5 Main Aims of Government for Economy Development

1. Full Employment:

Most governments try to achieve full employment. This means that people who are willing and able to work can find employment. Of course, not everyone wants to work or is able to work. These people are not in the labour force. They are said to be economically inactive and are dependent on those in the labour force.

They include children, the retired, those engaged in full time education, home makers and those who are too sick or disabled to work. Those who are in work or are unemployed but actively seeking work, form the labour force and are said to be economically active.

The unemployment rate is calculated as a percentage of the labour force, i.e.:

Unemployed / Labour force X 100

So if 5 million people are unemployed out of a labour force of 40 million, the unemployment rate is:

5m / 40m X 100 = 12.5%

Most economists think that full employment is not actually 0% unemployed. They usually put the figure at approximately 3%. This is because they think that even in a strong economy with demand for labour equalling the supply of labour, there will always be some workers changing jobs and being unemployed for short periods.

2. Price Stability:

Governments aim for price stability because it ensures greater economic certainty and prevents the country’s products from losing international competitiveness. If firms, households and workers have an idea. About future level of prices, they can plan with greater confidence. It also means that they will not act in a way that will cause prices to rise in the future.

Firms will not raise their prices because they expect their costs to be higher, households will not bring forward purchases for fear that items will be more expensive in the future and workers will not press for wage increases just to maintain their real disposable income.

In seeking to achieve price stability, most governments are not aiming for a zero percentage change in price. A common target is a stable inflation rate of 2%. They do not aim for unchanged prices, for two main reasons. One is that measures of inflation tend to overstate rises in prices.

A price index , for instance, might indicate that the general price level has risen by 1% but in practice, prices might not have changed and might have even fallen slightly. Some of the prices paid by people are lower than those appearing in the official price level indices, as people buy some products at reduced prices in sales and also make second hand purchases.

Price rises can also hide the improvements in products. A car may cost $100 more this year than last year, but it may incorporate a number of new features such as satellite navigation. So the question arises, is the car actually more expensive or is it a different car?

A second reason is that a slight rise in prices can provide some benefits. It can encourage producers to increase their output, as they may think that higher prices will lead to higher profits. It can also enable firms to cut their wage costs by not raising wages in line with inflation. The alternative to such a move might be a cut in employment.

3. Economic Growth:

When an economy experiences economic growth, there is an increase in its output in the short run. This is sometimes referred to as actual economic growth. In the long run, for an economy to sustain its growth, the productive potential of the economy has to be increased. Such an increase can be achieved as a result of a rise in the quantity and/or quality of factors of production.

The difference between actual and potential economic growth can be shown on a production possibility curve. On Fig, the movement from point A to point B represents actual economic growth – more capital and consumer goods are made. The shift outwards of the production possibility curve from YY to ZZ represents potential economic growth – the economy is capable of producing more.

Actual and Potential Economics Growth

In analyzing economic growth and other macroeconomic issues, economists also make use of aggregate demand and aggregate supply diagrams. Aggregate demand (AD) is the total demand for an economy’s products and consists of consumption (C), investment (I), government expenditure (G) and exports minus imports (X-M).

Aggregate supply is the total output of producers in an economy. Aggregate supply is perfectly elastic if the economy has a significant number of unemployed resources, as then more can be produced without a contingent rise in costs of production and prices.

The curve becomes more inelastic as the economy approaches full employment since then the firms will be competing for resources and this will push up their costs and, as a result, the price level. At full employment of resources, aggregate supply becomes perfectly inelastic, since at this point further increase in output is not possible.

Fig. 2 shows actual economic growth. The rise in AD has resulted in a rise in the country’s output (see unit 40 on real GDP) and a small rise in the price level.

Actual Economic Growth

Fig. 3 shows potential economic growth. The maximum amount, that the economy can produce, has increased.

Potential Economic Growth

In this case, the rise in the quantity and/or quality of resources has no impact on output. If, however, an increase in productive potential occurs when an economy is operating close to full employment, it can cause a rise in the country’s output and a fall in the price level as shown in Fig. 4.

Potential Economic Growth Causing a Rise in National Output

Governments want to achieve economic growth because producing more goods and services can raise people’s living standards. Economic growth can indeed transform people’s lives and enable them to live longer because of better nutrition, housing and health care.

The determinant of a country’s possible economic growth rate is its level of output, in relation to its current maximum possible output and its growth in productive capacity.

If, for instance, an economy is growing at 2% below its maximum possible output and its productive capacity is expected to increase by 3% this year, it’s possible economic growth rate is 5%. Most governments would like their economies to be working at full capacity and their actual economic growth rate to coincide with their potential economic growth rate.

4. Redistribution of Income:

A government may seek to redistribute income from the rich to the poor. The more money someone has, the less they tend to appreciate each unit. A rich person with an income of $10,000 a week is unlikely to miss $100 but that sum would make a huge difference to someone currently struggling on $20 a week.

Governments redistribute income by taxing and spending. The rich are taxed more than the poor. Some of the money raised is spent directly on the poor by means of benefits such as housing benefit and unemployment benefit. Other forms of government expenditure, such as that on education and health, particularly benefit the poor

Without the government providing these services free of cost or at subsidized prices, the poor may not find them accessible. Governments are unlikely to aim for a perfectly equal distribution of income. This is because taxing the rich too heavily and providing too generous benefits may act as a disincentive to effort and enterprise.

5. Balance of Payments Stability:

Over the long run, most governments want the value of their exports to equal the value of their imports. If expenditure on imports exceeds revenue from exports for a long period of time, the country will be living beyond its means and will get into debt. If export revenue is greater than import expenditure, the inhabitants of the country will not be enjoying as many products as possible.

Governments also seek to avoid sudden changes in other parts of the balance of payments. This is because they can prove to be disruptive for the economy. For instance, there may be a sudden and unexpected movement of money out of the country’s financial institutions into financial institutions of other countries. Such a movement can have an adverse effect not only on the banks of a country but also on the country’s exchange rate and eventually on the price of the country’s imports.

OBJECTIVES OF MARKETING MANAGEMENT

Objectives of Marketing Management

Management is the process of getting things done through other people. Following are the five key objectives of marketing management:-

Generate customer base

The responsibility of the marketing manager is to attract new customers and retain old customers for the business enterprise. Thus, to create product awareness among people many promotional activities viz. advertisement, distribution of samples, display of goods, etc. are carried out, which in turn increase sell of goods and services and generate profit for the firm.

Customer Satisfaction

The basic priority of the modern marketing is the satisfaction of the customer (or consumer). Thus, the marketing manager scientifically studies the needs and demands of the customers before offering them any goods or services.  Here, satisfying customers does not simply mean matching products with customers’ needs. It also requires regular supply of goods and services of reasonable quality at fair prices.

Market Share

The purpose of business activity is to increase its market share i.e. the ratio of its sales to the total sales in the economy. For this, companies may adopt all means of sales promotion viz. discounts, sales promotion, gifts, gift coupons, etc. to create awareness of its product in the market.

Profit Maximization

Without earning profit, no firm can survive in the market. Thus, profits are also needed for the growth and diversification of the firm. Hence, for maximization of profit, the marketing manager tries to satisfy the needs and wants of customer and maintains the regular supply of goods and services at fair prices.

Earn goodwill for the business

To build up the public image of the firm, the marketing management provides good quality products to the customers at reasonable rates and thus creates its positive image among the customers. The role of marketing manager is to sustain and raise the goodwill of the business through sales promotion, publicity, advertisement, high quality and reasonable prices of products, convenient distribution outlets, etc. If a firm enjoys goodwill in the market, it would increase the morale of its’ sales-force, which in turn increases profit.

Increases living standard among people

The marketing management attempts to increase the quality of life of the people by providing them better goods and services at reasonable rates. It facilitates production and distribution of a wide variety of goods and services for use by the customer.

ABC ANALYSIS

Every single item we order does not have equal value. Some parts cost more. Some are used more frequently. Some are both. ABC inventory analysis helps categorize those items so we can understand which ones should receive our full attention.

As the name suggests, this inventory categorization technique groups your inventory in three buckets: A, B, & C.

  • A’ items are the most important to an organization. This material should receive your full focus due to its high usage rate or a high price (or both).
  • B’ items have a lower dollar volume and are thus less important than ‘As’.
  • Finally, ‘C’ items are the low rung on the ladder. Out of the three groups, you’ll have the highest number of ‘C’ items, but they will account for the lowest portion for your inventory value.

The pareto principle states that 80% of your inventory costs comes from just 20% of your inventory. This is known as the 80/20 rule and it helps shape the results of your ABC Analysis. LeanDNA recommends the following breakdown as the optimal way to determine the three categories:

  • ‘A’ items – 80% of the annual inventory value of your items (likely made up of just 20% of your items)
  • ‘B’ items – 15% of the annual inventory value of your items (likely made up of 30% of your items)
  • ‘C’ items – 5% of the annual inventory value of your items (likely made up of 50% of your items)

ABC analysis has a lot of similarities to RRS analysis – “Runner, Repeater, Stranger analysis,” that is. Runners are your ‘A’ items, Repeaters are your ‘B’ items, and Strangers are your ‘C’ items.

In order to determine which parts fall into which categories, use the following steps:

  1. Determine inventory value by multiplying the price of an item by the consumption volume of that item in a year period. Simply put, item cost * annual consumption = inventory value.
  2. Repeat step 1 for all items to calculate total inventory value.
  3. Sort your parts from highest inventory value to lowest.
  4. Calculate each item’s percentage of total inventory value. That item’s inventory value / sum of all inventory values = item % of total inventory value.
  5. Group the parts that account for the highest 80% of your total inventory and allocate them as ‘A’ items. Group the parts that account for the next 15% and allocate them as ‘B’ items. Group all remaining items as ‘C’.

OBJECTIVES OF SALES MANAGEMENT

Let us delve deeper into the 4 main objectives of sales management

1) Achieving Sales volume

Achieving sales volume is the first objective of Sales. The word “volume” is critical because whenever a product sales start, the market is supposed to be a virgin market. Thus there needs to be optimum penetration so that the product reaches all corners of the region targeted. Ultimately, penetration levels can be decided on the basis of sales volume achieved.

2) Contribution to profit

Sales brings turnover for the company and this turnover results in profits. Naturally, sales has a major contribution to profit and it is categorized as a profit function in several organizations. But there is one more aspect to the contribution of profit by sales.

The objective of sales management is to sell the product at the optimum price. Some companies might target a premium pricing for a product to make it premium in the market. But if the sales team drops the price, then the objectives are not being met and the profit is dropping. This has to be kept in check by seniors as price drops directly affect the margin of the product.

3) Continuous growth

A company cannot remain stagnant. There are salaries to be paid, costs have been incurred and there are shareholders to be answered. So a company cannot survive without continuous growth. If there is no innovation at the product level or at the company level, then the company has to be blamed. But if the products are good, and still the penetration is not happening, then it is the fault of sales manager and sales executives.

It is the job of marketing to take feedback and bring new products in the market. But if the sales team does not provide the appropriate feedback of “Why the product is not selling”, then growth becomes impossible. This is why, more penetration and more growth is in the hand of sales people.

4) Sales Management and financial results

Financial Results are another objective of sales management and are closely related and therefore sales management has financial implications as well.

Sales – Cost of Sales = Gross Profit

Gross Margin – Expenses = Net profit.

Thus the variation in Sales will directly affect the Net profit of a company. Hence maintaining and managing sales is important to keep the product / service / organization financially viable.

The Objectives of sales are therefore decided on the basis of where the organization stands and where it wants to reach. It is a collaborated effort from the top management along with the marketing managers and sales managers to provide with a targeted estimate.

SUSTAINABLE DEVELOPMENT GOALS(SDG) OF INDIA

India, home to one-sixth of all humanity, holds the key to the success of the 2030 Agenda. India in its second VNR has made a paradigm shift to a “whole-of-society” approach with Government of India engaging sub-national and local governments, civil society organizations, local communities, people in vulnerable situations and the private sector.

India’s commitment to the SDGs is reflected in its convergence with the national development agenda as reflected in the motto of Sabka Saath Sabka Vikaas (Collective Efforts for Inclusive Growth). Based on the evidence from the SDG India Index, which measures progress at the subnational level, the country has developed a robust SDG localization model centered on adoption, implementation and monitoring at the State and district levels.

The following narrative further encapsulates India’s progress across the SDGs.

Sashakt Bharat – Sabal Bharat (Empowered and Resilient India): India has successfully lifted more than 271 million people out of multidimensional poverty through economic growth and empowerment. Enhanced access to nutrition, child health, education, sanitation, drinking water, electricity and housing, has led to reduced inequalities especially among people in vulnerable situations.

Swachh Bharat – Swasth Bharat (Clean and Healthy India): Through a nationwide initiative triggered by the Clean India Campaign and the National Nutrition Mission, India achieved 100% rural sanitation and sharp reduction in stunting and child and maternal mortality rates. Universal health coverage has been institutionalized through Ayushmaan Bharat, the world’s largest health protection scheme which provides an annual cover of USD 7,000 to 100 million families, covering nearly 500 million individuals.

India is at the forefront in the call for joint global action to address the COVID-19 pandemic. The country has extended medical assistance to several countries and has operationalized the SAARC COVID-19 Emergency Fund with an initial contribution of USD 10 million. Domestically, India’s response to the COVID-19 pandemic includes an initial USD 22.5 billion economic stimulus package, comprehensive health coverage for front-line workers and direct cash transfers for the most vulnerable.

Samagra Bharat – Saksham Bharat (Inclusive and Entrepreneurial India): Social inclusion is pursued through universalizing access to nutrition, health, education, social protection, and developing capabilities for entrepreneurship and employment. Financial inclusion through Jan Dhan-Aadhaar-Mobile (JAM) trinity – near universal access to bank accounts aided by the Jan Dhan Yojana (National Financial Inclusion Scheme); Aadhaar card (National unique identity number) for over 90% of the population; and expansive access to mobile phones, has propelled new avenues of credit, insurance, and Direct Benefit Transfers (DBT) to the poor, including to over 200 million women, thereby accelerating their economic empowerment.

Satat Bharat – Sanatan Bharat (Sustainable India): India’s climate action strategies call for clean and efficient energy systems, disaster resilient infrastructure, and planned eco-restoration. Acting on its nationally-determined contributions, India has electrified 100% of its villages, reduced 38 million tonnes of CO2 emissions annually through energy efficient appliances, provided clean cooking fuel to 80 million poor households, and set a target to install 450GW of renewable energy and restore 26 million hectares of degraded land by 2030. Globally, India stands third in renewable power, fourth in wind power, and fifth in solar power. India launched the Coalition for Disaster Resilient Infrastructure and the International Solar Alliance to leverage global partnerships for climate action and disaster resilience.

Sampanna Bharat- Samriddh Bharat (Prosperous and Vibrant India): India is one of the fastest growing emerging market economies with a young population and burgeoning innovation and business ecosystem. With a GDP of USD 2.72 trillion in 2018-19, India strives to become a USD 5 trillion economy by 2025, and pursue an inclusive and sustainable growth trajectory by stimulating manufacturing, building infrastructure, spurring investments, fostering technological innovation, and boosting entrepreneurship.

In the spirit of South-South Cooperation, for realizing the 2030 Agenda, India supports developing countries through the USD 150 million India-UN Development Partnership Fund. In this spirit of regional and global partnerships, and the country’s commitment to ‘leave no one behind’, India steps into the Decade of Action, drawing confidence from its experience in addressing challenges. Government of India will continue to work collaboratively with all domestic and global stakeholders to accelerate efforts for a sustainable planet for future generations.

CORPORATE SOCIAL RESPONSIBILITY(CSR) IN INDIA

Now Corporate Social Responsibility (CSR) is well accepted among shareholders as well as with various other stakeholders of society in India. The term CSR is new normal for Indian organisations. CSR tends to focus on what is done with profits after they are made. Larger corporations understand that CSR is an integral part of business framework for sustainable development. Companies also consider that CSR is an approach towards sustainable development and focus on the triple bottom line of Economic, Environmental and Social performance.

In India, the term Corporate Social Responsibility (CSR) is widely being used even though related concepts and terms, such as business responsibility, sustainable development, philanthropy, sustainability, corporate citizenship, responsible business, triple bottom line, shared value, value creation, business ethics, socio-economic responsibility, bottom of pyramid, stakeholder management, corporate responsibility, and corporate social performance.

The CSR activities of Indian companies are in line with the provisions of Section 135 with Schedule VII to the Companies Act, 2013. The CSR initiatives of companies thrust on creating value in the lives of the communities around its areas of business and manufacturing operations.

CSR has become an effective tool to work in the line of Sustainable Development Goals (SDGs) with a strong focus on social performance indicated in the CSR projects of the organizations. The SDGs, otherwise known as the Global Goals, are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity.

Most of the businesses consider community as one of its apex stakeholders and believes in inclusive growth. This year most of the organisations continued its CSR initiatives in the realm of Education, Health, Livelihood, Rural Development and Social Entrepreneurship.

Organisation’s diverse projects and operations touch lives of people in many ways and create value by helping in overall and holistic development of communities within multiple geographies. Through its various initiatives, Companies endeavour to play a relevant role by serving communities and projects that address gaps in basic societal requirements.

Conscious business decisions by the Companies have directly and indirectly created value for multiple stakeholders and helped in improving lives of the people and species. Businesses in India believed in creating societal value by providing affordable products and services which have assisted in the growth of relevant and allied industries. Across all its areas of operations of Business, there are inherent linkages and interconnections with the immediate and long term societal impact.

Most of the business have a practice of reporting the CSR performance not only in Annual Report but also in dedicated Annual CSR Report and Sustainable Development Report. These reports are externally verified and are in accordance with the Global Reporting Initiative (GRI) guidelines and Business Responsibility Report, mandated by the law and competent authorities.

CSR initiatives are conceptualized and implemented through Corporate Foundations, Non-Government Organisation (NGOs) and Agencies and not-for-profit organisations. Most of the organisations worked on 4P model (Public-Private-People-Partnership) for empowering communities and stakeholders. Businesses have positively impacted lives particularly of several hundreds of thousand underprivileged people through various CSR activities and approaches.

It has been observed that for Indian Companies, Corporate Social Responsibility (CSR) is the commitment of businesses to contribute to sustainable economic development by working with the employees, their families, the local community, experts and the society at large to improve lives in ways that are good for business and for its development.

In the broad manner, CSR segment of the organisation is guided by the Board of Governance, Business DNA, CSR and Sustainability Mission of the Companies. In compliance with the provisions of Section 135 of the Companies Act, 2013 with the Companies (Corporate Social Responsibility Policy) Rules, 2014, Companies have taken measures and steps to ensure improvement and betterment.

Most of the businesses seek to continue its contribution to the society through its distinct value proposition that meets the needs of millions of people, enhancing their lives through education, healthcare, improving quality of living by providing attitude, means and enabling livelihoods by creating employment opportunities through and for the Business, By the Business and Beyond the Business.

For the Business, value is being created for the society through business including employment generation, market growth and opportunity creation. By the Business- value is also being created through Corporate Social Responsibility (CSR) interventions across different operating facilities with appropriate linkages to local communities in which businesses operate and Beyond Business- value is being created through interventions for the societies in diverse geographies across India through creation of demand and services.

At public sector business organisations in India, CSR has been also looked upon as closely linked with the principle of sustainable economic development, which demand that organisations should make decisions and act based not only on financial factors but also on immediate and long term social and environmental consequences of their operations and activities.

Businesses in India have been sensitive towards the concerns of society and is committed to operating its core business in a socially responsible way by taking into consideration the wider interests of the community and the environment.

Seven pillars of CSR strategy

1. Need of partnership in CSR

2. Cross learning

3. Supplementing and nurturing CSR

4. Per beneficiary cost reduction and maximizing the impact while reaching more people

5. Knowledge management and documentation

6. Use and reuse of resources for better CSR

7. Capacity building of the CSR workforce and re-skilling

Need of partnership in CSR

Business organisations now recognise Corporate Social Responsibility (CSR) as a great opportunity to significantly strengthen their businesses – while building, strengthening and renewing human, social and natural resources and wealth. Finding the right kind of partners is absolutely important to the success of a CSR strategy. We are in connected world.

All issues are connected to the other issues, perspective and environment. Working alone is good but working together is great. Working alone yields lesser benefits as compared to the working together always. CSR world should explore togetherness by partnering with other entities. Togetherness in addressing the social and environmental issues is good for all. CSR world should encourage partnership to execute the mega social projects.

To fulfil the corporate social responsibility (CSR) goals businesses have to realise and act in partnership. Formation of partnerships has played a very significant role in progress and prosperity across the world. Partnership brings companies, businesses, people and society together and then pool their resources together in order to achieve the set goals. Partnerships is CSR is need of hour. Partnership opens doors for cross learning of knowledge and experiences.

Cross learning in CSR

Cross learning is key to CSR strategies. Learning improves performance and minimise risks. Effective partnership among likeminded organisations for CSR execution ensures cross learning in Corporate Social Responsibility. CSR leaders from different organisations must visit specific CSR locations of other organisation where CSR projects are being implemented and meanwhile they should meet the beneficiaries to gain new insights. CSR leaders must build a deep understanding of the socio-economic issues and they must be open enough to understand issues both from a business and a societal perspective. Learning from others in CSR can save time and resources. Concentrate on your CSR efforts but same time CSR leaders must learn from variety of successful CSR programmes. The greatest opportunities will come from areas where the business significantly interacts with society. Cross learning in CSR is immensely helpful in supplementing and nurturing CSR programme and projects.

Supplementing and nurturing CSR

Good CSR strategy and projects must be encouraged and supplemented. Opportunities for complementing and supplementing ongoing social projects and initiatives, programmes must be explored. Supplementing CSR emphasises on the sustainability of projects and programmes to ensure they remain relevant and viable even upon disengagement at the end of the project period. Every organisation explore possibilities for collaborating and co-operating with other corporations in order to synergise its efforts and increase both financial and social resources as well as outcomes and impact. Businesses may consider in supplementing even in smaller well defined CSR projects. Supplementing the CSR projects by the smaller or larger organisations matter in order to ensure optimal utilisation of the CSR budget and resources.

Per beneficiary cost reduction in CSR

Per beneficiary cost reduction and maximizing the impact while reaching more beneficiaries in CSR is key to success. Business organisations have a variety of motives for being attentive to CSR and run a CSR projects. Leaders can increase impact and reduce costs when they understand the role of Corporate Social Performance (CSP) in driving CSR Performance (CP). Business should think of reaching more people by using less money and resources. Reduction in per beneficiary cost can be achieved by the partnership, collaboration, cross learning and reuse of resources.

Knowledge management and documentation

CSR reporting practices strengthen organizations. The process of documenting and communicating CSR practices provides benefits to corporations, including the ability to formalize their position on CSR, identify organisational strengths and weaknesses, and manage stakeholder relationships and expectations. In India, any shortfall in spending in CSR shall be explained in the financial statements and the Board of Directors shall state the amount unspent and reasons for not spending that amount. As per the CSR Law, the CSR Committee of organisation shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.

Documentation, reporting and communication of the CSR performance in crucial to the CSR strategy.  Documentation of the CSR must be organised and structured and should be accessible. Companies can explore the new way of documentation, reporting and communications.

Use and reuse of resources for better CSR

Effective use and reuse of resources can improve the CSR performance. Awareness on use and reuse of resources among across the stakeholders can help in achieving the desired goals of CSR sustainability. Sustainable CSR can be achieved through community and beneficiaries engagement. CSR is a process oriented task.

Recycling and reuse often are the easiest places to start. CSR leaders should take the essential steps to recycle the commonly recyclable materials, and look for easy opportunities to replace disposable or recyclable items with reusable ones. CSR leaders also should look for partners to help with more challenging to recycle or exotic materials, as well as for opportunities to introduce reusable packaging. And of course, look upstream to design new idea, services and programmes.

Capacity building of the CSR workforce and re-skilling

In the fast changing world, capacity building of CSR workforce and re-skilling them are always relevant and are key to CSR performance. Human resource are fundamental requirement. CSR leaders must empower their subordinates by providing them right attitude, knowledge, information and trainings. Same time, CSR managers also be open to learn new things. Developing soft skill, professional skill, project management skill and leadership skill among CSR workforce is continuous process. Rigorous training, development and re-skilling of the CSR manners can save time, efforts and resources.

CORPORATE GOVERNANCE IN INDIA

Corporate Governance in India is a set on internal controls, policy and procedures which form the framework of a company’s operations and its dealings with various stakeholders such as customers, management, employees, government and industry bodies. The framework of such policies should be such as to uphold the principles of transparency, integrity, ethics and honesty. Corporate Governance is the soul of an organisation and must be adhered to while indulging in any business practices

It is indeed a proud moment for the Indian corporate sector. Around 12 Indian companies have featured in the Forbes list of the world’s 2,000 best regarded firms. Infosys. TCS, Tata Motors secured the 31st, 35th and 70th ranks, respectively.

Other Indian biggies like Tata Steel, L&T, Grasim, GIC, Mahindra & Mahindra, Asian Paints, SAIL and ITC are some of the other companies who have made it to this prestigious list. HDFC is the only company from the banking and financial sector to have attained a position in this list.

Forbes partnered with Statista, which surveyed 15,000 people from 60 countries regarding their opinion on top 2000 companies across the globe. Companies were evaluated on parameters such as trustworthiness, social conduct, performance of the company’s product or service and the company as an employer.

When bank scams, financial frauds, and cybercrimes become the order of the day, news like these reinstate our belief in the importance of sound Corporate Governance in India.

Why is Corporate Governance so important?

  • Risk Mitigation and compliance

There is a direct relationship between governance, risk mitigation and compliance. If a company is governed on the basis of sound principles, it will naturally work efficiently and ensure compliance with every statutory law and guideline. Being on track with the policies and law ensures that the company is braced well for any uncertainty and thus has risk mitigation mechanisms in place. More disciplined a company is in its operations, the better it is placed to face any risk or disruption arising out of political, technological and economic events.

  • Enhances shareholder value

While there is no established relation between corporate governance and market value of a company, it does enhance shareholder satisfaction. Corporate Governance in India plays a key role in protecting valuations of a company because the ultimate goal of good governance is to maximise the interest of all stakeholders. The value accumulated by the company over the years can be wiped away by a single unlawful incident, thus internal controls at the right place is mandatory.

  • Better image during economic downturns

During the last few months, we have heard many stories of banking frauds and financial malpractices. It is but natural for people to believe that all banks and financial institutions are involved in all these, which is not true. It is only when an organisation can ensure people about their inherent governance practises that people will believe them. Trustworthiness that has been established over ages plays a strong role in upholding the company’s image even during tough situations.

  • Improved organisational efficiency

Corporate Governance is an important determinant of industrial competitiveness. Nowadays there are many questions raised on the way a company is governed. Better governance ensures enhanced corporate performance and better economic results. Corporate Governance lays the foundation for behaviour of the company, the utilization of resources, product/service innovation and overall corporate strategies.

  • Crucial during mergers & acquisitions

Corporate Governance in India plays a critical role during restructuring events such as mergers and acquisitions. Not only does corporate governance of a company helps to differentiate between good deals from bad ones, but M&A activity by a company with good corporate governance is better received by stakeholders in the market. Another aspect to be mentioned is that mergers and acquisitions also has the power to improve the quality of corporate governance of the organisation.

Corporate Governance in India: The unseen force behind an organisation

A company is not all about just profits, market valuations, P/E multiples and turnovers, there is a lot that goes into building its position and image. Corporate Governance is one such hidden force. After numerous scandals, maligned reputations and economic downturns, companies are now realising that few concrete steps towards better governance could have saved years of their labour.

Most companies chase only monetary gains and take corporate governance for granted. Due to lack of trust on governance, investor sentiments go awry resulting in mass outflow of FII funds, sale by majority shareholders, reduced market value and so on.

Designing the framework of corporate governance in India is no mean task in itself. The requirement and fundamentals vary across sectors, industries as well as nationalities. Profound corporate governance is a must for banks and healthcare in particular.

Other sectors, such as FMCG, IT and Retail need to prioritize good governance, but this may not help them in enhancing their market value. The influence of governance on value also varies. It gains more importance during tough times rather than smooth sailing periods.

Nevertheless, corporate governance in India will continue to be crucial no matter what. The approach must be a perfect balance between excessive stringency and too much flexibility. Only the framework must be holistic and take the interests of all the stakeholders into account.

PERFORMANCE MANAGEMENT SYSTEM(PMS)

What Is Performance Management?

Performance management is the process of continuous feedback and communication between managers and their employees to ensure the achievement of the strategic objectives of the organization.

The definition of performance management has evolved since it first appeared as a concept. What was once an annual process is now transitioning to continuous performance management. The goal is to ensure that employees are performing efficiently throughout the year, and in the process, address any issues that may arise along the way that affect employee performance.

“Most workers perceive their organization’s performance management approach as confusing, subjective, and infrequent,” said Kathi Enderes (vice president, Talent, and Workforce Research Leader) and Matthew Shannon (senior research analyst) at Bersin, Deloitte Consulting LLP, in an exclusive with HR Technologist.

This is the current state of performance management. However, it doesn’t have to be that way. Automation now plays a significant role in performance management, and many of the processes involved can be streamlined so that employee performance can be strategically managed. This is the age of continuous performance management, and here’s everything you need to know about it.

Performance management differs from talent management in that the latter is a set of initiatives taken to engage employees to retain them. Performance management, on the other hand, is an initiative that guides employees towards establishing and achieving their goals in alignment with the organization’s immediate and overarching goals.

Why is performance management important?

1. Performance management supplements the annual performance review. This prepares both employees and managers about what to expect during the annual appraisal. It keeps both the manager and the employee in the loop about ongoing changes to the performance management process, what both can do to streamline it, and how performance overall can be improved.

2. To employees, continuous performance management indicates that managers value them. Employees believe that their managers are interested in their work and care about their goals and any issues they may face in the course of their job. They also become more open to receiving constructive feedback.

The Performance Management Cycle

The performance management process or cycle is a series of five key steps. These steps are imperative, regardless of how often you review employee performance.

1. Planning

This stage entails setting employees’ goals and communicating these goals with them. While these goals should be disclosed in the job description to attract quality candidates, they should be communicated once again when the candidate becomes a new hire. Depending on the performance management process in your organization, you may want to assign a percentage to each of these goals to be able to evaluate their achievement.

2. Monitoring

In this phase, managers are required to monitor the employees’ performance on the goal. This is where continuous performance management comes into the picture. With the right performance management software, you can track your team’s performance in real-time and modify and correct course whenever required.

3. Developing

This phase includes using the data obtained during the monitoring phase to improve the performance of employees. It may require suggesting refresher courses, providing an assignment that helps them improve their knowledge and performance on the job, or altering the course of employee development to enhance performance or sustain excellence.

4. Rating

Each employee’s performance must be rated periodically and then at the time of the performance appraisal. Ratings are essential to identify the state of employee performance and implement changes accordingly. Both peers and managers can provide these ratings for 360-degree feedback.

5. Rewarding

Recognizing and rewarding good performance is essential to the performance management process, as well as an important part of employee engagement. You can do this with a simple thank you, social recognition, or a full-scale employee rewards program that regularly recognizes and rewards excellent performance in the organization.

FUNCTIONS OF CENTRAL BANK

Function 1 # Bank of Issue:

Central bank now-a-days has the monopoly of note-issue in every country. The currency notes printed and issued by the central bank are declared unlimited legal tender throughout the country.

Central bank has been given exclusive monopoly of note-issue in the interest of uniformity, better control, elasticity, supervision, and simplicity. It will also avoid the possibility of over-issue by individual banks.

The central banks, thus, regulate the currency of country and the total money-supply in the economy. The central bank has to keep gold, silver or other securities against the notes issued. The system of note-issue differs from country to country.

The main objects of the system of currency regulation in general are to see that:

(i) People’s confidence in the currency is maintained,

(ii) Its supply is adjusted to demand in the economy.

Thus, keeping in view the aims of uniformity, elasticity, safety and security, the system of note-issue has been varying from time to time.

Function 2 # Banker, Agent and Adviser to the Government:

Central bank, everywhere, performs the functions of banker, agent and adviser to the government.

As banker to the government, it makes and receives payments on behalf of the government. It advances short-term loans to the government to tide over difficulties.

It floats public loans and manages the public debts on behalf of the government. It keeps the banking accounts and balances of the government after making disbursements and remittances. As an adviser to the government it advises the government on all monetary and economic matters. The central bank also acts as an agent to the government where general exchange control is in force.

Function 3 # Custodian of Cash Reserves:

All commercial banks in a country keep a part of their cash balances as deposits with the central bank, may be on account of convention or legal compulsion. They draw during busy seasons and pay back during slack seasons. Part of these balances is used for clearing purposes. Other member banks look to it for guidance, help and direction in time of need.

It affects centralisation of cash reserves of the member banks. “The centralisation of cash reserves in the central bank is a source of great strength to the banking system of any country. Centralised cash reserves can at least serve as the basis of a large and more elastic credit structure than if the same amount were scattered amongst the individual banks.

It is obvious, when bank reserves are pooled in one institution which is, moreover, charged with the responsibility of safeguarding the national economic interest, such reserves can be employed to the fullest extent possible and in the most effective manner during periods of seasonal strain and in financial crises or general emergencies…the centralisation of cash reserves is conducive to economy in their use and to increased elasticity and liquidity of the banking system and of the credit structure as a whole.”

Function 4 # Custodian of Foreign Balances:

Under the gold standard or when the country is on the gold standard, the management of that standard, with a view to securing stability of exchange rate, is left to the central bank.

After World War I, central banks have been keeping gold and foreign currencies as reserve note-issue and also to meet adverse balance of payment, if any, with other countries. It is the function of the central bank to maintain the exchange rate fixed by the government and manage exchange control and other restrictions imposed by the state. Thus, it becomes a custodian of nation’s reserves of international currency or foreign balances.

Function 5 # Lender of Last Resort:

Central bank is the lender of last resort, for it can give cash to the member banks to strengthen their cash reserves position by rediscounting first class bills in case there is a crisis or panic which develops into ‘run’ on banks or when there is a seasonal strain. Member banks can also take advances on approved short-term securities from the central bank to add to their cash resources at the shortest time.

This facility of turning their assets into cash at short notice is of great use to them and promotes in the banking and credit system economy, elasticity and liquidity.

Thus, the central bank by acting as the lender of the last resort assumes the responsibility of meeting all reasonable demands for accommodation by commercial banks in times of difficulties and strains.

De Kock expresses the opinion that the lending of last resort function of the central bank imparts greater liquidity and elasticity to the entire credit structure of the country. According to Hawtrey, the essential duty of the central bank as the lender of last resort is to make good a shortage of cash among the competitive banks.

Function 6 # Clearing House:

Central bank also acts as a clearing house for the settlement of accounts of commercial banks. A clearing house is an organisation where mutual claims of banks on one another are offset, and a settlement is made by the payment of the difference. Central bank being a bankers’ bank keeps the cash balances of commercial banks and as such it becomes easier for the member banks to adjust or settle their claims against one another through the central bank.

Suppose there are two banks, they draw cheques on each other. Suppose bank A has due to it Rs. 3,000 from bank B and has to pay Rs. 4,000 to B. At the clearing house, mutual claims are offset and bank A pays the balance of Rs. 1,000 to B and the account is settled. Clearing house function of the central bank leads to a good deal of economy in the use of cash and much of labour and inconvenience are avoided.

Function 7 # Controller of Credit:

The control or adjustment of credit of commercial banks by the central bank is accepted as its most important function. Commercial banks create lot of credit which sometimes results in inflation.

The expansion or contraction of currency and credit may be said to be the most important causes of business fluctuations. The need for credit control is obvious. It mainly arises from the fact that money and credit play an important role in determining the level of incomes, output and employment.

According to Dr. De Kock, “the control and adjustment of credit is accepted by most economists and bankers as the main function of a central bank. It is the function which embraces the most important questions of central banking policy and the one through which practically all other functions are united and made to serve a common purpose.”

Thus, the control which the central bank exercises over commercial banks as regards their deposits, is called controller of credit.

Function 8 # Protection of Depositors Interests:

The central bank has to supervise the functioning of commercial banks so as to protect the interest of the depositors and ensure development of banking on sound lines.

The business of banking has, therefore, been recognized as a public service necessitating legislative safeguards to prevent bank failures.

Legislation is enacted to enable the central bank to inspect commercial banks in order to maintain a sound banking system, comprising strong individual units with adequate financial resources operating under proper management in conformity with the banking laws and regulations and public and national interests.

THE IMPORTANCE OF TRAINING

The importance of training can be discussed under the following heads:

(i) Advantages of standardization:

The methods of production are standardised through training. All trained employees follow same methods and techniques of production and hence there can be little variation in output and standards produced by different employees. By using standardised methods, the quality of output would be increased.

(ii) Increasing organisational stability and flexibility:

Training provides opportunities for the employees to learn an acquire skills to work in several departments in an organisation. Training also results in low rate of labour turnover which means high consistency in organisations in retaining people for long period of time.

Low labour turnover means high organisational stability. Flexibility is ensured because employees may be placed in several departments over a period of time as they acquire multiplicity of skills through adequate training

(iii) Heightened morale:

Training results in increased morale of employees because of reduction in dissatisfaction at work, reduced complaints, and reduced absenteeism, and increased interest in work during the post-training period. Heightened morale results in increased loyalty to the organisation.

(iv) Reduced supervision and direction:

A trained employee knows what job he has to do and how to do that job and requires no guidance and supervision. Supervisors can devote their time to solve more important problems rather than concentrating on constant and regular supervision.

(v) Economical use of resources:

A well-trained employee makes better and economical use of available resources (materials, machines, and equipment). Optimum utilisation of resources results in reduced cost on production and higher profits.

(vi) Increase in productivity:

Training brings about increase in quantity and quality of goods produced resulting in high productivity.

(vii) Future manpower needs:

Through proper training employees become eligible for promotion handling more responsibility. An expanding and growing organisation wishes to train the existing employees so as to place them in higher positions in future.

(viii) Better industrial relations:

Training provides a platform for maintaining smooth industrial relations. Employees develop a feeling that organisation is taking care and interest in them through training programmes.

(ix) Reduced accidents at workplace:

Untrained people are bound to commit errors while handling machinery and equipment resulting in incidents at workplace. Training eliminates (reduces) the possibility of incident due to mishandling of equipment, machinery, and other resources of the organisation.

Proper training and development programmes ensure safety in handling the organisation’s resources which results in reduction in the accident rates.

(x) Reduced learning time:

An untrained worker consumes a lot of time to learn the methods, technique of doing the work. Skilled and trained employees reach the acceptable level of performance within no time. Therefore, training results in reduced learning time.