CHAPTER - 1

INTRODUCTION

1.1 Industrial Relations

Industrial Relations (IR) is the relationship between Management and Workers and
the role of regulatory mechanism in resolving any Industrial dispute. Relationships
between Employers and employees also fall into the realm of Industrial Relations.
Employer’s organizations / forums and platforms also discuss and study the
Management – Workers relations in any one or many industries. It is concerned with
the systems, rules and procedures used by Unions and Employers to determine the
reward for effort and other conditions of employment, to protect the interests of the
employed and their employers, and to regulate the ways in which employers treat their
employees.

The term “Industrial Relations” came into common usage in 1910s particularly in
1912 upon the appointment of a Commission on IR by the US President William Taft.
The Commission was to investigate causes of widespread, often violent labour
conflict and make recommendations on methods to promote greater harmony among
employers and employees. Post World War-I with the demand for industrial
democracy, in early 1920s universities began to teach IR to understand the dynamics
of employer - employee relations. Progressive business firms established Personnel
Departments.

Traditionally Industrial Relations is construed as a disputing situation. It deals with

conflicts and disagreements. On many occasions it sounds like a war amongst the
Rich and the Poor. There is absence or little concern for understanding, appreciation,
mutual benefit and respect. Despite 65 years of Indian Independence there still remain
signs of class conflicts. It was there earlier also, perhaps its context and gravity has
taken a new turn now. We have more education and awareness and the interchanging
dynamics of the involved parties continue to make situations worrisome and retarding
at times.

There are still few major factors which affect the relationships. A matured and
forward looking attitude is a true wagon for the good of both Employers and Workers.
Malpractices, corruption and individual interests of either party result into distorted
and imbalanced situations. Many times inefficient and corrupt Government machinery
is used to pressurize either party. Exhibition of muscle power and intimidating tactics
by both Management and Workers is quite commonly resorted to.

In an all inclusive sense, the term Industrial Relations (IR) refers to all aspects of
employment relations. Venkata, CS, Ratnam (2007)1. IR focuses on the relationship
between employers, managers and workers and their groups in running of an
enterprise. The aim of the workers is generally to seek improvement in wages,
working conditions, say in what work they do and seek redressal of their grievances.
In few instances there are political motives also. In this relationship, the government
also strives to foster solid labour management relations so that its programme of
economic and social development is well supported.

Industrial Relations is an art, the art of living together for purposes of production
(and/or services) Richardson (1959)2. Industrial Relations in its wider meaning is a
set of functional interdependence involving historical, economical, social,
psychological, demographic, technological, occupational, political and legal variables.
Singh (1968)3

In present day context IR has become a complex process since it is guided by a legal
framework and institutions. IR is based primarily on individual perceptions of what is
right in respect of fairness and the exercise of power and authority Salamon (1987)4.
The attitude of the workers and the employers is responsible for the quality of
relations between them. The attitudes could be of contempt, adversarial, acceptance,
cooperation, dictatorial, paternal, business like, participative. Fahlbeck (1996)5
Fahlbeck has mentioned about 4 approaches to IR:
a. My Boat Attitude: Get off, If you do not like it
b. Shared Boat Attitude: We sail together. Do not rock the boat

1
Ratnam, Venkata, CS (2007) “Industrial Relations” Oxford University Press, 2007 p 22-56
2
Richardson, J Henry (1959) “An Introduction to the Study of Industrial Relations” George Allen &
Unwin, London, p 11-18
3
Singh, VB, (1968) “A Study of Kanpur Cotton Mills”, Bombay Allied Publishers, 1968, p1
4
Salamon, Michael (1987) “Industrial Relations : Theory and Practice”, Prentice Hall, New York
5
Fahlbeck, R (1996) “ Guest Editorial : Reflections on Industrial Relations” IJCLLIR, Winter, p 289-
313
 c. Our Boat Attitude: It is our common enterprise. Let us combine our efforts to
better it
d. Your Boat Attitude: With a sense of ownership and pride. The purpose is to let
employees whole heartedly contribute to the cause of the enterprise.

The International Labour Organization (ILO) has propagated the values of freedom of
association and right to collective bargaining, among other which are now
constitutional and legal obligations in many parts of the world. A landmark event in
this regard is the 1998 ILO Declaration on Fundamental Principles and Rights at
Work which is one of the components of “Decent Work”.

Mahatma Gandhi proposed the trusteeship approach which is a solid principle to deal
with Industrial Relations. This principle expresses the inherent responsibility of the
employer to its customers, workers, shareholders and the community at large. Goyder
(1980)6

The basic concepts which result into sound Industrial Relations are equity and
fairness, power and authority, individualism and collectivism and integrity, trust and
transparency. Venkata, CS, Ratnam (2007)7

Industrial Relations would broadly cover following processes:

• Collective Bargaining
• Role of Unions, Management and the Governments
• Government Machinery for Resolution of Industrial Conflicts
• Individual and Collective Grievances
• Discipline and Working Practices
• Compliance of Labour Laws
• Managing Industrial Relations through Forums / Unions / Specific
Interventions

6
Goyder, G (1980), “Trusteeship : A Possible Solution to Problems of Power, Exploitation, Conflict &
Alienation”, Leslie Sawhny Programme of Training for Democracy, Trusteeship Foundation and
Friedrich Naumann Stifting, New Delhi
7
Ratnam, Venkata, CS (2007) “Industrial Relations” Oxford University Press, 2007 p 22-56
The above processes are both independent and dependent in managing IR in any
organization. It is a web of relationships which define the quality of strength and the
same is put to test in case of disagreements. In such situations more than the actions
of either party it is their “perceptions” on fairness in dealing with the situation, which
affect the outcome of issues of disagreements. As per a paper published by Haden,
Caruth and Oyler (2011)8 a survey was conducted of 224 workers in order to assess
their levels of perceived fairness, commitment, organizational citizenship
behavior(OCB), and intent to stay with the organization. Fair treatment was positively
related to commitment, OCB and intent to stay. In the post liberalized period there is
an impending issue of “perceptions” of fairness and commitment amongst the
Managers and the Workers.

In the pre liberalization period industrial relations were controlled through excessive
labour legislation. The sole purpose for such legislation was to protect the workers.
This protectionism resulted in creating an environment that led the way towards
inefficiencies, over employment and inability of companies to introduce efficacy.
During this period the Judiciary also displayed unprecedented judicial activism by
announcing pro labour judgments. This resulted in a tremendous impact on the
industrial relations scenario in the country. It resulted in stagnated, protected, passive,
regulated and controlled industrial relations. The traditional IR was reactive, negative,
ad-hoc and highly legalistic. Industrial Relations during these times confined itself to
its members only who had no concern for business organization and the society at
large. There were 3 principle actors who would guide the Industrial Relations-
Workers and their Unions, Managers/ Employers and the Government. In the post
Liberalization period the consumers and the community play an important role in the
Industrial Relations process. One of the major reasons for the trade unions
marginalized today is because they are not aligning themselves with the interests of
the wider society. Venkata, CS, Ratnam(2007)9

8
Haden, S S P, Caruth, D, and Oyler, J (2011), “Temporary and Permanent Employment in Modern
Organizations” Journal of Management Research, Vol. 11, No.3 December, 2011, p 145-158
9
Ratnam, Venkata, CS (2007) “Industrial Relations” Oxford University Press, 2007 p 22-56
Problems of relations in industries existed in the past and continue to exist in every
economic system Richardson (1959)10. It is said that discontent is a pre condition for
progress while unrest needs to be tackled rather than suppressed. In this context the
behavior, values and underlying assumptions become important in the industrial
relations process. Good Industrial Relations will always aim to secure the best
possible level of mutual understanding and goodwill. The process is participative. The
concern for fair dealing and good working conditions should always prevail.

IR is a sum total of employment relations, addressing the overall socio- political,

legal, economic, psychological, technological and corporate dimensions in the
industrial set-up involving the mutual participation of employer and employees in an
environment regulated by the state, the cumulative output of which determines the
collective human factor involved in industrial production. Ghosh and Ray (2012)11

1.2 Industrial Relations (IR) / Human Resource Management (HRM)

– Identity and Linkages
Any organization which has a competent and trouble free workforce, the credit for
this must go partly to HRM department. In case there is trouble the claim has to go to
the HRM department again. By better recruitment, hiring, induction, training and
development, safety and health, wages, welfare, communication and other practices
the HRM department can contribute to the quality of work life of employees. A
motivated and satisfied workforce can have no reason to raise industrial disputes.

Where the words Industrial Relations are capable of initiating scheming, anticipating,
evaluating strength of employee relations, goose-bumps and jitters to an Industrial
Relations Manager, the term Human Resource Management can actually put him into
a positive mindset, smilingly collating his efforts to make the Workplace A Great
Place to Work for its employees. Although a diversity of perceptions and debates
continue about the definition, intellectual boundaries, and major premises of the fields
of HRM and IR, the practitioners of both have achieved undefined consensus about

10
Richardson, J Henry (1959) “An Introduction to the Study of Industrial Relations” George Allen &
Unwin, London, p 11-18
11
Ghosh, A and Ray, P (2012) “A Contemporary Model for Industrial Relations : Relook from Global
Perspective” Management and Labour Studies37(I)p 17-30
the commonalities and differences between them. From the letter to spirit, the gamut
of HRM has enveloped in it all good of IR and cast away the bad and the ugly. The
issues, policies, practices, outcomes and challenges related to human resources are
well encapsulated in the broader term HRM and IR now gradually is writing its will
leaving retainable legacy to HRM.

For HRM function there is a double challenge - one to meet the aspirations of people
and the other to validate the success and effectiveness of HRM policies of the
company. Different kinds of institutions help the employees and employers to build
and maintain satisfactory relations between them. These institutions include
employee’s associations, employer’s associations, collective bargaining and
government machinery and mediating agencies. Thus industrial relations are
collective relations of individual workers with their management. There can be
multiple linkages between HRM and IR. (Both Proactive and Reactive)

HRM and IR are about how people are treated and their relevance increases where an
enterprise takes a long-term view, rather than a short term. The increasingly
significant role of IR in achieving management objectives is reflected in the
transformation of the personnel management function. Over the last two decades this
function was often marginalized in terms of its importance in management activities
and hierarchy. It has evolved from a concentration on employee welfare to one of
managing people in a way so as to obtain the best and highest productivity possible
from the employee, through methods that provide the employee with both intrinsic
and extrinsic rewards. Therefore today far from being marginalized, the HRM
function becomes recognized as a central business concern; its performance and
delivery are integrated into line management; the aims shift from merely securing
compliance to the more ambitious one of winning commitment.

If Trade Unionism thrives because of poor HRM Policies and Practices in the
company and if the Trade Unions become rigid and militant because of their deft
handling of employees’ discontent, the Managements must blame themselves for the
outcome. The proposition that HRM needs to focus less effort on
transactional/administrative tasks and become more strategic in focus is not new.
Over past couple of decades much has been discussed about HRM’s transition to a
strategic function, yet in too many organizations the identity of HRM/ IR remains
firmly in the transactional/ operational/ advisory zones only, the opportunities for a
more strategic value adding contribution from HRM/ IR awaits solid appreciation and
intervention.

IR is a central element in the human resource system. In IR the central monetary

reward is wages and salaries, which is guided by collective bargaining. It is based on
internal equity and distributive justice and, often standardized across industry. IR
policies must emphasize on monetary rewards linked to performance and skills
through the development of performance and skills-based pay systems, some of which
seek to individualize monetary rewards like individual bonuses and stock options.

Based on theoretical work in the field of organizational behavior it is expected that

HRM/IR comprises a set of policies designed to maximize organizational integration,
employee commitment, flexibility and quality of work. It is worthwhile that
organizations use learning as a tool to innovate, differentiate, attract and retain talent,
customers and investors.

Worker development is part of an integrated HRM approach. This helps to maximize

individual effectiveness and increase organizational productivity. HRM considers
development of both managerial and operatives essential. There is increased
recognition of the importance of human resources in the production process of an
organization and man is no longer considered a machine.

In last two decades management of people has been recognized as a main stream
function. It has replaced concepts like personnel administration, personnel
management and industrial relations or labour relations by Human Resource
Management. Today HRM practitioners deal with issues from recruitment to
retirement. Traditionally HR used to play a very reactive role of an administrator with
regulatory authority and some welfare orientation. Industrial relations was handled
majorly through fire fighting approach. The role of HRM has now shifted from just a
service provider to an important contributor. Today we need good ethical HR
practices which are strategically oriented. Chaudhuri (2012)12

12
Chaudhuri, S, (2012) “Personnel Today, Jan-Mar 2012” Vol. XXXII, No. 4, p 8-9
Post liberalization period has turnaround the working styles of an organization. If one
has to succeed and achieve organization vision it has to practice and adopt a new
mindset. Old beliefs and new values in HRM have transformed to establishment of a
new value system. Some myths have been broken and fresh inputs have surfaced.
Table below elaborates on the old beliefs and the new values in HRM.
Table 1.1
Old Beliefs and New Values in HRM
Past (Presently, Myths) Present/Future (Current Reality)

Employers own and Workers are In most cases, Managers do not own but
property less Workers control. All are employed and look for a
stake, if not share
Shop floor untrustworthy Shop floor trustworthy
Mostly manual jobs mainly requiring Mostly white collar jobs requiring use of
physical effort, rendering low-trust discretion and emotional involvement,
coercion strategy possible making high-trust consent strategy
inevitable
Master-servant relationship Employer- employee relationship
Employees believed they were divinely Employees no longer merely submit to
ordained to comply without questioning authority. Rising standards, education and
growing aspirations influence a change in
attitude
Employees did what they were told to Increasingly employees ask “Why
do. People were made to ask, “What (should) I?’ ‘Is it part of my job’, and
can I give to the organization?” ‘What can I get?’
Employees interests did not count Individual’s interests count: ‘What is in it
for me?’
Respect for position of authority Decline in respect for officially
constituted authority
Unequal relationship of dependence Balance of power based on inter-
dependence (mutuality)
People conditioned into a general Social Institutions are providing counter
acquiescence to hierarchy and reinforcement to selectively challenge the
subordination through ideological authority
reinforcement by social institutions
The virtue of ‘selfishness’- gradual Collective bargaining to secure power to
evolution towards ever rising prosperity employees to an acceptable approximation
for all within an acquisitive society – with that of management, leading, in turn,
still marked by inequalities of power, the evolution of a new ‘labour’ aristocracy
wealth, income, status and opportunity without much concern for the
 underprivileged
Struggle for control over organizational Struggle for distribution of resources
resources in the hands of a few at the among rank and file
top
Conflict inevitable Labour- Management cooperation
possible
Attention focused on organization Organizations do not live/ function in
isolation
Motives-use hook (consent) or crook Expediency, obligation, prudent
(coercion) to achieve organizational calculation, and moral values influence
purposes behavior
Management has the right to manage Need to manage by consent

Source: Venkata, CS, Ratnam, Industrial Relations (2007)13

The HRM function has to play the role of a symphony orchestra conductor. This
approach knits people and their tasks / roles together in a harmonious manner. HRM
has to focus on building stronger organizations which are dedicated to the vision of
the company. At the same time it also has to meet the aspirations of the employees.
HRM is to lead the cause of the organization and project as a guardian of the
employees.
HRM deals with the human resource aspect of business objectives and corporate
policy. Thus today it has achieved the status of a strategic management function. This
function further has the responsibility to align the human resources with the vision
and mission of the company through policies, procedures and programs. The HRM
concept is based on individual employee; however IR is based on collective issues of
a group of employees. There are multiple linkages between these two kinds of
relationships. The management and unions adopt different techniques in maintaining
the goodness in these relations.

1.3 THE INDIAN TYRE INDUSTRY

Tyre manufacturing has become a very competitive business. With globalization and
interdependence, there is tremendous transformation in the working of the tyre
industry. In order to compete and face the challenges to remain in the market, it is
imperative to ensure top of the grade operational efficiencies which can only be

13
Ratnam, Venkata, CS (2007) “Industrial Relations” Oxford University Press, 2007 p 657
possible if there is a peaceful Industrial Relations environment. India is a country of
opportunities and there is a surging market for tyres. Indian tyre industry is also
enjoying a robust export market. This requires cost competitiveness through higher
productivity. The tyre industry would continue to grow in the context of 8% - 9%
GDP growth.

As per Varghese Koshy (2013)14, Executive Vice President Marketing MRF “The
Indian Tyre Industry has emerged as one of the most competitive markets in the world
and with the emergence of new technology, ultra modern production facilities and
availability of raw materials, the sector is poised to grow further. Indian tyre
production is expected to reach 20 crore units by 2016-2017”.

The Indian market is tough and challenging but rewarding. India has the largest
reservoir of skilled and semi skilled manpower. It is a high growth economy enjoying
long term sustainable competitive advantages. Indian Tyre Industry is partly shielded
from global downturn because of domestic led growth. India already has a road
network of 33.14 million kilometers making it the second largest in the world. The
transportation economy is set to see continuing growth. There is boom in the
automobile sector and by implication the tyre industry would get a further boost.

India is the world’s largest maker of two wheeler motor cycles / scooters and the
largest three wheeler market. It is the second largest tractor manufacturer and the fifth
biggest commercial vehicle maker. It has the fourth largest car market and it can boast
of having the largest small car market with sales around one million units.

With over 39 tyre manufacturers and 60 manufacturing plants, the Indian tyre industry
enjoyed a turnover of over Rs. 30,000 Crores in 2009-10. India has the technical
capability to manufacture the entire gamut of tyres for catering to its domestic
requirements but still imports about Rs. 1,430 crores worth of tyres, largely low-cost
passenger car tyres and Truck & Bus tyres from China due to capacity constraints and
cost advantage. India also exports Rs. 7,000 crores of tyres, largely Commercial
Vehicle tyres, to over 60 countries. The ten large tyre companies (MRF India Limited,

14
Varghese, Koshy K (2013) “Indian Tyre Industry : On A Highway To Growth”, www.cio.in 2013
Apollo Tyres Limited, JK Tyre & Industries Limited, CEAT Limited, Balkrishna
Industries Limited, Goodyear India Limited, TVS Srichakra Limited, Falcon Tyres
Limited, Kesoram Industries Limited (Birla Tyres)) in India, account for over 85-90%
of the industry by value. MRF India Limited (MRF) is the largest tyre manufacturer in
India with a market share (value) of about 30-32%, followed by Apollo with about
20-22% and JK Tyres with about 15-16%.

While two-wheeler (2W) tyres account for the bulk of the domestic production (51%
of volumes), truck & bus tyres (T&B) dominate industry revenues at 65% of the
industry turnover. Over 51% (by volumes) of the production of tyres goes to the
replacement sales (largely from the T&B segment), 44% goes to OEMs and the
balance to exports. India continues to be largely a bias belted tyre market, although
radial tyres have made significant inroads into the passenger car market.

The global tyre industry (passenger car and trucks) is around US $190 billion
(growing by 13%) with the replacement market accounting for three-fourth of the
total sales. While mature markets currently account for the bulk of the demand (70%),
the incremental demand over the next five years is expected to come largely from
faster growing newer markets, which include China and India. The top three tyre
companies (Japan-based Bridgestone with a market share of 16.2%; France-based
Compagnie Generale des Etablissements Michelin with a market share of 15.5% and
U.S.-based Goodyear Tire & Rubber with 12.4%) account for 44% of the global sales.
The other key global market participants are US-based Continental Tyres, Pirelli of
Italy and Sumitomo of Japan. Bridgestone and Goodyear already have a
manufacturing presence in India while Michelin is in the process of setting up a
facility in Chennai.

Driven by the strong revival in automotive demand, particularly in the passenger

vehicle and two-wheeler segments and export demand for tyres, the Indian tyre
industry reported a healthy revenue growth of over 25% during fiscal 2010-11.
However surge in input costs especially that of natural rubber (NR) negated any scale
benefits, and resulted in a contraction of industry-wide operating margins by over 500
bps (basic points). This was despite numerous industry wide price hikes, cumulatively
amounting to a 15-20% increase in tyre prices. Despite the worrying macroeconomic
indicators and a general slowdown in domestic automotive sales, the Indian tyre
industry continued to post a healthy 25-30% revenue growth during Q1, 2011-12
supported by strong replacement and export demand. Domestic OEM demand growth
was also healthy at around 15-20%, albeit weaker than in the previous fiscal.
However continued cost pressure from high cost Natural Rubber inventory led to a
300-350 bps operating margin erosion, both on a year-on-year and sequential quarter
basis.

The domestic tyre industry has been in an investment mode during the last few years
with almost all participants adding significant capacities. Supply additions were high
between 2008 and 2010, with domestic capacities increasing by around 49%. While
the capacities in fiscal 2010-11 are estimated to have increased by 8%, the industry is
poised for another 25% addition during the next two years. Of this, bulk of the
investments is expected in fiscal 2011-12 with 19 tyre projects targeted for
completion this year. The industry has already witnessed an addition of 17.7 lac tyres
from JK Tyre, Metro Tyres Limited (Metro tyres) and Bridgestone India Private
Limited during the first quarter of fiscal 2011-12. Other major projects scheduled for
completion during the current year include JK Tyres, MRF Limited, Balkrishna
Industries Ltd; Falcon Tyre Limited, and Metro Tyres, with most of the capacity
additions being towards radial capacities.

The Indian Tyre industry like all other labour intensive industries has come a long
way traversing path treaded with turbulent macro and micro environmental factors
ranging from changing Governments and their policies, technological complexities,
constant raw materials cost fluctuations-having direct impact on operating results,
management styles and priorities and resultant unsettled IR/ HRM practices. Not to
underplay the radical change in the quality, design and formats of product itself and
the end user expectations and consciousness.

Major technological changes have taken place in tyre design, the testing standard have
also evolved accordingly to ensure performance, mileage, safety, reliability and
longevity of tyres. The concept of “Green Tyres” is becoming a paradigm of the
industry’s competitive edge. These tyres reduce CO2 emissions.

The current turnover of the Indian Tyre Industry is over 30,000 Crores which is
expected to further rise by about 25% in the next 5 years, due to the resurgence of the
economy and the automobile sector. Apart from domestic demands, most tyre
companies are aiming for increased exports. All companies also have a “China
Policy” both collaborative and competitive. It is surprising that over 95% turnover of
the Indian Tyre Industry is attributable to just around 10 large players. Remaining
turnover is shared by small players who are almost triple in strength. This factor
places immense importance on the way Industrial Relations are handled by these large
companies. It needs to be studied if there is a co-relation between HRM policies,
practices and peaceful IR.

It is in this backdrop, that this research was undertaken, to specifically explore the
Industrial Relations in Tyre Industry : Post Liberalization in India with specific
objectives of studying if Industrial Relations is an independent and a sound central
system for managing Employer-Employee Relations in the tyre industry in the post
liberalization period with specific reference to Grievance and Discipline Handling
Systems, Collective Bargaining Process and Worker Productivity. The research
attempts to gain insight into whether Grievance and Discipline Handling Systems have
been impacted by the post liberalization environment and have affected industrial
stability and peace in the tyre industry and whether Collective Bargaining has emerged
as a stronger process resulting into industrial peace through Long Term Wage
Settlements in the tyre industry in the post liberalization period. Additionally the study
aims at exploring if wages and working conditions have changed for better or worse
and has the change contributed to higher productivity levels in the tyre industry in the
post liberalization period. Based on these objectives the research expects to propose
and recommend major HRM interventions which would integrate IR with HRM
practices in the tyre industry for establishing industrial harmony and initiating people
development initiatives with a long term and a wide spectrum approach.

Globalization, government regulations and growing environmental pressures will

affect the Tyre Industry today as also in times to come. The industry faces
extraordinary challenges to stay competitive and at the same time contribute to
sustainable mobility. The industry will constantly be under pressure to stay cost
competitive under the newer trends in tyre manufacturing. Junio, Marc (2011)15

15
Junio, Marc (2011), “Innovate To Survive” Polymers And Tire Asia, April-May, 2011 p 20-21, 25
The Tyre Industry has to be prepared to face the challenges that are thrown by the
shift of production by the growth markets, mostly the developing countries in Asia. A
number of larger tyre, manufactures have expanded production bases in emerging
markets mainly driven by cost factor. Junio, Marc (2011)

In terms of purchasing power parity India is world’s fourth largest economy and it is
likely to cross Japan in 2012-2014 and attain the third position. After China, India is
considered the second largest emerging market. India has world’s largest pool of
skilled and semi skilled man power. It is a growing economy and can sustain
competitive advantages on a long term basis. The tyre industry thus can see
accelerated growth. Robust growth is projected for the future with growing per capita
income. The poverty level is on a downturn. The middle class at about 450 million
has contributed to 30 to 40 % of the GDP Growth due to its rising productivity. India
is also not much impacted by the global downturn because of the domestic- lead
growth. All the above factors are encouraging and would result in the growth of the
Tyre industry as well.