A large unit manufacturing electrical goods which has been known for its liberal personnel
policies and fringe benefits is facing the problem of low productivity and high absenteeism. How
should the management improve the organizational climate??
I am reminded of Machiavelli's comment that "it is better to be feared than to be loved. After having spent twenty years in the private sector prior to entering education, I have learned from experience that few employees give their best effort because of the intrinsic reward of doing a good job; particularly if the job is repetitive, which a great deal of manufacturing jobs are. Liberal benefits are a wonderful way to keep good employees from jumping ship, and perhaps attracting new qualified employees. Still, employees on the job may very well become complacent if management allows them to do so.
In this situation, I would suggest a quota system, or perhaps production pay in which workers are rewarded by meeting quotas or paid more for superior production. A uniform policy on absenteeism that is consistently applied is also helpful. It is important for management to set expectations for workers--good pay for a job well done. As with any radical change, there is apt to be resentment and reluctance to adjust; but with time and consistency, the situation should correct itself.
I don't think that liberal benefits policies (I assume you mean good health insurance and such) would cause low productivity and high absenteeism. So I see no reason to change that if it is economically viable. If, by "liberal personnel policies" you mean that management tolerates unexcused absences and slack work habits, then that is what needs to change.
I would say management would need to promote a culture of hard work. It could use "carrots" (highly publicized rewards for a "worker of the month" or other things like that). Or it could use "sticks" (punishments for excessive absenteeism or failure to meet work quotas). Preferably, it should use a mixture of these so that the climate gets tougher but workers do not feel completely oppressed.