Tuesday, February 12, 2008

Psychometric testing in recruiting

Psychometric testing turns out to be a handy tool for recruiting potential employees. From the manufacturing sector to BPO, from FMCG to Banking, there is hardly any domain that does not require organizations to assess its employees’ personality.

Recruit the right people for the right jobs is an elusive art. The high rates of attrition and lack of candidates possessing the appropriate qualities bear testimony to the fact that organizations have not been getting their recruitment process right. When faced with such dilemma, However, though psychometric testing is not exactly new, organizations still haven’t been able to make most of it. Some HR units are not even aware of the concept and are completely oblivious to its benefits. The lack of inclination towards psychometric testing can also be attributed to the fact that it is slightly lengthy process to start with. Therefore, rather than trying to find out what lies beneath, organizations tend to carry on with traditional modes of selection, that merely test the candidate’s subject knowledge, or perhaps they are skeptical of treading unknown territory.

What are psychometric tests?

Psychometrics is a part of psychology concerned with determining a person’s aptitude towards different kinds of jobs. Psychometric tests are designed to produce a quantitative assessment of one or more psychological attributes like reasoning ability, interests, propensity, and disposition, etc.

A psychometric test is a structure technique used to generate a careful sample of behaviour. This behavior sample is used to make inferences about the psychological attributes of people, who have been tested on attributes like intelligence, self – esteem etc. By definition, psychometric tests may vary from organization to organization. Myers – Briggs Type Indicator (MBTI) and PF 16 are two common types of tests. However, the objective remains the same: to screen candidates at the initial stage of recruitment. In a majority the psychometric tests, there are statements or situations to which a person responds. There are also tests which have pictures and abstracts. The experts in the field advise Psychometric tests are highly reliable and the success rate is high, provided a standardized test is being used and depending on the objective it is developed for. However, psychometric testing should not be used as a stand alone technique.

Tests essentially fall into two main groups, ability and personality. Personality testing helps to build a profile of characteristic, behavioral style and personality. Ability and aptitude testing measure natural talent, and current and future potential. Psychometric tests are usually given in the form of paper and pencil questionnaires, but can also be computer-administered. In its simplest form, a test will have a set of questions or tasks for the subject to complete, known as test items. However, simulations like in–tray exercises which may consist of memos, letters, etc that give feedback on the abilities like organizing, decision, decision making and written communication are becoming increasingly popular in testing used by employers,’ says a Manager- Recruitments, of a large company.

Adopting Psychometric tests PT:

One school of thought argues they are not reliable, since a candidate may ‘dupe’ the test. Well… it’s not that easy. The prime objective of the test is to penetrate deeper and deeper into the candidate’s psyche. The multistage test strives to find out the most from a candidate. Some of the most important thing about the people cannot be easily done by observation and interviews. His/Her attitude, personality characteristics, abilities and aptitude cannot be viewed directly. Psychometric assessment is assessing a person and also measuring the psychological differences between people asserts a HR Professional. Also the results have shown that the accuracy level through psychometric tests is nearly 85% whereas through traditional modes, it is around 65%. The business scenario in India is getting more complex. Companies are also realizing that domain knowledge is not tha only trait a candidate needs to have; key attributes like EQ also play significant role in creating a win-win situation for all concerned. Psychometric testing is a useful tool while planning development programs for employees. It can also be used as an additional source of information as an behavioral aspects of a candidates personality as an aid for making hiring decisions post the interviews.

Psychometric Testing in India (like all over the world) is bound to grow rapidly- but there is a need to train qualified psychometric assessors.

However psychometric tests are not a panacea to all the recruitment maladies. They should not be used as a standalone technique and should be used as one of the special options of recruiters. At the same time, professionals also need to be specially trained to carry out tests. If this is done, candidate selection and hiring will become a whole lot less tedious.

Testing is also growing more sophisticated; apart from detailed questionnaires, data mining like finding out more about the music someone likes, the books they prefer to read and even the e mail IDs they choose can say a lot about an individual and his personality if used prudently. If used inappropriately, these tests can be quite useless and possibly harmful said a psycho-analysis expert in the field.


Motivating employees

In this article we are discussing about some aspects of motivating the employees other than pay and perks. Interesting work patterns and breaking their monotony of stereotype work can also act as motivating factors.

An employee should be moved from one work to another at a regular interval. This type of job rotation reduces monotony and boredom. If a worker is given liberty to work in his own way without affecting quality and productivity, he will work with interest. Job design should be changed, if it is found necessary to simplify the operations or processes. Unnecessary interference by a supervisor, while a worker is performing his job, should be avoided as far as possible.

Suggestions from employees for improvement of quality should be encouraged and prizes should be awarded for good suggestions. Certain progressive companies run suggestion schemes very successfully.

Quality campaigns should be initiated and continuously promoted. Moreover progress against predetermined standards should be examined regularly to find out variances if any. Quality work should be appreciated and incentives in form of prizes, early promotions, higher wage rates etc should be given for quality work.

Reasonable wage rates linked with productivity and quality should be implemented to encourage the workers to work sincerely and carefully.

Provision for adequate training to workers should be made for improvement of quality and productivity. Workers should be made known about the use of parts, components, products etc. which that are making or are going to make. If they know the use and importance of the result of their hard labor, they will work with great care.

Promotion policy should be framed I such a way, which can provide an incentive to honest, sincere and hardworking employees in terms of comparatively early promotions at regular intervals. The officers or heads should be co-operative and capable of motivating their subordinates. Each head should work in such a way so that the workers under each head feel that the head is their own man and also that he is one important member of the team. The boss should take care of his subordinates. Such a practice makes the relations between heads and their subordinates cordial and workers work sincerely with full confidence in their superiors.

After working the employees get exhausted physically and mentally and so they require rest. Now the span of working period after which rest period is to be allowed depends upon the type of work. If there is more mental and physical work to the workers than long rest time is required Heavy work should be mechanized as far as reduce the strain on body and brain. In large factories, where the material handling is large, conveyor, belts are used.

Drawings, designs, operations, methods of production etc should be simple, well-defined and technically practicable as far as possible. Process sheets should be easy to understand the working of a process. Specifications should not be stringent than required for the function of the product. The production process required for the quality must be imparted to the workers by proper training. If the stringent specifications are followed, number of rejected products will be more. Workers get disappointed when they come to know that products are rejected even when they put their best efforts.

To minimize the rejection, tolerances (with the upper and lower limit) should be prescribed, instead of following the specification. Variations in dimension, weight etc should be permitted up to a certain limit (upper or lower), which do not affect the quality.

Employees should be provided with the better quality of tools and equipments so that better quality products are produced. Proper maintenance and timely repair of the tools are also important to ensure continuity in production.

Better working conditions generate healthy relations between the workers and the employers thereby resulting in industrial peace which means increased in productivity and better quality work.

We have highlighted above various measures to be taken in actual manufacturing to produce goods of specified quality by training processes, job rotation, functionally required specifications which keep the workmen motivated which may result in increased productivity. Therefore we consider this as part of operations management.


A conceptual analysis of industrial relations

The concept of industrial relations means the relationship between employees and management in the day-to-day working of industry. But the concept has a wide meaning. When taken in the wider sense, industrial relations is a “set of functional interdependence involving historical, economic, social, psychological demographic, technological, occupational, political and legal variables"? According to Dale Yoder, industrial relations is a “whole field of relationship that exists because of the necessary collaboration of men and women in the employment process of an industry.

According to the International Labor Organization (ILO), “Industrial Relations deal with either the relationship between the state and employers’ and workers’ organizations or the relation between the occupational organization and themselves. The concept of industrial relations has been extended to denote the relations of the state with employers, workers, and their organizations. The subject therefore includes individual relations and joint consultations between employers and work people at their work place, collective relations between employers and their organizations and trade unions and part played by the State in regulating these relations.

Analysis of the Definitions

The analysis of the definitions on industrial provides on the following points.

1.Industrial relations are the relations mainly between employees and employers.

2.Industrial relations are the outcome of the practice of human resources management and employment relations.

3.These relations emphasis on accommodating other party’s interest, values and needs. Parties develop skills of adjusting to and cooperating with each other.

4.Industrial relations are governed by the system of rules and regulations concerning work, work place and working community.

5.The main purpose is to maintain harmonious relations between employees and employers by solving their problems through grievance procedure and collective bargaining.

6. The government influences and shapes industrial relations through industrial relations policies, rules, agreements, mediation, awards, acts etc.

7.Trade Unions is another important institution in the industrial relations. Trade unions influence and shape the industrial relations through collective bargaining.

Characteristics of Industrial Relations

Characteristics of industrial relations include:

(a)Industrial relations are outcome of employment relationship in an industrial enterprise.

(b)Industrial relations develop the skills and methods of adjusting to and cooperating with each other.

(c)Industrial relations system creates complex rules and regulations to maintain harmonious relations.

(d)The Government-involves to shape the industrial relations through laws, rules, agreements, awards etc.

(e)The important factors of industrial relations are employees and their organizations, employer and their associations and Government.

Peculiar Features of Industrial Work

The industrial work has acquired special features with the introduction of large scale and modern industrialization. The special features of modern industrialization have changed the work environment and work organization. The peculiar features of industrial work include:

(i)The industry is the association of large number of workers, supervisors, managerial personnel, consultants and other stakeholders. Industry brings all these people together as a group to do the same work. This association brings group relationship. This relationship affects social, economic, political and cultural life of the community.

(ii)The large-scale industrialization needs highly specialized human resources . Further, it needs diversified skills and dynamic talent. The specialized and diversified skills demand continuous training of employees. In addition, to blue-collar and green hands workers, white–collar and gold-collar workers have emerged.

(iii) The industrial work reduces workers independence.

(iv)The large-scale and developed industries resort to tall organization which reflects centralization of authority and responsibility. Tall organizations are also characterized by rules and regulations. Workers develop a feel of alienation and loss of freedom. Workers are treated as a “cog in the machine"? in large organizations.

(v)The workers new to the industry find it difficult to follow the rules and regulation and lead highly disciplined organizational life.

(vi)The industrial jobs are highly insecure due to changes in production process, technology and consequent downsizing of the organization and organizational exit.

(vii)Wage/Salary is the main factor to attract workers and skill and abilities are the main factors to get suitable job.

(viii)Industrial employment is mostly based on economic considerations. Employers buy the labor and workers sell it.


Objectives of fringe benefits

The view point of employers is that fringe benefits form an important part of employee incentives to obtain their loyalty and retaining them. The important objectives of fringe benefits are:

1.To create and improve sound industrial relations

2.To boost up employee morale.

3.To motivate the employees by identifying and satisfying their unsatisfied needs.

4.To provide qualitative work environment and work life.

5.To provide security to the employees against social risks like old age benefits and maternity benefits.

6.To protect the health of the employees and to provide safety to the employees against accidents.

7.To promote employee’s welfare by providing welfare measures like recreation facilities.

8.To create a sense of belongingness among employees and to retain them. Hence, fringe benefits are called golden hand-cuffs.

9.To meet requirements of various legislations relating to fringe benefits.

Need for Extending Benefits to Employees

(i)Rising prices and cost of living has brought about incessant demand for provision of extra benefit to the employees.

(ii)Employers too have found that fringe benefits present attractive areas of negotiation when large wage and salary increases are not feasible.

(iii)As organizations have developed ore elaborate fringe benefits programs for their employees, greater pressure has been placed upon competing organizations to match these benefits in order to attract and keep employees.

(iv)Recognition that fringe benefits are non-taxable rewards has been major stimulus to their expansion.

(v)Rapid industrialization, increasingly heavy urbanization and the growth of a capitalistic economy have made it difficult for most employees to protect themselves against the adverse impact of these developments. Since it was workers who are responsible for production, it was held that employers should accept responsibility for meeting some of the needs of their employees. As a result, some benefits-and-services programs were adopted by employers

(vi)The growing volume of labor legislation, particularly social security legislation, made it imperative for employers to share equally with their employees the cost of old age, survivor and disability benefits.

(vii)The growth and strength of trade unions has substantially influenced the growth of company benefits and services.

(viii)Labor scarcity and competition for qualified personnel has led to the initiation, evolution and implementation of a number of compensation plans.

(ix)The management has increasingly realized its responsibility towards its employees and has come to the conclusion that the benefits of increase in productivity resulting from increasing industrialization should go, at least partly, to the employees who are responsible for it, so that they may be protected against the insecurity arising from unemployment, sickness, injury and old age. Company benefits-and-services programs are among some of the mechanisms which managers use to supply this security.

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Managers must become senior colleagues

An important reason why employees don’t feel free to walk up to their seniors and bring critical issues to their notice is because they are afraid of the consequences. The first and foremost task of managers is to facilitate people to work effectively in an interesting environment and remove all obstacles that might come their way. To do this well, managers have to listen to people. Facilitating an open door policy is part of a good manager’s job

Senior colleagues must follow an open-door policy in which any associate can approach the CEO and senior management with work-related problem. It may sound good but in reality there are very few who top level people like CEO and V.P who actually accept this HR suggestion. This leads to frustration among employees who feel cheated as they’ve actually fallen for the lip-service delivered by the CEO and other senior colleagues at the orientation. Top personnel cannot claim to be approachable unless they are able to put into practice. If there is a gap between what they do and say in this respect could actually lead to losing people in the bargain, tarnishing company’s image beyond repair. What attracts others to the company is word of mouth, so it is important to use these tools of accessibility channels to effectively nurture a culture of openness in the organization..

Manager’s large part of success depends upon those working in his team.. It is very important to maintain a good and positive relationship with them. One of the most important things to strive for as a manager is to remain open and approachable. Many senior managers maintain an intimidating air of ‘get out of my way’ that often leads to employee resentment. Problems that could have been nipped in the bud bloom into larger disasters. A CEO said that he has built up informal one-on-one meeting with each manager and his / her team. This way, all sorts of issues get addressed before they reach any serious level.

The Seniors must make sure there are no repercussions when employees provide open and honest feedback and maintain confidence. They should seek out ideas and concerns and do not wait for employees to approach them.

If the issue is related to their immediate boss who is the cause of the problem or lacks authority to resolve the problem then open door policy allow employees to take their grievances to different levels within the organization.

It is often argued that if managers invest time in solving personal problems of their team members, they are wasting valuable time. The concept of boss being the counselor is not ingrained among Indian bosses. But when one has to spend more than three-fourths of waking hours at work, personal problems are often related to work. In today’s work environment, the gap between work and personal life is fast diminishing.

Managers are happy to hear their assistants but do absolutely nothing about their problem. Something like this literally defeats the purpose of being approachable. An open culture is a essential and managers must be measured on how well they do on this trait.

Seniors acting as counselors will immensely help employees perform better. Today’s leaders are expected to play a dual role of managing their people in both a professional and a personal capacity.


Quality assurance

Quality assurance refers to the assurance to customers that the products, parts, components, tools etc. contain specified characteristics and are fit for the intended use. Quality assurance is concerned with determining the procedures to be used and frequency of checks or tests to be made within the system so as to ensure that the system is meeting the specification incorporated in the product/service design. In the present competitive industrial world, no business unit can exists for a long time without adhering to the quality. Now assurance of quality is not a responsibility of a single person or a department only. Only the inspection department or its personnel cannot be held responsible for assurance of quality. It is the responsibility of everybody connected with the production, directly or indirectly, e.g. each and every department connected with production- from design and raw material stage to dispatch and transportation stage that is from the designing of the product to the sales and delivery of the finished product- is responsible. Thus design engineering department, purchasing department, inspection department, materials handling department, maintenance and repair department, stores department, production department, sales department etc. are all equally responsible for assuring quality. They all play an important part in providing the customer a product of acceptable quality. Therefore everyone has to be alert and everyone has to perform one’s duty efficiently, because everyone’s activity is directly or indirectly related to the quality of the product which their company is manufacturing. Employees of the unit must be made quality conscious. They should be motivated, if the unit wants to get best results from them. This can be done by explaining to them, why the quality is important for themselves as well as for their unit.

Factors affecting employees’ morale:

Increase in moral results in the improvement of quality. If the workers are dissatisfied or the working conditions are poor, employees’ moral will be at a low level and cases of rejections will increase in any manufacturing unit right from the consumption stage to the finished product stage. Efficiency of any unit as a whole can be increased only by minimizing the chances of rejection, which in turn results in better quality. Employees may not be able to work or may not work or generally do not work efficiently because of many factors which can be classified as under:

(a) Psychological factors:

1. Monotony and boredom:

When a person is required to perform the same work number of times repeatedly over a long time, he gets bored or tired. He works only to spend time without having interest in his work. He gets dissatisfied. Not satisfied worker cannot discharge his duty efficiently and effectively. This ultimately badly affects the quality of a product resulting in higher rejections.

2. Frustrations:

Employees get frustrated due to various reasons. They may not find any chance of promotion or scope for self-development. The boss may not be co-operative or may be ill-tempered. Management may not have trust in the employees. Under such circumstances, employees may not work with interest.

3. Absence of incentives:

Absence of incentives in the form of wages linked with productivity, incentive wage rates, prizes for quality work etc. makes the employees dissatisfied and it becomes difficult for anyone to get the work done by such unsatisfied employees. Employees become careless, thereby affecting badly the quality of the product resulting in higher rate of rejections.

(b) Psychological factors

After working for a certain period continuously, a worker experiences stress. If fatigue is severe, it will affect the quality as well as the quantity of production.

(c) Technical factors

1. Unclear specification and faulty design:

The specification must be well defined and the design of the product must be faultless because ambiguous specifications and faulty design make the products unfit for usage. Quality of the product suffers heavily and it results in higher proportion of rejection.

2. Improper or unsuitable or substandard tools and equipments:

Tools and equipments which are not proper or suitable or standard quality, affect the quality badly even if the worker is efficient and sincere.

3. Complex or unsystematic operations or processes and improper maintenance and repairs of tools and machines:

Operations and processes must be planned and designed systematically and scientifically. Timely repairs and proper maintenance may result in higher productivity and production of defective products will be very small.

(d) Other factors

Working conditions in a factory must be satisfactory. Absence of (1) Proper ventilation, (2) sufficient light, (3) normal temperature, (4) Subsidized canteen facilities, (5) Urinals and latrines in sufficient numbers, (6) Provision of safety gloves, safety glasses, helmets etc. for workers, if found necessary etc. result in decreased efficiency. Possibilities of accidents and absenteeism show upward tendency with the passing of time. Unsatisfactory working conditions bring into existence conflicts between employees and management thereby resulting in decreased productivity and increased number of rejections.


Interview process


Interview is not a single step. It is a process consisting of several steps. The major steps are grouped into four categories.

1. Preparation for the interview

1.Appropriate type of interview.
2.The areas to be tested.
3.Type and number of interviews.
4.Review the information.

2. Conduct the interview

1.Open the interview.
2.Get complete and accurate information.
3.Record observations and impressions
4.Guide the interviews
5.Check the success of the interview

3. Close the interview

4. Evaluate interview results

Preparation for the Interview: Advance preparation for interview is essential as it permits focusing its coverage on the vital aspects and its helps the interviewer to remember and absorb many impressions and facts. The following preparation has to be made by the organization before starting an interview.

(i)Choose the appropriate types of interviews based on job requirements and the nature of the interviews discussed earlier.

(ii)Identify the knowledge, skill area to be examined through interviews based on job requirements.

(iii)Determine the type and number of interviewers: Interviewers should be selected based on personal characteristics, technical competence, initiative common sense, general smartness, ability to inspire confidence, capacity to work in a team and potential for growth.

Interviewers may be drawn from personnel specialists,line managers concerned experts in the discipline concerned, from academicians, practitioners and psychologists.

Use of Psychologists: A number of research studies and observations regarding the effectiveness of psychologists conclude that:

· There is a wide variation in the abilities of psychologists as in case of other specialists.
· The psychologist would be a competent interviewer if he has got knowledge of job requirements and organizational interests.
· Psychologists’ ability as an interviewer is probably higher than non-psychologists, if they are qualified, experienced and trained.
· Psychologist would act as an additional source of information rather than a deciding factor.

In view of these observations, psychologists may also be included as a number of interviewers.

Interviewers may interview the candidates either jointly or separately. A panel interview is preferable to individual interview. The number of interviewers is to be decided on the basis of number and nature of areas to be covered by the interview, number of candidates to be interviewed and the time available for interviewing

(iv)Review of the information collected in advance through other selection methods, finding out the validity of those methods, the score obtained etc. The information available in the application blank should be thoroughly checked regarding:

· Accuracy and validity.
· Acquainting about the applicant.
· To find out stability, review the number of positions and length of time held in each of the past jobs.
· Compare the nature of positions in the previous employment with that of proposed employment.
· Check the employee growth with the organizational progression in the past employment
· Find out discharges etc through unexplained breaks.

This helps in avoiding further evaluation of those areas appraised effectively by other means through interviews.

(v) Decide upon the administrative arrangements.

(vi) Finalize the physical setting including time which would be convenient to interviewees and interviewers.

(vii) Determine the coverage of the interview: Generally the interview should cover the areas like relevance of qualification and experience to job requirements, gaps in employment history and causes therefore, reasons for choosing course, school, occupation etc likes and dislikes sense of humor, quickness of reaction, ability to recognize thoughts, manner and poise, cultural level etc.

(viii)Find out the conditions under which the interview technique is effective This includes:
· Consistency in the results of various selection techniques.
· Use the interview technique to test the candidate in those areas where other techniques are ineffective.
· When the purpose of the interview is to find out the most suitable position to the applicant.


Types of interview

The types of interviews are:

1.Informal Interview.
2.Formal Interview.
3.Planned Interview.
4.Patterned Interview.
5.Non-directive Interview.
6.Depth Interview.
7.Stress Interview
8.Group Interview.
9.Panel Interview.

Preliminary Interview

·Informal interview
·Unstructured interview.

Core Interview

·Background information interview.
·Job and probing interview.
·Stress Interview.
·The group discussion interview.
·Formal and structured interview
·Panel interview
·Depth interview.

Decision-Making Interview:

Preliminary Interview:

Informal Interview: This is the interview which can be conducted at any place by any person to secure the basic and non-job related information.

Unstructured Interview: In this interview the candidate is given the freedom to tell about himself by revealing his knowledge on various items / areas, his background, expectations, interest etc. Similarly, the interviewer also provides information on various items required by the candidate

Core Interview

Background Information Interview:

This interview is intended to collect the information which is not available in the application blank and to check that information provided in the application blank regarding education, place of domicile, family, health, interests, hobbies, likes, dislikes, extracurricular activities of the applicant.

Job and Probing Interview This interview aims at testing the candidate’s job knowledge about duties, activities, methods of doing the job, critical/ problematic areas, methods of handling those areas etc.

Stress Interview: This interview aims at testing the candidate’s job behavior and level of withstanding during the period of stress and strain. Interviewer tests the candidate by putting him under stress and strain by interrupting the applicant from answering, criticizing his opinions, asking questions pertaining to unrelated areas, keeping silent for unduly long period after he has finished speaking etc. Stress during the middle portion of the interview gives effective results. Stress interview must be handled with at most care and skill. This type of interview is often invalid. As the interviewee’s need for a job, his previous experience in such type of interviews may inhibit his actual behavior under such situations.

Group Discussion Interview: There are two methods of conducting group discussion interview, namely, group interview method and discussion interview method. All candidates are brought into one room i.e. interview room and are interviewed one by one under group interview This method helps a busy executive to save valuable time and gives a fair account of the objectivity of the interview to the candidates.

Under the discussion interview method, one topic is given for discussion to the candidates who assemble in one room and they are asked to discuss the topic in detail. This type of interview helps the interviewer in appraising, certain skills of the candidates like initiative, inter-personal skills, dynamism, presentation, leading comprehension, collaboration etc.

Interviewers are at ease in this category of interview because of its informality and flexibility. But it may fail to cover some significant portions of the candidates’ background and skills.

Formal and Structured Interview: I this type of interview, all the formalities, procedure like fixing the value , time, panel of interviewers, opening and closing, intimati0ng the candidates officially etc. are strictly followed I arranging and conducting the interview. The course of the interview is preplanned and structured, in advance, depending on job requirements. The questions items for discussion are structured and experts are allotted different areas and questions to be asked. There will be very little room for the interviewers to deviate from the questions prepared in advance in a sequence.

Panel Interview: Interviewing of candidates by one person may not be effective as he cannot judge the candidates in different areas/ skills owning to lack of knowledge and competence in multiple disciplines and areas. Hence most organizations invite a panel of experts, specialized in different areas / fields / disciplines, to interview the candidates. A panel of experts interviews each candidates, judges his performance individually and prepares a consolidated judgment based on each expert’s judgment and weighted of each factor. This type of interview is called as panel interview. This type of interview would be more effective as each candidate is prepared by an expert in relevant areas. Experts should be cautioned against over accuracy, excessive weight-age to a particular factor, domination of other experts etc.

Depth Interview: In this type of Interview, the candidates would be examined extensively in core areas of knowledge and skills of the job. Experts in that particular field examine the candidates by posing relevant questions as to extract critical answers from them, initiating discussions regarding critical areas of the job, and by asking the candidates to explain even minute operations of the job performance. Thus, the candidate is examined thoroughly in critical / core areas in their interviews.


Successful Organizational Leadership: Effective Execution through Strategic Alignment

Successful Organizational Leadership: Effective Execution through Strategic Alignment
by Gerard A. Abraham, Thermo Electron, Process Systems

It is an all-too-familiar scenario. Corporation X misses badly on its commitments several quarters in a row and the stock plummets. As a result, the Board loses confidence, the CEO “resigns"? and a new CEO is appointed who immediately announces a sweeping restructure of the corporation.

In the past few years, papers have been inundated with such reports. Even at corporations where top-level executives show signs of “vision"? and have articulated what seems to be a sound business strategy on paper, results fall short of expectations.

We have all been there at one point or another in our careers. The leadership team spends long hours agreeing on a 3- or 5-year strategy to improve the performance of the business. Management teams work equally hard to come up with supportive annual budgets. Both teams populate long PowerPoint presentations and well-built, exhaustive spreadsheet files. Yet not much happens in terms of actual deliverables! Ambitious year-end targets are missed. Improvement curves keep being shifted to the right, until the scenario at the beginning of this article is realized. Now the process for restructure of the corporation begins.

Questions immediately arise as to why these events occur so often and include:
• What has gone wrong and why?
• Are the goals too aggressive?
• Are the visions and/or strategies inadequate?
• Are middle managers unable to execute?
• If the answer is yes to all these questions, then why is it so?

All are good questions, and many have been extensively addressed with proposals on how to find corresponding solutions. Based on my experience, however, a key element that needs to be addressed is the importance of strategic alignment.

What is strategic alignment?

Strategic alignment can be described as the linkage between the goals of the business, which quantify the progress of the implementation of the strategy towards the vision, and the goals of each of the key contributors. Key contributors include groups, divisions, business units, departments, or individual employees who have an interest in the continuation of a successful corporation.

Strategic alignment, put simply, is “everyone rowing in the same direction"? The tighter the linkage and the better the alignment, the likelihood of flawless corporate execution becomes stronger.

Strategic alignment has several advantages once implemented properly and practiced. Benefits include:
1. Allowing an efficient use of usually scarce resources,
2. Resulting in increased speed of execution, as a corollary,
3. Promoting team efforts towards common goals, and
4. Escalating employees’ motivation, giving them a keener sense of contribution to the results of their individual groups and of the corporation as a whole.

These are good results that many corporations would benefit from, but very few corporations are able to realize them. Since many corporations and their leadership teams attempt to gain strategic alignment, the question becomes what barriers must be overcome.

How can strategic alignment be implemented effectively and what are the key success factors?

The first component of a successful strategic alignment is the extensive communication necessary within the organization to understand the elements of the vision and of the key strategic directions needed. Relentless repetition by the leadership and management teams at every opportunity, including sales meetings, company meetings, and operational business reviews allow each employee to understand vividly how he/she can contribute to the overall progress. More often than not, however, these vital communication opportunities are restricted to boring presentations of high-level tables filled with data that are difficult for employees to associate with their day-to-day jobs.

The second component of a successful strategic alignment is absolutely essential to link the results of each employee’s job to the progress of the entire corporation strategy and to do it clearly and simply. This is best accomplished by using simple measures of key performances (KBMs= key business metrics, or KPMs= key performance metrics), which can be connected to the employee’s annual performance review.

One excellent example of effective strategic alignment is practiced at Thermo Electron Corporation, a leader in the field of analytical instrumentation, headquartered in Waltham, MA. Thermo Electron uses a cascading set of goals that quantitatively measure the progress of the strategic implementation. This “waterfall effect"? or “goal tree"? starts at the very top of the corporation and cascades down to all levels of the organization – from Corporation to Divisions; from Divisions to Business Units; from Business Units to Departments, and from Departments to Employees.

When it reaches the employee, the objectives are incorporated into her/his annual performance targets and these objectives directly support the key goals from the highest levels of the organization. This ensures both focus and alignment as the employee daily delivers on their objectives. Objectives are rolled back up the “waterfall"? or “goal tree"? in periodic reviews of goals at all levels in the organization.

Implementing strategic alignment is not rocket science. It requires, however, strong commitment from the top leadership and focus on relentless communication at every opportunity using simple management principles of focus, clarity and reinforcement.

In the end, effective execution of strategic alignment is a leader’s top priority and ensures that goals are met and success achieved.

Gerard A. Abraham is President of Process Instruments Division, a $400 million global manufacturing powerhouse, of Thermo Electron. Gerard is Gerard Abraham is best known for his C-level leadership ability in global, technology-based businesses that deliver “best-in-class"? returns for his company’s shareholders. He is a keynote speaker at leadership conferences on how to develop intimate market knowledge, leverage top quality talent, and develop a culture of risk tolerance to avoid commoditization in manufacturing. To contact Gerard to speak at your next leadership conference or to send him your comments, email him at gerard.abraham@thermo.com.


Concepts of testing for employment

Testing concepts include job analysis, reliability and validity.

1.Job Analysis: One of the important testing concepts is job analysis as it provides basic information about the type of the candidates needed by the organization. Job specification and job requirements provide information about the demands made by a job on the incumbent, whereas employee specification gives the information about the characteristics, qualities, behavior of the employees needed to perform a job successfully. Thus, employee specification is the basis to decide upon a particular test or tests and minimum acceptable score in order to test whether the candidates possessed the required amount and degree of behavior and qualities like intelligence, aptitude to perform the job successfully.

2.Reliability: After identifying the test(s), the administrator of test should ensure the reliability of test / instrument. Reliability of a test refers to the level of consistency of score or results obtained throughout a series of measurements. If a person obtains same or similar score in the tests conducted in first, second and third time, under the same conditions, it is said the test is reliable. The reliability of any selection technique / test refers to its freedom from systematic errors of measurements or its consistency under different conditions. A test is unreliable if the score differs considerably in first, second and third measurements. The causes of low reliability are: conducting the rest under non-standardized conditions, administering the test by different persons and under different psychological states of candidate, existence of factor of luck and ill-luck etc.
Generally, as suggested by Beach, the reliability coefficient should be between + 0.85 and + 1.00. In general, higher reliability can be obtained from written tests.

3.Validity: Any selection device should aim at finding out whether a candidate possessed the skills or talents required by a particular job or not. Each selection test aims at finding out whether a candidate possessed that particular skill / talent or not. For example, intelligence test aims at testing whether a particular candidate possessed the nature and level of intelligence essential to perform a job. If intelligence test is effective in measuring the level of intelligence, then it can be said that the test is a valid one. “The validity of a test is the degree to which it measures what it is intended to measure. A valid test predicts accurately the level of success or failure of a candidate on the job.

After the tests’ reliability and validity are tested, the personnel manager has to develop testing programs. The following steps can be followed in installing testing programs:

1.Formulation of the objectives of testing programs.

2.Analysis of jobs to identify those characteristics that appears necessary for job success.

3.Making of a tentative choice of tests for a try-out.

4.Administering of those tests to an experimental group of people.

5.Establishing of criteria for job success.

6.Analysis of results and making of decisions regarding test application.

Testing Terminology

Setting Passing Scores:

·A minimum score is that which generally shall at least twice as large as a chance score.

·A chance score is one which can be obtained even if a person knows nothing about test ‘s subject –matter.

·A norm is the percentage of people who get less than or equal to certain scores.

·Alternatives form means two or more versions of the same test which are identical in length, difficulty and type of coverage of questions but whose specific questions are different.

·A multiple choice test s one in which two or more possible choices are limited

·A true or false test contains a list of statements and the candidate given the test indicates which are true and which are false.

·A completion test contains sentences of one or more words or facts omitted, the task of the candidate giving the test is to insert the missing word or fact.

·An equivalency test is one of knowledge which indicates whether an applicant without the prescribed education or experience has the knowledge implied by an educational or work standard.

· An omnibus test is one which, although it contains diverse items, provides only a single score.

·A test battery means that the applicant is required to take two or more tests, each, individually-timed, scored and weighted.

·A work limit test is one in which the applicant is permitted to finish the given work and the amount of time he takes is recorded.

·A time-limit test is one in which the applicant is permitted to take fixed time and the amount of work he finishes is recorded.


Manpower crisis

In this article we are discussing a real case on Human Resources crisis at a reputed bank in India which is popularly known as IDBI Bank. There was a time when every fresh graduate after qualifying with a professional degree and most of the experienced professionals look forward to join this bank as an employee. Times have changed now with foreign banks setting up their organizations in India. This is consequential to India embarking upon its Globalization program in all facets of business from banking to software. Skilled professionals have opportunities one better than the other. This is making them to switchover from one organization to another better paying one.

Let us first look at the facts what exactly happened at IDBI,

IDBI operated their commercial banking and institutional banking as separate organizations. The merger between the two has precipitated the manpower crisis as the pay and seniority problems were not addressed to the satisfaction of all concerned.

Employees continue to desert IDBI Bank even as it struggles in a schizophrenic existence as a development finance institution and a modern commercial bank; the result of a merger with its new generation private sector bank two years ago.

IDBI lost 810 employees in 2005, majority of whom were from the commercial banking side, that is, the erstwhile private bank. Head of alternative bank channels and card products had left for Deutsche Bank immediately after the merger. Head of human resources had also quit to join another Bank. Sometime back the regional head of corporate banking also left to join some other Bank. Even the head of corporate banking at the bank, is the latest to quit the bank. Sources at the bank say that he left after the differences with the top management.

Their high salaries have often been the matter of envy for IDBI bank staff. A top official at IDBI commented that IDBI Bank officials need to understand that they are a part of the public sector organization and accept the rules. He added that IDBI was already working on ways to retain and develop the human resources and reduce the attrition.

International consultant Hewitt Associates has been helping the bank with post merger integration, the most critical factor of amalgamation or acquisition. IDBI is also seeking the help of National Institute of Bank Management on human resources development.

We presume the following could be strong reasons for the HR crisis. However the bank has taken steps to address the problems through proper expertise and it may take some more time before situation is normal.

·IDBI has lost 810 employees in 2005, majority of whom were from the commercial banking side

·Uneven pay scales have created rift between staff of the commercial and institutional banking units.

·The cultural difference between IDBI and IDBI bank has also led to a huge attrition in the organization.

·Attrition is a problem faced by entire finance sector but at IDBI the rate is abnormally high.

·The bank has added around 936 people in 2005 and plans to add another 250 during the year. However salary is not the only issue for all of them

·Cultural differences and uneven pay scales have created a wide chasm between the staff of the commercial and institutional banking units. At the time of the mergers the employees of the IDBI Bank, who were paid market salaries, were promised that their remuneration would be protected for three years.


Attracting, retaining, and growing customers

Markets can be characterized by their long-term buying dynamics and how easily and often customers can enter and leave.

1.Permanent capture markets. Once a customer, always a customer (e.g. nursing homes, trust funds and medical care).

2.Simple retention markets. Customers can permanently be lost after each period (e.g. telecom, cable, financial services, other services, subscriptions.).

3.Customer migration markets. Customers can leave and come back (e.g. catalogs, consumer products, retail, and airlines)

Some customers inevitably become inactive or drop out. The challenge is to reactivate dissatisfied customers through win-back strategies. It is often easier to re-attract ex-customers (because the company knows their names and histories) than to find new ones. The key is to analyze the causes of customer defection through exit interviews and lost-customer surveys. The aim is to win back only those customers who have strong profit potential.

Customers are becoming harder to please. They are smarter, more price conscious, more demanding, less forgiving, and they are approached by many more competitors with equal or better offers. The challenge, according to Jeffrey Gitomer, is not necessarily to produce satisfied customers; several competitors can do this. The challenge is to produce delighted and loyal customers.
Mass Marketing —————————————- One-to-One Marketing
Average customer ———————————— Individual customer
Customer anonymity———————————Customer profile
Standard product——————————- Customized market offering
Mass production———————————- Customized production.
Mass distribution———————————- Individualized distribution.
Mass advertising———————————- Individualized message
Mass Promotion———————————- Individualized incentives
One-Way message——————————Two-way messages
Economies of scale——————————Economies of scope
Share of market———————————- Share of customer
All Customers————————————Profitable customers
Customer attraction—————————- Customer retention

Companies seeking to expand their profits and sales have to spend considerable time and resources searching for new customer. To generate leads, the company develops ads and places them in media that will reach new prospects ; it sends direct mail and makes phone calls to possible new prospects; it salespeople participate in trade shows where they might find new leads; it purchases names from list brokers; and so on. All this activity produces a list of suspects. Suspects are people or organizations who might conceivably have an interest in buying the company’s product or service, but may not have the means or real intention to buy. The next task is to identify which suspects are really good prospects—customer with the motivation, ability, and opportunity to make a purchase—by interviewing them, checking on their financial standing, and so on. Then it is time to send out the sales people.

It is not enough, however, to attract new customers; the company must keep them and increase their business. Too many companies suffer fro High customer churn—high customer defection. It is like adding water to a leaking bucket. Cellular carriers, for example, are plagued with “spinners"? customers who switch carriers at least three times a year looking for the best deal. Many lose 25% of their subscribers each year at an estimated cost of $2 billion to $4 billion. Marketing practices instead of concentrating on the art of attracting new customers must ensure on retaining and cultivating the existing ones. The emphasis is traditionally has been on making sales rather than building Relationships; on pre-selling and selling rather than caring for the customer afterward.

There are two main ways to strengthen customer retention. One is to erect high switching barriers. Customers are less inclined to switch to another supplier when this would involve high capital costs, high search costs, or the loss of loyal-customer discounts. The better approach is to deliver high customer satisfaction. This makes it harder for competitors to offer lower prices or inducements to switch.

How to handle Customer Complaints

No matter how perfectly designed and implemented a marketing program is, mistakes will happen. Given the potential downside of having an unhappy customer, it is critical that the negative experience be dealt with properly. As with any marketing crisis large or small, swiftness and sincerity are the key watchwords. Customers must feel an immediate sense that the company truly cares. Beyond that, the following procedures can help to recover customer goodwill:

1.Set up a 7-day, 24-hour toll-free “hotline"? (by phone, fax, or e-mail) to receive and act on customer complaints.

2.Contact the complaining customer as quickly as possible. The slower the company is to respond, the more dissatisfaction may grow and lead to negative word of mouth.

3.Accept responsibility for the customer’s disappointment; don’t blame the customer.

4.Use customer service people who are empathic.

5.Resolve the complaint swiftly and to the customer’s satisfaction. Some complaining customers are not looking for compensation so much as a sign that the company cares.


Professional employees are more difficult to motivate

Professional employees are different than your average employee. And they’re more difficult to motivate. Why? Because professionals don’t respond to the same stimuli that nonprofessionals do.

Professionals like engineers, accountants, lawyers, nurses, and software designers are different from non-professionals. They have a strong and long-term commitment to their field of expertise. Their loyalty is more often to their profession than to their employer. And typical rewards, like money and promotions, are rarely effective in encouraging professionals to exert high levels of effort.

Professionals see their allegiance to their profession, not to the organization that employs them. A nurse, for instance, may work for Mercy Hospital but she reads nursing journals, belongs to nursing associations, attends nursing conferences, and hangs around with other nurses during her breaks at work. When asked what she does for a living, she’s more apt to respond. “I’m a registered nurse? than “I work at Mercy Hospital?

Money and promotions are typically low on the professional’s propriety list. Why? They are well paid and they enjoy what they do. For instance, professionals are not typically anxious to give up their work to take on managerial responsibilities. They’ve invested a great deal of time and effort in developing their professional skills. They’ve typically gone to professional school for several years and undergone specialized training to build their proficiencies. They also invest regularly—in terms of reading, taking courses, attending conferences, and the like—to keep their skills current. Moving into management often means cutting off their profession, losing touch with the latest advances in their field, and having to let the skills that they’ve spent years developing become obsolete.

This loyalty to the profession and less interest in typical organizational rewards makes motivating professionals more challenging and complex. They don’t respond to traditional rewards. And because they tend to give their primary allegiance to their profession rather than to their employer, they’re more likely to quit if they’re dissatisfied. An employer might be justified in deciding not to exert the effort to develop and keep professionals because they’re unlikely to reciprocate loyalty efforts.

Even if it is accepted that professionals are different from non-professionals, these differences may make it easier to motivate professionals. For a large proportion of professionals, their work is their life. They rarely define their workweek in terms of 8 to 5 and five days a week. Working 60 hours a week or more is often common. They love what they do and often prefer to- be working rather than doing anything else. So as long as they enjoy their work, they’re likely to be self-motivated.

How to motivate professionals? Provide them with ongoing challenging projects. Give them autonomy to follow their interest and allow them to structure their work in ways that they find productive. Provide them with lateral moves that allow them to broaden their experience. Reward them with educational opportunities training, workshops, attending conferences that allow them to keep up with the current developments in their fields. In addition, reward them with recognition and consider creating alternative career paths that allow them to earn more money and status. At Merck, IBM, and AT&T, for instance, the best scientist, engineers, and researchers gain titles such as fellow and senior scientist. They carry pay and prestige comparable to those of managers but without the corresponding authority or responsibility.

This will enable the professionals to concentrate exclusively on their work which may result in some new developments, innovations or cost saving techniques. They should be considered as pure R & D personnel with very high skills. This is partially followed by many leading companies.


Measuring customer satisfaction

A company would be wise to measure customer satisfaction regularly because one key to customer retention is customer satisfaction. A highly satisfied customer generally stays loyal longer, buys more as the company introduces new products and upgrades exiting products, talks favorably about the company and its products, pay less attention to competing brands and is less sensitive to price, offers product or service ideas to the company, and costs less to serve than new customers because transactions are routine.

Many companies systematically measure customer satisfaction and the factors shaping it. For example, IBM tracks how satisfied customers are with each IBM salesperson, the encounter, and makes this a factor in each sales person’s compensation.

The link between customer satisfaction and customer loyalty, however, is not proportional. Suppose customer satisfaction is rated on a scale from one to five. At a very low level of customer satisfaction (level one), customers are likely to abandon the company and even bad-mouth it. At levels two to four, customers are fairly satisfied but still find it easy to switch when a better offer comes along. At level five, the customer is very likely to repurchase and even spread good word of mouth about the company. High satisfaction or delight creates an emotional bond with the brand or company, not just a rational preference.

Xerox’s senior management found out that it’s “completely satisfied�? customers were six times more likely to repurchase Xerox products over the following 18 months than its “very satisfied�? customers.

When the customers rates their satisfaction with the element of the company’s performance say delivery—the company needs to reorganize that customers vary in how they define good delivery. It could mean early delivery, on-time delivery, order completing on time, so on. The company must also realize that two customer can report being “highly satisfied�? for different reasons. One may easily be satisfied most of the time and the other might be hard to please but was pleased on this occasion.

A number of methods exist to measure customer satisfaction. Periodic surveys can track customer satisfaction directly. Respondents can also be asked additional questions to measure the purchase intention and the likelihood or willingness to recommend the company and brand to others.

Paramount attributes the success of its five theme parks to the thousands of Web-based guest surveys it sends to customers who have agreed to be contacted. During past year, the company conducted more than 55 Web-based surveys and netted 100,000 individual responses that described guest satisfaction on topics including rides, dining, shopping, games, and shows.

Companies can monitor the customer loss rate and contact customers who have stopped buying or who have switched to another supplier to learn why this happened. Finally, companies can hire mystery shoppers to pose as potential buyers and report on strong and weak points experienced in buying the company’s and competitors’ products. Managers themselves can enter company and competitor sales situations where they are unknown and experience firsthand the treatment they receive, or phone their own company with questions and complaints to see how the calls are handled.

For customer satisfaction surveys, it’s important that companies ask the right question. Only one question really matters that is “Would you recommend this product or service to a friend?�? Marketing department typically focus on surveys on the areas they can control, such as brand image, pricing, and product features. According to Reichheld, a customer’s willingness to recommend to a friend results from how well the customer is treated by the front-line employees, which in turn is determined by all the functional areas that contribute to a customer’s experience.

In addition to tracking customer value expectations and satisfaction, companies need to monitor their competitors’ performance in these areas. One company was pleased to find that 80 % of its customers said that they were satisfied. Then the CEO found out that its leading competitor had a 90% customer satisfaction score. He was further dismayed when he learned that this competitor was aiming for a 95% satisfaction score.

For customer-centered companies, customer satisfaction is both a goal and a marketing tool. Companies need to be especially concerned today with their customer satisfaction level because the Internet provides a tool for consumers to spread bad word of mouth-as well as good word of mouth—to the rest of the world. On Web sites like troublebenz.com and lemonmb.com, angry Mercedes –Benz owners have been airing their complaints on everything from faulty key fobs and leaky sunroofs to balky electronics that leave drivers and their passengers stranded.

Companies that do not achieve high customer satisfaction ratings make sure that their targets market knows it. When J D Power began to rate national home mortgage leaders, Countrywide was quick to advertise its number-one ranking in customer satisfaction Dell Computer’s meteoric growth in the computer system industry can be partly attributed to achieving and advertising its number-one rank in customer satisfaction.

The University of Michigan’s Claes Fornell has developed the American Customer Satisfaction Index (ACSI) to measure the perceived satisfaction consumers feel with different firms, industries economic sectors, and national economies.


Customer relationship management CRM

In addition to working with partners called partner relationship management (PRM) many countries are intent on developing stronger bonds with their customers called customer relationship management (CRM). This is the process of managing detailed information about individual customers and carefully managing all customer “touch points"? to maximize customer loyalty. A customer touch point is any occasion on which a customer encounters the brand and product—from actual experience to personal or mass communication to casual observation. For a hotel, the touch points include reservations, check-in and check-out, frequent-stay programs, room service, business services, exercise facilities, laundry service, restaurants, and bars. For instance the Four Seasons relies on personal touches, such as a staff that always addresses guests by name, high-powered employees who understand the needs of sophisticated business travelers, and at least one best-in-region facility, such as a premier restaurant or spa.

Customer relationship management enables companies to provide excellent real-time customer service through the effective use of individual account information. Based on what they know about each valued customer, companies can customize market offerings, services, programs, messages, and media. CRM is important because a major driver of company profitability is the aggregate value of the company’s customer base. A pioneer in the application of CRM techniques is Harrah’s Entertainment.

  • Identify your prospects and customers. Do not go after everyone. Build, maintain, and mine a rich customer database with information derived from all the channels and customer touch points
  • Differentiate customers in terms of (1) their needs and (2) their value to your company. Spend proportionately more effort on the most valuable customers (MVC). Apply Activity Based Costing and calculate customer lifetime value. Estimating net present value of all future profits coming from purchases, margin levels, and referrals, less customer-specific servicing costs.
  • Interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships. Formulate customized offerings that are communicated in a personalized way.
  • Customize products, services, and messages to each customer. Facilitate customer/company interaction through the company contact center ad Wed site.

A key driver of shareholder value is the aggregate value of the customer base. Winning companies improve the value of their customer base by excelling at strategies such as the following:

(A)Reducing the rate of customer defection.

Whole Foods, the world’s largest retailer of natural and organic foods, woos customers with a commitment to marketing the best foods, and a team concept for employees. Selecting and training employees to be knowledgeable and friendly increases the likelihood that the inevitable shopping questions from customers will be answered satisfactorily.

(B)Increasing the longevity of the customer relationship.

The more involved a customer is with the company, the more likely he or she is to stick around. Some companies treat their customers as partners especially in business –to-business markets soliciting their help in design of new products or improving their customer service. Instant Web Companies (IWCO), a Chanhassen, Minnesota, direct mail printer, launched a monthly Customer Spotlight programs where guest companies provide an overview of their business and direct-mail programs and comment on IWCO practices, product, and services. IWCO staff not only gains exposure to customers, but also develops a broader perspective on customers’ business and marketing objectives and how to add value and identify options that help meet their customers’ goals.

(C)Enhancing the growth potential of each customer through ‘share–of-wallet’, cross-selling, and up-selling.

Harley –Davidson sells more than motorcycles riding supplements such as gloves, leather jackets, helmets, and sunglasses. Harley dealerships sell more than 3,000 items of clothing some even have their own fitting rooms. Licensed goods sold by others range from the predictable (shot glasses, cue balls, and Zippo cigarette lighters) to the more surprising items (cologne, dolls, and cell phones). Harley-branded merchandise amounted to more than $211 million in company sales in 2003.

(D)Making low-profit customers more profitable or terminating them.

To avoid the direct need for termination, unprofitable customers can be made to buy more or in larger quantities, forgo certain feature or services, or pay higher amounts or fees. Banks, phone companies, and travel agencies are all now charging for once-free services to ensure minimum customer revenue levels.

(E)Focusing disproportionate effort on high-value customers.

The most valuable customers can be treated in a special way. Thoughtful gestures such as birthday greetings, small gifts, or invitations to special sports or arts events can send a strong signal to the customer.

To conclude all the above mentioned practices are already in vogue even in the Asian countries considered as Global Economic powers. Huge malls are coming up in the metros of these countries with very attractive discounted prices of products, transparency in pricing as compared to normal market prices and other gifts, bonus points accumulation for future free purchases and many other incentives.


The quality challenge

In the altered regime of Globalization and free economy, business firms are also facing the challenge of graduating from shoddy products to products of excellence. In the earlier days, the permit-license–quota regime had guaranteed profits to them even when they turned out shoddy products at high prices. It has been a very peculiar phenomenon: India was one of the largest markets in the world, Indian products, sadly, were rated the shoddiest. And, the Indian consumer was paying, the highest price. Now, quality has suddenly become a major issue for business firms in India. It has acquired an additional significance in the context of the new focus on exports. Business firms of India have felt the pinch in this regard all the more as they went in search of global markets.

There is now a new awareness about quality; and a good deal of effort is being made by many firms to attain international quality standards and to obtain international quality certification.

The BHEL example: BHEL, for example, found that it could not achieve its planned exports without paying attention to quality and obtaining international quality certification. As a part of its new strategy to boost exports, BHEL set a target date to obtain ISO-9000 certification for its products. The company was forced to do this following the loss of orders worth millions of dollars on the ground that it did not have ISO-9000 certification. The company faced disqualification in several cases .A supplier without such certification was also required to pay higher insurance rates. The company realized that the third party quality assessment and registration was becoming a must for doing business in International markets. As a result, it organized a crash programs for ISO certification for its plants and products.

Examples of seafood industry: India’s seafood industry faced the quality challenge with the compulsion to implement the total quality solution based on Hazard Analysis Critical Control Point (HACCP). A majority of the processing units in the country have to upgrade their facilities or face the risk of being marginalized in international markets where quality was fast emerging as the most important concern of the consumers.

The detection of salmonella bacteria in cooked shrimps by the US health authorities, the rejection of several containers of marine products by the Italian health authorities and the detection of industrial waste materials in some consignments of low value fish were some of the quality problems the industry has confronted in the recent past.

Both the US and the European Union have made the HACCP-based quality system mandatory for seafood processors. The HACCP system necessitates better infrastructure facilities like better landing centers, more hygienic handling, both at the transportation and at the processing stages, laboratory facility for all units, adequate supply of good quality water and uninterrupted power supply. Training of personnel for implementing the HACCP system is another crucial area.

The Consumer Calls the Tune

With the change in the environment, the consumer clearly is gaining a new importance. Companies that could afford to ignore the consumer all along are now forced to compete with one another to win his favor.

In conclusion we say that the Indian consumer now has access to the best products in the World. He is no longer required to subsidize the antiquated production processes and inefficiencies of Indian manufacture. Till, now, he could not get a well-engineered product, though he was willing to pay the due price. Now, he has a choice. Rules of business, which have all along been in favor of the producer, are now being rewritten in favor of the consumer.


Managing HR supply from all sources

If manpower deficit is estimated in any department or in the entire organization, management has to forecast the future supply of human resources from various sources like internal sources, comparable organizations, educational and training institutes, employment exchanges, labor market, etc.

Action Plan for Recruitment and Development:

If the forecast relating to future supply of manpower from internal sources of the organization shows favorable trends, the management may prefer internal candidates and plan for promotion, transfer, training and development. If suitable candidates are not available from internal sources and, if the forecasts relating to future supply from external sources indicate the availability of required human resources, plan for recruitment and selection.

The promotion plan includes establishing of the ratio of internal promotion to external recruits, basis for promotion, promotional channel, reservations in promotions, etc. The transfer plan includes channel, company rules regarding organization initiated transfers and employee initiated transfers.

The training and development plan covers areas to be developed, training techniques, training programs, training time, availability of trainer, in plant training or institute training, new courses to be developed or changes to the existing courses, cost benefit analysis of training, development of the employees and matching of their improved skills with future job requirements etc.

The productivity plan includes maximization of productivity or minimization of labor cost per unit of output through technological changes, improving and streamlining methods, procedures, systems, productivity bargaining, training, financial incentives developing various schemes, motivation, commitment, organization development programs, job enrichment or enlargement, participation etc. It also includes improving of productivity efficiency.

Recruitment and selection plan covers the number and type of employees required, when they re required for the job, time necessary for recruitment and selection process, recruitment sources, recruitment techniques to be used, selection procedure to be adopted, selection techniques to be used to select the required candidates. It also covers the time factor for induction, preliminary training and placement.

Modify the Organizational Plan

If future supply of human resources from all the external sources is estimated to be inadequate or less than the requirement (share of the particular firm in labor market), the manpower planner has to suggest the management to alter or modify the organizational plan. For example, if the organizational plan of Indian Railways indicates that computerization should be completed in all the stations and offices by 1991 and the estimations of future supply of human resources shows that the supply of computer would be less than the human resources requirements from all the sources even by 1991, then the railways have to modify their organizational plan by extending the period of computerization by some more time when the supply of human resources available to railways will be equal or greater than the requirement of human resources.

In view of shortage of certain categories of employees, the organization has to take care not only of recruitment but also retention of existing employees.

Retention Plan

There may be a problem of unemployment in some categories but organizations experience shortage of employees in other categories. Hence, the organizations have to plan for retention of the existing employees. Retention plan includes:

1.Adjustment of the salary levels with those of the comparable industries so as to remove inequalities.

2.Providing opportunities for career development by providing training facilities, adopting the policy of promoting from within, more systematic promotional procedure, providing opportunities for self-development, assignment of challenging work, etc.

3.Introduction of effective consultation and negotiating machinery, encouragement of grievance redressing and conflict resolution rather than suppressing.

4.Providing of extensive training and development facilities. Encouraging the employees to participate in the management, development programs and training programs both within and outside the organization. And Programs should be effective in meeting not only organizational but individual needs..

5.Selection procedure should meet the job and organizational requirements not only for the present position to which the candidate has applied but also his potentialities for future jobs in the career line.

6.Provide more congenial working conditions and extensive fringe benefits.

7.Provide the scope for extensive participation of the employees in decision-making and create the environment that the system in the organization is participative management but not autocratic management.

8.Provide the facilities and environment for productive interpersonal relations.

9.Provide the scope for challenging, creative and innovative work.

In the days of Globalization and increasing outsourcing from India particularly in he area of Software it is imperative that the organizations must come up with well thought of and well drawn out plans for retention and create a congenial atmosphere for the employees to stay with them. Otherwise a high attrition rate and time taken in training new employees, how experienced they may be, will result in losing business for the company.


Conflicts in working environment

Conflicts are inevitable between people at any time but the ones at work place can have a negative effect on ones performance and health. Handling work conflict can take its toll on most of us. There are some better ways to cope up with such negative effects or conflicts themselves. Here we are trying to outline the ways and means of not only dealing with conflicts but also approaches to avoid them as much as possible.
Mr. Gajodhar (say G) thinks that working under his boss is a continuous stress. He is not in a small company but employed in a corporate sector. G feels that one of his peers flies off the handle at the slightest thing and even trying to be a peacemaker is not helping to avoid the conflict. This is the plight of many working people who face work conflict not only with their bosses but also with their colleagues.

Managing the conflict or differences is best done by understanding the conflict style because conflict can also be healthy and creative. The best thing is to handle it constructively.

Causes of difference in agreement

Conflicts may arise between you and your boss, friend or partner or in people working with each other in close proximity for a long time and is common especially amongst those having the same goals but who disagree on the means of by which they can be achieved. Even a minor conflict can create tension, so it is important to know the root cause of it because often its magnitude is hugely out of proportion to the disagreement that caused it while sometimes the problem seems trivial but actually there may be some thing deep-rooted.

Work stress

Today, work stress is a major problem that afflicts people. Basically, any argument can result in anger, anxiety and stress. These can then reflect upon overall health, giving rise to high blood pressure, headache or even depression. The sooner the differences are resolved the better. If one is not able to control his anger then h should seek the help through counseling.

Avoiding the ‘argument’ problem:

When a disagreement occurs then one should not over react. If so then the ‘opponent’ will never consider the other person’s viewpoint. By not over reacting at least you will find some consideration from the opponent. There are people who can manage their differences well. Everybody can do it but for that one needs to understand the conflict style. If one is able to do this then it helps one to act differently as suggested by expert psychologists.

Style to be adopted in tackling the different strikers:

A.Pre empting the attack itself——This can be achieved by tact and communication. If the communicator who wants to prevent any argument and also get the work smoothly proceed can communicate a background of the subject with a little humor and making the other person feel a little more important, then the action required from the other person can be derived faster without any conflict.

B.Defensive attacker—the faster you act, you believe it is better. You lay down laws and give out threats in your defense in order to prevent a full-fledged conflict.

C.Subtle striker—you wait for your opponent to notice something is wrong using silence, cribbing and nagging on and on about an issue.

D.Full-on foe—- You have fought all through your life to attain what you wish and hence you are ever ready to face a conflict. But although you look tough, you are scared of getting hurt and every conflict becomes a painful experience for you.

E.Shock-absorber—- You are afraid of conflicts and want to remain at a distance from them. You do not defend or stress your point of view. Instead, you wait for the storm to pass by. Anger and resentment build up within you.

F.Peacemaker –You want to remain cool and sort things out not considering your personal needs and opinions.

G.Negotiator—Best style to adopt. You find a peaceful solution to problem without anyone getting hurt.

Recognize, which style you belong to and try and change. Conflict in work relationship is natural. Communication and compromise is the key here. Accusations are a big ‘no’. Do not let conflicts go out of hand.


Flexible manufacturing system (FMS)

FMS Set-up

The CNC (Computerized & Numerically controlled) machine centre is a basic element of FMS. There is an automatic tool changer and pallet changer systems in CNC. There is automatic transfer of tools, identification of pallets and their changing. Even tool identification and correction is automatic. Inspection is automatic. Pallet pool contains pallets stored in front of the machine. Pallets are handled by Pallet handling System called Rail Guided vehicle (RGV) or Automatic Rail Guided Vehicle (ARGV). There are pallet and tool preparation areas.

Hierarchy of Hardware

Host computer is at the top of the hierarchy. It maintains data-base of parts, fixtures, pallets, machines, scheduling. This computer can be linked to a plant-wide PPC-system and also to CAD system.

The middle-level hierarchy consists of a cell controller. At the bottom level, there are control systems of individual machines, material handling system, tool pre-setter and peripheral devices for data exchange.

There is networking among these elements.

Functions of hardware

Host Computer: Decides detailed production schedule in the light of production requirements. Transfer shift-wise production to the cell controller. Generate MIS reports.

Cell Controller: Executes shift-wise production schedule after receiving it from the host computer. It does so by interacting with the individual elements. Carries tool management.


1. Increased machine utilization.
2. Reduced WIP.
3. Reduction in finished goods.
4. Reduction in number of machines and operating personnel.

The quantification of the above factors will make it possible to appreciate the savings by FMS, and may make us inclined to justify its high installation cost.

Technology of FMS

The ever changing environment has put a premium on flexibility. A manufacturing method today has to satisfy a variety of conflicting targets. Therefore, though flexibility is called for, it should not affect productivity. Flexible manufacturing system overcomes the limitations of conventional batch manufacturing system. It employs computer and numerical control techniques. It was first installed in England in 1968. Since then, it has been adopted by many countries. Mostly, it is applied in electronics assembly, IC manufacturing and metal cutting.

Steel-collar workers or robots are a common feature of automated factories. More and more manufacturing functions are being integrated to computers (CIM: Computer Integrated Manufacturing). Product specifications, designing, machine control, material handling, production process control are some such functions. A common data-base is used. It includes computer aided deign (CAD), computer aided manufacturing (CAM), robotics and material requirement planning (MRP). Data generated may include NC machine tools—CNC or DNC machines and robots

Structurally, FMS consists of a set of machine tools performing production operations, linked up material handling system. The overall control is exercised by a central computer. The Flexible Manufacturing System (FMS), as it is aptly called, consists of a large number of tools whose functioning is coordinated through a computer program. In fact, the same programs also integrates different aspects of the machining process, material handling and job scheduling into a seamless system that can respond quickly to any change I the demand for the final product.

We have traveled from automatic mechanisms to numeric control (NC). CNC uses mini-computers. NC machines use magnetic tape whereas CNC machines are on-line to a computer. DNC machines use a central computer to control several CNC machines. CNC machines can produce a specific part or group of parts. Such grouping is called a cell. Each cell has a computer which interfaces with the CNC. The operation of several such cells is coordinated by a central computer through the aid of a material handling system. In the FMS, scheduling decisions are made on the actual state of the system. FMS is put into different categories depending upon the number of CNC machines and their arrangements.

The three sub-system of FMS are—machining, assembly and fabrication. The CAD/ CAM system are integrated to FMS. The sub-system may be connected to storage/retrieval system (AS/RS) . It allows flexible routing of parts. The integration of AS/RS to FMS is through a material handling system, which could be an automatic guided vehicle (AGV) or robot or conveyor. Most FMS literature emphasizes machining only. Flexible assembly system (FAS) and flexible fabrication system (FFS) have developed independently. All three have the potential for application of flexible technology.

Bharat Forge’s Machine Components Division (MCD) uses an FMS to respond quickly to demand fluctuations. Flexible Manufacturing System will not work unless material handing systems are automated.


Attitudes toward risk

In this article we are beginning with a TV game as an illustration for a proper explanation of the topic covered by the title.

At the time you thought that you were safely immersed in the middle of a finance operation, you find yourself caught up in a time warp, and you are a contestant on the television game “Let’s Make a Deal�?. The host explains that you get to keep whatever you find behind either door #1 or door #2. He tells you that behind one door is $10,000in cash, but behind the other door is ‘Junk’ a used tire with a current market value of zero. You choose to open door #1 and claim your prize. But before you can make a move, the host says that he will offer you a sum of money to call off the whole deal.

Decide for yourself what dollar amount would make you indifferent, between taking what is behind the door and taking the money offered. That is, determine an amount such that one dollar more would prompt you to take the money; one dollar less and you would keep the door. Write this number down on a sheet of paper. In a moment, we will predict what that number will look like.

Let’s assume that you decide that if the host Monty offers you $2,999 or less, you will keep the door. At $3,000 you can’t quite make up your mind. But at $3,001, or more, you would take the cash offered and give up the door. Monty offers you $3,500 so you take the cash and give up the door. (By the way, the $10,000 was behind door #1, so you blew it.)

Certainty equivalent (CE):

The amount of cash someone would require with certainty at a point in time to make the individual indifferent between that certain amount and an amount expected to be received with risk at the same point in time.

What does any of this have to do with this on risk and return?
Everything; we have just illustrated the fact that the average investor is averse to risk. Let us see why. You had a 50 / 50 chance of getting $10,000 or nothing by keeping a door. The expected value of keeping a door is $5,000(0.50 x$10,000 plus 0.50 x$0). In our example, you found yourself indifferent between a risky (uncertain) $5,000 expected return and a certain return of $3,000. In other words, this certain or risk less amount, your certainty equivalent (CE) to the risky gamble, provided you with the same utility or satisfaction as the risky expected value of $5,000.

It would be amazing if actual certainly equivalent in this situation was exactly $3,000, the number that we used in the example. But, take a look at the number that we asked you to write down. It is probably less than $5,000. Studies have shown that the vast majority of individuals, if placed in a similar situation, would have a certainty equivalent less than the expected value (i.e. less than $5,000). We can, in fact, use the relationship of an individual’s certainty equivalent to the expected monetary value of a risky investment (or opportunity) to define their attitude towards risk. In general, if the

Ø Certainty equivalent < expected value, risk aversion is present.
Ø Certainty equivalent = expected value, risk indifference is present.
Ø Certainty equivalent > expected value, risk preference is present.

Thus, in our example, any certainty equivalent less than $5,000 indicates risk aversion,. For risk-averse individuals, the difference between the certainty equivalent and the expected value of an investment constitutes a risk premium; this is additional expected return that the risky investment must offer to the investor for this individual to accept the risky investment.

Risk-averse term applied to an investor who demands a higher expected return, the higher the risk.

We will take the generally accepted view that investors are, by and large averse. This implies that risky investments must offer higher expected returns than less risky investments in order for people to buy and hold them.

The actual return on a risky investment could be much less than the actual return on a less risky alternative. And, to have low risk, you must be willing to accept investments having lower expected returns. In short, there is no free lunch when it comes to investments. Any claims for high returns produced by low-risk investments should be viewed skeptically.