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Creating high performance through HRM

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Following is the keynote address delivered by United Motors Lanka PLC and Watawala Plantations PLC Chairman Sunil G. Wijesinha on ‘Developing strategies for uplifting high performance through HRM’ at the Institute of Personnel Management Research Symposium 2016 recently. 

 

I am delighted to be invited to deliver the keynote address at this prestigious symposium and also excited to learn about the research findings that will be unveiled at the technical sessions to follow. My presentation today is as a practitioner of management in which human resource management (HRM) forms a key component. I am not addressing you as an expert in HRM nor as a researcher or academic. My opinions on HRM naturally come from my experience in managing people spiced with some academic input I received in my academic and professional studies. I have also gained from interesting literature in my search for answers to some important HR issues I faced. With varied experience in public and private enterprises and having gone through a paradigm shift in the way people are managed since my foray into the world of managing people in the 1970s, I hope I will add value to your learning and provide you with some material for further thought, analysis and research.


I have no conceptual model on HRM nor do I have a prescription. Instead I responded to each situation according to the situation at hand, based on my past experience and with theoretical knowledge in the background. My varied experiences have held me in good stead in my retirement and now serving in advisory capacities and on boards of directors. My presentation is 30 minutes and therefore I will touch only on a few aspects of my varied HR interactions.


At the outset, I must say that I consider HRM as one of the more important aspects in managing an enterprise and uplifting the performance of the enterprise. I am not saying this just to please you; a group of HRM practitioners, but it is my sincere belief. I was even more convinced of this when I took over the helm of Merchant Bank of Sri Lanka in 1998 when it was on the verge of collapse and found that many of the projects we had invested in had collapsed and we had lost our investment made in them.


I met a former CEO of one of those companies who said the collapse of his company was not due to a defect in the product, nor due to a lack of export orders, but simply a case of mishandling of human resources, which had led to industrial strife and finally the liquidation of the company. Therefore, one of my first projects was to invite all our investee companies to a forum where we discussed “common mistakes in HR”. 


My view was further strengthened when I happened to read an article about a Japanese bank which had found a similar phenomenon and they too had found to their surprise that companies which had a good business model, adequately capitalized and with adequate resources still failed, because employee motivation was poor. They came up with a formula that P=MH x S xMn. P is the performance or power of the workforce, MH is man hours of work, S is skills, and Mn is Motivation to the power n. The formula was intended to reinforce the point that even a slight increase in motivation can have a great influence in the power of the workforce and thus performance.

 


Archaic practices 
HRM practices have evolved over the years and I believe I have gone through some of these changes perhaps more than most of you. Some of you may feel that past practices are just history and serves no purpose in discussing today, but it is surprising to find some senior managers and successful entrepreneurs still using archaic practices. My first work experience was at State Engineering Corporation as a trainee and I was put in the deep end when a senior engineer asked me to take charge of a project even before my training period was complete. When I look back, I am shocked at the way we handled labour then. 


The 1970 elections brought in a more left-oriented government and everything changed. The workers took the upper hand, drove out the management from the work sites, even assaulting some of the site heads and there was general chaos. Managing labour went through a paradigm shift. In fact, a few days after the elections there was a previously scheduled lecture by a very senior engineer on labour management and since he was getting late for the lecture I went to his office to remind him. He told me, “I am no longer qualified to lecture on this subject. The lecture is cancelled”. 


Shortly after, he left the shores of Sri Lanka unable to handle the change. Subsequently we had a very enlightened lecture by a communist leaning engineer. His thoughts were revolutionary for the time. We were in the habit of calling workers by their numbers and not their names. He was emphatic, “never do that” he said, “it is a most degrading thing to do, call them by their names in future”. He further told us that the most valued asset of Sri Lankan people is their children. “Inquire about them and even send a small gift to them and they will always be loyal to you.”


“You represent the whole organisation to them since you are the immediate boss and therefore make them look up to you as a parent and mentor and not as an adversary,” he said. Another important piece of advice was never to fine workers or cross them off the checkroll for a minor offense. Losing even a half day’s pay may mean that a worker may not have enough milk food for his child. These words from the 1970s still reverberate in my years and I have practiced them.


These practices may not work today. As you know we have changed our way of thinking about people, first merely as a pair of hands, then as humans with a heart where we need to treat them in a benevolent manner, and finally as people with brains who want to utilize their full potential. Today benevolent management is no longer the answer as many business leaders have found to their dismay. The modern worker wants to be treated as a partner with a brain to be used. 


Managing workers at the floor level and handling professionals are sometimes, but not always, different. I have not yet found an answer, nor have I found a model I could apply uniformly. I have found that a model or set of practices that work well in a particular situation will be a total disaster in another. It takes time to find the right model or set of practices to suit a particular situation. Then you find that over time that model too is irrelevant.

 


Motivating staff  
Let me give you some examples. When I took over Dankotuwa Porcelain I was very enthusiastic about implementing many Japanese management practices. I have tried them out in other places and some succeeded while others failed. Quality Circles, 5S and Kaizen were received very well; support from the unions was excellent and implemented very successfully. The Quality Circles came up with very useful projects and some even made presentations overseas at international events. 


The 5S programme too was very successful even to the surprise of the Japanese directors who believed that Sri Lankan culture did not support 5S and particularly the third step in 5S. The reason for success was that most workers had passed their Advanced Levels (ALs), many in science subjects and the projects used their mathematical skills, their knowledge of science, their presentation skills and even their artistic skills. In fact, this corresponded well with the Job Characteristic Model of Motivation.


Their whole society was the factory and being young and unmarried or just married they enjoyed the programmes very much. Several years later, maybe 15 years later, the interest in Quality Circles had waned, many attempts were made to revive Quality Circles and 5S but the enthusiasm was lukewarm. I analysed the problem and found that now most workers had children doing their OLs and ALs and their whole focus was sending them for classes and looking for jobs for them. 


Then we hoped that the new recruits, being young and unmarried, would take to Quality Circles but soon found they had different agendas, their society was outside the factory, the workplace was merely to earn something. They were communicating with their friends on SMS and their minds were elsewhere. For the older generation the factory was their life, and for the new generation the factory was a temporary but essential nuisance. It became a challenge to motivate the new generation. 


Prior to that, my experience at the Employees’ Trust Fund Board (ETF) was also enlightening but different. My appointment as Chairman was soon after the general elections of 1989. I started several programmes to engage employees, to implement Quality Circles, provide superior customer service, etc., but the enthusiasm was totally absent. After several rounds of discussions the reason became clear. They did not trust the management. 


They were convinced that promotions were on political and other considerations and were not convinced that there was justice and fair play. There were accusations that interview marks were falsified to give preference to politically-connected persons. Furthermore, hundreds had been recruited just before elections from an electorate close to Colombo. The new recruits were more sophisticated and better dressed than the original recruits who came from a rural electorate many years back when the ETF was established. 


So there were two problems; one was lack of confidence regarding justice and fair play and the other was the clear division of the two factions of the workforce. It took about a year to make the workforce realize that promotions were now fair and that it was performance that mattered and not political connections. Even on disciplinary action the employees soon realized that all were treated alike and there was in fact justice and fair play. With confidence restored the next step was to give uniforms to all and erase the visual difference in the workforce. Quality Circles, 5S and many other initiatives thrived thereafter. The ETF was recognized as a very efficient high-performing state sector organisation.

 


Unions’ role 
Unions play a significant role in creating a high-performance culture. I always believe that having trade unions in your workplace have more positive features than negative. Trade unions I dealt with were significantly different in different work places. They also changed from time to time even in the same place. In some, trade unions would act rationally and in others it could be totally irrational. 


A classic example was the union at Merchant Bank which had enormous issues with the management earlier but responded well when I treated it with the respect it deserved. In order to complete the restructure of the company I sought their co-operation to withdraw all the benefits that were guaranteed under the collective agreement but without repudiating the collective agreement. Officially they disagreed, but agreed not to disrupt the restructuring process.


They were wise enough to understand that there was no alternative. They did not participate in any management organised events but did not disrupt the workings. With the completion of the restructuring programme and profitability restored in about three years, the board restored all the guaranteed bonuses, loans, etc., which were earlier withdrawn. It was a win-win for both parties. The situation was drastically different when I had to restructure Dankotuwa Porcelain. The same approach did not work. A few elements in the unions would not accept any rational explanation.


I decided to get the Merchant Bank union leader to talk to them on how they made sacrifices to finally reap the benefits. He was not allowed to open his mouth. 


It was as if the union leaders did not want anyone to understand the rationale for the proposal. There appeared to be some outside hand. We had thought of many possible reasons and clarified every issue but to no avail. Finally the issue was resolved when the company was almost being liquidated and the unions finally had to agree to a settlement less than what was originally on offer. The issue caused substantial stress to both sides. 


I also believe strongly in financial incentives. I realise that many researchers condemn financial incentives, but a well formulated, well communicated and well monitored scheme can be very beneficial. Badly formulated schemes can be disastrous too. Financial incentives should be a component of a comprehensive HR strategy and should not be the sole mechanism to motivate employees. 


In my experience, financial incentive schemes have worked very well and I strongly support it. One of my early bosses in the 1970s convinced me that money can meet every step in Maslow’s hierarchy of needs. Obviously physiological needs can be satisfied by money, and so can safety needs, because if you have money you are safe. If you have enough money to spend you have more friends, more love and belonging satisfying your belongingness needs. Driving a Mercedes Benz and wearing Patek Phillip watch can satisfy esteem needs, while self-actualisation can come from having earned enough money to form trusts to do good deeds and give back to society. 


While the well-known theory suggests that lower level people can be more motivated by money I find that it is the other way about. The higher your position, the more money you want because you wish to acquire more material assets or send your children to better foreign universities. Today most senior officers in the corporate sector are highly focused on the annual bonus and many of them have admitted that it is necessary for them to finance their kid’s university education overseas and/or buy or build a good house. On the other hand, my experience is that lower level workers can be motivated more easily by needs such as belongingness and esteem. 

 


Financial incentives
Experts in financial incentive schemes will know how to build safeguards to prevent unintended consequences. Many of the better schemes are multifactor schemes with safeguards and have proved very effective. I recall my stint at the ETF when we introduced a financial incentive scheme. It was during the turbulent times in 1989 and it was this that kept the organisation running efficiently. This was a time when the whole country was not in a mood to work and when the then commissioner of labour visited our office one day he was surprised that our staff were busy working and admitted that his staff wern’t. I proudly announced that it was the power of the incentive scheme.


I even received a letter from a retired person who had come to sort out his EPF and ETF. He had written that he was pleased to see the ETF staff hard at work even in those troubled days but when he went to the Labour Department to see about his EPF only the fans were working. I must add that the Labour Department is far more efficient now not only because of a new work ethic but also aided by technology. Financial incentives can be an extremely powerful mechanism to uplift the performance of an enterprise.


Finally I wish to give a warning to all HRM practitioners. Be guided by experiences of others and do not go overboard with theories that may have worked in other countries. In my early years because of my inexperience I believed that giving more benefits would result in a more satisfied worker and thereby derive a higher performance. More mature seniors advised me to give only what the law required and nothing more.


 I thought I was smarter. To my horror I found that the result was totally different. They were receiving pay and benefits substantially more than those in most other companies, but still dissatisfied. 
They expected more and more, and finally the dispute was referred to compulsory arbitration.
 The verdict was that the generosity of the management had backfired. By giving more, a higher expectation was created, and therefore the company was directed that we have to meet these reasonable expectations and give even more. My message to all HRM professionals is to formulate a well-thought-out HRM strategy with a blend of theory and practice, rather than ad hoc responses, in an effort towards uplifting the performance of an enterprise. It should be a dynamic strategy responding to the changing needs of the people over time.


(Sunil G. Wijesinha is also Immediate Past Chairman of Employers’ Federation of Ceylon, Immediate Past President of National Chamber of Commerce of Sri Lanka and Honorary Life Member of Institute of Personnel Management)

 

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