Bulletin of Research Developments September 2015

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From Editor in chief's Desk

Research Articles

Vol. No. 5 September 2015th

2 3

Bulletin of Research Developments

Employee's Job Satisfaction in Tamilnadu State Transport Corporation.

S.Subendiran 05

Transformation of Organization through TQPInscribed by Novel Technique

Prasad Srinivasan 10

AnAnalyticalApproach at Critical Chain Project Management

S.Jothinathan 14

AnAnalysis of Bank Sector Functioning During Liberalization

Anup Varghese Cherian 28

AnalyticalApproach of Psychological Stress of the Building Construction Workers

Babu.M 40

Web Technology in Electronic Customer Relationship Management

(With Special Reference to the Consequence of Computerized Consumer

Relation on Client Satisfication a Study on Web Banking in India) Shamik Palit 53

Bulletin of Research Developments Vol.2, No.3, (5 September 2015)th

Employee's Job Satisfaction in Tamilnadu State Transport Corporation.

S. Subendiran.

Abstract

Keywords

Introduction

(M.Com., M. Phil., M.B.A., PGDCA,)

Assistant Professor, Department of Commerce (SF)

Arulmigu Palaniandavar College of Arts & Culture

Dindigul Road, Palani - 624 601

[email protected]

Job satisfaction is one of the most widely plays vital role in the field of organizational behavior and the

practice of human resource management. It occupies an important place in such disciplines as

industrial psychology and organizational communication. Job satisfaction has a rich history in the

management literature. Research shows that job satisfaction is related to important work-related

outcomes such as organizational commitment. Job satisfaction is of tremendous significance in the

study of organizationalbehavior. An organization having satisfied workers is a healthy one and has a

fewer problems. It is believed and also has been proved by many research studies that job satisfaction

leads to high level performance. This is because a satisfied worker will not hesitate to put forth the best

in him in the performance of the work allotted to him. The job description of the Tamilnadu State

Transport Corporation is subject to revival. Sleep deprivation, work schedule and heavy work load

deployed especially at festival times are the vital factors correlated with job satisfaction of TNSTC

employees. A case was filed in August 2013 with the Palani Branch about drivers and conductors

being forced to work extra in transport corporations. The case is still pending before the court. Hence,

drivers' and conductors' levels of satisfaction is subject to an in-depth research. In view of this an

attempt is made to make a study on job satisfaction of transport workers in Tamilnadu State Transport

Undertakings (TNSTU).

Drivers, Conductors, Requirement, Training, Job Satisfaction and Job Enrichment

As job satisfaction is a dynamic, it can decline even more quickly than it develops. Organizations are

composed of individuals. Each individual is an island in himself/herself, subject to particular motives,

aspirations, perception and abilities. The behavior of each individual is influenced by several factors,

such as environmental factors, performance and individual development of an employee is based on

the extent influence of various factors on him.

The type of job which an individual holds leads to a significant influence on his behavior. When an

employee takes up a job in an organization, his behavior is influenced by various factors. A person

likes the job when he/she is satisfied with the conditions of the job and vice versa. Attitude plays an

important role in reflecting the satisfaction of the employee.


Statement of the Problem

Objectives of the Study

1. TNSTC driver Dhandayuthapani told Times of India that most of them suffered gastro-intestinal

problems due to unhygienic food and lack of sleep. “Sleep deprivation and eating out will first

affect the digestion system and most of us have ulcers and other diseases,” he said. Further,

trafficrelated leads to blood pressure, cholesterol and heart disease, he says.

2. S. Sampath, Joint Secretary, Transport Corporation Staff Federation, told Times of India that the

work schedule differed according to type of bus. The city bus drivers work in two shifts starting

from early morning at 5 to 11 pm. The drivers working in village operations work from after-noon

to afternoon, spending the night at villages. As the mofussil buses operate round-the-clock, a

driver completes the entire route between destinations driving up to 10 or 12 hours, he said. The

batch system which shifts the driver and conductor to different routes every six months was

slowly being abandoned, leaving the crew tied to particular routes for years together. It seriously

affects the health of drivers and conductors as well since their lifestyle itself is altered. Most

drivers suffer stressrelated diseases, Sampath says.

3. During each festival season, there is a heavy rush of passengers. At these times, Tamilnadu State

Transport Corporation (TNSTC) usually operates additional buses to handle the heavy rush

during festival holidays. Hence drivers and conductors are forced and deployed with heavy

workloads. As they are not spending their times with their family during these festival times and

burden on their job will them lead to work life imbalance to them. But there is no yard stick to

study the levels of job satisfaction of them and no method is very specific to identify the factors

influencing the job satisfaction of TNSTC's drivers and conductors.

Based on the above research problems, this researcher paper is about Employees' job satisfaction in

Tamilnadu State Transport Undertakings.

To study the levels of job satisfaction of Employees in Tamilnadu State Transport Undertakings

Only the drivers and conductors of TNSTC has been studied for this research paper. The nature of the

job is widely differ from other employees of TNSTC like technical staff, administrative staff and

others. A case was filed in August 2011 with the Palani Bench about drivers and conductors being

forced to work extra in transport corporations. The case is still pending before the court. Hence,

drivers' and conductors' levels of satisfaction is subject to an in-depth research.

Ø

Scope of the Study


Methodology

Statistical Tools

Hypothesis

This study is based on both primary and secondary data. For collecting primary data interviewschedule technique will be adopted. As it is a pilot study the sample size of the respondents has beenfixed as 50 and they have been identified randomly by using simple random sampling techniques.

Appropriate scaling technique has been adopted where ever the necessity arises

1. Simple percentage analysis

2. Chi-square test

H0 There is no significance relationship between age and work shift and rotation

H0 There is no relationship between nature of job and work life balance.

The following statistical tools have been applied for this study. They are,

1

2

Variable

Age

Level of

Education

Below -30

HSC

31-40

UG

41 50

PG

Up to 10000

Drivers

Above 51

Diploma

10001-20000

Conductors

Above 30000

20001-30000

10

30

20

10

10

5

5

30

10

10

5

20

20

15

20

60

40

20

20

10

10

60

20

20

10

40

40

30

No. of Respondents Percentage

Table 1. Socio-Demographic Characteristics of Respondents

Nature of job

Income

(per month)

Source : Primary data

The table shows that sociodemographic factors of Tamilnadu State Transport Corporationemployees. It revealed that 40 per cent of the respondents were at the age group from 31 to 40. It is alsosignificant to notice that 40 per cent of the respondents were having experience in between 11 to 20years. Most of the respondents (30/50) that is 60 per cent have possessed higher secondary level ofeducation. It is significant to notice that some of the respondents (5/50) that is 10 per cent were postgraduates. Most of the respondents (20/50) that is 40 per cent were under the income group of Rs.10,001 to Rs. 20,000. Some of the respondents (15/50) that is 30 percent were earn more than Rs.30,000.

8 Bulletin of Research Developments Vol.2, No.3, (5 September 2015)th

Table 2. Levels of Job Satisfaction of TNSTC Employee

Factors

Work shift andRotation

Salary and other

Medical check up

Work life balance

Highly

5

-

10

10

-3

-2

-3

1

-3

-1

-1

5

-0

10

-0

5

-2

-0

-2

1

-2

-1

-2

-0

-2

-3

-2

-3

-2

-3

-3

0

3

0

Satisfied

20

5

25

25

Neutral

10

20

10

10

Dissatisfied

10

15

5

5

Highly

5

10

-

-

Source : Primary data

Expected Frequency:

From the above table it is revealed that 20 respondents havesatisfied with their work shift and rotation

and 10 of them have dissatisfied with their work shift and rotation. It is also revealed that 15 of the

respondents have dissatisfied with salary and other allowances. It is significant to notice that 25 of the

respondents have satisfied with the medical checkup and medical camp conducted by TNSTC. Out of

the total respondents it is revealed that 25 of the respondents have satisfied with work life balance and

five of them dissatisfied with work life balance.

Ho There is no significance relationship between age and work shift and rotation

Table 3. Test of Chi-SquareAnalysis on the Relationship betweenAge and WorkShift and Rotation.

1

Source : Computed from Primary Data

df = (r - 1) (c-1) = (5-1) (4-1) = 12 Table value @ 5% level = 21.026

The calculated value (97.8) is greater than the table value (21.026). Hence, the null

hypothesis is rejected. There-fore, there is a significant relationship between age and work shift

and rotation.

Ho There is no relationship between nature of job and work life balance.

Calculated χ2 Value = 97.18

Result :

Expected Frequency:

Table 4 Test of significance between nature of job and work life balance

2


Source : Computed from Primary Data

Result

Calculated χ2Value = 70.83

df = (r - 1) (c-1) = (5-1) (1-1) = 4 Table value @ 5% level = 9.488

: The calculated value (70.83) is greater than the table value (9.488). Hence, the null

hypothesis is rejected. Therefore, there is a significant relationship between nature of job and work

life balance.

The study is based on job satisfaction of the TNSTC employees. The problems suffered the bus drivers

and conductors are attributed to the nature of work they are exposed and it is associated with the

outcome from their occupation. What is really required, is a comprehensive personnel policy, with

programmes for proper recruitment and training, enforcement of discipline improved working

conditions like better seats for drivers, better buses, better roads, improved promotion avenues

introduction of well-conceived productivity linked schemes for motivation it leads job satisfaction,

work commitment, job enrichment and performance. It is the management's role to supply initiative,

both initiative towards creating better conditions and the initiative needed to apply technical skills to

the attainment of higher efficiency and productivity.

Conclusion

References

Ø

Ø

Ø

Ø

Ø

G. Jegadeesan. 2007, Job Satisfaction: a Conceptual Framework, Journal of Organizational

Behaviour, Vol. Vi, no.4, Pp.58.

JArockiaraj, health was a major causes for concern”. Times of

India17 December 2011

http://articles.timesofindia.indiatimes.com/Palani/30528981_1_bus-drivers-tnstc-long-

routes1.html

Bindu Bhatt and Seema M.S. 2012,

Journal of Health Management volume no. 12(1), Pp.205.

Padmakumar Ram. 2013,

-Acase study from India Vol.2, no.2, Pp.32.

“Government Bus Drivers'

“Occupational Health Hazards: A Study of Bus

Drivers”

“Relationship Between Job Satisfaction Job Performance in

the Public sector”


Transformation of Organization through TQP Inscribed by Novel Technique

Abstract

Introduction

Corporate Management

Anatomy-Cheetah

Prasad Srinivasan,

Doctoral Student

Department of Management

Himalayan University - Arunachal Pradesh

Managing corporate is an art and science that involves managing people and tasks. Successful

accomplishment of the task and the overall welfare of the corporate are deeply rooted in the Total

Quality Management (TQM) through Total Quality People (TQP). In a dynamic environment too

much emphasis is given to manage a task than the people. The quality never limits to the quality of the

people when they are hired but how to keep them continuously creative, innovative, energetic and

result oriented.

Eventually, people become mechanical in churning out results like machines. Such results output may

not help the organization to be competent at all times. Modern management approach lacks the

“Biology” component. A total and complete biological approach is desirable for developing people,

enable and empower them and make them successful both from within and in the corporate

ecosystem.

To demonstrate above novel concept, a wild animal Cheetah is chosen as an example. Its behavior,

functional mechanism is reviewed thoroughly and discovered an analogy to corporate management

principles.

The present day corporate are dynamic and engaged totally in competing with its competitor than

being creative. During this journey to achieve/ retain top position, they make corporate ecosystem

highly sterile for creative talents to provide an opportunity to grow than being fertile to nurture and

support talents. As a result of the above in most corporate talents exists more in its physical form than

in the biological form. A biology component inclusion to the corporate management approach is

desirable to achieve corporate goal faster.

The objective of present study is to establish various management principles that are involved in

the evolution and the adaption amongst animals-Cheetah and develop them for use in corporate

management learning.

The name "cheetah" comes from a Hindi word meaning "spotted one" or from the Sanskrit word

"chitraka". An adult has yellow or tan fur with solid black round or oval spots measuring .75 to 1.5

inches (1.9 to 3.8 centimeters) in diameter.


High-speed locomotion is essential for the survival and success of many species for both prey capture

and escape from predatory attacks .The cheetah (Acinonyx jubatus) is widely acknowledged as the

fastest living land mammal, capable of speeds up to 29 ms−1 (Sharp, 1997). Through the examination

of the musculoskeletal anatomy of an animal it is possible to gain insight into its locomotor

capabilities.

The moment arm of a muscle is defined as the perpendicular distance from the joint centre of rotation

to the line of action of the muscle, which can vary with changes in joint angle (Landsmeer, 1961;An et

al. 1981; Spoor & van Leeuwen, 1992). Through measuring the muscle's moment arm we can convert

the linear forces of a muscle to rotational joint moments, which act to resist external forces and move

the limb. One of the major functions of locomotor muscle is to support the body weight of the animal

by resisting the ground reaction force joint moments during stance.

To support body weight, an impulse must be applied to the ground (during stance) that is equal in

magnitude to the product of the animal's body weight and stride time (Alexander & Jayes, 1978). With

increasing speed, an animal's duty factor (proportion of the stride that the feet are in contact with the

ground) decreases, and therefore to maintain the impulse required to support body weight, the peak

ground reaction force must increase (Witte et al. 2006). It is therefore crucial for high-speed predators

such as the cheetah to be able to generate large muscle joint torques to resist this force.

Another requirement of high-speed locomotion is the ability to swing the limb rapidly and reposition it

for the next stride. This is dependent on several factors: the limb's inertia (Lee et al. 2004), the internal

architecture of the muscles (a long-fibred muscle has more sarcomeres in series enabling it to contract

at a high velocity), and the muscle moment arms (a short moment arm enables greater changes in the

joint rotation for a given change in muscle length).

1. The cheetah exhibits several unique skeletal adaptations that mostly act to increase muscle

moment arms when compared with the greyhound. The cheetah also possesses divergent

talar ridges, an adaptation that may help to prevent limb interference during the gathered

aerial phase of the gallop.

2. The cheetah has significantly longer hind limb bones than the greyhound, enabling it to have

a longer contact length and potentially an increased stride length. The cheetah's limb bones

are also proportionally heavier and have a larger mid-shaft diameter, suggesting that they are

suited for resisting larger forces.

3. The cheetah has a smaller volume of muscle at the hip than the greyhound, and thus is unable

to obtain the power required for acceleration from hip extensor musculature alone. We

hypothesise that the additional power is generated by the substantial amount of back

musculature that the cheetah possesses.

4. The cheetah has particularly large psoas muscles, which we suggest are used to rapidly

protract the hind limb, and to resist pitching moments about the hip that occur during

accelerations.


Cheetah Relationship with Humans:-

Primitive Set up Cheetah's Message Modern Facility

Analogy (Cheetah & Corporate)

Despite their fierce appearance, Cheetahs have actually been domesticated by local people for

thousands of years, as they were used to help with hunting for food for the villagers. They have also

been kept in captivity for a long time, but as they do not seem to produce particularly healthy

individuals, wild Cheetahs were regularly caught to restore the bloodline. Hunted by people as

trophies throughout much of their natural range, Cheetahs have completely disappeared from

numerous places and along with habitat loss to growing Human settlements and the clearing of land for

agriculture, Cheetah numbers are still declining rapidly in many areas today.

The successful survival of Cheetah in African jungle comes not just from its ability to run at great

speed but certainly from its intelligence and endurance to an extraordinary struggle/hardship.

Cheetah is the fastest cat. But compared to the jaw power of a lion or hyena or leopard, the jaw power

of cheetah is poor or not that strong. More often than not, the smart cheetah hunts the prey, the smarter

lion or leopard or hyena snatches the hunt away from cheetah, leaving them to work all again.

This competition for survival was there for cheetah perhaps ever since it was evolved and is continuing

even today. The wise cheetah has wisely applied its intelligence and redesigned its hunting time and

strategy and that is how it has become successful. That is how the cheetah has become a diurnal

hunter, carefully selected to hunt especially during the hot mid-day.

Most of the other big cats and hyena are nocturnal animals and they find it hard to work in hot mid-day.

Chasing the prey and running at great speed during hot mid-day will give an extraordinary pressure to

any animal. During run (chasing prey), the body temperature of cheetah is reported to rise to 105

degree centigrade. Hence this cat has to rest between. Cheetah does the above fete only to ensure its

success.

Sacrifice and endurance are inevitable for survival. Strength will support only if wisdom is applied

wisely and wise strategies are worked out to 'receive and support' the 'strength'.

Despite having the unique strength, i.e. ability to run at great speed and ability to catch even the fastest

deer impala, cheetah has to work differently by choosing the less chosen time, i.e., the hot mid-day to

hunt the prey. The hot mid-day has only minimized its competition and competitors snatching its

prey but not its struggle. Its struggle continues. But despite the continuous struggle, it could become

successful survivor in theAfrican jungle.

Corporate leaders should plan, work and think differently in order to achieve success. One should

never assume that struggle free path is 'the' path to success. Learn to live with struggle & overcome

wisely.

Endurance is essential for success. Cheetah has willingly accepted the hardship of hot sunny mid-day.As difficult the hot sunny day to cheetah, so is the day to its prey animals also. Cheetah saw anopportunity there. Cheetah wisely learned the art of avoiding competition. Cheetah wants to achievesuccess (survival). Cheetah was ready to endure and work hard.


Conclusion

Acknowledge

Cheetah a wild animal in nature has given various inputs to the corporate organization to shape and

mould to grow to greater heights. Its endurance to hard work and success is a set example to the

corporate organization.

Corporate leaders should plan, work and think differently in order to achieve success. There is no

struggle free path for success. Learn to live with struggle & overcome wisely. In order to be

successful Organization, it is strongly recommended to develop & mould more such cheetah's and

utilize them during crisis situation and growth and development.

I take deep pleasure in thanking Dr. S Ranganathan in directing me towards my approach and giving

insights about the animal kingdom and its messages to the corporate world. Also I have to thank

Dr. P Ramesh Babu who has given valuable inputs in shaping the details and giving additional

management prospective to the research. This paper publication would be incomplete without

mentioning a note on Dr. E Venugopal who has been throughout guiding me with his valuable inputs.

by Swami Sukhabodhananda and

Dr.S Ranganathan , Prasanna Trust , Year of Publication 2012.

by Gopalakrishnan Published by Penguin Books,India

by One Minute Manager Series written by Kenneth Blanchard.

Published by Dr. Ranganathan.(www.articlesbase.com/human-

resources)

by John Adair, Viva Publication,

Edition 2004.

b y S t e p h a n i e S . To l a n , O n l i n e

(http://www.stephanietolan.com/is_it_a_cheetah.htm), 2006.

(Cheetah Success Series Book 1) [Kindle Edition] by

Michelle LaBrosse PMP(Author).

References

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Ø

Ø

Ø

Ø

Ø

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Jungle Wisdom for Corporate Management

Bonsai Managers

Monkey Managers

Online Research Articles

The Concise, Management & Personal Development

I s i t a c h e e t a h

Cheetah Project Management

p u b l i c a t i o n

Analogy to Management is a Success wich demands endurance, willingness to travel an extra mile,

the intelligence to know the strength and how to use the same wisely. Every corporate person may

learn the success and struggle of cheetah in order to be successful in corporate life. In a given

circumstances corporates might be experiencing comfortless while challenged with crisis situation,

most of the corporate succumbs as they presumably have not developed many adequate cheetahs to

handle the crisis.

More cheetah's in the corporate organization helps to resolve the challenging situations.They can be

moulded for future growth and development of the organization.

The vanishing of cheetahs in jungles has learning to the corporate organization. Develop more

cheetahs for future growth and development to avoid extinct of cheetah like leaders in the

organization. Such cheetahs will accelerate the growth and would act as catalyst. Team viewing such

catalyst would get motivated and contribute more towards the organization goals.



An Analytical Approach at Critical Chain Project Management

Abstract

Introduction

S.Jothinathan

Doctoral Student



Critical Chain Project Management (CCPM) has emerged in the last few years as a novel approach for

managing projects. In this paper we analyze the principles, assumptions and techniques of CCPM in

the light of their contribution to project management practice and to project success. We start with a

brief review of the key elements of CCPM that pertain to project planning, execution and control.

These are: revision downwards of duration estimates; buffer calculations; task completion

notification; progress measurement; and priority setting.

We continue with a critical analysis of CCPM in the light of the evidence in the research literature and

in practice. The points addressed include duration estimation practices; project network structure;

stability of the critical chain; resource productivity under multitasking; and the organizational and

operational environment of the project. We also consider the place that CCPM occupies in the broader

project management context, and the costs associated with its adoption. Our conclusion is that

although CCPM has a number of valuable concepts, it does not provide a complete solution to the

needs of project management. Consequently, organizations should be very careful when considering

the adoption of CCPM to the exclusion of conventional project management techniques and methods.

Critical Chain Project Management is a novel approach for managing projects developed book

“Critical Chain”. Researcher is well known in the operations management community as the inventor

of the Theory of Constraints (TOC). TOC is a tool for managing repetitive production systems based

on the principle that every system has a constraint, and that the system performance can only be

improved by improving the performance of the constraining resource. CCPM is an extension of TOC

designed specifically for project environments. In the original book and in the writings of its

proponents, see for instance Newbold (1998), Simpson and Lynch (1999), Homer (1998), and Leach

(1999), CCPM is being presented as an alternative to the classical methods for project planning and

control, such as those contained in the management and engineering text books and in professional

standards such as the PMI Guide to the Project Management Body Of Knowledge (PMBOK).

The publication of Researcher's book generated some controversy in the project management

community see for instance Globerson (2000). The proponents of CCPM claim that it is a totally new,

revolutionary way of thinking that can lead to superior, even unprecedented, performance in terms of

reducing delivery time and increasing the ability to meet schedule and budget commitments. Others

dismiss this as hype, arguing that the principles behind CCPM have been known to and applied by

experienced project managers for decades, and that CCPM uniqueness is in the terminology rather

than in substance.



In addition to departing from the commonly accepted practice of project management, the application

of CCPM requires the use of specialized software currently offered by a small number of vendors, not

necessarily the market leaders.As a result, any organization that is considering the adoption of CCPM

as a way for improving project performance faces significant costs, both in economic terms and in

terms of changes to its culture and work procedures. Consequently, a careful evaluation and

assessment of CCPM and its potential to bring about significant and sustainable performance

improvements is in order.

The purpose of this paper is to provide some guidance to organizations and decision makers who are

considering CCPM as an addition or a substitute to their current project management practices. The

paper is organized as follows. We begin with a brief overview of CCPM and a discussion of its key

concepts and techniques. We continue with a critical examination of the assumptions behind CCPM,

while considering relevant results from the published research literature and from our own consulting

practices. Next, we examine the place that CCPM occupies in the PMI PMBOK. Finally, we conclude

with our assessment of the benefits and limitations of CCPM.

The starting point for CCPM is a list of tasks along with their duration estimates and dependencies.

The first step consists of developing an initial schedule for the project tasks. This is done while taking

into account the dependencies among the tasks (as reflected in the project network) and the

availability of resources. Since at least some of the resources have limited availability, the resulting

schedule is likely to be longer than the schedule obtained with the basic Critical Path Method

algorithm, as critical activities are delayed while waiting for the resources they require.

At this point CCPM identifies the “Critical Chain” as the set of tasks that results in the longest path to

project completion after resource leveling. The critical chain yields the expected project completion

date. Those resources required by the tasks on the critical chain are defined as “Critical Resources”.

So far CCPM is the same as conventional project management except for the terminology “Critical

Chain”, which would otherwise be called the “Leveled Critical Path”.1 The next step in CCPM

planning consists of recalculating the project schedule based on shortened task duration estimates.

The rationale of CCPM for shortening the original duration estimates is as follows: -

1.All the tasks in the project are subject to some degree of uncertainty.

2. When asked to provide an estimate of the duration, the task owner adds a safety margin in order to

be “almost certain” of completing the task on time. This means that task durations are, in

general, overestimated.

3. In most cases the task will not require the entire amount of safety margin and so should complete

sooner than scheduled.

4. However, since the safety margin is internal to the task, if it is not needed it is wasted. As the

resources for the following task are not

An Overview of the Critical Chain Project Management Method


1 Wiest and Levy (1969 and 1977) have noticed way before the publication of Researcher's book that

"While a critical path of technologically connected jobs does not always exist in a limited resources

schedule, under certain conditions a "critical sequence" of slackless jobs which span the length of the

project can be identified. The jobs are continuous in time, if not in predecessor-successor

relationship". In view of Wiest (1964) and Wiest and Levy early work on resource constrained

scheduling, Globerson's (2000) assertion that "the main contribution of the critical chain notion is the

addition of a new and relevant concept that states that the critical path does not remain the same under

constrained resources" seems to be inappropriate. available until the scheduled time, when it becomes

obvious that the buffer is unnecessary the task owner will use the buffer time since there is little

incentive to finish early. On the other hand, any delays in the completion of tasks on the critical chain

propagate to the successor tasks. Thus gains are lost, delays are passed on in full, and the project is

likely to finish late even if, on average, there are enough buffers hidden in the tasks. CCPM states that

original duration estimates are such that the likelihood of completion is 95%, and that they should be

reduced to the point where the likelihood of completion is 50%. The difference between the project

duration based on the new estimates and the original project duration is called the Project Buffer, and

should be displayed on the project Gantt chart as a separate task. Figure 1 illustrates the relationships

between the original schedule and the CCPM schedule based on the shortened task durations.

Figure 1 Conventional- schedule and CCPM schedule with the time buffers shown Explicitly

The buffers, which were previously hidden in each task, have been made explicit and pooled. This

pooled buffer is called the “Project Buffer”. Note that by calculating the project buffer the total

duration of the project did not increase: Under CCPM the project buffer is considered part of the

project and as such must be scheduled and assigned resources.Also, a Gantt chart showing the project

buffer serves to communicate the inherent uncertainty in the project, as opposed to a conventional

Gantt chart that presents a spurious air of certainty.

It is improbable that all the critical chain tasks will exceed their 50% likelihood duration estimates:

under the assumption of statistical independence, about half will complete over while the other half

will complete under. By pooling together the safety margins of the individual task, the protection

against uncertainty is improved, so CCPM suggests that the combined project buffer can be less than

the sum of the safety margins of the individual tasks.


This argument is supported by statistical theory that states that the standard deviation of the sum of a

number of mutually independent random variables (in this case, the actual durations of the tasks on the

path) is less than the sum of the individual standard deviations. Although the assumption of statistical

independence of tasks durations is questionable, in theory this justifies reducing the overall duration

of the project. In practice, it may be easier to gain task owners' acceptance of pooling their individual

task buffers if the total is not reduced.

The same process of making safety margins explicit and pooling them can be applied to non-critical

paths. As before, the safety margin in each task is identified, taken out, and pooled at the end of the

path. Because this buffer is placed where the path feeds back into the critical chain path, it is called

“Feeding Buffer”. Figure 2 shows a simple project network in which the feeding buffer has been

identified. Note that non-critical paths can still have slack, as well as buffer.

Figure 2 Project Network with Feeding Buffer

According to CCPM, a feeding buffer represents the extent of protection of the critical chain against

the uncertainty in the feeding non-critical chain, and its size may be adjusted as desired. Once the size

of the feeding buffer has been determined, if there is still some slack on the feeding chain, then CCPM

prescribes that the task be scheduled as late as possible. This is justified on the basis that it reduces

waste of time and work in process on the non-critical tasks while preserving the desired degree of

protection of the critical chain.

The third type of buffer used by CCPM is called a “Resource Buffer”. A resource buffer is a virtual

task that is inserted prior to critical chain tasks that require critical resources. Its purpose is to issue a

signal to the critical resource to the effect that a critical chain task to which they are assigned is due to

start shortly. According to CCPM, this “wakeup call” will cause the critical resource to wrap up any

non-critical work that it is involved with, and to be ready to start work on the critical chain task as soon

as its predecessors are completed. The resource buffer does not actually consume any resource, and it

adds neither time nor cost to the project.

At this point CCPM has created a new project schedule, which consists of the original tasks with

reduced durations, and various types of buffers: the project buffer, the feeding buffers and the resource

buffers.


For the execution of the project plan, CCPM prescribes the following principles.

Resources working on critical-chain tasks are expected to work continuously on a single task

at a time. They do not work on several tasks in parallel, or suspend their critical tasks to do

other work.

Further, resources are to complete the task assigned as soon as possible, regardless of the dates

on the schedule.

If the task is completed ahead of schedule, then work on its successor is to begin immediately.

If the task successor utilizes a critical resource for which a resource buffer has been defined,

then advance warning is provided to that resource at the point in time where the resource

buffer begins.

If the task is completed past its planned completion date as shown on the CCPM schedule,

then this is no reason for immediate concern, as the buffer on the chain on which the task is

situated will absorb the delay.

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As progress is reported the CCPM schedule is recalculated, keeping the final due date of the project

constant by adjusting buffer sizes. Project control focuses on consumption of the buffer. If buffer

consumption is out of proportion then this becomes a clear indication for implementing corrective

actions, such as reassignment of resources to the tasks on the chains leading to the buffer in question.

In this manner, the extent of buffer utilization serves to monitor the likelihood of project completion

by its committed due date.

CCPM also provides some guidelines for managing multiple projects sharing a common pool of

resources. While scheduling the various projects, CCPM suggests that we first identify the resource

whose availability constraints the system (the “drum”, according to TOC terminology), and then

schedule the projects around it. During execution, if a given resource is required to work

simultaneously on several tasks, then CCPM prescribes that priority should be given to the task of the

one project that is in the greatest risk of missing its committed date, as measured by the remaining

fraction of project buffer. Of course, working concurrently on tasks that belong to different projects is

not allowed.

In this part of the paper we consider the main elements of CCPM, and analyze them in terms of the

validity of the underlying assumptions and the availability of supporting empirical evidence.

CCPM assumes that all task owners overestimate task duration by a certain safety factor, and that the

duration of the actual execution of each task will expand to fill the time allotted. In other words, actual

task duration is a self-fulfilling prophecy. These two assumptions are plausible, but CCPM theorists

fail to provide any supporting scientific evidence. In fact, a recent study of task duration estimation in

software development by Hill et al. (2000) provides some contradictory results. The study analyzed

estimated and actual durations of over 500 tasks carried out by the Information Systems Development

Department of a major international financial organization. Only in 8% of the tasks was the actual

duration equal to the estimated duration, while in about 60% of the tasks the actual duration was less

Critique of CCPM

Task duration and safety margins


than the estimated duration. These findings in effect contradict the assumption that task owners will

use up all the allocated time. Further, in 32% of the tasks in the sample the actual duration exceeded the

estimate, indicating that the safety factor, if it existed at all, was certainly not sufficient for the 95%

confidence level.

However, let us leave aside the contradictory evidence and proceed under the CCPM assumptions.

There are still two important issues that CCPM does not address satisfactorily.

The first issue is how we estimate the extent of safety factor presumably built into the estimate

provided by the task owner. The only way for obtaining the correct answer to this question is to have

another method for estimating task durations that provides accurate estimates, and to subtract that

estimate from the one provided by the task owner. Of course, if such method is available then it is the

one that should have been used in the first place, and the issue remains. CCPM suggests reducing the

estimates by a certain percentage, typically 33%. Clearly such an approach is problematic, not only

due to the need to justify the percentage reduction chosen, but also due to the fact not all people

overestimate by the same amount. There are bound to be variations based on personality, job

experience, and nature of the task, workload, or other reasons.

If we are willing to accept that there is an appropriate formula to reduce the duration estimates

provided by the task owners, then we still have to face the second issue: will they agree to shorten their

duration estimates and to merge their individual safety factors into the project buffer and the feeding

buffers? Imposing shortened duration estimates on the task owners will reduce their commitment to

the estimates. In addition, the knowledge that their estimates will be reduced is likely to encourage the

task owners to add larger margins; so that after the correction they still have the safety margin they

want.At any rate, the behavioral aspects of identifying the precise amount of safety margin and taking

it away from the task owner are dealt only superficially by CCPM literature, and still require empirical

support.

The various types of buffers play a key role in CCPM theory. In principle, the size of the project buffer

and of the feeding buffers should reflect the amount of protection required against the uncertainty

regarding the sum of the durations of the tasks on the critical chain and the feeding chains,

respectively. In order to contribute to the reduction in the overall project duration, the size of the buffer

has to be less than the sum of the safety margins extracted from the tasks on the corresponding chain.

However, CCPM does not provide any scientific or objective basis for determining the buffer size.

This raises several problems.

First, the concept of feeding chains is based on the assumption that the project network consists of

several paths that can start in parallel and then proceed to merge into each other, eventually leading to

the final product of the project, as shown in Figure 3.

Use of buffers in planning and control

Figure 3 Typical Project Network According to CCPM


This network structure is applicable to projects that consist of construction, assembly, and integration

tasks, which are common in manufacturing environments. But many projects begin with a small core

of central activities (design, analysis, etc.), which split into parallel tracks that merge at various

intermediate review points, before producing the various deliverables of the project. This leads to

more complex network flows, where a given task may have both predecessors and successors from

several chains, as shown in Figure 4. In such cases, it is not clear at all how much feeding buffer should

be allotted to each merging task.

Schonberger (1981) has shown that projects will always be late relative to the deterministic critical

path. The amount of delay is contingent on the time variability of activities and the amount of parallel

paths in the network. In that respect, the critical chain is no different from the critical path, especially

in non-arborescent networks.

Figure 5 provides an example of such a network.

In addition to the critical chain that consists of activities 1 through 4, there are three more activities:

job 5 and job 6 run in parallel to each other and feed into job 7, which in turn feeds into the critical

chain at the beginning of job 4. For the sake of the example let us assume that the durations (after

reduction of up to 33% as recommended by CCPM) are 12, 12 and 1 time unit, respectively.

Thus, the feeding buffer has a length of 1 time unit, as shown in Figure 5. In order to examine whether

the feeding buffer is adequate and effective, we follow the same method used by Schonberger (1981).

Assuming a variability of +/- 3 units for each of the two longer activities Job 5 and Job 6, we calculate

the expected length of time required for the two to complete. Since the two run in parallel, the amount

of time required for both to complete is the maximum of the actual durations of each of the two. There

are seven possible duration values for each activity, for a total of 49 combinations. Table 1 shows the

combinations in a matrix, with the cells containing the maximum value. The average across the entire

matrix turns out to be 13.14.Adding to this the duration of Job 7, which is 1 time unit (and ignoring its

own variability), we come up with the result that the variability of the non-critical chain exceeds its

feeding buffer. In effect, this causes the non critical chain to become critical. More parallel chains will

increase the estimated duration even further. Table 1 Joint duration of parallel activities Job 5 and

Job6

Figure 4 General Case of a Project Network


Du

rati

on

of

Jo

b6

Duration of Job 5

9 10 11 12 13 14 15

9 9 10 11 12 13 14 15

10 10 10 11 12 13 14 15

11 11 11 11 12 13 14 15

12 12 12 12 12 13 14 15

13 13 13 13 13 13 14 15

14 14 14 14 14 14 14 15

15 15 15 15 15 15 15 15

Figure 5 The effect of the time variability on project duration

A second issue pertains to the validity and stability of the schedule that serves as the basis for

determining the buffers. According to CCPM, the critical chain and the associated buffers are

identified from a schedule obtained with a resource-leveling algorithm. The mathematical problem of

scheduling the project tasks under resource constraints is known to be very difficult to solve

optimally. In fact, this problem belongs to the class of problems for which it has been shown that there

are no efficient algorithms for finding the optimal solution for large projects. A comparison of three

exact approaches for solving the constrained resource project scheduling problem and their

limitations can be found in Patterson (1984). Consequently, resource-leveling algorithms use

heuristic rules to generate solutions that are hoped to be close to the optimum (see for example Wiest

(1967)).

CCPM theory does not prescribe a specific resource-leveling algorithm, out of the numerous

algorithms that have been published in the operations research literature and that vary in terms of

average distance from the optimum. Thus, it is hard to assess how good the schedule upon which the

buffers are based is. Project networks are not arborescent, and since the determination of the

appropriate buffer size has to take into account time variability of activities and fatness of the network,

simulation studies are required, as Schonberger (1981) suggests.

In addition, the critical chain itself may change due to several reasons. Hoel and Taylor (1999) showed

that if the overall uncertainty on a given feeding chain is such that the project planner defines a feeding

buffer greater than the free slack of the feeding chain, then that chain becomes part of the critical

chain. Further, during project execution the critical chain may change as a result of changes in

resource availability or in buffer utilization. Changes in the set of tasks that constitute the critical chain

are likely to affect the meaning of the buffers of various types, bringing us to the third issue which is

related to the use of buffers for project control.

According to CCPM, schedule control is based on monitoring the extent of buffer penetration, which

is defined as the amount of time running from the original start date of the buffer on the critical chain

or one of the feeding chains, as appropriate, to the projected end date of the last task on the

corresponding chain. The projected dates are based on estimates of the “duration left” for the tasks.

The estimation of how much work remains to be done is also subjected to inflation by safety margins,

the very same problem that CCPM attempted to solve by using buffers.


However, let us assume that buffer penetration data is indeed valid and accurate and can be trusted to

serve as an indication of the likelihood that the task chain will be completed by the end date of the

buffer. CCPM prescribes that in case of contention for limited resources priority should be given to the

task belonging to the chain with the highest rate of buffer penetration. The rationale for this rule is

clear: chains of tasks where a higher percentage of their buffers have been used are at a higher risk of

missing their committed dates, and consequently ought to be given higher priority in resource

allocation decisions.

However, this consideration is not the only one and may not be the most relevant one. For example, we

may prefer to give priority to tasks that belong to a project with very high penalties for missing

deadlines, or to those that have a key strategic impact, regardless of the amount of remaining buffer.

A final point regarding time buffers deserves attention. Buffers of the various types are shown on the

project schedule and Gantt chart as special types of activities. Since there is one feeding buffer at the

end of each chain of tasks in the project network, if we assume that typically a chain consists of eight to

ten tasks in series before each merging point and take into account resource buffers as well, then

buffers add at least 10-15% to the number of items on the Gantt chart. These additional items, which

have to be interpreted differently from the others, add clutter to the schedule and increase the potential

for confusion.

Overall, although feeding and project buffers have some intuitive appeal, one ought to be aware of the

limitations in their validity and usefulness as the main decision-making criterion in project control.

CCPM is against assigning more than one task to be carried out concurrently by a given resource. The

organization could reduce the extent of multitasking without switching to CCPM, but it is not clear at

all that this is a good idea. In fact, a study of 64 high technology firms carried out by McCollum and

Sherman (1991) presents some evidence to the contrary.

The researchers examined the effectiveness of matrix organizations and found that there was a

relationship between the number of projects that R&D personnel were assigned to and key

performance indicators of the firm. Specifically, they found that for two of the most important

measures of performance, return on the investment (ROI) and rate of sales growth, assignment to two

projects seems to be optimal, while a range of up to three may not be problematic.

Resource buffers are a unique feature of CCPM. They are fictitious tasks that serve to provide advance

notice to the critical resources that the prerequisites for their assigned tasks are about to be completed,

and that they should complete whatever they are doing and become ready to start working on their

tasks shortly. Further, they are asked to complete their assigned tasks as soon as possible, in order to

allow their successor tasks to start as soon as possible. This method of coordination among project

team members seems to us rather chaotic and requiring a great deal of unscheduled communication.

Further, it may not be feasible at all if some of the resources are outside contractors who may not have

the flexibility to drop their ongoing jobs and invest their full attention on their assigned project task.

Resource utilization


There is value in alerting resources to important (critical chain activities) early-start opportunities,

and CCPM is correct to point out that managing to complete tasks on time is not the same as managing

to complete the project on time. However, it is our opinion that this is a supplement rather than a

substitute for the traditional way of publicizing a schedule that all task owners have committed to. The

schedule's integrity still needs to be maintained through an effective change management process.

Overall we fail to see any advantage that this approach provides with respect to the traditional way of

publicizing a schedule that all task owners have committed to, and maintaining its integrity through an

effective change management process.

CCPM deals with multi-project environment by staggering the projects around the constraining

resource (the “drum” in the terminology of the Theory Of Constraints). In principle, at any given point

in time there could be several constraining resources, each leading to a different schedule. Further, at

different points in time we could have different constraining resources, so that there could be

conflicting schedules. The premise that there is a single drum is based on a steady state view of the

work mix in the organization and is applicable to manufacturing and operations environments. In

most project environments there is no steady state, and consequently we doubt the applicability of the

solution obtained with CCPM.

Project success and project management success are not necessarily equivalent. For many project

managers, “success” means meeting predefined planning goals stated in terms of schedule, budget

and scope commitments. To customers however, success relates primarily to whether the project

contributes to the goals of the organisation. The relative importance of the various dimensions of

project success was documented by Lipovetzky et al. (1997) in a study of 110 projects in Israel. Their

analysis revealed that benefit to the customer was by far the most important dimension, almost twice

as important as meeting planning goals. Nevertheless, a sound project management process well

executed by a qualified project manager enhances the likelihood of project success in the eyes of the

customer.

Like conventional project management, CCPM deals with project management success, rather than

project success. Further, ie CCPM focuses on a single aspect of project management, namely meeting

the schedule goals. The relative importance of this aspect is not universal: a project that exceeded its

original schedule by 10% but still earned ten times its cost in increased profits would be considered

more successful that a project that was completed on time and budget, but added little to the customers

business effectiveness.

Within the narrow scope of meeting the project schedule objectives, CCPM focuses mainly on the

uncertainty inherent in the schedule. Rather than addressing the root cause of duration uncertainty,

CCPM accepts it as a given, and attempts to overcome it by means of buffer management. In contrast,

most project risk management methodologies work at identifying and reducing the sources of

uncertainty, or by estimation methodologies that work to improve the quality of the duration

Multi-Project Management

Scope of CCPM


estimates. Although CCPM does not preclude the application of other, more comprehensive risk

management approaches, its limited focus makes it ill-suited to serve as the single tool for dealing

with project uncertainty. At best, it can help manage the schedule uncertainty that remains after the

application of risk analysis and risk mitigation tools.

Further, since CCPM is presented as a revolutionary concept that replaces rather than complements

current project management knowledge and practices, it is not properly integrated with the accepted

body of knowledge and state of the practice. This situation poses a certain dilemma to organizations

who are new to project management methodologies and are asked to choose between CCPM and

mainstream methodologies such as that contained in the PMI PMBOK.

An organization that considers the adoption of CCPM as its main project management methodology

has to take into account two major sources of cost: software tools and culture change. The

implementation of CCPM requires that project personnel use a software tool that supports the concept

of buffer creation and management. Currently only one of the mainstream mid-size project

management software tools is compatible with CCPM, and two add-in products are available for the

leading tool in the market, one of which requires a specific data base server. Thus, the range of

software tool options is limited and is bound to be relatively expensive.

However, the costs of acquiring, deploying and applying software that supports CCPM are likely to be

secondary relative to the costs resulting from the need to change the culture of the organization.

CCPM is presented as a methodology that has to be adopted in its entirety, ranging from buffer

calculation, personnel assignment, progress reporting, up to the criteria for determining delivery dates

in a multi-project environment. As such, CCPM requires massive education at various levels and

functions throughout the organization, and may even require from experience project managers to

forget some of their conventional knowledge in order to absorb the new way. Some of the key points

that involve a change in the organization culture are:

Giving up ownership of the task duration and relying on the schedule buffers to absorb

deviations in individual task performance.

Replacing the concept of “Due Date” by “Estimated Completion Date Range” as represented

by the feeding and project buffers.

Avoiding multi-tasking.

Clearly, CCPM is a departure from traditional project management and its adoption by any

organization will require a concerted effort at all levels.

Adoption of CCPM

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Concluding Remarks

Project performance is often less an issue of managing the constraints on the schedule and more a

function of the personal skills and capabilities of the leaders, such as articulating customer

requirements, understanding future needs, enlisting cooperation throughout the organization, etc.

CCPM is based on the premise that uncertainty in activity duration is the major factor affecting the

ability to complete the project on time. But, there are other relevant mismanagement practices that

affect schedule expectations such as external pressures; internal politics; distorting estimates to win

the project; etc. which should also be addressed.

CCPM leads us to believe that management of projects can be accomplished through the same rational

process that works for production management. In order to accomplish this, CCPM adapted the

concepts of bottlenecks and material buffers that were developed within the framework of

Researcher's Theory of Constraints, calling them “critical chain” and “time buffers” in the realm of

projects. These concepts and other elements of CCPM are not necessarily new. For instance, the

impact of resource availability on critical path calculations has been known for quite some time - see

Raz (1996) and the papers cited there.

However, the issue of intellectual innovation is not the main one, even though it is emphasized in the

CCPM literature. We already presented our concerns about the validity of the assumptions and the

adequacy of the scope covered. The key question is: Is CCPM indeed superior to the currently

accepted project management methodologies?

CCPM seems to hold answers to problems that have challenged project managers for many years, and

presentations on it are enthusiastically received. Proponents of CCPM have claimed some dramatic

successes, although from our personal experience these appear to be mainly in organizations that

started out with weak or non-existent project management methodologies. However, we are not aware

of any comparative studies that provide scientific evidence to the effect that organizations that have

adopted CCPM perform better than organizations that apply a conventional project management

methodology. In addition, CCPM has been out for a short period of time, and it is impossible to assess

any sustainable long-term benefits.

Although the bulk of this paper has been devoted to a critical analysis of CCPM, it is important to point

out its positive side. First, CCPM is a methodology, and any methodology is better than no

methodology at all. Even if CCPM is simplistic and oversold, it is worth studying for its several pieces

of good advice, which include:

Account for duration uncertainty by making buffers explicit, sharing the knowledge of

buffer sizes and placement with workers, management, and sponsors.

Consider resource availability;

Focus on the key tasks and resources;

Constantly monitor the amount of buffer in your schedule;

Provide advance notice of upcoming work to critical resources;

Do not split your attention among numerous tasks; .

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Some of the principles of CCPM do make sense in certain situations, and their careful application can

improve performance, provided the preconditions and assumptions are fully understood. However, to

the question “Should your organization adopt CCPM as its project management methodology?” We

offer the following qualified answer. “If your organization lacks effective project planning and control

processes, and you run a relatively large number of quite similar projects in a matrix environment, and

your main concern is meeting deadlines, then CCPM could be beneficial. Otherwise, we suggest

weighing very carefully the limitations of CCPM and its costs against the potential for contributing to

the long term business success of your organization”. Perhaps the optimal solution is to incorporate

those CCPM principles that are applicable to your environment within a broader conventional project

management methodology.

Globerson, S, “PMBOK and the Critical Chain”, , Vol. 14, No. 5, May 2000

Researcher, E. H., , North River Press,April 1997.

Hill, J., Thomas, L.C. and Allen, D.E., “Experts Estimates of Task Durations in Software

Development Projects”, 12(1):13- 24,

2000.

Hoel, K. and Taylor, S.G., “Quantifying Buffers for Project Schedules”,

, Second Quarter, 1999, pp:43-47

Homer, J.L., “Applying the Theory of Constraints to Projects”,

.

Leach, L., “Critical Chain Project Management Improves Project Performance”,

, 30(2): 39-51, 1999.

Lipovetsky, S., Tishler, A., Dvir, D. and Shenhar, A. : “The Relative Importance of Project

Success Dimensions”, , 27(2):97-106, 1997.

McCollum, J.K. and Sherman, J.D. “The Effects of Matrix Organization Size and Number of

ProjectAssignments on Performance”,

38(1):75-78, 1991

Newbold, R.C., , The St. Lucie Press, 1998.

Patterson, J. H., "A Comparison of Exact Approaches for Solving the Multiple Constrained

resource, Project Scheduling Problem". , 30(7): 854-867, 1984.

Raz, T. and B. Marshall, “Float Calculations in Project Networks Under Resource

Constraints”, ,14(A4):241-248, 1996.

ReferencesØ

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PM Network

Critical Chain

International Journal of Project Management

Production and

Inventory Management Journal

Proceedings of the 29th

Annual Project Management Institute 1998 Seminars and Symposium

Project

Management Journal

R&D Management

IEEE Transactions on Engineering Management,

Project Management in the Fast Lane

Management Science

International Journal of Project Management


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Simpson, W.P. and Lynch, W., “Critical Success Factors in Critical Chain Project

management”,

Schonberger J.R., "Why Projects are "always" Late: A Rationale Based on Manual

Simulation of a PERT/CPM Network", , 11(5):66-70, 1981.

Wiest J.D., "Some Properties of Schedules for Large Projects with Limited Resources",

, 12: 395-418, May-June 1964.

Wiest, J.D., "A Heuristic Model for Scheduling Large Projects with Limited Resources".

, 13(6): B359-B377, 1967.

Wiest J.D. and Levy F.K., , Prentice-Hall,

Englewood Cliffs, N.J., 1977.

Proceedings of the 30th Annual Project Management Institute 1999

Seminars and Symposium.

Interfaces

Operations Research

Management Science

A Management Guide to PERT/CPM


An Analysis of Bank Sector Functioning during Liberalization

Anup Varghese Cherian

Doctoral Student



Abstract

1. Introduction

Financial sector in India is changed over the past decade due to technological innovation,

deregulation of financial services, external financial liberalization and organizational changes in the

corporate. Competition among financial institutions further increased due to emphasis on market-

based outcomes and resultant deregulation of interest rates on deposits as well as on the advances.

Technological advances in information technology and securitization bill, reduction in employee

strength through voluntary retirement schemes has greatly reduced costs and non-performing assets

thereby increased profits, productivity and efficiency among Indian banks with simultaneous

increase in costumer services with competitive costs. There was a convergence of performance

among public, private and foreign banks in recent years due to adoption of technology. There was an

increasing importance of non-interest income in recent years for all banks. Even though PSBs

comparing poorly with the other two categories in terms of profit, PSBs had the highest efficiency in

deposit mobilization. And foreign and private banks are efficient in value added services. There has

been a decline in spreads and intermediation costs widely used measures of efficiency in banking and

a tendency towards their convergence across all bank-groups. While most of the studies emphasized

market related financial efficiency measures to boost banking sector, equally good number of studies

emphasized the importance of prudential and regulatory measures to increase financial health and

stability of banking sector. Only cost effective, costumer focused, technology driven, capital

strengthen banks which follow prudential regulations can only sustain in attracting depositors and

borrowers in the current competitive environment. The individual banks have to be competitive on

the one hand and the regulator should ensure that the prudential norms should ensure needed stability

and financial health of banks without jeopardizing the proper incentives to banks.

Financial sector in India is changed drastically since late 1990s due to technological innovation,

financial liberalization with entry of new private and foreign banks, and regulatory changes in the

corporate sector. (Allahabad Bank, 2002). The intense competition between these new entrances with

the already existing public sector banks to cater needs of same pie of consumers facilitated

implementation of new ways in reduce costs at the same time attracting customers/business. Further

liberalization of financial sector facilitated development of capital markets; non-banking financial

institutions that absorb current and potential borrowers and bank depositor thereby banks may face

competition both in raising resources and in deploying them. In the current scenario, liberalization

and deregulation has to go hand in hand with a greater emphasis on efficiency, consolidation, asset

quality and profitability (Jalan 2002).

29Bulletin of Research Developments Vol.2, No.3, (5 September 2015)th

The developments in banking sector such as technological advances in information technology and

securitisation bill, reduction in employee strength through Voluntary Retirement Schemes (VRS)

has greatly reduced costs and Non-Performing Assets (NPAs) thereby increased efficiency among

Indian banks. What is equally important is that the intermediation process has improved even in

Public Sector Banks (PSBs), as it is evident from the ratio of net interest income (interest spreads) to

total assets of PSBs has declined from 3.22 in 1990-91 to 2.84 in 2000-01 even though there was an

improvement in mode of function of banks from one of mere intermediator to that of provider of

quick, cost effective and efficient services (Bhide et al., 2002).

However there is still a large gap to be filled in improving financial health and providing quality

customer services, reducing NPAs, and improving corporate governance practices in banks in

general, and in PSBs in particular. Lower level of provisioning for NPAs when compared to

international standards is also a problem. For example, PSBs on average provide for 55 per cent of

their NPAs, while provisioning by foreign banks is much higher at 70 per cent whereas international

banks provide up to 140 percent. It was recognised that restoration of health of the banking system

required both a stock solution (i.e., restoration of net worth) and flow solution (i.e., an improvement

in future profitability) (Joshi and little 1997). Recent interest rate deregulation exposes the banks to

interest rate risk (market risk). Such interest rate risk has a potential impact on net interest income as

well as on the market value of the fixed income securities held by the banks, which may affect bank

risk exposure. The issue of capital adequacy and recapitalisation also require urgent attention

(Jaikvoulle and Kauko 2001). With the above background the paper specifically reviews banking

sector performance (especially scheduled commercial banks) and its determinants in developing

countries perspective especially in Indian context.

In analyzing the functions performed by commercial banks, Bergendhal(1998) mentions five

fundamental goals of efficient bank management: profit maximization, risk management, service

provision, intermediation and utility provision. To keep it simple, one can redefine the five goals in to

two by pooling the five goals, i.e., profit maximization (combining features of Bergendhal's profit

maximization and risk management) and interest spreads (combining service provision,

intermediation and utility provision).As by reducing interest spread one can maximize utility of bank

customers i.e., reduce intermediation cost in providing services to both depositors and borrowers

.

The banking system in India comprises the Reserve Bank of India (RBI), commercial banks, regional

rural banks and the co-operative banks. In the recent past, private non-banking finance companies

also have been active in the financial system, and are being regulated by the RBI. As in 2000,

commercial banks (which include public sector banks, private sector banks and foreign banks)

remains the most dominant with nearly 62 per cent of financial assets, followed by investment

institutions (18.6%), term lending institutions (15.1%) and cooperative banks (2.6 per cent) (Aditya

and Ghosh 2001). Indian banking sector has been characterized by the predominance of PSBs. The

PSBs had 47,579 branches during 2001 with total assets of Rs. 10,298 billion, which accounted for

79.5% of assets of all Scheduled Commercial Banks (SCBs) in India. PSBs account for 81% of

deposits, 79% of advances, 78% of income, and 90% of branches of all commercial banks during the

year 2001. Private sector banks accounted for 12.6% of the total assets and foreign banks accounted

for 7.9% of the total assets of all SCBs. The primary activity of most foreign banks in India has been

in the corporate segment, while f wider mass of India. However, in recent years, some of the


public sector banks cater to the needs o larger foreign banks have started making consumer financing.

The recent increase in foreign direct investment cap in banks from 49 per cent to 74 percent is a

significant development in liberaizing banking sector to foreign participation.

In a study that covers more recent period, Das (1999) compares performance among public sector

banks for three years in the post-reform period, 1992, 1995 and 1998. He finds a certain convergence

in performance. He also notes that while there is a welcome increase in emphasis on non-interest

income, banks have tend to show risk-averse behavior by opting for risk-free investments over risky

loans.

Sarkar and Das (1997) compare performance of public, private and foreign banks for the year 1994-95

by using measures of profitability, productivity and financial management. They find PSBs

comparing poorly with the other two categories.

Bhattacharya et al., (1997) studied the impact of the limited liberalization initiated before the

deregulation of the nineties on the performance of the different categories of banks, using Data

Envelopment Analysis. Their study covered 70 banks in the period 1986-91. They constructed one

grand frontier for the entire period and measured technical efficiency of the banks under study. They

found PSBs had the highest efficiency among the three categories, with foreign and private banks

having much lower efficiencies. However, PSBs started showing a decline in efficiency after 1987,

private banks showed no change and foreign banks showed a sharp rise in efficiency. The main results

accord with the general perception that in the nationalized era, public sector banks were successful in

achieving their principal objectives of deposit and loan expansion. However, Das (1997), which

analysed overall efficiency technical, allocative and scale efficiency of PSBs in the period 1990-96,

found a decline in overall efficiency. This occurred because there was a decline in technical efficiency,

which was not offset by an improvement in allocative efficiency. The study, however, pointed out that

the deterioration in technical efficiency was mainly on account of four nationalized banks.

In a review of performance of banks, RBI (1999a) concluded that 1. There has been a decline in

spreads a widely used measure of efficiency in banking and a tendency towards their convergence

across all bank-groups except foreign banks. 2. Intermediation costs as a percentage of total assets

have also declined especially for PSBs and new private sector banks, due largely to a decline in their

wage costs. 3. Capital adequacy and asset quality (measured by the net NPAs as percentage of net

advances) have both improved over the period 1995-96 to 1999-2000. 4. Median profit per employee

of PSBs witnessed a significant rise from 1996-97 to 1999-2000. 5. Non-interest income to working

funds rose modestly for the median PSBs. 6. The ratio wage bill to total expenses remained at a high

level for PSBs. 7. The cost to income ratio declined for PSBs. The RBI noted that, “Developments

after 1996 indicate that a majority of the public sector banks have been able to progress considerably

towards the direction of passing the acid test of achieving competitive efficiency.

2. Performance of Indian Banking Sector

The difference between the interest rate charged to borrower and the interest rate paid to depositors,

which reflects the cost of intermediation (interest spread), is an important indicator of efficiency. The

main components of interest spread are non-interest income, overhead, taxes, and loan loss provisions


and after tax bank profits. The efficiency of the banking system as a whole, measured by declining

spreads/total assets (3.22 in 1991-92 to 2.7 in 1999-2000), has improved, and public sector banks have

improved their performance in both absolute and relative terms (Ram, 2002). In contrary to that Souza

(2002) argued that banking system as a whole has not become more efficient as measured by the

interest spreads/working funds which have been rising (2.10 in 1990-91 to 2.73 in 1999-2000 for all

banks) and not declining. However, there are some issues need to be addressed in PSBs such as low

provisioning to non-performing assets and low employee productivity compared to private and

foreign banks. The turnover per employee in the private banks doubled relative to the public sector

banks during the 1990s. The establishment expenses as percent of total expenses drastically declined

in private and foreign banks due to these banks have been able to contain their wages and salaries

expenditures compared to the public sector banks however private and foreign banks spend more on

technology up gradation.

Another indicator of bank efficiency is the quality of assets (NPAs). As of March 31,2002, the gross

NPAs of scheduled commercial banks stood at Rs.71, 000 crore. Although the net NPAs of the

commercial banks in India have witnessed a decline over the past several years, they are still high as

compared to developed country standards of around 2 per cent. Some argue that, the high level of

NPAs in PSBs was due to higher proportion of NPAs in priority sector advances by PSBs which was

attributed to the directed and pre-approved nature of loans sanctioned under government sponsored

programmes, absence of any security, lack of effective follow up due to large number of accounts,

legal recovery measures being considered not cost effective, vitiation of repayment culture

consequent to loan waiver schemes, etc (Nachane, 1999; RBI, 1999b). However, all banks but three

have met RBIs capital adequacy norm of 9 per cent in 2002. Performance measured by gross and net

return on average assets worsens and liquidity (measured by cash over assets) declines for weak

banks.

The commercial banking system in the country has become quite apprehensive of exposing itself to

lending risk and has developed an unhealthy appetite for government securities. The pace at which the

commercial banks invested in government securities far exceeded those in both deposit mobilization

and credit disbursal (Nair, 2000) as in the low interest rate regime trading profits very high for

government securities (Rakesh, 2002).

In a cross-bank study for India Sarkar et al., (1998) regresses two profitability and four efficiency

measures on pooled data for two years 1993-94 and 1994-95, for a total of 73 banks, using single

equation OLS estimation for each. They found that after controlling for total assets, proportion of

government securities to total assets, proportion of priority sector loans, share of rural banking, non-

interest income to total income, foreign ownership showed positive association with profitability and

efficiency. Ajit and Bangar (1998) present a tabulation of the performance of private sector banks vis-

à-vis public sector banks over the period 1996-1997, using a number of indicators: profitability ratio,

interest spread, capital adequacy ratio and the net NPA. The conclusion is that Indian private banks out

perform public sector banks. The study also found that Indian private banks have higher returns to

assets in spite of lower spreads.

Rajaraman et al., (1999) show that bank-specific characteristics such as ownership or adherence to

prudential norms do not suffice to explain inter-bank variability in NPAs while region of operation


matters. The study argued that banks functioning in less developed areas like Bihar were having high

NPAs, while banks functioning in developed regions such as Delhi, Punjab were having less NPAs.

As Indian banking system is predominantly a public sector one, the incentive structure differs

significantly from those prevailing under private sector banking. In the changed scenario of

liberalization, banks will have to bring about an overall improvement in their working covering

human resource management, technology up gradation and integrated risk management (Jalan 2001).

Financial systems in developing countries typically exhibit significantly high and persistent spreads

as cost of poor quality loans is shifted to bank customers through higher spreads (Barajas et al., 2000).

Similarly Brock and Suarez (2000) also find significant evidence of a positive relation between

spreads and wages or non-financial costs. Non-financial costs reflect variations in physical capital

costs, employment and wage levels. While studying bank restructure policies of 11 transition

countries during 1991-98, Zoli (2001) stated that an increase in interest spreads may indicate that

banks are facing riskier borrowers and hence charging them with higher rates or that banks need to

cover larger expenses due to loan losses. So a decline in the spread is interpreted as an improvement in

efficiency. Undercapitalized banks faced distorted incentives in extending new loans and were prone

to excessive risk taking and high spreads. The excess risk taking was also encouraged by the

government by retaining a controlling stake in major banks that creates the expectations of future

bailout.

Intermediation margins are positively related to market power in the Columbian banking system

(Barajas et al., 1999). A study by Asli and Harry (1998) while studying bank performance that taken

interest spread and bank profitability as dependent variables and bank specific variables (size,

leverage, type of business, foreign ownership), country specific variables (macro-economic, legal and

institutional environment) as explanatory variables concluded that foreign banks are better in terms of

net profits with high interest spread and low NPAs. The study found that higher interest spread could

indicate greater banking efficiency under segmented or imperfectly competitive markets.

high wages, overhead as a share of total assets appears

to be lowest at around 1 per cent for banks in high-income countries. Large banks tend to have smaller

overheads.

The above studies are providing contradictory evidence about interest spread as bank efficiency

indicator in developing countries perspective such as in India. In the long run banking system should

be stable and efficient to enhance overall development of the country. Stability clearly requires

sufficient banking profitability, while economic efficiency requires banking spreads that are not too

large. A prerequisite to formulating effective banking policies is thus to understand the determinants

of bank profitability and interest margin (Asli and Harry 1999).

3. International Experience

3.1 Interest Spreads and Profitability

Implicit taxes such as Cash Reserve Ratios (CRR), Statutory Liquidity Ratio (SLR) and priority sector

lending are at higher level in developing countries, which is also a cause for higher spreads. There is a

positive and significant relationship between spreads and liquidity reserves in the Columbian

banking system (Barajas et al., 1999). Despite


3.2 Deposit Rates

3.3 Prudential Regulations and Banking Restructuring

One instrument to increase profitability and spread was lowering deposit rates, which lowers cost of

funds to banks. Abdourahmane (2000) by using United States data concluded that, commercial banks

ability to lower deposit interest rates diminishes when their deposits become closer substitutes to non-

bank liabilities requiring greater interest rate competition (for example ceiling rate for non-bank

financial companies were around 11 percent compared to average bank deposit rate of about 6 to 7

percent). Deposits can be inputs for the production of bank loans (an intermediation service) or

safekeeping services output provided to depositors (a non-intermediation service). The same deposits

may also be inputs to the provision of payment services (checking services). The framework shows

that the input-output nature of banking deposits may be such that banks to use their market power on

deposits to subsidize non-intermediation service fees as deposit raising strategy. Therefore reduction

of deposit interest rate does not mean a lack of competition but an increase in competition by using

another means. Banks would lower deposit interest rate provided they have market power on deposits

and non-intermediation services. Given the low-income levels in developing countries, small savers

and demand depositors may be less sensitive to the deposit interest rate and more responsive to the

convenience of bank branches and payments services for savings, safekeeping and transactions. The

public sector commercial banks are having advantage in competing via branch banking that may be

good for financial deepening. While foreign banks are competing via providing non-intermediation

banking services, which ultimately may increase domestic banks efficiency and foster domestic

financial deepening (Bernado and Douglous, 2001).

While most of the studies emphasized market related financial efficiency measures (spread and

profitability) to boost banking sector, equally good number of studies emphasized the importance of

prudential and regulatory measures to increase financial health and stability of banking sector.

Prudential tightening covered exposure and disclosure norms, guidelines on investment, risk

management, asset classification and provisioning. A study on Croatian banking system argued that

fundamental determinant of profitability is probably good management, which succeeds both in

cutting costs and managing risk prudently. It is the good prudential management rather than cost

efficiency explains the survival of more cost efficient banks in turbulent waters of transition banking

(Evan et al., 2002).

While discussing consequences of weak prudential regulation upon Russian banking system

Gidadhubli (2001) stated that due to the low minimum capital requirements a large number of small

banks were set up. Most of these banks engaged in utilizing their resources for speculative activities

such as exchanging rubles into dollars or vice versa to earn quick profits. It was reported that a few

banks even used money borrowed from government and the central bank of Russia for transactions

due to the inefficient regulation. In line with this David and Vlad (2002) found that tighter minimum

capital adequacy ratios seem to be associated with improved revenue generating capacity and more

aggressive deposit taking behavior. Well-capitalised banks face lower expected bankruptcy costs,

thereby reducing their cost of funding.

In a study of crisis and restructuring of Indonesian banking system, Mari and Manggi (2002) listed


causes for banking crisis as Firstly, a rapid expansion of the banking sector without necessary

strengthening of prudential regulations and central bank supervision. Secondly, the high

concentration of ownership in the banking sector led to weak corporate governance of banks.An even

more serious problem was the lack of ability to enforce prudential regulations because of the weak

capacity and capability of central bank supervisors, widespread corruption and political interference.

Further it was believed that banks would be bailed out in case of bank failure by the government and

there was no effective exit mechanism for failed banks.

In response to crisis, Indonesian Bank Restructuring Agency (IBRA) was set up to supervise and

restructure the banking sector. The IBRAs mandate was to close merge or take over and recapitalise

troubled banks. The banking reforms also included steps to intensify the supervision of a number of

the largest private banks, rehabilitation and surveillance plans for a number of smaller private banks

and mergers of state owned banks. The IBRA has recommended change in management some banks,

reducing number of banks to consolidate and increase scale and scope economies that will increase

performance and profitability. It also recommended higher capital requirements for banks, as

Indonesian banks need to operate in riskier environment. The high capital requirement is widely

practiced in high-risk environment such as community banks in United States. It also recommended

efficient deposit insurance scheme by giving incentive to better performing banks by linking the

annual premium payments to their risk profile.

Asli et al., (2000) stated that in crisis period rate of growth of real deposits falls significantly, in fact

banks lose other sources of funding (such as inter bank credit, foreign loans, commercial paper or

equity) more rapidly than deposits, as witnessed by significant increase in the ratio of deposits to

assets. On the assets side real credit slows down and NPAs increased significantly, banks shifts their

portfolio away from loans to shift to safer assets to economize on regulatory capital. The drop in

sources of funds calls for an effective management of liquidity in times of crisis.

capacity to evaluate financial contracts and safety with banks (Souza 2000). However the approach to

achieve the above objectives should be market friendly and cost effective with greater reliance should

be placed on incentives and less on supervision.

Institutional restructuring encompasses reforms of the legal framework, prudential regulations,

accounting standards and banking supervision. Operational restructuring deals with the flow

problems caused by sizable non-performing loans and high operating costs and aims at improving

corporate governance.

3.4 Reforms and Restructuring of Banking System in India

In the above backdrop there was a need for further reforms and prudential regulations to be placed

in adjust with the technological advances and economic conditions. The economist's case for

justifying prudential regulation in the field of banking is due to the existence of two types of market

imperfections i.e., externalities-social cost of failure of banking system far exceeds private costs and

information failures-as small depositors/clients does not have

The Working Group of RBI under chairmanship of M.S.Verma while identifying three weak banks,

which fall short of every competitive benchmark. In every business segment, in cost, productivity


and profitability, in technology and systems support, in internal control and risk management

procedures, in their mode of operation and servicing of customers. The restructuring plan has been

prepared for these banks. And suggested seven parameters covering three major areas i. Solvency

(capital adequacy ratio and coverage ratio), ii. Earning capacity (return on assets and net interest

margin) and iii. Profitability (include operating profit to average working funds, cost to income and

staff cost to net interest income plus other income), The core of the strategy to restructure weak

banks suggested by Verma Committee comprises five components.

1. Shed the load of non-performing assets by creating an Asset Reconstruction Fund (ARF) to

clean the balance sheet of large Non-PerformingAssets (NPAs).

2. Shed excess manpower by introducing a voluntary retirement scheme (VRS) or a 25 per cent

reduction in salary in case of failure to do so.

3. nstall a credible and effective governance model at the board and the top management level.

4. Review and change the core processes in each of the banks, principally those pertaining to

technology, customer service and human resources and

5. Establish a Financial Restructuring Authority (FRA) with statutory banking to oversee the

restructuring process of the three weak banks.

In stage one, focus will be on operational, organizational and financial restructuring of the units

involved, which aims at restoring their competitive efficiency. In the stage two of restructuring, after

investor attention, privatization or mergers will then assume relevance. In line with the above

recommendations, during 2001-02 RBI has taken many policy measures in the context of the banking

sector which were guided by the objectives of strengthening the banking sector through rigorous

operational, prudential and accounting norms set to gradually converge to international standards

(basal capital standards). Banks were encouraged to prepare themselves to follow international

practices in respect of assigning capital for market risk. Initiatives in the direction of redefining the

regulatory oversight of the Reserve Bank such as mitigating the potential conflict of interest regarding

issues of ownership, risk-based supervision, consolidated accounting and supervision, off-site

monitoring and inspection are underway. Policy attention was also drawn to issues in management of

NPAs and related supervisory initiatives, including the setting up of Asset Reconstruction Company

and the revival of weak public sector banks. New avenues of banking activity were created in

insurance and the access of the banking sector to foreign direct investment was enhanced during 2001-

02(RBI 2002).

The RBI has also initiated certain structured actions in respect of the banks now widely known as

Prompt Corrective Actions (PCA), based on trigger points in terms of CAR, Net NPA and Return on

Assets (ROA). The Reserve Bank, at its discretion, will resort to additional actions (discretionary

actions) as indicated under each of the trigger points. In this process a high-risk bank will be subjected

to enhanced supervisory focus through a shorter supervisory cycle and greater use of various

supervisory tools like targeted inspections, intensive off-site surveillance, structured meetings with

bank management, commissioned audits etc. In addition to these above prudential norms, progressive

deregulation of interest rates, shaving of priority lending commitments and moderating statutory

liquidity and reserve norms have steadily oriented the banking sector towards the market (Patel 2000).


Although tightening prudential requirements may limit banks flexibility and profitability in the short

run, doing so may encourage banks to look for new and innovative ways to invest, thereby expanding

the production-possibility frontier. It is therefore essential for a policy maker to be able to identify and

come up with the best (often the least-cost) policy response. However one cautious about excessive or

inappropriate regulation, as it can stifle efficiency and invite moral hazard problems and induce

entities to move out of over-regulated business to less regulated ones (Reddy 2001).

Financial sector in India is changed over the past decade due to technological innovation, deregulation

of financial services, external financial liberalization and organizational changes in the corporate.

Competition among financial institutions further increased due to emphasis on market-based

outcomes and resultant deregulation of interest rates on deposits as well as on the advances.

Technological advances in information technology and securitisation bill, reduction in employee

strength through voluntary retirement schemes has greatly reduced costs and non-performing assets

thereby increased profits, productivity and efficiency among Indian banks with simultaneous increase

in customer services with competitive costs. However there is still a large gap to be filled in improving

financial health and providing quality customer services, reducing NPAs, and improving corporate

governance practices in banks in general, and in PSBs in particular compared to international

standards. There was a convergence of performance among public, private and foreign banks in recent

years due to adoption of technology. There was an increasing importance of non-interest income in

recent years for all banks. Even though PSBs comparing poorly with the other two categories in terms

of profit, PSBs had the highest efficiency in deposit mobilization. And foreign and private banks are

efficient in value added services.

the

1990s. Another indicator of bank efficiency is NPAs, although the net NPAs of the commercial banks

in India have witnessed a decline over the past several years, they are still high. Some studies argued

region of operation play a greater role in amount of problem loans than the type of ownership of banks.

That is banks functioning in less developed regions were having high NPAs compared to banks

functioning in developed regions. While most of the studies emphasized market related financial

efficiency measures to boost banking sector, equally good number of studies emphasized the

importance of prudential and regulatory measures to increase financial health and stability of banking

sector. It is the good management rather than cost efficiency explains the survival of more cost

efficient banks in turbulent waters of transition banking. International experience Russian and

Indonesian banking systems were good examples of inefficient central banks and prudential

regulations. Due to low minimum capital requirements a large number of small banks were set up

which were weak, which lead to banking crisis in later periods. International experience also shows

that high concentration of ownership, weak corporate governance, lack of ability to enforce prudential

regulations, weak central bank supervisors, widespread corruption and political interference are major

reasons for banking crisis in most of the developing countries.

5. Conclusion

There has been a decline in spreads and intermediation costs widely used measures of efficiency in

banking and a tendency towards their convergence across all bank-groups. The establishment

expenses as percent of total expenses drastically declined in private and foreign banks due to these

banks have been able to contain their wages and salary expenditures compared to the public sector

banks however private and foreign banks spend more on technology up gradation. As a result

turnover per employee in the private banks doubled relative to the public sector banks during


According to the Varma committee of RBI, solvency, earning capacity and profitability were major

thrust areas banks to follow. The committee also recommended shed the load of non-performing

assets by creating an asset reconstruction fund, shed excess manpower by introducing a voluntary

retirement scheme, establishment of a financial restructuring authority with statutory banking to

oversee the restructuring process of the weak banks. The RBI has also initiated certain structured

actions in respect of the banks now widely known as prompt corrective actions, which have hit the

trigger points in terms of capital adequacy ratio, non-performing assets and return on assets.

In short, only cost effective, costumer focused, technology driven, capital strengthen banks which

follow prudential regulations can only sustain in attracting depositors and borrowers in the current

competitive environment. The individual banks have to be competitive on the one hand and the

regulator should ensure that the prudential norms should ensure needed stability and financial health

of banks without jeopardizing the proper incentives to banks.

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Analytical Approach of Psychological Stress of the Building Construction Workers

Babu.M

Abstract

Introduction

Doctoral Student

Department of Project Management

Himalayan University-Arunachal Pradesh

Construction industry plays a vital role in development of infrastructure of a country. About 50% of

the subjects of unorganised sector belonged to construction industry in our country. The questionnaire

based cross sectional prospective study was undertaken to know the socio-economic status and the

psychosocial stress & strain faced by the workers due to occupational exposure. The average age of

the workers was 30.6±10.9 years. Majority of them (79.2%) were literates and earned below Rs 5000/-

. About 59% were smokers and 37% consumed alcohol. The mean duration of present occupational

exposure was 8.6±8.0 years. The workers were victim of different health impairment like

occupational health hazards, psychosocial stress & strain etc. The psychosocial stress & strain were

due to long working hours (73.3%), lower wages (60.4%), job uncertainty (56.9%), poor

communication among workers with supervisors (22.7%). Exploitation by labour contractor, gender

discrimination, sexual harassment was observed. Low job satisfaction (42.4%), injuries & accidents

(47%) were also reported. About 94.6% of the workers were not aware of the different social security

schemes. This occupationally exposed group of workers was victims of different psychosocial

stresses & strains and other health impairments.

Industry plays a significant role in building up of a nation. In India, construction industry plays a vital

role in the development of infrastructures. It is one of the most hazardous industry. Workers belonged

to organised/formal and unorganised/informal sectors. About 340 million (roughly 92% of total

workers) workforce is engaged in unorganised sector of which around half of them are alone from the

construction industry (NCEUS, 2006; Das, 2007; Ramesh, 2009; Rajasekhar et al., 2009). In India it is

one of the fastest growing industries with an annual growth of 10% (CIDC, 2003; Baruah, 2008). It

consisted of different types of job categories like raj mistry, centering mistry, marble mistry, painter,

electrician, plumber etc. Usually the workers are poor and daily wage earner. They are victims of

different health hazards, diseases, psychosocial / occupational stress and strain.

Work stress is generally known for negative impact on productivity and job satisfaction among

workers of different professions (McVicar, 2003; Ng et al., 2005; Ibem et al., 2011). Job stress & strain

was believed to be one of the causes of absenteeism, low workers morale, high rate of accident and

poor turnover rates (Wahab, 2010). Ibem et al. (2011) reported that the stress & strain among

construction workers were due to work load, fixed time frame, lack of training, poor communication

among workers as well as with supervisors. Leiter (1991) and Ng et al. (2005) suggested that the other

causes of stress & strain among workers were inadequate room for innovation, lower wages,

ambiguity of job requirement, inadequate knowledge of project objectives, long working hours, tight

schedules and unfavourable working conditions etc. Lower wages and exploitation by labour

contractors to the unorganised construction workers was noted by self employed women's association

(SEWA, 2000).


Health Safety and Executive (HSE) suggested health priorities for construction industrial workers

with reference to manual handing of building materials, hand & arm vibration syndrome and cement

dermatitis (Beswick et al., 2007). It was also found that the level of stress among construction workers

was more in respect of four major factors (too much work- 64.1%, pressure - 59.9% , ambitious

deadlines-59.7% and conflicting demands- 52.2%). Insomnia, nausea and headaches due to

psychosocial stresses like job uncertainty, sexual harassment and gender discrimination in women

construction workers was reported by Goldenhar et al. (1998) and Linda & Goldenher (1999).

Kaminskas and Antanaitis (2010) reported that most of the occupational diseases found in

construction workers were multifactorial in nature. Huges et al. (1997) noted that psychosocial factors

like job satisfaction and social support might influence the prevalence of musculoskeletal symptoms

(Morken et al., 2000). Latza et al. (2002) and Abbe (2008) found that chronic low back pain in

construction workers might be due to awkward posture and repetitive nature of work.

Construction workers were prone to injuries and or accidents. It was observed that the prevalence rate

of injuries and accidents ranged from 5% to 41% (Shah and Jain, 2007; EI, 2008; Mehta, 2009; Joshi et

al., 2011). Some other reports suggested that the prevalence rate of injuries and accidents ranged from

18 % to 35% (Van et al., 2008; Lipscimb et al., 2006; Decklin, 2009; Hola, 2007; FACE, 2006).

According to Express News Service (2008), about 17% of the construction workers met with fatal

accidents.

Regan et al (2011) reported that the average body mass index (BMI) of 60.26% construction workers

were high and might be categorised as obese. The average BMI of Indian men were 20.1±2.7 kg/m2 as

stated by Kuriyan et al. (2008). It may be noted that subcutaneous fat acts as a thermoregulator of the

body (Chatterjee, 1985).

According to ILO (2012), the concept of decent work for construction workers is the work carried out

in a safe physical environment under national law and international conventions. Government of India

and State Governments enactedActs and framed Rules for governing the work condition and workers

of industries. Though the different social security schemes / measures / programmes for different

working groups associated with informal / unorganized sectors including agriculture had been well

circulated through mass medias by the authorities, yet the construction worker were not aware of these

schemes and as such did not availed off (NCEUS, 2007; NCEUS, 2009a; NCEUS, 2009b). Li & Peng

(2006) stated that 90% of the migrated construction workers from rural area were excluded from urban

social security schemes and they had to pay for their own health care. It was further stated that they

could not save money from their daily wages for their old age.

Research studies on occupational health especially psychosocial stresses in construction industries in

India are lacking. Considering the meagerness of reports the present study was undertaken with the

following objectives.

1. To know the socio-economic status of the construction workers.

2. To assess the psychosocial stress and strain faced by the workers due to exposure to work


Materials and methods

Results

This is a cross sectional prospective study. Different employment units/groups located in & around

north-east part of Kolkata were selected by stratified random sampling technique. Attempts were

made to cover all the workers in each selected unit.Aquestionnaire was prepared, tested and validated.

These subjects were apprised of the study protocol. Written consent of each subject was taken for their

voluntary participation. The questionnaire was administered to each worker separately individually

after gaining his/her confidence.

The individual responses were noted in proforma. The socioeconomic status (age, sex, marital status,

caste, income, literacy etc), occupational exposure history, psycho-social problems (bullying,

mobbing, frustration, job satisfaction, boredom, job stress and strain etc.), main medical complaints

were noted and different anthropometric measurements were taken. Scoring for psychosocial stresses

on a scale of 5 had been done following procedure of Maier (1970a) and Brown (1974). The

psychosocial problems for bonding and cohesiveness had been scored on the scale of 19 as suggested

by Seashore (1954) and Maier (1970b). Height, weight (bare foot) was measured following standard

techniques. Body mass index (BMI) was calculated using the formula as suggested by World Health

Organisation (WHO) (WHO, 1995).

BMI = W / H2

where W= weight in Kg (s)

H = height in metre (s)

Collected data was analysed using EPI INFO (WHO) software (2007).

The study covered 255 (male- 246, female-9) exposed construction workers. Distribution of subjects

according to socio-economic characteristics had been presented in Table 1. It was observed that there

were 57.6% Hindus and rest were Muslims. They mainly belonged to general caste (62.4%). It was

seen that 60.8% of the subjects were married. About 79.2% of the subjects were literate. Most of the

workers (57.2%) were earning below Rs.5000/-. It was difficult to maintain an average family size of 5

members with this income. In some cases, it was observed that the subjects' expenditure was higher

than their income.

Construction of building involved different job categories. Here according to job similarity the

subjects have been grouped into six categories. Percentage distribution of workers according to job

categories had been shown in Figure 1. The main job categories were helpers- 48.2% followed by raj

mistry- 24.7% and supervisors-12.2%. The workers were exposed to different types of working

environment.


Table 1 Distribution of subjects according to socio-economic characteristics

Income


Figure-1 Percentage Distribution of Workers According to Job Categories

Table 2 Physical characteristics of the subjects (mean ! SD)

ParameterMale Female Total

n=246 n=9 n=255

Age (Years)30.2±10.8 39.7±11.3 30.6±10.9

(16-67) (27-65) (16-67)

Height (cms)162.6±5.9 146.8±3.9 162.0±6.6

(147-185) (141-155) (141-185)

Weight (Kgs)52.9±8.4 41 .3±6 .9 52.6±8.6

(36-77) (35-56) (35-77)

The physical characteristics of the subjects had been depicted in Table 2. It may be seen that the

average age of the subjects was 30.2±10.8 years. It was further observed that the main bulk (64.3%) of

the subjects belonged to 20-39 years age groups. The mean height and weight of the studied subject's

was 162.0±6.6 cms and 52.6±8.6 Kgs respectively.


Figure-2 Percentage distribution of BMI (CED & Obese) in Workers

The calculated average BMI of the subjects was 19.96±2.75 kg/m2 (13.72-29.87 kg/m2). The mean

BMI of male subjects was 19.99±2.73 kg/m2 and that of female was 19.10±3.52 kg/m2. However, it

was noted that about 32.7% of the subjects were suffering from chronic energy deficiency (CED)

disorder with BMI < 18.50 kg/m2. It was further observed that BMI>24.99 Kg/m2 was found in 5.6%

subjects and they might be categorised as obese. Percentage distribution of CED and obese workers is

presented in figure-2. It was observed that mild CED was found in 58% of the subjects followed by

moderate CED in 22% of the total CED suffering subjects.

About 59% of subjects were smokers and smoked mainly bidi. It was also noted that 65.7% of workers

in the age groups of 20-39 years were smokers and smoked on an average of 12 bidis per day. The other

habits of chewing tobacco (21%), pan (12%), pan masala etc. were also noted. Addiction to alcohol

was observed in 37% of subjects mainly consumed country liquor. About 10.7% of them beat their

wife and children due to psychosocial stress & strain like anxiety and frustration. Alcohol

consumption due to workplace bullying, mobbing, anxiety and frustration was found in 24.4% of the

subjects.

The subjects were exposed to different types of working environment. The mean duration of present

occupational exposure was 8.6 years. About 53% of the workers were working for more than 5 years

duration. It was observed that they worked for on an average of 10.0 ± 1.9 hours per day.About 97.8%

of the subjects worked on no work no pay basis. They worked from morning 6 a.m. to evening 6 p.m.

with a lunch break for half / one hour. At times, they had to work even upto 12 hours. The study

revealed that 47% subjects were victims of injuries/ accidents. The different types of injuries/

accidents as reported were mainly due to (a) cut by sharp objects (54.2%), (b) falling of objects from

height (22.5%), (c) fall from height (15.8%) etc. The workers were not habituated of using preventing

Bulletin of Research Developments Vol.2, No.2, (5 March 2015)th


measures like helmets, boots, gloves, masks etc. Proper cleaning and washing of hand & legs after

work or during lunch break was not a common practice. Rough and keratotic skin of palm & feet was

found. They wore stained & dirty clothe for days together at work was also observed.

Distribution of workers according to their psychosocial stress and strain had been presented in Table 3.

It was found that a good number of construction workers were suffering from job stress & strain. This

might be due to low wages (60.4%), job insecurity (56.9%), repetitive work (21.6%) and bullying by

superiors (22.7%). It was observed that 42.4% of the subjects were not satisfied while doing same type

of work. Bullying by superiors at workplace might be responsible for anxiety and of frustration among

22.7% of the workers. About 20% of older workers felt that the new workers were not cooperating

with them at the workplace. It was observed that majority of them (56.9%) were uncertain about their

next day's engagement.

About 98% of the subjects felt that they were part of the working group and would like to stay with the

same group. The mean bonding cohesiveness value for staying in same group for exposed subjects

was 14.6 ± 2.5 in a total score of 19. It was found that about 94.9% subjects were neither aware nor

availing off the different social security measures / schemes like old age pension, accident benefits,

education benefits, home loan, maternity leave etc. as available presents.

The present study showed lower percentage of schedule caste and scheduled tribes worker's

participation contrary to the findings of Baruah (2008). The literacy rate (79.2%) of the present

study was more or less comparable with that of Census 2011 (West Bengal) report applicable to

general population (77.08%).

The average height (162.0±6.6 cms) of the subjects of present study was similar to the Indian standard

height (160.7±98 cms) (Chakrabarti, 1997). The mean weight of the studied subjects (52.6±8.6 Kgs)

was slightly less than the average Indian's standard weight of 55.2±11.3 Kgs (Chakrabarti, 1997).

Discussion

Types of psychosocial stress & strain Numbers of subjects Percentage

Low wages 154 60.4

Job insecurity145 56.9

Repetitive work 55 21.6

Bullying by superiors 58 22.7

Not satisfied by work 109 42.7

Table 3 Distribution of Workers According to Their Psychosocial Stress and Strain


The average weight of the subjects of this study was more than that of the subjects of the earlier studies

carried out in unorganized sector (Chatterjee et al, 1982; Gangopadhyay et al., 2004; Gangopadhyay

et al. 2009). The average BMI for both male (19.99±2.73 kg/m2) and female (19.10±3.52 kg/m2)

subjects of this study was found to be within normal range (18.50 to 24.99 kg/m2). Kuriyan et al

(2008) found similar average BMI for Indian males. According to WHO classification, BMI is

associated with degree of underweight and or over weight which at times may be associated with risk

of suffering from some diseases (WHO, 1995; WHO, 2000). The present study revealed that about

32.7% workers were found to suffering from chronic energy deficiency (CED). Majority of subjects

were suffering from mild CED (58%). A higher percentage of general population of West Bengal

(male-40.5%, female-44.9%) was suffering from CED compared to that of present studied subjects

(NNMB, 2002).

About 59% subjects were smokers and they used to smoke to get some relief from the work stress &

strain. In a study conducted in south India reported by Sellappa et al. (2010) revealed that lesser

number of construction workers were smokers than our study. Similarly the prevalence of addiction to

alcohol of this study (37%) was more or less similar to the findings of Sellappa et al (42%). They

usually consume alcohol to get relieved from the jobs stress & strain and for enjoyment. Excess intake

of alcohol might result in loss of mental state; resulting in misbehaviour with general public, their

family members etc and may lead to scolding, assaulting & beating of wife and children etc. (Tiwary et

al., 2012). The other cause might be their helplessness of un-fulfilment of their daily needs.

Alcoholism might be responsible for other health impairments like liver ailments etc (Tiwary &

Gangopadhyay, 2011; Tiwary et al., 2012). The mean duration of occupational exposure was 8.6

years. A study by Sellappa 2010 revealed higher average duration of occupational exposure (13.3

years) than the present study. The worker of our study worked for 10 hours on an average which is

more compared to than that of Indian Factories Acts maximum stipulated time of 48 hours in a week

(IFA, 1948). The major cause for working for long hour might be to get maximum overtime

allowances. In a report by Beswick et al. (2007) showed similar work pressure and ambitious

deadlines was found which resulted in work stress & strain among construction workers.

The accident & injuries of this study (47%) was less than the report of several authors (Mbaye et al.,

2001; Yu et al., 2002; Husberg et al., 2005; Lipscomp et al., 2006; Zeng et al., 2008; Shah & Mehta,

2009). Similarly, Joshi et al. (2011) and Fatality Assessment & Control Evaluation (FACE, 2006)

programme observed lower rate of (5% to 35%) injuries/ accidents of construction workers than the

present study. The finding of SEWA indicated similar rate of injury as observed in the present study

(SEWA, 2000). These injuries/accidents were responsible for loss of man days.

The Psychosocial stress & strain amongst the studied subjects was observed in 60.4% subjects. The

Psychosocial stress & strain might be due to low wages, job insecurity, job satisfaction, anxiety,

frustration, repetitive work and bullying by superiors. Ibem et al. (2011) found out lower prevalence

rate of psychosocial stress & strain than that of our studied subjects. More or less similar percentage

prevalence rate for bullying by superiors to the new/junior workers was also noted by Ibem et al.

(2011). Our findings of anxiety due to work burden and fixed time frame compulsion of work were

more or less similar as obtained by Beswick et al. (2007) and Ibem et al (2011).


The feeling of unsatisfaction, monotony, boredom due to repetitive work as obtained in our study

correlated the study of different authors (Huges et al., 1997, Morken et al., 2000, Leiter, 1991, Ng et al.

2005). The present study revealed that low back pain was in 58% of subjects. It might be due to

awkward posture, carrying of load, repetitive work etc. Morken et al., (2000) and SEWA (2000)

reported of higher prevalence rate of low back pain compared to our findings. However, Latza et al.

(2008) reported of lower prevalence rate for low back pain.

Our findings on psychosocial stress & strain due to ambiguity of job requirements (56.9%) showed

lower prevalence rate than Baruah (2008) and correlated the study of Leiter (1991) and Ng et al (2005).

All most all the subjects (98%) felt that they were part of the working group and would like to stay with

the same group. The main reasons most probably were familiarity of work culture and active help by

the fellow workers in case of need. Comparatively, lower percentage of workers worked in a group in

the study of Ibem et al 2011.

Majority of the subjects (94.9%) were neither aware of nor availing of the different social security

measures / schemes like old age pension, accident benefits, education benefits, home loan, maternity

leave etc. though it was already in vogue. For spread of this information each & every subjects were

apprised of the different schemes / measures separately, individually during collection of data. Higher

prevalence rate for workers availed off the different social security schemes were reported by

Rajshekhar et al. (2009).

The construction workers were poor. Majority of them were literate. Their wages were low. Hence,

fulfilment of their basic needs was a difficult proposition. The workers were exposed to different types

of working environment. The subjects were suffering from chronic energy deficiency (CED) disorder

and obesity. Smoking and alcohol intake is a problem. Excess intake of alcohol might result in loss of

mental state; misbehaviour with general public, their family members etc. They worked for long

hours. The workers might be lacking in concentration towards work due to tiredness and work load.

The injuries/accidents were responsible for loss of man days. High job demands might aggravate work

stress & strain among the workers. The workers were suffering from job stress & strain. Low wages,

job insecurity, repetitive work and bullying by superiors were some of the causes of occupational

stress & strain. A good number of subjects were suffering from low back pain. They were neither

aware off nor availed off the different available social security schemes. Individual awareness during

collection of data was made. However, awareness programmes was necessary for their overall

upliftment.

Conclusion


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Web Technology in Electronic Customer Relationship Management

(With Special Reference to the Consequence of Computerized

Consumer Relation on Client Satisfication

a Study on Web Banking in India)

Shamik Palit

Doctoral Student

Department of Computer Science & Engineering

Himalayan University-Arunachal Pradesh

Abstract

E-CRM emerges from the Internet and web technology to facilitate the implementation of CRM; it

focuses on Internet or web-based interaction between banks and their customers. In particular, E-

CRM enables banks to provide appropriate service and products to satisfy the customer and enhance

customer loyalty, Furthermore, E-CRM features are vital for managing customer relationships online.

They are generally referred to as concrete website functionality or tools and they are required for

customizing, personalizing and interacting with the customer. Without E-CRM features, CRM could

not be realized on the Internet.

In fact, in the literature, there appears to be an absence of theoretical model for effects of ECRM

features on customer satisfaction in general, and E-CRM features affect service quality, which in turn

leads to customer satisfaction in particular. Consequently, this research attempts to fill the information

gap. The aim of this thesis was to examine the effect of various E-CRM features at the different stages

of transaction cycle (pre-transaction, during-transaction, and post-transaction) on customer

satisfaction on banks websites in India.

Six basic hypotheses were tested, as parts of a theoretical model of these E-CRM features against

seven service quality dimensions selected from the SERVQUAL instrument and discussed in detail in

Chapter (3). Data was collected through a questionnaire which was administered in the Western

Region (Maharashtra) of India in April/May 2010. The empirical analysis was carried out using a

structural equation model. The results form of this research indicates that the use of E-CRM in

building customer relationships effects online customer satisfaction and service quality. The

efficiency of E-CRM program determine the level of which online features, such as site

customization, membership, site information, privacy, security, product or service customization,

alternative payment and frequently asked questions would be implemented on banks' websites.

This research contributes to knowledge in several ways. Most importantly, it illustrates the roles of E-

CRM features in enhancing service quality and customer satisfaction at different stage of transaction

cycle. In particular, this research highlights the critical dimensions of service quality, which managers

in the banking sector should invest in their customer satisfaction strategies.


Introduction

Research Background

The Electronic Customer Relationship Management (E-CRM) is relatively new area of research and

is undergoing significant change as new technologies are beginning to blur the lines of distinction

between information channels. Customers are interacting with businesses across far more information

channels that in part have emerged through the Internet and are related to information and

communication technology applications. Information and communication technology is fast

replacing labor-intensive business in all activities. Since the early 1990s information and

communication technology has been merged to become a viable substitute for labor- and paper-

intensive banking processes between and across all banks. This has been seen in the widespread use of

theATM, credit cards, debit cards, smart cards, and lending through E-CRM via the Internet. This type

of computer communication systems-based bank-to-bank, bank-to-customer and customer-to-

customer transactional and electronic data interchange has been referred to as Electronic Commerce

(EC) (Elias, 2000).

Over the past decades, Customer Relationship Management (CRM) has become an important tool in

increasing a firm's profitability by enabling it to recognize the best customer and satisfy his needs, in

order to make him remain loyal to the firm's products or service (Thomson, 2005; Nguyen & Mutum,

2012).

The internet has changed the way of all business processes especially in the banking industry. The

adaptation and strategic use of information & communications technologies (ICT), change began

with introducing the internet which is considered the starting point for other developments in many

fields form academic to business. One of the most important emerging developments is E-commerce,

which has become crucial to all businesses. Due to its information-intensive nature, the banking

industry can benefit greatly from the Internet.

The Internet platform offers new opportunities to banks to improve customer services and gain

competitive advantage by providing customers' requirements and needs through internet-based

services. Whereas, from a marketing perspective, the internet is not merely another marketing tool but

it can also be a strategic tool to help banks increase customer satisfaction and loyalty.

The objective of any service company that offers online service is to develop a service that not only

meets customer expectations but goes beyond. It must endeavour to offer full satisfaction to the

customer, as this has an important effect on customer retention (Petterson 1997; Sedon, 1997). In

the virtual-world, this presents a major challenge, as customer can easily switch from one service

provider to another at low cost (Robert & Liu 2003).

Therefore, in a web-based banking service, retaining existing customers could be considered more

economic than acquiring a new customer (Van ., 2001). Therefore, banks are laying much more

emphasis on CRM as a tool for managing customer relationship and increasing customer satisfaction

and loyalty. Customer satisfaction is a critical issue in the success of any business system which uses

traditional or manual processes or online which uses the electronic processes in order to identify

customer's reaction to the goods or services (Broderick &Vachirapornpuk, 2002).

et al.,

et al


In a highly competitive online environment, Internet-based companies need to understand how to

achieve customer satisfaction as this is critical for establishing long-term client relationships

(Peterson 1997). It is evident from the fact that over the last five years, customer satisfaction

surveys have become common in many financial institutions. Thus, a fundamental understanding of

factors impacting web-customer satisfaction is of great importance to e-business. Furthermore, there

is a clear need for research in web-customer satisfaction in seeking long-term profitability from on-

line companies and traditional companies that are “Net-enhanced” (Pather&Remenyi, 2002).

The role of an Internet website has changed from a simple indication of presence on the World Wide

Web (WWW) into a vital marketing and customer communication tool. Today, a website represents a

new platform for customer interaction (Bradshaw & Brash, 2001; Pitt 2006; Zineldin, 2000).

Recent research indicates that certain features on a website can create and maintain customer

satisfaction. These are so-called electronic CRM (E-CRM) features (Robert 2002; Robert &

Shen, 2005). E-CRM is a body of knowledge that deals with the application of CRM principles in the

new e-commerce context. E-CRM features range from advanced applications, such as database-

driven product customisation tools, to simple ones, like a line contact information (Feinberg .,

2002; Scullin 2004).

Bose (2002) described the essential and vital function of customer-oriented marketing is to gather and

accumulate related information about customers in order to provide effective services. CRM involves

attainment analysis and use of customer knowledge in order to sell goods and services. Reasons for

CRM coming into existence are the changes and developments in marketing environment and web

technology. Relationship with customers is a newly distinguished key point to set competitive power

of an organization. Companies gather data related to their customers, in order to perform CRM more

effectively. Web has opened a new medium for business and marketing scope to enhance data analysis

of customers' behaviors, and environments for one to one marketing have been enhanced. CRM lies at

the heart of every business transaction.

Roh (2005) study used customer satisfaction as one aspect of CRM success.Authors studied the

effect of internal efficiency for CRM process fit, customer information quality and systems support

on customer satisfaction as intermediate factor and profitability as final factor.

This study explores the CRM system success model that consists of CRM initiatives: process fit,

customer information quality and system support as intrinsic success: efficiency and customer

satisfaction as extrinsic success. These constructs underlie much of the existing literature on

information system success and customer satisfaction perspectives.

Moezzi (2012) studied the presence or the absence of meaningful difference between the levels

of user customer satisfaction of E-CRM system and non-user customer satisfaction of E-CRM system

and the base of his research was on the model of “The customer satisfaction (ACSI)” for private sector

industry. The company investment of E-CRM system lead to upgrading level of user group

satisfaction in comparison with nonuser group and this is a success for investment. The meaningful

et al.,

et al.,

et al.,

at el

et al.,

et al.,

et al.,

Review of Related Literature


difference between user and non-user satisfaction is hidden in presenting services issue. As the user

group makes use of better and more economic services than the non-user group due to using E-CRM

system, its level of satisfaction is higher. This rustle is in tune with the researches carried out by other

researchers such as Becker (2009) who prove the positive effects of technological and

organizational performance of CRM on obtaining satisfaction and customer retention in which they

found that there is a positive relation between technological and organizational performance of CRM

on obtaining satisfaction and customer retention.

Chang (2005) found that E-CRM evolved recently with the emergence of information technology

such as Internet and web technologies. It integrates and simplifies all customer related processes

through the Internet and helps leverage integrated information on customers to improve customer

acquisition, customer development and customer retention by managing deep and long-lasting

relationships. Firms can understand and anticipate customer needs much more easily than before

through online activities tracking and analyzing customer behavior.

E-CRM applications aim at providing additional value for customers via the use of the company's

website. E-CRM is a part of the company's overall CRM strategy to manage customer interaction

regardless of the time and the channel the customer chooses (Feinberg 2002). According to

Kotorov&Radoslav (2002), E-CRM is the use of information and communication technology to

improve customer service in terms of scale and scope. An example is 24-hour-a-day web-banking,

which is a threefold increase in scale compared to the working hours of a bank's brick-and- mortar

office. The increase in scope is manifested in offering value-added banking services online. The

potential of E-CRM for building fruitful customer relationships can only be realised if the company is

organised in such a way that it can quickly and efficiently respond to customer requests. It is

imperative that the customer requests are handled across different communication channels,

involving different organisational units (Bradshaw & Brash, 2001; 2002). There are many items that

can be described as features of E-CRM. These features are illustrated in Table 1

et al.

et al.,

Table 1Items Described as Features of E-CRM

Some Important Features of E-CRM Authors

E-CRM is vital for managing customer relationships online. Feinberg et al., 2002

E-CRM roughly refers to concrete website functionality or tools. Robert & Shen, 2005

E-CRM is needed for e.g., customizing, personalizing and interacting with the

customer.Nysveen, 2003

Without E-CRM, CRM could not be realised on the Internet Robert et al., 2002

E-CRM are also often labeled as “value-adding services.” Nysveenet al., 2001

Online banking is an example of E-CRM features. Kotorov, 2002

The main driver for E-CRM adoption seems to be a commonly shared belief of improving customer

loyalty and retention (Rosenbaum & Huang, 2002) through the enhancement of customer satisfaction.

Researchers and practitioners alike are claiming positive effects of E-CRM on customer satisfaction.

However limited empirical evidence has been provided for these claims. Since the late 1990s, CRM

has been one of the fastest growing businesses and energetically debated topics among practitioners


The main driver for E-CRM adoption seems to be a commonly shared belief of improving customer

loyalty and retention (Rosenbaum & Huang, 2002) through the enhancement of customer satisfaction.

Researchers and practitioners alike are claiming positive effects of E-CRM on customer satisfaction.

However limited empirical evidence has been provided for these claims. Since the late 1990s, CRM

has been one of the fastest growing businesses and energetically debated topics among practitioners

and academicians. Companies have invested or are planning to invest huge amounts to implement

CRM strategies tools and infrastructure in order to win the battle in an increasingly competitive

economy (Moedritshcher&Mussnig, 2005).

As a result, the growth in demand for CRM solutions has been increasing. Gartner estimated that the

market for CRM software exceeded $7.4 billion (£3.6 billion) in 2007, up 14 per cent from 2006

(Barker, 2007). Forrester estimated moderate growth in the CRM industry through 2012. Forrester

suggested that worldwide revenues for CRM solution providers reached $8.4 billion (£4.08 billion) in

2006 and would continue to grow to $10.9 billion by 2012. Forrester anticipated that overall CRM

spending will remain steady with services taking an increasing share of vendors' revenue (Band,

2007).

To understand satisfaction in the web context, we need to have a clear understanding of what is meant

by customer satisfaction.According to Bleuel (2004), customer satisfaction is defined as equivalent to

making sure that product and service performance meets customer expectations and occurs when the

marginal utility of a transaction is equal to or greater than preceding acquisitions.

Most of the researchers found that service quality is the antecedent of customer satisfaction (Bedi,

2010; Kassim&Abdulla, 2010; Kumar ., 2010;Yee 2010; Naeem&Saif, 2009; Balaji, 2009;

Lee & Hwan, 2005; Parasuraman ., 1988), therefore, understanding service quality issues within

the new delivery channel becomes very important to satisfy the customer (Broderick

&Vachirapornpuk, 2002). For this, the study is intended to evaluate effect of Electronic Customer

Relationship Management on customer satisfaction in Indian personal banks. This work aims to

provide empirical evidence about E-banking services quality and measurement framework to

evaluate the effect on customer satisfaction.

Establishing strong relationship with the customers has attracted an ever increasing attention from all

types of organizations. Many organizations have started to apply new marketing strategies by building

strong communication channels with their customers and using new technology to facilitate this

process. The ultimate objective is to improve customer satisfaction, loyalty and retention. These goals

can partially be achieved by enhancing the quality of the service provided to the customers. Recent

advances in technology; particularly the emergence of the Internet has offered new opportunities for

organizations to utilize this new tool as an effective, efficient and economic means to market their

products and services

The banking industry has been the first to jump on this opportunity and fully exploit the potential an

innovative web-based service can offer. Many banks have begun to use the Internet as a new market

channel to offer their customers a variety of services 24 hours a day and 7 days a week.

et al et al.,

et al

Research Problem


However, in a highly competitive industry, such as banking, a web based service presents a major

challenge, as the vast amount of information the web places at its disposal, offers the customer a

variety of choices, as well as ample opportunity to compare and contrast the services of one bank with

others. Further, customers in India expect some sort of personalized attention and care in their

dealings with banks. Banks are, therefore, confronted with the challenge of offering the best possible

service and in a prompt and efficient manner so as to ensure that they retain their customer base.

According to Khalfan . (2006), reasons for E-banking infrastructure investment include the

promise of transaction cost reduction by limiting overheads associated with bank staff and bank

branch costs and to provide better services to customers who increasingly desire 24 hour banking.

Indeed, Almogbil (2005) notes that a common reason for banks adoption of E-banking is to maintain

the bank's competitive position and image.

In order to improve the level of service quality, many companies need to set up web sites that provide

reliable information and competitive services to customers. The rapid development of information

and communication technologies during the 1990s has enabled companies to introduce web services

and to present a move to more personalized web services based on behavioral patterns. For this,

bankers first need to understand the attributes that customers use to judge service quality and monitor

and enhance the service performance.

In addition, to gain a competitive advantage in the personal banking sector in India, the knowledge

about defining high-quality service delivery over the internet becomes crucial for banks that want to

stay competitive in the marketplace. If banks have knowledge about the quality attributes they can use

to measure the quality of their online services and the overall satisfaction of their customers with each

of these attributes, it would be much easier for them to take necessary measures to improve the overall

service quality.

Web banking has become an important element of marketing strategy in all banks; many researchers

have investigated the effect of e-banking on the banks return on investment.

However, while the importance of web banking has been researched all over the world, there is a

scarcity of research efforts in this field in Asian countries, in general, and in India, in particular. This

research makes an effort to study the impact of e-banking and the multitude of challenges it presents

in terms of ensuring customer satisfaction so as to retain the Bank's customer base.

In addition, the importance of the current research is derived from the importance of the banking

sector in India. This sector contributes significantly to the national economy and improving the

performance of the Indian banks is expected to have positive effects on all economic sectors of the

country.

Furthermore, the web service quality is one of the most important topics in the banking sector. The

quality of service offered can contribute significantly to the level of customer satisfaction. However,

the area of service quality with regard to the banking sector has not been adequately researched in

India. Finally, the increasing importance of E-CRM in establishing and maintaining long-term

et al

Research Importance


relationships and ensuring customer satisfaction through personalized web services, in general, and

E-banking, in particular, merit further investigation.

The study is intended to evaluate effect of E-CRM features on customer satisfaction in India web

banking. This work aims to provide empirical evidence about the quality of Web-banking services and

measurement framework to evaluate the effect on customer satisfaction.

In order to meet the aim of this research, the following objectives are pursued:

ResearchAim and Objectives

Aim

Objectives

Objective 1

Objective 2

Objective 3

Objective 4

Research Questions

Potential Outcomes

: Identify the types of web service provided by the personal banks sector in India to

maintain a strong relationship with the customer.

: Evaluate the levels of customer satisfaction in the personal banks sector in India.

: Explore the customer perception of the service quality provided by their banks in India.

: Understand how web service quality can support the implementation of successful E-

CRM system in the personal banks sector.

1. In order to achieve the aforementioned objectives, this research must answer the following

questions:

2. What are the main types of web-based services provided by banks in India?

3. Does the E-CRM features have an effect on the customer perception of service quality in the

personal banks sector in India?

4. Does customer perception of the service quality affect the level of customer satisfaction?

5. Does the E-CRM features have a direct effect on the customer satisfaction in the personal

banks sector in India?

This research is expected to shed light on how the implementation of E-CRM features is related to

satisfaction. The findings of this research offer important managerial insights in assisting banks define

or reassess their E-CRM initiatives.


The E-CRM model indicates significant features which banks should implement on their sites in the

quest for enhanced customer value and increased competitive advantages. An understanding of the

connection between satisfaction and service quality would help managers to essentially focus on

upgrading services that will lead to increased satisfaction by securing these basic services and adding

value to their services. Banks stand to gain a competitive edge that may attract customers to return.

Better understanding of customers' varying needs across segments leads to better planning of how to

target marketing campaigns and investments for maximum competitive impact. This will provide

some guidelines to managers on the level of quality and types of services that should be given more

emphasis in order to attract varied customer segments.

In addition, the E-CRM process offers a high level framework of web technology contribution

towards forging long-term customer relationships. Banks should be aware of the value of technology

in driving growth in a customer-focused organization. Synchronizing the entire business strategies

technology, in general, and the web in particular, could help banks improve their profits and increase

market share in the long run.

This section provides and outlines the contents of the thesis; moreover, it discusses the key purposes of

the remaining chapters.

presents an outline of why such research was undertaken, along with discussing the

research motivations and the practical and theoretical outcomes. Furthermore, the aims of the research

and the key objectives and questions are addressed. Finally, the research procedures are explained and

an overview of the chapters is presented.

This study is conducted on India e-banking sector, therefore, it is important to identify

the place in which this study is carried out (which in this case is India). This chapter describes India in

brief, its culture, economy, education and politics. It also explores the Information and

Communication Technologies (ICTs) and the situation of e-banking in India.

This chapter provides the literature review for this PhD thesis. It covers the CRM

from different perspectives and distinguishes between CRM and E-CRM (which is the focus of this

research) explaining the main features of what can E-CRM add to the business for organizations in

general. In addition, it explores the main activities of E-CRM in financial institutions. Finally, it

presents findings suggesting how E-CRM could increase customer satisfaction in the online business,

in general, and web banking, in particular.

This chapter discusses the methodological approach of this research in order to

achieve its objectives and answer its questions. It highlights the rationale behind choosing the selected

methods. Moreover, advantages and disadvantages of each strategy are discussed.

Thesis Structure

Chapter One:

Chapter Two:

Chapter Three:

Chapter Four:


Chapter Five: In this chapter, a quantitative methodology is used to answer the questions of this part.

The data on this part has been collected through questionnaire and analyzed quantitatively using

Statistical Package for Social Sciences (SPSS) software to describe sample and test the proposed

hypotheses. Structural Equation Modeling (SEM) was used to measure the relationships between the

independent and dependent variables, help to gain additional insight into causal models and explore

the interaction effects and pathways between variables. The latest version of Amos 20.0, a software

package used for SEM to give the power to easily perform SEM and also enable data to be imported

directly from SPSS.

Chapter Six:

Chapter Seven

This chapter discusses the results of the study. Furthermore, this chapter views and

discusses the results along with the literature review presented in chapter three. Summary of the study

methodology is briefly presented, in addition to reviewing the research question and objectives

: This chapter aims to assess the results of quantitative analysis and view the main

findings and their implications for the research questions and objectives it begins with discussion, the

findings and implication for the study hypothesis and questions, followed by the contributions of this

research to knowledge. Finally, the study limitations, recommendations and future directions of

research conclude the chapter. Figure (1) summarizes the structure of this thesis.

Figure 1 Thesis Structure


Contribution of Research to Knowledge

The contribution of this study could be viewed based on the following:

Academic Contribution

Managerial Contribution

The findings of this study have important implication for the research as it provides further support to

the studies that examine the relationship between E-CRM and both factors of customer satisfaction

and service quality.

A number of studies have examined some of these study variables, such as the relationship between

customer satisfaction and service quality, or between customer satisfaction and ECRM or CRM, or

between service quality and E-CRM or CRM. But few of them integrate all of these variables together.

Another contribution is that it will add to academic contribution in investigating the study variable (E-

CRM, customer satisfaction and service quality) in the financial institution and banking sectors, in

addition to helping enhance the Asianic and Indian literature of these topics. This study combines

between these variables to figure out their interrelationship. Accordingly, this study could be

considered, a recognizedAcademic contribution.

Several studies assume the relationship between service quality and customer satisfaction considered

positive and some examine the relationship between customer satisfaction and CRM, and only few

examine the relationship between all these variables (E-CRM, customer satisfaction and service

quality).

The findings of this study have another importance to the banks who are offering electronic banking

services as well as the banks that are planning to offer e-banking services as the results of this study

show a positive relationship between the study variables and the qualitative analysis contributes to the

support this relationship.

Implementing E-CRM is considered costly and requires a lot of preparation and sometimes

restructuring and re-organizing the work approach, methods, systems, and procedures. It may also

require preparation time in addition to an experimental period before it could be fully operational. All

these costs should be paid for the possibility to generate the benefits in the future.Accordingly, the top

management, particularly, needs to have strong evidence in order to realize that the (ROI) the Return

on Investment will be good.

This study is considered particularly of great value, as it provides evidence on the positive relationship

of implementing the (E-CRM, customer satisfaction and service quality) based on experimental study

on three main, large and recognized banks in India, which will assist in providing implication and

insight for those banks and other banks and financial institutions as well.

The researcher tried to develop an understanding of E-CRM features effect on customer's satisfaction

in India web banking. Although the attempt was valuable, it was not without its limitations. However,

the limitations of the study offer opportunities for future research.

Limitations


First, the development of the conceptual framework was based on the evaluation of the previous

presented frameworks that were available during the time of conducting this research between the

beginning of 2009 and the end of 2012. The constructs of the framework were justified as well as the

relations among these constructs based on the aim of the framework as a guide for E-CRM success to

achieve a customer's satisfaction. Second, the information about E-CRM and its use in the web

services of Indian banks is still in its infancy stage at the time of the study.

Third, the sample for this study came from Internet users in the business-to-customers context, the

results are limited to the e-banking environment and may not be applicable to business-to-business

relationships, as the growth of Internet transactions in the business-tobusiness sector is escalating,

studies designed to investigate the relationships between ECRM, service quality and customer

satisfaction in a business-to-business environment may well be worthwhile.

Fourth, while this research posits a positive relationship between E-CRM features, service quality

and customers satisfaction, E-CRM features may have changed rapidly since the point of time this

study was conducted. Therefore other research may be necessary to incorporate other “new” factors

of E-CRM not included in this study. Moreover, this study included some E-CRM features in the three

stages while there are many other features of E-CRM not included in this study.

Fifth, in this survey, customer perceptions towards E-banking in specific were assessed. More in

depth studies could be carried out in future to investigate customers' perception on the use of E-CRM

towards E-commerce in general. Such as entertainment, health, government, and the education sector

since E-CRM may imply different meanings to product-based versus service-based industries.

Finally, the study is conducted only in the western region of India, (Maharashtra), due to limitations

on time and resources. Which may have an effect on the generalization of the findings?

The limitation of the study provides implication for further research. For example, as the study

respondents were mainly from the Western Region of India; further studies could be conducted in

other regions, to generalize the

result across different groups of web bank users in India. Further, a comparative study between the

different regions of India could be conducted in term of banks E-CRM services and analyze the

variances (if it is proven to be a variance).

Another recommendation could be investigating the E-CRM services at the National banks versus

foreign banks branches that are operating in India, or a study may be conducted to compare the E-

CRM services at the banks based on nature of the ownership. Furthermore, studies may focus on

individual customers "retail customers" and compare them with "corporate customers."

Furthermore, the results of this research are limited to the web bank users in the business-to

customer's context and may not be applicable to business to-business relationships. As the growth

of Internet transactions in the business-tobusiness sector is increasing, it may be worthwhile to

undertake further research to investigate the relationships between E-CRM features and customer

satisfaction in businessto-business.

Recommendations and Suggestions


Another important future research study which could be conducted could be to investigate the effect

of use E-CRM on customer satisfaction in other sectors in India, such as education, health,

government and communication sector since E-CRM features may imply different features in the

different industries. Furthermore, future research could be conducted to test the effect of other

features of E-CRM that was not included in this study on customer satisfaction.

In addition, future research needs to verify the service quality dimensions in web banking which are

not included in this study. Also, this study was conducted to find the relationship between E-CRM

features, service quality and customer satisfaction from the customer's viewpoint. The study could, in

the future, be conducted to explore these relationships from banks' viewpoint. This could further

confirm or repudiate the results in this study.

Studies show evidence on how the E-CRM could be of a great benefit to business profitability,

increasing customer satisfaction along with their loyalty. This could be applicable to a wide range of

sectors and fields; the banks and financial institutions considered one of those sectors that could

benefit from the adoption of E-CRM greatly, if it is designed and implemented properly.

Several researches have studied the relationship between (E-CRM, customer satisfaction and service

quality), but few of them combine all these elements together. For that reason, this study could be

considered quite important and its results will have academic and managerial value.

The results of the study show that there is a positive relationship between Pre-transaction, During-

transaction, and Post-transaction E-CRM features and customer satisfaction.

Summary and Conclusion

Thus it could be expected that there is a positive relationship between E-CRM features generally and

customer satisfaction. Another result was there is a significant relationship between web banking

service quality and customer satisfaction.Additionally the results find a positive relationship between

E-CRM features and service quality.

This study discusses the results thoroughly through quantitative methodology and provides some

implications related to the study variables, which mainly focus on how to enhance and strengthen the

Eservices and E-CRM system, in addition to providing a number of suggestions related to improving

those services, taking into consideration the remarks provided by the interviewees from the three

banks studied.


Through the discussion, the research objectives and questions have been answered in details. A brief

about the research question could be as follows:

This study has aimed to identify the types of web service provided by banking sector in India

in order to maintain a strong relationship with the customer in the banking sector from the

analysis of the main three banks based on the information generated during the interview.

The E-services vary in its nature from one bank to another, but they have similar and basic

services, such as account checking, request specific information by email. In addition to that

these banks are serving both individuals and corporate/business customers.

Evaluating the levels of customer satisfaction in the banking sector in India; the results shows

that there is good level of customer satisfaction regarding the Eservices, and when analyzing

the elements of customer satisfaction, the most positive and least preferred elements have

provided suggestions to strengthen the positive elements and other suggestion is to overcome

those least preferred elements.

Exploring the customer perception of the service quality provided by their banks in India.

This study examined the level of service quality provided by three main banks in India. The

result shows that there is a good level of service quality provided, and some elements of the

service quality achieve a high degree of acceptability, while others get low level of

acceptability. These elements were pointed out and recommended for improved actions.

Help understand how web service quality can support the implementation of successful E-

CRM system in the banking sector; this relationship has been discussed and the results show

that web service quality can support the implementation of successful E-CRM system, when

customers find what they are looking for in easy and direct way, the web contains full

information, and the possibility of providing help to the customers it will motivate them to

use the E-services generally and ECRM in particular. For example, they indicate that they are

using the E-services and they think that the E-CRM could help them to response to their

inquiries. But some features of the E-CRM (Pre-, During- and Post-) limit their ability for the

best utilization. The need for frequent updating of information, the inability to customize

some services according to their individual need, is some of the limitations. On the other

hand, they point out a number of good features which facilitate their interaction.

·

·

·

·


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5. Editor's Name : Dr.Subramonian


Address : Indian Institute of Research and Management


Karamadai

Coimbatore 641 035.

6. Names and addresses of individuals who own the newspaper and partners or shareholders holding

More than one per cent of the total capital.

I Dr. Subramonian (Individual)

Indian Institute of Research and Management


Coimbatore 641 035.

I Dr. Subramonian hereby declare that the particulars given above are true to the best of my

knowledge and belief.

Date 01 2015 Signature of Publisherst

September

Date 01 March 2015st

Bulletin of Research Developments September 2015

Education

Transcript of Bulletin of Research Developments September 2015