Maruti Suzuki's Q2 net profit rises 4 times on easing supply chain issues

INTRODUCTION

Human Capital (HC) – Centric Systems and Policies in an organization needs a conscious effort from the whole organization and might take time for a full transition. This action will bring a different culture that gives high regard to the Human Capital of the organization as its competitive advantage. According to Lawler (2018) an organization that is Human Centric has the following composition: (1) Human Capital Management is represented in the Corporate Board Members and that the metrics to ensure that this area is looked up is in place (2) Culture of Shared Leadership and Co-ownership is evident in the leadership pool (3) Human Resources (HR) function will be considered as a very important staff group and (4) Monitoring on the important competencies and capabilities of its human capital are in placed in the organization.

For a company whose main production depends on its manpower, I would believe that these companies would have given importance to their human capital. A human centric organization is in place to ensure that their most important asset, its human capital, has been taken care of.

For the past years, organizations had been too much driven by getting their profits. To protect employees’ rights for exploitation, employees organize themselves into trade unions that gives them a better representation to the management and the government.

This move is referred to as the Marxist Approach to Industrial Relations (IR). It assumes that conflict arises because of the division in the society between the owners of the company and the employees. The company whose main objective is to earn more profit is paying the least possible wages to its employees.
According to Businessjargons.com, “IR encompasses the relationship between the management and workmen and the role of a regulatory body to resolve any industrial dispute.”The Industrial Relations mainly cover the following:

(1) Regulatory body to resolve industrial disputes;
(2) Collective Bargaining;
(3) The role of management, unions and government;
(4) Labor Legislation;
(5) Worker’s Grievance Redressal System;
(6) Disciplinary policy and practice; and
(7) Industrial Relations Training.

Let us take a closer look of the Industrial Relations (IR) of the Maruti-Suzuki India Ltd (MSIL). I will discuss the different factors that lead to the tragic incident that occurred last July 18, 2012. I will lead you to look at where it started and how the small incidents became a contribution.

Understanding the scenario will lead us to suggest an alternative that might have prevented this incident.

STATEMENT OF THE PROBLEM:

Maruti-Suzuki India Ltd (MSIL)was faced with decent work deficits despite its performance and contribution of MSLI to the national economy of India, it. This was manifested by the unrest in its workplace brought about by the tension between the MSLI management and the labour unions from Gurgaon and Manesar plant. The desire to capitalize on production was prioritized at the expense of giving value to human capital, neglecting their employees’ work conditions.

# CONCEPTUAL FRAMEWORK

DISCUSSION OF EACH FACTOR

Factor 1 - Working Conditions

Environment conditions and factors affect the work output and motivation of the worker. Working conditions cover a broad range of topics and issues, from working time (hours of work, rest periods, and work schedules) to remuneration, including physical conditions and mental demands that exist in the workplace.1

The Maruti Suzuki Manesar plan was automated for better performance in terms of worker efficiency and production output. The Manesar plant had a production capacity of 550,000 units per year. The young workers were hired as trainees and placed as a permanent employee if found suitable with working conditions and discipline.

International Commission on Labor Rights visited to investigate the working conditions of the Manesar plant after the 18th July violence outbreak. The commission found the working conditions stressful. Some of the observations are as follow: 2

1. The physical and psychological strain associated with having to produce one car approximately every 45 seconds.

2. The lack of adequate rest time for meals and bathroom breaks, two tea breaks of 7.5 minutes each and 30 minutes break for lunch.

3. A wage structure where up to half of the monthly payment is based on productivity and other subjective factors, and where even taking a sick day will cost workers a quarter of this discretionary pay.

4. An average of two hours of unpaid overtime a day.

5. Reliance on a highly precarious workforce, where 75% of workers are contract labor, trainees, or apprentices. These workers earn dramatically less than full-time workers and have no job security or benefits.

The working conditions in the Manesar plant were replicated from the Gurgaon plant. Basically, the working schedule was design based on the Japan factory of Suzuki. Note however that there was a huge cultural and social gap between these two country workforces.

The working schedule to produce more cars per seconds created the trigger point for workers dissatisfaction. Despite increased production and profit, the workers’ compensation remains low and exploited. The management concern was only production and profit. They completely neglected the basic worker's right to provide reasons.

India is a highly social and cultural country. People have high social and cultural obligations. They also need to attend family functions and other emergencies. The head of the family’s role is important in all these events. Most of the workers are the main member of their families. They need to take a leave to attend the important and emergency work for their family. As per Maruti Suzuki policy, taking leave for this obligation was very difficult or near to impossible. Coming late or taking leave was very expensive for the workers as the salary was productivity-based.

The other aspect of working conditions were the rights of workers for a collective bargaining. Maruti Suzuki prevented the workers to form a labor union. As per international and Indian law, the labor union is the basic right of the workers. The autocratic behavior of Maruti Suzuki management was non-negotiable on the human rights perspective.

All these factors and events, resultedto a lack of ownership by the workers in the company. They felt detached from the company and motivated to raise their voice against the management.

Recommendation for Factor 1

The devastating working conditions was the main reason behind the long-standing tussle between management and the worker union. The management neglected the worker's demand for decent working conditions. This resulted in the loss of both parties. The following are my recommendations which may help develop the conducive working environment in the plant:

1. Increase the two-break duration from 7.5 minutes to 10 minutes each

2. Allow workers to talk during the break

3. Increase the fixed salary component in comparison to a variable component which is based on productivity.

4. Establish an effective performance management system to get satisfactory compensation system

5. Provide sick leave and casual leave (12 leaves per quarter)

6. Reward scheme for employees attain 100% attendance and target.

7. Provide medical insurance and other benefits.

Factor 2 – Recruitment and Selection

The importance of recruitment and selection in Human Capital Management is getting the right people for the right job and promoting flow at the workplace. The latter part was not fully supported with the systems in place because employees were not fully integrated into their job through proper orientation and training.

The unique value proposition of Maruti-Suzuki was their top selling cars, which had almost 50% share in the car industry of India. Young people, and in general the population of Haryana wanted to be part of this company. It is important to note this because for the young people of Manesar, the unique value proposition was not supported by the organizational activities, structure and practices as well as by the leadership and culture.

Employees at the Manesar plant were young and from well off families in India who take pride in having a job. The employees in Gurgaon were also well to do but accumulated their wealth mainly by selling their land to the government for a good price.

This key difference in demographic could easily explain how in the two plants where the organizational design and leadership were the same and yet it was only in the Manesar plant where turmoil and violence occurred.

The employees of Manesar were less tolerant. They do not mind losing a day or more of their pay in order to demand what they feel they were entitled to and what should be rightfully given to them.

The highly mechanistic organization design stifled the young workers. There was a lack of person-org fit. The idealism of the young workers was also a main factor and enabled them to participate with the labor union activities.

Human Capital initiatives put into place attempted to address these concerns were the change in Employment Practices, mixing older employees (Seniors) with younger associates, Training Academy, Umbrella Monitoring and the Higher Education Scheme.

Recommendation for Factor 2

In order to manage the working environment, recruitment practices need to be strategized. Instead of focusing on the immediate community or region, the recruitment of employees should come from across the region to come up with a good mix. The more importantreason would be, to be able to manage the expectations of employees from the company.

As seen in the case, locals of the community have a tendency to demand more from the local companies found in their area. The employees from the local community also tend to put pressure on management to cater to their demands. By building a good complement and mix of employees, a better working environment is created as there is more objectivity in expectations as well as a perhaps, more conciliatory temperament.

To meet the needs and satisfaction of the employees, the Human Capital systems need to be securely in place. These systems must aim to satisfy the hygienic conditions as this was what had been the most overlooked and what mainly caused the dissatisfaction.

There needs to be consistency as well as transparency in implementing these systems. Even if hygienic conditions are satisfied, if the employee is disengaged due to lack of integrity and trust between the employers and employees, the proper organizational design will not be enough. The leadership and culture created by the company plays an important role in ensuring this.

Factor 3 - Communication in the Workplace

Workplace communication is the transmitting of information between one person or group and another person or group in an organization which can improve worker productivity and increase employee job satisfaction.1 Communication can be upward (employee to management), downward (management to employee) or lateral (employee to employee).

The managers had a negative attitude towards workers. It was manifested in a higher degree of managerial indifference (to worker’s needs) which became noticeable after the union registration. A specific example occurred when the managers changed the lines of most permanent workers unilaterally without asking—from paint shop to welding; from welding to assembly. This widened the communication gap between the two sides, with several instances of a complete breakdown of communication.

Trade unions alleged that there were unfair labor practices and highhandedness on the part of MSIL management both before and after the violence. Unfair labor practices may include discriminate treatment for employees engaging in union activities while highhandedness means having or showing no regard for the rights, concerns or feelings of employees.

Unions are legal representatives of employees for the protection of their rights and welfare. It helps bridge the communication gap between the management and the employees.

In the case of MIL, an employee perceived that the management made an unfair labor practice and it was raised as a major issue by the Union. Jiyalal, who was a dalit, alleged that the supervisor had made a caste-related slur against him during this incident. This allegation violated the Constitution of India which envisages safeguards against the exploitation of dalits and other powerless groups inIndian society.

Without effective communication system in place, this incident resulted to violence in the Manesar plant that caused death and injuries to many managers and employees, stagnation in production and eventually decrease in company revenue.

Recommendation for Factor 3

In order to establish a communication system that could mitigate effects of a communication gap and if possible prevent any future violent incidents, the following measures should be continuously implemented and enhanced:

1. umbrella mentoring;

2. employee-company connections;

3. counselling system;

4. managerial visits; and

5. communication meetings.

The focus of management efforts in building an effective communication system is to increase employee engagement. It includes sharing of personal, family and work-related information, feelings and concerns.

In umbrella mentoring, every supervisor was given five workers as his mentees, and was expected to hold individual meetings with each of them. This will enable closer interaction with the employees.

In employee-company connections, supervisors were asked to have regular informal discussions with workers during break-time and build personal rapport with them. Periodic meetings between workers and top management were arranged to delve into issues of concern. Senior managers, including those from the Gurgaon plant, began attending lectures with workers on aspects of labor-management cooperation.

A counselling system was put in place involving top management support for workers in resolving family problems. This included child-education counselling, child-career planning, etc.

The new Managing Director pays surprise visits to different departments. He also goes to the Manesar plant two to three times every week. Earlier, the company was run on feedback from those reporting to him. Now, he believes in doing it himself. Communication with the Manesar workers has substantially improved with this initiative.

Lastly, the Manager has a monthly communication meeting with the union leaders. This is the means where the common workers are represented by the union to pursue their concerns
Management efforts in ensuring an effective communication system within the company is very important.

An effective communication should be a two-way system wherein employees have to feel secure give and receive information, ideas, thoughts and concerns within the company. For employees, communication is empowerment. An empowered employee gives the highest productivity, job satisfaction and commitment.2

Factor 4 – Renumeration

Compensation and benefits basically refers to the compensation/salary and other monetary and non-monetary benefits passed on by a firm to its employees. Most employees find these important because they want to be rewarded after all their hard work. Therefore, remuneration packages need to be created, managed and distributed efficiently.

The minimum monthly wage for skilled workers in the state of Haryana was Rs 9,699. The workers in Gurgaon plant was fortunate that their salaries were based on their seniority and tenure. Those who had been in MSLI for ten years were given Rs 600,000 annually or a monthly wage of Rs 50,000. Those who reached 5 years in service were given Rs 380,000 annually or Rs 31,666 per month. These were way higher than those given to the employees in Manesar, as theirs were comparatively lower. They were paid less than what was paid to senior workers doing the same similar work. Another malpractice was secrecy of payments.

Pay signals company values, focus and culture. Paying the Manesar disproportionately with those from Gurgaon delivered the message that the former were less important compared to the latter and that they were not valued. With secrecy payments, MSLI signaled that they were hiding something and could not trust their people. It failed to realize that such negligence pushes employees to uncover company secrets.

Based on our Human Capital Managementlearnings, people must be viewed to work primarily in an environment that’s enjoyable, challenging, respectful, and let them use their skill rather than merely for money. This was something undermined by Suzuki management with its employees at Manaser. Generally, Suzuki employees were aware of the disparity between the rates of compensation given to employees in between plants. They were also aware of secret payments that were exercised in issuing severance payments. Management was complacent to allow its employees to interpret these exercises for themselves. As a result, employees performing the same jobs tend to compare their salaries without respect to tenure. Such was viewed as unfair and disrespectful that later on breathes demotivation within the workforce.

Recommendation for Factor 4

The practice of secret payments must totally be discouraged. Pay secrecy results to employees’ disengagements and a decreased sense of importance. By exercising pay transparency, the company would solicit employees’ engagement as they are given a gauge on how they are compensated. This can be further reinforced by establishing a pay scale, which should properly be cascaded especially among rank and files. Generally, group compensation is a proper measure for people performing the same function. However, management must take diligence to provide clarity and guidance over the various difference in scale or degrees of compensation. Employees must have a clear understanding of the tenure, regularization status and other differences that serve as a factor for the compensation disparity. Similarly, the company must be able to set guidelines or steps on how these factors would possibly be met. In doing so, employees would come to know where they stand, where to move at and how possibly they can reach such level. These practices would make the workforce determined and motivated.

Even top-performing employees could be expected to do the same as they are able to get a sense of accomplishment by meeting each requirement. Overall, combining all these practices reinforces collaboration and team spirit within each employee that allows one to go beyond viewing what individual merit pay merely provides.

Factor 5 - LABOR UNIONS

Labor unions are organizations of workers formed for the purpose of advancing its members' interests in respect to wages, benefits, and working conditions. Inherently, it involves “collective bargaining”. Collective bargaining can be defined as negotiations about working conditions and terms of employment between an employer and a group of employees or one or more employees’ organizations with a view to reaching an agreement wherein the terms serve as a code of defining the rights and obligations of each party in their employment, relations with one another; fix a large number of detailed conditions of employment; and, during its validity, none of the matters it deals with can in normal circumstances be given as a ground for a dispute concerning an individual worker. (Rao,1999).

In collective bargaining an impasse occurs when the parties are not able to move further toward settlement. An impasse usually occurs because one party is demanding more than the other will offer. Sometimes an impasse can be resolved through a third party – a disinterested person such as a mediator or arbitrator. If the impasse is not resolved in this way, the union may call a work stoppage, or strike, to put pressure on management (Dessler, 2008).

MSLI had its first union formed in its Gurgaon plant and was named Maruti Udyog Employees’ Union (MUEU). For four months, the union went against the HR policies established by its management, which resulted to a company slowdown. MSLI management won the battle. This was taken lightly by the Gurgaon employees and just embraced the “privilege” they had, working at India’s leading automobile company. On the other hand, this was taken seriously by the Manesar employees and triggered them to form an independent union. It was obvious that the MSLI management refused the organization of the union as it required resignation from the MUEU first before the Manesar employees can become a member of a new union. The Manesar employees were prohibited of dual membership, but rejected the management’s idea. This began the 5-months disruption in the workplace, where employees went on strike for three times and got media’s attention. Employees involved were sanctioned, but a settlement was reached when a conciliation officer and the government personalities intervened.

Under the settlement, those dismissed and suspended were reinstated for work, except some 12 who were found guilty of misconduct. Despite this, Manesar employees persisted in forming the independent union until they succeeded and was named Masaruti-Suzuki Workers’ Union (MSWU). A higher degree of managerial indifference was noticeable especially when they submitted a list of demands to the management. Employee relations heated up because of this until the intense violence happened in July 18, 2012.

After the violence, the two unions collaborated and jointly attended conciliation meetings held over the reinstatement Manesar workers who had been acquitted by the court. The management was firm in denying this demand. With this set up, no collective bargaining happened between MSLI and the two unions. Instead, there was an impasse as the management felt that the demands of the union were more than what they could offer.

MSLI can be considered a high-intensity workplace. Researches reveal that there are 3 strategies in managing high-intensity workplaces.

First is through accepting and conforming to the demands of the high-pressure workplace. Here, employees sacrifice or significantlysuppress the other aspects of who they are. They give up being civically engaged and submit themselves to round-the-clock availability. Our team feels that the Gurgaon employees simply gave in and conformed. After losing the battle with the management, they became so absorbed with their jobs that “they no longer understand how unbelievably stressful it is to come in not knowing how to play the game”. They just got devoted to their work. After all, they were satisfied with their pays.

Second is through passing or quietly finding ways around the norm. Under this, employees hide their personal characteristics that would stigmatize and subject them to discrimination. They try to be distant and hide key dimension of themselves.

Third is by revealing their commitments and their unwillingness to abandon them. Revealing employees openly share other parts of their lives and ask for changes in the structure of their work, such as reduced schedules and other forms of accommodations. They suggest open resistance for demands of round-the-clock availability. We feel that the Manesar employees manifested this strategy. As mentioned above, they decided form an independent union because they are not contented with the way the management handled their complaints. They felt they were treated unfairly, so management had to do something about their demands.

Labor unions have both positive and negative impacts. In this case, it negatively affected the employee-employer relationship of Manesar employees and MSLI. Because of the employees’ feelings of anger, betrayal, defeat and disillusion, they have become disengaged.

Recommendation for Factor 5

I feel that the only way the issue on Industry Relations in MSLI be settled is when both the management and the unions meet halfway and go for a win-win solution. This is only possible through a collective bargaining agreement (CBA).

As mentioned above, they never came to that point. For as long as the management finds the demands of the unions reasonable, they have to grant them. After all, as a for-profit organization whose objective is to produce goods, its human resource is its most critical factor of production. As such, its employees must be treated and managed well so that it can achieve its intended goals. The CBA must include the recommendations mentioned for each factor above.

REFERENCES

https://businessjargons.com/approaches-to-industrial-relations.html

https://businessjargons.com/industrial-relations.html

https://www.ilo.org/global/topics/working-conditions/lang--en/index.htm

Report by a delegation of ICLR 2013 -Merchants of Menace Repressing workers in India’s new industrial belt Violations of workers’ and trade union rights at Maruti Suzuki India Ltd.

1,2https://study.com/academy/lesson/workplace-communication-importance-strategies-examples.html