METHODS FOR BUSINESS RESEARCH (MANZOOR ALI MBA-20)

Business research methods

Validity: It measures what it aims to measureReliability: It implies the truth of the methodology which allows it to be repeated again and again by the some researcher or different researcher but result will remain same.Deduction: AssumptionInduction: Orientation

Introduction to MBR (Research Methodology)

1. Research Methods: Pure-Applied research2. Data collection: Sampling, Tools, Scaling -----Questionnaire (Structured,

non-structured), observation, interviews, telephone interviews3. Data analysis: Qualitative Data (statistics, descriptive, inferenant) 4. Report writing: Inscription 5. Hypothesis: Hypothesis is one of the possible solutions to a problem.

Two types of hypothesis are Descriptive hypothesis (satisfaction describe) and casual hypothesis. The hypothesis which just describes the situation or solution of the problem is called descriptive hypothesis while the hypothesis which shows that one variable is caused by other variable is called causal hypothesis.

RESEARCHResearch is a spiral work; never ending process goes on and on. Natural sciences: Hard sciences, total control on the variables of researcher e.g H2 + O = H20.Social sciences: Soft sciences, not under the control of researcher e.g Supply------demand, all the factors constant.Social sciences divide into business study-------non-business study

Research methodology: four pillars of research methodology Research, Data collection, Data analysis, Interpretation/report writing(i) Measurement (ii) scales(iii) tools of data collection(iv) questionnaire(v) interviews(vi) observation(vii) statistical techniques -------test of hypothesis(viii) report writing

Research Design: There are seven perspectives of research, through which we can view a given study.

(a) Crystallization of the problem (structure)

Exploratory ----- Pure Research Formalized ----- Applied Research All structured Well structural Don’t have objectives have objectives Hypothesis is designed test the hypothesis

(b)On the topical scope

Depth Breadth Case study Statistical study One or few samples studied Many stratified samples in

one time at different times

(c) Research Environment

Actual environment Artificial environment Field study Laboratory Study Social sciences Natural sciences

(d)On time dimension

Once More than one time Cross-sectional study longitudinal study Stratified samples at one time same samples at different

times

(e) Communication model of data collection

Monitoring Interrogative Observational study mail Participate- non participate telephone Face to face Questionnaire: structured Interviews non structured

(f) Researcher’s control in variables

Variables are controlled Variables are not controlled by the researcher by researcher Experimental study Ex-post facto study Natural science study Social science study

(g)Nature of relationship between variables

Descriptive Causal

Who, what, when, WhyWhere, how much

MEASUREMENT

Measuring and weighting tools/instrumentsMeasuring and weighting tools are used for collecting data, surveying the variables and finally finding the reality. Finding the information related with the research Extract and classify the data Analyze the data

Social science data scale Standardized Reliability Researcher mode Minimum 7 to 10 questions = .07

SAMPLINGSample collection mostly collect from the population

Characteristics Time Money Energy Quality

Population: All the potential respondents for a particular quality of research parameters.Sample: A proportion taken from the population of the potential respondents for a particular research.

In statistics, quantities of measured qualities related to one sample are called “Indicators”

In statistics, quantities of measured qualities related to the whole of population is called “Parameters”

Statistics infer the estimate of the parameters of the population based on the indication of the sample.

Methods of sample collection

Probability Sampling-Non probability Sampling Probability is possibility of occurring from events providing equal chance

of selection to all samples available in a population Non-probability, not equal chance of selection of samples available in the

population

Probability varies Simple random probability Stratified sampling

Cluster sampling

Non-probability varies Quota sampling Accidental sampling Selective sampling Case study sampling

SECONDARY SOURCES OF DATA

DATA: Collection of raw facts and figures Information: Processed data

(a) Primary type: (data collected by researcher for his research) (b)Secondary type: (data collected by others for some other purpose) (c)Tertiary type: (data collected through same procedure of secondary)

SOURCES (a) Internal: Data collected by the department for their own use, e.g

reports, periodicals, magazines etc. (b) External: Data is collected by the government and non-government

organization for general use e.g economic survey, beaurue of statistics, Pakistan statistical survey, reports of state bank of Pakistan, newspapers etc.

Why use secondary data

Advantages (i) Speedy information (ii) Different sources are available (iii) Economical (iv) Less energy is used(v) Less time is consumed (vi) Legal status

Disadvantages (i) This is not collected for your research, therefore has less direct relation with your research(ii) Time period is different (iii) Biased ness of the organizations

Classification(a) Statistical Data: Numerical /Quantitative Data (b) Non- Statistical Data: Non- Numerical/Qualitative Data

Statistical Data (a) Integers (whole numbers 1,2,3,4,5,6,7,8,9,10)(b)Real numbers (Decimals, Fractions 1.2, 2.3,1/2)

DESIGN OF THE SURVEY INSTRUMENTS Primary sources (monitoring, interrogation)

Interrogation: Survey for collecting primary data, through interviews, questionnaires is is called interrogation, a survey instrument.

How to conduct survey Communication mode (a) (personal i-e face to face) (b) (impersonal i-e questionnaire through post or net) (c) (mixed i-e some portions filled personally while some impersonally e.g

telephone survey)

Design of instruments(a) (interviews, questionnaires, telephone)(b) (structured / non-structured) Disguise of the objectives of the study(a) (Disclose the objectives of the study)(b) (Do not disclose the objectives of the study)

SCALING The prime aim of scaling is to convert qualitative data into quantitative data. It includes four types:

Nominal: Describe the existence or property of sampling Ordinal: Describe the order and existence of the property of variable Ratio: Describe the properties of all other scale and properties of original

variable Interval: Describe the properties of previous scale and distance

OBSERVATION Observation describes as watching, listening, reading etc. observation used for behavioral and non- behavioral activities.

Non-behavioral activities are:(a)Record analysis (written, audio, video records used from private or

public organizations for their use to response)(b)Physical condition analysis (observer or researcher’s observation

analyzed the environment)(c)Physical process analysis (researcher observe the physical activities

process carried out at the particular place)

Behavioral activities are:(a) Non-verbal analysis (body movement, face expression, exchange

glances)(b)Linguistic analysis (researcher observe through language or words for

the satisfaction/dissatisfaction of the behaviors)

(c) Extra linguistic analysis (researcher observe the way of using language or words for the satisfaction/dissatisfaction of the behaviors)

(d)Spatial analysis (researcher observe the physical existence of the behavior of the respondent with the surroundings e.g friends, teachers, colleagues etc)

DATA ANALYSIS

(a) Data preparation Editing: Editing is a process of detecting errors and omissions from the

data. It is divided into two categories. (i) Field Editing: Where researcher edits data at the time of data collection.(ii) Central Editing: Here data is edited when preparing it for analysis.

Coding: Coding means assigning numerals to the responses/answers, so that they can be grouped into certain categories, it is divided into four groups i-e appropriate research, exhatedness (completeness), mutual exclusive (single option) and single dimension.

Tabulation: Tabulation is process of presenting data in a compact (solid) manner, it includes hand written, mechanical device and electronically/computer base. (Contingency table) is a table where data is presented on two or more characteristics.

Presentation: The data presented through diagrams and graphs.

(b) Data Analysis: Data analyzed which is in numerical form through statistical techniques. It includes: (i) Descriptive Analysis: Descriptive analysis is a largely the study of the distribution of one variable which is known, (also called one dimensional analysis) provides data for measuring the state or condition at a particular time, e.g average work performance of male and female. (ii) Causal Analysis: In this analysis one variable is affecting or is responsible for the changes on the second variable, e.g satisfaction increase performance. (iii) Co-relational Analysis: In this analysis we study how two variables will co-vary with each other, co-variables may be direct or indirect e.g income increasing savings (direct), expenses decrease savings (indirect).

(c) Interpretation: Also called report writing, it includes (i) Informational (short reports): These are based on facts and figures without any analysis, conclusion, methodology etc, also called informal reports.(ii) Research (long reports): These reports are prepared on findings, research methodology, conclusion, and recommendation etc, also called formal reports. Long reports are divided into two categories:

Technical reports: These reports are prepared for researcher, these include source of data collection, research design, sampling design, data gathering instruments and data analysis methods.

Popular reports: These reports design for non-technical persons (general public), these are less concerned with the methodology and are only concern with results.

Research Report FormatThere are three arrangements are typically found for the formation of reports:

Logical: It includes, Introduction ---- Purpose of study ---- Methodology ---- Limitation ---- Findings ---- Conclusion ---- Recommendation.

Psychological: It includes, Introduction ---- Conclusion and recommendation ---- Methodology ---- Findings.

Chronological: Here organization of report is only on time dimension.

Report Outlay

Prefatory Pages Title Page: Title of the report ---- The date ---- For whom prepared ---- By

whom prepared Letter of authorization Table of contents, charts, diagrams etc Synopsis

Body of the research report Introduction: Purpose ---- Problem definition ---- Hypothesis ---- Limitation

---- Scope Findings Summary and conclusion Recommendation

Appended Section Appendices Bibliography

Writing the report There should be four headings = standards Major topic headings Sub-major topic headings Sub-sub-major topic headings Minor-sub headings

FINANCIAL MANAGEMENT (MANZOOR ALI MBA-20)

INTRODUCTION

Financial Management is process of decision making concerned with planning, acquiring, and utilizing funds in a way firm will achieve its desirable goals.

FUNCTIONS OF FINANCIAL MANAGEMENT

Financial Analysis and PlanningAcquisition of fundsUtilization of funds

1. It involve of examine of firms financial position and determine the necessary action which are needed currently. Board of directors monitor and modify the firm’s current actions.

2. Acquisition of fund is involved in determining of best financial mix. The mix concern with various sources of finance that may be internal and external. Most appropriate mix of finance will be based on term or time period of the finance.

3. It concern with investing of money or funds in such a proper assets form (expenditure assets, capital assets).

GOALS OF FIRM OR COMPANY REGARDING THE FINANCE

1. Maximize the wealth of stockholder The stakeholder wealth depends on both dividends as well as on market price of the share, in actual meaning of maximize wealth is market price of share.

2. Maximize the profit of the firmMaximize the profit means the increase the net income of the firm by providing sale volume and credit policy which emphasis the management, to make proper structure of sales department and its activity, on other hand credit must be controlled by the limit of standard. Profit maximization is the ability of management skills, so increase will not contributed towards share holder but it will distributed among the employees as bonus, reward, benefits etc.

ROLE OF FINANCIAL MANAGER/ BUSINESS ORGANIZATION AND TAXES

Types of Business1. Sole Proprietorship 2. Partnership3. Corporation/Company

TAXES:Tax Reform act 1986-1996 (Pakistan)1. Flat or Fix Tax for company at 34% more than 15,000/= to 50,000/=

2. Marginal Tax rate (Alternative minimum tax)

50,000/= to 75,000 (25%)75,001/= to 100,000 (24%)100,000/= to 335,000 (29%)335,001/= to 700,000 (30%)700,001/= to 1,000,000 (34%)

A company has liable income for the year 105,000Taxable income = 105,000Tax rate = flat tax rateTax amount =? = 105,000 x 34%= 105,000 x 34 100= 105,000 x .34 = 35700 Ans.

5,855,00

50000 25000 25000 235,000 700,000 15% 25% 24% 29% 30%

= 50,000x15% + 25,000x25% + 25,000x24% + 335,000x29% + 250,500%30

= 7,500+6,250+6,000+6,350+75,150 = 163,050

Tax and organization Flat tax rateMarginal tax rate

A company has 319,000/= net income for the year which is titled for tax period, what is the marginal tax amount?

319,000

50,000 25,000 25,000 235,000 15% 25% 24% 29%

TaxEffective Tax Rate (ETR)Alternative minimum tax (AMT)

ETR = Tax Amount

AMT= Taxable Income

= 163050 585500= 0.278X100 = 27.8%

TIME VALUE OF MONEY

ANNUITY Stream of payment, the determination of future value involved equal payments and receipts in regular basis, time period is called annuity, sometime called fix annuity, and it has two types:

Ordinary Annuity: ordinary annuity is one which is occur at the end of each time period in terms of receipt and payment sometime called differed. This annuity gives a concept of payment which can be claimed against the income of future time period.(FVOA = A X (FVIFA i, n) future value ordinary annuity

Due Annuity: in which receipt and payments are made at the beginning of each time period is called due annuity. Concept of this annuity gives the opportunity to invest amount as an additional source.(FVDA = AX (FVIFA i, n) (1+i)

O.A 1_____2_____3_____4_____5 _____ . _____._____.______.

D.A 1_____2_____3_____4_____5 ._____ . _____._____.______.

Q. Company decides to invest for 3 laks for next five year with the interest payment 9%. Find the installment of total deposit at the end as well as at the beginning of the year.

FVOA = Ax (FVIFA i.n) = 300,000 (FVIFA 9%, 5) = 300,000(5.9847) = 1,795,410

FODA = 300,000(5.9847) (1+9%) = 1,795,410x (1.09) = 1956996.90

Effective interest rateEffective interest rate is technique to identify normal interest rate on a amount that is deserved for that particular time period, it may also called annual percentage rate.

EIR or APR = [1+i ]m -1 m = [1+9%] 2 -1 2 = [1+0.09] 2 -1 2 = [1+0.45] 2 -1 = [1.045] 2 -1 = 1.0920-1 = 0.0920x100 = 9.20%

SINKING FUND-LOAN AMORTIZATION

The sinking fund, the amount which gives concept of annuity, depositing on each year with lump sum amount of future, this arrangement is called sinking fund. It may involve in future annuity design for payments of future or retirement annuity.

FVOA = Ax (FVIFAi,n)FVOA =A(FVIFAi,n)

Loan Amortization is the series of equal installment over a life of loan, which includes both interest payment and actual re-payment which is called principle amount i-e mortgage or automobile loan.

PVOA = Ax (PVIFAi,n)PVOA = A(PVIFAi,n)

VALUATION

Valuation is process of estimation, the worth of assets mostly concern with real assets and fixed assets i-e plants, equipments, investment, bonds, shares etc. financial managers are concerned with the concept of time value of money as well as evaluation for their decisions and operations.

Types of Valuation

(1) Going Concern: A method used by the firm to focus on ability of generating future income by the interaction of goods sold and cash flow rather than concern with balance sheet assets. This type of valuation is important in terms of acquiring any company etc.

(2) Liquidity: It is the ability of firm to realize amount by selling assets after paying liability to face upcoming challenges

(3) Market Value: It is the price of assets in the market for the process of selling; it is the value which may be higher or lower than actual assets value. Commonly it is lower than original value depending on usage of assets, sometime it is higher than actual value.

(4) Book Value: Book value is also known as accounting value, recorded in books. It is value shown in balance sheet and reflects not actual or current value; it may misguide the user by its un upto date nature.

(5) Capitalization: Current value of real assets, it is the value which is expected by the investors as their weight of return. Investors are assumed to have accurate market price of stock by their own effort sometime called efficient market analyzer.

VALUE MODEL RISK ASSUMPTIONS(1) The model assumes to be measure at single point that may be time

factor rather than profitability.(2) Model may assume various risks associate with cash flow which reflect

investors required rate of return.

BOND VALUATIONInterest rate, principle amount, maturity, interest amount/time period

Bond Prize relationship Premium bond Discount bond Par/face bond

Coupon Rate Coupon rate is an interest rate which is set at the time of issuing of bond

If the current market value is equal to coupon rate, the bond is selling at par value.

If the current market rate of interest rate is more than coupon rate , the bond is set to be discounted bond.

If the current market interest rate is less than coupon rate, the bond is set to e sell at premium bond.

Q. A company has 10% coupon rate for a bond of 1000, interest paid annually for ten years maturity, the required rate of interest is 8%

Po = I_____ + M____ kd = interest rate (1 +kd) (1 + kd) n

Po = ? ___ + 1000 (1+8%) (1+ 8%) n

I = M x coupon rate

= 1000 x 10% = 1000 x .10 = 100

Po = 100 + 1000 (1+ 8%) (1+8%) 10 = 100 + 1000 1.08 (1+ 0.08) 10

Po = 100 + 1000 1.08 2.15 = 92.59 + 465.11 = 557.70 I = (PVIFA kd,n ) + M (PVIF kd,n ) = 100 (PVIFA 8% , 10 ) + 1000 (PVIF 8%, 10 ) = 100 (6.7%) + 1000 (0.4632) = 671 + 463.2 = 1134.2

YTM (Yield to maturity)YTM yield to maturity also called required rate of interest varies as: Coupon Rate Investor’s required rate of return

YTM = I + (m – P o ) / n (m +Po) /2

A company issue bond for 18 years with the par value of 1000/= carrying 12% coupon rate with present value 1165/= interest paid annually. Find out the approximate yield maturity.

YTM = m x coupon rate = 1000 x 12% = 1000 x .12 = 120

YTM = 120 + (1000 – 1165) /18 (1000 + 1165) /2 = 120 + (165) /18 (2165) /2 = 110.83 1082.5YTM = 0.1024 x 100 = 10.24%

Valuation of shares/stock

Common shares: common shares are those which do have definite or dividend amount, it does not have fix life time, but have advantage of easy transfer level.

Preferred shares: preferred shares have fix dividend amount also have fix time but can not transfer share, having one type of capitalizing, i-e no growth.

Proffered share = P 0 = D p or P0 = D p (1+ Kp) n Kp

A company issue preferred stock with the dividend of 6.99 at 12% interest rate, what will be the price of preferred stock

P0 = 6.99 12% = 6.99 0.12 = 58.25

A company offer dividend of 7.66 with the current price 75.25, find out the required rate of interest.

P0 = D p = P0 = 75.25 Kp Dp = 7.66 Kp =? (10.17)Kp = D P = 7.66 Kp 75.25 = 0.1017x 100 = 10.17

Common stock types/categories

(1)Zero growth divided (2)Constant growth dividend(3)Super-normal growth dividend

Zero growth Po = Ds KsConstant Po = Ds Ks – gSuper-normal Po = Ds (1+g) Ks – g

A company offers 2.00 dividends with the interest 15% return assuming have a growth rate of 5%. Find out the price of common stock

Po = Po = 2.00 = 2.00 = 20/= constantDs = 2.00 .15 -0.5 .10 Ks = 15% = 0.15G = 5% = 0.05 Po = 2.00 (1 +.05) .15 – 0.5

Po = 2.00 (1.05) = 2.1 = 21/= super-normal .10 .10 Po = 2.00 = 13.33/= zero growth .15

AFS (ANALYSIS OF FINANCIAL STATEMENT)

AFS (Analysis of financial statement) Balance Sheet Income StatementIt is a judgmental process, where we investigate by the study of firms’ financial performance, activities and projects. It is a technique which involved interpretation of firm’s financial statement and financial related data. There are many users who need these analytical results such as creditors, suppliers, banks, government departments, management, owner, board of directors etc.

There are two basic tools for analyzing financial statements:(1)Ratio Analysis(2) Common size statement

Limitations of financial analysis Financial statements deals only in numerical data Differences in operating and accounting practices Appropriate industry comparison does not exit Industry average may be follow standard Management may influence on the ratio by taking short-term parameters Inflation may have direct influence on ratio Financial ratios may be misinterpret Several definition exit for similar ratio

Balance SheetBalance sheet is a snap-shot of the financial records of the firms which provide us at the end of the financial year. Balance sheet has two parts, one contains assets and other contains claims against the assets. Assets are two types: Current Assets: Cash, account receivable, inventory, pre-paid insurance

etc Fixed Assets: Land, building etc

Income StatementIncome statement summarizes expenses and revenues over the period of time, the differences between revenues and expenses represent the firm profit and loss.

Balance Sheet

Assets Liabilities Equity

Cash 2500 Ac/Payable 7200 Common Stock 14600 Ac/Recie: 16000 Note/Payable 5500 Retain earning 16500Inventory 3000 salaries/pay 3900 capital 37500Pre-paid ins 10000 long tem liab 27000 Marketable 9900 _________________________________________Securities + 43600 + 68600Land 28700 = 112200Ac/dep 10%Building 31600Ac/dep 10%_______________+ 112200

Income Statement Net sales 166,000Cost of goods sold 90,000 _______Gross profit 76,000

Operating expenses Salaries 5000Assets 8000Dep 1100 _________ 14100 76,000 - 14100 __________EBIT 61,900

Interest expensesBank interest 550Other loan 3,600 _______ 4,150

61,900 - 4,150 ________EBT 57,750 Tax expenses (34%) 10,100 _________ Net income 47,650

TYPES OF RATIO 1. Liquidity Ratio: It measure company’s ability to meet liabilities, it will

provide us basic information regarding company’s net working capital. It will be measured by current and quick ratio:

Current ratio = current assts = 42000 = 2.50 times Current Liabilities 16600

Quick ratio = current assts- (inventory + prepaid assts) = 42000 – (3000+10000) Current liabilities 16600

= 42000 – 13000 = 29000 = 1.74 16600 16600

2. Assts base management ratio: This type of ratio tells us how efficiently a firm or a company manage its assets for the given time period. It also compares the activities of management at each level regarding manufacturing, collection of loans, purchasing of fixed assts.

a. Account receivable turn over = net sale = 166,000 A/c rec: 16,000

b. Average collection period = days = 365 = 35.180 = 36 days

A/c rec: turnover 10.375 c. Inventory turn over = cost of goods sold = 90,000 = 30

times

Inventories 3,000

d. Fixed assts turn over = net sale = 166,600 = 2.36 times

Net fixed assets 70,200

3. Debt management Ratio (Leverage ratio) it shows the extent to which firm use liability or debt for investment and it also shows the ability to meet firm’s interest charges and other fixed payments. If percentage of debt management financing is increasing, the firm becomes more leverage and more chances to solvent. The risk factor associate with finance becomes higher. There are two basic types of debt base management:

(a)Leverage Ratio(b)Coverage Ratio One is related with equity base finance and debt base financing, while other is concerned with interest charges.

(a) Debt Ratio = total liabilities = 43600 = 0.38x100 = 38% total assets 112200

(b) Debt equity Ratio = total liabilities = 43600 = 0.635x100 = 63.5% stock holder equity 68,600

(c) Time interest earned Ratio = EBIT = 61900 = 14.91 approximately 15% Interest expense

4. Profitability Ratio: Profitability Ratio is the combine effort of management decisions, market reputation, consumer satisfaction and the use of accounting formats. It is measuring the power of firm regarding earning income.

(a) Gross profit margin = gross profit = 76000 = 0.45x100 = 45% Net sale 166,000

(b) Operating profit margin = EBIT = 61900 = 0.37X100 = 37% Net sale 166,000

(c) Net profit margin = net income = 47,650 = 0.28x100 = 28% Net sale 166,000

(d) Return on investment = net income = 47,650 = 0.42x100 = 42% Total assets 112,200

5. Marketable Ratio: Marketable Ratio provide base for the investor’s investment decisions and long term planning for management. It provides basic information about market value regarding stocks.

(a) Earning per share = net income – preferred stock dividend = 47650 - 0 = 3.26 Common stock/common share 14600

(b) Price ratio (earning ratio) = current market price of share = 35 = 10.7 times Earning per share 3.26

(c) Dividend per share = total amount of share = 14600 = 21% Number of shares 695

COMMON SIZE STATEMENT Vertical: It expresses individual financial statement i-e balance sheet and

income statement of each accounting item in % base. This method of analysis interprets the financial position between companies and over the time period.

Horizontal: In terms of income statement for common size each item of income statement will divide with net income and % will multiply by 100. in terms of balance sheet each item will divide by total assets and the % will multiply by 100.

Example Income Statement Common size

Net sale 77000Sale return 1000

net sale 77000x100 = 100% 77000sale return 1000x100 = 1.29% 77000total sale 76000x100 = 98.70% 77000cost of goods sold 45000x100 = 58.44% 77000gross profit 31000x100 = 40.25% 77000expensesutility 5000x100 = 6.49% 77000

Total sale 76000Cost of goods sold - 45000

Gross profit 31000Expenses Utility 5000Bill 2000Salaries 3000 Tax 3000

Total expenses 13000

Gross profit 31000Total expenses -13000

Net income 18000

bill 2000x100 = 2.59% 77000salaries 3000x100 = 3.89% 77000tax 3000x100 = 3.89% 77000total expense 13000x100 = 16.88% 77000net income 18000x100 = 23.37% 77000

Balance Sheet Common size

AssetsCash 7000Account receivable 21000Bank account 20000Land 200000Machinery 150000

Assets Cash 7000x100 = 1.75% 398000accounts receivable 21000x100 = 5.27% 398000bank account 20000x100 = 5.02% 398000land 200000x100 = 50.25% 398000machinery 150000x100 =37.68% 398000total assets 398000x100 = 100% 398000note payable 18000x100 = 4.5% 398000accounts payable 10000x100 = 2.51% 398000bank loans 150000x100=

Total assets 398000

Liabilities Note payable 18000Accounts payable 10000Bank loans 150000Total liabilities 178000

Equity

Capital 220000

37.68% 398000capital 220000x100 = 55.27% 398000total liabilities + capital 398000x100 = 100% 398000

Total liability and equity 398000

RISK AND RETURN Risk is defines as the variability of any asset future value or future return

from investor’s point of view, uncertainty of actual return which is expected is called risk.

Probability is defines as % of chances that an event can occur or not, risk is typically considered from probability of losses and gaining. Probability can be associate with probability distribution, it may be in two terms:

(i) Objective/subjective probability distribution: objective can be measure and subjective can be define. The event which base on measurement is called objective while probability based on opinion/idea is called subjective. (ii) Discrete/continuous probability distribution: discrete defines as arrangement of probabilities associate with any value that is assumed to be limited or finite is called discrete probability distribution. The arrangement of probability associate with any value that is assumed infinite is called continuous probability distribution.

TYPES OF RISK (i) Systematic RiskSystematic risk is also called market risk, that can’t be removed by some sort of diversification, it affects market as whole. Systematic risk includes inflation, interest rate, fiscal or monitoring policies, business cycle etc.

(ii) Un-systematic Risk Un-systematic risk is also called company risk; it affects the factors of individual firm/industry. It can be diversifies from one company to other, it includes company management, strikes, marketing strategies, financial leverage etc.

EXPECTED VALUE OR EXPECTED RETURN Expected value is the average of all possible values or returns of an investment along with probability factor represented through r.

r = p r n=o p = for probability r = return n = total number of possible outcomes

Probability Project A return Project B return 0.2

0.6

0.2

800

1000

1200

200 1000

1800

3000 3000

Solution: Project A

r = p A r A = (0.2) (800) + (0.6) (1000) + (0.2) (1200) = 160 + 600 + 240 = 1000

Project B

r= p B r B = (0.2) (200) + (0.6) (1000) + (0.2) (1800) = 40 + 600 + 360 = 1000

STANDARD DEVIATION It is statistical measurement of variability regarding probability distribution for its expected value. It represent as , it is appropriate for risk measuring in terms of symmetrical distribution of minor probability distribution.

Project A

= p (r – r)2

= (0.2) (800 – 1000)2 + (0.6) (1000 – 1000)2 + (0.2) (1200 – 1000)2

= (0.2) (-200)2 + (0.6) (0)2 + (0.2) (200)2

= (0.2) (40000) + (0.6) (0) + (0.2) (40000)

= 8000+ 0+ 8000 = 16000 = 126.49

Project B

= p (r – r )2

= (0.2) (200 – 1000)2 + (0.6) (1000 – 1000)2 + (0.2) (1800 – 1000)2

= (0.2) (-800)2 + (0.6) (0)2 + (0.2) (800)2

= (0.2) (128000) + (0.6) (0) + (0.2) (128000)

= 128000+ 0+ 128000 = 256000 = 505.96

CAPITAL BUDGETING TECHNIQUESCapital Budgeting Techniques are done under un-certainties which will help investors in advance about future values of all the decisions which a firm or individual going to take. These techniques include the flow of decision making on two major categories(a) Unsophisticated: unsophisticated budgeting technique may do not

consider more important but an asset selection process, they give idea of time value and cost of capital, it include:

(i) ARR (accounting rate of return) it includes annual rate------ estimate life ------ target

Invest Annual rateEstimate life Target

1200020005 years 25%

ARR = average annual income = 2000 = 0.166x100 = 16.6% Net investment 12000

(ii) Pay back

Pay back = net investment = 12000 = 6 years Net cash in flow 2000

Q.1 Total Investment = 10000Year Cash Flow Cumulative Net Cash in flow 12345

20003000400050007000

2000500090001400021000

PB = 3+1000 5000 = 3+0.2 = 3.2 years or 3 years 2 months

Q.2 you have invested 200,000 for 5 years and cash flow is Year Cash Flow Cumulative Net Cash in flow 12345

50000500005000075000100,000

50000100,000150,000225,000325,000

PB = 3+50000 75000 = 3+0.67 = 3.67 years or 3 years 6 months and 7 days

(b)Sophisticated Sophisticated techniques considered financial factors for taking any project/investment. It depends on cash discounted flow techniques.

NPV (Net Present Value): NPV technique is sum of present value of the project net cash flow, subtracts its net investment.

Q.1 Total Investment = 10000Year Cash flow PVIFA (i, n)(16%, 5) PV1-5 2000 3.274 6548

PV-Investment = 6548 – 12000 = - 5452

Year Cash flow PVIFA (i, n)(16%, 5) PV12345

20003000400050007000

0.8620.7430.6400.5520.476

17242229256027603332

12605PV-Investment = 12605 – 1000 = 2605 NPV

Profitability IndexIt is the ratio of sum of present value, in terms of benefit ratio or cost ratio. It will be accepted if the value equal to 1.

PI = sum of present value = 12605 = 1.26 Net investment 10000IRR (INTERNAL RATE OF RETURN)IRR is a discount rate that is present in % percentage express the cost of capital and financial decisions. IRR is acceptable when it is greater than firm’s cost of capital.

PVIFA = net investment = 10,000 = 0.47 (i ,n) net cash flow 21,000

PVIFA = net investment = 40,000 = 3.076 (i, n) net cash flow 13,000

Mutual Risk factors/functions

Project have different expected lives Project have substitute investment size Project have different timing of cash flow Discount cash flow technique have different re-investment rate

Risk estimations Risk estimation is the process of determining the degree of risk associate with capital investment: Sensitive analysis: This is the process of change of one or more variable

elements of project to check that how sensitive is your project return? It enables investors to identify the relevant questions of what, if. The decision maker investigates the each variable carefully to identify the ability of each factor.

Simulation analysis: It is based on statistical information, which required probability of inputs such as revenue and cost, material and calculations. The process is repeated many times unless the probability of distribution. It helps to improve decision making, commonly require some equipments i-e computer applications (computer and some soft wares).

Bita estimation (capital assets price model):It is an approach to measure capital budgeting systematic risk of project, for this we use capital asset price model.

Cash ManagementIt is process of managing firm’s liquid assets which concern to cash and those assets which easily convertible to cash. Sequence wise cash is most liquid asset and inventory is the less liquid asset, marketable securities which are on short time period investment, they also have liquid asset in nature. All the firms manage risk return trade for, thus, they excessive cash balances, inadequate balances. Four reasons for maintaining Liquid assets (cash) Transactional balances Compensating balances Unexpected cash balances Speculative balances

FloatingFloating is a process of collection management and dispersement represent by cheques, out standings and in process, major types are: Negative floating: Also called collection float, it contains three parts;

mail float, processing float and clearing time float. Positive floating: Also called Accelerate collection, speed up the time of

payment receipts without incurred any excessive cost.

Changing customer behavior

Deposit direct cheques (open- online cheques) or slow disperment.

Financial markets and institutionsFinancial market is mechanism which facilitates investors bought, sold and exchange financial assets while financial accountings are claimed against the future income of the issuer. Financial management serves for corporate sector for financing asset growth, provide re-sale market and test the value of financial assets.

Types Money market (decentralized) Capital market (centralized) Treasury bills negotiation Federal agency issues Negotiable depositary bills

Investment bankerIt is financial expert body which acts as a agent between buyer and seller of new security issues. It is not a banker who invests or who take a borrow investment. It just performs services for debt and equity securities. It performs:

Under-writing proposal agent Advisor-concile Considerable expert

MANAGEMENT INFORMATION SYSTEM (MANZOOR ALI MBA- 20)

INTRODUCTION

The basic form of MIS contain three elements1. Management2. Information3. System

In management we are concerned with level of management functions, skills or role of management. Level of management: 1. Top or strategic management2. Middle or tactical management3. Lower or operative management

Functions of management: planning, organizing, leading, controlling, staffing; Financial function, information service function, manufacturing function, marketing function.

Management roles and skills: Interpersonal communication skills (leading, communication), informational skills (distributor, monitor, spoke person), decisional skills (entrepreneur, resource allocator, negotiator).

In Information, facts and figures are data, while organized facts and figures is called information.

Types of Data1. Numerical (decimal)2. Text (character, image, string form)

Behavior of DataCharacteristic of DataForms of Data/Nature of Data

PROCESS OF MISData --------- MIS ----------Information ------------User ProcessFlow --------- MIS ----------Flow ---------------------User Process ----------DecisionMIS = Code ------- Instruction -----------Guideline

A system which convert data from internal and external sources into information which communicate information in appropriate shape to the managers at all level for the functions they are performing with timely and effective decisions in regard of planning, controlling, organizing and directing the activities in a systematic manner is called flow of data for MIS process.

PROBLEMS WITH MIS1. Lack of management involvement in designing MIS2. Narrow and inappropriate emphasis of computer system3. Lack of management knowledge about the computer4. Poor appreciation by management for information specialist5. Lack of top support in terms of finance6. Lack of management coordination with the technological factors

REQUIREMENTS OF MISIn terms of requirement of MIS, knowledge for the basic department as well as task is necessary to learn for reacting, motivating and performing task or events with the capabilities of human nature.

KNOWLEDGE REQUIREMENTS OF MIS

GSC = General System ConceptImplemented in both reductionist and holiotic approach

DIC = Data, Information and communicationEmphasis on how data converted into information to communicate with application of each data. Here the data collection is also communicating a lot in communication.

IIT = Influence of Information TechnologyGenerally system is implemented with current technology with the provision of enhancement and adjustment such data processing, user requirement office support with upgration of technology which is rapidly changed in all

corner of MIS. The inefficient method of data operating may cause a big effect on MIS development.

OSP = Organizational structure and processFormal and informal may be centralized; decentralized, head office branch process may be social, behavioral and scientific.

CM = Controlling MechanismControl principles (Annually- semi annual – quarter)Current feedback (response at the spot) Forward feedbackControl mechanism is based on how the firm responds to any issue on matter of information regarding any activity or task by a fixed mechanism that is current feedback or forward feedback.

In current feedback at the spot activities are handled like shortage of material, resources, and any particular staff.In forward feedback control mechanism is established for the future plan like budgeting, appraisal reporting etc.

PDM = Planning and decision makingThe planning and decision making is called is the primary management function which is related at each level of management. MIS person recognize the nature of each planning and research on, effect on the decision making. Sometimes decisions are short term or long term like salaries. To create valuable information on the basis of which decisions are taken that may effective and efficient planning.

MFL = Management functions and levelsManagement hierarchy chart: lower (operational), middle (Technical) and top (strategic, conceptual). Specialist MIS need to know the total hierarchy of management and basic functions, when each level have the same functions but their dealing with functions is different in sense of their functions and results, some are based on some other level functions.

DATA, INFORMATION AND COMMUNICATION

Data is a fact event, any transaction that is recorded in a row shape which does not give any sense or any useable way. When data is processed in useful way according to the need of user is called information.

Characteristic of Information

1. By source = Internal and external sources2. By Nature = Qualitative and quantitative, formal and informal3. By level = Strategic, Technical or operational4. By time = Historical, current or future5. By frequency = Yearly, quarterly, monthly, daily or hourly6. By form = Written, visual or sound7. By existence = Interval, occasional or on demand8. By type = Detailed, summarized, aggregate or abstract

Functions of Information

It reduced uncertainty, uncertainty exists where there is imperfect or less perfect knowledge is available for any particular plan and its results. Information removes all imperfectness relevantly to planning and decisions. It help in monitoring and controlling, providing the perfect information make you able to analyze the events or tasks in a given mechanism such as rules, standards, limitations etc. It communicates information circulated between departments and establishes a link managers need to know the activities of each department in order to response them or establish their strategy. Each information is inter-connected with the information of other department.It helps in simplification by the help of information one can easily understand the situation or issue and prepare himself for current or immediate action. It becomes your guider, arbitrator.Memory supplementary, having historical information about the results of past transactions, events, performance, decision available for you can help to memorize and act as a supplement of current.

Characteristics of good information or dataRelevant, Accurate, Complete, Confidence, Timely, Understandable, Communicatable, Right level, Right person and channel of communicationFace to face communication includes interviews, formal meetings, addresses, speeches, training, and discussions.Written communication includes reports, emails, booklets, notice boards, fax, magazines or newspapers and manuals.Visual communication includes slides, video, graphics, posters and charts.Oral communication includes phone calls, direct speeches.Electronic communication includes television, internet, emails and mobile phones.

SYSTEM (Open system = close system) Input -------- process ---------- output

Transformation processEnvironment systemEnvironment consists on many components which influence directly or indirectly to internal system whether the system is closed or opened. Each element of environment attempt to change your transactional way or procedure act their own level some of them are controllable while some are adoptable.System can be dynamic, determinate, self organized, informational and flexible to make changes, easy accesses to technology, rapid respond mode

Characteristics of systemThe system approach and decision makingJohn Dewey 1910- gave a series of system approach which coordinate with decision making series start with

1. Preparation effort, definition effort, solution effort and each series contain steps which is overall called system approach steps. Preparation effort is one where company is going to provide an orientation of problem, which may be due to internal factor or may be external. This orientation contain problem, type whether structure or unstructured.

2. Approach series contain identifying the problem with its solution available to the environment. It contains understanding of problem and certain sequences of sub-system.

3. Solution effort involved identifies alternatives, their effects on the problem, their implementation and follow-up insured that problem will not rise again. This series contain analyze approach for select the best. One effort can support other, similarly one support/effort destroy other. So avoid such type of problem we use (JAD) Joint Application Design.

MIS MODELS A model is an abstract of something that may be process, entity, object, any activity, event which represent all its components.

Types of ModelThere are four types of modelPhysical Model: A 3-dimentional model for representing its entity or object with reference to business world where scale or measurement is more important. Physical model cannot replace by any other model, as it gives real sense to the managers.

Narrative Model: Managers use spoken and written words to express the object. Narrative model is used for those readers or listeners who belong to that field. The words are not commonly used for common persons, they have professional links with experts i-e Engineering and Medical fields are different.

Graphical Model: This type of model is commonly used for business class as well as for general public where some lines, shapes; symbols can

represent the entity or object. This type of model is using certain colors to represent the actual vision or level of the entity. The graphical model can also be used by some curves with two axes.

Mathematical Model: This model can be represent by any formula, equation which have some inputs, to find out the missing elements value, each formula have a result, on the basis of that result we draw a relationship among the parts of entity. This type of model used to determine a specific result which maintains the complexity of business system.

Application or use of models: All he models are trying to facilitate understanding/communicating in addition to predictive capabilities and skills. A model is easy to understand by the relationship of its procedures, methods and time. Models can be communicated the actual problem and its results. Managers decision making skills can take help from these models to express the logic of their decisions. Models can also predict the future out puts on the basis of previous history by which managers can able to control their activity in order to achieve desired targets or goals.

System Model: Physical/ Conceptual system model, physical system represents environment and its components present in the environment which are available for the system i-e material, machine, money, manpower. On the other hand system operations, processing, loops are represent by conceptual system where system express mechanism of performing activities. Both system models contribute information in four dimension i-e Relevancy, completeness, timeliness and accuracy.

DATABASE MANAGEMENT

A data is a sub-set of information resources where firms insure that data resources are accurately represent their goals/targets/results for this managerial use traditional from of data use hierarchy i-e File---------record---------data element, starting from down to top each level helping the other level to proceed. Data element is one lowest unit of data, record consist of all data elements relative to particular object or event or entity. File is the way to organize all records in a way of collection or gathering related subjects.

Data Management activity

(i) Data Collection: Data is collected from available source and put into the system. Available source may primary or secondary, data put into the system by two methods Ascending or Descending and randomly.

(ii) Integrity and verification: Data is examined by the link of its fields or data is matched with the field name, on the basis of this we also verify the data in terms of rule and standards, in technical words constraints.

(iii) Storage: Storage is some sort of medium used by data management in terms of magnetic disc, manual file, magnetic tape etc.

(iv) Maintenance: New data can be edit, previous can be changed or even remove from the file and make a new availability of file.

(v) Security: Data is more important for managers so that must be safeguard to prevent using of data by unauthorized person by the action of misuse, damage etc.

(vi) Organization: Data is arranged in a systematic order according to the need of user.

(vii) Retrieval: To check or to view the data this is already available for user’s usage.

SDLC (SYSTEM DEVELOPMENT LIFE CYCLE)

Storage systemSequential: We are concerned with the organized data on consistent data which follow other by some sort of link. This data is useable when the data is inserting with a concept of linking or change. It gives the benefit having the knowledge about data previous as well as upcoming with the little effort.Sequential has main advantage regarding allocation of addresses, can easily jump over a particular record in ascending or descending order, on the other side Sequential file misused the space when it deletes any record, the space will not reallocated until create a new file.

Direct Accessed: Direct access is way to organize data without any sequence format so that our hard ware can easily use proper mechanism for space allocation and several other technologies such as random access, individual existence and backward, forward searching. In direct accesses there is not any address node but hashing sigma is there. Hashing consist of index number which will continue to the limit of 45.

Relationship between storage processingThere are two types of processing which will lead other transactions like real time processing and offline processing and transactional processing.

(1) Batch Processing: Batch processing or team or group is tool which is used to store a data by a process of bunch. The main advantage is that is coordination between data elements. It will give you a chance to regenerate existence data in a particular time period; it checks all the basic requirements before data is stored.

(2) Online Processing: Online processing is one which takes place with the concept of present or current requirements. It is technology which is used

when both ends of records are currently linked. This type of processing gives a prompt answer or result. Time saving is an advantage as well as campaign of equal parameters.

(3) Off Time Processing: Off time processing is give concept of processing of data without any confirmation at the spot as well as no delay in at the time of execution. It is beneficial for those transactions which need confirmation from data base rather tan from server.

(4) Transaction Processing: Transaction processing is one where user enters data one by one for confirmation and each stage transaction is checked and verified. Any one stage can occur this verification will unauthorized of whole transaction, the benefit of it is user can check the real fact for un-authorization.

(5) Real Time Processing: It is used for combination of computer system, it controls the physical system of computer, I required computer system to response quickly to the status of physical configuration. It consists terminals, registers, components which are required executing any software, application on a system where it processed. It gives conceptual resources, a license to verify your data and its applications.

Data Base Structure:

Explicit: Contains index and fields which may arrangement of multiple files. It is one level of record is related to multiple records with subsidiary of parent child record and contains hierarchy of structure. It is logical integrity of data files.

Implicit: It introduced in 1970 by C.J. Date and E.F. Code in IBM Company developed a concept which established relationship records which are not recorded in a single file, they need rational structure. By the help of this relationship it is easy for users to maintain small file which can easily maintain along with the relationship of same record. In relational file key element must be present to interact.

DATA DICTIONARY SYSTEMData dictionary is an existence of your data on your system containing data modules, packages and data ad software. It may have some data descriptions that is sigma containing data elements, data alias, data types, data integrity rules, decimal positions if contain. Data dictionary also contains DDL (Data Description Language) that include queries, data manipulation, data events etc.

DBA (Database administrator)Data base administrator is a person who is specialist in data related operations. The specialist who performs four basic operations: Data base planning Data base implementation

Data base operations Data base securityData base administrator also called data base managers in many firms.

KDD (Knowledge discovery in data base)Knowledge discovery in data base is a gate way through which we come to know data storage system and complex data queries. A computer maintains our data in a knowledgeable way so that we can aware of its use. It contains data warehouse, data mart and data mining. Data Warehouse: is a reformation of database formation with its

available resources and all those necessary processing which may give a pure form of normal database with an artificial intelligence process. For this it is use a technique called cluster which arrange the data into the users required form. It manages the data in ascending or descending order regarding on user’s key operations.

Data Mart: is a database that contains segments of data with more fixed or constant approach like HR department containing employee’s information.

Data Mining: it is the process of finding relationship in the data that is unknown for users.

DATABASE ADVANTAGES(1) Reduce data redundancy with the help of database, the chances of data

duplicate will be reduced or removed, as it will ensure you when such data occurs.

(2) Data independence the specification of data is maintained in sigma rather than in application form, changes may be occurring in its structure, query and definition.

(3) Integrity from multiple files when files are constructed separately a logical link has to be created by the help of database.

(4) Security improvement with the help of many constants, passwords, data interruption, data access mode etc.

DISADVANTAGES (1) Expensive in terms of maintaining database(2) Hardware configuration (3) Expensive in terms database designing

SDLC (system development life cycle)SDLC is framework that describes activities which are performing at each level of software development. System development life cycle is technique which is used in computer base system to develop a system needed to operate according to the user desire and environmental changes. SDLC contain a cycle which is follow the steps and each step is contain some people involvement such as programmer, DBA, MIS steering people, project leader, analyst etc.SDLC is based on some approaches or any single approach

(1) Waterfall approach: easy to understand, provide structure to inexperience staff, it gives some basic requirement that going to be stable arrange. It gives us good control over activities and it gives quality for costing and schedule.

(2) V-shape approach: validity as well verification, deliverable must be testable, easy to use, system requires high reliability, upfront, analysis phase.

(3) Structured evolutionary prototyping model/approach: developers build during requirement phase, evaluated by end user, user must be satisfied. Physically visible, a more accurate end product, steady, flexible design and development, use at requirement clarification stage.

SDLC is a process of evaluating, implementing of computer based system along its all sub-systems which contain a series of tasks, which are closely follow the approaches such as water fall approach which refer to most systems designing process, some approaches such as V-Shape, structured evaluatory prototype model, rapid application development RAD, CASE computer adult software engineering, incremental model, spiral model. Each system life cycle contains a several phases, the tem manager, project leader; MIS steering committee members are responsible for each phase. SDLC contains following phases:

Planning PhaseSDLC Planning phase identifies the responsibilities of MIS steering committee, managers and system analysts along with the support of database administrator and network specialist, it contains eight steps:

(1) Recognize the problem: Actual problem is responsibility of managers so that target point can be achieved.

(2) Define the problem: Managers with analysts define the causes and reasons of the problem. They identified where, when, why and how questions to be answered.

(3) Set the objectives (system objectives): Firm have both short-term as well as long-term objectives to be achieved which give you satisfaction against the system risk. Objectives may qualitative or quantitative.

(4) Identify system constraints: The system may be operating under some imposed or general constraints. The imposed constraints are un-controllable such as government policies, taxes, international trade policy, and technology requirements. General constraints are controllable by management by time schedule, work load, targets etc.

(5) Conduct physibility report: Physibility study is the brief look of your system, factors which influence the performance and weight to achieve goals. The study of system varies in six dimensions: (1) Technical (2) economical return (3) non-economical return (4) legal and ethical issues (5) operational study (6) schedule study.

(6) Prepare system study proposal: It is called to be a detailed study proposal which contain operational as well as conceptual facts and figures awareness.

(7) Approve/disapprove study: The managers and steering committee check advantages and disadvantages of system study where they give

answers of two questions (1) how we complete our objectives (2) from where we start to study our system?

(8) Establish control mechanism: It is the main responsibility of steering committee to establish those parameters by which a system can be controlled according to the amount of time required. Here the approach may be person-month, where each person will be taken as one worker of one task for one month and so on. Calendar-project, the entire calendar months are treated as representation of average financial year for the result of current project. Besides, many other approaches can also be implemented, such as RAD, CASE, and Gantt chart.

Reasons for planning: (1) Organization may do not contain any computerized system.(2) The firm may have system but it is out of technology. (3) The firm may have system but it is not having capacity to take care

current operations.Benefits of planning phase(1) It will define the scope of your system(2) It recognize the areas which may have introduced some problems(3) Planning arranges sequence of tasks(4) It will provide you the control mechanism such as:

Pre-set control: It is called control in advance Back-up control: It is called those which take place after the activities,

mostly done on out put/results. Concern/current control: It is called to be parallel control take place

during the activities.

Analyze Phase Analyze phase containing the study of existing system and its problems. In this phase analysts perform major role along with mangers concern. It contains following steps: (1) Announce system study: In this step formal information is given to the

employees to make cooperation with study team along this they are welcome for any suggestion or problem discussion.

(2) Organize the project team: In this step relevant experts are assigned their duties according to the system’s requirement. Sometimes company does not allow interfering external person to examine their system. So analysts check the availability of concerned persons within the company.

(3) Define information needed: In this step particular information is collected from employees by face to face interviews, collective observations, research and survey. All the information is written down in a project dictionary.

(4) Define system performance criteria: The analysts required particular performance outputs for the manager and users. To operate the system with its full advantages some pre-training can be given to the employees to get the standard performance.

(5) Prepare design proposal: After studying system, analyst provide opportunity to managers to design a face where practical decisions can be taken.

(6) Approve/disapprove proposal: The managers can approve/disapprove the proposal.

Design PhaseSystem design phase contain determination of processes and hardware requirements of a new system. It specified the types of equipments required for new system. It contains following steps:

(1) Prepare detail design of a new system: Analyst is going to create structure designing with the help of DFD (data flow diagrams) and data dictionary.

(2) Identify alternative system configuration: It identify the sequence of processes and indicate the last task to be complete. By the combination of different available equipments and a reasonable excuse for not using the current equipment.

(3) Execute alternative system configuration: Analyst working managers closely on each alternative to check the output suitable for design criteria. Each alternative has its advantages and disadvantages.

(4) Select the best configuration: By testing each alternative analyst recommended the best configuration which will result according to the standard from the available choices or alternatives. The best configuration should enable the system to meet its basing objectives according to the requirement.

(5) Prepare implementation proposal: The implementation proposal contains list of works to be done, benefits of the task along with the cost for approval.

Implementation Phase Implementation phase is the acquisition and integration of physical and conceptual resources can put the system into working condition. Contain following steps:

(1) Plan the implementation: In this step analyst is going to take necessary decision regarding the good knowledge of new system and its development.

(2) Announce the implementation: In this step required employees’ cooperation in terms of time and using new system.

(3) Obtain hardware/software resources: In these steps system is required some software and hardware resources through which supplier are provided RFP (request for proposal). It contains a list of that software and hardware which can required on the time schedule. The supplier is supposed to provide all list items of RFP according to the schedule. All the hardware is checked along with their components.

(4) Prepare Database: DBA database administrator is responsible for creating all database requirements clear to the analyst with all manipulation that is takes place on data. DBA can suggest the required database to the analyst.

(5) Prepare physical facilities: According to the need of system sometimes it is necessary to re-model or re-construct the available space

for new system which may be have some problems such as security measures, room temperature, fire alarm, hardware access etc.

(6) Train the participants: New system may contain some new or advanced technologies which are not similar by the users, so to operate the new system basic training is provided to the users. It depends on firm policy to train all the employees or only key personals.

(7) Approve/disapprove the implementation: The proposal may approve or disapproved.

Cut-over Phase Cut over is a technique which is adopt by the firm to stop using old system and to start using new system, in other words switching from old to new system by adopting any one technique of cut-over. It includes:

(1) Pilot: Pilot approach also called trial approach where we implement a small unit of the system on a trial in a single department, if that experiment is successful then further sub-systems will be implementing, this approach is more secure but time consuming.

(2) Phased: This system is used with one part of new system along with old system. This approach can be applied to any one operation of the whole company. This system is applied on most large scale company.

(3) Immediate: This system is simplest approach for cut-over from old system into new system in a single target date. This system is only implemented in single or small company on a small level with the advantage of time.

(4) Parallel: This system is applied fully along with the old system, all the system will be monitored with both approaches, new and old one. An old system will maintained until the new system will fully applied and experience. This approach gives 0% chance of failure; it is most expensive but the most secure system. Mostly financial organizations used this approach.

Used Phase(1) Use the system: Use the system means operate the system meat its

objectives for which it is design. (2) Audit the system: audit is post implementation review where we study

that the result of each operation is whether equal to or not with planning. It can be conduct monthly/quarterly/semi-annual or annual.

(3) Maintain the system: While managers and end users use the system, modifications are made so that system will provide required support according to the need. Maintenance can be performed in three ways. It includes correct errors, keep system current, improve the system

(4) Prepare re-engineering proposals: MIS steering committee made proposals with the help of memo or report which describe the weakness of the system.

RAD (RAPID APPLICATION DEVELOPMENT)Rapid application development RAD, A methodology with the objective of speedy response for the user as well as for the administrator, programmer is used technically. The founder of this technique is James Martin who refers

this technique towards SDLC. Martin used the term information strategy planning ISP and BAA (Business area analysis) together in RAD. It consists of four initial components:

(i) Management: Management specially gives good response this technique by their early adaptor decision plans; provide a work environment that is easy to adjust.

(ii) People: People are those resources which recognize SWOT (strength, weakness, opportunity, threat) of your organization. These are people who convert this SWOT into SWAT (Skills with advanced tools). The team requires planning, designing, review and cut over.

(iii) Standard: Standard requires those rules, guidelines through which one can achieve its objectives. In RAD standard plays major roles in all fields and phases.

(iv) Tools: RAD consists mainly fourth generation language tools, for example CASE (Computer adult software engineering) facilities, prototyping and CODE generation queries. The natural language dictionary (NLD)

PROTOTYPING Prototyping provides developers and users an idea about the system performance and its functions. In short it is a demo or sample of actual task which may be extended whenever needed. There are two types of prototyping

(i) Type (I) prototype Steps involved: Identify user need Develop a prototype Determine if prototype is accept Use the prototype

(ii) Type (II) prototype

Steps involved: Identify user need Develop a prototype Determine if prototype is accept CODE operational system Test operational system Determine operational system is accepted Use operational system

Ethical Implementation of Information Technology Ethics is driven from Greek word ethos means suit of guidelines, believes, standards and ideas. James Moore is the first person who defined Information Technology ethics system. He analyzed nature and social impact of computer

technology and formulated some policies for ethical use of technology that technology may be legal impact, logical methodology transformation factors, invisibility factors such as calculation, values, prompting etc. He with the help of other scientists namely Thomas J. Winston and John Peterson who were in IBM Company designed some ethical codes in 1947 and made some professional societies:

ACM (Associate computing machinery) DPMA (Data processing management association) ICCP (Institute for certified computer professionals) ITAA (Information technology association of America)

Social Rights and computers Right to computer access Right to computer skills Right to computer specialties Right to computer decision making Right to information i-e PAPA (Right to privacy, right to accuracy, right to

property and right to access)

Need of Ethical Culture

Establish corporate code: Behavior of CEO/top management linkage with firm’s basic ethical culture, each relationship of this model defines how executives achieve their main functionality along with the ethical perspective of the business. The purpose of corporate code is to inform every employee about the firm’s strategies, so that communication process will take place in an ethical environment. Establish ethics program: Ethical program consist of multiple activities which give direction to carry out corporate code. Each activity is having a close audit so that the impact of each activity is derived from the organization as well as for individual person. Establish ethics code (model or steps): With the combination with ethical as well as corporate code one firm can achieve its basic ethical environment, that the firm and its employees are expected to follow their elements which can make them model for other firms/competitors.

COMPUTER USE IN INFORMATION TECHNOLOGY

Information Resources: The first effect of computer is to adopt database for information storage, for this following information resources we have:

(a) Computer Hardware (b) Computer Software (c) User (d) Information

(e) Specialist (f) Facilities (g) Database structure etcThese all are valuable resources, manager use information to achieve his basic objectives i-e speed, accuracy, reliability, relevancy etc. the person who manage information resources may be called CIO (Chief Information Officer) along with committee. The managers are experts in their relevant fields; each one is coordinating with other to make a strategic planning for information resources.

Strategic Planning (information resources): The basic task of this strategy is to create link between organization strategy and MIS strategy.

MIS Strategy Organization Strategy

System Objective System constraints System design strategy

Mission of organization Objectives of the organization Attributes of the organization Culture/structure of the

organization

End user have computer an issue its level for computer literacy, there are four categories based on computer capability: (a) Menu level (b) Command level (c) Program level (d) Functional support level

Risk of end user computing Poorly designed and documents system Loss of data integrity Loss of security Poorly objectives of system appeal

Information Resource Management (IRM)It is concept where all the managers at all level identify, accrue and manage the information according to their needs in order to perform these functions. The firm has effective approach which includes following conditions:

Formal strategic plan for information resource Strategy for stimulating end user facilities Re-consignation with information services Consideration of firm’s information resources when engaging an strategic

planning Competitive advantage with superior information resources

DSS (Decision Support System)When concept of problem solving occurred DSS provide information regarding problem and communication capability. Information may specific, periodic and mathematical type while communication may be use by the user to interact with that system. In short DSS is not replacing the managers but it enhances the relationship between managers and system capabilities to solve the problem.

DSS Objectives Assist the managers in making decisions to solve some structure problem. Support the managers’ judgments rather than try to replace them. Manager’s decision making could be efficient DSS makes it effective.

SIMON’S DSSProfessor Herbert Simon, Mellon University Noble Prize Winner in Management Sciences, identified that decisions are accrued on account of programmed and non-programmed decisions. Decisions which are programmed are repeated and routine to extend of definite procedures every time they occurred. Decision which are unusual consequently and which have novel, they used cut and died method are called non-programmed decisions. Simon gave four phases for DSS activities: 1. Intelligence Activity: Look for environment, checking the conditions

which suit the situation. 2. Design Activity: Possible causes of actions which are developed and

analyzed. 3. Choice Activity (Selection): Availabilities of alternatives.4. Review Activity: Assist the past situations.

ALTER’S DSSProfessor Alter Steven in 1976 built a research on Anthony Michael as well as Scot Martin’s frame work. Alter conducted 56 researches and conclude that there are six types of steps which give the degree to solve the problem.

1. Retrieve information elements 2. Analyze entire files 3. Prepare report from multiple files

4. Estimate decision consequence 5. Propose decision 6. Make decision (take action or implementation) The study gives two reasons: (a) Support the concept of system designing approach(b) It need to have some database

DSS MODEL In 1971 Scot Martin and Anthony Michael design a frame work of computer applications towards management decision making, this model is based on three elements:

1. Strategic Planning 2. Management Control3. Operational Control

In terms of problem hierarchy they rank structured to semi-structured to un-structured problems, each rank has horizontal link with the model. The model contains three sub-systems (i) mathematical mode (ii) report writing software(iii) Group ware

GDSS (Group Decision Support System) A computer based system with support group of people who are involved in group task as a common goal and provide them interface to share the resources. The group DSS includes CSCW (computer supported cooperative works), EMS (electronic meeting system) and CCWS (computerized collaborative work system), the name of this setting is called group ware.

Advantages of GDSS Improve communication Less time or proper time utilization Evaluate more alternatives Develop local area decision network Report definition database Easy implementation of strategy Give orientation sessions

Virtual OfficeIn 1960 IBM express the concept of office activities in a centralized processing system. It is till 1964 when the concept was launched to the users/market with the name of office automation. The starting applications of office automation were based on type writer. Later on introduce formal/informal electronic system which communicates people inside/outside firms.The capabilities automation link with people electronically open the new era of performance/standards where everyone can link with each other for their formal task where ever they are located, the name given this capability is virtual office, which suggests that the work is done virtually from any geographical location as long as work is link with more than one firm communicated with each other electronically. 1970 the era is called teleprocessing and telecommunication.The concept is accepted by the employees and firms but it is not fully implemented, most popular application of virtual office was introduced in 1995 which covered more than 60% of US work force.

Advantages

Reduce facility cost: In large organizations the facilities such as office cabinet, chair and tables, office premises etc. are required for making possible transactions for per day which cost in terms of rent and expansion.

Reduce equipment cost: Rather than providing equipments to each employee LAN facilities to share the resources from any geographical location i-e printer, server, hard disc etc.

Formal communication network: Information must be provided specific pattern for all employees to give them more attention rather than information is observed as traditional office setting.

Reduce work stoppage: When there is any weather circumstances strike, land sliding the work should not be stopped, everyone can do his/her work from the place he/she is.

Social contribution: The firm employee gives opportunity to all the persons like hand-cap, female and those who have young children can work at home by expressing their views, ideas, and capabilities with the help of virtual office.

Disadvantages

Sense of not belonging: Personal interaction reduced employees don’t come daily at work place; do not have direct contacts with colleagues and office environment, so the part of importance is loosed.

Fear of jobless: Since employees are working independently the modern work with the help of computer, they may be the victims of electronically lay off.

Low morale: The employee needs appreciation from his superiors face to face, it is not only the salary which satisfies inner needs of employee but employee needs physical contact with superiors to watch their expression on work.

Family tension: The family tension like sickness, children, neighborhood increase informal/miscommunication between task responsibilities.

Strategies/recommendation for virtual office

Arrange forwarding meetings Utilize conference calls Schedule regular meetings Follow the work routine Provide information access resources

Office Automation application Word processing ------ voice mail ----- electronic mail ----- electronic calendar ----- audio conferences ------ video/computer conferences ----- video text ----- fax ----- images ----- desktop applications. KNOWLEDGE BASED SYSTEM (KBS JHON MCCATHY)

Artificial Intelligence The activity of providing such machine or equipment with embedded with computer having ability to display behavior with regarding intelligence, which is commonly present in human being. It is currently applied in business sector in the form of knowledge basic and expert system; they are overlapping which are basic benefits of Artificial intelligence.Neural networks, learning, natural language processing, prospective system, robotics, artificial intelligence hardware.

Knowledge based systemIt contains facts, figures about problem area and describe the techniques how to gather logical information. The technique term use for this problem-domin (problem server – dictionary), it is based on four things:

User interface: It enables managers or human being to input information, instructions which will guide the processing and information is received from it based on certain variables.

Knowledge base: Popular knowledge based system represents use of rules which are per-set, does not have any physical link but make a logical relationship with evidence and conclusions.

Inference engine: It is engine, a portion of your system that performs its activities in knowledge base sequence where time conditions, actions are fixed as rule. There are main methods of inference engine: Forward reasoning or forward chaining and Backward or reverse reasoning.

Development engine: The fourth major component of system is development engine, it consists of shells which are ready- made processor for specific problem domin. It creates language and facilities for the system.

Expert System

In 1980, the expert system was developed widely with help of Professor Venkat from Boston University and Yong Kim Professor from University of China; they first use expert system for two activities: Credit limit and inventory review Handle errors or exceptional on daily base

AdvantagesConsider more alternatives, apply higher level of logic, make more easy or available decisions, develop time for result of the decisions or analyzed more, better ability to solve problem and get objectives, to maintain overall control.

DisadvantagesManagers may not be able to select best alternatives, technology may be out of fashion, and firm may have changed its focus for change.

Components of MIS

Executive information system Accounting information system Human resource information system Financial information system Manufacturing information system Marketing information system Resource allocator information system

INDUSTRIAL RELATIONS (MANZOOR ALI MBA-20)

Introduction to Industrial RelationsIndustrial relations has become one of the most delicate and complex problems of modern industrial society. Industrial progress is impossible without cooperation of labors and harmonious relationships. Therefore, it is in the interest of all to create and maintain good relations between employees (labor) and employers (management).

Concept of Industrial Relations:The term ‘Industrial Relations’ comprises of two terms: ‘Industry’ and ‘Relations’. “Industry” refers to “any productive activity in which an individual (or a group of individuals) is (are) engaged”. By “relations” we mean “the relationships that exist within the industry between the employer and his workmen.”

The term industrial relations explain the relationship between employees and management which stem directly or indirectly from union-employer

relationship.

Industrial relations are the relationships between employees and employers within the organizational settings. The field of industrial relations looks at the relationship between management and workers, particularly groups of workers represented by a union. Industrial relations are basically the interactions between employers, employees and the government, and the institutions and associations through which such interactions are mediated.

The term industrial relations have a broad as well as a narrow outlook. Originally, industrial relations were broadly defined to include the relationships and interactions between employers and employees. From this perspective, industrial relations cover all aspects of the employment relationship, including human resource management, employee relations, and union-management (or labor) relations. Now its meaning has become more specific and restricted. Accordingly, industrial relations pertains to the study and practice of collective bargaining, trade unionism, and labor-management relations, while human resource management is a separate, largely distinct field that deals with nonunion employment relationships and the personnel practices and policies of employers.

The relationships which arise at and out of the workplace generally include the relationships between individual workers, the relationships between workers and their employer, the relationships between employers, the relationships employers and workers have with the organizations formed to promote their respective interests, and the relations between those organizations, at all levels. Industrial relations also includes the processes through which these relationships are expressed (such as, collective bargaining, workers’ participation in decision-making, and grievance and dispute settlement), and the management of conflict between employers, workers and trade unions, when it arises.

GLOSSARY OF INDUSTRIAL RELATIONS

RELATED TERMSFor better understanding of industrial relations, various terms need to be defined here:

Industry:Industrial Disputes Act 1947 defines an industry as any systematic activity carried on by co-operation between an employer and his workmen for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes whether or not any capital has been invested for the purpose of carrying on such activity; or such activity is carried on with a motive to make any gain or profit. Thus, an industry is a whole gamut of activities that are carried on by an employer with the help of his employees and labors for production and distribution of goods to earn profits.

Employer: An employer can be defined from different perspectives as:-

A person or business that pays a wage or fixed payment to other person(s) in exchange for the services of such persons

a person who directly engages a worker/employee in employment. any person who employs, whether directly or through another person or

agency, one or more employees in any scheduled employment in respect of which minimum rates of wages have been fixed.

As per Industrial Disputes Act 1947 an employer means:-in relation to an industry carried on by or under the authority of any department of [the Central Government or a State Government], the authority prescribed in this behalf, or where no authority is prescribed, the head of the department;

in relation to an industry carried on by or on behalf of a local authority, the chief executive officer of that authority;

Employee: - Employee is a person who is hired by another person or business for a wage or fixed payment in exchange for personal services and who does not provide the services as part of an independent business.

An employee is any individual employed by an employer.

A person who works for a public or private employer and receives remuneration in wages or salary by his employer while working on a commission basis, piece-rates or time rate.

Employee, as per Employee State Insurance Act 1948, is any person employed for wages in or in connection with work of a factory or establishment to which the act applies.

In order to qualify to be an employee, under ESI Act, a person should belong to any of the categories: Those who are directly employed for wages by the principal employer

within the premises or outside in connection with work of the factory or establishment.

those employed for wages by or through an immediate employer in the premises of the factory or establishment in connection with the work thereof

Those employed for wages by or through an immediate employer in connection with the factory or establishment outside the premises of such factory or establishment under the supervision and control of the principal employer or his agent.

employees whose services are temporarily lent or let on hire to the principal employer by an immediate employer under a contract of service (employees of security contractors, labor contractors, house keeping contractors etc. come under this category).

Employment: The state of being employed or having a job.

Labor market: The market in which workers compete for jobs and employers compete for

workers. It acts as the external source from which organizations attract employees. These markets occur because different conditions characterize different geographical areas, industries, occupations, and professions at any given time.

Industrial Relations SystemAn industrial relations system consists of the whole gamut of relationships between employees and employees and employers which are managed by the means of conflict and cooperation.

A sound industrial relations system is one in which relationships between management and employees (and their representatives) on the one hand, and between them and the State on the other, are more harmonious and cooperative than confliction and creates an environment conducive to economic efficiency and the motivation, productivity and development of the employee and generates employee loyalty and mutual trust.

Actors in the IR system:

Three main parties are directly involved in industrial relations:

Employers: Employers possess certain rights vis-à-vis labors. They have the right to hire and fire them. Management can also affect workers’ interests by exercising their right to relocate, close or merge the factory or to introduce technological changes.

Employees: Workers seek to improve the terms and conditions of their employment. They exchange views with management and voice their grievances. They also want to share decision making powers of management. Workers generally unite to form unions against the management and get support from these unions.

Government: The central and state government influences and regulates industrial relations through laws, rules, agreements, awards of court ad the like. It also includes third parties and labor and tribunal courts.

The laws dealing with the arrangements that are made between workers and employers

These laws are developed by governments

What are awards? You will be employed under an award or you may be asked to sign a

Workplace Agreement Industrial relations laws, known as awards Awards set out the rights and obligations of employees and employers

The laws cover aspects of work Basic minimum conditions about workers rights, such as pay rates, leave

entitlements and dismissal rules Guidelines and rules.

Regulations regarding the relationships between employees and employers

Handling of workplace disputes

Awards deal with: Hours of employment Pay rates Penalty rates Leave entitlements Part time or casual work

Workplace Agreements This refers to an individual agreement between a particular employer and

employee about the employee’s wages and conditions of employment

What role do Unions play? An industrial union is a group of workers in a particular industry Representatives of the group strive to put into practice the wishes of the

workers The aim of the Union is to protect and improve the quality of the

members working lives

SCOPE: The concept of industrial relations has a very wide meaning and connotation. In the narrow sense, it means that the employer, employee relationship confines itself to the relationship that emerges out of the day to day association of the management and the labor. In its wider sense, industrial relations include the relationship between an employee and an employer in the course of the running of an industry and may project it to spheres, which may transgress to the areas of quality control, marketing, price fixation and disposition of profits among others.

The scope or industrial relations quite vast, the main issues involved here include the following:

Collective bargaining

Machinery for settlement of industrial disputes

Standing orders

Workers participation in management

Unfair labor practices

IMPORTANCE OF INDUSTRIAL RELATIONS:The healthy industrial relations are keys to the progress and success. Their significance may be discussed as under –

Uninterrupted production – The most important benefit of industrial relations is that this ensures continuity of production. This means, continuous

employment for all from manager to workers. The resources are fully utilized, resulting in the maximum possible production. There is uninterrupted flow of income for all. Smooth running of an industry is of vital importance for several other industries; to other industries if the products are intermediaries or inputs; to exporters if these are export goods; to consumers and workers, if these are goods of mass consumption.

Reduction in Industrial Disputes – Good industrial relations reduce the industrial disputes. Disputes are reflections of the failure of basic human urges or motivations to secure adequate satisfaction or expression which are fully cured by good industrial relations. Strikes, lockouts, go-slow tactics, gherao and grievances are some of the reflections of industrial unrest which do not spring up in an atmosphere of industrial peace. It helps promoting co-operation and increasing production.

High morale – Good industrial relations improve the morale of the employees. Employees work with great zeal with the feeling in mind that the interest of employer and employees is one and the same, i.e. to increase production. Every worker feels that he is a co-owner of the gains of industry. The employer in his turn must realize that the gains of industry are not for him along but they should be shared equally and generously with his workers. In other words, complete unity of thought and action is the main achievement of industrial peace. It increases the place of workers in the society and their ego is satisfied. It naturally affects production because mighty co-operative efforts alone can produce great results.

Mental Revolution – The main object of industrial relation is a complete mental revolution of workers and employees. The industrial peace lies ultimately in a transformed outlook on the part of both. It is the business of leadership in the ranks of workers, employees and Government to work out a new relationship in consonance with a spirit of true democracy. Both should think themselves as partners of the industry and the role of workers in such a partnership should be recognized. On the other hand, workers must recognize employer’s authority. It will naturally have impact on production because they recognize the interest of each other.

Reduced Wastage – Good industrial relations are maintained on the basis of cooperation and recognition of each other. It will help increase production. Wastages of man, material and machines are reduced to the minimum and thus national interest is protected.

Thus, it is evident that good industrial relations, the basis of higher production with minimum cost and higher profits. It also results in increased efficiency of workers. New and new projects may be introduced for the welfare of the workers and to promote the morale of the people at work. An economy organized for planned production and distribution, aiming at the realization of social justice and welfare of the massage can function effectively only in an atmosphere of industrial peace. If the twin objectives of rapid national development and increased social justice are to be achieved, there must be harmonious relationship between management and labor.

OBJECTIVES OF INDUSTRIAL RELATIONS:The main objectives of industrial relations system are:-

To safeguard the interest of labor and management by securing the highest level of mutual understanding and good-will among all those sections in the industry which participate in the process of production.

To avoid industrial conflict or strife and develop harmonious relations, which are an essential factor in the productivity of workers and the industrial progress of a country.

To raise productivity to a higher level in an era of full employment by lessening the tendency to high turnover and frequency absenteeism.

To establish and promote the growth of an industrial democracy based on labor partnership in the sharing of profits and of managerial decisions, so that ban individuals personality may grow its full stature for the benefit of the industry and of the country as well.

To eliminate or minimize the number of strikes, lockouts and gheraos by providing reasonable wages, improved living and working conditions, said fringe benefits.

To improve the economic conditions of workers in the existing state of industrial managements and political government.

Socialization of industries by making the state itself a major employer

Vesting of a proprietary interest of the workers in the industries in which they are employed.

DUNLOP'S CONTRIBUTION TO INDUSTRIAL RELATIONS

Dunlop's ModelOne of the significant theories of industrial labor relations was put forth by John Dunlop in the 1950s. According to Dunlop industrial relations system consists of three agents – management organizations, workers and formal/informal ways they are organized and government agencies. These actors and their organizations are located within an environment – defined in terms of technology, labor and product markets, and the distribution of power in wider society as it impacts upon individuals and workplace. Within this environment, actors interact with each other, negotiate and use economic/political power in process of determining rules that constitute the output of the industrial relations system. He proposed that three parties—employers, labor unions, and government-- are the key actors in a modern industrial relations system. He also argued that none of these institutions could act in an autonomous or independent fashion. Instead they were shaped, at least to some extent, by their market, technological and political contexts.

Thus it can be said that industrial relations is a social sub system subject to three environmental constraints- the markets, distribution of power in society and technology.

Dunlop's model identifies three key factors to be considered in conducting an analysis of the management-labor relationship: 1. Environmental or external economic, technological, political, legal and

social forces that impact employment relationships. 2. Characteristics and interaction of the key actors in the employment

relationship: labor, management, and government. 3. Rules that are derived from these interactions that govern the

employment relationship.

Dunlop emphasizes the core idea of systems by saying that the arrangements in the field of industrial relations may be regarded as a system in the sense that each of them more or less intimately affects each of the others so that they constitute a group of arrangements for dealing with certain matters and are collectively responsible for certain results”.

In effect - Industrial relations is the system which produces the rules of the workplace. Such rules are the product of interaction between three key “actors” – workers/unions, employers and associated organizations and government

The Dunlop’s model gives great significance to external or environmental forces. In other words, management, labor, and the government possess a shared ideology that defines their roles within the relationship and provides stability to the system.

COLLECTIVE BARGAINING

Collective Bargaining Negotiation between an employer and trade union Collective bargaining is the process whereby workers organize together to

meet, converse, and compromise upon the work environment with their employer.

A method of mutually determining wages, hours and terms and conditions of employment through negotiations between representatives of the employer and employees

It is the practice in which union and company representatives meet to negotiate a new labor contract.

It is the coming together of workers to negotiate their employment Simply we can say that “Collective Bargaining is the negotiation between

organized workers and their employers to determine wages, hours, rules, and working condition”.

BARGAINING FORM AND TACTICS Distributive Bargaining: Integrative Bargaining Attitudinal Restructuring Intra-Organizational Bargaining

Integrative Bargaining: This involves negotiation of an issue on which both the parties may gain, or at least neither party loses. 

As for example, representatives of employer and employee sides may bargain over the better training program or a better job evaluation method.

This type of bargaining is known as Cooperative Bargaining

Distributive Bargaining: - It involves haggling over the distribution of surplus (excess, extra). Under it economic issues like wages, salaries and bonus are discussed.

In distributive bargaining, one party’s gain is another party’s loss. Over here, both the parties are trying to get as much as they cab for

themselves.  This type of bargaining is also known as conjunctive bargaining.

Attitudinal Restructuring   This involves shaping and reshaping some attitudes like trust or distrust,

friendliness or hostility between labor and management. When there is a backlog of bitterness between both the parties, attitudinal restructuring is required to maintain smooth and harmonious industrial relations . It develops a bargaining environment and creates trust and cooperation among the parties.

Intra-Organizational Bargaining It generally aims at resolving internal conflicts. This is a type of

maneuvering to achieve consensus with the workers and management. Even within the union, there may be differences between groups. For example, skilled workers may feel that they are neglected or women workers may feel that their interests are not looked after properly. Within the management also, there may be differences. Trade unions maneuver to achieve consensus among the conflicting groups.

COLLECTIVE BARGAINING PROCESS Prepare: This phase involves composition of a negotiation team. The

negotiation team should consist of representatives of both the parties with adequate knowledge and skills for negotiation. In this phase both the employer’s representatives and the union examine their own situation in order to develop the issues that they believe will be most important. The first thing to be done is to determine whether there is actually any reason to negotiate at all. A correct understanding of the main issues to be covered and intimate knowledge of operations, working conditions, production norms and other relevant conditions is required.

Discuss: Here, the parties decide the ground rules that will guide the negotiations. A process well begun is half done and this is no less true in case of collective bargaining. An environment of mutual trust and understanding is also created so that the collective bargaining agreement would be reached.

Propose: This phase involves the initial opening statements and the possible options that exist to resolve them. In a word, this phase could be described as ‘brainstorming’. The exchange of messages takes place and opinion of both the parties is sought.

Bargain: negotiations are easy if a problem solving attitude is adopted. This stage comprises the time when ‘what ifs’ and ‘supposals’ are set forth and the drafting of agreements take place.

Settlement: Once the parties are through with the bargaining process, a consensual agreement is reached upon wherein both the parties agree to a common decision regarding the problem or the issue. This stage is described as consisting of effective joint implementation of the agreement through shared visions, strategic planning and negotiated change.

NEGOTIATION

What is Negotiation? In simplest terms, negotiation is a discussion between two or more

disputants who are trying to work out a solution to their problem.Negotiations can be normally broken down into four stagesPreparing for negotiation: setting objectives, defining strategy and assembling data Opening Bargaining Closing

Preparation Steps List the arguments to be used in supporting your case List the likely arguments or counter arguments that the other party is

likely to use. Obtain the data you need to support your case. Select the negotiating team: Brief the members on their roles and the negotiating strategy and tactics

that are to be adopted Rehearse the members of the team in their roles

Opening: Open realistically and move moderately Challenge the other side as it stands, do not destroy their ability to move.

Explore attitudes, ask questions, observe and above all, listen in order to assess the other side’s strengths and weaknesses.

Make to concessions of any kind at this stage Do not talk to much

Bargaining Always make conditional proposals: “If you will do this, then I will consider

doing that” – the words to remember are: if…then…. Never make one sided concessions “If I concede (grant) ‘x’, then I expect

you to concede ‘y’. Negotiate on the whole package

Closing Making a concession from the package Doing a deal: splitting the difference, or bringing in something new. Summarizing what has happened to date Giving the other side a choice between two courses of action

NEGOTIATING AND BARGAINING SKILLS:The main NEGOTIATING SKILLS Analytical Ability:  Empathy (understanding): The ability to put oneself in the other party’s shoes to understand not only what they are hoping to achieve but also why they have these expectations and the extent to which they are determined to fulfill them.

Planning Ability: To develop and implement negotiating strategies and tactics but to be prepared to be flexible about the tactics in the light of developments during negotiations

Interactive Skills: The capacity to relate well with other people.  Communicating Skills: The ability to convey information and arguments clearly, positively and logically while also being prepared to listen to the other side and to respond appropriately

BARGAINING SKILLS: - The basic bargaining skills are: The ability to sense the extent to which the other side wants or indeed expects to achieve its claims or sustain its offer.

Flexible Realism: - The capacity to make realistic moves during the bargaining process to reduce the claim or increase the offer.

Respect: - The ability to demonstrate to the other party that the negotiator respects their views and takes them seriously even if he or she disagrees with them.

Sensitivity: The ability to sense changes in moods and directions or weaknesses in arguments and respond quickly to press home a point.

GRIEVANCE IN INDUSTRY

DEFINATION Grievance means any type of dissatisfaction arising out of factors related to an employee’s job which he thinks are unfair. A grievance arises when an employee feels that something has happened or is happening to him who he thinks is unfair, unjust or inequitable.

FACTORSIn an organization, a grievance may arise due to several factors such as: Violation of management’s responsibility such as poor working conditions Violation of company’s rules and regulations Violation of labor laws Violation of natural rules of justice such as unfair treatment in promotion,

etc

SOURCES OF GRIEVANCE Various sources of grievance may be categorized under three heads: management policies, working conditions, personal factors

Grievance resulting from management sideWage rates Leave policyOvertimeLack of career planningRole conflictsLack of regard for collective agreementDisparity between skill of worker and job responsibility

Grievance resulting from working conditionsPoor safety and bad physical conditionsUnavailability of tools and proper machineryNegative approach to disciplineUnrealistic targets

Grievance resulting from interpersonal factorsPoor relationships with team membersAutocratic leadership style of superiorsPoor relations with seniorsConflicts with peers and colleagues

Difference between complaint and grievance

A complaint is an indication of employee dissatisfaction that has not been submitted in written. On the other hand, a grievance is a complaint that has been put in writing and made formal. Grievance procedureGrievance procedure is a formal communication between an employee and the management designed for the settlement of a grievance. The grievance procedures differ from organization to organization.

Open door policy Under this policy, the aggrieved employee is free to meet the top executives of the organization and get his grievances redressed. Such a policy works well only in small organizations. However, in bigger organizations, top management executives are usually busy with other concerned matters of the company. Moreover, it is believed that open door policy is suitable for executives; operational employees may feel shy to go to top management.

Step ladder policy Under this policy, the aggrieved employee has to follow a step by step procedure for getting his grievance redressed. In this procedure, whenever an employee is confronted with a grievance, he presents his problem to his immediate supervisor. If the employee is not satisfied with superior’s decision, then he discusses his grievance with the departmental head. The departmental head discusses the problem with joint grievance committees to find a solution. However, if the committee also fails to redress the grievance, then it may be referred to chief executive. If the chief executive also fails to redress the grievance, then such a grievance is referred to voluntary arbitration where the award of arbitrator is binding on both the parties.

Settlement of grievanceSTEP 1: In the first step the grievance is to be submitted to departmental representative, who is a representative of management. He has to give his answer within 48 hours. STEP 2: If the departmental representative fails to provide a solution, the aggrieved employee can take his grievance to head of the department, who has to give his decision within 3 days.STEP 3: If the aggrieved employee is not satisfied with the decision of departmental head, he can take the grievance to Grievance Committee. The Grievance Committee makes its recommendations to the manager within 7 days in the form of a report. The final decision of the management on the report of Grievance Committee must be communicated to the aggrieved employee within three days of the receipt of report. An appeal for revision of final decision can be made by the worker if he is not satisfied with it. The management must communicate its decision to the worker within 7 days.STEP 4: If the grievance still remains unsettled, the case may be referred to voluntary arbitration.

Arbitration Problems arise as a result of interpretation and application of collective bargaining. Contracts are resolved bilaterally representative of management and unions through negotiation. Arbitration avoids strikes and lockouts, 96% of all US labor agreement provide for arbitration as the final step in the grievance procedure. Only 08 to 10% agreements contained such clause in early 1930s. In 1944, arbitration provision was made by in 73% of contracts.

UNION ORGANIZATIONDecision to join union Employees often join Unions in order to have a method of collectively resisting actions of Management e.g. in case of wage cuts, dismissals, disciplinary actions, unpleasant working conditions, Managers’ interference in

personal life, dissatisfaction with some aspects of employment. Research indicates that low-paid workers are most committed to unions than the high paid workers. To participate in Union activities. To exercise leadership Because of Social Pressure Compulsory Unionism – no law but in some states, employee has to

become union member after 30 days

Why employees fail to join unions Anti Union attitudes of employees Social Pressures Job Satisfaction Fear of Reprisal (Revenge/ punishment) Cost (generally less than Rs.7000/=) Union hostility ( Lack of Sympathy) Religious and moral values

Why managers resist unions Employers and Managers look upon Unions as outsiders. They see Unions as Trouble – makers They see Unions as undermines of employee loyalty to the Company. They see Unions as source of tension They see unions as Labor movement. Security Democracy Collective bargaining covers – wages, bonuses, Leaves, holidays, medical,

housing, transport, P. Fund, gratuity etc.

Five main features of collective bargaining in Pakistan1. Collective bargaining is installed in armed forces, Para-military forces, and

the police and ordinance factories.2. CBA Union may send the employer a letter of differences or points of

dispute and collective bargaining is require on charter of demand – No strike at this stage. After 14 days, matter may go labor court and show of strength by unions.

Dissatisfaction Unions is a means to improve the situation

Support Union

Not Support Union

Union as a way to better myself

Support Union

Not Support Union

Unions Political / ideological beliefs

Support Union

Not Support Union

3. On national level, collective bargaining is carried out once each year with the Pakistan Tripartite (Employees + Employer + Govt. Department) Labor Conference, e.g. minimum wage board.

4. Joint consultation as a form of collective bargaining has existed from long time – introduction of shop Steward - workers council.

5. Due to few big business concerns, unions have tended to be plant-based but in inter-provincial industry e.g., railway, banks at settlement are for two years.

Union problem in Pakistan ILO Report (1958) on Labor Problems in Pakistan identified following problems: Lack of trained labor officers Lack of labor statistics Lack of permanent industrial courts Lack of women involvement in country’s economic life Lack of trade Union recognition law

Another study on labor – Management relations in Pakistan and Ceylon identified the following problems: Lack of educational Programs for both workers and managers Lack of trained labor officers etc.

RAZA 1963 Trade Union leaders failed to generate support for the movement No change in workers attitude Union leadership top heavy and no people are trained at intermediate

level Leaders more interested in P.R.

Other problems Illiteracy of the workers Higher labor turn over Lack of motivation

Employee Association The association of employees with the management De-motivated and self –motivated Work hard, if satisfied Management policies (Tactics) Employees’ sincerity Management has to look on the association of employees [any how]

Result Will be outstanding

DIFFERENT PATTERNS OF RELATIONS IN PUBLIC/ PRIVATE SECTOR

Centralization and Decentralization of Bargaining

Millions of work places in USA

Hundreds of thousands of separate firms 2,00,000 Collective Bargaining agreements

Tens of thousands of local Unions Economists suggest that bargaining structure affects bargaining outcomes

such as wage inflations, job satisfaction and wage levels for different jobs.

Decentralized bargaining structure leads to greater strike activity, affects

balance of power by influencing the economic leverage each side

possesses

Multilevel Bargaining

Bargaining occurs at different levels for different issues.

Major items like wages and grievances procedure may be included in primary

contract between parties but there may be supplemented agreement. These

are of two types:

1. Special agreements between primary parties e.g., pension for 06 years or 03 years.

2. Company-wide/industry-wide agreement are negotiated, plant level supplement agreement between parties may be negotiated relating to working conditions etc. between local unions and plant managers.

Centralized Bargaining

Centralized or Industry-wide bargaining used to be standard in many manufacturing industries but has been criticized and has two disadvantages:1. By eliminating competition from other unions or un-organized workers,

centralized bargaining allows a union to negotiate monopoly wage which is higher, which is not paid from profits but from price increases passed on to the consumers.

2. Centralized bargaining tends to reduce influence of individual employees on negotiations and to destroy democratic participation in trade unions.

Varieties of Bargaining PatternsFollowing are major types of union-management relationships: Several companies dealing with single union. Several unions dealing with a single company. Several Companies dealing with several unions.The Automobile Industry

The Companies: Dominating companies in USA are production of automobiles: General Motors, Ford and Chrysler. In sales, General Motors is largest but Ford and Chrysler are giants in this industry. General Motors lost market share from 45% in early 80s to just 33% in 1992. Japanese automobile companies are working in USA. In 1993, Honda, Nissan, Toyota, Mitsubishi, Subaru, Isuzu and Mazda all have significant production in USA by producing 1,815,000 vehicles per year. Three plants were un-unionized and five were not some 100,000 workers are employed in Japanese operated plants in USA but only 8,000 are in unions.

The Unions: A united Automobile workers (UAW). 02 Japanese companies have UAW representation in their American Plants (Toyota and Mazda) and two do not (Honda and Nissan). The union is head quartered in Detroit and has more than one million members.

The United Automobile Workers (UAW)Head Quarter Detroit, MichiganMembership 9, 22,000Local Union (Number) 1,231

Collective BargainingUAW has a department of each Automobile company. The departments are composed of locals at the plants of each company and staff is knowledgeable about the company involved. Each company has a national agreement with UAW with local supplements negotiated at plant level to the national agreement. The national agreements establish the economic package in relation to

working conditions and dispute procedures. Local supplements deal with conditions of work, grievances. There is no industry wide bargaining but company wide negotiations.

Other Industries Mining Manufacturing Construction Healthcare

RELATIONS IN PUBLIC SECTORAbout 17% of all employees in America work in Federal State or Local government. Of these, 1/6th are in Federal Govt. One quarter in State Governments and Rest in local governments.

There are differences between labor management relations in private sector and in public sector: i.e., different laws: The National Labor Relations Act does not apply to employees of Federal, State and local governments and they have different laws which do not allow employees a right of strike. Despite this, many employees have joined unions than have private employees. In 1991, 45.4% of all government employees were represented by the unions. Thus balance of power, procedures, and areas of bargaining are different from private sector and have resulted in confusion, complexity and evolution.

State and Local GovernmentGrowth in State and local Govt. Employment unionization, From the World War-II, no. of employees of state and local govt. has grown from 3.5 million to 15.5 million.Today 1 in seven in USA is an employee of same state or local govt. agency. Employees in state and local govt. work in police, firefighters, sanitation workers, nurses, health aides, engineers, clerks, prison guards and utility,

workers., More than 1/2 educationists as teachers, hospital and police and highway maintenance.

Employee OrganizationsAbout half of state and local govt. employees belong to unions or employee associations and is more than private sector.

What is difference between union and association?Unions are concerned with wages, benefits, work rules and employment relationship, while associations are concerned with professional aspects of employment, including quality of public service and of people performing it.Largest organization is not union but association e.g., National Education Association and larger Unions are:1. American Federation of State, country and Municipal Employees (AFSCME)2. American Federation of Teachers3. Others affiliated with AFL-CIO (American Federation of Labour-Congress of

Industrial Organizations).

The EmployersState and local government employees work in various agencies / departments of government.At present, there are over 78,000 separate units of government, including towns, districts. Some 13,375 of these units have bargaining units.

Collective Bargaining The structure of Collective Bargaining and local government has many

similarities with the private sector. Unions and associations meet with their employers (managers of agencies

/ officials of state or Municipality) to negotiate agreements that are binding on two parties for specified period.

Difference of public and private sectors:1. The strike is usually illegal for public employees.2. Labor negotiations have political aspect – unions and associations may

conduct negotiations on three trout’s at the same time:(a)by meeting with public managers(b)by lobbying with the legislative body involved and (c)By influencing voters.3. Many govt. bodies possess civil service system to regulate employee

relations for the purpose to limit political influence and corruption in public sector.

Collective Bargaining have objective to establish rules and procedures of similar nature. Collective Bargaining uses different methods e.g., to establish rules, it employees a process of negotiations, to enforce rules, it relies on grievance procedure.

STRATEGIC HUMAN RESOURCE MANAGEMENT (MANZOOR ALI MBA-20)

HUMAN RESOURCE MANAGEMENTHuman Resources Management or Personnel Management is defined as Planning, Organizing, Directing and Controlling of the procurement, development compensation, integration, maintenance and separation of human resources to the end that individual, organizational and societal objectives are accomplished.

Planning: Effective Managers need to spend more time on Planning. Planning for Human Resource Manager means determination in advance of a personnel program that will contribute to goals established for the enterprise and for that purpose involvement/participation of Human Resources Manager is must.

Organizing: is process of designing the structure of relationships among jobs, personnel and physical factors

Directing: is also known as “motivation”, “actuation” or “command” is linked to getting people to go to work willingly and effectively.

Controlling: concerns with regulating activities in accordance with the personnel plan, which in turn was formulated on the basis of analysis of fundamental organization goals

Procurement: is concerned with the obtaining of the proper kind and number of personnel necessary to accomplish the organizational goals. It deals with determination of human resource requirement and their

recruitment selection and placement. The hiring process includes: applications screening, tests, checking references and conducting interviews.

Development: deals with increase of skills through training that is necessary for proper job performance. This activity of development is important because of change in technology, re-alignment of jobs and increasing complexity of managerial task.

Compensation: is defined as the adequate and equitable remuneration of personnel for their contributions to organizational objectives. It covers job evaluation wage policies, wage systems and extra compensation plans.

Integration: it is concerned with an attempt to effect a reasonable reconciliation of individual, societal and organizational interests. It covers grievances, disciplinary action and labor unions.Maintenance: is concerned with physical condition of the employee to be maintained including health and safety.

Separation: The first function of Human Resources Manager is hire/secure employee; the last should be separation and return of that person to the society in good shape. The separation covers: retirement, layoff, discharge etc.

Primary Functions Job Evaluation Job Designing Job Specification Job Description Job Advertisement Making a pool of CVs Tests/Short listing Interviews Background Investigation

Secondary Functions Medical Check-up Offer letter Training and development Posting Transferring Performance Appraisal TA/DA Bills handling Leave Granting Making Policies etc Job Analysis = Right person for right jobIt is the process used to collect information about the duties, responsibilities, outcomes, necessary skills and work environment of a particular job.

“Job Analysis is a process of studying and collecting information relating to the operations and responsibilities of a specific job”. Filippo

“Job Analysis is the procedure for determining the duties and skill requirements of a job and the kind of person who should be hired for it.” Gary Dessler

The organizations consist of positions which need to be staffed. Job analysis is a procedure through which you determine the duties of these positions and the characteristics of the people who should be hired for them. The Job Analysis provides information on job requirements; this information is then used for developing job descriptions (a list of duties) and job specification (a list of a job’s human requirements or what kind of people need to be hired for it)

Normally the Human Resource specialists aim to collect following information via job analysis.

Work Activities: Information is usually collected about actual work activities performed, such as cleaning, selling, teaching or painting. Such a list may also indicate how, why and when the worker performs each activity.

Human Behavior: Information about human behaviors, like sensing, communicating, deciding and writing is collected.

Machines, tools, equipment and work aids used: Information is collected regarding products made materials processed, knowledge applied (i.e., Finance or Law) and services rendered (such as counseling or repairing).

Performance Standards: Information about performance standard (in terms of quantity and quality for each job) is collected. On these performance standards, the employees will be evaluated.

Job Context: this information includes matters like physical working conditions, work schedule, interpersonal relationship. Incentives may be included.

Human Requirements: Finally, the information regarding human requirements of the job is collected such as job knowledge or skill requirement (such as education training, work experience and personal attributes (aptitudes, physical characteristics, personality and interests).

Uses of Job Analysis Information1. Recruitment and Selection2. Performance Appraisal3. Compensation4. Training

It includes: Review the job responsibilities of a current employees

Doing internet research and view sample job description Analyse duties, responsibility that need to be accomplish by the employee

filling the position Share with other companies that have similar jobs

Process of Job Analysis Identify purpose of job analysis Collecting the analysts (professionals, human resource, consultants) Select the appropriate method of the job analysis Select the positions to analyse and it may not be necessary to analyse

them all Review the background organization charts, process charts

Job Analyse Method Train the analysts (internal and external analysts, teach them) Preparation of job analysis (communicate the project in the organization,

prepare the documentation i-e questionnaire) Collect data (on the job activities, employee behaviour, working

conditions, abilities)

Review and verify Consolidate the results Check the information that whether it is factually correct

How can you review the information? Through boss, supervisorTechnical conference/presentation

Develop a job description and job specification

Job description: It is a written document that gives the information about a job responsibilities, duties, tasks, salary, supervisor, sub ordinates, authority and job code. Job Description includes the following:

Identification of the job: Title of job Section/department Grade and hierarchy

Summary of job functions: Responsibility and communication

Job contents include: What is done? How it is done Why it is done What standard performance is necessary? Conditions of employment Training required

Job specification: Give the information about the skills, experience, knowledge, abilities required for a job. “Determines and indicates the minimum human qualifications which are considered necessary for performance of a particular job”.

Methods for Job Analysis

Observation: Continuous observation, random sampling Dairy: Record the activities in log when they are performed Interview: Group interview/Individual or one employee Questionnaire: Open-ended questionnaire/structured format questions Critical incidents: Behaviourally explained Check Lists Conference

Objectives of Job Analysis To assist in the preparation of upto date job description and job

specification To ensure effectiveness of recruitment exercises To add in formulating an effective performance management system Good performance management system i-e right man for right job

Job Analysis in Jobless World Job is defined as a set of closely related activities carried out for a pay.

Circumstance involved Economic Recession Hyper Inflation Downsizing Job Rotation: systematically moving a worker from one job to another to

enhance or to improve or to increase his/her experience. Job Enrichment: job enrichment is regarding to the job in a way that will

increase the opportunities, experience, responsibilities and growth. Dejobing: broading and increasing the responsibilities of the company’s

job and encouraging employees not to limit themselves what’s on the job? Self managing work teams: sales teams Re-engineering: redesigning the business process so that the teams or

the individuals would be able to complete the task at once. Competency: to make the job description based on the abilities or

expertise of a person.

TESTING (General sort of nature)To check the skills and the fastness of mind of person and approach

Why careful selection is important?To sort out: (a) Performance (b) Cost

(c) Legal obligations (negligent hiring) hiring workers with questionable background without proper safeguard, person doesn’t have any criminal record. To avoid negligent hiring:

Making a systematic effort to gain the relevant information and verify documents.

Reject the applicant, who may have false statement of material fact Take an immediate action when problem arises

Basic testing concepts Reliability: The characteristic that refers to the consistency of scores

obtained by the same person when re-tested with the identical or equivalent tests.

HOW TO VALIDATE A TESTStep 1: Analyze the job and write job description and job specificationStep 2: Chose your TestStep 3: Administer TestStep 4: Relate your test score and criteria

This determines the significance of the relationship between scores (predictors) and performance (the criterion).The usual method to do this is to determine statistical relationship between (1) scores on the test and (2) performance through co-relation analysis which indicates the degree of statistical relationship.If performance on the test and on the job is co-related, you can develop an expectancy chart.

Validity: A tests’ validity answers the question: What does the test measure?

The term/concept validity relates to the evidence that the test is job-related.There are two methods to demonstrate – a tests’ validity i.e., criterion validity and content Validity.

Criterion Validity: A type of validity based on showing that scores on the test i.e., (Predictors) are related to the job performance (criterion).Content Validity (Contents of the Job): A test that is content valid is one in which the test contains a fair sample of the tasks and skills actually needed for the job in question. (e.g., typing test)

Criteria

Types of Test (Job Point of view)

Intelligence Test: A general type of test conduct by every organization for recruitment or hiring. Intelligence (IQ) test are test of general intellectual abilities such as memory, vocabulary, verbal fluency and numerical ability. IQ (Intelligence Quotient) is a procedure to divide a child’s mental age (as measured by intelligence test) by his or her chronological age and then multiply results by 100.

Cognitive Test: A test conduct to measure the specific skills of the candidate. These tests are measures of specific mental abilities which include inductive & deductive reasoning, verbal comprehension, memory and numerical ability: These tests are called Aptitude Tests.

Physical Abilities: A test conduct to know the physical fitness of the candidate at the time of recruitment. These tests include finger dexterity, manual dexterity, speed of arm movement, reaction time and stamina (strength of body)

Measuring Personality and Interest: A test conduct to know person’s motivation and interpersonal skills. These include technological skills and behavioural skills (personality traits).

Achievement test: A test to measure that what person has learned? One must get training, knowledge and learning.

INTERVIEWING An interview is a procedure designed to obtain information from a person’s oral responses to oral inquiries; a selection interview which is designed to predict job performance on the basis of applicants’ oral responses and oral inquiries. Some estimates suggest that 70% use interview for selection of candidates. While one study of 852 employers found that 99% of them use interview for selection of employees

TYPES OF INTERVIEW1. Structured2. Non-structured3. Situational4. Sequential5. Panel6. Stress and7. Appraisal

STRUCTURED V/S UN-STRUCTURED INTERVIEWS In the structured or directive interviewed, “an interview follows a set of

sequence of questions. In this case, the interviewer follows a printed form of questions (structured interview Guide)

On the other hand, unstructured /non-directive interview, you ask the questions as they come to mind. In other words, unstructured / non-directive interview is an unstructured conversational style interview. The interviewer pursues points of interest as they come up in response to questions.

STRESS INTERVIEW An interview in which the applicant is made uncomfortable by a series of

often rude questions, this technique helps identify hypersensitive applicants and those with low or high stress tolerance. A stress interview is a special type of selection interview in which the applicant is made

uncomfortable by a series of rude questions while keeps the candidates in stress.

APPRAISAL INTERVIEW A discussion following a performance appraisal in which supervisor and

employee discuss the employee’s rating and possible remedial actions. When an employee leaves a firm for any reason, an exit interview is often

conducted. An exit interview, usually conducted by the HR department, aims at eliciting information about the job or related matters that might give the employer a better insight into what is right or wrong about the company.

SITUATIONAL INTERVIEW A series of job-related questions which focuses on how the candidates

would behave in a given situation, A situational type of interview is one in which the questions focus on the individual’s ability to project what his or her behavior would be in a given situation.

JOB-RELATED INTERVIEW A series of job-related questions which focuses on relevant past job-

related behaviors. Finally, psychological interviews are interviews conducted by a

psychologist in which questions are intended to assess personal traits such as dependability.

STRUCTURED SEQUENTIAL INTERVIEW An interview in which the applicant is interviewed sequentially by several

persons and each rates the applicant on a standard form. In a structured sequential interview, each interviewer rates the candidate

on a standard evaluation form, and the ratings are compared before the hiring decision is made.

PANEL INTERVIEW An interview in which a group of interviewers questions the applicant. The panel interview means the candidate is interviewed simultaneously by

a group (or panel) of interviewers (rather than sequentially). The group structure has several advantages.

A sequential interview often has candidates cover basically the same ground over and over again with each interviewer. The panel interview, on the other hand, allows each interviewer to pick up on the candidate’s answers, much as reporters do in press conferences.

This approach may elicit deeper and more meaningful responses than are normally produced by a series of one-on-one interviews. On the other hand, some candidates find panel interviews more stressful, and they may actually inhibit responses.

HOW USEFUL ARE INTERVIEWS?For many years, the ironic thing about interviews is that while used by virtually all employers, the earlier research gave selection interviews low marks in terms of reliability and validity. However, today studies affirm that

the interview is “generally a much better predictor of performance than previously thought and is comparable with many other selection techniques. The key, however, seems to be that this is true “especially if (and often only if) [the interview] is structured. Generally speaking, the research evidence suggests that structured interviews have reported validities about twice those of unstructured interviews. In other words, the key to an interview’s usefulness is the manner in which it is administered, including (most importantly) the degree to which it is structured:

With respect to predicting job performance, situational interviews yield a higher mean validity than do job-related (or behavioral) interviews, which in turn yield a higher mean validity than do psychological interviews.

Structured interviews, regardless of content, are more valid than unstructured interviews for predicting job performance.

TRAINING AND DEVELOPMENTTraining is a process of teaching, the basic thing to the employees the need to perform the job.

EMPLOYEE ORIENTATION:It is a procedure for providing new employees with basic background information about the firm. Employee orientation gives background information of the organization to

facilitate them to perform their jobs satisfactorily which includes information about rules.

Orientation is actually is part of the employer’s new employee socialization process.

Socialization process is process of equipping all employees the prevailing attitudes standards, values and patterns of behavior which is expected by the organization.

Orientation program ranges from brief informal introduction of the company to length of working hours, performance reviews, personnel policies, pay, vacations and the rest and recreation of the employees.

First-part of orientation is performed by Human Resource Specialist who explains issues like working hours, vacations, introduces to his/her new supervisor, introduces to his colleagues, familiarizing the new employees with the work place.

Methods of training On-The-Job Training: On-the-Job Training is most popular development

method. Important techniques here include job rotation, coaching/ under study approach, junior Boards and Action Learning.

Job Rotation: is a management training technique that involves moving a trainee from department to department to broaden his or her experience and identify strong and weak points.

The Five Steps Training & Development Process1. NEEDS ANALYSIS

Identify specific job performance skills needed to improve performance and productivity.

Analyze the audience to ensure that the program will be suited to their specific levels of education, experience, and skills, as well as their attitudes and personal motivations.

Use research to develop specific measurable knowledge and performance objectives.

2. INSTRUCTIONAL DESIGN Gather instructional objectives, methods, media, description of and

sequence of content, examples, exercises, and activities. Organize them into a curriculum that supports adult learning theory and provides a blueprint for program development.

Make sure all materials, such as video scripts, leaders’ guides, and participants’ work-books, complement each other, are written clearly, and blend into unified training geared directly to the stated learning objectives.

Carefully and professionally handle all program elements – whether reproduced on paper, film, or tape – to guarantee quality and effectiveness.

3. VALIDATION Introduce and validate the training before a representative audience. Base

final revisions on pilot results to ensure program effectiveness

4. IMPLEMENTATION When applicable, boost success with a train-the-trainer workshop that

focuses on presentation knowledge and skills in addition to training content.

5. EVALUATION AND FOLLOW-UPAssess program success according to: REACTION – Document that learner’ immediate reactions to the training. LEARNING – Use feedback devices or pre- and posttests to measure what

learners have actually learned. BEHAVIOR – Note supervisor’s reactions to learners’ performance

following completion of the training. This is one way to measure the degree to which learners apply new skills and knowledge to their jobs.

RESULTS – Determine the level of improvement in job performance and assess needed maintenance.

TRAINING NEEDS ANALYSIS Task Analysis: A detailed study of a job to identify the skills required so

that an appropriate training program may be instituted. Performance Analysis: Verifying that there is a performance deficiency

and determining whether that deficiency should be rectified through training or through some other means (such as transferring the employee)

The-Job Development Techniques

The Case Study Method: A development Method in which the manager is presented with a written description of an organizational problem to diagnose and solve.

Main Features Use of actual organizational problems Maximum possible involvement of participants for making decisions;

resulting in a minimum degree of dependence on faculty members who in turn hold position that there are rarely any right or wrong answers and Who still strive to make the case method for problem solving

Management Games: A development technique in which teams of managers complete with one another by making computerized decisions regarding realistic but simulated companies.

Outside Seminars (Seminars/Conferences): The American Management Association (AMA) provides thousands of courses and following areas:

General Management Human Resources Sales & Marketing International Management Finance Information System & Technology Purchasing & Distribution Transporting Research & Development Insurance and Employees Benefits

University – Related Program: Three types of Programs: Many Business Schools provide continuing education program in

leadership ranging from one to four days program to executive development program lasting one to four months. E.g. the advanced Management Program Harvard Business School is an example of the Programs.

Many colleges and universities offer individualized courses like business, management, health care administration.

Finally, many schools offer degree programs such as MBA or executive MBA for middle managers and above who take this course on week ends and proceeds with same colleagues.

SPECIAL MANAGEMENT DEVELOPMENT TECHNIQUESThese techniques are aimed at developing leadership ability, to increase the manager’s sensitivity to others and to decrease inter-departmental conflicts. Leader Match Training: a program that identifies types of leaders and

teaches them how to fit their leadership style to their situation. (e.g., people oriented/production oriented style is appropriate in particular situation. Fred Fielder (who developed this technique) argues:

“That production oriented leaders do best in situations where they can increase high control or very little control.”

“People oriented leaders do best in middle of the road situation where they can exercise moderate amount of control.”

Vroom –Yetton Leadership Training: “A devt. Program for Management Trainees that focuses on decision making with varying degrees of input from sub-ordinates

Developing O.K. Mangers: Transactional Analysis (TA) “A method for helping two people communicate and behave on the job in an adult manner by understanding each other’s motives, analyzing inter personal transactions or communications between yourself and your sub-ordinate.

Organizational Development: “A program aimed at changing the attitudes, values and beliefs of employees so that employees can improve the organization”. Organizational Development is called action/research O.D methods.

Survey Feed Back: A method which involves surveying employees’ attitudes and providing feed back to departmental Managers so that problems can be solved by the managers and employees. (e.g. attitude survey)

Sensitivity Training: is to increase participants’ insights into his or her behavior and the behavior of others by encouraging an open expression of the feelings in the trainer – Guided T-group laboratory (T is for Training) is controversial and less used today than used in the past.

Team Building: is a group of Org. development techniques aimed to improve effectiveness of the teams such as corporate officers and division directors through use of consultants, interviews and team building meetings.

Grid Training approach for team building by Blake and Mouton based on Management Grid.

THE SELECTION PROCESS

Selection is the process to choose between the number of candidates a very few.

Factors determining the selection criteria:

1. Job availability2. nature of job (terms and conditions related with the job)3. job requirement 4. experience5. merit

Why selection is important?The careful selection of employees is important for three reasons:

1. Firstly, your own performance always depends partly on your subordinates. Employees who do not have right capabilities, skills won’t work effectively and your own performance and your firm’s performance will suffer. The time to keep out these undesirables is before they are in the door, not after.

2. Effective screening is also important because it costs money to recruit and hire employees. Hiring and training even a clerk cost US dollars 5000 or more. Similarly total cost of hiring manager could easily cost 10 times more than clerical job. This includes search fees, interviewing time, reference checking and traveling/moving expenses.

3. Legal implications negligible Hiring: careful selection is important because of legal implications of incompetent hiring. For example: Equal employment opportunities (EEO) legislation a court decision requires you to systematically evaluate. Your selection procedures’ effectiveness to ensure that you are not unfairly discriminating against any protected group. The courts are also increasingly finding employers liable when employees with criminal records take an advantage of having access to customers’ homes and thereby to commit crimes. Hiring workers with such backgrounds without proper safeguards is called negligent hiring.

Steps against negligent hiring include: Carefully scrutinize all information provided by the applicant through his

application e.g., unexplained gaps in employment. Obtain written authorization of the applicant for reference checks from

employees and former employers. Save all records and information you obtain about the applicant during

each stage of selection process. Reject applicants who make false statements of material facts regarding

conviction and other offences. Keep in mind the need to balance the applicants’ privacy rights with

others “need to know” especially when damaging information is discovered.

Take immediate disciplinary action if problems develop.

APPRAISING PERFORMANCE

Performance appraisal is defined as evaluating an employee’s current or past performance relative to his or her performance standards. The appraisal process therefore involves: (1) setting work standards; (2) assessing the employee’s actual performance relative to these

standards; and

(3) Providing feedback to the employee with the aim of motivating that person to eliminate performance deficiencies or to continue to perform above par.

WHY APPRAISE PERFORMANCEThere are four reasons. First, appraisals provide information upon which promotion and salary

decisions can be made. Second, they provide an opportunity for you and your subordinate to

review the subordinate’s work-related behavior. This in turn lets both of you develop a plan for correcting any deficiencies the appraisal might have unearthed, and reinforce the things being done right.

Third, the appraisal is part of the firm’s career-planning process, because it provides an opportunity to review the person’s career plans in light of his or her exhibited strengths and weaknesses.

Finally (and in keeping with reasons 1 through 3 above), appraisals can, as we’ll see, help you better manage and improve your organization’s performance.

THE SUPERVISOR’S ROLE IN APPRAISALAppraising performance is a crucial supervisory skill. The supervisor – not HR – usually does the actual appraising, and a supervisor who rates his or her employees too high or low is doing a disservice to them, to the company, and to him – or herself as well. Supervisors must therefore be familiar with basic appraisal techniques, understand and avoid problems that can cripple appraisals, and know how to conduct appraisals fairly.

THE BEST PERFORMANCE APPRAISAL SYSTEMThe best performance appraisal systems, as we’ll see, are those in which the supervisor or manager makes an ongoing effort to coach and monitor employees, instead of leaving evaluation to the last minute.

STEPS IN APPRAISING PERFORMANCEThe performance appraisal process contains three steps: define the job, appraise performance, and provide feedback. (1) Defining the job means making sure that you and your subordinate

agree on his or her duties and job standards. (2) Appraising performance means comparing your subordinate’s actual

performance to the standards that have been set; this usually involves some type of rating form.

(3) Performance appraisal usually requires one or more feedback sessions. Here the subordinate’s performance and progress are discussed and plans are made for any development that is required.

PERFORMANCE APPRAISAL PROBLEMSWhen appraisals fail, they do so for reasons that parallel these three steps – defining the job, appraising performance, and providing feedback. Some fail because subordinates are not told ahead of time exactly what is

expected of them in terms of good performance.

Others fail because of problems with the forms or procedures used to actually appraise the performance; a lenient supervisor might rate all subordinates “high”, for instance, although many are actually unsatisfactory.

Still other problems arise during the interview-feedback session; these include arguing and poor communication. Let’s look first at defining the job.

APPRAISAL METHODSA scale that lists a number of traits and a range of performance for each, the employee is then rated by identifying the score that best describes his or her level of performance for each trait.

1. Graphic Rating Scale MethodThe graphic rating scale is the simplest and most popular technique for appraising performance. Figure 9-2 (P-324) shows a typical rating scale. It lists traits (such as quality and reliability) and a range of performance values (from unsatisfactory to outstanding) for each trait. The supervisor rates each subordinate by circling or checking the score that best describes his or her performance for each trait. The assigned values for the traits are then totaled.

2. Alternation Ranking Method Ranking employees from best to worst on a trait or traits is another method for evaluating employees. Since it is usually easier to distinguish between the worst and best employees than just rank them, an alternation ranking method is most popular. First, list all subordinates to be rated, and then cross out the names of any not known well enough to rank. 3. Paired Comparison Method (Ranking employees by making a chart of all possible pairs of the employees for each trait and indicating which the better employee of the pair is. The paired comparison method helps make the ranking method more

precise. For every trait (quantity of work, quality of work, and so on), every subordinate is paired with and compared to every other subordinate.

Suppose there are five employees to be rated. In the paired comparison method you make a chart, as in figure 9-5, (P-328) of all possible pairs of employees for each trait. Then for each trait indicate (with a + or -) who is the better employee of the pair. Next the number of times an employee is rated better is added up.

4. Forced Distribution Method The forced distribution method is similar to grading on a curve. With this method, predetermined percentages of rates are placed in performance categories. For example, you may decide to distribute employees as follows:(1) 15% high performers(2) 20% high-average performers(3) 30% average performers(4) 20% low-average performers(5) 15% low performers

(Although the proportions in each category need not to be symmetrical), As at school, forced distribution means not everyone can get an “A”, and that one’s performance is always rated relative to one’s peers.

5. Critical Incident MethodWith the critical incident method, the supervisor keeps a log of desirable or undesirable examples or incidents of each subordinate’s work-related behavior. Then every 6 months or so, the supervisor and subordinate meet and discuss the latter’s performance using the specific incidents as examples.

This method has following advantages: It provides you with specific hard examples of good and poor performance

for explaining the appraisal. It ensures that you think about the subordinate’s appraisal all during the

year because the incidents must be accumulated; therefore, the rating does not just reflect the employee’s most recent performance (we’ll return to this important point below).

Keeping a running list of critical incidents should also provide concrete examples of what specifically your subordinate can do to eliminate any performance deficiencies.

However, this method is not too useful by itself for comparing employees or for making salary decisions.

PERSONNEL PLANNING & RECRUITINGHuman Resource Planning (HRP) the system of matching the supply of people – internally (existing employees) - and externally (those to be hired or searched for)With the openings the organization expects to have over a given time frame” Byars and Rue (2000)

PERSONNEL PLANNING: is based on:Internal Plans: Internal Plans for recruitment, selection, training, placement and appraisal External Plans: it should be part of organization’s overall planning process: New business: adding more employees To build new plants: to reduce number of employees due to closure of

some branches / plants etc. To reduce level of activities -

THE RECRUITMENT & SELECTION PROCESSThe personnel planning are the first step in the recruiting and selection process which focuses on the following activities:

Do employment planning and forecasting to determine the duties of the position to be filled.

Build a pool of candidates for these jobs by recruiting internal or external candidates.

Have applicants fill out application forms and perhaps undergo an initial screening interview.

Utilize various selection techniques such as, tests, background investigations and physical examinations to identify viable job candidates.

Send one or more viable job candidates to the supervisor responsible for the job.

Have the candidate(s) go through one or more selection interviews with the supervisor and other relevant parties for the purpose of finally determining to which candidate(s) an offer should be made.

HOW TO FORECAST PERSONNEL NEEDS

Factors:

Overall Organizational

Plans

Job Analysis

What Staff do we need to do the job?

What staff is available within the

organization?

What is impact on wage and salary

system?

Is there a match

If not, what type of people do we need & how should we recruit them.

Performance AppraisalCompany data banksTrainingEmployees & Management Development

A part from expected demand of your product or service, sales demand is estimated first. The staff required to achieve this volume of output is estimated. In addition, you will have to consider the following factors:

Projected turnover (as a result of terminations and resignations) Quality and skills of your employees with reference to changing needs of

your organizations. Decisions to upgrade the quality of products or services or enter into new

markets. Technological and other changes resulting in increased productivity. The financial resources available.

METHODS/TECHNIQUES FOR FUTURE FORECASTING OF PERSONNEL REQUIREMENTS

1. Trend Analysis: You need to study firm’s employment position over the last five year or so to predict the future needs.

2. Ratio Analysis: A forecasting technique for determining future staff needs by using ratios between sales volumes and number of employees needed.

3. The Scatter Plot: “In another option”

RESOURCES SUPPLY FORECASTING (INSIDE) THE ORGANIZATION1. Current Inventory2. Productivity Level3. Turnover Rate4. Absenteeism5. Movement among jobs

RESOURCES SUPPLY FORECASTING (OUTSIDE) THE ORGANIZATION1. General economic conditions2. Local market conditions3. Occupational market