Industrial Management

29 Jun

Case 1:                                                                    

Trade Unions in the TNC Supply Chain and their relationship with the CSR movement

Chinese enterprises are essentially passive players at the sharp end of CSR in China. They are in a position of having to juggle between the different factors governing the development of industrial relations in China, including trade union reform. In this often tense dynamic, CSR is seen as an external factor and trade unions an internal factor. These two factors have an impact on each other. As part of the research for this case study, the research team (RT) ‘shadowed’ a CSR audit. The factory had come under very heavy CSR pressure in 2004. Altogether, the RT carried out two investigations: in March (see earlier printed report) and August 2006

Initial conclusions:

1) That factories undergoing CSR audits have better working conditions than those that don’t.

2) There is no evidence to suggest that trade unions have an impact on wage levels at enterprise level. However, factories subject to CSR pressure are generally large workplaces and this was perhaps a factor in improving labour conditions. Moreover, CSR-targeted factories are prone to data distortion due to ‘training of workers’ answers’ in interview and double or even triple accounting.

Enterprise Y was established in 1997 and now has 1,200 workers. It was ‘Re-registered’ in 2002 to take advantage of tax breaks etc. It manufactures electronic goods for export chiefly to three retailers and over 50% of goods go to a single US company.

Employment breakdown: 80 managers, 300 skilled workers; remainder are ordinary workers. Managers and skilled workers have contracts and social insurance based on minimum legal standards. The extent of contracts among unskilled workers remains unclear. The enterprise had previously supplied a ‘comprehensive’ contract and social insurance list to CSR audit team (excluding probationary workers) but the RT’s interviews with workers revealed that many had no idea if they had a contract or not or if they were paying into various social insurance schemes such as work injury or pensions.  The RT was not given access to formal SI contribution records.

Wages were verified at between 900-1100 yuan per month with on average more than 60 hours o/t but this was subject to orders. There were few disputes and conditions generally were better than at surrounding factories. Up until Aug 2006 accommodation was free and reasonably good. The labour turnover rate for unskilled workers was just 8% and most workers had been there more than two years already. However, in the same period the labour turnover rate for skilled workers had increased dramatically.

Enterprise Trade Union

Established in 2004. Trade union chair M directly elected by workers, largely as a result of pressure from the Brand. By August the follow-up research revealed M had left, apparently for ‘personal reasons’ according to management. Former vice chair C had taken over his position. C’s previous experience had been as a member of a trade union committee in an SOE trade union. He was appointed to the post at Y. The local township union said that there would be fresh union elections ‘soon’. The trade union at Y had three other union committee members. All were mid or senior level managers: human resources manager, one an engineer, and a finance manager. The union had an office in the enterprise but has no bank account or independent accounts/expenses system. All union activities were entirely dependent on management transferral of funds.

Trade Union Work

Approach to union work very similar to work in SOEs – i.e. very traditional. Also the union works very closely with the township union and pretty much depends on it for policy etc. The latter is very pleased with the Y union, which has received a number of awards. Activities include labour productivity competitions, May Day competitions. Prizes include going on holiday to HK. Examples of general day union work included:

  • Management introduced a charge for canteen food. The service had been franchised to outside contractors. In response the union organised a small group (xiao zu) which negotiated with the company and succeeded in getting the food and food hygiene situation improved.
  • Dormitory Management Team: made up of company reps and worker reps. Aim was to self-manage the dormitories and avoid management imposing arbitrary fines on workers. The committee’s work was based on a ‘Dormitory Management Contract’ which the union drew up. Any fines imposed had to be in accordance with the contract and workers reported an improvement in the overall dormitory conditions.

Union representing workers in wage consultations

The union was very proud of this aspect of its work. Wages stipulated in contracts were 574 yuan per month – however the real income of workers varied between 900 and 1100 per month due to o/t.

On 1 September 2006 – the government introduced new standards for min. wage which were reset at 690 yuan per month, which at current contract and o/t levels in the factory would mean a 300 yuan per month wage increase. Company provided figures which made it clear that if they abided by the wage increase in current market conditions they would go bust. Y’s HR department presented a proposal saying that Y should meet new min. wage requirements but cancel food and board subsidy. However, this would break contracts with workers in which the company agreed to supply food and dormitory accommodation. Management consulted with local government and township trade union and decided to try and solve the problem through consultations with enterprise union.

RT investigation found that the consultation did not follow either the regulations on collective consultations on wages, nor did they constitute a collective contract. Instead: Workers Rep meeting called by boss: mostly production managers but also a small number of line workers present who were appointed as ‘reps’ by the trade union chair. RT observed this meeting and also provided legal advice to worker reps. At the meeting was a deputy managing director and the two managers from the union committee.

Meeting procedures and presentations recorded in report – worker reps presented with an ultimatum regarding bankruptcy plus threat of dismissal from HR dep. for anyone who did not agree with the cancellation of free food and board.   Trade union said: it wanted the new min. wage standard met; new charges for food and board should be reasonable and include a self management team for dormitory. Union also called for further consultation with members.

Not much feedback from members. Union held further talks with senior company managers. This led to the Method of New wage Management. New charges 200 for dorm and 60 for food, a rate below market prices but reduced the wage rise itself to between 40-60 yuan. RT interviews with workers showed that most workers agreed with the new arrangements. A minority felt that they had been cheated. All signed the new agreement and anyone who refused was told their contracts would not be renewed.

CSR audit

RT shadowed and at times provided translation for a social audit team. Despite the professionalism of the audit team, their task to report actual conditions at the factory was essentially a failure. The audit team asked that the factory management bring o/t levels down to legal levels, although they also expressed an understanding of local conditions and stated that workers were able to take adequate rest time despite high levels of overtime. No workers expressed dissatisfaction with pay and conditions directly to audit team.

The audit team also had an extensive meeting with trade union chair who told them that the new wage levels had been met but did not mention the introduction of dormitory and canteen charges. The audit team also asked that a dispute mediation committee be established at factory level as well as warning management that a complaints system for workers should be implemented as soon as possible. Also discussions over whether the deposit that the factory demanded for work uniform was an illegal job deposit. Audit team agreed that it wasn’t.

Audit team did not discover the fact that some workers who did not meet piece rate targets had to complete quotas in their own time – up to 1-2 hours per day! The trade union chair had told workers it was in their interests to lie to audit team over working hours as trained to do so by enterprise management. He was under no pressure to take this line from the enterprise itself.


  • Organisation of the trade union was from CSR pressure not pressure from workers i.e. in effect top down. 2004 US client retailer had cancelled an order due to working conditions and this had caused losses.
  • Union operated in a cooperative manner with management not confrontational.
  • With regard to a workers’ complaints and mediation system. The US client did not believe it to be true when management had told them there were no disputes with or among the workers.  The real situation was that the union had not taken part in any disputes. RT checked with the MOLSS and found that a dispute had occurred following a death in the dormitory. Management denied it was due to a work injury and police ruled out criminal behaviour. Eventually MOLSS brokered compensation with family and Y enterprise. No details made available. However, RT concluded from this dispute that the company did not have an injury compensation scheme for workers. If they did have, the settlement would have been between the dead worker’s family and the insurance company.
  • Audit ream did not discover that the HR department pressured workers to hand in their notice when they wanted to cut staff levels rather than simply lay them off. This was to avoid compensation. The union also kept silent on this.
  • The wage negotiation process was entirely non-confrontational except for HR attitude to the workers, who were threatened with dismissal if they objected to concluding the agreement.
  • The union helped the enterprise and the brand find an easy way out of the wage dilemma. It did not ‘represent’ the workers in this process.


1. What is the experience of China about Trade Union in the above mentioned case?

2. How Trade Union resolved the dispute? By confrontation or by negotiations?

3. What is the general impression about the Trade Union movement with reference to this case?

4. Give your comments and opinion


Case 2                                                                                                           

Acas and Essex Ambulance Service NHS Trust: Improving consultation and working patterns.

The Challenge

Essex Ambulance Service (EAS) is an organisation dealing with unscheduled care,predominantly accessed via 999 calls. It was established as an NHS Trust in 1990 and employs around 1,300 people who are primarily members of two unions, Unison and the GMB.

The Trust had two inter-related problems. Firstly, relations between management and unions had deteriorated after a national ambulance dispute in 1989. Trade unions did not have recognition at the Trust, and a trade union representative described the management-union relationship throughout the 1990s as “arms-length” and “fairly tense”. During this time, trade union involvement was restricted to representatives attending health and safety committees and representing union members during individual disputes. Consultation between management and the workforce was nonexistent, and this was due in part to the management style of the organisation. A JNCC (joint negotiation and consultation committee) was established at the unions’ insistence, but it was largely ineffective. Decisions made at the JNCC were often overturned or ignored by the Chief Executive Officer (CEO), thereby damaging the committee’s credibility, and the CEO had no involvement in the committee.

This contributed to a second problem: a failure to respond to different staff interests by modernising working arrangements for part-time and relief staff. These workers were unable to influence their work roster and shift patterns to the same extent as full-time and longer serving staff. And because of a lack of consultation mechanisms, it was proving difficult to agree on strategies that would mutually resolve the problem.

The Trust eventually recognised trade unions in 1999. In 2002, following the departure of key managers who had resisted engaging in joint consultation, trade union representatives, supported by management, contacted Acas for help in addressing these problems and improving the employment relations climate. Acas was approached, according to the HR manager, because it was seen as “independent, and expert around this area”.

How Acas helped

In October 2002 the Acas adviser met with management and trade unions to develop two sets of workshop programmes, each addressing the issues identified as problems.

Two initial workshop sessions were held to discuss rostering issues. The Acas adviser led these workshops, using techniques to break down barriers between participants, including splitting them into mixed (management-trade union) groups to work on problems and design solutions. Throughout the workshops, the adviser also profiled examples of how problems were resolved in other organisations she had worked with.By the end of the first workshop a number of recommendations were developed, including the need to have clear principles driving consultation, the need for a review of the roster system, and the need to have stronger informal ties between key management-union players. The Acas adviser then put together a report based on the ideas and suggestions generated at the workshop, and these were discussed at a further workshop, at which participants ratified and agreed a new system of rosters.

‘Break-out groups’ addressed problems in a way that included the voice of all parties, and stakeholders and the adviser also worked with specific sub-groups of staff – for example relief workers (who fill in for workers on holiday or sick leave) – to tackle particular rostering problems and design improved working practices.

The adviser organised a subsequent facilitated workshop in early 2003, attended by key Trust managers and union groups. Its aim was to establish the purpose of the JNCC and its terms of reference. Whilst no formal output emerged from the workshop, participants felt that it had formed the basis for the renewal of the forum. The HR manager described the imperatives driving this initiative:

“… bear in mind we’re coming from a stance where the unions weren’t involved in negotiation at all … We’re moving towards Agenda for Change now and that’s very much about partnership working with staff-side. So we wanted to make sure that the JNCC had the right terms of reference and was going to be working effectively for both sides to benefit.”

The benefits: improved consultation and working patterns:

A range of positive outcomes flowed from Acas’ involvement at the Trust, with management and trade union representatives emphasising their significance in light of the relationship difficulties and low levels of trust at the Trust during the 1990s. Firstly, the JNCC has become a central feature of employment relations at the Trust. It now functions effectively, partly as a result of good informal relations between key trade union representatives and HR managers. The Committee has provided a vehicle for regular management-trade union dialogue on a wide variety of issues, including work-life balance and flexible working. The JNCC has also become a crucial medium for discussions around Agenda for Change. Secondly, in terms of work rosters, there is a new system that accommodates the interests of both full-time staff and those on a variety of different contracts. Employees who formerly had little advance knowledge of when they were working can now plan their rest days more clearly. In facilitating changes in working patterns, the Acas project has brought part-time staff closer to the strategic concerns of the Trust. This has meant that human resource planning is clearer and more consensual in nature, and levels of commitment from part-time staff are, according to trade union representatives, higher than in the past.

Thirdly, the process of improving consultative mechanisms and the roster system has helped build relationships between management and union representatives, enabling them to develop other new practices relating to, for example, meal breaks and work-life balance initiatives. A joint approach has also been taken to managing the implementation of Agenda for Change, with trade union representatives reporting that they now feel that they have some ownership over its development. There are now ‘joint management-union chairs’ for sub-groups, including Agenda for Change sub-groups, each tackling a variety of new issues and reforms. These new issues are approached in a very different way to the past, when the level of dialogue was virtually non-existent. There are still differences and problems, but the new framework has sustained a high degree of joint working. Central to this has been the strong explicit commitment and support for consultative mechanisms from the union and senior management, including the interim CEO, who chaired the JNCC. As one trade union representative explained:

“(The Acas project) has built a foundation to move forward on the working lives for our relief staff, for full time staff. And we’ve now got the JNCC firmly established as the main staff conduit to the head of the organisation on a formal basis.”

According to HR managers and trade union representatives, longer term benefits of Acas involvement have become evident over the last two years. These include increased levels of trust between employees, unions and managers, and improved formal and informal workplace relations. Trade union representatives and managers now speak to each other openly and constructively, and improvements to operational systems and practices are the subject of consultation and dialogue to a much greater extent than in the past. Such is the nature of the turnaround that Trust managers and union representatives are often called upon to provide advice to other Trusts who are attempting to improve employer-trade union relationships.


1. Give the brief history of the above mentioned case study

2. What was the problem? How it was resolved?

3. What was the effect of solution on the unit’s mechanism?

4. What is the message?


Case 3                                                                                                          

Changing role of trade unions

The curtain has at last come down on one of the most famous marquees in the motorcar industry, with MG Rover finally shutting down production earlier this month.

A company that once employed 40,000 people in the British Midlands, with an equal number employed in the factories of suppliers, had been forced to scale down its operations over the years.

But even skeletal operations with 4,000 people has now ceased. It is an example of what destructive trade unionism can do to an industry.

Arthur Scargil in the 1980s set out to destroy industry in the Midlands with his brand of militant and destructive trade unionism. Finally Mrs Thatcher stood up to him and showed him the limits to which trade unions could push industry.

She privatised industries and Scargil lost his power base, which was mainly in public sector heavy industries. Successive governments in Britain after Mrs Thatcher have refused to bail out public sector undertakings with subsidies and grants.

This has resulted in Britain transforming itself from being the sick man of Europe to one of the more dynamic economies in the West.

In India too we have had examples of the Arthur Scargil brand of trade unionism. What Datta Samant did to the cotton textile and engineering industries in Mumbai was equally devastating.

Almost all the textile mills in the city closed because of the unreasonable demands made by trade unions under Datta Samant. India has the advantages of (a) growing both long staple and short staple cotton and (b) a huge domestic market.

We could have been the cotton textile source for the whole world. But battling militant trade unions, on the one hand, while coping with price controls imposed by unimaginative governments and textile quotas imposed by foreign governments, on the other, proved too much for our textile industry.

It did not have the necessary financial and managerial resources, and it failed to modernize and remain competitive in terms of quality and cost. So it declined and became terminally ill.

Trade unions are a legitimate system for organizing workers and to voice their rights and grievances. Without them companies would become either too paternalistic or too dictatorial.

Responsible unions help to create a middle path in the relationship between management and labour while maintaining the responsibilities of the former and the dignity of the latter.

Where things go wrong is when the management becomes authoritarian, especially in owner/family-managed companies, or when a trade union leader allows emotion and ego to overcome reason.

Fortunately today, workers have become better informed and aware of the economic forces that impact their industry. The media has helped to create much greater economic awareness.

So it is not so easy to mislead them. Managements too have become more sensitive and skilled in handling relationships with employees. This is true of even family-owned and managed businesses.

TVS [Get Quote] in the South is a prime example of how a large family-managed industrial group has successfully managed its relationship with employees through enlightened management. There are more such examples in other parts of the country.

Perhaps the labour departments of governments at the state and the Centre should sponsor the institutes of management to do case studies of companies that have built up such successful relationships. Instead of merely administering rules and labour laws, these government departments could also act as apostles of good practices in the field.

As the skill levels and educational qualifications of employees advance, the role and significance of trade unions tend to diminish. This is because (a) employees are able to represent their own case and (b) managements are more sensitive to the needs of individual employees, whose intellectual skills become almost uniquely valuable.

This is already happening in the sunrise industries based on brainpower such as IT and telecommunications. Another phenomenon in these modern industries is that employees have greater opportunity and tendency to move from one company to another, not only because of better terms of employment but also because of their yearning to learn new skills.

This appetite for learning is something remarkable, especially in the IT industry. In fact, people in that industry are more bothered about what they can learn in a company than about how much they earn.

This phenomenon is facilitated by the fact that there are plenty of employment opportunities in IT and it is a young industry. That is why one does not notice any union flags in the Silicon Valley of India/Bangalore’s Electronic City.

Trade unions have declined in their importance even in the UK, the original home of trade unions. The UK’s Labour Party was formed by socialist leaders of trade unions.

Today, Tony Blair does not have to depend on trade unions as much as his predecessors had to do in the 1980s and 90s. The Labour Party’s appeal to the public is based on key policy issues such as spending on the National Health Service and the education system, rather than anything to do with labour policy.

In the US, trade unions are powerful in negotiations with individual employers, but have no significant political clout although they generally support the Democratic Party.

The same is the case in Japan. Even in Germany, France, and Italy, the role of trade unions has become more focused on negotiations with employers rather than on politics.

The privatization or corporatisation of many public services such as electricity and water supply has accelerated this shift. Hopefully the same shift in the character and role of trade unions will happen in India — even in places like Kerala and Bengal, as employment starts to move to more intellect-based activities and public sector industries are privatized.

Responsible trade union leaders with a long-term vision will adapt their policies to suit the new realities.

Correspondingly, there has also been a change in the attitude of management, even in family-managed companies. They are now better educated and many of them have been exposed to international education and international markets.

They realise the dignity of human beings more than their previous generation and therefore are less prone to treat employees in a scurvy manner. More and more companies are investing in management training and development.

This has also helped to create much better awareness of the aspirations of workmen, among the managers.

Yet the last vestiges of negative union practices continue to persist in monopolistic public services like the state transport undertakings, state electricity boards, etc.

The only way to correct this is to corporatise or privatise these undertakings or open them up to competition. A prime example of the change that is possible is what has happened in aviation.

Once airline services were opened up to competition, the whole scene changed. Instead of treating passengers with the indifference typical of a public sector employee, Indian Airlines staff learnt even to smile while greeting passengers.

In addition, we have created some world-class private carriers in the domestic market who are now set to take wing on international routes. Even the railways can be privatised.

The rail track in each region can be owned and operated by a company, which then allows competing companies to run their trains on these tracks. Similarly, there is no reason why urban bus services cannot be made more efficient by opening them up to competition.

Today they are run as monopolies due to pressure from unionised labour. For example, in Mumbai the urban bus service is cross-subsidised by BEST Electric Supply services.


1. What do you know about changing role of Trade Union activities?

2. What is the role of responsible Trade Unionism?

3. Is Privatisation a challenge for Union activities?

4. What is the lesson learnt from the IT sector?

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