CHITRA JHA
Ever wondered how different colors evoke different reactions from you? Colors influence our mood and emotions. Is it any wonder they are used to shift the energy in life? The following color tips and remedies to help you turn your life around!
What are you waiting for? Go ahead - play with colors.
Red
This color is not used for nothing as a warning! Red is known for attention grabbing and is known to increase brain activity. This color is great for spaces that need an activity enhancement. Add this color to create drama (ever notice how theatres use red curtains and carpets?) and a party atmosphere. Also associated with passion, adding a little red to your bedroom will SURELY spice up your love life. Here is another tip: add red to a room that is not so inviting or comfortable and see the difference it makes. Also, if you are depressed or frequently tired, add a dash of red décor to your bedroom; this stimulating color will add energy and boost positive vibes. Only, be moderate and don’t overdo it. Too much red leads to overwhelming emotions, aggression and restlessness. Avoid using this color if there are emotionally hyper people around.
A Red Dislike: Know someone who has an aversion to red? Notice carefully: this person may be over-active, too impulsive, hot-tempered, aggressive and egocentric, or have difficulties with people with such characteristics. It can also symbolize deeply hidden fears and rejection of a person’s own assertiveness.
Purple
Purple is an intensely purifying color, also known as the psychic color linked with activities such as meditation and healing. It's often the preferred color of mediums and those who are in touch with their spiritual side. It's, therefore, a great color for a spa or retreat. Did you know it aids in reducing blood pressure? And, that’s not all! Here’s a very simple tip for you if you are an outgoing sort of a person and need to channelise your energy inwards: add purple to your bedroom as it has a very calming and restorative effect and encourages introspection which is key at night time when your energy needs to be focused inwards. Use purple or violet shades if you feel emotionally drained and desire a more stable work-life balance.
A Purple Dislike: A person who has a dislike for purple may have a very serious attitude towards life; and may find it difficult to give dreams, fantasies, vague fears or memories a place in it. He/she might also have a tendency to rejecting everything they regard unrealistic.
Yellow
Yellow stimulates mental ability and concentration, and aids detachment. Here is an easy tip: if you feel cluttered in your mind, use yellow- wear yellow clothes, add yellow to your bedroom. Yellow is a great color that has the power to lift spirits, raise energy levels and dispel negativity. So, if you have been feeling nervous or sad, include yellow around you. You can use yellow in kitchens, hallways, living rooms, play rooms and offices but again avoid bedrooms as it may prove too energetic and intense.
Yellow is particularly good for focusing the mind and encouraging intellectual progress and performance. Did you know this color helps cure depression? How? It awakens an enthusiasm for life. It awakens greater confidence and optimism. Color therapists use yellow when working with illnesses such as jaundice, arthritis, immobility, depression and skin problems.
A Yellow Dislike: A person who has a dislike to yellow may be emotionally disappointed and bitter. This person might also have a tendency to rationalize feelings, or to avoid the depth of life by often changing relationships, many superficial relationships and/or constantly changing activities.
Orange
Orange is a high energy color that promotes happiness. Orange is a stimulating color and is often associated with enthusiasm, sociability and optimism. This makes it the ideal color for a dining room or any space where you receive visitors or entertain. Orange is a welcoming color for hallways which can often be dark or north-facing rooms that need warming up. Orange has traditionally been used by color therapists to reduce tiredness, depression and pain and help with disorders such as gout, constipation and alcoholism. Here is a tip if you feel you need to unblock your emotions and create a sense of joy in your life: add orange to your bedroom décor or wear orange teemed with blue.
However, here’s a caution tip: avoid too much orange in the bedroom as it can over stimulate but don't be frightened to use orange in other areas. Avoid overly bright orange. Also, it should be used along with tones of blue-green.
An Orange Dislike: A person who dislikes orange may have suppressed sexual feelings or other difficulties with sensual enjoyment of life. Alternately, their attitude can also be over-sensual, indulgent, or too materialistic.
Pink
Pink is the color of nurturing and love. It conveys compassion and love. Did you know wearing pink makes you more approachable? It's great for creating a sense of calmness and has sedative qualities if you have hyperactive children or are facing sleeping difficulties. Here’s a tip if you have a tendency to feeling neglected or angry: add pink to your bedroom décor or start wearing pink. Did you know this color can ease the stresses of the immune system? It also alleviates loneliness, despondency, oversensitivity, and vulnerability.
Pink is great if you are recovering from a divorce or need to move beyond relationship troubles.
A Pink Dislike: Know someone who dislikes pink? Notice that this person who has an aversion to pink may have a challenge with expressing their soft, tender, and more intuitive side.
Green
Green is a calming, reassuring color and promotes feelings of safety. Is it any wonder why it is used as the color of the international safety code?
It balances our energies, and it can be used to increase our sensitivity and compassion. The balancing, nourishing and restful qualities in greens make it perfect as a natural color choice for bedrooms, living rooms and places of retreat. It's also a great color to use if you are experiencing people who seem out of balance on an emotional level.
Color therapists generally use green to reduce stress, ease headaches, migraines and gastric ulcers or balance mood swings.
Although a restful color, green also represents growth (be it financial or personal). If you choose a bright green it can bring abundance to you and urge you to take positive action. Green is the color favored for decorating the South East corner.
A Green Dislike: A person who dislikes green may be more interested in independence and self-development than in a warm family-life. This person may prefer to keep a certain distance in (sexual) relationships.
Blue
Blue is the ultimate soother. This color is the final name in giving serene, tranquil vibes. Blue can, and does, reduce stress and tension and is useful to calm negative emotions when tempers are running high.
Blue is also associated with effective communication and clear thought and is great for focusing the mind and intellect. Is it any wonder most corporates prefer blue clothing? However, too much blue can be cold and depressing so avoid it
if you are prone to moodiness and low mood swings.
Color therapists tend to use blue to fight against hernias, back problems and muscular defects. It is also said to lower your blood pressure and heart rate.
A Blue Dislike: Know anyone who hates blue? Observe carefully and you’ll see that this person may be severely regimented, a strong career person, with an aversion of restrictions. He/she may have charted out a clear direction for their life and would never want to deviate from it.
Chitra Jha is a Life Skills Coach and Past Life Regression Therapist. She can be reached at chitrajhaa@gmail.com The views expressed in this article are the author’s own and do not necessarily purport to constitute an official position of Offline or Material World
Material World Group is Eastern India's emerging knowledge group. Material World through its knowledge aims at resolving man (human) and materials resource issues of those availing its services.
Saturday, July 11, 2009
IN LIGHTER VEIN
"A young guy was returning home on his two seater car after a late night party. There was hardly any public transport visible on the road. He then noticed an old, frail lady standing at the bus stop. She barely managed to stand and needed immediate medical attention. The young guy then realized that she was not alone. There was a beautiful young lady as well as a young man at the stop. Infact, he recognized the young man - he was an old friend who delivered an act of kindness more than once.
Our guy was in a dilemma…who would he help? The old lady or was it time to pay back the kindness of his friend.
After a seconds' thought the young guy walked out of his car and handed over the keys to his friend and asked him to take the old lady to the hospital. He then held the hand of the young girl and started a long walk home. "
This is thinking differently and thinking for the future:
(Source: Mr. Firdose Vandrevala, CMD, Hiranandani group -Heard at the Indian Chamber of Commerce AGM Meet on 27/6)
Our guy was in a dilemma…who would he help? The old lady or was it time to pay back the kindness of his friend.
After a seconds' thought the young guy walked out of his car and handed over the keys to his friend and asked him to take the old lady to the hospital. He then held the hand of the young girl and started a long walk home. "
This is thinking differently and thinking for the future:
(Source: Mr. Firdose Vandrevala, CMD, Hiranandani group -Heard at the Indian Chamber of Commerce AGM Meet on 27/6)
Micro Finance Institution and Poverty Alleviation – A case study
DR. MUKUL MITRA
The author explores the plausibility of micro finance as an effective tool for poverty alleviation
“We can in a process create a society, create a community totally free from poverty. Nobody should suffer from poverty because he does not have to. It is not part of human condition, human civilization. It is simply imposed on us. It is artificial thing imposed on us and we can throw it out.” – Mohammad Yunus
Abstract
India has been shining with an average 8.8 % growth in GDP in last four years. At the same time in the other India, 200 million people are living below poverty line. The approach paper to the Eleventh Plan indicated that the absolute number of poor is estimated to be approximately 300 million in 2004-05. Despite phenomenal growth in Banking system, 58% of household does not have any bank account. To supplement Government’s intervention, a large number of NGOs, Self Help Groups (SHG), Civil Society Organizations (CSO) and micro finance institutions (MFI) are making relentless effort to bring these teeming millions in the fold of inclusive growth. Bandhan is one such organization whose success in a short span of six years is noteworthy. This case study aims to understand functioning of this micro finance institution.
Introduction
Microfinance can change the lives of the poor. There may not be a quantum jump in the income but it is possible still to ensure a reasonable rise in the income of the poor
(Rangarajan, 2005). Asian development Bank- ADB (2000) has defined microfinance as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their micro-enterprises. Microfinance services are provided by three types of sources:
i) Formal institutions, such as rural banks and cooperatives;
ii) Semiformal institutions, such as non-government organizations; and
iii) Informal sources such as money lenders and shopkeepers.
Institutional microfinance is defined to include microfinance services provided by both formal and semiformal institutions. Microfinance institutions are defined as institutions whose major business is the provision of microfinance services. In India, RBI (2007) has defined micro credit (or finance) as the provision of thrift, credit and other financial services and products of very small amount to the poor in rural, semi-urban and urban areas for enabling them to raise their income levels and improve their living standards. Micro Credit Institutions are those, which provide these facilities.
M-CRIL’s data on the performance of Indian MFIs show that these have been expanding at about 30–50% per year in terms of clients and 50–60% per year in terms of portfolio. As a result, India now has a microfinance outreach that is as high as that in Bangladesh - perhaps over 18 million in July 2007. Contrary to the usual experience of microfinance sectors in other countries, however, this growth has been fuelled neither by large inflows of grants nor by a particularly high level of interest charged to clients. Indian microfinance institutions have seen dramatic improvements in efficiency which has resulted in decline in effective interest rates being paid by microfinance borrowers and it is among the lowest in the world. (Sinha, 2007). Despite these efforts, the annual supply-demand gap of credit is still in the range of Rs.2,234 – Rs.4,629 billions. Further, the World Bank estimates that the Indian microfinance activity currently reaches only 4% of the poor (CMF,2006).
According to All-India Debt and Investment Survey (AIDIS), 2002 of the National Sample Survey Organization (NSSO), share of non-institutional sources of credit for the cultivator households had declined from 92.7 per cent in 1951 to 30.6 per cent in 1991. However, it had increased to 38.9 per cent in 2002, mostly due to increase in moneylenders’ share. In this situation, all the agencies including Government, banks and microfinance institutions are expected to play greater role in eradication of poverty. Bandhan is one of the large microfinance institutions in the country and in the case study, their functioning has been examined.
Background Note
Bandhan was established by Mr Chandra Shekhar Ghosh in 2001 as an NGO. In the words of Mr. Ghosh, “Over the years, we have realized that microfinance is not the last word for the development of the poor. Therefore, we took an innovative initiative to design a program for the poorest of the poor with an objective of graduating them to the mainstream microfinance program. A health-education program was also introduced and is being run in a sustainable manner. We plan to address the other pressing issues of the society as well viz. child education and the like”. Bandhan Financial Services Pvt. Ltd. (BFSPL) was set up in 2006 as an NBFC with employees are the major stakeholders. Presently Bandhan is operating under two entities – as a Society and as an NBFC with its Head Office at Salt Lake, Kolkata. The NBFC unit is concentrating more on financial services and the parent Bandhan society continues with micro finance and development activities.
Bandhan’s mission
Reduce economic and social poverty significantly through providing client focused, quality, and cost effective, sustainable financial services.
Vision
A world class financial institution serving two million clients by March 2010.
Values
Bandhan deeply believes in its values and they are manifested through the day-to-day behavior of its team members. These values “CREATE” strong principles where:-
C- Cost effective and sustainable
R- Respect for all
E- Exemplary governance
A- Accountability, professionalism and discipline
T-Transparency and integrity
E- Effective team work and commitment
Growth of Bandhan in a short span is significant. Forbes (2008) magazine’s first-ever listing of the World’s Top 50 Microfinance Institutions out of 641 microfinance institutions operating globally; it has occupied the second position just after ASA of Bangladesh and 15 positions above “Grameen Bank”. It has received the prestigious “Skotch Challenger Award” in 1998 for contribution to financial inclusion. The Government of Afghanistan and the World Bank have approached them to facilitate development of micro credit at the strife torn country (The Hindu, 2008). Like many other MFIs, Bandhan focuses on poverty alleviation through increasing family income through women which in turn gradually increases the status of the woman in the family as well as in the society and ultimately leads to women empowerment.
Table 1: Bandhan – performance highlights as on April 2009
Area of operation 11 States
No. of districts covered 51
No. of branches 720
No. of staff 4277
No. of groups 65046
No. of members 1628551
No. of borrowers 1498808
Cumulative loan disbursed (in crores) 2359.47
Loan outstanding (in crores) 734.82
On time repayment rate 99.96%
[Source : www.bandhanmf.com]
Micro Finance Products
Bandhan provides micro loans to the poor women mostly through the group-based lending model developed by Bangladesh’s Association for Social Advancement (ASA), which has been suitably modified by Bandhan to suit the local requirements. The model focuses on simplified operations, and enhanced credit approval and loan-monitoring mechanisms. First, a group of 10-20 poor women is formed and then loans are given to individual member on the recommendation of the group. However, to get a loan, a member must have to attend minimum two successive weekly group meetings. Before sanctioning of loan field staff visits applicants’ houses and makes assessment of project as well as the applicants. The loans are finally sanctioned by Branch Manager on the basis assessment of field staff.
Table 2: Products of Bandhan
Products Micro loan product Micro enterprise loan Emergency loan
Loan amount Rural:– Rs 1000 -7000
Urban – Rs 1000 -10000 Rs. 20000
Rs.50000 Rs 1000-5000
Loan duration 1 year 1 year 1 year
Interest rate (flat) 12.5% 12.5% 10 %
Repayment frequency Weekly Weekly Weekly or monthly
Membership fee Rs.10 Rs. 20 NA
Insurance fee 1% on loan amount 1% on loan amount
Security deposit 10% on the loan amount 5% on the loan amount
Bandhan usually extends credit for agriculture, zari work, embroidery, animal husbandry, agriculture, crafts work, small cottage industries, small trading, vegetable vending, fishing, poultry, rice husking, horticulture, manufacture of surgical instruments, pottery, small services, small businesses etc.
Micro loans are given to landless and asset less women belonging to a family of five members with monthly household income less than Rs. 2,500 in rural areas and Rs. 3,500 in urban areas. The loans are also granted to individuals owning less than 50 decimal (1/2acre) of land or capital of its equivalent value. Quantum of the first loan is between Rs.1,000 - 7,000 for the rural areas and between Rs.1,000 - 10,000 for the urban areas. The subsequent loan is Rs.1,000 - 5,000 more than the previous loan. Though the loans repayment period is weekly, it offers 7 weeks grace period in deserving cases.
In 2007, the MFI launched health loan scheme to address the emergency health needs of the poor and their families. The applicant, her husband and her children can avail the loan. However, the loans are granted to members who have completed two loan cycles and past record as well as behavior and relationship with other group members is satisfactory.
Finance charges
Earlier Bandhan used to charge an interest rate of 17.50%. In May 2006, consequent upon increase in revenue and reduction in cost of operation the rate has been reduced to 12.50% flat which, in fact, translates into 23.56% annualized and this includes cost of borrowings (12% annualized), operation cost (9%), margin, risk gradation etc. Bandhan also charge 1% as processing fees and 10% upfront refundable loan security deposit on the principal loan amount at the time of disbursement.
New initiatives of Bandhan: Targeting the Hardcore Poor:
According to the MFI, hardcore poor as those who lack confidence to avail and repay loans or take the risk of initiating a business of their own and their desperate condition requires more than just micro credit. “To reach out to the invisibles of mainstream society and uplift their economic condition so that they can feed themselves and graduate into mainstream microfinance program”, Bandhan has introduced Chartering into Unventured Frontiers- Targeting the Hardcore Poor (CUF-THP) programme. The process involves tracking the poorest of the poor and developing their skills appropriate to the management of a local enterprise. Once the identification is made grant is given in the form of assets. Depending upon proper utilization of assets for income generation, these people become eligible for joining mainstream microfinance programmes. The prize money that Bandhan received from Consultative Group to Assist the Poor (CGAP) for the “Pro-Poor Innovation Challenge (PPIC)” award, is being utilized for the programme.
Bandhan’s Education Programme (BEP) – Non Formal Primary Education
With the stipend being received by Shri Chandra Shekhar Ghosh, Founder & CEO, Bandhan as Senior Ashoka Fellow, education programme has been launched. The scheme is meant for drop-out children and those who are not going to school in the age group of 8-14 years and belonging to poor families. Its objective is to ‘create a low cost educational model with 100% attendance of students and no dependence on private tuition’. Presently it has established 60 schools under the programme.
Performance:
In India, Credit Rating Information Services India Limited (CRISIL) rates the MFIs in a scale of mfR1 to mfR8, the former being the highest one. It’s rating for Bandhan in 2008 was mfR3 which according to CRISIL “reflects the MFI’s proven track record in scaling and sustaining its microfinance operations, its good assets quality and experienced governing board and senior management as well as its diversified funding portfolio. The MFI is one of the top ten micro finance institutions of the country” (CRISIL, 2008). The audited financial results throw light on significant growth in performance of Bandhan in the last three years.
Table 3: Highlights of financial performance of Bandhan
(Rs.in crores)
As on March 31 2008 2007 2006
Interest income from loans 44.62 18.19 5.24
Interest on investment/ bank deposits 0.58 0.23 0.02
Total fund based income 45.20 18.42 5.26
Total fee based income 6.54 2.59 0.16
Total income 51.74 21.01 5.42
Total interest on borrowing & finance charges 17.77 6.14 1.36
Gross spread 27.43 12.28 3.89
Gross profit 33.97 14.87 4.06
Expenses – Personnel 13.73 4.22 1.42
Expenses – Administrative 6.47 2.60 1.45
Write of loan losses 0.52 1.78 0.73
Net surpluses 12.81 6.20 0.25
Net worth 21.45 8.64 2.09
Long term borrowing 283.00 100.29 28.86
Short term borrowing /deposits /security of members 45.77 20.83 8.17
Total loans and advances 278.27 126.13 37.11
Total current liabilities 54.38 26.85 9.51
Total current assets 77.07 8.92 3.06
Total assets 358.95 136.12 40.47
Operational self sufficiency 132.39% 141.33% 104.87%
[Source: CRISIL MFI rating report July 2008]
The data in Table 3 indicate that there has been substantial growth in 2008 largely because of infusion of substantial funds by way of borrowing from financial institutions. The total borrowing including both long term and short term ones, increased from Rs 37.03 crores in 2006 to Rs.328.77 crores in 2008. During the same period, loan disbursement has gone up from Rs.37.11 crores to Rs.278.27 crores and income from Rs.5.42 crores to Rs.51.74 crores. Consequently net surplus rose from 0.25 crore in 2006 to Rs 12.81 crores in 2008.
HR Practices
An effective HR practices is essential for growth. As on 31st March 2008, out of Bandhan’s total employee strength of 2415, 1776 were credit officers each handling around 428 borrowers. In the organization, the employees receive fixed pay and promotion is performance based. The recruitment process is swift and the training is on the job under the supervision of a senior. Role and responsibility and growth path for each employee is clearly laid down. The staff at the Head office and Regional offices are to visit the branches regularly so that they can understand operations at the grass root level. Effective monitoring at each level has resulted in 99 % recovery rate over the years. In 2008, the employee attrition rate was only 7.79% as compared to 5.17% and 8.13% of 2007 and 2006 respectively.
Management Information System
MIS is viewed as one of the important tools for reduction of cost of operation and for improvement of operational efficiency for MFIs. As on 2008, in Bandhan data was maintained at branch level manually which delayed the process of consolidation at the Region and Head office level. However, the MFI is presently working with Bangladesh Rural Advancement Communities (BRAC) to develop a customized software which is likely to be implemented in 2009.
Conclusion
Success of Microfinance Institutions, pioneered by Grameen Bank of Bangladesh, has proved that it is a good business proposition too as is evident from the financial statement of Bandhan. However, paucity of capital is a major hindrance for growth of MFIs. The Reserve Bank of India has brought financing of MFIs by Scheduled Commercial Banks under the purview of Priority Sector Lending norms. The Banks too are finding quite it strategically attractive because of very high rate of recovery and wide spread reach of MFIs. In view of the performance and the growing reach of Bandhan, a large number of financial institutions such as SIDBI, ICICI Bank, HDFC Bank, AXIS Bank, ABN AMRO, Standard Chartered, Citi Bank, State Bank of India, UCO Bank, UBI, Yes Bank, BNP Paribas, IDBI Bank, Indian Bank, Bank of India and LIC, have extended their financial assistance by way of loans. However, concentration risk is quite high for Bandhan as 93.85% of its total loan portfolio is in West Bengal only. A socio economic and political changes and growing competition may pose serious challenge to them. Incidentally ASA, the mentor of Bandhan has also started operation in West Bengal. Therefore, to achieve its goal of reaching out to two million poor by March 2010 and thereafter to add one million members each year, Bandhan will have to strike an appropriate balance between cost of borrowings and cost of operation. By increasing scale of operation through innovation, technology initiatives and strategic partnership may be effective in the process of its sustainability and further growth.
References:
1. ADB (2000): Finance for the poor: Micro finance development strategy, ADB,
2000
2. CMF (2006): Microfinance in India – Current trends and challenges, Centre for microfinance, Institute for Financial management and research, October, 2006
3. CRISIL (2008): Bandhan: MFI Grading report, July 2008.
4. Rangarajan (2005):“Microfinance – the road ahead” Inaugural Address, April 12, 2005, New Delhi
5. RBI (2007): Circular no. RBI/2007-08/38 RPCD. MFFI. BC.No.08 / 12.01.001 / 2007-08 July 2, 2007
6. Sinha, Sanjay (2007) : Efficiency with Growth: The Emerging Face of Indian
Microfinance, ADB Quarterly News letter, Finance for the poor, Sept.2007,
Vol 8, no.3.
7. http://www.bandhanmf.com
8. http://www.cgap.org/p/site/c/template.rc/1.26.1453
9. http://www.forbes.com/2007/12/20/microfinance-philathropy-credit-biz-cz_ms_1220microfinance_table.html
10. http://www.mospi.nic.in/nss_502_press_note_16feb06.htm _______________________________
Dr. Mukul Mitra is Professor, International School of Business & Media (ISB & M), Kolkata. He can be reached at mitra.mukul@yahoo.com ALL RIGHTS RESERVED
The author explores the plausibility of micro finance as an effective tool for poverty alleviation
“We can in a process create a society, create a community totally free from poverty. Nobody should suffer from poverty because he does not have to. It is not part of human condition, human civilization. It is simply imposed on us. It is artificial thing imposed on us and we can throw it out.” – Mohammad Yunus
Abstract
India has been shining with an average 8.8 % growth in GDP in last four years. At the same time in the other India, 200 million people are living below poverty line. The approach paper to the Eleventh Plan indicated that the absolute number of poor is estimated to be approximately 300 million in 2004-05. Despite phenomenal growth in Banking system, 58% of household does not have any bank account. To supplement Government’s intervention, a large number of NGOs, Self Help Groups (SHG), Civil Society Organizations (CSO) and micro finance institutions (MFI) are making relentless effort to bring these teeming millions in the fold of inclusive growth. Bandhan is one such organization whose success in a short span of six years is noteworthy. This case study aims to understand functioning of this micro finance institution.
Introduction
Microfinance can change the lives of the poor. There may not be a quantum jump in the income but it is possible still to ensure a reasonable rise in the income of the poor
(Rangarajan, 2005). Asian development Bank- ADB (2000) has defined microfinance as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their micro-enterprises. Microfinance services are provided by three types of sources:
i) Formal institutions, such as rural banks and cooperatives;
ii) Semiformal institutions, such as non-government organizations; and
iii) Informal sources such as money lenders and shopkeepers.
Institutional microfinance is defined to include microfinance services provided by both formal and semiformal institutions. Microfinance institutions are defined as institutions whose major business is the provision of microfinance services. In India, RBI (2007) has defined micro credit (or finance) as the provision of thrift, credit and other financial services and products of very small amount to the poor in rural, semi-urban and urban areas for enabling them to raise their income levels and improve their living standards. Micro Credit Institutions are those, which provide these facilities.
M-CRIL’s data on the performance of Indian MFIs show that these have been expanding at about 30–50% per year in terms of clients and 50–60% per year in terms of portfolio. As a result, India now has a microfinance outreach that is as high as that in Bangladesh - perhaps over 18 million in July 2007. Contrary to the usual experience of microfinance sectors in other countries, however, this growth has been fuelled neither by large inflows of grants nor by a particularly high level of interest charged to clients. Indian microfinance institutions have seen dramatic improvements in efficiency which has resulted in decline in effective interest rates being paid by microfinance borrowers and it is among the lowest in the world. (Sinha, 2007). Despite these efforts, the annual supply-demand gap of credit is still in the range of Rs.2,234 – Rs.4,629 billions. Further, the World Bank estimates that the Indian microfinance activity currently reaches only 4% of the poor (CMF,2006).
According to All-India Debt and Investment Survey (AIDIS), 2002 of the National Sample Survey Organization (NSSO), share of non-institutional sources of credit for the cultivator households had declined from 92.7 per cent in 1951 to 30.6 per cent in 1991. However, it had increased to 38.9 per cent in 2002, mostly due to increase in moneylenders’ share. In this situation, all the agencies including Government, banks and microfinance institutions are expected to play greater role in eradication of poverty. Bandhan is one of the large microfinance institutions in the country and in the case study, their functioning has been examined.
Background Note
Bandhan was established by Mr Chandra Shekhar Ghosh in 2001 as an NGO. In the words of Mr. Ghosh, “Over the years, we have realized that microfinance is not the last word for the development of the poor. Therefore, we took an innovative initiative to design a program for the poorest of the poor with an objective of graduating them to the mainstream microfinance program. A health-education program was also introduced and is being run in a sustainable manner. We plan to address the other pressing issues of the society as well viz. child education and the like”. Bandhan Financial Services Pvt. Ltd. (BFSPL) was set up in 2006 as an NBFC with employees are the major stakeholders. Presently Bandhan is operating under two entities – as a Society and as an NBFC with its Head Office at Salt Lake, Kolkata. The NBFC unit is concentrating more on financial services and the parent Bandhan society continues with micro finance and development activities.
Bandhan’s mission
Reduce economic and social poverty significantly through providing client focused, quality, and cost effective, sustainable financial services.
Vision
A world class financial institution serving two million clients by March 2010.
Values
Bandhan deeply believes in its values and they are manifested through the day-to-day behavior of its team members. These values “CREATE” strong principles where:-
C- Cost effective and sustainable
R- Respect for all
E- Exemplary governance
A- Accountability, professionalism and discipline
T-Transparency and integrity
E- Effective team work and commitment
Growth of Bandhan in a short span is significant. Forbes (2008) magazine’s first-ever listing of the World’s Top 50 Microfinance Institutions out of 641 microfinance institutions operating globally; it has occupied the second position just after ASA of Bangladesh and 15 positions above “Grameen Bank”. It has received the prestigious “Skotch Challenger Award” in 1998 for contribution to financial inclusion. The Government of Afghanistan and the World Bank have approached them to facilitate development of micro credit at the strife torn country (The Hindu, 2008). Like many other MFIs, Bandhan focuses on poverty alleviation through increasing family income through women which in turn gradually increases the status of the woman in the family as well as in the society and ultimately leads to women empowerment.
Table 1: Bandhan – performance highlights as on April 2009
Area of operation 11 States
No. of districts covered 51
No. of branches 720
No. of staff 4277
No. of groups 65046
No. of members 1628551
No. of borrowers 1498808
Cumulative loan disbursed (in crores) 2359.47
Loan outstanding (in crores) 734.82
On time repayment rate 99.96%
[Source : www.bandhanmf.com]
Micro Finance Products
Bandhan provides micro loans to the poor women mostly through the group-based lending model developed by Bangladesh’s Association for Social Advancement (ASA), which has been suitably modified by Bandhan to suit the local requirements. The model focuses on simplified operations, and enhanced credit approval and loan-monitoring mechanisms. First, a group of 10-20 poor women is formed and then loans are given to individual member on the recommendation of the group. However, to get a loan, a member must have to attend minimum two successive weekly group meetings. Before sanctioning of loan field staff visits applicants’ houses and makes assessment of project as well as the applicants. The loans are finally sanctioned by Branch Manager on the basis assessment of field staff.
Table 2: Products of Bandhan
Products Micro loan product Micro enterprise loan Emergency loan
Loan amount Rural:– Rs 1000 -7000
Urban – Rs 1000 -10000 Rs. 20000
Rs.50000 Rs 1000-5000
Loan duration 1 year 1 year 1 year
Interest rate (flat) 12.5% 12.5% 10 %
Repayment frequency Weekly Weekly Weekly or monthly
Membership fee Rs.10 Rs. 20 NA
Insurance fee 1% on loan amount 1% on loan amount
Security deposit 10% on the loan amount 5% on the loan amount
Bandhan usually extends credit for agriculture, zari work, embroidery, animal husbandry, agriculture, crafts work, small cottage industries, small trading, vegetable vending, fishing, poultry, rice husking, horticulture, manufacture of surgical instruments, pottery, small services, small businesses etc.
Micro loans are given to landless and asset less women belonging to a family of five members with monthly household income less than Rs. 2,500 in rural areas and Rs. 3,500 in urban areas. The loans are also granted to individuals owning less than 50 decimal (1/2acre) of land or capital of its equivalent value. Quantum of the first loan is between Rs.1,000 - 7,000 for the rural areas and between Rs.1,000 - 10,000 for the urban areas. The subsequent loan is Rs.1,000 - 5,000 more than the previous loan. Though the loans repayment period is weekly, it offers 7 weeks grace period in deserving cases.
In 2007, the MFI launched health loan scheme to address the emergency health needs of the poor and their families. The applicant, her husband and her children can avail the loan. However, the loans are granted to members who have completed two loan cycles and past record as well as behavior and relationship with other group members is satisfactory.
Finance charges
Earlier Bandhan used to charge an interest rate of 17.50%. In May 2006, consequent upon increase in revenue and reduction in cost of operation the rate has been reduced to 12.50% flat which, in fact, translates into 23.56% annualized and this includes cost of borrowings (12% annualized), operation cost (9%), margin, risk gradation etc. Bandhan also charge 1% as processing fees and 10% upfront refundable loan security deposit on the principal loan amount at the time of disbursement.
New initiatives of Bandhan: Targeting the Hardcore Poor:
According to the MFI, hardcore poor as those who lack confidence to avail and repay loans or take the risk of initiating a business of their own and their desperate condition requires more than just micro credit. “To reach out to the invisibles of mainstream society and uplift their economic condition so that they can feed themselves and graduate into mainstream microfinance program”, Bandhan has introduced Chartering into Unventured Frontiers- Targeting the Hardcore Poor (CUF-THP) programme. The process involves tracking the poorest of the poor and developing their skills appropriate to the management of a local enterprise. Once the identification is made grant is given in the form of assets. Depending upon proper utilization of assets for income generation, these people become eligible for joining mainstream microfinance programmes. The prize money that Bandhan received from Consultative Group to Assist the Poor (CGAP) for the “Pro-Poor Innovation Challenge (PPIC)” award, is being utilized for the programme.
Bandhan’s Education Programme (BEP) – Non Formal Primary Education
With the stipend being received by Shri Chandra Shekhar Ghosh, Founder & CEO, Bandhan as Senior Ashoka Fellow, education programme has been launched. The scheme is meant for drop-out children and those who are not going to school in the age group of 8-14 years and belonging to poor families. Its objective is to ‘create a low cost educational model with 100% attendance of students and no dependence on private tuition’. Presently it has established 60 schools under the programme.
Performance:
In India, Credit Rating Information Services India Limited (CRISIL) rates the MFIs in a scale of mfR1 to mfR8, the former being the highest one. It’s rating for Bandhan in 2008 was mfR3 which according to CRISIL “reflects the MFI’s proven track record in scaling and sustaining its microfinance operations, its good assets quality and experienced governing board and senior management as well as its diversified funding portfolio. The MFI is one of the top ten micro finance institutions of the country” (CRISIL, 2008). The audited financial results throw light on significant growth in performance of Bandhan in the last three years.
Table 3: Highlights of financial performance of Bandhan
(Rs.in crores)
As on March 31 2008 2007 2006
Interest income from loans 44.62 18.19 5.24
Interest on investment/ bank deposits 0.58 0.23 0.02
Total fund based income 45.20 18.42 5.26
Total fee based income 6.54 2.59 0.16
Total income 51.74 21.01 5.42
Total interest on borrowing & finance charges 17.77 6.14 1.36
Gross spread 27.43 12.28 3.89
Gross profit 33.97 14.87 4.06
Expenses – Personnel 13.73 4.22 1.42
Expenses – Administrative 6.47 2.60 1.45
Write of loan losses 0.52 1.78 0.73
Net surpluses 12.81 6.20 0.25
Net worth 21.45 8.64 2.09
Long term borrowing 283.00 100.29 28.86
Short term borrowing /deposits /security of members 45.77 20.83 8.17
Total loans and advances 278.27 126.13 37.11
Total current liabilities 54.38 26.85 9.51
Total current assets 77.07 8.92 3.06
Total assets 358.95 136.12 40.47
Operational self sufficiency 132.39% 141.33% 104.87%
[Source: CRISIL MFI rating report July 2008]
The data in Table 3 indicate that there has been substantial growth in 2008 largely because of infusion of substantial funds by way of borrowing from financial institutions. The total borrowing including both long term and short term ones, increased from Rs 37.03 crores in 2006 to Rs.328.77 crores in 2008. During the same period, loan disbursement has gone up from Rs.37.11 crores to Rs.278.27 crores and income from Rs.5.42 crores to Rs.51.74 crores. Consequently net surplus rose from 0.25 crore in 2006 to Rs 12.81 crores in 2008.
HR Practices
An effective HR practices is essential for growth. As on 31st March 2008, out of Bandhan’s total employee strength of 2415, 1776 were credit officers each handling around 428 borrowers. In the organization, the employees receive fixed pay and promotion is performance based. The recruitment process is swift and the training is on the job under the supervision of a senior. Role and responsibility and growth path for each employee is clearly laid down. The staff at the Head office and Regional offices are to visit the branches regularly so that they can understand operations at the grass root level. Effective monitoring at each level has resulted in 99 % recovery rate over the years. In 2008, the employee attrition rate was only 7.79% as compared to 5.17% and 8.13% of 2007 and 2006 respectively.
Management Information System
MIS is viewed as one of the important tools for reduction of cost of operation and for improvement of operational efficiency for MFIs. As on 2008, in Bandhan data was maintained at branch level manually which delayed the process of consolidation at the Region and Head office level. However, the MFI is presently working with Bangladesh Rural Advancement Communities (BRAC) to develop a customized software which is likely to be implemented in 2009.
Conclusion
Success of Microfinance Institutions, pioneered by Grameen Bank of Bangladesh, has proved that it is a good business proposition too as is evident from the financial statement of Bandhan. However, paucity of capital is a major hindrance for growth of MFIs. The Reserve Bank of India has brought financing of MFIs by Scheduled Commercial Banks under the purview of Priority Sector Lending norms. The Banks too are finding quite it strategically attractive because of very high rate of recovery and wide spread reach of MFIs. In view of the performance and the growing reach of Bandhan, a large number of financial institutions such as SIDBI, ICICI Bank, HDFC Bank, AXIS Bank, ABN AMRO, Standard Chartered, Citi Bank, State Bank of India, UCO Bank, UBI, Yes Bank, BNP Paribas, IDBI Bank, Indian Bank, Bank of India and LIC, have extended their financial assistance by way of loans. However, concentration risk is quite high for Bandhan as 93.85% of its total loan portfolio is in West Bengal only. A socio economic and political changes and growing competition may pose serious challenge to them. Incidentally ASA, the mentor of Bandhan has also started operation in West Bengal. Therefore, to achieve its goal of reaching out to two million poor by March 2010 and thereafter to add one million members each year, Bandhan will have to strike an appropriate balance between cost of borrowings and cost of operation. By increasing scale of operation through innovation, technology initiatives and strategic partnership may be effective in the process of its sustainability and further growth.
References:
1. ADB (2000): Finance for the poor: Micro finance development strategy, ADB,
2000
2. CMF (2006): Microfinance in India – Current trends and challenges, Centre for microfinance, Institute for Financial management and research, October, 2006
3. CRISIL (2008): Bandhan: MFI Grading report, July 2008.
4. Rangarajan (2005):“Microfinance – the road ahead” Inaugural Address, April 12, 2005, New Delhi
5. RBI (2007): Circular no. RBI/2007-08/38 RPCD. MFFI. BC.No.08 / 12.01.001 / 2007-08 July 2, 2007
6. Sinha, Sanjay (2007) : Efficiency with Growth: The Emerging Face of Indian
Microfinance, ADB Quarterly News letter, Finance for the poor, Sept.2007,
Vol 8, no.3.
7. http://www.bandhanmf.com
8. http://www.cgap.org/p/site/c/template.rc/1.26.1453
9. http://www.forbes.com/2007/12/20/microfinance-philathropy-credit-biz-cz_ms_1220microfinance_table.html
10. http://www.mospi.nic.in/nss_502_press_note_16feb06.htm _______________________________
Dr. Mukul Mitra is Professor, International School of Business & Media (ISB & M), Kolkata. He can be reached at mitra.mukul@yahoo.com ALL RIGHTS RESERVED
Downturn as a Challenge: HR imperatives
JHILMIL DAS
Organizations should evaluate their business; their strategy, their financials and their people and internal structure before randomly cutting down on redundancies
In the fall of 2008, we all were stung by the collapse of the world financial markets that hit the economy so badly. However, it should be mentioned that in events of such avalanche in past, every time our history has witnessed a new savior which came along promising a quantum leap into a new land of sustained profitability, dotcom for example. Sustained success is the key behind organizational growth and survival amidst this upheaval and HR managers today are really caught in a whirlwind that is wreaking havoc at every level. Counter-intuitively, some organizations have actually been positively affected by the recession. The same cannot be said for most businesses however, many of whom have been forced to lay off staff and to re-evaluate and re-structure their businesses. The major challenges before the HR today are contribution to a company’s long-term success as well as its short-term survival. It strives to provide solution through addressing to the major concerns based on integration and predictability based on the following –
a) Manage risk against talent surprises and preparation for risk mitigation
b) Proven and effective talent management services from hiring through compensation, support and development
c) Support & guidance to line managers in retention of key human capital
d) Provide assistance in business functions to succeed through workforce and structural optimization
The additional prerogatives of the HR managers also encompass managing the operational effectiveness through internal process efficiency and maximization of human capital investment returns.
The initial step towards this effort consists of planning, which includes alignment of employee goal with organizational goals. The other necessary step obviously is a well-designed succession planning program focused on capabilities. The next step is deliverance based on optimization through cost-effective techniques, resulting in quality staffing or retention. Integration is another effort towards synchronization of HR deliveries through hiring, paying, developing and engaging programs. This increases efficiency and return on investment and creates transparency and confidence among employees. The last word is prediction, which involves measuring the past performance and future expectations. These lagging indicators fall into five categories: cost, timeliness, quantity, quality and human reactions, such as customer satisfaction or employee commitment. These are necessary to evaluate how the organization does against established objectives and goals. Leading indicators are derived by analyzing current events with future implications, for ex. leadership, readiness, engagement, culture, brand, reputation and retention.
In order to improve talent management and performance over the long term, they should also revamp and realign their function, policies and services, as well as seize other opportunities created by the downturn. As an alternative for reduction of redundancy owing to additional headcount, we can take recourse and only eliminate jobs that represent excess capacity, non critical or one that does not fit any longer with the strategic direction and structure of the company. Rather, focus can be aimed at building critical capabilities and key leadership development initiatives. Also reduction of service costs can be initiated in the form of outsourcing, offshoring and renegotiating vendor contract.
A profound talent review can be devised in order to maximize productivity and performance of the workforce, segregating the performers and non-performers and improving bench strength. Initiatives can be taken on energizing and rejuvenating the existing employees through building on employee trust, productivity and commitment.
Workforce today has become leaner, the reason being the driving budget cuts and layoff owing to the recession. During this time, the quality and effectiveness of organizational talent no longer serves simply as a competitive differentiator - it becomes a bottom-line necessity. Each person counts.
Yet, companies looking to employ the best and brightest have their work cut out for them, as the current climate introduces a variety of hiring challenges, for ex. the context of the interview has changed quite dramatically. Earlier candidates had the pick of a lot of different jobs. There was a lot of pressure on the interviewer to sell the job, to sell the company and to attract the right candidate. But today, with the economy the way it is, there are more candidates than jobs. There's a different set of pressures to be able to vet the candidates and make a decision. That increased competition - and in some cases, desperation - among applicants to get noticed can put a strain on interviewers and may require newer tools and techniques of interviewing. Further, companies can encourage candidates to self-screen by improving the accuracy of job descriptions. Also in order to save time and resources, organizations can consider panel interviews rather than the more traditional series of one-on-one interviews.
As companies tighten their belts in response to tough economic times, HR managers has also changed the way training used to be done and are finding new ways to make learning and training more effective and efficient by designing programs that maximize value while minimizing cost.
Most learning organizations rose to the challenge by taking advantage of then-new technologies such as video discs and computer-based training to decrease classroom time and cram as much nonessential content into pre-and post-work as they could, saving only the most valuable content for the classroom. Best-practice organizations also focused on more clearly defining performance objectives tied to training. In many ways, the ability to link learning interventions to a company's strategic objectives represents the epitome of training's aspirations. If HR can point to the metrics that show training's impacts on those objectives, so much the better - for both his budget and people.
If an organization has goals to increase customer retention by 20 percent this year, for example, it has the ability to communicate this goal within a talent management system, which can then automatically communicate the same to every employee, typically by job function. As the process filters down, the goal's components become more specific and actionable, and goal components are embedded into each one’s performance and development plans.
The employee performance goals can be systematically aligned with department goals, which in turn can be aligned with higher-level organizational objectives. This means that organizational goal alignment not only occurs on a top-down basis, but from a bottom-up perspective, too. Employee performance plans within such systems provide associates with an opportunity to share their plans and goals with managers and supervisors. These systems also provide tools and mechanisms designed to encourage employees to work with their managers to align individual goals to both departmental goals and to organizational initiatives and critical success factors. This creates a two-way reporting mechanism that allows all employees to see how they are doing individually and as a team in relation to achieving the company’s objectives. Such transparency not only helps everyone within the company better understand how their work contributes to the overall good of the organization - a key driver of employee engagement and the creation of a high-performance culture.
Amidst several challenges created by the downturn, it also has harbored opportunities if implemented successfully. Companies can reposition themselves to emerge with a higher performing workforce, differentiated capabilities and a great leadership bench.
Recession has forced businesses to take an honest view, and to realistically assess in light of market trends and operational costs, what they need to do safeguard their businesses for the future. In some cases it has lead to redundancies, in others they simply have emerged in able to engage in heightening staff engagement and productivity levels. In some cases it is a mixture of both approaches. Whatever the decision, the people of an organization are at the core of their strategy and it is imperative that the organizations treat them appropriately for the mutual benefit of both parties. HR is the domain that can and should advise on these issues. As a profession we need to be progressively more involved in these discussions and decisions and we must be seen to take the lead with innovative and cost effective solutions that support the businesses in which we work.
It is imperative that organization should take an evaluative look at their business; their strategy, their financials and their people and internal structure before randomly taking decision to cut down on redundancies. With a view to surviving for the long term, organizations must take considered action which sees them optimizing organizational structures and resources with a view to maximizing efficiencies, while at the same time optimizing employee engagement and productivity going forward. When the decision is being taken to go down the route of redundancy, it is important to act quickly. Legal parameters must be adhered to, and staff must be treated with respect and consideration. To this end, they must be met with individually and have explained to them the reasons and consequences of the decision that has been made. All questions should be answered swiftly and as comprehensively as possible and within the constraints of their organizational realities, employers should attempt to provide as much transitional support for the employee leaving their organization, as possible.
Individuals who are faced with redundancy typically go through emotional upheavelment on hearing the news of losing their job. Coupled with this there are practical considerations which they must deal with, both in terms of financial considerations and the need to source new employment. In managing this group and in sourcing or providing in-house outplacement services for them, holistic approach should be taken, which takes account of both the human and practical sides of redundancy, equipping individuals with the skills to move forward. Outplacement help is the new option that companies are offering to their laid off staff. The idea behind the service is to provide the employees with ample counseling and suggestions, and help them prepare better for a new job.
An important benefit of offering outplacement services is the positivism it brings to an employer-employee relationship. The laid off employee goes through classes-either online or internally at the company-to comprehend and present his skills better to potential employers. Also referred to as 'career transition services', they include a wide range of assistance. The service helps the displaced employee with counseling to make him: Understand and cope with the job loss
• Understand job markets
• Initiate job search
• Present skills better on paper and during interview
They also help in keeping the existing staff morale high and positive. Layoffs bring with them damaged morale, fear, reduced productivity, negative emotions and diminishing confidence. But, the practical and comprehensive approach of the outplacements services help in making career transitions easy. Most importantly, organizations are optimistic of improved market conditions and would want to take their talented employees back. Recruiting new employees is a costly affair, and also the talent and skills lost to a competitor are difficult to replace. In India, TCS, IBM, Motorola and Microsoft are some of the organizations to employ outplacement agencies to help their laid off employees.
There is no doubt that we are operating in challenging times and for many people the situation can seem desperate. Now more than ever we must deal with our people with respect, recognizing the impact and consequence that our business decisions can have. When employees are made redundant it is so important to deal with the situation humanely.
Regardless of whether redundancy is a feature in every organization, most employees will be frustrated and or concerned about their job security. These feelings will have a negative effect on motivation and commitment, and consequently performance levels. Organizations must first and foremost recognize this and begin to take active steps to actively listen to their people and to use this time as an opportunity to develop stronger relationships built on mutual responsibility and trust. It is only in this way that we can re-energize that component of our businesses that is so critical to us – that of our Human Resources.
The author is Regional Manager-HR, Aditya Birla Group Financial Services Ltd. The views expressed in this article are the author’s own and do not necessarily purport to constitute an official position of Offline or Material World ALL RIGHTS RESERVED
Organizations should evaluate their business; their strategy, their financials and their people and internal structure before randomly cutting down on redundancies
In the fall of 2008, we all were stung by the collapse of the world financial markets that hit the economy so badly. However, it should be mentioned that in events of such avalanche in past, every time our history has witnessed a new savior which came along promising a quantum leap into a new land of sustained profitability, dotcom for example. Sustained success is the key behind organizational growth and survival amidst this upheaval and HR managers today are really caught in a whirlwind that is wreaking havoc at every level. Counter-intuitively, some organizations have actually been positively affected by the recession. The same cannot be said for most businesses however, many of whom have been forced to lay off staff and to re-evaluate and re-structure their businesses. The major challenges before the HR today are contribution to a company’s long-term success as well as its short-term survival. It strives to provide solution through addressing to the major concerns based on integration and predictability based on the following –
a) Manage risk against talent surprises and preparation for risk mitigation
b) Proven and effective talent management services from hiring through compensation, support and development
c) Support & guidance to line managers in retention of key human capital
d) Provide assistance in business functions to succeed through workforce and structural optimization
The additional prerogatives of the HR managers also encompass managing the operational effectiveness through internal process efficiency and maximization of human capital investment returns.
The initial step towards this effort consists of planning, which includes alignment of employee goal with organizational goals. The other necessary step obviously is a well-designed succession planning program focused on capabilities. The next step is deliverance based on optimization through cost-effective techniques, resulting in quality staffing or retention. Integration is another effort towards synchronization of HR deliveries through hiring, paying, developing and engaging programs. This increases efficiency and return on investment and creates transparency and confidence among employees. The last word is prediction, which involves measuring the past performance and future expectations. These lagging indicators fall into five categories: cost, timeliness, quantity, quality and human reactions, such as customer satisfaction or employee commitment. These are necessary to evaluate how the organization does against established objectives and goals. Leading indicators are derived by analyzing current events with future implications, for ex. leadership, readiness, engagement, culture, brand, reputation and retention.
In order to improve talent management and performance over the long term, they should also revamp and realign their function, policies and services, as well as seize other opportunities created by the downturn. As an alternative for reduction of redundancy owing to additional headcount, we can take recourse and only eliminate jobs that represent excess capacity, non critical or one that does not fit any longer with the strategic direction and structure of the company. Rather, focus can be aimed at building critical capabilities and key leadership development initiatives. Also reduction of service costs can be initiated in the form of outsourcing, offshoring and renegotiating vendor contract.
A profound talent review can be devised in order to maximize productivity and performance of the workforce, segregating the performers and non-performers and improving bench strength. Initiatives can be taken on energizing and rejuvenating the existing employees through building on employee trust, productivity and commitment.
Workforce today has become leaner, the reason being the driving budget cuts and layoff owing to the recession. During this time, the quality and effectiveness of organizational talent no longer serves simply as a competitive differentiator - it becomes a bottom-line necessity. Each person counts.
Yet, companies looking to employ the best and brightest have their work cut out for them, as the current climate introduces a variety of hiring challenges, for ex. the context of the interview has changed quite dramatically. Earlier candidates had the pick of a lot of different jobs. There was a lot of pressure on the interviewer to sell the job, to sell the company and to attract the right candidate. But today, with the economy the way it is, there are more candidates than jobs. There's a different set of pressures to be able to vet the candidates and make a decision. That increased competition - and in some cases, desperation - among applicants to get noticed can put a strain on interviewers and may require newer tools and techniques of interviewing. Further, companies can encourage candidates to self-screen by improving the accuracy of job descriptions. Also in order to save time and resources, organizations can consider panel interviews rather than the more traditional series of one-on-one interviews.
As companies tighten their belts in response to tough economic times, HR managers has also changed the way training used to be done and are finding new ways to make learning and training more effective and efficient by designing programs that maximize value while minimizing cost.
Most learning organizations rose to the challenge by taking advantage of then-new technologies such as video discs and computer-based training to decrease classroom time and cram as much nonessential content into pre-and post-work as they could, saving only the most valuable content for the classroom. Best-practice organizations also focused on more clearly defining performance objectives tied to training. In many ways, the ability to link learning interventions to a company's strategic objectives represents the epitome of training's aspirations. If HR can point to the metrics that show training's impacts on those objectives, so much the better - for both his budget and people.
If an organization has goals to increase customer retention by 20 percent this year, for example, it has the ability to communicate this goal within a talent management system, which can then automatically communicate the same to every employee, typically by job function. As the process filters down, the goal's components become more specific and actionable, and goal components are embedded into each one’s performance and development plans.
The employee performance goals can be systematically aligned with department goals, which in turn can be aligned with higher-level organizational objectives. This means that organizational goal alignment not only occurs on a top-down basis, but from a bottom-up perspective, too. Employee performance plans within such systems provide associates with an opportunity to share their plans and goals with managers and supervisors. These systems also provide tools and mechanisms designed to encourage employees to work with their managers to align individual goals to both departmental goals and to organizational initiatives and critical success factors. This creates a two-way reporting mechanism that allows all employees to see how they are doing individually and as a team in relation to achieving the company’s objectives. Such transparency not only helps everyone within the company better understand how their work contributes to the overall good of the organization - a key driver of employee engagement and the creation of a high-performance culture.
Amidst several challenges created by the downturn, it also has harbored opportunities if implemented successfully. Companies can reposition themselves to emerge with a higher performing workforce, differentiated capabilities and a great leadership bench.
Recession has forced businesses to take an honest view, and to realistically assess in light of market trends and operational costs, what they need to do safeguard their businesses for the future. In some cases it has lead to redundancies, in others they simply have emerged in able to engage in heightening staff engagement and productivity levels. In some cases it is a mixture of both approaches. Whatever the decision, the people of an organization are at the core of their strategy and it is imperative that the organizations treat them appropriately for the mutual benefit of both parties. HR is the domain that can and should advise on these issues. As a profession we need to be progressively more involved in these discussions and decisions and we must be seen to take the lead with innovative and cost effective solutions that support the businesses in which we work.
It is imperative that organization should take an evaluative look at their business; their strategy, their financials and their people and internal structure before randomly taking decision to cut down on redundancies. With a view to surviving for the long term, organizations must take considered action which sees them optimizing organizational structures and resources with a view to maximizing efficiencies, while at the same time optimizing employee engagement and productivity going forward. When the decision is being taken to go down the route of redundancy, it is important to act quickly. Legal parameters must be adhered to, and staff must be treated with respect and consideration. To this end, they must be met with individually and have explained to them the reasons and consequences of the decision that has been made. All questions should be answered swiftly and as comprehensively as possible and within the constraints of their organizational realities, employers should attempt to provide as much transitional support for the employee leaving their organization, as possible.
Individuals who are faced with redundancy typically go through emotional upheavelment on hearing the news of losing their job. Coupled with this there are practical considerations which they must deal with, both in terms of financial considerations and the need to source new employment. In managing this group and in sourcing or providing in-house outplacement services for them, holistic approach should be taken, which takes account of both the human and practical sides of redundancy, equipping individuals with the skills to move forward. Outplacement help is the new option that companies are offering to their laid off staff. The idea behind the service is to provide the employees with ample counseling and suggestions, and help them prepare better for a new job.
An important benefit of offering outplacement services is the positivism it brings to an employer-employee relationship. The laid off employee goes through classes-either online or internally at the company-to comprehend and present his skills better to potential employers. Also referred to as 'career transition services', they include a wide range of assistance. The service helps the displaced employee with counseling to make him: Understand and cope with the job loss
• Understand job markets
• Initiate job search
• Present skills better on paper and during interview
They also help in keeping the existing staff morale high and positive. Layoffs bring with them damaged morale, fear, reduced productivity, negative emotions and diminishing confidence. But, the practical and comprehensive approach of the outplacements services help in making career transitions easy. Most importantly, organizations are optimistic of improved market conditions and would want to take their talented employees back. Recruiting new employees is a costly affair, and also the talent and skills lost to a competitor are difficult to replace. In India, TCS, IBM, Motorola and Microsoft are some of the organizations to employ outplacement agencies to help their laid off employees.
There is no doubt that we are operating in challenging times and for many people the situation can seem desperate. Now more than ever we must deal with our people with respect, recognizing the impact and consequence that our business decisions can have. When employees are made redundant it is so important to deal with the situation humanely.
Regardless of whether redundancy is a feature in every organization, most employees will be frustrated and or concerned about their job security. These feelings will have a negative effect on motivation and commitment, and consequently performance levels. Organizations must first and foremost recognize this and begin to take active steps to actively listen to their people and to use this time as an opportunity to develop stronger relationships built on mutual responsibility and trust. It is only in this way that we can re-energize that component of our businesses that is so critical to us – that of our Human Resources.
The author is Regional Manager-HR, Aditya Birla Group Financial Services Ltd. The views expressed in this article are the author’s own and do not necessarily purport to constitute an official position of Offline or Material World ALL RIGHTS RESERVED
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