Nature and Scope of Human Resource Management 1.

27

CASE STUDY
of the Company
Background
uthern Paper Millss Ltd. (SPML) was set up in the year 1965 in a backward tribal region
ut 300 kilometres from Hyderabad. It was promoted by a large private company
Gomango,about
workers in addition
1967when thecompany commenced its production there were only 77
In The strength grew to around 500 workers and around 100 managers witn
to managers. TH
expansion and modernisation in 1986.
ofiles. The difference
The work force of the company comprised two distinctly different were highiy
nsof profile were very evident in the initial years of operation. The managers
come from distant
alifed, experienced and extremely hard-working. Many of them had work culture. This
qual
ates The workers were mostly unskilled, not qualified, and had a poor
state quirements of
poor work cultulture seemed to be an offshoot of their inability to adjust to the
workers
as they
had in the past been agricultural labourers. In fact most of these
dustry, received
and had got their presentjob as a part of the compensation package they
indu

were
tribals,
over by the company.
land beingtaken
for their Continuous
Ltd. (SPML) was a success story, right from the beginning.
Souther Paper Mills the key to
with capacity utilisation of more than 100% were
vnansion, modernisation, along and it wasa
The
company heavily upon
relied contract labour,
the success of the company.
the contract labourers were not well-paid. Despite
a number
of
fact that
well known labour commissioner, both the workers and the contract
labourers,
enresentations to the by with
in the status of the contract labour. The company began
there was no substantial change Rs. 350 crores.
14 crores and today, in 1990, has a turnover of over
a modest
turnover of Rs. of industrial relations.
success of, the company had a chequered history
Despite financial
SPML has the following units:
150 permanent workers,
.Pulp Mill (PM) which employs
Unit (PMU) with 205 permanent workers,
.Paper Machine
with 45 permanent workers,
Soda Recovery Boiler (SRB)
workers, andbr
Coating Plan (CP) with 40 permanent
with 55 permanent workers.
Stores and Godown (S&G)

The Genesis of PMEU

attitude towards
the management of the company maintained a paternalistic
Since inception,
its leaders who had a
reflected in the way the management promoted
its workers. This was
to make sure that the workers did not organise
sympathetic attitude towards the management This
however, a union was formed in 1975.
themselves. With the blessing of the management,
and was affiliated to INTUC. Most of
union was called Paper Mill Employees Union (PMEU)
of a union as a means to provide them
the workers joined this union as they saw the formation union
so cleverly manipulated the
some representation. On the other hand, the management
that the major concerns of the workers regarding regularisation
of labour, working conditions,
with the union.
modernisation, and promotion policy were never discussed
The Second Generation Workers
factory)
in the when educated in
Second generation workers (children of parents working of the workers. They began
OWnship school, brought about a change in the perception discontent with
uSIng demands other than wage increases. There are regular rumblings of
y e management was manipulating the workers and the working of the PMEU.
 Human Resource Management
1.28
with the pPM 1or a period of t
June management signed an agreement
1986, the management signed ag
Incentive Scheme was
troduced
introduced to ink productivity three
link the productiv
the economie
of the
years. In the agreement, an
euphoric
about
lc
Workers to the wages. The
workers who were
initially
linked incentive was was so growth,
of the management.
The productivity
of skills or work as there designed
SOon realised the ploy a c r o s s the units although no
difference o

tnat the earning

differed
management
was trying
to follow a
policy
p of divide and
seemed that the
Detween the units. It

rule
Sanghatan
Formation of Karmika and dynamic person, joined the
in the Paper Machine Unit (PMU).
time that Mr.
He was the
Sudhakar, son of
a young an ex-employee of the comna pany
they
It was during this Was
him, before taking up any
nrek
workers normally approached
orator, and the
a good supervisors.
had with their respective workers, and his hostile attitude t o .
popularity among the
Sudhakar's increasing to the PMEU. Mr. Sitaram th eader
of the issues was not acceptable
management on
most
influence of Sudhakar by underplaying his
infio
reduce the growing
The management on its own did nothine
of PMEU tried to
workers in front of the management.
among the
or acknowledge
the increasing popularity of Suclha ar.
the sentiments of the workers
gauge in the state. The regional Darth
associated with the regional party
Sudhakar was closely
that they could use Sudhakar for achieuine
in the company and felt
wanted to gain a foothold would be better taken care of if thei
workers feel that their needs
it. Sudhakar made the the time in the state). This
cause was supported bythe regional party (which was in power at
led to the formation of Karmika Sanghatan (KS) (which was affiliated to TNUTUC, which was
Sudhakar as the President. Karmika Sanghatan (KS) got
linked to the regional party) with
Unions in December, 1987. Most of the workers slowly
registered with the Registrar of Trade
but steadily started flocking to
Karmika Sanghatan (KS).
The Rise of Karmika Sanghatan
Mr. Prabhakaran, the General Secretary of Karmika Sanghatan in one of the executive meetings
of the union claimed that there was no logic for using an incentive scheme which had differential
incentive rates across departments as this was a process based industry and the output of
one department alone could not earn revenues.
As the previous agreement was to expire on April 30, 1989 Sudhakar submitted a Charter
of Demands to the management on behalf of KS on January 1, 1989. The management refused
to look into the demands submitted by KS and maintained that it would bargain only with the
team of Mr. Sitaram, who represented the recognised union, PMEU. The management, unaware
of the strength of KS Union bargained with PMEU. In June 1989, an agreement was signed
between the PMEU and the management, which was valid for three years. Many of the important
issues connected with the workers were not included in this agreement. When the workers
fully understood the implications of the agreement, they felt cheated. There were rumours
thatMr Sltaram, who was leading the bargaining team on behalf of PMEU representing the
Workers, had accepted bribe, and had
manipulated his colleagues into signing the present
agreement.
On 21st July, 1989, Mr. Sitaram was murdered in the township. The company began a
disciplinary enquiry, and six members of the Karmika Sanghatan were suspended penaing
enquiry.
In November 1989, elections were due to elect the new union to the recognised. FD
lost the elections by a big margin.
 of Human Resource Management 1.29
Nature and Scope
to the management
Karmika Sanghatan, the new recognised unlon sent a memorandum
continued with the disciplinary
cpeking for a new agreement June, 1989. The management servlces., Karmlka Sanghatan
in

enquiry,found allssix of the workers guilty and terminated their terminated in

of the six
workers whose services had been
lemanded the reinstatement
that the move by the management
eonnection with the murder Sitaram and claimed
of
victimisation highlighting the fact that all the six
dismissed had been acquitted
amounted to
criminal court
by the threatened to on strike if the six workers
were not reinstated.
Karmika Sanghatan go sides refused to
Both
issue, soon
snowballed into a major industrial relations problem. to
This workers returned
stance. Finally, the strike was called off after 45 days. The
soften their the failure the strike was due to lack
of
bitter experience. Sudhakar realised that of
work witha their he raised the issue of regularisation
of contract labour. To get support
was one of extremne
of support his demands. The existing atmosphere
as one of major absenteeism and
contract labourers workers. The workers resorted to
the managers and the smai
distrust between of administrative rules,
and quit over
work schedules by using the pretext
disturbed
issues.

Change in Management re-orient

management
following it made the
PMEU in the elections, and the
events and there
The loss of had major expansion plans
for the next two years
As the management in the top
their stance. scenario at SPML, there were changes
volatile industrial relations after the corporate
was continuing who was looking
Ashish Sone, a young, dynamic,
manager
GM (Operations)
management. r e s o u r c e development
took over as the
and human Kapoor was
strategy for expansion, r e c r u i t m e n t manager, at the Corporate Office, Mr. Rajesh
1990. The
in February,
as the new HR manager. unit and
transferred to the factory the m o d e r n i s a t i o n of the present

Ashish Sone and Rajesh

Kapoor realised that nature of labour
force required.
ramifications for the
would have major level of Contract
the expansion plans a drastic
reduction in the present
Modernisation at
SPML would lead to Moreover, the existing
workforce by 25%.
reduction of the permanent Because of the
labour, along with the automated industry.
a
the challenges of worker
not suffice to meet with various
skill level would earlier ways of dealing the
situation coupled
with the management's a m e a n s of reducing
existing modernisation plan was only
workers felt that the
related issues, the
kilometres from
275
workforce new unit in Rampura (about had
wanted to set-up a This area
The company and was very close to Hyderabad.
area
not a backward at the new
Gomango) which was over the years at Gomango. The jobs
which had been developed
On
the civic amenities c a r e e r mobility
and skill requirement.
level of responsibility, of them belonged
to
unit would involve higher
found that the vast majority transfer
the management workers. In the past,
Identifying this group, consisted mainly of the young at
Karmika Sanghatan and the group effected transfers
but the management had not
had always been a managerial
prerogative, received the news of probable
to do now. The workers
the scale at which it was intending of transfer was interpreted by
the workers
The objective
transfer with wide-spread protests.
as an act to weaken Karmika Sanghatan.
The nature of work did
had given time-bound promotions.
All these years, management Time bound promotions was
for the workers to be promoted.
not require skill development modernisation and expansions and
the
and solution to all the parties. With
a simple accepted need to change from time-
market, the management felt the
increasing competition in the based promotions, To increase the efficiency
of the workers,
DOund promotions to performance a scheme. This required data on the performance
the management wanted to set up training
 Human Resource Management
1.30
a Performance
Appraisal system to
asked to develop
O the workers. Mr. Rajesh Kapoor was
workers, the workers were t
up in
this n e w s leaked to the decision and
meet these requirements. When w a s a subjective
argued that performance Moreover, the workers
The older generation workers had
arms.
criterion for promotion. for vindicte
the sole
that number of years should be would be used by
management
the satie.
Performance Appraisal data highly
ambitious were not
a fear that the workers who
were
aver
They were not
purposes. However,
the second generation seniority-based
promotions.
purely to assess their performa
based on
systems
with the c a r e e r progression and formal deman
promotions that o n e of the major
workers found
performance-based
to ideas like
in an
informal chat
with the
on the average
earnings rather th
than
Rajesh Kapoor Incentive payments also found h
that
of Karmika Sanghatan
w a s to
make
favour a particular
unit. It w a s

eac
huge
seemed to b e t w e e n the units, because
method which coordination
present little
by the up a s
there w a s incentive amount.
i n v e n t o r i e s w e r e building i n c r e a s e their
a s to
o n e anda half years and
so
m a x i m i s e its output
and

unit wanted to
for past
the
the figures of incentives the Incentive Scheme
Rajesh Kapoor went through tremendously after introducing
had increased
in comparison
with the earlier
found that productivity
increased
of the workers
the board, the earnings he felt that making payments on
Also, across
there. Moreover,
Incentive Scheme was not theincentive for increased
times when the
remove
union demanded would
the units as the to motivate the workers,
the average for all behind having an
incentive plan
defeat the very idea
production and
Ashish Sone and Rajesh
Kapoor, is the requirement that
to
First and foremost according and management has to be
between the workers
of mistrust and rivalry materialise. There was need for
the existing climate plans to
modernisation and expansion
totally changed
for the management decided to issue
among the employees. For this,
s e n s e of ownership share. The market price of the
generating a at the rate of Rs. 60 per
all the employees
preferential shares to besides giving preferential
allotment, went on to
time was Rs. 80. The company,
share at that allotment.
enable them to buy the preferential
loans to the employees to the need for a
give sent a letter to Rajesh Kapoor reiterating
Karmika Sanghatan
Meanwhile, in the company, Ashish Sone had
After studying in detail the situation existing
new agreement. Karmika Sanghatan for negotiating
on the demand by
a long discussion with Rajesh Kapoor having very ambitious growth plans
it was
the company was
new agreement. At this point,
as
a The
on a number of issues
which are not there in the existing agreement.
necessary to decide
for a new agreement was conveyed
decision management to bargain with Karmika Sanghatan
of
to Sudhakar.
loeoy Sw bis o1
guestions followed at SPML
1. Identify the weaknesses of the Human Resource Management policies
before Ashish Soni and Raj Kapoor came in.
2. Pinpoint the strategic prerogatives which could have been initiated by the management
to prevent the strike breakdown in IR situation.
3. Identify the major issues that are likely to surface on both sides during the Collective
Karmika Sanghatan and
Bargaining discussions between the Management and the
discuss the implications of the various alternate
solutionsa2rolssw ol 13s n
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