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Syllabus

Scheme of Assessment

Marketing Finance 50M

Personnel Finance 50M

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Marketing Finance

Impact of marketing policies on a firms working capital Credit policy, credit rating, credit recovery & overall receivablesmanagement

Finished stock policy, stock out & loss of profit, optimal stock holdingBreak Even Analysis and Marketing decisions like pricing, product mix,expansion etcMarketing Cost Control & analysisMarketing Investment Appraisal using DCF techniques

Appraisal of Distribution channels, Advertisement strategiesMarketing Performance EvaluationLeasing & Bill Discounting conceptsBrand Valuation

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Job Evaluation as the basis of Wage and Salary AdministrationFinancial implication of wage terms negotiated with UnionsCost of living index linkedIncentives wages system and their financial implicationsPayment of commission based on profitsPayment of bonus under Bonus ActDetermining optimal fringe benefits and salary of executives in relation to profitabilityand size of operations of a company using DCF techniquesDeveloping superannuation benefit schemes and early voluntary benefit schemesCost analysis for areas such as labour and executives turnover, cost of recruitmenttraining and development, cost of employment programmesCost of committee managementCost of strikes, lockouts and gheraosHuman resources accountingMotivational AccountingDeveloping Personnel BudgetPersonnel Cost Audit

Personnel Finance

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Marketing PerspectiveUnderstanding Terminology in Marketing

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MarketsTraditionally market is a physical place where

buyers & sellers gather to buy & sell goods.Economist describe a Market as collection of

buyers & sellers who transact over a particularproduct.

Buyer buys goods in the market to satisfy his needs/ wants.

Seller hands over the goods to the buyer for somemonetary consideration.

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Marketing Marketing in simplest form is meeting needs profitably. Marketing deals with identifying & meeting human & socialneeds.

As per social definition Marketing is a societal process bywhich individuals / groups obtain what they need & wantthrough creating, offering & freely exchanging products &services of value with others.

As per formal definition of American Marketing association Marketing is an organizational function and a set ofprocesses for creating, communicating & deliveringvalue to customers and for managing customer relationshipsin ways that benefit the organization & its stake holders.

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Marketing Core concepts Basic concept in Marketing is exchange.Exchange is the process of obtaining a desired product fromsomeone by offering something in return.When two parties engaged in exchange reach an agreement,a transaction takes place. A transaction is a trade of values between two or moreparties.To make successful exchange, marketer analyzes what each

party expects from the transaction. He seeks to elicit abehavioral response from another party called the prospect.

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Marketing - Core Concepts contd.Marketer must try to understand the target markets needs, wants &demands.Needs are the basic human requirements.Needs become wants when they are directed to specific objectsthat might satisfy the need.Food is the need of every person. Wants of Mumbai youth, when hungry, may be Pizza & softdrink whereas those of village youth may be Dal , rice, roti &vegetable.Demands are wants for specific products backed by ability to pay.

The buyer or potential customer pays only when he gets value.Marketers job becomes difficult if the customer is not fullyconscious of his needs & wants or is not able to articulate themproperly.

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Value The foundation of MarketingValue is the price the person pays to perform a specificfunction in an efficient way.The function of a product / material / service is the job it does.Therefore Value = Function / cost.Value is increased by improving the function & reducing cost.Value can not be easily specified because it changes fromperson to person & time to time.The buyer gets the best value when he incurs the least costfor an essential function or service with the required quality &

reliability.The marketer endeavors to create, communicate & delivervalue to his target customer.

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Process of Marketing Wants list of a Prospect in Business Environment includes--Good quality product, Fair price, Timely delivery, Attractive financing

terms, Reliable parts & service

Wants list of a Marketer in the same environment includes-- Good price for the product, On time payment. +ve word of mouth.

If there is sufficient match or overlap in the want lists, a basis fortransaction exists & may take place on mutually acceptable terms.

Win win situation is achieved for both the parties, when the solution isfound to customers needs economically & conveniently. Process of Marketing is different from Process of Selling.

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Selling conceptSelling concept aims at selling what the firm makes or produces

& is used when there is overcapacity.It is practiced aggressively for unsought goods like insurance

policy, encyclopedia.It presupposes that the customers who are coaxed into buying a

product will like it. If they are not happy with it, they will notreturn it or bad mouth it or complain to consumer protectionorganizations.

Their proponents try to sell more stuff to more people, moreoften, for more money in order to make more profit.

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Marketing Concept As per this concept, Marketing job is not to hunt for the rightcustomers for your products, but to offer the right product toyour customers.Marketing manager is responsible for demand management.His strategy is to stimulate requirements of companysproducts by influencing the level, timing & composition ofdemand to meet the organizations objectives. He believes that if the company is more effective than itscompetitors in creating ,delivering & communicating superiorcustomer value to its chosen target markets, organizationalgoals will be achieved by getting, keeping & growingcustomer base.

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Selling V/s MarketingSelling focuses on the needs of the seller.Marketing concentrates on the needs of the buyer.Selling involves preoccupation with the sellers need ofconverting his product into cash.Marketing is concerned with the idea of satisfying the needs& wants of the customer by means of the products & wholecluster of things associated with creating, delivering & finallyconsuming it.

Meeting expressed or stated needs of the customer is fairlysimple but identifying his implied needs & understanding hislatent requirements is quite complex.

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M arketing Policy Marketing Policy includes developing action plans for

- connecting with customers- building strong brands

- shaping the market offerings- delivering & communicating value- capturing marketing insights & performance- creating successful long term growth.

In short they aim at creating, communicating & delivering valueto the target customer.

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Marketing Mix

For implementation of Marketing Policy, the main focus of theMarketing manager is on organizing value enhancingmarketing activities while keeping marketing costs to theminimum.Traditionally marketing activities are depicted throughMarketing Mix which is defined as the set of Marketing toolsthe firm uses to achieve its Marketing Objectives.They are classified into four broad groups which arepopularly known as four Ps of Marketing. Viz. Product, Price,Promotion & Place .

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Buyers Perspective From a marketers perspective, the four Psrepresent the marketing tools available forinfluencing buyers.From Buyers point of view, each Marketing tool isdesigned to deliver a benefit to the customer.

Against each P of the marketer there is a

corresponding C which provides Value to thecustomer & influences his buying decision.

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Finance PerspectiveImpact of Marketing policy on WorkingCapital

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Marketing Policy & Working Capital Analyze each variable in four Ps or Marketing Tools toidentify its impact on Working Capital.The relevant constituents of Working Capital & functionsresponsible for their management & control are

- Debtors ( Marketing )- Stocks

( R.M. - Materials,W.I.P. Manufacturing,

F.G. - Marketing )- Cash - ( Operations)- Creditors - Materials

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The Working Capital CycleCash in bank

Receive money

Debtors

Sales

Finished goodsstock

Production

Conversioncosts

Labour

Raw materialstock

Pay andgoods arrive

Creditors

Purchasegoods

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Management of Working Capital

The major constituents of Gross Working Capital are Debtors &Stocks.Marketing Policy is the chief determinant of Debtors & FG stocks.Short term financing is called the management of working capital(current assets less current liabilities). One of the main aims is to reduce the amount of short-term financethat is needed to borrow for day to day operations.

The more money that is tied up in current assets, the more capital isneeded to finance those current assets. Essentially a company uses short-term borrowings to finance itsstock, debtors or cash needs.

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Overview of Working CapitalManagement

Components

Cash Debtors Stock Stock

ControlMeasure

- DebtorsCollection Model

EOQ &Throughput cycle

time

Just in- time

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Internal Financing Efficiently managed companies try to minimize theirlevels of working capital so as to avoid short-termborrowings. Each element or constituent of working capital needs tobe monitored & controlled closely. Working capital largely depends on the section ofindustry the firm operates in. For restaurants, supermarkets, malls etc. where

customer has to pay before he leaves the premises, theworking capital requirement may be negative &correspondingly the internal financing needs may be nearzero.

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CashCash is the lifeblood of a business.Business needs cash to survive and will try to keep enoughcash to manage its day-to-day operations (e.g. purchasestock and pay creditors), but not to maintain excessiveamounts of cash.Cash budgets are prepared which enable to forecast thelevels of cash needed to finance the operations.Liquidity and quick ratios are used to assess the level of cashrequirement.Despite careful cash management if the short-term cashrequirements are insufficient then the business will have toborrow.

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DebtorsFor control of working capital debtors management is a key activity. It is often called credit control.Debtors result from the sale of goods on credit.Careful monitoring of the receipts from debtors is essential to see

that they are received in full and on time.The debtors management involves --establishing credit limits for new customers,-monitoring the age of debts by drawing up a debtors age

schedule-chasing up bad debts

In short marketing has to profile the age of the debts and old debtsneed to be quickly identified before they turn bad.

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Marketing PerspectiveOut of 4 marketing tools, two have direct bearingon Current Assets or Gross Working Capital.Second P ( Price ) from Marketing Mix is

primarily responsible for Debtors.Here the term Price is used in generic manner& encompasses all its variables like discounts,credit period, payment terms.

Fourth P ( Place ) from Marketing Mix isresponsible for stocks or inventory.

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PricePrice is the major determinant of a buyers choice.

Although non price factors are also quite important attimes, price by far remains the most important factor indetermining sales and profitability.Pricing gets modified by discounts, credit terms,payment period etc. because of - Competitive pressures.- Consumer and middle men behavior.- Short term orientation of the companies.- Sales promotion activities.

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Price contd.Each price leads to a different level of demand andtherefore has a different impact on a companysmarketing objectives.The marketers draw demand curves to show relationbetween alternative prices and the resulting currentdemand.In the normal case, demand and price are inverselyrelated i.e. the higher the price the lower the demand.

The slope of the demand curve depends upon theelasticity (responsiveness ) of demand w,r,t, price.

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Inelastic demand

Rs. 10

Rs. 15

100 105

Quantity demand per period

P r i c e

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Elastic demand

Rs. 10

Rs. 15

50 150

Quantity demand per period

P r i c e

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Price Elasticity of DemandThe demand curve having a very steep slope shows inelasticbehavior of Demand w.r.t. price. Demand for essentialcommodities is less price sensitive or inelastic.Demand for luxury ( non essential ) goods is largelydependent on or over responsive to price changes i.e. highlyelastic.The company wants to charge a price that covers its cost ofproducing, distributing, and selling the product, including afair return for its effort and risk. To price intelligently management needs to know how itscosts vary with different levels of production.

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Price determinants The price demand curve provides the range within which the priceneeds to be fixed.Three Cs are the most important determinants of price.1) Customers demand schedule - Assessment of the unique features of the product establishes the

price ceiling .2) Cost

- The cost function sets the floor to the price. When the companytries to recover the full cost , the net result is not necessarily thehighest profitability.

3) Competitors prices - Competitors prices and the price of substitutes provide anorienting point.Ideally the price is based on the value perceived by the customer.

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Perceived Value PricingThe key to perceived value pricing is to deliver more valuethan the competitor and to demonstrate this to prospectivebuyers.Company has to deliver the value promised by its value

proposition & the customer must perceive this value.It uses other marketing mix elements like advertising, salesforce, discounts, credit period, payment terms etc. tocommunicate & enhance perceived value in buyers mind. Perceived value is made up of several elements such as thebuyers image of the product performance, the channeldeliverables, the warranty quality, customer support, & othersofter attributes such as suppliers reputation,trustworthiness, & esteem.

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Perceived Value Pricing (contd)

Each potential customer places different weights on these differentelements.The company stratifies the customers as per their response into price buyers, value buyers, and loyal buyers.Company uses different price strategies for these three groups.For price buyers it offers stripped down products and reducedservices.For value buyers it must keep innovating new value andaggressively reaffirming their value.

For loyal buyers it must invest in relationship building and customerintimacy.Basically the company must understand the decision makingprocess of the buyer.

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Finance Perspective Constituents of Current Assets & theircontrol.

Management of debtors & stocks.

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Stocks & InventoryFor many businesses especially for manufacturingcompanies, stock is often an extremely essential asset. From the view point of production function, stock is neededto -

- create a buffer against excess demand,- protect against rising prices- safeguard against a potential shortage of raw materials- balance sales and production.

Marketing function needs FG stocks to-

- avoid loss of Sales due to stock out situation.- prevent the potential customer from approaching the

competitor.

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Economic Order Quantity (EOQ)

This stock control measure falls within the domain of materials orSupply chain management function.The EOQ model seeks to determine the optimal order quantityneeded to minimize the costs of ordering and holding stock.These costs are the costs of placing the order and carrying costs.Carrying costs are those costs incurred in keeping an item in stock,such as insurance, obsolescence, interest on borrowed money orclerical / security costs. The costs associated with ordering stocks are mainly the clericalcosts, receiving & inspection costs.The EOQ can be determined either graphically or algebraically.

A key assumption underpinning the EOQ model is that the stock isused in production at a steady rate.

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Just in-TimeIt seeks to minimize stock holding costs by the careful timingof deliveries and efficient organization of productionschedules.

At its best, just-in-time works by delivering stock just before itis used. The amount of stock is thus kept to a minimum andstock holding costs are also minimized.In order to do this, there is a need for a very streamlined andefficient production and delivery service.Taken to its logical extreme, just-in-time means that nostocks of raw materials are needed at all.One potential problem with just-in-time is that if stock levelsare kept at a minimum there is no stock buffer to deal withunexpected emergencies.

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External FinancingCashCompany needs to borrow if it does not generate enough cash from

selling.Bank overdraft or loan are the most common methods of borrowing.Banks provide overdraft facility for a business as long as they are

sure the business is viable. Overdrafts are more flexible. A bank overdraft is more flexible. It is a good way to tackle the

fluctuating cash flows experienced by many businesses. An alternative to a bank overdraft is a Bank loan.Generally a loan is for a set period of years.

The interest rate for a loan is normally lower than that of a bankoverdraft.Loans may be secured on specific business assets, such as stock or

motor vehicles.

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External Financing (contd)b) Debtors

Since debtors are an asset, it is possible

to raise money against them. This is doneby debt factoring or invoice discounting.

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External Financing (contd)i. Debt factoring

Debt factoring is in effect the subcontracting ofdebtors. Many department stores, for example,

find it convenient to subcontract their creditsales to debt factoring companies. Theadvantage to the business is twofold.It does not have to employ staff to chase up the

debtorsIt receives an advance of money from factoringorganization

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External Financing (contd)There are however potential problems withfactoringThe debt factoring company will charge a fee, forexample 4% of sales, for its services. In additionthe debt factoring company will charge interest onany cash advances to the company.

Finally the company will lose the management ofits customer database to an external party.

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External Financing (contd)ii. Invoice discounting

Invoice discounting in effect is a loan secured ondebtors.The financial institution will grant an advance (forexample 75%) on outstanding sales invoices (i.e.debtors). Invoice discounting can be a one-off, or acontinuing, arrangement.

An important advantage of invoice discounting over debtfactoring is that the credit control function is notcontracting out.The company therefore keeps control over its records ofdebtors.

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External Financing (contd)c) Stock

As with debtors it is sometimes possible toborrow against stock. However the time periodis longer.Stock needs to be sold, then the debtors need topay. Stock is not , therefore , such an attractivebasis for lending for the financial institutions.However in certain circumstances financialinstitutions may be prepared to buy the stocknow and then sell it back to the company at alater date.

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RatiosDebtors Collection PeriodThis ratio seeks to measure how long customers take to paytheir debts.Obviously the quicker a business collects and banks themoney, the better it is for the company.This ratio can be worked out on a monthly, weekly or dailybasis.Daily basis = Average debtors/ Credit sales pr day

=((Opening debtors + Closing debtors)/2) / (Total annualsales/365)It is important to note that credit sales are needed for this ratioto be fully effective.

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RatiosCreditors Collection PeriodIn many ways this is the mirror image of thedebtors collection period.

It calculates how long it takes a business to payits creditors.The slower a business is to pay the longer thebusiness has the money in the bank. As withdebtors collection period we can calculate thisratio either monthly, weekly or daily.Daily basis = Average creditors/Credit purchasesper day

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RatiosCost of sales is used as the nearest equivalent tocredit purchases (cost of sales is openingstock+purchases closing stockIt is often important to compare the debtors andcreditors ratiosIt is Debtors collection period (in days) / creditorscollection period (in days)If this ratio is less than 50% it means the firmcollects cash from debtors in 40% of the time thatit takes to pay its creditors. The management ofworking capital is effective.

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RatiosDebtors and Creditors Collection periodBusinesses whose debtors collection periods are much lessthan their creditors collection periods are managing theirworking capital well. can you think of any businesses whichmight be well placed to do this?Businesses which sell direct to customers generally for cashwould be prime examples. Pubs and supermarkets operateon a cash basis or with short-term credit (cheques or creditcards). Their debtor collection period is very low. Howeverthey lay well take their time to apy their suppliers. If they have

a high turnover of goods they may collect the money for theirgoods from customers before they have even paid theirsuppliers.

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RatiosStock Turnover ratioThis ratio effectively measures the speed withwhich stocks move through the business.

This varies from business to business and productto product.Strictly this ratio compares the cost of sales toaverage stockStock turnover ratio = Cost of sales / Averagestock = xX should be more than 2

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RatiosQuick ratioThis is sometimes called the acid test ratio.It is a measure of extreme short term liquidity.Basically stock is sold turning into debtors.

When debtors pay the business gains cash.The quick ratio excludes the stock, the least liquid of thecurrent assets to arrive at an immediate test of a companysliquidity. If the creditors come knocking on the door for theirmoney, can the business survive?

It is current assets stock / current liabilitiesIf this ratio is less than1 the firm will not be able to pay itssuppliers in time.

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Marketing channels & Value Networks

Most producers do not sell their goods directly to the finalusers; between them stands a set of intermediariesperforming a variety of functions. These intermediariesconstitute a marketing channel (also called a trade channel or

distribution channel).Marketing channels are sets of interdependent organizationsinvolved in the process of making a product or serviceavailable for use or consumption. They are the set ofpathways a product or service follows after production,

culminating in purchase and use by the final end user.

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Marketing channels & Value Networks (contd)

Some intermediaries such as wholesalers and retailers buy, take title to, and resell the merchandise; they are calledmerchants.Others brokers, manufacturers representatives, sales

agents search for customers and may negotiate on theproducers behalf but do not take title to the goods; they arecalled agents.Still others- transportation companies, independentwarehouses, banks, advertising agencies- assist in the

distribution process but neither take title to goods nornegotiate purchases or sales; they are called facilitators.

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Importance of Channels A marketing channel system is the particular setof marketing channels employed by a firm.Marketing channels also represent a substantialopportunity cos. One of the chief roles ofmarketing channels is to convert potential buyersinto profitable orders. Marketing channels mustnot just serve market, they must also makemarkets.

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Importance of Channels (contd)The channels chosen affect all other marketingdecisions. The companys pricing depends onwhether it uses mass merchandisers or high

quality boutiques. The firms sales force andadvertising decisions depend on how muchtraining and motivation dealers need.In addition channel decisions involve relativelylong term commitments to other firms as well as aset of policies and procedures.

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Importance of Channels (contd)In managing its intermediaries, the firm mustdecide how much effort to devote to push versuspull marketing.

A push strategy involves the manufacturer usingits sales force and trade promotion money toinduce intermediaries to carry, promote and sellthe product to end users.Push strategy is appropriate where there is low

brand loyalty in a category, brand choice is madein the store, the product is an impulse item, andproduct benefits are well understood.

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Importance of Channels (contd) A pull strategy involves the manufacturer usingadvertising and promotion to persuade customersto ask intermediaries for the product, thus

inducing the intermediaries to order it.Pull strategy is appropriate when there is highbrand loyalty and high involvement in thecategory, when people perceive differencesbetween brands, and when people choose thebrand before they go to the store.

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Channel DevelopmentIf the firm is successful it might branch into newmarkets and use different channels in differentmarkets.

In smaller markets the firm might sell directly toretailers;In larger markets it might sell through distributors.In rural areas it might work with general-goods

merchants; in urban areas with limited-linemerchants

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Channel DevelopmentIn one part of the country it might grant exclusive franchises; inanother it might sell through all franchises; in another it might sellthrough all outlets willing to ahndle the merchandise.In one country it might use international sales agents; in another itmight partner with a local firm.

In short the channel system evolves in response to localopportunities and conditionsTodays successful companies are also multiplying the number ofgo-to- market or hybrid channels in any one market area. Companies that manage hybrid channels must make sure thesechannels work well together and match each target customers

preferred ways of doing business.

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Role of Marketing ChannelsProducers do gain several advantages by usingintermediaries:Intermediaries bring in pooled financial resources. About 250plus dealers help Maruti Udyog manage its capital better byinvesting in inventories, facilities and trained personnel.They help break bulk and create assortment for thecustomer( imagine buying each monthly grocery item fromspecialist direct marketers in bulk packs)They are normally more cost effective due to specializationMany small value items like candies ,chewing gum and ballpoint pens with large volume ambitions cannot be soldthrough direct marketing due to both assortment and costproblems

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Role of Marketing ChannelsIntermediaries normally achieve superiorefficiency in making goods widely availableand accessible to target markets.Through their contacts , experience ,specialization and scale of operation,intermediaries usually offer the firm morethan it can achieve on its own.

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Channel functions and Flows A marketing channel performs the work of moving goodsfrom producers to consumers. It overcomes the time place,and possession gaps that separate goods and services fromthose who need or want them. Members of the marketing

channel perform a number of key functions.Marketing channels also keep changing with the evolution ofmarkets and the development of new technologies. As theinternet and other technologies advance, service industriessuvh as banking, insurance, travel and share trading operate

through new online channels.

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Channel Design DecisionsDesigning a marketing channel systeminvolves analyzing customer needs,establishing channel objectives, identifyingmajor channel alternatives and evaluatingmajor channel alternatives.

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Channel Design Decisions (contd)Channel objectives vary with product characteristics.Perishable products require more direct marketing.Bulky products such as building materials require channels thatminimize the shipping distance and the amount of handling.Nonstandard products such as custom built machinery andspecialized business forms are sold directly by company salesrepresentatives.Products requiring installation or maintenance services such asheating and cooling systems are usually sold and maintained by thecompany or by franchised dealers.High-unit-value products such as generators and turbines are oftensold through a company sales force rather than intermediaries.Channel design must take into account the strengths andweaknesses of different types of intermediaries.

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Channel Design Decisions (contd)Companies can choose from a wide variety of channels forreaching customers from sales forces to agents, distributors,dealers, direct mail, telemarketing and the Internet.Each channel has unique strengths as well as weaknesses.Sales forces can handle complex products and transactions, butthey are expensive. The Internet is much less expensive, but tcannot handle complex products.Distributors can create sales but the company loses direct contactwith customersThe problem is further complicated by the fact that most companiesnow use a mix of channels.

Each channel hopefully reaches a different segment of buyers anddelivers the right products to each at the least cost.

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Understanding PricingPrice is the major determinant of a buyers choice.

Although non price factors have become quiteimportant price still remains an important factor indetermining sales ad profitability.Competitive pressures together with consumerand middle men behavior and short termorientation of the companies have resulted in amarketplace characterized by heavy discountingand sales promotion.

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Each price will lead to a different level ofdemand and therefore have a differentimpact on a companys marketingobjectives. The relation between alternativeprices and the resulting current demand iscaptured in a demand curve.In the normal case, demand and price areinversely related :the higher the price thelower the demand.

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Elastic demand

Rs. 10

Rs. 15

50 150

Quality demand per period

P r i c e

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Price Elasticity of DemandDemand sets a ceiling on the price the company can chargefor its product.Costs set the floor.The company wants to charge a price that covers its cost ofproducing, distributing, and selling the product, includingafair return for its effort and risk.Yet when companies price products to cover full costs the netresult is not always profitability.To price intelligently management needs to know how itscosts vary with different levels of production.

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Within the range of possible prices determined by marketdemand and company costs, the firm must take consider thenearest competitors price. Given the three Cs the customers demand schedule, the

cost function, and competitors prices the company is nowready to select a price.Costs set a floor to the price.Competitors prices and the price of substitutes provide anorienting point.

Customers assessment of unique features establishes theprice ceiling.

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Perceived Value PricingCompanies base their price on the customersperceived value.They must deliver the value promised by theirvalue proposition and the customer must perceivethis value.They use other marketing-mix elements such asadvertising and sales force, to communicate andenhance perceived value in buyers minds

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Perceived Value Pricing (contd)Perceived value is made up of several elements such as thebuyers image of the product performance, than channeldeliverables, the warranty quality, customer support, and softerattributes such as the suppliers reputation, trustworthiness, andesteem.

Furthermore each potential customer places different weights onthese different elements with the result that some will be pricebuyers, others will be value buyers, and still others will be loyalbuyers.Companies need different strategies for these three groups.For price buyers companies need to offer stripped down products

and reduced services. For value buyers companies must keepinnovating new value and aggressively reaffirming their value. Forloyal buyers companies must invest in relationship building andcustomer intimacy.

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P.M. CoveragePersonnel Management encompasses the activities of

- Recruitment & employment-Man power planning-Employee training & management development- Wage & salary administration- Health & Safety-Benefits & services-Union management Relations

-Applied human resource behavior areas like motivation,morale , communication etc.

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P. M. Objectives, Functional areasObjectives -

Effective utilization of human resourcesDesirable working relationships among all members of theorganizationMaximum individual development.

Major Functional Areas -PlanningStaffingEmployee developmentEmployee maintenance

The focus is to provide an adequate number of employees competentwith the skills , abilities, knowledge & experience to further theorganizational goals.

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P. M. - ResponsibilitiesResponsibilities assigned to personnel function depend upon

the size, goals, philosophies, & structure of the organization.Even small organizations also have to perform the basic

personnel functions of hiring, training , compensation &

benefits, record keeping etc.With the increase in size & complexity of the organization, the

requirement of people with different skill sets & competenciesgoes up. The expectations from Personnel Departmentbecome more demanding. To meet this challenge, this

function also tends to branch out into different specializedareas with different responsibilities.

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P. M. - Major functions contd.1) Manpower Planning -Deals with determination of number & type of employees

needed to accomplish organizations objectives. Here the basic work is staffing & employee development.

2) Job Analysis -It is the process of describing the nature of a job & specifying

the human requirements like skill, competencies,experience, knowledge required to perform it.

Job Analysis process leads to Job Description which spells outwork duties & activities of the employee. Job content hasgreat influence on personnel programs & practices.

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P.M. Major Functions contd.3) Staffing

Includes recruitment & selection of the human resources.Human resource Planning precedes the actual selection ofpeople for positions in the organization. The emphasis is on

attracting qualified applicants to fill job vacancies.4) Selection -Most qualified applicants are selected for hiring from among

those applications. Here the personnel function is involved indeveloping & administering methods that enable the

functional manager to decide which applicants to be rejected& which are to be considered for the given job.

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P.M. - Major Functions contd.5) Orientation -It is the first step towards helping a new employee adjust himself to the

new job & the employer. It involves acquainting the new employeewith company rules, regulations & expectations, working hours,grades, rewards, salary & other facilities as well as benefits.

6) Training & Development -The objective of T & D function is to impart the skills & knowledge tothe employee to perform his job effectively. It includes-

- providing training to new or inexperienced employees,- re training experienced employees whose jobs are undergoing

change or are being job rotated,- preparing employees for higher level responsibilities.T & D is essential to ensure that the employees are capable of doing

their jobs / performing their duties at acceptable levels.

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P.M. - Major Functions contd.9) Compensation Provision of a rational method for determining the payment for

different types of jobs is one of the sensitive aspect ofpersonnel function.

Pay structure is a major consideration in planning &maintenance of the human resources.

It is a major cost to many organizations.It directly affects staffing function ( inadequate compensation

leads to high turnover of people.)It is the most important incentive at lower & middle levels of the

employees for motivating them to higher levels of jobperformance & to shoulder greater responsibilities.

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P.M. - Major Functions contd.10) Benefits They are another form of compensation to

employees other than the direct pay.They include legally required items as well as those

offered at employers discretion. Since they provide for many basic employee needs,

they are primarily related to the maintenancearea.

However the cost of (fringe) benefits have risen tosuch an extent that they become an importantconsideration in human resource planning.

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P.M. - Major Functions contd12) Employee Record Keeping This is the oldest & the most basic personnel function.It involves recording, maintaining & retrieving employee related

information for a variety of purposes.

Employee records cover the entire spectrum of the inputs rightfrom job application to retirement stage.

They include family background, educational qualifications,employment history ( experience) , medical & health reports,& records of all job related parameters like skills,competencies, training, attendance, output, leave, rewards ,promotions, penalties etc.

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PM & HRMThe traditional approach of PersonnelManagement is non strategic, separate from thebusiness, reactive, & of short term.

It is constrained by the limited definition of its roleas dealing with mostly unionized & low levelemployees.PM is curative while HRM is preventive.

HRM essentially emphasizes & incorporatesthose expectations which are not being fulfilled bythe traditional approach.

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