Tag: Decision-Making Processes

Key Managerial Personnel (KMP) or Key Management Personnel refers to the employees of a company who are vested with the most important roles and functionalities. They are the first point of contact between the company and its stakeholders and are responsible for the formulation of strategies and its implementation. The Companies Act mandates certain classes of companies to include such personnel in its ranks. This article looks at this designation which holds a significant place in the Companies Act of 2013.

The definition of Key Managerial Personnel has been made more elaborate in the Companies Act of 2013 as the 1956 Act restricted its scope to a Managing Director, Whole Time Director and Manager. The current definition of the term provides for the inclusion of the Chief Executive Officer (CEO), the Manager, the Managing Director, the Company Secretary, the Whole-Time Director, the Chief Financial Officer (CFO) and such other officers as may be prescribed. For the purpose of this Act, a Key Managerial Personnel (KMP) is considered as an “Officer and an “Officer who is in default”.

It may be noted that companies are prohibited from appointing or employing a Managing Director and a Manager at the same time. Also, no individuals should be appointed or reappointed as the Managing Director, Manager, Whole-Time Director or Chief Executive Officer (CEO) of a Company for a term exceeding five years at a time, and no reappointments are allowed earlier than one year before the expiry of its term (conditions are subject to additional clauses).

Key management personnel are those people having authority and responsibility for planning, directing, and controlling the activities of an entity, either directly or indirectly. This designation typically includes the following positions:

• Board of directors
• Chief executive officer, chief operating officer, and chief financial officer
• Vice presidents

An entity shall disclose key management personnel compensation in total and for each of the following categories

(a) Short-term employee benefits

(b) Post-employment benefits

(c) Other long-term benefits;

(d) Termination benefits

(e) share-based payment.

Compensation includes all employee benefits as defined in Ind AS 19 Employee Benefits including share based payments to employees as per Ind AS 102.  Employee benefits are all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of the entity.

If an entity obtains key management personnel services from another entity (the ‘management entity’) [See related party definition point (b) (viii)] in such case, the entity should disclose the amount of fees/compensation paid to the management entity.  Generally, the reporting entity pays agreed amount to the management entity and in return management entity pays to its employees i.e., who managed the reporting entity. The details of payment by the management entity to its employees/directors are not required to be disclosed in the reporting entity financial statements.

According to section 203(1) read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the following companies are mandated to appoint a Whole-time KMP:

• Every Listed Company
• Public Companies having paid-up share capital of 10 Crore rupees or more.
• Public Companies Having paid-up share of 5 Crore rupees or more.
• Companies having paid-up share capital of 10 Crore rupees or more are mandated to appoint a Company Secretary.

Roles and Responsibilities of Key Managerial Personnel

The Management function of implementing important decisions comes under the responsibilities of Key Managerial Personnel. Here are some of the main Roles and Responsibilities of KMP:

As per Section 170 of the Act, the details of Securities held by the Key Managerial Personnel in the company or its holding, subsidiary, a subsidiary of the company or associated companies should be disclosed and recorded in the registrar of the Books.

KMP has a right to be heard in the meetings of the Audit Committee while considering the Auditor’s Report; however they do not have the right to vote.

According to Section 189(2), Key Managerial Personnel should disclose to the company, within 30 days of appointment, relating to their concern or interest in the other associations, which are required to be included in the register.

Procedure of Appointment of KMP

• The appointment of key managerial personnel is prescribed under Section 203 of the Act. Every member of managerial personnel is appointed through a resolution adopted by the Board with terms and conditions of appointment and remuneration.
• A member of managerial personnel can hold the position in one company at a given time. However a member of managerial personnel of a company can be a member of managerial personnel of its subsidiary company.
• In case of vacancy the Board has the responsibility of filling up within six months from the date of such vacancy.
• If the company or its Board tries to violate the provision of appointment of managerial personnel, then the company has to suffer from penalty. The company shall be punishable with fine of rupees one lakh which may extend up to rupees five lakh.
• Every Director and other key managerial personnel shall also be punishable with a fine of Rs.50, 000. If the contravention is continuing, then they would be charged with Rs. 1000 per day after the first offense.

Officer in default

According to section 2(60) of the Act, an ‘officer who is in default ‘shall be liable for any penalty or punishment by way of imprisonment or fine. The officers may include:

Key Managerial Personnel

Whole-Time director’.

Any person who is responsible for maintenance, filing or distributing records or accounts.

Any Director who is aware of the activities taking place is in contravention of the law or the provisions and yet indulges in or participates in it.

Maintenance of Register:

Every Company falling under this provision is required to maintain a register comprising particulars of its Directors and KMPs, which is to be placed at the registered office of the Company. The documents should include the details of securities held by each of them in the company or its holding, subsidiary, subsidiary of a company’s holding company or associate companies. Further requirements of its contents have been mentioned in Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Significant influence

Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control of those policies.

IND-AS 28 defines significant influence as under:

Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies.

Decision-making is one of the most crucial steps in the planning process. Effective decision-making helps managers choose the best course of action to achieve the organization’s goals. In the context of planning, decision-making involves selecting the most appropriate strategies, actions, and alternatives based on available information, analysis, and forecasts. This step serves as the foundation for developing and implementing a plan, ensuring that all activities and resources are aligned with the organization’s objectives. Below is an explanation of the significance of decision-making in the planning process and how it contributes to organizational success.

• Establishing Objectives

The first step in planning is setting clear objectives, and decision-making plays a pivotal role in this process. Managers must make decisions about the goals the organization needs to achieve. These objectives must be specific, measurable, achievable, relevant, and time-bound (SMART). During this stage, managers evaluate the needs of the organization, market trends, and external factors to decide on the goals that align with the organization’s mission and vision. The decision about which objectives to prioritize influences the direction of the entire planning process.

• Analyzing Alternatives

Once objectives are set, decision-making continues with the analysis of different alternatives and approaches. There are often several ways to achieve the same goal, and each approach may have different implications. Decision-makers assess the various alternatives by considering factors such as cost, time, resources, feasibility, and risks. They also take into account potential obstacles and challenges that may arise. The selection of the best alternative is crucial as it will guide the entire planning process and determine the actions required to accomplish the goals.

• Allocating Resources

One of the critical decisions in planning is how to allocate resources, including human, financial, and physical assets. Decision-makers must assess the availability and requirements of resources for each task or objective. They need to decide which projects, activities, or departments will receive which resources. Effective allocation ensures that resources are used efficiently and effectively to achieve the desired outcomes. Poor decision-making at this stage can lead to resource wastage, project delays, or unmet goals.

• Risk Assessment and Contingency Planning

Another important aspect of decision-making in planning is the assessment of risks. All plans are subject to some degree of uncertainty, and decision-makers must make informed choices about the potential risks and how to mitigate them. This includes deciding on the risks that are acceptable and those that require action. Managers often create contingency plans to address possible challenges and to ensure that the organization can adapt if unexpected situations arise. These decisions are critical for ensuring the continuity and resilience of the organization in the face of uncertainties.

• Setting Timelines and Milestones

Decision-making in planning also involves determining the timelines for achieving objectives. Managers must decide on the duration of each task, the deadlines for milestones, and the overall time frame for completing the plan. Effective decision-making ensures that timelines are realistic, resources are appropriately allocated, and tasks are achievable within the specified period. Decisions about setting achievable deadlines are important for maintaining motivation, reducing stress, and keeping the plan on track.

• Monitoring and Evaluation

Decision-making does not end once the plan is put into action. Managers must continuously make decisions regarding the monitoring and evaluation of the plan’s progress. They decide on the metrics to measure performance, establish control mechanisms, and assess whether the plan is on target. If the progress deviates from the plan, managers may decide to adjust strategies, reallocate resources, or make other changes to keep the plan aligned with the objectives.

• Adapting to Change

In a dynamic business environment, decision-making in planning also includes the ability to adapt and adjust to changing circumstances. This requires managers to make ongoing decisions about modifying the plan based on new information, changing market conditions, or internal developments. The ability to adapt the plan ensures that the organization remains competitive and responsive to external factors.

Strategic decisions are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

• Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others.
• Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities.
• Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about.
• Strategic decisions involve a change of major kind since an organization operates in ever-changing environment.
• Strategic decisions are complex in nature.
• Strategic decisions are at the top most level, are uncertain as they deal with the future, and involve a lot of risk.
• Strategic decisions are different from administrative and operational decisions. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. To reduce cost is a strategic decision which is achieved through operational decision of reducing the number of employees and how we carry out these reductions will be administrative decision.

Nature of Strategy

Based on the above definitions, we can understand the nature of strategy. A few aspects regarding nature of strategy are as follows:

• Strategy is a major course of action through which an organization relates itself to its environment particularly the external factors to facilitate all actions involved in meeting the objectives of the organization.
• Strategy is the blend of internal and external factors. To meet the opportunities and threats provided by the external factors, internal factors are matched with them.
• Strategy is the combination of actions aimed to meet a particular condition, to solve certain problems or to achieve a desirable end. The actions are different for different situations.
• Due to its dependence on environmental variables, strategy may involve a contradictory action. An organization may take contradictory actions either simultaneously or with a gap of time. For example, a firm is engaged in closing down of some of its business and at the same time expanding some.
• Strategy is future oriented. Strategic actions are required for new situations which have not arisen before in the past.
• Strategy requires some systems and norms for its efficient adoption in any organization.
• Strategy provides overall framework for guiding enterprise thinking and action.

Marketing Strategies

Marketing strategy is the total and unbeatable instrument or a plan shaped and designed specifically for attaining the marketing objectives of a firm. A marketing mission and objectives tell us as to where we want to go and marketing strategy provides us with the grand design for reaching out there.

The borrow the words of Prof. Jerome Mc Carthy “strategy is the all important part of marketing. The one time planning decision the most crucial decision that determines what business the company is in and the general strategy, it will follow may be more important than has ever been realized”

In the words of Mr. Robertson and Yoram Wind, “there are three generic strategies for achieving success in the competitive market place. The first of these is to gain control over the supply or distribution, the second competitive cost advantage and the third product differentiation; marketing as a discipline is critical component of all these three strategies. Marketing performs a boundary role function in the firm’s selection of an appropriate strategy; marketing spares the customer interface and provides the assessment of needs which must ultimately guide all strategy development”.

To quite Michael E. Porter “marketing strategy has mainly one aim to cope up with competition; these are five major and vital forces that decide the nature and intensity of competition the threat of new entrants, bargaining power of customers, bargaining power of suppliers, threat of substitute products and jockeying among the existing contest arts ; the collective strength of these forces determine the ultimate profit potential, of an industry; the strategists goal is to find a position in the industry where his company can best defined itself against these forces or can influence them in his favour; strategy can be viewed as building defences against competitive forces.

In the final analysis marketing strategy stands for competitive marketing actions that are bound to evoke a response from competition. That is why a successful marketer needs to have a comprehensive strategy to tackle competition at any cost.

However, one cannot go to the extent of “any cost” unless one works according to a plan and that is competitive strategy for thumping success in marketing. It is but, therefore, natural that competitive strategy has to be one that will evoke the much sought after competitive advantage. Having given the competitive advantage, the said strategy should give a sustainable competitive edge.

It warrants the thorough investigation and analyses of competition before one hope to have a competitive advantage. Thus competitive investigation, scanning and analysis consist of two things namely, the “long-term profit- opportunity” and owns one’s competitive position.

The ways of out beating competition are:

1. Reducing competition

Perhaps this is the simplest way of fighting out. It sounds well in theory; however in practice it means acquisition of smaller or weaker units which are in competition. Thus, Hindustan Lever acquired TOMACO and Broke Bond acquiring Kissan and Lipton.

2. Joining competition

This is another way out to mitigate competition which is gaining ground. The best example is that of joint venture of Procter and Gamble and Godrej Soaps.

3. Pre-empting competition

This is another way which is a proactive approach, which is very effective particularly when it is backed by competitive analysis. The example of pre-empting competition is that of.

4. To create barriers

This implies forbidding others from entry in the line based on very strong financial and muscle power. Good many companies spend heavily barring others to just think of such extravagance a luxury or a dream for them. The example of this kind is that of.

5. To differentiated the products

It pays to differentiate the products. One must not hesitate to differ his own product with a new to provide better value for the money paid by the customers. It is not only ideal but practical. That is majority of the companies to do it. The examples are good many but we can take toiletotries of all companies.

6. To improve the speed of response

The competitive edge can be further sharpened than one thinks. There are certain manufactured products where speed of response as well as quick source is of top significance.

Though the companies are aware of keeping pace with changing technological tempo they should be well ahead of the same. Quality in consonance with technology has much valid response if it catches the required speed.

7. To divest from regular activities

Instead of moving in the same grow; it should more out of it. The firm should divest out of focus activities. This makes available much wanted scarce recess in the focused activities.

8. To improve efficiency

It is but natural that there is close alliance between important efficiency and the competitive edge. This helps the marketer to distinguish his products though reduced cycle of line and reduced costs.

To restate, a competitive marketing strategy should be such that will give sustainable competitive advantage. One has to be therefore proactive and quick in one’s responses and one should be willing to invest in long-term profits.

Nature of Marketing Strategies

The exact nature of strategy is self evident from the definitions we have gone through.

The nature is clearly spoken by the following points:

1. They are dynamic

The concept of marketing strategy is relative as it is designed to meet the changing demands of a situation. Each situation and event needs a different strategy that is why strategies are revised and recast very frequently to cope up with the changes in a given situation or event.

2. They are futuristic

A marketing strategy is forward looking. It orients towards future. A marketing strategy is designed to bring out the organization from a ditch of degression to the path of progress for better change in the coming times.

3. They are complex

A marketing strategy is a very complex plan impounding in its compound other plans or firms of plans which area must to achieve the organizational goals. It is a compendium or complex of plans within plan to out beat the strength and vitality of others in the line are allied activities.

4. They provide direction

Marketing strategies provide a set direction in which human and physical resources will be allocated and deployed for achieving organisational goals in the face of change environmental pressure, stress and strains and constraints and restraints.

5. They are all covering

Marketing strategies involve the right combination of factors governing the best results. In fact strategic planning warrants not only the isolation of various elements of a given situation but a judicious and critical evaluation of their relative importance.

6. They are a link between the unit and environment

The strategic decisions that are basically related with likely trends in the changing marketing changes in govt., policies, technological developments, ecological change over’s, social and cultural overtones. Then, the ever-changing environment which is external to the organization has impact on it because unit is the sub-systems of supra-system namely environment.

7. They are interpretative

Marketing strategies are the interpretative plans formulated to interpret and give meaning to other plans in the spot-light of a specific situation or situations. They demand an adjustment of plans in anticipator of the reactions of those who will be influenced. Strategic decisions are the result of a complex and intricate process of decision making.

8. They are Top Management Blue-print

Marketing strategies their formulation is the basic responsibility of top management. It is because, it is top management that spells out the missions, objectives and goals and the policies and strategies are the ways to reach them. Thus, top management is not only to say to where to go but how best to go the terminal point.

Essentials of Marketing Strategies

Any marketing strategy to be worth calling as successful or effective must enjoy certain extras which can be called as essentials or requisites of it.

The basic guidelines, used to call a strategy a successful one used by experts are:

1. It is consistent

A marketing strategy to be effective is to be consistent with the overall and specific objectives and policies and other, strategies and tactics of the marketing organization. Interval consistency is an essential ingredient of a good strategy as it identifies the areas where the strategic decisions are to be made imminently or in the long run.

2. It is workable:

Any strategy however laudable and theoretically sound is meaningless unless it is able to meet the ever changing need of a situation. In this business world contingency is quite common and the strategy that strikes at the head to contribute to the progresses and prosperity of marketing organization.

3. It is suitable

A strategy is emergent of situations or environment. It is the subservient of changing environment of business world. It is but natural that any strategy not suiting to .the environment can impound the marketing organization in the compounds of danger, digress and frustration.

4. It is not risky

Any strategy involves risks as uncertainty is certain; what is important is that the extent of the risk involved or associated with strategy is reasonably low as compared to its pay-off or returns. It is because; a high risk very strategy may threaten the survival of the marketing organization, let alone its success, if calculations go fit.

5. It is resource based

A sound strategy is one which is designed in the background of the available resources at its command. A strategy involves certain amount of risk which can hardly be segregated. A strategic decision warrants commitment of right amount of resources to the opportunity and reservation of sufficient resources for an anticipated or “Pass through” errors in such demands of resources.

6. It has a time horizon

The statement “a stitch in time saves nine” that aptly applies to the concept of strategy. A sound strategy is time bound to be used at the nick of the hour and tick of the opportunity. It has an appropriate time horizon. This time this is costlier than money and its horizon banks on the goals to be achieved.

The time should be long enough to permit the organization to make adjustments and maintain the consistency of a strategy.

There are four methods:

1. Three Paths of Yoga. According to this, traditionally, four paths have been suggested to motivate.

(1) Cyan Yog: Path of knowledge of right or wrong and person is motivated through discussions, debate and contemplation.

(2) Bhakti Yog: Emotional path; he feels that devotion alone will satisfy his psychological needs.

(3) Karma Yog: Action orientation: Cause and effect relationship. He takes right step. Does his duty religiously. Gita teaches karma yog.

(4) Raj Yog: Mystic experiences: Internal psyche brings in a change.

According to the pshyce of an individual, any one or a mix of the above-mentioned methods can be adopted to motivate an individual.

2. LAW OF PURUSHARTHA: According to this tradition, a person is motivated to satisfy fourfold Purusharthas or missions of life. They are Dharma, Artha, Kama and Moksha. The word Purushartha is derived from two Sanskrit words ‘Purusha’ meaning person, and ‘Artha’ meaning aim or goal. Therefore, the term Purushartha means aim of life or missing of life.

(1) Dharma: It is the rightful duty of a person. An individual is guided by his inner instincts to follow his Dharma. Also, one has to follows one’s ‘Swadharma’ which is beneficial to him as well as to the society.

(2) Artha: It is the pursuit of material wealth. However, Artha is only a means to achieve the ends, viz., to get comforts of life. But it must be remembered that Artha hopas to be acquired through dharmic means only. The most important thing to remember is that one should not have any attachment with money.

(3) Kama: It means ‘desire’. According to this, one’s desires (needs) must be fulfilled. However, one must keep desires to a minimum level so as not to miss the ultimate aim of life, which is to realise the soul within oneself.

(4) Moksha: It means ‘liberation’. It implies self-realisation which is the ultimate aim of a human being. It is the ultimate experience of union of self with the superme self. By obtaining Artha, through Dharma, one fulfills one’s Kama – desires and finally attains Moksha.

3. THEORY OF RIN: According to this theory, man is born to repay the ‘Rin’ (Debts) of all his past lives. This motivates a person to act in such a manner so as to repay these debts. Right from the birth, one is indebted to the following:

(1) Deva Rin: Here, Deva means all the Pancha Bhutas viz., Agni Dev, Varun Dev (Air), Vasundhara (Earth), Akash Dev, and Jal Dev. All living beings should be indebted to these five cosmic forces for their existence. They should repay their debt by preserving them.

(2) Rishi Rin: Our Rishis have given us great scriptures which have enriched our lives. Therefore, it is our duty to live our lives according to these thoughts. So also, we must spread the knowledge given in the scriptures.

(3) Guru Rin: Our teachers have taught us so many things in life and made it wonderful. Hence, we should feel indebted to them and repay these debts by using this knowledge. Also, we must respect our teachers.

(4) Pitru Rin: Our parents and grandparents have brought us into this world and gave us the value system which gives us peace. Therefore, we are indebted to them. We should do our best to look after them.

(5) Matru Rin: The word ‘Matru’ has double meaning. The first one is mother, who rears a child in her womb and brings him/her in this world and sacrifices her life for her children. The second one is the mother earth which sustains the life of all the living beings without any expectation.

(6) Bandhav Rin: Man is a social animal. Therefore, besides having good mental and physical health, he must possess a good social health. For good social health, one must contribute towards society’s improvement and peace. According to Indian ethics, we believe in ‘VASUDEV KUTUMBKAM’ which means that entire world is our family and therefore we must take care and love every human being in this world.

(7) Nrip Rin: ‘NRIP’ means the King. In the present context, it means the government. In this sense, we must be indebted to the government and be a law-abiding citizen.

(8) Bhuta Rin: According to this concept, a man is indebted to all his ancesstors who have died. Indians worship their deceased forefathers. For this purpose they perform ‘SHRADDHA’ a ritual, every year, to remember their departed forefathers.

Also, Indians believe that an indebted man cannot go to heaven, after death. Therefore, every Indian would like to repay all his debts, before leaving this world.

4. Ancient Technique of Motivation: According to this technique, there are four methods of motivation, viz., SAAM (Association), DAAM (Reward), DAND (Punishment) and BHED (Difference).

(1) SAAM: Man is social animal and he would like to be a part of the group to which he belongs. Therefore, a person can be motivated by the values, beliefs, ideology and lifestyle habits of the social and official groups.

(2) DAAM: Man can be motivated by offering rewards. Rewards should be such so as to satisfy the unfulfilled needs of an individual. These can be in terms of money or recognition, or both.

(3) DAND: Sometimes fear of punishment or losing a thing, may motivate a person to do a job.

(4) BHED: This technique believes in the method of ‘DIVIDE AND RULE’. Groups are created in the society and competition is set between them. This competition motivates the individuals in the groups.

Virtual Teams

A virtual team is a group of people who work for a common purpose but in separate locations. The concept of the virtual team has been introduced with the enhancement of technology. In these teams, people perform jobs in a virtual work environment created and maintained through IT and software technologies. The virtual team concept is relatively new to project management areas and IT. Most of the processes are outsourced in a virtual work environment. Since virtual team solely rely on electronic communication media, they work in different time zones and a variety of cultural boundaries. More diversified team members may work in a virtual team.

Virtual team management includes the following:

• Training: Team leader sets targets and develops the team member until he meets the standard level.
• Assembling: Probation periods are the measurable indicator to be applied when commencing with remote teamwork organization.
• Managing: Use of telecommunication technologies to manage ongoing projects and jobs of remote group members.
• Controlling: Team leader establishes performance indicators to evaluate the performance of team members.

Traditional Teams

A traditional team, also known as an intact team, is a functional team in which experts work together and share a common path to achieve their team’s processes and goals. In some cases, traditional teams are an entire department. Leadership is undertaken by a senior-level manager. New recruitments to the team are based on their technical skills and competency. Traditional teams mostly engage in described routine jobs.

Organization Structure: Compared to the traditional teams, virtual teams support flatter organization structure with dim lines of authorities and hierarchies. This is required to survive in hypercompetitive market, deliver results faster and encourage creativity which are actually the primary objectives for forming a virtual team.

Selection of Team Members: In case of traditional teams, members are largely selected based on their functional skills. But performing in a virtual team environment is not easy for everyone. Lack of face-to-face interactions and social focus in a virtual setting might lead to isolation and loneliness. It calls for managing ambiguity, proactive networking, exceptional time management and work discipline, ability to learn new technologies, and the ability to collaborate across functional and cultural boundaries. So, in the selection of a virtual team member, there is a need to look into these core competencies in addition to the basic functional skills.

Accountability

In a team-based organization, team members are accountable to each other, and to the team as a whole. This mutual accountability means that the entire team is responsible for its collective actions. This is the opposite of accountability at an individual level inherent in traditional organizations.

Although there are times when teams could have collectively performed better, lack of effort and accountability are rarely intentional. According to a February 2020 Harvard Business Review article, a team’s underperformance is most likely due to limited resources, ambiguity regarding roles, a poor strategy and/or unrealistic goals.

Leadership Style: In virtual team setting, managers cannot physically control the day-to-day activities and monitor each team members’ activities, therefore they need to delegate little more as compared to traditional teams. The command-and-control leadership style of yester years is giving way to the more democratic and coaching style of today.

Relationship Building: When traditional team members meet in the workplace every day they tend to develop close social ties with each other. They strike rapport with each other when they interact face-to-face. In the virtual team the interactions are tend to be more task-focused. Further, lack of verbal cues and gestures in virtual setting does not allow any scope for personal touch in the communication.

Psychological Contract: The foundation of psychological contract is more fragile in the virtual environment. Smaller instances of misunderstanding or gaps in communication result in violation of the psychological contract which has negative effects on the team’s effectiveness. Virtual teams also experience difficulties in building trust, cohesion and commitment among its members.

Knowledge Exchange & Decision-taking: Many a times in traditional teams, information is being exchanged during informal discussions. But in case of virtual teams, members have a very limited or no informal access to the information. Hence there is a need for more frequent updates on project status and building a shared database to provide all the important information to the team. Considering the time zone differences in global virtual teams, it becomes difficult to schedule meetings. Thus, in case of virtual teams many a times delay occurs in fixing a problem or reaching a consensus, whereas in traditional teams a meeting can be called at any time of the day when all the members are present together in the office, resulting quick decisions and problem solving.

Staffing for global operations is quite a complex affair. It involves activities on a global basis, including candidate selection, assignment terms and documentation, relocation processing and vendor management, immigration processing, cultural and language orientation and training, compensation administration and payroll processing, tax administration, career planning and development, and handling of spouse and dependent matters. In global staffing, companies need to choose from various types of global staff members and need to have specific approaches and strategies to global staffing. Global staff members are selected from among three different types: expatriates, host-country people and third-country nationals. Expatriate is a person who belongs to the country in which the organization is headquartered and not a citizen of the country in which the company operates. A host-country national is a citizen of the country in which the subsidiary company is located. A third-country national is a citizen of a country, but works in another country and employed by an organization headquartered in a third country.

Types of International Employees

International employees can be placed in three different classifications.

An expatriate is an employee working in a unit or plant who is not a citizen of the country in which the unit or plant is located but is a citizen of the country in which the organization is headquartered.

A host-country national is an employee working in a unit or plant who is a citizen of the country in which the unit or plant is located, but where the unit or plant is operated by an organization headquartered in another country.

A third-country national is a citizen of one country, working in a second country, and employed by an organization headquartered in a third country. Each of these individuals presents some unique HR management challenges. Because in a given situation each is a citizen of a different country, different tax laws and other factors apply. HR professionals have to be knowledgeable about the laws and customs of each country. They must establish appropriate payroll and record-keeping procedures, among other activities, to ensure compliance with varying regulations and requirements.

Selection Criteria of Global Staffing

Experts sometimes classify top executives’ values as ethnocentric, polycentric, or geocentric, and these values translate into corresponding corporate behaviors and policies. These values translate into three broad international staffing policies. The vital factors that affect Multinational enterprises (MNEs) staffing include strategy, organizational structure, and subsidiary specific factors such as its duration of operations, technology, production and marketing technologies, and host country characteristics such as level of economic and technology development, political stability, regulations and culture. Thus the philosophies of staffing abroad are ethnocentric, polycentric, regiocentric and geocentric.

Ethnocentric Staffing: In ethnocentric staffing, Parent Country Nationals (PCNs) are selected for key position regardless of location. Japanese, European, U.S and Korean firms utilise ethnocentric staffing. With an ethnocentric staffing policy, the firm fills key management jobs with parent country nationals. Reasons given for ethnocentric staffing policies include lack of qualified host-country senior-management talent, a desire to maintain a unified corporate culture and tighter control, and the desire to transfer the parent firm’s core competencies to a foreign subsidiary more expeditiously.

Polycentric Staffing: The polycentric staffing policy requires host-country nationals to be hired to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters. Although home-country personnel fill top management positions, this is not always the case. For example, many US MNCs use home-country managers to get the operations started, and then hand it over to the host-country managers. Hindustan Lever Ltd, (HLL), the Indian subsidiary of Unilever, has local as its chiefs. Preference for home-country citizens for key positions does not fit into a pattern, unless government interventions dictate selection processes. In Brazil, for example, two-thirds of the employees in any foreign subsidiary traditionally had to be Brazilians. In additions, many countries exert real and subtle pressures to staff the upper management ranks with nationals. The polycentric approach to staffing has both merits as well as demerits. Hiring host country nationals eliminates language barriers, expensive training periods and cross-cultural adjustment problems of managers and their families. The disadvantages of the polycentric approach are equally strong. Local managers may have difficulty bridging the gap between the subsidiary and the parent company, because the experience and exposure they possess may not have prepared them to work as part of global enterprises. Language barriers, national loyalties, and a range of cultural differences may isolate the corporate headquarters staff from the various foreign subsidiaries. Finally, consideration of only home and host-country nationals may result in the exclusion of competent executives.

Regiocentric Staffing: With regiocentric approach, a firm’s recruitment for its international operation is done on a regional basis and the managers are selected on the basis of ‘the best in the region’ with international transfers that are restricted to regions. Regiocentric approach takes a somewhat larger operational view than that of polycentric approach as it covers a trade region like European Union and allowing managers to move between business units in various countries of the same region. In this staffing approach, a mix of Parent-country nationals, host-country nationals and third-country nationals can be used depending on the specific needs of the company. The regiocentric approach has recently become more popular as many multinational companies are choosing to organize in regional basis. One of the main advantages of this approach is that it reduces the need for costly duplication of support services. Most multinational companies regiocentric rather than truly international and majority of their sales and operations are concentrated on the region. When it comes to the corporate level, the regiocentric approach is may be limiting as ethnocentric approach as multinational companies are failing to understand the features of the regions outside of their home-region. The regional structure may also lead to the mergence of silo-mentalities as regional managers will be trying to hold and protect their top talent within the region rather than allowing them to develop outside their region.

Geocentric Staffing: This staffing philosophy seeks the best people for key jobs throughout the organization regardless of nationality. Seeking the best person for the job, irrespective of nationally is most consistent with the underline philosophy of a global corporation. Colgate-Palmolive is an example of a company that follows the geocentric approach. A geocentric policy is based on assumptions that, highly competent employees are available not only at headquarters, but also in the subsidiaries; international experience is a condition for success in top position; managers with high potential and ambition for promotion are always ready to be transferred from one country to another; competent and mobile managers have an open disposition and high adaptability to different conditions in their various assignments; and those not blessed initially with an open disposition and high adaptability can acquire these qualities as their experience abroad accumulates. The geocentric approach has merits and demerits. Among its advantages is the possibility of making the best use of its human resources and it enables the firm to build a cadre of international executives who feel at home working in a number of cultures. In addition, the multinational composition of the management team that results from geocentric staffing tends to reduce cultural myopia and to enhance local responsiveness. Thus, other things being equal, a geocentric policy seems to be the most attractive. Among the disadvantages, the restrictions imposed on staffing by host governments that a high number of their citizens are to be employed in subsidiaries, the increased training and relocation costs and a remuneration structure with standardized international base pay are the prominent.

Medium selectivity medium selectivity refers to the extent that a medium is directed towards the target Group. Medium selectivity can be represented by a selectivity index showing how well the target group is represented in the medium reach, relative to the universe:

Selectivity index = (% of the target group in total reach / % of the target group in the universe Selectivity index) * 100

Selectivity index < 100:

• The target group is under-represented.
• The vehicle is not selective on the target group.

Selectivity index = 100:

• The target group is proportionally represented.

Selectivity index > 100:

• The target group is over-represented.
• The vehicle is selective on the target group.

Goal approach:

The goal approach refers to optimal profit by offering the best service that will lead to high productivity. The limitation of the goal approach is that it is a bit difficult to identify the real goal and not the ideal goal

System-resource approach:

The system resource approach puts its onus on the interdependency of processes that align the organization with its environment. It takes the form of input-output transactions and includes human, economic and physical resources. The limitation of this approach is that acquisition of resources from the environment becomes aligned with the goal of the organization and thus it becomes quite similar to the goal-oriented approach.

Strategic Constituency Approach:

The strategic constituency model assesses effectiveness by measuring the degree to which it satisfies those in the environment who can threaten the organization’s survival; i.e., its strategic constituencies or interest groups. Each constituency has a degree of power and pursues different goals.

Constituencies can include owners, management, employees, customers, suppliers, government, and customer groups. Here, it is key to identify the relevant strategic constituencies, identify their expectations, and the way to meet these expectations.

Internal Process Approach:

The internal process model looks not at the outcome but at what happens inside of the organization. This approach assesses effectiveness through the smooth functioning of organizational operations. This is achieved through information management, documentation, and continuous consolidation.

The best-known example is the lean process approach, focused on continuous improvement and efficiency. The drawback is that the focus is often more on efficiency than on effectiveness and that the focus is more on inward processes than on outward opportunities.

Functional approach:

The functional approach assumes that the organization has already identified its goals, and now the focus should be upon attainment of these goals and how to serve society. The limitation of this approach is that the organization has the autonomy to take independent action for attaining its goals and so why will it accept serving society as its ultimate goal.