At the outset, it is essential to understand the ideology that drives the actions of the workers and the management at HMSI. Each group can either be Unitarist, where it is only concerned about establishing its authority, or be Pluralist, or accepting differing viewpoints. The diagram illustrates HMSI’s current labour-management relationship:
Unitarist labour – Unitarist Management: Classical Industrial Conflict
Unitarist labour – Pluralist Management: Accommodative Industrial Relations
Pluralist labour – Unitarist Management: Exploitational Industrial Relation
Pluralist labour – Pluralist Management: Co-operative Industrial Relations
Why did the unrest turn to a stalemate?
The union of permanent workers supported the contract workers, leading to production stoppage. Through primary interviews with the permanent workers, it was identified that HMSI and permanent workers were at loggerheads egarding wage increase under the LTS programme. Under this scheme, the fixed wages of permanent workers were revised every three years.
What could have HMSI done?
This structural challenge could have been avoided by restructuring the compensation with a lower fixed component and a higher variable component linked to the revenue of the company. Maruti did the same in 2001. This would have mitigated wage-related issues during the current economic downturn. Further, it would have helped workers better understand the downturn’s impact, which they were oblivious to. To get the buy-in of workers for this initiative, it should have been implemented at a time of boom in the automobile industry.
Having curbed the permanent-worker specific issue, HMSI should have limited the bargaining power of contract workers by including Terms of Employment, stating that contract workers are the responsibility of the contractors and that the company has no liability regarding them, countering the worker’s sentimental argument of long-term association with the company.
Finally, moving towards managerial pluralism, HMSI should have involved the labour union in overall decision making.
Part 2: Smoothen production
1. Hire new outside contract workers
In the current slowdown, when layoffs are high, finding new contract workers would not be a challenge. These new workers will further have lower bargaining power. However, they will not be trained on plant-specific operations.
2. Use permanent workers to train contract workers
This will improve the morale of the permanent workers and their stature within the company. Further, this will ease the settling in of new contract workers. The lower production during the transition period can be offset by other Honda plants.
Long-term objective
There is a vast wage discrepancy between permanent and contract workers. A contract worker is paid ₹18,000, while an experienced permanent worker may be paid up to 5X of this, also creating LTS conflicts within the company. Using permanent workers as trainers of the new contract workers will reduce the reliance on permanent workers. In the long term, HMSI can move towards a contract worker heavy workforce, adding financial sustainability. Xiamen Airlines implemented a similar system in 2011.
Do not reinstate union leader
From the interviews, it has been inferred that the permanent workers have accepted the suspension of the union leader. This obviates the need to reinstate the union leader. Moreover, re-instating him increases the likelihood of him leading permanent workers to protest against the company in the future. The key motivation drivers for workers, apart from money, are power and control. Hence, the new workers must be given the opportunity for a union leader to be elected from among them.
Part 3: Manage Workers
How to hire only the required workers?
Hiring a few contract workers from outside, as suggested above, will lower the morale of the protesting workers as it displays the company’s ability to achieve its production targets without their support. With this, HMSI will be in a position to individually negotiate with contract workers who could enhance their production process. If this fails, HMSI can seek legal recourse, using the stay order for which it has applied at court, as a last resort.
How to improve the morale of the workers?
To improve the morale of the workers at the plant the company should investigate two key factors –
Economic Factors
Due to the auto-sector slowdown, there is little scope for the company to increase wages. But it can look to add incentives such as a suggestion scheme that rewards ideas from employees that improve plant’s operational efficiency. The company can introduce a monetary reward in the form of an Idea of the Month Award.
Emotional Factors
Efforts should be undertaken by HMSI to make the workplace more comfortable for the employees by introducing role-specific infrastructure for the workers such as chairs, where it would not reduce efficiency, cupboards, and so on.
Families of workers have a strong influence over them; thus, initiatives can be taken to increase engagement of family members such as annual competitions including dance and painting competitions. The union leader can have dedicated incentives such as quarterly resort trips. Similar schemes have been implemented by truck-maker Ashok Leyland.
(The winners are First Year MBA students at IIM Ahmedabad.)