HONDA MOTORCYCLES AND SCOOTERS INDIA LTD.

(HMSI)
The president of Honda Motorcycles and Scooters India Ltd. (HMSI), who was also its CEO, had recently chalked out an aggressive expansion plan, which involved making the production capacity of the companys plant (at Manesar, Gurgaon, India) triple by the end of 2007-08. Postexpansion, the company would produce 0.6 million motorcycles compared to 0.2 million in 2005; and its total two-wheeler capacity would increase to 1.2 million units from eight lakh in 2005. He was exploring the options towards building a strategy for a long-term cooperation with the employees. But he had bitter memories of the recent past. He looked back at the happenings in the company in the last twelve months. Neither he nor perhaps any of the members in his managerial team could have imagined that workers seemingly not-so-major grievances could actually lead to a war-like situation. It was not just any ordinary unionization struggle that HMSI workers had recently fought for. The company could not prevent the union formation, which took place in May, 2005; that too with affiliation to AITUC (All India Trade Union Congress), which was the trade union wing of the Communist Party of India. What was more worrying to him was the damage to the companys image due to the large-scale violence that took place at the Gurgaon civil lines area involving its workers and the police on 25 July, 2005. The workers had gone there to seek a more proactive intervention of the state machinery towards reinstatement of their colleagues who had been dismissed or suspended by the HMSI management for acts related with union formation. This incident was reminiscent of a police state reflecting barbarism of the type practiced in the feudal era. The CEO would surely not have liked that to happen even to his supposedly indisciplined workers. Many happenings of that day were telecast almost live by multiple news channels in India. And they were perceived by the management to have done perhaps an irreparable harm to the social existence of the company. The drop in the companys sales was also worrying him. The company had suffered a production decline resulting in monetary loss of Rs. 1300 million as a consequence of the strike and go-slow tactics by the workers especially during the months of May and June, 2005. But there was much more to it than just the monetary loss. He wanted to focus the attention of his whole workforce and the managerial team on the ambitious goals that the company had set before itself when it decided to extend its manufacturing operations to India. While choosing the companys logo of the wings, the company aimed to fly high by taking a dominant role in the Indian two-wheeler industry, simultaneously taking advantage of the rapidly growing Indian economy. He was looking at the possible ways in which he could increase the intensity of the companys march towards realization of its vision. HMSI: PRODUCTS AND WORFORCE Honda was the largest manufacturer of two-wheelers at the global level. HMSI was a whollyowned subsidiary of Honda Motor Company Limited (HMCL), Japan. The Tokyo-headquartered HMCL was one of the leading manufacturers of automobiles and power products and the largest manufacturer of two-wheelers in the world, with more than 120 manufacturing facilities in 30 countries worldwide. HMCL was known to have excelled in the adoption of the post-Fordist production system (also called Toyota Production System). HMSI was established on 20th October 1999. Its aim was to achieve this dream through production of world-class scooters and motorcycles manufactured at its state-of-the-art plant. The HMSI factory was spread over 52 acres. The initial installed capacity was 100,000 scooters per year, which was scheduled to reach 6,00,000 scooters by the end of 2005.

This case is prepared by Prof. Debi Saini, MDI, Gurgoan

HMSI operated on principles, which were followed worldwide by all Honda companies. Maintaining a global viewpoint, HMSI was dedicated to supplying products of the highest quality,

yet at a reasonable price for complete customer satisfaction. It aimed to produce technologically superior, efficient and reasonably priced two-wheelers, with Honda-tested technology, backed up with after-sales service of Hondas global standard. Instead of being just vehicles of transportation, its products were intended to become vehicles of change: change in the way you work, the way you travel, and change in the way you live. The company had about 3000 employees in all; of these 2000 were in the worker category1300 were confirmed workers, and 700 were contract workers. About 1000 employees belonged to the supervisory and managerial staff. Besides, 700 persons were working as trainees and 300 were apprentices under the Apprentices Act, 1960. Almost every worker or trainee held a certificate from some or the other ITI (industrial training institute) in India. All trainees normally got absorbed in the regular workforce after the training; whereas only about 15 per cent of the apprentices were able to get a job with the company after the apprenticeship was over. Going by the region-cum-industry considerations, HMSI had the reputation of being a comparatively good paymaster. During the time when workers waged recent agitation, the company had increased the wages of each worker by Rs. 3000 per month. Thus, in October 2005, salaries for workers ranged from Rs. 8,150 for its unskilled worker to Rs. 11,200 for skilled worker, which included Rs. 2,000 towards house rent allowance. EMPLOYEE WELFARE HMSI had taken several initiatives in the area of employee welfare, which ranged from subsidized canteen facilities to attractive hospitalization reimbursement for all employees. Some of the key initiatives in this regard were as follows: Besides canteen, transport facilities to and from workers residences were provided at subsidized rates. The company had a sports club for employees use at Sukhrali village in Gurgaon, which had facilities for indoor games. Workers had been organizing matches with employees of other companies in different games including football, volleyball, table tennis, chess, carom board, badminton, tug of war and high/long jump. Two sets of uniforms, one company cap and one pair of shoes were provided to each employee every year; all employees including the managers wore similar uniforms. Most of the HMSI workers were not covered by the Employees State Insurance (ESI) scheme under the ESI Act, 1948 as their salaries had crossed the maximum salary limit for coverage. The company covered such employees under Paramount Health Care facility. Besides OPD (outpatient department) facility, this scheme envisaged re-imbursement for hospitalization expenses. Till very recently, the coverage of the workers and their family for hospitalization insurance was as follows: A workman and his/her spouse and up to two children were covered for Rs. 75,000 each, and workers mother and father were covered for Rs. 1,50,000 each. On the intervention of the union these rates were enhanced later on in September, 2005. The company also met its liabilities under various labour laws. Earlier, it used to invite workers families for celebrating the foundation day, but as the size of the workforce increased, that practice was stopped. To provide support to an associate at the time of happy and sad occasions the company had a policy of paying cash as under: Rs. 2100 birth of a child (limited to maximum number of two children); Rs. 3100 on his/her marriage; Rs. 5000 given to the family of an employee on his/her death; and Rs. 3000 on death of an associates spouse or child or parent. HUMAN RESOURCE POLICIES The Human resource policies of HMSI were in alignment with the philosophy of its parent company, HMCL. The latter considered itself as a unique organization as it claimed to have adopted some distinctive employment and production practices. It also had certain fundamental beliefs, which among others, included the value of each individual. HMSIs philosophy advocated two fundamental beliefs: 1) Respect for Individual Differences; and 2) the Three Joys

that it wanted to promote for all organizational members. Respect for the individual stemmed from initiative, equality, and trust. The company believed that it was the contribution from each individual in the company that was responsible for companys success, and which would take the company into the future. With its focus on The Three Joys, in line with its parent Honda's Philosophy, HMSI conducted all its daily activities in pursuit of: the Joy of Buying, i.e. the joy of using world-class products; the Joy of selling, i.e. the joy of selling world-class products; and the Joy of Manufacturing i.e. the joy of producing high-quality products. Based on its philosophy, the respect for the individual got translated into independent spirit and freedom, equality and mutual trust of human beings who worked for or came in contact with the company. The company claimed that its policies focused on developing each individuals capacity to think; reason; and most importantly, ability to dream. The company believed that what thrilled its employeeswho were called its associatesmost was the Joy of Creating, which was a key mission at Honda, which aimed to promote working for companys own happiness. The company promoted association among different categories of employees through provision of similar uniforms and same canteen facilities for all. The induction programme of HMSI involved, among others, acclimatizing the employees to the Honda philosophy, which was a clear written statement. The company also talked of a Honda way which was not a written statement but was expected to run through the company. For example, one of the prominent Honda ways was perseverance to ensure safety and quality in all aspects. The Honda way meant human behaviour or way of thinking based on Honda philosophy. The HR department was expected to organize training programmes and facilitate internalization of culturebuilding so as to promote the Honda way among the employees. Apart from training in Honda philosophy, the company organized the following types of training for its employees: TQM (total quality management) training; training for building team leaders; ISO 9000 training; and 5S training. The training department, which was a part of its Human Resource department, was supposed to be headed by an assistant manager; but this position was lying vacant since long. HMSI had a performance appraisal (PA) system for all its employees including those in the worker category. It involved interviewing of the person concerned by the section head and the shift incharge, on the basis of which PA was done on a rating scale. For the purpose of increment, workers were divided into five categories; increments ranged from Rs. 400 to 1400 per month depending upon the PA grade of an employee. The company announced all PA results and salaryhikes immediately on the end of the financial year. Thus on April 1 of each year, one would get his/her pay-hike/promotion letter. The promotion chances for workers ranged from worker to subleader to assistant executive to executive. Since almost nobody was covered by the Payment of Bonus Act, 1961, as they got higher salary, the company had the policy of giving an ex gratia of one months gross pay to every employee as incentive pay around the Diwali festival. Since April 1, 2004 the company had constituted a works committee (WC) under the Industrial Disputes Act 1947 (IDA) consisting of 15 workers and 5 management representatives. However, after the union came up, the WC had become merely symbolic. The management had also constituted some other committees consisting of workers and management representatives. Some of these were canteen committee, transport committee, health committee, and sports committee. The nominations to these committees were done by the management on the basis of the perceived interest of different persons. The companys six-page three-monthly quarterly newsletter was titled Dream Team. Its focus, among others, was on covering companys achievement in terms of awards, contracts, recognitions, quality certification, list of new dealers, and kaizen activity. A perusal of the past issues of the Newsletter revealed that its focus was on targets, safety, exhortations related to, and announcement of, achievements concerning quality, safety and training programmes on defensive and safe driving of two-wheelers. Very few employee-related matters were covered. Nor was there any scope for workers expression through any letter to the editor related to issues that concerned

them. Employee-related matters covered included: sports competition results; news about marriage; and child birth in case of employees or their spouses. SEEDS OF UNIONIZATION AND AFTER Things were going smooth for nearly two years after production started, but for a series of unpleasant events. Perhaps the major resentment of the workers was expressed when the company decided to give to each employee a Diwali gift of Rs. 600 in November, 2004. Union leaders said, In the past years also, the value of the Diwali gift was of about 400 to 500 rupees. Looking at the stature that our company enjoys in the global market, we all felt belittled at this small gift. A manager added that the perception of unfairness among workers was enhanced when some rumour also got spread that Hero-Honda had given a refrigerator each to its workers as Diwali gift. Ninety nine per cent of the workers refused to accept this Diwali gift, and the company took it back. Alternatively, it offered a coupon of Rs. 600, which too was refused by the workers. After 10 days of Diwali, this money was transferred to the bank accounts of all workers. Workers also encountered certain other problems. They were made to sign a movement sheet whenever they went to toilet or drink water. One day a worker was denied permission to go to the toilet, as he could not withstand the pressure, he pulled the line chain and rushed to relieve himself. When he returned some minutes later, he was dismissed. Often workers had to attend to more than one machine simultaneously, as happened in the post-Fordist production system; this created stress for them. The company was also very strict in granting leave. Even when a workers close relative was seriously ill or circumstances were otherwise serious, leave would not be granted. While denying the leave, sermons were given to them, which they did not like. Sometimes they would be told to leave the company permanently if they could not perform up to its expectations. If a worker wanted to change a shift temporarily for some compelling reason, it was almost never granted. Memos were issued for different reasons; almost every day some or the other worker would get a threat of termination. There was considerable fear of managements authority amongst the workers; nobody could dare raise his voice or think of seeking a grievance redressal. Workers perceived that many managers had been showing partiality in matters related to posting. Their blue-eyed boys were posted in jobs outside the production-line work. The production-line job was far more exerting than that outside it. The enormity of the problem had taken a serious proportion, and led to considerable bickering among workers. The managers enjoyed this picture as it prevented the workers from uniting. The practice was going on since beginning. The Japanese top management knew little about it. The Indian managers would not let the workers meet the top management to share their problems. Union leaders claimed that this was done mainly with a view to creating a friction amongst the common worker. They wanted these postings to be done on the basis of seniority. Workers were also unhappy with the idiosyncratic attitude of the Vice-President (VP) Manufacturing (a Japanese national), a free-style person, who was a strict Honda disciplinarian; they were afraid of him as he could say anything to anybody any time. He was often seen moving on the shop-floor with a 14-feet-long stick that was used for measuring the standard height of a trolley. Most workers did not like his carrying a stick; they would crack jokes about him at his back. One day, a worker got late by 2 minutes after the tea time. He kicked this worker at his leg to show his anger; but partly it was a friendly kick. This worker somehow did not react at all, nor did the other workers do so. As the news spread amongst others by the evening, workers raised slogans against the VP. The next day, he apologized in front of the workers gathering. The Indian managers asked some 15 workers to have a meeting with them on this issue. Production got completely stopped for one and a half day. Another somewhat similar incident occurred on a day when a Sikh officer of the company was wearing a different-coloured cap and not the usual company cap. The VP gave a push to his cap from one edge; and it fell down. The official

concerned felt insulted but kept quite. The errant VP was later sent back to Japan; no other action was taken against him. The workers were not satisfied with a mere apology from the VP. In the next 15 days they came out with a charter consisting of more than 50 demands which included: an increase of Rs. 2500 per month in wages; 20 per cent annual increment in wages; house rent allowance to be pegged at 70 per cent of wage; conveyance allowance at Rs. 1500 per month; 20 per cent bonus on wage + dearness allowance; provision for free distribution of one kilogram of milk and kilogram of gur (jaggery) per worker everyday; provision for a Union Office within the company premises along with all incidental facilities like telephone; a loan of Rs. 2 lakh for marriage of sibling/child; provision of a library within company premises; abolition of the policy of overstay (if the production target for the day was not achieved, workers were required to compulsorily stay back until the target was achieved). With considerable heartburn and opposition, on April 1, 2005 the management offered to workers a compensation package comprising of an increment of Rs. 3000 per month. This was on the condition that the workers would not form a union. They refused to accept the managements offer. When the management did not yield, the workers started collecting money for funding of union activities. HMSI management suggested to the workers, Why dont you form an internal committee instead? The workers declined this suggestion. Many workers were individually called to a managers room and were exhorted not to join the union. Letters were sent to certain workers homes that they were indulging in undesirable activities. The management allegedly hired some outsider toughs to frighten the workers if they formed a union; but their resolve was too strong. With the help of local union leaders (affiliated to political parties), they began making efforts to form a union, and subsequently moved an application for registration of the union to the Registrar of Trade Unions at Chandigarh. The management, not wanting the formation of a union in the organization, tried its level best to stop union registration. It resorted to various means like lobbying with the Haryana Government to help prevent union formation and its registration. The registrar allegedly denied registration of the union on the ground that the proposed workers action was initiated in bad taste. It also apprehended that it would result in disharmony of relations between the industry and workers in the region at large, and would also prove detrimental to the growth and development of the industrial belt in and around Manesar. Consequent to this, the workers resorted to a slowdown of work (go slow) and refused to put in overtime to complete the production targets. The management viewed the new stand of the workers as a serious case of breach of discipline and suspended four workers on charges of insubordination, tampering with the quality of output, adopting a go-slow policy, indiscipline and unrest. During the same period, the management also refused to absorb some trainees who had completed their two years of internship. The aforementioned actions of the management led to widespread discontent among the workers. Most workers, whether permanent or trainees, collected together under the leadership of the suspended workers, and started raising slogans. They also gheraoed the management within the offices located at the factory premises. During this gherao one person from senior management was manhandled and beaten up. The entire incident of gherao and violence resulted in the production being shut down for 30 minutes. The management saw this as a grave and acute case of breach of discipline. It retorted by suspending 50 workers and dismissing the previously suspended four workers without any enquiry. This made the situation in the company still more explosive. Interestingly, so far as the importance of local laws was concerned, the global philosophy of Honda stated as follows: Honda is committed to providing a work environment that is free from unlawful discrimination, including harassment that is based on any legally protected status.

Honda will not tolerate any form of harassment that violates this policy. This policy forbids any unwelcome conduct that is based on an individuals age, race, colour, religion, sex, national origin, ancestry, marital status, sexual-orientationor any other basis protected by state, federal or local law. In view of the resistance from the management, the registration of the proposed HMSI union was further delayed by more than a month. The cause of the workers and their application for registration was then supported by a letter of the AITUC chief Mr. Gurudas Dasgupta, a member of Indian Parliament. This letter dated May 20, 2005 was addressed to the Chief Minister of Haryana and requested him to look into the matter to secure early registration of the proposed union. Subsequently the HMSI labour union was registered by the Registrar. The newly-formed union raised further demands while adopting the demands raised earlier. CONCILIATION FAILURE AND THE INTESITY OF WORKERS ACTION Eventually, the dispute landed itself for conciliation. Conciliation proceedings were initiated on May 26, 2005 by the Deputy Labour Commissioner of Gurgaon, who was the conciliation officer in the Gurgaon region for all general-demands disputes. For conciliating matters related to individual disputes, the Gurgaon area was divided into four regions, each headed by a labour-cumconciliation officer. Six conciliation meetings were held on June 3, 17, 28, and July 8, 14, and 19. The HMSI management was represented by two managers belonging to the companys human resources department. They remained almost quiet during the proceedings. The only contention of the management was that the company was not required, on any groundwhether legal or equitableto raise the wages of the workers since it was already paying more than the regioncum-industry standards. The representatives of the union, however, chose to stick to their demands. The DLC thought that the conciliation proceedings failed due to the uncompromising stand adopted by both the union as well as the management representatives. He submitted a confidential failure report to the Haryana Government under section 12 (4) of the Industrial Disputes Act 1947 (IDA) on July 19, 2005. In the meanwhile, during the pendency of the conciliation proceedings, the management asked the workers to sign a statement of good conduct. This statement provided that workers would remain disciplined while in the factory premises and that they were returning to work unconditionally. The statement also contained a clause envisaging non-pursuance of union activities by the workers while on work. It was this clause that became contentious and due to which the workers refused to sign the statement. The management, in retaliation, refused to let the workers enter into the factory premises without their signature on the good-conduct bond. The management hired some temporary workers from its vendor companies in order to maintain production schedules. These temporary workers were asked to stay in the factory premises and requisite facilities were provided to them within the factory. Eventually, the management and the union reached an agreement in June 2005 whereby the management agreed to allow the workers to enter the premises of the company and work only under the condition that the terminated staff would not be taken back/reinstated. Furthermore, it was decided that the workers would be allowed entry into the factory premises in batches of 400 that too if they signed good conduct bonds. Workers agreed to do so. However, an apprehension continued to bother the management as a few years ago at Hero-Honda Motorcycles Ltd., Dharuhera (a joint venture between the Hero Group of Companies and Honda Motors) a similar situation had arisen, and temporary workers from vendor companies were used to continue the production. The management of Hero-Honda Motorcycles Ltd, under circumstances similar to those in the present case, entered into an agreement with the workers and allowed batches of 400 workers to enter the premises and resume work. However, after entering the premises, these workers disrupted the work done by the temporary workers from the vendor

companies and brought production to a halt. The management at HMSI feared a similar incident being repeated at HMSI. On the following day, the workers put up the union flag at the factory gate, the HMSI management got apprehensive and decided to allow only batches of 100 workers to enter the factory premises; but later the management further retracted and announced that it would take back workers in batches of 50 only. Anguished workers agreed yet again but the management eventually decided not to allow any worker to enter the factory. The management also requested and got a good degree of police protection. The persistently explosive situation in the factory resulted in fear being instilled in the minds of the temporary workmen who had come from the vendor companies. Many of these workers fled from the factory premises. At the end, only 38 workers reported to work on June 18, 2005. At 1:30 p.m., the management was forced to declare that the production would be shut down for the day. After obtaining registration for their union, the workers had been resorting to go slow, as a result of which during the month of May, June and July 2005 the production was reduced to just 10 per cent of the normalfrom 2000 scooters per day to around 200 scooters per day. Later it was discovered that the management had placed an advertisement in a newspaper for recruitment of new workers. THE DANCE OF NAKED VIOLENCE AND ITS AFTERMATH On July 25, 2005 workers from HMSI and those from the neighbouring industries staged a rally at offices of the district authorities to press their demand for reinstatement of their dismissed and suspended colleagues. The police prohibited the workers from entering the Civil Lines area which housed the offices of all major government functionaries of the district, including the District Collector. At this point several masked men began throwing stones. The protesters attacked the Deputy Superintendent of Police (DSP), who was beaten mercilessly, an incident covered by the television media that invited public sympathy for the police. They also set fire to the vehicle belonging to the sub-divisional magistrate (SDM). The police, however, succeeded in controlling the mob. The identity of these masked men had not been confirmed, and workers denied that anyone from their ranks were amongst them. After this clash a message was sent to the workers that the administration would meet them and accept their memorandum; they were asked to assemble at the lawns of the secretariat. When within the enclosure, in order to take revenge of the earlier attack on the police, on some slight provocation it resorted to the use of brute force against the unarmed workers (see pictures to the left). The media reported the use of the worst possible police brutality on the workers. While the initial claim of workers injured was 700, most workers were discharged after first-aid. But 70 of them suffered severe injuries. Later on the police arrested a number of workers and booked them under different sections of the Indian Penal Code. The legal counsel of the HMSI union was also booked by the Haryana Police on charges of

An angry lady relative of an injured worker assaulting a policeman on 26 July, 2005, Times of India

attempt to murder. The media reported that the police brutality, though inexcusable, was not exactly unprovoked. The television images of the savagery

exhibited by the Police in their attack on the workers brought to many minds the savagery of Jalianwala Bagh by General Dyers army perpetrated in the interest of their British masters. A journalist of The Hindu, English daily wrote: The scenes from Gurgaon gave us more than just a picture of labour protest, police brutality or corporate tyrannyThe streets of Gurgaon gave us a glimpse of something larger than a single protest. Bigger than a portrait of the Haryana police. Greater than Honda. Far more complex than the "image of India" as an investment destination. It presented us a microcosm of the new and old Indias. Of private cities and gated communities. Of different realities for different classes of society. Of ever-growing inequality. Of course, it was admitted that some policemen were beaten by the mob before the police responded with its brutality. The HMSI union maintained that it was so done by the outsiders. The constabulary forced workers indiscriminately to kneel holding their ears while they were being thrashed. The second days violence was reportedly sparked off when enraged members of the public who turned up at the civil hospital could not find their relatives (see picture above). Some of these were whisked away by the police and were charged with the previous days violence. That inflamed matters further. The police action on workers was severely protested by the print and the television media and the politicians in and outside Parliament. As a result, the Inspector-General of Police conceded that the incident was an act of gross negligence on part of the police. The DSP and the SDM concerned claimed that out of the 375 odd persons arrested after the incident, 79 had nothing to do with the strike at HMSI; this was later on also verified with the records of the HMSI. On July 26, 2005, the day after the unprecedented violence, HMSI had closed operations for half a day; but it did not declare a lockout. Consequent to severe protests in different circles, on 27 July, the Haryana Chief Minister ordered a court of enquiry to investigate the violent incident to be conducted by a retired Judge of the Punjab and Haryana High Court. The terms of reference, among others, provided for: completing the inquiry within a period of 3 months; examining the role of outsiders in the incident; and examining whether the force used by the Police was justified or excessive; and whether the means available with the police were adequate to control the crowd. The Haryana Chief Minister was also directed by the Congress President Mrs. Sonia Gandhi to hold discussions with the HMSI management and its workers. Sixty-one workers remained in jail for more than two weeks; they were released on 11 August. THE TRUCE AND ROLE OF THE STATE On July 30, 2005 an agreement, arbitrated by the Haryana Chief Minister, was arrived at between the workers and the management of HMSI. Of course, technically this was a conciliated settlement and not a case of arbitration under the IDA. The agreement stated that the striking workers would resume duty from Monday, the 1st of August 2005 and that they would not raise any new demands during the next one year. The trade union, which was the bone of contention between the workers and management would, however, continue to operate. The agreement also stated that the 50 suspended workers would be reinstated as also the four union leaders whose services had been terminated. However, the terminated employees would be reinstated only after they had submitted an unconditional letter of apology. The four terminated workers were also required to submit a separate assurance letter to the top management. The undertaking contained a clause that the workers promised not to engage in any act of indiscipline and assure normal production. However, the management retained the right to conduct an enquiry into the reasons for termination of the aforementioned four terminated employees and if after such enquiry the employees were found guilty, the management had the right to transfer them to any other department other than the manufacturing department. The agreement also provided for termination of any employee of

HMSI who would get convicted in any of the court cases that had been initiated against them by the city administration in connection with the July 25, 2005 incident. And, the workers would get full salary for the months of May and June, 2005. However, from June 27 onwards, the principal of no work no pay (as per an earlier ruling of the Supreme Court of India) would be implemented. It was also provided that the injured workers who were not able to work immediately would be given paid leave. About the workers demand to absorb the trainees as permanent employees after the completion of their internship as per the prevalent practice, it was decided that a proper test and a detailed appraisal form would be administered for evaluating their performance before inducting them as permanent staff. Finally, it was agreed that the agreement would be considered as final conciliation in respect of all demands raised by the workers and in future both the parties would maintain cordial relations. UNIONMANAGEMENT DYNAMICS IN THE POST-VIOLENCE SCENARIO The union office-bearers felt that a good degree of change could be seen in the attitude of the managers in the post-July 25 scenario. The management allowed concessions on several fronts. On the day of the tripartite agreement, the management wanted to terminate the services of some 200 contract workers even though the tripartite agreement provided for reinstatement of all workers. But the union could convince the management that the company should stick to the agreement. There was also an informal understanding that the union leaders would have the freedom of not working on the shop floor since several IR issues were pending that required their persistent attention. No domestic enquiry proceedings were started against the four dismissed workers who had been taken back; nor were they transferred to other departments as envisaged in the tripartite agreement. Police had registered cases against 63 workers, including all the seven union office-bearers for the July 25-violence. This necessitated running around to contact different people for making their defence sound. The injured workers had their problems, which needed intervention of the union: out of 50 workers who had suffered major injuries, 15 cases were far more serious which included head injuries, multiple fractures, damage to knee caps, etc. The company showed all these injured as absent, and was hesitant to pay them their salaries. Union leaders said, We had to struggle to ensure that their salaries are paid regularly. They had to monitor the workersupervisor relations closely to see that workers were treated better. The management had also informally allotted a room to the union leaders, though it was not sufficiently big. But it had promised them a proper union office after some time. Another area of the union leaders involvement was the issue of absorption of trainees in regular jobs. Even as the absorption of all persons who had completed their trainees into regular service formed part of the tripartite settlement, the management was initially refusing to take most of them on different pretexts; they had supported the workers struggle. The union got all of them absorbed in regular jobs. Speaking of the change, a union leader observed: Now, when a worker asks for leave, managers speak with much restraint; their response being far more positive. Workers are able to adjust half-day shift within the next day with negligible hassles. The number of memos that workers get is negligible. The workers wanted four days leave on Diwali in November 2005, and consequently closure of the factory for four days. This meant three days compensatory working on Sunday and/or holidays; the management has hesitantly agreed to this proposal. Further, most factories in Gurgaon were working on 29th September, 2005 when some of the major Indian trade union federations gave a call for industrial strike all over the country in protest against the Central Governments economic policies. Our union, however, observed the day as strike.

Though the management felt bad to know its decision, the union compensated the loss by working on a Sunday. One of the major recent achievements of the union was the hike in the coverage of the worker and their family members under the medical insurance scheme. In September 2005, the hospitalization expense of a workers wife went up to Rs. 1,35,000. The management refused to pay the excess of the coverage limit. The worker was already in distress as his wife had died. Earlier, nobody could dare talk these things with the management. The union negotiated this issue and made the management agree for a family floater coverage scheme of Rs. 1,75,000; this overall limit could be utilized by one or more or all the family members. If the expenses still exceeded this amount, the company agreed to pay up to Rs. 1,00,000. This agreement was reached not through any written settlement with the union but by way of a change in management policy at the instance of the union, and came into effect from October 1, 2005. Another new development was that whenever there was a workers-related problem or issue, the management invited all the seven union office-bearers for discussion; this was never so earlier. The management was facing the problem of increasingly stressed workers who had to work overtime to meet the production targets. Overtime was being paid at the rate of double of the basic wage rate. Workers found it somewhat attractive to work overtime and make extra money. But this had led to, among others, medical problems. Workers never felt fresh while on work. Unions help was sought, and a decision was taken to scrap the overtime working completely in most cases. Despite these developments, union leaders still did not feel happy at the workermanager relations. One incident took place on 2nd September 2005, when two supervisors in the aluminum machine shop behaved with workers authoritatively and in a provocative manner as they used to do so earlier. The workers of this department reacted; some 150 of them came to the union leaders seeking their intervention. When the union leaders went to settle the issue with the Senior Manager concerned, he spoke angrily with the union leaders too. Workers of the whole shift stopped the work for some 15 minutes. A union leader said, We went to all the departments to exhort the workers to start the work; we did not want work to be interrupted. That day most senior managers had gone to Chandigarh for some work. After they came back, the next day they all felt sorry for the incident and appreciated our intervention in the matter. Another incident occurred on 9 September, 2005. The A shift in assembly achieved its target of 1000 scooters for the first time after the union formation. Earlier, the target used to be achieved in almost every shift. Union leaders said that the targets could not be achieved for various interruptions. However, they could not satisfactorily explain why these interruptions did not affect the target achievement earlier. On hearing the target achievement that day, Vice-President Manufacturing, along with GMProduction came to the shop floor during the lunch time and commended the achievement of the workers; next day sweets were distributed to all workers. The scheme of inviting workers family on the founders day had been stopped as the number of employees had increased, and this was becoming unmanageable in view of the fact that Honda workers were from more than 20 different states of India. This practice had been revived since late September, 2005. Now the family members were invited to the factory at the companys expense in batches. They were shown the conditions under which their near ones worked in the factory. The Diwali gift for the year 2005 became a matter of negotiation. Each employee was given a gift of Rs. 2000 and a credit in their bank account of Rs. 4,000 in the form of incentive bonus including the managerial staff. So unlike one months gross pay for the year 2004 the bonus money for the year 2005 was smaller. But the management could convince the union that the factory had suffered huge losses and hence the ex gratia bonus had to be cut down. The biggest sufferers were the managerial employees, as they had got a bonus of one months salary in 2004.

10

Expatiating on the issues involved, a union office bearer observed as follows: We are committed to the company. We consider it as ours, and always want to do our best for it. The respect for the individual and the Joys that the company claims to be practicing are merely in the book. Some of the senior managers want to see a big distance between the top management and the workers. The HR manager never wants that we meet the Japanese top management, as he feels that a transparent working may expose his ulterior designs and motives. Only some 20 per cent of the managers treat us with the dignity that we expect as members of the company; most others have big egos. The managers as well the workers need to change. You know, the problems always emanate at the shop floor, but nobody bothers about analyzing their causes and possible solutions in a more practical and acceptable manner. The worker always wants fair and just working of the company. When this does not happen, he reacts. LOOKING BACK AND THE FUTURE PLANS The company had been performing extremely well since beginning, and had shown promising results on several fronts. As shown in Figure 1, as per a research conducted on two-wheeler dealers by TNS Automotive Dealers Satisfaction study in 2004, HMSI led the two-wheeler category in India. It got 108 points, leaving behind Hero-Honda which got second place with 96 points. It had got several other recognitions in other spheres. But in the post-July 25 scenario, the company took quite some time to absorb the shock of what had happened. It wanted to know what had gone wrong and where, and how could things be made to improve. Recently, it revamped and intensified its training function. Managers were being sent out to attend management development programmes (MDPs) organized by, among others, Confederation of Indian Industry (CII), and All India Management Association (AIMA) in areas such as inter-personal skills; negotiation skills; team-building and conflict management; and leadership building. The HR department had been actively informing the line managers to volunteer for the MDPs that were being organized by some of the leading organizations. Interestingly, however, the solitary vacancy of an Assistant Manager Training was lying vacant since long. Some of the issues at hand that needed attention were identified by a manager of HMSI as follows: The company had a total lack of direction on people front, which to a great extent is still persisting. Management does not know what to do to overcome the shock of July 25 and its aftermath. Japanese were conversant dealing with the Japanese unions, that were known to be much more tolerant. The company also has a lot of problems of hierarchy consciousness. The present GMOperations came from Maruti (a Suzuki-controlled automobile company), where he could successfully tackle somewhat similar discontent among workers. The Japanese do not understand the workers language also. The DirectorGeneral Affairs, who also is responsible for overall HR management, came with a lot of ideas, but he could not understand the organizational working from the employees point of view. When workers had resorted to go-slow, Japanese managers did not know what to do. On the other hand, Indian managers were specialists in production; they did not understand how to handle industrial relations (IR) issues. If D.P. Singh [who was HR chief till some time ago, and had left HMSI, commanded respect among most workers] had not left, perhaps the problems may never have arisen. He had a good rapport with the workers. Another problem was that the Japanese had not given Indian managers much power to take major initiatives in different dimensions. Things have, however, somewhat improved in this regards now after 25/7.

11

Fig. 1: 2004 DSS Ranking: Two-Wheeler Source: Dream Team: HMSI Newsletter, April-June, 2005

LML Hero Motors

In view of the damage done to the companys reputation, HSMI was busy in an image-building exercise. Earlier, the managers seemed to remain under the impression that Honda products would sell due to its world-wide image. But it realized that in the post-July 25 scene, its advertisements were not being perceived as effective; so newer ways were being thought of to cope with those problems. It recently organized a one-week drive in this regard, whereby the HMSI logo was applied in henna on ladies hands. In its endeavour to reach the far-flung masses across the country, HMSI was running road shows of two of its popular two-wheeler models, Eterno and Unicorn. A meeting of the top management and the department heads took place at an outside resort to decide the future course of action. They were aware that two posts of Senior ManagerIR and Senior ManagerAdministration were lying vacant since long. These officials decided that a new person should be appointed as Senior ManagerIR and Administration. Also, in September, 2005 all union office-bearers were taken to an outside resort, and were given training by the HR department on building cooperative industrial relations. Outsider trainers were also invited in this programme. The company also nominated a committee consisting of seven worker representatives who would bring the workers grievances to the notice of the management and the union leaders. The CEO was asking himself whether these measures were sufficient to move in the right direction, given the substantial damage the company has recently suffered. He was perhaps haunted by the ghost of July 25 more than anything else. He was considering alternatives for bringing about change in the situation fast; he was also wondering if some radical decisions were required and on what fronts.

Kinetic Engineering Yamaha

You may focus on the following Questions while presenting the case, though do not restrict yourselves to these questions only:
1.

2. 3.
4.

5.

What do you think were the principal causes of the trouble that HSMI faced? Whether the HMSI management committed any major violations of the industrial relations law? What role of trade unions you can foresee in HMSI? Assume different possible scenarios in this regard. What lessons in people management do you learn from this case? If you are engaged as a people-management consultant by the CEO of HMSI about the predicament that he faces, what would be your advise?

Royal Enfield
12