Downsizing at Tata Steel
Rajeev Kumar
This case is set at the organizational level and looks at the process of downsizing and communication from a strategic perspective. It shows how communication could be used in support of business restructuring objectives, specifically, organizational change through a reduction in force. It is based on an actual downsizing process of an Indian Steel company. It highlights the need for a pragmatic, ethical, and professional approach to using communication in change management.
Downsizing is one of the key restructuring strategies adopted by an organization in order to adapt to the changing and competitive economic scenario, as well as increased automation, and improved technologies. It is aimed at achieving lower labor costs and increased efficiency, productivity and profitability. Organizations with well-defined manpower plans conduct in depth research and use voluntary retirement or early separation as one method to “rightsize” the workforce.
This case illuminates the nuances of strategic communication planning in support of the business objective of downsizing in an industrial organization, with particular focus on the role of visionary leadership, tradition, culture, communication processes, and business ethics.
Downsizing—a deliberate reduction in the size or complexity of a firm’s activities intended to improve the profitability, productivity, and/or competitiveness of the firm’s continuing operations. Employee costs are fixed costs and have a major impact on the total expenditure. Often, apart from downsizing, there may be no other alternative to improve performance in a competitive environment. Reducing the workforce is not always a cost-focused defensive reaction to economic problems. It can also be a proactive element of the organization’s long-term business strategy. Downsizing is not an isolated event; it is a process, a subsystem interrelated with other business and management subsystems. Downsizing has a tremendous social cost and impacts on employees, the community, the business product, the balance sheet and the company culture.
Once downsizing is chosen from amongst other alternatives, as the strategy the company will adopt, there are a number of options to consider its execution:
Normal attrition
Hiring slowdown/freeze
Wage freeze-reduction of pay increases, wages/benefits and perks
Reduction of work hours offer of leave without pay, shut down of facility
Voluntary retirement
Phased retirement
Voluntary/early separation
Termination for poor performance
Release of contract/temporary workers
Termination of constant percentage of employees throughout the company
Termination of employees in one division
Closure of one plant site
Closure of the business
Termination of all employees in all locations.
Rightsizing—a euphemism for downsizing at Tata Steel), used by the management so as to make the term inclusive of restructuring for the future through the creation of new and modern plants that would require fresh manning. Fresh posts were also created in the restructuring and some departments gained employee numbers.
Stakeholders—are internal and external individuals and organizations with a stake in the activities and actions of a corporation. Stakeholders work towards the survival or improvement of their stake holding. Their self-interest acts as a strong motive for their actions. Stakeholders may have vested interests.
Stakeholder analysis is important for communication planning. The degree of importance and interests of each stakeholder at each point of time in a business process must be identified. All stakeholder interests must be balanced and optimized. No stakeholder should be overlooked as each stakeholder has power and influence that may affect the implementation of the organization’s strategy. Surviving employees after a downsizing are also stakeholders.
Value of the firm—is not only a function of its earning potential, the maintenance of its market share, and the competency of its management, but also a function of the information flow between the firm’s owners and its stakeholders.
Strategy—is the direction and scope of an organization over the long term; ideally matching its resources to its changing environment and in particular, its markets, customers, or clients so as to meet stakeholder expectations.
Employee communication strategy—in employee communication, factors that influence the type of communication strategy adopted are as follows:
a. Size—the huge numbers involved requiring the adoption of formalized communication structures.
b. Fragmentation—separate geographical units spread raising the special difficulties of ensuring contact, consistency, and control.
c. Diversity—different audiences requiring different methods of communication to achieve desired impact.
d. Working arrangements—part timers working odd hours adding to difficulties of communication.
e. Politicization—company getting drawn by trade union attitudes into issues of no relevance to them.
Employee communication cannot be turned on and off like a tap. Once started, expectations are created for the future, which one must continue to meet, if credibility is to be maintained. As employee communication is a product of company culture, it must become a unifying element in helping achievement of business objectives.
Employee communication plan—for effective communication, the organization needs to integrate the message, messenger, methods, and media with the needs of the audience. A basic communication model for employee communication requires that for each issue that needs to be communicated, the audiences, message, messenger, media/methods and time/frequency be determined. A communication plan needs to build in mechanics to ensure that two-way communication occurs so that the organization addresses employees’ information needs and its own.
Survivors—employees who survive a downsizing exercise. They are an important audience for communication if the objectives of downsizing are to be achieved.
The classical theory of organization is based on the analogy between organization and machines. The role of the individual is underplayed in favor of output, efficiency, and order. Since human beings do have an influence on organizations, human relations theory stresses the importance of the individual and of social relations in organizational life, and suggests strategies for improving organization members’ satisfaction and for creating organizations that help individuals achieve their potential. The focus in human relations theory is on fulfilling the needs of organization members. Workers satisfaction was expected to lead to better motivation and higher productivity. The notion that “a happy worker is a productive worker” is based on the human relations approach (Kreps, 1990).
A superficial use of human relations theory principles gave human relations programs a bad reputation as a manipulative management strategy designed to increase worker output by offering workers false hopes and empty platitudes (Redding, 1984 cited in Kreps, 1990). Workers did not like being told that they were important and respected members of the organization only to be treated as mere cogs in the machine. The human resources perspective then developed in response to the cosmetic applications of the human relations theory, as a more enlightened strategy for meeting the needs of organization members, and increasing members’ participation in organizational activities. The human resources orientation emphasizes genuine participation in all levels of the organizational hierarchy. [A comparison of the superficial approach and the human resources approach to Human Relations Theory is given at Table 4.1 in Kreps’ book (Kreps, 1990:86)].
Participative management became an important part of the human relations theory. Human relations theory regards communication with workers as extremely important. Human relations theory suggests that the development of humanistic management, which acknowledges that it is important for organization leaders to determine the individual needs of the organization members. This can be achieved only through effective management-worker communication (Kreps, 1990). At Tata Steel, the human relations theory was an effectively prevalent practice.
Peters and Waterman (1982) identified some primary cultural themes in their sample of excellent business organizations. Firstly, excellent organizations emphasize productivity through people. These organizations have a people orientation, training their employees supportively with respect and positive regard. They stress intimacy and caring. Members often feel that they are a part of an extended family.
Secondly, excellent organizations emphasize hands-on value driven organizational activities. The hands-on notion suggests that the best leaders are those who are most in touch and involved with organizational activities. They follow the philosophy of “management by wandering around” where managers are highly visible and in contact with organization members. Both these cultural themes were evident at Tata Steel and are representative of the human relations theory practiced there. Communication was the primary channel used to promote the development and maintenance of organizational culture. There is a very close relationship between organizational communication and organizational culture.
At Tata Steel, communication was used to develop a thematic base for the development of a collective vision about the future development of the organization.
Failure to conform to the cultural norms can have a negative effect on the way an employee is perceived and evaluated by others, ultimately influencing the employee’s ability to elicit cooperation from co-workers and potentially jeopardizing raises, promotions, and even continued employment. Organizational culture enables its members to behave in accordance with the particular organization’s philosophy and goals by providing them with guidelines for their interpretations and reactions to organizational inputs. As the vision of Tata Steel was constantly fed to the masses, “rightsizing,” got equated with modernization and, by implication, a route to a rosy future. Organizational culture therefore required that all members contribute to the future state. A member targeted for separation would thus be under the latent pressure of the collective to accept the separation scheme lest he be viewed as an obstacle to the company’s progress, and the larger stake that the rest of the members thought they would have in the future organization.
Diane Gayeski (1993:142) has listed some communication heuristics that are relevant to change situations as existed at Tata Steel. One of them states that, “Organizations need to seek a balance between authoritarian, decisive, top down and rule based communication and participating, open, creative and discovery based communication. Neither the older scientific approaches nor the newer humanistic approaches to management are necessarily correct; thus, a situationally based set of theories will prove more useful.” Thus there are no blue prints and human ingenuity in practicing communication will always be in demand.
A1. Outstanding leadership can transform organizations. Leaders who inspire changes are those who have certain qualities about them. They are never satisfied with the status quo.
Kreps (1990:179) cites Bennis who spelt out the following characteristics that leaders should reflect, and which seem to fit Dr. Irani’s style:
Leaders develop vision and assertiveness to make effective and decisive organizational decisions.
They look at the larger picture rather than at the nuts and bolts of organizational life.
They see things in context, interpreting situations in terms of the organization’s unique history and goals.
They have the strength and courage to make difficult decisions and take calculated risks.
They gather relevant information and are able to interpret the multitude of organizational messages.
They recognize the importance of organizational culture and shape that culture to enhance interpersonal cooperation within and loyalty to the organization.
They feel comfortable with themselves and can handle the stress of leadership.
In addition, through his ethical behavior and personal role in planning and executing communication, Dr. Irani served as a role model, reinforcing values and expectations along with building leadership and initiative throughout the organization. His exceptional communication skills and focus on the communication process stand out.
Strategic planning is an essential activity of effective organizational leadership. Pursuing a strategy of downsizing requires courage and determination. Communication is the means by which a leader exercises influence and accomplishes his task. Dr. Irani used a communication strategy that demonstrates creativity and innovation and which contributed to the business success of the organization. Communication by leadership is critical to organizational success. Senior leaders set, communicate, and deploy organizational values, performance expectations, and a focus on creating and balancing value for customers and other stakeholders.
Dr Irani preferred communication face to face. He adopted a pro-active style, and managed while walking around. He had both a concern for people as well as the task. It is necessary to be skilful at influencing others, especially at a time of rapid organizational change. As managing director (MD), he addressed all stakeholders personally. He took a lot of trouble trying to convince people, including the top management, why the cuts were necessary.
According to Dr. Irani, “In a big organization, either intentionally or unintentionally, all people are not oriented towards their strategic objective. It is the task of the top management; of particularly the CEO that everybody does so.”
Dr. Irani kept his ear to the ground. He was fond of touring and keeping in close touch with the workers. He searched for opportunities to interact and motivate the employees himself. In him, the employees saw the visible face of the management. Often getting the real picture is the most important step to reaching crucial decisions. CEO’s fail when they get buffered from reality. This can happen in some organizations if too many people who prevent him from getting a reality check surround the CEO, and he gets filtered information. A successful CEO is one who is able to cut through this and get feedback without intermediaries.
Dr. Irani was a benevolent authoritarian, yet dynamic and charismatic with sound technical knowledge. He maintained a high degree of control in decision making, which may be necessary in transformation efforts. A straightforward speaker, he was quick to chastise. His dynamism was not tempered by tact. Such an approach can risk the motivations of subordinates and cause a decline in morale. Dr. Irani was highly energetic; decisive with a focus on the big picture; and with very high integrity. People held Dr. Irani in awe.
Invariably good leaders are good orators. It is with their power of speech that they communicate their vision and get their followers and supporters to buy in. To be able to persuade, a leader must have cogent arguments based on credible data. Credibility was Dr. Irani’s greatest strength.
When asked, “What did you achieve in Tata Steel?” Dr. Irani replied, “The most important thing to me was earn others respect, not popularity. I could build credibility and more importantly take hard decisions in the interest of the organization as a whole. Even those who were affected by my decisions accepted because they knew I had acted in good faith. This way people respect you even when they may not like you.”
A2. Tata Steel signed a historic agreement with the Tata Worker’s Union in August 1956, whereby the existing spirit of close cooperation, and the involvement of the workers’ representatives in management, was formalized with the formation of the Joint ConsultativeCommittee of Management, and elaborate consultative machinery and procedures. For the first time in the country, Tata Steel had agreed to associate the workers representatives in the management of the industry. This brought employees and management closer together, in the pursuit of their common objectives. Tata Steel’s approach reflected a paternalistic sensitivity to the concerns of the workforce, and a deeper benevolence that stems from an appreciation of the importance of people and the desire to ensure their welfare. Tata Steel is a role model in industrial relations and harmony and is considered a benchmark in Indian industry.
In addition to the constitution of several joint committees, a three-tier system of Joint Consultation machinery was installed. A streamlined grievance procedure was introduced. In the agreement, the union also achieved a guarantee that there would be no retrenchment and a payment of full emoluments for redundant workers was also agreed upon even if they were absorbed in lower-rated jobs.
The preamble of the 1956 agreement stated that:
“The purpose of this agreement is to establish and maintain orderly and cordial relations between the Company and the Union so as to promote the interests of the employees covered by this agreement and efficient operation of the companies business. The parties realized the importance and need of maintaining such good and cooperative management-labor relations for the effective and timely implementation of the schemes of modernization and expansion programmes....”
While the 1956 agreement paved the way for modernization, it also tied the hands of management with the clauses:
“that there will be no retrenchment of existing employees.”
“those employees required for the jobs other than those in which they are at present employed will, wherever necessary, be trained for other jobs.”
“the present average earnings of employees transferred or under training will be guaranteed to them.”
The agreement is renewed every four years with the same clauses. The foresight of Tata Steel is evident in the drafting of the 1956 agreement wherein it is clearly mentioned:
“… the Union recognizes the rights of management to introduce new or improved methods or equipment; to decide the number and locations of plants; the nature of equipment or machinery and the products to be manufactured....”
The agreement of 1956 with the union was the biggest hurdle to downsizing. But from the agreement, Tata Steel also got the rationale for change. The agreement recognized the need for management to have the prerogative of introducing new technologies. So this became the theme for change. This helped the management in completing its ambitious modernization phases between 1983 and 2000.
At Tata Steel, surplus manpower was generated because of closure of old units, skill obsolescence, and rationalization of force. Committed to the 1956 agreement, Tata Steel did not retrench any employee who had been declared surplus for any reason.
A collaborative approach to “agreement” formation ensures that both parties are actually committed to the spirit behind the words of that contract, decreasing the chance of misunderstandings and wrong assumptions that lead to disruptive conflict.
A3.What is effectiveness? According to Kreps (Kreps:1990:281), there are two primary strategies for determining organizational effectiveness-output measures and process measures. Effectiveness is a combination of high quality output and process. Output measures of organizational effectiveness evaluate organizational productivity and profit. Effectiveness has to be in line with the primary production-related purposes for which the organization was founded. Output measures are amenable to observation and quantification. There is a strong correlation between the effectiveness of human communication and the effectiveness of organizational output. From the output measures, Tata Steel’s downsizing effort was a tremendous success.
It is important to note that there may be no direct correlation between the productivity gains and the numbers of employees reduced since productivity gains could be attributed to many other confounding variables such as modernization of processes and equipment, level of training, environmental factors etc. Also, evaluation of raw output is insufficient for evaluating overall organizational effectiveness as many qualitative issues are ignored. “Organizations can demonstrate high productivity and profits while being inhumane, coercive and oppressive to their members and their environment. (Kersten & Pickett, 1981; Deetz, 1979 in Kreps, 1990). Ruthless management techniques can sometimes result in increased profits. Organizational effectiveness is much more than raw output. The quality of organizational communication processes is also an indicator of organizational effectiveness.” So when we look at the organizational communication processes at Tata Steel, we see that they were credible, multifarious, rich in content and media, frequent, repetitive, reinforcing, and efficient. However, organizational processes cannot be easily measured. “They are evaluated by assessing organizational members’ interpretation of quality of organizational life. Process outcomes such as member satisfaction, commitment, cohesiveness, loyalty, and cultural integration are useful measures of the effectiveness of organizational communication processes.” (Putnam & Pacanowsky, 1983; in Kreps,1990).
Thornhill et al (1990:253) hold the view that the continued commercial success of many organizations that have engaged in significant downsizing need to be viewed with a degree of caution. They believe that a range of contextual variables could affect and disguise the impact of negative reactions of downsizing survivors on the commercial performance of an organization, including the nature of technology being used, the skills of the workforce, the nature of work processes, and the need for innovative behavior. They therefore believe that the negative impact of psychological and behavioral reactions of survivors may be hidden from an organization’s balance sheet, at least in the short term.
The processes that contributed to the effectiveness of the downsizing strategy are now discussed.
Dr. Irani’s strategy was to change when one is still strong; when it appears change is not necessary; not when you have to. According to Kotter, (1995: 59–67), there is a need to establish a great sense of urgency and the status quo must be made to seem more dangerous than launching into the unknown. The business scenario must be explained to the employees. A powerful guiding coalition at the top management must be formed and a vision for the future must be created that is relatively easy to communicate and appeals to all the stakeholders. Dr. Irani was able to establish a sense of urgency, a steering group, and a vision of the future effectively. Gaining understanding and support is difficult when downsizing is a part of the vision. For this reason, successful visions usually include new growth possibilities and the commitment to treat anyone who is laid off fairly. The internal communication campaigns at Tata Steel were focused on new growth possibilities for the organization and its employees. In successful transformation efforts, executives use all communication channels to broadcast their vision. They walk the talk and feel the pulse of the organization. Then the guiding coalition empowers the executives to take action in the direction that they have provided and the obstacles to the new vision must be removed. What ‘obstacles’ does Dr. Irani want removed? The obstacles could be the organizational structure, compensation or performance appraisal systems, and rigid mindsets or ideas of those supporting the status quo. The removal could be through development of better understanding through communication, or at worst, dismissal or transfer of recalcitrant employees. But action to remove obstacles is essential so as to maintain the credibility of the change effort.
Organizations like Tata Steel with strong, supportive cultures that nurture their members and integrate them into the communication activities of organizational life demonstrate the process aspects of organizational effectiveness. Shared values, recognized heroes, participation in rites and rituals, and integration in communication networks are the key elements of strong cultures. These elements of strong culture also lead to process effectiveness. (Kreps:1990:281–283)
Companies with a strong culture remove a great deal of uncertainty because they provide structure and standards and a value system in which to operate (Kreps:1990:141). Culture produces extraordinary loyalty among the members and often extraordinary efforts in pursuit of shared goals. This in turn produces superior performance over the long term. It is vital to financial success. Downsizing, particularly on a large scale, and repeated over and over again as was the case at Tata Steel, can attack the core belief structure of the company, which for most employees has traditionally meant buying into the ethos of the company, working hard, remaining loyal, and having a job for life. Downsizing signals that there is no such thing as a lifetime job and no guarantee of continuity.
Tata Steel was an old company with an excellent reputation. Reputation is another motivation for benign downsizing. A lot of companies want to downsize nicely so that they are not looked down upon by their remaining employees and society in general. Employees still associate a stigma to being asked to leave an organization so the situation calls for delicate handling. It is important to offer people a soft landing with dignity if you want to be perceived as an employer of choice. Tata Steel was a paternalistic company with a real family feeling on the part of its employees. The key issues before companies like Tata Steel is how effective they are in helping their employees to cope with the tremendous changes in the environment as well as addressing the problems and concerns arising from a restructuring.
From the contingency theory of organizations we know that behavior in organizations is contingent upon a range of factors, such as the organization’s history, its management style, the industrial relations traditions which prevail, and the many environmental influences which are specific to that organization during that period of time.
Often, companies can become locked into their history. More recently formed companies can adapt practices from a modern era and can support change as their basic systems are still being developed, while industries with ample time to experience hardening of the organizational arteries, resist change (Kanter:1983:353). So, the challenge for Tata Steel was how to reduce employees and keep its corporate image intact. At the same time, in good companies there is always tremendous pride based on their past accomplishments. This must be capitalized on in communication as was done at Tata Steel.
In India, the Industrial Disputes Act, 1947, virtually prohibits lay-offs and retrenchment without permission of the government. Such permission is never really granted. Economic liberalization policies introduced by the Indian government in 1991–92, exerted pressure on the industry to optimize resources and become efficient. Downsizing became vital to the survival and growth of many industries as the markets became competitive. Given the rigid legal framework, organizations resorted to indirect means of trimming the workforce through introduction of voluntary retirement schemes or early separation schemes. Notice by an employer announcing voluntary retirement schemes is an invitation to workmen to offer to retire on the terms indicated in the scheme. When the employee makes an offer and the employer accepts it, the proposal becomes an agreement enforceable by law. Pursuance of strategic aims may often overlook human resource implications of the changes taking place. Tata Steel took special care in protecting the interests of its employees beyond the legal requirements.
The Tata organization had established clear standards of both behavior and performance. All managers were carefully socialized into the group’s culture, values, and business philosophy. Companies with commendable corporate cultures properly communicated their need for help from stakeholders when they need to because they have earned it. Tata Steel found loyalty and support from its primary stakeholder—the employees—through deeds and communications. The key to success is persuasion, motivating people to act the way you want. The need is to get them to care about the company and become part of the team, to understand all the stakeholders, to analyze how certain actions affect them, how to take actions and communicate them, and to know accurately what kind of behavior we can expect as a result of what and how we communicate to them.
Employees who separated were given help in dealing with the practical realities of losing their jobs. They were given help in terms of counseling, tax and investment advice, and help to find other jobs. External communication is also important to convince those leaving as well as the public, that those leaving were not discarded.
Voluntary retirement/early separation schemes must be designed after understanding the psychological and demographic profile of the employees as well as their current aspirations. Managements in the corporate sector are known to employ overt and covert pressures and counselling services to persuade redundant employees to exercise their voluntary retirement option. The scheme needs to be ‘sold’ to the employees.
The computation-of-benefits formula must be uncomplicated and psychologically reassuring to the employee that the voluntary retirement or early separation will not result in any material difference to his lifestyle.
The employees must be psychologically prepared. In this case, the employees were well versed with the theme of downsizing through annual lectures by a variety of guest speakers, as well as through the specific communication effort of the company prior to introducing the early separation schemes.
Schemes tend to succeed when they are perceived to actually build a sense of security for the employees who opt for the scheme. To cater to this need, some companies offer a lump sum or a pension scheme or both. In the case of Tata Steel, both were offered.
In the implementation phase, communication of separation schemes were through–the immediate supervisor or manager; counselling meetings; senior officers who “sell” the scheme; video films of successfully resettled ESS optees; union encouragement; involvement of family members; organization of exhibits/posters, and other techniques. Decision-making authority for accepting ESS must be swift and the decision on the application must be conveyed quickly.
The union must be taken into the confidence of management.
Timing is a crucial determinant impacting the employee in his decision to accept or reject the scheme. If the company announces an attractive VRS but keeps it open for a limited period, it is likely to be a success. In fact, the private sector experience indicates that the offer should never be kept indefinitely open.
In sum, communication and a combination of top-down and bottom-up management approach have been the key success factors in the effective process of downsizing at Tata Steel.
A4. In countries both rich and poor, dislocations from economic and corporate restructuring, downsizing and lay-offs, as well as diminished safety nets have meant heavy job losses and worsening employment conditions for many. At all levels there is a growing sense of insecurity. Many workers feel haunted by a constant sense of insecurity.
Downsizing can result in reduced loyalty and commitment, lower morale, lower levels of job satisfaction, increased stress, feelings of betrayal, anger, fright, and confusion and a disruption of the organization’s functions leading to poor quality and productivity. Some other common consequences of organizational change are, change in job content; change in social grouping; change in status; loss of earnings potential; changes in location; changes in conditions of employment; and changes in people’s beliefs, values, and assumptions (Sadler, 1995).
Trust can be the first victim of downsizing. It can turn into cynicism about the process as well as the integrity of the top management. There can be a breakdown of trust and friendship among men who work together and the disappearance of sustaining relationships that took years to develop.
Career anxiety caused by downsizing also affects organizational functioning. People begin to cover their career bases by increased rivalry. “The security of employment that comes from an expectation of continued ‘place’ in the organization is what creates not only an innovation embracing outlook, higher flexibility and lower resistance to change—but also a willingness to invest in the future (Kanter,1983).”
Layoff survivors experience the loss of co-workers, friends, supervisors, subordinates, and access to valued organizational resources. The loss in the reconfiguring of relationships can influence employee morale, well being, self esteem, and performance. Gaps in communication networks created by people who exit, are called structural holes. Important knowledge and contacts for the organization may get lost. These changes impact upon employee response to management initiatives.
In all restructuring situations, management of uncertainty through communication is common. Communication is a vital part of good management. Lack of communicative efficiency on the part of managements can lead to industrial unrest, operational inefficiency, and a condition where rumors will abound, causing frustration and possibly entrenching attitudes. Credible communication with the workforce may get harder to achieve and yes it contributes to harmonious working relationships, understanding of environmental conditions, the acceptance of change, and the improvement of productivity. Success or failure in business depends on how human resources are managed and success in managing human resources depends upon how communication is planned and executed. Even difficult issues can be tackled if a company attempts to manage change through communication with sensitivity.
The use of teams and visionary leaders takes care of the impact of organizational politics and a clear vision helps in allaying anxiety in the organization (Kanter, 1983: 413). Dialogues with all levels of the hierarchy proved to be a very constructive and interactive mode of communication at Tata Steel. Allowing employees to ask questions of the senior management, including the MD is an excellent mode of communication. Such openness and interactivity helps build trusting relationships.
Ram Charan (2001), cites what can differentiate companies and how a strong communication process of continuing dialogue with all the stakeholders can give a company the competitive edge. He argues that:
products and operational strengths of successful companies aren’t what really set them apart–they can all be rented or duplicated. What can’t be easily duplicated are the decisive dialogues and robust operating mechanisms and their links feedback and follow through. These factors constitute an organization’s most enduring competitive advantage, and they are heavily dependent on the character of dialogue that a leader exhibits and thereby influences throughout the organization. Decisive dialogue is easier to recognize than to define. It encourages incisiveness and creativity and brings coherence to seemingly fragmented and unrelated ideas. It allows tensions to surface and then resolves them by fully airing every relevant viewpoint. Because such dialogue is a process of intellectual inquiry rather than of advocacy, a search for truth rather than a contest, people feel emotionally committed to the outcome. The outcome seems ‘right’ because people have helped shape it. They are energized and ready to act.
Kanter (1983:64), states that “Change…is disturbing when it is done to us, exhilarating when it is done by us. It is considered positive when we are active contributors to bringing about something that we desire, or at least to making something valuable out of what is inevitable...” Kanter suggests that by reducing secretiveness, we can avoid surprises and increase a sense of security by making future plans known in advance and making it possible for those at lower levels to make their plans. We must give lower-level people a chance to contribute to the shape of change before decisions are made at the top.
Tata Steel appears to have followed the golden rule for communication—need to be regular, open, relevant, and honest and to recognize the vital importance of employees being among the first to be told. The responsibility of drawing up information briefs and ensuring that these reach the right people at the right time falls on the members of the management team. At Tata Steel, communication was high on the management agenda throughout the downsizing process. The MD personally guided the communication philosophy of the organization.
The first challenge was changing the mindset of Tata’s longstanding employees who were inured to the previous company credo of employment for life. Note how the MD personally took on the challenge of explaining business imperatives, including the guarantees to be withdrawn to the union representatives. The more controversial the change, the greater the need to invest time and to involve employees in face-to-face communication before implementing the change. The interaction with employees should help them to understand why change is necessary, the positive and negative effect on employees and how they can benefit from the change.
A variety of factors shape an employee’s thinking. Each person interprets events based on available information and his or her experience, wants, needs, fears, hopes, prejudice, and beliefs. It is human nature to selectively perceive, choosing what they will pay attention to or what they will ignore. Information is weighed in a very personal way, sizing up the situation and drawing conclusions that reflect one’s own angular viewpoint. Frequently people develop a negative mindset based on misinterpretation, faulty assumptions, ill motives or wrong-headed thinking in general. The result can be a collection of myths about change. It is important to identify and challenge these myths through organizational communication. In this case, note the capturing of employee’s fears about the company not paying up dues and the company’s decision about use of redundant, legally stamped paper to allay that fear.
Employees want a bigger say in what is happening in their companies, and they also have a keen interest in where their companies are heading. They want to know the company’s master plan—its goals and strategies. To identify what their communication needs are, and their preference of media, through opinion research or focus groups is an important part of employee communication planning. Feeding employees with information that management feels that they ought to know is a common mistake that should be avoided.
While companies look at themselves and their markets from a global perspective, it is not easy to make employees think globally. This poses a communication challenge. The role of employee communication is critical. What is in it for the employee needs to be communicated. They must be spoken with and not talked at. Communication has to be looked upon as everyone’s job.
A survey of potential targets decided the designing of the ESS and how the scheme was to be communicated to them. Solid research is the foundation on which an effective communication program is built. A communication program must be designed to ensure that everyone receives written and verbal explanations of the changes which are occurring and how they will be affected. Any such program needs to be timed and planned to release accurate information to the lowest levels swiftly and ahead of the grapevine. The grapevine can pose a threat to industrial relations. A well-planned and efficient program of internal communication can counteract that.
Clutterbuck, (2001) identified four categories of communication activity as the core competencies of the communication function in an organization. These were: Strategic communication planning; effective management of communication activity; experience/-ability/skills of communication professionals; and high quality communication media /tools.
He found four communication-related factors to be present in varying degrees in all successful companies and initiatives. These were:
A. Clarity of purpose—Focus on few key messages and reinforce them.
B. Effective Interfaces—Level of trust and openness between leaders and employees, managers and direct reports, within teams and between business and customers.
C. Effective information sharing—System and networks enabling managers and employees to have the right information at the right time sharing opinions, discussing ideas, circulating the best practices and learning from each other.
D. Consistent leadership behaviour—Need to be consistent formally and informally. Actions must support the business story.
At Tata Steel, we find that these communications-related characteristics were also present and therefore, the case supported the findings of Clutterbuck.
Communication is an integral part of the change process and should be treated as a key management lever in the planning, design, and implementation of any change program. It should get the resources and support from the top management. Many change programs fail to deliver because they fail to take the communication dimension into account. Strategic communications planning includes the development of a clear purpose and statement of the need for change, employee commitment to the change process, trained change leaders for support, and resources to facilitate communication’s vital role in successful change.
A5. Tate Steel had been a model employer. The management culture was benevolent and paternalistic. The biggest challenge was an entrenched tradition and history. A way had to be found to explain the need for change of the organization’s attitude and business practices. Social responsibility and business imperatives had to be balanced. Loyalty had to be balanced against productivity. There was no immediate crisis, but the threat of competition loomed large on the horizon. The case for restructuring had to be built and reinforced in several ways.
A6. In contracting organizations, the benefits to employees are not as attractive as they would be in growing organizations that are restructuring. The changes leave the majority with circumstances less attractive than before. A dilemma is how to cut costs yet maintain management effectiveness and motivation.
Firstly, redeployment helped people in gaining experience and they received training. The salary structure was not touched even if redeployment led to working several rungs down. Great sensitivity was shown in handling such issues.
Secondly, Waterman (1994), states a case for developing a career-resilient work force.
Under the old covenant, respectable companies offered job security in exchange for adequate performance and some exhibition of loyalty. Employees entrusted career progression to their employers. This is no longer true. Under the new covenant, employers give individuals the opportunity to develop greatly enhanced employability in exchange for better productivity and some degree of commitment to company purpose and community. It is the employee’s responsibility to manage his own career. It is the employer’s responsibility to provide employees with the tools, the open environment and the opportunities for assessing and developing their skills. The result is a group of self-reliant workers—a career resilient workforce. By this is meant a group of employees who not only are dedicated to the idea of continuous learning but also stand ready to reinvent themselves to keep pace with change; who take responsibility for their own career management; and last but not the least, who are committed to the company’s success.
At Tata Steel, the parallel initiative of cluster manning and multi-skilling increased the employability of workers. A caring philosophy, which recognizes the importance of the individual and expresses the objective of developing the inherent talents of every member of the workforce through ongoing training, throughout the career is likely to provide its own reward in a highly motivated and committed workforce.
Thirdly, the Tata Steel trade union leader refers to a “bigger share of the pie.” Gainsharing refers to a compensation system where the employer and employee together improve performance by better use of human resources resulting in productivity gain. Sharing is according to a predetermined formula derived from productivity and profit parameters. A complete department could be given a bonus based on performance level, as was being practiced at Tata Steel. Gainsharing systems are based on a participatory approach and enable employees to understand business imperatives for long-term growth. Financial participation can make a critical difference both to employees interest in, and reception of, business information and to their readiness to cooperate with management in improving performance. When everyone shares in the profits, the results become relevant and the psychological distance from the workplace is greatly reduced. (Wilkinson, 1989:46)
Fourth, an overly adequate and attractive compensation led many people at Tata Steel to crave early separation programs. Several were refused. As it was a targeted scheme.
Finally, with the withdrawal of the assurance of employment for the children of employees, alternate assistance to some, for instance, allowing use of company land for setting up small businesses or preference given for advertised job vacancies.
7. Was the process “transparent,” or was it manipulative?
A7. First, it is important to understand what “manipulative communication” is. Intention to mislead or deceive, malicious intent, gaining compliance by exploiting people’s fear and ignorance, distortion of meaning to achieve certain responses, and being economic with the truth are all different communicative actions that fall within the definition of manipulative communication. Use of manipulation can lead to loss of credibility and trust and a feeling among the employees of being used.
Kreps cites three broad principles to evaluate the relative ethics of internal and external organizational communication: honesty, avoiding harm, and justice.
Honesty is the best policy. Yet it is a deceptively tricky communication principle when applied to organizational life. For example, certain organizational information is proprietary or confidential and should not be disclosed for general dissemination. There is also potential confusion when examining depth of information disclosed. For example, does honesty mean telling only some of what you believe to be true or does it mean telling everything that you believe to be true? Furthermore there are few absolute truths. What people believe to be true is generally only their point of view, which may be based on false or incomplete information. Judgments of the honesty of human communication must take these limitations into account when determining the ethicality of organizational communication (1990:250).
Honest managerial communication can help establish trusting organizational climate, develop meaningful interpersonal relationships and elicit interpersonal co-orientation.
The commitment to honesty as understood by supervisors and managers is multifaceted. It involves not only truthful reporting of facts and numbers, but also such dimensions of good communication as openly giving employees information about higher management decisions that affect their work; being open to hear the concerns of employees; letting people know where they stand by being explicit about the standards and expectations by which their performance is judged; giving frequent feedback to employees on both the strengths and weaknesses of their performance; encouraging the development of a relationship of credibility and trust with one’s superior as well as with subordinates; and finally, the obligation of each manager to make explicit the expectation that employees are to report accurately on problems as they emerge, rather than tell the manager what they think he or she wants to hear. (Batchelder, 1982 cited in Kreps: 1990, 252)
At the same time that there are sensitivities of employees, there must be respect for the operational imperatives and prerogatives of management.
The management of information is important in helping organizations operate and adapt to change. In a change situation the aim is to influence the opinion of particular people in the organization in particular ways. Hence the management and disseminators need to have sufficient power, influence, and credibility to be able to decide:
a. Who is to be fed what information? To appreciate what exactly audiences expect, the company must blend psychology and methodology.
b. Do all groups need to be fed with same information?
c. How is the information to be offered to various groups? The way data is offered is put across is material to the effect that is desired. How the MD puts across the same facts to the trade union and to his senior management may vary.
d. What are the concerns of the various groups in the organization and to what extent should the data address each group’s concerns?
Information helps to reduce a receiver’s uncertainty and helps him direct his own behavior with increasing certainty (Kreps, 1990:27–32). In the absence of information, distrust and suspicion can creep in. Good employee communications depend to a large extent on trust. Trust has to be earned. Trust does not mean that everyone will like what they are told, but it does imply an acceptance that management is being honest in what they say, and is not hiding things they do not want people to know (Wilkinson, 1989:19).
The Principle of Managing Expectations
Note how Dr. Irani plans to develop a shared vision and build the future state of the organization in the minds of the men. The internal campaigns were aimed at this objective. To make such a vision an active management process at all levels of the company, it is necessary to bring its vision and values down to the level of each individual. Visions ought to include fundamental values and an inspiring image.
Setting realistic and attainable goals can solve the problem of arousing expectations. People are given realistic information at the outset. This means communicating exactly what will or will not come out of the process. Expectations of employees can be deliberately lowered or raised to ensure their general acceptance of changed circumstances.
The principle of managing expectations can, it seems, be orchestrated in a carefully calculated way in order to achieve the desired impact on the employees by controlling the timing and the release of the news at appropriate intervals. This gives managers a powerful tool to handle human relationships, and on occasions there must remain a thin borderline between sensitive communication and news manipulation. “The architects of change have to operate on a symbolic as well as a practical level, choosing, out of all possible truths about what is happening, those truths needed at the moment to allow the next steps to be taken.” (Kanter, 1983:305).
It is at this borderline that closest cooperation between professional communicators and line management is called for; the communicators’ function tends to be used by management with an eye on the bottom line–securing a particular end result, and the personnel function operating more as a guardian of the integrity of information. Both corporate communicators and line management need to be aware of the inherent dichotomy and work together as a team to ensure due weight is given to each other’s role (Wilkinson, 1989:55). However, expectations created for the future must be continued to be met, if credibility is to be maintained.
At Tata Steel, it was evident that the communication between the management and the employees occurred at multiple levels and frequently. Even though the union was constantly involved in all communication processes, it did not seem to wield a filter between the communications of management with their employees. Thornhill (2000), has dealt with the subject of how employee involvement is used to develop a united workforce. Employee involvement may also be used as a means to reduce union influence or to replace the role of unions in managing employee relations (Thornhill, 2000:228). Managements have realized the advantage of communicating directly with employees and bypassing the union as mediator. Earlier, the practice was of communicating and discussing key policy changes with trade union representatives who, in turn, passed on the information to the employees. This single channel of information, consultation, and representation reflected union wishes. Management left it to the union to put over information on issues relevant to employees. Unions guarded this information chain. To bypass it was to cause trouble. Managements have always attempted direct communication with employees and their families to gain support and indirectly marginalize the union. A communication strategy aimed at bypassing the union is unlikely to work in the long term and that is why Tata Steel considered the union as a partner in communication.
Mark how the dais at the trade union meeting is shared by both the MD and the trade union leader. The management and the union both communicate with the workers. The management communicates dually to both the union and the workers. They attempt to reduce the distance between the management and the union so that there is absolute convergence in what both convey to the workers. Both the MD and the president of the trade union sign all major policy decisions and agreement letters. This communicates transparency, unity, and harmony.
The trade union leader communicates the dilemma facing the management when he gives the analogy of a ship crossing the river. Employees will generally appreciate the dilemma facing the management and respond positively to new situations if they are made aware of the plans of management, at least at the same time as, if not before the general public. Meticulous timing of announcement is crucial to success. Also observe how the schemes offered were timed to be convenient for the employees to take up the offer.
Peter Wright, in his book Spycatcher popularized a phrase in the English language that has become a euphemism for deliberately seeking to withhold all material facts.
Economic with the truth’ was a masterly phrase to disguise a less than forthright approach to the truth, the whole truth and nothing but the truth. This phrase can be accurately applied to the internal communication practices of many companies. Some would argue that a circumspect approach to the level of information supplied to the employees is the safest route. For others, this apparent need for caution is a thinly veiled excuse for not communicating or only when pressed. An organization is too easily caught out when it is being deliberately ‘economic with the truth.’ It is counter productive and loses the confidence of one’s audience when it is essential to maintain that confidence long term. (Wilkinson, 1989:12)
While, “masters of Change are also masters of the use of participation” (Kanter, 1983:241), and the centerpiece of all good communication is ethics; when to communicate or be silent and how much to communicate will always be a matter of professional judgment. Legal demands sometimes conflict with communication demands. There are however, no hard and fast rules and no blue print. Each organization needs to weigh the general principles in the context of their own situation and devise a communication strategy, which stands the test of openness and integrity while at the same time, respects the operational imperatives of management and the sensitivities of employees.
8. Were the benefits for separation excessive?
A8. Could the strategy be classified as buying worker compliance with unusually high compensation and generous payoffs? Was the price that the company paid to maintain its image too high? Despite the early separation schemes being one of the most lucrative in the country, a good number of employees did not opt for it. The company was saddled with a bulk of surplus manpower, which had to be redeployed to other departments. The response to ESS had been low among the unskilled labor, particularly at shop floor level, since they had no other career options.
In hindsight, the senior management felt that they could have been more economic with the offer had they employed a creeping up method in the value offered as part of the consecutive schemes until the desired level of response was achieved.
Even in the case of survivors of the downsizing, a productivity based ‘gain sharing’ incentive system was adopted. It could be a mistake to tie the share value to everything that the company does. Employees never stop expecting more. Companies find it difficult to come down drastically from what they have offered earlier.
Issues to Initiate Discussion
1. Relations with the Trade Union
The degree of cooperation achieved was remarkable. There was a high level of trust between management and the union. There was employee involvement in the management of their own work practices and strong leadership down the chain. From their long history, Tata Steel had acquired a style of management at once paternalistic and respectful of union representatives. The management of change at Tata Steel built on that tradition. Trust could not have been built where management and union had acted deceitfully with each other before. Employee representatives were persuaded to give their support to a plan in which cooperation at the introduction of new technology and more redundancies of their fellow members were essential parts.
Employee involvement was institutionalized, through a parallel communication route, with interactive communication sessions and large-scale dialogue meetings which were regularly conducted by the top management. It was an open style. There were formal procedures for grievance handling, disputes, and discipline to which both the management, and the union were committed.
2. Role of the Trade Union Leader
Union officials are very vulnerable. They are subject to constant prodding and threats from both inside and outside the union. Their positions are not secure and they have to seek election every few years. Their re-election is not guaranteed. They have to present an image of agitation to their constituents. Union representatives are both insiders and outsiders. They are insiders with an inbuilt loyalty to the company, but in another sense they are outsiders, struggling to maintain an uneasy compromise between allegiance with, and criticism of management. So, in management–union relationships, all may not be as smooth as it can seem. “Conflicts disappear into consensus. What was highly contentious at the beginning eventually gets worked out, and the price of agreement is to forget that conflict had existed, as in a political system where the final vote has to be unanimous despite the acrimony of the debate. Equally possible alternatives disappear into obvious choices (Kanter, 48).”
3. Role of the Communication Executive
During the first stage, meetings were held with managers, supervisors, and worker unions to discuss the concept, gain agreement to its introduction and to outline the overall plan. Communication executives have to be in the information loop of top management from the very beginning. An important component of any restructuring plan should be a communication plan. Professional communicators should be able to participate in formulating corporate strategy and to play a proactive role in designing and implementing the communication effort in support of business objectives. The communication executive should be part of the steering group managing the change.
4. Role of Line Managers
Managers are central to the communication system. Communication at the top management level with its official pronouncements and communication of important events is only a small part of any worker’s communication experience. The major part of the communication that goes on in an organization is the day to day communication exchanges that occur between teams, supervisors and managers, and the employees they are charged to lead, as well as the important peer-to-peer communication. The line managers at all levels from the CEO to the first line supervisor ought to be the primary communicators with the employees. The nonverbal information provided in the richer face to face communication may be especially important for the social integration it provides as well as for the enhanced meaning conveyed for equivocal task communication. For these reasons managers are encouraged to maintain personal contact through management by walking around. This is what was practiced at Tata Steel.
5. Handling of Rumors
A rumor persists either until the wants and expectations creating the uncertainty underlying the rumors are fulfilled, or until the anxiety is reduced. Rumors identify for managers those confusing issues that employees consider important and anxiety provoking. It acts therefore, as both a filter and a feedback mechanism, picking up the issues that employees consider relevant. Note how the rumor of “company may not pay up” is captured. Managers cannot eliminate rumors but they can minimize the negative consequences of rumors by limiting their range and impact. To reduce negative consequences the management may announce the timetable of important decisions; explain decisions and behaviors that may appear cryptic; emphasize the advantages and disadvantages of current decisions and future plans; and openly discuss worst case scenarios. Rumors are likely to occur in ambiguous situations or where there is an information shortfall. They can be shut off by the rapid dissemination of credible information across all levels.
6. Media Handling
During restructuring it is advisable to keep media informed as public understanding can be increased with as much factual and explanatory information as can be legally released. Being first, there is the greater chance that your interpretation of the news events is included. It is important that the CEO act as the corporate spokesperson because it reflects that the management is in charge and improves media relations when the CEO is accessible. There is a basic principle that all business in a democratic country begins with public permission and exists by public approval. In plant towns, particularly, like Jamshedpur, where Tata Steel is situated, the community is an important stakeholder and the media assumes more importance (Caywood, 1992:161–162).
7. Euphemisms for Downsizing.
Instead of downsizing, companies sometimes refer to workforce restructuring, resizing, reengineering, dehiring, unfunding, refocusing, delayering, decluttering, and rightsizing. These terms are not always euphemisms designed to soften the blow to employees. They may actually be more accurate than downsizing. At Tata Steel, the term “rightsizing” was used by the management so as to make the term inclusive restructuring for the future through the creation of new and modern plants that would require fresh manning. Fresh posts were also created in the restructuring and some departments gained employee numbers.
Some authors are critical of the use of euphemisms and feel that management uses these terms to sell the need for change to their employees and to make them believe that there is really no alternative to downsizing. For example, Boje et al (1997) deconstruct ‘reengineering’ as an ideology inscribed in discourse of storytelling and metaphor used to justify the displacement of workers. According to the authors, the story of reengineering was used mostly to justify downsizing. The authors also give numerous examples of how managers use doublespeak. “Doublespeak specifically refers to the using, creating or attaching of words to a concept that have a more neutral or positive connotation than the word or words commonly employed or traditionally linked to that concept.” While euphemisms play a useful role in everyday communication by softening the impact of words, they can also distort reality. Overuse of ambiguity and euphemism will result in a decrease in trust in communication.
The Need for Change at Tata Steel
An excerpt of a talk delivered by Dr. Irani, erstwhile Managing Director, Tata Steel, at Jamshedpur on March 2,1998, on the occasion of the union’s founders day.
“The changing economic scenario necessitates that we look at industrial relations anew…competition in markets, which was often nonexistent, or was completely localized, has greatly increased. Producers, who were earlier isolated from one another, and who functioned in protected environments, such as we did, secure in the cocoons woven around them in the form of duties, concessions and other forms of governmental controls; have now been pitted against rival producers from all over the globe, in their quest for market shares…. In short therefore, one can safely say that the age of “comfortable living” is over.
While goodwill between managements and unions, and an understanding of the issues on the part of both sides is as crucial as in the past, it cannot be a substitute for some of the more pragmatic approaches that need to be followed in this era of change and uncertainty.
What are the changes that are called for by the events around us? In my opinion, the most fundamental change that has to occur, is in the minds of the employers, the employees, the trade union leaders and the government. All those who comprise the industrial relations system have to undergo a basic attitudinal change. All those involved in ensuring harmonious industrial relations have got to understand how competition impacts the business that they are in…. The understanding, and an openness to the impact of competition on one’s industry, is not something that needs to be imbibed simply because it is academically interesting, but because we have come to a stage where the world is now akin to a “tiny village” where the efforts and initiatives of one player have a bearing on those of the others. Everything has in fact become so interdependent in today’s business environment that communities and markets are no longer distant, and separated by political or national boundaries. Information technology and the tremendous power of communication technology have greatly helped to integrate the world in a manner like never before. Prospective corporations are no longer looking at regional markets. They are in fact seeking dominance on a global level.
….[P]ragmatism calls for learning to survive during the times of downturns [of the business cycle]; tightening one’s belts, pruning costs and waiting and preparing for the inevitable upturn. It is not enough that this understanding is confined to management and union leaders alone. I believe that it is the responsibility of all concerned to ensure that the workforce shares this understanding in its entirety. Their well-being can only be guaranteed when changes are made in anticipation of potential downturns. It should not be the managements or unions that need to spearhead change or give the battle cry for improvement. It must be the entire workforce which demands change, and willfully makes changes that are essential for survival. I would also expect managements and unions to together stimulate the work force, so that they continuously upgrade themselves, and keep abreast of the changes in technology and ensure that they possess the needed knowledge and skills so essential for success.
What do these changes mean to us in Tata Steel?
Tata Steel is a giant with profound strengths. However, these strengths could not all be used in the days gone by, because we operated without much competition…. In the process it did seem as if the giant got used to having things easy. The giant has now woken up fully to the current realities, and realizes that the “dream days” are over. Tata Steel also realizes that it has to change surely and quickly or perish. I am confident that change it will.
.…[F]actors such as the cost of production have become critical to long-term success....The endeavor is to cut down those costs that do not add value to the products and services that the customers receive. Costs such as those related to raw materials, energy, purchased materials, labor, freight and the like are therefore under constant review, so that the company is able to continuously and consciously make improvements in the way these resources are used to produce steel.
….It is a myth that productivity levels can only be improved with additional investments. When the French company, Thomson bought the Polkolor television factory located outside Warsaw in 1991, nobody could believe that the company could do any better. At that time the workforce was a staggering 8000, and in the 12 years before the take over, the plant had produced a mere 2.1 million tubes. Today the plant is geared to produce 3.3 million tubes a year, and the leaner workforce, numbering 5000, has demonstrated impressive gains in productivity.
Most developing nations, I am aware, are being accused of adopting stringent policies when it comes to managing the workforce. In India, we realize that despite the positive impact that drastic manpower-reduction strategies might have on the fortunes of an enterprise, especially in terms of corporate productivity and the bottom line, such approaches also cause widespread discontent, and should be avoided. The need therefore, is for humane and creative ways of using people and ensuring that firms in India are at least as productive, if not more so, compared to their counterparts elsewhere in the world.
Tata Steel is conscious that success in the coming years requires that the organization becomes slim, trim, and agile. To be able to deliver value to our customers at the least cost, and the highest levels of productivity, calls for optimal manning: neither too few, nor too many people. This would ensure that we are sufficiently resilient and sinewy, so as to be able to meet the challenges placed upon us by the demanding business environment…there can be no significant gains without some form of pain, and I am deeply conscious that in matters concerning people, the prospect of having to undergo change itself, can be painful…. Yet, when the survival of an organization is itself at stake, everybody has to be made aware that in the interest of the larger good of all, it is better to allow the surgeon to remove the tumor, than to let the malignant growth spread unmitigated. The role of the union and management in the education of the employees and their families, and the community, becomes an integral part of the process of maintaining harmonious relations in trying times. An understanding spouse greatly supports the efforts of her man working in the company, and inevitably provides opportunities to further prepare the ground for rapid and willful change. The learning has also got to be extended to upgrade the skill levels of the employees.
Another aspect of what needs to change concerns the opportunities available for two-way communication. Change-ready organizations have got to be humming with opportunities for open two-way communications. This ensures that people more readily address issues, and respond to concerns, thereby providing a climate where rumors and canards, that otherwise vitiate the atmosphere if spread, are blown away with the freshness of facts and data. Besides, extensive opportunities for two-way communication also help to align everybody towards the objectives of the enterprise, and ensure that all work gets done in a concerted manner for overall well-being.
What do these changes mean to the leaders in the management and the union?
It is well known that no change is possible unless it is led from the top. If the organization has to change, it has to change across all dimensions, and that would call for changes that are both top-down and bottom-up.
….[I]n order to bring to fruition some of the ideas I have enunciated above, it is critical that business leaders and leaders in trade unions serve as exemplary role models whom others can joyfully emulate. It is often said that doing something which one would like others to do, is far more inspiring, and definitely a more effective way of getting things done, than merely by talking or exhorting others to do them. This is all the more true when touchy issues are involved, or goals have to be achieved entirely with the help and support of the people. Leaders have to lead the way in a manner, which makes their communications credible and convincing.
Leaders will also need to serve as a beacon, and as a guide to all those whom they represent or lead. This requires them to keep pace with the changes in the external environment as well as the plans that have to be initiated…. Pursuing the above goals, however, must not distract leaders from a continual emphasis on the maintenance of excellent relations with all concerned. Many organizations in their endeavor to survive, resort to using harsh methods to pursue their agendas, causing needless discord and discontent…. [M]anagements and unions must endeavor to soften the pain as far as possible. This calls for the maintenance of harmonious relations, and working with sensitivity and genuine concern and compassion.
….Though the changing economic scenario is full of potential opportunities, it also calls for respecting and understanding the expectations of all our stakeholders. I am sure that if Tata Steel follows an approach that is based on a blend of our values and the pragmatism that this era necessitates, the well being of the company, and that of all stakeholders is definitely guaranteed…. I am convinced that in the years to come, this emphasis on industrial relations will serve as a catalyst to harmonize management and labor priorities, and ensure that there is completely open and trust-building communication between the two. When buttressed by a conscious sharing of corporate information and other relevant data, such an approach ensures that management and Union leaders jointly commit themselves to achieving the common goals of the enterprise.”
Fourteenth Michael John Memorial Lecture delivered by Dr. Jamshed J. Irani, Managing Director, Tata Steel, at Jamshedpur on March 2,1998.
Boje, David M., et al.,(1997, December), Restorying reengineering. Communication Research, Vol 24, No 6.
Caywood, C.L. and Ewing, R.P. (Eds.). (1992). The handbook of communications in corporate restructuring and takeovers. New Jersey: Prentice Hall.
Charan, Ram. (2001, April). Conquering a culture of indecision. Harvard Business Review, pp. 75–82.
Clutterbuck, David. (2001). Linking communication competence to business success: A challenge for communicators. San Francisco: IABC Research Foundation.
Dawson, Sandra. (1996). Analyzing Organizations. London: Macmillan Business.
Deal, Terrence E. and Kennedy, Allan A. (1999). The new corporate cultures—revitalising the workplace after downsizing, mergers and reengineering. Reading, MA: Perseus Books.
Gayeski, Diane. (1993). Corporate communication management–The renaissance communicator in information age organizations. Boston: Focal Press.
Kanter, Rosabeth M. (1983). The change masters. New York: Fontana.
Kotter, John P. (1995, March-April). Leading change: Why transformation efforts fail. Harvard Business Review.
Kreps, Gary L. (1990). Organizational communication–Theory and practice. New York: Longman.
Peters, T.J. and R.H. Waterman. (1982). In search of excellence: Lessons from America’s best-run companies. New York: Harper & Row.
Sadler, Philip. (1995). Managing change. London: Kogan Page.
Thornhill, Adrian et al., (2000). Managing change—A human resources strategy approach. Essex, England: Pearson Education Ltd.
Waterman, Robert H. et al., (1994, July-August). Towards a career resilient workforce. Harvard Business Review.
Wilkinson, Theon (Ed.). (1989). The communications challenge-personnel and PR perspectives. Wimbledon, England: Institute of Personnel Management.
Caywood, Clarke L. and Ewing, Raymond P. (Eds.). (1992). The handbook of communications in corporate restructuring and take-overs. New Jersey: Prentice Hall.
Gayeski, Diane. (1993). Corporate communications management—The renaissance communicator in information age organizations, Stoneham, MA: Butterworth-Heineman.
Kreps, Gary L. (1990). Organizational communication—Theory and practice. New York: Longman.
Quirke, Bill. (1996). Communicating corporate change–A practical guide to communication and corporate strategy. London: McGraw Hill.
Thornhill, Adrian, et al., (2000). Managing change, a human resource strategy approach. Essex, England: Pearson Education Limited.
Wilkinson, Theon. (Ed.). (1989). The communications challenge—personnel and PR perspectives. Wimbledon, England: Institute of Personnel Management.
Tata Steel: <http://www.tatasteel.com>
Epilogue
Over the long term, the financial benefit was very substantial for the Company.
1. What would be the communication strategy had the trade union not been cooperative?
2. How would ‘hard nuts’ be dealt with?
3. If you were to devise a communication program in support of a downsizing/restructuring business objective, what would be your communication objectives?
Value of the firm—is not only a function of its earning potential, the maintenance of its market share, and the competency of its management, but also a function of the information flow between the firm’s owners and its stakeholders.
Strategy—is the direction and scope of an organization over the long term; ideally matching its resources to its changing environment and in particular, its markets, customers, or clients so as to meet stakeholder expectations.
Employee communication strategy—in employee communication, factors that influence the type of communication strategy adopted are as follows:
Size—the huge numbers involved requiring the adoption of formalized communication structures.
Fragmentation—separate geographical units spread raising the special difficulties of ensuring contact, consistency, and control.
Diversity—different audiences requiring different methods of communication to achieve desired impact.
Working arrangements—part timers working odd hours adding to difficulties of communication.
Politicization—company getting drawn by trade union attitudes into issues of no relevance to them.
Employee communication cannot be turned on and off like a tap. Once started, expectations are created for the future, which one must continue to meet, if credibility is to be maintained. As employee communication is a product of company culture, it must become a unifying element in helping achievement of business objectives.
Employee communication plan—for effective communication, the organization needs to integrate the message, messenger, methods, and media with the needs of the audience. A basic communication model for employee communication requires that for each issue that needs to be communicated, the audiences, message, messenger, media/methods and time/frequency be determined. A communication plan needs to build in mechanics to ensure that two-way communication occurs so that the organization addresses employees’ information needs and its own.
Survivors—employees who survive a downsizing exercise. They are an important audience for communication if the objectives of downsizing are to be achieved.
Discussion Questions
1. What is Dr. Irani’s management style?
2. What was the nature of the contract that Tata Steel had with its employees?
3. How effectively did Tata Steel deal with its challenge of downsizing its workforce?
4. What was the importance of communication in the process of downsizing?
5. What were the ethical issues at stake?
7. Was the process “transparent,” or was it manipulative?
8. Were the benefits for separation excessive?
References and Resources
Boje, David M., et al.,(1997, December), Restorying reengineering. Communication Research, Vol 24, No 6.
Caywood, C.L. and Ewing, R.P. (Eds.). (1992). The handbook of communications in corporate restructuring and takeovers. New Jersey: Prentice Hall.
Charan, Ram. (2001, April). Conquering a culture of indecision. Harvard Business Review, pp. 75–82.
Clutterbuck, David. (2001). Linking communication competence to business success: A challenge for communicators. San Francisco: IABC Research Foundation.
Dawson, Sandra. (1996). Analyzing Organizations. London: Macmillan Business.
Deal, Terrence E. and Kennedy, Allan A. (1999). The new corporate cultures—revitalising the workplace after downsizing, mergers and reengineering. Reading, MA: Perseus Books.
Gayeski, Diane. (1993). Corporate communication management–The renaissance communicator in information age organizations. Boston: Focal Press.
Kanter, Rosabeth M. (1983). The change masters. New York: Fontana.
Kotter, John P. (1995, March-April). Leading change: Why transformation efforts fail. Harvard Business Review.
Kreps, Gary L. (1990). Organizational communication–Theory and practice. New York: Longman.
Peters, T.J. and R.H. Waterman. (1982). In search of excellence: Lessons from America’s best-run companies. New York: Harper & Row.
Sadler, Philip. (1995). Managing change. London: Kogan Page.
Thornhill, Adrian et al., (2000). Managing change—A human resources strategy approach. Essex, England: Pearson Education Ltd.
Waterman, Robert H. et al., (1994, July-August). Towards a career resilient workforce. Harvard Business Review.
Wilkinson, Theon (Ed.). (1989). The communications challenge-personnel and PR perspectives. Wimbledon, England: Institute of Personnel Management.
Caywood, Clarke L. and Ewing, Raymond P. (Eds.). (1992). The handbook of communications in corporate restructuring and take-overs. New Jersey: Prentice Hall.
Gayeski, Diane. (1993). Corporate communications management—The renaissance communicator in information age organizations, Stoneham, MA: Butterworth-Heineman.
Kreps, Gary L. (1990). Organizational communication—Theory and practice. New York: Longman.
Quirke, Bill. (1996). Communicating corporate change–A practical guide to communication and corporate strategy. London: McGraw Hill.
Thornhill, Adrian, et al., (2000). Managing change, a human resource strategy approach. Essex, England: Pearson Education Limited.
Wilkinson, Theon. (Ed.). (1989). The communications challenge—personnel and PR perspectives. Wimbledon, England: Institute of Personnel Management.
Epilogue
Over the long term, the financial benefit was very substantial for the Company.
Chapter 4 Questions
1. What would be the communication strategy had the trade union not been cooperative?
2. How would ‘hard nuts’ be dealt with?
3. If you were to devise a communication program in support of a downsizing/restructuring business objective, what would be your communication objectives?