Robert M. Noe III, Personnel: The Management
of Human Resources, p. 47.

Fig. 5.2.5 The Collective Bargaining Process

From the management side the negotiations are required to:

i. Prepare specific proposal for changes in the contract language.

ii. Determine the general size of the economic package the

company proposes to offer.

iii. Prepare statistical displays and supportive date for use in

negotiations, and

iv. Prepare a bargaining book for company negotiations, a

compilation of information on issues that will be discussed, giving an
analysis on the effect of each case, its use in other companies, and
other facts.

From the employees side, the union should collect information in at

least three areas:

The financial position of the company and its ability to

pay.

The attitude of the management towards various issues in

past negotiation or inferred from negotiations in similar
companies.

The attitudes and desires of the employees.

The other arrangements to be made are selecting the negotiators from

both sides and identifying a suitable site for negotiation.

2. Identifying Bargaining Issues:

The major issues discussed in collective bargaining fall under the

following four categories:

a. Wage related issues:

This includes such topics as how basic wage rates are determined,
cost of living adjustments, wage differentials, overtime rates, wage
adjustments and the like.
b. Supplementary economic benefits:

These include such issues as pension plans, paid vacations, paid

 holidays, health insurance plans, retrenchment pay, Unemployment
pension, and the like.

c. Institutional issues:

These consist of the rights and duties of employers, employees,

unions, employees stock ownership schemes, and the like.

d. Administrative issues:

These include such issues as seniority, employee discipline and

discharge procedures, employee health and safety, technological
changes, work rules, job security, and the like.

While the last two categories contain important issues, the wage and
benefit issues are the ones which receive the greatest amount of attention at
the bargaining table.

3. Negotiating:

Preparations have been made and issues being identified, the next
logical step in collective bargaining process is negotiation. The negotiating
phase begins with each side presenting its initial demands. The negotiation
goes on for days until the final agreement is reached. But before the
agreement is reached, it is a battle of wits, playing on words, and threats of
strikes and lockouts. It is a big relief to every body when the management
representatives and the union finally sign the agreement.

The success of negotiation depends on skills and abilities of the

negotiators. At times, negotiations may breakdown even through both the
labour and the management may sincerely want to arrive at an amicable
settlement. In order to get negotiations moving again, there are several
measures that are usually adopted by both the parties, which sometimes even
includes unethical measures:
 a. Through third party intervention such as arbitration and
adjudication,

b. Unions tactics likes strikes and boycotts, and

c. Management strategies such as lockouts, splitting the

union, bribing union leaders and using political influence.

(B) Contract Administration

When the process of negotiation has been completed, it is time to sign

the contract, the terms of which must be sincerely observed by both the
parties. The progress in collective bargaining is not measured by the more
signing of an agreement rather, it is measured by the fundamental human
relationships agreement. Once an agreement is signed, both the trade union
and the management are required to honour it in letter and spirit. The union
officers and company executives should explain the terms and implications of
the contract to employees and supervisors with a view to ensuring that the day
to day working relationship between workers and management is guided by
that contract. It is important that contract must be clear and precise. Any
ambiguity leads to grievances or other problems.

The whole process of contract administration is identified by two steps,

namely settlement and contract agreement i.e. settlement of disputes by
collective bargaining and find a solution as an contract agreement between
union and management and administration of agreement i.e. implementation
according to the letter and spirit of the provisions of the agreement.

5.2.6 Prerequisites for Collective Bargaining

1. There should be careful selection of negotiation teams and

issues.
The team should have a mixed composition, including productions
finance and IR experts. It should be headed by personnel and
industrial relations specialists of sufficient seniority, who has
adequate authority to commit the enterprise and take decisions,
without frequent referrals to top management. For instance, many
organizations have a vice-president personnel or director-personnel
 heading the team with a brief to commit the organization up to a
certain amount which can be spread out depending on the
negotiating depending on the negotiating situation based on union
demands.

2. It is important for the management to recognize the union and to

bargain in more good faith, in unionised situations. This can put
pressure on the union to formulate plans and demands in a
systematic way. Strong unions and progressive managements can
help create an atmosphere of mutual confidence.

3. The negotiating teams should have open minds, to listen and

appreciate the others concern and point of view and also show
flexibility in making adjustments to the demands made.

4. The need to study adequately or do homework on the demands

presented, i.e. to gather data on wages and welfare benefits in
similar industries in the geographical area.

5. Both the management and union should be able to identify

grievances, safety and hygiene problems on a routine basis and
take appropriate remedial steps.

6. Trade unions should encourage internal union democracy and

have periodic consultations with the rank and file members.

7. Trade unions should show their equal concern regarding both

quantity of work output as agreed upon and quality of work. They
should show their full commitment towards the viability of the firm
and its products/services.

Periodic discussions may be necessary between the management and

the unions to interpret the provisions of the contract and clarify doubts.

5.2.7 Collective Bargaining in Developed and Developing

Countries: A Comparison

Based on a discussion initiated by Morris Weisez at a meeting of the Delhi

Management Association, Chatterjee presents a comparative analysis of

bargaining behaviors in developed and developing economies. As it emerged,
the bargaining behaviour in a developing economy and in a developed
economy may be different in their approach: ideological, political and social.

Ideological Differences

In developed countries, labour has gained considerably in earning and in

accomplishing a standard of living. What is shared with the employer is a cake of
big size. Thus, labour, becomes interested in a continuous relationship with the
employer rather than in frequent conflicts. However, in developing countries the
cake to be shared is of a small size and the conflict is frequent and has at times
ideological flavor. In several of these countries the habit of conflict still persists
and the idea of class struggle is still appealing to labour.

Political Differences

In developed economies, the industrial revolution emerged much

earlier. In some of them, along with the revolution, some kind democratic
government was also formed. This has happened in USA and U.K. The
democratic government provided gradually the political base to labour which it
used for its economic gains. However, the labour organizations, try even today
to keep the trade union activities separate from their political activities. This is
true even of the UK and France. On the other hand, in developing economies,
there may be immense interest in political activities on the part of labour than
in activities which directly promote heir economic gains.

Social Differences

In developed countries, practically all-available manpower is

used for production. There is generally full employment. As productivity is high
because of superior technology, less labour is needed. In this process labour
become expensive, both highly skilled and highly paid. This explains the
migration of cheap labour from less developed countries to developed
countries. Within a developing country itself, there may be certain pockets of
prosperity which similarly attracts labour from less developed areas. For
instance, the green revolution in the Punjab caused for some time a shortage
of labour. In developing countries much more workers are available than that
can be utilized. Accordingly, efficiency tends to be low.

Some Possibilities Common to both Developed and Developing

Countries

Since the bargaining leads to the joint decisions to regulate working

conditions, wage etc., generally it makes for peace and harmony in both
developed and developing countries. This is likely to occur especially where
such an agreement is entered into with a recognized trade union having a
majority following. These joint decisions establish a kind of rule of law in
labour-management relations and remove arbitrariness on the part of the
employer or militancy on the part of the workers. In an industry where such
bargaining take place, a sound mutual understanding is achieved between
parties. Each understands the position of the other and a genuine negotiation
takes place on the basis of such mutual understanding. Some of e.g. quoted
over here are, the TISCO agreements, agreements between the Textile labour
Association and Mill-Owners Association of Ahmedabad.

Collective bargaining with its flexible and adjusting behaviour opens

with the knowledge and consent of all the parties concerned. Thus, under
certain conditions some clauses of agreement can be opened for negotiation.

Collective bargaining reflects a willingness approach towards dispute

resolution. So that it is considered as constructive approach towards
organizational conflict.

5.2.8 Collective Bargaining in India

Historical Development

Collective Bargaining on voluntary basis in India has developed after

independence, although we find some examples of collective bargaining earlier in
textile industry in Ahmedabad. As Sur M. observes, this system is a result of
mutual voluntary effort of certain management and trade unions that realized that
disputes can be solved easily by discussion rather than industrial court.
The pioneer collective agreements were those made by Dunlop Rubber
Company in West Bengal in 1947 for three years embracing the three
categories of employees. Thereafter, the Bata Shoe Company in West Bengal
made its agreements for two years incorporating a grievance procedure. In
1951, the Indian Aluminum Company made its five-year agreements with
employees union in Belur.

The Imperial Tobacco Company negotiated during 1952-54 one of its

three series of agreements ranging from four to give years in Bombay and
elsewhere. During 1955-56, numerous collective bargaining agreements were
made in the Tata Iron and Steel Company, Jamshedpur; lever Brother,
Calcutta; the Hindustan lever, Bombay; National Newsprint and Paper Mills
Nepanagar.

A study conducted by the Employers Federation of India in 1962

indicates that in all 114 agreements were made during 1954-61 by 49
enterprises involving nearly 4.5 lakhs of employees. These agreements
largely related to the issues of pay and allowances as well as annual bonus. It
may be noted that collective bargaining agreements are largely obtained in
private sector than public sector exception of Railways.

Emergence of Independent Unions and Unit Agreements

The emergence of independent trade union leaders changed the

scene of collective Bargaining. Independent Union leader like R.J.Mehta and
Datta Samant in Mumbai were a big challenge to the centralized trade unions.
The trade union movement entered a more militant phase. The slowly
changing equations with in the industrial setting were bringing about a change
in employer and employee relationship.

Traditional industries like textiles and jute proved totally uneconomical

and their industrial relations were deteriorating. It witnessed the historic strike,
which was not success. Its failure changed the scene of trade unionism in
India as well as the equations between employers and employees. Industry
level wage negotiations were reducing and were being replaced by unit level
agreements. This resulted in increase of independent unions.
Unions as Irritants than Threats

During the regimes of Rajiv Gandhi and V.P.Singh, when economic

liberalization was introduced, there was depoliticalization of the working class
movement. It is evident from the fact that out of 554 seats of parliament, only
40 seats were decided by workers votes. The 1980s witnessed the
weakening of labour movement as it completely lost its focus. The higher
failure rate of strikes and the rising frequency of lockouts were responsible for
fasts deteriorating labour scenario and unions were seen more as an irritant
than as a serious threat to the employers.

Changed Concept of Collective Bargaining and Compromise

There was a big change in the concept of collective bargaining in

1980s, though it actually began in the 1960s. The new concept was based on
the phenomenon of linking of wages to productivity spread to all major
industries. In Premier Auto, the workers were able to accomplish six-fold
increase in production during 1978 to 1991 without any major changes in
technology or significant capital investment with the existing staff.

Growing Employer Activism and Dwindling Fortunes of Employer Union

It is evident from the fact that between 1976 to 1996 the number of
employees unions rose only by 76 percent. With the decreased number of
labour unions, the need to bring reforms in laws was felt. The labour unions
were not happy with this industrial sector reforms due to economic
liberalization. It appears that the employers associations become more
assertive in direct contrast to the dwindling fortunes of the employees unions.

Need for Reorienting Unions Goals

As the situation have not changed significantly. Unions must reorient

their goals and aspirations. Unions are emerging at floor level. But it is
restricted to organized sector only. So there is a need to reorient unions goals
in unorganized sector to improve wages and quality of life using collective
bargaining.
Difficulties

There are two major difficulties, which include prerogative of

management, and multiple and rival unions. The term prerogative implies
that the unrestricted right of the sovereign. Indeed, theoretically, management
prerogative is peculiar right to do what it likes with the men, metal and money
that it employs. However this concept is changing significantly. In a socialistic
democracy, labour is considered as a partner in the common table of
development. Moreover, management prerogative has no sense in the face of
new developments in the field.

Another difficulty is caused due to the rival trade unions. Trade unions
are more political than economic in character. The employers frequently exert
a pressure on the rival union and to sign the agreement, which is already
being negotiated with representative union. Because they want to avoid
conflict as well as adopt a tactful approach to take the employees in
conference who are already confused by the conflict itself. The management
may recognize all unions, negotiate separate agreements with them and
persuade them to accept identical clauses in different agreements. Although
unions are largely instable and subject to shifting allegiances and political
influences, the negotiation should concentrate on the economic issues which
is major concern of the rank and file members.

What contributes to successful agreements?

There are several factors examined by Sur influencing successful

collective bargaining in India. The size of the company has no relevance to the
effective bargaining because it is frequently conducted at the unit level. Both large
as well as small enterprises can have successful collective bargaining because at
plant level, they have through under standing of local events. Moreover, while
linking wages to productivity, some employers have provided the unions and
employees a realization of their role in industry. Rational and technological
changes contribute to voluntary agreements. The urgent need for increased
productivity has forced management to find out measures to introduce changes
with the minimum of conflict and provisions for retaining
and absorption of surplus workers in other jobs. The introduction of collective
bargaining has been more effective in a relatively new industry.

In addition, the introduction of new management with knowledge of

production process and labour relations and a willingness to experiment with
them have facilitated the development of effective collective bargaining. A formal
recognition of the union should also have a stable and responsible leadership,
recognition of the function of management and a desire to discuss problem
contribute to effective bargaining process and agreement. Finally, personalities of
the leaders on both sides form effective facilitators of collective bargaining. Thus,
there are many factors conducive to collective bargaining.
However, the management must give a lead towards the development of
effective collective bargaining.

5.2.9 Role of Collective Bargaining in Tea Plantations in- Tamil

Nadu - A Case Study

The trade union movement in South Indian Plantations in general, and

in Tamil Nadu Plantations in particular, is of recent origin. The entry of political
parties and the en-actment of the Plantations Labour Act, 1951, has
contributed for the growth of the plantation labour unions in tea plantation in
Tamil Nadu.

In Tamil Nadu, at present, the tea plantation workers are affiliated

under the banners of the three major national trade unions including INTUC,
AITUC, and HMS. Besides, the two state level political parties (namely, the
DMK and AIADMK) have also their own unions. Whenever negotiations take
place, representatives of 14 unions, from all districts tend to participate..

In Tamil Nadu, next to agriculture, tea plantations are the largest single
employer providing regular employment to 1,00,000 rural unemployed.
Plantation workers of the state are the best-organised sections of rural workers.
Plantations being labour intensive, the share of wages is an important element of
cost for the planters. The important wage institutions such as
Minimum Wage Fixation and Tripartite Wage Boards till 1968 influenced their
wages. However, when the two institutions failed to provide not even a need
based minimum wage, the workers started looking for a better alternative
system. Accordingly, there emerged bipartism and tripartism as wage setting
forces since 1969. In this section based on Meenakshisundarajans study, an
attempt has been made to analyze the role of collective bargaining in the tea
plantations in Tamil Nadu since 1969 embracing the period of 25 years (1969-
1994).

Wage Settlements in Tea Estates

As per the Wage Board recommendations, the wages of the tea

plantation workers were to remain in force till December 31, 1970. However, in
the face of workers agitation, the employers were forced to enter into a wage
settlement in June 1969. Inclusive of this settlement, a total of 15 negotiated
settlements took place between the Planters Association of Tamil Nadu and
the 14 Union leaders representing the tea workers in Tamil Nadu.

Apart from these settlements, six agreements relating to incentive rates

for pluckers, and payment of annual bonus were also entered into between
the parties. For arriving at these settlements and agreements, the workers had
to resort to strike threats. Out of fifteen, nine settlements were signed only
after the workers actually struck work. These were caused by steep rise in the
cost of living index. During the period 1969-89, cost of living index had
increased annually at the rate of 45.87 with a growth rate of 9.43, which were
statistically significant. Due to the wage settlements, the dearness allowance
part of the wage component had been increasing more proportionately than
the increase in basic wage rate. Accordingly, the present day wage structure
resembles a pyramid of which the main base is the ever growing dearness
allowance component, whereas the basic wage rate had become
progressively less significant. For instance, the share of basic wage in the
total wage had declined from 72.76 percent in 1975 to 44.44 percent in 1989.
On the other hand, the dearness allowance component had increased from
27.24 per cent to 59.56 per cent in the same period. Thus, the
disproportionately large share of dearness allowance had grossly undermined
the basic purpose underlying the structure of wages.
Money and Real Wages

Due to these settlements, the percentage increases in money wage for

the field workers were at the rate of Rs. 732 for men, Rs. 917 for women, Rs.
774 for adolescents and 880 for children. These increases did not show the
real position. It is because the real wages had not increased much. The
percentage increase of real wages was at the rate of 38 for men, 69 for
Payment of Bonus.

Taking into account the past industry wise settlement on bonus, a long
term agreement was reached in respect of the year 1968,1969 and 1970
providing for bonus at 9 percent, 8.75 percent and 8.75 percent respectively to
the workers in the tea estates as per the settlement of 1969. In the mean time,
on 3d September 1977, the Payment of Bonus (Amendment) Ordinance,
1977 was promulgated which was later replaced by an Act according to which
the minimum bonus payable was fixed at 8.33 per cent whether an
establishment made a profit or not.

Trend and Growth Rate Estimates

The trend and growth rate estimates for the area in tea shows an
annual increase of 194.01 hectares with a compound growth rate of 0.54,
production of tea at the rate of 2.135 million kilograms with a growth rate of
3.04 and the yield per hectare increased annually at the rate of 48.28
kilograms with the compound growth 2.50. The income to he planter showed
an annual income of Rs. 2,951 per hectare with compound growth rate of
10.69. All these figures are statistically significant.

Average Daily Employment

For this period also, the daily employment in tea plantations in the state
showed significant increase from 77,983 to 85,145 (an increase of 9.18
percent). This significant increase was due to a very significant increase in the
area under tea (11 percent). Thus, it also confirms the contention that
optimum land-labour ratio was not at all maintained and the plantations could
have employed more labourers. The trend and growth rate estimates of the
labour employed show that it annually increased at the rate of 807 with a
growth rate of 1.01.
Significance of Collective Bargaining as a Wage Setting Force

The present study on the role of collective bargaining shows, that of the
three institutional forces which influenced the process of fixation of wages in
the tea plantations, collective bargaining had a major and positive influence.
Thus, the period from 1969 to 1989 can be considered as the best period of
wage fixation for the workers in the tea plantations. The researcher also
conducted the analysis to prove this point in terms of the wage structure and
wage rates in real terms.

Wage Structure

The minimum wage fixation machinery devised a wage structure

consisting of a basic wage and dearness allowance, but in the
recommendations, only an all inclusive wage rate was proposed with no
provision for protecting the workers from escalating cost of living index. The
same is the case with the award of the Wage Board though it recommended
annual increase of wages but with a ceiling. However, from the second
negotiated settlement of 1975, the basic wage rate and variable dearness
allowance were fixed. Again, the rates of dearness allowance were increased
in the settlement of 1978. The dearness allowance rates were enhanced
upwards during the settlements of 1980 and 1987. Accordingly, in addition to
the revision of dearness, in an effort to neutralize the increase in the cost of
living, upward revision of basic wage rates were accomplished at least once in
two years in a total of 12 wage revisions.

Wage Differentials and Rates

In making recommendation on the wage rates, both minimum wage

fixation and wage board award had recommended lower rates for women
workers in field and factory work. Labour unions had been demanding equal
wages for equal work irrespective of sex differential. Yet this was denied.
However, this long standing demand was met and same rates of wages were
fixed for men and women under the settlement of 1978.
 It was under the collective bargaining that both real and money wages had
registered significant increases. The alarming rate of rise in the cost of living
index was also a reason for this trend. The period of collective bargaining
revealed marked increase in the real wage rates of all categories of workers.

Conclusion

As Meenakshisundarajan concluded, there were a series of wage

settlements. The result of these settlements was a considerable increase in
money wages and separate calculation of basic wage and dearness
allowance. Payment of bonus and other benefits became possible.

However, a close scrutiny of all these wage settlements reveals that

despite their strength, the workers could not accomplish all their just demands
during the negotiations and some important issues were postponed from
settlement after settlement till these issues became the cardinal points. At
times, the negotiations went on for long and the workers forced to agree for
postponement of some of their demands. Though it is claimed by the planters
that they have been paying fair wages to the workers, it is a fact that cent
percent neutralization is yet to be provided. Compared to the periods of
previous wage institutions, the period of collective bargaining represents a
more alarming rate of increase in the cost of living index, the result of which
was that the increase in the real wage of the workers during the last two
decades was only marginal.

Further, during this period, the prosperity of the plantations was far
higher than the earlier periods. Accordingly, it is only justifiable that the
workers should at least have been paid a need based minimum wage in tune
with the increase in cost of living. It is sure that, as long as the present system
of wage settlements continues, there is no possibility for the workers to earn a
wage, based on their minimum requirements.

Therefore, under the circumstances, the workers have to continuously

fight in order to protect the existing level of their living standards. They are not
likely to demand the wage rates based on justifiable calculation of minimum
requirements. A need-based system of wage payment is yet to be evolved and
it remains a dream for the tea plantation workers.
5.2.10 Collective Bargaining In Indian Railways - A Case Study

As Subba Rao and Narayana based on their study (described in this

section) observe, the economic liberalizations announced by the Government
of India and consequent programmes implemented could not shake the
railway industry in India. Of course, these programmes could bring the
management and trade unions of Indian Railways closer to each other by
changing their attitudes to meet the challenges of competition from other
modes of transportation and thereby create favourable climate for collective
bargaining and participative management.

The Government of India adopted a number of industrial relations

strategies to facilitate the process of industrialization. It accorded legal
recognition to collective bargaining in 1952, which had been in practice since
1920. The scheme of workers participation in management adopted by the
government (Resolution No. S 61011 (4) 75-DK-l (B)) on October 30,1975 as
part of its Twenty point Economic Programme, forms one such industrial
relations promotion strategy. The important objectives of the scheme were
reduction of industrial conflict and improvement of productivity.

Three schemes of collective bargaining and workers participation in

management are in operation at present in Indian Railways (viz., Permanent
Negotiating Machinery, Joint Consultative Machinery and Compulsory
Arbitration and Participation of Railway Employees in Management - formerly
known as Corporate Enterprise Group).

The Structure of Indian Railways

Indian Railways, the core of nations transport system forms Asias largest
and Worlds forth-largest rail system. It is largest employer in the country with an
average employment of 1.60 million by the end of 1994-95. It is also the largest
undertaking in the country with an invested capital of Rs. 177,
125 million and with route kilometers of 82.458 (by the end of 1991- 92) spread
geographically throughout the length and breath India. Railways in India is owned
and managed by the Union Government except a few branch lines on the narrow
gauge which are owned and managed by private companies and
municipal bodies. The management responsibilities of the Railways vest with
the Railway Board headed by a chairman who is a functional member. It is
divided into nine zones, each headed by a general manager. The chief
personnel manager at this level assists the general manager in bargaining
and workers participation the management. Every zone is divided into several
divisions headed by a divisional manager who is helped by a division
personnel officer.

Formation and Recognition of Trade Unions

In view of the failure of individual unions and to strengthen the railway

trade union movement, the concept of an All India Railway Employees Union
was first evolved in the year 1921. Accordingly, the All India Railwaymens
Federation (AIRF) with the, affiliation of union at company level was
constituted in 1925. The Federation was granted recognition by the Railway
Board in 1930.

The railway management was criticised for refusing recognition to most

of the in unions at company / zonal level with large-size membership during
1924 and 1947. The plethora of rules imposed made recognition a sore point
for the unions.

A rival federation emerged in 1948 under the leadership of the

Congress Party (by dividing the workers). It was designated as The Indian
National Railway Workers the Federation (INRWF). This federation was also
recognised by the Railway Board in the same year. The formation and
recognition of INRWF was questioned by the AIRF. With the formation of
INRWF grave rivalries came into existence in the railway trade union
movement. This led to the formation of two rival unions in each zone.

After the co-existence of the two rival camps for about four years, the
AIRF and of the INRWF were merged into a new federation called National
Federation of Indian Railwaymen. However, this unity could not exist for long and
the federation was divided into All India Railwaymens Federation (AIRF) and
National Federation of Indian Railwaymen (NFIR). Thus, currently, there are two
recognised federations. AIRF and NFIR. Instead of improving industrial
relations, recognition of the second federation is responsible for inter-union
rivalries and non-settlement of grievances. This has hampered their
bargaining strength with the formation of craft unions.

Working of Permanent Negotiating Machinery and Joint Consultative

Machinery

In this section an attempt will be made to examine two schemes of

collective bargaining in Indian Railways including Permanent Negotiating
Machinery and Joint Consultative Machinery. Permanent Negotiating
Machinery (PNM) has been functioning at the Railway Board level, Zonal level
and divisional level since 1952, whereas Joint Consultative machinery (JCM)
has been functioning at the National level since 1967 and at the Railway
Board level since 1968.

The performance of PNM during the period 1991-92 to 1994-95

compared to that of 1970-71 to 1990-91 has been improved. The percentage
of issues settled in favour of employees to total was 29.48 during the period
1970-71 to 1990-91 and 33.41, during the period 1991-92 to 1994-95. This is
most probably due to the fact that the trade unions referred the issues like
hike in wages, dearness allowance, recruitment 991 promotions and transfers
to the PNM before 1991-92 whereas the issues relating to railway safety,
gauge conversion, employee training in business handling and passenger
service, competition with other modes of transport etc., were referred to the
PNM by the trade unions during and after 1991-92.

It has been charged that management before 1991 generally favoured

the NFIR while settling the issues; the percentage of items settled in favour of
the NFIR being 35.11 as against 25.45 percent in case of AIRF during the
period 1970-71 to 1990-91. This further aggravated inter union rivalry between
AIRF and NFIR. It has been further charged that the machinery, which was set
up to resolve disputes and differences, was itself becoming the source of
disputes and differences. It is also observed that though the management
continued favouring NFIR while settling the issues during the period 1991-92
to 1994-95 also, the scheme was not targeted for criticism as the percentage
of items settled in favour of NFIR being 33.23 as against 31.14 percent in
case of AIRF during the period. This is mostly due to the fact that AIRF
referred more of the issues relating to passenger service, business handling,
etc., to the PNM meetings.

Although it is claimed that the Joint Consultative Machinery did not

contribute inter-union rivalry as the management met both the federations jointly
and its functioning was relatively better, it could also not solve major problems of
workers. Thus, the functioning of the two machineries did not lead to settlement of
major grievances of the workers including shortage of staff of crucial categories
such as station masters, drivers, guards and train examiners
(Railway Accidents Inquiry Committee, 1978) leading to overload of work of
the existing employees and abnormal delay in confirmation of services
resulting in employees dissatisfaction. The most crucial demands employees
for parity of wages with those of other public sector organizations, payment of
bonus based on the Payment of Bonus Act, 1965, extension of employee
benefits and services adequately to all employees have not been
accomplished at the time of the study. The NFIR criticized that the
management created crisis in industrial relations by not implementing the
agreed decisions regarding re- classification of staff and cadre structuring.
Non-implementation of the decisions of the cadre and restructuring of the
committee created a deadlock in the functioning of PNM and JCM during the
period from August, 1982 to July 1983.

Both the federations criticised that from the management side meetings
were conducted with least seriousness; there was always a tendency to brush
off subjects without resolving the issues. More than anything else,
bureaucratic and highhanded behaviour of the officers had almost spoiled the
purpose for which these machineries were constituted. The federations further
felt that the machineries did not accomplish their objectives, because of the
non-cooperation on the part of the management.

The management, on the other hand, holds that absence of cooperation

and coordination between the federations in conducting meetings were
responsible for the limited success of PNM and JCM. It has been charged that
industrial unrest arose It of the managements attitude towards the labour in
respect of amicable settlement their problems. It is observed that the JCM has
contributed to the inter-union cooperation after 1991 as both the unions
referred the items relating to the increase in productivity, strength of railways
compared to other modes of transport, energy conservation and
modernisation. Again, the management tended to seek the cooperation
between the two unions in view of the challenges posed by globalization.

Union-Management Conflicts

The failure of the Railway Management to settle employee problems

such as retrenchment of temporary staff, delay in confirmation, anomalies
arising out of the implementation of the recommendation of the First Pay
Commission and uniformity of conditions of services in all Zonal Railways was
responsible for conflicts and loss of 760.90 mandays per 1000 workers
employed during the period from 1950-51 to 1959-60.

High incidence of loss of mandays (0.81 million) during the year 1960-
61 was the result of non-settlement of the grievances including payment of
dearness allowance on the basis of the First Pay Commissions
recommendations, grant of a national minimum wage, appointment of a
permanent wage board and recognition of unions. Strikes were launched
during the period from 1961-62 to 1973-74 (except in 1961-62, 1965-66 and
1966-67) in order to demonstrate the discontent of the employees in the
matter of wages, dearness allowance and problems of the craft unions.

An All-India strike was organised in May, 1974 for 18 days due to the
absence of cooperation from the management regarding the demand for the
payment of bonus, parity in wages between railway employees and those in
other public sector undertakings, etc. This strike was launched by the AIRF
and all other unrecognized unions and federations. This strike resulted in a
loss of 14.84 million of mandays. The inter-union rivalry between the AIRF and
the NFIR was also aggravated. Thus, the cooperation between the two
recognised federations and between the labour and management was
altogether non-existent during the period.
 However, it was observed that labour extended their cooperation to the
management during 1965-66 and 1966-67 despite their discontent regarding
economic standards and working conditions. The railway management stated
that labour also extended their cooperation during 1981-82 and 1985-86 in
view of the settlement of the problem of the payment of bonus and due to the
enlightened approach in the matters of cadre restructuring re-classification of
artisan workers and in issues raised by organised-labour, which were
pragmatically resolved. However, the railway unions felt that they extended
their cooperation to the management after 1979-80, though the management
did not implement the agreed decisions relating to the varied issues until July,
1983 which caused a deadlock of PNM and JCM meetings. However, craft
unions organised strikes in 1986-87. NFIR tended to criticise that .the
management was not interested in settling issues through consultation.
However, it did not participate in strikes because (as claimed) it strongly
believed in consultation, Thus, labour federations criticised that labour
management cooperation in Indian Railways before 1991 meant cooperation
from the labour to the management and vice-versa.

As Subba Rao and Narayana conclude, the challenges posed by the

economic liberalisations created a positive climate for cooperation between
trade unions and railway management. Trade unions and management have
taken initiative to discuss the issues for strengthening railways and
cooperating with each other consequently there were no industrial conflict in
Indian Railways after the liberalisation.

5.3 SUMMARY

While describing the nature of collective bargaining, attempt has been

made to present its definition, characteristics, objectives, functions, process
and types. The widening scope of collective bargaining embraces various
issues. The collective bargaining procedure involves variation, preparation,
stages, critical situations, drafting and designing of contract and contract
administration. It reveals several prerequisites for collective bargaining. It also
reveals several similarities and dissimilarities across developed and
developing countries. At present, trade unions are irritant rather than threat to
management. Accordingly, concept of collective bargaining has changed with
growing power of employers and dwindling fortunes of trade unions.

5.4 KEYWORDS

Collective Bargaining - To bar the gains collectively

Class Bargaining - Bargaining for their own community

5.5 SELF ASSESSMENT QUESTIONS

1. What is collective bargaining? What are its major functions?

2. Describe the nature and scope of collective bargaining?

3. Describe the characteristics & classification of collective

bargaining.

4. Describe various strategies and tactics of collective bargaining.

5. Describe the procedure of collective bargaining.

6. Explain the major similarities and dissimilarities of collective

bargaining in developed and developing countries.

7. Explain the historical background of collective bargaining in

India.

5.6 REFERENCES/SUGGESTED READINGS

1. Arun Monappa, Industrial Relation in India, Tata McGraw-Hill

Publishing Company Limited

2. Gary Dessler, Human Resource Management, Printice Hall of

India

3. R.S. Dwivedi, Managing Human Resource Industrial

Relation,
Galgotia Publishing Company

4. K. Aswathapa, Human Resource and personnel Management,

Himalaya Publishing House
5. C.B. Memoria and S. Memorial, Industrial Relation, Himalaya
Publishing House
 LESSON NO. 6

PARTICIPATIVE MANAGEMENT

STRUCTURE

6.0 Objectives

6.1 Introduction

6.2 Presentation of contents

6.2.1 Meaning of Workers Participation in Management

6.2.2 Objectives and Aims of WPM

6.2.3 Forms of Employee Involvement and Participation

6.2.4 Kinds of Involvement and Participation of Employee at

Different Levels

6.2.5 Government Policies and Participation

6.2.6 Hurdles in the way of Workers Participation in India

6.2.7 Requirements for Successful Employee Involvement

and
Participation

6.3 Summary

6.4 Keywords

6.5 Self Assessment Questions

6.6 References/Suggested Readings

 6.0 OBJECTIVES

The present Lesson is an attempt to overview the concept of

participative management. After reading the Lesson the students will be able
to understand:

meaning, essence and objectives of Workers Participation in

Management (WPM)

various forms, levels and varieties of WPM

history and present scenario of workers participation in India

government view point and efforts towards WPM

hurdles in participative management

requirements for successful employee involvement and

participation

6.1 INTRODUCTION

It is almost a matter of common sense that human will take greater

pride and pleasure in their work if they are allowed participatory freedom in
shaping the policies and decisions which affect their work.

Management of the employment relationship has been subject to

significant change in the last two decades, as the process of globalization has
intensified competition in product and labour markets. In this context, modern
management theorists and practitioners have commonly emphasised the
importance of two-way communication and cooperation between management
and labour in determining the success of HRM strategy and maximizing
workplace efficiency. Cooperation relies upon building employee commitment,
and employee consultation and participation are intrinsic to this process.

Industrial democracy and participative management or workers

participation in management, as it is popularly known, has gained recognition
in developed and developing countries. The concept is extension of political
process to workplace. It emphasizes that workers and employees should feel
that in their work they would be evaluated and respected as free persons of
equal value within the rules, order and discipline. In the atmosphere of co-
operation, mutual respect and tolerance, they should have the right to
influence conditions and measures that affect them directly and the enterprise
as a whole.

The term participation is derived from Latin word participare that means
taking part or sharing. Sharing is a bilateral process involving motivational and
functional manifestations. The term workers participation involves sharing, in an
appropriate manner, the decision-making power with the lower ranks of the
organization. Participation has a unique motivational power and a great
psychological value. It generates a we-feeling among workers and promotes
harmony and peace between workers and management. When workers
participate in organizational decisions, they are able to see the big picture clearly,
i.e. how their actions would contribute to the overall growth of the company. They
can offer feedback immediately based on their experiences and improve the
quality of decisions significantly. Since they are involved in the decisions from
beginning, they tend to view the decisions as their own and try to translate the
rhetoric into concrete action plans with zeal and enthusiasm. Participation makes
them more responsible. They are willing to take initiative and come out with the
quality-suggestions and growth-oriented ideas. With the feeling of being treated
as equals they begin to view the job and organization as their own and commit
themselves to organizational activities wholeheartedly. Bilateral decisions help in
bringing out radical changes in organizational systems, plans and procedures
more easily.
Employees do not feel threatened by such moves as they understand and
appreciate the reasons behind such strategic shifts.

6.2 PRESENTATION OF CONTENTS

6.2.1 Meaning of Workers Participation in Management

The concept of workers participation in management is a broad and

complex one. Depending on the socio-political environment and cultural
conditions, the scope and content of participation may change. Various terms
have come to be used to denote different forms and degree of participation.
For example, joint consultation, labour-management cooperation, co-
determination, joint decision making, workers participation in industry and
workers participation in management. These terms or their variants have
been interpreted and explained differently. In any case, a common thread
running through all interpretations is the idea of associating employees in
managerial decision- making. The International Institute for Labour Studies
defined WPM as the participation resulting from practices which increase the
scope for employees share of influence in decision-making at different tiers of
organizational hierarchy with concomitant assumption of responsibility.

In the words of Gosep, Workers Participation may be viewed as:

an instrument for increasing the efficiency of enterprises and

establishing harmonious industrial relations;

a device for developing social education for promoting solidarity

among workers and for tapping human talent;

a means for achieving industrial peace and harmony which

leads to higher productivity and increased production;

a humanitarian act, elevating the status of a worker in the

society;

an ideological way of developing self-management and

promoting industrial democracy.

A clear and more comprehensive definition is

Workers Participation, may broadly, be taken to cover terms of

association of workers and their representatives with decision-making
process, ranging from exchange of information, consultation, decisions and
negotiations to more institutionalized forms such as the presence of workers
member on management or supervisory boards or even management by
workers themselves.

6.2.2 Objectives and Aims of WPM

It would be more appropriate to classify the objectives of Workers

Participation in Management in the following broad categories:
Ethical or Moral Objectives

In an ethical or moral context, participation in decision making is

designed to promote individual development or fulfillment in accordance with
the conception of human rights and dignity to which the Universal Declaration
of Human Rights (1948) probably gives the most widely published expression.
The declaration reads-All human beings are born free and equal in dignity and
rights. They are endowed with reason and conscience and should act towards
one another in a spirit of brotherhood. Further, everyone, as a member of
society is entitled to realizationof the economic, social and cultural rights
indispensable for his dignity and the free development of his personality.

The Special Advisory Committee, set up by the Government of

Jamaica, defined Workers Participation as the extension of the individuals
human rights at the work place and stressed that the procedures,
institutions, rules and styles of management should bring the workers
recognition, treatment and attention as a human being rather than as a mere
statistical unit of production.

Socio-Political Objectives

Political democracy ceases to have much significance in the absence

of democracy in economic life. A citizen cannot be regarded as sufficiently
mature for political democracy if he is denied democratic rights in his
economic life. The industrial democracy programme adopted by the Swadeshi
Trade Union Confederation in 1971 emphasised: Industrial democracy is part
of the effort made by the labour movement to extend democracy throughout
societyLife away from the workplace has developed in one way and life at
the workplace in another. The difference constantly grows and is at the root of
the increasing need which employees feel to exert an influence on conditions
of work and on managementIf arbitrary situations are allowed to persist in
one sector of society, they are an obstacle to the progress of democracy in the
other sectorsIndustrial democracy should be regarded as part of the general
process of democratization.
 In our own country, the Second Five Year Plan, which was directed to
the establishment of a socialist society, stated that a socialist society was
based not only on cash incentives but also on the idea of serving the
community and its willingness to recognize such service. So, individual
workers must be induced to feel that in their own way they were helping to
build a state directed towards progress. Consequently, the introduction of
industrial democracy was a prerequisite for the establishment of a socialist
society.

Economic Objectives

Economic objectives relate directly or indirectly to increasing the

efficiency of the undertaking. By associating the workers with the decisions
taken, it is hoped to improve the quantity and quality of output and the
utilisation of labour, raw materials, equipment and introduction of new
techniques. There is growing awareness of the fact that the knowledge,
experience and intelligence of those who actually do the work are not
sufficiently used for improving industrial organisation and methods. Through
participation, it is also hoped to reduce the areas of conflict of interest
between management and labour and to improve labour relations.

The implications of workers participation in management have been

summarized in a publication of the International Institute for Labour Studies:

Workers have ideas, which can be useful.

Effective upward communication facilitates sound decision-

making at the top.

Workers may accept decisions better if they participate in them.

Workers may work harder if they share in decisions that affect

them.

Workers may work more intelligently if, through participation in

decision-making, they are better informed about the reasons for and
the intention of decisions.
 Workers participation may foster a more cooperative attitude
amongst workers and management, thus, raising the efficiency by
improving team spirit and reducing the loss of efficiency arising from
industrial disputes.

Workers participation may act as a spur to managerial

efficiency.

Conversely, it has been pointed out that the absence of participation

results in misunderstanding, resistance, low morale and suspicion.

The CIPD in its Code on Employee Involvement and Participation in the

United Kingdom (1993) states that the involvement of, and participation by,
employees in any organization, should aim to:

generate commitment of all employees to the success of the

organization;

enable the organization better to meet the needs of its

customers and adapt to changing market requirements and hence to
maximize its future prospects and the prospects of those who work in
it;

help the organization to improve performance and productivity

and adopt new methods of working to match new technology, drawing
on the resources of knowledge and practical skills of all its employees;

improve the satisfaction the employees get from their work ; and

provide all employees with the opportunity to influence and be

involved in decisions, which are likely to affect their interests.

6.2.3 FORMS OF EMPLOYEE INVOLVEMENT AND PARTICIPATION

Worker participation is a situation where workers are involved in some way

with decision-making in a business organization. Worker participation can take
many forms. There might be a Consultative Council in the Company, where trade
unions and management meet regularly to discuss points of mutual interest.
Workers can be organized in quality circles and meet regularly in small groups to
discuss ways in which their work could be better organized.
 Decision-making may be further pushed down the line so that even the
most junior worker has some say in how work is organized. On a financial
level, workers may be invited to buy or be given shares in the Company,
encouraging them to participate in the affairs of the Company as
shareholders. In a worker cooperative the shares and control of the company
lie with its workers.

Marchington (1995) has identified five forms of employee involvement

and participation:

Downward communications

Downward communications (team briefing and meetings) take place

from managers to employees in order to inform and educate staff so that they
accept management plans.

Upward problem solving

Upward problem solving is designed to tap into employee knowledge

and opinion, either at an individual level or in small groups. The aims are to
increase the stock of ideas in an organization, to encourage cooperative
relationship at work, and to legitimize change. Attitude surveys, quality circles,
suggestion schemes and, total quality management/customer care
committees come into this category.

Task participation

Task participation and job redesign processes engage employees in

extending the range and type of tasks they undertake. Approaches to job
design, such as horizontal job redesign (extending the range of tasks
undertaken at the same level) job enrichment, vertical role integration (taking
greater responsibility for supervisory duties) and team working (where the
team organizes its own work so that it becomes self managed) may be used.
Consultation and representative participation

Consultation and representative participation enables employees to

take part through their representatives in management decision-making. One
of the aims of management in encouraging this form of participation is to use it
as a safety valve - an alternative to formal disputes - by means of which more
deep-seated employee grievances can be addressed. Joint Consultative
Committees and the appointment of worker directors falls into this category.

Financial involvement/participation

Financial involvement or participation takes the form of such schemes

as profit sharing and employee share ownership. Some companies also use
gain sharing as a means of involvement. The general purpose of Financial
Participation is to enhance employee commitment to the organization by
linking the performance of the firm to that of employee. Employee is more
likely to be positively motivated as he or she has a financial stake in the
company by having a share of profit or by being a shareholder.

Co-ownership

In this scheme, the workers are involved in management by making

them shareholders of the Company. Thus, workers share the capital as well as
profit. This may be done by inducing them to buy equity shares. The
management may promote the scheme by allowing the worker to make
payment in installments. It may also advance loans or even give financial
assistance to such workers to enable them to buy equity share. Workers may
also be allowed to leave their bonus with the Company as shares (bonus
shares).

Participation through ownership has the distinct advantage of making

the worker committed to the job and to the organization. It also offers
recognition of the claim of the dignity of labour as the worker is viewed as
partner in the business. This would, in turn, create a sense of belongingness
among workers and stimulate them to contribute their best for the continued
progress of the Company.
Productivity Bargaining

In this scheme workers wage & benefits are linked to productivity.

Information on Company performance is provided to employees as part of the
scheme and they are encouraged to discuss with their managers or team
leaders the reasons for success or failure and methods of improving
performance. A standard productivity index is finalized through negotiations
initially. Workers do not have to perform at exceptionally high levels to beat
the index. If they are able to exceed the standard productivity norms, they will
get substantial benefits. The aim of such schemes is to educate employees
and gain their commitment. Without such agreement, workers may not realize
the importance of raising productivity for organizational survival and growth.

Gainsharing

A form of contingent compensation where owners and employees share in

productivity gains, as an incentive for improvement. Gains are determined by
agreed-upon measures of organizational performance. Gain sharing typically
provides for a long term distribution to manufacturing or similar units of a set
percentage of the costs saved through the often substantial revamping of
production processes. Gain sharing programs encourage teams within a firm to
solve fundamental problems within their specific area of expertise.

6.2.4 KINDS OF INVOLVEMENT AND PARTICIPATION OF

EMPLOYEE AT DIFFERENT LEVELS

Employee involvement and participation can vary according to the level

at which it takes place, the subject matter of participation, the degree to which
decision making is shared, and the extent to which the mechanisms are formal
or informal.

Levels

Involvement and participation takes various forms at different levels in

an enterprise. These levels are described below.
 The job level involves team leaders and their teams and the processes
include the communication of information about work and interchange of ideas
about how the work should be done. These processes are essentially informal.

The management level can involve sharing information and decision

making about issues, which affect the way in which work is planned and
carried out, and working arrangements and conditions. There are limits.
Management as a whole, and individual managers must retain authority to do
what their function requires. Involvement does not imply anarchy. But it does
require some degree of willingness on the part of management to share its
decision- making powers. At this level, involvement and participation may
become more formalized, through consultative committees, briefing group or
works councils involving management and employees or their representatives.
At the policy making level, where the direction in which the business is going,
is determined, total participation would imply sharing the power to make key
decisions.

At the ownership level, participation implies a share in the equity, which

is not meaningful unless the workers have sufficient control through voting
rights to determine the composition of the Board.(also see Box-6.1)

Subject matter of Participation

The range of subjects covered by participative managements can vary.

At one extreme the matter discussed could include issues of strategic
importance to the whole enterprise, such as product range, investment
decisions and other commercial and financial matter of similar significance. At
the other, the subject matter may be more restricted to issues relating to items
quite peripheral to the running of the business, for example the state of the car
parking or canteen. Between these two extremes are issues of varying
degrees of operational importance, such as those concerned with production
or service decisions.
 Box-6.1

Levels of Worker Influence on Company Decision Making

(Center for Labor Education and Research, Florida International University)

7. Workers Council or Assembly SUPERIOR to managers (and if out- side

constituencies have representatives on this body, they must be approved by the
workers). Known as FULL WORKER CONTROL or SELF MANAGEMENT
(WORKERS AUTONOMY)

6. Joint power or PARTNERSHIP (workers and managers co-decide on joint

board).
This has many different voting proportions in existence and is considered JOINT
MANAGEMENT or CODETERMINATION.

5. Workers wait until management has decided; then may VETO or AP- PROVE: if
veto, then management submits modifications. Also known as collective
bargaining.

4. MANAGER DELEGATES some decisions generally to workers, reserving

ultimate veto, which is rarely used.

3. Workers initiate CRITICISMS AND SUGGESTIONS and discuss them face-to-

face with managers. Latter still have sole power to decide, but usually adopt
workers proposals.

2. Same as immediately above but managers usually reject workers proposals.

1. Managers give PRIOR NOTICE of a change, workers have a chance to voice

their views, and perhaps stimulate reconsideration.

0 Impersonal SUGGESTION BOX system; managers accept or reject without

giving reasons.
The degree to which decision-making is shared

At the one end of the scale, management makes decisions unilaterally;

at the other end, in theory, but never in practice except in a workers
cooperative, workers decide unilaterally. Between these extremes, there is a
range of intermediate points, which can be expressed as a scale (Figure 6.1)

Employees
decide
unilaterally

Fig 6.1 Scale of participation

The point on this scale at which participation should or can take place
at any level in an organization depends on the attitudes, willingness and
enthusiasm of both management and employees. Management may be
reluctant o give up too much of its authority except under pressure from the
unions (which is unlikely today), or from Government Directives on workers
consultation.

Mechanisms for involvement and participation

At the job level, involvement and participation should be as informal as

possible. Teams may be called together on an ad hoc basis to consider a
particular problem, but formal committees should be avoided. Team briefing
can be used to provide for informal two way communications.
 At the next higher level, more formality may be appropriate in larger
organizations. There is scope for the use of consultative committees or
departmental councils with carefully defined terms of reference on the matters
they can discuss. At the enterprise level, company or works councils can be
set up.

At the policy-forming level, company or works councils may be given the

chance to discuss policy issues, but if the final decision on any matter, which
is clearly not negotiable, is made at board level, the works council may be
seen as an ineffectual body.

Further mechanisms for involvement on an organization wide basis can be

provided by quality circles and suggestion scheme.

6.2.5 GOVERNMENT POLICIES AND PARTICIPATION

The participation of workers in management in India is not a novel idea,

imported from outside. Advocating the idea, Mahatma Gandhi insisted that
capital and labour should supplement and help each other; they should be a
great family, living in unity and harmony. Since independence, several
schemes have been formulated by the Government of India to promote
workers participation in management, which are discussed below.

Mill Committees

Instances of informal joint consultation can be traced back to the

second decade of the 20th century, in cotton textile industry. The employers in
the textile industry stated joint consultation with the workers, by establishing
Mill Committees which were merely to ascertain and represent the
grievances of workers. But the management did not accept the committees as
spokesmen on behalf of the emerging trade unions, the existence of which
they preferred to ignore. Though such consultation was of a rudimentary type,
yet it was significant, as it was first of its kind in the country.
Royal Commission on Labour and Workers Participation in Management
(1920)

The Government of India, in 1920, constituted joint committees in their

Printing Presses and Railways. During the same period such committees were
formed in Tata Iron and Steel Company, Jamshedpur. At the instance of
Mahatma Gandhi, the workers and employers of the textile mills in
Ahmedabad agreed in 1920 for mutual discussions and consultation of issues
failing which they were to be resolved by arbitration. There was a permanent

Arbitration Board consisting of a nominee each from the association of

labour and employers. Although the scope of mutual consultation was confined
largely to grievances of workers, yet the Ahmedabad Agreement may be regarded
as a milestone in the history of joint consultation in our country. The
Royal Commission on Labour opined that the system is admirable in its
intention and has had a substantial measure of success.

From 1922 onwards, joint committees of workers and management

were formed in Bengal, Madras and other states. One of the examples was
the formation of Workers Welfare Committee in Buckingham and Carnatic
Mills, Madras (now Chennai). The Committee had the object of securing close
contact with the workers by discussion on matters relating to their work and
welfare and proved useful in maintaining sound relations between the
management and the workers.

Assessing the performance of such committees, the Royal Commission

on Labour recommended the formation of works committees and viewed that
if they are given proper encouragement and past errors are avoided, these
committees can play a useful part in the Indian industrial relations system.
Along with the works committee, the Commission also stressed the setting up
of a joint machinery for the internal settlement of disputes on the pattern of the
informal consultative machinery of Ahmedabad textile industry.

These recommendations of the Commission have had no impact on the

system of joint consultation for the settlement of disputes. This is because of
the economic depression in the 1930s, which led to deterioration in industrial
relations because of wage cuts, rationalization and emergence of militant
trade unionism under communist leadership. Further, with the outbreak of the
World War II, the Government under the Defence India Rules prohibited
strikes and lockouts and required compulsory reference of disputes to
conciliation or arbitration. This again gave a setback to the movement.

Developments during 1940s

With all these setbacks, joint consultation did not entirely die out, but
had receded to the background at the plant level. The wartime developments,
however, led the labour management and Government to come closer. Around
the same time the Indian Labour Conference was held to promote closer ties
between the two parties of the Indian Labour Conference in August 1942. The
conference was modelled on the pattern of the International Labour
Organisation and was advisory in nature.

The National Planning Committee of the Indian National Congress, as

far back as 1940, had recommended the nationalisation of industries like
engineering and heavy explosives. Also, the committee had suggested that
both in the interest of industry and community, it was desirable to associate
workers progressively with control and management. The Indian Federation of
Labour also endorsed the policy of nationalization. The All India Trade Union
Congress also raised similar demands.

After attaining Independence, India attempted to introduce workers

participation in management. One of the earliest attempts to promote this was the
enactment of the Industrial Disputes Act, 1947 and the Factories Act 1948, for the
establishment of bipartite committees. Another type of scheme that was
introduced is the Joint Consultative Machinery in government undertakings to
facilitate cooperation between the government and its employees. Government
also tried another form of having workers representatives on the Boards of
Management in certain public sector undertakings.
Works Committees (1947)

The Industrial Disputes Act, 1947, provides for the setting up of bipartite

Works Committees as a scheme of workers participation in management,

which consists of representatives of employers and employees. The Act
provides for these bodies in every undertaking employing100 or more
workmen. The aim of setting up of these bodies is to promote measures for
maintaining harmoniums relations in the work place and to sort out differences
of opinion in respect of matters of common interest to employers and
employee. The Bombay Industrial Relations Act, 1946, also provides for these
bodies, but under the provisions of this Act they can be set up only in units
that have a recognised union and they are called Joint Committees. The
workers directly elect their representatives where there is a union.

Functions

The Works Committees /Joint Committees are consultative bodies.

Their functions include discussion of conditions of work like lighting,
ventilation, temperature, sanitation, etc., amenities like water supply for
drinking purposes, provision of canteens, medical services, safe working
conditions, administration of welfare funds, educational and recreational
activities and encouragement of thrift and savings. It shall be the duty of the
Works Committee to promote measures for securing and preserving amity and
good relations between the employers and workmen and to comment upon
matters of their common interest or concern and endeavour to reconcile any
material difference of opinion in respect of such matters.

Structure

The Works Committees have, as office bearers, a President, a Vice-

President, a Secretary and a Joint Secretary. The President is a nominee of
the employer and the Vice-President is the workers representative. The
tenure of these bodies is two years. The total strength of these bodies should
not exceed 20. The employees representatives have to be chosen by the
employees.
 These committees functioned actively in some organisations like Tata
Iron and Steel Company, Indian Aluminum Works at Belur and Hindustan
Lever. In all these, the managements have evolved Joint Committees
independently of the statutory requirements.

Joint Management Councils (JMCs1958)

The Second Five-year Plan recommended the setting up of Joint

Councils of Management consisting of representatives of workers and
management. The Government of India deputed a study group (1957) to study
the schemes of workers participation in management in countries like UK,
France, Belgium and Yugoslavia. The Indian Labour Conference (ILC)
considered the report of the study group in its 15th session in 1957 and it
made certain recommendations:

(i) Workers participation in management schemes should be set

up in selected undertakings on a voluntary basis.

(ii) A sub-committee consisting of representatives of employers,

workers and government should be set up for considering the details of
workers participation in management schemes. This committee should
select the undertakings where workers participation in management
schemes would be introduced on an experimental basis.

Objectives

The objectives of Joint Management Councils are as follows:

(i) to increase the association of employers and employee

there by promoting cordial industrial relations;

(ii) to improve the operational efficiency of the workers;

(iii) to provide welfare facilities to them;

(iv) to educate workers so that they are well prepared to

participate in these schemes; and
(v) to satisfy the psychological needs of workers.
 A tripartite sub-committee was set up as per the recommendations of
Indian Labour Conference, which laid down certain criteria for selection of
enterprises where the JMCs could be introduced. They are:

(i) The unit must have 500 or more employees;

(ii) It should have a fair record of industrial relations;

(iii) It should have a well organise trade union;

(iv) The management and the workers should agree to

establish
JMCs;

(v) Employers (in case of private sector) should be members

of the leading Employers Organisation; and

(vi) Trade unions should be affiliated to one of the central

federations.

It was observed by the sub-committee that if the workers and employers

mutually agree they could set up JMCs even if these conditions are not met. The
sub-committee also made recommendations regarding their composition,
procedure for nominating workers representatives, the membership of JMCs etc.
The details of these aspects have to be worked out by the parties themselves. A
draft model was drawn up regarding the establishment of JMCs.
This sub-committee was later reconstituted as the Committee on Labour-
Management Co-operation to advise on all matters pertaining to the scheme.

Functions

The following are the important functions of JMCs:

(i) To be consulted on matters like standing orders,

retrenchment, rationalisation, closure, reduction of operations
etc.
(ii) To receive information, to discuss and offer suggestions.
(iii) To shoulder administrative responsibilities like maintaining
welfare measures, safety measures, training schemes, working
hours, payment of rewards.
Working of JMCs

Over the years, there has been a good growth in number of units
adopting JMCs in public sector. JMCs in some of the public sector
undertakings, for example, Bharat Heavy Electricals Limited, have provided an
appropriate forum for effective communication and managements
unreservedly furnished all facts and information sought for. The unions have
responded by moderation their enthusiasm and exercising reasonable
restraint in demanding information, disclosure of which could be detrimental to
the interest of the organisation. Deliberations in the JMCs are characterised
by mutual understanding and a high level of objectivity in the appreciation of
problems without acrimony or emotionalism.

But the working of the JMCs indicates that they have not been
successful both in private and public sectors. JMC was first introduced in
Hindustan Machine Tools in 1958 among the public sector units but survived
less than one year. The scheme has also failed in other public sector units like
Posts and Telegraphs, Railways, Hindustan Insecticides, Indian Airlines
Corporation, Air India and Fertilizer and Chemical Corporation.

It is often criticised by different quarters that the scheme of employee

participation in management did not make headway though it was initiated
with much enthusiasm. The National Commission on Labour observed that
mental reservations which operated against it are the same both in the ranks
of management and among the workers.

Board Level Participation (1970)

Following the recommendations of Administrative Reforms

Commission, the Government has accepted that representatives of workers
be taken on the Board of Directors of public sector undertakings. It was
introduced in Hindustan Antibiotics Ltd, Hindustan Organic Chemicals Ltd,
National Coal Mines Development Corporation, BHEL, National Textile Mills,
Newsprint and Paper Mills, etc. The worker Director was supposed to be
elected by all the workers of the company through secret ballot. After the
nationalization of banks, the government advised all nationalized banks to
appoint employee directors to their boards one representing employees and
the other representing officers having a tenure of 3 years. The scheme
required verification of trade union membership, identification of the
representative union and the selection of a worker director who is chosen out
of a panel of three names furnished to the government by the representative
union within a prescribed period. In some of the banks, the scheme could not
be introduced smoothly after 1971 owing to difficulties in verifying union
membership figures. A study of the scheme in the nationalised banks by the
National Labour Institute has indicated that it has failed in promoting cordial
relations between labour and management.

Shop and Join Councils (1975 and 1977)

The 1975 scheme has come into existence after the emergency was
declared in June 1975. It had envisaged the setting up of Shop Councils at
the shop/ departmental level and Joint Councils at the enterprise level. These
were to be introduced in manufacturing and mining units employing 500 or
more workers whether in public, private or cooperative sector.

The actual number of Shop Councils in an enterprise was to be decided

by the employer after consultations with the recognised union/ workers. The
chosen workers representatives must be actually working in the shop or
department concerned .The Chairman of the council will be elected by
management and the Vice-Chairman by the workers representatives. The
council shall function for 2 years and will meet regularly to discuss matters
relating to safety, discipline, physical working conditions, welfare measures,
productivity norms and targets, absenteeism, flow of communication etc.

The Joint Council, having a tenure of two years, shall be constituted for
the whole enterprise consisting of representatives of both the management
and the labour. The chief executive shall be the Chairman of the council and
the representatives of workers shall nominate the Vice-President. The Council
will meet once in a quarter to discuss matters which remain unsolved by shop
councils including: schedules of working hours, holidays, optimum use of
materials, productivity standards, training facilities to develop skills of workers,
awards to workers for creative suggestions, general health, safety and welfare
of workers, etc.

Apart from manufacturing and mining units, commercial and service

organisations (such as railways, hospitals, P&T, state electricity boards) were
also covered in the 1977 scheme. Both the schemes evoked considerable
interest and were introduced with a lot of enthusiasm, covering a wide
spectrum of public and private sector units. However, after the emergency was
lifted, most of the councils became defunct. Several operational problems
surfaced from time to time, including: (a) inadequate sharing of information,
(b) absence of a participative culture, (c) indifferent attitude of management,
(d) lack of interest on the part of workers, (e) failure to clarify the norms for the
nominations of representatives, (f) absence of a single union interested in a
bipartite consultative process etc.

Adding Article 43A in the Indian Constitution

In view of the growing acceptance of the importance of workers

participation in management for increasing productivity, maintaining industrial
peace and accelerating the pace of economic development, Article 43A was
inserted in the Indian Constitution under the Directive Principles of the State
Policy in 1977. The Article provides that the State shall take steps, by suitable
legislation or any other way, to secure the participation of workers in the
management of undertakings, establishments or other organisations engaged
in any industry.

The New Scheme (1984)

A new scheme of workers participation in management was prepared

and notified in 1984 after reviewing the progress of various schemes in
industry. It was applicable to all central public sector enterprises. It was
decided that workers would be allowed to participate at the shop level, the
plant level and the board level. The mode of representation of workers
representatives was to be determined by consultations with the concerned
unions. A wide range of work related issues (personnel, welfare, plant,
operations, financial matters, etc.) were brought within the ambit of the
councils. The Ministry of Labour constituted a tripartite committee to review
the working of the scheme and to suggest corrective measures.

Participation of Workers in Management Bill, 1990

The Participation of workers in Management Bill was introduced in the

Rajya Sabha on 30th May 1990. This Bill had been referred to the
Parliamentary Standing Committee on Labour and Welfare. This Bill is still
under consideration of the Standing Committee.

The bill aims at providing participation of workers in management at

shop floor level, establishment level and board of management level.

Provisions

I. Shop floor council

Except for industries having one shop floor, all other industries are required to
have shop floor council in accordance with the rules.

Functions: It carries out functions specified in Schedule I of the Bill which

include:

(i) production facilities

(ii) storage facilities
(iii) materials economy
(iv) operational problems
(v) wastage control
(vi) hazards and safety problems
(vii) quality improvement
(viii) cleanliness
(ix) monthly targets and production schedule
(x) cost reduction programme
(xi) formation & implementation of work systems
(xii) design group working
(xiii) welfare measures.
II. Establishment council

Every industry is required to set up an establishment council at establishment

level.

Functions: An establishment council can exercise powers as specified in

Schedule II of the Bill, which includes:

(A) Operational Area:

(i) evolution of productivity schemes

(ii) planning, implementation, fulfillment and review of

monthly targets and schedules

(iii) material supply & its shortfall

(iv) storage and inventories

(v) house keeping

(vi) improvement in productivity

(vii) encouragement and consideration of suggestion

(viii) quality of technological improvement

(ix) machine utilisation, knowledge and development of new

product

(x) operational performance figure, etc.

(B) Economic and Financial Areas:

(i) profit & loss statement and balance sheet

(ii) review of operating expenses, financial result and cost of
sales
(iii) plant performance in financial terms.

(C) Personnel Matters:

(i) absenteeism
(ii) problems of women workers
(iii) initiation of supervision of workers training programme
(iv) administration of social security schemes.
 (D) Welfare Areas:

(i) operational details

(ii) implementation of welfare schemes

(iii) safety measures etc.

(E)Environmental Areas:

(i) extension activities and community development projects

(ii) pollution control.

III. Representation of Board of Management

The representatives of workmen are to constitute 13% and those of

other workers 12% of the total strength of the Board of Management. The bill
provides for a monitoring committee to advise on matters of administration of
the Act and scheme under it.

6.2.6 HURDLES IN THE WAY OF WORKERS PARTICIPATION IN INDIA

The foregoing discussions reveal that ever since the independence of

the country, Government has been keen on promoting workers participation in
management in the country. There has been a growing realisation in the
country, especially in the Government circles, that promotion of workers
participation would lead to increase in productivity and would be helpful in
maintaining industrial peace and accelerating the pace of economic
development. With the adoption of planning as an instrument of economic and
industrial development, maintenance of cordial relations between labour and
management is considered all the more desirable. To achieve these
objectives, Government embarked upon different programme of workers
participation at different intervals of time, for example, Works Committee
(1947), Joint Management Councils (1977), Shop Floor and Plant Councils
(1983) and so on. However, experience has shown that these schemes, which
were launched so enthusiastically, have on the whole proved to be a failure.
This has been supported by the findings of the studies conducted in regard to
their functioning. The failure of the schemes of workers participation in
management may be attributed to several factors:

Employer-related

Employers, by and large, were not very enthusiastic about schemes of

workers participation in management. They feared dilution of their powers,
participation would take away from them their right to manage. Also, they felt
that workers might not be able to contribute much in discussions relating to
matters where they lack a broad perspective. When employers tried to
substitute trade unions with the bipartite bodies, conflicting situations
developed, vitiating the atmosphere of give and take.

Worker-related

By and large, workers representatives were not fully equipped to

participate in discussions relating to organisational issues. Factors, such as
illiteracy, lack of knowledge, lack of enthusiasm to update their viewpoints,
have often come in the way of extending wholehearted support to the
schemes of workers participation in management.

Union-related

Trade union movement in India is largely fragmented, poorly organised,

characterized by intense inter union rivalry and colored by various political
ideologies. In such an atmosphere, the union representatives are not
expected to act in the best interests of workers and the organisations.

Macro level factors

All the schemes of workers participation in India are non-statutory. The

different pieces of labour legislation have complicated matters further. There is
no central law on the subject. Some of the forms of participation envisaged by
the government like Works Committees, Joint Managements Councils
appear to be similar in scope and function. The multiplicity of such bipartite
bodies with loosely defined structure and purpose, not surprisingly have failed
to deliver the goods.
 Box- 6.3

Necessary Elements for Effective Worker Participation in Decision Making

(Center for Labor Education and Research, Florida International University)

From an article by Dr. Paul Bernstein, Journal of Economic Issues, Vol. X No. 2 June 1976

In this classic article on work place democracy efforts Bernstein identifies six
necessary components for successful programs on worker participation in decision making:

1. Workers must have an increased degree of power vis-a-vis management

regarding various levels of decision making in the company.

2. Workers must have access to and sharing of management level

information. If employees are to make decisions on the issues that go on in areas
outside their normal jobs, they will need information such as engineering reports
and company economic information that was previously only available to accounting
or finance departments. A corollary to this component is that workers must be
trained to understand and use this information in a correct and effective manner.

3. A guaranteed right of protection from reprisal for employees who voice

criticisms of management.

4. An independent board of appeals to settle disputes between labor and

management (grievance procedure).

5. A participatory/democratic consciousness or a set of beliefs and traits

among the work force and among management that tends to worker participation in
decision making. The belief that workers have the ability to make good decisions or
a strong feeling of self-reliance are two such traits.

6. A guaranteed economic return on cost savings or surplus produced above

the employees regular salary. This sometimes is labeled as gainsharing.
Moreover as pointed out by Sheth (1972), mere creation of institutions and
structures does not guarantee success. In some cases even elementary
procedures for ensuring the success of the schemes were not clearly laid
down: such as selection of representatives, recognition of union, procedures
for holding meetings, etc. (Sheth 1977). As far as public sector is concerned,
Lall (1984) concluded that apart from other factors, absence of genuine
bargaining platforms also leads to lack of trust between the labour and
management leading to eventual breakdown of meetings.

6.2.7 REQUIREMENTS FOR SUCCESSFUL EMPLOYEE

INVOLVEMENT AND PARTICIPATION

The overall success of workers participation (employee involvement)

depends fundamentally on:

building trust;
eliminating status differentials;
committing the organization to vigorous training and
envelopment;
breaking down barriers to change the organizations culture.

Armstrong suggested the following 10 basic requirements for success:

i. The objectives of participation must be defined, discussed and

agreed upon by all concerned.

ii. The objectives must be related to tangible and significant

aspects of the job, the process of management or the formation of
policies that affect the interests of employees.

iii. Management must believe in and must be seen to believe in

involving employees. Actions speak louder than words and
management must demonstrate that it will put into effect the joint
decisions made during discussions.

iv. The unions must believe in participation as a genuine means of

advancing the interests of their members and not simply as a way of
getting more power.
 v. Joint consultation machinery should be in line with any existing
system of negotiation and representation. It should be regarded as a
process of integrative bargaining complementary to the distributive
bargaining that take place in joint negotiating committees.

vi. If management does introduce joint consultation in a non-union

environment, it should be prepared to widen the terms of reference as
much as possible to cover issue concerning company employment
policies and plans and working arrangements and conditions (e.g.,
health and safety matters).

vii. Consultative committees should always relate to a defined

working unit, should never meet unless there is something specific to
discuss, and should always conclude their meetings with agreed
points which are implemented quickly.

viii. Employee and management representatives should be properly

briefed and trained and have all the information they require.

ix. Managers and team leaders should be kept in the picture and,
as appropriate, involved in the consultation process it is clearly
highly undesirable for them to feel that they have been left out.

x. Consultation should take place before decisions are made.

6.3 SUMMARY

As evident from various studies conducted in different countries,

participative management can be a very effective tool in the hands of
managers in solving various problems, as also achieving the other
organisational objectives. Decisions based on collective wisdom of the
concerned people could prove to be superior in many cases and also there
would be fewer problems in the matter of their implementation. Participative
management does not alter the balance of control in any significant way.
Experts would continue to influence the final outcome of the discussions.

Past studies indicate that participation and consultation can become a

way of working even in a vast organization, like TISCO, because there has
been a genuine desire on the part of both top management and the union to
give the experiment on working together a fair trial. If the management
policies and methods are oriented not only towards better performance and
higher profitability, but also towards concern for employees and if the
management is sincere in its approach to evolve an internal climate, where
employees can freely express their views on all relevant issues without fear of
reprisal, the psychological barrier from the side of employees against
participation could be largely overcome. People learn from the failures, not
only of their own, but also of others. If the commitment to the concept is
strong, initial setbacks in the functioning of the scheme need not cause
frustration, or deter the parties from going ahead. In due course, a kind of
culture for working together would grow and develop as a natural process.
While the scheme is at its initial stages, nurturing by both management and
the union would help it in taking a proper shape. However, it should be left to
the management and the union to discuss and decide the framework, scope
and powers of such a scheme and to modify same as warranted by the local
conditions and needs from time to time.

Thus, it can be said that even under Indian conditions, participative

management that is home-grown and oriented towards the culture and needs of
the organisation can be workable. Better, if it is introduced after necessary
preparation and understanding with the trade union of workmen, and in stages:
first at the department or shop floor level and after acquiring necessary
experience, it can be extended to all departments at the plant level. While
finalising the scope of such a forum, matters coming within the area of
collective bargaining should be specifically excluded. A law may be useful
in providing the basic framework and breaking the inertia, but it should leave
enough freedom for individual organisations to formulate their own scheme to
suit their individual needs and requirements.

The present band of workers, here and elsewhere, it should be

realized, are more knowledgeable in terms of skills and professional
attainments. They are also more conscious of their rights. They belong to a
generation where respect for the values of yesteryears based on the laws,
custom, authority and discipline are often questioned. They are also impatient.
In the coming years, managers will be expected not only to deal with militant
trade union leaders but also with a different kind of workforce that is more
demanding and volatile. And this is the perspective.

Participation is like a child and it requires only two willing partners to

make it a reality. In industries, participation requires both willingness and
capability of the two partners to participate. Third party intervention of
extraneous influence of pressure, in both cases, tantamounts to interference
and tends to prove counter- productive.

It is, therefore, imperative that participation should be viewed by managers

as an opportunity rather than a threat, irrespective of the fact whether there is
any law requiring it or not. Perhaps, Drucker (1980), was right when he said: The
one certainty about the times ahead, the times in which the mangers will have to
work and to perform, is that there will be turbulent times.
And in turbulent times, the first task of management is to make sure of the
institutions capacity to survive a blow, to adapt to sudden change and to avail
itself of new opportunities.

6.4 KEYWORDS

Coownership - Joint ownership

Participative - Associating employees in management decision

management Making

6.5 SELF ASSESSMENT QUESTIONS

(i) Employee participation is a must today Comment.

(ii) What is meant by workers participation in management?
Describe the objectives of WPM.
(iii) What are different forms of WPM?
(iv) Discuss different varieties of workers participation/involvement.
(v) Examine various schemes of workers participation in India.
What are your suggestions to improve them?
(vi) The concept of WPM is facing tough times today and reason
lies on
 part of all those involved. Discuss
(vii) Workers participation in India has not been a resounding
success. Do you agree? Give reasons.

6.6 REFERENCES/SUGGESTED READINGS

(i) The Essence of Personnel Management and Industrial Relations

by Alan Cowling and Philip James. PHI Pvt. Ltd., New Delhi.
(ii) Essential of Human Resource Management and Industrial
Relations by Dr. P. Subba Rao. Himalaya Publishing House, Delhi.
(iii) A Handbook of HRM Practices by Micheal Armstrong. Kogan
Page
Ltd., London.
(iv) Human Resource Management and Personnel Management by
K.
Aswthappa. Tata McGraw Hills Publishing Company Ltd., New
Delhi.
(v) Industrial Relations by Monal Arora. Excel Books, New Delhi.
(vi) Participative Management Vs Collective Bargaining by B.R.
Virmani. Vision Books, New Delhi.
(vii) Industrial Relations by Arun Monappa. Tata McGraw Hill
publishing
Company Ltd., Delhi.
(viii) Industrial Democracy by Sidney Webb and Beatrice
Webb. Longman, Melbourne.
LESSON NO. 7

EMPLOYEE EMPOWERMENT

STRUCTURE

7.0 Objectives

7.1 Introduction

7.2 Presentation of Contents

7.2.1 What is Empowerment?

7.2.2 Need for Empowerment

7.2.3 Process of Empowerment

7.2.4 Managerial Imperatives for successful Empowerment

7.3 Summary

7.4 Keywords

7.5 Self Assessment Questions

7.6 References/Suggested Readings

 7.0 OBJECTIVES

Having motivated employees is an important goal for any organization,

and employee empowerment is an important motivational tool organizations
have to use in current scenario. The present Lesson discusses the concept of
Employee Empowerment. After reading the Lesson the students will be able to
understand:

Meaning, essence and objectives of Employee Empowerment

The need of Employee Empowerment
Various phases for the implementation of Employee
Empowerment Program
Managerial Imperative for the success of Employee
Empowerment
Program

7.1 INTRODUCTION

Excellent companies pay attention to four things: customers, innovation,

people and leadership. The challenge for leaders is to empower employees so
that they create great customer relations and continuous innovations.

- Tom Peters and Nancy Austin

Donald Petersen was the President of Ford Motor Company from 1980
to 1985 and CEO and Chairman of the Board from 1985 till his retirement in
1990. In his book, A Better Idea, written with John Hillkirk, he describes the
turnaround of that 370,000-person company from one that was losing money
and market share to one that produced high-quality products, made big
profits, and created the Ford Taurus, one of the best-selling cars in American
history. The primary vehicle for the turnaround was employee involvement,
participation, and empowerment. The net effect was a significant change in
the Companys culture from being a top-down, autocratic, functionally-oriented
Company to one that gave responsibility and power to cross-functional teams
at all levels of the Organization. Ford became a different Company, and a
much more successful Company, by empowering its employees.
 You pick up any popular business periodical; you will find interesting
profiles of managers whose roles have changed considerably. They are being
called coaches, advisors, sponsors and facilitators. The dividing line between
the roles of managers and workers has become very thin. You will find in
progressive, pro-active organizations, decision making authority being
pushed to lower levels, where workers are given a free hand to decide about
schedules, procedures and work related issues all by themselves. In early
1980s managers encouraged workers to participate in work related decisions.
Now managers let employees make decisions at all levels of an Organization
without seeking approval form upstairs simply stated, managers are asking
employees to take charge of what they do. The idea behind empowerment is
quite simple. People, who do the job for years together, are in the best
positions to learn how to do that job in the best way. So, when there is a
chance to improve it, people should go ahead and carry out improvements
without getting the stamp of approval form the manger.

7.2 PRESENTATION OF CONTENTS

7.2.1 WHAT IS EMPOWERMENT?

Simply stated, empowerment means to enable, to give power, to allow

or to permit. Empowerment has been defined in several ways. Ken Murrell
defines Empowerment as an act of building, development and increasing
power Conger and Kanungo see Empowerment as a motivational concept
associated with enabling rather than delegating. Gupta and Murrari define
Empowerment as a process of making the organization responsive and
flexible; providing a climate for continuous learning; developing a culture
which values initiative, honesty and encouraging the employees to take more
responsibility through sharing of power and responsibility by working together.
Amalgamating the above definitions, one can conclude that empowering
employees means entrusting them - their intellect, their creativity, and
innovation, their commitment towards Organization, which would yield a
performance beyond expectations.
 Empowerment, thus, is the authority to take decisions within ones area
of operations without having to get approval from anyone else. Here the
operatives are encouraged to use their initiative to do things the way they like.
To this end, the employees are given not just authority but resources as well
so that they not only take decisions but also implement them quickly. This
empowerment means giving the employees the authority to make decisions
and providing them with financial resources to implement these decisions.

Belasco uses a simple four-step model to describe the empowerment

process: preparation, create tomorrow, vision and change. One of the most
important ingredients of empowerment is vision a coherent, credible picture of the
desired future. Developing a clear vision, devising a strategy to achieve the
vision, and unleashing the intelligence and energy of the work force to accomplish
the vision are what empowerment is all about, according to
Belasco.

Table 7.1 Key differences between Traditional organizations and

Empowered- team organizations

Element Traditional Organization Empowered-team Organization

Organization Structure Layered/Individual Flat/Team

Job Design Narrow/Single-task Whole Process/Multiple Task

Management Role Direct/Control Coach/Facilitator

Leadership Top-down Shared with Team

Information flow Controlled/Limited Open/Shared

Rewards Individual/Seniority Team-based/Skill-based

Job Process Managers plan, control, Team plan, control, improve

improve
 The most visible features of empowerment in organizations include the
following:

(i) a flatter organization structure facilitating dispersion of authority;

(ii) participative decision making and allied activities in the

organization;

(iii) open communication systems and exchange of information; and

(iv) resource sharing

In an empowered organization, people should not expect to be told what to

do, but they should know what to do. The primary role of management is to
support and stimulate their people, co-operate to overcome cross functional
barriers, and work to eliminate fear within their own team

Empowered-team organizations differ from traditional organizations in

several aspects. Table 7.1 brings out the key differences.

7.2.2 NEED FOR EMPOWERMENT

James Belasco, author of famous book Teaching the Elephant to Dance: The
Managers Guide to Empowering Change believes

(i) that only massive changes will suffice to keep organizations

viable in the future,

(ii) that people will not naturally embrace the needed changes, and

(iii) that empowerment is the key to getting people to want to

participate in change.

Thus, empowering employees no longer remains an optional decision,

but has become a necessity to make organizations flexible and adaptable to
the volatile environment.

Why are more and more companies empowering employees? One

reason is the need of quick decisions by those people, who are most
knowledgeable about the issues often those at lower organizational levels. If
organizations are to successfully compete in a dynamic global economy, they
have to be able to make decisions and implement changes quickly. Another
reasons is the reality that organizational downsizings during the last part of the
twentieth century left many managers with larger spans of control. In order to
cope with the increased work demands, managers had to empower their
people.

If an organization implements employee empowerment properly-that is,

with complete and total commitment to the program and with appropriate
employee training results can be impressive for the entrepreneurial venture
and for the empowered employees. The business can enjoy significant
productivity gains, quality improvements, more satisfied customers, increased
employee motivation, and improved morale. Employees can enjoy the
opportunities to do a greater variety of work that is more interesting and
challenging.

In addition, employees are encouraged to take the initiative in

identifying and solving problems and doing their work. For example, at Mine
Safety Appliances in Murrysville, Pennsylvania, employees are empowered to
change their work processes in order to meet the organizations challenging
quality improvement goals. Getting to this point took an initial 40 hours of
classroom instruction per employee sin areas such as engineering drawing,
statistical process control, quality certifications, and specific work instruction.
However, the Companys commitment to an empowered workforce has
resulted in profitability increasing 91 percent over the last five years; 95
percent of the Companys employees achieving multi-skill certifications; and
the Company being named Home Depots Supplier of the Year in 1999 in its
first year of supplying the Company. See Box 7.1 for more examples of
success with empowerment.
7.2.3 PROCESS OF EMPOWERMENT

The process of empowerment will differ from organization to

organization, depending on their:

concept of empowerment;

organizational objectives and strategies;

resources, financial and non financial;

attitudes towards customers and employees; and

employees knowledge, skills, enthusiasm towards job and

loyalty to Organization, etc.

Empowerment is a philosophical concept that organizations have to

buy into. For many organizations, it is a gradual process and is facilitated by a
combinations of factors including values, leadership actions, job structure and
reward system as illustrated in Fig. 7.1
Fig. 7.1 Facilitators of Empowerment
 Organizations can begin by using participative decision-making in
which employees provide input into decisions. Although getting employees to
participate in decisions isnt quite taking the full plunge into employee
empowerment, yet, at least, it is a way to begin tapping into the collective
array of employees talents, skills, knowledge, and abilities.

Another way to empower employees is through delegation-the process

of assigning certain decisions or specific job duties to employees. By
delegating decisions and duties, the management is turning over the
responsibility for carrying them out.

When the Organization is finally comfortable with the idea of Employee

Empowerment, fully empowering employees means redesigning their jobs so
they have discretion over the way they do their work. Its allowing employees
to do their work effectively and efficiently by using their creativity, imagination,
knowledge, and skills.

The whole process of Empowerment can, therefore, be spread in three

phases:

Phase- I Studying the work environment of the employees.

Phase- II Redefining tasks and reallocating resources.

Phase III Focusing on the psychological and motivational needs of

employees in empowered position.

Phase-I: Studying the work environment of the employees:

Empowerment is brought in to meet several objectives, such as improving the

quality of service encounters, increasing efficiency and productivity, etc.
Therefore, it is of utmost importance to study the work environment, where
employees work. It is, therefore, important to consider the following:

present level of employee- skills, confidence, and enthusiasm

towards
 job etc;

financial and physical resources of the organization;

present level of decision making authority with customer contact

employees etc.; and

Relationship between frontline employees and next,

organizational hierarchy.

Such a preliminary analysis or study provides a framework that helps

management design the empowering process for employees, so that the
ultimate objectives of empowering are effectively met. The adage, well begun
is half done is very apt for this situation because careful analysis and
planning will ensure that whole empowerment process goes smoothly and the
purpose for which empowerment is incorporated is met without any chaos.

Biswajeet Pattanayak has proposed the following guidelines for

empowerment process.

Understand why the organization is making the change and

what it wants to achieve?

Select strong leaders to head the change

Involve people in planning how to introduce empowerment

Create transition project teams to test and co-ordinate efforts

and communicate results

Provide training in new skills and behaviors

Acknowledge and reward achievements

Phase-II: Redefining tasks and reallocating resources:

Every organization will have its own concept about empowerment.

There is no specified process which can be universally applied to
organizations and, therefore, every organization has to design the
empowerment on individual basis. What exactly needs to be done to empower
will be based on the analysis of management in Phase-I. It would include a
number of activities such as information sharing, redesigning communication
system, job enrichment, allocating resources or providing decision-making
authority. Pailin has defined empowerment as having three major dimensions

Influence over standards/participative decision-making: Frontline

employees know best what must be done. They have first-hand experience
with a wide range of problems and they know what is required to solve them.
Employee input is essential for job design and setting of appropriate
performance standards, and it should be taken seriously. Therefore, decision-
making should be participative so that employees can give continuous
feedback to management on how to improve service delivery.

Resource availability: To be truly empowered, employees must be

given adequate tools to do the job. They need information about
customers, about their organization, its products, and its performance.
They must have access to the basic equipment and supplies necessary to
serve customers well. They may also require the assistance of support
personnel to expedite their tasks, and they definitely need full support of
senior management.

Decision-making authority: Empowered employees must have the

authority to make timely decisions so as to be able to take the appropriate
actions during the initial moment of truth. Such decisions might have
clearly identified limits that are instilled through training. This component of
empowerment affects customer satisfaction most directly.

Further, Bowen and Lawler defined empowerment as the sharing of

four commodities with frontline employees

Information about organizations performance

Rewards linked to the organizations performance

Knowledge that, allows the workers to understand the

organizations performance and make contributions to it

Power to make decisions that influence the organizational

performance Once again, it may be emphasized that the range and

continuum of
activities, incorporated by the Organization to empower eventually, would be
contingent upon the operating environment of the employees and the
organizational objectives.

Phase-III: Focussing on the psychological and motivational needs of

employees in empowered position:

It is not enough to mechanically undertake steps or activities to empower.

Cogner and Kanungo point out that delegating- authority to employees may be
necessary to empower them, but it doesnt guarantee that they will have the will
or incentive to use it. They propose that employment should be thought as a
motivational construct - the act of giving a person a sense of power. It is,
therefore, important to psychologically enable employees by instilling in them a
belief that their actions can make a difference.

The founder of a restaurant chain that evolved into an empowered

organization found that its employee progressed through several stages. At
first they were wary of using the broad authority they were told they had to
delight customers. Only after considerable coaxing and demonstrations of
sincerity on the part of senior management did employees come to believe in
its stated commitment and embrace it wholeheartedly. (Source: Rust, Zahorik
L. Keiningham, 1999, Service Marketing)

7.2.4 Managerial Imperatives for Successful Empowerment

No leader can possibly have all the answers...The actual solutions

about how best to meet the challenges of the moment have to be made by the
people closest to the actionThe leader has to find the way to empower
these frontline people: to challenge them, to provide them with resources they
need, and then to hold them accountable, As they struggle withthis
challenge, the leader becomes their coach, teacher and facilitator. Change
how you define leadership, and you change how you run a company

These lines by Steve Miller, Group Managing Director of Royal

Dutch/Shell, highlight the role of lower and middle level managers for the
success of empowerment program for employees.
 The role of lower and middle level managers is vital for the success of
empowerment programs for frontline. Rust, Zaharik & Kennigham have
highlighted new duties at the managerial level, which are as follows:

Mentoring employees in problem solving, decision-making, and teamwork

skills. Managers must foster a spirit of trust, treat workers with respect, and
listen carefully to their ideas. They must be able to help teams and individuals
and make decisions for themselves.

Coaching employees to do their work better. This approach requires that

managers recognize achievement and provide encouragement and
psychological support. They must also get away from the mindset of punishing
wrongdoers, and rather help employees to build from successes and learn
from mistakes.

Setting goals and providing incentives through compensation and special

awards, both monetary and otherwise. Managers must ensure that the goals of
lower level units are consistent with the goals of the Organization as a whole.

Facilitating the work of the front line by making available necessary

resources and training. The need for adequate resources to do the job
required is clear. Continuous learning is also essential in a Company that
hopes to produce quality. But teams and individuals should be responsible for
their own learning. It is the managers job to help them identify their training
needs and to teach them how to learn and how to train others.

Coordinating the work of teams, helping to resolve problems within and

between teams, allocating resources among them, and helping them to share
their best practices with other parts of the Company.

Monitoring and evaluating internal and external performance. Producing

consistent quality requires that diagnostic measures be regularly monitored.
Several measures seem to be obvious candidates for tracking the progress of
an Empowerment System. Measures of the effectiveness of the process itself
should include surveys of employee satisfaction and employee turnover, and
measures of employees perceptions of the extent of their empowerment.
 7.3 SUMMARY

Empowerment has come to play a major role in corporate excellence. It

is, today, in the forefront to facilitate management efforts to bring about
increased productivity quality improvements in every sphere of activity in the
Organization and to build high morale among employees, which are the
cornerstone of survival, competitive edge and progress.

The process of empowering employees involves-studying their

operating environment, reallocating resources and providing a psychological
and motivational support. The success of empowerment programs would
depend upon managements sincerity as reflected by continuous support,
open communication and a compatible reward system. Though empowering
involves both monetary and nonmonetary costs, yet training and monitoring
programs can minimize these costs. Eventually the benefits would always
exceed costs.

Although empowerment is not a universal panacea, especially when

employees have the knowledge, skills, and experience to do their jobs
competently and when they seek autonomy and possess an internal locus of
control, yet empowerment can be beneficial.

7.4 kEYWORDS

Empowerment - Process of making the organization responsive

and flexible

Participative - Associating employees in management decision

Management Making

7.5 SELF ASSESSMENT QUESTIONS

(i) Employee empowerment is a must today, Comment

 (ii) Describe the concept of Employee Empowerment

(iii) Discuss the need for Empowering Employees

(iv) Employee Empowerment is an important motivational tool

Organization can use Discuss the statement and explain how
empowerment motivates employees.

(v) Discuss the process of Employee Empowerment

(vi) How managerial roles are changing in the current scenario?

State the conditions necessary for success of employee
empowerment program.

7.6 SUGGESTED READINGS

(i) The Essence of Personnel Management and Industrial Relations

by Alan Cowling and Philip James. Prentice Hall of India Pvt. Ltd.,
New
Delhi.

(ii) Essential of Human Resource Management and Industrial

Relations by Dr. P. Subba Rao. Himalaya Publishing House, Delhi.

(iii) A Handbook of HRM Practices by Micheal Armstrong.

Kogan Page Ltd., London.

(iv) Human Resource Management by VSP Rao. Excel Books, New

Delhi.

(v) Human Resource Management and Personnel Management by

K. Aswthappa. Tata McGraw Hills Publishing Company Ltd., New
Delhi.

(vi) Industrial Democracy by Sidney Webb and Beatrice Webb.

Longman, Melbourne.

(vii) Empowerment in Organizations by Murrell and Vogt. S.

Chand & Company, New Delhi.

(viii) Management by Stephen P Robins and Mary Coulter.

Pearson Education.
Workers, affected by proposed changes, must be involved in the
decision to change, else they will fight progress
LESSON NO. 8

QUALITY MANAGEMENT: AN INTRODUCTION

Structure:

8.0 Objectives

8.1 Introduction

8.2 Presentation of Contents

8.2.1 Total Quality Management Concept

8.2.2 Features of TQM

8.2.3 Quality Management and Leadership

8.2.4 Quality Policy and Mission Statements

8.2.5 Organisational Structure for QM

8.2.6 Training for QM

8.2.7 Role of HRD in implementing QM

8.2.8 Cost of Quality

8.2.9 Quality Circles

8.3 Summary

8.4 Keywords

8.5 Self- assessment Questions

8.6 References/Suggested Readings
 8.0 OBJECTIVES

The major objectives of the present chapter are to

Discuss the nature, features and importance of various elements

that constitute Quality Management and TQM.
Gain appreciation for basics of quality policy and statement and
provide a guideline to frame an appropriate quality policy and mission
statement.
Explain the means of providing QM training to employees and
outline the role of HRD.
Identify the basic patterns of quality costs, and understand the
Quality Circles.

8.1 INTRODUCTION

Although the concept of quality is very old, today it is perhaps the major
preoccupation of organisations worldwide. However, in the recent years, Total
Quality Management (TQM) has captured the worldwide attention and is being
adopted in many organisations, both profit and non-profit. TQM is being
accepted as a management philosophy. Many organisations around the globe
are conducting Organisational Development (OD) programmes to enhance
quality awareness and change the attitudes of their employees. These efforts
towards understanding, adopting and promoting TQM are primarily because of
the changes taking place in the global economy, changing market conditions
and customers expectations and increasing competitive pressures. Many
large organisations have recognized the important contributions that TQM can
make in dealing with these challenges.

Quality though familiar to everyone has a variety of uses and

meanings. The classic perception of quality is the position of a product
attribute on a good-bad scale. Most people associate it with defects in
products. However, quality relates not only to the product but also to the
instructions for its use, to installations, to service, to marketing and so on.
Quality has been defined in various ways. Some of the important definitions of
quality are presented as:
 Quality is fitness for use. (Juran, 1974).

Quality is conformance to requirements (Crossby, 1984).

Quality means best for certain customer conditions. These

conditions are: The actual use and the selling price of the product
(Feigenbaum, 1961).

Quality is the capability of products or services to knowingly

satisfy those reconceived composite wants of the user(s) that are
intelligently related to the characteristics of performance, and do not
cause major overt or covert reactions or actions by other people.
(Johnson, 1987).

The totality of features and characteristics of products or

services that bears on its ability to satisfy given needs (ANSI & ASAC,
1978).

Quality is, thus, both a user-oriented and a production-oriented

expression. From the users point of view, quality is an expression of the
products/services usefulness in meeting the needs and expectations and its
reliability, safety, durability and so on. From the production point of view, the
quality of a product is measured by- the quality of its performance, which
depends on the quality of design and the quality of conformance. Quality of
design is concerned with the stringency of the specifications for manufacturing
the product. The quality of conformance is concerned with how well the
manufactured product conforms to the original requirements.

8.2 PRESENTATION OF CONTENTS

8.2.1 Total Quality Management Concept

TQM has been defined in various ways such as a search for

excellence, creating the right attitudes and controls to make the prevention of
defectives possible and optimise customer satisfaction by increased efficiency
and business effectiveness. All pervading characteristics of TQM has been
described by Oakland (1989) in the following definition:
 Total Quality Management (TQM) is an approach to improving the
effectiveness and flexibility of business as a whole. It is essentially a way of
organising and involving the whole organisation, every department, every
activity, every single person at every level.

TQM has been considered as a combination of various processes

representing the dynamic behaviour of an organisation for this, organisation is
referred to as a total system (socio-technical), where the activities carried out
are geared towards meeting customer requirements with efficiency and
effectiveness in mind and where the health of business is considered by
measuring costs/returns at each stage of the business cycle as reflected by
the following definition given by Zaire and Simintiras (1991). The definition
takes a dynamic system view of TQM.

Total Quality Management is a combination of socio-technical process

towards doing the right things (externally), everything right (internally), first
time and all the time with economic viability considered at each stage of each
process.

Another approach of TQM has been based on the quest for progress
and continual improvement in the areas of cost, reliability, quality innovation,
efficiency and business effectiveness. Pfau (1989) states that TQM is an
approach for continuously improving the quality of goods and services
delivered through the participation of all levels and functions of the
organisation. Tobin (1990) views TQM as the totally integrated efforts for
gaining competitive advantage by continuously improving every facet of
organisational culture. For environmental quality management, Bemowski
(1991) states that TQM should pursue and achieve continuous improvement
in every process of an organisations environmental compliance program
through the integrated efforts of all members of the program so as to lead to a
reduction in the total cost of environmental quality.

Atkinson (1990) describes TQM as a strategic approach to produce the

best product and service possible through constant innovation.

According to Price and Chen (1993), TQM is a management system,

not a series of programs. It is a system that puts customer satisfaction before
profit. It is a system that comprises a set of integrated philosophies, tools and
processes used to accomplish business objectives by creating delighted
customers and happy employees.

TQM can also be viewed as an integration of two philosophies, that is,

Total Quality and Quality Management. Thor (1992) feels that the Total in
TQM has four fundamental definitions; horizontal, vertical, intellectual and
strategic.

Horizontal total means that the unit of analysis is the business

process that cuts its way across the organisation, starting with external
suppliers, passing through operational and/or support groups of the
organisation, and ending with the final customer.

Vertical total means that all levels of the organisation have adopted
the basic quality ethics and apply it in the processes they touch or otherwise
influence. Quality is not the exclusive interest of production workers, or
executives, or first line supervisors. Problem solving teams are often made
from several organisational levels. There is a quality way to issue legal
opinions and to advertise the products, just as there is a quality way to make
and sell the products.

An intellectual process means that the thoughts and models that drive
the improvement process have been derived from, and reflect the best
managerial, behavioural and technical thinking.

Strategic means the improvement efforts at any level and any where
in the organisation must be linked with the priority needs of the organisation.

Total Quality, thus, is a long-term success strategy for the organisation.

Customer satisfaction, employee satisfaction, product quality at all stages and
continuous improvements and innovations are the main ingredients of Total
Quality.

Whereas Quality Management is the way of working and managing that

combines the capabilities of all the employees for continuous improvement of
every process with the main purpose of increasing customer satisfaction.
TQM, therefore, can be viewed as the process wherein the top management
along with the people in the organisation ensure improvement in the product
quality and work environment continuously at all the stages and levels, with
the aim of improving customers and employees satisfaction. It is a process of
examining every critical system in an organisation, establishing base line
measures of performance and then constantly working to improve them.

The underlying principles behind TQM efforts, therefore, are:

Customer satisfaction.

Continuous improvement.

Management-by-fact

All functions are interdependent.

Participative and Integrated problem solving process, and

Every work stations a control point.

Organisations are dynamic entities in a societal milieu. They undergo

changes in the structure, culture, values, systems and beliefs continuously.
The expectations of the customers who take services from organisations vary
from customer to customer and from time to time. To meet these varying
expectations of the customers, an all out effort is required from every part of
the organisational system. TQM plays a major role in bringing such a change
and therefore we define TQM as a pragmatic long-term systems approach
initiated and driven by the top management to bring about a total change
culture and interlink and integrate everyone, every function, every process and
every activity of the organisation through involvement, participation and cross-
functional management to meet the dynamic needs of the customer and to
create a loyal but at the same time a diversified customer base.

8.2.2 Features of TQM

1. TQM is a pragmatic long-term systems approach:

TQM is not a randomized approach. It is not a buzzword. It is a concept,
which can be adopted and practised through proper planning, systematic
evaluation and allocating responsibilities and resources. It is also not a one-
time strategy but a long-term continuous approach.

2. TQM is initiated and driven by top management:

TQM is a strategic direction and only the top management can trigger
such a direction. Developing organisational vision, mission, philosophy,
strategies, objectives and plans is the responsibility of the top management
Top management, therefore, needs to be involved in TQM and the quality
improvement process and should lead the new way of thinking to bring
innovations.

3. TQM aims at bringing about a total cultural change in every

facet of the organisation:

TQM creates an organisational culture, which is conducive to

continuous improvement. Treating every other person receiving help as a
customer and directing all efforts to satisfy his needs is the primary purpose of
every person in the organisation.

4. TQM interlinks and integrates the various subsystems of

the organisation:

Each department in the organisation strives for excellence and tries to

achieve its set objectives. However, in most cases these departments conflict
either in their objectives or approaches. TQM tries to break down the barriers
between the departments and integrates the objectives of various
departments with the main objective of the organisation so as to follow the
same common, unified approach for meeting the customer requirements.

5. TQM requires involvement, participation and cross-

functional management:

The objectives of TQM cannot be achieved unless there is participation

of all, at different levels in the problem solving process. In a conventional
system, the employees of one department rarely get a chance to interact and
understand the problems of other departments. By forming cross-functional
quality improvement teams, TQM overcomes this barrier.

6. TQM aims at meeting the dynamic needs of the customer

and creates a loyal and diversified customer base:

TQM recognizes customers both as internal as well as external. It also

recognizes that the needs of these customers vary across the population and
also with time. To meet these expectations it is essential to make a continuous
effort to identify the customers, their needs and expectations and then develop
strategies to meet them. Through this it tries to create a diversified and loyal
customer base, which promotes the profitability of the organisation and helps
to withstand any competition.

8.2.3 Quality Management and Leadership

The first step towards the quality excellence is the major business
decision to make quality leadership a basic strategic goal of the concern.
Unless the management of the company clearly defines to the organisation,
the specific quality results that are required, and budgets the specific financial
resources for manpower, machines and systems to meet these priorities, the
quality results are not going to come about.

Feigenbaum (1988) defines quality leadership as a policy commitment

to the engineering, production and sale of products that consistently and with
very low failure rates, will perform correctly for buyers when first purchased,
and that with reasonable maintenance, will continue to perform with very high
reliability and safety over the life of the product.

Quality is what customer perceives it to be. However, as the customers

go on changing as well as their needs-also-change, the quality level needs to
be improved continuously to meet their demand. The quality level, therefore, is
not static, fixed standard but is dynamic in nature. The traditional quality
control programs fix a standard quality level and efforts are directed to reach
and achieve it. However, as this level is met, the organisation finds the
customer more demanding. Therefore, quality leadership demands more and
more upgraded quality levels as a way of life throughout the organisation. The
organisations must realise that the products that represent a high risk of
customer dissatisfaction are not necessarily those with high failure rates but
those with high exposure to a large total number of dissatisfied customers.

Generally, the quality leadership is perceived as encouraging the

commitment of all stakeholders and establishing a knowledge base for the
people so that they can learn to deliver the continued and improved quality of
services, in all dimensions. However, unless and until the leadership accepts
the personal responsibility to educate them as to what their role and
responsibility is in QM, the goal of commitment from all cannot be achieved.
The leadership, therefore, has to be more pro-active than reactive in nature.

However, it must be realised that leadership should devote more time

to quality management issues as compared to financial budgeting. The
leadership thus needs to be exhibited and directed in this sense, both in
manufacturing as well as in service operations. People learn and do what they
see their leader is doing. The commitment of the leadership to quality,
therefore, is of vital importance to promotion and movement of QM culture
within the organisation. Leaderships involvement in promoting the importance
of quality and customer satisfaction needs to be exhibited through activities
such as speeches, meeting with customers, giving formal and informal
recognition, receiving training and imparting training to others. Leadership
needs to develop key values of OM such as importance of the customer,
process orientation, continuous improvement, teamwork, and management by
fact, mutual respect and dignity, value of individual employee and recognition
of his contributions. Furthermore, these values need to be communicated to
one and all through proper channel. Leadership also needs to develop an
understanding of OM, internal and external customers, knowledge of
processes and application of such knowledge in their own functional areas.
There are some roles, which are played by leaders in quality management.
These are as follows:
 (i) Identify and encourage employee potential

Every person, however bad a workman he may be, has some talents
and potentials. Most of these remain hidden as they are not recognised and
no opportunity is provided to reveal them. The management has the
responsibility to explore these talents and inspire the workforce to make use of
these towards OM efforts. This can be done through an open environment and
better communication.

(ii) Accept the responsibility

The responsibility for the quality of output from the work area rests with
the manager. In fact, it is said that there is really no such thing as a quality
problem; there are real problems related to workmanship, design problems,
accounting problems, and the like. Instead of the quality control department
revealing these problems, it is essential that the management shoulders and
accepts the responsibility and accountability for the output from their own areas
investigate the causes for it and formulate action plans for improvement.

(iii) To play a role model

Each manager is responsible for setting the standards for quality and
setting the example, through their own actions and behaviour, for the
employees. The honest conviction about the importance of quality and the
need to improve it must be revealed through their directions and be
communicated to one and all. Managements actions count, not words. Some
can be fooled sometimes, but all cannot be fooled all the time. Generally, the
stress placed by the management is on production schedules or meeting the
requirements in specific time and thus the quality gets a backseat in the minds
of employees. However, management must realize that neglecting quality at
the expense of emphasis on cost and schedules will result in increased cost
because of scrap, rework, and rejection and thus the managers need to put
more stress on quality and exhibit it through their actions.

The management can expect a total commitment to quality from

employees only if they also are careful in following principles proposed by
them, as employees also watch the performance of management and are
better in understanding the hidden intentions behind the managements
actions. Thus, a truthful behaviour and commitment is essential on the part of
management. This commitment must be revealed through allocation of
resources, organising the work, setting policies, goals and performance
standards, establishing operating procedures, measuring and rewarding
performance and setting priorities.

(iv) Remove Roadblocks

QM demands a total change and thus resistance is expected at

different levels. First-line and middle managers resist it as they are not familiar
with it and they feel uncomfortable facing the uncertainty. Furthermore, it is
viewed as another bandwagon which will come and go with time, replaced by
a new philosophy. Over a period of time, each manager develops a style
unique to himself. Furthermore, because of concern about job security, loss of
authority, increased workload, loss of power, doubt about top management
commitment and fear of failure, the middle level management resists the QM.
However, this misconception must be removed, as a better work environment
will result in improving communication amongst employees resulting in
solution to the problems, which never get solved.

Leaders are committed to work for quality management in the following

positions:

(i) Role of the Chief Executive

Total commitment of chief executive is considered as the key factor in

implementing QM. It is the first and the most critical step in initiating QM. The
review of QM applications reveals that without this commitment, the
implementation would certainly fail. The Chief Executive should provide the
necessary resources to start and foster the development of a quality program
and keep it running. He should recruit and demand the involvement of key
executives and personally sell the process. Bringing a quality improvement
process to life requires changing the culture of the organisation. This cultural
alteration must be shaped at the top with the leaders vision translated into
strategic action and a change in the organisational direction. Commitment can
be achieved and demonstrated as follows:

The chief executive should be the first trainee in the philosophies

and practices of QM.

He should participate in the training of others.

He should regularly attend QM seminars.

He should address quality issues every time he meets the

employees.

He should seek the help of outside consultants and should lead

the quality improvement committee.

(ii) Role of top management:

Members of top management must lead the QM effort. They must

provide the vision of where the company is heading with its quality effort. They
must lead in creating a cultural change within the company. The top
management thus should

Study QM ahead of everyone else in the company; investigate

how QM is implemented elsewhere and have a good understanding of
the issues involved.

Establish policies defining the positions the company will take in

regard to QM.

Establish priority of quality and customer satisfaction as the

basic policy and determine the long-term goals

Assume leadership in bringing about a cultural change.

Check to see if quality improvement programs are conducted as

planned.

Assume leadership in bringing about a breakthrough.

Establish the QM vision for the future, and personally

communicate it.
 Become coaches and cheerleaders, encouraging and
supporting the managers during the transition phase of the
transformation change.
 Generate enthusiasm for QM activities.

Create coordination and harmony in departments.

Enforce code of conduct.

Visit other companies to observe QM functioning.

Attend QM training programmes.

Teach others to better the society and the surroundings.

(iv) Role of middle management:

The position occupied by middle management is important as they act as a

link between the top and bottom. Their job is, therefore, difficult in terms of
developing and maintaining vertical and horizontal relations. They have to
fulfill following responsibilities towards QM

Delegate authority to subordinates to make them more

responsible and active.
Provide opportunities to the subordinates to grow in their jobs.
Dont always look to the top for direction.
Strive to become an indispensable person.
Make quality circle and other participative activities work.
Cross-function management; communicate with other
departments.
Serve as mini-coordinators.
Promote QM in each area.

Leadership Accountability:

The important role a leader has to play in driving QM efforts and

bringing about a cultural change is of vital nature. In playing this role it is also
necessary to put checks and balances to monitor the efforts. Leadership
accountability towards quality is an important factor to drive the QM message
throughout the organisation. In management theory, accountability has been
viewed as authority and responsibility. This view has been somewhat
restrictive in real life. The value of accountability lies in its applicability to all
types of human activities oriented towards the welfare of a society of human
system, which is the basic mission of quality management. As a guiding
mechanism for governing work activity, this view holds immense benefit for the
clarification of individual and group behaviour.

From the Concise Oxford Dictionary of 1982, one can find that the term
accountable means bound to give an account, responsibility for things, to
persons. Accountability is an implicit answerability that arises when
responsibility is accepted and the acceptance creates an obligation to
perform. Accountability is a systematic means to seek assurance on an
expected end. Some researches have identified two kinds of accountability, 1.
that which is personally imposed, and which results from personal involvement
with the decision and the outcomes related to it; 2. that which is externally
imposed, and which results from being accountable to others for the decisions
rather than for the quality of the procedure used to make the decisions. These
research findings have some implications to quality management. These are
as follows:

1. Leaders in quality management system depend upon a flow of

timely and accurate information for the performance of their work. They
are likewise responsible for generating a flow of timely and accurate
information to others. The performance of the organisational leaders is
heavily influenced by the quality and timeliness of information available
to them.

2. Managers who have formal authority issue a variety of

commands, instructions, orders, directives, procedures and so on that
have the function of ordering and instructing subordinates concerning
the performance of their responsibilities. These methods may constrain
the freedom to exercise ones own judgment in performing the work.
Sometimes managers transmit messages, which have the purpose of
altering the attitudes and behaviours of other organisational members.
The purpose of such messages may be either to influence the members
behaviour directly or to influence the frame of reference within which
members interpret information from other parts of the organisation or from
outside the organisation. This brings the concept of interpersonal
 interaction, within the quality management system. (Mohanty 1993)

3. Quality management is an integration of all behavioural

operations, which is essential in assuring smooth and coordinated
function of the organisation. Peculiar to each organisation, the problem
of coordinating and directing the interaction of its members may be a
complex one. This co-ordination function is one of the primary
dimensions of accountability. The coordination functions are not
performed in isolation, but in interaction with authority, responsibility,
workflow, technology, tasks and people.

Quality management today is teamwork and needs managing of a

network of relationships. Traditionally, the degree to which the management
function assumes accountability for quality has been largely ignored. The
network of relationships as desired in TQM brings to the fore the importance
of the accountability issue. The challenge to quality management lies in
meeting accountability both through economic and social controls and not
merely coping with responsibility within the defined framework of authority.
The lack of recognition to this results in the decline of quality performance,
dilution of standards and erosion of human values in organisation life. In view
of this, Mohanty (1993) has outlined some propositions that can enhance the
accountability behaviour towards the quality management:

Make it crystal clear that is accountable to whom in the

organisation for quality improvement.

Involve the individual, however small he may be in the

organisation, in setting up the standards for accountability without
persuasion or coercion.

Tie accountability to how excellently the process is being carried

out particularly to build linkages and outcomes.

Create a system to facilitate all leaders in the organisation to

become aware of themselves and others and become more tolerant
towards others through development not through harassment so as to
make them accountable towards humanity at large.
8.2.4 QUALITY POLICY AND MISSION STATEMENTS

An organisation must have quality policy and mission statements

because they determine and strongly influence how work is done and how
people behave and are treated. Policies and mission statements are usually
indicative of an organisations value system, its assumptions about people and
human behaviour and its understanding of and beliefs about what makes
organisations effective.

According to Flippo (1976), a policy is a man-made rule of a

predetermined course of action that is established to guide the performance of
the work toward the organisations objectives. It is a type of standing plan that
is established to guide subordinates in the execution of their tasks. Policies
are plans or course of actions adopted by business units to guide or channel
thinking, and designed to influence and determine decisions, actions and
other matters. It is a guiding principle considered to be expedient, prudent and
advantageous. Quality policy, therefore, refers to principles and rules of
conduct designed and formulated to govern the relationship with employees in
the attainment of the organisations TQM objectives. Quality policy and
mission statement, therefore, is

the key-stone and the life-blood for the successful functioning of

quality improvement process.

the statement of intentions of top management guiding a set

course of action and indicating specifically what the organisation
proposes to do.

a statement that suggests the values and viewpoints which

dominate the organisations actions and translates the goals of an
organisation into selected routes.

a positive declaration and a command to an organisation.

a means of encouraging initiative and autonomy.

Organisations need to create a sound quality policy:

To build enthusiasm and loyalty of people.

 To serve as a standard for evaluating performance.
 To support the mission and principles of the organisation.

To break barriers between people and groups of people.

To encourage improvement and create conditions that allow

Innovation.

To support global optimization and long-term objectives.

To promote teamwork and leadership.

To foster decision.-making at appropriate levels.

To enable an organisation to carry out the main objective of

customer satisfaction.

While designing the quality policy and mission statement, it is essential

to observe the following:

The statement of policy should be definite, clear and easily

understood by everyone in the organisation.

It should be well written and documented.

It should be the result of careful analysis of all the available data.

It should focus on quality, continuous improvement and

customer satisfaction.

It should not be rigid.

It should provide a rallying point, uniting people so that they feel

satisfied in working towards a common goal.

It should be communicated properly to one and all in the

organisation.

The development of quality policy and mission statement is a complex,

long and arduous task, caning for the help of experts. Top management has
the responsibility for preparing it with the involvement of employees and
consultation with unions, vendors, customers etc. The policy should be
evolved after studying existing documents, surveying industry and community
practices, reviewing the prevailing conditions in the company, interviewing
other executives in the organisation to collect appropriate information and
obtaining their suggestions and cooperation. The policy plan should also deal
with future developments in customer needs, performance requirements,
training and skill requirements, supervisory methods etc. The top
management should critically analyze the policy statement, once prepared.
Next stage is to circulate it widely to all concerned with the organisation.
Constructive criticism and suggestions from various channels provide input for
further modifications and change. Developed in this manner, the policy
statement will stand the test of time and will hold even under conditions of
stress. It must, however, be remembered that it takes a substantial time to
develop a guiding policy and mission statement. Also, periodic review and
evaluation is essential to keep it vibrant. In brief, the steps necessary in
designing a policy and mission statement are

Initiating a policy by top management.

Collecting and analysing facts and information from all sources.

Preparing a written draft of the policy.

Expanding and discussing the proposed policy with persons

concerned with the organisation.

Adopting and launching it.

Communicating it to all levels.

Follow up and evaluation.

Reformulation.

The quality policy and mission statement, once framed, should be

written, published and communicated to all concerned. The written policy
makes it apparent to everyone that the management means business and
does what is says. It also helps to ensure that the set path is followed even if
some changes takes place in the organisation. A quality policy and mission
statement provides guidance and an overall picture of corporate policy. It,
therefore, needs to be communicated to everyone concerned with the
organisation.
8.2.5 Organisational Structure for QM

In order to be successful in quality improvement effort it is essential to

set up an organisational structure at the outset for the introduction of QM. The
organisational structure required for QM includes a quality steering committee
and quality improvement teams. The management with the help of an outside
consultant to determine whether a different organisational structure is required
for the quality effort can evaluate the structure of the organisation. The
structure helps to harness the total potentials to improve at every level of the
organisation. It also ensures that each individual in each department really
gets involved in the quality improvement process. Organisational structure
involves the followings:

Fig. 10.1: Framework of Organisation Structure

QM Promotion Committee:

The promotion committee is, actually, the top management of the

company, which establishes and approves QM polices and programmes. The
promotion committee also gives the approval to start the program and offers
basic guidelines to make the QM program operate effectively. Once the
promotion committee approves the program, mission statement should be
established so that guidelines can be set for the rest of the organisation.
 Generally, the steering committee handles most of the quality
improvement program. However, the promotion committee performs the
following functions:

1. Understands the principles and concepts of QM.

2. Promotes QM in the organisation.

3. Explains benefits and advantages of QM.

QUALITY STEERING COMMITTEE:

The first line managers constitute the quality steering committee.

Members of all the major departments are represented in the committee. The
committee determines policy, establishes direction, provides support and by
example demonstrates commitment to quality improvement. The committee is
responsible for supervising the entire quality improvement process. This
includes the following:

Maintain the momentum of the quality improvement effort.

Identify the processes that are to be improved by quality

improvement teams.

Make recommendation for allocation of resources to selected

areas.

Establish educational methods and policies.

Establish recognition policies.

Develop quality awareness programmes.

Evaluate quality improvement efforts, including monitoring

processes, both before and after attempts at improvement.

Meet regularly.

To establish an environment where quality improvement groups

can flourish.
 Establish procedures for measuring ongoing performance and
cost of quality and ensure corrective actions wherever appropriate.
 Actively support the implementation of the established policy
consistently and on a continuous basis ensuring that all
disciplines/work areas are fully involved in quality improvement.

To measure personal performance and display it to demonstrate

commitment to the quality improvement process.

It is essential that the meetings of the steering committee must get

priority over other meetings. Otherwise it will appear as if quality improvement
is merely a project that will be worked on only when there is extra time.
Furthermore, the focus of the committee must be confined to the
aforementioned responsibilities and an outside consultant must be involved
with the committee to keep it on track and maintain its objectivity.

Quality Improvement Teams (QIT)

QITs are groups of people who are responsible for making actual
improvements in processes. QITs operate all levels in the organisation on a
departmental basis. Once the process requiring improvement is identified, an
improvement team meets to identify probable causes of deficiencies and
recommend changes in the process to improve performance. These teams
are to have representatives of all departments affected by the process being
studied. This is necessary to gain knowledge of every part of the process.

QITs operate on group dynamics and team approach. They create a

framework where personnel involvement can be maximized in striving for
improvement and excellence. The issues are approached with the purpose of
reducing waste and error, enhancing performance and proposing corrective
actions. Benefits for those participating include improved morale, increased
job satisfaction, stimulation of teamwork and development of skills.

Facilitator Team or Corrective Action Team

The facilitator team addresses specific corrective action requests with

the purpose of establishing a permanent and cost effective solution. The
facilitator, therefore, should have a good educational background,
communication skills, and public speaking skill, be bold and tactful. The
facilitator team carries out following duties:
 Works as an active member of the steering committee.

Serves as quality improvements coordinator.

Trains members, leaders, and management.

Co-ordinates QITs.

Maintains progress records.

Prepares new training material.

Spreads some good words about the program.

Links all people in the organisation.

Follows up on completed projects.

Attends meetings and conferences]

8.2.6 Training for QM

An effective and successful training programme for the managers and

workers is the heart of QM implementation programme. The fundamentals of
QM must be taught to everyone, because everyone has a role to play in the
quality improvement process. The training thus should concentrate on building
awareness, improving communication skills and problem solving techniques.
However, training cannot be done in abstract. It needs to be designed and
built in the implementation plan to focus on:

The quality problems and challenges faced by the organisation.

Understanding and assimilating the QM concept.

Developing leadership qualities.

Problem solving attitude.

Involving everyone and making him or her more responsible.

Breaking down the existing barriers.

Building up trust between individuals and departments.

 Introducing totally new ways of working.
The goals of the quality education programme should be to

Develop an understanding of the fundamentals of quality.

Create awareness and perspective of the national and

international quality issues as they apply to the companys growth
strategy.

Provide tools to help management build and use quality systems

as a major lever to achieve business objectives.

Influence management to integrate quality as a primary

company goal in the decision making process;

The properly organised QM training program should have the following

objectives:

i. Provide an opportunity for free communication on the quality

ii. Issues rose during the training program.
iii. To generate creative ideas helpful in diagnosing and solving
quality problems.
iv. The facilitate development of mutual understanding and
cooperation amongst different personnel from various departments.
v. To improve the moral and human relations climate in the
organisation.
vi. To provide an opportunity for self-development.
vii. To remove imbalance in quality related practices and
programmes adopted in an organisation.
viii.To create awareness about quality problems and challenges, to
develop the knowledge and skills needed to solve these problems
and to meet these challenges.

8.2.7 Role of HRD in Implementing QM

Total quality management requires the introduction and acceptance of

an individual, group and organisational change throughout a companys
operations; a complete change in the way a business is managed. QM
provides real opportunities to make and influence behaviour and attitudes,
which have real effects on internal and external relationships and the way the
organisation conducts its business. Any changes and restructuring will have to
be achieved by a process of continuous and ongoing change. To make and
sustain the necessary changes in the company culture and at the same time
run day-to- day business operations is a difficult task and thus Human
Resource Development Department has to playa major role.

Changing peoples behaviour and attitude is one of the most difficult

tasks in implementing QM. Resistance to Change is a term often used to
describe a situation when the quality improvement process enters a trough
and becomes stagnant. In order to appreciate fully the task and implications of
changing a culture, managers need to understand not only assumptions about
individual motivation and learning, but also about the process, various
strategies for change and about individual resistance to change. This is where
HRD comes into the picture. This paper explores and outlines the issues and
concerns of HRD in the process of organisational change to facilitate
implementation of QM. Organisational change can take place at three levels;
the individual, the group and the organisation.

Individual change is the basis for all change; unless an individual

changes in some way, nothing changes. The HRD must make efforts to
ensure that the employees understand that through a process of continuous
quality improvement the thought process, decision-making, suggestions,
initiatives, communications and presentation skills improve. The initiation and
establishment of a company-wide QM education and training programme,
therefore, must be based on the premises that those responsible for planning
the strategy understand the theories of human learning. The participation of
people in decision making and training is essential to ensure long-term
involvement and commitment.

Organisational changes and developments, on the other hand, have

following five characteristics:

They are planned.

They take place organisation-wide.

They are initiated and managed from the top.

 They attempt to increase the organisations effectiveness.

They are involved in changing not only the structure but also the
organisations processes.

The following three-step process promoted by HRD should help to

bring about organisational and individual change required for QM:

Step 1: Establish a number of key cultural parameters to provide the basis for
a common understanding throughout the company as to the style or way of
working the organisation is seeking to encourage. The parameters should be
selected with considerable care and forethought and must be applicable to all
levels of the organisation. They should highlight fundamentals as opposed to
superficial aspects of management style.

Step 2: Devise a means of measuring the parameters and assess the current
position against these parameters. Relate the extent of the presence or
absence of the key behaviour parameters identified to the effectiveness of the
organisation and for individual departments. The connection between
organisational effectiveness and corporate culture would strongly support the
efforts to bring about cultural change and identify a desirable future situation.

Step 3: Develop an action plan, which will address the weaknesses and
achieve the transition. This could be done, away from the workplace, in a
traditional training forum, or at the workplace by means of facilitative support.

For the change to take roots a new mind-set is required. People with an
intoxicating and compelling vision, possessed with an impulse to excel are the
only ones who would change for the better on a continuous basis. They ought
to have a missionary zeal and be prepared for hard work. For establishment of
an environment conducive to accomplish the acceptance of a new paradigm,
as envisaged in QM, Human Resource Development has to playa key role
through setting of new objectives aligned with its role and guiding the
organisational cultural change process.
8.2.8 COST OF QUALITY

In spite of the organisational benefits that a successful QM program

can provide, its real value will ultimately be determined by its ability to
contribute to profit. The top management always likes to have tangible proof,
in terms of profit improvement, for continuing all the efforts and providing the
resources to continue quality improvement programmes. This is provided by
collection, reporting and use of quality related cost information. .

Quality costs are a measure of all costs associated with achievement of

product quality. Traditionally, collection and analysis of quality related costs
received less attention because of the lack of understanding of the concept
and difficulties in measuring and linking it with the organisations cost system.
However, the measurement of these costs helps to:

highlight to all employees the importance of product and service

quality to business profitability.

form a basis for decision making.

identify areas which need immediate attention and

improvements.

measure the effect of action taken.

budget the expenditure for accomplishing the QM program.

For achieving these purposes an understanding of quality costs and a

program for evaluating these is required. Quality costs incurred in
manufacturing are divided into four major classifications: prevention,
appraisal, internal failures and external failures.

1. PREVENTION COSTS

This category involves all those activities aimed at preventing defects,

defective products and errors, on the one hand and building acceptable
quality into products and services, on the other. It includes designing,
implementing, maintaining and auditing - the quality system where such a
system is actually identified. It includes planning, training, seminars, customer
surveys and consumer research, oriented at improving quality.
 However, prevention, as is used, is a negative term and should be
replaced in QM by a new phrase as cost of building acceptable quality. The
term thus will not be related only to quality control activities, which aim at
preventing defects and errors but will be related to all employees and
operations.

(2) APPRAISAL COSTS

These include those costs incurred in attempting to measure the extent to

which QM objectives are met. These activities include measuring, inspecting,
testing and auditing products and performance to determine conformance with
acceptable quality levels, standards of performance and specifications. These
include evaluating products, components and purchased materials. It includes
performance of employees, performance of equipment and machines, receiving
field tests, laboratory tests, quality audits, life testing, quality data processing,
failure testing and random time sampling for appraisal.

3. FAILURE COSTS

These can be classified into two categories, internal failure cost and
external failure cost.

(a) Internal failure costs: These are the costs, which are incurred because of

defects in the product before its shipment to a customer. These include:

(1) Scrap and Rework: For the purpose of obtaining operating quality costs,
scrap represents the total cost of defective product (material, labour and
overheads) which can not be economically reworked to conform to
requirements. This includes the cost of material or product, which is discarded
because of irreparability or uneconomical rework, the total cost incurred in
selling and price differential required to sell a non-conforming substandard
product, and productive labour hours lost.

Rework cost represents the cost of correcting defectives for reuse. It includes
material and labour cost incurred in rework and the cost of inspection and test
additionally required.

(2) Downtime costs: This includes costs incurred because of loss of

productive time of engineers, workers etc and the machines.

(b) External failure costs: These represent all costs incurred on defective
products after it is delivered to a customer. These include:

(i) the cost of investigating and resolving individual customer

complaints.

(ii) costs associated with receipt and replacement of defective

products returned by the customer.

(iii) the cost to correct defects according to the required

specifications.

(iv) the total cost of additional claims to be paid to the customer to

cover legitimate expenses.

(v) liability costs and Penalty costs.

4. ANALYSIS AND USE OF QUALITY COSTS

The quality cost data collected through a systematic program needs to

be analysed for orienting efforts to reduce them. For this, it must be realized
that for each failure there. is an assignable cause, causes can be discovered
and prevented and prevention is always economical. The strategy for
analysing quality costs involves:

i. Use zero defect program to eliminate failure costs.

ii. Review the quality standards for their utility.
iii. Use cause and effect analysis to reveal failures and causes for
it.
iv. Eliminate through effective corrective action.

8.2.9 QUALITY CIRCLES

The concept of Quality Circle is essentially Japanese. After the World

War II, the Japanese economy crumbled and the product quality suffered. To
improve this, Dr. Kaoru Ishikawa of Japan made a successful experiment of
establishing a Quality Circle in order to create an awareness of quality. Quality
Circle was formed for the purpose of propagating Q.C. philosophy. The
concept of Q.C. is based on the managements faith in the capabilities of
employees. A. Q.C. is only a forum to operationalise this faith.

Quality Circle essentially is a participatory management process where the

actual involvement of people at the grass root level of the organisation is
effectively applied. Q.C. is a .small voluntary group of people from the same work
area who meet together, on a regular basis, for the purpose of identifying,
selecting, analysing and solving work related problems of quality, productivity,
cost reduction, safety, customer service. The problems are chosen in their work
area, leading to improvement in their work effectiveness and enrichment of their
work life. The Q.C. is a group of persons consisting of 3 to 12 employees doing
similar work and drawn from the same section of the unit.
The group members volunteer to meet regularly for one hour every week or
fortnight usually in Paid time, to identify all the problems or opportunities for
further improvement in the work area. Thereafter, the group takes up one
problem after another, collects pertinent data, . analyses them, applies
different quality circle tools, techniques and based on their findings make their
recommendations and present solutions to the management for decision
making.

Quality circle thus is a people building philosophy, providing self

motivation and happiness in improving environment without any compulsion or
monetary benefits. It is primarily based upon the recognition of the value of the
work doer as a human being, as someone who willingly involves his wisdom,
intelligence, experience, attitudes and feelings on his job. A large amount of
creative and productive potential remains to be explored at work places. If
people are convinced that the management trust them to be capable of
responsibility and contribution, an explosion of creativity can spontaneously
permeate the entire organisation. The people, the doers of actual jobs, are the
real experts on the intricacies of their jobs. They can make valuable
suggestions on many small things that go wrong or are not fully utilised.
Quality circle provides them with the right environment for meaningful
contribution.
 The organisation structure of the Quality Circle is pyramidal. It consists
of:

1. Non-members:

Who help in implementing decision of Q.C.

2. Members:

They are the basic elements of Q.C who voluntarily join the circle, take
active part in its working and performance. They identify their problems,
discuss them, use the techniques, identify causes and arrive at
solutions. They also present and demonstrate their solutions to the
management.

3. Leader:

He is mutually elected by the members to regulate the working of the

group, to ensure members involvement, to chalk out action plan, to
assign tasks and to maintain discipline and decorum during meetings.
He trains members, organises and keeps all records.

4. Facilitator:

He is nominated by the management and is responsible for the

successful performance of the circle. He ensures continued and visible
management support, availability of necessary facilities, timely review
and organises management presentations.

5. Steering committee:

It is constituted of major heads of departments, to take an overview of

circle activity, to take decisions on important recommendations, to give
major policy guidelines and direction and to decide financial support.

6. Top management:
It provides support, finance and encourages healthy growth of Q.Cs.
 7. Coordinating agency:

It co-ordinates all activities of Q.Cs in the organisation, keeps records,

interacts with all Q.C. members for effective performance of the circles.

The Q.Cs by using various techniques such as brainstorming, data

collection, pare to analysis, line graph etc. achieves the following objectives

change in attitude from I dont care to I do care

continuous improvement in quality of work life through

humanization of work

self development

development of team spirit.

Improved organisational culture.

Q.C. thus is a widely accepted team work participative management

process to bring about total involvement of people at all levels.

8.3 SUMMARY

QM is not uni-dimensional approach but is multifaceted in nature.

Understanding these facets is essential to promote a successful quality
improvement program. Focussing only on a few dimensions and overlooking
others would create problems leading to the failure of the program. An
integrated mutual supportive approach from all parts of the organisation,
focussing on all vital components of QM is required to achieve the desired
goal.

8.4 KEYWORDS

Total Quality - an approach to improving the effectiveness and

Management flexibility of business as a whole

Accountable - Bound to give an account

Quality Policy - principles and rules of conduct designed and
formulated to govern the relationship with
Employees

Quality Improvement - groups of people who are responsible for

Team making actual improvements in processes

Quality Circles - participatory management process where the

actual involvement of people at the grass root
Level

8.5 SELF-ASSESSMENT QUESTIONS

1. Explain the nature, features and importance of various elements

that constitute QM.

2. What is the perspective scenario of QM and TQM?

3. How can you train the managers for QM?

4. How to identify the basic pattern of quality costs, and the role of
vendors in QM?

5. Discuss the concept of Quality circles

8.6 REFERENCES/SUGGESTED READINGS

1. Adam, E. Hersaur, J. and Ruch, W.A., Productivity and Quality,

England

Cliff, 1981, NJ: Prentice Hall.

2. Aktinson, P.E., Creating Culture Change: a key to Total

Quality
Management, 1990, IFS Publication.

3. Garvin D.A., Managing Quality, the Free Press, 1988, NY:

Macmillan.

4. Mohanty, R.P. and P.R. Lakhe, Handbook of Total Quality

Management, 2000, New Delhi: Jaico Publishing House.
5. Stanton, W.I., Fundamentals of Marketing, 1986, Singapore:
McGraw Hill. 2000
 LESSON NO. 9

INDUSTRIAL RELATIONS AND TECHNOLOGICAL CHANGE

Structure:

9.0 Objective

9.1 Introduction

9.2 Presentation of Contents

9.2.1 An Industrial Relations Concept

9.2.2 Industrial Relations facing Technological Innovation

9.2.3 Factors Influencing Change

9.2.4 The Importance and Objectives of Sound Industrial

Relations

9.2.5 A Sound Industrial Relations System at the National and

Industry

Level

9.3 Summary

9.4 Keywords

9.5 Self-Assessment Questions

9.6 References/Suggested Readings

 9.0 OBJECTIVE

The objective of this chapter is to provide:

an overview of events and factors influencing industrial relations

industrial relations in changing technological environment

the importance of sound industrial relations

policy formulation for sound industrial relations

the available options to transform a conflictual system into a

more cooperative one.

9.1. INTRODUCTION

Besides employers and employees, governments and institutional

bodies have also become relevant actors in the Industrial Relations, with the
aim to define policies related to labour related problems. New information and
communication technologies and their particular characters determine deep
changes in industrial organisation and, particularly, in work culture. Relevant
consequences are arising with regard to traditional content of Industrial
Relations, such as professional skills, future career perspectives, work
satisfaction, working time, etc.

The role of public authorities is to broaden the range of choices,

eliminating constraints and, sometimes, to guarantee procedures. In addition, old
tools of unionist bargaining have to be updated and to assume a different
character, trying to improve workers autonomy. At a general level, there emerges
a need of a more consistent industrial democracy in a socio-economic framework
continuously evolving towards the so-called globalisation.

Technological innovations, linked to network and multimedia work

development clearly emphasise meanings and forms of distance working.
During the recent past, at organisational level, telework has enlightened a
need of a flexible and centralised management of the workforce, asking for a
precise individualisation of formal relationship between parties, usually
determined by national labour law.
9.2 PRESENTATION OF CONTENTS

9.2.1 An Industrial Relations Concept

Industrial Relations or Labour Relations, is an expression used not only for

relationships between employers and Trade Unions, but also for those involving
Government with the aim of defining policies, facing labour problems.

As an Industrial Relations definition we can accept the following

concept of the set of:

rules for employment management;

methods defining those rules;

typology of actors (not only employers and workers organisations and

their representatives, but also State and institutional bodies);

interaction processes between these entities.

Historically (in industrialised western countries) the various styles of

relations can be summarised in a double typology: participative and conflicting:
the first is highly regulated by government and industry based, and last one is
less regulated by government and firm based. Drawing up collective agreements,
i.e. the last step of a negotiation, is the traditional objective of the parties. The
customs across which rules have been accepted must be shared by Industrial
Relations actors: employers, organisations, management and its organisations,
State and institutional organisms, Trade Unions. All they aim to stipulate collective
bargains to take under control social conflict.

9.2.2 Industrial Relations facing Technological Innovation

Now, when Industrial Relations impact with new information and

communication technologies, their traditional framework is deeply changing. In
fact, Information Communication Technologies are:

horizontal and pervading all sectors, more and more reciprocally

linked;
 dynamic, i.e. rapidly innovating;
 labour and capital saving and, principally, flexible (i.e. suitable
for many purposes).

Such changes themselves reflect alterations at industrial or

organisational levels, as well as at the single job level. At the organisational
level (professional requirements, the workplace environment, health and
safety in the workplace, future career prospects, work satisfaction, working
hours and remuneration levels) constitute further aspects of working life,
which can be modified considerably by technological changes. These changes
can, in fact, be even more striking in newly founded industries that incorporate
the latest technological developments and working organisational models
which are quite different from those already operating in the same sector,
division or area.

Classical studies on technological innovation have focused on lack of

direction in technological planning as a whole and disregard for the impact of
any mutations. The impact on labour is more the result of a series of decisions
made by those directly involved in introducing new technologies, including
those who are responsible for the introduction of changes, for management
norms, as well as those who have to work with the new technologies, i.e. the
workers and their Trade Unions. In order to achieve specific organisational
objectives, conscious technological choices may be adopted. For example,
one particular technological option may be preferred on the basis of its
potential to reduce costs or rationalise procedures, without taking into account
the effect this can have on occupational levels or the physical conditions of the
workers involved. The operational area, which deals with technological
choices, has been described by several authors as a project area.

When changes are programmed or carried out, technological choices

may frequently be affected, unconsciously, where alternative technological
options or project areas are simply unknown or not taken into consideration.
For example, in many industries, when a new data processing system is being
developed, the Systems Analyst is never asked to consider the impact of the
new system on the people who have to work with them, thus, the possibility of
satisfying both economic and social objectives are never taken into account.
 The choice for those, who are directly involved in the implementation
and management of the changes, may seem limited by the range of elements,
such as, the economic position of the industry in question, temporal
obligations, the lack of experience and organisational pressures. Such
constraints can apply to Trade Unions representatives as much as to industrial
management. The role of public authority is to broaden the range of choices,
eliminating constraints and making alternative choices known to those directly
involved. Furthermore, it must guarantee procedures, which ensure that the
best choices are introduced. This refers not only to the span of economic and
social policies, which accompany the changes, but also to those institutional
regulations, which are at the basis of the changes introduced at the work-
place level.

Forcing Limits of Traditional Trade Unions Strategy

At a general level, one can understand that the dialectic between

technology and Industrial Relations System appears in our post-industrial
society very complex, in accordance with the difficulty of Trade Unions to face
new processes of technological re-organisation. After the advent of computer-
based work in the Seventies, Trade Unions in industrialised countries discover
their own methods inadequate to represent different positions and
professional novelties from the labour market. While management strategies
and practices often try to change some of the rules, or the whole Industrial
Relations System, Trade Unions point to concentrate their efforts on a new
confederate organisational system. Consequently, the old tools of their action
and, among these, the collective bargaining, assume a different character:
they try to improve workers autonomy, to reach the drawing of a more
consistent level of industrial democracy. Within a general framework of
negotiation on technological innovations, Trade Unions warn either the crisis
of previous organisational models (accompanied by a problem of decreasing
representation), as well as the need of information and participation to choices
concerning introduction of new technologies in traditional production
processes.
 In particular, Trade Unions try to define new strategies facing the
problem of companies re-organisation but in a broader sense, also to build
new-styled agreements in a socio-economic framework more and more
evolving towards the so-called globalisation of economy.

Telework and New Bargaining Demand

In any case, it is necessary to consider that, in a next future,

technological innovations will be linked to networked and multimedia
development, emphasising meanings and forms of distance working, or
telework (in its various typology). The Industrial Relations framework has
supplied with similar extension of legal regulation. At organisational level,
telework assumes a flexible and not centralised management of the work
force. So, it requires a precise individualisation of formal relationship between
two parties, usually determined by national labour law.

A fundamental issue of telework related to Industrial Relations regards

new skills and competencies. The loss of traditional skills is strictly related to
the possibility of reaching new ones. More exactly, it is very important to deal
with the new working aptitudes requested by these absolutely new material
and immaterial conditions.

Even more, as many European experiences show, the flexibility

increases the need of a regulating framework. Teleworkers, as persons
involved in a social network, claim for a clear definition on references,
generally refusing - if skilled - to work in a sort of stand-by form, or
sometimes accepting it, if unskilled. Nevertheless, the work flexibility needs
rules enabling to exercise some fundamental rights. This is important for
safeguarding the teleworker from the ambiguity linked to post-fordist new
paradigms.

9.2.3 Factors Influencing Change

Management Practices Changes in labour relations within an organization

are often affected by management practices. Therefore, attitudes towards
industrial relations should be understood in the background of theories
and practices relating to the management of enterprises and organizational
behaviour. In this context it is useful to note two important - and diametrically
opposite - theories about management. The first and earlier theory is to be
found in the scientific management school (best represented by F. Taylor),
which viewed the worker as a mere cog in the organizational structure. Since,
according to Taylor, the worker does not possess creative ability let alone
intelligence and wisdom, the elements of a human-oriented management
system which promotes sound industrial relations such as communication,
consultation and participation, found no place in the theory.

The hallmarks of organizations based on this model are centralized and

clear lines of authority, a high degree of specialization, a distinct division of
labour, and numerous rules pertaining to authority and responsibility, and
close supervision. This concept of management can be seen as an ideal
breeding ground for an industrial relations system based on conflict rather
than on cooperation. The opposite theory, appropriately styled the human
relations school, had as one of its earliest and greatest exponents, Douglas
McGregor. He gave an impetus to the development of a management theory,
which focused on the human being as part of an enterprise, which, in turn,
was viewed as a biological system, rather than as a machine. Human
relations, trust, delegation of authority, etc. were some of the features of this
theory. In the preface to his classic The Human Side of Enterprise, Douglas
McGregor underlined the necessity to learn about the utilization of talent,
about the creation of an organizational climate conducive to human growth.

This volume is an attempt to substantiate the thesis that the human side of
enterprise is all of a piece - that the theoretical assumptions management holds
about controlling its human resources determine the whole character of the
enterprise. They determine also the quality of its successive generations of
management. Two basic realities of an organization in McGregors model is the
dependence of every manager on people under him and the potential of people to
be developed to match organizational goals. He, therefore, postulated that people
are not, by nature, resistant to change in an organization, and that people have
the potential to be developed and to shoulder responsibility. As such,
managements main task is to organize
business in such a way as to match peoples goals with organizational ones.
McGregor believed that the dynamism for organizational growth is found in the
employees of the organization. It could be said that in McGregors Theory Y
(as it is called) is to be found the essence of human-oriented management and
workplace industrial relations systems. The events noted in the succeeding
paragraphs which are compelling enterprises to pay greater attention to the
human factor in management, serve to vindicate McGregors basic theory
propounded as far back as 1960, if not earlier. However, subject to exceptions
(such as Japan in Asia) most large enterprises continued to be dominated by
hierarchies. This is reflected in the classic strategy, structure, systems (the
three Ss) of modern corporations, vividly expressed by two writers:

Structure follows strategy. And systems support structure. Few

aphorisms have penetrated western business thinking as deeply as these two.
Not only do they influence the architecture of todays largest corporations but they
also define the role that top corporate managers play. As explained by Bartlett
and Ghoshal, in this concept of an enterprise top level managers see themselves
as the designers of strategy, the architects of structure, and the managers of
systems. The impact of the three Ss was to create a management system, which
minimized the idiosyncrasies of human behaviour, emphasized discipline, focus
and control, and led to the view that people were replaceable parts. The basic
flaw - particularly in the context of todays globalised environment of this concept
is that it stifled the most scarce resource available to an enterprise: the
knowledge, creativity and skills of people. Successful enterprises have now
moved away from this corporate design, and their philosophy, which has
transformed corporations enabling them to compete in the new competitive
environment, consists of the following:

First, they place less emphasis on following a clear strategic plan than on
building a rich, engaging corporate purpose. Next, they focus less on formal
structural design and more on effective management processes. Finally, they are
less concerned with controlling employees behaviour than with developing their
capabilities and broadening their perspectives. In sum, they have moved beyond
the old doctrine of strategy, structure, and systems to a softer, more organic
model built on the development of purpose, process, and people.
Those enterprises which have affected a successful transformation to a more
people focused organization recognize that the information necessary to
formulate strategy is with their frontline people, who know what is actually
going on, whether it be in the marketplace or on the shop floor. The chief
executive officer, for instance, can no longer be the chief architect of strategy
without the involvement of those much lower down in the hierarchy. How do
these developments relate to enterprise level labour relations? In essence,
they heighten the importance of the basic concepts of information sharing,
consultation and two-way communication. The effectiveness of the procedures
and systems which are established for better information flow, understanding
and, where possible, consensus building, is critical today to the successful
management of enterprises and for achieving competitiveness.

As such, the basic ingredients of sound enterprise level labour relations

are inseparable from some of the essentials for managing an enterprise in
todays globalised environment. These developments have had an impact on
ways of motivating workers, and on the hierarchy of organizations. They are
reducing layers of management, thus, facilitating improved communication.
Management, today, is more than an activity rather than a badge of status or
class within an organization, and this change provides it with a wider
professional base. The present trend in labour relations and human resource
management is to place greater emphasis on employee involvement,
harmonious employer -employee relations and mechanisms, and on practices,
which promote them. One of the important consequences of globalization and
intense competition has been the pressure on firms to be flexible. Enterprises
have sought to achieve this in two ways.

First, through technology and a much wider worker skills base than
before in order to enhance capacity to adapt to market changes. Second, by
introducing a range of employee involvement schemes with a view to
increasing labour-management cooperation at the shop floor level, necessary
to achieve product and process innovation. Achieving flexibility does not
depend on the absence of unions. Organization flexibility depends upon trust
between labour and management. It implies that workers are willing to forego
efforts to establish and enforce individually or through collective action
substantive work rules that fix the allocation of work, transfer among jobs, and
workloads. Organizational flexibility also implies that workers are willing to
disclose their proprietary knowledge in order to increase labour productivity
and the firms capacity for innovation. Manufacturers in Japan and Germany
were more successful than those in Britain and France in achieving this
flexibility. The former two countries, after World War II, institutionalized labour
management consultation.

Many organizations have successfully transformed themselves to

promote the role of trust. In both strategies involving the use of technology
and promotion of innovation, employees are a critical factor. The requirement
of organizational flexibility and its industrial relations and human resource
implications have had a major impact on the way organizations are structured
(less hierarchical), how authority within the firm is exercised (less unilateral),
and on how decisions are arrived at and work organized (through information
sharing and consultation, transfer of more responsibility to employees and
cooperative methods such as team work). Traditional assumptions that
efficiency is achieved through managerial control, technology and allocation of
resources have given way to the view that efficiency is the result of greater
involvement of employees in their jobs, teams and the enterprise.
Organizations which have made this shift tend to reflect the following
characteristics: few hierarchical levels; wide spans of control; continuous staff
development; self managing work teams; job rotation; commitment to quality;
information sharing; pay systems which cater to performance rewards and not
only payment for the job; generation of high performance expectations; a
common corporate vision; and participative leadership styles. It hardly
requires emphasis that achieving most of these requires training.

The earlier generations recipe for success hinged on hard work, smart
moves, the right business and political connections, monopolies, protectionist
barriers, subsidies, access to cheap funds and, in many cases, autocratic
leadership and a docile labour force. The global village is this systems
nemesis.. the new Global-Asian manager has to exercise greater levels
of leadership than before, and balance this with being an entrepreneur,
modern manager and deal-maker skilled at public relations. To this has to be
added coaching, team-building and motivating the company, the ability to
visualize, plan strategically, market and re-engineer products and services,
and the belief in a customer driven culture. None of these shifts is feasible
without a substantial change in traditional modes of dealing with people in an
enterprise.

The labour market was dominated by the classical economics view,

which espoused free and unregulated labour markets. This laissez-faire
capitalism led to social injustices and inequities since labour did not have the
power to bargain with employers on terms, which even approached a degree
of equality in bargaining strength. Industrial relations, therefore, initially came
to espouse a degree of labour market regulation to correct this unequal
bargaining power. Consequently, industrial relations developed in the context
of the theory that problems in labour relations emanate largely from market
imperfections, which operate against the interests of labour and cause
imbalances in the power relationships of employers and employees. These
imperfections were external to the enterprise.

Additionally, the dominant position of the employer in what was formerly

called the master and servant relationship prevented labour from enjoying
rights. These causes for labour problems - external and internal to the
enterprise - needed to be addressed through a range of initiatives, both by the
State through protective labour laws, conciliation and dispute settlement
machinery, by voluntary action on the part of employees to protect themselves
and further their interests through trade unionism (but backed by State
interventions to guarantee this right in the form of freedom of association), and
by redressing the balance of power (through collective bargaining). The focus
on relations external to the enterprise - especially through national and
industry level collective bargaining - was initially welcomed even by employers
in several industrialized countries because it reduced competitive advantage
based on labour costs. Besides, collective bargaining in particular transferred
one of the most conflictual aspects of the employment relationship - wages -
out of the workplace, and made it the responsibility of the respective
representatives of employers and employees. Unions naturally welcomed it as
it gave them an influential base outside the workplace. When transferred to
developing countries, this concept sometimes had disastrous consequences
because it facilitated the politicization of unions.

Moreover, the workability of a system of industrial relations in which the

emphasis was on decisions outside the enterprise presupposes a high degree
of literacy, education and awareness among employees able to monitor the
actions of their representatives operating at a level a removed from the
workplace. However, regulation of the external labour market did not
necessarily address all the causes of labour problems. A more pluralistic view
recognized that labour problems or issues do not relate only to conflict
between employers and employees. They include many other forms of
problems such as low productivity, absenteeism, high labour turnover, lack of
job security, unsatisfactory or unsafe working conditions, non-recognition of
performance in standardized wage systems, and lack of motivation. Many of
these problems cannot be addressed through measures directed purely at the
external labour market, and require measures to be taken within the
enterprise.

Therefore, another view, emanating from human resource management

and increasingly important since the 1980s, is that labour problems arise not so
much from factors external to the enterprise, as from unsatisfactory management
of human resources within the enterprise. Corrective action should include the
installation of human resource management policies and practices embodied in
concepts such as recruitment and selection, leadership and motivation, employee
development and retention, etc. The objective is to ensure a convergence of
organizational and individual goals, and to balance individual and organizational
needs. With the pressures on enterprises to adapt and change, it is not surprising
that employers are pushing for greater concentration on issues at the enterprise
level. In the final analysis, the quality of an industrial relations system has to be
judged by how it works in practice - and that means at the workplace level. This
relative neglect provided the
space for the rise of human resource management. Neither view is entirely
correct or entirely incorrect, because industrial relations problems do flow from
circumstances both external and internal to the enterprise. The problem is that
there has been over-emphasis on the environment external to the enterprise,
so that inadequate attention has been paid to the policies and practices
needed within the enterprise. As a result, we may have lost sight of the fact
that in the final analysis sound labour relations have to be built up from within
an organization.

The environment external to the enterprise should be facilitative, and at

times protective in the sense that it needs to prescribe certain basic
standards relating to such areas as social security, safety and health, freedom
of association, weekly and other holidays and rest periods, etc.

In more recent times industrial relations has been influenced by other

social sciences such as organizational psychology and behaviour. Traditionally
economics and law were two main influences on industrial relations, which led
to a concentration on macro level industrial relations, and therefore on unions,
government and collective bargaining. Organizational behaviour has been
influenced by psychology, which centres on the individual, and by social
psychology, which focuses on relationships between people and on group
behaviour. It is easy to see, therefore, why human resource management has
been influenced by organizational behaviour. Paradoxically industrial relations,
though dealing with relation, has until recently largely ignored the social
sciences relevant to behaviour and human relations. While labour problems
are the result of imperfections in the employment relationship, industrial
relations should be seen as the theories and methods, which have been
developed over time to address and correct these problems, in both the
external and internal labour markets.

During the past decades, governments viewed labour relations as a

means of preventing or minimizing conflict. In South and South East Asia this
objective was achieved through dispute prevention and settlement
mechanisms external to the enterprise (e.g. conciliation, arbitration and labour
courts). In South Asia, the objective was also achieved through restrictions or
prohibitions on the freedom of action of employers in matters, such as
termination of employment, closures and even transfers of employees. On the
other hand, several South East Asian countries resorted to measures to
restrict trade union action and to control unions, as well as to avoid union
multiplicity. While in South Asia, the focus of industrial relations was on equity
from the point of view of workers and unions, in South East Asia the emphasis
was on economic efficiency and less on worker protection laws. Low
unionization in many Asian countries, strong governments in South East Asian
countries and South Korea, and perceptions that unions could be potential
obstacles to the direction of economic development led to a relative neglect of
industrial relations.

Moreover, hierarchical management systems and respect for authority,

which have mirrored the external social system, have been inconsistent with
consultation, two-way communication, and even with the concept of
negotiating the employment relationship. Japan, however, was an exception,
where, since the 1960s, workplace relations and flexibility facilitated by
enterprise unionism dominated industrial relations in the larger enterprises.
Australia and New Zealand continued to focus on centralized industrial
relations, though the emphasis has radically changed in New Zealand during
this decade, and is changing in Australia. But major changes are taking place
in Asia. Employers, as well as some governments, are viewing labour relations
from a more strategic perspective i.e. how labour relations can contribute to
and promote workplace cooperation, flexibility, productivity and
competitiveness. It is increasingly appreciated that how people are managed
impact on an enterprises productivity and quality of goods and services,
labour costs, quality of the workforce and its motivation, and on the prevention
of disputes as well as on aligning employee aspirations with enterprise
objectives International Factors. The establishment of a sound or harmonious
industrial relations system is a central theme for governments, employers,
workers and their representatives, in their endeavours to achieve economic
and social development. Several changes on the international scene presently
exert a major influence on how industrial relations need to be viewed.

The internationalization of business, intense competition and rapid

changes in technology, products and markets has increased the need for
economies and enterprises to remain or become competitive. These trends
have, in turn, necessitated a greater reliance than before on workers skills,
productivity and cooperation in achieving competitiveness. The new
information technology, the limits of which are not known in terms of its
potential to effect change, is exerting a tremendous impact on the structure of
organizations, the nature of work and the way it is organized, and even on the
location where work is performed. In societies of the future information and
knowledge will be as, in fact, they already are-crucial to competitiveness.
Technology is already facilitating changes in organizational structures so as to
create flatter organizations. This has resulted in less management by
command and supervision, in more emphasis on cooperation, information
sharing and communication, and in a more participative approach to
managing people.

Modern technology now makes it possible for aspects of work to be

performed outside the enterprise, for example from home, and even outside
national borders, and this trend is being given a further push by the influx of
more females into employment and their preference in some cases, for part-
time work. Developing countries are also feeling the impact of these changes.
Many countries are undergoing a process of industrial restructuring which, in
some cases, include privatization of public sector undertakings and
technology upgrading. This process has resulted in several social
consequences, such as redundancy, all of which have sometimes strained the
relationships between employers and workers (and unions) and between the
latter and the government. Another feature is the changes occurring in the
workforces, to varying degrees, in both industrialized market economies and
developing economies. Many countries have witnessed the emergence of
workforces with higher levels of education and skills which need to be
managed in a manner different from the way in which employees, especially
blue collar employees, have, hitherto, been managed. This factor will assume
more critical proportions in the future as a result of the increasing importance
of the service sector and the growth of knowledge-intensive industries.

The skills of an employee are, therefore, an issue on which the

interests of employers and employees converge, and the development of the
employee is now of mutual advantage to both employers and employees.
Consequently, there is a greater need than before for a cooperative and
participative system of industrial relations. Further, the many emerging work
arrangements do not fit into the traditional employment relationships. Increasing
numbers of enterprises are differentiating between the core and peripheral
workforce, which consists of those whose work can be performed by persons
outside the enterprise who specialize in it. The tendency is to contract with
outsiders to perform this work. Even manufacturing companies are becoming
essentially assembly firms, and many service organizations now act as brokers,
connecting the customer with a supplier with some intervening advice. Another
category of employees consists of the increasing number of temporary and part-
time employees in the rapidly expanding service industries, some of which
experience peak periods (hotels, airlines, shops) requiring a flexible labour force.
Thus, instead of one workforce, we are moving towards these various groups,
each with different contractual arrangements and requiring to be managed
differently. The indications are that at the beginning of the next century, less than
half the workforce in industrialized countries will be in full-time employment, as we
know it. These trends will not be confined to the highly industrialized countries,
but will appear in the fast growing economies of Asia as costs rise,
competitiveness increases, and more women participate in economic activity. The
role of unions is changing. During the cold war, political considerations sometimes
dominated or influenced union activities, attitudes and their role, especially in
some of the developing countries.

Unions are now gradually concentrating more on their traditional role in

industrial relations, which is to improve the working conditions of their
members and to protect their interests through negotiation. As a result of
intense competition for goods and services and the recognition of the
enterprise as an important engine of growth to an extent unknown in the past,
the centre of gravity of industrial relations is now more than ever before the
workplace, and managing human resources is now receiving the attention it
should have been given much earlier.

9.2.4 The Importance and Objectives of Sound Industrial Relations

A sound industrial relations system is not capable of precise definition.

Every industrial relations system has to take into account, and reflect cultural
factors. Systems cannot change culture, but only behaviour within a cultural
environment. As such, one can only describe some of the elements, which
have generally come to be recognized as contributing to a sound industrial
relations system. These elements would constitute a sort of check-list. A
relatively sound industrial relations system will exhibit some of these
elements. A sound industrial relations system is one in which relationships
between management and employees (and their representatives) on the one
hand, and between them and the State on the other, are more harmonious
and cooperative than conflictual and creates an environment conducive to
economic efficiency and the motivation, productivity and development of the
employee and generates employees loyalty and mutual trust. Industrial
relations itself may again be described as being concerned with the rules,
processes and mechanisms (and the results emanating there from) through
which the relationship between employers and employees and their respective
representatives, as well as between them on the one hand and the State and
its agencies on the other, is regulated. Industrial relations seek to balance the
economic efficiency of organizations with equity, justice and the development
of the individual, to find ways of avoiding, minimizing and resolving disputes
and conflict and to promote harmonious relations between and among the
actors directly involved, and society as a whole.

The rules, processes and mechanisms of an industrial relations system

are found in sources such as laws (legislative, judicial, quasi-judicial), practices,
customs, agreements and arrangements arrived at through a bipartite or tripartite
process or through prescription by the State. Industrial relations operate at
different levels - at the national level, at the level of the industry and at the
enterprise level. The elements, which reflect a sound industrial relations system
at all these levels, are not necessarily the same. At the national level industrial
relations operates so as to formulate labour relations policy. In market economies,
this is usually done through a tripartite process involving government, employers
and workers and their representative organizations. At the industry level,
industrial relations often take the form of collective bargaining between
employers organizations and unions. This, process may result in determining
wages and other terms and conditions of employment for an industry or sector. It
may also result in arrangements on
issues, which are of mutual concern such as training, ways of avoiding or
settling disputes, etc.

At the enterprise level the relationship between employers and workers

is more direct, but unions may represent the interests of workers. Employers
organizations, however, are not usually involved (though sometimes they are
when negotiations take place between them and unions in respect of
enterprise issues) at the enterprise level in representing the employers
interests with workers or their union, but this does not mean that they do not
have an important promotional role at this level. Sound industrial relations at
the national level build trust and confidence between representatives of
workers and employers. Sound relations at the enterprise level build trust and
confidence between workers and management, which is the point at which the
system must ultimately be effective. Effectiveness at one level would naturally
have some impact on the other. A sound industrial relations system requires a
labour management relations policy (LMRP). There are many specific
objectives of such a policy, all of which go to make up the policy at the
national level. The following are some of the objectives, the emphasis varying
from country to country depending on the priorities and stage of development
of each of them at any given point of time:

Employment and job security and increased employment opportunities.

Raising living standards through improved terms and conditions of

employment.

Productivity improvement, which enables employers to be more

competitive and to increase their financial capacity to raise the living
standards of the employees.

Minimizing conflict, achieving harmonious relations, resolving conflicts

through peaceful means and establishing stable social relationships.

In Western industrialized societies harmony and harmonious

relations are not explicitly referred to either as an objective or as a means,
though basically it represents an important objective in such societies.
However, this concept is explicitly referred to in many Asian societies.
Development has an economic and social dimension on the one hand and a
cultural dimension on the other. The economic and social aspects involve
guiding or influencing economic and social change in a desirable direction.
This means, not only economic development measured in terms of growth
rates and per capita incomes, but also equity in terms of income distribution
and employment opportunities, life expectancy, and population growth rates,
literacy, poverty alleviation, etc. As aptly stated by John Kenneth Galbraith, It
is one of the least advertised, and for the very affluent the least attractive, of
economic truths that a reasonably equitable distribution of income throughout
the society is highly functional.

The experience of countries and regions, which have good productivity

records, underlines the link between labour management relations and
productivity. For example, the Japanese productivity movement, which began
in the 1950s, emphasized employment security, and this fact did much to
secure acceptance by unions of the productivity movement at that time. The
Japan Productivity Centre, which was supported by the government, reached
an agreement with the national labour organization and employers on the
following matters:

In the long-term, productivity increases employment security.

Therefore, the employer should relocate redundant workers. Concrete
measures to enhance productivity should be decided through labour
management consultation, which will be promoted. Productivity gains should
be distributed fairly among management, employees and customers. The
productivity movement in Europe recognized similar principles. The underlying
theme, here relevant to the present discussion, is that all three principles
mentioned above form a part of labour management relations and
cooperation. Another important link between labour management relations
and productivity has arisen in the context of recent events in many societies
and major changes in industrial relations such as the move towards labour
market flexibility. The latter involves the need for employers to adopt, in the
interests of competitiveness, new working time and work arrangements,
atypical contracts of employment, new methods of pay and remuneration, and
control over the size of the labour force.
 These developments have partly resulted from intense competition, new
technologies, and shorter product life and so on, all of which require flexibility in
the use of resources if an enterprise is to remain productive and competitive.
These changes are more likely to achieve the objectives of increased
productivity, if they are introduced through cooperation and consensus at the
enterprise level. Therefore labour management relations and cooperation
have a vital role to play in achieving with the least possible conflict, the
changes of the type referred to above that are critical to productivity and
competitiveness in the modern enterprise. A sound labour management
relations system is important to the removal of one of the main objections of
workers and unions to productivity drives by employers. Workers and unions
have, sometimes, opposed productivity increases on the grounds that they do
not result in equitable sharing of benefits to workers and that increased
productivity may lead to redundancy.

Developing understanding of basic productivity concepts and of the

methods of increasing productivity, as well as of the formulation of equitable
productivity gain- sharing schemes help to dispel such suspicions. This task is
easier where there are mechanisms, which provide for dialogue and two-way
communication between management and workers. Labour management
relations, therefore, play a crucial role in securing acceptance by workers and
unions of the need for productivity improvement, and also in obtaining their
commitment to achieve it. Cooperation between management and workers or
unions facilitates not only a settlement of disputes or disagreements but also
the avoidance of disputes, which may otherwise arise. At the industry level,
the relationship between employers organizations and representatives of
workers is a precondition to collective bargaining. Where collective bargaining
takes place at the enterprise level, management workers/union relations
determine the success to a great extent or otherwise of collective bargaining.

At the national level, a good relationship between representatives of

employers and workers enables them to effectively participate in labour-
management relations policy formulation and to arrive at a consensus. The
importance of cooperation in industrial relations and the stability achieved
through it to gain economic competitiveness are well illustrated by Germany
and Japan. Writing at the end of the 1980s, Wolfang Streek stated: Despite its
relatively small population, West Germany is still the worlds largest exporter of
manufactured goods, ahead of both Japan and the United States. Among the
larger economies, the West German is, more than any other, exposed to world
market pressures. It is only against this background that the high degree of
stability and mutual cooperation in West German industrial relations can be
understood, and it is this stability and cooperation that has in the past accounted
for part of the countrys competitive success in world markets.

This cooperation is reflected in Germanys system of collective

bargaining (which has often shown wage restraint), in the system of co-
determination, and in the vocational training system to which employers and
unions have made a substantial contribution, thus, ensuring a highly skilled
workforce producing goods of the highest quality attractive to the global
marketplace. Though this cooperation does not imply an absence of conflict,
yet when conflict occurs it has usually been resolved through compromise
solutions. The participative management system also explains the relatively
easy acceptance by German workers of technological change.

In a broad sense, therefore, labour management relations policy

formulation (LMRP) should aim at achieving social justice through a process
of consensus by negotiation so as to avert adverse political, social and
economic consequences. Labour relations reflect the power structure in
society, and it emphasizes negotiation and reconciliation by peaceful means of
the interests of government, workers and employers who are the main
participants in the system. Consensus enables the policy formulation to be
implemented with the minimum of conflict as it has the support of all three
parties. This is, in fact, reflected in the ILOs principle of tripartism. In the final
analysis, labour management relations policy seeks to achieve development
through establishing conditions, which are fairer, more stable and more
peaceful than they are at any given moment of time. Labour management
relations policy also seeks to achieve an acceptable balance between labour
and management, necessary for a negotiated development strategy and the
establishment or preservation of a society which is essentially pluralist.
 9.2.5 A Sound Industrial Relations System at the National and
Industry Level

Labour-management relations policy formulation is one of the significant

tasks at the national level, and its successful formulation and implementation can
influence the labour relations climate at the industry and enterprise levels. Such
policy formulation, however, can be formulated not only at the national level
through a tripartite process, but also at the industry level on a bipartite basis as
between employers and workers organizations. Whether bipartite policy
formulation becomes a part of national policy depends largely on the respective
strengths of employers and workers organizations.
In some of the industrialized market economies, there is a greater likelihood
than in developing countries of bipartite policy formulations are being reflected
in national policies due to the strength of the employers and workers
organizations.

In Sweden, for instance, in the past, the agreements between the union
and the employers organization tended to be translated into national policy
instruments. The policies and methods of training of workers, for example,
reflected what the two social partners had identified as appropriate for the
industry. Or again, in Belgium, the State recognizes the two social partners as
the main formulators of social policy through collective bargaining; the two
social partners manage even the social security system. The pervasive
influence of bipartite arrangements is felt only where there is a balance of
power among the social partners. There is less likelihood of bipartism
impacting on national policy formulation in developing countries due to strong
central governments in many cases, and their assumption of the role of
identifying the direction of economic and social policies. The relative
weakness of employers and workers organizations or of one of them, or the
inability of such organizations to agree on the fundamentals of what the labour
relations policy should be, often prevents bipartism from influencing national
policy formulation.

The fundamental premise of a sound industrial relations system is the

recognition and existence of the freedom of association accorded to both
employers and workers. This freedom should include recognition of
organizations of workers and employers as autonomous, independent bodies,
subject to their domination neither by each other nor by the government.
Observance by states of the basic principles of the ILO Convention relating to
Freedom of Association and Protection of the Right to Organize No. 87 (1948)
is often regarded as the yardstick by which a countrys recognition of this
freedom is measured. In essence, the Convention postulates that workers and
employers, without distinction whatsoever, have the right to establish and to
join organizations of their own choosing with a view to defending their
respective interests, subject to national legislation, which determines the
extent to which the guarantees in the Convention will apply to the armed
forces and the police.

Such organizations have the right to draw up their own constitutions and
rules; elect their representatives in full freedom; organize their administration and
activities and formulate their programmes. Public authorities are required to
refrain from any interference, which would restrict this right or impede the lawful
exercise of this right. The organizations are not liable to be dissolved or
suspended by administrative authority. Organizations have the right to establish
and to join federations and confederations, which are entitled to the same rights
and guarantees, and to affiliate with international organizations. The acquisition of
legal personality by these organizations shall not be subject to restrictive
conditions. In exercising the rights provided for in the Convention, employers and
workers and their respective organizations are required to respect the law of the
land, which should not impair the guarantees in the Convention both in respect of
its content and its application.

9.3 SUMMARY

A sound industrial relations climate in an enterprise is essential to a

number of issues, which are critical to employers, employees and the community.
The efficient production of goods and services depend, to an extent, on the
existence of a harmonious industrial relations climate. Efficiency and quality
depend on a motivated workforce, for which a sound industrial relations climate is
necessary. Productivity - a key consideration of profitability,
the ability of enterprises to grant better terms and conditions of employment and
for economic and social development - needs a sound labour relations base.
Productivity does not depend on individual effort alone. Many mechanisms, which
contribute towards productivity gains, are workable only where there is teamwork
and cooperation e.g. small group activities, joint consultation mechanisms.
Therefore, labour management relations should be geared to create the climate
appropriate to securing the cooperation necessary for productivity growth. Labour
Management Relations (LMR) and Labour
Management Cooperation (LMC) are also important to the creation of a
culture which is oriented towards innovation, adaptable to and encourages
change, where authority is decentralized and two-way communication, risk-
taking and maximizing opportunities are encouraged, and where the output
rather than the process is what matters. Changing attitudes, awareness and
behaviour to move from counter-productivity to a productivity culture requires
the appropriate labour management relations climate based on labour
management cooperation.

9.4 KEYWORDS

Labour Management - creation of a culture which is oriented towards

Cooperation innovation, adaptable to and encourages
change

9.5 SELF -ASSESSMENT EXERCISE

1. What do you mean by Industrial Relations and Technological

Change?

2. Elaborate the perspective scenario of technology with reference

to
Industrial Relations.

3. Technology is the backbone of organisational relations.

Comment.

4. Explain the features of a sound Industrial Relations system.

5. How can you maintain the Industrial Relations at national level
with the help of technology?
6. How to promote new Industrial Relations in a post-industrial
society, avoiding the risk in a new economic context?

9.6 REFERENCES/SUGGESTED READINGS

1. Adler P. Technology and Future of Work, Oxford University

Press, New
York, Oxford, 1992.

2. Asdhir, Vijay, Management of Industrial Relations, Kalayani

Publishers, New Delhi, 1993.

3. Hyman R. E Streeck W., New Technology and Industrial

Relations, Blackwell Oxford, New York, 1988.

4. Mamoria, et al, Dynamics of Industrial Relations, Himalaya

Publishing
House, New Delhi, 2002.

5. Martin Ross M., Trade Unionism: Purpose And Form, Clarendon

Press,
Oxford, 1989.

6. Monappa, Arun, Industrial Relations, TATA Mc-Graw Hill

Publishing Pvt. Co. Ltd., New Delhi, 1996.

7. Niland J. R., Lansbury Russel D. E Verevis C., The Future of

Industrial Relations: Global Change And Challenge, Sage Thousand
Oaks, 1994.

8. Ratnam, C.S. Vekata, Globalisation and Labour-

Management
Relations-Dynamics of Change, Response Books, New Delhi, 2001.