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Workers' participation in management: a conduit between present & past.

Introduction

"Workers participation in management is not a new concept; it is as old as the institution of owners and workers. Only its importance has increased and has been brought into sharp focus with the industrial revolution and the advent of large enterprises" (Virmani, 1978). In the feudal system before the Industrial Revolution, the units were small and there used to be a joint decision making through consultation between the owner and worker. The owner took a paternalistic approach and interest in the employee.

At times interests of workers and of management clash with each other and effective discussion becomes essential. Groups representing both sides negotiate to derive common ground for finding solutions for the conflict. Such a common ground can also be prepared through cooperation, mutual trust and understanding of issues between the management and workers. This can be possible when both cooperate jointly to manage issues. Such an understanding and a collaborative approach to find a common understanding is called as workers participation in management.

Some Stylized Facts

The roots of modem cry for participation are deep in history. We have come a long way from master- servant relationship to the present stage of participation. Social thinkers like Comte and Omen had advocated the participation of workers in management for achieving social and distributive justice. The most remarkable contribution in this field is done by Karl Marx who advocated complete control of enterprise by workers. It was however a distant dream for the workers to have control over the production and product under capitalism. Later on Webb and Cole propagated that participation of worker in management would be sufficient to meet the needs of social justice and distribution. They believed that if the workers are also given opportunity to participate in the management process, there would be positive gains for the enterprise through higher productivity and efficiency. They want to bridge the divide between the management and workers in order to bring harmony in industrial relations.

F. W. Taylor was the first to champion the recognition of the importance of human beings in managing an organization. Taylor's work on scientific management was the first explicit attempt at using in an organization the knowledge that for increased productivity the employers need to make efforts to satisfy workers needs (Taylor, 1911). The importance of making fuller use of potential of workers through management methods was elaborated in the researches carried out by behavioral scientist like Likert (1961) and McGregor (1960). Their analysis was based on the assumption that the average worker is willing to accept the responsibility and will respond to the opportunity of using his intellectual faculties in larger measure. The introduction of a more participative management style and the improvement of job design are reported in several cases to have given good results in terms of workers attitudes and productivity (ILO, 1976).

In spite of the controversies and conflicts, Workers Participation in Management, is being increasingly adopted both in capitalist and socialist countries particularly in Europe and in the third world as an ideal form of industrial democracy Since the conclusion of World War II more appropriately in the fifties and sixties, various European countries have been experimenting in what may be called participative management. Wertheim (1976) stated that in Europe, there appears as a complement to traditional patterns, an attempt to decentralize influence. Efforts towards worker control are likely to have limited appeal in place such as the United States and Britain where labor perceives industrial relation as already fairly decentralized. Jecchinis (1979) explained the experiences of certain successful West European practice in employee's participation. He pointed out the establishment of complementary intuitional arrangements in the existing system of labor-management relations in Canada for its success which, at the present, is based only on the institution of collective bargaining.

Alas (2007) made an attempt to study, "The impact of employee participation on job satisfaction during change process". He mentioned that "Estonia has succeeded in replacing a planned economy with a free market economy. Still, a lot has to be done to achieve a quality level comparable with developed countries in the European Union. The main problem is: how to change Estonian business organizations even faster than organizations change in developed countries. To meet this challenge, we must rely on both the theories and the experiences of developed countries". More recently Kuyea and Sulaimonb (2011) examine the relationship between employee involvement in decision making and firms' performance in the manufacturing sector in Nigeria. The results indicate a statistically significant relationship between employee involvement in decision making and firms' performance. The study also reveals a significant difference between the performances of firms whose employee involvement in decision making is deep and of firms whose employee involvement in decision making is shallow. The findings also reveal the involvement of participating firms in employee involvement in decision making.

World War Era

It was during the First World War that a need to study the relationship between employer and employee was felt as the entire United Kingdom faced a challenge for having effective control over the situation as emerged due to the World War, which has adversely affected the industrial production. The government appointed a committee to examine the ways and methods for increasing production. This committee was headed by Lord Whitley who was then deputed to India to lead Royal Commission on Labor in India in 1929. Whitley conducted extensive studies and had discussions with various people connected with industry and labor. He then recommended that management must consult labor on issues related to production. This would lead to greater involvement and commitment of labor in promoting industrial production. He suggested that factories and other workplaces should form works committees comprising equal representatives from both sides. This committee would suggest means to increase productivity through workers' participation.

Whitley's suggestions were implemented by the government and works committees were set up in all the factories. Soon, the country witnessed a rapid increase in production. Workers' participation in management therefore had scored a strong point. These works committees continued till the War was over when production became normal as there was no need for excessive industrial goods. Managements immediately disbanded the works committees. They were successful when there was a need to increase the production or otherwise management did not think it necessary to consult labor in issues that were defined as prerogatives of the management. It looked like the workers were used by management in order to achieve its short term goals. After disbanding the works committees, industrial unrest increased and the trade union movement grew stronger. However, there was no talk of consultation with the workers' nor was there any move of institutional recognition of workers' participation.

The next major step towards the realization of importance of the workers was felt soon after World War II. Though the War caused havoc in the lives of people, it also led to the questioning of certain traditional beliefs. For example, when men went to war, production and factories had to be managed by someone in order to meet the increased needs caused by the War. It was then that women started manning the factories and exploring for coal and iron ore in the mines. This gave greater confidence to women that they were proficient to work in these industrial areas. One must remember that the ILO had earlier passed convention that prevented women from working in factories at night and in working underground in the mines. Similarly, workers too became a part of the movement to defend their country against the onslaught of the Nazis. This in turn made workers' feel that they played a positive role in society and they were not mere cogs in the wheels of industry. These factors had important effects on the working class movement as well as the women's movement in the post War period. Universal adult suffrage was granted in Britain which in turn led to movements for democratizing the workplace. The argument put forth was that if workers were competent to elect governments, why could they not take part in the functioning of their factories? This led to a new phase of movement for workers' participation in management. The new move was quantitatively different from that of the works committees proposed by Whitley. The workers now demanded the right to form policies along with the management.

Post Independence Developments

The need for some form of worker participation was felt in the mid-1950s and 1960s, well after Independence, and more by the government than by the employers, because of the need for rapid industrialization. Workers' participation in management came to India through government intervention. There was no urge among unions for greater involvement in the management of industrial enterprises. This is a characteristic feature of most participative schemes in the country, and had continuing effects on the functioning of the schemes themselves. The introduction of works committees through the Industrial Disputes Act in 1947 was hailed by many as an encouraging measure for participation. But section 3 of this Act states that the works committee is meant "to promote measures for securing and preserving amity and good relations between the employer and the workmen and to that end comment upon matters of their common interest or concern and endeavor to compose any material differences of opinion in respect of such matters." The objective was clear. The works committee was envisaged as an industrial relations tool to resolve differences between managements and labor. It was not a participative body at all, and was not meant to be so. From the point of view of structure, the body had some participative affectations. It was to be introduced in all enterprises with 100 or more workmen and composed in such a way that the number of representatives of workmen was not less than that of management representatives. The workers' representatives were to be elected for two years by the workmen of the enterprise, and had to be workers. They could in addition be unionists or union leaders. If there was any doubt about its non-participative nature, the successive clarifications removed them. When joint management councils (JMCs) were proposed to be set up in the late 1950s, it was explained that works committees should deal with a small number of issues so as not to encroach on the jurisdiction of the former or on the sphere of collective bargaining. Three lists of issues were prepared, one for JMCs, one for collective bargaining and one for works committees. Works committees were allotted discussions on lighting, ventilation, temperature, sanitation, drinking water, canteens, dining and rest rooms, medical and health services, safe working conditions, administration of welfare funds, educational and recreational activities, and encouragement of thrift and savings among workers (Sen, 2010: 375). There was some enthusiasm over the committees initially, but interest declined as other forums came up. In many enterprises, workers were particularly excited about the elections associated with them, and some unions treated the election exercise as a means of verifying union strength and flexing their muscles. The National Commission on Labor, 1969, recommended that the recognized union be given the right to nominate worker representatives to the works committee. However, the committees did serve some purpose. Even if elections were not held regularly or the committees did not meet often, they served as forums for ventilating workers' grievances. They are now redundant in most enterprises.

The first real scheme where some kind of participation was envisaged was that proposing joint management councils. The Industrial Policy Resolution of 1956 stated that "in a socialist democracy, labor is a partner in the common task of development and should participate in it with enthusiasm ... there should be joint consultation, and workers and technicians should, wherever possible, be associated progressively in management. Enterprises in the public sector have to set the example in this respect" (Sen, 2010:375). In 1956, the government suggested at the Annual Labor Conference that a delegation should go to Europe and study how the system worked in countries where many of the joint bodies were still active. The delegation reported back to the Conference and proposed that JMCs be set up in all establishments employing 500 or more workers. The Conference adopted this recommendation as a resolution in 1958, which thereafter became applicable to industrial undertakings, since employers and unions were a party to the resolution. The Third Plan desired that the JMCs become a normal feature of the industrial system and integrate private enterprises into a socialist order. The objectives of the JMCs were to promote warm relations between managements and labor and build up trust and understanding, but also to increase productivity, secure effective welfare and other facilities, to train workers to understand and share responsibilities, and in general function as a consultative body.

It was stated categorically that all matters for collective bargaining such as wages and allowances were to be excluded, and the creation of new rights between managements and unions was to be avoided. It was decided that initially JMCs would be set up in 50 selected enterprises and gradually expanded to others, using the experience of the first 50. But ultimately the total number never exceeded 140, and even that number gradually dwindled (Sen, 2010: 376). The JMCs did get off to a good start in a few instances where managements were not averse to the concept of sharing decision-making with workers and state government officials had vision and initiative. But these were few. With the growing inflation of the early and mid-1960s, the councils gradually fell into disuse. Ultimately, and very often, the councils discussed relatively inoffensive subjects including safety and canteen, thus becoming glorified works committees. The main problem was management reluctance to share decision-making with workers. It was this reluctance which lay at the root of the failure of the JMCs and the later schemes (Sheth, 1972).

After the JMC experience, the Government decided to make a fresh attempt at participation in public sector units (PSUs) at least. It announced in 1971 a scheme for worker directors on PSU boards. One worker director was made mandatory for each PSU, the representative being a nominee of the recognized union. Since most of the recognized unions in the central PSUs were INTUC affiliates, it became easy to nominate the national INTUC president or general secretary on most boards. The practice barely survived into the 1990s. In the entire steel industry by then, the lone employee director was in IISCO, West Bengal.

For the banks, statutory amendments in 1973 to the State Bank of India Act 1959 and the Banking Regulation Act 1969 provided for the appointment of one workman (non-executive) director and one non-workman (officer/executive) director in each bank. The working of the scheme was delayed by both managements of various banks and by unions. Unions protested against officer directors, contending that officers were in any case represented. The controversy continued for many years till it was settled by the Supreme Court in 1989. The most representative union was to submit a panel of three names, one of which would be approved by the Reserve Bank of India and appointed by the Government. Most of the nominations were placed by either INTUC or AITUC affiliates, since they were in the majority. But few in office workmen or bank staff members were appointed to the boards, since union leadership in many cases was in the hands of retired employees. Ghosh & Gupta (1992) found that while employees favored elected representatives, the unions favored nomination by the majority union.

However, the performance and role expectations of the nominees proved major obstacles to participation in banks. It was found that the top management envisaged the role of a worker director as one of coordination and cooperation. Employees, however, felt that the role should additionally involve policy formulation, improvement in working conditions and reduction in unjust treatment of employees. Where the actual performance was concerned, employee directors rarely spoke in the board meetings. Employees felt their number was too small to make an impact, and in many cases employee directors felt intimidated by the presence of so many non-workmen directors who all came from social and educational strata superior to the workmen (Ghosh & Gupta, 1992: 416).

Years ago, the general secretary of the All-India Bank Employees Association indicated that managements did not really want participation because agenda papers were sent late, just ahead of meetings. But he did concede that participation at the board level gave employees access to a lot of policy information as well as the antecedents of such policy. This was found useful by the unions (Sen, 1983). But Ghosh and Gupta (1992) found in their survey that employees were able to extract improvements in working conditions, minimize unjust treatment and settle many employee problems. In policy formulation, the observation was that the smaller executive committee of the board made the actual decisions without the presence of employee directors, and even the dissent of the latter was usually not recorded. It can be concluded that the worker director scheme has been partially successful.

In 1975, one of the populist measures adopted by the Government was a 20-point program, and workers' participation was one of the points. A new scheme of shop councils and joint councils was formulated in October that year. This was applicable to all enterprises in manufacturing and mining employing 500 or more people in the public, private and cooperative sectors. Accordingly, in 1976, at the time of the Emergency, the constitution was amended (article 43A of the Directive Principles) to include the introduction of workers' participation as an objective of state policy. The article states that the Government shall take steps by suitable legislation, or in any other way, to secure the participation of employees in the management of undertakings, establishments or other organizations engaged in any industry. In 1977, the Shop Councils Scheme was extended by a government order to service and commercial undertakings employing 500 or more (Sen, 2010 : 378). The two-tier scheme provided for the appointment of shop councils in each department or shop of enterprises, with the management and workers represented in equal numbers. The former would be nominated by the management, and workers' representatives would be from the respective departments or shops. The manner of representation was not specified, though. The recognized union should be consulted on the number of councils and their coverage, depending on the number of workmen employed and on the number of members in each council. Once formed, each shop council should function for two years and meet at least once a month. The council should be nominated by the management and the vice-chairman by the workers. Decision-making should be by consensus and decisions implemented within one month.

The functions of the shop councils would be to assist the management in achieving production targets, improving production, productivity and efficiency, eliminating wastage, and utilizing capacity and manpower to the optimum level. They should specifically identify areas of low productivity, study absenteeism and recommend measures for their improvement. The councils should also concern themselves with safety, working conditions, discipline and two-way communication. There would be one joint council for a single plant, its constitution being much on the same lines as the shop councils, with the chief executive of the plant as chairman. Any one of the council members could be secretary for the council, which should meet at least once every three months. Voting on decisions was to be avoided. The functions included optimum production; efficiency; fixation of targets; matters emanating from the councils; inter-shop council matters; training; work schedules and holidays; evaluating suggestions; optimum use of raw materials and; health, safety and welfare for the plant as a whole. The order did not clarify whether workers or unions would represent employees. This had obvious repercussions in intense inter-union rivalry. Private and cooperative sector enterprises hardly attempted to implement the scheme. PSUs did start implementing the scheme, but most attempts came up against the wall of union representation, especially in multi-union enterprises. There was also an overlap of issues with works committees and JMCs.

When the Janata Party came to power in 1977, it appointed a committee under Labor Minister Ravindra Verma to investigate statutory imposition of participation. The Verma Committee in 1978 duly recommended a statute on participation. This was hotly contested by employers' organizations, and the controversy led to inevitable delay. The fall of the Government in 1979 helped shelve the proposal for statutory participation once more. In 1980, the new government preempted any move in this regard by appointing the Sachar Committee to go into the whole question of company governance. Workers' participation was one of the issues. The committee did recommend compulsory participation, but with a condition that at least 51 per cent of the total employees of an enterprise votes in favor of such participation (Sen, 2010: 379).

Unable to make much progress on these controversies, the Government announced on 31 December 1983 yet another scheme for shop councils and plant councils. It was billed as a new comprehensive scheme for workers' participation in central PSUs, but excluded departmental undertakings such as the railways and post and telegraphs. This scheme would ordinarily be two-tier, like the 1975 scheme but, if the Government so ordered, could be extended to the board level, with worker directors. Hence, it could be referred to as a three-tier scheme. It was largely a modified version of the 1975 scheme. The issues were more comprehensive than in the 1975 scheme.

Virmani (1988) found in his investigations that the scheme was not even circulated properly by the public sector units (PSUs), and it was left to one of the major central union organizations to circulate it among workers and unions. Bisht (1986) found that in the early 1980s, the three-tier scheme was practiced in just four PSUs and the two-tier scheme in eight. His study also indicated that the representation system was extremely varied. Office bearers of recognized unions were on the forums in some PSUs, but in others representation was based on workers' seniority, sectional representatives from among workers or elected representatives in a few.

The final step in the rather prolonged introduction of participation was taken in 1990, when the new government drafted a Participation of Workers in Management Bill, and circulated it among chambers of commerce and major unions for comments. The Annual Labor Conference that year had an almost single-point agenda--statutory participation. The structure of the participative scheme and the issues were no different from those of the 1983 scheme. But a major improvement was that persons representing "the workmen shall be elected by and from amongst the workmen of the industrial establishments, by secret ballot or nominated by the registered trade unions." The term of the councils was extended to three years and penal provisions for non-compliance added, as is common to most Acts. Board-level participation was mandatory, and the number of workmen and non-workmen would together constitute 25 per cent of the total board strength. This was also an improvement on the existing worker director scheme. A monitoring agency to review the progress of implementation was included in the Act. This scheme too suffered the sad dilemma of its predecessors, though, and before it could be passed, the non-Congress government fell. Interestingly, the new Government did not formulate any new schemes on participation, although the appropriate noises on workers' participation were made in both the Eighth and Ninth Plan approach documents. Obviously, the economic developments of 1991 and the new economic regime that it ushered in were incompatible with socialist ideas of workers' participation (Sen, 2010: 381).

Current Scenario

Since then, governments have come and gone but have generally been either silent or inactive in the matter of workers' participation, except marginally. For instance, India and the European Union (EU) entered into a Joint Action Plan in 2006 for a policy dialogue and cooperation in the fields of employment and social policy. In line with this plan, the Ministry of Labor and Employment signed a Memorandum of Understanding (MoU) with the European Commission to strengthen dialogue and exchange of views and information on issues of common interests within the areas of employment. Social policy such as skills training and employment, social security, occupational health and safety, workers' participation in management and other relevant issues were identified jointly. The structured dialogue was to consist of exchange of experience, best practice, views and information on topics of common interest, trends and policy developments related to the above areas. As a part of this structured dialogue, it was agreed to organize a joint seminar on mutually identified issues every year. Accordingly, the first seminar on skill development and training was held in New Delhi in November 2006. The second seminar on social security and social protection was held in Lisbon, Portugal, in September 2007. The third seminar on employment relations and resolution of conflicts held in New Delhi in September 2008, focused on trends in employment relations and social dialogue, collective bargaining, workers' participation in management and challenges, strategies and best practices in labor dispute resolution. However, the background paper for the last seminar still cited the history of participation in India up to the time of the 1990 Bill (http://labour.nic.in/lc/Indo-EU/ seminarSep22-23-08.pdf).

Government of India after nearly 26 years amended the Industrial Dispute Act, 1947 through its Amendment Act, 2010, which has now come into force with effect from 15.09.2010 vide its Notification No. S.O. 2278(E) dated 15.09.2010. The amendment brought a provision stating that every industry employing 20 or more workmen is now under legal obligation to constitute and have grievance ventilating machinery in place in the organization to resolve the workers dispute at the final level. Earlier it was not legally essential. The related provisions which were brought in the ID Act in 1984 were enforced.

Conclusion

The effective conditions for workers' participation in management can be viewed from two perspectives: micro as well as macro. It is difficult to achieve macro-level changes within a short time. But in the present situation, micro-level changes would not be difficult to bring. Participative management has basic contradictions--in terms of diversity of goals and role-conflict among government, management and union. In the public sector where government is managing the industry, the schemes of workers' participation in management can be fruitfully implemented. But in the private sector where the contradiction in terms of diversity of goals and role-conflict remains, unless the participating groups, namely, employers, managers and workers adopt the necessary value orientation, attitude and behavior pattern to understand the philosophy of participation, implementation of schemes of workers' participation in management remains a unresolved question.

Facing the urgent problems of our time, participative machinery offers immense scope simply because it recognizes the obvious truth that the success or failure of an enterprise depends on the people in it. PSUs are now required to mandatorily follow the provisions as envisaged in the above said directives. It is expected that this would further give a boost to the scheme.

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Pramod Mohan Johri is Chief General Manager (HR & Adm), Goa Shipyard Limited e-mail: jpmohan@goashipyard.com
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