Vol8 Issue4

IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X.Volume 8, Issue 4 (Mar. - Apr. 2013), PP 01-11 www.iosrjournals.
org
Computerization In Banks -Some Issues

1
Prachi Mittal
Sneha Singh Jadaun
Manoj Kumar Dash
1, 2-Student ABV-IIITM, Gwalior (India) 3-Assistant Professor, ABV-IIITM, Gwalior (India)
Abstract: Renovation in Indian banks is taking place from all aspects and is being refined as time proceeds and
the products of the banking industry are enthusiastically modifying the face of banking. This paper defines the way renovation has affected the banking sector and the approach of using IT products which has changed the face of banking sector in India. It tells about the current scenario of the banking industry; and the factors that have brought changes in the industry; and how these factors have contributed to the development of banking. This paper shows how banks have now flourished into one-stop Supermarkets. Their focus is flowing from bulk banking to class banking with introduction of value added and customized products. Technology helps banks to create what appearances like a branch in a business buildings lobby without taking to hire manpower for manual operations. These branches are 24 x 7 working which has been made possible due to ATMs, Tele banking, Internet Banking, E-banking and Mobile Banking. The technology determined delivery channels which are used to reach maximum customers in most effective manner and at lowest cost. The splendor of these banking novelties is that it puts both customer and banker in a win-win situation. The need is to design a system to promote marginal efficiency of investment in technology and to increase the gap between marginal benefits and marginal cost involved in Banking Innovation with special reference to technological up gradation. In the paper survey on use of several E-channels and issues related to them is also shown. Keywords- Banking industry, Computerization, Computerization in banks, Issues in banks
I.
Introduction
Improvements in technology employ innovations in a rapid speed in our daily life. With the increased competition in banking sector and increasing demand of customer is forcing banks to provide their service online. One of the major users of communication and information technology in business life is Banking Industry and technology has changed the face of the banking industry through computation. 1.1 INNOVATIONS IN BANKS: In late 1980s and early 1990s there was arrival of card- based payments- debit card, credit cards In late 1990s Electronic Clearing Service (ECS) was introduced. Electronic Fund Transfer/ Special EFT (EFT/SEFT) was introduced in the early 2000s Introduction of Real Time Gross Settlement (RTGS) in March 2004 Introduction of NEFT (National Electronic Funds Transfer)as a replacement for EFT/SEFT in 2005/06 In 2007 plan for implementation of cheque truncation system as a pilot program in New Delhi. Migration from cash and cheque based payment system, it has become a necessity to electronic fund transfer system on account of the following reasons: a) Large volumes of transaction b) High cost of physical handling and storage of paper instruments. c) Delay in realization is a common feature. d) Finality of payment takes time because the physical movement of instruments in large volumes from branches to and from clearing house, and sorting them according to each bank branch at the center creates problems.
II.
History Of Banking Industry
Since independence Indian Banking Industry has gone under many transformations and now Indian Banking industry is no longer same as before. The change in the system is large and a vivid in all its forms, be it qualitative, attitudinal or structural. The expansion of globalization and changing new technologies forced banks to launch new channels to gain competitive environment reducing cost, enlarging customer database and improving their financial services. The significant transformation which occurred in the banking industry of India were the changes that were occurred in the financial markets, institutions and products. In the earlier 1970s the banking industry was using a traditional system such as they had to record data by following up a database, they had to waste their time in recording that database. www.iosrjournals.org 1 | Page

2.1 BEFORE COMPUTERIZATION Earlier banking industry had two main functions primary and secondary. Primary functions included granting of loans and advances and accepting deposits. Secondary functions were providing customers with facilities of foreign exchange, issuing demand draft and pay orders, undertaking safe custody of valuables, important documents, securities, by providing safe deposit vaults or lockers. While performing these activities banks as well as customers had to face many problems like large no of queues, large no of files were there to record data manually and due to which there was a huge wastage of time. In spite of these problems Indian banks also faced also faced difficulty in competing with the international banks in terms of customer service without the use of technology. 2.2 AFTER COMPUTERIZATION Computerization in Indian banking sector and the use of modern innovation has increased many folds after the economic liberalization as the countrys banking sector has been exposed to the worlds market. In 1984 a committee was formed by RBI on mechanization in the banking industry whose chairman was Dr. C Rangarajan, Deputy Governor of RBI. Under mechanization an electronic ledger posting machine was installed which included a type writer keyboard, a printer, two floppy disc drives and a video screen. The machine was used to prepare statement on accounts for customers, maintaining primary ledgers and post transaction entries in them. The reports were submitted by the committee in 1989 and computerization began from 1993 with the settlement between bank administration and bank employees association. In 1994 for issues related to payment system, security settlement and check clearing a committee on technology was set up in the banking industry which emphasized on Electronic Funds Transfer system. TABLE: Changes In Banking Technology Transformation Banking Modern Banking Sell product Meet customer needs Product research Customer research Product sale & profitability target sale Customer segment sale & profitability Introduce new offering every few months/years Introduce customer specific new offering every week/day Banking hours only Any time banking Personal contacts Personnel and electronic contacts Focus-Customer acquisition Focus-deepen existing customer Relationship
III.
Milestones In Indian Banks And It Transformation
MICR ( MAGNETIC INK CHARACTER RECOGNITION ) During the years 1986-88 MICR was introduced. MICR technology was used principally by the banking industry to smooth the progress of the processing of cheques and develops the routing number and account number at the bottom of a cheque. This allowed computers to translate information ( like account numbers) off printed certificates. From the late nineties all branches started handling government business to perform their functions using technology for facilitating computerization of government business. IDRBT (Institute for Development & Research in Banking Technology ) In 1996 a committee was formed by RBI in Hyderabad to upgrade technology in payment system. IDRBT was thus established as a result of recommendation of committee. Under the Information Technology Act, 2000;IDRBT ensured that e-banking transactions will get requisite legal protection with the commencement of Certification Authority(CA) functions. IS AUDIT (information systems audit ) Its purpose is to determine systems internal control design and effectiveness which included security protocols. Guidelines related to it were made and circulated to ensure IS audit in banks. ATMs ( AUTOMATED TELLER MACHINES ) Enabling IT channels which enhances customer service at banks in areas such as cash delivery through card based transaction settlements, Automated Teller Machines (ATMs).etc. E-BANKING ( INTERNET BANKING ) E-Banking allows financial institution customers to conduct a secure financial transaction on website to have personal access to internet a customer must register for the service to the institution and some password will be set-up for verification of customer. RTGS ( REAL TIME GROSS SETTLEMENT ) www.iosrjournals.org 2 | Page

It is a transfer system for funds where money is being transferred from one bank to another bank on gross and real time basis. When there is no waiting period for payment transaction the settlement is in real time. One to one basis settlement of transaction without clustering or mesh with other transaction is gross settlement.
IV.
STAGE TRANSFORMATION OF
Transformation Stages In Indian Banks

TABLE: Transformations STRUCTURE OF OBJECTIVES OF THE BANKS BANKS NATURE OF TECHNOLOGY USED Manual work
Pre-Nationalized banks(before 1969)
Private control of banks
Higher profitability
Control of Govt. Post-Nationalized Banks(1969-90) Entry of foreign and NPSBs-Social Banking to IT based Banks Social Banking Limited Computerization
Economic 2000)
Reforms
(1991-
Higher profitabilityFierce Competition
E-banks
Current Stage
Implementation of various committees report
New products services
and
Maximum use of ITMobile ATMs
TABLE: Process Of Transformation

PARAMETERS TRANSFORMATION Structure OF PROCESS IMPLICATIONS Improved and efficient structure Improved vision for business Business re-engineering Productivity, Profitability and Efficiency has increased. Innovation are taking place. Work culture IT as the catalyst of information International Outlook Information Technology Inspire employees System, Process and Procedure -More ethical work culture -Vision for global economy
Human resources development
Ethos/Philosophy
V.
Technology Used:
Automated clearing House (ACH): To handle cheques in clearing house computers are used. It is difficult to clean up, substitute and establish transactions within many banks. To increase the process and wiping the operations immediately an deficiently computers are used in cleaning house. ACH allows huge number of credit and debit transactions in batches. www.iosrjournals.org 3 | Page

National Automated clearing house Association (NACHA): It helps to transfer debit for point-of-purchase conversation check. ACH payment is being implemented by both commercial sector and government. Business is also improving by using ACH to accumulate online payment from customers than accepting debit or credit cards. NACHA and Federal Reserve established rules and regulations to govern ACH network. Electronic Clearing Services (ECS): ECS uses services of cleaning house to transfer funds from one to another bank account. This is used for large transfers from one to many accounts or vice-versa. Types of ECS:Two types of ECS are ECS (credit) and ECS (debit). 1. ECS (credit)-it is used to allow credit to huge number of receivers by raising only one debit to an account like interest, salary payment, pension 2. ECS (Debit)-it is used to inflate debits to a huge number of accounts of customers or account holders for honoring a particular institution e.g. utility companies payments like telephone, house tax charges, water tax charges. TABLE: ECS Transaction In Rs. Crores Item 2005-06 2006-07 2007-08 2008-09 2009-10 ECS 32,324 83,277 82,222 97,487 17,833 CREDIT ECS 12,986 25,441 48,937 66,976 69,819 DEBIT Source: RBI, Annual Report 2009-10 5.1 NATIONAL ELECTRONIC FUND TRANSFER (NEFT): It is an online system by which funds of Indian financial institutions are being transferred. Funds below Rs 2, 00,000/- are mainly transferred by it. Structured financial messaging solutions (SFMS) were used as a platform to make NEFT. To maintain security in NEFT public key infrastructure (PKI) technique was used. 5.2 ELECTRONIC FUNDS TRANSFER (EFT): It is electronic transfer or exchange of money from one to another account. This exchange of money takes place across multiple financial institutions through computer systems to help banks offering money transfer service to their customers from any bank branch account to other branch bank. TABLE: EFT/NEFT Transactions In Rs. Crores 2006-07 2007-08 2008-09 77,446 1,40,326 2,51,956 Source: RBI, Annual Report 2009-10
Item EFT/NEFT
2005-06 61,288
2009-10 4,11,088
5.3 CARDS TRANSACTION: Debit card is an alternative method of payment of cash when transactions are being made. While using it cardholder can see available balance in account. Debit cards are widely used to withdraw cash from ATM, to purchase online on internet, making bill payments, transferring funds, etc. during opening of account banks provide free of cost debit cards. From Jan 1st 2011, RBI announced that user has to enter password on ATM for every transaction with debit card. TABLE: Card Based Payment Transaction Value (Rs. Crores) 2005-06 2006-07 2007-08 2008-09 33,886 41,361 57,985 65,356 5,897 8,172 12,521 18,547 Source: RBI, Annual Report 2009-10
ITEM CREDIT CARDS DEBIT CARDS
2009-10 62,950 26,566
5.4 CORE BANKING: To adopt core banking solutions (CBS), computerization in branches of banks is closely related with the technological development.
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Name of the bank TABLE: Branches Under Core Banking (In %) Branches under core banking solutions
Public Sector Banks 90% Nationalised Banks 85.9% State Bank group 100 Source: Details on Trend and Growth of Banking in India 2009-10, P-55 5.8 AUTOMATED TELLER MACHINE (ATM): ATM is used for many functions of banks like to withdraw cash, to print bank statements, to transfer funds, reservation of train tickets, to pay premiums. TABLE: Growth In ATM Installation (2005 To 2009) Number of ATMS 21110 25247 34547 43651 Source: Cyber Media DQ Estimates Research
Year 2005-06 2006-07 2007-08 2008-09
NUMBER OF ATM's
50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2005-06 2006-07 2007-08 2008-09
NUMBER OF ATM's
Graph: Details On Trend And Growth Of Banking In India 2008-09 At the end of march 2009 ATMs were installed in the country , largest share in off-site ATMs were eighth private sector banks while largest share in on-site ATMs was with nationalized banks.
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12,000 10,000 8,000 6,000 4,000 2,000 0 Nationalised State Banks Old Private New Private Banks Banks Foreign Banks On-site Off-site
Graph: Showing Number Of Atms Per Banks 5.7 INFINET: Many components like servers, connecting networks, communication channels etc. are required for working of e-banking. Various service providers were established and connected in India by RBI to control and monitor e-banking. Some service of provider is INFINET which stands for Indian Financial Network. Services which are provided by INFINET are e-mail, transmission of inter-city cheque realization advices, electronic clearing services-debit and credit. TABLE: Pros And Cons Of IT Technology Limitations of electronic-only Potential for electronic-only retail commercial banking retail commercial banking -Each new technological innovation accounts for (proportionally) smaller reductions in price differentials. Innovation Offering in Service -Bank customers remain unwilling to pay for interfaces for the new technology. While merchants expect to share the revenue of new payment through lower commission charges. -Defection rates remain low, thanks to the inertia of bank customers, which has been historically high Operational Innovation Functional -The possibilities of scale economies make it very hard for potential entrants to catch up, even with technically better systems. -Continued importance contextual non-standard sable Elements to assess risks. -More specialized labour force. of -Greater price transparency. -Greater consumers. convenience to
Dimensions innovation
of
IT
-Each customer segment interacts with the bank through the most cost effective distribution channel. -Innovations such as smart cards and digital cash. -creation of new segments and relationship banking. customer improved
-Enhanced financial performance due to reductions in overhead expenses. -Standardised of activities in payment and lending services eliminates uniqueness of proven expertise and ability to control losses from payment activities efficiently.
VI.
Threats
The most up to date fraud which is now considered as the secured method of crime not including any physical damage is the technological frauds in banks. Since 1994 computerization of banks had started in India. Working model for local area network and wide area was developed by reserve bank of India by founding unique microwave stations in order to have safe www.iosrjournals.org 6 | Page

and quick money transactions. The main job performed by computers in banks are preserving debit-credit records of accounts, carrying out electronic fund transfer, operating automated teller machines, making periodic balance sheets, printing out accounts statements etc. 6.1 RISK FACTORS: Computers internet facilities have revolted international banking to transfer funds and substitute data of interest concerning to banking and to perform other functions of banks and by giving different passwords and pin numbers. Some of the negative effects of computers are classified as: 6.1.1 6.1.2 COMPUTER FRAUDS COMPUTER CRIMES Computer frauds are those in which misuse or defalcations are accomplished by altering with data record of computer or program, etc. whereas computer crimes are those that are committed with a computer i.e. where a computer acts as a standard. The three most common are: 6.1.1.1 CHEQUE FRAUDS The tenacious growth of paper cheques joined with the readily availability of most recent technology has resulted in shocking rise in cheque frauds in banks of India. It is fascinating to note that cheques as a payment method is still having a major position in both developing and developed countries. Hard work is being done by banks to discourage customers from the use of paper cheques. Additional problems related to cheques are inbuilt manually like process of handling, high cost of transportation between parties, handling process. Concept and Magnitude of Cheque Frauds There are many ways to classify cheque frauds. One wide distinction is internal and external. Internal cheque frauds are those in which schemes are formulated by insiders employees are responsible for authorizing, creating and processing cheques. External cheque frauds are those in which schemes are made by independent operators or by classified gangs. Most familiar forms of external frauds are a. Modification of cheque details b. Creation of fake cheques c. Forgery of cheques Physical controls of security used are high resolution micro printing, watermarks, security inks and reflective holograms etc. 6.1.1.2 ATM FRAUDS ATMs are electronic machines that are connected to the accounts and records of banking institutions. It allows customers to make banking transactions without going to banks. ATMs are implicit banks that allows users to withdraw money, pay bills, deposit cash etc. ATM machine is derived with the help of an access drive i.e. a card, code i.e. personal identification number or through other methods of access to account of customer or any combination thereof. Fraud Related to ATMs Commitment of frauds can be by both insiders and outsiders. It is known that number of frauds will rise with the increase in number of transactions. Frauds can occur due to carelessness on part of both the cardholder and part of bank. If the holder of card does not follow preventative measures then is exposed to risk. A cheat may go through the carbons or discarded receipts to find out the card number illegally. A clerk who is dishonest makes an imprint from the charge card or credit card for his personal use. In addition to all these, E-mail and Internet-related fraud schemes are carry out with the increasing frequency, creativity and intensity. Fraudsters adopt a number of methods which are as follows: a) Phishing Phishing is the center stage of Internet Scams. Phishing is the way of sending emails at arbitrary, indicating to come from a candid company which is operating on the internet. When the customers make an attempt, its request disclosing information at a bogus website will be operated by them. Information entered on the bogus website is captured by the criminals and they use it for their own purpose. b) Skimming www.iosrjournals.org 7 | Page

Fraudsters use skimmers to make fake ATM cards, a swipe-card device which reads consumers ATM cards information. Scammers swipe information from credulous customers by inserting onto an ATM. They take a blank card and by inserting the card they are able to encode all the information when they swipe from an ATM. And through a small camera which is mounted on the ATM the skimmer catches the PIN. c) Spoofing The invader creates a misleading context which false you in making an unsuitable security- appropriate decision. For example false ATM machines have been set up. If they will be having PIN number they will be having enough information to steal from the account. 6.1.1.3 Credit Card Frauds Credit card is made of polyvinyl chloride sheet. The innermost sheet of credit card is known as core stock. Personal data is embossed over it and the cards are of fixed size. Fraudsters of credit cards steal credit cards from banks, clients and merchants. Credit card fraud is committed in many ways like: Authentic cards are distorted. Forged cards are made Duplicitous telemarketing is made with credit cards. Forged cards are taken on duplicitous applications on the address and name of other people. People have concern that as e-commerce and internet facilities are expanded on large scale than credit card frauds will increase rapidly.
VII.
Issues In Risk Management In Online Banking
The problem arising with the banks is that they have already invested huge amount of money in the online initiatives and their online offerings are remaining unprofitable. Banks are already having its existing customers so they are not getting large number of customers. Just enrolling customers to use the id will not be sufficient, the user will have to use the website frequently. Banks should make efforts to increase the usage of their site by customers and co-ordinate with the branches effectively. By doing this they will be able to obtain maximum value which would include cost reduction, higher customer retention and cross-selling opportunities. An important issue on which banks must focus on is integrating online channel with all other banks. Integrated channels working together are effective than a group of channels which are working without co-ordination. Internet banking initiatives like risk management and implementing controls follow same principles like other processes. Most dangerous thing is considering risk management a technical problem and leaving it on IT management Following are some of the risks which are integral in online banking: Strategic Risk: It is one of the prospective and current risks that affect capital arising and earnings from divergent business decisions associated mainly with Board and Management decisions. As senior management is responsible for developing the businesss strategy and establishing of management affective oversight over risks, then they are predictable to take an informed and planned strategic decision as whether and how the bank is providing e-banking services. There are many managers who do not understand strategic and technical aspects of the Internet Banking. Encouraged by the competition, banks introduce online banking without cost-benefit analysis even if the management does not have plan, manage and monitor the performance of technology related to products, services and delivery channels. Poor investment decisions and e-banking planning can increase a financial institutions strategic risk. Operational-Transactional Risk: Transactional risk is also known as IT or security risk which affects capital arising and earnings from fraud, abandon, error and the inability to maintain predictable service levels. One of the important challenges faced by the banks in the online environment is predicting and managing the number of that the banks want to obtain. Certain factors like structure and complexity of banking products, types of services offered, difficulty of understanding and executing new technologies will increase the level of operational risk, especially when the institutions recommend innovative services that are not yet standardized. Information Security Risk: Information security risk has negative impact on capital arising and earnings out of information security processes, and thus revealing the institution about the insider attacks or malicious hacker, denial-of-service attacks, viruses, data theft, fraud and data destruction. Most sensitive computer systems are used for storing highly confidential information and for high value payments which are tend to be most carefully secured. The programmes and viruses or anti viruses and security systems must be updated whenever required. Credit Risk: A customers failure to meet his financial commitments is called credit risk. Internet banking allows customers to apply for praise or credit from anywhere in the world. It is very difficult for the banks to verify the identification of the customer, if they are making payment through the internet. Verifying guarantees
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and if the person is in another country then in case of conflict different dominion procedures may cause difficulties.
VIII.
8.1 1. 2. 3. 4. 5. 8.2
Suggestions &Recommendations:
FOR ATM:Avoid leaving cards at ATM. Watch over the privacy of PIN number as you safeguard hard cash. Never keep ATM card and PIN number together. Dont give your ATM card to anyone and never disclose Pin to other people. Do remember PIN.
FOR CREDIT CARDS:While using the card keep an eye on it. Dont give your credit card information on phone call. Dont reply to phishing mails. Dont use unsecured websites 5. Immediately sign your credit card as soon you receive it. 1. 2. 3. 4.
OBJECTIVES:
Evaluating how computerization takes place in banking sector. Estimating the convention of various banking tools. Evaluating the usage pattern of various I.T tools in banking industry. Estimating the precautionary measures that litigant take against frauds. Evaluating preventing measures to be taken against frauds.
IX.
Methodology:
Data was collected from 79 respondents who were the users of various IT tools/services. Objective questionnaire was used-as a result of which responses were tabulated. 10.1 ANALYSIS 79litigants questionnaires were filled. The data was gathered through a tested and ordered questionnaire. Respondents were chosen randomly, making sure that they were shrewd customers using most latest banking products. The findings were as follows: TABLE: Consciousness About The Technology Threats YES NO 40 39 PHISHING 29 50 SPOOFING 53 26 SPAMMING
% OF CONSCIOUSNESS
80 70 60 50
40
30 20 10 0 PHISHING SPOOFING www.iosrjournals.org SPAMMING 9 | Page

SPAMMING clearly is most dominating of these three, though all of them are dangerous. What is not clear is that whether people are really able to appreciate the dangers it poses or maybe they just take it for granted. PHISHING websites are common these days and itis secure to note that all respondents at some point or other have visited a phishing site. It is hazardous sign thus that they are not well-known with the huge dangers it poses. Similar threats exist with spoofing. TABLE: Preventive Measures Taken QUESTIONS have you ever given your credit card information on a unverified have you ever replied to phishing mails Surfed unsecured website Written your PIN number on your credit card Written your Credit Card number in a public place Did you ever carried the only needed card Do you change your ATM PIN every month Do you use your birth date, phone number as your pin Do you always ensure that card is swiped in your presence Do you save receipts generated
YES 40 29 53 24 15 24 13 53 47 31
NO 39 50 26 55 64 55 66 26 32 48
The above table shows the preventive measures taken by people. It is evident that people are making some silly mistakes with their transactions. TABLE: Marking For Unseen Service Charges
E Channels Internet Banking Mobile Banking ATM CREDIT CARD DEBIT CARD SMART CARD TELEBANKING Most Reasonable 34 0 22 5 14 11 1 Reasonable 20 15 34 31 46 28 48 Undecided 14 17 23 16 10 13 13 Unreasonable 9 18 0 15 9 16 7 Most Unreasonable 2 29 0 12 0 11 10
% RATING FOR MOST REASONABLE UNSEEN SERVICE CHARGES

INTERNET BANKING MOBILE BANKING ATM CREDIT CARD DEBIT CARD SMART CARD TELE-BANKING INTERNET BANKING is clearly leading here, followed by ATMs and DEBIT CARDs. it is pleasant to see that ATMs are growing as inexpensive, efficient and paperless way of dealing.
X.
Conclusions:
In the beginning of new technological period of certain technology in banks, technology is the one which is subjected to and has balanced fundamental changes in the banks. We implicit from the Paper: It is a time that we have initiated ourselves in the next course and touched new heights of brilliance in the working and efficiency of banks. www.iosrjournals.org 10 | Page

Safety measures in terms of firewalls, data interruption, digital certification are few safety security measures which must be rooted in the software used by banks Regular quest for improvement of skills, mission, commitment and vision to perform efficiently for gaining profit are some areas high needs urgent attention.
References:
[1] [2] [3] [4] [5] [6] [7] [8] Uppal R.K., Transformation in Indian Banks through E Services- Emerging Issues And new Opportunities, The Asian Journal Of Research In Social Science and Humanities, Vol.2, 2012. Uppal R.K., Customer Perception of E-Banking Services of Indian Banks: Some Survey Evidence, The ICFAI Journal of Bank Management, Vol. VII No.10, 2008, 63-78. Indian Banking Special issue, IBA bulletin, IBA Mumbai, Vol. 26 No I, 2010. Yang, J. and Ahmed, K.T, Recent Trends and Developments in E-Banking in an Underdeveloped Nation-An Empirical Study, International Journal of Electronic Finance, Vol.3, 2009. Gupta V, Risks of E-Banking in India in E-Banking, (ICFAI University Press, 2004). Aladwani Adel M, Online Banking: a field study of drivers, development challenges and expectations, International Journal of Information Management, Vol 21, 2001. N Pitchandi and A Sivamurthy, Frauds in banks , The Indian Society of Criminology, Dept. of Psychology, University of Madras, 1984, P-5. Sawant B.S., Technological Developments in Indian Banking Sector, Indian Streams Research Journal, Vol.1, 2011, 1-4.
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IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X.Volume 8, Issue 4 (Mar. - Apr. 2013), PP 12-15 www.iosrjournals.org
Assessment of the current status of adoption of Six Sigma by auto components sector - Literature Review
A Raghunath*, Dr. R V Jayathirtha**
*
Research Scholar, Centre for Research, Anna University of Technology, Coimbatore, India ** Director, Bullseye Consulting Group, Bangalore, India
Abstract: Six Sigma is a business improvement strategy that focuses on improving products, processes and bottom line of businesses. The ultimate goal of Six Sigma is flawless performance leading to remarkable and tangible quality improvements when implemented judiciously. An attempt has been made to review all the available literature about the current researches and empirical studies regarding the adoption of Six Sigma by companies and findings of most of the implementation efforts are presented in this article. Keywords: Six Sigma, survey, implementation, auto components, automotive sector, manufacturing industry
I.
Introduction
In the present ever changing and highly competitive environment it is imperative that the companies continuously improve themselves for survival and growth. Quality and cost are the two key elements for the success of any manufacturing industry. Industries are adopting different systems such as ISO 9000, TQM, etc. to improve quality. But, these systems failed to bring in the financial element of the businesses into focus. Six Sigma is a business improvement initiative rather than a quality initiative. It is a customer focused business improvement methodology driven by data than assumptions with breakthrough performance gains validated by bottom line results. It enables an organization to improve performance by eliminating deficient processes and defects in products and services. The companies that adopt Six Sigma approach will have to reduce the process variation so drastically that the number of defective parts will come down to negligible level. If a company is at 3 sigma level the number of rejections per million would be around 67000 and with the adoption of six sigma the rejections would be as less as only 3.4 PPM. Six Sigma project management approach will change the culture of the companies in many ways. Originally goal of Six Sigma was to focus on manufacturing processes and was confined to the domain of only the large OEM companies. However, Six Sigma approach applies equally well to the delivery of services as it does to the manufacture of products and Six Sigma concepts, methods and the tools are equally applicable for small and medium enterprises as for large companies. In general, Six Sigma is applicable for any company of any size delivering any product or service to the customers. It is very vital for the auto component manufacturing sector to employ Six Sigma methodologies for defects free production and be globally cost effective. This literature review was carried out as a prelude to the research on effectiveness of implementation of Six Sigma by auto-component manufacturing industries. The present paper is focused on the literature review on implementation of Six Sigma by manufacturing and service companies at a broader spectrum considering findings related to various inter related factors like: benefits of implementation; barriers for implementation; critical success factors; metrics for measurement of break through performance; customer satisfaction; change in organization culture; leadership behaviour; change management; etc.
II.
Review of the literature
Jiju Antony (Ref. 5) presents the results of a pilot survey of the service organizations based in the UK to understand status of Six Sigma. The paper reports the essential ingredients that are required for the successful deployment of Six Sigma in the service sector. According to the authors, service-oriented businesses adopting Six Sigma business strategy have the benefits like: Improved cross-functional teamwork across the entire organization; transformation of organizational culture from reactive mode to preventive mode; Increased employee morale; reduced number of non-value added steps in critical business processes leading to faster delivery of service and reduced throughput time; reduced cost of poor quality (COPQ) (costs associated with late delivery, customer complaints, repair and rework etc.); increased awareness of various problem solving tools and techniques, leading to greater job satisfaction for employees; improved consistency level of service through systematic reduction of variability in processes; and effective management decisions due to reliance on data and facts rather than assumptions. The criteria considered during the project selection process are: impact on customer needs and expectations; financial impact on the bottom-line; duration of the projects considered; resources required for projects under consideration; expertise and skills required to carry out the projects; probability of success of projects under consideration and risk involved in projects, etc. The guidelines given by the authors that may be used to select Six Sigma projects are: projects should have linkage to strategic business www.iosrjournals.org 12 | Page
Assessment of the current status of adoption of Six Sigma by auto components sector - Literature
plan and organizational goals; projects should improve the overall business performance both financially and service process vise; projects should be doable in less than six months; The time for completion and hence the cost of the project deployment will increase if broader scope is assigned to the project. This would lead to frustration among the key players due to lack of progress, diversion of manpower, delay in realization of financial benefits, etc.; Project objectives must be clear, succinct, specific, achievable, realistic and measurable (SMART). Projects should have the support and approval of the senior management. Project deliverables should be defined in terms of their impact on one or more critical characteristics in the service such as CTQ, critical-tocost or critical-to-delivery. Projects must be selected based on realistic and good metrics (DPMO, SQL, Capability Indices, etc.). Pulaknam & Voges (Ref. 11) have reviewed seventeen studies, which the authors believed constitute most of the published empirical studies on implementing Six Sigma in different parts of the world. Nine of these were research journal articles and the others included a PhD thesis and research reports published by research, consulting or professional organizations such as Aberdeen Group, IW/MPI (Industry Week / Manufacturing Performance Institute), EIU (Economic Intelligence Unit) and CC (Celerant Consulting). These empirical studies on Six Sigma were undertaken in UK, USA, Canada, India, Brazil, Singapore, and Taiwan. Empirical studies covered all sectors of industries including healthcare, financial institutions, information technology as well as the SME sector. The authors are of the opinion that despite the apparent popularity of Six Sigma, very little is known about the extent to which Six Sigma has actually been adopted by business firms in the world, the patterns of adoption across industrial sectors and occupational groups, and the factors that differentiate firms that heavily adopt Six Sigma from those who do not. As per the authors, a number of empirical studies have been undertaken in different countries and industry sectors to address these gaps and the majority of those studies are reviewed. The review includes the extent of Six Sigma adoption in industry, and the benefits and major hurdles in implementing the programme. This research paper concludes with a brief review of methodological limitations in those studies and how future research can address them. Lee Revere, Sukran N, Kadipasaoglu & Faiza Zalila (Ref. 6), USA have published a research paper on pilot research exploring the critical success factors of Six Sigma. It gives insight into the gaps between Six Sigma theory and execution and the primary drivers of financial improvements. Findings of the authors demonstrate the key aspects that seem to be consistent among Six Sigma organizations. According to the authors organizations cite Six Sigma for cost reduction and increased revenues. Chi-square analyses indicate gaps exist between theory and actual practice across the three critical success factors viz. team selection, project selection and project implementation. A larger percent of respondents agree on the criticality of key tasks/issues, yet fewer companies execute them in practice. Regression results demonstrate that the factors like team selection and project selection significantly impact the financial performance of the organizations. Xingxing Zu, Lawrence D Fredendall & Tina L Robbins (Ref. 12) have done a study for understanding the effect of organizational culture on Six Sigma by empirically investigating the relationship between culture and quality practices associated with Six Sigma implementation in US manufacturing companies. The authors have reviewed both the academic and practitioner literature to identify key quality practices in Six Sigma. According to the authors while industry is increasingly adopting Six Sigma, there is very little academic research on Six Sigma practices and much of the Six Sigma literature is written by practitioners who worked in major companies that used Six Sigma including GE, Motorola, Honeywell, etc. Literature review of the authors encompass key practices like top management support, customer relationship, supplier relationship, workforce management, quality information, product/service design, process management, six sigma role structure, structured improvement procedure and focus on metrics. Study of these authors is an effort to conduct a comprehensive assessment of the relationships between different cultural orientations and quality practices in Six Sigma. The findings suggest that organizational culture generally has a significant influence on quality management and different cultural orientations influence different quality practices. The authors argue that Six Sigma is multidimensional consisting of multiple quality management practices, which are driven by and reflect multiple dimensions of organizational culture. It appears that not only emphasis on the flexibility and peopleoriented cultural orientations (i.e., group and developmental culture) but also emphasis on the control-oriented cultural orientation (i.e., rational culture) can lead to higher implementation level of quality practices. Darshak A. Desai (Ref. 1) illustrates the results obtained from a cross-sectional study of the benefits obtained by entire Indian industries as a whole by implementing Six Sigma in their organizations. The basic objective of the research study was to highlight the spectrum of benefits the Indian industries could achieve by Six Sigma and thus to encourage other industries who have not yet attempted Six Sigma for the breakthrough improvements. According to the author sparing some sporadic articles and case studies in the corporate publications and magazines, the research publications illustrating wide-ranging studies regarding penetration of Six Sigma among Indian industries as a whole are not available so far. The author lists the challenges and advantages of SSI sectors on Six Sigma initiatives compared to large organizations. The challenges listed by the author are: lack of time and resources for implementing the drive; ignorance about the strategic gains of Six www.iosrjournals.org 13 | Page
Assessment of the current status of adoption of Six Sigma by auto components sector - Literature
Sigma; misconception that Six Sigma involves a lot of statistics and it is a sort of luxury; comfortable with tradition of resorting to quick-fix solutions; solving the problems as and when they encounter; indifferent attitude about investing time and money in the long term, permanent and strategic solutions. The advantages listed by the author are: complete involvement of top management in the implementation drive; ease of arriving at the consensus for the most problematic area for initial trial of Six Sigma improvement drive; convenience of keeping a close watch on the processes and experimenting with variables; easier and faster response to the change management program in the context of Six Sigma implementation. According to the author the benefits of small size are: speed and flexibility in responding to change; ease of keeping close to the customers and locating the vital few Critical to Quality (CTQs) parameters. The following points have been listed as the answer to why many industries are apathetic about Six Sigma (Edgeman and Bigio, 2004): they think that their existing culture and system, such as ISO 9000 and continuous improvement are sufficient to meet their needs; they think that the managerial benefit to the organisation of adopting Six Sigma does not justify its cost; they lack knowledge of Six Sigma or the internal capability to assess its potential value to their organization; they have a perception that the cost of hiring, training and retaining Six Sigma talents is prohibitive compared to the returns. Prof. Dr. Armin Tpfer (Ref. 10) in his paper Six Sigma Project management for zero defect quality in the automobile industry states that Six Sigma is a perfect solution if introduced in its entirety and applied consistently, if the company managers and directors provide their full commitment and if there is a company culture which encourages transparency of errors, stringent project control and a desire for quantitative results. According to the author automobile manufacturers have recognized this and demand zero defect quality from their suppliers. The author opines that companies who develop high level of Six Sigma expertise at an early stage will achieve significant cost reductions and gain competitive advantages. The authors suggestion of seven elements or stages for introducing a Six Sigma project are: understanding the project-oriented specific directions or requirements and performance capability of six sigma; involvement of the company management and commitment of the directors; structuring the Six Sigma groups and recruiting /selecting the right players; qualifying Six Sigma specialists (Champions, Master Black Belts, Black Belts, Green Belts and Yellow Belts); selecting suitable Six Sigma projects; analysis of the financial consequences of Six Sigma; introduction of project control and creation of a knowledge management concept. G.V. Prabhushankar, S R Devadasan & P R Shalij (Ref. 8) have conducted a research by interviewing the practitioners of automobile components manufacturing companies located in Bangalore city. The authors aim was to assess the trend in implementing Quality Management System (QMS) standards, Six Sigma programme and innovation practice in Indian automobile components manufacturing sector. The overall assessment of the authors was that the conglomeration of these three strategies to bring out synergy out of them was missing. The authors stress on the need for exclusive model of QMS which would link the standards, innovation practices and Six Sigma for enabling the automobile manufacturing sector of not only India, but also of other developing countries to achieve world class competitiveness. Jiju Antony & Darshak A. Desai (Ref. 4), have presented results from an exploratory study conducted within the Indian state of Gujarat. According to the authors although many Indian industries have successfully embraced the six-sigma business improvement strategy, the adoption of Six Sigma in Indian industries is not as encouraging as it should be. In the research paper the authors have examined the status of six sigma implementation in Indian industries including the details, such as how long companies have been using six sigma, their implementation process, the tools and techniques that have been employed and common six sigma metrics used by Indian companies. The paper also identifies the critical success factors (CSFs) for six-sigma implementation in the Indian industries, followed by the key benefits derived from six-sigma implementation and the common barriers encountered. Rajeshkumar U. Sambhe &; Dr. Rajendra S Dalu (Ref. 9) have presented a paper on Evaluation of Critical Success Factors For Successful Six Sigma Implementation in Indian Medium Scale Automotive Enterprises with the objective of the research as to study the implementation of Six Sigma in Indian mid - sized automotive organizations, identification and analysis of critical success factors and development of Six Sigma framework. The survey reported was conducted from December 2009 to July 2010 and restricted to medium scale automotive industries located in and around Pune city of India. Fifteen critical success factors for Six Sigma Implementation were considered for their research. Based on evaluation of the results of the survey, the authors have grouped the critical factors for successful implementation of Six Sigma in to four categories with the following number of factors under them: most critical - two, next level critical - eight, lower end critical four and least critical - one. According to the authors the two most critical success factors are: an effective top management leadership and Commitment; and team selection for Six Sigma projects. The least critical factor for successful implementation of Six Sigma as per the finding of the authors is the role of information technology.
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Assessment of the current status of adoption of Six Sigma by auto components sector - Literature References
[1] [2] [3] [4] [5] [6] [7] [8] Darshak A Desai: Improving customer delivery commitments the Six Sigma way: case study of an Indian small scale industry, Int. J. Six Sigma and Competitive Advantage, vol. 2, no. 1, 2006 Darshak A Desai; Mulchand B Patel: Impact of Six Sigma in a developing economy: analysis on benefits drawn by Indian industries, Journal of Industrial Engineering and Management, vol. 2, no. 3, 2009, 517-538 Edgeman, RL; Bigio, DL: Six Sigma in Metaphor: heresy or holy writ?, Quality Progess, January 2004, 25-30 Jiju Antony; Darshak A Desai; Assessing the status of six sigma implementation in the Indian industry, Results from an exploratory empirical study, Management Research News, vol. 32, no. 5, 2009, 413-423 Jiju Antony: Six Sigma in the UK service organisations: results from a pilot survey, Managerial Auditing Journal, vol. 19, no. 8, 2004, 1006-1013 Lee Revere; Sukran, N; Kadipasaoglu; Faiza Zalila: An empirical investigation into Six Sigma critical success factors, Int. J. of Productivity and Quality Management, vol 1, no. 3, 2006, 224-252 Paulo A Cauchick Miguel, (1, 2); Joo Marcos Andrietta, (2): An Exploratory-descriptive Survey on Six Sigma Utilisation in Brazil, 1. Universidade de So Paulo USP, Brazil, 2. Universidade Metodista de Piracicaba UNIMEP, Brazil Prabhushankar, GV; Devadasan, SR; Shalij, PR: Journey of Indian automobile components sector: from Quality Management System certification to innovation via Six Sigma, International Journal of Indian Culture and Business Management , vol 2, no. 2, 2009, 185-210 Rajeshkumar U Sambhe; Dr. Rajendra S Dalu: Evaluation of Critical Success Factors For Successful Six Sigma Implementation in Indian Medium Scale Automotive Enterprises, International Journal of Engineering Science and Technology (IJEST) , vol. 3, no. 3, Mar 2011 Tpfer Armin: Six Sigma Project management for zero defect quality in the automobile industry, www.slideshare.net/Sixsigmacentral/six-sigma-project-m... - United States, 16 Apr 2010 Venkateswarlu Pulakanam; Kevin E Voges: Adoption of Six Sigma: Review of Empirical Research, International Review of Business Research Papers, vol. 6, no. 5, November 2010, 149 163 Xingxing Zu; Lawrence D Fredendall; Tina L Robbins: Organizational Culture and Quality Practices in Six Sigma, The 2006 Annual Meeting of the Academy of Management, June 2006 Jim Folaron; J P Morgan: The Evolution of Six Sigma, Six Sigma Forum Magazine, August 2003, www.asq.org James M Lucas: The Essential Six Sigma How successful Six Sigma implementation can improve the bottom line, Quality Progress, January 2002, www.asq.org Mark Goldstein: Six Sigma Program Success Factors, Six Sigma Forum Magazine, November 2001, www.asq.org India Symposium, IBEF, Sectoral Reports Automotive, Davos, 2006
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Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities and Knowledge Sharing Toward Business Performance: Study at Batik SMEs in East Java Indonesia
Sri Wahyu Lelly Hana Setyanti1, Eka Afnan Troena2, Umar Nimran2 and Mintarti Rahayu2
(Doctoral Program of Management Science, Faculty of Business and Economics in Brawijaya University Malang East Java of Indonesia) 2 (Department of Management, Faculty of Business and Economics in Brawijaya University, Malang East Java of Indonesia)
1
Abstract : This study is based on a phenomenon that occurred at Batik SMEs in East Java, Indonesia. Nowadays innovation is a critical issue in SMEs, especially in Batik SMEs. This is because batik has a social and economic uniqueness, and also the uniqueness is a product of culture and art. This potential will be one of great power in creative industries sector if dealt with seriously. This study aims to examine and explain the innovation role in mediating the effect of entrepreneurial orientation, management capabilities and knowledge sharing toward business performance of Batik SMEs in East Java. The unit of analysis is Batik SMEs in East Java. Survey respondents are 125 owners of Batik SMEs in East Java. This study uses a quantitative approach. Data analysis tool used is PLS (Partial Least Square). The results showed that innovation role proved affect positively and significantly toward business performance improvement. Innovation becomes complete mediation in relationship between management capabilities and knowledge sharing toward business performance. Innovation becomes a partial mediation in relation to entrepreneurship orientation toward business performance. An important finding of this study are 1) be able to integrate the affect of entrepreneurial orientation, management capabilities and knowledge sharing toward business performance through innovation as a mediating variable, and 2) integrating the resourcesbased view (RBV) and knowledge-based view (KBV). Keywords: Entrepreneurial Orientation, Management Capabilities, Knowledge Sharing, Innovation, Business Performance I. Introduction
Ministry of Commerce data show the potential of Batik SMEs increased. This was demonstrated by an increase in total transaction value of batik products by 56%, ie 2.9 trillion in 2006, rising to 3.9 trillion in 2010. In addition, the development of domestic market have pushed Batik SMEs in Indonesia to continues to grow, from 53,250 units with 873.510 labor in 2009 become 55,778 units with 916,783 worker in year 2011 [1]. This situation will certainly bring a positive affect. If the potential of batik can be improved, it will be able to reduce poverty and unemployment in Indonesia. In addition to potential and opportunities, there are problems faced by Batik SMEs nationally. BPS data, processed Ministry of Commerce, shows the exports value of batik Indonesia and batik products continued to decline. In 2006, the total export value of Indonesian batik products was US$ 74 million. This figure rose to US$ 78 million in 2007. In 2008, the total export value of batik products increased to US$ 93 million. The global economic crisis at the end of 2008 made batik exports gradually fell back to 18.34% become US$ 76 million in 2009. In 2010, batik exports more sloping and decreased 8.91% to US$ 69 million. Batik exports in 2011 reached US$ 60 million, decrease of 13.34% over the previous year [1]. In addition to global economic crisis, this situation occurs because the increasingly competitive global market conditions. The entry of printing batik products from China, Japan and Korea to Indonesia are challenges faced by batik SMEs today [1]. Another problem faced is regarding innovation of Batik SMEs entrepreneurs itself, namely strong willingness of SMEs to constantly develop new ideas and creativity, which is generated through product, process and managerial innovation. Rapid flow batik garment import and difficulty to get young workers to create new motifs in accordance with market demand is a constraint faced Batik SMEs at this time. In addition, other constraints related to climate rivalry of Batik SMEs in East Java. Several previous studies prove that a good resource become a determinant of business performance [2, 3, 4]. The findings of previous studies show that business success requires entrepreneur ability in operations [5]. www.iosrjournals.org 16 | Page
Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

In order to run the business successfully, an entrepreneur is expected to have the ability to implement management functions (entrepreneurial skills) that is consistent with entrepreneurship orientation concept. The approach in this study is resource based view (RBV), that all resources are assets such as expertise, organizational processes, attributes, information and knowledge held by the company and led the company to develop and implement strategies to improve the efficiency and effectiveness [6]. This study also uses knowledge based view (KBV) approach to clarify knowledge sharing role on Batik SMEs. Knowledge-based view approach states that if an organization wants to have a competitive advantage, it is important to master knowledge management, which included a knowledge sharing [7]. Knowledge sharing role for SMEs is considered as very important economic resource. Therefore, this study sought to integrate the resource-based view (RBV) and knowledge-based view (KBV) because knowledge is one of intangible assets as a competitive advantage source for organization [6, 7]. Various theories and research in entrepreneurship field has been able to explain very well the importance of role and impact the entrepreneurship orientation toward innovation and its affect toward business performance [8, 9, 10, 11]. A similar study has been done. The results showed entrepreneurship orientation affects insignificantly toward business performance [12, 13]. The inconsistent results of previous studies become interesting research gaps for further investigation. In this study, measurement of entrepreneurship orientation refers to previous research, with autonomous attitude, proactive attitude and courage to take risk indicators [11]. Previous studies [11] carried out in 25 SMEs in Sri Lanka. The results showed that entrepreneurship orientation affects significantly toward business performance. Basically, entrepreneurship orientation is closely related to management capabilities an entrepreneur. The key to entrepreneurship is how to make right decisions with various calculations and reasoning [14]. The study will also examine the affect of management capabilities as it has been researched [15, 16]. The study findings suggest that management capability, if supported by good knowledge sharing, will be able to improve innovation and performance [17]. This study wants to reexamine contradiction of empirical studies on management capabilities variable and its affect toward business performance. This study attempted to fill a gap of previous studies that show that there is insignificant effect between management capabilities toward business performance [18, 19]. The novelty in this research is to prove whether knowledge sharing on Batik SMEs has very significant role in creating innovations to improve business performance Batik SMEs in East Java. Based on batik process, there are processes to see each other, and the interaction of imitation batik artisans will create the creative process in form of product innovation, or managerial processes that will give birth to exciting new design motifs. The study follows a suggestion (future research) study [10] to analyze the Knowledge Sharing variable to improve business performance in SMEs. Various studies on knowledge sharing in SMEs have also been done by [20,21,22]. The results show that knowledge sharing not only improve the business performance but also very beneficial for SMEs to face the uncertain business competition. Innovation itself is divided into: product, process and managerial innovation [23]. With regard to innovation issue in SMEs, several studies have found inconsistent results. Empirical research shows that innovation has an affect toward business performance [24, 25]. While the results of previous studies [25, 26] showed different results that there is no affect between innovation toward business performance. Therefore, the originality of this study is to fill the research gap by offering innovation role to improve business performance. In addition, this study also examines innovation role in mediating the effect of entrepreneurial orientation, management capabilities and knowledge sharing and toward business performance. The purpose of this study is expected to SMEs, especially Batik SMEs, in future will further enhance innovation and business performance by improving the quality, production processes and have better managerial skills. The study is divided into several sections, section 2 is theoretical study of resources based view (RBV) approach, knowledge based view (KBV), entrepreneurial orientation, management skills, knowledge sharing, innovation and business performance. Section 3 describes the development of hypotheses, Section 4 describes the research methods used, section 5 describes the research findings, part 6 convey the discussion of research and section 7 contains conclusions, suggestions, contributions and future research directions. These research formulations are: 1) weather entrepreneurial orientation, mediated by innovation, affect toward business performance improvement of Batik SMEs in East Java? 2) Whether management capabilities, mediated by innovation, affect toward business performance improvement of Batik SMEs in East Java? 3) weather knowledge sharing, mediated by innovation, affect toward business performance improvement of Batik SMEs in East Java? 4) whether innovation affect toward business performance of Batik SMEs in East Java? Purposes of study were: 1) examine and describe the effect of entrepreneurial orientation, mediated by innovation, toward business performance of Batik SMEs in East Java, 2) examine and explain effect of management capabilities, mediated by innovation, toward business performance of Batik SMEs in East Java, 3) examine and describe the effect of knowledge sharing, mediated by innovation, toward business performance of
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Batik SMEs in East Java, 4) examine and describe the effect of innovation toward business performance of Batik SMEs in East Java. This research has theoretical and practical benefits. Theoretical benefit of this research is to develop theoretical knowledge, particularly theoretical study on entrepreneurial orientation, management skills, knowledge sharing, innovation and business performance. Practical benefit of this research is to provide advice to the government as a model for the development of entrepreneurial empowerment for SMEs.
II. Fundamental Theories

2.1 Resources Based View (RBV) RBV theory describe and classify the company resources as follows: all assets, capabilities, organizational processes, firm attributes, information, knowledge, and others that controlled by company and enables companies to formulate and implement strategies that will improve efficiency and effectiveness [6]. The resources are classified into three categories: 1) physical capital resources, include: physical technology used by the company, plant and equipment, geographic location, and access to raw materials; 2) Human capital resources, include: training, experience, opinions , intelligence, relationships and views of managers and employees to company, and 3) Organizational capital resources, include: corporate formal reporting structure, formal and informal planning, supervision, and coordination, as well as formal relationships among groups within enterprise and between enterprises and the environment [6]. RBV theory usually expressed as a strategic approach with two different views, namely the tendency to look capabilities that become core competitive position but remains affected by market forces [6]. RBV indirectly advise the company to focus on more efficient of resources utilization. Resources can be grouped into tangible resources, intangible resources and capabilities [27]. Tangible resources include: physical buildings, production equipment, raw materials and others. Intangible resources, including corporate reputation, name (brand), culture, technology, knowledge, patents and trademarks, as well as a collection of learning and experience. Capability is a complex combination of assets, people, and processes that companies use to transform inputs into outputs. Resources refer to the intangible asset. Resources can be financial and physical assets, licenses and patents, brand, reputation, expertise as trade secrets, processes and scientific knowledge and human capital, including networks, organizational culture and collective learning [3]. 2.2 Knowledge Based View (KBV) Knowledge based view (KBV) approach illustrates that organization involved in producing, integrating and distributing knowledge. According to this approach, the organization's success is measured from the organization's ability to develop new knowledge based on their own resources. KBV approach also stated that core resources of organization are knowledge [7]. Previous research by [28, 29] suggests that knowledge-based organizations have more creativity and excellence than any other organization. Knowledge is the only source of sustainable competitive advantage. To produce superior performance, in addition to necessary resources and superior capabilities [28], it also need tacit knowledge in organizations to integrate, coordinate resources-resources and capabilities of organization [7]. In knowledge based view, organizational knowledge has an important position as a major source of organizational competence. The development of this view based on resources based view (RBV) approach [7]. According to this view, knowledge is contextual information, experiences, values and opinions of experts [28]. Knowledge-based view is concerned with how organizations create, acquire, apply, protect and transfer the knowledge. Furthermore, competitive advantage based on knowledge and the ability to continually develop is acquired. According to this view, the knowledge element is an important factor for the organization success [29]. 2.3 Entrepreneurship Orientation Entrepreneurship orientation is organization desire to promote and support the creativity, flexibility and risk considerations. It demonstrates entrepreneurial process and to answer the question of how an activity implemented. Conversely, entrepreneurship terms related to the content of entrepreneurial decisions by asking what was done [8]. Previous research [30] concluded that knowledge-based resource and entrepreneurship orientation affect positively toward SMEs business performance. The findings of previous studies that entrepreneurship orientation has a strong relationship with business performance [8]. This study uses the concept from variable measurement of entrepreneurship orientation referring to past study [11]. In small businesses, entrepreneurial behavior manifested itself in two ways. First, on entrepreneurs effectiveness in managing their business. Secondly, with regard to business planning, attitude or response to market. Strategy usage always follows the character of entrepreneurs themselves. Entrepreneurship orientation of entrepreneurs can lead to business performance improvement [10, 11]. Previous research states that market www.iosrjournals.org 18 | Page

leaders often use the innovations and breakthroughs in doing business. In addition, the company expert in a particular field will increasingly necessary innovation [8, 11]. 2.4 Management Capabilities Although researchers had different ideas on various attributes of managerial effectiveness, but basically there are three important components, ie appropriate behavior, motivation and ability (skill) [16]. This study specializing in managerial skills possessed by an entrepreneur. Managerial effectiveness is very important in achieving success in business world. Such behavior are [16]: 1. Controlling the organization environment and resources 2. Organizing and coordination abilities 3. Ability to handle information 4. A place to grow and develop 5. Able to motivate employees and deal with problems or conflicts 6. Able to solve strategic problems Based on resource-based perspective, human resources aspect, such as attitudes, behavior and intelligence is critical to improve performance. Therefore, human resource development practice is part of process of extraction and utilization that can improve performance [6, 31]. Management capabilities is an important aspect for the organization, in addition to ensure employee understanding of what is expected by their organizations and provide them with the skills and knowledge to interact effectively with customers and others in company [31]. 2.5 Knowledge Sharing Knowledge sharing is one step in knowledge management to provide an opportunity for group members, organization, or company to share the knowledge, techniques, experiences and ideas that they have to other members [22]. Knowledge sharing is the most important process in knowledge management [10, 21]. Knowledge sharing can only be done if each member had ample opportunity to express opinions, ideas, criticisms and comments to other members. A critical factor in implementing knowledge management in an SME is a knowledge sharing. Knowledge sharing implementation takes at least 6 (six) phases, namely creating, seizing, capturing, storing, processing, and distributing the knowledge. This includes the desire of each member organization to share knowledge [20, 21, 22]. 2.6 Innovation Innovation is openness and usage of new knowledge, technology, and creativity process to create a product or service according to customer desires [31]. There are five types of innovation: 1) the introduction of a new product or a qualitative change in an existing product, 2) new process innovation to an industry, 3) new market opening, 4) new sources development to supply raw material or other inputs and 5) the changes in industrial organization [29, 31]. Innovation is transformation the knowledge to products, processes and services; action using something new [31]. Innovation is the successful exploitation of a new idea. In other words, innovation is the mobilization of knowledge, technological skills and experience to create products, processes and services. Innovation is the main function in entrepreneurial process [31]. Conventionally, the term is defined as a breakthrough innovation that relates to new products [23]. Innovation is a broader concept in discussing the application of an idea, a product or a new process and a high level of an individual or a unit in a system [26]. 2.7 Business Performance The definition refers to the performance achievement level or company achievements within a certain time period. The company performance is crucial development of company. The company's goal consists of: continue exist (survive), to make a profit (benefit) and development (growth). It can be achieved if the company has a good performance. Performance can be seen from the company's sales, profitability, return on capital, turnover level and market share [30]. Business performance can be measured by seven indicators: number of complaint, return on investment, financial performance, sales growth, productivity, customer satisfaction and employment satisfaction [26]. Previous study [19] uses performance measurement indicators of growth in sales, growth in assets and profitability.
III. Conceptual Framework For Research

3.1 Research Hypothesis The hypothesis of this study are follows: H1: The better the entrepreneurial orientation, mediated by innovation, the higher business performance of Batik SMEs in East Java. www.iosrjournals.org 19 | Page

H2: The better management capabilities, mediated by innovation, the higher business performance of Batik SMEs in East Java.. H3: The better knowledge sharing, mediated by innovation, the higher business performance of Batik SMEs in East Java. H4: The better innovation, the higher business performance of Batik SMEs in East Java.
Figure 1. Research Model 3.2 Operational Variables Definition Entrepreneurship Orientation is capability that reflecting the SMEs preferences in strategic decision making and business operations through autonomous implementation, proactive attitude and courage to take risks. Operationalization of variables entrepreneurship orientation is result of research findings [11], based on previous study [8], namely autonomy attitude, proactive attitude and courage to take risks. Entrepreneur management capabilities is a set of skills and competencies, both administrative and operative, in performing management functions that consists of ability to plan, organize, direct and implement the assignment and supervision. Management capabilities is measured by indicators developed from the study [16] which has been modified in accordance with the object study, namely: 1) ability to plan, 2) making a decision; 3) market share; 4) recognizing the market changes, 5) solving problem, 6) improving quality; 7) motivating employees; 8) delegation; 9) creating a marketing strategy; 10) well communication; 11) teamwork building, and 12) the ability to make a budget. Knowledge sharing is the action taken by SMEs leader in knowledge acquisition, knowledge dissemination and responsiveness to knowledge, work experience, ideas, expertise and information to other employees. This study was developed from previous studies [20] which has been adapted to the object studied. Innovation is an activity that leads to changes in product or service (technical) and production process as well as managerial that offered by the company to adapt to dynamic environment [23]. Innovation measurements in this study are based on product, process and managerial innovation. Business performance is output and capacity of all efforts made by organization to achieve its objectives. This study was developed based on the findings of study [19] namely growth in sales, growth in assets and profitability. Table 1 Research Instruments
Variables Entrepreneurship Orientation (X1) Indicators X1.1 Autonomy attitude X1.2 Proactive Attitude X1.3 Brave to take risks X2.1 Capable to plan X2.2 Capable to make decisions X2.3 Capable to seize market share X2.4 Able to recognize changes in market X2.5 Capable to solve problems X2.6 Capable to improve the quality X2.7 Capable to motivate employees X2.8 Capable to delegate work X2.9 Capable to create a marketing strategy X2.10 Capable to communicate well X2.11 Capable to build teamwork X2.12 Capable to create a budget X3.1 Acquiring knowledge X3.2 Spreading knowledge X3.3 Response toward knowledge Y1.1 Product innovation Y1.2 Innovation process Y1.3 Managerial Innovation
Management Capabilities (X2)
Knowledge sharing (X3)
Innovation (Y1)
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Business Performance (Y2) Y2.1 Relative sales growth Y2.2 Growth assets Y2.3 Profitability relative
The variables is measured by Likert scale with 1 to 5 ranges. Range 1 indicates strongly disagree, 2 indicates disagree, 3 indicates normal /neutral, 4 shows agree, 5 indicates strongly agree.
IV. Research Methods

4.1 Population and Sample This study uses a quantitative approach. The research was conducted on Batik SMEs in East Java. The study population was 1.895 Batik SMEs in East Java . Based on two-stage sampling method, the sample locations are Batik SMEs in Sidoarjo, Jember, Tulungagung, Tuban and Bangkalan. Sample areas defined by using judgment sampling, where samples were selected using certain considerations according with research purpose or research problems developed. The area was selected based on criteria 1) Represents districts that having more than 100 Batik SMEs, 2) In line with strategic plan of Department of Cooperatives and SMEs in East Java 2009-2014, the regional economic development priorities based on regional development dimension is determined by each region. Samples for each of selected districts are determined by proportional random sampling. That is, the sample taken randomly in each region population. Sample size of each region is proportional to magnitude of subject area concerned [32]. Determination samples is based on assumptions that must be met in data collection and processing procedures. Therefore, the study samples are 125 entrepreneurs Batik SMEs in East Java . 4.2 Data Collection Data collected in this study are two types: primary and secondary data. Primary data was collected by distributing questionnaires directly to the 125 respondents. Once, it is done in-depth interviews. The goal is to get a clear picture of information and what the conditions on field, what innovations ever made and how business performance of SMEs Batik. 4.3 Data Analysis Methods This study used two types of analysis, namely descriptive and quantitative techniques or inferential statistical analysis to data obtained in field. Descriptive analysis is used to describe more deeply each variable in this study. Quantitative techniques are used to see how strong the effect between independent variables and dependent variables, by analyzing the data with Likert scale score [32]. Causal relationships are defined in this study using a model that is not simple. The variables in model has a recursive relationship. This causal relationship requires analytical tools that are able to explain the relationship, so the inferential statistical methods used to analyze data of this research is based-variance SEM analysis of Partial Least Square (PLS). The inner model is the relationship between entrepreneurship orientation (X1), management capabilities (X2), knowledge sharing (X3), innovation (Y1) and business performance (Y2). Outer model (measurement model) specifies the relationship between indicators of latent variables. Based on summary results for validity and reliability of instrument, all study variables are valid, because all indicators have correlation coefficient greater than 0.30 and Cronbach alpha greater than 0.60. That is, all statements items that serve as instrument are a reliable. It can be concluded that all point (item) statement used to measure entrepreneurship orientation variables (X1), management capabilities (X2), knowledge sharing (X3), innovation (Y1) and business performance (Y2), is valid and reliable. Therefore, the questionnaires used are valid and reliable or have an acceptable level of reliability as instruments to measure each indicator variable and subsequent data analysis [33].
V. Analysis And Results

5.1 Respondents Characteristics Respondents characteristics describe the characteristics of Batik SMEs entrepreneurs as sample of this study. Most respondents are female (68%). Majority of respondents aged between 38-45 years (38.40%). Business experience most of respondents were between 16-20 years (34.40%). The majority respondents (45.60%) produced handmade batik. Majority respondents have employees between 18-24 people (36.80%). Majority respondents education level are high school/equivalent (58.40%). Based on the results of annual sales, 33.60% respondents has annual sales between Rp. 75 million to Rp. 149 million. 5.2 Linearity Test Assumptions Before making more evaluations with Partial Least Square (PLS), it is necessary to test the linearity assumption, namely weather relationship between latent constructs tested had a linear relationship. Linearity test
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aimed to see whether the model used is a linear model. The results of linearity test relationships between variables are presented in Table 2. Linearity test result in Table 2 shows that relationship between entrepreneurial orientation, management capabilities and knowledge sharing toward innovation and business performance is linear, with the significance level is less than 5 percent (p> 0.05). It can be concluded that all the relationships between the variables in structural models are linear. Therefore, it meet linearity assumption. Thus, further analysis can be done. Table 2 Test Results Linearity Assumption
Variable Relationship Exogenous variable Endogenous variable Entrepreneurship orientation (X1) Innovation (Y1) Management capabilities (X2) Innovation (Y1) Knowledge Sharing (X3) Innovation (Y1) Entrepreneurship orientation (X1) Business Performance (Y2) Management capabilities (X2) Business Performance (Y2) Knowledge Sharing (X3) Business Performance (Y2) Innovation (Y1) Business Performance (Y2) R2 0.531 0.606 0.138 0.496 0.525 0.082 0.655 Linearity test result F Sig. 139.269 .000 188.841 .000 19.749 .000 121.170 .000 136.022 .000 11.074 .001 232.998 .000 Desc. Linear Linear Linear Linear Linear Linear Linear
5.3 Evaluation of Goodness of Fit Model The calculations show the predictive value-relevance is Q2 = 0.717 or 71.70%. That is, accuracy or timeliness of this research model can explain variance of entrepreneurship orientation, management capabilities, and knowledge sharing toward innovation and business performance of 71.70%. The remaining 28.30% is explained by other variables that are not included in this research model. Table 3 Goodness of Fit Test Results
Structural Model 1 2 Endogenous Variable Innovation (Y1) Business Performance (Y2) R-square 0.677 0.691
5.4 PLS (Partial Least Square) Analysis The test results in Figure 3 shows that from seven direct effect tested, there are five have significant effect, namely: (1) a entrepreneurship orientation affect significantly toward innovation, (2) management capabilities affect significantly toward innovation, (3) knowledge sharing affect significantly toward innovation, (4) entrepreneurship orientation affect significantly toward business performance, and (5) innovation affect significantly toward business performance. While there are two insignificant, namely: (1) management capabilities affect insignificantly toward business performance, and (2) knowledge sharing affect insignificantly toward business performance.
Note: (s) = significant at = 0.05, (ns) = not-significant Figure 2. Diagram for hypothesis testing and path coefficient for PLS
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Table 4 The Direct Path Coefficient Path tCoefficie statisti Endogen n c Innovation (Y1) 2.57 0.246 8 Business Performance 2.10 0.178 (Y2) 6 Innovation (Y1) 5.92 0.546 6 Business Performance 1.62 0.134 (Y2) 1 Innovation (Y1) 2.18 0.172 7 Business Performance 0.14 0.006 (Y2) 2 Business Performance 6.78 0.573 (Y2) 3
Direct Effect Eksogen Entrepreneurship Orientation (X1) Entrepreneurship Orientation (X1) Management Capabilities (X2) Management Capabilities (X2) Knowledge Sharing (X3) Knowledge Sharing (X3) Innovation (Y1)
pvalu e 0.01 1 0.03 7 0.00 0 0.10 8 0.03 1 0.88 7 0.00 0
Description
Significant Significant Significant Not Significant Significant Not Significant Significant
Table 5 The Indirect Path Coefficient and Hypothesis Testing Indirect effect (Mediation) Mediasi Innovation (Y1) Innovation (Y1) Innovation (Y1) Path Descripti Coefficie on Endogen nt Business Performance 0.141 Significan (Y2) t Business Performance 0.313 Significan (Y2) t Business Performance 0.099 Significan (Y2) t Nature of Mediation Partial Mediation Complete Mediation Complete Mediation
Eksogen
Entrepreneurship Orientation (X1) Management Capabilities (X2) Knowledge Sharing (X3)
The test results the indirect effect path coefficients (mediation) in Table 5 shows that effect entrepreneurship orientation toward business performance through innovation is a partial mediation. This means that relationship between entrepreneurship orientation variables can directly affect business performance, as well as through innovation as mediation. Furthermore, innovation is significantly affected by management capabilities knowledge sharing and innovation and significantly affect business performance. But management capabilities and knowledge sharing directly have insignificant effect toward business performance. Therefore, innovation variables can be considered as complete mediation. That is, the relationship between management capabilities and knowledge sharing are insignificant toward business performance, but through the innovation as mediation able to significantly affect business performance. Hypothesis testing shows the following results. (1) Hypothesis 1 received, the entrepreneurship orientation, mediated by innovation, can improves business performance. (2) Hypothesis 2 is received, management capabilities, mediated by innovation, can improve business performance. (3) Hypothesis 3 received, knowledge sharing, mediated by innovation, can improves business performance and (4) Hypothesis 4 is accepted, that high level innovation can improve business performance.
VI. Discussion
6.1 Innovation role In Mediating the Effect of Orientation Entrepreneurship toward Business Performance The results showed innovation becomes partial mediation the effects of entrepreneurship orientation toward business performance. These findings shows that entrepreneurship orientation directly affects business performance. These findings extend previous research by examining the relationship between entrepreneurial orientation, innovation and business performance [14]. Using 398 samples SMEs in Malaysia, one of study results concluded that innovation mediates the effect of entrepreneurship orientation toward business performance of SMEs. This is consistent with research result that final result of business performance depends on a high degree of innovation [31, 34]. If the company is able to increase the entrepreneurial orientation, innovation will be able to provide a positive affect toward business performance improvement. The study
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findings provide the concept of effective entrepreneurship orientation development and the innovative behavior of entrepreneurs to face market dynamics. Interviews with some respondents of Batik SMEs in East Java show that innovation is needed in creative process of batik creation, expansion the existing production processes and beneficial for marketing activities of batik products on market. Product innovation can be seen from the quality of batik produced, such as writing, and stamp combination batik. Some batik craftsmen in East Java has known batik dyeing process that has been known in Central Java. They learned batik from Central Java to absorb knowledge and inspiration of new coloring techniques. The statement explained that innovation can arise if it based on entrepreneur characteristics who has attitude to always outperform its competitors. This will bring innovation and ultimately improve business performance of Batik SMEs in East Java, as stated in earlier results that a good entrepreneurship orientation will enhance SME innovation that will ultimately improve the performance [35]. The results of this study extend the research [14.35] which concluded that innovation is a partial mediator between entrepreneurship orientation and business performance. Previous research conducted with a sample of 368 SMEs Malaysia. It showed that entrepreneurship orientation was required as a key factor to create high products quality to encourage increased business performance. The nature and specific characteristics of SME is keen to see the opportunities and creative to use its resources. It makes SMEs to survive and win the competition [35]. 6.2 Innovation role In Mediating the Effect of management capabilities Toward Business Performance Referring to indirect test, path coefficients the effect of management capabilities toward business performance, mediated by innovation, shows positive values (Table 4). This result means that management capabilities has insignificant direct effect toward business performance, but through the innovation mediation, it significantly can affect business performance of Batik SMEs in East Java. The study result support the concept [16] which states that if you want to run a business successfully, it is necessary to maintain good management capabilities. These study findings confirm the management skills theory [36] which states that an entrepreneur, in addition to having a creative talent, also must understand good management to create innovations in their work. Empirical facts (mean) showed that majority of respondents said innovation has been implemented. Management capabilities, based on respondents' assessment, described by its ability to recognize changes in market and ability to build teamwork, while innovation is explained by product innovation. Business performance described by relative profitability. The results of this study reinforce the notion that innovation is an outcome of management capabilities to be able to produce high performance [15]. That is, management capabilities that managed rightly will generate innovation that needed for business performance excellence. 6.3 Innovation role in Mediating the Knowledge Sharing Effect toward Business Performance Innovation in this research model is a complete mediation variable. That is, knowledge sharing directly has insignificant effect toward business performance, but through innovation mediation, it can significantly affect business performance. Thus, there is ample empirical evidence that good knowledge sharing significantly affect toward business performance improvement, which is mediated by innovation. These findings confirm previous research that knowledge sharing will affect significantly through innovation as antecedents [24]. Knowledge sharing effect toward innovation also included in study [9, 10, 20]. Knowledge sharing implementation will provide excellent benefits for business performance improvement of SMEs, such as increased competitive advantage [37], improved financial performance [38, 20, 21], increased innovation and networking products [39]. Support from employers of Batik SMEs itself is absolutely necessary for the success and benefits of knowledge sharing implementation [40]. The results of this study support the knowledge-based view of firm [7, 41] about the concept of knowledge sharing as a central mechanism in any organization to leverage affect business performance improvement. Referring to the RBV theory [6], the findings of this study provide insights to integrate the resource-based view and the knowledge-based view. In this case the knowledge sharing serve as capability for Batik SMEs that leverage organizational capabilities as a unique resource and can not be copied perfectly to achieve superior performance as source of sustainable competitive advantage. 6.4 Innovation capability effect Toward Business Performance These study findings provide empirical evidence that innovation, reflected through product innovation, can increase assets growth as a reflection of business performance of Batik SMEs in East Java. The results of this study confirms innovation theory [42] which states that simultaneous innovations can improve business performance. That is, a good innovation can support business performance improvement. Innovation is an important function in management, and has a direct effect toward performance. The results of this study extend research studies [23, 24] who found a positive effect of innovation toward business performance. www.iosrjournals.org 24 | Page

Batik SMEs Innovation also encouraged the emergence of new success ideas that reflected on product, process and managerial innovation. Product innovation is a factor preferred in practice, measured by the ability to increase the novelty of product produced as compared to competitors, improving the new product quality that produced, quicker development of new products compared to competitors. SMEs current is required to produce good quality products, creative motifs and batik dyeing and innovation in new product development. Empirical facts show that product innovation is the most preferred factor in the implementation. These results confirm the findings [43] that product innovation are important determinants of business performance. Interviews with respondents, employers of Batik SMEs in East Java, shows that Batik SMEs recognize the threat came from invasion of batik printing products which can be easily found in market. Therefore, batik SMEs constantly make new innovations in creating new motifs and classical motifs creation and then adjusted to the current market demand. This study is contrast to results of studies [25, 26] which concluded that innovation has insignificant effect toward performance. The results of previous studies [25] were carried out with a sample of 333 small businesses in South Korea. The results show that innovation has significant negative effect toward performance. The analysis technique used was LISREL with a Likert scale of measurement.
VII. Research Originality And Implication

This study contributes to theoretical development of management science, particularly entrepreneurship orientation theory, management skills, knowledge sharing and innovation to improve business performance, both directly or indirectly, based on the resource-based view of firm [6, 7, 27 ], the theory of entrepreneurship orientation [8]. This study also contributes to theoretical knowledge-based view of firm [7, 42]. The resource-based view of firm stresses that organization resources can be a resource that enables organizations to have internal resources to encourage organization competitive advantage [6]. The study's findings also strengthen the resource-based strategy approach. This strategy emphasizes the role of resources and organization capabilities as basic principles of strategy and organizational profitability determinants [7]. Theoretical contribution of this study also reinforces the entrepreneurship theory with emphasizing that entrepreneurship orientation is a process, practice and decision-making activities that lead to the development and creation of new and innovative products that can differentiate an organization with other organizations in market [8]. It is important for SMEs to continue to maintain a good level of entrepreneurship orientation to achieve high business performance. The results of this study also support the knowledge-based view of firm. The concept of knowledge sharing is a central mechanism in any organization to leverage the affect of organization business performance improvement [7]. The knowledge sharing concept in this study is also one novelty because not many studies examine in depth the implementation of knowledge management, particularly the implementation of knowledge sharing in SMEs. Implications of study are entrepreneurs of Batik SMEs need to understand the constraints in promoting innovation in order to support the new products development that have a competitive advantage in marketplace. Some entrepreneurs Batik SMEs have concerns in marketing the product. Therefore, it is time entrepreneur of Batik SMEs to develop informal mechanisms actively, which is considered the most applicable to small and medium enterprises in sharing and exploiting knowledge that determine the quantity and quality of decisionmaking that qualified for Batik SMEs, so knowledge creation process will take place more quickly and effectively.
VIII. Conclusion, Limitations And Future Research

This study results show the important role of innovation as a mediating link between entrepreneurial orientation, management capabilities and knowledge sharing toward business performance. Innovation can provide significant and tangible contribution to support business performance improvement on Batik SMEs in Java, as a partial or complete mediation. The results also showed that high innovation can improve business performance. These results indicate that indicator of product innovation implementation became priority and have dominant contribution to reflect innovation. Meanwhile, growth in assets is the most important indicator to reflect business performance measurement. That is, an increase in product innovation can determine which assets growth as a reflection of business performance, thereby providing a significant contribution toward business performance improvement of Batik SMEs in East Java . This research limitation is not using control variables, such as age entrepreneur. Most older entrepreneurs showed a more conservative attitude in running the business than younger entrepreneurs. The study also does not distinguish between Batik SMEs managed by men and women entrepreneurs. Women employers of Batik SMEs seem more willing to take risk and be more proactive in running their business than men. www.iosrjournals.org 25 | Page

Accuracy and precision of model is 0717. This means that variance of entrepreneurial orientation, management skills, knowledge sharing, innovation and business performance variables can be explained by the model by 71.70% and the remaining 28.30% explained by other variables. Therefore, further research could develop a research model by adding other variables such as the characteristics of business environment, market orientation, culture or developing quality measurement models such as business performance, namely: customer delivery performance. In additions, the object and scope of study's respondents can be advanced, not just Batik SMEs in East Java but throughout Indonesia.
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Organizational Change Capacity, Environmental Uncertainty, and Organization Performance Studies on Traditional Retail Ownership of Chinese and nonChinese in Malang
Lussia Mariesti Andriany1, Mintarti Rahayu1, Djumahir1
1
Graduate Programme of Faculty of Economic and Business, University of Brawijaya, Indonesia
Abstract: This study aims to show the effect of Organizational Change Capacity (OCC) and environment
uncertain on traditional retail performance. In addition, this study also shows how cultural differences, reflected in ethnic differences in retail ownership of traditional Chinese and non-Chinese will affect organizational performance, and to differentiate the effect of OCC and environment uncertain on organization performance. This study uses a quantitative approach as the primary analysis method to explain the research results that supported by qualitative information of interview. The samples were 37 retails in Malang City. The respondents are the owner of retail. Data were collected directly by survey method using questionnaire instrument. Then the data is analyzed in two stages. The first stage is confirmatory factor analysis to determine the scores factor of each indicator. Furthermore, multiple regression analysis with dummy variables is used to test the research hypothesis. The findings of research is empirical evidence the effect of OCC on organizational performance, role of cultural differences on performance, and culture role to differentiate the effect of OCC on organizational performance. Uncertainty does not affect organizational performance and cultural differences do not make a difference in predicting the external environment in traditional retail. Keywords: culture differences, environmental uncertainty, organizational change capacity, organization performance
I.
Introduction
Today organization will face more severe challenges. Business environment is constantly changing with higher competition level (Lawler and Woley, 2006; Hutabarat and Huseini, 2006). It attracted the leader attention of any organization that wants to survive in those conditions. But in reality, many organizations do not able to survive for several reasons. First, practice design always pushes to achieve stability and mentioning the changes importance with small portions (Lawler and Woley, 2006; Andrews, 1971). Second, the organization resources inability to understand the importance of change (Clarke, 1994). Third, notion that the changes is expensive (Lawler and Woley, 2006). In short term, the organization stability will impact on value and high organizational performance, but in long term, organization stability would make organization difficult to adjust to their environment (Judge and Blocker, 2008). Accordingly, Welch (2005) in Judge and Douglas (2009) states that an organizations capability to make changes is key to win the 21st century competition and a new strategy is very important for organization (Lawler and Woley, 2006). In addition, training materials conducted by WHO (2003) shows the change is beneficial to maintain survival of organization to face tahun age change. The above description shows that capability to make changes is very important for the organization. How large the organizations capability to make changes is known from Organizational Change Capacity (OCC). Elenkov and Judge (2005) refer to OCC as one of organizations dynamic capability to adapt old capability to new threats and opportunities as well as an organizations capability to create new ones. In line with the idea, Judge and Douglas says that OCC is a combination of managerial and organizational capability of an organization to adapt more quickly and effectively than their competitors in constantly changing circumstances. OCC description above shows that OCC would relate to how organizations can use their abilities to compete in a constantly changing situation. Some researchers previously had tried to unravel the relationship of OCC with organizational performance to prove that OCC is one of tools organization to compete. These studies show different results. Siggelkow and Levinthal (2003) argued that the higher the change capability of an organization, the higher of organization performance. In line with these findings, Judge and Elenkov (2005) also showed a positive relationship between the OCC and the organizations environmental performance. Conversely, Pagell and Krause (2003) showed that higher flexibility does not correlate on organization performance in manufacturing companies. The contradictory research findings made the need for reexamination the influence of OCC on organizational performance. www.iosrjournals.org 28 | Page
Organizational Change Capacity, Environmental Uncertainty, and Organization Performance

Besides looking OCC as organization internal factors to respond the external environment, organizations also need to look at external environment itself. Organizations external environment is seen as an unpredictable dynamic conditions change, and can create opportunities and challenges for organization (Child, 1997; Swamidass and Newel, 1987; Clarke, 1994). Therefore, success also depends on organizations capability to monitor their external environment (Boyd and Fulk, 1996). Organizational difficult to forecast external environment changes, especially related to the market demand and the competition level (Suardhika, 2011), is a source of organization uncertainty (Miliken, 1987). Several previous studies indicate the organizational external environmental uncertainty level will affect Organization Performance. Wiklund (1999) states the external environmental uncertainty level influence organizations organizational performance regardless of chosen strategy. This finding was supported by Nurhajati (2004) which states that external environment related to customer positively affect organizational performance. These results are contrast to Suardhika (2011) which states that an increase in environment uncertain and competition intensity faced by organization is able to inhibit or degrade their performance. In contrast to these three studies, other studies found no association between external environment on organizational performance (Pagell and Krause, 2003) and found no direct relationship between the two variables (Pelham, 1999; Rivard et al., 2005; Parnell et al., 2000). Contradictory results of these studies provides an opportunity to further explore the relationship between the environmental uncertainty, manifested in competition level and changes in market demand on organization performance. The description above shows two research gap. First, it has not been showed clearly how the relationship between OCC with organization performance in various industries type. Second, there are different views the role of environmental uncertainty in relation with organization performance. Previous research gaps will require disclosure the relationship between OCC and environmental uncertainty on organizational performance in a particular cultural context, in accordance with suggestions for future research of Judge and Douglas (2009). A study on different cultures serve to broaden understanding of OCC because in different cultures, organization capability to change and adapting to business environment will be different (and Wolliams Trompenaars, 2003). Some previous research has shown about how culture affects organizational perspective on changes, organization external environmental conditions, and organizational performance. Judge and Elenkov (2005) tried to examine how the relationship OCC and performance in Bulgaria organizations. The results showed a strong positive correlation between OCC and business environment performance. Furthermore, Kirsch et al. (2012) stated that culture will have an impact on organization changes. The results stated that difference in performance improvement, turbulence, communication, management of change, employee engagement and emotional expression are influenced by cultural dimensions. Harzig and Hofstede (1996) also showed the effect of culture on change resistance level. Based on the description, researchers are interested to uncover effect of cultural, which is reflected in ethnic ownership of an organization namely Chinese and non-Chinese, on organizational performance and relationship between OCC and environmental uncertainty on organization performance. Chinese ethnicity selection as basis of cultural differences is based on several reasons. First, the dominance of Chinese ethnic in trade sector, especially in Indonesia is very visible. Fujitsu Research Studies in Tokyo Japan stated that approximately 73% of businesses in Indonesia is controlled by Chinese ethnic (Munarwan, 2011). In addition, business operated by Chinese generally appears as a dynamic business (Rahayu, 2005). Based on description above, the purpose of this study is to show the effect of OCC and environment uncertain on organization performance. In addition, this study also aims to uncover the role of cultural differences in distinguishing organizational performance, and the effect of OCC and environment uncertain on organization performance. The explanation is expected to expand knowledge the relationship of OCC, environmental uncertainty, and organization performance. In addition, description the relationships in different ethnic are expected to expand the organization concept operated by Chinese and non-Chinese ethnic. This study is also expected to provide practical benefits for businesses so they can understand the change is unavoidable in running the business. Retailer can also find out how retailer with different cultures manage and utilize its business to keep their businesses.
II.
Theoretical and Literature Review
2.1. Organizational Change Capacity (OCC) Organizational Change Capacity (OCC) or organization capacity to change is a combination of managerial and organizational capability of an organization to adapt more quickly and effectively than their competitors in changing circumstances (Hatum and Pettigrew, 2009; Judge and Douglas, 2009; Buono and Kerber, 2009). In another study, the OCC is referred to as dynamic organizational capability to adapt old capability to new threats and opportunities as well as an organizations capability to create a new (and Elenkov Judge, 2005). OCC concept relates to other concepts, such as organizational flexibility (Palaniswamy and Sushil, www.iosrjournals.org 29 | Page

2003), which is the capacity to respond to environmental changes. In addition, the OCC also related to an organizations willingness to accept change, where the idea began to grow in line with the importance of change for an organization (Butler, 2003). OCC concept is also known as a unique concept for a few reasons (and Elenkov Judge, 2005). First, the OCC is a concept that saw the readiness of all aspects and not just individuals within organization to change (Cunningham et al., 2002). Second, the concept is not just looking at OCC as intangible organizational capabilities, such as individual capability, but also looks at tangible organization capability, such as organizational infrastructure to promote or inhibit the change (Tsoukas and Chia, 2002). Previous description shows that OCC would relate to how organizations can use the capability owned, both managerial capability as intangible capabilities of organization, and intangible organizational capabilities, to apply those capabilities to face threats and opportunities posed by competition condition that constantly change (and Elenkov Judge, 2005; Judge and Douglas, 2009; Hatum and Pettigrew, 2009). 2.2. Environmental Uncertainty Environmental uncertainty is organization inability to predict accurately their external environment (Miliken, 1987) which is seen as an dynamic conditions with unpredictable change, and can create opportunities and challenges for organization (Child, 1997; Swamidass and Newel, 1987; Clark et al., 1994), so the organization success depends on their capability to monitor their external environment (Boyd and Fulk, 1996). Organizations external environment consists of competition level conditions and consumer tastes changes (Rivard et al. 2005) that would make organizations continues to seek ways to adapt in order can survive and winning competition (Suardhika, 2011). 2.3. Organization performance Each organization will always strive to achieve the decided goals. Goal is the end result being pursued through the existence of company and its operations, such as sustainability, profitability, efficiency, satisfaction, and employee development, quality of products or services to consumers, market leadership, and so forth (Glueck and Jauch, 1988). Generally, the concept of organizational performance is based on idea that company is a collection of productive assets, including human resources, physical resources and capital, to achieve a common goal (Carton and Hofer, 2006). Business performance, beside become a reflection of organization success or failure, can also describe the results achieved by organization of series of implementation of work function or activity in a given period (Wheelen and Hunger, 2011). In a study of small and medium enterprises, the performance appraisal is done by using the financial and non-financial approach to measure the extent a business achieve its goals (Chong, 2008). The statement supports the suggestions for future studies of Parnell et al. (2000) which states that a comprehensive performance assessment is important to do to get comprehensive information about organizational performance.
III.
Research Hypothesis and Research Model
3.1. Organizational Change Capacity and Organization Performance Several previous studies show different results regarding the relationship between OCC and organization performance. Siggelkow and Levinthal (2003) argued that if organizations are increasingly able to change, then their relative performance will be higher. Meanwhile, Judge and Douglas (2009) showed there is a relationship between organization capacity to change and capability to generate competitive advantage. Judge and Elenkov (2005) also showed a positive relationship between OCC and organizations environmental performance. Adversely, Pagell and Krause (2003) showed the increase in flexibility is not related to the organization performance in manufacturing companies. Description of research results made researcher interested in studying again the effect of OCC on organization performance using the following hypothesis: H1: Organizational Change Capacity (OCC) affect on organization performance. 3.2. Environmental Uncertainty and Organization Performance This study assumed the environmental uncertainty affect organizational performance. Environmental uncertainty is seen as an organizational inability to predict accurately their external environment (Miliken, 1987). Previous researchers showed different results for the relationship of environment uncertainty and organization performance. Wiklund (1999) states that organizations external environment affect their performance regardless of chosen strategy by organization. Nurhajati (2004) states that external environment that related to buyers positively affect organizational performance. This is in contrast to results Suardhika (2011) which states that environmental uncertainty and the intensity of competition faced by organization is able to inhibit or degrade their performance. In contrast to the three studies, other studies have found no link between the external environment and organizational performance (Pagell and Krause, 2003) and found no direct relationship between the two variables (Pelham, 1999; Rivard et al., 2005; Parnell et al., 2000). Description of studies results www.iosrjournals.org 30 | Page

allowed the researchers keen to re-examine the effect of environmental uncertainty external to organizational performance using the following hypothesis: H2: External environmental uncertainty affects the organization performance. 3.3. The role of culture in relationship between the OCC, environmental uncertainty, and organization performance Research Kirsch et al. (2012) stated that difference in performance improvement, turbulence, communication, change management, employee engagement and emotional expression, is affected by cultural dimensions. Cultural differences will impact on how organizations create structures, how employees are motivated, and what approach used to change and becoming the most successful (Kirsch et al., 2012). Accordingly, Walumbwa et al. (2007) says that cultural differences will affect on organizational change and organizational characteristics, such as compensation system, performance appraisal, teamwork and team collaboration, organizational structure, and leadership style. Research results by Harzig and Hofstede (1996) shows the effect of culture on level of resistance to change. Based on these explanations, the researchers will use culture as a factor that distinguishes organizational performance, and differentiate the effect of OCC and environment uncertain on organization performance. Hypotheses constructed based on above description are: H : Culture will become variables that play a role to differentiate the organization performance . H3a : Culture will become variable that plays a role to differentiate the effect of Organizational Change Capacity on organization performance. H3b : Culture will become variable that plays a role to differentiate the effect of environment uncertain on organization performance. From the explanation above, it can be drawn a research model in Figure below. OCC
Unvironmental Uncertainty
Organization Performance
Culture Differences Figure 1 Research Model
IV.
Methodology
4.1. Research Context The context of this study is to explain the relationship between variables at traditional retail in Malang City, East Java, Indonesia, where based on several reasons. First, the retail itself is a business that growing rapidly in provinces and cities in Indonesia, one of them in Malang City, East Java. This is evidenced in Surabaya Post online article explanation in 2011 that retail growth in East Java reached 7% and dominated by national network establishment of modern retail. Malang, a city with significant economic growth in East Java, which reached 6.7%, is a city dominated by the growth of modern retail development (PPOTODA, 2012). Department of Industry Malang recorded 91 modern retail minimarket has been established, with a composition of 54 Indomaret and 37 Alfamart. Total modern retail minimarket far beyond the ideal limit, the number of 18 to 20 modern retails (PPOTODA, 2012). Unfortunately, the growth in a number does not occur in traditional retail that decreased by 8% per year (Kurniawan, 2012). Second, an increasing the number of modern retail impact on traditional retail performance as evidenced by a decline in traditional retail turnover by 30% (Kurniawan, 2012). It is also mentioned by Saddewisasi et al. (2011) and Suman (2011), that an increasing number of modern retail cause a decrease in sales turnover, turnover and gross profit from traditional retail. If the condition is continue, it will kill traditional retail today. Third, there is an imbalance competition between traditional retail and modern retail, so the bargaining position of traditional retail declines (Suman, 2011). In addition, Kasali (2007) also noted that changes in incomes structure, consumer time constraints, availability of electronic payment instruments, and refrigeration, are also the things that making role of traditional retail business fades. www.iosrjournals.org 31 | Page

4.2. Population and Sample This study population is an infinite population. Therefore, it decided some conditions to obtain the population. First, the traditional retail distances up to 500 meters away from the study of modern retail, taking into account the Regional Regulation No. 8 of 2010 which states that establishment of a modern shop should only be done at a distance of 500 meters between stores modern and traditional shops. In fact, the establishment of modern stores do not consider the regulations, so there is a traditional store located at a distance less than 500 meters from the modern shops. Second, the traditional retail around modern retail is owned by Chinese and nonChinese ethnic to know the difference of performance, OCC relationships and environmental uncertainty performance between the traditional retail ownership of Chinese and non-Chinese ethnic in Malang City. Based on these criteria 37 traditional retail is determined. It is a census population. This amount meets the minimum sample requirements proposed by Hair et al. (2010) which states that minimum amount is five times the indicator sample study, the number of 35 retails. The respondents are owners of traditional retail, because they most familiar and responsible to maintain the organization viability. 4.3. Research Variables and Measurement 4.3.1. The Independent Variables Organizational Change Capacity The operational definition of variables OCC is capability to apply the traditional retail managerial and organizational capability possessed, so retailers can adapt to the changing business environment and survive in those conditions. Managerial capability seen through the capability and willingness of retail owners to change in accordance with changes in business environment, while the organizational capabilities can be seen through venture capital and suppliers availability (Judge and Douglas, 2009; Buono and Kerber, 2009). Environmental Uncertainty Operational definition of environmental uncertainty is the retailers inability to predict the changes from organizations external environment. Variable environmental uncertainty has two indicators refer to Rivard et al. (2005) and Khandwalla (1977) that has been adapted to the study context, the competition level from modern retail and consumer tastes change. 4.3.2. The Dependent Variable Organization Performance Operational definition of organizational performance is the end result of activities undertaken based on resources and has two indicators reflecting the financial approach and non-financial as an approach for performance assessment of small and medium enterprises (Chong, 2008). Profitability is seen through profit and capital, and market is seen through a number of sales and consumer of traditional retail (Sanchez and Marin, 2005). Independent and dependent variables measured using a 5-point Likert scale, where point 1 indicates strongly disagree and point 5 indicates strongly agree. 4.3.3. Dummy Variable Cultural Differences Operational definitions of cultural differences variables are difference of Chinese and non-Chinese ethnic differences proxied with traditional retail owners that make a difference in basic values of traditional retail business that will be different, both in terms of performance and relationship of OCC and environmental uncertainty on organizational performance. Traditional retails of Chinese ethnic were coded with numbers 1 and 0 for traditional retail non-Chinese ethnic. 4.4. Methods of Data Collection and Analysis Data was collected through direct survey method with questionnaire instrument or a list of statements given to respondents. Furthermore, the researchers also conducted interviews with some of traditional retail owner, both Chinese and non-Chinese ethnic. Interviews were conducted to obtain information from owner related to their response to changes of business environment conditions, as well as enriching the quantitative data obtained from the questionnaire. Research instruments were then tested for validity and reliability. Validity test performed to test the accuracy of research instrument size (Sekaran, 2006). It is valid if able to measure accurately what is to be measured. Validity test is performed by bivariate Pearson product moment correlation. A research instrument is valid if the value of correlation coefficient is significant, both at the level of 1% and 5% (Ghozali, 2011). Reliability test is used to measure the consistency of indicator variables. Reliability tests conducted using Cronbach Alpha () and is said to be reliable if it consistently led to the same result for each www.iosrjournals.org 32 | Page

time measurement (Ferdinand, 2006) or have a Cronbach Alpha () above 0.60 (Nunnally, 1978 in Chew et al., 2008). The result of validity and reliability test is all items in instrument are valid and reliable. This research used descriptive analysis and inferential analysis. Descriptive analysis method is used to give an idea of respondents profile and variables description, inferential statistics to test hypotheses of study, and qualitative data analysis to generate the required supplementary information to enrich the results of quantitative analysis. Inferential statistical methods used in study are a confirmatory factor analysis function to see the scores factor of each indicator variable and multiple regression analysis with dummy variables to examine the relationship between the study variables and prove the research hypothesis.
V.
Research Result and Discussion
5.1. Respondents Characteristics The data analyzed in this study are based on research instrument that is distributed directly to all respondents of 37 traditional retails. All instruments distributed can be used in analysis. Therefore, the instrument used level is 37 units or 100%. The initial phase of data analysis is descriptive statistical analysis. One results of statistical analysis is the descriptive characteristics of respondents, as shown in Table 1 below.
Table 1 Respondent Characteristics

No 1 Sex Males Females 2 Development Year (2002 early modern retail development) Until 2002 After 2002 3 Distance from Retail Modern Until 100 meter > 100 - 200 meter > 200 - 300 meter > 300 - 400 meter > 400 - 500 meter 4 Ownership Chinese Non-Chinese Source: data processed (2013) 16 21 43.24% 56.76% 15 6 9 4 3 40.54% 16.22% 24.32% 10.81% 8.11% 29 8 78.38% 21.62% 10 27 27.03% 72.97% Characteristic Number Percent (%)
5.2. Research Variable Profiles The study of research profile is conducted to explore the variables studied based on scores factor, mean, and results of interviews in this study. 5.2.1. Profile of Organizational Change Capacity The study results in Table 2 show that organization owner capability to change, organization owner willingness to change and resources organization has been confirmed as managerial and organizational capabilities that support organization to change and adapting to environmental conditions. This is evidenced by all the indicators have a significant factor score (Sig. <0.05). The capability of traditional retail is strength for the business in order able to compete with modern retail. The results of this study reinforce Judge and Douglas (2009) and Kerber and Buono (2009) that capability is a source to compete in a constantly changing environment. Other information that can be extracted from Table 2 above is organization owner capability to change has the highest score (0.888), followed by organization owner willingness to change (0.861), and then owned resources (0.734). These results meant that organization owner capability to change is the most important for an organization in supporting OCC, and make them survive in competition. However, respondent is highest in resources indicators with a mean of 3.72, while the organization owner capability to change has second rank with average of 3.57. www.iosrjournals.org 33 | Page
Organizational Change Capacity, Environmental Uncertainty, and Organization Performance Table 2 Variable Profile: Organizational Change Capacity
Indicators The owner organization capability to change The owner organization willingness to change Resources owned Source: data processed (2013) Score Factor Coefficient 0.888 0.861 0.734 sig. 0.000 0.000 0.000 Mean 3.57 3.42 3.72
This condition indicates that traditional retail owner thought that most important thing to establish their capability to change is organization resource, such as the availability of suppliers and working capital. Thus, the traditional retail owners do not make their own capability to change as a priority in shaping the OCC. This is consistent with the fact that traditional retailers rely on salesman as their supplier. Therefore, the owner can not quickly replace old products with new products when salesmen come late or did not come to their store. In addition, the majority of products sold by owner of a traditional retail supplied by salesmen who came to them. Therefore, selling price of product will depend on purchase price of product at the salesman. It is not seen as an attempt to adjust the prices of products sold for the latest products by traditional retail owner. The owner did not take the traditional retail items in bulk. It increases the risk of causing business owners do not get a discount from the salesman. It certainly makes the owners are increasingly dependent on base price given by the salesman with no discounts for quantity purchases. 5.2.2. Profile of Environmental Uncertainty The study results in Table 3 show that competition level from modern retail and consumer tastes change are indicator that not confirmed as indicator to make traditional retailers not able to see their external environment condition. It is known from the significant value of factor score that more than 0.05. This result means do not support the environmental uncertainty concept from Rivard et al. (2005) and Khadwalla (1977).
Table 3 Variable Profile: Environmental Uncertainty

Indicators The competition level with modern retail Consumer tastes change Source: data processed (2013) Score Factor Coefficient 0.765 0.765 sig. 0.316 0.316 Mean 3.68 3.48
Conditions in Table 3 shows that competition level from modern retail as well as changes in consumer tastes do not actually make the organizations external environment becomes unpredictable. These results are due to the capability of traditional retailers to adapt to the environmental conditions encountered. In addition, traditional retail also use promotions from modern retail to customize the type of products sold and know the latest price of product. This utilization makes traditional retail able to predict consumer tastes. Therefore, products obsolescence sold by traditional retail can also be avoided. Based on this, the traditional retail actually has been able to predict their external environment despite retail owner considers the competition level from modern retail and consumer tastes change as a source of environment uncertain that will make the traditional retail difficult to survive in a changing environment. 5.2.3. Profile of Organization Performance The study results in Table 4 show that profitability and financial market activity are confirmed as nonfinancial and financial activities to create organizational performance. This is evidenced from all the scores factors of performance indicators with significance value lower than 0.05. These findings reinforce the measurement model of Chong (2008) and Sanchez and Marin (2005).
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Organizational Change Capacity, Environmental Uncertainty, and Organization Performance Table 4 Variable Profile: Organization Performance
Indicators Profitability Market Source: data processed (2013) Score Factor Coefficients 0.924 0.924 sig 0.000 0.000 Mean 3.63 3.59
Other information that can be extracted in above table is the scores factor of two indicators in organizational performance is same, amounting to 0.924. Conceptually, it shows the profitability and market is an important measure in achieving the organization performance because the profits increased and capital will make the traditional retail market increase, whereas an increase in sales and consumers will increase the profits and provide opportunities for retail owners to raise the working capital. However, the traditional view that retail owners achieve high profitability is the strongest measure of performance. This is evident from the mean is higher market indicators score. This means that traditional retailer owners focus their efforts to improve profitability and increase business capital rather than expand the market by trying to increase the number of customers and the number of sales by increasing the number and variation of products sold. These findings indicate that both indicators that having role in shaping the organization performance has not been fully achieved by traditional retail. This finding is consistent with the fact that traditional retail owners tend to keep their customers because their reluctance to seize other retail customers. It happened due to traditional retail owner considers that seizing other retail customers is unfair competition. 5.3. Hypothesis Testing Hypothesis testing is done by looking at significance value of each relationship between independent and dependent variables in the research model. Table 5 shows the test results for each hypothesis by looking at t-test to see significance the relationship of each variable included in model as well as to test the research hypothesis.
Tabel 5 Research Hypothesis Test Result

Notation H1 H2 H3 H3a Variable Relationship OCC (X1) Performance (Y) Environmental Uncertainty (X2) Performance (Y) Cultural Differences (D) Performance (Y) T test t-count 7.100 1.723 -2.130 3.189 -0.5 Sig. 0.000 0.094 0.041 0.003 0.620 Result Accepted Rejected Accepted Accepted Rejected
Cultural Differences (D) OCC (X1) - Performance (Y) Cultural Differences (D) Environmental Uncertainty H3b (X2) - Performance (Y) Source: data processed (2013)
5.3.1. T-test Results Table 5 shows significance the results obtained for each variable relationships or hypotheses. It can be described as follows: H1 : Organizational Change Capacity (OCC) affect on organization performance Table 5 shows that value and significance for the relationship of OCC on organizational performance is 0.000 or less than 0.05. It means OCC affect organizational performance. T-count results are 7.100 and are positive. This means an increase in managerial and organizational capability of an organization will be accompanied by an increase in organization performance. Thus, the first hypothesis (H1) of this study is accepted. The study findings illustrate that traditional retail in Malang City has managerial and organizational capability to improve their performance. Through the capabilities, traditional retail can adapt to external environment change and remain competitive in this condition. These results reinforce the findings of Siggelkow and Levinthal (2003), Judge and Douglas (2009), Judge and Elenkov (2005) which states that Organizational Change Capacity affect organizational performance. Meanwhile, the findings of this study do not support Pagell and Krause (2003) who suggested the increased flexibility does not have a relationship with organization performance in manufacturing companies. www.iosrjournals.org 35 | Page

Based on above presentation, it can be asserted that in order to improve the traditional retail performance environment in changing conditions, managerial and organizational capabilities are needed in order traditional retailers can adjust and maintain survival of organization. Thus, these findings confirm the uniqueness presented by Cunningham et al. (2002) and Tsoukas and Chia (2002) that concept of OCC look at all aspects of organization, the individual aspects and resources that will encourage or discourage a change in organization. H2 : External environmental uncertainty affects the organization performance Information from Table 5, with respect to environmental uncertainty and organizational performance, is significant at 0.094 and t values of 1.723. These results suggest that second hypothesis (H2) is not accepted. These results meant that environmental uncertainty, derived from the competition level and changing consumer tastes, is not a factor that makes the traditional retail performance decline. This finding is interesting because the traditional retail in Malang able to produce a good performance in a changing environment. These findings support the research hypothesis of Pagell and Krause (2003) who stated that external environment does not relate to the performance of manufacturing firms in United States. Moreover, the results also support Pelham (1999), Rivard et al. (2005), and Parnell et al. (2000) that there is no direct relationship between the two variables. In contrast, this study differ with the results of research Suardhika (2011) that the environmental uncertainty is part of business environment dynamics that will degrade SMEs performance in Bali and Nurhajati (2004) which showed that external environment related to buyers will affect the SMEs performance in East Java. The hypothesis test results show the traditional retail in Malang has been able to overcome the external environmental uncertainty by utilizing their managerial and organizational capability. The usage is consistent with the fact that traditional retail owners always try to get information about new products and the latest price of products sold. The information is obtained in several ways, namely through the electronic media, salesmen or business suppliers who come to shop, and the usage of promo done by modern retail. In some ways, the traditional retailers are able to know the new products launched in market and the impact on their performance. Hypothesis testing results explanation inline with Rivard et al. (2005) which states that an increase in environmental uncertainty will make small businesses always look for ways and taking advantage of every opportunity continuously. It will impact on their business performance. H3 : Culture will become variables that play a role to differentiate the organization performance Table 5 shows information that t-count and significance the relations of cultural differences on organizational performance are at -2.130 and 0.041. The significance is lower than 0.05. It means that cultural differences variables are variables that can distinguish organizational performance. The findings from this hypothesis testing supports Kirsch et al. (2012) and Walumbwa et al. (2007) which states that different cultures will affect the organization performance. Value of t-count indicates that traditional retail performance of non-Chinese ethnic as an excluded group (D = 0) is better than the Chinese ethnic retail as included group (D = 1), where business founded by Chinese ethnic were seen as a dynamic (Rahayu, 2005). Negative results of this hypothesis test is inline with the different ways to survive for traditional retail-owned of Chinese ethnic and non-Chinese. This impact on performance perception of business owner. To survive the competition, traditional retail ownership of non-Chinese ethnic make diversification by opening other business, such as opening a pulse counter, restaurant, and LPG dealer. Diversification efforts to make venture capital, profits, number of customers, and increase the number of products sold. While the Chinese ethnic owners do not diversify the business, but retain their early business while maintaining customer loyalty and attention to consumer tastes. Thus, differences way in traditional retail to maintain business make owners perception is different to organization performance. H3a : Culture will become variable that plays a role to differentiate the effect of Organizational Change Capacity on organization performance. Table 5 shows that t count and significance for the relationship of cultural differences and OCC are 3.189 and 0.003. These results meant that cultural differences that reflected in traditional retail ownership differences of is a variable to differentiate OCC of an organization. These results corroborate the results of studies of Kirsch et al. (2012), Walumbwa et al. (2007), as well as Harzig and Hofstede (1996) which states that cultural differences will make a difference in perspectives and approaches to organizational change. OCC with Chinese traditional retail ownership as included group (D = 1) is better than non-Chinese ethnic as excluded group (D = 0). This result is consistent with the fact that Chinese traditional retailers are able to provide a cheaper price than non-Chinese retailer. Retail owners realize that their consumers are very www.iosrjournals.org 36 | Page

sensitive to price, so the owners always try to adjust the prices of products sold with latest market price. The Chinese traditional retailers have no inventory of large quantities products because most of their products are perishable and the prices change rapidly. Supply arrangements could be made because the owner has a good relationship with a number of suppliers namely salesmen and wholesalers who was instrumental in providing the requested product owner at any time (Halim, 2007). Retail owners are also trying to establish good relations with customers in several ways. First, the owner communication with consumers is not limited to products that consumers want to buy, but the owner also tried to gather information about consumer tastes while offering products sold outside of products that consumers want. Second, owners try to help consumers by providing information on products when consumers have many choices of one product to be purchased. The explanation is inline with Halim (2011) which stating that Chinese people are friendly with their customers. In line with the statement, Munarwan (2011) showed that Chinese are able to capture buyer confidence with communicating to their customers. When linked with the organization performance, managerial and organizational capability, traditional retailer ownership of Chinese ethnic apparently have an impact on a better performance than the traditional retail ownership of non-Chinese ethnic. This is evidenced by the value of t-count for cultural differences dummy on OCC is higher than cultural difference dummy on performance. Thus, the cultural differences is a variable that distinguishes OCC effect on organizational performance. H3b : Culture will become variable that plays a role to differentiate the effect of environment uncertain on organization performance. Information from Table 5 for the relationship between cultural differences and environmental uncertainty has t-count of -0.5 and significance of 0.62. These results indicate that cultural differences is not a variable to differentiate traditional the retail perspective to their external environment. These results reject Harzig and Hofstede (1996) which stating that cultural differences have an impact on their level of prevention against alteration. The results are consistent with the fact that retail traditional ownership of Chinese and non-Chinese are able to predict their external environment. The study findings is inline with the explanation of environmental uncertainty which shows that even though the traditional retail owners generally considered environment uncertain as a thing that can not be predicted, but they make an effort to survive. Managerial and organizational capabilities have made them capable to face external environment and no impact on performance. In addition, research duration is less than 10 years from the rise of modern retail establishments that have an impact on relations with the cultural differences, environmental uncertainty and performance. In past 10 years, the traditional retail ownership of both ethnic groups have been looking for a way to survive in competition by utilizing their managerial and organizational capability. The explanation is inline with statement of Rivard et al. (2005) that in an uncertain environment, small businesses will find a way to survive that impacting on their business performance. Therefore, cultural differences did not distinguish the effect of external environmental uncertainty on organizational performance.
II.
Conclusion
Based on research findings that has been described, the result results has prove empirically the findings of Siggelkow and Levinthal (2003), Judge and Douglas (2009) and Judge and Elenkov (2005) about the relationship between the OCC and the organization performance. In addition, dummy variable of cultural differences is used in this study to differentiate traditional retail ownership. Study findings the effect of cultural differences on organizational performance, the relationship of OCC and environmental uncertainty on organization performance demonstrate the empirical future research suggestions proposed by Trompenaars and Wolliams (2003). These study findings showed that cultural differences would distinguish the relationship of organizational performance and OCC on organization performance. The findings of this study support the concept of Kirsch et al. (2012), Walumbwa et al. (2007), and Harzig and Hofstede (1996) which showed that in different cultures, organizational responses to change will be different, therefore the organizational performance would be different. The results of this study provide practical implications with respect to the use of managerial and organizational capability to maintain and improve business performance and address the Environmental uncertainty caused by competition level with modern retail and changing consumer tastes. To take advantage of these capabilities, the retail owner should focus on their capability and willingness. It proved important to encourage organizations to change and to adapt with business environment. With the capability and willingness to change, retail owners will be able to utilize capital resources and suppliers that had already possess. Another practical implication of this study findings is the ethnic differences in traditional retail ownership will make the owner will use differ way to maintain organizations and impacting on OCC difference. Traditional retail ownership of non-Chinese ethnic can learn how retail owners communicate with the Chinese people to www.iosrjournals.org 37 | Page

win consumers trust and leverage resources to sustain their business. By doing this, the Chinese traditional retailers are able to perform better than non-Chinese traditional retailer despite the non-Chinese retail performance is proved better. Limitation of this study is using perception method in measuring the perception of organizational performance. Therefore, future researchers can use more than one method of measuring performance with the goal to minimize measurement bias due to different perceptions. In addition, future research should also consider the consumers as respondents, because the study results stated that communication is an important factor to retain customers besides adjusting the products sold with consumer tastes. Consideration is needed to conduct research in a larger scale or with different ethnic comparisons in order the results of this study can be generalized.
References
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Effect of Management Control to Organizational Culture, Compensation, Work Behavior and Employees Performance.
(Studies in the Village Unit Cooperatives (KUD) in Southeast Sulawesi) Nurwati
FakultasEkonomiUniversitasHaluoleoKendari Jalan HEA. Mokodompit Kendari Sultra Indonesia
Abstract: Cooperative as a business organization or company that is managed on the basis of principle of the
family, must adhere to the principles of sound management, transparent, accountable, and to be fair in the achievement of common goals. Executives / managers and employees of cooperatives should be responsible in the use of cooperative economic resources efficiently to sustain profit efforts in this regard.It is therefore necessary to control management role in carrying out the work culture generate employment, foster an atmosphere of cooperation, and can influence the behavior of subordinates that will have an impact on improving employee performance. Besides, it also required that promote employee professional and cooperative interests.This study aims to identify and assess the relevance of management control on employee performance by considering the organizational culture, compensation, and work behavior as determinants of employee performance improvement. This study sampled 135 employees at 18 Village Unit Cooperatives se Sulawesi Tenggara. Data collection is done by distributing questionnaires followed by in-depth interviews (in-depth). This study used descriptive analysis to determine the characteristics of the respondent and respondent description of indicators each study variable. While to examine the pattern of relationships between the study variables used inferential analysis tool that analyzes point to the approach of SPSS version 20. The results of this study indicate that adequate management controls to improve employee performance when attention to the factors that contributed to the culture of the organization, compensation and workplace behavior on cooperatives in the province of Southeast Sulawesi. The study also produced findings to improve employee behavior for the better when the culture of the organization and compensation factors considered. Keywords: management control, organizational culture, compensation, workplace behavior and employee performance.
I.
Introduction
The control function (controlling) role is to detect potential weaknesses that occur as a feedback to the management of an activity, starting from the planning stage to the implementation stage. Matters covered by the controlling function includes the creation of standards or criteria, comparing results with standardmonitoring, the implementation of an improvement over the deviation or aberration, modification and adjustment of the control method, and control glasses result of changing conditions, as well as communicating the revisions and adjustments to the entire process management in the hope of irregularities or flaws that ever happened does not happen again. Management control aims to ascertain whether the tasks and functions of supervision and objects or activities in accordance with established (Sitorus at al., 2007).Management control is the process of influencing others in a company in order to effectively and efficient for achieve the goals. Determination of corporate objectives and strategies to achieve them done in a process called strategic planning. Since strategic planning can not be separated from the environment, the strategic planning can also be regarded as a reaction to the environment companies.Management control is a tool to monitor or observe the implementation of the management company that tried to steer the achievement of more efficient and effective (Anthony et al., 2000). A reliable employees and administrators, capable and competent to complete a variety of duties and functions entrusted to them.Carrying capacity is a likely take place if the cooperative is managed and implemented by the board that can be the inspiration that can encourage organizational culture and work behavior, so as to improve the performance of the employee as a result of work accomplished in relation to its position within the organization. Improved employee performance, through the achievement of goals and objectives, both to improve services to members and improve the ability of cooperatives to obtain windfall profits, the cooperative as an economic institution needs to improve its competitiveness, in order to conduct business is always based on the efficiency and effectiveness of business. The best way to conduct business that www.iosrjournals.org 40 | Page
Effect of Management Control to Organizational Culture, Compensation, Work Behavior and

is based on the elements of the efficiency and effectiveness of the business is through the implementation of good management control. Culture is able to help a person or group of people to interact and communicate with others in the community (Gibson, 1996). The same is happening in the organization (Babin et al., 1998), every organization has a culture, and depending on the behavior. Culture can be a powerful influence on the attitudes and behavior of the members of the organization at the organizational level, culture is a set of assumptions beliefs, values and perceptions that of the members of the group (Hofstede, 1980; Schein, 1996; Sachman, 1992; Meschi and Roger, 1995). Susanto (1997) states as organizational culture values the grip of human resources in performing its obligations affecting the behavior of individuals within the organization. However the high level of complexity of individual behavior and group or organizational behavior, should be managed, because in the end the work of the organization is achieved through people, either individually or collectively, either by himself or with the help of technology. Therefore, the management of organizational behavior has a central position in the organization due to some issues related to the goals of organizational behavior itself. The amount of employee performance, employee performance appraisal needs to be done which is very important for achieving organizational performance. The purpose is to evaluate the performance as well as to train and develop employees being assessed. Because so many benefits for the employee performance appraisal and concerns the life of an employee, the performance appraisal system should be able to be an effective instrument and on target, Blau (1999), Miller (2001) in Siahaan (2007) The performance is the level of achievement for the implementation of a specific task (Wibowo, 2010). Employee performance as the end of an employee's performance and contain several things, such as the specific targets are achieved, have a term in the achievement and realization of efficiency and effectiveness Culture is able to help a person or group of people to interact and communicate with others in the community (Gibson, 1996). The same is happening in the organization (Babin et al., 1998), because every organization has a culture, and depending on the strength. Culture can be a powerful influence on the attitudes and behavior of the members of the organization at the organizational level, culture is a set of assumptions beliefs, values and perceptions that of the members of the group (Hofstede, 1980; Schein, 1996; Sachman, 1992; Meschi and Roger, 1995). Susanto (1997) states as organizational culture values the grip of human resources in performing its obligations affecting the behavior of individuals within the organization. In line with studies conducted Kempt & Dwyer (2001) concluded that the tissue culture research results significantly influence employee behavior. The effectiveness of any organization is strongly influenced by the behavior of every person in the organization. One important principle states that each human being is different in the uniqueness of perception, personality, and life experiences, therefore the company needed a social system that governs the relationship between individuals and groups are able to establish expectations for the behavior of individuals (Gibson et al., 1996). Effectiveness is one of the goals to be achieved by an organization, which reflects the achievement of the original objectives have been endorsed by the organization. The same thing was said by Gibson et al. (1996) which states that the purpose of the organization in the form of overall performance depends on the performance of individual members of the organization. Ine'set al. (2010) assert control has a significant effect on employee compensation and firm performance.Company's control system, said to be a significant effect on compensation, the provision of a fixed salary plus a commission on sales greater employee performance will form a better and more effective.In a previous study Birnberg et al. (1999) stated that the control has a significant impact on the culture or values and norms in the company. Whereas research conducted Chelariu et al. (2008) that control a significant effect on the culture and mediate to improve performance. Performance related to the culture and design of management control based on culture (Bimberg, 2004; Brigibe, 2007, and Bernard 2010). This statement is consistent with the Contingency Theory of the organization (Hall, 1978) which is the organizational structure problem free in an organizational context, which could affect performance related. Testing direct and control management culture together can affect the performance of the company. The results of a survey conducted by research (Lawrence et al, 2009); Birnberg and Snograss, 1988) found differences in behavior management and culture affects the effectiveness of management control. Shon et al. (2009) stated that the system of management control significant positive effect on compensation. The high level of compensation in the form of incentives to help managers undertake such efforts deployed, aligning the work to achieve effective management control. Ines et al. (2010) concluded in his research that ties compensation to the employee's performance is positive. Collins et al. (2005) in a similar study found that human resource practices that will either affect the performance of the employees effectively on small businesses. Teclemichael and Soeters (2006) also found that a significant effect of compensation on employee performance. Sarah Javed (2010) research concluded that significant compensation to organizational performance. Chidambaram et al. (2009) the implications of the compensation effect on employee behavior.
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Based on the interplay between the variables of the study, the management control as independent variables, organizational culture, compensation and work behavior as an intervening variable, whereas the performance of the employee as the dependent variable. Of the five variables can be built drawings hypothetical model as in Figure 3.1 studies the following: Figure: 3.1 Research Hypothesis Model
Sources: compiled from several studies The link between management control of organizational culture based on the fact that the controller of life in many cultures and often is instrumental in managing and developing culture. Therefore, one of the obligations of controllers is to understand and control what they face and what is done in the organization. Birnberg et al. (1999) stated that the control has a significant impact on the culture or values and norms in the company. Chelariu et al. (2008) that control a significant effect on the culture and mediate to improve performance. From the description Birnberg et al. (1999), Chelariu et al. (2008), `and Segall (1986) concluded that there is a positive influence between management control and organizational culture. This is supported by the results of the study (Birnberg et al., 1999 and Chelariu et al., 2008) which states that the management control of the positive influence of organizational culture. Based on the above proposed hypothesis H1 more adequate management controls to strengthen the culture of the organization. Shon et al. (2009) stated that the system of management control significant positive effect on compensation.The high level of compensation in the form of incentives to help managers undertake such efforts deployed, aligning the work to achieve effective management control. Iwaka (2007) states that the control system significantly influence compensation, or having a positive relationship between the effectiveness of the management control with compensation. Management control to increase compensation to achieve effective and efficient results. Collins et al. (2005), concluded that there is a positive influence between management control and compensation. This is supported by the results of the study (Shon et al., 2009 and Iwaka, 2007) which states that the management control of the positive effect on compensation. Based on the above proposed hypothesis H2: The more adequate management controls to improve compensation. Steers (1987) that organizational culture will reflect the characteristics or perceived characteristics contained in the work environment and Sitorus for organizational activities, which is done consciously or not, and thought to affect behavior while Susanto (1997) stated that organizational culture as the values of the handle human resources in carrying out their obligations and their behavior within the organization.Opinions on the stresses that organizational culture affects the behavior of its members, similar things in the clear by Wigjaseptina (1998) which states the strength of corporate culture is the intensity of the impact on employee behavior of management process of company. Organizational culture that emphasizes that employees behave in accordance with the demands of the organization, can lead to good or bad behavior.Salfen (2004) found that organizational culture democratic yan increase good behavior, a sense of fun and responsibility of the individual within the organization. From the description Steers (1998); Susanto (1997); Wigjaseptina (1998) and Salfen (2004) concluded that there is a positive effect between organizational culture and work behavior. This is supported by the results of research Kempt & Dwyer (2001); Arogaswamy&Byles (2002); Stavrou et al. (2005); Biswas (2007); Litrell (2005); OReilly (1991); Alas danvadi (2006); Rashid, Sambasivan&Rahman (2003)which states that the organizational culture of positive influence workplace behavior. Based on the above proposed hypothesis H3: The stronger the culture of an organization can improve employee behavior www.iosrjournals.org 42 | Page

Compensation is everything received by employees as a reward for their work. Compensation is given properly, employees will be more satisfied and motivated to achieve organizational goals. Compensation is important for employees as individuals because besarya compensation reflects the size of the value of their work among the employees themselves, their families and communities. Absolute level of compensation of employees to determine the scale of life (Ojo, 2009). Ojo (2009); Handoko and Siagian (2003), it can be concluded that there is a positive effect between compensation and workplace behavior. This is supported by the results of research Chidambaram et al. (2009) which states that the compensation positive effect on work behavior.Based on the above proposed hypothesis H4: The higher the compensation can improve workplace behavior. Cultural organization accomplishments emphasized by Peters and Waterman (1982) on the theory that emphasizes excellence success is determined values are embedded in the organization.Peters and Waterman insists on superior organizational characteristics, and found that there is a relationship between organizational culture and job performance in the United States, if it is connected between specific management practices with a success. This shows that there are dimensions of organizational culture that can affect the performance of the organization. Robbins (2003), states that organizational culture is a system of shared meaning held by members that distinguishes between organizations. Similarly, Robbins explained that the measure organizational culture can understand how employees view an organization, encourage teamwork, reward innovation, and enhance initiatives. So the culture of performance-oriented organization will demand results and high expectations and emphasis on aggressiveness, competition and exploiting opportunities and to encourage and support the dissemination of information and reward good performance (O'Reilly, 2002). Peters and Waterman (1982), Robbins (2003) and O'Reilly (2002) concluded that there is a positive effect between organizational culture on performance. This is supported by research findings Kotter and Heskett (1992); Kempt & Dwyer (2001), Waclawski (2003); Moeljono (2003); Rashid et al.(2003); Tsang (2007); Amran et al.(2008); Stavrou et al.(2005); Xenikou&Simosi (2006) which states that organizational culture affects performance.Based on the above proposed hypothesis H5: The better the culture of an organization can improve employee performance. Robbins (1996) says that people do what they do to make ends meet.Before they do work, they look for salaries and benefits.Many types of benefits such as: increase in salaries, employee benefits, job assignments are preferred, all these types of benefits are controlled by the organization. Lawler III. et al., 2002.In Dunette and Hough (1992) says that the important role of the control of the organization (under policy control) is through control of rewards in influencing employee behavior.Robbins (1996) in line with Gibson (1996) divides the two types of rewards in the form of extrinsic and intrinsic rewards.Robbin further divide extrinsic rewards in the form of the following: a.Direct Compensation, b.Indirect compensation, c.Reward is not money. Marwan et al.(2009) the relationship of compensation on employee performance is positively correlated Collins et al.(2005) in the same study targeting small businesses have found that the HR practices of effective influence on employee performance.Teclemichael and Soeters (2006) have found that a significant compensation on employee performance. Robbins description (1996), Gibson (1996), Marwan et al.(2009), it can be concluded that there is a positive effect between kompensasii and employee performance.This is supported by the results of study by Collins et al.(2005); Teclemichael and Soeters (2006), which states that the compensation positive effect on employee performance.Based on the above proposed hypothesis H6: The more adequate compensation can improve employee performance. Management control is a tool to monitor or observe the implementation of the management company that tried to steer the organization in the company's goals for the performance by the management company to run more efficiently and smoothly.Monitored or regulated in a management control system is to manage the behavior of employees in the company to be accountable to stakeholders (Soobaroyen, 2006) Merchant (1998) who said that the orientation of the management control environment related to the behavior of employees, management control systems to assist, control, motivate management to make decisions and monitor behaviors that can control the activities that occur within an organization. But the implementation is often the case of a deviation behavior or intentional breach outside of the rules and procedures of management control systems by controlling in this study is the controller, to direct, deviations or violations committed by employees that influence behavior. Brigitte et al. (2004) that examined the effects of behavioral control mediate a significant influence on employee performance. Brigibe et al. (2007) stated that the control of management is behavioral orientation related to the design of management control systems to assist, control, motivate management to make decisions and monitor the activities of controlling behavior that occurs in an organization. Brigitte et al. (2004) and Brigibe et al.(2007) concluded that there is a positive effect between management control and work behavior.This is supported by the results of research Anthony et al. (2000); Brigitte et al. www.iosrjournals.org 43 | Page

(2004) and Brigibe et al.(2007), which states that the management control of the positive influence workplace behavior.Based on the above proposed hypothesis H7: The more adequate management controls to improve employee behavior. Work behavior concerning individual activities in an organization in achieving organizational goals (Gibson et al., 1996), while Hersey and Blanchard (1992) states essentially goal-oriented behavior.The purpose here of course is the goal that has been set out in a plan that incorporates all components of the organization or at least the decision makers in the organization. Kast and Rosenzweig (1990) found the behavior of all the actions are carried out by someone either for themselves or their group and organization. The results of Arogyaswamy&Byles (2002); Kempt & Dwyer (2001); Gilder (2003); Somers & Birnbaum (2000); Biswas and Varma (2007); Bierhoff& Muller (2005), and Sumarsan (2010) which states that there is influence between work behavior and performance. Based on the above proposed hypothesis H8: The better work habits can improve employee performance. Management control is the process of influencing others in a company in order to effectively and efisisen achieve goals.Determination of strategic corporate goals and to achieve them done in a process called strategic planning.Therefore, strategic planning can not be separated from the environment, the strategic planning can also be regarded as a reaction to the environment companies.Management control is a tool to monitor or observe the implementation of the management company that tried to steer the achievement of more efficient and effective (Anthony et al., 2000). Management control and performance research done by Shon et al.(2009) that the management control of a significant effect on performance.Marcela (2006) stated that management control directly affects the performance of using the contingency model with more intensive management control to overcome two major sources of uncertainty of the local market and the technology. Billy et al.(2008) examined the control of a dominant factor in determining the organization's capacity for improvement, to improve employee performance.Billy et al.(2008) and Shon, (2009), it can be concluded that there is significant influence between management control and employee performance.This is supported by the results of the study Marcela (2006), Anthony et al. (2000), which states that there is an influence between management control and performance.Based on the above proposed hypothesis H9: The more adequate management controls to improve employee performance.
II.
Methods
Type of Research This research is an explanatory analysis of the survey method using questionnaires and a questionnaire to the respondent. This study describes the systematic nature of the data or characteristics of a particular population or a particular field.In a survey study will describe each of the variables and testing hypothesis (explanatory research) whose purpose is to explain causal relationships between variables through hypothesis testing (Singarimbun, 1995). Population and Research Sample The research population is all employees who entered ranked KUD "Highly Qualified" in 75 Village Unit Cooperatives (KUD) in Southeast Sulawesi employees numbered 1332 people.Given the large number of Village Unit Cooperatives (KUD), the sampling is done by using a two stage sampling, which uses a two-stage sampling.The sampling steps described below: 1. The first phase, set the number of population at 75 Village Unit Cooperatives (KUD) judgment sampling method, which sampled 18 Village Unit Cooperatives (KUD) Highly Qualified in Southeast Sulawesi 2. The second stage, is a sampling of employees from 18 cooperatives are classified assessment of "Highly Qualified". Of the 18 cooperatives, employee sampling conducted using proportional stratified sampling method. Having known of the population (N) of all employees at 18 KUD Southeast Sulawesi, the sample size (n) can be determined that 135 employees (Slovin formula in Umar 2004).After sampling the selection of the sample at each KUD done in proportion to the number of samples per KUD.Slovin formula sample size can be calculated as follows:
315 1 315 (0,065) n 135
Research Variables Variable or construct is a concept based on the theory that such relationships examined in this study as follows: www.iosrjournals.org 44 | Page

1) Exogenous Constructs Construct exogenous sources are variable or independent variables are not caused or predicted by other variables in the model, in this study is the control of management. 2) Construct Endogenous Endogenous constructs are factors that predicted by one or more of the other constructs, in this study consisted of organizational culture, compensation, workplace behavior and employee performance. Inferential Statistical Analysis Inferential Statistical Analysis is an analysis conducted to test the hypothesis that has been made that this research method is used path analysis (path analysis) that are definitely under the WinarsunuPedhazur (2004) is a method used to see the consequences (effects) directly and not directly from a variable that is hypothesized as a cause (causes) of the variables are treated as a result. Variables in the analysis of this pathway can be divided into two: the exogenous variables (exogenous variables) which is the cause and the endogenous variable (endogenous variable) as a result variable (Al Rashid, 1993).Path analysis was conducted to find explanations of patterns of direct and indirect relationships based on theoretical considerations and knowledge of research presented in the form of images (path diagram / diagram line) which serves to assist in conceptualizing complex issues and recognize the empirical implications of the theory being tested.
III.
Results And Discussion
Hypothesis Testing Results Model effect between the dependent variable and the independent variables are presented in Table 5.1 as follows: Figure 5.1 Diagram of Path Analysis Results
The results of path analysis as shown in Figure 5.1. Coefficient of determination obtained results for total management control (X1) on employee performance (Y4) through through organizational culture (Y1,), compensation (Y2,) and work behavior (Y3) of R2M = 0.997.This number can be used to look at the contribution of the control of management on employee performance through organizational culture, compensation, and work behavior. This figure has the meaning that the contribution of the management control of the organization's culture, compensation, workplace behavior and employee performance is 99.7%, while the remaining 0.3% is obtained from the contributions of other factors. In other words sumbangsi of power or management control of the variable employee performance through organizational culture, compensation, and work behavior significantly. Discussion of Research Findings The results of the analysis of the model line above it can be seen that the influence of management control of the organization culture, compensation, workplace behavior and employee performance can be explained as follows: 1. Effect Of Organizational Culture Management Control The results of the analysis of the influence of direct management control of the organizational culture values obtained significant positive path coefficients. This suggests that management control affect organizational culture.Path coefficient is positive means that there is a direct relationship between the control of management to organizational culture.Management control with indicator control environment, risk assessment, www.iosrjournals.org 45 | Page

information and communication, control activities, and adequate monitoring, will strengthen the organizational culture on cooperatives in the province of Southeast Sulawesi. The results of this study support the notion Birnberg et al. (1999) stated that the control has a significant impact on the culture or values and norms in the company Chelariu et al. (2008) that control a significant effect on the culture and mediate to improve performance. The theory of cultural perspectives expressed the relationship between management control and control management culture that if implemented at the company level will be more clearly seen how the culture be created, invested and developed even changed by a controller. The controller of the organization can instill, develop and change in accordance with organizational goals.Efferin et al. (2010) stated that the control of the control culture is focused on creating an organizational culture that is good and strong as pengicu subordinate behavior to be consistent with the goals and strategies of the organization. Organizational culture is good and powerful look at the values peribadi and groups created in the organization and serves as the informal mechanisms of behavioral control. The results of this study support previous research Tsang (2007) which concluded that there is a significant effect between entrepreneurial behavior of the software industry in China with the existing organizational culture in the industry. Also supports the results of research conducted by Xenikou et al. (2006); states management control positive effect on organizational culture. Medium Kuchinke research (2004), concluded that the management control styles can predict cultural value to the organization or company. 2. Influence Of Compensation Management Control The results of the analysis of the influence of direct management control of the compensation values obtained significant positive path coefficients. This suggests that the effect on compensation management control. Path coefficient is positive means that there is a direct relationship between the control of the management of labor compensation. Management control that has a value of the control environment, risk assessment, information and communications, employee compensation will increase the cooperatives in Southeast Sulawesi. The results are consistent with the results of research conducted by Shon et al. (2009) stated that the system of management control significant positive effect on compensation. The high level of compensation in the form of incentives to help managers undertake such efforts deployed, aligning the work to achieve effective management control. Iwaka (2007) states that the control system significantly influence compensation, or having a positive relationship between the effectiveness of the management control with compensation. Management control to increase compensation to achieve effective and efficient results. Both the research (Shon et al., 2009 and Iwaka, 2007) which states that the positive effect of management control compensation. 3. Effect Of Organizational Culture Work Behavior The results of the analysis of the direct influence of organizational culture on work behavior coefficient values obtained significant positive path. This suggests that organizational culture affects work behavior. Path coefficient is positive means that there is a direct relationship between the culture of the organization to conduct the work. The stronger the culture of the organization will improve the behavior of employees' cooperatives in Southeast Sulawesi. The results of this study reinforce the theory related to the relationship between organizational culture and work behavior. According to Steers (1987) that organizational culture will reflect the characteristics or perceived characteristics contained in the work environment and organizational activity, which is done consciously or not, and thought to affect behavior while Susanto (1997) states as organizational culture that values a grip human resources in carrying out their obligations and their behavior within the organization. Opinions on the stresses that organizational culture affects the behavior of its members, similar things in the clear by Wigjaseptina (1998) which states the strength of corporate culture is the intensity of the impact of the internalization of the company on employee behavior. The results are consistent with the results of previous research by Arogyaswamy&Byles (2002); Rashid et al. (2003) express a person's preference in the organizational culture can affect the behavior of individuals, and employees who proved stronger culture of evaluation and implementation of cultural participation in the form of behavior. 4. Compensation Effect Of Work Behavior The results of the analysis of the influence of direct compensation for work behavior coefficient values obtained significant positive path. This suggests that the compensation effect on work behavior. Path coefficient is positive means that there is a direct relationship between compensation and workplace behavior. The higher compensation the employees' behavior cooperatives in Southeast Sulawesi, the better.
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The findings of this study support the theory advanced by Ojo (2009) that the compensation is important for employees as individuals because besarya compensation reflects the size of the value of their work among the employees themselves, their families and communities, the absolute level of compensation of employees to determine the scale of life. The primary responsibility for developing control system of rewards for an organization to reach its goals and is based on principles such as justice, fairness and equality that benefits become powerful instruments for various purposes. Reward system should have appeal for a high-quality workforce to belong to the organization, a strong attraction to retain existing workforce work in the organization, containing the principles of fairness, respect for the principle of behavioral compliance to rules and regulations, the creation of administrative wages and salaries an efficient and effective manner. From the description Ojo (2009); Handoko and Siagian (2003), it can be concluded that there is a positive effect between compensation and workplace behavior. This is supported by the results of research Babib et al. (2009) which states that the compensation positive effect on work behavior. Based on the above proposed hypothesis can be accepted: 5. Effect Of Organizational Culture Employee Performance The results of the analysis of the direct influence of organizational culture on employee performance values obtained positive path coefficient is not significant. This suggests that organizational culture is less effect on employee performance. Path coefficient is positive means that there is a direct relationship between the culture of the organization with employee performance, but not mean. The stronger the culture of the organization will be less improve employee performance in cooperatives in Southeast Sulawesi. Under the conditions that existed at the Village Unit Cooperatives, and the results of interviews conducted against several employees who were respondents, that organizational culture that employees sometimes poorly understood cooperative oraganisasi Based kinship based economy so that most employees are not optimal bahkkan sometimes confused running jobs. This sort of thing will lead to poor employee performance. It's one of the reasons for the characteristics of respondents to the level of education, the high school-educated workers by 83 people or 61.48%. This suggests that employees performing work in the lowpower analysis because it has low education levels resulting in poor understanding of organizational culture if it is associated with the performance, so will have an impact on the poor performance of employees at KUD. The results in line with research Tseng et al. (2011) that organizational culture had no significant effect on employee performance. This is due to different levels of background knowledge and confidence values that vary their working ability, However the study was not in line with the study by Rashid et al. (2003) that a strong organizational culture will provide superior performance. Also research Arogyaswamy&Byles (2002) who found that organizational culture has a significant impact on employee performance. Similarly, research Xenikou&Simosi (2006) stated that strong organizational culture determines the performance of the employees. Amran et al. (2007) stated that organizational culture has a very important role to improving employee performance. The results of this study do not support the thesis Robbins (2003) who explains that measuring organizational culture that understanding of how employees view an organization, encourage teamwork, reward innovation, and enhance initiatives. So the culture of performance-oriented organization will demand results and high expectations and emphasis on aggressiveness, competition and exploiting opportunities and to encourage and support the dissemination of information and reward good performance (O'Reilly, 2002). Success is determined by the values that are embedded in the organization (Peters and waterman; 1982). 6. Effect Compensation Against Employee Performance The results of the analysis of the direct influence of compensation on employee performance values obtained positive path coefficient is not significant. This shows that the compensation does not affect the performance of the employees. Path coefficient is positive means that there is a direct relationship between compensation and employee performance is not significant. Repair rise less compensation in accordance with the minimum wage, education level, the less time working to improve the performance of employees of cooperatives in Southeast Sulawesi. Based on the characteristics of the respondents with a high school education levels by 61 people or 45.19%. This suggests that employees performing work in the low-power analysis because it has less able to respond due to low education levels, which resulted in low quantity of work of the employees, thus impacting on the poor performance of employees at KUD. The results of interviews conducted against several employees of the respondent, that the compensation to the Village Unit Cooperatives less meet the needs, not according to the level of education, even the skillful of respondents only as a place to make a cooperative work experience to find a better job, they can be the main waiting civil servants. This sort of thing will lead to poor performance of the employees, because employees who have high levels of ability or performance, and higher education after www.iosrjournals.org 47 | Page

obtaining a civil service job or a better worker, they are resigned to employee cooperatives. The process of removal or dismissal of employees who have the experience, ability to work well as a high level of education berdampat with less optimal employee performance at the Village Unit Cooperatives (KUD) The results of this study support by Ryan et al. (2003) stated that the compensation does not have a significant effect on performance, because of bonuses that high salaries and bonuses actually reduce the company's financial performance; Also not in line Ine's et al. (2010) states that compensation of employees significantly influence the performance of the company .. Also rejected Teclemichael and Soeters (2006) have found that a significant compensation on employee performance. 7.Effect of Management Control Of Behavior The results of the analysis of the influence of direct management control of work behavior coefficient values obtained significant positive path. This suggests that the effect on the behavior of management control. Significant path coefficient is positive means that there is a correlation between the direction of the management control with significant workplace behavior. Therefore it can be explained that the management control value control environment, risk assessment and management of self, capable of improving workplace behavior that is the spirit and excitement of work, power work initiatives, job involvement and connectedness to the organization when employees work with innovative and willing to take risks, conscientious, results-oriented, employees, team, stable aggressive, full salary, bonus / commission, and education / training The findings of this research in line with the stated Brigitte et al. (2004) that the orientation behavior of management control is related to the design of management control systems to assist, control, motivate management to make decisions and monitor the activities of controlling behavior that occurs in an organization. In the implementation of workplace behavior often occurs a deviation or willful violation of the rules or outside management control procedures performed by the executor. Irregularities or violations committed by employees outside of the rules or procedures referred to as behavior (behavior). 8. Influence Behavior Working Against Employee Performance The results of the analysis of direct influence on the performance of the employee work behavior coefficient values obtained significant positive path. This shows that the work behavior affects employee performance. Path coefficient is positive means that there is a direct relationship between work behavior and employee performance. The better the work behavior of employees in the performance of cooperatives in Southeast Sulawesi province will increase. The results of this study support the notion put forward by Gibson et al. (1996) that the behavior of the activity involves individuals working in an organization in achieving the organization's goals are basically oriented objectives set out in the plan include all components of the organization or at least the decision makers in the organization (Hersey and Blanchard; 1992) . Medium Kast&Rosenzweig (1990) states the behavior is all the actions of a person either for themselves or their group and organization. The results are consistent with the results of previous studies Bierhoff& Muller (2005), stated that there is a positive relationship between work behavior with employee performance. Also the results of research conducted by the Gilder (2003) states that good work habits will have a positive impact on employee performance. Supports research Arogyaswamy&Byles (2002) which states that good behavior impact on employee performance. 9.Effect Of Employee Performance Management Control The results of the analysis of direct influence on employee performance management control values obtained significant positive path coefficients. This shows that the control effect on employee performance management. Path coefficient is positive means that there is direct relationship between management control performance with real employees. Therefore it can be explained that the management control with indicator control environment, risk assessment, information and communication, control activities and monitoring can improve the performance of employees in the form of quantity, quality and time, when the attention of organizational culture, compensation and workplace behavior. The results of this study parallel the results of previous studies conducted by research management control and performance done by Shon et al. (2009) that the management control of a significant effect on performance. Also the study by Marcela (2006) stated that management control directly affects the performance of using the contingency model with more intensive management control to overcome two major sources of uncertainty of the local market and the technology. Similarly, in line with research by Billy et al. (2008) examined the control of a dominant factor in determining the organization's capacity for improvement, to improve employee performance.
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Effect of Management Control to Organizational Culture, Compensation, Work Behavior and IV. Research Contributions
Theoretical Contributions Theoretically, this study has been able to contribute to justify the opinion of management control of Anthony et al. (2000) which describes the control of management is the process of influencing others in a company in order to achieve performance; controlling organizational culture, compensation and employee behavior can achieve performance This study supported partially by Billy et al. (2008), Ryan et al. (2003) and Shon et al. (2009) that management control significantly influence employee performance; Birnberg et al. (1999), Chelariu et al. (2008) and Kuchinke (2004) significantly influence the management control culture; Brigitte et al. (2004) and Brigibe, (2007) Management control and work behavior have a significant impact on employee performance and Ines et al. (2010), Shon et al. (2009) and Iweka (2007) control a significant effect on compensation management and performance The results of this study have been able to contribute pengenbangan theoretical justification and holistic (whole) of the results of research on management control, ie the implementation of management control must harmonize the implementation of organizational culture, compensation and workplace behavior to improve employee performance Practical Contribution For the Village Unit Cooperatives The results of this study can be used as useful information to enhance understanding of the management team of Village Unit Cooperatives about the importance of implementing management control should harmonize the implementation of a holistic (whole) organizational culture, compensation and workplace behavior to improve employee performance at the Village Unit Cooperatives (KUD) in Southeast Sulawesi. With unknown primary determinant of each variable so the actors Village Unit Cooperatives (management team) can make the right policy in the conduct of business activities. For the local government (Department of Cooperatives and SMEs) This research is expected to contribute to formulating programs and policies adopted by the government in order to empower the Village Unit Cooperatives relating to control measures in the management of co-operatives to improve employee performance by taking into account organizational culture, compensation and workplace behavior; making functions of government (Department of Cooperatives and SMEs) as the holder of regulation and coaches on Cooperatives and Small and Medium can be done well and on target. Research limitations. The results of this study have provided a number of findings, but there are still some things that need to be studied further. This condition is influenced by several factors that are not directly a limitation of the study, namely: 1. In order to reveal the influence of management control of the organization's culture, compensation, workplace behavior and employee performance at the Village Unit Cooperatives (KUD) just look at KUD Highly Qualified, so the results of this study can not generalize to other cooperatives. 2. Measurement of management control in this study was limited to the measurement of organizational culture, compensation, workplace behavior and employee performance alone, whereas according to the theory and some previous research findings more management control affect the financial performance of the organization. 3. In this study, observations were made by using a scope with cross sections which means that the data obtained from a specific time or only at the time of the study while the behavior of the controlling behavior and the impact of employee performance at other times (time series) are not included in this study.
V.
Conclusions And Recommendations
Conclusion Based on the research, discussion, and interpretations that have been described in the previous chapter, it can be concluded, as follows: 1. Management control with indicator control environment, risk assessment, information and communication, control activities, and adequate monitoring so as to maintain and establish a strong organizational culture. reflected by working in an innovative, risk-taking, and attention to detail. 2. Management control indicators have the control environment, risk assessment, information and communication, control activities, and monitoring served to increase compensation. This means that the management control that has the value of the control environment, risk assessment, information and communication, control activities, and monitoring to increase the compensation reflected in remuneration in www.iosrjournals.org 49 | Page

the form of salaries, bonuses, and education and training facilities required employees to achieve organizational goals. The strengthening of the role of organizational culture in improving workplace behavior. Organizational culture are realized by working in an innovative, risk-taking and result oriented work behaviors that can improve with better employment initiative power. High compensation can improve workplace behavior. This indicates that high compensation is shown with rewards such as salary, bonus, and education and training facilities role in improving workplace behavior that is the spirit and excitement of labor and employment initiative power, the higher the job involvement. Weak organizational culture plays less improve employee performance. Weak organizational culture by employees who are destined to work an innovative, risk-taking, attention to detail, it will be less than the employee's performance improve the quality of employment. Compensation is low less instrumental improve employee performance. This means that the low compensation of employees less in accordance with the conditions of remuneration such as salary, bonus, and education and training facilities lacking improve employee performance. Management control with indicator control environment, risk assessment, information and communication, control activities, and monitoring role in improving workplace behavior. Based on the empirical findings that the role of management control repair work behavior. Good work habits play a role in improving employee performance. This means that the better work habits demonstrated by the initiative power of employee role in improving employee performance is an improvement. Management control indicators have the control environment, risk assessment, information and communication, control activities, and monitoring served to increase compensation. This means that the management control that has the value of the control environment, risk assessment, information and communication, control activities, and monitoring can improve employee performance as reflected in the quantity, quality and timeliness of work.
3.
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Suggestion Based on the results of the study, researchers gave some of the things that need to be enhanced by both theoretical and practitioner, among others: 1. Future studies should control variables as exogenous management is not only associated with endogenous variables such as organizational culture, compensation and work behavior and its impact on employee performance by incorporating other variables such as financial variables Cooperative. 2. For the government especially the Department of Cooperatives and Small and Medium Enterprises Southeast Sulawesi Provincial Government involvement is necessary to provide an understanding of the control of management with respect to the cooperative organizational culture and results-oriented cooperation, fair compensation and working as a behavioral foundation unut Rural Cooperatives (KUD) for karyaan improve performance. In this study, there are two variables that are not significant to get attention and improvement, namely: a. Cultural organizations improve performance karyawa less meaningful because of low education levels (the majority of high school graduates), it is necessary for cooperation between the board and the Department of Cooperatives cooperatives and SMEs raise the level of education. b. Compensation less means improving employee performance, due to an increase in compensation is not comparable with the best performance of the employees and ultimately employee chooses another job as a civil servant or other private sector, it is expected the government to provide special allowances for the running of the 45 Constitution for the welfare of the community through cooperative efforts which is currently handled by the Ministry of Cooperatives and SMEs.
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Occupational Stress among Pandyan Grama Bank Employees in Virudhunagar District, Tamil Nadu, India.
R. Sam Renu1, G. Arumugasamy2
2
(Assistant Professor in Management Studies, Ponjesly College of Engineering, Nagercoil, India) (Associate Professor & HOD in Management Studies, Ponjesly College of Engineering, Nagercoil, India)
Abstract: The study aimed to investigate the occupational stress among pandyan grama bank employees in Virudhunager District. The sample for the study consisted of 165 of the respondents. While 10 fell under senior manager III grade, 35 came under senior manager II grade, 90 were of officer I grade and the remaining 30 fell under the clerical grade. The study objectives are to measure the level of stress among the employees of Pandyan Grama Bank in Virudhunager District, to analyze the causal factors of stress among the employees, to study the consequences of stress of employees. The following statistical tools are used for the analysis of research data. Percentage analysis, Chi-square test, Rank order rating scale, Garett Ranking Method, Mean Score Analysis-Likert 5 point scale and ANOVA. The research design chosen is descriptive as the study reveals the existing facts. Descriptive research is the study which describes the characteristics of a particular individual or a group. The present study reveals that stress in work setting stems from different sources such as individuals, group, organizational, and environmental. Though the precise impact of stress is difficult to predict, it adversely affects the physiological, psychological and behavioural aspects of employees experiencing to it. Effects of stress vary from employee to employee depending on their resilience capacity, perception of stimuli, prior experience to it, and complexity of task to be performed. The study suggests that stress can be managed at both the individual level and the organizational level. Individual approaches to manage stress include exercise, behavioral control, proper diet, meditation, relaxation and the like. Keywords - Occupational Stress, Corporate Profits, Emotional, Behaviour. I. INTRODUCTION
The origin of the concept of stress predates antiquity. Derived from the Latin word Stringere Stress was popularly used in the seventeenth century to means hardship, strain, adversity, or affliction. It was used in the eighteenth and nineteenth centuries to denote force, pressure, strain, or strong efforts with reference to an object or person. In the modern times, stress has become a buzz word and legitimate concern for people of all walks of life. In fact, no one is immune to stress. Right from the time of birth till death, an individual is invariably exposed to various stressful situations. Hence stress is a subject, which is hard to avoid; stress is a much and widely talked about phenomenon in corporate (western) world because it is a costly business expense that affects both employee health and corporate profits. Stress has existed throughout the evolution, about 4 billion years ago, violent collision of rock and ice along with dust and gas, led to the formation of a new planet. The planet survives more than 100 million years of meltdown to give birth to microscopic life. These first organisms endured the harshest of conditions lack of oxygen, exposure to suns UV rays and other inhospitable elements, to hang on to their dear life. Roughly 300,000 years ago, the Neanderthals learnt to use fire in a controlled way, to survive the Glacial Age. And around 30,000 years, Homosapiens with their dominant gene constitutions and better coping skills, won the game of survival. Each step of evolution a test of survival, and survival, a matter of coping with the stress of changing conditions. Stress at work resulting from increasing complexities of work and its divergent demand, has become a prominent and pervading feature of the modern organizations. Caplan Cobb and French (1975) have accordingly defined occupational stress as any characteristics of job environment which poses a threat to the individual. Copper and Marshall (1976) have expressed that by occupational stress is meant negative environmental factors or stressors associated with a particular job. Maslach and Jackson (1982) view work pressure as one of the determinants of burnout. Friesen and Sarrors (1989) have found that only one burnout dimension, i.e. emotional exhaustion, was closely related to work stress. Occupational stress may produce both overt psychological and physiologic disabilities. However, it may also cause subtle manifestation of morbidity that can affect personal well being and productivity (Quick, Murphy, Harel and Romen 1992) . www.iosrjournals.org 53 | Page
Occupational Stress among Pandyan Grama Bank Employees in Virudhunagar District, India. 1.1 Origin of the Study Area
Pandyan Grama Bank a scheduled bank is in the public sector in India under Regional Rural Banks Act, 1976. It was established on 9th March, 1977 with its Head Office at Sattur, a semi-urban centre in Virudhunagar district in Tamilnadu. It is sponsored by Indian Overseas Bank and has been catering mainly to the needs of the rural clientele. The primary objective of the bank is to finance farm sector and other employment generation programmes. The head office of the Bank was shifted to Virudhunagar, the District Head Quarters on 16th July, 1993 and was functioning in a rental building up to 30 th December, 2000. From 31st October, 2000 onwards, the Head office has started functioning in its own building. The Bank is operating in fifteen districts, namely, Virudhunagar, Sivagangai, Ramanathapuram, Thirunelveli, Thoothukudi, Pudukottai, Madurai, Dindugal, Kanyakumari, Theni, Thiruchirappalli, Thanjavur, Perambalur and Nagapattinam.
1.2 Statement of the Problem

Pandyan Grama Bank is one of the scheduled banks in the public sector in India, established under the Regional Rural Banks Act, 1976. There are 935 employees working in all the branches of Regional Rural Bank; of them 165 employees are working in Pandyan Grama Bank in Virudhunagar District.
1.3 Objectives of the Study

To measure the level of stress among the employees of Pandyan Grama Bank in Virudhunager District. To analyse the causal factors of stress among the employees. To study the consequences of stress of employees. To offer suitable suggestions to cope with the stress of the employees.
1.4 Scope for the Study

The study attempts to analyse the level of occupational stress of Pandyan Grama bank employees in Virudhunagar District. The present study takes a close look at the stress related issues facing the employees working Pandyan Grama bank and analyse the factors responsible for the same and suggest suitable measures to tackle the problem of the occupational stress.
II. 2.1 Sources of Data
METHODOLOGY
The present study depended on both secondary and primary data. The secondary data were collected from the standard text books, leading journal, magazines, reports and records and relevant websites relating to the topic chosen for the study.
2.2 Questionnaire
The required primary data were collected by administering interview schedules to the respondents. The questioner was pre-tested before issuing it to the respondents.
2.3 Census Study

The total number of employees working in Pandyan Grama Bank in Virudhunagar District as on 1 st April 2009 was 165. Owing to the limited number of employees, it is thought fit to contact all the 165 employees of the Bank. Hence, there was a census study of Bank employees, to find out their level of work stress.
2.4 Statistical Tools

1. 2. 3. 4. 5. The following statistical tools are used for the analysis of research data. Percentage Analysis Chi-square test Rank order rating scale Garett Ranking Method Mean Score Analysis- Likert 5 point scale and ANOVA (One way)
2.5 Research Design

The research design chosen is descriptive as the study reveals the existing facts. Descriptive research is the study which describes the characteristics of a particular individual or a group. This study is about selected variables of stress. Thus the design of the present study is descriptive design of conclusive one.
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Occupational Stress among Pandyan Grama Bank Employees in Virudhunagar District, India. 2.6 Sample size
Table-1 shows the sample size of the respondents. While 10 fell under Senior Manager III grade, 35 came under Senior Manager II grade, 90 were of Officer I grade and the remaining 30 fell under the clerical grade. Table-1 Sample Size Sl. No. Particulars Number of Employees Senior Manager - III 10 1 Senior Manager - II 35 2 Officer - I 90 3 Clerk 30 4 Total 165 Source: Primary Data
III.
ANALYSIS OF DATA
The Managing Occupational Stress among Employees in Pandyan Grama Bank shown in Table - No.2. Table-2 Managing Occupational Stress Sl. No. Particulars Taking steps to control my physical and emotional 1 well being Avoiding pitfalls by identifying knee jerk habits and 2 negative attitude that add to my work stress Learning better communication skills to ease and improve my relationships with management and co3 workers Try to come earlier in the morning from home to 4 working organization Create a balanced schedule 5 Plan to regular breaks in work 6 Total Source: Primary Data.
Frequency 38 19 45 22 34 7 165
Total % 23 11.5 27.3 13.3 20.6 4.3 100
It is evident that a sizable number of 2 7.3% began to learn better communication skills to ease and improve their relationships with management and co-workers for managing occupational stress. Also, the above analysis evidences that the employees resort to one form of action or another to manage their work stress. Figure-1 portrays this phenomenon. Figure - 1 Managing Occupational Stress
40 35 30 25 23 13.3 4.3 27.3 20.6 11.5
Frequency
20 15 10 5 0 Taking steps to control my physical and emotional well being Avoid pit falls Learning better Try to come communication earlier in the skills morning home to working organisation Managing occupational stress Create a balanced schedule Plan to regular breaks in work
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Occupational Stress among Pandyan Grama Bank Employees in Virudhunagar District, India. IV. FINDINGS OF THE STUDY
The main findings recorded in the preceding chapters of the present research report are consolidated and given in the following passages.
4.1 Demographic Factor

It was found that a sizable number of 33.3% of respondents were in the age grouping of 40-49 years. A majority of 84.2% respondents were males. Most of 84.8% of respondents were married. Majority of 54.5% respondents were graduates. Most of 69.7% of respondents had nuclear families. A majority of 54.5% of respondents were Officer I scale. A sizable number of 47.3% of respondents had the monthly salary of Rs. 20,000 and above. A majority of 56.4% of respondents were residing in urban area.
4.2 Level of Stress

It was a revelation that 31.5% of respondents Often experienced the feeling of stress. A considerable number of respondents of 47.9% had 26 to 50% level of stress, namely, normal level of stress.
4.3 Causes of Stress

A majority of 56.4% of the respondents were getting stress due to Work Load To a sizable number of 29.7% respondents, the source of stress was their supervisors. Most of 64.2% of respondents committed wrong in their work; and, 65% of them had experience of lesser concentration in work due to their wrong doing of work A majority of 54.5% of respondents, as their reaction, avoided to meet the person concerned who was responsible for the occurrence of stress.
4.4 Subordinates view of Stressor

It is heartening that a vast majority of 92.7% respondents have accepted the superiors suggestions and ideas. A vast majority of 88% of respondents feeling were Indirectly hurt by their superiors. A majority of 51.9% were Scolded by their superiors. The feelings of respondents, namely, 45.5% were Indirectly hurt by their superior by way of dumping heavy work A vast majority of nearly 90% of respondents expressed that on the whole their relationship with their superiors is either good or satisfactory.
4.5 Superiors view of concerning Stress

A majority of 58.8% of superiors, while they were at stress, have not met their subordinates. Superiors of 54.4% while they were at stress had reaction in the form of tension at the time of meeting the subordinates.
4.6 Co-workers as a source of Stress

Majority of 65.5% respondents have experienced stress feeling from the action of co-employees. Respondents of 38.9% cited the reason of lack of co -operation from co-employees as the source of their stress.
4.7 Dealing with Bank Customers

A majority of 52.1% respondents may also turn out to be a stressor. It is a revelation that while 46.5% experienced stress feeling quite often, 44.2% experienced such feeling. Either rarely or sometimes in dealings with the customers. The remaining 9.3% never experienced such a feeling.
4.8 Management policy as a source of Work Stress

It was a revelation that a majority of 60.6% of respondents considered that the policies of management changed frequently. A sizable number of 30% of respondents were frequently affected by changes in management policies.
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Occupational Stress among Pandyan Grama Bank Employees in Virudhunagar District, India. 4.9 Organizational factors as a source of Work Stress
A majority of 83.6% respondents cope with their organizational rigid rules; and, 30.4% of respondents always cope with their organizational rigid rules. A sizable number of 31.5% of respondents reported that their higher authorities often care for their self respect. A vast majority of nearly 87% of respondents were satisfied with their organizational working environment. Most of 65% of respondents were satisfied with their organizational welfare measures. A significant finding is that ineffective communication is the most important organizational factor of job stress among employees (41.73%).
4.10 Personal factors as the source of work Stress

A majority of nearly 60% of respondents had opportunity frequently for independent thought and actions in their job. A majority of 59.4% of respondents had provision to take occasional break in the job; and, nearly 70% of respondents frequently took occasional break in the job. A sizable number of 27.3% respondents had financial problem as a source of personal factor caused stress. It was found that heavy work load is a reason as a source of work stress among bank employees.
4.11 Psychological factors as the source of Stress

A vast majority of 80.6% respondents felt psychological factor as the source of work stress. Respondents namely, 32.47% reported emotional out burst suffered from due to the psychological factor as a source of work stress. A vast majority of 63.7% respondents had longtime stress. A majority of 52.1% of respondents had heavy work load in their job. A majority of 62.4% respondents had excessive job responsibilities; and, 83.5% experienced hardship due to excessive job responsibilities. A large number of 47.7% respondents had insufficient time to spend with their family members and friends because of having excessive job responsibilities. A majority of 63.7% of respondents had chronic stress. A sizable number of 39.1% of respondents mitigated the pressure of the chronic stress by meeting and conversing with their friends
V.
CONCLUSION
Shakespeare, in his drama King Lear aptly remarks that it is the actions of the mankind that are responsible for the fruits they reap. Danial Goleman says, if the actions of leaders are to be functional, they should have a critical mass of emotional intelligence. The present study was conducted to examine the Occupational stress among employees in Pandyan Grama Bank, Virudhunagar District. Stress is inevitable in human life. Stress is non -specific response to demands from organization environment that results in physical, psychological, and behavioural deviations for bank employees. No one is immune to stress. The present study reveals that stress in work setting stems from different sources such as individuals, group, organizational, and environmental. Though the precise impact of stress is difficult to predict, it adversely affects the physiological, psychological and behavioural aspects of employees experiencing to it. Effects of stress vary from employee to employee depending on their resilience capacity, perception of stimuli, prior experience to it, and complexity of task to be performed. The study suggests that stress can be managed at both the individual level and the organizational level. Individual approaches to manage stress include exercise, behavioral control, proper diet, meditation, relaxation and the like. The study also pinpoints organizational strategies to manage stress which include clarity of employee roles, procedures, policies and rules, change in organizational structure, counseling, spread of message of evil effects of stress and so forth. Prevention is better than cure
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Occupational Stress among Pandyan Grama Bank Employees in Virudhunagar District, India. REFERENCES Books:
[1] [2] [3] [4] [5] Khanka S.S, Organisational Behaviour, S. Chand and company Limited, First Edition, 2000. Mirza S. Saiyadain, Organisational Behaviour, Tata Mc Graw-Hill publishing company Limited, New Delhi, 2004. Srivastava A.K, Management of occupational stress( Theories and practice) Gyan publishing house, New Delhi, 1999. Dr. Umesh Sharma, Stress management (through ancient wisdom and modern science), First Edition, New Delhi, 2005. Uma Sekaran, Organisational behavior, Tata Mc Graw-Hill publishing company Limited, New Delhi, Second Edition, 2005.
Journals:
[1] Dr. Bob Murray, Building high performance team, managing a high performance team in stressful times, the journal of Effective Executive, Vol-XII, No.5, May 2009. [2] Debdatta Gupta, Mergers and Acquisitions, Stress among BPO employees, Vol-VIII, Issue-VIII, August 2008. [3] Daisy Chauhan, Effect of job involvement on burnout, The Indian journal of Industrial Relations, Vol-44, No.3, January 2009. [4] Kavitha Singh, A review of economic and social development, Emotional Intelligence and workplace effectiveness, The Indian journal of Industrial Relations, Vol-44, N0.2, Oct-2009. [5] Kakolisen, A review of economic and social development relationship between job satisfaction and job stress amongst teachers and managers, The Indian jounal of Industrial Relations, Vol-44, No.1, July 2008. [6] Kathirvel .N , A study on stress among employees working in BPOs with special reference to Coimbatore, The IUP journal of management research, Vol-VIII, No.11, 2009. [7] Prof. Krishnan Nair.N, Stress among Bank employees in India, The journal of management research, Vol-I, Issue-I, July2008. [8] Lakshmi Ravikanth, Paraxis, Wired for stress, Business lines journal of management, Vol-3, Issue-2, May 2001. [9] Parul Rishi, Women in Mnagaement, I love my stress, Jouranl of Effective Executive, Vol-VII, No.9, Oct - 2007. [10] Vasumathy .S and Catrherine Joseph, Mergers and Acquistions, Emotional Intelligence, The journal of HRM review, Vol-VIII, Issue-VIII, August 2008.
Reports and Records:

Annual Report of Pandyan Grama Bank.
Websites:
[1] [2] [3] [4] [5] [6] www.about.com www.changingminds.org/explanations/stress/stress_causes.htm www.ehealthmd.com www.mindpowerindia.com/mindnachine-lab/stress-buster.htm www.stressfocus.com www.stressfocus.com/stress-focus-article/post-traumaticstress.htm
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Business Continuity and Challenge of Succession in Nigeria: What happens when the CEO leaves?
Dauda, Abdulwaheed
Department of Entrepreneurship & Business Studies, Federal University of Technology Minna, Niger State, Nigeria.
Abstract: Corporate succession planning has attracted considerable interest among management and social
science researchers. Most of the research has been conducted in the developed countries and organizations from specific vantage points such as understanding the impact of CEO succession or successor. On balance, there is little research of leadership succession planning in most less developed countries, especially Nigeria. Succession planning is a critical tool for ensuring lasting organizational improvement. However, the biggest challenge for most organizations is how to effect a well-designed change of leadership without disrupting the organizational continuity. This paper asserts that most organizations in Nigeria will be heading for leadership transition crisis unless effective succession planning is urgently integrated into organizational culture. The paper examines what succession planning is about and the challenges associated with its implementations. The paper also reviews the strategies for developing and implementing leadership succession plans. The author used qualitative research methods to investigate leadership succession in Nigeria in both public and private sector organizations. The research reveals that most Nigerian organizations are not engaged in leadership succession planning and implementation. It is also apparent from research findings that for those that tried, the success rate is negligible. The research also revealed other issues such as culture and political complications that are entrenched in most Nigerian organizations, especially those in the public sector. These entrenched issues need to be understood and dealt with to ensure organizational renewal, business continuity and economic growth. Keywords: succession, continuity, planning, leadership, organizational culture and CEO
I.
Introduction
Successful companies, agencies and organizations have one thing in common, culture of succession management (Walsh & Seaward, 2006). Corporate leadership succession is of considerable interest among management and social researchers. Most of the research is conducted in developed countries with little attention given to emerging economies such as Nigeria. Corporate leadership succession whether in the public or private sector organizations, is the proactive identifications at all levels of the organization. It differs from leadership replacement, which is the reactive initiative to find a replacement for a retiring or resigning manager. The inability of organizations to have a well-articulated leadership succession plan and culture is capable of leading to disruptions and leadership transition crisis. For instance, sudden death, incapacitation, unplanned resignation or retirement could be disruptive if there is no pool of talents readily available. Similarly, the Board may find itself in a situation where it has irreconcilable differences squabbles with attendant consequences on the organizations performance and image. Furthermore, there may be instance where a large number of employees in the senior and middle management positions could retire within the same period. This would definitely create a huge vacuum and adversely affect performance. Organizations do not have to wait for leadership transition problems/ challenges to manifest before taking steps to ensure continuity of leadership talents. It is therefore imperative to have in place a process that is capable of developing a pool of talents, especially in key operational areas. Statement of the Problem There is little evidence to show that even Nigeria leading organizations undertake succession planning. There was a semblance of succession planning practice in foreign multinationals such as UAC & Cadbury perhaps due to link to British parent companies. Otherwise unlike some emerging economies that have vibrant public corporations (for example Etisalat, owned by United Arab Emirates (UAE) Telecommunications Corporation); most companies in Nigeria are generally small with poor performance. The major problem is that failure to practice succession planning leads to failure to take advantage of diversity that Nigeria has, as almost all recent public appointments are disputed and sometimes end in courts. Furthermore, it has led to entrenched leadership culture where leaders are not willing to leave office in Nigerian indigenous institutions even when obviously the term of office is stated. Even more disturbing is that the growth of Nigerian institutions remains abysmal as lack of succession planning reduces the scope for leadership development and planning, leading to www.iosrjournals.org 59 | Page
Business Continuity and challenge of Succession in Nigeria: What happens when the CEO leaves?
problems of business continuity and growth. The aggregate effect of these problems is failure of business continuity and growth, reducing the effectiveness of Nigerian institutions. Objectives Succession of leadership is a real organizational issue world wide as recent study by a leading executive search and leadership consultants (Crowder et al & Struggles, along with Stanford Universitys Center for Corporate Governance, 2001) concluded that CEO succession planning is poor or non-existence in most North American public and private companies. In view of this, report along with the foregoing background. The main objective of this paper is to investigate the corporate succession planning practices of Nigerian organizations and the issues surrounding corporate leadership succession planning and implementation. The researcher sub divided this main objective into the following objectives: To identify the main factors responsible for lack of succession planning in Nigeria To examine and evaluate the effect of failure to practice succession planning in Nigeria as regards business continuity and growth. Finally, to suggest a framework for improved growth and reduce the level of disputes that has followed public appointments in recent decades. The Concept of Succession Planning The concept of succession planning refers to the process where managers identify, assess and develop their staff to ensure that they are capable of assuming key roles in the organization. It is the process of determining key roles within an organization, identifying and assessing possible successors and developing them for present and future opportunities. Succession planning has been defined as a dynamic, ongoing process of systematically identifying, assessing and developing leadership talent; and assessing, developing and recognizing key contributors to meet future organizational strategic and operational needs (Gronn, 1996). Succession planning entails identifying top performers in the organization and engaging them to ensure that they are involved and committed to stay for a long period. Benefits of Succession Planning Succession planning is critical to the sustainability and competitive advantage of any organization irrespective of its ownership nature. Thus, succession planning facilitates the organization to take a strategic approach to its leadership development and employee skill assessment. It is particularly important where the Government policy causes massive retirements in order to preserve critical organizational knowledge. According to Collin & Hussy (2009), succession planning also facilitates a flow of talent emerging from within the organization. This is also capable of boosting the confidence in staff. This point is supported by the findings of Smith et al (2006) observes that succession planning is a tool for talent management in organization, and it is crucial for attracting, keeping, and promoting special talents that helps an organization to remain competitive. succession planning is widely believed to help business organizations with inter nal re-sourcing, reduce attrition of the work force caused by job- hopping high-fliers, and prepare qualified candidates for appointment to senior management positions (Huang, 1999). Successions planning gives a bigger picture and not just focus on replacing top executives and a good succession plan usually forces organizations to examine all levels of employees and plug talent and skills gaps for the future of the organization. A well-designed succession gives organizations enough time to offer professional development to the talented employees who are likely to be selected as replacement for those who leave. The main advantage of succession planning in an organization is the active development of a strong talent resource for the future which is vital to attract and retain the best and key people which will help in present and more for the future growth of the organization. Have the right people with right skills in the right jobs doing the right things. Strategy for Succession Planning A comprehensive succession planning strategy encompasses various activities, which provide a roadmap for developing succession plans. There is no right or wrong way to develop a succession plan, hence, different organizations will implement components of any succession planning strategy. Firstly, there must be assessment of key positions in terms of competencies and experiences needed to qualify for leadership positions. Then identify key talents at the top two or three levels in the organization through management assessment of their performance and potential for advancement. Secondly, assess key talents, primary development needs of skills ready for the next level and strategies for potential successors through s formal education, training, leadership and management training, coaching or mentoring and job enrichment. Lastly, monitor implementations of the employee development plans with annual reviews and implementation of transition plan to select leaders from the talent pool to fill the vacancies. Usually there are three succession planning with internal skills, and talent pool planning for training for future successions and replacements (Conger & Naddler, 2004).
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Models of Succession Planning There are mainly three models of succession planning organizations use and these are; a) short-term planning or emergency replacements, b) long-term planning or managing talent, and c) combination of above plans. Firstly, the short-term planning or emergency replacements is the most common model of succession planning and serves as a crucial point for all types of businesses. This model focuses on an urgent need caused by a sudden need to replace departing or lost executive. Secondly, long-term planning or managing talent is based on the strategic frame work for organizations future goals, key positions necessary for growth are identified as well as the best candidates to fill those roles. Some organizations invite all employees to take part in assessment processes, which help identify talent to be developed for the future needs of the organization. Organizations that wish to groom leaders from within their existing talent pool employ talent management as a key component of its long-term human capital strategy. This model has several advantages that include; having a specialized talent pool, defining and building future skills required for the success of the organization, and motivate and retain employees by involvement in internal skills and may be bureaucratic. Thirdly, is the combination model, which combines both plans, allowing senior management to plan for the long-term growth of both the organization and employees within the organization and prepare for emergency replacements to ensure that business is not affected by knowledge loss or lack of skilled employees.
II.
Review of Related Literature
The current literature on corporate leadership succession emphasizes the strategic importance that organizations need to attach to it. It is imperative that organizations ensure that there is a ready pool of adequately prepared employees who are able to take on higher responsibilities and positions when the need arises. To support this, Charna, Drotter and Noel (2001) argue that organization needs to develop a leadership pipeline to allow for orderly succession of leaders at all levels in the organization. Other researchers like Kets de Vries (1995) and Hill (2005) contend that leadership succession is crucial in enhancing ability of an organization to minimize potential loss of competitive advantage and ensuring business continuity. There is evidence in literature that for some reasons, leadership succession planning and implementation processes often fail to meet the desired result (Conger and Fulmer, 2003; Conger and Nadler, 2004). Reasons such as failure to invest money, energy and time in people, and entrenchment tendencies on part of the CEO who is reluctant to vacate his or her position contribute to failure of succession planning (Cannella and Shen, 2001; Vancil, 1987; Walsh and Seward, 1990). Another reason for failure of corporate leadership succession planning and implementation is the inherent weaknesses often found in succession models. Take the case of public sector organizations in Nigeria where the geopolitical arrangement of switching top management positions around the zones, irrespective of successor suitability often results in appointing incompetent leaders. Such weakness may hinder smooth transition of the actual succession process, especially the CEO level (ChungHerrara, Enz and Lankau, 2003). However, this is meant not to be the case as geopolitical arrangement to provide needed personnel at short notice. One can overcome some of the deficiencies in generic models by using alternative models that are specific in their treatment within the process of leadership succession planning (Friedman, 2006). The existing literature on corporate leadership succession studies are within the triad; Europe, Asia and USA (Ohmae, 2005) with little information about leadership succession planning and implementation among Nigerian organizations. Our interest is to investigate how these studies could be adapted and implemented within the peculiarity of the Nigerian culture, ethnics and political systems. With this consideration in mind the researcher attempted to examine the HR policies of some Nigerian organizations to learn how they engage or practice corporate succession planning to ensure organizational renewal and business continuity. The study posits that organizational entrenchment exists in Nigerian organizations that are capable of reducing overall effectiveness or leadership succession management. The study also postulates that organizationally generated entrenchment arises from the influence of culture and political environment affecting leadership succession planning and setting up roadblocks to successful transition from one CEO to the next, particularly in government owned corporations and agencies. The presence of ethnic, culture and environmental complexity is not unique to Nigeria, many developed and other developing countries have similar mix, so why should these be tumbling blocks to Nigerians situation? Over the decades large amount of literature has been published on several aspects of leadership succession, incorporating the importance of succession management (Rothwell, 2005; Taylor and McGraw, 2004; Huang, 2001), succession rates (Dalton and Dalton, 2007; Brant, Dooley and Iman, 2008), successor origins (Agrawal, Knoeber and Tsoulouhas, 2006) and succession theories (Kesser and Dalton, 1994) to mention a few, we observed that much of the literature concerns with broader issues of leadership succession with little attention to the organization or business strategy. Most literature takes roots deep into Human Resources Management. Yet there is always over concentration on CEO succession instead of succession at all levels www.iosrjournals.org 61 | Page
within the organization of qualified and prepared successors within the organization that will ascend to leadership positions following the departure of those in the top positions (Hambrick and Mason, 2004) or top management team (Smith, Houghton, Hood and Ryman, 2006). Generally top management of senior management team are the ones involved in the strategic vision and direction of an organization. Furthermore, Sobol, M.R; Phil Harkings and Terry Conley (2007) feel that the single most important accomplishment by most admired manager and legendry Chairman and CEO of GE, Jack Welch, was building and integrated system of succession planning. This gave Welch the ability to make wise decisions regarding people as the source of most competitive advantage. Much earlier Huang (2004) stated that most Japanese top management spend more time thinking about management succession than on anything else. Most successful organizations engage actively in teaching, mentoring and coaching to identify, develop existing talent for future succession. Succession planning is key to business continuity and longevity (James, C. and Jerry P, 1994), the point further emphasized by James Collins (2001) that the best companies groom talented employees for positions of leadership. James Collins (2009) even went further to show that most fallen companies had outside chief executive officers, stating that leaders who fail the process of succession planning set their companies on a path to decline (p. 60). Failure to engage in succession planning early on causes organizations to make decisions based on informal judgments, which are often problematic with negative results in most cases. The mismanagement succession planning often arise from a basic assumptions that leadership, as people tend to equate leadership with administratively senor individuals (leithwood, Jantzi, and Steinbanch, 1999). Transformational leaders, rather than transformational leadership, get the greatest attention in leadership research (Gronn 1996). However, distributed leadership, leadership that spreads across organizations without diminishing the importance of the principals role, is starting to draw more attention (Crowther et al. 2002; Spillane, Halverson, and Diamond 2001). Sustainable, significant improvement depends on understanding and managing this process over time (Hargreaves and Fink 2003). Reformers and change experts rarely grasp the long-team aspects of leadership. Although scholarly research into servant leadership is increasing, those selfless individuals (Dalton, 2007), a lack of specific details persists when examining the definitions and models of servant leadership (Hill, 2005; Hambrick & Mason 2004; and Vancil; 1997). One business process which holds potential to reflect the impact of servant leadership is succession planning. It is logical that servant leadership would place emphasis on succession planning with its emphasis on the follower (employee) and the followers development (Cannella & Shen, 2006). While virtually all organizations encounter the need for succession planning, research and literature have not focused on the actual process (James, C & Jerry Porras, 1994). This study provided the opportunity to examine the succession process in a servant led organization to determine the manner in which the process is involved with servant leadership and its seven constructs (love, humility, altruism, vision, trust, empowerment, and service) that explain the process by which servant leadership behavior manifests itself in the workplace.
III.
Methodology
In this research, the researcher used two design strategies, emergent design flexibility and purposeful sampling (Patton, 2002). Emergent design flexibility means the researcher was open to adapting inquiry as the understanding of the situation deepened or changed. This strategy allowed the important analysis dimensions to emerge from patterns found in the cases under study without presupposing in advance, what the important dimensions will be, as it is open and flexible. The view of Hill (2003) that emergent design requires the researcher to follow new information as it emerges. Additionally, purposeful sampling was selected because it offers useful manifestations of the phenomenon of interest (Patton, 2002). In this research, the phenomenon of interest was the effect of succession planning and its effects on business continuity. By purposefully selecting a servant-led organization that had gone though a succession, the researcher gained insights and in depth understanding of the phenomenon of interest. This design strategy also did not try to generalize the data from a sample to a population but merely looked at gaining insight about the phenomenon studied. The data collection for this qualitative study took place during a 4-week period in May 2012 within Nigeria. The researcher made observations and list of Nigerian organizations in two distinct sectors, public and private. The enquiry centered on how top or senior management positions were filled within these two groups of organizations. The researcher made inquiries to find out if formal succession planning took place or head hunting started at the eminent departure of the current Chief Executive. He then analyzed documents gotten from various sources to obtain an insight into the practice of promotion and top management succession. Documents regarding promotion policies, training programs, evaluation programs, and hiring practice helped to shed light on the succession process of the organization. The research also utilized the general interview guide with leadership and succession planning as the two issue explored. The researcher also conducted interviews using unstructured methods (Easterby-Smith, Thorpe and Lowe, 1991, Lee, 1993) which allowed and exploration of the role leadership played in the succession process without trying to define the role. The research also looked at political issues incorporating geopolitical www.iosrjournals.org 62 | Page
arrangements and affiliations. These additional methods of data collection enable data source triangulation where in the researcher examined all data collected to ascertain whether the themes found in the data remained consistent at different times (Conger and Fulmer, 2003). The researcher employed iterative process to review the data (personal interviews, organizational material, and observations).
IV.
Results and Discussion
The research reveals that most of the world admired states and corporations that have achieved longevity have had chief executives that start planning their departure right at the beginning of their appointment. This seems to make sense because all the CEOs will ultimately come and go, and how they come and go has a profound effect on their corporations, which may largely determine the difference between extended periods of failure and success. In Nigerian organizations, we found that the CEOs have hard times facing and accepting the impending loss of power, a step necessary to plan for their own succession. Some even find delegation difficult as it exposes some deals that need to be covered. As a result, the transitions are not as smooth as they could be. We found cases of unplanned continuity and discontinuity. Discontinuity with the achievements of a leaders immediate predecessor has negative and reversal effect on the progress previously achieved (Hargreaves and Fiunk, 2006). This is true in diverse sectors of Nigerian operational environment, whether in Academic, public sector or private sector. In the private sector however, foreign multinationals do have CEO succession planning and experience less difficulties with replacement. There were also few examples of indigenous organizations with succession planning, for example some Banks in Nigeria. Often innovative leaders left before their innovations take root and their less creative successors abandon their projects and return to status quo. With the experience of what happens elsewhere, the researcher felt that its time for Nigerian organizations to start being more proactive in succession planning and get serious about it so that Nigerian will benefit from global economic/financial recovery. Here the work of Carey, Ogden and Roland (2000) readily comes to mind. They suggested ten core principles an organization needs to use if it is serious about succession planning. We have summarized these core principles here. Organizations that are serious about succession planning have strong, involved boards, which are professional, understand industry, and are close to their top management team. They encourage next generation CEOs to gain exposure to outside board service, to the media and to the investment community. These organizations also form executive committees or operating committees to facilitate the development of several entire organizations. Next, they view succession planning as an ongoing and real time process and take as much of the CEOs compensation to the development of succession plans. Finally, they pay their directors increasingly in stocks and require the directors to make a personal investment and periodically calibrate likely internal candidates for CEO against comparable outside leaders and develop succession culture. In the public sector arena, many parallels could be drawn to create such a best practices checklist for MDAs and universities that should be serious about succession planning. Universities, Polytechnics, COE and MDAs need to have strong, involved trustees, stakeholders and boards that are close to their executives. They should encourage next generation executives to gain exposure to outside community and form executive committees or operating committees to facilitate the development of several administrators who are aware of the challenges, business plans, and strategies across the entire institutions. Succession planning should be ongoing and take as much of the CEOs compensation to the development of succession plans and require the trustees or boards to make a personal commitment to the organization or institution and develop succession culture. In all these settings, similar incentives and emphasis could be placed on the preparation of other senior administrative executives such as Vice Chancellors of Universities/Rectors of Polytechnics and Director Generals of MDAs as do CEO of private sector organizations. Despite the above, the researcher share the feeling of those who feel that several factors strongly militate against a more proactive succession planning, especially in the public sector; the biggest challenge appears to be the geopolitical arrangements that, in most cases, ignore competence or the merit criteria. Another challenger springs from the fact that Government unduly influences appointment into senior management positions, particularly during the democratic dispensation in Nigerian. Sometimes Government policies somersault overnight and this has significant impact on work force requirement of public sector establishments. For instance, in the early 1990s, there was a government circular to MDAs to arbitrary reduce their staff strength by a certain percentage. Again in October 2009, another circular was issued that all Directors who had put in eight years of service as at 31st December, 2009 should be asked to retire, irrespective of the manpower needs and succession plans of those establishments. This would destabilize any system and upturn whatever plans in place. The researcher used one example of this event from an MDA that has staff profile that is heavily skewed to retirement age bracket that would make leadership succession shock is eminent. In this establishment, more than 45% of the workforce had less than eight years to retire from service and about 50% of those in senior and middle management positions would retire the same period. In addition, there was no clear recruitment policy, no succession plans as seniority rather than capacity to perform was what determined the next person to www.iosrjournals.org 63 | Page
fill a vacancy. This situation can be replicated to most public sector organizations as government somehow regulates employment.
V.
Conclusion
The research shows that corporate succession planning is essential for any organization that is to achieve consistent performance. For profit making organizations; this mean survival or collapse. The research reveals that there is an apparent lack of a systematic approach and willingness to recruit, nurture, groom, and retain potential leaders in most institutions in Nigeria. Though succession planning is critical to achieving business sustainability and competitive advantage, organizations in Nigeria do not appear to have well thought out succession plans. Succession planning is important and useful to all types of organizations. The research demonstrates that most public sector organizations in Nigeria have not taken any deliberate efforts toward succession planning. Employees are not nurturing and development for higher responsibilities is none existent as seniority rather than capacity to perform is what determines the next person to fill a job vacancy. Furthermore, before he or she assumes a higher post, there is usually no deliberate training planned for him or her nor is he or she exposed to the demands of the new position. He or she has to grapple with how best to perform the new assignment. The absence of succession planning has resulted in the placement of square pegs in round hole, thus affecting negatively on morale and overall performance. This explains why some establishment, which did well in the past, is almost in extinction now. The leadership transition crisis is compounded by the fact that appointment into top positions are made by the Government usually bases on the geo-political bias. It is sad, because this is a blessing that many countries with experience in managing diversity and inclusion to broaden personnel portfolio, based on objective approach, cases abound when top management exit, the institutions are left without substantive leaders for long periods. The research also points out that some of these establishments do not have recruitment strategy, hence in some cases; more than 50% of the workforce are within the same age group and would retire in the next seven years. The consequences of this are obvious; talent and knowledge drain, critical skill gaps, a change in the ethos and dynamics of the business and disruptions. No deliberate attempt has been made to anticipate attrition and deal with it. The researcher also found that these establishments had no retention policies hence no effort is made to gain employee loyalty or commitment. In recent decades, most establishments in the Nigerian public sector have had or experienced and are experiencing leadership succession challenges, which adversely affect organizational renewal. Recall the case of NAFDAC when the previous CEO exited. Because of lack of succession planning, the replacement created a lot of tension and disruptions. The NCC, SEC and BPE are also suffering from leadership succession deficiency is not different in the government is yet to resolve the replacement issues therein. The situation is not different in the educational institutions either. The appointment of Vice Chancellors in most Nigerian Universities has generated a great deal of tension because of lack of leadership succession planning. In a particular case, the transition crisis led to the resignation of the Chairman. The most recent case is the leadership challenges at INEC. The private sector organizations are also grappling with leadership transition challenges. Apart from Guarantee Trust Bank Plc that has a developed leadership succession plans, leadership change in the some banks involved regulatory authorities.
VI.
Recommendations
Despite the benefits of succession planning, most organizations do not practice succession planning. Replacement of disengaged staff is not done in a systematic manner. To reposition organization for effective performance and service delivery, there is the urgent need for organizations to establish effective succession planning capable of building a pool of talents from within. This will enhance leadership continuity, values, and ethos of the business. It will also facilitate the development of a strong talent resource for the future which is vital to attract and retain the best and key people which will help in present and more for the future growth of the organization. Have the right people with right skills in the right jobs doing the right things. The key is to match the needs of the organization to the goals of the individual. Very critical to the succession planning process is a retention strategy that will not only motivate employees, but also build up their commitment to the organization. Keeping talented people in place by providing them with opportunities they may not receive elsewhere will create a stronger and more loyal group of future managers and executives thus saving the companys recruiting and hiring costs over the long-term. One way to ensure a successful leadership transition is to build a culture of strong leadership whereby employees show effective leadership at all levels. Strengthening leadership capacity throughout the organization can enable a highly successful transition by reducing dependency on a single individual, such as a certain senior leader or key person. Succession planning in the public sector organizations is inhibited by such factors as politically motivated geo-political arrangements, inconsistency and policy upheavals, sit tight attitude of leader. These factors can be overcome if organizational renewal and continuity become the goal priority of leadership in the country. www.iosrjournals.org 64 | Page
Business Continuity and challenge of Succession in Nigeria: What happens when the CEO leaves? References
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Role of Performance Appraisal System on Employees Motivation

Muhammad Faseeh ullah khan
(Lecturer Federal Urdu Art & Science University)
Abstract: In many organizations, reward decisions depend on subjective performance evaluations. However,
evaluating an employee's performance is often difficult. In this paper, we develop a model in which the employee is uncertain about his own performance and about the manager's ability to assess him. The manager gives an employee a performance appraisal with a view of affecting the employee's self perception, and the employee's perception of the manager's ability to assess performance. We examine how performance appraisals affect the employee's future performance. The predictions of our model are consistent with various empirical findings. These comprise (i) the observation that managers tend to give positive appraisals, (ii) the finding that on average positive appraisals motivate more than negative appraisals, and (iii) the observation that the effects of appraisals depend on the employee's perception of the manager's ability to assess performance accurately. Key Words: Subjective Performance Appraisal, Credibility, Cheap Talk
I.
Introduction
1 INTRODUCTION: 1.1 MEANING AND DEFINITION OF PERFORMANCE APPAISAL Performance appraisal is a formal system that evaluates the quality of an employees performance. An appraisal should not be viewed as an end in itself, but rather as and important process within a broader performance management system that links: Organizational objectives Day to day performance Professional development Rewards and incentives In simple terms, appraisal may be understood as the assessment of an individuals performance in a systematic way, the performance being measured against such factors as job knowledge, quality and quantity of output, initiative, leadership abilities, supervision, dependability, cooperation, judgment, versatility, health and the like. Assessment should not be confirmed to past performance alone. Potentials of the employee for future performance must also be assessed. 1.1.1 A formal definition of performance appraisal is: It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development. 1.1.2 A more comprehensive definition is: Performance appraisal is a formal, structured system of meaning and evaluating an employees job related behaviors and outcome to discover how and why the employee is presently performing on the job and he the employee can perform more effectively in the future so that the employee, organization and society and all benefit. 1.2OBJECTIVE OF STUDY 1.2.1(A) Primary Objectives: 1) To study the performance appraisal system in different organization. 2) To study the transformation of performance appraisal from traditional to modern. 3) To get an insight into the relative importance of performance appraisal in organization. 4) To study the effectiveness of performance appraisal system in different organization. 5)To study the practical application of performance appraisal. 6) To compare appraisal system of different organization and find out the most common parameters for appraisal. 7) How can companies use performance appraisal as an effective tool to achieve organizational effectiveness and efficiency.
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Role Of Performance Appraisal System On Employees Motivation

1.2.2 (B) Secondary Objectives: 1) To observe the work environment in organization. 2) To get experience and expertise in making projects. 3) To enhance my communication skills. 4) To increase my confidence. 1.3 LIMITATION OF STUDY 1) To get contacts of HR managers for interviews was difficult. 2) Getting the views and opinion of the interviewee (HR Manager) was a difficult task.
II.
Literature Review
2 LITERATURE REVIEW Performance appraisals are a systematic way of evaluating the standard of an employees pe rformance. 2.1 Steps for developing a systematic performance appraisals 2.1.1. Identify key performance criteria Development of key performance criteria should be based on a comprehensive job description and undertaken in consultation with employees. 2.1.2. Develop appraisals measure In order to obtain accurate and valid performance appraisals, appraisals measures should be tailored to the specific job or job family (i.e., groups of similar jobs). An evolution of factors in the work environment which help or hinder performance is also recommended. This ensures that realistic expectations are set for employees performance. And is also likely to increase the perceived fairness and acceptability of performance appraisals. 2.1.3 Collect performance information from different sources Traditionally, it has been the sole responsibility of managers/supervisors to assess performance. However, other organizational members (e.g., clients, coworkers, and subordinates) can be valuable source of information as they are likely to have exposure to different aspects of an employees performance. Collecting information from multiple sources can increase the accuracy of performance evaluation (i.e., reduce bias), and increase employees perceptions of fairness. 2.1.4 Conduct an appraisal interview The two central purposes of the appraisal interview are to: 1. Reflect on past performances to identify major achievement, areas for further improvement, and barriers/facilitators to effective are performance. 2. Identify goals and strategies for future work practice. The appraisal interview should be a constructive, two-way exchange between the supervisor and employee, with preparation for the interview done by both parties beforehand. 2.1.5. Evaluate the appraisal process The performance appraisal process should undergo regular review and improvement. For example, focus groups or surveys could be conducted to gauge employees perceptions of the appraisal process. A success performance appraisal process should demonstrate a change in both the rating of employees performance and aspects of the work environment that impact upon work performance. 2.2 Best practice in performance appraisal In essence, best practice in performance, appraisals involves: Integrating performance appraisal into a formal goal setting system Basting appraisals on accurate and current job descriptions Offering adequate support and assistance to employees to improve their performance (e.g., professional development opportunities) Ensuring that appraisers have adequate knowledge and direct experience of the employees performance Conducting appraisals on a regular basis. 2.3 TRADITIONAL PERFORMANCE APPRAISAL The history of performance appraisal is quite brief. Its roots in the early 20 th century can be traced to Taylors pioneering Time and Motion Studies. But this not very helpful, for the same may be said about almost everything in the filed of modern human resources management. During the First World War, appraisal concept was adopted by US army which was in the form of merit rating. It was man-to-man rating system for evolution of military personnel. From the army this concept entered the business field and was restricted to hourly-paid workers. During 1920 relational wage structures for hourly paid workers were adopted in industrial units and each worker were used to be rated in comparison to www.iosrjournals.org 67 | Page

other for determining wages rates. This system was called merit rating. The process was firmly linked to material outcomes. If an employees performance was found to tha n the supervisor expected, a pay rise was in order. Little a consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well. Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed. For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance. These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not only element that had an impact on employee performance. It was found that other issues, such as moral and selfesteem, could also have a major influence. As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United State, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time. MODERN APPRAISAL Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weakness and strengths as well as opportunities for improvement and skills development. In many organization but not all - appraisal results are used, either directly or indirectly, to help determine reward outcome. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions. By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in the extreme cases, demotion dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay.)whether this is an appropriate use of performance appraisal the assignment and justification of rewards and penalties very uncertain and contentious matter. 2.4 OBJECTIVES OF PERFORMANCE APPRAISAL 2.4.1 Salary increase Performance appraisal plays a role in making decision about salary increase. Normally salary increase of an employee depends upon on how he is performing his job. There is continuous Evolution of his performance either formally or informally. This may disclose how well an employee is performing and how much he should be compensated by way of salary increase. 2.4.2Promotion Performance appraisal plays significant role where promotion is based on merit and seniority. Performance appraisal discloses how an employee is working in his present job and what his strong and weak points are. In the light of these, it can be decided whether he can be promoted to the next higher position. 2.4.3 Training and Development Performance appraisal tries to identify the strengths and weakness of an employee on his present job. This information can be used for devising training and development programmes appropriate for overcoming weakness of employees. 2.4.4 Feedback Performance appraisal provides feedback to employees about their performance. A person works better when he knows how he is working. This works in two ways, firstly, the person gets feedback about his performance. Secondly, when the person gets feedback about his performance, he can relate his work to the organizational objectives. 2.4.5 Pressure on Employees Performance appraisal puts a sort of pressure on employees for better performance. If the employees are conscious that they are being appraised in respect of certain factors and their future largely depends on such appraisal. 2.4.6 Others a) Identifying systemic factors that are barriers to, or facilitators of, effective performance. b) To confirm the services of probationary employees upon their completing the probationary period satisfactorily.
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c) To improve communication. Performance appraisal provides a format for dialogue between the superior and the subordinate, and improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the rater and the rate. d) To determine whether HR programmes such as selection, training and transfer have been effective or not. 2.5 HOW TO CONDUCT A PERFORMANCE APPRAISAL PROCESS The following five-step approach to conducting a systematic performance appraisal is recommended: 1) Identify key performance criteria 2) Develop appraisal measures 3) Collect performance information from different sources 4) Conduct an appraisal interview 5) Evaluate the appraisal process. 2.5.1 STEP 1: IDENTIFY KEY PERFORMANCE CRITERIA Perhaps one of the most challenging aspects of setting up a performance appraisal is deciding what to assess. In the essence, four key dimensions of performance should be considered in a performance appraisal. KEY DIMENSIONS OF PERFORMANCE Competencies Knowledge, skills, and abilities relevant to performance Behaviours Specific actions conducted and / or tasks performed Results/outcomes Output, quantifiable results, measurable outcomes achievements, objectives attained Organizational citizenship Actions that are over and above usual job responsibilities behaviours To ensure that the performance criteria are relevant to work practice and acceptable to appraisers and employees: i. Base the performance criteria on an up-to-date job description ii. Develop criteria in consultation with appraisers and employees. i) Base the performance criteria on an up-to-date job description: clear and explicit links between performance appraisal and a job description will ensure the relevance of the appraisal. If a detailed job description is not available or is out-of-date, it is strongly recommended that an accurate job description be developed prior to conducting a performance appraisal. ii) Develop criteria in consultation with appraisers and employees Linking performance appraisals with job descriptions can help to focus the appraisal process on the key competencies, behaviours and outcomes associated with a particular role or position. It can also be useful to consult with employee to: Ensure that key aspects of a role / position are represented in the job description, for example: Conduct assessments Plan interventions Manage cases Liaise with and refer to other providers Keep up-to-date service records and case notes Write reports Develop a clear understanding of the relative importance of various competencies, Behaviours and outcomes Identify how these key competencies, behaviours and outcomes can be fairly and accurately assessed. Employees are more likely to accept and be satisfied with the appraisal system if they participate in the development of appraisal criteria and measures, and in the process of conducting appraisals. Strategies for facilitating employees participation include: Engagement in formal meetings or informal discussions with supervisors to seek input and / or feedback on appraisal measures and criteria Representation on groups/ committees involved in the design and implementation of performance appraisals Inclusion of self appraisals in the appraisal process
and
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Providing opportunities for employees to contribute to the performance appraisal of coworkers and managers/ supervisors. It is also important that employees perceive the appraisal system to be equitable and fair. 2.3.2 STEP 2: DEVELOP APPRAISAL MEASURES Once clear and specific performance criteria have been developed, the next step is to decide how to access employees performance. It is recommended that a structured and systematic approach is taking to assessing performance. Problems that arise when an unstructured blank sheet approach is used include: Increased chance to appraiser errors (i.e, reduced accuracy) Knowledge, skills and abilities most critical to job performance may be overlooked (i.e., feedback may have limited impact on performance effectiveness) Reduced consistency between appraisal (i.e., evaluations may reflect differences between appraisers rather than actual difference in a employees performance) Perceptions of subjectivity in evaluations, which may in turn, reduce employees satisfaction with, and acceptance of appraisals. There are three important considerations in the design of appraisal measure: Generic versus individually tailored measures Objective versus subjective assessments Assessing the impact of the work environment on performance. i. Generic versus individually tailored measures Many workplaces use a generic rating form for all employees irrespective of their role or position with in the organization. Although this approach can save time and minimize cost, the accuracy and relevance of appraisals may be significantly diminished. The one size fit all approach of generic measures may overlook important performance criteria that are relevant to particular jobs, and may also include criteria that are irrelevant to others. Where time and other resources permit, it is more appropriate to construct appraisal formats tailored to specific jobs or families of jobs. If the development of job -specific (i.e., individually tailored) appraisal formats is beyond the resource capacity of the organization, an alternative would be to develop two groups of criteria: 1) Core competencies that have applicability to the performance appraisal of all employees with in the organization. 2) Additional competencies applicable only to some jobs and included in the performance Appraisal if relevant. ii) Objective versus subjective assessments a basic distinction between different types of appraisal measures concerns the use of objective or subjective criteria. Objective assessments of work performance Objective measures of job performance involve counts of various work-related behaviours. Some common objective job performance measures include Absenteeism (number of days absent) Accidents (number of accidents) Incidents at work (number of incidents/ assaults/ altercations) Lateness (day late) Meeting deadlines. Objective measures can be relatively quick and easy to obtain (give good organizational record-keeping). However, it can be unwise to place too much emphasis on these types of objective measures. An exclusive focus on results/ outcomes may mask factors that impact on employees performance that are beyond their control (e.g., client workload). Subjective assessments of work performance Subject measures rely on the judgment of an appraiser (self, coworkers or supervisor). Subjective assessments are commonly used in performance appraisals and often involve the use of rating scales. Subjective assessments are more likely to provide accurate performance appraisals, when: The behaviours and outcomes being assessed are stated in clear behavioral terms The employee understands the measures (e.g, rating scales) being used to evaluate their performance, and agree that the measures are fair and accurate (i.e., measures what it is supposed to) Measurement is as brief as possible whilst addressing essential behaviours and outcomes (frustration with long and unwieldy questionnaires may introduce error in responses). www.iosrjournals.org 70 | Page

ii. Assessing the impact of the work environment on performance The goal of a performance appraisal is to support and improve employees performance and effectiveness. Therefore, it makes sense for an appraisal to include an assessment of factors in the work environment that help or hinder a employees capacity to perform effectively. Explicit assessment of environmental factors is also likely to increase the perceived fairness and acceptability of performance appraisals. For examples, an employees capacity to provide effective treatment interventions is influenced by factors such as: Access to private, soundproofed, adequately sized rooms for counseling Availability of validated, user-friendly assessment tools Availability of reliable and approachable management/ administration 2.5.3 STEP 3: COLLECT PERFORMANCE INFORMATION FROM DIFFERENT SOURCES Once the appraisal measures are developed, the next step involves collection of accurate performance information. A common trap is to begin noting observations of employees just before conducting appraisals. This is likely to give an inaccurate picture of a employees performance. Ideally, employees performance should be observed in a systematic way overtime (e.g. in a diary). This method ensures the accuracy of information about their performances. Many employees in the organization operate with a relatively high degree of autonomy. This combined with the heavy workload of most managers/supervisors may limit opportunities to conduct regular observation of employees performance. In addition, perceptions of ongoing monitoring may foster a sense of surveillance which can damage staff morale. A more suitable approach may be to keep critical incident reports that note specific examples of both excellent and unsatisfactory performances. Supervisors can also encourage employees to keep track of their own performance records such as emails or letters that commend them on their achievements. Traditionally, it has been the sole responsibility of managers/ supervisors to assess performance. However, other organizational members can be valuable source of information as they are likely to have exposure to different aspects of a employees performance. This approach is known as 360 degree feedback. For instance, coworkers can provide valuable information on teamwork skills, and subordinates can provide useful information on leadership style. There are many advantages to obtaining feedback on performance from sources other than supervisors or managers. Key benefits include: Accuracy and reduced bias (incorrect information from one source can be corrected from another) Increased likelihood that employees will perceive the performance appraisal system to be a fair and accurate reflection of their performance compared to relying on supervisor ratings alone). If time and resources are limited, it is recommended that supervisor appraisals be conducted in conjunction with self-assessment. Including self-assessments as part of the appraisal process is likely to enhance employees commitment to, and satisfaction with, the appraisal process. It also provides employees with an opportunity to identify barriers and facilitators to effective performance in their work environment. Five different sources of performance appraisal information are considered here: i) Manager/ supervisor appraisals ii) Self appraisals iii) Coworker appraisals iv) Subordinate appraisal v) Client appraisals. i) Manager/ supervisor appraisals Managers/ supervisor play a central role in the appraisal process, and should always be included as one of the main appraisers. In essence, managers and supervisors have two roles in performance appraisal: 1. Judge assessing performance 2. Coach providing constructive feedback and identifying areas for improvement. Performing both roles simultaneously can be difficult. Employees may be reluctant to admit areas for improvement if performance assessment is linked with desired outcomes such as pay, promotion or opportunities to work in desired areas. One solution is to separate the judge and coach roles by conducting separate appraisal meetings. ii) Self appraisals The process of evaluating ones own performance can help to increase employees commitment to the appraisal process, perceptions of appraisal fairness, and satisfaction with the appraisal process. Self-appraisal www.iosrjournals.org 71 | Page

can also be useful for identifying areas for development. Not surprisingly, self-appraisals are usually biased towards leniency. Strategies to increase the accuracy of self appraisals include: a. Using clear definitions of performance criteria linked to specific, observable behaviours b. Information employees that their ratings will be checked and compared to other sources of appraisal (i.e., for accuracy) c. Ensuring employees receive regular feedback on their performance. It is recommended that self appraisals are used for professional development purposes, rather than for making administrative decisions (i.e., pay increases, promotion) iii) Coworker appraisals Coworkers can provide valuable feedback on performance, particularly where teamwork occurs. Coworkers are often aware of different aspects of a employees performance that managers/ supervisors may not have the opportunity to observe. In addition as there is usually more than one coworker who rates a workers performance their evaluations tend to be more reliable. Coworkers evaluations, however, may be biased towards those individuals most well liked in an organization (i.e., friendship bias). Furthermore, Coworker appraisals may have a negative impact on teamwork and cooperation if employees are competing with one another for organizational incentives and rewards. It is recommended that Coworker appraisals are used for professional development rather than administrative decisions. iv) Subordinate appraisal Subordinates are a valuable source of information regarding particular aspects of a supervisor or leaders performance such as communication, team building or delegation. Subordinates can provide feedback to help managers/ supervisors develop their skills in these areas. The focus should be on aspects of managerial performance that subordinates are able to comment upon. This source of appraisal may only be appropriate in larger organizations where there are sufficient subordinates to allow anonymity. v) Client appraisals Clients may also offer a different perspective on a employees performance, particularly for jobs that require a high degree of interaction with people. For example, client appraisals can be a valuable source of feedback regarding the quality of service provision (e.g. the quality of interaction, degree of empathy, level of support, degree of professionalism). Organizations often have performance contracts that specify goals and deliverables for client outcomes. Whilst it is important that organizational gorals and deliverables are reflected in the appraisal criteria for individuals and teams, it is recommended that particular care be taken if incorporating client outcomes. Relying on client outcomes as an indicator of performance can have undesirable effects due to the complex and sensitive nature of work. A range of factors may influence client outcomes, many of which are outside the control of an individual employee. It is rare for a successful (or otherwise) outcome to be the sole result of one persons efforts. This makes client outcomes a poor reflection of the quality of treatment provided by the employee. For example, good employee performance will not always bring about client improvement, and client relapses may not be due to poor employee performance. In additional to considering client outcomes, it may also be beneficial to focus on employees skills and abilities in providing services per se (i.e., independent of client outcomes). 2.5.3.1 Strategies to support appraisers and enhance appraisal accuracy Rating another persons performance is not an easy task, particularly with complex jobs or performance criteria. Strategies to support appraisers and increase the likelihood accurate assessments include: Providing practical training in rating techniques, which includes opportunities to practice appraising performance and providing feedback Limiting the assessment to performance criteria that an appraiser has observed/ experienced in regard to the employee Providing structured assessment tools with clear explanations regarding the criteria to be assessed, and performance standards. 2.5.4 STEP 4: CONDUCT AN APPRAISAL INTERVIEW The next step in a performance appraisal is to conduct the appraisal interview. The two central purposes of the appraisal interview are to: Reflect on past performance to identify major achievements, areas that require further development, and barriers/ facilitators to effective performance Identify goals and strategies for further work practice. www.iosrjournals.org 72 | Page

As discussed below, supervisors and managers can use a range of strategies to ensure that the appraisal interview is positive, constructive and of greatest benefit for employees effectiveness. 2.5.4.1 Before the interview Help employees to become familiar and comfortable with talking about their performance by engaging in regular, informal communication on work progress, potential obstacles and issues, possible solutions and assistance Encourage employees to prepare employees should be encouraged to review their own performance before the interview Does your own preparation- plan ahead Draft a list of the issues that you want to address with the employee (i.e. strengths and weaknesses of performance, strategies to improve performance). Give specific examples of the employees performance that you want to h ighlight. During the interview Encourage employee participation start by inviting the employee to share their views about their performance Begin with positive feedback to put the employee at ease Make it a two- way discussion Set goals mutually ensure employees participate in determining specific, challenging but attainable goals for future work performance Ensure that there is a clear agreement on performance objectives and the evaluation criteria for the next year Keep written records of the appraisal interview on which both parties have signed off. 2.5.4.2 After the interview Coach employees regularly- frequent feedback to help employees improve their performance Assess progress towards goals frequently- periodic reviewing of progress towards goals helps keep behavior on track and enhances commitment to effective performance. Relate rewards to performance by linking appraisal results to employment decisions such as promotions and salaries, employees are more likely to prepare for, participate in, and be satisfied with the appraisal system. 2.2.2 STEP 5: EVALUATE THE APPRAISAL PROCESS: As with any organizational, the performance appraisal process should undergo regular review and improvement. For example, the process of performance appraisal could be evaluated by conducting focus groups or surveys with employees to gauge their satisfaction with the appraisal process (and suggestions for improvements). It may also be useful to monitor the types of issues raised by supervisors and employees overtime. A successful performance appraisal process should demonstrate a change in both the ratings of employees performance (i.e., ideally performance rating should improve, or at least remain at a satisfactorily stable level over time) and the work environment (i.e., evidence that significant barriers to work practice are being addressed by the organization). 2.6 HYPOTHESIS: To know the extent of accuracy and perfection of the Performance Appraisal to motivate the employees in the organization. H0 To motivate the employee in our organization. H1 Dont motivates the employee in our organization. 2.7 DATA COLLECTION: 2.7.1 PRIMARY DATA COLLECTION: DATA COLLECTION I have collected for this research from different websites, articles, newspaper and through the questionnaire. Data collected through the website such as, Wikipedia, Data collection from, library, Concerned Management Books and also touch the some Newspaper such as Daily Down, the magazines, the daily Jang. It is good sources to providing help to data collection.
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2.7.2 SURVEYS Selected question from the questionnaires. Q.1 What is your organization? Q.2 Is the Performance Appraisal System in your organization linked to him incentives or the reward system? Q.3 Do you think the system of Performance Appraisal has been successful in your organization and is able to achieve the required objectives in your organization? Q.4 The should at least 3 appraisers, team in charge, Head of Department, and HR Manager respectively to measure the performance of employees. This will help to have intense control over system to reduce bias effect? Q.5 Job description/ specification are the best way to measure the performance. All employees should know their job description / specification so that they can work efficiently and can measure them selves? Q.1 What is your organization? S.NO 1 2
OPTIONS Management Staff
SELECTED 44 56
III.
Conclusion:
According to survey result approximately 56% people are said that management to play their role in the organization for set their goals in the organization through the performance appraisal system 44% people are said staff are the part of management and also to play their role in the organization for set their goals in the organization through the performance appraisal system. Q.2 Is the Performance Appraisal System in your organization linked to him incentives or the reward system? S.NO OPTIONS SELECTED YES 1 64 NO 2 36
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Conclusion: According to survey result approximately 64% people are said that the Performance Appraisal System in your organization linked to him incentives or the reward system and 36% people are not said that the Performance Appraisal System in your organization linked to him incentives or the reward system. Q.3 Do you think the system of Performance Appraisal has been successful in your organization and is able to achieve the required objectives in your organization? S.NO OPTIONS SELECTED YES 1 64 NO 2 36
Conclusion: According to survey result approximately 64% peoples are said that you think that the system of the Performance Appraisal System has been successful in your organization and is able to achieve the required objectives in your organization and 36% people are said that you think that the system of the Performance Appraisal System has not been successful in your organization and is able to achieve the required objectives in your organization. Q.4 The should at least 3 appraisers, team in charge, Head of Department, and HR Manager respectively to measure the performance of employees. This will help to have intense control over system to reduce bias effect? S.NO OPTIONS SELECTED 1 Strongly agree 56 2 Agree 24 3 Disagree 14 4 Strongly Disagree 06
30 25 20 15 10 5 0 Strongly agree Agree Disagree 12
7 3
28
Strongly disagree
Conclusion: According to survey result approximately 56% people are strongly agree the Appraisal system should be at least 3 appraisers, Head of Department, and HR Manager respectively to measure the performance of www.iosrjournals.org 75 | Page

employees. This will help to have intense control over system to reduce bias effect and 24% people are only agree the Appraisal system should be at least 3 appraisers, Team in charge Head of Department , and HR Manager respectively to measure the performance of employees. This will help to have intense control over system to reduce bias effect and 14% people are disagree the Appraisal system should be at least 3 appraisers, Head of Department, and HR Manager respectively to measure the performance of employees. This will help to have intense control over system to reduce bias effect and 06 % people are strongly disagree the Appraisal system should be at least 3 appraisers, Head of Department, and HR Manager respectively to measure the performance of employees. And this will help to have intense control over system reduce bias effect. Q.5 Job description/ specification are the best way to measure the performance. All employees should know their job description / specification so that they can work efficiently and can measure themselves? S.NO OPTIONS SELECTED 1 Strongly agree 38 2 Agree 34 3 Disagree 18 4 Strongly Disagree 10
20 15 10 5 0 Strongly agree Agree Disagree Strongly disagree 19
17 9 5
Conclusion: According to survey result approximately 38% people are strongly agree that in Performance Appraisal system the Job description / specification are the best way to measure the performance. All employees should know their Job description / specification so that they can work efficiently and can measure them selves and 34% people are only agree that in Performance Appraisal system Job description / specification are the best way to measure the performance. All employees should know their Job description / specification so that they can work efficiently and can measure them selves and 18% people are only disagree that in Performance Appraisal system Job description / specification are the best way to measure the performance. All employees should know their Job description / specification so that they can work efficiently and can measure them selves and 10% people are only strongly disagree that in Performance Appraisal system Job description / specification are the best way to measure the performance.
IV.
Methodology
3.1 METHOD OF PERFORMANCE APPRAISAL SECONDARY DATA COLLECTION: A) 3.1.1 Past-oriented methods 1) 3.1.1 Rating Scales: The rating scale method offers a high degree of structure for appraisal. Each employee trait or characteristic is rated on a bipolar scale that usually has several points ranging from poor to excellent (or some similar arrangement). The traits assessed on these scales include employee attribute such as corporation, communications ability, initiative, punctuality and technical (work skills) competence. The nature and scope of the traits selected for inclusion is limited only by the imagination of the scales designer, or by the organizations need to know. The one major provision in selecting traits is that they should be in some way relevant to the appraisers job.
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Advantages The greatest advantage of rating scales is that they are structured and standardized. This allows ratings to be easily compared and contrasted even for entire workforces. Each employee is subjected to the same basic appraisal process and rating criteria, with the same range of responses. This encourages equality in treatment for all appraises and imposes standard measures of performance across all parts of the organization. Rating scale method are easy to use and understand. The concept of the rating scale makes obvious sense; both appraisers and appraises have an intuitive appreciation for the simple and efficient logic of the bipolar scale. The result is widespread acceptance and popularity for this approach. Disadvantages Are the selected rating- scale traits clearly relevant to the jobs of all the appraises? It is inevitable that with a standardized and fixed system of appraisal that certain traits will have a greater relevance in some jobs than in others. For example, the trait initiative might not be very important in a job that is tightly defined and rigidly structured. In such cases, a low appraisal rating for initiative may not mean that an employee lacks initiative. Rather, it may reflect that fact that an employee has few opportunities to use and display that particular trait. The relevance of rating scales is therefore said to be context- sensitive. Job and workplace circumstances must be taken into account. 3.1.1 (i) Systemic Disadvantage Rating scales, and the traits they purport to measure, generally attempt to encapsulate all the relevant indicators of employee performance. There is an assumption that all the true and best indicators of performance are included, and all false and irrelevant indicators are excluded. This is an assumption very difficult to prove in practice. It is possible that an employees performance may depend on factors that have not been included in the selected traits. Such employees may end up with ratings that do not truly or fairly reflect their effort or value to the organization. Employees in this class are systemically disadvantaged by the rating scale method. 3.1.1 (ii) Perceptual Errors This includes various well-known problem of selective perception (such as the horns and halos effect) as well as problems of perceived meaning. Selective perception is the human tendency to make private and highly subjective assessments of what a person is really like, and then seek evidence to support that view (while ignoring or downplaying evidence that might contradict it). This is common and normal psychological phenomenon. All human beings are affected by it. In other words, we see in others what we want to see in them. An example is the supervisor who believes that an employee is inherently good (halo effect) and so ignores evidence that might suggest otherwise. Instead of correcting the slackening employee, the supervisor covers for them and may even offer excuses for their declining performance. On the other hand, a supervisor may have formed the impression that an employee is bad (horns effect). The supervisor becomes unreasonably harsh in their assessment of the employee, and always ready to criticize and undermine them. The horns and halo effect is rarely seen in its extreme and obvious forms. But in its more subtle manifestations, it can be a significant threat to the effectiveness and credibility of performance appraisal. 3.1.1.1. (iii) Perceived Meaning Problems of perceived meaning occur when appraisers do not share the same opinion about the meaning of the selected traits and the language used on the rating scales. For example, to one appraiser, an employee may demonstrate the trait of initiative by reporting work problems to a supervisor. To another appraiser, this might suggest an excessive dependence on supervisory assistance and thus a lack of initiative. As well, the language and terms used to construct a scale such as performance exceeds expectations or Below average skill may mean different things to different appraisers. 3.1.1.1. (iv) Rating Errors The problem here is not so much errors in perception as errors in appraiser judgment and motive. Unlike perceptual errors, these errors may be (at times) deliberate. The most common rating error is central tendency. Busy appraisers, or those wary of confrontations and repercussions, may be tempted to dole out too many passive, middle-of-the-road ratings (e.g., satisfactory www.iosrjournals.org 77 | Page

or adequate), regardless of the actual performance of a subordinate. Thus the spread of ratings tends to clump excessively around the middle of the scale. This problem is worsened in organizations where the appraisal process does not enjoy strong management support, or where the appraisers do not feel confident with the task of appraisal. 3.1.2 Check- list Method: Under this method, checklist of Statements of Traits of employee in the form of YES or No based questions is prepared. Here, the rater only does the reporting or checking and HR department does the actual evaluation. The rater concerned has to tick appropriate answers relevant to the appraises. When the check-list is completed, it is sent to HR department for further processing. Various questions in the check list may have either equal weightage or more weightage may be given to those questions which are more important. The HR department then calculates the total scores which show the appraisal result of an employee. Advantages: Economy, ease of administration, limited training required, standardization. Disadvantages: Raters biases, use of improper weights by HR Dept., do not allow rater to give relative ratings. 2)
3) 3.1.3 Force Choice Method: A series of statements arranged in the blocks of two or more are given are rater indicates which statement is true or false. The rater is forced to make a choice. HR department does actual assessment. Advantages: Absence of personal biases because of forced choice. Disadvantages: Statements may not be correctly framed. 4) 3.1.4 Force Distribution Method: One of the problems faced in large organizations is relative assessment tendencies of raters. Some are too lenient and others too severe. This method overcomes that problem. It forces every one to do a comparative rating of all the employees on a predetermined distribution pattern of good to bad. Say 10% employees in Excellent Grade, 20% in Good Grade, 40% in Average Grade 20% in Below Average Grade and 10% in unsatisfied grade. The real problem of this method occurs in organizations where there is a tendency to pack certain key departments with all good employees and some other discards and laggards. Relatively good employees of key departments get poor rating and relatively poor employees of laggards departments get good rating. 5) 3.1.5 Critical Incident Method: In this method, only critical incidents and behavior associated with these incidents are taken for evolution. This method involves three steps. A test of noteworthy on the job behavior is prepared. A group of experts then assigns scale values to them depending on the degree of desirability for the job. Finally, a checklist of incidents which define good and bad employees is prepared. Advantages: This method is very useful for discovering potential of employees who can be useful in critical situation.
Disadvantages: a) Negative incidents are, generally, more noticeable than positive ones. b) The recording of incidents is a core to the superior and may be put off and easily forgotten. c) Overly close supervision may result. 6) 3.1.6 Essay Method: In the essay method approach, the appraiser prepares a written statement about the employee being appraised. The statement usually concentrates on describing specific strengths and weakness in job performance. It also suggests courses of action to remedy the identified problem areas. The statement may be written and edited by the appraiser alone or it be composed in collaboration with the appraise. Advantages The essay method is far less structured and confining than the rating scale method. It permits the appraiser to examine almost any relevant issuer or attribute of performance. This contrasts sharply with methods where the appraisal criteria are rigidly defined. Appraisers may place whatever degree of emphasis on issues or attributes that they feel appropriate. Thus the process is open- degree of emphasis on issues or attributes that www.iosrjournals.org 78 | Page

they feel appraisal system the limits expression or assumes that employee traits can be neatly dissected and scaled. Disadvantages Essay methods are time- consuming and difficult to administer. Appraisers often find the essay technique more demanding than methods such as rating scales.The techniques greatest advantage- freedom of expression is also its greatest handicap. The varying writing skills of appraisers can upset and distort the whole process. The process is subjective and, in consequence, it is difficult to compare and contrast the results of individuals or to dram any broad conclusions about organizational needs. 7) 3.1.7 Grading: In this method, certain categories of abilities of performance are defined well in advance and person is put in particular category depending on their traits and characteristics. Such categories may be definitional like outstanding, good, average, poor, very poor or may be in terms of letter like A, B, C, D etc. with A indicating the best and D indicating the worst. This method, however, suffers from one basic limitation that the rater may rate most of the employees at higher grades. 8) 3.1.8 Performance Test & Observations: This is based on the test of knowledge or skills. The test may be written or an actual presentation of skills. Tests must be reliable and validated to be useful. Advantage: Test only measure potential and not attitude. Actual performance is more a function of attitude of person than potential. Disadvantage: Some times costs of test development or administration are high. 9) 3.1.9 Confidential Reports: Though popular with government departments, its application in industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR). The system is highly secretive and confidential. Feedback to the assesse is given only in case of an adverse entry. Disadvantage is that it is highly prone to biases and regency effect and ratings can be manipulated because the evolutions are linked to future rewards like promotions, good postings, etc. 10) 3.1.10 Comparative Evolution Method (Ranking & Paired Comparisons): These are collection of different methods that compare performance with that of other coworkers. The usual techniques used may be ranking methods and paired comparison method. 3.1.10.1 Ranking Method: Superior ranks his worker based on merit, from best to worst. However how best and why best are not elaborated in this method.it is easy to administer. 3.1.10.2 Paired Comparison Method: In this method each employee is paired with every other employee in the same cadre and then comparative rating done in pairs so formed. The number of comparisons may be calculated with the help of formula Nx (N-1) / 2. The method is too tedious for large departments and often such exact details are not available with rater.
B) 3.2 Future Oriented Methods 4) 3.2.1 MBO (Appraisal by Results): The use of management objectives was first widely advocated in the 1950s by the noted management theorist Peter Drucker. MBO (management by objectives) methods of performance appraisal are resultsoriented. That is, seek to measure employee performance by examining the extent to which predetermined work objectives have been met. Usually the objectives are established jointly by the supervisor and subordinate. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. Typically they do not rely on others to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress. Advantages The MBO approach overcomes some of the problems that arise as a result of assuming that the employee traits needed for job success can be reliably identified and measured. Instead of assuming traits, the MBO method concentrates on actual outcomes. If the employee meets or exceeds the set objectives, then he or she has demonstrated an acceptable level of job performance. Employees are judged according to real outcomes, and not on their potential for success, or on someones subjective opinion of their abilities. The guiding www.iosrjournals.org 79 | Page

principle of the MBO approach is that direct results can be observed, whereas the traits and attributes of employees (which may or may not contribute to performance) must be guessed at or inferred. The MBO method recognizes the fact that it is difficult to neatly dissect all the complex and carried elements that go to make up employee performance. MBO advocates claim that the performance of employees cannot be broken up into so many constituent parts as one might take apart an engine to study it. But put all the parts together and the performance may be directly observed and measured. Disadvantages MBO methods of performance appraisal can give employees a satisfying sense of autonomy and achievement. But on the downside, they can lead to unrealistic expectations about what can and cannot be reasonably accomplished. Supervisors and subordinates must have very good reality checking skills to use MBO appraisal methods. They will need these skills during the initial stage of objective setting, and for the purposes of self-auditing and self monitoring. Unfortunately, research studies have shown repeatedly that human beings tend to lack the skills needed to do their own reality checking. Nor are these skills easily conveyed by training. Reality itself is an intensely personal experience, prone to all forms of perceptual bias. One of the strengths of the MBO method is the clarity of purpose that flows from a set of well- articulated objectives. But this can be a source of weakness also. It has become very apparent that the modern organization must be flexible to survive. Objectives, by their very nature, tend to impose certain rigidity. Of course, the obvious answer is to make the objectives more fluid and yielding. But the penalty for fluidity is loss of clarity. Variable objectives may cause employee confusion. It is also possible that fluid objectives may be distorted to disguise or justify failures in performance. 4) 3.2.2 Assessment Center Methods This technique was first developed in USA and UK in 1943. An assessment center is a central location where managers may come together to have their participation in job related exercises evaluated by trained observers. It is more focused on observation of behaviors across a series of select exercises or work samples. Assesses are requested to participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which require same attributes for successful performance in actual job. Advantages Well- conducted assessment centre can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in Assessment Centers. The tests also make sure that the wrong people are not hired or promoted. Finally, it clearly defines the criteria for selection and promotion. Disadvantages Concentrates on future performance potential No assessment of past performance Costs of employees travelling and lodging, psychologists. Rating strongly influenced by assesses interpersonal skills. Solid performers may feel suffocated in simulated situations. 3) 3.2.3 360 degree Appraisal It is a technique in which performance data/feedback/rating is collected form all sections of people employee interacts in the course of his job like immediate supervisors, team members, customers, peers, subordinates and self with different weight age to each group of raters. This technique has been found to be extremely useful and effective. It is especially useful to measure inter-personal skills, customer satisfaction and team building skills. One of the biggest advantages of this system is that assesses cannot afford to neglect any constituency and has to show all- round performance. However, on the negative side, receiving feedback from multiple sources can be intimidating, threatening, and expensive and time consuming. 4) 3.2.4 Psychological Appraisals These appraisals are more directed to assess employees potential for future performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. It is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance. This approach is slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depends upon the skills of psychologists who perform the evaluation.
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3.4 ESSENTIALS FOR A SUCCESSFUL PERFORNACE APPRAISAL SYSTEM Basing appraisals on accurate and current job descriptions Ensuring that appraisers have adequate knowledge and direct experience of the employees performance Providing rating via aggregated anonymous feedback when multiple sources of information are used Incorporating performance appraisals into a formal goal setting system Offering adequate support and assistance to employees such as professional development opportunities in order to improve their performance Conducting appraisals on a regular basis (at least two times a year) rather than annually. If resource constraints do not permit frequent formal appraisals, consider conducting one formal appraisal annually, with a review of progress in the mid-year and ongoing review in regular supervision meetings. 3.5 USING PERFORMANCE APPRAISAL TO ADDRESS WORKFORCE DEVELOPMENT CHALLENGES Regular performance appraisals provide a useful opportunity to conduct a check -up on various work force development issues that may impact on emplo yees effectiveness and well being. Performance appraisals can be used to: Recognize, reward and support effective performance Develop and reward effective teamwork Identify and manage issues likely to impact on retention Monitor and support employees well being. 3.5.1Recognize, reward and support effective performance Ensuring employees receive adequate rewards and recognition is a key workforce development issue for the performance. Performance appraisals provide a good opportunity to formally recognize employees achievements and contributions to the organization, and to ensure a clear link is maintained between performance and rewards. The appraisal interview can also be used as a vehicle to demonstrate supervisory and organizational support for employees by discussing barriers and supports to effective performance, and strategies to address problems or difficulties. 3.5.2 Develop and reward effective teamwork The appraisal interview is also a useful vehicle for recognizing and rewarding employees con tributions to various teams in the organization, especially if appraisal information is gained from team members. An appraisal of the team as a whole can also be a useful strategy to recognize and reward team performance, and to identify strategies to improve team functioning. 3.5.3 Identify and manage issues likely to impact on retention Open and constructive performance appraisals can be useful to identify issues that are likely to impact on employees willingness to stay with organization in the longer -term. Key factors associated with retention include salary and remuneration, professional development opportunities, and work-related demands and stress. The appraisal interview provides a good opportunity for a check - up regarding employees satisfaction with their working conditions and environment, and a discussion of strategies to address any problem or issues. 3.5.4 Monitor and support employees well being. Performance appraisal interviews are a good opportunity to discuss employees health an d well being in the workplace, particularly in regard to factors that contribute to feelings of stress and experiences that promote satisfaction with their work.
V.
Conclusion And Suggestion
4.1 SALIENT FRATURES OF FINDINGS Everyone organization, irrespective of its size, has an appraisal system for its employees. This implies the performance appraisal has become an indispensable activity in any organization. Most of the companies have separate appraisal system for each level of employees. These appraisal system differ on the factors on which a person is rated and the nature of duties handled by him. Even when a same appraisal system exists in different organizations, the probability of its success is not the same; this can be attributed to the following factors: implementation problems, organizational climate, and commitment from top management.
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In most of the companies it is seen that the employees are not satisfied with the way they are appraised or they have not been appraised properly. For this matter, almost all the companies have interview and discussion. The frequency of appraisal in all organizations is yearly. Where appraisal is based on Key Result Areas, a mid-term review is also undertaken. This data is then compiled and the final appraisal is conducted at the end of the year. In the most of the cases the immediate supervisors is the appraiser but some times it is also the HR department or HOD. All organizations have goal setting as part of appraisal. The performance is evaluated against these targets. On an average 85% of the employees in an organization are motived by performance appraisal. Most of the companies use the data that is maintained for every employee to compare the performance over a period of time. Some companies also use this data for making decision regarding job rotation, succession planning. Very few companies make use od this data for retrenchment as proof of poor performance. A good deal of respondents felt that appraisal that appraisal is likely to be more successful when it is linked with financial and semi-financial incentives like promotion, bonus, increments. This increases the commitment from the parties concerned the appraisal and the appraise. 360 degree feedback system is not very popular in the Indian companies. Among the companies under study, this system has been implemented in TITTAN and GODREJ. This system can be adopt and its success only in the presence of an open presence of open organizational climate. Most of the companies have an separate appraisal system for the new employees, who are not probation. This basically to confirm them. In the most of companies the current (new) performance appraisal was stared in the year 2000-01. But in Nicholas Primal it was stared in financial year 2005-06. Almost all the companies are satisfied with the current performance appraisal system and do not require any changes. But in Nicholas Primal they would like to provide more training to appraisers, weightage to few traits of employee need to be rewarded, if possible appraisal from should be standardized. In the most of the organizations training is provided for the appraisal system one to two weeks before appraisal and also when new or revised Performance appraisal system introduced. UTI Mutual Funds dose not provide any such training. Performance appraisal is surly a good indicator (about 80%) for the training and developmental need of the employees. No monitoring is done to find out any loopholes in the performance appraisal system and if it exists, it is on informal basis (feedback every year). Awareness sessions about the performance appraisal (objectives and importance) are conduct in a few organizations. It is normally done for new employees.
4.2 CONCLUSION AND SUGGESTIONS: Performance appraisal should not be perceived just as a regular activity but its important should be recognized and communicated down the line to all the employees. There should be a review of job analysis, job design and work environment based on the performance appraisal. It should bring more clarity to the goal and vision of the organization. It should provide more empowerment to the employees. New methods of appraisal should be adopted so that both appraiser and the appraise take interest in the appraisal process. The employees who have excellent performance should be used as a mentor for other employees who would motivate others to perform better. Employees should be given feedback regarding their appraisal. This will help them to improve on their weak areas. Financial and non-financial incentive should be linked to the annual appraisal system so that employees would be motivated to perform better. New mechanisms should be evolved to educe the time factor involved in the procedure of appraisal. Introducing online-appraisal can do this. The frequency of training program for the appraiser should be increased and these sessions should be made interactive. The awareness sessions for the employees/appraises should be made more interactive and the views and opinion of the appraises regarding appraisal should be given due consideration.
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Assistance should be sought from specialists for framing a proper appraisal system that suits the organization climate. Constant monitoring of the appraisal system should be done through discussions, suggestions, interactions. Combing the different methods of appraisal can minimize the element of biasness in an appraisal. Like the rating method combined with assessment center method would give an evidence of poor /unfavorable or outstanding behavior of the appraise if any. Use of modern appraisal techniques like 360 degree appraisal, assessment centers which are more effective. More transparency should be brought about in the appraisal system. The appraisal system should cover all employees in the organization both white collar and blue-collar jobs. Recognizing the good performers i.e., appraises who have accomplished the targets for the year can help in getting more commitment from the employees. Information regarding the performance of the employees should be kept in proper manner. Some of the performance appraisals should be conducted by the top management so that they can understand the employees and their needs, behavior better and to find out the loopholes. Performance appraisal should be effectively link to the performance management system of the organization.
References
References And Biblography:
[1] [2] Langdon, D. (2002). Aligning performance improving people, system, and organizations. San Francisco: Josey Bass/Pfeiffer. Laurel, D. S. (2003). User friendly performance management. Performance Appraisal: Perspectives on a Quality Management Approach. Laurel and Associates, Ltd. University of Minnesota Training and Development Research Center and the American Society for Training and Development Research Committee, 1990. Lecky-TH ompson, R. (1999). Constructive appraisals. Washington, D.C.: American Management Association. Levinson, H. (2003). Management by whose objectives. Harvard Business Review On Motivating People. Cambridge: Harvard Business School Press. Maddux, R. B. (1987). Effective performance appraisals. Rev. ed. Los Altos, California: Crisp Publications Inc. Mark, G. L. (2000). Catalytic coaching the end of the performance review. Westport, Connecticut: Quorum Books. Marriott, J. (1997). Tough bosses, easy bosses. (Employee performance evaluation). Bernardin, H. J., Kane, J. S., ross, S.,Spina, J. D., and Johnson, D. L. (1996). Performance Appraisal Design, Development, and Implementation. In Handbook of Human Resource Management, Gerald R. Ferris, Sherman D. Rosen, and Darold T. Barnum ed., Cambridge, Mass: Blackwell, 462-493. Cascio, W. F. (1998), Applied Psychology in Human Resources Management, 5th ed. Upper Saddle River, NJ: Prentice-Hall. Cawley, B. D., Keeping, L. M., and levy, P. E. (1998) Participation in the performance appraisal process and employee reacti ons: a meta-analytic review of field investigations, journal of applied psychology, 83 (4):615 -633. DeNisi, A. S., Robbins, T. L., and Summers, T. P. (1997). Organization, processing, and Use of Performance Information: a Cognitive Role for Appraisal Instruments, Journal of Applied Social Psychology, 27: 1884-1905. Griller, M. M. (1998). Participation in the Performan ce Appraisal Review: Inflexible Manager Behavior and Variable Worker Needs, Human Relations, vol. 51, no. 8, pp 1061-1083. Grote, D. (1996). The Complete Guide to Perform Appraisal, New York: AMACOM Book Division. Illegen, Daniel R., Barnes-Farrell, Janet L., and Mckellin, David B. (1993). Performance Appraisal Process Research in the 1980s: What Has it Contributed to Appraisals in Use? Organizational Behavior and Human Decision Processes, 54:321-368. Jawahar, I. M., and Stone, T. H> (1997). Influence of Raters Self-Consciousness and Appraisal Purpose on Leniency and Accuracy of Performance Ratings Psychological Reports, 80:323-336. Jordan, J. L., and Nasis, D. B. (1992). Preferences for Performance Appraisal Based on Method Used, Type of Rater, and Pu rpose of Evaluation Psychological Report, 70:963-969. Kaplan, R. E. (1993). 360 Degree Feedback Plus: Boosting the Power of Co -Worker Ratings for Executives. Human Resource Management, 32:299-314. Kravitz, D. A., and Blazer, W. K. (1992). Context Effec ts in Performance Appraisals: a Methodological Critique and Empirical Study Journal of Applied Psychology, 77:24-31 Munrer, T.J., Raju, N.S,. and Collins, W.C. (1998). Peer and Subordinates Performance Appraisal Measurement Equivalence Journal of Applied Psychology, 83, 5:693-902 Mount M.K,. Judge, J.A, Scullen,S.E., Sytsma, M.R and Hezlett, S.A (1998). Trait, Rater, and Level Effects in 360 -Degree Performance Personal Psychology, 51, 3:557. Peach, E,B., and Buckley, M.R. (1993). Pay of performance. In H.J Bernardin and J. Russell (eds.), Human Resources Management: An Experiential Approach. New York: McGraw-Hill, 482-515. Sanchez, J. I., De La Torre, P. (1996). A Second Look at the Relationship Between Rating and Behavioral Accuracy in Performance Appraisal, Journal of Applied Psychology, 81:3-10. Schneier, C.E and R.W. Beatty, Developing Behaviorally Anchored Rating Scales (BARS) The Personnel Administrator, August (1979), 60 Smith, H.P (1997). Performance Appraisal and Human Development, Reading, MA: Addison and Wesley Longman Inc. Wynne, B. (1996).Performance Appraisal: A Practical Guide, Philadelphia: Technical Communications, Oct.
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A study on impact of select factors on the price of Gold

Dr. Sindhu*
Associate Professor, School of Management Studies, Jawaharlal Nehru Technological University Hyderabad. Kukatpally, Hyderabad -500 085, India.
Abstract: The investors always look for the various investment avenues which increase their risk-adjusted
returns and add diversification. Since ages, gold is preferred as the one of the major investment option especially by the Indian investors. The prices of the gold are increasing and the price of the gold is affected by the various factors. This paper is basically focused on the factors like exchange rate of US dollar with INR, Crude oil prices, repo rate and inflation rate. Each of the factors is studied with the gold prices. The relationship between the factor and the gold prices is emphasized in this paper. There exists an inverse relation between the US$ and gold prices. The crude oil prices have an impact on the gold prices. Gold prices and repo rates are interdependent. Gold prices and inflation rates are also dependent and positively correlated. Key Words: Crude oil prices, Diversification, exchange rate of USD and INR, Gold Prices, Inflation, Investment, repo rate.
I.
Introduction
Diversified Portfolios which contain assets such as private equity, hedge funds, real estate and commodities can be enhanced by adding a discrete allocation to gold as a foundation. Investors are looking to increase their risk-adjusted returns and add diversification. However, gold produces benefits that separate it from other investments. It is not only an ideal source of diversification for an investors portfolio, but also provides a foundation which investors rely on to manage risk and preserve capital more efficiently, especially in times of financial turmoil when stability is needed the most. Moreover, an allocation to gold provides investors with the confidence to invest in a wider range of strategies including alternative assets. Sherman (1983) in his study on a gold pricing model has concluded that gold price has a significant positive relationship with unexpected inflation. Similar study is carried out by Moore (1990) that the gold price movements are predicted by a leading indicator of inflation. A research study by Larson & McQueen(1995) conclude that there is coefficient of unexpected inflation for gold price is significant. Sadorsky (1999) to explore the correlation among three month US Treasury interest rates, S & P 500 stock returns and oil prices. Adrangi et al. (2003) conclude that gold has a positive relationship with expected inflation; there exists no relationship with unexpected inflation. Ratanapakorn and Sharma (2007) studied the long-term and shortterm relationships among the US stock price index(S&P 500) and macroeconomic variables during a study period from 1st quarter 1975 to 4th quarter 1998. The stock price index and long-term interest rates are negatively correlated as per the empirical study. Blose (2010) has concluded that unexpected changes in CPI do not affect gold spot prices and investors cannot determine market inflation expectations by examining the price of gold. Researchers have made an attempt to explore the reasons of investment in gold. An analytical research work has been carried out by Sashikant Singh in Dalal Street Journal on how investing in Gold ETFs has started gaining popularity in recent times. The analysis is based on the various options for investing in gold such bars, coins, ETFs. It has been observed that investing in gold ETFs is less risky and less cumbersome than the other means available in investing in gold. He has concluded that investing in gold ETFs are becoming more popular and Sachs Gold ETFs and Kotak Gold ETFs looks better keeping in mind the liquidity available in it. The research work carried out by Devdutt Pattanaik in his research paper Sacred Gold published by World Gold Council mainly focuses on the mythological and cultural significance of gold in India. According to him Indians love gold and this has been explained logically and culturally. Logically, gold is a tangible investment, unlike shares and bonds; a portable investment, unlike property and a beautiful ornament, one that can be worn daily on the body as jewellery. But the same can be said of diamonds and other precious metals. Kannan carried out an econometric analysis for knowing the Indian gold demand from 1980 -2009 and the key drivers for this gold demand published by the World Gold Council. He has observed that for the higher income level groups platinum is a substitute for gold but for the majority gold is a way of life. The value of gold ste ms from jewellery to a major vehicle of wealth accumulation by the low and middle-income households in rural and urban areas. The key drivers for the gold demand were real income level of the population, expectation of higher gold price, exchange rates, as an alternative instrument of saving, gold as an equity security, constrained supply conditions, the relationship between savings and uncertainty. Empirical www.iosrjournals.org 84 | Page

studies reveal that gold demand is not only price sensitive but also affected by macro economic variables and financial variables. It has been understood from above that one of the factors affecting gold price is also exchange rates. This area was further studied by Capie et. al(2005) conclude Gold as a Hedge against the US Dollar. Much focus was drawn on the relationship between gold price and US Dollar. A statistical approach was adopted to study the behaviour of gold with respect to Dollar value. A variety of statistical tools were applied to explore the relationship between gold and the exchange rates of various currencies against the US dollar. The relationship was examined over the whole periods of years from 1971 to 2002, with particular attention paid to the hedging properties of gold in episodes of economic or political turmoil. The US dollar gold price was found to move in opposition to the US dollar and the movement was especially contemporaneous. For each exchange rate considered, a typical weekly movement against the dollar generated a movement in the gold price. The overall conclusion of this study is that gold is indeed a hedge against fluctuations of the US Dollar on the foreign exchanges.
II.
Need and objectives of the Study:
There are a number of distinctive qualities that separate gold from the rest of the commodities, such as the U.S. dollar is weakening, Inflation fears, Emergence of China and India, Supply constraints, Geopolitical instability. But gold is viewed as a safe haven during times of political or economic calamity. Objectives of the study: To analyze the different factors which affect the price of gold. To study and analyze the impact of exchange rate of USD with INR on gold prices. To study and analyze the impact of Prices of crude oil on the gold prices. To study and analyze the impact of repo rate on the gold price. To study and analyze the impact of Inflation on the gold prices
III.
Research Methodology:
For causal research to establish the quantitative relationship between prices of gold and other factors (daily prices of gold and other factors) were collected from the various secondary sources like newspapers, internet, magazines, books, journals were referred to understand the relationship between price movements of gold and other factors. The major data sources are WGC(World Gold Council), Gem & Jewellery Export Promotion Council (GJEPC), MMTC Ltd, State Trading Corporation(STC Ltd). In addition to usage of statistical packages the quantitative data was analyzed through regression etc. For the quantitative study, the period of five years is taken commencing from November 2006 to December 2011 is considered, during which daily prices of gold and other factors were taken into account. Hypotheses: 1. Hypothesis Assumed (H0): Gold Prices do not depend upon Dollar exchange rate. 2. Hypothesis Assumed (H0): Gold prices do not depend on crude oil prices. 3. Hypothesis Assumed (H0): The Repo rate does affect the gold prices. 4. Hypothesis Assumed (H0): The Inflation rate doesnt affect the gold prices. Tools and techniques: A comparative analysis of various factors has been done on the various parameters like trend analysis, Standard Deviation, Regression, and correlation to make possible the tedious task of analysis of these factors. Further analyzing the factors will suggest the investors that whether it will be profitable for the investors to invest in gold or not.
IV.
Data Analysis:
The factors that impact the price of the gold is given below and also the changes in these factors on the gold price is studied. US Dollar, Crude oil Price Repo Rates Inflation Rates The analysis of all these above mentioned factors is as follows: US DOLLAR: It is an important question that is there any correlation between gold prices and the value of US DOLLAR. Now the answer depends upon situation and changes with change in global economic scenario. Now www.iosrjournals.org 85 | Page

there is an inverse relationship between gold prices and US Dollar. Before 1950 US $ was also considered as the inflation hedge. But this is not true now. So in the past it can observe the positive correlation between gold prices and US $. But now the relation is negative. US has a large debt (15 trillion $ as on 16 th February, 2012) and also it pays more interest than it earns. So it creates a downward pressure on the Dollar and makes it weak. This creates an inverse relation. As a tool of hedge now gold is demanded more than the US $. When the price of gold depreciates the investors outside US will benefited because the dollar price of the gold will increase. Investor can shift away from the dollar denominated assets to gold. Past experiences also that gold has been used as a hedge against currency risk. Graph: 1 Gold price Vs US Dollar:
Graph2: Trend Analysis of USD Vs Gold Price:
1.
Hypothesis Assumed (H0): Gold Prices do not depend upon Dollar exchange rate. Regression Statistics 0.477275 Multiple R 0.227792 R Square 0.214478 Adjusted R Square 13292.35 Standard Error 60 Observations ANOVA www.iosrjournals.org 86 | Page

df 1 58 59 SS 3.02E+09 1.02E+10 1.33E+10 MS 3.02E+09 1.77E+08 F 17.10929 Significance F 0.000115
Regression Residual Total
Intercept X Variable 2274.4 549.8584 4.136337 0.000115 1173.739 3375.061 1173.739 3375.061 1 Tabulated z-value= 3.856547 Significant correlation with R=0.477275. Approximately 22% of variation in gold prices accounted for with US Dollar value. Significant linear regression with p value=0.000115. Regression Equation is Y=22274.4X -55386.6 Here the multiple R value is 0.477 which shows that there is significant correlation between the US dollar and the gold prices. This tells us that the current scenario of the US dollar does affect the gold prices. This R value is closer to 0.5 which makes it more significant. Also the value of R square is 0.227 which shows the extent to which the US Dollar value affects the gold prices. But from t value which is more than the tabulated value (hypothesis is accepted) it can predict that there is a relation between US $ and gold prices. The ve intercept of t value as well as ve intercept of regression equation shows the inverse relation between the US$ and gold prices. Therefore the hypothesis is rejected that gold prices do not depend upon the US dollar. CRUDE OIL: The crude oil is one of the factors for inflation. As the prices of crude oil increases, economy always falls into a recession there is upward pressure on inflation. In order to hedge against the inflation people invest in gold. So it can say that there is a relationship between gold and crude oil prices. It will be clearer from the following discussion. Gold has almost always been the most-highly-sought-after universal store of wealth and the gold is the king of all the currencies. The demand for crude oil is in elastic. Now paper currencies lose their purchasing power with time but this doesnt happen with the gold. So during inflationary period when other cu rrencies lose their value more gold can be purchased with gold due to its purchasing power stability. So during high crude oil prices, high inflation, and declining equity market gold can be stored to hedge the inflation. Graph 3: Trend Analysis for Gold Price and Crude oil Price:
Coefficients -55386.6
Standard Error 24714.96
t Stat -2.24102
P-value 0.028868
Lower 95% -104859
Upper 95% -5914.26
Lower 95.0% -104859
Upper 95.0% -5914.26
Hypothesis Assumed (H0) : Gold prices do not depend on crude oil prices.
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Tabulated z value=4.259374 Significant correlation with r =0.52. Approximately 27% of variation in gold prices accounted for with crude oil. Significant linear regression with p value - 0.0000205. Regression Equation- Y=8.58237X+ 15596.6 R is 0.52 which shows that there is correlation between predicted gold prices and Actual one but it is greater than 0.5 which shows that the correlation is significant. It can also be interpreted from the R square value which is 0.27 which shows significance correlation. By R square it can be said that variation in crude oil prices accounts for 27% (approx) for the variation in the prices in gold. Also the t value is (4.63) greater than the tabulated value (4.25) which shows that the null Hypothesis is rejected. Therefore it can be said that the crude oil prices do affect the prices of gold significantly. Here it is important to know that there is great impact of the current economic scenario. It can be analyzed from the graph and the table that there is more correlation in some time period. REPO RATE: Repo Rate is that rate at which the commercial banks borrow money from the RBI. It is a good measure to control inflation. When the repo rate will be high, the borrowing from the banks will be low which will actually reduce the purchasing power of the public. This will reduce the investment in gold and it will ultimately reduce the price the gold. Graph4: Gold Price Vs Repo rate:
Graph5: Trend Analysis of Repo Rate and Gold price: www.iosrjournals.org 88 | Page
Hypothesis Assumed :(H0)-. The Repo rate doesnt affect the gold prices. *NOTE- By analyzing the graph and table it can be said that there are three periods. First one being the period where there is no drastic increase in the repo rates.(November-06 to August-08). Second is that period in which there is increase in gold prices but there is decrease in repo rate(September08 to February-10). Last is that period in which there is increase in repo rate and gold prices (March-10 to October-11). So it will be better that it is shown in the regression analysis separately in three different parts. The common thing in the 3 parts is that there is continuous increase in gold prices. Analysis overview: Regression Analysis for case-1: Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations ANOVA df Regression Residual Total 1 20 21 SS 1.68E+08 2.73E+08 4.41E+08 MS 1.68E+08 13634058 F 12.318526 Significance F 0.002204647 0.617381 0.38116 0.350218 3692.433 22
Regression Analysis for case -2: www.iosrjournals.org 89 | Page

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations ANOVA df Regression Residual Total 1 16 17 SS 2.41E+08 1.61E+08 4.01E+08 MS 2.41E+08 10048062 F 23.94491 Significance F 0.000162 0.77424 0.599448 0.574414 3169.868 18
Regression Analysis for case-3: Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations ANOVA df Regression Residual Total 1 18 19 SS 1.56E+09 1.49E+08 1.71E+09 MS 1.56E+09 8257420 F 189.1031 Significance F 5.47E-11 0.955556 0.913087 0.908258 2873.573 20
As the analysis has been divided into three parts. Case-1 1. Significant correlation with r -0.617381 Change in repo rate accounts 38% for the change in gold prices. Significant linear regression with p value- 0.0022046 Regression Equation- Y= 6115.01237X-15916.127 Case-2 2) Significant correlation with r -0.77424 Change in repo rate accounts 59% for the change in gold prices. www.iosrjournals.org 90 | Page

Significant linear regression with p value-0.000162 Regression Equation- Y= -3256.03X+63298.67 Case-3 3)Significant correlation with r 0.955556 Change in repo rate accounts 91% for the change in gold prices. Significant linear regression with p value- 5.47E-11( approx 0). Regression Equation- Y= 8442.216X+8577.991 From all the three cases it can seen that there is significant correlation between the repo rates and the gold prices (R1-0.61,R2-0.77,R3 -0.95).All the three values are above 0.5 which prove that there is significant correlation. Also the t and p values show that the hypothesis is accepted that repo rates give by the RBI do affect the gold prices. It can be easily observe that in the period (which relates to sep-08 to oct-08) there is a sharp downfall in the repo rate which is affect of crisis in the economy and inflation rate downfall in this period. So it can be said that there is a high correlation between repo rate and gold prices, being other economic factors constant. Also by observing the R square values i.e. 0.39, 0.59, 0.91 which tell us that repo rates affect the gold prices in three cases given above. The t-values are 3.509776, -4.89335 and 13.75148 which shows the acceptance of hypothesis. The negative sign only shows the inverse correlation within that period. INFLATION RATE: Gold has always been considered a good hedge against inflation. Rising inflation rates typically appreciates gold prices. Traditional theory implies that the relative price of consumer goods and of such real assets as land and gold should not be permanently affected by the rate of inflation. A change in the general rate of inflation should, in equilibrium, cause an equal change in the rate of inflation for each asset price While calculating the price of gold there are two inflation rates. One is Gold internal inflation rate, which is change in its production from its mines. Other is monetary inflation. The price of gold over the medium to long term is determined by its inflation rate relative to that of the currency you want to measure it with. With most fiat currency inflation rates, running substantially higher than gold's inflation rate it is easy to see why the gold price will continue to increase over time, and why it has consistently increased over time. This is not about to change regardless of short-term volatility. Graph 6: Trend analysis of Inflation rates and Gold Prices:
Analysis Overview: Regression Statistics 0.462288 Multiple R 0.21371 R Square Adjusted R 0.200153 Square Standard 13413 Error 60 Observations ANOVA www.iosrjournals.org 91 | Page

df Regression Residual Total 1 58 59 SS 2.84E+09 1.04E+10 1.33E+10 MS 2.84E+09 1.8E+08 F 15.76414 Significance F 0.0002
Tabulated z-value:3.71 Significant correlation with r 0.462288 Change in repo rate accounts 21% for the change in gold prices. Significant linear regression with p value- 0.0002 Regression Equation- Y= 1754.174X+31849.31 The value of multiple R shows that (0.46) shows that there is significant relation between gold prices and inflation rate. It verifies whatever our studies are until now that is the gold is an inflation hedge. This analysis also shows that change in inflation rate accounts 21% for the variation in gold prices variation in gold prices but this movement is in reverse direction.. In addition, it should be noted that increase in inflation rate accounts for increase in investment in gold, as it is an inflation hedge. Also from the t-value it can be said that the hypothesis assumed can be rejected.. T-value is 3.97 which are greater than tabulated value 3.71. Also in the later period the gap between gold prices and inflation rate becomes larger which shows the inverse movement between them. Now actually what happens is, when there is increase in inflation rate, generally the RBI increases the CRR and Repo rate and the securities are demanded more. Gold is one of them universally accepted within the accepted within the banking industry. Therefore the demand increases as well as prices also. V :FINDINGS and CONCLUSIONS : 1) Hypothesis Assumed (H0): Gold Prices do not depend upon Dollar exchange rate. But from t value (-4.136337) which is more than the tabulated value (3.856547) it can predict that there is a relation between US $ and gold prices and the hypothesis assumed is rejected. The negative intercept of t value as well as negative intercept of regression equation shows the inverse relation between the US$ and gold prices. 2) Hypothesis Assumed (H0) : Gold prices do not depend on crude oil prices. Also the t value is (4.63) greater than the tabulated value (4.25) which shows that the Hypothesis assumed is rejected. Therefore it can be said that the crude oil prices do affect the prices of gold significantly. 3) Hypothesis Assumed :( H0). The Repo rate does affect the gold prices. This part has been again sub-divided into three parts as there were huge fluctuations in repo rates during the period considered. The analysis of the three parts is as follows: In all the three cases in data analysis, the R-square values i.e. 0.39, 0.59, 0.91 indicate that repo rates do affect the gold prices. Also all the t-values are 3.509776 , -4.89335 and 13.75148 show the acceptance of alternate hypothesis. Negative sign only shows the inverse correlation within that period. 4) Hypothesis Assumed :( H0) - The Inflation rate doesnt affect the gold prices. By observing the t-value it is concluded that the hypothesis assumed is rejected i.e. alternate hypothesis is accepted (T-value is 3.97 which is greater than tabulated value 3.71) and therefore Gold prices do depend upon inflation rates.
V.
Conclusions:
In India, gold is one of the foundation assets for Indian households in the form of investment. It is viewed as secure, liquid investment. Four factors have been considered here which influence the gold prices and the analysis of these factors reveals that: Gold price and Dollar value share an inverse relationship i.e. an increase in gold price will result in decrease in the Dollar value. Gold prices and Crude oil price share a positive correlation which can be understood from the analysis. It can be inferred that an increase in the gold prices will increase the crude oil prices. www.iosrjournals.org 92 | Page

Gold prices and repo rates are interdependent and also negatively correlated during september-08 to February-10 i.e. increase in repo rates resulted in decrease gold prices and. But the correlation remained positive during the other two periods i.e. from November-06 to August-08 and March-10 to october-11. Gold prices and inflation rates are also dependent and positively correlated i.e. increase in inflation increases gold prices also. From the study it is concluded that all the select factors like USD, crude oil prices, repo rate and inflation do have impact on the price of the gold as given in detail their relationship eith price of the gold in the conclusions part above. References
[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] Adrangi, B., Chatrath, A., Raffiee, K.,2003, Economic activity, inflation and hedging: The case of gold and silver investments, The Journal of Wealth Management 6, 60-77. Blose, L.E., 2010, gold prices, cost of carry, and expected inflation, Journal of Economics and Business 62, 35-47. Capie, F., Terence, C.M., Wood, G., 2005, Gold as a hedge against the dollar, International Financial Markets, Institution and Money 15, 343-352. Devdutt Pattanaik (2010): Sacred Gold, World Gold Council, November, 12 -15. Kannan,R., (2010), An Econometric Analysis, World Gold Council,Pg-16-27. Larsen, A.B., McQueen,G.R., 1995, REITs, real estate and inflation: Lessons from the gold market, Journal of Real Estate Finance and Economics 10, 285-297. Moore,G.H.,1990, gold prices and a leading index of inflation, Challenge33, 52-56. Orawan Ratanapakorn and Subhash C. Sharma (2007), Dynamic Analysis between the US Stock Returns and the Macroeconomic Variables, Applied Financial Economics, 17(4-6), 369-377. Perry Sadorsky (1999), Oil price shocks and stock market activity, Energy Economics,21(5),449-469. Sashikant Singh (2012): Gilt Edged paper, Dalal Street - Investment Journal, Vol.27.No.2,15 January 2012, 74-75. Sherman, E.J.,1983, A gold pricing model, Journal of Portfolio Management 9, 68-70. WGC (2010),World Gold Council. The 10-year gold bull market in perspective, World GoldCouncil,5-7
Websites: www.rbi.org.in www.goldresearch.org.in www.gold.org www.investopedia.comwww.wickipedia.com www.bseindia.com www.moneycontrol.com www.mcxindia.com www.kitco.com www.karvy.com www.rateinflation.com
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Conversion of NBFCs in to banks in Indian prospective.

Madhvi Julka
Lecturer (SSIMT Dinanagar) Punjab.
Abstract: With growing pace of life and shortage of time youths try to save each second. Their curiosity to
have funds easily at short notice to shape or give final touch to their ideas is also rising.So to raise the spanner of raising funds raising means, the government has initiated the RBI draft guidelines as on august 2010, which encloses the laws and regulations that would govern NBFCs conversion in to banks. The main motive behind this is the consolidation and the convergence of financial systems globally. In this study I have made an effort to know the perception of the managers towards this suggestion. That whether this initiative would be a success or failure. Abreast what should be the minimum capital requirements and lock in period for such NBFCs. Therespondents (managerial cadre persons) for this aretaken from both public and private banks located in Jalandhar and Ludhiana locality of Punjab.
I.
Introduction
NBFCs in India The NBFCs have a phenomenal role to play in Indian economy to have sound sources of funding. Sharing the broadening of financial services role they have come near to the banking system in meeting the shocks of economy. Having larger portfolio of products, they also improves the return prospects.as per FICCI data NBFCs have accounted for 10.5% of population only from top metros (Delhi, Haryana, Mumbai, Chennai, Kolkata, & Bangalore), who consumed 61% of bank credit in 2006-2007. near about 70% of Indian population is using NBFCs as means to raise funds.
Meaning
NBFCs is a company that is licensed by the commission to engage in business categories as elaborated in its MOA & AOA, it includes: asset management company discount house housing finance company investment adviser investment finance company leasing company & such others as federal government may by notification in official gazette specify.
II.
Literature review
Literature Review is the study of the various papers, articles, and project that have been done in the past to on the same topic NBFCS CONVERSION IN TO BANKS done in the past years. The data for this purpose has been collected from articles in the newspapers, papers on entry of NBFCs in to the banking sector presented by financial advisors and different banking institutions & articles in the Indian banker journal. www.iosrjournals.org 94 | Page

Krishnamurthy.S (2003) analysed that Kotak Mahindra getting of license to operate as a NBFC has led to an initiative in direction of NBFCs conversion in to banks . Now, other large profitable NBFCs such as Sundaram Finance, Ashok Leyland Finance and Cholamandalam Finance should try to avail this option in future for competition sake. Though the initial cost would be high as there higher capital requirements. Sridhar.R (2006) reviewed that mostly NBFCs target niches. As they are oriented towards customers and try to keep the cost low, sothey can be targeted to tap unbanked areas also. He exemplified the growth story of Shriram fin corp. of being converted to top tycoon in NBFC world with a credit worth of 5000 cr.According to him these institutions have to maintain a higher CAR ratio compared to banks, as they are more risky. Dubey.S (2007) analysed that Nbfcs in India had a great revolution after 1991 liberalization which led to simple regulatory mechanisms and allowance to greedy investors to park their money with NBFCs. With more customers base and unwise investments start rising to have large profitability. This in turn leads to weak not compatible with strong players and fading of golden era for NBFCs. Aggarwal. M (2010) reviewed that the private banks conversion in to banks is very risky decision for RBI. As per Official estimates only 30,000 of the total 6, 00,000 habitations in the country are exposed to banking services, therefore the RBI has mainly targeted this effort towards rural India .
III.
Research methodology
Research is the systematized efforts to gain new knowledge. A Research Methodology defines the purpose of the research, how it proceeds, how to measure progress and what constitute success with respect to the objectives determined for carrying out the research study. The appropriate research design being formulated is detailed below. A scientifically carried out research project has a definite framework for data collection. This framework constitutes the research design. It determines the data collection method, sampling method, the fieldwork and so on. 1.1 Data Collection: There are two sources from which data can be collected. For the purpose of study, both primary and secondary data were required. (A) Primary data Primary data is that type of data which is collected first time for some specific purpose. There are various means of the primary data collection. The survey research is been used for the primary data with the help of questionnaire which were filled by the managers of banks of Jalandhar & Ludhiana in Punjab. (B) Secondary data The secondary data in this project has been collected from the The Indian banker journal, The RBI bulletin, RBI Discussion papers, and journals of finance. 3.2 Research design The research design used for the study is both exploratory &descriptive research design as its main objective is to describe something. In this research design it is assumed that researcher is having prior knowledge of the field of study. The main emphasis is given on prior formulation of hypothesis . The uses descriptive method as there was a clear specification beforehand of who, what, when, where, why, and way six Ws of research. its exploratory because only few persons belonging to the industry are aware of the same. 3.3 Data analysis tools Logit regression analysis technique has been used for testing the favorable or unfavorable attitude of bank managers towards NBFCS conversion to banks. 3.4 Sampling technique Here Convenience sampling technique has been used for selecting respondents (i.e. managers) by visiting the banks that are located in hubs and the banks from whom proper support & cooperation was provided, & the managers with whom certain links were found. 3.5 Sample size: For this study sample size of 50 bank managers is taken from the following cities of Punjab i.e. Jalandhar, & Ludhiana.
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3.6 Limitations of Study The study was based on finding whether the nbfcs conversion to bank would help in broadening economic growth; widen the coverage of banks in that area which are still unbanked & what will be its Impact on achieving the objective of financial inclusions. 1. First and the foremost difficulty was to find contacts for getting my questionnaires filled as in most of the cases the persons from managerial cadre dont entertain easily and try to avoid filling questionnaire by saying that they are not authorized for these purpose. 2. One another major hurdle was the stubborn behaviour of the managers who straight away try to respond negatively by saying; this topic is not at all linked with the banking sector. 3. Mixed responses were there from the respondents of different age groups. 4. Time factor-was still one issue as in most of cases I have to wait for 20-25 minutes before I was finally able to meet managers. 5. One another stumbling block was the widely scattered banks where a lot of time was wasted for covering these banks. 6. One another limitation of study was the biased attitude of the managers as they may be biased in accepting NBFCs as their competitors and dont treat this option as viable.
IV.
Analysis and interpretation of data Method of logit regression
The study has been directed judge the attitude of respondents from the managerial cadre towards NBFCs conversion in to banks. Data for this has been collected from 50 respondents (25 of whom are in favour of exercising this option and 25 of whom are against this option) with broadening of economic growth, covering unbanked areas, experience in financial sector, low cost funds, achieving financial inclusion, impact on ticket size, addressing sectoral issues, regulatory forbearances, sources of contagion & concern, financial stability as the ten independent variables.
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Variables not in the Equation Score Step 0 Variables I. II. III. IV. V. VI. VII. VIII. IX. X. Overall Statistics Broadening of economic growth. Unbanked areas coverage Experience in financial sector Cost of funds Impact on ticket size Achieving financial inclusion Better addressing of sectoral issues Regulatory forbearances Source of contagion Financial stability .494 6.129 .492 3.634 .538 3.954 3.574 .338 2.023 .433 10.05 3 df 1 1 1 1 1 1 1 1 1 1 10 Sig. .482 .013 .483 .057 .463 .047 .059 .561 .155 .510 .436
The hosmer and lemeshow test shows lack of significance, indicating that the model predictions are not significantly different from observed values.In other words model fits well.
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The classification table above shows that the overall correct classification rate of the model is 70.00%.the model predict in favorable attitude of managers towards NBFCs conversion in to banks.
V.
Findings of study
The trends in attitude towards the NBFCs conversion in to banks are positive from the side of respondents from the managerial cadre in the banking industry. This idea was subject to criticism in the past by the banking sector but with the proposal of banking sector adopting the model of branchless banking and working through bank correspondents in near future the attitude has been totally changed. They are now favoring this option of proposed by the banks. The change in attitude has been made possible because of the following effects that it will have: www.iosrjournals.org 98 | Page

1. 2. 3. On the basis of survey it was found that maximum numbers of respondents were aware of the RBI discussion paper on the entry of new banks in to the private sector. It was observed that maximum number of have an idea of what should be the minimum capital requirement. Maximum number of respondents responded that the minimum capital requirement should be 500 crores INR which will be an ideal scenario. this amount of capital has been preferred as it will make those only those entities with adequate financial backing or capable of raising funds to go in for this option. It will also help in achieving the final objective of consolidation. Maximum numbers of respondents have gone for the option of current approach of 40% capital with lock in clause of 5 years or maximum 10% with requirement of approval after threshold of 5% is reached. this option were most favored as such high promoter stake in the initial stage & would bring in stability while dilution in the later stage would bring in diversity in shareholding. The respondents were of believe that exercising of this option will promote financial promoting financial inclusions. It was observed that only those NBFCs with adequate experience in financial sector and having sound financial backing would be able to survive. Respondents were of the view that major obstacles that blocks the way of NBFCs conversion in to banks are: low capital base, heterogeneity in terms of size, heterogeneity in terms of activities, heterogeneity in terms of operations. Respondents have given a balanced opinion about the conversion of NBFCs backed by industrial houses in to banks. respondents who have given negative response towards conversion of NBFCs backed by industrial houses in to banks have given the following reasons for it:This would undermine the independence & neutrality of bank as arbitrator of credit allocation to real estate, Restrict the credit availability to competitors, Lead to concentration of economic power, Conflict of interest. The respondents believe that NBFCs conversion in to banks would result in the increase in the ticket size which will ultimately leads to the increase in the cost of funds. The ticket size according to them should be in the range of 5-6 lacks or even more. The respondents were of the view that with NBFCs conversion in to banks some of the sectoral credit issues, such as infrastructure and microfinance, could be better addressed. Maximum number of the respondents from the population believes that Initial stages of NBFCS conversion to banks will demand regulatory forbearances. It was observed that exercising of this option will lead to NBFCs entrance in the areas which are still not explored. This will lead to foster the competition in financial sector.
4. 5.
6. 7. 8.
9. 10.
11. 12. 13. 14. 15. 16.
Bibliography
[1] [2] [3] [4] [5] [6] [7] [8] [9] Krishnamurthy.S (, Jan 26, 2003) NBFCS be bank or not, THE HINDU from http://www.thehindubusinessline.in/iw/2003/01/26/stories/2003012600611400.htm NBFCs get new life through retail operations (Jun 03, 2005) financial express from http://www.financialexpress.com/news/nbfcsget-new-life-through-retail- operations/139472/0 Kamath, R. (2006), Retail financing: NBFCS getting in to fast lane, The Hindu group of publications accessed on http://www.thehindubusinessline.com/iw/2006/12/10/stories2006121000570300.htm NARASIMHAN C. R. L. (Jan 10, 2011) Licensing new banks the feedback mirrors the sharp differences India's National Newspaper, from http://www.hindu.com/2011/01/10/stories/2011011051631600.htm. SRIDHAR. R (Oct 13, 2006) Is there a long-term role for NBFCs? ECONOMIC TIMES http://articles.economictimes.indiatimes.com/2006-10-13/news/27464247_1_nbfcs-mile-credit-delivery-unorganised-sector/2 Kumar M.V.S. (Aug 12, 2010) NBFCs to banks: Rocky road to conversion THE HINDU http://www.thehindubusinessline.in/2010/08/12/stories/2010081251511200.htm Dubey. Shubhashish (Mon Jan 29, 2007) NBFCs: Is the future bright? http://www.123eng.com/forum/viewtopic.php?t=11936&start=0&postdays=0&postorder=asc&highlight= Narayan S.(17 august 2010) the RBI discussion paper on entry of new banks in the private sector by the insights http://www.google.co.in/#hl=en&source=hp&biw=1308&bih=536&q=nbfcs+conversion+to+bank&btnG=Google+Search&aq=f&aqi =&aql=&oq=nbfcs+conversion+to+bank&fp=e8cf0a54441423b1 Sriram M S. ( March 2010) A Comparative Study Of NBFCs In India 2010 IIM-A - Research And Publications, fromhttp://www.scribd.com/doc/34280832/Final-Report-on-NBFC AGGARWAL.M (21 mar 2010) banking license to private companies -journal of finance from http://www.journaloffinance.in/?p=733. The Indian banker vol v no.11 November 2010. The Indian banker vol v no.12-December 2010 .
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IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X.Volume 8, Issue 4 (Mar. - Apr. 2013), PP 01-11 www.iosrjournals.

Computerization In Banks -Some Issues

Sneha Singh Jadaun

Manoj Kumar Dash

1, 2-Student ABV-IIITM, Gwalior (India) 3-Assistant Professor, ABV-IIITM, Gwalior (India)

History Of Banking Industry

Computerization In Banks -Some Issues

Milestones In Indian Banks And It Transformation

Computerization In Banks -Some Issues

Transformation Stages In Indian Banks

Pre-Nationalized banks(before 1969)

Private control of banks

Higher profitabilityFierce Competition

Implementation of various committees report

New products services

Maximum use of ITMobile ATMs

TABLE: Process Of Transformation

Human resources development

Computerization In Banks -Some Issues

ITEM CREDIT CARDS DEBIT CARDS

2009-10 62,950 26,566

Computerization In Banks -Some Issues

Year 2005-06 2006-07 2007-08 2008-09

Computerization In Banks -Some Issues

Computerization In Banks -Some Issues

Computerization In Banks -Some Issues

Issues In Risk Management In Online Banking

Computerization In Banks -Some Issues

Computerization In Banks -Some Issues

% RATING FOR MOST REASONABLE UNSEEN SERVICE CHARGES

Computerization In Banks -Some Issues

Review of the literature

[10] [11] [12] [13] [14] [15] [16]

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

II. Fundamental Theories

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

III. Conceptual Framework For Research

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

Management Capabilities (X2)

Knowledge sharing (X3)

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

IV. Research Methods

V. Analysis And Results

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

pvalu e 0.01 1 0.03 7 0.00 0 0.10 8 0.03 1 0.88 7 0.00 0

Significant Significant Significant Not Significant Significant Not Significant Significant

Entrepreneurship Orientation (X1) Management Capabilities (X2) Knowledge Sharing (X3)

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

VII. Research Originality And Implication

VIII. Conclusion, Limitations And Future Research

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

[5] [6] [7] [8] [9] [10] [11] [12] [13]

[17] [18] [19] [20] [21] [22] [23] [24]

[25] [26] [27] [28] [29] [30] [31] [32]

Innovation Role in Mediating the Effect of Entrepreneurship Orientation, Management Capabilities

[41] [42] [43]

Graduate Programme of Faculty of Economic and Business, University of Brawijaya, Indonesia

Organizational Change Capacity, Environmental Uncertainty, and Organization Performance

Theoretical and Literature Review

Organizational Change Capacity, Environmental Uncertainty, and Organization Performance