A SCHEME TO LINK UP PRODUCTIVITY WITH BONUS

Synopsis: Communication For Productivity Letters written to some 7500 Workers / Managers / Union Leaders, following a period of strike / Go slow / Murders (1979 - 1987), at Mumbai factory of Larsen & Toubro Ltd. This direct / open / honest communication led to a remarkable atmosphere of trust between Workers and Management, which, in turn, increased productivity at 3% per year (ave).

8 March 1985

My Dear Mr. Naik,

Sub: A Scheme to link up productivity with Bonus

Ref: Your letter dt. 28^th December 1980

I your above mentioned letter, you have expressed many thoughts. I agree with some of these and do not agree with some others.

Matters on which we agree:

1.  When the salient working results of the Company appear in the newspapers, workers start voicing their aspirations on bonus and after the Company’s Annual General Meeting, pressure groups start expressing demands.

2.  The Management and the Union should work together to find a permanent solution to the bonus problem.

Matters on which we differ:

1.  If the Management and the Union are to work together to find a permanent solution to the bonus issue, it should not only be ‘in line with the workers’ expectations, but, it should be in line with the Management’s expectation as well.

2.  Linking Productivity with bonus does not appear to be the ‘permanent’ solution that you and I seek – not atleast in the near future.

What makes me dis-agree with you ? Let us examine:

Whereas, it is not difficult to think of a Scheme linking productivity to bonus, where is the assurance that it will work? 

Both, the Union and the management, made one such attempt in January 1979. In our 4-year Agreement, we linked productivity with substantial benefits granted to the ‘give –and take’ basis, the Union and the workmen undertook to raise the individual/departmental productivity indices by 25 points. That was the linkage.

Nearly two years have elapsed since we first established this linkage – what do we find? The workmen continue to receive Rs. 200/- month after month, whereas the performance indices have largely remained where they were in January 79 and in stray cases marginally gone up – or even down:

And we cannot say that the workers/Union are unaware of the commitment made by them or unaware of what has actually happened: with 3-tier productivity Committees constituted in September 79 (and announced jointly by Mr. S.V.Nalwade, the then General Secretary and myself) and the number of monthly meetings taking place, it would difficult to say that there has been any communication failure in this respect. Despite necessary efforts, both on the part of the Union office bearers and the managers, the results are simply not there. Why is it that despite so much good-will and communication, the increase in performance indices by 25 points remains a dream?

This is the key question to which all of us must address ourselves. Till such time, we find an answer to this question, (and implement the same) we should not, I believe, attempt linking poor productivity to anything else.

And I believe, I know the answer.

The answer lies in the very human nature. An individual would make additional efforts if he could expect to be reasonably rewarded for the extra efforts. This is the basic efforts/reward relationship. What apparently went wrong with our 1979 Agreement is that we put the ‘cart before the horse’. I strongly feel that instead of giving away the reward of Rs. 200/- in advance, had we linked the reward of Rs. 8/- per rise of each P.I. point and rewarded only after the PI has actually gone up, we would have by now, attained a total rise of 25 points or perhaps more.

The linkage was supposed to be already there but the effort/reward relationship was twisted.

Should we not straighten out our existing ‘twisted’ links first before we think of adding others ?

H.C. PAREKH