CSJM UNIVERSITY KANPUR

INSTITUTE OF BUSINESS MANAGEMENT

MBA IVTH SEM.

SUBJECT: INDUSTRIAL RELATIONS

TOPIC: WORKER’S PARTICIPATION IN MANAGEMENT

Definition of WPM:

WPM means different things to different people depending upon their objectives and expectations. Thus, WPM is an elastic concept. For example, for management it is a joint consultation prior to decision making, for workers it means co-determination, for trade unions It is the harbinger of a new order of social relationship and a new set of power equation within organizations, while for government it is an association of labour with management without the final authority or responsibility in decision making.

Worker’s participation is a system where workers and management share important information with each other and participate in decision taking.

“Workers’ participation refers to the mental and emotional involvement of a person in a group situation which encourages him to contribute to group goals and share in responsibility of achieving them”.

A system of communication and consultation, either formal or informal, by which employees of an organization are kept informed about the affairs of the undertaking and through which they express their opinion and contribute to the management decisions.

Participation refers to the mental and emotional involvement of a person in a group situation which encourages him to contribute to group goals and share the responsibility of achievement.

“Applied to industry, the concept of participation means sharing the decision-making power by the rank and file of an industrial

organization through their representatives, at all the appropriate levels of management in the entire range of managerial action”.

According to the ILO “Workers’ participation may, broadly be taken to cover all terms of association of workers and their representatives with the decision-making process, ranging from exchange of information, consultations, decisions and negotiations to more institutionalized forms such as the presence of workers’ members on management or supervisory boards or even management by workers themselves as practiced in Yugoslavia”.

In India, WPM is in the form of, what we call Labour Management Cooperation and Workers’ Participation in Management. It is implemented through the agencies like Works Committees, Joint Management Councils (JMCs) Shop Councils, Unit Councils and Joint Councils. Notwithstanding, these different forms of WPM differ only in degree, not in nature.

Characteristics of WPM:

The following are the main characteristics of WPM:

• Participation implies practices which increase the scope for employees’ share of influence in decision-making process with the assumption of responsibility.

• Participation presupposes willing acceptance of responsibility by workers.

• Workers participate in management not as individuals but as a group through their representatives.

• Worker’s participation in management differs from collective bargaining in the sense that while the former is based on mutual trust, information sharing and mutual problem solving; the latter is essentially based on power play, pressure tactics, and negotiations.

• The basic rationale tor worker’s participation in management is that workers invest their labour and their fates to their place of work. Thus, they contribute to the outcomes of organization. Hence, they have a legitimate right to share in decision-making activities of organization.

Objectives of WPM:

v To raise level of motivation of workers by closer involvement. v To provide opportunity for expression and to provide a sense of

importance to workers. v To develop ties of understanding leading to better effort and

harmony. v To act on a device to counter-balance powers of managers. v To act on a panacea for solving industrial relation problems.

The objectives of WPM are closely netted to the ration-able for WPM. Accordingly, the objectives of WPM vary from country to country depending on their levels of socio-economic development political philosophies, industrial relations scenes, and attitude of the working class.

To quote, the objective of WPM is to co-determine at the various levels of enterprises in Germany, assign the final to workers over all matters relating to an undertaking in Yugoslavia, promote good

communication and understanding between labour and management on the issues of business administration and production in Japan, and enable work-force to influence the working of industries in China, for example.

In India the objective of the government in advocating for workers’ participation in management, as stated in the Industrial Policy Resolution 1956, is a part of its overall endeavor to create a socialist society, wherein the sharing of a part of the managerial powers by workers is considered necessary.

Objectives of WPM in India are to:

Promote mutual understanding between management and workers, i.e., industrial harmony.

v Establish and encourage good communication system at all levels. v Create and promote a sense of belongingness among workers. v Help handle resistance to change. v Induce a sense among workers to contribute their best for the cause

of organization. v Create a sense of commitment to decisions to which they were a

party.

Levels of Participation: Having known the objectives of WPM, the question then is to what extent workers can participate in decision-making process. In other words, it is important to know the extents/levels of co-determination in an organization.

Viewed from this angle, Mantras has suggested five levels of workers’ participation ranging from the minimum to the maximum. Since these levels of workers’ influence the process and quality of decision making in an organization. We are therefore highlighting here these levels briefly ranking them from the minimum to the maximum level of participation.

v Informative Participation: This refers to management’s information sharing with workers on such items those are concerned with workers. Balance Sheet, production, economic conditions of the plant etc., are the examples of such items. It is important to note that here workers have no right of close scrutiny of the information provided and management has its prerogative to make decisions on issues concerned with workers. It ensures that employees are able to receive information and express their views pertaining to the matters of general economic importance.

v Consultative Participation: In this type of participation, workers are consulted in those matters which relate to them. Here, the role of workers is restricted to give their views only. However the acceptance and non-acceptance of these views depends on management. Nonetheless, it provides an opportunity to the workers to express their views on matters

involving their interest.Here works are consulted on the matters of employee welfare such as work, safety and health. However, final decision always rests at the option of management and employees’ views are only of advisory nature.

v Associative Participation: Here, the role of the workers’ council is not just advisory unlike consultative participation. In a way, this is an advanced and improved form of consultative participation. Now, the management is under a moral obligation to acknowledge, accept and implement the unanimous decision of the council.It is extension of consultative participation as management here is under moral obligation to accept and implement the unanimous decisions of employees.

v Administrative Participation: In the administrative participation, decisions already taken are implemented by the workers. Compared to the former three levels of participation, the degree of sharing authority and responsibility by the workers is definitely more in this participation. It ensure greater share of works in discharge of managerial functions. Here, decision already taken by the management come to employees, preferably with alternatives for administration and employees have to select the best from those for implementation.

v Decisive Participation: The decisions are taken jointly by the management and the workers of an organization. In fact, this is the ultimate level of workers’ participation in management. Highest level of participation where decisions are jointly taken on the matters relation to production, welfare etc. is called decisive participation.

Forms of Participation:

v Collective Bargaining:

Collective bargaining results in collective agreements which lay down certain rules and conditions of service in an establishment. Such agreements are normally binding on the parties. Theoretically, collective bargaining is based on the principle of balance of power, but, in actual practice, each party tries to outbid the other and get maximum advantage by using, if necessary, threats and counter threats like; strikes, lockouts and other direct actions. Joint consultation, on the other hand, is a particular technique which is intended to achieve a greater degree of harmony and cooperation by emphasizing matters of common interest. Workers prefer to use the instrument of collective bargaining rather than ask for a share in management. Workers’ participation in the U.S.A has been ensured almost exclusively by means of collective agreements and their application and interpretation rather than by way of labour representation in management.

v Works Councils: These are exclusive bodies of employees, assigned with different functions in the management of an enterprise. In West Germany, the works councils have various decision-making functions. In some countries, their role is limited only to receiving information about the enterprise. In Yugoslavia, these councils have wider decision-making powers in an enterprise like; appointment, promotion, salary fixation and also major investment decisions.

v Joint Management Councils and Committees: Mainly these bodies are consultative and advisory, with decision-making being left to the top management. This system of participation is prevalent in many countries, including Britain and India. As they are consultative and advisory, neither the managements nor the workers take them seriously.

v Board Representation: The role of a worker representative in the board of directors is essentially one of negotiating the worker’s interest with the other members of the board. At times, this may result in tension and friction inside the board room. The effectiveness of workers’ representative at the board depend upon his ability to participate in decision-making, his knowledge of the company affairs, his educational background, his level of understanding and also on the number of worker representatives in the Board.

v Workers Ownership of Enterprise: Social self-management in Yugoslavia is an example of complete control of management by workers through an elected board and workers council. Even in such a system, there exist two distinct managerial and operative functions with different sets of persons to perform them. Though workers have the option to influence all the decisions taken at the top level, in actual practice, the board and the top management team assume a fairly independent role in taking major policy decisions for the enterprises, especially in economic matters.

WPM in India:

• In 1920 Mahatma Gandhi had suggested that workers contributed

labour and brains, while shareholders contributed money to enterprise, and that both should, therefore share in its prosperity.

• The influence of Mahatma Gandhi bore fruit and for the first time Joint Consultation was adopted in the Cotton Textile Industry.

• The first major step came during the enactment of Industrial Disputes Act, 1947.

• Workers’ participation in Management Bill, 1990 was introduced in Parliament which provided scope for upliftment of workers.

• The Industrial Policy Resolution had suggested that labour should be consulted in all matter concerning industrial production & works committees.

• The Joint Management Councils were established in 1950 which increased the labour participation in management.

Reasons for the failure of the WPM in India:

• Employees feel that workers are not competent enough to take decisions.

• Lower level needs of workers are not fully satisfied.

• Workers representatives who participate in management have to perform the dual role of workers spokesman and co-managers. So very few representatives are competent to perform both role.

Public Sector in India:

A public enterprise is an organization which is owned by public authorities including central state or local authorities to an extent of 50% or more.It is established for achievement of a defined set of public purpose, which may be multidimensional.

When India achieved independence in 1947, India was primarily an agricultural country with a weak industrial base. The national consensus was in favors of rapid industrialization of the economy which was seen as the key to economic development, improving living standards and economic sovereignty. Building upon the Bombay Plan, which noted the requirement of government intervention and regulation, the first Industrial Policy Resolution announced in 1948 laid down broad contours of the strategy of industrial development. Subsequently, the Planning Commission was constituted in March 1950 and the Industrial (Development and Regulation) Act was enacted in 1951 with the objective of empowering the government to take necessary steps to regulate industrial development. Prime Minister Jawaharlal Nehru promoted an economic policy based on import substitution industrialization and advocated a mixed economy. He believed that the establishment of basic and heavy industry was fundamental to

the development and modernization of the Indian economy. India's second five year plan (1956–60) and the Industrial Policy Resolution of 1956 emphasized the development of public sector enterprises to meet Nehru's national industrialization policy. Indian statistician Prasanta Chandra Mahalanobis was instrumental to its formulation, which was subsequently termed the Feldman–Mahalanobis model.

The major consideration for the setting up of PSUs was to accelerate the growth of core sectors of the economy; to serve the equipment needs of strategically important sectors, and to generate employment and income. A large number of "sick units" were taken over from the private sector. Additionally, Indira Gandhi's government nationalized fourteen of India's largest private banks in 1969, and an additional six in 1980. This government-led industrial policy, with corresponding restrictions on private enterprise, was the dominant pattern of Indian economic development until the 1991 Indian economic crisis.[2] After the crisis, the government began disinvesting its ownership of several PSUs to raise capital and privatize companies facing poor financial performance and low efficiency.

Objective of Public sector:

v To help in rapid growth and industrialization and create necessary infrastructure for economic development.

v Promote redistribution of income & wealth. v Create employment opportunities.

v Promote regional balance development. v Promote import substitution save and earn foreign exchange for

country. v Basic Infrastructure (STC, Railways, SAIL)

The main objectives of public enterprises in India are as follows:

• Economic development: Public enterprises were set up to accelerate the rate of economic growth in a planned manner. These enterprises have created a sound industrial base for rapid industrialization of the country. They are expected to provide infrastructure facilities for promoting balanced and diversified economic structure of development.

• Self-reliance: Another aim of public enterprises is to promote self-reliance in strategic sectors of the national economy. For this purpose, public enterprises have been set up in transportation, communication, energy, petro-chemicals, and other key and basic industries.

• Development of backward Areas: Several public enterprises were established in backward areas to reduce regional imbalances in development. Balanced development of different parts of the country is necessary for social as well as strategic reasons.

• Employment generation: Unemployment has become a serious problem in India. Public enterprises seek to offer gainful employment to millions. In order to

protect jobs, several sick units in the private sector have been nationalized.

• Economic surplus: Public enterprises seek to generate and mobilize surplus for reinvestment. These enterprises earn money and mobilize public savings for industrial development.

• Egalitarian society: An important objective of public enterprises is to prevent concentration of economic power and growth of private monopolies. Public sector helps the Government to enforce social control on trade and industry for ensuring equitable distribution of goods and services. Public enterprises protect and promote small scale industries.

• Consumer welfare: Public enterprises seek to protect consumers from exploitation and profiteering by ensuring supply of essential commodities at cheaper prices. They aim at stabilizing prices.

• Public utilities: Private sector is guided by profit motive. Therefore, it is reluctant to invest money in public utility services like water supply, gas, electricity, public transport. Therefore, the Government has to assume responsibility for providing such services.

• Labour welfare: Public enterprises serve as model employers. They ensure welfare and social security of employees. Many public enterprises have developed townships, schools, college and hospitals for their workers.

Organization of Public Sector:

v Ministry (Railway, Finance etc.) v Departmental Undertaking (Defense Post & Telegraph, defense

production unit) v Statutory Corporation (LIC, AIR India, IFC, RBI, ONGC, NTC etc.) v Government Companies (Ashok Hotels, ITI, HMT Hindustan

shipyard etc.)

Private Sector in india:

A private sector enterprise is an organisation which is owned, managed & controlled by private individuals or a group of individuals or both. It is also engaged in business activity but with the motive of profit maximisation rather than public service like in case of public sector enterprise.

Privatization: Transfer of ownership and control of an existing public sector enterprise, activity or service to the private sector. Privatization may be full or partial. It may be selective i.e. some function are transformed to the private sector, which other are retained in public sector.

Private sector includes all different types of individual or corporate enterprises, both domestic and foreign, engaged in different fields of productive activity. Private sector enterprises are owned and managed by the private sector. These private sector enterprises are mostly characterized by certain common characteristics like private initiative, profit motive and ownership and management in private hands.

In 18th and 19th century, most of the countries of the world adopted the policy of laissez faire where the Governments followed a policy

of non-interference in economic activity by the State. This had led to huge expansion of private sector in almost all the countries of the world. In recent times, the private sector has changed its character and is now quite different from the private enterprises of the past.

Now-a-days, the private sector in the form of corporate industrial units are normally owned by the shareholders and managed by professional managers, where they are not only guided by profit motive but also by expansion, consolidation, arousing social consciousness, social responsibilities, social welfare etc.

Now-a-days, the scope of private enterprises is very much restricted due to the expansion of public sector in different countries of the world. Even the capitalist countries like USA, Japan, Western European countries etc. have developed public sector in some strategic areas like defense production, aircraft production, atomic energy, multi-purpose projects etc.

In a developing country like India, with the continuous expansion of the public sector, the productive areas open for the private sector has gradually squeezed. It is only during the post-1991 period of economic liberalization, more and more areas are being made open for the private sector and the industrial activities in this sector gained its momentum both through participation of domestic and foreign, private companies.

In India, the distinction between the private sector and the public sector gained its importance, particularly after the introduction of Industrial Policy Resolutions 1948 and 1956, paving the way for the adoption of mixed economy in India.

These industrial policy resolutions firstly reserved certain industrial areas for the public sector; secondly allowed certain existing industries in the private sector to continue along with the public sector, whose future development would be restricted to the public sector alone and finally, reserved certain other areas exclusively for the private sector.

Objective of Private Sector:

The government resorts to privatisation with the multiple objectives which are as follows:

v To reduce political interference in the management of enterprise, leading to improved efficiency & productivity.

v To provide adequate competition to the public sector.

v To generate cash in order to fund the ever-increasing expenses.

v To reduce the concentration of economic power in the country.

Reasons for growth of Private Sector:

v Political will towards privatisation.

v Financial Reforms

v Usage of more advanced technology

v Young & large English Speaking class.

v Opening up of Indian Economy has led to free flow of FDIs along with modern cutting edge technology.

Reason for Indian Privatization: v Changes in China v Emergence of professional management v IMF & World Bank extended arm to capitalism v Lack of demand in economy v Integration of world trade v Developed local capital market and Financing Institution v To strengthen Competition v To improve public finance v To fund Infrastructure Growth v Accountability of share holders v To reduce unnecessary interference v More disciplined Labour force

The main reason for increased efficiency gain as a result of privatization are attributed to:-

v Less political interference in decision making. v Staff remuneration is more closely linked to productivity and

profitability. v Firm are exposed to financial market discipline as opposed to

government support. v Firm’s cost reducing effort are higher under competitive private

ownership.

CASE STUDIES Case study ofGeneral Motors India Private Limited:

Ø General motors: An American multinational automotive. Ø Headquartered in Detroit, Michigan and one of the world’s largest

automaker. Ø Major brands worldwide: Chevrolet, Buick, GMC, Opel, etc. Ø Started its business in India: 1928 but ceased its operations in 1954. Ø Re-entered in India in 1994 as a joint venture. Ø Owned 50% by Hindustan motors and 50% by General motors. Ø Operating plants at Halol in Gujarat and Talegaon in Maharashtra. Ø Corporate office at Gurgaon and technical office at Bangalore.

General Motors,Halol Plant, Gujarat

Ø The Halol GM factory produces Cruze sedans, Aveo sedans and the hatchbacks and Tavera and optra vehicles, which are specific to India.

Ø Total no. of workers: 1600, which includes 800 full time worker and 800 half-time workers who do same amount of work but are paid half amount of full time workers.

Ø The Halol unit of GMI has a capacity to roll out 190 units daily with an installed capacity of 85,000 units a year.

Issue: 1- What GM strike demanded

Ø The striking workers formed a new union under INTUC (Indian National Trade Union Congress) and have alleged that they were subjected to excess workload.

Ø The workers alleged they were facing health hazards. Ø The company has violated PF Act, gratuity norms and rules of

Industrial Safety and Health Act. Ø The workers were also demanding for an equal pay for both the full-

time and the part-time workers. Ø The company termed the strike illegal.

Issue: 2- Working hours

Ø Working hours at the Halol plant are nine hours a day, six days a week for a ‘regular’ 54 hour workweek.

Ø Such hours are illegal under India’s Factory Act Legislation, which limits the regular shift to 8.5 hours.

Ø This means that the workers are owed back wages for the three hours of overtime they work each week.

Issue: 3- Unhealthy work environment

Ø The “ Factory Act in India “ places a cap on how much weight a worker can manually lift, which is set at no higher than 44 pounds. However, the law places no limit on how much lifting a worker can be required to complete during their shift.

Ø Some workers are constantly lifting heavy car doors, tires, steering columns and other auto parts.

Ø Over 269 GM Halol workers have filed complaints of spinal cord damage.

Issue 4: Pocket Union

Ø GM Factory Management Halol plant created the “GENERAL MOTORS EMPLOYEES UNION” which has less than 150 workers out of 1600 workers at the factory.

Ø Management then negotiated with its pocket unions to unilaterally increase the mandatory Daily Unit Production Goals by 20%.

Output Loss

Ø The strike continued for 42 working days. Ø It caused an estimated production loss of 2500 vehicles to GMI.

Strike Facts: Longest Strike in Gujarat

Ø Gujarat Kamdar Mandal Union filed a complaint against GM with India’s “NATIONAL HUMAN RIGHTS COMMISSION” over unfair labour practices and dangerous health and safety conditions at Halol factory.

Ø The union and the workers also filed a petition in Gujarat High Court regarding Labour Rights Violation.

Ø The striking workers are being threatened with firing, suspension or relocation to lower level GM facilities. Management is trying to bring “non-union” replacement workers- “Scabs” to take the place of the strikers.

Ø The Association of Trade Unions in Gujarat, with 100 trade unions affiliated, are supporting GM strikers.

Ø The INTUC with more than 8 million members is also supporting GM strikers.

Ø Over 500 GM strikers marched towards Vadodara and were detained by the police.

Ø The International Workers Metal Federation is also standing in solidarity with GM strikers in India.

Ø Nearly 2000 labor, religious, academics and business leaders and activists have written to the CEO of General Motors, US demanding the workers’ legal right to organize a union at Halol plant in India and improved health and safety conditions.

SUGGESTIONS

Some of our suggestions which could help General Motors from getting rid of this long persisted labour problem at its Halol facility, Gujarat are:

Ø Wages remained important means for satisfying human wants and needs. So, wages should be of Primary consideration.

Ø Humans must be treated as a human being, not just as a means of production tool.

Ø The HR managers must be of humanitarian view rather than authoritative view.

Ø The challenging jobs must be given to the workers from time to time to protect and safeguard the interests of the workers and keep their task interesting.

Ø Labours should not be under-estimated. Human beings have emotions and that should be respected. And whenever, the emotions or the self-respect of the workers will be played with, these strikes will keep on occurring.

Case study ofAir India’s Pilot Strike of May 2012:

Case Points

Ø In 2007, the Government of India announced that Air India would be merged with Indian Airlines.

Ø As part of the merger process, a new company called the National Aviation Company of India Limited (NACIL) was established.

Ø Around 2006-2007, the airlines began showing signs of financial distress- combined losses for Air India and Indian Airlines in 2006-07 were 770 crore (7.7 billion).

Ø On 27 February 2011, Air India and Indian Airlines merged along with their subsidiaries to form Air India Limited.

Employee’s Demands Ø Better salary, promotion and increment. Ø Equality between Air India and India Airline Staff. Ø Reappoint the pilots, who force to resign.

Ø Career progression. Ø Integration across various cadres. Ø Rationalization of pay scale.

Chronology of the Air India Strike May 2012

Ø May 8, 2012: About 100 pilots went on medical leave as a mark of protest while their talks with the management were still on.

Ø Reason for mass sick leave: pilots were protesting the move to provide Boeing-787 Dreamliner training to pilots from the erstwhile Indian Airlines.

Ø Later, the same day Air India sacked ten agitating pilots and de-recognized their union after 160 pilots failed to join duty by the given deadline.

Ø An original list of 14 demands was put and reinstatement of their 101 sacked colleagues was demanded by aviators.

Ø May 15, 2012: the Union Civil Aviation Minister Ajit Singh stated that the Government was giving Air India one last chance and that it must perform in order to qualify for a bailout.

Ø May 26, 2012: Aviation Minister Ajit Singh announced that he would go ahead and hire new pilots if the strike didn’t end soon.

Ø AI management gave an assurance to Delhi High Court that it would look into the hardships of the pilots sympathetically.

Ø July 4, 2012: 58 day old strike ended immediately. Ø Air India suffered a loss of 500 crore due to strike in 45 days.

Employee view

Ø Employee opinion: “The merger created problems that cannot be solved. Our grades, work, promotions and allowances are different. When you see your colleague from the other cadre doing the same work, but getting easy promotions, allowances, there is bound to be resentment,”.

Ø No attempts were made to standardise hiring policies for the rank and file. Air India has a five-day week; Indian Airlines has a six-day week.

Ø Indian Airlines pilots were promoted unconditionally once in six years while Air India pilots complained they got their turn after 10 years - if there was a vacancy.

Ø The ground handling teams of the two airlines continue to operate separately.

Management view

Ø Efforts were being made to resolve the situation. Ø Appeal to the pilots that they should think about the passengers. Ø As per Rule 42 (2) of the Aircraft Rules, 1937: Pilots who have

claimed sickness for two months were asked to submit medical reports. But verification of the two-month long sickness and related tests and reports may catch pilots on the wrong foot.

How did it End?

Ø The Delhi high court asked them to join duty within 48 hours and the management to sympathetically consider their grievances.

Ø "The AI management shall sympathetically consider the grievances of the pilots including the aspect of reinstatement of those pilots whose services were terminated as a consequence to their strike," Justice Khetrapal.

Air India Management could have prevented the Strike

Ø Why was the airline management in such a tearing hurry to send pilots from the erstwhile Indian Airlines (IC) to train on the B787 aircraft?

Ø So what was the point in rushing the IC pilots for B787 training? Ø The management should have reached an agreement with the AI

pilots on their career progression issues before sending the IC pilots for training.

Ø Successive managements have been insensitive to issues raised by unions.

Ø Main reason: weak HR setup, lack of structured policies and their inconsistent application.