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Individual Dynamics and Leadership: Employee Behavioural Issues in Unorganized Sector

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India is known for its cheap labor availability. Due to the rapid growth in population and the growth in the economy, several companies in the world have identified India as a manufacturing hub. This globalization has led to setting up of multiple labor-intensive manufacturing plants that want to establish connections with Indian economy. In response to this rapid industrialization, the employment of unorganized sector has been on a constant rise, standing around 92% of India’s total workforce, according to the 2011-12 statistical data released by National Sample Survey Organization (NSSO). With the cheap supply of labor force, some of the firms that are set up have been trying to exploit them by putting them to work under harsh conditions with no proper compensation and with no proper work-life balance. Various rules and regulations have been brought into the picture to the aid of this sector. But still reports are emerging across the country stating the fact that unfair treatment has been enforced upon the workforce. An aspect of organizational behavior which is related to the dissatisfaction of the labour force, at the firm we collaborated with, was discerned. After conducting in-depth interviews, we were able to zero-in on the major pain-points affecting the morale of the laborers working at the organization. This dissertation is aimed at critically analyzing the major concerns and then reaching at a practically implementable solution that would benefit both the organization and its labor force.

Objective of the Study

The objective of the study was to understand the behavioral issues that are prevalent in the organization. Conduct analysis of these problems and try to provide an intervention which would include the concepts from the theoretical aspect of Organizational Behavior. For the analysis, we decided to visit a plywood trading company and actively seek for existing issues with the labour force employed that could be intervened and worked upon.

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Review of Literature

Mathew Joseph, Nirupama Soundararajan, Manisha Gupta and Sanghamitra Sahu in their research paper Impact of Organized Retailing on the Unorganized Sector highlighted on how unorganized sectors are being benefited by the retailers of the mini and megacities. They recommended few policies that will strengthen the relationship between large retailers and small suppliers.

In his research paper, Sector: Concept and Policy, T. S. Papola discussed concerns related to various disadvantages of informal sectors and conveyed to reduce their problems they suffer, and also told to increase the absorption capacity of in-migrant works into the city to enhance their productivity and to develop working condition of workers.

Silvia M. D. Mendonca Noronha (2005): In his thesis of “Migrant Construction Workers in Goa” discussed about migrant labours working in Construction Company. It was observed that maximum numbers of workers were engaged in constructing company. The author made an endeavour to find out the socio-economic of workers and its impact on economic situation of Goa.

Neha Mittal (2012) in her Research Paper Women Workers in ‘Unorganized Sector: Socio-Economic Perspective’ discussed about the problems of women worker. Long working hours daily, chaotic working conditions, and very low wages and above all they keep on working without proper social security measure.

“Social Security System and the Informal Sector in India: A Review” discusses views on how Indian government managed social security since 1947, effective very negligible for the labourers of unorganized sectors whether in India maximum labour force comes under the informal sectors. This article surveys about monetary problems of the workers i.e. they do not have savings to keep themselves secure in a problematic situation. It also tries to convey that absence of standardize saving of this type of workforce mark on the efficiency of the whole Indian economy.

Statement of Research Problem

During the past six months of observation by the firm, it had been observed that there was a steep fall in productivity of the firm. When looked at, the firm found that there was a decline in the sales for successive months. The revenue through sales that they had forecasted was not being met. This led to the ideation to observe and understand if this drop in sales was related to the change in the behaviour of the labourers working for the firm. If it were so, we were to provide a corrective measure for the firm before the situation worsened.

Method of Study

Our method of study was primary research which we carried out through personal interviews. We interviewed the supervisor to get his perspective on the issue. Our deduction was that he would have a better understanding of the problem in hand. We prepared a list of questions that we felt were crucial. But due to the free flow of interview, we got additional information pertaining to the working conditions. The interview happened for a solid twenty minutes. We got to know the presence of concerning behaviour in the firm. The sales dipped majorly due to the inadequacy of the work force on various occasions. We had a good data bank of required information for us to proceed further.

We analysed the data given by the floor supervisor and connected it to certain behavioural characteristics that would force the employees to take frequent leaves. With this, we again built a structure for the interview with the labourers. But the list was not exhaustive.

With these in hand, we started conversing with the labourers, only five in the beginning. The interviews went around for fifteen minutes on an average. We took this group as our sample study to refine our questionnaire to frame the questions in a better manner. The new questionnaire was then used during the conversation. This helped us gather much more data with better connection to the issue in hand.

The following issues were discovered:

  1. The working hours: There was no fixed timing and was dependent on the arrival of the trucks.
  2. Holidays and Festivals: There is no provision for holidays for the workers, neither do they have a paid-leave structure. During festivals, they are expected to work longer hours due to boom in sales. Even half-day leave leads to entire day’s wage getting cut.
  3. Absenteeism: They don’t show up to work at times, without any prior intimation, and the burden falls on few select labourers (especially during festivals).
  4. Miscellaneous: The trucks have no fixed timings, due to which the labourers have to wait back compulsorily for long hours.

All the collected data were collated for further analysis and discussions.

Analysis and Results


The analysis pointed towards the following findings:
  • The work load was mostly on an intermittent basis.
  • The workers didn’t get any holiday during the festival seasons due to peak in sales and business.
  • There was no satisfactory compensation system for extra manual labour they did.

We decided to figure out a solution for these factors after confirming the strength of the connection it had with the issue of absenteeism in hand.

From the above data that we collected, we figured the root cause of the issues was the wage structure.

Lack of Compensation

The base pay was fixed for the labourers’. The compensation was fairly low, in fact it was the minimum wage fixed by government for the efforts that they put in. The efforts included working on holidays, festivals and for the erratic work hours. The cost of living had increased more than 77% in the last 7 years in Mumbai. With the increase in cost of living the pay was not enough to meet their ends. This has increased the dissatisfaction in workplace.

No Variable Pay

Incentive plans are established to reward employees for improved commitment and performance and as a means of motivation. Incentive plans have not typically been popular in the company. The workers get no variable pay irrespective of the number of trucks they unload, the payment is fixed. They don’t get any extra benefit for working overtime and sick leaves.

Advance Payment Issues

The labourers don’t receive complete payment. The reason being past experiences, they had demanded for advance payments and don’t return to work after the payment is done. At times, they need some advance for genuine reasons but get dissatisfied with the refusal.


The root cause for the various behavioural issues had been identified and listed. The issues faced by the labourers were needed to be resolved but at the same time, the plight faced by the proprietors/employers was also to be kept in mind. Without causing much disruption to the current mode of operations and not much discontent to the work force and employers, we came up with the following course of actions.

We devised the following wage structure:

Fixed Pay

The labourers will receive a fixed pay of Rs. 11000/- per month. This would be a substantial increase from the initial pay of Rs. 9500 /-. This increase has been proposed keeping in mind the erratic working hours, irregular truck timings and lack of holidays for the labourers. This proposal would also address the behavioural issues that arise due to the non-existence of a proper compensation plan. As per different organisations the minimum cost of living in Mumbai is 7500-8000.

The company took up our wage structure suggestion in an experimental basis for six months and decided to stick to it if the results will be considerable.

They increase the fixed salary to 11000 as it had been a constant demand from the workers’ side. Post payment of the salary we talked to the workers and found that they were more satisfied. However they had issues continued in the advance salary field.

Variable Pay

The number of trucks that arrive on a daily basis is not fixed. Each truck comes with a different tonnage. Instead of paying labourers on the basis of number of trucks they unload, we suggested the idea of paying them based on the number of tonnes of plywood they unload. This is a win-win situation for both employers and labourers: labourers get cash depending on the amount of work they do and employers can keep track of incoming load and its associated expenses. Keeping in mind the industry standards, we suggested a pay of Rs. 150 per ton. So, on an average if a truck of 20 tonnes arrives, the pay that they’ll receive would be 3000 Rs.

The numbers of trucks reached in the last 10 days were 30, which contained approximate 500 tonnes of material.

As per our structure they were paid Rs. 75,000 which was distributed amongst the workers who worked on those specific loading and unloading tasks. Most of them earned Rs. 2500 to Rs. 3000 extra. The extra payment worked as ‘positive reinforcement’ and increased a sense of motivation among the workers to work for more and more loading and unloading task. As per the manager of the firm, Gupta, the workers have started coming to him looking for more task that would be rewarding for them.


Bonus pay is compensation over and above the amount of pay specified as wages or salary. The company is not bound to pay the amount but depends on the profit of the business window. We proposed a Diwali bonus to be provided to the labourers. The bonus will be equivalent to one month’s salary. However, keeping in mind the other side of the business, this bonus will be provided only if they work for the entire duration of 12 months i.e. it will be paid at the end of the year. If they don’t work for the entire duration, then they’ll receive only 3/4th monthly salary as a bonus, keeping in mind that they have worked for a minimum of 9 months. This will increase the workers’ morale and job satisfaction.

The firm has implemented the initiative as of now but they will be considering it in future. Diwali, being the most famous festival and best season for business, the firm will start the bonus system where bonus amount will be directly proportional to the work experience of the worker from coming Diwali.

Advance Payment

During emergency times, labourers weren’t given any sort of advance payments. Due to this most of the labourers would quit their jobs without taking the payment. At times, if an advance would be given, they’d abscond. This could be tackled by giving advance payments to only those who have been working for a certain period of time and who have a good track record. Employers could take security measures (such as using collateral) to avoid the problem of labourers’ repayment issues or them quitting their job without any prior information.

The proprietor is still little skeptical about the advance payment system. A single case of any person absconding after getting advance salary will set a bad example amongst other workers. However, after listening to the problems the workers had faced in past due to lack of capital, we expect him to be a bit considering from next time.

Discussion of Findings

Effect of Managerial Styles

Managers are supposed to lead their people and act in a figurehead role. They have to train, discipline and motivate their employees. This is not being implemented effectively in the company that we have selected.

In this organization, the employees are suffering from a range of problems right from the basic hygiene factors. They have no fixed working schedule. It is dependent on the arrival of goods. They have to devote extra working hours when required without proper compensation. They also have to make up for their absent companions. Effective planning and management could have eliminated these problems.

In the company, we have tried to implement a variation of path-goal theory as the intervention. We have suggested a wage structure as a specimen of directive leadership. Here the leader (the manager of the company) has provided the followers resources required by them (compensation).

Motivational Theories for Employees

Maslow’s Theory: As per Maslow’s theory, a person fulfils his safety and physiological needs before achieving love, belonging, esteem and self-actualization needs. The absence of motivation or pride in the work these labourers do is a clear indication of that. They are working for the sake of meeting their daily bread and do not really care about growth or passion.

The intervention we have given focuses on meeting their first two needs of the Maslow’s hierarchy so that they can go up the hierarchy to meet their other needs.

Two Factor Theory: The working conditions, the less pay and bad supervision brings dissatisfaction to the employees in the company. According to Herzberg, removal of these factors is not enough for the employees to feel satisfied. The presence of intrinsically rewarding factors like proper appreciation or recognition may lead to job satisfaction.

We believe providing a wage structure that supports their priorities would keep the employees satisfied.

Theories Relating to Work Relations and Interactions

Uncertainty reduction theory: Here, the entry, personal and exit phase of the employee (the period for which the labourer is in the company) is made as normal as possible. The flat hierarchy in the workplace does not give the chance to one/ group of employees to empower other employees. They are differentiated only on the basis of their experience and hence, wages.

Social exchange theory: This theory focuses on the exchange of material or non-material goods like appraisals-promotions in the organization. Ours being the example of unorganized sector, did not have a formal approach to this. Right now, we focus only on the credibility of the manager to appreciate the work of an employee and give him raise depending on his tenure with the company.

Conclusions and Recommendations


The increase in fixed salary has increased the job satisfaction to some extent. The increased income has helped in providing the workers and their families a better lifestyle. The introduction of variable pay has helped in reducing unplanned absenteeism of the workers. The workers are more excited and look forward to come to job as every day can be rewarding depending on the trucks arrival. When they need leaves, as noticed in the 20 days window, they informed the supervisor a day in advance to be in the good book of the firm. This has also helped in structuring and assigning tasks to the workforce. They are also not that reluctant anymore to work during odd hours.


The firm was recommended to consider the bonus pay system that will give them an edge over the competitors. The current trend that the firm follows is hierarchy based. Most of the issues reach the owner through the manager. We encouraged the proprietor to communicate with the workers to get direct feedback, so that they can improve the holistic experience of the workplace. The salaries of the employees should be increased on an annual basis considering the inflation rise and increase in cost of living in the city of dreams.


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