Driving a hard bargain - Wage negotiations
In Negotiating a settlement, the Management and Union ‘gauge’ each other’s mind, place each other’s expectations or demands, negotiate hard and then after a few quick meetings which are breathe taking, they conclude the agreement, reminding to the other party the commitments made by it.
Settlements represent a very interesting period in industrial relations of a unit. I have always likened it to ‘khyal’ recital in Hindustani Classical Music. It begins with Alap, then vilambit, then it gathers fast rhythm [drut] before it comes to an end usually with a ‘tihai’ a sign off with reciting the starting line three times.
Negotiating a settlement has a similar pattern. Management and Union ‘gauge’ each other’s mind, place each other’s expectations or demands, negotiate hard and then after a few quick meetings which are breathe taking, they conclude the agreement, reminding to the other party the commitments made by it. That is if you successfully conclude the agreement. But it takes two to tango. Sometimes the agreement is not reached, and then the flurry of activities gets converted in violence physical or verbal.
Essentially the activity is seen by both the parties as a ‘contracting’ rather than ‘relationship building’. If you wish to build relationship, you have to be honest, open – that means making yourself very vulnerable, and yet setting boundaries of commitment. Since we are in a mood to find metaphors, we will liken this to ‘wooing’ your partner. When you woo [and coo!] your partner, you make unconditional commitment, you make promises and display your lovely plumage, like a peacock! Wooing [in that sense] in industrial relations is a rare phenomenon!
So much for building the suspense and introduction to the story! Automotive Stampings and Assemblies Ltd. [ASAL] has a factory at Bhosari, Pune. [They also have a factory in Chakan, but we are not talking about it]. They employ 95 workers who have organised an employees union. When they negotiated the wage agreement four years ago, they were in ‘contracting’ mode, and it was reached after very-forgettable-incidents [read violence].
The old settlement ended in September last. The Union decided to take a radical step. Why radical? Because the company has been making losses for the last three years, and has reportedly accumulated losses of about Rs 48 Cr. Revenue declined from Rs 571 Cr to almost 50% of it at Rs 291 Cr in the last four years. Do you woo an ailing person? Not unless you think that the person has indomitable will to come out of it. Radical because the union did not put a charter of demands, but instead made a suo moto offer to buttress the intangibles in any relationship. Unconditional! They wrote a letter to the ASAL management. I have a copy of the letter and here is I quote:
Before moving forward we expect few words of wisdom and inspiration from you. We would like to place on record that we will create appropriate atmosphere which is conducive to investment and growth.
Sir, we have decided to adopt totally new path which will not create distress, jealousy, enmity, division between management and union, etc. We are in the process of detailing on the above aspects and present to you in due course of time. This time we have decided not to demand wage rise, but to earn wage rise and without your cooperation and support it will not be possible. We are serious…… and we will show it through our behaviour and attitude. We will submit our detailed proposal in terms of productivity improvements not only in labour but also material, energy, capital. We will also propose wastage reduction plan in all these areas so that our Company shall be competitive and sustainable.
The first lesson in building any relationship is that it must be built proactively, not re-actively. The step taken by ASAL union is based on this sound understanding and belief. Result? Some hesitation initially, but it was quickly overcome and the management responded positively. There was no charter of demands, but there were productivity improvement proposals tabled for discussion by the union. If a loss making unit has to grant wage increase and yet survive, productivity improvement becomes imperative. To a great extent, if not fully, the productivity improvement must finance the wage increase.
The management responded positively. The spirit of give and take guided the parties. The final result – Productivity is set to increase by 60 to 70%. Wage rise of Rs. 7000 over four year period is agreed to, in addition to the special allowance equal to what is payable as a part of minimum wage. Add to that incentive scheme. And a signing bonus of Rs 2500/-. This is surely not the best in the industry, but it is surely the best under the circumstances! There are other aspects of the agreement which are laudable, but frankly those aspects are not the focus of this blog-post.
What must be appreciated is that a good wage increase has been offered by the management of ASAL. And the workers have offered to increase the productivity which is the need of the hour for this company considering its financials. And this win-win situation could not have been achieved but for a culture-changing-approach by both the parties. These are the ‘critical incidents’ that impact workplace culture positively. What kind of conflicts we have on hand is not important. How the players conduct themselves while resolving it is more important. The values we declare and adhere to while resolving conflicts set the tone for building workplace culture. It sets a unique tradition. So for taking these steps we must congratulate both, the management as well as workers of ASAL.
What made the parties do this ‘out-of-box’ thinking? What made union to seize initiative to make suo moto offer of adhering to a certain code of conduct? What convinced both the parties to do away with their scepticism about the other party and the traditional approach to negotiating a settlement? When Golda Meir said, “Trust yourself. Create the kind of self that you will be happy to live with all your life. Make the most of yourself by fanning the tiny, inner sparks of possibility into flames of achievement,” she didn’t know that her words captured the essence of the learning of all ASAL employees, regardless of the status, out of this experience.
And that is the message of this story. Don’t you agree?
PS: There have been several queries about the people behind this initiative from union's side. It is Arvind Shrouti of Option Positive. He is the advisor to the union, and not to be mistaken for union leader. Needless to say, without an equally positive response from the management, this experiment would not have succeeded. Please do note that the settlement was signed on Oct 21 [today], and we have brought this report to you immediately!