Management Tools – Dutch Uncles

What Is Moving Average (MA) In The Stock Market?

Aakash Sharma — Thu, 23 Sep 2021 08:35:10 +0000

Moving averages are one of the most accessible tools of the technical analysis of stocks for investors and traders. Securities and stock market analysts often use the mnemonic “trend is your friend” to identify buy and sell points in short-term investment periods.

This is based on the assumption that a stock that goes up constantly is more likely to go up, and the one that goes down has a larger probability of constantly nosediving in the near future.

Having a clear view of trends can help an investor decide whether to sell, buy or hold a market position. However, determining a trend becomes difficult due to various reasons like rapid fluctuation or sudden increase/decrease in market activity.

This is where the metric of ‘moving averages’ comes in handy. A moving average is a technical indicator that tracks the securities’ price over a specific period and plots it on a line. A moving average essentially smooths out price fluctuations to give investors a general idea of where the trend is heading.

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Using moving averages to determine trends, an investor can better identify buy and sell signals.

What can you identify with moving averages?

Uptrend

- If a stock’s price value follows an upward tendency, where its recent high is higher than the previous high, and the recent low is higher than the previous low, then that stock is said to be in an uptrend.

Downtrend

- Contrary to an uptrend, a stock is said to be in a downtrend if its price values keep fluctuating on a downwards path, meaning that its current high is lower than the previous high and its current low is lower than the previous low.

Sideways trend

- Sideways trend occurs when the price of a security trades within a reasonably stable range without forming any distinct trends over time. In this trend, price action oscillates in a horizontal range or channel.

Significance of moving average

Examining a stock’s moving average based on current prices can help investors identify potential buy and sell signals. If the stock price is higher than the average price, it means that the trader is ready to buy the stock at a price higher than the average price. This shows that traders are optimistic about a surge in stock prices, indicating the opening for you to buy as well.

If the stock price is lower than its average price, it means that traders are ready to sell the stock at a price lower than the average price. This means that traders are frustrated with the volatility of stock prices. Therefore, sales opportunities should be sought.

The formula for moving average is:

Moving Average (MA) = Sum of stock prices in a particular period / Number of days (in the period)

Types of moving averages

Simple moving average (SMA)

The Simple Moving Average (SMA) calculates the average price of the selected price range based on the number of periods in the series, usually the closing price.

Let’s understand SMA with an example.

The closing prices of a stock for five days are as follows:

As per the formula, we need to calculate this:

(SP Day 1 + SP Day 2 + SP Day 3 + SP Day 4 + SP Day 5) / 5, (where SP = Stock Price).

Thus, the moving average of the stock price in this example would be:

=> MA = (55 + 56 + 55.5 + 52 + 56.02) / 5

=> MA = 274.52/5 = 54.904

Hence, the moving average of the stock price is Rs. 54.904.

A simple moving average weights all the data equally. Keep in mind that the longer the SMA, the slower it will react to recent price changes. After another trading day, the final closing price is added to the calculation and the first price expires (Rs. 55 in the above example).

Weighted moving average (WMA)

For the weighted moving average, the latest data points carry more weight. It is intended to show the latest changes in stock prices. The weights decrease consistently for each preceding period.

Example

The three data points recorded over three days are Rs. 50, Rs. 45, and Rs. 60. In WMA, weights are assigned to each number as per the latest day.

Since there are 3 periods, the most recent day (Rs. 60) gets the largest weight of 3, the second recent day (Rs. 45) receives a weight of 2, and the last day (Rs. 50) receives a weight of just 1.

Using the WMA formula, which is multiplying each data point’s price by its weighting factor and adding them, the calculation will go as follows:

=> [(3 x Rs. 60) + (2 x Rs. 45) + (1 x Rs. 50)]

=> 180+ 90 + 50 = 320.

The last step in WMA involves dividing the resulting value by the sum of the periods. The sum of the periods is 1+2+3 = 6.

=> WMA (180 + 90 + 50) / 6 = Rs. 53.33

Word of caution

Moving averages take a long time to reflect price changes. This is because the activity volume and transaction volume are assumed to be equal in all time periods. Moving averages cannot predict future performance, they only confirm established trends. Nevertheless, it is a powerful tool for the technical analysis of stocks and trends.

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The 5 Ms of Management: Key Components of Every Business

Tanisha Achrekar — Mon, 25 Jan 2021 03:53:31 +0000

Cooking is an art and science at the same time. Even though two people are cooking the same dish with the same ingredients, the taste of both might be different. It is because the way the ingredients were used and the way the food was cooked has a personal individual touch to the dish. Management systems across organisations may function like that. Every organisation has access to a set of standard resources, the outcome of which depends upon how effectively they are managed. Management is the catalyst that plans, organises and directs all resources to achieve the company’s goal. It is the centre around which the factors of production revolve. The key factors of production that revolve around management are known as the 5 Ms of Management. They include – Manpower, Money, Materials, Machinery and Methods.

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If I have one skill as a manager, I can make things extremely clear.

- Ben Horowitz

The 5 Ms of Management

Manpower

Be it modern-day corporate high-rise or an ancient monument like the Taj Mahal, neither would be complete without the aid of manpower. To make the raw materials into a structure, an effective team of workers is needed. Similarly, an organisation can have the best of raw materials but without any manpower those fancy materials are useless.

Management is often referred to as the art of getting things done by people. Manpower is a vital component of any organisation as no other resource can function without it. Managerial and non-managerial people who are part of the organisation fall under this category. Having a qualified and competent workforce drives the success of any organisation.

A manager must ensure that his team is functioning smoothly by resolving conflicts promptly. Fair remuneration, work-life balance, sustainable working environment and adequate resources helps in gaining an employee’s loyalty in the long-run.

Money

Money is an all-purpose resource. A business needs capital to manufacture products or provide services. It is required for procuring raw materials, hiring staff, buying machines and the several other expenses that a business incurs. Availability of funds ensures smooth functioning of a business. A business requires adequate working capital and fixed capital.

Having inadequate capital can hamper the functioning of a business or in some worst cases, shut it down completely. Having enough money ensures that you can hire the best people, the finest quality raw materials and well-functioning machines. This, in turn, will ensure that your end-product or service meets the quality standards and offers value for money.

Several people quit their jobs when they are paid inadequately. Factories lose their orders if the machinery they have is outdated compared to its competitors. Lack of quality raw materials can cause a reduction in sales. For any start-up, it usually takes around two-three years to start making money. It is essential that a start-up has enough capital to cover all the expenses for at least two years.

Material

The materials are those products which are utilised for creating the final product. Materials can be raw or even semi-finished products that are used for making the end-product that the company sells. In cotton mills, cotton is considered as raw materials. Yarn or cloth sheets derived from these factories are then sent to the clothing factories. These sheets of cotton are viewed as raw materials in the clothing factory. The cotton is sewed, tailored and altered to make a desirable outfit. A final product for one factory can be the raw material for another.

Raw materials are the primary building blocks of any production process. The management has to ensure that the quality and quantity is enough to meet the demand. They also have to note the transportation and conversion expenses of these raw materials. Quality and inventory checks determine if the company has an adequate amount and desired quality of raw materials.

Raw materials can be direct or indirect. Direct raw materials are the ones that are a part of the finished product. While, indirect raw materials are those who were a part of the process but not directly included in the final product. The steel used for manufacturing kitchen units is an example of direct raw materials. While the oil used in machines from which the steel cabinets are made is considered as an indirect material.

Machines

Machines are used for converting raw materials into finished goods. There can be several machines involved in the production process depending on the products the company is selling.

Purchasing modern machines helps in improving the process of manufacturing. The upcoming technology in machines plays a key role in production. Having well-functioning machines leads to quick production and may offer a competitive advantage over others.

Method

The method, being a way of getting things done, definitely does revolve around management. Method is all about the time efficiency. There are several methods a manager can use to get the same thing done. Getting from point A to point B may have ten different routes, it is a challenge here for a manager to choose the best one. The best method usually is the one that is cost-efficient while meeting the quality standards.

Also, different methods require different time for the completion of the same tasks. Two managers can be given the same raw materials, machines, staff and budget but still, the result produced might be different. This is because every manager has his own way of getting things done.

For the smooth functioning of your business, you need to ensure that the best resources are hired or bought across all the 5 Ms of Management. These 5 Ms of Management are interlinked and dependent on each other. In order to make a business successful, all the five components are needed to be utilised to their maximum potential. That’s what a manager does.

Management does have its set of theories that back it up as a science but still, the execution varies from person-to-person which makes it an art as well. To ensure that the factors of production above are well-curated and established, management systems are set in place. These management systems monitor the entire process and conduct evaluations accordingly. To know more about it, read our article on the ‘Management Systems’.

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Lean Canvas: Map Out Those Brilliant Ideas

Tanisha Achrekar — Mon, 25 Jan 2021 03:48:19 +0000

An entrepreneur grinds every day facing new challenges and taking advantage of the opportunities. One of the biggest challenges he/she faces is having an idea out on papers. You cannot just say I have an idea as an entrepreneur you are answerable to a bunch of people mainly your employees and investors. You need a plan. However, mapping out your idea may take weeks and months. How can you map out your idea quickly and effectively? This is where Lean Canvas comes into the picture.

What are the Lean Canvas?

The Lean Canvas is a simplified one-page business plan. Ash Maurya created this method and it is an adaptation of the Business Canvas Model by Alexander Osterwalder. The Lean Canvas helps you to map out all the essential points of a business idea. It provides a structure to your ideas, making it more concrete. The Lean Canvas model was created for entrepreneurs to help them map out their ideas simply and clearly. It is a time-efficient model as it is the go-to one-page format for brainstorming business ideas.

Understanding the components of Lean Canvas

Lean Canvas has nine blocks that highlight the needs and requirements of a start-up. The blocks create a logical understanding of how an idea would look on paper. Read on to know exactly what the nine blocks are all about:

Problem

What are you bringing to the table? What problems of your customers are you planning to solve? In this block, write the customer issues you plan to address with your idea. Know the top three problems your customer is facing and make a note of it.

Customer Segments

You cannot solve your customers’ problems without knowing who your customers are in the first place. In the customer segment section, write down your target customers. The type of customers you are targeting will help you to think what problems they are probably facing.

Unique Value Proposition

What sets you apart from the rest of the competition? Your USP is your unique value proposition that you are offering to your customers. In this segment, you will write about what unique value your business has to offer. Especially, when they are competitors attempting to solve the same problem as you are. What makes your brand or product stand out? Write about that in this section.

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Everything begins with an idea.

- Earl Nightengale

Solution

After you have found your customer’s problems, look for what solutions do you have to offer. How do you plan to tackle the problems your customers are facing? You may not hit it at your first shot, but at least you have started brainstorming for solutions. One of the best ways to find the solution is by conducting research amongst your targeted customers. Give them surveys and questionnaires to know what they feel and then use those learnings while finding the solution.

Channels

Channels are the medium through which you are going to reach your customer segment. Here you need to brainstorm through what channels can you reach your targeted customers the most. Like if your customer segment is millennial, social media like Instagram, Twitter, and Facebook would be the way to go. Find out the channels used by your customer segment and reach them through it.

Revenue Streams

How is your business plan going to make money? This section addresses where the revenues will come from the plan. Talk about how you are going to price your product/service. Though you may feel as your business is just getting started you should lower the cost or even offer services for free like most start-ups. However, avoid only focusing on getting validated by your customers. Conduct research and work on a price point that will generate revenue and the customer’s will be willing to pay for as well.

Cost Structure

To get your product/service out there in the market, a number of costs are incurred. If you have a website, you need to consider how much building it will cost to get customers on your landing page. At every step of the business, there is a cost involved. To have a rough break-even point, estimated costs and potential revenue streams need to be calculated.

Key Metrics

The only way to know that you are on the right track is to evaluate your business using its key metrics from time-to-time. Every business has different key metrics to keep track of. If you run an e-commerce website, probably the traffic you are attracting would be one of the metrics you would monitor.

Unfair Advantage

As an entrepreneur, while filling the lean canvas, it might be challenging to come with an unfair advantage. What sets you apart from the rest of the competition? Having an unfair advantage helps in attracting investors attention. Your unfair advantage can be anything like your well-equipped team, a loyal customer base, fixed set of clients, insider information, or a cost-effective plan compared to the competitors. Your unfair advantage should be such that it cannot be bought with money or easily copied by a competitor.

How to create a Lean Canvas?

The whole purpose behind creating a Lean Canvas is to get your ideas on paper for you and others to see. It is an alternative to the traditional business plans that are time-consuming and may not offer insights that are often needed. When you are creating your Lean Canvas, you can do it alone or along with your business partner. Basically, take 20 minutes and jot down everything that is in your head in those nine boxes. Some people like to have their Lean Canvas on paper while others prefer to have a PDF version of it. To each its own here, whatever sails your boat.

There are also several tools available online to create your Lean Canvas with the utmost ease. Some entrepreneurs prefer taking a print of their Lean Canvas or writing it on paper and placing it in a place where they can see it every day.

What are the features and benefits of creating a lean canvas?

Lean Canvas being a quick way to formulate business ideas from a business model to a marketing campaign, it has several benefits. It acts as a visual guide and helps to communicate your idea more effectively.

Focused on the entrepreneur

The Lean Canvas model was crafted for entrepreneurs. It is a simple business model which proves to be of great value to any start-up business. It is focused completely on what an entrepreneur is thinking and revolves around him. It helps him/her gain a clear perspective of his/her idea before involving other people.

Saves time

A business idea can take days sometimes even weeks to get on paper. The time one business is preparing an idea, another business may be launched implementing it. Time is more valuable than anything in a business. The Lean Canvas model is time-efficient to bring your idea on papers. It will not take you more than 30 minutes to fill the blocks in your Lean Canvas. Making it one of the most time-efficient brainstorming models.

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The difficulty lies not so much in developing new ideas as in escaping old ones.

- John Maynard Keynes

Helps in mapping an entrepreneur’s mind

The Lean Canvas has been designed to promote clarity in an entrepreneur’s mind. It helps him/her in mapping out everything regarding the business idea that is in his/her mind. Also, the model is so simplified that it can be adopted for different niches, making it handier and more useful.

Has a solution-based approach

The first block of the Lean Canvas is a problem and eventually, the solution is followed. It has a simple approach where it compels a person to think about what problem is their business addressing? How are they going to solve it? The approach is problem-solving and solution-based at the same time. It helps a business to understand the ‘why’ behind their model.

Aids in finding a company’s USP

An entrepreneur thinks hard when he/she is filling the unfair advantage section of the Lean Canvas. Here he/she is compelled to think about the unique value proposition of his/her business model. Along with thinking about what will make him/her stand out, an entrepreneur is also forced to think of how his/her USP cannot be easily copied by any entrepreneur. Finding an edge over the competition that cannot be adopted easily is a game changer to any business.

Easy to understand

The Lean Canvas has nine sections that compel an entrepreneur to think intensely. Also, the boxes have a limited spacing allowing him/her to focus only on the key points of any section. It ensures that the entrepreneur is jotting down things to the point. The Lean Canvas is a crisp and clear model which is quite easy to understand. It helps an entrepreneur gain his own perspective on his idea before showing it to anyone else.

The Lean Canvas is one of several business models available. It’s a quick way to get those ideas out of your head and on to papers. Read our article on the ‘Business Model Canvas’ by Alexander Osterwalder to know about the business model that inspired the Lean Canvas.

The post Lean Canvas: Map Out Those Brilliant Ideas appeared first on Dutch Uncles.

Management – It’s All About Getting Your Business Together

Tanisha Achrekar — Fri, 25 Dec 2020 12:04:14 +0000

As working adults, we are no strangers to managing our time. Most budding entrepreneurs usually plan their day a night before or early in the morning. As individuals we manage our money, time, work, social life, and other commitments simultaneously. We are often in awe of people who manage to make time for everything including themselves. What is the difference between them and others? Both have the same 24 hours in a day, but how do they manage to juggle time so much better? It is all about their management skills.

The way you manage your business determines how the managers working under you will handle their teams. The environment of a business is contagious making it vital to create and maintain an environment where everyone can work collectively to achieve the business goals.

Evolution

Management exists since humans exist, so it has been there for centuries now. The only difference is that back then we chased animals and now we are chasing money. Whether it was the royal dynasties ruling their subjects or an officer directing his army, there was always a need for a leader to ‘manage’ the troop. As we have evolved over the decades, so did our approach towards management.

The definition and meaning of management have been shaped over several decades. It is important to know how management has evolved over the years for better understanding of it. A major transformation in the concept of management was witnessed during the industrial revolution of the 18th century. There are several management concepts that can be divided into three broad categories based on their timeline.

The Classical theory

Prof Babbage, Robert Owens, Henry Robson, Towne James, Watt Junior and Seebohm Rowntree are often considered as the pioneers of management theory. The classical theory of management was primarily focused on the job content, standardization and division of labour. It also led to the beginning of the ‘science of management’ where F.W. Taylor, Emerson and H.L. Grant considered a scientific approach towards managing an organisation.

The Neo-Classical theory

During this period, the classical theory of management began to evolve-an upgraded and improved version of the existing classical theory. The classical theory was focused on the job content but the neo-classical theory placed an emphasis on employee relationships in an organization.

The Bureaucratic Model

Max Weber, a German sociologist proposed the bureaucratic model of management. The bureaucratic model included a set of rules and division of labour as a management practice. It also takes into account the hierarchy of authority and placement on employees on the basis of their technical competence.

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Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall.

- Stephen Covey

The core elements

While managing a business, an entrepreneur has to handle its various resources. After the industrial revolution, it was found that a set of resources is utilised by every business as mentioned below:

Man
Money
Machines
Materials
Methods

These resources are also popularly known as the 5 Ms of Management.

Five key areas of management in a modern business

The above elements are usually a part of most businesses. Every business is divided into departments for effective functioning. Each department has its own set of responsibilities to cater. The key areas of a business can be numerous based on the size and type of a business. It is totally an individual choice as to how many departments they wish to have in their business. Usually, there are five departments that every business has nowadays. These departments have their individual management styles, techniques, making it key areas of management in a modern organisational setting.

Production

Production management covers the manufacturing of goods and services. It is the primary function where the goods or services that the business is selling are produced at the right time, right cost and right quantity. Usually, material, purchase and inventory management are also a part of production management. Key things handled in production management usually include:

Picking the location of the plant and maintaining it
Planning and development of the product
Handling the purchase of raw materials
Storing raw materials
Managing the machines and systems

Financial

A business cannot exist without money, without the right financial management, all the profits go in vain. The financial department looks after the money aspect of the business. The numbers derived from this department directly impact the operations of other departments. Handling the capital, preparing and following a budget, portfolio management and handling the sources of investments are all a part of financial management. The finance department manages:

Capital budgeting and expenditures
Handling the profits and losses (Both short term and long term)
Distribution of dividend to investors

Human resource

An employee in your office, be it any human who is working for you, plays a crucial role in your business. The human resources handle the ‘man’ element of management. They ensure that they hire the right people for the right job at the right remuneration. It is a huge responsibility as the workforce is a foundation of any organization. The duties of human resource management usually include:

Recruitment
Placement
Induction and training
Wages and salaries
Appraisals
Employee welfare

Office

Office management is also referred to as administration or general management. It is usually responsible for functioning and coordinating between all the other departments. They take care of the paperwork of the company. Collecting data, overseeing reports and coordinating with clients, communicating between different teams – that’s all them. The usual responsibilities of office management include:

Conducting meetings
Collecting and managing data
Organizing the events and conferences of a company
Managing everyday correspondences
Coordinating with staff, suppliers, and clients

Marketing

Marketing management is one of the significantly growing areas of a business. It focuses on marketing the products and services that the business is trying to sell. Marketing directly impacts the sales and revenues of a business. In the past years, marketing campaigns have managed to change the fate of an organisation.

One of the most popular marketing strategies used by Fast-Moving Consumer Goods (FMCG) companies in India is the sachet packing. The strategy literally exposed the product to a whole new demographic. The affordability of sachets made it available to millions of people in the country. The components of marketing management are:

Tracking consumer behaviour
Marketing mix
Estimating price of the products
Marketing mix
Conducting marketing research
Coming up with promotional and advertising strategies

Functions of management

Functions of management are quite a debatable topic on the internet. There are several management theorists, who came up with their own set of functions of management. According to them, a management requires a set of functions for smoothly conducting their business. The most popular acronym for the function of management is POSDCORB. It stands for Planning, Organising, Staffing, Directing, Co-ordinating, Reporting, and Budgeting. It gives a systematic framework that aids a business to ensure maximum efficiency.

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Good management is the art of making problems so interesting and their solutions so constructive that everyone wants to get to work and deal with them.

- Paul Hawken

The 14 Principles of Management

Henry Fayol is known as the ‘father of modern management’. To regulate and organise the internal activities of an organisation, he came up with a set of 14 principles of management. Each of the principles mentioned below can be applied to any and all levels of management –

Division of work

Division of work simply means segregating the work and assigning tasks to the employees on the basis of their specialisation. In a bank, you will always see that each employee is given a specific task and section to handle. This ensures that an employee can lay his full focus on the task assigned to him. Division of work increases the focus of an employee, leading to better productivity, accuracy and overall efficiency.

Authority and responsibility

Authority and responsibility are the principle that goes hand-in-hand with each other. Using his authority, a manager allocates tasks to his employees. However, he is responsible to get the task done from his employee as well. The performance of subordinates is impacted on how a manager handles his authority and responsibilities.

Discipline

Discipline is needed in any sphere of life where you wish to achieve something. Discipline is all about being consistent. In order to have a healthy work culture, discipline is needed on both ends- the managers and the subordinates.

It is not the goal that is a game changer. All the runners in an Olympic running race have the same goal to win the gold. However, what separates the winner from others is his skill set and discipline. As Swami Vivekananda rightly said, ‘The whole point is to discipline the mind.’

Unity of Command

Unity of command simply means that an employee should be answerable and accountable only to one manager. This helps in avoiding conflict and confusion that may arise by receiving multiple directions from different managers. As the popular saying goes, ‘too many cooks spoil the soup.’

Unity of Direction

Unity of direction means that the managers and the subordinates, all those who are working on the same project should be on the same page. They all should be directed towards the same goal and be involved in the same plan.

Subordination of Individual Interest

The principle of Subordination of Individual Interest refers to keeping the interest of the organisation over and above your personal interests. Simply focus on the company’s goal rather than the individual ones. This works exactly like the theatrical play, where the overall play matters more than the individual performance.

Remuneration of Personnel

Money is a huge motivator, be it an employee or an investor. The principle states that the remuneration should be such that an employee and an employer both are content with it. For an employee, it is all about getting paid well for his efforts. For an employer, it is about getting his money’s worth.

Centralisation

Centralisation is all about striking the perfect balance between hierarchy and division of power. It is all about making decisions that are not biased and neutral in nature. Centralization is subjected to the size of an organization; bigger the business, bigger the chain of hierarchy.

Scalar Chain

Scalar Chain is the principle that promotes clarity of authority. The scalar chain model indicates there is a clear line from the subordinates to the highest management. The clarity helps the employees to be aware of their hierarchy and whom they are reporting to.

Order

Order is having things arranged in an optimum manner. Be it products, people, or activities, having an order generates better results. An order works in favour of the company and also those who are working for it. It sets a positive and standardized tone of getting things done in an order. Just like most of us have a set way of style in ordering food at a restaurant. The usual drill being first the tasty starters, then the filling main course and we do always have a room for dessert, right?

Equity

Equity here neither refers to the capital of your business nor has anything to with shares. Here, equity is basically equality. It simply means treating everyone with equal respect. It discourages employees and owners from behaving in an entitled manner. Instead, it encourages them to connect with each other on a human level.

Stability of Tenure of Personnel

Job security is one of the key factors that any employee looks for while applying for a job. Having job security takes the stress-off an employee’s head and allows him to focus on his work. That is the reason why even though freelancing is a pretty lucrative career these days, most people opt for a stable full-time instead due to the volatile opportunities.

Initiative

A good manager walks with the employees rather than ahead of them. Encourage your employees to take initiatives by creating an environment where they can voice their opinions. An enthusiastic and dynamic culture will get the employees more involved and encouraged.

Esprit De Corps

There is no ‘I’ in the team. Working together as a team creates an uplifting and motivating environment. The unity of an organisation can be one of its biggest strengths. Communicate openly and focus on group achievements rather than individual strengths unity.

Management is all about an entrepreneur’s vision. We all are managers of our own life. Knowing the above elements and key areas gives us a better understanding of management. Applying the principles and functions of management in your business will only make it more efficient and successful. Your leadership skills and management skills as a business owner will impact your business the most. Read our article on ‘leadership’ to know about its impacts on an entrepreneur’s journey.

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PEST Analysis: Market Research for Businesses

Aakash Sharma — Thu, 24 Dec 2020 12:25:10 +0000

Precise planning and calculation are necessary for undertaking any task- PEST Analysis

Precise planning and calculation are necessary for undertaking any task, be it going on a road trip or starting a new business. And for planning, some tools always come in handy to give the best possible outcomes. This method can be used to examine the situation you might find yourself in the future and attain a decision in a particular time frame. One such tool that is extremely important for planning any business, or in fact, for any activity that can be deemed necessary is PEST Analysis.

Let’s get into the details of what PEST analysis, how to do it, and how it benefits you in setting up your business.

What is PEST Analysis?

Let’s make it clear in the very beginning, PEST analysis has nothing to do with the harmful animals and plants that are often found on grasslands and farms. PEST is an acronym that stands for Political, Economic, Social, and Technological factors that an entrepreneur must keep in mind while setting up her/his business. These factors are critical to be analysed as these have decisive power of influence over any business’s organizational decision making and running.

Similar to PEST analysis is SWOT analysis – it is the analysis of Strengths, Weaknesses, Opportunities, and Threats of a business.

PEST analysis is done as a part of an external examination when conducting a strategic market analysis or research. It takes into account the various macro-environmental factors that need to be considered for a company. In simple words, it is a strategic tool to understand market growth or decline, business conditions, operational potential, and direction.

Components of PEST Analysis

As mentioned above, PEST is the acronym for the political, economic, social, and technological factors of the business industry. Naturally, these four elements form the components of the analytical process. They are explained below:

Political

In political factors, the government’s intervention in the economy and functioning of businesses is considered.

For example, political issues that impact businesses primarily include tax policies, labour laws, environmental laws, trade barriers, taxes, and political stability.

Political matters may include goods and services that the government intends to provide or provide. Moreover, government policies also impact a country’s health, education, and infrastructure industries.

Economic

Economic factors affecting a business majorly consist of economic growth, exchange rates, inflation and interest rates. These factors have a plausible impact on the functioning of businesses work and their decision-making processes.

For example, interest rates affect a company’s capital expenditure and its growth and expansion. Exchange rates can impact the value of exports and supplies and the value of imports.

Social

Social factors include facets of cultural and moral awareness, population growth rates, age limits, occupational outlooks, and safety protocols. Strong trends in social factors affect a company’s demand for its products and business.

For example, an aging population could mean a smaller and undesirable workforce, which will end up increasing labour costs. Moreover, businesses adopt different management strategies to keep up with emerging societal trends, like increasing racial and gender diversity in the workplace.

Technological

Technological factors comprise technical aspects that impact a company’s activities like R&D, automation, and technological transformation.

For example, technological changes in an industry can affect a company’s existence in the market, the minimum level of costs, and influence the hiring decision. Technological changes also impact costs, quality, and innovation in a business.

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The best part about the PEST analysis is that it doesn't require anything that you can't find sitting right on your study table-a pen and a sheet of paper.

Why is PEST analysis critical?

As we have already established, immense planning and analysis go into setting up a business. And a plethora of parameters need to be checked off the lists to ensure a safe, reliable, and impactful landing of a new business in the market.

And, well, PEST analysis is one such tool to help in the process because it:

Helps assess the suitability of your business strategy for the wider environment and stimulates strategic thought process,

Considers all external impacts affecting your organization,

Pushes for a more transparent and more insightful decision-making process, and

Enhances the planning, marketing, organizational transformation initiatives, sales and development, project management, and research methodologies.

As PEST analysis gives a greater understanding of your company and business proposition, it leads to more effective long-term strategic planning. It leads to heightened attention to potential threats and dangers while providing insights for valuable business opportunities.

Political Factors

(Politically influenced factors that could impact the store)

Municipal Permissions
Opening/Closing Timings
Goods Delivery Permissions
Permissions for selling particular goods (essential medicine, liquor, etc.)
Environmental impacts by your store (if any)
Funding for your opening your store
GST rates and policies

Social Factors

(Social dispositions, behaviours, and trends that influence your organization and target market)

Business contribution to the community
Employee health
Leisure time for labourers
Customer relations and general behaviour
Trends and awareness
The sensibility of community ties
Population in the area

Economic Factors

(Overall economic forces that could impact your business)

Growth rates
Seasonal business
Demand in the area
Labour costs
Raw material costs
Capped monetary investment

Technological Factors

(Technology that can impact the way you produce, distribute, and market your products and services)

Competitors technology
Online transactions
Telephones and communication
Automation
Email services to customers
Digital Presence (website/application)

These are just examples of what might impact retail stores’ setting in the political, economic, technological, and social senses.

After you have done the PEST analysis, you need to ask the right questions that originate out of each of the four columns:

Political Factors: What is the government’s policy or political party that can hamper or boost your business? Is the political climate stable, or will it change?

Economic Factors: What financial factors will affect your business in the future? How are you doing financially now? How does this affect sales and prices?

Social Factors: How do customers believe, value, and relate to your sales practices? What role do cultural rules and human behaviour play in your business?

Technological Factors: What technologies and inventions are available or ongoing? How will this technology impact your business?

You need to analyse and consider the PEST analysis outcomes and plan with the possibilities of how potential changes are affecting the company in the future.

To get the most out of PEST analysis, you should collect suggestions and reviews from multiple sources and people. Gathering other people can be difficult, inconvenient, and expensive when you work with a large or dispersed team. Various technologies, such as video conferencing, networking, and brainstorming platforms, can help address these challenges.

Who can use PEST analysis?

PEST analysis can be used for any business or even event management purposes. As it helps establish the external factors that could impact decisions, it gives a detailed overview of a fool proof plan.

It can be used by new businesses, as shown in the above example. It can, and is, also be used by conglomerate companies that produce a wide range of products, like Reliance Industries or Disney, to maintain inter-departmental coordination and research for further growth. College students can even use it to organize fests and events to understand better the impacts of such events on society, the college, and the students.

You can also use it to analyse an organization’s internal structure to identify strengths and weaknesses in the company’s internal law, economic outlook, climate, and technical framework. The results of this analysis may facilitate change or adaptation in areas considered below average.

Thus, PEST analysis can be used at any organizational level in any suitable scenario.

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PEST can be used to analyse an organization's internal structure to identify strengths and weaknesses in the company's internal law, economic outlook, climate, and technical framework.

Applications of PEST Analysis

After the process is completed, the application is a critical part of the procedure. You can use PEST analysis to identify and utilize existing business environmental conditions. It can also identify current or future challenges to plan on how to manage these challenges effectively.

PEST analysis can be combined with other business strategy analysis forms, such as SWOT analysis, to obtain more complete results. Comparing these completed analyses provides an excellent foundation for making correct decisions.

Shortcomings & Limitations

Depending on PEST factors’ dynamic nature, many of the elements analysed can change within an hour or a day. Some factors are based on assumptions and may not be accurate. The data collected is too large; it must be used with caution. Its accuracy cannot always be ascertained again because it is obtained from multiple outside sources.

Nevertheless, PEST aspects impact strategic business decisions like marketing activities, product development, and research projects. And the analysis helps entrepreneurs make better business decisions and improve efficiency by studying the factors that can affect their business.

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Project Management in the Modern Workplace: Building Towards Something Better

Kiran Kennedy — Wed, 23 Dec 2020 03:18:06 +0000

Ever hear of the ‘Seven Wonders of the World’? Well, you know that most of those are man-made, that does not take away from the wonder of it, rather, it adds to it. There was a time in history, long ago, when we did not just build office complexes and skyscrapers. There was, in fact, a time where we built monuments to civilisation and human ingenuity with nothing but the most basic of tools and our bare hands. How was this possible you ask? Simple; we were great at project management. It may seem like a term to be thrown around the office, but it is much more than that. It lives in our DNA; it is who we are. We build things together; we always have and probably always will.

Understanding What Project Management Is All About

The definition of what it exactly means has varied over the years. The common origin is agreed to be one that originates in the 1960s, when businesses were looking to unify their workflow into something more compound and efficient – a project. Despite the different forms it has taken over the years, communication and collaboration are key elements in a project and essential to the project management approach.

If you want to get scientific about it, it can be described as a combination of practices or steps that have been taken to deliver a final work output. It is a scientifically-proven approach to executing a certain task or set of tasks for the business or a certain goal. It is not to be confused with running the business itself.

This modern-day definition allows it to include other theories and methodologies in parallel, such as leadership and management approaches. In fact, project management is simply a very niche management style that takes care of very narrow but important business functions.

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Though it may have its origins in business and science, it would serve well to keep in mind that at the end of the day, it all comes down to human communication.

What Is The Point Of It?

Like any other business model or management concept that was developed over the last two centuries, it was meant to increase efficiency, to be frank. This approach allows the upper management to have more control over the business processes and gives them a clear view of the goings-on.

As mentioned earlier, it is not the business itself, just bits and pieces, individual projects that together make up the inner machine of the company’s beast. In that sense, it is a tool rather than a full-on plan, thanks to its defined nature of having a fixed beginning, middle and end. A step-by-step guide if you will. In today’s economy, a clear-cut path to success is a valuable commodity.

Where It All Began

The concept of managing projects has been around since early civilisation and has contributed to many great monuments throughout human history. One such example is the construction of the Pyramids of Giza, an undertaking so massive in comparison to the level of technology available at the time that it defies reason. One thing that historians do agree on is that it serves as a prime example of what can be achieved if human beings get organised.

As for the modern rendition of project management, that was born around the 1950s. In 1956, ‘The American Association of Cost Engineers’ were formed and they formulated project management to help run cost estimates and schedules. Later down the line around 1958, the U.S. The Navy invented ‘Program Evaluation Review Technique (PERT)’. It was formed to analyse the different tasks involved in completing an overall project and the minimum time needed to do so.

This is as far as the early forms of the project management went, purely used for its efficiency in saving time and money, as well as some degree of coordination for tasks. Then in the 1960s, the moon landing happened – the first large-scale modern achievement of humanity. The successful execution of this brought people to the realisation that large-scale project management skills were a benefit to society.

With the advent of globalisation and technological development in the 1980s and 1990s, like e-commerce and the internet, it became much easier for businesses to readily integrate project management as a working principle in a more widespread manner.

The Different Phases Of Project Management

As a project manager, you need to ensure certain steps are taken in the setting up of the project and how it is going to be approached. Here are some of the building blocks and stages you need to address moving forward:

Initiation

Before starting, show your organisation and higher-ups that there is, in fact, a need for the project and that they will see a return on their investment should it be launched. You need to build a ‘business case’ – a fancy term that tells them why the project is needed and do an assessment of the project in terms of the cost needed to achieve the goals.

Planning

This is where you make sure you have all the schedules, payment systems, communication modes and reporting formats are laid out for easy access after the launch. Make sure that you have the funding ready and in place before-hand.

Execution

Getting started on the project won’t be easy. You will have to track and assign tasks to team members and different departments, do all the paperwork and account for any initial slip-ups. Call it, ‘growing pains’ if you will.

Monitoring & control

Just observing and fixing problems over the duration of the project. It is just maintenance if you think about it.

Close

Once the goals of the project are achieved, plan the next one. Project management does not end with one project, it ends when the business has what it needs. This could mean multiple projects.

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Project management is a role of supervision and dialogue, It is not a dictatorship.

Best Practices For The Best Chances

Communication

In business, it is never a monologue, or rather it should never be like that. Yes, there needs to be a hierarchy in the company but keep in mind that your employees have just as much invested in the company. Keep the channel of communication open for any and all feedback from your team. It not only brings a sense of equality and involvement in the business, but it also helps you identify which are the weak spots in the workflow that you need to fix.

Analyse

Going over your initial plan and revising it over and over, for the course of the project benefits the end goal as it refines the quality of work. This is where all that feedback is helpful. Another good way to do the analysis is to make use of tracking and business management software. There are so many on the market these days and they need only the basic understanding of technology.

Flexibility

If you have ever worked directly with the clients in your line of work, you know what it is like. Some tend to push for an earlier deadline, trying to save money and time, but all it ends up doing is affecting the result and the quality of the process. Push back against premature deadlines, as a project manager you have to maintain that quality till the end. Convince your clients to try to be a little more flexible so that the project can happen as it is supposed to.

Goal setting

Set realistic goals when you start a new project. Don’t try to overachieve. If there is time later down the road, you could attempt something more. It is best to avoid overwhelming your team right out the gate as this can put unnecessary pressure on them. Goals should be set as an indicator, not as a work instruction. Not every step of the work process has to be micromanaged, so long as the final result is on track to be completed.

Using IT

Make full use of the digital and IT resources at your disposal. The IT department has the best understanding of the business’s layout and how the project fits into it from a digital and technological standpoint. Rely on them to regularly assess your efficiency and allow them to automate as much of the project as possible.

Remember, these are just broad guidelines as to what you might want to consider doing, but as the project manager, it is your call. That said, there are a million ways in which management can be done, but only a few ways in which it can be done right. Check out our article on ‘management’ to learn how to be all that you can be in business.

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Porter’s Value Chain: How to Get Ahead of the Competition

Kiran Kennedy — Wed, 23 Dec 2020 02:27:32 +0000

You probably have a favourite restaurant or maybe even a specific snack that you like to enjoy from time-to-time – a guilty pleasure. The fact that you keep going back for more means that you find value in that snack or restaurant. This sense of product value is essentially what ‘Porter’s Value Chain’ boils down to. It is the value that your business can provide to the customer. It is not as complicated as it seems, so don’t be afraid. Let’s get into it.

What Is Meant By ‘Value Chain’?

Going in search of these answers online can be quite overwhelming. The ‘Value Chain’ seems like a very complicated term, but it is quite simple. Porter’s Value Chain is a business tool and model that was devised by American economist Michael Porter, in his book Competitive Advantage (1985).

It is essentially a model that companies use to measure the competitive advantage that they have in the market. This competitive advantage is measured by looking at what kind of value the company brings to the table. The higher the value a company can bring, the more competitive advantage it has over other businesses. The results will be higher profits, which translate into growth for the company.

Why It Is Needed And How It Helps

Porter’s Value Chain Analysis has a unique approach. It focuses on how the different components across the company interact and benefit the customers rather than how the departments themselves work. It is very customer-centric in that way and keeps the focus on what really helps a company grow – the customer.

Additionally, it also helps make it clear which areas in the company are lacking efficient performance standards and consequently lacking value in those departments. This allows you to catch it early on and nip it in the bud. Simultaneously it also helps you identify which areas in the company’s performance could be improved to maximise the added value of the product.

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The quality of a product can be directly linked to the value it brings to the customer as well as the cost and efforts that go into making it available to them.

Porter’s Value Chain Activities Explained

The model, as stated earlier, calculates the value that the product brings the customer and the profits made from it as a result. The profits can be calculated by looking at the total cost of production subtracting that from the price of the product. This value is derived from the nine activities that a company engages in, to add value to said product. The activities that help determine all this are divided into two categories, ‘Primary Activities’ and ‘Secondary Activities’.

The primary activities are directly involved in the production and selling of the product. The secondary activities are supporting activities that coordinate the process across the different primary activities. This ensures a smooth and seamless workflow that maximises efficiency.

Primary Activities

Inbound logistics

This basically refers to the relationship that companies have with their suppliers – the networks through which they receive their raw materials. It also includes the receiving of goods, storage and the internal distribution within the production unit of the company to begin the production process.

Production/Operations

It is the manufacturing stage of the process where the goods are produced. This is where value is added. For example, a hand-crafted leather wallet is much more valuable than a mass-produced leather wallet.

Outbound logistics

Once you have a birthday present ready, you want to wrap it perfectly and make sure it is delivered to your friend on time and safely. This is what outbound logistics is. It is everything to do with packaging and getting the finished product to the customer. This means shipping, storage, transport and distribution to the different stores or points of sale.

Marketing and sales

This stage revolves around informing the customers about the product and helping them find value in it. Once they buy the product, the next step is to provide post-purchase services.

Service

This is just helping your customers after the sales stage. This could be maintenance, customer helplines, customer service, and online/offline consultations. Service is keeping the customers happy.

Secondary Activities

Procurement

It performs the function of purchasing things for the business. Not necessarily the physical raw materials. It supports all the primary activities across the board. This may include arranging transport, the purchase of machinery for the production of the product, or even buying the actual office space for sales operation.

Technology development

Tech development is basically developing the quality of operations in the company, for example, better IT infrastructure, improved ERP (Enterprise Resource Planning) systems, better planning and development tools used among the various departments in the company for seamless workflow.

Human resource management

The HR management concerns itself with activities related to developing and improving the workforce within an organisation. It overlooks the hiring, staffing, training and compensating employees.

Company infrastructure

It gives a business the ability to maintain the day-to-day operations, it is the management, the administration, the finances and even the building itself. It’s an umbrella term, which supports both the primary and secondary activities.

Putting The Value Chain Analysis To Use

Before adopting the value chain model, you need to check if it is required in your company. This helps you identify where your company currently stands, what areas are lacking, and how it is possible for the VCA to be adapted based on the current situation. A thorough look at the business’s existing protocols is essential if you want to successfully implement the VCA for a long period of time.

When it comes down to actually using it, there are a few steps to take to ensure the long-term survival of the business. The price that the customer is willing to pay for the product, should be higher than what it costs to make it. This should be a rule of thumb if a profit is to be made. You need to regularly analyse and update your approach if it is lacking in any areas. This helps the company maintain that competitive edge.

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Your product should be so good or so convincing that customers should be willing to pay more. The model itself is just a metric of measure that keeps an eye on things, the rest is up to you.

To Use Or Not To Use Porter’s Model

Like any business practice, there are benefits and downsides to adapting a new work model. In terms of advantages, it offers cost reduction, a competitive edge, increased profitability, increased efficiency, reduced waste of time, and high-quality production capacity at low costs. On the downside, the model was crafted based on companies in the 1980s, making it a little outdated to work with and rigid in terms of application.

Porter’s Value Chain is a very linear structure and doesn’t really allow a company to make sudden changes should the need arise. This takes a toll on the creative freedoms and capabilities for change within the company. A business, in this day and age, needs to maintain flexibility and innovation for today’s customers. While the model does not necessarily give much room for innovation, it does have its strengths in terms of helping the business turn a profit and stay ahead of the curve. If you were to implement it, use some discretion and make an informed decision.

Let Us Wrap It Up With An Example

A company who provides auto-parts has recently adopted the VCA model. It would need to look at the different Primary and Secondary activities. It starts with inbound logistics to source the raw materials and then move to the operations phase for manufacturing those parts. Next, outbound logistics comes into play where they ship them to market. In the marketing and sales segment, they sell the parts to the customers. If there is anything wrong with the parts, the customers could then choose to get those parts fixed by the auto-part, from which they bought it – this comes under services.

The secondary activities help support the primary activities through management, finances, infrastructure and salaries. Secondary activities ensure that all the infrastructure is provided for a smooth operation throughout the company.

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Human Resources Management System (HRMS)

Aakash Sharma — Tue, 22 Dec 2020 15:06:37 +0000

For the smooth functioning of any organisation, an impeccable system is required to manage and organise the most valuable assets of the company-its employees.

Just hiring a team of human resource professionals is not enough. What completes the human resource management process in any organisation is a team of professionals that is well equipped with an easy to use, latest and productive platform which can assist them in managing the intricacies of an organisation’s human capital. And that platform is called a Human Resource Management System (HRMS).

What is a Human Resource Management System?

Human Resource Management System, commonly abbreviated as HRMS, is a software tool that assists in managing the human capital of an organisation and is a tool for the HR department of any organisation. HRMS has modernised the traditional management strategies as it has brought all the key functions of HR management, like managing wages and salaries, vacations, presence, personal information, perks, etc. under one roof.

What is the need for an HRMS?

HRMS simplifies the work of the HR department and improves its efficiency manifold. For instance, before HRMS, the HR department of a company used to get overburdened with employee complaints. With HRMS, employees can express their concerns and submit them directly to relevant departments using the HRMS tool.

This not only improves the communication process but also counters other hassles like privacy concerns. Employees who work remotely or off-site can also update their work status and other concerns using an HRMS tool due to the sheer simple user interface of the tool. It goes without saying that HRMS helps in improving employees’ work efficiency and capacity, as well as the productivity and profit of an organisation.

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For the most suitable HRMS module for your business/company, you need to chart out your requirements.

HRMS is nothing short of a boon for human resource professionals. HRMS eases and enhances the ways HR professionals hire and retain talented people, helping a company grow significantly. It is worth noting that the role of HR departments is not just restricted to the management of employees, but is associated with boosting employees’ motivation. And HRMS enables them in doing so by giving detailed performance analysis of employees, and their strengths and weaknesses which can be further worked upon productively.

Moreover, HRMS is a very secure and personal tool. Only the administrators in a company’s HR department have full access to sensitive data, thus limiting the scope of any privacy breach in the sensitive data of the company as well as the employees.

Components of HRMS

1. Recruitment Module

Recruiting employees with a variety of skills and competencies is an important task. The HRMS recruitment module provides all the important recruitment procedures in compliance with general rules and authorisations. It can also build a pool of talent that can be searched for suitable candidates as and when there are vacancies.

Features of the recruitment module in HRMS include:

Special channels for different roles

One-click job posting and job descriptions to various job positions

Automated review process, including scheduling interviews

Follow up with candidates

Resume parsing

Analysis of indicators and criteria for candidate profiles

Mobile application

Social media interface

Digital offer management

2. On-boarding Module

Once a new employee is hired, he or she needs instructions about the role and the organizational process. In this process, HRMS significantly reduces the workload for managers and staff groups as new employees are introduced to the nitty-gritty of the company, like organization strategy, motto, peers’ user accounts, respective departments, etc., using the HRMS tool.

On-boarding module features include:

Pre-first-day preparation

Simple (paperless) user record setup

Providing valuable information about the company and key employees

Automatically schedule important meetings

Meet the legal requirements

Goals setting for the trial period

3. Performance Management Module

Performance management of employees includes reviewing documents, tracking goals and objectives, professional background, standards of practice, and/or other relevant topics.

Performance management module features include:

Setting and maintaining goals

Scheduling meeting and reviews

360-degree performance analysis

Current feedback tool

Collecting big data for a better picture of individual metrics

Talent management and heritage planning functions interlinking

4. Administration Module

Management and administration primarily amount to providing timely information and necessary assistance to employees for making the right choices in a professional workspace. This module assists in tracking attributes like employee benefits, healthcare and pension/social security packages, and any financial engagements.

Features of an administration module include:

Online registration

Automatic registration of enrolment options and information

Plan comparative tools to take into account employees’ personal financial situation

Automatic control of events and their management

5. Workforce Management Module

Workforce management (WFM) is a set of processes that a company uses to improve the productivity of its employees. WFM includes effective forecasting of business needs, scheduling recruitment and management to perform specific tasks on a daily and hourly basis.

Workforce management module features include:

Scheduling and administration

Monitoring work progress

Management dashboard with real-time data and metrics

6. Time and Attendance Module

Combined with payroll accounting, time and attendance module is one most efficient job in HR automation. These systems often include biometrics to avoid proxy attendance and are directly linked in the workforce management module via informational links to payroll and accounting software.

Time and attendance module features include:

Attendance monitoring

Clock management

Biometric system

Remote efficiency for mobile employees

Law compliance

7. Absence and Leave Management Module

This module also is often associated with time and attendance, and management functions module. This module is an automated way to assign, reserve, approve, track, and monitor any absenteeism in the workplace.

Leave application can be for different reasons, including any compassionate cause, illness, parental leave, etc. The application and approval processes are streamlined and the results should be included in the team’s schedule where required.

Absence and leave management module features include:

Request for self-service leave

Work schedules, working time and presence functions

Account Management to track vacation time and usage.

Measurements and analyses, including levels and trends of leaves

8. Learning and Development Module

Using the outcomes of the performance management process as the basis, this module creates a unique staff training plan, schedule, and practice (for courses and other learning opportunities) and assists in managing the assessment and response steps.

Learning and development module features include:

Training portal

Training recommendations related to roles, skills and career aspirations

Independent customer training scheme

Goal setting and management

Competency range links

Effective management of training (reduction of additional resources)

9. Talent Management Module

This module is designed for focusing on identifying potential individuals and helping build a talent chain that deals with specific roles and heritage planning. The links between employment, training, development and activity management are continuous.

Talent management module features include:

Final planning board

Consistent plans with the business goals

Identifying the business process and plans for each event

Integration of important meetings

Reward milestones

10. HR Analytics Module

This module is integrated with almost all other modules to provide HR analysis and reporting functions (mainly in the form of HR indicators and measurement libraries) to the teams easily. It also provides insights and predictions by analysing data collected by HRMS (and other business systems) to guide the organization’s business plans.

It is important to remember that some of these models might overlap in some HRMS tools. For example, benefits management might fall under the payroll banner. In some tools, payroll itself might be an independent HRMS module.

How is HRMS beneficial for employees?

Firstly, HRMS provides the option of self-service, thus making employees’ access to their personal records and details just a click away.

Maintaining accurate information about employees is clearly the most important aspect of any HRMS module. These important pieces of information usually include:

Name, gender, date of birth, contact information, phone number, email ID, etc.

Preliminary employment information

Information about the current department, location, level, reporting manager, etc.

Payment and legal information, such as PF number, ESI number, PAN income tax, etc.

In addition to the above, HRMS also stores information about employees such as passports, visas, company names and assets. Ensuring that accurate and up-to-date information for employees is kept is one of the most important tasks of the HR department and HRMS makes the task easier for both employers and employees.

How to find the right HRMS?

Before beginning your search for the most suitable HRMS module for your business/company, you need to chart out your requirements. Draft your necessities, list the features you require, and try matching them with the functionalities that a prospective HRMS Software is offering.

This quick and detailed checklist will help you in figuring out the right HRMS for your organisation:

Create a strong selection team with different partners

Identify gaps in the current staffing process and clearly plan your needs

Make a complete list of selected features and other features

List of applicants for suppliers who meet the main requirements of your HR processes

Gather more information about the list of suppliers in the list of candidates

Sorted the list of suppliers based on business preferences (cost, time limit, etc.).

Undertake vendor demo software and get to know about their customer reviews and profiles

Ensure that the price or license fee is transparent

Ensure that future business needs are met

Use the data collected so far to make an informed final decision

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HRMS is an automated way to assign, reserve, approve, track, and monitor any absenteeism in the workplace.

An ideal HRMS for your organisation must comprise the following features:

Centralized management system

Cloud-based files

Latest features of mobile applications

Employee self-service options

Real-time analysis

Information security and audit records

Role-based visits and collaboration

Updated and agile integration

Conclusion

It can be concluded that choosing the best HRMS is not easy and straightforward, but it must be done correctly. While there are many HR tools that offer many features, it is really hard to find the best ones. With good research, you can find an HRMS that will ease up your organizational functions and smoothen the workflow.

Always choose the HRMS that best suits your purpose, which is eliminating the need for individual applications and data integration infrastructure between applications and you to seamlessly share and retrieve information across the organisation.

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POSDCORB: The Circadian Rhythm of Business

Tanisha Achrekar — Sat, 19 Dec 2020 04:41:33 +0000

We can simply say that in today’s world, management goes much beyond top-rung managers or company CEOs ruling with an iron fist or overworked teams compelled to hit the targets every time. Instead, it is all about strategies which ensure efficient operations, sustainable team performance and keeping alive people’s motivation for growth and success. It is easier said than done, but it is quite achievable if all companies, big or small, follow the seven basic management functions – a systematic framework for running a business without a hitch. Many of us may have come across the widely used management acronym POSDCORB (stands for Planning, Organising, Staffing, Directing, Coordinating, Reporting and Budgeting).

In 1937, a social scientist, Luther Gulick and business thinker, Lyndall Urwick described seven major activities and duties of any higher authority of the organisation, in their paper titled The Science of Administration. Since then, the term POSDCORB has been used to describe the seven functions of management. Even though the term was coined decades ago, its application and significance stand the test of time. These functions were, are and will be used by businesses to get the maximum output of their resources.

Now, let us take a look at how these seven management functions help business operations and why they are so important.

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A manager sets objectives, organizes, motivates and communicates, sets yardsticks, and measures develops people.

- Peter Drucker

Planning

Failing to plan is planning to fail. Planning is the foundation of POSDCORB as any work you intend to do and it involves a lot of thinking involved. When you are planning, you are visualizing your goals, identifying the tasks to meet those goals, determining how you are going to do those tasks and preparing in advance to handle any possible setback. In a business environment, your personal, short-term plans must align with the long-term goals of the organisation.

We see examples of effective planning almost every day. A student appearing for UPSC might have planned her preparations years before the actual test, given the vast syllabus and difficulty level. Taking into account the days she will not be able to study, the success of this study plan relies on her time management and skill execution. Excellent managers always plan on how they are going to face any upcoming challenges.

Organising

Now that you have the blueprint, the next step according to POSDCORB is organising your resources to get maximum outputs. The set-plans are divided and allocated among different teams. The different departments of the organisation divide and conquer to ensure that the tasks are conducted as planned. organising gives a structure to the plan by breaking down the work, defining its scope and allocating it accordingly.

The example of organising is the sports days and annual days in schools. After planning all the events of the annual day, the teachers then have to select students for the performances based on their talents. Here the teachers act like managers and have to assign the right student to the right job. In this case, the job being singing, dancing, acting – If the teacher organises the annual day performances by assigning the acts to students whose talents best suit said act, the annual day is bound to succeed. The same thing applies in an organisation, where after defining activities, responsibilities are distributed and duties are allocated.

Staffing

Unlike self-driving cars, people or human resources with specific skills are required to carry out specific tasks to fulfill organisational goals. Staffing is focused on bringing hiring the best people to get the job done. If you have more than required people, over-staffing will lead to wastage of your resources. On the other hand, if you are under-staffed, achieving organisational goals can get difficult. Staffing is also about hiring qualified staff for skill-specific job roles. Recruitment, selection, placement, training, development and remuneration are all a part of the staffing function.

An evident example of insufficient staffing is the Government bank counters. During rush hours, people dread standing in huge lines. It has been a prevalent problem of under-staffing or even inefficient staffing. With the advent of digitalization, online banking has solved this issue for a lot of people but not eradicated it. Since most of India still opts for going to the bank instead of doing things online.

Directing

Directing, in a nutshell, is setting the tone of how work is done, oversee and handhold. It is having efficient communication with the workforce by motivating and inspiring them. A manager has to ensure that he unleashes his team’s maximum productivity by tapping to the fullest potential of his employees.

The way a manager directs can make the work environment better or bitter. Directing is about supervising the work of your employees, monitoring their performance, communicating in a supportive manner, motivating them to face challenges and mainly leading by example. An effective manager uses the principle of directing by working along with his employees rather than ahead of them.

We come across different ways with which parents handle their children. The parents here act like managers while handling the children. Their directing skills are put to test every day while getting their homework done, ensuring they eat their food, or simply not hurt themselves.

Co-ordinating

They work in sync, in tandem, so that no one is out of the loop and every cog is doing her job. Co-ordinating is the management function of POSDCORB that ensures all the teams of an organisation are on the same page. Different teams of the organisation are always interdependent on each other to get the end goals accomplished. Synchronizing the responsibilities of various departments and employees is vital for stable functioning.

In the festival of Dahi Handi, pyramids are formed to break the pot of curd, money and butter hung on the top of any structure. A business operates similarly where there are different departments, all working towards the same goal. In Dahi Handi, if all the tiers of the pyramid are well-coordinated, the goal of breaking the pot is achieved. If not, the pyramid collapses and the pot is a distant dream. Coordination in a company works similarly – the more synced it is, the better the chance of success.

Reporting

Reporting is about accountability and work progress. It makes the communication of an organisation more transparent and integrated. It also helps in having written data of the past, on the basis of which the company can plan their present and future actions. Weekly and quarterly team meetings highlight the present functioning of an organisation.

We have been seeing reports since we were kids. The report cards that we dreaded after every exam in schools and colleges are a classic example of reporting. Also, attendance records, the school fees receipts and calendars denote a form of reporting.

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Those who plan do better than those who do not plan, even though they rarely stick to their plan.

- Winston Churchill

Budgeting

A business runs with the intention of making profits. Budgeting is allocating money, workforce, raw material and time to different tasks. A predetermined allocation helps in understanding the resources required to accomplish a task. Budgeting is a part of POSDCORB that helps in gauging an estimate of how many resources are needed and to avoid any excess or waste of it.

Most people who grew up in an Indian household are no stranger to the concept of budgeting. Since we were kids, we have seen our parents drafting a monthly budget for our house. The budget is planned according to the paycheck that comes on the first day of the month. An estimate of household expenses, everyday expenditures and savings help keep the track of money and avoid any reckless spending.

Theories parallel to POSDCORB

Apart from the popular POSDCORB, there are several other theories on functions of management. Several theorists came up with their own combination of management functions, which according to them a business needs to function optimally.

Henri Fayol’s 5 five functions of management

Henri Fayol was the first to classify management activities into specific and detailed functions. He is also known as the ‘father of modern management’. Henri Fayol established the five functions of management in his book, “Administration Industrielle et Generale” in 1916. The five functions of management according to Fayol were planning, organising, commanding, coordinating and controlling. He stated that these functions are universal in nature and are being practised by managers in everyday work.

George R. Terry

George R. Terry wrote a book, “The Principles of Management” in 1968. Terry stated that there are four functions of management – planning, organising, actuating and controlling. He also theorized that each of the four key functions solves a specific question of the management.

Harold Koontz and Cyril O’Donnell

Harold Koontz and Cyril O’Donnell published back in 1976, an essay, “Management: A Systems and Contingency Analysis of Managerial Functions”. They believed that the previous principles of management could be more detailed and specific. They came up with the five functions of management – planning, organising, staffing, directing/leading and controlling.

The several theories on functions of management find their relevance and applicability even today. This is because they revolve around the core human behaviour and managing people. These functions act like a lighthouse that helps you reach the shore of your business goal. If these functions are used efficiently, handling of the elements of management becomes easier. To know more about the elements of management, check out our article, ‘5Ms of Management ’.

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