Navigating Employee Relations: Centralized vs. Decentralized Teams and the Role of Technology

Kindly share your thoughts and practical experience on Employee Relations/Industrial Relations.

A large corporate house with manufacturing operations in numerous locations has multiple unions, some with external connections and some with internal unions/works committees.

Centralized or Decentralized Employee Relations Team

1. What would you consider about a centralized or decentralized employee relations team?

2. Why should it be centralized or decentralized? What are the benefits and drawbacks? How would it benefit the company and management in both cases?

Role of Technology in Employee Relations

3. How will technology play a significant role, and what aspects should be centralized and which should not?

Ideal Organizational Structure in Employee Relations

What should be the ideal organizational structure in Employee Relations?

Centralized vs. Decentralized Employee Relations/Industrial Relations

Both centralized and unit-limited ER/IR have their advantages and disadvantages. If the constituent units are separately incorporated, then there is no need for centralization as it is very difficult to have uniform service conditions across the units. For example, the Tatas, Birlas, or ITC groups have only individual unit-based structures. However, in the case of multi-location operations of a single enterprise like banks, insurance companies such as SAIL, BHEL, NTPC, etc., they have centralized ER teams with the Corporate Group dealing with major/policy/long-term issues, and the unit-level structures handling local issues. This helps in standardizing employee practices across the organization and prevents the formation of differing practices within the organization. It also helps in containing local-level discontent and assists in developing rationalized rules, which bring in better morale and motivation across the organization.

The Role of Technology in Employee Relations

The question of how technology will play a significant role, take communication for instance; modern technology has rendered distances meaningless even across continents, and the response time stands vastly reduced. In these pandemic days, we have seen how online means of communication have helped organizations deal with work issues and cater to business needs. The aspects to be centralized and decentralized would depend on the nature of the operations of the enterprise and would vary from one to another. However, it can be stated that all aspects needing uniformity in approach and working across the units in an enterprise should be centralized, and unit-specific matters shall be decentralized.

Dear member, Is your query on "Employee Relations" or "Industrial Relations"? The reply would depend on your focus on either of the two. Anyway, the replies to your queries are as below:

What would you consider about a centralized or decentralized employee relations team?

Reply: The centralization or decentralization is not an issue as such. The reply depends on the activities done under the head of employee relations and, of course, the budget allocated. If the focus of employee relations is on employee well-being, then the organization needs to create a mechanism for that across the organization.

Secondly, to improve relations with the employees, it is important to understand what they think about the company. To improve their perceptions, the company can do the following:

a) Promulgate the values of the company and ensure that the managers and the top leadership live by these values.

b) Create a culture of rewards and recognition.

c) Create a culture of justice and fairness.

d) Conduct Employee Satisfaction Surveys and other organizational surveys.

e) Create a culture of communication. There should be a free flow of communication - upward, downward, and sideways.

f) All relations, whether employee relations or otherwise, depend on interpersonal skills. Therefore, the organization must take a strong initiative to promote a healthy interpersonal environment.

g) Identify whether the employees are stressed and, if yes, then identify the stressors.

Why should it be centralized or decentralized? What are the benefits and drawbacks? How would it benefit the company and management in both cases?

Reply: Employee relations initiatives have to be across the organization. Therefore, it needs a central authority who executes all the initiatives single-handedly. If decentralization is done, there may not be uniformity in execution, and the organization could go into disarray. Secondly, ER initiatives cannot be executed only in one of the business units in isolation. That does not create the right impact.

How will technology play a significant role, and what aspects should be centralized and which should not?

Reply: Yes, technology plays a vital role in improving employee relations. For example, conducting organizational surveys like ESS becomes much easier if these are assisted by modern IT software. Modern IT systems develop understandable dashboards, and the graphs and charts provide insights to the concerned authorities. Secondly, it becomes easy to identify the similarities and differences among the various business units of the organization. Lastly, technology makes communication with employees easier.

What should be the ideal organizational structure in Employee Relations?

Reply: ER depends more on the organization's culture than the structure. ER is a byproduct of the culture. Therefore, the focus should be on building a suitable culture that promotes healthy employee relations. Secondly, whatever the organization's structure may be, the organization needs to have a dedicated team that is sufficiently empowered to take corrective actions. If empowerment is missing, then the following challenges remain:

a) Notwithstanding the ER initiatives by the organization, employee attrition remains high.

b) Notwithstanding the ER initiatives by the organization, employees do not come forward to give suggestions for process improvement.

Final Comments: There are a large number of US MNCs that operate in hundreds of countries. These global companies have a uniform way of working across the globe. Information is shared globally on who stands where and on which factor of employee relations.

Thanks,

Dinesh Divekar

Dear colleague,

Your query is of vital practical importance for the setup of your organization—Corporate office, with multi-location manufacturing units having multi-union external and internal presence.

Insight on Policy Issues

Mr. KK!HR has brought to bear practical and workable insight on some of the broader policy issues raised.

Centralized vs. Decentralized Approach

Since ER/IR Relations are dynamic in nature, there cannot be a one-size-fits-all centralized or decentralized approach to emerging and evolving relationship issues. A sound blend of centralized and decentralized approaches seems to have worked well. What has successfully worked in several large multi-location, multi-union manufacturing units is that issues of wage settlements/service conditions applicable to bargainable employees and employee engagement activities are left to the respective local HR teams to deal with, with centralized expert IR/ER resources who monitor the situation and ensure that harmonious and productive mutual relations are maintained. The service conditions of other non-workmen—VPs, Sr. Managers, Executives, and supervisors—are dealt with by the Central HR resources, and they are largely uniform across all locations to enable the smooth transfer of any resource to other locations.

Organizational Structure

As regards org structure, at the Central level, the HR/ER team will work on policy issues, monitoring its effective implementation at all unit levels, supported by able, experienced local teams to add a local flavor.

Many multinational companies like Unilever, ITC, Tata, Birla, and Reliance seem to have used this approach to mutual advantage. Of course, no approach is foolproof for all situations and all the time, and one has to adapt it to the changing scenario and governmental initiatives in labor laws governing the ER scene in the country.

Regards,

Vinayak Nagarkar

HR and Employee Relations Consultant

Dear Colleague,

The importance of Employee Relations/Industrial Relations

Employee Relations/Industrial Relations is a subject matter that is a vital success factor for any multi-locational organization. A strong Industrial Relations Mechanism is important for sustained business growth. Nowadays, the focus on IR is missing compared to two decades ago when a lot of emphasis was placed on IR. Due to various socio-economic factors and Industrial Policies, the recent focus on IR has not been significant. However, in some sectors/regions, it remains strong.

Centralized vs. Decentralized Employee Relations Teams

1. What would you consider about a centralized or decentralized employee relations team? In the case of ER/IR, a strong Local IR Team is required as each organization will have unique features in IR. The Trade Union, the Location Stakeholders, and the Community around are all important and can be sensibly handled by a Location-based IR Team. On Policy Matters on IR, there should be Central IR Expertise in Policy guidelines and a Monitoring mechanism to ensure that IR aligns with Corporate expectations. Local decisions on IR should be taken at the local level for a more realistic approach.

Benefits and Drawbacks of Centralization and Decentralization

2. Why should it be centralized or decentralized? What are the benefits and drawbacks? How would it benefit the company and management in both cases? The Local IR Team can respond immediately to dynamic IR decisions. They should follow Central IR Team guidelines and be monitored/consulted when necessary. Empowering the Local IR Team in non-policy matters is crucial. In a totally centralized system, understanding ground realities and making timely decisions may be challenging. Having a local IR Team under Central IR Governing Expert Team monitoring is advantageous.

Role of Technology in Employee Relations

3. How will technology play a significant role, and what aspects should be centralized and which should not? An IR Portal should be established to track IR challenges faced by the Local IR Team, solutions, financial impacts, settlements, pending disputes, legal cases, contingent liabilities, and potential future challenges. Central IR Team approval can be given as an Apex Control mechanism.

Ideal Organizational Structure for Employee Relations

4. What should be the ideal organizational structure in Employee relations? Each location should have an IR Lead reporting to the HR Head or Unit Head with matrix reporting to the Central HR & IR Head. Sufficient staffing for the Location IR Head should be based on unit size, number of employees, and number of Unions.

Valuable Practices in IR

One valuable practice is the MAGCOM - Management Committee, where top Union Office Bearers and Management Members collectively make critical decisions monthly. In case of escalation, it goes to IR Head and Unit Head for resolution. Involving Labour Department Authorities in meetings as observers for suggestions can be beneficial.

IR is a significant subject, and a strong IR mechanism and strategy contribute to industrial growth. A Central IR Manual called IR Blueprint can help frame policy matters comprehensively in a digital form for better understanding across locations. These insights are shared from 30 years of past IR experiences in multi-location/union setups, proving effective in handling IR productively.

All the best.

Employee Engagement and Relations

The point is that we should engage consistently with employees, addressing their sorrows, celebrating their small happiness, and focusing on their welfare activities. Organize events like birthdays or wedding anniversaries, solve their grievances, and track good work. Additionally, reward attendance on a monthly and quarterly basis.