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Employee discontent and economic recovery

By R Gopalakrishnan
June 03, 2009 10:32 IST
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Debate is raging everywhere in the world as to whether the green shoots of economic recovery are for real, whether they are sustainable and how soon the gloom and doom folks can be silenced.

I doubt that the angle of employee discontent and low motivation has been explored in these debates. In fact, I wonder whether the high discontent of workers has even been recognised as an emerging issue.

Something very unusual is going on. What is it and could these developments influence the nature and pace of economic recovery?

I requested an analysis from the Dow Jones Factiva, which screened 10,000 print titles, 15,000 web sites, 16 million blogs and searched for the key word "Labor Union" appearing on a daily basis from Feb 20, 2009 to May 18, 2009. The number of documents containing the key word "Labor Union" rose from a few hundred to 10,000 on April 27, 2009.

As an economic system, capitalism is under scrutiny everywhere; in fact it is under attack. In the most capitalist of societies, the debates are becoming hugely un-capitalistic. In the UK, banks have been effectively nationalised; in the US, the White House is influencing who will chair a company or how corporate leaders should travel.

In the new dispensation, the labour union will own 40 per cent of Chrysler; therefore, the union will have board representation as well. In Japan, the communist party, which for long had been fading into irrelevance, has suddenly revived as the recession bites workers.

There are two hard facts: first, that the level of employee discontent is at a level so high that this has not been experienced for at least a quarter of a century.

Second, today's corporate leaders, who have developed their careers during the last twenty five years, have little or no direct experience of handling serious employee discontent, unionisation and such matters.

That makes for a complex combination, which could turn out to be a party pooper in the recovery party that the world awaits - unless managements learn to be sensitive in handling the emerging issues.

Employee discontent does seem to be widespread: it has been observed  all around the world in recent months.

Arcelor Mittal curtailed its European steel production by half in view of the market conditions. During the annual shareholders' meeting in May this year at the company's headquarters in Luxembourg, 1,000 workers attacked the corporate headquarters.

Riot police had to be called in. And remember, Arcelor Mittal had not undertaken any major lay-off of workers; they had merely offered voluntary redundancy to 9,000 workers.

In March, Serge Foucher, the head of Sony in France, was taken hostage by factory workers seeking a better severance package. The workers shut him up inside the factory premises overnight, reminding one of the technique of gherao invented by the communists in Bengal during the 1970s.

In Ireland, the employees of Waterford Crystal factory occupied their factory building in March this year. They refused to leave because they wanted the factory to open again. They had a deep emotional attachment to their craft, a way of life for them - it was not just about a job.

For eight years, the National Labor Relations Board of the US exerted a pro-business posture under the Bush administration. President Obama's election has changed that. The Employee Free Choice Act is pending in Congress and the President has expressed his opinion in favour of how unions should be recognised. Richard Trumka of the AFL-CIO says, "We now have the president on our side."

In China, the number of labour disputes has doubled to 700,000 from March, 2008 till March, 2009. Over 1.2 million workers are involved in labour disputes. The trend may have been accelerated due to recent labour reform which allows workers to voice their discontent. But then we cannot rule out that discontent itself may have increased. The workers do not want any lay-offs.

In Chandigarh, in April this year, an unemployed BPO employee used his IT skills to post nude pictures of his female boss on a network site. It was a novel way to protest about not having his job or compensation.

In September last year, an Italian company's Indian CEO was killed in an auto-components factory in Gurgaon. The police chief stated that it was "an unplanned, but violent outburst".

During April and May this year, there has been a spate of industrial actions in Indian units all over the country. M&M had a stoppage of production at Nashik, Hyundai faced problems at its Chennai factory, Nestle had a closure of its foods factory in Uttaranchal, and the Wockhardt Hospital in Goa had to be shut down.

Assuming that employee discontent can spoil the recovery party, what can corporate leaders do about it? The solution is tantalisingly simple, but requires a huge mindset change. Start treating people as people again.

Since the Reagan-Thatcher era, managements have been able to take employees for granted. The rise of the software industry caused labour issues to recede further from the corporate leaders' agenda.

Once more managers must realise that HR is the job of the line manager; it is not the job of the HR department. The touch time of bosses with employees must increase and the tendency to "leave employee matters to HR" must change.

Tomorrow's leaders will engage with their employees. And every manager can begin now.

The author is executive director, Tata Sons. These are his personal views

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