NIBM 1st year 1 semi q& A ( Assignments)

QUESTION:

Suppose the price elasticity of demand for text books is two and the price of the text book is increased by 10%. By how much does the quantity demand fall? Inter the result and discuss reasons for the fall in the quantity demand.

SOLUTION:

Price elasticity of demand (PED) is defined as the responsiveness of the quantity demanded of a good or service to a change in its price.

Price Elasticity of Demand

Percentage Change in Quantity Demand for product A

Percentage Change in Price for Product A

So,

Percentage Change in Quantity Demand for Product A

= PED X Percentage Change in Price for Product A

Given,  PED of Books= 2,

Percentage Change in Price for Books = 10%

So,

Percentage Change in Demand for Books

= 2 X 10%

= 20%

Therefore the fall in the Quantity Demand of the Books will be 20%

Price elasticity of demand

In other words, it is percentage change in quantity demanded by the percentage change in price of the same commodity. In economics and business studies, theprice elasticity of demand is a measure of the sensitivity of quantity demanded to changes in price. It is measured as elasticity, that is, it measures the relationship as the ratio of percentage changes between quantity demanded of a good and changes in its price.

In simpler words, demand for a product can be said to be very inelastic if consumers will pay almost any price for the product, and very elastic if consumers will only pay a certain price, or a narrow range of prices, for the product. Inelastic demand means a producer can raise prices without much hurting demand for its product, and elastic demand means that consumers are sensitive to the price at which a product is sold and will not buy it if the price rises by what they consider too much.

Drinking water is a good example of a good that has inelastic characteristics in that people will pay anything for it (high or low prices with relatively equivalent quantity demanded), so it is not elastic. On the other hand, demand for sugar is very elastic because as the price of sugar increases, there are many substitutions which consumers may switch to.

Value	Meaning
Ed = 0	Perfectly inelastic.
- 1 > Ed > 0	Relatively inelastic.
Ed = – 1	Unit (or unitary) elastic.
∞ > Ed > – 1	Relatively elastic.
Ed = ∞	Perfectly elastic.

A price fall usually results in an increase in the quantity demanded by consumers. The demand for a good is relatively inelastic when the change in quantity demanded is less than change in price. Goods and services for which no substitutes exist are generally inelastic. Demand for an antibiotic, for example, becomes highly inelastic when it alone can kill an infection resistant to all other antibiotics. Rather than die of an infection, patients will generally be willing to pay whatever is necessary to acquire enough of the antibiotic to kill the infection.

Various research methods are used to calculate price elasticity:

• Test markets
• Analysis of historical sales data
• Conjoint analysis

Price elasticity is always negative, although analysts tend to ignore the sign. It is always negative due to the very nature of demand, if the price increases, less is demanded, and thus quantity change is negative, leading to a negative price elasticity of demand. Conversely, if price falls, this negative value will lead to a negative price elasticity of demand value.

Determinants

• Substitutes: The more substitutes, the higher the elasticity, as people can easily switch from one good to another if a minor price change is made.
• Percentage of income: The higher the percentage that the product’s price is of the consumer’s income, the higher the elasticity, as people will be careful with purchasing the good because of its cost.
• Necessity: The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price, such as the case of insulin for those that need it.
• Duration: The longer a price change holds, the higher the elasticity, as more and more people will stop demanding the goods (i.e. if you go to the supermarket and find that blueberries have doubled in price, you’ll buy it because you need it this time, but next time you won’t, unless the price drops back down again)

• Breadth of definition: The broader the definition, the lower the elasticity. For example, Company X’s fried dumplings will have a relatively high elasticity, whereas food in general will have an extremely low elasticity (see Substitutes, Necessity above).

Org Behaviour

QUESTION:

If you are made the campaign leader for a particular political party how will you use your leadership skills to motivate your party men to ensure success of the party nominee in the elections? (Focus on the individual, motivate and apply leadership style)

ANSWER:

“A leader takes people where they want to go. A great leader takes people where they don’t necessarily want to go but ought to be.”

Bringing unity and coherence to a group of people is perhaps one of the most difficult tasks, which require effective leadership qualities. Be it politics, business or even sports, leaders are required in any situation that calls for a joint effort. Every leader has his / her own unique leadership style. Broadly speaking, there can be several effective leadership styles, which are as follows:

[A]          Effective Leadership Styles: Director’s Approach

This leadership style is somewhat authoritarian in its approach since the leader has a specific goal in mind and directs the team towards the goal according to his plan of action. The leader identifies the requirements of the situation and creates a plan to handle the situation. The leader is completely in charge of division of work and specifically assigns roles for each and every team member. In this style of leadership, the leader has the final word on all the decisions and rarely asks for suggestions from the team members. The leader, who uses a director’s approach for leading a team, usually supervises and evaluates the work of every individual.

[B]          Effective Leadership Styles: The Coaching Style

This leadership style involves more mutual interaction of the leader and the team. In this style, the leader sets the goals and identifies the problems; however the leader consults with his team members and encourages a healthy dialogue to facilitate exchange of ideas that can be beneficial for the team as a whole. The leader usually arrives at the decisions after having consulted the team members. This style of leadership displays more respect for individual opinions since the leader is more considerate towards the team members. The leader tends to encourage and appreciate the efforts of his team and constantly provides encouragement for the team by inculcating a sense of team spirit. The leader evaluates the performance of the leaders.

[C]          Effective Leadership Styles: The Facilitating Approach

This is a more flexible leadership style in which the leader allows the team members to be a part of almost every process starting from the role-delegation, goal setting, problem solving as well as the evaluation and overview. The leader acts more like a facilitator who inspires the team to reach their goal, by giving them a nudge every now and then. The leader tries to inculcate a sense of individual responsibility within every individual and hence creates an effective team that can function with minimum supervision.

[D]          Effective Leadership Styles: The Delegating Approach

The delegating style of leadership is more democratic than any other styles of leadership. In this style of leadership, the employees and the leader are a part of every process. The leader empowers the team members and allows them to be a part of the planning and decision making process and decide their own roles and responsibilities. In this style of leadership, the leader accepts the decisions of the team members, allows them to evaluate their own work. This sense of leadership tends to develop a team, which functions as a cohesive and responsible team.

Thus there exist several effective leadership styles, which are suited for various setups and organizations. The success of the team and the satisfaction of team members as a cohesive group are the two important indicators of an effective leadership style.

The Leadership Qualities

Leadership can be defined as one’s ability to get others to willingly follow. Every political party needs leaders at every level. Leaders can be found and nurtured if you look for the following character traits.

Leadership is nothing but the quality which makes a person stands out different from other ordinary members. It is associated with such a person who has aggressiveness in speech and action, love for the party men, and who can handle pressure under different circumstances and a person who is always ready to fight for the rights of followers. A leader is useless without followers. It is the followers who make a person as a leader and if required overthrow him.

Leaders play a critical role during change implementation, the period from the announcement of change through the installation of the change. During this middle period the organization is the most unstable, characterized by confusion, fear, loss of direction, reduced productivity, and lack of clarity about direction and mandate. It can be a period of emotionalism, with employees grieving for what is lost, and initially unable to look to the future.

In addition to forecast and amiability, the characteristics that leader must have are ability to recognize employees’ talents, the know-how to make teams work and an open mind.

Leadership does vary to some extent as per the positions i.e. it may be slight different for manager and different for a union leader but the basic qualities of leadership does not change.

Vision

A leader with vision has a clear, vivid picture of where to go, as well as a firm grasp on what success looks like and how to achieve it. But it’s not enough to have a vision; leaders must also share it and act upon it. Good leaders create a vision, articulate the vision, passionately own the vision and relentlessly drive it to completion.

Leadership qualities are different for different position. For a CIO he must be thinking for stabilizing the current business and always looking for future scope of expansion. He has to be able to look beyond where we are today, know where the business is going, and be able to use that vision to move the company forward. Being able to do this is a rare skill indeed.

Good communication skill

Communication is the key to be a great leader. The reason for this is simple: if he possesses the other nine leadership qualities but if he fails to communicate well, he will never be great leader.

What he can do is communicate with others in the team about what can do to move the party forward. In other words, good communication is the key for developing good political relationships. If he can’t establish a good political working relationship, he is not going to be that leader, that team player. He will not be able to communicate how it can add long-term value to the company. The modern leaders must therefore be equipped with good communicational skill and use new ways to do effective communication.

Discipline

A good leader must have the discipline to work toward the vision single-mindedly, as well as to direct the actions and those of the team toward the goal. Action is the mark of a leader. A leader does not suffer “analysis paralysis” but is always doing something in pursuit of the vision, inspiring others to do the same.

Integrity

Integrity  is the integration of outward actions and inner values. A person of integrity is the same on the outside and on the inside. Such an individual can be trusted because he or she never veers from inner values, even when it might be expeditious to do so. A leader must have the trust of followers and therefore must display integrity.

Honest dealings, predictable reactions, well-controlled emotions, and an absence of tantrums and harsh outbursts are all signs of integrity. A leader who is centered in integrity will be more approachable by followers.

Dedication

Dedication means spending whatever time or energy is necessary to accomplish the task at hand. A leader inspires dedication by example, doing whatever it takes to complete the next step toward the vision. By setting an excellent example, leaders can show followers that there are no nine-to-five jobs on the team, only opportunities to achieve something great.

Honesty

The most valuable asset of a leader is honesty. He must be honest with both his employees and the management committee. Another part of his features is integrity. Once a leader compromises his or her integrity, it is lost. That is perhaps the reason integrity is considered the most admirable trait. The leaders therefore must keep it “above all else.”

Consistency

Leadership effectiveness is impossible without consistency. Every leader has an approach that is unique to them. Don’t change your personal style radically after all; it got you in a leadership position. Modify the rough spots but take care not to confound your staff by displaying inconsistency. Your expectations, though subject to modification based on ever-changing business needs, should remain as constant as possible. The business world is confusing enough without you adding unwelcome surprises into the mix. Keep things simple and consistent.

Magnanimity

Magnanimity means giving credit where it is due. A magnanimous leader ensures that credit for successes is spread as widely as possible throughout the company. Conversely, a good leader takes personal responsibility for failures. This sort of reverse magnanimity helps other people feel good about themselves and draws the team closer together. To spread the fame and take the blame is a hallmark of effective leadership.

Humility

Leaders with humility recognize that they are no better or worse than other members of the team. A humble leader is not self-effacing but rather tries to elevate everyone. Leaders with humility also understand that their status does not make them a god. Mahatma Gandhi is a role model for Indian leaders, and he pursued a “follower-centric” leadership role.

Openness

Openness means being able to listen to new ideas, even if they do not conform to the usual way of thinking. Good leaders are able to suspend judgment while listening to others’ ideas, as well as accept new ways of doing things that someone else thought of. Openness builds mutual respect and trust between leaders and followers, and it also keeps the team well supplied with new ideas that can further its vision.

Creativity

Creativity is the ability to think differently, to get outside of the box that constrains solutions. Creativity gives leaders the ability to see things that others have not seen and thus lead followers in new directions. The most important question that a leader can ask is, “What if ….?” Possibly the worst thing a leader can say is, “I know this is a dumb question .. ”

Fairness

Fairness means dealing with others consistently and justly. A leader must check all the facts and hear everyone out before passing judgment. He or she must avoid leaping to conclusions based on incomplete evidence. When people feel they that are being treated fairly, they reward a leader with loyalty and dedication.

Assertiveness

Assertiveness is not the same as aggressiveness. Rather, it is the ability to clearly state what one expects so that there will be no misunderstandings. A leader must be assertive to get the desired results. Along with assertiveness comes the responsibility to clearly understand what followers expect from their leader.

Many leaders have difficulty striking the right amount of assertiveness, according to a study in the February 2007 issue of the Journal of Personality and Social Psychology, published by the APA (American Psychological Association). It seems that being under assertive or overassertive may be the most common weakness among aspiring leaders.

Sense of Humour

A sense of humour is vital to relieve tension and boredom, as well as to defuse hostility. Effective leaders know how to use humour to energize followers. Humour is a form of power that provides some control over the work environment. And simply put, humour fosters good camaraderie.

Intrinsic traits such as intelligence, good looks, height and so on are not necessary to become a leader. Anyone can cultivate the proper leadership traits.

Selecting a good team

A good CIO although he possesses sound technical skills he assures that the team he selects is efficient enough to back up any skill he lacks. Choosing the best people for such team is a skill. A CIO after all is a human being and does not have answer for everything. But by working together he creates an atmosphere of mutual trust and respect; the team then always find the best solution.

Ability to stand against critics

As the success rate increases your critics multiply and become louder. Come to peace with the fact that you will always have a camp of people who critique every decision you make. They are generally the ones who are excellent problem-identifiers rather than problem-solvers. Develop your skills of repelling such critics so that they do not diminish your confidence or enthusiasm.

It takes focus and confidence not to be adversely affected by criticism. Strong leaders learn the art of listening to critics, but ultimately making decisions for the good of the department, not to simply please the critics. The following quote sums it up nicely: “Some of the most talented people are terrible leaders because they have a crippling need to be loved by everyone.”

Action speaks louder than words

Managers must be able to put aside their concerns to listen to (and appear to listen to) those around them. As a result, they come know what is going on, and know what is both said, and said between the lines. They have the knack of appearing to know what people need even if those needs are not expressed directly. However, knowing what is going on, and identifying the needs of those around them is not sufficient. The responsive manager also acts upon that knowledge, attempting to help fulfill the needs of employees, superiors, etc. Responsive managers wield influence to solve problems for those around them, often before even being asked.

Ability to motivate people around

A good leader must always keep motivating his team mates for good work and should maintain healthy environment. He must give first priority to safety of workers and see that they are not exploited by superiors.

Marketing management

QUESTION:

If you are working in a Super Market, what techniques/tools you will use in data collection. How are you going to analysis the data and make inferences? How will you finally apply your market research to improve sales and win over customers?

ANSWER:

Primary data-collection methods have been understood and studied to a great degree. For example, volumes can be written on the proper way to conduct a survey-based study. However, the process of collecting data from a retail establishment is not as well documented. This paper covers the tools and strategies used to collect weekly data in a retail environment and make some suggestions for future researchers so that they may avoid similar problems that occurred during the data collection and entry process.

In a traditional retail environment, prices and advertisements are not the only factors that are influence consumers’ purchasing behaviours. Factors such as product placement, display size, product appearance, etc., can all influence consumers’ decisions. Expanding on the classical economic-demand model, a study was developed to investigate how different retail marketing strategies influence consumers’ purchasing behaviours for fresh fruit. Variables beyond price and quantity sold were included in the model, including display sizes, point-of-purchase promotional material, and product placement. To collect this data, weekly in-store visits were needed. To accomplish this, a new method of data collection was developed. The developed data collection and entry process has proven to be an efficient and effective way of tracking primary data. Currently, the data collection and entry process has been effectively used for over 150 weeks and implemented by six different data collectors. This paper provides a brief description of the data, an explanation of the tools and strategies that were used, and suggestions for future researchers when developing a data collection pro-cess for tracking sales in a retail environment.

Data Collected

During weekly store visits, information was collected on individual prices, the origin of production, eco-labelling, fruit sizes, display sizes, point-of-purchase material sizes, weekly advertisements, in-store specials, and quality-scale measures for different varieties of fresh fruit. Information on quantity sold was taken from weekly movement reports provided by the produce managers or other qualified personnel, at the time of the weekly store visit. The weekly movement reports listed fruit varieties by PLU numbers, the codes used by almost all stores to track produce sales. At times, data were being collected from as many as nine different retail grocery stores within the same chain. The stores had different management styles and were located in different demographic areas.

Tools and Strategies Useful for Data Collection

To ensure that all relevant variables were tracked on a weekly basis and to minimize data collection error and collector bias, tools and methods were developed for the data collection process. The tools developed were an inventory sheet, maps of the produce area, a weekly log, and use of pictures. The methods used include management of the collected data, reconciling of conflicting prices, interactions with managers and consumers, and selecting and training new data collectors.

Tools

There were a few tools that made collecting data at the retail level easier. One of the most important tools developed and used for the study was an inventory sheet. The inventory sheet is a table listing the fresh fruit varieties on the left-hand side and the different variables that were being racked across the top. This sheet provides a quick and ac-curate way to record individual prices, the origin of production, eco-labelling, fruit sizes, display sizes, point-of-purchase material sizes, weekly advertisements, in-store specials, and quality-scale measures for different varieties of fresh fruit.

Maps were another useful tool. Before the study began detailed maps of the produce area were created. On the maps, changes in display locations and the locations of any special banners or promotional material used were documented. Displays of fresh fruit appearing outside the produce department were also noted on the maps. These outside displays were either located in other sections of the store or out-side the store’s main entrance. From the information documented on the produce department maps, variables were created for entry displays (those fresh fruit displays that appeared in the entryway of the produce department), and the aisle location of displays (which included variables for within, end, and freestanding displays).

A weekly log was also created to document the items featured each week, changes in display locations, and any changes in the overhanging banners within the produce department. The log was organized by date, which provided easy reference. The log helped researchers adjust to unforeseen changes that occurred at the retail level.

Pictures were taken to document the dimensions of each fruit display, the corresponding point-of-purchase material, special promotional material, changes in the produce area, and any overhanging eco-labelling banners. For easy reference, the pictures were catalogued according to retail store, date, and subject. Pictures were also useful in checking for any entry errors or abnormalities in the data. The pictures of each display recorded the prices, point-of-purchase material, and display dimensions. When an error was observed in the data set, the pictures were checked to determine if the prices, display size, point-of-purchase size, display location, and eco-labelling signage were correctly entered in the data set. The pictures provided the ability to re-examine the appearance of the displays to determine if new variables should be added. For example, using the pictures, variables were developed for specific sensory wording which appeared on point-of-purchase material such as fresh, sweet, and crisp.

Methods

Methods to efficiently manage the collected data, all in-formation was manually entered into an Excel spreadsheet. The hard copies of the collected data were catalogued and sorted by week. To check for entry errors, sub-sets of ten per week were checked for accuracy. If any errors were found the entire weekly entry was double-checked with pictures and the hard copies of information collected during the store visits.

During data collection the prices at the point-of-purchase would sometimes conflict with the prices posted within the in-store fliers. Since the price at the point-of-purchase was easier to observe than the price within the in-store fliers, the price at the point-of-purchase should have a larger impact on consumers’ spending. As a result, when the prices differed, the price at the point-of-purchase was entered in the data set as the weekly price.

The data-collection process was designed to be convenient for the retail managers and as unobtrusive as possible. Data was collected during times that worked well with their schedules. The data collectors were instructed to be polite and Courteous when interacting with the produce managers and their staff. The produce managers also helped in the data collection by providing valuable information about the consumer purchasing behaviours within their stores. Also, discussions took place about the typical product-placement strategies used by the produce managers.

One product-placement strategy that was not accounted for in the development of the data-collection process was the use product association. Produce managers would sometimes place produce displays in other areas of the store to increase sales not only of produce but sales of products that are often consumed together with fresh produce. An example of product association is displaying bananas in the cereal section, which can have a positive impact on the sales of both bananas and some cereals. Regularly visiting with the produce managers helped to ensure that all relevant information was collected each week.

The data-collection process took place in a consumer-based business. Therefore, interaction with consumers was expected. Data collectors were instructed to try to stay out of consumers’ way, while providing friendly assistance when asked. For example, if consumers asked about the data-collection process, the data collectors were instructed to be polite and inform them about the study being conducted. Treating consumers politely helped with the purchasing process and left a favourable impression with consumers, and consequently with the produce and store managers.

When a new data collector needed to be hired, one of the important characteristics sought was a personable nature. The data-collection process involves interaction with retail managers, other store staff members, and consumers; thus, the data collector should be personable to maintain good relationships with managers, their staff, and their customers.

When training new data collectors it is paramount to convey the importance of accurately collecting and entering the data. New data collectors were instructed to collect and enter data in a timely manner. Previous experience has shown that delaying data entry leads to mistakes during the entry process. These mistakes will lead to incorrect results from the data analysis, and can take weeks to detect and correct. In addition, a process was needed to ensure consistency across data collectors. Project managers allowed sufficient time for the hiring process in order to overlap the outgoing and incoming data collectors by two weeks. This provides for a training process where the new recruit can observe a data collection and entry cycle and can be observed and coached in the second cycle.

Suggestions for Future Researchers

Future researchers can learn from this study in developing a data-collection process for a real-time market-research project in a retail environment. When developing a data collection process it is important that the research project has a clear objective. Having a clear objective will help determine the primary variables that should be examined. After the primary variables have been selected, other variables need to be looked at to ensure that the project will examine the selected objective. Conducting interviews with other professionals in the area of focus can provide added insight into variables that may be important. For example, interviews conducted with the produce managers or other qualified personnel added new insight into what variables should be tracked for this study.

It is also important that the data-collection process be flexible. If slight changes in the objective of the research project occur, the data-collection process should be able to easily and quickly adjust. To keep the data-collection process flexible, new variables should be easy to add to the process, so that a new process does not need to be developed when new variables are added. The slightest change in how things appear at the retail level can have an impact on sales. When collecting data it is better to collect too much information and have the luxury of looking at many different areas than trying to backtrack and create new variables based on previously gathered information.

Conclusions

The tools and methods developed for this study have proven invaluable. For over 150 weeks, spanning nine different retail grocery stores, different data collectors have taken weekly observations of primary data in an efficient and accurate manner. The tools that were found to be most helpful are an inventory list, maps of the produce department, a weekly log, and the use of pictures. The strategies that were developed and used for this study include management of the collected data, reconciling conflicting prices, interactions with managers and consumers, and selecting and training new data collectors.

Many challenges have been faced and solutions developed for this study to ensure that all relevant information is collected on a weekly basis. Not all of the tools and strategies may directly apply to future studies that expand on the classical demand model, but using the experiences from this study can help ensure that future projects do not face the same problems.

Financial management

QUESTION:

What will your outlook towards maintenance of liquid assets to ensure that the firm has adequate cash in hand to meet its obligations at all times?

ANSWER:

Maintenance OF LIQUID ASSETS TO ENSURE ADEQATE CASH IN HAND

A common problem for small business owners is the struggle to maintain adequate cash flow levels. Without cash, a business must eventually close its doors. Understanding and managing the company’s cash flow will help to measure the amount of cash on hand and prepare for cash flow shortfalls in the future.

[a]       Do the Math

Cash flow is the movement of money in and out of a business. Cash inflow is the movement of money into your business, and most likely comes from the sale of goods or services to your customers. Cash outflow is the movement of money out of your business, and is generally the result of paying expenses. By projecting the inflow and outflow of your businesses cash, you can determine the amount of cash that will be available during a designated period of time.

[b]       Prepare Your Profit and Loss Statement

Your business plan should contain several financial statements. If you’re a start-up businessman, base your estimates of cash inflow and outflow on the revenues and expenses listed in your profit and loss statements. Complete your profit and loss statement before completing your cash flow statement. Over time, you will be able to base cash inflows and outflows on actual historical data.

[c]       Develop a Cash Flow Statement

A cash flow statement measures cash flow over time. During your first year in business, you should include a month-by-month cash flow statement in your business plan. If you’re seeking a loan, an important feature of your cash flow statement is that it will show the lender exactly how you’re going to afford loan payments.

In order for a business to stay afloat, it must maintain an adequate level of cash. These are some which we can apply to improve the cash flow in our organization. Adequate cash means that you can meet your obligations. It is to remember that cash is king and life blood of the organization. The following points help make it easier to maintain the adequate cash level and an improvement in cash position can be seen sooner rather than later:

1. Check Customers’ Credit Histories

Decide the type of customer to whom you want to extend credit. Do you want to have a particular cut-off credit score? If you extend credit to customers with questionable credit histories or low credit scores, you may experience late payments or no payments, which will slow down your cash flow and increase your collection costs.

2. Keep Track of Your Customers’ Payments

Have up-to-date payment records. Keep accurate payments records by using a specialized accounting software program that will keep track of your invoices and when payments are made. If customers are late with their payments, it could cause a cash flow bottleneck for you. Accurate recordkeeping will help solve this problem.

3. Set Appropriate Credit Terms and Offer a Cash Discount

Make sure your customers understand how long they have to pay their bill. In order to speed up the cash they pay, you might want to offer a cash discount to any customer that pays in a short period of time, designated by you, or to a customer who pays cash.

4. Extend Your Timetable for Making Cash Payments

Pay your bills on time and take advantage of any cash discounts your suppliers offer you. However, hold onto your cash as long as possible. Don’t pay bills weeks earlier than they are due. Your company can use that cash balance, rather than letting your supplier use your company’s cash.

5. Cut Back on Spending Wherever Possible

Do you really need to take money out of your business for a Hawaiian vacation right now? Cut back on spending until it is less than your revenue on a month-by-month basis. If an emergency happens, then you will be prepared from a cash standpoint.

6. Increase Your Sales

Make sure you aren’t holding on to obsolete inventory. If you are, mark it down and sell it. Storing it is costing you money and selling it at a lower price is better than not selling it at all. The longer you hold on to obsolete inventory, the less likely it is to sell.

7. Think before investing

The price and value of investments and their income fluctuates: you may get back less than the amount you invested. Remember that how an investment performed in the past is not a guide to how it will perform in the future.

Human resource management

QUESTION:

The present state of recession in the IT industry – as a Human Resource Manager How are you going to undertake Human Resource Planning at Macro Level to tide over this crisis?

ANSWER:

HRM Role in Recession

The recession is healthy, from time to time. The recession helps to stop the businesses, which are not bringing value added and the human capital is transferred to more vital businesses at lower costs. In the companies, which survive the recession, the HRM Role is very important.

The recession is very dangerous for the companies. During the times, when the business grows dramatically, the HRM Function introduces different policies, which are focused on spending money. The company was able to carry all the costs and the employees started to take the policies as the standard.

In time of the recession, the HRM Role is to make cost cuts and the HRM Function has to provide the list of the policies and the procedures to be cancelled or discontinued. The employees do not like it, but the company has to return to the healthy basis for the future growth.

The HRM Function has to be able to identify the top potential in the organization quickly as the company needs to make the cuts in the human capital of the organization. The HRM Function needs to provide the tools to managers to inform their key employees about the security, the company wants to offer to key employees.

The HRM Function is not a department to make employees happy, the role of HRM Function is also about the cuts in the costs of the organization and the HRM Function’s role is about minimizing the damages to the organization.

The recession can be a very interesting period for the HRM Function. The HRM Professionals can design, develop and implement a lot of new HRM Processes in the recession, which are simple and really efficient. But they need to have a clear vision of the HRM behavior in the recession to be really successful.

The HRM Management has to define the HRM Vision for the Recession. The employees in Human Resources have to understand the goals for the difficult period of the recession. Many activities in the organization can be cancelled, but the HRM Employees have to understand the reasons.

The HRM Vision for the Recession is needed for the employees of the HRM Function as they should serve the organization as the change agents. Many procedures, policies and processes can be cancelled during the recession or they can be strongly changed and the HRM Employees have to be able to explain the reasons for the change or cancellation of the policies.

The HRM Management has to push the top management to define the vision of the organization for the recession as the roles in the organization can be clearly defined. The top management has to set the vision for the strategic initiatives as the whole organization can share the same goals. It is very painful for the top management to define such goals, but the employees and managers can support the painful way to prosperity, when they believe and trust their leaders.

The HRM Function can serve as the navigator and facilitator for employees, but the HRM Vision for the recession has to be defined and clearly communicated and explained to HRM employees. The HRM Management has to communicate the full story as the HRM Employees have usually access to confidential information and they can build a good picture of the organization’s health very quickly.

The HRM Vision for the Recession should be about the trust and honesty. The HRM Employees have to understand the need to make changes and to make the cuts in the procedures they introduced and run for the organization. The HRM Management has to be proud to announce the cutting of job positions in the HRM Function and to explain the reasons for selecting the employees to be fired.

The HRM Vision for the Recession can play a significant role in the success of the HRM Function in the recession. The HRM Management Team has to set it as a priority and the vision has to be transformed into actions quickly.

Main HR Recession Initiatives

The HR Function has to conduct several HR Recession Initiatives as soon as the recession is recognized in the organization. The organization can grow rapidly, when the recession ruins companies around your organization. But, when the organization feels the pain from the recession, the HRM Function has to start several HR Recession Initiatives.

The HR Recession Initiatives have to be focused on the analysis of the current situation and the unlocking the potential for the future growth. The HR Recession Initiatives are not just about the cost cutting, the recession initiatives have to be focused in more areas:

• Cost Cutting
• Key Groups of Employees
• Process Efficiency
• Honest Information for Employees
• Management Consulting

The HR Recession Initiatives have to be balanced well. The cost cutting is about the immediate activities to decrease the personnel expenses of the organization, but the HR Recession Initiatives have to be focused on the future as well.

The employees are told to be the best capital of the organization and the HR Recession Initiatives cannot be focused on the full destroy of the human capital of the organization. The employees to be fired have to be selected carefully and the rest of employees have to sure about the future of the organization. The organization has to guarantee the future for the most important employees – the key employees, high potentials and the managers.

The HRM Function has to focus on the honest communication in the recession. The HRM Function has to inform the employees fairly about the bonuses, salaries and number of employees in the organization in advance as the employees can prepare themselves.

The HRM Function has to have a good balance in the HR Recession Initiatives. The employees and managers have to feel the fairness and transparency in the initiatives as they can build the trust to the HRM Function.

HRM Priorities and Recession

The recession changes the priorities of the organization. The change of the organization´s priorities should be reflected in the HRM Function priorities and HRM Strategy as well. The HRM Function cannot live alone; it has to follow the general business strategy.

The HRM Priorities in the Recession can change quickly or they need to be adjusted at least. The organization has no resources to add to the new initiatives and the HRM Function can be asked to produce cost savings on current programs.

The HRM Management has to make a quick scan of current procedures and policies to be prepared for the cancellation or change, when asked to make an urgent cost cut. The recession is about cost cuts and designing efficient, cheap HR Processes.

The HR Priorities have to be assessed using a simple tool for selecting the processes and policies to be discontinued. The best tool is to use the simple matrix, which divides the processes and procedures according their costs and impact on the organization.

Generally, the HRM Function should cancel the processes and procedures with the highest costs and lowest impact on the organization. The HRM Function has to be very careful as cancellation of some policies can be very sensitive for employees. Those are the processes and procedures with the highest impact.

The recession changes HRM Priorities. The HRM Function has to make a quick response to changed conditions by the cancellation of the least important procedures and policies, but the HRM Function has to change the HR Strategy to have a consistent approach during the whole recession period.

The HRM Function has to adjust the HRM Priorities in the recession very sensitive way as the employees feel some security and consistency and that they can trust the organization and its success in the war with the recession. The HRM Function has to keep the role of the employee advocate and this should be reflected in the decision matrix as well. The recession is not a chance to change and cancel everything, the corporate culture should not be touched by the change of the HRM Priorities during the recession.

The recession is about the creative Human Resources Management. The HRM Function is asked to bring new ideas, to change the HRM Processes and to develop or change the procedures. And this effort has to be cheap or it has to cut the costs of the organization. The HRM Innovation is easy in times of the business growth, but the recession is not good for big innovative HRM Initiatives.

On the other hand, the top management understands the effort to innovate the HRM Processes better. The top management is in the search for the potential cost savings and they count every single penny brought by the line management. The HRM Costs are usually a very significant cost to the organization and the HRM Function has to be proactive.

The HRM Function has to focus on unpopular innovations during the recession as the role of Human Resources during the recession is to save money to the organization. The top management expects all the support functions to bring innovative solutions, which will have to make the organization stronger, when the next growth era comes.

The HRM Innovation during the recession has to focus on the following topics:

1. Reduce the number of employees in the organization
2. Strategic initiatives to increase the productivity and efficiency of the whole organization
3. Redesign of the compensation scheme
4. Cancellation of several benefit schemes
5. Training and Development Programs cutting

On the other hand the HRM Function has to find innovative solutions for the following topics:

1. Identifying the real key employees and to keep them in the organization
2. Identifying the real top potentials and to strengthen their development program

The second two topics have to be done with the minimum additional costs and it is a really hard task to accomplish. The HRM Function has to have priorities in mind and the strategic impact of the HRM Innovations in the recession time. The role of the HRM Function is not to cut the costs for the time being, but to make the organization stronger and ready for the future growth.

Recession and Employees’ career options

The employees are the most important assets of the organization. In times of the recession, the employees have to be secure about their future and the organization should announce a clear plan to them.

The HRM Function is responsible for the employees as their employee advocate and the change agent. The HRM Function has to be involved in all the communication plans, the communication toward employees.

The recession brings a panic to the organization. The rumors about the recession and the layoffs spread quickly around the organization and the HRM Function has to monitor the emotions in the employee population. The rumors are the most important danger for the successful survival of the recession. When the employees start to speak about the recession, the key employees and top talents can leave the organization within several weeks, as they feel no future in the organization.

The role of the HRM Function in Recession for the employees is being their real advocate. The HRM Function should prepare the proper communication and it should manage to get the buy in from the top management.

The employees feel the danger from the recession, the top management has to inform all the employees honestly about the outlook for the organization and it has to provide them with the vision to follow.

Affected HR Processes by the Recession

The recession affects different HRM Processes. Some HR Processes can be affected by the recession very hardly and other processes can be completely immune from the recession impact. The HRM Function has to react very quickly and the response has to include the whole HRM team as all employees have to help the most affected employees to keep the level of the satisfaction.

The organization needs to save the costs and it needs to identify and potential additional source for the cost saving and starting a new growth era. The HRM Function has to prepare a new HRM Vision and a new HR Strategy for the coming period as the cost cutting is not the only way to build a stronger organization fighting with the recession.

The most affected HR Processes are the following:

1. Recruitment – The first HR Process with the change in the recession. The job vacancies are cancelled and the HRM Function should come with a new recruitment strategy. The organization can hire a new set of skills and competencies to strengthen the position of the organization on the market
2. Training – The training are cancelled as it is a quick cost cut. The training can be later focused on more specialized training session and more internal training courses can be introduced.
3. Compensation and Benefits – The department can be asked to bring a new compensation scheme, which will save the costs and motivate employees to be more proactive.
4. HR Front Office – The HR Front Office have to be present at clients all the time as they will need a strong guidance and facilitation during the recession.

The HR Processes are heavily affected by the recession, but the HRM Function has to take this as the opportunity to change and to bring new ideas on the scene. The recession is the best time to design a completely new approach of the organization to its human capital.

The HRM Function should be ready for the recession, which comes from time to time. The HRM Function should be always very careful about the costs added to the organization as cost cutting always hurt. The HRM Function has always to predict, the recession will come and the nice initiatives can be then very painful initiatives. The HRM Function has to prepare the HRM Recession Quick Wins.

The HRM Recession Quick Wins should include the following actions:

1. Stop and prioritize the recruitment process. The vacancies should be cancelled and all the vacancies should be strategically re-shifted. The organization can need a completely different set of jobs to survive the recession. Why the continuing recruitment process should make the situation even worse?
2. The FTEs in the organization has to be evaluated. The number of FTEs can be fine, but the structure has to be reviewed. There is no company in the world, which cannot decrease the number of FTEs. The HRM Function has to offer the methodology for the FTEs review and the HRM Function has to act as the facilitator in the process of the FTEs review.
3. The bonus schemes have to be reviewed. The bonus scheme can support the organization in the time of the strong growth, but it can de-motivate employees in time of the recession. The HRM Function has to prepare a good analysis of the bonus scheme performance and its impact on the motivation of employees. The HRM Function can propose additional changes to the bonus scheme to provide the employees with some kind of the stability.
4. The talents have to move around the organization to play their strategic role in the change of the organization during the recession. The organization needs to awake its creativity and the shift of the talents can help a lot.

The HRM Recession Quick Wins are not hard, but they need a lot of courage from the HRM Function. The HRM Function has to reflect itself and it has to be proud to say, it made some mistakes in the past. The recession is always about the restart and the HRM Function needs to restart its processes quickly at the beginning of the recession.

HRM Communication in Recession

The HRM Function is always responsible for the mass communication to employees in the recession. The HRM Function should be responsible for the consistency, transparency and fairness of the crisis communication to employees. The recession is usually not about the good news, but the HRM Function has to be the employee advocate and the messages should provide the employees with the clear outlook of the future.

The crisis and recession communication have to be targeted, as not all the employees should receive the same amount of the information. The Sales employees should have completely different details from the Operations guys.

The HRM Communication in the Recession is about defined and agreed target groups. The organization cannot publish the details about its business position to all the employees, but some groups of employees have to know more to feel comfortable and more secure.

The HRM Communication is one of the strongest tools for the retention of key groups of employees. The talents and key employees have to receive more information from the organization to keep their own security and their value for the organization.

The organization needs to raise the level of the motivation and the honest communication is one of the best tools for motivation. But the HRM Function has to act as the consultant to make sure, the employees are not de-motivated and frustrated by the amount of messages and the details provided.

The HRM Function has to provide the advice on the communication channels used as not all the messages should be sent via email. The HRM Function is the only function in the organization to have a general picture of the target groups and it can provide useful consultancy in the description of the target communication groups.

The HRM Communication in Recession is about a clear description of the organization´s position on the market, the economic outlook for the next period and about the strategic products and services, which will be the leading the growth in the era after the recession. The employees should know about these topics as they can prepare themselves.

Talent Management in Recession

The talents are the best assets in the recession, as the organization needs to mobilize the entire top potential in the company to bring new and innovative solutions to fight with the recession.

The talent management is under a huge pressure in the recession. Each manager tries to protect the resources in the unit and the HRM Function has to leverage the resources of the organization.

The talent management has to define a clear group of employees to be separated from their current units in the finding a new successful way to the future. The HRM Function has to have a mandate from the top management in the decision about the staffing of the special task force to define a new and bright future of the organization.

Talent Management under Pressure

The talent management works nice in the time of the economic growth. In the recession, the talent management gets under a huge pressure from the line management and the top management, as their interests are not aligned, at least fully.

The HRM Function has to be able to mobilize all the talents across the whole organization and the line management can be fully confused by such an activity. The top management can have a nice plan to use the top talents of the organization to have a new opportunity to win the war with the recession, but the line management likes to have the talents in their units to have the smooth operations certainty.

The talents usually like the challenges and the recession is the challenge for them. The HRM Function has to find the plan to allow the top potentials to be freed from their current units and to propose a good plan to the line management to keep their satisfaction and buy-in.

The talent management is usually set as the long-term activity of the HRM Function. The recession makes the whole talent management a lot quicker. The talents have to be set to new teams, they have to learn to co-operate quickly and they have to learn to make quick decisions.

The talent management in the recession is about the quick assessment of the top talents of the organization and assigning them to the special tasks from the top management. The role of the line management has to be minimized as they have no chance to prefer their own task above the strategic tasks of the top management.

Recession and Recruitment

Recruitment is one of the most affected HR Processes by the global recession on the market. The companies do not offer vacancies, the number of job applicants grows rapidly and the organization has to manage the recruitment smartly.

The organization has to change the focus of the recruitment and the recession is a good moment to focus on the recruitment process development and redesign.

The talents on the job market

The recession is a good moment to hire the top potentials from the job market and other competitors. The HRM Function has to act quickly to hire the best class employees before their current employers take the action to protect them.

The HR Recruiters should always ask the managers and key employees of the organization about the excellent people, they know on the job market. The HR Recruiters should have a list of the job candidates, who can be asked to join the organization.

The talents are usually known in the industry and the recession can make them to be more sensitive to the job offers from the competitors. When the organization has a clear plan for the fight with the recession, the talents from the job market do increase the personnel expenses of the organization, but they can bring new sources of the revenue and they hugely increase the trust of the existing customers.

The role of the HRM Function is in the quick reaction to the recession, making the proposal to the top management and having a good contact with the recruitment agencies to start the hiring process as soon as possible.

The HRM Function has to co-operate closely with the top management, as the talents from the job market need to know the clear plan and clear expectations from them. The HRM Function cannot communicate the clear expectations itself, but it can co-operate with the middle management of the job positions, which can be created for the top talents from the job market.

The HRM Function has to monitor the personnel expenses added to the payroll of the organization as the company does not exceed the agreed rules and the HRM Function has to co-operate closely with the recruitment agencies to get the best class employees from the job market. The recession is a tough time and the top talents from the job market will definitely help to win the battle on the market.

Principles practices of management

QUESTION:

How will you influence people to strive willingly for group objectives in your organization (target based industry)? Apply interpersonal influence through communication process towards attaining your personalized goals?

Answer:

Several organizational factors must be in place in order for a team to succeed:

* Common and consistent goals that are accepted by all team members. Organizational commitment to the team concept, including support from top management,

* Clear roles and well-defined responsibilities for members and leaders.

* Both real and perceived power delegated to the teams.

* Mutual accountability for team performance.

* Recognition and reward systems that support team performance.

Teams sometimes fail because they don’t adequately define leadership roles and task clarity. These may be clarified by using a shared leadership model. For example, team members may agree to take leadership responsibility for specific aspects of the team’s mission. In some cases, leadership may shift to different team members on a rotating basis.

The following elements are necessary when building a cross-functional team:

* It must contain the right members.

* The team must have a clear direction.

* Members must have access to the “movers and shakers” of the organization.

* Members must agree on the standards by which they will

gauge success or failure.

* Everyone must agree on the ground rules from the start.

* Members must have the proper training in teamwork.

Teams are not always the best way to structure work. Managers should ask themselves if requiring employees to make decisions as a group enhances or impairs work efficiency.

Effective Pay Programs

More and more companies are trying to develop effective team-based pay programs. A Hewitt Associates study found that successful team pay programs have the following common characteristics:

* They link teams to their performance management systems with the use of shared responsibilities, goals and training.

* They provide variable pay plans, especially team incentive plans, business incentive plans or project outcome plans.

* They use peer reviews, subordinate reviews and internal client-customer reviews.

* When making pay increase decisions, they involve a number of different people in the process.

Communication Anxiety

Good employee communication is essential to good teamwork, but studies indicate that some team members suffer from “communication anxiety.” To address the problem, Whirlpool Corp. tested employees for such anxiety and then provide them with training to alleviate the problem.