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Purpose and Objectives of Project

The purpose and objective of this study can be summarized as follows:

• Discuss history of workers participation in Management

• Objectives of workers Participation
• Damage of unhappy labour management-labour relations.
• Benefits of Cape Gemeni: Involve Everyone, Learn Together
• Collective Bargaining
• Indian Scenario
• Worker Participation in Management in Different Countries with New Trends.
• When workers turn owners -
• Success stories on successful management

Collective Bargaining and Workers Participation in Management

Integration of collective bargaining and formal worker participation processes: Boon

or barrier to worker rights?

Many employers are extending workplace rights by allowing for more employee
voice in decision making. Numerous unionized organizations have established
formal worker participation processes to help achieve this end and to improve
organizational performance. Based largely on theory, such processes are normally
designed to operate independently from the bargaining process. The purpose of this
study was to examine the relationship between participation and bargaining
processes, and the effect of this relationship on workplace satisfaction. From the
employees surveyed the results indicate that the processes tend to become
integrated in the workplace. Further, employee' workplace satisfaction was greater
where formal worker participation is institutionalized within the bargaining process.
Workers Participation in Management
History of Workers Participation in Management 8
Objectives / Features of Participation 12
Damage of unhappy management-labour relations 18
Cape Gemini: Involve Everyone, Learn Together 22
Scope and Ways of Participation 25
Limitations of Participation 33
Evolution of Worker Participation in India 33
Collective Bargaining
Hamal Panchayat 36
Features / Importance / Type of CB 39
Indian Scenerio 46

In Germany 64
In Japan 67
In Yugoslavia 69
In India 73
Workers Participation in management in TISCO 77
Case Study
Convenience Corporation 80
Another Union, Oh No! 81
KDHP – Success Story 82
Worker-turned-Owners Revive Failing Tea Estates 85
Tata Tea turns a new chapter 89
Conclusion 92

If whole populations are told that they cannot control or even discuss key elements
in their lives - wages and work - it will inevitably give rise to a whole range of
dysfunctionalities. New forms of social control of capital are essential in order to
fulfill the promise of democracy.
Norman Birnbaum, in "Die Zeit" 44/1997

If management must participate in decisions for determining the share of the

worker from the results of the co-operative use of labour and capital, then the
worker is equally entitled to participate in the decisions relating to share of capital,
namely, profit and indeed all decisions hitherto arrogated to itself by the employer
or management relating to the whole organization and operation of the enterprise;
determining objectives and policies, the relative share of the co-operating factors of
Yesufu, 1992: 142

“The management in this company does not consider it as its duty to contact junior
employees on how decisions are made”
“I am always busy in the factory, may be this is why I don’t know about decision

“I am in this company to work and earn my salary. I have no business with decision
making. I am not paid for such job.”

An opinion like this reflects the instrumental orientation of some of the workers.
Being mostly junior workers, these respondents tend to demonstrate more interest
in earning a living from work rather than to satisfy the higher order needs of self
expression through participation.

“Management in this company does not hesitate to involve some of us in the

decision making process whenever it is necessary”

“As a senior staff, I and other Foreman in the various units are made to contribute
to the decisions in matter relevant to our department”

Views like the one above shows that respondents have some measures of
involvement in the decision making process of their organization.

The human being has been on this earth for over 30,000 years. However, civilization
started with his acquiring two technologies: farming and keeping animals. Both the
technologies required manual work. Initially, he did the work himself. As the assets
increased, the work available from the family was not adequate. So he had to get
‘human resources’ to supplement the efforts of himself and his family members.

Initially, the help was obtained by acquiring slaves and creating master-slave
relationship. This relationship became economically untenable so he modified it to
master-servant relationship. In both these relationships, the supremacy of the
master was fundamental – the slave or the servant working according to the
instructions from the master. Thus, slaves position was obviously a survile one and
it continues the same way in feudal organizations. The technology was by and large
passed on by the master to the servant and the servant was totally dependent on
the master. The children of the servants normally looked forward to becoming
servants in the master’s organization. Over a period, the servants also acquired
some technologies and became craftsmen. Thereafter, the relationship became
contractual. The craftsman’s products became available to others besides his

A sea-change came with the industrial revolution and establishment of factories.

The master-servant relationship now became a distant one – the master being
concerned with the servants only for the servant’s period in the factory. The
master’s approach now was to get the maximum production from the worker
irrespective of what happened to him when he left the factory. This created a wave
of resentment regarding “exploitation”. With the French Revolution, advent of
Communism and the labour union movement, there was a struggle for a greater
equality from the human resources i.e. the workers. The struggle continues all
through the 19th and 20th centuries.

The 20th century started with increasing conflict between the employer and the
employee. This adversary relationship created a lot of hostility. The employer was
accused of exploitation and the employee was accused of resistance to productivity.
By this time, it was obvious that the prospects of an organization depended on
productivity, quality and innovation. The employers tried to bring in the productivity
by supervision with industrial engineering techniques like time and motion study.
These increased the conflict between the employer and the employee and the
employee used all his intellect to resist productivity. Quality also became a
problem. Department had to be created to check and ensure quality and here again
adversary relationship increased. The innovation of the employees was largely used
against the employer. Experiments were carried out through suggestion schemes to
utilize the innovation of workers. However, by and large these were not successful.

While the industrial engineers were concentrating on techniques to improve

productivity, they were shaken by the “Hawthorne” experiment. In this experiment,
the effect of intensity of light on productivity was being studied. As the intensity of
light increased, the productivity went up and it went further up when the intensity
of light went down. It was then discovered that discipline regarding time, task and
methods do not decide productivity by themselves. The motivation of workers is
also an important factor. It is not only the skill, but also the will that determines
productivity. Thereafter, the employers tried to create motivation among the
workers through “Workers Participation in Management”.

This project represents an attempt to find whether there should exist a system of
labour-management consultation or worker participation that supplements or
replaces collective bargaining. It discusses worker participation in management at
corporate, establishment and shop-floor level, especially at large firms in the private
sector. Worker participation in management here means that workers have a say in
managerial decision making individually or collectively through their
representatives, and that they regulate it or in some cases play a role in helping to
execute the decisions. Although there are various forms of worker participation in
management such as worker director schemes, profit-sharing schemes, joint
consultation, collective bargaining, quality circles and so on, the following issues are
analyzed using a three-tiered model:

First of all, the practices of the above-mentioned worker participation are described
using a body of case studies and questionnaire surveys. In each section, the
characteristics of the practices are pointed out. Then some theoretical explanations
are systematically developed in order to understand worker participation in

Workers Participation in Management

Worker participation in management is a concept shrouded with so much

vagueness that for different people it has different meanings. For management it is
joint consultation prior to decision making; for workers it is co-decision making or
co-determination; for trade union leaders it is the ushering in of a new era of social
relationship and for administrators it is merely the association of workers with
management without assigning them any authority or responsibility.
Notwithstanding these different views on worker participation, all agree that it is an
essential step involving redistribution of power between the management and
workers in the direction of industrial democracy.

It should be remembered that the worker participation in management is not the

same thing as participative management. While workers' participation in
management refers to institutional and formal arrangements resulting into the
creation of various participative forms to associate worker representatives with
management, participative management refers to a manager's specific style in
which he interacts with his people. It is his leadership pattern.

Similarly, worker participation in management is not the same thing as collective

bargaining. What distinguishes worker participation from collective bargaining is the
element of mutual trust and information sharing. Collective bargaining is typically
based on power dynamics, pressure tactics and to some extent on non-sharing of
information whereas worker participation in management is based on trust,
information-sharing and mutual problem-solving.
However, if collective bargaining refers to productivity bargaining and productivity
agreements, one may regard it as a form of worker participation in management.

Objectives of Participation

The economic objective of workers participation in management is the increased

workers' productivity. Workers participation results in cooperation between labour
and management and enhances productivity of labour. Poor labour management
relations may demotivate a worker and he may land up in minimum possible
production. Workers participation helps management in maintaining sound labour-
management relations and hence contributes to higher productivity.

One of the psychological objectives of workers participation is to increase the

workers' level of motivation. Participation provides satisfaction of non-economic
needs of workers. Through participation scheme, a worker feels that his importance
is felt by the management; he feels proud of working in the organization; he would
have a sense of belonging to the organization. Thus, participation provides the
employees with a sense of importance, pride and accomplishment, freedom and
opportunity for expression, a feeling of a belonging to the place of work and send of
workmanship and creativity, and a total devotion to the work. The ultimate result
would be the enhanced motivation and higher productivity.

Workers participation ensures a respectable status for the employees in the society.
It assures the human dignity because the workers become a partner in the gains of

One of the ethical objectives of workers participation is to change and mould the
employee behaviour. For instance, if employees resist some important changes in
organization, participative approach would be fruitful in introducing change and
reduce the resistance to change. The ethical objective of participation is to develop
workers' free personality, dignity, and belonging to the enterprise.

Workers participation should be distinguished from collective bargaining. Collective

bargaining is essentially based on power-play, pressure tactics and to a certain
extent non-sharing of information whereas participative management is based on
mutual trust, information, and mutual problem-solving.

Factors Influencing Participation

Several research studies have shown that the intensity of participation depends on
four factors:

i. the extent of participation

ii. the level of participation
iii. the subject-matter of participation
iv. the personal characteristics of the individuals who are asked to participate in the

(i) Extent of Participation: There are four degrees of participation. These are as
a) Communication: sharing of information with the management about all decision
taken by it.
b) Consultation: exchanging the opinion and the views with the management before
the decisions are taken.
c) Co-determination: taking joint decisions with the management.
d) Self-management: enjoying complete autonomy right from decision-making to

(ii) Level of participation: Level of participation is another factor which determines

the interest of workers in participation as such. Participation can take place at three
levels in an enterprise - floor level, plant level and corporate level. In big enterprises
there may be a fourth level also, i.e. the departmental level, in between the shop-
floor and the plant. Studies have revealed that most workers desire participation at
the shop-floor level and not at higher levels because they feel that with their
knowledge of the work place they can contribute best at that level only.

(iii) Subject-matter of participation: By and large, the workers' interest in

participation varies with the nature of issues involved in participation.
Broadly speaking, there can be two types of issues: work-related and interest-
related. Examples of work-related issues are safety, welfare, such as canteen,
sports, water-supply, housing, etc. These are the simplest issues. Examples of
interest related issues are wages and sharing of productivity gains. These are the
most difficult issues. Workers show greatest interest in the second type of the

(iv) Personal characteristics: Workers' interest in participation is also influenced by

certain personal or group characteristics. For example, several research studies
have shown that both very low and very high levels of task-relevant maturity
discourage participation. Participation by extremely immature workers is like the
blind leading the blind. It is pooling of ignorance. On the other hand, extremely
mature workers rarely participate. They resist "group think" because they prefer
only the expert in an area to make the decisions. Thus, the effectiveness of workers'
participation in management increases as one moves from low to moderate levels
of maturity and then begins to plateau and finally to decline as workers become
high in task-relevant maturity.

Participation in Strategic Decision Making

How much say workers have in each issue, formally or in a written agreement, is
shown in Table 2. A first glance reveals that the extent of their influence varies
among firms and that in general it is limited, at least formally. It varies also with the
issue and the firm size. As for larger firms with 5,000 workers or more, 30 to 40 per
cent of them no only explain about business issues (with the exception of the
introduction of new equipment) but also listen to workers' opinions. Moreover,
around 20 percent of these particular firms try to reach consensus between labour
and management.

Table 2. Establishments which discuss business issues at joint consultation

committees, by the extent of workers' influence (per cent)

Business Issues Size of Firm Dealt with by JCCs Of which

Report & explain to workers (%) Listen to workers' opinions (%) Consult with
workers (%) Need consensus of workers (%)
Basic business policy 5000- 100 69.1 12.1 16.1 2.7
1000-4999 100 76.7 11.6 6.6 5.1
Basic plan on production and sales 5000- 100 61.7 12.1 21.3 5
1000-4999 100 77.5 9.9 7.1 5.5
Changes in organisational structure 5000- 100 58.2 12.3 25.8 3.8
1000-4999 100 75 9.2 11.8 4
Introduction of new equipment 5000- 100 42.8 12.4 38 6.9
1000-4999 100 55.7 21.4 21.6 1.3

Source: Ministry of Labour (1994)

Note: To consult with workers means that both labour and management exchange
their opinions to each consensus; failing that, the final decision is made by

Business policies based on the opinions of the shop-floor, and occasionally they ask
management to revise its policies. For that purpose, the unions have a special
department or committee which analyses and monitors business policies. According
to the union officers, management takes these suggestions seriously and makes
every effort to implement them. In few firms, the collective agreements do not
specify the extent of the workers' influence at the top tier and only require that
union and management talk or exchange opinions about business issues. But in
reality, the unions are involved in strategic decision making just as seriously as in
the above three cases. The union may offer its members business analysis training.
Matsushita is renowned for having the most advanced worker participation system.
A branch of the Matsushita union gathers complaints and requests regarding
business issues from the rank and file in order to put forward proposals. Regardless
of formal written agreements, many unions in private large-sized firms actively
participate in strategic decision making.

Collective bargaining is the process of negotiation between the management and

the worker representatives for resolving differences related to wages, bonus and
other benefits, employee working conditions, grievance redressal procedure,
collective bargaining procedure etc. The process of collective bargaining has three
steps - preparation for negotiation, negotiation and contract administration.
If collective bargaining fails, the other stages in conflict settlement are conciliation,
arbitration and adjudication, in that order. Worker participation in management is
an effective tool for prevention of industrial disputes. The level of workers’
participation can vary from organization to organization. The basic objective of
worker participation is to provide an opportunity to the workers to participate in the
organizational decision-making.

By virtue of their participation, employees are bound to abide by all the decisions
taken. This also helps in boosting the employee morale and enhancing their
commitment to the organization. Some of the common forms of worker participation
in management in India are works committees, joint management councils, joint
councils, plant councils, shop councils etc.

Worker participation in India has achieved only partial success due to factors like
lack of proper education among workers, lack of understanding between the
management and the workers and multi-unionism. A good organizational
environment built on mutual trust and confidence between the management and
the workers would help in effective and successful worker participation in

'Industrial relations' is a major force which influences the social, political and
economic development of a country. In the changing industrial environment and in
the context of the fast technological development in India, employers and trade
unions have to face the challenge of finding new ways to stimulate greater
productivity and job satisfaction among the workers. Worker is no longer to be
treated as having a commodity value only but he should be treated essentially, as a
partner in the organization and is entitled to dignity and fair treatment. It is a
comprehensive work which has been brought out with the main object of clarifying
the important concepts underlying modern participative management. It will
undoubtedly prove immensely useful not only for workers and employers but also
for Govt. Departments and Undertakings in facing many issues which they often
find themselves confronted with.

Workers' participation in Management of Companies ensures better industrial

relations and increased productivity.

India experimented with this for the past fifty years. There are many models: some
succeeded while others failed.

Japanese as a cohesive society adopted the "Zero Defect" as a national goal and
succeeded beyond dreams.

Damage that unhappy management-labor relations can cause to an organization

Organization : Hyundai Motor Co.
Industry : Automobile
Countries : India

Hyundai Motor Co., formed in 1967, was a part of the large South Korean Chaebol -
the Hyundai Group - until the group split in September 2000. In the last four
decades, Hyundai managed to establish itself all over the world as a company
producing reliable, technically sound and stylish automobiles.

In the 90s, the company started aggressive overseas expansion programs. By the
late 90s, when Southeast Asian crisis struck, the company like all the other
chaebols, faced serious financial problems. To survive, it had to cut its labor force.
The company offered various retirement schemes, unpaid leave for two years, etc.
to workers, and expressed its inability to support its entire workforce in the slack

The unions refused to compromise and the management too held its ground.
Finally, the government intervened to force a negotiated settlement between the
union and the management.

"If the company refuses to accept our demands, we have no choice but to go on a
full-fledged strike. As the union leader, I cannot control the anger of the union."
-Hyundai union leader Kim Kwang-shik, July 1998.

"Laws and principles, along with dialogue and compromise, should be adhered to in
dealing with labor issues."
-Choi Kil-seon, president and CEO of Ulsan-based Hyundai Heavy Industries in an
interview to The Washington Times, June 2003.

The Hyundai Motor Co. (Hyundai), South Korea's largest automobile manufacturer
was in the midst of acute labor problems in the late 1990s and early 2000s. Until
the mid 1990s, Hyundai had been successful in handling South Korea's traditionally
disruptive labor unions. It had kept strikes at bay with nearly double-digit pay hikes
and other benefits. But the Southeast Asian crisis3 and the general slump in the
automobile industry in the late 1990s forced the company to restructure and cut
down jobs. However, the Hyundai labor union and workers rebelled against the
management's efforts to restructure the organization and the company faced
strikes and worker unrest repeatedly from late 1990s to early 2000s.

Members of the Hyundai group4 such as the Hyundai Construction and Engineering
and Hynix Semiconductor were also facing financial troubles at the time, and were
on the brink of insolvency.
Founder chairman of the Hyundai Group, Chung Ju-yung commented, "We are losing
our international competitiveness."5 Regretting the continuous labor unrest, he
said, "Wages have doubled in three years and productivity has gone down."6

The labor problems Hyundai faced were not an isolated case in South Korea. By the
late 1990s, the chaebols had grown into large mismanaged structures with many
having several unprofitable units. During the economic slump of the late 1990s,
most of these chaebols felt the need to downsize.

There was also mounting pressure from the IMF on the South Korean government to
undertake strict economic reforms and restructuring measures. The labor unions,
which have traditionally been very strong and influential in South Korea, felt

Since jobs were being cut, social unrest and a feeling of insecurity among the labor
class was rising. The unions resorted to extreme measures in an effort to establish
their authority. Although, all over South Korea, companies were facing labor unrest,
Hyundai was among those that were hit the most.

An Overview of the South Korean EconomyUntil 1960, South Korea focused on

agricultural development. But a series of five-year plans, the first of which was
implemented in 1962, greatly altered the economic structure of South Korea.
Starting from 1962, economic policies were geared towards industrial growth.
Export promotion and import substitution were the key elements in South Korea's
growth plans. The industries of electronics, telecommunication, automobile
production, chemicals, ship building and steel were the major thrust areas.

Business in South Korea was predominantly controlled by a few large

conglomerates or chaebols. Chaebols were industrial groups that were established
after the Korean War in early 1950s. They differed from other corporate
organizations in the sense that they were still largely controlled by their founding
families and were not managed by professional corporate managers.

All decisions, expansion plans and company policies were made by the members of
the founding families, who occupied the top positions in the chaebols. In 1995, the
top 30 chaebols alone accounted for nearly 16% of South Korea's GDP.

The top four chaebols at that time - Samsung, Hyundai, Daewoo and LG contributed
9% of GDP. South Korea has shown an incredible growth pattern. Between mid
1960s and mid 1990s, the annual GDP expanded by more than nine percent

From being at par with some of the poorer countries of Asia and Africa in 1960, its
GDP per capita in 2003 was seven times that of India7, eighteen times that of North
Korea8 and at par with some of the less prosperous economies of the European

This remarkable success has been a result of close cooperation between the
government and the chaebols. Government policies were framed keeping the
industrialists' demands - availability of credit, import restriction, sponsorship of
specific industries, import of raw material and technology, encouragement of
savings and investment over consumption - in mind. To encourage domestic
industry, the markets were heavily protected by quotas and tariffs...

Labour Problems in the Late 1990sThe slump in the South Korean economy in late
1990s was bound to have an effect on Hyundai also. The automobile segment was
among the first to be hit by the downslide in the economy. The domestic automobile
sector had negative growth of almost 55% in 1998 compared to the previous year.

Hyundai was responsible for almost 50% of total automobile production in South
Korea and was therefore badly hit. The domestic sales of the company fell by 55%
in the year 1998 and its exports crashed by 74 percent to only 15,056 units .
Hyundai recorded a 200 billion won loss in 1998.

According to company officials, Hyundai's six assembly plants with a yearly

production capacity of 1.65 million vehicles, were operating at only 40 percent of
their capacity. In May, 1998, Hyundai reacted to this grim situation by announcing
plans to lay off 27 percent of its 46,000 workforce in South Korea and to cut pay
bonuses and benefits in a bid to save 230 billion won.

Unfortunately for the management of the company, Hyundai had one of the most
powerful and militant unions. The decision of the company to lay off workers
sparked off agitations not only in Hyundai but in other companies too. The unions
were particularly offended at the government's approval of Hyundai's decision.

In a demonstration in Ulsan, where Hyundai has its biggest automobile plant,

32,000 employees participated in rallies. All across South Korea almost 1,20,000
employees from about 125 companies participated in demonstrations against
Hyundai and the government's decision. The government had to deploy nearly
20,000 riot police to control the demonstrators...

Labour Problems in the Early 2000sOn September 1, 2000, Hyundai officially cut
ties with the Hyundai Group and had relocated its head office to Yangjae-dong,
Seoul, Korea - a move that was seen as symbolic of its rebirth as an independent
automotive business group . In December 2001, Hyundai forecasted its highest
profits ever - $900 million for the year.

In the same year, it posted 23.4 percent growth in unit sales and a 74.5 percent
improvement in net income. Most importantly, Hyundai vehicles were being
accepted as a technologically advanced, stylish and reliable in overseas markets
like the US and Europe. In the United States, the world's largest auto market,
Hyundai recorded a 42 percent sales increase in 2001.

This was an era of growth, reorganization and new market exploration. But the
success story was marred by another strike threat in Hyundai.

Workers at the Ulsan plant went on a two-day strike in December 2001, demanding
higher wages and higher bonuses. They also demanded a 30% share in the profits
that year as a performance bonus.

The management clarified, that though the company had done well that year, it
could not afford performance bonuses to the tune of 30% of profit. The reasons
given were: firstly, the increased influx of imported cars into South Korea was
bound to hurt Hyundai's market share and margins in South Korea.

Secondly, General Motors' purchase of Daewoo was a threat that could not be
ignored or taken lightly, and the company had to gear itself up to be able to
compete with General Motors, and lastly, the most important reason stated was that
due to the appreciation of the Korean won, Hyundai cars were becoming less
competitive in international markets and profitability consequently would be hurt...

How Cape Gemeni Adapted the Toyota Production System to IT Work

How Cape Gemeni Took a Leaf out of Toyota’s Book: Cape Gemeni has successfully
implemented the Toyota Production System in an IT business.

Cape Gemeni is an Indian firm providing back office operations handling medical
claims and human resource policies for customers around the world. Their approach
is as the use of an assembly line method for transactional office work.
Cape Gemeni had previously implemented Six Sigma and CMMI, and then found TPS
from the local Toyota Kirloskar factory in Bangalore. Cape Gemeni has implemented
330 kaizen projects over 1,100 processes, involving nearly 7,000 employees.

What success tips can we take away from Cape Gemeni’s adaptation of TPS to IT?


Sambuddha Deb, Cape Gemeni’s Chief Quality Officer is quoted:

“We adopted the lean manufacturing practice of Toyota for the IT industry. We
chose it because the Japanese were successful in making it participatory even to
the last level” This implies total participation, if we presume that by “last level” he
means front-liner workers.
Gain a sufficiently deep understanding of what you are trying to do, then do it. Cape
Gemeni took one and a half years to learn the Toyota Production System techniques
and how to adapt them to the IT industry. This is in stark contrast to many U.S.
firms are restless for short term results, and some consultants who promise a
transformation in “weeks not months” don’t help the situation. As Taiichi Ohno said,
“Understanding means doing” but doing does not necessarily mean understanding.

“There has been no resistance from employees as we have taken them along,
improving on their suggestions and learning as we expanded,” says Sambuddha
Deb of Cape Gemeni.

Three groups of managerial decisions affect the workers of any industrial

establishment and hence the workers must have a say in it.

1. Economic decisions – methods of manufacturing, automation, shutdown, lay-offs,

2. Personnel decisions – recruitment and selection, promotions, demotions,
transfers, grievance settlement, work distribution.
3. Social decisions – hours of work, welfare measures, questions affecting work rules
and conduct of individual worker’s safety, health, sanitation and noise control.

Participation basically means sharing the decision-making power with the lower
ranks of the organization in an appropriate manner.


♣ ILO:Workers’participationmaybroadlytakencovertermsassociationtheirdecision-

According to Gosep, workers’ participation may be viewed as:

Ameansachievingpeaceharmonyleadshigherproductivityincreased production;♣
Other objectives of WPM can be cited as:


The main implications of workers’ participation in management as summarized by





- They become more willing to take initiative and come out with cost-saving
suggestions and growth-oriented ideas.

Scope and ways of participation:

♣ Oneviewisworkersorshould,partners,sitmanagementandjointmanagerialdecisions.

- Board level participation
- Ownership participation
- Complete control
- Staff or work councils
- Joint councils and committees
- Collective Bargaining
- Job enlargement and enrichment
- Suggestion schemes
- Quality circles
- Empowered teams
- Financial participation

Participation at the Board level:

- He or she can prevail upon top management not to take measures that would be
unpopular with the employees.
- He or she can guide the Board members on matters of investment in employee
benefit schemes like housing, and so forth.

- Focus of workers’ representatives is different from the focus of the remaining
members of the Board.
- Communication and subsequently relations between the workers’ representative
and the workers suffers after the former assumes directorship.
- As a result, he or she may be less effective with the other members of the Board in
dealing with employee matters.
- Because of the differences in the cultural and educational backgrounds, and
differences in behaviour and manners, such an employees’ representative may feel
inferior to the other members, and he or she may feel suffocated. Hence, his or her
role as a director may not be satisfying for either the workers or the management.
- Such representatives of workers’ on the Board, places them in a minority. And the
decisions of the Board are arrived at on the basis of the majority vote.

Participation through ownership:

- In many cases, advances and financial assistance in the form of easy repayment
options are extended to enable employees to buy equity shares.
- Makes the workers committed to the job and to the organization.
- Effect on participation is limited because ownership and management are two
different things.
Participation through complete control:

- Ensures identification of the workers with their organization.
- Industrial disputes disappear when workers develop loyalty to the organization.
- Trade unions welcome this type of participation.
♣ Conclusion:Completecontrolbyworkersisnot an answer the problem of
participation because the workers do not evince interest in management decisions.

Participation through Staff and Works Councils:

Staff councils or councils are bodies which the is entirely of the employees.♣
There may be one the entire organization or a hierarchy of councils.♣
The employees of the respective sections elect the members of the councils.♣
Such councils play a varied role.♣
- Their role ranges from seeking information on the management’s intentions to a
full share in decision-making.
♣ Such councils not enjoyed too of because leaders fear the erosion of their power
and prestige if workers’ bodies prevail.

Participation through Joint Councils and Committees:

Joint councils are bodies comprising representatives of employers and employees.♣

- This method sees a very loose form of participation, as these councils are mostly
consultative bodies.
Work committees are a legal requirement in industrial establishments employing
100 or more workers.♣
- Such committees discuss a wide range of topics connected to labour welfare.
- Examples of such committees are welfare committee, safety committee, etc.
- Such committees have not proven to be too effective in promoting industrial
democracy, increasing productivity and reducing labour unrest.

Participation through Collective Bargaining:

♣ Through the of management and workers may reach agreement regarding rules
for the formulation and termination of the contract of employment, as well as of
service in an establishment.
Even though these are not legally binding, they do some force.♣
For work, the workers’ and the employers’ representatives need to bargain in the
in practice, while bargaining, each party tries to take advantage of the other.♣
♣ This process of be called WPM in strongest sense as in reality; is based on the
crude concept of exercising power for the benefit of one party.
- WPM, on the other hand, brings both the parties together and develops
appropriate mutual understanding and brings about a mature responsible

Participation through Job Enlargement and Job Enrichment:

♣ Excessive job specialization that is seen as a by-product of mass in industries,

leads to boredom and associated problems in employees.
Two methods of job designing job enlargement and job enrichment are seen as
methods of addressing the problems.♣
- Job enlargement means expanding the job content – adding task elements
- Job enrichment means adding ‘motivators’ to the job to make it more rewarding.
This is WPM in that offers freedom and scope to the workers to use their
♣ But this form of participation is very basic as provides limited freedom to a worker
concerning the method of performing his/her job.
The worker has no say in other vital issues of concern to him♣ – issues as job and
income security, welfare schemes and other decisions.

Participation through Suggestion Schemes:

Employees’ views are invited and reward is given for the best suggestion.♣
With this scheme, the employees’ interest in the problems of the organization is
aroused and maintained.♣
Progressive managements increasingly use the suggestion schemes.♣
Suggestions can come from various levels.♣
♣ The ideas could range from changes in inspection procedures to design changes,
process simplification, paper-work reduction and the like.
- Out of various suggestions, those accepted could provide marginal to substantial
benefits to the company.
The rewards given to the employees are in the benefits derived from the

Participation through Quality Circles:

Concept originated in Japan in the 1960s and has now all over the world.♣
♣ A QC consists of seven to ten people from the same work area who meet
regularly to define, analyze, and solve quality and related problems in their area.
Training in problem-solving techniques is provided to the members.♣
QCs are said to provide quick, concrete, and impressive results when correctly
- Employees become involved in decision-making, acquire communication and
analytical skills and improve efficiency of the work place.
- Organization gets to enjoy higher savings-to-cost ratios.
- Chances of QC members to get promotions are enhanced.

The Scenario:♣
- Tried by BHEL, Mahindra and Mahindra, Godrej and Boyce among others.
- Experienced mixed results:
o M&M (jeep division) with 76 QCs has experienced favourable results.
Technical problems got solved.♣
Workers got to get of their daily routine and do something challenging.♣
unions look at it as:♣
- A way of overburdening workers, and
- An attempt to undermine their role.
These circles require a lot of and commitment on the of members for regular
meetings, analysis, brainstorming, etc.♣
Most QCs a definite life cycle – one to three years.♣
- Few circles survive beyond this limit either because they loose steam or they face
simple problems.
QCs can be an excellent bridge between participative and non-participative
♣ For QCs to succeed in the long run, the management needs to show commitment
by implementing some of the suggestions of the groups and providing feedback on
the disposition of all suggestions.

Empowered Teams:

♣ Empowerment occurs when authority and responsibility are passed on to the

employees who then experience a sense of ownership and control over their jobs.
Employees may feel more responsible, may take initiative in their work, may get
more work done, and may enjoy the work more.♣
For empowerment to occur, the following approach needs to be followed as
compared to the traditional approach:♣
- Element Traditional Org. Empowered Teams
- Organizational structure Layered, individual Flat, team
- Job design Narrow, single task Whole process, multiple tasks
- Management role Direct, control Coach, facilitate
- Leadership Top-down Shared with the team
- Information flow Controlled, limited Open, shared
- Rewards Individual, seniority Team-based, skill-based
- Job process Managers plan, control, improve Teams plan, control, improve

Features of empowered or self-directed teams:

Empowered to share various management and functions.♣

Plan, control and improve their work.♣
Often create their schedules and review their performance as a group.♣
prepare their budgets and co-ordinate their work with other departments.♣
Usually order materials, keep inventories and deal with suppliers.♣
Frequently responsible for acquiring new training they might need.♣
May hire their own replacement to assume responsibility for the quality of their
products or services.♣
- Titan, Reliance, ABB, GE Plastics (India) and Cape Gemeni InfoTech are
empowering employees – both frontline as well as production staff, and are enjoying
positive results.

Total Quality Management:

TQM refers to the deep commitment, almost obsession, of an organization to

Every step in processes is subjected to intense and regular scrutiny for ways to
improve it.♣
Some traditional beliefs are discarded.♣
- High quality costs more.
- Quality can be improved by inspection.
- Defects cannot be completely eliminated.
- Quality in the job of the QC personnel.
New of TQM are:♣
- Meet the customer’s requirement on time, the first time, and 100% of the time.
- Strive to do error-free work.
- Manage by prevention, not correction.
- Measure the cost of quality.
♣ involving¬TQM is called participative because it is a formal programme every
employee in the organization; making each one responsible for improving quality

Financial Participation:

This method involves less consultations or even joint decisions.♣

Performance of the organization is linked to the performance of the employee.♣
♣ The logic behind this is that if an employee has a financial stake in the
organization, he/she is likely to be more positively motivated and involved.
Some schemes of financial participation:♣
- Profit-linked pay
- Profit sharing and Employees’ Stock Option schemes.
- Pension-fund participation.

Pre-requisites for successful participation:

♣ Management and operatives/employees should not work at cross-purposes i.e.

they have clearly defined and complementary objectives.
Free flow of communication and information.♣
Participation of outside leaders to be avoided.♣
Strong and effective unionism.♣
Workers’ education and training. Trade unions and government needs to work in
this area.♣
Trust between both the parties.♣
Workers should be associated at all levels of decision-making.♣
Employees cannot spend all their time in participation to the exclusion of all other

Limitations of participation:

Technology and today are so complex that specialized work-roles are required.♣
- This means employees will not be able to participate effectively in matters beyond
their particular environment.
Everybody need not want participation.♣
The role of unions in promoting participative management has been far from
Employers are unwilling to share power with the workers’ representatives.♣
Managers consider participative management a fraud.♣

Evolution of participative management in India:

♣ The beginning WPM was made with the Disputes Act, 1947, which made Works
Committees mandatory in industrial establishments employing 100 or more
The Industrial♣ Policy Resolution adopted by the government in 1956 stated that
there should be some joint consultation to industrial peace, and improve employer-
employee relations.
The functions of both these joint bodies to be consultative and were not binding on
the management.♣
The to these schemes was encouraging to begin with, but gradually waned.♣
- A study team was appointed in 1962 to report on the working of joint councils and
The team identified some reasons for their failure.♣
No concrete were taken to remove the difficulties, or change the pattern of
participative management.♣
♣ During the emergency of 1975-77, the interest in these schemes was revived by
the then Prime Minister by including Workers’ Participation in in the government’s
20-point programme.
- The government started persuading large enterprises to set up joint consultative
committees and councils at different levels.
The Janata Government who came to power in 1977 on this initiative.♣
It was again emphasized by the Congress government who came back n 1979.♣
♣ This continued in a “non-statutory vein” till the late 1980s, and the response from
the employers and employees stayed luke-warm.
- Then, the 42nd Amendment to the Constitution was made.
♣ Now, Article 43-A reads: The State shall take steps, by suitable legislation, or in
any other way, to secure the participation of workers in the management of
undertakings, establishments or other organizations engaged in any industry.
participative management is a constitutional commitment in India.♣
- And then, on May 30, 1990; the government introduced the Participation of
Workers in Management Bill in the Rajya Sabha.
♣ The bill requires every industrial enterprise to constitute one or more ‘Shop-Floor
Councils’ at the shop floor and ‘Establishment Council’ at the establishment
These councils have equal representation of employers and employees.♣
Shop-Floor councils enjoy over a wide range of functions from production, wastage
control to hazards.♣
The Establishment Council enjoys similar powers.♣
The bill provides for the constitution of a Board of Management of every corporate
body owning an industrial establishment.♣
The bill provides for penalties on individuals who contravene any provision of the
spite of all these efforts, only the government and the academicians have been
interested in participative management.♣
But participative management is staging a comeback.♣
- The compulsions of emerging competitive environment have made employee
involvement more relevant than ever before.
- Managers and the managed are forced to forget their known stands, break
barriers, and work in unison.

Managers and workers are partners in the progress of business.


“Collective Bargaining is a mode of fixing the terms of employment by means of

bargaining between an organized body of employees and an employer, or an
association of employers usually acting through organized agents. The essence of
collective bargaining is a bargain between interested parties, and not a decree from
outside parties”.
- Hoxie.

“Collective Bargaining takes place when a number of work-people enter into a

negotiation as bargaining unit with an employer or group of employers with the
object of reaching an agreement on the conditions of employment of the work-
- Richardson.

Hamal Panchayat

It was the year 1956, when the hamals (head loaders) of Pune first struck work for 8
days to demand a raise in wages. “kata band kara” (boycott the weighing scale)
was the unifying slogan and “kata band dukan band”(no weighing scale no
shop/business) was the outcome. Excluded from the purview of the Shops and
Establishments Act, 1948 hamals were not assured minimum wages; their hours of
work were not regulated and they had no legal recourse under the Act. The shops,
the warehouses, the markets could not function without them and all commercial
activity ground to a halt. The hamals were collectively invited to the negotiating
table and a settlement was reached- higher piece rate service charges for different
commodities to be reviewed every three years. The hamals demanded a written
agreement, signed by both parties and the traders refused to sign on the dotted
line. The stalemate continued till the then Collector (Administrative head of the
district) intervened. He wrote down the substance of the settlement in the presence
of both parties and affixed his signature to it, in his capacity as the administrative
head of the district. Neither of the parties signed the document but a record was
created and a new practice established as precedent. From then on it was business
as usual with a difference. The employer-employee relationship is often visualised in
terms of polarities, positing the employer and employee in adversarial roles. In this
case both parties recognised the strength of the other and sought to define their
ongoing relationships as mutually interdependent and beneficial long term
partnerships that needed to be maintained and nurtured and that they had common
interests in maintaining and enhancing business growth.

They could have chosen otherwise. The hamals based on their capacity to paralyse
commerce could have chosen to invoke the Industrial Disputes Act to demand
“employee” status and prolong the imbroglio, just as the traders could have used
their greater financial muscle to “break” the collectivisation of labour. Both
bargained with a view to reaching an agreement keeping aside the ambiguous and
contentious issue of determining “employer-employee” status.

Although hamals operate from within the trading establishments, they are not paid
by the shop owners and are therefore not their employees. They load and unload,
fetch and carry for various consumers and vendors and are paid for the sale of their
labour. The relationship between the establishment owner and the hamal is in the
nature of “permission” to operate from the establishment. The hamals did not seek
to define their relationship with the traders. On the contrary they asserted “We own
our backs. No one owns us. We cannot be compelled to work”.

The unionisation of hamals also brought in another change, that of the union
assigning hamals to the establishments. Violation of this tenet by the employers
was rare because of the threat of “kata band”.

The working conditions at the time were horrific………………………..

At the goods yard at the railway station………

Hamals had to work in the closed, dark railway containers, jostling each other in the
limited space, inhaling cement dust and chemical fumes and choking on on them;
and tripping on the uneven floors. There was no rest room, no toilets and not even
drinking water. They paid a “handewali bai” (water women) to supply drinking water
to them through the working day. At the grocery market………… enormous loads of
jaggery had to be carried on their backs. There being few sugar processing factories
at the time all the jaggery was brought to the city. Often the jaggery was hot and
dripping, and burnt their backs through the sacks that were meant to protect them.
The vegetable and fruit markets operated at night and the average weight carried
was 100 kg. and still is for the most part, despite the ILO Convention that requires it
to be less than 40 kg. The condition of the women workers was even more
abysmal………mostly Dalits, they were not paid wages by anyone. They swept the
establishment and collected the spilled grain which they had rights to and
constituted their “wages”.

The modes of communication between union members were the information boards
outside the larger warehouses around which the members could congregate.
Typically hamals worked in tolis or gangs cemented by kinship or natal village ties.
This enabled the strengthening of the network.

There were similar struggles afoot in Bombay as well, P. D’Mello had organised the
dock workers and porters while Alvarez tried to organise the loaders at the railway
station. The demand for legislative protection became more strident and in
response to the pressure the Maharashtra government set up a committee to study
the conditions of work of hamals.

What followed was the enactment of the Hamal Mathadi and Other Unprotected
Manual Workers (Regulation of Employment and Welfare) Act, 1969, a historic and
radical piece of legislation that was specifically intended to protect the thousands of
labouring manual workers in insecure employments across the state.

Features of CB:
- Workers collectively bargain for their common interests and benefits.
- Workers and management jointly arrive at an amicable solution through
- With industrial democracy at work, both the parties bargain from the position of
equal strength.
- CB cannot be rigid or inflexible as its’ aim is to arrive at a consensus.
- Both the parties negotiate voluntarily in order to have a meaningful dialogue.
- Through negotiations, they try to probe each other’s views thoroughly before
arriving at an acceptable solution.
- The implementation of the agreement resulting from such a bargaining process is
also voluntary.
- This process begins with negotiations but does not end with an agreement.
- Implementation of such an agreement, which is an on-going process, is also a part
of CB.
- The whole process of CB is influenced by the mental make-up of the parties
- As a result, the concept of CB changes, grows, and expands over time.
Power relationship:♣
- Each party wants to extract the maximum from the other.
- To reach a consensus, both have to retreat from their original positions and accept
less than what is asked for and give more than what is on offer.
- While doing so, the management tries to retain its control on workplace matters
and unions attempt to strengthen their hold over workers without any serious
dilution of their powers.
- The participants in CB do not act for themselves.
- They represent the claims of labour and management while trying to reach an
- Each participant is an authorized representative of workers and employers.
Bi-partite process:♣
- This process does not have third party intervention.

Importance of CB:

It helps increase the economic of both the parties at the same time protecting their
It helps establish uniform of employment with a view to avoid occurrence of
industrial disputes.♣
It helps resolve disputes when they occur.♣
It lays down rules and for dealing with labour.♣
It helps usher in democratic principles into the industrial world.♣

Bargainable Issues:

Any issue relevant to management and workers.♣

- Management not too keen on negotiating work methods arguing that is their
exclusive right to decide how the work is to be done.
- Unions do not want negotiations on production norms and disciplinary matters.
They believe that an agreement in this regard would put limits on their freedom to
demand at a later stage.
- Wages and working conditions have been the primary focus areas of CB.
recent times, has extended to a lot many areas.♣
- Examples:
» Wages and working conditions;
» Work norms;
» Incentive payments;
» Job security;
» Changes in technology;
» Work tools, techniques and practices;
» Staff transfers and promotions;
» Grievances;
» Disciplinary matters;
» Health and safety;
» Insurance and benefits;
» Union recognition;
» Union activities/responsibilities;
» Management rights.

Types of Bargaining:

Conjunctive/Distributive Bargaining: Here, the parties try to maximize their

respective gains.♣
- In this method, the parties try to settle economic issues through a zero-sum game.
- Zero-sum game is where ‘my gain is your loss and your gain is my loss’.
- Neither party is willing to yield an inch.

Co-operative Bargaining:♣
- Both parties are more open to coming down from their high horses and co-
- They are willing to negotiate the terms of employment in a flexible way.
- This willingness is because of recession and the need to be able to survive in such
difficult times.
- This would not be possible without each other’s support and hence co-operative
- TELCO and Ashok Leyland resorted to co-operative bargaining when the
automobile sector was going through a period of recession.
- Employees may now be willing to accept a cut in wages in return for job security.
- Management may also agree to modernize and bring in new technology and invest
in marketing efforts in a phased manner.

Productivity Bargaining:♣
- In this method, workers’ wages and benefits are linked to productivity.
- Initially, a standard productivity index is finalized through negotiations.
- This index is not fixed at an exceptionally high level.
- Workers crossing the standard productivity norms will get substantial benefits.
- This method of bargaining helps in making the workers realizes the importance of
raising productivity for organizational survival and growth.

Composite Bargaining:♣
- Workers tend to argue that productivity bargaining increases their workload.
- Rationalization, introduction of high technology, tight productivity norms hit the
unions and workers below the belt.
- As a result, workers tend to favour composite bargaining?
- In this method, labour bargains for wages as usual.
- In addition, they also bargain for such issues that, if permitted, may result in lower
employment in some other plant, diluting the bargaining powers of unions.
- Eg. Workers demand further equity in matters relating to work norms, employment
levels, manning standards, environmental hazards, sub-contracting clauses, etc.
- We see that workers are no longer solely interested in the monetary aspects to the
exclusion of work related matters.
- Through composite bargaining, unions are able to prevent the dilution of their
powers and ensure justice to workers by putting certain limits on the freedom of
- For the employer, this is the lesser evil when compared to strikes and lockouts.

The Collective Bargaining Process:

Identification of the problem:♣

- Nature of the problem influences the CB process.
the problem very important?♣
- Yes; to be discussed immediately.
- No; can be postponed for some other convenient time.
Is the problem minor?♣
- Yes; can be solved immediately after its’ presentation.
- No; involves the long process of CB.
♣ Nature of the problem influences the selection of representatives, their size,
period of negotiations, and duration of the agreement that is ultimately reached.
Preparation for negotiation:♣
- This means that the problem can be solved only through CB.
- Representatives have to be selected.
» Qualities of representatives: patience, composure while carrying out negotiations,
and the ability to present views effectively.
» Selected representatives have to be educated about the complete problem and
its’ pros and cons.
» Powers and authority of the negotiating representatives should be clarified.
» Fix up the time for negotiations, duration of negotiations, etc.
But once the begin, the actual period may vary depending upon circumstances.♣
Negotiation of Agreement:♣
- These are the people most likely to be found at the negotiating table:
» Chief negotiator – generally from the side of management.
» Representatives of both the parties.
• Chief negotiator presents the problem, its’ intensity and nature, and the views of
both the parties.
• Then, the representatives of both the parties are invited to present their views.
• Principle to be followed by both the parties at the time of negotiations `being
attentive to the other party’
- While negotiating, each party, instead of paying attention to the point of view of
the other party, tends to think more about their counter arguments and how to say
`no’ to their offer.
- Both the parties need to maintain a positive attitude and should `think’ rather than
`feel’ their way through the problem under consideration.
- Both parties should try to reach an amicable solution.
- When a solution is reached at, it is put on paper, taking into consideration the
concerned legislations.
- Thereafter, both the parties sign the agreement, which, in turn becomes a binding
contract for both the parties.
- On the other hand, if no amicable solution is reached, both parties may consider
- The agreement resulting from CB may be temporary.
» In this case, before its expiry, both parties consult each other and can terminate
or renew the agreement depending upon the circumstances.
- Depending on the attractiveness of the agreement for either of the parties, one
may want a renewal while the other may want a termination.
- This leads to further negotiations.

So, in reality, CB is a continuous process and not a temporary accommodation.

Collective Bargaining vs. Negotiation Skills:

♣ is a process by which the terms and condition of employment of workers are

regulated by between their bargaining agent and their employers.
Negotiation, on the other hand, is a process of resolving conflicts between two or
more parties wherein both or all modify their demands to reach a workable

The process of CB also uses negotiations to reach a mutual consensus.♣

♣ While negotiating issues, parties their stand from an ideal position to a settlement
point, which is mutually agreed upon. The position of the settlement point depends
on the relative bargaining strength and skill of the negotiator.

The sacrifices to be♣ made and the concessions to be yielded, depend to a large
extent on the negotiating skills of the bargaining agent.
- If he is powerful, he will have his way. If this power is challenged on justifiable
grounds where other people see reason, he may have to yield his ground.

EvolutiCB and with the of CB in it in response to the by the Industrial with trade the
of bargaining strength in the part of the the negotiations were carried out at early
industry and The to and through the process of CB, organizations have to with
industrial trade unions much – only as the of the workers – the of through CB But
the interest only the The Government of that time took steps of for negotiations,
and The trade and also CB Indian from at the level, such spread to industries such
as and In and and were right at the level. of in all in the way of collective
agreements towards industrial have to be for the success of CB for promoting
industrial to and trade for union by of in which collective agreements have a to of
the trade must other and employees’ for a to on on and of the to and shift the to the
conditions to workers’ education for union leadership and make workers more con

itions any which cannot be production to an ensure that work is and are given
industrial and in with the service as between workers and the Is on and May on its
own initiative take a and safety on working environment policy the of Trade the of
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have equal representation on the of the In in line with a of representatives the
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the representatives.have a The powers of the works council by Thus, it will also be
to workers in if they are a and In that the company to social at the and norms such
as the International Labour the principles the and the for and for

on of Collective Bargaining:

CB rose and grew with the trade union movement.♣

Roots of CB lie in Great Britain where it developed in response to the conditions
created by the Industrial Revolution.♣
Along with trade unions, the idea of bargaining collectively gained strength in the
early part of the 18th Century.♣
Initially, the negotiations were carried out at plant level.♣
By early 1900, industry and national level agreements became quite common.♣
The idea spread across to France, Germany, and USA.♣
And today, through the process of CB, organizations have learnt to cope with
industrial conflict.♣

The Indian Scenario:

In India, trade unions gained prominence much later – only after 1900.♣
♣ In 1918, Gandhiji - as the leader of the Ahmedabad textile workers – advocated
the resolution of conflict through CB agreements.
But the idea gathered interest only after the Second World War.♣
The Government of that time took steps like setting up of machinery for
negotiations, conciliation and arbitration.♣
The trade union movement and also CB agreements became popular after Indian
♣ Moving from agreements at the plant level, such agreements spread to industries
such as chemicals, petroleum, tea, coal, oil and aluminum.
In ports and docks, banking and insurance, collective agreements were arrived at,
right at the national level.♣
Assessment of Collective Bargaining in India:♣
- Other than in Ahmedabad and Mumbai, so far, collective agreements have not
made much headway in India.

- Reasons:
» Lack of statutory recognition of unions by the country as a whole.
» Lack of provisions requiring employers and workers to bargain in ‘good faith’.
» The historical problem of ‘lack of trust’ between the parties
Have all stood in the way of collective agreements contributing towards industrial
Proper conditions have to be created for the success of CB for promoting industrial
Encouragement to strong and powerful trade unions.♣
Satisfactory arrangements for union recognition by statute.♣
Creation of conditions in which collective agreements have a chance to succeed.♣

Causes of limited success of CB in India:

- Problems with unions:
» CB mainly depends on the strength of unions.
» Weak trade unions cannot initiate strong arguments during negotiations.
» Not many strong unions in India.
» Indian unions are bogged down by the problems of: multiplicity, inter and intra-
union rivalry, weak financial position and non-recognition.
» So, unanimous decision is unlikely to be presented at the negotiating table.
- Problems from Government:
» The Government has not been making any strong efforts for the development of
» Imposition of many restrictions regarding strikes and lockouts has removed the
`edge` of the CB process.
Political interference:
» Interference of political leaders in all aspects of union matters has increased over
the years.
Almost all unions are associating themselves with some political party or the other.
Legal problems:
» Now that adjudication is easily accessible, the CB process is losing its importance.
Management attitude:
In India, managements have a negative attitude towards unions.
» They do not appreciate their workers joining unions.

Suggestions for better functioning of CB:

The Indian Institute of Personnel Management has offered the following

A progressive and strong management that is conscious of its obligations and
responsibilities to the various stakeholders.
A truly representative – enlightened and strong – trade union should come into
being and should function on strictly constitutional lines.
There should be unanimity between labour and management on the basic
objectives of the organization and a mutual recognition of their rights and
When there are several units of the company, there should be a delegation of
authority to the local management.
A fact-finding approach and a willingness to use new tools should be adopted for the
solution of industrial problems.

Pre-requisites of successful bargaining:

Employer’s recognition of the trade union.♣

Bargaining must precede other measures:♣
- Neither party should take any unilateral action. Results of bargaining should be
Employers’ and employees’ attitude calls for a change:♣
- The workers and the employers should be quite clear that they are not looking for
third party intervention in the form of litigation and adjudication.
- They want to sort out their differences in a peaceful way.
Top priority to plant level bargaining:♣
- The representatives of the employees must have a firm resolution to have an
agreed solution to their individual matters.
Negotiations on differences:♣
- Both the parties should negotiate on their points of differences or demands with
the sole purpose of making an agreement.
Reliance on facts and figures:♣
- In order to make the negotiations result into success, the workers and the
management agents must rely on facts and figures to substantiate their claims.
Giving up unfair labour practices.♣
Written agreement:♣
- The final decisions should be incorporated in a written agreement.
- The agreement should include the validity of the agreed matters as also the
frequency of its review.
Progress review:♣
- Agreements should not be signed and forgotten.
- During their implementation, regular meetings should be held between the
representatives of both the parties to watch the progress of the implementation.
- This way any changes, adjustments and amendments can be effected.
Respect of agreement:♣
- Both the parties must respect the agreement and see that it is implemented in a
fair and justifiable manner.
Arbitration provision:♣
- The agreement must include an arbitration clause.
- Whenever the parties have any differences pertaining to the interpretation of the
terms and conditions, the arbitration clause can be resorted to.

Recommendations of the National Commission on Labour: The NCL (1969) offered

the following recommendations.
Gradually, withdraw the easy accessibility to adjudication and shift the emphasis to
Create the conditions to promote CB. How?♣
- Make the recognition of a representative union as the sole bargaining agent,
- Define the employees’ right to `strike’ work and place it in the overall scheme of
Intensify workers’ education for building up internal union leadership and make
workers more knowledgeable.♣

Worker participation in management decision-making is a highly complex concept.

The notion that the workers should participate in the management which employees
them is not a new concept. It has apparently existed since the industrial revolution.
However its importance has increased gradually over the period of years due to
various factors like large scale enterprises, increase in work force, paternalistic
philosophy and practice of informal consultation. Moreover the growth of
professional in industry, advent of democracy and development of principles of
social justice, transformation of traditional labour management relations have
added new dimensions to the concept of participative management. The philosophy
behind worker participation in management stresses:

• Democratic participation in decision making

• Maximum employer – employee collaboration
• Minimum state intervention
• Realization of great measure of social justice
• Higher level of organizational health and effectiveness

It has been varyingly understood and practiced as a system of a joint consultation in

industry, as a form of labour management cooperation, as recognition of the
principle of co partnership, and as instrument of industrial democracy.
Consequently, participation has assumed various forms varying from mere
voluntary sharing of information by management with the workers to formal
participation by later in the actual decision making process of the management.

Elements of Participation

The term participation has different meaning for different purposes in different
situations. Mc–Gregor is of the view that participation is one of the most
misunderstood ideas that has emerged from the field of human relationship. Keith
Davis has defined participation as a mental and emotional involvement of a person
in a group situation, which encourages him to contribute of group goal and share
responsibilities in them. This definition focuses on three on three important

• Mental and Emotional involvement is required rather than mere physical activity.
• Participation must motivate a person to contribute to a specific situation to invest
his own resources in form of initiative, knowledge, creativity and ingenuity the
objectives of the organization.
• It encourages people to share responsibility for a decision or activity. Sharing of
responsibility committee’s people to ensure the success of the decision or activity.
Six necessary components for successful programs on worker participation in
decision making:
1. Workers must have an increased degree of power vis-a-vis management
regarding various levels of decision making in the company.
2. Workers must have access to and sharing of management level information. If
employees are to make decisions on the issues that go on in areas outside their
normal jobs, they will need information such as engineering reports and company
economic information that was previously only available to accounting or finance
departments. A corollary to this component is that workers must be trained to
understand and use this information in a correct and effective manner.
3. A guaranteed right of protection from reprisal for employees who voice criticisms
of management.
4. An independent board of appeals to settle disputes between labor and
management (grievance procedure).
5. A participatory/democratic consciousness or a set of beliefs and traits among the
work force and among management that tends to worker participation in decision
making. The belief that workers have the ability to make good decisions or a strong
feeling of self-reliance are two such traits.
6. A guaranteed economic return on cost savings or surplus produced above the
employee's regular salary. This sometimes is labeled as "gain sharing."
Objectives of Worker Participation
The scope and the extent of worker participation depend on the objectives set by
the organization to be achieved. Basically forms participation differs from country to
country because of the differences in political, social and economic environment of
that specific country. For instance in India the main objective of worker to
participate in management is to achieve security of employment, better wages,
bonus etc. whereas employers interest in participation is to maximize the profits,
and the government considers it as a means to increase productivity and as a part
of dispute resolving machinery. In our country it has been mainly viewed as a
means of information sharing concerning balance sheet, production, economic
condition of the plant and a process of consultation on certain matters such as
welfare programs, safety and methods of work.
In Yugoslavia the major objective of self-management (worker participation) is to
overcome human alienation. Alienation in production process, technological
alienation, over specialization, revolt against bureaucratic authorities, and technical
The system of coordination in Germany aims at;
• Prevention of exploitation of labors either by owners or top managers.
• Growth of economy through democratic process
• Resolution of conflict between labour and management
• Obligation on the part of the management not to abuse its authority but to use it
as trustees.
• Sharing of financial and other information.
In short the basic objective of workers participation in management is:
• To establish good communication system
• To promote mutual understanding between management and workers
• To create a sense of belongingness among the workers
• To prevent alienation and exploitation
• Create a proper climate for cordial and harmonious employer- employee relations.

Pre-Requisites for Effective Participation

The pre-requisites for the success of any scheme of participative management are
the following:
1. There should be strong, democratic and representative unionism for the success
of participative management. Trade union politics and multiplicity of trade unions
goes against the sprite of participation. It is desirable to have participation of
workers directly through their representatives at the plant level rather then through
the external trade union leader, who may not be aware of the plant problem.
2. There should be a mutually agreed and a clearly formulated objective for the
participation to succeed, for instance if the objective of the participation is only to
increase the productivity then it will fail as it has to look at the benefit of both the
participating body or the other might loose interest. Increased productivity could
also be achieved through autocratic kind of leadership, which is against the spirit of
participation. Employee would favor participation when they experience autonomy
and satisfaction of the higher order need of their work.
3. There should be a feeling of participation at all levels. Too much emphasis on
hierarchical structure and close supervision is not conducive to participation. The
working environment must be congenial enough to create participatory culture. The
style of supervision and the culture of organization are the two most important
elements for the success or failure of the participative system
4. There should be effective consultation of the worker by the management to
inculcate enthusiasm in them in the formulation of policies that affect them directly.
They should have a say in issues affecting them including personnel and economc
matters. There should be complete sharing of information with the worker
representatives. No information is to be treated as secret.
5. Both the management and workers must develop favorable attitude and outlook
and must have full faith in the soundness of the philosophy unlined the concept of
labour participation. a relationship based on mutual trust and respect is essential
for effective participation.
6. Till the participative structure is fully accepted by the parties legislative support
is necessary to ensure that rights of each other are recognized and protected. The
parties must not use the legal framework but the fact that it exists may make them
much more responsible and keenly conscious of each other’s rights and obligations.
7. Education and training make a significant contribution to the purposeful working
of participative management. Employee’s trade unions and government can play a
major and meaningful role in organizing and conducting training programs and in
developing the necessary skills in the representatives of workers and employers.
The areas of education and training may relate to:
• Conceptual and philosophical aspects
• Aims, scope, roles and responsibilities
• Changes in management and trade union approaches and relationship pattern
• Communication skills
• Technical & managerial knowledge of decision making
8. Forums of participation, areas of participation and guidelines for implementation
of decision should be specific and there should be prompt follow up, action and feed
Management should be prepared to give all information connected with the working
of the industry and labor should handle that information with full confidence and
responsibility. The workers should become aware of their responsibilities. The
leaders should initiate this in them. Similarly, the top management should make the
lower echelons to show a new attitude in the light of the new relationship.

Levels and Forms Of Worker Participation

The phrase workers' participation is used loosely to encompass various forms of

workers' participation in decision-making, usually at the enterprise level. The types
of workers' participation arrangement differ widely with regard to their functions
and powers, ranging from informal individual employee suggestion schemes to co-
determination of certain matters by workers' representatives together with
management. The mechanisms used for encouraging employee participation vary
so widely. The main forms that have attracted recent interest, are reviewed below;.
As particularly relevant today, joint safety and health committees are examined as
a special form of workers' participation within the larger labour relations context.
The idea of workers' participation arose in Europe, where collective bargaining has
usually been at the branch or industry level; this often left a gap of employee
representation at the enterprise or plant level, which became filled by bodies such
as works councils, works committees, enterprise committees and so forth. Many
developing countries have also adopted legislative initiatives with a view to having
works councils or similar structures set up (e.g., Pakistan, Thailand, Zimbabwe) as a
means of promoting labour-management cooperation. The relationship of these
bodies to trade unions and collective bargaining has been the subject of
considerable legislation and negotiation. ILO states that where both trade union
representatives and elected representatives exist in the same undertaking,
measures should be taken to ensure that the existence of those representatives is
not used to undermine the position of the trade union.
Direct Participation

Workers may participate in decision making either directly themselves or indirectly

through their representatives - trade unions or elected employee representatives.
Since the 1980s, there has been a spread of direct participation by workers, if the
term participation is understood as the exercise of any influence on their work or
how it is to be carried out. Thus workers may “participate” in work-related decisions
not only when there is an institution, such as a quality circle, at the workplace.
Accordingly, a simple exercise of work enrichment may be a form of promoting
direct participation of workers.

Direct participation may be on an individual basis - for example, through suggestion

schemes or “enriched” work. It may also be on a group basis - for example, in
quality circles or similar small-group activities. Teamwork in itself constitutes a form
of group-based direct participation. Direct participation may be integrated into
decisions about daily work, or it may take place outside daily work, such as in a
voluntary quality circle that cuts across the group structure habitually used. Direct
participation may also be “consultative” or “deliberative”. With consultative
participation, employees are encouraged and enabled, either as individuals or
members of a group, to make their views known, but it is up to management to
accept or reject their proposals. Deliberative participation, on the other hand,
places some of traditional management responsibility in the employees' hands, as
in the case of team working or semi-autonomous work groups wherein some
authority has been delegated to the workers.
Works Councils and Similar Structures; Co-determination

The term works councils describes arrangements for the representation of

employees, usually at the plant level although they also exist at higher levels also.
Their relationship to trade unions is often delineated by legislation or clarified by
collective agreement, but tensions between these institutions sometimes remain all
the same. Extensive use of works councils, sometimes called workers' committees,
cooperation committees or otherwise, is well established in a number of European
countries, such as Belgium, Denmark, France, Germany and the Netherlands.
The possible powers of works councils are best illustrated by the example of
Germany, although in some ways it is a unique case. Weiss, describes the works
council in that country as the form of institutionalized representation of interests for
employees within an establishment. A works council enjoys certain rights to
information, consultation (as in all countries) and co-determination (much more
rare). As the most far-reaching form of participation, co-determination covers
participation in arrangements on health and safety at work and the formal adoption
of a reconciliation of interests and a “social plan” in the event of a substantial
alteration in the establishment, such as a plant closure. Co-determination rights
also extend to guidelines for staff selection and appraisal, in-service training and
measures affecting individual workers such as grading, transfer and dismissal. The
German works council is empowered to conclude works agreements at the
enterprise level and can initiate complaints where it believes the agreement is not
being honored. Included in the areas of obligatory collective co-determination are
accident prevention and health protection, works rules, working time, the fixing of
performance-related pay rates, the manner of payment, general principles
governing holidays and others. On these matters, the employer cannot take action
without the works council's agreement. The works council also has the right to take
the initiative and can refer a matter to the establishment-level arbitration
committee for enforcement. As Weiss characterizes it, the works council's role is
“participating in the `how' after the employer has made a decision on the
`whether'”. The right to consultation affords the works council a chance to play a
part in the decisions made by the employer, but failure to consult will not invalidate
the decision. The subjects on which consultation is required include protection
against dismissal, protection against technical hazards, training and preparation of
a social plan.
The works council must observe the principles of cooperation with the employer and
the peace obligation (no work stoppages); it also must cooperate with trade unions
present and with the appropriate employers' organization. Works councils are
bound to conduct their business impartially, without regard to race, religion or
creed, nationality, origin, political or union activity, sex or age of the employees.
The employer provides the facilities for the works council, funds it and is liable for
its actions.
Works councils are elected separately for manual and non-manual workers in
Germany. Special works council elections are held; while there is no legal
connection between these representatives and trade union officers in fact, they
often coincide. In Austria and Germany, special representation is ensured for
disabled workers and young workers and trainees.
Works council members receive no remuneration for this, but necessarily incurred
expenses are reimbursed. Members are guaranteed retention of their pay level and
job grading after the term of office has expired and enjoy special protection against
dismissal. They are entitled to release from work to conduct works council business
and attend training.
Many countries feature less ambitious works council schemes that provide for
information and consultation rights. Especially where trade unions have little
presence on the shop floor level, there is considerable interest in introducing works
councils or workers' committees as a means for workers to have a voice at the
workplace level.
Quality Circles and Total Quality Management

Quality circles and other similar group activities were rapidly introduced in a large
number of enterprises in some Western European countries (e.g., the United
Kingdom and France) at the start of the 1980s and in the United States a little
earlier. They built upon “Quality of Working Life” (QWL) or “Humanization of Work”
programs that began in the early 1970s. Their spread was considerably later in
some other Western countries (e.g., Germany) and still seems to be very limited in
countries where joint project groups are the predominant means of dealing with
work organization, such as Sweden. They were stimulated by a belief that Japan's
ability to produce innovative and high-quality products at low cost had something to
do with the way human resources were managed in that country; quality circles
were the most visible and easily transplantable feature of Japanese human resource
management. Quality circles are generally expected to produce two types of effect:
one is the enhancement of quality and productivity and the other is the fostering of
a sense of participation in work-related decisions among workers, leading to
increased job satisfaction and better industrial relations. In Japan the emphasis has
been placed more on the first aspect and in Europe and North America on the
second. There are also structural differences: while circle leaders are normally
appointed by management in Japan, they are often elected in Germany. Today, the
emphasis of QWL programs is more on enhancing productivity and competitiveness
(Ozaki 1996).
In some of the countries where quality circles were experimented with widely in the
1980s, such as France and the United Kingdom, there has been a certain
disenchantment with their relative ineffectiveness in producing the expected
results. Many circles disappeared a few years after their creation; many others exist
on paper, but are in fact moribund. The failure has been attributed to many factors -
their tendency to create confusion in the normal lines of command, non-
management control over membership, circles' determining their own agenda
without heed for management priorities, lack of enthusiasm or hostility on the part
of middle management, absence of durable commitment on the part of top
management and restriction of scope to minor work-related issues.
Realization of these shortcomings led to the formation of a theory of “Total Quality
Management” (TQM). Certain principles of TQM have implications for employee
participation: all employees are to participate in the process of improving the
business, and responsibility for quality is to be assigned to people who in fact
control the quality of what they do. Thus TQM encourages job enlargement and
enrichment leading to semi-autonomous work groups. It also promotes horizontal
coordination in a firm through, for example, the use of ad hoc, multi-functional or
interdepartmental project teams.
Joint Project Groups

The practice of establishing joint project groups to study the best ways of
introducing technological or organizational changes through the joint efforts of
managers and workers is a traditional feature of labour relations in some countries,
such as Sweden. A joint project group is normally composed of managers,
workplace union representatives and shop-floor workers and often assisted by
outside experts. The management and the union concerned often establish joint
project groups separately on four issues: new technology, work organization,
training and work environment. The Swedish model of joint project groups presents
a notable example of direct participation of shop-floor workers within a framework
of established collective labour relations. The system is also found in other
countries, such as Germany and Japan.
Semi-autonomous Group Work and Teamwork

Semi-autonomous group work and teamwork are both forms of on-line direct
participation of shop-floor workers in work-related decisions, unlike the above-
mentioned joint project group work, which is a form of off-line participation. The
main difference between the two forms of participation lies in the degree of
autonomy which the members of the team or group enjoy in organizing their work.
Semi-autonomous group work was used extensively in Scandinavia, although
recently there has been a move back to a more traditional approach; there have
been experiments with it elsewhere in Europe as well.
While experiments with semi-autonomous group work are generally declining,
teamwork is spreading fast throughout Western countries. The degree of autonomy
which a team enjoys varies widely from one company to another. Team structure
also differs. In many countries, team leaders are usually appointed by management,
but in a few countries (e.g., Germany) they are often elected by co-workers.
Frequently, the creation of teams is accompanied by significant changes in the role
of first-line supervisors; they tend to take on greater responsibility for advising team
members and for both vertical and horizontal communication, but lose their
supervisory role. Employers have shown increasing interest in teamwork because it
tends to facilitate the upgrading of workers' skills and widens the range of workers'
tasks, thus allowing greater flexibility in production processes. However, it is
sometimes criticized by workers as a means of inducing them to work harder
“voluntarily” by substituting co-workers' pressure for management control.
Employee Representation on Supervisory Boards; Employee Shareholding

Some commentators include forms of employee ownership or representation on

company boards as expressions of workers' participation. In Germany and the
Scandinavian countries, among others, workers have indirect participation above
the enterprise level by the inclusion of workers' representatives on supervisory
boards. This involves incorporating workers' representatives in the traditional
company board structure, where they are in a minority (although sometimes, as in
Germany, a numerous one). It does not necessarily imply participation in the active
management of the company and the workers' representatives have the same
status as other board members. This means they are to put the interests of the
company first and foremost and are bound by the same duty of secrecy as other
board members. Holding positions on the board may provide access to additional
information, however, and a number of trade unions have sought the right to have
workers' representatives on boards. It is a phenomenon now seen in Eastern and
Western Europe and North America, but remains rather rare elsewhere.
Another expression of workers' participation is as owners of shares in limited
liability companies or corporations. Sometimes workers are able to scrape enough
capital together to purchase a firm that would otherwise be going out of business.
The rationale behind these situations is that a worker who identifies financially with
a company will work harder for its success. Important variables are the form of
participation (return on investment rights or control rights), its degree (amount and
timing of returns) and the reasons behind financial participation. In any event, these
practices are largely reserved to Europe and North America. If cooperative ventures
are considered part of this phenomenon, however, the notion of workers being
stakeholders in their work is much more widespread throughout the world. It would
be interesting to study whether and to what extent employee ownership of a firm or
of shares in it has an effect on the workplace safety and health record.
Health and Safety Committees and Representatives

A specialized form of workers' participation is seen in the development of health

and safety committees and health and safety representatives (for worker
participation in Denmark, see Box). The legislation of a number of countries
provides for the establishment of such committees and for such representatives
(e.g., Belgium, several provinces of Canada, Denmark, France, the Netherlands,
Sweden). Smaller companies, variously defined, are usually excluded from such
mandatory measures, but they, like larger units, often set up health and safety
committees on their own initiative. In addition, many collective bargaining
agreements have led to the creation of such committees and to the designation of
health and safety representatives (e.g., in Canada and the United States).

Danish industrial relations provide an example of a country with a number of

institutions that play a role in relation to health and safety.
Their legal FRAMEWORK has made provision in The Working Environment Act
stating “the basis on which the undertakings themselves will be able to solve
questions relating to safety and health under the guidance of the employers' and
workers' organizations and under the guidance and supervision of the Labour
Inspection Service”
Safety representatives are elected representatives required in firms employing at
least ten workers; they enjoy protection against dismissal and retaliation.
Safety groups: The safety representative and the department supervisor form the
safety group. Its functions are to:
monitor working conditions♣
inspect equipment, tools, materials♣
report any risk which cannot be avoided immediately♣
halt production where necessary to avert an imminent serious danger♣
ensure that work is performed safely and proper instructions are given♣
investigate industrial accidents and occupational diseases♣
participate in prevention activities♣
cooperate with the occupational health service♣
act as link between workers and the safety committee.♣
Members of the safety group are entitled to training and to necessary information.
Safety Committees are required in firms employing at least 20 workers. In firms
with more than two safety groups, the safety committees consist of workers elected
from among safety representatives, two supervisor members and an employer's

The functions are:

Planning, directing and coordinating health and safety activities
being consulted on these matters
Cooperating with other companies engaged in work at the same workplace
Cooperating with the company's occupational health service
supervising the activity of safety groups
Making recommendations on prevention of accidents and diseases.

WORKING ENVIRONMENT COUNCIL involves employers' and workers' organizations

in the definition and application of preventive policy at the national level.
Composition: 11 representatives of employee organizations representing manual
and non-manual workers, one for supervisors, ten of employers' organizations, plus
an occupational medical practitioner, a technical expert and non-voting
governmental representatives. Functions:
Is consulted on drafting legislation and regulations♣
May on its own initiative take up a health and safety matter♣
Submits annual recommendations on working environment policy♣
Coordinates the activities of Trade Safety Councils♣
Supervises the activity of the Working Environment Fund.♣

WORKING ENVIRONMENT FUND is managed by a tripartite board. The Fund has

mainly information and training duties, but also finances research programmes.

TRADE SAFETY COUNCILS: Twelve Trade Safety Councils examine the problems of
their trade or industry and advise undertakings. They are also consulted on draft
legislation. Equal representation of employers' and supervisors' organizations on the
one hand and workers' organizations on the other hand.

GOVERNMENTAL AUTHORITIES: In addition, the Ministry of Labour, the Labour

Inspection Service and within it, the Danish Institute of the Working Environment,
provide various types of services and advice in the field of occupational safety and
health. Collective industrial disputes are heard by the Labour Courts.

Worker Participation in Management in Different Countries

Germany – Concept of Co- determination

The works council represents the interests of employee’s vis-à-vis their employers.
A works council may be elected in all private companies employing at least five
people. All employees who have worked for the firm for at least six months are
eligible for election to the works council. This also includes periods during which the
employees worked in another branch of the same company. Foreigners, too, are
entitled to vote and hold office. Members of the works council normally perform
their duties on a voluntary basis without pay in addition to their normal work. Large
firms with 300 or more employees, however, must release one or several members
of the works council from their jobs to do council work full-time.

Responsibilities and Composition of the Works Council

The works council must, among other things, ensure that the laws and regulations,
accident prevention rules, collective wage agreements and company arrangements
applying to employees are observed. The works council call a shop-floor meeting
once per calendar quarter and report on its activities. Employees attending the
meeting may comment on the council's decisions and make proposals of their own.

Codetermination covers such important matters as company organization, working

hours, including the introduction of short time or overtime, holidays, the structure
and administration of social facilities confined to the plant, company or group,
technical monitoring of employee conduct or performance, accident prevention
rules, occupational diseases and health protection regulations, allocation of
company-owned housing or termination of tenancy, as well as company pay
structures, remuneration principles, piecework payment and bonus schemes, etc.
The works council also has a considerable say in job descriptions, work processes
and the working environment, personnel planning and vocational training.

Where a company proposes to introduce changes (to cut back operations, close
down or move to a different location, for example) the works council may under
certain conditions draw up a "social plan" which cushions the economic
repercussions on the employees affected.
In firms more than 20 employees who are entitled to vote, the employer must
obtain the approval of the works council on all matters concerning personnel, such
as hiring, job classifications, departmental restructuring and transfers.

Co – determination basically runs on the principle that democratic legitimating

cannot be confined to government but must apply in all sectors of society.
Election of Labor Representatives on the Supervisory Board
All labor members on the supervisory board, i.e. those on the company's payroll and
the union representatives, are elected by direct ballot or by delegates. In companies
with up to 8,000 employees the law prescribes a ballot, but employees may, by a
majority vote, opt to be represented by delegates. In the case of enterprises with a
workforce of more than 8,000 the law prescribes elections through delegates. The
employees may, however, reverse this procedure, in other words, they can choose
by a majority vote to have a direct ballot.
Election of Shareholder Representatives
Shareholder representatives on the supervisory board are elected at the firm's
shareholders' meeting (the "Hauptversammlung" in the case of stock corporations,
the "Gesellschafterversammlung" in the case of limited liability companies).
Election of the Chairman
The members of the supervisory board elect the chairman and deputy chairman at
their constituent meeting. A two-thirds majority is required. Failing this a second
vote is taken in which the shareholder representatives elect the chairman and the
labor representatives the deputy chairman.
The Board of Management
The supervisory board appoints the members of the management board and may
also revoke their appointment. Here, too, a two-thirds majority is necessary,
otherwise a mediation committee is appointed. Should this, too, fail to produce an
absolute majority a second ballot is taken in which the chairman of the supervisory
board has a casting vote.
A labor director with equal rights is chosen according to the same procedure. The
labor director is chiefly concerned with personnel and social affairs.

IN JAPAN Lifetime employment is reinforced by a seniority- based system that

establishes a steady progression for workers in status and pay, a system that is
based on the age of the employee rather than on the precise work done. The result
is a flexible work force that is willing to perform a variety of tasks and to accept
technological change. The organization of unions on a company basis rather than by
occupation or industry, as is the case in most other countries, tends to stimulate
cooperation between the unions and management. It is in the interest of both labor
and Management for the company to perform well. This commonality of interests is
underpinned by a bonus system whereby as much as 6 months of wages are paid to
employees on the basis of the company's performance.

In many Japanese companies, before any decision is made, consensus is sought at

all levels of the company, a procedure known as ringi. Although time-consuming,
the process stimulates an exchange of information and fosters cohesion, ultimately
resulting in decisions being implemented with speed and broad support within the
enterprise. This is reinforced in many companies by an extensive labor-
management consultation system. Employee representatives have no formal veto
power, but in practice many exercise considerable informal influence in company
decision making. Shop-floor participation takes a concrete form in Japan. Adapted
from the ideas of an American scientist, William Deming, quality control circles have
proliferated in Japan, currently involving more than one worker in every eight. Part
of the reason they have caught on is that as a concept, quality control corresponds
well to the attitudes fostered by the system of industrial relations: cooperation for
the common purpose of achieving company goals. The Japanese system of
industrial relations has nourished industrial harmony. Damaging strikes are rare.
However, the most persuasive evidence of the positive relationship between
productivity and employee participation comes from the quality control circles. With
the establishment of these circles, responsibility for quality control shifted from
engineers with limited shop-floor experience to employees working in teams with
engineers. Numerous examples have been cited of employee suggestions that,
when implemented, improved productivity.' It has also been suggested that
because of the quality control circles, Japanese workers accept changes in the
production process more willingly than workers in environments where solutions are
handed down by management. This is particularly important in consumer durable
industries, where changes in models require frequent alterations in the production
process. Quality control circles also have an impact on the efficiency of production.
Because far fewer inspectors are needed, one layer of bureaucracy is substantially
reduced. For example, Japanese auto assembly plants have one inspector for every
twenty employees; in the United States the ratio is one in seven. Moreover, because
there is greater confidence that components are not defective (suppliers, too, are
required to achieve rigorous quality standards),
many companies can keep minimal inventories . As a result, the need for stock
rooms and warehousing is reduced, production costs are lower, and the efficiency of
assembly-line operations is increased.

Lifetime employment, although it covers only employees of large firms, or about

one-third of the work force, has been credited with reducing employee resistance to
the introduction of new technology; workers have cooperated with management in
seeking ways to increase productivity without fear of being displaced by machines
or robots . Lifetime employment has also encouraged employers to invest heavily in
the training and retraining of their employees, which has been reported to enhance
the overall technical ability of the nation's work force.

The worker’s self-management here dates back to 1949 when president Marshal
Tito dissented from the Russian authority. He emphasized the need for development
of a distinctively Yugoslavian system with a complete departure from that of
bureaucratic Russian system of sate ownership. Infact the system of social
ownership in Yugoslavia differs from most other socialist societies. In Yugoslavia
enterprise are owned by society as a whole and the management of the enterprise
is delegated by society to the workers collective- those people who work in it and
create social wealth. The basic decision about a firm including decision about the
purchase supplies and the pricing of the product are made within the firm itself
rather than by centralized federal agencies. The trade unions have no direct role in
the management of the enterprise but they have to the right to submit list of
candidates for election to the workers council their approval is necessary for the
councils decision relating to wages and distribution of the surplus. The trade unions
are consulted at a higher level on legislation in the area of labor. The workers
council is free to take their own decision in most of the matters without trade unions
and party interference. The major institution under Yugoslavian model is workers
council management board, management board director and local peoples

Workers council:
The first law of self management introduced in 1950 provided for workers council in
each enterprise consisting of 15 to 120 persons depending on size of enterprise.
The council includes the director of the firm as an Ex – officio member. They are
elected by the workers and the staff for a term of three years. The council s
designed to represent all employees in the decision making process although
initially it was a consultative body with limited powers. The council is the supreme
operative authority in the enterprise and is responsible only to the workers
collective as a whole. The basic objective of the council is to formulate a general
policy for the involvement of the workers within the organization. Its major duties
include adoption of statute, development plans and programs, decisions on the
basic issues of operational policies, adoption and approval of financial statement of
the enterprise, decision concerning merger of the enterprise with the other
enterprises, supervision of the work of the management board and so on.

Management Board:
It’s the executive organ of workers council it comprises a minimum of five members
elected from among the members of workers council. The director is an ex – officio
member of the board. At least three- fourth of its members belong to workers
directly engaged in production or the basic activities of the undertaking. They
continue their normal jobs during their period of their tenure as member of the
board. Its main function is to mange enterprise in accordance with the policy laid
down by the council. It is responsible for efficient running of enterprise. The board
generally draws up the production plan, determines the internal organization of the
enterprise and formulated proposal for discussion in the workers council.

The role of director in the Yugoslavia system is of crucial importance. The director of
the enterprise is at the apex of the organization structure. The council and the local
peoples committee select him for the tenure of four years. He can also be
reappointed; he is recruited through open competition on the bases of ads in the
press and professional publication and other appropriate channels. The workers
council may remove a director for inefficiency or incompetence. The director being
the chief executive is responsible for implementing the decision of the workers
council and management board. He has to ensure the profitable management of the

Peoples Committee:
This committee of local people has say in the appointment of director as well as
enterprise they provide investment funds for the establishment. In case the
enterprise is unable to pay the statutory minimum wage to its workers the peoples
committee takes the responsibility to provide for the difference. This committee is
powerful enough to intervene in the management and to dissolve the workers
The greatest achievement of social self-management in Yugoslavia is prevention of
workers exploitation. It has instituted in the mind of workers a sense of
belongingness to the enterprise. Industrial conflicts are less as compared to other
European countries where there is no self-management.
A bigger future for worker participation in Europe thanks to Allianz SE

An agreement on worker participation concluded with the new European company

Allianz SE in Munich on 20 September 2006 marked a new milestone for Europe’s
trade unions. For the first time ever, a large company - employing some 160,000
workers in virtually all EU Member States - expressly subscribed to a system of
European management comprising significant, mandatory worker participation.

● Workers will have equal representation on the supervisory board of the SE

(European company) In future, in line with staff numbers, a group of European
workforce representatives will defend the interests of workers from a total of 29
countries on the company’s highest body, its supervisory board. UNI-Europe Finance
Vice-President Jörg Reinbrecht will be one of the workforce representatives.

● Workers will have a strong SE works council The powers of the works council will
extend beyond those stipulated by law. Thus, it will also be entitled to inform
workers in off-shore companies if they are affected by any decisions taken by
Allianz SE. Moreover, the works council will have the right of initiative, enabling it to
raise topics of its own choosing in talks with the management. The workforce
representatives with a seat on the supervisory board will be designated by the SE’s
works council. The works council also has the right to invite European trade union
representatives to meetings.

● The agreement contains a social and political preamble In that preamble the
company pledges to promote social dialogue at the global level and respect
international norms such as the International Labour Organisation’s core labour
standards, the principles underlying the United Nations Global Compact and the
Organisation for Economic Cooperation and Development Guidelines for
Multinational Enterprises.

The challenge faced was to breathe life into this agreement. The workers employed
by Allianz SE find themselves faced with extensive restructuring. Unlike any other
key company in Europe, Allianz SE’s workforce and unions will have a chance to
show just what worker participation can do to promote socially acceptable structural
change and build a more social Europe.

"From the European viewpoint, the arrangement reached with Allianz SE regarding
worker participation constitutes an important step towards a form of company
management that is not geared solely towards shareholders’ interests,” said
European Trade Union Confederation (ETUC) Deputy General Secretary Reiner
“Mandatory worker participation is not a historically obsolete model, as many
employer federations repeatedly claim! Moreover, it does not hamper companies in
applying the European Company Statute Directive. Under the European legislation
on SEs, not fewer but more workers in Europe will benefit from effective
participation rights. Moreover, the further provisions applying to SEs’ works councils
make the European employers’ attitude of playing for time, and their resistance to
an improved European Works Councils Directive, seem less and less


In our country the concept of worker participation in management is comparatively

of recent origin even though there were a few instances of informal joint
consultation earlier in 1920’s in government aluminum works and railways. The
Delhi cloth and general mils also introduced worker participation in management in
1938 by having an elected representative in Board of Directors of the mills. The
Royal Commission of Labours recommended the formation of works committee
which can play a useful part in Indian Industrial system. It also suggested the
establishment of joint machinery to deal wit more general questions, and to act as
an advisory body in case of disputes which are confined to one establishment.

The recommendation of commission bore fruits with the provision of formal

statutory machinery under the Bombay Industrial Relations Act,1946 and the
Industrial Dispute Act, 1947. The BIR act which applies to textile industries in
Gujarat and Maharashtra provides for setting up of joint committees in units which
have representative Unions. The UP industrial Dispute Act,1947 provides for
formation of works council in state government undertaking, employing 100 or
more workmen. The government of Gujarat by amending the BIR act in 1972 has
made it compulsory for the industrial establishment employing 500 or more workers
to set up joint management council.

Joint Councils
The joint councils are for the whole unit and its membership remains confined to
those who are actually engaged in the organization. The tenure of the joint councils
is for two years. The Chief executive of the unit becomes its Chairman. workers
members of the council nominate the Vice Chairman. The joint council appoints the
Secretary. The Secretary is responsible for discharging the functions of the council.
The joint councils will meet once in four months ,but the periodicity of the meeting
varies from unit to unit ,it may be once in a month, quarter etc. The decisions taken
at the joint council meetings are by he process of consensus and the management
shall implement the decisions within one month. The scheme was implemented by
the major units of the central and State governments. The government enlarged the
functions of the councils in 1976.
Initial enthusiasm was revealed in the setting up of joint management councils. But
the councils lost flavor gradually with the management and trade unions due to
several reasons such as hostility of trade unions, indifference of management and
lack of interest on the part of workers.
The Indian dilemma of workers participation through JMC’s has bees brought out by
Prof. Zivan Tanic in these words: “ although worker is recognized as the partner of
management in joint bodies consultative or decision making is not a equal partner
in reality. He cannot be so because he is subordinate to management by the entire
system of responsibility, duty, control and obligations he cannot have dual status. In
joint council even if the workers get the right to criticize management and to take
an opposite stand they do not get protection against consequences of such
attitude.” Prof. Tanic rightly points out that a unique dominant and strong trade
union is the first political condition for the JMC to perform their fundamental, social
functions and to establish some sort of political balance between labour and capital
in a class society. The existing relationship among trade unions is such that it
cannot develop any scheme of worker participation in industry. He thinks that in
India workers participation has reached only the initial step, and the actual
perspective for the evolution of workers participation in India “is not favorable
without larger social development. The necessary economic, social, political and
cultural conditions concomitant to the success of such an experiment are not ripe in

Shop Councils
The shop council represents each department or a shop in an unit. Each shop
council will consist of an equal number of representatives of employers and workers
.The employers representatives will be nominated by the management and must
consist of persons from within the unit concerned .The workers representative will
be from among the workers of the department or shop concerned. The number of
members of each council may be determined by the employers in consultation with
the recognized union. The total number of members however, may not generally
exceed twelve.
The decisions of the shop council are t be taken on the basis of consensus but not
by voting .Management has to implement the decisions within one month .The
tenure of the shop council is for a period of two years .Members of the shop councils
meet at least once in a month .Management nominates the Chairman of the shop
council whereas workers members of the council elect the Vice-chairman of the

The number of shop councils to be established in an organization are determined by

the employer in consultation with the recognized trade unions/workers of the
organization. The decisions of a shop council which have a bearing on another shop
will be referred to joint council for consideration and approval.

Workers Committee
The Section 3(1)of the Industrial Disputes Act of 1947 lays down that an industrial
establishment where 100 or more workmen are employed or have been employed
on any day in the preceding twelfth months is required to constitute in the
prescribed manner a works committee. The purpose of this committee is “to
promote measures for securing and promoting amity and good relations with
employer and workmen and to that end to comment upon matters of their common
interest or concern and endeavor to compose any material difference of opinion in
respect of such matters .” the representative of the workers are to be chosen
among the workmen employed in the establishment and in consultation with the
registered trade unions, if any. If there is more than one trade union, the central
rule provides for the selection of representative by secret ballot. The list of items
which the committee will normally deal with includes:
• Condition of workers such as light, temperature etc.
• Amenities such as drinking water, canteens, dining room, medical and health
• Safety and accident prevention
• Educational and recreational activities.
• Administration of welfare and fine funds
• Promotion of thrift and saving
• Implementation and review of the decisions taken at works committee.

Below are the list of items which the works committee will not deal with:
• Wages and allowances
• Bonuses and fixation of workload
• Programs for planning and development
• Matters connected with fixation of standard work force
• Matters connected with retrenchment and layoff
• Victimization of trade union activities
• PF, gratuity schemes and other retirement benefits
• Quantum of leaves and national and festival holiday
• Incentive scheme
• Housing and transport services.

The general feeling that people in industry have about the functioning of works
committee is that it has not been able to represent and solve basic problems of the
workers in the required manner. The employers association has attributed the
failure of works committee to factors like: inter union rivalries, conflict between the
jurisdiction of works committee and unions, lack of positive response, routine
meeting without any worthwhile discussion. In a nutshell works committee
mechanism is a failure in India.

Workers Participation in management in TISCO

After several years of study and discussions with the recognized unions in 1997,
Tata Iron and Steel Company at Jamshedpur set up a three-tier machinery for

I. Joint Departmental Councils

II. Joint Works Councils
III. Joint Consultative Council of Management

The Joint Departmental Council operates at the level of every department or a

combination of two or more departments. The Joint Works Council is for the entire
works, and coordinates the activities of the Departmental Councils. Parallel to the
Joint Works Councils there is a joint town and medical council for dealing with
matters relating to the township, medical, health and education matters (including
those of TELCO). The Joint Consultative Council of Management is at the top. It is
entrusted with the task of advising the management on all matters concerning the
working of the industry in relation to production and welfare. As a safeguard against
he overlapping of the functions of the joint councils and the collective bargaining
machinery the role of the joint councils has been streamlined. The functioning of the
joint councils is further reviewed in consultation with the Trade Union from time to



Dr. Sahib Singh, Union Labour Minister said that Government is committed to
workers' participation in the management but this would take shape on the basis of
consensus among industrialists, workers' organizations and the government. Dr.
Singh was inaugurating one-day Workshop on Participation of Workers in Industry
with a special focus to discuss the Tata Iron and Steel Company (TISCO) Model at VV
Giri National Labour Institute at NOIDA today. The Minister underlined the point that
the industrialists invest their money into the industrial venture, whereas the
labourers put in their life and labour into it. Therefore, any industrial venture can
grow only on the basis of mutual trust and sharing of concerns. It is, therefore,
imperative that every worker has right to participate in the decision-making in the
industry and the modalities should be discussed among the social partners in the
process. He said the Ministry is already taken up the serious discussions on it with
industrialists and the workers' organisations. This one-day workshop is one more
effort to arrive at the solutions to the contentious issues of possible formulations of
the workers' participation in industry. He also underlined the point that in order to
make it a success we are very conscious and taking up this issue with consensus
among all. This is the only way to make industrial democracy a success. Dr. Singh
also mentioned that recently the industry is passing through a bad patch of
recession but with more integrated decision-making among workers and the owners
of the industry, the better industrial environment would be created and this would
lead to industrial progress.

The Secretary in his address said that there are many models of workers'
participation in the decision-making relating to technical matters; employment and
personnel matters; economic and financial policies; and general policies. These
models may take the form of structural arrangements, functional arrangements and
jurisdictional schemes. He also lauded the Japanese model of participation through
joint management councils where workers inputs are taken on the matters relating
to their operational difficulties and other matters of vital interests. Shri Udai Kumar
Verma, the Director of the Institute in his inaugural address underlined the point
that in order to generate cordial industrial relations between the employers and the
employees, the workers' participation in the decision-making becomes a sine qua
non in the era of global competition. The solutions may vary, the approaches may
be diverse and the formulations may be different but we will have to work on the
consensus to arrive at the possible solutions.

TISCO is today one of the most efficient steel producer in the world where, there
has neither been any labour strike since 1928 , nor there is a case of assault to
anybody and theft. The concept of working together in TISCO was conceived in
1956 and was implemented since 1958. The core of the process is based on the
recognition of co-determined decision-making wherever the interest of the worker is
concerned. There are 56 joint departmental councils with rotating presentship,
some of them relate to welfare, production, safety, health, education and civil life



Mr. Chopra was in a fix. The Convenience Corporation which he headed provided
the middle class house wives with ready to cook storage food. The food involved
minor preparation with a very small preparation time come in versions for Noodles /
chicken / local vegetables, etc. However, with the entry of the multinationals the
market share started declining, more because of the financial muscles shown by
these giants by gross price undercutting.

Convenience Corporation employed around 250 workers in the skilled and

semiskilled grade. Due to a decrease in the market share Mr. Chopra approached
the recognized union with a request to cut down the production cost. The union
complied but with resistance. However, obsolete machinery and equivalent quality
was no match for the attractive advertisement campaigns put up by the

As a desperate attempt Mr. Chopra requested the union to cut the monthly wages
by Rs. 250/- per month. This, as expected, was received with hostile response. The
union simply refused to comply with the request. The situation worsened and finally
the union went on a strike. The strike continued for about two months which
actually brought the organization into real hard times. Finally Mr. Chopra threatened
to shut down the organization and started looking for a buyer.

This did not go unnoticed and union called a fully body meeting. The meeting was
hovering around the theme that some wage cutting was better than no wages and it
was passed that a cutting of Rs. 200/- per month will be a more reasonable cutting.
Though the suggestion was difficult to be accepted but was finally accepted.

As the union leaders were entering the office their attention was drawn to a circular
which announced 205 rise in the salaries of the senior management. They cannot
be allowed to leave the organization for their presence is a must for the
organisation’ existence, was the reason.



ne public sector undertaking with a chequered past, a line manager was appointed
as the Chief of Personnel. Within a year after taking up the assignment, he had to
sign a wage agreement with the workers union. The union at that time was
dominated by non-technical staff. The union’s charter of demands favoured the
interests of the dominant members’ groups. It asked for a significant revision in
gardeners’ pay, but was not equally vocal in pressing for the increase in the pay

of the workers in certain technical grades. The management conceded these

demands because the union cooperated with them in keeping the burden of the pay
revisions well within the guidelines of Bureau of Public Enterprises (BPE).

Once the agreement was signed and communicated to the employees/members by

the management and the union respectively, there was commotion among the
technical employees. They walked out of the union and formed a separate technical
staff union. They marched round the company premises holding the placards which
read. “Here grass cutters get more than the gas cutters”. In the engineering
assembly unit till the pay revision occurred, welding was a highly rated job. But not
any longer.

KDHP – Success Story

MUNNAR, Kerala, Faced with unemployment in their failing tea estates, about two
years ago, tea pluckers in the rolling highlands of this southern state formed their
own cooperatives to buy out the tea estate of their former employers Tata Tea and
turn the gardens into profitable enterprises.

The KDHP company, in which 13,000-odd ordinary tea pluckers and other staff now
hold 70 percent of the stake, was set up on Apr. 1, 2005, some three years after the
house of Tatas made known its intention to exit the tea plantation sector in Kerala.
Tata Tea, which owns the famed 'Tetley' brand runs world's second largest branded
tea operation with a presence in 40 countries. Its products in Munnar include instant

The dipping fortunes of the Tea industry reflects the story of Tata tea. There were
some 20 closed tea gardens in Kerala, affecting nearly 35,000 workers where as in
West Bengal as many as 17 gardens had been closed, affecting some 50,000
workers While inefficient management was a factor, and fierce competition from
new entrants into the global tea market like Kenya were identified as main factors
that affected tea plantation majorly in India. One of the world's major exporters of
tea, India nets roughly 500 million dollars in profits from producing 200 million kg of
tea. With large chunks of profits estimated to have been eaten away by wildly
fluctuating global prices. The situation called for new strategies especially in
plantation management, marketing and handling unions in an industry which
happens to be the country's second biggest employer — with close to a million
workers on its rolls.

The KDHP company, in which 13,000-odd ordinary tea pluckers and other staff
worked got closed somewhere in 2002, leaving all these tea pluckers unemployed
and no other alternative to earn. But the KDHP workers came forward to take over a
company to save their own livelihood and also revive a failing company. on Apr. 1,
2005, some three years after the house of Tatas made known its intention to exit
the tea plantation sector in Kerala tea pluckers and other staff bought out the
company from its former employer.

At that time Tata had made it clear that it would not hurt the workers or allow the
pristine misty-aired ecology of the Munnar hills to be disturbed by letting in
industries other than tea. High on the list of options considered by the management
was selling the plantations to a third party. But this was dropped after it became
clear that there was no corporate or other business outfits capable of turning
around the plantations.

Initially, a cooperative model did not enthuse the workers since there were fears
that it would lack professional management. But a plan was worked out combining
worker participation with professional management. The unions were skeptical
about the plan. It took several months of painstaking work to put the framework in
place and convince the workers to give it try

At present 97 percent of the KDHP workforce holds almost 70 percent of the equity.
Tata Tea continues to hold 19 percent of the stakes while other parties have the
remainder. The new company administers 16 tea gardens spread across 23,000

It was seen that average tea leaf plucking per worker climbed from about 25 kg a
day to 40 kg. There is a sense of participation and ownership among the workers.
They know that their hard work will result in more money in their pockets.
A 'flat' management structure and a 'bottom-up' management plan has also served
the company to manage and turnaround the loss making tea estate. Especially in
the industry which is faced with large number of worker problems especially due to
large number of trade unions which is very typical in this industry.

Advisory and consultative committees, consisting of workers' representatives, are

involved in the day-to-day functioning and decision-making in all areas by KDHP—
be it the estates, the factory, marketing or welfare. This gives them first hand
solution to any problem that occurs during the operation add to it workers have a
feel good factor and commitment and responsibility towards the organization as
they know their views and opinion count. These consultative committees hold
monthly meetings to advise on such issues as productivity enhancement, cost
control, absenteeism and to review the performance of the estate and the factory. a
'productivity-linked incentive' structure and policies focused on training, recruitment
and remuneration have also worked to keep workers on their toes.

Though workers had direct stakes in the fortunes of their company, KDHP worker-
owners were not only able to wipe off the cumulative losses of 24 million US dollars
run up by Tata Tea, within a year, but also register a post-tax surplus of 500,000
dollars as on Mar. 31, 2006. They also managed to declare a 14 percent dividend for
its first year of operations.

In the first half of fiscal 2006-07, KDHP reported a pre-tax profit of 1.2 million dollars
or five times the figure for the same period last year. The company hopes to post a
pre-tax profit of two million dollars by the end of this fiscal that ends on Mar. 31,
Labour India: Worker-turned-Owners Revive Failing Tea Estates

So successful has the 'Munnar story' of participative management been that the
World Bank (WB) recently sent a team to study it, and has plans to back similar
initiatives in other major tea-growing areas of India, especially the famed Darjeeling
district of West Bengal and in Assam state.

A WB team visited us a few months ago. Clearly impressed by what they saw, the
team members said they would be willing to fund similar initiatives in the north-
east. Not only WB noticed this 'quiet revolution' but also India's commerce minister
Jairam Ramesh said, during his visit that his ministry was examining the KDHP
Model to revive nine other defunct tea.

Commerce Minister, Jairam Ramesh said there were some 20 closed tea gardens in
Kerala, affecting nearly 35,000 workers. The new initiative is being discussed with
the government of West Bengal state where as many as 17 gardens have been
closed, affecting some 50,000 workers.

The KDHP company, in which 13,000-odd ordinary tea pluckers and other staff now
hold 70 percent of the stake, was set up on Apr. 1, 2005, some three years after the
house of Tatas made known its intention to exit the tea plantation sector in Kerala.

Tata Tea, which owns the famed 'Tetley' brand runs world's second largest branded
tea operation with a presence in 40 countries. Its products in Munnar include instant

The dipping fortunes of the Tata Tea reflected the state of the tea industry in India
as a whole. While inefficient management was a factor, accession to the World
Trade Organisation (WTO) by India and fierce competition from new entrants into
the global tea market like Kenya also took their toll.

One of the world's major exporters of tea, India netted roughly 500 million dollars in
profits from producing 200 million kg of tea, last year, with large chunks of profits
estimated to have been eaten away by wildly fluctuating global prices.

The situation called for new strategies especially in plantation management,

marketing and handling unions in an industry which happens to be the country's
second biggest employer -- with close to a million workers on its rolls.

Given direct stakes in the fortunes of their company, KDHP worker-owners were not
only able to wipe off the cumulative losses of 24 million US dollars run up by Tata
Tea, within a year, but also register a post-tax surplus of 500,000 dollars as on Mar.
31, 2006. They also managed to declare a 14 percent dividend for its first year of

In the first half of fiscal 2006-07, KDHP reported a pre-tax profit of 1.2 million dollars
or five times the figure for the same period last year. The company hopes to post a
pre-tax profit of two million dollars by the end of this fiscal that ends on Mar. 31,

There are worries. A proposed wage revision notification could impose a liability of
over 1.5 million dollars and cut the profits, KDHP chairman Joy Joseph told IPS. ''But
this is a story of vision, courage and leadership blended with innovation, teamwork
and collective effort,'' he added.

According to Joseph, the KDHP experiment was the first time in the history of the
plantation sector in India, long a bastion of large corporate holdings, that workers
have come forward to take over a company to save their own livelihood and also
revive a failing company.

To be fair to Tata Tea, while exiting the plantation business in Kerala state, its
management was clear that it would not hurt the workers or allow the pristine
misty-aired ecology of the Munnar hills to be disturbed by letting in industries other
than tea.

High on the list of options considered by the management was selling the
plantations to a third party. But this was dropped after it became clear that there
was no corporate or other business outfits capable of turning around the

Initially, a cooperative model did not enthuse the workers since there were fears
that it would lack professional management. But a plan was worked out combining
worker participation with professional management. ''The unions were sceptical
about the plan. It took several months of painstaking work to put the framework in
place and convince the workers to give it try,'' recalls Alexander, who was earlier a
Tata Tea manager.

After a major bank stepped in as financial partner things became even easier. At
present 97 percent of the KDHP workforce holds almost 70 percent of the equity.
Tata Tea continues to hold 19 percent of the stakes while other parties have the
remainder. The new company administers 16 tea gardens spread across 23,000

Ascribing the remarkable turnaround in the company's fortunes to increased worker

productivity, Alexander says average tea leaf plucking per worker climbed from
about 25 kg a day to 40 kg. ''There is a sense of participation and ownership among
the workers. They know that their hard work will result in more money in their
pockets,'' he adds.

A 'flat' management structure and a 'bottom-up' management plan has also served
the company well. Advisory and consultative committees, consisting of workers'
representatives, are involved in the day-to-day functioning and decision-making in
all areas -- be it the estates, the factory, marketing or welfare.

Chandra, who worked as tea plucker for 17 years now sits on the KDHP board of
directors as a representative of the workers. ''Earlier, we had nothing to do with
profits or losses of the company. But, now, there is a greater sense of responsibility
and involvement in these matters,'' she said.

Chandra's presence on the board, once considered a rarefied zone open only to the
''bosses'', has helped her to highlight several worker issues such as timely payment
of incentives. ''With the workers' day-to-day complaints and expectations finding
ready redress, their morale has gone up resulting in greater productivity,'' she

The consultative committees hold monthly meetings to advise on such issues as

productivity enhancement, cost control, absenteeism and to review the
performance of the estate and the factory.

According to Alexander a 'productivity-linked incentive' structure and policies

focused on training, recruitment and remuneration have also worked to keep
workers on their toes.

Tata continues to shoulder the social welfare projects of the gardens, which include
a school for the disabled children of the tea garden workers and running
employment generation units for them. These include vegetable dye, paper making
and strawberry preserve units.

Sensing a hugely popular proposition, the trade unions quickly came round and
cooperated with the changeover -- though it meant a loss of collective bargaining
capability under labour laws.

Not resting on its laurels, the worker-owned KDHP is now going on to explore niche
areas such as organic tea, flavoured tea and speciality teas that are fetching good
prices in the export market.

Employees participatory management — Tata Tea turns a new chapter

WITH 13,350 employees and encompassing an area of 24,137 hectares of south
Indian tea plantations, Tata Tea is poised to create one of the largest participatory
management enterprises in the world, which is to be run on corporate lines.

Mr V. Venkiteswaran, Executive Director of Tata Tea, told Business Line that barring
some preliminary apprehensions, the response from the workers, trade unions and
staff to the creation of the new company has been quite positive.

"We are planning to hand over the company to the workers, staff and managers
who know the business of running the plantations best. By this move, we will be
shaving off a part of the large overhead expenses that the plantation business has
been bearing until recently."
The new company will be focusing exclusively on the business of growing tea at the
lowest cost, targeting its product to the auction centres and commodity markets.
With a 20 per cent stake in the new company, Tata Tea will also get into a buyback
arrangement for its packeting and marketing division.

The new company will no longer be contributing to the operational cost in

maintaining the Kochi regional office or the corporate office in Kolkata. The cost of
maintaining these offices will be borne exclusively by Tata Tea. It is a win-win
situation for both the management and the workers, Mr Venkiteswaran said.

Focus to shift

As Tata Tea has grown, the plantation business, which contributed close to 80 per
cent of the company's business 20 years ago, has now shrivelled to less than 15 per
cent. With this move, the company can focus its undivided attention to its instant
tea division, packaging and branding activities both in India and across the world. In
Kerala, Tata Tea will retain control over its instant tea division, packeting centre,
general hospital, High Range school and Srishti Complex — its centre for the
physically and mentally challenged.

It will handover the 17 estates over which it has permanent lease to the new
company. It will also sell the Pallivasal and Periyakanal estate, which the company
owns. The company has also initiated the process to sell the five tea estates and
one coffee estate that it has in Tamil Nadu.

On the successful execution of the project in south India, the company has similar
designs for its North Indian plantations as well.

Unions happy

Coming out of a meeting with the Executive Director, the trade union leaders
expressed optimism.

Mr Kuppuswamy, INTUC leader, said that his union was satisfied with the proposal
and termed it a good scheme.

Mr M.Y. Ouseph, leader of AITUC, said that further discussions and clarifications
were sought on several issues, but overall the scheme seemed feasible.

Mr Manikkam of CITU said that it was a good scheme but only on the successful
implementation of the project would the true benefits percolate down the workers.

Mr A.K. Mani, MLA for Devikulam, said that he was very happy with the scheme.
"The employees are becoming the owners and proprietors of the new enterprise.
That is something novel and great."

Conclusion – Perception

Worker participation in India in form of works council or quality circles or joint

council is not working well because there is no goal congruence between the goals
of the management, worker and government. Add to it trade unions find this as the
threat to their power in the organization and a gimmick by the management so they
do not support this initiative majorly.

Each of the above mentioned parties wants to go for worker participation for their
own selfish reasons. As in, workers want higher salary, management wants higher
productivity, and government wants political stability. All the three supporters of
worker participation are running in different direction with their own goals, that is
the main reason for the failure of worker participation. Everyone wants to take
maximum advantage without keeping the larger picture of the company and its
sustainability (growth) in mind.

All the three parties in participation need to align their goals first with each other
and then with organization as a whole then only one can expect to bear the fruits
from worker participation. So basically one requires an attitudinal change in this
case, management has to consider workers as stakeholder of the organization and
not just tools to get the required work done and workers need to be more
approachable in their approach towards the management. For this both the worker
and management have to discuss this issue with open mind and clear thoughts. If
worker participation is practiced in right spirit - high productivity, higher salary and
bonuses will automatically fall in place, as they are the byproducts of worker
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