Tag: Career Development

Gain or Loss to Stakeholders

In mergers and acquisitions it largely depends upon the terms and conditions of the merger and the track record of the transferee or acquirer company. Based on the cardinal principle, every buyer, in other words transferee or acquirer has to pay more than the book value of the transferor or target company. However, the terms and conditions of the transaction depend upon their present operations and past historical records.

Implementation of Objectives

We have so far discussed various objectives, motives, reasons and purposes which are to be achieved and accomplished by implementing them after completion of merger, amalgamation or acquisition. Much of the senior management’s attention must be focused on developing a ‘post-transaction’ strategy and integration plan that will generate the revenue enhancements and cost savings that initially prompted the merger or acquisition. After merger or acquisition, the resources of two or more companies should be put together for producing better results through savings in operating costs because of combined management of production, marketing, purchasing, resources etc. These economies are known as synergistic operative economies. Synergy is also possible in the areas of Research and Development function of the combined company for optimum utilization of technological development, which could not be taken up by the separate companies for want of resources.

A key challenge in mergers and acquisitions is their effective implementation as there are chances that mergers and acquisitions may fail because of slow integration. The key is to formulate in advance integration plans that can effectively accomplish the goals of the M&A processes. Since time is money and competitors do not stand still, integration must not only be done well but also done expeditiously.

To implement the objectives of mergers or acquisitions, there are various factors, which are required to be reorganized in the post merged or acquired company. Such factors can be grouped in the followed heads:

(i) Legal Requirements

Fulfilment of legal requirements in post-merger reorganisation of any amalgamating company becomes essential for an effective and successful venture. The quantum of such obligations will depend upon the size of company, debt structure and profile of its creditors, compliances under the corporate laws, controlling Integration of Businesses and Operations regulations, distribution channels and dealers network, suppliers relations, labour etc.

(ii) Combination of operations

The amalgamating company has to consolidate the operations of the transferor company’s operations with its own. This covers not only the production process, adoption of new technology and engineering requirements in the production process but also covers the entire technical aspects like technical know-how, project engineering, plant layout, schedule of implementation, product designs, plant and equipment, manpower requirements, work schedule, pollution control measures, etc. in the process leading to the final product.

Integrating two different technological systems for complex business entities while continuing to run the business can be a massive challenge. It requires proper planning for phased transitions, extensive preparation and intensive testing. It is necessary to define workable implementation plans as to what needs to be integrated, when it should happen and how it can be done successfully.

(iii) Top Management Changes

The takeover or merger of one company with another affects the senior managerial personnel. A cohesive team is required both at the board level as well as at senior executive level. The reorganisation would involve induction of the directors of the transferor company on the Board of the amalgamating company, or induction of reputed and influential persons from outside who have expertise in directing and policy planning to broad base the Board for public image as well as smooth functioning of the company. Selection of directors, finalising their term of holding the office as directors, managerial compensation and other payments or reimbursements of expenses etc. are issues to be sorted out.

At the senior executive level also, changes are required particularly in respect of compensation depending upon the terms and conditions of merger, amalgamation or takeover and to adjust in suitable positions the top executives of the amalgamated company to create a congenial environment and cohesive group leadership within the organisation. Understanding different cultures and where and how to integrate them properly is vital to the success of an acquisition or a merger. Important factors to be taken note of would include the mechanism of corporate control particularly encompassing delegation of power and power of control, responsibility towards accounting, management information system, to and fro communication channels, interdivisional and intra-divisional harmony and achieving optimum results through changes and motivation.

(iv) Management of financial resources

Takeover, merger, amalgamation or demergers facilitate the attainment of the main objectives of achieving growth of the company’s operations. Growth is dependent upon the expansion, modernization or renovation or restructuring. Generally, the management plans in advance about the financial resources which would be available to the company to finance its post-merger plans. Such preplanning is based on certain assumptions which might change post-merger depending upon the volatility of a variety of factors involved.

(v) Financial Restructuring

Financial restructuring becomes essential in post merger reorganisation. Financial restructuring is characterised by liquidity crisis, ‘abnormal’ balance sheets and negative equity. The ‘clean-up’ must happen fast. Replacement of costlier fundings by cheaper borrowings on a long and short term basis as per requirement is one of the several ways and means of financial restructuring for a company. This being an important aspect concerns most of the top management, creditors, bankers, shareholders, regulatory bodies like stock exchange, SEBI as well as the government where provisions of corporate laws are attracted and their permissions or approvals for planned changes are required. Generally, financial restructuring is done as per the scheme of arrangement, merger or amalgamation approved by the shareholders and creditors but in those cases where takeover or acquisition of an undertaking is made by one company of the other through acquiring financial stake by way of acquisition of shares, e.g. IPCL by RIL, reorganisation of financial structure would be a post-merger event which might compel the company to change its capital base, revalue its assets and reallocate reserves.

Post Merger Success and Valuation and Impact on Human and Cultural Aspects

Every merger is not successful. The factors which are required to measure the success of any merger:

1. The earning performance of the merged company can be measured by return on total assets and return on net worth. It has been found that the probability of success or failure in economic benefits was very high among concentric mergers. Simple vertical and horizontal mergers were found successful whereas the performance of concentric mergers was in between these two extremes i.e. failure and success.
2. Whether the merged company yields larger net profit than before, or a higher return on total funds employed or the merged company is able to sustain the increase in earnings.
3. The capitalisation of the merged company determines its success or failure. Similarly, dividend rate and payouts also determines its success or failure.
4. Whether merged company is creating a larger business organisation which survives and provides a basis for growth.
5. Comparison of the performance of the merged company with the performance of similar sized company in the same business in respect of (I) Sales, (ii) assets, (iii) net profit, (iv) earning per share and (v) market price of share.

In general, growth in profit, dividend payouts, company’s history, increase in size provides base for future growth and are also the factors which help in determining the success or failure of a merged company

6. Fair market value is one of the valuation criteria for measuring the success of post merger company. Fair market value is understood as the value in the hands between a willing buyer and willing seller, each having reasonable knowledge of all pertinent facts and neither being under pressure or compulsion to buy or sell. Such valuation is generally made in pre merger cases.
7. In valuing the whole enterprise, one must seek financial data of comparable companies in order to determine ratios that can be used to give an indication of the company position.
8. Gains to shareholders have so far been measured in terms of increase or decrease in share prices of the merged company. However, share prices are influenced by many factors other than the performance results of a company. Hence, this cannot be taken in isolation as a single factor to measure the success or failure of a merged company.
9. In some mergers there is not only increase in the size of the merged or amalgamated company in regard to capital base and market segments but also in its sources and resources which enable it to optimize its end earnings.
10. In addition to the above factors, a more specific consideration is required to be given to factors like improved debtors realisation, reduction in non-performing assets, improvement due to economies of large scale production and application of superior management in sources and resources available relating to finance, labour and materials.

Human and Cultural Aspects

The merger is a period of great uncertainty for the employees of the merging organizations. The uncertainty relates to job security and status within the company leading to fear and hence low morale among the employees. It is natural for employees to fear the loss of their revenue or change in their status within the company after a merger since many of these employees literally invest their whole lives in their jobs. Hence the possibility of a change in their position is likely to be viewed with fear and resentment. The possibility of a change in compensation and benefits also creates a feeling of insecurity and unease. The influx of new employees into the organisation can create a sense of invasion at times and ultimately leads to resentment. Further, the general chaos which follows any merger results in disorientation amongst employees due to ill defined role and responsibilities. This further leads to frustrations resulting into poor performance and low productivity since strategic and financial advantage is generally a motive for any merger. Top executives very often fail to give attention to the human aspects of mergers by neglecting to manage the partnership in human terms. By failing to give attention to the problems faced by their employees, they fail to fully develop their companies’ collaborative advantage.

The successful merger demands that strategic planners are sensitive to the human issues of the organizations. For the purpose, following checks have to be made constantly to ensure that:

sensitive areas of the company are pinpointed and personnel in these sections carefully monitored;

• Serious efforts are made to retain key people;
• A replacement policy is ready to cope with inevitable personnel loss;
• Records are kept of everyone who leaves, when, why and to where;
• Employees are informed of what is going on, even bad news is systematically delivered. Uncertainty is more dangerous than the clear, logical presentation of unpleasant facts;
• Training department is fully geared to provide short, medium and long term training strategy for both production and managerial staff;
• Likely union reaction be assessed in advance;
• Estimate cost of redundancy payments, early pensions and the like assets;
• Comprehensive policies and procedures be maintained up for employee related issues such as office procedures, new reporting, compensation, recruitment and selection, performance, termination, disciplinary action etc.;
• New policies to be clearly communicated to the employees specially employees at the level of managers, supervisors and line manager to be briefed about the new responsibilities of those reporting to them;
• Family gatherings and picnics be organized for the employees and their families of merging companies during the transition period to allow them to get off their inhibitions and breed familiarity.

Training means imparting the knowledge, skills and aptitudes necessary to undertake the required jobs efficiently with a view to developing the worker to his fullest potential. As an organised activity, training is designed to create a change in the thinking and behaviour of people. Training is a two-way and continuous process because there is no end to learning and secondly, a person gets to learn new technology, new patterns etc., continuously.

The training acquaints the employee with the requisite skill, real life situations at the work place and helps him in the faultless accomplishment of the work. Training, thus, involves the development of the manual and mental skills that are necessary for performing a specific work, through instruction, drill and discipline.

“Training is a process by which the attitudes, skills and abilities of employees to perform specific jobs are increased.” Micheal J. Jucious

“Training is the act of increasing the knowledge and skill of an employee for doing a particular job.” Edwin B. Flippo

“Training is the organised procedure by which people learn knowledge and/or skill for a definite purpose.” E. F. L. Breach

Character

• Training helps to perform the role of different sections of em­ployees, the managerial responsibility and the importance of communication and participation.
• Training must be help to create an attitudinal change by creating awareness of the overall process.
• It must enhance skills in organizational and managerial areas
• Proper orientation and training should be given to the new en­trants.
• It must make orient new entrants in the organization to the dis­cipline and culture requirement of the organization.
• An effective training programme should process the following characteristics.
• Training programmes should be chalked out after identifying needs or goals.
• An effective training programme should be flexible.
• It should have relevance to the job requirements.
• It should make due allowance for the differences among the in­dividuals in regard to ability, aptitude, learning capacity, emo­tional make-up, etc.
• Training programmes should be conducted by well qualified and experienced trainers.
• An effective training programme should have the support from top management.
• A good training performance should prepare the trainee mentally before they are imparted any job knowledge or skills.
• Top management can gently influence the quality of training in the organization by the policies it adopts and the extent to which it supports training programmes.
• An effective training programme should be supported by critical appraisal of the outcome of the training efforts.

Purposes:

• Training is necessary to prepare existing employees for higher level jobs (promotion).
• Newly recruited employees require training so as to perform their tasks effectively and efficiently. Instructions, guidance, coaching help them to handle jobs competently without any wastage.
• Existing employees require refresher training so as to keep abreast of the latest developments in the job operations. In the phase of rapid technological changes, this is an absolute necessity.
• Better performing workers are less likely to make operational mistakes. Quality increases may be in relationship to a company product or services or in reference to the intangible organisational employment atmosphere.
• Instruction can help employees increase their level of performance on their present assignment. Increased human performance often directly leads to increased operational productivity and increased company profit.
• Training is necessary when a person moves from one job to another (transfer). After training, the employee can change jobs quickly, improve his performance levels and achieve career goals comfortably.
• Training is necessary to make employees mobile and versatile. They can be placed on various jobs depending on organizational needs.
• Training is needed to bridge the gap between what the employees have and what the job demands. Training is needed to make employees more productive and useful in the long run.
• Organisations that have a good internal educational programme will have to make less drastic manpower changes and adjustments in the event of sudden personnel alterations. When the need arises, organizational vacancies can be more easily staffed from internal sources, if a company initiates and maintains an adequate instructional programme for both its non- supervisory and managerial employees. So, it will help company to fulfil its future personnel needs.
• An endless chain of positive reactions results from a well-planned training programme. Production and product quality may improve, financial incentives may then be increased, there is a boost for internal promotions, less supervisory pressure and base pay rate increases result. Increased morale may be due to many factors but one of them is current state of an organization’s educational endeavour. Thus, it will improve overall organizational climate.
• Training and development programmes foster the initiative and creativity of employees and help to prevent manpower obsolescence, which may be due to age or temperament or motivation or the inability of a person to adapt him to technological changes.
• On a personal basis employees gain individually from their exposure to educational experiences. Again management development programmes seem to give participants a wider awareness, an enlarged skill and enlightened altruistic (kindness) philosophy and enhance personal growth.
• Proper training can help to prevent industrial accidents. A safer work environment leads to more stable mental attitudes on the part of employees. Managerial mental state would also improve if supervisors know that they can better themselves through company designed development programmes. So it improves health and safety.
• Training is needed for employees to gain acceptance from peers, (learning a job quickly and being able to pull their own weight is one of the best ways for them to gain acceptance).

Objectives

To Remain Competitive in the Market:

To tackle the immensely growing competition in the target market, it is important for an employer to increase the productivity of its workers while reducing the cost of production of the products. Training, therefore, aims to bring about efficiency and effectiveness in an organization to enable it to remain competitive in a highly competitive market situation and for the achievement of organizational goals.

To Increase Productivity of Employees:

Training helps in developing the capacities and capabilities of the employees-both new and old, by upgrading their skills and knowledge so that the organization could gainfully avail their services for higher grade professional, technical, sales or production positions from within the organization. In case of new employees, training aims to provide them with basic knowledge and skill they need for an intelligent performance of their specific tasks.

To Change Attitude of the Workers:

Training not only provides new knowledge and job skills to employees, but also brings about a change in their attitude towards fellow workers, supervisor and the organization. It increases job satisfaction among employees and keeps them motivated. It gives them security at the workplace and as a result, labour turnover and absenteeism rates are reduced. It also develops in them self-consciousness and a greater awareness to recognize their responsibilities and contribute their very best to the organization.

To Mitigate the Risk of Accidents:

Trained workers can handle the machines safely. They also know the use of various safety devices in the factory. Thus, they are less prone to industrial accidents.

To Reduce Wastage of Time and Resources:

Training aims at making employees efficient in handling materials, machines and equipment and thus to avoid wastage of time and resources. It also helps in imparting new skills among the workers systematically so that they may learn quickly. If the workers learn through trial and error, they will take a longer time and even then, may not be able to learn right methods of doing work.

To Enable Workers to Adapt Quickly to Changes:

Technology is changing at a fast pace. Technological changes like automation and development of highly mechanized and computer-oriented systems, threaten the survival of dynamic companies by creating new problems, new methods, new procedures, new equipment’s, new jobs, new skills and knowledge, new product and services etc.

In such a situation, the employees may find themselves helpless to adapt to the changes and may feel frustrated and compelled to leave their jobs. Thus, training acts as a continuous process to update the employees in the new methods and procedures and make them efficient in handling advanced technology.

To Provide Growth Opportunities to Existing Employees:

Sometimes, it may not be possible for the management to fill in higher work positions from outside. Under such conditions, the apprenticeship programmes aiming at improving the skills of the present employees come to the aid of the company by make available their requirements of the personnel from within the organization. This reduces the need for recruiting people from outside and also improves the morale of the existing employees.

To Make the Management Effective:

One of the primary objectives of training and development process is to give rise to a new and improved management which is capable of handling the planning and control without any serious problem. Knowledge and experience gathered through training enables them to handle the tough situations and confusing realities, thus opening the way for bigger and better opportunities for business. It can also be used for strengthening values, building teams, improving inter- group’s relations and quality of work life.

Levels of training of the employees:

1. Training to Unskilled Workers:

Unskilled workers require training to acquaint themselves with improved methods of handling their work to reduce the cost of production and do the job in the most economical and efficient way. Such employees are given training on the job itself and the training is imparted either by their immediate superior officers, or foremen.

2. Training to Semi-Skilled Workers:

This category of employees requires training to cope with the requirements of the industry arising out of the adoption of mechanisation and rationalisation. These employees are given training either in the section or department itself, or in segregated training shops, where machines and other facilities are easily available. The training is usually imparted by more proficient workers and it lasts for a few hours or weeks, depending upon the number of operations and speed and accuracy required.

3. Training to Skilled Workers:

Skilled workers are given training through the system of apprenticeship, varying in length up to a period of 5 years. Crafts training is imparted through training centres and the industry itself.

4. Training to Senior and Supervisory Staff:

Since the supervisors form a very important link in the chain of administration, therefore, they need advanced up-to-date training at frequent intervals. The training programmes for the supervisory staff must be specific and tailor-made to fit the need of the undertaking.

They are generally given training in:

(a) Organisation and control of production, maintenance and materials handling at the departmental levels.

(b) Planning, allocation and control of work and personnel.

(c) Planning their own work and allocation of time to their various responsibilities.

(d) Effect of industrial legislation at the departmental level.

(e) Cost factors and costs control.

(f) Accident prevention.

(g) Training of subordinates.

(h) Communication, effective instructing, report-writing.

(i) Handling and settling human/Labour problems.

(j) Leadership for effective working of the undertaking.

5. Training to Other Staff:

5esides the above categories of unskilled, semi-skilled and skilled workers, other employees are also required to be trained; they are computer operators, typists, stenographers, accounts clerks, etc. They need training in their field but such training is usually not provided. Salesmen are also given training about the nature of the products; routine involved in putting through the deal and art of salesmanship, along with the latest knowledge of the products being developed in the organisation.

Advantage

Lesser Supervision:

Well-trained employees have the knowledge about their jobs and equipment’s and can do their work efficiently. Thus, the training reduces the need of supervision to bare minimum.

Improvement in Production and Productivity:

Training helps to improve the efficiency and productivity of employees. Well-trained employees make better use of materials and machinery. Wastage is reduced and as a result quality and quantity of production becomes higher.

Maximum Utilisation of Materials and Machines:

Training teaches the employees the method of doing their job in the best possible manner. They have knowledge of operating machines and equipment’s and handles them properly and methodically. As a result of it, they make the best possible utilisation of materials and machines.

High Morale:

Effective training improves the self-confidence and job satisfaction of employees. Well-trained employees take greater interest in their job and derive a sense of security. By boosting the morale of employees, training helps to reduce absenteeism and improve labour turnover.

Better Chances of Promotion:

As the trained employees have the requisite qualifi­cation and training, they can be promoted to higher grades and position more easily than untrained workers.

Better Safety:

Human error or negligence is the major cause of accidents in the industry. Due to the operational efficiency of the trained workers and the complete knowledge about the working of the plants and machines, chances of accidents are reduced.

Stability and Flexibility in the Organisation:

An enterprise, where trained personnel are available, can expand and grow easily. Its survival is not threatened when a few key personnel are lost because proper replacements are available. Well- trained employees can be transferred from one job to another in order to meet the requirements of other departments. Thus, training also lends flexibility to the organisation.

Steps:

Determine the Target Audience

You need to thoroughly analyze any country that you think should show great potential for your product or service. And, bear in mind that even the big global players, like McDonald’s, have sometimes found it necessary to close down or decrease their presence in some countries. Sometimes companies find there is not sufficient market demand for their offerings or it’s too arduous to comply with burdensome local legislation. So, deciding to jump feet first into a foreign marketplace without proper research is, to put it mildly, highly unadvisable. Big international players such as McDonald’s can absorb the cost of localization blunders, but will you be able to?

People: Understanding Customer Behavior in a Different World

The people you are marketing to and the product that you are marketing go hand in hand. However, we’re leading off with the people because if you don’t first and foremost understand who you are marketing to, you may end up trying to sell them a product they don’t want and probably will never buy.

For example, Best Buy has not found much international success, especially in Europe. While their products were something that their target market wanted overseas, the way in which it was distributed was not well executed based on the way consumers shop in Europe.

Instead of tailoring their stores to fit the preferred mold of Europeans which is smaller shops as opposed to large box stores Best Buy opened up brick and mortars that were much bigger than what Europeans were used to. We’ll get more into how important the ‘place’ is in which you sell your product internationally in a bit.

Product: Altering to Fit the Needs of Your New Market

If you notice that the current offering of your product now won’t play in the new market you want to enter then you can do one of two things:

A) Decide not to sell in that market

B) Change your offering to meet the local demand

Prices: Choosing a Premium or Economy Pricing Strategy

For the most part, if you already have a product or service that is successful in one area of the world, the price point you use won’t vary much in comparison to the competition in that area.  If you have a premium product, it’s likely premium elsewhere. If you have a more affordable, economically-friendly product, it’ll be the same in your new market.

This is for the sake of consistency. It’s difficult to pull off being associated as a more expensive, premium product in one country, and the complete opposite in another. You may even risk bringing down your brand image as a result.

Promotion: Choosing Strategies That Work in This New Environment

Figuring out the most effective methods for marketing your product or service abroad is not that much different than doing it domestically.

Even if you live where you’re promoting your product, you still have to do some additional research to find out where your target audience is and which mediums they frequent.

Positioning: Determining Which Messages Will Resonate with The Market

Positioning is absolutely critical when entering a new market. If your initial positioning fails, an attempt to reposition your product can be costly and is not guaranteed to be successful. This is why it’s important to get it right the first time. A significant part of your positioning will be evident in the messages you relay in marketing campaigns. The messaging should be derived from your unique value proposition (UVP), which should be made up of the following:

Relevancy: How your product solves customers’ problems or improve their lives.

Value: What are the specific benefits.

Differentiation: Why your ideal customers should choose your product over the competition.

Determine Specific Campaigns

Focus on regions where your best audiences are found

Narrow down your focus to specific regions where your business is generating consumer interest and has the best chance of performing well. A great way to do this is by analyzing your website traffic and seeing which countries or cities get the most traffic. This is easily done with Google Analytics. You can also examine your social media following and activity to see which regions have high engagement. Create a shortlist of promising locations and begin by homing in your efforts on these.

Research competitors in each locale

Before launching in any new market, whether it be around the world or around the corner, it is essential to scout out the competition’s products, operations, and marketing efforts. By researching competitors, you may discover that a regional market is saturated, and probably not worth your global marketing investment. You don’t necessarily need to launch all your offerings in every market; rather, competitor research can reveal which products or offerings are missing in a particular region and this can help you decide what to launch and where.

Develop region-based distribution strategies and partnerships 

If you are offering physical products in international markets, you will need to create distribution and shipping operations for each region. This requires researching delivery service providers, estimated shipping costs, and other issues, such as customs and regional tax implications for customers. For companies launching digital or online services or products, like an app, you don’t need to worry about this step. Rather, focus on making sure your online infrastructure can support expected increases in traffic and use.

Localize your branding and campaigns

Once your product or service is ready to be launched, it’s time to focus on adapting your branding and marketing strategy for each region. This will entail the translation and localization of ads, user guides, product descriptions, and more. It may also mean localizing images to better appeal to customers in a specific region. Remember, localization is not just word-for-word translation. It’s capturing the sensibilities and norms of your target audience.  

Be constantly aware of cultural and language differences

This is a touchy subject for any business looking to run global marketing campaigns. It is critical to avoid the pitfalls of advertising mistakes in foreign countries that can lead to bad publicity and a poor brand image. This means keeping up to date with current affairs and cultural events in different regions of the world where your business is active.

For example, running an upbeat ad campaign in a particular country on national Memorial Day is a very bad idea. For business owners who are on top of their global markets, the local cultures can actually provide a wealth of inspiration for clever, catchy ad campaigns. But you do need to stay on top of it constantly to make the most of the different global marketing opportunities.

Global Marketing Campaign Examples

Brands that have an international identity and infrastructure are ripe with amazing global marketing campaign examples. However, that doesn’t mean that small and medium businesses need massive marketing budgets to get their own results in global markets. Use examples like those below as inspiration for the different ways you can create a global marketing campaign to your advantage.

Standardization means an undifferentiated use of the same Marketing Mix (4-7Ps) in all countries. In this case, the firm simply replicates, without any changes, the same strategy in the different markets in which it operates. In general, firms that adopt the standardization strategy are those that are exporting for the first time, or those that focus on cost savings through economies of scale and for whom an adaptation process could result very costly. You can find below some factors that favour standardization:

• Economies of scale: Mass production allows the firm to lower unit production costs by increasing volumes through economies of scale.
• Globalization of the market (consumers/customers): Companies that offer a product whose market is “Global” can offer the same product in multiple countries, catering to a wide range of consumers.
• Transferable competitive advantages: Offering a standard product can provide several competitive advantages. The cost reduction provided by economies of scale allows the firm to introduce competitive pricing. In addition, a standard product ensures quick response times to the market, provides a global standardized image and better control over marketing strategies.

Adaptation means that each country/market has its Marketing Mix. The adaptation strategy is geared towards meeting the needs of the market, planning all business activities with the aim of efficiently meeting the specific needs and respecting the values of local consumers. We can take as an example beer companies. When entering a new market we can see that one country can prefer non-alcoholic beer. The company then has to adapt to the situation and, for instance, decide to produce more beer which results preferable for the chosen country/market. As in the case of the standardization, the adaptation strategy is better suited in the presence of the following factors:

• Differences in local competitive conditions
• Differences between customers/consumers
• Differences in local legal conditions
• High degree of service in the company’s offering

Standardization vs. Adaptation

The first view is the standardization standpoint. According to these authors, supporters of standardization believe that there is a union of cultures with similar environmental and customer demand around the globe. They argue that trade barriers are getting lower and that technological advances and firms are displaying a global orientation in their strategy. As they believe, creating one strategy for the global market and standardizing the marketing mix elements can achieve consistency with customers as well as lower costs. Levitt argues that companies that are managed well have moved away from customizing items to offering globally standardized products that are advanced, functional, reliable and low priced. According to him, companies can achieve long-term success by concentrating on what everyone wants rather than worrying about the particulars of what everyone thinks they might like. 

On the contrary, supporters of the international adaptation approach, emphasize the importance of customization. The fundamental basis of the adaptation school of thought, is that when entering a foreign market one must consider all environmental factors and constraints such as language, climate, race, occupations, education, taste, different laws, cultures, and societies. However, researchers have identified important source of constraints that are difficult to measure such as cultural differences rooted in history, education, religion, values and attitudes, manners and customs, aesthetics as well as differences in taste, needs and wants, economics and legal systems. According to Vrontis and Thrassou supporters of this approach believe that “multinational companies should have to find out how they must adjust an entire marketing strategy and, including how they sell, distribute it, in order to fit new market demands”. It is important to alter the marketing mixed and marketing strategy to suit local tastes, meet special market needs and consumers non-identical requirements.

Advantages and Disadvantages of Standardization

Standardization and international uniformity has many advantages. For one, people can expect the same level of quality of any specific brand anywhere around the world. Standardization also supports positive consumer perceptions of a product. If a company enjoys strong brand identity and a strong reputation, choosing a standardized approach might work to its benefit. Positive word-of-mouth can mean an increase in sales around the globe. Another advantage includes cost reduction that gives economies of scale. Selling large quantities of the same, non-adapted product and buying components in bulk can reduce the cost-per-unit. Other advantages related to economies of scale include improved research and development, marketing operational costs, and lower costs of investment. In addition, standardization is a reasonable strategy at a time where trade barriers are coming down. Finally, following a standardized approach helps companies aim focus on a uniformed marketing mix specifically focusing on one single product, leaving enough room for quality improvement. By emphasizing on one uniformed product, staff can be trained to enhance the quality of the product attracting manufacturers to invest in technology and equipment that can “safeguard the quality of the standardized product offering”.

Standardization, however, poses a number of disadvantages. As mentioned previously, different markets mean different preferences. Selling one unified product lacks uniqueness. This allows competition to gain market share through tailoring their products to meet the need of a specific market/segment. Since different markets have different needs and tastes, by using the standardized approach, companies can become vulnerable. One example is Walmart’s failure in entering global markets. The retail giant faced many challenges when entering foreign markets such as Germany, Brazil, South Korea and Japan as it discovered that its formula for success in the USA (low prices, inventory control and a large collection of merchandise) did not translate to markets with their own discount chains and shoppers with different habits. The biggest problem was that Walmart, a uniquely powerful American enterprise, tried to impose its values around the world. In particular, Walmart’s experience in Germany, where it lost hundreds of millions of dollars since 1998, “has become a sort of template for how not to expand into a country”.

Another disadvantage is that it depends largely upon economies of scale.  Naturally, businesses that are global manufacture in many counties. This can pose a problem since a number of countries implement trade barriers such as the USA and the European Union (Products and International Marketing, n.a). In this case, adaptation is predestined.

Sales promotions have the specific purpose of driving short-term sales of products or services. Because they are highly effective in triggering short-term sales, they play a vital role in most marketing managers’ arsenal of tools to drive demand. As companies expand into international markets, marketers’ usual relies on the same tools that serve them well in the domestic market. However, some sales promotions may not work in foreign markets because of host country differences.

Trade Fair Participation:

Participation in foreign trade fairs is one of the oldest forms of promotion of exports. Success in exports business involves long term approach to marketing. This approach rests on the basic premise of developing long term business relations with the foreign buyers.

Trade fairs provide an opportunity to the exporters to display their products to large number of buyers or their representatives who visit the fair. The participation in the foreign fair can, thus, be a very efficient tool to communicate with the market. It offers tremendous facilities to bring across the message to a large number of buyers than perhaps any other trade promotional tool.

The objectives of trade fair participation are as follows:

• To introduce the concept of the product, i.e., the basic theme of the products.
• To introduce the export firm in the foreign market.
• To introduce the brand of the product or increase the popularity of the existing brand.
• To conduct consumer research on the new product and test it in the market.
• To ensure customer loyalty.
• To look for prospective buyers.

It is generally believed that one can achieve very positive results by participating in a trade fair. But it has been observed that achieving successful results at the trade fair is not guaranteed, it requires lot of planning and handwork. To ensure successful participation is a trade fair, certain conditions need to be satisfied by the exporter. That is to say, he/she should:

• Ensure that the products selected for display are competitive and have been developed keeping in view the requirements of the buyers in that market.
• Define clearly the objectives for participation.
• Select the right fair.
• Prepare the plan for participation in advance including the financial budget.
• Take all possible steps to invite as many visitors to the fair as possible.
• Ensure effective people to handle the visitors at the stand.
• Follow up on the points/queries generated during the fair.
• Plan for repeated participation at the fair, not just once.

Point-of-Purchase Promotion (POP):

The point-of-purchase display is the silent salesman that calls the attention of customer to the product in the hope of initiating buying action. This medium is known by several names such as dealer hopes, dealer aids, dealer displays, merchandising and point-of-sale materials.

The point-of-purchase material may be classed as exterior items or interior items. Exterior items such as signs, banners, pendants, and display are utilized by the retail business like service stations.

On the other hand, interior items are found in store windows, on counters and shelves, and hanging from the ceiling or the walls and on the floor. Most of the point-of-purchase materials are temporary counter cards, dummy packages, cut outs, shelf strips and streamers. But exterior items are permanent store identification signs, clocks, thermometers, floor cabinets, calender’s and racks. The materials of which these are made may be cardboard, metal, plastic, wood, cloths, glass, etc.

The most popular point-of-purchase items are magazines and advertisement, reprints window, banners and streamers decals on windows, doors and mirrors wall posters, racks of wire metal and wood, plaques, merchandise display on counters and floors, display shopping cartons and exhibition displays.

This medium exerts a great influence in the direction of impulse purchase and replacement purchases. Buying stimulus, arises from the nearness of the customer to the actual product. Observe little field and Kirkpatrick. No other medium enjoys such a combination of time, place and atmosphere, at no other time are merchandise, money and mood, so co-operative and harmonious.

To be successful this medium must possess two characteristics. First, the effectiveness and excellence of the item itself, second it must be directed toward the individual shopper. This medium is of great use to the manufacturers, retailers and consumers. Manufacturers use this medium to help persuade retailers to stock new products, to help increase the size of retail orders, to help introduce special offers and help the retailer to trade up some of his customers.

Retailers use this medium to get the attention of the prospects and then to urge them to buy promptly then and there. Exterior items and window display attempt to influence, even to control, sidewalk traffic by converting part of it into floor traffic by keeping passerby from passing by. Interior display tries for a sale be appealing to the impulse of the buyers. Consumers get useful information about problems, solution and satisfaction.

Publicity and Public Relations:

Public relations include a variety of programs designed to improve, maintain or project a company or product image. It encompassed wide variety of communication efforts to contribute a generally favourable attitude towards the organization and its products.

Publicity is not paid for. The tool includes press conferences, speeches, annual reports, events, publications, donations for public cause and sponsorships. Sponsorship is covered here to include that part which is not paid for. For example, Pepsi paid for the sponsorship of the Independence Cup, 1997. But it generated news items in Newspaper, Radio, Television, Sports Magazines, etc.

First part is advertising and the second part is publicity. Not all trade publications. accept product publicity stories but new product editorial coverage may be an excellent way to supplement other promotional programs.

Sales Literature:

Sales literature constitutes non-personal contact to solicit a trial or purchase. The tool includes catalogue, booklets, circular letters, calender’s, leaflets, etc. For this purpose, the advertiser has to identify the customers to whom sales literature would be mailed or given personally. The materials have to be tailored to the characteristics of the target country.

In sales literature it is admissible to include technical information, such as weight, dimension, qualities, etc. Sales literature have to be modified to suit the environment of the foreign market particularly the languages and understood by the residents of the market segment.

EPRG tends to depend on several factors which are as follows:

• Experience gained in the given market
• Size of the firm
• Size of the potential market
• Type of the product and its cultural dependency

Different attitudes towards company’s involvement in international marketing process are called international marketing orientations. EPRG framework was introduced by Wind, Douglas and Perlmutter. This framework addresses the way strategic decisions are made and how the relationship between headquarters and its subsidiaries is shaped.

Perlmutter’s EPRG framework consists of four stages in the international operations evolution. These stages are discussed below.

Ethnocentric Orientation

The practices and policies of headquarters and of the operating company in the home country become the default standard to which all subsidiaries need to comply. Such companies do not adapt their products to the needs and wants of other countries where they have operations. There are no changes in product specification, price and promotion measures between native market and overseas markets.

The general attitude of a company’s senior management team is that nationals from the company’s native country are more capable to drive international activities forward as compared to non-native employees working at its subsidiaries. The exercises, activities and policies of the functioning company in the native country becomes the default standard to which all subsidiaries need to abide by.

The benefit of this mind set is that it overcomes the shortage of qualified managers in the anchoring nations by migrating them from home countries. This develops an affiliated corporate culture and aids transfer core competences more easily. The major drawback of this mind set is that it results in cultural short-sightedness and does not promote the best and brightest in a firm.

Polycentric Orientation

In this approach, a company gives equal importance to every country’s domestic market. Every participating country is treated solely and individual strategies are carried out. This approach is especially suitable for countries with certain financial, political and cultural constraints.

This perception mitigates the chance of cultural myopia and is often less expensive to execute when compared to ethnocentricity. This is because it does not need to send skilled managers out to maintain centralized policies. The major disadvantage of this nature is it can restrict career mobility for both local as well as foreign nationals, neglect headquarters of foreign subsidiaries and it can also bring down the chances of achieving synergy.

This approach lays a strong groundwork for its every subsidiary to develop its unique marketing and business strategies for success and the country’s domestic market is given equal importance. This approach is best suited for the countries with certain constraints on the front of finance, political, and culture.

As there is no need to send the skilled workforce to the other countries to maintain the factor of centralization, this approach is less expensive as compared to the ethnocentric one. However, one disadvantage of this approach is that it can restrict the career mobility of both local and foreign nationals working in the company plus reduces the chances of synergy within the firm as a whole.

Regiocentric Orientation

In this approach a company finds economic, cultural or political similarities among regions in order to satisfy the similar needs of potential consumers. For example, countries like Pakistan, India and Bangladesh are very similar. They possess a strong regional identity.

The cultural and regional identity of India, Pakistan, and Bangladesh is quite similar whereas Norway and Spain that both falls in Europe are very different in terms of culture, climate, and transport amongst other aspects.

Geocentric Orientation

Geocentric approach encourages global marketing. This does not equate superiority with nationality. Irrespective of the nationality, the company tries to seek the best men and the problems are solved globally within the legal and political limits. Thus, ensuring efficient use of human resources by building strong culture and informal management channels.

The main disadvantages are that national immigration policies may put limits to its implementation and it ends up expensive compared to polycentrism. Finally, it tries to balance both global integration and local responsiveness.

The Geocentric approach doesn’t equate nationality with the factor of superiority and the company tries to sell the best of human resources to solve the problems globally within the limits of legal and political factors. This ensures the effective and efficient use of the human resources as a result of building a strong culture and the informal channels of management that facilitates the smooth flow of work processes.

Pros of EPRG Framework

• Easy route to explore international markets with similar domestic features.
• Less expensive as no costs and efforts required for the product adaptation.

Cons of EPRG Framework

• The main focus is always on the domestic market.
• No optimum and exploitation of international human resource opportunities.

The feature areas of your store are the areas of you store that draw attention. Place the right items at key locations and you will most likely see an increase in sales. It’s not just the front display of your store that’s a feature area; there are many ideal spots inside your store.

Locations

The first feature area in your retail store is your entrance area (typically the first 5 to 15 feet of your store). This includes your window displays and what you have at your door. It is in this area that people decompress and switch their thought process from the outside world to the world you’ve created within your store. It is here that customers decide whether your store is worthy of their time, if it’s expensive or not, and what kind of atmosphere you have. If they like what they see and feel, then they’ll venture further. Because the entrance area is where your customers decompress, it is not the best place to put products that you want your customers to focus on…this comes later.

The next feature area is to the right of the entrance area. In the United States, 90 percent of customers will typically look to the right after they’ve decompressed at the entrance. All of this takes seconds, so your feature areas really need to make the right statement and impact. Your wall to the right is often called your ‘power wall,’ as this is the feature area where you give your customers the best impression of your products. Think carefully and highlight key products in this area. You want this area to attract your customers, and in turn create the need to see more.

The next feature area is your aisles/pathway. Place your aisles, tables, and other furnishings in a way as to create a path and flow for your customers. A path allows the customer’s eye to travel throughout your store and it also prompts the customer to walk in certain directions. You can create a flow that is circular or you can group your product displays to allow for free movement. An example of a path is a grocery store that places highly desirable items at the back of the store. This layout makes customers walk through the whole store to get what they want.

Windows

• Can be an important component of the store layout.
• Window displays can help draw customers into the store.

Provide a visual message about:

• The type of merchandise offered in the store.
• the type of image the store wishes to portray.
• Should be tied to the merchandise and other displays in the store

Entrances

• Often referred to as the “decompression zone”.
• Customers are adjusting to the new environment.

Freestanding Displays

Fixtures or mannequins located on aisles designed primarily to attract customers attention and bring them into a department.

End Caps

Displays located at the end of an aisle. Retailers use end caps to display:

• Seasonal
• Temporary
• Promotional Items
• High-Margin Items

Promotional Aisles

A space used to display merchandise that is being promoted. Some stores that use promotional aisles or areas include:

• Walgreens
• CVS
• The Gap

Walls

• Retail floor space is limited.
• Merchandise can be stored on shelving and racks and coordinated with displays, photographs, or graphics featuring the merchandise.

Dressing Rooms

Crucial space in which customers decide whether to make a purchase. Fitting Rooms must be:

• Large
• Clean
• Comfortable

Cash Wraps

Also known as point-of-purchase (POP) counters or checkout areas. Used to display impulse items. Discount and extreme value retailers and category specialists use centralized checkouts at the front of their stores. Department stores have traditionally placed cash wraps off the main aisle within each department

A static environment can quickly antiquate an organization. Therefore, change is a constant and necessary requirement for organizations to stay competitive and survive in this volatile global economy. Organizational change can help streamline business processes and eliminate redundant systems or groups. However, it can also have negative consequences. To minimize the negative impacts, strategic change in an organization should always seek to achieve advancement in both business and employee performance. The overall change process should reflect a “win-win” situation for both the organization and its employees.

The Process of Change

To implement sustainable organizational change, companies employ a three-prong phased approach. The most important and difficult phase of the process is unfreezing, which involves identifying and unlearning wrong past behavior that are sometimes ingrained in an organization’s culture. The most significant indicator of success at this phase is employee acceptance. If an organization manages employee resistance promptly and effectively at this stage, it will ensure the success of the next two phases. The second phase, changing, involves replacing past behavior with new behavior through significant redevelopment and training. Refreezing, the final phase of the process, reinforces and sustains the new behavior through continued visibility and measurement of success. One reinforcement technique is the employment of a praise and reward system. Praise and reward systems elicit high performance and motivate employees to embrace change.

Employee Resistance to Change

A changing organization should not ignore the human element. It is important to change business activities within a company. If employees are not involved or are not willing to accept change, the process is likely to fail. Employees resist change because they are afraid that to lose a job or have to take on additional responsibilities that an employee is either unqualified or unequipped to handle. Using encouraging and inspiring techniques to implement change demonstrates to an employee that she is not being forced to accept change, but is an integral part of the process. An employee feels like a significant contributor in the work place environment when he is part of a successful revolution.

Employee Turnover

After a major reorganization, businesses typically undergo some employee turnover. An employee may feel that the environment is too unstable and might seek employment elsewhere where she feels more secure. High employee turnover can severely affect an organization’s productivity due to loss of skilled workers and the need to recruit and train new people. Sometimes the loss of resources can also result in loss of business revenue as an employee may take key accounts with him. To abate employee resistance and turnover, an organization should initiate a deliberated change management process that explains the significance and implications of the change and guides employees afterward.

Deteriorating Work Climate

Organizational changes that lead to ambiguity and job uncertainty create a declining work environment, which can negatively affect the economic health of an organization. The most detrimental impact is mortality, which is a clear sign that a business transformation has gone horribly wrong. An organization can die when change occurs too quickly or erratically. In a deteriorating environment, employees become self-preserving, less productive, unmotivated and fearful. Avoiding ineffective changes and implementing positive ones will promote a productive corporate culture and prevent organizational death.

Ways in Which Organizations Achieve Growth

• Licensing: “License your most advanced technology,” advised Peters, who argued that truly proprietary technologies are quickly becoming extinct. Peters and other consultants contend that competitors will soon copy whatever a company develops in the realm of technology (and other areas), so it may make good sense for a company to turn to licensing. This creates cash flow for the company to fund future research and development.
• Joint Venture/Alliance: This strategy is particularly effective for smaller firms with limited resources. Such partnerships can help small business secure the resources they need to grapple with rapid changes in demand, supply, competition, and other factors. Forming joint ventures or alliances gives all companies involved the flexibility to move on to different projects upon completion of the first, or restructure agreements to continue working together. Subcontracting, which allows firms to concentrate on those aspects of their business that they do best, is sometimes defined as a type of alliance arrangement (albeit one in which the parties involved generally wield differing levels of power). Joint ventures and other business alliances can inject partners with new ideas, access to new technologies, new approaches, and new markets, all of which can help the involved businesses to grow. Indeed, establishing joint ventures with overseas firms has been hailed as one of the most potentially rewarding ways for companies to expand their operations. Finally, some firms realize growth by acquiring other companies.
• Sell Off Old Winners: Some organizations engaged in a concerted effort to grow divest themselves of mature “cash cow” operations to focus on new and innovative product or service lines. This option may sound contradictory, but analysts note that businesses can command top prices for such tried and true assets. An addendum to this line of thinking is the divestment of older technology or products. Emerging markets in Latin America and Eastern Europe, for instance, have been favourite places for companies to sell products or technology that no longer attract high levels of interest in the United States. These markets may not yet be able to afford large quantities of state-of-the-art goods, but they can still benefit from older models.
• New Product Development: Creation of new products or services is a primary method by which companies grow. Indeed, new product development is the linchpin of most organizations’ growth strategies.
• New Markets: Some businesses are able to secure significant organizational growth by tapping into new markets. Creating additional demand for a firm’s product or service, especially in a market where competition has yet to fully develop, can spur phenomenal growth for a small company, although the competitive vacuum will generally close very quickly in these instances.

Mindset and The Five Stages of Organizational Growth

There are five basic stages of organizational growth. Along the way, there are definitely skill and strategy needs. However, the challenge in each of these stages is to avoid slipping back into a lower stage. This challenge is nearly always a result of mindset.

Stage I: Conception

Just getting an idea past being a wish or a dream and into action and reality is a major event. The conception stage is marked by creating a vision and some level of planning, developing initial partners.  It is also where the first or initial customers are developed.

Mindset Challenges:

• Fear & Self-Doubt: Allowing real-feeling but unsubstantiated fears to guide decision making.
• Over-Optimism: Insufficient acceptance or exploration of inevitable challenges, investment, and effort.
• Being Closed to the Input of Others: Inability to recognize and obtain wise mentors and input.

Practical Challenges:

• Demonstrating profitability: Creating a “paper model” demonstrating how & when profitability (for-profit) or sustainability (non-profit) will be achieved.
• Estimating investment and risk: Estimating what will be required to achieve profitability or sustainability.
• Market Acceptance: Demonstrating that there is demand for what you offer.
• Organizational structure: Clarifying roles and responsibilities, including how decisions will be made, delegated and implemented.
• Financial management & accounting: The tools, the people, the procedures.

Stage II: Birth / Startup

The birth/startup stage is when you launch the business or non-profit. The “Open” sign is on. You’ve created a legal entity. You’ve begun to offering your products or services to the community. You are making a lot of changes and adjustments due to initial feedback. You are likely still learning about your product, your customer and your business model: What is wanted. What isn’t. What works. What doesn’t.

Mindset Challenges:

• Fear and Self Doubt: There will be new fears and challenges that emerge. Interpreting them accurately.
• Ego: When success or survival is on the line it is very easy for ego issues to emerge.
• Trust & Communication: Issues regarding communication, decision making, follow-through, accountability will all emerge here.
• Crisis-only mode: Forgetting to think, plan and act ahead only responding to urgent issues in the moment.
• Sales-only mode: Business development must happen at this stage but systems need to be clarified and developed to support the new business.

Practical Challenges:

• Managing Cash: Running out of money may be a constant threat.
• Adjusting Expectations: The realities of market demand may be slower or faster, lesser or greater than expected or planned on.
• Financial Management & Accounting: Ensuring that the tools are being used, the procedures work and are followed, that you have the right people managing your finances and books.
• Building Relationships & Credibility: Making sure you are known and attracting attention from current and future stakeholders.
• Clarifying The Value You Offer: The value of what we offer is rarely self-evident. Learning to communicate how the customer benefits in ways the customer cares about.

Stage III: Growth & Stability

You’ve made it! The start-up is over. You can walk now. Mostly. You are generating revenue, you’ve developed brand awareness and you are adding new customers. There is growing predictability in your models and approaches. You are learning what works and what doesn’t. However, competition may be a real concern. Customer loyalty may not be strongly developed. You may or may not be financially stable.

Mindset Challenges:

• Trust: Learning to delegate and let go effectively becomes very important.
• Ego: Continuing to learn to give credit and accept responsibility for problems.
• Scarcity vs abundance: Removing any elements of “survival” and “crisis” mode in favour of investment, stability, and growth.

Practical Challenges:

• Cash Flow: Sustaining financial growth and cash flow.
• Making Large Investments: Timing critical staff, facility or equipment decisions with cash flows.
• Competition: Becoming unique by distinguishing yourself from competitors in terms of service, relationship or product.
• Managing workload: Engaging the fruits of success in terms of increases in management, customers, and revenue.
• Financial management: Growth and management depend on good information.

Stage IV: Maturity and Choices

At this stage, the business or non-profit is established. Survival is not the key question. The business has customer awareness and loyalty. It has built marketing gravity so revenue is easier to obtain. It requires less effort and energy to sustain the organization. This is the point where leaders tend to either disengage, bureaucratize or expand.

Disengagement can look like an owner or executive who takes advantage of the decreased leadership need to step away. This may be less attention to detail or less time at work. This can be a good place for owners to bring in a new executive or consider a sale.

Bureaucratizing often happens as a reaction to the unpredictable and crisis mode nature of the startup and survival phases. There is a real need and opportunity for systems & structures to be developed. However, when this happens to primarily serve internal needs as opposed to external (to serve management and staff as opposed to the customer) it’ll begin to undermine the possibility of success or growth.

Expansion means utilizing existing strength, brand, and knowledge to either expand into new markets or offer new lines of services or products.

Mindset Challenges:

• Ego & Reputation: Perceptions of how “I” or “We” are seen can inhibit good decisions.
• Ossification & Complacency: Lack of creativity and rigid thinking, systems or structures that no longer best serve the customer.
• Founder Syndrome: The founder is unable to stop tinkering, changing or rebuilding when structure is needed.
• Personal Identity & self-worth: Outgoing owners or executives may stay too long.

Practical Challenges:

• Financial management: Owners or executives often extend more trust to financial managers or CFO’s at this point. Ensure that good systems & procedures are in place. That oversight remains.
• Moving into New Markets: The organization may need to move into new markets to continue to grow. This may increase management complexity.
• Adding New Products & Services: The organization may need new products or services to grow. Ensuring that competency and culture are protected is important.
• Engaging New Competition: New markets, products or services all mean engaging new competition. Time to revisit those skills.
• Developing Systems & Structure Without Becoming Rigid: Effective growth only occurs with the development of predictable systems and structure. Learn to build ones that promote growth instead of stifling it.

Stage V: Arriving & Thriving

Not every organization reaches Stage V. It is similar to Stage IV with the difference of organizational influence, recognition, and potential impact. It is often an “institution” that others depend or rely on.  After successful expansions, your organization may now be at the top of its industry. It has maturity in the market, systems, and processes. It has a dominant presence. It could still be growing but it may not be. You are again in the place of determining whether or not you will stabilize or expand.

Mindset Challenges:

• Legacy: What does the leader or organization want to be known for?
• Energy: Does the leader still have the drive to expand or maintain?
• Mythical Thinking: “We can’t fail.” Organizations who’ve made it often believe that they can’t make mistakes or lose their position. They stop pursuing excellence and believe they define excellence.
• Ossification: Lack of creativity and rigid thinking, systems or structures that no longer best serve the customer.
• Personal Identity & self-worth: Outgoing owners or executives may stay too long.
• Founder syndrome: The founder is unable to stop tinkering, changing or rebuilding when structure is needed.

(1) Planning:

Planning is one of the major areas where human resource audit can be conducted. Planning of HR requirement and effectiveness of forecasting and scheduling can be ascertained through HR audit. It is to be seen whether the needs of HR were identified in time or not. If there is an indication through audit about inaccurate forecast, the efforts can be made to improve the forecasting techniques for accurate results in future. Through audit management knows whether there is surplus or shortage of manpower.

A review of recruitment and selection practices can be made to meet the future HR requirements. Better programmes and procedure can be adopted by way of cost benefit, budgets. The training programmes can be reviewed in terms of results obtained. Motivation of employees at all levels is the key aspect in HRM. Evaluation of employee motivation will show whether they feel at ease at work and have better prospect if they work hard.

HR auditors should evaluate the communication in the organisation which is one of the major criteria of failure or success. HR auditors should find out the causes of absenteeism, rate of accidents, labour turnover and can make suggestion to improve them. In respect of all these appropriate policies can be formulated by the management.

(2) Staffing and Development:

Staffing and development is yet another are a need to be evaluated with reference to results obtained, programmes and procedures adopted and policies framed. Staffing is done through recruitment and selection. Here the HR auditors need to evaluate the sources of recruitment and the number of persons hired by the organisation. The success of these programmes depends upon the contributions made by the hired persons in the achievement of organisational objectives.

Auditors have to see whether committed workforce is procured through recruitment and selection programmes. They can then make appraisal of recruitment and selection policies, practices and results. As for results are concerned they depend upon the effectiveness of H.R. policies and practices adopted by the enterprise. For conducting the audit of results the HR auditors need to adopt the methods such as questionnaires, checklists, personal data, and attitude and morale surveys productivity data, and costs, time.

The auditors should thoroughly check the records and statistics and should stress on their accurate maintenance. The information in respect of disciplinary actions, absentees, transfers and promotions are available in records. HR auditors have to examine the procedure and programmes adopted in respect of career and succession planning. The policy for staffing should be formulated in to achieve organisational goals. In this case cream should get due consideration that too without any discrimination.

As for training and development, proper policies need to be formulated by making the SWOT analysis of the existing staff and training and development programmes should be prepared to meet the organisational needs. The cost of training is increasing day by day.

Hence there must be evaluation of specified training and development programme. Auditors should see whether the best practice is adopted or not. They should evaluate the training results in terms of cost per trainee hour, average training hours per employee and revenues per employee per year etc. They can obtain the feedback from reports and records available in the organisation.

Another main element of conducting an HR audit needs to include the effectiveness of the HR department’s people management activities. Areas for auditing under people management include staff performance and employee morale, department organization, responsiveness to employees, day-to-day HR operations, the department’s HR strategies and more.

(3) Organizing:

Organisational structures are meant for facilitating coordination, communication and collaboration. HR auditors have to evaluate effectiveness of organisation structure in attaining the results. They can obtain feedback from the employees and from reports and records. They can check the jobs assigned to the individual employees, authority delegated to the subordinates, special task forces etc. H.R. auditors can also evaluate the policy formulated for encouraging employees to accept change. They can also verify effectiveness of three way communication.

(4) Commitment:

Enterprise wants committed employees. Efforts are taken by the management in this respect for motivating individual and groups of employees. HR auditors have to examine the results of motivation through increase in productivity, improvement in performance and costs. They also have to examine the programmes and procedures followed for job enrichment, wage and salary administration, fringe benefits, morale of employees. They have to verify the satisfaction level of employees through the HR policies adopted by the organisation. A satisfied employee is committed to the work.

(5) Administration:

HR auditors have to examine the style of leadership adopted by the management in dealing with the subordinates. Leadership may be authoritative or participative should be evaluated. One of the benchmark in this respect is delegation of authority.

Delegation is more in participative style. Auditors can assess the results of style of leadership adopted in getting the things done through others by inviting suggestion, going through grievances of the staff, disciplinary actions taken against the subordinates etc. Leadership results can also be visualized if auditors examine the union management relationship and the employees getting promotions.

The auditors also have to examine the position of collective bargaining and its procedure to assess the effectiveness of administration in the organisation. They have to look at the policy of the management in respect of collective bargaining and employee participation in decision making.

(6) Research and Innovation:

Research and innovation is yet another area of HR audit. Here several experiments are conducted and theories are put to test by the experts relating to quality design, marketing etc. Results obtained through this Endeavour can be evaluated on the basis of changes brought about, experiments made and reports and other similar publications.

Auditors can evaluate the results. They can also examine the programmes and procedures adopted for R and D efforts. The management’s policy in respect of R & D efforts can be examined by the auditors and necessary suggestions can be made by them in this regard.

The purpose of the audit is to reveal the strengths and weaknesses in the organization’s human resources system, and any issues needing resolution. The audit works best when the focus is on analyzing and improving the HR function in the organization. The HR audit itself is a diagnostic tool, not a prescriptive instrument.

It is most useful when an organization is ready to act on the findings, and to evolve its HR function to a level where it’s full potential to support the organization’s mission and objectives can be realized.

An organisation has tended to grow bigger, so have the staff departments along with line functions. A time comes when each of them becomes so big that one does not get a fair idea of how they are doing unless special effort is made and studies are undertaken. For the line functions, some indices are available.

In production, for instance, performance can be judged by how much was produced, to what extent schedules were adhered to, at what cost manufacturing was done, what was the unit cost, etc. These figures in themselves are important and they take added meaning when they are compared with, say previous year or years or with the planned and budgeted figures.

Similarly, marketing departments efficiency can be judged by the quantum of sales, sales vis-a-vis competitor’s sales, cost of sales, territories covered, new customers explored, old customers retained, etc.

In case of departments like HR such yardsticks are not readily available. Essentially they have to be evolved according to an organisation’s requirements. Today personnel departments have become big and employ sizable staff and specialists. As such, some kind of audit needs to be undertaken to secret in the functioning of the department. Hence, HR audit comes in the picture.

Method

HR audit is a tool to measure the level of human resources development system.

1. Interview Method:

Top management and senior management (Line managers and employees) are interviewed by the HRD auditor. It is a structured interview designed to solicit information on the perspectives of respondents on the future growth plans and goals of the organization, organization culture, working style, career development, work flow system, leadership style, morale, motivation, vision, mission etc. In view of the time and resources constraints, HRD auditor uses sampling techniques to interview the employees.

2. Questionnaire Method:

HRD auditor designs and administers structured questionnaire to assess the various dimensions of HR development. It is usual practice to test the reliability and validity of the instrument using appropriate statistical technique by conducting a pilot study. Then he has to choose the proper sample size. The questionnaire should accommodate questions reflecting the objectives of HRD audit. It is given to the sample respondents who have to record appropriate response.

3. Observation Method:

HRD manager observes the employees in their natural environment i.e., workplace, canteen, training camps, residential colony to assess the suitability and conduciveness of environment for human resource development.

4. Desk Research Method:

HRD manager collects and uses details relating to performance appraisal report, ethical practices, achievement records, welfare measures, suggestion scheme, career development, frequency of training programmes, feedback of participant trainees, methods used to ascertain training needs, safety practices, accident prevention, incentive and compensation system, etc. He analyses the facts and figures relating to aforesaid areas and arrives at appropriate findings.

This method does not involve interviewing the respondents through a questionnaire or an interview schedule. The entire information is gleaned from the relevant records of the organization.

5. Workshop Method:

Employees are selected either through a sampling technique or through some other norms, for participation in a workshop conducted exclusively for HRD audit purpose. All the participants selected are divided into groups. Different dimensions of HRD are assigned to different groups for SWOT analysis. Then each group is required to prepare a report and make presentation on the themes assigned. The outcomes of the report of each group are deliberated deeply and suggestions are made to the organization. The whole exercise is moderated by the HRD auditor.

6. Task Force Method:

A task force comprising different experts from various domains in the organization is constituted to identify, evaluate and recommend an appropriate solution to the HRD problems identified. HRD manager can work on the accepted recommendations for further development.