Allana Management Journal of Research January-june-2011

HUMAN

RESOURCES

MANAGEMENT

“NURSES' MOTIVATION IN INDIA : INTRINSIC AND EXTRINSIC MOTIVATION, ‘WHAT DO YOU LOOK FOR IN

A JOB?’ AN EMPIRICAL STUDY”

RAVINDER KAUR, RESEARCH SCHOLAR, AMITY BUSINESS SCHOOL, NOIDA

“A STEP FORWARD BEYOND THE TIP OF ICEBERG IN CONFLICTS : AN EMPIRICAL STUDY”

MS. V. SELVA LAKSHMI, LECTURER, AIMS, PUNE

“REINVENTING SOCIAL ETHOS [THE DIALECTIC OF ORGANISATION AND SOCIETY IN SOCIAL WORK CONTEXT]”

MS. MONA SINHA, ASST. PROFESSOR, BHARATI VIDYAPEETH’S INSTITUTE OF MANAGEMENT STUDIES &

RESEARCH, NAVI MUMBAI

DR. ANJALI KALSE, PROFESSOR, BHARATI VIDYAPEETH’S INSTITUTE OF MANAGEMENT STUDIES & RESEARCH,

NAVI MUMBAI

13

24

36

ALLANA MANAGEMENT JOURNAL OF RESEARCH / JAN - JUN 2011 / PAGE NO. 001

FINANCIAL

MANAGEMENT

“FINANCIAL FLEXIBILITY AND OPERATIONAL RISK MANAGEMENT IN BANKS”

PROF. (DR.) M.D. MOHITE, PROFESSOR (EMERITUS), DR. D.Y. PATIL INSTITUTE OF MANAGEMENT AND

RESEARCH, PIMPRI, PUNE

“VALUE CREATION IN INDIAN BANKING INDUSTRY : AN ANALYSIS”

DR. R. SATISH, ASST. PROFESSOR, SRR ENGINEERING COLLEGE, CHENNAI

M. DANIEL RAJKUMAR, ST. MARYS SCHOOL OF MANAGEMENT STUDIES, CHENNAI

“WILL CHINESE YUAN BECOME THE NEXT RESERVE CURRENCY?”

PROF. PURNENDU MAITY, ANALYST, CREDIT POINT E.COM, PUNE

63

72

84

GENERAL

MANAGEMENT

“A CRITICAL STUDY OF THE VALUE ADDITION TO EDUCATION BY ACADEMIC JOURNALS WITH SPECIAL

REFERENCE TO E-PUBLISHING”

PROF. S. P. SINGH, DY DIRECTOR, INDIRA INSTITUTE OF MANAGEMENT, PUNE

“GLOBAL RECESSION : MANAGEMENT CHALLENGES AND STRATEGIES MANAGERIAL PERCEPTION ON

GROWTH, CHALLENGES & STRATEGIES”

MS. SHARAYU BHAKARE, HOD, BUSINESS ADMINISTRATION (COMMERCE), MODERN COLLEGE OF ARTS,

SCIENCE AND COMMERCE, PUNE

PROF. SUBBARAM RANGANATHAN, PROFESSOR & DIRECTOR, ASMA INSTITUTE OF MANAGEMENT, PUNE

“ISLAMIC PERCEPTION OF COMMERCE & BUSINESS MANAGEMENT”

DR. DASTAGEER ALAM, PROFESSOR, P.A. COLLEGE OF ENGG., MANGALORE

97

107

121

ALLANA MANAGEMENT JOURNAL OF RESEARCHCONTENTS

JANUARY - JUNE 2011


EDITORIAL

BOARD

CHIEF EDITOR

PROF. R. GANESAN

DIRECTOR, AIMS

ADVISOR

DR. A. B. RAO

SENIOR RESEARCH GUIDE & MANAGEMENT CONSULTANT

EDITORS

DR. ASHRAF RIZVI

PROFESSOR, IIM, INDORE

DR. ROSHAN KAZI

PROFESSOR, AIMS

DR. SURYA RAMDAS

DIRECTOR, INTERNATIONAL INSTITUTE OF MANAGEMENT SCIENCES (HRD)

ASST. EDITORS

PROF. ASHFAQUE AHMED PINITOD

ASST. PROFESSOR, UNIVERSITY OF YAMBU, KINGDOM OF SAUDI, ARABIA

PROF. S. D. BAGADE

ASST. PROFESSOR, AIMS


EDITORIAL

ach issue of this journal has played a remarkable role in

Eenthusing and enlightening research - minded scholars

and academicians. Original research in the areas of

Management and Commerce can be ignited by an innovative

search for achieving objective – oriented ends. Every type of

purposeful and realistically authentic research is guided by a

spirit of enthusiasm and self-motivation.

To support and supplement the modern technological

advancement, multi-disciplinary research and more especially

research in management and allied areas, is the dire need of the

day. Further genuine research in various fields of human

endeavour can yield valuable results thereby contributing to the

enrichment of knowledge.

The aim of 'Allana Management Journal of Research' is to 'nurture

and promote' talent in research. Accordingly as a research

journal approved by the office of Registrar of Newspapers for

India, Ministry of Information and Broadcasting, Government of

India, it has been registered and assigned ISSN 2231-0290.

This journal is meeting the requirements of many enthusiastic

researchers.

The editorial committee would appreciate enlightened views of

the readers on the research papers in this journal.

PROF. R. GANESAN

CHIEF EDITOR


ABSTRACT

ike many other developing countries, India too has a serious human resource crisis in the healthcare

Lsector. One of the challenges is the low motivation of nurses'. Experience and the evidence suggest that

any comprehensive strategy to maximize nurses' motivation in a developing country context has to involve

a mix of financial and non-financial incentives.

THE OBJECTIVE :

of this study is to assess the role of non – monetary incentives for motivation and to demonstrate to what extent

non-monetary incentives have the potential to increase the motivation of hospital employees' i.e. nurses as much

as the monetary incentives. Incentive is any means that makes an employee desire to do better, try harder and

expend more energy. Non-monetary incentives such as participation in decision making, verbal or written

recognition of good work etc. are the kinds of incentives that do not involve direct payment of cash. To realize the

objectives of the study, a survey study was administered at the 4 different units of Apollo Hospitals.

METHODOLOGY :

The research design entailed structured quantitative questionnaire with nurses from the 4 units of Apollo Hospital.

The selection of nurses was the result of a random sampling process. In each unit 130 nurses were carried out and

the total sample size was of 520 nurses'. Results from these questionnaires by respondents were backed up with

information from focus group discussions/interviews with senior nursing staff of the hospital. The field work

material was coded and quantitative data was analyzed with SPSS software.

RESULTS AND DISCUSSION :

The study shows that nursing employees overall are strongly guided by their professional conscience and similar

aspects related to professional ethos. In fact, many nurses are de-motivated and frustrated precisely because they

are unable to satisfy their professional conscience and impeded in pursuing their vocation due to lack of means and

supplies and due to inadequate or inappropriately applied human resources management (HRM) tools. The paper

also indicates that even some HRM tools that are applied may adversely affect the motivation of health workers.

KEYWORDS :

nurses, non-monetary incentives, motivation, human resource management and hospitals.

13 “NURSES' MOTIVATION IN INDIA : INTRINSIC AND EXTRINSIC MOTIVATION,

‘WHAT DO YOU LOOK FOR IN A JOB?’ AN EMPIRICAL STUDY”

MS. RAVINDER KAUR, RESEARCH SCHOLAR, AMITY BUSINESS SCHOOL, NOIDA


ABSTRACT

In an organizational practice, the management has many aspects to reflect on for a workplace to be

harmonious and triumphant. One of these things that should not be left unattended is any presence of

conflict. The purpose of this study is to explore the area which induces conflicts among the employee's .The

employee's behavioral change after the conflicts is also investigated. The Significance of this study is, if solution

given in this paper be applied in day-to-day organizations, it helps reducing conflicts effectively. At last, it

provides some suggestions for the managers to handle the conflict in the better way.

24 “A STEP FORWARD BEYOND THE TIP OF ICEBERG IN CONFLICTS : AN EMPIRICAL STUDY”

MS. V. SELVA LAKSHMI, LECTURER, AIMS, PUNE


ABSTRACT

he form and content of the world economy is fast evolving and we find capital being increasingly

Tconcentrated and centralised as the battle of market competition intensifies. Companies have to keep

running just to stay in the same place so intense is the competition. One of the factors that make the

critical difference between the companies is the public perception of a business's value systems that are best

exhibited by initiatives in discharging its Corporate Social Responsibility (CSR). However, there is a great deal of

ambivalence and uncertainty about what CSR really means as well as what drives businesses to pursue it. We have

undertaken a detailed literature review to delineate the various positions taken in understanding and explaining

the concept of CSR especially how business relates to society and vice versa. In the process, we have examined the

conceptual evolution of CSR and explained some of its critical facets. Then we have tried to relate these facets to

the objective social reality, as we perceive it and posited our definition of CSR giving both the reason and

rationality of what we say and why we say so. We have found that there has been a shift in the paradigm with both

the academia and the industry moving from the altruistic standpoint to the strategic standpoint on CSR

interventions. Finally we have seen how this has moulded the science and the art of social work.

36 “REINVENTING SOCIAL ETHOS [THE DIALECTIC OF ORGANISATION AND SOCIETY IN SOCIAL

WORK CONTEXT]”

MS. MONA SINHA, ASST. PROFESSOR,

BHARATI VIDYAPEETH’S INSTITUTE OF MANAGEMENT STUDIES & RESEARCH, NAVI MUMBAI

DR. ANJALI KALSE, PROFESSOR,

BHARATI VIDYAPEETH’S INSTITUTE OF MANAGEMENT STUDIES & RESEARCH, NAVI MUMBAI


ABSTRACT

conomic reforms and financial sector reforms have provided the great deal of Financial Flexibility to the

E banks. An increasing use of modern information technology has provided the Financial Flexibility in terms

of volume of business, geographical coverage, products and service profiles, customer mix & emerging

new global banking business. All these have exposed the banks to new risk prone areas of Operational Risk.

In an emerging scenario of global banking the operational risk management is a new risk prone area with multi

complexities. Moreover, reward and risk are sensitively correlated. Therefore risk management must focus on risk

inventory risk synchronization, risk reduction and risk diversification. Along with this the risk base audit (RBA), risk

base supervision (RBS) and effective internal control system are must for banking operations for monitoring the

operational risk and ensuring financial flexibility with sustainable stability in banking business.

63 “FINANCIAL FLEXIBILITY AND OPERATIONAL RISK MANAGEMENT IN BANKS”

PROF. (DR.) M.D. MOHITE, PROFESSOR (EMERITUS),

DR. D.Y. PATIL INSTITUTE OF MANAGEMENT AND RESEARCH, PIMPRI, PUNE


ABSTRACT

Shareholders' value creation and maximization has become the hallmark of corporate parlance. For a

number of years there has been a growing awareness of the importance of shareholder value for financial

strategy and management. At the same time there has been growing concern that the traditional

accounting measures of performance have serious inherent limitations that may lead to poor financial decision

making. In the academic world, a number of studies have been carried out on this burning topic abroad but has not

received much attention from Indian context in Banking Sector.The concepts of Economic Value Added (EVA) and

Market Value Added (MVA), which are currently regarded as the important indicators of shareholder value and

financial performance, are examined, along with some research evidence supporting them (and other evidence

opposing them). Various aspects of EVA are discussed, including different ways of calculating them, and their link

to other financial concepts such as employee productivity. This study helps us whether there is a prime facie

case for the adaptability of EVA as one of the performance measurement tool in Indian Banking Sector.It is hoped

that the results and perspectives gained from this study will be helpful to bank managers who aim to optimize their

approach to shareholder value management.

KEYWORDS

Economic Value Added, Market Value Added, Employee Productivity.

72 “VALUE CREATION IN INDIAN BANKING INDUSTRY : AN ANALYSIS”

DR. R. SATISH, ASST. PROFESSOR, SRR ENGINEERING COLLEGE, CHENNAI

M. DANIEL RAJKUMAR, ST. MARYS SCHOOL OF MANAGEMENT STUDIES, CHENNAI


ABSTRACT

ub-prime crisis, European debt crisis, Fed's QE2 policy… consequently many observers conjecture is once

Sagain rife that we are reaching the end of the era of dollar dependency. Evidently next question is where

will be the safe heaven? Who will give the hope against all odds ? Given the sheer size of economy and

fierce growth rate spotlight is now on Chinese Yuan. In another two decade years China is set to replace the US as

the world's largest economy. It is already the world's largest exporter and will soon also be the largest trading

nation. Contrary to the US, the world's largest debtor, China is also a large net external creditor, only trailing

Japan. A close parallelism from history in hand is that as once economically and financially ascendant Dollar has

replaced British Sterling troubled by the bequest of two world wars; would this time Redback will replace the

Greenback in similar way ? China is taking many incremental steps like more trade settlements in Yuan, Currency

Swap, and diversification of its reserves to internationalize its currency. Along the way there are challenges of

growth with right monetary policy maneuver, exchange rate stability, financial market and legal reforms which

requires considerable time in coming years. While Pound, Yen are not so strong currency given their economic and

financial size and structure but Euro is still in the race. Also technically speaking IMF SDR might be another viable

alternative. As world is becoming more multi-polar there is less conclusive possibility of actually Yuan becoming

single monopoly reserve currency like Dollar. After next 15-20 years more probable scenario is that it will become

an internationalized currency and pose as a strong contender along with Dollar and Euro for reserve currency

option.

84 “WILL CHINESE YUAN BECOME THE NEXT RESERVE CURRENCY?”

PURNENDU MAITY, ANALYST, CREDIT POINT E.COM, PUNE


ABSTRACT

cademic Performance Indicators (API) in Performance Based Assessment Scheme (PBAS) by University

A Grants Commission (UGC) proposes, research and academic publications as important parameter in

assessment of teachers. The All India Council for Technical Education (AICTE) has also used the

'cumulative impact index' in drawing equivalence to Ph.D. These and many other factors have resulted in almost

every institute of higher and technical education, promote and publish academic journal. This research paper

critically analyses the role of academic journals in adding value to the process of education. Brief overview of the

merits and demerits of journal rankings and valuation methodologies (e.g. Impact Factors of JCR, SJR indicators,

Citations etc) is considered. The research also dwells with the various manipulative tendencies and practices

prevalent towards the same. The researcher analyses benefits of electronic form of journals publications. The

paper makes suitable recommendations to scholarly researchers and academicians based on outcomes of above

research.

KEY WORDS

Academic journal, Value to education, E-publishing, Journal rankings.

97 “A CRITICAL STUDY OF THE VALUE ADDITION TO EDUCATION BY ACADEMIC

JOURNALS WITH SPECIAL REFERENCE TO E-PUBLISHING”

PROF. S. P. SINGH, DY DIRECTOR, INDIRA INSTITUTE OF MANAGEMENT, PUNE


ABSTRACT

ccording to the World Bank, developing countries' combined growth will fall to 2.1 per cent, or to zero

Aper cent excluding China and India. In this context the study gains immense importance in understanding

the managerial perceptions of the emerging challenges during recession and the necessary remedial

actions to be taken so that the business growth is ensured.

The objectives of the study are :

a) To understand the managerial perceptions of challenges in business growth during recession

b) To analyse the perceptions using appropriate statistic.

c) To discuss the analyzed results in fora of managers to brief on their possible futuristic performance

orientation.

A list of 15 statements had been prepared and managers who are employed in corporates across the world ranging

from the far east to the west in Asia, Africa and USA were asked to rank order them as they perceived them to be

challenges for business growth during recession. The mean of the ranks was divided in two comparable formats of

Indian Managers and Foreign Managers. Spearman's Rank correlation was used as statistic to determine the impact

of the ranking and necessary correlation study made. Total of 100 managers were asked to submit their response by

email and these were tabulated to obtain the mean rank and hypotheses tested at 5% significance level using 'z'

test(critical value: 1.771 at 5% significance) and statistical inference was made. It was seen that the calculated

value (-3.006689) is less than the critical value as per Table and hence the null hypotheses that 'the perceptions of

foreign and Indian managers are independent' is accepted. Managers need to understand that they have an

important role to play in organizational development vis-a vis their own growth.

107 “GLOBAL RECESSION : MANAGEMENT CHALLENGES AND STRATEGIES MANAGERIAL PERCEPTION

ON GROWTH, CHALLENGES & STRATEGIES”

MS. SHARAYU BHAKARE, HOD, BUSINESS ADMINISTRATION (COMMERCE),

MODERN COLLEGE OF ARTS, SCIENCE & COMMERCE, PUNE

PROF. SUBBARAM RANGANATHAN, PROFESSOR & DIRECTOR,

ASMA INSTITUTE OF MANAGEMENT, PUNE


ABSTRACT

n today's world, life have become challenging and at every facet of one's life, we are faced with dilemmas on

Ihow to live an ideal life, a life that is guided by the Holy Book of Quran and the Sunnah of Prophet Muhammad

(PUBH). This paper tries to draw inferences from various texts and ancient documents to present and draw

comparisons between what is permitted and disallowed. It draws comparisons between a Muslim who is ordained

by God to live his life as per the guidances and principles of the religion and the one who enjoys material benefits

and his behaviour is guided by results and outcomes and not how it is gained or earned.

121“ISLAMIC PERCEPTION OF COMMERCE & BUSINESS MANAGEMENT”

DR. DASTAGEER ALAM, PROFESSOR, P.A. COLLEGE OF ENGG., MANGALORE

ALLANA MANAGEMENT JOURNAL OF RESEARCH / JAN - JUN 2011 / PAGE NO. 013HUMAN

RESOURCES

MANAGEMENT

he nurses' crisis has numerous dimensions. There are Tinadequate numbers of workers, poorly distributed with

an unplanned brain drain (domestically and

internationally). With respect to existing human resources, the

low level of nurses' motivation has often been identified as a

central problem in health service delivery. For example, the

results from a survey undertaken by the Gesellschaft für

Technische Zusammenarbeit (German Technical Cooperation,

GTZ) among representatives of ministries of health and GTZ staff

from 29 countries showed that low motivation is seen as the

second most important health workforce problem after staff

shortages. From the perspective of health professionals, the

challenges include lack of equipment, frequent shortages of

supplies and a mounting workload – all these exacerbated in

small and rural facilities. Furthermore, despite decentralization

efforts, key functions of human resource management

(recruitment, overall staff distribution, remuneration,

promotion and transfers) remain highly centralized.

A study in South Africa on the effects of a newly introduced, so-

called "rural allowance" showed the limited impact on retention

and motivation (Reid S, Durban: Health Systems Trust; 2004).

Similarly, analyzing the role of wages in nurses migration,

(Vujicic et al) conclude that what they call non-wage

instruments may be more effective in reducing migration flows,

as portrayed in a (WHO report- 2003). The study of (Kingma M),

while undertaken in developed countries, also provides

important insights on the limited effect of financial incentives

on nurses and instead points at the relevance of non-financial

incentives for nurses' job satisfaction and self-esteem. In their

“NURSES' MOTIVATION IN INDIA :

INTRINSIC AND EXTRINSIC MOTIVATION,

‘WHAT DO YOU LOOK FOR IN A JOB?’

AN EMPIRICAL STUDY”

MS. RAVINDER KAUR,

RESEARCH SCHOLAR,

AMITY BUSINESS SCHOOL, NOIDA


study on health workers' motivation and performance

in Benin, (Alihonou et al) suggest introducing non-

financial incentives while also improving structural

conditions. (Stilwell) shows, by reference to

Zimbabwe, that nurses based in remote areas,

despite lack of financial incentives and hard working

conditions, frequently exhibited a high level of

motivation to perform well.

Low motivation has a negative impact on the

performance of individual nurse, facilities and the

health system as a whole. Moreover, it adds to the

push factors for migration of nurse, both from rural

areas to the cities and out of the country (WHO-

2003,JLI press -2004). It is therefore an important

goal of human resources management in the health

sector to strengthen the motivation of nurses. Many

nurses' are de-motivated and frustrated precisely

because they are unable to satisfy their professional

conscience and impeded in the pursuit of their

vocation due to lack of means and supplies at work

and due to inadequate or inappropriately applied

human resources management (HRM) tools.

Motivation can be defined as "the willingness to exert

and maintain an effort towards organizational goals"

(Franco LM, Benett S, Kanfer R). Motivation develops

in each individual as a result of the interaction

between individual, organizational and cultural

determinants. Some of these factors are of more

distal nature, such as cultural norms and values and

individual personality, hence they lie outside the

scope of human resources management.

(Kanfer) identifies two aspects of the internal

motivation process: The "will-do" aspect concerns the

establishment of congruence between personal goals

and the goals of the organization (goal setting).

Questions that characterize this psychological

process are: "What is the personal value of devoting

more of my resources to the job?" or "What is the

personal value of achieving higher job performance?"

The "can-do" aspect concerns motivational

effectiveness, the extent of individual resources that

are mobilized to accomplish adopted goals (goal

achievement). The related question is: "How likely is

it to achieve the desired level of job performance?”

Despite interest in the issue of human resources for

health, human resource management and the

question of what can be done to strengthen nurses'

motivation in developing countries has so far not

received as much attention as the subject merits. In

addition to the above problems, there is an ever-

higher demand for the availability and retention of

health workers.

One way to do this is to offer incentives. The World

Health Organization (WHO) defines incentives as “all

rewards and punishments that providers face as a

consequence of the organizations' in which they work,

the institution under which they operate and the

specific interventions they provide” (WHO, 2000: p

61). (Buchan) use the objective(s) of the incentive as

the definition: “An incentive refers to one particular

form of payment that is intended to achieve some

specific change in behaviour." Incentives serve as

motivation for the nurses' to perform better - and stay

in the job - through better job satisfaction (Zurn,

Dolea and Stilwell, 2004). Enhanced motivation leads

to improved performance, while increased job

satisfaction leads to reduced turnover (greater

retention). Nurses' are internally motivated by :

Valence - how they perceive the importance of their

work;

Self-efficacy - their perceived chances of success in

their tasks; and

Personal expectancy - their expectations of personal

reward.

Although motivation is an internal state consisting of

perceived task importance, self-efficacy and

expected personal reward, it is possible to influence

it with external changes in the workplace. The

workplace climate plays a role in job satisfaction,

correlating highly with retention because workers

who are satisfied with their jobs remain in their jobs

(Luoma, 2006).

An exit study on 40,000 nurses in 11 European

countries showed a relationship between job

satisfaction and the intention to leave the profession:

the lower their job satisfaction, the more likely

nurses were to leave (Hasselhorn, Tackenberg and

Muller, 2003). Indeed, facilities that are able to


attract and retain staff tend to be those that offer the

nurses' high levels of job satisfaction (Zurn et al,

2004). Incentives systems are the most widely used

external influences on motivation (Louma, 2006).

Beyond worker motivation, incentives are used to

attract and retain health professionals to areas of the

greatest need, such as rural or remote areas with poor

infrastructure and poor populations. Incentives are

used to overcome inequities in supply of and access to

health services, such as rural allowances (South

Africa) and mountain allowances (Lesotho).

METHODOLOGY OF RESEARCH

Before prospective respondents agreed to participate

in the study, the interviewer informed them about the

overall subject of the questions: their experiences

and views of certain HRM tools and needs around their

work environment. The Design of the research study is

as follows :

The type of research adopted is Descriptive.

Descriptive research is used to gather descriptive

information nurses' classifications, nurses motivation

levels etc. The research study is quantitative in

nature. Mathematical analysis is used to generalize

the statements. The type of questionnaire used is

structured and formal. The types of questions used

are straight forward and limited probing in nature.

Time Dimension is cross – sectional, information was

obtained from 520 samples of respondents from the

target population in senior nurse and junior nurse

from the 4 units of Apollo Hospitals Group. The type of

analysis is statistical analysis. The hypothesis is

tested using Spearman rank order correlation. The

research technique used is survey method. The

primary data needed for the study has been collected

through questionnaire and the contact method used

was person administered survey.

The target population for the 4 units of Apollo

hospitals Group for 4 units; Delhi, Hyderabad, Pune

and Kolkata is 2200 nurses. Sample consisted of 520

nurses' working with Apollo hospitals Group from units

like Delhi, Hyderabad, Pune and Kolkata included

employees from two hierarchical levels i.e. Senior

and junior nurses working in organizations. The size of

sample was determined using formula for sample for

small population.

The actual research question on the role and

relevance of non-financial monetary factors affecting

motivation levels was not unveiled in order to avoid

"socially desired behaviour" responses. The field work

material was coded and quantitative data was

analyzed with SPSS software.

ORGANIZATIONAL SITES

The study design entailed structured qualitative

questionnaire with nurses from the 4 units of Apollo

Hospital. The selection of nurses was the result of a

random sampling process. In each unit 130 nurses

were carried out and the total sample size was of 520

nurses'. Results from these questionnaires by

respondents were backed up with information from

focus group discussions/interviews with senior

nursing staff of the hospital.

MEASURES

The study used “Measures Intrinsic and extrinsic

Motivation: What do you look for in a Job?”

Udai Pareek (1968a, 1968b) identified and was used

specifically for healthcare workers working in

hospitals. The instrument contains 14 items in the

questionnaire, seven related to intrinsic and seven to

extrinsic motivation.

PURPOSE

To study if there any correlation exists between the

senior and the junior nurses ranking for non monetary

motivations while selecting a job.

NULL HYPOTHESIS

Ho – there is no correlation between senior and the

junior nurses ranking for non monetary while


TABLE 1 :

TEST PERFORMED - Non parametric correlation test was performed.

TABLE 2


TABLE 3 :

that they look into while selecting a job.

RESULTS AND CONCLUSION

Data were collected from 520 nursing employees

altogether, there were 130 employees equally drawn

from the four units of Apollo Hospital, which included

Delhi, Hyderabad, Pune and Kolkata. From each of

these four units sixty five (senior and junior nurses)

were selected for this study. In order to examine the

pattern of intrinsic and extrinsic motivation levels

were analyzed. The scores of nurses belonging to the

organizations working at two hierarchical levels

namely Senior Nurses and Junior Nurses for fourteen

items are shown in Table 1. The nurses are strongly

guided by their professional conscience and similar

aspects related to professional ethos overall, relating

to the "will-do" component of motivation. Many

health workers appear to be de-motivated and

frustrated precisely because they are unable to

satisfy their professional conscience and impeded in

pursuing their vocation due to lack of means and

supplies and due to inadequate or inappropriately

applied HR tools. These appeared to negatively affect

the "can-do" component of motivation. Due to the

extent of the problems at hand, they also affect the

"will-do" component of motivation.

In conclusion, efforts to strengthen nurse motivation

must protect, promote and build upon the

professional ethos of nurses. This entails appreciating

their professionalism and addressing health workers'

professional goals such as recognition, career

development and further qualification. It must be the

aim of HR to develop the work environment so that

nurses are enabled to meet personal and

organizational goals. This requires strengthening

nurses' self-efficacy by offering training and

supervision, but also by ensuring the availability of

essential means, materials and supplies as well as

equipment and the provision of adequate working

conditions that enable them to carry out their work

appropriately and effectively.

The findings confirm our starting point that non-

financial incentives and HR tools do play an important

role when it comes to increasing motivation of health

staff. The findings suggest that HR tools have the dual

task to promote nurses' professional ethos and

commitment, and to strengthen their perception of

self-efficacy.

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RESOURCES

MANAGEMENT

INTRODUCTION

teven V. Thulon quotes that “Conflict builds character;

S 9 crisis defines it” .Conflict is inevitable is life. It became a

necessary and healthy part of healthy relationships. Most

of us experience conflicts or skirmishes in every walks of our life,

starting from home to work place, which is natural and

unavoidable. It depends upon individual perspective to face 1conflict in positive or negative manner.

In organization, most of the people resource and people

management team and to look at conflicts at one look, and may

be due to time constraint or other factor constraint, they don't

see beyond one certain level. This article focuses on those areas,

which can be seem to be simple, but which in fact causes more

problems.

There is a close relationship between conflict and organizational

performance. The very mention of the term 'conflict' envisions

fights, riots, or war. In fact, on virtually every day of every year

one can find dozens of armed combat situations somewhere in

the world. During the typical workday, managers encounter

more subtle and nonviolent types of opposition such as 2arguments, criticism, and disagreement .But, there is also

belief that, moderate level of conflicts enhances organizational

performance. Chun and Mcgginson define conflict as “the

struggle between incompatible or opposing needs, wishes,

ideas, interests, or people. Conflict arises when individuals or

groups encounter goals that both parties cannot obtain 3satisfactorily”

“A STEP FORWARD BEYOND THE

TIP OF ICEBERG IN CONFLICTS :

AN EMPIRICAL STUDY”

MS. V. SELVA LAKSHMI

LECTURER, AIMS, PUNE


Conflicts can lead to search for solutions. Thus, it is

instrument of organizational innovation and 2change .It does impact not only organization, but also

individual performance. Conflict can either be bane

or boon according to the situation.

This paper helps to take a deeper look into the

perspective of, what impact conflict brings into

organizational. It does the analysis of whether

conflict has positive or negative impact on the

organizational performance.

OBJECTIVES OF THE STUDY

1. To find out which factor influences largely on

conflicts arousal.

2. To study about the association between the

team size and post conflict behavior.

3. To study about the association between the

age group and post conflict behavior.

4 a) To study whether female members are

independent of time period.

4 b) To study whether female members are

independent of time period.

5. To study relationship between compatibility

among the members and mental stress

caused due to that.

6. To find out whether conflicts has positive or

negative effect on the organizational

performance and on the individuals

LITERATURE REVIEW

According to Kirchoff and Adams (1982),

there are four distinct conflict

conditions, i.e., high stress environments,

ambiguous roles and responsibilities, multiple

boss situations, and prevalence of 4advanced technology.

According to Kirchoff and Adams,1982,

Traditional theory says that conflicts are

caused by trouble- maker, conflicts

are bad, conflicts should be avoided or

suppressed, but contemporary theory states that

conflicts are inevitable between human

beings, conflicts are often beneficial

conflicts are the natural result of change,

conflicts can and should be managed.

Almost 80 percent of workers in Quebec

indicated that they have often or

occasionally witnessed workplace

conflict in the last year. This according to a

survey published today by Ordre des

conseillers enresources humaines

agrees; a Quebec b a s e d H u m a n 10Resource Professional Association.

A 2005 UK survey by Roffey Park found that

“78% of managers are suffering from work

related stress, 52% have experienced

harassment, 46% have seen an increase in

conflict at work.”

42% of a manager's time is spent addressing 6 conflict in the workplace.

Conflict in the workplace has clear effect on

a company's bottom line and more 6 importantly on the happiness of the staff

Conflict resolution absorbs 30-40% of a

manager's time in the workplace.

25.8% of Hr personnel spend over 10% of their

time per week dealing with conflict. This

translates to somewhere between 3.5- 4 hrs

lost per Hr employee per week, meaning a 7 loss of 23.5 hrs per year

Different views of values, organizational

structural limitations, and historical events

are core issues frequently serving as the

basis for conflict. The other major basis for

conflict is competition for limited resources.

Competition arises over tangible resources

(e.g., land, money, food, and water) and

intangible assets (e.g., power, 8appreciation, stature, or companionship).

RESEARCH HYPOTHESES

H Ego issues and miscommunication have 1:

significant influence on Conflicts arousal.


H Team size is not independent of Post conflict 2:

behavior

H Age group is not independent of Post conflict 3:

behavior

H Female members are not independent of 4:

Time period.

H Male members are not independent of Time 5:

period

H : There is significant correlation between 6

compatibility among members and

mental stress.

RESEARCH METHODOLOGY AND DATA COLLECTION

The research was conducted in the Months of

February 2011 with the help of structured

questionnaire. The questionnaire was distributed

through various methods, such as in person, through

mail etc..The primary data collected as a result of the

survey has been systematically tabulated and

analyzed. The sample size was 100 respondents from

IT Industries in Pune. The sampling method was

simple random and judgemental. For test of

Hypotheses, Chi-square test was used. Other

analytical method adopted was Frequency

distribution, descriptive statistics.

INTERPRETATION

FOR RESEARCH OBJECTIVE 1

To study the analysis of the factors, which influences

on arousal of conflicts in organization.

MEAN AND STANDARD DEVIATION SCORES FOR

DIFFERENT FACTORS INFLUENCING CONFLICTS

INTERPRETATION

Table No.1.0 shows analytical interpretation of the

mean and standard deviation score for the different

factors influencing conflicts. It is found that, mean

value and standard deviation value for ego issues is μ

=4.19 and σ =.825, Mis communication is μ =3.94 and σ

=.722.Thus, it is concluded that ego issues and

miscommunication are two factors which is the

influencing factor behind conflicts.


To study association between team size and post

conflict behavior.

CHI-SQUARE TEST BETWEEN TEAM SIZE AND POST –

CONFLICT BEHAVIOUR

INTERPRETATION

The Pearson chi-square value for a two tailed test is

.752, which is greater than level of significance (α =

0.05).Thus, we fail to reject the null hypothesis.

Hence, it is concluded, that team size is independent

of post conflict behavior.


To study the association between age group and post

conflict behavior

INTERPRETATION


.427, which is greater than level of significance (α =


Hence, it is concluded, that age group is independent

of post conflict behavior.


To study association between number of female

members in the team and time taken to get back to

work.

CHI-SQUARE TEST SHOWING ASSOCIATION

BETWEEN NUMBER OF FEMALE MEMBERS IN THE

TEAM AND TIME TAKEN TO GET BACK TO WORK

AFTER CONFLICTS

INTERPRETATION


.001 which is less than level of significance (α =

0.05).Thus, we reject the null hypothesis. Hence, it is

concluded, that number of female members in the

team is not independent of time taken to get back to

work after the conflicts.


To study association between number of male

members in the team and time taken to get back to

work

CHI-SQUARE TEST SHOWING ASSOCIATION

BETWEEN NUMBER OF MALE MEMBERS IN THE TEAM

AND TIME TAKEN TO GET BACK TO WORK AFTER

CONFLICTS.

a. 3 cells (33.3%) have expected count less than 5. The

minimum expected count is 1.44.

INTERPRETATION


.208 which is greater than level of significance (α =


Hence, it is concluded, that number of male members

in the team is independent of time taken to get back

to work.


To study the correlation between compatibility and

mental stress.

TABLE SHOWING CORRELATIONS BETWEEN

COMPATIBILITY AMONG COLLEAGUES AND MENTAL

STRESS.



INTERPRETATION

The value of r value is -.1, which means that the

compatibility and mental stress are negatively

correlated. Thus, we reject null hypothesis .Hence, it

is concluded that there is no significant relationship

between compatibility between members of the

group and mental caused due to incompatibility.

TABLE NO.7

TABLE SHOWING NO OF HOURS TAKEN TO GET BACK

TO WORK AFTER THE HEATED ARGUMENTS.

INTERPRETATION

On an average of 33 % spent 2-4 Hrs to get back to

work after the heated arguments.

TABLE NO.8

TABLE SHOWING EMPLOYEE'S ATTITUDE TOWARDS

INFLUENCE OF IMPROPER DELEGATION OF WORK

FROM MANAGEMENT

INTERPRETATION

The survey result interprets that 48% accept to the

fact, that improper delegation of work from

management is one of the reasons that cause conflicts

between the employees.

TABLE NO.9 TABLE DEPICTING VARIOUS BEHAVIOUR

EMPLOYEES POST CONFLICT

INTERPRETATION

The survey depicts the scenario, which says about 45

% of the employee behavior is not affected post

conflict, but at the same time 25% prefer smoking.

TABLE NO .10

TABLE SHOWING EMPLOYEE BEHAVIOR ABOUT

FOCUS LEVEL

INTERPRETATION

The survey result states that 57 % of the respondents

retain more focus level at work after conflicts to

prove them.

FINDINGS

Findings of the study can be summarized as follows :

Table No 1 reveals that, ego issues and mis

communication among the employees are the

main factors which forms as a clout for the

conflict arousal in the organization.

Table no 2 reveals that, the size of the team

does not have any influence upon the post

conflict behaviour of the employees such as


smoking, exercise, gossiping or getting back

to work.

Table No 3 reveals that, age group of the

employees, doesn't have any

influence upon the post conflict behaviour of the

employees such as smoking, exercise, gossiping

or getting back to work.

Table No 4 & 5, reveals that, the female

members in the team take time get

back to work after the conflicts, whereas

study also states that numbers of male

members of the team are not dependent on

the time taken to get back to work.

Table No 6 reveals that, mental stress caused

after the conflicts doesn't have any

correlation with compatibility among the

members of the team.

According to table no.7 ,post the conflict, 33

% employees need 2-4 hours to get back to

work, which indirectly indicates the time

wasted due to conflicts but at the same time

61 % need less than 2 hrs to get back to work.

According to table no.8, apart from ego and

miscommunication, 48% of the surveyed

employees agreed that, the role of

improper delegation of work from the

management plays the major in inducing conflicts.

According to table no.9, study shows that 45%

of the surveyed employees get back to work

after the conflicts, But 25 % prefer smoking

after the conflicts.

According to table no.10, conflicts helps in

the positive way, 57% of the surveyed

employees felt that, they are more focused

on their work after the conflict.

Respondents had mixed feeling about,

whether conflicts are boon or bane. One felt

that conflicts affect the mental stability.

It helps in stimulation of a search for new

facts or resolutions and also create an

ambience of healthy competition in the

organization, so to some extent it

can be present.

SUGGESTION

Employees should learn to channelize the

post conflict behaviour in the right manner,

which will be a constructive tool.

Smoking as the way adopted after the

conflicts suggest the possibility of health

hazard in long run. So, the Hr team should

interfere and help the employees suppress

arguments and conflicts.

Employees prefer exercising after the

conflicts, so management can set up a small

work out area at the walk able distance so,

that employees can de-stress,This helps in

behavioral regulation.

Organization should be careful when

apportioning work to the employees. Proper

channel should be choose, when delegating

work to employees, which helps them in

understanding the work clearly,

which in turn helps avoid conflicts between

working members of the team to

which the task is given.

For employees, if the conflicts arise between

them, it's better to forego the ego and have a

face to face communication to clear the

matter among them.

If the task assigned to them is not clear,

employees should get clarified to

avoid miscommunication which helps to

curtail conflicts. Unsolved preceding conflicts

should be given importance.

CONCLUSIONS

There is a leap frog effect in the minds of the

employees about the conflicts. When the individuals

and organization handles the conflicts with right

attitude, it brings out positive energy among the

employees, which in turn helps the individual and the

organization for the better performance. In formal

working environment, Hr manger should take to


create right ambience to discuss clearly about the

goals to be achieved for further growth, strength &

weakness of the employees and norms should also be

stated in clear manner.

Work place also needs conflicts to build the synergy

among the employees, which helps them to bring out

their skills.

REFERENCES

James A. F. Stoner (1984), New Delhi, Prentice Hall of India.1984, P.408

thK. Aswathappa, Organizational Behaviour,8 Revised Edition, p.354-355

Kae H. Chung and Leon C. Megginson (1981), Organizational behaviour, New

York, harper and Row. p.252

Kirchoff, N., & Adams, J.R. 1982. Conflict Management for Project Managers.

Drexel Hill : Project Management Institute.

Roffey Park [online](Jan 2005), Failure to manage change heightens stress,

harassment and conflict at work, survey reveals)

Watson, C. & Hoffman, R.(1996), Managers as Negotiators, Leadership

Quarterly, 03/17/96.

Helen Ross, Work place conflict survey, UK (2010), People Resolutions

Limited.

Fundamentals of Conflict for Business Organizations by Lawrence Kahn,

WEB REFERENCE

http://thinkexist.com/quotations/conflict/2.html

http://www.oppapers.com/essays/Workplace-Conflict-Survey-Says-We-

Could/621404







RESOURCES

MANAGEMENT

DEFINITIONAL PREMISE

ocial work is a profession and a social science committed

Sto the pursuit of social justice, to quality of life, and to

the development of the full potential of each individual,

group and community in a society. Social workers draw on the

social sciences to solve social problems. They may work in

research, practice, or both. Practitioners will usually possess a

degree or registered license in the discipline, dependent on

national law. Social work research is often focused in areas such

as individual and family therapy, social policy, public

administration and development. Social workers are organized

into local, national, continental and international segments.

Professional social scientists and Non-Governmental

Organizations are most often in the forefront of social work

intervention. This gives this author both the reason and the

rationale to co-author this paper.

According to the International Federation of Social Workers,

social work bases its methodology on a systematic body of

evidence-based knowledge derived from research and practice

evaluation, including local and indigenous knowledge specific to

its context. It recognizes the complexity of interactions between

human beings and their environment, and the capacity of people

both to be affected by and to alter the multiple influences upon

them including bio-psychosocial factors. The social work

profession draws on theories of human development, social

theory and social systems to analyze complex situations and to

facilitate individual, organizational, social and cultural changes.

There are three general categories or levels of intervention. The

“REINVENTING SOCIAL ETHOS

[THE DIALECTIC OF ORGANISATION AND

SOCIETY IN SOCIAL WORK CONTEXT]”

MS. MONA SINHA

ASST. PROFESSOR,

BHARATI VIDYA PEETH’S INSTITUTE OF

MANAGEMENT STUDIES & RESEARCH,

NAVI MUMBAI

. ANJALI KALSE DR

PROFESSOR,

BHARATI VIDYA PEETH’S INSTITUTE OF

MANAGEMENT STUDIES & RESEARCH,

NAVI MUMBAI


first is "Macro" social work which involves society or

communities as a whole. This type of social work

practice would include policy forming and advocacy

on a national or international scale.

The second level of intervention is described as

"Mezzo" social work practice. This level would involve

work with agencies, small organizations, and other

small groups. This practice would include policy

making within a social work agency or developing

programs for a particular neighborhood.

The final level is the "Micro" level that involves service

to individuals and families.

Similarly there are three factors that form the

content of the social work dialectic: individual,

organization and society. This paper shall essentially

be concerned with the interaction between business

and industrial organizations on the one hand and civil

society on the other.

BACKGROUND

The dialectic between organisations and society is

best typified through the initiatives taken in

furthering corporate social responsibility and thus we

shall limit our academic discussion to this aspect only.

The concept of Corporate Social Responsibility (CSR)

in its present form originated in the fifties of the last

century when Howard R Bowen wrote a seminal book

The Social Responsibilities of a Businessman whom

Carroll takes to be the father of CSR. Since then the

notion of CSR has come to dominate the society-

business interface and many theories and approaches

have been proposed. Although the concept of CSR has

dominated the Business-Society Interface, many

other alternative concepts have infiltrated the

academic literature to study the same such as

Corporate Citizenship, Corporate Governance,

Corporate Social Responsiveness, and Corporate

Social Performance. Even for CSR, many definitions

have also been proposed in order to explain the form

and the content. Lantos considers that CSR has been a

fuzzy area with unclear boundaries and debatable

legitimacy.

Importantly, the approach to CSR has also changed

from Agency theory to Stakeholder theory. The

concept of CSR has a normative altruistic basis and

the strongest indication comes from the terminology

itself used to describe the concept (Corporate Social

Responsibility) but current trends from both

academia and industry strongly indicate a shift in

paradigm from normative altruistic bias of CSR to

positivist strategic orientation to CSR.

At first we need to remove the fuzziness and thus to

clarify the CSR concept while distinguishing it from

other concepts having their genesis in Business

Society interrelationship by offering a historical

perspective on CSR and the debate preceding CSR,

reviewing the different viewpoints on the role of

business in society and what CSR actually means,

delimiting CSR boundaries, and distinguishing two

types of CSR: altruistic, and strategic, thereby

establishing parameters for its practice. The paper

also identifies and delineates the shift in CSR

paradigms from altruistic to strategic orientation of

firms towards CSR along with changing rules of the

games and machinations of the market place.

THEORETICAL UNDERPINNING

The interest of political economists in the man-

society interface is legion. It can even be traced to

Aristotle's Politics where he spoke of Oikanomie as the

“science of household budgeting” on the same

premises as the budgeting for the “city state”. Much

later Adam Smith in the Theory of Moral Sentiments

argued passionately for the need to have a just (fair)

society. Fourteen years thereafter, he propounded his

thoughts on how that “just” society can be managed

in An Enquiry into the Nature and Causes of the

Wealth of Nations. In both his works, Smith

concentrated on the concepts of equitable

distribution of wealth, value and profit “for the

common good” through the twin principles of “unity

of interests” and “dignity of labor”. Contrary to the

prevailing opinion in India, Smith was never in favor of

promoting big business and argued for the

emancipation of the small commerce in a highly

competitive but socially fair environment. Then came

a string of Socialist thinkers from Owen to Fourier and

from Rodbertus to Marx who spoke about equality of

opportunity and emancipation of man so that civil

society as a whole stands to gain, as has been argued


by Holesovsky. Pigou's Welfare Economics, Joan

Robinson's Theory of Imperfect Competition, Piero

Sraffa's The Production of Commodities by Means of

Commodities, and John Keynes's The General Theory

of Employment, Income and Money cautioned against

both “primitive accumulation” and “speculative

spending” and urged corporate houses to base their

behaviour on sound fundamentals such that society as

a whole stood to benefit there from. They argued that

since capitalist greed may disequilibrate markets in

favour of the owners of capital it was the solemn task

of the State (government) to undertake proactive

macroeconomic intervention measures. Some

economists like Tobin and Ross in their paper “Living

with Inflation” say that the trade-off between the

price level (and thus inflation) and unemployment as

envisaged by the Phillips Curve is no longer valid

under stagflation i.e. when stagnation and inflation

combined. Other economists, such as Jackson, Turner

and Wilkinson, (in Do Trade Unions Cause Inflation?

1972), have argued that the “critical threshold of

inflation” has been breached since “institutional

mechanisms can no longer function adequately” and

so it becomes the government's responsibility to see

that business in its zeal for the pursuit of profit does

not offset the balance within civil society. (See

Holevsovsky 1977 for details of above citations).

Political economists alluded to but did not directly

speak about a social responsibility of business.

Bowen's seminal work that gave birth to the notion of

CSR also generated a debate as to whether a business

has any social responsibility or not. This debate led to

evolution of not only CSR but also many other

concepts attempting to explain and understand the

business- society interface.

THE CSR DEBATE

The spectrum of opinions regarding the appropriate

role of business in society given by Lantos captures

the essence of the debate of CSR. At one end there are

those who say business only has an economic

responsibility to make a profit while obeying the law

(the pure profit-making view or economic CSR). These

are the monetarists and the supply side economists.

In the middle are people who simply want corporate

management to be more sensitive to the societal

impact of their decisions, especially regarding

potential harms to stakeholders (the socially aware

view or ethical CSR). These are the economic liberals

and neo-Keynesian interventionists. At the other end

of the spectrum are those who want to see

corporations actively involved in programs which can

ameliorate various social ills, such as by providing

employment opportunities for everyone, improving

the environment, and promoting worldwide justice,

even if it costs the shareholders money (the

community service view or altruistic CSR). These are

the NGOs with a socialist bent of mind and some

armchair revolutionaries. Whereas at one end of the

spectrum the basic concern is with economic values

such as productivity and efficiency, while avoiding

social involvement, at the other end the primary

concern is with societal welfare and improving the

quality of life even if this means at the expense of

profits.

Bornstein points out that there are instances of left

wing anarchists like Pierre Proudhon who declared

“property is theft” in his masterpiece Philosophy of

Poverty and socialists like Karl Marx replying to it in

his brilliant rejoinder Poverty of Philosophy, by

stating that “primitive exploitation is a necessary

condition of capitalism”. On the ideological centre

there are researchers who espoused the pure profit

making perspective arguing that business has lower

standards of ethics than society and no social

responsibility other than obedience of the law. In

contradiction, we have right wing economists like

Milton Friedman (the high priest of monetarism) took

to constrained profit making perspective and argued

“There is one and only one social responsibility of

business - to use its resources and engage in activities

designed to increase its profits so long as it stays

within the rules of the game, which is to say, engages

in open and free competition without deception or

fraud”. He disagreed with the notion of social

responsibility of business but accepted the constraint

that the business should respect the ethical values

and play fair. Then there were people who were

liberal thinkers and conscious of the objective social

reality that surrounded them and were socially

aware. Freeman accordingly presented the view of

business in his stakeholder model arguing that a

business should be sensitive to the stakeholder issues


and avoids harm to them. He espoused a more

positive view of Managers' support to CSR. In the

stakeholder theory proposed by him, he asserted that

managers must satisfy a variety of constituents,

(workers, customers, suppliers, local community

organizations etc.), who can influence the outcome

of the firm. In such a vein, Carroll took a community

service view of the business and argued that a firm

has economic, legal, ethical and discretionary

responsibilities and held that business should use its

vast resources for social good.

The debate changed gears over the years and the

original normative concept was given a positive hue

by many scholars, (e.g. Hart, Jones, Donald,

McWilliams, and Siegal), thus bridging the distance

between the extremes of the spectrum and building a

business case for CSR. Many of these studies

unmistakably pointed out to the fact that CSR may

help companies in achieving their business goals.

Taking the point further, Jones applied the classical

economic and institutional theory to CSR and argued

that firms involved in repeated transactions with

stakeholders on the basis of trust and cooperation

have an incentive to be honest and ethical, since such

behaviour is beneficial to the firm.

Hart applied the resource based view of the theory of

the firm to CSR and argued that for certain types of

firms environmental social responsibility can

constitute a resource or a capability that leads to

sustained competitive advantage. Russo and Fouts

(1997) tested this theory empirically and found that

firms with higher levels of environmental

performance recorded superior f inancial

performance. These studies by demonstrating that

while CSR by its adoption can help firms further their

economic interest, it can hurt the economic interest

by the absence of it and thereby settling the debate in

favour of CSR.

The debate having been settled, Van Oosterhout and

Huegens argue that the predominant concern

appearing in CSR literature seems to be not whether

CSR is the responsibility of business or not, but rather

to both posit and validate the argument that CSR is

desirable in its own right or is practiced because it is

in the long term interest of corporations to do so.

This why, what and how of the social responsibilities

of business has led to evolution of many concepts and

notions in the Business-Society interface e.g.

Corporate Governance, Sustainability, Corporate

Social Performance each one with its own perspective

and emphasis, merits and demerits. Social work

methodology is one such perspective.

BUSINESS-SOCIETY INTERFACE

Literature in the last decade of the last century was

dominated by the many important conceptions each

one tying to demarcate its own area in terms of

perspectives, focus and approach and many of them

are overlapping. While some of them can be

distinguished form CSR notion, others merely look at

CSR from a different focus. Three main approaches

follow. (a) The concept of Corporate Social

Performance according to Carroll, Wood and others is

essentially a performance (outcome) oriented

approach to CSR and is no different from CSR. (b)

Similarly, the Corporate Social Responsiveness

(Frederick) refers to the ability of the firm to manage

social dimension in the dynamic environment and

describes CSR only within the context of changing

environment. These concepts can be seen as

evolution of the concept of CSR according to Branco

and Rodrigues rather than an attempt at charting out

a different domain separate from CSR. (c) In

discussing the concept of Corporate Citizenship

Matten and Crane, see a corporate as a citizen having

rights and responsibilities but reciprocates the stessence of CSR. With the onset of the 21 Century

ecological concerns like acid rain, the greenhouse

effect, global warming and deforestation gained

international attention, especially after the Kyoto

Protocol.

This rise of ecological concerns in a way gave rise to

the Triple Bottom Line or the Profit, People and

Planet approach to CSR as espoused by Elkington.

While quality was the dominant buzzword in the 1980-

90 decade and excellence was the buzzword in the

1990-2000 decade, it was the sustainability that

claimed centre stage of corporate concern in the new

century. One could further argue that business

sustainability as a concept is no different from the

Elkington paradigm except that it seeks to measure


the performance of a corporate on the three aspects

of society business interface and may be seen as

measurement orientated conceptualization of CSR.

Our research indicates that while some other

concepts like Corporate Governance and

Sustainability differ on the parameters of nature and

focus they can be easily distinguished from CSR. Of

all the concepts treated above, CSR has relatively the

longest track record in the field and is often seen as a

kind of primitive to other established concepts in

business and society (Carroll) such as Stakeholder

Theory (Donaldson & Preston,: Freeman,) and

Corporate Citizenship (Matten and Crane,),

Corporate Social Performance (Carroll). In addition,

CSR is a highly popular notion with many companies

having some form of CSR policy in place (Maignan &

Ralston,). CSR is linked to ethics and governance as

per Jayashree, Sadri and Jayashree) while it is linked

to sustainability by Sadri and Guha later on.

There is need for clarity in what CSR really is.

Unfortunately, these competing concepts (treated

above) have proliferated in the business-society

interface. Some of them overlap with the domain of

CSR apparently, because the concept of corporate

social responsibility (CSR) is a fuzzy one with unclear

boundaries and debatable legitimacy. 'CSR means

something, but not always the same ting to every

body. to some it conveys the idea of legal

responsibility or liability; to others it means socially

responsible behaviour in the ethical sense; to still

others the meaning transmitted is that of 'responsible

for' in a causal mode; many simply equate it with

charitable contributions; a few see it as a sort of

fiduciary duty imposing higher standards of behaviour

on businessman than on citizens at large' (Votaw) as

quoted by Garriga et al.

Definitions are important no doubt but real clarity

comes when we see how the definition has evolved. In

order to address this issue of clarity, the paper would

explain the CSR concept by offering a historical

perspective on CSR, reviewing the different

viewpoints on the role of business in society, defining

CSR and distinguishing two types of CSR: altruistic,

and strategic, thereby establishing dichotonomous

parameters for its practice and outline the

boundaries of the same. The paper also identifies and

describes the shift in Paradigm from Altruistic to

Strategic CSR.

EVOLUTION OF CSR

As was stated earlier, though the concept of social

responsibility has a long historical existence and

there are references in the literature available dating thit back to 17 century, it has come to known formally

as CSR with the seminal book by Bowen on the topic.

Since then the concept has been interpreted by

different scholars with different approach and

perspective. The focus of CSR has also shifted from

the shareholder primacy perspective, propounded by

neoclassical school, to stakeholder primacy

perspective given by Freeman. Based on their own

interpretation scholars have defined and classified it

differently.

While many scholars have posited varied definitions

of the concept, the first one to give a comprehensive

outline of CSR embracing the entire range of business

responsibilities was that of Carroll. According to

Carroll, one of the most cited authors on the topic

“The CSR firm should strive to make a profit, obey the

law, be ethical and be a good corporate citizen.” a la

Carrol., He proposed a four-part definition of CSR,

suggest ing that corporat ions have four

responsibilities to fulfil: economic, legal, ethical and

philanthropic. Economic responsibility is to be

profitable by delivering a good quality product at a

fair price is due to the consumers. Legal duties entail

complying with the law and playing by the rules of the

game. Ethical responsibilities call for being moral,

doing what is right, just, fair, respecting people's

moral rights and avoiding harm or social injury.

Philanthropic and discretionary responsibilities

involve giving back time and money in the forms of

voluntary service, voluntary association, and

voluntary returns to the society. These four parts are

termed as pyramid of corporate social responsibility

with economic responsibility being fundamental to

the total corporate responsibility structure.

Frederick outlined a classification based on a

conceptual transition from the ethical- philosophical

concept of CSR (CSR1), to the action oriented

managerial concept of Corporate Social


Responsiveness (CSR2). He then included the

normative element based on the ethics and values

(CSR3) and finally introduced the cosmos as the basic

normative reference for social issues in management

and considered the role of science and religion in

these issues (CSR4).

Wood on the other hand had thus stated: "The basic

idea of corporate social responsibility is that business

and society are interwoven rather than distinct

entities; therefore, society has certain expectations

for appropriate business behavior and outcomes." To

assess whether a corporation meets society's

expectations, she points to "the degree to which

principles of social responsibility motivate actions

taken on behalf of the company " She also argues that

"managers are moral actors who are to exercise their

discretion to meet expectations” She strongly

suggested to substitute the language of force

,coercion and violence with the language of choice

and freedom and mature relationships at individual ,

corporate and societal level to make good ethical

choices to create good society. Building further on the

work of Carroll (1991) and Wartick and Cochran

(1985), she related the four responsibilities of

Carroll's pyramid to the three principles of legitimacy,

public responsibility and, managerial discretion. She

outlined three levels at which these three principles

operate.

The principle of legitimacy manifests at the

institutional level and stems out of a company's

overall responsibility to the society specifying what is

expected of all companies and implies that the

society has sanctions available with it, which it can

use if the obligations are not fulfilled. The next level

is the organizational level and operates on the

principle of public responsibility implying that

companies are responsible for solving the problems

created or caused by them. The third level is the

individual level where the principle of managerial

discretion is functioning emphasizing upon the

individuals to behave as moral managers choose

activities to achieve socially responsible outcomes.

She suggested three types of processes to bring these

principles operating at three different levels into

practice: Environmental Assessment (EA), Issues

Management (IM) and Stakeholder Management (SM).

She then presented the outcomes of bringing

principles into practice within the domains outlined

by Carroll (1991) as responsibilities and categorizes

them in terms of social impact, social programmes

and social policies.

Baron had argued that both motivation and

performance are required for actions to receive the

CSR label. He distinguished CSR as motivated by self

interest (Strategic), normative principles (Moral) and

threats (Defensive) from stakeholders. He stated that

the subject of redistribution has a long history in the

normative literature on CSR. He argued that CSR

advocates argue both that normative principles

demand redistribution by firms and that firms which

do not meet the expectations of the society with

regards to their social performance they will be faced

with government actions .The first argument, he

states pertains to a moral motivation, whereas the

second argument pertains to or in anticipation of a

threat. The third argument according to him is that

firms voluntarily taking actions in the name of CSR

will be rewarded in the marketplace, e.g., by

increased demand for their products. So he classifies

CSR into three categories based on motivation into

Strategic CSR (motivated by self interest), Altruistic

CSR (motivated by normative principles) and

Defensive CSR (negatively motivated by threats). He

termed profit maximizing CSR as Strategic CSR.

Lantos on the other hand, has classified CSR into

Altruistic CSR, Strategic CSR and Ethical CSR. He

strongly built a case for strategic CSR and argued that

for any organization ethical CSR (avoiding societal

harms) is obligatory, for a publicly-held business

altruistic CSR (doing good works at possible expense

to stockholders) is not legitimate, and that

companies should limit their philanthropy to strategic

CSR (good works that are also good for the business).

On the basis of a thorough examination of the

arguments for and against altruistic CSR, he agreed

with Milton Friedman that (i) Altruistic CSR is not a

legitimate role of business; (ii) Ethical CSR, grounded

in the concept of ethical duties and responsibilities, is

mandatory and (iii) concluded that Strategic CSR is

good for business and is the only legitimate form of

CSR. Thereby he placed CSR initiatives squarely

within the realms of bounded rationality. He has also


distinguished between responsibilities which are

mandatory and which are voluntary. According to him

responsibilities which are mandatory can not be

treated as CSR while those that are voluntary can. In

the process he took CSR out of the hands of the

“regulators and regulations” and placed it in the

arena of “core values” of the corporate organisation.

He thus laid down the basis for integrating CSR within

the business model of the company.

Garriga and Mele to demonstrate divergent views on

a convergent theme (CSR) have classified the CSR

theories based on four dimensions of profits, political

performance, social demands and ethical values into

four categories (1) instrumental theories, in which

the corporation is seen as only an instrument for

wealth creation, and its social activities are only a

means to achieve economic results; (2) political

theories, which concern themselves with the power

of corporations in society and a responsible use of this

power in the political arena; (3) integrative theories,

in which the corporation is focused on the satisfaction

of social demands; and (4) ethical theories, based on

ethical responsibilities of corporations to society.

Munilla and Miles taking perhaps the cue from the

notion of the ongoing concern have proposed the

Corporate Social Responsibility Continuum as a

component of stakeholder theory to address the

levels of corporation's commitment to corporate

social responsibility from compliance to strategic and

thence to forced CSR. According to them, Forced CSR

occurs when CSR expenditures are perceived as a tax

or fiscal penalty being mandated by NGOs or other

external stakeholders that will diminish the firms

ability to create value for relevant stakeholders.

Compliance CSR occurs when CSR expenditure are

seen as a cost of doing business and when the firm

sees CSR expenditure as an investment in forms set of

competencies, it is called strategic CSR. They argued

that a strategic CSR perspective helps immunize the

firm from subsequent pressure from NGOs, and allows

the firm to exploit its investments in CSR for the

development of distinctive competencies, resulting

in superior, sustainable performance. Management,

they go on to argue, must understand the legitimacy

of the claims from their owners (principals) and other

stakeholders, and the power that each group has to

enforce the claim a la Carroll. In addition, while a

Compliance-based Stakeholder Perspective of CSR

may be the least costly, it may not be a sustainable

position for many corporations in the current dynamic

regulatory & social environments.

Jayashree has argued that business ethics and

corporate governance combine to create the

conditions for approximating organizational

excellence. CSR is nothing but a characteristic of

organizational excellence and shows the richness of

the corporate beliefs, values and cultures in so far as

they impact the larger civil society of which they are

an intrinsic part. Hence, they look at CSR definitively

and yet indirectly arguing that CSR is essentially

voluntary in nature and yet can be used strategically

to leverage the corporate brand image.

Based on the above seven perspectives the following

elements have been used by the present authors to

define, classify or capture the form and content of

CSR :

1) THE APPROACH

There are two contending views herein. It could be

used as an instrument for stakeholder wealth

maximization or managing the stakeholder.

2) NATURE OF THE RESPONSIBILITY

Although CSR is a corporate activity the nature of

(perceived) top managerial responsibility to carry it

through could be voluntary, obligatory or mandatory.

3) MOTIVE

Corporate houses that are involved in CSR could be

driven by either an altruistic (normative) motive or a

strategic (Instrumental) motive.

We would take into consideration all these aspects

before arriving at what we consider as constituting

the form and content of the concept of CSR in the post

WTO regime within the capitalist world economy a la

Wallerstein.

THE APPROACH

The first important element of CSR defining the form

and content of CSR stems from a book by Freeman


called Strategic Management: A stakeholder

approach often refers to the responsibility of business

towards society. The stakeholder theory developed by

Freeman focuses on the interactions between firms

and society. He defines a stakeholder as anybody who

affects and is affected by, the actions of the company.

The stakeholder approach has become central to the

CSR concept as the battle for market competition

intensifies and as capital is increasingly both

centralized and concentrated. Even the most ardent

opponents of CSR are compelled to agree that the use

of stakeholder management is an effective

instrument to generate long term profitability and

shareholder value. They agree with the notion of

stakeholder management from a business strategy if

not from a business ethics point of view. Even Carr

(1968), one of the strongest proponents of the pure

profit making view of the business also has recognized

that if a company wishes to take a long-term view of

its profits, it would need to preserve amicable

relations with whom it deals. Jensen's 'enlightened

shareholder maximization view' also holds that a

company can not maximize value if any important

stakeholder is ignored or mistreated, but the

criterion for making the requisite tradeoffs among it

stakeholders is long term value maximization.

Indeed, the very concepts of brand image, brand

value and brand recall hinge on how the stakeholders

are treated by the corporate entity and how they

perceive business and behaving.

Over the years the stakeholder theory has been

recognized as an integral part of CSR by many authors

prominent among who are Harrison & Freeman,

Klonoski, Clarkson, and Dawkins & Lewis. It is argued

that through effective stakeholder management

social and ethical issues can be resolved and the

demands of society and also those of the shareholders

will be properly accounted for Harrison & Freeman,

Once their concerns are attended to satisfactorily the

stakeholder takes a positive view towards the

corporate entity and this is always good for business.

Clarkson's definition distinguishes between

responsibilities towards society and those towards

stakeholders. He differentiated between social and

stakeholder issues, stating that social issues are

furthered by local institutions and adopted in the

forms of regulation and legislation, while stakeholder

issues are not concerned with legislation and

regulation. He defined stakeholder issues as an issue

when this institutional interference is absent

according to Clarkson. While many scholars have

interpreted and presented the theory differently, a

general congruence of opinion exists on the basic

assumptions of the stakeholder theory. Every

company has stakeholders who can influence the

company's performance and stakeholders that have a

stake in the company's performance and businesses

have relationships with stakeholders that affect and

are affected by the company's decisions, a la Jones &

Wicks.

Because the stakeholder theory is concerned with all

parties that influence and are influenced by the

company, it can automatically be linked to CSR a la

Klonoski. The obligation towards every stakeholder

needs to be identified and the company needs to

assume responsibility for meeting the obligations

towards their stakeholders according to Robertson &

Nicholson. There are many different stakeholders a

company has to take into account. They range from

stockholders to NGOs and from customers to

suppliers. The company has responsibilities towards

each of these. There are also many stakeholders that

have very different expectations of the company. It is

important to note that every company has its own set

of different stakeholders with different

expectations. Some stakeholders expect more than

others, while other stakeholders may be more

important or have a more direct influence on the

company. The withdrawal from some stakeholder,

because of their dissatisfaction with the company's

actions, may seriously damage or even cause

discontinuance of the system the company operates

in. Other stakeholders might be less influential, but

their withdrawal may cause the company significant

damage a la Clarkson. So, the stakeholder

management theory with respect to CSR identifies

the stakeholders and their expectations in order for

the company to identify its areas of involvement and

influence that need to be managed accordingly to be

able to prosper as a business. When Clarkson

distinguished between the primary and secondary

stakeholders, he defined the primary stakeholders as

those stakeholders without whose continuing


participation the corporation can not survive as a

going concern (shareholders and investors,

employees, customers, suppliers and government and

communities) whereas secondary stakeholders are

those who influence or affect, or are influenced or

affected by, the corporation, but are not engaged in

transactions with it and are not essential for its

survival. Mitchell et al offered a theory of stakeholder

identification and salience to address the issue of

stakeholder identification suggested three key

stakeholder attributes of Power to influence the

company, Legitimacy of the relationship with the

company and urgency of the claim on the company.

The perception of the managers on these attributes

will have definite implications on the priority given by

managers to competing claims of stakeholders.

It was Freeman who set the ball rolling by giving the

stakeholder theory, which was essentially normative

in nature. Subsequently the theory was expanded into

normative, descriptive and instrumental (building a

business case for CSR) theory by Donaldson and

Preston (1995). Whereas the descriptive theory

attempts to analyse the way things are, the

normative theory is prescriptive and suggests how

things should be. The instrumental theory builds the

business case and talks about how traditional business

objectives can be achieved using stakeholders

management as an instrument. The instrumental

aspect of the stakeholder theory views stakeholder

interests as means for higher level goals of profit

maximization, survival and growth. Jawahar and

McLaughlin consider the use of stakeholder

management as a means to reach the end objective of

marketplace success, which for a corporate is the

ultimate objective of corporate decisions.

This clearly establishes the significance of

stakeholder management theory as a central tool

regardless of the perspective one has, to look at CSR.

In sum, if the stakeholders are managed well then

wealth creation follows. Hence it is debatable if the

two approaches are indeed contending or in

contradistinction of each other. The difference is one

of primary intention and stakeholder perception

besides being purely academic. What could be better

said is that primacy is given to wealth creation in

some cases whereas primacy is given to effective

stakeholder management in other cases.

NATURE OF THE CORPORATE RESPONSIBILITY

We see the nature of the overall responsibility of the

corporate entity towards CSR initiatives according to

the reviewed literature as being threefold.

1. MANDATORY

(When carrying out the responsibility is mandated by

law or code.)

2) OBLIGATORY

(When the industry norms, stakeholder pressure

make it obligatory.)

3) VOLUNTARY

(The corporate entity takes up social activities of its

own volition).

In consonance with Sadri and Jayashree's work, we

argue and posit our view that the obligatory and

mandatory responsibilities do not constitute CSR and

may very well be termed as Corporate Responsibility.

For any activity to be labelled as CSR it must be

voluntary in nature.

Many other scholars also stress the voluntary nature

of CSR. The distinction was made by Lantos in respect

of the inherent nature of CSR. In his work Lantos had

classified CSR as being either mandatory (ethical) or

being voluntary (social). Subsequent some writers,

disagree with this distinction since Lantos seems to

have used the term ethical rather loosely. Ethical

CSR being thus broadly defined extends beyond

economic and legal obligations of the corporate

entity. Acting as a morally responsible agent the

corporate entity is expected to also conform to the

mandatory requirements of CSR. That the mandatory

component of CSR includes more than economic and

legal considerations has been articulated by early

scholars including Joseph McGuire and Davis who had

insisted that the corporate entity has obligations that

extend beyond narrow economic and legal

requirements.

The voluntary aspect of social CSR delineated by

Lantos has similarly been touched upon by various


authors including Manne and Wallich. As Jamali has

aptly pointed out, in his book entitled Corporate

Social Responsibilities, Walton suggested that an

essential ingredient of a corporate entity's social

responsibilities is a degree of voluntarism, and Manne

and Wallich (1972) insisted that to qualify as a socially

responsible social action, a business expenditure or

activity must be purely voluntary. Davis suggested

that CSR describes a condition in which the

corporation is at least in some measure a free agent

and that the coerced pursuit of social objectives is

difficult to imagine. Hence, various early scholars

conceived of social responsibility as voluntary,

beginning where ethical responsibility ends,

reinforcing in turn the mandatory versus the

voluntary distinction articulated by Lantos. If the CSR

contribution is voluntary it should constitute CSR else

it may be termed as corporate responsibility.

Adopting this logic, Dima Jamali had further argued

that the use of the term CSR should be restricted to

social voluntary responsibility and the term corporate

responsibility can be used for the other (economic,

legal and ethical) responsibilities given by Carroll.

Applying the same yardstick to the CSR as motivated

by threats given by Baron or the ethical CSR given by

Lantos and later by Jayashree, Sadri and Dastoor

which being mandatory or obligatory can then be

considered to be out of the bounds of CSR definition.

To elucidate the point further we give the following

table that shows nature of CSR in terms of the various

CSR conceptualizations.

MOTIVATION

This is simply the answer to the question “what

causes a corporate house to embark on CSR” or

alternatively, “what is the philosophical underpinning

that makes a corporate house undertakes CSR

initiatives”. The theory of rational choice in

economics takes into account the subjective

condition (willingness) and the objective condition

(ability) that need to be fulfilled. So too is the case in

CSR. Baron for instance, has stated that in order to

receive a CSR label both motivation (subjective

condition) and performance (objective condition) are

critical. We, in this paper, ask and address the issue of

what motivates a corporate entity to undertake CSR

whereas they straight away answer the question

(without even raising it) in that CSR is a vehicle for

business sustainability and so it is at once strategic

and altruistic. They speak more in terms of creating,

maintaining and developing the Triple Bottom Line,

which is a concept this paper shall presently address.

There is an ongoing debate about the purposes and

reasons for undertaking CSR initiatives. The question

“why would a firm practice CSR?” has been raised

often, and there were many and varied answers to

this. The answers were mostly two fold, on the one

hand the enlightened self- interest of the firm was

mentioned, and on the other hand authors argued

that the role of business in society requires the use of

CSR. This two-fold perspective is supported by Porter

and Krammer who have distinguished between pure

philanthropic and pure business views focusing on

social benefit and economic benefit respectively.

Graafland and Ven have also distinguished between

the positive strategic and positive moral motivation

and concluded that both strategic and moral

motivation are important for corporate social

performance.

To glean an understanding of what motivates a

company to undertake CSR initiatives the investigator

refers to the work of Garriga and Melé who have

identified four theoretical approaches to CSR. These

CSR motivations grew out of a four fold classifications

of CSR theories that in turn were based on the

dimensions of profits, political performance, social

demands and ethical values. These classifications

have been used by Cochius (2006) to answer the

question “what motivations for CSR do firms have?”

These classifications were plotted against four

categories: (1) Instrumental Theories, in which the

corporation is seen as only an instrument for wealth

creation, and its social activities are only a means to

achieve economic results; (2) Political Theories,

which concern themselves with the power of

corporations in society and a responsible use of this

power in the political arena; (3) Integrative Theories,

Nature

Voluntary

Obligatory

Mandatory

Carroll

Discreptionary/

Philanthropic

Ethical

Economic /

Legal

Lantos

Strategic/

Altruistic

Ethical

*

Strategic/

Altruistic

Defensive

*

Strategic/Altruistic/

Ethical

*

*

Baron Sadri And Jayashree


in which the corporation is focused on the satisfaction

of social demands; and (4) Ethical Theories, based on

ethical responsibilities of corporations to society.

However, both Jamali and Sadri & Jayashree accept

that these approaches overlap with the motivations

of enlightened self- interest and the role of business

in society. The other two motives (ethical and

integrative) are considered as they add value by

means of giving more detailed descriptions and

classifications of the same motivations. Baron (2001),

on the other hand, talked about the motivations of

self interest, moral values, and of suitably addressing

the threats by stakeholders. Lantos accordingly

proceeded in a logical manner when he grouped the

motivations into three categories ethical, altruistic

and strategic motivations. We too agree with Jamali

in that social reality is not to be seen in clear black

and white terms but as a huge grey area with several

shades within it.

The above discussion, leads us to conceptualize CSR

as having two fundamental approaches or

motivations: Strategic (also termed as value driven,

instrumental, driven by self interest, profit

maximizing CSR) vs. Altruistic (alternatively termed

as philanthropic, value based, ethical, moral, and

humanitarian CSR). Those approaches where this

dichotomy is not clearly demarcated may be

explained with the reference to the classification

made by Lantos and the accepted working definition

given earlier. This definition (as stated above) was

based on whether the CSR practice is voluntary or

mandatory. If the CSR contribution is voluntary it

should constitute CSR else it may be termed as

corporate responsibility according to Jamali.

Adopting this logic, Dima Jamali argued that the use

of the term CSR should be restricted to social

voluntary responsibility and the term corporate

responsibility can be used for the other (economic,

legal and ethical) responsibilities given by Carroll.

In line with Sadri and Jayashree's recent work,

according to us, CSR as motivated by stakeholder

threats mentioned by Baron and the ethical CSR given

by Lantos, which, being obligatory if not mandatory,

may be considered to be out of the bounds of CSR

definition. This is precisely because we opine that

CSR is a voluntary corporate commitment that

enhances the business-society interface and

meaningfully contributes to the elevation of the

quality of human life thereby.

In the classification posited by Garigga and Mele

instrumental theorists are motivated by strategic

motives; political theorists are motivated by

responsible use of the power in the political arena;

integrative theorists focusing on satisfaction of social

demands and ethical theories based on ethical

responsibilities of corporations to society may be

grouped under the CSR motivated by normative

principles or altruistic CSR. This paper seeks to

reduce this four fold motivational classification into a

two fold classification as was argued above. The two

fold classification is essentially either strategic or

altruistic. These two categories are further

elaborated below for the sake of definitional clarity

since these are germane to the ensuing investigation.

Strategic CSR has also been termed in the literature

as economic benefit, a la Porter and Krammer; a la

Windsor and as instrumental approach, a la Garriga

and Melé. CSR with this motivation (hereinafter

referred to as Strategic CSR) is supported by the

argument of enlightened self interest and focuses on

the economic benefit of the organization and aims at

gaining some advantage out of CSR in terms of

reputation, market acceptance, employee

motivation, corporate image, government support

and aims at profit maximization either in the short

run or long run. Davis (1973) indicates several reasons

for imbibing CSR into a firm's daily practice and

weaving it into the overall business plan that will lead

to business advantages. He argues that the long-run

self interest is one of the most prevalent reasons to

practice CSR. This belief assumes that business needs

to provide a variety of social goods in order to remain

profitable in the long run. The company that takes

community needs into account will create a better

community for conducting business (Davis 1973).

Strategic CSR or “strategic philanthropy” (Carroll,

2001) is done to accomplish strategic business goals

i.e. good deeds are believed to be good for business as

well as for society. With strategic CSR, corporations

“give back” to their constituencies because they


believe it to be in their best financial interests to do

so. This is “philanthropy aligned with profit motives”,

Quester and Thompson, (2001) which considers that

social goals might be profitable in the long run since

market forces provide financial incentives for

perceived socially responsible behaviour.

Stakeholders outside the stockholder group are

viewed as means to the ends of maximizing

shareholder wealth, Goodpaster, (1996). Such

strategic philanthropy grew popular beginning around

the mid-1980s Jones, (1997), and Carroll, (2001)

expects it to grow in the years ahead. The idea is that

while being socially responsible often entails short-

run sacrifice and even pain, it usually ultimately

results in long-term gain. Vaughn, (1999) states that

expenditures on strategic CSR activities should

properly be viewed as investments in a Goodwill Bank

which yields financial returns (McWilliams and Siegel,

2001). These long-term benefits might not

immediately show up on a firm's financial statements,

as is true of economic outcomes of many marketing

activities, such as marketing research and advertising

for image-building. Also, a company, (he argues)

would be wise to make deposits in this bank of

goodwill in order to make withdrawals when it comes

under fire. We somehow find that hard to agree with.

Providing for good (social) works from the corporate

coffer is therefore compatible with Friedman's

Monetarist view so long as the firm reaps indirect

financial benefits (Boatright, 1999). We might find a

corporation practicing strategic CSR by providing

charitable good deeds such as providing shelter for

the destitute, building a museum, or renovating the

local park if, as a result, those helped will feel

grateful and indebted to that organization, and will

reciprocate in various ways by giving it their business,

recommending it to others, asking government

regulators to stay at bay, and so on as Dadrawala

(1992) and Sunder (2000) variously argue. And, some

of those not directly helped will still look more

favourably on the firm and thereby turn their

loyalties toward it as Brenkert, (1996) points out.

Several Studies have been conducted confirming the

positive impact of CSR on the corporations. These

studies exploring the linkage between the firms' CSR

and corporate performance have given impetus to the

thinking on this dimension to the extent that Lantos

2001 argues that Strategic CSR is the only legitimate

form of CSR for organizations. CSR can positively

affect profitability Graafland, Graafland and Smid,

and it is seen to improve the company's reputation in

the consumer market Fombrun and Shanley, The work

of Miles and Covin extended empirical support for the

claim that environmental stewardship creates a

reputation enhancing advantage that assists

marketing and financial performance. Several other

empirical studies show that a good social reputation

facilitates the support of consumers to buy or refrain

from buying goods, especially in the retail sector

Brown and Dacin. There is substantial evidence

pointing to the fact that a negative social reputation

ultimately has a detrimental effect on overall

product evaluations whereas a positive social

reputation can enhance product evaluations (Brown

and Dacin). Furthermore, a good CSR reputation may

also be rewarded by both potential employees and

the current workforce according to Turban and

Greening.

ALTRUISTIC CSR

The other category of motive is the altruistic motive

that does not aim at any kind of advantage by

practicing CSR and insists that CSR is desirable in its

own right regardless of the impact it has on the

company. CSR based on this motive is herein after

referred to as Altruistic CSR. Unlike strategic CSR,

where it is believed that the money put into good

works will yield a return on investment for the

business, with altruistic CSR this is not the motive

(benefits accruing due to CSR are just a byproduct and

not the reason for undertaking CSR). For instance, if a

firm adopts an inner-city school and pours resources

into it, there is no guarantee that the business will

immediately gain when tomorrow's workers are

better educated, as they could work for other area

organizations or even move away (Singer, 2000).

According to Lantos (2001) the term altruistic or

humanitarian CSR suggests, “genuine optional caring,

even at possible personal or organizational sacrifice”.

Altruistic CSR is Carroll's “fourth face” of

CSR—philanthropic responsibilities—to be a “good

corporate citizen” by “giving back” to society,

furthering some social good, regardless of whether


the firm will financially reap what it has spiritually

sown. It demands that corporations help alleviate

“public welfare deficiencies” (Brenkert, 1996), such

as urban blight, drug and alcohol problems, poverty,

crime, illiteracy, lack of sufficient funding for

educational institutions, inadequate moneys for the

arts, chronic unemployment, and other social ills

within a community or society. Altruistic CSR is based

on capability responsibility—the company has the

resources to be able to do social good. One of the

favourite justifications for this form of CSR comes

from the contract theory, which argues that there is

an implicit contract between the constituents of the

society, and the business and business has a

responsibility to do justice to the contractual

obligations.

Altruistic CSR includes all philosophies, policies,

procedures, and actions intended to enhance

society's welfare and improve the quality of life, and

it involves linking core corporate competencies to

societal and community needs. Altruistic CSR

therefore, in a way, goes beyond and yet rests on

business ethics while attempting to make the world a

better place by helping to solve social problems.

Karanjia in the case of the House of Godrej, Lala in

the case of the House of Tata, Heredia in the case of

Amul showed this amply through the business

histories and biographies.

The proponents of the altruistic motive assume that

business' role in society is more than just making

profits and providing products and services. The most

basic justification for Altruistic CSR is the social

contract argument that “business is a major social

institution that should bear the same kinds of

citizenship costs for society that an individual citizen

bears” according to Davis. Similarly, Klonoski sees

corporations as social institutions that are not only

responsible to their shareholders, but also to society.

The view is also supported by the idea that companies

seek legitimacy pressurized by societal institutions,

such as governments and media as exemplified by

Weaver, Treviño and Cochran. Going a step further

Wartick and Cochran state that “business exists at the

pleasure of society”. This means that business has

certain obligations towards society as part of a social

contract. The details of this contract are subject to

change and differ for every situation, but the basic

notion is that businesses gain legitimacy through this

social contract. Their actions are brought into

conformity with the objectives of society through this

(implied or explicit) social contract Fox, Wartick and

Cochran. Wood translates this understanding as

business and society being interwoven and therefore,

“society has certain expectations for appropriate

business behaviour and outcomes”. Altogether the

different views on the specific role of business in

society can be summed up as business having a moral

obligation towards society and society having certain

expectations from business.

Another point made for Altruistic motivation of CSR is

that, as the two most powerful institutions, business

and government are obliged to address and rectify

problems of social concern ("power begets

responsibility."). They say corporate philanthropy is a

preferable substitute for government welfare, or at

least is necessary in the face of deficient public

welfare, which, indeed, is partially due to corporate

opposition to higher taxes a la Benkert. The public is

apparently transferring its expectations for solving

social problems from failed “Great Society”

government programs to business (Carroll, 2001).

This is reminiscent of the conservative economic

opposition to John Maynard Keynes on the question of

promoting aggregate demand through artificial

employment and public works even at the cost of

deficit financing.

In short, what distinguishes Strategic CSR and

Altruistic CSR is the motive of the managers adopting

CSR. If the motive is gaining some kind of advantage

for the company, it is strategic CSR and absence of any

such motive would classify the CSR programme as

altruistic CSR. On the philosophical plane the former

is akin to Jeremy Bentham's utilitarianism or “what is

in it for me?” and summum bonum of Stanley Jevons

and John Stuart Mill or “the greatest good of the

greatest number”. The latter takes its cue from

Immanuel Kant's categorical imperative or some

things are right or wrong irrespective of the personae

and the consequences involved or Georg Hegel's

minority of one or when an moral issue is at stake the

minority of one is enough to carry the day. The praxis

view takes the position that “if a person can discuss


his or her decision openly then such a decision is

ethical”. When a strategic CSR initiative is portrayed

as an altruistic business decision then we are in the

realm of Praxis.

The importance of the distinction is thrown into relief

when we see the work of Boatright who states that

the wisdom of strategic CSR is seen in the fact that

some of the most successful corporations are also

among the most socially responsible. Carroll argues

that due to belt tightening and increased pressure on

accountability for expenditures, the trend will likely

be towards funding those good works expected to

financially benefit the companies. Lantos while

making a case or strategic CSR argues that in view of

the rising public expectations for corporate good

works, returns to strategic CSR should rise.

RE-DEFINING CSR

Based on the above position taken, the essential

elements that now re-define the form and the

content of CSR in our considered opinion may be

identified as under

1. Sufficient focus by the enterprise on its

contribution to the welfare of

society.

2. The relationship with its stakeholders and

society at large.

3. Voluntary nature

Scholars whose works were reviewed in the previous

section further strengthen these three points that

emanate from the accepted working definition. The

first point emphasizes the company's contribution to

the welfare of society. This element is closely related

to the 'values and objective of society' and 'benefit

society' stressed most of the definitions above a la

Bowen, Carroll, and Wood. The second point stresses

the importance of stakeholder management, which

has been stressed by Freeman, Donaldson and Preston

and Jones. The third point covers the voluntary

nature of CSR has been stressed upon by Lantos and

Jamali. Based on the same we can thus re-define CSR :

CSR is a voluntary verifiable continuing

commitment by business to contribute to

development of the quality of life of the

stakeholders and society at large.

Strategic CSR is defined as CSR undertaken

with the motive of gaining some kind of

advantage for the corporation.

Altruistic CSR is defined as CSR undertaken

without any motive or regard for its

implications on Organisational profitability

either short-term or long-term.

As the battle for competition intensifies every

company will be forced to leverage its core

competency to gain competitive advantage. In this

regard the “perceived value of the corporate brand”

is very crucial. This brand image, reputation and

recall have a direct impact on company profits as well

as its market expansion plans. Hence, it is

understandable that CSR could be used strategically

to gain competitive advantage. There is accordingly

evidence of a palpable shift in CSR paradigm from

Altruistic CSR to Strategic CSR that is apparent in both

industry practices and academic literature.

This shift in the movement involving integration and

involvement of business with society is evident not

just in the academic literature but also in industry

practices world over and especially in India, which

along with China will decide the future of CSR a la

Nelson. The reason and the rationality for positing our

argument is thus strengthened.

DYNAMICS OF THE SHIFT

The shift is prominently observable and appears to be

irreversible on account of the support it has gained on

account of the following :

1) LEGITIMACY

Strategic CSR helps companies see CSR not as a cost

but as a strategic investment which contributes to

their profitability directly, that way helps gain

legitimacy for corporations not only from community

and other stakeholders' point of view but also from

the point of view of shareholders. This grants them

legitimacy from the agency theory perspective also.

This form of CSR would also make the neoclassical

economists opposing CSR on the grounds of the


notions such as the free market, economic efficiency,

and profit maximization

2) SUSTAINABILITY

For CSR to be successful it has to be sustainable. By

linking the CSR with the core corporate objective

strategic CSR not only improves the probability of its

success but also makes it sustainable.

3) EFFICIENCY AND EFFECTIVENESS

Integration of CSR with business helps CSR to attain

high levels of efficiency and effectiveness and that

way promises better performance on the TBL of

people, profit and planet .

From a social work perspective therefore we need to

look at CSR differently from the usual altruistic /

strategic dichotomy. This is because the area of

operations and focus of inquiry in social work is

boundless whereas in CSR it is to an extent regulated

by both the corporate ethos and the social

environment. It is therefore imperative for us to look

at CSR from an essential ethical perspective rather

than depend on the strategic-altruistic dichotomy.

This is because pure altruism is not at all devoid of

strategy and more often than not there is a hidden

(marketing or finance) perspective. This paper charts

a path towards a new paradigm and a new focus of

inquiry.

CONCLUSION

Given the apparent conceptual fuzziness about what

CSR actually means and entails we first reviewed

dominant literature on the subject. Then we

concretised the views by stating them succinctly so

that the definition could be logically arrived at. We

defined CSR and delineated the two approaches to

CSR (altruistic and strategic). Viewing it as a

continuum and explaining as an evolutionary process

we demonstrated first through literature and then

through industry examples why and how there was a

strategic shift of emphasis on CSR motivations for

business. In the process we re-defined the business-

society interface and explained how and why the

paradigm had shifted from 1953 to 2007. Finally we

gave an indication of the new direction for academic

inquiry based on ethics on the very important reality

of CSR.

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FINANCE

MANAGEMENT

very country, on the global planet has ultimate aim of Edevelopment, irrespective of system of development is

to achieve maximum human welfare. For this a country

has to make huge productive investments, in leading sectors in

the economy. The commercial banks are the biggest financial

intermediaries in the economy. The banks play a vital role in

collecting the scattered savings of households, corporate savings

and government savings. These savings are channelized as

loanable funds into productive investment in the economy. Thus

banks are monetary blood banks for promoting sustainable

development in the economy. Therefore, operational financial

flexibility is a key issue in determining their efficiency,

productivity and profitability.

The commercial banks had relatively high financial flexibility

during 1947 to 1968. During this period of time, the banks were

owned and managed by private sector. The banks had flexibility

in pricing their assets and liabilities, assets allocations, branch

expansion customers mix and market segmentation. As a result

of financial flexibility banks had accumulated substantial

profits.

Our government in 1969, nationalized the fourteen leading

commercial banks. Since nationalization of banks, they have lost

their financial flexibility. The banks had no financial flexibility in

pricing their assets, allocation of assets, branch expansion

customers mix and market segmentations. Even in certain

segments of priority sector lending bank funds were provided

under concessional finance / differential rate of interest scheme

below the cost of funds. The government also utilized substantial

“FINANCIAL FLEXIBILITY

AND OPERATIONAL RISK

MANAGEMENT IN BANKS”

PROF. (DR.) M.D. MOHITE

PROFESSOR (EMERITUS),

DR. D.Y. PATIL INSTITUTE OF

MANAGEMENT AND RESEARCH,

PIMPRI, PUNE


bank funds for development at low rate of interest. As

a consequence of lack of financial flexibility to the

banks, they had serious problems of low productivity,

inefficiency low profitability and losses.

In 1990 our government realized that the growing

inefficiencies, low productivity and losses in public

sector enterprises including banks were due to the

model of growth founded on public sector. Therefore,

in 1991, government introduced the economic

reforms viz liberalization, privatization and

globalization (LPG). By liberalization all controls

were removed. The model of growth built on public

sector has been dismantled and Indian economy is

integrated to global economy. Thus Indian economy is

geared to the market mechanism. As a result of

market economy, the management is sensitized for

quality, productivity, cost and customer service.

The foreign banks entered into Indian financial

market for business. These banks have financial

flexibility, new products profiles, modern technology

based banking operations, aggressive customer focus

banking and customer care and customer service. In

order to make our banks comparable and competitive

with foreign banks the financial flexibility to the

banks was advocated. Therefore government

appointed the committee on financial sector reforms,

chaired by Narsimham. The Narsimham Committee

submitted its report in 1991 and mainly focused its

recommendations on financial flexibility and

autonomy to the banks.

The Committee observed that lack of financial

flexibility to the banks due to over regulation and

excessive supervision resulted into deterioration in

the health and asset quality of the banking system as

indicated by the large sickness in the banks, bad and

doubtful debts, losses etc.

Reserve Bank of India (RBI), the statutory regularity

and supervisory authority has progressively

introduced the banking sector reforms recommended

by the Narsimham Committee to provide financial

flexibility and autonomy to the banks. RBI has also

directed to the banks to use modern information

technology for financial inclusion in the country.

The growing use of information technology, in banks

has provided maximum financial flexibility for

complex and huge volume of business, large number

of heterogeneous customers, vast geographical

areas, complex & multiple new products and services

profiles, different types of accounts, and emerging

new business in global market. The growing use of

information technology in banks has helped them to

reduce their banking cost, cost of human resources

and increase in productivity.

The information technology has become the major

input mechanism for banking operations. The vast

technology infrastructure, process, systems & people

have become the critical key segments of banking

operations. The failure of people, systems and

process will lead to failure in banking operations and

thereby a failure of an organization. Therefore, banks

are subject to an operational risk because of internal

failure in its operations. The failure of internal

operations controls resulted into sensational Harshad

Mehta scam in the Banking industry in our country.

The operational risk relates to information assets.

These are tangible assets comprising of hardware,

minicomputers, printers, printed materials,

programmers, furniture etc. The assets that are

conceptual in nature are software, data, information,

policies and procedures.

The operational risk management is also subject to

the external and internal threats. Therefore, the

Operational Risk Management (ORM) has to assess the

risk in terms of its occurrence, and magnitude of loss.

This will help the operational risk management to

design the strategy to monitor the risk. The

operational risk management can resort to the

strategy of risk elimination, reduction, retention and

transfer.

The exhibit I shows the structure of operational risk

management.


The Basel Committee on Banking Supervision has done

the pioneering work in the areas of risk management

for promoting the international banking on sound

line. The Basel Committee comprising of the

Governors of central banks of ten countries was

formed in 1975. The Basel Committee produced the

first document on 'International Convergence of

Capital Standards', in July 1988, for creating safety

and stability of global commercial banking. The Basel

Committee in June 2004 published the second accord.

The Basel Committee Accord Second has classified

the risk into three categories viz, Credit risk, Market

risk and Operational risk.

The second Basel Committee Accord defined the

operational risk as the risk of loss resulting from

inadequate or failure of internal processes, people

and system or from external events. In order to create

a structured framework of risk management in banks,

the Basel Committee has innovated three foundation

pillars of risk management system, which is exhibited

in the following exhibit II.


OPERATIONAL RISK MEASUREMENT MODEL

The operational risk measurement model is briefly

explained as under

1. SCALAR MODEL

The key business variables are identified. The

operational risk is calculated as a percentage of these

key business variables. The Basel Committee has

suggested two approaches viz.

A. BASIC INDICATOR APPROACH (BIA)

The capital calculated for operational risk is equal to

the average of previous three years of a fixed

percentage of positive annual gross income. The same

can be put in the form of equation as under :

B. STANDARDIZED APPROACH (SA)

Under this approach the major business activities of

the bank is divided into eight portfolios viz.

I. Corporate Finance

ii. Trading and Sales

iii. Retail Banking

iv. Commercial Banking

v. Payment and Settlement

vi. Agency Services

vii. Asset Management

viii. Retail Brokerage

The capital charge for each business portfolio is

separately calculated by respective percentage. The

total capital is calculated as the three year average of

the simple summation of the regulatory capital

charges across each business line in the year.

2. STATISTICAL APPROACHES

The statistical models are used in this method. The

loss data of past years is an input of building

statistical models. The statistical tools like 'Time

Series Analysis' of moving average method can be used

for this purpose. The past years loss data is arranged

in a chronological order. It becomes a time series data

of loss. It shows the trend behavior of loss. Based on

trend behavior of the variable viz loss, the future

trend behavior of loss can be illustrated with the help

of diagram of freehand method.


3. FUZZY LOGIC

In this method, sensitivity risk variables are identified

at each level of an organization hierarchy. Such

sensitive variables are aggregated at the each level of

an organization' hierarchy. The ranked risk variables

show their significance in terms of their hierarchy

level in the organization. The key risk indicators are

identified. Then the scaling technique is used to know

their key influences. This technique focus on the key

risk drives in the hierarchy structure of an

organization.

4. CAUSAL MODEL

In this model, causes and effects of operational losses

are ascertained. The operational losses occur due to

an adverse influence of certain factors. Such factors

can be identified and significance efforts of these

factors can be checked.

CONCLUSION

During 1947 to 1968 banks had Financial Flexibility in

terms of pricing of assets and liabilities, allocation of

assets, customer mix and branch expansion. Since

1969 to 1990, banks lacked financial flexibility, due to

over regulation & supervision which resulted into

deterioration in their health and assets quality.

The economy reforms and financial sector reforms

have influx a great deal of financial flexibility for the

banks.

The banks management is inherited to manage the

credit risk and liquidity risk. Now, the expansion in

scale of banking operations due growing retail

banking, investment banking, electronic banking,

new product profiles and global banking have shifted

to high-tech banking. The digital revolution has

influenced the revolution in banking operations. The

banking operations are now information technology

oriented. The fabrics of modern IT have embraced the

fabrics of baking operations to deal with mass and

diversified banking business at lowest cost, high

productivity performance and high profitability

through modern IT is subject to an operational risk.

The Operational Risk Management (ORM) has to place

a focus driven attention on IT, software model &

operative personnel. The bank management should

install in a phase manner the suitable IT

infrastructure with the help of professional experts. A

task force of technically competent persons should be

deployed to monitor its maintenance and work

efficiency. A task force should also effectively

supervise its functioning.

In order to minimize the probability of operational

risk, the bank management should hire the services of

software experts for designing an appropriate

software model for the bank. The software model

should be designed on the principle of need base

approach. The software model should be prepared in

such a way that there is no possibility of lacuna in

banking operations. It must be full proof model.

The operational risk may arise because of operative

personnel. The operative personnel may be

inefficient, ignorant and inexperience. Therefore,

the bank management must recruit the persons who

possess the required knowledge, experience and

expertise of operating the modern technology.

The bank management should create a training

center for training and up grading the existing

operative skill and expertise. A proper feedback of

training is necessary to improve the existing training

input and system.

The operational risk can also outburst due to willful

act of operative personnel. To restrict such

operational risk, the proper procedure and rules

should be made effective along with an effective


supervision and control.

Finally, in an emerging scenario of global banking the

operational risk management is a new risk prone area

with its multi complexities. Moreover, reward and risk

are sensitively related. Therefore, risk management

must focus on risk inventory, risk synchronization, risk

reduction and risk diversification. Along with this risk

base audit (RBA) risk based supervision (RBS) and

effective internal control system are must for banking

operations for monitoring the operational risk and

ensuring stability.

REFERENCES

Rao N K: The New Basel Accord, ICFAI University Press 2004.

Apte Narendra M: Corporate Governance, Risk Management and Internal

Audit, Journal of Institute of Chartered Accountant of India, Vol 53, No 5,

November 2004.

Banks Wake Up Risk Management, The Economic Times, April 25, 2001.

Dr Chitta Ranjan Sarkar: Managing Risk, A challenging task, Journal of

Institute of Chartered Accountant of India, Vol 53, No 5, November 2004.

IBA Bulletin, Operational Risk Management, Vol XXIV, No 8, August 2002.

Implementation of Basel II, An Indian Perspective by Kishor J. Udeshi, RBI

Bulletin, July 2004.

Managing High tech Risks in Banks, The Economic Times June 23, 1999.

Sharma N & Rajashekar : Operational Risk Management, IBA Bulletin, Vol.

XXIV, No 8, August 2002.

Risk Management is Good Management : Canadian Treasurer, May / June

2001.

Risk Management Tailoring Risk and Return, Chartered Financial Analyst,

Many 2001.

Risk Management in Banks, How to shield yourself,- this paper was presented

at the conference of Executive Director of Public Sector Banks, March 12-13,

2001, NIBM, Pune.

Raddar Datt & K P M Sundharam : Indian Economy, S Chand, 2009.





FINANCE

MANAGEMENT

INTRODUCTION

n business schools, we get to learn the various measures Iadopted by analysts to gauge the performance of banks and

are able to fathom abbreviations like EPS, ROA and ROF but

many of us are not comfortable with these matrices rather a set

of new value-based measures like CVA, SVA, CFROI, EVA have

emerged on the screen. Out of these EVA has emerged as a clear

cut winner to these traditional accounting measures EPS, ROA,

ROF, etc. do not correlate well with the shareholder value

creation. On the contrary, EVA offers a consistent approach to

setting goals and measuring performance, communicating with

investors, evaluating strategies and allocating capital. EVA as a

value-based performance metric seeks to measure the periodic

performance in terms of change in value. Maximizing EVA means

the same as maximizing long-term yield on shareholder's

investment. It is the measure that captures the true economic

profit of the organization. For measuring the bank's financial

performance, there are traditional accounting profitability

measures and shareholders value based measures like EVA and

MVA.

IMPORTANCE OF THE BANKING INDUSTRY

The banking industry in India is in the midst of a transformation,

thanks to the economic liberalization of the country, which has

changed the business environment in the country. During the

pre-liberalization period, the industry was merely focusing on

deposit mobilization and branch expansion. Based on the

recommendations of the Narasimhan committee, the

Government of India started diluting its stakeholder ship in

“VALUE CREATION IN INDIAN

BANKING INDUSTRY : AN ANALYSIS”

DR. R. SATISH

ASST. PROFESSOR,

SRR ENGINEERING COLLEGE, CHENNAI

M. DANIEL RAJKUMAR

ST. MARYS SCHOOL OF MANAGEMENT

STUDIES, CHENNAI


public sector banks. Banks have been asked to

maintain a minimum capital adequacy ratio and make

provision for Non-Performing Assets [NPAs]. The

sector has become very competitive with the entry of

many private and foreign sector banks. The face of

banking is changing rapidly. Banks are trying to trim

costs but have achieved limited success because of

fixed overheads. There is a need to reduce

transaction costs and pass on a part of the savings to

customers by way of lower service charges and lower

interest charges. This will require tremendous efforts

in the area of technology and for banks to build

capabilities to handle much bigger volumes. Banking

sector reforms have improved the profitability,

productivity and efficiency of banks, but, in the days

ahead, banks will have to prepare themselves to face

new challenges.

Indian Banking has seen many changes in the last

decade like imposition of prudential standards,

greater competition among banks, entry of new

private banks, etc. This paradigm shift in the Indian

banking sector can be seen in terms of two

dimensions: One relates to operational aspect

especially performance and risk-management system

and the second dimension relates to structural and

external environment or exogenous aspects. Is

evaluating Indian bank's performance a rather

straight forward issue? The answer is no. One might

say that like a corporate, even banks can be judged

from the behavior of their stock prices. However, as

bank stocks have not been very active on exchanges,

barring few on few occasions, should we conclude

that Indian banks have by and large failed to add

values to their shareholders' wealth. The answer is

once again no as one needs to evaluate private and

public sector banks in a more dynamic manner than

just looking at their stock prices, non-performing

assets (NPAs), C/D ratios and others. Some may also

argue that the general slow down in lending by banks

and their eternal problem of recovery of non

–performing assets (NPAs) has led to the sufferings of

Indian banks. The liberalization of the finance sector

in India is exposing Indian Banks to a new economic

environment that is characterized by increased

competition and new regulatory requirements. Indian

and foreign banks are exploring growth opportunities

in India by introducing new products for different

customer segments, many of which were not

conventionally viewed as lucrative customers for the

banking industry. Many Indian banks have, in the last

ten years, witnessed new shareholders. In general,

the performance of the banks may be viewed on three

dimensions namely structural, operational and

efficiency factors as suggested by Indian Banking

Association.

LITERATURE REVIEW

Tully (1993) has confirmed that there is no tricky

situation about the technique through which the EVA

can be augmented. It is a basic measure of return on

capital and there are three ways to increase it: Earn

more profit without using more capital, Use less

capital, and Invest capital in high return projects.

Jain (1994) has argued that the value added

statements has certain advantages like comparison of

performance, productivity measurement, resource

allocation and incentive schemes for employees. The

value added approach shows hoe the corporate

quiche has been alienated among various

contributors of value.

Lehn and Makhija (1996) affirm that EVA and Market

Value Added (MVA) are increasingly being eyed as

alternative measures of business performance and

strategic development. Despite the attention,

however, the empirical research has been devoted to

these two metrics. To provide clarifications on the

subject, a study, which examines the effectiveness of

EVA and MVA as measures of performance, as signals of

strategic development was conducted. They were

found to be significantly correlated with stock price

performance and inversely related to turnover. Firms

having greater focus in their business activities had

higher MVA than less focused counterparts.

Banerjee (1997) has conducted an empirical

research to find the superiority of EVA over other

traditional financial performance measures. Ten

industries have been chosen and each industry is

represented by four/five companies. ROI and EVA has

been calculated for sample companies and a

comparison of both has been undertaken, showing the

superiority of EVA over ROI. Indian companies are

gradually recognizing the importance of EVA. Some of


such companies are Ranbaxy Laboratories, Samtel

India Ltd. And Infosys Technologies Ltd.

Uyemura (1997) observed that over the last 20 years,

bankers have toiled with a variety of risk

management and profit concepts, such as matched-

maturity funds transfer pricing, duration analysis and

activity based cost accounting. Today, the interest

has developed in value-at-risk (VAR) capital

allocations and risk adjusted return on capital. Such

tools are important to understand and implement

when analyzing specific transitions; however, a top

down approach be the best choice for portfolios or

lines of business. The article describes a 'top-down'

approach to risk management- easily understood and

simpler to implement and lower in cost than

traditional approaches by using economic value

added (EVA) concept.

Thenmozhie (1999) explained the concept of EVA

and compared it with some other traditional measure

of corporate performance viz. ROI, EPS, RONW, ROE,

ROCE, etc. He used the coefficient of determination

to demonstrate that the traditional measures do not

reflect the real value of the shareholders, and thus

EVA has to be taken into account to measure of the

value of shareholders' wealth. She has also described

the concept of EVA in the Indian scenario with specific

reference to companies like NIIT, Hindustan Lever and

ITC.

Parasuram (2000) discussed the EVA position of 14

major public sector banks, 7 new private sector

banks, 5 old private sector banks and 2 foreign banks.

Among the strength indicators, Deposit, return on

assets, interest income as a percentage of total

assets, interest yield spread as a percentage of total

assets and EVA were considered. The study concludes

that EVA is an Important measure to judge a bank

performance in view of current scenario of banks. EVA

has been found to have a high degree of correlation

with ROA but not with any of the other measures.

It signifies a fact that banks realize the importance of

measuring EVA measuring separately even if they do

well on other fields.

Thampy and Beheli (2001) studied the economic

profits of commercial banks in the public and private

sectors during 1990s. It also moves the benchmark of

performance of banks from accounting profits to

economic profits and shareholder wealth creation.

The study has been restricted to 12 commercial banks

consisting of 4 public and 8 private sector banks. The

period covered under the study is three years starting

from 1995-96 to 1997-98. Beta has been calculated on

the basis of daily stock price data with Bombay Stock

Exchanges BSE 200 index returns during January 1,

1997 to March 31, 1998 as the proxy for the market

returns. The study shows that the performance of the

Indian banks as measured by EVA is not very

satisfactory. The results of the study reveal that the

commercial banks under consideration have not

created any positive EVA due to: (a) banks could be

over-capitalized and (b) returns are very poor from

banking business. It also suggests that bank should

improve and strengthen their credit assessment

technique and monitoring mechanism to bring down

the non-performing assets so as to improve the

earning capacity.

Prakash Singh [2007] discussed banks profiles to

demonstrate a direct correlation between the

investment in stakeholder relationships and

corporate performance. EVA and MVA tell what the

institution is doing with investor's hard earned money.

He has examined how to evaluate banks performance

and also see which Indian bank have been able to

create or destroy shareholders wealth since 1998-99.


To examine the relationship between

Economic Value Added and Market Value

added in the Indian Banking Industry.

To analyze the trend and growth of Economic

Value Added and Market Value Added.

To assess the level of Employee productivity

in Indian Banking Sector.

RESEARCH METHODOLOGY

SOURCES OF DATA

This study is based on secondary data. The required

financial data is collected from the electronic

database PROWESS, provided by Centre for

Monitoring Indian Economy (CMIE), Mumbai. Apart


from this, we have used the published annual reports

of banks wherever required.

SAMPLE DESIGN

The sample size of the present study is 39 banks from

the Indian Banking Industry. The study takes all the

banks that are listed on Bombay Stock Exchange BSE-

SENSEX. Further, we eliminate the banks which have

merged with other bank. Finally, the sample

comprises of top 39 banks which includes 22 public

sector banks and 17 private sector banks were

selected as sample banks by considering the

availability of financial data for the study period

2003-04 to 2008-09.

COMPUTATION OF EVA

“The Equity Approach is more suited to banks

compared to the entity approach since a big part of

banking business is liability management. The deposit

franchise given by the banking license gives the bank

the potential to create value on the liability side of its

balance sheet. The liability side of the banks balance

sheet is part of the business operations of the bank,

and it is not pure financing. This makes the equity

approach more appropriate” In the case of banks, the

equity approach is recommended for calculating EVA

is : EVA= NOPAT–(Capital * Cost of Equity)

Where, NOPAT is Net operating profit after tax.

Capital includes equity capital and retained earnings.

COST OF EQUITY

Cost of equity is the minimum rate of return, which

has to be made from an equity-financed project, in

order to maintain the present wealth of the

shareholders unaffected. It can be computed based

on Capital Asset Pricing Model (CAPM). According to

CAPM, Cost of Equity = Risk-free rate + (Beta * Market

Premium)

RISK-FREE RATE

It is the rate of return from securities, which are free

from any type of risk. Generally, government - backed

securities are considered as risk - free securities. So,

the yield on the 364-day Government of India

Treasury Bill is considered as risk-free rate [Thampy

et.al (2001), sen (2003)]. These show 5.93%, 6.2%,

7.4%, 6.4%, 6.1% and 6.3% for years 2003-04, 2004-05,

2005-06, 2006-07, 2007-08, 2008-09 respectively.

BETA

It is the measure of the volatility of a stock in relation

to the market. It is the index of systematic risk. Beta

for the each stock was calculated based on the daily

stock price with the Bombay Stock Exchange's sensex

returns as the proxy for the market returns. Beta was

calculated by using the data from the period April 1,

2003 to March 31, 2009.

MARKET PREMIUM

Market premium is the excess return offered by the

market over the risk-free rate.

EMPLOYEE PRODUCTIVITY

Employee productivity can be defined as the total

quantity of output/result generated by the bank

during a specific period divided by the number of

employees. Business Per Employee and Profit Per

Employee are the two variables under employee

productivity used for this study.

CORRELATION

The relationship of the EVA with NPAs and with

employee productivity is computed with the help of

simple correlation. Correlation coefficient lies

between -1 and +1. If the correlation coefficient is

negative, the relationship between the variables is

also negative and vice versa. A coefficient of zero

implies no relationship. (It is to be noted that the

researcher has considered only six years for the study,

which may affect the accuracy of correlation test.)

ECONOMIC VALUE ADDED : TREND & GROWTH

Thampy and Baheti have followed a method which

was proposed by Tom Copeland , Tim Koller in 1996.

Parasuraman also proposes this equity approach

method for bank valuation. In equity approach, EVA =

Adjusted Net Profit – (Capital x Cost of Equity) The

equity approach is more suited to banks compared to

the entity approach since a big part of banking

business is liability management, that is raising


deposits at rates below the opportunity cost of

capital. The deposit franchise given by the banking

license gives the bank the potential to create value on

the liability side of its balance sheet. The liability side

of the banks balance sheet is part of the business

operations of the bank, and it is not pure financing.

This makes the equity approach the more

appropriate.

The results of the study give a picture of positive

EVAs, contrary to the previous study. This clearly

shows that Indian banks are improving their

performance not only in making profits but also in

EVAs. Table 1 brings out the sector-wise computation

of EVA. It is clear from the table that the private

sector has not fulfilled the public expectations in

terms of average EVA generated during 2002-03 to

2007-08 where it registered Rs. 358.52 crores. On the

contrary to this, the public sector has shown high

sense of financial discipline by recording average EVA

of Rs.767.34 crores during the same period. The other

figures in the table tell the similar story where the

correlation coefficient is 0.119, which is positive, but

very low degree level and skewness values are

positively tilted in both the sectors. While testing

through the hypothesis, it is observed that the EVA

performance level in both the sectors has not been

significantly different if tested at 5% level of

significance.

EVA-based frequencies distribution is shown by Table

2. It is clear from the table that about fifty four

percent of the total sample banks are reporting

negative EVA throughout the period and another forty

one percent are generating positive EVA but it has

been less than Rs. 500 crores. About five percent of

sample banks reported an EVA of over Rs. 500 crores.

Table 3 presents the sector-wise Aggregate EVA of

Sample banks. Public sector has been able to come up

to the expectations of the public at large when

compared to the private sector banks.

Table 4 brings out the sector-wise statistical analysis

of EVA. It is clear from the table that the private

sector has not fulfilled the public expectations in

terms of average EVA generated during 2002-03 to

2007-08 where it registered Rs. 358.52 crores. On the

contrary to this, the public sector has shown high

sense of financial discipline by recording average EVA

of Rs.767.34 crores during the same period. The other

figures in the table tell the similar story where the

correlation coefficient is 0.119, which is positive, but

very low degree level and skewness values are

positively tilted in both the sectors. While testing

through the hypothesis, it is observed that the EVA

performance level in both the sectors has not been

significantly different if tested at 5% level of

significance.

Bank-wise statistical analysis is offered by Table 5

where it is interesting to observe that the number of

banks displaying the mean EVA and sum total of six

years EVA is thirty four which is quite contradict with

the results of Table 1. The values of range show the

volatility in EVA and that of standard deviation and

variance display variation scale from central

tendency and dispersion. Sixty-one percent banks

find their EVA positively skewed and Forty-three

percentages indicate positive kurtosis that indicated

longer tails.

EMPLOYEE PRODUCTIVITY

There is a clear positive relationship between EVA and

productivity. Employees of Indian Banks have become

more productive over the last few years. The average

business and profit per employee for Indian banks has

more than doubled in six years from 2003-04 to 2008-

09. The improvement was due to business growth

outpacing. Private sector banks increased their

workforce by more than 110 percent during the study

period. The new-age private sector banks such as

ICICI, Axis Bank and YES Bank witnessed improvement

in their employee productivity in terms of both

business and profit. HDFC Bank, Kotak Mahindra Bank

and IndusInd Bank are the only banks which have

witnessed decline in their productivity over the

years. IDBI Bank, Corporation Bank and Oriental Bank

are the top three Public Sector Banks in terms of

productivity as shown in TABLE 7.


TABLE 1 : EVA OF SAMPLE BANKS [Rs. in Crore ]


TABLE 2 EVA-BASED FREQUENCIES DISTRIBUTION OF SAMPLE BANKS

TABLE 3 SECTOR-WISE AGGREGATE EVA [Rs. in Crore ]

TABLE 4 SECTOR-WISE STATISTICAL ANALYSIS OF EVA [Rs. in Crs]

MARKET VALUE ADDED : TREND & GROWTH

Market value added (MVA) is the excess of market

value of capital (both debt and equity) over the book

value of capital. If the MVA is positive, the bank has

created wealth for its shareholders. If the MVA is

negative, the bank has destroyed wealth for its

shareholders. The result of the trend and growth

analysis of MVA for Banking Industry is exhibited by

Table 6. MVA data is analyzed along with its primary

components Market capitalization and Net worth for

the selected banks during the study period.


TABLE 4 SECTOR-WISE STATISTICAL ANALYSIS OF EVA [Rs. in Crs]


CONCLUSION

Economic Value Added has become the order of the

day. Most of the Public and Private sector banks in our

country have already started looking at their portfolio

of services offered and what they should do in the

future for remaining competitive in the industry.

Shareholders Value is gaining an increased attention

as a criterion of business performance. All the banks

have no disagreement on the usefulness of the EVA.

However, many of the respondent banks still use

traditional accounting measures. Bank managers can

understand the intricacies in EVA, but seldom have

they succeeded in prevailing on the employees and

the need to adopt the EVA as a performance indicator

in order to achieve better results. We, however feel

that all this should not be a barrier to present more

re l iable results . A long with the above

recommendations there should be environment of

acceptance of the concept among the shareholders,

employees, owners, management and other various

agencies. Then only this concept can hold its ground

in a sustainable manner especially in the context of

Indian Environment.

REFERENCES

Bacidore, J.M.., J.A. Boquist, T.T. Milbourn and A.V. Thakor [1997 ] , “ The

Search for the Best Financial Performance “, Financial Analyst Journal, Vol .

53 , No.3, pp.11-20.

Bao B and D.Bao [1998], “Usefulness of Value Added and Abnormal Economic

Earnings: An Empirical Examination “, Journal of Business Finance &

Accounting, Vol.25, No.1/2, pp. 251-64.

Grant, J.L. [1996], “Foundations of EVA for Investment Managers”, The

Journal of Portfolio Management, Vol.23, No.1, pp.41-48.

Madhu Sehrawat , “ Economic Value Added and Performance Measurement”

, Deep and Deep Publications . (2009), Ch 8, pp.170-185.

O'Byrne, S.F. [1997] , “ EVA and Shareholder Return “ , Financial Practice and

Education , Vol.7, No.1, pp.50-54.

Parasuraman [2000], “ EVA- Its computation and impact on select banking

companies”, The ICFAI Journal of Applied Finance, Vol.6, No.4 (October),

pp.14-30.

Singh and M.C.Garg , “Economic Value Added in Indian Corporates”, Deep

and Deep Publications, 2004, Ch 8 , pp. 261-273.

Stern Stewart & Co.[1997], The Stern Stewart Performance 1000:

Introduction and Documentation, Stern Stewart Management Services Inc.

Tully , S. [1993] , “ The Real key to Creating Wealth “ , Fortune, No.128, No.6,

pp.38-50.

Thampy Ashok and Baheti Rajiv [2001], “ EVA in Banks”, The ICFAI Journal of

Applied Finance, Vol.7, No.1 (January), pp.44-55.

Uyemura, Kantor and Petit, “EVA for Bank Value Creation, Risk Management

and Profitability Measurement”, Journal of Applied Corporate Finance,

Vol.9, No.2, Summer, p.94.

Wood, A. Nicholas, “ Economic Value Added : Uses, Benefits and Limitations-

A South African Perspective”, Southern African Business Review, pp.1-12.

Young S. and Stephen F.O'Byrne, EVA and Value-Based Management, New

York: McGraw-Hill publications, 2001, Ch-5, pp.161-179.

TABLE 7 DETAILS OF EMPLOYEE PRODUCTIVITY





FINANCE

MANAGEMENT

EXECUTIVE SUMMARY

ub-prime crisis, European debt crisis, Fed's QE2 policy…

Sconsequently many observers conjecture is once again

rife that we are reaching the end of the era of dollar

dependency. Evidently next question is where will be the safe

heaven? Who will give the hope against all odds ? Given the sheer

size of economy and fierce growth rate spotlight is now on

Chinese Yuan. In another two decade years China is set to replace

the US as the world's largest economy. It is already the world's

largest exporter and will soon also be the largest trading nation.

Contrary to the US, the world's largest debtor, China is also a

large net external creditor, only trailing Japan. A close

parallelism from history in hand is that as once economically and

financially ascendant Dollar has replaced British Sterling

troubled by the bequest of two world wars; would this time

Redback will replace the Greenback in similar way ? China is

taking many incremental steps like more trade settlements in

Yuan, Currency Swap, and diversification of its reserves to

internationalize its currency. Along the way there are challenges

of growth with right monetary policy maneuver, exchange rate

stability, financial market and legal reforms which requires

considerable time in coming years. While Pound, Yen are not so

strong currency given their economic and financial size and

structure but Euro is still in the race. Also technically speaking

IMF SDR might be another viable alternative. As the world is

becoming more multi-polar there is less conclusive possibility of

actually Yuan becoming single monopoly reserve currency like

Dollar. After next 15-20 years more probable scenario is that it

will become an internationalized currency and pose as a strong

“WILL CHINESE YUAN BECOME

THE NEXT RESERVE CURRENCY?”

PURNENDU MAITY

ANALYST,

CREDIT POINT E.COM, PUNE


contender along with Dollar and Euro for reserve

currency option.

DETERMINANTS AND PROCESS FOR BECOMING A

RESERVE CURRENCY

1If we look at various financial literature , there are

several conditions fortifying a reserve currency: the

size of the economy, low inflation, exchange rate

stability, deep and efficient capital markets, political

stability with geo-political strength. One more

important factor is network externalities which

explain why once a currency becomes an

international currency, in a short time period it is 2quite implausible to lose its standing . In general,

market participants would like to stick to their loyal

platform as they have invested substantially over

time to accumulate the knowledge of the platform. As

they use it, further more market participants will find

it comfortable to use that currency and it becomes 3more of a self-reinforcing process generating a

positive network effect. Internationalization of a

currency is a multi-stepped long-drawn-out process

that involves: at first, becoming a settlement

currency; next, a vehicle currency for third-party

trade or foreign exchange transactions; then, a unit

of account in commodity pricing; and finally acting as

a reserve currency.

CHINESE YUAN INTERNATIONALIZATION POLICY

STEPS AND STANCE

INCREASE USE OF YUAN IN TRADE

Since 2003, the Beijing-based State Administration of

Foreign Exchange has allowed limited use of yuan in

border trade in Yunnan, Heilongjiang, Guangxi, Inner 4Mongolia, Xinjiang, Liaoning and Jilin . Banks in China

began offering banking services in Yuan in 2004,

including, deposits, currency exchange, remittances,

debit and credit cards, and personal checking. The

outstanding Yuan deposits is RMB54. 4 billion at the

end of June 2009, a 348% jump from RMB12. 1 billion 5at the end of 2004 . In Dec 2008 State Council decided

to launch two pilot schemes to allow selected

companies to settle trade using the Yuan in place of 6the dollar . One scheme is centered on trade between

China's export engines the Pearl River Delta and

Yangtze River Delta and Hong Kong and Macau. The

other scheme covers trade between Yunnan and

Guangxi and the Association of Southeast Asian

Nations (ASEAN). In June 2009, it was also announced

that China and Brazil had reached an “initial

understanding” to gradually eliminate the dollar in

bilateral trade, which is estimated to reach $40 7billion in 2009 . A similar agreement to move toward

settling bilateral trade in their respective currencies

was reached earlier in the month between Beijing and 8Moscow . In Jan 2010, China and the Association of

Southeast Asian Nations (ASEAN) kicked off one of the

world's largest free trade area (FTA).By 2015, it is

expected that the policy of zero-tariff rate would be

for 90 percent of traded goods between China and

four new ASEAN members, Cambodia, Laos, Myanmar 9and Vietnam .As of Sept 2010, cross-border Yuan

trade settlement has reached 197.1 billion Yuan 10(about 29.5 billion U.S. dollars) .

YUAN TRADE SUPPORTING INFRASTRUCTURE

To develop an offshore currency market and

supporting Yuan internationalization, the State

Council has also begun to allow financial institutions

registered in Hong Kong to issue Yuan-denominated 11bonds . For the offshore Yuan market, In May 2009,

HSBC and Bank of East Asia became the first foreign

banks to gain approval to sell Yuan bonds in Hong 12Kong . This issuance will give liquidity support for

those Yuan trade settlement. Bank of China (BoC) has

already been selling Yuan-denominated bonds in Hong 13Kong since 2007 . In June 2009, China launches a new

multilateral net settlement system, which will be run

by the China Foreign Exchange Trade System 14(CFETS) . The CFETS is the foreign exchange and

money-market trading platform of the People's Bank

of China, China's central bank.

CURRENCY SWAP AGREEMENTS

China first used currency swap arrangements to

promote both its economic interests and geopolitical

agenda in 2001, when it signed the first of four swap

agreements with ASEAN nations Indonesia, Malaysia,

Thailand, and South Korea under the Chiang Mai 15Initiative . Most recently China has concluded of six

currency swap agreements with Argentina, Belarus,

Hong Kong, Indonesia, Malaysia, and South Korea,

respectively. Since the G-20 summit in November


2008, the People's Bank of China (PBOC) has signed

bilateral currency swap arrangements totaling 16Yuan650 billion (US$95 billion) . China and Brazil

announced more direct plans on May 18, 2009 to

settle China's imports from Brazil in Yuan, while

Brazil's imports from China would be paid for in real, 17bypassing the use of the U.S. dollar . In November

2010, Russia and China decided to use their own

currencies rather than US Dollar for trade 18settlement .

DIVERSIFICATION OF RESERVE

China is insistently pursuing diversification into

commodities, particularly oil. In early 2009, China

made a deal with Russia which involves a $25-billion

loan from the China Development Bank to Russia's

Rosneft and Transneft in return for secured oil 19deliveries for the next 20 years . In May 2009,

another deal settled with Brazil involving US$10

billion loan to develop oil reserves and for Petrobas to

supply crude to China's oil companies over the next 10 20years . In July 2009, China signed a deal with Ecuador

21to secure supplies of oil over the next two years .

China's National Energy Administration announced

that it would build 8 new strategic petroleum 22reserves bases by 2011, making it to total 12 bases .

23China is aiming for 100 days of reserves by 2020 .

CHINESE GOVERNMENT APPEAL

People's Bank of China released a paper by Zhou 24Xiaochuan , the central bank's governor, on March 23,

2009. It calls for replacing the dollar as the dominant

world currency and creating "an international reserve

currency that is disconnected from individual nations

and is able to remain stable in the long run". His paper

includes specific steps to reduce China's reliance on

the dollar and implicit references to an increased role

for China's Yuan (i.e., “the basket of currencies

forming the basis for SDR valuation should be

expanded to include currencies of all major

economies, and gross domestic product may also be

included as a weighting”). Another far-fetched

proposal made by Zhou in his paper that expanded use

of the SDR as a settlement currency in international

trade & financial transactions, including commodities

pricing.

INFERENCE FROM THESE CHINESE STEPS

With increasing trade settlement in Yuan what is

happening is that China is trying to reducing reliance

on Dollar. As far as bilateral trade agreements are

concerned, these agreements seem to be more

oriented at trade finance and political goodwill

rather than spreading or augmenting Yuan use as

reserve. Yuan is not convertible; a Latin American

country like Brazil could not sell Yuan to defend its

currency which is a classic use for foreign reserves.

They can only use these to pay for imports of Chinese

goods, basically a good option while dollar liquidity

remains a problem for many countries during the

current global financial crisis. Another justification

for these currency swaps and trade-financing

agreements is that it will help to lock in China's future

need of raw materials and commodities. Argentina,

Indonesia, Malaysia –all these are source for various

commodities. Also Argentina, Indonesia and South

Korea were among the countries that were facing

short-term liquidity problems in 2008 which turned to 25China for assistance . Comparing the trillion dollar

reserve of China, these currency swap deals or trade

statistics are minimal. Also by basic economics, China

can't initiate any major sell-off because the resultant

decrease in Dollar value would only reduce the

valuation of Chinese reserve assets.

26According to IMF press release to include a currency

in SDR two important criteria is largest export and

freely usable currency. At present there is four

currency in SDR basket but there is no specific

regulation or standard for inclusion of only four

currencies – from 1981-98 SDR included five 27currencies . So additionally Yuan can be included if it

deemed fit. On export front China is global leader but

Yuan is not a freely usable currency therefore

inclusion in SDR is not probable; at least not now.

Zhou admits that “the reestablishment of a new and

widely accepted reserve currency with a stable 24valuation benchmark make take a long time” .

ANALYSIS OF OTHER FACTORS FOR YUAN AS

RESERVE CURRENCY

Going by the economic forecasting from Goldman 28 29 30 Sachs , PWC , Standard Chartered China is likely to

surpass US economy sometime in 2027, 2030, and


2020 respectively. Very clearly it is largest positive

factor that can lead the Yuan to become Reserve

Currency. But is it sustainable thereafter? We know

keeping the numero uno spot is tougher than getting

there. One crucial element is that China will face the

demographic ageing effect which can slow down the 31growth momentum. Another Goldman Sachs report

suggest that. If the Chinese government changes the

one child policy then matter might look different.

Though China has been able to keep low inflation and

exchange rate stability so far (various economic

statistics shown in Exhibit 1), but it maintains capital

controls and a quasi-pegged exchange rate. Sudden

opening of market have its risks like undesirable

appreciation of Yuan, financial instabilities such as

speculative capital inflows, asset bubbles and short-

term ostensible shocks to employment and business.

China have to opt for plodding currency convertibility

roadmap along with the necessary domestic

institutional reforms i.e. central bank independence,

inflation targeting, changing the state-controlled

credit approach, reducing the NPA of banking 32system , developing a deep and sophisticated capital

market. In Jan 2010 China has just started stock index 33trading, margin trade, shorting . In Nov 2010 China

indicated the gradual realization of capital account

convertibility; also it is focusing stimulating domestic

demand so that economy becomes less export-34oriented which will give scope for policy flexibility .

present in Chinese capital market qualified foreign 35funds are allowed to purchase only up to $30 billion

but trillions of dollars can be sunk into secure U.S.

Treasuries, which have no limits on foreign purchases.

Albeit a long way to go from here, but China is taking

steps and in this process it always has to think of

rebalancing with the other counterpart US.

Let's assume China makes its Yuan fully convertible

today. What could be its share in world's reserve

holding? Referring to an econometric analysis in BIS 36research paper “applying China's data, the Yuan's

share in the world reserve holdings would be 12.7%

according to the linear model and 4.4% based on the

nonlinear model. They suggest that the Yuan's

potential as a reserve currency would be comparable

to the case of the Japanese yen and British pound

should the Yuan become fully convertible today”.

Last but not least, though China enjoys so-called

communist & authoritarian political stability, but it

has a poor law & governance image (low ranking in

rule of law, control of corruption, economic freedom

index as shown in Exhibit 2,3) so network externality

factor is in negative side of China. Even talking of

transparency, China still do not report official figure

of its reserve composition to IMF. As long as it

continues to compare poorly with the US and Euro

zone, foreigners will remain reluctant to invest in

Yuan assets.

OTHER MAJOR CONTENDERS OF RESERVE

CURRENCY

Since its inception in 1999, the Euro has advanced to

become a key global reserve currency, second only to

the dollar, and accounting for more than 25% of total

international reserves. Also, while euro area

government securities markets are fairly large, they

are fragmented because of the heterogeneity in

government credit risks. Furthermore, recent debt

crisis, fiscal and balance of payments problems in

some Euro area countries have weaken the position of

euro at the moment. Lately, debate is cooking on

possibility of a new world reserve currency, most

likely building on SDR. This idea has been endorsed by 37former World Bank chief economist Joseph Stiglitz .

Even with the new $250 billion allocation of SDRs just 38implemented by the IMF , total volume of SDR in

existence is less than 5% of global non-dollar 39reserves . It is not enough to make a significant

difference and question of supply flexibility and

managing authority remains. Without an effective

government to back it, a world reserve currency of

this kind would have obscurity attaining a minimal

level of credibility.

CONCLUSION

Success of Yuan's international ambition depends

upon many factors like: realizing full convertibility of

the Yuan, to liberalize and strengthen domestic

financial system and marketplace, flexibility of the

Yuan exchange rate, with necessary adjustment of

the legal system. The network externality is currently

favoring the dollar and the euro. Apart from economic

aspects, geopolitical elements are equally important.

It depend on China's serene rise, Japan's response to


China's growing influence in Asia, and the United

State's reaction to China's rise in the world. IMF Coffer

data shows Dollar is still the leader but its share of

currency reserve is slowly diminishing (Exhibit 4).

Policymakers have learned from the global economic

history that single hegemony is subject to triffin

dilemma and vulnerable to shock and volatility during

crisis and adjustments. As changing economics,

technology and globalization is transforming this 40world in a multi-polar structure ; there are

expectations of possible multi-polar reserve currency

41system so in future it would be possible for two or 3maybe three major reserve currencies to co-exist .

Looking at the qualitative and quantitative

arguments it is more likely that rather than out rightly

replacing Dollar; in next 15-20 years Yuan will emerge

as one of the internationalized currency with

potential of becoming reserve currency rival along

with USD and Euro. The strength of that system will

depend on the future economic, financial, political

dynamics and development.

LIST OF EXHIBITS



Since its inception in 1999, the Euro has advanced to

become a key global reserve currency, second only to

the dollar, and accounting for more than 25% of total

international reserves. Also, while euro area

government securities markets are fairly large, they

are fragmented because of the heterogeneity in

government credit risks. Furthermore, recent debt

crisis, fiscal and balance of payments problems in

some Euro area countries have weaken the position of

euro at the moment. Lately, debate is cooking on

possibility of a new world reserve currency, most

likely building on SDR. This idea has been endorsed by 37former World Bank chief economist Joseph Stiglitz .

Even with the new $250 billion allocation of SDRs just 38implemented by the IMF , total volume of SDR in

existence is less than 5% of global non-dollar 39reserves . It is not enough to make a significant

difference and question of supply flexibility and

managing authority remains. Without an effective

government to back it, a world reserve currency of

this kind would have obscurity attaining a minimal

level of credibility.

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BOC to sell yuan bonds in HK,Updated: 2007-05-28 13:48

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Petrobras sign $10 billion deal with china, http://bestshippingnews.com/

freight-news/petrobras-sign-10-billion-loan-deal-with-china

Ecuador signs contract to export oil to China By Eduardo Garcia Jul 23 2009

http://www.reuters.com/article/idUSTRE56N04820090724

China to bolster oil reserves By Sun Xiaohua (China Daily


content_7524427.htm

China stocks up on oil http://english.cctv.com/program/newshour/

20090822/102608.shtml

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China's Burgeoning Foreign Reserves: Too Much of a Good Thing

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sec/pr/2010/pr10434.htm

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China 'will be the world's biggest economy by 2027, 17th November 2009

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will-be-the-worlds-biggest-economy-by-2027.do

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The Potential of the Renminbi as an International Currency

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International Monetary System, http://www.imf.org/external/np/

speeches/2010/051110.htm







GENERAL

MANAGEMENT

INTRODUCTION

Academic Performance Indicators (API) in Performance

Based Assessment Scheme (PBAS) by University Grants

Commission (UGC) proposes, research and academic

publications as an important parameter in assessment of

teachers. The All India Council for Technical Education (AICTE)

has also used the 'cumulative impact index' in drawing

equivalence to Ph.D. These and many other factors have resulted

in almost every institute of higher and technical education,

promote and publish academic journal. With this huge number of

academic journals, in print, how can an academic researcher

decide where to publish, as to which journal is good, as all these

journals cannot be taken to be equal in quality. Academic

publishing includes books, academic research findings, student's

projects, theses, conference proceedings, grey literature etc.

(This paper focuses more on journals and other publications than

on books).

There were 612 colleges and 307 institutes affiliated to

University of Pune, as per information on their website, March

2011. If these colleges or institutes on an average publish one

Journal or a Magazine a year, huge paper gets consumed in

prints, raises environmental concerns. How many of these

journals are really getting the subscription or being read by

intended audience.

Mackenzie, C.J. et al 2001, 'The current environment in higher

education drives faculty members towards research and

publication'. 'But who benefits'? Their research included

marketing practitioners and the work stated 'Clear evidence was

“A CRITICAL STUDY OF THE VALUE

ADDITION TO EDUCATION BY

ACADEMIC JOURNALS WITH SPECIAL

REFERENCE TO E-PUBLISHING”

PROF. S. P. SINGH

DY DIRECTOR,

INDIRA INSTITUTE OF MANAGEMENT,

PUNE


obtained that academic marketing journals are

neither read nor recognized by the great bulk of the

sample'. Then what value do they actually provide,

and to whom? How can and how much value, the

academic journals add to existing knowledge? Their

visibility, quality, storage, archive and many similar

aspects needs to be addressed.

WHY ACADEMIC PUBLISHING ?

Academic publishing is simple, with many

standardized formats (e.g. for research paper,

students project reporting, theses and dissertations

etc, there are guidelines and formats available).

Academic publishing is for most reasons, a mandatory

practice. The students and faculties are required to

conduct research and write reports as either a part of

fulfillment of the course or career enhancement.

Academic Performance Indicators (API) proposes

credits points for books and many of these academic

publications categorically.

Huges, C. A. 1998, mentions the core activity of

academic profession as 'advancement of knowledge'

and credits the 'professional publications' and

'scholarly reputation' to be deciding factor as to who

belongs to this profession.

Other factors includes the information need of self

and peers, satisfaction of creating, adding to existing

body of knowledge. Intense competition amongst

scientist and researchers is also one of the factors for

publications being made. Correia, A.M.R. and

Teixeira, J. C.2002 have presented that 'researchers

and academics, seeks to free scientific information

and provide unrestricted access to it for all scientist,

students and interested public'. They have also cited

Guedon, 2001, that 'scholarly journals have assumed

functions' of, 'registering ownership', 'establishing

priority of discovery', and 'public registry of scientific

innovation'. They have also mentioned 'author

recognition, author evaluation, Validation of

knowledge and quality control'.

A publication helps gain various intangible benefits

like , time- stamp that gives them priority (Rao, M.K.

2009), with respect to others working in a similar area

of interest. It helps to build a brand for researcher

with respect to his area of expertise. He also

mentioned 'ownership of ideas' and 'social

recognition'. Publication is required for professional

development as well as development of profession.

Monetary considerations may also be there for certain

publishing.

E-PUBLISHING

The paper print has its bag of problems, from

increasing paper cost, cost of printing delays in

process of submission, peer review process, etc..

With so many journals being printed the libraries are

finding the selection of journals for subscription a

major problem. Library budgets are shrinking,

storage space problems and limited search, access (as

journals are locked in wealthy university libraries-

Wikipedia)to end users of the print journals restricts

its visibility.

Almquist 1992 as quoted by Huges, C. A. 1998, has

mentioned use of Information Technology (IT) for

subject identification and proposal development. IT

was also used to acquire familiarity with literature.

These represent earlier stages of research and

publications.

Rao, M.K 2009, has attributed the existence of

electronic journals since 1976, and full- fledged e-

journals came to limelight in 1990s.

Highlighting the visibility and impact of E-Publishing

Sahu, D.K(2006), cited the case of Journal of Post

Graduate Medicine (JPGM, www.jpgmonline.com) as

this particular journal was having print circulation of

less than 400 and received less than 180 articles till

2001. Today the online version attracts close to

100,000 virtual visitors with more than 110,000

articles downloads per month. He has further

mentioned the problems and delays in peer review

system of print journals and how online submission

and processing has eliminated the postal, delays and

resulted in considerable decrease in the submission to

decision (turnaround) time. He however highlighted

the need of trained editorial staff, in the process of

electronic peer review system.

Libraries are forming Consortia and subscribing to e-

journals at concessional rates Rao M.K , 2009, eg

UGC- INFONET digital library consortium.


Third party aggregators are being used by various

publishers' in order to make available databases, for

access to users. Open Access Initiatives (OAI) are now

providing a new method of scholarly communication.

Dispelling various myths and bringing the facts to light

about Open Access Journals Sahu, D. K has stated

Indian journals as mostly having low impact. Going

online is not costly, Open Access(OA) are peer

reviewed, not all OA charge for publication, free

access may not result in loss of revenue and finally OA

journals do have good Impact Factor.

JOURNAL EVALUATIONS AND RANKINGS

Journals need to be evaluated primarily because,

there is need know the progress, status, of what

others have done in similar area of study or research.

The researcher would turn to the reliable and

authentic source of research findings which he/she

may get from a highly rated journal.

The question of journal becoming obsolescence, or

change in name of a journal is also an reason why

ranking and ratings are looked upon as they usually

list only journals in the current year, for considered of

evaluation.

Citations, Impact factor (IF) are popular, current and

widely used metrics, Satyanarayana. K. 2010.

Citation rates are used to measures the visibility of a

journal. 'Journals with larger circulations tend to

receive more citations' Starbuck and Mezias (1997) as

quoted by Vincent, A. and Ross, D. (2000). Further one

of the reasons why Citation analysis is gaining

important in evaluation of faculty research,

according to Vincent, A. and Ross, D. (2000) is 'the

availability of databases that provide citation

information'.

Eugene Garfield in 1955 came out with Impact Factor

(IF) which is indicator of the success of journals

contents. The IF is used by researchers, authors,

publishers' librarians etc for making their decisions

about a journal. Nagaraja, A. and Vasanthakumar, M.

have done comparison of Web of science and Scopus

impact factors of Indian journals. According to them

the 'best tools available to select the quality journals

are Journal Citation Report (JCR) and Scimago journal

ranks (SJR) from Scopus data'. Similarly Lu An and

Junping Qui, 2004, has researched on the Journal

impact factors (JIFs) as determined by the Institute

for Scientific and Technological Information of China

(ISTIC).

Timeliness is an important criterion in evaluation

process, as mentioned on the Thomson Reuters site.

'The evaluation process' and 'How to submit a journal

for evaluation' are detailed on the website along with

address for submission. However there are

limitations to use of IF factors as inferred from

following,

'…..impact factor calculated for individual journals

should not be used as a basis for evaluating the

significance of an individual scientist's past

performance or scientific potential. There are

several reasons not to equate the impact factor of a

journal in which the scientist publishes with the

quality of the scientist's research…….

'…..Impact factor measures only the frequency of

citations which cannot be assumed to always equate

with quality….', (Russell R. and Singh Dave 2009),

forms the parts of the statement adopted at an

editors roundtable.

Satyanarayana, K. (2010) has listed many known

limitations and deficiencies with citation based

evaluation systems.

Satyanarayana, K. 2010, listed and discussed

alternative methods of evaluation as compared to

Impact factor. These include Google scholar, Page

Rank, Weighted page rank, h-index, y-factor, Euro

factor, Faculty of 1000 , Eigenfactor etc.

Touzani, M. and Moussa, S. 2010 have researched on

Google Scholar for Marketing discipline and

highlighted the benefits and limitations of same.

Google website describes 'About Google Scholar', for

search of scholarly literature in various disciplines

and sources like books, theses, articles, abstract and

opinions, from academic publishers and professional

societies, online repositories, Universities and other

websites, and has documents ranked.

MANIPULATIVE TENDENCIES

Russell R. and Singh Dave 2009, 'A journals impact


factor can be inflated by certain journal practices

such as publication of many review articles'.

Self citing is a practice which although necessary in

certain cases to an extent, overuse of self citation can

be construed as a manipulative attempt and can

result in journal rejection from evaluation process.

According to Satyanarayana, K. 2010, longer articles,

controversial papers to negate the contents, are used

to boost citations. He has also talked of citation

cartels. A 'recommender system', for peer review

system is quoted in the same paper.

Nordling Linda, 2008, stated that focusing on

numbers from impact factor encourages both

researcher and journals to play games to raise their

impact factor. The research suffers and it becomes a

popularity contest, instead of truth contests. For

online publishing also there are focus on search

engine optimization, rather than on research

contents and quality.

Romano, N. C. 2009, has discussed the editorial

coercive self citation and concluded that it violates

the very spirit of scientific integrity.

VALUE ADDITION

Value in respect to education has many dimensions.

Educational institutes rarely have agenda of

developing any single skill or capability in its student,

many of the skills and knowledge inputs are for

lifelong, skill enhancement. 'The term value

sometimes has a very remote connection with money'

Henry C. Lucas, Jr, (2001). Bennett, (2001) as 'By

value addition we mean what is improved about

student's capabilities or knowledge as a consequence

of their education at a particular college or

university.’

An important component to optimize, improve, any

business, process is technology. Value in this context

refers to the effect of services enhancement of the

educational process that has been or could be brought

about by using IT based solutions. Reduction in cost of

acquiring and providing educational service is a good

indicator of value addition.

Vincent, A. and Ross, D. (2000) have mentioned that a

'way of determining the value of work in a discipline is

by studying the impact of that discipline on other

fields'. They have stated with reference to 'Journal

Citation Reports and others like them', to 'provide

valuable information to faculties who are evaluated

on their publishing record, to administrators who

must do the evaluating, and to the journals that are

listed in the databases'.

Value addition of e-publishing can be inferred from

the fact that publishing on internet movement is

'because of a key assumption that scholars and

scientists publish in peer reviewed journals not for

monetary reward but in having their work read, used

built-upon and cited' (Harnd and Hemus 1998) as cited

by Correia, A.M.R. and Teixeira, J. C.2002.

Highlighting the benefits of digital libraries with

respect to theses and dissertations, Correia, A.M.R.

and Teixeira, J.C. 2002, have stated that it 'empowers

universities to unlock their information resources.

Improving graduate education as they inspire and

instigate faculty and graduate to experiment new

mentoring models, empowering students to convey

richer message, lowering cost of submitting and

handling, etc, were listed which signify the value

addition to education.

Huffine Richard, 2010, cited 'value of grey literature',

as 'a mixed bag', with reference to digital age

publishing. 'Non publishers can produce valid

research and publishers can release invalid research

just as easily'. He adds 'in some domains the best

source of information may be grey'.

Digital grey literature according to him includes pre-

prints, blogs, project websites, institutional

repositories, data archives etc.

A research publication helps authors to understand

themselves, their competence and boost confidence

self image.

Open Access helps give visibility to unknown authors

and enhances educational and accelerates research.

The Universities benefit due to researchers' increased

impact and in turn the increase in return on

investment in research. Rao, M.K, 2009. Further it

facilitates sharing of learning's between rich and poor

nations. He concludes that authors will have no


choice but to accept the new means of publishing

over internet.

Nordling Linda, 2008, has stated the value of Open

Access movement as the one that will tear down the

walls between academic publishing and rest of the

internet. However the editors, authors have limited

exposures with the tools and technologies that are

available and can be used judicially for the process of

online, open access publication, archiving etc.

Wikis and the online repository system add value by,

allowing engaging community participation and free

dissemination- Wikipedia.

SUGGESTIONS AND RECOMMENDATIONS

To enhance the value addition by academic

publications the researcher deduces following

suggestions from the above study.

1. Information Technologies (IT) that are being

used in creation, submission, review of

journals, uploading, archiving and other

aspect of journal communications

needs to be made available to academic

researchers, editors, evaluators etc.

2. Proper training needs to be imparted to the

stakeholders of education and research with

respect to the Information Technology

solutions being used at various stages of

research, e-journals publication,

storage, retrieval, licensing usage and

relevant aspects.

3. There is a need to educate the educational

stakeholders about the prevalent journal

ranking and evaluation systems, their

methodology, and ethics in research

publishing. This is to eradicate the

temptation of malpractices for gaining high

citation or impact.

4. Authors, editors and others needs to focus

towards the e-publishing options as much as

possible and may follow a hybrid system

(e-publishing and minimum copies in

paper form for archiving purpose only) to begin

with.

5. Open Access Initiatives should be promoted

at all levels of research and publications.

6. The findings of Theses and dissertations

should be encouraged to be

published in public domains as they are

capable of great value addition.

7. Regulatory bodies at University and higher

level need to set guidelines for print journals

from individual institutes, so as to control the

rampant printing of journals especially those

which neither gets subscribed nor have any

worthwhile readership.. They may make

provisions of clubbing certain journal

types unless an institute can prove the quality and

standard to bring out unique and

substantially significant research work.

Settings minimum criteria and standards for

journal printing before registration may be

framed without hampering the freedom of

research and expression.

CONCLUSIONS

Research and publications are the backbone of

academia. They provide tremendous value to various

stakeholder of education specially, the researcher

who may be a faculty or a research scholar. A research

publication also benefits the educational

administrators, evaluators and the society. An

academic journal helps the academia to

communicate, identify scope of research, trends and

practices. It also assists, for hiring, promotions and

merit based pay decisions. It helps in ranking of the

faculty, departments and the institutes.

There must be encouragement and motivation for

research in academics either through funded projects

or for expansion of theory. The existing system of

journal evaluation has merits but needs to be used

judicially to avoid abuse of the ranking system and

output. E-publishing is gaining grounds, evolving and

maturing in many aspects of journal communication.

It offers visible advantages over paper or print

journals. Proper awareness and technical expertise

needs to be provided to researchers, editors, and

evaluators in the use of Information Technology

solutions for the same. The following paragraph


appropriates conclusion of this research study.

Huges, C. A. 1998, cites the notion of “accumulated

averages” or the Matthew effect”, i.e. “ the tendency

for people who have early recognition to receive

increasingly more resources & opportunities for

further recognition and publication, can mediate

many other effects”.

REFERENCES

Bennett, D.C. 2001, Assessing quality in higher education- perspectives,

Liberal Education, Vol. 87, No. 2, pp. 40-46.

Correia, A.M.R . and Teixeira, J. C.2002, New Initiatives for Electronic

Scholarly Publishing: Academic Information Sources on the Internet, Paper

published at the RTO IMC Lectures series 24-26 Sept. 2002.

Garfield, E. 1998, The use of journal impact factors and citation analysis for stevaluation of science', paper present at the 41 Annual meeting of the

Council of Biology Editors, Salt Lake City UT, May 4-7.

Henry C. Lucas, Jr. 2001, Information technology for Management, Tata

McGraw- Hill Education Private Limited.

Lu An and Junping Qui, 2004, Research on the Relationships between Chinese

Journal Impact Factors and External Web Link Counts & Web Impact Factors,

The Journal of Academic Librarianship, Vol. 30, No.3, Pg.199-204.

Romano, N. C. 2009, Coercive Journal self citation- manipulation to increase

Impact factors may do more harm than good in long run, Communications of

the association for Information systems, Vol 25, issue 5, Article 5.

Rao, M.K., 'Academic Publishing : Role of University Libraries in the Scholarly

Communication System', ICAL- 2009.

Russell, Richard. and Singh Dave, 2009, Impact factor and its role in

academic promotion: A statement adopted by the International Respiratory

Journal Editors Roundtable.

Sahu, DK (2006) Journal publishing in India: a case study of MedKnow

Publications. National Seminar on Electronic Publications, 23-24 March,,

Hyderabad, India.

Satyanarayana, K. 2010, Impact factor and other indices to assess science,

scientists and scientific journals', Indian Journal of Physiol Pharmacol,

Vol.54(3), Pg.197-212.

Touzani, M. and Moussa, S. 2010, Ranking marketing journals using the search

engine Google Scholar', Marketing Education Review, Vol.20, No.3 (fall

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Vincent, A. and Ross, D. 2000, On Evaluation of Faculty Research Impact of

Citation Analysis, The Journal of Applied Business Research, Vol. 16, No.2, Pg

.1-13.

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about.html, assessed March 2011.

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[online], www.iatul.org/doclibrary/public/conf_proceedings/1998/

huges.pdf assessed May 2011

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digital age, [online], http://www.elsevier.com/framework_librarians/

Docs/2010RichardHuffine.pdf, assessed April 2011.

Nagaraja, A. and Vasanthakumar, M., 'Comparison of Web of science and

Scopus impact factors of Indian journals', http://findarticles.com/p/

articles/mi_7005/is_2011_Feb/ai_n57336445/ accessed April 2011.

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http://www.guardian.co.uk/education/2008/oct/28/research-internet,

accessed may 2011.

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Occasional Paper No 62, [online] https://www.dora.dmu.ac.uk/xmlui/

handle/2086/4509, abstract assessed May 2011.

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accessed May 2011






GENERAL

MANAGEMENT

INTRODUCTION

he past year has seen a dramatic change in the prospects Tof developing countries due to the effects of the global

recession. Declines in foreign direct investment, export

revenue, remittances, tourism and other adverse impacts of the

recession will reduce economic growth and, in turn, may unravel

progress towards the Millennium Development Goals (MDGs).

International Monetary Fund forecasts released on 22 April 2009

indicate that global economic growth will contract by 1.3 per

cent in 2009, compared to 3.2 per cent positive growth in 2008.

According to the World Bank, developing countries' combined

growth will fall to 2.1 per cent, or to zero per cent excluding

China and India. (Australian Journal of Management, April'09).

RATIONALE FOR SELECTING THE THEME : GROWTH

CHALLENGES AND STRATEGIES

Global recession has engulfed the entire economy making it

dawdling and sluggish. It has drastically affected all the sectors

and its outcome is severe. Less demand for the goods, increase in

the debts leading to cash flow crunch has led to closure of many

industries, and the sustainability of many is in question today. It

is therefore challenging for an enterprise's owner or manager to

operate in such circumstances. This study endeavors to

elucidate the perceptions of managers in various countries

around the world about the growth challenges and also expounds

the strategies they comprehend as critical to face these

challenges.

GLOBAL RECESSION – A PERSPECTIVE

“GLOBAL RECESSION : MANAGEMENT

CHALLENGES AND STRATEGIES -

MANAGERIAL PERCEPTION ON

GROWTH, CHALLENGES & STRATEGIES”

MS. SHARAYU BHAKARE

HEAD OF DEPARTMENT,

BUSINESS ADMINISTRATION (COMM.),

MODERN COLLEGE OF ARTS, SCIENCE

& COMMERCE, PUNE

PROF. SUBBARAM RANGANATHAN

PROFESSOR & DIRECTOR,

ASMA INSTITUTE OF MANAGEMENT,

PUNE


Recession is defined by National Bureau of Economic

Research as a significant decline in the economic

activity lasting for more than a few months. United

States has been worst hit by recession but any country

that has even a remotely similar modern economic

structure has suffered to some degree from economic

recession. The world output is for the first time in 60

years s expected to contract, according to IMF

statistics by 0.5% to 1% in 2009 , US output by 2.6%.A

shrink in the Euro zone's GDP us expected to be 3.2%,

where as Japan's by as much as 5.8%.(HBR July-August

2009)

GENESIS OF GLOBAL RECESSION

The global financial crisis has been attributed to the

subprime mortgages which originated in the US

mortgage sector few years back. During the booming

housing market, when low interest rates were

prevailing and the housing prices were continuously

increasing, offering financial assistance to the

subprime borrowers were considered a lucrative

proposition by some banks/ financial institutions

ignoring the inherent risk involved in such activities.

This situation became complex when some

investment banks innovated some complex financial

instruments to investors across the globe. However,

the situation changed dramatically when the

property prices started falling sharply, leading to

significant rise in default in mortgage loans and

foreclosures. One of the latest international surveys

reveals that the top three reasons for this financial

crisis are inadequate risk management practices at

banks, increased complexity of financial instruments

and speculation of financial markets. The crisis

coupled with bank collapse in the US and Europe, has

caused consumer confidence and credit availability

to plummet to new lows.

THREE F'S AND RECESSION

THE FINANCIAL TURMOIL

Besides the huge losses for major investment

bankers, the subprime crisis has caused liquidity and

credit crunch globally. Rising fuel and food prices

have added fuel to the fire. The current scenario

carries with it certain follies. The US, the superpower

in a unipolar world is in an economic recession and

financial turmoil following the subprime crisis in

home mortgages, the twin deficits (current and

fiscal) besides a lax monitory policy. While the federal

deficit is gradually narrowing, its reduction to

acceptable levels calls for increased spending

discipline, especially through drastic reductions in

huge expenditure like the Iraq war.US, the wealthiest

nation, which is the biggest borrower, must return to

the basics of prudent macro economics management

by drastically slashing its twin deficits. It should

realize that its currency is destined to lose its primacy

of place sooner than later.

The recession has reduced America's trade gap as

consumers are now forced to trim their spending.

Delaying the correction of part excesses by pumping

in more money and encouraging more borrowing is

likely to make the eventual correction more painful.

The US economy needs to display financial prudence

and exhibit resilience and innovation.

THE RISING ENERGY PRICES

The major turbulence has been caused by the steep

rise in the petroleum prices which shot up to 135 $ per

barrel. The OPEC (Organization of the Petroleum

Exporting Countries) attributes this rise not so much

to its cartelization efforts but to the falling dollar.

Many emerging economies have not allowed the

complete pass through of this price rise to the

customers, they have adopted a gradual & marginal

rise in oil prices. However, the effect of rising prices

has passed in the emerging economy by way of

inflation. Inflation management therefore, acquires

the centre stage for these economies. Actions take by

the central bankers may only provide marginal results

and alternative solutions like long term planning that

involves investing substantially. Capital expenditure

for oil exploration programs, development of

alternative sources of energy through renewable

sources can have long term ramifications.

Many economies have to downscale their GDP growth

projections. A price correction may be possible if

dollars depreciation is halted, but it is not a distinct

possibility, as the greenback is bowed to slip further,

following the fundamental weaknesses of the super

powers economy.


AGFLATION (FOOD CRISIS) - ANOTHER MAJOR

SOURCE OF TURMOIL

At present, the world is witnessing supply shortages,

while demand is steeply rising with respect to wheat,

rice, pulses and host of other soft commodities. In

India agflation is causing a major havoc with

dwindling buffer stocks, inadequate imports at very

high prices and general rise in prices of food products.

As per the reports, the situation is no better in US.

There is a demand spurt in India and China because of

rising incomes of the middle class population.

However, globally food production is rising only in

absolute terms and not in percentage terms to meet

the rising demand. Conscious efforts of US to switch

to cultivation of biofuel are one significant reason for

slow rise. “Food security” has therefore become a

matter of concern for all the economies. Achieving

sustainable food security calls for long term planning

and investments but consecutively the medium and

the short term consequences of agflation have to be

endured by many economies the world over. G8

nations have highlighted three major reasons for

financial turbulence, the subprime crises,

supplemented by fuel prices and food prices.

The bankruptcy and closure of several top finance

firms and industries in US shook the confidence of the

Industrialists and managers. Bankruptcy of Lehman

Brothers, Washington Mutual, WorldCom, Cosceco,

Chrysler, Washington Mutual and Wachovia being

some of the top performing firms of US, undermined

the abilities of similar such firms. Markets across the

globe experienced pain caused by growing defaults on

US subprime mortgages.

IMPACT OF THE GLOBAL CRISIS

The financial downturn has severe impacts on the

various spheres of economy which can be stated in

three levels. The first level impact is uncertainty,

leading to risk aversion and shortage of funds, sharp

decline in stock prices, fall in business sentiments and

Erosion in investor wealth and company valuations.

The second level impact is Loan led demand to remain

low as interest rates remain high, Companies with

highly leveraged balance sheets face shortage of

investable funds, Infrastructure companies saw

project costs go up.

The third level impact is the slow income growth and

job creation and snipped GDP growth.

An obvious manifestation of the global economic

slowdown in developing countries will be increased

unemployment, under-employment and loss of

income. Numbers of working poor are projected to

rise by more than 200 million. For example, many

laid-off formal sector workers will be forced into low-

income jobs in the informal and rural sectors.

The global recession will generate enormous

difficulties for developing country governments.

While needing to help newly vulnerable populations,

they will have less tax and other revenue to fund crisis

responses and to maintain basic services such as

health and education. This places a special

responsibility on donor governments to support

developing country counterparts to generate

employment and help limit the scale of the human

impacts.

The recession is a global challenge requiring global

solutions. G-20 members, including Australia, have

reaffirmed their commitment to achieving the MDGs.

G-20 members have recognised that the current crisis

will impact disproportionately on the vulnerable in

the poorest countries and that there is a collective

responsibility to mitigate its social impact.

The need for policy and regulatory reform to address

the causes of the global recession is widely

recognised. The global recession provides both an

opportunity and a rationale to move more quickly to

address overdue reforms, in areas as diverse as

financial regulation, trade, competition and public

sector improvement.

POSSIBLE EFFECTS OF THE RECENT GLOBAL CRISIS

IN DIFFERENT COUNTRIES

(Ozlem Onaran, EPW March, pg 176)For analyzing the

possible effects of the recent global crisis in different

countries, they have been divided into four groups :

1. The developed countries

2. The developing countries


3. The emerging markets of Eastern

Europe.

4. Other developing countries.

The developed countries are affected much more

than the previous stock market or banking crisis of

1980s. The effects of the credit crash, particularly in

countries with high household debt (eg US and UK)

will be severe. The multiplier effects of credit crash

as well as the decline in consumption have already

stared to affect the investments. In Germany and

Japan where there is a high degree of dependence on

export markets the contraction will also be rather

severe and the reliance on low wages to expand

export markets will prove to be accurse. In the EI

some countries ability to respond to the shocks will

also be constrained by their fiscal capacity. The

negative effects of the crisis on labor in the

developed countries will work through demand,

bargaining power and path dependency channels. The

decline in the wages in the emerging markets, which

will suffer from the global crisis, will also add further

pressures. Since it is a global crisis, the recovery in

economic activity can last much longer, bringing in

worries about “L” type recession. In case the

recession persists longer, the pressure on wages and

the bargaining power of labor will intensify.

Many developing countries with a former crisis history

are once again experiencing a crisis led by speculative

capital outflow during this global crisis. Countries like

South Korea and Argentina are suffering from a crisis

which they have not created. The countries with

current account deficit such as Turkey, South Africa)

might suffer through a deeper bust, due to

accumulated fragilities during the speculation-led

boom cycle. There is expected to be a radical and long

lasting decline in real wages and the wage share, and

a sharp hike in unemployment.

The emerging markets of Eastern Europe are also

being threatened by the credit crash and capital

outflows and also a probable currency crisis

accompanying the banking crisis. After a decade of

restructuring and high growth following the initial

transition shock, these countries will once again face

the costs of integration with unregulated global

markets. Hungary, Bulgaria, Romania, Serbia,

Croatia, Baltic countries, Ukraine and Russia are more

exposed than Poland, Czech, republic, Slovenia and

Slovakia. But even the latter group might suffer from

the contagion effects, the slowdown in global

demand, the decline in FDI inflows and the

contraction of remittances. Excessive dependence on

export markets will turn out to be major risk, for non

EU countries the results can be worse. Russia, also

with a former crisis record and a more intense

reliance on market base finance is already under the

pressure of devaluation.

For the other developing countries like China, India

and Brazil although the contagion effects and the

slowdown in global demand will be an important

problem. These countries could manage the crisis

based on their large domestic markets, if they could

make a policy shift away from pure dependence on

export orientation based on low labor costs.

The crisis has created such a situation for the

countries of the world that more innovative financial

system means more risk and a wider contagion;

export market contraction will make recovery harder

and as the previous imbalances of the debt led growth

is now being corrected, it is unclear where their

recovery will come from. Higher interest rates,

double digit inflation, dire fiscal position, slowing

growth, more expensive capital and could hit firm

profitability.

WHY GROWTH CHALLENGES ???

Alan Greenspan, ex chief of the US FED has said “I

have made a mistake in presuming that the self-

interests of organizations, specifically banks and

others, were such that they were best capable of

protecting their own shareholders and their equity in

the firms”.

18 months after the subprime loan crises broke

through the surface in US, twelve months after the

investment banking firm Bear Stearns was rescued

and six months after Lehman Brothers collapsed,

there is no sign that the people of the world have seen

the worst of crises that now envelopes the global

economy. What started as a financial crisis has

became full blown real economy crises that seem to

spare no corner of the world. The world economy is


expected to contract in 2009, by up to 1%, the first

such contraction since the second world war; open

unemployment is expected to touch 233 million, the

deepest level of fallen ever since 1945 and the world

trade is contracting in an accelerating manner and is

projected to fall by as much as 9% this year, again the

sharpest fall since the numbers began to the tracked

six decades ego.

The crises that began in Anglo-American heart land,

primarily as a financial crises, penetrated in Japan,

German and its periphery quite later, primarily as an

export crises response to slowdown in Anglo-

American heartland. The export crises then fed

through the financial and wider growth problems

through the US governments has been applying the

Collins Powels doctrine of “Shock and awe” to the

economy throwing every conventional and

unconventional policy it can think of at the problems ,

yet the numbers from the US economy keep getting

worse. GDP contracted in the final quarter of 2008 at

an annualized rate of over 6%. Industrial production in

Jan 2009 was 10% lower than in Jan 2008. Consumer

confidence is lowest as measured by conference

board since it started. Outcomes in the world's second

biggest economy Japan are worst. Toyota has cut car

production by half; Sony has put most of its labour

force on a part time work and is in the process of

closing at least force factories overseas. Export

orders of machinery fell by 43% in 2008 and domestic

orders by 20%. GDP fell in the last quarter of 2008 at

an annualized rate of 13%.

Germany GDP fell by an annualized rate of 8% in last

quarter of 2008 and the unemployment rate in Feb

2009 showed a rising graph.

Most Asian economies, which had become dependent

or export of manufacturing goods to the west, are

experiencing a big falls in output and increases in

unemployment. South Korea's GDP collapsed in the

last quarter of 2008 at the annualized rate of 21%.

Taiwan's export is in December 2008 were 40%.

Indonesia is experiencing surging unemployment and

however China is the only major economy likely to

significant growth in 2009, besides the fact that

electricity production fell by more than 6% in 2008.

The global magnitude of the shock can be noted from

two indicators.

First, stock market in the last nine months of 2008 lost

a “value” equivalent to 3000 Euros for every man and

woman and child on the planet. Western European

stock markets lost about 5000 Euros to every

European.

Second, world trade in the four months from Nov2008

to Feb 2009 fell at a faster rate than at any time

during the great depression.

The US budget deficit in 2009 is set to triple to $1.75

trillion, the largest ever from last years figure of $450

billion. The Bank of England has faced the lowest

interest rates since it came into being in 1634.

The largest housing mortgage companies, Freddie

Mac and Fannie Mae, the largest insurance company,

AIG and banks like Citi bank exist because they have

been rescued with hundreds of billion dollars pumped

by the US government.

Smaller economies like Spain, Mexico, Ireland,

Iceland, Singapore, Greece, Ecuador, Hungary,

Latvia, Pakistan and Ukraine are in deep trouble. This

is in spite of massive bailout packages put together by

various governments.

The current crisis will bring down the Capitalist

system, since the financial system is fundamental to

the functioning of the capitalistic system.

Businesses which have been votaries of markets and

minimum government intervention till recently are

unashamedly demanding massive help from the

government. The policymakers have to now bring

about a systemic change. Most policymakers are from

the world of finance and for them saving real

companies is less importance than saving the

financial world.

The crisis has reversed the capital flows from virtually

all developing economies, whether or not their

growth prospects were otherwise diminished. In the

process of protecting their financial system and

ensuring their stability, the capital flows from US and

Europe to the developing world and emerging

markets have come to a hard stop. This has been

further exacerbated by the reduction of global


aggregate demand, which in turn makes export-

oriented economies less desirable locations for

investment. Falling demands in America and Europe

affect exports particularly in Asia and Mexico.

THE YEAR ON YEAR % CHANGE IN GDP CLARIFIES THE

MOMENTUM OF INDUSTRIAL PERFORMANCE GLOBALLY

Thus the crisis is not only the fallout of a faulty risk

management strategy, but also a crucial factor like

failure of business strategy. With this economic

backdrop, growth is all the more challenging and

strategists have to be sharp to incorporate it in the

organizations.

SOCIAL IMPACT

Besides the economic impacts, the social impact also

has to be considered by the manager while operating

their businesses. Impact of the global recession will

be felt differently in different countries, with

particular groups more vulnerable in some countries

than others. The most vulnerable groups include :

those just above the poverty line who have

limited access to alternate sources of income

in an economic downturn;

children of poorer households who may suffer

malnutrition, be subject to neglect or

violence or who may need to leave school to

seek work;

t ho se engaged i n t r ade -expo sed

industries;

p o o r p r e g n a n t w o m e n , n e w b o r n

babies and infants who may have less access to

appropr iate medicat ion and

nutrition; and

marginalized groups, such as ethnic

minorities, the rural poor and people with a

disability.

To support those most at risk of falling into

extreme poverty and avoid the risks of life-

long 'poverty traps' social protection

programs may include:

conditional cash transfer programs, such as

payments made to parents for children

attending school;

nutrition and feeding programs in schools or

for pregnant and lactating women and

infants; and

Micro-insurance programs to support

informal sector livelihoods.

With nations involved in such rehabilitation and other

measures to survive the recession, new challenges

are thrown to managements to ensure proper display

of courage and determination to sustain the

onslaught of the growing consequences and impact of

the recession. To this is the newly added horror of the

“Dubai Debt' that lists the crumbling of the oil rich

nation.

SIGNIFICANCE OF THE STUDY AND THE RESEARCH

QUESTIONS

In this context the study gains immense importance in

understanding the managerial perceptions of the

emerging challenges and the necessary remedial

actions to be taken so that the business growth is

ensured. The following questions emerge out of these

discussions :

a) What is the perception of managers across

the world as to the challenges posed by

recession ?

b) How these perceived challenges are


attributed to an organisation's response to

solve an issue ?

c) What if the managers' perceptions have

direct impact on their performances

and

d) What is the future growth of the

organizations ?


The objectives of the study have been in accordance

with the research questions posed :

a) To understand the managerial perceptions of

challenges in business growth.

b) To analyse the perceptions using appropriate

statistic

c) To discuss the analyzed results in fora of

managers to brief on their possible

futuristic performance orientation.

RESEARCH METHODOLOGY

A list of 15 statements(as enclosed) has been

prepared and managers who are employed in

corporates across the world ranging from the far east

to the west in Asia, Africa and USA were asked to rank

order them. The mean of the ranks was divided in two

comparable formats of Indian Managers and Foreign

Managers. Spearman's Rank correlation was used as

statistic to determine the impact the ranking and

necessary correlation study made. This statistic

assesses how well an arbitrary monotonic function

could describe the relationship between two

variables, without making any other assumptions

about the particular nature of the relationship

between the variables. The study was conducted as

part of a research presentation to be made in the

'International Commerce and Management

conference' organized by the Department of

Commerce, University of Mumbai and was conducted

during the last week of Nov'09. Random sampling

method was used to determine the managerial

sample from Australia, New Zealand, South Africa,

Zimbabwe, Dubai, Singapore, Malaysia, USA and

India. Total of 100 managers (as given in Table 1) were

asked to submit their response by email and these

were tabulated to obtain the mean rank and

hypotheses tested at 5% significance level using 'z'

test(critical value: 1.296 at 5% significance) and

statistical inference made. It was seen that the

calculated value (-3.006689) is less than the critical

value as per Table and hence the null hypotheses that

'the perceptions of foreign and Indian managers are

independent' is accepted.

THE HYPOTHESES ARE SET AS BELOW

Ho= the perception of Indian and Foreign Managers

are independent

H¹= the perception of Indian and Foreign Managers

are dependent

TABLE 1 COUNTRY PROFILE OF MANAGERS (N 100)


ANALYSIS

TABLE 3 COMPUTED VALUE TABLE OF SPEARMAN'S

RANK CORRELATION (RHO)

From the above Table it can be seen that the

'perceptions of Indian and Foreign Managers' are

positively correlated though 'z-test' signifies negative

which is less than the critical value as per Table (1.771

at 5% significance) and hence the null hypotheses is

accepted that there is significant independence

between the perceptions of Indian and Foreign

Managers about the 'Business challenges and their

subsequent managerial growth and strategies'.

DISCUSSIONS

The on going discussion as to what constitutes

challenges in the emerged scenario of global

recession and its impact has been vividly understood

by studying the perceptions of managers across the

world. In the given context of information sharing, we

can conclude that the perceptions of managers across

the world are independent depending on the

economic environment that the managers are placed.

Observations reflect that the views of foreign and

Indian managers are independent. Equating excellent

financial results with excellence is not the first

preference of all managers. However, looking at this

situation as an opportunity and venturing into new

business areas is the priority for some managers.

Regular and personal contact with customers is one

preferred perceived challenge whereas using fewest

possible people for the highest possible output is

another. This may be necessarily due to the impact of

external environmental factors on their organizations

and the strategies adopted by these organizations.

Managers are an integral part of the organizations and

their perceptions need to be valued by their

organizations. For example change management and

customer focus are the key challenges perceived by

some managers. Considering these views can make a

vast difference in incorporating a strategy or facing a

challenge. Managers need to be given a platform

where they can express their concerns and priorities

for the organizations, so that any type of growth

strategy is accepted easily and successfully.

Perceptions of managers across the globe may differ,

but they are extremely important for the

organization they are a part of.

Few managers have commented independently on

the scope of the 'challenges that have emerged' and

have gone a further step to guide the researchers in

order to have more detailed analysis on the subject.

On account of limitations of time, those aspects could

not be taken for study but the information has

provided ample scope for further research on the

topic. The objectives that have been set are thus

achieved by having undertaken the study.

CONCLUSIONS

'Men may come and men may go, but an organization

goes on for ever and ever' (Lord Gower).

Organizations have to embark on specific strategies

to combat the onslaught of any recession which is

ultimately due to the actions or inactions of

managers. Managers need to understand that they

have an important role to play in organizational

development vis-a vis their own growth. Where the

interests conflict, as we have seen in the case of

Satyam debacle and the collapse of Lehman, we need

to emphasise the role of modern managers to have

'more concern for others 'since they have a crucial

role in developing an effective organization and

hence an effective and efficient economy. Days are

not far when managers across the world have to

perceive stakeholder interests in a big way thus

paving way for 'peace, prosperity and hence

purposiveness' in human development

ACKNOWLEDGMENTS

The researchers thank the managers who have

responded to the 'email' survey at very short notice

and the Managements of their respective affiliations.

They also thank their family members who were

patient enough to allow them to complete this 'short

term' but purposeful exercise.

REFERENCES

BOOK

Arora P.N, Arora Sumeet, Arora S, “Comprehensive Statistical Methods”, S

Chand publication,2004

JOURNALS

“Asia's Suffering”, The Economist, January 31-February 6, 2009, pp 30-34.

“Crunch Time”, Business Today, November 2, 2008.


Ferguson Nial,”The Descent of Finance”; Harvard Business Review, July -

August 2009.

Journal of Australian Management, pp 75-78,April 09.

Kumar Arun, “Tackling the Current Global Economic and Financial Crisis:

Beyond Demand Management”, Economic and Political Weekly, March 28-

April 3, 2009, Vol XLIV.

“Managing in the downturn”, The Economist, November 22-28, 2008, pp15-

16.

thOttawa, “Breaking the deficit taboo”, The Economist, 15 November 2008,

pp 45-46.

Ozlem Onaran, “A Crisis of Distribution”, Economic and Political Weekly,

March 28-April 3, 2009, Vol XLIV, pp 176-178.

Patnaik Prabhat, “A democratic agenda of five elements for coming out of

the recession”, Economic and Political Weekly, March 28-April 3, 2009, Vol

XLIV,pp 147-148.

Rao Kasturi Nageshwara, “Global Financial Turbulence”', Professional

Banker, The Icfai University Press, September 2008, pp 51-54.

“Redesigning the global finance”, The Economist November 2008, pp 60-61.

Rhodes David et al, “Seize Advantage in a Downturn”, Harvard Business

Review, February 2009.

thSrikant Srinivas, “None Too Big To Fall”, Business World, 13 October, 2008,

pp34-35.

Wade Robert, “Steering Out of the Crisis”, Economic and Political Weekly,

March 28-April 3, 2009, Vol XLIV

“What Next”, The Economist, September 20-26, 2008, pp19-20

World Economic Outlook, IMF

NEWSPAPER ARTICLES

Bali Vivek, “Business in a tough environment”, The Economic Times,

Wednesday, 23rd September 2009.

Chaudhari Saumitra, “Remember Lehman's collapse”, The Economic Times, th11 September 2009.

Ram Mohan T.T, “A new paradigm for management?” The Economic Times, th14 April 2009.

Roy Subhasish “Managing global financial crisis”, The Economic Times,

Thursday, 12th March, 2009.

ONLINE

http://www.merinews.com/article/10-indian-industry-to-do-well-during-

recession

thwww.imf.org /date visited 27 Nov 09

thwww.economist .com/date visited 27 Nov 09







GENERAL

MANAGEMENT

BACKGROUND

n today's world, life have become challenging and at every Ifacet of one's life, we are faced with dilemmas on how to live

an ideal life, a life that is guided by the Holy Book of Quran

and the Sunnah of Prophet Muhammad (PUBH). This paper tries

to draw inferences from various texts and ancient documents to

present and draw comparisons between what is permitted and

disallowed. It draws comparisons between a Muslim who is

ordained by God to live his life as per the guidances and

principles of the religion and the one who enjoys material

benefits and his behaviour is guided by results and outcomes and

not how it is gained or earned.

ISLAMIC HISTORY

Islam came, conquered and remained glittering for centuries

together. The world derived innumerable benefits of the Islamic

revolution which came on this earth. It was the time when the

world witnessed many discoveries, inventions and rule of

peaceful governance. But after gradual depletion of Islamic

spirit, the Islamic Kingdom also shrunk. Imperialism, Capitalism,

Socialism and other isms overpowered the world but the

humanity could not get relief, equality, peace and freedom

which it cherished during Islamic regime. Over last few decades

Muslims started to reaffirm their conformance to Shariah norms

and restructured their lives on the basis of Islamic principle. It

was a strong feeling and may be blunt reality also that political

and economic dominance of the west, during past few centuries,

has deprived them of divine guidance in almost every field and

especially in the socio-economic fields. Therefore, after

“ISLAMIC PERCEPTION OF

COMMERCE & BUSINESS

MANAGEMENT”

DR. DASTAGEER ALAM

PROFESSOR,

P.A. COLLEGE OF ENGG., MANGALORE


acquiring political freedom, the masses were striving

for the revival of their Islamic identity to organize in

collective life in conformity to Islamic principles.

After the economic recession of 2009 the majority of

the world came to realize that it was the collapse of

capitalism after socialism. American researches

affirmed that the Tsunami's impact of recession would

hamper the least, to those who were practicing

Muslims. The whole world, especially the developed

ones are looking toward Islamic economic system to

rescue the sinking ship of the world economy. But

here, a sensible question raises the doubts as to why

are Islamic theories not relevant to the present

context prevailing in Muslim countries. One very

pertinent reason being given over here is that the

Islamic scholars are un-aware of conventional

knowledge, and those who have conventional

knowledge, do not have sufficient Islamic knowledge

to authoritatively comment on Islamic perspective

and so should not meddle with them and keep a safe

distance. The Ulema, on the other hand, are not

considered suitable to comment on conventional

subjects. This hiatus makes it difficult for scholars on

either side to cross boundaries. Scholars, generally,

choose their own domain to make comments or give

advices. There are some more reasons observed as to

why Islamic knowledge is not supporting the existing

perspective of the Muslim world to prosper or at least

to move in a meaningful positive direction. I think it

should be crystal clear in every mind that Islam is

neither an economic system; nor a business system;

nor a way of accumulation of power; nor a set of rules

for governance, it is purely a religion providing

guidance in every sphere of human life which also

includes economic system, business management and

commerce as well. The holy Quran clarifies the very

purpose of creation of human beings, “WAMA

KHALAQTUL JINNA WALINSA ILLA LI ABUDOON”. “I

created the jinn and human kind only that they might

worship me”. In book of traditions Almighty says “I

was a hidden treasure, I wanted to be known, so

created creations”.

If we analyse the book of Hidayat of mankind i.e "THE

HOLY QURAN”, we will find that there are around 6666

verses in it. Out of which Do's and Don'ts are only in

666 verses. Then what is there in dominant 6000

verses, Ulema confirm that 2000 verses discuss the

life hereafter i.e Qabar, Barzakh, HASHR, YOUMAL

QIYAMAH finally JANNAH, JAHANNAM and AERAF. The

other 2000 verses discuss how Almighty created this

universe, the earth, the moon, the mountains, the

sea, the system of plant life, the animal life and how

He exercises control over them. He emphasizes that it

is He who is creator, sustainer, destroyer and absolute

commander. Cause and effect relationships have

been created to facilitate mankind. He can do

anything without cause. Effects of causes may also be

altered instantly without any apparent cause. But He

does not do that in normal course of life.

While the rest 2000 verses discuss that the Almighty

sent 124000 Prophets out which around 25 have been

discussed thoroughly in Quran to drive home the

concept as towhy they were sent, how they fulfilled

their tasks, what reaction and repercussions they

faced; how ultimately Almighty gave them success

over their opponents and finally, how world realized

that Prophet should be followed.

In a nutshell, it can be concluded that out of the 6666

verses of Quran, nearly 6000 are only for shaping the

behaviour of man and making him an “Islamic

Rational entity”. An Islamic rational man has the

characteristics to become most suitable for every

facet of the human life. If we refer to the lives of

sahabah it will be very clear that they had all the

qualities of an Islamic rational man i.e. a true

believer of Islam or in terms of Quran a “Momin”.

The characteristic of an “Islamic rational man” is

being compared here with an “Economic Rational Man

to differentiate as to why an Islamic Rational Man

becomes more suitable for different aspects of

human activity.


1. Has a clear perception of life given in divine

revelation, his importance for every system of

human life, the do's & don'ts which Islam has

prescribed for him.

2. Believes that only that material wealth which

has been earned from (HALAL) legitimate

sources (i.e caring the laws of Almighty) will

give success, satisfaction, peace, tranquility &

pleasure, irrespective of quantity, i.e quality

of earning is important.

3. Almighty

Man Material

Understands a clear cut role of Almighty

between him and material wealth (as

shown in above diagram).

4. Is motivated by divine motives.

5. Will consider it HARAM to earn money without

doing work.

6. Considers work as a duty, fulfillment of which

will lead to salvation on the Day of Judgment.

7. Fears for the accountability on the Day of

Judgment regarding the way of life and

behavior

8. Has to justify his wage in terms of fair day's

work in order to be considered as HALAL

9. Exerts his muscles fully to fulfill the duty

assigned in order to repel HARAM

earning.

10. Believes illegitimate source of earning

(HARAM) leads to chaos, dissatisfaction,

detracted children, peace-less

environment and obstructs salvation on the Day of

1. Has a clear objective of earning money and

fulfilling the requirements and desires of life.

Has no divine guidance but some traditions,

rituals and values which he bypasses whenever

he gets an opportunity or whenever he feels

monetary benefits in doing so.

2. Bel ieves that accumulat ing wealth

irrespective of mode of acquiring it will give

satisfaction in the proportion of its quantity,

i.e quality of earning is not a matter of

concern.

3. Man Material

He does not think any role of Almighty between

him and material. (as shown in above

diagram).

4. Is motivated by economic motives.

5. Will not work if he gets money without doing

work.

6. Considers work as means of earning money and

in no way as a means of salvation.

7. Has no fear of accountability on the Day of

Judgment regarding the way of life and

behaviour.

8. Wants a fair day's wage without justification of

fair day's work.

9. Exerts himself the least and thinks of passing

hours of work and avoid obligation as there is

no concept of HARAM RIZQ.

10. Believes in earning more and more,

irrespective of source and methods, to amass

materialistic wealth to gain more satisfaction

and pleasures in present life.

ISLAMIC RATIONAL MAN ECONOMIC RATIONAL MAN


11. Believes that human values, social values,

ethical values and religious values are ultimate

goals as they lead to create a contented,

secured, respectful happy life and

humane society.

12. If we have Islamic rational employees the

following benefits we may get.

a. Minimum or no supervision required to extract

work.

b. Quality work possible without much concern of

management.

c. Working hours fully utilized.

d. Personal conflicts will be avoided as ego is

sacrificed.

e. Group dynamics can be achieved easily.

f. Smooth industrial relations and no unionism.

11. Believes that human values, social values,

ethical values should be taken care of so long

as economic motives are being fulfilled.

12. If we have ERM employees the following

problem we may face:

a. More supervision required to extract work.

b. Quality work possible only if extraneous

rewards exist.

c. Punching machines and performance target

would be required for proper utilization of

working hours.

d. Personal conflicts get aggravated due to ego

clashes.

e. Group dynamics becomes a difficult task.

f. Strained industrial relations and potent

unionism.

ISLAMIC RATIONAL MAN ECONOMIC RATIONAL MAN

To conclude, to create an Islamic rational man is

indispensable to have fruits of Islam (The sentence is

not explanatory enough). This is the reason why

Islamic do's & don'ts were not given by the Almighty in

13 years of Makkah life and early few year of

Madeenah as well (whose life?). The 6000 verses first

descended and sahabah inculcated and cultivated

theses verses in their faith, style and all spheres of

life. They became fully receptive to the

Commandment of the Almighty. It was just impossible

for them to know a Command of Almighty or a Sunnah

of the prophet (BPUH) and not to obey it. So much so

that the Almighty himself witnessed and praised the

highest degree of their submission. This was the base

for total adoption of Islam. Whatever commandments

were revealed, got obeyed completely in its true

spirit even by the commonest of the common man.

When the verse of Purdah was revealed, a common

lady was working in the field. She sent someone to

bring a thick (Is it necessary to mention a thick sheet –

will it not suffice to state “sheet” of cloth) sheet of

cloth to cover herself to be able to return home as

commanded by the Almighty. There are innumerable

and unbelievable (“unbelievable” is not the right

word. Consider use of words like “astounding”,

“amazing”, etc.) examples in sahaba's life regarding

how they valued Islam and proved their credential of

being a MOMIN (an Islamic rational man).

Coming to the Islamic perception of commerce and

business management or any field of knowledge,

there is no hurdle and not much rigorous research

required.

Of course, the Ulema have to be well-acquainted with

what is happening in different aspects of live and

what would be the proper Islamic injunctions in a

given situation. Taking the case of business

management, it's one of the areas in marketing in


which advertizing is a very important area. If we look

into the present scenario, we find that it has become

anti-social, immoral, obscene, vulgar, unethical and

constantly ruining human culture and traditions.

Islam can never accept these unwanted elements. It

can never be said to be HALAL. But how many Muslims

are accepting and obeying this command. Reason is

clear, they are not Islamic rational. Likewise in every

sphere of human activity Islam has drawn a clear line

and that boundary cannot be crossed by an Islamic

rational man.

The practical solution of the problem is to form a body

consisting of Ulema and experts from diverse

specialities. Whenever some issues crop up, the

matter may be referred to this body for a practical

solution. Through a proper consultative process with

the Ulema, these experts and the leaders at the helm

of affairs, Islamic boundaries can be ascertained.

Islam has no prejudice with any field of knowledge

which is needed to ease the life, smoothen human

activities and provide research for making life

comfortable. Needless to say, that during the rise of

Islam, all type of knowledge and expertise was

developed and they were treated as Islamic in spirit.

Chemistry, physics mathematics, statistics, public

administration, medical science, surgery,

engineering, Navy, geography, Algebra and Algorithm

on which entire modern computer and Information

technology is based on, have been provided by

Muslims. All these are Islamic allied fields of

knowledge. “Wisdom is the lost property of believer.

So where ever he finds it he has better right to it”.

The fact is that all knowledge is Islamic until they

contradict Islamic faith and cross clear boundaries

drawn by Shariah. In the book of tradition it is stated

“wisdom is ultimate goal of believer and where ever

he finds it, it is his prerogative to acquire it, as he

deserves it more than anybody else”. Rasulullah BPUH

said “seek knowledge even if it were in china”. The

important matter is the implementation of

knowledge in true Islamic spirit which is not possible

without an Islamic rational man.

My submission is that it is not the lack of knowledge,

but rather lack of zeal to implement available

knowledge in every field of human activity. This zeal

can only be there in an Islamic rational man who was

pivot of entire efforts of the whole life of the prophet

S.A. For every knowledge, training the people to

implement that knowledge in its true spirit and

perspective is essential. But we do not think that a

Muslim Engineer or Doctor or Expert of any field tries

to know its Islamic boundaries of that knowledge so

that it may be implemented in true spirit and

perspective of Islam.

The crux of the whole paper may be viewed as follows

1. At first, effort is to be made to create an

Islamic rational man as two-third's of

the life of Rasulullah S.A was spent on it and about

6000 out 6666 versses of the Quran have been

revealed for this purpose. How to do this

needs, is a completely dedicated and

gigantic task by itself.But every Muslim prior

to entering in to practical life must

become an Islamic rational man in order to enjoy

the real fruits of Islamic knowledge and lit a

candle for others to follow.

2. To know what would constitute an

Islamic stand on any particular issue in any

domain of knowledge, a body of Ulema

experts of that respective field and the

people at the helms of affairs should

sit together to discuss and to know

correct view of shariah. Institute of Objective

Studies N. Delhi is doing this beautiful job

through organizing FIQHI seminars on

different issues. A viable solution would be to

entrust this work to Dar-ul-ulums and

now in every city Darul Iftas have come up.

Every Darul Ifta may have people drawn from

different fields of knowledge. Through this, work

may be diversified and Islamic views on any issue of

practical life, Islamic knowledge may be

communicated to the whole Ummah

very easily.

3. Experts of diverse fields of modern

knowledge should do exhaustive and

qualitative research to achieve excellence in

every field of research activity and have

ample share of contribution in every

area so as to have a say in that domain and have


courage to point out those items

which cross the boundary of Shariah.

Shall feel aptly rewarded if this paper is read

objectively with open mind and with the zeal to

create an Islamic rational man who is of core

importance in the existing perspective.

REFERENCES

1. Surat Adh-Dhariyat.

2. Narrated by al aman ajilooni in kashful khifa

3. Narrated by Abu Nuain in Hilyatil Awliyaa.

4. Narrated by Al Iman Tirmizi in his book Sunan-e-Tirmizi

5. Narrated by Imam Baihaqi in his book Ma dkh

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