MBA HR02 Unit III Industrial Relation and labour Enactments

UNIT III TECHNOLOGICAL CHANGE IN IR- -

Employment Issues

1. 2. 3. 4.

Multi- Professional E-recruitment recruitment & Selection Procedure Training & Development factors improves & requirement increases 5. % layoff & retrenchment r etrenchment increases 6. Jobs become intellectual 7. Body Shopping Body shopping is the practice of consultancy firms recruiting information technology workers in order to contract their services out on short-term bases. Regarded as legitimate consultancy by both the companies that practice it and by the people employed, body shopping is disparaged by those IT services companies in India that assert that they provide real services (such as software development) development) rather than t han the "sham" of merely farming out professionals to overseas companies. Also we can say BODY SHOPPING is like OUTSOURCING Outsourcing The practice of a company hiring a different company to supplement its services at a lower l ower cost. For example, a company may outsource its accounting to another firm, which would then prepare and provide appropriate statements for the company. Likewise, an automobile manufacturer may buy auto parts from another company and use them to make its own cars. Companies outsource in order to reduce their costs and thereby reduce the prices they charge for their goods and services. The practice is somewhat controversial, especially as some companies in the developed world outsource to firms in other, often developing nations. Critics contend that this drives jobs out of the home country, while proponents argue that this benefits consumers 8. Business Alliances

Prof. Amit Kumar

Faculty Management

A business alliance is an agreement between businesses, usually usually motivated by cost reduction and improved service for the customer. Alliances are often bounded by a single agreement with equitable risk and opportunity share for all parties involved and are typically managed by an integrated project team. t eam. An example of this is code sharing in airline alliances. There are five basic categories or types of alliances: • • • • •

Sales alliance Solution-specific alliance Geographic-specific Geographic-specific alliance Investment alliance Joint venture alliance

In many cases, alliances between companies can involve two or more categories or types of alliances. A sales alliance occurs when two companies agree to go to market together to sell complementary products and services. A solution-specific alliance occurs when two companies agree to jointly develop and sell a specific marketplace solution. A geographicgeographicspecific alliance is developed when two companies agree to jointly market or co-brand their products and services in a specific geographic region. An investment alliance occurs when two companies agree to join their funds for mutual investment. i nvestment. A joint venture is an alliance that occurs when two or more companies agree to undertake economic activity together Management Strategies Corporate restructuring a. BPRE b. VRS c. participation of employees d. Planning for change well in advance e. Protecting employee interest f. Sharing benefits of change a. BPRE Business process re-engineering is a business management management strategy, originally pioneered in the early 1990s, focusing on the analysis and design of workflows and processes within an organization. BPR aimed to help organizations fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors. In the mid-1990s, as many as 60% of the Fortune 500 companies claimed to either have Page 1

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initiated reengineering efforts, or to have plans to do so. BPR seeks to help companies radically restructure their organizations by focusing on the ground-up design of their business processes. According to Davenport (1990) a business process is a set of logically related tasks performed to achieve a defined business outcome. Re-engineering emphasized a holistic focus on business objectives and how processes related to them, encouraging full-scale recreation of processes rather than iterative optimization of sub processes. Business process re-engineering is also known as business process redesign, business transformation, or business process change management.

The role of information technology

Information technology (IT) has historically played an important role in the reengineering concept. It is considered by some as a major enabler for new forms of working and collaborating within an organization and across organizational borders. Early BPR literature literature identified several several so called disruptive technologies that were supposed to challenge traditional wisdom about how work should be performed. •

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Shared databases, making information available at many places Expert systems, allowing generalists to perform specialist tasks Telecommunication Telecommunication networks, allowing organizations to be centralized and decentralized at the same time Decision-support Decision-support tools, allowing decisionmaking to be a part of everybody's job

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Automatic identification and tracking, allowing things to tell where they are, instead of requiring to be found High performance computing, allowing onthe-fly planning and re-visioning

In the mid 1990s, especially workflow management m anagement systems were considered as a significant contributor to improved process efficiency. Also ERP (Enterprise Resource Planning) vendors, such as SAP, JD Edwards, Oracle, PeopleSoft, positioned their solutions as vehicles for business process redesign and improvement. b. Voluntary Retirement Scheme (VRS)

In the present globalised scenario, right sizing of the manpower employed in an organisation has become an important management strategy in order to meet the increased competition. The voluntary retirement scheme(VRS) is the most humane technique to provide overall reduction in the existing strength of the employees. It is a technique used by companies for trimming the workforce employed in the industrial unit. It is now a commonly method used to dispense off the excess manpower and thus improve the performance of the organisation. It is a generous, tax-free severance payment to persuade the employees to voluntarily retire from the company. It is also known as 'Golden Handshake' as it is the golden route to retrenchment. In India, the Industrial Disputes Act,1947 puts restrictions on employers in the matter of reducing excess staff by retrenchment, by closures of establishment and the retrenchment process involved lot of legalities l egalities and complex procedures. Also, any plans of retrenchment and reduction of staff and workforce are subjected to strong opposition by trade unions. Hence, VRS was introduced as an alternative legal solution to solve this problem. It allowed employers including those in the government undertakings, to offer voluntary retirement schemes to off-load the surplus manpower and no pressure is put on any employee to exit. The voluntary retirement schemes were also not subjected to not vehement opposition by the Unions, because the very nature of its being voluntary and not using any compulsion. It was introduced in both the public and private sectors. Public sector undertakings, however,





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Due to recession in the business. Due to intense competition, the establishment becomes unviable unless downsizing is resorted to. Due to joint-ventures with foreign collaborations. Due to takeovers and mergers. Due to obsolescence obsolescence of Product/Technology. Product/Technology.

Though the eligibility criteria for VRS varies from company to company, but usually, employees who have attained 40 years of age or completed 10 years of service are eligible for voluntary retirement. The scheme applies to all employees including workers and executives, except the directors of a company. The employee who opts for voluntary retirement is entitled to get forty five days emoluments for each completed year of service or monthly emoluments at the time of retirement multiplied by the remaining months of service before the normal date of service, whichever is less. Along with these benefits, the employees also get their provident fund and gratuity dues. Compensation received at the time of voluntary retirement is exempt from tax under section 10 (10C) of the Income Tax Act, 1961 up to the prescribed amount upon fulfilling certain stipulated conditions. However, the retiring employee should not be employed in another company or concern belonging to the same management.

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Some companies offers very attractive package of benefits to the employees who opt for VRS. For example, the VRS scheme may also include providing counselling to employees about their future; managing of funds received under the scheme; offering rehabilitation facilities to them, etc. A company may make the following announcements while implementing a voluntary retirement scheme:

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The companies can frame different schemes of voluntary retirement for different classes of their employees. However, these schemes have to conform to the guidelines prescribed in rule 2BA of the Income-tax Rules. The guidelines for the purposes of section 10(10c) of the Income-tax Act have been laid down in the rule 2BA of the t he Income tax Rules. The guidelines provide that the scheme of voluntary retirement framed by a company should be in accordance with the following requirements, namely : 

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It applies to an employee of the company who has completed ten years of service or completed 40 years of age It applies to all employees (by whatever name called), including workers and executives of the company excepting Directors of the company The scheme of voluntary retirement has been drawn to result in overall reduction in the

The amount receivable on account of voluntary retirement of the employees, does not exceed the amount equivalent to one and one-half months salary for each completed year of service or monthly emoluments at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannuation. In any case, the amount should not exceed rupees five lakhs in case of each employee, and The employee has not availed in the past the benefit of any other voluntary retirement scheme.

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The reasons behind downsizing the organisation. The eligibility criteria for voluntary retirement scheme. The age limit and the minimum service period of employees who can apply for the scheme. The benefits that are offered to t o the employees who offer to retire voluntarily. The rights of the employer to accept or reject any application for voluntary retirement. The date up to which the scheme is open. The income tax benefits and income tax incidence related to the scheme. It should also indicate that the employees who opt for voluntary retirement and accept the benefits under such scheme shall not be eligible in future for employment in the organisation.

Voluntary Retirement Schemes have been legally found to be giving no problem to employers, employees and their unions. But, the retrenchment plans of an organization must be compatible to its strategic plans. Its procedure and reasons for introduction must be discussed with all





scheme will be open. Also, existing employees might face insecurity because of fear of losing their job too. One of the possible drawback of the VRS is that the efficient employees would leave the company while the inefficient may stay back. Thus it is the /responsibility of the employer employer to motivate them them and remove their apprehensions and fears

Integrative Approaches to HRM

HRM policies,

HR Utilisation & Compensation,

Strategies,

Interaction b/w Employee &

Response of Trade Unions

Fear of losing jobs Fear of losing value among members of an organisation Fear of under going training Fear of losing comfort in an organisation Fear of losing bargaining power against employer HRM & IR

Interaction among Actors of IR & modify HR policy

Sound/Unsound Relations

International Dimensions of IR

In Holland most of employees belongs to work councils and play less role in trade Unionism

HRM: It is an art of procuring, developing & maintaining competent workforce to achieve to goals of an organisation in an effective and efficient manner.

In Scotland there is no-Unionism, instead of that there is governance procedure to enable the employee to file complaints

IR

Japan have company based unions.

Industrial relation

means the relationship between employers and employees in course of employment in industrial organizations.

In France large companies are oblige by law to spend a certain % of their annual turnover on employee training.

How HRM contribute in IR by following ways

In UK in union right to be recognised was until, the late 1990's

By QWL Diagnosis of problems & design of intervention to bring out the necessary changes Proper communication programme Participative decision making Training Worker performance appraisal Counselling Labour Flexibility Analysis Making an efforts to reduce the gap in b/w workers & mgt.

Approaches to HRM

1. System Approach 2. Contingencies 1. Systems Approach Since 1950 researchers began to look at organisations or ganisations from a systems systems viewpoint. viewpoint. In In -1951We -1951We i ne r ’s pioneering work on cybernetics developed concepts of systems control by information feedback. He described an adaptive system as mainly dependent upon measurement and correction through feedback Later Ludwig Von





the systems approach. The main elements of systems approa roach ar are as follo llows —( —( i ) A n o r g a n i s a t i o n i s a u n i f i e d a n d p u r p o s e f u l s y s t e m c o n s i s t i n g o f s e v e r a l interconnected, interaction and interdependent parts. (ii)The parts or components of a system are called sub-systems. E a c h s u b - s y s t e m inf influences the other subsystems and the system as a whole. Different subsystems are tied together into an organic whole through goals, authority flows, resource flows and information flows. (iii)The position and function of each sub-system and can be analysed and u n d e r s t o o d only only in rela relatio tion n to to the the othe otherr sub sub-system to the organisation as a whole. Similarly, the organisation as a system can be analysed and understood only by reference to its sub-systems.

The reaction or response of the environment to the output is known as feedback. Feedbacks useful in evaluating and improving the functioning of the system. Therefore, feedback is the key to system control. As an open system, an organisation has to adapt its structure and processes to the environmental changes, which affect its internal functioning. In other words, an an organisation has to be a steady state and in a state of dynamic equilibrium in relation tothe external environment. A steady state means internal equilibrium and stability. When an organisation’s functioning is temporarily disturbed (say, due to power shortage) it may strive to maintain balance and regain its original position. However, if the power shortage becomes a - regular phenomenon, it may have to modify its production schedule or install power plant or adopt any an y other adaptive response. It has to move from its original state toa new state of equilibrium, i.e., dynamic equilibrium.

(iv)Each sub-system derives its strength by its association and interaction with the other subsystems. As a result the collective contribution of the organisation is greater than the aggregate of individual contributions of its subsystem. This is known kno wn as syner synergy gy

Thus, organisations use maintenance(for steady state) and adaptive (for dynamic equilibrium) mechanisms in order to ensure their survival and growth.

(v) Every system has a boundary that separates it from its e n v i r o n m e n t . T h e bo boundary • determines which parts are internal to the organisation and which are external. For instance, employees are within the boundary whereas creditors and customers are external to a business firm.

(i)Some systems tend to disintegrate to dissipate their e n e r g y a n d t o b e c o m e in inactive. This tendency is called entropy. On the other hand, other systems have the tendency (called negative entropy) towards order, activity, perpetuation, etc. These are able to generate the required energy and surplus to sustain themselves.

(v)Systems are of two types. An open system continually interacts with its e n v i r o n m e n t (the (the force forcess lyi lying ng outs outsid idee it) it) wher wherea eass a closed system is self contained and isolated from the environment.

(ii)Organizations operate on the principle of equi-finality, which means t h a t t h e y have have severa severall alte alterna rnativ tivee way wayss of of doin doing g the same goal. Different initial conditions and paths are permissible to reach a single final state. Similarly, a given initial condition to state may be adopted to reach different final states.

(vi)A business enterprise is an open and dynamic system. It draws inputs (raw materials, machinery, labour, finance, information etc.) from its environment. It converts these inputs

2. Contingency Approach The contingency approach is a relatively new approach to organisation and management. It is





concepts of earlier approaches to real life situations. They found that the concepts and techniques highly effective in one situation failed to work in other situations. The basic theme of the contingency approach is that there is no single best way of managing applicable in all situations. The best solution is the one that is responsive to the peculiarities of the given situation. Significant differences exist between one situation and others. Therefore, management should deal with different situations in different ways. In other words, the effectiveness of any technique is contingent on the given si t ua t io n. Th e co nd i t i on s an d co complexities of the situation determine which approach is applicable and effective. The approach or technique should be a match or ‘fit’ between the situational variables and management variables. It is the responsibility of management to analyze the contingencies or conditions peculiar to each situation and then choose the right ri ght approach to deal de al with wi th it. Conting Contingency encyapproac approach h rejects rejects unive universa rsality lity of of management management concept. It appeals appeals to common sense. But Bu t it is much more than common sense. It requires the ability to analyse and diagnose a managerial situation correctly. It also requires knowledge and understanding of different principles, techniques and styles of management. Use of contingency approach is not possible without the ability to match the management management knowledge and skills to the demands of the given situation The main features of the contingency approach approach are as follows — (i)Management is entirely situational. The application and effectiveness of any technique is contingent on the situation. In other words, the c o n d i t i o n s a n d compl complex exit ity y of the the situ situat atio ion n determine which measure or technique is applicable and effective. ( i i ) M a n a g e m e nt nt s h o u l d , t h e r e f o r e m a t c h or ‘fit’ its approach to the requirement o f t h e particul particular ar situatio situation. n. To be effectiv effective, e, managem management ent

e n v i r o n m e nt nt i t s h o u l d s h a r p e n i t s diagnostic skill so as to anticipate and c o m p r e h e n d t h e envir nviro onmen mental tal ch change nges. (iv)Managers should understand that there is no one best way to manage. T h e y m u s t not not con consid sider er manag manageme ement nt princ principle ipless and techniques universal. Several examples can be given to illustrate and explain the contingency approach. approach. For example there are several forms of organising work. The functional structure is the t he most common. But in a dynamic environment, matrix structure may be more appropriate because of the need for sharing authority and power. The choice of the form of organisation should be made according to to the requirements of the enterprise. Similarly several incentivesmone moneta tary ry and and non non-m -mon onet etar ary y-are avail av ailabl ablee for fo r moti mo tivat vatin ing g employees. The choice of motivational moti vational technique should be based on the needs and expectations of the people to be motivated. To take another example, an effective leader should change his/her style to match the given situation. Thus the contingency approach has applicability and usefulness for all the t he functions of management. Contingency approach may be viewed as ‘if and ‘then’ approach as shown below. ‘If represents environmental or situational variables, which are independent.’ Then represents management management variables (concepts, principles, and techniques) which are dependent on the environment. : In order to operationalise the contingency approach, approach, managers have to take four sequential steps :(i)analyse and understand the situation, (ii)study and examine the validity of various concepts, principles and t e c h niques niques to the situation situation at hand, hand, (iii)make the right choice by matching the technique to the situation, and ( i v ) i m p l e m e n t t h e c h o i c e . Tom Burns. G.W.Stalker, Joan Woodward. James Thompson, Paul Lawrence, Jay Lorsch. JayGalbraith and other pioneers have made significant contributions to the development of con-tangency







influence of technology on organisation structure of about100 British firms during the 1960s. She classified the technology adopted by these firms into three types- units of small batch production, mass or larger batch production, and continuous process production. She found that span of control, interpersona! relationships, ratio of man-agers to non managers, participation in decision making, use oi committees and other structural aspects of these firms differed according to the type t ype of the technology used. Lawrence and Lorsch also found empirically that organisations functioning in a complex environment adopted a higher degree of differentiation and integration than those working in a simple environment. Jay Galbraith revealed that the amount of information required by an organisation depended on the level of uncertainties, interdependence and adaptation mechanisms.

MBA HR02 Unit III Industrial Relation and labour Enactments

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