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RESPONDING TO CHANGE IN THE WORKPLACE:

INNOVATIONS IN LABOR-MANAGEMENT-GOVERNMENT COOPERATION

**Labor Management Cooperation**

**In the Face of Rapid Change in the Workplace :**

**The Ultimate Roadway for Thailand**

####### Thai Honda Motors

# THAILAND

June 25 -- 26, 2001 Mexico City, Mexico

**Thai Honda Manufacturing Co., Ltd. : The Genesis of the Motorcycle
Production Center in Southeast Asia**

Thai Honda Manufacturing Co., Ltd. was established on July 1, 1965 in
Ampher Samrong, Samutprakarn province, with an initial capitalization of
150 Million Baht shared 40% by Thai investors and 60% by Japanese
investors. Its mission was to assemble Honda motorcycles to supply the
Thai domestic market and neighboring countries' markets with the support
of the Thai Board of Investment (BOI). In 1975, the plant expanded its
production lines to produce motorcycle engines for the plant motorcycle
assembly line as well as power products for both the domestic and
international market.

With an established human resources capacity and over 20 years of
developed production technology, the plant was expanded and moved to its
current location at Ladkrabang Industrial Estate, 40 Kms. from the
business center of Bangkok. At Ladkrabang Industrial Estate, the plant
was conceived as a Honda production and exportation base in Southeast
Asia. The production lines are ranged from 100 to 150 CC of motorcycles
\-- both two-stroke and four-stork engines such as Dream, Tena, Nova,
Wave, Phantom, and NSR. The production lines also include 150 -- 200 CC
power products and water pumps. The plant's production capability is
approximately 1,000,000 motorcycles annually and 400,000 general power
products annually with 90% of local contents.

Thai Honda exports motorcycles to Japan, China, Brazil, Vietnam,
Cambodia, and Laos P.D.R. It exports power products to over 40 countries
in Asia, Africa, the Middle East, Europe, North America, and South
America.

**Respect for the Individual: The Root of Labour Relations**

> **The Honda Philosophy**

150 companies in over 40 countries of the Honda family have been
cultivated with common philosophy, which are the three aspects of
Respect for Individual: **(1) Initiative, (2) Equality, and (3) Trust.**
These are the three consistent, key concepts for conducting Labour
Relations at Thai Honda and other companies in the Honda family all over
the world. Initially, the concepts of Equality and Mutual Reliability
created some questions for Thai Honda's staff. Clearly, there are
various levels of understanding of the word "equality." For instance, if
equality truly exists, why do management and staff have different levels
of welfare? Why are company cars provided only for the management and
not the staff. However, after gaining insights through discussion
regarding the meaning of "equality," the staff acknowledges that
"equality" means equality of opportunity for advancement in the company
hierarchy. Thus, even an educational background should be recognized
only as being a requirement for entry into the company. Although, at the
start, staff members may earn a different salary, they all obtain a fair
opportunity to be promoted depending on their working performance. That
insight is the meaning of the word "equality" at Thai Honda.

> **Associate, Not Employee**

Another outstanding feature of labour relations at Honda is the word
"associate" instead of "employee" to further the aforementioned ideal of
equality. The word "associate" is always used in the Honda family all
over the world, referring to everybody who works for the company \--
from the president to a production line staff." Therefore, no
"employees" or "employers" exist in the Honda family.

# The Clean Bright White Uniform : Reflecting "equality"

The third factor that makes Honda's environment brilliant is a white
uniform. White uniforms are required for all associates, from those who
work with engine oil or coolant in Press, Welding, Painting, and
Machining in the production line to those who work in the office of the
President, managing directors, general managers and department managers.
All associates in Thai Honda Manufacturing Co., Ltd. are counted as part
of a team and all are on the same team. When associates are in a
meeting, the outsiders are unable to distinguish the President from a
staff member.

**One Floor Management**

The final factor that identifies Honda's work culture, especially in
Thai Honda Manufacturing Co., Ltd., is **One Floor Management**. Without
private rooms and partitions, all associates can see one another.
Working tables are arranged face-to-face whether they are staff member's
tables or the president's table. Since One Floor Management it is an
organizational culture of the Japanese, it is generally found in
Japanese companies. However, in most of the other Japanese companies, in
contrast to Honda, the management working area is obviously
distinguished from that of the staff.

One Floor Management creates a working philosophy as follows.

1.  It ignores a working hierarchy so that communications between
    management and staff occur conveniently and continuously. There is
    no secretary or any other formal barrier.

2.  It creates down-to-earth behavior by the management. There is no
    arrogant management at Thai Honda Manufacturing Co., Ltd., so the
    management has to study hard to understand basic problems before
    managing.

3.  It provides a spirit of cooperation both in individual working
    behavior and a team spirit in the workplace. All associates are
    inevitably socialized to this *esprit de corps* either formally or
    informally. The face-to-face working table layout enhances this
    attitude. If a severe problem occurs, leaders who sit together can
    immediately know of and promptly solve that problem.

## Internal Communication System

The internal communication system is considered to be the most important
thing in this Bipartite Labour Relations System because, if the company
and the labour union hold a mutual understanding and the staff and the
company do not, the company and the labour union might be considered to
be in a conspiracy. To avoid that perception, regular communications at
Thai Honda include:

1.  A morning meeting or a "Chorei." In just five minutes, associates
    can recognize what important matters happened the previous day as
    well as what today's working goals are. The meeting ends with an
    emphasis on working safety.

2.  Information board: There are the labour union's boards and the
    company's boards at Thai Honda. Due to mutual trust, the information
    can be released on the boards without any approval from the Human
    Resources department. No problems have occurred so far.

3.  On-air programs are presented at the air-conditioned canteen. For
    instance, the safe driving campaign during long holidays is
    presented at this 2,000 person capacity canteen in order to motivate
    all associates to drive or ride carefully and not to drive or ride
    when drunk. The goal is to decrease the accident rate.

4.  Annual meeting: The annual meeting is held on the first working day
    of every year to announce the management's annual policy objectives.
    This is a very good opportunity for the president to explain about
    the production plan, quality, and managing direction to all
    associates in every department, totaling over 3,000 people. The
    president can take this chance to give his best New Year's wishes to
    all associates. While operational level associates may not be able
    to catch all of what the president announces, they are still proud
    that the company regards them importantly and equally.

All factors mentioned above cultivate for Thai Honda a distinctive
organizational culture from other Japanese companies. This distinctive
organizational culture is a significant foundation of the **Bipartite
Sustainable Labor Relations System**, which will be discussed next.

#### Problematic Conditions Prior to Change 

Thai Honda Manufacturing Co., Ltd. has been in business for ten years,
but the Labour Union was established on February 17^th^, 1975 under the
name of "Motorcycle Producer Worker's Union of Thailand" by 31 employees
of a company who were subsequently terminated. Labour Relations at the
company struggled in the beginning period because everyone strived only
for his or her own benefit.

Subsequently, when The Labour Relations Act B.E. 1975 was issued, the
situation started to improve. The whole picture of Thai labour
experienced the same rule change. Consequently, many Labour Unions and
Labour Federations, on both employee and employer sides, have been
established. Thailand is now known as one of the economies that has the
most Employers' Federations and Employees' Federations, as there are
nine Employees' Federations and ten Employers' Federations. Currently,
the condition of the problems has changed: many people perceive
Employers' Federation and Employees' Federations negatively as simply
trying to further their individual interests.

For internal Labour Relations problems of Thai Honda, for many years
there was only one activity: the negotiation season (or *Shuntou* in
Japanese) that was conducted annually to designate rising wages and
other fringe benefit rates proposed by the Labour Union. The *Shuntou*
had the following characteristics:

1.  During the negotiation period the company negotiated directly with
    the union. In certain seasons, customer demand for motorcycles
    appeared to impose greater demands on the staff, which generated
    some pressures and sometime causes conflicts or even a slowdown.
    This led to some damage in the form of labour problems as well as
    other problems associated with running the business.

2.  The labour union's requests could be divided into two major
    portions: (1) requests that were about rising wages and bonus rates,
    and (2) requests regarding welfare and fringe benefits such as
    medical allowance and children's education allowance. It was hard to
    finish all the issues in a limited time of one or two months. In
    addition, some issues needed surveys and careful analysis of data
    and facts that could not possibly be done in such limited time.
    Sometimes, if they could not be concluded, some issues were
    withdrawn. In these cases, unfortunately there was no genuine
    learning about important problems and they were just temporarily
    dealt with from year to year.

3.  Therefore, there was a high risk of having labour problems that came
    from old annual requests for benefits. This meant that customers and
    dealers were unable to receive motorcycles in time for their sales
    in the mentioned period, especially when they wanted their new
    motorcycles on a certain day for good luck, which varied depending
    on geographical factors. If the products could not be delivered on a
    certain day, it was be unable to be sold for the whole month.

This often happened. Some requests were made over and over again for
more than 20 years.

Finally, in the wake of the economic crisis in Thailand, there were
critical problems during the negotiation of the requests and resulting
severe damage. Therefore, the company and the union started to review
their roles by addressing issues from the past. This was a big turning
point for the Bipartite Sustainable Labour Relations System that is
described in this case study:

### A Joint Study of the Past and a Search for the Causes of Problems: The Turning Point of Labour Relations at Thai Honda.

After the concerned parties had brainstormed and had discussions about
issues arising in the past, the following was found.

1.  Employers and employees working together are like the two wheels of
    a motorcycle. The front wheel is the company. The rear wheel may be
    the employees and the union. One or the other cannot be missing.
    Moreover, for a bike to run to its destination, the wheel must be
    balanced and steady. This meant that there had to be a steadiness in
    the origination of the Bipartite Sustainable Labour Relations
    System. The power of this engine could mean the potential or quality
    of the employees that have the ability to drive the entire
    organization to reach its goals.

2.  Another concept is that Labour Relations will develop if every
    participant has the same understanding using the same database. In
    addition, in order to achieve proper, rising wages and other
    benefits, both parties need to work together.

3.  Running any business -- whatever type of the business it may be \--
    there will be more difficulties since the world is entering the age
    of no frontiers. Free trade policies are the major factor that makes
    every organization rise up and improve itself. Thai Honda also needs
    to do the same. Even though its core product is motorcycles, holding
    70% market share in the country, the union and the associates cannot
    be sure that the firm will survive if it does not go about creating
    a work system, production processes, quality control processes, and
    especially a Labour Relations system that is stable by itself --
    i.e., not dependent on any one person.

4.  Regarding employees' benefits, salaries, bonuses, and fringe
    benefits, the most important things to keep in mind are: (1)
    *employees work for the organization to succeed and achieve its
    goals so they need good and proper benefits consistent with the
    efforts that they have put into it*; and (2) *the company and the
    management have the same goal and, consequently, the*

> *organization needs to make profits in order to survive and hold its
> status in the industry and in the country.* Therefore, the parties
> have the same goal and are mutually dependent.

5.  In the past, an member of a labour union was always evaluated as a C
    for his/her working performance, which is the lowest (the scale runs
    from are S, A ,B+ ,B and C) since, in fact, the management lacked
    knowledge and understanding about Labour Relations. What they saw
    was the Union committees ask for time for labour union activities
    such as meetings, training, and seminars. They thought, since these
    tasks were not for the benefit of their department, then the
    employee deserved a C. In truth, of course, the unions are working
    for the company by being coordinators who connect the benefits
    between the company and all employees. That point of view is very
    important for maintaining labour steadiness, but for many years it
    was not held at the company. The appropriate solution was to have
    the annual evaluation for these employees done both by the
    supervisor as well as the human resources department.

Taking into account the five Thai Honda concepts, we reviewed the
situation and found that something needed to be changed in order to
create the labour steadiness that is necessary for success in today's
economy. Even though there was a law that they could hold on to \--
i.e., the Labour Relations Act B.E. 1975, the law basically was just
written words on paper. When the negotiations ended, there were winners
and losers. The loser was disappointed, upset and looking for revenge
the following year.

### 

What we needed was to adapt ourselves so that the labour union and the
company could work together permanently. To that end, labour and
management developed the following principles applicable to each
respective party:

### 

### For The Employers (The Company and The Management)

1.  Reduce, neglect, and stop suspicion of one another. Use sincerity
    and try to respect each other by using the Honda Philosophy (Respect
    for the individual) and Initiative, Trust, and Equality as
    guidelines.

2.  Keep the Business Partner concept in mind since every partner
    (Production Department, Quality Control Department, Management, and
    the Labour Union) needs to be part of the partnership concept to
    generate a sense of belonging.

3.  Give the labour union the ability to jointly access news and
    information such as profits and the costs of production, and join
    the firm's activities such as a new model launching ceremony (the
    Union President cut the ribbon with the Company President).

4.  Provide opportunities for additional education. Support training and
    observation of others to widen the vision of the union committees
    and the members to get more information.

5.  Support and allow the members to use more time for union activities.

6.  Adapt an annual evaluation process of labour union committees by
    management to balance the process for more fairness.

7.  Learn to compromise by balancing political and legal concerns. Do
    not strictly adhere to the laws and regulations since those rules
    are created for protecting general elementary rights of the
    employees. The firm and the union have history of being together for
    more than 25 years (the labour union 25 years, the company 36
    years). There are many things that are better than those basic
    rules, so why use them? Thus, if an idea is not right according the
    regulations, but it has some reasons that acceptable for both
    parties and is understandable, it should be adopted. On the other
    hand, if something has no reason but is right by the rules, it
    should be rejected.

**For the Employees (The Labour Union)**

1.  Reduce, neglect, and stop suspicion of each other. Respect each
    other including the decisions of management for the business.

2.  Wholly cooperate with the employers to maintain a competitive
    marketing capability.

3.  Provide correct information to the union members for suitable
    understanding, and jointly interpret events with management on a
    continuous basis.

4.  Do not try to protect employees that err without trying to improve
    themselves. Act cooperatively and manage the labour ethically.

5.  Be a good example for the employees by minimizing absences and
    working hard to build a new model of labour union committees based
    on these new concepts, and generate faith in both the concepts and
    each individual.

**Bipartite Sustainable Labor Relations System Organizational
Structure**

##### Benefits of the New Concepts

1.  Results of 1998\~2001: While we have not had 100% success with
    everything, we are moving in the right direction toward sustainable
    labor relations. It is important to be persistent;

2.  It is now an open management policy to make trust the established
    process more and more;

3.  The company can do business just as smoothly with this new system;

4.  Associates are happy and there is no conflict or violence

5.  The cooperation between the company and the union will strengthen
    the team and create innovations that will benefit all associates,
    customers and all the public.

###### 

###### How to Maintain the New Concepts

1.  There is a big project for expansion of these concepts to all
    associates through training. About 1,000 associates have been
    trained to date. We expect that we will be finished by the end of
    this year;

2.  We have a plan to recruit some associates who volunteer to work as a
    sub-committee in the future; if some sub-committees retire, we will
    have a successor to maintain this concepts for along long time;

3.  We always report to top management to monitor and provide some ideas
    or direction to collaborate with us. It means that we can also
    receive some support from the top level.

This concept is breaking through the old model of Labour Relations
Management, which based on instability, to the Bipartite Sustainable
Labour Relations System. Both parties have to reduce self-pride and
self-esteem and work harmoniously as members of the same family.
Happiness in a family cannot exist if its members are quarreling.
Members of the family should know what the problems of the family are
and help one another solve those problems. The family will obtain the
synergy and can protect itself against all of the harms that may destroy
its happiness.