Blog: The Inner Game of Industrial Relations - Part III

Employee Relations

The Inner Game of Industrial Relations - Part III

The end game is about closures and how companies scheme cutting on people and jobs and what employees go through
The Inner Game of Industrial Relations - Part III

The ‘End game’ is when the parties decide to part ways. Sometimes due to closure, sometimes they part ways because of downsizing, retirements voluntary or otherwise.

A very senior industrialist who was known to me called on me and asked me to meet the owner of a textile mills. The strike was long over. I met him who asked me to introduce him to certain persons in the Government. I quickly disassociated myself but I got curious and followed his case for a long time. His mills had suffered an accident and he wanted to use that ‘opportunity’ to close it down. I watched with interest and shock how questions raised in assembly are also scuttled by the bureaucracy. That was my first brush with reality of closures.

The technique of closure is well known: First declare Voluntary retirement scheme for reducing the number of workmen to less than 100. Once this is achieved, close down the factory or establishment because it can be done so under the law.

The ‘[step] mother’ of all closures

Although it is over thirty years the scars of Textile strike, its closure of mills and unemployment are bleeding. I attended a meeting of Girni Kamgar Sangharsha Samiti in May this year. Nikhil Wagle, the outspoken editor of MahaNagar and anchor at IBN Lokmat channel, blamed the negligence of the society and press to support the cause of the textile workers. And there is a lesson to learn in the story. Real estate offered just too much money to numb the conscience.

This is what a shocking report on Phoenix Mills says:

1995: Yet again, the Management moves to declare the mill as sick and approaches the BIFR. The approved revival scheme allows tax concessions. Management is directed to upgrade machinery and constitute a committee accountable to banks and financial institutions to oversee the modernisation and revival process. Once these tax concessions were approved, no revival scheme was implemented.

23rd April 1998 – The Management applies to the BMC for adding recreational facilities such as table tennis, health clubs and – of course - bowling alleys. On the grounds that its workers are “continuously demanding these facilities, and went on agitation in Jan-98”. Yes – workers demanding bowling alleys, sauna steam baths and billiards tables.

April and May 1998 – Management begins to terminate services of staff across various departments. The processing department is closed abruptly. Second and third shift at the Mills are stopped.

July 1998 – Labour Court issues an order to the Mill to restart closed departments and reinstate workers. Workers allege that just before the orders, Management had introduced a voluntary retirement scheme (VRS) for retrenched workers. In the meantime Phoenix Towers is constructed over what unions allege was space reserved for a municipal school and a public garden. Not a single paisa from these constructions goes to the workers. [See: Mumbai Matters: April 19, 2006, ‘Phoenix Mills – ‘Because the story must be told’]

Hindustan Lever shows the door…

The economic vicissitudes have made some organisations redundant just as technology made some organisations redundant. In Mumbai the most remembered closure is that of the Sewree Factory of Hindustan Unilever [then called Hindustan Lever]. After a very prolonged battle, spanning over three decades, with the union and employees, and with some decisions not-so-free-of-controversy it finally closed down. This is what the report of Feb 1, 2010 in Business World says:

“We are happy; the union is happy,” says Ashok Gupta, HUL’s executive director, legal and secretarial practice, describing the mood at the send-off given to workers a few days ago.

“We had no alternative but to sign,” says a subdued Franklin D’Souza, an office bearer of HLEU. “The workers were tired of waiting. Some even threatened to immolate themselves in front of the union office if we did not agree to the settlement.”

This was a closure in offing for over thirty years!

….But Colgate shows the way

As against this, Colgate managed closure of its Sewree factory which incidentally was adjacent to HLL’s factory exceptionally well. The talk about closure was not a secret, it was told openly to employees with reasons. The openness was in stark contrast to the subterfuges adopted by many employers. A VRS scheme was worked out which showed flexibility enough to accommodate employees of different age groups – it was not ‘one rule applies all’ scheme. Reportedly, support was offered by HLL’s action committee, but it was spurned by the employees. The employees exited and the Company hosted a farewell dinner on Dasara day.

In Recent Times

In the city of Thane, where I stay, three units were closed recently. These were: Raymonds, GSK [erstwhile Glaxo] and Asian Cables which became RPG Cables and later a part of KEC International Ltd. in that order.

All the three present different approach to the end game. Raymond and KEC have one thing in common – they have shifted production elsewhere – in Gujarat. They reportedly said that their units were making losses and were unviable. GSK on the other hand kept that stance, but it is widely believed that their Thane plant never made losses and was not unviable.

Raymonds - The ‘Incomplete’ Man

Raymond was the first to go. Let us go back in history. You will recall that Singhanias had established a hospital, a very good facility in the sprawling 125 acre area in which all of Raymonds units were placed. The hospital was set on fire by Shiv Sena supporters on hearing the death of their popular local leader. It was then shut down by Singhanias as retaliation to the act of sabotage. This may seem unconnected event, but this was the proverbial ‘beginning of the beginning.’ In an era when shutting down an establishment was considered impossible, the powers that be realised that it was possible to do. Emboldened by this success, the next to go was JK Files. Interestingly, though some resistance was put up by the employees and their unions, it quickly waned. The reason? The average age of employees was 50. Many of them had their children studying in the Singhania’s School in the adjacent property – it is considered one of the top ten schools in Mumbai-Thane belt. Their children had been educated well, some were in Army, and some were doctors, many in IT industry and were placed abroad. So it was not a bad idea to collect the booty that the VRS offered and part ways.

Next was the turn of Raymonds. With the closure of Raymonds, Singhanias would have 125 acres for development as real estate. They had already built a factory at Vapi where the same production could be made at lower cost. So 1885 workers were offered a VRS, but it was only an invitation to the political leaders to intervene, lured by the value of the real estate, and they are also believed to be beneficiaries of the final settlement [the result of protracted negotiations] between workers and management of Raymonds. The union earned in terms of donations [3% of the package] from workers, a whooping sum of Rs 8 Crores! Workers received Rs 263 Cr in payment while value of the real estate was estimated to be more than Rs 2300 Cr. The workers received an average benefit of Rs 16 Lakhs to Rs 21 Lakhs which was to be paid over two years; 68% of the total dues immediately and the remaining 32% would be paid in three years` time. [‘Why in instalments?’ we asked a senior manager of Raymonds – He said that the official reason given is lack of working capital!]. Many in the city of Thane believe that they got a raw deal, while political leaders made ‘hay while the sun was shining!’ The most interesting part was the ability of the management to bring Labour Minister Hasan Mushrif, Labour Secretary Kavita Gupta and Shiv Sena local MLA Pratap Sarnaik for the one hour function announcing closure. Mushrif was airlifted from Kolhapur in a Raymond chopper and after the hour-long function to announce closure, held in the factory premises, he flew back home in the same chopper! What story does it tell?

This is a classic case study of how managers get emboldened by turn of events, and how external factors play a role in bringing about a settlement in which they had developed a vested interest. But the Raymonds story leaves a message about the vulnerability of employees at the hands of many interested parties, and chaos that precedes the closure.

[Raymonds started a new textile plant in Valsad. It manufactures suiting and shirting. In March 2013 it received a notice from Gujarat Pollution Control Board for closure for alleged violation of norms. The newspaper report of March 7, 2013 [Business Standard] says: We have not only issued the notice but have also cut their power connection. The company will now have to give us a bank assurance for norm compliance before we revoke the closure," said KC Mistry, GPCB In-charge Member Secretary.” It has been since restarted. Perhaps this discloses some uncomfortable management styles of the Company]

The Secret Formulations of GSK

The case of GSK is diametrically opposite. While it was known that the plant at Thane was heading for closure, nobody knew the real reason. The company somehow managed to keep the political leaders away, who have developed tendencies of the ‘ambulance chasers.’

So there are various theories on why the plant was closed down. One version, unconfirmed, is that there was an accident in the plant that threw up the high susceptibility of the organisation to Bhopal like mishap. The plant was in the midst of prime residential locality. It was not so when it was set up, but later all plum housing complexes were built around it. The fear [presuming that this is the correct version] was real and justified.

The union said [and this is another version] that the company wanted to shift production to their Scotland factory under pressure from British Government which wanted to curb unemployment. [One worker said to me about this decision of the Company: ‘The British have left, but the psyche of slavery continues in India’]. This brings the effect of the new economic policies. GSK is headquartered in England. GSK paid an average benefit of Rs 29 Lakhs with maxima of Rs 45 Lakhs. Although very reasonable compensation, if not generous, the readers will have to keep in mind that there the average age of employees was forty years. The plant was closed in April 2012. [There is the third version which is the official version of GSK that the plant had become unviable – nobody seems to believe this except management staff, if at all!]

But the 35 contract labourers who worked there for several years got nothing! The end game was well played, but not for all. The Asian Cables also represents more or less the same story of Raymonds. They have set up a factory at Vadodara in Gujarat.

A few factors deserve our attention:

[a] It reminds all that there is ‘organisational life cycle.’ Like all living organisms organisations also seem to have a life cycle, though in the case of human beings it is inevitable, and it need not be so in the case of organisations. Each phase of ‘life’ has its own set of problems, but managing change successfully is the only way to stay afloat for an organisation. Research tells us of four successive phases in an organisation’s life cycle: [a] the pioneer phase, [b] the growth phase, [c] the consolidation phase, and [d] the relapse phase. Each phase has its own characteristics.

Some plants get outdated if you do not continuously renew it. Even if you do, the aging work force may not be able to learn the new skills. So sometimes the ‘death’ of a plant is inevitable. But the manner in which it happens leaves scars. Our laws do not allow easy adoption of new technologies.

[b] Bad town planning schemes can ruin a profitable plant. Like GSK. Nobody wants to be in Bhopal tragedy like situation.

[c] People in GSK may have received fat benefits, but they are unemployable today! And they are all middle aged in the age group of 40 – 45. The benefit may not suffice if they do not get a good job which is very rare to find.

[d] Contract labour can be the biggest sufferer in this end game of closure.

In the final analysis it is all about the values and beliefs of the employer which show. It is also about the employer’s role and social responsibility. The powerful play of greed and power is usually in full public view. Colgate and GSK handle it reasonably well; conscious as they are of their internal governance standards and public image. But image is not a consideration of those who are greedy. It is unfortunate that the government fails to act often, and fails to play its role.

It is not the theme here that no establishment should be closed. The point which is being made is that the parting can be respectful and honourable with long relationship still a happy memory. This is not impossible as two organisations showed us. Industrial relations, like any other relationship, are as rewarding and meaningful as the parties make it by understanding their role, purpose and values. It is a game that begins in mind and ends there!

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Topics: Employee Relations, Employee Engagement, #IndustrialRelations, #HRInsights

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