RBI Grade B Phase II Descriptive Super Notes: Finance and Management

RBI – Descriptive – Super-Notes © M S Ahluwalia Sirf Business

Finance and Management

RBI – Grade B Exam

Phase II - Descriptive

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RBI – DESCRIPTIVE – SUPER NOTES

Finance and Management





Contents

- The Union Budget - Direct and Indirect Taxes; Non-tax

sources of Revenue; Financial Sector Reforms; Outlays; New

Measures;

- Capital Market, Money Market and Foreign Exchange Market,

- Stock Exchanges and their Regulation; Capital Market

Intermediaries and their Regulation; Role of SEBI;

- Functions of the Money Market;

- Growth and Operation of the Money Market;

The Foreign Exchange Market; From FERA to FEMA; Exchange

Rate Management; Exchange Risk Management,

- Role of Banks and Financial Institutions in Economic

Development;

- Regulation of Banks and Financial Institutions;

- Disinvestment in Public Sector Units.

- Management, its Nature and Scope;

- The Management Processes

- Leadership

- Human Resource Development; Concept of HRD, Goals of

HRD, Performance Appraisal - Potential Appraisal and

Development - Feedback and Performance Counselling -

Career Planning - Training and Development - Rewards -

Employee Welfare,

- Motivation, Morale and Incentives; Theories of Motivation:

How Managers motivate; Concept of Morale; Factors

Determining Moral; Role of Incentives in Building up Morale.

Communication: Steps in the Communication Process;

Communication channels; Oral versus written

communication; Verbal versus Non-Verbal Communication;

Upward, Downward and Lateral Communication; Barriers to

Communication, Role of Information Technology,

- Corporate Governance; Factors affecting Corporate

Governance; Mechanisms of Corporate Governance.





FINANCE

1.





THE UNION BUDGET

1.1.





MANAGEMENT

2.





INTRODUCTION TO MANAGEMENT

2.1.





THE MANAGEMENT PROCESSES

2.2.





The Management Processes

Planning

Organizing

Staffing

Directing

Controlling





CONTROLLING

2.2.5





Controlling

• Measurement and correction to ensure achievement of goals

• Direct control is through the control of managers





Types of Control

Based on scope

Based on scope

Partial Partial

Complete Complete

Based on nature

Based on nature

Direct Direct

Indirect Indirect

Based on timing

Based on timing

Feedback Control

Feedback Control

Feed-forward Control

Feed-forward Control

Real Time Control

Real Time Control





Control Devices

Budget Scenarios

Budget Scenarios

P&L Statements

P&L Statements

ROI ROI Enterprise Self-Audit Enterprise Self-Audit





The Control Process

Establishment of Standards Establishment of Standards

Measurement of Performance Measurement of Performance

Correction of Deviations Correction of Deviations





The Feedback Loop

Measurement of Actual

Performance

Measurement of Actual

Performance

Actual Perf. Vs. Desired Perf.

Actual Perf. Vs. Desired Perf.

Identification of Deviations

Identification of Deviations

Analysis of causes of deviations

Analysis of causes of deviations

Program of corrective

action

Program of corrective

action

Implementation of Corrections

Implementation of Corrections

Desired Performance

Desired Performance

Actual Performance

Actual Performance





Simple feedback vs. Feed-forward comparison

Inputs Inputs Process Process Outputs Outputs

Desired Values of Outputs

Desired Values of Outputs

Simple Feedback

Simple Feedback

Feedforward Feedforward

Information Corrective Action





Designing Feed-forward Control

Action Action

Actual input vs. planned input variation to be assessed Actual input vs. planned input variation to be assessed

Input data about input variables into the system Input data about input variables into the system

Update model real-time Update model real-time

Develop a model of the system Develop a model of the system

Analysis of Planning & Control System (Identification of important control variables) Analysis of Planning & Control System (Identification of important control variables)





Factors to be kept in mind while designing controls

Plans to be controlled Plans to be controlled

Position of person controlling

Position of person controlling

Critical factors Critical factors Organisation

Pattern Organisation

Pattern

Understanding levels of individual

managers

Understanding levels of individual

managers

Personalities of individual managers

Personalities of individual managers

Should point exceptions at critical points

Should point exceptions at critical points

Should be objective Should be objective

Flexibility Flexibility Economical (Efficiency) Economical (Efficiency)

Should lead to corrective action

Should lead to corrective action





Critical Points

• In the sense either of being limiting factors in the operation or

of showing better than other factors whether plans are

working out





Types of Critical Point Standards

•Non-monetary measurements

Physical Standards Physical Standards

•Monetary Measurements

Cost Standards Cost Standards

•Application of monetary measurements to physical items (related to Balance sheet & not P&L)

Capital Standards Capital Standards

•Attaching monetary value to sales

Revenue Standards Revenue Standards

•Usually subjective, objective standards such as program performance, timing and other factors

Program Standards Program Standards

•Standards for goals that cannot be given clear quantitative or qualitative measurement (ex: success of PR program)

Intangible Standards Intangible Standards

•Through research and thinking it is possible to define goals that can be used as performance standards

Goals as Standards Goals as Standards





Control Techniques

Traditional Control

Techniques

The Budget

Revenue and Expense Budgets

Sales Budget

Operating Expense Budget

Time, Space, Material and

Product Budgets

Capital Expenditure

Budgets Cash Budgets

Traditional Non- Budgetary Control

Devices

Statistical Data

Special reports and analysis

Operational Audit

Personal Observation

Time Event Network Analysis

Milestone budgeting

PERT – Optimistic, Most Likely, Pessimistic

Program planning and Budgeting





The Budget

• The Budget: Formulation of plan for a given future period in

numerical terms

• Variable or Flexible Budgets: Vary with variance in sales or some

other measure of output

• Zero-Base Budgeting: To start entire budgeting from a zero base

instead of only previous period changes

• Alternative Budget: Budget for alternative eventualities

• Supplementary Budget: Budget prepared on a more frequent basis

in addition to the basic budget prepared for a period





The Budget: Dangers in Budgeting

Over-budgeting

Budgetary goals becoming more important than enterprise goals

Hiding inefficiencies

Inflexibility





Control of Overall Performance

• Budget summaries and reports:

– Profit and Loss control

– Control through ROI

– The enterprise self-audit





LEADERSHIP

2.3.





Leadership

• About coping with change

• Establish direction by developing a vision of the future

• Ability to influence a group towards the achievement of goals





THE TASKS OF A LEADER

2.3.1





LEADERSHIP STYLES

2.3.2





LEADERSHIP THEORIES

2.3.3





Leadership Theories

Lead

ersh

ip T

heo

ries

Le

ader

ship

Th

eori

es

Trait Theories Trait Theories

Behavioral Theories Behavioral Theories

Ohio State Studies Ohio State Studies

University of Michigan Studies

University of Michigan Studies

Managerial Grid Managerial Grid

Scandinavian Studies Scandinavian Studies

Contingency Theories Contingency Theories

Fiedler Model Fiedler Model

Hershey and Blanchard’s Situational Theory

Hershey and Blanchard’s Situational Theory

Leader Member Exchange Theory Leader Member Exchange Theory

Path-goal Theory Path-goal Theory

Leader Participation Model

Leader Participation Model





Trait Theories

• High self-monitors => Flexible behavior as per situation

• 6 Traits:

Ambition and Energy Ambition

and Energy Desire to

Lead Desire to

Lead Honesty and

Integrity Honesty and

Integrity

Self Confidence

Self Confidence

Intelligence Intelligence Job Relevant Knowledge

Job Relevant Knowledge





Trait Theories

• Limitations:

– No universal traits

– Traits predict behavior in ‘weak’ situations

– Evidence is unclear in separating cause from effect

– Predicts behavior of leadership, not effective/ineffective leadership





Behavioral Theories :: Ohio State Studies

• Sought to identify independent dimensions of leader behavior

• Two dimensions:

– Initiating Structure: Behavior that attempts to organize work, work

relationships and goals

– Consideration: Extent to which a person is likely to have job relationships

• High-High leaders achieved high employee performance and

satisfaction more frequently

• Weakness: Situational factors not considered





Behavioral Theories :: University of Michigan Studies

• Two dimensions:

– Employee Oriented: High productivity and job satisfaction

– Production Oriented





Behavioral Theories :: Managerial Grid

• Also known as Leadership Grid

• Two dimensions:

– Concern for people

– Concern for production

• It shows the leader’s thinking, not the result produced





Behavioral Theories :: Scandinavian Studies

• Leaders would exhibit development oriented behaviour

• Leaders who value experimentation, seek new ideas, and

generate and implement change

• Added a third dimension – Development Orientation





Contingency Theories :: Fiedler Model

• Group performance depends on proper match between the

leader’s style and degree to which the situation gives control

to the leader

• Process for model implementation given on following page

• Cognitive Resource Theory: Stress unfavorably affects a

situation; intelligence and experience can lessen the

influence of stress on a leader





Contingency Theories :: Fiedler Model

Identify leadership style

• Relationship/Task Oriented

Identify leadership style

• Relationship/Task Oriented

Define the Situation

• 3 dimensions:

• Leader member relations

• Task structure

• Position power

Define the Situation

• 3 dimensions:

• Leader member relations

• Task structure

• Position power

Matching leaders and situations

• Task oriented: favorable/unfavorable situations

• Relationship oriented: Moderately favorable situation

• Change leader to fit situation or vice-a-versa

Matching leaders and situations

• Task oriented: favorable/unfavorable situations

• Relationship oriented: Moderately favorable situation

• Change leader to fit situation or vice-a-versa





Contingency Theories :: Situational Leadership Theory

• Also known as Hershey and Blanchard’s Situational Theory

• Leaders can compensate for ability and motivational limitations in their

followers

Supportive/Participative

Style

Supportive/Participative

Style

Clear and Specific

Directions

Clear and Specific

Directions

Leader doesn’t do

much

Leader doesn’t do

much

High Task/High

Relationship orientation

High Task/High

Relationship orientation

Unable Able

Unwilling

Willing





Contingency Theories :: LMX Theory

• LMX: Leader Member Exchange Theory

• Highly satisfied in-group





Contingency Theories :: Path-Goal Theory

• Leader’s job is to assist followers in attaining their goals

• Same leader can display all these behaviors based on situation

Directive Leader

Supportive Leader

Participative Leader

Achievement Oriented Leader

Leader Behavior

Subordinate Contingency Factors

Environmental Contingency Factors

Outcomes

• Performance

• Satisfaction





Contingency Theories :: Leader Participation Model

• Leader behavior must adjust to reflect the task structure

• 12 contingency variables





A SUCCESSFUL LEADER VERSUS AN EFFECTIVE LEADER

2.3.4





THE ROLE OF A MANAGER IN AN ORGANISATION

2.3.5





HUMAN RESOURCE DEVELOPMENT

2.4





CONCEPT OF HRD

2.4.1





GOALS OF HRD

2.4.2





PERFORMANCE APPRAISAL

2.4.3





Purpose of Performance Evaluation

General HR Decisions Identify training &

development needs

Can be used as a criterion against which

selection and development programs

are validated

Measuring effectiveness of training programs

Providing feedback to employees





What to and Who should evaluate?

What is evaluated?

Individual task

outcomes

Behaviors (subjective/ contextual

factors)

Traits

Who should evaluate?

(360 Degree Evaluations)

Immediate Supervisor

Peers

Self-Evaluation

Immediate Subordinates





Methods of Performance Evaluation

Written Essays Critical Incidents Graphic Rating

Scales

Behaviorally Anchored Rating

Scales

Forced Comparisons

• Group Order Ranking

• Individual Ranking

• Paired Comparison





Suggestions for Improving Performance Evaluation

(To avoid leniency, halo and similarity errors and intentional political intervention)

Emphasize behaviors rather

than traits*

Document performance

behaviors in a diary

Use multiple evaluators

Evaluate selectively Train evaluators Provide employees with due process

* Traits suffer from weak inter-rater agreement





Do you have any questions or queries or some feedback to give?

Just mark an email to [email protected]




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RBI – Descriptive – Super-Notes © M S Ahluwalia Sirf Business For more Super-Notes: Click Here

M S Ahluwalia, amongst other things, is a visual artist, blogger,

blog designer, MBA, CAIIB (First Class with

Distinction) and Ex-Banker from New Delhi, India.

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RBI Grade B Phase II Descriptive Super Notes: Finance and Management

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