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PROJECT REPORT ON TOTAL QUALITY MANAGEMENT
CONCEPTUALIZATION This is Total Quality Management Project Report. Human resource is the most important factor for any organization and success of any Organization is depending upon its resource .If human resource of organization is not happy with the organization. It will adversely affect the organization.
The higher degree of commitment toward work will improve productivity and will decrease rejection cause due to human factor.
So to make the people happy is the responsibility of the organization. So this study is helpful to measure the level of commitment toward work and to know the factor affecting the commitment level .
QUALITY:-
1. Quality means fit ness for use.
2. Quality means productivity, competitive cost, and timely delivery, total customer satisfaction.
3. Quality means conformance to specification and standard.
4. Conformance to requirements.
5. Quality is what the customer says
6. Quality means getting every one to do what they have agreed to do and to do it right the first time and every time.
TOTAL QUALITY :-
It means all the people of the organization are committed to product quality by doing right things right, first time, every time by employing organization resource to provide value to customer.
TOTAL QUALITY MANAGEMENT: -
It is the process designed to focus external/internal customer expectation preventing problems building ,commitment to quality in the workforce and promoting to open decision making.
TOTAL:
Every one associated with the company is involved in continuous improvement, in all functional area, at all level.
QUALITY:
Customer express and implied requirement is met fully.
MANAGEMENT:
Executive are fully committed
Decision in a planned way.
To maintain existing lever of quality.
To improve existing lever of quality.
Effective utilization of resource.
PRINCIPLES OF TQM:-
1.Delight the customer
2. Management by fact
3. People based management
4. Continuous improvement
5. Strong leadership
6. Quality system measure& record
7. Team work, Team accountable, correct problem
8. People oriented technology, speed.
FOUR C’S OF TQM
1. Commitment 2. Comptence
3. Communication 4. Continuous improvement
FACTOR AFFECTED THE COMMITMENT OF THE EMPLOYEES:-
General worker attitude toward the company.
General worker attitude toward the supervisor.
Lever of satisfaction toward job standard.
The lever of consideration the supervisor shows to his subordination.
The workload & work pressure level.
The treatment of individual by the management
The lever of worker’s satisfaction with the salaries
The level of worker pride in the company and its activity
Worker reaction to the formal communication network in the organization.
Intrinsic job satisfaction level of the worker.
Worker attitude toward the fellow worker.
OPERATIONALISATION OF THE
CONCEPT:-
I have studied on impact of employee’s commitment toward. I have explained earlier.
In the company, they already have implemented TQM so through this study, I measured the degree of implementation in the organization and what are the factor that are affected the commitment lever and to check how much they are satisfaction with the TQM implement.
For this purpose, I have made the questionnaire which consisting of multiple-choice questions. I have collected the data from them and after that I have tabulated them and interpreted them and give the recommendation.
Focus of the problem:The main emphasis will be on to find out quality employee’s commitment toward their work as a result total quality implementation.
Review of Existing literature: Many people have work on this topic. They sum up various finding. They found that apply TQM has directly increased their morale; increase the satisfaction lever and commitment toward their work. These are the finding of various researchers.
Several articles have been published in different journals , magazines and newspaper such as HARVARD BUSINESS REVIEW,THE ECONOMIC TIMES,VIKALPA etc.
But the effect of TQM on employees commitment in the company has so far not undertaken. This project has been done first time in the company.
LIMITATION
~Employees of the organization may hide the fact.
~The management did not agree to disclose all the confidential data.
~Number of respondents are very less, so clear conclusion can’t be
drawn.
OBJECTIVE OF THE STUDY:-
The objectives of this study are:
1.To find the degree of TQM implemented in the organization.
2.To study the level of commitment of employees toward their work.
3. To find out factor influencing the commitment.
RESEARCH METHODOLOGY
Research methodology is a way to solve the research problem in a systematic manner. It may understand as a science of studying how the research is done
significantly. The methodology may differ from problem to problem, yet the basic approach towards the research remains the same. The sequence or steps followed have been explained as under:
UNIVERSE AND SURVAY POPULATION
The universe is the employee working at mill. I have selected 100 employee 40 FROM THE STAFF,60 FROM THE WORKER for the survey.
RESEARCH DESIGN
This research is of EXPLORATARY RESEARCH DESIGN .I have used the
questionnaire method for collecting the data.
ANALYSIS PATTERN
Data collection:
This data is primary data, which I have been collected with the help of
questionnaire. I have prepared a questionnaire on the basis of the factors
responsible for employee’s commitment in the organization.
MACRO ANALYSIS (Inferences &Interpretation)
The detailed analyses of the results are explained below:
MOST OF EMPLOYEES FEELS THAT:
Most of the staff member and worker feel that organization is quality conscious toward the employees. This also increases their commitment toward the work and toward the organization.
Some of the employee’s feel that thy have proper information about the policies, practices followed in the organization. But some of employees feel that there is no proper communication.
Most of the facts related with the organization are hided by the management from the employees.
Most of the employees feel that they don’t get rewarded for their good performance.
Most of the staffs member feel that their performance is properly measured in the organization.
RECCOMENDATIONS
The suggestions I have given for the betterment are explained below:
It is very important to provide the opportunity to the employees of the
organization to express their ideas or whatever they want to express.
Management should clear their vision mission and goals towards the employees
in the organization.
Management should involve the workers representatives in managerial activities
so that the transparency could be maintained and through this they can win the
confidence of the employees.
Management should give due importance to mental relaxation &social cultural
development of an employees who strives hard for the company.
Reward or Praise/appreciation works as magic for an individual and motivates
them for work.
Role clarity of each position should be defined and based on that individuals can
plan their work accordingly.
Self-potential system should be encouraged.
There are regular review and comparison of current & past performance to detect
gradual deterioration in the strategy.
Proper cooperation should be necessary in the company.
NOTE: THIS QUESTIONNAIRE IS PURELY FOR ACADEMIC PURPOSES.
ALL THE INFORMATION PROVIDED WOULD BE KEPT CONFIDENTIAL.
Do you think the organization is quality conscious toward employees?
YES NO
Does the organization have the certification of ISO 9000?
YES NO
Is the organization providing quality assurance system & operation?
YES NO
Does the organization have quality circle?
YES NO
How many people are involved in quality circle?
Below 10 above 10 above 15 can’t say
How frequently the organizations have the meeting of quality circle?
Weekly biweekly monthly yearly
Do you about the agenda of information or any other information?
YES NO
Are the organization is going for the quality audit?
YES NO can’t say
Does your organization have quality information system?
YES NO can’t say
Are the information system is regularly updated?
YES NO can’t say
Do you think the organization used bench marking, if any, please tell me the name of the benchmark organization?
YES NO can’t say
If yes, then
Org. Area
a.
b.
Does the organization is going for the brain storming session?
YES NO don’tknow
Are you practicing the 5’s Japanese philosophy ?
YES NO
Does the organization have the certification of ISO 14000 or any other, if any please mention?
YES NO don’tknow
Are you practicing the six sigma for the error control?
YES NO don’tknow
A formal career planning process exist in the organization
Strongly Agree Strongly disagree
Don’t know Agree Disagree
There is a shared vision of where your business is growing?
Strongly Agree Strongly disagree
Don’t know Agree Disagree
Employees are kept updated with changes in job skills & job designs?
Strongly Agree Strongly disagree
Don’t know Agree Disagree
Formal or informal method is followed for employees feedback and acting on that feedback?
Strongly Agree Strongly disagree
Don’t know Agree Disagree
Does the organization provide right environment to apply your knowledge from new programs to the job?
Very much Some whatLittle
Not at all
Do you feel that the organization is a good place to work?
Yes No Sometimes
Do you feel comfortable with rules and policy of the organization?
Yes No Sometimes
What types of relations are you having with your superior, peers and subordinates?
Good Average Poor
If bad then why it is so?
They are not cooperating.
Their behavior is not good
There is no proper communication.
All above
Do you feel that you can get ahead in the org. if you make an effort?
Yes No Sometimes
Do you get any reward on your good performance?
Yes No Sometimes
Do you find that your performance is properly measured in the organization?
Yes No Sometimes
Do you find that your job makes the best use of your abilities?
Yes No Some Times
Thank you for your kind co-operation.
Find the Next Chapter - objective_wise_analysis of total quality
management ..............
Project Report on Total
Quality Management [TQM]
OBJECTIVE WISE ANALYSIS
(Micro Analysis)
The analysis according to the objectives are explained below:
Do you think that this organization is QUALITY conscious
toward employees?
A. Yes
B. No
Staff % Workers %
A 87 65
B 13 25
This shows that about 87% staff and 65% worker agreed that organization is quality
conscious toward employees.
Does the organization have the certification of ISO 9000?
A. Yes
B. No
Staff % Worker %
A. 100 67
B. 0 33
This shows that 100% staff and 70% worker said that the organization have the
certification of ISO 9000.
Is the organization provide quality assurance system& operation
A. Yes
B. No
Staff % Worker %
A. 80 58
B. 20 42
This shows that 80% staff& app.65% worker think that organization
providing quality assurance system &operation.
Does the organization have the quality circle?
A. Yes
B. No
Staff % Worker %
A. 87 46
B. 13 54
It shows that app.90% staff & 46% worker agreed with the statement . 54%
workers said they don’t know about this.
How many people are involved in the quality circle?
A. Below 10 B.Above 10
C. Above 15 D. Can’t say
Staff % Worker%
A. 22 36
B. 54 28
C. 14 22
D. 10 14
It shows that about 54% staff says there are above 10 member in the quality
circle.
How frequently the organization have the meeting of quality circle ?
A. Weekly B. Biweekly
C. Monthly D. Yearly
Staff % Worker%
A. 17 35
B. 57 42
C. 26 23
D. 0 0
It shows that app.60 % staff & 42% worker says organization have the
biweekly meeting of quality circle.
Do you know about the agenda of information or any other
information?
A. Yes
B. No
Staff % Worker %
A. 60 14
B. 40 86
Above graph shows that 60% staff say that
they know about the agenda of the information but 86% worker say they
don’t know about this.
Are the organization s going for the quality audit?
A. Yes
B. No
C. Can’t say
Staff % Worker %
A. 85 26
B. 10 24
C 5 50
Above shows that 85% staff &26% worker says that organization is going for quality
audit but 50% worker says they don’t know about the quality audit.
Does the organization s have quality information system?
A. Yes
B. No
C. Can’t say
Staff % Worker %
A. 95 15
B. 0 31
C 5 54
Above shows that 95% staff says that organization have quality information system
&54 % worker says they don’t know about this.
Are the information system is regularly updated?
A. Yes
B. No
C. Can’t say
Staff % Worker %
A. 69 55
B. 11 11
C 20 34
About 70 % staff & 55% worker says that organization regularly updated.
Do you think the organization s used benchmarking?
D. Yes
E. No
F. Can’t say
Staff % Worker %
A. 30 8
B. 25 0
C 45 92
This shows that 95%staff says that organization have quality information system but 54%
worker say they don’t know about this.
Does the organization s is going for brain storming session?
A. Yes
B. No
C. Don’t know
Staff % Worker %
A. 70 3
B. 13 0
C 17 97
Above table shows that 70%staff agreed with the statement.but 97% worker say they
don’t know about this.
Are the organization is practicing the 5’s Japanese philosophy?
A. Yes
B. No
Staff % Worker %
A. 90 26
B. 10 74
It shows that about the 90% staff and 26% worker says they are practicing
this but 74% workers don’t know about this.
Does the organization has the certification of ISO 14000 ?
A. Yes
B. No
C. Don’t know
Staff % Worker %
A. 100 53
B. 0 16
C 0 31
It shows that all of the respondent of staff & most of the worker category
says that organization have ISO 14000.
A formal planning process exist in the organization?
A. Strongly agree
B. Strongly disagree
C. Don’t know
D. Agree
E. Disagree
Staff % Workers %
A 18 7
B 12 30
C 20 46
D 30 7
E 20 10
It shows that about 50% of the respondent are agree with the statement but
in worker category most of them are either disagree or don’t know.
There is a shared vision of where the business is growing?
A. Strongly agree
B. Strongly disagree
C. Don’t know
D. Agree
E. Disagree
Staff % Workers %
A 22 7
B 5 13
C 25 40
D 45 13
E 3 27
It shows that about 50% staff of the respondent are agree with the statement
but in worker category app.60% disagree with the statement.
Employees are keep updating with change in the job skill & job design?
A. Strongly agree
B. Strongly disagree
C. Don’t know
D. Agree
E. Disagree
Staff % Workers %
A 10 3
B 5 15
C 10 13
D 55 45
E 20 24
It shows that app. 70% respondents are agree with the statement .
Formal& informal method is followed for employees feedback &
acting on that feedback?
A. Strongly agree B. Strongly disagree C. Don’t know
D.Agree E. Disagree
Staff % Workers %
A 15 2
B 5 21
C 0 7
D 70 40
E 10 30
Above table shows that app. 80% respondents of the staff and 45% from
worker said that there are proper feedback system. are agree with the
statement .
Does the organization provide right environment to apply knowledge
from new programs to the job?
A. Strongly agree B.Strongly disagree C. Don’t know
D. Agree E. Disagree
Staff % Workers %
A 5 5
B 75 28
C 10 13
D 7 46
E 3 8
Above table shows that 75% staff and 50% from worker said that organization provide the right environment to apply knowledge to the job Proper feedback system. are agree with the statement .
Do you feel that this organization is a good place to work?
A. Yes
B. No
C. Can’t say
Staff % Workers %
A 80 58
B 5 36
C 15 8
It shows that 80% staff&58% worker agreed with the statement.
Do you feel comfortable with the rules and policies of the
organization?
A. Yes
B. No
C. Some times
Staff % Worker %
A. 55 47
B. 20 40
C. 25 13
It shows that the employees of the staff category are more satisfied with
the rules and policies of the organization then employees from the
workers category.
What type of relations are you having with your superiors, peers
and subordinates?
A. Good
B. Average
C. Poor
Staff Workers
A. 90 34
B. 10 50
C. 0 16
It shows that most of the employees from the staff category are having
good relationships with their superiors. But most of the workers are
having only satisfactory relationships.
If bad, then why it is so?
A. They are not co-operating with you
B. There behavior is not good
C. There is not proper communication.
D. All of the above
Workers
A. 10
B. 27
C. 18
D. 45
It shows that most of the worker take misbehaviour from their superior.
Do you feel that you can get ahead in the organization if you make efforts?
A. Yes B. No C. Sometimes
Staff Workers
A. 45 24
B. 25 72
C. 30 4
This shows that most of the workers feels that they cant get ahead in the organization if they work hard but the attitude of employees of staff is just opposite.
Do you get reward on your good performance?
A. Yes
B. No
C. Sometimes
Staff % Workers %
A. 30 22
B. 65 68
C. 5 10
This shows that most of the staff members or workers have not get
reward in the organization on their good performance.
Do you feel that your performance is measured properly in the
organization?
A. Yes
B. No
C. Sometimes
Staff % Workers %
A. 45 26
B. 40 67
C. 15 7
Most of the staff members thinks that their performance is properly
measured in the organization but the workers feels just opposite of it
Do you find that your job makes the best use of your abilities?
(For Managers)
A. Yes
B. No
C. Sometimes
Staff
A. 55
B. 30
C. 15
It shows that most of the staff members are feels that their job makes
the best use of their abilities.
Objective of Project Report : The main objective of the Project Report is Find the Ratio Analysis of company. And sub objectives of this report is understand the Meaning
of Ratio, Pure Ratio or Simple Ratio, Advantages of Ratio Analysis, Limitations of Ratio Analysis, classification of Ratio, Liquidity Ratio, Profitability Ratio or Income
Ratio, Activity & Turnover Ratio, Return on Capital Employed
RATIO ANALYSIS
Meaning of Ratio:- A ratio is simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions.
According to Accountant’s Handbook by Wixon, Kell and Bedford, “a ratio is an expression of the quantitative relationship between two numbers”.
Ratio Analysis:- Ratio analysis is the process of determining and presenting the relationship of items and group of items in the statements. According to Batty J. Management Accounting “Ratio can assist management in its basic functions of forecasting, planning coordination, control and communication”.
It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is helpful tool to aid in applying judgement, otherwise complex situations.
Ratio analysis can represent following three methods.
Ratio may be expressed in the following three ways :
1. Pure Ratio or Simple Ratio :- It is expressed by the simple division of one number by another. For example , if the current assets of a business are Rs. 200000 and its current liabilities are Rs. 100000, the ratio of ‘Current assets to current liabilities’ will be 2:1.
2. ‘Rate’ or ‘So Many Times :- In this type , it is calculated how many times a figure is, in comparison to another figure. For example , if a firm’s credit sales during the year are Rs. 200000 and its debtors at the
end of the year are Rs. 40000 , its Debtors Turnover Ratio is 200000/40000 = 5 times. It shows that the credit sales are 5 times in comparison to debtors.
3. Percentage :- In this type, the relation between two figures is expressed in hundredth. For example, if a firm’s capital is Rs.1000000 and its profit is Rs.200000 the ratio of profit capital, in term of percentage, is 200000/1000000*100 = 20%
ADVANTAGE OF RATIO ANALYSIS
1. Helpful in analysis of Financial Statements.
2. Helpful in comparative Study.
3. Helpful in locating the weak spots of the business.
4. Helpful in Forecasting.
5. Estimate about the trend of the business.
6. Fixation of ideal Standards.
7. Effective Control.
8. Study of Financial Soundness.
LIMITATIONS OF RATIO ANALYSIS
1. Comparison not possible if different firms adopt different
accounting policies.
2. Ratio analysis becomes less effective due to price level
changes.
3. Ratio may be misleading in the absence of absolute data.
4. Limited use of a single data.
5. Lack of proper standards.
6. False accounting data gives false ratio.
7. Ratios alone are not adequate for proper conclusions.
8. Effect of personal ability and bias of the analyst.
CLASSIFICATION OF RATIO
Ratio may be classified into the four categories as follows:
A. Liquidity Ratio
a. Current Ratio
b. Quick Ratio or Acid Test Ratio
B. Leverage or Capital Structure Ratio
a. Debt Equity Ratio
b. Debt to Total Fund Ratio
c. Proprietary Ratio
d. Fixed Assets to Proprietor’s Fund Ratio
e. Capital Gearing Ratio
f. Interest Coverage Ratio
C. Activity Ratio or Turnover Ratio
a. Stock Turnover Ratio
b. Debtors or Receivables Turnover Ratio
c. Average Collection Period
d. Creditors or Payables Turnover Ratio
e. Average Payment Period
f. Fixed Assets Turnover Ratio
g. Working Capital Turnover Ratio
D. Profitability Ratio or Income Ratio
(A) Profitability Ratio based on Sales :
a. Gross Profit Ratio
b. Net Profit Ratio
c. Operating Ratio
d. Expenses Ratio
(B) Profitability Ratio Based on Investment :
I. Return on Capital Employed
II. Return on Shareholder’s Funds :
a. Return on Total Shareholder’s Funds
b. Return on Equity Shareholder’s Funds
c. Earning Per Share
d. Dividend Per Share
e. Dividend Payout Ratio
f. Earning and Dividend Yield
g. Price Earning Ratio
LIQUIDITY RATIO
(A) Liquidity Ratio:- It refers to the ability of the firm to meet its current liabilities. The liquidity ratio, therefore, are also called ‘Short-term Solvency Ratio’. These ratio are used to assess the short-term financial position of the concern. They indicate the firm’s ability to meet its current obligation out of current resources.
In the words of Saloman J. Flink, “Liquidity is the ability of the firms to meet its current obligations as they fall due”.
Liquidity ratio include two ratio :-
a. Current Ratio
b. Quick Ratio or Acid Test Ratio
a. Current Ratio:- This ratio explains the relationship between current assets and current liabilities of a business.
Formula:
Current Ratio = Current Assets/
Current Liabilities
Current Assets:-‘Current assets’ includes those assets which can be converted into cash with in a year’s time.
Current Assets = Cash in Hand + Cash at Bank + B/R + Short Term Investment + Debtors(Debtors – Provision) + Stock(Stock of Finished Goods + Stock of Raw Material + Work in Progress) + Prepaid Expenses.
Current Liabilities :- ‘Current liabilities’ include those liabilities which are repayable in a year’s time.
Current Liabilities = Bank Overdraft + B/P + Creditors + Provision for Taxation + Proposed Dividend + Unclaimed Dividends + Outstanding Expenses + Loans Payable with in a Year.
Significance :- According to accounting principles, a current ratio of 2:1 is supposed to be an ideal ratio.
It means that current assets of a business should, at least , be twice of its current liabilities. The higher ratio indicates the better liquidity position, the firm will be able to pay its current liabilities more easily. If the ratio is less than 2:1, it indicate lack of liquidity and shortage of working capital.
The biggest drawback of the current ratio is that it is susceptible to “window dressing”. This ratio can be improved by an equal decrease in both current assets and current liabilities.
b. Quick Ratio:- Quick ratio indicates whether the firm is in a position to pay its current liabilities with in a month or immediately.
Formula:
Quick Ratio = Liquid Assets/ Current Liabilities
‘Liquid Assets’ means those assets, which will yield cash very shortly.
Liquid Assets = Current Assets – Stock – Prepaid Expenses
Significance :- An ideal quick ratio is said to be 1:1. If it is more, it is considered to be better. This ratio is a better test of short-term financial position of the company.
LEVERAGE OR CAPITAL STRUCTURE RATIO
(B) Leverage or Capital Structure Ratio :- This ratio disclose the firm’s ability to meet the interest costs regularly and Long term indebtedness at maturity.
These ratio include the following ratios :
a. Debt Equity Ratio:- This ratio can be expressed in two ways:
First Approach : According to this approach, this ratio expresses the relationship between long term debts and shareholder’s fund.
Formula:
Debt Equity Ratio=Long term Loans/Shareholder’s Funds or Net Worth
Long Term Loans:- These refer to long term liabilities which mature after one year. These include Debentures, Mortgage Loan, Bank Loan, Loan from Financial institutions and Public Deposits etc.
Shareholder’s Funds :- These include Equity Share Capital, Preference Share Capital, Share Premium, General Reserve, Capital Reserve, Other Reserve and Credit Balance of Profit & Loss Account.
Second Approach : According to this approach the ratio is calculated as follows:-
Formula:
Debt Equity Ratio=External Equities/internal Equities
Debt equity ratio is calculated for using second approach.
Significance :- This Ratio is calculated to assess the ability of the firm to meet its long term liabilities. Generally, debt equity ratio of is considered safe.
If the debt equity ratio is more than that, it shows a rather risky financial position from the long-term point of view, as it indicates that more and more funds invested in the business are provided by long-term lenders.
The lower this ratio, the better it is for long-term lenders because they are more secure in that case. Lower than 2:1 debt equity ratio provides sufficient protection to long-term lenders.
b. Debt to Total Funds Ratio : This Ratio is a variation of the debt equity ratio and gives the same indication as the debt equity ratio. In the ratio, debt is expressed in relation to total funds, i.e., both equity and debt.
Formula:
Debt to Total Funds Ratio = Long-term Loans/Shareholder’s funds + Long-term Loans
Significance :- Generally, debt to total funds ratio of 0.67:1 (or
67%) is considered satisfactory. In other words, the proportion of long term loans should not be more than 67% of total funds.
A higher ratio indicates a burden of payment of large amount of interest charges periodically and the repayment of large amount of loans at maturity. Payment of interest may become difficult if profit is reduced. Hence, good concerns keep the debt to total funds ratio below 67%. The lower ratio is better from the long-term solvency point of view.
c. Proprietary Ratio:- This ratio indicates the proportion of total funds provide by owners or shareholders.
Formula:
Proprietary Ratio = Shareholder’s Funds/Shareholder’s Funds + Long term loans
Significance :- This ratio should be 33% or more than that. In other words, the proportion of shareholders funds to total funds should be 33% or more.
A higher proprietary ratio is generally treated an indicator of sound financial position from long-term point of view, because it means that the firm is less dependent on external sources of finance.
If the ratio is low it indicates that long-term loans are less secured and they face the risk of losing their money.
d. Fixed Assets to Proprietor’s Fund Ratio :- This ratio is also know as fixed assets to net worth ratio.
Formula:
Fixed Asset to Proprietor’s Fund Ratio = Fixed Assets/Proprietor’s Funds (i.e., Net Worth)
Significance :- The ratio indicates the extent to which proprietor’s (Shareholder’s) funds are sunk into fixed assets. Normally , the purchase of fixed assets should be financed by proprietor’s funds. If this ratio is less than 100%, it would mean that proprietor’s fund are more than fixed assets and a part of working capital is provided by the proprietors. This will indicate the long-term financial soundness of business.
e. Capital Gearing Ratio:- This ratio establishes a relationship between equity capital (including all reserves and undistributed profits) and fixed cost bearing capital.
Formula:
Capital Gearing Ratio = Equity Share Capital+ Reserves + P&L Balance/ Fixed cost Bearing Capital
Whereas, Fixed Cost Bearing Capital = Preference Share Capital + Debentures + Long Term Loan
Significance:- If the amount of fixed cost bearing capital is more than the equity share capital including reserves an undistributed profits), it will be called high capital gearing and if it is less, it will be called low capital gearing.
The high gearing will be beneficial to equity shareholders when the rate of interest/dividend payable on fixed cost bearing capital is lower than the rate of return on investment in business.
Thus, the main objective of using fixed cost bearing capital is to maximize the profits available to equity shareholders.
f. Interest Coverage Ratio:- This ratio is also termed as ‘Debt Service Ratio’. This ratio is calculated as follows:
Formula:
Interest Coverage Ratio = Net Profit before charging interest and tax / Fixed Interest Charges
Significance :- This ratio indicates how many times the interest charges are covered by the profits available to pay interest charges.
This ratio measures the margin of safety for long-term lenders.
This higher the ratio, more secure the lenders is in respect of payment of interest regularly. If profit just equals interest, it is an unsafe position for the lender as well as for the company also , as nothing will be left for shareholders.
An interest coverage ratio of 6 or 7 times is considered appropriate.
ACTIVITY RATIO OR TURNOVER RATIO
(C) Activity Ratio or Turnover Ratio :- These ratio are calculated on the bases of ‘cost of sales’ or sales, therefore, these ratio are also called as ‘Turnover Ratio’. Turnover indicates the speed or number of times the capital employed has been rotated in the process of doing business. Higher turnover ratio indicates the better use of capital or resources and in turn lead to higher profitability.
It includes the following :
a. Stock Turnover Ratio:- This ratio indicates the relationship between the cost of goods during the year and average stock kept during that year.
Formula:
Stock Turnover Ratio = Cost of Goods Sold / Average Stock
Here, Cost of goods sold = Net Sales – Gross Profit
Average Stock = Opening Stock + Closing Stock/2
Significance:- This ratio indicates whether stock has been used or not. It shows the speed with which the stock is rotated into sales or the number of times the stock is turned into sales during the year.
The higher the ratio, the better it is, since it indicates that stock is selling quickly. In a business where stock turnover ratio is high, goods can be sold at a low margin of profit and even than the profitability may be quit high.
b. Debtors Turnover Ratio :- This ratio indicates the relationship between credit sales and average debtors during the year :
Formula:
Debtor Turnover Ratio = Net Credit Sales / Average Debtors + Average B/R
While calculating this ratio, provision for bad and doubtful debts is not deducted from the debtors, so that it may not give a false impression that debtors are collected quickly.
Significance :- This ratio indicates the speed with which the amount is collected from debtors. The higher the ratio, the better it is, since it indicates that amount from debtors is being collected more quickly. The more quickly the debtors pay, the less the risk from bad- debts, and so the lower the expenses of collection and increase in the liquidity of the firm.
By comparing the debtors turnover ratio of the current year with the previous year, it may be assessed whether the sales policy of the management is efficient or not.
c. Average Collection Period :- This ratio indicates the time with in which the amount is collected from debtors and bills receivables.
Formula:
Average Collection Period = Debtors + Bills Receivable / Credit Sales per day
Here, Credit Sales per day = Net Credit Sales of the year / 365
Second Formula :-
Average Collection Period = Average Debtors *365 / Net Credit Sales
Average collection period can also be calculated on the bases of ‘Debtors Turnover Ratio’. The formula will be:
Average Collection Period = 12 months or 365 days / Debtors Turnover Ratio
Significance :- This ratio shows the time in which the customers are paying for credit sales. A higher debt collection period is thus, an indicates of the inefficiency and negligency on the part of management. On the other hand, if there is decrease in debt collection period, it indicates prompt payment by debtors which reduces the chance of bad debts.
d. Creditors Turnover Ratio :- This ratio indicates the relationship between credit purchases and average creditors during the year .
Formula:-
Creditors Turnover Ratio = Net credit Purchases / Average Creditors + Average B/P
Note :- If the amount of credit purchase is not given in the question, the ratio may be calculated on the bases of total purchase.
Significance :- This ratio indicates the speed with which the amount is being paid to creditors. The higher the ratio, the better it is, since it will indicate that the creditors are being paid more quickly which increases the credit worthiness of the firm.
d. Average Payment Period :- This ratio indicates the period which is normally taken by the firm to make payment to its creditors.
Formula:-
Average Payment Period = Creditors + B/P/ Credit Purchase per day
This ratio may also be calculated as follows :
Average Payment Period = 12 months or 365 days / Creditors Turnover Ratio
Significance :- The lower the ratio, the better it is, because a shorter payment period implies that the creditors are being paid rapidly.
d. Fixed Assets Turnover Ratio :- This ratio reveals how efficiently the fixed assets are being utilized.
Formula:-
Fixed Assets Turnover Ratio = Cost of Goods Sold/ Net Fixed Assets
Here, Net Fixed Assets = Fixed Assets – Depreciation
Significance:- This ratio is particular importance in manufacturing concerns where the investment in fixed asset is quit high. Compared with the previous year, if there is increase in this ratio, it will indicate that there is better utilization of fixed assets. If there is a fall in this ratio, it will show that fixed assets have not been used as efficiently, as they had been used in the previous year.
e. Working Capital Turnover Ratio :- This ratio reveals how efficiently working capital has been utilized in making sales.
Formula :-
Working Capital Turnover Ratio = Cost of Goods Sold / Working Capital
Here, Cost of Goods Sold = Opening Stock + Purchases + Carriage + Wages + Other Direct Expenses - Closing Stock
Working Capital = Current Assets – Current Liabilities
Significance :- This ratio is of particular importance in non-manufacturing concerns where current assets play a major role in generating sales. It shows the number of times working capital has been rotated in producing sales.
A high working capital turnover ratio shows efficient use of working capital and quick turnover of current assets like stock and debtors.
A low working capital turnover ratio indicates under-utilisation of working capital.
Profitability Ratios or Income Ratios
(D) Profitability Ratios or Income Ratios:- The main object of every business concern is to earn profits. A business must be able to earn adequate profits in relation to the risk and capital invested in it. The efficiency and the success of a business can be measured with the help of profitability ratio.
Profitability ratios are calculated to provide answers to the following questions:
i. Is the firm earning adequate profits?
ii. What is the rate of gross profit and net profit on sales?
iii. What is the rate of return on capital employed in the firm?
iv. What is the rate of return on proprietor’s (shareholder’s) funds?
v. What is the earning per share?
Profitability ratio can be determined on the basis of either sales or investment into business.
(A) Profitability Ratio Based on Sales :
a) Gross Profit Ratio : This ratio shows the relationship between gross profit and sales.
Formula :
Gross Profit Ratio = Gross Profit / Net Sales *100
Here, Net Sales = Sales – Sales Return
Significance:- This ratio measures the margin of profit available on sales. The higher the gross profit ratio, the better it is. No ideal standard is fixed for this ratio, but the gross profit ratio should be adequate enough not only to cover the operating expenses but also to provide for deprecation, interest on loans, dividends and creation of reserves.
b) Net Profit Ratio:- This ratio shows the relationship between net profit and sales. It may be calculated by two methods:
Formula:
Net Profit Ratio = Net Profit / Net sales *100
Operating Net Profit = Operating Net Profit / Net Sales *100
Here, Operating Net Profit = Gross Profit – Operating Expenses such as Office and Administrative Expenses, Selling and Distribution Expenses, Discount, Bad Debts, Interest on short-term debts etc.
Significance :- This ratio measures the rate of net profit earned on sales. It helps in determining the overall efficiency of the business operations. An increase in the ratio over the previous year shows improvement in the overall efficiency and profitability of the business.
(c) Operating Ratio:- This ratio measures the proportion of an enterprise cost of sales and operating expenses in comparison to its sales.
Formula:
Operating Ratio = Cost of Goods Sold + Operating Expenses/ Net Sales *100
Where, Cost of Goods Sold = Opening Stock + Purchases + Carriage + Wages + Other Direct Expenses - Closing Stock
Operating Expenses = Office and Administration Exp. + Selling and Distribution Exp. + Discount + Bad Debts + Interest on Short- term loans.
‘Operating Ratio’ and ‘Operating Net Profit Ratio’ are inter-related. Total of both these ratios will be 100.
Significance:- Operating Ratio is a measurement of the efficiency and profitability of the business enterprise. The ratio indicates the extent of sales that is absorbed by the cost of goods sold and operating expenses. Lower the operating ratio is better, because it will leave higher margin of profit on sales.
(d) Expenses Ratio:- These ratio indicate the relationship between expenses and sales. Although the operating ratio reveals the ratio of total operating expenses in relation to sales but some of the expenses include in operating ratio may be increasing while some may be decreasing. Hence, specific expenses ratio are computed by dividing each type of expense with the net sales to analyse the causes of variation in each type of expense.
The ratio may be calculated as :
(a) Material Consumed Ratio = Material Consumed/Net Sales*100
(b) Direct Labour cost Ratio = Direct labour cost / Net sales*100
(c) Factory Expenses Ratio = Factory Expenses / Net Sales *100
(a), (b) and (c) mentioned above will be jointly called cost of goods sold ratio.
It may be calculated as:
Cost of Goods Sold Ratio = Cost of Goods Sold / Net Sales*100
(d) Office and Administrative Expenses Ratio = Office and Administrative Exp./
Net Sales*100
(e) Selling Expenses Ratio = Selling Expenses / Net Sales *100
(f) Non- Operating Expenses Ratio = Non-Operating Exp./Net sales*100
Significance:- Various expenses ratio when compared with the same ratios of the previous year give a very important indication whether these expenses in relation to sales are increasing, decreasing or remain stationary. If the expenses ratio is lower, the profitability will be greater and if the expenses ratio is higher, the profitability will be lower.
(B) Profitability Ratio Based on Investment in the Business:-
These ratio reflect the true capacity of the resources employed in the enterprise. Sometimes the profitability ratio based on sales are high whereas profitability ratio based on investment are low. Since the capital is employed to earn profit, these ratios are the real measure of the success of the business and managerial efficiency.
These ratio may be calculated into two categories:
I. Return on Capital Employed
II. Return on Shareholder’s funds
I. Return on Capital Employed :- This ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and the capital employed to earn it. This ratio is usually in percentage and is also known as ‘Rate of Return’ or ‘Yield on Capital’.
Formula:
Return on Capital Employed = Profit before interest, tax and dividends/
Capital Employed *100
Where, Capital Employed = Equity Share Capital + Preference Share Capital + All Reserves + P&L Balance +Long-Term Loans- Fictitious Assets (Such as Preliminary Expenses OR etc.) – Non-Operating Assets like Investment made outside the business.
Capital Employed = Fixed Assets + Working Capital
Advantages of ‘Return on Capital Employed’:-
Since profit is the overall objective of a business enterprise, this ratio is a barometer of the overall performance of the enterprise. It measures how efficiently the capital employed in the business is being used.
Even the performance of two dissimilar firms may be compared with the help of this ratio.
The ratio can be used to judge the borrowing policy of the enterprise.
This ratio helps in taking decisions regarding capital investment in new projects. The new projects will be commenced only if the rate of return on capital employed in such projects is expected to be more than the rate of borrowing.
This ratio helps in affecting the necessary changes in the financial policies of the firm.
Lenders like bankers and financial institution will be determine whether the enterprise is viable for giving credit or extending loans or not.
With the help of this ratio, shareholders can also find out whether they will receive regular and higher dividend or not.
II. Return on Shareholder’s Funds :-
Return on Capital Employed Shows the overall profitability of the funds supplied by long term lenders and shareholders taken together. Whereas, Return on shareholders funds measures only the profitability of the funds invested by shareholders.
These are several measures to calculate the return on shareholder’s funds:
(a) Return on total Shareholder’s Funds :-
For calculating this ratio ‘Net Profit after Interest and Tax’ is divided by total shareholder’s funds.
Formula:
Return on Total Shareholder’s Funds = Net Profit after Interest and Tax / Total Shareholder’s Funds
Where, Total Shareholder’s Funds = Equity Share Capital + Preference Share Capital + All Reserves + P&L A/c Balance –Fictitious Assets
Significance:- This ratio reveals how profitably the proprietor’s funds have been utilized by the firm. A comparison of this ratio with that of similar firms will throw light on the relative profitability and strength of the firm.
(b) Return on Equity Shareholder’s Funds:-
Equity Shareholders of a company are more interested in knowing the earning capacity of their funds in the business. As such, this ratio measures the profitability of the funds belonging to the equity shareholder’s.
Formula:
Return on Equity Shareholder’s Funds = Net Profit (after int., tax & preference dividend) / Equity Shareholder’s Funds *100
RATIO ANALYSIS
Where, Equity Shareholder’s Funds = Equity Share Capital + All Reserves + P&L A/c
Balance – Fictitious Assets
Significance:- This ratio measures how efficiently the equity shareholder’s funds are being used in the business. It is a true measure of the efficiency of the management since it shows what the earning capacity of the equity shareholders funds. If the ratio is high, it is better, because in such a case equity shareholders may be given a higher dividend.
(c) Earning Per Share (E.P.S.) :- This ratio measure the profit available to the equity shareholders on a per share basis. All profit left after payment of tax and preference dividend are available to equity shareholders.
Formula:
Earning Per Share = Net Profit – Dividend on Preference Shares / No. of Equity Shares
Significance:- This ratio helpful in the determining of the market price of the equity share of the company. The ratio is also helpful in estimating the capacity of the company to declare dividends on equity shares.
(d) Dividend Per Share (D.P.S. ) :- Profits remaining after payment of tax and preference dividend are available to equity shareholders.
But of these are not distributed among them as dividend . Out of these profits is retained in the business and the remaining is distributed among equity shareholders as dividend. D.P.S. is the dividend distributed to equity shareholders divided by the number of equity shares.
Formula:
D.P.S. = Dividend paid to Equity Shareholder’s / No. of Equity Shares *100
(e) Dividend Payout Ratio or D.P. :- It measures the relationship between the earning available to equity shareholders and the dividend distributed among them.
Formula:
D.P. = Dividend paid to Equity Shareholders/ Total
Net Profit belonging to Equity Shareholders*100
OR
D.P. = D.P.S. / E.P.S. *100
(f) Earning and Dividend Yield :- This ratio is closely related to E.P.S. and D.P.S. While the E.P.S. and D.P.S. are calculated on the basis of the book value of shares, this ratio is calculated on the basis of the market value of share
(g) Price Earning (P.E.) Ratio:- Price earning ratio is the ratio between market price per equity share & earnings per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company & is widely used by investors to decide whether or not to buy shares in a particular company.
Significance :- This ratio shows how much is to be invested in the market in this company’s shares to get each rupee of earning on its shares. This ratio is used to measure whether the market price of a share is high or low.
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Project Report - Working Capital Management
WORKING CAPITAL - Meaning of Working Capital
Capital required for a business can be classified under two main categories via,
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment and to carry out
its day- to-day operations. Long terms funds are required to create production facilities
through purchase of fixed assets such as p&m, land, building, furniture, etc. Investments
in these assets represent that part of firm’s capital which is blocked on permanent or fixed
basis and is called fixed capital. Funds are also needed for short-term purposes for the
purchase of raw material, payment of wages and other day – to- day expenses etc.
These funds are known as working capital. In simple words, working
capital refers to that part of the firm’s capital which is required for financing short- term
or current assets such as cash, marketable securities, debtors & inventories. Funds, thus,
invested in current assts keep revolving fast and are being constantly converted in to cash
and this cash flows out again in exchange for other current assets. Hence, it is also known
as revolving or circulating capital or short term capital.
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
1. Gross working capital
2. Net working capital
The gross working capital is the capital invested in the total current assets of the
enterprises current assets are those
Assets which can convert in to cash within a short period normally one accounting
year.
CONSTITUENTS OF CURRENT ASSETS
1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6. Temporary investment of surplus funds.
7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net
working capital is the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS – CURRENT
LIABILITIES.
Net working capital can be positive or negative. When the current assets
exceeds the current liabilities are more than the current assets. Current liabilities
are those liabilities, which are intended to be paid in the ordinary course of
business within a short period of normally one accounting year out of the
current assts or the income business.
CONSTITUENTS OF CURRENT LIABILITIES
1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation , if it does not amt. to app. Of profit.
6. Bills payable.
7. Sundry creditors.
The gross working capital concept is financial or going concern concept whereas net
working capital is an accounting concept of working capital. Both the concepts have their
own merits.
The gross concept is sometimes preferred to the concept of working capital for the
following reasons:
1. It enables the enterprise to provide correct amount of working capital
at correct time.
2. Every management is more interested in total current assets with
which it has to operate then the source from where it is made
available.
3. It take into consideration of the fact every increase in the funds of the
enterprise would increase its working capital.
4. This concept is also useful in determining the rate of return on
investments in working capital. The net working capital concept,
however, is also important for following reasons:
It is qualitative concept, which indicates the firm’s ability to meet to its
operating expenses and short-term liabilities.
IT indicates the margin of protection available to the short term
creditors.
It is an indicator of the financial soundness of enterprises.
It suggests the need of financing a part of working capital requirement
out of the permanent sources of funds.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in to ways:
o On the basis of concept.
o On the basis of time.
On the basis of concept working capital can be classified as gross working
capital and net working capital. On the basis of time, working capital may be
classified as:
Permanent or fixed working capital.
Temporary or variable working capital
PERMANENT OR FIXED WORKING CAPITAL
Permanent or fixed working capital is minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work- in-process,
finished goods and cash balance. This minimum level of current assts is called permanent
or fixed working capital as this part of working is permanently blocked in current assets.
As the business grow the requirements of working capital also increases due to increase
in current assets.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is required
to meet the seasonal demands and some special exigencies. Variable working capital can
further be classified as seasonal working capital and special working capital. The capital
required to meet the seasonal need of the enterprise is called seasonal working capital.
Special working capital is that part of working capital which is required to meet special
exigencies such as launching of extensive marketing for conducting research, etc.
Temporary working capital differs from permanent working capital in the sense that is
required for short periods and cannot be permanently employed gainfully in the business.
IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL
SOLVENCY OF THE BUSINESS: Adequate working capital helps in
maintaining the solvency of the business by providing uninterrupted of
production.
Goodwill: Sufficient amount of working capital enables a firm to make prompt
payments and makes and maintain the goodwill.
Easy loans: Adequate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favorable terms.
Cash Discounts: Adequate working capital also enables a concern to avail
cash discounts on the purchases and hence reduces cost.
Regular Supply of Raw Material: Sufficient working capital ensures
regular supply of raw material and continuous production.
Regular Payment Of Salaries, Wages And Other Day TO Day
Commitments: It leads to the satisfaction of the employees and raises the
morale of its employees, increases their efficiency, reduces wastage and costs and
enhances production and profits.
Exploitation Of Favorable Market Conditions: If a firm is having
adequate working capital then it can exploit the favorable market conditions such
as purchasing its requirements in bulk when the prices are lower and holdings its
inventories for higher prices.
Ability To Face Crises: A concern can face the situation during the
depression.
Quick And Regular Return On Investments: Sufficient working capital
enables a concern to pay quick and regular of dividends to its investors and gains
confidence of the investors and can raise more funds in future.
High Morale: Adequate working capital brings an environment of securities,
confidence, high morale which results in overall efficiency in a business.
EXCESS OR INADEQUATE WORKING CAPITAL
Every business concern should have adequate amount of working capital to run its
business operations. It should have neither redundant or excess working capital nor
inadequate nor shortages of working capital. Both excess as well as short working
capital positions are bad for any business. However, it is the inadequate working
capital which is more dangerous from the point of view of the firm.
DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL
1. Excessive working capital means ideal funds which earn no profit
for the firm and business cannot earn the required rate of return on
its investments.
2. Redundant working capital leads to unnecessary purchasing and
accumulation of inventories.
3. Excessive working capital implies excessive debtors and
defective credit policy which causes higher incidence of bad debts.
4. It may reduce the overall efficiency of the business.
5. If a firm is having excessive working capital then the relations
with banks and other financial institution may not be maintained.
6. Due to lower rate of return n investments, the values of shares
may also fall.
7. The redundant working capital gives rise to speculative
transactions
DISADVANTAGES OF INADEQUATE WORKING CAPITAL
Every business needs some amounts of working capital. The need for working capital
arises due to the time gap between production and realization of cash from sales. There is
an operating cycle involved in sales and realization of cash. There are time gaps in
purchase of raw material and production; production and sales; and realization of cash.
Thus working capital is needed for the following purposes:
For the purpose of raw material, components and spares.
To pay wages and salaries
To incur day-to-day expenses and overload costs such as office expenses.
To meet the selling costs as packing, advertising, etc.
To provide credit facilities to the customer.
To maintain the inventories of the raw material, work-in-progress, stores and
spares and finished stock.
For studying the need of working capital in a business, one has to study the business
under varying circumstances such as a new concern requires a lot of funds to meet its
initial requirements such as promotion and formation etc. These expenses are called
preliminary expenses and are capitalized. The amount needed for working capital
depends upon the size of the company and ambitions of its promoters. Greater the
size of the business unit, generally larger will be the requirements of the working
capital.
The requirement of the working capital goes on increasing with the growth and
expensing of the business till it gains maturity. At maturity the amount of working
capital required is called normal working capital.
There are others factors also influence the need of working capital in a business.
FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS
1. NATURE OF BUSINESS: The requirements of working is very
limited in public utility undertakings such as electricity, water supply and
railways because they offer cash sale only and supply services not products,
and no funds are tied up in inventories and receivables. On the other hand the
trading and financial firms requires less investment in fixed assets but have to
invest large amt. of working capital along with fixed investments.
2. SIZE OF THE BUSINESS: Greater the size of the business,
greater is the requirement of working capital.
3. PRODUCTION POLICY: If the policy is to keep production steady
by accumulating inventories it will require higher working capital.
4. LENTH OF PRDUCTION CYCLE: The longer the
manufacturing time the raw material and other supplies have to be carried for
a longer in the process with progressive increment of labor and service costs
before the final product is obtained. So working capital is directly proportional
to the length of the manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season,
a firm requires larger working capital than in slack season.
6. WORKING CAPITAL CYCLE: The speed with which the
working cycle completes one cycle determines the requirements of working
capital. Longer the cycle larger is the requirement of working capital.
DEBTORS
CASH FINISHED GOODS
RAW MATERIAL WORK IN PROGRESS
7. RATE OF STOCK TURNOVER: There is an inverse co-relationship
between the question of working capital and the velocity or speed with which
the sales are affected. A firm having a high rate of stock turnover wuill needs
lower amt. of working capital as compared to a firm having a low rate of
turnover.
8. CREDIT POLICY: A concern that purchases its requirements on credit and
sales its product / services on cash requires lesser amt. of working capital and
vice-versa.
9. BUSINESS CYCLE: In period of boom, when the business is prosperous,
there is need for larger amt. of working capital due to rise in sales, rise in
prices, optimistic expansion of business, etc. On the contrary in time of
depression, the business contracts, sales decline, difficulties are faced in
collection from debtor and the firm may have a large amt. of working capital.
10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall
require large amt. of working capital.
11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more
earning capacity than other due to quality of their products, monopoly
conditions, etc. Such firms may generate cash profits from operations and
contribute to their working capital. The dividend policy also affects the
requirement of working capital. A firm maintaining a steady high rate of cash
dividend irrespective of its profits needs working capital than the firm that
retains larger part of its profits and does not pay so high rate of cash dividend.
12. PRICE LEVEL CHANGES: Changes in the price level also affect the
working capital requirements. Generally rise in prices leads to increase in
working capital.
Others FACTORS: These are:
Operating efficiency.
Management ability.
Irregularities of supply.
Import policy.
Asset structure.
Importance of labor.
Banking facilities, etc.
MANAGEMENT OF WORKING CAPITAL
Management of working capital is concerned with the problem that arises in
attempting to manage the current assets, current liabilities. The basic goal of
working capital management is to manage the current assets and current liabilities
of a firm in such a way that a satisfactory level of working capital is maintained,
i.e. it is neither adequate nor excessive as both the situations are bad for any firm.
There should be no shortage of funds and also no working capital should be ideal.
WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its
probability, liquidity and structural health of the organization. So working capital
management is three dimensional in nature as
1. It concerned with the formulation of policies with regard to
profitability, liquidity and risk.
2. It is concerned with the decision about the composition and level
of current assets.
3. It is concerned with the decision about the composition and level
of current liabilities.
WORKING CAPITAL ANALYSIS
As we know working capital is the life blood and the centre of a business.
Adequate amount of working capital is very much essential for the smooth
running of the business. And the most important part is the efficient management
of working capital in right time. The liquidity position of the firm is totally
effected by the management of working capital. So, a study of changes in the uses
and sources of working capital is necessary to evaluate the efficiency with which
the working capital is employed in a business. This involves the need of working
capital analysis.
The analysis of working capital can be conducted through a number of devices,
such as:
1. Ratio analysis.
2. Fund flow analysis.
3. Budgeting.
1. RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another. The technique
of ratio analysis can be employed for measuring short-term liquidity or working
capital position of a firm. The following ratios can be calculated for these
purposes:
1. Current ratio.
2. Quick ratio
3. Absolute liquid ratio
4. Inventory turnover.
5. Receivables turnover.
6. Payable turnover ratio.
7. Working capital turnover ratio.
8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.
2. FUND FLOW ANALYSIS
Fund flow analysis is a technical device designated to the study the source from
which additional funds were derived and the use to which these sources were put.
The fund flow analysis consists of:
a. Preparing schedule of changes of working capital
b. Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position
(working capital) business enterprise between beginning and ending of the
financial dates.
3. WORKING CAPITAL BUDGET
A budget is a financial and / or quantitative expression of business plans and
polices to be pursued in the future period time. Working capital budget as a part
of the total budge ting process of a business is prepared estimating future long
term and short term working capital needs and sources to finance them, and then
comparing the budgeted figures with actual performance for calculating the
variances, if any, so that corrective actions may be taken in future. He objective
working capital budget is to ensure availability of funds as and needed, and to
ensure effective utilization of these resources. The successful implementation of
working capital budget involves the preparing of separate budget for each element
of working capital, such as, cash, inventories and receivables etc.
ANALYSIS OF SHORT – TERM FINANCIAL POSITION OR TEST OF
LIQUIDITY
The short –term creditors of a company such as suppliers of goods of credit and
commercial banks short-term loans are primarily interested to know the ability
of a firm to meet its obligations in time. The short term obligations of a firm can
be met in time only when it is having sufficient liquid assets. So to with the
confidence of investors, creditors, the smooth functioning of the firm and the
efficient use of fixed assets the liquid position of the firm must be strong. But a
very high degree of liquidity of the firm being tied – up in current assets.
Therefore, it is important proper balance in regard to the liquidity of the firm.
Two types of ratios can be calculated for measuring short-term financial
position or short-term solvency position of the firm.
1. Liquidity ratios.
2. Current assets movements ‘ratios.
A) LIQUIDITY RATIOS
Liquidity refers to the ability of a firm to meet its current obligations as and
when these become due. The short-term obligations are met by realizing
amounts from current, floating or circulating assts. The current assets should
either be liquid or near about liquidity. These should be convertible in cash for
paying obligations of short-term nature. The sufficiency or insufficiency of
current assets should be assessed by comparing them with short-term liabilities.
If current assets can pay off the current liabilities then the liquidity position is
satisfactory. On the other hand, if the current liabilities cannot be met out of the
current assets then the liquidity position is bad. To measure the liquidity of a
firm, the following ratios can be calculated:
1. CURRENT RATIO
2. QUICK RATIO
3. ABSOLUTE LIQUID RATIO
1. CURRENT RATIO
Current Ratio, also known as working capital ratio is a measure of general
liquidity and its most widely used to make the analysis of short-term financial
position or liquidity of a firm. It is defined as the relation between current assets
and current liabilities. Thus,
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITES
The two components of this ratio are:
1) CURRENT ASSETS
2) CURRENT LIABILITES
Current assets include cash, marketable securities, bill receivables, sundry
debtors, inventories and work-in-progresses. Current liabilities include
outstanding expenses, bill payable, dividend payable etc.
A relatively high current ratio is an indication that the firm is liquid and has the
ability to pay its current obligations in time. On the hand a low current ratio
represents that the liquidity position of the firm is not good and the firm shall
not be able to pay its current liabilities in time. A ratio equal or near to the rule
of thumb of 2:1 i.e. current assets double the current liabilities is considered to
be satisfactory.
CALCULATION OF CURRENT RATIO
(Rupees in crore)
e.g.
Year 2006 2007 2008
Current Assets 81.29 83.12 13,6.57
Current Liabilities 27.42 20.58 33.48
Current Ratio 2.96:1 4.03:1 4.08:1
Interpretation:-
As we know that ideal current ratio for any firm is 2:1. If we see the current
ratio of the company for last three years it has increased from 2006 to 2008. The
current ratio of company is more than the ideal ratio. This depicts that
company’s liquidity position is sound. Its current assets are more than its current
liabilities.
2. QUICK RATIO
Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio
may be defined as the relationship between quick/liquid assets and current or
liquid liabilities. An asset is said to be liquid if it can be converted into cash
with a short period without loss of value. It measures the firms’ capacity to pay
off current obligations immediately.
QUICK RATIO = QUICK ASSETS
CURRENT LIABILITES
Where Quick Assets are:
1) Marketable Securities
2) Cash in hand and Cash at bank.
3) Debtors.
A high ratio is an indication that the firm is liquid and has the ability to meet its
current liabilities in time and on the other hand a low quick ratio represents that
the firms’ liquidity position is not good.
As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally thought
that if quick assets are equal to the current liabilities then the concern may be
able to meet its short-term obligations. However, a firm having high quick ratio
may not have a satisfactory liquidity position if it has slow paying debtors. On
the other hand, a firm having a low liquidity position if it has fast moving
inventories.
CALCULATION OF QUICK RATIO
e.g. (Rupees in Crore)
Year 2006 2007 2008
Quick Assets 44.14 47.43 61.55
Current Liabilities 27.42 20.58 33.48
Quick Ratio 1.6 : 1 2.3 : 1 1.8 : 1
Interpretation :
A quick ratio is an indication that the firm is liquid and has the ability to
meet its current liabilities in time. The ideal quick ratio is 1:1. Company’s
quick ratio is more than ideal ratio. This shows company has no liquidity
problem.
3. ABSOLUTE LIQUID RATIO
Although receivables, debtors and bills receivable are generally more liquid
than inventories, yet there may be doubts regarding their realization into cash
immediately or in time. So absolute liquid ratio should be calculated together
with current ratio and acid test ratio so as to exclude even receivables from the
current assets and find out the absolute liquid assets. Absolute Liquid Assets
includes :
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS
CURRENT LIABILITES
ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.
e.g. (Rupees in Crore)
Year 2006 2007 2008
Absolute Liquid Assets 4.69 1.79 5.06
Current Liabilities 27.42 20.58 33.48
Absolute Liquid Ratio .17 : 1 .09 : 1 .15 : 1
Interpretation :
These ratio shows that company carries a small amount of cash. But there is
nothing to be worried about the lack of cash because company has reserve,
borrowing power & long term investment. In India, firms have credit limits
sanctioned from banks and can easily draw cash.
B) CURRENT ASSETS MOVEMENT RATIOS
Funds are invested in various assets in business to make sales and earn
profits. The efficiency with which assets are managed directly affects the
volume of sales. The better the management of assets, large is the amount of
sales and profits. Current assets movement ratios measure the efficiency with
which a firm manages its resources. These ratios are called turnover ratios
because they indicate the speed with which assets are converted or turned over
into sales. Depending upon the purpose, a number of turnover ratios can be
calculated. These are :
1. Inventory Turnover Ratio
2. Debtors Turnover Ratio
3. Creditors Turnover Ratio
4. Working Capital Turnover Ratio
The current ratio and quick ratio give misleading results if current assets include
high amount of debtors due to slow credit collections and moreover if the assets
include high amount of slow moving inventories. As both the ratios ignore the
movement of current assets, it is important to calculate the turnover ratio.
1. INVENTORY TURNOVER OR STOCK TURNOVER
RATIO :
Every firm has to maintain a certain amount of inventory of finished goods
so as to meet the requirements of the business. But the level of inventory
should neither be too high nor too low. Because it is harmful to hold more
inventory as some amount of capital is blocked in it and some cost is
involved in it. It will therefore be advisable to dispose the inventory as
soon as possible.
INVENTORY TURNOVER RATIO = COST OF GOOD SOLD
AVERAGE INVENTORY
Inventory turnover ratio measures the speed with which the stock is
converted into sales. Usually a high inventory ratio indicates an efficient
management of inventory because more frequently the stocks are sold ; the
lesser amount of money is required to finance the inventory. Where as low
inventory turnover ratio indicates the inefficient management of inventory.
A low inventory turnover implies over investment in inventories, dull
business, poor quality of goods, stock accumulations and slow moving
goods and low profits as compared to total investment.
AVERAGE STOCK = OPENING STOCK + CLOSING STOCK
2
(Rupees in Crore)
Year 2006 2007 2008
Cost of Goods sold 110.6 103.2 96.8
Average Stock 73.59 36.42 55.35
Inventory Turnover Ratio 1.5 times 2.8 times 1.75 times
Interpretation :
These ratio shows how rapidly the inventory is turning into receivable
through sales. In 2007 the company has high inventory turnover ratio but in
2008 it has reduced to 1.75 times. This shows that the company’s inventory
management technique is less efficient as compare to last year.
2. INVENTORY CONVERSION PERIOD:
INVENTORY CONVERSION PERIOD = 365 (net working days)
INVENTORY TURNOVER RATIO
e.g.
Year 2006 2007 2008
Days 365 365 365
Inventory Turnover Ratio 1.5 2.8 1.8
Inventory Conversion Period 243 days 130 days 202 days
Interpretation :
Inventory conversion period shows that how many days inventories takes to
convert from raw material to finished goods. In the company inventory
conversion period is decreasing. This shows the efficiency of management to
convert the inventory into cash.
3. DEBTORS TURNOVER RATIO :
A concern may sell its goods on cash as well as on credit to increase its
sales and a liberal credit policy may result in tying up substantial funds of a firm
in the form of trade debtors. Trade debtors are expected to be converted into
cash within a short period and are included in current assets. So liquidity
position of a concern also depends upon the quality of trade debtors. Two types
of ratio can be calculated to evaluate the quality of debtors.
a) Debtors Turnover Ratio
b) Average Collection Period
DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)
AVERAGE DEBTORS
Debtor’s velocity indicates the number of times the debtors are turned
over during a year. Generally higher the value of debtor’s turnover ratio the
more efficient is the management of debtors/sales or more liquid are the debtors.
Whereas a low debtors turnover ratio indicates poor management of
debtors/sales and less liquid debtors. This ratio should be compared with ratios
of other firms doing the same business and a trend may be found to make a
better interpretation of the ratio.
AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR
2
e.g.
Year 2006 2007 2008
Sales 166.0 151.5 169.5
Average Debtors 17.33 18.19 22.50
Debtor Turnover Ratio 9.6 times 8.3 times 7.5 times
Interpretation :
This ratio indicates the speed with which debtors are being converted or
turnover into sales. The higher the values or turnover into sales. The higher the
values of debtors turnover, the more efficient is the management of credit. But
in the company the debtor turnover ratio is decreasing year to year. This shows
that company is not utilizing its debtors efficiency. Now their credit policy
become liberal as compare to previous year.
4. AVERAGE COLLECTION PERIOD :
Average Collection Period = No. of Working Days
Debtors Turnover Ratio
The average collection period ratio represents the average number of days
for which a firm has to wait before its receivables are converted into cash. It
measures the quality of debtors. Generally, shorter the average collection period
the better is the quality of debtors as a short collection period implies quick
payment by debtors and vice-versa.
Average Collection Period = 365 (Net Working Days)
Debtors Turnover Ratio
Year 2006 2007 2008
Days 365 365 365
Debtor Turnover Ratio 9.6 8.3 7.5
Average Collection Period 38 days 44 days 49 days
Interpretation :
The average collection period measures the quality of debtors and it
helps in analyzing the efficiency of collection efforts. It also helps to analysis
the credit policy adopted by company. In the firm average collection period
increasing year to year. It shows that the firm has Liberal Credit policy. These
changes in policy are due to competitor’s credit policy.
5. WORKING CAPITAL TURNOVER RATIO :
Working capital turnover ratio indicates the velocity of utilization of net
working capital. This ratio indicates the number of times the working
capital is turned over in the course of the year. This ratio measures the
efficiency with which the working capital is used by the firm. A higher
ratio indicates efficient utilization of working capital and a low ratio
indicates otherwise. But a very high working capital turnover is not a
good situation for any firm.
Working Capital Turnover Ratio = Cost of Sales
Net Working Capital
Working Capital Turnover = Sales
Networking Capital
e.g.
Year 2006 2007 2008
Sales 166.0 151.5 169.5
Networking Capital 53.87 62.52 103.09
Working Capital Turnover 3.08 2.4 1.64
Interpretation :
This ratio indicates low much net working capital requires for sales.
In 2008, the reciprocal of this ratio (1/1.64 = .609) shows that for sales of Rs. 1
the company requires 60 paisa as working capital. Thus this ratio is helpful to
forecast the working capital requirement on the basis of sale.
INVENTORIES
(Rs. in Crores)
Year 2005-2006 2006-2007 2007-2008
Inventories 37.15 35.69 75.01
Interpretation :
Inventories is a major part of current assets. If any company wants to
manage its working capital efficiency, it has to manage its inventories
efficiently. The graph shows that inventory in 2005-2006 is 45%, in 2006-2007
is 43% and in 2007-2008 is 54% of their current assets. The company should try
to reduce the inventory upto 10% or 20% of current assets.
CASH BNAK BALANCE :
(Rs. in Crores)
Year 2005-2006 2006-2007 2007-2008
Cash Bank Balance 4.69 1.79 5.05
Interpretation :
Cash is basic input or component of working capital. Cash is needed to
keep the business running on a continuous basis. So the organization should
have sufficient cash to meet various requirements. The above graph is indicate
that in 2006 the cash is 4.69 crores but in 2007 it has decrease to 1.79. The
result of that it disturb the firms manufacturing operations. In 2008, it is
increased upto approx. 5.1% cash balance. So in 2008, the company has no
problem for meeting its requirement as compare to 2007.
DEBTORS :
(Rs. in Crores)
Year 2005-2006 2006-2007 2007-2008
Debtors 17.33 19.05 25.94
Interpretation :
Debtors constitute a substantial portion of total current assets. In India it
constitute one third of current assets. The above graph is depict that there is
increase in debtors. It represents an extension of credit to customers. The reason
for increasing credit is competition and company liberal credit policy.
CURRENT ASSETS :
(Rs. in Crores)
Year 2005-2006 2006-2007 2007-2008
Current Assets 81.29 83.15 136.57
Interpretation :
This graph shows that there is 64% increase in current assets in 2008. This
increase is arise because there is approx. 50% increase in inventories. Increase
in current assets shows the liquidity soundness of company.
CURRENT LIABILITY :
(Rs. in Crores)
Year 2005-2006 2006-2007 2007-2008
Current Liability 27.42 20.58 33.48
Interpretation :
Current liabilities shows company short term debts pay to outsiders. In
2008 the current liabilities of the company increased. But still increase in
current assets are more than its current liabilities.
NET WOKRING CAPITAL :
(Rs. in Crores)
Year 2005-2006 2006-2007 2007-2008
Net Working Capital 53.87 62.53 103.09
Interpretation :
Working capital is required to finance day to day operations of a firm.
There should be an optimum level of working capital. It should not be too less
or not too excess. In the company there is increase in working capital. The
increase in working capital arises because the company has expanded its
business.
RESEARCH METHODOLOGY
The methodology, I have adopted for my study is the various tools, which basically
analyze critically financial position of to the organization:
I. COMMON-SIZE P/L A/C II. COMMON-SIZE BALANCE SHEET
III. COMPARTIVE P/L A/C
IV. COMPARTIVE BALANCE SHEET
V. TREND ANALYSIS
VI. RATIO ANALYSIS
The above parameters are used for critical analysis of financial position. With the evaluation of each component, the financial position from different angles is tried to be presented in well and systematic manner. By critical analysis with the help of different tools, it becomes clear how the financial manager handles the finance matters in profitable manner in the critical challenging atmosphere, the recommendation are made which would suggest the organization in formulation of a healthy and strong position financially with proper management system.
I sincerely hope, through the evaluation of various percentage, ratios and comparative analysis, the organization would be able to conquer its in efficiencies and makes the desired changes.
ANALYSIS OF FINANCIAL STATEMENTS
FINANCIAL STATEMENTS:
Financial statement is a collection of data organized according to logical and consistent accounting procedure to convey an under-standing of some financial aspects of a business firm. It may show position at a moment in time, as in the case of balance sheet or may reveal a series of activities over a given period of time, as in the case of an income statement. Thus, the term ‘financial statements’ generally refers to the two statements
(1) The position statement or Balance sheet.
(2) The income statement or the profit and loss Account.
OBJECTIVES OF FINANCIAL STATEMENTS:
According to accounting Principal Board of America (APB) states
The following objectives of financial statements: -
1. To provide reliable financial information about economic resources and obligation of a business firm.
2. To provide other needed information about charges in such economic resources and obligation.
3. To provide reliable information about change in net resources (recourses less obligations) missing out of business activities.
4. To provide financial information that assets in estimating the learning potential of the business.
LIMITATIONS OF FINANCIAL STATEMENTS:
Though financial statements are relevant and useful for a concern, still they do not present a final picture a final picture of a concern. The utility of these statements is dependent upon a number of factors. The analysis and interpretation of these statements must be done carefully otherwise misleading conclusion may be drawn.
Financial statements suffer from the following limitations: -
1. Financial statements do not given a final picture of the concern. The data given in these statements is only approximate. The actual value can only be determined when the business is sold or liquidated.
2. Financial statements have been prepared for different accounting periods, generally one year, during the life of a concern. The costs and incomes are apportioned to different periods with a view to determine profits etc. The allocation of expenses and income depends upon the personal judgment of the accountant. The existence of contingent assets and liabilities also make the statements imprecise. So financial statement are at the most interim reports rather than the final picture of the firm.
3. The financial statements are expressed in monetary value, so they appear to give final and accurate position. The value of fixed assets in the balance sheet neither represent the value for which fixed assets can be sold nor the amount which will be required to replace these assets. The balance sheet is prepared on the presumption of a going concern. The concern is expected to continue in future. So fixed assets are shown at cost less accumulated deprecation. Moreover, there are certain assets in the balance sheet which will realize nothing at the time of liquidation but they are shown in the balance sheets.
4. The financial statements are prepared on the basis of historical costs Or original costs. The value of assets decreases with the passage of time current price changes are not taken into account. The statement are not prepared with the keeping in view the economic conditions. the balance sheet loses the significance of being an index of current economics realities. Similarly, the profitability shown by the income statements may be represent the earning capacity of the concern.
5. There are certain factors which have a bearing on the financial position and operating result of the business but they do not become a part of these statements because they cannot be measured in monetary terms. The basic limitation of the traditional financial statements comprising the balance sheet, profit & loss A/c is that they do not give all the information regarding the financial operation of the firm. Nevertheless, they provide some extremely useful information to the extent the balance sheet mirrors the financial position on a particular data in lines of the structure of assets, liabilities etc. and the profit & loss A/c shows the result of operation during a certain period in terms revenue
obtained and cost incurred during the year. Thus, the financial position and operation of the firm.
FINANCIAL STATEMENT ANALYSIS
It is the process of identifying the financial strength and weakness of a firm from the available accounting data and financial statements. The analysis is done
CALCULATIONS OF RATIOS
Ratios are relationship expressed in mathematical terms between figures, which are
connected with each other in some manner.
CLASSIFICATION OF RATIOS
Ratios can be classified in to different categories depending upon the basis of
classification
The traditional classification has been on the basis of the financial statement to which the
determination of ratios belongs.
These are:-
Profit & Loss account ratios
Balance Sheet ratios
Composite ratios
Project Description :
Title : Working Capital Management of ____________
Pages : 73
Category : Project Report for MBA
We made this project of various companies like Reliance Industries, Grasim Industries, Dabur India Ltd. etc., its cost is Rs. 2499/- only without Synopsis and Rs. 2999/- only with synopsis. If you need this project, mail us at this id : [email protected]
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TABLE OF CONTENTS
· INTRODUCTION TO BANKING SECTOR
· OBJECTIVES OF THE STUDY
· RESEARCH METHODOLOGY
· ANALYSIS AND INTERPRETATION
· FINDINGS
· RECOMMENDATIONS
· LIMITATIONS
· CONCLUSION
· BIBLIOGRAPHY
· ANNEXURE
OBJECTIVES OF THE STUDY
Primary Objective:
· To know the various HR implications in private banks.
Secondary Objective:
· To know whether employees are satisfied with their jobs or not.
· To know the various retention practices used in banks?
· To know the motivational factors used by the banks?
· To know whether training and development programs are conducted b the banks or not
· To know the cause of their problems related with :
1. Their Health Problem
2. Dissatisfaction
Project Report - Training Need / Identification and Importance of Training for Employees
TRAINING EFFECTIVENESS - 5p/Training
The game of economic competition has new rules. Firms should be fast and responsive. This requires responding to customers' needs for quality, variety, customization, convenience and timeliness. Meeting these new standards requires a workforce that is technically trained in all respects. It requires people who are capable of analyzing and solving job related problems, working cooperatively in teams and 'changing hats' and shifting from job to job as well. Training has increased in importance in today's environment where jobs are complex and change. Rapidly. Companies that pay lip-service to the need for training, by lazily setting aside a few hours a year, will soon find themselves at the receiving end when talented employees leave in frustration and other employees find it difficult to beat rivals with new products, sophisticated designs and improved ways of selling. To survive and flourish in the present day corporate-jungle, companies should invest time and money in upgrading the knowledge and skills of their employees constantly. For, any company that stops injecting itself with intelligence is going to die. The purpose of this chapter is make the student understand the basic principles, areas, and methods of training currently in use in the corporate circles.
Need for Training
After employees have been selected for various positions in an organization, training them for the specific tasks to which they have been assigned assumes great importance. It is true in many organizations that before an employee is fitted into a harmonious working relationship with other employees, he is given adequate training. Training is the act of increasing the knowledge and skills of an employee for performing a particular job. The major outcome of training is learning. A trainee learns new habits, refined skills and useful knowledge during the training that helps him improve performance. Training enables an employee to do his present job more efficiently and prepare himself for a higher-level job. The essential features of training may be stated thus:
Increases knowledge and skills for doing a particular job; it bridges the gap between job needs and employee skills, knowledge and behaviors
Focuses attention on the current job; it is job specific and addresses particular performance deficits or problems
Concentrates on individual employees; changing what employees know, how they work, their attitudes toward their work or their interactions with their co-workers or supervisors
Tends to be more narrowly focused and oriented toward short-term performance concerns.
Training is needed to serve the following purposes:
Newly recruited employees require training so as to perform their tasks effectively. Instruction, guidance, coaching help them to handle jobs competently, without any wastage.
Training is necessary to prepare existing employees for higher-level jobs (promotion).
Existing employees require refresher training so as to keep abreast of the latest developments in job operations. In the face of rapid technological changes, this is an absolute necessity.
Training is necessary when a person moves from one job to another (transfer). After training, the' employee can change jobs quickly, improve his performance levels and achieve career goals comfortably
Training is necessary to make employees mobile and versatile. They can be placed on various jobs depending on organizational needs.
Training is needed to bridge the gap between what the employee has and what the job demands.
Training is needed to make employees more productive and useful in the long-run.
Training is needed for employees to gain acceptance from peers (learning a job quickly and being able to pull their own weight is one of the best ways for them to gain acceptance).
Importance
Training offers innumerable benefits to both employees and employers. It makes the employee more productive and more useful to an organization. The importance of training can be studied under the following heads:
Benefits to the business:
Trained workers can work more efficiently. They use machines, tools, and materials in a proper way. Wastage is thus eliminated to a large extent.
There will be fewer accidents. Training improves the knowledge of employees regarding the use of machines and equipment. Hence, trained workers need not be put under close supervision, as they know how to handle operations properly.
Trained workers can show superior performance. They can turn out better performance. They can turn out better quality goods by putting the materials, tools and equipment to good use.
Training makes employees more loyal to an organization. They will be less inclined to leave the unit where there are growth opportunities
Benefits to the employees:
Training makes an employee more useful to a firm. Hence, he will find employment more easily.
Training makes employees more efficient and effective. By combining materials, tools and equipment in a right way, they can produce more with minimum effort.
Training enables employees to secure promotions easily. They can realise their career goals comfortably.
Training helps an employee to move from one organization to another easily. He can be more mobile and pursue career goals actively.
Employees can avoid mistakes, accidents on the job. They can handle jobs with confidence. They will be more satisfied on their jobs. Their morale would be high.
Thus, training can contribute to higher production, fewer mistakes, greater job satisfaction and lower labour turnover. Also, it can enable employees to cope with organizational, social and technological change. Effective training is an invaluable investment in the human resources of an organization.
Learning Principles: The Philosophy of Training
Training is essential for job success. It can lead to higher production, fewer mistakes, greater job satisfaction and lower turnover. These benefits accrue to both the trainee and the organization, if managers understand the principles behind the training process. To this end, training efforts must invariably follow certain learning-oriented guidelines.
Modelling
Modeling is simply copying someone else's behavior. Passive classroom learning does not leave any room for modeling. If we want to change people, it would be a good idea to have videotapes of people showing the desired behavior. The selected model should provide the right kind of behavior to be copied by others. A great deal of human behaviour is learned by modelling others. Children learn by modelling parents and older children, they are quite comfortable with the process by the time they grow up. As experts put it. "managers tend to manage as they were managed"
Motivation
For learning to take place, intention to learn is important. When the employee is motivated, he pays attention to what is being said, done and presented. Motivation to learn is influenced by the answers to questions such as: How important is my job to me? How important is the information? Will learning help me progress in the company? etc. People learn more quickly when the material is important and relevant to them. Learning is usually quicker and long-lasting when the learner participates actively. Most people, for example, never forget how to ride a bicycle because they took an active part in the learning process.
Reinforcement
If a behavior is rewarded, it probably will be repeated. Positive reinforcement consists of rewarding desired behaviors. People avoid certain behaviors that invite criticism and punishment. A bank officer would want to do a postgraduate course in finance, if it earns him increments and makes him eligible for further promotions. Both the external rewards (investments, praise) and the internal rewards (a feeling of pride and achievement) associated with desired behaviors compel subjects to learn properly. To be effective, the trainer must reward desired behaviors only. If he rewards poor performance, the results may be disastrous: good performers may quit in frustration, accidents may go up, and
productivity may suffer. The reinforcement principle is also based on the premise that punishment is less effective in learning than reward. Punishment is a pointer to undesirable behaviors. When administered, it causes pain to the employee. He mayor may not repeat the mistakes. The reactions may be mild or wild. Action taken to repeal a person from undesirable action is punishment. If administered properly, punishment may force the trainee to modify the undesired or incorrect behaviors.
Feedback
People learn best if reinforcement is given as soon as possible after training. Every employee wants to know what is expected of him and how well he is doing. If he is off the track, somebody must put him back on the rails. The errors in such cases must be rectified immediately. The trainee after learning the right behaviour is motivated to do things in a 'right' way and earn the associated rewards. Positive feedback (showing the trainee the right way of doing things) is to be preferred to negative feedback (telling the trainee that he is not correct) when we want to change behaviour.
Spaced Practice
Learning takes place easily if the practice sessions are spread over a period of time. New employees learn better if the orientation programme is spread over a two or three day period, instead of covering it all in one day. For memorizing tasks, 'massed' practice is usually more effective. Imagine the way schools ask the kids to say the Lord's prayer aloud. Can you memorise a long poem by learning only one line per day? You tend to forget the beginning of the poem by the time you reach the last stanza. For 'acquiring' skills as stated by Mathis and Jackson, spaced practice is usually the best. This incremental approach to skill acquisition minimises the physical fatigue that deters learning.
Whole Learning
The concept of whole learning suggests that employees learn better if the job information is explained as an entire logical process, so that they can see how the various actions fit together into the 'big picture'. A broad overview of what the trainee would be doing on the job should be given top priority, if learning has to take place quickly. Research studies have also indicated that it is more efficient to practice a whole task all at once rather than trying to master the various components of the task at different intervals.
Active Practice
'Practice makes a man perfect': so said Bacon. To be a swimmer, you should plunge into water instead of simply reading about swimming or looking at films of the worlds' best swimmers. Learning is enhanced when trainees are provided ample opportunities to repeat the task. For maximum benefit, practice sessions should be distributed over time.
Applicability of Training
Training should be as real as possible so that trainees can successfully transfer the new knowledge to their jobs. The training situations should be set up so that trainees can visualise - and identify with - the types of situations they can come across on the job.
Environment
Finally, environment plays a major role in training. It is natural that workers who are exposed to training in comfortable environments with adequate, well spaced rest periods are more likely to learn than employees whose training conditions are less than ideal. Generally speaking, learning is very fast at the beginning. Thereafter, the pace of learning slows down as opportunities for improvement taper off.
Areas of Training
The Areas of Training in which training is offered may be classified into the following categories.
Knowledge
Here the trainee learns about a set of rules and regulations about the job, the staff and the products or services offered by the company. The aim is to make the new employee fully aware of what goes on inside and outside the company.
Technical Skills
The employee is taught a specific skill (e.g., operating a machine, handling computer etc.) so that he can acquire that skill and contribute meaningfully.
Social Skills
The employee is made to learn about himself and others, and to develop a right mental attitude towards the job, colleagues and the company. The principal focus is on teaching the employee how to be a team member and get ahead.
Techniques
This involves the application of knowledge and skill to various on-the-job situations.
In addition to improving the skills and knowledge of employees, training aims at moulding employee attitudes: When administered properly, a training programme will go a long way in obt8ining employee loyalty, support and commitment to company activities.
Types of Training
There are many approaches to training. We focus here on the types of training that are commonly employed in present-day organisations.
Skills training: This type of training is most common in organisations. The process here is fairly simple. The need for training in basic skills (such as reading, writing, computing, speaking, listening, problem solving, managing oneself, knowing how to learn, working as part of a team, leading others) is identified through assessment. Specific training objectives are set and training content is developed to meet those objectives. Several methods are available for imparting these basic skills in modern organisations (such as lectures, apprenticeship, on-the-job, coaching etc.). Before employing these methods, managers should:
explain how the training will help the trainees in their jobs.
relate the training to the trainees' goals.
respect and consider participant responses and use these as a resource.
encourage trainees to learn by doing.
give feedback on progress toward meeting learning objectives.
Refresher training: Rapid changes in technology may force companies to go in for this kind of training. By organising short-term courses which incorporate the latest developments in a particular field, the company may keep its employees up-to-date and ready to take on emerging challenges.
It is conducted at regular intervals by taking the help of outside consultants who specialise in a particular descriptive.
Cross-functional Training: Cross-functional Training involves training employees to perform operations in areas other than their assigned job. There are many approaches to cross functional training. Job rotation can be used to provide a manager in one functional area with a broader perspective than he would otherwise have. Departments can exchange personnel for a certain period so that each employee understands how other departments are functioning. High performing workers can act as peer trainers and help employees develop skills in another area of operation. Cross functional training provides the following benefits to an organisation (and the workers as well) (1) Workers gain rich experience in handling diverse jobs; they become more adaptable and versatile (2) they can better engineer their own career paths (3) they not only know their job well but also understand how others are able to perform under a different set of constraints (4) A broader perspective increases workers' understanding of the business and reduces the need for supervision (5) when workers can fill in for other workers who are absent, it is easier to use flexible scheduling, which is increasingly in demand as more employees want to spend more time with their families. Eli Lilly and Company
(India), for example, encourages cross-functional movements to make the organisation equally attractive to both specialists and generalists.
Team Training: Team training generally covers two areas; content tasks and group processes. Content tasks specify the team's goals such as cost control and problem solving. Group processes reflect the way members function as a team - for example how they interact with each other, how they sort out differences, how they participate etc. Companies are investing heavy amounts, nowadays, in training new employees to listen to each other and to cooperate. They are using outdoor experiential training techniques to develop teamwork and team spirit among their employees (such as scaling a mountain, preparing recipes for colleagues at a restaurant, sailing through uncharted waters, crossing a jungle etc.). The training basically throws light on (i) how members should communicate with each other (ii) how they have to cooperate and get ahead (iii) how they should deal with conflict-full situations (iv) how they should find their way, using collective wisdom and experience to good advantage.
Creativity training: Companies like Mudra Communications, Titan Industries, Wipro encourage their employees to think unconventionally, break the rules, take risks, go out of the box and devise unexpected solutions.
Postpone judgment: Don't reject any idea
Create alternative frames of reference
Break the boundary of thinking
Examine a different aspect of the problem
Make a wish list of solutions
Borrow ideas from other fields
Look for processes to change or eliminate
Think up alternative methods
Adopt another person's perspective
Question all Assumptions.
In creativity training, trainers often focus on three things:
(a) Breaking away: In order to break away from restrictions, the trainee is expected to (i) identify the dominant ideas influencing his own thinking (ii) define the boundaries within which he is working (iii) bring the assumptions out into the open and challenge everything
(b) Generate new ideas: To generate new ideas, the trainee should open up his mind; look at the problem from all possible angles and list as many alternative approaches as possible. The trainee should allow his mind to wander over alternatives freely. Expose himself to new influences (people, articles, books, situations), switch over from one perspective to another, -arrange cross fertilization of ideas with other people and use analogies to spark off ideas.
(c) Delaying judgement: To promote creative thinking, the trainee should not try to kill off ideas too quickly; they should be held back until he is able to generate as many ideas as possible. He should allow ideas to grow a little. Brainstorming (getting a large number of ideas from a group of people in a short time) often helps in generating as many ideas as possible without pausing to evaluate them. It helps in releasing ideas, overcoming inhibitions, cross fertilising ideas and getting away from patterned thinking.
Diversity Training: Diversity training considers all of the diverse dimensions in the workplace race, gender, age, disabilities, lifestyles, culture, education, ideas and backgrounds - while designing a training programme. It aims to create better cross-cultural sensitivity with the aim of fostering more harmonious and fruitful working relationships among a firm's employees.
The programme covers two things: (i) awareness building, which helps employees appreciate the key benefits of diversity, and (ii) skill building, which offers the knowledge, skills and abilities required for working with people having varied backgrounds.
Literacy Training: Inability to write, speak and work well with others could often come in the way of discharging duties, especially at the lower levels. Workers, in such situations, may fail to understand safety messages, appreciate the importance of sticking to rules, and commit avoidable mistakes. Functional illiteracy (low skill level in a particular content area) may be a serious impediment to a firm's productivity and competitiveness. Functional literacy programmes focus on the basic skills required to perform a job adequately and capitalise on most workers' motivation to get help in a particular area. Tutorial programmes, home assignments, reading and writing exercises, simple mathematical tests, etc., are generally used in all company in-house programmes meant to improve the literacy levels of employees with weak reading, writing or arithmetic skills.
Training Methods
Training methods are usually classified by the location of instruction. On the job training is provided when the workers are taught relevant knowledge, skills and abilities at the actual workplace; off-the-job training, on the other hand, requires that trainees learn at a location other than the real work spot. Some of the widely used training methods are listed below.
1. Job Instruction Training (JlT)
The JIT method (developed during World War II) is a four-step instructional process involving preparation, presentation, performance try out and follow up. It is used primarily to teach workers how to do their current jobs. A trainer, supervisor or co-worker acts as the coach. The four steps followed in the JIT methods are:
1. The trainee receives an overview of the job, its purpose and its desired outcomes, with a clear focus on the relevance of training.
2. The trainer demonstrates the job in order to give the employee a model to copy. The trainer shows a right way to handle the job.
3. Next, the employee is permitted to copy the trainer's way. Demonstrations by the trainer and practice by the trainee are repeated until the trainee masters the right way to handle the job.
4. Finally, the employee does the job independently without supervision.
Merits:
• Trainee learns fast through practice and observation.
• It is economical as it does not require any special settings. Also, mistakes can be corrected immediately.
• The trainee gains confidence quickly as he does the work himself in actual setting with help from supervisor.
• It is most suitable for unskilled and semi-skilled jobs where the job operations are simple; easy to explain and demonstrate within a short span of time.
Demerits:
• The trainee should be as good as the trainer if the trainer is not good, transference of knowledge and skills will be poor.
• While learning, trainee may damage equipment, waste materials, cause accidents frequently,
• Experienced workers cannot use the machinery while it is being used for training.
2. Coaching:
Coaching is a kind of daily training and feedback given to employees by immediate supervisors. It involves a continuous process of learning by doing. It may be defined as an informal, unplanned training and development activity provided by supervisors and peers. In coaching, the supervisor explains things and answers questions; he throws light on why things are done the way they are; he offers a model for trainees to copy; conducts lot of decision making meetings with trainees; procedures are agreed upon and the trainee is given enough authority to make divisions and even commit mistakes. Of course, coaching can be a taxing job in that the coach may not possess requisite skills to guide the learner in a systematic way. Sometimes, doing a full day's work may be more important than putting the learner on track.
When to use coaching usefully? Coaching could be put to good use when:
an employee demonstrates a new competency
an employee expresses interest in a different job within the organisation
an employee seeks feedback
an employee is expressing low morale, violating company policies or practices or having performance problems
an employee needs help with a new skill following a formal training programme.
Effective working, obviously, requires patience and communication skills. It involves:
explaining appropriate ways of doing things
making clear why actions were taken
stating observations accurately
offering possible alternatives / suggestions
following up
3. Mentoring :
Mentoring is a relationship in which a senior manager in an organisation assumes the responsibility for grooming a junior person. Technical, interpersonal and political skills are generally conveyed in such a relationship from the more experienced person. A mentor is a teacher, spouse, counsellor, developerr of skills and intellect, host, guide, exemplar, and most importantly, supporter and facilitator in the realisation of the vision the young person (protege) has about the kind of 1ife he wants as an adult.
The main objective is to he1p an employee attain psychological maturity and effectiveness and get integrated with the organisation. In a work situation, such mentoring can take place at both formal and informal levels, depending on the prevailing work culture and the commitment from the top management. Formal mentoring can be very fruitful, if management invests time and money in such relationship building exercises.
Career functions: Career functions are those aspects of the relationship that enhance career advancement. These include:
1. Sponsorship: Where mentors actively nominate a junior person (called 'mentee') for promotions or desirable positions.
2. Exposure and visibility: Where mentors offer opportunities for mentees to interact with senior executives, demonstrate their abilities and exploit their potential.
3. Coaching: Mentors help mentees to analyse how they are doing their work and to define their aspirations. Here mentors offer practical advice on how to accomplish objectives and gain recognition from others.
4. Protection: Mentors shield the junior person from harmful situations/seniors.
5. Challenging assignments: Mentors help mentees develop necessary competencies through challenging job assignments and appropriate feedback. Mentors create opportunities clients to prove their worth to demonstrate clearly what they have to offer.
Psychological functions: Psychological functions are those aspects that enhance the mentee’s sense of competence, and identify effectiveness in a professional role. These include:
6. Role modeling: Mentors offer mentees a pattern of values and behaviours to imitate
7. Acceptance and confirmation: mentors offer support, guidance and encouragement to mentees so that they can solve the problems independently and gain confidence in course of time. Mentors also help people to learn about the organisation's culture and understand why things are done in certain ways.
8. Counseling: Mentors help mentees work out their personal problems, learn about what to do and what not to do, offer advice on what works and what doesn't, and do everything to demonstrate improved performance and prepare themselves for greater responsibility.
9. Friendship: Mentors offer practical help and support to mentees so that they can indulge in mutually satisfying social interactions (with peers, subordinates, bosses and customers)
Mentoring in India is based on the time-honoured guru-shishya relationship where the guru would do everything to develop the personality of the shishya, offering emotional support, and guidance. Companies like TISCO, Neyveli Lignite Corporation, Polaris, Coca-Cola India have used mentoring systems to good effect in recent times (Economic Times, 25 Oct., 2002). Organisations like General Electric, Intel, Proctor & Gamble have given a lot of importance to mentoring programmes, going even gone to the extent of penalising senior managers if they fail to develop leadership skills among subordinates. Of course, mentoring is not without its problems. Mentors who are dissatisfied with their jobs and though who teach or narrow or distorted view of events may not help a protege's development. Not all mentors are well prepared to transfer their skills and wisdom to their junior colleagues. When young people are bombarded with conflicting viewpoints - about how things should go - from a series of advisors, they may find it difficult to get ahead with confidence. Mentoring can succeed if (i) there is genuine support and commitment from top management (ii) mentors take up their job seriously and transfer ideas, skills and experiences in a systematic way and (iii) mentees believe in the whole process and carry out things in an appropriate manner.
4. Job Rotation :
This kind of training involves the movement of trainee from one job to another. This helps him to have a general understanding of how the organisation functions. The purpose of job rotation is to provide trainees with a larger organisational perspective and a greater understanding of different functional areas as well as a better sense of their own career objectives and interests. Apart from relieving boredom, job rotation allows trainees to build rapport with a wide range of individuals within the organisation, facilitating future cooperation among departments. The cross-trained personnel offer a great amount of flexibility for organisations when transfers, promotions or replacements become inevitable.
Job rotation may pose several problems, especially when the trainees are rolled on various jobs at frequent intervals. In such a case, trainees do not usually stay long enough in any single phase of the operation to develop a high degree of expertise. For slow learners, there is little room to integrate resources properly. Trainees can become confused when they are exposed to rotating managers, with contrasting styles of operation. Today's manager's commands may be replaced by another set from another manager! Further, job rotation can be quite expensive. A substantial amount of managerial time is lost when trainees change positions, because they must be acquainted
with different people and techniques in each department. Development costs can go up and productivity is reduced by moving a trainee into a new position when his efficiency levels begin to improve at the prior job. Inexperienced trainees may fail to handle new tasks in an efficient way. Intelligent and aggressive trainees, on the offer hand, may find the system to be thoroughly boring as they continue to perform more or less similar jobs without any stretch, pull and challenge. To get the best results out of the system, it should be tailored to the needs, interests and capabilities of the individual trainee, and not be a standard sequence that all trainees undergo.
5 Apprenticeship Training
Most craft workers such as plumbers and carpenters are trained through formal apprenticeship programmes. Apprentices are trainees who spend a prescribed amount of time working with an experienced guide, coach or trainer. Assistantships and internships are similar to apprenticeships because they also demand high levels of participation from the trainee. An internship is a kind of on-the-job training that usually combines job training with classroom instruction in trade schools, colleges or universities. Coaching, as explained above, is similar to apprenticeship because the coach attempts to provide a model for the trainee to copy. One important disadvantage ofthe apprenticeship methods is the uniform period of training offered to trainees. People have different abilities and learn at varied rates. Those who learn fast may quit the programme in frustration. Slow learners may need additional training time. It is also likely that in these days of rapid changes in technology, old skills may get outdated quickly. Trainees who spend years learning specific skills may find, upon completion of their programmes, that the job skills they acquired are no longer appropriate.
6 Committee Assignments
In this method, trainees are asked to solve an actual organisational problem. The trainees have to work together and offer solution to the problem. Assigning talented employees to important committees can give these employees a broadening experience and can help them to understand the personalities, issues and processes governing the organisation. It helps them to develop team spirit and work unitedly toward common goals. However, managers should very well understand that committee assignments could become notorious time wasting activities. The above on-the-job methods are cost effective. Workers actually produce while they learn. Since immediat.e feedback is available, they motivate trainees to observe and learn the right way of doing things. Very few problems arise in the· case of transfer of training because the employees learn in the actual work environment where the skills that are learnt are actually used. On-the-job methods may cause disruptions in production schedules. Experienced workers cannot use the facilities that are used in training. Poor learners may damage machinery and equipment. Finally, if the trainer does not possess teaching skills, there is very little benefit to the trainee.
Off-the-Job Methods
Under this method of training, the trainee is separated from the job situation and his attention is focused upon learning the material related to his future job performance. Since the trainee is not distracted by job requirements, he can focus his entire concentration on learning the job rather than spending his time in performing it. There is an opportunity for freedom of expression for the trainees. Off-the-job training methods are as follows:
a. Vestibule training: In this
method, actual work conditions are simulated in a classroom. Material, files and equipment - those that are used in actual job performance are also used in the training. This type of training is commonly used for training personnel for clerical and semi-skilled jobs. The duration of this training ranges from a few days to a few weeks. Theory can be related to practice in this method.
b. Role playing: It is defined as a method of human interaction that involves realistic behaviour in imaginary situations. This method of training involves action, doing and practice. The participants play the role of certain characters, such as the production manager, mechanical engineer, superintendents, maintenance engineers, quality control inspectors, foreman, workers and the like. This method is mostly used for developing interpersonal interactions and relations.
c. Lecture method: The lecture is a traditional and direct method of instruction. The instructor organizes the material and gives it to a group of trainees in the form of a talk. To be effective, the lecture must motivate and create interest among the trainees. An advantage of lecture method is that it is direct and can be used for a large group of trainees. Thus, costs and time involved are reduced. The major limitation of the lecture method is that it does not provide for transfer of training effectively.
d. Conference/discussion approach: In this method, the trainer delivers a lecture and involves the trainee in a discussion so that his doubts about the job get clarified. When big organisations use this method, the trainer uses audio-visual aids such as black boards, mockups and slides; in some cases the lectures are videotaped or audio taped. Even the trainee's presentation can be taped for self confrontation and self-assessment.
The conference is, thus, a group-centered approach where there is a clarification of ideas, communication of procedures and standards to the trainees. Those individuals who have a general educational background and whatever specific skills are required such as typing, shorthand, office equipment operation, filing, indexing, recording, etc. - may be provided with specific instructions to handle their respective jobs.
e. Programmed instruction: This method has become popular in recent years. The subject matter to be learned is presented in a series of carefully planned sequential units. These units are arranged from simple to more complex levels of instruction.
The trainee goes through these units by answering questions or filling the blanks. This method is, thus, expensive and time-consuming.
Behaviourally Experienced Training
Some training programmes focus on emotional and behavioural learning. Here employees can learn about behaviour by role-playing in which the role players attempt to act their part in respect of a case, as they would behave in a real-life situation. Business games, cases, incidents, group discussions and short assignments are also used in behaviourally-experienced learning methods. Sensitivity training or laboratory training is an example of a method used for emotional learning. The focus of experiential methods is on achieving, through group processes, a better understanding of oneself and others. These are discussed elaborately in the section covering Executive Development Programmes.
Evaluation of a Training Programme
The specification of values forms a basis for evaluation. The basis of evaluation and the mode of collection of information necessary for evaluation should be determined at the planning stage.
The process of training evaluation has been defined as any attempt to obtain information on the effects of training performance and to assess the value of training in the light of that information. Evaluation helps in controlling and correcting the training programme. Hamblin suggested five levels at which evaluation of training can take place, viz., reactions, learning, job behaviour, organisation and ultimate value.
1. Reactions: Trainee's reactions to the overall usefulness of the training including the coverage of the topics, the method of presentation, the techniques used to clarify things, often throw light on the effectiveness of the programme. Potential questions to trainees might include: (i) What were your learning goals for the programme? (ii) Did you achieve them? (iii) Did you like this programme? (iv) Would you recommend it to others who have similar learning goals? ( v) what suggestions do you have for improving the programme? (vi) Should the organisation continue to offer it?
2. Learning: Training programme, trainer's ability and trainee's ability are evaluated on the basis of quantity of content learned and time in which it is learned and learner's ability to use or apply the content learned.
3. Job behaviour: This evaluation includes the manner and extent to which the trainee has applied his learning to his job.
4. Organisation: This evaluation measures the use of training, learning and change in the job behaviour of the department/organisation in the form of increased productivity, quality, morale, sales turnover and the like.
5. Ultimate value: It. is the measurement of ultimate result of the contributions of the training programme to the company goals like survival, growth, profitability, etc. and to the individual goals like development of personality and social goals like maximising social benefit.
Methods of Evaluation
Various methods can be used to collect data on the outcomes of training. Some of these are:
Questionnaires: Comprehensive questionnaires could be used to obtain opinions, reactions, views of trainees.
Tests: Standard tests could be used to find out whether trainees have learnt anything during and after the training.
Interviews: Interviews could be conducted to find the usefulness of training offered to operatives.
Studies: Comprehensive studies could be carried out eliciting the opinions and judgements of trainers, superiors and peer groups about the training.
Human resource factors: Training can also be evaluated on the basis of employee satisfaction, which in turn can be examined on the basis of decrease in employee turnover, absenteeism, accidents, grievances, discharges, dismissals, etc.
Cost benefit analysis: The costs of training (cost of hiring trainers, tools to learn, training centre, wastage, production stoppage, opportunity cost of trainers and trainees) could be compared with its value (in terms of reduced learning time, improved learning, superior performance) in order to evaluate a training programme.
Feedback: After the evaluation, the situation should be examined to identify the probable causes for gaps in performance. The training evaluation information (about costs, time spent, outcomes, etc.) should be provided to the instructors, trainees and other parties concerned for control, correction and improvement of trainees' activities. The training evaluator should follow it up sincerely so as to ensure effective implementation of the feedback report at every stage.
Training Programme of Company
Purpose-
To establish and maintain a documented procedure for identifying and providing training to all the employees of the organization with essential skill and knowledge so as to achieve desired quality and productivity goals.
Scope-
This procedure is applicable to all employees. Company's personnel involved in quality system.
Training Process
Training is provided both “In House” and through “Outside Agencies” Which could be for an individual or for group of persons as a collective training.
Training is conducted either through “Planned Training Programme” “Emergent Training Programme” which is organized by the HRD Department
Planned Training-
The planned training programme is drawn on annual basis both for individual and group of persons for collective training at the beginning of Calendar Year by Manager HRD and HRD Executive of factory. The departmental Heads drawn out the training requirements on the training requisition slip and sent it to HID Dept. Training of the senior personnel at Factory Is also catered for at Head Office on receipt of requirement from HRD Executive.
The annual Training Prog. at Head office is approved by from Chairman cum Managing Director.
Annual training Prog. is prepared on format and circulated to all heads of department and is updated. If required in case of additional training needs.
Emergent Training –
The Emergent training programme is a supplementary training programme both for individual and collective persons which is imparted during the course of work to take care for unforeseen or uncatered training requirements arisen due to installation of new machine, system, procedure etc.
Identification of such training need is done by the concerned HOD at Head Office and HOD/Supervisor at factory and accordingly forwards their request. The procedure as in case of planned training is followed there after.
Conduct of Training
HRD Head at HO & HRD (Executive) at factory ensures that identified training in their respective areas is conducted as scheduled.
In case of External training, liaison with the agency is done and dates, venue etc. is fixed up and concerned person is intimated through Heads of Department.
For In-House training, date/Venue is fixed up with identified faculty and concerned individual is informed through Heads of Department. Besides, necessary resource/infrastructure is also provided for effective training.
External Trainers for the Company are:
Father Son & Company
Skill & Thoughts
Logic Consultant
Topics covered under Training Programme
EFT Act & Scheme Provisions
Rigid and Semi Rigid Packaging
Principles of Contract Labour Act
Self-motivational & Attitudinal Seminar
Organic farming
Training about operations in the company.
Processing of Rice (value addition In Rice)
Knowledge about rice trade
Operational and maintenance of dryer & Cleaning Plant
Silo storage Techniques
Scientific Instrumentation
Finished goods quality control
Trouble shooting
PURPOSE OF PROJECT
To know the effectiveness of the training programme conducted by the company.
To know whether employees are aware about their responsibilities and authorities or not.
To improve Organizational Climate and increase the morale of employees.
To know whether training programme is conducted successfully or not.
To know about the work culture of the organization.
Job satisfaction
Job satisfaction is in regard to one's feeling or state of mind regarding the nature of their work. It can be influenced by a variety of factors e.g.: quality of one's relationships with there supervisor, quality of physical environment in which they work, degree of fulfillment in there work etc.
Locke gives a comprehensive definition of job satisfaction as involving cognitive, effective and evaluative reactions or attitudes and states it is "a pleasurable or positive emotional state resulting from the appraisal of one's job or job experience." Job satisfaction is a result of employees' perception of how well their job provides those things that are viewed as important.
There are three generally accepted dimensions to job satisfaction.
First, job satisfaction is an emotional response to a job situation, as such it cannot be seen; it can only be inferred.
Second, job satisfaction is often determined by how well outcomes meet or exceed expectations. For example if organizational participants feel that they are working more harder than others in the department but are receiving fewer rewards, they will probably have a negative attitude toward the work, the boss or the coworkers. They will be dissatisfied. On the other hand, if they feel they are being treated very well and are being paid equitably, they are likely to have a positive attitude toward the job. They will be job - satisfied.
Third, job satisfaction represents several related attitudes.
Factors determining job satisfaction
• Factors affecting jobs are the main factors of job satisfaction, which may be challenging work, reward systems, working conditions, colleagues, learning and personality. Skill variety autonomy and significance are challenging tasks, which provide maximum satisfaction to employees. Many people feel bored if a job is too simple and routine, but many employees also enjoy simple and routine jobs.
• The job characteristics are important factors for providing satisfaction. Reward systems, equitable rewards, equal pay for equal work, promotion avenues, etc are satisfaction factors. Money is important to employees having unfulfilled basic needs, i.e. they require more award and recognition.
• Fairness in promotion, unbiased attitude of management, responsibilities and social status are the factors that are said to be providing satisfaction to employees.
• Working conditions influence employee's level of satisfaction. Under conducive working condition, people prefer to work hard while in an adverse atmosphere people avoid work. Working condition not only include physicals of the work but also the working relationships in the organization. The physical conditions, for example, are the light, temperature, willingness, etc. A clerk working under routine conditions likes to work hard in an air - conditioned atmosphere with computer facilities. It increases the working capacity of the employee.
The relationships between the employees and the managers have an important bearing on job satisfaction.
Job satisfaction is greater in case the higher authority is sympathetic, friendly and willing to help the employees. Employees feel satisfied when their views are listened to and regarded by their higher authorities
Personal attitude and perceptions are the employees' angles of satisfaction, which should be taken into consideration while motivating people to arrive at job satisfaction
Feedback from the job itself and autonomy are two of the major job-related motivational factors. A recent found that career development was most important to both younger and older employees.
Supervision is another moderately important of job satisfaction. There seem to be two dimensions of supervisory style that affect job satisfaction. One is employee -centeredness, which is measured by the degree to which a supervisor takes a personal interest and cares about the employee.
It commonly is manifested in ways such as checking to see how well the employee is doing, providing advice and assistance to the individual, and communicating with the associate on a personal as well as an official level . The other dimension is participation
or influence, as illustrated by managers who allow their people to participate in decisions that affect their own jobs. In most case, this approach leads higher job satisfaction.
Friendly, cooperative coworkers or team members are a modest source of job satisfaction to individual employees. The group, especially a "tight" team, serves as a source of support, comfort, advice, and assistance to the individual member.
Outcomes of job satisfaction
To society as a whole as well as from an individual employee's standpoint, job satisfaction in and of itself is a desirable outcome. It is important to know, if at all, satisfaction relates to outcomes variable. For example, if job satisfaction is high, will the employee perform better and the organization be more effective? I f job satisfaction is low, will there be performance problems and ineffectiveness? The following sections examine the most important of these.
Satisfaction and performance:
Most assume a positive relationship; the research to date indicates that there is no strong linkage between satisfaction and performance. Conceptual, methodological, and empirical analyses have questioned and argued against these results.
The best conclusion about satisfaction and performance is that there is, definitely a relationship. The relationship may even be more complex than others in organization behavior. For example, there seem to be many possible-moderating variables, the most important of which is reward. If people receive reward they feel are equitable, they will be satisfied, and is likely to result in greater performance effort.
Satisfaction and turnover:
Unlike that between satisfaction and performance, research has uncovered a moderately negatively relationship between satisfaction and turnover. High job satisfaction will not, in and of itself, keep turnover low, but it does seem to help. On the other hand, if there is considerable job dissatisfaction, there is likely to be high turnover. Obviously, other variables enter into an Employees decision to quit besides job satisfaction. For example, age tenure in the organization, and commitments to the organization, may playa role. Some people cannot see them selves working anywhere else, so they remain regardless of how dissatisfied they feel.
Another factor is the general economy, typically there will be an increase in turnover because will being looking for better opportunities with other organization.
Satisfaction and absenteeism:
Research has only demonstrated a weak negative relationship between satisfaction and absenteeism. As with turnover, many variables enter into the decision to stay home besides satisfaction with the job. For example, there are moderating variables such as the degree to which people that there job are important. For example, research among state govt. Employees has found those who believed that there was important had lower absenteeism than did who did not feel this way. Additionally, it is important to remember that although job satisfaction will not necessarily result in absenteeism, low job satisfaction more likely to bring about absenteeism.
Significance of Study
Every organization desires that it will grow continuously and make and retain its position in the competitive and continuously changing market environment. For this purpose the employees of the organization must be skilled and talented. But all the employees may not have the desired skills. Their skills can be improved with the help of training programs. It is an important activity for the origination to conduct appropriate and related programme for its employees, so that may be able to understand the terms required for the completion of his job. This also helps the employees of the organization to know about his job and organization very well. This also helps in better communication and relation among the organization wants to grow rapidly, then it is essential for it to conduct periodically training programmes for its employees to improve the skills and knowledge.
So the top management must concentrate on the training programs and organize them in such a way that maximum number of employees wants to attend these programs. These must be related to employees and their jobs.
Recruitment and selection of Insurance Companies
PREFACE
People are a company’s most important assets. They can make or break the
fortunes of a business. In today’s highly competitive business environment
placing the right people in the right position is very critical for the success of
any organization.
The recruitment and selection decision is of prime importance as it is the
vehicle for obtaining the best possible person-to-job fit that will, contribute
significantly towards the Company's effectiveness. It is also becoming
increasingly important, as the Company evolves and changes, that new recruits
show a willingness to learn, adaptability and ability to work as part of a team.
The Recruitment & Selection procedure ensures that these criteria are
addressed
In this project I have studied Recruitment and Selection process of ICICI
Prudential Life Insurance and attempted to provide some ways so as to make
recruitment more effective and to reduce the cost of hiring an employee.
I am privileged to be one of the students who got an opportunity to do my
training with ICICI Prudential Life Insurance. My involvement in the project
has been very challenging and has provided me a platform to leverage my
potential in the most constructive way.
ICICI Prudential Life insurance is
one of India's leading financial
institutions offering complete
financial solutions that encompass
every sphere of life. In a short span
of time,ICICI has set an example by
having a steady and confident
journey to growth and success.
During the training period I have
studied deeply the process of hiring
in ICICI Prudential Life insurance
and did a SWOT analysis of ICICI
Prudential Life Insurance to find out
the existing shortcomings and
potential threats and thereby
recommended suggestions.
This project however is an attempt
to share as best as possible my
experience in corporate world with
all my colleagues and my faculty.
I would be delighted to receive
reader’s comments which maybe
valuable lessons for my future
projects.
EXECUTIVE SUMMARY
In today’s rapidly changing business environment, organizations have to
respond quickly to requirements for people. The Financial market has been
witnessing growth which is manifold for last few years. Many private players
have entered the economy thereby increasing the level of competition. In the
competitive scenario it has become a challenge for each company to adopt
practices that would help the organization stand out in the market. The
competitiveness of a company of an organization is measured through the
quality of products and services offered to customers that are unique from
others. Thus the best services offered to the consumers are result of the genius
brains working behind them. Human Resource in this regard has become an
important function in any organization. All practices of marketing and finances
can be easily emulated but the capability, the skills and talent of a person
cannot be emulated. Hence, it is important to have a well-defined recruitment
policy in place, which can be executed effectively to get the best fits for the
vacant positions. Selecting the wrong candidate or rejecting the right candidate
could turn out to be costly mistakes for the organization. Therefore a
recruitment practice in an organization must be effective and efficient in
attracting the best manpower.
Coverage –The extent and limitation
With largest number of life insurance policies in force in the world,
insurance happens to be a mega opportunity in India. Its business is growing at
15-20% annually and presently is of the order of Rs. 450m. Together with
banking sector it adds about 7% to the GDP.
Like in the case of BPO’s, Insurance sector too faces the problem of
attrition. Thus, recruitment is an ongoing process carried through out the year.
The project is based on the study of recruitment process. The various
recommendations suggested have been the result of the study. The idea is to
generate ways of dealing with high attrition and making hiring process
manageable and efficient.
Data Used
There were mainly two sources of data collection
Ø Primary data:
Ø Survey method
Ø Personal interview with candidates
Ø In depth conversation with the placement agency
v Secondary data:
Ø Study of recruitment policy
Ø Websites
Ø Published articles
Research methodology used
v Study of recruitment and selection at ICICI Prudential Life Insurance by the manual provided by the HR department;
v Web sites
v Journals
v Magazines
v Books
Findings
v Recruitment is done throughout the year more during the months of May-June and Oct-Nov;
v Huge investment of time;
v Huge recruitment cost;
To pursue these, I would be going through the recruitment policies of the
company. By active participation in the recruitment process, the areas where
improvement can be bought about can be identified.
Thus the whole research would be done under the guidance of external guide. It
will also involve recruitment and selection processes, reading the material
provide internally by the organization, information from the new employees.
Introduction
1.1 Introduction Of The Insurance Industry
Overview
The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era – past few centuries – yet its beginnings date back almost 6000 years.
The first two decades of the twentieth century saw lot of growth in insurance business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with total business-in-force as Rs.298 crore in 1938. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business.
Some of the important milestones in the life insurance business in India are:
1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business.
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.
1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the
general insurance business in India with effect from 1st January 1973.
With largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7 per cent to the country’s GDP. Gross premium collection is nearly 2 per cent of GDP and funds available with LIC for investments are 8 per cent of GDP.
Yet, nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subject to weak social security and pension systems with hardly any old age income security. This itself is an indicator that growth potential for the insurance sector is immense.
A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and at the same time strengthens the risk taking ability. It is estimated that over the next ten years India would require investments of the order of one trillion US dollar. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain economic growth of the country.
India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries.
Present Scenario
The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership.
The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 14 life insurance and 8 general insurance companies have been registered. A host of private Insurance companies operating in both life and non-life segments have started selling their insurance policies..
Life Insurance Market
The Life Insurance market in India is an underdeveloped market that was only tapped by the state owned LIC till the entry of private insurers. The penetration of life insurance products was 19 percent of the total 400 million of the insurable population. The state owned LIC sold insurance as a tax instrument, not as a product giving protection. Most customers were under- insured with no flexibility or transparency in the products. With the entry of the private insurers the rules of the game have changed.
The 12 private insurers in the life insurance market have already grabbed nearly 9 percent of the market in terms of premium income. The new business premiums of the 12 private players has tripled to Rs 1000 crore in 2002- 03 over last year. Innovative products, smart marketing and aggressive distribution. That's the triple whammy combination that has enabled fledgling private insurance companies to sign up Indian customers faster than anyone ever expected. Indians, who have always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer.
The private insurers also seem to be scoring big in other ways- they are persuading people to take out bigger policies. Buoyed by their quicker than expected success, nearly all private insurers are fast- forwarding the second phase of their expansion plans.
Major Insurance Players
Licenses have been issued for the following companies
Ø ICICI Prudential Life Insurance Limited
Ø ICICI Prudential Life Insurance Company Limited
Ø HDFC Standard Life Insurance Company Limited
Ø Birla Sun Life Insurance Company Limited
Ø TATA AIG Life Insurance Company Limited
Ø Max New York Life Insurance Company Limited
Ø SBI – Cardiff Life Insurance Company Limited
Ø ING Vysya Life Insurance Company Limited
Ø Bajaj Allianz Life Insurance Company Limited
Ø MetLife Life Insurance Company Limited
Ø Aviva Life Insurance Company Limited
Ø AMP Sanmar Life Insurance Company Limited
Ø Sahara India Life Insurance Limited
Ø Sri Ram Life Insurance Limited
Protection of the interests of policyholders:
IRDA has the responsibility of protecting the interest of insurance
policyholders. Towards achieving this objective, the Authority has taken the
following steps:
v IRDA has notified Protection of Policyholders Interest Regulations
2001 to provide for: policy proposal documents in easily
understandable language; claims procedure in both life and non-life;
setting up of grievance redressal machinery; speedy settlement of
claims; and policyholders' servicing. The Regulation also provides for
payment of interest by insurers for the delay in settlement of claim.
v The insurers are required to maintain solvency margins so that they
are in a position to meet their obligations towards policyholders with
regard to payment of claims.
v It is obligatory on the part of the insurance companies to disclose
clearly the benefits, terms and conditions under the policy. The
advertisements issued by the insurers should not mislead the
insuring public.
v All insurers are required to set up proper grievance redress
machinery in their head office and at their other offices.
The Authority takes up with the insurers any complaint received from the
policyholders in connection with services provided by them under the
insurance contract.
1.2 COMPANY PROFILE
ICICI Prudential Life Insurance
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential plc, a leading international financial services group headquartered in the United Kingdom.
ICICI was established in 1955 to lend money for industrial development. Today, it has diversified into retail banking and is the largest private bank in
the country. Prudential plc was established in 1848 and is presently the largest life insurance company in UK.
ICICI Prudential is currently the No. 1 private life insurer in the country. For the financial year ended March 31, 2005, the company garnered Rs 1584 crore of new business premium for a total sum assured of Rs 13,780 crore and wrote nearly 615,000 policies.
The Company recognizes that the driving force for gaining sustainable competitive advantage in this business is superior customer experience and investment behind the brand. The Company aims to achieve this by striving to provide world class service levels through constant innovation in products, distribution channels and technology based delivery. The Company has already taken significant steps to achieve this goal.
India's Number One private life insurer, ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank-one of India's foremost financial services companies-and Prudential plc- a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 23.72 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%.
ICICI Prudential was the first life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted Brands'. As we grow our distribution, product range and customer base, we continue to tirelessly uphold our commitment to deliver world-class financial solutions to customers all over India.
FACT SHEET
THE COMPANY
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA).
ICICI Prudential's capital stands at Rs. 23.72 billion with ICICI Bank and
Prudential plc holding 74% and 26% stake respectively. For the first quarter ended June 30, 2007, the company garnered Rs. 987 crore of weighted retail + group new business premiums and wrote over 450,000 retail policies in the period. The company has assets held to the tune of over Rs. 18,400 crore.
ICICI Prudential is also the only private life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. The AAA (Ind) rating is the highest rating, and is a clear assurance of ICICI Prudential's ability to meet its obligations to customers at the time of maturity or claims.
For the past six years, ICICI Prudential has retained its position as the No. 1 private life insurer in the country, with a wide range of flexible products that meet the needs of the Indian customer at every step in life.
Distribution
ICICI Prudential has one of the largest distribution networks amongst private life insurers in India. It has a strong presence across India with over 680 branches and over 235,000 advisors.
The company has over 23 bancassurnace partners, having tie-ups with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord Krishna Bank, Idukki District Co-operative Bank, Jalgaon Peoples Co-operative Bank, Shamrao Vithal Co-op Bank, Ernakulam Bank, 9 Bank of India sponsored Regional Rural Banks (RRBs), Sangli Urban Co-operative Bank, Baramati Co-operative Bank, Ballia Kshetriya Gramin Bank, The Haryana State Co-operative Bank and Imphal Urban Cooperative Bank Limited.
Products Insurance Solutions For Individuals
ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its products can be enhanced with up to 4 riders, to create a customized solution for each policy holder.
Savings Solutions
Save’n’Protect is a traditional endowment savings plan that offers life protection along with adequate returns.
CashBak is an anticipated endowment policy ideal for meeting milestone expenses like a child’s marriage, expenses for a child’s higher education or purchase of an asset.
LifeTimeSuper offer customers the flexibility and control to customize the policy to meet the changing needs at different life stages. Each offer 4 fund options — Preserver, Protector, Balancer and Maximiser.
LifeLink Super is a single premium Unit Linked Insurance Plan which combines life insurance cover with the opportunity to stay invested in the stock market.
Premier Life Gold is a limited premium paying plan that offers customers life insurance cover till the age of 75.
InvestShield Life New is a unit linked plan that provides premium guarantee on the invested premiums and ensures that the customer receives only the benefits of fund appreciation without any of the risks of depreciation.
· InvestShield Cashbak is a unit linked plan that provides premium guarantee on the invested premiums along with flexible liquidity options.
Protection Solutions
LifeGuard is a protection plan, which offers life cover at very low cost. It is available in 3 options – level term assurance, level term assurance with return of premium and single premium.
HomeAssure is a mortgage reducing term assurance plan designed specifically to help customers cover their home loans in a simple and cost-effective manner.
Child Plans
· SmartKid education plans provide guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the child’s life. SmartKid plans are also available in unit-linked form – both single premium and regular premium.
Education Insurance Plans
· Education insurance under the SmartKid brand provides guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the child's life. SmartKid plans are
also available in unit-linked form - both single premium and regular premium
Retirement Solutions
ForeverLife is a retirement product targeted at individuals in their thirties.
Market-linked retirement products LifeTime Super Pension is a regular premium market-linked pension
plan. Golden Years: is a limited premium paying retirement solution that
offers tax benefits up to Rs 100,000 u/s 80C, with flexibility in both the accumulation and payout stages.
Health Solution
Health Assure and Health Assure Plus: Health Assure is a regular premium plan which provides long term cover against 6 critical illnesses by providing policyholder with financial assistance, irrespective of the actual medical expenses. Health Assure Plus offers the added advantage of an equivalent life insurance cover
· Cancer Care: is a regular premium plan that pays cash benefit on the diagnosis as well as at different stages in the treatment of various cancer conditions.
· Diabetes Care and Diabetes Care Plus*: 1st ever critical illness insurance cover for diabetics.
· Hospital Care*: Hospital Care offers a Cashless hospitalization facility in more then 3000 network hospitals
· Crisis Cover : is a 360-degree product that will provide long-term coverage against 35 critical illnesses, total and permanent disability, and death
Note (*) products Re-launched on 1st July 2006
Group Insurance Solutions
ICICI Prudential also offers Group Insurance Solutions for companies seeking to enhance benefits to their employees.
ICICI Pru Group Gratuity Plan: ICICI Pru’s group gratuity plan helps employers fund their statutory gratuity obligation in a scientific manner. The plan can also be customized to structure schemes that can provide benefits beyond the statutory obligations.
ICICI Pru Group Superannuation Plan: ICICI Pru offers a flexible defined contribution superannuation scheme to provide a retirement kitty for each member of the group. Employees have the option of choosing from various annuity options or opting for a partial commutation of the annuity at the time of retirement.
ICICI Pru Group Term Plan: ICICI Pru’s flexible group term solution helps provide affordable cover to members of a group. The cover could be uniform or based on designation/rank or a multiple of salary. The benefit under the policy is paid to the beneficiary nominated by the member on his/her death.
Flexible Rider OptionsICICI Pru Life offers flexible riders, which can be added to the basic policy at a marginal cost, depending on the specific needs of the customer.
1. Accident Benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the rider sum assured under the policy. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit.
2. Accident & Disability Benefit: This rider option pays 10% the sum assured under the rider every year till next 10 years on Accidental Permanent Disability of 2 Organs.
3. Critical Illness Benefit: protects the insured against financial loss in the event of 9 specified critical illnesses. Benefits are payable to the insured for medical expenses prior to death.
4. Income Benefit: This rider pays the 10% of the sum assured to the nominee every year, till maturity, in the event of the death of the life assured. It is available on SmarKid, SecurePlus and CashPlus
5. Waiver of Premium: In case of total and permanent disability due to an accident, the premiums are waived till maturity. This rider is available with SecurePlus and CashPlus.
Choice of Six Investment Options :-
ICICI prudential offers you the opportunity of selecting between investment options to match your investment priorities.
1) Protector:-
An Investment Option with investment indebt and money market instruments.
2) Maximiser :-
An investment option with investment in equity and equity related instruments.
3) Balancer :-
An investment option with investment in a mix of equity and debt oriented instruments.
4) Preserver :-
An investment option with investment in low-risk instruments like cash and call
money markets.
5) Flexi Growth:-
New Fund (NFO) launched in March 2007, Long term returns from an equity portfolio lare,mid and small cap companies.
6) Flexi balanced:-
Balance of capital appreciation and stable returns from an equity (large,mid & small cap companies) & debt portfolio.
Vision and Mission
Their vision is to make ICICI Prudential Life Insurance Company the dominant new insurer in the life insurance industry. This they hope to achieve through
their commitment to excellence, focus on service, speed and innovation, and leveraging our technological expertise.
The success of the organisation will be founded on its strong focus on values and clarity of purpose. These include:
· Understanding the needs of customers and offering them superior products and service
· Building long lasting relationships with their partners· Providing an enabling environment to foster growth and learning for
their employees
And above all building transparency in all our dealings.
They believe that they can play a significant role in redefining and reshaping the sector. Given the quality of their parentage and the commitment of their team, they feel that tere will be no limits to their growth.
DISTRIBUTION
ICICI Prudential has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 150 cities and towns in India, stretching from Bhuj in the west to Guwahati in the east, and Jammu in the north to Trivandrum in the south.
The company has 9 bank partnerships for distribution, having agreements with ICICI Bank, Bank of India, Federal Bank, South Indian Bank, Lord Krishna Bank, and some co-operative banks, as well as over 300 corporate agents and brokers. It has also tied up with NGOs, MFIs and corporates for the distribution of rural policies.
ICICI Prudential has recruited and trained more than 1, 90,000 insurance advisors to interface with and advise customers. Further, it leverages its state-of-the-art IT infrastructure to provide superior quality of service to customers
RegisteredOffice :
ICICI Towers 9thfloor, Bandra-Kurla ComplexMumbai - 400 051.Tel: 494 3232
Regional Office :8th floor EROS Coorporate Tower,Nehru place,
New Delhi-110011.Tel:46554405
Delhi office :
3rd floor Videocon Towers E-1, Rani Jhansi Road New Delhi - 110055. Tel: 601 3232
ICICI Prudential Life Insurance opens office in Dubai
In a move to consolidate its position in the Gulf region, ICICI Prudential Life Insurance (ICICI Prudential), India's No. 1 private life insurance company, today opened its representative office in Dubai, becoming the first private life insurer from India to open an office in the Emirate.
At ICICI Prudential we offer pragmatic, world-class solutions. Put
simply, solutions with a lot of common sense. Solutions that take care of your
four basic financial needs - Earning, Saving, Investing and Spending. So you
live your life to the fullest, sans worries.
Find the Next Chapter - RECRUITMENT AND SELECTION RECOMMENDATIONS conclusion, learning .........
Project Report Recruitment-Selection Process Insurance Companies
OBJECTIVES OF THE PROJECT
Every task is undertaken with an objective. Without any objective a task is rendered meaningless.
The main objectives for undertaking this project are:
To understand the internal Recruitment process at ICICI Prudential Life Insurance
To identify areas where there can be scope for improvement
To give suitable recommendation to streamline the hiring process
METHODOLOGY
The insurance sector is marked with a
high level of attrition and therefore recruitment
process becomes a crucial function of the
organization. At ICICI Prudential Life Insurance,
recruitment is all time high during May-June and
Oct-Nov. The attrition is high among the sales
managers, unit mangers mostly in the sales
profile. The recruitment is high during these
months due to the fact that March and September
are half year closing and business is high during
Jan-Mar. Thus it is only after March that people
move out of the companies.
Since my summer training was in the
months of May-June, it gave me the opportunity
of involving myself directly with the recruitment
process and analyzing the process so that suitable
recommendations can be given. This project is
centered on identifying best hiring practices in
the insurance industries. It therefore requires
great amount of research work. The methodology
adopted was planned in advance so as to collect
data in the most organized way.
My area of focus was the recruitment and selection particularly at ICICI Prudential Life Insurance.
I was directly involved with the recruitment for candidates for the sales profile. I was particularly involved
with the sourcing of candidates for the regions outside Delhi such as M.P, U.P and Rajasthan.
Before any task was undertaken, we were asked to go through the HR policies of ICICI Prudential
Life Insurance so that we get a better understanding of the process followed by them.
The first task was to understand the various job profiles for which recruitment was to be done.
The next step was to explore the various job portals to search for suitable candidates for the job
profile.
Once the search criteria were put, candidates went through a telephonic interview to validate the
information mentioned in their resume.
A candidate matching the desired profile was then lined for the first round of Face to Face interview
in their respective cities.
Firstly the candidate had filled up the personal data form(pdf).
Then the candidates INTERVIEW EVALUATION SHEET which is provided by interviewer was
crosschecked by the HR team. If they think that the candidate was good to hire or not.
When a candidate cleared his first round, he is then made to take an online aptitude test. We created
the online aptitude test. It the HR department, which has the exclusive rights to assign test, codes to the
candidates. Each code was unique and could be used only once by a candidate.
I was involved in assigning codes and administering the test
Once the candidate completed his first assessment, his scores were checked. If he cleared his cut-off
he was given another test.
I had the responsibility to make sure that candidates complete all formalities and had to regularly
follow up with them.
Since we received many resumes, it was essential that a database be maintained to keep a track. It was
convenient method than to stock up piles of papers. ICICI has their own database named as “PACE”, I
update all the records of the new joinees in that tracker. PACE containes all the information of a
candidate such as name, contact number, location etc.
The external guide maintained a regular updating of the database.
Understanding what kinds of database are maintained and how they help in keeping a record.
I was also involved in maintaining a track of test codes given, the database for employee referrals,
Database for the resumes received through mails and response of advertisement.
RESEARCH METHODOLOGY
Date Source
Primary :- Through Questionnaires
Secondary :- Through Internet, Journals, News papers and Misc.
Data Collection Procedure :- Survey
Research Instrument :- Structured Questionnaire.
Sample Size : - 80
Sample Area : - work done in Delhi regional Office.
Sample procedure :- Random sampling.
PROJECT SCHEDULE :-
First 1 week :-Training program from the company.
Second week :-Collecting the primary and secondary data.
Third Fourth week :- Study Recruitment & Selection Process
Fifth week :-Designing the questionnaire .
Sixth week :-Conducting the survey in RO.
Seventh week :-Analysis of Data Collection.
Eighth week :-Final Report preparation and presentation.
Limitations of the study
Every task is undertaken with an objective and accomplishment of this
objective determines our success.
Task:
The recruitment at ICICI Prudential Life Insurance involved a lot search
from the database and calling up candidates to check whether they fit
the job specification.
Difficulties:
Candidates were reluctant to talk at times;
Candidates who were contacted were not interested in Insurance on
many occasions;
Candidates who were scheduled for interview would not turn up;
Run out of database many times since most of them would have
already been contacted;
Task:
Candidates were to be searched from the job portals and called up to
be scheduled for an interview.
Difficulties:
A summer trainees we could not separate systems to work on;
At times many people had for couple of hours to work on the
computer;
Since STD calls had to be made, the availability of phone was
limited, so there was greater coordination required with respect to
its usage and maintains a time slot so that other person has a
chance to use.
Task:
Inter company analysis through survey and questionnaire filling.
Difficulties:
Did not secure cooperation easily;
People asked lot of counter question so convincing them was a
major task;
People did not disclose much about their employee details.
Topic Information
RECRUITMENT AND SELECTION
“The art of choosing men is not nearly so difficult as the art of
enabling those one has chosen to attain their full worth”.
Recruitment is the process by which organizations locate and
attract individuals to fill job vacancies. Most organizations have a
continuing need to recruit new employees to replace those who leave
or are promoted in order to acquire new skills and promote
organizational growth.
Recruitment follows HR planning and goes hand in hand with
selection process by which organizations evaluate the suitability of
candidates. With successful recruiting to create a sizeable pool of
candidates, even the most accurate selection system is of little use
Recruiting begins when a vacancy occurs and the recruiter receives
authorization to fill it. The next step is careful examination of the job
and enumeration of skills, abilities and experience needed to perform
the job successfully. Other steps follow:
Creating an applicant pool using internal or external methods
Evaluate candidates via selection
Convince the candidate
And finally make an offer
Scope: To define the process and flow of activities while recruiting,
selecting and appointing personnel on the permanent rolls of an
organization.
Authorization:
S.No
.
Authorized Signatory
1 Head- Human resource
2 Managing director
Amendments and deviations:
Any amendments to and deviations from this policy can only be
authorized by the Head-human Resources and the Managing Director.
Exclusions:
The policy does not cover the detailed formalities involved after the
candidate joins the organization.
ACTIVITY FLOWACTIVITY FLOW
The organization philosophy should be kept in mind while formulating
the recruitment procedure.
The HR department would set the recruitment norms for the
organization. However, the onus of effective implementation and
compliance with the process rests with the heads of the respective
functions and departments who are involved in the recruitment and
selection process.
The process is aimed at defining the series of activities that
needs to be performed by different persons involved in the process of
recruitment, the checks and control measures to be adopted and
information that has to be captured.
Recruitment and Selection is conducted by:
HR & Branch Manager
Functional Head
RECRUITMENT PLANNING
Recruitment planning on the basis of budget
A. The manpower planning process for the year would commence
with the company’s budgeting activity. The respective Functional
heads would submit the manpower requirements of their
respective functions/ departments to the board of Directors as
part of the annual business plan after detailed discussion with
the head of human Resource Function along with detailed notes
in support of the projected numbers assumptions regarding the
direct and indirect salary costs for each position.
B. A copy of the duly approved manpower plan would be forwarded
by the HR department for their further actions during the course
of the year. The annual budget would specify the manpower
requirement of the entire organization, at different levels, in
various functions/departments, at different geographical
locations and the timing of the individual requirements. It would
also specify the requirement budget, which is the cost allotted
towards the recruitment of the budgeted staff and the
replacement of the existing employees. The manpower plan
would also clearly indicate the exact time at which the
incumbent should be on board in such a way that the Regional
HR has adequate notice for the time lapses involved in sourcing
any other activities.
C. The Regional HR’s would undertake the planning activity and
necessary preparations in advance of the anticipated
requirements, as monthly and quarterly activities on the basis of
the approved budget, estimated separations and replacements
therefore.
D. The vacancies sought to be filled or being filled shall always be
within the approved annual manpower budget and no
recruitment process shall be initiated without the formal
concurrence of the Head of the Regional HR under any
circumstance. Head of the Regional HR shall also have the
responsibility to monitor the appointments being considered at
any point of time with specific respect to the duly approved
manpower budgets.
Review of Manpower Plans and Additional Manpower
A. Review of manpower budgets shall take place on a quarterly
basis. In the event of any new position or any deviations to the
original plans, details of the positions maybe forwarded to the
VP-HR along with the adequate supporting information. The
recommendations would normally require a formal approval of
the Managing Director. Alternately, VP-HR may record the
summary of his discussion with the Managing Director and the
MD’s approval on the recommendations, to signify the final
decision taken regarding the recommendations.
SOURCING OF SUITABLE CANDIDATES
Selection of Sources
Regional HR would tap various sources/channels for getting the
right candidate. Depending on the nature of the position/grade,
volumes of recruitment and any other relevant factors, the Regional
HR would use any one multiple sources such as:
Existing database (active application data bank);
Employee referral as per any company scheme that may be
approved from time to time;
Advertisement in the internet/newspapers/magazines/company’s
sites/job sites or any other media;
Placement Agencies (particularly for positions of Managers and
above);
Headhunting firms particularly for senior positions, specialist
positions and critical positions;
Direct recruitment from campuses/academic institutes;
Job websites and
Any other appropriate sources.
The norms for using any of the sources are not water tight.
Number of positions, criticality of positions and the urgency of the
positions, confidentiality requirements, relative efficacy and cost
considerations would play a role in the choice of the appropriate
sourcing mechanism.
ADVERTISEMENTS
All recruitment advertisements (in any form and any medium) shall
always conform to the KLI compliance norms and would not be
released by any department or branch without the approval of the
VP-HR. depending on the specifics of each position for which
recruitment advertisements are to be released, Regional HR may
obtain assistance from the company’s marketing department and/or
any external advertising agencies for the preparation of the
contents. Key features of the positions as notified by the Functional
Heads would normally form a part of the advertisement text.
The media for releasing advertisement would depend on the level
of the position being considered and the urgency of the
requirements.
The advertisement mode that could be broadly specified as
newspapers (local or mainline depending on requirements), internet
sites and business magazines.
Placement Agencies/Headhunting Agencies
Depending upon the vacancies, fresher fitting different description
listed above may be recruited from time to time, from academic
institutes of appropriate standards/reputation/grade, in the requisite
numbers and at the compensation/stipend amounts to be formally
approved of the VP-HR. Plans for such recruitment need specific
special approval of VP-HR. norms regarding the identification of the
appropriate institutes, constitution of the selection panels, timings
of the recruitment, number of candidates to be recruited into
different positions, choice of the appropriate selection process and
the tools thereof shall be decided by the Head of the Regional HR in
consultation with the VP-HR, depending on the specific features of
the position.
Screening the candidates
First level screening
The Candidates would be screened by the HR Manager/Branch
Manager for the respective locations. Screening would be on the basis
of the profile of the candidate and the departmental requirements.
This assessment will be with respect to:
a. The general profile of the candidate,
b. Personality fit of the candidate into the profile,
c. Aptitude/attitude of the candidate,
d. Motives of the person to join the company and whether focus is
in the short term or is a long term player,
e. Basic skill level on our set of requirements, say numerically
ability, networking ability, etc
f. Establish the annual guaranteed cash compensation of the
individual and check whether the person would fit into the
system.
g. Explain the role of Sales manager to the applicant and check the
acceptance of the candidate for the same.
In case of need, the Regional HR may take a Tele interview of the
candidate for further assessment process.
Second Level Screening
Aptitude Test
If the first assessment is positive, the candidates will give the
aptitude test, once such test is selected approved by the company.
The scoring, interpretation and the generation of interview probes from
that test will also be done at this time. People who qualify the
minimum criteria on this test will be put up on to the Functional Head
(VP’s in case of HO) for functional assessment and suitability into the
role.
Tied Agency Sales Manager candidates short listed by the BM
have will then take sales Aptitude test, once such a test is finalized. For
the final selection, the regional Manager (Business Heads for HO) will
meet the candidates short listed by the branch manager/VP. The chart
specifying the Minimum approval level for each level of recruitment is
specified below:
Category Branch
Manager/Chie
f Manager
Area
Manager/AVP/VP
Busines
s Heads
Managin
g
Director
CSE/ADVISORS Yes No No No
BIC Yes Yes No No
BM/CM Yes Yes Yes No
SM Yes Yes Yes Yes
General Norms regarding interview Process:
A. Interviews should consider the entire data provided by the
candidate either through the formal CV or otherwise before
coming to a conclusion about the candidate. They may insist on
seeing the proof of the claims made by the candidate regarding
qualifications, experience and other achievements. They may, at
their discretion, decide to meet the candidate on more than one
occasion or to refer the candidate to another panel.
B. Ratings on various attributes of the candidates shall be recorded
in the interview evaluation sheet, soon after the interview is
over. Along with these numerical ratings, qualitative
observations about the candidate and overall decision regarding
selection or otherwise (including a decision to defer the
induction, referral to another panel, considering for another
position) shall be forwarded to the associated Recruitment
Manager/ Head of Regional HR. Individual panel members have
the option of appending their additional remarks/observations.
No selection will be treated as final unless the IES form is filled
comprehensively. Suitably appropriate IES formats may be
created for specific positions.
C. Any discrepancies noticed by the panel members regarding the
authenticity of the data provided by the candidate should be
specifically and formally recorded on the IES form and suitably
high lightened.
D. Specific points to be probed during the reference check process,
if any, must also be clearly recorded and high lightened on the
IES forms.
Administrative Actions Regarding Interviews
A. Scheduling and the venue of the interviews would be handled by
the recruitment team in consultation with the short listed
candidate and the selection panel members, after taking mutual
convenience into account. For field positions, respective
branch/regional heads would undertake this co-ordination.
B. After the final round, if the candidate is selected, the complete
set of papers Personal Data Form, CV, job requisition no.,
Interview evaluation sheet ,reference check details, educational
details, along with the interviewer’s recommendations and
Reference check form should be forwarded by the recruitment
managers to recruitment head. Fitment of the candidate into a
grade and compensation fitment shall be on the assumption of
authenticity of the information provided in the CV/application
form.
C. An appropriate formal communication shall be sent to the
candidate whose candidature is not being taken forward, or
details of the verbal/telephonic communications provided to the
candidate shall be recorded on the candidates papers, by the
recruitment team/associated line managers. In the case of
interviews taking place at the branch/regional levels, similar
noting should be recorded on the individual candidate’s papers.
Negotiations of the terms and conditions and other pre-appointment
formalities
A. In the case of sales-Tied Agency functions, the branch managers
will be allowed to fix the salary and grade of the incoming sales
manager, provided the compensation does not exceed 20% of
the candidates current cash salary. Any fitment beyond this
norms will need the approval of Head-HR. HR will forward a
worksheet to support the BM’s to evaluate the appropriate cash
CTC of the incumbent. For all other functions, the compensation
and grade would be fixed post a discussion between the Head of
the Regional HR and the associated AVP/VP. Any candidate being
offered a CTC of more than 4lacs will need the sign off from
HEAD-HR. In appropriate cases, at the discretion of the VP-HR, a
deviation may be referred to the Managing Director, for the MD’s
formal approval.
B. Responsibility for negotiations and finalization of the terms shall
rest with the best Branch Manager/Associated Manager. They
may seek the assistance of the recruitment managers, whenever
required. Reference checks process should not normally be
initiated unless the candidate has indicated his firm acceptance
of the offer being made by us.
Reference checks
A. Normal, reference checks should be undertaken with at least one
reference. A second reference check will be done if considered
necessary. Responsible officials from the former employers,
academic institutes and/or any other eminent personalities can
be considered as appropriate references. Close relatives and
friends cannot be considered as references. Wherever feasible
and considered appropriate, a reference should be made with a
senior official of the candidate’s current employer. In case the
candidate is currently un-employed, reference should be made
with the latest employer. The format of reference check is to be
used as a framework for conducting the process.
B. Where the minimum two reference checks are not possible
(particularly with the current employer) or where there is a
mixed response from different sources, the matter may be to the
VP-HR for a final decision. Depending on the seniority and any
other considerations about the positions, VP-HR would normally
consult the functional head concerned, before coming to
conclusions. Any candidate whose credentials are doubtful shall
not be recruited.
C. In case of recruitment of Management trainees, fresher and life
advisors as sales Managers no reference checks will be required.
Employment offer letter
A. When a recruitment Manager is fully satisfied about the selection
of the right candidate and about completion of all the formalities
connected with the appointment of candidate including requisite
documentation, satisfactory reference check reports and medical
fitness, he/she would forward the relevant papers listed below to
the head of recruitment.
Personal Data form
Employee requisition form duly filled by the regional
Head/Branch Manager
Interview evaluation sheet filled by the regional head/Branch
manager/interviewer with his/her comments.
Latest and updated resume of the candidate
Photocopy of the appointment letter of the last employer or
latest salary slip.
Employment details.
Two Professional references.
Language Proficiency.
B. Document check list for every grade is as follows:
Authorization Release Form.
Background check Form.
Highest Education certificate.
Highest Education marksheet.
1 Month Salary Slip of Current Employer.
1 Month Salary Slip of Last Employer.
Relieving Letter of last Employment.
Proof of Residence.
2 Passport Size Photograph.
C. Regional HR manager will take the signature of Head-HR on the
employee requisition form and forward the papers to the
employee service team for issuance of the offer letter.
D. Employee services team will issue offer letter, to be signed by
the National Recruitment Manager or Chief Manager-HR, and
send the same to the concerned Branch Manager/ HR Manager.
E. It would be the responsibility of the Branch Manager/HR Manager
to ensure that the accepted copy of the offer letter is forwarded
to the employee service team within a week of receipt of the
offer letter. Till this letter is issued, the ‘offer’ has not taken place
in formal sense. A copy of the offer letter shall be duly signed
and returned to the candidate. Candidate would be expected to
fulfill various joining formalities, which are also formally
communicated to him/her in the form of a checklist that is
attached to the letter of offer. The Regional HR head shall have
the overall responsibility and accountability to maintain the
templates of the offer letters and also for drafting of suitable
non-standard terms to any specific candidate.
F. The employee service team will follow up Branch
Manager/Regional HR Manager for the joining of the candidate
and will collect all relevant documents from the candidate
including the joining report, before issuing the appointment
letter. The employee service team may enlist the help of the
Branch Manager to ensure that all necessary documents within
ten days o the person joining. After the of all necessary
documents, the employee service team will send the
appointment letter to the new joinee.
G. Once the documentation is complete for the new joinee
(including the accepted appointment letter), people who may
have joined before 20th of the month but have not been included
in the payroll for the month because of delay in receipt of papers
will be given ad-hoc salary advance (up to maximum of 65% of
the pro rated salary). This advance will be adjusted once the
person gets included in the subsequent month’s payroll.
H. If the person does not submit the relieving letter from the
previous organization, where required to be submitted as per the
table given above, within three months of joining, the employee
service manager can put their salary on hold till such time as the
said documents are received.
Key tasks of Regional HR Head
Regional HR Head will have the authority and responsibility to
administer/implement the recruitment and selection process as
outlined. An illustrative list of the key deliverables of these incumbents
is listed below.
Ensuring inductions as per quality, numbers, time and cost
consideration of the company in accordance with the approved
manpower budget.
Creation of appropriate sourcing mechanism along with tracking the
performance of these mechanisms.
Creation of quarterly and monthly recruitment plans
Effective coordination with external parties such as candidates,
placement agencies, consultants, academic/professional institutes
and any other including the custody of the formal agreements ,
tracking timely payments and adjusted thereto
Creation of comprehensive and appropriate tools, linkages,
documents, templates and any other mechanisms to ensure smooth
execution of the process requirement, along with timely
improvements thereto
Assistance to user department and line managers including in
interviewing/selection support, scheduling etc.
Effective internal communication with user departments and line
managers including making the standard recruitment formats and
other templates easily available to such users and notifying the
modifications to such formats and templates.
Creation and maintenance of qualitative information base regarding
candidates, placement agencies, campuses, institutes, and any
other employment-market information.
Creation and maintenance of appropriate and high-quality MIS for
current and future needs of the organization, including
publication/circulation of appropriate reports there from to the
relevant users within the company.
Monitoring recruitment costs
Complete documentation for the entire recruitment and selection
process for easy and quick retrieval in a readily auditable format
Timely and effective communication with all internal and external
parties including the candidates
Tracking the progress of the selected candidates including
resignation, extensions of probation periods/training period, etc for
the purpose of improvement to recruitment and selection process.
Effective coordination with the post recruitment arm of the Human
Resource function
Documentation and creating MIS regarding waiver, deviation, etc
and identifying the key areas for improvement in the formal
recruitment and selection process document.
SWOT Analysis of ICICI Prudential Life Insurance’s Recruitment Process
Strengths
Brand equity of Kotak Mahindra Bank.
Rigorous Pre-Hiring assessment tests to understand aptitude and personality of candidates.
Proper reference checks to ensure that only bonafide candidates are appointed.
Adequate number of channel partners to generate footfalls for each location.
Footfall MIS being maintained at
Weaknesses
Pre assessment tests are costly.
Conversion of footfalls is low.
Lengthy pre-offer formalities.
Huge employee turnover.
each branch locally by Admin.
Opportunities
Campus recruitments have huge potential for fulfilling manpower requirements cost effectively.
Tie up with recruitment agencies on supplying fixed number of footfalls week on week.
Develop exclusive contract with channel partners to meet the manpower requirements.
Make blue form brief and to the point.
Reduce turn around time of making an offer.
Threats
Increasing number of private players in insurance sector creates ample choices, frequent and easy mobility for employees.
Same channel partners are handling all insurance companies. This leads to same pool of candidates being circulated to all partners.
Increasing spill over as a candidate has more than one offer at the time of making a job shift.
As the insurance industry is small, senior level candidates hesitate to meet HR of other companies for the fear of grapevine.
RECOMMENDATIONS & SUGGESTIONS
Compress the "white space" in your hiring process.
White Spaces are delays in hiring process that are unproductive,
waste time, and virtually assure you'll lose talented candidates. Often
the longest delays occur between critical selection events. For
example, a recruiter may need several weeks to screen a few hundred
resumes from the Web job boards, or candidates who make it through
screening may wait weeks to interview with a hiring manager.
Here at ICICI Prudential Life Insurance, the delays occur when the
outstation candidates are called for interviews at Regional branches
like Delhi and Mumbai. Sometimes, because of busy schedule of senior
managers and sometimes because of tight schedule of candidate, the
interview has to be postponed. This delay could be minimized by
scheduling interviews in the regional locations. It is recommended to
reduce the turnaround time for the recruitment and selection process.
It must be made mandatory for the candidates to take the test, filling
up forms etc within the stipulated time, this will make sure that the
candidates do not hold casual attitude and take the recruitment
process more seriously. Additionally it can send across a positive
image about the company. White space in recruitment can be
compressed by the use of IT also. Technology (such as automated or
Web-based tracking) is ideal for eliminating unnecessary steps and
reducing delays.
Tie up with more & more consultants from multiple segments
Since the limited placement agencies are sourcing candidates to all
insurance companies, there often comes the problem of duplication of
data. Therefore it is recommended that more and more consultants
should be tied up from multiple segments to attract large pool of new
and fresh talent.
Know what you're looking for in candidates.It is observed that the candidates sourced by placement agencies
and send for further rounds of interviews are rarely found suitable
by the hiring managers. Therefore, in case there is need to utilize
the service of a placement agency, then it is recommended that
these placement agencies be given a well drafted job description
and job specification. This can also be circulated to internal
employees under the employee referral scheme. This will help
people to get a clearer picture and provide for most suitable
candidates. Thus making efficient utilization of the existing
resources.
Reduce the pre offer formalities:
Pre-offer documentation includes filling of a lengthy Blue form which
includes all personal, educational and professional details of candidate.
This is very time consuming and even after taking these details from
candidate its not sure that offer will be made or not. This also becomes
frustrating for the candidate sometimes. So, it is recommended that
unnecessary details should not be asked before we make the final offer
to the candidate. Blue form should be made consise.
One size doesn’t fits all
An effort must be made to study local condition, education levels.
Since applying common test for all candidates across entire country
can overshadow a candidates capabilities. This factor must be given
importance since Indian society is divided on various parameters
such as education, language, infrastructure etc. A test with high
level of English and complicated sentence structure can be a hurdle
in areas where language itself is barrier. An option is to have
different tests for different regions.
Blend technology into every aspect of your recruiting and
hiring process.
Web-based technology lets you increase hiring speed and quality
while reducing costs. Currently, job boards constitute the biggest
use of the Web, offering access to thousands of resumes within
hours. But the Web can also be a powerful tool for screening and
qualifying that flood of resumes. Companies have begun to use the
Web to collect and instantly match data on candidate skills,
motivations, and experiences against job criteria. Other uses of
Web-based technology include online interviewing, candidate
assessment and testing, applicant self-scheduling, and tracking.
Work the Web wisely and you save time for recruiters and hiring
managers and nab top candidates before your competitors can.
It is recommended that apart from the person-job fit, method must
be devised to check for person-organization fit. A person-
organization helps to assess how well a candidate is suited the
organization. Whether the attitude he/she carries will promote both
organizational as well personal goals. This takes a great importance
especially when attrition is high. It will help the organization to
retain its employees for a longer period of time and less burden on
recruitment staff.
Build and manage your candidate pool as a precious resource.
A "candidate pool" is a group of individuals who have shown interest
in working for your company and are qualified for and ready to fill
certain positions. Rather than undertaking the time-consuming
process of filling one job at a time, you draw on the candidate pool
and fill jobs as they become available. How do you keep a pool
active? Some companies send their newsletters to pool candidates,
give them product coupons, and keep in touch through e-mail. Pool
management is not easy in a tight labor market --good candidates
often go elsewhere. But many organizations, especially those with a
reputation as a great place to work, are able to fill positions quickly
using the pool concept.
Create winning impression even on those who are not selected
Its very important to create a favorable impression of your
organization on all those who come for interview. Those who are not
selected in the first round of personal interview should also carry
this impression that they have missed the opportunity to work in a
great company. For this, there must a proper coordination of the
interview of the candidate and greater degree of professionalism. A
candidate when invited for a interview must be attended as soon as
possible and should be made to wait for hours together. Interviews
conducted on a scheduled time leave a good impression on the
candidate. Even if he is not selected, a good impression about the
will make him recommend the name to his people.
CONCLUSION
Insurance is confronted with high attrition rate. Therefore it
makes recruitment a critical function in the organization. In order to
grow and sustain in the competitive environment it is important for an
organization to continuously develop and bring out innovations in all it
activities. It is only when organization is recognized for its quality that
it can build a stability with its customers. Thus an organization must be
able to stand out in the crowd.
The first step in this direction is to ensure competitive people
come in the organization. Therefore recruitment in this regard
becomes an important function. The organization must constantly
improvise in its recruitment process so that it is able to attract best in
the industry in order to serve the best. Thus the organization must look
out for methods that can enable it to adopt best recruitment practices.
LEARNINGS
Every endeavor undertaken to accomplish challenging goals, can only be successful
under the experienced and encouraging guidance. I am privileged to have undergone
training at ICICI Prudential Life Insurance. As learning never stops, my learning at Kotak
has come from a lot of exposure, on the job training and close interaction with the
corporate. In brief my learning and achievements can be summarized as under:
Understanding of person and profile fit. Convince people about the job profile and to sell the job to the prospective candidate; Following up with the candidates during the entire selection process; Learned to convince candidates about the offer rolled out and making them accept the offer through effective communication; Learning about salary fitments. Communicating with the corporate; Performance appraisals, its various types, implications and significance; Handling queries received from various quarters; Managing HR department in the absence of HR manager; Reply to official mails; Prioritize issues according to their importance; Field work exposure to tap candidates that further strengthened the learning.
Find the Next Chapter - Analysis & interpretations of recruitments and
selection .......
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Q1.Do you have a clearly stated Recruitment & Selection Policy ?
Yes
No
To some extent
2) What are the quality of ICICI Prudential Life Insurance Company recruitment System:-
Quick Response time for requirement
Bringing in Quality People
Proper coordination with other team or department
Efficient Maintenance & Updating of Database
3)What Recruitment Sources are used?
Advertisement
Employee Referral
Consultant
Portals
All of these….
4)Does ICICI Prudential adopt Internal Recruitment Source i.e. Transfer & Promotion:-
(i) Yes (ii) No
If Yes than for which type of post………………………………….
5)Which source of Recruitment is better for companies:-
(i) Internal Source (ii) External Source
(iii) Depends on Situation & Post……………………………………
6)Rank the Qualities in the order of your preference on the basis of which you select candidate:-
Qualification
Experience
Skills
Personality
Depend on Job Variety
7) How many Stages are followed in selection procedure:-
2
3
4
8) Does ICICI Prudential ask candidates to enter into BONDS with them:-
Yes
No
If Yes then what kind of Job or Department………………………….
Q9. Is the estimation of Recruitment Process cost is done?
Yes
No
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