[My address at the Second National IR Summit ‘Towards Sustainable Industrial Relations’ on May 16, 2014]

Friends,

In this summit, the session theme is “Framework for Responsive Industrial Relations.” The purpose of any seminar is to examine and debate some ideas and thoughts which lead to greater understanding and progress. I am going to present a few for your consideration. And we will move from ideas and thoughts which are at transactional level to those at transformational level. My submission is that great possibilities exist to do work at both transactional and transformational level.

The session theme is ‘Responsive Industrial Relations.’ The catchword is ‘responsive. We will see [a] how parties are meeting each other’s expectations, [b] how those expectations are shaped by social and economic circumstances, and [c] How can we create responsive industrial relations?

Expectations of parties determine employee relationship:

Let us look at the subject. It is industrial relations – it is not industrial disputes. And in every relationship there are expectations from each other. Things start getting messy when the expectations are not met.

Organisations expect their employees to show commitment and dedication, they expect working at high productivity level.

Employees on the other hand expect four things from their employer; these are: Individual Growth, Bright future, Positive Workplace and Fair compensation practices.

The problem is that in all relationships there is so much in the unsaid area. That is what really causes problems, because it is in the area of fear. What you are afraid of you are reluctant to speak about. Communication and Influencing is therefore very important aspects of industrial relations like any other relations. I know of some very renowned companies which have regular ‘open house’ meetings. Not just with white collar workers but also with blue collar workers. When Godrej Industries shifted their well-established factory at Vikhroli in Mumbai to Ambernath, about 50 Km away, they extensively and used this forum of Open House to communicate with workers. They shifted their factory without a glitch. This trend is very welcome.

The experience is that with the formation of unions there is complete breakdown of communication, and influencing happens only thru use of power, both are so counter-productive for healthy relationship. The recent strikes in Bajaj Auto are example to cite. Forget what you read in the newspapers. The real issues are different. The parties are engaged in a power game. I have blogged about it in my blog post ‘The Snake and the mongoose: The Story of Bajaj Auto Strike.’

Are expectations getting managed better? I cannot make a general statement. I can however say that many companies have spotted opportunity posed by weak unions, or no unions and they are going an extra mile to listen. The Godrej example is not solitary. There are many organisations which have instituted practices to understand expectations as well as convey concerns.

Expectations and responses are fuelled by social and economic changes: Employees have higher expectations of quality of life and Employers have higher expectations of flexibility

Let us look at social changes. The economic policy changes took place in 1990. When I asked what changes in the lifestyle of workers we have seen since then, here are the answers I have received:

• The education levels have changed for better.
• Most of the workers own a two wheeler.
• They have a TV at home and also own a mobile.
• They wear branded clothes, their children attend tuition classes
• Some of them also take a vacation using tour operators within India.
• I know some workers whose sons are placed abroad by the IT companies, they have visited USA.
• I met a union leader in Pune who researched my profile on the internet and LinkedIn before meeting me!
• Wives are employed; workers have seen the need to have a double income.

What impact is it having on the aspirations of workers? Higher wages. The Bajaj Auto Union did a survey very systematically and has launched an initiative to help employees’ wives to be gainfully employed.

So perhaps higher living standard is the expectation. But there is a catch here. If you take a look at absolute level, the wages in reputed organisations might seem good. People who are paid well, experience a sense of deprivation when they feel that others are getting paid disproportionately higher. I have been talking to workers and I beg to submit that this feeling is getting stronger. Remember people want to be paid fairly, and people’s concept of fairness is based on comparisons. Now let us check what is the proportion of min to max salary, in other words, the ratio of an unskilled worker’s salary to that of MD’s.

Here is the data.

Today a worker’s CTC is about 3 L pa and MD’s is about Rs 5.50 Cr in a medium size company. That makes it 183 times. So we know that organisations are sharing prosperity disproportionately.

Peter Drucker said the ratio should be 20. Switzerland wanted to make a law and it was proposed to have min-max differential at 12. Incidentally, this proposal never got approved. Our own Bhoothalingam committee recommended a ratio of 16. Research of David Francis points out that the differential among top US Corporations was 42 in 1980 and 379 in 2007.

And we have a ratio of over 200! This points out to increasing inequality. And that is a landmine. Things can explode anytime.

Will continued in ‘Responsive Industrial Relations: Where HR Meets IR – Part II’