2016

RBI Phase 2 Management E Book 2

Career Anna

Types of Leadership Styles

Different types of leadership styles exist in work environments. Advantages and disadvantages
exist within each leadership style. The culture and goals of an organization determine which
leadership style fits the firm best. Some companies offer several leadership styles within the
organization, dependent upon the necessary tasks to complete and departmental needs.
Laissez-Faire
A laissez-faire leader lacks direct supervision of employees and fails to provide regular feedback
to those under his supervision. Highly experienced and trained employees requiring little
supervision fall under the laissez-faire leadership style. However, not all employees possess
those characteristics. This leadership style hinders the production of employees needing
supervision. The laissez-faire style produces no leadership or supervision efforts from managers,
which can lead to poor production, lack of control and increasing costs.
Autocratic
The autocratic leadership style allows managers to make decisions alone without the input of
others. Managers possess total authority and impose their will on employees. No one challenges
the decisions of autocratic leaders. Countries such as Cuba and North Korea operate under the
autocratic leadership style. This leadership style benefits employees who require close
supervision. Creative employees who thrive in group functions detest this leadership style.
Participative
Often called the democratic leadership style, participative leadership values the input of team
members and peers, but the responsibility of making the final decision rests with the participative
leader. Participative leadership boosts employee morale because employees make contributions
to the decision-making process. It causes them to feel as if their opinions matter. When a
company needs to make changes within the organization, the participative leadership style helps
employees accept changes easily because they play a role in the process. This style meets
challenges when companies need to make a decision in a short period.
Transactional
Managers using the transactional leadership style receive certain tasks to perform and provide
rewards or punishments to team members based on performance results. Managers and team
members set predetermined goals together, and employees agree to follow the direction and
leadership of the manager to accomplish those goals. The manager possesses power to review
results and train or correct employees when team members fail to meet goals. Employees
receive rewards, such as bonuses, when they accomplish goals.
Transformational
The transformational leadership style depends on high levels of communication from
management to meet goals. Leaders motivate employees and enhance productivity and
efficiency through communication and high visibility. This style of leadership requires the
involvement of management to meet goals. Leaders focus on the big picture within an
organization and delegate smaller tasks to the team to accomplish goals.

Leadership Theories
The Great Man theory evolved around the mid 19th century. Even though no one was able to
identify with any scientific certainty, which human characteristic or combination of, were
responsible for identifying great leaders. Everyone recognized that just as the name suggests;
only a man could have the characteristic (s) of a great leader.
The Great Man theory assumes that the traits of leadership are intrinsic. That simply means that
great leaders are born Heroes. This theory sees great leaders as those who are destined by birth
to become a leader. Furthermore, the belief was that great leaders will rise when confronted with

the appropriate situation.

The Trait Theory

The trait leadership theory believes that people are either born or are made with certain qualities
that will make them excel in leadership roles. That is, certain qualities such as intelligence, sense
of responsibility, creativity and other values puts anyone in the shoes of a good leader.
The trait theory of leadership focused on analyzing mental, physical and social characteristic in
order to gain more understanding of what is the characteristic or the combination of
characteristics that are common among leaders.
There were many shortfalls with the trait leadership theory.

Behavioural Theory of Leadership

Behavioural Theory of Leadership is a leadership theory that considers the observable actions
and reactions of leaders and followers in a given situation. Behavioural theories focus on how
leaders behave and assume that leaders can be made, rather than born and successful
leadership is based on definable, learnable behaviour. Behavioural theories of leadership are
classified as such because they focus on the study of specific behaviours of a leader. For
behavioral theorists, a leader behaviour is the best predictor of his leadership influences and as
a result, is the best determinant of his or her leadership success.
These theories concentrate on what leaders actually do rather than on their qualities. Different
patterns of behaviour are observed and categorized as 'styles of leadership'. This area has
probably attracted most attention from practicing managers.
Overview of Behavioural Theory of Leadership:
Behavioural Theory of leadership is a big leap from Trait Theory, in that it assumes that
leadership capability can be learned, rather than being inherent. This theory is based on the
principle that behaviours can be conditioned in a manner that one can have a specific response
to specific stimuli. Rather than seeking inborn traits this theory looks at what leaders actually do
by studying their behaviours in response to different situations, assessing leadership success by
studying their actions and then correlating significant behaviours with success. The practical
application of the theory is that leaders behaviour affects their performance and different
leadership behaviours could be appropriate at different times. The best leaders are those have
the adaptability to flex their behavioural style, and choose the right style suitable for each
situation.
According to this theory, people can learn to become leaders through teaching and observation
and certain behavioural patterns may be identified as leadership styles.
Advantages of Behavioural Theory of Leadership
Behavioural theory promotes the value of leadership styles with an emphasis on concern for
people and collaboration. It promotes participative decision making and team development by
supporting individual needs and aligning individual and group objectives. It helps managers
evaluate and understand how their behavioural style as a manager affects their relationship with
the team and promotes commitment and contribution towards organizational goals. This theory
helps managers find the right balance between different styles of leadership, and helps them
decide how to behave as a leader, depending on concerns for people and for productivity.
Criticism / Arguments against - Behavioural Theory of Leadership:
As there were inherent limitations with the Trait approach to leadership, when early researchers

ran out of steam in their search for traits, they turned to what leaders did, how they behaved and
came with behavioural theory of leadership. This became the dominant way of approaching
leadership within organizations in the 1950s and early 1960s but this theory too had its own
limitations. Behavioural Theory of Leadership proposes leadership styles but a specific
leadership style may not be best in all circumstances. When researchers really got to work on
this it didnt seem to validate their assumptions. While behavioural theories may help managers
develop particular leadership behaviours but they provide little guidance as to what constitutes
effective leadership in different situations.
There were lots of differences and inconsistencies between studies. It was difficult to say which
style of leadership was significant in enabling one group to work better than another. The styles
that leaders can adopt are far more affected by those they are working with, and the environment
they are operating within, than had been originally thought. Most researchers today conclude
that no one leadership style is right for every manager under all circumstances.
Contingency Theory of Leadership
Contingency theories are a class of behavioural theory that contend that there is no one best
way of leading and that a leadership style that is effective in some situations may not be
successful in others.
An effect of this is that leaders who are very effective at one place and time may become
unsuccessful either when transplanted to another situation or when the factors around them
change.
This helps to explain how some leaders who seem for a while to have the 'Midas touch' suddenly
appear to go off the boil and make very unsuccessful decisions.
Transactional Leadership Theory
Transactional theories, also known as exchange theories of leadership, are characterized by a
transaction made between the leader and the followers. In fact, the theory values a positive and
mutually beneficial relationship.
For the transactional theories to be effective and as a result have motivational value, the leader
must find a means to align to adequately reward (or punish) his follower, for performing leaderassigned task. In other words, transactional leaders are most efficient when they develop a
mutual reinforcing environment, for which the individual and the organizational goals are in sync.
The transactional theorists state that humans in general are seeking to maximize pleasurable
experiences and to diminish un-pleasurable experiences. Thus, we are more likely to associate
ourselves with individuals that add to our strengths.
Transformational Leadership Theory
The Transformational Leadership theory states that this process is by which a person interacts
with others and is able to create a solid relationship that results in a high percentage of trust, that
will later result in an increase of motivation, both intrinsic and extrinsic, in both leaders and
followers.
The essence of transformational theories is that leaders transform their followers through their
inspirational nature and charismatic personalities. Rules and regulations are flexible, guided by
group norms. These attributes provide a sense of belonging for the followers as they can easily
identify with the leader and its purpose.

Burn's Transformational Theory

Pro's

Burns Transformational Leadership Theory appeals to the "high road" in developing

social values and individual purpose. It is one of, if not the only one with a coherent
philosophy underpinning the nature of leadership.
The Theory set apart from the rest of the leadership theories and asks the most
fundamental question of what the ultimate goal of leadership is and why one should be a
leader.
Not only is Burns Transformational Leadership Theory transcendent in overall scope, but
it may be what is necessary if the human species is counting on saving itself from the
numerous potential disasters it faces, such as overpopulation, global warming, and
systemic economic collapse.

Con's
Burns Transformational Leadership Theory is idealistic and may not be applicable to
populations not wanting or able to go beyond just living as they do and maintaining their
own status quo. In this case, Burns Transformational Leadership Theory must be
coupled with a motivational theory, as well as preparing them emotionally and
intellectually.
Burns Transformational Leadership Theory may not work in emergency situations or
situations in which tasks are enormously complex and beyond the skill level of the
average group member.
A major issue with Burns Transformational Leadership Theory, is how a transformational
leader is to deal with other leaders not so enlightened.

Path Goal Theory

The path-goal theory, path-goal theory of leader effectiveness, or path-goal model can be
considered as a variant on Transactional Leadership Theory, where the leader clearly is directing
activity and the only factor that varies is the manner in which this is done. There are some
aspects of Contingency Theory, as well, where various means of application vary with the
situation. The leader sees a path that needs to be tread, one leading to the accomplishment of a
goal and she or he attempts to clear it and get the group members to tread on it. The leader may
cajole, command, reward or punish, get suggestions from the group, or sugar coat the tasks, if
necessary, but it is clear that democracy is not the hallmark of this method.

Pro's

In a situation where something needs to be done in a short time - such as emergencies

and complicated situations in which there is a time constraint, this method may be
preferable.
The revised theory adds more with respect to group participation, making it more
amenable to use in groups who are knowledgeable and intelligent.
The Path-Goal Theory has a common sense ring to it and the ideas are easy to convey.
The analogy to a path needing to be cleared and workers driven along it is an easy
visualization.

Con's

This theory assumes that the group members do not know what is good for them. It is
inherently undemocratic.
If the leader has flaws the whole method stands a good chance of failure.
Leaders are not always rational, and a course of action might be based on delusion, thus
jeopardizing group members.
The leader-led-task system could collapse, if there is too much dependence on the
leader and where either something happens to the leader or he simply cannot carry out
his leadership functions.

Successful Leadership
Success of a leader depends upon:
(i) How the individual or the group behaves.
(ii) Position power.
(iii) Close Supervision.

Effective Leadership
Effectiveness of leadership depends upon:
(i) Internal shape or predisposition of an individual or a group and thus, it is attitudinal in nature.
(ii) Personal power.
(iii) General Supervision.

Concept, Meaning And Nature Of Human Resource Development (HRD)

The active resource of an organization is human resource. Other resources remain inactive
unless there are competent people to utilize the available resources for the production of goods
and services. Human brain has a limitless energy to think and act in a productive way. Hence,
competent and qualified human resource is a key factor of organizational success. In this regard,
the emergence of human resource development (HRD) plays a vital role in enhancing the
entrepreneurial skill of people.
Human Resource Development (HRD) is a process of developing skills, competencies,
knowledge and attitudes of people in an organization. The people become human resource only
when they are competent to perform organizational activities. Therefore, HRD ensures that the
organization has such competent human resource to achieve its desired goals and objectives.
HRD imparts the required knowledge and skill in them through effective arrangement of training
and development programs. HRD is an integral part of Human Resource Management (HRM)
which is more concerned with training and development, career planning and development and
the organization development. The organization has to understand the dynamics of HR and
attempt to cope with changing situation in order to deploy its HR effectively and efficiently. And
HRD helps to reach this target.
Hence, HRD is a conscious and proactive approach applied by employers which seeks to
capacitate employees through training and development to give their maximum to the
organization and to fully use their potential to develop themselves.
Nature Of HRD
1. HRD is a continuous process
2. HRD concerned with behavioural knowledge.
3. HRD is a well integrated system
4. HRD provides better quality of life.
5. HRD focuses on all round development of human resources.

The importance or significance of HRD can be explained as follows:

1. HRD Develops Competent HR
HRD develops the skills and knowledge of individual, hence, it helps to provide competent and
efficient HR as per the job requirement. To develop employment's skill and competencies,

different training and development programs are launched.

2. HRD Creates Opportunity For Career Development
HRD helps to grasp the career development opportunities through development of human skills
and knowledge. Career development consists of personal development efforts through a proper
match between training and development opportunities with employee's need.
3. Employ Commitment
Trained and efficient employees are committed towards their jobs which is possible through
HRD. If employees are provided with proper training and development opportunities, they will
feel committed to the work and the organization.
4. Job Satisfaction
When people in the organization are well oriented and developed, they show higher degree of
commitment in actual work place. This inspires them for better performance, which ultimately
leads to job satisfaction.
5. Change Management
HRD facilitates planning, and management of change in an organization. It also manages
conflicts through improved labor management relation. It develops organizational health, culture
and environment which lead to change management.
6. Opportunities For Training And Development
Trainings and development programs are tools of HRD. They provide opportunity for employee's
development by matching training needs with organizational requirement. Moreover, HRD
facilitates integrated growth of employees through training and development activities.
7. Performance Improvement
HRD develops necessary skills and abilities required to perform organizational activities. As a
result of which, employees can contribute for better performance in an organization. This leads
to greater organizational effectiveness.
Performance Appraisal
Performance Appraisal is the systematic evaluation of the performance of employees and to
understand the abilities of a person for further growth and development. Performance appraisal
is generally done in systematic ways which are as follows:
1. The supervisors measure the pay of employees and compare it with targets and plans.
2. The supervisor analyses the factors behind work performances of employees.
3. The employers are in position to guide the employees for a better performance.
Objectives of Performance Appraisal
Performance Appraisal can be done with following objectives in mind:
1. To maintain records in order to determine compensation packages, wage structure, salaries
raises, etc.
2. To identify the strengths and weaknesses of employees to place right men on right job.
3. To maintain and assess the potential present in a person for further growth and development.
4. To provide a feedback to employees regarding their performance and related status.
5. To provide a feedback to employees regarding their performance and related status.
6. It serves as a basis for influencing working habits of the employees.
7. To review and retain the promotional and other training programmes.

Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the company which can be justified by
following advantages:
1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion
programmes for efficient employees. In this regards, inefficient workers can be dismissed or
demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation packages for
employees. Merit rating is possible through performance appraisal. Performance Appraisal
tries to give worth to a performance. Compensation packages which includes bonus, high
salary rates, extra benefits, allowances and pre-requisites are dependent on performance
appraisal. The criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance appraisal helps the
supervisors to frame training policies and programmes. It helps to analyse strengths and
weaknesses of employees so that new jobs can be designed for efficient employees. It also
helps in framing future development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors to understand the validity
and importance of the selection procedure. The supervisors come to know the validity and
thereby the strengths and weaknesses of selection procedure. Future changes in selection
methods can be made in this regard.
5. Communication: For an organization, effective communication between employees and
employers is very important. Through performance appraisal, communication can be sought
for in the following ways:
a. Through performance appraisal, the employers can understand and accept skills of
subordinates.
b. The subordinates can also understand and create a trust and confidence in superiors.
c. It also helps in maintaining cordial and congenial labour management relationship.
d. It develops the spirit of work and boosts the morale of employees.
All the above factors ensure effective communication.
6. Motivation: Performance appraisal serves as a motivation tool. Through evaluating
performance of employees, a persons efficiency can be determined if the targets are
achieved. This very well motivates a person for better job and helps him to improve his
performance in the future.

Performance Appraisal Tools

1. Ranking Method
The ranking system requires the rater to rank his subordinates on overall performance. This
consists in simply putting a man in a rank order. Under this method, the ranking of an employee
in a work group is done against that of another employee. The relative position of each employee
is tested in terms of his numerical rank. It may also be done by ranking a person on his job
performance against another member of the competitive group.
Advantages of Ranking Method
i.
Employees are ranked according to their performance levels.
ii.
It is easier to rank the best and the worst employee.
Limitations of Ranking Method
iii.
The whole man is compared with another whole man in this method. In practice, it
is very difficult to compare individuals possessing various individual traits.
iv.
This method speaks only of the position where an employee stands in his group. It
does not test anything about how much better or how much worse an employee is

v.
vi.

when compared to another employee.

When a large number of employees are working, ranking of individuals become a
difficult issue.
There is no systematic procedure for ranking individuals in the organization. The
ranking system does not eliminate the possibility of snap judgements.

2. Forced Distribution method

This is a ranking technique where raters are required to allocate a certain percentage of rates to
certain categories (eg: superior, above average, average) or percentiles (eg: top 10 percent,
bottom 20 percent etc). Both the number of categories and percentage of employees to be
allotted to each category are a function of performance appraisal design and format. The
workers of outstanding merit may be placed at top 10 percent of the scale, the rest may be
placed as 20 % good, 40 % outstanding, 20 % fair and 10 % fair.
Advantages of Forced Distribution
i.
This method tends to eliminate raters bias
ii.
By forcing the distribution according to pre-determined percentages, the problem of
making use of different raters with different scales is avoided.
Limitations of Forced Distribution
iii.
The limitation of using this method in salary administration, however, is that it may
lead
low
morale,
low
productivity
and
high
absenteeism.
Employees who feel that they are productive, but find themselves in lower grade(than
expected) feel frustrated and exhibit over a period of time reluctance to work.
3. Critical Incident techniques
Under this method, the manager prepares lists of statements of very effective and ineffective
behaviour of an employee. These critical incidents or events represent the outstanding or poor
behaviour of employees or the job. The manager maintains logs of each employee, whereby he
periodically records critical incidents of the workers behaviour. At the end of the rating period,
these recorded critical incidents are used in the evaluation of the workers performance
Advantages of Critical Incident techniques
i.
This method provides an objective basis for conducting a thorough discussion of an
employee's performance.
ii.
This method avoids recency bias (most recent incidents are too much emphasized)
Limitations of Critical Incident techniques
iii.
Negative incidents may be more noticeable than positive incidents.
iv.
The supervisors have a tendency to unload a series of complaints about the incidents
during an annual performance review sessions.
v.
It results in very close supervision which may not be liked by an employee.
vi.
The recording of incidents may be a chore for the manager concerned, who may be
too busy or may forget to do it.
4. Checklists and Weighted Checklists
In this system, a large number of statements that describe a specific job are given. Each
statement has a weight or scale value attached to it. While rating an employee the supervisor
checks all those statements that most closely describe the behaviour of the individual under
assessment. The rating sheet is then scored by averaging the weights of all the statements
checked by the rater. A checklist is constructed for each job by having persons who are quite
familiar with the jobs. These statements are then categorized by the judges and weights are
assigned to the statements in accordance with the value attached by the judges.

Advantages of Checklists and Weighted Checklists

i.
Most frequently used method in evaluation of the employees performance.
Limitations of Checklists and Weighted Checklists
ii.
This method is very expensive and time consuming
iii.
Rater may be biased in distinguishing the positive and negative questions.
iv.
It becomes difficult for the manager to assemble, analyze and weigh a number of
statements about the employees characteristics, contributions and behaviours.

Career Planning
Career planning is an ongoing process that can help you manage your learning and
development.
You can use the four step planning process whether you are:
still at school;
a school leaver;
an adult adding on skills; or
an adult changing your job or career.
Career planning is the continuous process of:
thinking about your interests, values, skills and preferences;
exploring the life, work and learning options available to you;
ensuring that your work fits with your personal circumstances; and
continuously fine-tuning your work and learning plans to help you manage the changes in
your life and the world of work.

Features of Career Planning and Career Development:

1. It is an ongoing process.
2. It helps individuals develop skills required to fulfil different career roles.
3. It strengthens work-related activities in the organization.
4. It defines life, career, abilities, and interests of the employees.
5. It can also give professional directions, as they relate to career goals.

Objectives of Career Planning:

The major objectives of career planning are as follows:
1. To identify positive characteristics of the employees.
2. To develop awareness about each employees uniqueness.
3. To respect feelings of other employees.
4. To attract talented employees to the organization.
5. To train employees towards team-building skills.
6. To create healthy ways of dealing with conflicts, emotions, and stress.
Benefits of Career Planning:
1. Career planning ensures a constant supply of promotable employees.
2. It helps in improving the loyalty of employees.
3. Career planning encourages an employees growth and development.
4. It discourages the negative attitude of superiors who are interested in suppressing the growth
of the subordinates.
5. It ensures that senior management knows about the calibre and capacity of the employees
who can move upwards.
6. It can always create a team of employees prepared enough to meet any contingency.
7. Career planning reduces labour turnover.
8. Every organization prepares succession planning towards which career planning is the first
step.

EMPLOYEE REWARDS
There are a number of ways to classify rewards. Three of the more typical dichotomies are:
Intrinsic versus extrinsic rewards, financial versus non financial rewards, and performance-based
versus membership based rewards. These categories are far from being mutually exclusive.
Reward
1. Intrinsic versus extrinsic rewards: The satisfactions one gets from the job itself are its
intrinsic rewards. These satisfactions are self initiated rewards, such as having pride in ones
work, having a feeling of accomplishment, or being part of a team. The techniques of flex time,
job enrichment, shorter work weeks, and job rotation, can offer intrinsic rewards by providing
interesting and challenging jobs and allowing the employee greater freedom.
On the other hand extrinsic rewards include money, promotions, and fringe benefits. Their
common thread is that extrinsic rewards are external to the job and come from an outside
source, mainly, management.
Thus, if an employee experiences feelings of achievement or personal growth from a job, we
would label such rewards as intrinsic. If the employee receives a salary increase or a write up in
the company magazine, we would label those rewards as extrinsic.
While we have stressed the role of extrinsic rewards in motivation, we should point out that
intrinsic and extrinsic rewards may be closely linked.
2. Financial versus Non financial rewards: Rewards may or may not enhance the employees
financial well being. If they do they can do this directly through wages, bonuses, profit sharing,
and the like, or indirectly through supportive benefits such as pension plans, paid vacations, paid
sick leaves and purchase discounts.
Non financial rewards are potentially at the disposal of the organization. They do not increase
the employees financial position, instead of making the employees life better off the job, non
financial rewards emphasize making life on the job more attractive.
The old saying one mans food is another mans poison applies to the entire subject of rewards,
but specifically to the area of non financial rewards. What one employee views as something Ive
always wanted, another finds superfluous. Therefore care must be taken in providing the right
non financial reward for each person, yet where selection has been done assiduously, the
benefits to the organization should be impressive.
Some workers are very status conscious. An attractive office, a carpeted floor, a large executive
desk, or a private bathroom may be just the office furnishing that stimulates an employee
towered top impressive job title, their own business cards, their own secretary, or a well located
parking space with their name clearly painted underneath the Reserved sign.
3. Performance based versus membership based rewards: The rewards that the
organization allocates can be said to be based on either performance criteria or membership
criteria. While the managers in most organizations will vigorously argue that their reward system
pays off for performance, you should recognize that this is almost invariably not the case. Few
organizations actually rewards employees based on performance. However, without question,
the dominant basis for reward allocations in organization is membership.
Performance based rewards are exemplified by the use of commission, piecework pay plans,
incentive systems, group bonuses, or other forms of merit pay plans. On the other hand,
membership based rewards include cost of living increases, profit sharing, benefits, and salary
increases attributable to labour market conditions, seniority or time in rank, credentials (such as
a college degree or a graduate diploma), or future potential (the recent M.B.A. from a prestigious
university). The demarcation between the two is not always obvious.

Theories of Motivation
At a simple level, it seems obvious that people do things, such as go to work, in order to get stuff
they want and to avoid stuff they don't want.
Why exactly they want what they do and don't want what they don't is still something a mystery.
It's a black box and it hasn't been fully penetrated.
Overall, the basic perspective on motivation looks something like this:

Classifying Needs
People seem to have different wants. This is fortunate, because in markets this creates the very
desirable situation where, because you value stuff that I have but you don't, and I value stuff that
you have that I don't, we can trade in such a way that we are both happier as a result.
But it also means we need to try to get a handle on the whole variety of needs and who has them
in order to begin to understand how to design organizations that maximize productivity.
Part of what a theory of motivation tries to do is explain and predict who has which wants. This
turns out to be exceedingly difficult.
Many theories posit a hierarchy of needs, in which the needs at the bottom are the most urgent
and need to be satisfied before attention can be paid to the others.
Maslow
Maslow's hierarchy of need categories is the most famous example:
self-actualization
esteem
belongingness
safety
physiological
Specific examples of these types are given below, in both the work and home context. (Some of
the instances, like "education" are actually satisfiers of the need.)
Need

Home

Job

selfactualization

education, religion, hobbies,

personal growth

training,
creativity

esteem

approval of family, friends,

community

recognition,
responsibilities

belongingness

family, friends, clubs

teams, depts, coworkers, clients,

supervisors, subordinates

advancement,
high

growth,
status,

safety

freedom from war, poison,

violence

work safety, job security, health

insurance

physiological

food water sex

Heat, air, base salary

According to Maslow, lower needs take priority. They must be fulfilled before the others are
activated. There is some basic common sense here -- it's pointless to worry about whether a
given color looks good on you when you are dying of starvation, or being threatened with your
life. There are some basic things that take precedence over all else.
Alderfer's ERG theory
Alderfer classifies needs into three categories, also ordered hierarchically:
growth needs (development of competence and realization of potential)
relatedness needs (satisfactory relations with others)
existence needs (physical well-being)
This is very similar to Maslow -- can be seen as just collapsing into three tiers. But maybe a bit
more rational. For example, in Alderfer's model, sex does not need to be in the bottom category
as it is in Maslow's model, since it is not crucial to (the individual's) existence. (Remember, this
about individual motivation, not species' survival.) So by moving sex, this theory does not predict
that people have to have sex before they can think about going to school, like Maslow's theory
does.
Alderfer believed that as you start satisfying higher needs, they become more intense (e.g., the
power you get the more you want power), like an addiction.
Do any of these theories have anything useful to say for managing businesses? Well, if true,
they suggest that
Not everyone is motivated by the same things. It depends where you are in the hierarchy
(think of it as a kind of personal development scale)
The needs hierarchy probably mirrors the organizational hierarchy to a certain extent: top
managers are more likely to motivated by self-actualization/growth needs than existence
needs. (but try telling Bill Clinton that top executives are not motivated by sex and
cheeseburgers...)
Acquired Needs Theory (mcclellan)
Some needs are acquired as a result of life experiences
need for achievement, accomplish something difficult. as kids encouraged to do things for
themselves.
need for affiliation, form close personal relationships. as kids rewarded for making friends.
need for power, control others. as kids, able to get what they want through controlling others.
These needs can be measured using the TAT (thematic apperception test), which is a projectionstyle test based on interpreting stories that people tell about a set of pictures.
Cognitive Evaluation Theory
This theory suggests that there are actually two motivation systems: intrinsic and extrinsic that
correspond to two kinds of motivators:
intrinsic motivators: Achievement, responsibility and competence. motivators that come from
the actual performance of the task or job -- the intrinsic interest of the work.
extrinsic: pay, promotion, feedback, working conditions -- things that come from a person's
environment, controlled by others.
One or the other of these may be a more powerful motivator for a given individual.

Intrinsically motivated individuals perform for their own achievement and satisfaction. If they
come to believe that they are doing some job because of the pay or the working conditions or
some other extrinsic reason, they begin to lose motivation.
The belief is that the presence of powerful extrinsic motivators can actually reduce a person's
intrinsic motivation, particularly if the extrinsic motivators are perceived by the person to be
controlled by people. In other words, a boss who is always dangling this reward or that stick will
turn off the intrinsically motivated people.
Note that the intrinsic motivators tend to be higher on the Maslow hierarchy.
Two Factor theory (Herzberg)
According to Herzberg, two kinds of factors affect motivation, and they do it in different ways:
hygiene factors. These are factors whose absence motivates, but whose presence has no
perceived effect. They are things that when you take them away, people become dissatisfied
and act to get them back. A very good example is heroin to a heroin addict. Long term addicts
do not shoot up to get high; they shoot up to stop being sick -- to get normal. Other examples
include decent working conditions, security, pay, benefits (like health insurance), company
policies, interpersonal relationships. In general, these are extrinsic items low in the
Maslow/Alderfer hierarchy.

motivators. These are factors whose presence motivates. Their absence does not cause any
particular dissatisfaction, it just fails to motivate. Examples are all the things at the top of the
Maslow hierarchy, and the intrinsic motivators.

So hygiene factors determine dissatisfaction, and motivators determine satisfaction. The two
scales are independent, and you can be high on both.
Equity Theory
Suppose employee A gets a 20% raise and employee B gets a 10% raise. Will both be motivated
as a result? Will A be twice as motivated? Will be B be negatively motivated?
Equity theory says that it is not the actual reward that motivates, but the perception, and the
perception is based not on the reward in isolation, but in comparison with the efforts that went
into getting it, and the rewards and efforts of others. If everyone got a 5% raise, B is likely to feel
quite pleased with her raise, even if she worked harder than everyone else. But if A got an even
higher raise, B perceives that she worked just as hard as A, she will be unhappy.
In other words, people's motivation results from a ratio of ratios: a person compares the ratio of
reward to effort with the comparable ratio of reward to effort that they think others are getting.
Of course, in terms of actually predicting how a person will react to a given motivator, this will get
pretty complicated:
1. People do not have complete information about how others are rewarded. So they are going
on perceptions, rumors, inferences.
2. Some people are more sensitive to equity issues than others
3. Some people are willing to ignore short-term inequities as long as they expect things to work
out in the long-term.
Reinforcement Theory

Positive reinforcement. Strengthening a behaviour. This is the process of getting goodies

as a consequence of a behaviour. You make a sale, you get a commission. You do a good
job, you get a bonus & a promotion.
Negative reinforcement. Strengthening a behaviour. This is the process of having a stressor

taken away as a consequence of a behaviour. Long-term sanctions are removed from

countries when their human rights records improve. (you see how successful that is!). Low
status as geek at Salomon Brothers is removed when you make first big sale.

Extinction. Weakening a behaviour. This is the process of getting no goodies when do a

behavior. So if person does extra effort, but gets no thanks for it, they stop doing it.

Punishment. Weakening a behaviour. This is the process of getting a punishment as a

consequence of a behaviour. Example: having your pay docked for lateness.
Apply

Withhold

Reward

positive
reinforcement
(raise above
baseline)

negative
reinforcement
(raise up to
baseline)

Stressor

punishment
(bring down
below
baseline)

extinction
(stay
baseline)

at

Reinforcement schedules
The traditional reinforcement schedule is called a continuous reinforcement schedule. Each
time the correct behavior is performed it gets reinforced.
Then there is what we call an intermittent reinforcement schedule. There are fixed and
variable categories.
The Fixed Interval Schedule is where reinforcement is only given after a certain amount of time
has elapsed. So, if you decided on a 5 second interval then each reinforcement would occur at
the fixed time of every 5 seconds.
The Fixed Ratio Schedule is where the reinforcement is given only after a predetermined
number of responses. This is often seen in behavior chains where a number of behaviors have
to occur for reinforcement to occur.
The Variable Interval Schedule is where the reinforcement is given after varying amounts of
time between each reinforcement.
The Variable Ratio Schedule is where the reinforcement is given after a varying number of
correct responses.

Expectancy Theory (Vroom)

This theory is meant to bring together many of the elements of previous theories. It combines the
perceptual aspects of equity theory with the behavioral aspects of the other theories. Basically, it
comes down to this "equation":
M = E*I*V
or
motivation = expectancy * instrumentality * valence
M (motivation) is the amount a person will be motivated by the situation they find themselves in.
It is a function of the following.
E (expectancy) = The person's perception that effort will result in performance. In other words,

the person's assessment of the degree to which effort actually correlates with performance.
I (instrumentality) = The person's perception that performance will be rewarded/punished. I.e.,
the person's assessment of how well the amount of reward correlates with the quality of
performance. (Note here that the model is phrased in terms of extrinsic motivation, in that it asks
'what are the chances I'm going to get rewarded if I do good job?'. But for intrinsic situations, we
can think of this as asking 'how good will I feel if I can pull this off?').
V(valence) = The perceived strength of the reward or punishment that will result from the
performance. If the reward is small, the motivation will be small, even if expectancy and
instrumentality are both perfect (high).
Employee Morale: Nature, Significant and Measures to Improve Morale!
Employee morale is the relationship that a particular employee or a group of employees have
with their work and the organization they work for. High employee morale means that employees
are happy, and this is reflective in the kind of work they produce. On the other hand, low
employee morale results in less productivity and pessimism among employees. It is important for
every organization to continually keep employee morale high.
According to Dalton E. McFarland, morale is basically a group phenomenon. It is a concept that
describes the level of favourable or unfavourable attitude of employees collectively to all aspects
of their workthe job, the company, their tasks, working conditions, fellow workers, superiors
and so on.
Nature of Employee Morale:
Morale represents a composite of feelings, attitudes, and sentiments that contribute to general
feelings of satisfactions. It is a state of mind and spirit affecting willingness to work, which, in
turn, affects organizational and individual objectives. It describes the overall group satisfaction.
1. High morale and low morale:
If the enthusiasm and willingness to work of a group is high, we can say morale is high and vice
versa. Just as good health is essential for an individual, high morale is necessary for an
organization. High morale represents an attitude of satisfaction with desire to continue and
willingness to strive for the goals of the group. Under conditions of high morale, workers have
few grievances, frustrations, and complaints. They are clear about the goalsindividual and
organizationaland are satisfied with human relations in the organization.
2. Morale versus motivation:
Morale should be distinguished from motivation. Although both are cognitive concepts, they are
quite different. Morale is a composite of feelings, attitudes and sentiments that contribute to
general feeling of satisfaction at the workplace. But motivation is something that moves a person
to action.
It is a process of stimulating individuals to action to accomplish the desired goal. It is a function
of drives and needs. Motivation is concerned with mobilization of energy, whereas morale is
concerned with mobilization of sentiments.
3. Morale affects productivity:
Morale has a direct effect on productivity. High morale leads to high productivity and low morale
leads to low productivity.
4. Measurement of morale:
It is hard to measure morale directly as it is an intangible state of mind of the workers.

There are four methods which can be used for measuring the morale of the employee
indirectly:
a. Observation:
The managers can measure the morale of the employees by keenly observing and studying their
activities and behaviour. Since the manager is close to the scene of action, they can always find
out unusual behaviours and report promptly. Observation is not a very reliable way of measuring
morale.
b. Attitude or morale survey:
Survey helps to know the opinion of the employees either by direct interview or by
questionnaires. Efforts are made to find out the view of employees about their job, co-workers,
supervisors, and the organization.
c. Morale indicators:
Employee morale can be measured by examining company records regarding absenteeism,
labour turnover, fluctuations in output, quality records, excessive waste and scrap, training
records, accident rate, and the number of grievances filed.
d. Suggestion boxes:
Employees can be asked to put in their complaints, protests, and suggestions in suggestion
boxes even without disclosing their identity. Morale generates long-term benefits such as
improving the goodwill and increasing the productivity for the organization, and a satisfied
employee is an asset to the organization.
Significance/Importance/Benefits of Morale:
Morale is an important part of organizational climate. It is a vital ingredient of organization
success because it reflects the attitudes and sentiments of organizational members towards the
organization, its objectives, and policies. Morale is the total satisfaction that employees derive
from their job, their work group, their boss, their organization and their environment.
Benefits of High Morale:
Morale of employees must be kept high to achieve the following benefits:
1. Willing cooperation towards objectives of the organization.
2. Loyalty to the organization and its leadership or management
3. Good disciplinevoluntary conformity to rules and regulations
4. High degrees of employees interest in their jobs and organization
5. Pride in the organization
6. Reduction of rates of absenteeism and labour turnover
7. Happy employees are productive employees
Indicators of Low Morale:
Low morale indicates the presence of mental unrest. Such a situation will have the following
adverse consequences;
1. High rates of absenteeism and labour turnover
2. Excessive complaints and grievances
3. Frustration among the workers
4. Friction among the workers and their groups
5. Antagonism towards leadership of the organization
6. Lack of discipline
Measures to Improve Morale:
Morale building is a continuous process which cannot be stopped even for a moment. Morale
cannot be maintained at a high level forever. It is dynamic. Morale building may be done either
on individual basis or on ground basis. Morale building on group basis is always preferable.
Group morale can be increased by understanding the group dynamics. It will automatically

achieve the individual morale.

Following are the important steps to achieve high morale among employees:
1. Fair remuneration:
Remuneration should be fair and equitable since this is the most important factor affecting the
employee morale. The basic and incentive pay plans should be fair.
2. Incentives:
Monetary and non-monetary incentives to the employees are important to motivate them.
Employees can be offered extra perks to improve morale. These can include time off, the option
to work from home, a flexible schedule, or simple recognition when work is well done.
3. Work environment:
The condition of work should be friendly for the employees mental and physical well-being.
Employees may be more concerned with intangible benefits, such as work- life balance and the
atmosphere in the workplace.
4. Job satisfaction:
Well-placed employees take pride and interest in their work and feel satisfied.
5. Two-way communication:
Two-way communication (upward and downward) is necessary to know the sentiments of
employees in the organization. Organization policies and programmes should be properly
communicated to employees.
6. Training:
In this ever-evolving world of new technologies and ideas, employees need to stay up- to-date
with developments in their field. Training gives psychological satisfaction to employees and
improves their performance.
7. Workers participation:
Workers must be consulted and taken into confidence whenever a change is to be introduced.
8. Social group activities:
These activities encourage employees to take on a community-service project together.
Employees will likely enjoy the opportunity to give back to their local community. Management
should encourage social group activities by the workers. This will help to develop greater group
cohesiveness for building high morale.
9. Counselling:
Employee counselling helps the employees with their problems and complaints, and provides an
opportunity to get back on track since the counsellor is impartial. It helps to reduce absenteeism
and labour turnover. The release of emotional tension alone may serve to minimize
dissatisfactions.
10. Treating employees with respect:
Treat employees with the courtesy and respect they deserve say please and thank you. Ask
about their weekend, and take an interest in projects that they are working on. Thus, an unhappy
employee is an unproductive employee.
A company needs to pursue policies like the ones mentioned above to help its business become
a more enjoyable place to work. Not only will employees start to look forward to their workdays,
the organization will benefit from the new-found efficiency.

Communication Process
Communication process consists of some interrelated steps or parts through which messages
are sent form sender to receiver. The process of communication begins when the sender wants
to transmit a fact, idea, opinion or other information to the receiver and ends with receivers
feedback to the sender. The main components of communication process are sender, message,
channel, receiver and feedback.
it is clear that communication process is the set of some sequential steps involved in
transferring message as well as feedback. The process requires a sender who transmits
message through a channel to the receiver. Then the receiver decodes the message and sends
back some type of signal or feedback.
Steps or elements of communication process
The communication process refers to the steps through which communication takes place
between the sender and the receiver. This process starts with conceptualizing an idea or
message by the sender and ends with the feedback from the receiver. In details, communication
process consists of the following eight steps:
1. Developing idea by the sender: In the first step, the communicator develops or
conceptualizes an idea to be sent. It is also known as the planning stage since in this stage
the communicator plans the subject matter of communication.
2. Encoding: Encoding means converting or translation the idea into a perceivable form that
can be communicated to others.
3. Developing the message: After encoding the sender gets a message that can be transmitted
to the receiver. The message can be oral, written, symbolic or nonverbal. For example, when
people talk, speech is the message; when people write a letter, the words and sentences are
the message; when people cries, the crying is the message.
4. Selecting the medium: Medium is the channel or means of transmitting the message to the
receiver. Once the sender has encoded his into a message, the next step is to select a
suitable medium for transmitting it to the receiver. The medium of communication can be
speaking, writing, signalling, gesturing etc.
5. Transmission of message: In this step, the sender actually transmits the message through
chosen medium. In the communication cycle, the tasks of the sender end with the
transmission of the message.
6. Receiving the message by receiver: This stage simply involves the reception of senders
message by the receiver. The message can be received in the form of hearing, seeing,
feeling and so on.
7. Decoding: Decoding is the receivers interpretation of the senders message. Here the
receiver converts the message into thoughts and tries to analyze and understand it. Effective
communication can occur only when both the sender and the receiver assign the same or
similar meanings to the message.
8. Feedback: The final step of communication process is feedback. Feedback means receivers
response to senders message. It increases the effectiveness of communication. It ensures
that the receiver has correctly understood the message. Feedback is the essence of two-way
communication.

Communication Channels
In order for employers to maximize their messaging strategy, they need to understand which
communication
channels
are
most
effective
at
reaching
their
employees

.
The chart on the right shows a list of strategies that employers indicated were most or least
effective, with the most effective on the top.
No matter which channel an employer uses, its important to put together a targeted strategy that
includes multiple channels. In general, people who receive information in a variety of ways will
have a better chance of actually paying attention to the information and taking action. Results of
a study by Guardian showed.

Employees want to receive benefits communications in a minimum of three ways

When employees receive benefits communications through their preferred channels, 70% are
confident in their benefit selections, compared to 57%.

Employers are getting more creative in how they communicate to their covered population. Some
are using videos and training materials on employee portals, pre-enrollment campaigns and
social media.
Emerging Trends
Social media (e.g. texts, tweets, blogs, web sites such as Facebook, YouTube, LinkedIn) has
been an emergent trend as a channel for benefits communications. While employers may still be
testing the waters, social media is widely used by health plans and vendors in the benefits
space. Before a company embarks on this type of strategy it is important to understand their
populations level of interest in wanting to use it.
Best Communication Channels to Use
In the following 5-Step Method to Effective Employee Benefits Communication, employers can
determine which communication channels work best with their approach. Determining what
channel to use when is very important to the success of an overall strategy.
1. Analyze employers available HR data/feedback including EOS (Employee Opinion Survey)
2. Identify key areas for improving employee perceptions, knowledge and understanding
3. Design communication program and implementation time line that includes:
Development of an overall image for benefits communication program
Initial communications focusing on the realities and business reasons for changes in

the benefit plan designs (if necessary)

Plan out targeted communication elements that address the top benefit issues
Different educational opportunities for employees to learn about becoming better
health care consumers - include what employees can do to help keep costs down and
how their decisions and actions can benefit themselves as well as the employer
(dovetails to existing Wellness program, if applicable)
Determine specific pre-enrollment employee benefits communication campaign
Create new hire employee benefit kits, tools, resources and materials
Provide specific on-going employee benefits educational and training tools, resources
and materials
4. Create and execute program per implementation time line. Repeat entire process annually
5. Conduct post-implementation surveys to analyze effectiveness and identify new
opportunities

Corporate Governance
The system of rules, practices and processes by which a company is directed and
controlled. Corporate governance essentially involves balancing the interests of the many
stakeholders in a company - these include its shareholders, management, customers, suppliers,
financiers, government and the community.
Internal Mechanism
The foremost sets of controls for a corporation come from its internal mechanisms. These
controls monitor the progress and activities of the organization and take corrective actions when
the business goes off track. Maintaining the corporation's larger internal control fabric, they serve
the internal objectives of the corporation and its internal stakeholders, including employees,
managers and owners. These objectives include smooth operations, clearly defined reporting
lines and performance measurement systems. Internal mechanisms include oversight of
management, independent internal audits, structure of the board of directors into levels of
responsibility, segregation of control and policy development.
External Mechanism
External control mechanisms are controlled by those outside an organization and serve the
objectives of entities such as regulators, governments, trade unions and financial institutions.
These objectives include adequate debt management and legal compliance. External
mechanisms are often imposed on organizations by external stakeholders in the forms of union
contracts or regulatory guidelines. External organizations, such as industry associations, may
suggest guidelines for best practices, and businesses can choose to follow these guidelines or
ignore them. Typically, companies report the status and compliance of external corporate
governance mechanisms to external stakeholders.
Independent Audit
An independent external audit of a corporations financial statements is part of the overall
corporate governance structure. An audit of the company's financial statements serves internal
and external stakeholders at the same time. An audited financial statement and the
accompanying auditors report helps investors, employees, shareholders and regulators
determine the financial performance of the corporation. This exercise gives a broad, but limited,
view of the organizations internal working mechanisms and future outlook.
Small Business Relevance
Corporate governance has relevance in the small business world as well. Internal mechanisms
of corporate governance may not be implemented on a noticeable scale by a small business, but
the functions can be applied to many small businesses nevertheless. Business owners make
strategic decisions about how workers will do their duties, and they monitor their performance;
this is an internal control mechanism -- part of business governance. Likewise, if a business
requests a loan from a bank, it must respond to that banks demands to comply with liens and
agreement terms -- an external control mechanism. If the business is a partnership, a partner

might demand an audit to place reliance on the profit figures provided -- another form of external
control.

Corporate Governance in Banking Sector

Effective corporate governance is critical to the proper functioning of the banking sector and the
economy as a whole. While there is no single approach to good corporate governance, the Basel
Committee's revised principles provide a framework within which banks and supervisors should
operate to achieve robust and transparent risk management and decision-making and, in doing
so, promote public confidence and uphold the safety and soundness of the banking system.
The Committee's revised set of principles supersedes guidance published by the Committee in
2010. The revised guidance emphasises the critical importance of effective corporate
governance for the safe and sound functioning of banks. It stresses the importance of risk
governance as part of a bank's overall corporate governance framework and promotes the value
of strong boards and board committees together with effective control functions. More
specifically, the revised principles:

expand the guidance on the role of the board of directors in overseeing the implementation of
effective risk management systems;
emphasise the importance of the board's collective competence as well as the obligation of
individual board members to dedicate sufficient time to their mandates and to keep abreast of
developments in banking;
strengthen the guidance on risk governance, including the risk management roles played by
business units, risk management teams, and internal audit and control functions (the three
lines of defence), as well as underline the importance of a sound risk culture to drive risk
management within a bank;
provide guidance for bank supervisors in evaluating the processes used by banks to select
board members and senior management; and
recognise that compensation systems form a key component of the governance and incentive
structure through which the board and senior management of a bank convey acceptable risktaking behaviour and reinforce the bank's operating and risk culture.