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Test your business skills, win Rs 25,000
Dr Upinder Dhar, Dr Akhilesh Misra, V K Gautam, Pawan Patni & Vijaylaxmi Iyenger, The Smart Manager | November 08, 2006
Rediff Business presents the TCS Smart Business Case Study Contest for managers, along with The Smart Manager, the management magazine! We give you a profile and the history of a company.
All you have to do is study it and post your solution here, in 500 words or less. The best solution will win a cash prize of Rs 25,000 and a one-year complimentary subscription to India's first world class management magazine! The Smart Manager will also publish the winning solution along with your photograph.
Hurry! The last date to post your solution is November 22, 2006.
A strike at alpha automobiles
Mohit Sarkar, head of Industrial Relations (IR) at Alpha Automobiles, glanced at his watch. He closed the file he was working on, it was time to meet his boss, Saurav Mishra, Alpha's Chairman and Managing Director, who had founded the company in 1987. The agenda was a tricky one: the Memorandum of Agreement (MOA) with the workers was coming up for renewal. In the past, the MOA process had been peaceful but one never knew.
"Come in, come in," Saurav invited genially. "I have a couple of ideas I want to run by you. As you know, competition is increasing, and our margins are under pressure. We need a radical performance improvement plan. I've heard that productivity has jumped at our neighbors, Gamma Manufacturing, because they have renegotiated their MOA with the workers. If we can get even a 20% improvement in productivity, I'm happy to pay something more in terms of salaries. What do you think will be the reaction of our two unions?" Mohit's response was cautious. "Let me speak of the IR manager at Gamma Manufacturing, and revert."
Nagpur-based Alpha Automobiles Limited (AA), a subsidiary of Mishra Enterprises, was one of the biggest assembly plants in the state of Maharashtra. The company manufactured 32,000 vehicles per annum of various types including tractors, tempos and pickup trucks. The plant was fully automated with 1,200 employees. Only 64% of the plant's installed capacity of 50,000 vehicles per annum was being utilized.
Since its inception, industrial relations had been harmonious at AA. The majority of the workforce was from Maharashtra and Madhya Pradesh (40% each) and the remaining 20% were drawn from other states across India. The workers were divided among two main unions: the Bhartiya Mazdur Sangh (BMS, affiliated to the ruling party, the BJP) and the Indian National Trade Union Congress (INTUC, affiliated to the opposition party, the Congress Party).
The company had two categories of workers: 50% of the workforce were permanent employees, and 50% were temporary or casual employees, engaged for a period upto five months so that fluctuations in demand could be adjusted. In keeping with the requirements of the Industrial Employment (Standing Orders) Act, 1961, the company and its workers signed a new MOA every three years. The current MOA was due to expire in two months, ie by 1 November 1997.
After leaving Saurav's cabin, Mohit did not delay fixing an appointment with his counterpart at Gamma Manufacturing. What he learnt was reassuring. Getting the workers to agree to performance pay might not be such a tough task as Mohit had originally feared. Consequently when Saurav asked him for his opinion, Mohit was quick to endorse his boss' view.
After some serious haggling with the workers, a new MOA was signed on 22 October 1997, and was to be implemented with effect from 1 November 1997. The agreement was signed by ten representatives of the BMS union, the majority of them being its office bearers. The INTUC union refused to sign, protesting against the newly introduced "efficiency clause".
This clause required productivity to rise from the current level of 80% efficiency to 90%. In return, workers would get between Rs270 to Rs540 extra per month. With Diwali round the corner on 3 November, the agreement was implemented despite resistance from members of the INTUC union. INTUC's boycott was not taken too seriously by AA's management as its membership was significantly smaller than the BMS union.
Mohit gave a sigh of relief, but his equanimity was soon cut up. At 7.45am, while driving to work, his mobile rang. It was the head of security, calling from the factory's main gate. "Sir, there's trouble here, big trouble. The leaders of the INTUC union and about 300 workers have gathered outside the gate. They are not allowing anyone to enter the premises. It's getting ugly. What should we do?"
"I'm on my way, keep calm, I'll be there in a few minutes," replied Mohit. Stopping the car, he updated Saurav and the other team leaders, requesting them not to come to the factory until he gave the go-ahead. Next he called the police, the commissioner luckily was well known to him. "Sir, we have a situation at the AA plant. I'm on my way there. Until I reach I don't know what the situation will be like, but I would like to keep you posted if I may." "Of course."
Starting up the car, Mohit reviewed his options. The priority was to understand what was going on: what was the INTUC union protesting against? What did they want? The factory had been peaceful for years. True, the INTUC had not been keen on the MOA but workers of both unions had been coming in to work every day since its implementation six months ago.
The next step, considered Mohit, was to see if the workers could be persuaded to go home while AA's management and the INTUC leadership sorted out the issues. His thought process halted abruptly: he had reached the factory gates. The scene was appalling.
Workers who had known each other for years and shared their lunch boxes every day were shouting abusively at each other. Leaders of the two rival unions were standing in the middle of the road, both sides looked as if they had been manhandled.
The ten security guards -- highly outnumbered, as on a normal day, they would have been checking id cards -- were trying to remonstrate with both parties, and to keep apart the workers affiliated to the rival unions. Even as he pulled up to the kerb, Mohit was horrified to see the BMS' leaders being pushed out of the gates, and the INTUC leaders and workers clanging the gate shut. The time was 8.00am, the date 2 June 1998.
Once the INTUC union workers had captured the front gates, obviously there was no opportunity for anyone to enter the premises. The lightening strike had taken the entire AA management by surprise: not even a single manager had even the smallest suspicion of INTUC's plans.
Mohit, somewhat manhandled himself by this time, took an important decision. His priority at this moment was to avoid violence of any kind. While he had personally never been involved in such a tense situation, he had met with and spoken to enough IR managers to know that the current situation rested on a knife's edge. Calling his boss, he advised him to stay at home and to request the other senior managers to do the same. "If you come here, Sir, emotions will get inflamed. If you come later, when tempers are cooler, there is space to negotiate," Mohit pleaded.
The next call was to the police commissioner, requesting support if the workers resorted to bashing up the machinery. It was decided that a police unit of about fifty men would wait a little way away and out of sight of the factory, ready for a lathi charge if necessary. Even as he mingled with the BMS workers, asking them to sit down while he negotiated, Mohit prayed that no television cameras would take their time about coming.
His prayer was not answered. Out of the corner of his eye, he could see reporters from all the major papers and television channels pouring out of taxis and vans. The mood was going to become uglier. Once again, he took a gamble and requested the INTUC leaders to send their workers home, and at the same time, requesting the leaders themselves to stay on. This way, so Mohit hoped, the chances of violence would diminish.
While Mohit was working the crowd, Saurav called an emergency meeting of the leadership team at home. Everyone was shocked. With little information to go on, they tuned into the local news channels on TV to see what was going on at the gate. Already the various channels were announcing a break in the normal programming to bring a news flash on the emerging situation at AA. Saurav was constantly on the phone to everyone he thought could help advise him: the local police, the Industry Commissioner, the media, the CEOs of other factories in the vicinity, and labor lawyers.
As workers could not resume work, production came to a grinding halt.
On 4 June, management approached the Labor Court, protesting that insufficient notice had been given for the strike. The Court agreed, and declared the strike as illegal. Armed with this award, and as quickly as they could prepare the documentation, on 6 June, AA's management moved the Civil Court for an injunction based on the Labor Court's award.
The Civil Court too supported the management and held that no striker be allowed to approach within a hundred meters of the factory premises. The management promptly displayed the court notices at vantage points and all the gates. Strikers were warned, "Do not to enter the factory as the strike has been declared illegal."
Unfazed, INTUC protesters continued their vigil outside the gates, albeit at the distance prescribed by the Civil Court. And threw down their own gauntlet. On 8 June, a cell of INTUC's leadership moved the Labor Court for declaring the strike legal. To no avail. The Court dismissed the plea.
Meanwhile, a group of sincere and dedicated managers had managed to enter the factory premises by sneaking through the rear gate, thereby taking a great risk. They started one assembly line in the plant. This was more a gesture of defiance and provocation than anything else. As the leader of this splinter group told his followers, "We have to keep the factory open for those workers who are willing to come to work. If the factory stays shut, it will be much more difficult for them to report to work, even if they want to. And the longer the factory is shut, the more difficult it will be to reopen."
During the night of the same day, however, Shiv Angre, a local politician with a small but enthusiastic following and one who wanted to merge with the Congress party, now decided to use the strike to his advantage. He encouraged the INTUC leaders to continue the strike, and started supporting them with food and finance. Heartened by his rhetoric, the strikers pitched tents outside the factory gate.
Saurav, Mohit and the others watched in dismay as the strikers were joined in their nightly vigil by their wives and children. They even started cooking meals over small fires dotted around the gate. The pressure was mounting on the management to do something. A three-pronged strategy was adopted.
First, AA's management framed charges against thirteen INTUC office bearers and active strikers. They were charge sheeted and notified accordingly. However, and as expected, the move only served to harden the strikers' stand, especially as the management insisted on the productivity efficiency percentage, and strictly followed legal procedure as laid down in the Industrial Disputes Act, 1947.
Second, and simultaneously, the management approached each worker individually, asking them if they wanted to return to work. BMS workers, who were in any case itching to get back to work and hated the drain on their pay package caused by the action of their rivals, jumped at the management's request.
The morale of INTUC workers who didn't back the strike was boosted by the management's action and promise of financial aid. Those workers who were willing to report for duty, were allowed to do so, and were paid as before. A system was devised for their safe conveyance into the factory, and a roster was maintained. Gradually the factory began humming again.
Third, the management stepped up pressure on the strikers through politicians, the media and other mediators. Throughout this time, Mohit and Saurav insisted that their door was always open for negotiation, that they were willing to sit and talk with the INTUC leaders and any striker who was willing to discuss ways to end the strike.
Angre began to be nervous as the media played up the fact that the strike was illegal rather than taking the side of the strikers. Negotiations between management and strikers continued in a desultory manner, with the management staying firm on the efficiency clause but open to other suggestions.
The strike continued for forty days by the stragglers. On 11 July 1998, the Chief Minister made a general appeal on radio for the maintenance of industrial harmony in the state.
By this time, the remaining workers had lost the stamina to continue the strike. The lack of wages had begun to pinch them at the same time that Angre had started diluting his support. The supply of food came down from three meals a day to one. The wily politician began looking for a face saving excuse.
The next day, on 12 July, local leaders with Angre prominent among them appeared on the scene requesting the strikers to call off the strike, with a view to implementing the Chief Minister's appeal.
Saurav, Mohit and the leadership team had been waiting patiently exactly for this moment. They swung into action. The INTUC union's morale was nearing the annihilation stage. A patch up took place and all workers promised to report for duty the next day. The media covered the event extensively and were present en masse on the morning of 13 July 1998 when workers of both unions, strikers and non-strikers, streamed in through the wide open gates. By 8am, the factory was buzzing. And the political leaders had disappeared from the scene.
Management engaged a legal expert and a departmental inquiry commenced. Seven workers were subsequently dismissed.
The strike of 1998 was an eye opener for the workers and the management as well. Once the strike was over, the management formed a committee under the Industrial Engineering Department to take a new look at the efficiency norms for the workers. A time and motion study was launched which took into account important aspects such as R&D, production engineering, hi-tech manufacturing and assembling. This task force won the workers' respect.
Saurav and Mohit, backed by the board of directors, did their best to reinforce industrial harmony. Policies were modified and everyone, managers and workers, were encouraged to familiarize themselves with them. As the company grew, it began to recruit heavily from the IIMs, IITs and polytechnic institutes. Experts were invited from outside to give talks to employees, and a well equipped training centre was established for the benefit of operators, supervisors and engineers.
Promotions, rewards and letters of appreciation were given on the basis of performance appraisal, and periodic counseling was also introduced. A majority of the workers and staff were accommodated nearby in leased accommodation. A standing committee was constituted to facilitate grievance handling. Union and shop floor representatives were involved in decision making.
Thirty months later, sitting in Saurav's cabin, Mohit threw a wry smile at his boss. "It's that time again. The MOA will need to be renewed again by November. Diwali is early this year, on 21 October. Let's get the agreement wrapped up well before the festive season so that we don't have that pressure as well. What do you say?" Saurav nodded.
"Can we improve on the efficiency percentage based on the time and motion study? And can be bring in the casual workers into the agreement as well as the permanent workers? We need to enhance quality as well as productivity."
The questions that you have to solve are:
1. Given that the two unions will always be at loggerheads as they try to gain greater power over the workers, what can the management do to leverage the situation whenever sensitive situations such as MOA renewals come up?
2. Not a single manager knew that a strike was brewing between November 1997 and June 1998. How can AA avoid such a critical lapse in information in the future?
Please submit your case here!
Published with the kind permission of The Smart Manager, India's first world class management magazine, available bi-monthly.