Examination Paper: Human Resource Management
5
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Industrial Relations
Section A: Objective Type (30 marks)
•This section consists of True and False & Short Answer type questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
True and False:
1. Central Board of Workers Education (CBWE) was set up in 1986.
2. The joint Departmental Councils are encouraged to hold annual meetings, a scheme which
was initiated in 1970.
3. The lockout of the pilots was lifted from 3rd November, 1974.
4. The Employers federation of India formed in 1936.
5. Indian Jute Mills Association (IJMA) was formed in 1887.
6. All India Trade federation was established in 1921.
7. In India, the foundation of modern industry was laid between 1850 and 1860.
8. HMS stands for Hind Maha Sabha.
9. A feature of Indian trade unionism is not the multiplicity of unions.
10. Standing Orders may provide as to who should enquire.
Part two:
1. Who are ‘Blue Collor’ workers?
2. What are the basic causes of ‘Grievances’?
3. Write a note on ‘Payment of Gratuity Act, 1972’.
4. Explain ‘Walker’s Model’ for worker’s participation in management.
END OF SECTION A
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
Section B: Caselets (40 marks)
•This section consists of Caselets.
•Answer all the questions.
•Each Caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
(A)HISTORY OF THE FIRM:
Bombay Electricals was started in 1940 by Mr. Desai, a refrigeration engineer, as a proprietary company.
In 1941 he ran short of money and approached Mr. Khanna, Chairman of a large group of companies, for
help. Mr. Khanna decided to invest capital in the company and thereby obtained 75% control. The
company was later registered in 1945 as a Public Limited company but management was left all this time
in the hands of Mr. Desai. Until 1947 the company showed substantial losses because Mr. Desai started a
number of new product lines but did not stick to any long enough to establish either the production or the
markets. Nor did he make any study of the existing markets or production in the country before
introducing any of the products. This was a period in which the company launched and finally gave up a
number of products all of which resulted in severe losses. In 1947 two senior offices from the group were
brought into Bombay Electricals Company. Mr. Jain, an engineer by qualification, had served the Group
for twenty years and was appointed Works Manager. Mr. Sharma who had also been with the Group for
18 years was made Finance and Sales Manager. Within six months after Jain and Sharma joined the
company, Mr. Desai decided to retire. Mr. Jain was made General Manager (Works) and Mr. Sharma,
General Manager (Finance and Sales). At this stage management of the company rested with a part-time
Chairman, Mr. Khanna, who was also the Chairman of the parent Group, and with the two General
Managers. There were six superintendents for each of the manufacturing departments plus a sales
manager and an accountant. In 1949 the company took two decisions: (1) to suspend manufacturing all
products except those which could be manufactured by mass production methods, and (2) not to compete
with the small scale or cottage industry in any of its production lines. They agreed to concentrate only on
the manufacture of refrigerators and air conditioners. In the decade between1950-60, the company made
impressive progress and sustained a steady growth in production and in domestic and export sales. The
following figures show the employment and net income.
Year ending March Employment Net income in Lakhs
1947
1950
1960
500
750
3500
150.00
250.50
925.00
(B)FINANCIAL STATUS:
The company’s financial and cost position had deteriorated markedly between1958-1960. The rate of
equity divided declared was calculated by the company as 20% in 1956, 1957 and 1958; to 0.5 lakh in
1960. In 1960 if it had not been for 10 lakhs on profit on import entitlement and 18.50 lakhs on ‘other
income’, the balance available for equity dividends would have been a negative figure. The short-term
financial position of the company in March 1960 was tight and it faced a stringent cash position. The
costs on inventories too were high, imposing strain on the financial position. The finished stock levels in
March 1960 were equipment to a little over eight weeks production; in process stocks were equivalent to
about ten weeks production; and raw materials stocks were sufficient for about 15 weeks production. The
table below gives the expenditure on labour between 1958-1960:
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
Year ended
March
Salary and
wages per
employee
Profits bonus per
employee
Other
expenditure per
employee
Total per
employee
1958
1959
1960
5344
5131
5434
400
346
286
217
317
576
6021
5793
6296
Separating these figures for workers from clerical staff, the cost per worker was Rs. 6,000 per year. The
comparable figures of earnings in other industries averaged Rs. 1,400 in 1960. Thus workers’ earnings in
Bombay Electricals were nearly four times the industry average. Furthermore, the earnings of the
employees in the company increased at an average of 13% between 1958 and 1960.
During the same period the figure below compares the physical output and average real earnings
(the figure of the real earnings is reached by allowing for the shift in consumer price index for the period).
Year Index of physical output per
employee earnings
Index of average real earnings
per employee
1958
1959
1960
100
133
123
100
120
108
(C) TECHNOLOGICAL STATUS:
When, in 1948, Bombay Electricals Limited decided that the company would not compete with the small
scale or cottage industry and would manufacture only those products which could be manufactured
economically by mass production techniques, it suspended the manufacture of small tools, at that time a
profitable product. The exclusive products on which the company concentrated were refrigerators and air
conditioners. Consequent upon the technical decisions to manufacture on mass production lines, highspeed
and special purpose machinery was gradually installed in the plant. The decision resulted also in
the setting up of an industrial engineering (work study) department and a vast development department.
The jobs were time-studied and after negotiations with the union, standards were established and these
were used in developing a comprehensive incentive scheme. In all cases workers achieved the targets and
often exceeded them. The technology of manufacturing refrigerators and air conditioners had remained
reasonably stable. Between1950-60 three models were introduced and each had required a change of
approximately 10-30 per cent parts. This implied that the basic processes had remained fairly constant and
the bulk of innovation had taken place in the methods of production. It was during this period that high
speed machinery and mass producing methods and equipment replaced slower and hand operated
machinery. As a result of the technological changes the output per employee was comparable to similar
production units abroad. These technological innovations have had direct bearing on the man-machine
relationships. Primarily these are two: one, the operator became an attendant to the machine as against the
skilled craftsman who he was before. His activities were governed by the speed of the machine and his
work was controlled by the technology rather the skill he could have exercised to improve the production;
two, the fictionalization of jobs on high speed, special purpose equipment used for manufacturing process
deprived him of his association with the totality of operations. The task became “meaningless’ from the
point of view of the operator. His concern therefore became one of earning a high incentive rate and for
job satisfaction he had to seek involvement elsewhere. The incentive scheme covered both direct and
indirect employees. Incentive earnings were often 100-200% of the basic earnings. The minimum take
home pay packet in the company was about Rs. 250.00 per month. At the same time, as the earnings
increased, the need to earn higher incentive became less imminent. The needs shifted from the economic
to the social levels. As would be discussed later, the alternative for the satisfaction of social needs was
denied in the work situation. The problem of social needs snowballed. As the earnings increased, the
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
management decided to recruit workers from middle class families in preference to the traditional
working class population. The purpose for doing this was to obtain an educated workforce which would
support the company’s programme of rapid expansion and mechanization. To a large extent this policy
was successful in the context of increased output.
(D) ADMINISTRATIVE POLICY AND INDUSTRIAL RELATIONS:
As mentioned earlier the active management of the company rested with the Chairman and the two
General Managers. The Chairman visited Bombay almost every month. He believed in giving
considerable freedom of action to the local management. He saw his role as a philosopher and guide to
the local management and chose to take only broad policy decisions in matters of finance, sales, industrial
relations, employment etc. He made it known that the General Managers must evaluate his comments in
the light of the local conditions and should not regard his remarks as mandatory. He expressed his
management philosophy as “finding the right man for the job and then leaving him free to do it”. He
advocated the same philosophy for the General Managers. The Chairman during his visits spent a lot of
time individually with both the General Managers, but interacted more with Mr. Jain, General Manager
(works). Most of the discussions were held outside the office while they had lunch together or went for
morning walks or other simple, social occasions of this kind. Neither believed in the formal procedure of
writing down their decisions and preparing formal minutes. Very occasionally the Chairman and both the
General Managers discussed the policy or other issues together. This was party because the two General
Managers had shown visible signs of strained work relations between them although they were otherwise
friends. Both, the Chairman and the General Manager (works), believed in establishing personal
relationships with everyone in the company and both were highly regarded by employees. The General
Manager (works) knew at least half the workers in the factory by their first names and often went to their
houses during festivals or whenever an occasion demanded. Most employees felt free to approach him
with their personal problems. Invariably helped them even with money, sometimes from his own pocket.
Employees knew him as a kind person who had in mind their personal well-being as much as that of the
company. He had expressed his views by saying that Bombay Electricals should be seen as a company
that belongs to all those who contribute to its growth. He felt sure that the only problem was to produce
more and everyone would share its gains, but none should ever stop production; whatever problems
existed would be resolved by discussions among responsible people.
(E) INDUSTRIAL RELATIONS:
Bombay Electricals Limited Employees Trade Union was organized in 1946 by a well known trade union
leader who was also a member of the AITUC executive Committee. The union was not recognized by the
management in spite of several representations by the President. In 1951, as a protest against discharge of
four employees in the works without proper enquiry, the workers left their departments and assembled to
listen to an address by the union President. The General Manager (works) came out of his office and also
declared that he wished to address the workers. And he did. This was the first time that the General
Manager (works) and the union president met each other. The employees went back to work when the
management agreed to hold an enquiry by a joint team of representatives of the management and the
union. Consequent upon the enquiry two of the four employees were reinstated by the company. In the
meantime the union elected another President for their union who was also an experienced trade union
leader as well as a Member of Parliament on a communist party ticket. Although the union was not
officially recognized by the management, the two met together regularly and in 1955 signed a
comprehensive agreement for five years. This agreement covered the following:
•Recognizing the union as the sole bargaining agent for the employees and allowing them facilities
to collect union dues inside the factory;
•Wage scales, dearness allowance and other benefits;
•Incentive scheme
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
•A network of consultative committees at departmental, works and top union management levels;
and
•Grievance procedure
Events after the agreement showed the following characteristics:
1. There were frequent meetings between the management at the departmental and works levels
but invariably the settlement took place only in the union’s meetings with the General Manager
(works).
2. Most departmental promotions and transfers involved consultations with the union and the
departmental heads seldom took a decision concerning an employee without formally or
informally consulting the union.
3. If the union disagreed with certain issues they quickly resorted to demonstrations within the
factory or stoppage of work. The Labour Welfare Officer was manhandled outside the factory.
The officer concerned left. On all these occasions the General Manager (works) solved the
dispute.
4. Inspite of a bonus formula traditionally used by the management, the employees agitated every
year when bonus was declared and they invariably got more bonus or loans after negotiations
with the General Manager (works).
5. Some representative incidents below would illustrate one aspect of the relationship:
(a) A worker, found smoking near the paint shop, where smoking was not allowed, complained that the
officer concerned manhandled him and issued a charge sheet even when he was not smoking. He claimed
that the officer was prejudiced and wanted him out of the department. Employees walked out of their
departments and demonstrated for withdrawal of the charge sheet. The General Manager (works) and the
union Secretary resolved this matter by everyone going back to the departments and the company
withdrawing the charge sheet.
(b) A peon was found asleep on his job and was charge sheeted. Repeated agitation led to withdrawal of
the charge sheet after top level discussions.
(c) At bonus time every year there were demonstrations. Workers left their departments, surrounded the
senior officers and indulged in drum beating until a settlement was reached.
(d) At the same time the company carried out a programme of expansion with all the attendant changes in
the departments. No serious difficulty was faced by the company in introducing technology change or in
increasing productivity per worker.
(F) THE STRIKE
In 1960 when the bonus was declared, the employees agitated in the same as they did in previous years.
The difference between the offer made to workers and the quantum demanded by them was about Rs. 30/-
(thirty) per employee. Unlike other years, the negotiations failed and the employees gave 15 days notice
to go on strike. The matter was taken up for conciliation by the State Labour Commissioner but the
dispute could not be settled. On the appointed day, the strike began and six anxious months went by
before a settlement was reached.
This case raises some highly interesting and significant questions:
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
Questions:
1. Similar problems which caused this strike in 1960 were satisfactorily resolved in the past in Bombay
Electricals. Why could not the differences be settled in 1960?
2. Inspite of high earnings by employees, why did they choose to go on strike for a relatively small
difference of Rs 30/- in their demand preceding the strike?
Caselet 2
THE ORGANIZATION
Thomson and Richards, two technocrats from Holland, both in the age group of late 30s came as
consultants to Calcutta with French Company on a project assignment in 1940. They were quite
impressed with Indian culture and decided to settle down in India. Upon completion of their project, they
started their own company under the name Thomrich Pvt. Ltd. which manufactured agricultural
equipments. Encouraged by the performance of the company, they ventured into the manufacturing of
fertilizer manufacturing equipments in 1944 under the same banner. Their entrepreneurial skills and
success promoted them to diversify their business into manufacturing of lubricants in 1951, and
subsequently to electrical gadgets for industrial use in the year 1970. In the same year, they pioneered the
manufacturing of hovers at Chennai. In 1992, Thomrich Pvt. Ltd. entered the tractor segment and
established its plant at Gwalior, M.P. It entered into the tractor segment when another company KCP had
already established its reputation as a sole reliable brand. Unaffected by the competition, they started their
brand of tractors and soon, after three years they started manufacturing cultivators too. So far Thomrich
had a smooth sailing. With the coming of liberalization and globalization in the 1990s, Thomrich did not
remain untouched by the surmounting pressures of MNCs venturing into the Indian market. This made
them sell one of their profit-making divisions, i.e., the fertilizer manufacturing to a leading Indian
business house, to concentrate on their core competency areas. To add to the woes, the rumours of
Elegators, the world’s No. 1 tractor manufacturer foraying into Indian market gave sleepless nights. Being
protective, the company decided to enter in a collaborative venture with Wooge of France, the world’s
No. 2 tracror manufacturer, and rechristened itself to Thomrich-Wooge Pvt. Ltd. In the year 2002, they
improvised the then existing model in terms of efficiency by reducing its cycle-time, thereby becoming
No. 1 in the country. The company considered this product as flagship product, although it had not been
takes the place of KCP Tractors, despite improvisation in its efficiency. The company was purely
technocrat in nature with an annual turnover of Rs. 10,000 crores. With
Thomrich-Wooge Pvt. Ltd. contributing Rs. 125 crores to it. The Gwalior unit had a total strength of 308
employees, which included 94 executives and supervisors and the rest 214 as workmen. All the
executives were engineering graduates with 50% of them as locals. The workmen were ITI qualified with
60% of them as Weldors, 10% as Mechanics and 30% as Fitters. 40% of the workmen were from
Maharashtra and the rest were from Madhya Pradesh. K. Vaswani, a 54 year old technocrat who had
succeeded Ranjan Khare when he retired after serving this unit for 3 years, headed the Gwalior unit as
Chief Executive (C.E.). Vaswani had been with the company from 1972 to 1993 and had left to join
Conclave Ltd, an MNC, as Chief Executive. He rejoined Thomrich-Wooge Pvt. Ltd., in June 2004.
Vaswani did not seem to be different from the earlier CEs who had ingrained an employee-friendly
culture in the organization. He regularly held meetings with employees irrespective of their levels and
also made frequent visits to the shopfloor to have face-to-face interaction with the workmen.
HR PROCESSES
Thomrich-wooge had a policy of recruitment in two phases. The corporate office at Calcutta, through
campus selection, recruited the engineering graduates and the Certificate and Diploma holders were
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
recruited independently at the unit level. The company did not encourage inter-unit transfers, although
there were a few need-based transfers to facilitate the employees’ and company’s operations. The
company had the policy of recruiting the graduate engineers at entry level and nurturing and grooming
them for higher positions. As a result, only the Thomrichians occupied all the top positions in all the units
of the organization. The company had a firm belief that the workers would always put their best efforts if
facilitated with good quality of work life and therefore, did not have the provision of monetary incentives.
They also believed that the incentive schemes would hamper the quality of products by compelling the
employees to pay more attention to quality rather than quality. Lured by the incentives they will somehow
try to sell the product without due consideration to the customer’s need. They felt that monetary
incentives can motivate an employee to a certain extent, and beyond that level it would fail to have any
impact on his efficiency. Rather, it would raise his expectations and unfulfilled expectations would lower
the morale of the employee. Nonetheless, the top management acknowledges and appreciated the
performance of workers from time to time. The company had a fixed wage / salary structure across all the
units in India. However, allowances varied from place to place. Thomrich-wooge had a performance
appraisal system based on management by objectives (MBO). The top management would set the goals
and communicate it to the CEs who in turn would pass down to the HODs. They were given sufficient
time to speculate on its feasibility and once the feasibility was decided; the goals were frozen and
communicated to the employees. At every quarter, the superiors would discuss the performance with the
employees and pass on the ratings to HR departments. The expert committee consisting of 4-5 members
from various functional departments evaluated these ratings. These members knew all the employees who
were being evaluated, and then they re-rated them to reduce the inter-rater bias. The ratings of the
committee were final and were communicated to the respective superiors, which was then discussed with
the concerned employees. The superiors would also counsel the subordinates in order to redress their
grievances, if any. Decisions regarding promotions and rewards were made annually and were based on
quarterly performance appraisals. The company had a 2-tier system of training, one at the plant level and
other at the corporate level. It had its own Management Development Centre at Darjeeling where most of
the training programs were conducted for managers, incorporating prayers and yoga too. The company
did not have a separate budget for training, it was need-based. Every employee was required to undergo at
least 15 days of training every year. Since, multiskilling was practiced within assembly lines, the
employees were exposed to both technical as well as behavioural training. Most of the trainers engaged
by the company were outsiders. All the training programmes were thoroughly evaluated every quarter by
talking the feedback from the immediate superior. The company would administer psychometric
measures once in three years to appraise the potential of employees fro various functional areas. Once the
competence and aptitude was identified in an employee, he was groomed in that particular area by a
mentor.
The company had a recognized trade union, which was earlier affiliated to Bhartiya Mazdoor
Sangh (B.M.S) and was now enjoying an independent status. The union would place a charter of demands
before the management once in four years, which was followed by harmonious negotiations between the
two. As the management involved the workmen even in the market survey of the products, the union also
discussed the quality issues with the management. The company’s employment policies radiated a single
principle that they believed in people and that they were the most valuable assets for them. Employees
had the freedom to see any superior ant time without prior appointment. The company boasted of an open
communication system, total transparency, no-status barrier, security and sense of professional among the
employees, which was reflected in the unit not witnessing any strike or major indiscipline since its
inception. The company had also introduced “Prayaas”, an HR-initiative as a proactive measure to have a
competitive edge in the dynamic scenario. Prayaas involved OD interventions like cross functional team,
large-scale integration, kaizen, etc. All the employees in the group of 3-5 were asked to suggest changes
for the betterment of the unit. Subsequent solutions and action plans were also invited from the employees
and the consolidated suggestions were implemented which resulted into introduction of suggestion
schemes, wastage utilization and recycling of packaging material. Some of the brilliant ideas of the
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
employees were suitably recognized and widely circulated through in-house journals in all the units of
Thomrich.
CHALLENGES
Since 2002, the unit had seen 12% of executive turnover, which was earlier just 3%. This drew attention
of the top management who were confident of the high degree of employee-loyalty and believed that the
employees were emotionally attached to the unit. At this juncture, the HR Head, S. Abraham anticipated
trouble, as he feared that the turnover rate might increase in the wake of globalization and liberalization
with more and more MNCs offering lucrative packages and challenging assignments to the executives.
These firms were recruiting people at all levels, which made the employees feel that growth prospectus at
their units were rather slow. Moreover, employees had also become more risk talking and their varied
expertise encouraged them to experiment in new segments namely IT, Banking and BPOs. Though the
MNCs had 15-18 hours of working, but the changing orientation of employee made them feel that they
were handsomely compensated. S. Abraham apprehended further deterioration due to the influence of
Dollar Packages, which was unaffordable for Thomrich-Wooge Pvt. Ltd. The market conditions were
already tight with too many competitors, prices being down, customers becoming more demanding and
choosy, making the inputs scarce for the unit. Abhraham was considering the options of overcoming the
exodus of executives by increasing the efficiency with lesser input for which the company would have to
minimize its task force. This would tarnish its employee friendly image. The other was to increase the
profits by exploring new markets. The Indian market by now was already flooded with many players,
leaving the international market as the only option, which was equally a hard nut to crack. Abraham felt
trapped in a highly volatile situation, where he fumbled for a speedy and pragmatic remedy.
Questions:
1. Was the company’s decision to enter the tractor segment right, when KCP had already captured
the market?
2. Had you been Abraham, how would you tackle the present situation?
END OF SECTION B
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. What is inflation? Compare its role with money and the real earning of the Industrial workers.
Use appropriate data to justify your answer.
2. How can the bargaining affect the workers as well as the firm? “It is a method of wage fixation.”
Evaluate.
5
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Industrial Relations
Section A: Objective Type (30 marks)
•This section consists of True and False & Short Answer type questions.
•Answer all the questions.
•Part One questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
True and False:
1. Central Board of Workers Education (CBWE) was set up in 1986.
2. The joint Departmental Councils are encouraged to hold annual meetings, a scheme which
was initiated in 1970.
3. The lockout of the pilots was lifted from 3rd November, 1974.
4. The Employers federation of India formed in 1936.
5. Indian Jute Mills Association (IJMA) was formed in 1887.
6. All India Trade federation was established in 1921.
7. In India, the foundation of modern industry was laid between 1850 and 1860.
8. HMS stands for Hind Maha Sabha.
9. A feature of Indian trade unionism is not the multiplicity of unions.
10. Standing Orders may provide as to who should enquire.
Part two:
1. Who are ‘Blue Collor’ workers?
2. What are the basic causes of ‘Grievances’?
3. Write a note on ‘Payment of Gratuity Act, 1972’.
4. Explain ‘Walker’s Model’ for worker’s participation in management.
END OF SECTION A
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
Section B: Caselets (40 marks)
•This section consists of Caselets.
•Answer all the questions.
•Each Caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
(A)HISTORY OF THE FIRM:
Bombay Electricals was started in 1940 by Mr. Desai, a refrigeration engineer, as a proprietary company.
In 1941 he ran short of money and approached Mr. Khanna, Chairman of a large group of companies, for
help. Mr. Khanna decided to invest capital in the company and thereby obtained 75% control. The
company was later registered in 1945 as a Public Limited company but management was left all this time
in the hands of Mr. Desai. Until 1947 the company showed substantial losses because Mr. Desai started a
number of new product lines but did not stick to any long enough to establish either the production or the
markets. Nor did he make any study of the existing markets or production in the country before
introducing any of the products. This was a period in which the company launched and finally gave up a
number of products all of which resulted in severe losses. In 1947 two senior offices from the group were
brought into Bombay Electricals Company. Mr. Jain, an engineer by qualification, had served the Group
for twenty years and was appointed Works Manager. Mr. Sharma who had also been with the Group for
18 years was made Finance and Sales Manager. Within six months after Jain and Sharma joined the
company, Mr. Desai decided to retire. Mr. Jain was made General Manager (Works) and Mr. Sharma,
General Manager (Finance and Sales). At this stage management of the company rested with a part-time
Chairman, Mr. Khanna, who was also the Chairman of the parent Group, and with the two General
Managers. There were six superintendents for each of the manufacturing departments plus a sales
manager and an accountant. In 1949 the company took two decisions: (1) to suspend manufacturing all
products except those which could be manufactured by mass production methods, and (2) not to compete
with the small scale or cottage industry in any of its production lines. They agreed to concentrate only on
the manufacture of refrigerators and air conditioners. In the decade between1950-60, the company made
impressive progress and sustained a steady growth in production and in domestic and export sales. The
following figures show the employment and net income.
Year ending March Employment Net income in Lakhs
1947
1950
1960
500
750
3500
150.00
250.50
925.00
(B)FINANCIAL STATUS:
The company’s financial and cost position had deteriorated markedly between1958-1960. The rate of
equity divided declared was calculated by the company as 20% in 1956, 1957 and 1958; to 0.5 lakh in
1960. In 1960 if it had not been for 10 lakhs on profit on import entitlement and 18.50 lakhs on ‘other
income’, the balance available for equity dividends would have been a negative figure. The short-term
financial position of the company in March 1960 was tight and it faced a stringent cash position. The
costs on inventories too were high, imposing strain on the financial position. The finished stock levels in
March 1960 were equipment to a little over eight weeks production; in process stocks were equivalent to
about ten weeks production; and raw materials stocks were sufficient for about 15 weeks production. The
table below gives the expenditure on labour between 1958-1960:
Examination Paper: Human Resource Management
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IIBM Institute of Business Management
Year ended
March
Salary and
wages per
employee
Profits bonus per
employee
Other
expenditure per
employee
Total per
employee
1958
1959
1960
5344
5131
5434
400
346
286
217
317
576
6021
5793
6296
Separating these figures for workers from clerical staff, the cost per worker was Rs. 6,000 per year. The
comparable figures of earnings in other industries averaged Rs. 1,400 in 1960. Thus workers’ earnings in
Bombay Electricals were nearly four times the industry average. Furthermore, the earnings of the
employees in the company increased at an average of 13% between 1958 and 1960.
During the same period the figure below compares the physical output and average real earnings
(the figure of the real earnings is reached by allowing for the shift in consumer price index for the period).
Year Index of physical output per
employee earnings
Index of average real earnings
per employee
1958
1959
1960
100
133
123
100
120
108
(C) TECHNOLOGICAL STATUS:
When, in 1948, Bombay Electricals Limited decided that the company would not compete with the small
scale or cottage industry and would manufacture only those products which could be manufactured
economically by mass production techniques, it suspended the manufacture of small tools, at that time a
profitable product. The exclusive products on which the company concentrated were refrigerators and air
conditioners. Consequent upon the technical decisions to manufacture on mass production lines, highspeed
and special purpose machinery was gradually installed in the plant. The decision resulted also in
the setting up of an industrial engineering (work study) department and a vast development department.
The jobs were time-studied and after negotiations with the union, standards were established and these
were used in developing a comprehensive incentive scheme. In all cases workers achieved the targets and
often exceeded them. The technology of manufacturing refrigerators and air conditioners had remained
reasonably stable. Between1950-60 three models were introduced and each had required a change of
approximately 10-30 per cent parts. This implied that the basic processes had remained fairly constant and
the bulk of innovation had taken place in the methods of production. It was during this period that high
speed machinery and mass producing methods and equipment replaced slower and hand operated
machinery. As a result of the technological changes the output per employee was comparable to similar
production units abroad. These technological innovations have had direct bearing on the man-machine
relationships. Primarily these are two: one, the operator became an attendant to the machine as against the
skilled craftsman who he was before. His activities were governed by the speed of the machine and his
work was controlled by the technology rather the skill he could have exercised to improve the production;
two, the fictionalization of jobs on high speed, special purpose equipment used for manufacturing process
deprived him of his association with the totality of operations. The task became “meaningless’ from the
point of view of the operator. His concern therefore became one of earning a high incentive rate and for
job satisfaction he had to seek involvement elsewhere. The incentive scheme covered both direct and
indirect employees. Incentive earnings were often 100-200% of the basic earnings. The minimum take
home pay packet in the company was about Rs. 250.00 per month. At the same time, as the earnings
increased, the need to earn higher incentive became less imminent. The needs shifted from the economic
to the social levels. As would be discussed later, the alternative for the satisfaction of social needs was
denied in the work situation. The problem of social needs snowballed. As the earnings increased, the
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management decided to recruit workers from middle class families in preference to the traditional
working class population. The purpose for doing this was to obtain an educated workforce which would
support the company’s programme of rapid expansion and mechanization. To a large extent this policy
was successful in the context of increased output.
(D) ADMINISTRATIVE POLICY AND INDUSTRIAL RELATIONS:
As mentioned earlier the active management of the company rested with the Chairman and the two
General Managers. The Chairman visited Bombay almost every month. He believed in giving
considerable freedom of action to the local management. He saw his role as a philosopher and guide to
the local management and chose to take only broad policy decisions in matters of finance, sales, industrial
relations, employment etc. He made it known that the General Managers must evaluate his comments in
the light of the local conditions and should not regard his remarks as mandatory. He expressed his
management philosophy as “finding the right man for the job and then leaving him free to do it”. He
advocated the same philosophy for the General Managers. The Chairman during his visits spent a lot of
time individually with both the General Managers, but interacted more with Mr. Jain, General Manager
(works). Most of the discussions were held outside the office while they had lunch together or went for
morning walks or other simple, social occasions of this kind. Neither believed in the formal procedure of
writing down their decisions and preparing formal minutes. Very occasionally the Chairman and both the
General Managers discussed the policy or other issues together. This was party because the two General
Managers had shown visible signs of strained work relations between them although they were otherwise
friends. Both, the Chairman and the General Manager (works), believed in establishing personal
relationships with everyone in the company and both were highly regarded by employees. The General
Manager (works) knew at least half the workers in the factory by their first names and often went to their
houses during festivals or whenever an occasion demanded. Most employees felt free to approach him
with their personal problems. Invariably helped them even with money, sometimes from his own pocket.
Employees knew him as a kind person who had in mind their personal well-being as much as that of the
company. He had expressed his views by saying that Bombay Electricals should be seen as a company
that belongs to all those who contribute to its growth. He felt sure that the only problem was to produce
more and everyone would share its gains, but none should ever stop production; whatever problems
existed would be resolved by discussions among responsible people.
(E) INDUSTRIAL RELATIONS:
Bombay Electricals Limited Employees Trade Union was organized in 1946 by a well known trade union
leader who was also a member of the AITUC executive Committee. The union was not recognized by the
management in spite of several representations by the President. In 1951, as a protest against discharge of
four employees in the works without proper enquiry, the workers left their departments and assembled to
listen to an address by the union President. The General Manager (works) came out of his office and also
declared that he wished to address the workers. And he did. This was the first time that the General
Manager (works) and the union president met each other. The employees went back to work when the
management agreed to hold an enquiry by a joint team of representatives of the management and the
union. Consequent upon the enquiry two of the four employees were reinstated by the company. In the
meantime the union elected another President for their union who was also an experienced trade union
leader as well as a Member of Parliament on a communist party ticket. Although the union was not
officially recognized by the management, the two met together regularly and in 1955 signed a
comprehensive agreement for five years. This agreement covered the following:
•Recognizing the union as the sole bargaining agent for the employees and allowing them facilities
to collect union dues inside the factory;
•Wage scales, dearness allowance and other benefits;
•Incentive scheme
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•A network of consultative committees at departmental, works and top union management levels;
and
•Grievance procedure
Events after the agreement showed the following characteristics:
1. There were frequent meetings between the management at the departmental and works levels
but invariably the settlement took place only in the union’s meetings with the General Manager
(works).
2. Most departmental promotions and transfers involved consultations with the union and the
departmental heads seldom took a decision concerning an employee without formally or
informally consulting the union.
3. If the union disagreed with certain issues they quickly resorted to demonstrations within the
factory or stoppage of work. The Labour Welfare Officer was manhandled outside the factory.
The officer concerned left. On all these occasions the General Manager (works) solved the
dispute.
4. Inspite of a bonus formula traditionally used by the management, the employees agitated every
year when bonus was declared and they invariably got more bonus or loans after negotiations
with the General Manager (works).
5. Some representative incidents below would illustrate one aspect of the relationship:
(a) A worker, found smoking near the paint shop, where smoking was not allowed, complained that the
officer concerned manhandled him and issued a charge sheet even when he was not smoking. He claimed
that the officer was prejudiced and wanted him out of the department. Employees walked out of their
departments and demonstrated for withdrawal of the charge sheet. The General Manager (works) and the
union Secretary resolved this matter by everyone going back to the departments and the company
withdrawing the charge sheet.
(b) A peon was found asleep on his job and was charge sheeted. Repeated agitation led to withdrawal of
the charge sheet after top level discussions.
(c) At bonus time every year there were demonstrations. Workers left their departments, surrounded the
senior officers and indulged in drum beating until a settlement was reached.
(d) At the same time the company carried out a programme of expansion with all the attendant changes in
the departments. No serious difficulty was faced by the company in introducing technology change or in
increasing productivity per worker.
(F) THE STRIKE
In 1960 when the bonus was declared, the employees agitated in the same as they did in previous years.
The difference between the offer made to workers and the quantum demanded by them was about Rs. 30/-
(thirty) per employee. Unlike other years, the negotiations failed and the employees gave 15 days notice
to go on strike. The matter was taken up for conciliation by the State Labour Commissioner but the
dispute could not be settled. On the appointed day, the strike began and six anxious months went by
before a settlement was reached.
This case raises some highly interesting and significant questions:
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Questions:
1. Similar problems which caused this strike in 1960 were satisfactorily resolved in the past in Bombay
Electricals. Why could not the differences be settled in 1960?
2. Inspite of high earnings by employees, why did they choose to go on strike for a relatively small
difference of Rs 30/- in their demand preceding the strike?
Caselet 2
THE ORGANIZATION
Thomson and Richards, two technocrats from Holland, both in the age group of late 30s came as
consultants to Calcutta with French Company on a project assignment in 1940. They were quite
impressed with Indian culture and decided to settle down in India. Upon completion of their project, they
started their own company under the name Thomrich Pvt. Ltd. which manufactured agricultural
equipments. Encouraged by the performance of the company, they ventured into the manufacturing of
fertilizer manufacturing equipments in 1944 under the same banner. Their entrepreneurial skills and
success promoted them to diversify their business into manufacturing of lubricants in 1951, and
subsequently to electrical gadgets for industrial use in the year 1970. In the same year, they pioneered the
manufacturing of hovers at Chennai. In 1992, Thomrich Pvt. Ltd. entered the tractor segment and
established its plant at Gwalior, M.P. It entered into the tractor segment when another company KCP had
already established its reputation as a sole reliable brand. Unaffected by the competition, they started their
brand of tractors and soon, after three years they started manufacturing cultivators too. So far Thomrich
had a smooth sailing. With the coming of liberalization and globalization in the 1990s, Thomrich did not
remain untouched by the surmounting pressures of MNCs venturing into the Indian market. This made
them sell one of their profit-making divisions, i.e., the fertilizer manufacturing to a leading Indian
business house, to concentrate on their core competency areas. To add to the woes, the rumours of
Elegators, the world’s No. 1 tractor manufacturer foraying into Indian market gave sleepless nights. Being
protective, the company decided to enter in a collaborative venture with Wooge of France, the world’s
No. 2 tracror manufacturer, and rechristened itself to Thomrich-Wooge Pvt. Ltd. In the year 2002, they
improvised the then existing model in terms of efficiency by reducing its cycle-time, thereby becoming
No. 1 in the country. The company considered this product as flagship product, although it had not been
takes the place of KCP Tractors, despite improvisation in its efficiency. The company was purely
technocrat in nature with an annual turnover of Rs. 10,000 crores. With
Thomrich-Wooge Pvt. Ltd. contributing Rs. 125 crores to it. The Gwalior unit had a total strength of 308
employees, which included 94 executives and supervisors and the rest 214 as workmen. All the
executives were engineering graduates with 50% of them as locals. The workmen were ITI qualified with
60% of them as Weldors, 10% as Mechanics and 30% as Fitters. 40% of the workmen were from
Maharashtra and the rest were from Madhya Pradesh. K. Vaswani, a 54 year old technocrat who had
succeeded Ranjan Khare when he retired after serving this unit for 3 years, headed the Gwalior unit as
Chief Executive (C.E.). Vaswani had been with the company from 1972 to 1993 and had left to join
Conclave Ltd, an MNC, as Chief Executive. He rejoined Thomrich-Wooge Pvt. Ltd., in June 2004.
Vaswani did not seem to be different from the earlier CEs who had ingrained an employee-friendly
culture in the organization. He regularly held meetings with employees irrespective of their levels and
also made frequent visits to the shopfloor to have face-to-face interaction with the workmen.
HR PROCESSES
Thomrich-wooge had a policy of recruitment in two phases. The corporate office at Calcutta, through
campus selection, recruited the engineering graduates and the Certificate and Diploma holders were
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recruited independently at the unit level. The company did not encourage inter-unit transfers, although
there were a few need-based transfers to facilitate the employees’ and company’s operations. The
company had the policy of recruiting the graduate engineers at entry level and nurturing and grooming
them for higher positions. As a result, only the Thomrichians occupied all the top positions in all the units
of the organization. The company had a firm belief that the workers would always put their best efforts if
facilitated with good quality of work life and therefore, did not have the provision of monetary incentives.
They also believed that the incentive schemes would hamper the quality of products by compelling the
employees to pay more attention to quality rather than quality. Lured by the incentives they will somehow
try to sell the product without due consideration to the customer’s need. They felt that monetary
incentives can motivate an employee to a certain extent, and beyond that level it would fail to have any
impact on his efficiency. Rather, it would raise his expectations and unfulfilled expectations would lower
the morale of the employee. Nonetheless, the top management acknowledges and appreciated the
performance of workers from time to time. The company had a fixed wage / salary structure across all the
units in India. However, allowances varied from place to place. Thomrich-wooge had a performance
appraisal system based on management by objectives (MBO). The top management would set the goals
and communicate it to the CEs who in turn would pass down to the HODs. They were given sufficient
time to speculate on its feasibility and once the feasibility was decided; the goals were frozen and
communicated to the employees. At every quarter, the superiors would discuss the performance with the
employees and pass on the ratings to HR departments. The expert committee consisting of 4-5 members
from various functional departments evaluated these ratings. These members knew all the employees who
were being evaluated, and then they re-rated them to reduce the inter-rater bias. The ratings of the
committee were final and were communicated to the respective superiors, which was then discussed with
the concerned employees. The superiors would also counsel the subordinates in order to redress their
grievances, if any. Decisions regarding promotions and rewards were made annually and were based on
quarterly performance appraisals. The company had a 2-tier system of training, one at the plant level and
other at the corporate level. It had its own Management Development Centre at Darjeeling where most of
the training programs were conducted for managers, incorporating prayers and yoga too. The company
did not have a separate budget for training, it was need-based. Every employee was required to undergo at
least 15 days of training every year. Since, multiskilling was practiced within assembly lines, the
employees were exposed to both technical as well as behavioural training. Most of the trainers engaged
by the company were outsiders. All the training programmes were thoroughly evaluated every quarter by
talking the feedback from the immediate superior. The company would administer psychometric
measures once in three years to appraise the potential of employees fro various functional areas. Once the
competence and aptitude was identified in an employee, he was groomed in that particular area by a
mentor.
The company had a recognized trade union, which was earlier affiliated to Bhartiya Mazdoor
Sangh (B.M.S) and was now enjoying an independent status. The union would place a charter of demands
before the management once in four years, which was followed by harmonious negotiations between the
two. As the management involved the workmen even in the market survey of the products, the union also
discussed the quality issues with the management. The company’s employment policies radiated a single
principle that they believed in people and that they were the most valuable assets for them. Employees
had the freedom to see any superior ant time without prior appointment. The company boasted of an open
communication system, total transparency, no-status barrier, security and sense of professional among the
employees, which was reflected in the unit not witnessing any strike or major indiscipline since its
inception. The company had also introduced “Prayaas”, an HR-initiative as a proactive measure to have a
competitive edge in the dynamic scenario. Prayaas involved OD interventions like cross functional team,
large-scale integration, kaizen, etc. All the employees in the group of 3-5 were asked to suggest changes
for the betterment of the unit. Subsequent solutions and action plans were also invited from the employees
and the consolidated suggestions were implemented which resulted into introduction of suggestion
schemes, wastage utilization and recycling of packaging material. Some of the brilliant ideas of the
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employees were suitably recognized and widely circulated through in-house journals in all the units of
Thomrich.
CHALLENGES
Since 2002, the unit had seen 12% of executive turnover, which was earlier just 3%. This drew attention
of the top management who were confident of the high degree of employee-loyalty and believed that the
employees were emotionally attached to the unit. At this juncture, the HR Head, S. Abraham anticipated
trouble, as he feared that the turnover rate might increase in the wake of globalization and liberalization
with more and more MNCs offering lucrative packages and challenging assignments to the executives.
These firms were recruiting people at all levels, which made the employees feel that growth prospectus at
their units were rather slow. Moreover, employees had also become more risk talking and their varied
expertise encouraged them to experiment in new segments namely IT, Banking and BPOs. Though the
MNCs had 15-18 hours of working, but the changing orientation of employee made them feel that they
were handsomely compensated. S. Abraham apprehended further deterioration due to the influence of
Dollar Packages, which was unaffordable for Thomrich-Wooge Pvt. Ltd. The market conditions were
already tight with too many competitors, prices being down, customers becoming more demanding and
choosy, making the inputs scarce for the unit. Abhraham was considering the options of overcoming the
exodus of executives by increasing the efficiency with lesser input for which the company would have to
minimize its task force. This would tarnish its employee friendly image. The other was to increase the
profits by exploring new markets. The Indian market by now was already flooded with many players,
leaving the international market as the only option, which was equally a hard nut to crack. Abraham felt
trapped in a highly volatile situation, where he fumbled for a speedy and pragmatic remedy.
Questions:
1. Was the company’s decision to enter the tractor segment right, when KCP had already captured
the market?
2. Had you been Abraham, how would you tackle the present situation?
END OF SECTION B
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. What is inflation? Compare its role with money and the real earning of the Industrial workers.
Use appropriate data to justify your answer.
2. How can the bargaining affect the workers as well as the firm? “It is a method of wage fixation.”
Evaluate.
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