Você está na página 1de 112

ISSN: 2320-8899

FMU JOURNAL OF MANAGEMENT

Volume IV Issue I 2016

P.G. DEPARTMENT OF BUSINESS MANAGEMENT


Fakir Mohan University, Balasore, Odisha
Editor-in-Chief
Prof. Bhagaban Das

Managing Editor
Prof. Devi Prasad Misra

Associate Editor
Dr. Padmalita Routray

Members of Editorial Board


Dr. Artta Bandhu Jena
Dr. Debadutta Das

Editorial Advisory Board


Prof. Sunil Kumar Gandhi Prof. Raj Kumar
Professor, Department of Commerce Professor,Director,Dean& Head
University of Kalyani, Faculty of Management Studies
West Bengal Banaras Hindu University
Varanasi, Uttar Pradesh

Prof. Lalit Prakash Pateriya Dr. C. Swarnalatha


Professor, Head & Dean Professor, Head & Dean
Department of Management Studies Department of Management Studies
Guru Ghasidas Viswavidyalaya, Anna University(RC), Madurai
Bilaspur, Chhattisgarh Tamilnadu

Dr. Nikhil Chandra Shil


Department of Business Administration,
East West University, Dhaka
Bangladesh

Editorial Office
HOD
PG Department of Business management
Fakir Mohan University,
Januganj,Balasore-756019
From Managing Editors Desk

It gives me immense pleasure and pride to place the fourth volume of the FMU Journal of Management
before our erudite readers. The recent surveys conducted in connection with research activities carried out in
India portrayed a gloomy picture and research in business, commerce and management discipline is not an
exception to this. Perhaps, lack of whole hearted commitment by the scholars and lack of requisite support
from the institutions for whom it matters, are the reasons for such pitiable condition. However, at individual
level the scholars do research with all odds and constraints, and contribute the outcome of their research for
the betterment of the society, which cannot be ignored. Thus, publishing research articles in journals having
wide reach and social relevance can benefit the society at large. I strongly believe that the research articles
included in this volume are innovative and quite relevant to various stake holders.

I wish all the contributors and researchers all the best and seek similar cooperation in future

Managing Editor
GUIDELINES FOR SUBMISSION OF ARTICLES
Guidelines for Submission
The Department of Business Management, Fakir Mohan University, Odisha invites original research articles
from both academician and practitioners in the area of Management, Commerce, Business and Industry for
its research journal FMU Journal of Management. The journal gives importance to empirical work,
conceptual papers having extensive literature review and Case Studies.
1. An electronic version of the paper may be submitted to the Managing Editor in WORD as well PDF
in the following email address. There is no need to mail a hard copy by normal postal mail. If needed,
author will be requested for a hard copy.
headmbafmu@yahoo.com, profdpmisra61@gmail.com
2. Manuscripts written in English should be of 5000-6000 words approximately, excluding tables, graphs
& charts.
3. All text should be in double spaced within 1 inch margin on all sides on A-4 size paper using Arial
font with size 11 (alignment justified) with margin 1.3 (left), 1.0 (right), 1.2 (top) and 1.0 (bottom).
4. The first page of the manuscript should have the title of the paper, name of the author(s),
organizational affiliation, complete mailing address, phone number, e-mail address. Please dont
indicate author name, affiliation or any other such information in the manuscript elsewhere.
5. Second page of the manuscript should have the abstract of not more than 200 words. Abstract should
be in Italics with indent 0.6 (on left) and 0.6 (on right) followed by (maximum six) keywords.
6. Tables & Charts should have self explanatory tittles and the source should be mentioned below the
table.
7. Last page of the manuscripts must have a brief autobiographical sketch of all the author(s) about 100
words for each author.
8. References should be arranged in alphabetical order and use of APA Guidelines (please see
http://www.apastyle.org for details)
9. A declaration to the effect that manuscript submitted to this journal has not been submitted for
publication and will not be simultaneously submitted for publication or be published elsewhere.
10. The editor(s) has full right to accept/modify and improve or reject the article. Editorial decision will be
communicated within a period of four weeks of the receipt of the manuscript
11. Author(s) will receive a complimentary copy of the journal in which his/her article is published.
12. Last date of receiving full paper: 31st October, 2016
13. All correspondence should be addressed to the
The Managing Editor,
FMU Journal of Management
Department of Business Management,
Fakir Mohan University, Vyasa Vihar,
Balasore, Odisha-756019
profdpmisra61@gmail.com
headmbafmu@yahoo.com
TABLE OF CONTENTS

Sl.
Title and Authors Page No.
No.
1 Determinants of Capital Structure in Emerging Economics: Some Indian Evidences 01-09
Satyajit Dhar, Pralay Kumar Talapatra.
2 Performance Evaluation of Select Commercial Banks in India: An Application of 10-19
CAMEL Model

Indrani Ghosh, Debdas Rakshit
3 CRAFTING NEUROECONOMIC-MANAGERIAL DECISIONS 20-32

Jyotirmaya Satpathy, Adyasha Das, Suneetha Narendran, Michael Sturman, Sandhya
R Das
4 An Analysis of Employees Engagement in Selected Corporate Enterprises in India 33-40
Dr. Kamini
5 BRAND EXPERIENCE AND ITS EFFECT ON BRAND LOYALTY-AN EMPIRICAL 41-46
STUDY
Sudipta Kumar Jana
6 DEVELOPMENT OF COMPETENCY PROFILE : A STUDY IN RETAIL INDUSTRY 47-60
IN INDIA
Padmalita Routray, Madhusmita Panda
7 Strategies for Managing Shopping Mall: A Study in Eastern Region in India 61-68
Prakash Chandra Dash, Ashok Kumar Dash

8 CORPORATE SUSTAINABILITY REPORTING PRACTICES IN INDIA: A 69-76


COMPARATIVE SECTORAL ANALYSIS
BiswoRanjan Mishra, Bhagaban Das
9 FINANCIAL CHALLENGES OF MSMEs IN INDIA: AN ANALYTICAL STUDY 77-84
GANESH PRASAD PANDA
10 FINANCIAL PERFORMANCE EVALUATION OF STATE BANK GROUP 85-93
Tapas Kumar Sethy
11 Impact of Non-financial Rewards on Employee Motivation in PSUs of India: A Study on 94-99
MCL
Satya Swarup Das
12 IMPROVED ORGANISATIONL AND LOGISITCS PERFORMANCE IN SILENT 100-104
COMMERCE TECHNOLOGY ADOPTION
Venkatesh. J
FMU Journal of Management
________________________________________________________________________________________________

Determinants of Capital Structure in Emerging Economics: Some


Indian Evidences
1
Satyajit Dhar, 2Pralay Kumar Talapatra.
1
Department of Business Administration, University of Kalyani.
2
University Research Scholar, Department of Business Administration, University of Kalyani.
Email: 1satyajitdhar@yahoo.co.in, 2talapatrapralay02@gmail.com

Abstract : This study identifies the most influencing factors of capital structure in the context of firms in the
that determine capital structure of 254 listed Indian firms emerging markets. Such studies are important as the
selected from BSE 500 index for the period 2015-16. Nine institution structures of emerging markets are different
independendent variables are used and two models are from those of developed markets and institutional
tested using multiple regression analysis. Dependent
characteristics can also affect capital structure. Booth
variables are Debt/Equity ratio(DER) based on market
value and Debt to Total Capital Ratio(DTR) based on book et.al. (2001) is a pioneering study on firms in the
value. Results indicate that factors such as ROA, size,tax emerging markets.
rate,tangibility,interest coverage ratio,cash flow and In this paper, we analyse the trends in the capital
financian distress cost(pxoxied i.e.,by current ratio) have
significant influence on the borrowing level of the firms in
structure of Indian companies. The purpose of this paper
India. It is observed that Indian companies make dynamic is to determine whether capital structure determinants in
balancing of capital structure based on changes in market the emerging market of India support the capital
value of equity. structure theories which were developed in the context
of developed economies. In other words, the main
Keywords: Capital structure ; Institutional characteristics
motivation for this study is to analyse the role of firm
; Tradeoff theory ; Pecking order theory ; India
characteristics in determining capital structure.
I. INTRODUCTION Specifically, we try to answer the following questions:
First, are determinants of capital structure (correlated
The search for the explanatory factors of capital with leverage) that have been identified in the developed
structure is a popular area of empirical studies in economies setting correlated in India as emerging
finance. There are series of empirical and theoretical market as well? And secondly, are the, modern capital
studies that started with the famous work of Modigliani structure theories (e.g. trade-off and pecking-order
and Miller (1958). The ability of financial theory to hypothesis) useful in explaining capital structure of the
explain capital structure decisions has advanced Indian companies within the emerging markets?
remarkably. Extant studies propose theoretical models to
explain capital structure patterns across firms and This study contributes to existing literature as it is based
geographies, and to provide empirical support to on a large sample of 254 firms and covers the most
application of these models for the real business world recent period. The sample selection is based on the listed
(e.g., Jensen and Meckling, 1976; Myers, 1977; Harris firms in manufacturing and service sectors that covers
and Raviv 1991). more than 90% of total market capitalization of India. It
also analyse the role of firms level characteristics that
The empirical studies which have contributed to the are identified as explanatory variables in previous
explanation of capital structure are mainly undertaken in studies.
the context of firms in developed markets(e.g., Myers,
1977; Majluf, 1984; Myers, 1984; Titman & Wessels, The remainder of the paper is organized as follows.
1988; Bartonet.al., 1989; Prowse, 1990; Stulz, 1990; Section 2 outlines a brief review of earlier studies.
Jensenet.al.,1992; John,1993 and Rajan & Zingles, Section 3 gives an overview of dependent and
1995). independent variables of capital structure determinants,
sample selection and methodology. Section 4 gives
In recent years there are attempts to undertake empirical findings of the study. In this section results are discussed
work that analyses firm characteristics as determinants
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
1
FMU Journal of Management
________________________________________________________________________________________________

according to financial theories. Finally, our conclusions Titman & Wessels (1988) in their paper analysed the
are presented in section 5. determinants of capital structure choice of 469 firms
over 8 years time period in United States. The study
II. LITERATURE REVIEW found that debt levels are negatively related to the
Since Modigliani and Miller published their seminal Uniqueness of a firms line of business. The results
paper in 1958, the issue of capital structure decision has also indicate that transaction costs may be an important
generated great interest among financial researchers. determinant of capital structure choice. They used
With respect to the theoretical studies, there are two factor-analytic technique for analysis purpose.Harris &
widely acknowledgedcompetitive models of capital Raviv (1991) summarizes a number of empirical studies
structure: the static tradeoff model and the pecking order from US firms, suggesting that leverage increases with
hypothesis. fixed assets, non-debt shields, investment opportunities
and firm size, and decreases with volatility,
According to static tradeoff models, the optimal capital advertisement expenditure, and the probability of
structure does exist. A firm is regarded as setting a target bankruptcy, profitability and uniqueness of the
debt level and gradually moving towards it. The firms product.Rajan &Singles (1995) in their paper suggested
optimal capital structure will involve the trade-off that, at an aggregate level, firm leverage is more similar
among the effects of corporate and personal taxes, across G-7 countries (United States, Japan, Germany,
bankruptcy costs and agency costs, etc. Both tax-based France, Italy, United Kingdom and Canada) over a
and agency-cost-based models belong to the static period of 1984 to 1991 with sample of 2583 companies.
tradeoff models. On the other hand, the pecking order They found that factors identified by previous studies as
hypothesis, first suggested by Myers & Majluf (1984), correlated with cross-section with firm leverage in the
states that there is no well-defined target debt ratio. United States, are similarly correlated in other countries
Firms are said to preferretained earnings (available as well. . Booth et.al (2001) analysed capital structure
liquid assets) as their main source of funds for choices of firms in 10 developing countries and indicate
investment. that the variables that are relevant for explaining capital
It is important to test which hypothesis, tradeoff or structure in United States and European countries are
pecking order is more powerful in explaining firms also relevant in developing countries despite the
financing behaviour. Unfortunately, there is no profound differences in institutional settings across these
conclusive test yet. Shyam-Sunder& Myers (1999)claim developing countries.Deesompak et.al (2004)
that the tradeoff model can be rejected; thepecking order investigated the determinants of capital structure of
model has much greater time-series explanatory power firms operating in the Asia-pacific region, in four
than the tradeoff model by testing the statistical power countries with different legal, financial and institutional
of alternative hypotheses. However, Chirinko & Singha environment viz., Thailand, Malaysia, Singapore and
(2000)show that the test conducted byShyam-Sunder& Australia and suggested that capital structure decision of
Myers (1999)generatesmisleading inferences and that firms influenced by the environment in which they
their empirical evidence can evaluate neither the pecking operate, as well as firm-specific factors.Jong et. al
order nor static tradeoff models. Fame& French (2002) (2007) analysed the importance of firm- specific and
find that pecking order and tradeoff models explain country-specific factors in the leverage choice of firms
some companies financing behaviour, and none of them from 42 countries around the world. The sample
can be rejected. Booth et.al. (2001) point out that consisted of 11845 firms. They found that the impact of
empirically distinguishing between these two different several firm specific factors like tangibility, firm size,
models has proven difficult because variables that risk, growth and profitability on cross- country capital
describe one model can also be classified as other model structure is significant. They also observed that in each
variables. Myers (2003)claims that all the capital country one or more firm specific factors are not
structure models are conditional and thatthere isno significantly related to leverage.
universal theory of capital structure and no reason to In the context of Indian companies there are a few
expect one. Partly because of this, many recent studies. Bhaduri (2002) made a study on determinants of
empirical studies have employed cross-sectional tests corporate borrowing and concluded that the optimal
and used a variety of variables that can be justified using capital structure choice is influenced by factors such as
either of these two models. growth, cash flow, size and product & industry

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
2
FMU Journal of Management
________________________________________________________________________________________________

characteristics using factor analysis technique. The data We have chosen annual accounts for the year 31st
on cross section variables are collected over the 1989 March, 2016 for our study. The choice is made
through 1995-time period. The study covered of 363 considering that it is the latest year for which require
manufacturing firms selected across nine broadly data are available. The data have been obtained from
defined industries. Khasnobis & Bhaduri (2002) made a CMIE prowess database. Also, we have consulted BSE
study on determinants of capital structure in India and website for cross verification and other purposes.
found that capital structures of Indian manufacturing Initially, we have considered 500 companies comprising
firm were significantly influenced by factors such as BSE 500 index. Our choice cover most of the large and
size, asset structure, profitability and short-term medium size companies as the market capitalization of
financial distress cost. The study covered a balanced the BSE 500 companies is over 90% of the total market
panel of 697 manufacturing and non-financial firms over capitalization of the listed company in BSE(BSE ,2016).
the period 1990-1998. Chakraborty (2010) made a study We excluded Banking and Non-Banking financial
on capital structure in India over the period 1995-2008 company having different type of business models and
using panel of 1169 non-financial firms listed either in financing requirements. We have also excluded zero
the Bombay Stock Exchanges or in the National Stock debt company and companies with missing data. After
Exchange and found that profitability, size of the firm all such exclusions there are 266 companies. It is
and uniqueness are negatively related to leverage while observed that there are few cases of outliers. We have
tangibility and non-debt tax shield are positively related identified the outliers by using Quartiles and excluded
to leverage. The author used panel cointegration 12 outliers. Ultimately, our sample consists of 254
analyses to conclude the results. Handoo & companies.
Sharma(2014) investigated the determinants of capital
3.2 Overview of dependent and independent
structure of a sample of 870 listed Indian firms
variables of capital structure determinants
comprising both private sector companies and
government companies for the period 2001 to 2010 and Capital Structure is represented by level of debt and
used multiple regression analysis. They found that equity in the total capital. Introduction of debt in the
profitability, asset tangibility, size, tax rate, and debt total capital structure is called gearing or financial
servicing capacity have significant impact while raising leverage. Use of financial leverage is made to get
short term debt; profitability, growth, asset tangibility, advantage of debt tax shield. In literature, while some of
cost of debt, tax rate, and debt servicing capacity have the empirical studies used book leverage (for e.g.
significant impact while raising long term debt; and Chakraborty, 2010; Chen, 2004), others used market
profitability, growth, asset tangibility, size, tax rate, and leverage (for e.g.,Deesomsak et al., 2004; Huang and
debt servicing capacity have significant impact while Song, 2006) as dependent variable. We have used two
making choices on total debt by Indian companies. measures for measurement of extent of leverage in the
capital structure viz., Debt/Equity Ratio (DER) and Debt
III. SAMPLE SELECTION AND to Total Capital Ratio (DTR) [variables based on Titman
METHODOLOGY & Wessels (1988)]. There may be a number of
3.1 Sample variations in which these two ratios can be expressed
and the definitions used by us are given below:

Book Value of Total Debt


Debt/Equity Ratio=
Market Value of equity ie .,maket capitalization and Book Value of Total Debt

Book Value of Total Debt nevertheless market value measures are preferable than
Debt to Total Capital Ratio=
Book Value of Total Asset book value measures(Sweeney et.al,1997). We also used
Thus, D/E Ratio (DER) is a market based measured of Debt to Total Capital Ratio (DTR) as a book value based
leverage. Market based measured in considered measure. DTR is used to understand the role of book
appropriate for calculation of cost of capital as specific value based measure in capital structure decision by the
cost of capital depends on market value. We have not sample companies.
used market value of debt for estimation issues,

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
3
FMU Journal of Management
________________________________________________________________________________________________

Among the firm-specific determinants of capital 3.3 Econometric Specification of model


structure, we have used age, return on asset, and
We posit that debt level of firms depends on firm level
tangibility of assets, size, growth, tax, current ratio, cash
characteristics as proxied by certain explanatory
flow and interest coverage ratio. Current ratio (CR) is
variables. We use two variables viz., DER & TDR as
used as a proxy of financial distress costs. The variables
explained in the section 3.2. We use multiple regression
used in this study and their measurements are largely
analysis to find out the role of explanatory variables.
adopted from existing literature. In other words,
Accordingly, our models can be expressed as:
previous empirical findings in the context of developed
and emerging markets guided the selection of Model 1
independent variables. We avoid framing of hypotheses
DER = + 1(AGE) + 2(GROWTH) + 3(SIZE) +
as competing theories are available regarding predicted
relationship between firm characteristics and capital 4(TAX) + 5(CR) + 6(CFLOW)+ 7(ICOV) +
structure. Table 1 gives the definition of the variables. 8(TANG) + 9(ROA) +ei

TABLE 1 Model 2
TDR = + 1(AGE) + 2(GROWTH) + 3(SIZE) +
Definitions of the variables
4(TAX) + 5(CR) + 6(CFLOW) + 7(ICOV) +
Explanatory Definition 8(TANG) + 9(ROA)+ei
Variable
The symbols have their usual meaning. We have carried
AGE Year of study minus
out test for normality before carrying out the regression
incorporation year
analysis (explained in the next section).
GROWTH Change in Total assets between
two consecutive years i.e.,2015- IV. FINDINGS AND DISCUSSIONS
16 scaled by 2014-15
SIZE Natural Logarithm of sales As discussed earlier our sample consists of 254 firms.
TAX Corporate tax scaled by profit There are no missing data in respect of two dependent
before tax variables and nine explanatory variables chosen by us.
Table 2 gives summary statistics regarding the variables.
Current Current assets scaled by current
Interest cover (ICOV) has exhibited the most variability
ratio(CR) liabilities
among the explanatory variables (standard deviation is
Cash Cash flow from operating
1904.6). On the otherhand tangibility (TANG) is the
flow(CFLOW) activities scaled by sales
least volatile variable having standard deviation of
Interest Profit before depreciation,
0.1768. An overview of range of different variables
coverage Ratio interest and tax scaled by total
indicates that in few cases minimum values are negative;
(ICOV) interest
such variables are GROWTH, TAX, CFLOW, ICOV,
Tangibility(TA Net fixed assets scaled by total and ROA. The dependent variables are exhibiting
NG) assets moderate variability. Between TDR and DER, the later
Profitability(RO Profit before interest and tax has exhibited with more variability with standard
A) scaled by total assets deviation 0.1702.

TABLE 2
Descriptive Statistics
Variables Observations Mean Standard Deviation Minimum Maximum
DER 254 0.1369 0.1702 0.0000369 0.7638787
DTR 254 0.1761 0.1518 0.0001405 0.5832988
AGE 254 39.4055 23.0712 4 114
GROWTH 254 0.1141 0.1609 -0.418288 1.438335

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
4
FMU Journal of Management
________________________________________________________________________________________________

SIZE 254 7.7796 1.2212 3.042616 11.36057


TAX 254 26.9298 10.7872 -4.03 84.51
CR 254 1.6073 0.9779 0.21 5.75
CFLOW 254 0.1245 0.1829 -1.769628 0.8519615
ICOV 254 437.4554 1904.617 -915.1795 17329
TANG 254 0.2688 0.1768 0.0011599 0.7758122
ROA 254 9.0411 7.2479 -6.56 43.43

Source: CMIE Prowess database. Results computed.


We have carried out normality test (Shapiro-Wilk W test) of all the eleven variables (two dependent & nine
independent) using Stata 10. Output of normality test is given in Table 3. All the variables are having normal
distribution at 1% significance level expect size. Size variable is also normal at 5% level of significance.
TABLE 3
Shapiro-Wilk W Test

Variables Observations W V Z Prob.>Z


DTR 254 0.91676 15.309 6.353 0
DER 254 0.78035 40.397 8.612 0
AGE 254 0.90813 16.896 6.583 0
GROWTH 254 0.77223 41.89 8.697 0
SIZE 254 0.98569 2.631 2.252 0.01215
TAX 254 0.87655 22.705 7.271 0
CR 254 0.83987 29.45 7.876 0
CFLOW 254 0.66081 62.382 9.624 0
ICOV 254 0.23957 139.854 11.504 0
TANG 254 0.9624 6.915 4.502 0
ROA 254 0.9172 15.229 6.341 0

Source: CMIE Prowess database. Results computed.


The results of correlation analyses among variables are exhibited in Table 4. There are high degree of correlation
between TDR and DER as expected. However, this does not affect our test as these two factors are taken separately as
dependent variable and two separate regression analyses are made. Among independent variables there is lower level of
correlation (none being more than 48%). Tangibility, ROA is having the least correlation value being 0.001.VIF
statistics indicated that none is more than 2. It indicates that there is no problem of multicolinearity.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
5
FMU Journal of Management
________________________________________________________________________________________________

TABLE 4
Correlation Analysis
DTR DER AGE GROWTH SIZE TAX CR CFLOW ICOV TANG ROA VIF
DTR 1
DER 0.78 1
AGE -0.026 0.086 1 1.114
GROWTH -0.039 -0.111 -0.185 1 1.195
SIZE 0.075 0.148 0.198 -0.159 1 1.169
TAX -0.091 -0.071 0.127 -0.034 0.03 1 1.027
CR -0.437 -0.35 -0.087 0.005 -0.18 -0.04 1 1.407
CFLOW -0.151 -0.078 0.057 0.038 0.01 0.07 0.12 1 1.163
ICOV -0.232 -0.174 -0.121 0.144 0.02 -0.03 0.11 0.04 1 1.144
TANG 0.297 0.169 0.047 -0.097 0.08 -0.03 -0.3 0.266 -0.12 1 1.244
ROA -0.401 -0.473 -0.146 0.274 0.1 -0.05 0.37 0.199 0.32 0.001 1 1.537
Source: CMIE Prowess database. Results computed.
Table 5 gives model summary of multiple regression using DER as dependent variable (Model 1). Model is highly
significant at 0.01%. R2 is also very high at 0.34 and adjusted R2 is 0.286. Durbin-Watson statistics is 1.509 i.e., below
2.207. Hence, there is no autocorrelation problem in the data set.
TABLE 5
Summary of Multiple Regression (Model 1)
Model Sum of Squares df Mean Squares F Sig Durbin-Watson
1 Regression 2.283 9 0.254 12.261 .000 1.509
Residuals 5.049 244 0.021
Total 7.332 253
Source: CMIE Prowess database. Results computed.
Dependent Variable: DER TABLE 6
R Square = 0.311 & Adjusted R Square =0.286 Coefficients and t-Values(Model 1)
In Table 6 we have given coefficients of predictors and Explanatory Coefficients t-Values
constant for Model 2. Among the independent variables Variables
SIZE and ROA are significant at 1% level. It implies in AGE -0.0001 -0.23
respect of Indian companies capital structure dependents
on profitability and size of the company. Tangibility GROWTH 0.0575 0.94
(TANG) is also significant at 5% level. Tax and current SIZE 0.0251* 3.14
ratio (CR) are significant at 10% level. It indicates TAX -0.0015*** - 1.79
Indian companies take tax aspect and short-term
financial distress cost (CR) into consideration for their CR -0.0200*** -1.83
capital structure decision & Cash flow from operating CFLOW -0.0034 -0.06
activities (CFLOW), interest coverage ratio (ICOV) and
ICOV -0.000001 -0.23
AGE have a negative relationship with leverage.
However, none of these variables is statistically TANG 0.1222** 2.14
significant. Growth is having positive relation with DER ROA -0.0110* -7.08
but it is not also statistically significant.
CONSTANT 0.0789 1.07

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
6
FMU Journal of Management
________________________________________________________________________________________________

Source: CMIE Prowess database. Results computed. (Table7) indicates that R2 and adjusted R2are relatively
higher than the Model 1 using DER as the dependent
*significant at 1% level; **significant at 2% level &
variable. Model is highly significant and Durbin-Watson
***significant at 10% level.
statistics of 1.365 indicates lack of auto-correlation
We have also used DTR, a book value based measure as problem.
dependent variable (model 2). Results of the multiple
regression are given in Table 7 & 8. Model summary
TABLE 7
Summary of Multiple Regression (Model 2)
Model Sum of Squares df Mean F Sig Durbin-
Squares Watson
1 Regression 2.084 9 0.232 15.064 .000 1.365
Residuals 3.75 244 0.015
Total 5.834 253

Source: CMIE Prowess database. Results computed.


Dependent Variable: DTR *significant at 1% level; **significant at 2% level &
R Square = 0.357 & Adjusted R Square =0.333 ***significant at 10% level.
Three co-efficient viz., CR, TANG & ROA are The capital structure decision in our sample of listed
significant at 0.1% level of significance. Size is not firms is significantly influenced by factors such as SIZE,
significant unlike Model 1. Also, two new variable TAX, CR, TANG, CFLOW, ICOV and ROA. The
CFLOW & ICOV are statistically significant at 5% and coefficient of SIZE variable is positive and significant at
10% level of significance respectively. TAX is also 1% level indicating that large size firm depends more on
significant at 10% level. Hence, in model 2 most of the borrowings, when DER is measured in terms of market
identified explanatory variables except GROWTH, SIZE value. However, SIZE variable is not significant when
and AGE are significant. Overall, the results indicate leverage is measured on the basis of book value. It
that in Indian context multiple factors influence capital indicates Indian firms do consider market value for
structure decision of sample companies. making decision borrowing level. This aspect is very
interesting from capital structure theory perspective and
TABLE 8 may require further research. The coefficient of
Coefficients and t-Values(Model 2) profitability factor i.e., ROA are negative in both the
Explanatory Variables Coefficients t-Values model. This negative significant coefficient of ROA
supports the Pecking Order Hypothesis that firms first
AGE -0.0006 -1.82
uses internal sources of finance in preference to external
GROWTH 0.0800 0.51 sources of finance. TAX variable is significant in both
SIZE 0.0106 1.54 the models. This debt tax-shield has expected role in
TAX -0.0013*** -1.71 capital structure decision. TANG variable is significant
in all cases supports the collateral value hypothesis i.e.,
CR -0.0347* -3.68 value of available asset that can be offered as collateral
CFLOW -0.1017** -2.21 has a significant role in capital structure decision. We
ICOV 0.0000*** -1.85 have used current ratio (CR) as proxy of short-term
financial distress risk. CR turns out to be significant in
TANG 0.2253* 4.58 both the models. Hence, Indian companies do take
ROA -0.0066* -4.92 financial distress risk into consideration for capital
CONSTANT 0.2146 3.39 structure decision. The coefficients of the CR are
negative as expected. GROWTH is not significant any
Source: CMIE Prowess database. Results computed. of the models. It implies investment needs are not
important for higher level of borrowings. ICOV and
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
7
FMU Journal of Management
________________________________________________________________________________________________

CFLOW are significant variables using TDR (book economic variables that may influence capital structure
value measure) as dependent variable. But these two decision. Despite limitations, it may be hoped that the
variables are not significant when market value measure study can used for developing better models for research
is used as dependent variable. Use of market value may on determinants of capital structure for compaanies
increase the borrowing capacities and explanatory power operating in India and other emerging economics.
of these two variables reduces in market value measure.
REFERENCES
Our results are consistent with studies in the context of
both developed and developing countries. For example [1] Barton, S.L., Hill, C.H., Sundaram, S. (1989). An
like Booth et.al (2001) our results also identifies empirical test of stakeholder theory predictions of
statistically significant factors like size, tangibility, capital structure. Financial Management, 18, 36-
profitability and short-term financial distress cost as 44.
significant factors influencing capital structure decision. [2] Bhaduri, S.N. (2002).Determinants of Corporate
Our findings support both pecking order and tradeoff Borrowing: Some Evidence from the Indian
theories. Corporate structure. Journal of Economics and
Finance, 26(2), 200-215.
V. CONCLUSION
[3] Bhaduri, S.N., & Khasnobis, B.G.
Our study contributes towards a better understanding of
(2002).Determinants of Capital Structure in India
capital structure planning by Indian companies during
(1990-1998): A Dynamic panel Data Approach.
the most recent period. Based on extant literature we
Journal of Economic Intregation, 17(4), 761-776.
have used traditional factors that are likely to affect
financing decision of sample Indian companies. In India [4] Booth,L., Aivazian,V., Demirguc-Kunt, A.,&
most of the selected factors have some influence among Maksimovic,V.(2001). Capital Structure in
the factors used. Profitability (ROA) has most Developing Countries. The Journal of Finaance,
significant influence giving importance to financial 26(1), 87-130.
flexibility or Pecking Order Theory. Sample companies
also take into consideration fiscal discipline by taking [5] Chakraborty, A.(2010). Capital structure in an
emerging stock market:The case of
into consideration financial distress cost as proxies by
India.Research in International Business and
current ratio(CR). The most important of the study
Finance,24,295-314.
findings relates to the role of size factor. When market
value proxy(Model 1) is considered size has significant [6] Chen, J.J. (2004). Determinants of capital
role but on the basis of book value based measure of structure of Chinese-listed companies. Journal of
leverage the size has no significant role.It indicates Business Research, 57, 1341-1351.
dynamic balancing of leverage on the basis of market
value by the Indian companies. [7] Chirinko,B.,& Singha, A.R.(2000). Testing static
tradeoff against pecking order model of capital
This study distinguish itself from earlier studies in this structure: a critical comment. Journal of Financial
area with the cosideration of two different measures of Economics, 58(3), 417-425.
leverage VIZ., DER(based on Market Value) and
TDR(based on Book Value). This study has [8] Deesomsak, R., Paudyal, K., &
concentrated on one country but sample covers most of Pescetto,G.(2004).The determinants of capital
the listed companies being based on index covering structure: evidence from the Asia Pacific region.
more than 90% of total market capitalization. The data Journal of Multinational Financial Management,
set used is also most recent as it uses latest available 14,387-405.
annual reports. [9] Fama, E.,& French, K.(2002).Testing tradeoff
Due to time and resource constraint there are certain and pecking order predictions about dividends
limitations . The authors plan to study in a more roboust and debt.Review of Financial Studies,15,1-33.
manner covering a large time frame, say 10 years. There [10] Handoo, A., and Sharma, K. (2014).A study on
is a scope of inclusion of few more firm specific determinants of capital structure in India .IIMB
variable like promoters holding and uniqueness. Any Management Review, 26, 170-182.
future research may extend this study covering macro
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
8
FMU Journal of Management
________________________________________________________________________________________________

[11] Harris, M., &Raviv, A.(1991). The theory of [19] Myers, S. C. (1984). The Capital Structure
capital structure. The Journal of Finaance, 46(1), Puzzle. Journal of Finance, 34, 575-592.
297-355.
[20] Myers, S.C.(2003). Capital Structure. The
[12] Huang, G., & Song, F.M. (2006). The Journal of Economic Perspectives, 15(2),81-102.
determinants of capital structure: Evidence from
[21] Myers, S.C., & Majluf, N.S.(1984).Corporate
China. China Economic Review, 17, 14-36.
Financing and Investment Decisions when Firms
[13] Jensen, M. C.,& Meckling, W. H. (1976) .Theory have Information that Investors do not have.
of the Firm: Managerial Behavior, Agency Costs Journal of Financial Economics,13,187-221.
and Ownership Structure. Journal of Financial
[22] Prowse, S.D.(1990).Institutional investment
Economics, 3, 305-360.
patterns and corporate financial behaviour in the
[14] Jensen, M,C., and Meckling, US and Japan. Journal of Financial Economics,
W.H.(1992).Specific and General Knowledge, 27, 43-66.
and Organizational Structure, in L. Werin and H.
[23] Rajan, R.G.,& Zingales, L.(1995). What do we
Wijkander (eds.). Contract Economics,
know about capital structure? Some evidence
Massachusetts, Blackwell.
from international data. Journal of Finance,50,
[15] John,T.A.(1993). Accounting measures of 1421-1460.
corporate liquidity, leverage and costs of
[24] Shyam-Sunder, L. and S.C. Myers. (1999).
financial distress. Financial Management, 22, 91-
Testing static tradeoff against pecking order
100.
models of capital structure. Journal of Financial
[16] Jong, D, A., Kabir, A.,& Nguyen, Economics,51, 219-244.
T.T.(2008).Capital structure around the world:
[25] Stulz,R.M.(1990). Managerial discretion and
The roles of firm-and country-specific
optimal financing polices. Journal of Financial
determinants. Journal of Banking & Finance, 32,
Economics, 26, 3-27.
1954-1969.
[26] Sweeney, R.J; Warga, A.D;&Winter, S.(1997).
[17] Modigliani, F.,& Miller, M.(1958). The cost of
The market value of debt, market versus book
capital, corporation finance and the theory of
value of debt, and return to assets. Financial
investment. The American Economic
Management, 20(1), 5-21.
Review,48(3),261-297.
[27] Titman, S. & Wessels, R. (1988).The
[18] Myers, S. (1977). Determinants of corporate
Determinants of Capital Structure Choice.
borrowing. Journal of Financial Economics, 5,
Journal of Finance, 43(1), 1-19.
147-175.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
9
FMU Journal of Management
________________________________________________________________________________________________

Performance Evaluation of Select Commercial Banks in India: An


Application of CAMEL Model
1
Indrani Ghosh, 2Debdas Rakshit
1
Assistant Professor, Department of Commerce, Naba Barrackpur Prafulla Chandra Mahavidyalaya
2
Professor, Department of Commerce, The University of Burdwan

Abstract: Indian Banking sector has been witnessing new context of 21st century. However, the specific objectives
opportunities and challenges with the beginning of the 21st of this study are as follows:
century. Thus, it becomes pertinent to analyze how far it
has been able to confront with the challenges and accepting i. To examine the relative performance of sample
the opportunities. This study makes an honest attempt in banks during the study period based on the sub-
evaluating the financial performance of some select public parameters under each parameter (Capital adequacy,
and private sector banks from the Indian banking sector Asset quality, Management efficiency, Earnings quality
during 2000-2001 to 2014-2015. CAMEL model is and Liquidity) of CAMEL approach.
considered here for the purpose of such performance
evaluation. ii. To study the relative performance of each
Key-words: Ranking, Capital adequacy, Asset Quality,
sample bank by providing ranks under each parameter
Management efficiency, Earnings and Liquidity based on sub-parameter ranking.
iii. To apply a composite ranking technique to
I. INTRODUCTION
trace the overall relative position of each sample bank.
The sphere of banking in India has received new
iv. To identify the best and worst performers and
dimensions with the onset of 21st century. It has been
provide necessary recommendations.
confronted with new opportunities and challenges.
Indian banking industry has got a new look mostly III. RESEARCH METHODOLOGY
because of introduction of banking sector reforms, Basel
norms, Core Banking Services, entry of foreign banks, The study encompasses 30 (15 public sector banks and
financial inclusion, globalization etc. Thus, it becomes 15 private sector banks) randomly selected banks. The
pertinent to analyze the financial performance of Indian sampled banks from the Indian public sector banks are
bank industry. Therefore, the present study focuses on Allahabad Bank, Andhra Bank, Bank of Baroda, Bank
the performance analysis of some select Public sector of India, Canara Bank, Central Bank of India, IDBI
banks and Private sector banks in India. CAMEL Model Bank , Indian Bank, Indian Overseas Bank, Oriental
is used for such analysis of the select banks. It measures Bank of Commerce, Punjab National Bank, State Bank
the financial performance of banks based on five of India, Syndicate Bank, UCO Bank and Union Bank.
aspects. CAMEL is the acronym of these five aspects The sample banks from the Indian private sector banks
Capital adequacy (C), Asset quality (A), Management are Axis Bank, City Union Bank, DCB Bank,
efficiency (M), Earnings (E) and Liquidity (L). This Dhanalakshmi Bank, Federal Bank, HDFC Bank, ICICI
study is organized in five sections as follows. Section 2 Bank, IndusInd Bank, Jammu & Kashmir Bank,
specifies the objectives of the study. Section 3 deals Karnataka Bank, Karur Vysya Bank, Kotak Mahindra
with the research methodology. Section 4 presents the Bank, Lakshmi Vilas Bank, South Indian Bank and Yes
analysis and findings of the study and Section 5 provides Bank. Financial years ranging from 2000-01 to 2014-15
the conclusions and necessary recommendations. is considered as the study period. Data required for this
purpose has been obtained from the Capitaline - 2000
II. OBJECTIVES OF THE STUDY Database Package.
Primarily, the present study aims at analyzing the CAMEL (Capital adequacy, Asset quality, Management
financial performance of the Indian banking sector in the efficiency, Earnings quality and Liquidity) model is
used to evaluate the relative financial performance of
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
10
FMU Journal of Management
________________________________________________________________________________________________

banks. The CAMELS approach was initially developed reflects the banks risk
in the US for measurement of financial condition of taking ability in lending of
financial institutions. Accordingly, the Uniform funds. The aggressiveness of
Financial Institutions Rating System was established by the bank in lending funds
the Federal Financial Institutions Examination Council increases with the increase
in the US. Here, the acronym CAMELS stands for in this ratio.
Capital adequacy (C), Asset quality Management Government Government securities are
efficiency (M), Earnings Quality (E), Liquidity (L) and Securities to the risk-free debt
Sensitivity to market risk (S). In 1995, RBI established a Investment Ratio instruments and thus, safe.
committee under the chairmanship of S. Padmanabhan This ratio measures the
and it recommended the CAMELS model based on the proportion of Government
lines of the international model. In this acronym C, A, securities in the total
M, E, L meant the same as that represented in the investment of the bank. It
international model. Only S stood for Systems and shows the risk-taking ability
controls. of the banks. The higher the
ratio the lesser the risk for
In this study, C, A, M, E and L (i.e. CAMEL model) is
the bank.
considered. The Banks are not rated as such, instead the
relative position of the sample banks is analyzed by the Asset Quality Ratios
method of ranking. At first the banks are ranked under Net NPAs to Net This ratio measures the
each sub-parameter (i.e. each ratio) based on the average Advances extent of net NPAs in
of that particular ratio during the study period of 15 portfolio of net advances.
years (2000-01 to 2014-15). Average of the ranks of the This reflects the quality of
sub-parameters are computed and based on that group advances. The lower the
ranks of each of the five parameters are computed. ratio, the better the asset
Finally, a composite ranking is done based on the quality.
average of the ranks of all the sub-parameters under Net NPAs to This ratio measures the
each of the five parameters. This shows the overall Total Assets proportion of net NPAs to
relative position or rank of each bank. The sub- total assets. This depicts the
parameters i.e. the ratios used for this study along with effectiveness of banks in
their brief description are shown in the table below: evaluating credit risk. The
asset quality improves with
Table 1: Ratios Used and Their Brief Description the decrease in this ratio.
Capital Adequacy Ratios Total Investments This represents the portion
Capital Adequacy It is a measure of the banks to Total Assets of total assets which is
Ratio capital expressed as a locked in investments.
percentage of its risk- Investments are those assets,
weighted assets. It measures income from which does not
the proportion of the banks form the core income of
capital to its risks. The banks. Thus, with the
protection for investors increase in deployment of
increases with the increase fund in investments, the
in the ratio. grant of loans and advance
decreases.
Debt-Equity This ratio reflects the degree
Ratio of leverage of a bank. It Percentage This ratio measures the
indicates how much portion Change in NPAs change in net NPAs. It
of capital is financed by debt reflects the improvement or
and how much by equity. deterioration in asset quality
over the years. The decrease
Advance to Total This ratio depicts the
in ratio signifies
Asset Ratio proportion of advances in
improvement in asset quality
total assets. This ratio
and vice-versa.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
11
FMU Journal of Management
________________________________________________________________________________________________

Management Efficiency Ratios difference between interest


Business per Business per employee earned and interest
Employee signifies the competence and expended.
yield of human resources of Liquidity Ratios
banks. Higher the ratio, Liquid Assets to This ratio evaluates the
better the managerial Total Assets liquidity position of the bank
efficiency and financial Ratio as a whole. The liquid assets
performance of banks. comprise of cash in hand,
Profit per It reflects the surplus earned money at call and short
Employee per employee. It is the ratio notice, balance with Reserve
of profit after tax to number Bank of India and balance
of employees. The higher with other banks/ financial
the ratio, the more efficient institutions. It thus reflects
the bank. what proportion of total
Return on Net It is the ratio of net profit assets is in the liquid form to
worth after tax to net worth. It meet the overall liquidity
measures the rate of return requirements.
on the resources provided by Liquid Assets to This ratio measures the
the shareholders. The higher Total Deposits liquidity position of the bank
the ratio, the better the Ratio from the view point of the
managerial efficiency. depositors. It reflects to what
Advance-Deposit This ratio measures the ratio extent of liquid assets are
Ratio of total advances to total available to meet the
deposits. It reflects the requirement of the
managerial efficiency in depositors.
utilizing deposits in creating Liquid Assets to Demand deposits are those
higher earning advances. Demand Deposits deposits which are
Earnings Quality Ratios Ratio immediately payable by the
Operating Profit This ratio indicates how bank on demand and bear no
to Average efficiently the bank has restrictions on withdrawal.
Working Fund utilized its working funds in This ratio indicates the
generating operating profit. proportion of liquid assets
The higher the ratio, the available to meet the
better the profitability. requirement of the demand
Return on Assets It relates the profits to the depositors.
size of the bank which is Government Government securities are
measured in terms of its Securities to safest investment and
assets. A higher return on its Total Assets possess easy liquidity as
total assets is an indicator of Ratio well. This ratio measures the
higher profitability and a proportion of Government
good overall efficiency. Securities in Total assets. A
Interest Income Interest forms to be the higher ratio is preferable to a
to Total Income prime source of banks lower one.
Ratio earnings. This ratio
measures the proportion of IV. ANALYSIS AND FINDINGS
interest income to total Section 4 deals with the analytical part of the study. This
income. section comprises of six sub-sections classified as A.
Spread to Total It measures the relation of Capital Adequacy Ranking, B. Asset Quality Ranking,
Assets Ratio spread to total assets. C. Management Efficiency Ranking, D. Earnings
Income spread is the Quality Ranking, E. Liquidity Ranking and F.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
12
FMU Journal of Management
________________________________________________________________________________________________

Composite Ranking. The findings are stated below under each of these sub-sections:
A. Capital Adequacy Ranking
Table 2: Capital Adequacy Ranking
Capital Adequacy Advance to Asset Govt. Sec. to
Debt-Equity Ratio Group Rank
Banks Ratio Ratio Investment Ratio
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 11.97 22 18.06 22 55.24 19 78.05 17 20 26
Andhra Bank 12.47 17 18.47 24 55.3 17 86.79 2 15 13
Bank of Baroda 12.77 12 16.21 17 55.3 17 77.07 19 16.25 16
Bank of India 11.64 26 19.44 26 60.15 3 78.23 16 17.75 21
Canara Bank 12.56 15 17.19 20 56.71 10 81.79 9 13.5 9
Central Bank of India 10.87 29 20.84 28 52.38 27 80.19 12 24 30
IDBI Bank 14.02 8 13.02 6 62.12 1 55.54 30 11.25 3
Indian Bank 12.06 21 16.16 16 53.77 23 82.35 7 16.75 19
Indian Overseas Bank 12.15 20 20.34 27 55.62 15 85.57 4 16.5 18
Oriental Bank of Commerce 11.79 25 14.72 13 55.73 14 76.62 20 18 23
Punjab National Bank 12.23 19 16.61 18 56.48 11 79.94 13 15.25 14
State Bank of India 12.56 15 17.17 19 53.37 24 80.35 11 17.25 20
Syndicate Bank 11.39 27 22.01 29 58.74 5 87.2 1 15.5 15
UCO Bank 11.33 28 24.48 30 56.19 13 79.86 14 21.25 29
Union Bank 11.82 23 18.17 23 58.59 6 75.62 21 18.25 25
Axis Bank 12.98 11 15.7 14 50.53 29 60.4 29 20.75 28
City Union Bank 13.1 10 13.22 8 58.43 7 85.58 3 7 2
DCB Bank 12.62 13 13.14 7 54.89 20 77.76 18 14.5 11
Dhanalaxmi Bank 10.64 30 18.89 25 54.55 21 84.27 5 20.25 27
Federal Bank 14.43 4 14.13 11 57.25 9 73.87 22 11.5 4
HDFC Bank 14.24 6 11.45 4 49.62 30 68.01 25 16.25 16
ICICI Bank 14.78 3 9.82 2 52.51 26 61.61 28 14.75 12
IndusInd Bank 13.19 9 14.34 12 56.31 12 78.74 15 12 5
Jammu & Kashmir Bank 14.21 7 13.49 9 52.03 28 61.79 27 17.75 21
Karnataka Bank 12.6 14 13.86 10 52.52 25 70.06 23 18 23
Karur Vysya Bank 14.37 5 11.39 3 60.42 2 81.74 10 5 1
Kotak Mahindra Bank 18.06 1 6.65 1 53.81 22 68.04 24 12 5
Lakshmi Vilas Bank 11.81 24 15.75 15 59.98 4 83.15 6 12.25 7
South Indian Bank 12.27 18 17.99 21 57.8 8 82.3 8 13.75 10
Yes Bank 16.57 2 11.86 5 55.33 16 62.76 26 12.25 7

Source: Authors compilation from available data


Table 2 above shows the ranking under each sub- position, followed by Lakshmi Vilas Bank and Yes
parameter and the ranking under capital adequacy as a Bank at the 7th position, Canara Bank at the 9th rank and
whole. The major findings are that Karur Vysya Bank is South Indian Bank at the 10th rank.
the best bank among the select banks in terms of overall
The three banks having worst overall Capital Adequacy
Capital Adequacy. City Union Bank and IDBI Bank also
as compared to its peers are Central Bank of India at 30 th
mark good Capital Adequacy by securing the 2nd and 3rd
position, UCO Bank at 29th position and Axis Bank at
position respectively. Among the first ten banks, Federal
28th position.
Banks stands at the 4th position followed by IndusInd
Bank and Kotak Mahindra Bank jointly at the 5 th

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
13
FMU Journal of Management
________________________________________________________________________________________________

B. Asset Quality Ranking


Table 3: Asset Quality Ranking
Net NPA/ Net Net NPA/ Total Total Investment/
% Change in NPA Group Rank
Banks Advances (%) Assets (%) Total Assets (%)
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 3.35 26 1.67 26 33.69 24 28.82 16 23 29
Andhra Bank 1.27 6 0.82 8 32.09 20 43.1 26 15 15
Bank of Baroda 1.87 10 0.94 11 27.24 3 20.76 10 8.5 1
Bank of India 2.66 19 1.54 24 25.87 1 28.2 15 14.75 14
Canara Bank 2.1 14 1.12 13 29.4 9 17.34 8 11 6
Central Bank of India 3.64 28 1.73 27 33.98 25 30.93 18 24.5 30
IDBI Bank 3.99 29 2.97 30 26.98 2 11.34 5 16.5 19
Indian Bank 2.61 18 1.23 15 34.87 27 26.7 14 18.5 22
Indian Overseas Bank 2.82 21 1.46 22 32.12 21 32.45 21 21.25 28
Oriental Bank of Commerce 1.64 8 0.9 10 32.38 22 -3.04 1 10.25 3
Punjab National Bank 2.07 12 1.1 12 30.95 13 53.58 27 16 18
State Bank of India 2.75 20 1.24 16 31.54 16 5.81 3 13.75 11
Syndicate Bank 1.85 9 0.7 6 28.86 7 31.17 19 10.25 3
UCO Bank 3 24 1.59 25 31.74 17 22.01 11 19.25 23
Union Bank 2.46 17 1.34 20 29.46 10 33.99 22 17.25 21
Axis Bank 1.11 4 0.49 3 34.5 26 18.84 9 10.5 5
City Union Bank 2.94 23 1.51 23 29.06 8 14.95 7 15.25 16
DCB Bank 3.3 25 1.26 19 31.33 14 34.78 23 20.25 26
Dhanalaxmi Bank 4.1 30 2.25 29 29.8 11 26.31 13 20.75 27
Federal Bank 2.31 15 1.24 16 31.83 18 7.76 4 13.25 9
HDFC Bank 0.34 2 0.16 2 35.06 29 42.23 25 14.5 13
ICICI Bank 1.96 11 0.72 7 31.43 15 24.66 12 11.25 7
IndusInd Bank 2.09 13 1.13 14 27.97 6 5.37 2 8.75 2
Jammu & Kashmir Bank 1.14 5 0.57 5 34.91 28 86.77 28 16.5 19
Karnataka Bank 2.82 21 1.36 21 37.37 30 13.63 6 19.5 24
Karur Vysya Bank 1.53 7 0.83 9 27.72 5 38.3 24 11.25 7
Kotak Mahindra Bank 0.85 3 0.56 4 32.04 19 348.67 30 14 12
Lakshmi Vilas Bank 3.59 27 2.08 28 27.59 4 31.95 20 19.75 25
South Indian Bank 2.41 16 1.24 16 30.12 12 29.9 17 15.25 16
Yes Bank 0.09 1 0.05 1 33.18 23 118.4 29 13.5 10

Source: Authors compilation from available data


The ranking of banks under overall asset quality and its followed by Canara Bank at the 6th position, followed by
derivation from ranking under each ratio is shown in Karnataka Bank and ICICI Bank jointly at the 7th
table 3 above. The key findings are that Bank of Baroda position, Federal Bank at the 9th rank and Yes Bank at
is the best bank among the select banks regarding the 10th rank. The three banks having worst overall
overall Asset Quality. IndusInd Bank secures the 2nd Asset Quality as compared to its peers are Central Bank
position followed by Oriental Bank of Commerce and of India at 30th position, Allahabad Bank at 29th position
Syndicate Bank jointly in the 3rd position. Others, among and Indian Overseas Bank at 28th position.
the first ten banks are Axis Bank at the 5th position

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
14
FMU Journal of Management
________________________________________________________________________________________________

C. Management Efficiency Ranking


Table 4: Management Efficiency Ranking
Business per Profit per
Return on Advance- Deposit
Employee (Rs. Employee (Rs. Group Rank
Banks Networth (%) Ratio (%)
Cr.) Cr.)
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 6.84 14 0.0438 18 19.98 9 62.82 26 16.75 21
Andhra Bank 7.41 10 0.0476 16 21.92 2 64.38 21 12.25 9
Bank of Baroda 8.59 7 0.054 11 15.77 20 64.43 20 14.5 14
Bank of India 8.57 8 0.0373 21 17.69 14 71.4 6 12.25 9
Canara Bank 7.69 9 0.0447 17 19.88 11 65.25 18 13.75 12
Central Bank of India 5.31 25 0.0162 28 13.97 24 60.41 28 26.25 29
IDBI Bank 20.99 1 0.1054 4 9.02 29 447.79 1 8.75 4
Indian Bank 6.44 19 0.0586 10 15.16 23 61.79 27 19.75 24
Indian Overseas Bank 6.66 16 0.0286 25 21.39 4 65.73 17 15.5 17
Oriental Bank of Commerce 9.68 5 0.0527 12 16.16 18 63.83 24 14.75 15
Punjab National Bank 6.42 20 0.042 20 20.41 7 67.17 14 15.25 16
State Bank of India 4.51 29 0.0293 24 15.69 21 69.24 8 20.5 25
Syndicate Bank 6.72 15 0.0347 23 24.82 1 67.36 13 13 11
UCO Bank 7.23 11 0.0279 26 16.33 17 64.04 23 19.25 23
Union Bank 7.03 13 0.0433 19 20.55 6 68.7 10 12 7
Axis Bank 10.93 3 0.1073 3 21.39 4 64.13 22 8 2
City Union Bank 5.37 24 0.0527 12 21.78 3 66.38 16 13.75 12
DCB Bank 4.94 27 0.0027 29 8.25 30 68.59 11 24.25 28
Dhanalaxmi Bank 4.48 30 -0.0079 30 10.51 28 63 25 28.25 30
Federal Bank 6.46 18 0.05 15 15.97 19 67.93 12 16 20
HDFC Bank 7.21 12 0.0813 5 19.2 13 66.59 15 11.25 6
ICICI Bank 8.62 6 0.1087 2 13.25 25 96.19 3 9 5
IndusInd Bank 10.02 4 0.074 7 16.5 16 72.49 5 8 2
Jammu & Kashmir Bank 6.39 21 0.06 8 19.79 12 59.14 30 17.75 22
Karnataka Bank 6 23 0.0373 21 15.44 22 59.81 29 23.75 27
Karur Vysya Bank 6.32 22 0.0593 9 19.9 10 71.18 7 12 7
Kotak Mahindra Bank 4.65 28 0.076 6 12.44 26 153.63 2 15.5 17
Lakshmi Vilas Bank 5.27 26 0.0197 27 11.27 27 68.84 9 22.25 26
South Indian Bank 6.54 17 0.0527 12 16.91 15 64.82 19 15.75 19
Yes Bank 13.04 2 0.1345 1 20.31 8 80.43 4 3.75 1

Source: Authors compilation from available data


Table 4 above represents the ranking of the banks under HDFC Bank at the 6th position, followed by Union Bank
each of the ratios and management efficiency as a and Karur Vysya Bank jointly at the 7th position, Andhra
whole. The major findings of the analysis are that Yes Bank and Bank of India at the 9th rank. The three banks
Bank is the best bank among the select banks regarding having worst overall Management Efficiency as
overall Management Efficiency. Axis Bank and compared to its peers are Dhanalaxmi Bank at 30 th
IndusInd Bank jointly secure the 2nd position followed position, Central Bank of India at 29th position and DCB
by IDBI Bank at the 4th position. Others, among the first Bank at 28th position.
ten banks are ICICI Bank at the 5th position followed by

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
15
FMU Journal of Management
________________________________________________________________________________________________

D. Earnings Quality Ranking


Table 5: Earnings Quality Ranking
Operating Profit / Interest Income /
Return on Assets Spread / Total
Average Working Total Income Group Rank
Banks (%) Assets Ratio (%)
Fund (%) Ratio (%)
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 2.09 17 0.9 22 86.65 11 2.68 12 15.5 16
Andhra Bank 2.4 10 1.14 9 86.43 14 2.75 9 10.5 8
Bank of Baroda 2.05 21 0.92 18 85.95 18 2.47 18 18.75 21
Bank of India 1.95 23 0.8 24 85.62 20 2.32 21 22 26
Canara Bank 2.08 18 0.98 17 86.38 15 2.33 20 17.5 17
Central Bank of India 1.56 28 0.42 28 89.79 2 2.53 16 18.5 20
IDBI Bank 1.69 27 0.66 25 87.14 9 0.88 30 22.75 27
Indian Bank 2.13 16 1.12 11 85.95 18 2.84 7 13 10
Indian Overseas Bank 2.05 21 1 16 87.96 8 2.68 12 14.25 12
Oriental Bank of Commerce 2.29 13 1.03 15 88.56 5 2.56 15 12 9
Punjab National Bank 2.4 10 1.04 13 87 10 3.11 3 9 7
State Bank of India 2.06 20 0.84 23 84.33 22 2.69 11 19 23
Syndicate Bank 1.7 26 0.92 18 89.44 3 2.71 10 14.25 12
UCO Bank 1.73 25 0.63 27 88.92 4 2.26 25 20.25 25
Union Bank 2.15 15 0.92 18 88.18 6 2.61 14 13.25 11
Axis Bank 2.82 4 1.4 6 79.02 29 2.31 22 15.25 15
City Union Bank 2.8 5 1.51 4 86.35 16 2.84 7 8 6
DCB Bank 1.21 29 0.03 29 82.03 25 2.34 19 25.5 30
Dhanalaxmi Bank 1.14 30 0.01 30 86.15 17 2.29 23 25 29
Federal Bank 2.85 3 1.14 9 86.61 12 2.94 4 7 3
HDFC Bank 2.98 2 1.58 3 82.46 24 3.55 2 7.75 4
ICICI Bank 2.42 9 1.28 8 78.24 30 1.98 29 19 23
IndusInd Bank 2.55 8 1.07 12 81.71 26 2.27 24 17.5 17
Jammu & Kashmir Bank 2.69 6 1.29 7 90.42 1 2.9 5 4.75 1
Karnataka Bank 2.18 14 1.04 13 84.88 21 2.1 27 18.75 21
Karur Vysya Bank 2.61 7 1.64 2 86.54 13 2.9 5 6.75 2
Kotak Mahindra Bank 3.33 1 1.86 1 79.07 28 4.52 1 7.75 4
Lakshmi Vilas Bank 1.86 24 0.66 25 84.34 23 2.25 26 24.5 28
South Indian Bank 2.08 18 0.92 18 88.15 7 2.49 17 15 14
Yes Bank 2.37 12 1.48 5 79.51 27 2.09 28 18 19

Source: Authors compilation from available data


Table 5 above contains the ranking under earnings position followed by City Union Bank at the 6 th position,
quality as a whole and each of the sub-parameters as Punjab National Bank at the 7th position, Andhra Bank
well. The major findings are that Jammu & Kashmir at the 8th position, Oriental Bank of Commerce at the 9th
Bank is the best bank in terms of overall Earnings position and Indian Bank at 10th position. The banks
Quality followed by karur Vysya Bank and Federal which mark weakest performance in this regard are
Bank at the 2nd and 3rd position respectively. HDFC DCB Bank standing at 30th position, Dhanalaxmi Bank
Bank and Kotak Mahindra Bank jointly occupies the 4 th at 29th position and Lakshmi Vilas Bank at 28th position.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
16
FMU Journal of Management
________________________________________________________________________________________________

E. Liquidity Ranking
Table 6: Liquidity Ranking
Liquid Assets to Liquid Assets to Liquid Assets to Government
Total Assets Ratio Total Deposits Demand Deposits Securities to Total Group Rank
Banks
(%) Ratio (%) Ratio (%) Assets Ratio (%)
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 7.71 24 8.72 27 120.66 14 26.23 5 17.5 21
Andhra Bank 9.17 11 10.62 14 130.72 8 27.63 2 8.75 3
Bank of Baroda 13.63 1 15.87 3 188.26 2 20.64 26 8 2
Bank of India 10.37 6 12.3 8 185.22 3 19.91 28 11.25 7
Canara Bank 10.26 7 11.77 11 155.8 5 23.87 16 9.75 5
Central Bank of India 8.28 20 9.44 23 107.15 21 26.93 4 17 19
IDBI Bank 5.28 30 24.43 1 88.69 28 16.33 30 22.25 28
Indian Bank 7.59 25 8.72 27 128.6 10 28.65 1 15.75 15
Indian Overseas Bank 8.87 15 10.38 16 120.87 12 27.34 3 11.5 8
Oriental Bank of Commerce 8.66 17 9.91 19 120.71 13 24.32 15 16 17
Punjab National Bank 9.01 12 10.68 13 108.35 19 24.54 13 14.25 12
State Bank of India 10.41 5 13.48 5 98.33 23 25.54 7 10 6
Syndicate Bank 8.99 13 10.25 18 111.61 17 25.07 8 14 11
UCO Bank 8.67 16 9.86 20 117.25 16 24.99 9 15.25 14
Union Bank 8.1 21 9.43 24 94.27 25 22.08 22 23 30
Axis Bank 11.02 2 13.55 4 81.81 29 20.74 25 15 13
City Union Bank 8.55 18 9.71 21 109.31 18 24.94 11 17 19
DCB Bank 8.37 19 10.34 17 106.82 22 24.43 14 18 22
Dhanalaxmi Bank 10.71 3 12.28 9 130.2 9 24.99 9 7.5 1
Federal Bank 7.27 26 8.58 29 155.46 6 23.53 17 19.5 24
HDFC Bank 10.01 9 13.43 6 58.79 30 22.88 18 15.75 15
ICICI Bank 8.89 14 16.22 2 145.83 7 19.22 29 13 9
IndusInd Bank 10.23 8 13.05 7 119.43 15 21.5 23 13.25 10
Jammu & Kashmir Bank 10.48 4 11.92 10 92.62 26 21.29 24 16 17
Karnataka Bank 7.24 27 8.21 30 126.72 11 26.23 5 18.25 23
Karur Vysya Bank 8.08 22 9.55 22 88.76 27 22.56 20 22.75 29
Kotak Mahindra Bank 5.33 29 10.76 12 97.16 24 22.4 21 21.5 26
Lakshmi Vilas Bank 7.91 23 9.1 26 107.44 20 22.75 19 22 27
South Indian Bank 9.37 10 10.49 15 228.19 1 24.91 12 9.5 4
Yes Bank 6.56 28 9.32 25 177.62 4 20.62 27 21 25

Source: Authors compilation from available data


Liquidity ranking including ranking under each ratio of India at 7th position, Indian Overseas Bank at 8th
therein is shown in table 6 above. The key findings are position, ICICI Bank at the 9th position and IndusInd
that Dhanalaxmi Bank secures the 1st rank followed by Bank at the 10th position. The banks which show poorest
Bank of Baroda at 2nd rank and Andhra Bank at the 3rd performance regarding liquidity are Union Bank at 30 th
rank. The others among the top ten banks are South rank, Karur Vysya Bank at 29th rank and IDBI Bank at
Indian Bank at the 4th position followed by Canara Bank 28th rank.
at 5th position, State Bank of India at 6th position, Bank

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
17
FMU Journal of Management
________________________________________________________________________________________________

F. Composite Ranking
Table 7: Composite Ranking
Capital Management Earnings Composite
Banks Asset Quality Liquidity Average
Adequacy Efficiency Quality Ranking
Allahabad Bank 20 23 16.75 15.5 17.5 18.55 24
Andhra Bank 15 15 12.25 10.5 8.75 12.3 4
Bank of Baroda 16.25 8.5 14.5 18.75 8 13.2 7
Bank of India 17.75 14.75 12.25 22 11.25 15.6 18
Canara Bank 13.5 11 13.75 17.5 9.75 13.1 5
Central Bank of India 24 24.5 26.25 18.5 17 22.05 30
IDBI Bank 11.25 16.5 8.75 22.75 22.25 16.3 21
Indian Bank 16.75 18.5 19.75 13 15.75 16.75 22
Indian Overseas Bank 16.5 21.25 15.5 14.25 11.5 15.8 19
Oriental Bank of Commerce 18 10.25 14.75 12 16 14.2 16
Punjab National Bank 15.25 16 15.25 9 14.25 13.95 14
State Bank of India 17.25 13.75 20.5 19 10 16.1 20
Syndicate Bank 15.5 10.25 13 14.25 14 13.4 8
UCO Bank 21.25 19.25 19.25 20.25 15.25 19.05 25
Union Bank 18.25 17.25 12 13.25 23 16.75 22
Axis Bank 20.75 10.5 8 15.25 15 13.9 13
City Union Bank 7 15.25 13.75 8 17 12.2 3
DCB Bank 14.5 20.25 24.25 25.5 18 20.5 29
Dhanalaxmi Bank 20.25 20.75 28.25 25 7.5 20.35 28
Federal Bank 11.5 13.25 16 7 19.5 13.45 10
HDFC Bank 16.25 14.5 11.25 7.75 15.75 13.1 5
ICICI Bank 14.75 11.25 9 19 13 13.4 8
IndusInd Bank 12 8.75 8 17.5 13.25 11.9 2
Jammu & Kashmir Bank 17.75 16.5 17.75 4.75 16 14.55 17
Karnataka Bank 18 19.5 23.75 18.75 18.25 19.65 26
Karur Vysya Bank 5 11.25 12 6.75 22.75 11.55 1
Kotak Mahindra Bank 12 14 15.5 7.75 21.5 14.15 15
Lakshmi Vilas Bank 12.25 19.75 22.25 24.5 22 20.15 27
South Indian Bank 13.75 15.25 15.75 15 9.5 13.85 12
Yes Bank 12.25 13.5 3.75 18 21 13.7 11

Source: Authors compilation from available data


After assessing the relative performance of the select the best three banks are from the private sector. The
banks based on each of the parameters namely, Capital others among the top ten banks are Andhra Bank at the
Adequacy, Asset Quality, Management Efficiency, 4th position, followed by Canara Bank and HDFC Bank
Earnings Quality and Liquidity, it becomes pertinent to jointly at the 5th position, followed by Bank of Baroda at
rank the banks based on their overall performance. Table the 7th position, Syndicate Bank and ICICI Bank jointly
7 above shows the composite ranking of the select at the 8th position and Federal Bank at the 10th position.
banks. It is found that the top three banks based on their The banks which show weakest overall performance are
overall performance are Karur Vysya Bank having the Central Bank of India at the 30th position, DCB Bank at
1st rank, IndusInd Bank at the 2nd position and City 29th position and Dhanalaxmi Bank at the 28th position.
Union Bank at the 3rd position. Thus, it is witnessed that

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
18
FMU Journal of Management
________________________________________________________________________________________________

V. CONCLUSIONS AND RECOMMENDATIONS


Table 8: Summary of Important Findings

Oriental Bank of Commerce


3rd IDBI Bank _ Federal Bank Andhra Bank City Union Bank
B and Syndicate Bank
E
Axis Bank and
S 2nd City Union Bank IndusInd Bank karur Vysya Bank Bank of Baroda IndusInd Bank
T IndusInd Bank
Karur Vysya Jammu & Kashmir
1st Bank of Baroda Yes Bank Dhanalaxmi Bank Karur Vysya Bank
Bank Bank
C A M E L Overall
Lakshmi Vilas
28th Axis Bank Indian Overseas Bank DCB Bank IDBI Bank Dhanalaxmi Bank
W Bank
O Central Bank of
R 29th UCO Bank Allahabad Bank Dhanalaxmi Bank Karur Vysya Bank DCB Bank
India
S
T Central Bank of Central Bank of
30th Central Bank of India Dhanalaxmi Bank DCB Bank Union Bank
India India

Table 8 above summarizes the important findings of the Banks, World Journal of Social Sciences, Vol. 3, No.
study. From the study, it can be concluded that Karur 3, Pp. 71-88.
Vysya Bank is the best among the select 30 banks based [2] Chowdhury, Subroto (2011), An Inquiry into the
on overall performance. Its capital adequacy and Financial Soundness of Commercial Banks in India
Using CAMEL Approach, Journal on Banking
earnings quality is mainly responsible for the same. In Financial Services and Insurance Research, Vol. 1,
terms of each individual parameter, again Karur Vysya Issue 7, Pp. 88-121.
Bank is the best one in terms of capital adequacy. Bank [3] Kouser, Rehana and Saba, Irum (2012), Gauging the
of Baroda is the most efficient one in maintaining its Financial Performance of Banking Sector using
asset quality. Yes Bank is having the best managerial CAMEL Model: Comparison of Conventional, Mixed
efficiency. Jammu & Kashmir Bank is having the best and Pure Islamic Banks in Pakistan, International
earnings quality and Dhanalaxmi Bank is having the Research Journal of Finance and Economics, Issue 82,
best liquidity position. Pp. 67-88.
[4] Mani, Mukta (2011), Parameters of Rating of Indian
Central Bank of India is having worst overall Commercial Banks A Critical Analysis,
performance. This bank should try to improve its weak International Journal of Research in Commerce, IT and
areas i.e. overall capital adequacy, asset quality and Management, Vol. 1, Issue 2, Pp. 149-155.
management efficiency. DCB Bank occupies the 2nd last [5] Manoj, P K (2010), Financial Soundness of Old
Private Sector Banks(OPBs) in India and
rank in terms of overall performance. It should
Benchmarking the Kerala Based OPBs: A CAMEL
concentrate on improving its management efficiency and Approach, American Journal of Scientific Research,
earnings quality which seems to be weaker than its Issue 11, Pp. 132-149.
peers. Though the liquidity position of Dhanalaxmi [6] Prasad, K.V.N. (2012), Evaluating Performance of
Bank is better than all its peers, it occupies the 28 th Public Sector and Private Sector Banks through
position. This is again attributable to weak management CAMEL Model, Asian Journal of Research in
and poor earnings quality. The bank should try to Banking and Finance, Vol.2, Issue 3, Pp. 36-46.
develop these aspects. Eventually, it is recommended [7] Prasad, K.V.N. and Reddy, D. Maheshwara (2012),
that the banks should try to improve its weak areas and Evaluating Performance of Nationalized Banks and
SBI Group through CAMEL Model, Academicia: An
maintain its strong areas in order to sustain in future.
International Multidisciplinary Research Journal,
BIBLIOGRAPHY Vol.2, Issue 3, Pp. 32-39.
[8] Reddy, K. Shriharsha (2012), Relative Performance
[1] Aspal, Parvesh Kumar and Malhotra, Naresh (2013), of Commercial Banks in India Using CAMEL
Performance Appraisal of Indian Public Sector Approach, International Journal of Multidisciplinary
Research, Vol.2, Issue 3, Pp. 38-58.


________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
19
FMU Journal of Management
________________________________________________________________________________________________

CRAFTING NEUROECONOMIC-MANAGERIAL DECISIONS


1
Jyotirmaya Satpathy, 2Adyasha Das, 3Suneetha Narendran, 4Michael Sturman, 5Sandhya R Das
1
DLitt, Faculty, Officers Training Academy, Indian Army, Gaya, India.
2
PhD, Faculty, Indian Institute of Tourism Management, Bhubaneswar, India.
3
PhD, Faculty, Dept. of Management(Organisation Behaviour) and Director Research, University of East London, UK.
4
PhD, Faculty, Dept. of Management, Cornell University, Cornell, USA.
5
PhD, PhD, Faculty, Dept. of Economics, Berhampur University, Berhampur, India.
Email: jyotisatpathy@gmail.com

management levels of analysis capable of predicting


Abstract : Decision-making is a region of intense study in observed behaviour. This provides conceptual framework
neuroscience, and cognitive neuroscience, In real, World for understanding and conducting Neuro (managerial)
decision processes, management decisions emerge from management research at intersection of neuro (managerial)
complexly interlinked, This paper explores how brain science, management and psychology, offer solution
absorbs information, recognises and frames problematic through measurements of brain activity at time of
situations, and chooses appropriate responses, Brain decisions, linking and spanning neuro(managerial)
structures suggest that brain considers various sources of biological and psychological and management levels of
information before making decision,Brain imaging analysis.
technologies have stimulated neuro (managerial) studies of
internal order of mind and its links with bandwidth of Key Words: Cognitive Neuroscience, Brain Imaging,
human decisions,How is (managerial) decision making Coherent Brain Dynamics, VUCA, fMRI, BOLD, EEG,
processes carried out in brain? What are the limits of ECG
understanding thinking as a form of computing? How does
previous experience alter behavior? Do we interpret I. INTRODUCTION
research findings when neuro (managerial) logical results
conflict? Theoretical explanations posit that human brain
What are minds for? Human brain is the most complex
accomplishes this through neural computations. thing that we know of within our own World. Perhaps it
Deciphering such transactions require understanding of is the most complex thing in the universe! Why have we
neuro processes that implement value - dependent decision as a species been blessed with such a gift? What is it
making. This leads to formulation of a neuro - for?How much of our managerality is determined by our
management decision making paradox. The goal is a brain? Its a question thats perplexed philosophers for
speculation of how brain implements decisions that is tied centuries and scientists for decades,This is the
to behaviour. There are unsolved research issues; how does old character versus nurture debate, Despite all the
Manager decide in a state of vacillation, Risk and
recent advances in the cognitive and neurosciences,
Probability? How does Manager decide in state of VUCA
(Uncertainty, Vulnerability, Complexity and Ambiguity?
theres still much about the human brain that we do not
How do we make decisions? How do human brains know, We are still quite a ways off from understanding
compute and represent abstract ideas? What counts as how the brain produces phenomenal experience or
explanation of how brain works (what are function, qualia, Its what makes us the unique, self-reflective
algorithm and implementation)? This paper attempts at creatures that we are, Decision-making is a region of
addressing current pace of advances in methods (fMRI, intense study in neuroscience, and cognitive
BOLD, EEG, ECG, etc), where we are going and what we neuroscience, In real, World decision processes,
ought to research next. This Paper attempts to explore management decisions emerge from complexly
phenomena through individual action, decision -making
interlinked, There is a need to explore how brain absorbs
and reasoning processes. Objective is to put forward a
model for neuro - management decision, in which
information, recognises and frames problematic
interaction between variables of neuro - management situations, and chooses appropriate responses.
decision processes are addressed through series of How are decisions carried out in brain? Question is how
measurements of brain activity at time of decisions.
manager make decisions. Brain considers sources of
Attempt is to describe a regular model for decision making
process with intent of linking neuro - psycho and information before decision. In particular, the processes
by which individuals reach decisions have been ignored.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
20
FMU Journal of Management
________________________________________________________________________________________________

Problems confronting decision makers often embody Managerial Activity: Managers make (economic)
conflicting values. Manager often fail to design decision makings in complex situations.
rational decisions. When faced with obscure decision, Neuromanagerial economic decision making needs a
individuals engage in strategic simplifications of decision maker (Manager) responsible for economic
decision problems. How do parts of the brain that decision making. This maker has number of alternatives
govern decision-making coordinate their activity when and must choose the best alternative (or optimised
making a decision? This paper explores certain neuro- combination). When this has been made, events may
underpinnings in managerial decision modeling. Brain have occurred (maker has no control). Each
structures suggest that brain considers various sources of (combination) of alternatives, followed by an event,
information before making decision, Brain imaging leads to a result with some quantifiable significance.
technologies have stimulated neuro (managerial) studies Cognitive neuroscience research suggests that diverse
of internal order of mind and its links with bandwidth of preference orderings and decisions possibly will surface
human decisions, how is (managerial) decision making depending on which brain circuits are activated. This
processes carried out in brain? What are the limits of perchance contradicts the microeconomic postulate that
understanding thinking as a form of computing? How one complete preference ordering provides sufficient
does previous experience alter behavior? Do we information to predict decision and behaviour.
interpret research findings when neuro (managerial)
Interpretation of Managerial activity in terms of
logical results conflict?
neuroscience is typically concerned with the
Imaging is an important aspect of dynamic capabilities neurophysiological underpinnings of Managerial
and there is an increasing amount of evidence of how neurodecision Managerial economic behaviours. One
evolutionary patterns are shaped, There are yet unsolved key insight is modularity of human brain (not all brain
problems in (managerial) cognition, although some of circuits get activated when executing response to given
these problems have evidence supporting a hypothesized circumstances). Same stimuli may generate different
solution, and the field is rapidly evolving, What are the behavioural responses depending on which brain circuits
general implications of neuro (managerial) are activated. If hypothesis is accurate, different brain
management? There are unsolved research issues; how circuits can guide to different decisions depending on
does Manager decide in a state of vacillation, Risk and which brain structures and circuits are activated.
Probability? How does a Manager decide in state of Consequently, there would be various (possibly
VUCA (Uncertainty, Vulnerability, Complexity and conflicting) preference orderings. Furthermore, if a
Ambiguity? How do we make decisions? How does particular brain circuit could act relatively insulated,
human brain compute and represent abstract ideas? distinctive preference ordering would result (closed
What counts as explanation of how the brain works system).
(what are function, algorithm and implementation)? This
paper attempts at addressing current pace of advances in II. HUMAN BRAIN TECTONICS
methods (fMRI, BOLD, EEG, ECG, etc), where we are Human resources rely on cautious mock-up of
going, and what we should research next. This provides neuromanagerial economic decision making modeling.
conceptual framework for understanding and conducting Tactic consists in construction models to display
Neuro (managerial) management research at intersection relationship between cause and neuro incongruity.
of neuro (managerial) science, management and Freedom provided by introspection technique leads to a
psychology, offer solution through measurements of model selection problem. Neuro - management
brain activity at time of decisions, linking and spanning neuromanagerial economic decision making-making,
neuro(managerial) biological, psychological and regarded as a mental process (cognitive process), result
management levels of analysis, in selection of path of action among alternative
volatility, uncertainty, complexity and ambiguity of circumstances. Each neuromanagerial economic
general conditions and situations, The deeper meaning decision making-making process produces
of each element of VUCA serves to enhance the neuromanagerial economic decision making. Process is
strategic significance of VUCA foresight and insight as regarded as incessant process integrated with situation.
well as the behavior of groups and managers in Investigation is concerned with rationale of
organisations. neuromanagerial economic decision making -making,
reasonableness and invariant neuromanagerial economic
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
21
FMU Journal of Management
________________________________________________________________________________________________

decision making. These reflect compensatory interface The human brain is the most complex organ in the body.
of neuromanagerial economic decision making -related The human brain is one of the most complex objects of
expanse. scientific research. Understanding the brain, its
cognitive functions, and the related conscious
Specific brain structure potentiates neuromanagerial
experience requires cooperation of quite a number of
economic decision making - makings depending on
different disciplines. The number of connections in the
strategy, traits and framework. Therefore,
brain exceeds the number of atoms in the universe. The
neuromanagerial economic decision making is a
brain is foremost a control structure that builds an inner
reasoning or emotional process which can be rational or
illustration of outer world and uses this depiction to
irrational, based on explicit / tacit assumptions. This
make decision, goals and priorities, formulate plans and
leads to formulation of a neuro - management
be in charge of activities with objective to attain its
neuromanagerial economic decision making paradox.
goals. Cognitive Neuroscience relies on non-invasive
Explorations on brain mechanisms juxtapose link
techniques to look at neural activities at different brain
between brain and behaviour, known as Cognitive
regions when Managers perform cognitive tasks. The
Neuroscience, to study neuronal activities, connections
techniques offer information concerning brain activity
between neurons, plasticity of brain and relationship
during diverse cognitive processes but not about
between brain and behaviour. These inherit methods as
underlying relationship linking brain expanse and
how brain encodes, processes information, stores
cognitive functions. It is mysterious whether activities in
representation in mind to craft actions in reaction to
brain regions are essential to analogous cognitive
stimuli. These embrace sensation and perception of
functions. These have confines.
information, interface linking information in dissimilar
modalities, matrix of memory and dispensation of III. VOLATILITY, UNCERTAINTY,
information. Deduction is based on postulation that COMPLEXITY AND AMBIGUITY
individual cognitive functions are based on neural
activities in brain. We are living in a World where volatility and
uncertainty have become the new normal. We look at
Neuromanagerial economic decision making involves the World through a lens, which we call VUCA, which
detection of need, discontent within oneself, decision stands for Volatile, Unstable, Complex, and
making to change and mindful perseverance to execute Ambiguous. VUCA, as prescribed in Wikipedia,is
decision making. How are neuromanagerial economic describes or reflects on ischemic failures and
decision making carried out in brain? What are the behavioural failures, which are imperative to
general implications? Primary argument is that organisational failure, At some level, capacity for
neuromanagerial economic decision making-making is VUCA management and leadership hinges on enterprise
coupled with factors of uncertainties, compound value schemes, assumptions and natural goals, A
objectives, interactive intricacy and apprehension that 'prepared and resolved' enterprise is engaged with
makes neuromanagerial economic decision making- strategic agenda that is aware of and empowered by
making course of action difficult. There is the VUCA forces, The capacity for VUCA leadership in
requirement for strategic neuromanagerial economic strategic and operating terms depends on a well,
decision making-making. Questions include; how to developed mindset for gauging the technical, social,
choose in situations where stakes are high with multiple political, market and economic realities of the
conflicting objectives? How to plan for dealing with environment in which people work, Working with
risks and uncertainties involved? How to craft options deeper smarts about the elements of VUCA may be a
better than originally available? How to become better driver for survival and sustainability in an otherwise
neuromanagerial economic decision making makers? complicated World,
What resources will be invested? What would be the
potential responses? Who will make this V = Volatility, The character and dynamics of
neuromanagerial economic decision making? How change, and the character and speed of change forces
should they be evaluated? How will one decide? Which and change catalysts,
of the things that could happen would happen? How can
we ensure neuromanagerial economic decision making U = Uncertainty, The lack of predictability, the
will be carried out? These questions are crucial for prospects for surprise, and the sense of awareness and
understanding of issues and events,
understanding complex human behaviours.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
22
FMU Journal of Management
________________________________________________________________________________________________

C = Complexity, The multiplex of forces, outcomes themselves are unknown, as is the case in
confounding of issues and disorder and confusion that complex real-world neuromanagerial economic decision
surround an organisation, makings. So far, neuromanagerial economic decision
making neuroscience research has established weak,
A = Ambiguity, The haziness of reality, the albeit numerous, links between uncertainty and its
potential for misreads, and the mixed meanings of neural substrates.
conditions; causeandeffect confusion,
To meet the challenges of a complex World, strategic
These elements present the context in which planners need to understand the differences between the
organisations view their current and future state, They four elements of VUCA. In a VUCA World, whats the
present boundaries for planning and policy management, point of strategy? Strategy does still have a purpose, but
They come together in ways that either confound building one in a VUCA environment requires more
decisions or sharpen the capacity to look ahead, plan nuanced thinking. Today's turbulent environment of
ahead and move ahead, VUCA sets the stage for volatility, uncertainty, complexity and ambiguity means
managing and leading, The particular meaning and new challenges for government managers and
relevance of VUCA often relates to how people view the policymakers, VUCA environments require that we
conditions under which they make decisions, plan learn from big, picture thinkers from different
forward, manage risks, foster change and solve disciplines and industries, And such learning can reduce
problems, In general, the premises of VUCA tend to the 'U' in VUCA, uncertainty, Volatility has to do with
shape an organisation's capacity to: the nature, speed and magnitude of change, Volatility or
Anticipate issues that shape conditions turbulence is a phenomenon that is occurring more
frequently than in the past, Uncertainty relates to the
Understand consequences of issues and actions unpredictability of issues and events, Information about
Appreciate interdependence of variables the past and present are less and less useful in
anticipating the future, making it extremely difficult for
Prepare for alternative realities and challenges decision, makers to forecast and allocate resources
effectively, Complexity, the multiple and
Interpret and address relevant opportunities
difficult,to,understand causes of problems, poses another
Uncertainty pervades neuromanagerial economic challenge, Ambiguity adds to the other three factors,
decision making. Nearly all real-world decisions involve Ambiguity makes it difficult to understand the meaning
some form of psychological uncertainty, whether about of fast, moving, unclear and complex events,
the likelihood of an event or about the nature of future Leadership agility and adaptability are now required
preferences. Most studies in neuromanagerial economic
skills if organisations are to succeed in a VUCA World,
decision making neuroscience literature like in its
Leaders must be able to make continuous shifts in
counterparts in the socio - Managerial sciences have
people, processes, technology and structure, This
examined the effects of risk; for reviews see Knutson requires flexibility and speed in decision-making the
and Bossaerts (2007), Platt and Huettel (2008), ability to diagnose, decide and deploy resources quickly
Rushworth and Behrens (2008). While definitions vary , and preferably proactively rather than reactively,
across contexts, a risky neuromanagerial economic
Theorists of some of the success factors we have
decision making involves potential outcomes that are
identified around leading effectively in a VUCA World:
known but probabilistic, such that risk increases with always retain a clear vision against which judgments can
variance among those outcomes, potentially normalized be made, with agility to flex and respond appropriately
by the expected value (Weber et al., 2004). Uncertainty to rapidly unfolding situations, provide clear direction
can have other forms, however. Outcomes may be and consistent messaging against a backdrop of
known but occur with unknown probability; such
continually shifting priorities, supported with the use of
neuromanagerial economic decision makings
new virtual modes of communication where necessary,
reflect ambiguity (Ellsberg, 1961). Only a handful of anticipate risks but dont invest too much time in long,
studies, so far, have investigated the neural basis of term strategic plans, dont automatically rely on past
ambiguity (Smith et al., 2002; Hsu et al., 2005; Huettel solutions and instead place increased value on new,
et al., 2006; Bach et al., 2009). And, still other states of
temporary solutions, in response to such an
uncertainty might be evoked in cases where the
unpredictable climate, think big picture, make decisions
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
23
FMU Journal of Management
________________________________________________________________________________________________

based as much on intuition as analysis, capitalise on important to understand intricacy of managerial brain.
complexity, if your talent management strategy is Brain is main organ of nervous scheme. It has the same
working, then you should be confident that you have the general structure as brains of other mammals, but with
right people in the right place, this will enable you to developed cerebral cortex. Model of brain function can
rapidly break down any challenge into bite size pieces explain a wide range of anatomical and physiological
and trust in the specialist expertise and judgment of aspects of brain schemes.
those around you, be curious, uncertain times bring
Size of brain comes from cerebral cortex, especially
opportunities for bold moves, seize the chance to
frontal lobes, which are associated with executive
innovate, encourage networks rather than hierarchies
functions. The area of cerebral cortex devoted to vision,
as we reach new levels of interconnection and
visual cortex, greatly enlarged as compared to other
interdependency collaboration yields more than
animals. Basic structural design of brain is constructed
competition, leverage diversity as our networks of
through a process that begins early in life and continues
stakeholders increase in complexity and size, be sure to
into adulthood. Simpler circuits come first and more
draw on the multiple points of view and experience they
obscure brain circuits endow with basic blueprint.
offer, doing so will help you expect the unexpected,
Certain neurons seem to represent the accumulation of
never lose focus on employee engagement, provide
evidence to a threshold and others represent the
strategic direction, whilst allowing people the freedom
evidence itself, and that these two types of neurons
they need to innovate new processes, products and
interact to drive decision-making. Experiences influence
services, get used to being uncomfortable, resist
how or whether genes are expressed. Imaging studies
temptation to cling on to outdated, inadequate processes
suggest that differences in cognition and behaviour
and behaviours, take leaps of faith and enjoy adventure.
(might) relate to differences in brain connectivity.
Perceptive the coverage to which two brains can differ is
How are Decisions carried in Brain? crucial in basic neuroscience research.
How are decisions carried out in brain? Question is how What is mind? The decision-making mechanism consists
manager make decisions. Psychological models of on a loop, ie a connection back and forth between these
decision-making explain that humans gradually two types of areas. Where does it come from? How are
accumulate evidence for a particular choice over time, brain, mind, matter, and energy related? How do they
and execute that choice when evidence reaches a critical interact? Why does this interaction seem to be the source
level. Brain considers sources of information before of our suffering? What could we learn about being
decision. In particular, the processes by which managers managerial if we were to weave the psychological
reach decisions have been ignored. Problems sciences, neurosciences, biological sciences, and the
confronting decision makers often embody conflicting physical sciences into a single integrated depiction? Can
values. Manager often fail to design rational decisions. we create a comprehensive model of mind and brain so
When faced with obscure decision, managers engage in that we may be able to perceive and influence the
strategic simplifications of decision problems. How do network of interactions that we are embedded within and
parts of the brain that govern decision-making influenced by? What is the most elementary way in
coordinate their activity when making a decision? This which we can describe their interaction so that we may
paper explores certain neuro-underpinnings in understand who we are and ultimately improving the
managerial decision modeling. quality of managerial life?
In neurosciences, how the brain processes different An emerging theme in decision neuroscience is that
sensory stimuli (such as images or sounds) and which organisms need to make a number of value-related
are the neural basis involved in deciding what we computations to make even simple choices. Consider the
perceive, have been the deeply studied in the past case of action-based choice exemplified by the
decades. Impairments in decision-making are at the core goalkeeper's problem. First, he needs to assign a value to
of a variety of psychological and neurological each action under consideration. These signals, known
impairments. Brain accumulates evidence when faced as action values, encode the value of each action before
with a choice and triggers an action once that evidence choice and regardless of whether it is subsequently
reaches a tipping point. But, how do we know where we chosen or not, which allows them to serve as inputs into
are, where we have been and where we are going? It's the decision-making process. Second, these action

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
24
FMU Journal of Management
________________________________________________________________________________________________

values are compared to generate a choice. Third, the calculation. An awareness level focuses on the brains
value of the option that is selected, known as the chosen representations of emotion, attention and consciousness,
value, is tracked to be able to do reinforcement learning. showing that they can operate with great economy in the
In particular, by comparing the value of the outcome context of the neural and embodiment substrates.
generated by the decision to the chosen value, the
Each step in the decision-making process may include
organism can compute a prediction-error signal that can
social, cognitive and cultural obstacles to successfully
be used to update the action value of the chosen option.
negotiating dilemmas. It has been suggested that
Note that while the action values are computed before
becoming more aware of these obstacles allows one to
the decision is made, the chosen value and outcome of
better anticipate and overcome them. Neuroscience and
the comparator process signals are computed afterward.
social science have witnessed tremendous advance in
A basic question, intimately tied to the problem of Neuroeconomics and Neuromanagement since the birth
action choice, is that of how actions are assembled into of these interdisciplinary fields at the turn of Century. In
organised sequences. Theories of routine sequential order to explain the cognitive and neural underpinning
behaviour have long acknowledged that it must rely not of managerial decision-making, the ability to process
only on environmental cues but also on some internal multiple substitutes and to choose an optimal course of
representation of temporal or task context. It is assumed, action, especially in a managerial context. Nerve
in most theories, that such internal representations must management is contemporary developments in cognitive
be organised into a strict hierarchy, mirroring the neuroscience, neural imaging technology progress, and
hierarchical structure of naturalistic sequential behaviour the traditional management research across a field of
Based on recent neuroscience evidence, we model the study, through study of manager in their daily
brain as a dual-scheme organisation subject to three management behaviour such as consumption,
conflicts: asymmetric information, temporal horizon, investment, production, circulation, financial
and incentive salience. Under the first and second management, managerial activities such as various acts
conflicts, we show that the uninformed scheme imposes of the neurophysiologic underpinning, thereby from
a positive link between consumption and labour at every brain science perspective on managerial management
period. Furthermore, decreasing impatience activities of the mechanisms behind, and brings forward
endogenously emerges In decision-making, purposes corresponding management measures and strategies.
must first be established, purposes must be classified And neuroeconomics, nerve management emphasis on
and placed in order of importance, substitute actions exact situations, manager differences and the operational
must be developed, the substitute must be evaluated level of behaviour, study different conditions managed
against all the purposes, the substitute that is able to object evolution rule and achieve the most effective
achieve all the purposes is the tentative decision, the management method. Decision makers must have vast
tentative decision is evaluated for more possible amounts of information in order to make use of the
consequences, the decisive actions are taken, and rational comprehensive decision-making technique.
additional actions are taken to prevent any adverse There needs to be an ability to predict the future
consequences from becoming problems and starting consequences of decisions made. Also, problems
both schemes (problem scrutiny and decision-making) confronting decision makers often embody conflicting
all over again. values. In addition, it is tough to ignore the sunk costs of
former decisions, these may foreclose many substitutes.
There are steps that are generally followed that result in
a decision model that can be used to determine an IV. QUESTIONS IN DECISION SPECTRUM
optimal production plan and in a situation featuring
conflict, role-playing may be helpful for predicting Overall, this multi-dimensional and thus potentially
decisions to be made by involved parties. Each of these integrative approach combines neuro-biological, socio -
factors leads to a fresh perspective. A neural level Managerial and trans-cultural dimensions of decision-
focuses on the basic forebrain functions and shows how making and trust into a stratified image of the human
processing demands dictate the extensive use of timing- being and its behaviour(s). Important to this paradigm is
based circuitry and an overall organisation of tabular the need to characterize the interaction of physical,
memories. An embodiment level organisation works in psychological, cultural, and even spiritual cognitions
reverse, making extensive use of multiplexing and on- that establish various decisions, and which relate
demand processing to achieve fast analogous decisional-actions and outcomes to evaluations of trust.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
25
FMU Journal of Management
________________________________________________________________________________________________

We opine that this explicitly experimental (heuristic) knowledge of neurological mechanisms of decision-
neuro-bio-psycho-socio - Managerial model of trust making is not explanatorily relevant for all or even most
encompasses at least six dimensions: socio - Managerial scientific phenomena. Moreover,
unification as such cannot be used as an evidential
A neural level that proposes the neural networks argument for the probable truth of neuromanagerial
involved in ecological / economic decision-making; economic decision making hypotheses. Second, that
A biological attribute that describes the neuromanagerial economic decision makings provides
evolutionary and developmental bases and relevance of the mark of the real for typical socio - Managerial
decision-making and trust; scientific explanation rests on the mistaken intuition that
causal relations are more real the closer we get to
An anthropological component that defines and describing them in a purely physical vocabulary.
describes the collective meaning and basic value of trust Without this assumption, the finding that there is a
for human beings as a self-conscious species among correspondence between a psychological entity and a
other (conscious) species; particular brain area does not, by itself, make the
A psychological aspect that provides a definition of psychological entity any more real. Third,
trust pertinent to the specific cognitions, emotions and neuromanagerial economic decision makings do not
character of an individual; automatically improve Managerial neuroeconomic
decision making explanations, because mechanistic
A philosophical dimension that regards the rational details are not always explanatorily relevant for socio -
dimension of trust in the sense of an in-depth scrutiny of Managerial and Managerial neuroeconomic decision
causes and origins as related to effects; making phenomena.
A socio - managerial level of influence, that Mechanistic details only improve the explanation of the
describes dependent inter-relations with others, original socio - Managerial scientific explanandum if
respective past and present experiences of these inter- knowledge of them effectively increases our ability to
relations; make causal and explanatory inferences about the
explanandum. Thus far, however, this has rarely been
But why would specifically neurological experiments be
the case in neuromanagerial economic decision makings.
relevant to causal knowledge concerning the Managerial
Consequently, just the fact that some neural variables
neuroeconomic decision making realm? Practitioners
are directly manipulated does not necessarily mean that
and philosophers have advanced a number of arguments.
Managerial neuroeconomic decision making relevant
First, neuromanagerial economic decision makings
variables are been controlled. Moreover, the argument
holds out the promise to unify within the socio -
that unlike behavioural experiments, neuromanagerial
Managerial sciences: uncovering the neural
economic decision makings experiments obviate the
underpinnings of decision making would get us a theory
need for matching the subjects and the experimenters
that is applicable to all human behaviour in all socio -
models, and hence afford more reliable causal
Managerial contexts. We could use the same theory to
inferences, overestimates the current status of
causally explanation for, not just rationalize post hoc,
neurological theories of decision making.
pro-socio - Managerial behaviour as well as for self-
regarding Managerial neuroeconomic decision making We argue that the relevance of neuroscientific findings
decisions. Second, neuromanagerial economic decision is mostly to be understood in terms of triangulation of
makings evidence has been thought to establish the evidence by independent means of determination.
reality of key Managerial neuroeconomic decision Triangulation is a standard term in the methodology of
making variables; for example, some measurable neural the socio - Managerial sciences. It refers to the use of
phenomenon of decision (activation patterns in multiple different and independent sources of evidence
VTMPFC) is said to be the physiological referent of or theoretical perspectives to check whether a putative
utility, thus vindicating a realist interpretation of phenomenon is an artifact of some particular method or
Managerial neuroeconomic decision making theory. perspective. The epistemic rationale of triangulation is
thus to distinguish the real from the artefactual by
In this paper we show that neuromanagerial economic
controlling for errors and biases of particular methods.
decision makings do none of these things. First, it does
Conceiving neuromanagerial economic decision making
little to unify socio - Managerial phenomena because
experimentation as triangulation explicates what is
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
26
FMU Journal of Management
________________________________________________________________________________________________

correct behind some of the arguments discussed above. prompting a certain decision and its subsequent
For example, a finding that a certain brain area is behaviour. Pressing questions, then, are how and where
involved in altruistic punishment does not, as such, these abstract variables are combined in the brain, and
render socio - Managerial preferences more real by the dynamics of the neural computation which
providing a physical realiser, but provides additional engenders a decision. Because economists base their
confirmatory evidence through another independent models on optimal behaviour, they have the ability to
means of determination (i.e. imaging studies of the brain develop a precise, unified framework for interpreting
or the measurement of hormonal levels in the body) of human behaviour; thesis is, essentially, that humans
the involvement of socio - Managerial preferences in the choose alternatives that maximize rewards. Managerial
explanation of altruistic punishment. neuroeconomic decision making draws upon the
precision and rigor of formal models of economics to go
A similar point applies to unification: when appraising
beyond the sensory-motor circuit, allowing opportunities
neuromanagerial economic decision making hypotheses,
for understanding neural basis of more abstract
the sound evidential principle of triangulation should be
economic ideas, such as value and the profitability of
distinguished from the common intuition that
outcomes (a bit more challenging to study than sensory
neuromanagerial economic decision making hypotheses
and motor systems). Thus, principle of economics
are likelier to be true in virtue of explaining much by
allows neuroscientists to explore physical mechanisms
little. The latter mixes evidential and explanatory
underlying high level cognitive processes.
virtues. Unification in this case is relevant only insofar
as a unifying hypothesis related to diverse sources of But if Managerial decision Economists could develop
evidence actually has more, and mutually independent, models that explain for subtleties of human brain, they
evidence. Our claims apply beyond the case of might be able to predict complex behaviours more
neuromanagerial economic decision makings: the accurately. This, in turn, might have any number of
epistemic contribution of neuroscience to socio - practical applications: investment bankers could hedge
Managerial scientific theories and explanations lies in against financial euphoria like Internet boom;
the generation of (further kinds of) evidence for the advertisers could sell products more winningly. The idea
triangulation of socio - Managerial scientific hypotheses. that understanding the brain can inform Managerial
decision Economics is controversial but not new; for 20
The irrationality of human decision-making attracts the
years, behavioural economists have argued that
fierce interest of two very different fields: neuroscience
psychology should have a greater influence on the
and economics. Economic theories of human decision-
development of economic models. What is new is use of
making are essentially based on two parameters: what
technology: economists, like other researchers, now
something is worth and the probability of its occurrence.
have at their disposal powerful tools for observing brain
Neuroscientists, on the other hand, think of decision-
at work. Functional Magnetic Resonance Imaging
making as a product of physical neural circuits: sensory
(fMRI) has been around since late 1980s; but only in
information enters the brain, journeys through the brain
past few years has it been used to study decision-
where a decision is made, and eventually exits the
making, which is crux of economic theory. The result is
brain to evoke bodily responses. Economics ignores
emerging field of neuromanagerial decision
these biological, more proximal roots of behaviour,
Economics. A flurry of recent papers in scientific and
whereas neuroscience ignores the economic goals that
economic by Caltech Managerial decision Economics
ultimately guide our decisions. These two approaches
Professor Colin Camerer shows how researchers are
have recently been integrated in the hybrid field of
using neural basis of decision-making to develop new
Managerial neuroeconomic decision making.
neuromanagerial decision economic models.
Managerial neuroeconomic decision making attempts to
unify abstract economic variables with neuroanatomical, Neuroeconomic decision making has always relied on a
and thus understand physical mechanisms by which our careful modeling of decision-makers. They are described
brains make decisions. by utility functions that represent their goals, and they
interact at (Nash) balance. Nevertheless, discrepancies
The basic premise is that somewhere along sensory-
between theoretical predictions and observed behaviour
motor circuits are the neural substrates that represent
have haunted the field for many decades. The objective
value and probability. These areas must interact and
of neuroeconomic theory is to build models based on
influence flow of information along the circuit, thereby
evidence from brain sciences, such as experimental
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
27
FMU Journal of Management
________________________________________________________________________________________________

neuroeconomic decision making, but also other fields in can help uncover the true motivations for the wrong
neuroscience and neurobiology. Measurement of brain decisions and improve the predictive power of the
activity provides information about the underlying theory. Behavioural theories that explanation for biases
mechanisms used by the brain during decision in judgment build on specific models of preferences
processes. In particular, it shows which brain regions are over beliefs or non-Bayesian updating processes. Rather
activated when a decision is made and how these regions than guessing a cause for biases, neuroeconomic theory
interact with each other. This information can then be builds a model based on the existing physiological
used to build a model that represents this particular properties underlying learning and belief formation. In
mechanism. Contrary to behavioural neuroeconomic principle, this can help pinpoint biological foundations
decision making, the model does not rely on for anomalous decisions. For example, research in
introspection or plausible assumptions but rather on an neurobiology demonstrates that the brain cannot encode
existing and documented biological property of the all the information contained in a signal. A decision is
brain. triggered when enough information supporting one
alternative is obtained, and the brain uses a variety of
Deciphering brain - environment transactions requires
biological mechanisms to filter information in a
mechanistic understandings of neurobiological processes
constrained optimal way. In a recent paper we show that
that implement value-dependent decision-making. There
these properties of the brain result in a behavioural
is a crucial difference between thinking about thinking
tendency to confirm initial priors (Brocas and Carrillo;
and actually enhancing brain and mental processes by
2009).
developing latent potential of each individual.
Theoretical explanations posit that human brain As a result, field raises questions that require the
accomplishes this through a series of neural engagement of several fields, as investigators must
computations, in which expected future reward of parse out and quantify all the different aspects of
different decision options are compared with one thinking that seem to happen simultaneously in order to
another and then option with highest expected value is literally make headway into perceptive the physical
selected. If human brain is often compared with underpinning for making decisions. The field is still in
computer, one aspect is crucially missing. Humans its infancy, but one of the driving forces behind the field
define goals for information processing in computers, now is to try to understand more exactly what are the
whereas goals for biological brains are determined by computations performed in different brain areas, and
need for survival in uncertain and competitive how they are similar or different. Also how do they
environments. How to handle brains behind businesses communicate with each other and how is information
in age of dramatic alter and growing uncertainty? What transformed as it moves around in brain. How do these
then are the coherent brain dynamics underlying different representations about important variables for
prediction, control and decision-making? To cope with decision making come together and allow you to form a
this mismatch, behavioural economists have developed decision? (Kavli Foundation; 2011)
new theories of decision-making that are a better fit for
Quantification of choice has been a major area of
the behavioural data than traditional models. The
research for neuro scientists for several decades. This is,
methodology consists in building models to demonstrate
in part, due to the discovery of the Matching Law that
the relationship between cause (preference for particular
stipulates that relative response rate on concurrently
object) and behavioural anomaly. This line of research
available substitutes match the available relative
formulates possible explanations for behavioural data,
reinforcement rates. This theoretical construct has been
but it is nevertheless subject to shortcomings. Often the
developed to describe response allocation in more
cause is not observable, and there is no evidence of the
obscure situations. Manager often fail to design
relationship provided by the model. Most notably,
rational decisions. Economics agents are subject to
freedom provided by introspection method leads to
multiple biases that affect the way they perceive events,
model selection problem. Also, cause of behavioural
act upon them and learn from experience. These
anomaly may simply lie elsewhere.
behaviours cannot be ignored since they have disastrous
The methodology used in neuroeconomic theory has two consequences for organisations. When faced with
advantages. Primarily, evidence from the brain sciences obscure decision, managers engage in simplifying
provides precise guidelines for the constraints that strategies. Adaptive decision making in real-World
should be imposed on decision-making processes. This contexts relies on strategic simplifications of decision
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
28
FMU Journal of Management
________________________________________________________________________________________________

problems. Yet, neural mechanisms that shape these economics model of expected utility. Neuro-multiple-
strategies and their implementation remain largely schemes approach to decision-making, in turn,
unknown. Although we now know much about how influences economics, a perspective strongly rooted in
brain encodes exact decision factors, much less is known organisational psychology and neuroscience. Integration
about how brain selects among multiple strategies for of these approaches and methodologies offers exciting
managing computational demands of obscure decision- potential for construction of near-accurate models of
making task. Expansion of neuroeconomics parallels decision-making (Satpathy; 2014).
development of cognitive science (Satpathy;2015).
Among the gargantuan questions are; How do neurons
Neuroeconomics has bridged the contrasting fields of code emotional weight of experiencesdo some
economics and psychology. Economics, psychology, neurons only become active in response to negative
and neuroscience are converging today into a single, experiences while other neurons only fire when we
unified discipline with the ultimate aim of providing a experience something favorably? How do neurons code
single, general conjecture of managerial behaviour. This the numerical value of various optionsdo more or
is the emerging field of Neuroeconomics in which different neurons fire for an option with bigger rewards
consilience, accordance of two or more inductions than that for a lesser reward? How does the coding for
drawn from different groups of phenomena, seems to be rewards that you receive immediately differ from that of
operating. Economists and psychologists are providing rewards that are delayed? How do the far-flung different
rich conceptual tools for perceptive and modeling parts of the brain that govern decision-making
behaviour, while neurobiologists endow with tools for coordinate their activity when making a decision? What
study of mechanism. The goal of this discipline is thus triggers a decision? Is it cumulative buildup of firing
to understand the processes that connect sensation and neurons that tip balance to final choice? How do we
action by revealing the neurobiological mechanisms by alter decision-making rules when we encounter new
which decisions are made. Such union is almost information that makes those rules obsolete? (Satpathy;
exclusively attributable to changes within economics. 2015).
Neuroeconomics has inspired change because important
General implications of neuro (managerial)
findings have posed more of a challenge to standard
management?
economic perspective. The important source of
inspiration for neuro economist has been neuro New brain imaging technologies have motivated
judgment research, which can, in turn, be seen as an neuromanagement studies of internal order of the mind
amalgamation of ideas from cognitive science and and its links within spectrum of human managerial
economics. Neuroeconomics has primarily challenged choices from managerial choice making among fixed
customary economics postulation that decision-making gambles to managerial choice making mediated by
is a unitary process a simple matter of integrated and market and other institutional rules. We are only at the
coherent utility maximization suggesting instead that it beginning of the enterprise, but its promise suggests a
is driven by interaction between automatic and fundamental change in how we think, observe and
controlled processes (Satpathy;2015). model managerial choice in all its contexts (Smith;
2002). Neuroscience and social science have
What do brain scans really tell us? What are the
witnessed tremendous advance in
practical implications of this research? Despite
Neuroeconomics and Neuromanagement since the
substantial advances, question of how we design and
birth of these interdisciplinary fields at the turn
how we ought to craft judgments and decisions has
of the century.
engaged researchers for decades, with different
disciplines approaching the problem through Managerial choice neuroscience offers a novel approach
characteristically different techniques. However, to the study of both individual and interactive
neuroeconomics decision making has recently emerged managerial choicemaking by combining the methods of
as an inter-disciplinary effort to bridge this gap. It has behavioral experiments, functional neuroimaging, and
sought to integrate ideas from fields of organisational formal management models. Use of this methodology
psychology, neuroscience and neuroeconomics in an has the potential to advance our knowledge of existing
effort to specify accurate models of choice and decision. theoretical accounts of how people make managerial
Research investigates neural bases of decision choices and judgments by informing and constraining
predictability and value, central parameters in these models based on the underlying neurobiology.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
29
FMU Journal of Management
________________________________________________________________________________________________

Examining sophisticated high-level behavior at a neural affective as well as cognitive processes involved? Can
level, such as deciding on how much risk to take with an the Managerial neuro - economic present rewrite the
investment or deciding on a strategy when playing a Managerial neuro - economic past? What are the
competitive game with an opponent, can provide implications of memory-dependence for modeling and
important clues as to the fundamental mechanisms by policy-making? Is there place for emergence in
which managerial choice making operates. Despite Managerial neuro - economical explanations; in
substantial advances, the question of how we make particular, how does one take into explanation
managerial choices and judgments continues to pose downward causality? Is psychology indispensable for
important challenges for scientific research. understanding of Managerial neuro - economical
phenomena? What can and cannot one expect of
How can we leverage our brain in business? How can
mathematical modeling in Managerial neuro -
we capitalise / invest on the brain? How can we make
Economics? Does Managerial neuro - Economics have
the best decision? How can we find the productivity hot
an ontologically sound domain? How dissimilar are
buttons in the brain? How can we encourage creative
biological systems and Managerial neuro - economical
and ethical brain? What is the nature of explanation in
ones? Is an analysis of various notions of rationality
Managerial neuro - Economics? What information about
(including bounded rationality) still important, and if so,
the past is relevant to Managerial neuro - economic
why? What is bounded rationality? A complete answer
decision making? What past experiences cannot be
to this question cannot be given at the present state of
unlearned in view of subsequent developments? How
the art. However, empirical findings put limits to the
does experience influence our decisions? What kinds of
concept and indicate in which direction further inquiry
experiences would produce better decisions and better
should go. What has philosophy of Managerial neuro -
adaptation? How does experience transfer to new
Economics to say about the present crisis? What has
situations? What learning processes take place during
philosophy to offer the methodology of behavioural
sampling and repeated consequential decisions? How do
Managerial neuro - Economics and neuromanagerial
these processes alter when decisions are interrelated
economics?
over time? When feedbacks are delayed? When
decisions are time-dependent? How do we address Some managerial behaviors patently fail to achieve the
consequential and sampling decisions when the goals of the organisation in which they are performed,
environment is dynamic? When it involves other leading often to the downfall of the managers who are
individuals? What learning processes take place during responsible for them and sometimes to the failure of the
sampling and repeated consequential decisions? How do entire organisation in which they
these processes alter when decisions are interrelated arise. Neuromanagement has bridged management and
over time? When feedbacks are delayed? When psychology. It challenges standard management
decisions are time-dependent? How do we address assumption that decision-making is a unitary process-a
consequential and sampling decisions when the simple matter of integrated and coherent utility
environment is dynamic? When it involves other maximization. The goal is a mathematical theory of how
individuals? How do Managers make decisions in brain implements decisions that is tied to behaviour.
dynamic stock management tasks? How do Managers This theory is likely to show some decisions for which
perceive accumulation over time? Why do Managers rational - decision making is a good approximation
perform so poorly at control tasks? How can judgments (particularly for evolutionarily sculpted or highly
of accumulation be improved? What are the effects of learned decision makings), provide deeper level of
feedback complexity and feedback delays? How are distinction among competing alternatives and provide
theories represented in computational models? How can empirical inspiration to incorporate nuanced ideas about
we validate and test theories/hypotheses with endogeneity of preferences, individual difference,
computational models? What is the value of using video emotions and endogenous regulation. Researches
games and simulations in behavioural decision research? investigate central parameters viz. neural bases of
How can we best present, measure, and analyse data on decision predictability and value in theory of expected
human learning? How do Managers make inferences utility.
from numbers? How do Managers process logic
The key question is what level of management is likely
representations of data relationships? Is the
to be involved in each decision type? This starts with the
representation of the past in any sense rational? Are
premise that most basic decisions (in form of decision
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
30
FMU Journal of Management
________________________________________________________________________________________________

makings or effort allocation) can be traced back in Conclusion: Real-world problems are often
structure of macro-scale brain activity, as measured with complicated. Psychological scientists have been
modern neuroimaging apparatus. Typically, such interested in how people make decisions for several
responses involve regions in brain whose precise decades, but philosophers and economists have been
function depends upon specific task the brain is solving. studying decision making for centuries. Highlighting
This context-dependency expresses itself through areas of overlap between cognitive modeling and multi-
(induced) specific plasticity of networks, in parallel to attribute judgment will stimulate further cross-
tonic changes in neuromodulatory activity. In turn, this fertilization and inspire research examining the
reconfiguration networks subtends learning and yield boundary conditions of various models. Deciphering
(mal) adaptive behaviour. In other words, it is very brain - environment transactions requires mechanistic
likely that goal-directed behaviour emerges from understandings of neurobiological processes that
interactions that shape spatio - temporal dynamics of implement value-dependent organisational decision-
macro-scale brain networks (Satpathy; 2015). This making. There is a crucial difference between thinking
means that understanding mechanics of multimodal about thinking and actually enhancing brain and mental
observation of brain activity (electrophysiology, fMRI) processes by developing latent potential of each
and neuro measurements (explicit decision makings, individual. Theoretical accounts posit that human brain
reaction times, autonomic arousal signals, grip force) accomplishes this through a series of neural
poses exciting challenge of quantitatively relating computations, in which expected future reward of
information processing to brain effective connectivity. different organisational decision options are compared
with one another and then option with highest expected
Decision usually involves three steps: recognition of a
value is selected. If human brain is often compared with
need, dissatisfaction within oneself (void or need),
computer, one aspect is crucially missing. Humans
decision to change (fill void or need) and conscious
define goals for information processing in computers,
dedication to implement the decision. How are decisions
whereas goals for biological brains are determined by
carried out in brain? Do we interpret research findings
need for survival in uncertain and competitive
when neurological results conflict with self-report?
environments. How to handle brains behind businesses
What are the general implications of neuro
in age of dramatic change and growing uncertainty?
management? Central argument is that decision-making
What then are the coherent brain dynamics underlying
is at core of all managerial functions and future of any
prediction, control and organisational decision-making?
organisation lies on vital decisions made. However,
there are certain critical issues coupled with factors such Organisational cognitive neuroscience is a brave new
as uncertainties, multiple objectives, interactive World of research opportunities. Neuroimaging has
complexity and anxiety make decision-making process attracted most concerns from those critical of
difficult. At times when making a decision is complex or neuroscientific research in business and other fields.
there are many interests at stake, then we realize the Organisational cognitive neuroscience research has
need for strategic decision-making. Questions include; made a number of inroads into understanding economic
how to choose in tough situations where stakes are high decision-making .There is growing interest in exploring
and there are multiple conflicting objectives? How the potential links between human biology and
should we plan? How can we deal with risks and management and organisation studies, which is bringing
uncertainties involved in a decision? How can we create greater attention to bear on the place of mental processes
options that are better than ones originally available? in explaining human behaviour and effectiveness. This
How can we become better decision makers? What represents a multidisciplinary and multi-method
resources will be invested in decision - making? What approach to the conceptualization of management and
are the potential responses to a particular problem or organisations. In keeping with the methods dominance,
opportunity? Who will make this decision? Every there is a focus on particular concerns when conducting
prospective action has strengths and weaknesses; how neuroimaging work, and especially functional magnetic
should they be evaluated? How will they decide? Which resonance neuroimaging (fMRI) based research. While
of the things that could happen would happen? How can much of the above discussion covered issues that are of
we ensure decision will be carried out? These questions particular concern to fMRI and other neuroimaging
are crucial for understanding complex human research methods, studies that which use alternative
behaviours (Satpathy; 2015). research methods possess their own unique caveats.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
31
FMU Journal of Management
________________________________________________________________________________________________

REFERENCES The Endless Pursuit of Winning in the VUCA


Environment, KIIT School of Management, January
[1] Satpathy, J. (2012). Neuro - Economic Actors in 30- 31, 2015, Bhubaneswar, India.
Organisational Decision Making: An Anthology,
Proceedings of National Conferenceon Perspectives on [10] Satpathy, J., Mohapatra, B.B. and Sturman, M. (2015).
Employment Relations, Dated December 22 - 23, Managerial Neuro - Choice Mechanism,
Berhampur University, India. International Journal on Research and Development: A
Management Review (IJRDMR), Volume: 4 Issue: 1,
[2] Satpathy, J. (2013). Issues in Neuro - Management ISSN (Print): 2321- 5747, Bhubaneswar, India.
Decision Making, International Journal of Business
Management, Vol.2, Issue. 2, December 2012. ISSN: [11] Satpathy, J. (2015). Neuro - Perspective In
2231 - 5470, India. Managerial Decision - Making Efficacy,
International Journal of Multidisciplinary and
[3] Satpathy, J. and Datta, T. (2014). Contributions to Academic Research (SSIJMAR) Vol. 4, No. 3, June,
Neuro - Decision Computational Modeling, 41st (ISSN 2278 - 5973), India.
Annual Conference of Orissa Mathematical Society
and International Conference on Industrial [12] Satpathy, J. (2015). Neuro - Underpinnings in
Mathematics and Scientific Computing, No. Managerial Decision Modeling, ITIHAS - The
ICIMSC14/OMS41/06, 4th and 5th January 2014, Journal of Indian Management, ISSN 2249 - 7803,
Department of Mathematics, School of Applied Vol. 5, No. IV, Forthcoming, Oct- Dec 2015,
Sciences, KIIT University, Bhubaneswar, India. Hyderabad (India).

[4] Satpathy, J., Mishra, S. and Mahapatra, B. B. (2014). [13] Satpathy, J. Theoretical Challenges in Neuro-
Neuro - Perspectives in Sustainable Progression, Decision Making, www.oppapers.com, 17 Sep 2012,
Proceedings of UGC Sponsored National Seminar on California, USA.
Management Practices and Sustainable Development, [14] Satpathy, J, Some Paradoxical Issues in
23 - 24 March, F M University, Balasore, Odisha, Neuromanagement of Decision - Making,
India. www.oppapers.com, 22 May 2012, California, USA.
[5] Tiwari, P., Satpathy, J. and Mishra, S. (2014). [15] Satpathy, J. (2013). Reflections on Neuro-
Cognitive Paths in Techno - Managerial Absenteeism Decision Computational Modeling,
Continuum: Some Human Resource Perspectives, SSRN: Abstract: 2363740, (December 5, 2013),
Proceedings of UGC - Sponsored National Seminar on Philosophy of Mind Journal, December 27, USA.
Management Practices and Sustainable Development,
23 24 March, F M University, Balasore, Odisha, [16] Satpathy, J. (2014). Dynamics Of Neuroeconomics
India. Decision - Making, SSRN: Abstract: 2509585,
(October 10, 2014), USA.
[6] Satpathy, J., Mishra, S. and Rath, B. P. (2014).
Explorations in Neuro - Decision Making, Odisha [17] Satpathy, J. and Satpathy, B.N. (2015). Neuro - Based
Journal of Social Science, Vol. I (1), Pp: 101 - 111, Decision Making Archetype in Bhagwad Gita,
Odisha, India. SSRN: Abstract: 2546230, (January 07, 2015), USA.

[7] Satpathy, J. and Mishra, S. (2014). Paradigm [18] Satpathy, J. and Mishra, S. (2015). Commentary on
Tectonics in Neuro - Choice Making, 3rd Neuro- Economic Modeling, SSRN - Abstract:
International Conference on Managing Human 2623023, (June 25), Neuroeconomics eJournals, July
Resources at the Workplace, 05 and 06 December, 01, USA.
Mysore, India. [19] Satpathy, J and Mishra, B.P. (2015). Inquiry into
[8] Mishra, S. and Satpathy, J. (2014). Reflections On Neuro- Managerial Decision Making (A Web Based
Neuropsychological - Decision Making , 3rd Anthology), SSRN - Abstract: 2625977, (July, 02,
International Conference on Managing Human 2015), USA.
Resources at the Workplace, 05 and 06 December, [20] Satpathy, J (2015). Neuro - Underpinnings in
Mysore, India. Managerial Decision Modeling, SSRN - Abstract:
[9] Satpathy, J. (2015). Anthology on Managerial Neuro 2638258, (July 31, 2015), USA.
- Decision VUCA Architecture, Proceedings of
KSOMs 8th National Management Convention on

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
32
FMU Journal of Management
________________________________________________________________________________________________

An Analysis of Employees Engagement in Selected Corporate


Enterprises in India
Dr. Kamini
Assistant Professor, Faculty of Commerce, Jamshedpur Womens College, Jamshedpur.
Email:drkamini08@gmail.com

Abstract : Employee Engagement is hot topic of discussion productivity. It is only an engaged employee who is
among the researchers, practitioners, and corporate intellectually and emotionally bound with the
enterprises and is proved that it is positively correlated organization, feels passionately about its goals and is
with the organizational performance. In this paper committed towards its values who can be termed thus.
employee engagement is evaluated of north India and is
He goes the extra mile beyond the basic job
correlated with different demographic factor. Employee
engagement is a vast construct that touches almost all parts responsibility and is associated with the actions that
of human resource management facets we know hitherto. drive the business. Moreover, in times of diminishing
If every part of human resources is not addressed in loyalty, employee engagement is a powerful retention
appropriate manner, employees fail to fully engage strategy. The fact that it has a strong impact on the
themselves in their job in the response to such kind of bottom-line adds to its significance. A successful
mismanagement. The construct employee engagement is employee engagement helps create a community at the
built on the foundation of earlier concepts like job workplace and not just a workforce. As organizations
satisfaction, employee commitment and Organizational globalize and become more dependent on technology in
citizenship behaviour. Though it is related to and
a virtual working environment, there is a greater need to
encompasses these concepts, employee engagement is
broader in scope. connect and engage with employees to provide them
with an organizational identity.
I. INTRODUCTION
Especially in Indian culture this becomes more relevant
Human resource executives in India continue to struggle given the community feeling which organization provide
with talent management issues, particularly retention. in our society. There are a lot of HR things. They are
The quest to find the best way to retain employees has called fads. Those are the bandwagons upon which we
taken HR pundits through concepts such as employee hop. Perhaps its time to evaluate whether employee
review, employee satisfaction and employees delight. engagement is a fad or a new knowledge domain for
The latest idea is Employee Engagement, a concept which HR executives can help make their companies a
that holds, that, it is the degree to which an employee is better place to work.
emotionally bonded to his organization and passionate
Drivers of Employee Engagement
about his work that really matters. Engagement is about
motivating employees to do their best. An engaged Many researches have tried to identify factors leading to
employee gives his company his hundred percent. The employee engagement and developed models to draw
quality of output and competitive advantage of a implications for managers. Their diagnosis aims to
company depends upon the quality of its people. It has determine the drivers that will increase employee
been proved that there is an intrinsic link between engagement level.
employee engagement, customer loyalty and
According to Penna research report (2007) meaning at
profitability. When employees are effectively and
work has the potential to be valuable way of bringing
positively engaged with their organization they form an
employers and employees closer together to the benefit
emotional connection with the company. This impacts
of both where employees experience a sense of
their attitude towards the companys clients, and thereby
community, the space to be themselves and the
improves customer satisfaction and service levels. Most
opportunity to make a contribution, they find meaning.
organizations realize today that a satisfied employee is
Employees want to work in the organizations in which
not necessarily the best employee in terms of loyalty and
they find meaning at work. Penna (2007) researchers
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
33
FMU Journal of Management
________________________________________________________________________________________________

have also come up with a new model they called communication is the top priority to lead employees to
Hierarchy of engagement which resembles Maslows engagement. The report singles out having the
need hierarchy model. In the bottom line there are basic opportunity to feed their views and opinions upwards as
needs of pay and benefits. Once an employee satisfied the most important driver of peoples engagement. The
these needs, then the employee looks to development report also identifies the importance of being kept
opportunities, the possibility for promotion and then informed about what is going on in the organization.
leadership style will be introduced to the mix in the
Effects of Employee Engagement in Organizational
model. Finally, when all the above cited lower level
Performance
aspirations have been satisfied the employee looks to an
alignment of value-meaning, which is displayed by a Why should companies invest in employee engagement?
true sense of connection, a common purpose and a The answer is because employee engagement is
shared sense of meaning at work. interwoven significantly with important business
outcomes. In this part we will see how employee
The Blessing White (2006) study has found that almost
engagement impacts organizational performance in the
two thirds (60%) of the surveyed employees want more
light of various research works done.
opportunities to grow forward to remain satisfied in their
jobs. Strong manager-employee relationship is a crucial Studies have found positive relationship between
ingredient in the employee engagement and retention employee engagement and organizational performance
formula. outcomes: employee retention, productivity,
profitability, customer loyalty and safety. Researches
Development Dimensions International (DDI, 2005)
also indicate that the more engaged employees are, the
states that a manager must do five things to create a
more likely their employer is to exceed the industry
highly engaged workforce. They are:
average in its revenue growth. Employee engagement is
Align efforts with strategy found to be higher in double-digit growth companies.
Research also indicates that engagement is positively
Empower
related to customer satisfaction (Coffman, 2000; Ellis
Promote and encourage teamwork and and Sorensen, 2007; Towers Perrin Talent Report, 2003;
collaboration Hewitt Associates, 2004; Heintzman and Marson, 2005;
Coffman and Gonzalez-Molina, 2002).
Help people grow and develop
Engaged employee consistently demonstrates three
Provide support and recognition where general behaviours which improve organizational
appropriate performance:
The Towers Perrin Talent Report (2003) identifies the
Say-the employee advocates for the organization to
top ten work place attributes which will result in
co-workers, and refers potential employees and
employee engagement. The top three among the ten
customers
drivers listed by Perrin are: Senior managements
interest inemployees well-being, Challenging work and Stay-the employee has an intense desire to be a
Decision making authority. member of the organization despite opportunities
to work elsewhere
After surveying 10,000 NHS employees in Great
Britain, Institute of Employment Studies (Robinson et Strive-the employee exerts extra time, effort and
al., 2004) points out that the key driver of employee initiative to contribute to the success of the
engagement is a sense of feeling valued and involved, business ( Baumruk and Gorman, 2006)
which has the components such as involvement in
What will happen to an organization if its employees are
decision making, the extent to which employees feel
disengaged? Employees who are not engaged are likely
able to voice their ideas, the opportunities employees
to be spinning (wasting their effort and talent on tasks
have to develop their jobs and the extent to which the
that may not matter much), settling (certainly do not
organization is concerned for employees health and
show full commitment, not dissatisfied enough to make
well-being.
a break) and splitting (they are not sticking around for
CIPD (2006) on the basis of its survey of 2000 things to change in their organization), have far more
employees from across Great Britain indicates that misgivings about their organization in terms of
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
34
FMU Journal of Management
________________________________________________________________________________________________

performance measures such as customer satisfaction Start it from the top: Employee engagement requires
(Blessing White, 2006; Perrin Report, 2003). Meere leadership commitment through establishing clear
(2005) based on the survey conducted by ISR on 360000 mission, vision and values. Unless the people at the top
employees from 41 companies in the worlds 10 believe in it, own it, pass it down to managers and
economically strong countries finds that both operating employees, and enhance their leadership, employee
margin and net profit margins reduced over a three year engagement will never be more than just a corporate
period in companies with low engagement, while these fad or another HR thing. Employee engagement does
measures increased over the specified period in not need lip-service rather dedicated heart and action-
companies with high levels of engagement. oriented service from top management. It requires
Leading by Being example
Financial News, March 2001, as cited by Accord
Management Systems (2004), reveals that disengaged Enhance employee engagement through two-way
employees are more likely to cost their organization. communication: Managers should promote two-way
According to the report, Employees who are disengaged: communication. Employees are not sets of pots to which
you pour out your ideas without giving them a chance to
Miss an average of 3.5 more days per year
have a say on issues that matter to their job and life.
Are less productive Clear and consistent communication of what is expected
of them paves the way for engaged workforce. Involve
Cost the US economy your people and always show respect to their input.
Employee Engagement Strategies Share power with your employees through participative
decision making so that they would feel sense of
So far we have discussed the evolution and definition of belongingness thereby increasing their engagement in
employee engagement, the factors that affect it and realizing it.
importance of employee engagement explaining how it
is linked to business performance. Now, at this stage any Give satisfactory opportunities for development and
inquisitive reader may ask a question: So what? advancement: Encourage independent thinking through
Employee engagement strategies listed below answer giving them more job autonomy so that employees will
this question. In order to have engaged employees in any have a chance to make their own freedom of choosing
organization, managers need to look at the following ten their own best way of doing their job so long as they are
points. We can call these points tablets because it is producing the expected result. Manage through results
believed that they will cure employee disengagement rather than trying to manage all the processes by which
diseases. Take these ten tablets: that result is achieved.
Start it on day one: Most organizations do have clear Ensure that employees have every thing they need to
new talent acquisition strategies. However, theylack do their jobs: Managers are expected to make sure that
employee retention strategies. Effective recruitment and employees have all the resources such as physical or
orientation programs are the first building blocks to be material, financial and information resources in order to
laid on the first day of the new employee. Managers effectively do their job.
should be careful in pooling out the potential talent of Give employees appropriate training: Help employees
the new employee through effective recruitment. The
update themselves increasing their knowledge and skills
newly hired employee should be given both general
through giving appropriate trainings. Generally it is
orientation which is related to the company mission,
understood that when employees get to know more
vision, values, policies and procedures and job-specific about their job, their confidence increases there by being
orientation such as his/her job duties, and able to work without much supervision from their
responsibilities, goals and current priorities of the
immediate managers which in turn builds their self-
department to which the employee belongs in order to
efficacy and commitment.
enable him/her to develop realistic job expectations and
reduce role conflict that might arise in the future. After Have strong feedback system: Companies should
the hiring decision is made, the manager has to ensure develop a performance management system which holds
role-talent fit when placing an employee in a certain managers and employees accountable for the level of
position and exert all managerial efforts needed to retain engagement they have shown. Conducting regular
that talent in the organization. survey of employee engagement level helps make out

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
35
FMU Journal of Management
________________________________________________________________________________________________

factors that make employees engaged. After finalizing Benefits of Engagements of Employees
the survey, it is advisable to determine all the factors
Employee engagement and psychological well-being are
that driving engagement in the organization, then narrow
different but related constructs. It has been proved by
down the list of factors to focus on two or three areas. It
the research that the engagement of employees is the
is important that organizations begin with a
result of psychological well-being.
concentration on the factors that will make the most
difference to the employees and put energy around As per Ivan T. Robertson etal, it should now be clear
improving these areas as it may be difficult to address that psychological well-being is important for
all factors at once. Managers should be behind such employees. In fact it may be even more important for
survey results and develop action-oriented plans that are employers and organizations. Explaining the reasons he
specific, measurable, and accountable and time- bound. said, people with higher levels of psychological well-
being learn and problem solve more effectively, are
Incentives have a part to play: Managers should work
more enthusiastic about change, related to others more
out both financial and non-financial benefits for
positively, and accept change for rapidly. It is difficult to
employees who show more engagement in their jobs.
think of another set of characteristics, apart from job-
Several management theories have indicated that when
specific skills that are more important to an
employees get more pay, recognition and praise, they
organizations success.
tend to exert more effort into their job. There should be
a clear link between performance and incentives given As cited by J. Bhatnagar and Soumendu Biswas, more
to the employees. recently employee engagement has been related to
building a firms competitive advantage. Employee
Build a distinctive corporate culture: Companies
engagement in fact can make or break the business
should promote a strong work culture in which the goals
bottom line(Lockwood 2006), Martel (2003:30,42) is of
and values of managers are aligned across all work
the opinion that in order to obtain high performance in
sections. Companies that build a culture of mutual
post industrial, intangible work that demands
respect by keeping success stories alive will not only
innovation, flexibility, and speed, employers needs to
keep their existing employees engaged but also they
engage their employees. They say that objectives are
baptize the new incoming employees with this
more easily met when employee are engaged are more
contagious spirit of work culture.
likely to fall short when they are not. They further said
Focus on top-performing employees: A study that in a study they proposed linkage between firm
conducted by Watson Wyatt Worldwide in 2004/05 performance and employee engagement, but in a reserve
onHR practices of 50 large USA firms shows that high- feedback loop. This entails that those firms which are
performing organizations are focusing on engaging their financially robust will have a higher employee
top-performing employees. According to the finding of engagement score.
the same research, what high-performing firms are doing
The above studies reveal that performance and financial
is what top-performing employees are asking for and
status of an organisation is directly related to the
this reduces the turnover of high-performing employees
engagement of employees of that organisation. The
and as a result leads to top business performance. Note
practitioner and academics tend to agree that the
that there is lack of sufficient literature on what could be
consequences of employee engagement are positive
the challenges that entangle with leaders effort to
(Saks 2006).From the above discussion it is clear that
improve their employee engagement scores. Most
employee engagement is sought field of researches and
researches on the area focus on identifying the drivers or
practitioners for the benefits of employees and
factors leading to engagement; however, failing to
employers. The practitioners and consultancies have
indicate clearly articulated strategies to get employees
given long list and data of benefits of this construct and
engaged in their work. The suggested strategies will
researchers also in favour of practice and for further
definitely have financial implications on organizations.
research of this construct.
However, researches do not lucidly show the cost of
efforts aimed at increasing employee engagement. II. METHODOLOGY:
During this study 220 Employees of different selected
Enterprises of Jharkhand, Bangal, and Madhya Pradesh
was surveyed with Systematic Random Sampling. Three
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
36
FMU Journal of Management
________________________________________________________________________________________________

Percent of large scale companies were selected of scale or not; Karl Pearson Correlation used to
randomly from the CII directory of the north region measure the strength of association between two
2013. To analyse Employees Engagement UWES 17, variables; Mann Whitney Test-2 group is to test
Developed by Wilmar B. Schaufeli is used. For analysis, statistics to compare the two group on same set of
Percentage Distribution Tables are used to listing the responses available from the respondents and Kruskal
percentage of respondents selecting each response Wallis Test-3 or more Groups : to test statistics to
category or scale point; Chi Square Test of compare the three or more groups on same set of
Homogeneity used to analyze weather there were equal responses available from the respondents.
distribution responses from the respondent on all level
III. RESULT OF ANALYSIS
Table 1: percentage Distribution of the Respondents on 7-point Scale Question Regarding Employees Engagement
Factor of Vigor, Dedication & Absorption Practiced in the Selected Organisations
Q No. N AN R S O VO AW 2test
2 1.8 1.4 2.7 13.2 19.1 27.2 34.1 162.20*
5 0.0 0.9 3.6 12.3 17.7 27.3 38.2 133.83*
7 0.9 0.5 8.2 9.1 22.3 21.8 37.3 166.84*
Vigor 10 0.5 2.7 4.1 15.0 19.1 25.5 33.2 143.87*
13 0.0 1.4 4.5 9.5 23.2 32.3 29.1 115.12*
15 0.0 0.9 3.6 5.9 25.5 28.2 35.9 147.03
1 0.5 0.5 3.2 9.1 22.7 23.6 40.5 211.96*
4 0.5 0.9 3.2 11.8 16.8 22.3 44.5 228.96*
Dedication 8 0.5 0.9 5.9 10.0 18.6 22.3 41.8 200.12*
12 0.9 0.9 3.6 9.5 17.7 22.3 45.0 232.96*
17 0.9 0.9 3.2 15.0 20.9 20.9 38.2 175.62*
3 0.0 1.8 4.1 11.4 15.0 28.2 39.5 140.65*
6 2.3 2.3 5.5 10.5 21.8 25.9 31.8 135.60*
Absorption 9 0.0 0.5 2.7 9.5 14.5 27.3 45.9 196.23*
11 0.5 0.9 2.3 12.3 20.0 28.6 33.5 185.61*
14 0.9 1.4 6.4 12.3 24.5 27.3 27.3 131.71*
Absorption 16 1.4 1.8 4.5 13.2 25.5 24.1 29.51 134.32*
N: Never, AN: Almost Never, R: Rarely, S: Sometimes, O: Often, VO: Very Often & AW: Always
*the value of the chi square were significant at 5% level of significance

Vigor Dedication
For the statement of Vigor, 89.7% respondent believe On the statement of Dedication, 86.8% believe that
that they were regularly preserving at their work even they find the work they do full of meaning and purpose
when things were not going well while 84.6% feel they while 85.0% nts feel they were proud of the work they
were very resilient, mentally their work. On the issue do. On the issue feel enthusiastic regarding their job,
regarding feel strong and vigorous at work 83.2% feel 83.6% stated in range of often while 82.7% respondents
often, 81.4% thought that they frequently think up of surveyed were of thoughts that they their job inspires
going to the office when they get up in the morning them. Similarly, on the issue of my job is challenging
Similarly, on the issue of at my work I feel bursting with for me. 80.0% of the respondents surveyed were
energy, 80.9% of the respondents were thinking it quite thinking it quite often.
often on another issue I cannot continue working for
Absorption
very long period at time, 77.8% quite frequently.
On the statement of Absorption, 87.7% believed that
they feel hungry when they work intensely while 82.7%
feel time flies when they work. On the issue feel
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
37
FMU Journal of Management
________________________________________________________________________________________________

immersed at work, 82.1% of the respondents stated tin Table 3: Mann Whitney Test Analysis of the Average Score
range of often while 79.5% respondents surveyed were of Employees Engagement Factors of Respondents
of thoughts that they frequently think of forgetten According to their Gender & Marital Status
everything around them whenever they work. Similarly, Male Female MW-Test p-value
on the issue of at my work I feel. Bursting with Vigor 4.71 4.68 5175.5 0.938
energy,80.9% of the respondents surveyed were thinking Dedication 4.81 4.84 5201.0 0.984
Absorption 4.68 4.71 4958.0 0.565
it quite often. On another issue regarding I get carried
Married Single MW-Test p-value
away when I am working and Its difficult to detach Vigor 4.81 4.55 5027.0 0.064
myself from my work, 79.1% of the each respondents Dedication 4.97 4.61 4718.0 0.011
surveyed were thinking it quite frequently. The above Absorption 4.77 4.57 5308.5 0.274
analysis of the organisation shows the high score on
There was no significant difference of assessment of
Vigor, Dedication and Absorption. As per Wilmar
employee engagement was present among male and
Schaufeli & Arnold Bakker High sore on vigor depicts
female employees regarding Vigor and Absorption, but
energy, zest and stamina of employees when working.
on dedication there was difference of opinion among
Score high and on dedication strongly identify with their
married and single employees as married employees
work because it is experienced as meaningful, inspiring,
were more dedicated than the single employees.
and challenging. Score high on absorption feel that they
usually are happily engrossed in their work, they feel Table 4: Kruskal-Wallis Test Analysis of the Employees
immersed by their work and have difficulties detaching Engagement Factors Vigor, Scores of the Respondents
from it because it carries them away. Categorized into various Demographic Variables
Mean Score KW-Test p-value
Correlation of Employee Engagement with
Diploma 5.13
Demographic Factors Education
Graduate 4.56 5.21 0.074
Qualification
Followings are the result of correlation with different Post Graduate 4.77
Junior 4.99
demographic factors like age, job experience, gender, Level in
Middle 4.57 8.53* 0.014
marital status, education qualification, level in Organization
Senior 4.83
organisation, type of industry and department: Manufacturing 4.69
Type of Services 4.61
Table 2: Correlation Analysis of Employees 14.03* 0.003
Industry ITES 5.08
Engagement Factors with The Respondents Age and Financial 4.29
In Job Experience HR 4.95
Finance 4.37
Vigor Age In Job Experience Department
Marketing 4.71
9.90 0.078
Correlation -0.039 0.032 Material 4.57
Production 4.63
p-value 0.069 > 0.05 0.635 > 0.05
Customer Care 4.95
Dedication
Correlation 0.019 0.014 Table 5: Kruskal-Wallis Test Analysis of the Employ
p-value 0.779 > 0.05 0.835 > 0.05 Engagement Factor Dedication Scores of the
Absorption Respondents Categorized into Various demographic
Correlation 0.001 0.011 Variables
p-value 0.993 > 0.05 0.867 > 0.05 Mean KW-Test p-value
Score
There were no existences of correlation between the age Diploma 5.44
Education
and employee engagement factors vigor, dedication and Graduate 4.71 7.43* 0.024
Qualification
absorption practiced in their organization and similar Post Graduate 4.85
Junior 5.05
was the results with the job experience of the Level in
Middle 4.70 6.66* 0.036
employees. Thus it was concluded that age and job Organization
Senior 4.99
experience of employees was not effecting its employee Manufacturin
4.86
engagement in the organization. g
Type of
Services 4.64 19.48* 0.0001
Industry
ITES 5.27
Financial 4.17
Department HR 5.02 6.44 0.265
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
38
FMU Journal of Management
________________________________________________________________________________________________

Finance 4.59 female employees regarding vigor and absorption but


Marketing 4.71 married employees were more dedicated then the single
Material 4.70
Production 4.89
employees.
Customer 4. Educational qualification had no effect on the
4.86
Care
vigor and absorption of the employees whereas it
Education qualification had no effect on the vigor, and does effect the dedication as lesser degree employees are
absorption, of the employees whereas it does effect the more dedicated.
dedication as lesser degree employees are more
5. Junior level employees were again more vigor in
dedicated. Junior level employees were also assessed as
nature and dedicated then the other higher ranks
more vigor in nature and dedication then the other
employee.
higher ranks employees but on absorption parameters
they were all same. On similar Pattern ITES employees 6. ITES employee were again more vigor and
were again more vigor in nature and dedicated then the dedicated then the employee of manufacturing,
other employees but on absorption parameters they were services, financial sector.
all same. There was no effect of departments in
organization on the employees engagement V. LIMITATION & SCOPE FOR FUTURE
WORK
Table 6: Kruskal-Wallis Test Analysis of the
Employee Engagement Factor Absorption Scores of We surveyed large scale enterprises of north India; the
the Respondents Categorized into Various inclusion of SSI and other states may change the results.
Demographic Variables There is a lot of scope for further research on
employees engagement in India. This study can be
Mean Score KW-Test p-value
Education Diploma 5.09 4.21 0.121
expanded to other states, sectors and levels of
Qualification Graduate 4.60 employees.
Post Graduate 4.72
Level in Junior 4.85 5.01 0.082 REFERENCES
Organization Middle 4.60 [1] Alen M Saks, (2006). Antecedents and
Senior 4.86
consequences of employee engagement, Journal
Type of Manufacturing 4.65 6.74 0.080
Industry Services
of Managerial psychology, Vol 21 No. 7, 2006pp.
4.71
ITES
600-619. Accord Management Systems. (2004).
4.94
Financial 4.33 Employee Engagement Strategy: A Strategy of
Department HR 4.88 7.14 0.210 Analysis to Move from Employee Satisfaction to
Finance 4.40 Engagement. [Online] Available:
Marketing 4.67 www.accordsyst.com/papers/engagement_wp.pdf
Material 4.60 (March 3, 2009)
Production 4.67
[2] Baumruk R., and Gorman B. (2006). Why
Customer
Care
4.83 managers are crucial to increasing engagement.
Melcrum Publishing. Blessing White. (2006).
IV. FINDINGS Employee Engagement Report 2006 Blessing
White, Inc. Princeton, New Jersey. [Online]
1. As Shown in table 1. The level of employees
Available: www.blessingwhite.com (November
engagement (Vigor, Dedication and Absorption) is good
15, 2008)
in the surveyed organization; about 80% respondents
have good Vigor, Dedication and Absorption. [3] Clifton, James K. (2008). Engaging your
employees: Six keys to understanding the new
2. There were no existences of significant correlation
workplace. 2002 SHRM Foundation Thought
of age and job experience with employee
Leaders Remarks. Society for Human Resource
engagement factor vigor and absorption practiced in
Management.
their organization.
[4] Clifton, James K. (2008). Engaging your
3. There was no significant difference of assessment
employees: Six keys to understanding the new
of employee engagement was present among male and
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
39
FMU Journal of Management
________________________________________________________________________________________________

workplace. 2002 SHRM Foundation Thought [9] Dernovsek D. (2008). Creating highly engaged
Leaders Remarks. Society for Human Resource and committed employee starts at the top and
Management. ends at the bottom line Credit Union Magazine,
May 2008. Credit Union National Association,
[5] Coffman C. (2000). Is Your Company Bleeding
Inc.
Talent? How to become a true employer of
choice. The Gallup Management Journal, 2000. [10] Development Dimensions International. (2005).
The Gallup Organization, Princeton, NJ. (Predicting Employee Engagement MRKSRR12-
1005 Development Dimensions International,
[6] Coffman, C., and Gonzalez-Molina, G. (2002).
Inc., MMV. [Online] Available:
Follow this Path: How the worlds greatest
www.ddiworld.com (October 30, 2008).
organizations drivegrowth by unleashing human
potential. New York Warner Books, Inc. [11] Ellis C. M., and Sorensen A. (2007). Assessing
Employee Engagement: The Key to Improving
[7] Cohen G., and Higgins N. J. (2007). Employee
Productivity. Perspectives, vol .15, Issue 1 The
Engagement: The secret of highly performing
Segal Group, Inc.
organizations.
[8] Journal of Applied Human Capital Management,
Vol 1 Number 2007.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
40
FMU Journal of Management
________________________________________________________________________________________________

BRAND EXPERIENCE AND ITS EFFECT ON BRAND LOYALTY-


AN EMPIRICAL STUDY
Sudipta Kumar Jana
Assistant Professor, Indian Institute for Production Management, Kansbahal, Odisha-770034
Email: sudiptajana82@gmail.com

Abstract : Experiential marketing and brand experience in & Maertens, 2010; Kochhar et al.2006), still there has
particular has attracted a lot of attention among been a lot of potential and prospective. Bosworth &
practioners and academicians as well. In the era of Meurtens (2010) mentioned that the Total Factor
globalization, service brands have to ensure uniqueness of Productivity (TFP) was the highest in the service sector.
the brand. This study aims to investigate the effect of quick
Indias projected economic growth at 7.3 % by 2025
service brand experience on brand loyalty. The present
study has also explored the applicability of brand will drive the countrys total consumption (Mc Kinsey
experience construct in the context quick service & Company; 2007). As per reports, there will be
restaurant brand in India. Data were collected from 215 demand for different types of services but the demand
consumers in Bhubaneswar city of India. Data was for education, healthcare, personal care, hotels and
analysed with help of SPSS and AMOS and research restaurants will be maximum.
methods like confirmatory factor analysis and structural
equation modelling were applied. The results of the present The restaurant industry in India is comprised of both
study revealed that the four factor brand experience unorganized as well as organized sector. In India the
construct was valid as well as reliable. The findings of the restaurant industry is dominated by unorganized sector
present study have strategic importance for marketing which is characterized by road side location and with no
managers as it re-established that the four factors of the technical as well as accounting standards. The organized
brand experience construct have a positive effect on brand sector is characterized by quality control, organized
loyalty. supply chain, accounting transparency, multiple outlets
Key words- Experiential marketing, Brand experience, and dominated by global players. The organized sector
Brand Loyalty, Structural equation modelling is again segmented in to four types namely full service,
quick service restaurants, bars & Lounge and kiosk/cart.
I. INTRODUCTION The full service is further segmented in to fine dining
Services sector in India is the largest contributor to the and casual dining, while the quick service restaurant is
national GDP. The United Nations central product further segmented in to take away, home delivery and
classification (UNCPC) classified the service sector but eat in. Although Indians take pride in eating home food,
India has its own classification and the basic difference but there is an increasing demand for fast food.
is that while construction is not a part of the service The growth in the Quick Service Restaurant (QSR) is
sector in India, it is a part of UNCPC. Since many driven by several factors like expanding middle class,
services are rendered in the unorganized or informal urbanization, youth spending, nuclear families, better
sector, it is difficult to get the exact figure about the logistics, increased income, mall and multiplex boom.
service sector. In the last decade the contribution of The quick service restaurant industry at the same time is
services to Gross Domestic Product (GDP) has also facing different problems like health and hygiene
outweighed the combined contribution of agriculture concern among buyers, localization of menu,
and industry. Different types of services have standardization of products across outlets, ordering
contributed in different ways for the overall growth of service time, talent acquisition, high attrition rate,
the service sector but basically the growth is driven by building a cost effective supply chain, establishing a
telecommunications, financial services along with supply chain in a new region, monitoring quality of
export of Information and Communication Technology products procured from third parties etc. Most of the
(ICT). Although there has been disagreement about the different quick services retailing brands are located near
role of service sector in the generation of jobs (Bosworth the malls, tourist hubs, corporate hubs, shopping centres,
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
41
FMU Journal of Management
________________________________________________________________________________________________

multiplexes, airport, railway station, college and III. METHODOLOGY


Universities with an objective to create an adequate
experience as well as ambience for the success of the As the purpose of the study was to find the applicability
brand. The present study concerns consumer brand of the brand experience concept for quick service
experience with a quick service retailing brand and its restaurant in Indian context, so quantitative approach
effect on brand loyalty. was applied. Also the study emphasizes on the effect of
brand experience on brand loyalty. Brakus et al. (2009)
II. LITERATURE REVIEW brand experience construct comprising of four
dimensions namely sensory, affective, behavioural and
Brand experience has attracted a lot of attention not only
intellectual has been selected for the study. Similarly, to
among the marketing professional but also academicians
study the brand loyalty construct Olivers (1999)
as well. Brakus et al. (2009) in their seminar article
measure has been selected. For the purpose of the
revealed the for deferent factors of brand experience.
present study although 650 number of questionnaires
Experience can entice customers to consume a product
were distributed to customers visiting Pizza hut stores
and service again (Joy & Sherry, 2003) drive customer
but only 515 number of valid responses were used for
satisfaction (Wu and Liang, 2009). Experiential value, in
the study. In the present study convenience sampling
the context of service, and behavioural intentions are
approach was used. A five point Likerts scale was
closely related (Sheih and Cheng, 2007), and can have a
anchored to the questions. In the present study Anderson
positive effect on customer satisfaction (Wu and Liang,
and Gerbing (1988), two step method i.e. measurement
2009). Although Experiential marketing was introduced
model and structural model has been used.
by (Holbrook and Hirschman, 1982) and letter by Pine
& Gilmore, 1999) but was made popular by (Brakus et IV. RESULTS AND DISCUSSION
al., 2009; Zarantonello & Schmitt, 2010). Brand
experience should be delivered as per the commitment A convenience sample of customers over 18 years of age
made to the customer via different communication tools at different Pizza hut stores in Bhubaneswar city of India
(Glatstein,2012) and should be consistent in all the steps were asked to fill up the questionnaires. The sample
of the service delivery process. A brand experience comprised of 53% female respondents followed by 47 %
manual (Fihlo, 2012) can be strategically very helpful male respondents. Similarly, the sample comprised of
for service organizations. Walls et al (2011) in their 57% of respondents who were less than 25 years of age
study on qualitative hotels revealed that physical and revealed that most of the customers visiting Pizza
environment as well as human interaction can drive Hut stores, were very young.
positive brand experience. Developing appropriate In the present study we have used the two-step structural
service personality will give firms and advantages equation modelling process. A measurement model was
position in new service development (Clatworthy, used because it will measure different variables logically
2012). Personality traits have a positive impact and systematically that represents constructs involved in
(Mehmetoglu, 2012) on customer experience. There are a theoretical model. In the measurement model, fit and
many antecedents of brand experience, i.e. convenience, validity is tested. The results of the confirmatory factor
media richness (Min & Dong, 2012), Ease of product analysis and the overall measurement model is Chi
use (Sheng and Teo, 2012). Positive Brand experience square = 160.188 with 109 degrees of freedom and the
can drive consumer-brand relationship (Morgan-Thomas p-value associated with this result is .0063, which is
& Veloutsou, 2011) and also positively impacts brand appropriate for our study.
prestige (Choi et al., 2011).
Hypothesis 1: Sensory dimension of brand experience
has a positive effect on brand loyalty.
Hypothesis 2: Affective dimension of brand experience
has a positive effect on brand loyalty.
Hypothesis 3: Behavioural dimension of brand
experience has a positive effect on brand loyalty.
Hypothesis 4: Intellectual dimension of brand
experience has a positive effect on brand loyalty.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
42
FMU Journal of Management
________________________________________________________________________________________________

between sensory and behavioural to .614 which is the


estimated correlation between affective and intellectual.
Table-1.2: Correlations: (Measurement Model)
Estimate
Affective <--> Sensory .580
Behavioural <--> Intellectual .645
Sensory <--> Behavioural .475
Intellectual <--> Brand loyalty .561
Affective <--> Brand loyalty .570
Sensory <--> Intellectual .459
Affective <--> Intellectual .614
Behavioural <--> Brand loyalty .515
Sensory <--> Brand loyalty .542
Figure-1.1 Measurement Model Affective <--> Behavioural .610
Regression Weights: (Group number 1 - Default
model)
Table-1.3, shows construct reliabilities, and average
Table-1.1, gives the standardized regression weight of variances extracted (AVE) for all the latent variables.
different variables and latent variables and which ranges All factors exhibited adequate convergent validity. The
from .729 for the variable named sensory to .958 for the average variance extracted (AVE) of all the first order
latent variable named behavioural. factors were much higher than the cut off value of 0.5
(Fornell & Larcker, 1981) and which ranged from .50 to
Table-1.1: Standardized Regression Weights: .88 To measure the reliability of the measure Cronbachs
(Measurement model) alpha method has been used and from the measurement
Estimate model it can be concluded that all the measures used in
A1 <--- Affective .799 the study were valid as well as reliable (Table-1.3).
A2 <--- Affective .777 Table 1.3: Construct Reliability, and Average
A3 <--- Affective .849 Variance Extracted (AVE) for Latent Variables
S1 <--- Sensory .729 (Measurement Model)
S2 <--- Sensory .648 Sens Affecti Behavi Intellect Brand
ory ve oural ual Loyalty
S3 <--- Sensory .754 Construct .74 .84 .82 .92 .89
B3 <--- Behavioural .926 Reliability
AVE 0.50 0.68 0.82 0.78 0.88
B2 <--- Behavioural .958
B1 <--- Behavioural .834 Similarly, all the squared multiple correlation values
I3 <--- Intellectual .894 among the different factors was less than the average
I2 <--- Intellectual .924 variance extracted (Table-1.2), hence it can be
concluded that the construct displayed adequate
I1 <--- Intellectual .858
divergent validity.
bl1 <--- Brand loyalty .945
bl2 <--- Brand loyalty .958 Model Fit Summary
bl3 <--- Brand loyalty .942 Although different researchers (Wheaton et.al, 1997;
bl4 <--- Brand loyalty .947 Carmines and McIver, 1981) have suggested different
bl5 <--- Brand loyalty .920 cut off value for ratio of chi square to degrees of
freedom and it can be as high as 5 or as low as 2, but in
From Table-1.2, it is evident that there exist significant the present model we have achieved a value of lower
correlations among different latent variables which than 2 (CMIN/DF= 1.470; see Table-1.4). So, it is
range from .475 which is the estimated correlation clearly evident that the model fit is acceptable.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
43
FMU Journal of Management
________________________________________________________________________________________________

Table-1.4 CMIN Table-1.7 Parsimony-Adjusted Measures


CMIN/ Model PRATIO PNFI PCFI
Model NPAR CMIN DF P
DF Default model .801 .786 .796
Default model 44 160.188 109 .001 1.470 Saturated model .000 .000 .000
Saturated Independence model 1.000 .000 .000
153 .000 0
model
Independence
17 8327.803 136 .000 61.234
Root mean square error of approximation is another very
model important absolute fit index to check and correct the chi
In Table-1.5, the Root mean square residual (RMR = square goodness of fit statistic result. Root mean square
.021) and the smaller the RMR, the better it is and a error of approximation takes in to account the sample
RMR of zero indicates better fit. Similarly, from Table- size as well as the number of variables to determine the
1.5, it is evident that the Goodness of fit index (GFI) goodness of fit. Although there is controversy for the cut
value of .964 indicates an acceptable fit, whereas the of value of Root mean square error of approximation,
Goodness of fit index value of one indicates a perfect fit. but RMSEA value of 0.5 and less is usually considered
Accordingly, from Table-1.5, it is evident that adjusted appropriate whereas in our study the RMSEA=.030
goodness of fit index (AGFI = .950) and Parsimony (Tabe-1.8) which is acceptable but values close to zero
goodness of fit index (PGFI = .687), both of which takes is desirable.
the degrees of freedom into account, indicates an Table-1.8 RMSEA
acceptable fit.
LO HI
Model RMSEA PCLOSE
Table-1.5 RMR, GFI 90 90
Default model .030 .020 .040 1.000
Model RMR GFI AGFI PGFI Independence
Default model .021 .964 .950 .687 .343 .336 .349 .000
model
Saturated model .000 1.000
Independence model .644 .201 .101 .179 Structural Model

From Table-1.6, it is evident the Normed fit index (NFI A structural theory is a conceptual representation of the
=.981), Incremental fit index (IFI = .994), Tucker Lewis structural relationships between constructs. It can be
index (TLI = .992) and Comparative fit index (CFI = represented in terms of a structural model that represents
.994) are very close to one and hence indicates an the theory with a set of structural equations and is
appropriate model fit. usually depicted with a visual diagram (Figure-2.1)

Table-1.6 Baseline Comparisons


NFI RFI IFI TLI
Model CFI
Delta1 rho1 Delta2 rho2
Default model .981 .976 .994 .992 .994
Saturated model 1.000 1.000 1.000
Independence
.000 .000 .000 .000 .000
model

Although the use of parsimony fit indices remains


somewhat controversial but still parsimony fit indices
are useful as it takes in to account the model complexity
to determine the model fit. Parsimony fit indices are
somewhat conceptually similar to that of adjusted R
square. Although parsimony fit indices are useful in
evaluating competing models but they should be used
along with other fit indices. Parsimony normed fit index
(PNFI) is the most widely used parsimony fit index and
in our study PNFI= .786 (Table-1.7), which is
acceptable whereas relatively high values, closer to 1, Figure-2.1 Structural Model
represent better fit.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
44
FMU Journal of Management
________________________________________________________________________________________________

The structural model (Figure-2.1) proposed direct limitations, like, the study was conducted in a particular
relationships from Brand experience dimensions to city and in the context of a particular brand. Hence
Brand Loyalty. Parameter estimates (Table-2.1), for the future researchers are encouraged to explore these
relationship of sensory, affective, behavioral and facets, so generalization can be drawn.
intellectual to Brand loyalty all indicated strong positive
relationships (Sensory to Brand Loyalty = 0.29; REFERENCES
Affective to Brand Loyalty = 0.26; Behavioral to Brand [1] Anderson, J. C., & Gerbing, D. W. (1988).
Loyalty =0.17, Intellectual to Brand Loyalty =0.31). All Structural equation modeling in practice: A
hypothesized relationships were statistically significant review and recommended two-step
at the .01 level. Results showed that Intellectual approach. Psychological bulletin, 103(3), 411.
dimension of brand experience had the greatest direct
effect on brand loyalty thus providing empirical [2] Bosworth, B. and Annemie, M. (2010).
evidence that strengthening Brand experience will lead Economic Growth and Employment Generation:
to higher levels of Brand Loyalty. The Role of the Service Sector. In Ejaz Ghani,
ed. The Service Revolution in South Asia. New
Table-2.1 Results of Hypothesis Testing Delhi: Oxford University Press.
Hypotheses Standardized Regression P [3] Brakus, J. J., Schmitt, B. H., & Zarantonello, L.
Regression Weights Value
Weights (2009). Brand experience: what is it? How is it
H1: Sensory dimension 0.29 0.79 0.000 measured? Does it affect loyalty? Journal of
of brand experience has marketing,73(3), 52-68.
significant effect on
brand loyalty. (Pizza [4] Carmines, E. G., & McIver, J. P. (1981).
Hut) Analyzing Models with Unobserved Variables:
H2: Affective dimension 0.26 0.47 0.000 Analysis of Covariance Structures. Social
of brand experience has
Measurement: Current Issues, 65-115.
significant effect on
brand loyalty. (Pizza [5] Choi, Y. G., Ok, C., & Hyun, S. S. (2011).
Hut)
H3: Behavioural 0.17 0.26 0.000
Evaluating relationships among brand
dimension of brand experience, brand personality, brand prestige,
experience has brand relationship quality, and brand loyalty: an
significant effect on empirical study of coffeehouse brands.
brand loyalty. (Pizza
Hut) [6] Clatworthy, S. (2012). Bridging the gap between
H4: Intellectual 0.31 0.43 0.000 brand strategy and customer
dimension of brand
experience has
experience. Managing Service Quality: An
significant effect on International Journal, 22(2), 108-127.
brand loyalty. (Pizza
Hut) [7] Da Motta Filho MA,"The brand experience
manual: addressing the gap between brand
CONCLUSION, LIMITATIONS AND strategy and new service development, Available
SUGGESTIONS through <http://designresearch.no/news/brand
experience manual-addressing gap bran -strategy
From the present study it is evident that brand new service development>, 2014 [accessed 10
experience is a very important construct and can play a April 2014].
very strategic role for the success of brands and service
brands in particular. The findings of the study revealed [8] Fornell, C., & Larcker, D. F. (1981). Structural
that all the four dimensions of brand experience namely equation models with unobservable variables and
sensory, affective, behavioural and intellectual have a measurement error: Algebra and statistics.
positive effect on brand loyalty. The results of the Journal of marketing research, 382-388.
present study have practical implications for marketers [9] Glatstein, S. (n.d.). 5 Steps of Brand Building.
and hence marketers too should ensure a positive Retrieved 02 13, 2012, from
experience for their consumers which will in turn lead to http://sbinfocanada.about.com:
brand loyalty. Like all studies this study has its own
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
45
FMU Journal of Management
________________________________________________________________________________________________

[10] Holbrook, M. B., & Hirschman, E. C. (1982). [18] Pine, B. J., & Gilmore, J. H. (1999). The
The experiential aspects of consumption: experience economy: work is theatre & every
Consumer fantasies, feelings, and fun. Journal of business a stage. Harvard Business Press.
consumer research, 9(2), 132-140.
[19] Sheng, M. L., & Teo, T. S. (2012). Product
[11] Joy, A., & Sherry, J. F. (2003). Speaking of art as attributes and brand equity in the mobile domain:
embodied imagination: A multisensory approach The mediating role of customer
to understanding aesthetic experience. Journal of experience. International Journal of Information
consumer research, 30(2), 259-282. Management, 32(2), 139-146.
[12] Kochhar, K., Kumar, U., Rajan, R., Subramanian, [20] Shieh, K. F., & Cheng, M. S. (2007). An
A., & Tokatlidis, I. (2006). India's pattern of empirical study of experiential value and lifestyle
development: What happened, what follows? and their effects on satisfaction in adolescents: an
Journal of Monetary Economics, 53(5), 981- example using online gaming. Adolescence, 42
1019. (165), 199-215.
[13] McKinsey & Company. 2007. The Bird of Gold: [21] Walls, A. R., Okumus, F., Wang, Y. R., & Kwun,
The Rise of Indias Consumer Market. McKinsey D. J. W. (2011). An epistemological view of
Global Institute. consumer experiences. International Journal of
Hospitality Management, 30(1), 10-21.
[14] Mehmetoglu, M. (2012). Personality effects on
experiential consumption. Personality and [22] Wheaton, B., Muthen, B., Alwin, D. F., &
Individual Differences, 52(1), 94-99. Summers, G. F. (1977). Assessing Reliability and
Stability in Panel Models. Sociological
[15] Min Li, Z.Y. and Dong, X.C. (2012). Factors
Methodology, 8(1), 84-136.
influencing consumption experience of mobile
commerce: A study from experiential view, [23] Wu, C. H. J., & Liang, R. D. (2009). Effect of
Internet Research, 22(2),120 141. experiential value on customer satisfaction with
service encounters in luxury-hotel
[16] Morgan-Thomas, A., & Veloutsou, C. (2013).
restaurants. International Journal of Hospitality
Beyond technology acceptance: Brand
Management, 28(4), 586-593.
relationships and online brand
experience. Journal of Business Research, 66(1), [24] Zarantonello, L., & Schmitt, B. H. (2010). Using
21-27. the brand experience scale to profile consumers
and predict consumer behaviour. Journal of
[17] Oliver, R. L. (1999). Whence consumer
Brand Management, 17(7), 532-540.
loyalty? The Journal of Marketing, 63,33-44.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
46
FMU Journal of Management
________________________________________________________________________________________________

DEVELOPMENT OF COMPETENCY PROFILE : A STUDY IN


RETAIL INDUSTRY IN INDIA
1
Padmalita Routray, 2Madhusmita Panda
1
Reader, Department of Business Management, Fakir Mohan University, Balasore
2
Research Scholar, IIT Kharagpur
Email : proutray2007@redifmail.com, m.pandamba09@gmail.com

Abstract : Retail sector is becoming an important about service excellence1. Workforce is therefore
contributor to the growth of the economy and increasingly playing a vital role in the success of retail business. In
manpower intensive. Competency mapping is the need of an industry which is highly competitive, creating
the day where organizations business focus and strategic sustainable advantages is no longer limited to Sales or
direction are converted in form of creating right mix of
the right Strategy. HR, by providing and retaining
skills (technical and performance) to execute the strategy.
It tries to chart out the differences between the core competent employees plays a major role in ensuring
competencies of an organization and the individual Sustainability. Competency mapping to ensuring that the
competencies of an employee. The study gives some right candidates are in the right position is the first step
practical insights into developing competency profile of to create this advantage. In the absence of competency
people working in retail industry at different levels. mapping, all the resources spent on training, retention
Further, the research study will identify the competency strategy or growth strategy for workforce can be in-
gap and suggest strategies for competency development. effective and non productive.
This will help to determine the requirement for training,
recruitment and to create a suitable performance Competency mapping is the need of the day where
management system, reward and career development organizations business focus and strategic direction are
system. converted in form of creating right mix of skills
Key Words: Competencies, Competency Mapping, Retail (technical and performance) to execute the strategy.
Sector Competency focus gives insights into the process of
aligning the human resource of the organisation with its
I. INTRODUCTION: vision and mission. It tries to chart out the differences
In the era of competition, with a changing business between the core competencies of an organization and
scenario and new challenges emerging in the the individual competencies of an employee. Generic
competitive world, there is a dearth of right people in the competency mapping does not suit a growing industry.
right kind of job. Competencies have a major say in Retail has to go beyond the obvious of presentable,
terms of proving one's capability in any job profile. The product knowledgeable, and persuasive nature of the
organizations have to develop a right kind of framework work force. Today retail needs focus on competencies
of competency modeling in terms of job specific which are inherent to running and managing the
requirements, functional requirements, role attributes, business and can create sustainable customer stickiness.
leadership attributes and the organization's culture and Retail organizations have business challenges of unique
values. Retail sector is becoming an important talent management. When combined with success
contributor to the growth of the economy and factors performance framework for retail offers for the
increasingly manpower intensive. retail industries access to robust competencies.

India remains a high-potential market with accelerated II. OBJECTIVES OF THE STUDY:
retail market growth of 15 to 20% expected over the The present research paper tries to create competency
next five years, supported by GDP growth of 6 to 7%, profiles of key jobs and positions of selected sample
rising disposable income and rapid urbanization. The organizations in retail industry in terms of critical
changing FDI climate has provided an interesting success factors and then to isolate the key performance
dynamic to several international retailers' entry and indicators. The second objective of the research work is
expansion plans for India. Retail is becoming more
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
47
FMU Journal of Management
________________________________________________________________________________________________

to identify the gap in terms of competencies and Table 1 Different Explanation of Competencies
performance of the key job holders. The third objective Authors Definitions
is to suggest measures for developing competencies. Hayes (1979) Competencies are generic knowledge,
motive, trait, social role or a skill of a person
III. REVIEW OF LITERATURE: linked to superior performance on the job.
Boyatzis (1982) Boyatzis described competencies as
The competency approach to human resources underlying characteristics of an individual,
management is not new. The early Romans practiced a which are, causally (change in one variable
form of competency profiling in attempts to detail the cause change in another) related to effective
job performance
attributes of good Roman soldier. The introduction of Albanese(1989) Competencies are personal characteristics of
competency based approaches within the corporate a person that results that contribute to
environment initiated around 1970 and their effective superior performance.
development and use since then has been rapid. The Ansfield(1997) Underlying characteristics of a Person that
results in a effective superior performance.
distinguished Harvards psychologist, David McClelland UK National The National Vocational Council for
is credited with introducing the idea of competency Vocational Council Vocational Qualification described
into the human resource literature; in his efforts to assist for Vocational competency as performance standards, the
the United States Information Agency improve its Qualification (1997) ability to perform in work roles or jobs to the
standard required in employment
selection procedures. The latter argued that traditional LeBoterf (1998) LeBoterf says that competencies are not
intelligence tests, as well as proxies such as scholastic themselves resources in the sense of knowing
grades, failed to predict job performance. McClellands how to act, knowing how to do, or attitudes,
counter argument to the growing dissatisfaction with but they mobilize, integrate and orchestrate
such resources. This mobilization is only
intelligence testing and the traditional job analytic pertinent in one situation, and each situation
approaches to personnel selection, was the proposal to is unique, although it could be approached as
test for competency. In his research, McClelland found an analogy to other situations that are already
that competencies such as interpersonal sensitivity, known.
Marrelli (1998) (1) Competencies are measurable human
cross-cultural positive regards and management skills capabilities that are required for effective
differentiated superior from average Information work performance demands.
Officers (Dubois, 1993).Throughout the years Dubois (1998) (2) Competencies are those characteristics,
competency based approaches have proved to be a knowledge, skills, mindsets, thought
patterns, and the like-that, when used either
critical tool in many organizational functions, such as singularly or in various combinations, result
workforce and succession planning and performance in successful performance.
appraisal. The main reasons for selecting these HR-XML (www.hr- A specific, identifiable, definable, and
approaches are the following: xml.org) measurable knowledge, skill, ability and/or
other deployment-related characteristic (e.g.
They can provide identification of the skills, knowledge, attitude, behaviour, physical ability) which a
behaviors and capabilities needed to meet current and human resource may possess and which is
necessary for, or material to, the performance
future personnel selection needs, in alignment with the of an activity within a specific business
differentiations in strategies and organizational context.
priorities. They can focus the individual and group Selby et al. (2000) A capacity to mobilize diverse cognitive
development plans to eliminate the gap between the resources to meet a certain type of situation.
Perrenaud (2000) A capacity to mobilize diverse cognitive
competencies required by a project, job role, or resources to meet a certain type of situation.
enterprise strategy. In Table 1, we present the main Intagliata et al. (2000) Most fundamentally, competencies provide
definitions of competencies from different researchers organizations with a way to define in
or companies in an effort to provide a complete behavioral terms what their leaders need to
do to produce the results the organization
understanding of the different aspects that this term desires and do so in a way that is consistent
incorporates. with and builds its culture. They should
provide the North Star by which leaders at
all levels navigate in order to create synergy
and produce more significant and consistent
results.
Unido (2002) A competency is a set of skills, related
knowledge and attributes that allow an
individual to successfully perform a task on
an activity within a specific function or job.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
48
FMU Journal of Management
________________________________________________________________________________________________

Rankin (2002) Competencies are definitions of skills and emphasis on product and price. Retailing effectiveness is
behaviors, that organizations expects their
the degree to which business activities add value to the
staff to practice on work.
Jackson and Schuler Competencies are defined as the skills, products and the manner in which they are sold to
(2003) knowledge, abilities and other characteristics customers for their personal and family use (Saji & Nair,
that someone needs to perform a job 2004).In India, sudden and unprecedented growth in
effectively
organized retailing poses a challenge to human resources
Managing Competencies in Retail development. Therefore, it would be useful to look at the
dimension of human resource practices in retail industry,
At the macro-level, retail industry faces the challenge of emerging requirements and challenges and measures to
bridging the gap between demand and supply of talent. improve work atmosphere in Indian scenario. Although
According to a research report by NSDC on skill gap in a few studies have initiated their efforts on analyzing
the retail industry, the aggregate talent demand in Indian HR challenges in Indian retail sector (Chella 2002,
organized retail is projected to be 17.6 million by 2022. Chakraborthy 2007, Abraham & Kumudha 2007), there
The employment figure for the sector was roughly 0.6 are gaping holes in the existing research: in particular
million in 2011. Thus, on the demand side, there is a the skill gap and competency challenges faced by the
need of 17 million additional employees in organized retail sector.
retail within a decade. Reliance Retails approach is to
recruit freshers at the associate trainee, graduate trainee IV. METHODOLOGY:
and management trainee levels and develop them to
The specific aim of this research was to investigate the
assume higher responsibilities over time. They look for
need for competency management in retail industry
basic educational qualification and minimum required
through perceptions of employee competency gap in
aptitude at all the three levels of intake. However, the
context of an emerging city in India. Since 2003, there
organization emphasizes on value orientation of the
has been phenomenal growth in the organized retail in
individual. They hire intelligent people who are aligned
the state of Odisha. Future group opened its first Big
to organizational values of being hardworking, honest,
Bazaar outlet in Bhubaneswar in 2004. Since then the
humble and helpful. Retail is a service industry touching
group has expanded its operations in Bhubaneswar and
day-to-day lives of customers. Value orientation is
Cuttack. The group now has a Pantaloon outlet which is
critical for superior customer service and delightful
a chain of fashion outlets primarily selling apparels,
client experience2. Competencies of individuals are
jewellery, beauty products and other luxury items, 3 Big
related to their performance at work (New, 1996)
Bazaar outlets and Food Bazaar outlets selling food and
.Previous studies have identified the critical value of
beverages. Similarly, Reliance Retail has also opened its
employee competencies for providing good service to
outlets in the state capital. The unit of analysis for the
retail customers (Dabholkar et al., 1996). Successful
present research studies are Reliance Retail, Pantaloon
competence building in organizations can lead to greater
and Big Bazaar.
effectiveness and increased workplace satisfaction for
employees (Paulson et al., 2005) and can reduce high The research design for the present study is exploratory
attrition. Similarly, effective management of employee as well as conclusive. Exploratory study was used to get
competencies can have an important impact upon insight into the retail industry in general and in context
business performance (Homer, 2001) which will become with the emerging cities in India like Bhubaneswar.
critical with chances of more foreign players Further, the researchers tried to isolate the core
participating in this sector. According to a recent study competencies, business competencies and role
conducted by Wharton (2007) at a Canadian consulting competencies affecting the key jobs and positions in
firm on retail customer dissatisfaction, it was found that terms of critical success factors through focused and in-
disinterested, ill-prepared and unwelcoming salespeople depth interviews with the senior executives operating in
lead to more lost business and word-of-mouth than any retail sectors like Reliance Retail, Pantaloon India and
other management challenge. As retailers strive to Big Bazaar.
delight their customers and to reduce their cost bases, a
knowledgeable, skilled, change oriented and highly Therefore, the research was carried out in two phases. In
first phase a focus interview with Zonal Heads,
productive workforce will be the key to future success
Departmental Heads and with Store Managers are made
(Skills mart, 2002). The primary emphasis should be on
access, experience and service and the secondary for identifying key jobs & key position based on
organizational hierarchy. Further, competency profile
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
49
FMU Journal of Management
________________________________________________________________________________________________

for each position viz. senior managers, business Table 2(b) Cross Tabulation of Responses
managers, stores managers and sales executive at store
Senior Managers/ Business Rating Total
level are developed. In second phase questionnaires Managers Self Others
were constructed for each position on the basis of Rating Rating
developed competency profiles and the same were Organization Reliance 15 45 60
administered to people operating at different levels. The Retail
researchers covered corporate office and stores. They Pantaloon 8 20 28
covered 8 stores of Reliance Fresh, Reliance Super, Big Big Bazaar 7 15 22
Bazaar and Pantaloon in Bhubaneswar area. The Total 30 80 110
questionnaire was distributed to 145 employees at
Table 2(c) Cross Tabulation of Responses
different levels using stratified random sampling
technique and 110 completed questionnaires were Store Managers Rating Total
collected resulting in 75.9 per cent response rate. The Self Others
data were coded and analyzed using SPSS 20.The Rating Rating
sample profile of the respondents are given in table 2(a), Organization Reliance 17 43 60
2(b),2(c) & 2(d).In the sample, 15 top management,30 Retail
senior managers/business managers, 25 store managers Pantaloon 3 25 28
and 40 sales executives from three different Big Bazaar 5 17 22
Total 25 85 110
organizations were included. Each of the respondents
filled up the questionnaire for himself/herself, for the Table 2(d) Cross Tabulation of Responses
position which he/she representing and also at the same
Sales Executives Rating Total
time rated the other positions. Each of the competency
Self Others
identified was rated on basis of performance in a five
Rating Rating
point scale where 5 denoted competency far exceeds Organization Reliance 21 39 60
acceptable standards, 4 denoting competency better Retail
than acceptable standards 3 denoting competency meets Pantaloon 12 16 28
requirements, 2 denoting competency not quite up to Big Bazaar 7 15 22
acceptable standards and 1 denoting competency fails to Total 40 70 110
meet acceptable standards.
Findings
Table 2(a) Cross Tabulation of Responses
For the top management twenty competencies were
Top Management Rating Total identified which described the extent to which the top
Self Others management is visionary, able to develop people, have
Rating Rating strong values and ethics, committed and performance
Organization Reliance 7 53 60 oriented. The ratings of the competencies show better
Retail
than acceptable standards in almost all competencies and
Pantaloon 5 23 28
Big Bazaar 3 19 22
such competencies are perceived to be the same when
Total 15 95 110 self and others ratings were compared (table 3a) except
in case of three competencies viz. competency of
inspiring and motivating others with enlightened
insights, competency of rewarding right behavior and
competency of integrating social objectives into
business activities. So far as organizational difference is
concerned the competency profiles are the same except
in case of two competencies viz. ability to take more
ownership on the assigned responsibilities and ability to
communicate effectively with people (table 3b).

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
50
FMU Journal of Management
________________________________________________________________________________________________

Table 3(a) Descriptive statistics of Competency Profile of Top Management(on basis of ratings)
Top Management Competency N Mean Std. Deviation F Sig.
Sees everything with a positive outlook Self Rating 15 4.13 .743 1.356 .247
Others Rating 95 4.35 .649
Total 110 4.32 .663
Sees new possibilities to take the organization to a Self Rating 15 4.67 .488 .059 .809
higher realm Others Rating 95 4.63 .527
Total 110 4.64 .520
Creates and communicates compelling vision or Self Rating 15 4.40 .737 1.343 .249
direction Others Rating 95 4.19 .641
Total 110 4.22 .655
Inspires and motivates others with enlightened Self Rating 15 3.87 .743 11.419 .001*
insights Others Rating 95 4.36 .482
Total 110 4.29 .548
Assembles strong teams Self Rating 15 4.00 .535 2.404 .124
Others Rating 95 4.21 .481
Total 110 4.18 .492
Empowers and trains people Self Rating 15 4.20 .676 .476 .492
Others Rating 95 4.31 .527
Total 110 4.29 .548
Provides rewards, feedback and recognition Self Rating 15 4.27 .799 .132 .717
Others Rating 95 4.33 .554
Total 110 4.32 .589
Communicates effectively with people Self Rating 15 4.33 .724 .024 .877
Others Rating 95 4.36 .544
Total 110 4.35 .568
Aligns with company values Self Rating 15 4.20 .676 1.031 .312
Others Rating 95 4.37 .584
Total 110 4.35 .597
Adheres to code of conduct Self Rating 15 3.67 .816 2.260 .136
Others Rating 94 3.95 .645
Total 109 3.91 .674
Ensures that the standards and specifications are Self Rating 15 4.33 .617 .014 .905
kept Others Rating 95 4.32 .511
Total 110 4.32 .523
Rewards right behaviors Self Rating 15 4.07 .594 6.495 .012*
Others Rating 95 4.44 .520
Total 110 4.39 .543
Widely trusted Self Rating 15 4.53 .516 2.379 .126
Others Rating 95 4.29 .563
Total 110 4.33 .560
Takes ownership on the assigned responsibilities Self Rating 15 4.00 .756 .272 .603
Others Rating 95 4.09 .637
Total 110 4.08 .651
Impartial and fair in exercising the responsibilities Self Rating 15 3.87 .516 3.091 .082
Others Rating 95 4.15 .583
Total 110 4.11 .580
Delivers results on commitment Self Rating 15 3.87 .516 2.059 .154
Others Rating 95 4.11 .610
Total 110 4.07 .601
Sets and achieves ambitious goals Self Rating 14 4.21 .426 1.031 .312
Others Rating 95 4.05 .572
Total 109 4.07 .556
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
51
FMU Journal of Management
________________________________________________________________________________________________

Drives for continuous improvement Self Rating 15 4.00 .655 .313 .577
Others Rating 95 4.09 .603
Total 110 4.08 .608
Social objectives are integrated into business Self Rating 15 3.80 .775 4.698 .032*
activities Others Rating 95 4.21 .667
Total 110 4.15 .693
Gets results consistently Self Rating 15 4.20 .561 .087 .768
Others Rating 95 4.25 .652
Total 110 4.25 .638
*Significant at .05 level
Table 3(c) Descriptive statistics of Competency Profile of Top Management (on basis of organization)
Top Management Competency N Mean Std. Deviation
F Sig.
Sees new possibilities to take the organization to a Reliance Retail 60 4.73 2.689 .073 .073
higher realm Pantaloon 28 4.57
Big Bazaar 22 4.45
Total 110 4.64 1.138 .324 .324
Optimistic. Sees everything with a positive Reliance Retail 60 4.23
outlook Pantaloon 28 4.39
Big Bazaar 22 4.45 .725 .487 .487
Total 110 4.32
Creates and communicates compelling vision or Reliance Retail 60 4.17
direction Pantaloon 28 4.21 .154 .857 .857
Big Bazaar 22 4.36
Total 110 4.22
Inspires and motivates others with enlightened Reliance Retail 60 4.32 2.274 .108 .108
insights Pantaloon 28 4.25
Big Bazaar 22 4.27
Total 110 4.29 .689 .505 .505
Assembles strong teams Reliance Retail 60 4.27
Pantaloon 28 4.04
Big Bazaar 22 4.14 1.368 .259 .259
Total 110 4.18
Empowers and trains people Reliance Retail 60 4.27
Pantaloon 28 4.39 3.261 .042* .042*
Big Bazaar 22 4.23
Total 110 4.29
Provides rewards, feedback and recognition Reliance Retail 60 4.35 .263 .769 .769
Pantaloon 28 4.39
Big Bazaar 22 4.14
Total 110 4.32 2.390 .097 .097
Communicates effectively with people Reliance Retail 60 4.23
Pantaloon 28 4.46
Big Bazaar 22 4.55 .341 .712 .712
Total 110 4.35
Aligns with company values Reliance Retail 60 4.35
Pantaloon 28 4.29 .384 .682 .682
Big Bazaar 22 4.41
Total 110 4.35
Adheres to code of conduct Reliance Retail 60 3.78 .667 .515 .515
Pantaloon 27 4.04
Big Bazaar 22 4.09
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
52
FMU Journal of Management
________________________________________________________________________________________________

Total 109 3.91 4.664 .011* .011*


Ensures that the standards and specifications are Reliance Retail 60 4.33
kept Pantaloon 28 4.25
Big Bazaar 22 4.36 .236 .790 .790
Total 110 4.32
Rewards right behaviors Reliance Retail 60 4.40
Pantaloon 28 4.32 2.328 .102 .102
Big Bazaar 22 4.45
Total 110 4.39
Widely trusted Reliance Retail 60 4.38 1.910 .153 .153
Pantaloon 28 4.25
Bigbazar 22 4.27
Total 110 4.33 1.305 .276 .276
Takes ownership on the assigned responsibilities Reliance Retail 60 3.92
Pantaloon 28 4.32
Big Bazaar 22 4.23 .406 .667 .667
Total 110 4.08
Impartial and fair in exercising the responsibilities Reliance Retail 60 4.10
Pantaloon 28 4.07 2.364 .099 .099
Big Bazaar 22 4.18
Total 110 4.11
Delivers results on commitment Reliance Retail 60 3.97 .663
Pantaloon 28 4.25 .441
Big Bazaar 22 4.14 .560
Total 110 4.07 .601
Sets and achieves ambitious goals Reliance Retail 60 4.17 .557
Pantaloon 27 3.96 .518
Big Bazaar 22 3.95 .575
Total 109 4.07 .556
Drives for continuous improvement Reliance Retail 60 4.00 .638
Pantaloon 28 4.21 .630
Big Bazaar 22 4.14 .468
Total 110 4.08 .608
Social objectives are integrated into business Reliance Retail 60 4.10 .706
activities Pantaloon 28 4.21 .686
Big Bazaar 22 4.23 .685
Total 110 4.15 .693
Gets results consistently Reliance Retail 60 4.13 .676
Pantaloon 28 4.32 .612
Big Bazaar 22 4.45 .510
Total 110 4.25 .638
*Significant at .05 level
So far as senior managers/business managers in table 4(a).These are relevant professional knowledge,
competencies are concerned, almost all the emotional resilience and balanced learning habits and
competencies are rated better than acceptable skills. However, at organizational level the
standards. However, in certain competencies the self competencies are found to be same (table 4b).
ratings are lower from others rating(p> 0.05) as shown

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
53
FMU Journal of Management
________________________________________________________________________________________________

Table 4(a) Descriptive statistics of Competency Profile of Senior Managers/Business Managers (on basis of
ratings)
Senior Managers/Business Managers Competency N Mean Std. Deviation
F Sig.
Command of basic facts Self Rating 30 4.30 .206 .206 .651
Others Rating 80 4.24
Total 110 4.25
Relevant professional knowledge Self Rating 30 3.93 9.730 9.730 .002*
Others Rating 80 4.44
Total 110 4.30
Continuing sensitivity to events Self Rating 30 4.07 .538 .538 .465
Others Rating 80 4.18
Total 110 4.15
Analytical, problem solving and decision- Self Rating 30 4.03 2.020 2.020 .158
making skill Others Rating 80 4.29
Total 110 4.22
Social skills and abilities Self Rating 30 3.93 3.207 3.207 .076
Others Rating 80 4.21
Total 110 4.14
Emotional resilience Self Rating 30 3.83 7.156 7.156 .009*
Others Rating 80 4.25
Total 110 4.14
Pro-activity Self Rating 30 4.03 1.521 1.521 .220
Others Rating 80 4.23
Total 110 4.17
Creativity Self Rating 30 4.03 .563 .563 .455
Others Rating 80 4.16
Total 110 4.13
Mental agility Self Rating 30 3.87 1.740 1.740 .190
Others Rating 79 4.09
Total 109 4.03
Balanced learning habits and skills Self Rating 30 4.03 4.776 4.776 .031*
Others Rating 80 4.36
Total 110 4.27
Self-knowledge Self Rating 30 4.10 2.823 2.823 .096
Others Rating 80 4.33
Total 110 4.26
*Significant at .05 level
Table 4(b)Descriptive statistics of Competency Profile of Senior Managers/Business Managers (on basis of
organization)
Senior Managers/Business Managers Competency N Mean Std. Deviation Std. Error F Sig.
Command of Reliance Retail 60 4.25 .654 .084 .729 .485
basic facts Pantaloon 28 4.36 .621 .117
Big Bazar 22 4.14 .640 .136
Total 110 4.25 .642 .061
Relevant Reliance Retail 60 4.38 .783 .101 1.521 .223
professional Pantaloon 28 4.32 .723 .137
knowledge Big Bazar 22 4.05 .844 .180
Total 110 4.30 .785 .075
Continuing Reliance Retail 60 4.10 .681 .088 .297 .743
sensitivity to Pantaloon 28 4.21 .738 .140
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
54
FMU Journal of Management
________________________________________________________________________________________________

events Big Bazar 22 4.18 .664 .142


Total 110 4.15 .689 .066
Analytical, Reliance Retail 60 4.28 .846 .109 .442 .644
problem solving Pantaloon 28 4.11 .956 .181
and decision- Big Bazaar 22 4.18 .664 .142
making skill Total 110 4.22 .839 .080
Social skills and Reliance Retail 60 4.10 .706 .091 .469 .627
abilities Pantaloon 28 4.11 .786 .149
Big Bazaar 22 4.27 .767 .164
Total 110 4.14 .735 .070
Emotional Reliance Retail 60 4.13 .747 .096 1.214 .301
resilience Pantaloon 28 4.29 .713 .135
Big Bazaar 22 3.95 .785 .167
Total 110 4.14 .748 .071
Pro-activity Reliance Retail 60 4.20 .708 .091 .155 .856
Pantaloon 28 4.11 .786 .149
Big Bazaar 22 4.18 .733 .156
Total 110 4.17 .728 .069
Creativity Reliance Retail 60 4.13 .873 .113 .438 .646
Pantaloon 28 4.21 .686 .130
Big Bazar 22 4.00 .756 .161
Total 110 4.13 .803 .077
Mental agility Reliance Retail 60 4.02 .833 .108 .249 .780
Pantaloon 27 4.11 .801 .154
Big Bazar 22 3.95 .653 .139
Total 109 4.03 .787 .075
Balanced learning Reliance Retail 60 4.27 .686 .089 .110 .896
habits and skills Pantaloon 28 4.32 .772 .146
Big Bazar 22 4.23 .752 .160
Total 110 4.27 .716 .068
Self-knowledge Reliance Retail 60 4.22 .640 .083 .788 .458
Pantaloon 28 4.39 .567 .107
Big Bazar 22 4.23 .685 .146
Total 110 4.26 .631 .060

From table 5(a) it was found that Store managers are organizational awareness, presentation skill, decision-
also equally competent like top management and making skill, concern for excellence, negotiation skill,
senior/business managers. However, analyzing the persuasiveness and sensitivity. Similarly from table 5(b)
ratings it is found that the store managers rated less than it was found that the organizations significantly differ in
others so far as their emotional stamina is concerned. integrity and self-sufficiency.
But competencies like quality consciousness,

Table 5(a) Descriptive statistics of Competency Profile of Store Managers (on basis of ratings)
Store Managers Competency N Mean Std. Deviation Std. Error
F Sig.
Integrity Self Rating 25 4.32 .690 .138 .034 .854
Others Rating 85 4.29 .594 .064
Total 110 4.30 .614 .059
Self- sufficiency Self Rating 25 4.28 .614 .123 .329 .568
Others Rating 85 4.20 .613 .067
Total 110 4.22 .612 .058
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
55
FMU Journal of Management
________________________________________________________________________________________________

High emotional stamina Self Rating 25 3.88 .781 .156 4.985


Others Rating 85 4.22 .643 .070 .028*
Total 110 4.15 .689 .066
Command of basic facts Self Rating 25 4.24 .597 .119 1.421 .236
Others Rating 85 4.07 .632 .069
Total 110 4.11 .626 .060
Quality consciousness Self Rating 25 4.48 .586 .117 10.249 .002*
Others Rating 85 3.99 .699 .076
Total 110 4.10 .703 .067
Organizational awareness Self Rating 25 4.44 .507 .101 4.604 .034*
Others Rating 85 4.14 .639 .069
Total 110 4.21 .622 .059
Knowledge on standards Self Rating 25 4.24 .779 .156 .041 .839
and specifications Others Rating 85 4.27 .625 .068
Total 110 4.26 .659 .063
Presentation skill Self Rating 25 4.48 .586 .117 4.125 .045*
Others Rating 85 4.18 .676 .073
Total 110 4.25 .666 .064
Decision-making skill Self Rating 25 4.40 .577 .115 4.390 .038*
Others Rating 85 4.07 .720 .078
Total 110 4.15 .702 .067
Concern for excellence Self Rating 24 4.71 .624 .127 20.686 .000*
Others Rating 85 4.04 .645 .070
Total 109 4.18 .696 .067
Negotiation skill Self Rating 25 4.32 .557 .111 7.071 .009*
Others Rating 85 3.93 .669 .073
Total 110 4.02 .663 .063
Listening skills Self Rating 25 4.32 .690 .138 .780 .379
Others Rating 85 4.19 .645 .070
Total 110 4.22 .655 .062
Social skill Self Rating 25 4.20 .500 .100 1.261 .264
Others Rating 85 4.04 .680 .074
Total 110 4.07 .646 .062
Persuasiveness Self Rating 25 4.56 .507 .101 8.008 .006*
Others Rating 85 4.15 .664 .072
Total 110 4.25 .652 .062
Sensitivity Self Rating 25 4.52 .510 .102 6.943 .010*
Others Rating 85 4.16 .614 .067
Total 110 4.25 .609 .058
*Significant at .05 level
Table 5(b)Descriptive statistics of Competency Profile of Store Managers Managers (on basis of organization)
Store Managers Competency N Mean Std. Deviation Std. Error F Sig.

Integrity Reliance Retail 60 4.37 .581 .075 3.447 .035*


Pantaloon 28 4.39 .567 .107
Big Bazar 22 4.00 .690 .147
Total 110 4.30 .614 .059
Self- sufficiency Reliance Retail 60 4.05 .622 .080 5.797 .004*
Pantaloon 28 4.36 .559 .106
Big Bazar 22 4.50 .512 .109
Total 110 4.22 .612 .058
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
56
FMU Journal of Management
________________________________________________________________________________________________

High emotional stamina Reliance Retail 60 4.03 .736 .095 1.777 .174
Pantaloon 28 4.29 .600 .113
Big Bazar 22 4.27 .631 .135
Total 110 4.15 .689 .066
Command of basic facts Reliance Retail 60 4.20 .576 .074 3.172 .046
Pantaloon 28 4.14 .651 .123
Big Bazar 22 3.82 .664 .142
Total 110 4.11 .626 .060
Quality consciousness Reliance Retail 60 4.18 .725 .094 .926 .399
Pantaloon 28 4.00 .667 .126
Big Bazar 22 4.00 .690 .147
Total 110 4.10 .703 .067
Organizational awareness Reliance Retail 60 4.13 .724 .093 1.017 .365
Pantaloon 28 4.32 .476 .090
Big Bazar 22 4.27 .456 .097
Total 110 4.21 .622 .059
Knowledge on standards and Reliance Retail 60 4.23 .745 .096 1.359 .261
specifications Pantaloon 28 4.43 .504 .095
Big Bazar 22 4.14 .560 .119
Total 110 4.26 .659 .063
Presentation skill: Reliance Retail 60 4.18 .748 .097 2.109 .126
Pantaloon 28 4.46 .508 .096
Big Bazar 22 4.14 .560 .119
Total 110 4.25 .666 .064
Decision-making skill Reliance Retail 60 4.13 .769 .099 2.567 .082
Pantaloon 28 3.96 .637 .120
Big Bazar 22 4.41 .503 .107
Total 110 4.15 .702 .067
Concern for excellence Reliance Retail 60 4.20 .708 .091 2.650 .075
Pantaloon 28 4.36 .621 .117
Big Bazar 21 3.90 .700 .153
Total 109 4.18 .696 .067
Negotiation skill: Reliance Retail 60 4.07 .686 .089 1.766 .176
Pantaloon 28 3.82 .612 .116
Big Bazar 22 4.14 .640 .136
Total 110 4.02 .663 .063
Listening skills Reliance Retail 60 4.17 .717 .093 .406 .667
Pantaloon 28 4.29 .535 .101
Big Bazar 22 4.27 .631 .135
Total 110 4.22 .655 .062
Social skill Reliance Retail 60 4.07 .686 .089 .490 .614
Pantaloon 28 4.00 .720 .136
Big Bazar 22 4.18 .395 .084
Total 110 4.07 .646 .062
Persuasiveness: Reliance Retail 60 4.17 .717 .093 2.192 .117
Pantaloon 28 4.21 .568 .107
Big Bazar 22 4.50 .512 .109
Total 110 4.25 .652 .062
Sensitivity Reliance Retail 60 4.18 .651 .084 1.147 .322
Pantaloon 28 4.39 .497 .094
Big Bazar 22 4.23 .612 .130
Total 110 4.25 .609 .058
*Significant at .05 level

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
57
FMU Journal of Management
________________________________________________________________________________________________

From table 6(a) interesting results can be noticed. The and product knowledge in comparison to others rating
sales executives have given high self rating on their which is found to be significant( p< 0.05).People other
sales tolerance ability, social skill , competency on being than the sales executive have rated them on these
energetic, adaptability skill , clarity on oral expression competencies just meeting the requirements.
Table 6(a) Descriptive statistics of Competency Profile of Sales Executives (on basis of ratings)
Sales Executives Competency N Mean Std. Deviation Std. Error F Sig.
Stress tolerance Self Rating 40 4.45 .552 .087 67.994 .000*
Others Rating 70 3.54 .557 .067
Total 110 3.87 .705 .067
Social skill Self Rating 40 4.10 .709 .112 17.915 .000*
Others Rating 70 3.59 .551 .066
Total 110 3.77 .659 .063
High energy level Self Rating 40 4.55 .504 .080 54.268 .000*
Others Rating 70 3.70 .622 .074
Total 110 4.01 .710 .068
Adaptability Self Rating 40 4.55 .504 .080 59.578 .000*
Others Rating 70 3.64 .638 .076
Total 110 3.97 .735 .070
Product knowledge Self Rating 40 4.28 .640 .101 32.758 .000*
Others Rating 70 3.56 .629 .075
Total 110 3.82 .719 .069
Customer knowledge Self Rating 40 4.40 .632 .100 .207 .650
Others Rating 70 4.34 .634 .076
Total 110 4.36 .631 .060
Clarity in oral expression Self Rating 40 4.38 .586 .093 5.755 .018*
Others Rating 70 4.07 .666 .080
Total 110 4.18 .652 .062
Committed to responsibilities Self Rating 40 4.15 .580 .092 3.785 .054
Others Rating 70 3.90 .684 .082
Total 110 3.99 .657 .063
*Significant at .05 level
Table 6(b) Descriptive statistics of Competency Profile of Sales Executives (on basis of organization)
Sales Executives Competency N Mean Std. Deviation Std. Error F Sig.
Stress tolerance Reliance Retail 60 3.87 .791 .102 .221 .802
Pantaloon 28 3.82 .548 .104
Big Bazar 22 3.95 .653 .139
Total 110 3.87 .705 .067
Social skill Reliance Retail 60 3.92 .696 .090 3.286 .041
Pantaloon 28 3.61 .567 .107
Big Bazar 22 3.59 .590 .126
Total 110 3.77 .659 .063
High energy level Reliance Retail 60 4.02 .725 .094 .086 .917
Pantaloon 28 4.04 .693 .131
Big Bazar 22 3.95 .722 .154
Total 110 4.01 .710 .068
Adaptability Reliance Retail 60 4.08 .696 .090 1.679 .191
Pantaloon 28 3.89 .685 .130
Big Bazar 22 3.77 .869 .185
Total 110 3.97 .735 .070
Product knowledge Reliance Retail 60 3.93 .733 .095 1.715 .185

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
58
FMU Journal of Management
________________________________________________________________________________________________

Pantaloon 28 3.68 .670 .127


Big Bazar 22 3.68 .716 .153
Total 110 3.82 .719 .069
Customer knowledge Reliance Retail 60 4.35 .659 .085 .593 .554
Pantaloon 28 4.46 .508 .096
Big Bazar 22 4.27 .703 .150
Total 110 4.36 .631 .060
Clarity in oral expression Reliance Retail 60 4.03 .663 .086 4.507 .013
Pantaloon 28 4.46 .508 .096
Big Bazar 22 4.23 .685 .146
Total 110 4.18 .652 .062
Committed to responsibilities Reliance Retail 60 4.18 .651 .084 6.815 .002
Pantaloon 28 3.68 .548 .104
Big Bazar 22 3.86 .640 .136
Total 110 3.99 .657 .063
Managerial Implications application. Thus, future research can be done to
overcome the above limitations.
The study gives some practical insights into developing
competency profile of people working in retail industry V. CONCLUSION:
at different levels. The top level professionals in the
industry are high on aspiration and tend to rate The retailers in India are optimistic about growth of the
themselves low with the understanding that there is industry in spite of global slowdown. When workers are
always greater scope for upgrading their competencies well trained and a retail operation is fully staffed,
to the next level. This is true because employees who operational failures like missing merchandise are
stay in the retail industry have always climbed the ladder severely mitigated. And when employees are paid and
faster when they have shown high level of competency. trained well, they are much less likely to leave. While
Therefore, outstanding managers must be engaged and investing in human resources may have always been a
rewarded in a meaningful way to ensure performance. good strategy, it is one that is more important now than
The sales executives should be groomed to integrate ever for brick-and-mortar retailers. The headlong rise of
their career objectives with the organisations. People e-commerce has put extreme pressure on retailers to
joining at the entry level always rate themselves high on become more efficient and to justify their existence to
their competencies and thus create gaps in creating customers. Theres been a shift from retailers pushing
service excellence. Hence, selecting people at entry level goods to consumers being able to pull what they want
requires rigorously evaluating the potential from a variety of different places that didnt exist five
competencies to find a fit with the retail organization years go. Retailers are recognizing that their key
and further can be groomed on a continuous basis to differentiator could be that person standing in the store.
meet the changing customer requirements. REFERENCE
Limitation and Scope for Further Work [1] Abraham S. & Kumudha, A. (2007), "HR
In the present study only one emerging city i.e. Challenges in Retailing in India", Personnel
Bhubaneswar was considered. The research if extended Today, April-June: 29-32.
to other cities would reveal results which can help to
[2] Chakraborthy D. (2007), "Indian Retail Sector-
identify whether competencies can be generalized or it
HR Challenges", Effective Executive, May, 28-
can be developed in a particular geographical context.
32.
Second, the study included only three retail companies.
Including more companies will enable to develop a [3] Chella, G. (2002), A Passion for People, Praxis-
competency model suitable for the retail industry. Third, Business line, January, 28-36.
the present study has incorporated only two ratings i.e.
[4] KPMG Report (2006) Indian Retail on the Fast
self and others who are working in different positions
Track: Bridging the Capability Gaps.
within a specific company. The rating made by
customers particularly at sales executive level can help
to develop competency profile that will have better
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
59
FMU Journal of Management
________________________________________________________________________________________________

[5] Wharton Report (2007), "Dissatisfaction Ltd. Available online at


Guaranteed" Brand Equity, Economic Times, 23 http://www.skillsmart.com/pages/displaycontent.
May. asp?id=328 (accessed 11 June 2004)
[6] Dabholkar, P.A., Thorpe, D.I. and Rentz, J.O. [12] Fotis Draganidis, Gregoris Mentzas,
(1996), A measure of service quality for retail (2006),"Competency based management: a
stores: Scale development and validation, review of systems and approaches", Information
Journal of the Academy of Marketing Science, Management & Computer Security, Vol. 14 Iss: 1
Vol. 24, No. 1, pp. 3-16. pp. 51 64
[7] New, G.E. (1996), Reflections: A three-tier [13] R.Yuvaraj, International Journal of Scientific &
model of organizational competencies, Journal Engineering Research, Volume 2, Issue 8,
of Managerial Psychology, Vol. 11, No. 8, pp. August-2011 ISSN 2229-5518
44-51.
End Note
[8] Paulsson, K., Ivergrd, T. and Hunt, B. (2005),
Learning at work: competence development or [1] http://timesofindia.indiatimes.com/business/
competence-stress, Applied Ergonomics, Vol. india-business/India-ranks-5th-among-emerging-
36, No. 2, pp. 135-144 markets-for-retail-
investment/articleshow/14327829.cms
[9] Homer, M. (2001), Skills and competency
management, Industrial and Commercial [2] Retail: Value orientation of new employees
Training, Vol. 33, No. 2, pp. 59-62. critical in this sector appeared in Retrieved
November 02, 2011 from
[10] Saji K.B and Mrs.Uma Nair S,(2004) QUEST http://info.shine.com/Career-Advice-
based Modeling of Retailing Effectiveness Paper Articles/Shine-Experts/Retail-Value-orientation-
Presented at International Conference WAHIA- of-new-employees-critical-in-this-
2004, Kyoto, Japan sector/5445/Aty18.aspx
[11] Skillsmart, 2004 A Skills and qualifications
strategy for the Retail Industry, Skills mart Retail

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
60
FMU Journal of Management
________________________________________________________________________________________________

Strategies for Managing Shopping Mall: A Study in Eastern Region in


India
1
Prakash Chandra Dash, 2Ashok Kumar Dash
1
Asian School of Business Management, Bhubaneswar, Odisha
2
Faculty Member, School of Management Studies, Ravenshaw University, Cuttack
Email: 1dashprakash04@gmail.com , 2ashokdash69@rediffmail.com

Abstract : Retail has become an emerging area of research the research that has been carried out earlier in this area
both for academicians and practitioners. The changes are with a focus on the research works based in international
happening like never before. Retaining customers is very context.
difficult in today's highly competitive environment;
Customer retention and loyalty have become possible Second part of the research presents the methodology
through the development of long-term relationship with adopted to identify the shopping preferences on mall
the customers and mutually beneficial marketing attributes. It explains the data collection method and the
strategies. This paper tries to explore the preferences that measures taken for the study. Last part of the work
enforce consumers to shop at the organized mall in eastern includes the analysis, including exploratory factor
regions of India. It has explored five shopping preferences
in the retail mall services tenant mix, safety and security,
analysis (EFA) and confirmatory factor analysis (CFA)
amenities, convenience and image. The critical areas along with the managerial implication, limitation of the
discussed in the study offer valuable insight to the existing study and direction for further research.
as well as forthcoming developer planning to foray into the
eastern region of India. The findings provide the II. REVIEW OF LITERATURE
underlying factors that may affect the preference of A number of studies have explored the mall attributes in
customers shopping at mall on one hand and develop
India. This research has presented the deep consumer
effective mall management strategies on the other.
sentiments for shopping preference and guided to design
Keywords: Organized Mall, Services tenant mix, Safety effective retail strategy. However, studies on shopping
and Security, Amenities, Convenience, Image motives in India are very generic in nature. Issues
mostly discussed are consumers motivation to shop in
I. INTRODUCTION
shopping malls (Patel and Sharma, 2009), exploration of
The retail development has reached the nook and corner gender difference in shopping malls (Kuruvilla, Joshi,
of Indian cities. This has given opportunities and and Shah, 2009) and gender and mall shopping
challenges for many big and small players. The change (Kuruvilla and Rajan, 2010). The underlying idea is to
in technology and economic downfall has forced the explore the shopping preferences across the chosen
retailer to make adjustments in their strategies. The regions as there is inadequate literature available. The
demographic shift of the consumer and the change in need for such a research is felt primarily for ascertaining
shopping preference towards organized retailing has the preference of customers for organized retailing in
envisioned the rule of the game. The geographical developing world in context of the geographical
distance between courtiers is becoming closer and expansion taking place exponentially.
retailers are forced to think beyond the traditional
In such a sweeping background, it is imperative to know
culture and diversity. The diversity of culture across the
the shopping preferences in the eastern region as
nation has led to the retailer to design strategy which is
compared to preferences of shoppers of India as a
region specific. The growing difference in preference
whole. A study conducted by Venkateswarulu and
among the customers has also enhanced the scope of
Uniyal (2007) with reference to shopping malls in the
research. Thus, the study tries to explore the shopping
city of Mumbai has indentified the following set of five
preference of eastern region customers in India. This
factors that constitute the attractiveness of a shopping
research work has been divided into three sections. The
mall.
first section deals with the theoretical background and
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
61
FMU Journal of Management
________________________________________________________________________________________________

Appeal and convenience providing enough time to make choice along with
recreational means of shopping (Rajgopal, 2009).
Amenities and atmospherics
White (2008) in his study explained the considerable
Ambience
change in consumer lifestyle and with the change;
Personnel shopping malls have become the preferred destinations
for shoppers. Entertainment has now become the
Parking and seating essential part of retail mix which was of little
A study was conducted by Chattopadhyaya and significance to shopping malls in the past. The best way
Sengupta (2006) on the malls in Kolkata on the to generate more footfalls in a mall is to build a strong
importance of marketing activities to create the image of the mall on delivery of a unique bundle of
distinctive positioning. They highlighted that benefits (Chebat, Sirgy and Grzeskowiak, 2010). It
appropriate marketing strategies adopted by the malls needs worthmentioning here that mall security in terms
enhanced the customer patronage. The penetration of of security and safety of the shoppers who usually carry
mall in different parts of India is quite irregular and credit cards, cash, wear jewellery and vehicles is to be
distorted to a greater extent because of customer ensured for a better flow of shoppers. The importance of
preference and mall conversion. However, it is also such an issue has led to deployment of security guards
interesting to observe that quite a good number of and installation of metal detectors and surveillance
shopping malls found in North India having similarity in cameras in vital locations which have become an
terms of size, ambience, amenities and tenant mix integral part of many malls today.
(Singh and Sahay, 2012). Shopping preference differs
Convenient shopping experience as a means of obtaining
across the region because of difference in customers
physical and mental balance, leads to gratification and
socio-cultural values and tastes and preferences. Mall
shopping enjoyment (Wanger, 2007). Thus, the mall
patronage can be augmented by integrating the image can be administered to provide a shopping
management philosophy and standard mall practices enjoyment for its potential shoppers (Warnaby and
with a thrust on consumer motivation.
Medway, 2004). Location can be portrayed as an image
In order to have deeper insight into the preference of of the mall to encourage customers purchase intentions,
shoppers towards the shopping attributes, two longer shopping time and higher sales turnover and
distinguished approaches were identified; shopping more positive shopping behavior (Dennis, Newman, and
motivations and shopping mall attributes The success of Marsland, 2005). Malls represent the state of the society
any mall would depend on the adoptability of six factors and are perceived as agents of change (Kuruvilla and
including value for money, customer delight, Ganguli, 2008). The mall has created a space in the lives
information security, credibility, store charisma and of the urban lot because of growing young population,
product excellence (Devgan and Kaur, 2010) . Study by rising incomes and busier lifestyles.
Yilmaz (2004) highlighted the importance of
It is clear from the review of literature that shoppers
convenience while deciding the consumers choice of preference to a shopping mall is influenced by diverse
shopping centre. It is observed that the stimulating malls attributes. The attributes can be effectively managed to
are preferred to the traditional ones. Further, atmosphere
provide a better experience to the shopper. This paper
among other things has greater importance in mall
attempts to identify the diverse attributes of mall
evaluation, patronage and loyalty (Andreu,
shopping across regions and explores the possibilities of
Bigne,Chumpitaz, and Swaen,2006). meaningful and productive integration.
Shoppers prefer to shop in a mall which has a variety of
assortments and provides convenient shopping. This III. OBJECTIVES
means with a certain type of store, mall that provides A large number of studies have been made on mall
variety is mostly preferred by shoppers. The development and operations (Kuruvilla and Ganguli,
contribution of shopping mall towards business is 2008), shopping attitude, perception and purchase
significantly higher than traditional markets, which are pattern (Kuruvilla and Joshi, 2010; Swaminathan and
viewed as simple convergence of supply and demand. Vani, 2008; Venkateswarulu and Uniyal, 2007), mall
Shopping malls bring buyers and sellers together financing (Singh et al.,2010), but hardly any study is
found on shopping preference towards mall attributes.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
62
FMU Journal of Management
________________________________________________________________________________________________

Thus the present study attempts to enquire into this were drawn and in this regard simple random sampling
issue. The study undertaken aimed at identifying method was used. The questionnaires were distributed to
consumers preferences of shopping at malls in the the public who entered in the mall for their shopping
eastern region of India. Thus, the objectives of the study either all alone or with their family. Out of total 300
are questionnaires distributed, 264 responses were received
and out of 264 responses, 216 were finally considered
To explore the determinants of shopping
for analysis and the rest others were rejected due to
preference towards shopping mall attributes in eastern
incomplete responses.
region of India.
Profile of Respondents
To analyse the relative significance of these
determinants. Out of those 216 samples, most of respondents are in the
age group of 25 to 40 years, which accounts for almost
Method
45% of the sample size. Major respondents are male
This research was carried out in two phases. Initial (55%) and married (70%). Working professionals (31%)
phase involved an extensive literature review and are the major visitors at the mall followed by private
personal interactions with selected practitioners, service holders (28.2%) and government employees
academicians and shoppers to define the preferences of (15.3%). It is also observed that 37% of visitors income
shoppers on mall attributes. This led to the preparation is less than Rs.10, 000. The respondents are basically
of a structured questionnaire. Data collection was from different parts of West Bengal, Odisha and nearby
conducted in the second phase of the research. states.
Research Instrument Table I. Demographic Profiles of Respondents
Five selected mall attributes were considered for the Demographi Demographi Numbe Percentag
study. Convenience was captured by six measures c Group c Sub-Group r e (%)
adapted from Dennis et al. (2001). Ambience was Age Group 13-19 Years 25 11.6
captured by four measures adapted from Wakefield and 20-35Years 67 31.0
Baker (1998). Five measures were taken from the work 36-50 Years 94 43.5
of Bell (1999) to assess shoppers' subjective judgment 51-65Years 30 13.9
about the facilities extended by the mall. Six measures Gender Male 118 54.6
related to tenant-mix were generated from the work of Female 98 45.4
Finn and Louviere (1996) and Wakefield and Baker Marital Status Unmarried 64 29.6
(1998). Three measures for safety and security were Married 152 70.4
generated from the work of Frasquet et.al (2001). Three Qualification Schooling 61 28.2
measures for image were generated from the work of
Graduation 114 52.8
Leo and Phillipe (2002).The initial pool thus comprised
PG and above 41 19
of 27 items. Content and face validity was done with the
Occupation Govt. service 33 15.3
help of two experts on these 27 items. They were asked
to rank each item on a five point scale ranging from 1 Private 61 28.2
(strongly agree) to 5 (strongly disagree) with 3 (not sure) service
as the midpoint and then mean ratings per item were Professional 67 31
calculated. Then, 3 items were rejected following the Business 30 13.9
procedure of means scores less than 4(Kim et al. 2001) Student 25 11.6
finally leading to 24 items for further analysis. Monthly Less than 80 37
income Rs10,000
Sampling and Data Collection Rs 10,000-Rs 75 34.7
For this research, population was defined as people 25,000
visiting shopping malls in eastern region of India for Rs. 25,000-
31 14.4
shopping irrespective of age, gender, educational Rs. 40,000
qualification etc. Sampling element was individuals More
30 than
13.9
visiting malls for shopping. Sampling unit for this Rs.40,000
research was shopping mall from where the elements
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
63
FMU Journal of Management
________________________________________________________________________________________________

IV. RESULT AND ANALYSIS analysis has been carried out to confirm the underlying
factors of shopping preferences.
An exploratory factor analysis has been made to know
the major preferences of visiting a mall. For reduction of Exploratory Factor Analysis
the variables, data analysis proceeds in two steps. First It can be seen from Table -1, five factors were extracted, accounting fo
the exploratory factor analysis is used to identify the Cronbachs alpha value of greater than equal to 0.7 is
underlying preferences of shopping at organized mall. considered reliable. In one case only two items loaded
For this, the exploratory factor analysis was performed on the factor so correlation variance was taken into
on the items selected using the principal component consideration. So overall the factors are reliable.
analysis with varimax rotation. An orthogonal rotation Extracted factors are presented in the summarized table
was chosen for the sake of simplicity (Nunnally and (Table II) below.
Bernstein, 1994). Subsequently, confirmatory factor

Table II. Consolidated Factor Output


Variables Factor loadings
Factor No.(Variance Explained) Factors Included F1 F2 F3 F4 F5 Cronbachs alpha
Title
F1 (14.09%) Images Characteristics .795 0.65
Navigation .599
Awareness .732
F2 (12.4%) Ambience Road .732 0.71
Music .493
Air condition .636
Cleanness .627
Parking .496
F3 (12.3%) Amenities Escalator .684 Corr.coeff.=.524
Lift service .670 (sig.at0.001 level)
F4 (9.3%) Tenant Brands .716 0.80
Mix P.Brand .756
Products .719
Anchor tenant .711
Entertainment .493
F5 (9.2%) Safety Personal 0.78
.559
and safety
security Safe to use .620
Safety in lift .706
Fire .739
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
*As there are only two variables for amenities factor, so co-relation value has been taken into consideration for
reliability testing.

Factor 1: First factor comprising of five mall attributes reliability among these variables is quite high as the
(Brands, Preferred Brands, Products, Anchor Tenant, value is close to 0.80.
and Entertainment) explains 14.09 per cent of variance.
Factor 2: The second extracted factor explains around
These variables have significantly high factor loadings
12.4 percent of variance with variables like personal
(close to 0.5) on this factor. Since these variables are
safety, safe to use, safety in lift and Fire. All these
close to variety of stores, it is labeled as tenant mix. The
variables loaded quite well with the factor ranging from
.739 to .559. Those variables have got strong bearing on
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
64
FMU Journal of Management
________________________________________________________________________________________________

safety and security, since the alpha value has been Model fit
observed to be 0.78.
The measurement model indicated an acceptable model
Factor 3: Third factor comprising five attributes (Music, fit of the data (2=235.9,df=140,p<0.001;
2
Air conditioner, Cleanliness, Parking) explains 12.3 % /df=1.68(<5); CFI=0.92; TLI=0.90; IFI=0.93;
variance and loaded quite well ranging from .496 to.732 NFI=0.84; PNFI=0.68; PCFI=0.76 ;PRATIO= 0.82 and
with the variables. The attributes are also close to RMSEA=0.06) (Anderson and Gerbing, 1988). In
benefits given by malls, labeled as Ambience, having addition, all the indicators have loaded significantly on
reliability value of 0.71. the latent constructs. The values of the fit indices
indicate a reasonable fit of the measurement model with
Factor 4: The fourth factor consists of three variables
data (Byrne, 2001, pp.79-86). In short, the measurement
(Characteristics, Navigation, and Awareness) having 9.3
model confirms to the five factors structure of the
% of variance and the factor loading of those variables
customer preferences on shopping mall attributes.
are ranging from .599 to .795, which is quite good
enough. The variables are labeled as Images and the Reliability of the service quality instrument
corresponding reliability value is 0.65.
The Cronbachs alpha for the shopping preference
Factor 5: The factor five is loaded with two major instrument was more than 0.60, which is acceptable and
variables (Escalator and lift) having loading value more shows that the instrument is reliable. Further evidence of
than .6 and its co-relation coefficient value is more than the reliability of the scale is provided in below given
.5.This factor is labeled as Amenities. Table III, which shows the composite reliability and
average variance extracted scores of the different factors
Confirmatory Factor Analysis
obtained (Fornell and Larcker, 1981; Hair et al., 2006).
After identifying five clear factors through exploratory Composite reliability (CR) of all the latent variables is
factor analysis, the next stage is to confirm the factor found greater than or equal to the acceptable limit of
structure through Structural Equation Modeling (SEM). 0.70,(Carmines and Zeller,1988).The average variance
In this regard AMOS 16.0 has been used to perform the extracted for all the factors is greater than or equal to
confirmatory factor analysis. From the confirmatory 0.5, which is acceptable( Fornell and Lacker,1981).This
factor analysis it is clear that the measurement items are shows the internal consistency of the instrument used in
loaded in accordance with the pattern revealed in the the study.
exploratory factor analysis.

Table III. Confirmatory factor analysis results


Constructs Measurement Items Standardized Estimate P-value AVE CR
Preferred Brands TN1 .706
Products TN2 .622 ***
Anchor tenant TN3 .682 *** 0.45 0.8
Brands TN4 .745 ***
Entertainment TN5 .580 ***
Personal safety SEC1 .618
Safe to use SEC2 .720 ***
0.69 0.8
Safety in lift SEC3 .798 ***
Fire SEC4 .621 ***
Parking AM1 .476
Music AM2 .487 ***
Road AM3 .575 *** 0.59 0.7
Air condition AM4 .670 ***
Cleanliness AM5 .729 ***

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
65
FMU Journal of Management
________________________________________________________________________________________________

Constructs Measurement Items Standardized Estimate P-value AVE CR


Escalator CON1 .782
0.72 0.7
Lift service CON2 .663 ***
Navigation IMG1 .582
Characteristic IMG2 .660 *** 0.62 0.7
Awareness IMG3 .621 ***

Construct Validity which can be used to design marketing programmes


accordingly. The current research makes important
Construct validity is the extent to which a set of
contribution to the field of mall management by
measured variables actually reflects the latent construct
identifying the shopping preferences from the
(Hair et al., 2006).Construct validity is established in
customers prospective. These preferences will act as
this study by establishing the face validity, convergent
guidelines for the mall developers and mall managers
validity and discriminant validity.
specifically in eastern region of India as it will help
Face validity is established by adopting the them to understand the particular preferences that
measurement items used in the study from the existing customers consider while visiting and patronizing the
literature and adapting the same to the present research malls. The study validates the proposition that shopping
context. Convergent validity is assessed by examining preferences in the eastern region is determined by five
the factor loadings and average variance extracted of the factors: convenience, ambience, tenant-mix, amenities,
constructs as suggested by Fornell and Larcker safety and security and image. The first and foremost
(1981).All the indicators have significant loading on to factor defining shopper motives is ambience already
the respective latent constructs(p<0.001) with values studied in some previous literature (Singh and
varying between 0.47 and 0.79 (Table-IV). In addition, Sahay,2012) in National Capital Region (NCR) of India.
the average variance extracted (AVE) for each construct Mall developers need to consider ambience as a crucial
is greater than or equal to 0.50, which further supports factor to enhance the shopping experience apart from
the convergent validity of the constructs. importance to be given also to a few other factors like
safety and security and physical infrastructure impacting
Fornell and Larcker (1981) states that discriminant
the shopping experience considerably. Irrespective of
validity can be assessed by comparing the average
geographical location, Indian customers prefer some
variance extracted (AVE) with the corresponding inter- common amenities in their mall visit that can be
construct squared correlation estimates. The AVE values considered as the basic expectation of the mall shoppers.
of all the purchase preferences factors are greater than
the inter-construct correlations, which supports the It is important for the mall managers to understand the
discriminate validity of the constructs. Thus, the composition of mall attributes. However, the variables
measurement model reflects good construct validity and under each factor would vary depending on the intended
desirable psychometric properties. positioning. For upcoming shopping malls, it is
important to decide location, design, leasing and
V. CONCLUSION facilities management in a manner so that the mall can
The paper makes two important contributions to the attract number of footfalls. The existing malls and
existing literature. First, with the help of empirical forthcoming malls can design their marketing strategy
research, the intricate issues involved in the shopping accordingly for their growth and sustainability. This
preferences of shoppers in the eastern region of India research also provides benchmark to evaluate future
could be studied from varied angles. It is interesting to options for management, operations and promotion of
observe that eastern region of India specifically Kolkata, malls. There could be decisions beyond the list of
Bhubaneswar have shown good responses in attracting variables (observable parameters) included in this
some mall developers. Needless to say that among other research. These may be evaluated in terms of their
things the motives behind the shopping mall across the analogy to variables and compatibility with factors
regions differs because of variation in culture and social included in the proposed model.
aspects. From managerial point of view, it is Though respondents identified five shopping preferences
instrumental to understand the shoppers preferences on mall attributes, all five are not equally significant.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
66
FMU Journal of Management
________________________________________________________________________________________________

For instance, only two preferences basically tenant mix [3] Byrne,B.M.(2001).Structural Equation Modeling
and safety and security have more contribution having with AMOS: Basic Concepts, Applications and
higher score. Thus the mall managers operating in Programming. Mahwah, NJ: Lawrence Erlbaum
eastern region need to give due importance to aspects Associates.
like the tenant mix as well as the safety and security
[4] Carmines, E.G. & Zeller, R.A. (1988). Reliability
level to increase the footfalls. This also signifies to
and Validity Assessment. Beverly Hills, CA:
identify key preferences and sensitive areas where
Sage.
suitable changes can yield more dividends in the years to
come. [5] Chattopadhyaya, A. & Sengupta, K. (2006).
Perception of mall shoppers in Kolkata: a study.
VI. SCOPE FOR FUTURE RESEARCH The ICFAI Journal of Consumer Behavior,1(3),
This study is probably the first study carried on 34-43.
constitution of shopping preferences for purchase in [6] Chebat.C.J, Joseph.M. & Stephen.G
shopping mall specific to any region for existing (2010).How can Shopping Mall Management
shopping malls as well as forthcoming mall. Results are best capture Mall Image?, Journal of Business
based on a sample of respondents taken from a few Research , 63 (7),735740.
shopping malls in eastern region. It is possible that
individuals demonstrate different shopping preferences [7] Dennis, C., Marsland, D., & T, Cockett.
on varying occasions. It is advisable to test these (2001).The mystery of consumer behavior:
preferences so as to arrive a generalized theory that market segmentation and shoppers' choices of
could be applied to all the Indian malls. Even though the shopping centres. International Journal of New
importance of mall development to the society, Product Development and Innovation
countrys economy and end customer demographic, Management, 3 (3), 221-237.
psychographic benefit has been highlighted in a number [8] Dennis,C.,Newman,A. & Marsland, D. (2005).
of studies, the other interesting aspect would be to study Objects of Desire. Consumer Behavior in
whether these preferences change with the change in Shopping Centre Choices, New York: Palgrave
geographical locations, cultural influences, size of the Macmillan.
mall, nature of town (tier-I, tier-II etc.) and
demographics of respondents. Another issue relates to [9] Devgan, D. & Kaur, M. (2010). Shopping Malls
the significance of tenant mix. In a country like India in India: Factors affecting Indian Customers
where the existing malls have more or the less identical Perceptions, South Asian Journal of
tenant mix it is difficult to differentiate one mall from Management , 17 (2), April June, 2942.
the other. The aspect of safety and security which has [10] Fornell,C. & Larcker, D.F. (1981).Evaluating
not yet been given due importance by the developers structural equation models with unobservable
may be treated as a new focus area. Further, other variables and measure. Journal of Marketing
important aspects like cultural impact, mall loyalty, Research, 18 (3), 39-50.
patronage intentions and shopping experience impacting
shopping preferences can also be studied in future. [11] Finn, A. & Louviere, J. J. (1996). Shopping
Center Image, Consideration, and Choice:
REFERENCES Anchor Store Contribution. Journal of Business
[1] Andreu, L., Bigne, E., Chumpitaz, R., & Research, 35(3), 241251.
Swaen,V.(2006).How does the Perceived Retail [12] Frasquet, M., Gil, I. & Molla,A. (2001).
Environment Influence Consumer Emotional Shopping-centre selection modeling: a
Experience? Evidence from Two Retail Settings. segmentation approach. The International Review
International Review of Retail, Distribution and of Retail, Distribution and Consumer
Consumer Research, 16(5), 559575. Research,11(1), 23 38.
[2] Bell,S.(1999).Image and consumer attraction to [13]
Hair, J.F. Jr, Black, C.W., Babin, J.B., Anderson,
interurban retail areas: an environmental R.E. & Tatham, L.R. (2006), Multivariate Data
psychology approach. Journal of Retailing and Analysis (6th ed.). NJ: Pearson, Upper Saddle
Consumer Services, 6( 2), 67-78 River.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
67
FMU Journal of Management
________________________________________________________________________________________________

[14] Kuruvilla, S.J. & Ganguli, J. (2008). Mall [23] Rajagopal (2009). Growing Shopping Malls and
development and operations: an Indian Behaviour of Urban Shoppers, Journal of Retail
perspective. Journal of Retail and Leisure and Leisure Property, May, 8 (2), 99118.
Property, 7( 3), 204-15.
[24] Singh, H. and Vinita, S. (2012).Determinants of
[15] Kuruvilla, J, Joshi, N., & Shah, N. (2009). Do shopping experience: Exploring the mall
men and women really shop differently? An shoppers of national capital region (NCR) of
exploration of gender differences in mall India. International Journal of Retail and
shopping in India. International Journal of Distribution Management, 40(3), 235-248.
Consumer Studies, 33 (2), 715-723.
[25] Tripathi, S.N. and Sidddiqui, M.H. (2008).
[16] Kuruvilla, J., & Rajan, K. (2010). Gender and Servicescape of a shopping mall: a hierarchical
Mall Shopping. International journal of Business framework. AIMS International Journal of
Insight and Transformation, 10(2), 54-68. Management,2(3), 215-35.
[17] Kim, S.Y. & Lim, Y.J. (2001).Consumers [26] Venkateswarulu, A. and Uniyal, D.P.
perceived importance of and satisfaction with (2007).Concept of a mall: measuring attitude and
internet shopping. Electronic Markets,11(3), 148- perception of shoppers towards malls of Mumbai,
54. Indian Retail Review,1(2),7-16.
[18] Leo, P. Y. & Phillipe, J. (2002).Retail Centres: [27] Yilmaz,V. (2004).Consumer Behavior in
Location and Consumers Satisfaction. Service Shopping Center Choice. Social Behavior and
Industries Journal, 22(1), 122147. Personality,32(8),783790.
[19] LeHew, M. L. A., Burgess, B., & Wesley, S. [28] Wakefield, K. and J. Baker (1998).Excitement at
(2002).Expanding the Loyalty Concept to Include the mall: determinants and effects on shopping
Preference for a Shopping Mall. International response. Journal of Retailing,74(4),515-539.
Review of Retail, Distribution and Consumer
[29] Warnaby, G. and Medway, D. (2004). The Role
Research, 12(3), 225236.
of Place Marketing as a Competitive Response by
[20] Nunnally J.C, & Bernstein I.H (1994). Town Centres to Out-of-Town Retail
Psychometric theory. (3rd ed.). New York: Developments. International Review of Retail,
McGraw-Hill Inc. Distribution and Consumer Research,14(4), 457
477.
[21] Patel, V, & Sharma, M., (2009).Consumers'
Motivations to shop in Shopping Malls: A Study [30] Wanger, T. (2007). Shopping Motivation
of Indian Shoppers. Advance in Consumer Revised: A Means -End Chain Analytical
Research, 53 (8),285-292. Perspective, International Journal of Retail &
Distribution Management, 35(7),569582
[22] Singh, H. Bose, S.K. & Sahay, V.
(2010).Management of Indian shopping malls: [31] White, Randy (2008). The Role of Entertainment
impact of the pattern of financing, Journal of in Shopping Centres and Malls, Leisure
Retail and Leisure Property,9(1), 55-64. eNewsletter,8(5),115.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
68
FMU Journal of Management
________________________________________________________________________________________________

CORPORATE SUSTAINABILITY REPORTING PRACTICES IN


INDIA: A COMPARATIVE SECTORAL ANALYSIS
1
BiswoRanjan Mishra, 2Bhagaban Das
1
Lecturer in Commerce, DDCE, Utkal University
2
Professor, P.G. Department of Management Studies, F.M. University Balasore
Email-biswomishra@gmail.com , drbhagabandas@gmail.com

Abstract : This study analyses the level of corporate II. LITERATURE REVIEW:
sustainable reporting practices of 50 largest companies of
India in 10 selected sectors for three years (2013 to 2015). A number of empirical studies have been undertaken to
Based on content analysis method, the study examined the investigate the extent and nature of corporate sustainable
sustainability reports of sample companies (Rated by disclosure (CSD) practices in different countries (Gray
Economic Times in ET-500 Indian companies list for the et al. 1995, Guthrie and Parker, 1989). Several
year 2015) using UNEP benchmarking tool. In the study a approaches for scoring sustainability reports have been
comparative analysis of corporate sustainable reporting
scores between different sectors in India is made. Both
proposed either by consultancy firms or by academic
parametric and non-parametric significant tests are used to researchers (Skouloudis et al., 2009). Morhardt et al.
ascertain the degree of comprehensiveness of sustainability (2002) constructed a scoring system based on the first
reporting practices and if there exists significant version of the GRI Guidelines (G1) to assess
differences between different sectors. The results from the environmental reports. Similarly, Stratos (2005)
analysis show that there is a significant difference in the proposed a scoring system to examine Canadian
level of corporate sustainability reporting practices companies based on the GRI Guidelines consisting of 46
between the selected sectors. criteria within six major clusters.
Keywords: - Sustainability Reporting, Triple Bottom Line, Kolk (2001) has investigated the extent to which
GRI, Content Analysis.
sustainability reporting varies between industries for the
I. INTRODUCTION: largest 250 firms in the world. Results of the research
show a relationship between the direct impact of an
Triple bottom line reporting (TBLR), a term coined by industry and the degree of sustainability reporting. Non-
John Elkington (1997), involves incorporating industrial companies such as banks and insurance
economic, environmental and social performance companies appear to report less than average, whereas
indicators into an entity's management, measurement industrial companies such as motor vehicles and parts
and reporting processes. Ranganathan (1998) depicts companies report more than average.
three sustainability related measurements: social,
environmental and economic performances. The Ahmad and Rahim (2003) showed that the highest
emergence of this concept, however, seems to have CSR disclosure level came from the trading and services
created some uncertainty as to what is required of sector.
organizations that seek to undertake such practice.Verma, Saxena and Kaushik (2002) made a study for
Definitions and integration measures vary (Vandenberg,
measuring social performance of nineteen public
2002). At its narrowest, triple bottom line reporting
enterprises of India. They observed that public sector
involves measuring and reporting economic,
enterprises in oil and petroleum industry made an
environmental and social performance objectives that
effective and sincere effort for appraisal of social
are pursued simultaneously. A broader view, however,
performance. It has been also observed that Board of
suggests that triple bottom line reporting involvesDirectors carried on a significant responsibility to report
assessing an entity's values, strategies and practices and
social performance in annual reports. Most of the social
how these can be utilized to achieve economic, performance reports were made annually. Directors
environmental and social objectives (Sustainability,
report and Chairmans report had been taken as most
2003). popular and convenient medium for making reporting
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
69
FMU Journal of Management
________________________________________________________________________________________________

practices on social activities and descriptive mode had III. OBJECTIVES OF THE STUDY:
been considered as popular mode.
The objective of the paper is:
Parkash (2006) conducted a study of eighty-five Indian
companies which showed that environmental accounting To understand the theoretical concepts, purpose
of Indian companies had been made mainly on a and driving forces for sustainability reporting in India.
voluntary basis with a positive manner. As far as This study seeks to find out whether there is a
industry wise reporting practices was concerned the oil significant difference in the level of corporate
and petroleum sector and steel and engineering sector sustainability reporting practices between different
both had ranked highest in environmental reporting i.e. business sectors.
60% followed by cement 57%, fertilizers, chemicals and
pharmaceuticals 50% and consumer products 37%, In order to achieve this objective, this study used the
whereas textile 29%, power and electricity 25% and judgmental sampling technique for selected business
shipping and airways 20%. No environmental reporting sectors. The selected business sectors are grouped into
was found in case of health sector. She observed, In two broad categories i.e. manufacturing sector and
India, there is no legal compulsion on the corporates services sector. Out of 10 selected business sectors,
part to account and report for the environmental issues seven fall in manufacturing category namely,
thats why companies are disclosing environmental automobiles & parts, chemicals, construction & building
matters on a voluntary basis with in a positive manner materials, mining, oil & gas, pharmaceuticals & bio-
only. Thus, there is need to popularize the benefits of technology and steel & other metals. The three services
environmental reporting among the industrials sectors are banking, software & computer services and
community. telecommunication.

Sujit (2007) conducted a study and examined the HYPOTHESIS DEVELOPMENT:


environmental disclosure practices of top 50 Indian In order to achieve the objectives of this study, the
private sector companies spread over 14 industry following hypotheses are stated in the null form:
segments. The performances of these companies have
been evaluated against the 20 core environmental There is no significant difference in the average
indicators recommended by UNEP/Sustainability. The corporate sustainability reporting scores between
major findings of the paper are that there are fewer different business sectors.
examples of corporate sustainability reporting or triple
bottom line reporting in India. Not only are those, a vast
IV. RESEARCH METHODOLOGY:
majority of the Indian companies failing to demonstrate The present study adopts the following methodology:
their social and environmental accountabilities in a real,
meaningful reporting. Sources of Data:

DuttaSumanta., (2012) has worked on Triple Bottom The study is based on the secondary data obtained from
Line Reporting: An Indian Perspective The main the company websites and sustainability reports for the
objective of the study has been made an attempt to period 2013 to 2015.
highlight how the TBLR implementation is taking place Sample Design:
in with special reference GRI initiative. Corporate
Sustainability is of utmost important for the survival of The present study is carried out on a focus group of 50
organizations and their future generations stakeholders. most valuable companies (top 5 companies each from
Hence, Triple Bottom Line Reporting (TBLR) is selected sectors i.e. automobiles & parts, chemicals,
considered to be a sine qua non for corporate growth on construction & building materials, mining, oil & gas,
a sustained basis. Triple Bottom Line Reporting (TBLR) pharmaceuticals & bio-technology and steel & other
goes beyond the traditional way of reporting mechanism metals, banking, software & computer services and
and encourages businesses to give closer attention to the telecommunication), as rated by Economic Times in ET-
whole impact of their commercial activities, over & 500 list for the year 2015.
above their financial performance.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
70
FMU Journal of Management
________________________________________________________________________________________________

Sampling Unit: 9. Awards 10. Verification


11. Reporting Policy 12. Corporate Context
Sampling unit for this study is one company. All
companies are public companies listed in National Stock 2. Inputs / Outputs
Exchange (NSE). Inventory
Inputs:
Period of the Study: 13. Material Use 14. Energy
For the present study, the samples are collected for the Consumption
period of 2013, 2014 and 2015. 15. Water Consumption 16. Clean Technology
17. Health & Safety 18. Accidents &
Research Tool: Emergency Response
To analyze the content of the TBL reports, benchmark 19. Risk Management & 20. Land contamination
tool developed by UNEP/Sustain Ability have been EIS &Remediation
used. The tool is chosen as it grounds the study in 21. Stewardship of
international standards and compares Indian corporate Ecosystem
reports to international levels. The tool is similar to Outputs:
those used in a number of other international 22.Waste Minimization 23. Air Emission
benchmarking studies (Kolk, 1999; Morhardt, 2001; 24.Water Effluents 25. Noise &Odours
Morhardt et al., 2002). It is chosen for its explicit 26.Transportation
guidelines, which permits a clear procedure to be Products:
followed. 27. Life Cycle Design & 28. Environmental
Assessment Impacts
Since 1994, UNEP/Sustainability has undertaken several
29. Product Stewardship 30. Packaging
surveys of international corporate environmental and
social reports (1994, 1996, 1997, 2000, 2002, and 2006). 3. Finance
The basis for these surveys has been a benchmark tool 31. Environmental Spending 32. Environmental
used to integrate the content of the reports. The Liabilities
benchmark tool produced by the UNEP/Sustainability 33. Market Solutions & 34. Environmental Cost
group has been revised several times since its Instruments Accounting
development, making slight alterations to account for 35. Charitable Contributions
new developments in reporting. This detail was 4. Stakeholders
perceived important as it allowed for the reports to be Relation & Partnership
reviewed consistently with the design of the benchmark. 36. Employees 37. Legislators &
The benchmark tool comprises 50 reporting items, Regulators
grouped under the five sections of (1) Management 38. Local Communities 39. Investors
Policies and Systems, (2) An Input/output Inventory, (3) 40. Suppliers & Contractors 41. Customers &
Finance, (4) Stakeholder Relations and Partnerships, and Consumers
(5) Sustainability Development. (Figure 1) 42. Industry Associations 43. Environment
Groups
Figure 1: UNEP/Sustainability Engaging
44. Science & Education 45. Media
Stakeholders Survey Instrument 2006 Revised
5.Sustainable
Version
Development
1. Management Policy and 46. Global Developmental 47. Technology
Systems Issues cooperation
1. Top Management 2. Environmental 48. Global Environment 49. Global Operating
Statement Policy standards
3. Environmental 4. Responsibility & 50. Visions, Scenarios,
Management System Accountability Future Trends
5. Environmental Audit 6. Goals & Target
Source: UNEP/Sustainability (2006) Engaging
7. Legal Compliance 8. Research&
Stakeholders
Development

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
71
FMU Journal of Management
________________________________________________________________________________________________

The above 50 reporting items are scored on a scale of 0- higher the score that it is given. Thus a score of 0
4. This rating scale (shown in Table 1 below) is based on indicates that the element is not reported while a score
the principle that the more complete and comprehensive of 4 indicates comprehensive coverage.
the information relating to a given reporting item, the

Table 1: UNEP/Sustainability Report Scoring Criteria


0 1 2 3 4
No Minimum Detailed and Commitment to Commitment to and progress
coverage coverage, honest, including and progress towards triple bottom line of
little company towards sustainable development
detail shortcomings and sustainable in core business plus
commitments development in benchmarking against
core business competition and/or best
practice in other sectors
Source: UNEP/Sustainability (2006) Engaging Stakeholders
Scoring Procedure: have been summed up and the total scores represented
the companys sustainability reporting scores Index
On the basis of the above four point scale an overall
(CSRS). It is considered that all the key area information
assessment of the corporate sustainability reporting
in the index is equally important to the average users.
practices of selected companies have been done by
The sustainability reporting score index can be found
developing a sustainability reporting score index
out with the help of following procedure:
(CSRS). For this purpose all the key area wise scores

Corporate Sustainability Reporting Score (CSRS) = SMPS+SIOI+SF+SSRP+SSD


Where, SMPS = Total Scores for Management Policy and Systems Variables
SIOI = Total Scores for Inputs / Outputs Inventory Variables
SF = Total Scores for Finance Variables
SSRP = Total Scores Stakeholders Relation & Partnership Variables
SSD = Total Scores Sustainable Development Variables

Data Analysis Technique: ascertained using non-parametric tests (Kruskal Wallis


test and Mann-Whitney U Test).
This study conducted an inferential statistical analysis
for testing the hypotheses using the SPSS-Grad Pack REFLECTION ON SAMPLE (DATA
13.0. Parametric tests (ANOVA, T- test) are used in DESCRIPTIVE):
order to answer all five hypotheses. For robustness, the
The descriptive statistics of CSRS from 2013 to 2015 for
hypothesis of no significant difference would be further
total sample is presented below.
Table 2: Descriptive Statistics of CSRS from 2013 to 2015 for India
Year Count Minimum Maximum Mean Median Std. Deviation
2013 50 40.00 95.00 60.94 60.00 15.47
2014 50 42.00 103.00 67.78 63.50 15.37
2015 50 47.00 108.00 72.88 71.00 15.51
Source: Authors own computations
Table 2 reflects the values of mean, median, standard 2015 for selected companies. Results show that there is
deviation, maximum and minimum CSRS from 2013 to a difference between mean and standard deviation of
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
72
FMU Journal of Management
________________________________________________________________________________________________

CSRS across the years. It also indicates that mean CSRS Ho1.01: There is no significant difference in the average
for 2015 is higher (72.88) in comparison to other two corporate sustainable reporting scores across selected
years. The values of maximum, minimum and mean sectors of India.
CSRS have increased steadily from the year 2013 to
Ha1.01: Significant difference exists in the average
2015.
corporate sustainable reporting scores across selected
FINDINGS OF THE STUDY: sectors of India.
Considering the influence of the industry specific
factors, the following four hypothesis have been tested.
Table 3: Comparative CSRS-Sample Sectors in India
(ANOVA and Kruskal Wallis Test)

Country Sector Count Mean S.D F Sig. Chi Square Sig.


India Auto 05 61.60 12.62 6.330 .000 26.167 .002
Chem 05 63.60 5.46
Const 05 63.40 18.32
Fin 05 60.40 11.87
Min 05 57.27 8.54
O&G 05 87.33 6.05
Phar 05 56.07 3.03
Soft 05 89.73 14.89
Steel 05 73.00 2.55
Tele 05 59.60 12.52

Source: SPSS Output (Authors own computations)


The result as indicated in Table 3 above shows that at Ho1.02: There is no significant difference in the average
5% level of significance, i.e. = 0.05, the p value i.e. corporate sustainable reporting scores across selected
the level of significance is 0.000 in the case of ANOVA manufacturing sectors of India.
and 0.002 in the Kruskal - Wallis test. Since p < , null
Ha1.02: Significant difference exists in the average
hypothesis of equality of means is rejected. The alternate
corporate sustainable reporting scores across selected
hypothesis that there exists a significant difference in the
manufacturing sectors of India.
average corporate sustainable reporting score across
selected sectors of India is accepted.
Table 4: Comparative CSRS- Manufacturing Sectors
(ANOVA and Kruskal Wallis Test)
Chi
Country Sector Count Mean S.D F Sig. Sig.
Square
India Auto 05 61.60 12.62 6.382 .000 17.931 .006
(Manufact Chem 05 63.60 5.46
ure Const 05 63.40 18.32
Sector) Min 05 57.27 8.54
O&G 05 87.33 6.05
Phar 05 56.07 3.03
Steel 05 73.00 2.55

Source: SPSS Output (Authors own computations)


________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
73
FMU Journal of Management
________________________________________________________________________________________________

The result as indicated in Table 4 above shows that at Ho1.03:There is no significant difference in the average
5% level of significance, i.e. = 0.05, the p value i.e. corporate sustainable reporting scores across selected
the level of significance is 0.000 in the case of ANOVA service sectors of India.
and 0.006 in the Kruskal Wallis test. Since p < , null
Ha1.03: Significant difference exists in the average
hypothesis of equality of means is rejected. The alternate
corporate sustainable reporting scores across selected
hypothesis that there exists a significant difference in the
service sectors of India.
average corporate sustainable reporting score across
selected manufacturing sectors of India is accepted.
Table 5: Comparative CSRS-Service Sectors (ANOVA and Kruskal Wallis Test)
Chi
Country Sector Count Mean S.D F Sig. Sig.
Square
India Fin 05 60.40 11.87 8.517 .005 7.330 .026
(Service Soft 05 89.73 14.89
Sector) Tele 05 59.60 12.52

Source: SPSS Output (Authors own computations)


The result as indicated in Table 5 above shows that at Ho1.04: There is no significant difference in the average
5% level of significance, i.e. = 0.05, the p value i.e. corporate sustainable reporting scores between
the level of significance is 0.005 in the case of ANOVA manufacturing sector and service sector in India.
and 0.026 in the Kruskal Wallis test. Since p < , null
Ha1.04: Significant difference exists in the average
hypothesis of equality of means is rejected. The alternate
corporate sustainable reporting scores between
hypothesis that there exists a significant difference in the
manufacturing sector and service sector in India.
average corporate sustainable reporting score across
selected service sectors of India is accepted.
Table 6: Comparative CSRS-Manufacturing and Service Sector
(T-Test and Mann Whitney Test)
Mea Sig. Sig.
Country Sector Count S.D t value U
n (2-tailed) (2-tailed)
India Manu 35 66.04 13.45 -0.822 .415 236.000 .575
Service 15 69.91 18.95

Source: SPSS Output (Authors own computations) Independent sample t-test (equal variances assumed)
Table 6 shows that at = 0.05, p i.e. level of and the findings may not necessarily be representative of
significance = 0.415 when t test is run and 0.575 when sustainability reporting practices of other entities or
Mann Whitney test is run. Since p > , null hypothesis public sector institutions; and second, content analysis
of equality of means of average corporate sustainable techniques of annual and sustainability reports may have
reporting scores between manufacturing sector and specific limitations.
service sector in India fails to be rejected. Thus, there is
no significant difference in the average corporate VI. CONCLUSION:
sustainable reporting scores between manufacturing With the increased focus on sustainability and increasing
sector and service sector in India. demands for corporate accountability, many companies
are now reporting not only their financial results to their
V. LIMITATION OF THE STUDY:
stakeholders, but also on their sustainability
The study has two specific limitations: first, the performance regarding their social, environmental and
assessment is limited to the top 50 companies each from governance issues. The paper found that there are no
selected ten sectors in India as rated by Economic Times mandatory requirements for companies to undergo

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
74
FMU Journal of Management
________________________________________________________________________________________________

sustainability report and their assurance. In India, Capstone,. Oxford, 1997, 402 pp. ISBN 1-
typically, reporting beyond mandatory requirements is 900961-27-X.
low.
[5] Kolk A. (1999). Evaluating corporate
This study revealed that there is a significant difference environmental reporting. Business Strategy and
in the level of corporate sustainability reporting the Environment 8: 225237
practices between selected sectors in India.
[6] Milne, M.J., Ball, A. & Gray, R. (2005), From
Sustainability reporting practices of services sectors is
soothing palliatives and towards ecological
found same as manufacturing sectors.It concludes that
literacy: A critique on the Triple Bottom-line.
corporate sustainability reporting practices among the
International Conference on Social and
selected companies is basically very low and still at its
Environmental Accounting Research, 30 March
embryonic stage and therefore needs more attention.
1April2005.
There is a definite need that these industries improve on
their environmental activities and management and [7] Morhardt, J. E., Baird, S., & Freeman, K. (2002),
consequently report these via their sustainability reports, Scoring corporate environmental and
annual reports, magazines, and corporate websites sustainability reports using GRI 2000, ISO 14031
amongst others. Work on the triple bottom line, and other criteria. Corporate Social
however, is being crucially undermined by the way in Responsibility and Environmental Management,
which the term sustainability is still bandied about by 9, 215-233.
business consultants and organizations in the context of
[8] Parkash, N. (2006), Environmental Accounting
the triple bottom line. Conclusively, this study
in India- A Survey of Indian Companies, The
recommends that the Financial Reporting Council and
Chartered Accountant, August, 2006, p.254.
other relevant bodies in the standard setting process
draft a comprehensive framework for sustainability [9] Ranganathan, J. (1998), Sustainability rulers:
reporting practices for Indian companies. measuring corporate environmental and social
performance. Sustainability Enterprise
REFERENCES Perspective, May, 111. Washington, D.C.: World
[1] Dutta, Sumanta(3) Triple Bottom Line Resource Institute. Retrieved from
Reporting: An Indian Perspective www.igc.org/wri/meb/pdf/janet.pdf/.
Interdisciplinary Journal Of Contemporary [10] Skouloudis, A., Evangelinos, K. and Kourmousis,
Research In Businessapril 2012,vol.3,No 12 F., 2010, Assessing nonfinancial reports
[2] Guthrie, J & Parker, LD (1989), Corporate according to the Global Reporting Initiative
social reporting: A rebuttal of legitimacy theory, guidelines: evidence from Greece, Journal of
Accounting & Business Research, vol.19, no.76, Cleaner Production 18 (5), 426-438.
pp343-352. [11] Sujit Kumar Roy., (2007),Corporate
[3] Gray, R. (2006), Social, environmental and Sustainability Reporting: How Indian Companies
sustainability reporting and organisational value Measure up The ICFAI University Journal of
creation? Whose value? Whose Environmental Economics 02/2007; V(2).
creation?Accounting, Auditing & Accountability [12] Verma, J., Saxena, P. and Kaushik, S.P. (2002),
Journal 19(6):793-819. Measuring Corporate Social Reporting in Indian
[4] John Elkington, Cannibals With Forks: The Public Sector Enterprises, The Indian Journal of
Triple. Bottom Line of 21st Century Business. Accounting, Vol. XXXII, June, pp.15-20.
Annexure
Overall Company-Wise CSRS from 2013 to 2015 for Selected Companies
CSRS CSRS CSRS Average
Company Name Sector
2015 2014 2013 CSRS
69.00 64.00 62.00 Tata Motors Limited Automobiles & Parts 65.00
89.00 82.00 75.00 Mahindra & Mahindra Limited Automobiles & Parts 82.00
61.00 56.00 51.00 Bajaj Auto Limited Automobiles & Parts 56.00
55.00 58.00 52.00 Hero Motor Corporation Limited Automobiles & Parts 55.00
54.00 51.00 45.00 Maruti Suzuki India Limited Automobiles & Parts 50.00
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
75
FMU Journal of Management
________________________________________________________________________________________________

78.00 72.00 63.00 Tata Chemicals Limited Chemicals 71.00


68.00 67.00 66.00 United Phosphorus Limited Chemicals 67.00
63.00 61.00 59.00 BASF India Limited Chemicals 61.00
69.00 62.00 55.00 Pidilite Industries Limited Chemicals 62.00
61.00 58.00 52.00 Gujarat Fluorochemicals Limited Chemicals 57.00
99.00 96.00 90.00 Larsen & Toubro Limited Construction & Building 95.00
materials
75.00 65.00 50.00 Jaiprakash Associates Limited Construction & Building 63.33
materials
61.00 55.00 40.00 Punj Lloyd Limited Construction 52.00
& Building materials
54.00 54.00 45.00 DLF Limited Construction & Building 51.00
materials
62.00 58.00 47.00 Gammon India Limited Construction & Building 55.67
materials
83.00 77.00 65.00 HDFC Bank Limited Financial 75.00
52.00 48.00 44.00 Canara Bank Financial 48.00
60.00 51.00 48.00 State Bank of India Financial 53.00
82.00 70.00 61.00 ICICI Bank Limited Financial 71.00
60.00 56.00 49.00 Punjab National Bank Limited Financial 55.00
72.00 63.00 60.00 Coal India Limited Mining 65.00
73.00 62.00 54.00 NMDC Limited Mining 63.00
66.00 61.00 60.00 Sesa Sterlite Limited Mining 62.33
49.00 47.00 45.00 Shirpur Gold Refinery Limited Mining 47.00
59.00 48.00 40.00 Gujarat Mineral Development Mining 49.00
Corporation Limited
100.00 95.00 90.00 Reliance Industries Limited Oil & Gas 95.00
99.00 94.00 82.00 Oil & Natural Gas Corporation Limited Oil & Gas 91.67
90.00 86.00 85.00 Indian Oil Corporation Limited Oil & Gas 87.00
86.00 82.00 78.00 Bharat Petroleum Corporation Limited Oil & Gas 82.00
86.00 81.00 76.00 Hindustan Petroleum Corporation Oil & Gas 81.00
Limited
62.00 55.00 48.00 Sun Pharma Industries Limited Pharmaceuticals & 55.00
Biotechnology
68.00 56.00 47.00 Cadila Healthcare Ltd Pharmaceuticals & 57.00
Biotechnology
75.00 60.00 42.00 Dr. Reddy's Laboratories Limited Pharmaceuticals & 59.00
Biotechnology
62.00 59.00 53.00 Cipla Limited Pharmaceuticals & 58.00
Biotechnology
56.00 52.00 46.00 Lupin Limited Pharmaceuticals & 51.33
Biotechnology
103.00 99.00 95.00 Tata Consultancy Services Limited Software & Computer services 99.00
106.00 102.00 95.00 Infosys Limited Software & Computer services 101.00
108.00 103.00 94.00 Wipro Limited Software & Computer services 101.67
86.00 74.00 65.00 HCL Technologies Limited Software & Computer services 75.00
79.00 75.00 62.00 Tech Mahindra Limited Software & Computer services 72.00
80.00 75.00 70.00 Tata Steel Limited Steel & Other metals 75.00
77.00 74.00 68.00 Steel Authority of India Limited Steel & Other metals 73.00
75.00 70.00 65.00 Jindal Steel and Power Limited Steel & Other metals 70.00
78.00 75.00 60.00 Hindalco Industries Limited Steel & Other metals 71.00
81.00 78.00 69.00 JSW Steel Limited Steel & Other metals 76.00
78.00 77.00 70.00 BhartiAirtel Limited Telecommunication 75.00
70.00 69.00 65.00 Reliance Communications Limited Telecommunication 68.00
47.00 42.00 40.00 Idea Cellular Limited Telecommunication 43.00
56.00 53.00 50.00 Tata Communications Limited Telecommunication 53.00
62.00 61.00 54.00 Mahanagar Telephone Nigam Limited Telecommunication 59.00
3644.00 3389.00 3047.00 Total Score 3360.00
72.88 67.78 60.94 Average Score 67.20
Source: Authors own computations

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
76
FMU Journal of Management
________________________________________________________________________________________________

FINANCIAL CHALLENGES OF MSMEs IN INDIA: AN


ANALYTICAL STUDY
GANESH PRASAD PANDA
Lecturer, Department of Commerce Sadhu Goureswar Degree College, Kanikapada, Jajpur, 755011
Email: gpanda673@gmail.com

Abstract: India is the 3rd largest economy in the world. major hurdle in the path of growth. Most entrepreneurs
Development of any nation depends largely upon the in this sector are not getting adequate finance which is
development of its industrial sector. Industries does not compressing the innovative spirit of young talents. The
only mean the large industrial houses having huge capital new centrally sponsored scheme MUDRA BANK by
outlays, rather it constitutes the MSME units, which is
honble prime minister will revitalise the MSME sectors
accepted as an engine of economic growth creating high
employment opportunities with lower capital base. It by providing security free loans which will flourish
contributes significantly to countrys GDP & export some new leaves in the MSME tree.
performance. In the present scenario this sector is facing
IMPORTANCE OF THE STUDY:
number of bottlenecks like inadequacy of bank finance,
difficulties in raw material procurement, marketing & Since MSME sector in India is responsible for the steady
distribution which obstruct the inclusive growth and growth of Indian economy by contributing a major share
development potentiality. Presently funding issues have to the GDP, so this sector needs to be overhauled and
been a greater concern for the MSMEs, due to poor credit
developed. But the matter of concern is that this sector is
accessibility from commercial banks. It is due to the higher
level of NPAs, inadequate information about background
facing many challenges in the area of finance, marketing
of MSMEs. This paper specially focuses on the financing , technology and exporting. Among these, financing
eco system of the MSME & their relationship between issues have a deep impact on the operational
bank financing and the MSME growth. Govt.s Make in performance of MSMEs. Our study strictly focus on the
India programme will boost the MSME sector to make a various funding problems, the relationship between bank
new horizon in the industrial progress. On the other hand financing and the performance of MSMEs and the future
the MUDRA bank financing will act like fuel to the engine prospects of this sector through the recently introduced
of MSME sector which will unleash the young & dynamic scheme of central Govt. i.e MUDRA bank.
entrepreneurial talent, leading to neutralizing the regional
imbalances and promoting growth & development. II. LITERATURE REVIEW:
Key words: MSMEs, finance, inclusive growth, GDP, 1) Oke, M.O, Aluko, O.A(2015) assessed the
credit, MUDRA bank
impact of commercial banks on small and medium
I. INTRODUCTION: enterprises financing using a sample of 10 banks out of
the 21 commercial banks operating in Nigeria by
Industrial sector plays an eminent role in the overall adopting panel data found regression analysis technique
growth and upliftment of a nation. From Indian context and commercial banks have significant impact on
it is the most dynamic and significant organ for the financing of SMEs.
economy. As India is a labour intensive country, MSME
functions as a catalytic agent by utilising the scarce 2) Kumar ashish, Batra vikas(2009) studied
capital resources which ushers to giving a boost to the regarding the challenges & issues of Indian MSMEs in
industrial development. MSME covers 90 % of total the current scenario and found that MSMEs are the
enterprises creating lots of employment opportunities at major contributor towards growth of domestic economy
comparatively lower capital cost than large industries for and employment generation & should get adequate
the rural as well as urban poor which ushers to reduce support in terms of policy framework, incentives and
regional imbalances. Despite of so much significance of other relevant aids.
this sector , still it is one of the deprived section of the
3) Nishanth. P & DR. Zakkariya K.A (2014)
economy in the area of financing which stands as a has made a study on barriers faced by micro, small &
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
77
FMU Journal of Management
________________________________________________________________________________________________

medium industries in raising finance, by selecting 200 MSME sector has emerged as a dynamic sector in Indian
units of MSMEs through systematic random sampling economy. It plays a pivotal role in the socio-economic
methods & found that too much formalities in the credit development by providing adequate employment
scheme standing as a major barrier for availing schemes. opportunities at a lower cost & significantly contributing
to Indias manufacturing output & exports .Besides it
4) Anis Ali,Firoz Husain(2014) stated the
acts as a nursery of entrepreneurship which leads to
problems, solution & prospects of MSME in Indian &
neutralising the regional imbalances prevailed in our
stated that MSMEs are providing the uniform
country. The ratio of capital to labour in MSMEs is
development to the society and can be a strong mean to
lower in comparison to large industrial undertakings.
utilize the natural resources of the India.
Since independence MSMEs in India have ear-marked
OBJECTIVES: as a important sector. The economic planning from
1951, followed by industrial policy prompted the Govt.
To study the present status of MSME sector in
To give more & more attention to this underprivileged
India.
sector . Till the liberalization period Govt. Of India has
To analyse the major funding issues prevailed in little role & intervention in the regulation of MSME
the Indian MSME sector. sector. After 1991, the fruits of globalization and
liberalization were sweet, but it created serious threats
To examine the co- relationship between bank and challenges to the small industries. The inflow of
financing and performance of MSMEs. foreign capital in the form of FDI, had negatively
To know the impact of MUDRA bank on the affected the domestic small & medium industries. To
growth of small scale industries. wipe out these problems Govt. Enacted MSME
development act in 2006 to provide a legal framework to
III. RESEARCH METHODOLOGY: tackle the development concerns relating to MSMEs.
The data are basically collected from secondary sources The MSME sector in India is a dynamic one constituted
which includes journals, magazines, various websites with different size of enterprises dealing with variety
and newspaper articles. We have applied karl pearsons products & services & levels of technology.
correlation technique and T-test to examine the co-
relationship between bank financing and performance The MSMED act 2006 classified MSMEs into 2 sectors.
of MSMEs. Manufacturing companies on the basis of
MSME: A SNAPSHOT FROM INDIAN investment in plant & machinery.
CONTEXT: Services on the basis of investment in equipment.
(CHART-1: Types of MSME)

(Source: self compiled)


________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
78
FMU Journal of Management
________________________________________________________________________________________________

PRESENT STATUS OF MSME IN INDIA employment, output, exports etc. Indicate the
performance of MSME sector in India. On the basis of
Development of any economy depends on the
data on GDP published by CSO, MOSPI and final result
development of its backward and poor sections of the
of the fourth census, the contribution of MSME sector to
society and MSME sector has a high potential to
GDP and output during 2006-07 to 2012-13 are as
accomplish that .But this sector has been neglected since
below.
last number of years .The growth parameters like GDP,

(Table no-1: Performance of MSMEs)

(Source: Annual report 2014-15, ministry of MSME, Govt. of India)


As stated earlier MSME sector provides vast lakh persons were employed while it rose to1114.29
employment opportunities as low capital .As per the lakhs in the year 2013-14 following graph will reflect
forth all India census of MSMEs, the employment rate is the projected data for the years 2007-08 to 2013-14.
in an increasing trend. At the time of MSME act,805.23

(Graph-1: Employment in MSME sector)

(Source: Annual report 2014-15, ministry of MSME, Govt. of India)


Exports of MSMEs increased at a higher rate than the FUNDING: A MAJOR ISSUE
total exports of india.
MSME sector has a strong has a strong impact on Indian
economy by contributing 45% of industrial output,40%
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
79
FMU Journal of Management
________________________________________________________________________________________________

of exports, creating employment of 6 crores people, scheme is Rs. 1crore, it is operated through NABARD&
create 1.3 million jobs every year and produce more SIDBI.
than 8000 quality products for the Indian & international
The Govt. Also encouraging MSME by providing
markets. Despite the above strong contribution MSMEs
tax sops. Such as general excise exemption scheme
to Indias economic health, this sector is presently facing
where specified goods are exempted from excise for
so many challenges. Govt. departments, banks. F.Is and
SMEs. Tax holidays are also allowed on export oriented
corporate are becoming a hurdle in the path of growth of
units.
MSMEs by not supporting as per the requirement.
Market development assistance scheme of MSMEs
There are lot of issues & challenges for MSME in India
offer funding to the manufacturing MSMES who
like
participate in international trade fairs/exhibition on the
Lacking of timely and adequate bank finance behalf of India.
Non-availability of suitable technologies. Performance & rating scheme :under this scheme
Low production capacity the ministry of MSME, through NSIC offers to the
In effective marketing strategies. MSEs a subsidy of 75% of fee charged by the rating
Among these the funding of MSME has been a major agency, subject to a ceiling of 40000
obstacle in the path of growth. Finance is the main Prime minister task force on MSME had recently
requirement to any business, wheather it is small or big recommended 20% year on year growth in credit to
in size, wheather it is producing 1 or many variety of micro & small enterprises to ensure enhanced credit
products. flow.
Govt. Initiatives for financing MSMEs: To encourage greater bank led financing the RBI
The development commission MSME Govt. Of had driven attention towards this sector, through
India had provided an alternative scheme of finance directed lending policies, such as priority sector loans.
assistance for registered micro & small enterprise which WHY MSME ARE NOT GETTING ADEQUATE
allows the registered units to claim reimbursements of FINANCE ?
75% of the one time registration fee and 75% of the
annual fee paid to GS1 India for the 1st 3 years. The main issue of getting finance is the borrowers
incompetencies to justify their worthiness as a reliable
Another initiative was the credit guarantee fund and performing borrower while addressing lenders
scheme which enabled the micro & small enterprises to demands. Some common reasons which come in the
avail credit free of any collateral through a credit way of MSME to avail finance are
guarantee fund trust for micro & small enterprises. A
new or existing MSME can avail up to 10 million as The true potential of MSMEs can not be
term loans and working capital facility without any evaluated and the finance health can not be
collateral security or third party guarantee. In this judged.
scheme, among others institutions schedule commercial Information and knowledge between lender and
banks are eligible for lending .The guaranteed amount borrower is uneven.
which is covered under the scheme is to the extent of
75% of the credit amount sanctioned. The guarantee Absence of adequate equity position of the client
cover is for the period of the term loan/composite credit or unacceptable debt to equity ratio situation.
and in case of working capital the cover is for 5 year or a Insufficient disclosure of information
block of 5 years.
Due to poor records to support organizations
Credit linked capital subsidy scheme was initiated health cannot be measured.
to facilitate technology upgradation of MSMEs. It was
designed for the specified products /sub sectors as Sector specific problems are also there some
notified by the Indian govt to provide 15% capital sectors create a negative feeling
subsidy for induction of proven technologies approved Absence of proper business plan
under the scheme. Maximum eligible loan under the
Low margin of profit.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
80
FMU Journal of Management
________________________________________________________________________________________________

Absence of sufficient collateral security fairly detailed information on small firms, banks would
hesitate to take risk. Hence, securing transparency of
Problems in physically accessing lending
financial conditions influence the decisions on loan
institutions
finance.
Minimal quantitative info, is provided orally
ANALYSIS OF RELATIONSHIP BETWEEN
without support documents.
BANK FINANCING & PERFORMANCE OF
Bureaucracy in various govt agencies. MSME:
WHY BANKS DONT EASILY FUND MSME ? As the study is on the financial aspect of the issues of
MSME sector, here we have presented the finances
Most banks are not ready to fund MSMEs because they
provided by the scheduled commercial banks in India in
feel these firms are not providing transparent different years. we can see that there is an increasing
information regarding their financial conditions. Some trend in the financial assistance provided by the banking
enterprise owners themselves are not feeling that their
sector. This indicates that Govt. is really concerned
financial health is well. This influence banks to not give
about the financial problems of MSME sector and it is
loan to SSI units. Another major problem that bank had
inducing the banks to provide financial support.
faced in the past that is high non performing assets,
because fairly significant proportion of loans given to
small units have resulted in N.P.As. Unless there is

(Table 2: Outstanding bank credit to micro & small enterprises)


Rs. Crore

(Source: Annual report 2014-15, ministry of MSME, Govt. of India)


Performance of MSME can be measured on the basis of & many more. In this study we will examine the co-
different parameters. Such as number of MSME relationship between bank financing to the MSMEs and
enterprises, number of persons employed in the MSME its performance. we have taken 2 performance
sector, total fixed investments, output of the sector, its parameters which are investment in fixed asset and
contribution to GDP on macro basis. Good performance output.
depends on many aspects such as technological aspect,
financial aspect, marketing aspect, management aspect
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
81
FMU Journal of Management
________________________________________________________________________________________________

STUDY 1: and Y represents fixed investment by MSMEs from the


year 2006-07 to 2012-13.
In this we have taken two variables X and Y. Here X
represents finance provided by scbs to MSME sector (Table-3: Bank Finace and fixed investments of
and Y represents Output of MSMEs from the year 2006- MSME in different years)
07 to 2012-13
Years Finance By SCBs Fixed Investments
(Table-3: Bank Finance and output of MSME in (in crores) (In crores)
different years) 2006-07 127323 868543
Years Finance by SCBs (crores) Output (crores) 2007-08 213538 920459
2006-07 127323 1198818 2008-09 256127 977114
2007-08 213538 1322777 2009-10 364001 1038546
2008-09 256127 1375589 2010-11 485943 1105434
2009-10 364001 1488352 2011-12 528617 1182757
2010-11 485943 1653622 2012-13 687209 1268763
2011-12 528617 1788584
( Source: self compiled)
2012-13 687209 1809976
By applying Karl pearsons co-efficient of Correlation;
(Source: self compiled)
By applying Karl pearsons co-efficient of Correlation;

Correlation coefficient of the two data sets above


according to the above formula 0.99
Correlation coefficient of the two data sets above To know its significance we will apply T- test.
according to the above formula 0.97.
t=
From this it is obvious that there is positive correlation
between the bank financing and output of MSME. H0=relationship is not significant.
So we can say here that financing by SCBs and Output H1= relationship is significant.
are correlated to the extent of 97 % Degrees of freedom = 5
= 0.05
To know its significance we will apply T- test. by applying t- statistics the value comes to 15.69
Critical value of t for V=5, and = 0.05 in a two tailed
t=
test is 2.571
H0=relationship is not significant. Calculated value > Critical value. Hence null hypothesis
H1= relationship is significant. is rejected so the relationship between financing by
Degrees of freedom = 5 SCBs and fixed investments is significant.
= 0.05
From this it is clear that there is positive correlation
by applying t- statistics the value comes to 8.92 between the bank financing and fixed investment of
Critical value of t for V=5, and = 0.05 in a two tailed MSME. So, from the above two analysis we found that
test is 2.571 there is definitely some positive relationship among
bank financing and operational performance of MSME
Calculated value > Critical value. Hence null hypothesis sector. This confirms that commercial banks remain an
is rejected so the relationship between financing by important source of finance for MSMEs and an avenues
SCBs and Output is significant. through which MSMEs can grow.
STUDY 2 : SOME CRUCIAL HIGHLIGHTS OF MSME:
In this we have taken two variables X and Y. Here X There are around 48 million industries in small scale
represents finance provided by SCBs to MSME sector sector in India. They have grown at a stable pace of 4.5
% in the last 5 years. But, funds focusing on MSMEs are
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
82
FMU Journal of Management
________________________________________________________________________________________________

having difficulties in raising money. Due to this factor development. Besides that the contribution of the
Indian SMEs are growing undoubtedly but in a very MSME sector to Indias GDP now at 8%. And it is
small rate. The potentiality of the MSME sector is not growing at a rate higher than the projected growth rate.
being properly utilised or underutilised. According to If we analyse the current trend, then we can find that the
world bank, India has slipped 3rd rank in the ease of contribution of MSME to the GDP in many of the global
doing business index. Thus creating deep concerns about economies is in the range of 25-60 % . we can say that
the industrial development of India. SMEs are said to be the Indian MSME sector has the potential to increase the
the backbone of Indian economy. However due to share of contribution to GDP from 8% to 15% by 2020.
carelessness, there is a lacuna in their growth and
(Graph-2: Contribution of MSME in different countries to their GDP )

(Source: KPMG)
This graph encompasses that major economies of the Pradhan mantra Mudra yojana to facilitate funding to the
earth depend on their MSME sector somewhat to a unfunded sectors. This bank will be started with a
greater extent than India. USA , the largest economy in corpus of Rs. 20,000 cr. Given the Indias largest
the world . The MSME sector provides 48 % to the GDP disaggregated business ecosystem in the world, the
in Italy, 68 % of GDP are contributed by MSME sector. launch of MUDRA is a good policy initiative for the
But in India, it is only 8 %. So, there are problems in the MSME sector. The good sign is that this will be a
mechanism of the MSME establishment management, separate entity focused exclusively on increasing the
financing, producing and marketing. As discussed flow of finacing to micro and small sectors. MUDRA is
earlier, the major problems of financing, .Lack of access proposed to setup as a subsidiary of SIDBI initially and
to finance usher to systemic risk and failure and have latter it would be converted to a full fledged institution.
certain negative impact on the economic health of India.
MUDRA is the prime financial institution which will
These impact may be in the form of,
finance and support the small business sector. It will
1) Low employment generation. also act as the regulator of MFIs. Developer and
2) Reduction in national as well as per capita refinancer to facilitate effective channelization of vast
income. resources to the MSME sector. And will transform the
3) Reduction in the number of domestic industry. social as well as economic wellbeing of millions of
4) More dependence on foreign goods and services. people.
5) Rupee value depreciation.
In India, small businessman faces exploitations from the
6) No creation of new entrepreneurs.
money lenders in the unorganised sector. But creation of
MSME FINACING THROUGH MUDRA BANK: MUDRA will raise confidence in them which will lead
to nation building. MUDRA will also partnered with
As MSME sector in India faces the major obstacles of
state and regional level coordinators to provide finance
finance, the existing financial institutions cant fulfil the
to last mile financiers of MSME. MUDRA will help the
financial requirements of this sector, the Govt. Of India
proprietorship or partnership[ farms running as
in 2015 annual budget introduced a scheme called
manufacturing units, SHGs, grocers, washermen,
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
83
FMU Journal of Management
________________________________________________________________________________________________

weavers, transporters, truck owners, vegetable sellers, financing. Govt. should encourage commercial banks to
hackers, beauty parlours, hair cutting saloons, lend to SMEs by providing incentives to give preference
professional and service providers, artisans etc. both in to SMEs. Besides that, we expect that MUDRA bank , a
rural and urban areas. new initiative by Govt. of India will boost micro
enterprises to a greater extent which will definitely
The initial products and schemes under MUDRA yojana
bolster the standard of living of Indians indirectly
have been divided into three categories. Shishu, Kishor
contributing to inclusive growth.
and Tarun to develop and fulfil the funding needs of the
micro units. Shishu will cover loans upto Rs. 50,000 REFERENCES:
.Kishor wil cover loans above Rs. 50,000 and upto Rs. 5
lakh and Tarun would cover loans above Rs.5 lakh and [1] Nishanth.p, Dr. zakkariya k. a (2014). Barriers
upto Rs. 10 lakh. faced by micro, small and medium
enterprises in raising finance Abhinav national
Besides that MUDRA will include supporting financial monthly refereed journal of research in
literacy. Promotion and support of grass root commerce & management, volume 3, issue 5
institutions, creation of framework of small business [2] Oke, M.O. , Aluko, O.A.(2015). Impact of
finance entities etc. Commercial Banks on Small and Medium
Some major loopholes of MUDRA yojana. Enterprises Financing In Nigeria IOSR Journal
of Business and Management.
1) Creation of another bank, where the PSBs are [3] Ali anis, Husain firoz (2014). MSME`s in India:
suffering large amount of NPAs. problems, solutions and prospectus in present
2) MUDRA bank will lead add to the growing deficit International journal of engineering and
because of the extra salary and operation burden for the management sciences.
employees of the bank. [4] Sonia and Kansai Rajeev (2009), Globalisation
and its impact on Small Scale Industries India ,
3) MUDRA has to give loans at zero returns of PCMA Journal of Business, Vol. 1, No. 2 (June,
guarantee. On the other hand, it has laid down the 2009) pp. 135-146.
policies to reduce NPAs. So it will create a conflicting [5] Kumar ashish , batra vikas & sharma s.k. (2009),
situation. Micro, small and medium enterprises (MSMEs)
FINDINGS: in india: challenges and issues in the current
scenario Sms Varanasi
IN India MSME sector is facing the financial [6] Kharbanda, V.P. (2001), Facilitating Innovation
problems which is an obstacle for its growth. in Indian SMEs The role of
The banking sector shows a negative interest to clusters,CurrentSc.,Vol.80,No3
finance MSMEs due to no. Of reasons like higher [7] Prof M. Chandraiah ,2,R. Vani (2014), The
level of NPAs etc. Prospects and Problems of MSMEs sector in
There is a positive correlationship among the bank India an Analytical study International Journal
financing and various performance of MSMEs like of Business and Management Invention.
output, and fixed investments. [8] Verma. Dr. Subhash Chandra (2015),Mudra
The MUDRA scheme will definitely cherish the bank to "fund small businesses"
small entrepreneurs in the MSME sector. [9] Annual Report, 2014-15; Ministry of Micro,
Small and Medium Enterprises (MSMEs), Govt
IV. CONCLUSION: of India, New Delhi.
The contribution of MSMEs to Indian economy is [10] Report of the Committee set up to examine the
explained in terms of its employment, products, export. financial architecture of the MSME sector
The MSME sector faces key challenges like availability February 2015
of adequate finance in proper time, high interest rate, [11] www.msme. Gov.in
technological constraints, inadequate infrastructure [12] www.pmindia.gov.in
facilities and making of their products. Commercial [13] www. mudra.org.in
banks have significant impact on SMEs. And their

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
84
FMU Journal of Management
________________________________________________________________________________________________

FINANCIAL PERFORMANCE EVALUATION OF STATE BANK


GROUP
Tapas Kumar Sethy
Assistant Professor, Department of Commerce, Ramkrishna Mahavidyalaya, Kailashahar, Unakoti, Tripura-799277
Affiliated to Tripura University, Agartala
E-mail: s.tapaskumar@gmail.com

Abstract: The Indian banking sector is the backbone of important to evaluate financial performance of banks
Indian financial system, playing a very important role in and also there is a need to measure various global forces
economic development of the country. The present study and economic slowdown on performance of Indian
aims to evaluate the financial performance by using banking sector.
profitability ratios i.e. Return on Equity (ROE), Return on
Assets (ROA), Return on Capital Employed (ROCE), II. REVIEW OF LITERATURE:
Earning Per Share (EPS) and Net Profit Margin of selected
banks of state bank group by considering the data of five This study is related to the evaluation of performance of
years from 2011 to 2015. This study also attempts to show banks particularly State Bank of India and its associate
the statistical difference between the profitability of bank like State Bank of Bikaner and Jaipur, State Bank
selected banks by using one way ANOVA. And it has found of Travancore and State Bank of Maysore for five years
that all the banks have shown the lower performance and
from 2011 to 2015. So a very few previous research has
there is no significant difference among the banks.
been followed in this studies about the efficiency
Key Words: Financial Performance, Profitability, Return measurement of various commercial banks and financial
on Equity, Return on Asset, Earning per Share. institutions.
I. INTRODUCTION: National Level Studies:
The role of banks in the economic development of the Mahesh, and Rajeev, (2004), attempted to examine the
country assumes greater significance due to the fact that changes in the productive efficiency of Indian
they provide one of the essential inputs, namely finance, Commercial Banks after the financial sector reforms
for the growth of various segments of the economy. It is initiated in 1992. By using stochastic frontier technique
important to take stock of the special features of the they estimated banks specific deposits, advance and
banking sector in India, in order to put efficiency issue investment efficiencies for the period 1985-2004. The
in perspective. India is the largest country in South Asia, study collected panel data of 94 banks for 20 years from
characterised by many and varied financial institutions performance highlights of Banks published by Indian
and instruments. Indian banking sector was well Banks Association and Annual Accounts of Scheduled
developed even prior to its political independence in Commercial Banks published by Reserve Banks of
1947. There was significant presence of both foreign and India. The result shows that deregulation has favourable
domestic banks and well developed stock market. The impacts on the performance of Public Sector Banks and
system expanded rapidly after nationalisation of major marked improvement in Private Banks during the post
commercial banks in 1969 and 1980. liberalization period.
In the year 1991 Economic reforms in India brought Shanmugam and Das, (2005), attempted to measure the
drastic changes on the operational system of Indian technical efficiency of the Indian Banking industry from
banking sector by reducing CRR & SLR, deregulation of 1992 to 1999 by employing the stochastic frontier
interest rates, introducing capital adequacy norms for function methodology. The panel data of inputs and
credit risk management, obviously had favourable output of 94 Indian Commercial Banks from 1992-1999
impact on performance of banks. The main aim was to have been compiled from the Statistical Tables relating
make Indian banks as globally competitive. So, after two to Banks in India published by the RBI. The results
decades of economic reforms, it is becoming very indicate that the efficiency of raising interest margin is
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
85
FMU Journal of Management
________________________________________________________________________________________________

time invariant, while the efficiencies of raising other (IBA, 1999). The sample had 27 Public Sector
output like non-interest income, investments and credits Commercial banks, 33 Private Sector Banks and 34
are time varying. The study also suggested State Bank Foreign Banks. The study recommended that the
Group and Foreign Banks are more efficient than their existing policy of bringing down non-performing assets
other counterparts. as well as curtailing the establishment expenditure
through voluntary retirement scheme for bank staff and
Arora, and Verma, (2007), attempted to study the
rationalization of rural branches are steps in the right
relative efficiency of Public Sector Banks from 1991-92
direction that could help Indian Banks improved
to 2003-04 by using the Average Compound Growth
efficiency over a period of time.
Rate (ACGR) method. The study collected data from
various sources such as Annual Reports of the Banks, Sathya Swaroop Debasish, (2006), attempted to measure
Indian Banking Association Bulletin and various the relative performance of Indian Banks over the period
journals. The analysis shows that, after liberalization the 1997-2004 using the output-oriented CRR DEA model.
performance of Public Sector Banks has improved a lot The relevant panel data for the commercial banks were
in general and Corporation Bank ranks higher in obtained from CMIE data bases. The study concluded
operational and productivity parameters and results in that Foreign owned Banks were on an average more
higher efficiency. efficient and that new banks were more efficient than
old ones. In terms of size, the smaller banks were
Bhat, and Reddy, (2006), examined the effects of
globally efficient, but large banks were locally efficient.
deregulation on the technical efficiency of Commercial
Banks in India by using Stochastic Frontier Approach Rampratap Sinha, (2006), tried to make a comparative
(SFA) with specification of Cobb-Douglas Production assessment of public and private sector banks for reform
Function for the period 1992-2004. The necessary period 1996-2003 by using Data Envelopment Analysis
information for the study were collected from Annual through intermediate cost efficiency. The study relied on
Accounts Data of Scheduled Commercial Banks and the Statistical Table relating to Banks in India for bank
Statistical Tables relating to Banks in India published by wise data published by Reserve Bank of India on an
the Reserve Bank of India (RBI) and PROWESS online annual basis. The study shows that, the observed Private
database provided by (CMIE). The empirical results Sector Commercial Banks have higher cost efficiencies
revealed that, in general, the technical efficiency of than the observed Public Sector Commercial Banks, if
Commercial Banks increased during the post reform non-increasing return to scale (NIRs) is assumed.
period. Public Sector Banks achieved relatively higher However, the results change substantially if one assumes
in terms of technical efficiency, Foreign Banks are more constant return to scale.
efficient in terms of net interest income and the Private
Dugal, (2015), studying the impact of mergers on the
Domestic Banks seemed to be relatively less efficient
operating and financial performance of Indian
than others.
pharmaceutical companies examining various financial
Chakrabarti, and Chawla, (2002), tried to evaluate the ratios of the sample of companies listed on the BSE
relative efficiency of Indian Banks during the 1990-2002 from the period 2000-2006. For the purpose of analysis
period using Data Envelopment Analysis approach. paired sample t-test is conducted. The results suggested
For the study the data were collected from Trend and that there was positive impact (t+1 year window) of
Progress of Banking in India Published by Reserve Bank mergers on the profitability of the acquiring firms but
of India. The study found that, the Foreign Banks as a this impact has not sustained in (t+3, t+5 yr period) post
group, have been considerably more efficient followed merger in terms of selected profitability variables. The
by the Private Banks. From a Quantity perspective results reported in the study points to the positive impact
however, the Indian Private Banks seem to be doing the of merger announcement on the operating and financial
best while the Foreign Banks are the worst performers. performance in short run (+1 yr).
The Public Sector Banks have, in comparison, lagged
International Studies:
behind their private counterparts in performances.
Anca, and Jiri Podpiera, (2002), attempted to estimate
Milind, (2001), attempted, to measure the productive
the cost efficiency scores of Czech banking sector from
efficiency of Indian Banks by using Data Envelopment
1994 to 2002 by using stochastic frontier approach and
Analysis (DEA). The present study uses data for the
hazard model as methodology. Quarterly real data, used
year 1997-98 complied by the Indian Banks Association
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
86
FMU Journal of Management
________________________________________________________________________________________________

in the analysis, cover all commercial banks operating in ones operating only at a national level. Higher
the Czech Republic during the period 1994-2002. The capitalization, loan activity, and market power increase,
data were based on balance sheets and income the efficiency of banks. The number of ATMs does not
statements of banks that were reported to the Banking appear to influence efficiency. The results are mixed
Supervision of the Czech National Bank. The study with respect to variables indicating whether the banks
concluded that cost inefficient management was the are operating abroad through subsidiaries or branches.
leading indicator of bank failures during years of
Berger and Humphrey, (1997), surveyed 130 studies of
banking sectors consolidating and thus suggest its
financial institutions efficiency in 20 countries covering
inclusion into early warning systems.
various types of depository institutions including
Leong, Dollery, and Coeffi, (2002) attempted to commercial banks. The study surveyed five different
investigate whether the nature and extent to which Data econometric techniques of measuring efficiency with an
Envelopment Analysis type analysis in its current state aim of summarizing and critically reviving empirical
can supplement traditional measures of bank estimates of financial institutions of efficiency. They
performance and function effectively as a tool of policy identified that the various efficiency methods under
for industry regulators. They employed data on parametric and non-parametric frontiers do not always
Singaporean Banking for the period 1993 to 1999, by yield consistent results. The study suggested that
using industry statistics compiled by the KENIG (1997) deregulation of financial institutions can either improve
survey of Financial Institutions and data available from or worsen efficiency; it depends on industry conditions
the official Registry of Companies. They derived some prior to deregulation.
efficiency scores, which are reasonably consistent with
Mathews and Ismail, (2006), examined the technical
competitive industry conditions, in identifying best
efficiency and productivity of domestic and foreign
practice banks and across alternative DEA
commercial banks in Malaysia 1999-2000. The study
specifications.
used the Data Envelopment Analysis as a tool and
YAO and HAN, (2005), tried to measure the efficiency collected the data mostly from the financial statement of
of 15 large commercial banks of China during the period every bank. In a sample totally 193 observations were
1995-2005, by using Data Envelopment Analysis taken. The study found that Foreign Banks have a higher
approach and also conducted a Malaquist Index Analysis efficiency level than Domestic Banks and those efficient
to study the evolution of productivity changes. They banks are characterized by size but not profitability or
used data from all the National Commercial Banks, state loan quality. The productivity growth was found average
and non-state owned, domestic and foreign invested. between 20% and 25% and such growth was contributed
They concluded that ownership reform and foreign by improvement in technical change rather than
competition have forced the Chinese commercial banks improvement in technical efficiency.
to improve their performance, as their total factor
Allen and Boobal, (2002), tried to measure and compare
productivity rose by 5.6% per annum, and three of the
the relative pre-and post merger pure technical
four large state owned banks were among the best
efficiency and scale efficiency scores of Malaysian
performers.
Domestic Banks for a period from 1996 to 2002. The
Fotions Pasiouras, (2006), estimated the technical and non-parametric Data Envelopment Analysis (DEA)
scale efficiency of Greek Commercial banks by using approach is applied to detect any efficiency gains
Data Envelopment Analysis (DEA) over the period resulting from bank mergers. In a sample the systematic
2000-2004. The sample consists of the universe of merger of 54 pre-crisis Malaysian Domestic Banks into
commercial banks with financial statements available in 10 Domestic post-crisis anchors Banking Groups. The
Bank scope database of Burean Van Dijks Company, data were obtained from the individual commercial
operating in Greece between 2000 and 2004. banks audited annual reports as well as from other
Supplementary data for the banks (e.g., staff number, publicly available published information from stock
number of ATMs) were collected from the Hellenic exchanges and libraries. The study concluded that, there
Bank Association. The sample ranges between 12 and is some evidence of increase in efficiency immediately
18 banks per year and consists of 78 observations in post-merger but these are not sustained.
total. He concluded that banks have expanded their
Akthar, (2002), examined the efficiency of commercial
operations abroad appear to be more efficient than the
banks in Pakistan by taking Data Envelopment Analysis
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
87
FMU Journal of Management
________________________________________________________________________________________________

(DEA) as a tool. The study examined the results of 40 Gilberto Turati, (2003), estimated the evolution of cost
commercial banks. The data source of the research is the efficiency scores in European Banking Markets from
Banking Statistics of Pakistan 1998-99 published by the 1992 to 1999. He established the relationship between
State Bank of Pakistan. The study suggested for the the cost efficiency and profitability with the production
improvement in efficiency of Pakistans banks and also function of intermediation approach. The empirical
recommended combined efforts of banking sector and analysis was based on a panel of about 250 commercial
the government to be at par with the best world practice. banks observed from 1992 to 1999. Data were from the
The results also supported the ongoing process of IBCA Bank Scope database and represent balance sheet
privatization of Public Sector Banks in Pakistan. information of banks located in France (123), Germany
(59), Italy (42), Spain (13) and U.K. (26). He found no
Angetidis and Lyroudi, (2006), attempted to investigate
striking differences in mean efficiency among European
the productivity of the 100 larger Italian banks for the
countries. The study also estimated scale economies and
period of 2001-2002. The study used Data Envelopment
scope economies; while scale economies were found
Analysis (DEA) technique to calculate the Malmquist
widespread scope economies appeared rather small.
Indices of Total Factor Productivity (TFP) change. The
data were collected from Thompsons Bank scope Berger, and De Young, (1997), tried to examine the
database. The pertinent information was brought from intersection between the problem loans and cost
the Banks Balance Sheets for the years 2001 and 2002. efficiency in commercial banks. They employed
The study concluded that, there is an inverse relationship Granger-Causality Techniques to test four hypotheses
between size and productivity growth. regarding the relationships among loan quality, cost
efficiency and bank capital. For this study, they
Berger, Hasan and Zhon, (2005), tried to analyse profit
followed mostly the annual observation report of
and cost efficiency by using 256 annual observations
commercial bank. The analysis suggested that problem
over 1994-2003 in commercial banks in China with
loan precede reductions in measured cost efficiency; that
different majority ownership i.e. state owned, private,
measured cost efficiency precedes reductions in problem
domestically owned, and foreign-owned. In a study they
loans; and that reductions in capital at thinly capitalized
used TransLog Functional form to estimate the cost and
banks precede increase in problem loans.
profit functions for each year. The data collected from
various official sources such as Almanac of Chinas Orea and Kumbhakar, (2003), attempted to estimate the
Finance and Banking, 1994-2004, yearly statistics book efficiency of Spanish Banks by using the latent class
of Chinas economics, each individual banks website Stochastic Frontier model. The study used an
which provides the banks financial statement and unbalanced paper of 169 banks for the period 1999-
ownership structures, etc. the empirical results suggested 2000. The study found that saving banks are as efficient
strong favourable efficiency effects from reforms that as private banks, and that structural changes (closure of
reduced the state ownership of banks in China and branches, staff location, etc) resulting from acquisitions
increased the role of foreign ownership. processes led to a significant reduction in cost
efficiency. The results also suggested that bank-
Barr, Killgo, Siems and Zimmel, (1999), surveyed to
heterogeneity can be fully controlled when a model with
evaluate the productive efficiency and performance of
four classes is estimated.
U.S. Commercial Banks from 1984 to 1998 by using the
Data Envelopment Analysis (DEA) as a methodology. Simon, H.K , (2001), tried to investigate the cost
The publicly available year end data reported by U.S. efficiency of multibank operating in Hong Kong by
commercial banks was the only source of information using Stochastic Econometric cost frontier approach
for their study. The analysis found strong and consistent from 1992-1999. Micro banking data from 1992:Q1 to
relationships between efficiency and inputs and outputs, 1999:Q4 obtained from the Return of Assets and
as well as independent measures of bank performance. Liabilities, Return of current years Profit and Loss
Further, the study suggested that the impact of varying Account, and Quarterly Analysis of Loans and Advance
economic conditions is mediated to some extent by the and Provisions that Authorizes Institutions in Hong
relative efficiencies of the banks that operate in these Kong must file with the Hong Kong Monetary Authority
conditions. Finally, they also found existence of a close are used to estimate the model. The study concluded that
relationship between efficiency and soundness as the average efficiency of Hong Kong banks is about
determined by bank examiner ratings. 16% to 30% which is similar to the findings in the U.S.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
88
FMU Journal of Management
________________________________________________________________________________________________

He also reported that the average large bank is found to were negatively related to product diversity and
be less efficient than the average small bank, particularly positively related to urbanization.
during the earlier time Period.
The most of the studies revised in this study directed
Imed, Liman, (1999), attempted to measure the technical towards measuring efficiency of Banks. Both national
efficiency of Kuwaiti Banks by using stochastic cost and international studies used parametric and non-
frontier approach. The data used in the analysis were parametric approaches in estimating the technical as
obtained from eight banks for the period (1994-1999) well as allocative efficiency in banks. Most of the
from various issues of the Financial Operating Report studies had concentrated on developed countries
published by the research unit of the Institute of Banking particularly in U.S. and European countries a few
Studies in Kuwait. He found that banks produce earning studies were completed in developing countries like
assets at constant return to scale and hence have less to India. Studies like Kumbhakar et al (2001), Shanmugam
gain from increasing scale production notably, through and Das (2004), Mahesh and Rajeev (2004) and Bhat
merging with other banks, than from reducing their and Reddy (2006), show the deregulation has positive
technical inefficiency. The results show that larger bank effect on the efficiency of banks. Kumbhakar (2004)
size, higher share of equity capital in assets and greater study highlighted the cost efficiency, where the study
profitability are associated with better efficiency. used total branches as one of the output variables due to
Analysis also suggested privatization of banks could that the results of the study favoured Public Sector
also improve corporate governance that leads to better Banks which has more number of branches. Shanmugam
efficiency through lower intermediation margins and and Das (2004) studied the period of first generation
spreads and a wider range of services. reforms. This study used fixed assets as one of the input
variables instead capital. Due to this reason banks
Rangan, G.N. et al., (1988) tried to measure the
(Public Sector Banks) which have long been in business
technical efficiency of U.S. banking industry. A non-
might have more fixed assets and considered as
parametric frontier production approach was applied to
inefficient. Milind Sathye (2003) cross sectional study
measure technical efficiency. A total of 215 samples of
has taken only one year period. None of the studies are
banks were drawn from the Federal Deposit Insurance
conducted in recent years and shown ownership and
Corporation of the Reports of Condition and Reports of
performance relationship. Duggal, (2015) was
Income for yearend 1986. The results indicated that the
investigated to know the financial improvement of banks
banks could have produced the same level of output with
in post merger on analyzing some ratio for a period of 3
just 70 percent of the inputs actually used. Most of this
years pre and post 5 years is becoming evident that the
efficiency was the result of wasting resources and
major impact was seen in terms of ROA and maximum
almost all of the banks were operating at constant
banks in the sample shows significant results. Least
returns to scale. Regression Analysis indicated that
performing ratios are ROE and EPS. Whereas NP
technical efficiency measure was positively related to
Margin and ROCE depicted a considerable
bank size and negatively related to product diversity.
improvement. Thus, conclude mergers have proved to
Aly Y.H et al., (1990) made an attempt to calculate the have a profound effect on banks ability to earn profits
overall, technical and allocate efficiencies in U.S. and building on assets for future group.
Baking by using non-parametric frontier approach. The
pooled data of 322 banks used in this study was taken III. OBJECTIVES:
from the Federal Deposit Insurance Corporation tapes on The present study attempt to focus on following
the Reports of Condition and Reports of Insurance (Call objectives.
Reports) for the year 1986. The study identified that
inefficiency in banks mainly attributed to under 1) To assess the profitability of State Bank of
utilization or wasting of inputs rather than choosing the India and its selective associates.
incorrect input combinations (allocative inefficiency). 2) To test the statistical difference of profitability
The study also found that there was no significant among the State Bank of India and its selective
difference in efficiency between branch banks (that are associates.
allowed to operate branches) and non-banking unit
banks (that are prohibited from operating branches). The
study concluded that overall and technical efficiency

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
89
FMU Journal of Management
________________________________________________________________________________________________

IV. METHODOLOGY: group as well as other scheduled Commercial Banks are


completely excluded from this study due to shortage of
To evaluate the financial performance of banks and any time.
other DMU, there are many parametric and non-
parametric approaches i.e. parametric approaches Conceptual Framework of Profitability Ratios used
includes Stochastic Frontier Analysis, Free Disposal in this study:
Hull, Thick Frontier Analysis and Distribution Free For analysing the financial performance of banks in
Approach and non- parametric approaches includes Data general and profitability in particular, this study has used
Envelopment Analysis i.e. Malmquist Total Factor different financial ratio, which are explained below:
Productivity index DEAP Version 1996, developed by
Tim Coelli. For this analysis descriptive statistics and 1) Return on Equity(ROE):
One way ANOVA have used. Basically this study has A return on shareholders equity is calculated to see the
been used the Descriptive Statistics of MS Excel to find profitability of owners investment. The shareholders
out the Mean value for making the comparison of equity or net worth will include paid up share capital,
financial performance of various selective banks like share premium and reserves and surplus less
State Bank of India, State Bank of Bikaner and Jaipur, accumulated losses. Net worth can also be found by
State Bank of Travancore and State Bank of Maisore. subtracting total liabilities from total assets.
On the other hand this study has also used one way
ANOVA to test the significant difference among the Profit after Tax
ROE = 100
group of banks. Net Worth
Research Hypothesis: 2) Return on Assets(ROA):
These are the following hypothesis has been set to test EBIT
ROA = 100
the objectives of the study. Total Assets
H0 : There is no significant difference in the profitability 3) Return on Capital Employed(ROCE):
of selected banks under this study. EBIT
ROCE = 100
Ha : There is significant difference in the profitability of Capital Employed
selected banks under this study.
4) Earning Per Shares(EPS):
Sources of Data: EPS simply shows the profitability of the firm on a per
Mostly the secondary data is used for this present study share basis; it does not reflect how much is paid as
collected from Annual Data of Scheduled Commercial dividend and how much is retained in the business. But
banks and statistical table relating to banks in India as a profitability index, it is a valuable and widely used
published by RBI, PROWESS online data base of CMIE ratio.
and any other sources. The study has based on five years Profit after Tax
data on financial ratio from 2011 to 2015 of only EPS =
selected banks i.e. State Bank of India, State Bank of Number of common shares outstanding
Bikaner and Jaipur, State Bank of Travancore and State 5) Net Profit Margin (NP Margin):
Bank of Maysore.
This ratio is the overall measure of Banks ability to turn
Scope and Limitation: each rupee income in to net profit. If the net profit
This present study has particularly considers a very margin is inadequate, the bank will fail to achieve
small sample size where only selected banks of State satisfactory return on shareholders fund.
Bank Group has focused i.e. State Bank of India , State Net Profit after Tax
Bank of Bikaner and Jaipur, State Bank of Travancore Net Profit Margin = 100
Total Income
and State Bank of Maysore for five years from 2011 to
2015. The data of other two SBI Associates like State Data Analysis and Interpretation
Bank of Hyderabad and State Bank of Patiala are not The present research is attempting to highlight the
available. On the other hand the study could not able to following empirical data followed by analysis and
cover other financial aspects of bank of State Bank
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
90
FMU Journal of Management
________________________________________________________________________________________________

interpretation of those in order to cater the needs and The table-3 is showing ROCE of all banks like State
requirements of thrust objectives which are given below: Bank of India, State Bank of Bikaner and Jaipur, State
Bank of Travancore and State Bank of Maysore for five
Table-1: Return on Equity (ROE) of the selected banks
years from 2011 to 2015. Here only SBM is achieving
YEAR SBI SBBJ SBT SBM
CONSOL target of Mean value in the year 2011. But except this
IDATED year all other year of SBM along with SBI, SBBJ &
2015 10.2 12.92 6.38 9.37 16.46 SBT has been the worst performer.
2014 9.2 13.66 6.65 6.87 16.26 Table-4 : Earnings per Share (EPS) of the selected banks
2013 14.26 15.32 14.09 9.61 15.64
CONSOL
YEAR SBI SBBJ SBT SBM
2012 10.99 15.65 6.38 9.26 18.59 IDATED
2015 175 110.98 56.63 85.14 177
2011 11.34 19.32 21.01 13.61 17.83
2014 145.88 104.53 60.87 42.52 162
The table-1 indicates the performance of all selected
2013 206.2 104.32 123.01 88.91 154
banks i.e. State bank of India, State Bank of Bikaner and
Jaipur, State Bank of Travancore and State Bank of 2012 174.46 93.15 56.63 78.88 185
Maysore for five years from 2011 to 2015 in respect of 2011 116.07 110.18 145.55 106.97 116.07
Return on Equity (ROE). It found that SBBJ is
performing better than other banks but lagging behind The table-4 is showing EPS of all banks like State Bank
overall results. of India, State Bank of Bikaner and Jaipur, State Bank
of Travancore and State Bank of Maysore for five years
Table-2 : Return on Assets (ROA) of the selected banks
from 2011 to 2015. Here only SBI & SBT is achieving
YEAR SBI SBBJ SBT SBM
CONSOL target of Mean value in the year 2011.
IDATED
2015 172.04 858.95 886.42 908.41 188.47 Table-5 : Net Profit (NP) Margin of the selected banks
2014 1584.34 765.13 914.96 830.78 1626 CONSOL
YEAR SBI SBBJ SBT SBM
IDATED
2013 1445.6 680.59 873 925.55 1564 2015 8.59 8.62 3.5 5.89 20.73
2012 1251.05 594.98 886.42 851.02 1859 2014 7.98 8.95 3.13 4.33 16.26
2011 1023.4 570.16 692.71 785.79 462.77 2013 11.78 9.73 7.12 6.97 15.64
2012 10.99 10.36 3.5 7.26 18.59

The table-2 is showing ROA of all like State Bank of 2011 9.05 11.48 13.91 12.27 22.35
India, State Bank of Bikaner and Jaipur, State Bank of
The table-5 is showing NP Margin of all banks like
Travancore and State Bank of Maysore for five years
StateBank of India, State Bank of Bikaner and Jaipur,
from 2011 to 2015. The study examined that SBI is the
State Bank of Travancore and State Bank of Maysore for
best performer during throughout study period and lying
five years from 2011 to 2015. Here all the banks are not
above frontier.
at all achieving any mean value of overall results.
Table-3 : Return on Capital Employed (ROCE) of the
Table: 6 : Mean Value of all selected Banks
selected banks
Variables SBI SBBJ SBT SBM Overall
CONSOL
YEAR SBI SBBJ SBT SBM
IDATED ROE (%) 11.45 15.99 12.03 9.84 17.08
2015 9.11 10.28 10.14 10.12 10.38 ROA(Rs.) 1326.09 652.72 841.78 848.29 1377.95
2014 9.11 10.23 10.21 9.81 16.26 ROCE (%) 9.11 10.01 9.76 9.85 14.96

2013 9.35 10.37 9.91 10.28 15.64 EPS (Rs.) 160.65 103.04 96.51 79.32 154.26
NP Margin
2012 9.45 10.17 10.04 9.95 18.59 9.95 10.13 6.91 7.70 18.21
(Rs.)
2011 8.54 9.28 8.91 9.36 9.35

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
91
FMU Journal of Management
________________________________________________________________________________________________

The above table-6 presents the Mean value of all scheduled commercial banks and also found that there is
selected banks i.e. State Bank of India, State Bank of no significance difference between the banks.
Bikaner and Jaipur, State Bank of Travancore, State
Bank of Maysore and also the Mean value of BIBLIOGRAPHY:
consolidated financial ratio of scheduled commercial [1] Akhtar, M.H., (2002) X-Efficiency Analysis of
banks( excluding regional rural banks) published by Commercial Banks in Pakistan: A preliminary
RBI. It has found that in the regards of Mean Value of Investigation, Working Paper B.Z. University,
ROA, the mean value of SBI is Rs. 1326.09 comes Multan, Pakistan.
closer to overall mean value i.e. Rs. 1377 and also EPS
mean value of SBI is Rs. 160.65 which is higher than the [2] Angelidis, D. and Lyroudi, K.,(2006) Efficiency
overall mean value of EPS i.e. Rs. 154.26, here might be in the Italian Banking Industry: Data
some existing factors having the positive impact on Envelopment Analysis and Neural Networks,
better performance of SBI i.e. listed in NSE as NIFTY Internal Research Journal of Finance and
hits 8,000 during last couple of years. Whereas other Economics,Euro Journals Publication, Inc.,
three mean value of ratio i.e. ROE, ROCE, NP Margin University of Macedonia, Thessaloniki, Greece.
of SBI along with all ratio mean value of three [3] Barr, R.S., Killgo, K.A., Siems, T.F. and Zimmel,
associates i.e. SBBJ, SBT & SBM are lagging behind S., (1999) Evaluating the Productive Efficiency
from overall mean values as because high NPA i.e. more and Performance of U.S., Commercial Banks,
than 6.5%, announcement of merger of associates with Working Paper, Southern Methodist University
SBI leads to make SBBJ, SBT & SBM show worst and Federal Reserve Bank of Dollas.
performance.
[4] Berger, A.N. and Humpery, D.B., (1999)
Table-7 ; ANOVA (One Way) Efficiency of Financial Institutions:
Variables F- Value P- Value International Survey and Directions for Further
ROE 94.05 7.95 Research, Working Paper, University of
ROA 164.67 2.18 Pennsylvania.
ROCE 649.07 1.71 [5] Berger, A.N., and Young, R.D.,(1997) Problem
EPS 97.04 5.17 Loan and Cost Efficiency in Commercial Banks,
NP Margin 60.87 2.08 Journal of Banking and Finance, Vol.21.
The table-7 represents the the F-Value and P-Value and [6] Berger, A.N., Hasan, I. and Zhou, M., (2005)
provides categorically that in respect of variables like Bank Ownership and Efficiency in China: What
ROE, ROA, ROCE, EPS & NP Margin, the P-Value is will happen in the worlds Largest Nation?,
positive and higher than 0.05 I.e. test at 5% Level of Working Paper, Wharton Financial Institutions
Significance. As results it clearly indicates that Null Centre, Philadelphia and Rensselaer Poly
hypothesis is accepted and alternative hypothesis is Technic Institute, Troy, NY, USA.
rejected. So, there is no significance differences are
[7] Chakrabarti, R. and Chawla, G.,(2002) Bank
there between the selected banks like SBI, SBBJ, and
efficiency in India since the reforms an
SBT & SBM.As because the service qualities of all
assessment, working paper ICRA Bulletin,
banks are almost same.
Money and Finance.
V. CONCLUSION: [8] D. Allen. And Boobal-Batchler, V.,(2002) The
The Indian banking sector is the backbone of Indian role of post-crisis bank mergers in enhancing
financial system, playing a very important role in efficiency gains and benefits to the public in the
economic development of the country and also going by context of developing economy: evidence from
remarkable phase since last two decade witnessing high Malaysia, working paper Monash University
NPA, lower profitability etc. The present study has Malaysia.
found that the performance of all selected bank under Debasish, S.W., (2006) Efficiency Performance
[9]
the sample of the study are not performing well in in Indian Banking- Use of Data Envelopment
comparison with overall performance of Indian Analysis, Global Business Review, 7.pp325-
333.
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
92
FMU Journal of Management
________________________________________________________________________________________________

[10] Duggal, N.,(2015) Mergers and Acquisitions in impact of credit risk, off balance sheet activities
India: A case study on Indian Banking Sector, and International operations.
Ird India.
[20] Podpiera, A. and Podpiera, J., (2002)
[11] Kumbhakar, S.C. and Orea, L., (2003) Deteriorating cost efficiency in commercial
Efficiency measurement using a latent class banks signal increasing risk of failure.
Stochastic Frontier Model, working paper, State
[21] Reddy, K.S. and Bhat, K.S., (2006) An
University of New York, U.S.A., Ovido.
empirical analysis of technical efficiency of
[12] Kwan, S.H.,(2002) The x-efficiency of commercial banks in India, Asia-African
commercial bank in Hong Kong, FRBSF, Journal of Economics and Econometrics; vol,6.
working paper, 2002-14. No-2, pp 119-136.
[13] Leong, S.H. Dollery, B. and Coelli, T., (2002) [22] Sathye, M.(2001) Efficiency of banks in a
Measuring the technical efficiency of banks in developing country: The case of India, working
Singapore for the period 1993 to 1999: An paper, University of Canberra, Bruce act2617.
application and extension of the Bauer ET AL
[23] Shanmugam, K.R. and Das, A., (2004)
(1997) Technique, working paper series in
Efficiency of Indian Commercial Banks during
Economics, No.2002-10, IIN, 1442 2980.
the reforms period, Applied Economics, 14,pp
[14] Limam, I., (1999) Measuring technical 681-686.
efficiency of Kuwaiti Banks, working paper
[24] Sinha, R.P., (2006) Net interest margin of Indian
Arab Planning Institute, Kuwait.
commercial banks: A Data Envelopment
[15] Mahesh, H.P. and Rajeev, M.,(2004) Approach, volume-8, Number 1, Business
Liberalization and Productive Efficiency of Persective.
Indian Commercial Banks: A Stochastic Frontier
[25] Turati, G., (2003) Cost efficiency & profitability
Analysis. Working Paper Institute for Social and
in European commercial banking: Implications
Economic Change, Bangalore.
for antitrust analysis working paper, Universita
[16] Mathews, K & Ismal, M., (2006) Efficiency and di Torino.
productive growth of domestic and foreign
[26] Wheelock, D.C. and Wilson, P.W., (1995)
commercial banks in Malasia, working paper
Evaluating the efficiency of commercial banks:
Kardiff University, United Kingdom, ISSN,
Does our view of what bank do matter?,
1749-6201.
working paper Federal Reserve Bank of St. Louis
[17] Mester, L.J., (2003) Applying efficiency and University of Texas at Austin.
measurement techniques to Central Banks,
[27] Yao, S. and Han, Z., (2005) Ownership reform,
working paper No 03-13, Federal Reserve Bank
foreign competition and efficiency of Chinese
of Philadelphia and University of Pennsylvania.
commercial banks: A Non-parametric
[18] Pandey, I.M.,(1999) Financial Management , Approach, working paper, China Policy
Vikas Publishing House Pvt. Ltd. Institute.
[19] Pasiouras, F., (2006) Estimating the technical &
scale efficiency of Greek commercial banks: The

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
93
FMU Journal of Management
________________________________________________________________________________________________

Impact of Non-financial Rewards on Employee Motivation in PSUs of


India: A Study on MCL
Satya Swarup Das
Research Scholar, Department of Business Management, Fakir Mohan University, Balasore

Abstract : This study is conducted to measure the impact sector to provide such incentives in adequate levels in a
of non-monetary rewards on employees motivation in developing national economy. As a result, it is important
Mahanadi coalfields ltd (MCL). The study aims to to look for any possible alternative means that can be
highlight importance of the non-monetary rewards in used to motivate employees in the public sector. In line
terms of their effectiveness as well as efficiency. The study
with this purpose, this study focuses on the use of non-
also identifies to what extent the MCL are taking care of
this source of employee motivation.. This research can be monetary rewards as a motivational tool on public sector
helpful for HR managers in public sector. They can design employees.
effective compensation package to retain their competent
employees. II. RESEARCH PROBLEM
Key words: Motivation, monetary rewards, non-monetary Mahanadi Coalfields Ltd (MCL), which is a public
rewards, employees motivation. sector holding company in India with Miniratna Coal
Mining PSU status, is the second largest coal producing
I. INTRODUCTION company of Coal India Ltd (CIL). At present, the
The public sector enterprises (PSUs) in India have company produces, on an average, 103.12 MTe of coal
always been considered as model employers. The and is catering mainly the needs of power sectors. Also
brightest of candidates dreamt of working for a public 22,278 (as on 31.03.2014) number of persons were
sector enterprise. However, with the opening of working in it and the company was operating at 6 UG
economy, the situation has taken a u-turn, the public and 16 OC mines. However, the fact is that such a huge
sector enterprises are in a war for talent with its private company which is playing a vital role in the national
counterparts. It is not only losing its talent pool to the economy is showing almost a declining trend for
private sector but fresh talents are more attracted to join production of coal per employee as well return on its
private sector or MNCs were there is tremendous career capital employed for almost 5 years since 2009-10. As
progression along with attractive pay packages. With the researcher is an employee of MCL and has already
increase in opportunities, Central Public Sector spent many years of his career in this company, present
Enterprises (CPSEs) are also finding it difficult to retain plight of the company has been a matter of shock to him.
talented employees. As a result, public sector is under One question has been continuously knocking his mind
severe pressure in terms of attracting and retaining as to why such a vital company in the public sector
talent. should be allowed to lose its capital employed bit by bit,
why the production of coal is not increasing in spite of
When the issue is motivation, one of the first thing that higher wages. Why they are not motivated properly?
comes to ones mind is the concept of incentive, which Again, there are many contemporary research studies
refers to any means that makes an employee desire to do supporting the effectiveness of non-monetary incentives
better, try harder and expend more energy. With regard as a motivating tool in the private sector organizations.
to monetary incentives, it can be argued that private However, there is hardly any study regarding its use in
organizations have more financial sources to motivate public sector organizations.
their employees than the public organizations. It is
known that public employees payment levels in India Under the above backdrop, the researcher has
are generally low compared to private sector employees. undertaken the study on The use of non-monetary
Moreover, while many private organizations have incentives as a motivational tool in Public Sector
monetary incentives such as bonuses, commissions, cash Undertakings in India: A study on Mahanadi Coal Fields
Incentives etc., it is quite challenging for the public Limited (MCL).
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
94
FMU Journal of Management
________________________________________________________________________________________________

III. LITERATURE REVIEW examine the relationship between non-monetary rewards


and job satisfaction among teachers in public schools in
Ever since Taylor Frederick (1911) pioneering work, Pakistan and found that non-financial rewards are the
financial benefits were used either as an incentive or most dominant predictors of employees job satisfaction
reward to encourage or reinforce the desired behavior.
Similarly, Borjas (1979) mentioned that pay is an When employers give more attention to non-financial
essential aspect of job satisfaction. Shields, Scott, reward tools such as work-life balance, career
Sperling, and Higgins (2009) added that some financial advancement, educational benefits the employee may
rewards for example health care are considered a vital recognize the organization as helpful and supporting.
foundational element in attracting or retaining talent as Abdullah and Wan (2013) give more importance to the
competitors for talent also offer employee benefits. employees recognition as the most dominant instrument
Some other studies show that certain financial benefits that is being used in the organization to drive employee
such as pensions and medical coverage can increase satisfaction. Rewards are imperative factors that
employees retention and organizations with benefit elucidate certain job aspects that contribute significantly
programs that employees value has higher shareholder to the organization such as job satisfaction. ztrk and
value (Milkovich & Newman, 2008; Pfau & Kay, 2002). Dndar (2003) conduct a survey from employees
working in public sector organization in UK. The results
Different types of Non-financial rewards lead employees of the study concluded that employees are working in
more towards high satisfaction and motivation as public sector organizations give more importance to
compare to financial rewards (Nel et al., 2004).Stovall non-financial rewards as compare to financial rewards
(2003)conducted research on non-financial rewards and for example performance appreciation, promotional
their impact on employees job satisfaction and opportunities, and involvement in decision making.
concluded that an effective reward package could have a Similarly, (Erbasi & Arat, 2012) examined the
significant impact on the employees performance. He importance of non-financial rewards among head
explained that non-financial rewards motivate workers physician in hospital and concluded that the respondents
which lead to job satisfaction. Tausif (2012) in his study give more prominence to job security, promotional
concluded that organizational non-financial rewards has opportunities, and organizational culture that have
significant role in teachers job satisfaction. Tippet and significant and imperative effects on job satisfaction.
Kluvers (2009) regarded non-financial rewards as a
helpful tool to develop employees job satisfaction. In most organizations very limited time and efforts are
Barton (2006) has considered employees' recognition as spend or considering non-monetary sources of rewards.
most the important factor among non-financial rewards Erbasi & Arat (2012) regarded non-financial rewards as
to enhance the employees job satisfaction level. In same a helpful tool to develop employees job satisfaction.
vein, Bull (2005) further added that challenging jobs For example research confirmed contribution of
also enhance the employees job satisfaction. Similarly, effective training and development opportunities to learn
several studies were also conducted on university faculty and develop enhance employee retention (Arnold,
which identified remuneration as the most important job 2005). The drawbacks associated with absence of non-
satisfaction factor (Grace & Khalsa, 2003). financial rewards could be job turnover of talented
employees who look for place where there are high
Despite the significance of monetary rewards Budhwar chances of growth and professional training (Herman,
& Bhatnagar, (2007) pointed towards other type of 2005).
rewards that are in general ignored in discussions of
employees' job satisfaction. Non-financial rewards have Thus it can be concluded that besides the importance of
a significant role in employee's opinion concerning the financial rewards i.e. salary, fringe benefits, bonuses and
reward climate in organization (Khan, Shahid, Nawab, life insurance; the employees also expect various non-
& Wali, 2013).Ngatia (2015)conducted research on non- financial rewards like; job recognition, decision making,
financial rewards and their impact on employees job and appreciation from the organization. The impact of
satisfaction and concluded that useful reward package non-financial rewards is instrumental in improving the
could have a major impact on the employees job employees morale and enhances their satisfaction level.
satisfaction and performance. Similarly, Hayati and
Caniago (2012) find the positive link between non-
financial rewards and job satisfaction. Tausif (2012)
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
95
FMU Journal of Management
________________________________________________________________________________________________

IV. OBJECTIVES OF THE STUDY a direct reward for performance; if it is money, the
marginal amount should be perceived by the individual
a) To investigate the effectiveness of financial as being significant, therefore, for money to motivate,
incentives on employees motivation. the marginal difference in pay increases between a high
b) To investigate the importance of non-monetary re- performer and an average performer or a high skilled
wards on employees motivation. and a low skilled should be significant.

c) To determine which reward best motivate The Concept of Monetary and Non-Monetary
employees. Rewards

Employee Motivation and Rewards Bates (2006) indicates, for money to motivate, merit pay
rises must be at least seven percent of base pay for
Rewards are divided by Armstrong (2007) into two employees to perceive them as motivating and to catch
groups; these are monetary and non- monetary rewards. anybodys attention. Recent studies for example by
The monetary rewards include base pay, merit pay, Locke (1998) on the four methods of motivating
incentives, commission, bonus and healthy allowances. employees indicated that money rated the second among
Non-monetary rewards include recognition, decision lower-level employees. Such evidence demonstrates that
making roles, promotion, flexible working hours and money may not be the only motivator, but its difficult
company uniforms. Armstrong (2007) indicated that to argue that it doesnt motivate. This therefore opens up
employees are rewarded in accordance with their the debate that non-financial rewards such as
contribution, skill and competence and their market recognition, decision making and job security have a
worth. The importance of money as a motivator has role to play in the internal motivation of employees that
been consistently downplayed by most behavioral monetary rewards cannot address. To assume that
scientists like Herzberg who point out the value of financial incentives will always motivate people to
challenging jobs, feedback, cohesive work teams and perform better is therefore as simplistic as to assume that
other nonmonetary factors as stimulants to motivation. they never motivate people to perform better. The only
However, money is the crucial incentive to work issue that is certain about this is that multiplicities of
motivation because it is the vehicle by which employees interdependent factors are involved in motivating
can purchase the numerous need-satisfying things they employees ranging from money to non-monetary.
desire (Robbins et al. 2003). Researches reaffirm that for Another stream of analyses points out that people never
the vast majority of the workforce, regular pay is rate money as their main motivator, most achievements
absolutely necessary in order to meet basic physiological are reached for reasons other than money, and it is a
and safety needs, hence, lower level employees are factor that attracts people but does not play a big role in
caught in the trap. Furthermore, money also performs retaining and motivating. Robert and Shen (1998) point
the function of a scorecard by which employees asses out, salary and other hygiene factors yielded
the value that the organization places on their services, dissatisfaction and only motivators directly influence
hence an element of being a valuable assert in the motivation beyond the psychological neutral level. In a
organization results in personal motivation resulting in recent survey, by (Ellis and Pennington, 2004) direct
money having a positive impact on motivation (Langton financial reward played a critical role in attracting
and Robbins 2007). Armstrong (2007) also point out that talented employees, but they have only a short term
rewards can act as a goal that employees generally strive impact on the motivational levels of employees. Kohn
for, and as an instrument which provides valued quoted by Armstrong (2007) challenge what he calls the
outcomes. It is also a symbol which indicates the behaviorists dogma about money and motivation. He
recipients value to the organization and can act as a claims that, no controlled scientific study has found a
general reinforce because it is associated with valued long-term enhancement of the quality of work as a result
feedback (Langton and Robbins 2007). Many of any reward system. Slater quoted by Armstrong
organizations face problems when trying to understand (2007) also argued that the idea that everybody wants
the relationship that exists between rewards and money is propaganda circulated by wealth addicts to
motivation, however, Langton and Robbins (2007) make they feel better about their addiction. Armstrong
argued that for rewards to motivate an individual certain (2007) further argued that, a closer look on how
conditions must be met, that is, the type of reward must employees are motivated indicates that it becomes
be important to an individual and should be perceived as disturbingly clear that the more you use rewards to
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
96
FMU Journal of Management
________________________________________________________________________________________________

motivate, the more employees tend to lose interest in V. METHODOLOGY


whatever they had to do to get the rewards. The more
reinforcing the reward is, the more it erodes intrinsic Population and Sample
interest. Therefore, various devices can be used to get The study population is all the employees in the MCL,
employees to do something, but that is a far cry from which had a total of 22,278 employees as on 31.03.2014.
making people want to do something in this regard, non- Sample Size was determined by the formula:
monetary rewards apply. Theorists therefore point out
the value of challenging jobs, feedback, cohesive work n= [NZ2 * 0.25] / [d2 * {N-1} +Z2 * 0.25]
teams and other nonmonetary factors as stimulants to Where
motivation which should never be left out when
addressing the subject of motivation in the workplace. n= Sample size required
Pfeffer 1998 as quoted by Armstrong (2007) also N= Total Population Size
contends that employees do work for money but they
work even more for meaning in their lives. Where there d= Precision Level (usually 0.05 or 0.10) and
is no meaning of work, there is greater loss of loyalty Z= Number of Standard deviation units of the sample
and commitment and pay should therefore not substitute distribution corresponding to desired confidence level
for a working environment high on trust, fun, and
meaningful work. The above simply mean, money Hence total sample size determined for my study is
should be used in conjunction with other motivating n= [22,278 *1.962 * 0.25] / [(0.05)2 * {22,277} +
factors in order to win the attention of employees. (1.962 * 0.25)]
However, according to Armstrong (2007), in a much
publicized study, Gupta and her colleagues analyzed = 377.66 OR 378
thirty-nine studies conducted over four decades and
The questionnaires were distributed to 580 employees
found that cold-hard cash motivates workers whether
who were present in their offices/worksite at the time the
their jobs are exciting or mundane in labs and real world
survey was conducted. Subjects who did not wish to
settings alike. But the research team acknowledges that
participate in the study were asked to return the blank
money is not the only factor that concerns employees
survey to the researcher. 169 employees refused to
noting that beyond a certain point higher salaries will
participate in the study and 27 questionnaires were
make employees happier, but it will not buy better
rejected by the researcher as those are incomplete. The
performance and motivation. Still, Gupta warns that
number of employees completed the questionnaires in
employers who dole out small merit raises-less than
all respects were 384, leading to a response rate of
seven percent of base pay may do more harm than
17.8%. The sample consists of 225 executives and 159
good. According to her, small raises can actually be
nonexecutives. Executives were selected from the levels
dysfunctional in terms of motivation because employees
covering different cadres from E0 to E9. Similarly, non-
become irritated that their hard work yielded so little.
executives were also selected from almost all the
Therefore there are mixed feelings among scholars on
departments and sections of the company. The non-
whether money has a positive or negative impact on
executives include supervisors, statisticians, welders,
motivation and such a question can only be addressed
fitters, electricians, drill operators, dozer operators,
through an empirical study.
dumper operators, mining sardars, overman, shot firers
Research Hypothesis etc. It is to be noted that clerical staff have also been
included in the non-executive category.
In light of the objectives and related literature, the
following research hypotheses were operationalised: Period of the Study
H1: There is no significant effect of monetary The study covers a period starting from the year 2010
rewards on employee motivation. and extended up to the year 2015. However, the period
varies depending on the availability of data. The survey
H2:Non-monetary rewards have a significant effect was conducted during the past two years i.e., 2012-13
on employee motivation. and 2013-14 in different time intervals as convenient to
H3: Recognition is the best motivating factor for both respondents and the researcher; as latter is an
lower level employees. employee of Mahanadi Coalfields Limited.

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
97
FMU Journal of Management
________________________________________________________________________________________________

Measuring instruments Research hypothesis 1: There is no significant effect of


monetary rewards on employee motivation. As indicated
A structured questionnaire with reward items as
in Table 1, there was no significant relation-ship
developed by Luthans (1998:65) was used to collect data
between monetary/financial rewards and employee
from the respondents. This questionnaire was used to
motivation (r = .161, p >0.01). The research hypothesis
determine the relationship between rewards and
was therefore not rejected. Research hypothesis 2: Non-
employee motivation. The three variables under study
monetary rewards have a significant effect on lower-
which are monetary rewards, non-monetary rewards and
level employees motivation. As indicated in Table 2,
motivation were each asked in separate sections. Section
there is a moderate significant relationship between non-
A asked employees their demographic information.
monetary rewards and motivation with a correlation of (r
Section B asked the employees the extent to which the
= .607, p< 0.01) this means that, non-monetary rewards
organizations use of selected monetary rewards was
are good motivators among lower-level employees. This
driving them to work hard with direction. These rewards
concurs with Herzbergs two factor theory of
included base pay, merit pay, bonus, commission,
motivation. The research hypothesis was therefore not
allowances and incentive pay. The items were measured
rejected. Overally, Table 3 shows that there is a
on a five point likert scale that ranged from to a large
significant but weak relationship between rewards in
extent to a smaller extent. The second question was
general and motivation (r=.436p<0.01). Research
dealing with non-monetary rewards, respondents were
hypothesis 3: Recognition is the best motivating factor
asked to evaluate how likely they were inspired to
for lower level employees.
perform their best when they receive rewards such as
recognition, promotion, pension benefits, uniforms, Table 2 : Correlation Results for non-monetary rewards
flexible working hours and decision making roles. The and motivation
response categories were from very likely to very Non Motivation
unlikely in a five point likert scale. The third question Financial
then examined the employees level of motivation taking Reward
Non Financial Pearson Correlation Sig. 1.000 .607**
into consideration (Herzberg, 1957)s tangible measures Reward (2-tailed) .000
of motivation ranging from, meaningfulness of the job, N 384 384
Motivation Pearson Correlation Sig. .607** 1.000
enjoying the job, love the job, freedom in doing the job, (2-tailed) .000
main goal of working accomplished, and overall work N 384 384
environment satisfying or not. Lastly, the questionnaire **Correlation is significant at the 0.01 level (2-tailed).

provided a section for the employees to indicate their Table 3 : Correlation for all rewards and motivation
best reward.
Non Motivation
Analysis and Discussion Financial
Reward
Level of motivation was measured using motivational Overall Pearson Correlation 1.000 .436**
Rewards Sig.(2-tailed) .005
factors such as meaningfulness of job, sufficient N 384 384
rewards, satisfying environment, job security and Motivation Pearson Correlation .436** 1.000
Sig.(2-tailed) .005
freedom in doing work. A correlation between the three N 384 384
variables was calculated using the Pearson Product
Moment Correlation. The empirical results showed that, non-monetary
rewards were given number one ranking by the
Table 1 : Correlation Results for monetary rewards and employees especially in MCL. These results are in
motivation agreement with Herzbergs two factor theory of
Financial Non Motiva motivation by Nelson (2004) which shows that 78% of
Reward Financial tion
Reward employees indicated that it was very or extremely
Financial Pearson Correlation 1.000 .278 .161 important to be recognized by their managers when they
Reward Sig.(2-tailed) .083 .321
N 384 384 384 do good work but contradict with the general
Non Pearson Correlation .278 1.000 .607**
Financial Sig.(2.tailed) .083 .000
perceptions for example, in a much publicized study,
Reward N 384 384 384 The notion that money is not a motivator among all level
Motivation Pearson Correlation .161 .607** 1.000
Sig.(2-tailed) .321 .000 employees has been regarded as more theoretical than
384 384 384 practical, however, the results of the study suggest that
**Correlation is significant at the 0.01 level (2-tailed).
,managers who implement motivational strategies will
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
98
FMU Journal of Management
________________________________________________________________________________________________

definitely reap the benefits in terms of improved world. McGraw-Hill: Boston. Bates S (2006).
employee job performance and morale. Top Pay for Best Performers. Annual Editions.
Hum. Resource. 31: 130-134.
VI. CONCLUSION
[7] Delany K, Turvey S (2007). Competing in the
For the employees of PSUs in India, non-monetary Race for Talent. Peo Dynam., 22(1).
rewards according to this study have proved to be
effective on employee motivation. Therefore non- [8] Ellis L, Pennington S (2004). Should leaders
monetary rewards must be used to create a sincere focus have Tasks or Fangs? Man. Tod. 20: 9-10.
of appreciation and on the other hand, money should be [9] Hellriegel D (2004). Organizational Behavior.
used as a reward linked directly to compensation not Cincinnati: Ohio South Western.
necessarily motivation. Secondly, the results have
indicated that, flexible working hours are highly [10] Iglans J, Roussel P (1999) Relationship between
motivational, to this extent; managers should allow Compensation package and work Motivation.
flexibility in the workplace. Lastly, PSUs should aim to Org. Behav. p.12.
have a highly motivated workforce which will ensure [11] Kanungo, R.N. (1982) Measurement of job and
high productivity and high levels of productivity. All work involvement. Journal of Applied
this can be achieved through strategic implementation of Psychology, 67(3), 341-349.
motivational techniques to meet the needs of the
workforce. [12] Langton N, Robbins S (2007). Organizational
Behavior Concepts, Controversies and
REFERENCES Application. Toronto, Ontario: Pearson Prentice
[1] Agrawal, S. (2010), Motivation and Executive Hall.
Compensation, The IUP Journal of Corporate [13] Luthans F (1998). Organizational Behavior
Governance, Vol. 9, Nov. 1 & 2, 27-46. .Singapore: McGraw Hill. Nelson L (2004). Non-
[2] Anjali Ganesh and Vijayi D Souza, Social Monetary rewarding in Organisations. Retrieved
Security and Welfare Measures at New September, 12, 2012 from
Mangalore Port Trust: A Case Study, The [http://www.101rewards.com/non-monetary-
ICFAI Journal of Management Research, rewards.html].
Hyderabad, August 2008, Vol. VII, No. 8, pp. 44- [14] Milkovich, G., & Newman, J. (2008).
60. Compensation Boston: Irwin McGraw Hill.
[3] Armstrong M (2007). Organization and People [15] Nalini Nayak, Social Security for the
Employee Reward. Broadway Wimbledon: CIPD Unorganized Sector, Economic & Political
publishers. Weekly, May28, June 04, 2005, Mumbai, Vol.40,
[4] Borjas, G. J. (1979). Job satisfaction, wages, and No.22, pp.115-117.
unions. Journal of Human Resources, 21-40. [16] Nel, P., Gerber, P., van Dyk, P., Haasbroek, G.,
[5] Bandopadhyay, P. (2006). Industrial Relations in Schultz, H., Sono, T., & Werner, A. (2004).
Coal Mining Industry in India. Unpublished Human resources management. Cape Town:
Ph.D. Thesis submitted to the University of Oxford University Press.
Burdwan, Burdwan, West Bengal [17] Robbins SP, Odendaal A, Roodt G (2003).
[6] Bateman TS, Snell F (2007). Management, Organizational Behavior; Global and South
Leading and collaborating in a competitive African Perspectives. Cape Town:

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
99
FMU Journal of Management
________________________________________________________________________________________________

IMPROVED ORGANISATIONL AND LOGISITCS PERFORMANCE


IN SILENT COMMERCE TECHNOLOGY ADOPTION
Venkatesh. J
Associate Professor, Department of Management Studies, Anna University Regional Campus Coimbatore, Navavoor,
Coimbatore - 641 047, INDIA
Email: drjvmba@gmail.com

Abstract: This study observes the consequence of RFID read at greater distances. RFID tags can recognize so
technology utilization on legislative agility in industrialized much faster than bar codes that it seems that all tags in a
firms. Findings state that implementation of RFID center are read at the same time rather than successively
technology relevance directly and definitely effects as with bar codes.
managerial quickness which in turn honestly and certainly
effects both dynamic and logistics performance. Besides, RFID tags are sturdier than bar codes and may be fixed
operational performance directly and totally impacts within products swearing long-term traceability. These
logistics performance. Data were composed during the advantages enable an organizations skill to provide
progress stage of RFID technology supposition and were timely information vital for agile performance.
only collected from firms in the industrialized sector.
Defendants held operations-level positions in
Organizations with recognized enterprise resource
manufacturing organizations. Results should be incidental planning systems have the skill to synchronously share
with these limits in mind. The application of Silent real-time data with supply chain partners. We argue that
Commerce technology (RFID) can effect in improved RFID technology serves to improve the ability of
organizational agility resulting in better performance. manufacturing organizations to share data with suppliers
Experts considering adoption of silent commerce and customers better permitting those organizations to
technology (RFID) expertise should weigh credible benefits quickly respond to changes in customer demand. RFID
from increased agility and performance beside the technology permits the real-time capture and sharing of
expenditure of technology recognition. inventory-related information across the supply chain. It
Keywords: Silent Commerce, RFID implementation, is our persistence to examine the impact of RFID
operational performance, logistics, agility. technology utilization on administrative agility and the
impact of both RFID technology deployment and
I. INTRODUCTION: organizational agility on operational performance and
Silent Commerce technology - RFID (Radio Frequency logistics performance.
Identification) is considered to be the most important We build on current empirical findings that RFID
invention in these recent days. This technology is been technology deployment and organizational agility
used widely in various sectors like logistics, inventory, certainly impact performance. These studies do not
warehouse, supply chain etc., for the purpose of asset combine RFID technology deployment and
tracking and monitoring. RFID utilization augments the organizational dexterity within the same exemplary,
appropriateness of production information, creates however, as does the structural model projected here.
tracking capability allowing for traceability of portfolios Specifically, we propose that adoption of RFID
and increases service level competences resulting in technology utilization positively affects an
organizational growth and productivity. RFID organizations agility leading to enhanced operational
technology also has inferences for improving and logistics performance by providing higher quality
performance at the supply chain level. RFID, while and more timely data to the organization as well as
more expensive, has substantial advantages over bar providing the technological ability to detention and use
codes and the cost discrepancy is rapidly narrowing. that information in ways that are much more challenging
RFID labels do not require line-of-sight in directive to or impossible with other technologies.
be delivered and dependent upon the type of tag can be

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
100
FMU Journal of Management
________________________________________________________________________________________________

II. LITERATURE REVIEW AND are labeled primarily at the case as the cost of the
PROPOSITIONS: technology goes down, administrations will begin to tag
at the item level. The implementation of RFID
We conceive a structural model integrating RFID technology has inferences for performance at the supply
technology utilization as ancestor to organizational chain level, as well as at the structural level. Based on a
agility, RFID technology utilization and organizational recent review of related literature, RFID tools may
agility as antecedents to operative performance and increase performance at the supply chain level by
logistics performance, as well as operational reducing inventory losses, increasing the efficacy and
performance as precursor to logistics performance. agility of procedures, and refining information
Generally, we propose that RFID technology utilization accurateness.
positively impacts managerial agility which, in turn,
clearly impacts organizational performance. RFID III. ASSUMPTIONS:
technology offers additional inventory-related data on a Agile organizations are considered as being practical,
real-time basis that can be shared synchronously with sensitive and change creating. Dexterity requires
supply chain partners. This additional data improves the physical and economic promptness to respond to volatile
ability of manufacturing organizations to respond to events. Agility in a manufacturing context has been
changes in customer demand through better labeled as the skill to proficiently change effective
organizational agility. This enhanced agility leads to states in response to unreliable and changing demands.
better efficiency (operational performance) and RFID technology is described to have the potential to
consumer satisfaction (logistics performance). This improve supply chain agility. The incorporation of
model is presented in Figure 1. information technology was found to result in better
Earlier research found evidence that transmission of agility for a business and should finally have a positive
technology can have a profitable effect on monetary effect on competitive business performance in areas
growth in and across countries. Technology such as response to changes in consumer demand,
dissemination in manufacturing impacts productivity in response to market changes, and the ability to sense,
a manufacturing environment. Dissemination of observe and expect market changes.
information technology allows companies to be
proactive, reactive, and create change. These features are
all considered to be responsive activities. RFID is a tool
that offers a means of gathering apt information, and the
dissemination of RFID technology can provide ways for
firms to be both active and reactive and to create change.
RFID systems are quickly exchanging Universal Product
Codes (barcodes). To date, price has been the major Fig.1: RFID Implementation and Organizational Factors
obstacle to the utilization of RFID. Costs are, however, RFID permits organizations to support active
reducing which should make RFID technology more management through use of real-time data. Customers
reachable. RFID utilization has been found to enable rapidly exchanging needs highlight the point that
better manufacturing performance. More organizations organizations must be able to respond quickly with
are realizing the benefits of engaging RFID to track list essential changes to inner processes and products.
within the organization. Manufacturing organizations Accordingly, technology dispersal theory and prior
can profit from greater inventory perceptibility via the study suggests that organizations exploiting RFID
real-time information delivered by RFID technology to technology should then be able to competently provide
manage the flow of inventory. current information that allows organizations to become
RFID technology has been to speed up the flow of data more active. Based on this abstract and empirical
allowing for greater reflectivity of records as they drift explanation, we postulate the following:
through the manufacturing procedures. RFID can be 3.1. RFID technology use influences organizational
used to track all types of record, such as raw materials, agility:
work-in-progress, and finished goods inventories,
through the engineering process. The level of labeling It can be claimed that technology dissemination in
can be crucial for an organization. Currently most items manufacturing impacts efficiency in a manufacturing

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
101
FMU Journal of Management
________________________________________________________________________________________________

environment. Operational performance is defined as, 3.4. Organizational facility positively controls
the performance connected to firms in-house operational performance.
operations, such as production, product eminence and
Logistics performance is the capacity to respond to
customer satisfaction. Operational performance is also
customers' ever-changing requests and needs in a timely
reliant on upon an organizations capabilities and
way. The consumption of technologies such as RFID
technologies. Several events of operational performance
can lead to agility in organizations. Organizations that
have been recognized as output, inventory, and working
are responsive have the competence to respond to
expense. Organizations directing on fundamental
unexpected changes and increase processing speed, thus
technologies find a development in throughput,
increasing logistics performance. The incorporation of
inventory expense, and operating cost finally resulting in
information technology is likely to effect in more
a positive impact on operational performance. RFID is
dexterity for an organization resulting in better reply to
an emergent technology that is increasingly being
market changes as well as augmenting the competence
employed in manufacturing. Based on this hypothetical
to sense, perceive and anticipate market changes. Based
and empirical reasoning, we postulate the following:
on this hypothetical and empirical explanation, we
3.2. RFID technology positively influences hypothesize the following:
operational performance.
3.5. Organizational efficiency positively impacts
Evidence that transmission of technology can have a logistics performance.
profitable effect for organizations has been found. The
Previous researchers argue that operational performance
need for performance dimension has been recognized.
is influenced by logistics performance. Other researchers
Logistics performance captures a measure of
found that operational performance positively impacts
performance that is peripheral (manufacturer/ supplier)
logistics performance. They also found that operational
to the organization. Logistics performance reflects an
performance positively impacts logistics performance
organizations ability to please customers through the
but did not test this theory in a context of technology
on-time delivery of quality products and services.
diffusion. Researchers examined overall firm
Logistics performance can be dignified as a complex of
performance in a digitally-enabled supply chain and
customer satisfaction, receptiveness, delivery reliability,
found that evidence related technology squeezed supply
delivery speed, elasticity and capacity. Organizations
chains, but did not inspect whether working
utilizing RFID technology can assume to be more
performance impacts logistics performance. Based on
receptive to customers logistically. Further, it was found
this speculative and empirical validation, we
that lead time fallen from 497 days to 27 hours
hypothesize the following;
subsequent in a dramatic drop in stock level following
the employment of RFID technology. Based on this IV. SUMMARY OF RESULTS:
theoretical and empirical explanation, we postulate the
following: The measurement scales are necessarily valid and
consistent and the measurement model fits the data
3.3. RFID technology influences logistics performance. comparatively well. Results of the calculation of the
Dexterity is alleged to be vital to preserving competitive operational model support five of the six study
advantage in a manufacturing environment. The focus of propositions. Generally, RFTD technology operation
the former research was on model development for the positively impacts organizational dexterity which, in
calculation of quickness, but they did pressure the need turn, completely impacts both active performance and
for performance measurements. Technology logistics performance. In addition, effective performance
dissemination in manufacturing has been found to definitely impacts logistics performance. While the
influence efficiency, a component of operative results specify that RFTD technology use positively
performance. In addition, dissemination of information influences operational performance and negatively
technology has been found to allow firms to be active, influences logistics performance, the consistent
volatile and create change. Based on technology estimates are comparatively small (.12 and -.07)
dissemination theory and prior research, we postulate compared to the regular estimate (.46) for the impact of
the following: RFID technology use on organizational dexterity. To
review, the results specify that RFID technology
utilization leads to enhanced organizational agility
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
102
FMU Journal of Management
________________________________________________________________________________________________

driving improvements in both operative and logistics improves performance. Data were collected during the
performance. development stage of RFID technology approval and
were only composed from firms in the manufacturing
V. DISCUSSION: sector. While some defendants hold managerial and
This study and the related findings build on preceding regulatory positions, the bulk hold operations-level
works that have established experimental relationships positions within manufacturing organizations. Because
between the two focal concepts within this study (RFID of economic restrictions, it was not imaginable to
technology use and organizational agility) and conduct a follow-up wave of data collection making it
organizational and supply chain performance paradigms. difficult to assess non-response bias. Results should be
The model integrates constructs formerly defined and inferred with these limits in mind. Future research
labeled and the survey instrument included previously should monitor the evolution of technology employment
established and evaluated measurement scales. The from growth through to development stage. Further
substantial contribution of this study is the connection of research should examine the impact of the technology
RFID technology application and organizational on dexterity and performance within the amenities and
dexterity within a single operational model and the governmental sectors. This is one of the empirically-
valuation of the combined influence on performance. based studies exploring the impact of RFID technology
The results related to measurement scale rationality and application on organizational agility, repetition of this
consistency reproduce the results from previous studies study with other samples is important to simplification
and the separate correlations for the relationships of of the findings.
RFID technology utilization and performance and
VI. CONCLUSION:
organizational alertness and performance variables
repeat the judgments from previous studies. What is The study is limited only to RFID implementation and
newly conveyed here is the positive relationship organizational capacity with respect to logistics and
between RFID technology utilization and organizational operational performance. It should also be noted that it
agility. is anticipated to incorporate a measure of supply chain
performance in an expanded model since RFID
RFID technology utilization enhances an organization's
technology has inferences at both the organizational and
ability to respond to changes in customer demand. In
supply chain levels. Manufacturing organizations must
other words, manufacturing organizations that have
struggle to be both efficient in terms of reducing costs
adopted RFID technology are more agile and
related with the industrialized process and effective in
manufacturing organizations that are more agile exhibit
terms of sustaining customers. RFID technology
higher levels of operational and logistics performance.
acceptance supports both the cost minimization
RFID technology utilization directly impacts an
objective of the operations function and the client
organization's agility and operational performance but
satisfaction objective of the marketing function. The
does not directly impact logistics performance. The
study states that RFID technology directly impacts
negative relationship between RFID technology
operational performance thereby reducing the costs
utilization and logistics performance is surprising and
related to manufacturing products. The result of the
requires additional discussion. When viewed in
study also supports that RFID implementation responds
isolation, the pairing of RFID technology utilization and
to the changing demands of the customers immediately
logistics performance are positively and significantly
with improved logistics activity. Thus the manufacturing
correlated (.326, significant at the .01 level). This
sector can expect better organizational performance that
suggests that the impact of RFID technology utilization
will improve operational and logistics performance with
on logistics performance is mediated through agility and
the help of RFID espousal.
operational performance with agility having the
strongest meditational effect. REFERENCES:
The technology synchronously provides organizations [1] Azevedo, S. G. and Ferreira, J (2009). RFID
with real-time information that facilitates efficient and technology in retailing: an exploratory study on
effective response to changes in customer demands and fashion apparels. The 1UP Journal of Managerial
markets that facilitates improved logistics performance. Economics, 7(1), 2009: 722.
The findings provide support for the general proposition
that RFID technology utilization improves agility and
________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
103
FMU Journal of Management
________________________________________________________________________________________________

[2] Bowersox, D. J., Closs, D. J., Stank, T. P. and organizational performance. International Journal
Keller, S. B (2000). How supply chain of Innovation and Learning, 6(2): 147-162.
competency leads to business success. Supply
[6] Green Jr., K. W., Whitten, D., and Inman, R.A
Chain Management Review, 4(4):7078.
(2007). The impact of timely information on
[3] Feng, M., Terziovski, M., and Samson, D (2008). organizational performance in a supply chain.
Relationship of ISO 9001:2000 quality system Production Planning and Control, 18(4): 274-282.
certification with operational and business
[7] Hozak, K. and Collier, D.A (2008). RFTD as an
performance: a survey in Australia and New
enabler of improved manufacturing performance.
Zealand-based manufacturing and service
Decision Sciences, 39(4): 859-881.
companies. Journal of Manufacturing
Technology Management, 19(1): 22-37. [8] Spiegel, R (2005). News and trends. Supply
Chain Management Review, 9(4): 63-64.
[4] Gerbing, D. W and Anderson, J. C (1988). An
updated paradigm for scale development [9] Stambaugh, C. T. and Carpenter, F. W (2009).
incorporating unidimensionality and its Wireless innovation in inventory monitoring and
assessment. Journal of Marketing Research, accounting. Strategic Finance, 91(6): 35-40.
25(2):186-192.
[10] Zhou.W (2009). RFID and item-level information
[5] Green Jr., K. W, Whitten, D., and Inman, R.A visibility. European Journal of Operational
(2009). The impact of RFID technology Research, 198(1): 252-258.
utilization on supply chain productivity and

________________________________________________________________________________________________
ISSN : 2320-8899, Vol IV | Issue I | 2016
104