PROFILE DR. ABDUL QADEER
COLUMN FOR THE RECORD
POLITICS & POLICY AFTER ELECTIONS
EDUCATION  PROBLEMS OF EDUCATION
SOCIETY  1- CHANGING ROLE FROM CBA TO PSA.
2-
BOOK REVIEW 

 

CHANGING ROLE FROM CBA TO PSA

 


By Prof. Dr. KHAWAJA AMJAD SAEED

Oct 14 - 20, 2002
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Trade Unions are an integral part of Capitalistic/Free Economy set-up. Constituencies of democratic countries encourage establishment of trade unions and their positive roles. Enlightened Culture of trade unions has been instrumental in producing productive and profitable results. Earnest desire of every stakeholders is to ensure that trade unions play the role and create synergy.

However, it has generally been observed that the employers do not feel comfortable after the trade unions through CBAs serve Charter of Demand. These charters continue to be highly demanding and employers continue to be worried on these aspects.

It may not be unfair to deny the sharing of ever increasing profitability amongst the employees/workers. However there is a strong school of thought which argues that there are four factors of production namely, land, labour, capital and organization. Therefore labour is one factor of production. Accordingly sharing of profitability to labor needs to be re-examined and reassessed.

Moreover, there is a traditional approach of distributing bonuses to workers. The minimum is generally one and maximum has no limit. Interesting aspect is that every worker/employee receives bonus, irrespective of the tangible contribution.

Ever demanding attitude of workers results in cost-push inflation and eventually consumers also suffer badly and thus social tensions are caused.

At the end of the day, employers, employees and other stakeholders appear to be dissatisfied with the present system of CBA. Therefore, it is high time that we may initiate innovative thinking to help develop a new system which should, at least, meet the following two pre-requisite:

1. The system should be non-inflationary
2. It should be self-financing

Keeping the foregoing aspects, it is suggested that we may re-define the role of Collective Bargaining Agreements and switch to another creative and innovative approach which we wish to name as Produtive Sharing Agreements (PSA). The Trade Union leaders must not misunderstand the position as a suggested new and innovative role of CBA is being suggested. This is in the interest of all stakeholders and would be highly beneficial for the economy of each SAARC Country.

CHALLENGES

The whole world is facing tough and cut-throat competition. Interesting challenges have emerged. This is highlighted by the following events:

1. Ability to compete globally is becoming complex.
2. The economic expansion and glorious performance of Japan and Pacific Rim is posing great problems to several countries.
3. The rise of European Economic Union and Europe will have great impact on every Country.
4. The economic growth of China is a great worry for several economies.
5. The East European Countries are developing themselves to take a place on the table of the world.
6. WTO regime will facilitate open and accelerated cross border trade and services.

In this backdrop, challenges need to be visualized and human resource management/development is a great niche to be harnessed to prepare ourselves to accept the challenge of economic survival and later economic growth through generating wealth and later sharing it.

CBA CONSTITUENTS

Collective Bargaining Agreements are negotiated between Labor and Management. These contain several aspects (Table 1). It has been generally experienced that the trade unions continue to be demanding and the matters to be agreed continue to show rising trend. Besides adding worries to management this trend has consequential effect in the form of cost-push inflation.

TABLE 1
CBA CONSTITUENTS

1. Wage rates and allowances
2. Union recognition
3. Check off
4. Insurance
5. Retirement benefits (Providen Fund, Pension, etc.)
6. Time off benefits (vacations, holidays, etc.)
7. Discipline
8. Strikes/Lockouts
9. Dispute settlement
10. Management Rights

APPROACHES TO COMPENSATION

The world is trying to strongly link productivity with compensation to employees. Developing countries, by and large, are continuing monthly wage/salary system.

Due to various decisions and announcements by Governments and negotiation between labor and Management, pay increases take place. One must target to increase the size of the cake and later share it in an appropriate manner.

Search for a change must continue. There can be no improvement except through change. Consequently the world is struggling to develop alternate systems of compensation to employees based on increase in productivity. So far the following four approaches have been developed and are in operation in developed part of the world.

Table 2
GROWING TRENDS IN COMPENSATION HANDLING

Focus

Operational Aspects

1. Ernployee Ownership

ESOP as creative finance.

2. Production Sharing

Bonuses to employees exceeding predetermined levels of output.

3. Profit Sharing

EVA sets the targets and these should exceed.

4. Cost Reduction

Contain labor cost. Scanlan Plan is an example

ACHIEVING PRODUCTIVITY

Four stages exist for achieving productivity. The first one relates to awareness. The second one is known as understanding it. This paper will focus on the other two, namely, operationalizing productivity and sharing gains of productivity via PSA.

OPERATIONALIZING PRODUCTIVITY

A strategy for operationalising productivity and three phases for implementing a program for productivity management are suggested below:

i) Analytical phase
ii) Planning and control phase at operational levels
iii) Planning and control at the financial levels

Practical steps to be taken for the above phases are now explained:

Analytical phase

Three steps to be taken in the analysis phase would include identification of work unit responsibilities, analysis of methods and procedures, and development of performance measures. A checklist in respect of each of the above steps is given in Table 3.

Table 3 
ANALYTICAL PHASE

Steps

Activities

1- Identification of Work Unit responsibilities

Activities essential to accomplish basic responsibilities of the department.
Identify duplicate and overlapping responsibilities Responsibilities that should be addressed within the organization be clearly identified and assigned.

2. Analysis of Methods and Procedures

Evaluate and identify potential improvement Conduct detailed analysis of existing operating systems emphasizing a clear definition of procedure and collection of pertinent statistical information, e.g. deadline, timing, frequency and volume of activity.
Carry out work load balancing through development of work schedule systems for planning systems for planning production cycle times, eliminating bottlenecks, and maintaining high levels of operating and equipment utilization.

3. Development of Performance Measures

Establish basis for efficiency.
Measurement and planning of resources requirements.
Measure of performance be evolved. A suggested approach is as under:

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Resources

Activity

Performance Measures

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Materials

Auto/Truck Operation

Miles/Gallons

.

Production

Planned/ Actual Operation

Turnover

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Equipment

Production Operation Construction

Hours available/ Hours Used Hours Scheduled/ Hours used

PLANNING AND CONTROL AT THE OPERATIONAL LEVELS

Two essential objectives for accomplishing the above phase include: Develop quantified operating goals, and monitor and control operations. A suggested checklist to achieve these objectives, are given in Table 4.

Table 4 
OPERATIONAL PLANNING AND CONTROL

Steps

Activities

1. Develop Quantified Operating Goals

Responsibilities of first line management be spelled out.
Goals should not be established unilaterally. Participatory approach should be followed. Important factors inhibiting productivity growth should be carefully watched. Productivity goals should be established for each performance measure.

2. Monitoring and Controlling Operation

Corrective action be initiated.
Information and timing would facilitate productivity control. Operational statistics be collected to facilitate control.
Periodical statistical summary and financial report be prepared for higher summary and financial report be prepared for higher level of management.
Highlight variances between productivity objectives and actual productivity attained.

PLANNING AND CONTROL AT THE FINANCIAL LEVELS

Four steps for establishing a mechanism for planning and control at financial level include: ensure quality of budgeting, launch cost reduction plans, initiate budget development steps, and undertake budget variance analysis. A checklist to achieve these steps is tabulated in Table 5:

Table 5 
FINANCIAL PLANNING AND CONTROL

Steps

Activities

1. Quality of Budgeting

Creative approach will target for achieving cost rationalization resulting in cost reduction.
Concern over energy cost and its conservation continues to be shared.

2. Cost Reduction

Improvement in productivity potentially result in improved services level, capacity to perform additional work in direct reduction of payroll expenses.

3. Budget Development

Instead of incremental budgeting, thoughts be given to introducing program budget or zero-based budget. Consideration be given to developing standard costing system.

4. Budget Variance Analysis

Feedback mechanism be institutionalized Positive or negative variances be worked out for initiating corrective action.

CRITERIA FOR DEVELOPING PSA

Productivity measurement and sharing schemes should be developed meeting the following criteria:

* APPROPRIATENESS

The reward to labour should be appropriate. It should be proportionate to the extra effort and high enough to provide the incentive.

*SIMPLICITY

The system should be easy to understand and compute. Labour may comprehend it fully. In case of any ambiguity, clarification must be provided to the entire satisfaction of labour. A well-defined communication policy should be followed to earn credibility about operational aspects of the schemes.

*LOGISTICS

Full logistics should be provided to ensure supportive working conditions and environment for achieving goals of productivity.

*QUALITY

High qualitative standards must be ensured. There should be no compromise on this aspect.

*FAITH

Both labour and management must pin their faith in the above aspects, failing which the whole exercise will be infructuous.

*REMOVING IRRITANTS

Literature is full of techniques to be used for removing irritants for breaking the status quo and implementing change by following a new and innovative approach for a new system. Apart from conceptualizing a new approach in a clear cut manner, developing operational details, there is a dire need to have continuous dialogue with those who are going to implement. Two approaches are needed in this respect. The first is known as "Feed Forward". The change agent must visualize the irritants and try to punture the fears of implementors. The second one is "Feed Back". An institutionalized approach must be followed to receive feedback so that PSA becomes popular and is implemented as a changing role to CBA.

SUPPORTIVE LOGISTICS TO PSA

Supportive logistics to PSA require a successful accomplishment in three directions, namely, consultation, harmony and concern for productivity. Focus should be on fuller capacity utilization and on labor productivity. Long-term technology perspectives supported with action plans should be visualized, consultations should be held with collective bargaining agents and harmonious industrial relations alongwith positive trade union attitude must exist.

As supportive logistics to PSA, the organization must hire the best, maintain congenial atmosphere, continue consultative mechanism, ensure quality training, create productivity awareness, create team spirit, institutionalize monitoring and demonstrate results. Code of Ethics (Annex "A") is suggested to be implemented.

No one system can be suggested as a generic model. Customized system will need to be developed for application in each case. However for guidance purpose, redeeming features of various incentive plans used to operationalize PSA are given on Annex "B" and "C".

CONCLUDING COMMENTS

It is high time that we may initiate steps to operationalise PSA into reality. Successful dialogue must be initiated to pave the way for a confident implementation. Our region aspires for sustainable prosperity, higher standards of living, accelerated socio-economic growth and satisfaction as a member of civil society. PSA will be a prosperity driver. Let us get committed to it and demonstrate productive results and harvest the benefits highlighted in this paper. Prosperous future awaits us. We need to stay committed for implementing PSA.

Annex "A"
CODE OF ETHICS

As a member of the Society for Human Resource Management, I pledge myself to:

•Maintain the highest standards of professional and personal conduct.

•Instill in the employees and the public a sense of confidence about the conduct and intentions of my employer.

•Strive for personal growth in the field of human resource management.

•Maintain loyalty to my employer and pursue its objectives in ways that are consistent with the public interest.

•Support the Society's goals and objectives for developing the human resource management profession.

•Uphold all laws and regulations relating to my employer's activities.

•Encourage my employer to make the fair and equitable treatment of all employees a primary concern.

•Refrain from using official position, either regular or volunteer, to secure special privilege, gain or benefit for myself.

•Strive to make my employer profitable both in monetary terms and through the support and encouragement of effective employment practices.

•Maintain the confidentiality of privileged information.

.

•Improve public understanding of the role of human resource management.

This Code of Ethics . for members of the Society for Human Resource Management has been adopted to promote and maintain the highest standards of personal conduct and professional standards among its members. Adherence to this code is required for membership in the Society and serves to assure public confidence in the integrity and service of human resource management professionals.

Source: Reprinted by permission of the Society for Human Resource Management, Alexandria Virginia.

Annex "B"
PRODUCTIVITY SHARING PLANS

1. Taylor Differential Piece Rate System
2. Rowan Premium Plan
3. Halsey Premium Plan
4. Halsey - Weir System
5. Emerson Efficiency System
6. Priestman's Productive Bonus System
7. Towne Gain Sharing Scheme
8. Merrick Differential Piece Rate System
9. Bedeaux Premium Point System
10. Gantt or Task Bonus System
11. Barth Scheme
12. Scanlan Plan
13. Rucker Plan
14.
Improshare

Annex "C"
A COMPARISON OF SCANLON, RUCKER AND IMPROSHARE
GAINSHARING APPROACHES

SCANLON

RUCKER

IMPROSHARE

Improve labor costs and/or quality

Improve labor and/or material costs

Reduce labor hours 

By vote of employees

By management or optional vote

By management
Usually goods producers Usually goods producers Usually goods producers

Production areas

Company or facility wide or smaller groups

Usually entire firm or facility

Production workers

Usually all employees excluding senior management

Usually all employees excluding senior management

Reductions in historical labor costs as a percentage of sales revenue, adjusted for inventory

Reductions in labor costs as a percentage of sales, adjusted for inventory, materials, and supplies. Reduction in labor hours for unit of output

Monthly bonus as a percentage of wages with a reserve for year-end bonus and seasonality

Monthly bonus as a percentage of wages with reserves for seasonality

Usually weekly (or payroll period) or a four week moving average

Extensive through formal suggestion system; also weekly department production committee and a monthly screening committee composed of production committee representatives, both of which review suggestions

Extensive through formal suggestion system and Rucker committees composed of employees and managers to improve communications about suggestions and problems. Limited primarily to employees figuring out how to reduce the number of hours needed to produce a standard output.
Source: Werther, William B., Davis, Keith; JR, Human Resources and Personnel Mananement, New York: McGraw-Hill, Inc. 1997, p.423.