ISSN: 2320-8899

FMU JOURNAL OF MANAGEMENT

Volume IV Issue I 2016

P.G. DEPARTMENT OF BUSINESS MANAGEMENT

Fakir Mohan University, Balasore, Odisha
 Editor-in-Chief
Prof. Bhagaban Das

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Editorial Advisory Board

Prof. Sunil Kumar Gandhi Prof. Raj Kumar
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West Bengal Banaras Hindu University
Varanasi, Uttar Pradesh

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Professor, Head & Dean Professor, Head & Dean
Department of Management Studies Department of Management Studies
Guru Ghasidas Viswavidyalaya, Anna University(RC), Madurai
Bilaspur, Chhattisgarh Tamilnadu

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East West University, Dhaka
Bangladesh

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PG Department of Business management
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From Managing Editors Desk

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Managing Editor
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 TABLE OF CONTENTS

Sl.
Title and Authors Page No.
No.
1 Determinants of Capital Structure in Emerging Economics: Some Indian Evidences 01-09
Satyajit Dhar, Pralay Kumar Talapatra.
2 Performance Evaluation of Select Commercial Banks in India: An Application of 10-19
CAMEL Model

Indrani Ghosh, Debdas Rakshit
3 CRAFTING NEUROECONOMIC-MANAGERIAL DECISIONS 20-32

Jyotirmaya Satpathy, Adyasha Das, Suneetha Narendran, Michael Sturman, Sandhya
R Das
4 An Analysis of Employees Engagement in Selected Corporate Enterprises in India 33-40
Dr. Kamini
5 BRAND EXPERIENCE AND ITS EFFECT ON BRAND LOYALTY-AN EMPIRICAL 41-46
STUDY
Sudipta Kumar Jana
6 DEVELOPMENT OF COMPETENCY PROFILE : A STUDY IN RETAIL INDUSTRY 47-60
IN INDIA
Padmalita Routray, Madhusmita Panda
7 Strategies for Managing Shopping Mall: A Study in Eastern Region in India 61-68
Prakash Chandra Dash, Ashok Kumar Dash

8 CORPORATE SUSTAINABILITY REPORTING PRACTICES IN INDIA: A 69-76

COMPARATIVE SECTORAL ANALYSIS
BiswoRanjan Mishra, Bhagaban Das
9 FINANCIAL CHALLENGES OF MSMEs IN INDIA: AN ANALYTICAL STUDY 77-84
GANESH PRASAD PANDA
10 FINANCIAL PERFORMANCE EVALUATION OF STATE BANK GROUP 85-93
Tapas Kumar Sethy
11 Impact of Non-financial Rewards on Employee Motivation in PSUs of India: A Study on 94-99
MCL
Satya Swarup Das
12 IMPROVED ORGANISATIONL AND LOGISITCS PERFORMANCE IN SILENT 100-104
COMMERCE TECHNOLOGY ADOPTION
Venkatesh. J
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Determinants of Capital Structure in Emerging Economics: Some

Indian Evidences
1
Satyajit Dhar, 2Pralay Kumar Talapatra.
1
Department of Business Administration, University of Kalyani.
2
University Research Scholar, Department of Business Administration, University of Kalyani.
Email: 1satyajitdhar@yahoo.co.in, 2talapatrapralay02@gmail.com

Abstract : This study identifies the most influencing factors
that determine capital structure of 254 listed Indian firms
selected from BSE 500 index for the period 2015-16. Nine
independendent variables are used and two models are
tested using multiple regression analysis. Dependent
variables are Debt/Equity ratio(DER) based on market
value and Debt to Total Capital Ratio(DTR) based on book
value. Results indicate that factors such as ROA, size,tax
rate,tangibility,interest coverage ratio,cash flow and
financian distress cost(pxoxied i.e.,by current ratio) have
significant influence on the borrowing level of the firms in
India. It is observed that Indian companies make dynamic
balancing of capital structure based on changes in market
value of equity.
Keywords: Capital structure ; Institutional characteristics
; Tradeoff theory ; Pecking order theory ; India
I. INTRODUCTION
The search for the explanatory factors of capital
structure is a popular area of empirical studies in
finance. There are series of empirical and theoretical
studies that started with the famous work of Modigliani
and Miller (1958). The ability of financial theory to
explain capital structure decisions has advanced
remarkably. Extant studies propose theoretical models to
explain capital structure patterns across firms and
geographies, and to provide empirical support to
application of these models for the real business world
(e.g., Jensen and Meckling, 1976; Myers, 1977; Harris
and Raviv 1991).
The empirical studies which have contributed to the
explanation of capital structure are mainly undertaken in
the context of firms in developed markets(e.g., Myers,
1977; Majluf, 1984; Myers, 1984; Titman & Wessels,
1988; Bartonet.al., 1989; Prowse, 1990; Stulz, 1990;
Jensenet.al.,1992; John,1993 and Rajan & Zingles,
1995).
In recent years there are attempts to undertake empirical
work that analyses firm characteristics as determinants
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of capital structure in the context of firms in the
emerging markets. Such studies are important as the
institution structures of emerging markets are different
from those of developed markets and institutional
characteristics can also affect capital structure. Booth
et.al. (2001) is a pioneering study on firms in the
emerging markets.
In this paper, we analyse the trends in the capital
structure of Indian companies. The purpose of this paper
is to determine whether capital structure determinants in
the emerging market of India support the capital
structure theories which were developed in the context
of developed economies. In other words, the main
motivation for this study is to analyse the role of firm
characteristics in determining capital structure.
Specifically, we try to answer the following questions:
First, are determinants of capital structure (correlated
with leverage) that have been identified in the developed
economies setting correlated in India as emerging
market as well? And secondly, are the, modern capital
structure theories (e.g. trade-off and pecking-order
hypothesis) useful in explaining capital structure of the
Indian companies within the emerging markets?
This study contributes to existing literature as it is based
on a large sample of 254 firms and covers the most
recent period. The sample selection is based on the listed
firms in manufacturing and service sectors that covers
more than 90% of total market capitalization of India. It
also analyse the role of firms level characteristics that
are identified as explanatory variables in previous
studies.
The remainder of the paper is organized as follows.
Section 2 outlines a brief review of earlier studies.
Section 3 gives an overview of dependent and
independent variables of capital structure determinants,
sample selection and methodology. Section 4 gives
findings of the study. In this section results are discussed
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according to financial theories. Finally, our conclusions
are presented in section 5.
II. LITERATURE REVIEW
Since Modigliani and Miller published their seminal
paper in 1958, the issue of capital structure decision has
generated great interest among financial researchers.
With respect to the theoretical studies, there are two
widely acknowledgedcompetitive models of capital
structure: the static tradeoff model and the pecking order
hypothesis.
According to static tradeoff models, the optimal capital
structure does exist. A firm is regarded as setting a target
debt level and gradually moving towards it. The firms
optimal capital structure will involve the trade-off
among the effects of corporate and personal taxes,
bankruptcy costs and agency costs, etc. Both tax-based
and agency-cost-based models belong to the static
tradeoff models. On the other hand, the pecking order
hypothesis, first suggested by Myers & Majluf (1984),
states that there is no well-defined target debt ratio.
Firms are said to preferretained earnings (available
liquid assets) as their main source of funds for
investment.
It is important to test which hypothesis, tradeoff or
pecking order is more powerful in explaining firms
financing behaviour. Unfortunately, there is no
conclusive test yet. Shyam-Sunder& Myers (1999)claim
that the tradeoff model can be rejected; thepecking order
model has much greater time-series explanatory power
than the tradeoff model by testing the statistical power
of alternative hypotheses. However, Chirinko & Singha
(2000)show that the test conducted byShyam-Sunder&
Myers (1999)generatesmisleading inferences and that
their empirical evidence can evaluate neither the pecking
order nor static tradeoff models. Fame& French (2002)
find that pecking order and tradeoff models explain
some companies financing behaviour, and none of them
can be rejected. Booth et.al. (2001) point out that
empirically distinguishing between these two different
models has proven difficult because variables that
describe one model can also be classified as other model
variables. Myers (2003)claims that all the capital
structure models are conditional and thatthere isno
universal theory of capital structure and no reason to
expect one. Partly because of this, many recent
empirical studies have employed cross-sectional tests
and used a variety of variables that can be justified using
either of these two models.
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2
Titman & Wessels (1988) in their paper analysed the
determinants of capital structure choice of 469 firms
over 8 years time period in United States. The study
found that debt levels are negatively related to the
Uniqueness of a firms line of business. The results
also indicate that transaction costs may be an important
determinant of capital structure choice. They used
factor-analytic technique for analysis purpose.Harris &
Raviv (1991) summarizes a number of empirical studies
from US firms, suggesting that leverage increases with
fixed assets, non-debt shields, investment opportunities
and firm size, and decreases with volatility,
advertisement expenditure, and the probability of
bankruptcy, profitability and uniqueness of the
product.Rajan &Singles (1995) in their paper suggested
that, at an aggregate level, firm leverage is more similar
across G-7 countries (United States, Japan, Germany,
France, Italy, United Kingdom and Canada) over a
period of 1984 to 1991 with sample of 2583 companies.
They found that factors identified by previous studies as
correlated with cross-section with firm leverage in the
United States, are similarly correlated in other countries
as well. . Booth et.al (2001) analysed capital structure
choices of firms in 10 developing countries and indicate
that the variables that are relevant for explaining capital
structure in United States and European countries are
also relevant in developing countries despite the
profound differences in institutional settings across these
developing countries.Deesompak et.al (2004)
investigated the determinants of capital structure of
firms operating in the Asia-pacific region, in four
countries with different legal, financial and institutional
environment viz., Thailand, Malaysia, Singapore and
Australia and suggested that capital structure decision of
firms influenced by the environment in which they
operate, as well as firm-specific factors.Jong et. al
(2007) analysed the importance of firm- specific and
country-specific factors in the leverage choice of firms
from 42 countries around the world. The sample
consisted of 11845 firms. They found that the impact of
several firm specific factors like tangibility, firm size,
risk, growth and profitability on cross- country capital
structure is significant. They also observed that in each
country one or more firm specific factors are not
significantly related to leverage.
In the context of Indian companies there are a few
studies. Bhaduri (2002) made a study on determinants of
corporate borrowing and concluded that the optimal
capital structure choice is influenced by factors such as
growth, cash flow, size and product & industry
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characteristics using factor analysis technique. The data
on cross section variables are collected over the 1989
through 1995-time period. The study covered of 363
manufacturing firms selected across nine broadly
defined industries. Khasnobis & Bhaduri (2002) made a
study on determinants of capital structure in India and
found that capital structures of Indian manufacturing
firm were significantly influenced by factors such as
size, asset structure, profitability and short-term
financial distress cost. The study covered a balanced
panel of 697 manufacturing and non-financial firms over
the period 1990-1998. Chakraborty (2010) made a study
on capital structure in India over the period 1995-2008
using panel of 1169 non-financial firms listed either in
the Bombay Stock Exchanges or in the National Stock
Exchange and found that profitability, size of the firm
and uniqueness are negatively related to leverage while
tangibility and non-debt tax shield are positively related
to leverage. The author used panel cointegration
analyses to conclude the results. Handoo &
Sharma(2014) investigated the determinants of capital
structure of a sample of 870 listed Indian firms
comprising both private sector companies and
government companies for the period 2001 to 2010 and
used multiple regression analysis. They found that
profitability, asset tangibility, size, tax rate, and debt
servicing capacity have significant impact while raising
short term debt; profitability, growth, asset tangibility,
cost of debt, tax rate, and debt servicing capacity have
significant impact while raising long term debt; and
profitability, growth, asset tangibility, size, tax rate, and
debt servicing capacity have significant impact while
making choices on total debt by Indian companies.
III. SAMPLE SELECTION AND
METHODOLOGY
3.1 Sample
Book Value of Total Debt
Debt/Equity Ratio=
Market Value of equity ie .,maket capitalization
Book Value of Total Debt
Debt to Total Capital Ratio=
Book Value of Total Asset
Thus, D/E Ratio (DER) is a market based measured of
leverage. Market based measured in considered
appropriate for calculation of cost of capital as specific
cost of capital depends on market value. We have not
used market value of debt for estimation issues,
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We have chosen annual accounts for the year 31st
March, 2016 for our study. The choice is made
considering that it is the latest year for which require
data are available. The data have been obtained from
CMIE prowess database. Also, we have consulted BSE
website for cross verification and other purposes.
Initially, we have considered 500 companies comprising
BSE 500 index. Our choice cover most of the large and
medium size companies as the market capitalization of
the BSE 500 companies is over 90% of the total market
capitalization of the listed company in BSE(BSE ,2016).
We excluded Banking and Non-Banking financial
company having different type of business models and
financing requirements. We have also excluded zero
debt company and companies with missing data. After
all such exclusions there are 266 companies. It is
observed that there are few cases of outliers. We have
identified the outliers by using Quartiles and excluded
12 outliers. Ultimately, our sample consists of 254
companies.
3.2 Overview of dependent and independent
variables of capital structure determinants
Capital Structure is represented by level of debt and
equity in the total capital. Introduction of debt in the
total capital structure is called gearing or financial
leverage. Use of financial leverage is made to get
advantage of debt tax shield. In literature, while some of
the empirical studies used book leverage (for e.g.
Chakraborty, 2010; Chen, 2004), others used market
leverage (for e.g.,Deesomsak et al., 2004; Huang and
Song, 2006) as dependent variable. We have used two
measures for measurement of extent of leverage in the
capital structure viz., Debt/Equity Ratio (DER) and Debt
to Total Capital Ratio (DTR) [variables based on Titman
& Wessels (1988)]. There may be a number of
variations in which these two ratios can be expressed
and the definitions used by us are given below:
and Book Value of Total Debt
nevertheless market value measures are preferable than
book value measures(Sweeney et.al,1997). We also used
Debt to Total Capital Ratio (DTR) as a book value based
measure. DTR is used to understand the role of book
value based measure in capital structure decision by the
sample companies.
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Among the firm-specific determinants of capital 3.3 Econometric Specification of model

structure, we have used age, return on asset, and
We posit that debt level of firms depends on firm level
tangibility of assets, size, growth, tax, current ratio, cash
characteristics as proxied by certain explanatory
flow and interest coverage ratio. Current ratio (CR) is
variables. We use two variables viz., DER & TDR as
used as a proxy of financial distress costs. The variables
explained in the section 3.2. We use multiple regression
used in this study and their measurements are largely
analysis to find out the role of explanatory variables.
adopted from existing literature. In other words,
Accordingly, our models can be expressed as:
previous empirical findings in the context of developed
and emerging markets guided the selection of Model 1
independent variables. We avoid framing of hypotheses
DER = + 1(AGE) + 2(GROWTH) + 3(SIZE) +
as competing theories are available regarding predicted
relationship between firm characteristics and capital 4(TAX) + 5(CR) + 6(CFLOW)+ 7(ICOV) +
structure. Table 1 gives the definition of the variables. 8(TANG) + 9(ROA) +ei

TABLE 1 Model 2
TDR = + 1(AGE) + 2(GROWTH) + 3(SIZE) +
Definitions of the variables
4(TAX) + 5(CR) + 6(CFLOW) + 7(ICOV) +
Explanatory Definition 8(TANG) + 9(ROA)+ei
Variable
The symbols have their usual meaning. We have carried
AGE Year of study minus
out test for normality before carrying out the regression
incorporation year
analysis (explained in the next section).
GROWTH Change in Total assets between
two consecutive years i.e.,2015- IV. FINDINGS AND DISCUSSIONS
16 scaled by 2014-15
SIZE Natural Logarithm of sales As discussed earlier our sample consists of 254 firms.
TAX Corporate tax scaled by profit There are no missing data in respect of two dependent
before tax variables and nine explanatory variables chosen by us.
Table 2 gives summary statistics regarding the variables.
Current Current assets scaled by current
Interest cover (ICOV) has exhibited the most variability
ratio(CR) liabilities
among the explanatory variables (standard deviation is
Cash Cash flow from operating
1904.6). On the otherhand tangibility (TANG) is the
flow(CFLOW) activities scaled by sales
least volatile variable having standard deviation of
Interest Profit before depreciation,
0.1768. An overview of range of different variables
coverage Ratio interest and tax scaled by total
indicates that in few cases minimum values are negative;
(ICOV) interest
such variables are GROWTH, TAX, CFLOW, ICOV,
Tangibility(TA Net fixed assets scaled by total and ROA. The dependent variables are exhibiting
NG) assets moderate variability. Between TDR and DER, the later
Profitability(RO Profit before interest and tax has exhibited with more variability with standard
A) scaled by total assets deviation 0.1702.

TABLE 2
Descriptive Statistics
Variables Observations Mean Standard Deviation Minimum Maximum
DER 254 0.1369 0.1702 0.0000369 0.7638787
DTR 254 0.1761 0.1518 0.0001405 0.5832988
AGE 254 39.4055 23.0712 4 114
GROWTH 254 0.1141 0.1609 -0.418288 1.438335

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SIZE 254 7.7796 1.2212 3.042616 11.36057

TAX 254 26.9298 10.7872 -4.03 84.51
CR 254 1.6073 0.9779 0.21 5.75
CFLOW 254 0.1245 0.1829 -1.769628 0.8519615
ICOV 254 437.4554 1904.617 -915.1795 17329
TANG 254 0.2688 0.1768 0.0011599 0.7758122
ROA 254 9.0411 7.2479 -6.56 43.43

Source: CMIE Prowess database. Results computed.

We have carried out normality test (Shapiro-Wilk W test) of all the eleven variables (two dependent & nine
independent) using Stata 10. Output of normality test is given in Table 3. All the variables are having normal
distribution at 1% significance level expect size. Size variable is also normal at 5% level of significance.
TABLE 3
Shapiro-Wilk W Test

Variables Observations W V Z Prob.>Z

DTR 254 0.91676 15.309 6.353 0
DER 254 0.78035 40.397 8.612 0
AGE 254 0.90813 16.896 6.583 0
GROWTH 254 0.77223 41.89 8.697 0
SIZE 254 0.98569 2.631 2.252 0.01215
TAX 254 0.87655 22.705 7.271 0
CR 254 0.83987 29.45 7.876 0
CFLOW 254 0.66081 62.382 9.624 0
ICOV 254 0.23957 139.854 11.504 0
TANG 254 0.9624 6.915 4.502 0
ROA 254 0.9172 15.229 6.341 0

Source: CMIE Prowess database. Results computed.

The results of correlation analyses among variables are exhibited in Table 4. There are high degree of correlation
between TDR and DER as expected. However, this does not affect our test as these two factors are taken separately as
dependent variable and two separate regression analyses are made. Among independent variables there is lower level of
correlation (none being more than 48%). Tangibility, ROA is having the least correlation value being 0.001.VIF
statistics indicated that none is more than 2. It indicates that there is no problem of multicolinearity.

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TABLE 4
Correlation Analysis
DTR DER AGE GROWTH SIZE TAX CR CFLOW ICOV TANG ROA VIF
DTR 1
DER 0.78 1
AGE -0.026 0.086 1 1.114
GROWTH -0.039 -0.111 -0.185 1 1.195
SIZE 0.075 0.148 0.198 -0.159 1 1.169
TAX -0.091 -0.071 0.127 -0.034 0.03 1 1.027
CR -0.437 -0.35 -0.087 0.005 -0.18 -0.04 1 1.407
CFLOW -0.151 -0.078 0.057 0.038 0.01 0.07 0.12 1 1.163
ICOV -0.232 -0.174 -0.121 0.144 0.02 -0.03 0.11 0.04 1 1.144
TANG 0.297 0.169 0.047 -0.097 0.08 -0.03 -0.3 0.266 -0.12 1 1.244
ROA -0.401 -0.473 -0.146 0.274 0.1 -0.05 0.37 0.199 0.32 0.001 1 1.537
Source: CMIE Prowess database. Results computed.
Table 5 gives model summary of multiple regression using DER as dependent variable (Model 1). Model is highly
significant at 0.01%. R2 is also very high at 0.34 and adjusted R2 is 0.286. Durbin-Watson statistics is 1.509 i.e., below
2.207. Hence, there is no autocorrelation problem in the data set.
TABLE 5
Summary of Multiple Regression (Model 1)
Model Sum of Squares df Mean Squares F Sig Durbin-Watson
1 Regression 2.283 9 0.254 12.261 .000 1.509
Residuals 5.049 244 0.021
Total 7.332 253
Source: CMIE Prowess database. Results computed.
Dependent Variable: DER TABLE 6
R Square = 0.311 & Adjusted R Square =0.286 Coefficients and t-Values(Model 1)
In Table 6 we have given coefficients of predictors and Explanatory Coefficients t-Values
constant for Model 2. Among the independent variables Variables
SIZE and ROA are significant at 1% level. It implies in AGE -0.0001 -0.23
respect of Indian companies capital structure dependents
on profitability and size of the company. Tangibility GROWTH 0.0575 0.94
(TANG) is also significant at 5% level. Tax and current SIZE 0.0251* 3.14
ratio (CR) are significant at 10% level. It indicates TAX -0.0015*** - 1.79
Indian companies take tax aspect and short-term
financial distress cost (CR) into consideration for their CR -0.0200*** -1.83
capital structure decision & Cash flow from operating CFLOW -0.0034 -0.06
activities (CFLOW), interest coverage ratio (ICOV) and
ICOV -0.000001 -0.23
AGE have a negative relationship with leverage.
However, none of these variables is statistically TANG 0.1222** 2.14
significant. Growth is having positive relation with DER ROA -0.0110* -7.08
but it is not also statistically significant.
CONSTANT 0.0789 1.07

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Source: CMIE Prowess database. Results computed. (Table7) indicates that R2 and adjusted R2are relatively
higher than the Model 1 using DER as the dependent
*significant at 1% level; **significant at 2% level &
variable. Model is highly significant and Durbin-Watson
***significant at 10% level.
statistics of 1.365 indicates lack of auto-correlation
We have also used DTR, a book value based measure as problem.
dependent variable (model 2). Results of the multiple
regression are given in Table 7 & 8. Model summary
TABLE 7
Summary of Multiple Regression (Model 2)
Model Sum of Squares df Mean F Sig Durbin-
Squares Watson
1 Regression 2.084 9 0.232 15.064 .000 1.365
Residuals 3.75 244 0.015
Total 5.834 253

Source: CMIE Prowess database. Results computed.

Dependent Variable: DTR *significant at 1% level; **significant at 2% level &
R Square = 0.357 & Adjusted R Square =0.333 ***significant at 10% level.
Three co-efficient viz., CR, TANG & ROA are The capital structure decision in our sample of listed
significant at 0.1% level of significance. Size is not firms is significantly influenced by factors such as SIZE,
significant unlike Model 1. Also, two new variable TAX, CR, TANG, CFLOW, ICOV and ROA. The
CFLOW & ICOV are statistically significant at 5% and coefficient of SIZE variable is positive and significant at
10% level of significance respectively. TAX is also 1% level indicating that large size firm depends more on
significant at 10% level. Hence, in model 2 most of the borrowings, when DER is measured in terms of market
identified explanatory variables except GROWTH, SIZE value. However, SIZE variable is not significant when
and AGE are significant. Overall, the results indicate leverage is measured on the basis of book value. It
that in Indian context multiple factors influence capital indicates Indian firms do consider market value for
structure decision of sample companies. making decision borrowing level. This aspect is very
interesting from capital structure theory perspective and
TABLE 8 may require further research. The coefficient of
Coefficients and t-Values(Model 2) profitability factor i.e., ROA are negative in both the
Explanatory Variables Coefficients t-Values model. This negative significant coefficient of ROA
supports the Pecking Order Hypothesis that firms first
AGE -0.0006 -1.82
uses internal sources of finance in preference to external
GROWTH 0.0800 0.51 sources of finance. TAX variable is significant in both
SIZE 0.0106 1.54 the models. This debt tax-shield has expected role in
TAX -0.0013*** -1.71 capital structure decision. TANG variable is significant
in all cases supports the collateral value hypothesis i.e.,
CR -0.0347* -3.68 value of available asset that can be offered as collateral
CFLOW -0.1017** -2.21 has a significant role in capital structure decision. We
ICOV 0.0000*** -1.85 have used current ratio (CR) as proxy of short-term
financial distress risk. CR turns out to be significant in
TANG 0.2253* 4.58 both the models. Hence, Indian companies do take
ROA -0.0066* -4.92 financial distress risk into consideration for capital
CONSTANT 0.2146 3.39 structure decision. The coefficients of the CR are
negative as expected. GROWTH is not significant any
Source: CMIE Prowess database. Results computed. of the models. It implies investment needs are not
important for higher level of borrowings. ICOV and
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CFLOW are significant variables using TDR (book
value measure) as dependent variable. But these two
variables are not significant when market value measure
is used as dependent variable. Use of market value may
increase the borrowing capacities and explanatory power
of these two variables reduces in market value measure.
Our results are consistent with studies in the context of
both developed and developing countries. For example
like Booth et.al (2001) our results also identifies
statistically significant factors like size, tangibility,
profitability and short-term financial distress cost as
significant factors influencing capital structure decision.
Our findings support both pecking order and tradeoff
theories.
V. CONCLUSION
Our study contributes towards a better understanding of
capital structure planning by Indian companies during
the most recent period. Based on extant literature we
have used traditional factors that are likely to affect
financing decision of sample Indian companies. In India
most of the selected factors have some influence among
the factors used. Profitability (ROA) has most
significant influence giving importance to financial
flexibility or Pecking Order Theory. Sample companies
also take into consideration fiscal discipline by taking
into consideration financial distress cost as proxies by
current ratio(CR). The most important of the study
findings relates to the role of size factor. When market
value proxy(Model 1) is considered size has significant
role but on the basis of book value based measure of
leverage the size has no significant role.It indicates
dynamic balancing of leverage on the basis of market
value by the Indian companies.
This study distinguish itself from earlier studies in this
area with the cosideration of two different measures of
leverage VIZ., DER(based on Market Value) and
TDR(based on Book Value). This study has
concentrated on one country but sample covers most of
the listed companies being based on index covering
more than 90% of total market capitalization. The data
set used is also most recent as it uses latest available
annual reports.
Due to time and resource constraint there are certain
limitations . The authors plan to study in a more roboust
manner covering a large time frame, say 10 years. There
is a scope of inclusion of few more firm specific
variable like promoters holding and uniqueness. Any
future research may extend this study covering macro
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8
economic variables that may influence capital structure
decision. Despite limitations, it may be hoped that the
study can used for developing better models for research
on determinants of capital structure for compaanies
operating in India and other emerging economics.
REFERENCES
[1] Barton, S.L., Hill, C.H., Sundaram, S. (1989). An
empirical test of stakeholder theory predictions of
capital structure. Financial Management, 18, 36-
44.
[2] Bhaduri, S.N. (2002).Determinants of Corporate
Borrowing: Some Evidence from the Indian
Corporate structure. Journal of Economics and
Finance, 26(2), 200-215.
[3] Bhaduri, S.N., & Khasnobis, B.G.
(2002).Determinants of Capital Structure in India
(1990-1998): A Dynamic panel Data Approach.
Journal of Economic Intregation, 17(4), 761-776.
[4] Booth,L., Aivazian,V., Demirguc-Kunt, A.,&
Maksimovic,V.(2001). Capital Structure in
Developing Countries. The Journal of Finaance,
26(1), 87-130.
[5] Chakraborty, A.(2010). Capital structure in an
emerging stock market:The case of
India.Research in International Business and
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[6] Chen, J.J. (2004). Determinants of capital
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[7] Chirinko,B.,& Singha, A.R.(2000). Testing static
tradeoff against pecking order model of capital
structure: a critical comment. Journal of Financial
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[8] Deesomsak, R., Paudyal, K., &
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14,387-405.
[9] Fama, E.,& French, K.(2002).Testing tradeoff
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[10] Handoo, A., and Sharma, K. (2014).A study on
determinants of capital structure in India .IIMB
Management Review, 26, 170-182.
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[11] Harris, M., &Raviv, A.(1991). The theory of [19] Myers, S. C. (1984). The Capital Structure
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determinants of capital structure: Evidence from
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China. China Economic Review, 17, 14-36.
Financing and Investment Decisions when Firms
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patterns and corporate financial behaviour in the
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W.H.(1992).Specific and General Knowledge, 27, 43-66.
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[23] Rajan, R.G.,& Zingales, L.(1995). What do we
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know about capital structure? Some evidence
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from international data. Journal of Finance,50,
[15] John,T.A.(1993). Accounting measures of 1421-1460.
corporate liquidity, leverage and costs of
[24] Shyam-Sunder, L. and S.C. Myers. (1999).
financial distress. Financial Management, 22, 91-
Testing static tradeoff against pecking order
100.
models of capital structure. Journal of Financial
[16] Jong, D, A., Kabir, A.,& Nguyen, Economics,51, 219-244.
T.T.(2008).Capital structure around the world:
[25] Stulz,R.M.(1990). Managerial discretion and
The roles of firm-and country-specific
optimal financing polices. Journal of Financial
determinants. Journal of Banking & Finance, 32,
Economics, 26, 3-27.
1954-1969.
[26] Sweeney, R.J; Warga, A.D;&Winter, S.(1997).
[17] Modigliani, F.,& Miller, M.(1958). The cost of
The market value of debt, market versus book
capital, corporation finance and the theory of
value of debt, and return to assets. Financial
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[27] Titman, S. & Wessels, R. (1988).The
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147-175.

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Performance Evaluation of Select Commercial Banks in India: An

Application of CAMEL Model
1
Indrani Ghosh, 2Debdas Rakshit
1
Assistant Professor, Department of Commerce, Naba Barrackpur Prafulla Chandra Mahavidyalaya
2
Professor, Department of Commerce, The University of Burdwan

Abstract: Indian Banking sector has been witnessing new
opportunities and challenges with the beginning of the 21st
century. Thus, it becomes pertinent to analyze how far it
has been able to confront with the challenges and accepting
the opportunities. This study makes an honest attempt in
evaluating the financial performance of some select public
and private sector banks from the Indian banking sector
during 2000-2001 to 2014-2015. CAMEL model is
considered here for the purpose of such performance
evaluation.
Key-words: Ranking, Capital adequacy, Asset Quality,
Management efficiency, Earnings and Liquidity
I. INTRODUCTION
The sphere of banking in India has received new
dimensions with the onset of 21st century. It has been
confronted with new opportunities and challenges.
Indian banking industry has got a new look mostly
because of introduction of banking sector reforms, Basel
norms, Core Banking Services, entry of foreign banks,
financial inclusion, globalization etc. Thus, it becomes
pertinent to analyze the financial performance of Indian
bank industry. Therefore, the present study focuses on
the performance analysis of some select Public sector
banks and Private sector banks in India. CAMEL Model
is used for such analysis of the select banks. It measures
the financial performance of banks based on five
aspects. CAMEL is the acronym of these five aspects
Capital adequacy (C), Asset quality (A), Management
efficiency (M), Earnings (E) and Liquidity (L). This
study is organized in five sections as follows. Section 2
specifies the objectives of the study. Section 3 deals
with the research methodology. Section 4 presents the
analysis and findings of the study and Section 5 provides
the conclusions and necessary recommendations.
II. OBJECTIVES OF THE STUDY
Primarily, the present study aims at analyzing the
financial performance of the Indian banking sector in the
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10
context of 21st century. However, the specific objectives
of this study are as follows:
i. To examine the relative performance of sample
banks during the study period based on the sub-
parameters under each parameter (Capital adequacy,
Asset quality, Management efficiency, Earnings quality
and Liquidity) of CAMEL approach.
ii. To study the relative performance of each
sample bank by providing ranks under each parameter
based on sub-parameter ranking.
iii. To apply a composite ranking technique to
trace the overall relative position of each sample bank.
iv. To identify the best and worst performers and
provide necessary recommendations.
III. RESEARCH METHODOLOGY
The study encompasses 30 (15 public sector banks and
15 private sector banks) randomly selected banks. The
sampled banks from the Indian public sector banks are
Allahabad Bank, Andhra Bank, Bank of Baroda, Bank
of India, Canara Bank, Central Bank of India, IDBI
Bank , Indian Bank, Indian Overseas Bank, Oriental
Bank of Commerce, Punjab National Bank, State Bank
of India, Syndicate Bank, UCO Bank and Union Bank.
The sample banks from the Indian private sector banks
are Axis Bank, City Union Bank, DCB Bank,
Dhanalakshmi Bank, Federal Bank, HDFC Bank, ICICI
Bank, IndusInd Bank, Jammu & Kashmir Bank,
Karnataka Bank, Karur Vysya Bank, Kotak Mahindra
Bank, Lakshmi Vilas Bank, South Indian Bank and Yes
Bank. Financial years ranging from 2000-01 to 2014-15
is considered as the study period. Data required for this
purpose has been obtained from the Capitaline - 2000
Database Package.
CAMEL (Capital adequacy, Asset quality, Management
efficiency, Earnings quality and Liquidity) model is
used to evaluate the relative financial performance of
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banks. The CAMELS approach was initially developed reflects the banks risk
in the US for measurement of financial condition of taking ability in lending of
financial institutions. Accordingly, the Uniform funds. The aggressiveness of
Financial Institutions Rating System was established by the bank in lending funds
the Federal Financial Institutions Examination Council increases with the increase
in the US. Here, the acronym CAMELS stands for in this ratio.
Capital adequacy (C), Asset quality Management Government Government securities are
efficiency (M), Earnings Quality (E), Liquidity (L) and Securities to the risk-free debt
Sensitivity to market risk (S). In 1995, RBI established a Investment Ratio instruments and thus, safe.
committee under the chairmanship of S. Padmanabhan This ratio measures the
and it recommended the CAMELS model based on the proportion of Government
lines of the international model. In this acronym C, A, securities in the total
M, E, L meant the same as that represented in the investment of the bank. It
international model. Only S stood for Systems and shows the risk-taking ability
controls. of the banks. The higher the
ratio the lesser the risk for
In this study, C, A, M, E and L (i.e. CAMEL model) is
the bank.
considered. The Banks are not rated as such, instead the
relative position of the sample banks is analyzed by the Asset Quality Ratios
method of ranking. At first the banks are ranked under Net NPAs to Net This ratio measures the
each sub-parameter (i.e. each ratio) based on the average Advances extent of net NPAs in
of that particular ratio during the study period of 15 portfolio of net advances.
years (2000-01 to 2014-15). Average of the ranks of the This reflects the quality of
sub-parameters are computed and based on that group advances. The lower the
ranks of each of the five parameters are computed. ratio, the better the asset
Finally, a composite ranking is done based on the quality.
average of the ranks of all the sub-parameters under Net NPAs to This ratio measures the
each of the five parameters. This shows the overall Total Assets proportion of net NPAs to
relative position or rank of each bank. The sub- total assets. This depicts the
parameters i.e. the ratios used for this study along with effectiveness of banks in
their brief description are shown in the table below: evaluating credit risk. The
asset quality improves with
Table 1: Ratios Used and Their Brief Description the decrease in this ratio.
Capital Adequacy Ratios Total Investments This represents the portion
Capital Adequacy It is a measure of the banks to Total Assets of total assets which is
Ratio capital expressed as a locked in investments.
percentage of its risk- Investments are those assets,
weighted assets. It measures income from which does not
the proportion of the banks form the core income of
capital to its risks. The banks. Thus, with the
protection for investors increase in deployment of
increases with the increase fund in investments, the
in the ratio. grant of loans and advance
decreases.
Debt-Equity This ratio reflects the degree
Ratio of leverage of a bank. It Percentage This ratio measures the
indicates how much portion Change in NPAs change in net NPAs. It
of capital is financed by debt reflects the improvement or
and how much by equity. deterioration in asset quality
over the years. The decrease
Advance to Total This ratio depicts the
in ratio signifies
Asset Ratio proportion of advances in
improvement in asset quality
total assets. This ratio
and vice-versa.
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Management Efficiency Ratios
Business per Business per employee
Employee signifies the competence and
yield of human resources of
banks. Higher the ratio,
better the managerial
efficiency and financial
performance of banks.
Profit per It reflects the surplus earned
Employee per employee. It is the ratio
of profit after tax to number
of employees. The higher
the ratio, the more efficient
the bank.
Return on Net It is the ratio of net profit
worth after tax to net worth. It
measures the rate of return
on the resources provided by
the shareholders. The higher
the ratio, the better the
managerial efficiency.
Advance-Deposit This ratio measures the ratio
Ratio of total advances to total
deposits. It reflects the
managerial efficiency in
utilizing deposits in creating
higher earning advances.
Earnings Quality Ratios
Operating Profit This ratio indicates how
to Average efficiently the bank has
Working Fund utilized its working funds in
generating operating profit.
The higher the ratio, the
better the profitability.
Return on Assets It relates the profits to the
size of the bank which is
measured in terms of its
assets. A higher return on its
total assets is an indicator of
higher profitability and a
good overall efficiency.
Interest Income Interest forms to be the
to Total Income prime source of banks
Ratio earnings. This ratio
measures the proportion of
interest income to total
income.
Spread to Total It measures the relation of
Assets Ratio spread to total assets.
Income spread is the
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12
difference between interest
earned and interest
expended.
Liquidity Ratios
Liquid Assets to This ratio evaluates the
Total Assets liquidity position of the bank
Ratio as a whole. The liquid assets
comprise of cash in hand,
money at call and short
notice, balance with Reserve
Bank of India and balance
with other banks/ financial
institutions. It thus reflects
what proportion of total
assets is in the liquid form to
meet the overall liquidity
requirements.
Liquid Assets to This ratio measures the
Total Deposits liquidity position of the bank
Ratio from the view point of the
depositors. It reflects to what
extent of liquid assets are
available to meet the
requirement of the
depositors.
Liquid Assets to Demand deposits are those
Demand Deposits deposits which are
Ratio immediately payable by the
bank on demand and bear no
restrictions on withdrawal.
This ratio indicates the
proportion of liquid assets
available to meet the
requirement of the demand
depositors.
Government Government securities are
Securities to safest investment and
Total Assets possess easy liquidity as
Ratio well. This ratio measures the
proportion of Government
Securities in Total assets. A
higher ratio is preferable to a
lower one.
IV. ANALYSIS AND FINDINGS
Section 4 deals with the analytical part of the study. This
section comprises of six sub-sections classified as A.
Capital Adequacy Ranking, B. Asset Quality Ranking,
C. Management Efficiency Ranking, D. Earnings
Quality Ranking, E. Liquidity Ranking and F.
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Composite Ranking. The findings are stated below under each of these sub-sections:
A. Capital Adequacy Ranking
Table 2: Capital Adequacy Ranking
Capital Adequacy Advance to Asset Govt. Sec. to
Debt-Equity Ratio Group Rank
Banks Ratio Ratio Investment Ratio
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 11.97 22 18.06 22 55.24 19 78.05 17 20 26
Andhra Bank 12.47 17 18.47 24 55.3 17 86.79 2 15 13
Bank of Baroda 12.77 12 16.21 17 55.3 17 77.07 19 16.25 16
Bank of India 11.64 26 19.44 26 60.15 3 78.23 16 17.75 21
Canara Bank 12.56 15 17.19 20 56.71 10 81.79 9 13.5 9
Central Bank of India 10.87 29 20.84 28 52.38 27 80.19 12 24 30
IDBI Bank 14.02 8 13.02 6 62.12 1 55.54 30 11.25 3
Indian Bank 12.06 21 16.16 16 53.77 23 82.35 7 16.75 19
Indian Overseas Bank 12.15 20 20.34 27 55.62 15 85.57 4 16.5 18
Oriental Bank of Commerce 11.79 25 14.72 13 55.73 14 76.62 20 18 23
Punjab National Bank 12.23 19 16.61 18 56.48 11 79.94 13 15.25 14
State Bank of India 12.56 15 17.17 19 53.37 24 80.35 11 17.25 20
Syndicate Bank 11.39 27 22.01 29 58.74 5 87.2 1 15.5 15
UCO Bank 11.33 28 24.48 30 56.19 13 79.86 14 21.25 29
Union Bank 11.82 23 18.17 23 58.59 6 75.62 21 18.25 25
Axis Bank 12.98 11 15.7 14 50.53 29 60.4 29 20.75 28
City Union Bank 13.1 10 13.22 8 58.43 7 85.58 3 7 2
DCB Bank 12.62 13 13.14 7 54.89 20 77.76 18 14.5 11
Dhanalaxmi Bank 10.64 30 18.89 25 54.55 21 84.27 5 20.25 27
Federal Bank 14.43 4 14.13 11 57.25 9 73.87 22 11.5 4
HDFC Bank 14.24 6 11.45 4 49.62 30 68.01 25 16.25 16
ICICI Bank 14.78 3 9.82 2 52.51 26 61.61 28 14.75 12
IndusInd Bank 13.19 9 14.34 12 56.31 12 78.74 15 12 5
Jammu & Kashmir Bank 14.21 7 13.49 9 52.03 28 61.79 27 17.75 21
Karnataka Bank 12.6 14 13.86 10 52.52 25 70.06 23 18 23
Karur Vysya Bank 14.37 5 11.39 3 60.42 2 81.74 10 5 1
Kotak Mahindra Bank 18.06 1 6.65 1 53.81 22 68.04 24 12 5
Lakshmi Vilas Bank 11.81 24 15.75 15 59.98 4 83.15 6 12.25 7
South Indian Bank 12.27 18 17.99 21 57.8 8 82.3 8 13.75 10
Yes Bank 16.57 2 11.86 5 55.33 16 62.76 26 12.25 7

Source: Authors compilation from available data

Table 2 above shows the ranking under each sub- position, followed by Lakshmi Vilas Bank and Yes
parameter and the ranking under capital adequacy as a Bank at the 7th position, Canara Bank at the 9th rank and
whole. The major findings are that Karur Vysya Bank is South Indian Bank at the 10th rank.
the best bank among the select banks in terms of overall
The three banks having worst overall Capital Adequacy
Capital Adequacy. City Union Bank and IDBI Bank also
as compared to its peers are Central Bank of India at 30 th
mark good Capital Adequacy by securing the 2nd and 3rd
position, UCO Bank at 29th position and Axis Bank at
position respectively. Among the first ten banks, Federal
28th position.
Banks stands at the 4th position followed by IndusInd
Bank and Kotak Mahindra Bank jointly at the 5 th

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B. Asset Quality Ranking

Table 3: Asset Quality Ranking
Net NPA/ Net Net NPA/ Total Total Investment/
% Change in NPA Group Rank
Banks Advances (%) Assets (%) Total Assets (%)
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 3.35 26 1.67 26 33.69 24 28.82 16 23 29
Andhra Bank 1.27 6 0.82 8 32.09 20 43.1 26 15 15
Bank of Baroda 1.87 10 0.94 11 27.24 3 20.76 10 8.5 1
Bank of India 2.66 19 1.54 24 25.87 1 28.2 15 14.75 14
Canara Bank 2.1 14 1.12 13 29.4 9 17.34 8 11 6
Central Bank of India 3.64 28 1.73 27 33.98 25 30.93 18 24.5 30
IDBI Bank 3.99 29 2.97 30 26.98 2 11.34 5 16.5 19
Indian Bank 2.61 18 1.23 15 34.87 27 26.7 14 18.5 22
Indian Overseas Bank 2.82 21 1.46 22 32.12 21 32.45 21 21.25 28
Oriental Bank of Commerce 1.64 8 0.9 10 32.38 22 -3.04 1 10.25 3
Punjab National Bank 2.07 12 1.1 12 30.95 13 53.58 27 16 18
State Bank of India 2.75 20 1.24 16 31.54 16 5.81 3 13.75 11
Syndicate Bank 1.85 9 0.7 6 28.86 7 31.17 19 10.25 3
UCO Bank 3 24 1.59 25 31.74 17 22.01 11 19.25 23
Union Bank 2.46 17 1.34 20 29.46 10 33.99 22 17.25 21
Axis Bank 1.11 4 0.49 3 34.5 26 18.84 9 10.5 5
City Union Bank 2.94 23 1.51 23 29.06 8 14.95 7 15.25 16
DCB Bank 3.3 25 1.26 19 31.33 14 34.78 23 20.25 26
Dhanalaxmi Bank 4.1 30 2.25 29 29.8 11 26.31 13 20.75 27
Federal Bank 2.31 15 1.24 16 31.83 18 7.76 4 13.25 9
HDFC Bank 0.34 2 0.16 2 35.06 29 42.23 25 14.5 13
ICICI Bank 1.96 11 0.72 7 31.43 15 24.66 12 11.25 7
IndusInd Bank 2.09 13 1.13 14 27.97 6 5.37 2 8.75 2
Jammu & Kashmir Bank 1.14 5 0.57 5 34.91 28 86.77 28 16.5 19
Karnataka Bank 2.82 21 1.36 21 37.37 30 13.63 6 19.5 24
Karur Vysya Bank 1.53 7 0.83 9 27.72 5 38.3 24 11.25 7
Kotak Mahindra Bank 0.85 3 0.56 4 32.04 19 348.67 30 14 12
Lakshmi Vilas Bank 3.59 27 2.08 28 27.59 4 31.95 20 19.75 25
South Indian Bank 2.41 16 1.24 16 30.12 12 29.9 17 15.25 16
Yes Bank 0.09 1 0.05 1 33.18 23 118.4 29 13.5 10

Source: Authors compilation from available data

The ranking of banks under overall asset quality and its
derivation from ranking under each ratio is shown in
table 3 above. The key findings are that Bank of Baroda
is the best bank among the select banks regarding
overall Asset Quality. IndusInd Bank secures the 2nd
position followed by Oriental Bank of Commerce and
Syndicate Bank jointly in the 3rd position. Others, among
the first ten banks are Axis Bank at the 5th position
followed by Canara Bank at the 6th position, followed by
Karnataka Bank and ICICI Bank jointly at the 7th
position, Federal Bank at the 9th rank and Yes Bank at
the 10th rank. The three banks having worst overall
Asset Quality as compared to its peers are Central Bank
of India at 30th position, Allahabad Bank at 29th position
and Indian Overseas Bank at 28th position.

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C. Management Efficiency Ranking

Table 4: Management Efficiency Ranking
Business per Profit per
Return on Advance- Deposit
Employee (Rs. Employee (Rs. Group Rank
Banks Networth (%) Ratio (%)
Cr.) Cr.)
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 6.84 14 0.0438 18 19.98 9 62.82 26 16.75 21
Andhra Bank 7.41 10 0.0476 16 21.92 2 64.38 21 12.25 9
Bank of Baroda 8.59 7 0.054 11 15.77 20 64.43 20 14.5 14
Bank of India 8.57 8 0.0373 21 17.69 14 71.4 6 12.25 9
Canara Bank 7.69 9 0.0447 17 19.88 11 65.25 18 13.75 12
Central Bank of India 5.31 25 0.0162 28 13.97 24 60.41 28 26.25 29
IDBI Bank 20.99 1 0.1054 4 9.02 29 447.79 1 8.75 4
Indian Bank 6.44 19 0.0586 10 15.16 23 61.79 27 19.75 24
Indian Overseas Bank 6.66 16 0.0286 25 21.39 4 65.73 17 15.5 17
Oriental Bank of Commerce 9.68 5 0.0527 12 16.16 18 63.83 24 14.75 15
Punjab National Bank 6.42 20 0.042 20 20.41 7 67.17 14 15.25 16
State Bank of India 4.51 29 0.0293 24 15.69 21 69.24 8 20.5 25
Syndicate Bank 6.72 15 0.0347 23 24.82 1 67.36 13 13 11
UCO Bank 7.23 11 0.0279 26 16.33 17 64.04 23 19.25 23
Union Bank 7.03 13 0.0433 19 20.55 6 68.7 10 12 7
Axis Bank 10.93 3 0.1073 3 21.39 4 64.13 22 8 2
City Union Bank 5.37 24 0.0527 12 21.78 3 66.38 16 13.75 12
DCB Bank 4.94 27 0.0027 29 8.25 30 68.59 11 24.25 28
Dhanalaxmi Bank 4.48 30 -0.0079 30 10.51 28 63 25 28.25 30
Federal Bank 6.46 18 0.05 15 15.97 19 67.93 12 16 20
HDFC Bank 7.21 12 0.0813 5 19.2 13 66.59 15 11.25 6
ICICI Bank 8.62 6 0.1087 2 13.25 25 96.19 3 9 5
IndusInd Bank 10.02 4 0.074 7 16.5 16 72.49 5 8 2
Jammu & Kashmir Bank 6.39 21 0.06 8 19.79 12 59.14 30 17.75 22
Karnataka Bank 6 23 0.0373 21 15.44 22 59.81 29 23.75 27
Karur Vysya Bank 6.32 22 0.0593 9 19.9 10 71.18 7 12 7
Kotak Mahindra Bank 4.65 28 0.076 6 12.44 26 153.63 2 15.5 17
Lakshmi Vilas Bank 5.27 26 0.0197 27 11.27 27 68.84 9 22.25 26
South Indian Bank 6.54 17 0.0527 12 16.91 15 64.82 19 15.75 19
Yes Bank 13.04 2 0.1345 1 20.31 8 80.43 4 3.75 1

Source: Authors compilation from available data

Table 4 above represents the ranking of the banks under
each of the ratios and management efficiency as a
whole. The major findings of the analysis are that Yes
Bank is the best bank among the select banks regarding
overall Management Efficiency. Axis Bank and
IndusInd Bank jointly secure the 2nd position followed
by IDBI Bank at the 4th position. Others, among the first
ten banks are ICICI Bank at the 5th position followed by
HDFC Bank at the 6th position, followed by Union Bank
and Karur Vysya Bank jointly at the 7th position, Andhra
Bank and Bank of India at the 9th rank. The three banks
having worst overall Management Efficiency as
compared to its peers are Dhanalaxmi Bank at 30 th
position, Central Bank of India at 29th position and DCB
Bank at 28th position.

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D. Earnings Quality Ranking

Table 5: Earnings Quality Ranking
Operating Profit / Interest Income /
Return on Assets Spread / Total
Average Working Total Income Group Rank
Banks (%) Assets Ratio (%)
Fund (%) Ratio (%)
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 2.09 17 0.9 22 86.65 11 2.68 12 15.5 16
Andhra Bank 2.4 10 1.14 9 86.43 14 2.75 9 10.5 8
Bank of Baroda 2.05 21 0.92 18 85.95 18 2.47 18 18.75 21
Bank of India 1.95 23 0.8 24 85.62 20 2.32 21 22 26
Canara Bank 2.08 18 0.98 17 86.38 15 2.33 20 17.5 17
Central Bank of India 1.56 28 0.42 28 89.79 2 2.53 16 18.5 20
IDBI Bank 1.69 27 0.66 25 87.14 9 0.88 30 22.75 27
Indian Bank 2.13 16 1.12 11 85.95 18 2.84 7 13 10
Indian Overseas Bank 2.05 21 1 16 87.96 8 2.68 12 14.25 12
Oriental Bank of Commerce 2.29 13 1.03 15 88.56 5 2.56 15 12 9
Punjab National Bank 2.4 10 1.04 13 87 10 3.11 3 9 7
State Bank of India 2.06 20 0.84 23 84.33 22 2.69 11 19 23
Syndicate Bank 1.7 26 0.92 18 89.44 3 2.71 10 14.25 12
UCO Bank 1.73 25 0.63 27 88.92 4 2.26 25 20.25 25
Union Bank 2.15 15 0.92 18 88.18 6 2.61 14 13.25 11
Axis Bank 2.82 4 1.4 6 79.02 29 2.31 22 15.25 15
City Union Bank 2.8 5 1.51 4 86.35 16 2.84 7 8 6
DCB Bank 1.21 29 0.03 29 82.03 25 2.34 19 25.5 30
Dhanalaxmi Bank 1.14 30 0.01 30 86.15 17 2.29 23 25 29
Federal Bank 2.85 3 1.14 9 86.61 12 2.94 4 7 3
HDFC Bank 2.98 2 1.58 3 82.46 24 3.55 2 7.75 4
ICICI Bank 2.42 9 1.28 8 78.24 30 1.98 29 19 23
IndusInd Bank 2.55 8 1.07 12 81.71 26 2.27 24 17.5 17
Jammu & Kashmir Bank 2.69 6 1.29 7 90.42 1 2.9 5 4.75 1
Karnataka Bank 2.18 14 1.04 13 84.88 21 2.1 27 18.75 21
Karur Vysya Bank 2.61 7 1.64 2 86.54 13 2.9 5 6.75 2
Kotak Mahindra Bank 3.33 1 1.86 1 79.07 28 4.52 1 7.75 4
Lakshmi Vilas Bank 1.86 24 0.66 25 84.34 23 2.25 26 24.5 28
South Indian Bank 2.08 18 0.92 18 88.15 7 2.49 17 15 14
Yes Bank 2.37 12 1.48 5 79.51 27 2.09 28 18 19

Source: Authors compilation from available data

Table 5 above contains the ranking under earnings
quality as a whole and each of the sub-parameters as
well. The major findings are that Jammu & Kashmir
Bank is the best bank in terms of overall Earnings
Quality followed by karur Vysya Bank and Federal
Bank at the 2nd and 3rd position respectively. HDFC
Bank and Kotak Mahindra Bank jointly occupies the 4 th
position followed by City Union Bank at the 6 th position,
Punjab National Bank at the 7th position, Andhra Bank
at the 8th position, Oriental Bank of Commerce at the 9th
position and Indian Bank at 10th position. The banks
which mark weakest performance in this regard are
DCB Bank standing at 30th position, Dhanalaxmi Bank
at 29th position and Lakshmi Vilas Bank at 28th position.

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E. Liquidity Ranking
Table 6: Liquidity Ranking
Liquid Assets to Liquid Assets to Liquid Assets to Government
Total Assets Ratio Total Deposits Demand Deposits Securities to Total Group Rank
Banks
(%) Ratio (%) Ratio (%) Assets Ratio (%)
Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank
Allahabad Bank 7.71 24 8.72 27 120.66 14 26.23 5 17.5 21
Andhra Bank 9.17 11 10.62 14 130.72 8 27.63 2 8.75 3
Bank of Baroda 13.63 1 15.87 3 188.26 2 20.64 26 8 2
Bank of India 10.37 6 12.3 8 185.22 3 19.91 28 11.25 7
Canara Bank 10.26 7 11.77 11 155.8 5 23.87 16 9.75 5
Central Bank of India 8.28 20 9.44 23 107.15 21 26.93 4 17 19
IDBI Bank 5.28 30 24.43 1 88.69 28 16.33 30 22.25 28
Indian Bank 7.59 25 8.72 27 128.6 10 28.65 1 15.75 15
Indian Overseas Bank 8.87 15 10.38 16 120.87 12 27.34 3 11.5 8
Oriental Bank of Commerce 8.66 17 9.91 19 120.71 13 24.32 15 16 17
Punjab National Bank 9.01 12 10.68 13 108.35 19 24.54 13 14.25 12
State Bank of India 10.41 5 13.48 5 98.33 23 25.54 7 10 6
Syndicate Bank 8.99 13 10.25 18 111.61 17 25.07 8 14 11
UCO Bank 8.67 16 9.86 20 117.25 16 24.99 9 15.25 14
Union Bank 8.1 21 9.43 24 94.27 25 22.08 22 23 30
Axis Bank 11.02 2 13.55 4 81.81 29 20.74 25 15 13
City Union Bank 8.55 18 9.71 21 109.31 18 24.94 11 17 19
DCB Bank 8.37 19 10.34 17 106.82 22 24.43 14 18 22
Dhanalaxmi Bank 10.71 3 12.28 9 130.2 9 24.99 9 7.5 1
Federal Bank 7.27 26 8.58 29 155.46 6 23.53 17 19.5 24
HDFC Bank 10.01 9 13.43 6 58.79 30 22.88 18 15.75 15
ICICI Bank 8.89 14 16.22 2 145.83 7 19.22 29 13 9
IndusInd Bank 10.23 8 13.05 7 119.43 15 21.5 23 13.25 10
Jammu & Kashmir Bank 10.48 4 11.92 10 92.62 26 21.29 24 16 17
Karnataka Bank 7.24 27 8.21 30 126.72 11 26.23 5 18.25 23
Karur Vysya Bank 8.08 22 9.55 22 88.76 27 22.56 20 22.75 29
Kotak Mahindra Bank 5.33 29 10.76 12 97.16 24 22.4 21 21.5 26
Lakshmi Vilas Bank 7.91 23 9.1 26 107.44 20 22.75 19 22 27
South Indian Bank 9.37 10 10.49 15 228.19 1 24.91 12 9.5 4
Yes Bank 6.56 28 9.32 25 177.62 4 20.62 27 21 25

Source: Authors compilation from available data

Liquidity ranking including ranking under each ratio
therein is shown in table 6 above. The key findings are
that Dhanalaxmi Bank secures the 1st rank followed by
Bank of Baroda at 2nd rank and Andhra Bank at the 3rd
rank. The others among the top ten banks are South
Indian Bank at the 4th position followed by Canara Bank
at 5th position, State Bank of India at 6th position, Bank
of India at 7th position, Indian Overseas Bank at 8th
position, ICICI Bank at the 9th position and IndusInd
Bank at the 10th position. The banks which show poorest
performance regarding liquidity are Union Bank at 30 th
rank, Karur Vysya Bank at 29th rank and IDBI Bank at
28th rank.

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F. Composite Ranking
Table 7: Composite Ranking
Capital Management Earnings Composite
Banks Asset Quality Liquidity Average
Adequacy Efficiency Quality Ranking
Allahabad Bank 20 23 16.75 15.5 17.5 18.55 24
Andhra Bank 15 15 12.25 10.5 8.75 12.3 4
Bank of Baroda 16.25 8.5 14.5 18.75 8 13.2 7
Bank of India 17.75 14.75 12.25 22 11.25 15.6 18
Canara Bank 13.5 11 13.75 17.5 9.75 13.1 5
Central Bank of India 24 24.5 26.25 18.5 17 22.05 30
IDBI Bank 11.25 16.5 8.75 22.75 22.25 16.3 21
Indian Bank 16.75 18.5 19.75 13 15.75 16.75 22
Indian Overseas Bank 16.5 21.25 15.5 14.25 11.5 15.8 19
Oriental Bank of Commerce 18 10.25 14.75 12 16 14.2 16
Punjab National Bank 15.25 16 15.25 9 14.25 13.95 14
State Bank of India 17.25 13.75 20.5 19 10 16.1 20
Syndicate Bank 15.5 10.25 13 14.25 14 13.4 8
UCO Bank 21.25 19.25 19.25 20.25 15.25 19.05 25
Union Bank 18.25 17.25 12 13.25 23 16.75 22
Axis Bank 20.75 10.5 8 15.25 15 13.9 13
City Union Bank 7 15.25 13.75 8 17 12.2 3
DCB Bank 14.5 20.25 24.25 25.5 18 20.5 29
Dhanalaxmi Bank 20.25 20.75 28.25 25 7.5 20.35 28
Federal Bank 11.5 13.25 16 7 19.5 13.45 10
HDFC Bank 16.25 14.5 11.25 7.75 15.75 13.1 5
ICICI Bank 14.75 11.25 9 19 13 13.4 8
IndusInd Bank 12 8.75 8 17.5 13.25 11.9 2
Jammu & Kashmir Bank 17.75 16.5 17.75 4.75 16 14.55 17
Karnataka Bank 18 19.5 23.75 18.75 18.25 19.65 26
Karur Vysya Bank 5 11.25 12 6.75 22.75 11.55 1
Kotak Mahindra Bank 12 14 15.5 7.75 21.5 14.15 15
Lakshmi Vilas Bank 12.25 19.75 22.25 24.5 22 20.15 27
South Indian Bank 13.75 15.25 15.75 15 9.5 13.85 12
Yes Bank 12.25 13.5 3.75 18 21 13.7 11

Source: Authors compilation from available data

After assessing the relative performance of the select
banks based on each of the parameters namely, Capital
Adequacy, Asset Quality, Management Efficiency,
Earnings Quality and Liquidity, it becomes pertinent to
rank the banks based on their overall performance. Table
7 above shows the composite ranking of the select
banks. It is found that the top three banks based on their
overall performance are Karur Vysya Bank having the
1st rank, IndusInd Bank at the 2nd position and City
Union Bank at the 3rd position. Thus, it is witnessed that
the best three banks are from the private sector. The
others among the top ten banks are Andhra Bank at the
4th position, followed by Canara Bank and HDFC Bank
jointly at the 5th position, followed by Bank of Baroda at
the 7th position, Syndicate Bank and ICICI Bank jointly
at the 8th position and Federal Bank at the 10th position.
The banks which show weakest overall performance are
Central Bank of India at the 30th position, DCB Bank at
29th position and Dhanalaxmi Bank at the 28th position.

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V. CONCLUSIONS AND RECOMMENDATIONS

Table 8: Summary of Important Findings

Oriental Bank of Commerce

3rd IDBI Bank _ Federal Bank Andhra Bank City Union Bank
B and Syndicate Bank
E
Axis Bank and
S 2nd City Union Bank IndusInd Bank karur Vysya Bank Bank of Baroda IndusInd Bank
T IndusInd Bank
Karur Vysya Jammu & Kashmir
1st Bank of Baroda Yes Bank Dhanalaxmi Bank Karur Vysya Bank
Bank Bank
C A M E L Overall
Lakshmi Vilas
28th Axis Bank Indian Overseas Bank DCB Bank IDBI Bank Dhanalaxmi Bank
W Bank
O Central Bank of
R 29th UCO Bank Allahabad Bank Dhanalaxmi Bank Karur Vysya Bank DCB Bank
India
S
T Central Bank of Central Bank of
30th Central Bank of India Dhanalaxmi Bank DCB Bank Union Bank
India India

Table 8 above summarizes the important findings of the
study. From the study, it can be concluded that Karur
Vysya Bank is the best among the select 30 banks based
on overall performance. Its capital adequacy and
earnings quality is mainly responsible for the same. In
terms of each individual parameter, again Karur Vysya
Bank is the best one in terms of capital adequacy. Bank
of Baroda is the most efficient one in maintaining its
asset quality. Yes Bank is having the best managerial
efficiency. Jammu & Kashmir Bank is having the best
earnings quality and Dhanalaxmi Bank is having the
best liquidity position.
Central Bank of India is having worst overall
performance. This bank should try to improve its weak
areas i.e. overall capital adequacy, asset quality and
management efficiency. DCB Bank occupies the 2nd last
rank in terms of overall performance. It should
concentrate on improving its management efficiency and
earnings quality which seems to be weaker than its
peers. Though the liquidity position of Dhanalaxmi
Bank is better than all its peers, it occupies the 28 th
position. This is again attributable to weak management
and poor earnings quality. The bank should try to
develop these aspects. Eventually, it is recommended
that the banks should try to improve its weak areas and
maintain its strong areas in order to sustain in future.
BIBLIOGRAPHY
[1] Aspal, Parvesh Kumar and Malhotra, Naresh (2013),
Performance Appraisal of Indian Public Sector
Banks, World Journal of Social Sciences, Vol. 3, No.
3, Pp. 71-88.
[2] Chowdhury, Subroto (2011), An Inquiry into the
Financial Soundness of Commercial Banks in India
Using CAMEL Approach, Journal on Banking
Financial Services and Insurance Research, Vol. 1,
Issue 7, Pp. 88-121.
[3] Kouser, Rehana and Saba, Irum (2012), Gauging the
Financial Performance of Banking Sector using
CAMEL Model: Comparison of Conventional, Mixed
and Pure Islamic Banks in Pakistan, International
Research Journal of Finance and Economics, Issue 82,
Pp. 67-88.
[4] Mani, Mukta (2011), Parameters of Rating of Indian
Commercial Banks A Critical Analysis,
International Journal of Research in Commerce, IT and
Management, Vol. 1, Issue 2, Pp. 149-155.
[5] Manoj, P K (2010), Financial Soundness of Old
Private Sector Banks(OPBs) in India and
Benchmarking the Kerala Based OPBs: A CAMEL
Approach, American Journal of Scientific Research,
Issue 11, Pp. 132-149.
[6] Prasad, K.V.N. (2012), Evaluating Performance of
Public Sector and Private Sector Banks through
CAMEL Model, Asian Journal of Research in
Banking and Finance, Vol.2, Issue 3, Pp. 36-46.
[7] Prasad, K.V.N. and Reddy, D. Maheshwara (2012),
Evaluating Performance of Nationalized Banks and
SBI Group through CAMEL Model, Academicia: An
International Multidisciplinary Research Journal,
Vol.2, Issue 3, Pp. 32-39.
[8] Reddy, K. Shriharsha (2012), Relative Performance
of Commercial Banks in India Using CAMEL
Approach, International Journal of Multidisciplinary
Research, Vol.2, Issue 3, Pp. 38-58.

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CRAFTING NEUROECONOMIC-MANAGERIAL DECISIONS

1
Jyotirmaya Satpathy, 2Adyasha Das, 3Suneetha Narendran, 4Michael Sturman, 5Sandhya R Das
1
DLitt, Faculty, Officers Training Academy, Indian Army, Gaya, India.
2
PhD, Faculty, Indian Institute of Tourism Management, Bhubaneswar, India.
3
PhD, Faculty, Dept. of Management(Organisation Behaviour) and Director Research, University of East London, UK.
4
PhD, Faculty, Dept. of Management, Cornell University, Cornell, USA.
5
PhD, PhD, Faculty, Dept. of Economics, Berhampur University, Berhampur, India.
Email: jyotisatpathy@gmail.com

management levels of analysis capable of predicting

Abstract : Decision-making is a region of intense study in
neuroscience, and cognitive neuroscience, In real, World
decision processes, management decisions emerge from
complexly interlinked, This paper explores how brain
absorbs information, recognises and frames problematic
situations, and chooses appropriate responses, Brain
structures suggest that brain considers various sources of
information before making decision,Brain imaging
technologies have stimulated neuro (managerial) studies of
internal order of mind and its links with bandwidth of
human decisions,How is (managerial) decision making
processes carried out in brain? What are the limits of
understanding thinking as a form of computing? How does
previous experience alter behavior? Do we interpret
research findings when neuro (managerial) logical results
conflict? Theoretical explanations posit that human brain
accomplishes this through neural computations.
Deciphering such transactions require understanding of
neuro processes that implement value - dependent decision
making. This leads to formulation of a neuro -
management decision making paradox. The goal is a
speculation of how brain implements decisions that is tied
to behaviour. There are unsolved research issues; how does
Manager decide in a state of vacillation, Risk and
Probability? How does Manager decide in state of VUCA
(Uncertainty, Vulnerability, Complexity and Ambiguity?
How do we make decisions? How do human brains
compute and represent abstract ideas? What counts as
explanation of how brain works (what are function,
algorithm and implementation)? This paper attempts at
addressing current pace of advances in methods (fMRI,
BOLD, EEG, ECG, etc), where we are going and what we
ought to research next. This Paper attempts to explore
phenomena through individual action, decision -making
and reasoning processes. Objective is to put forward a
model for neuro - management decision, in which
interaction between variables of neuro - management
decision processes are addressed through series of How are decisions carried out in brain? Question is how
measurements of brain activity at time of decisions.
manager make decisions. Brain considers sources of
Attempt is to describe a regular model for decision making
process with intent of linking neuro - psycho and information before decision. In particular, the processes
by which individuals reach decisions have been ignored.
________________________________________________________________________________________________
20
observed behaviour. This provides conceptual framework
for understanding and conducting Neuro (managerial)
management research at intersection of neuro (managerial)
science, management and psychology, offer solution
through measurements of brain activity at time of
decisions, linking and spanning neuro(managerial)
biological and psychological and management levels of
analysis.
Key Words: Cognitive Neuroscience, Brain Imaging,
Coherent Brain Dynamics, VUCA, fMRI, BOLD, EEG,
ECG
I. INTRODUCTION
What are minds for? Human brain is the most complex
thing that we know of within our own World. Perhaps it
is the most complex thing in the universe! Why have we
as a species been blessed with such a gift? What is it
for?How much of our managerality is determined by our
brain? Its a question thats perplexed philosophers for
centuries and scientists for decades,This is the
old character versus nurture debate, Despite all the
recent advances in the cognitive and neurosciences,
theres still much about the human brain that we do not
know, We are still quite a ways off from understanding
how the brain produces phenomenal experience or
qualia, Its what makes us the unique, self-reflective
creatures that we are, Decision-making is a region of
intense study in neuroscience, and cognitive
neuroscience, In real, World decision processes,
management decisions emerge from complexly
interlinked, There is a need to explore how brain absorbs
information, recognises and frames problematic
situations, and chooses appropriate responses.
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Problems confronting decision makers often embody
conflicting values. Manager often fail to design
rational decisions. When faced with obscure decision,
individuals engage in strategic simplifications of
decision problems. How do parts of the brain that
govern decision-making coordinate their activity when
making a decision? This paper explores certain neuro-
underpinnings in managerial decision modeling. Brain
structures suggest that brain considers various sources of
information before making decision, Brain imaging
technologies have stimulated neuro (managerial) studies
of internal order of mind and its links with bandwidth of
human decisions, how is (managerial) decision making
processes carried out in brain? What are the limits of
understanding thinking as a form of computing? How
does previous experience alter behavior? Do we
interpret research findings when neuro (managerial)
logical results conflict?
Imaging is an important aspect of dynamic capabilities
and there is an increasing amount of evidence of how
evolutionary patterns are shaped, There are yet unsolved
problems in (managerial) cognition, although some of
these problems have evidence supporting a hypothesized
solution, and the field is rapidly evolving, What are the
general implications of neuro (managerial)
management? There are unsolved research issues; how
does Manager decide in a state of vacillation, Risk and
Probability? How does a Manager decide in state of
VUCA (Uncertainty, Vulnerability, Complexity and
Ambiguity? How do we make decisions? How does
human brain compute and represent abstract ideas?
What counts as explanation of how the brain works
(what are function, algorithm and implementation)? This
paper attempts at addressing current pace of advances in
methods (fMRI, BOLD, EEG, ECG, etc), where we are
going, and what we should research next. This provides
conceptual framework for understanding and conducting
Neuro (managerial) management research at intersection
of neuro (managerial) science, management and
psychology, offer solution through measurements of
brain activity at time of decisions, linking and spanning
neuro(managerial) biological, psychological and
management levels of analysis,
volatility, uncertainty, complexity and ambiguity of
general conditions and situations, The deeper meaning
of each element of VUCA serves to enhance the
strategic significance of VUCA foresight and insight as
well as the behavior of groups and managers in
organisations.
________________________________________________________________________________________________
21
Managerial Activity: Managers make (economic)
decision makings in complex situations.
Neuromanagerial economic decision making needs a
decision maker (Manager) responsible for economic
decision making. This maker has number of alternatives
and must choose the best alternative (or optimised
combination). When this has been made, events may
have occurred (maker has no control). Each
(combination) of alternatives, followed by an event,
leads to a result with some quantifiable significance.
Cognitive neuroscience research suggests that diverse
preference orderings and decisions possibly will surface
depending on which brain circuits are activated. This
perchance contradicts the microeconomic postulate that
one complete preference ordering provides sufficient
information to predict decision and behaviour.
Interpretation of Managerial activity in terms of
neuroscience is typically concerned with the
neurophysiological underpinnings of Managerial
neurodecision Managerial economic behaviours. One
key insight is modularity of human brain (not all brain
circuits get activated when executing response to given
circumstances). Same stimuli may generate different
behavioural responses depending on which brain circuits
are activated. If hypothesis is accurate, different brain
circuits can guide to different decisions depending on
which brain structures and circuits are activated.
Consequently, there would be various (possibly
conflicting) preference orderings. Furthermore, if a
particular brain circuit could act relatively insulated,
distinctive preference ordering would result (closed
system).
II. HUMAN BRAIN TECTONICS
Human resources rely on cautious mock-up of
neuromanagerial economic decision making modeling.
Tactic consists in construction models to display
relationship between cause and neuro incongruity.
Freedom provided by introspection technique leads to a
model selection problem. Neuro - management
neuromanagerial economic decision making-making,
regarded as a mental process (cognitive process), result
in selection of path of action among alternative
circumstances. Each neuromanagerial economic
decision making-making process produces
neuromanagerial economic decision making. Process is
regarded as incessant process integrated with situation.
Investigation is concerned with rationale of
neuromanagerial economic decision making -making,
reasonableness and invariant neuromanagerial economic
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decision making. These reflect compensatory interface
of neuromanagerial economic decision making -related
expanse.
Specific brain structure potentiates neuromanagerial
economic decision making - makings depending on
strategy, traits and framework. Therefore,
neuromanagerial economic decision making is a
reasoning or emotional process which can be rational or
irrational, based on explicit / tacit assumptions. This
leads to formulation of a neuro - management
neuromanagerial economic decision making paradox.
Explorations on brain mechanisms juxtapose link
between brain and behaviour, known as Cognitive
Neuroscience, to study neuronal activities, connections
between neurons, plasticity of brain and relationship
between brain and behaviour. These inherit methods as
how brain encodes, processes information, stores
representation in mind to craft actions in reaction to
stimuli. These embrace sensation and perception of
information, interface linking information in dissimilar
modalities, matrix of memory and dispensation of
information. Deduction is based on postulation that
individual cognitive functions are based on neural
activities in brain.
Neuromanagerial economic decision making involves
detection of need, discontent within oneself, decision
making to change and mindful perseverance to execute
decision making. How are neuromanagerial economic
decision making carried out in brain? What are the
general implications? Primary argument is that
neuromanagerial economic decision making-making is
coupled with factors of uncertainties, compound
objectives, interactive intricacy and apprehension that
makes neuromanagerial economic decision making-
making course of action difficult. There is the
requirement for strategic neuromanagerial economic
decision making-making. Questions include; how to
choose in situations where stakes are high with multiple
conflicting objectives? How to plan for dealing with
risks and uncertainties involved? How to craft options
better than originally available? How to become better
neuromanagerial economic decision making makers?
What resources will be invested? What would be the
potential responses? Who will make this
neuromanagerial economic decision making? How
should they be evaluated? How will one decide? Which
of the things that could happen would happen? How can
we ensure neuromanagerial economic decision making
will be carried out? These questions are crucial for
understanding complex human behaviours.
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22
The human brain is the most complex organ in the body.
The human brain is one of the most complex objects of
scientific research. Understanding the brain, its
cognitive functions, and the related conscious
experience requires cooperation of quite a number of
different disciplines. The number of connections in the
brain exceeds the number of atoms in the universe. The
brain is foremost a control structure that builds an inner
illustration of outer world and uses this depiction to
make decision, goals and priorities, formulate plans and
be in charge of activities with objective to attain its
goals. Cognitive Neuroscience relies on non-invasive
techniques to look at neural activities at different brain
regions when Managers perform cognitive tasks. The
techniques offer information concerning brain activity
during diverse cognitive processes but not about
underlying relationship linking brain expanse and
cognitive functions. It is mysterious whether activities in
brain regions are essential to analogous cognitive
functions. These have confines.
III. VOLATILITY, UNCERTAINTY,
COMPLEXITY AND AMBIGUITY
We are living in a World where volatility and
uncertainty have become the new normal. We look at
the World through a lens, which we call VUCA, which
stands for Volatile, Unstable, Complex, and
Ambiguous. VUCA, as prescribed in Wikipedia,is
describes or reflects on ischemic failures and
behavioural failures, which are imperative to
organisational failure, At some level, capacity for
VUCA management and leadership hinges on enterprise
value schemes, assumptions and natural goals, A
'prepared and resolved' enterprise is engaged with
strategic agenda that is aware of and empowered by
VUCA forces, The capacity for VUCA leadership in
strategic and operating terms depends on a well,
developed mindset for gauging the technical, social,
political, market and economic realities of the
environment in which people work, Working with
deeper smarts about the elements of VUCA may be a
driver for survival and sustainability in an otherwise
complicated World,
V = Volatility, The character and dynamics of
change, and the character and speed of change forces
and change catalysts,
U = Uncertainty, The lack of predictability, the
prospects for surprise, and the sense of awareness and
understanding of issues and events,
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C = Complexity, The multiplex of forces,
confounding of issues and disorder and confusion that
surround an organisation,
A = Ambiguity, The haziness of reality, the
potential for misreads, and the mixed meanings of
conditions; causeandeffect confusion,
These elements present the context in which
organisations view their current and future state, They
present boundaries for planning and policy management,
They come together in ways that either confound
decisions or sharpen the capacity to look ahead, plan
ahead and move ahead, VUCA sets the stage for
managing and leading, The particular meaning and
relevance of VUCA often relates to how people view the
conditions under which they make decisions, plan
forward, manage risks, foster change and solve
problems, In general, the premises of VUCA tend to
shape an organisation's capacity to:
Anticipate issues that shape conditions
Understand consequences of issues and actions
Appreciate interdependence of variables
Prepare for alternative realities and challenges
Interpret and address relevant opportunities
Uncertainty pervades neuromanagerial economic
decision making. Nearly all real-world decisions involve
some form of psychological uncertainty, whether about
the likelihood of an event or about the nature of future
preferences. Most studies in neuromanagerial economic
decision making neuroscience literature like in its
counterparts in the socio - Managerial sciences have
examined the effects of risk; for reviews see Knutson
and Bossaerts (2007), Platt and Huettel (2008),
Rushworth and Behrens (2008). While definitions vary
across contexts, a risky neuromanagerial economic
decision making involves potential outcomes that are
known but probabilistic, such that risk increases with
variance among those outcomes, potentially normalized
by the expected value (Weber et al., 2004). Uncertainty
can have other forms, however. Outcomes may be
known but occur with unknown probability; such
neuromanagerial economic decision makings
reflect ambiguity (Ellsberg, 1961). Only a handful of
studies, so far, have investigated the neural basis of
ambiguity (Smith et al., 2002; Hsu et al., 2005; Huettel
et al., 2006; Bach et al., 2009). And, still other states of
uncertainty might be evoked in cases where the
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outcomes themselves are unknown, as is the case in
complex real-world neuromanagerial economic decision
makings. So far, neuromanagerial economic decision
making neuroscience research has established weak,
albeit numerous, links between uncertainty and its
neural substrates.
To meet the challenges of a complex World, strategic
planners need to understand the differences between the
four elements of VUCA. In a VUCA World, whats the
point of strategy? Strategy does still have a purpose, but
building one in a VUCA environment requires more
nuanced thinking. Today's turbulent environment of
volatility, uncertainty, complexity and ambiguity means
new challenges for government managers and
policymakers, VUCA environments require that we
learn from big, picture thinkers from different
disciplines and industries, And such learning can reduce
the 'U' in VUCA, uncertainty, Volatility has to do with
the nature, speed and magnitude of change, Volatility or
turbulence is a phenomenon that is occurring more
frequently than in the past, Uncertainty relates to the
unpredictability of issues and events, Information about
the past and present are less and less useful in
anticipating the future, making it extremely difficult for
decision, makers to forecast and allocate resources
effectively, Complexity, the multiple and
difficult,to,understand causes of problems, poses another
challenge, Ambiguity adds to the other three factors,
Ambiguity makes it difficult to understand the meaning
of fast, moving, unclear and complex events,
Leadership agility and adaptability are now required
skills if organisations are to succeed in a VUCA World,
Leaders must be able to make continuous shifts in
people, processes, technology and structure, This
requires flexibility and speed in decision-making the
ability to diagnose, decide and deploy resources quickly
, and preferably proactively rather than reactively,
Theorists of some of the success factors we have
identified around leading effectively in a VUCA World:
always retain a clear vision against which judgments can
be made, with agility to flex and respond appropriately
to rapidly unfolding situations, provide clear direction
and consistent messaging against a backdrop of
continually shifting priorities, supported with the use of
new virtual modes of communication where necessary,
anticipate risks but dont invest too much time in long,
term strategic plans, dont automatically rely on past
solutions and instead place increased value on new,
temporary solutions, in response to such an
unpredictable climate, think big picture, make decisions
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based as much on intuition as analysis, capitalise on
complexity, if your talent management strategy is
working, then you should be confident that you have the
right people in the right place, this will enable you to
rapidly break down any challenge into bite size pieces
and trust in the specialist expertise and judgment of
those around you, be curious, uncertain times bring
opportunities for bold moves, seize the chance to
innovate, encourage networks rather than hierarchies
as we reach new levels of interconnection and
interdependency collaboration yields more than
competition, leverage diversity as our networks of
stakeholders increase in complexity and size, be sure to
draw on the multiple points of view and experience they
offer, doing so will help you expect the unexpected,
never lose focus on employee engagement, provide
strategic direction, whilst allowing people the freedom
they need to innovate new processes, products and
services, get used to being uncomfortable, resist
temptation to cling on to outdated, inadequate processes
and behaviours, take leaps of faith and enjoy adventure.
How are Decisions carried in Brain?
How are decisions carried out in brain? Question is how
manager make decisions. Psychological models of
decision-making explain that humans gradually
accumulate evidence for a particular choice over time,
and execute that choice when evidence reaches a critical
level. Brain considers sources of information before
decision. In particular, the processes by which managers
reach decisions have been ignored. Problems
confronting decision makers often embody conflicting
values. Manager often fail to design rational decisions.
When faced with obscure decision, managers engage in
strategic simplifications of decision problems. How do
parts of the brain that govern decision-making
coordinate their activity when making a decision? This
paper explores certain neuro-underpinnings in
managerial decision modeling.
In neurosciences, how the brain processes different
sensory stimuli (such as images or sounds) and which
are the neural basis involved in deciding what we
perceive, have been the deeply studied in the past
decades. Impairments in decision-making are at the core
of a variety of psychological and neurological
impairments. Brain accumulates evidence when faced
with a choice and triggers an action once that evidence
reaches a tipping point. But, how do we know where we
are, where we have been and where we are going? It's
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24
important to understand intricacy of managerial brain.
Brain is main organ of nervous scheme. It has the same
general structure as brains of other mammals, but with
developed cerebral cortex. Model of brain function can
explain a wide range of anatomical and physiological
aspects of brain schemes.
Size of brain comes from cerebral cortex, especially
frontal lobes, which are associated with executive
functions. The area of cerebral cortex devoted to vision,
visual cortex, greatly enlarged as compared to other
animals. Basic structural design of brain is constructed
through a process that begins early in life and continues
into adulthood. Simpler circuits come first and more
obscure brain circuits endow with basic blueprint.
Certain neurons seem to represent the accumulation of
evidence to a threshold and others represent the
evidence itself, and that these two types of neurons
interact to drive decision-making. Experiences influence
how or whether genes are expressed. Imaging studies
suggest that differences in cognition and behaviour
(might) relate to differences in brain connectivity.
Perceptive the coverage to which two brains can differ is
crucial in basic neuroscience research.
What is mind? The decision-making mechanism consists
on a loop, ie a connection back and forth between these
two types of areas. Where does it come from? How are
brain, mind, matter, and energy related? How do they
interact? Why does this interaction seem to be the source
of our suffering? What could we learn about being
managerial if we were to weave the psychological
sciences, neurosciences, biological sciences, and the
physical sciences into a single integrated depiction? Can
we create a comprehensive model of mind and brain so
that we may be able to perceive and influence the
network of interactions that we are embedded within and
influenced by? What is the most elementary way in
which we can describe their interaction so that we may
understand who we are and ultimately improving the
quality of managerial life?
An emerging theme in decision neuroscience is that
organisms need to make a number of value-related
computations to make even simple choices. Consider the
case of action-based choice exemplified by the
goalkeeper's problem. First, he needs to assign a value to
each action under consideration. These signals, known
as action values, encode the value of each action before
choice and regardless of whether it is subsequently
chosen or not, which allows them to serve as inputs into
the decision-making process. Second, these action
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values are compared to generate a choice. Third, the
value of the option that is selected, known as the chosen
value, is tracked to be able to do reinforcement learning.
In particular, by comparing the value of the outcome
generated by the decision to the chosen value, the
organism can compute a prediction-error signal that can
be used to update the action value of the chosen option.
Note that while the action values are computed before
the decision is made, the chosen value and outcome of
the comparator process signals are computed afterward.
A basic question, intimately tied to the problem of
action choice, is that of how actions are assembled into
organised sequences. Theories of routine sequential
behaviour have long acknowledged that it must rely not
only on environmental cues but also on some internal
representation of temporal or task context. It is assumed,
in most theories, that such internal representations must
be organised into a strict hierarchy, mirroring the
hierarchical structure of naturalistic sequential behaviour
Based on recent neuroscience evidence, we model the
brain as a dual-scheme organisation subject to three
conflicts: asymmetric information, temporal horizon,
and incentive salience. Under the first and second
conflicts, we show that the uninformed scheme imposes
a positive link between consumption and labour at every
period. Furthermore, decreasing impatience
endogenously emerges In decision-making, purposes
must first be established, purposes must be classified
and placed in order of importance, substitute actions
must be developed, the substitute must be evaluated
against all the purposes, the substitute that is able to
achieve all the purposes is the tentative decision, the
tentative decision is evaluated for more possible
consequences, the decisive actions are taken, and
additional actions are taken to prevent any adverse
consequences from becoming problems and starting
both schemes (problem scrutiny and decision-making)
all over again.
There are steps that are generally followed that result in
a decision model that can be used to determine an
optimal production plan and in a situation featuring
conflict, role-playing may be helpful for predicting
decisions to be made by involved parties. Each of these
factors leads to a fresh perspective. A neural level
focuses on the basic forebrain functions and shows how
processing demands dictate the extensive use of timing-
based circuitry and an overall organisation of tabular
memories. An embodiment level organisation works in
reverse, making extensive use of multiplexing and on-
demand processing to achieve fast analogous
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calculation. An awareness level focuses on the brains
representations of emotion, attention and consciousness,
showing that they can operate with great economy in the
context of the neural and embodiment substrates.
Each step in the decision-making process may include
social, cognitive and cultural obstacles to successfully
negotiating dilemmas. It has been suggested that
becoming more aware of these obstacles allows one to
better anticipate and overcome them. Neuroscience and
social science have witnessed tremendous advance in
Neuroeconomics and Neuromanagement since the birth
of these interdisciplinary fields at the turn of Century. In
order to explain the cognitive and neural underpinning
of managerial decision-making, the ability to process
multiple substitutes and to choose an optimal course of
action, especially in a managerial context. Nerve
management is contemporary developments in cognitive
neuroscience, neural imaging technology progress, and
the traditional management research across a field of
study, through study of manager in their daily
management behaviour such as consumption,
investment, production, circulation, financial
management, managerial activities such as various acts
of the neurophysiologic underpinning, thereby from
brain science perspective on managerial management
activities of the mechanisms behind, and brings forward
corresponding management measures and strategies.
And neuroeconomics, nerve management emphasis on
exact situations, manager differences and the operational
level of behaviour, study different conditions managed
object evolution rule and achieve the most effective
management method. Decision makers must have vast
amounts of information in order to make use of the
rational comprehensive decision-making technique.
There needs to be an ability to predict the future
consequences of decisions made. Also, problems
confronting decision makers often embody conflicting
values. In addition, it is tough to ignore the sunk costs of
former decisions, these may foreclose many substitutes.
IV. QUESTIONS IN DECISION SPECTRUM
Overall, this multi-dimensional and thus potentially
integrative approach combines neuro-biological, socio -
Managerial and trans-cultural dimensions of decision-
making and trust into a stratified image of the human
being and its behaviour(s). Important to this paradigm is
the need to characterize the interaction of physical,
psychological, cultural, and even spiritual cognitions
that establish various decisions, and which relate
decisional-actions and outcomes to evaluations of trust.
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We opine that this explicitly experimental (heuristic)
neuro-bio-psycho-socio - Managerial model of trust
encompasses at least six dimensions:
A neural level that proposes the neural networks
involved in ecological / economic decision-making;
A biological attribute that describes the
evolutionary and developmental bases and relevance of
decision-making and trust;
An anthropological component that defines and
describes the collective meaning and basic value of trust
for human beings as a self-conscious species among
other (conscious) species;
A psychological aspect that provides a definition of
trust pertinent to the specific cognitions, emotions and
character of an individual;
A philosophical dimension that regards the rational
dimension of trust in the sense of an in-depth scrutiny of
causes and origins as related to effects;
A socio - managerial level of influence, that
describes dependent inter-relations with others,
respective past and present experiences of these inter-
relations;
But why would specifically neurological experiments be
relevant to causal knowledge concerning the Managerial
neuroeconomic decision making realm? Practitioners
and philosophers have advanced a number of arguments.
First, neuromanagerial economic decision makings
holds out the promise to unify within the socio -
Managerial sciences: uncovering the neural
underpinnings of decision making would get us a theory
that is applicable to all human behaviour in all socio -
Managerial contexts. We could use the same theory to
causally explanation for, not just rationalize post hoc,
pro-socio - Managerial behaviour as well as for self-
regarding Managerial neuroeconomic decision making
decisions. Second, neuromanagerial economic decision
makings evidence has been thought to establish the
reality of key Managerial neuroeconomic decision
making variables; for example, some measurable neural
phenomenon of decision (activation patterns in
VTMPFC) is said to be the physiological referent of
utility, thus vindicating a realist interpretation of
Managerial neuroeconomic decision making theory.
In this paper we show that neuromanagerial economic
decision makings do none of these things. First, it does
little to unify socio - Managerial phenomena because
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knowledge of neurological mechanisms of decision-
making is not explanatorily relevant for all or even most
socio - Managerial scientific phenomena. Moreover,
unification as such cannot be used as an evidential
argument for the probable truth of neuromanagerial
economic decision making hypotheses. Second, that
neuromanagerial economic decision makings provides
the mark of the real for typical socio - Managerial
scientific explanation rests on the mistaken intuition that
causal relations are more real the closer we get to
describing them in a purely physical vocabulary.
Without this assumption, the finding that there is a
correspondence between a psychological entity and a
particular brain area does not, by itself, make the
psychological entity any more real. Third,
neuromanagerial economic decision makings do not
automatically improve Managerial neuroeconomic
decision making explanations, because mechanistic
details are not always explanatorily relevant for socio -
Managerial and Managerial neuroeconomic decision
making phenomena.
Mechanistic details only improve the explanation of the
original socio - Managerial scientific explanandum if
knowledge of them effectively increases our ability to
make causal and explanatory inferences about the
explanandum. Thus far, however, this has rarely been
the case in neuromanagerial economic decision makings.
Consequently, just the fact that some neural variables
are directly manipulated does not necessarily mean that
Managerial neuroeconomic decision making relevant
variables are been controlled. Moreover, the argument
that unlike behavioural experiments, neuromanagerial
economic decision makings experiments obviate the
need for matching the subjects and the experimenters
models, and hence afford more reliable causal
inferences, overestimates the current status of
neurological theories of decision making.
We argue that the relevance of neuroscientific findings
is mostly to be understood in terms of triangulation of
evidence by independent means of determination.
Triangulation is a standard term in the methodology of
the socio - Managerial sciences. It refers to the use of
multiple different and independent sources of evidence
or theoretical perspectives to check whether a putative
phenomenon is an artifact of some particular method or
perspective. The epistemic rationale of triangulation is
thus to distinguish the real from the artefactual by
controlling for errors and biases of particular methods.
Conceiving neuromanagerial economic decision making
experimentation as triangulation explicates what is
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correct behind some of the arguments discussed above.
For example, a finding that a certain brain area is
involved in altruistic punishment does not, as such,
render socio - Managerial preferences more real by
providing a physical realiser, but provides additional
confirmatory evidence through another independent
means of determination (i.e. imaging studies of the brain
or the measurement of hormonal levels in the body) of
the involvement of socio - Managerial preferences in the
explanation of altruistic punishment.
A similar point applies to unification: when appraising
neuromanagerial economic decision making hypotheses,
the sound evidential principle of triangulation should be
distinguished from the common intuition that
neuromanagerial economic decision making hypotheses
are likelier to be true in virtue of explaining much by
little. The latter mixes evidential and explanatory
virtues. Unification in this case is relevant only insofar
as a unifying hypothesis related to diverse sources of
evidence actually has more, and mutually independent,
evidence. Our claims apply beyond the case of
neuromanagerial economic decision makings: the
epistemic contribution of neuroscience to socio -
Managerial scientific theories and explanations lies in
the generation of (further kinds of) evidence for the
triangulation of socio - Managerial scientific hypotheses.
The irrationality of human decision-making attracts the
fierce interest of two very different fields: neuroscience
and economics. Economic theories of human decision-
making are essentially based on two parameters: what
something is worth and the probability of its occurrence.
Neuroscientists, on the other hand, think of decision-
making as a product of physical neural circuits: sensory
information enters the brain, journeys through the brain
where a decision is made, and eventually exits the
brain to evoke bodily responses. Economics ignores
these biological, more proximal roots of behaviour,
whereas neuroscience ignores the economic goals that
ultimately guide our decisions. These two approaches
have recently been integrated in the hybrid field of
Managerial neuroeconomic decision making.
Managerial neuroeconomic decision making attempts to
unify abstract economic variables with neuroanatomical,
and thus understand physical mechanisms by which our
brains make decisions.
The basic premise is that somewhere along sensory-
motor circuits are the neural substrates that represent
value and probability. These areas must interact and
influence flow of information along the circuit, thereby
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27
prompting a certain decision and its subsequent
behaviour. Pressing questions, then, are how and where
these abstract variables are combined in the brain, and
the dynamics of the neural computation which
engenders a decision. Because economists base their
models on optimal behaviour, they have the ability to
develop a precise, unified framework for interpreting
human behaviour; thesis is, essentially, that humans
choose alternatives that maximize rewards. Managerial
neuroeconomic decision making draws upon the
precision and rigor of formal models of economics to go
beyond the sensory-motor circuit, allowing opportunities
for understanding neural basis of more abstract
economic ideas, such as value and the profitability of
outcomes (a bit more challenging to study than sensory
and motor systems). Thus, principle of economics
allows neuroscientists to explore physical mechanisms
underlying high level cognitive processes.
But if Managerial decision Economists could develop
models that explain for subtleties of human brain, they
might be able to predict complex behaviours more
accurately. This, in turn, might have any number of
practical applications: investment bankers could hedge
against financial euphoria like Internet boom;
advertisers could sell products more winningly. The idea
that understanding the brain can inform Managerial
decision Economics is controversial but not new; for 20
years, behavioural economists have argued that
psychology should have a greater influence on the
development of economic models. What is new is use of
technology: economists, like other researchers, now
have at their disposal powerful tools for observing brain
at work. Functional Magnetic Resonance Imaging
(fMRI) has been around since late 1980s; but only in
past few years has it been used to study decision-
making, which is crux of economic theory. The result is
emerging field of neuromanagerial decision
Economics. A flurry of recent papers in scientific and
economic by Caltech Managerial decision Economics
Professor Colin Camerer shows how researchers are
using neural basis of decision-making to develop new
neuromanagerial decision economic models.
Neuroeconomic decision making has always relied on a
careful modeling of decision-makers. They are described
by utility functions that represent their goals, and they
interact at (Nash) balance. Nevertheless, discrepancies
between theoretical predictions and observed behaviour
have haunted the field for many decades. The objective
of neuroeconomic theory is to build models based on
evidence from brain sciences, such as experimental
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neuroeconomic decision making, but also other fields in
neuroscience and neurobiology. Measurement of brain
activity provides information about the underlying
mechanisms used by the brain during decision
processes. In particular, it shows which brain regions are
activated when a decision is made and how these regions
interact with each other. This information can then be
used to build a model that represents this particular
mechanism. Contrary to behavioural neuroeconomic
decision making, the model does not rely on
introspection or plausible assumptions but rather on an
existing and documented biological property of the
brain.
Deciphering brain - environment transactions requires
mechanistic understandings of neurobiological processes
that implement value-dependent decision-making. There
is a crucial difference between thinking about thinking
and actually enhancing brain and mental processes by
developing latent potential of each individual.
Theoretical explanations posit that human brain
accomplishes this through a series of neural
computations, in which expected future reward of
different decision options are compared with one
another and then option with highest expected value is
selected. If human brain is often compared with
computer, one aspect is crucially missing. Humans
define goals for information processing in computers,
whereas goals for biological brains are determined by
need for survival in uncertain and competitive
environments. How to handle brains behind businesses
in age of dramatic alter and growing uncertainty? What
then are the coherent brain dynamics underlying
prediction, control and decision-making? To cope with
this mismatch, behavioural economists have developed
new theories of decision-making that are a better fit for
the behavioural data than traditional models. The
methodology consists in building models to demonstrate
the relationship between cause (preference for particular
object) and behavioural anomaly. This line of research
formulates possible explanations for behavioural data,
but it is nevertheless subject to shortcomings. Often the
cause is not observable, and there is no evidence of the
relationship provided by the model. Most notably,
freedom provided by introspection method leads to
model selection problem. Also, cause of behavioural
anomaly may simply lie elsewhere.
The methodology used in neuroeconomic theory has two
advantages. Primarily, evidence from the brain sciences
provides precise guidelines for the constraints that
should be imposed on decision-making processes. This
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can help uncover the true motivations for the wrong
decisions and improve the predictive power of the
theory. Behavioural theories that explanation for biases
in judgment build on specific models of preferences
over beliefs or non-Bayesian updating processes. Rather
than guessing a cause for biases, neuroeconomic theory
builds a model based on the existing physiological
properties underlying learning and belief formation. In
principle, this can help pinpoint biological foundations
for anomalous decisions. For example, research in
neurobiology demonstrates that the brain cannot encode
all the information contained in a signal. A decision is
triggered when enough information supporting one
alternative is obtained, and the brain uses a variety of
biological mechanisms to filter information in a
constrained optimal way. In a recent paper we show that
these properties of the brain result in a behavioural
tendency to confirm initial priors (Brocas and Carrillo;
2009).
As a result, field raises questions that require the
engagement of several fields, as investigators must
parse out and quantify all the different aspects of
thinking that seem to happen simultaneously in order to
literally make headway into perceptive the physical
underpinning for making decisions. The field is still in
its infancy, but one of the driving forces behind the field
now is to try to understand more exactly what are the
computations performed in different brain areas, and
how they are similar or different. Also how do they
communicate with each other and how is information
transformed as it moves around in brain. How do these
different representations about important variables for
decision making come together and allow you to form a
decision? (Kavli Foundation; 2011)
Quantification of choice has been a major area of
research for neuro scientists for several decades. This is,
in part, due to the discovery of the Matching Law that
stipulates that relative response rate on concurrently
available substitutes match the available relative
reinforcement rates. This theoretical construct has been
developed to describe response allocation in more
obscure situations. Manager often fail to design
rational decisions. Economics agents are subject to
multiple biases that affect the way they perceive events,
act upon them and learn from experience. These
behaviours cannot be ignored since they have disastrous
consequences for organisations. When faced with
obscure decision, managers engage in simplifying
strategies. Adaptive decision making in real-World
contexts relies on strategic simplifications of decision
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problems. Yet, neural mechanisms that shape these
strategies and their implementation remain largely
unknown. Although we now know much about how
brain encodes exact decision factors, much less is known
about how brain selects among multiple strategies for
managing computational demands of obscure decision-
making task. Expansion of neuroeconomics parallels
development of cognitive science (Satpathy;2015).
Neuroeconomics has bridged the contrasting fields of
economics and psychology. Economics, psychology,
and neuroscience are converging today into a single,
unified discipline with the ultimate aim of providing a
single, general conjecture of managerial behaviour. This
is the emerging field of Neuroeconomics in which
consilience, accordance of two or more inductions
drawn from different groups of phenomena, seems to be
operating. Economists and psychologists are providing
rich conceptual tools for perceptive and modeling
behaviour, while neurobiologists endow with tools for
study of mechanism. The goal of this discipline is thus
to understand the processes that connect sensation and
action by revealing the neurobiological mechanisms by
which decisions are made. Such union is almost
exclusively attributable to changes within economics.
Neuroeconomics has inspired change because important
findings have posed more of a challenge to standard
economic perspective. The important source of
inspiration for neuro economist has been neuro
judgment research, which can, in turn, be seen as an
amalgamation of ideas from cognitive science and
economics. Neuroeconomics has primarily challenged
customary economics postulation that decision-making
is a unitary process a simple matter of integrated and
coherent utility maximization suggesting instead that it
is driven by interaction between automatic and
controlled processes (Satpathy;2015).
What do brain scans really tell us? What are the
practical implications of this research? Despite
substantial advances, question of how we design and
how we ought to craft judgments and decisions has
engaged researchers for decades, with different
disciplines approaching the problem through
characteristically different techniques. However,
neuroeconomics decision making has recently emerged
as an inter-disciplinary effort to bridge this gap. It has
sought to integrate ideas from fields of organisational
psychology, neuroscience and neuroeconomics in an
effort to specify accurate models of choice and decision.
Research investigates neural bases of decision
predictability and value, central parameters in
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29
economics model of expected utility. Neuro-multiple-
schemes approach to decision-making, in turn,
influences economics, a perspective strongly rooted in
organisational psychology and neuroscience. Integration
of these approaches and methodologies offers exciting
potential for construction of near-accurate models of
decision-making (Satpathy; 2014).
Among the gargantuan questions are; How do neurons
code emotional weight of experiencesdo some
neurons only become active in response to negative
experiences while other neurons only fire when we
experience something favorably? How do neurons code
the numerical value of various optionsdo more or
different neurons fire for an option with bigger rewards
than that for a lesser reward? How does the coding for
rewards that you receive immediately differ from that of
rewards that are delayed? How do the far-flung different
parts of the brain that govern decision-making
coordinate their activity when making a decision? What
triggers a decision? Is it cumulative buildup of firing
neurons that tip balance to final choice? How do we
alter decision-making rules when we encounter new
information that makes those rules obsolete? (Satpathy;
2015).
General implications of neuro (managerial)
management?
New brain imaging technologies have motivated
neuromanagement studies of internal order of the mind
and its links within spectrum of human managerial
choices from managerial choice making among fixed
gambles to managerial choice making mediated by
market and other institutional rules. We are only at the
beginning of the enterprise, but its promise suggests a
fundamental change in how we think, observe and
model managerial choice in all its contexts (Smith;
2002). Neuroscience and social science have
witnessed tremendous advance in
Neuroeconomics and Neuromanagement since the
birth of these interdisciplinary fields at the turn
of the century.
Managerial choice neuroscience offers a novel approach
to the study of both individual and interactive
managerial choicemaking by combining the methods of
behavioral experiments, functional neuroimaging, and
formal management models. Use of this methodology
has the potential to advance our knowledge of existing
theoretical accounts of how people make managerial
choices and judgments by informing and constraining
these models based on the underlying neurobiology.
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Examining sophisticated high-level behavior at a neural
level, such as deciding on how much risk to take with an
investment or deciding on a strategy when playing a
competitive game with an opponent, can provide
important clues as to the fundamental mechanisms by
which managerial choice making operates. Despite
substantial advances, the question of how we make
managerial choices and judgments continues to pose
important challenges for scientific research.
How can we leverage our brain in business? How can
we capitalise / invest on the brain? How can we make
the best decision? How can we find the productivity hot
buttons in the brain? How can we encourage creative
and ethical brain? What is the nature of explanation in
Managerial neuro - Economics? What information about
the past is relevant to Managerial neuro - economic
decision making? What past experiences cannot be
unlearned in view of subsequent developments? How
does experience influence our decisions? What kinds of
experiences would produce better decisions and better
adaptation? How does experience transfer to new
situations? What learning processes take place during
sampling and repeated consequential decisions? How do
these processes alter when decisions are interrelated
over time? When feedbacks are delayed? When
decisions are time-dependent? How do we address
consequential and sampling decisions when the
environment is dynamic? When it involves other
individuals? What learning processes take place during
sampling and repeated consequential decisions? How do
these processes alter when decisions are interrelated
over time? When feedbacks are delayed? When
decisions are time-dependent? How do we address
consequential and sampling decisions when the
environment is dynamic? When it involves other
individuals? How do Managers make decisions in
dynamic stock management tasks? How do Managers
perceive accumulation over time? Why do Managers
perform so poorly at control tasks? How can judgments
of accumulation be improved? What are the effects of
feedback complexity and feedback delays? How are
theories represented in computational models? How can
we validate and test theories/hypotheses with
computational models? What is the value of using video
games and simulations in behavioural decision research?
How can we best present, measure, and analyse data on
human learning? How do Managers make inferences
from numbers? How do Managers process logic
representations of data relationships? Is the
representation of the past in any sense rational? Are
________________________________________________________________________________________________
30
affective as well as cognitive processes involved? Can
the Managerial neuro - economic present rewrite the
Managerial neuro - economic past? What are the
implications of memory-dependence for modeling and
policy-making? Is there place for emergence in
Managerial neuro - economical explanations; in
particular, how does one take into explanation
downward causality? Is psychology indispensable for
understanding of Managerial neuro - economical
phenomena? What can and cannot one expect of
mathematical modeling in Managerial neuro -
Economics? Does Managerial neuro - Economics have
an ontologically sound domain? How dissimilar are
biological systems and Managerial neuro - economical
ones? Is an analysis of various notions of rationality
(including bounded rationality) still important, and if so,
why? What is bounded rationality? A complete answer
to this question cannot be given at the present state of
the art. However, empirical findings put limits to the
concept and indicate in which direction further inquiry
should go. What has philosophy of Managerial neuro -
Economics to say about the present crisis? What has
philosophy to offer the methodology of behavioural
Managerial neuro - Economics and neuromanagerial
economics?
Some managerial behaviors patently fail to achieve the
goals of the organisation in which they are performed,
leading often to the downfall of the managers who are
responsible for them and sometimes to the failure of the
entire organisation in which they
arise. Neuromanagement has bridged management and
psychology. It challenges standard management
assumption that decision-making is a unitary process-a
simple matter of integrated and coherent utility
maximization. The goal is a mathematical theory of how
brain implements decisions that is tied to behaviour.
This theory is likely to show some decisions for which
rational - decision making is a good approximation
(particularly for evolutionarily sculpted or highly
learned decision makings), provide deeper level of
distinction among competing alternatives and provide
empirical inspiration to incorporate nuanced ideas about
endogeneity of preferences, individual difference,
emotions and endogenous regulation. Researches
investigate central parameters viz. neural bases of
decision predictability and value in theory of expected
utility.
The key question is what level of management is likely
to be involved in each decision type? This starts with the
premise that most basic decisions (in form of decision
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 FMU Journal of Management
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makings or effort allocation) can be traced back in
structure of macro-scale brain activity, as measured with
modern neuroimaging apparatus. Typically, such
responses involve regions in brain whose precise
function depends upon specific task the brain is solving.
This context-dependency expresses itself through
(induced) specific plasticity of networks, in parallel to
tonic changes in neuromodulatory activity. In turn, this
reconfiguration networks subtends learning and yield
(mal) adaptive behaviour. In other words, it is very
likely that goal-directed behaviour emerges from
interactions that shape spatio - temporal dynamics of
macro-scale brain networks (Satpathy; 2015). This
means that understanding mechanics of multimodal
observation of brain activity (electrophysiology, fMRI)
and neuro measurements (explicit decision makings,
reaction times, autonomic arousal signals, grip force)
poses exciting challenge of quantitatively relating
information processing to brain effective connectivity.
Decision usually involves three steps: recognition of a
need, dissatisfaction within oneself (void or need),
decision to change (fill void or need) and conscious
dedication to implement the decision. How are decisions
carried out in brain? Do we interpret research findings
when neurological results conflict with self-report?
What are the general implications of neuro
management? Central argument is that decision-making
is at core of all managerial functions and future of any
organisation lies on vital decisions made. However,
there are certain critical issues coupled with factors such
as uncertainties, multiple objectives, interactive
complexity and anxiety make decision-making process
difficult. At times when making a decision is complex or
there are many interests at stake, then we realize the
need for strategic decision-making. Questions include;
how to choose in tough situations where stakes are high
and there are multiple conflicting objectives? How
should we plan? How can we deal with risks and
uncertainties involved in a decision? How can we create
options that are better than ones originally available?
How can we become better decision makers? What
resources will be invested in decision - making? What
are the potential responses to a particular problem or
opportunity? Who will make this decision? Every
prospective action has strengths and weaknesses; how
should they be evaluated? How will they decide? Which
of the things that could happen would happen? How can
we ensure decision will be carried out? These questions
are crucial for understanding complex human
behaviours (Satpathy; 2015).
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31
Conclusion: Real-world problems are often
complicated. Psychological scientists have been
interested in how people make decisions for several
decades, but philosophers and economists have been
studying decision making for centuries. Highlighting
areas of overlap between cognitive modeling and multi-
attribute judgment will stimulate further cross-
fertilization and inspire research examining the
boundary conditions of various models. Deciphering
brain - environment transactions requires mechanistic
understandings of neurobiological processes that
implement value-dependent organisational decision-
making. There is a crucial difference between thinking
about thinking and actually enhancing brain and mental
processes by developing latent potential of each
individual. Theoretical accounts posit that human brain
accomplishes this through a series of neural
computations, in which expected future reward of
different organisational decision options are compared
with one another and then option with highest expected
value is selected. If human brain is often compared with
computer, one aspect is crucially missing. Humans
define goals for information processing in computers,
whereas goals for biological brains are determined by
need for survival in uncertain and competitive
environments. How to handle brains behind businesses
in age of dramatic change and growing uncertainty?
What then are the coherent brain dynamics underlying
prediction, control and organisational decision-making?
Organisational cognitive neuroscience is a brave new
World of research opportunities. Neuroimaging has
attracted most concerns from those critical of
neuroscientific research in business and other fields.
Organisational cognitive neuroscience research has
made a number of inroads into understanding economic
decision-making .There is growing interest in exploring
the potential links between human biology and
management and organisation studies, which is bringing
greater attention to bear on the place of mental processes
in explaining human behaviour and effectiveness. This
represents a multidisciplinary and multi-method
approach to the conceptualization of management and
organisations. In keeping with the methods dominance,
there is a focus on particular concerns when conducting
neuroimaging work, and especially functional magnetic
resonance neuroimaging (fMRI) based research. While
much of the above discussion covered issues that are of
particular concern to fMRI and other neuroimaging
research methods, studies that which use alternative
research methods possess their own unique caveats.
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REFERENCES
[1] Satpathy, J. (2012). Neuro - Economic Actors in
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[5] Tiwari, P., Satpathy, J. and Mishra, S. (2014).
Cognitive Paths in Techno - Managerial
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[6] Satpathy, J., Mishra, S. and Rath, B. P. (2014).
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[7] Satpathy, J. and Mishra, S. (2014). Paradigm
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[13] Satpathy, J. Theoretical Challenges in Neuro-
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Absenteeism Decision Computational Modeling,
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Managerial Decision Modeling, SSRN - Abstract:
2638258, (July 31, 2015), USA.
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An Analysis of Employees Engagement in Selected Corporate

Enterprises in India
Dr. Kamini
Assistant Professor, Faculty of Commerce, Jamshedpur Womens College, Jamshedpur.
Email:drkamini08@gmail.com

Abstract : Employee Engagement is hot topic of discussion
among the researchers, practitioners, and corporate
enterprises and is proved that it is positively correlated
with the organizational performance. In this paper
employee engagement is evaluated of north India and is
correlated with different demographic factor. Employee
engagement is a vast construct that touches almost all parts
of human resource management facets we know hitherto.
If every part of human resources is not addressed in
appropriate manner, employees fail to fully engage
themselves in their job in the response to such kind of
mismanagement. The construct employee engagement is
built on the foundation of earlier concepts like job
satisfaction, employee commitment and Organizational
citizenship behaviour. Though it is related to and
encompasses these concepts, employee engagement is
broader in scope.
I. INTRODUCTION
Human resource executives in India continue to struggle
with talent management issues, particularly retention.
The quest to find the best way to retain employees has
taken HR pundits through concepts such as employee
review, employee satisfaction and employees delight.
The latest idea is Employee Engagement, a concept
that holds, that, it is the degree to which an employee is
emotionally bonded to his organization and passionate
about his work that really matters. Engagement is about
motivating employees to do their best. An engaged
employee gives his company his hundred percent. The
quality of output and competitive advantage of a
company depends upon the quality of its people. It has
been proved that there is an intrinsic link between
employee engagement, customer loyalty and
profitability. When employees are effectively and
positively engaged with their organization they form an
emotional connection with the company. This impacts
their attitude towards the companys clients, and thereby
improves customer satisfaction and service levels. Most
organizations realize today that a satisfied employee is
not necessarily the best employee in terms of loyalty and
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33
productivity. It is only an engaged employee who is
intellectually and emotionally bound with the
organization, feels passionately about its goals and is
committed towards its values who can be termed thus.
He goes the extra mile beyond the basic job
responsibility and is associated with the actions that
drive the business. Moreover, in times of diminishing
loyalty, employee engagement is a powerful retention
strategy. The fact that it has a strong impact on the
bottom-line adds to its significance. A successful
employee engagement helps create a community at the
workplace and not just a workforce. As organizations
globalize and become more dependent on technology in
a virtual working environment, there is a greater need to
connect and engage with employees to provide them
with an organizational identity.
Especially in Indian culture this becomes more relevant
given the community feeling which organization provide
in our society. There are a lot of HR things. They are
called fads. Those are the bandwagons upon which we
hop. Perhaps its time to evaluate whether employee
engagement is a fad or a new knowledge domain for
which HR executives can help make their companies a
better place to work.
Drivers of Employee Engagement
Many researches have tried to identify factors leading to
employee engagement and developed models to draw
implications for managers. Their diagnosis aims to
determine the drivers that will increase employee
engagement level.
According to Penna research report (2007) meaning at
work has the potential to be valuable way of bringing
employers and employees closer together to the benefit
of both where employees experience a sense of
community, the space to be themselves and the
opportunity to make a contribution, they find meaning.
Employees want to work in the organizations in which
they find meaning at work. Penna (2007) researchers
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have also come up with a new model they called communication is the top priority to lead employees to
Hierarchy of engagement which resembles Maslows engagement. The report singles out having the
need hierarchy model. In the bottom line there are basic opportunity to feed their views and opinions upwards as
needs of pay and benefits. Once an employee satisfied the most important driver of peoples engagement. The
these needs, then the employee looks to development report also identifies the importance of being kept
opportunities, the possibility for promotion and then informed about what is going on in the organization.
leadership style will be introduced to the mix in the
Effects of Employee Engagement in Organizational
model. Finally, when all the above cited lower level
Performance
aspirations have been satisfied the employee looks to an
alignment of value-meaning, which is displayed by a Why should companies invest in employee engagement?
true sense of connection, a common purpose and a The answer is because employee engagement is
shared sense of meaning at work. interwoven significantly with important business
outcomes. In this part we will see how employee
The Blessing White (2006) study has found that almost
engagement impacts organizational performance in the
two thirds (60%) of the surveyed employees want more
light of various research works done.
opportunities to grow forward to remain satisfied in their
jobs. Strong manager-employee relationship is a crucial Studies have found positive relationship between
ingredient in the employee engagement and retention employee engagement and organizational performance
formula. outcomes: employee retention, productivity,
profitability, customer loyalty and safety. Researches
Development Dimensions International (DDI, 2005)
also indicate that the more engaged employees are, the
states that a manager must do five things to create a
more likely their employer is to exceed the industry
highly engaged workforce. They are:
average in its revenue growth. Employee engagement is
Align efforts with strategy found to be higher in double-digit growth companies.
Research also indicates that engagement is positively
Empower
related to customer satisfaction (Coffman, 2000; Ellis
Promote and encourage teamwork and and Sorensen, 2007; Towers Perrin Talent Report, 2003;
collaboration Hewitt Associates, 2004; Heintzman and Marson, 2005;
Coffman and Gonzalez-Molina, 2002).
Help people grow and develop
Engaged employee consistently demonstrates three
Provide support and recognition where general behaviours which improve organizational
appropriate performance:
The Towers Perrin Talent Report (2003) identifies the
Say-the employee advocates for the organization to
top ten work place attributes which will result in
co-workers, and refers potential employees and
employee engagement. The top three among the ten
customers
drivers listed by Perrin are: Senior managements
interest inemployees well-being, Challenging work and Stay-the employee has an intense desire to be a
Decision making authority. member of the organization despite opportunities
to work elsewhere
After surveying 10,000 NHS employees in Great
Britain, Institute of Employment Studies (Robinson et Strive-the employee exerts extra time, effort and
al., 2004) points out that the key driver of employee initiative to contribute to the success of the
engagement is a sense of feeling valued and involved, business ( Baumruk and Gorman, 2006)
which has the components such as involvement in
What will happen to an organization if its employees are
decision making, the extent to which employees feel
disengaged? Employees who are not engaged are likely
able to voice their ideas, the opportunities employees
to be spinning (wasting their effort and talent on tasks
have to develop their jobs and the extent to which the
that may not matter much), settling (certainly do not
organization is concerned for employees health and
show full commitment, not dissatisfied enough to make
well-being.
a break) and splitting (they are not sticking around for
CIPD (2006) on the basis of its survey of 2000 things to change in their organization), have far more
employees from across Great Britain indicates that misgivings about their organization in terms of
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34
 FMU Journal of Management
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performance measures such as customer satisfaction
(Blessing White, 2006; Perrin Report, 2003). Meere
(2005) based on the survey conducted by ISR on 360000
employees from 41 companies in the worlds 10
economically strong countries finds that both operating
margin and net profit margins reduced over a three year
period in companies with low engagement, while these
measures increased over the specified period in
companies with high levels of engagement.
Financial News, March 2001, as cited by Accord
Management Systems (2004), reveals that disengaged
employees are more likely to cost their organization.
According to the report, Employees who are disengaged:
Miss an average of 3.5 more days per year
Are less productive
Cost the US economy
Employee Engagement Strategies
So far we have discussed the evolution and definition of
employee engagement, the factors that affect it and
importance of employee engagement explaining how it
is linked to business performance. Now, at this stage any
inquisitive reader may ask a question: So what?
Employee engagement strategies listed below answer
this question. In order to have engaged employees in any
organization, managers need to look at the following ten
points. We can call these points tablets because it is
believed that they will cure employee disengagement
diseases. Take these ten tablets:
Start it on day one: Most organizations do have clear
new talent acquisition strategies. However, theylack
employee retention strategies. Effective recruitment and
orientation programs are the first building blocks to be
laid on the first day of the new employee. Managers
should be careful in pooling out the potential talent of
the new employee through effective recruitment. The
newly hired employee should be given both general
orientation which is related to the company mission,
vision, values, policies and procedures and job-specific
orientation such as his/her job duties, and
responsibilities, goals and current priorities of the
department to which the employee belongs in order to
enable him/her to develop realistic job expectations and
reduce role conflict that might arise in the future. After
the hiring decision is made, the manager has to ensure
role-talent fit when placing an employee in a certain
position and exert all managerial efforts needed to retain
that talent in the organization.
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35
Start it from the top: Employee engagement requires
leadership commitment through establishing clear
mission, vision and values. Unless the people at the top
believe in it, own it, pass it down to managers and
employees, and enhance their leadership, employee
engagement will never be more than just a corporate
fad or another HR thing. Employee engagement does
not need lip-service rather dedicated heart and action-
oriented service from top management. It requires
Leading by Being example
Enhance employee engagement through two-way
communication: Managers should promote two-way
communication. Employees are not sets of pots to which
you pour out your ideas without giving them a chance to
have a say on issues that matter to their job and life.
Clear and consistent communication of what is expected
of them paves the way for engaged workforce. Involve
your people and always show respect to their input.
Share power with your employees through participative
decision making so that they would feel sense of
belongingness thereby increasing their engagement in
realizing it.
Give satisfactory opportunities for development and
advancement: Encourage independent thinking through
giving them more job autonomy so that employees will
have a chance to make their own freedom of choosing
their own best way of doing their job so long as they are
producing the expected result. Manage through results
rather than trying to manage all the processes by which
that result is achieved.
Ensure that employees have every thing they need to
do their jobs: Managers are expected to make sure that
employees have all the resources such as physical or
material, financial and information resources in order to
effectively do their job.
Give employees appropriate training: Help employees
update themselves increasing their knowledge and skills
through giving appropriate trainings. Generally it is
understood that when employees get to know more
about their job, their confidence increases there by being
able to work without much supervision from their
immediate managers which in turn builds their self-
efficacy and commitment.
Have strong feedback system: Companies should
develop a performance management system which holds
managers and employees accountable for the level of
engagement they have shown. Conducting regular
survey of employee engagement level helps make out
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factors that make employees engaged. After finalizing Benefits of Engagements of Employees
the survey, it is advisable to determine all the factors
Employee engagement and psychological well-being are
that driving engagement in the organization, then narrow
different but related constructs. It has been proved by
down the list of factors to focus on two or three areas. It
the research that the engagement of employees is the
is important that organizations begin with a
result of psychological well-being.
concentration on the factors that will make the most
difference to the employees and put energy around As per Ivan T. Robertson etal, it should now be clear
improving these areas as it may be difficult to address that psychological well-being is important for
all factors at once. Managers should be behind such employees. In fact it may be even more important for
survey results and develop action-oriented plans that are employers and organizations. Explaining the reasons he
specific, measurable, and accountable and time- bound. said, people with higher levels of psychological well-
being learn and problem solve more effectively, are
Incentives have a part to play: Managers should work
more enthusiastic about change, related to others more
out both financial and non-financial benefits for
positively, and accept change for rapidly. It is difficult to
employees who show more engagement in their jobs.
think of another set of characteristics, apart from job-
Several management theories have indicated that when
specific skills that are more important to an
employees get more pay, recognition and praise, they
organizations success.
tend to exert more effort into their job. There should be
a clear link between performance and incentives given As cited by J. Bhatnagar and Soumendu Biswas, more
to the employees. recently employee engagement has been related to
building a firms competitive advantage. Employee
Build a distinctive corporate culture: Companies
engagement in fact can make or break the business
should promote a strong work culture in which the goals
bottom line(Lockwood 2006), Martel (2003:30,42) is of
and values of managers are aligned across all work
the opinion that in order to obtain high performance in
sections. Companies that build a culture of mutual
post industrial, intangible work that demands
respect by keeping success stories alive will not only
innovation, flexibility, and speed, employers needs to
keep their existing employees engaged but also they
engage their employees. They say that objectives are
baptize the new incoming employees with this
more easily met when employee are engaged are more
contagious spirit of work culture.
likely to fall short when they are not. They further said
Focus on top-performing employees: A study that in a study they proposed linkage between firm
conducted by Watson Wyatt Worldwide in 2004/05 performance and employee engagement, but in a reserve
onHR practices of 50 large USA firms shows that high- feedback loop. This entails that those firms which are
performing organizations are focusing on engaging their financially robust will have a higher employee
top-performing employees. According to the finding of engagement score.
the same research, what high-performing firms are doing
The above studies reveal that performance and financial
is what top-performing employees are asking for and
status of an organisation is directly related to the
this reduces the turnover of high-performing employees
engagement of employees of that organisation. The
and as a result leads to top business performance. Note
practitioner and academics tend to agree that the
that there is lack of sufficient literature on what could be
consequences of employee engagement are positive
the challenges that entangle with leaders effort to
(Saks 2006).From the above discussion it is clear that
improve their employee engagement scores. Most
employee engagement is sought field of researches and
researches on the area focus on identifying the drivers or
practitioners for the benefits of employees and
factors leading to engagement; however, failing to
employers. The practitioners and consultancies have
indicate clearly articulated strategies to get employees
given long list and data of benefits of this construct and
engaged in their work. The suggested strategies will
researchers also in favour of practice and for further
definitely have financial implications on organizations.
research of this construct.
However, researches do not lucidly show the cost of
efforts aimed at increasing employee engagement. II. METHODOLOGY:
During this study 220 Employees of different selected
Enterprises of Jharkhand, Bangal, and Madhya Pradesh
was surveyed with Systematic Random Sampling. Three
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 FMU Journal of Management
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Percent of large scale companies were selected of scale or not; Karl Pearson Correlation used to
randomly from the CII directory of the north region measure the strength of association between two
2013. To analyse Employees Engagement UWES 17, variables; Mann Whitney Test-2 group is to test
Developed by Wilmar B. Schaufeli is used. For analysis, statistics to compare the two group on same set of
Percentage Distribution Tables are used to listing the responses available from the respondents and Kruskal
percentage of respondents selecting each response Wallis Test-3 or more Groups : to test statistics to
category or scale point; Chi Square Test of compare the three or more groups on same set of
Homogeneity used to analyze weather there were equal responses available from the respondents.
distribution responses from the respondent on all level
III. RESULT OF ANALYSIS
Table 1: percentage Distribution of the Respondents on 7-point Scale Question Regarding Employees Engagement
Factor of Vigor, Dedication & Absorption Practiced in the Selected Organisations
Q No. N AN R S O VO AW 2test
2 1.8 1.4 2.7 13.2 19.1 27.2 34.1 162.20*
5 0.0 0.9 3.6 12.3 17.7 27.3 38.2 133.83*
7 0.9 0.5 8.2 9.1 22.3 21.8 37.3 166.84*
Vigor 10 0.5 2.7 4.1 15.0 19.1 25.5 33.2 143.87*
13 0.0 1.4 4.5 9.5 23.2 32.3 29.1 115.12*
15 0.0 0.9 3.6 5.9 25.5 28.2 35.9 147.03
1 0.5 0.5 3.2 9.1 22.7 23.6 40.5 211.96*
4 0.5 0.9 3.2 11.8 16.8 22.3 44.5 228.96*
Dedication 8 0.5 0.9 5.9 10.0 18.6 22.3 41.8 200.12*
12 0.9 0.9 3.6 9.5 17.7 22.3 45.0 232.96*
17 0.9 0.9 3.2 15.0 20.9 20.9 38.2 175.62*
3 0.0 1.8 4.1 11.4 15.0 28.2 39.5 140.65*
6 2.3 2.3 5.5 10.5 21.8 25.9 31.8 135.60*
Absorption 9 0.0 0.5 2.7 9.5 14.5 27.3 45.9 196.23*
11 0.5 0.9 2.3 12.3 20.0 28.6 33.5 185.61*
14 0.9 1.4 6.4 12.3 24.5 27.3 27.3 131.71*
Absorption 16 1.4 1.8 4.5 13.2 25.5 24.1 29.51 134.32*
N: Never, AN: Almost Never, R: Rarely, S: Sometimes, O: Often, VO: Very Often & AW: Always
*the value of the chi square were significant at 5% level of significance

Vigor Dedication
For the statement of Vigor, 89.7% respondent believe On the statement of Dedication, 86.8% believe that
that they were regularly preserving at their work even they find the work they do full of meaning and purpose
when things were not going well while 84.6% feel they while 85.0% nts feel they were proud of the work they
were very resilient, mentally their work. On the issue do. On the issue feel enthusiastic regarding their job,
regarding feel strong and vigorous at work 83.2% feel 83.6% stated in range of often while 82.7% respondents
often, 81.4% thought that they frequently think up of surveyed were of thoughts that they their job inspires
going to the office when they get up in the morning them. Similarly, on the issue of my job is challenging
Similarly, on the issue of at my work I feel bursting with for me. 80.0% of the respondents surveyed were
energy, 80.9% of the respondents were thinking it quite thinking it quite often.
often on another issue I cannot continue working for
Absorption
very long period at time, 77.8% quite frequently.
On the statement of Absorption, 87.7% believed that
they feel hungry when they work intensely while 82.7%
feel time flies when they work. On the issue feel
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immersed at work, 82.1% of the respondents stated tin Table 3: Mann Whitney Test Analysis of the Average Score
range of often while 79.5% respondents surveyed were of Employees Engagement Factors of Respondents
of thoughts that they frequently think of forgetten According to their Gender & Marital Status
everything around them whenever they work. Similarly, Male Female MW-Test p-value
on the issue of at my work I feel. Bursting with Vigor 4.71 4.68 5175.5 0.938
energy,80.9% of the respondents surveyed were thinking Dedication 4.81 4.84 5201.0 0.984
Absorption 4.68 4.71 4958.0 0.565
it quite often. On another issue regarding I get carried
Married Single MW-Test p-value
away when I am working and Its difficult to detach Vigor 4.81 4.55 5027.0 0.064
myself from my work, 79.1% of the each respondents Dedication 4.97 4.61 4718.0 0.011
surveyed were thinking it quite frequently. The above Absorption 4.77 4.57 5308.5 0.274
analysis of the organisation shows the high score on
There was no significant difference of assessment of
Vigor, Dedication and Absorption. As per Wilmar
employee engagement was present among male and
Schaufeli & Arnold Bakker High sore on vigor depicts
female employees regarding Vigor and Absorption, but
energy, zest and stamina of employees when working.
on dedication there was difference of opinion among
Score high and on dedication strongly identify with their
married and single employees as married employees
work because it is experienced as meaningful, inspiring,
were more dedicated than the single employees.
and challenging. Score high on absorption feel that they
usually are happily engrossed in their work, they feel Table 4: Kruskal-Wallis Test Analysis of the Employees
immersed by their work and have difficulties detaching Engagement Factors Vigor, Scores of the Respondents
from it because it carries them away. Categorized into various Demographic Variables
Mean Score KW-Test p-value
Correlation of Employee Engagement with
Diploma 5.13
Demographic Factors Education
Graduate 4.56 5.21 0.074
Qualification
Followings are the result of correlation with different Post Graduate 4.77
Junior 4.99
demographic factors like age, job experience, gender, Level in
Middle 4.57 8.53* 0.014
marital status, education qualification, level in Organization
Senior 4.83
organisation, type of industry and department: Manufacturing 4.69
Type of Services 4.61
Table 2: Correlation Analysis of Employees 14.03* 0.003
Industry ITES 5.08
Engagement Factors with The Respondents Age and Financial 4.29
In Job Experience HR 4.95
Finance 4.37
Vigor Age In Job Experience Department
Marketing 4.71
9.90 0.078
Correlation -0.039 0.032 Material 4.57
Production 4.63
p-value 0.069 > 0.05 0.635 > 0.05
Customer Care 4.95
Dedication
Correlation 0.019 0.014 Table 5: Kruskal-Wallis Test Analysis of the Employ
p-value 0.779 > 0.05 0.835 > 0.05 Engagement Factor Dedication Scores of the
Absorption Respondents Categorized into Various demographic
Correlation 0.001 0.011 Variables
p-value 0.993 > 0.05 0.867 > 0.05 Mean KW-Test p-value
Score
There were no existences of correlation between the age Diploma 5.44
Education
and employee engagement factors vigor, dedication and Graduate 4.71 7.43* 0.024
Qualification
absorption practiced in their organization and similar Post Graduate 4.85
Junior 5.05
was the results with the job experience of the Level in
Middle 4.70 6.66* 0.036
employees. Thus it was concluded that age and job Organization
Senior 4.99
experience of employees was not effecting its employee Manufacturin
4.86
engagement in the organization. g
Type of
Services 4.64 19.48* 0.0001
Industry
ITES 5.27
Financial 4.17
Department HR 5.02 6.44 0.265
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Finance 4.59 female employees regarding vigor and absorption but

Marketing 4.71 married employees were more dedicated then the single
Material 4.70
Production 4.89
employees.
Customer 4. Educational qualification had no effect on the
4.86
Care
vigor and absorption of the employees whereas it
Education qualification had no effect on the vigor, and does effect the dedication as lesser degree employees are
absorption, of the employees whereas it does effect the more dedicated.
dedication as lesser degree employees are more
5. Junior level employees were again more vigor in
dedicated. Junior level employees were also assessed as
nature and dedicated then the other higher ranks
more vigor in nature and dedication then the other
employee.
higher ranks employees but on absorption parameters
they were all same. On similar Pattern ITES employees 6. ITES employee were again more vigor and
were again more vigor in nature and dedicated then the dedicated then the employee of manufacturing,
other employees but on absorption parameters they were services, financial sector.
all same. There was no effect of departments in
organization on the employees engagement V. LIMITATION & SCOPE FOR FUTURE
WORK
Table 6: Kruskal-Wallis Test Analysis of the
Employee Engagement Factor Absorption Scores of We surveyed large scale enterprises of north India; the
the Respondents Categorized into Various inclusion of SSI and other states may change the results.
Demographic Variables There is a lot of scope for further research on
employees engagement in India. This study can be
Mean Score KW-Test p-value
Education Diploma 5.09 4.21 0.121
expanded to other states, sectors and levels of
Qualification Graduate 4.60 employees.
Post Graduate 4.72
Level in Junior 4.85 5.01 0.082 REFERENCES
Organization Middle 4.60 [1] Alen M Saks, (2006). Antecedents and
Senior 4.86
consequences of employee engagement, Journal
Type of Manufacturing 4.65 6.74 0.080
Industry Services
of Managerial psychology, Vol 21 No. 7, 2006pp.
4.71
ITES
600-619. Accord Management Systems. (2004).
4.94
Financial 4.33 Employee Engagement Strategy: A Strategy of
Department HR 4.88 7.14 0.210 Analysis to Move from Employee Satisfaction to
Finance 4.40 Engagement. [Online] Available:
Marketing 4.67 www.accordsyst.com/papers/engagement_wp.pdf
Material 4.60 (March 3, 2009)
Production 4.67
[2] Baumruk R., and Gorman B. (2006). Why
Customer
Care
4.83 managers are crucial to increasing engagement.
Melcrum Publishing. Blessing White. (2006).
IV. FINDINGS Employee Engagement Report 2006 Blessing
White, Inc. Princeton, New Jersey. [Online]
1. As Shown in table 1. The level of employees
Available: www.blessingwhite.com (November
engagement (Vigor, Dedication and Absorption) is good
15, 2008)
in the surveyed organization; about 80% respondents
have good Vigor, Dedication and Absorption. [3] Clifton, James K. (2008). Engaging your
employees: Six keys to understanding the new
2. There were no existences of significant correlation
workplace. 2002 SHRM Foundation Thought
of age and job experience with employee
Leaders Remarks. Society for Human Resource
engagement factor vigor and absorption practiced in
Management.
their organization.
[4] Clifton, James K. (2008). Engaging your
3. There was no significant difference of assessment
employees: Six keys to understanding the new
of employee engagement was present among male and
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workplace. 2002 SHRM Foundation Thought [9] Dernovsek D. (2008). Creating highly engaged
Leaders Remarks. Society for Human Resource and committed employee starts at the top and
Management. ends at the bottom line Credit Union Magazine,
May 2008. Credit Union National Association,
[5] Coffman C. (2000). Is Your Company Bleeding
Inc.
Talent? How to become a true employer of
choice. The Gallup Management Journal, 2000. [10] Development Dimensions International. (2005).
The Gallup Organization, Princeton, NJ. (Predicting Employee Engagement MRKSRR12-
1005 Development Dimensions International,
[6] Coffman, C., and Gonzalez-Molina, G. (2002).
Inc., MMV. [Online] Available:
Follow this Path: How the worlds greatest
www.ddiworld.com (October 30, 2008).
organizations drivegrowth by unleashing human
potential. New York Warner Books, Inc. [11] Ellis C. M., and Sorensen A. (2007). Assessing
Employee Engagement: The Key to Improving
[7] Cohen G., and Higgins N. J. (2007). Employee
Productivity. Perspectives, vol .15, Issue 1 The
Engagement: The secret of highly performing
Segal Group, Inc.
organizations.
[8] Journal of Applied Human Capital Management,
Vol 1 Number 2007.

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BRAND EXPERIENCE AND ITS EFFECT ON BRAND LOYALTY-

AN EMPIRICAL STUDY
Sudipta Kumar Jana
Assistant Professor, Indian Institute for Production Management, Kansbahal, Odisha-770034
Email: sudiptajana82@gmail.com

Abstract : Experiential marketing and brand experience in
particular has attracted a lot of attention among
practioners and academicians as well. In the era of
globalization, service brands have to ensure uniqueness of
the brand. This study aims to investigate the effect of quick
service brand experience on brand loyalty. The present
study has also explored the applicability of brand
experience construct in the context quick service
restaurant brand in India. Data were collected from 215
consumers in Bhubaneswar city of India. Data was
analysed with help of SPSS and AMOS and research
methods like confirmatory factor analysis and structural
equation modelling were applied. The results of the present
study revealed that the four factor brand experience
construct was valid as well as reliable. The findings of the
present study have strategic importance for marketing
managers as it re-established that the four factors of the
brand experience construct have a positive effect on brand
loyalty.
Key words- Experiential marketing, Brand experience,
Brand Loyalty, Structural equation modelling
I. INTRODUCTION
Services sector in India is the largest contributor to the
national GDP. The United Nations central product
classification (UNCPC) classified the service sector but
India has its own classification and the basic difference
is that while construction is not a part of the service
sector in India, it is a part of UNCPC. Since many
services are rendered in the unorganized or informal
sector, it is difficult to get the exact figure about the
service sector. In the last decade the contribution of
services to Gross Domestic Product (GDP) has
outweighed the combined contribution of agriculture
and industry. Different types of services have
contributed in different ways for the overall growth of
the service sector but basically the growth is driven by
telecommunications, financial services along with
export of Information and Communication Technology
(ICT). Although there has been disagreement about the
role of service sector in the generation of jobs (Bosworth
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& Maertens, 2010; Kochhar et al.2006), still there has
been a lot of potential and prospective. Bosworth &
Meurtens (2010) mentioned that the Total Factor
Productivity (TFP) was the highest in the service sector.
Indias projected economic growth at 7.3 % by 2025
will drive the countrys total consumption (Mc Kinsey
& Company; 2007). As per reports, there will be
demand for different types of services but the demand
for education, healthcare, personal care, hotels and
restaurants will be maximum.
The restaurant industry in India is comprised of both
unorganized as well as organized sector. In India the
restaurant industry is dominated by unorganized sector
which is characterized by road side location and with no
technical as well as accounting standards. The organized
sector is characterized by quality control, organized
supply chain, accounting transparency, multiple outlets
and dominated by global players. The organized sector
is again segmented in to four types namely full service,
quick service restaurants, bars & Lounge and kiosk/cart.
The full service is further segmented in to fine dining
and casual dining, while the quick service restaurant is
further segmented in to take away, home delivery and
eat in. Although Indians take pride in eating home food,
but there is an increasing demand for fast food.
The growth in the Quick Service Restaurant (QSR) is
driven by several factors like expanding middle class,
urbanization, youth spending, nuclear families, better
logistics, increased income, mall and multiplex boom.
The quick service restaurant industry at the same time is
also facing different problems like health and hygiene
concern among buyers, localization of menu,
standardization of products across outlets, ordering
service time, talent acquisition, high attrition rate,
building a cost effective supply chain, establishing a
supply chain in a new region, monitoring quality of
products procured from third parties etc. Most of the
different quick services retailing brands are located near
the malls, tourist hubs, corporate hubs, shopping centres,
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multiplexes, airport, railway station, college and III. METHODOLOGY

Universities with an objective to create an adequate
experience as well as ambience for the success of the
brand. The present study concerns consumer brand
experience with a quick service retailing brand and its
effect on brand loyalty.
II. LITERATURE REVIEW
Brand experience has attracted a lot of attention not only
among the marketing professional but also academicians
as well. Brakus et al. (2009) in their seminar article
revealed the for deferent factors of brand experience.
Experience can entice customers to consume a product
and service again (Joy & Sherry, 2003) drive customer
satisfaction (Wu and Liang, 2009). Experiential value, in
the context of service, and behavioural intentions are
closely related (Sheih and Cheng, 2007), and can have a
positive effect on customer satisfaction (Wu and Liang,
2009). Although Experiential marketing was introduced
by (Holbrook and Hirschman, 1982) and letter by Pine
& Gilmore, 1999) but was made popular by (Brakus et
al., 2009; Zarantonello & Schmitt, 2010). Brand
experience should be delivered as per the commitment
made to the customer via different communication tools
(Glatstein,2012) and should be consistent in all the steps
of the service delivery process. A brand experience
manual (Fihlo, 2012) can be strategically very helpful
for service organizations. Walls et al (2011) in their
study on qualitative hotels revealed that physical
environment as well as human interaction can drive
positive brand experience. Developing appropriate
service personality will give firms and advantages
position in new service development (Clatworthy,
2012). Personality traits have a positive impact
(Mehmetoglu, 2012) on customer experience. There are
many antecedents of brand experience, i.e. convenience,
media richness (Min & Dong, 2012), Ease of product
use (Sheng and Teo, 2012). Positive Brand experience
can drive consumer-brand relationship (Morgan-Thomas
& Veloutsou, 2011) and also positively impacts brand
prestige (Choi et al., 2011).
Hypothesis 1: Sensory dimension of brand experience
has a positive effect on brand loyalty.
Hypothesis 2: Affective dimension of brand experience
has a positive effect on brand loyalty.
Hypothesis 3: Behavioural dimension of brand
experience has a positive effect on brand loyalty.
Hypothesis 4: Intellectual dimension of brand
experience has a positive effect on brand loyalty.
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42
As the purpose of the study was to find the applicability
of the brand experience concept for quick service
restaurant in Indian context, so quantitative approach
was applied. Also the study emphasizes on the effect of
brand experience on brand loyalty. Brakus et al. (2009)
brand experience construct comprising of four
dimensions namely sensory, affective, behavioural and
intellectual has been selected for the study. Similarly, to
study the brand loyalty construct Olivers (1999)
measure has been selected. For the purpose of the
present study although 650 number of questionnaires
were distributed to customers visiting Pizza hut stores
but only 515 number of valid responses were used for
the study. In the present study convenience sampling
approach was used. A five point Likerts scale was
anchored to the questions. In the present study Anderson
and Gerbing (1988), two step method i.e. measurement
model and structural model has been used.
IV. RESULTS AND DISCUSSION
A convenience sample of customers over 18 years of age
at different Pizza hut stores in Bhubaneswar city of India
were asked to fill up the questionnaires. The sample
comprised of 53% female respondents followed by 47 %
male respondents. Similarly, the sample comprised of
57% of respondents who were less than 25 years of age
and revealed that most of the customers visiting Pizza
Hut stores, were very young.
In the present study we have used the two-step structural
equation modelling process. A measurement model was
used because it will measure different variables logically
and systematically that represents constructs involved in
a theoretical model. In the measurement model, fit and
validity is tested. The results of the confirmatory factor
analysis and the overall measurement model is Chi
square = 160.188 with 109 degrees of freedom and the
p-value associated with this result is .0063, which is
appropriate for our study.
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between sensory and behavioural to .614 which is the

estimated correlation between affective and intellectual.
Table-1.2: Correlations: (Measurement Model)
Estimate
Affective <--> Sensory .580
Behavioural <--> Intellectual .645
Sensory <--> Behavioural .475
Intellectual <--> Brand loyalty .561
Affective <--> Brand loyalty .570
Sensory <--> Intellectual .459
Affective <--> Intellectual .614
Behavioural <--> Brand loyalty .515
Sensory <--> Brand loyalty .542
Figure-1.1 Measurement Model Affective <--> Behavioural .610
Regression Weights: (Group number 1 - Default
model)
Table-1.3, shows construct reliabilities, and average
Table-1.1, gives the standardized regression weight of variances extracted (AVE) for all the latent variables.
different variables and latent variables and which ranges All factors exhibited adequate convergent validity. The
from .729 for the variable named sensory to .958 for the average variance extracted (AVE) of all the first order
latent variable named behavioural. factors were much higher than the cut off value of 0.5
(Fornell & Larcker, 1981) and which ranged from .50 to
Table-1.1: Standardized Regression Weights: .88 To measure the reliability of the measure Cronbachs
(Measurement model) alpha method has been used and from the measurement
Estimate model it can be concluded that all the measures used in
A1 <--- Affective .799 the study were valid as well as reliable (Table-1.3).
A2 <--- Affective .777 Table 1.3: Construct Reliability, and Average
A3 <--- Affective .849 Variance Extracted (AVE) for Latent Variables
S1 <--- Sensory .729 (Measurement Model)
S2 <--- Sensory .648 Sens Affecti Behavi Intellect Brand
ory ve oural ual Loyalty
S3 <--- Sensory .754 Construct .74 .84 .82 .92 .89
B3 <--- Behavioural .926 Reliability
AVE 0.50 0.68 0.82 0.78 0.88
B2 <--- Behavioural .958
B1 <--- Behavioural .834 Similarly, all the squared multiple correlation values
I3 <--- Intellectual .894 among the different factors was less than the average
I2 <--- Intellectual .924 variance extracted (Table-1.2), hence it can be
concluded that the construct displayed adequate
I1 <--- Intellectual .858
divergent validity.
bl1 <--- Brand loyalty .945
bl2 <--- Brand loyalty .958 Model Fit Summary
bl3 <--- Brand loyalty .942 Although different researchers (Wheaton et.al, 1997;
bl4 <--- Brand loyalty .947 Carmines and McIver, 1981) have suggested different
bl5 <--- Brand loyalty .920 cut off value for ratio of chi square to degrees of
freedom and it can be as high as 5 or as low as 2, but in
From Table-1.2, it is evident that there exist significant the present model we have achieved a value of lower
correlations among different latent variables which than 2 (CMIN/DF= 1.470; see Table-1.4). So, it is
range from .475 which is the estimated correlation clearly evident that the model fit is acceptable.
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Table-1.4 CMIN Table-1.7 Parsimony-Adjusted Measures

CMIN/ Model PRATIO PNFI PCFI
Model NPAR CMIN DF P
DF Default model .801 .786 .796
Default model 44 160.188 109 .001 1.470 Saturated model .000 .000 .000
Saturated Independence model 1.000 .000 .000
153 .000 0
model
Independence
17 8327.803 136 .000 61.234
Root mean square error of approximation is another very
model important absolute fit index to check and correct the chi
In Table-1.5, the Root mean square residual (RMR = square goodness of fit statistic result. Root mean square
.021) and the smaller the RMR, the better it is and a error of approximation takes in to account the sample
RMR of zero indicates better fit. Similarly, from Table- size as well as the number of variables to determine the
1.5, it is evident that the Goodness of fit index (GFI) goodness of fit. Although there is controversy for the cut
value of .964 indicates an acceptable fit, whereas the of value of Root mean square error of approximation,
Goodness of fit index value of one indicates a perfect fit. but RMSEA value of 0.5 and less is usually considered
Accordingly, from Table-1.5, it is evident that adjusted appropriate whereas in our study the RMSEA=.030
goodness of fit index (AGFI = .950) and Parsimony (Tabe-1.8) which is acceptable but values close to zero
goodness of fit index (PGFI = .687), both of which takes is desirable.
the degrees of freedom into account, indicates an Table-1.8 RMSEA
acceptable fit.
LO HI
Model RMSEA PCLOSE
Table-1.5 RMR, GFI 90 90
Default model .030 .020 .040 1.000
Model RMR GFI AGFI PGFI Independence
Default model .021 .964 .950 .687 .343 .336 .349 .000
model
Saturated model .000 1.000
Independence model .644 .201 .101 .179 Structural Model

From Table-1.6, it is evident the Normed fit index (NFI
=.981), Incremental fit index (IFI = .994), Tucker Lewis
index (TLI = .992) and Comparative fit index (CFI =
.994) are very close to one and hence indicates an
appropriate model fit.
A structural theory is a conceptual representation of the
structural relationships between constructs. It can be
represented in terms of a structural model that represents
the theory with a set of structural equations and is
usually depicted with a visual diagram (Figure-2.1)

Table-1.6 Baseline Comparisons

NFI RFI IFI TLI
Model CFI
Delta1 rho1 Delta2 rho2
Default model .981 .976 .994 .992 .994
Saturated model 1.000 1.000 1.000
Independence
.000 .000 .000 .000 .000
model

Although the use of parsimony fit indices remains

somewhat controversial but still parsimony fit indices
are useful as it takes in to account the model complexity
to determine the model fit. Parsimony fit indices are
somewhat conceptually similar to that of adjusted R
square. Although parsimony fit indices are useful in
evaluating competing models but they should be used
along with other fit indices. Parsimony normed fit index
(PNFI) is the most widely used parsimony fit index and
in our study PNFI= .786 (Table-1.7), which is
acceptable whereas relatively high values, closer to 1, Figure-2.1 Structural Model
represent better fit.
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The structural model (Figure-2.1) proposed direct limitations, like, the study was conducted in a particular
relationships from Brand experience dimensions to city and in the context of a particular brand. Hence
Brand Loyalty. Parameter estimates (Table-2.1), for the future researchers are encouraged to explore these
relationship of sensory, affective, behavioral and facets, so generalization can be drawn.
intellectual to Brand loyalty all indicated strong positive
relationships (Sensory to Brand Loyalty = 0.29; REFERENCES
Affective to Brand Loyalty = 0.26; Behavioral to Brand [1] Anderson, J. C., & Gerbing, D. W. (1988).
Loyalty =0.17, Intellectual to Brand Loyalty =0.31). All Structural equation modeling in practice: A
hypothesized relationships were statistically significant review and recommended two-step
at the .01 level. Results showed that Intellectual approach. Psychological bulletin, 103(3), 411.
dimension of brand experience had the greatest direct
effect on brand loyalty thus providing empirical [2] Bosworth, B. and Annemie, M. (2010).
evidence that strengthening Brand experience will lead Economic Growth and Employment Generation:
to higher levels of Brand Loyalty. The Role of the Service Sector. In Ejaz Ghani,
ed. The Service Revolution in South Asia. New
Table-2.1 Results of Hypothesis Testing Delhi: Oxford University Press.
Hypotheses Standardized Regression P [3] Brakus, J. J., Schmitt, B. H., & Zarantonello, L.
Regression Weights Value
Weights (2009). Brand experience: what is it? How is it
H1: Sensory dimension 0.29 0.79 0.000 measured? Does it affect loyalty? Journal of
of brand experience has marketing,73(3), 52-68.
significant effect on
brand loyalty. (Pizza [4] Carmines, E. G., & McIver, J. P. (1981).
Hut) Analyzing Models with Unobserved Variables:
H2: Affective dimension 0.26 0.47 0.000 Analysis of Covariance Structures. Social
of brand experience has
Measurement: Current Issues, 65-115.
significant effect on
brand loyalty. (Pizza [5] Choi, Y. G., Ok, C., & Hyun, S. S. (2011).
Hut)
H3: Behavioural 0.17 0.26 0.000
Evaluating relationships among brand
dimension of brand experience, brand personality, brand prestige,
experience has brand relationship quality, and brand loyalty: an
significant effect on empirical study of coffeehouse brands.
brand loyalty. (Pizza
Hut) [6] Clatworthy, S. (2012). Bridging the gap between
H4: Intellectual 0.31 0.43 0.000 brand strategy and customer
dimension of brand
experience has
experience. Managing Service Quality: An
significant effect on International Journal, 22(2), 108-127.
brand loyalty. (Pizza
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DEVELOPMENT OF COMPETENCY PROFILE : A STUDY IN

RETAIL INDUSTRY IN INDIA
1
Padmalita Routray, 2Madhusmita Panda
1
Reader, Department of Business Management, Fakir Mohan University, Balasore
2
Research Scholar, IIT Kharagpur
Email : proutray2007@redifmail.com, m.pandamba09@gmail.com

Abstract : Retail sector is becoming an important
contributor to the growth of the economy and increasingly
manpower intensive. Competency mapping is the need of
the day where organizations business focus and strategic
direction are converted in form of creating right mix of
skills (technical and performance) to execute the strategy.
It tries to chart out the differences between the core
competencies of an organization and the individual
competencies of an employee. The study gives some
practical insights into developing competency profile of
people working in retail industry at different levels.
Further, the research study will identify the competency
gap and suggest strategies for competency development.
This will help to determine the requirement for training,
recruitment and to create a suitable performance
management system, reward and career development
system.
Key Words: Competencies, Competency Mapping, Retail
Sector
I. INTRODUCTION:
In the era of competition, with a changing business
scenario and new challenges emerging in the
competitive world, there is a dearth of right people in the
right kind of job. Competencies have a major say in
terms of proving one's capability in any job profile. The
organizations have to develop a right kind of framework
of competency modeling in terms of job specific
requirements, functional requirements, role attributes,
leadership attributes and the organization's culture and
values. Retail sector is becoming an important
contributor to the growth of the economy and
increasingly manpower intensive.
about service excellence1. Workforce is therefore
playing a vital role in the success of retail business. In
an industry which is highly competitive, creating
sustainable advantages is no longer limited to Sales or
the right Strategy. HR, by providing and retaining
competent employees plays a major role in ensuring
Sustainability. Competency mapping to ensuring that the
right candidates are in the right position is the first step
to create this advantage. In the absence of competency
mapping, all the resources spent on training, retention
strategy or growth strategy for workforce can be in-
effective and non productive.
Competency mapping is the need of the day where
organizations business focus and strategic direction are
converted in form of creating right mix of skills
(technical and performance) to execute the strategy.
Competency focus gives insights into the process of
aligning the human resource of the organisation with its
vision and mission. It tries to chart out the differences
between the core competencies of an organization and
the individual competencies of an employee. Generic
competency mapping does not suit a growing industry.
Retail has to go beyond the obvious of presentable,
product knowledgeable, and persuasive nature of the
work force. Today retail needs focus on competencies
which are inherent to running and managing the
business and can create sustainable customer stickiness.
Retail organizations have business challenges of unique
talent management. When combined with success
factors performance framework for retail offers for the
retail industries access to robust competencies.

India remains a high-potential market with accelerated
retail market growth of 15 to 20% expected over the
next five years, supported by GDP growth of 6 to 7%,
rising disposable income and rapid urbanization. The
changing FDI climate has provided an interesting
dynamic to several international retailers' entry and
expansion plans for India. Retail is becoming more
________________________________________________________________________________________________
47
II. OBJECTIVES OF THE STUDY:
The present research paper tries to create competency
profiles of key jobs and positions of selected sample
organizations in retail industry in terms of critical
success factors and then to isolate the key performance
indicators. The second objective of the research work is
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 FMU Journal of Management
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to identify the gap in terms of competencies and
performance of the key job holders. The third objective
is to suggest measures for developing competencies.
III. REVIEW OF LITERATURE:
The competency approach to human resources
management is not new. The early Romans practiced a
form of competency profiling in attempts to detail the
attributes of good Roman soldier. The introduction of
competency based approaches within the corporate
environment initiated around 1970 and their
development and use since then has been rapid. The
distinguished Harvards psychologist, David McClelland
is credited with introducing the idea of competency
into the human resource literature; in his efforts to assist
the United States Information Agency improve its
selection procedures. The latter argued that traditional
intelligence tests, as well as proxies such as scholastic
grades, failed to predict job performance. McClellands
counter argument to the growing dissatisfaction with
intelligence testing and the traditional job analytic
approaches to personnel selection, was the proposal to
test for competency. In his research, McClelland found
that competencies such as interpersonal sensitivity,
cross-cultural positive regards and management skills
differentiated superior from average Information
Officers (Dubois, 1993).Throughout the years
competency based approaches have proved to be a
critical tool in many organizational functions, such as
workforce and succession planning and performance
appraisal. The main reasons for selecting these
approaches are the following:
They can provide identification of the skills, knowledge,
behaviors and capabilities needed to meet current and
future personnel selection needs, in alignment with the
differentiations in strategies and organizational
priorities. They can focus the individual and group
development plans to eliminate the gap between the
competencies required by a project, job role, or
enterprise strategy. In Table 1, we present the main
definitions of competencies from different researchers
or companies in an effort to provide a complete
understanding of the different aspects that this term
incorporates.
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48
Table 1 Different Explanation of Competencies
Authors Definitions
Hayes (1979) Competencies are generic knowledge,
motive, trait, social role or a skill of a person
linked to superior performance on the job.
Boyatzis (1982) Boyatzis described competencies as
underlying characteristics of an individual,
which are, causally (change in one variable
cause change in another) related to effective
job performance
Albanese(1989) Competencies are personal characteristics of
a person that results that contribute to
effective superior performance.
Ansfield(1997) Underlying characteristics of a Person that
results in a effective superior performance.
UK National The National Vocational Council for
Vocational Council Vocational Qualification described
for Vocational competency as performance standards, the
Qualification (1997) ability to perform in work roles or jobs to the
standard required in employment
LeBoterf (1998) LeBoterf says that competencies are not
themselves resources in the sense of knowing
how to act, knowing how to do, or attitudes,
but they mobilize, integrate and orchestrate
such resources. This mobilization is only
pertinent in one situation, and each situation
is unique, although it could be approached as
an analogy to other situations that are already
known.
Marrelli (1998) (1) Competencies are measurable human
capabilities that are required for effective
work performance demands.
Dubois (1998) (2) Competencies are those characteristics,
knowledge, skills, mindsets, thought
patterns, and the like-that, when used either
singularly or in various combinations, result
in successful performance.
HR-XML (www.hr- A specific, identifiable, definable, and
xml.org) measurable knowledge, skill, ability and/or
other deployment-related characteristic (e.g.
attitude, behaviour, physical ability) which a
human resource may possess and which is
necessary for, or material to, the performance
of an activity within a specific business
context.
Selby et al. (2000) A capacity to mobilize diverse cognitive
resources to meet a certain type of situation.
Perrenaud (2000) A capacity to mobilize diverse cognitive
resources to meet a certain type of situation.
Intagliata et al. (2000) Most fundamentally, competencies provide
organizations with a way to define in
behavioral terms what their leaders need to
do to produce the results the organization
desires and do so in a way that is consistent
with and builds its culture. They should
provide the North Star by which leaders at
all levels navigate in order to create synergy
and produce more significant and consistent
results.
Unido (2002) A competency is a set of skills, related
knowledge and attributes that allow an
individual to successfully perform a task on
an activity within a specific function or job.
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Rankin (2002) Competencies are definitions of skills and emphasis on product and price. Retailing effectiveness is
behaviors, that organizations expects their
the degree to which business activities add value to the
staff to practice on work.
Jackson and Schuler Competencies are defined as the skills, products and the manner in which they are sold to
(2003) knowledge, abilities and other characteristics customers for their personal and family use (Saji & Nair,
that someone needs to perform a job 2004).In India, sudden and unprecedented growth in
effectively
organized retailing poses a challenge to human resources
Managing Competencies in Retail development. Therefore, it would be useful to look at the
dimension of human resource practices in retail industry,
At the macro-level, retail industry faces the challenge of emerging requirements and challenges and measures to
bridging the gap between demand and supply of talent. improve work atmosphere in Indian scenario. Although
According to a research report by NSDC on skill gap in a few studies have initiated their efforts on analyzing
the retail industry, the aggregate talent demand in Indian HR challenges in Indian retail sector (Chella 2002,
organized retail is projected to be 17.6 million by 2022. Chakraborthy 2007, Abraham & Kumudha 2007), there
The employment figure for the sector was roughly 0.6 are gaping holes in the existing research: in particular
million in 2011. Thus, on the demand side, there is a the skill gap and competency challenges faced by the
need of 17 million additional employees in organized retail sector.
retail within a decade. Reliance Retails approach is to
recruit freshers at the associate trainee, graduate trainee IV. METHODOLOGY:
and management trainee levels and develop them to
The specific aim of this research was to investigate the
assume higher responsibilities over time. They look for
need for competency management in retail industry
basic educational qualification and minimum required
through perceptions of employee competency gap in
aptitude at all the three levels of intake. However, the
context of an emerging city in India. Since 2003, there
organization emphasizes on value orientation of the
has been phenomenal growth in the organized retail in
individual. They hire intelligent people who are aligned
the state of Odisha. Future group opened its first Big
to organizational values of being hardworking, honest,
Bazaar outlet in Bhubaneswar in 2004. Since then the
humble and helpful. Retail is a service industry touching
group has expanded its operations in Bhubaneswar and
day-to-day lives of customers. Value orientation is
Cuttack. The group now has a Pantaloon outlet which is
critical for superior customer service and delightful
a chain of fashion outlets primarily selling apparels,
client experience2. Competencies of individuals are
jewellery, beauty products and other luxury items, 3 Big
related to their performance at work (New, 1996)
Bazaar outlets and Food Bazaar outlets selling food and
.Previous studies have identified the critical value of
beverages. Similarly, Reliance Retail has also opened its
employee competencies for providing good service to
outlets in the state capital. The unit of analysis for the
retail customers (Dabholkar et al., 1996). Successful
present research studies are Reliance Retail, Pantaloon
competence building in organizations can lead to greater
and Big Bazaar.
effectiveness and increased workplace satisfaction for
employees (Paulson et al., 2005) and can reduce high The research design for the present study is exploratory
attrition. Similarly, effective management of employee as well as conclusive. Exploratory study was used to get
competencies can have an important impact upon insight into the retail industry in general and in context
business performance (Homer, 2001) which will become with the emerging cities in India like Bhubaneswar.
critical with chances of more foreign players Further, the researchers tried to isolate the core
participating in this sector. According to a recent study competencies, business competencies and role
conducted by Wharton (2007) at a Canadian consulting competencies affecting the key jobs and positions in
firm on retail customer dissatisfaction, it was found that terms of critical success factors through focused and in-
disinterested, ill-prepared and unwelcoming salespeople depth interviews with the senior executives operating in
lead to more lost business and word-of-mouth than any retail sectors like Reliance Retail, Pantaloon India and
other management challenge. As retailers strive to Big Bazaar.
delight their customers and to reduce their cost bases, a
knowledgeable, skilled, change oriented and highly Therefore, the research was carried out in two phases. In
first phase a focus interview with Zonal Heads,
productive workforce will be the key to future success
Departmental Heads and with Store Managers are made
(Skills mart, 2002). The primary emphasis should be on
access, experience and service and the secondary for identifying key jobs & key position based on
organizational hierarchy. Further, competency profile
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for each position viz. senior managers, business Table 2(b) Cross Tabulation of Responses
managers, stores managers and sales executive at store
Senior Managers/ Business Rating Total
level are developed. In second phase questionnaires Managers Self Others
were constructed for each position on the basis of Rating Rating
developed competency profiles and the same were Organization Reliance 15 45 60
administered to people operating at different levels. The Retail
researchers covered corporate office and stores. They Pantaloon 8 20 28
covered 8 stores of Reliance Fresh, Reliance Super, Big Big Bazaar 7 15 22
Bazaar and Pantaloon in Bhubaneswar area. The Total 30 80 110
questionnaire was distributed to 145 employees at
Table 2(c) Cross Tabulation of Responses
different levels using stratified random sampling
technique and 110 completed questionnaires were Store Managers Rating Total
collected resulting in 75.9 per cent response rate. The Self Others
data were coded and analyzed using SPSS 20.The Rating Rating
sample profile of the respondents are given in table 2(a), Organization Reliance 17 43 60
2(b),2(c) & 2(d).In the sample, 15 top management,30 Retail
senior managers/business managers, 25 store managers Pantaloon 3 25 28
and 40 sales executives from three different Big Bazaar 5 17 22
Total 25 85 110
organizations were included. Each of the respondents
filled up the questionnaire for himself/herself, for the Table 2(d) Cross Tabulation of Responses
position which he/she representing and also at the same
Sales Executives Rating Total
time rated the other positions. Each of the competency
Self Others
identified was rated on basis of performance in a five
Rating Rating
point scale where 5 denoted competency far exceeds Organization Reliance 21 39 60
acceptable standards, 4 denoting competency better Retail
than acceptable standards 3 denoting competency meets Pantaloon 12 16 28
requirements, 2 denoting competency not quite up to Big Bazaar 7 15 22
acceptable standards and 1 denoting competency fails to Total 40 70 110
meet acceptable standards.
Findings
Table 2(a) Cross Tabulation of Responses
For the top management twenty competencies were
Top Management Rating Total identified which described the extent to which the top
Self Others management is visionary, able to develop people, have
Rating Rating strong values and ethics, committed and performance
Organization Reliance 7 53 60 oriented. The ratings of the competencies show better
Retail
than acceptable standards in almost all competencies and
Pantaloon 5 23 28
Big Bazaar 3 19 22
such competencies are perceived to be the same when
Total 15 95 110 self and others ratings were compared (table 3a) except
in case of three competencies viz. competency of
inspiring and motivating others with enlightened
insights, competency of rewarding right behavior and
competency of integrating social objectives into
business activities. So far as organizational difference is
concerned the competency profiles are the same except
in case of two competencies viz. ability to take more
ownership on the assigned responsibilities and ability to
communicate effectively with people (table 3b).

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Table 3(a) Descriptive statistics of Competency Profile of Top Management(on basis of ratings)
Top Management Competency N Mean Std. Deviation F Sig.
Sees everything with a positive outlook Self Rating 15 4.13 .743 1.356 .247
Others Rating 95 4.35 .649
Total 110 4.32 .663
Sees new possibilities to take the organization to a Self Rating 15 4.67 .488 .059 .809
higher realm Others Rating 95 4.63 .527
Total 110 4.64 .520
Creates and communicates compelling vision or Self Rating 15 4.40 .737 1.343 .249
direction Others Rating 95 4.19 .641
Total 110 4.22 .655
Inspires and motivates others with enlightened Self Rating 15 3.87 .743 11.419 .001*
insights Others Rating 95 4.36 .482
Total 110 4.29 .548
Assembles strong teams Self Rating 15 4.00 .535 2.404 .124
Others Rating 95 4.21 .481
Total 110 4.18 .492
Empowers and trains people Self Rating 15 4.20 .676 .476 .492
Others Rating 95 4.31 .527
Total 110 4.29 .548
Provides rewards, feedback and recognition Self Rating 15 4.27 .799 .132 .717
Others Rating 95 4.33 .554
Total 110 4.32 .589
Communicates effectively with people Self Rating 15 4.33 .724 .024 .877
Others Rating 95 4.36 .544
Total 110 4.35 .568
Aligns with company values Self Rating 15 4.20 .676 1.031 .312
Others Rating 95 4.37 .584
Total 110 4.35 .597
Adheres to code of conduct Self Rating 15 3.67 .816 2.260 .136
Others Rating 94 3.95 .645
Total 109 3.91 .674
Ensures that the standards and specifications are Self Rating 15 4.33 .617 .014 .905
kept Others Rating 95 4.32 .511
Total 110 4.32 .523
Rewards right behaviors Self Rating 15 4.07 .594 6.495 .012*
Others Rating 95 4.44 .520
Total 110 4.39 .543
Widely trusted Self Rating 15 4.53 .516 2.379 .126
Others Rating 95 4.29 .563
Total 110 4.33 .560
Takes ownership on the assigned responsibilities Self Rating 15 4.00 .756 .272 .603
Others Rating 95 4.09 .637
Total 110 4.08 .651
Impartial and fair in exercising the responsibilities Self Rating 15 3.87 .516 3.091 .082
Others Rating 95 4.15 .583
Total 110 4.11 .580
Delivers results on commitment Self Rating 15 3.87 .516 2.059 .154
Others Rating 95 4.11 .610
Total 110 4.07 .601
Sets and achieves ambitious goals Self Rating 14 4.21 .426 1.031 .312
Others Rating 95 4.05 .572
Total 109 4.07 .556
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Drives for continuous improvement Self Rating 15 4.00 .655 .313 .577
Others Rating 95 4.09 .603
Total 110 4.08 .608
Social objectives are integrated into business Self Rating 15 3.80 .775 4.698 .032*
activities Others Rating 95 4.21 .667
Total 110 4.15 .693
Gets results consistently Self Rating 15 4.20 .561 .087 .768
Others Rating 95 4.25 .652
Total 110 4.25 .638
*Significant at .05 level
Table 3(c) Descriptive statistics of Competency Profile of Top Management (on basis of organization)
Top Management Competency N Mean Std. Deviation
F Sig.
Sees new possibilities to take the organization to a Reliance Retail 60 4.73 2.689 .073 .073
higher realm Pantaloon 28 4.57
Big Bazaar 22 4.45
Total 110 4.64 1.138 .324 .324
Optimistic. Sees everything with a positive Reliance Retail 60 4.23
outlook Pantaloon 28 4.39
Big Bazaar 22 4.45 .725 .487 .487
Total 110 4.32
Creates and communicates compelling vision or Reliance Retail 60 4.17
direction Pantaloon 28 4.21 .154 .857 .857
Big Bazaar 22 4.36
Total 110 4.22
Inspires and motivates others with enlightened Reliance Retail 60 4.32 2.274 .108 .108
insights Pantaloon 28 4.25
Big Bazaar 22 4.27
Total 110 4.29 .689 .505 .505
Assembles strong teams Reliance Retail 60 4.27
Pantaloon 28 4.04
Big Bazaar 22 4.14 1.368 .259 .259
Total 110 4.18
Empowers and trains people Reliance Retail 60 4.27
Pantaloon 28 4.39 3.261 .042* .042*
Big Bazaar 22 4.23
Total 110 4.29
Provides rewards, feedback and recognition Reliance Retail 60 4.35 .263 .769 .769
Pantaloon 28 4.39
Big Bazaar 22 4.14
Total 110 4.32 2.390 .097 .097
Communicates effectively with people Reliance Retail 60 4.23
Pantaloon 28 4.46
Big Bazaar 22 4.55 .341 .712 .712
Total 110 4.35
Aligns with company values Reliance Retail 60 4.35
Pantaloon 28 4.29 .384 .682 .682
Big Bazaar 22 4.41
Total 110 4.35
Adheres to code of conduct Reliance Retail 60 3.78 .667 .515 .515
Pantaloon 27 4.04
Big Bazaar 22 4.09
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Total 109 3.91 4.664 .011* .011*

Ensures that the standards and specifications are Reliance Retail 60 4.33
kept Pantaloon 28 4.25
Big Bazaar 22 4.36 .236 .790 .790
Total 110 4.32
Rewards right behaviors Reliance Retail 60 4.40
Pantaloon 28 4.32 2.328 .102 .102
Big Bazaar 22 4.45
Total 110 4.39
Widely trusted Reliance Retail 60 4.38 1.910 .153 .153
Pantaloon 28 4.25
Bigbazar 22 4.27
Total 110 4.33 1.305 .276 .276
Takes ownership on the assigned responsibilities Reliance Retail 60 3.92
Pantaloon 28 4.32
Big Bazaar 22 4.23 .406 .667 .667
Total 110 4.08
Impartial and fair in exercising the responsibilities Reliance Retail 60 4.10
Pantaloon 28 4.07 2.364 .099 .099
Big Bazaar 22 4.18
Total 110 4.11
Delivers results on commitment Reliance Retail 60 3.97 .663
Pantaloon 28 4.25 .441
Big Bazaar 22 4.14 .560
Total 110 4.07 .601
Sets and achieves ambitious goals Reliance Retail 60 4.17 .557
Pantaloon 27 3.96 .518
Big Bazaar 22 3.95 .575
Total 109 4.07 .556
Drives for continuous improvement Reliance Retail 60 4.00 .638
Pantaloon 28 4.21 .630
Big Bazaar 22 4.14 .468
Total 110 4.08 .608
Social objectives are integrated into business Reliance Retail 60 4.10 .706
activities Pantaloon 28 4.21 .686
Big Bazaar 22 4.23 .685
Total 110 4.15 .693
Gets results consistently Reliance Retail 60 4.13 .676
Pantaloon 28 4.32 .612
Big Bazaar 22 4.45 .510
Total 110 4.25 .638
*Significant at .05 level
So far as senior managers/business managers in table 4(a).These are relevant professional knowledge,
competencies are concerned, almost all the emotional resilience and balanced learning habits and
competencies are rated better than acceptable skills. However, at organizational level the
standards. However, in certain competencies the self competencies are found to be same (table 4b).
ratings are lower from others rating(p> 0.05) as shown

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Table 4(a) Descriptive statistics of Competency Profile of Senior Managers/Business Managers (on basis of
ratings)
Senior Managers/Business Managers Competency N Mean Std. Deviation
F Sig.
Command of basic facts Self Rating 30 4.30 .206 .206 .651
Others Rating 80 4.24
Total 110 4.25
Relevant professional knowledge Self Rating 30 3.93 9.730 9.730 .002*
Others Rating 80 4.44
Total 110 4.30
Continuing sensitivity to events Self Rating 30 4.07 .538 .538 .465
Others Rating 80 4.18
Total 110 4.15
Analytical, problem solving and decision- Self Rating 30 4.03 2.020 2.020 .158
making skill Others Rating 80 4.29
Total 110 4.22
Social skills and abilities Self Rating 30 3.93 3.207 3.207 .076
Others Rating 80 4.21
Total 110 4.14
Emotional resilience Self Rating 30 3.83 7.156 7.156 .009*
Others Rating 80 4.25
Total 110 4.14
Pro-activity Self Rating 30 4.03 1.521 1.521 .220
Others Rating 80 4.23
Total 110 4.17
Creativity Self Rating 30 4.03 .563 .563 .455
Others Rating 80 4.16
Total 110 4.13
Mental agility Self Rating 30 3.87 1.740 1.740 .190
Others Rating 79 4.09
Total 109 4.03
Balanced learning habits and skills Self Rating 30 4.03 4.776 4.776 .031*
Others Rating 80 4.36
Total 110 4.27
Self-knowledge Self Rating 30 4.10 2.823 2.823 .096
Others Rating 80 4.33
Total 110 4.26
*Significant at .05 level
Table 4(b)Descriptive statistics of Competency Profile of Senior Managers/Business Managers (on basis of
organization)
Senior Managers/Business Managers Competency N Mean Std. Deviation Std. Error F Sig.
Command of Reliance Retail 60 4.25 .654 .084 .729 .485
basic facts Pantaloon 28 4.36 .621 .117
Big Bazar 22 4.14 .640 .136
Total 110 4.25 .642 .061
Relevant Reliance Retail 60 4.38 .783 .101 1.521 .223
professional Pantaloon 28 4.32 .723 .137
knowledge Big Bazar 22 4.05 .844 .180
Total 110 4.30 .785 .075
Continuing Reliance Retail 60 4.10 .681 .088 .297 .743
sensitivity to Pantaloon 28 4.21 .738 .140
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events Big Bazar 22 4.18 .664 .142

Total 110 4.15 .689 .066
Analytical, Reliance Retail 60 4.28 .846 .109 .442 .644
problem solving Pantaloon 28 4.11 .956 .181
and decision- Big Bazaar 22 4.18 .664 .142
making skill Total 110 4.22 .839 .080
Social skills and Reliance Retail 60 4.10 .706 .091 .469 .627
abilities Pantaloon 28 4.11 .786 .149
Big Bazaar 22 4.27 .767 .164
Total 110 4.14 .735 .070
Emotional Reliance Retail 60 4.13 .747 .096 1.214 .301
resilience Pantaloon 28 4.29 .713 .135
Big Bazaar 22 3.95 .785 .167
Total 110 4.14 .748 .071
Pro-activity Reliance Retail 60 4.20 .708 .091 .155 .856
Pantaloon 28 4.11 .786 .149
Big Bazaar 22 4.18 .733 .156
Total 110 4.17 .728 .069
Creativity Reliance Retail 60 4.13 .873 .113 .438 .646
Pantaloon 28 4.21 .686 .130
Big Bazar 22 4.00 .756 .161
Total 110 4.13 .803 .077
Mental agility Reliance Retail 60 4.02 .833 .108 .249 .780
Pantaloon 27 4.11 .801 .154
Big Bazar 22 3.95 .653 .139
Total 109 4.03 .787 .075
Balanced learning Reliance Retail 60 4.27 .686 .089 .110 .896
habits and skills Pantaloon 28 4.32 .772 .146
Big Bazar 22 4.23 .752 .160
Total 110 4.27 .716 .068
Self-knowledge Reliance Retail 60 4.22 .640 .083 .788 .458
Pantaloon 28 4.39 .567 .107
Big Bazar 22 4.23 .685 .146
Total 110 4.26 .631 .060

From table 5(a) it was found that Store managers are
also equally competent like top management and
senior/business managers. However, analyzing the
ratings it is found that the store managers rated less than
others so far as their emotional stamina is concerned.
But competencies like quality consciousness,
organizational awareness, presentation skill, decision-
making skill, concern for excellence, negotiation skill,
persuasiveness and sensitivity. Similarly from table 5(b)
it was found that the organizations significantly differ in
integrity and self-sufficiency.

Table 5(a) Descriptive statistics of Competency Profile of Store Managers (on basis of ratings)
Store Managers Competency N Mean Std. Deviation Std. Error
F Sig.
Integrity Self Rating 25 4.32 .690 .138 .034 .854
Others Rating 85 4.29 .594 .064
Total 110 4.30 .614 .059
Self- sufficiency Self Rating 25 4.28 .614 .123 .329 .568
Others Rating 85 4.20 .613 .067
Total 110 4.22 .612 .058
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High emotional stamina Self Rating 25 3.88 .781 .156 4.985

Others Rating 85 4.22 .643 .070 .028*
Total 110 4.15 .689 .066
Command of basic facts Self Rating 25 4.24 .597 .119 1.421 .236
Others Rating 85 4.07 .632 .069
Total 110 4.11 .626 .060
Quality consciousness Self Rating 25 4.48 .586 .117 10.249 .002*
Others Rating 85 3.99 .699 .076
Total 110 4.10 .703 .067
Organizational awareness Self Rating 25 4.44 .507 .101 4.604 .034*
Others Rating 85 4.14 .639 .069
Total 110 4.21 .622 .059
Knowledge on standards Self Rating 25 4.24 .779 .156 .041 .839
and specifications Others Rating 85 4.27 .625 .068
Total 110 4.26 .659 .063
Presentation skill Self Rating 25 4.48 .586 .117 4.125 .045*
Others Rating 85 4.18 .676 .073
Total 110 4.25 .666 .064
Decision-making skill Self Rating 25 4.40 .577 .115 4.390 .038*
Others Rating 85 4.07 .720 .078
Total 110 4.15 .702 .067
Concern for excellence Self Rating 24 4.71 .624 .127 20.686 .000*
Others Rating 85 4.04 .645 .070
Total 109 4.18 .696 .067
Negotiation skill Self Rating 25 4.32 .557 .111 7.071 .009*
Others Rating 85 3.93 .669 .073
Total 110 4.02 .663 .063
Listening skills Self Rating 25 4.32 .690 .138 .780 .379
Others Rating 85 4.19 .645 .070
Total 110 4.22 .655 .062
Social skill Self Rating 25 4.20 .500 .100 1.261 .264
Others Rating 85 4.04 .680 .074
Total 110 4.07 .646 .062
Persuasiveness Self Rating 25 4.56 .507 .101 8.008 .006*
Others Rating 85 4.15 .664 .072
Total 110 4.25 .652 .062
Sensitivity Self Rating 25 4.52 .510 .102 6.943 .010*
Others Rating 85 4.16 .614 .067
Total 110 4.25 .609 .058
*Significant at .05 level
Table 5(b)Descriptive statistics of Competency Profile of Store Managers Managers (on basis of organization)
Store Managers Competency N Mean Std. Deviation Std. Error F Sig.

Integrity Reliance Retail 60 4.37 .581 .075 3.447 .035*

Pantaloon 28 4.39 .567 .107
Big Bazar 22 4.00 .690 .147
Total 110 4.30 .614 .059
Self- sufficiency Reliance Retail 60 4.05 .622 .080 5.797 .004*
Pantaloon 28 4.36 .559 .106
Big Bazar 22 4.50 .512 .109
Total 110 4.22 .612 .058
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High emotional stamina Reliance Retail 60 4.03 .736 .095 1.777 .174
Pantaloon 28 4.29 .600 .113
Big Bazar 22 4.27 .631 .135
Total 110 4.15 .689 .066
Command of basic facts Reliance Retail 60 4.20 .576 .074 3.172 .046
Pantaloon 28 4.14 .651 .123
Big Bazar 22 3.82 .664 .142
Total 110 4.11 .626 .060
Quality consciousness Reliance Retail 60 4.18 .725 .094 .926 .399
Pantaloon 28 4.00 .667 .126
Big Bazar 22 4.00 .690 .147
Total 110 4.10 .703 .067
Organizational awareness Reliance Retail 60 4.13 .724 .093 1.017 .365
Pantaloon 28 4.32 .476 .090
Big Bazar 22 4.27 .456 .097
Total 110 4.21 .622 .059
Knowledge on standards and Reliance Retail 60 4.23 .745 .096 1.359 .261
specifications Pantaloon 28 4.43 .504 .095
Big Bazar 22 4.14 .560 .119
Total 110 4.26 .659 .063
Presentation skill: Reliance Retail 60 4.18 .748 .097 2.109 .126
Pantaloon 28 4.46 .508 .096
Big Bazar 22 4.14 .560 .119
Total 110 4.25 .666 .064
Decision-making skill Reliance Retail 60 4.13 .769 .099 2.567 .082
Pantaloon 28 3.96 .637 .120
Big Bazar 22 4.41 .503 .107
Total 110 4.15 .702 .067
Concern for excellence Reliance Retail 60 4.20 .708 .091 2.650 .075
Pantaloon 28 4.36 .621 .117
Big Bazar 21 3.90 .700 .153
Total 109 4.18 .696 .067
Negotiation skill: Reliance Retail 60 4.07 .686 .089 1.766 .176
Pantaloon 28 3.82 .612 .116
Big Bazar 22 4.14 .640 .136
Total 110 4.02 .663 .063
Listening skills Reliance Retail 60 4.17 .717 .093 .406 .667
Pantaloon 28 4.29 .535 .101
Big Bazar 22 4.27 .631 .135
Total 110 4.22 .655 .062
Social skill Reliance Retail 60 4.07 .686 .089 .490 .614
Pantaloon 28 4.00 .720 .136
Big Bazar 22 4.18 .395 .084
Total 110 4.07 .646 .062
Persuasiveness: Reliance Retail 60 4.17 .717 .093 2.192 .117
Pantaloon 28 4.21 .568 .107
Big Bazar 22 4.50 .512 .109
Total 110 4.25 .652 .062
Sensitivity Reliance Retail 60 4.18 .651 .084 1.147 .322
Pantaloon 28 4.39 .497 .094
Big Bazar 22 4.23 .612 .130
Total 110 4.25 .609 .058
*Significant at .05 level

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From table 6(a) interesting results can be noticed. The and product knowledge in comparison to others rating
sales executives have given high self rating on their which is found to be significant( p< 0.05).People other
sales tolerance ability, social skill , competency on being than the sales executive have rated them on these
energetic, adaptability skill , clarity on oral expression competencies just meeting the requirements.
Table 6(a) Descriptive statistics of Competency Profile of Sales Executives (on basis of ratings)
Sales Executives Competency N Mean Std. Deviation Std. Error F Sig.
Stress tolerance Self Rating 40 4.45 .552 .087 67.994 .000*
Others Rating 70 3.54 .557 .067
Total 110 3.87 .705 .067
Social skill Self Rating 40 4.10 .709 .112 17.915 .000*
Others Rating 70 3.59 .551 .066
Total 110 3.77 .659 .063
High energy level Self Rating 40 4.55 .504 .080 54.268 .000*
Others Rating 70 3.70 .622 .074
Total 110 4.01 .710 .068
Adaptability Self Rating 40 4.55 .504 .080 59.578 .000*
Others Rating 70 3.64 .638 .076
Total 110 3.97 .735 .070
Product knowledge Self Rating 40 4.28 .640 .101 32.758 .000*
Others Rating 70 3.56 .629 .075
Total 110 3.82 .719 .069
Customer knowledge Self Rating 40 4.40 .632 .100 .207 .650
Others Rating 70 4.34 .634 .076
Total 110 4.36 .631 .060
Clarity in oral expression Self Rating 40 4.38 .586 .093 5.755 .018*
Others Rating 70 4.07 .666 .080
Total 110 4.18 .652 .062
Committed to responsibilities Self Rating 40 4.15 .580 .092 3.785 .054
Others Rating 70 3.90 .684 .082
Total 110 3.99 .657 .063
*Significant at .05 level
Table 6(b) Descriptive statistics of Competency Profile of Sales Executives (on basis of organization)
Sales Executives Competency N Mean Std. Deviation Std. Error F Sig.
Stress tolerance Reliance Retail 60 3.87 .791 .102 .221 .802
Pantaloon 28 3.82 .548 .104
Big Bazar 22 3.95 .653 .139
Total 110 3.87 .705 .067
Social skill Reliance Retail 60 3.92 .696 .090 3.286 .041
Pantaloon 28 3.61 .567 .107
Big Bazar 22 3.59 .590 .126
Total 110 3.77 .659 .063
High energy level Reliance Retail 60 4.02 .725 .094 .086 .917
Pantaloon 28 4.04 .693 .131
Big Bazar 22 3.95 .722 .154
Total 110 4.01 .710 .068
Adaptability Reliance Retail 60 4.08 .696 .090 1.679 .191
Pantaloon 28 3.89 .685 .130
Big Bazar 22 3.77 .869 .185
Total 110 3.97 .735 .070
Product knowledge Reliance Retail 60 3.93 .733 .095 1.715 .185

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Pantaloon 28 3.68 .670 .127

Big Bazar 22 3.68 .716 .153
Total 110 3.82 .719 .069
Customer knowledge Reliance Retail 60 4.35 .659 .085 .593 .554
Pantaloon 28 4.46 .508 .096
Big Bazar 22 4.27 .703 .150
Total 110 4.36 .631 .060
Clarity in oral expression Reliance Retail 60 4.03 .663 .086 4.507 .013
Pantaloon 28 4.46 .508 .096
Big Bazar 22 4.23 .685 .146
Total 110 4.18 .652 .062
Committed to responsibilities Reliance Retail 60 4.18 .651 .084 6.815 .002
Pantaloon 28 3.68 .548 .104
Big Bazar 22 3.86 .640 .136
Total 110 3.99 .657 .063
Managerial Implications application. Thus, future research can be done to
overcome the above limitations.
The study gives some practical insights into developing
competency profile of people working in retail industry V. CONCLUSION:
at different levels. The top level professionals in the
industry are high on aspiration and tend to rate The retailers in India are optimistic about growth of the
themselves low with the understanding that there is industry in spite of global slowdown. When workers are
always greater scope for upgrading their competencies well trained and a retail operation is fully staffed,
to the next level. This is true because employees who operational failures like missing merchandise are
stay in the retail industry have always climbed the ladder severely mitigated. And when employees are paid and
faster when they have shown high level of competency. trained well, they are much less likely to leave. While
Therefore, outstanding managers must be engaged and investing in human resources may have always been a
rewarded in a meaningful way to ensure performance. good strategy, it is one that is more important now than
The sales executives should be groomed to integrate ever for brick-and-mortar retailers. The headlong rise of
their career objectives with the organisations. People e-commerce has put extreme pressure on retailers to
joining at the entry level always rate themselves high on become more efficient and to justify their existence to
their competencies and thus create gaps in creating customers. Theres been a shift from retailers pushing
service excellence. Hence, selecting people at entry level goods to consumers being able to pull what they want
requires rigorously evaluating the potential from a variety of different places that didnt exist five
competencies to find a fit with the retail organization years go. Retailers are recognizing that their key
and further can be groomed on a continuous basis to differentiator could be that person standing in the store.
meet the changing customer requirements. REFERENCE
Limitation and Scope for Further Work [1] Abraham S. & Kumudha, A. (2007), "HR
In the present study only one emerging city i.e. Challenges in Retailing in India", Personnel
Bhubaneswar was considered. The research if extended Today, April-June: 29-32.
to other cities would reveal results which can help to
[2] Chakraborthy D. (2007), "Indian Retail Sector-
identify whether competencies can be generalized or it
HR Challenges", Effective Executive, May, 28-
can be developed in a particular geographical context.
32.
Second, the study included only three retail companies.
Including more companies will enable to develop a [3] Chella, G. (2002), A Passion for People, Praxis-
competency model suitable for the retail industry. Third, Business line, January, 28-36.
the present study has incorporated only two ratings i.e.
[4] KPMG Report (2006) Indian Retail on the Fast
self and others who are working in different positions
Track: Bridging the Capability Gaps.
within a specific company. The rating made by
customers particularly at sales executive level can help
to develop competency profile that will have better
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[5] Wharton Report (2007), "Dissatisfaction Ltd. Available online at

Guaranteed" Brand Equity, Economic Times, 23
May.
[6] Dabholkar, P.A., Thorpe, D.I. and Rentz, J.O. [12]
(1996), A measure of service quality for retail
stores: Scale development and validation,
Journal of the Academy of Marketing Science,
Vol. 24, No. 1, pp. 3-16.
[7] New, G.E. (1996), Reflections: A three-tier [13]
model of organizational competencies, Journal
of Managerial Psychology, Vol. 11, No. 8, pp.
44-51.
End Note
[8] Paulsson, K., Ivergrd, T. and Hunt, B. (2005),
Learning at work: competence development or [1]
competence-stress, Applied Ergonomics, Vol.
36, No. 2, pp. 135-144
[9] Homer, M. (2001), Skills and competency
management, Industrial and Commercial [2]
Training, Vol. 33, No. 2, pp. 59-62.
[10] Saji K.B and Mrs.Uma Nair S,(2004) QUEST
based Modeling of Retailing Effectiveness Paper
Presented at International Conference WAHIA-
2004, Kyoto, Japan
[11] Skillsmart, 2004 A Skills and qualifications
strategy for the Retail Industry, Skills mart Retail
http://www.skillsmart.com/pages/displaycontent.
asp?id=328 (accessed 11 June 2004)
Fotis Draganidis, Gregoris Mentzas,
(2006),"Competency based management: a
review of systems and approaches", Information
Management & Computer Security, Vol. 14 Iss: 1
pp. 51 64
R.Yuvaraj, International Journal of Scientific &
Engineering Research, Volume 2, Issue 8,
August-2011 ISSN 2229-5518
http://timesofindia.indiatimes.com/business/
india-business/India-ranks-5th-among-emerging-
markets-for-retail-
investment/articleshow/14327829.cms
Retail: Value orientation of new employees
critical in this sector appeared in Retrieved
November 02, 2011 from
http://info.shine.com/Career-Advice-
Articles/Shine-Experts/Retail-Value-orientation-
of-new-employees-critical-in-this-
sector/5445/Aty18.aspx

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Strategies for Managing Shopping Mall: A Study in Eastern Region in

India
1
Prakash Chandra Dash, 2Ashok Kumar Dash
1
Asian School of Business Management, Bhubaneswar, Odisha
2
Faculty Member, School of Management Studies, Ravenshaw University, Cuttack
Email: 1dashprakash04@gmail.com , 2ashokdash69@rediffmail.com

Abstract : Retail has become an emerging area of research
both for academicians and practitioners. The changes are
happening like never before. Retaining customers is very
difficult in today's highly competitive environment;
Customer retention and loyalty have become possible
through the development of long-term relationship with
the customers and mutually beneficial marketing
strategies. This paper tries to explore the preferences that
enforce consumers to shop at the organized mall in eastern
regions of India. It has explored five shopping preferences
in the retail mall services tenant mix, safety and security,
amenities, convenience and image. The critical areas
discussed in the study offer valuable insight to the existing
as well as forthcoming developer planning to foray into the
eastern region of India. The findings provide the
underlying factors that may affect the preference of
customers shopping at mall on one hand and develop
effective mall management strategies on the other.
Keywords: Organized Mall, Services tenant mix, Safety
and Security, Amenities, Convenience, Image
I. INTRODUCTION
The retail development has reached the nook and corner
of Indian cities. This has given opportunities and
challenges for many big and small players. The change
in technology and economic downfall has forced the
retailer to make adjustments in their strategies. The
demographic shift of the consumer and the change in
shopping preference towards organized retailing has
envisioned the rule of the game. The geographical
distance between courtiers is becoming closer and
retailers are forced to think beyond the traditional
culture and diversity. The diversity of culture across the
nation has led to the retailer to design strategy which is
region specific. The growing difference in preference
among the customers has also enhanced the scope of
research. Thus, the study tries to explore the shopping
preference of eastern region customers in India. This
research work has been divided into three sections. The
first section deals with the theoretical background and
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the research that has been carried out earlier in this area
with a focus on the research works based in international
context.
Second part of the research presents the methodology
adopted to identify the shopping preferences on mall
attributes. It explains the data collection method and the
measures taken for the study. Last part of the work
includes the analysis, including exploratory factor
analysis (EFA) and confirmatory factor analysis (CFA)
along with the managerial implication, limitation of the
study and direction for further research.
II. REVIEW OF LITERATURE
A number of studies have explored the mall attributes in
India. This research has presented the deep consumer
sentiments for shopping preference and guided to design
effective retail strategy. However, studies on shopping
motives in India are very generic in nature. Issues
mostly discussed are consumers motivation to shop in
shopping malls (Patel and Sharma, 2009), exploration of
gender difference in shopping malls (Kuruvilla, Joshi,
and Shah, 2009) and gender and mall shopping
(Kuruvilla and Rajan, 2010). The underlying idea is to
explore the shopping preferences across the chosen
regions as there is inadequate literature available. The
need for such a research is felt primarily for ascertaining
the preference of customers for organized retailing in
developing world in context of the geographical
expansion taking place exponentially.
In such a sweeping background, it is imperative to know
the shopping preferences in the eastern region as
compared to preferences of shoppers of India as a
whole. A study conducted by Venkateswarulu and
Uniyal (2007) with reference to shopping malls in the
city of Mumbai has indentified the following set of five
factors that constitute the attractiveness of a shopping
mall.
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Appeal and convenience
Amenities and atmospherics
Ambience
Personnel
Parking and seating
A study was conducted by Chattopadhyaya and
Sengupta (2006) on the malls in Kolkata on the
importance of marketing activities to create the
distinctive positioning. They highlighted that
appropriate marketing strategies adopted by the malls
enhanced the customer patronage. The penetration of
mall in different parts of India is quite irregular and
distorted to a greater extent because of customer
preference and mall conversion. However, it is also
interesting to observe that quite a good number of
shopping malls found in North India having similarity in
terms of size, ambience, amenities and tenant mix
(Singh and Sahay, 2012). Shopping preference differs
across the region because of difference in customers
socio-cultural values and tastes and preferences. Mall
patronage can be augmented by integrating the
management philosophy and standard mall practices
with a thrust on consumer motivation.
In order to have deeper insight into the preference of
shoppers towards the shopping attributes, two
distinguished approaches were identified; shopping
motivations and shopping mall attributes The success of
any mall would depend on the adoptability of six factors
including value for money, customer delight,
information security, credibility, store charisma and
product excellence (Devgan and Kaur, 2010) . Study by
Yilmaz (2004) highlighted the importance of
convenience while deciding the consumers choice of
shopping centre. It is observed that the stimulating malls
are preferred to the traditional ones. Further, atmosphere
among other things has greater importance in mall
evaluation, patronage and loyalty (Andreu,
Bigne,Chumpitaz, and Swaen,2006).
Shoppers prefer to shop in a mall which has a variety of
assortments and provides convenient shopping. This
means with a certain type of store, mall that provides
variety is mostly preferred by shoppers. The
contribution of shopping mall towards business is
significantly higher than traditional markets, which are
viewed as simple convergence of supply and demand.
Shopping malls bring buyers and sellers together
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62
providing enough time to make choice along with
recreational means of shopping (Rajgopal, 2009).
White (2008) in his study explained the considerable
change in consumer lifestyle and with the change;
shopping malls have become the preferred destinations
for shoppers. Entertainment has now become the
essential part of retail mix which was of little
significance to shopping malls in the past. The best way
to generate more footfalls in a mall is to build a strong
image of the mall on delivery of a unique bundle of
benefits (Chebat, Sirgy and Grzeskowiak, 2010). It
needs worthmentioning here that mall security in terms
of security and safety of the shoppers who usually carry
credit cards, cash, wear jewellery and vehicles is to be
ensured for a better flow of shoppers. The importance of
such an issue has led to deployment of security guards
and installation of metal detectors and surveillance
cameras in vital locations which have become an
integral part of many malls today.
Convenient shopping experience as a means of obtaining
physical and mental balance, leads to gratification and
shopping enjoyment (Wanger, 2007). Thus, the mall
image can be administered to provide a shopping
enjoyment for its potential shoppers (Warnaby and
Medway, 2004). Location can be portrayed as an image
of the mall to encourage customers purchase intentions,
longer shopping time and higher sales turnover and
more positive shopping behavior (Dennis, Newman, and
Marsland, 2005). Malls represent the state of the society
and are perceived as agents of change (Kuruvilla and
Ganguli, 2008). The mall has created a space in the lives
of the urban lot because of growing young population,
rising incomes and busier lifestyles.
It is clear from the review of literature that shoppers
preference to a shopping mall is influenced by diverse
attributes. The attributes can be effectively managed to
provide a better experience to the shopper. This paper
attempts to identify the diverse attributes of mall
shopping across regions and explores the possibilities of
meaningful and productive integration.
III. OBJECTIVES
A large number of studies have been made on mall
development and operations (Kuruvilla and Ganguli,
2008), shopping attitude, perception and purchase
pattern (Kuruvilla and Joshi, 2010; Swaminathan and
Vani, 2008; Venkateswarulu and Uniyal, 2007), mall
financing (Singh et al.,2010), but hardly any study is
found on shopping preference towards mall attributes.
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Thus the present study attempts to enquire into this were drawn and in this regard simple random sampling
issue. The study undertaken aimed at identifying method was used. The questionnaires were distributed to
consumers preferences of shopping at malls in the the public who entered in the mall for their shopping
eastern region of India. Thus, the objectives of the study either all alone or with their family. Out of total 300
are questionnaires distributed, 264 responses were received
and out of 264 responses, 216 were finally considered
To explore the determinants of shopping
for analysis and the rest others were rejected due to
preference towards shopping mall attributes in eastern
incomplete responses.
region of India.
Profile of Respondents
To analyse the relative significance of these
determinants. Out of those 216 samples, most of respondents are in the
age group of 25 to 40 years, which accounts for almost
Method
45% of the sample size. Major respondents are male
This research was carried out in two phases. Initial (55%) and married (70%). Working professionals (31%)
phase involved an extensive literature review and are the major visitors at the mall followed by private
personal interactions with selected practitioners, service holders (28.2%) and government employees
academicians and shoppers to define the preferences of (15.3%). It is also observed that 37% of visitors income
shoppers on mall attributes. This led to the preparation is less than Rs.10, 000. The respondents are basically
of a structured questionnaire. Data collection was from different parts of West Bengal, Odisha and nearby
conducted in the second phase of the research. states.
Research Instrument Table I. Demographic Profiles of Respondents
Five selected mall attributes were considered for the Demographi Demographi Numbe Percentag
study. Convenience was captured by six measures c Group c Sub-Group r e (%)
adapted from Dennis et al. (2001). Ambience was Age Group 13-19 Years 25 11.6
captured by four measures adapted from Wakefield and 20-35Years 67 31.0
Baker (1998). Five measures were taken from the work 36-50 Years 94 43.5
of Bell (1999) to assess shoppers' subjective judgment 51-65Years 30 13.9
about the facilities extended by the mall. Six measures Gender Male 118 54.6
related to tenant-mix were generated from the work of Female 98 45.4
Finn and Louviere (1996) and Wakefield and Baker Marital Status Unmarried 64 29.6
(1998). Three measures for safety and security were Married 152 70.4
generated from the work of Frasquet et.al (2001). Three Qualification Schooling 61 28.2
measures for image were generated from the work of
Graduation 114 52.8
Leo and Phillipe (2002).The initial pool thus comprised
PG and above 41 19
of 27 items. Content and face validity was done with the
Occupation Govt. service 33 15.3
help of two experts on these 27 items. They were asked
to rank each item on a five point scale ranging from 1 Private 61 28.2
(strongly agree) to 5 (strongly disagree) with 3 (not sure) service
as the midpoint and then mean ratings per item were Professional 67 31
calculated. Then, 3 items were rejected following the Business 30 13.9
procedure of means scores less than 4(Kim et al. 2001) Student 25 11.6
finally leading to 24 items for further analysis. Monthly Less than 80 37
income Rs10,000
Sampling and Data Collection Rs 10,000-Rs 75 34.7
For this research, population was defined as people 25,000
visiting shopping malls in eastern region of India for Rs. 25,000-
31 14.4
shopping irrespective of age, gender, educational Rs. 40,000
qualification etc. Sampling element was individuals More
30 than
13.9
visiting malls for shopping. Sampling unit for this Rs.40,000
research was shopping mall from where the elements
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IV. RESULT AND ANALYSIS
An exploratory factor analysis has been made to know
the major preferences of visiting a mall. For reduction of
the variables, data analysis proceeds in two steps. First
the exploratory factor analysis is used to identify the
underlying preferences of shopping at organized mall.
For this, the exploratory factor analysis was performed
on the items selected using the principal component
analysis with varimax rotation. An orthogonal rotation
was chosen for the sake of simplicity (Nunnally and
Bernstein, 1994). Subsequently, confirmatory factor
analysis has been carried out to confirm the underlying
factors of shopping preferences.
Exploratory Factor Analysis
It can be seen from Table -1, five factors were extracted, accounting fo
Cronbachs alpha value of greater than equal to 0.7 is
considered reliable. In one case only two items loaded
on the factor so correlation variance was taken into
consideration. So overall the factors are reliable.
Extracted factors are presented in the summarized table
(Table II) below.

Table II. Consolidated Factor Output

Variables Factor loadings
Factor No.(Variance Explained) Factors Included F1 F2 F3 F4 F5 Cronbachs alpha
Title
F1 (14.09%) Images Characteristics .795 0.65
Navigation .599
Awareness .732
F2 (12.4%) Ambience Road .732 0.71
Music .493
Air condition .636
Cleanness .627
Parking .496
F3 (12.3%) Amenities Escalator .684 Corr.coeff.=.524
Lift service .670 (sig.at0.001 level)
F4 (9.3%) Tenant Brands .716 0.80
Mix P.Brand .756
Products .719
Anchor tenant .711
Entertainment .493
F5 (9.2%) Safety Personal 0.78
.559
and safety
security Safe to use .620
Safety in lift .706
Fire .739
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
*As there are only two variables for amenities factor, so co-relation value has been taken into consideration for
reliability testing.

Factor 1: First factor comprising of five mall attributes reliability among these variables is quite high as the
(Brands, Preferred Brands, Products, Anchor Tenant, value is close to 0.80.
and Entertainment) explains 14.09 per cent of variance.
Factor 2: The second extracted factor explains around
These variables have significantly high factor loadings
12.4 percent of variance with variables like personal
(close to 0.5) on this factor. Since these variables are
safety, safe to use, safety in lift and Fire. All these
close to variety of stores, it is labeled as tenant mix. The
variables loaded quite well with the factor ranging from
.739 to .559. Those variables have got strong bearing on
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safety and security, since the alpha value has been
observed to be 0.78.
Factor 3: Third factor comprising five attributes (Music,
Air conditioner, Cleanliness, Parking) explains 12.3 %
variance and loaded quite well ranging from .496 to.732
with the variables. The attributes are also close to
benefits given by malls, labeled as Ambience, having
reliability value of 0.71.
Factor 4: The fourth factor consists of three variables
(Characteristics, Navigation, and Awareness) having 9.3
% of variance and the factor loading of those variables
are ranging from .599 to .795, which is quite good
enough. The variables are labeled as Images and the
corresponding reliability value is 0.65.
Factor 5: The factor five is loaded with two major
variables (Escalator and lift) having loading value more
than .6 and its co-relation coefficient value is more than
.5.This factor is labeled as Amenities.
Confirmatory Factor Analysis
After identifying five clear factors through exploratory
factor analysis, the next stage is to confirm the factor
structure through Structural Equation Modeling (SEM).
In this regard AMOS 16.0 has been used to perform the
confirmatory factor analysis. From the confirmatory
factor analysis it is clear that the measurement items are
loaded in accordance with the pattern revealed in the
exploratory factor analysis.
Model fit
The measurement model indicated an acceptable model
fit of the data (2=235.9,df=140,p<0.001;
2
/df=1.68(<5); CFI=0.92; TLI=0.90; IFI=0.93;
NFI=0.84; PNFI=0.68; PCFI=0.76 ;PRATIO= 0.82 and
RMSEA=0.06) (Anderson and Gerbing, 1988). In
addition, all the indicators have loaded significantly on
the latent constructs. The values of the fit indices
indicate a reasonable fit of the measurement model with
data (Byrne, 2001, pp.79-86). In short, the measurement
model confirms to the five factors structure of the
customer preferences on shopping mall attributes.
Reliability of the service quality instrument
The Cronbachs alpha for the shopping preference
instrument was more than 0.60, which is acceptable and
shows that the instrument is reliable. Further evidence of
the reliability of the scale is provided in below given
Table III, which shows the composite reliability and
average variance extracted scores of the different factors
obtained (Fornell and Larcker, 1981; Hair et al., 2006).
Composite reliability (CR) of all the latent variables is
found greater than or equal to the acceptable limit of
0.70,(Carmines and Zeller,1988).The average variance
extracted for all the factors is greater than or equal to
0.5, which is acceptable( Fornell and Lacker,1981).This
shows the internal consistency of the instrument used in
the study.

Table III. Confirmatory factor analysis results

Constructs Measurement Items Standardized Estimate P-value AVE CR
Preferred Brands TN1 .706
Products TN2 .622 ***
Anchor tenant TN3 .682 *** 0.45 0.8
Brands TN4 .745 ***
Entertainment TN5 .580 ***
Personal safety SEC1 .618
Safe to use SEC2 .720 ***
0.69 0.8
Safety in lift SEC3 .798 ***
Fire SEC4 .621 ***
Parking AM1 .476
Music AM2 .487 ***
Road AM3 .575 *** 0.59 0.7
Air condition AM4 .670 ***
Cleanliness AM5 .729 ***

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Constructs Measurement Items Standardized Estimate
Escalator CON1 .782
Lift service CON2 .663
Navigation IMG1 .582
Characteristic IMG2 .660
Awareness IMG3 .621
Construct Validity
Construct validity is the extent to which a set of
measured variables actually reflects the latent construct
(Hair et al., 2006).Construct validity is established in
this study by establishing the face validity, convergent
validity and discriminant validity.
Face validity is established by adopting the
measurement items used in the study from the existing
literature and adapting the same to the present research
context. Convergent validity is assessed by examining
the factor loadings and average variance extracted of the
constructs as suggested by Fornell and Larcker
(1981).All the indicators have significant loading on to
the respective latent constructs(p<0.001) with values
varying between 0.47 and 0.79 (Table-IV). In addition,
the average variance extracted (AVE) for each construct
is greater than or equal to 0.50, which further supports
the convergent validity of the constructs.
Fornell and Larcker (1981) states that discriminant
validity can be assessed by comparing the average
variance extracted (AVE) with the corresponding inter-
construct squared correlation estimates. The AVE values
of all the purchase preferences factors are greater than
the inter-construct correlations, which supports the
discriminate validity of the constructs. Thus, the
measurement model reflects good construct validity and
desirable psychometric properties.
V. CONCLUSION
The paper makes two important contributions to the
existing literature. First, with the help of empirical
research, the intricate issues involved in the shopping
preferences of shoppers in the eastern region of India
could be studied from varied angles. It is interesting to
observe that eastern region of India specifically Kolkata,
Bhubaneswar have shown good responses in attracting
some mall developers. Needless to say that among other
things the motives behind the shopping mall across the
regions differs because of variation in culture and social
aspects. From managerial point of view, it is
instrumental to understand the shoppers preferences
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66
P-value AVE CR
0.72 0.7
***
*** 0.62 0.7
***
which can be used to design marketing programmes
accordingly. The current research makes important
contribution to the field of mall management by
identifying the shopping preferences from the
customers prospective. These preferences will act as
guidelines for the mall developers and mall managers
specifically in eastern region of India as it will help
them to understand the particular preferences that
customers consider while visiting and patronizing the
malls. The study validates the proposition that shopping
preferences in the eastern region is determined by five
factors: convenience, ambience, tenant-mix, amenities,
safety and security and image. The first and foremost
factor defining shopper motives is ambience already
studied in some previous literature (Singh and
Sahay,2012) in National Capital Region (NCR) of India.
Mall developers need to consider ambience as a crucial
factor to enhance the shopping experience apart from
importance to be given also to a few other factors like
safety and security and physical infrastructure impacting
the shopping experience considerably. Irrespective of
geographical location, Indian customers prefer some
common amenities in their mall visit that can be
considered as the basic expectation of the mall shoppers.
It is important for the mall managers to understand the
composition of mall attributes. However, the variables
under each factor would vary depending on the intended
positioning. For upcoming shopping malls, it is
important to decide location, design, leasing and
facilities management in a manner so that the mall can
attract number of footfalls. The existing malls and
forthcoming malls can design their marketing strategy
accordingly for their growth and sustainability. This
research also provides benchmark to evaluate future
options for management, operations and promotion of
malls. There could be decisions beyond the list of
variables (observable parameters) included in this
research. These may be evaluated in terms of their
analogy to variables and compatibility with factors
included in the proposed model.
Though respondents identified five shopping preferences
on mall attributes, all five are not equally significant.
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 FMU Journal of Management
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For instance, only two preferences basically tenant mix [3] Byrne,B.M.(2001).Structural Equation Modeling
and safety and security have more contribution having with AMOS: Basic Concepts, Applications and
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eastern region need to give due importance to aspects Associates.
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[4] Carmines, E.G. & Zeller, R.A. (1988). Reliability
level to increase the footfalls. This also signifies to
and Validity Assessment. Beverly Hills, CA:
identify key preferences and sensitive areas where
Sage.
suitable changes can yield more dividends in the years to
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This study is probably the first study carried on 34-43.
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whether these preferences change with the change in Shopping Centre Choices, New York: Palgrave
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mall, nature of town (tier-I, tier-II etc.) and
demographics of respondents. Another issue relates to [9] Devgan, D. & Kaur, M. (2010). Shopping Malls
the significance of tenant mix. In a country like India in India: Factors affecting Indian Customers
where the existing malls have more or the less identical Perceptions, South Asian Journal of
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CORPORATE SUSTAINABILITY REPORTING PRACTICES IN

INDIA: A COMPARATIVE SECTORAL ANALYSIS
1
BiswoRanjan Mishra, 2Bhagaban Das
1
Lecturer in Commerce, DDCE, Utkal University
2
Professor, P.G. Department of Management Studies, F.M. University Balasore
Email-biswomishra@gmail.com , drbhagabandas@gmail.com

Abstract : This study analyses the level of corporate II. LITERATURE REVIEW:
sustainable reporting practices of 50 largest companies of
India in 10 selected sectors for three years (2013 to 2015). A number of empirical studies have been undertaken to
Based on content analysis method, the study examined the investigate the extent and nature of corporate sustainable
sustainability reports of sample companies (Rated by disclosure (CSD) practices in different countries (Gray
Economic Times in ET-500 Indian companies list for the et al. 1995, Guthrie and Parker, 1989). Several
year 2015) using UNEP benchmarking tool. In the study a approaches for scoring sustainability reports have been
comparative analysis of corporate sustainable reporting
scores between different sectors in India is made. Both
proposed either by consultancy firms or by academic
parametric and non-parametric significant tests are used to researchers (Skouloudis et al., 2009). Morhardt et al.
ascertain the degree of comprehensiveness of sustainability (2002) constructed a scoring system based on the first
reporting practices and if there exists significant version of the GRI Guidelines (G1) to assess
differences between different sectors. The results from the environmental reports. Similarly, Stratos (2005)
analysis show that there is a significant difference in the proposed a scoring system to examine Canadian
level of corporate sustainability reporting practices companies based on the GRI Guidelines consisting of 46
between the selected sectors. criteria within six major clusters.
Keywords: - Sustainability Reporting, Triple Bottom Line, Kolk (2001) has investigated the extent to which
GRI, Content Analysis.
sustainability reporting varies between industries for the
I. INTRODUCTION: largest 250 firms in the world. Results of the research
show a relationship between the direct impact of an
Triple bottom line reporting (TBLR), a term coined by industry and the degree of sustainability reporting. Non-
John Elkington (1997), involves incorporating industrial companies such as banks and insurance
economic, environmental and social performance companies appear to report less than average, whereas
indicators into an entity's management, measurement industrial companies such as motor vehicles and parts
and reporting processes. Ranganathan (1998) depicts companies report more than average.
three sustainability related measurements: social,
environmental and economic performances. The Ahmad and Rahim (2003) showed that the highest
emergence of this concept, however, seems to have CSR disclosure level came from the trading and services
created some uncertainty as to what is required of sector.
organizations that seek to undertake such practice.Verma, Saxena and Kaushik (2002) made a study for
Definitions and integration measures vary (Vandenberg,
measuring social performance of nineteen public
2002). At its narrowest, triple bottom line reporting
enterprises of India. They observed that public sector
involves measuring and reporting economic,
enterprises in oil and petroleum industry made an
environmental and social performance objectives that
effective and sincere effort for appraisal of social
are pursued simultaneously. A broader view, however,
performance. It has been also observed that Board of
suggests that triple bottom line reporting involvesDirectors carried on a significant responsibility to report
assessing an entity's values, strategies and practices and
social performance in annual reports. Most of the social
how these can be utilized to achieve economic, performance reports were made annually. Directors
environmental and social objectives (Sustainability,
report and Chairmans report had been taken as most
2003). popular and convenient medium for making reporting
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practices on social activities and descriptive mode had
been considered as popular mode.
Parkash (2006) conducted a study of eighty-five Indian
companies which showed that environmental accounting
of Indian companies had been made mainly on a
voluntary basis with a positive manner. As far as
industry wise reporting practices was concerned the oil
and petroleum sector and steel and engineering sector
both had ranked highest in environmental reporting i.e.
60% followed by cement 57%, fertilizers, chemicals and
pharmaceuticals 50% and consumer products 37%,
whereas textile 29%, power and electricity 25% and
shipping and airways 20%. No environmental reporting
was found in case of health sector. She observed, In
India, there is no legal compulsion on the corporates
part to account and report for the environmental issues
thats why companies are disclosing environmental
matters on a voluntary basis with in a positive manner
only. Thus, there is need to popularize the benefits of
environmental reporting among the industrials
community.
Sujit (2007) conducted a study and examined the
environmental disclosure practices of top 50 Indian
private sector companies spread over 14 industry
segments. The performances of these companies have
been evaluated against the 20 core environmental
indicators recommended by UNEP/Sustainability. The
major findings of the paper are that there are fewer
examples of corporate sustainability reporting or triple
bottom line reporting in India. Not only are those, a vast
majority of the Indian companies failing to demonstrate
their social and environmental accountabilities in a real,
meaningful reporting.
DuttaSumanta., (2012) has worked on Triple Bottom
Line Reporting: An Indian Perspective The main
objective of the study has been made an attempt to
highlight how the TBLR implementation is taking place
in with special reference GRI initiative. Corporate
Sustainability is of utmost important for the survival of
organizations and their future generations stakeholders.
Hence, Triple Bottom Line Reporting (TBLR) is
considered to be a sine qua non for corporate growth on
a sustained basis. Triple Bottom Line Reporting (TBLR)
goes beyond the traditional way of reporting mechanism
and encourages businesses to give closer attention to the
whole impact of their commercial activities, over &
above their financial performance.
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70
III. OBJECTIVES OF THE STUDY:
The objective of the paper is:
To understand the theoretical concepts, purpose
and driving forces for sustainability reporting in India.
This study seeks to find out whether there is a
significant difference in the level of corporate
sustainability reporting practices between different
business sectors.
In order to achieve this objective, this study used the
judgmental sampling technique for selected business
sectors. The selected business sectors are grouped into
two broad categories i.e. manufacturing sector and
services sector. Out of 10 selected business sectors,
seven fall in manufacturing category namely,
automobiles & parts, chemicals, construction & building
materials, mining, oil & gas, pharmaceuticals & bio-
technology and steel & other metals. The three services
sectors are banking, software & computer services and
telecommunication.
HYPOTHESIS DEVELOPMENT:
In order to achieve the objectives of this study, the
following hypotheses are stated in the null form:
There is no significant difference in the average
corporate sustainability reporting scores between
different business sectors.
IV. RESEARCH METHODOLOGY:
The present study adopts the following methodology:
Sources of Data:
The study is based on the secondary data obtained from
the company websites and sustainability reports for the
period 2013 to 2015.
Sample Design:
The present study is carried out on a focus group of 50
most valuable companies (top 5 companies each from
selected sectors i.e. automobiles & parts, chemicals,
construction & building materials, mining, oil & gas,
pharmaceuticals & bio-technology and steel & other
metals, banking, software & computer services and
telecommunication), as rated by Economic Times in ET-
500 list for the year 2015.
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Sampling Unit: 9. Awards 10. Verification

11. Reporting Policy 12. Corporate Context
Sampling unit for this study is one company. All
companies are public companies listed in National Stock 2. Inputs / Outputs
Exchange (NSE). Inventory
Inputs:
Period of the Study: 13. Material Use 14. Energy
For the present study, the samples are collected for the Consumption
period of 2013, 2014 and 2015. 15. Water Consumption 16. Clean Technology
17. Health & Safety 18. Accidents &
Research Tool: Emergency Response
To analyze the content of the TBL reports, benchmark 19. Risk Management & 20. Land contamination
tool developed by UNEP/Sustain Ability have been EIS &Remediation
used. The tool is chosen as it grounds the study in 21. Stewardship of
international standards and compares Indian corporate Ecosystem
reports to international levels. The tool is similar to Outputs:
those used in a number of other international 22.Waste Minimization 23. Air Emission
benchmarking studies (Kolk, 1999; Morhardt, 2001; 24.Water Effluents 25. Noise &Odours
Morhardt et al., 2002). It is chosen for its explicit 26.Transportation
guidelines, which permits a clear procedure to be Products:
followed. 27. Life Cycle Design & 28. Environmental
Assessment Impacts
Since 1994, UNEP/Sustainability has undertaken several
29. Product Stewardship 30. Packaging
surveys of international corporate environmental and
social reports (1994, 1996, 1997, 2000, 2002, and 2006). 3. Finance
The basis for these surveys has been a benchmark tool 31. Environmental Spending 32. Environmental
used to integrate the content of the reports. The Liabilities
benchmark tool produced by the UNEP/Sustainability 33. Market Solutions & 34. Environmental Cost
group has been revised several times since its Instruments Accounting
development, making slight alterations to account for 35. Charitable Contributions
new developments in reporting. This detail was 4. Stakeholders
perceived important as it allowed for the reports to be Relation & Partnership
reviewed consistently with the design of the benchmark. 36. Employees 37. Legislators &
The benchmark tool comprises 50 reporting items, Regulators
grouped under the five sections of (1) Management 38. Local Communities 39. Investors
Policies and Systems, (2) An Input/output Inventory, (3) 40. Suppliers & Contractors 41. Customers &
Finance, (4) Stakeholder Relations and Partnerships, and Consumers
(5) Sustainability Development. (Figure 1) 42. Industry Associations 43. Environment
Groups
Figure 1: UNEP/Sustainability Engaging
44. Science & Education 45. Media
Stakeholders Survey Instrument 2006 Revised
5.Sustainable
Version
Development
1. Management Policy and 46. Global Developmental 47. Technology
Systems Issues cooperation
1. Top Management 2. Environmental 48. Global Environment 49. Global Operating
Statement Policy standards
3. Environmental 4. Responsibility & 50. Visions, Scenarios,
Management System Accountability Future Trends
5. Environmental Audit 6. Goals & Target
Source: UNEP/Sustainability (2006) Engaging
7. Legal Compliance 8. Research&
Stakeholders
Development

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The above 50 reporting items are scored on a scale of 0- higher the score that it is given. Thus a score of 0
4. This rating scale (shown in Table 1 below) is based on indicates that the element is not reported while a score
the principle that the more complete and comprehensive of 4 indicates comprehensive coverage.
the information relating to a given reporting item, the

Table 1: UNEP/Sustainability Report Scoring Criteria

0 1 2 3 4
No Minimum Detailed and Commitment to Commitment to and progress
coverage coverage, honest, including and progress towards triple bottom line of
little company towards sustainable development
detail shortcomings and sustainable in core business plus
commitments development in benchmarking against
core business competition and/or best
practice in other sectors
Source: UNEP/Sustainability (2006) Engaging Stakeholders
Scoring Procedure: have been summed up and the total scores represented
the companys sustainability reporting scores Index
On the basis of the above four point scale an overall
(CSRS). It is considered that all the key area information
assessment of the corporate sustainability reporting
in the index is equally important to the average users.
practices of selected companies have been done by
The sustainability reporting score index can be found
developing a sustainability reporting score index
out with the help of following procedure:
(CSRS). For this purpose all the key area wise scores

Corporate Sustainability Reporting Score (CSRS) = SMPS+SIOI+SF+SSRP+SSD

Where, SMPS = Total Scores for Management Policy and Systems Variables
SIOI = Total Scores for Inputs / Outputs Inventory Variables
SF = Total Scores for Finance Variables
SSRP = Total Scores Stakeholders Relation & Partnership Variables
SSD = Total Scores Sustainable Development Variables

Data Analysis Technique: ascertained using non-parametric tests (Kruskal Wallis

test and Mann-Whitney U Test).
This study conducted an inferential statistical analysis
for testing the hypotheses using the SPSS-Grad Pack REFLECTION ON SAMPLE (DATA
13.0. Parametric tests (ANOVA, T- test) are used in DESCRIPTIVE):
order to answer all five hypotheses. For robustness, the
The descriptive statistics of CSRS from 2013 to 2015 for
hypothesis of no significant difference would be further
total sample is presented below.
Table 2: Descriptive Statistics of CSRS from 2013 to 2015 for India
Year Count Minimum Maximum Mean Median Std. Deviation
2013 50 40.00 95.00 60.94 60.00 15.47
2014 50 42.00 103.00 67.78 63.50 15.37
2015 50 47.00 108.00 72.88 71.00 15.51
Source: Authors own computations
Table 2 reflects the values of mean, median, standard 2015 for selected companies. Results show that there is
deviation, maximum and minimum CSRS from 2013 to a difference between mean and standard deviation of
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CSRS across the years. It also indicates that mean CSRS Ho1.01: There is no significant difference in the average
for 2015 is higher (72.88) in comparison to other two corporate sustainable reporting scores across selected
years. The values of maximum, minimum and mean sectors of India.
CSRS have increased steadily from the year 2013 to
Ha1.01: Significant difference exists in the average
2015.
corporate sustainable reporting scores across selected
FINDINGS OF THE STUDY: sectors of India.
Considering the influence of the industry specific
factors, the following four hypothesis have been tested.
Table 3: Comparative CSRS-Sample Sectors in India
(ANOVA and Kruskal Wallis Test)

Country Sector Count Mean S.D F Sig. Chi Square Sig.

India Auto 05 61.60 12.62 6.330 .000 26.167 .002
Chem 05 63.60 5.46
Const 05 63.40 18.32
Fin 05 60.40 11.87
Min 05 57.27 8.54
O&G 05 87.33 6.05
Phar 05 56.07 3.03
Soft 05 89.73 14.89
Steel 05 73.00 2.55
Tele 05 59.60 12.52

Source: SPSS Output (Authors own computations)

The result as indicated in Table 3 above shows that at Ho1.02: There is no significant difference in the average
5% level of significance, i.e. = 0.05, the p value i.e. corporate sustainable reporting scores across selected
the level of significance is 0.000 in the case of ANOVA manufacturing sectors of India.
and 0.002 in the Kruskal - Wallis test. Since p < , null
Ha1.02: Significant difference exists in the average
hypothesis of equality of means is rejected. The alternate
corporate sustainable reporting scores across selected
hypothesis that there exists a significant difference in the
manufacturing sectors of India.
average corporate sustainable reporting score across
selected sectors of India is accepted.
Table 4: Comparative CSRS- Manufacturing Sectors
(ANOVA and Kruskal Wallis Test)
Chi
Country Sector Count Mean S.D F Sig. Sig.
Square
India Auto 05 61.60 12.62 6.382 .000 17.931 .006
(Manufact Chem 05 63.60 5.46
ure Const 05 63.40 18.32
Sector) Min 05 57.27 8.54
O&G 05 87.33 6.05
Phar 05 56.07 3.03
Steel 05 73.00 2.55

Source: SPSS Output (Authors own computations)

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The result as indicated in Table 4 above shows that at Ho1.03:There is no significant difference in the average
5% level of significance, i.e. = 0.05, the p value i.e. corporate sustainable reporting scores across selected
the level of significance is 0.000 in the case of ANOVA service sectors of India.
and 0.006 in the Kruskal Wallis test. Since p < , null
Ha1.03: Significant difference exists in the average
hypothesis of equality of means is rejected. The alternate
corporate sustainable reporting scores across selected
hypothesis that there exists a significant difference in the
service sectors of India.
average corporate sustainable reporting score across
selected manufacturing sectors of India is accepted.
Table 5: Comparative CSRS-Service Sectors (ANOVA and Kruskal Wallis Test)
Chi
Country Sector Count Mean S.D F Sig. Sig.
Square
India Fin 05 60.40 11.87 8.517 .005 7.330 .026
(Service Soft 05 89.73 14.89
Sector) Tele 05 59.60 12.52

Source: SPSS Output (Authors own computations)

The result as indicated in Table 5 above shows that at Ho1.04: There is no significant difference in the average
5% level of significance, i.e. = 0.05, the p value i.e. corporate sustainable reporting scores between
the level of significance is 0.005 in the case of ANOVA manufacturing sector and service sector in India.
and 0.026 in the Kruskal Wallis test. Since p < , null
Ha1.04: Significant difference exists in the average
hypothesis of equality of means is rejected. The alternate
corporate sustainable reporting scores between
hypothesis that there exists a significant difference in the
manufacturing sector and service sector in India.
average corporate sustainable reporting score across
selected service sectors of India is accepted.
Table 6: Comparative CSRS-Manufacturing and Service Sector
(T-Test and Mann Whitney Test)
Mea Sig. Sig.
Country Sector Count S.D t value U
n (2-tailed) (2-tailed)
India Manu 35 66.04 13.45 -0.822 .415 236.000 .575
Service 15 69.91 18.95

Source: SPSS Output (Authors own computations) Independent sample t-test (equal variances assumed)
Table 6 shows that at = 0.05, p i.e. level of
significance = 0.415 when t test is run and 0.575 when
Mann Whitney test is run. Since p > , null hypothesis
of equality of means of average corporate sustainable
reporting scores between manufacturing sector and
service sector in India fails to be rejected. Thus, there is
no significant difference in the average corporate
sustainable reporting scores between manufacturing
sector and service sector in India.
V. LIMITATION OF THE STUDY:
The study has two specific limitations: first, the
assessment is limited to the top 50 companies each from
selected ten sectors in India as rated by Economic Times
and the findings may not necessarily be representative of
sustainability reporting practices of other entities or
public sector institutions; and second, content analysis
techniques of annual and sustainability reports may have
specific limitations.
VI. CONCLUSION:
With the increased focus on sustainability and increasing
demands for corporate accountability, many companies
are now reporting not only their financial results to their
stakeholders, but also on their sustainability
performance regarding their social, environmental and
governance issues. The paper found that there are no
mandatory requirements for companies to undergo

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sustainability report and their assurance. In India, Capstone,. Oxford, 1997, 402 pp. ISBN 1-
typically, reporting beyond mandatory requirements is 900961-27-X.
low.
[5] Kolk A. (1999). Evaluating corporate
This study revealed that there is a significant difference environmental reporting. Business Strategy and
in the level of corporate sustainability reporting the Environment 8: 225237
practices between selected sectors in India.
[6] Milne, M.J., Ball, A. & Gray, R. (2005), From
Sustainability reporting practices of services sectors is
soothing palliatives and towards ecological
found same as manufacturing sectors.It concludes that
literacy: A critique on the Triple Bottom-line.
corporate sustainability reporting practices among the
International Conference on Social and
selected companies is basically very low and still at its
Environmental Accounting Research, 30 March
embryonic stage and therefore needs more attention.
1April2005.
There is a definite need that these industries improve on
their environmental activities and management and [7] Morhardt, J. E., Baird, S., & Freeman, K. (2002),
consequently report these via their sustainability reports, Scoring corporate environmental and
annual reports, magazines, and corporate websites sustainability reports using GRI 2000, ISO 14031
amongst others. Work on the triple bottom line, and other criteria. Corporate Social
however, is being crucially undermined by the way in Responsibility and Environmental Management,
which the term sustainability is still bandied about by 9, 215-233.
business consultants and organizations in the context of
[8] Parkash, N. (2006), Environmental Accounting
the triple bottom line. Conclusively, this study
in India- A Survey of Indian Companies, The
recommends that the Financial Reporting Council and
Chartered Accountant, August, 2006, p.254.
other relevant bodies in the standard setting process
draft a comprehensive framework for sustainability [9] Ranganathan, J. (1998), Sustainability rulers:
reporting practices for Indian companies. measuring corporate environmental and social
performance. Sustainability Enterprise
REFERENCES Perspective, May, 111. Washington, D.C.: World
[1] Dutta, Sumanta(3) Triple Bottom Line Resource Institute. Retrieved from
Reporting: An Indian Perspective www.igc.org/wri/meb/pdf/janet.pdf/.
Interdisciplinary Journal Of Contemporary [10] Skouloudis, A., Evangelinos, K. and Kourmousis,
Research In Businessapril 2012,vol.3,No 12 F., 2010, Assessing nonfinancial reports
[2] Guthrie, J & Parker, LD (1989), Corporate according to the Global Reporting Initiative
social reporting: A rebuttal of legitimacy theory, guidelines: evidence from Greece, Journal of
Accounting & Business Research, vol.19, no.76, Cleaner Production 18 (5), 426-438.
pp343-352. [11] Sujit Kumar Roy., (2007),Corporate
[3] Gray, R. (2006), Social, environmental and Sustainability Reporting: How Indian Companies
sustainability reporting and organisational value Measure up The ICFAI University Journal of
creation? Whose value? Whose Environmental Economics 02/2007; V(2).
creation?Accounting, Auditing & Accountability [12] Verma, J., Saxena, P. and Kaushik, S.P. (2002),
Journal 19(6):793-819. Measuring Corporate Social Reporting in Indian
[4] John Elkington, Cannibals With Forks: The Public Sector Enterprises, The Indian Journal of
Triple. Bottom Line of 21st Century Business. Accounting, Vol. XXXII, June, pp.15-20.
Annexure
Overall Company-Wise CSRS from 2013 to 2015 for Selected Companies
CSRS CSRS CSRS Average
Company Name Sector
2015 2014 2013 CSRS
69.00 64.00 62.00 Tata Motors Limited Automobiles & Parts 65.00
89.00 82.00 75.00 Mahindra & Mahindra Limited Automobiles & Parts 82.00
61.00 56.00 51.00 Bajaj Auto Limited Automobiles & Parts 56.00
55.00 58.00 52.00 Hero Motor Corporation Limited Automobiles & Parts 55.00
54.00 51.00 45.00 Maruti Suzuki India Limited Automobiles & Parts 50.00
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78.00 72.00 63.00 Tata Chemicals Limited Chemicals 71.00

68.00 67.00 66.00 United Phosphorus Limited Chemicals 67.00
63.00 61.00 59.00 BASF India Limited Chemicals 61.00
69.00 62.00 55.00 Pidilite Industries Limited Chemicals 62.00
61.00 58.00 52.00 Gujarat Fluorochemicals Limited Chemicals 57.00
99.00 96.00 90.00 Larsen & Toubro Limited Construction & Building 95.00
materials
75.00 65.00 50.00 Jaiprakash Associates Limited Construction & Building 63.33
materials
61.00 55.00 40.00 Punj Lloyd Limited Construction 52.00
& Building materials
54.00 54.00 45.00 DLF Limited Construction & Building 51.00
materials
62.00 58.00 47.00 Gammon India Limited Construction & Building 55.67
materials
83.00 77.00 65.00 HDFC Bank Limited Financial 75.00
52.00 48.00 44.00 Canara Bank Financial 48.00
60.00 51.00 48.00 State Bank of India Financial 53.00
82.00 70.00 61.00 ICICI Bank Limited Financial 71.00
60.00 56.00 49.00 Punjab National Bank Limited Financial 55.00
72.00 63.00 60.00 Coal India Limited Mining 65.00
73.00 62.00 54.00 NMDC Limited Mining 63.00
66.00 61.00 60.00 Sesa Sterlite Limited Mining 62.33
49.00 47.00 45.00 Shirpur Gold Refinery Limited Mining 47.00
59.00 48.00 40.00 Gujarat Mineral Development Mining 49.00
Corporation Limited
100.00 95.00 90.00 Reliance Industries Limited Oil & Gas 95.00
99.00 94.00 82.00 Oil & Natural Gas Corporation Limited Oil & Gas 91.67
90.00 86.00 85.00 Indian Oil Corporation Limited Oil & Gas 87.00
86.00 82.00 78.00 Bharat Petroleum Corporation Limited Oil & Gas 82.00
86.00 81.00 76.00 Hindustan Petroleum Corporation Oil & Gas 81.00
Limited
62.00 55.00 48.00 Sun Pharma Industries Limited Pharmaceuticals & 55.00
Biotechnology
68.00 56.00 47.00 Cadila Healthcare Ltd Pharmaceuticals & 57.00
Biotechnology
75.00 60.00 42.00 Dr. Reddy's Laboratories Limited Pharmaceuticals & 59.00
Biotechnology
62.00 59.00 53.00 Cipla Limited Pharmaceuticals & 58.00
Biotechnology
56.00 52.00 46.00 Lupin Limited Pharmaceuticals & 51.33
Biotechnology
103.00 99.00 95.00 Tata Consultancy Services Limited Software & Computer services 99.00
106.00 102.00 95.00 Infosys Limited Software & Computer services 101.00
108.00 103.00 94.00 Wipro Limited Software & Computer services 101.67
86.00 74.00 65.00 HCL Technologies Limited Software & Computer services 75.00
79.00 75.00 62.00 Tech Mahindra Limited Software & Computer services 72.00
80.00 75.00 70.00 Tata Steel Limited Steel & Other metals 75.00
77.00 74.00 68.00 Steel Authority of India Limited Steel & Other metals 73.00
75.00 70.00 65.00 Jindal Steel and Power Limited Steel & Other metals 70.00
78.00 75.00 60.00 Hindalco Industries Limited Steel & Other metals 71.00
81.00 78.00 69.00 JSW Steel Limited Steel & Other metals 76.00
78.00 77.00 70.00 BhartiAirtel Limited Telecommunication 75.00
70.00 69.00 65.00 Reliance Communications Limited Telecommunication 68.00
47.00 42.00 40.00 Idea Cellular Limited Telecommunication 43.00
56.00 53.00 50.00 Tata Communications Limited Telecommunication 53.00
62.00 61.00 54.00 Mahanagar Telephone Nigam Limited Telecommunication 59.00
3644.00 3389.00 3047.00 Total Score 3360.00
72.88 67.78 60.94 Average Score 67.20
Source: Authors own computations

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FINANCIAL CHALLENGES OF MSMEs IN INDIA: AN

ANALYTICAL STUDY
GANESH PRASAD PANDA
Lecturer, Department of Commerce Sadhu Goureswar Degree College, Kanikapada, Jajpur, 755011
Email: gpanda673@gmail.com

Abstract: India is the 3rd largest economy in the world.
Development of any nation depends largely upon the
development of its industrial sector. Industries does not
only mean the large industrial houses having huge capital
outlays, rather it constitutes the MSME units, which is
accepted as an engine of economic growth creating high
employment opportunities with lower capital base. It
contributes significantly to countrys GDP & export
performance. In the present scenario this sector is facing
number of bottlenecks like inadequacy of bank finance,
difficulties in raw material procurement, marketing &
distribution which obstruct the inclusive growth and
development potentiality. Presently funding issues have
been a greater concern for the MSMEs, due to poor credit
accessibility from commercial banks. It is due to the higher
level of NPAs, inadequate information about background
of MSMEs. This paper specially focuses on the financing
eco system of the MSME & their relationship between
bank financing and the MSME growth. Govt.s Make in
India programme will boost the MSME sector to make a
new horizon in the industrial progress. On the other hand
the MUDRA bank financing will act like fuel to the engine
of MSME sector which will unleash the young & dynamic
entrepreneurial talent, leading to neutralizing the regional
imbalances and promoting growth & development.
Key words: MSMEs, finance, inclusive growth, GDP,
credit, MUDRA bank
I. INTRODUCTION:
Industrial sector plays an eminent role in the overall
growth and upliftment of a nation. From Indian context
it is the most dynamic and significant organ for the
economy. As India is a labour intensive country, MSME
functions as a catalytic agent by utilising the scarce
capital resources which ushers to giving a boost to the
industrial development. MSME covers 90 % of total
enterprises creating lots of employment opportunities at
comparatively lower capital cost than large industries for
the rural as well as urban poor which ushers to reduce
regional imbalances. Despite of so much significance of
this sector , still it is one of the deprived section of the
3) Nishanth. P & DR. Zakkariya K.A (2014)
economy in the area of financing which stands as a has made a study on barriers faced by micro, small &
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major hurdle in the path of growth. Most entrepreneurs
in this sector are not getting adequate finance which is
compressing the innovative spirit of young talents. The
new centrally sponsored scheme MUDRA BANK by
honble prime minister will revitalise the MSME sectors
by providing security free loans which will flourish
some new leaves in the MSME tree.
IMPORTANCE OF THE STUDY:
Since MSME sector in India is responsible for the steady
growth of Indian economy by contributing a major share
to the GDP, so this sector needs to be overhauled and
developed. But the matter of concern is that this sector is
facing many challenges in the area of finance, marketing
, technology and exporting. Among these, financing
issues have a deep impact on the operational
performance of MSMEs. Our study strictly focus on the
various funding problems, the relationship between bank
financing and the performance of MSMEs and the future
prospects of this sector through the recently introduced
scheme of central Govt. i.e MUDRA bank.
II. LITERATURE REVIEW:
1) Oke, M.O, Aluko, O.A(2015) assessed the
impact of commercial banks on small and medium
enterprises financing using a sample of 10 banks out of
the 21 commercial banks operating in Nigeria by
adopting panel data found regression analysis technique
and commercial banks have significant impact on
financing of SMEs.
2) Kumar ashish, Batra vikas(2009) studied
regarding the challenges & issues of Indian MSMEs in
the current scenario and found that MSMEs are the
major contributor towards growth of domestic economy
and employment generation & should get adequate
support in terms of policy framework, incentives and
other relevant aids.
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medium industries in raising finance, by selecting 200
units of MSMEs through systematic random sampling
methods & found that too much formalities in the credit
scheme standing as a major barrier for availing schemes.
4) Anis Ali,Firoz Husain(2014) stated the
problems, solution & prospects of MSME in Indian &
stated that MSMEs are providing the uniform
development to the society and can be a strong mean to
utilize the natural resources of the India.
OBJECTIVES:
To study the present status of MSME sector in
India.
To analyse the major funding issues prevailed in
the Indian MSME sector.
To examine the co- relationship between bank
financing and performance of MSMEs.
To know the impact of MUDRA bank on the
growth of small scale industries.
III. RESEARCH METHODOLOGY:
The data are basically collected from secondary sources
which includes journals, magazines, various websites
and newspaper articles. We have applied karl pearsons
correlation technique and T-test to examine the co-
relationship between bank financing and performance
of MSMEs.
MSME: A SNAPSHOT FROM INDIAN
CONTEXT:
(CHART-1: Types of MSME)
MSME sector has emerged as a dynamic sector in Indian
economy. It plays a pivotal role in the socio-economic
development by providing adequate employment
opportunities at a lower cost & significantly contributing
to Indias manufacturing output & exports .Besides it
acts as a nursery of entrepreneurship which leads to
neutralising the regional imbalances prevailed in our
country. The ratio of capital to labour in MSMEs is
lower in comparison to large industrial undertakings.
Since independence MSMEs in India have ear-marked
as a important sector. The economic planning from
1951, followed by industrial policy prompted the Govt.
To give more & more attention to this underprivileged
sector . Till the liberalization period Govt. Of India has
little role & intervention in the regulation of MSME
sector. After 1991, the fruits of globalization and
liberalization were sweet, but it created serious threats
and challenges to the small industries. The inflow of
foreign capital in the form of FDI, had negatively
affected the domestic small & medium industries. To
wipe out these problems Govt. Enacted MSME
development act in 2006 to provide a legal framework to
tackle the development concerns relating to MSMEs.
The MSME sector in India is a dynamic one constituted
with different size of enterprises dealing with variety
products & services & levels of technology.
The MSMED act 2006 classified MSMEs into 2 sectors.
Manufacturing companies on the basis of
investment in plant & machinery.
Services on the basis of investment in equipment.

(Source: self compiled)

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PRESENT STATUS OF MSME IN INDIA employment, output, exports etc. Indicate the
performance of MSME sector in India. On the basis of
Development of any economy depends on the
data on GDP published by CSO, MOSPI and final result
development of its backward and poor sections of the
of the fourth census, the contribution of MSME sector to
society and MSME sector has a high potential to
GDP and output during 2006-07 to 2012-13 are as
accomplish that .But this sector has been neglected since
below.
last number of years .The growth parameters like GDP,

(Table no-1: Performance of MSMEs)

(Source: Annual report 2014-15, ministry of MSME, Govt. of India)

As stated earlier MSME sector provides vast lakh persons were employed while it rose to1114.29
employment opportunities as low capital .As per the lakhs in the year 2013-14 following graph will reflect
forth all India census of MSMEs, the employment rate is the projected data for the years 2007-08 to 2013-14.
in an increasing trend. At the time of MSME act,805.23

(Graph-1: Employment in MSME sector)

(Source: Annual report 2014-15, ministry of MSME, Govt. of India)

Exports of MSMEs increased at a higher rate than the FUNDING: A MAJOR ISSUE
total exports of india.
MSME sector has a strong has a strong impact on Indian
economy by contributing 45% of industrial output,40%
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of exports, creating employment of 6 crores people,
create 1.3 million jobs every year and produce more
than 8000 quality products for the Indian & international
markets. Despite the above strong contribution MSMEs
to Indias economic health, this sector is presently facing
so many challenges. Govt. departments, banks. F.Is and
corporate are becoming a hurdle in the path of growth of
MSMEs by not supporting as per the requirement.
There are lot of issues & challenges for MSME in India
like
Lacking of timely and adequate bank finance
Non-availability of suitable technologies.
Low production capacity
In effective marketing strategies.
Among these the funding of MSME has been a major
obstacle in the path of growth. Finance is the main
requirement to any business, wheather it is small or big
in size, wheather it is producing 1 or many variety of
products.
Govt. Initiatives for financing MSMEs:
The development commission MSME Govt. Of
India had provided an alternative scheme of finance
assistance for registered micro & small enterprise which
allows the registered units to claim reimbursements of
75% of the one time registration fee and 75% of the
annual fee paid to GS1 India for the 1st 3 years.
Another initiative was the credit guarantee fund
scheme which enabled the micro & small enterprises to
avail credit free of any collateral through a credit
guarantee fund trust for micro & small enterprises. A
new or existing MSME can avail up to 10 million as
term loans and working capital facility without any
collateral security or third party guarantee. In this
scheme, among others institutions schedule commercial
banks are eligible for lending .The guaranteed amount
which is covered under the scheme is to the extent of
75% of the credit amount sanctioned. The guarantee
cover is for the period of the term loan/composite credit
and in case of working capital the cover is for 5 year or a
block of 5 years.
Credit linked capital subsidy scheme was initiated
to facilitate technology upgradation of MSMEs. It was
designed for the specified products /sub sectors as
notified by the Indian govt to provide 15% capital
subsidy for induction of proven technologies approved
under the scheme. Maximum eligible loan under the
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80
scheme is Rs. 1crore, it is operated through NABARD&
SIDBI.
The Govt. Also encouraging MSME by providing
tax sops. Such as general excise exemption scheme
where specified goods are exempted from excise for
SMEs. Tax holidays are also allowed on export oriented
units.
Market development assistance scheme of MSMEs
offer funding to the manufacturing MSMES who
participate in international trade fairs/exhibition on the
behalf of India.
Performance & rating scheme :under this scheme
the ministry of MSME, through NSIC offers to the
MSEs a subsidy of 75% of fee charged by the rating
agency, subject to a ceiling of 40000
Prime minister task force on MSME had recently
recommended 20% year on year growth in credit to
micro & small enterprises to ensure enhanced credit
flow.
To encourage greater bank led financing the RBI
had driven attention towards this sector, through
directed lending policies, such as priority sector loans.
WHY MSME ARE NOT GETTING ADEQUATE
FINANCE ?
The main issue of getting finance is the borrowers
incompetencies to justify their worthiness as a reliable
and performing borrower while addressing lenders
demands. Some common reasons which come in the
way of MSME to avail finance are
The true potential of MSMEs can not be
evaluated and the finance health can not be
judged.
Information and knowledge between lender and
borrower is uneven.
Absence of adequate equity position of the client
or unacceptable debt to equity ratio situation.
Insufficient disclosure of information
Due to poor records to support organizations
health cannot be measured.
Sector specific problems are also there some
sectors create a negative feeling
Absence of proper business plan
Low margin of profit.
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Absence of sufficient collateral security fairly detailed information on small firms, banks would
hesitate to take risk. Hence, securing transparency of
Problems in physically accessing lending
financial conditions influence the decisions on loan
institutions
finance.
Minimal quantitative info, is provided orally
ANALYSIS OF RELATIONSHIP BETWEEN
without support documents.
BANK FINANCING & PERFORMANCE OF
Bureaucracy in various govt agencies. MSME:
WHY BANKS DONT EASILY FUND MSME ? As the study is on the financial aspect of the issues of
MSME sector, here we have presented the finances
Most banks are not ready to fund MSMEs because they
provided by the scheduled commercial banks in India in
feel these firms are not providing transparent different years. we can see that there is an increasing
information regarding their financial conditions. Some trend in the financial assistance provided by the banking
enterprise owners themselves are not feeling that their
sector. This indicates that Govt. is really concerned
financial health is well. This influence banks to not give
about the financial problems of MSME sector and it is
loan to SSI units. Another major problem that bank had
inducing the banks to provide financial support.
faced in the past that is high non performing assets,
because fairly significant proportion of loans given to
small units have resulted in N.P.As. Unless there is

(Table 2: Outstanding bank credit to micro & small enterprises)

Rs. Crore

(Source: Annual report 2014-15, ministry of MSME, Govt. of India)

Performance of MSME can be measured on the basis of
different parameters. Such as number of MSME
enterprises, number of persons employed in the MSME
sector, total fixed investments, output of the sector, its
contribution to GDP on macro basis. Good performance
depends on many aspects such as technological aspect,
financial aspect, marketing aspect, management aspect
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81
& many more. In this study we will examine the co-
relationship between bank financing to the MSMEs and
its performance. we have taken 2 performance
parameters which are investment in fixed asset and
output.
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STUDY 1: and Y represents fixed investment by MSMEs from the

year 2006-07 to 2012-13.
In this we have taken two variables X and Y. Here X
represents finance provided by scbs to MSME sector (Table-3: Bank Finace and fixed investments of
and Y represents Output of MSMEs from the year 2006- MSME in different years)
07 to 2012-13
Years Finance By SCBs Fixed Investments
(Table-3: Bank Finance and output of MSME in (in crores) (In crores)
different years) 2006-07 127323 868543
Years Finance by SCBs (crores) Output (crores) 2007-08 213538 920459
2006-07 127323 1198818 2008-09 256127 977114
2007-08 213538 1322777 2009-10 364001 1038546
2008-09 256127 1375589 2010-11 485943 1105434
2009-10 364001 1488352 2011-12 528617 1182757
2010-11 485943 1653622 2012-13 687209 1268763
2011-12 528617 1788584
( Source: self compiled)
2012-13 687209 1809976
By applying Karl pearsons co-efficient of Correlation;
(Source: self compiled)
By applying Karl pearsons co-efficient of Correlation;

Correlation coefficient of the two data sets above

Correlation coefficient of the two data sets above
according to the above formula 0.97.
From this it is obvious that there is positive correlation
between the bank financing and output of MSME.
So we can say here that financing by SCBs and Output
are correlated to the extent of 97 %
To know its significance we will apply T- test.
t=
test is 2.571
H0=relationship is not significant.
H1= relationship is significant.
Degrees of freedom = 5
= 0.05
by applying t- statistics the value comes to 8.92
Critical value of t for V=5, and = 0.05 in a two tailed
test is 2.571
Calculated value > Critical value. Hence null hypothesis
is rejected so the relationship between financing by
SCBs and Output is significant.
STUDY 2 :
In this we have taken two variables X and Y. Here X
represents finance provided by SCBs to MSME sector
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82
according to the above formula 0.99
To know its significance we will apply T- test.
t=
H0=relationship is not significant.
H1= relationship is significant.
Degrees of freedom = 5
= 0.05
by applying t- statistics the value comes to 15.69
Critical value of t for V=5, and = 0.05 in a two tailed
Calculated value > Critical value. Hence null hypothesis
is rejected so the relationship between financing by
SCBs and fixed investments is significant.
From this it is clear that there is positive correlation
between the bank financing and fixed investment of
MSME. So, from the above two analysis we found that
there is definitely some positive relationship among
bank financing and operational performance of MSME
sector. This confirms that commercial banks remain an
important source of finance for MSMEs and an avenues
through which MSMEs can grow.
SOME CRUCIAL HIGHLIGHTS OF MSME:
There are around 48 million industries in small scale
sector in India. They have grown at a stable pace of 4.5
% in the last 5 years. But, funds focusing on MSMEs are
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having difficulties in raising money. Due to this factor development. Besides that the contribution of the
Indian SMEs are growing undoubtedly but in a very MSME sector to Indias GDP now at 8%. And it is
small rate. The potentiality of the MSME sector is not growing at a rate higher than the projected growth rate.
being properly utilised or underutilised. According to If we analyse the current trend, then we can find that the
world bank, India has slipped 3rd rank in the ease of contribution of MSME to the GDP in many of the global
doing business index. Thus creating deep concerns about economies is in the range of 25-60 % . we can say that
the industrial development of India. SMEs are said to be the Indian MSME sector has the potential to increase the
the backbone of Indian economy. However due to share of contribution to GDP from 8% to 15% by 2020.
carelessness, there is a lacuna in their growth and
(Graph-2: Contribution of MSME in different countries to their GDP )

(Source: KPMG)
This graph encompasses that major economies of the
earth depend on their MSME sector somewhat to a
greater extent than India. USA , the largest economy in
the world . The MSME sector provides 48 % to the GDP
in Italy, 68 % of GDP are contributed by MSME sector.
But in India, it is only 8 %. So, there are problems in the
mechanism of the MSME establishment management,
financing, producing and marketing. As discussed
earlier, the major problems of financing, .Lack of access
to finance usher to systemic risk and failure and have
certain negative impact on the economic health of India.
These impact may be in the form of,
1) Low employment generation.
2) Reduction in national as well as per capita
income.
3) Reduction in the number of domestic industry.
4) More dependence on foreign goods and services.
5) Rupee value depreciation.
6) No creation of new entrepreneurs.
MSME FINACING THROUGH MUDRA BANK:
As MSME sector in India faces the major obstacles of
finance, the existing financial institutions cant fulfil the
financial requirements of this sector, the Govt. Of India
in 2015 annual budget introduced a scheme called
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83
Pradhan mantra Mudra yojana to facilitate funding to the
unfunded sectors. This bank will be started with a
corpus of Rs. 20,000 cr. Given the Indias largest
disaggregated business ecosystem in the world, the
launch of MUDRA is a good policy initiative for the
MSME sector. The good sign is that this will be a
separate entity focused exclusively on increasing the
flow of finacing to micro and small sectors. MUDRA is
proposed to setup as a subsidiary of SIDBI initially and
latter it would be converted to a full fledged institution.
MUDRA is the prime financial institution which will
finance and support the small business sector. It will
also act as the regulator of MFIs. Developer and
refinancer to facilitate effective channelization of vast
resources to the MSME sector. And will transform the
social as well as economic wellbeing of millions of
people.
In India, small businessman faces exploitations from the
money lenders in the unorganised sector. But creation of
MUDRA will raise confidence in them which will lead
to nation building. MUDRA will also partnered with
state and regional level coordinators to provide finance
to last mile financiers of MSME. MUDRA will help the
proprietorship or partnership[ farms running as
manufacturing units, SHGs, grocers, washermen,
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 FMU Journal of Management
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weavers, transporters, truck owners, vegetable sellers,
hackers, beauty parlours, hair cutting saloons,
professional and service providers, artisans etc. both in
rural and urban areas.
The initial products and schemes under MUDRA yojana
have been divided into three categories. Shishu, Kishor
and Tarun to develop and fulfil the funding needs of the
micro units. Shishu will cover loans upto Rs. 50,000
.Kishor wil cover loans above Rs. 50,000 and upto Rs. 5
lakh and Tarun would cover loans above Rs.5 lakh and
upto Rs. 10 lakh.
Besides that MUDRA will include supporting financial
literacy. Promotion and support of grass root
institutions, creation of framework of small business
finance entities etc.
Some major loopholes of MUDRA yojana.
1) Creation of another bank, where the PSBs are
suffering large amount of NPAs.
2) MUDRA bank will lead add to the growing deficit
because of the extra salary and operation burden for the
employees of the bank.
3) MUDRA has to give loans at zero returns of
guarantee. On the other hand, it has laid down the
policies to reduce NPAs. So it will create a conflicting
situation.
FINDINGS:
IN India MSME sector is facing the financial
problems which is an obstacle for its growth.
The banking sector shows a negative interest to
finance MSMEs due to no. Of reasons like higher
level of NPAs etc.
There is a positive correlationship among the bank
financing and various performance of MSMEs like
output, and fixed investments.
The MUDRA scheme will definitely cherish the
small entrepreneurs in the MSME sector.
IV. CONCLUSION:
The contribution of MSMEs to Indian economy is
explained in terms of its employment, products, export.
The MSME sector faces key challenges like availability
of adequate finance in proper time, high interest rate,
technological constraints, inadequate infrastructure
facilities and making of their products. Commercial
banks have significant impact on SMEs. And their
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84
financing. Govt. should encourage commercial banks to
lend to SMEs by providing incentives to give preference
to SMEs. Besides that, we expect that MUDRA bank , a
new initiative by Govt. of India will boost micro
enterprises to a greater extent which will definitely
bolster the standard of living of Indians indirectly
contributing to inclusive growth.
REFERENCES:
[1] Nishanth.p, Dr. zakkariya k. a (2014). Barriers
faced by micro, small and medium
enterprises in raising finance Abhinav national
monthly refereed journal of research in
commerce & management, volume 3, issue 5
[2] Oke, M.O. , Aluko, O.A.(2015). Impact of
Commercial Banks on Small and Medium
Enterprises Financing In Nigeria IOSR Journal
of Business and Management.
[3] Ali anis, Husain firoz (2014). MSME`s in India:
problems, solutions and prospectus in present
International journal of engineering and
management sciences.
[4] Sonia and Kansai Rajeev (2009), Globalisation
and its impact on Small Scale Industries India ,
PCMA Journal of Business, Vol. 1, No. 2 (June,
2009) pp. 135-146.
[5] Kumar ashish , batra vikas & sharma s.k. (2009),
Micro, small and medium enterprises (MSMEs)
in india: challenges and issues in the current
scenario Sms Varanasi
[6] Kharbanda, V.P. (2001), Facilitating Innovation
in Indian SMEs The role of
clusters,CurrentSc.,Vol.80,No3
[7] Prof M. Chandraiah ,2,R. Vani (2014), The
Prospects and Problems of MSMEs sector in
India an Analytical study International Journal
of Business and Management Invention.
[8] Verma. Dr. Subhash Chandra (2015),Mudra
bank to "fund small businesses"
[9] Annual Report, 2014-15; Ministry of Micro,
Small and Medium Enterprises (MSMEs), Govt
of India, New Delhi.
[10] Report of the Committee set up to examine the
financial architecture of the MSME sector
February 2015
[11] www.msme. Gov.in
[12] www.pmindia.gov.in
[13] www. mudra.org.in
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 FMU Journal of Management
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FINANCIAL PERFORMANCE EVALUATION OF STATE BANK

GROUP
Tapas Kumar Sethy
Assistant Professor, Department of Commerce, Ramkrishna Mahavidyalaya, Kailashahar, Unakoti, Tripura-799277
Affiliated to Tripura University, Agartala
E-mail: s.tapaskumar@gmail.com

Abstract: The Indian banking sector is the backbone of
Indian financial system, playing a very important role in
economic development of the country. The present study
aims to evaluate the financial performance by using
profitability ratios i.e. Return on Equity (ROE), Return on
Assets (ROA), Return on Capital Employed (ROCE),
Earning Per Share (EPS) and Net Profit Margin of selected
banks of state bank group by considering the data of five
years from 2011 to 2015. This study also attempts to show
the statistical difference between the profitability of
selected banks by using one way ANOVA. And it has found
that all the banks have shown the lower performance and
there is no significant difference among the banks.
Key Words: Financial Performance, Profitability, Return
on Equity, Return on Asset, Earning per Share.
I. INTRODUCTION:
The role of banks in the economic development of the
country assumes greater significance due to the fact that
they provide one of the essential inputs, namely finance,
for the growth of various segments of the economy. It is
important to take stock of the special features of the
banking sector in India, in order to put efficiency issue
in perspective. India is the largest country in South Asia,
characterised by many and varied financial institutions
and instruments. Indian banking sector was well
developed even prior to its political independence in
1947. There was significant presence of both foreign and
domestic banks and well developed stock market. The
system expanded rapidly after nationalisation of major
commercial banks in 1969 and 1980.
In the year 1991 Economic reforms in India brought
drastic changes on the operational system of Indian
banking sector by reducing CRR & SLR, deregulation of
interest rates, introducing capital adequacy norms for
credit risk management, obviously had favourable
impact on performance of banks. The main aim was to
make Indian banks as globally competitive. So, after two
decades of economic reforms, it is becoming very
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85
important to evaluate financial performance of banks
and also there is a need to measure various global forces
and economic slowdown on performance of Indian
banking sector.
II. REVIEW OF LITERATURE:
This study is related to the evaluation of performance of
banks particularly State Bank of India and its associate
bank like State Bank of Bikaner and Jaipur, State Bank
of Travancore and State Bank of Maysore for five years
from 2011 to 2015. So a very few previous research has
been followed in this studies about the efficiency
measurement of various commercial banks and financial
institutions.
National Level Studies:
Mahesh, and Rajeev, (2004), attempted to examine the
changes in the productive efficiency of Indian
Commercial Banks after the financial sector reforms
initiated in 1992. By using stochastic frontier technique
they estimated banks specific deposits, advance and
investment efficiencies for the period 1985-2004. The
study collected panel data of 94 banks for 20 years from
performance highlights of Banks published by Indian
Banks Association and Annual Accounts of Scheduled
Commercial Banks published by Reserve Banks of
India. The result shows that deregulation has favourable
impacts on the performance of Public Sector Banks and
marked improvement in Private Banks during the post
liberalization period.
Shanmugam and Das, (2005), attempted to measure the
technical efficiency of the Indian Banking industry from
1992 to 1999 by employing the stochastic frontier
function methodology. The panel data of inputs and
output of 94 Indian Commercial Banks from 1992-1999
have been compiled from the Statistical Tables relating
to Banks in India published by the RBI. The results
indicate that the efficiency of raising interest margin is
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time invariant, while the efficiencies of raising other
output like non-interest income, investments and credits
are time varying. The study also suggested State Bank
Group and Foreign Banks are more efficient than their
other counterparts.
Arora, and Verma, (2007), attempted to study the
relative efficiency of Public Sector Banks from 1991-92
to 2003-04 by using the Average Compound Growth
Rate (ACGR) method. The study collected data from
various sources such as Annual Reports of the Banks,
Indian Banking Association Bulletin and various
journals. The analysis shows that, after liberalization the
performance of Public Sector Banks has improved a lot
in general and Corporation Bank ranks higher in
operational and productivity parameters and results in
higher efficiency.
Bhat, and Reddy, (2006), examined the effects of
deregulation on the technical efficiency of Commercial
Banks in India by using Stochastic Frontier Approach
(SFA) with specification of Cobb-Douglas Production
Function for the period 1992-2004. The necessary
information for the study were collected from Annual
Accounts Data of Scheduled Commercial Banks and
Statistical Tables relating to Banks in India published by
the Reserve Bank of India (RBI) and PROWESS online
database provided by (CMIE). The empirical results
revealed that, in general, the technical efficiency of
Commercial Banks increased during the post reform
period. Public Sector Banks achieved relatively higher
in terms of technical efficiency, Foreign Banks are more
efficient in terms of net interest income and the Private
Domestic Banks seemed to be relatively less efficient
than others.
Chakrabarti, and Chawla, (2002), tried to evaluate the
relative efficiency of Indian Banks during the 1990-2002
period using Data Envelopment Analysis approach.
For the study the data were collected from Trend and
Progress of Banking in India Published by Reserve Bank
of India. The study found that, the Foreign Banks as a
group, have been considerably more efficient followed
by the Private Banks. From a Quantity perspective
however, the Indian Private Banks seem to be doing the
best while the Foreign Banks are the worst performers.
The Public Sector Banks have, in comparison, lagged
behind their private counterparts in performances.
Milind, (2001), attempted, to measure the productive
efficiency of Indian Banks by using Data Envelopment
Analysis (DEA). The present study uses data for the
year 1997-98 complied by the Indian Banks Association
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86
(IBA, 1999). The sample had 27 Public Sector
Commercial banks, 33 Private Sector Banks and 34
Foreign Banks. The study recommended that the
existing policy of bringing down non-performing assets
as well as curtailing the establishment expenditure
through voluntary retirement scheme for bank staff and
rationalization of rural branches are steps in the right
direction that could help Indian Banks improved
efficiency over a period of time.
Sathya Swaroop Debasish, (2006), attempted to measure
the relative performance of Indian Banks over the period
1997-2004 using the output-oriented CRR DEA model.
The relevant panel data for the commercial banks were
obtained from CMIE data bases. The study concluded
that Foreign owned Banks were on an average more
efficient and that new banks were more efficient than
old ones. In terms of size, the smaller banks were
globally efficient, but large banks were locally efficient.
Rampratap Sinha, (2006), tried to make a comparative
assessment of public and private sector banks for reform
period 1996-2003 by using Data Envelopment Analysis
through intermediate cost efficiency. The study relied on
the Statistical Table relating to Banks in India for bank
wise data published by Reserve Bank of India on an
annual basis. The study shows that, the observed Private
Sector Commercial Banks have higher cost efficiencies
than the observed Public Sector Commercial Banks, if
non-increasing return to scale (NIRs) is assumed.
However, the results change substantially if one assumes
constant return to scale.
Dugal, (2015), studying the impact of mergers on the
operating and financial performance of Indian
pharmaceutical companies examining various financial
ratios of the sample of companies listed on the BSE
from the period 2000-2006. For the purpose of analysis
paired sample t-test is conducted. The results suggested
that there was positive impact (t+1 year window) of
mergers on the profitability of the acquiring firms but
this impact has not sustained in (t+3, t+5 yr period) post
merger in terms of selected profitability variables. The
results reported in the study points to the positive impact
of merger announcement on the operating and financial
performance in short run (+1 yr).
International Studies:
Anca, and Jiri Podpiera, (2002), attempted to estimate
the cost efficiency scores of Czech banking sector from
1994 to 2002 by using stochastic frontier approach and
hazard model as methodology. Quarterly real data, used
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in the analysis, cover all commercial banks operating in
the Czech Republic during the period 1994-2002. The
data were based on balance sheets and income
statements of banks that were reported to the Banking
Supervision of the Czech National Bank. The study
concluded that cost inefficient management was the
leading indicator of bank failures during years of
banking sectors consolidating and thus suggest its
inclusion into early warning systems.
Leong, Dollery, and Coeffi, (2002) attempted to
investigate whether the nature and extent to which Data
Envelopment Analysis type analysis in its current state
can supplement traditional measures of bank
performance and function effectively as a tool of policy
for industry regulators. They employed data on
Singaporean Banking for the period 1993 to 1999, by
using industry statistics compiled by the KENIG (1997)
survey of Financial Institutions and data available from
the official Registry of Companies. They derived some
efficiency scores, which are reasonably consistent with
competitive industry conditions, in identifying best
practice banks and across alternative DEA
specifications.
YAO and HAN, (2005), tried to measure the efficiency
of 15 large commercial banks of China during the period
1995-2005, by using Data Envelopment Analysis
approach and also conducted a Malaquist Index Analysis
to study the evolution of productivity changes. They
used data from all the National Commercial Banks, state
and non-state owned, domestic and foreign invested.
They concluded that ownership reform and foreign
competition have forced the Chinese commercial banks
to improve their performance, as their total factor
productivity rose by 5.6% per annum, and three of the
four large state owned banks were among the best
performers.
Fotions Pasiouras, (2006), estimated the technical and
scale efficiency of Greek Commercial banks by using
Data Envelopment Analysis (DEA) over the period
2000-2004. The sample consists of the universe of
commercial banks with financial statements available in
Bank scope database of Burean Van Dijks Company,
operating in Greece between 2000 and 2004.
Supplementary data for the banks (e.g., staff number,
number of ATMs) were collected from the Hellenic
Bank Association. The sample ranges between 12 and
18 banks per year and consists of 78 observations in
total. He concluded that banks have expanded their
operations abroad appear to be more efficient than the
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87
ones operating only at a national level. Higher
capitalization, loan activity, and market power increase,
the efficiency of banks. The number of ATMs does not
appear to influence efficiency. The results are mixed
with respect to variables indicating whether the banks
are operating abroad through subsidiaries or branches.
Berger and Humphrey, (1997), surveyed 130 studies of
financial institutions efficiency in 20 countries covering
various types of depository institutions including
commercial banks. The study surveyed five different
econometric techniques of measuring efficiency with an
aim of summarizing and critically reviving empirical
estimates of financial institutions of efficiency. They
identified that the various efficiency methods under
parametric and non-parametric frontiers do not always
yield consistent results. The study suggested that
deregulation of financial institutions can either improve
or worsen efficiency; it depends on industry conditions
prior to deregulation.
Mathews and Ismail, (2006), examined the technical
efficiency and productivity of domestic and foreign
commercial banks in Malaysia 1999-2000. The study
used the Data Envelopment Analysis as a tool and
collected the data mostly from the financial statement of
every bank. In a sample totally 193 observations were
taken. The study found that Foreign Banks have a higher
efficiency level than Domestic Banks and those efficient
banks are characterized by size but not profitability or
loan quality. The productivity growth was found average
between 20% and 25% and such growth was contributed
by improvement in technical change rather than
improvement in technical efficiency.
Allen and Boobal, (2002), tried to measure and compare
the relative pre-and post merger pure technical
efficiency and scale efficiency scores of Malaysian
Domestic Banks for a period from 1996 to 2002. The
non-parametric Data Envelopment Analysis (DEA)
approach is applied to detect any efficiency gains
resulting from bank mergers. In a sample the systematic
merger of 54 pre-crisis Malaysian Domestic Banks into
10 Domestic post-crisis anchors Banking Groups. The
data were obtained from the individual commercial
banks audited annual reports as well as from other
publicly available published information from stock
exchanges and libraries. The study concluded that, there
is some evidence of increase in efficiency immediately
post-merger but these are not sustained.
Akthar, (2002), examined the efficiency of commercial
banks in Pakistan by taking Data Envelopment Analysis
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(DEA) as a tool. The study examined the results of 40
commercial banks. The data source of the research is the
Banking Statistics of Pakistan 1998-99 published by the
State Bank of Pakistan. The study suggested for the
improvement in efficiency of Pakistans banks and also
recommended combined efforts of banking sector and
the government to be at par with the best world practice.
The results also supported the ongoing process of
privatization of Public Sector Banks in Pakistan.
Angetidis and Lyroudi, (2006), attempted to investigate
the productivity of the 100 larger Italian banks for the
period of 2001-2002. The study used Data Envelopment
Analysis (DEA) technique to calculate the Malmquist
Indices of Total Factor Productivity (TFP) change. The
data were collected from Thompsons Bank scope
database. The pertinent information was brought from
the Banks Balance Sheets for the years 2001 and 2002.
The study concluded that, there is an inverse relationship
between size and productivity growth.
Berger, Hasan and Zhon, (2005), tried to analyse profit
and cost efficiency by using 256 annual observations
over 1994-2003 in commercial banks in China with
different majority ownership i.e. state owned, private,
domestically owned, and foreign-owned. In a study they
used TransLog Functional form to estimate the cost and
profit functions for each year. The data collected from
various official sources such as Almanac of Chinas
Finance and Banking, 1994-2004, yearly statistics book
of Chinas economics, each individual banks website
which provides the banks financial statement and
ownership structures, etc. the empirical results suggested
strong favourable efficiency effects from reforms that
reduced the state ownership of banks in China and
increased the role of foreign ownership.
Barr, Killgo, Siems and Zimmel, (1999), surveyed to
evaluate the productive efficiency and performance of
U.S. Commercial Banks from 1984 to 1998 by using the
Data Envelopment Analysis (DEA) as a methodology.
The publicly available year end data reported by U.S.
commercial banks was the only source of information
for their study. The analysis found strong and consistent
relationships between efficiency and inputs and outputs,
as well as independent measures of bank performance.
Further, the study suggested that the impact of varying
economic conditions is mediated to some extent by the
relative efficiencies of the banks that operate in these
conditions. Finally, they also found existence of a close
relationship between efficiency and soundness as
determined by bank examiner ratings.
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88
Gilberto Turati, (2003), estimated the evolution of cost
efficiency scores in European Banking Markets from
1992 to 1999. He established the relationship between
the cost efficiency and profitability with the production
function of intermediation approach. The empirical
analysis was based on a panel of about 250 commercial
banks observed from 1992 to 1999. Data were from the
IBCA Bank Scope database and represent balance sheet
information of banks located in France (123), Germany
(59), Italy (42), Spain (13) and U.K. (26). He found no
striking differences in mean efficiency among European
countries. The study also estimated scale economies and
scope economies; while scale economies were found
widespread scope economies appeared rather small.
Berger, and De Young, (1997), tried to examine the
intersection between the problem loans and cost
efficiency in commercial banks. They employed
Granger-Causality Techniques to test four hypotheses
regarding the relationships among loan quality, cost
efficiency and bank capital. For this study, they
followed mostly the annual observation report of
commercial bank. The analysis suggested that problem
loan precede reductions in measured cost efficiency; that
measured cost efficiency precedes reductions in problem
loans; and that reductions in capital at thinly capitalized
banks precede increase in problem loans.
Orea and Kumbhakar, (2003), attempted to estimate the
efficiency of Spanish Banks by using the latent class
Stochastic Frontier model. The study used an
unbalanced paper of 169 banks for the period 1999-
2000. The study found that saving banks are as efficient
as private banks, and that structural changes (closure of
branches, staff location, etc) resulting from acquisitions
processes led to a significant reduction in cost
efficiency. The results also suggested that bank-
heterogeneity can be fully controlled when a model with
four classes is estimated.
Simon, H.K , (2001), tried to investigate the cost
efficiency of multibank operating in Hong Kong by
using Stochastic Econometric cost frontier approach
from 1992-1999. Micro banking data from 1992:Q1 to
1999:Q4 obtained from the Return of Assets and
Liabilities, Return of current years Profit and Loss
Account, and Quarterly Analysis of Loans and Advance
and Provisions that Authorizes Institutions in Hong
Kong must file with the Hong Kong Monetary Authority
are used to estimate the model. The study concluded that
the average efficiency of Hong Kong banks is about
16% to 30% which is similar to the findings in the U.S.
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He also reported that the average large bank is found to
be less efficient than the average small bank, particularly
during the earlier time Period.
Imed, Liman, (1999), attempted to measure the technical
efficiency of Kuwaiti Banks by using stochastic cost
frontier approach. The data used in the analysis were
obtained from eight banks for the period (1994-1999)
from various issues of the Financial Operating Report
published by the research unit of the Institute of Banking
Studies in Kuwait. He found that banks produce earning
assets at constant return to scale and hence have less to
gain from increasing scale production notably, through
merging with other banks, than from reducing their
technical inefficiency. The results show that larger bank
size, higher share of equity capital in assets and greater
profitability are associated with better efficiency.
Analysis also suggested privatization of banks could
also improve corporate governance that leads to better
efficiency through lower intermediation margins and
spreads and a wider range of services.
Rangan, G.N. et al., (1988) tried to measure the
technical efficiency of U.S. banking industry. A non-
parametric frontier production approach was applied to
measure technical efficiency. A total of 215 samples of
banks were drawn from the Federal Deposit Insurance
Corporation of the Reports of Condition and Reports of
Income for yearend 1986. The results indicated that the
banks could have produced the same level of output with
just 70 percent of the inputs actually used. Most of this
efficiency was the result of wasting resources and
almost all of the banks were operating at constant
returns to scale. Regression Analysis indicated that
technical efficiency measure was positively related to
bank size and negatively related to product diversity.
Aly Y.H et al., (1990) made an attempt to calculate the
overall, technical and allocate efficiencies in U.S.
Baking by using non-parametric frontier approach. The
pooled data of 322 banks used in this study was taken
from the Federal Deposit Insurance Corporation tapes on
the Reports of Condition and Reports of Insurance (Call
Reports) for the year 1986. The study identified that
inefficiency in banks mainly attributed to under
utilization or wasting of inputs rather than choosing the
incorrect input combinations (allocative inefficiency).
The study also found that there was no significant
difference in efficiency between branch banks (that are
allowed to operate branches) and non-banking unit
banks (that are prohibited from operating branches). The
study concluded that overall and technical efficiency
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89
were negatively related to product diversity and
positively related to urbanization.
The most of the studies revised in this study directed
towards measuring efficiency of Banks. Both national
and international studies used parametric and non-
parametric approaches in estimating the technical as
well as allocative efficiency in banks. Most of the
studies had concentrated on developed countries
particularly in U.S. and European countries a few
studies were completed in developing countries like
India. Studies like Kumbhakar et al (2001), Shanmugam
and Das (2004), Mahesh and Rajeev (2004) and Bhat
and Reddy (2006), show the deregulation has positive
effect on the efficiency of banks. Kumbhakar (2004)
study highlighted the cost efficiency, where the study
used total branches as one of the output variables due to
that the results of the study favoured Public Sector
Banks which has more number of branches. Shanmugam
and Das (2004) studied the period of first generation
reforms. This study used fixed assets as one of the input
variables instead capital. Due to this reason banks
(Public Sector Banks) which have long been in business
might have more fixed assets and considered as
inefficient. Milind Sathye (2003) cross sectional study
has taken only one year period. None of the studies are
conducted in recent years and shown ownership and
performance relationship. Duggal, (2015) was
investigated to know the financial improvement of banks
in post merger on analyzing some ratio for a period of 3
years pre and post 5 years is becoming evident that the
major impact was seen in terms of ROA and maximum
banks in the sample shows significant results. Least
performing ratios are ROE and EPS. Whereas NP
Margin and ROCE depicted a considerable
improvement. Thus, conclude mergers have proved to
have a profound effect on banks ability to earn profits
and building on assets for future group.
III. OBJECTIVES:
The present study attempt to focus on following
objectives.
1) To assess the profitability of State Bank of
India and its selective associates.
2) To test the statistical difference of profitability
among the State Bank of India and its selective
associates.
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IV. METHODOLOGY: group as well as other scheduled Commercial Banks are

completely excluded from this study due to shortage of
To evaluate the financial performance of banks and any time.
other DMU, there are many parametric and non-
parametric approaches i.e. parametric approaches Conceptual Framework of Profitability Ratios used
includes Stochastic Frontier Analysis, Free Disposal in this study:
Hull, Thick Frontier Analysis and Distribution Free For analysing the financial performance of banks in
Approach and non- parametric approaches includes Data general and profitability in particular, this study has used
Envelopment Analysis i.e. Malmquist Total Factor different financial ratio, which are explained below:
Productivity index DEAP Version 1996, developed by
Tim Coelli. For this analysis descriptive statistics and 1) Return on Equity(ROE):
One way ANOVA have used. Basically this study has A return on shareholders equity is calculated to see the
been used the Descriptive Statistics of MS Excel to find profitability of owners investment. The shareholders
out the Mean value for making the comparison of equity or net worth will include paid up share capital,
financial performance of various selective banks like share premium and reserves and surplus less
State Bank of India, State Bank of Bikaner and Jaipur, accumulated losses. Net worth can also be found by
State Bank of Travancore and State Bank of Maisore. subtracting total liabilities from total assets.
On the other hand this study has also used one way
ANOVA to test the significant difference among the Profit after Tax
ROE = 100
group of banks. Net Worth
Research Hypothesis: 2) Return on Assets(ROA):
These are the following hypothesis has been set to test EBIT
ROA = 100
the objectives of the study. Total Assets
H0 : There is no significant difference in the profitability 3) Return on Capital Employed(ROCE):
of selected banks under this study. EBIT
ROCE = 100
Ha : There is significant difference in the profitability of Capital Employed
selected banks under this study.
4) Earning Per Shares(EPS):
Sources of Data: EPS simply shows the profitability of the firm on a per
Mostly the secondary data is used for this present study share basis; it does not reflect how much is paid as
collected from Annual Data of Scheduled Commercial dividend and how much is retained in the business. But
banks and statistical table relating to banks in India as a profitability index, it is a valuable and widely used
published by RBI, PROWESS online data base of CMIE ratio.
and any other sources. The study has based on five years Profit after Tax
data on financial ratio from 2011 to 2015 of only EPS =
selected banks i.e. State Bank of India, State Bank of Number of common shares outstanding
Bikaner and Jaipur, State Bank of Travancore and State 5) Net Profit Margin (NP Margin):
Bank of Maysore.
This ratio is the overall measure of Banks ability to turn
Scope and Limitation: each rupee income in to net profit. If the net profit
This present study has particularly considers a very margin is inadequate, the bank will fail to achieve
small sample size where only selected banks of State satisfactory return on shareholders fund.
Bank Group has focused i.e. State Bank of India , State Net Profit after Tax
Bank of Bikaner and Jaipur, State Bank of Travancore Net Profit Margin = 100
Total Income
and State Bank of Maysore for five years from 2011 to
2015. The data of other two SBI Associates like State Data Analysis and Interpretation
Bank of Hyderabad and State Bank of Patiala are not The present research is attempting to highlight the
available. On the other hand the study could not able to following empirical data followed by analysis and
cover other financial aspects of bank of State Bank
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interpretation of those in order to cater the needs and The table-3 is showing ROCE of all banks like State
requirements of thrust objectives which are given below: Bank of India, State Bank of Bikaner and Jaipur, State
Bank of Travancore and State Bank of Maysore for five
Table-1: Return on Equity (ROE) of the selected banks
years from 2011 to 2015. Here only SBM is achieving
YEAR SBI SBBJ SBT SBM
CONSOL target of Mean value in the year 2011. But except this
IDATED year all other year of SBM along with SBI, SBBJ &
2015 10.2 12.92 6.38 9.37 16.46 SBT has been the worst performer.
2014 9.2 13.66 6.65 6.87 16.26 Table-4 : Earnings per Share (EPS) of the selected banks
2013 14.26 15.32 14.09 9.61 15.64
CONSOL
YEAR SBI SBBJ SBT SBM
2012 10.99 15.65 6.38 9.26 18.59 IDATED
2015 175 110.98 56.63 85.14 177
2011 11.34 19.32 21.01 13.61 17.83
2014 145.88 104.53 60.87 42.52 162
The table-1 indicates the performance of all selected
2013 206.2 104.32 123.01 88.91 154
banks i.e. State bank of India, State Bank of Bikaner and
Jaipur, State Bank of Travancore and State Bank of 2012 174.46 93.15 56.63 78.88 185
Maysore for five years from 2011 to 2015 in respect of 2011 116.07 110.18 145.55 106.97 116.07
Return on Equity (ROE). It found that SBBJ is
performing better than other banks but lagging behind The table-4 is showing EPS of all banks like State Bank
overall results. of India, State Bank of Bikaner and Jaipur, State Bank
of Travancore and State Bank of Maysore for five years
Table-2 : Return on Assets (ROA) of the selected banks
from 2011 to 2015. Here only SBI & SBT is achieving
YEAR SBI SBBJ SBT SBM
CONSOL target of Mean value in the year 2011.
IDATED
2015 172.04 858.95 886.42 908.41 188.47 Table-5 : Net Profit (NP) Margin of the selected banks
2014 1584.34 765.13 914.96 830.78 1626 CONSOL
YEAR SBI SBBJ SBT SBM
IDATED
2013 1445.6 680.59 873 925.55 1564 2015 8.59 8.62 3.5 5.89 20.73
2012 1251.05 594.98 886.42 851.02 1859 2014 7.98 8.95 3.13 4.33 16.26
2011 1023.4 570.16 692.71 785.79 462.77 2013 11.78 9.73 7.12 6.97 15.64
2012 10.99 10.36 3.5 7.26 18.59

The table-2 is showing ROA of all like State Bank of 2011 9.05 11.48 13.91 12.27 22.35
India, State Bank of Bikaner and Jaipur, State Bank of
The table-5 is showing NP Margin of all banks like
Travancore and State Bank of Maysore for five years
StateBank of India, State Bank of Bikaner and Jaipur,
from 2011 to 2015. The study examined that SBI is the
State Bank of Travancore and State Bank of Maysore for
best performer during throughout study period and lying
five years from 2011 to 2015. Here all the banks are not
above frontier.
at all achieving any mean value of overall results.
Table-3 : Return on Capital Employed (ROCE) of the
Table: 6 : Mean Value of all selected Banks
selected banks
Variables SBI SBBJ SBT SBM Overall
CONSOL
YEAR SBI SBBJ SBT SBM
IDATED ROE (%) 11.45 15.99 12.03 9.84 17.08
2015 9.11 10.28 10.14 10.12 10.38 ROA(Rs.) 1326.09 652.72 841.78 848.29 1377.95
2014 9.11 10.23 10.21 9.81 16.26 ROCE (%) 9.11 10.01 9.76 9.85 14.96

2013 9.35 10.37 9.91 10.28 15.64 EPS (Rs.) 160.65 103.04 96.51 79.32 154.26
NP Margin
2012 9.45 10.17 10.04 9.95 18.59 9.95 10.13 6.91 7.70 18.21
(Rs.)
2011 8.54 9.28 8.91 9.36 9.35

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The above table-6 presents the Mean value of all
selected banks i.e. State Bank of India, State Bank of
Bikaner and Jaipur, State Bank of Travancore, State
Bank of Maysore and also the Mean value of
consolidated financial ratio of scheduled commercial
banks( excluding regional rural banks) published by
RBI. It has found that in the regards of Mean Value of
ROA, the mean value of SBI is Rs. 1326.09 comes
closer to overall mean value i.e. Rs. 1377 and also EPS
mean value of SBI is Rs. 160.65 which is higher than the
overall mean value of EPS i.e. Rs. 154.26, here might be
some existing factors having the positive impact on
better performance of SBI i.e. listed in NSE as NIFTY
hits 8,000 during last couple of years. Whereas other
three mean value of ratio i.e. ROE, ROCE, NP Margin
of SBI along with all ratio mean value of three
associates i.e. SBBJ, SBT & SBM are lagging behind
from overall mean values as because high NPA i.e. more
than 6.5%, announcement of merger of associates with
SBI leads to make SBBJ, SBT & SBM show worst
performance.
Table-7 ; ANOVA (One Way)
Variables F- Value P- Value
ROE 94.05 7.95
ROA 164.67 2.18
ROCE 649.07 1.71
EPS 97.04 5.17
NP Margin 60.87 2.08
The table-7 represents the the F-Value and P-Value and
provides categorically that in respect of variables like
ROE, ROA, ROCE, EPS & NP Margin, the P-Value is
positive and higher than 0.05 I.e. test at 5% Level of
Significance. As results it clearly indicates that Null
hypothesis is accepted and alternative hypothesis is
rejected. So, there is no significance differences are
there between the selected banks like SBI, SBBJ, and
SBT & SBM.As because the service qualities of all
banks are almost same.
V. CONCLUSION:
The Indian banking sector is the backbone of Indian
financial system, playing a very important role in
economic development of the country and also going by
remarkable phase since last two decade witnessing high
NPA, lower profitability etc. The present study has
found that the performance of all selected bank under
the sample of the study are not performing well in
comparison with overall performance of Indian
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92
scheduled commercial banks and also found that there is
no significance difference between the banks.
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Debasish, S.W., (2006) Efficiency Performance
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[10] Duggal, N.,(2015) Mergers and Acquisitions in
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Efficiency measurement using a latent class
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Liberalization and Productive Efficiency of
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Impact of Non-financial Rewards on Employee Motivation in PSUs of

India: A Study on MCL
Satya Swarup Das
Research Scholar, Department of Business Management, Fakir Mohan University, Balasore

Abstract : This study is conducted to measure the impact
of non-monetary rewards on employees motivation in
Mahanadi coalfields ltd (MCL). The study aims to
highlight importance of the non-monetary rewards in
terms of their effectiveness as well as efficiency. The study
also identifies to what extent the MCL are taking care of
this source of employee motivation.. This research can be
helpful for HR managers in public sector. They can design
effective compensation package to retain their competent
employees.
Key words: Motivation, monetary rewards, non-monetary
rewards, employees motivation.
I. INTRODUCTION
The public sector enterprises (PSUs) in India have
always been considered as model employers. The
brightest of candidates dreamt of working for a public
sector enterprise. However, with the opening of
economy, the situation has taken a u-turn, the public
sector enterprises are in a war for talent with its private
counterparts. It is not only losing its talent pool to the
private sector but fresh talents are more attracted to join
private sector or MNCs were there is tremendous career
progression along with attractive pay packages. With
increase in opportunities, Central Public Sector
Enterprises (CPSEs) are also finding it difficult to retain
talented employees. As a result, public sector is under
severe pressure in terms of attracting and retaining
talent.
When the issue is motivation, one of the first thing that
comes to ones mind is the concept of incentive, which
refers to any means that makes an employee desire to do
better, try harder and expend more energy. With regard
to monetary incentives, it can be argued that private
organizations have more financial sources to motivate
their employees than the public organizations. It is
known that public employees payment levels in India
are generally low compared to private sector employees.
Moreover, while many private organizations have
monetary incentives such as bonuses, commissions, cash
Incentives etc., it is quite challenging for the public
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94
sector to provide such incentives in adequate levels in a
developing national economy. As a result, it is important
to look for any possible alternative means that can be
used to motivate employees in the public sector. In line
with this purpose, this study focuses on the use of non-
monetary rewards as a motivational tool on public sector
employees.
II. RESEARCH PROBLEM
Mahanadi Coalfields Ltd (MCL), which is a public
sector holding company in India with Miniratna Coal
Mining PSU status, is the second largest coal producing
company of Coal India Ltd (CIL). At present, the
company produces, on an average, 103.12 MTe of coal
and is catering mainly the needs of power sectors. Also
22,278 (as on 31.03.2014) number of persons were
working in it and the company was operating at 6 UG
and 16 OC mines. However, the fact is that such a huge
company which is playing a vital role in the national
economy is showing almost a declining trend for
production of coal per employee as well return on its
capital employed for almost 5 years since 2009-10. As
the researcher is an employee of MCL and has already
spent many years of his career in this company, present
plight of the company has been a matter of shock to him.
One question has been continuously knocking his mind
as to why such a vital company in the public sector
should be allowed to lose its capital employed bit by bit,
why the production of coal is not increasing in spite of
higher wages. Why they are not motivated properly?
Again, there are many contemporary research studies
supporting the effectiveness of non-monetary incentives
as a motivating tool in the private sector organizations.
However, there is hardly any study regarding its use in
public sector organizations.
Under the above backdrop, the researcher has
undertaken the study on The use of non-monetary
incentives as a motivational tool in Public Sector
Undertakings in India: A study on Mahanadi Coal Fields
Limited (MCL).
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III. LITERATURE REVIEW
Ever since Taylor Frederick (1911) pioneering work,
financial benefits were used either as an incentive or
reward to encourage or reinforce the desired behavior.
Similarly, Borjas (1979) mentioned that pay is an
essential aspect of job satisfaction. Shields, Scott,
Sperling, and Higgins (2009) added that some financial
rewards for example health care are considered a vital
foundational element in attracting or retaining talent as
competitors for talent also offer employee benefits.
Some other studies show that certain financial benefits
such as pensions and medical coverage can increase
employees retention and organizations with benefit
programs that employees value has higher shareholder
value (Milkovich & Newman, 2008; Pfau & Kay, 2002).
Different types of Non-financial rewards lead employees
more towards high satisfaction and motivation as
compare to financial rewards (Nel et al., 2004).Stovall
(2003)conducted research on non-financial rewards and
their impact on employees job satisfaction and
concluded that an effective reward package could have a
significant impact on the employees performance. He
explained that non-financial rewards motivate workers
which lead to job satisfaction. Tausif (2012) in his study
concluded that organizational non-financial rewards has
significant role in teachers job satisfaction. Tippet and
Kluvers (2009) regarded non-financial rewards as a
helpful tool to develop employees job satisfaction.
Barton (2006) has considered employees' recognition as
most the important factor among non-financial rewards
to enhance the employees job satisfaction level. In same
vein, Bull (2005) further added that challenging jobs
also enhance the employees job satisfaction. Similarly,
several studies were also conducted on university faculty
which identified remuneration as the most important job
satisfaction factor (Grace & Khalsa, 2003).
Despite the significance of monetary rewards Budhwar
& Bhatnagar, (2007) pointed towards other type of
rewards that are in general ignored in discussions of
employees' job satisfaction. Non-financial rewards have
a significant role in employee's opinion concerning the
reward climate in organization (Khan, Shahid, Nawab,
& Wali, 2013).Ngatia (2015)conducted research on non-
financial rewards and their impact on employees job
satisfaction and concluded that useful reward package
could have a major impact on the employees job
satisfaction and performance. Similarly, Hayati and
Caniago (2012) find the positive link between non-
financial rewards and job satisfaction. Tausif (2012)
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95
examine the relationship between non-monetary rewards
and job satisfaction among teachers in public schools in
Pakistan and found that non-financial rewards are the
most dominant predictors of employees job satisfaction
When employers give more attention to non-financial
reward tools such as work-life balance, career
advancement, educational benefits the employee may
recognize the organization as helpful and supporting.
Abdullah and Wan (2013) give more importance to the
employees recognition as the most dominant instrument
that is being used in the organization to drive employee
satisfaction. Rewards are imperative factors that
elucidate certain job aspects that contribute significantly
to the organization such as job satisfaction. ztrk and
Dndar (2003) conduct a survey from employees
working in public sector organization in UK. The results
of the study concluded that employees are working in
public sector organizations give more importance to
non-financial rewards as compare to financial rewards
for example performance appreciation, promotional
opportunities, and involvement in decision making.
Similarly, (Erbasi & Arat, 2012) examined the
importance of non-financial rewards among head
physician in hospital and concluded that the respondents
give more prominence to job security, promotional
opportunities, and organizational culture that have
significant and imperative effects on job satisfaction.
In most organizations very limited time and efforts are
spend or considering non-monetary sources of rewards.
Erbasi & Arat (2012) regarded non-financial rewards as
a helpful tool to develop employees job satisfaction.
For example research confirmed contribution of
effective training and development opportunities to learn
and develop enhance employee retention (Arnold,
2005). The drawbacks associated with absence of non-
financial rewards could be job turnover of talented
employees who look for place where there are high
chances of growth and professional training (Herman,
2005).
Thus it can be concluded that besides the importance of
financial rewards i.e. salary, fringe benefits, bonuses and
life insurance; the employees also expect various non-
financial rewards like; job recognition, decision making,
and appreciation from the organization. The impact of
non-financial rewards is instrumental in improving the
employees morale and enhances their satisfaction level.
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IV. OBJECTIVES OF THE STUDY
a) To investigate the effectiveness of financial
incentives on employees motivation.
b) To investigate the importance of non-monetary re-
wards on employees motivation.
c) To determine which reward best motivate
employees.
Employee Motivation and Rewards
Rewards are divided by Armstrong (2007) into two
groups; these are monetary and non- monetary rewards.
The monetary rewards include base pay, merit pay,
incentives, commission, bonus and healthy allowances.
Non-monetary rewards include recognition, decision
making roles, promotion, flexible working hours and
company uniforms. Armstrong (2007) indicated that
employees are rewarded in accordance with their
contribution, skill and competence and their market
worth. The importance of money as a motivator has
been consistently downplayed by most behavioral
scientists like Herzberg who point out the value of
challenging jobs, feedback, cohesive work teams and
other nonmonetary factors as stimulants to motivation.
However, money is the crucial incentive to work
motivation because it is the vehicle by which employees
can purchase the numerous need-satisfying things they
desire (Robbins et al. 2003). Researches reaffirm that for
the vast majority of the workforce, regular pay is
absolutely necessary in order to meet basic physiological
and safety needs, hence, lower level employees are
caught in the trap. Furthermore, money also performs
the function of a scorecard by which employees asses
the value that the organization places on their services,
hence an element of being a valuable assert in the
organization results in personal motivation resulting in
money having a positive impact on motivation (Langton
and Robbins 2007). Armstrong (2007) also point out that
rewards can act as a goal that employees generally strive
for, and as an instrument which provides valued
outcomes. It is also a symbol which indicates the
recipients value to the organization and can act as a
general reinforce because it is associated with valued
feedback (Langton and Robbins 2007). Many
organizations face problems when trying to understand
the relationship that exists between rewards and
motivation, however, Langton and Robbins (2007)
argued that for rewards to motivate an individual certain
conditions must be met, that is, the type of reward must
be important to an individual and should be perceived as
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96
a direct reward for performance; if it is money, the
marginal amount should be perceived by the individual
as being significant, therefore, for money to motivate,
the marginal difference in pay increases between a high
performer and an average performer or a high skilled
and a low skilled should be significant.
The Concept of Monetary and Non-Monetary
Rewards
Bates (2006) indicates, for money to motivate, merit pay
rises must be at least seven percent of base pay for
employees to perceive them as motivating and to catch
anybodys attention. Recent studies for example by
Locke (1998) on the four methods of motivating
employees indicated that money rated the second among
lower-level employees. Such evidence demonstrates that
money may not be the only motivator, but its difficult
to argue that it doesnt motivate. This therefore opens up
the debate that non-financial rewards such as
recognition, decision making and job security have a
role to play in the internal motivation of employees that
monetary rewards cannot address. To assume that
financial incentives will always motivate people to
perform better is therefore as simplistic as to assume that
they never motivate people to perform better. The only
issue that is certain about this is that multiplicities of
interdependent factors are involved in motivating
employees ranging from money to non-monetary.
Another stream of analyses points out that people never
rate money as their main motivator, most achievements
are reached for reasons other than money, and it is a
factor that attracts people but does not play a big role in
retaining and motivating. Robert and Shen (1998) point
out, salary and other hygiene factors yielded
dissatisfaction and only motivators directly influence
motivation beyond the psychological neutral level. In a
recent survey, by (Ellis and Pennington, 2004) direct
financial reward played a critical role in attracting
talented employees, but they have only a short term
impact on the motivational levels of employees. Kohn
quoted by Armstrong (2007) challenge what he calls the
behaviorists dogma about money and motivation. He
claims that, no controlled scientific study has found a
long-term enhancement of the quality of work as a result
of any reward system. Slater quoted by Armstrong
(2007) also argued that the idea that everybody wants
money is propaganda circulated by wealth addicts to
make they feel better about their addiction. Armstrong
(2007) further argued that, a closer look on how
employees are motivated indicates that it becomes
disturbingly clear that the more you use rewards to
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motivate, the more employees tend to lose interest in
whatever they had to do to get the rewards. The more
reinforcing the reward is, the more it erodes intrinsic
interest. Therefore, various devices can be used to get
employees to do something, but that is a far cry from
making people want to do something in this regard, non-
monetary rewards apply. Theorists therefore point out
the value of challenging jobs, feedback, cohesive work
teams and other nonmonetary factors as stimulants to
motivation which should never be left out when
addressing the subject of motivation in the workplace.
Pfeffer 1998 as quoted by Armstrong (2007) also
contends that employees do work for money but they
work even more for meaning in their lives. Where there
is no meaning of work, there is greater loss of loyalty
and commitment and pay should therefore not substitute
for a working environment high on trust, fun, and
meaningful work. The above simply mean, money
should be used in conjunction with other motivating
factors in order to win the attention of employees.
However, according to Armstrong (2007), in a much
publicized study, Gupta and her colleagues analyzed
thirty-nine studies conducted over four decades and
found that cold-hard cash motivates workers whether
their jobs are exciting or mundane in labs and real world
settings alike. But the research team acknowledges that
money is not the only factor that concerns employees
noting that beyond a certain point higher salaries will
make employees happier, but it will not buy better
performance and motivation. Still, Gupta warns that
employers who dole out small merit raises-less than
seven percent of base pay may do more harm than
good. According to her, small raises can actually be
dysfunctional in terms of motivation because employees
become irritated that their hard work yielded so little.
Therefore there are mixed feelings among scholars on
whether money has a positive or negative impact on
motivation and such a question can only be addressed
through an empirical study.
Research Hypothesis
In light of the objectives and related literature, the
following research hypotheses were operationalised:
H1: There is no significant effect of monetary
rewards on employee motivation.
H2:Non-monetary rewards have a significant effect
on employee motivation.
H3: Recognition is the best motivating factor for
lower level employees.
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V. METHODOLOGY
Population and Sample
The study population is all the employees in the MCL,
which had a total of 22,278 employees as on 31.03.2014.
Sample Size was determined by the formula:
n= [NZ2 * 0.25] / [d2 * {N-1} +Z2 * 0.25]
Where
n= Sample size required
N= Total Population Size
d= Precision Level (usually 0.05 or 0.10) and
Z= Number of Standard deviation units of the sample
distribution corresponding to desired confidence level
Hence total sample size determined for my study is
n= [22,278 *1.962 * 0.25] / [(0.05)2 * {22,277} +
(1.962 * 0.25)]
= 377.66 OR 378
The questionnaires were distributed to 580 employees
who were present in their offices/worksite at the time the
survey was conducted. Subjects who did not wish to
participate in the study were asked to return the blank
survey to the researcher. 169 employees refused to
participate in the study and 27 questionnaires were
rejected by the researcher as those are incomplete. The
number of employees completed the questionnaires in
all respects were 384, leading to a response rate of
17.8%. The sample consists of 225 executives and 159
nonexecutives. Executives were selected from the levels
covering different cadres from E0 to E9. Similarly, non-
executives were also selected from almost all the
departments and sections of the company. The non-
executives include supervisors, statisticians, welders,
fitters, electricians, drill operators, dozer operators,
dumper operators, mining sardars, overman, shot firers
etc. It is to be noted that clerical staff have also been
included in the non-executive category.
Period of the Study
The study covers a period starting from the year 2010
and extended up to the year 2015. However, the period
varies depending on the availability of data. The survey
was conducted during the past two years i.e., 2012-13
and 2013-14 in different time intervals as convenient to
both respondents and the researcher; as latter is an
employee of Mahanadi Coalfields Limited.
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Measuring instruments Research hypothesis 1: There is no significant effect of

monetary rewards on employee motivation. As indicated
A structured questionnaire with reward items as
in Table 1, there was no significant relation-ship
developed by Luthans (1998:65) was used to collect data
between monetary/financial rewards and employee
from the respondents. This questionnaire was used to
motivation (r = .161, p >0.01). The research hypothesis
determine the relationship between rewards and
was therefore not rejected. Research hypothesis 2: Non-
employee motivation. The three variables under study
monetary rewards have a significant effect on lower-
which are monetary rewards, non-monetary rewards and
level employees motivation. As indicated in Table 2,
motivation were each asked in separate sections. Section
there is a moderate significant relationship between non-
A asked employees their demographic information.
monetary rewards and motivation with a correlation of (r
Section B asked the employees the extent to which the
= .607, p< 0.01) this means that, non-monetary rewards
organizations use of selected monetary rewards was
are good motivators among lower-level employees. This
driving them to work hard with direction. These rewards
concurs with Herzbergs two factor theory of
included base pay, merit pay, bonus, commission,
motivation. The research hypothesis was therefore not
allowances and incentive pay. The items were measured
rejected. Overally, Table 3 shows that there is a
on a five point likert scale that ranged from to a large
significant but weak relationship between rewards in
extent to a smaller extent. The second question was
general and motivation (r=.436p<0.01). Research
dealing with non-monetary rewards, respondents were
hypothesis 3: Recognition is the best motivating factor
asked to evaluate how likely they were inspired to
for lower level employees.
perform their best when they receive rewards such as
recognition, promotion, pension benefits, uniforms, Table 2 : Correlation Results for non-monetary rewards
flexible working hours and decision making roles. The and motivation
response categories were from very likely to very Non Motivation
unlikely in a five point likert scale. The third question Financial
then examined the employees level of motivation taking Reward
Non Financial Pearson Correlation Sig. 1.000 .607**
into consideration (Herzberg, 1957)s tangible measures Reward (2-tailed) .000
of motivation ranging from, meaningfulness of the job, N 384 384
Motivation Pearson Correlation Sig. .607** 1.000
enjoying the job, love the job, freedom in doing the job, (2-tailed) .000
main goal of working accomplished, and overall work N 384 384
environment satisfying or not. Lastly, the questionnaire **Correlation is significant at the 0.01 level (2-tailed).

provided a section for the employees to indicate their Table 3 : Correlation for all rewards and motivation
best reward.
Non Motivation
Analysis and Discussion Financial
Reward
Level of motivation was measured using motivational Overall Pearson Correlation 1.000 .436**
Rewards Sig.(2-tailed) .005
factors such as meaningfulness of job, sufficient N 384 384
rewards, satisfying environment, job security and Motivation Pearson Correlation .436** 1.000
Sig.(2-tailed) .005
freedom in doing work. A correlation between the three N 384 384
variables was calculated using the Pearson Product
Moment Correlation. The empirical results showed that, non-monetary
rewards were given number one ranking by the
Table 1 : Correlation Results for monetary rewards and employees especially in MCL. These results are in
motivation agreement with Herzbergs two factor theory of
Financial Non Motiva motivation by Nelson (2004) which shows that 78% of
Reward Financial tion
Reward employees indicated that it was very or extremely
Financial Pearson Correlation 1.000 .278 .161 important to be recognized by their managers when they
Reward Sig.(2-tailed) .083 .321
N 384 384 384 do good work but contradict with the general
Non Pearson Correlation .278 1.000 .607**
Financial Sig.(2.tailed) .083 .000
perceptions for example, in a much publicized study,
Reward N 384 384 384 The notion that money is not a motivator among all level
Motivation Pearson Correlation .161 .607** 1.000
Sig.(2-tailed) .321 .000 employees has been regarded as more theoretical than
384 384 384 practical, however, the results of the study suggest that
**Correlation is significant at the 0.01 level (2-tailed).
,managers who implement motivational strategies will
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definitely reap the benefits in terms of improved
employee job performance and morale.
VI. CONCLUSION
For the employees of PSUs in India, non-monetary
rewards according to this study have proved to be
effective on employee motivation. Therefore non-
monetary rewards must be used to create a sincere focus
of appreciation and on the other hand, money should be
used as a reward linked directly to compensation not
necessarily motivation. Secondly, the results have
indicated that, flexible working hours are highly
motivational, to this extent; managers should allow
flexibility in the workplace. Lastly, PSUs should aim to
have a highly motivated workforce which will ensure
high productivity and high levels of productivity. All
this can be achieved through strategic implementation of
motivational techniques to meet the needs of the
workforce.
REFERENCES
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Compensation, The IUP Journal of Corporate
Governance, Vol. 9, Nov. 1 & 2, 27-46.
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Hyderabad, August 2008, Vol. VII, No. 8, pp. 44-
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Coal Mining Industry in India. Unpublished
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Burdwan, Burdwan, West Bengal
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Leading and collaborating in a competitive
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world. McGraw-Hill: Boston. Bates S (2006).
Top Pay for Best Performers. Annual Editions.
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Race for Talent. Peo Dynam., 22(1).
[8] Ellis L, Pennington S (2004). Should leaders
have Tasks or Fangs? Man. Tod. 20: 9-10.
[9] Hellriegel D (2004). Organizational Behavior.
Cincinnati: Ohio South Western.
[10] Iglans J, Roussel P (1999) Relationship between
Compensation package and work Motivation.
Org. Behav. p.12.
[11] Kanungo, R.N. (1982) Measurement of job and
work involvement. Journal of Applied
Psychology, 67(3), 341-349.
[12] Langton N, Robbins S (2007). Organizational
Behavior Concepts, Controversies and
Application. Toronto, Ontario: Pearson Prentice
Hall.
[13] Luthans F (1998). Organizational Behavior
.Singapore: McGraw Hill. Nelson L (2004). Non-
Monetary rewarding in Organisations. Retrieved
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[http://www.101rewards.com/non-monetary-
rewards.html].
[14] Milkovich, G., & Newman, J. (2008).
Compensation Boston: Irwin McGraw Hill.
[15] Nalini Nayak, Social Security for the
Unorganized Sector, Economic & Political
Weekly, May28, June 04, 2005, Mumbai, Vol.40,
No.22, pp.115-117.
[16] Nel, P., Gerber, P., van Dyk, P., Haasbroek, G.,
Schultz, H., Sono, T., & Werner, A. (2004).
Human resources management. Cape Town:
Oxford University Press.
[17] Robbins SP, Odendaal A, Roodt G (2003).
Organizational Behavior; Global and South
African Perspectives. Cape Town:
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IMPROVED ORGANISATIONL AND LOGISITCS PERFORMANCE

IN SILENT COMMERCE TECHNOLOGY ADOPTION
Venkatesh. J
Associate Professor, Department of Management Studies, Anna University Regional Campus Coimbatore, Navavoor,
Coimbatore - 641 047, INDIA
Email: drjvmba@gmail.com

Abstract: This study observes the consequence of RFID
technology utilization on legislative agility in industrialized
firms. Findings state that implementation of RFID
technology relevance directly and definitely effects
managerial quickness which in turn honestly and certainly
effects both dynamic and logistics performance. Besides,
operational performance directly and totally impacts
logistics performance. Data were composed during the
progress stage of RFID technology supposition and were
only collected from firms in the industrialized sector.
Defendants held operations-level positions
manufacturing organizations. Results should be incidental
with these limits in mind. The application of Silent
Commerce technology (RFID) can effect in improved
organizational agility resulting in better performance.
Experts considering adoption of silent commerce
technology (RFID) expertise should weigh credible benefits
from increased agility and performance beside the
expenditure of technology recognition.
Keywords: Silent Commerce, RFID implementation,
operational performance, logistics, agility.
I. INTRODUCTION:
Silent Commerce technology - RFID (Radio Frequency
Identification) is considered to be the most important
invention in these recent days. This technology is been
used widely in various sectors like logistics, inventory,
warehouse, supply chain etc., for the purpose of asset
tracking and monitoring. RFID utilization augments the
appropriateness of production information, creates
tracking capability allowing for traceability of portfolios
and increases service level competences resulting in
organizational growth and productivity. RFID
technology also has inferences for improving
performance at the supply chain level. RFID, while
more expensive, has substantial advantages over bar
codes and the cost discrepancy is rapidly narrowing.
RFID labels do not require line-of-sight in directive to
be delivered and dependent upon the type of tag can be
read at greater distances. RFID tags can recognize so
much faster than bar codes that it seems that all tags in a
center are read at the same time rather than successively
as with bar codes.
RFID tags are sturdier than bar codes and may be fixed
within products swearing long-term traceability. These
advantages enable an organizations skill to provide
timely information vital for agile performance.
in
Organizations with recognized enterprise resource
planning systems have the skill to synchronously share
real-time data with supply chain partners. We argue that
RFID technology serves to improve the ability of
manufacturing organizations to share data with suppliers
and customers better permitting those organizations to
quickly respond to changes in customer demand. RFID
technology permits the real-time capture and sharing of
inventory-related information across the supply chain. It
is our persistence to examine the impact of RFID
technology utilization on administrative agility and the
impact of both RFID technology deployment and
organizational agility on operational performance and
logistics performance.
We build on current empirical findings that RFID
technology deployment and organizational agility
certainly impact performance. These studies do not
combine RFID technology deployment and
organizational dexterity within the same exemplary,
however, as does the structural model projected here.
Specifically, we propose that adoption of RFID
technology utilization positively affects an
organizations agility leading to enhanced operational
and logistics performance by providing higher quality
and more timely data to the organization as well as
providing the technological ability to detention and use
that information in ways that are much more challenging
or impossible with other technologies.

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II. LITERATURE REVIEW AND
PROPOSITIONS:
We conceive a structural model integrating RFID
technology utilization as ancestor to organizational
agility, RFID technology utilization and organizational
agility as antecedents to operative performance and
logistics performance, as well as operational
performance as precursor to logistics performance.
Generally, we propose that RFID technology utilization
positively impacts managerial agility which, in turn,
clearly impacts organizational performance. RFID
technology offers additional inventory-related data on a
real-time basis that can be shared synchronously with
supply chain partners. This additional data improves the
ability of manufacturing organizations to respond to
changes in customer demand through better
organizational agility. This enhanced agility leads to
better efficiency (operational performance) and
consumer satisfaction (logistics performance). This
model is presented in Figure 1.
Earlier research found evidence that transmission of
technology can have a profitable effect on monetary
growth in and across countries. Technology
dissemination in manufacturing impacts productivity in
a manufacturing environment. Dissemination of
information technology allows companies to be
proactive, reactive, and create change. These features are
all considered to be responsive activities. RFID is a tool
that offers a means of gathering apt information, and the
dissemination of RFID technology can provide ways for
firms to be both active and reactive and to create change.
RFID systems are quickly exchanging Universal Product
Codes (barcodes). To date, price has been the major
obstacle to the utilization of RFID. Costs are, however,
reducing which should make RFID technology more
reachable. RFID utilization has been found to enable
better manufacturing performance. More organizations
are realizing the benefits of engaging RFID to track list
within the organization. Manufacturing organizations
can profit from greater inventory perceptibility via the
real-time information delivered by RFID technology to
manage the flow of inventory.
RFID technology has been to speed up the flow of data
allowing for greater reflectivity of records as they drift
through the manufacturing procedures. RFID can be
used to track all types of record, such as raw materials,
work-in-progress, and finished goods inventories,
through the engineering process. The level of labeling
can be crucial for an organization. Currently most items
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101
are labeled primarily at the case as the cost of the
technology goes down, administrations will begin to tag
at the item level. The implementation of RFID
technology has inferences for performance at the supply
chain level, as well as at the structural level. Based on a
recent review of related literature, RFID tools may
increase performance at the supply chain level by
reducing inventory losses, increasing the efficacy and
agility of procedures, and refining information
accurateness.
III. ASSUMPTIONS:
Agile organizations are considered as being practical,
sensitive and change creating. Dexterity requires
physical and economic promptness to respond to volatile
events. Agility in a manufacturing context has been
labeled as the skill to proficiently change effective
states in response to unreliable and changing demands.
RFID technology is described to have the potential to
improve supply chain agility. The incorporation of
information technology was found to result in better
agility for a business and should finally have a positive
effect on competitive business performance in areas
such as response to changes in consumer demand,
response to market changes, and the ability to sense,
observe and expect market changes.
Fig.1: RFID Implementation and Organizational Factors
RFID permits organizations to support active
management through use of real-time data. Customers
rapidly exchanging needs highlight the point that
organizations must be able to respond quickly with
essential changes to inner processes and products.
Accordingly, technology dispersal theory and prior
study suggests that organizations exploiting RFID
technology should then be able to competently provide
current information that allows organizations to become
more active. Based on this abstract and empirical
explanation, we postulate the following:
3.1. RFID technology use influences organizational
agility:
It can be claimed that technology dissemination in
manufacturing impacts efficiency in a manufacturing
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environment. Operational performance is defined as,
the performance connected to firms in-house
operations, such as production, product eminence and
customer satisfaction. Operational performance is also
reliant on upon an organizations capabilities and
technologies. Several events of operational performance
have been recognized as output, inventory, and working
expense. Organizations directing on fundamental
technologies find a development in throughput,
inventory expense, and operating cost finally resulting in
a positive impact on operational performance. RFID is
an emergent technology that is increasingly being
employed in manufacturing. Based on this hypothetical
and empirical reasoning, we postulate the following:
3.2. RFID technology positively influences
operational performance.
Evidence that transmission of technology can have a
profitable effect for organizations has been found. The
need for performance dimension has been recognized.
Logistics performance captures a measure of
performance that is peripheral (manufacturer/ supplier)
to the organization. Logistics performance reflects an
organizations ability to please customers through the
on-time delivery of quality products and services.
Logistics performance can be dignified as a complex of
customer satisfaction, receptiveness, delivery reliability,
delivery speed, elasticity and capacity. Organizations
utilizing RFID technology can assume to be more
receptive to customers logistically. Further, it was found
that lead time fallen from 497 days to 27 hours
subsequent in a dramatic drop in stock level following
the employment of RFID technology. Based on this
theoretical and empirical explanation, we postulate the
following:
3.3. RFID technology influences logistics performance.
Dexterity is alleged to be vital to preserving competitive
advantage in a manufacturing environment. The focus of
the former research was on model development for the
calculation of quickness, but they did pressure the need
for performance measurements. Technology
dissemination in manufacturing has been found to
influence efficiency, a component of operative
performance. In addition, dissemination of information
technology has been found to allow firms to be active,
volatile and create change. Based on technology
dissemination theory and prior research, we postulate
the following:
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102
3.4. Organizational facility positively controls
operational performance.
Logistics performance is the capacity to respond to
customers' ever-changing requests and needs in a timely
way. The consumption of technologies such as RFID
can lead to agility in organizations. Organizations that
are responsive have the competence to respond to
unexpected changes and increase processing speed, thus
increasing logistics performance. The incorporation of
information technology is likely to effect in more
dexterity for an organization resulting in better reply to
market changes as well as augmenting the competence
to sense, perceive and anticipate market changes. Based
on this hypothetical and empirical explanation, we
hypothesize the following:
3.5. Organizational efficiency positively impacts
logistics performance.
Previous researchers argue that operational performance
is influenced by logistics performance. Other researchers
found that operational performance positively impacts
logistics performance. They also found that operational
performance positively impacts logistics performance
but did not test this theory in a context of technology
diffusion. Researchers examined overall firm
performance in a digitally-enabled supply chain and
found that evidence related technology squeezed supply
chains, but did not inspect whether working
performance impacts logistics performance. Based on
this speculative and empirical validation, we
hypothesize the following;
IV. SUMMARY OF RESULTS:
The measurement scales are necessarily valid and
consistent and the measurement model fits the data
comparatively well. Results of the calculation of the
operational model support five of the six study
propositions. Generally, RFTD technology operation
positively impacts organizational dexterity which, in
turn, completely impacts both active performance and
logistics performance. In addition, effective performance
definitely impacts logistics performance. While the
results specify that RFTD technology use positively
influences operational performance and negatively
influences logistics performance, the consistent
estimates are comparatively small (.12 and -.07)
compared to the regular estimate (.46) for the impact of
RFID technology use on organizational dexterity. To
review, the results specify that RFID technology
utilization leads to enhanced organizational agility
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driving improvements in both operative and logistics
performance.
V. DISCUSSION:
This study and the related findings build on preceding
works that have established experimental relationships
between the two focal concepts within this study (RFID
technology use and organizational agility) and
organizational and supply chain performance paradigms.
The model integrates constructs formerly defined and
labeled and the survey instrument included previously
established and evaluated measurement scales. The
substantial contribution of this study is the connection of
RFID technology application and organizational
dexterity within a single operational model and the
valuation of the combined influence on performance.
The results related to measurement scale rationality and
consistency reproduce the results from previous studies
and the separate correlations for the relationships of
RFID technology utilization and performance and
organizational alertness and performance variables
repeat the judgments from previous studies. What is
newly conveyed here is the positive relationship
between RFID technology utilization and organizational
agility.
RFID technology utilization enhances an organization's
ability to respond to changes in customer demand. In
other words, manufacturing organizations that have
adopted RFID technology are more agile and
manufacturing organizations that are more agile exhibit
higher levels of operational and logistics performance.
RFID technology utilization directly impacts an
organization's agility and operational performance but
does not directly impact logistics performance. The
negative relationship between RFID technology
utilization and logistics performance is surprising and
requires additional discussion. When viewed in
isolation, the pairing of RFID technology utilization and
logistics performance are positively and significantly
correlated (.326, significant at the .01 level). This
suggests that the impact of RFID technology utilization
on logistics performance is mediated through agility and
operational performance with agility having the
strongest meditational effect.
The technology synchronously provides organizations
with real-time information that facilitates efficient and
effective response to changes in customer demands and
markets that facilitates improved logistics performance.
The findings provide support for the general proposition
that RFID technology utilization improves agility and
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103
improves performance. Data were collected during the
development stage of RFID technology approval and
were only composed from firms in the manufacturing
sector. While some defendants hold managerial and
regulatory positions, the bulk hold operations-level
positions within manufacturing organizations. Because
of economic restrictions, it was not imaginable to
conduct a follow-up wave of data collection making it
difficult to assess non-response bias. Results should be
inferred with these limits in mind. Future research
should monitor the evolution of technology employment
from growth through to development stage. Further
research should examine the impact of the technology
on dexterity and performance within the amenities and
governmental sectors. This is one of the empirically-
based studies exploring the impact of RFID technology
application on organizational agility, repetition of this
study with other samples is important to simplification
of the findings.
VI. CONCLUSION:
The study is limited only to RFID implementation and
organizational capacity with respect to logistics and
operational performance. It should also be noted that it
is anticipated to incorporate a measure of supply chain
performance in an expanded model since RFID
technology has inferences at both the organizational and
supply chain levels. Manufacturing organizations must
struggle to be both efficient in terms of reducing costs
related with the industrialized process and effective in
terms of sustaining customers. RFID technology
acceptance supports both the cost minimization
objective of the operations function and the client
satisfaction objective of the marketing function. The
study states that RFID technology directly impacts
operational performance thereby reducing the costs
related to manufacturing products. The result of the
study also supports that RFID implementation responds
to the changing demands of the customers immediately
with improved logistics activity. Thus the manufacturing
sector can expect better organizational performance that
will improve operational and logistics performance with
the help of RFID espousal.
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