2nd Edition

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CAMS Journal of Business Studies and Research ISSN 0975 ± 7953 Aprril - June 7 IMPACT OF FLEXI-TIME (AWORK-LIFE BALANCE PRACTICE) ON EMPLOYEE STRESS REDUCTION IN IT SECTOR ² INDIAN PERSPECTIVE S. Suman Babu A.R.Aryasri K.V.S.Raju K.Bhavana Raj Abstract This paper examines the relationship between flexi-time on employee stress reduction as part of a work- life balance practice based on empirical evidence drawn from IT Sector in Hyderabad, India. A total of 300 samples with 30 samples (Asst.Managers, Managers, and Sr. Managers) from each company had been included from the Ten IT companies based on simple random sampling. Managerial personnel from HR, Marketing, Finance, Operations and Technical functions are included in the study. The study shows that when the average flexi-time score increases, the average stress reduction score also increases proportionately. The study reveals positive correlation and significant association between employee stress reduction and flexi-time. The findings of the study shows that majority of the managerial personnel are able to reduce their stress levels with the help of flexi-time as one the important work-life balance practice. Keywords: Work-life balance, Stress reducer. Introduction In the pursuit of reducing stress, improving performance, increasing productivity, reducing costs and enhancing profitability in the workplace, organizations have been evolving new ways and means to build psychological relationships with employees. Work-life balance (WLB) is a common challenge throughout the industrialized world. Employees all over the world are facing challenges how to balance work and personal life (Ramachandra Aryasri A & Suman Babu S., 2007). In the era of globalization, the boundaries of world are disappearing especially with respect to work. The present global organization is working 24*7, 365 days a year and the growth of the economy is the present priority amidst global recession, which the world over is facing today. Everyone·s focus is more on the work than the personal life which is creating an imbalance in the professional work and personal life. (Sindhu & S.Suman Babu, 2008). Most cited work- family policies in work-family literature are on-site day care; help with day care costs, elder care assistance, information on community day care, paid parental leave, unpaid parental leave, maternity or paternity leave with reemployment, and flexible scheduling (Perry-Smith et al., 2000). Workplace flexibility is the ability of workers to make choices influencing when, where, and for how long they engage in work-related tasks" (Hill, et al., 2008). http://www.SmartPDFCreator.com http://www.SmartPDFCreator.com http://www.SmartPDFCreator.com http://www.SmartPDFCreator.com http://www.SmartPDFCreator.com

Transcript of 2nd Edition

Page 1: 2nd Edition

CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 7

IMPACT OF FLEXI-TIME (AWORK-LIFE BALANCE PRACTICE) ON EMPLOYEE STRESS REDUCTION IN

IT SECTOR – INDIAN PERSPECTIVE

S. Suman Babu A.R.Aryasri K.V.S.Raju K.Bhavana Raj

Abstract This paper examines the relationship between flexi-time on employee stress reduction as part of a work-life balance practice based on empirical evidence drawn from IT Sector in Hyderabad, India. A total of 300 samples with 30 samples (Asst.Managers, Managers, and Sr. Managers) from each company had been included from the Ten IT companies based on simple random sampling. Managerial personnel from HR, Marketing, Finance, Operations and Technical functions are included in the study. The study shows that when the average flexi-time score increases, the average stress reduction score also increases proportionately. The study reveals positive correlation and significant association between employee stress reduction and flexi-time. The findings of the study shows that majority of the managerial personnel are able to reduce their stress levels with the help of flexi-time as one the important work-life balance practice.

Keywords: Work-life balance, Stress reducer.

Introduction

In the pursuit of reducing stress, improving performance, increasing productivity, reducing costs and enhancing profitability in the workplace, organizations have been evolving new ways and means to build psychological relationships with employees. Work-life balance (WLB) is a common challenge throughout the industrialized world. Employees all over the world are facing challenges how to balance work and personal life (Ramachandra Aryasri A & Suman Babu S., 2007). In the era of globalization, the boundaries of world are disappearing especially with respect to work. The present global organization is working 24*7, 365 days a year and the growth of the economy is the present priority amidst global recession, which the world over is facing today. Everyone’s focus is more on the work than the personal life which is creating an imbalance in the professional work and personal life. (Sindhu & S.Suman Babu, 2008). Most cited work-family policies in work-family literature are on-site day care; help with day care costs, elder care assistance, information on community day care, paid parental leave, unpaid parental leave, maternity or paternity leave with reemployment, and flexible scheduling (Perry-Smith et al., 2000). Workplace flexibility is the ability of workers to make choices influencing when, where, and for how long they engage in work-related tasks" (Hill, et al., 2008).

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 8

Work-Life research in IT Sector in India During the period 1995-2000 India saw the information technology enables services (ITES) e g, call centre and software sector boom. Many organizations in this sector adopted work styles and organizational practices from developed countries in the west. Workers were expected to work 24/7 × 365 days of the year. To prevent such a work style from affecting worker health and productivity, workplaces offered services traditionally associated with the family and non-work domain within their premises such as gymnasiums, day-care facilities, laundry facilities, canteen facilities, even futons to sleep on if you felt like a nap (Uma Devi, 2002). The IT sector was meant to have emancipatory potential for workingwomen on account of the possibility of telecommuting and working flexible hours. However in reality IT workplaces turned out to give very little room for family time and therefore did not live up to this promise. Also, since family friendly measures were offered more as an imitation of western organizational practices rather than from a genuine concern to enable (women) workers handle work and family responsibilities, they have suffered casualties during the recent recession in the IT sector (Winifred 2003). The need to avoid stress and absenteeism associated with work and family demands among a newly downsized, highly pressurized core workforce as a result of massive downsizing and restructuring of organizations during 1990s has been recognized by some organizations as a compelling argument for continuing or developing family-oriented policies for this group particularly public sector(Lewis et al., 1996).

There is more innovation conceiving work-life balance policies and practices in IT and IT enabled services-be they multinational or Indian companies-because of the preponderance of gender balance and resultant increased awareness and concern about family responsibilities. Interestingly, as Wipro’s website puts it, the emphasis is on “Work balance towards life” rather than “life balance towards work”. (V.Chandra and C.S.Venkata Ratnam, 2009). In view of longer working hours and around the clock support, IT workers suffer more from work-life conflict than in most other cases. (C.S.Venkata Ratnam and V.Chandra, 2009)

Stress levels among IT employees in IT Sector in India Information Technology (IT) sector in India is doing very good. There are more job opportunities due to the IT boom. Just after the completion of professional qualifications like B.Tech and MCA (engineering graduates and computer post graduates), the applicants are getting jobs. The pay and perks are encouraging. But the work life is highly complicated and highly demanding. There are many pulls and pressures during the work life. There are too many commitments and deadlines and there are too much of unpredictable peaks and troughs during the course of the working time. Managerial personnel have to work for long hours and in different shifts to meet those deadlines. All these things make the work as a hectic activity and a strenuous one and creating enormous stress due to work-life conflict there by

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 9

hampering performance, which is causing decline in productivity levels and also forcing them to leave organizations due to work-life problems. The different responsibilities, expectations, duties, and commitments required by the multiple roles (work and family) can become difficult to balance, creating pressure and thus resulting in personal stress (Netemeyer, Boles, & McMurrian, 1996). The difficulty or inability to cope with the competing demands of each role is commonly referred to as work-family conflict while the ability to manage both roles simultaneously is referred to as work-family balance. Stress literature indicates that inter role conflict rises from tension in one role that leads to stress in another role (Wiley, 1999); for example, work pressure that interferes with family/marital functioning (indicated as W -F) and family tensions that interfere with work functioning (indicated as F-W) Flexi time, a stress reducer and it is importance Nowadays employers are in the habit of cutting costs. Flexi time is one such work-life balance practice that does not add any cost to the employers but moreover it adds many benefits to the bottom line like improved retention, increased performance apart from reduction of employee stress. Research Problem - The literature review reveals that there are very few studies in India which explore the

impact of flexi-time on employee stress reduction. - After having extensive discussions with the research guide, academicians, key HRD

people in IT industry, and colleagues, the research problem has been formulated keeping following questions in perspective:

Research Questions - Whether flexi-time as a work-life balance practice is being adopted by IT organizations

in India and what are its possible outcomes? - How Flexi-time help organizations in reducing employee stress? - How Management and Coworker Support helps in smooth implementation of Flexi-

time in IT companies.

Objectives of the study - To asses existing work-life balance practices in select IT organizations in Hyderabad. - To examine into and analyze the influence of flexi time on employee stress reduction. - To examine how management and co-worker support helps in smooth

implementation of flexi-time to reduce employee stress.

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 10

Literature Review

Relationship between work-life balance practices and employee stress reduction.

When balance is not achieved, the potential for stress in terms of work-family conflict exists. A number of studies will be reviewed to understand the work-family conflict construct. As organization leaders begin to see that work-family conflict affects work-related outcomes, interventions are created in the form of employee benefits as a means to ameliorate the stress. Stress at work is a well known factor for low motivation and morale, decrease in performance, high turnover and sick-leave, accidents, low job satisfaction, low quality products and services, poor internal communication and conflicts etc. (Murphy, 1995). Reduced related stress outcomes due to work-life balance practices have been observed in many research studies (Johnson, 1995). Reduction in worker stress from conflicts between work and family roles (White, et al. 2003). Research studies on Management & Co-worker Support The literature has suggested that the adoption of formal family-responsive policies may not have the desired effects if there is no supportive organizational culture (Kossek & Nichol, 1992). Therefore, if lack of supervisor and organizational support is shown from the research findings, then companies considering family-responsive policies should take steps to promote a corporate culture that values or at least accepts the necessity and potential long-tern benefits of the policies. Organizational culture is often cited as the key facilitator or barrier to work-life policies (Thompson et al., 1999) with cultural norms often over-riding formal policy intentions. According to the business case, a supportive culture (management and coworker support) can improve morale and motivation and reduce stress and absences. Based on a study of managers' and professionals' use of work-family policies specifically, Blair-Loy and Wharton (2002) also argue that employees were more likely to use these policies if they worked with powerful supervisors and colleagues who could buffer them from perceived negative effects on their careers. Another factor which may contribute to an understanding of why many employees are reluctant to take up work-family provisions is lack of co-worker support. Also referred to as the “backlash” movement (Haar and Spell, 2003), there is some evidence, based on theories of organizational justice (Hegtvedt et al., 2002) that resentment by some employees may contribute to a work environment where the utilization of work-life policies is not encouraged.

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 11

Theoretical Perspective/Conceptual Framework for the Present study The theoretical underpinning for this present research study was also built on the concept of spillover theory (FIGURE A--Conceptual Model on Flexitime as a WLB practice and employee stress reduction outcome); Spillover theory can help explain the reciprocal relationship between work and family by accounting for both the positive and negative influence of multiple roles (Leiter & Durup, 1996). Spillover refers to the experiences (attitude, behavior, environment, demands, emotions, responsibilities, resources) of one role "spilling over" or affecting the other role. Spillover can simultaneously involve the experience of both stress and support. When an individual's experienced stress accumulates in one domain and cannot be contained within that domain due to lack of resources, the stress spills over into the other domain and is expressed there as well. For example, spillover from work to family occurs when an employee experiences a difficult, stressful day at the office and comes home to the family, yelling at one's spouse and children. Stress experienced at the office is then experienced at the home. Hypothesis After conducting an extensive review of literature, the following hypothesis predominantly in the alternate form is developed in line with the research problem and objectives.

Ha: There is significant impact of flexi-time in reducing employee- stress. Methodology and Sampling Design The primary data was collected from May’2008 to Oct’2008.The study is based on both the primary data and secondary data. Secondary data was collected from various research journals, books, magazines, websites related to the field of the study. Primary data was collected by administering a structured questionnaire to the junior level & middle level managers of the sample companies. A 1-5 point Likert Scale from strongly disagree to strongly agree has been used to measure the statements in the questionnaire. The measures were adapted and Cronbach’s coefficient of reliability was computed for all dimensions to verify the internal consistency of the items (Flexitime and employee stress reduction) that constitute the dimensions. For flexi time and employee reduction scale , the number of items are 8 and the Cronbach alpha value is 0.947 Sampling Techniques and sample size description. Firm size affects the type and extent of work-life balance policies that are offered. In their study of US firms, Galinsky and Bond (1998) found that company size was the next best predictor of the presence of work-life balance policies, after industry type. Larger companies (more than 1,000 employees) were more likely to provide flexible work options and longer and paid parental leave.

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 12

Ten IT companies are selected on the basis of non-probability sampling which is non-random in nature. A total of 300 samples with 30 samples (Asst.Managers, Managers, and Sr. Managers) from each company had been included from the 10 companies based on simple random sampling. The sizes of each of the junior level and middle level management depends on the population of respective cadre of managers. Managerial personnel from HR, Marketing, Finance, Operations and Technical functions are included in the study. All these companies have more than 1000 employees each. Males respondents constitute 218 (72.7%) and Females respondents constitute 82 (27.3%). They belong to age group between 25 yrs to above 45 yrs. The highest percentage of participants is between 35yrs-45yrs (45.7%). 280 participants i.e., (93.3%) are married and 20 participants (6.7%) are unmarried. Truly this is a representative of the work-life problems faced by married managerial personnel. 280 participants i.e., (93.3%) said they have children and 290 participants (96.7%) said they have elderly persons in their families whom they need to look after. 210 participants (73.3%) said they work more than 8 hrs and nearly 100 participants (33.3%) said they work night shifts (8pm -4am) and another important observation is that 244 participants (81.3%) said they have working spouses. All these combinations will help to further study and evaluate work-life balance practices on organizational outcomes. The following tables will explain the demographic characteristics of the respondents

Statistical Analysis and Results When asked how important you think the following work-life balance practices?

For flexi time :The data collected out of 300 Managerial personnel 25.3% -34.7% felt extremely important to important.11.7% respondents felt neutral and 14.3% -14.0% felt somewhat important to not at all important. When asked “I would feel less stressful if flexi-time were offered”. 24.2% -25.7% respondents felt agree to strongly agree.15.3% respondents felt neutral and 17.3% -17.3% respondents felt disagree to strongly disagree.

Table 1.1: Mean and Standard Deviation Scores of ‘Overall Sample’ Descriptive Statistics

Mean Std. Deviation N

Employee Stress Reduction 3.24 1.445 300

Flexitime 3.47 1.357 300

Table 1.1 gives the mean and standard deviation scores for the overall sample of 300 managerial personnel (which includes Assistant Managers, Managers and Senior Managers). It

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 13

is interesting to observe that the averages of these domains are almost the same with lesser variation on Employee Stress Reduction. For Flexitime, the corresponding range is 1 to 5. In order to measure the extent of linear relationship between the average Flexitime scores and the average Employee Stress Reduction scores, Karl Pearson coefficient of correlation is computed; and is tested for significance. Table 1.2 reveals that there is a positive correlation between Employee Stress Reduction and Flexitime (r=0.689, p=0.000), and is found to be statistically highly significant. For future research, it may be suggested that Flexitime can be used to estimate Employee Stress Reduction. Since managers from all cadres for the purpose of work-life balance practices study are included, it reflects the importance of Flexitime to measure Employee Stress Reduction.

The coefficient of determination R2 = 0.475, p=0.000 highlights that Flexitime contributes on Employee Stress Reduction to a large extent (Table 1.3). Thus, Employee Stress Reduction can be estimated from Flexitime scores.

Table 1.3: Coefficient of determination between Employee Stress Reduction and Flexitime

Model Summary

Change Statistics

Model R R Square Adjusted R

Square Std. Error of the Estimate

R Square Change F Change df1 df2

Sig. F Change

1 .689a .475 .473 1.049 .475 269.114 1 298 .000

a. Predictors: (Constant), Flexi time

Table 1.2: Correlation between Employee Stress Reduction and Flexitime Correlations

Employee Stress Reduction Flexitime

Pearson Correlation 1 .689**

Sig. (2-tailed) .000

Employee Stress Reduction

N 300 300

Pearson Correlation .689** 1

Sig. (2-tailed) .000

Flexitime

N 300 300 **. Correlation is significant at the 0.01 level (2-tailed).

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 14

The analysis of variance table (ANOVA) given in Table 1.4 reveals that the regression model

fits well for the data (F=269.114, p=0.000).

Table 1.4: ANOVA results of Employee Stress reduction and Flexitime

Model Sum of Squares df Mean Square F Sig. Regression 296.201 1 296.201 269.114 .000a

Residual 327.995 298 1.101

1

Total 624.197 299 a. Predictors: (Constant), Flexitime b. Dependent Variable: Employee Stress Reduction

The regression coefficient and its associated test of significance are given in Table 1.5. The

fitted regression m odel is as follows:

Employee Stress Reduction = 0.733 Flexitime + 0.694 From the above regression line, the average score on Employee Stress Reduction can be estimated for a given average score on Flexitime. Further, the population regression coefficient is different from zero as t=16.405, p=0.000. It signifies that when the average Flexitime score increases, the average Employee Stress Reduction score also increases proportionately.

Table 1.5: Regression Coefficient and its Associated Test of Significance

Hence, the study hypothesis “There is significant impact of flexi-time in reducing employee stress” is accepted

Unstandardized Coefficients

Standardized Coefficients

Model B Std. Error Beta t Sig.

(Constant) .694 .166 4.172 .000 1

Flexitime .733 .045 .689 16.405 .000

a. Dependent Variable: Employee Stress Reduction

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 15

Managerial implications of the study The findings of the study reveals that work-life balance is becoming a burning issue in IT sector in India. To facilitate employees, organizations are practicing work-life balance strategies like flexi time to their employees so that they can balance their work and life domains. Most of the western organizations are providing work-life balance practices like flexi time to its employees and are competing with the global organizations. Indian organizations should match with global approach in providing work-life balance practices to its employees. The literature review revealed that there are only few studies in India in evaluating flexi time as a work-life balance practices based on employee stress reduction. Either the study has been conducted by taking one practice or in single country. Hence the researcher found that the existing literature was short of empirical studies in the area of evaluating flexi time as a work-life balance practice based on reduction in employee stress in India, thereby providing the impetus for this study. This research work, which is conceptual and empirical in nature, has taken a step, and a significant one in the Indian context to fill the void. This study has been a modest attempt to evaluate flexi time as a work-life balance practice based on employee stress reduction. The results of this study conclude that there is significant impact of flexi time on employee stress reduction. This research work was undertaken in Hyderabad region of Andhra Pradesh in India in ten organizations from the IT sector. The future research can be in areas of evaluation of work-life balance practices such as flexi time based on employee stress reduction in other regions of India and in other sectors to compare the results to arrive at more generalized conclusions. Future research can also focus on the impact of other work-life balance practices on organizational outcomes. This research work was carried out by taking managerial personnel as a sample, whereas future research can be focused by taking different samples like employees belonging to different levels and comparing between the levels. Conclusion To conclude how provision of work-life balance practices like flexi time may benefit organizations by reducing employee stress rate where employees can perform to the best of their potential and also helps policy makers to frame welfare measures to employees. Organizations should integrate flexi time as a work-life balance practice in core business objectives and also should use as a strategic tool for reducing employee stress. For effective implementation of flexi time as a work-life balance practice there should be both management and co-worker support and also organizations should observe the moods, attitudes, behavior and environment of its employees because spillover of these will have both positive and negative outcomes with reference to employee stress reduction. Organizations should also

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 16

consider other practices which will increase employee stress reduction. During this economic downturn or global recession organizations should adopt flexi time as a employee stress reduction tool because it does not add any cost to the organizations and moreover it adds many organizational benefits to the bottom line like increased satisfaction and productivity, retention of valuable employees ,decreased absenteeism apart from reducing employee stress.

The above article can be summed up in Fig. A (Conceptual Framework of Flexi-time as a Work-Life Balance Practice and reduced employee stress outcome). `

Positive Outcome

Reduced stress levels

Family Attitudes Behaviors Environment

Spillover Theory

Similarity between what occurs in the family and at work

Workplace Attitudes Behaviors Environment

Negative Outcome Increased Stress levels

Work-Life Balance Practice

Flexi time

Management/Coworker Support Provides support for implementing work and family practices.

Work-Life Balance Combining employment with family life, caring

responsibilities, and personal life while meeting employer’s needs

Proper mix of personal and work responsibilities which leads to better work-life balance

Fig A Conceptual Model of Work-Life Balance Practices and reduced employee stress outcome Note: Direct Linkages Interactional Impacts

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 17

References Blair-Loy, M., & Wharton, A. (2002). Employee’s use of work–family policies and workplace social context. Social Forces, 80, 813-845. Venkata Ratnam, C.S., & Chandra, V. (2009). Work-Life Balance: Review of Literature. NHRD Network Journal, 2(3), 89-97. Farid A. Muna & Ned Mansour, (2009). Balancing work and personal life: the leader as acrobat. Journal of Management Development, 28(2), 121-133. Haar, J., & Spell, C.S. (2003). Where is the justice? Examining work-family backlash in New Zealand: the potential for employee resentment. New Zealand Journal of Industrial Relations, 28 (1), 59-75. Hegtvedt, K.A., Clay-Warner, J., & Ferrigno, E.D. (2002). Reactions to injustice: factors affecting workers' resentment toward family-friendly policies. Social Psychology Quarterly, 65(4), 386-401. Hill, E.J., Grzywacz, J.G., Allen, S., Blanchard, V.L., Matz-Costa, C., Shulkin, S., & Pitt-Catsouphes, M. (2008). Defining and conceptualizing workplace flexibility. Community, Work, and Family, 11, 149-163. Johnson, A, A. (1995). The business case for work-family programs. Journal of Accountancy, 180, 53-57. Kossek, E. E., & Nichol, V. (1992). The effects of an on-site childcare on employee attitudes and performance. Personnel Psychology, 45, 485-509. Leiter, M.P., & Durup, M.J. (1996). Work, home, and in-between: A longitudinal study of spillover. Journal of Applied Behavioral Science, 32, 29-47. Lewis, S., Watts, A., & Camp, C. (1996). Midland Bank’s experience, In S. Lewis and J. Lewis (Eds.) The Work-Family Challenge. Rethinking Employment. London: Sage. Murphy, L.R. (1995). Managing job stress: an employee assistance/human resource management partnership. Personnel Review, 24 (1), 41-50. Perry-Smith, J. E. & Blum, T. C. (2000). RESEARCH NOTES - Work-Family Human Resource Bundles and Perceived Organizational Performance. Academy of Management Journal, 43(6), 11. Ramachandra Aryasri, A., & Suman Babu, S. (2007). Work-Life Balance- A holistic Approach.Siddhant-A Journal of Decision Making, 7 (1), 1-11. Sindhu & Suman Babu, S. (2008). Achieving Work-Life Balance-Women Perspective. Indian Journal of Training and Development, 38(1), 79-86. Uma Devi, S. (2002). Globalization, Information Technology and Asian Indian Women in US”, Economic and Political Weekly, available on line at http://www.epw.org.in. Chandra, V., & Venkata Ratnam C.S. (2009). Model guidelines and best practices for family friendly workplaces and workforce. NHRD Network Journal, 2(3), 79-88. White, L., Rogers, S.J., "Economic circumstances and family outcomes: a review of the 1990s", Journal of Marriage and the Family, Vol. 62, 2000, pp.1035-51. Winifred, R. P. (2003). Organizational Change, Globalization, and Work- Family Programmes: Case Studies from India and the United States. Chapter submitted to Work-Family Interface in International Perspective, LEA Press. Netemeyer, R.G., Boles, J.S., & McMurrian, R. (1996). Development and validation of work-family conflict and family-work conflict scales. Journal of Applied Psychology, 81, 400-410. Wiley, M.G. (1999). Gender, work, and stress: The potential impact of role-identity salience and commitment. The Sociological Quarterly, 32, 495-510. White, M., Hill, S., McGovern, P., Mills, C., & Smeaton, D. (2003). High performance management practices, working hours and work-life balance. British Journal of Industrial Relation, 41 (2), 175-196. McHugh, M. (1993). Stress at work: do managers really count the costs?. Employee Relations, 15 (1), 18-32. Thompson, C.A., Beauvais, L.L. & Lyness, K.S. (1999). When work–family benefits are not enough: The influence of work–family culture on benefit utilization, organizational attachment, and work–family conflict. Journal of Vocational Behavior, 54, 392–415. Galinsky, Ellen & Bond, James T. (1998). The 1998 Business Work-Life Study: A Sourcebook – Executive Summary. New York: Families and Work Institute, , http://familiesandwork.org/summary/worklife.pdf

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 18

BRANCHLESS BANKING: UPSHOT OF INNOVATIVE TECHNOLOGY TO SERVE THE POOR

Ritu Sinha

Abstract

Newer technology has penetrated in every field of life. Even the banking sector has not remained unscathed and undergoing dramatic transformation. Banks are embracing technology to innovate and update business processes improve customer service and differentiate them in a market. Branchless Banking (BB) is the consequence of such advancements. It desires to offer basic banking services to customers at a cost of at least 50 percent less than that through traditional channels. The endeavor of BB is to utilize innovative information and communications technologies to deliver financial services through retail channels that reach beyond traditional bank branches and ATMs. Mobile phones, Plastic cards and point-of-sale devices, hybrid technologies are few aids of technology trying to reach out to remote villages. This paper is an attempt to draw focus on BB as a new delivery channel to offer banking services in a cost effective manner. This paper offers analytical discussion on challenges, issues and concludes with policy perspectives and future ahead for this development.

Key words: Branchless banking, Upshot of Innovative Technology to Serve Poor

Introduction In 1980, telephones were stuck to walls, facts were found in books and people had to browse shelves in a record store if they wanted to buy the latest music. But, today all these things are accessible by the click of a button. This is by virtue of newer technology penetrating in the every field of life. Even the banking sector has not remained unscathed and undergoing dramatic transformation. The competitive retail environment is compelling the banks to become more customer-centric. Banks are embracing technology to innovate and update business processes, improve customer service, increase sales opportunities and differentiate them in a market. Branchless Banking (BB) is the consequence of such advancements. It desires to offer basic banking services to customers at a cost of at least 50 percent less than that through traditional channels. In the Philippines, a typical transaction through a bank branch costs the bank US$2.50; which can cost only US$0.50 if it were automated by using a mobile phone (Asian Banker 2007). The endeavor of BB is to utilize innovative information and communications technologies (ICTs) to deliver financial services through retail channels that reach beyond traditional bank branches and ATMs. Mobile phones, Plastic cards and point-of-sale devices, hybrid technologies are few aids of technology to enhance the penetration of banking services and tying to reach out to remote villages and aiming towards achieving inclusive finance for social sector.

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Financial sector reforms and competitive environment in the country conveyed a sea change in the profile of the banking sector. The concept of branchless banking serves as an additional way of reaching unbanked people for delivering financial services, thereby, contributing towards financial inclusiveness. In our country, there are around one billion people who constitute the segment of unbanked people and marginalized communities, incessantly in the need of financial services like access to banking for savings, loans and microfinance and bank account. They offer enormous potential proviso banks comprehend their needs, requirements and preferences and accordingly upgrade their solution by harnessing new age technology and working out innovative products and new age delivery channels to serve them. These needs could be affordability, simplicity, proximity and easiness of access, flexibility in savings and repayment plans and speed in processing, small product sizes for loans and low-balance savings accounts. Customers are supportive of those banks which make their products available in a place which is convenient to them. Hence, place utility is a strategically vital variable responsible for the deepest outreach of the bank. Technology, today, has become a strategic and integral part of banking and its outreach can be further augmented by increasing technological advances in the form of mobile phone, telephone banking, PC banking, internet banking, plastic magnetic stripe, point-of-sale devices, hybrid technologies a debit card, or an ATM machine on the street. In the light of these developments, further methods of obtaining and retaining customers are to offer increased convenience in banking via self-service technology at the customer interface. What is branchless banking? Branchless banking represents a new distribution channel through which range of customers acquires an access to the varied services of banks without actually paying a visit to the branch. This channel offers banking and payment services through postal and retail outlets, including grocery stores, pharmacies, seed and fertilizer retailers, rather than using banks branches and their field officers. It employs information and communication technologies applied to record and communicate transaction details quickly, reliably, and economically over vast distances. The instruments used under this system include cell phones, debit and prepaid cards, and card readers to transmit transaction details from the retail agent or customer to the bank and vice-versa. Internet banking and automatic teller machines (ATMs) can be distinguished as extensions of conventional branch-based banking whereas in branchless banking customers conduct financial transactions at retail agents instead of at bank branches or through bank employees. It will deliver fast and real-time services to the customers and reduce operational costs. The key players in the branchless banking delivery chain include customers, financial service providers, agents, products, and technology interface. Since most of banks offer more or less same type of products, no differentiation between me-too products, therefore they try to have

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an edge over their competitors in terms of large number of access point’s network. Hence it is an endeavor to encourage more expediency and efficiency in the system in extending its outreach to remote places. This channel aims for to a low-value, high-volume transactional environment and to build more flexible, scalable retail networks of points. It broadens the distribution of financial services to poor, both by reducing the cost of delivery (of building and maintaining branches and handling low value transactions directly) and by plummeting the cost to customers of accessing services (travel and queuing time). This phenomenon is being use extensively in many countries like Brazil, India, South Africa, Kenya and Philippines. In Brazil, customers open bank accounts, make deposits, and pay bills at lottery houses and small retail outlets. In the Philippines, urban migrants send money to their families in rural areas using mobile phones. Both of these cases can be described as branchless banking1. But all these services come with high economic cost and banks often lack appetite to serve the poor. Banks would opt for distribution channels that will maximize the branch’s profit position offering optimum service and coverage at a minimum cost. However, with the passage of time, economies of scale and upcoming information and communication technology can bridge the gap between demand and supply. A mobile banking model, upshot of optimal technology, serves as a primary channel for distributing banking services to the unbanked. It adds value from product development to collection and results in convenient, fast, simple, and secure branchless banking for the unbanked sector. In this approach people can conveniently pay into or cash out from their savings accounts, pay their regular microinsurance contributions, and receive and service their microloans, at a variety of outlets, right in their vicinity. It also proves invaluable to the banks in terms of reduced integration by leveraging common interface messages, maintenance and deployment costs. This method would also support interface with host systems, core banking systems and third-party applications. This will cut the cost considerably to the banks and allow them to extend the product portfolio and customize the solution to unbanked segment. However, this approach cannot be successful with the help of other market players like telecom companies, technology service providers, and agents etc., who have significant roles and responsibilities in this process. Models of Branchless Banking Two models of branchless banking have been discussed as below: Bank-based: In the bank-based model, the bank offers financial products and services, but distribution of these products and services is done through retail agents who handle customer interaction. Here the touch point for the customer is the agent who carries out face-to-face

1 Ivatury, Gautam, and Ignacio Mas. 2008. “The Early Experience with Branchless Banking.” Focus Note 46. Washington, D.C.: CGAP.

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interaction with customers and performs cash-in/cash-out functions, rather than the bank. But customers maintain accounts with the bank. In some countries, these retail agents also deal with all account opening procedures and even identify and service loan customers. He can be in touch directly with the bank by using either a mobile phone or a point-of-sale (POS) terminal. Once account formalities are complete, the customer goes to the retail agent to carry out his financial transactions. After checking the customer’s identification documentation, retail agent conducts the transaction and an electronic record of the transaction is either routed to the bank directly or is supervised by a payment processing agent that clears up the transaction between the customer’s account and the payee’s account.

Source: www.microfinancegateway.com/content/article/detail/36551 Non-banked Model: In the nonbank-based model, bank is not involved with the customers at point of transaction. Even customers do not maintain a bank account with the bank. Under this, customers transact with a nonbank firm like a mobile network operator or prepaid card issuer or retail agents and exchanges cash at a retail agent in return for an electronic record of value or e-money stored in a virtual e-money account on the nonbank’s server. It is not connected to a bank account in the individual’s name. E-money, according to the Basel Committee’s definition, is “a stored value or prepaid product in which a record of the funds or value available to the consumer for multipurpose use is stored on an electronic device in the consumer’s possession.” (Bank for International Settlements 2004). This e-money account can be used to store funds for future use and can be converted back to cash from any participating retail agent. In this model, the role of bank is limited only to the designing of financial and payment products, contracts retail agents directly or indirectly and maintains customer e-money accounts. When the nonbank is a prepaid card issuer, it issues POS card readers and customers must visit to the participating retail agent to process his transaction. But, if the nonbank is a mobile operator, the customer can completes his transaction over his cell phone service and has to visit his retail agent only for transactions that involve depositing or withdrawing cash. Under this model, retail agents accept and disburse cash and record the same with the help of mobile phones or POS card readers.

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Source: www.microfinancegateway.com/content/article/detail/36551 Logic of branchless banking Branchless banking can offer basic banking services to customers at a cost of at least 50 percent less than that through traditional channels. It addresses the two biggest problems of access to finance: the cost of roll-out (physical presence) and the cost of handling low-value

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transactions. This is achieved by delegating the work to third-party agents for cash transactions and account opening and by conducting all transactions online. This helps in increasing the population with access to formal finance and, in particular, in rural areas where many poor people live. There could be biggest cost saving on transactions that can be done electronically via mobile banking. In the Philippines, a typical transaction through a bank branch costs the bank US$2.50; this would cost only US$0.50 if it were automated by using a mobile phone (Asian Banker 2007). There is huge cost reduction, when agents are used as compare to banks for remote cash transactions. Banco de Credito in Peru calculates approximately that a cash transaction at a branch costs about US$0.85, while the same transaction at an agent would cost US$0.32. According to Tameer Bank in Pakistan, the setup cost of a branch in the Orangi slum of Karachi would be 30 times more than the setup cost per agent, which is about US$1,400. The monthly average cost for running a branch is about US$28,000 as compared to US$300 for an agent. Most of banks and other financial service providers perceive a symbiotic relationship with business entities that have local retail outlets. They serve as business correspondents or agents. They can offer their services, depending on regulations, to open new accounts or conduct, agents can be used to conduct customers’ cash transactions like to deposit into or withdraw from an account, or to make or receive payments. The pace of agent sign-up is most dramatic in Brazil, where 95,000 agents have opened for business, leaving no municipality without a retail bank outlet. This agent network has directly led to the opening of more than 13 million bank accounts in the past five years2. This move often helps the banks and other players to jump-start their agent network like by including NGOs, SHGs, MFIs mobile operators, post offices and main retail chains. This gives an access to local knowledge, requirements of product design catering to their need, and aptitude to manage small loans. Issues and challenges Ahead The major challenge for the banks is to make use of sophisticated technology to unsophisticated people and areas. Also, the rural areas are full of power shortage and lack of telephone connectivity and their people are not familiar with complex machine processes. Therefore all these technological innovation presents challenges and opportunities for regulators while maintaining a safe and sound banking system. The factors that limit the access of Branchless banking to the target segment are the remote places or places of low population density, little income with respect to cost of the service, illiteracy and low education and awareness level, short of credit history, problem with product or channel design and narrow range of products offered by the institutions. BB must aim for

2 Ivatury, Gautam, and Ignacio Mas. 2008. “The Early Experience with Branchless Banking.” Focus Note 46. Washington, D.C.: CGAP.

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simplicity and use friendly interface with the poor and financially excluded segment to increase its outreach and penetration. Hence there is a need to get better customer awareness about BB, to train customers about its mechanism, its asking price and advantages over the available options. Branchless banking has yet to exhibit pro-poor, pro-growth impacts for households, communities, and national economies. Most of the customers are using BB channels only for the utility bill payments apart from other services which this channel offers like account opening, cash payments like cash deposits and cash withdrawal, transfer of funds, payment of utility bills, dividends etc. In Brazil, bill payments and the payments of government benefits to individuals comprised 78 percent of the 1.53 billion transactions conducted at the country’s more than 95,000 agents in 20063. They are still very reluctant to keep their savings at BB channels and majority of them tend to withdraw the full amount received. But, if this segment receives their pension, remittance receipt or salary payment through BB, then it can act as sole motivators for opening saving accounts at these outlets. It has been emphasized by various studies that very few poor and unbanked people have began using this channel for financial services and constitutes around even less than 10 percent of this segment. They could not be early adopters of technology which makes the jobs of government and service providers difficult to make regular use of those accounts and maintain sizable deposit balances over a period of time. Under BB, when most of work is done through outsourcing, this phenomenon becomes highly susceptible to risks like agent-related risks or e-money risks. The agents may lack expert training when their functions go beyond the cash-in or cash-out transactions like a role in credit decisions. They might operate in remote places devoid of security. But, apart from this, the most important risks are credit risk, operational risk, legal risk, liquidity risk, and reputational risk when customers use retail agents rather than bank branches to access banking services. When there is involvement of nonbank collecting repayable funds from the public in exchange for e-money, there is likelihood that they might use these funds imprudently, resulting in insolvency and the inability to honor customers’ claims. So, maintaining adequate liquidity to honor customer claims is other challenge that nonbank model faces otherwise subject to prudential regulation and supervision. It also raises a question mark regarding the compliance with rules for combating money laundering and financing of terrorism. Here the task is not to eliminate these risks, but to balance them appropriately with the benefits of branchless banking. This calls for need of strict regulations for the successful implementation of this technique. BB raises issues of taxation, redress of grievances, price transparency, and competition regulation and consumer protection for the successful implementation of this approach. Also, consumer data privacy and its security is another concern as there is a large amount of dependability on technology and that technology can be breached at various level, resulting in

3 ibid

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malpractices. Payment Systems is another area which has to be regulated well as India does not have a payment systems law. According to Payment and Settlement Systems Bill, passed by the Lok Sabha on 26 November 2007, only banks and financial institutions may collect funds for payment to third parties. A nonbank may provide "payment services" only if these services do not categorize the provider as a bank or as a financial institution4. Branchless Banking in India Indian government and RBI have demonstrated its deep commitment for making branchless banking work in India. They have categorized concerns like access to finance, consumer protection and banking sector stability as decisive dimensions for improving access to financial services for poor people. Our country has a great network of sophisticated banks, competitive mobile phone industry and plethora of cutting-edge technology providers and most importantly, presence of a central bank mindful of potential risks posed by branchless banking models in future. Government has selected the business facilitators and correspondent model to unleash the potential of this approach by offering wide range of agents outside bank branches resulting in proliferation in the number of service points; facilitates the process of account opening while upholding adequate KYC standards; and allowing players to provide payment services and issue e-money thereby utilizing innovative technology for the benefit of society. Under this, business correspondents are given modern biometric smart cards and voice-guided systems to provide secure banking facilities to the rural populace and are allowed to carry out various banking functions like disbursal of small-value credit, collection of loan repayments, gathering of small-value deposits and receipt and disbursing of small-value remittances and other payments. In spite of numerous government initiatives and a burgeoning microfinance sector, lack of access to formal financial services remains a problem in India to date. As of 2006, around 29 percent or 321 million Indians, subsisted below the national poverty line. Of these, nearly 80 percent lack access to formal financial services. Less than 59 percent of the adult population has access to a bank account, and less than 14 percent of the adult population has a loan with a bank. With more than 30,000 bank branches, 110,000 cooperatives (one in every five villages), and 150,000 post offices, financial sector policy makers and regulators do not believe the number of service points is a major problem5. Many private and public-sector banks have shown substantial interest for the unbanked sector. ICICI Bank is using "ICICI partnership model," in which in which the bank make use of MFIs as agents in initiating, disbursing, following, and collecting loans. Under this model, they are using smartcards, biometrics, and electronic capability that help the banks to monitor

4 Notes on Regulation of Branchless Banking in India(2008), document can be assessed at www.cgap.org/gm/document-1.9.2322/India-Notes-On-Regulation-Branchless-Banking-2008.pdf 5 Notes on Regulation of Branchless Banking in India(2008), document can be assessed at www.cgap.org/gm/document-1.9.2322/India-Notes-On-Regulation-Branchless-Banking-2008.pdf

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transactions with partner MFIs within 24 hours. This enables banks in complying with the KYC requirement and also allows for the verification customer KYC via the card. SBI is using Business Correspondents in which an agent is available at various customer service points with POS terminals. Customers hold smart cards and access their bank accounts at these customer service points. Various new banks like YES Bank and UTI are also planning to follow the suite. Many big NBFCs like SKS and Basix and many NGO and M FIs are keen to use agents and technology to offer deposit and/or remittance services but BC Circular prohibits them to take deposits. Thus it may act as restraint for them to go ahead with this approach. In fact, a number of banks have commenced the use of post offices for lending under the business correspondent model. Anti-money laundering (AML) and combating the financing of terrorism (CFT) issues have forced the RBI to remain stringent over the KYC norms and AML standards. In response, RBI issued a circular substantially relaxing the identification and proof of residence requirements for small-value accounts with a maximum account balance of Rs. 50,000 (approximately US$1,225) and maximum money deposit into the account per year of Rs. 100,000 (approximately US$2,450)6. These KYC procedures will be further simplified in the interest of financial inclusion as stated by governor of RBI. It also allocates for non face-to-face customer identification requirements, if and only if there are specific and adequate procedures to alleviate the higher peril involved. For the payment services, India Post has played a major role and followed the same suite by incorporating new technology of iMO (instant Money order) to expedite the services. ICICI Bank has tied up with Reliance Communication (R-Com) that facilitates its customer who also subscribes to R-Com's CDMA or GSM mobile services to send to and receive money from another ICICI Bank customer. Same kind of initiatives has been spearheaded by banks like HDFC, Corporation Bank and others. Even Visa International and mCheck permit its customers to send and receive money through their cell phones. Bharti Airtel has tied up with SBI for domestic remittances through mobile phones. They are also getting into strategic allowance with Western Union, which make possible for purchaser outside India to send money via the person’s mobile phone to a Bharti Airtel customer in India. Technology providers Oxigen, m -Check, Obopay, and A Little World have developed mpayment business models for unbanked customers via agents but they are still in nascent stage and looking for the nod of RBI.

6 Notes on Regulation of Branchless Banking in India(2008), document can be assessed at www.cgap.org/gm/document-1.9.2322/India-Notes-On-Regulation-Branchless-Banking-2008.pdf

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Future Ahead Branchless banking is spreading fast all over the world with the aim of providing basic banking facilities to the poorest of the poor in country’s vast and sparsely populated areas. The concept of BB is still new and the period of experimentation is short and the acceptability of this novel concept in the remote villagers largely depends on people most of whom are illiterate and has no idea about the value for money. With the ongoing rapid growth in branchless banking, this approach has huge potential provided it is been allowed to use extensive range of agents outside bank branches, resulting in increased number of service points; relaxing account opening norms while maintaining adequate KYC standards; and permits a range of players to provide payment services and issue e-money. The further development of branchless banking is being pressurized by the risks posed by unregulated entities as well as by the legal ambiguity regarding whether nonbanks may provide payment services. We should give some more time to really access the advantages of this approach. But technologies are just the tools and the parties to branchless banking models must realize the importance of emergence of newer business opportunities offered by new system. It calls for the need of developing a network of agent and shared agent networks between different banking providers. This will further enhance increased savings and product offering. It is also evident from support from central banks and guidance from the World Bank. The existing example is clear guiding principle in recent times published by the Pakistan central bank. In addition to this, a number of major banks have also announced their plans in providing product and services to these markets e.g. Tameer Bank in Pakistan, ICICI bank in India, Corporation bank in Mongolia, Pacific and Western in Canada to name few of them. References Ivatury, Gautam, and Ignacio Mas. 2008. “The Early Experience with Branchless Banking.” Focus Note 46. Washington, D.C.: CGAP document can be assessed at http://www.cgap.org/p/site/c/template.rc/1.9.2640 Ghate P (2008), Branchless banking in India, Economic Times, Mumbai, Section: Editorial, Page 8. Bandyopadhyay G (2008), Banking the Unbanked: Going Mobile, document can be assessed at www.infosys.com/finacle/pdf/thoughtpapers/Banking-the-Unbanked.pdf State Bank of Pakistan (2008), Branchless Banking Regulations for Financial Institutions Desirous to undertake Branchless Banking, Banking Policy & Regulations Department, document can be assessed at http://www.sbp.org.pk/bprd/2008/Annex_C2.pdf Prendergast G., Marr N.(1994), Towards a Branchless Banking Society?, International Journal of Retail & Distribution Management, Vol. 22, No. 2, 1994, pp. 18-26 , MCB University Press, document can be assessed at http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=/published/emeraldfulltextarticle/pdf/0890220203.pdf Lyman TR, Ivatury G, and Stefan Staschen S.(2006), Use Of Agents In Branchless Banking For The Poor: Rewards, Risks, And Regulation, Focus Note No. 38, October 2006, document can be assessed at www.microfinancegateway.com/content/article/detail/36551

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IMPACT OF GLOBAL ECONOMIC SLOWDOWN – AN INDIAN PERSPECTIVE

D.Hema

Abstract

The economic impact of global financial turmoil and US slowdown in particular, on the Indian economy is expected to be within limits i.e. less than 1% impact on GDP as forecast by economists. This is supported by the fact that the growth being witnessed is not as much from export-oriented sectors, and that the Indian economy is consumption-based driven by domestic demand and supply. This is substantiated by the fact that trade is comparatively a smaller part of the GDP. Further, the economy is also adequately prepared for any capital outflows due to large foreign exchange reserves; high CRR and MSS. Taking into account all these factors it could be a fair assumption that the Indian economy is relatively decoupled from the US economy to some extent in the long term.

Keyword: Global Economic Slowdown, Financial crisis, Real Estate, Infrastructure, Information Technology

Introduction China held a spectacular Olympics Games; India made giant strides in reaching the moon and

in Europe, scientists initiated the largest experim ent in particle physics. Yet, 2008 won’t be

remembered for any of these. It will be remembered as the year when corporate greed,

speculation and excesses brought the global economy down on its knees. The global financial

situation continues to be uncertain and unsettled. What started off as a Sub-prime crisis in the

US housing mortgage sector has turned successively into a global banking crisis, global

financial crisis and now a global economic crisis.

This crisis is also the first of a kind in the sense that it is the first financial crisis since the great

depression that originated in the advanced economies and rapidly engulfed the whole world.

Such is the depth and sweep of financial globalization. By far, the most frequently asked

question today is whether the worst – in terms of the financial sector meltdown, and in

particular, failure of financial institutions – is behind us or worst is still to come?

Despite the global slowdown India and China still forecast the growth rate of 7.1% and 8%

respectively in the FY 2009. This paper aims to discuss, the impact of slowdown on India, the

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facilitating factors for an anticipated growth rate of 7.1%, the measures to be taken by the

government and Corporates to keep the performance level of the economy high.

How did we get into the current financial crisis?

- High liquidity due to loose monetary policy post 2001

- US government deficits due to tax cuts

- Asian capital flows into dollar assets after Asian crisis

- Low savings rate in the US

- Large US current account deficits: global imbalances

- Housing bubble

- Abolition of Glass-Steagall in 1999 accelerates move of investment banks and shadow

banks into risky business plans

- Investment banking falls outside regulatory net

- Credit rating agencies have conflicts of interest

- This results in good and bad financial innovation

- Securitisation and originate-to-distribute model

- High leverage ratios

- Macro interacts with bad incentives interacts with policy mistakes:

- No ex ante strategy, only ad hoc responses until recently

- The Lehman Brothers fundamental error that spooked the market

Where we are?

Impact of the crisis on the global economies

Many economists are now predicting that this ‘Great Recession’ of 2008/09 will be the worst

global recession since the 1930s. The IMF made its customary forecast for global growth in

the World Economic Outlook published in October 2008. By early November, the IMF had

revised its forecast for global growth downwards – from 3.9 per cent to 3.7 per cent for 2008,

and from 3.0 per cent to 2.2 per cent for 2009. There are two inferences that follow from this.

Firstly, that the global situation has deteriorated rapidly, in a space of less than two months.

Secondly, that 2009 is going to be a more challenging year than 2008.

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Impact on different sectors

Least Impacted Sectors include Pharmaceuticals, Oil & Gas, FMCG and Media & Entertainment

Mildly Impacted Sectors are

Power equipment & Services, Auto, Retail, Logistics and Hospitality and tourism

Most Impacted Sectors are

Banks, Financial Services, Real Estate, Infrastructure, and Information Technology

The most impacted sectors include

Indian Financial Services - The US sub-prime market crisis, which so far caused losses worth $181 billion to the

world’s top 45 banks by the end of FY08, has started hitting Indian banks also.

- India’s largest private sector bank ICICI Bank was the first bank to announce a loss of

about Rs. 1056 crores owing to the subprime crisis of US in the FY08 results.

- The public sector banks have had a limited position in the structured products and

therefore impact is expected to be minimal. However negative sentiments will hit

harder.

- Punjab national Bank, Bank of India, State Bank of India, Bank of Baroda were major

banks having an exposure to the instruments issued by Lehman and Merrill Lynch.

- However the banking sector in general will have to face tight liquidity conditions apart

from further mark-to-market losses. The net non performing assets of entire banking

sector are less than 2% and it is well capitalized. The capital adequacy ratio is around

13% as against the statutory requirement of 8 to 9%. The banks are expected to

continue going strong due to limited impact from exposures.

Real Estate

With the sudden collapse of world leading financial houses, the Indian real estate players who

were already facing the problem of lack of funds due to economic slowdown & correction in

prices would find it difficult to raise further funds.

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- Among the US Financial Houses --- Lehman Brothers was very bullish on Indian

Reality Sector and had an investment in excess of US$ 700 mn (maximum amongst

peers)

- Lehman’s real estate investments at project levels (including the big ones like DLF,

Unitech & Future Capital) have been disbursed & it will not affect the ongoing

projects.

- RBI’s directive not to remit investments made by US financial houses in India without

permission is also a step in positive direction and would restrict flight of capital.

- However, stocks of companies in which sunked financial institutions have a direct

exposure (as FII investments especially Lehman) would see selling pressure.

Infrastructure

- Adverse impact on the infrastructure companies as it disturbs the financial atmosphere for the companies which are in the growth stage.

- Lately, after having raised money through IPO’s many Indian infrastructure companies have gone in for QIP issues with the financial majors across the world.

- Thus, the current situation might not affect the companies at the project implementation level; however we might see heavy selling pressure in the stocks of these companies by the sinking US financial institutions which have an exposure to these companies.

Information Technology

USA as a region and Banking Financial Services and Insurance as a vertical are most critical

for top Indian IT companies

- Lesser probability of immediate cancellation of orders or vendor consolidation

- Sales cycle would become longer and hence top line impact should be visible after

two-three quarters due to this crisis

- Large investment banks had significant discretionary IT spend, which should reduce

now resulting in reduction of outsourcing pie.

But still, the software sector is doing well which showed a growth in the exports of invisibles

in the Balance of payments report of January 2009.

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Why business in India should continue the way it was?

When a 150 year old global investment bank sinks without a trace in no time and government

desperately attempts to rescue beleaguered banking, insurance and automotive giants in free

market’s homeland i.e. USA, the times have to be extraordinarily compelling.

The credit crisis in US has grown beyond sectors and national boundaries to take the entire

global economy in its sweep. In India too, as elsewhere across the world, from policymakers

to entrepreneurs to customers — everyone is acutely aware of the magnitude of the crisis as

we enter2009. Owing to this contagious global crisis we are confronted with a unique set of

challenges. Though the liquidity crisis first showed up in the real estate sector, it has now

spread. Demand slowdown in some of the sectors is compelling Corporates to rework their

business plans for the coming year. Job losses have been reported from several sectors.

Considerable wealth erosion too has already occurred in the bourses shaking investor

confidence as never before. There is a general crisis of confidence today. In times like this, the

resilience of an economy does come to the fore. Three things prompt to think that the Indian

economy will sail through the coming year relatively unscathed. One, India’s strong financial

regulatory framework prevents a US type credit crisis from developing. Two, unlike China,

domestic demand continues to be the prime driver of our economy. Hence a slump in global

demand is unlikely to affect growth as much as it is doing elsewhere. Three, of late, inflation

has dipped significantly to protect consumer purchasing power.

Even though we are very optimistic about our economy in the coming years due to the factors

stated above, growth rate in the manufacturing sector halved from 8.2% in 2007-08 to 4.1% in

2008-09, which will certainly raise doubts about the capacity of Indian economy to sustain a

growth rate between 7% and 8 % which the economists are forecasting. But in the words of

Kamal Nath, Union Cabinet Minister for Commerce and Industry “It is a fact that the Indian

economy has suddenly slowed down, but it would not have happened if, first, the US banks,

and then its markets as well as those of Europe had not collapsed. These put the Foreign

Institutional Investors (FIIs) in a panic. They fled from our capital markets with profit, which

speaks volumes for the consistent return and encashability of the Indian stocks.

But we had to pay for the FIIs’ sudden exit. Our currency, tied to the US dollar, lost 25%

value in ten months, and the stock indices shed 60% in a year. It has resulted in a crisis of

confidence.

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The Index of Industrial Production has shown a negative growth because the manufacturer is

not sure about sales. And the buyer is hesitant because he too is not confident about future

income. Our problem is limited to a deficit of confidence. It may temporarily postpone the

upward movements of the ‘threshold population’, like those aspirers who hope to move up

from an Rs 50,000 income bracket to a lakh of rupees. But it is a temporary glitch, like a traffic

jam, or a landing delay at a fog-bound airport. The problems in India are not so massive and

menacing as the US seems to be facing. Our banking system has remained untouched. There

has been little or no asset price bubble here, except for a moderate correction in places.

But there has been no disaster on the scale of the US sub-prime housing loan crisis, which

has, in a matter of weeks, turned bustling localities into rows of foreclosed houses. And the

credit card crisis, which is about to hit the West, is just a blip on the screen in India, where less

than 2% people use plastic money”.

Growth Intact-Indian Economy seen growing 7.1% despite slow down

At a time when the global economy is under weather, India will turn in a growth rate that is

just second to china’s.

Suresh Tendulkar, Chairman, Prime minister’s economic advisory council has opined that

“India is not insulted from global meltdown. But as bulk of investment is led by domestic

growth, advance estimates of growth are positive”

Trends in GDP by activity (%)

Particulars FY 08 FY-09

Agriculture 4.9 2.6

Industry 8.1 4.8

Services 10.9 9.6

GDP 9 7.1

Source: Central statistical organization (CSO)

Indian Economy in 2009

1. Indian economy will turn in second fastest growth rate in the world after China’s 8%

for 2008-09.

2. Overall consumption held up due to high public sector spending

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3. The rate of growth is forecasted to decline in all sectors barring two: mining and

quarrying, and community, social and personal services

4. But for the first time in the last four decades, farm sector growth has been positive for

four consecutive years.

The catch-word for the coming year, however, appears to be ‘hope. An election that the world

watched turned on it. Are there things India can hope to achieve, in the throes of a

slowdown? Doing well in adversity after all, is what this country does best — Indian

economists and policy makers alike often say that India is lethargic except in crisis.

The outlook for India, going forward, is mixed. There is evidence of a slowdown in the

economic activity. The real GDP growth has moderated in the first half of 2008-09. Industrial

activity, particularly in the manufacturing and infrastructure sectors, is decelerating. The

services sector too, which has been our prime growth engine for the last five years, is slowing,

mainly in the construction, transport and communication, trade, hotels and restaurants

subsectors.

For the first time in seven years, exports have declined in absolute terms in October 2008.

Recent data indicate that the demand for bank credit is slackening despite comfortable

liquidity in the system. Higher input costs and dampened demand have dented corporate

margins while the uncertainty surrounding the crisis has affected business confidence.

Despite these facts, on the positive side, headline inflation, as measured by the wholesale price

index, has fallen sharply, and the decline has been sustained for the past four weeks, pointing

to a faster-than-expected reduction in inflation. Largely, the falling commodity prices have

been the key drivers behind the disinflation; however, some contribution has also come from

slowing domestic demand. The reduction in prices of petrol and diesel announced last week,

and a cut in the excise duties should further ease the inflationary pressures. To be sure,

consumer price inflation for the months of September and October 2008 did increase. This is

possibly owing to the firm trend in food-articles inflation and the higher weight of food

articles in the measures of consumer price inflation. Historically, there has been a positive

correlation between wholesale and consumer price inflation, and given this correlation,

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consumer price inflation too can be expected to soften in the months ahead. All these factors

suggest that the forecasted growth rate of 7.1% may not be too hard to achieve in FY 2009.

Measures Taken So Far by the RBI and the Govt. of India in the wake of Slowdown

The RBI has taken several measures aimed at infusing rupee as well as foreign exchange

liquidity and to maintain credit flow to productive sectors of the economy. Measures aimed at

expanding the rupee liquidity included significant reduction in the cash reserve ratio (CRR),

reduction of the statutory liquidity ratio (SLR), opening a special repo window under the

liquidity adjustment facility (LAF) for banks for on-lending to the non-banking financial

companies (NBFCs), housing finance companies (HFCs) and mutual funds (MFs), and

extending a special refinance facility, which banks can access without any collateral. To

improve the flow of credit to productive sectors at viable costs so as to sustain the growth

momentum, the Reserve Bank signaled a lowering of the interest rate structure by reducing its

key policy rate, the repo rate. The govt. in February, 2009 approved new FDI rules which will

open up the scope for additional foreign equity inflow into Indian companies and in the

process, dilutes the foreign investment ceiling that had earlier been imposed on sensitive

sectors such as telecom, media, aviation, banking, defense and insurance.

Even though the govt. and RBI has taken several measures to tackle the slowdown and credit

crunch, the fact is that the way forward on this crisis at the present time is too uncertain as the

economies of the world are interdependent on each other and to see one’s economy in

isolation is highly impossible. Even today, it is not possible to clearly see the path of the crisis

and its resolution over the coming months. It is just not possible to have a precise road map

all laid out to be unleashed in one go. This crisis does not allow us that luxury. And, even

though India is showing strong signals of progress and growth in the coming years, it is not

unique in this respect. Almost every country, whether or not directly affected, has to manage

under uncertainty. There are simply too many unknown unknowns.

The road ahead…

Bright opportunities lie in SMEs for India It is a known fact that India’s export to US forms a substantial part of its total export basket.

Factors like higher net realization and less competition have forced Indian exporters to focus

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primarily on developed markets in the US and EU or in the emerging economies like Latin

America. In the current economic scenario India needs to de-risk its exposure in such markets

and it must steadily explore trade opportunities across the globe. India can achieve this by

concentrating on the SMEs (Small and Medium enterprises) and by diverting the exports of

such enterprises to other emerging economies of neighboring countries in the Asia-pacific.

UNIDO (United Nations Industrial Development Organization) estimated that SMEs

comprise more 90% of all enterprises in the world, and on an average, they are responsible for

80% to 90% of total employment. In the HSBC’s Asia Pacific small business confidence

surveys conducted in the year 2008, the Indian SME’s emerged most optimistic about the

economic growth and capital investment plans followed by China and Taiwan.

Mr. Puneet Chaddha, MD and Head, commercial banking, HSBC India, has opined that

SMEs posses the ability to adapt to changing conditions faster and they would see less impact

of the global slowdown than others. The current financial crisis is global and in nature and has

impacted the Asian economies as well. Nonetheless, the encouraging news is that Asian

economies have responded to the crisis in a coordinated fashion. From an Indian perspective,

this crisis represents an opportunity to acquire strategic assets abroad at significantly cheaper

prices and also balance the trade economic crisis offers Indian companies an opportunity to

reinvest and establish themselves as cost and quality champions in these tough times and

garner a higher export share of both regional and global exports, which can be achieved by

concentrating on the SMEs. Thankfully, the seeds have already been sown a few years ago. In

the recent past the Indian govt. has taken quite a few steps to improve the trade relations with

its neighboring countries in the Asia-pacific and exports to Singapore from India has grown to

16% in the year 2007-08.

Conclusion

The recent developments in the global market and their impact on India have raised concerns

on the sustainability of the India growth story. Though the global economic developments do

indeed pose a serious challenge, one should not lose sight of the strong domestic

underpinnings of India’s growth and the many positives that the country has on its side. The

effects of the global crisis were also transmitted through the trade and capital market channels,

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and began to see a slowdown in exports and substantial portfolio investment outflows. This in

turn has led to pressure on domestic liquidity balance of payments and the exchange rate.

These challenges and the rapidity of their emergence have created a mood of shock and

erosion of confidence among businesses, consumer, lenders and investors. Let us look at the

positives. India’s growth has been driven by a balance of consumption and investment,

industry and services. More importantly, India’s ability to finance this growth has been

significantly strengthened over the years. Gross domestic savings as a percentage of GDP

increased from 26% in 2002-03 to 35% at present, while investments as a percentage of GDP

increased from 25% to 34% during this period. Our favorable demographic profile and large

and growing consuming class continues to provide opportunity. The Indian banking system is

sound, with conservative leverage, stable funding, healthy asset quality, high regulatory

reserves and no exposure to US sub-prime credit. The Indian private sector has demonstrated

its ability to compete in a global environment, and today, is far stronger than it was in the late

1990s, in terms of quality, operating efficiency and balance sheet health. These trends will

continue to power the economy even during this phase of global slowdown and help it to

weather the global storm. On the macro front, a declining inflation rate and reduction in

interest rates would help revive domestic consumption and demand. Falling crude oil prices

and food and commodity prices have had a dramatic positive impact on inflation. Foreign

exchange reserves of over $240 billion provide a cushion for negative external balances for

some time.

References

Advanced estimates of national income growth in FY 2009, Central statistical organization. “Bright Opportunities”, The Economic Times, February10, 2009 “New FDI rules to bring in more $”, The Economic Times, February 12, 2009 “Impact of global financial turmoil on Indian Markets”, DAWNAY DAY AV, September 2008 The Global Financial Turmoil and Challenges for the Indian Economy” – Speech by Dr. D Subbarao, Governor, Reserve Bank of India at the Bankers’ Club, Kolkata on December 10, 2008. “How did we get into the current financial crisis” Paper presented by Prof. Helene Rey, London Business School, October 14, 2008 “Why believe in India”, Ranjit.V.Pandit, The Mckinsey Quarterly Edition-fulfilling India’s promise, 2005 Credit Crisis Update”, The New York Times, October.

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CAMS Journal of Business Studies and Research ISSN 0975 – 7953 Aprril - June 38

IT Governance in the Cooperative Sector and the Hosted

Model Solution

S.Syam & Dr.V. P.Jagathy Raj

Abstract

Like any other business sector, Cooperative sector can also reap the benefits of ICT when IT Governance is implemented. However, when IT Governance is implemented in The Cooperative sector, one needs to take care of the weaknesses and challenges of the Cooperative sector. Also, the current status of IT in the Cooperative sector is not very strong. This paper discusses some of these issues and suggests a Hosted Model Solution for bringing IT into the Cooperate sector. Even though this paper refers to the Indian environment many times in the document, the topic is very well applicable across the globe.

Keywords: Cascading IT strategy, IT governance IT Governance as Applicable to Enterprises Increasingly, top management is realizing the significant impact that IT can have on the success of the enterprise. Management hopes for heightened understanding of the way IT is operated and the likelihood of its being leveraged successfully for competitive advantage. In particular, top management needs to know if its IT management is:

- Likely to achieve its objectives? - Resilient enough to learn and adapt? - Judiciously managing the risks it faces? - Appropriately recognizing opportunities and acting upon them?

Successful enterprises understand the risks and exploit the benefits of IT, and find ways to deal with: - Aligning IT strategy with the business strategy - Cascading IT strategy and goals down into the enterprise - Providing organizational structures that facilitate the implementation of strategy and

goals - Creating constructive relationships and effective communications between the

business and - IT, and with external partners - Insisting that an IT control framework be adopted and implemented - Measuring IT’s performance

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Boards and executive management need to extend governance to IT and provide the leadership, organizational structures and processes that ensure that the enterprise’s IT sustains and extends the enterprise’s strategies and objectives. IT governance is not an isolated discipline. It is an integral part of overall enterprise governance. The need to integrate IT governance with overall governance is similar to the need for IT to be an integral part of the enterprise rather than something practiced in remote corners or ivory towers. An increasingly educated and assertive set of stakeholders is concerned about the sound management of its interests. This has led to the emergence of governance principles and standards for overall enterprise governance. Furthermore, regulations establish board responsibilities and require that the board of directors exercise due diligence in its roles. Enterprise governance is a set of responsibilities and practices exercised by the board and executive management with the goal of providing strategic direction, ensuring that objectives are achieved, ascertaining that risks are managed appropriately and verifying that the enterprise’s resources are used responsibly. Investors have also realized the importance of governance, because they are willing to pay a premium of more than 20 percent on shares of enterprises that have shown to have good governance practices in place (McKinsey’s Investors Opinion Survey). While governance developments have primarily been driven by the need for the transparency of enterprise risks and the protection of shareholder value, the pervasive use of technology has created a critical dependency on IT that calls for a specific focus on IT governance. IT is essential to manage the transactions, information and knowledge necessary to initiate and sustain economic and social activities. In most enterprises, IT has become an integral part of the business and is fundamental to support, sustain and grow the business. Successful enterprises understand and manage the risks and constraints of IT. As a consequence, boards of directors understand the strategic importance of IT and have put IT governance firmly on their agenda. Usually, advice to boards on how to operate is long on board structure, composition, size and independence, but short on risk management and practical IT governance. Boards and management need to assess their capacity to: - Take advantage of IT’s enabling capacity for new business models and changing

business practices - Balance IT’s increasing costs and information’s increasing value to obtain an

appropriate - return from IT investments - Manage the risks of doing business in an interconnected digital world and the

dependence on entities beyond the direct control of the enterprise - Manage IT’s impact on business continuity due to increasing reliance on information

and IT in all aspects of the enterprise - Maintain IT’s ability to build and maintain knowledge essential to sustain and grow the

business

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- Avoid the failures of IT, increasingly impacting the enterprise’s value and reputation The overall objective of IT governance, therefore, is to understand the issues and the strategic importance of IT, so that the enterprise can sustain its operations and implement the strategies required to extend its activities into the future. IT governance aims at ensuring that expectations for IT are met and IT risks are mitigated. Boards and executive management generally expect their enterprise’s IT to deliver business value, i.e., provide fast, secured, high-quality solutions and services; generate reasonable return on investment; and move from efficiency and productivity gains toward value creation and business effectiveness. In many enterprises, expectations of IT and reality often do not match and boards are faced with: - Business losses, reputational damage and a weakened competitive position - Inability to obtain or measure a return from IT investments - Failure of IT initiatives to bring the innovation and benefits they promised - Technology that is inadequate or even obsolete - Inability to leverage available new technologies - Deadlines that are not met and budgets that are overrun

Boards exercising proper IT governance often uncover and address problems in advance simply by asking the right questions: - How critical is IT to sustaining the enterprise and how critical is IT to growing the - enterprise? - How far should the enterprise go in risk mitigation and is the cost justified by the

benefit? - Is IT a regular item on the agenda of the board and is it addressed in a structured

manner? - Is the reporting level of the most senior IT manager commensurate with the

importance of IT? Other aspects of an effective IT governance framework can be explored by asking questions like: - Does the board of the organization occasionally ask questions about IT? - Is the board regularly informed of major IT initiatives, their status and issues? - Does the board approve IT strategy? - Does the board have a standing IT strategy committee with representation from the

business as well as IT? IT Governance in the Cooperative Sector How much of the above discussion is applicable to the cooperative sector? In most of the cooperatives, IT itself does not exist! Also, there are weaknesses and challenges that are non-existent in the corporate enterprises. We will have to have an overview of those before we discuss this further.

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The Cooperative Sector in India The Cooperative sector in India is more than 100 years old. The Cooperative Credit Societies Act was passed in 1904 and in 1912, it was amended to recognize non-credit societies and central co-operative organizations. After India become independent in 1947, a detailed study was conducted by the Rural Credit Survey Committee in 1954 to reveal that the co-operative sector had indeed failed to achieve their expected objectives.

However, soon after that, cooperative sector has undergone tremendous growth and contributed remarkably to the Indian economy. Currently, co-operative sector is active in almost all areas of Indian economy like banking, agriculture, production, distribution, transportation, diary etc. Weaknesses and Challenges The following list elaborates what Dr. A. Vinayagamoorthy1 wrote in his articles2: Weaknesses - Weak structure at primary level. Efforts have been taken by many Governments around the world to define a proper structure and to bring in good practices and governance to the cooperative sector. ICA3 also played a pivotal role at various levels to come up with appropriate recommendations. However, most of these efforts were of isolated nature and sometimes, tied to the specific activities engaged by the sector. Also, even though commonalities can be seen across various cooperative organizations across the world engaged in the same activities, their working environment differ a lot due to geographical, political and market demand/supply conditions. This is one of the reasons why the same solution cannot be applied to the same sectors across the globe. - Lack of responsiveness from federal organizations towards the needs of their member organizations. This is a common phenomena, especially, in countries like India where federal organizations themselves do not want to look at the practical needs of the member organizations. All issues associated with government organizations in India is applicable here including lack of accountability, issue of transparency, lack of monitoring capability, unwillingness to accept changes, red-tape etc. - Working of different cooperatives in isolation rather than unified system. Even though quite a few of the activities of the cooperatives are inter-related and inter-dependent, there is no formal collaboration seen, almost anywhere in the world. It depletes their collective strength and bargaining power. In many cases, this also introduces unnecessary middle-men in their business, leading to dip in profitability

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- Lack of participation of user-members. Members do not see immediate benefits and sometimes they do not have much hope due to the bad performance in the past. Corruption and influence of politics are the other factors that keep genuine members away.

- Lack of professional management. It is a fact that talented professionals do not want to join or run the cooperative sector. Incentives and growth-path in cooperative sector may not look that promising for them. However, it is slowly changing in India after multinational organizations started tapping the Indian cooperative sector. - Lack of adequate infrastructure. No further discussion is needed on this issue and it this issue exists in all developing and under-developed countries. The main concern is that it might take a long time to build the much needed infrastructure in most of the countries. -Lack of capability to withstand competition. This has always been the case even though, in some cases, subsidies and other help from the parent organizations, helped a bit. The recent invasion of multinational companies poses another big challenge.

-Over-dependence on government for financial assistance. Due to various reasons, cooperative sector was unable to attract funding from other entities. In some cases, cooperative sector shied away from other entities due to the higher cost of funds. However, the main culprit is the lack of rating system and monitoring capability of the sector. -Restrictive provisions and complexities of cooperative law. This always affected the smooth functioning and growth of the cooperative sector. Sometimes, based on the activities, multiple laws are applicable to confuse the matter further. A typical example is the financial sector where an entity like an Urban Cooperative Bank that is registered under the Cooperative societies Act of the respective state government, comes under the Reserve Bank of India4, the regulatory and supervisory authority for banking related operations. Also, Union Cooperative Banks have to be registered under the Multi-state Cooperative Societies Act because of their multi-state presence. Weaknesses of the Cooperative sector are quite well known and discussed by many individuals and organizations in the past too. Also, quite a few solutions have been proposed and tried out all over the world even though not all of them were successful. However, the application of ICT and the implementation of IT Governance to eliminate some of these weaknesses did not yield spectacular results expected by many. New Challenges - With globalization, a borderless system of economic activity is coming into being. Big

multinational companies will take full advantage of the borderless world, without any hindrance of national boundaries to undertake large-scale economic activities, which will dominate the world market. Such a new economic scenario, presented a threat to cooperative movement’s ability to survive. Multinational companies can quikcly take

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advantage of technologies such as Internet to reach the masses more cost effectively than before. With zero IT and lack of technical knowledge and support, coopertives lag behind these 'big' brothers.

- Due to changed economic priorities, many cooperatives encounter difficulties in

generating their own resources and have to completely reorganize themselves to survive and succeed in a competitive environment, without depending on any state support. Even though state and central government have plans for helping the cooperatives, most of the time, the help does not reach in time and thus, not dependable. Also, policies and plans of government cannot catch up with fast changing economic scenarios.

- At present, there are about 239 member organizations, which are the backbone of ICA

and there are about 800 million individuals spread over 89 countries of Asia, Africa, Europe and America, who are members of ICA. With such a huge and diversified structure around the world, one cannot question the ability of the cooperatives to survive and succeed, but what needs to be deliberated upon is, the new direction towards which cooperative movement should move with firm determination. Also, further area of cooperation between inter-disciplinary cooperatives must be studied and utilized.

- Internal and structural weaknesses of cooperative institutions, combined with lack of

proper policy support have neutralized their positive impact and resulted partly in the mismanagement, inefficiency and corruption in the financing of cooperatives. This has necessitated the need for a clear-cut policy on co-operatives, to enable sustained development and growth of healthy and self-reliant cooperatives.

IT for the Cooperative Sector – The Hosted Model Solution There is no point in discussing IT Governance in the cooperative sector, if the IT itself does not exist in that sector5. So, we will discuss ways of bringing IT infrastructure to the cooperative sector, keeping in mind that the sector has numerous weaknesses and challenges. Two main direct factors that are technology cost and expertise. So, the solution proposed here is an ASP (Application Service Provider) model where the Application Software, Data Center infrastructure and a information sharing framework are hosted. In the IT industry, this solution is already known as the SaaS model but generally, does not include any information sharing framework. The information sharing framework allows the participating cooperatives to effectively interact and share with other cooperatives; not necessarily belonging to the same sector; thus, forming a cross-fertilizing business model. The ASP itself need not be a third party. Instead, it can be another “cooperative entity” formed for this purpose and the member can be from the cooperatives participating in the hosted model programme. So, this entity can be considered as the IT of all the participating cooperatives.

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What are the advantages of this model? - It is very cost effective because the cost is divided and distributed across many

participating entities. - It can easliy embrace most modern ICT technologies that individual entities cannot

afford otherwise. - Once implemented with few entities as participants, it is very easy to extend the

services to additional entities. - For each participating sector, best industry practices can be easily brought in.

This is not entirely true because some of the performing sectors have already implemented IT infrastructure. For example, most of the major co-operative banks in Kerala, India have core-banking systems implemented. However, not all of them are fully successful. - Information sharing across various sectors will be easier (because data pertaining to

multiple entities are available on the same system) and it will enable effective cross-selling opportunities. In many cases, this will eliminate middle-men and thus, will increase profitability.

- Market reach will increase because participants are located in geographically different

locations and because of the availability of information about demand and supply of various locations, it is easy to encash such information. This will also enable each participant to do more accurate capacity planning and utilization.

- It is possible to do collective bargaining and thus, compete more effectively with

competitors and multinational companies. - Better risk mitigation measures can be taken by more accurately determining product

mix and concentrating on multiple activities. - Better insurance terms can be obtained when applicable to multiple entities across

geographically distributed locations. This is particularly good for bigger countries like India where climate condition varies across the country.

From these points, it is obvious that this model will greatly help to tackle with many of the weaknesses and challenges of the cooperative sector discussed in the earlier section. Selection and use of specialised and appropriate technologies is a crucial part when deciding on what and how the hosting model solution is delivered. One of the main issues is the cost involved in the delivery channels. Also, the fact that most cooperatives operate in the rural areas of India, immediately brings up the infrastructure issue. So, the proposed solution must be deliverable through cheap channels such as “mobile”. Also, the solution should take care of other issues such as muliple languages and cultures. End user simplicity is another factor due to low levels of literacy in the rural areas compared to the urban areas.

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IT Governance in the Cooperative Sector – Revisited If the hosted model solution proposed above is acceptable, IT governance can be looked at again from this perspective. So, the IT governance as applicable to cooperative sector is discussed here by bringing up the same points applicable to the enterprise level, with necessary variations. Some of the terms used are re-defined, in accordance with the hosted model, wherever required.

IT Governance Should Be Integrated within Cooperative Governance An IT governance framework helps boards and management of the participating cooperatives to understand the issues and strategic importance of IT, and assists in ensuring that the cooperatives can sustain its operations and implement the strategies required to extend its activities into the future. It provides assurance that expectations for IT are met and IT risks are addressed.

IT governance fits in the broader governance arrangements that cover relationships between the management of the participating entities and its governing body, its owners and its other stakeholders. It provides the structure through which the overall objectives of the participating entities are set, the method of attaining those objectives is outlined and the manner in which performance will be monitored is described. In summary, IT governance ensures that IT goals are met and IT risks are mitigated such that IT delivers value to sustain and grow the participating cooperatives. IT governance drives strategic alignment between IT and the businesses of the entities and must judiciously measure performance. IT is an integral part of the businesses involved by the participating cooperatives. IT governance is an integral part of the governance of the participating cooperatives. IT Governance Roles and Responsibilities: Need to be Defined Since, multiple cooperatives are participating in the hosted model, a separate board (referred to as the Board in further discussions) needs to be formed with selected board members from each of the participating cooperatives. When determining the representation from different cooperatives, care must be taken to ensure that all activity areas are covered. An Executive Committee must be formed in a similar fashion from the selected executives of the participating entities. Other than these two, it is recommended to have five more committee viz. Committee of CEOs (selected CEOs from the participating cooperatives), IT Strategy Committee, IT Steering Committee, Technology Council, IT Architecture Review Board. IT Strategy Committee is at the board level, selected from board members and specialist non-board members whereas the IT Steering Committee is at the executive level, selected from the sponsoring executives, the business executives (key users), the CIO and the key advisors as required (typically from IT, audit, legal and finance). A more complete picture of the roles of the business and IT executives, and for the two other committees that typically support the

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Committee of CEOs and the CIO in setting and controlling technology (Technology Council) and architecture standards (Architecture Review Board), are discussed below. These two committees drive the standardization, reuse and optimization of IT resources. Together with the IT strategy and IT steering committees, they complete the emerging best practice of a three-tier IT governance structure: strategy, steering and standards. An overview of the roles and responsibilities are listed here for each of the five IT governance domains: Strategic Alignment, Value Delivery, Resource Management, Risk Managem ent, Performance Measurement The Board Strategic Alignment Ensure that management has put in place an effective strategic planning process Ratify the aligned businesses and IT strategies Ensure the IT organizational structure complements the business models and directions Value Delivery Ascertain that management has put processes and practices in place that ensure IT delivers provable value to the businesses Ensure that IT investments represent a balance of risk and benefit and that budgets are acceptable Resource Management Monitor how management determines what IT resources are needed to achieve strategic goals Ensure a proper balance of IT investments for sustaining and growing the participating cooperatives Risk Management Be aware about IT risk exposures and their containment Evaluate the effectiveness of the IT risk monitoring function Performance Measurement Assess senior management's performance of IT strategies in operations Work with the Executive Committee to define and monitor high-level IT performance The IT Strategy Committee Strategic Alignment Provide strategy direction and the alignment of IT and the businesses Issue high-level policy guidance (examples: risk, funding, sourcing, partnering) Verify strategy compliance (examples: achievement of strategic goals and objectives) Value Delivery Confirm that IT/business architecture is designed to drive maximum business value from IT

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Oversee the value of delivery by IT to the participating cooperatives Take on to account return and competitive aspects of IT investments Resource Management Provide high level direction for sourcing and use of IT resources (example: strategic alliances) Oversee the aggregate funding of IT Risk Management Ascertain that management has resources in place to ensure proper management of IT risks Take into account risk aspects of IT investments Confirm that critical risks have been managed Performance Measurement Verify strategy compliance (achievements of strategic IT objectives) Review the measurement of IT performance and the contribution of IT to the businesses (delivering the promised business values) The Committee of CEOs • Strategic Alignment Align and integrate IT strategies with business goals Align IT operations with business operations Cascade strategies and goals into their respective organizations Mediate between imperatives of the businesses and of the technologies • Value Delivery Direct the optimization of IT costs Establish the co-responsibility between businesses and IT for IT investments Ensure the IT budget and investment plan is realistic and integrate into the overall financial plans of the participating cooperatives Ensure financial reporting has accurate reporting of IT • Resource Management Ensure the participating cooperatives are in the best position to capitalize on the information and knowledge Establish business priorities and allocate resources to enable effective IT performance Set up organizational structures and responsibilities that facilitates IT strategy implementation Define the support of CIO's role, ensuring the CIO is a key business player and part of executive decision making • Risk Management Adopt a risk, control and governance framework Embed responsibilities for risk management in the organization

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Monitor IT risk and accept residual IT risks • Performance Measurement Obtain assurance of the performance, control and risk of IT and independent comfort about major IT decisions Work with the CIO on developing an IT balanced scoreboard ensuring it is properly linked to business goals The Committee of Executives • Strategic Alignment Understand the IT organization, infrastructure and capabilities Drive the definition of business requirements and own them Act as sponsor for major IT projects • Value Delivery Approve and control service levels Act as a customer for available IT services Identify and acquire new IT services Assess and publish operational benefits of owned IT investments • Resource Management Allocate business resources required to ensure effective IT governance over projects and Operations • Risk Management Provide business impact assessments to the risk management process of the participating Cooperatives • Performance Measurement Sign off on the IT balanced scoreboard Monitor service levels Provide priorities for addressing IT performance problems and corrective actions CIO • Strategic Alignment Drive IT strategy development and execute against it, ensuring measurable value is delivered on time and budget, currently and in the future Implement IT standards and policies Educate executives on dependence on IT, IT related costs, technology issues and insights, and IT capabilities • Value Delivery Clarify and demonstrate the value of IT Proactively seek ways to increase IT value contribution

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Link IT budgets to strategic aims and objectives Manage business and executive expectations relative to IT Establish strong IT project management disciplines • Resource Management Provide IT infrastructures that facilitate creation and sharing of business information at optimal cost Ensure availability of suitable IT resources, skill and infrastructure to meet the strategic objectives Ensure that roles critical for driving maximum value from IT are appropriately defined and staffed. Standardize architectures and technology • Risk Management Assess risk, mitigate efficiently and make risk transparent to others Implement an IT control framework Ensure that roles critical for managing IT risks are appropriately defined and staffed • Performance Measurement Ensure the day-to-day management and verification of IT processes and controls Implement and IT balanced scoreboard with few but precise performance measures directly and demonstrably linked to the strategy The IT Steering Committee • Strategic Alignment - Define project priorities - Assess strategic fit of proposals - Perform portfolio reviews for continuing strategic relevance

• Value Delivery - Review, approve and fund initiatives, assessing how they improve business processes - Ensure identification of all costs and fulfillment of cost/benefit analysis - Perform portfolio reviews for cost optimization

• Resource Management - Balance investments between supporting and growing the participating cooperatives

• Risk Management - Ensure all projects have a project risk management component - Act as a sponsor of control, risk and governance framework - Make key IT governance decisions

• Performance Measurement

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- Define project success measures - Follow progress on major IT projects - Monitor and direct key IT governance processes

The Technology Council • Strategic Alignment - Provide technology guidelines - Monitor relevance of latest developments in IT from a businesses perspective

• Value Delivery - Consult/advise on the selection of technology within standards - Assist in variance review

• Resource Management - Advise on infrastructure products - Direct technology standards and practices

• Risk Management - Ensure vulnerability assessments of new technology occur

• Performance Measurement - Verify compliance with technology standards and guidelines

The IT Architecture Review Board • Strategic Alignment - Provide architecture guidelines

• Value Delivery - Consult/advise on the application of architecture guidelines

• Resource Management - Direct IT architecture design

• Risk Management - Ensure that IT architecture reflect the need for legislative and regulatory compliance,

the ethical use information and business continuity • Performance Measurement - Verify compliance with architecture guidelines

An IT Governance Implementation Plan Is Required To get its IT governance initiatives headed in the right direction, the participating cooperatives need an effective action plan that suits its particular circumstances and needs. First, it is important for the board to take ownership of IT governance and set the direction

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management should follow. This is best done by making sure that the board operates with IT governance in mind:

- Making sure IT is on the board agenda - Challenging management’s activities with regard to IT, to make sure IT issues are

uncovered - Guiding management by helping it to align IT initiatives with real business needs, and

ensuring that it appreciates the potential impact on the business of IT-related risks - Insisting that IT performance be measured and reported to the board - Establishing an IT strategy committee with responsibility for communicating IT issues between the board and management

Insisting that there be a management framework for IT governance based on a common

approach (e.g., COBIT). With this mandate and direction in place, management then can

initiate and put into action an IT governance approach. To help management decide where to

begin and to ensure that the IT governance process delivers positive results where they are

needed most, the following steps are suggested:

Step 1: Set up a governance organizational framework that will take IT governance forward and own it as an initiative, with clear responsibilities and objectives and participation from all interested parties. Step 2: Align IT strategy with business goals. What are the current business concerns and issues where IT has a significant influence? Obtain a good understanding of the business environment, risk appetite and business strategy as they relate to IT. Identify the top IT issues on management’s agenda. Step 3: Understand/define the risks. Given top management’s business concerns, what are the risk indicators relating to IT’s ability to deliver against these concerns? Consider:

- Previous history and patterns of performance - Current IT organizational factors - Complexity and size/scope of the existing or planned IT environment - Inherent vulnerability of the current and planned IT environment - Nature of the IT initiatives being considered, e.g., new systems projects,

outsourcing considerations, architectural changes Step 4: Define target areas. Identify the process areas in IT that are critical to managing these risk areas. Use the COBIT process framework as a guide.

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Step 5: Analyze current capability and identify gaps. Perform a maturity capability assessment to find out where improvements are needed most. Use COBIT’s management guidelines as a guide. Step 6: Develop improvement strategies. Decide which are the highest priority projects that will help to improve the management and governance of these significant areas. This decision should be based on most potential benefit and ease of implementation, and a focus on important IT processes and core competencies. Define specific IT governance projects as the first step in the IT governance continuous improvement initiative. Step 7: Measure results. Establish a balanced scorecard mechanism for measuring current performance. Monitor the results of new improvements considering, as a minimum, the following key considerations: - Will the organizational structures support strategy implementation? - Are responsibilities for risk management embedded in the participating cooperatives? - Do infrastructures exist that will facilitate and support the creation and sharing of vital

business information? - Have strategies and goals been communicated effectively to everyone who needs to

know within the participating entities? Step 8: Repeat steps 2 to 7 on a regular basis. There are also some obvious but pragmatic rules that management ought to follow: - Treat the IT governance initiative as a project activity with a series of phases rather

than a “oneoff” step.

- Remember that IT governance involves cultural change as well as new processes, and therefore a key success factor is the enablement and motivation of these changes.

- Make sure there is a clear understanding of the objectives.

- Manage expectations. In most environments, achieving successful oversight of IT will take some time and is a continuous improvement process.

- Focus first on where it is easiest to make changes and deliver improvements. Build

from there one step at a time. Conclusion A hosting model solution is proposed for the Cooperative sector for the implementation of IT. IT Governance framework is discussed with the assumption that this model is acceptable

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because of the various advantages it has over the impractical implementation of fragmented IT systems at each of the cooperatives. References IT Governance Institute. “Board Breifing on IT Governance”. 2nd Edition. A. Vinayagamoorthy. “Globalization and Cooperative Sector in India”. Web article – www.flyhighonline.com Banco Central Do Brasil. Cooperative Governance: Guidelines for Good Practices of FinancialCooperative Governance. Brasilia, October 2008. Satyanarayana, J. E-Government: The Science of the Possible. India: Prentice Hall, 2004. Mary Maureen Brown. “Electronic Government” Jack Rabin (ed.). Encyclopedia of Public Administration and Public Policy, Marcel Dekker, 2003. Thorpe, Stephen. “Facilitating effective online participation in e-government”. E-government in New Zealand. 2009. K. Ramesha. “Corporative Banking and Financial Sector Reforms in India – Agenda for Future Research”. International Conference on Mapping Co-operative Studies in the New Millennium. May 28-31, 2003. British Columbia Institute of Cooperative Studies, University of Victoria and Cooperative Alliance, Victoria BC, Canada. Eva Gutierrez. “The Reform of Italian Cooperative Banks: Discussion of Proposal”. IMF Working Paper, European Department. Mar 2008. Bir Bahadur Karki. Strategic Planning in Cooperative Sector: A Study on Diary Cooperative. The Journal of Nepalese Business Studies, Vol. II, No. 1, December 2005. Banishree Das, Nirod Kumar Palai, Kumar Das. “Problems and Prospects of the Cooperative Movement in India under the Globalization Regime”. XIV International Economic History Congress, Helsinki 2006, Section 72.

Do you pay heed to your boss at work? And when He had finished speaking, He said to Simon, “Put out into the deep water and let down your nets for a catch”. And Simon answered and said, “Master, we worked hard all night and caught nothing, but at Your bidding I will let down the nets" Our earthly bosses may not always be correct, and we may think that we know better, but they have been granted authority over us at work, and we must respond to their guidance. Notice how Simon Peter answers Jesus. He first explains his view of the situation, but then he willingly submits to Christ’s direction. If we’re wise, we will follow Peter’s example. If you have a disagreement with your boss, discuss your perspective calmly and respectfully. Then if your boss insists on a particular course of action, you must proceed accordingly. In business, knowledge and experience spell success. That’s why effective bosses will be right most of the time. Don’t forget, when Simon Peter heeded Christ’s advice and lowered the nets, the catch was great!

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PERFORMANCE AND PROBLEMS OF ADARSHA HANDLOOM WEAVERS’ COOPERATIVE PRODUCTION

AND SALES SOCIETY - A CASE STUDY

H.S.K.Tangirala

Abstract

It is to be noted that many Indian weavers face the problems such as low wages; high levels of indebtedness, unemployment and underemployment, even starvation are the problems that many weavers in India are facing today. To avoid these problems measures such as strengthening weavers’ co-operatives to provide inputs, credit and marketing channels to weavers, improving productivity and quality through improved looms, imparting new skills, designs and technology to weavers. In this case study an attempt has been made with an objective to study the performance and problems of the Adarsha Handloom Weavers’ Cooperative Production and Sales Society Ltd. Karimnagar, Andhra Pradesh.

Keywords: Export markets, cash credit, NIFT, APCO.

Introduction Handloom weaving in India is still largely a household enterprise, as well as being predominantly a rural activity, providing employment to the largest number of people next only to agriculture. The major handloom states in India are West Bengal, Tamil Nadu, Uttar Pradesh, Andhra Pradesh, Assam and Manipur. These 6 States account for 75% of handloom weaving in the country. Almost all handloom production in India is for domestic markets and only 1.3% of working looms produce for export markets. Further, the market for handloom products is four-tiered:

The self-consumption sector where handlooms are made for household requirements

and not for sale, as in the northeast of India.

The rural market where weavers do the marketing themselves.

The distant domestic market, largely urban, and which is beyond the reach of weavers.

Export markets.

It is to be noted that many Indian weavers face the problems such as low wages; high levels of indebtedness, unemployment and underemployment, even starvation are the problems that many weavers in India are facing today. To avoid these problems measures such as strengthening weavers’ co-operatives to provide inputs, credit and marketing channels to weavers, improving productivity and quality through improved looms, imparting new skills, designs and technology to weavers.

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In this case study an attempt has been made with an objective to study the performance and problems of the Adarsha Handloom Weavers’ Cooperative Production and Sales Society Ltd. Karimnagar, Andhra Pradesh. Methodology

To study the case study a structured questionnaire was developed and served to the society. Interviews were conducted with members, workers, board members, employees, and President of the society. It was an attempt that the data was collected from the year of the inception of the cooperative society.

Scope The present study focused mainly on the working performance and problems faced by it. The study has not concentrated on the living conditions of the members of the society. The present study was limited to the Adarsha Handloom Weavers Cooperative Production and Sales Society Ltd. Hence, the issues raised and discussions will be limited to the extent of the society and cannot be generalised and cannot be compared with the other societies.

Genesis of Adarsha

With the affect of closure of APCOs’ model weaving centre, Adarsha Handloom Weavers’ Cooperative Production and Sales Society Ltd. No.2 registered with 160 members on 1st May 1981 at industrial estate of Karimnagar in Andhra Pradesh. During the year 1981 the Apex society (APCO) has provided yarn to the society and recovered the value of the yarn by purchasing the finished goods from the society. The society could not have the experience of managing the society and requested the APCO to provide Manager free of cost for one year. APCO has accepted and given the managerial assistance to help the society in managing the business of the society.

Membership and Share Capital

In the year 1981 the total membership was 160 with the total share capital of Rs.26400 and as on 31st March 2008 it was Rs. 395143 with 82 members. During the year 1989-90 government has sanctioned Rs.75000 as share capital.

It is clear from the table no.1 that the membership of the society was reducing gradually from the year 2003-04 when compared with the previous year figures. The membership remains constant from the year 2005-06. During observation it was also found that the age of the members was nearly 60(approximately) years. The author could not see any young man or women either on looms or in any other processes involved in the activities of the society. During the discussions with the member-workers, it was found that the youth were not interested in this profession and most of weavers’ sons/daughters doing graduation/post-graduation. Some of their sons/ daughters have already employed elsewhere in the cities.

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Even though these statements sounds good, the reality is youngsters are reluctant to join/continue the same profession because the activities in this handloom industry do not provide lucrative wages, or they were given very less wages. During the discussion, the president explained that they were facing problem of young skilled workers. He further added that if this trend continues then the sector has to face lot of manpower problems. Hence, the predominance of the caste-based population in handloom sector has to be diluted with more migration from other castes into low-skilled jobs in handloom sector.

It is also interesting to note that even though the membership was decreasing the share capital amount was increasing. This was due to share capital contribution from the government.

Looms

It could be seen from the table no.2 that the looms of the society were 96 which was given by the APCO to the society in the year 1981-82. The table no.2 reveals that the numbers of the looms were reducing from the year 1989 onwards and slumped to 58 by the year 2007-08. Hence, it is suggested that the Society has to increase the looms and create more employment to all the members and also give training to the new incumbents.

Wages to the member workers

The wages paid to the member –workers is very important aspect to any handloom weavers’ cooperative society. The society should always see that the members get continuously work and suitable wage rates either monthly or piece rate method. Generally, wages are decided as per the weaving and the skill involved in it. It is general practice in most of the cooperative societies that it gives specifications and inputs to the weavers who in turn prepare the products/cloth and handover to the society. It is not necessary that the member works at his house but he also work on the looms owned by the society if the loom in the house is occupied by any member in the family. There were situations where at both places the weaver has to work to come out of his debts otherwise the living conditions would be dismal and the poverty would drive him to hang. There are many situations where there is a bleak scenario on livelihood and working conditions. The table no.2 discloses that the average wage of a worker was Rs.171 per month and gradually it has gone upto Rs.1953 per month. Even though there was an increase/great change in the wage received by the weavers, it was not be sufficient for his sustenance. The average wage mentioned elsewhere and mentioned in this paragraph was calculated separately for the people on looms was shown in the table No.2.1 and average wage given to the people for other activities could be seen in the table no.2.2 .

It is clear from the above discussion and from the table 2.1 and 2.2 that the weavers are getting very less wages and the society has to provide more wages by creating more work. It is

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also important to the society that every weaver member in the society to get work to do and earn wage for his living and living conditions.

Production The major raw material for the production of cloth is yarn. Hence, quality and cost of the yarn is an essential factor to ensure quality output with minimum cost. Keeping this factor, most of the societies purchase yarn from the APCO and National Handloom Development Corporation (NHDC), Hyderabad. This society is regular procurer from the APCO. During the year 2007-08 it has purchased yarn from NHDC worth Rs.46,97,463/-. The society was producing the products based on the demand from the APCO. These products are Design double cloth bed sheets, Design bed sheets, Design towels, Design pillow covers, lungies, and furniture cloth. The society also produces Polyster suitings, Polyster shirting, Lykra cloth and Mosquito nets occasionally. During the year 1981-82 the society produced the Handloom products to the extent of Rs.13.10 lakhs and the society was faring well during the course of time. The table No.2 disclosed that there was growth in production in many years and the production has gone up Rs.69.59 lakhs by the year 2007-08. The production was based on the demand and orders from APCO. The society was not much dared to produce more quantity of the products, more designs and according to the market. It requires market intelligence and institutional orders. Sales and Marketing A sale is very important variable to a Handloom Weavers’ Cooperative, for not piling up the stock in the godowns. Every business has to increase its sales day-by-day to revolve its funds in the business and enhance profits. The sales of handloom products are mostly based on the quality, durability, colours, designs and price. Hence, every society has to keep these factors into account while initiating for production. The increase in sales turnover should not be based on the escalation of price but the volume of the sales. The products will be sold just based on the brand name, image developed by the society. Further, the Cooperatives have to highlight that handloom’s unique quality is that of the yarn which is of pure cotton variety suitable only for slow speed spinning and weaving process. This preserves the lustre, colour-holding capacity, absorbency, softness and durability of cotton products. It was this finesse and feel that made Indian cotton fabric famous.

The sales of the society were increasing in most of the years when compared with the preceding year. It is clear from the table no.2 that the sales during the year 1981-82 was only Rs.10.88 lakhs and by the year 2007-08 it has grown upto Rs.78.82 lakhs. But this society is mostly depending on the orders of the APCO. It is clear from the below table No.2.3 that nearly 88.94% of total value of the products are sold to the APCO and just 11.06% local sales. Hence, the society was not much exposed to the public.

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To increase the sales, the society has to start identifying the needs, choices, tastes of the public. Further, they have to develop market intelligence system in the future instead of totally depending on the APCO. It is suggested that the society has to create institutional alliances and marketing channels to augment sales. The society should also fully use the SHGs and route all its products through them. The society has to participate more in exhibitions where ever arranged by the department or by any other agency.

Financial position The performance of the society is based on the surplus generated out of sales. The society can be said good when it earns sizeable net profits from its main operations and when the cooperative maintain its net-worth. The financial position of the Handlooms cooperatives is largely depends on surplus generation, reserves besides, cash credit limit.

It is seen from the table no.3 that the society was making profits except from the year 1990 to 1993 and 2000 to 2002. Even though the society was able to earn profits, it was not sufficient to plough back to the society operations as they were meagre. The reasons for the less profit were due to increase of operational expenses and less profit margin. Another reason was also due to less production and non-aggressive sales strategy. The society was doing work only for the APCO and not creating any local market for its sales expansion and for future growth. If the society concentrates more on local sales, then society would have earned more profits.

Table No.3 also shows about the reserves of the society. There is gradual increase/growth in the reserves. These reserves were used by the society for business operations. In real terms any reserve of a society has to be kept separately and should be used for unforeseen events and as a cushion. Hence, it is suggested that the society should not repeat this type diversion. Cash Credit It was getting cash credit loans from DCCB to increase the business. As on 31st March 2008, it was able to get the credit limit up to Rs.29 lakhs.

In the initial years, the society has got 96 looms from APCO which was valued Rs.1.10 lakhs. This amount was returned back to APCO by the society after getting the loan from the government under the looms modernisation scheme.

Board From the year 1981-82 to 1988-89 M.Sayanna was the president and 1988-89 to 1990-91 Shri H.Manana Rao was Person incharge. From the year 1991-92 to 2001 02 M.Sayanna was once again elected as President of the society. From the year 2002-03 to 2006-07 N.Parsaramulu was the president and from 2007-08 Shri.G Laxman.

It is clear from the above paragraph that there were elections for the position of president on democratic basis and no much conflict over it. Only demand from the members was proper wages and development of the society.

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Schemes implemented by the society The Government encourages the weavers’ cooperatives through various schem es to develop infrastructure, capacity building training programmes through Weavers’ Service Centres, National Institute of Fashion Technology (NIFT). The Managerial Workshops, and Leadership Development Programmes, are conducted by the Institute of Cooperative Management (ICM), Rajendranagar, Hyderabad.

During the year 1996-97 Handloom Development Scheme was sanctioned. But the fund of this scheme was released during the year 2000-01. These funds were utilised for purchase of yarn and in turn increased the production of the cloth. Further, under DRDA Scheme, the society has constructed Common workshed for the benefit of the weavers and society. During the year the society has got the project package scheme. Under this scheme, the society has provided the training to the weavers and also constructed a shed. It is clear from the above facts that the society is creating infrastructure by utilising the various schemes. Findings and Suggestions - It was found that the membership was reducing year by year. The reason for the

reluctance to join the cooperatives was due to non-availability of lucrative wages and society was not in a position to attract the young members. The weavers’ cooperatives are also suffers from the predominance of the caste-based population in handloom sector. It is suggested that the society has to induct new members who can be useful to the development of the society. Further, the caste based membership has to be diluted with more migration from other castes into at least low-skilled jobs in handloom sector (Ref Table.No.1).

- It was found that the numbers of the looms were reducing from the year 1989

onwards and slumped to 58 by the year 2007-08. Hence, it is suggested that the

Society has to increase the looms and create more employment to all the members and

also give training to the new incumbents (Ref: Table No.2). It is common observation

that in many societies the situation is similar manner. Hence, the weavers are to be

provided with upgraded looms, raw materials and design inputs. If the production is

in-house then works should be on frame looms to produce a variety of woven fabrics

in contemporary designs for apparel and furnishing products.

- It is found that the weavers were getting very less wages and the society has to provide

more wages by creating more work without much financial burden on the society. It

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is also important to the society that every weaver member in the society to get work to

do and earn wage for his living and improving living conditions (Ref: Table No.2.1

and 2.2).

- It is seen that majority of its products are being sold to APCO. It collects demand

from the APCO and getting the payments from it. Hence, it is suggested that the

society should find more institutional customers to create local sales. If the APCO

stops giving the work then the society has to close its operations or it has to be in

search of other customers. It is disastrous proposition for this society. Hence, it is

suggested that the society has to concentrate more on retail sales to gradually create

market (Ref: Table 2.3).

- It was observed that more concentration was only on the bedsheets and other one or two products. Hence it is suggested that the society has to diversify its business within the fold of Handloom products.

- It is found that the Sales and Profits of the Society are not much encouraging. Hence,

it has to do market survey to increase the sales. The society is able to increase the

profits when it produces more units of products. Venture in new type of products,

expanding market also results profits. So, the society may think strategically and take

steps to augment the profits. It is also suggested that the society has take austerity

measures in the financial aspects to cut short the costs and other administrative costs.

Another suggestion to the society in this context is to increase the volume of the

business by new avenue like participating in the exhibitions, keeping new alliances with

the SHGs, creating partnerships etc(Ref: Table 2 and 3).

- It was revealed that the Reserves and the Share capital of the Society were used for the

purchase of yarn and for other purposes rather it should keep them in any public

sector banks/cooperative banks which yields more amount by way of interest and the

Society also feels confident of having physical cash with it to meet any unforeseen

contingencies or for investing for infrastructure to the Society.

It was found that the society did not purchase computer so far. It is suggested that the society to purchase a computer for maintaining accounts, database and to develop more designs.

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Table No.1 Membership and Share capital

Membership Share Capital. Year (Numbers) Amount in Rs

1981-82 160 26400

1982-83 160 50121 1983-84 164 50281

1984-85 164 47751

1985-86 175 52071

1986-87 142 41031 1987-88 144 41031

1988-89 147 45331

1989-90 147 45706

1990-91 143 45206 1991-92 142 43586

1992-93 98 43586

1993-94 72 216516

1994-95 77 285480 1995-96 168 367300

1996-97 173 511340

1997-98 165 496730

1998-99 167 496730 1999-2K NA NA

2000-01 165 476240

2001-02 163 465940

2002-03 162 438270 2003-04 102 430580

2004-05 84 406880

2005-06 82 399480

2006-07 82 399480 2007-08 82 395143

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Table No.2

Year

Looms (in

Numbers)

Average Wage per worker per month (Amount in Rs)

Production (Rs. in Lakhs)

Sales (Rs. in Lakhs)

1981-82 96 171.42 13.10 10.88

1982-83 96 156.73 12.93 13.66

1983-84 96 101.87 9.95 11.98

1984-85 96 123.81 15.25 16.72

1985-86 96 415.55 50.52 50.76

1986-87 96 343.72 28.09 20.26

1987-88 96 333.07 24.98 22.38

1988-89 96 183.94 13.50 16.37

1989-90 90 231.45 20.45 22.84

1990-91 86 334.56 23.87 27.41

1991-92 70 348.99 21.36 21.74

1992-93 68 512.44 33.39 35.79

1993-94 68 798.30 37.61 48.21

1994-95 65 1068.81 58.19 64.19

1995-96 78 730.85 52.20 56.73

1996-97 75 1164.27 68.58 64.85

1997-98 65 1357.04 51.18 71.67

1998-99 65 1465.95 64.24 70.54

1999-2K N.A N.A N.A N.A

2000-01 66 487.00 22.63 47.31

2001-02 68 1233.42 51.84 56.75

2002-03 70 1327.30 60.79 60.86

2003-04 60 1446.28 57.92 58.96

2004-05 60 2211.74 72.93 85.94

2005-06 61 1744.96 65.04 72.70

2006-07 58 1933.86 70.39 73.98

2007-08 58 1953.33 69.59 78.82

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Table No.2.1

Year Weaving In Rs.

Drafting In Rs. Looms

Average wage(on Looms + Drafting) Per worker per month In Rs.

1981-82 183126 14350 96 171.42

1982-83 167932 12619 96 156.73

1983-84 108330 9026 96 101.87

1984-85 136000 6629 96 123.81

1985-86 466709 12000 96 415.55

1986-87 391650 4314 96 343.72

1987-88 379263 4431 96 333.07

1988-89 207994 3905 96 183.94

1989-90 238065 11900 90 231.45

1990-91 340913 4351 86 334.56

1991-92 289701 3451 70 348.99

1992-93 398203 19950 68 512.44

1993-94 641839 9571 68 798.3

1994-95 822158 11516 65 1068.81

1995-96 674600 9479 78 730.85

1996-97 1035146 12699 75 1164.27

1997-98 1044899 13596 65 1357.04

1998-99 1129641 13803 65 1465.95

1999-2K N.A N.A N.A N.A 2000-01 380762 4945 66 487

2001-02 993733 12738 68 1233.42

2002-03 1100058 14870 70 1327.3

2003-04 1027704 13615 60 1446.28

2004-05 1575247 17204 60 2211.74

2005-06 1260785 16528 61 1744.96

2006-07 1327205 18761 58 1933.86

2007-08 1337778 21738 58 1953.33

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Table No.2.2

Year Warping Winding Stitching No.of Workers

Wage per worker per month

1981-82 36521 45781 25432 64 140.28 1982-83 32061 34750 26380 64 121.34 1983-84 21665 27082 14445 68 77.44 1984-85 27200 40800 16135 68 103.11 1985-86 20900 119000 42573 79 192.48 1986-87 19888 73423 26532 46 217.11 1987-88 19730 84899 30455 48 234.52 1988-89 12306 49934 16930 51 129.36 1989-90 47613 71419 27775 57 214.63 1990-91 22968 84130 26053 57 194.67 1991-92 18776 68188 23315 72 127.64 1992-93 79640 119460 53093 30 700.54 1993-94 45088 144210 55802 4 5106.25 1994-95 53474 168223 66560 12 2001.78 1995-96 49323 146904 61254 90 238.41 1996-97 69952 224208 87619 98 324.64 1997-98 44038 151572 88393 100 236.67 1998-99 59125 179084 96920 102 273.80 1999-2K N.A N.A N.A N.A N.A 2000-01 5100 19635 3428 99 23.71 2001-02 29364 129131 33432 95 168.36 2002-03 39195 178630 41305 92 234.72 2003-04 37089 165907 47429 42 496.88 2004-05 51459 203530 53366 24 1070.68 2005-06 57049 218112 72920 21 1381.27 2006-07 70560 262415 85560 24 1453.25 2007-08 69911 310554 101030 24 1671.86

Table No.2.3 Sales to APCO Sales to others (Local

sales) Total Sales Years

% Rs.in Lakhs % Rs.in Lakhs % Rs.in Lakhs 2005-06 89.15 64.81 10.85 7.89 100% 72.70 2006-07 88.44 65.43 11.56 8.55 100% 73.98 2007-08 88.94 70.10 11.06 9.72 100% 78.82

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Table No.3

Amount in Rs.

Year Profit(+)/Loss(-) Reserves 1981-82 83803 Nil 1982-83 67098 Nil 1983-84 19465 Nil 1984-85 28369 Nil 1985-86 42220 Nil 1986-87 22261 Nil 1987-88 48590 Nil 1988-89 48590 Nil 1989-90 10422 Nil 1990-91 (-)153240 80595 1991-92 (-)161805 80595 1992-93 (-)66690 80595 1993-94 46582 80595 1994-95 64458 92239 1995-96 35947 108354 1996-97 54924 117341 1997-98 1955 131072 1998-99 7860 131072 1999-2K N.A N.A 2000-01 (-)554876 131072 2001-02 (-)349886 155782 2002-03 10442 155782 2003-04 9790 158393 2004-05 34509 169468 2005-06 35126 169468 2006-07 13228 178249 2007-08 44198 179057

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SOCIAL AND VALUE BASED MANAGEMENT OF COOPERATIVES

V.Ambilikumar

ABSTRACT

The cooperative movement in India has a very long and illustrious history. During these 105 years, the movement has diversified manifold and has played a significant role in bringing about important socio-economic changes in different sectors of the economy. Now a shift is gradually taking place in the corporate sector and people are realizing that the values are imperative for ultimate success. Some of the most successful businessmen today are practicing value- based management. Knowingly or unknowingly, value based management is practiced in many of the cooperative organizations too. However, there requires a deliberate attempt to adapt value based management in the cooperative sector in order to offer the maximum benefits to the members as well as other stakeholders.

Keywords: Cooperative model, CAPEX, HANTEX, MATSYAFED, CAMPCO, COOPTEX, HAFED, RUBCO, MARKFED

Introduction The cooperative model of economy has proved to be the safe and secure model which can provide a ray of hope to the common masses. Due to strong roots in the community in which the cooperatives are embedded, the cooperative model is governed by community consciousness. The cooperative model of development is unique as it does not depend on external influences like stock markets. It is a model which is owned and controlled by the people. The democratic principles of cooperatives are its life-blood. The cooperative movement in India has a very long and illustrious history. During these 105 years, the movement has diversified manifold and has played a significant role in bringing about important socio-economic changes in different sectors of the economy. It is now a major force in important sectors like sugar, dairy, rural credit, housing, marketing and fertilizers. Several cooperative brands have already become a house-hold name, not only in India but also abroad. However, with the advent of the market economy, the functioning of cooperatives has undergone changes. They are now transformed through adoption of professional, financial and administrative skills. The cooperative movement has proved to be an effective social and economic development model, which ensures inclusive growth.

Traditionally, business firms have placed the highest priority on earning profits – concern for the employees, concern for the community and human values have typically received less attention. However, the corporate sector has now started realizing the importance of maintaining social values. Perhaps, this may be the reason for the popularity of books on

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ethical management practices. One such book is ‘The Power of Ethical Management’ co-authored by the well known management expert Kenneth Blanchard and Norman Vincent Peale, the famous author of the book ‘The Power of Positive Thinking’. On the cover of this book it is written in bold letters –“Integrity pays, you do not have to cheat to win”1. The book says that managing only for profit is like playing tennis with your eyes on score board and not on the ball.

A paradigm shift is gradually taking place and people are realizing that the values are imperative for ultimate success. Some of the most successful businessmen today are practicing value- based management. For instance, Bill Gates, the head of the world’s biggest software company, and who was ranked as the richest person in the world has announced his intension of giving away his entire wealth, barring a small percentage for his two children, for the welfare of the poor. INFOSYS Technologies has bagged the number one position in India in respect of value based management practices. TATA group of industries, AMUL, Reliance group of industries, Birla group, Zee TV etc. are upholding the merits of value based management. Commitment to education, welfare of employees, social change in rural areas, empowering the rural masses, offering quality products at competitive prices, ethical business practices and transparency, etc. are the various outputs offered by these organizations. The Steel Authority of India Limited has also succeeded in building lasting relationship with customer based on trust and mutual benefit.

The Excel Industries Limited has got its value system from the mother’s kitchen – the values like excellence, service, accuracy, consistency, etc. All the employees irrespective of their position eat together, pray together and work together in harmony following the principle of ‘saha veeryam’(energetic cooperation). Many such companies today are practicing value based management and achieving great success.

The Concept and Objectives

Value based management is the management approach that ensures firms are running on values. It includes creation of values, management for values and measurement of values. It aims to provide consistency of the corporate mission (business policy), the corporate strategy, corporate governance, corporate culture, corporate communication, organization structure, decision processes and systems, performance management processes and reward processes and systems.

Value based management can be simply stated as a management system in which the entire organization is focused, measured, compensated for creating value for stakeholders. It includes the following; for the Organization- encouraging a working climate with innovation & free exchange of ideas.

Members- protecting and safeguarding their interest, Employees- understanding & accepting the needs and rights of employees, providing adequate wages, good working condition, job

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security, effective machinery for the speedy redressal of grievances, suitable opportunities for promotion and self development and creating a sense of belongingness & team spirit through their close link with management.

Customers - ensuring the availability of quality goods and services at reasonable prices.

Government – Protect the national interest, act as a supportive system to the government in investment, creation of employment and production.

Community – (Social responsibility)- Effective use of natural resources, assistance in community affairs, assistance during natural hazards.

Present Scenario

In India, at present, the cooperative movement has covered 100 per cent villages and functioning over 5,45,000 co-operatives of various levels with a membership coverage of 239 million2. This itself indicates the extent of the social responsibility expected from this sector. Of course, the cooperative sector has been trying to meet the social values and responsibilities to the level best. But, an independent evaluation may raise the question, whether the cooperatives in India could provide value based services to the stakeholders at the maximum level? The answer is ‘No’.

Many reasons are attributed for this failure. Lack of active participation of user-members, poor level of response from federal organizations towards the needs of their member cooperatives, political interference in the administration and management, absence of professional management, lack of adequate infrastructure, lack of capability to withstand competition, over-dependence on government for financial assistance and restrictive provisions of cooperative law are important among them.

Being the most popular form of organization at the grass root level of the economy, cooperatives should adapt the value based management system in its full sense. There is no doubt that "Co-operatives are based on the values of community, self-help, mutual responsibility, quality, equity, service and stewardship. They practice honesty, openness and social responsibility in all their activities."3

The contribution of the cooperative sector in India has to be viewed as a part of discharging their social responsibilities as well as upholding the values. Cooperatives have made remarkable contributions in sectors such as rural credit, marketing, agro-processing, consumer business, housing, industrial promotion, information technology, health care, women empowerment and creation of employment.

Undisputedly, there is no alternative other than cooperative credit structure in order to serve the needs of the rural economy. The cooperative credit structure was the first to realize that increasing rural incomes through enhancing agricultural production, generating employment in non-farming activities etc. has been critical for expanding marketing accelerated investment

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and industrial growth. This has helped in boosting the growth rate of the economy by providing a fillip to agricultural production in the country. The short term cooperative institutions alone have the capabilities to meet and cater to the agricultural needs of the farmers. Cooperatives with less than 6% of the deposits of the total banking sector in the country cater to around 50% of the short term agricultural needs of the farmers. They alone have issued the largest number of Kissan Credit Cards which are around 65% of the total Kissan Credit Cards issued in the country.4 With a view to provide inputs at the door steps of the farmers and developing holding capacity of the produce to be sold at the right time to offer remunerative prices to the growers, marketing cooperatives sprang up in all the states. They have professionalized the management and get strong support from the governments. Amul, MATSYAFED, HANTEX, CAPEX, Indian Coffee House and RUBCO in Kerala, CAMPCO, COOPTEX in Tamilnadu, MARKFED in Punjab, HAFED in Haryana, etc. are examples.

Cooperative sugar factories have played an important role in the rural areas for bringing radical changes in the rural economy (As on 31.3.2009, there were 317 cooperative sugar mills in India)5. Development of irrigation facilities, laying of roads, promotion of dairy and poultry, establishment of educational institutions, medical facilities, area development, generation of employment, etc. resulted in growth of assets and better living standards of the people.

Price control and supply of good quality consumer items in time to the people are two major challenges usually faced by any government. Consumer cooperatives in India also discharge this social responsibility in the most effective way. The consumer cooperative stores are providing controlled and non- controlled items to the consumers at very reasonable prices, thus strengthening the Public Distribution System. The role of cooperatives in price control has been experienced by the common people, particularly in the light of the ever increasing prices of commodities at present.

Besides meeting the shelter needs of the needy people effectively, housing cooperatives foster to the national integration both as an end in itself and as a means to promoting national development. One of the significant contributions of housing cooperatives is the improvement of the ecology of the area where they function. They plant trees and maintain gardens, thus protecting the environment too. Special attention is paid by them for collection and disposal of garbage and to keep the surroundings clean. It requires special mention that housing cooperatives play a major role in many developing countries, particularly in helping informal sector households to obtain access to land and to key material and equipment. Members of the SEWA Bank in India benefit as their bank insists that, since a housing loan is in the name of a woman member, the house itself should be in her name. Housing cooperatives have an important role in the transitional economies; for example in the former Czechoslovakia, in 1991, there were 1.5 million cooperative apartments.

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Industrial cooperatives in the country have been playing a predominant role in the creation of employment and entrepreneurship development. This has contributed a lot in the attempts towards eradication of poverty particularly in the rural areas.

Cooperatives are considered as an important instrument for economic development to emphasize the values of self-help, responsibility, democracy, equality, honesty, awareness and caring for others. Its network has almost covered all the Indian villages and sectors by providing necessary services including information technology to improve quality of life especially in rural areas. The cooperatives encourage coverage of weaker sections viz. people below poverty line and those deprived of basic minimum facilities such as women and youth. The cooperatives are committed to uplift the standards of entire community as a whole without discrimination based on caste, gender, religion, etc. Women cooperatives provide platform for the complete development of women in all fields of human activity. The well flourished cooperative educational institutions in Kerala are another example for the commitment of this sector towards the society.

Significance of Value Based management in Cooperatives

Values are some basic aspirations of mankind applicable everywhere, all the time. The proponents of cooperative movement discovered that human society can be better with equality, fraternity, spirit de corps, equity, peace, prosperity, happiness and free from conflict and exploitation, if we conduct our affairs on cooperative basis. These virtues will automatically emerge in true cooperatives. The values to be cherished by a cooperator are “cooperativeness” based on “mutuality” in true spirit. The principle of “all for one and one for all” is talked about but in actual practice, there is hardly any mutuality in cooperatives. Neither the members feel “belonging” to the cooperative society nor does the cooperative society make them feel that they are the members in the society. One becomes member of a cooperative society not because he subscribes to the cooperative ideology and believes in cooperative values and principles, but due to economic compulsions of deriving benefits like availing credit from a cooperative credit and banking institution. Members do not know even their rights and obligations. Otherwise, the problem of overdue would not occur. Once the loan is repaid, the borrower would like to withdraw the share capital.

Similarly, deposits are made with cooperatives, not because of any commitment to the cooperative ideology. It is therefore, necessary to educate the members about the cooperative principles, cooperative values and socio-economic benefits of coming together. It has been a general experience observed in most cooperatives in recent years that the initial zeal and enthusiasm that is found in starting a cooperative is not matched by sound and proper knowledge and appreciation of cooperative values and principles underlying it. There are many cooperative organizations in our country, where the board members exploit the

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resources for their own personal benefits only. They totally ignore the social values and their obligations towards the members.

Enlightened and very effective leadership is very essential for the growth and success of cooperatives. Good leadership is a pre-requisite not only for creating and nurturing a cooperative but also for providing a vision, and inspiring and guiding both the members and the management so as to enable the cooperative to achieve its purpose. Elected members of the board and office bearers, it is observed from the experience, have not played completely the role expected from them and have not been responsive to the aspirations of the members in many cases. Therefore, cooperatives have to re-orient their functioning and management by having enlightened members and professional managers.

Since the governments have limitations, in terms of resources, in the protection of social values, cooperatives are one of the best organizations as they operate at the grass root level and people’s participation in cooperatives is the highest. Sincere efforts are, therefore, to be initiated for the implementation of social and value based management in cooperatives. For this purpose, the members and office bearers should be made more aware about the need for practicing social and value based management. The cooperatives can educate not only the members but the public as a whole on issues such as climate change and its impacts, harmful practices in agriculture, environmental protection, etc. In the agricultural sector, a key challenge is to enable the farmers, especially small holders, to obtain higher crop yields and to adopt sustainable farming practices as they cope with the challenges posed by climate change. Cooperatives can help by disseminating knowledge and good practices to farmers, as well as by facilitating productive investments and expanded access to technology

In China, health co-operatives achieved universal coverage of basic health services but became dysfunctional when state support was withdrawn. In Gujarat (India), co-operatives have been useful to provide primary health care services and not as a mechanism to run hospitals and provide medical care for the general population. In Kerala, health co-operatives could not successfully compete with expanding state health services and private services as they were not managed like private enterprises.

With widespread privatization in the health sector, access to health services is becoming an individual responsibility. As large population segments in developing countries are unable to access health care, there exists a renewed interest in a “third realm”, an intermediary between the receding state and the profit-oriented private sector. Co-operatives are seen as a potential “third realm”, and there already appears to be a global revival of co-operatives in the social and health fields6.

Of course, the value based management in cooperatives should focus on the interests of all the stakeholders. It should be made possible to offer maximum return to the members in the

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form of dividends or other benefits, reasonable pay and benefits to the employees and quality products and services to its customers at reasonable prices. The existing legislations controlling the distribution of benefits to the members may have to be modified so as to motivate the members to be more active. Also the myth of co-operative managers as civil servants carrying out the policies of the elected board must be replaced by a new reality of a co-operative professional management that is a part of the co-operative community it serves.

The formal implementation of value based management in cooperatives involve three important steps; gain commitment of top level management , customize the value based management framework, and finally, make value based management a way of life in the cooperative society. Top level management needs to support value based management with their words and ultimately with their actions. Redesigning of its management practices like performance measurement, compensation design, planning/budgeting, training and communication programs is the next step. Value based management needs to become a part of the drinking water, so to speak, meaning we have to turn our efforts to ensuring that everyone in the organization understands his or her role in creating value in the organization.

Conclusion

Value based management also includes making money. It is not a question of either man or money. It is a quest for both happiness and profit. Researches show that value based or visionary companies perform on a markedly higher level – they earn much more money – than merely profit-based companies. (The Care of VBM systems (2003) by Harley E. Ryan, Louisiance State University aimed at finding whether a firm significantly improves adjusted residual income after adopting value based management. He found that VBM improves economic performance; it highlights inefficiencies and need for improvement in compensation contacts. VBM is more effective for high growth firm than for low growth firms. VBM encourages efficient use of the invested capital.) Cooperative activities need to be carried out with credibility in order to win the confidence of the public. It is also necessary to take note of the emerging problems and realities and to equip oneself to cope up with such challenges effectively and with confidence. The general public should be motivated to join the cooperative movement to strengthen the economy by making the cooperative movement truly as a people's movement. Knowingly or unknowingly, value based management is practiced in many of the cooperative organizations too. However, there requires a deliberate attempt to adapt value based management in the cooperative sector in order to offer the maximum benefits to the members as well as other stakeholders.

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References: Kenneth Blanchard and Norman Vincent Peale, ‘The Power of Ethical management’, William Marrow and Company, Inc.105, New York, 2001. ICA Report, Geneva, 2009. ICA "Draft Statement on Co-operative Identity, in Review of International Co-operation, Vol. 87, No. 3, Geneva, 1994, p25. Reserve Bank of India, ‘Report on Trend and Progress of Banking in India 2008-09’. National Federation of Sugar Cooperatives United Nations. Cooperatives in social development: report of the secretary-general. Geneva: UN Economic and Social Council; 2001. *Dr. V.Ambilikumar, Associate Professor, Dept. of Management Studies,College of Fisheries (Kerala Agricultural University), Panangad P.O., Kochi- 682 506.

Did you know that your mistakes often make a bigger impression than your success?

There is no lasting remembrance of the wise man as with the fool (Ecclesiastes 2:16). When planning a project, keep in mind that disaster may be far more costly than the gain of a success. Unfortunately, it’s often true that our mistakes make a bigger impression than our triumphs. However, don’t become paralysed by risk or fearful of taking action. Instead, weigh the risk against the possible reward, and move forward only when the balance is in your favour. When a project appears to be failing, analyze the situation and assess the options available for correcting the problem. Once you understand what is causing the lack of success, make corrections and keep moving forward. If you run out of options and nothing has succeeded, it may be time to give up and cut your losses. Make balanced decisions and know when to quit, and you’ll avoid being remembered for your mistake.

Fools despise wisdom and instruction (Proverb 1:7)

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INFLUENCE OF SOCIO-ECONOMIC FACTORS ON THE CUSTOMERS OF COMMERCIAL BANKS IN KERALA

K.K Muraleedharan

Abstract

Bank marketing is the creation and delivery of financial services suitable to meet the customers’ needs at a profit to the bank. Two important functions of bank marketing are to attract and mobilise deposits on one hand and attract borrowers and users of services on the other. The need for the application of marketing concept in banks arises due to intense competition faced by banks, increased sophistication of bank customers, improvement in work technology and increased cost of meeting customer’s needs. For these reasons, in the last few years there has been a growing interest in applying marketing techniques and tools in the field of banking. The study has been conducted against this background.

Keywords: Public provident fund, Chi-square value

Introduction

It is also confirmed that life-style has a direct bearing on the saving potential. If a person invests with the motto of earning interest, the study of lifecycle assumes an outstanding significance. An employed bachelor, staying away from parents may have less motivation and propensity to save than couples with children. Those in middle age may be more interested in investment in house and savings for old age. A survey conducted by State Bank of India revealed that when compared to other age groups, persons between 35 and 60 years save more in Public Provident Fund. Those above 60 years of age invest more in company shares than others4.

Bank professionals also need to be aware of the opinion leaders and intermediaries especially while sanctioning loan. Opinion leaders are people within a group or place, who because of special skill, knowledge, personality or other characteristics exert influence on others. An opinion leader is one whose advice is sought on the issue at hand. People become opinion leaders because they have been found to be more well- read in the area they influence; more confident and sociable; have higher social status; and have credibility and enjoy the confidence of the people in the area of their influence.

Opinion leaders can exert influence over those people whose level of awareness about a particular service or bank is low. The branch manager must distinguish between opinion leaders and intermediaries. While opinion leaders act without consideration, intermediaries do the same with consideration. Kerala is one of the highly banked states in India. There is no geographical area in Kerala, which has no commercial banks, either nationalised or

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private and co-operative banks indiscriminately whether the area is – urban, semi-urban or rural.

The entire study was attempted on the basis of primary data collected by the researcher. For the conduct of the study, two interview schedules were designed after pre-test. One was for collecting data from bank employees and the second interview schedule was for collecting data from bank customers. 270 bank employees and 900 bank customers were taken at random as samples.

As the socio-economic conditions throughout Kerala are uniform, three districts were selected to represent three regions, which in turn represent the entire state. They were Kozhikode, to represent the northern region, Ernakulam to represent the central region and Trivandrum to represent the southern region. From each district three areas were selected at random to represent urban, semi-urban and rural areas and from each area, 30 bank employees of any commercial bank including co-operative banks and 100 customers of any commercial bank including co-operative banks were selected at random. As regards bank employees, all categories of employees of commercial and co-operative bank were selected at random. It included managers of the bank, supervisors and clerks. Supervisors are those employees who are working as officers of the bank including field officers. They were contacted directly in order to elicit the information. The entire study has been arranged in three parts. The first part was on the basis of questions common to both bank personnel and customers. The second was based on questions asked to bank personnel alone and the third based on questions asked to customers alone.

As the bank is a service-oriented industry, customer satisfaction is of prime importance for the very survival and progress of the banks. As customers are an unorganised group, the major problem in the study of marketing bank services is the non-availability of requisite information. This is further compounded by the fact that most of the performances of bank marketing are not amenable to direct measurement. In the absence of systematically collected data, the assessment of the quality of bank marketing is largely dependent on the subjective judgement of the decision makers. Customers in the present study are both the depositors and borrowers of any commercial or Co-operative bank in Kerala. As stated in the methodology, the researcher collected the required data through the interview schedule which was finalised on the basis of pilot study. 900 customers from three regions of Kerala were selected. In each region, three areas were selected at random to represent urban, semi urban, and rural areas and for each area, 100 customers of banks were also selected at random.

Generally banks have two types of customers using their service. They are general users and commercial users. General users are persons who have an account in the bank and who use the banking facilities at the terms and conditions fixed by a bank. On the other hand, commercial users are entrepreneurs having an account in the bank and using the credit facilities and other services for the establishment and expansion of their business.

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Economic factors play a very important role in banking activities. It is the income that ultimately influences the behavioural profile of a bank. The gross income of a person is composed of disposable income and discretionary income. Disposable income is the balance remaining after deducting taxes and compulsory deductions from gross income. Disposable income includes money on necessities or for the fulfilment of physiological satisfaction like food, shelter and clothing. The surplus that is left over is called discretionary income, which is free to be spent on luxuries or to be saved. When there is more income, the ultimate result is that earnings increase along with the spending. But if earnings are less, savings will come down. The western study revealed that in urban families with lower incomes, average personal consumption spending exceeded income5. It also showed that average propensity to consume declined rather than rose since income rose above the poverty line. Like this, the behavioral profile is also influenced by the expected income and awareness for getting additional income. In economic factor, three factors are taken for study. They are level of income, savings and expenditure. The outcome of the studies is as follows.

Table-1

Location of bank and bank personnel’s response to customer’s behaviour on economic factors - Level of income (Figures in percentage)

Location of Bank High Medium Low Total

Urban 90.00 10.00 0.00 100

Semi-urban 85.56 12.22 2.22 100

Rural 93.33 6.67 0.00 100

Total 89.63 9.63 0.74 100.00

Source: Field survey

Pearson Chi-square: 5,76732, df=4, p=,217239

Table - 2

Location of bank and bank personnel’s response to customer’s behaviour on economic factors – savings (Figures in percentage) Location of Bank High Medium Low Total

Urban 58.89 38.89 2.22 100

Semi- urban 65.56 27.78 6.66 100

Rural 75.56 21.11 3.33 100

Total 66.67 29.26 4.07 100.00

Source: Field survey

Pearson Chi-square: 10,4305, df=4, p=,033787

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Table - 3

Location of bank and bank personnel’s response to customer’s behaviour on economic factors – expenditure

(Figures in percentage)

Location of Bank High Medium Low Total

Urban 14.44 41.11 44.45 100

Semi- urban 7.78 46.66 45.56 100

Rural 18.89 34.44 46.67 100

Total 13.70 40.74 45.56 100.00

Source: Field survey

Pearson Chi-square: 5,81143, df=4, p=,213707

The data contained in Table- 1 discloses the attitude of bank personnel with regard to the influence of the level of income on customer behaviour location wise. The chi-square value at 5 per cent level of significance and ‘p’ value reveal that there is no statistically significant relation between location and level of income in the behaviour of customers. The data furnished in the Table also shows that, more than 89 per cent are of the view that the influence of the level of income on customer behaviour is at the maximum in rural areas. Interaction with villagers revealed that it is mainly because of the fact that in the rural area, banks are the dependable avenues for villagers to save their income. But in the urban and semi urban areas, there are a lot of dependable channels for utilization of income in an effective way.

Another important economic factor studied is ‘savings’. The data contained in Table - 2 discloses the opinion of bank personnel regarding the influence of savings on the customers’ attitude location wise. Chi-square value at 5 per cent level of significance and ‘p’ value state that there is a statistically significant relation between savings and attitudes of customers towards banks. More than 66 per cent opined that the savings of customers have a high influence on customers’ behavior towards the bank. Close verification shows that among the three locations, influence of ‘savings’ is the maximum in rural areas.

Another important economic factor which influences customer behavior is expenditure. The data contained in Table-3 gives location wise outcome of the study Chi-square value at 5 per cent level of significance and ‘p’ values reveal that there is no statistically significant relation between expenditure and consumer behavior location wise. More than 86 per cent are of the view that the influence of ‘expenditure’ on customer behavior towards banks is either ‘low or medium’. Out of this 86 per cent, 45.56 per cent are of the view that the influence of expenditure is low. Only a nominal percentage (13) opined that the influence is high. Among the location, the response of bank personnel is somewhat equal i.e. there is no wide variation between different locations. In region wise analysis also, the Table reveals that the relation of customers towards banks on the basis of expenditure is not statistically significant. Among

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the regions, central regions come first (52.22 per cent) and in both the northern and southern region the bank personnel’s attitude is the same.

Much the same question was asked to the customers of banks also to learn their attitude towards economic factor. The information furnished in Table-4 shows the outcome of the study.

Table-4

Location wise influence of economic factors on customers in dealing with bank- level of income

(Figures in percentage)

Location High Medium Low Total

Urban 92.67 6.67 0.66 100

Semi- urban 94.00 6.00 0.00 100

Rural 88.33 9.33 2.34 100

Total 91.67 7.33 1.00 100.00

Source: Field Survey

Pearson Chi-square: 11,7867, df=4, p=,019025

Pearson Chi-square: 8,67030, df=4, p=,069916

For assessing whether there is any statistically significant relation between the level of income of customers dealing with banks location wise, chi-square value at 5 per cent level of significance and ‘p’ value were calculated and a statistically significant relation was discerned. By close observation it is clear that the attitude of customers is the same as that of bank personnel. More than 91 per cent are of the view that the influence of the level of income on the customers’ behaviour is ‘high’. Among the location also the customers’ attitude is more or less equal.

Table .5

Location wise influence of economic factors on customer in dealing with bank- savings

(Figures in percentage)

Location High Medium Low Total

Urban 62.00 33.00 5.00 100

Semi-urban 57.00 40.00 3.00 100

Rural 45.00 45.00 10.00 100

Total 54.67 39.33 6.00 100.00

Source: Field Survey

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Pearson Chi-square: 26,9204, df=4, p=,000021

The second economic factor taken for study is savings. The data contained in Table.5 gives the outcome of the study location wise. In order to see whether there is any statistically significant relation between customers’ attitude towards banks in location wise and savings chi-square value at 5 per cent level of significance and ‘p’ value were calculated, which shows that the relation is statistically significant. More than 94 per cent of the customers stated that the influence of savings is either high or medium in customers’ attitude towards banks. Out of this 94 per cent more than 54 per cent opined that there is ‘high’ influence. Among the locations, the maximum influence is in the urban area (62 per cent).

Table.6

Location wise influence of economic factors to customer in dealing with bank- expenditure

(Figures in percentage)

Location High Medium Low Total

Urban 27.33 39.00 33.67 100

Semi-urban 29.00 30.67 40.33 100

Rural 30.33 39.00 30.67 100

Total 28.89 36.22 34.89 100.00

Source: Field Survey

Pearson Chi-square: 8,51378, df=4, p=,074497

Expenditure is another economic factor taken for study. The data contained in Table .6 gives the outcome of the study location wise . Location wise analysis shows that there is no statistically significant relation between expenditure and customers dealings with banks . Out of the total sample respondents, 71 per cent opined that the influence of expenditure on customer dealings is low or medium. Among the locations, the northern region and southern regions occupy equal status (39 per cent) with regard to the attitude of customers.

Conclusion

Earners Engel on the basis of empirical evidence propounded the following law, which is commonly known as Engel’s Law.

- As income rises, the proportion spent on food declines.

- As income rises, the proportion spent or housing and house hold good remains about the same.

- As income rises, the proportion spent on clothing stays the same or rises slightly.

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- As income rises the proportion spent on luxuries rises6.

It is in this context it was verified whether there is significant influence of economic factors among the bank users of Kerala. The study result may be concluded the influence of economic factors is significant.

References

Saxena, K.K. Bank Marketing, Skylark Publications,Delhi. p. 56, Bimal Jalan. Chartered Secretary, March 2002, p. 104, Jha, S. M. Service Marketing, Himalya Publishing House,Delhi. p113. Saxena, K.K. Bank Marketing, Sky Lark Publication, Delhi. p. 17. Jha, S.M. Service Marketing, Himalya Publishing House.Delhi. p. 114, Saxena, K.K. Bank Marketing, Sky Lark Publications,Delhi. p. 20.

Adrian Payne, The Essence of Service Marketing, Prentice- Hall of India, New Delhi.

Have you ever lost a star performer who felt unappreciated?

I will give you renown and praise among all the peoples (Zephaniah 3:20) One of the least expensive and most effective ways to reward your employees is with abundant praise and encouragement. Everybody wants to feel appreciated, especially those who are working hard and producing good results. Don’t assume that your star performers know how you feel, and don’t shy away from giving praise because you think it might go to their heads. Tell them how you feel and follow through with other tangible expressions of your appreciation. Furthermore, make sure employees know how they fit into the future plans of the business. Give them a vision for how they can earn promotions, salary increases, and other benefits. Feeling unappreciated and undervalued is the number one reason why top employees look for other jobs. If you express your appreciation for and share your hopes and dreams with members of your staff, you will build a strong foundation for long-term success. Pleasant words are a honeycomb, sweet to the soul and healing to the bones (Proverb 16:24)

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NEED FOR EGOVERNANCE IN THE COOPERATIVE

ENTERPRISES K.G.Manju

Abstract Researches have indicated beyond doubt that the weaker internal governance mechanism of the cooperative sector has been a serious bane for effective and efficient performance. Lack of transparency in the procedures followed and ineffective planning and control make the situation worst. It is essential that the cooperative system must be able to reveal the required information adequately, clearly, accurately and comparably on time for the use of the stakeholders. The application of information and communication technology is expected to transform the efficiency, effectiveness, transparency and accountability of informational and transactional deals. Naturally there arises a question on the insufficiencies of the present situation. On a close observation on the operations of cooperative sector in India , it can be noted that there are a number of constraints like : Lack of coordination and integration ; Inadequacy in infrastructure as well as capacity ; Insufficiency of sustained funds for implementing projects and Lack of awareness among the members , beneficiaries and other stakeholders.

Keywords: E-Governance, coordination, infrastructure, sustained funds, integration

Introduction Cooperative sector in India stands only second to the Government sector in providing employment. Cooperative societies were initially established in India for extending support to the weaker sections. Cooperative getting together has helped them a lot to get freed from the clutches of middle men who exploited them to a considerable extent. The activities of cooperative sector in recent years have wided and the Principles of Cooperation have touched almost all spheres in the economy. Together with the support of Government, the cooperative sector could play a vital role in the economy for establishing place control mechanism and ensuring equitable distribution of essential commodities. In the banking sector, especially in Kerala, Cooperative institutions have succeeded in providing financial support for areas like agriculture, allied activities, rural industries , and small and medium enterprises. Several research field studies have confirmed that the role played by cooperatives in strengthening the livelihood of rural population of India is significant. At the national level cooperative sector has a dominant role in fertilizers, dairy, vegetable oil production and agricultural credit. In the globalised economy, cooperative enterprises have been facing severe problems in relation to operations, human resource management, marketing and management of funds. It is a widely accepted fact that the cooperative sector has supported the Indian Economy significantly in overcoming the pressure of global recession. However, the cooperative sector has been severely affected by the problems of in sufficient professionalism in the management activities. An effective system of governance is the need of the hour for cooperative enterprises. There is atmost need for the application of electronic devices and systems in the governance of these enterprises. It shall bring about improvement in the process of transformation of relationships with its constituents – the public and the business world. It

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means there will be enhanced access, transparency, accountability and effectiveness in the delivery of products and services from the cooperative sector. It is against this backdrop that the present paper attempts to access the determinance of egovernance implementation on a better governance in the cooperative sector. E-Governance for the present situation is the process of using information technology for augumenting resources for both the internal operations and the external interactions with the members, beneficiaries and general public. Applications of Information Technology on the areas are illustrated below: Lack of coordination and integration In order to improve the operational effectiveness employee, creativity and organizational competitiveness, it is essential to coordinate these three aspects in such a way as to evolve a control system that allows appropriate integration of all the elements. This demands a thorough review of the conventional and modern competitive strategy, identifying both positive and negative effects of the managemental control system. Effective integration depends upon the control system that can explore the employee creativity to the maximum extent possible. The integration also supports to monitor of performance of the employees and to initiate the corrective action on short comings, if any. All these measures can be made transparent, effective and efficient by using appropriate electronic devices as well as softwares. In addition to eliminating undue man power this will help reduction of time, energy and cost. Inadequacy in infrastructure as well as capacity Proper attention in augmenting infrastructure has a favourable impact on how the cooperatives are planning and managing capacitive as well as related resources. The traditional capacity planning tools adopt a conventional approach to analyse facts and to determine capacity. Such an approach may be inadequate because these tools can build an end to end model for production/operations. It may not be suited to the present situation. Egovernance introduces new challenges in ensuring that existing workloads serve with sufficient capacity to meet to the organizational requirements. Optimum uutilisation of the available capacity can be highlighted by the management with the intention of attaining economies of the scale. Capacity planning must be required for forecasting of the trends internally and externally. Egovernance mechanism shall be able to reduce the workloads connected with forcasting and capacity planning to a considerable extent. Insufficiency of sustained funds for implementing projects The cooperative enterprises are not able to attain smooth progress on account of the inadequacy of the mechanism foe effective utilization of the available financial resources as well as in exploring the possibilities of procuring required funds. It is often noted that the cooperative enterprises are faced with adequate shortage of working capital and this affects the routine operations of these enterprises adversely. At the same time many of these organizations earmark huge funds for blocked assets. As a result, the blocked assets may be lying idle owing to the inadequacy of funds for day-to-day operations. This problem can be well sorted out by developing a financial information system with the help of electronic

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devices specially by preparing monthly/quart nightly / weekly/ daily projected cash flow statements and projected fund flow statements. This will help the enterprises to strike a balance in the unbearable cash/ fund positions. There is also an added advantage that the whole process makes things transparent and action oriented. Lack of awareness among the members, beneficiaries and other stakeholders It is a curse for the cooperative sector that the members are kept away from the operations of the organization. In fact, the owners, but unaware of their role in boosting the image of the enterprise. This causes a poor participatory role for the owners. In a developing economy like India, the success of any enterprise/ economic activity is purely on the basis of active participation of the owners as well as other stakeholders. The conventional system of providing annual financial statements like income statement , balance sheet, auditor report and directors report are not able to serve the purpose in full. In the modern world of knowledge management, the whole financial operations and other material facts related to the working of the organization should be brought to the attention of the stakeholders from time to time. In the present set up, this may not be practical on account of the laborious task and huge cost involved. But all these can be made possible by using electronic devices supported by appropriate softwares. Its high time that the cooperative enterprises go for electronic governance to tackle this issue. Conclusion Considering the importance of the cooperative sector, it is suggested that the state government provides financial and managerial support to encourage Egovernance in the cooperative sector. This will be a motivation for the cooperative enterprises to create an ideal support for long term growth in respect of procurement of raw materials and human resources, utilization of infrastructure, going for proper storage of finished goods, evolving strategies for logistic management and exploring market potential. Egovernance shall be able to give a fresh lease to the life of cooperatives as well as cooperative enterprises. Reference

Balachandran V. and chandrasekharan V, 2009 PHI, ‘ Corporate Governance and Social Responsibility.’ Amita Singh, Kapil Kapoor, Rabindranath Bhattacharyya, 2009 PHI, ‘ Governance and Poverty Reduction, Beyond the Cage of Best Practices.’ Fred. R. Kaen, 2008 PHI ‘ A Blueprint for Corporate Governance, Strategy, Accountability and the Preservation of Shareholder Value.’ Rao. V M, 2007 Abd Publisher s, ‘Egovernance’ Subhash Chandradas, 2008 PHI, ‘ Corporate Governance in India , an Evaluation.’ Jayashree Bose, ICFAI University Press, ‘Egovernance in India, Issues and Cases’ IOD, The Handbook of International Corporate Governance – a Definitive Guide.’

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RETAINING TALENTS IN THE ORGANISATION - A

GOOD HR PRACTICE (Challenges for Indian Organisations vis-s-vis Organisations Abroad)

Rajib Lochan Panigrahy

Abstract

The new age of economic there is a shift of relations in Human Capital which needs change in acquisition, utilization, development and retention not in the traditional manner but to a modern updated form of HR practices. Because, due to perfect elastic HR market, global change in HR mobility, demand of HR talent by new companies, changes of growth in organizational sectors, even talent retention become a hardship to the old, existing companies due to changing nature of the talent from one to another. And also professionalization of HR sector has made the talent retention a challenge to the HR department or Hr managers. Even in a small scarcity in Human Capital Management strategies, performance appraisal, perks and compensations, training and development, work environment, talent retention is found more acute in organizations.

Key Words: Talent retention, key personnel, Talent war, Attrition, talent, HR practices, Talent acquisition, Challenges of retaining talents, Poor mentoring, Career development, Compensation, training & development

Introduction Every organisation is made up of people, acquiring their service, developing their skill, motivating them to higher level of performance, ensuring that they continue to maintain their commitment to the organization are essential to achieving organizational objection. The organizations which is able to acquire, develop, stimulate and keep outstanding workers will be both effective and efficient one. Human resource thus creates organization and makes them to survive and prosper in the organization. So, there is a phrase of HR, "No one is indispensable". Hence, key word for any HR department are "key personnel". "talent war”, “attrition". In such situation, employee retention programmes have gained importance in today's corporate sector, IT/ITES, retail, banking and financial services in the post globalization period of competitive organizations which witness high rates of employee turnover. 1After talent acquisition and talent management, talent retention is the next most im portant issue on HR Policy. " Employee retention is of utmost importance. At the senior level, each individual brings a unique set of skills. Where talent is already rare and people with requisite skills and experience are difficult to find, retention becomes a critical component of organization building.”-says Zubeen Mody, Senior V.P., IndusInd. Retaining talent is one of the topmost priorities of employees today. The biggest challenge in Hr process is to identify the key personnel and devise ways and means to retain them. The challenge is not only to

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identify and attract them, but to retain them. Rising opportunities for career development, lifestyle decisions, job changing, unbalanced work life, poor mentoring and stress are some factors which influence on individual's decision to continue or quit, where monetary compensation, salary, perks, stock options, intangible benefits like career roadmaps, binding of employees with the organization which determine whether one will seek out greener pastures. They best bet to retain employees is to provide them the vehicle of opportunity to grow in their career. Career compression and accelerated growth is a reward for employee performance. This growth is enabled through early identification of the stream of choice for the employee equipping them through focused training and providing them enough opportunities to deliver on their acquired skills - Aditi Technologies, Kalpana Srinivas, HR Director, Aspire Systems agreed that employee needs to be shown a path of continuous growth development, recognition organizational goals are important and the road map that it is taking for the short to medium term needs to be visible. Retention effort must be a part of an organization strategic business initiative and must be carefully aligned with who, what, where, when and how for an organization. It implies that there must be a complete clarity on who needs to e retained, why they need to be retained, where their skills and expertise is to be used and when the need to be ready to share those skills and that expertise. Organizations are to look at what makes personnel happy that they lose sights of the real reason that they are in operation, they need to turn a profit. Subash Rao, Director HR, SISCO India says, "When employees are doing work which they like, with people the like, in the company they like, they are less likely to leave". Retention can not be viewed in isolation and nor is there a magic tool which ensures retention when other necessary conditions are not met, he explains, "Retention becomes a byproduct when a company is a great place to work and is rated among the best employees. Of course, having good work opportunities with learning and growth along with a competitive compensation package or pre-requisite". The company has to be a good environment, great work culture, great leadership, easily approachability of managers, are some tools of talent retention. Social relation in the company one-to-one is very important at the top level. How long you have in the organization and the top officials mean to the individual, personal rapport with the chief of company all these play a crucial role in determining an individual's length of stay with the organization. Employee retention is more challenging job of employer is the dynamic corporate world with a rush of organizations entering with lucrative opportunities and facilities. Recruitment became more costly. Without active in retention of talent, the HR model of the organization will be unsustainable. So, retention efforts must be a part of an organization’s strategic business initiatives and must carefully part of an organization’s strategic business initiative and must carefully aligned with employees in right people at right place at right time and in right manner. At IT major SISCO -India well structured employees’ retention initiatives have helped attrition rates down from 13% to 10% (as on May'2007). Aspire Systems claims that its retention initiatives have brought the attrition rate down to 3% from 8% in two years. A six

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years of their experience make learned about talent retention with cherished value system and strong desire to succeed with good atmosphere.

Need of retention Retention keeps company’s reputation. Turnover in an organization loses the reputation of a company. So, maintaining company’s reputation is otherwise to attract talented. The organization with the talents, where there is goodwill and reputation in the society.

Productivity A talented employee is productive because s/he is self motivated, self driven towards the work. He can act as a motivator to other employees in work life which increases total productivity of the organization. Causes of Employee Turnover5 Lack of training programs: Organizations should plan training programs that helpful to improve the employee competencies with current trends. Ineffective Mentoring: Another reason for leaving is lack of effect to mentoring policies. Employees get de-motivated due to lack of proper mentors. Lack of Challenging Atmosphere: Employer must provide challenging environment, that help to prove the employees. Challenging atmosphere help the employees prove their worth and bring out their skills. Lack of Autonomy: Employer maintains centralization, employees feel some in convince. Giving employees responsible positions, they work in their own style. Lack of work place relationships: In case employers failed to maintain healthy relationships among the staff members that causes for all disputes. Attractive compensation: Compensation plays an important role in motivating employees. Plans for Retention Maintaining Image: Maintain image is a better way to attract skilled employees. Identifying the talented employees, provide excellent package and challenging environment are the indicators of corporate image.

Conduct exit interviews: Organizations strictly conduct exit interviews and identity reasons for turnover. The information must be ideally used to plan good retention strategy.

Concentrate on Development: Organizations adopt new policies and technologies for development. Give freedom to new employees and build a long-term relationship.

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Employee Information: Organizations must maintain employee information; particularly new employees should be kept in mind even after the recruitment process over. This information will help in identifying their strengths and setting targets. Prerequisites for Retention

- Properly designed induction programs - Creating good work environment - Provide proper training programs - Provide suitable compensation packages - Counselling - Implementing reward strategies

Now-a-days, retaining talent is one of the most priority of an organization because the cost of employee turnover is 40 to 100% of salary of an employee considering productivity, recruitment cost, efficiency reduction by transition and time. Worker shall continue escalate. Each and every day good employees will quit their employment for better job. Here, talent is not to be attracted but to retain them by fulfilling their perks, compensation, work culture and environment, relation, organization progress and prosperity, family benefits, education and training. leaves and tours, balanced work life, change of job, less stress which influence an individual's decision to continue the job which ultimately retaining the talent. Failing which they will think of to continue or quit. Modern organizations are operating in an unprecedented, highly competitive, updated, turbulent business environment after globalization and due to this characteristics workforce is more competitive to mobile them for which talent retention is more essential, otherwise, the talented workers will switch over to other organizations. Due to such a cut throat competition, there is a need of strategic change in management techniques by putting robust mechanism for attracting and retaining top talent which becomes vital and potential for survival and growth of the company.

The new age of economic there is a shift of relations in Human Capital which needs change in acquisition, utilization, development and retention not in the traditional manner but to a modern updated form of HR practices. Because, due to perfect elastic HR market, global change in HR mobility, demand of HR talent by new companies, changes of growth in organizational sectors, even talent retention become a hardship to the old, existing companies due to changing nature of the talent from one to another. And also professionalization of HR sector has made the talent retention a challenge to the HR department or Hr managers. Even in a small scarcity in Human Capital Management strategies, performance appraisal, perks and compensations, training and development, work environment, talent retention is found more acute in organizations.

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Today there is heavy demand of HR profession. So, HR is expected to comprehend, conceptualizes, innovate, implement, sustain relevant strategies to contribute effective achievement towards organizational goals, Here, talent becoming a strategic priority for company's result organization.

"Talent is the sum of person's abilities his or her intrinsic gifts, skills, knowledge, experience, intelligence, judgment, attitude, character and derive including his/her ability to learn and grow-NcKinsey. So, "Talent management implies recognizing person's inherent skill, traits, personality and offering him a matching job". Hence, talent management will be benefited to both the employer and employee." Need of talent management towards retention - It is essential to identify, realize and to guide the untapped potentiality. - To nurture and developing the identified people having ability and potential to be part

of the organization development and retention strategy. - Talent management involves individual in organizational development with the

changing environment for creation and maintenance of a supportive talent oriented organizational culture.

- Talent management is a core deliberative approach to attract, develop and retain talent with the aptitude and ability to meet organizational needs of current and future.

- Talent management brings a series of important HR initiative. - Talent management is essential to adopt the approaches of coordinating and

organizing the people for right place to achieve organizational and individual goals. - Talent management needs implementation of practices to reward and support

employees for development of them ensuring continuous formal and informal learning and development.

Recent trend of talent management towards retention Attracting talent towards organization for retention is the challenging step of HR practices in the recent age. Finding right candidate and holding him in the organization is a challenge. As the good brand get groomed customers, a good organization get good workers. So, the organization should implement good practices to maintain their image in the society which attracts good employee branding. Employees branding therefore helps organization to attract recruit and retain employees even in talent tight market.

From the selection and recruitment process talent retention strategy is to be followed. It is find that most of the employee turnover starts from selection and recruitment process and the poor environment occurrence. Most of the employee leaves organization due to mistake during hiring process. Hence, many of the companies adopt skill training and attituditional hiring. They have realized that the development in skill and capabilities of employees takes

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attempt to change their personality and mindset. In spite of this company adopts feedback about the status of learn ability, make competitive among the workers about analytical ability, team work, leadership quality, innovative ideas, structural approach for problem solving, etc. While hiring job, organization goes through several rounds of selection which help them to realize that hiring will whether fit for the organization and have survival capacity/quality or not. Recruitment is the significant indicator or an organization which make the mindset of the hired about the image of the organization as elite one. It creates high expectations and gives positive impression which last long in the organization.

Organization should feel the workers are asset to them. Sometimes many companies can not own employees which is only on industrial relations (IR), so why the workers will not be innovative towards success, profit, growth of the organization. If there is no congenial relation in the organization workers will get desired to change it. The attrition rate of employees in organization is alarming. Thus organization should take care of good culture, relation, personnel development which will retain talent ultimately. Failing talent retention turn over leads direct expense on selection and recruitment, train them, pay over time to remaining workers (if necessary) to fill the gap of workers, lost of opportunity cost an production, reduction in potential employees and potentiality of the existing employees. Authors suggested the burden of talent cost including selection, recruitment, hiring, training, lost of productivity and others suggest one-two time of yearly pay of one who leaves is expense of the organization due to turnover. It is a continuous process, an over age amount to be kept by employer to be more investment in organization in a certain time gap on turn over cost. So, the problem of attrition continues to escalate. Now-a-days, talented professionals are increasingly mobile with high transferable skills, learning interest; well informed organizations are constantly struggling to keep sustained competitive advantage in the knowledge economy of employees.

Developments So, retaining talents is inevitable. Strategy must address employees in order to infuse confidence among them towards effective performance of management, career development, and balanced work life. Talent retention is talent continuity. The organization should treat employees as human asset, as much they keep rigor to financial assets . Hence, organization should follow appropriate talent retention strategy. So around top 20 % talents should be kept in the bent of organizational highness. For their turnover organization will loose drastically. It is called dysfunctional turnover. They are the star performers. Managing the star performance others will likely to manage to retain top talents and to retain others people will be identified and develop them as key personnel. Many organizations commit such a wrong step to omit attention towards development of general personnel, faces great loss.

Engagement and job satisfaction

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Employee should be engaged, not kept isolated. For best retention, job satisfaction, engagement, motivation towards challenges, achievements, treating them significant, predictable with the system and practice of individuals will be helpful. Task force should be continued to examine the sources of attrition. When employees engaged, satisfied on job, find adequate industrial, social, industrial individual, financial security which ultimately will be talent retention. Adequate Package World is changing, inflation continues, expenses going up, status to be maintained, salary should be increased and suitable to make the employees morale high and satisfied as self sufficient as their organization is best. But, it is mostly seen salary hike, retrenchment, voluntary retirement, abolition of posts, etc. deteriorates employee morale and shock to their mind where talent retention becomes a challenge to the organization. In last two years it is find 4 to 15% salary hikes reported in India which is high in the Government sectors, Undertakings, nationalized banks, corporations which is just opposite of corporate sectors. In spite of flexible employment with good work environment, restrictions in salary increments and growth of industry in such a slow down financial market employment opportunities reduced and the employees are in juncture to retain or not, to be retained or to be restricted by employer. Balanced work life Balanced work life plays significant consequence for employee attitude towards organizations. Employee should realize their role in helping employees before they born out. So, today the organizations introduced person(s) to look after work life management issues which reduces stress, handles grievances and inconveniences, misunderstandings, wrong mental notions, etc. It has introduced balanced work life initiatives like in-home care facilities, day-care centre, parenting workshops, work life essential information and web sites with work life balance tips. Recognition, Reward, Rejoice Always employees need recognition by performance appraisal, leading which they should be rewarded and to maintain rejoice as HRD tools. The major HR tools for talent to be maintained is recognition. Every person has their own image and goodness. They should be recognized workers. The major cause of leaving the organization is lack of involvement and poor management. To retain talent to give recognition and rewards, feedback system to be adopted and ideas for retaining talents. The organization is to arrange the opportunity for every individual working on fulfilled trips and for off-sites their employees to maintain their interest and rejuvenating them. So, some companies operating fun gallery, laughing club, etc. with Chief Fun Officer having fun filled tips. It includes performance appraisal. Career Counsellors

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It is a new effective retention tool to have career counsellors for guiding junior staffs in particular to make them aware about their attitude towards organization, behaviour towards co-workers and seniors, environmental and industrial relations, training and developments to be appeared, etc. which can retain talent. The career counsellors can find, right people for the organization and the workers can consult him for their do’s and don’ts for their career advancements. A career counsellors helps em ployees on the personal and professional front and find a balanced work life. Leisure and Reset Suffocation arises among workers on the continuous work and health hazards. Hence, they should be motivated to take rest after lunch, have a walk after dinner, relax their body some time at the working time, don’t take hardship at a stretch, go to calm and soothing atmosphere during the time of relaxation will be advised which develop the morale and physique of the workers which can retain workers. It is a modern tool of talent retention in the recent age of polluted environment. Change of Job

Change of job is a HR tool for job satisfaction of an employee. In a certain time gap, change of work place is required to keep away the employee from suffocation. Similarly, change of job, department, work place, position & designation, etc. increases the employee morale which helps employees to retain in the organization. Social Responsibility & family safety Every person has family. They have social belongings. Family deserves his/her presence, participation, contribution in certain functions, celebrations, etc. that should be availed by them by availing leave(s). Children needs schooling for which presence of earned family members to be required for admission, etc. they should be allowed tactfully. Office should be time bound. In the rest time of office, they will take care of their day-to-day home related works. Some office staff to be supported to them even in office hours for simple needs like deposit of cheque in bank, transactions in nearest bank or cooperatives, deposit of children school fees, deposit of domestic telephone, electricity bills, etc. otherwise the talent retention will be in hardship.

Talent Retention in India & Factors influencing

To quest for retaining employees is employee engagement and job satisfaction which is the degree of emotional bondage of employees to their organization and passionate about his work. The emotional engagement represents an alignment of maximum job satisfaction with maximum job contribution. Government sector is relatively low engagement level in comparison to other sectors. High tech industries like pharma, bio-tech score low engagement

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level and service sectors like retail, consumer product, FMCG score high engagement. It is found that higher experienced requires higher engagement. In gender, men are 8% more full engaged and women are less 6 % disengaged. Talent retention seek more job satisfaction at work. They need career development, opportunity and training (30%), challenging work (20%), to be best in work (19%), how much the employee requires for the organisation (26%).

In a survey9 in 2008, question of Indian workers that they will retain in the organisation, 64.54 % workers said ‘yes’. The global survey shows that 34% of employees in India are fully engaged and 13% are disengaged, 29% are almost engaged. So, talent retention in Indian organisation is not more challenging job. Hence in the modern organizations individualization of management with team spirit and one to one industrial relation which has been effective for HRM and talent retention. With regard to global figure Indian workers are more satisfied which is a significant tool for talent retention Indian industries and Indian workers serving abroad. More than one third of the employees (34%) are fully engaged while very less (13%) are disengaged. Because, employee engagement is a distinct tool leads job satisfaction with maximum worker contribution to the organisation. It has been identified in five distinct employee segments as (a)fully engaged, (b) almost engaged, (c) honeymooners and hamsters, (d) crash and burn, (e) disengaged. It is envisaged in the following tables. Heights of engagements

Workers fully engaged in the organisation going up with the participation in closure to centers decision, promoted to work at best their ability towards achievement of organisation goal. The workers are categorised into five and data revealed on the five segment of employees.

Employee Segments (%)

Employee Types

Fully Engaged

Almost Engaged

Honeymooner & Hamsters

Crash & Burn

Disengaged

Administrative/Clerical 13 11 16 22 28 Specialist/Professional 16 11 16 28 29

Team Leaders/Tech. Lead. 13 11 10 30 36 Manager/Supervisors 11 11 11 31 36

Director 9 10 12 25 44 Vice President & above 12 07 11 24 46

Gender wise Engagement

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Workers distinguished in gender where male workers are more engaged (8%) of male population and female workers are more disengaged (6%) of female population in an organisation.

Employee Segments (%) Employee Types

Fully Engaged

Almost Engaged

Honeymooner & Hamsters

Crash & Burn

Disengaged

Male Workers 36 29 12 10 12

Female Workers 28 29 14 12 18

Grand Total 34 29 13 11 13

Opportunity to develop in all level

Opportunities on career development is mostly expected by the Indian workers who are also

requesting to work in all levels of engagements. Offering challenging work would build

engagement with the ‘newly wed and hamsters’. It also helps to sustain engagement level of

those who are already fully engaged.

Employee Segments (%) Employee Types

Fully Engaged

Almost Engaged

Honeymooner & Hamsters

Crash & Burn

Disengaged

Career Dev. & Training 26.25 27.45 28.67 32.06 31.13 More challenging work 15.63 18.82 20.33 16.98 24.75 Opportunity to do best 20.31 19.22 18.00 19.18 19.61 Own work preference & career goal

10.31 12.94 11.67 11.57 9.19

Clarity on organisation needs me to do & why

13.13 8.63 9.67 6.88 5.27

Cooperation in co-workers 4.63 5.88 4.00 4.69 3.55 How the works done 5.00 3.14 3.67 4.10 4.04 Better relationship with Manager

3.75 3.92 4.00 4.54 2.45

Grand total 100.00 100.00 100.00 100.00 100.00 Remaining with employer

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Workers surveyed that they wish to stay with the employer throughout the year, more workers

agreed to say, others probably to stay and no way to go, so desires to stay (negligible

4.76%).as data revealed below

Employee Segments (%) Employee Types

Fully Engaged

Almost Engaged

Honeymooner & Hamsters

Crash & Burn

Disengaged

Indian Context

No way 17.81 9.02 3.00 1.02 2.08

Probably stay 49.06 49.02 29.67 28.84 16.79

Definitely stay 33.13 41.96 67.33 70.13 81.13

Global context of Non-Indians

No way 21.89 11.71 5.57 3.33 0.81

Probably stay 48.51 50.78 39.51 31.02 14.79

Definitely stay 29.60 37.52 54.92 65.65 84.41 Factors influencing Retention Challenges of retaining talents has some factors influencing as HRM objective as

Development opportunity & training, More challenging work, More opportunities to do best,

Regular feed back on employee’s work, Transparency on work performance & career goal,

Clarity on what organisation need me, Better communication with Manager, More resources,

Better Relation with co-workers, More say on how my work done, Coach or Mentor other

than Manager. These are the core factors influencing HR retention as data revealed below.

Employee seek more Challenging Assignments While survey of Indian workers, they are more satisfactory on opportunity development and

training, more challenging work and how s/he can do best. It is more important factor of

demand on Indian worker in global market. It has been depicted below.

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Factors Influencing

Region

Career Development Opportunity & Training

more challenging work

More opportunities to do best

Transparency on work performance & career goal

Clarity on what organisation need me to do and why

Better Relation with co-workers

More say on how my work done

Better Relation with Manager

India 30.03 20.09 19.33 10.74 7.71 4.47 4.04 3.58

Employees’ Contribution towards Organisation: Opportunity developments and training moves employees towards goal orientation. Quality

relationship with manager is also a significant tool not for retaining talents but to be with the

organisation to give notable contribution to the organisation. It is the workers participation

towards organizational goal, it will definitely retain workers. So, quality of relationship of

manager with workers will retain workers and achievement of organisational goal will be

easiest otherwise there will be a hindrance to it.

Factors Influencing

Region

Career Development Opportunity & Training

Regular feed back about how I am doing

Clarity about what the organisation need to do & why

Better communication with Manager

More resources

Better relation with co-workers

Coach/ mentor other than Manager

India 26.28 25.32 21.74 7.41 7.25 7.25 4.76

Global 20.35 20.34 18.54 6.77 17.78 4.81 11.41

Clarity influencing performance More clarity required on career opportunities & training, why I am required to the organisation & how, regular feedback how I am doing, etc. will be required to make workers towards more performance. One can shift the clarity towards greater clarity in regular feedback method towards personal and organizational goals.

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Employee Segment (%) Factors Influencing

Dis-engagement

Crash & Burn

Newlyweds & Hamsters

Almost Engaged

Fully Engaged

Grand Total

Career Development Opportunity & Training

24.69 27.84 24.67 27.23 26.23 26.28

Regulat, Specific Feedback on how I am working

14.69 15.29 21.33 29.28 30.76 25.32

Clarity about what the organisation needs me

31.88 23.92 26.67 18.01 18.38 21.74

Better communication with Manager

7.50 9.02 8.00 6.30 7.60 7.41

Better relation with co-workers

9.06 7.45 5.67 8.05 6.37 7.25

More Resources 5.31 9.80 6.67 6.73 7.84 7.25 Coach/Mentor except Manager

6.88 6.67 7.00 4.39 2.82 4.76

Grand Total 100.00 100.00 100.00 100.00 100.00 100.00 Suggestions Now-a-days, in the globalisation and privatisation world every organization striving towards excellence. Excellence in terms of production, productivity, reducing labour cost, enriching quality, organizational effectiveness, prioritizing customer satisfaction have become the focus. In the fast paced globally business scenario, efforts to heighten productivity never ends. And in order to attain all, talent resources are essential. To retain these key resources in organizations, some tentative suggestions are given as follows:

- Recruitment method should not be restricted to one type rather it should be

opened for different types as per the requirement of the job. And utmost care must e taken for attracting talents.

- Fresher and young talents should be provided opportunities despite which their innovativeness will remain unutilized.

- To overcome attitudinal problems, behavioural traits should be emphasized more than technical competencies.

- Employment branding strategies should be stressed more. It will make the talent acquisition job easier.

- potentiality of talents. - Compensation package, job payment should be flexile. Regular conduct of

performance and potential appraisal, educating the employees about the pros

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and cons of various talent management assessment tools; should be emphasized.

- Enhance the feedback mechanism which helps employees to learn and overcome their pitfalls.

- HRD mechanism should be strengthened to develop talents for the current and future job/s.

- Equal importance should be given to all stages in talent management. recognition, attraction, selection, segmentation, development, and transition of talents; all activities should be handled with great care.

- National apex body should be formed to restrict talent attrition by enacting legal measures.

- Relation between co-workers and Managers should be good. It depends on the industrial environment in the organisation.

- Worker should be treated as asset. They should feel their requirement to the organisation towards achieving personal and organisational goals.

- Career counsellors to be present as independent body other than organisational works. Workers can counsel about their career.

- Entertainment, rejoice, performance appraisal, library and literary activities, sports & games, clubs & seminar halls, audio-visual hall/cultural house, awards & prizes, appreciations, personal work assistance, etc. should be available in the organisation premises for the mental development of the workers.

Conclusion No organisation can succeed without its man at work which is Human Assets or Human Resources. Success of an organization depends upon its Human Resources. Due to dynamics nature of Human Resources, retaining talent becomes more challenging. More particularly, retention of the talent became most critical area of concern in the globalised world because of every organisation competing others attracting talents with more attractive perks and opportunities. Talents are the future leaders. For betterment of the organization proper conglomeration of organizational requirements and the expectations of the human resources are to be strategically planned and implemented. Talents(HR) can save the organisation in any short of problems. They can drive forward in any condition of the workplace and in any condition of the organisation, if they are properly motivated, working with good environment and cooperation with co-workers. The relation with the workers and Manager should be positive, close and good. It is imperative for the firms to provide congenial and friendly environment for retaining and developing talents. Development of talent is the ultimate development of Organisation.

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References

Purakayastha, Banasree, Talent retention is the name of the game, Financial Express, supplement of Indian Express, Sat 26 May‘ 2007, http://www.financialexpress.com Dealing with Change and Change Management, , http://www.impactfactory.com Coaching and Mentoring, http://www.impactfactory.com Talent retention is the name of the game, http://www.addthis.com/bookmark.php N.viswanadham, Talent Retention -Human Asset - A valuable Asset, www.indianmba.com K.Aswathappa, Human Resource Development, 5th Edition, 2008, The McGraw-Hill Companies, Panigrahy,R.L., Human Resource Development & Labour Welfare, Discovery Publishing House, New Delhi (2001) Panigrahy, R.L., Education & Training for HRD in Indian Economy and Industry, Consequences of Demographic Transition in India (ed), Discovery Publishing House, New Delhi, 2006 HR special survey, Business World, 5 May’2008 or log on www.hranexi.com Express Computer (Weekly), Management Pages, Indian Express (Mumbai) Ltd.

Do you use work teams in your business? Two are better than one because they have a good return for their labor (Ecclesiaster 4:9) Business people talk about a lot about teamwork, but when problems arise at work, the temptation is often to try to solve it themselves. The advantage of work teams is that they bring together individuals with different skills, experience, and knowledge, resulting in a well-rounded effort. As long as team members are willing to work well together and maintain a positive attitude, the output produced by a team will almost always exceed the sum of the individual parts. The key is cooperation. Start by selecting team members who are experts in their respective disciplines and are able to get along. Establish clear goals and expectations, including deadlines and quality standards. Help team members see how their contributions fit with the big picture. Work through differences in style and communication, and keep everyone focused on the ultimate goal. Then watch as your team works together to strengthen your business. He who trusts in his own heart is a fool, but he who walks wisely will be delivered. (Proverb 28:26)

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