Tag: Articles on Management

PREDICTION OF BANKRUPTCY RISK IN INDIAN BANKS: AN APPLICATION OF ALTMAN’S MODEL

 

*Prashant Kumar **Kavita,

ABSTRACT

After the financial crisis and pressure of implementing Basel III norms, financial solvency has become top priority for the banking sector, because there are some factors like failure of management, competition, increasing NPAs, growing incidence of fraud, inability to meet regulatory requirements which create the probability of risk and leads to financial distress. In this context, measuring financial health of a bank has become an imperative need. Bankruptcy risk has always been a matter of concern not only for bankers but for all stakeholders in the business world because the risk can seriously jeopardizes the affairs of the business. Therefore proper assessment of bankruptcy risk is required to smooth functioning of banks and proper implementation of Basel III regulations. It is contemporary to study solvency position of Indian banks. The axle of this study is to predict the financial health and risk of bankruptcy by applying Altman Z Score model in the selected Indian banks. This model highlights that the position of the banks, under study is healthy and comparatively sound. It can be conclded that the selected Indian banks which are under study falls in ‘safe Zone’ as per Z-score criteria and there is not any chance of financial distress.

Keywords: Bankruptcy risk, EBIT, Financial health, financial ratios, Z-score.

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Introduction

Banks play significant role in the financial stability of any economy as banking sector is the main component of financial system. A stable and financially sound banking system leads to economic development of any country. Now these days, financial stability has become the major issue for banking sector because there are some factors such as failure of management, external factors, competition, increasing portfolio of NPA, growing incidence of fraud, inability to meet regulatory requirements which create the probability of risk and leads to financial distress.  Banking sector faces various types of risk viz. credit risk, market risk, liquidity risk, foreign exchange risk, political risk, sovereign risk, interest rate risk, operational risk etc. and high intensity of risk leads to business failure (Campbell 2007).

There are five stages of business failure such as incubation, financial embarrassment, financial insolvency, total insolvency and confirmed insolvency (Fitzpatrick 1932). Bankruptcy or insolvency is the form of financial failure refers to where a firm cannot meet its current obligations, when the current obligations exceed the current assets.

Bankruptcy is a severe matter and very common thing among companies and financial institutions. There may be many reasons like changes in market policy, inflation and political reasons which have led to bankruptcy (Movaziri et al, 2012). Bankruptcy can be used as a proxy for measuring economic sustainability. Because it is considered that bankrupt banks have weak position while non-bankrupt banks have strong economic sustainability and long term survival (Amin Jan et al, 2015).

Global financial crisis blessed with inflation, currency deterioration, economic uncertainty, high interest rates and many other uncontrollable factors was enough to break down the resilience of financial sector. The Financial soundness of banking sector is backbone of every economy. In this context, it is very crucial to analyze the financial soundness of domestic banks (Nishi sharma et al, 2013). Bankruptcy prediction is of immense importance to both for lenders as well as for the investors. There are many techniques that have developed to assess the bankruptcy risk. Bankruptcy is a worldwide problem.  Bankruptcy histories shows that a company with efficient management, strong financial performance and capable to grow without any distress symptoms, can be turned out to be a sudden bankruptcy. In the period from 2000 to 2011, it has been witnessed a wave of bankruptcies in the giant companies like, Lehman Brothers, Enron give examples to the world that no matter how strong the company is, it can face bankruptcy if it is not well managed. On 30th November 2001, Enron bankruptcy was reported and appealed for bankruptcy protection on the 2nd of December 2001. The other company is Lehman Brothers which was the fourth largest investment bank in US.  Lehman filed for bankruptcy protection in 2008 to avoid the possibility of being distressed (Anita et al, 2013). There is a dire need to manage risk of bankruptcy as it is the critical issue for banks. Prediction of bankruptcy is one of the challenging task for every organization (Fawad et al, 2014). In 2008, the largest bankruptcy in U.S. history represents an example for Indian banks to manage their cash flows efficiently .Thus careful attention to the impact of bankruptcy risk level on bank’s profitability is necessary because intense risk puts serious threat to banks and increasingly level of risk may create a chance of closing down the bank’s operations. Financial soundness is of prime importance in the current crisis and financial scams scenario in the banking sector (Parul Chotalia 2014). In the wake of the financial crisis of 2008, Basel-III accord was released in 2010. The New Basel Capital Accord (popularly known as Basel-III) is desirable regulation and major agenda for the commercial banks in India and across the world. The main focus of Basel-III is on the estimation of capital requirements which would ensure financial stability and determine the common standards of banking regulation. From the perspective of Basel III, to maintain the higher capital requirements and to comply with Basel III norms are the concerned areas for banks. Thus, Indian banking sector need to predict bankruptcy risk and analyze their financial statements because the risk of bankruptcy directly hits the financial strength and earnings of banks. Therefore proper assessment of bankruptcy risk is required to smooth functioning of banks and proper implementation of Basel III regulations. The prediction of business failure is an important step for taking timely corrective and remedial measure for protecting business from the problem of bankruptcy. The basic concern of prediction is to evaluate the terms of credit and ensure repayment safely (Roli Pradhan 2014). The problem of business failure is attributed to both financial and non-financial causes such as poor planning, inefficient management and fraud. There is need for predicting financial failure on time for taking curative measures in relation to financial investments (Venkata Ramana et al, 2012).

There are many different models to forecast the complex problem of bankruptcy. There may be many  internal credit rating model used  for bank which improves their current predictive power of financial risk factors and explained how banks assess the credit worthiness of the borrowers and how can they identify the defaulters so as to improve their credit evaluation process (Kishore Navin 2011).  Many internal and external users of financial statements like banks, credit rating agencies, underwriters, auditors, policy makers and regulators analyze company’s financial position. For this purpose different approaches and models are used. During financial and economic crisis selection of model for bankruptcy prediction is essential.  For example when bank financially assists a company, bank predicts risk of bankruptcy of that company prior to financial help. The prediction models are used to check the bankruptcy and can be applied to modern economy to predict distress and bankruptcy of one, two and three years in advance (Sanobar Anjum 2012). But the most influential model is Altman Z score model due to most acceptable and widely used. The well-known Altman model developed by Edward Altman in 1968 called Z score model has been identified as independent variables (financial ratios) as well as the relative weight of each variable which represents dependent variable (Z) through an analytical study of a sample of US companies in 1968 (Ali Abusalah et al, 2012).

ALTMAN’S Z-SCORE MODEL

The Z-score model was constructed by Edward I. Altman in 1968 (Assistant Professor of finance at New York University). It is a multivariate formula and powerful diagnostic tool that measures the probability of bankruptcy within a two year period with proven high degree of accuracy. This model is known as bankruptcy prediction model and has gained popularity since 1985 (Altman 1968). Altman used 22 variables from the financial reports of 66 publicly held manufacturing companies in USA with assets of more than $1 million. The 66 companies were categorized into 2 groups, 33 failed and 33 successful. Altman’s Z-value is derived through a multiple discrete analysis (MDA). The discriminant analysis was applied to calculate the coefficients for Z-score equation. Altman first compiled 22 variables describing the standard ratio categories. He reduced his selection to five ratios. This model is also called multiple discriminant analysis model (MDA).  Z score analysis is capable of predicting default through combining various financial ratios (M Jayadev 2006).  Altman model may be used as an indicator and evidence to determine the firm’s bankruptcy and credibility.  Altman’s z-score model predicts the corporate default and measure financial distress status of companies. Z-score is calculated by multiplying the coefficients by each of financial ratio. Linear combination of 5 common financial ratios has been widely used to predict default risk.  Altman’s model has found 95.0% accuracy rate and also called Zeta. This model is internationally accepted. The Z score original model was developed in 1968 for manufacturing firms.  Altman again devised the Z score to be adapted for private companies in 1983.This model was further developed to create the Z Score model for emerging market companies and for non-manufacturers in 1993. This model kept the first four variables. Altman’s models are:

  • Original model for manufacturing firms
  • Revised model for privately held firms
  • Revised four model for non-manufacturing or emerging market

 Table 1 ALTMAN’S INDEX                          

                                                             COEFFICIENTS
RATIOS Original Model 1968Revised model
1983 		Revised four model
1993
X1 = WC/TA1.210.7176.56
X2= RE/TA1.410.8473.26
X3 =EBIT/TA3.30.3.1076.72
X4 = MVE/TL0.60.0.421.05
X5 = S/ TA1.090.998N/A

 

Table 2 Altman’s benchmark

Score 1968Score 1983Score  1993Interpretation
Z > 2.99Z > 2.90Z > 2.60Non-bankrupt firms, Safe zone
1.81 < Z < 2.991.23 < Z <2.901.10 <Z < 2.60Difficult to predict, Grey zone
Z < 1.81Z < 1.23Z <1.10Distress zone, bankrupt firms

Source: Author

FINANCIAL RATIOS

Bankruptcy predictions are based on accounting ratios and other financial variables. Linear discriminant analysis was the first statistical method applied to explain which firms entered in bankruptcy (Richard et al, 2014). The most widely used tool for financial analysis is financial ratios. Financial analysis discloses the financial performance of firm and indicates the possible causes standing behind the deterioration of financial performance (Obaid Saif 2011). Ratios have been using for many years by investors, creditors, lenders, stockholders, auditors and others who may get substantial losses as a result of business failure. Researchers have used financial ratios to construct business failure prediction models. Ratio analysis is used in various part of the world for measuring financial accuracy and creditworthiness of the firms (Vineet et al, 2014).

Financial ratios are the significant component of financial analysis to evaluate and analyze the financial statements. Altman used five standard ratios in Z score viz. liquidity ratio, profitability ratio, leverage ratio solvency ratio, activity ratio. Financial ratios are used to assess profit and risk and provide the basis for estimating the results of business operations and explaining how well a business is doing (Khalid Al-Rawi et al, 2008). Financial ratios are good indicator of the probability of bankruptcy.  While analyzing the ratios, formulas are used to determine the financial position of the firms. Ratio predicts the financial soundness of the firms whether a firm is going to bankrupt or not (Bashar 2015). Financial ratios have been used for making comparison among the firms in same industries. Efficient performing firms have been identified through their financial analysis and higher performance of firms makes their transition towards adopting new regulations easily (Ravi Chandran 2015).

VARIABLES USED IN ALTMAN’S Z-SCORE MODEL

X1 Working Capital/Total Assets

This is the most valuable variable to predict bankruptcy. This liquidity ratio calculates the ability of the firm to finance its short term obligations. A decreasing figure will suggest the higher chance of bankruptcy. This ratio is the measure of liquid asset of firm in relation to total capitalization. WC (working capital) = current assets – current liabilities.

X2 Retained Earnings/Total Assets

This variable indicates the ability of a firm to accumulate earnings using its assets. The higher the ratio the better as it suggests the firm can accumulate earnings. A young firm will usually display a very low RE/TA as it has not had the time to build up cumulative profits hence the incidence of failure is much higher in a firm’s earlier years (Altman, 1968).

X3 Earnings before Interest and Taxes/ Total Assets

This indicates company’s profitability and company’s assets. The decreasing ratio indicates the firm is not earning and decreasing the profit on each investment.

X4 Book Value Equity/ Total Liabilities

This expresses the financial leverage i.e. the proportion of equity. It is directly related to solvency position of firm. It calculates how much the firm’s market value would decline before the liabilities exceeds the assets and firm becomes insolvent. If the market value of equity is below the total debt the firm becomes insolvent.

X5: Sales/Total assets

The sales of a firm depict the manufacturing capability of companies’ assets. In Altman’s model this financial ratio did not deliver any statistical significance but he still found it to be useful to default prediction because of the relationship to other variables in the model (Altman 1968).

USES OF Z-SCORE

Altman’s model still exists and used by the financial institutions to measure creditworthiness of the companies Z score is a beneficial analytical tool and the application of Altman’s failure prediction model is not constrained by geographical boundaries (Oforegbunam et al, 2011). Altman’s model provides credibility to the valuation process. It helps in evaluating the reliability statistically and providing insight into relative performance and financial viability (Altman 2000). The Z-score is the best measure for evaluating the financial soundness of a firm that shows the lower the score higher the chance of failure. The importance of Z-score can be identified by a number of studies. Altman’s Z-score model has been used to predict the financial distress in a number of sectors like empirical analysis examined 21 textile companies listed in the Karachi stock exchange, during the period 2000 to 2010. These result for bankrupted and non-bankrupted show that Altman model can give good predictions (Fawad Hussain et al, 2014), predicted the risk of bankruptcy in cement companies (N VenkataRamana et al, 2012), Measured the financial health of Indian Logistic industry (Vikas Tyagi 2014), Indian Steel industry (M.S.Ramaratnam et al, 2010), Automobile Industry of India (Sarbapriya Ray et al, 2011), Sugar Manufacturing Units (Ramana Reddy et al 2013), Seed industry in India (Praveena et al, 2012).

 Z score has been used as a tool to measure credit risk (Sairani et al, 2014), Altman score is applied to test credit worthiness of company. It can be concluded from the study that the banks face risk more consciously. The model calculates the financial soundness of corporate house in terms of Z values. Z score has originally been devised to signal the probability of bankruptcy of manufacturing firms. But it has been frequently updated to make it applicable for private companies, non-manufacturers and service industries. The model presents for more than 70% accuracy in predicting bankruptcy (Nishi et al, 2013). This study contributes to the field of accounting and finance, specifically on bankruptcy prediction in a developing country. The study is limited to only fifteen quoted firms including Food & Beverages, Manufacturing, Printing, Insurance, Trading in Ghana (Kingsley Opoku Appiah 2011). The empirical analysis by (M Sulphey 2013) examined 220 companies of BSE small cap for financial solvency using Z score. The result showed that only 79 companies were in safe zone. 117 companies were difficult to predict and 24 are the bankrupt firms. The study proved the efficiency of Altman model in predicting failures. The wide usage of the Z-Score Model as a measure of financial distress in the economic and financial research points out that it is widely accepted because it is a simple and consistent measure of calculating bankruptcy.

A popular risk measure in the banking and financial solvency related literature that reflects a banks probability of insolvency is the Z-score. Its widespread use is because of its simplicity and it can be calculated using only accounting information (Laetitia Lepetit 2015).

CRITICS OF Z-SCORE

This model does not always have the same accuracy to different business entities. This model is criticized for discriminating only among three borrower behavior; high, indeterminate, and low default risk. The weights in the Z-score model will be constant or not over any but very short periods, there is no reason to expect. The model ignores important factors (such as qualitative and macroeconomic factors) that may play a significant role in the default or non-default decision.

 OBJECTIVES OF THE STUDY

  • To analyze the financial soundness and risk of bankruptcy in selected Indian public sector and private sector banks.
  • To compare the financial soundness of selected Indian public sector and private sector banks.

 

 MATERIAL AND METHODS

The present study is an attempt to analyze bankruptcy risk in banking sector through the application of Altman Z-score which helps in forecasting the financial health of bank. In order to achieve the objectives of research, a descriptive and analytical approach has been used. Five banks were selected from public sector and five banks were selected from private sector. The present study predicts Z score for 10 Indian banks for a period of 5 years from 2011-2015. Public sector Banks namely state Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank and Union Bank of India and Private sector Banks namely ICICI, Axis Bank, Yes Bank, IndusInd bank and Kotak Mahindra bank were chosen. Data for the present study were collected from secondary sources including bank’s annual report and The Economic Times (newspaper) website for last 5 years to generate the financial ratios. The period of the study is 2011-2015. Altman Z-score model for non-manufacturer or emerging markets (1993) has been used in this study.

The revised Z-score is as:

Z = 6.56 X1 + 3.26 X2 + 6.72 X3 + 1.05 X4

Whereas:

Z = overall score

X1 = working capital / Total Assets

X2 = Retained earnings/ Total Assets

X3 = Earnings before interest and taxes/ Total Assets

X4 = Book Value of Equity / Total Liabilities

 

Altman’s Z score value

 Z Score > 2.60 shows firms are in safe zone, Z < 1.10 reflects firms are in distress zone, 1.10 <Z< 2.60 indicates firms are in grey zone and difficult to predict.

 

 

 

 

 

HYPOTHESES

Two hypotheses have been formulated according to the objectives of study:

Null hypothesis H0: Banks are likely in financial distress and going to bankrupt within twelve months.

 Alternate hypothesis H1: Banks are not likely in financial distress and not going to bankrupt with in twelve months.

H’0:  There is no difference between the financial performance of public sector banks and private sector banks.

H’1:  There is difference between the financial performance of public sector banks and private sector banks

 RESULTS AND DISCUSSIONS

This study was intended to identify the risk of bankruptcy in selected Indian public and private sector banks. Average Z-score have been calculated for 5 Indian public sector and private sector banks from 2011 – 2015. The score would help to identify the financial viability of the banks. This can be presented as:

                         Figure1 Average Z-score of banks (2011-2015)

    Source: Author

It can be seen from the graph that all 10 banks comprise five public sector and five private sector banks come under safe zone. The Z score value of selected Indian banks shows that no banks are going to bankrupt. All banks are in safe zone as their Z score values are more than 1.1                   

 

Figure 2 Z score value for public sector banks

Source: Author

 Public sector banks secured Z score value more than 2.6 means no banks are in distress zone, all banks are safe. This shows bank under observations are not facing bankruptcy. SBI secured highest value among public sector banks in 2015.

Figure 3 Z score value for private sector banks

Source: Author

The graph indicates all five private banks are in safe zone as their Z score value is greater than 2.6. IndusInd bank got highest value among private sector banks. In comparison of last year, Z score value has decreased for IndusInd, Axis bank, Kotak and ICICI bank, but banks position is in safe zone.

Table3 Z SCORE BASED RANKS

Sr.noBANKSAverage z score 2015Z score rank 2015Average z score 2014Z score rank 2014
1Bank of Baroda5.534825.43452
2State bank of India6.269815.71041
3Punjab national bank5.045165.06235
4Canara bank5.142145.12253
5Union bank of India5.077455.03156
6Yes bank4.2333104.307310
7ICICI4.882184.87169
8Axis bank4.878694.93437
9IndusInd bank5.169135.07814
10Kotak Mahindra bank4.889874.92368

Source: Author

Altman model assigns highest rank to SBI among 10 Indian banks. The second rank is assigned to Bank of Baroda which is followed by IndusInd bank. However, other banks are also in safe zone as they secure more than 2.6 score. Z score for Yes bank is the least which is followed by Axis bank.

Figure4 Z score value for Indian public and private sector bank

Source: Author

Z score value of selected Indian banks in 2015 is more than 2.6. In 2015 SBI got highest value among all banks. But as compared to 2014 few banks show decreasing trend such as PNB, Axis bank, Yes bank and Kotak bank. Z score value for IndusInd bank, ICICI, Union Bank of India, Canara bank, SBI and Bank of Baroda has increased as compared to 2014. The graph shows that public sector banks have secured greater score than private sector banks it means public banks are financially sounder than private banks. Although private banks are in safe zone and their financial performance is satisfactory.

HYPOTHESIS TESTING

H0: null hypothesis banks are in financial distress and going to bankrupt within twelve months has been rejected while the alternative hypothesis has been accepted.

The calculated Z score indicates that each bank has got score more than 1.1. So banks are in safe zone. The average Z-score reveals that no banks are going to bankrupt, as all banks are financially healthy.

H’0: The second null hypothesis there is no difference between the performance of public sector banks and private sector banks has been rejected.

Alternative hypothesis has been accepted that there is difference between the performance of public sector banks and private banks. The greater score for public banks shows that public sector banks are financially sounder than private sector banks. Financial performance of public banks is better than private banks.

CONCLUSIONS

The prediction of business failure is very crucial for financial managers, analysts, investors and other users of financial statements.  Z score model is useful to estimate the financial soundness of any entity. The financial ratio is the most significant factor in bankruptcy prediction. In the present study it has been tried to know whether selected Indian banks are in distress zone or not.  The efficiency of Altman model has been highlighted in the present study. The study estimates Z score value for 10 Indian banks comprising five public and five private sector banks. Conclusively it has been witnessed that by using Altman model for a period of 5 years, all banks are financially sound as they all got Z value more than 2.60.There is difference between the financial performance of public sector banks and private banks as public banks have secured greater Z score value than private banks. This shows that the public banks are financially sounder than private banks (Deepak et al, 2014).   The attainment of greater performance would determine safe credit norms, better management of earnings, assets, capital that would easily absorb the risk exposure and ascertain the stability and long term survival of banks. The present study would help the banks to put themselves on the track of Basel-III. It can be concluded from the study that Edward Altman model is a useful tool for investors, managers and other stakeholders to predict the financial failure that can evaluate bankruptcy risk of organizations. The present study is expected to provide efficient framework to policymakers as well as bankers while making investment decision.

 

RECOMMENDATIONS

Based on the result and conclusion from the present study, the following recommendations should be given as a consideration to Indian banks for effective management and good performance. Basel norms should be given special concerns specially capital regulations that may strengthen the risk absorbing capacity of banks. In order to improve risk analysis practices, efforts should be made to strengthen the risk management system of banks. The adoption of sound management practice and corporate governance will definitely reduce the chance of bank failure. The special training efforts should be made to enhance the capabilities of staff members. Banks should not only rely on Altman model or financial ratios as a tool to predict bankruptcy but also other tools should be considered. Banks should identify and evaluate the factors that determine the probability of default. Banks should evaluate Z score on regular basis

 

SUGGESTIONS FOR FUTURE RESEARCH

In present study an attempt has been made to predict the bankruptcy in selected Indian banks using Altman model, One can use other tools to predict bankruptcy. The Altman model for bankruptcy prediction can be used in other sectors. This type of study can be explored in future studies as Bankruptcy risk puts bank in distress zone or leads to failure. Further research can be done to extent observation years or sample used. The research can be done on testing the efficacy of various bankruptcy risk models and compare them to find out the best model. The analysis of this study can be repeated for other economies using the same methodology.

 

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ANNEXURE

SBI                                                    in cr.20152014201320122011
Current assets1543723.21385924.31208328.81017855.07923371.44
Current Liabilities137698.0596412.9695455.0780915.09105248.39
Total Assets1910381.71695821.614708061254604.141118487.81
Net sales/Revenue152397.07136350.8119657.1106521.4595525.58
EBIT3108173210931081.7231573.5416291.89
Shares746.57746.57684.03671.04635
Reserves and surplus127691.65117535.6898199.6583280.1664351.04
Total Liabilities1910381.71695821.614708061254604.141118487.81
WC1406025.11289511.31112873.7936939.98818123.05
Z score7.72125347.93461485.32372715.285092055.0843825
X1=working capital/Total assets0.73599170.7604050.75664210.746801280.7314546
X2=Retained earnings/Total assets0.55196350.8646190.06676590.066379630.05753397
X3=Earnings before interest and taxes/Total assets0.16269880.01893420.02113240.025166140.014566
X4=Book value of equity/ total liabilities0.00039070.00044020.00046510.000534860.00056773
      
PNB20152014201320122011
Current assets448499.77403214.66345623.17332395.67280057.3
Current Liabilities17204.8915093.4415019.1513524.1812328.27
Total Assets603334535326.47463857.89444669.82365996.97
Net sales/Revenue46315.3643223.2541893.3339711.5329804.4
EBIT119551138410907.377971.856901.45
Shares371362.07353.47339.18316.81
Reserves & Surplus38708.435533.2532323.4326028.3719720.99
Total Liabilities603334535326.47463857.89444669.82365996.97
WC431294.88388121.22330604.02318871.49267729.03
Z score4.9645835.08121485.06147575.016253255.10196371
X1=working capital/Total assets0.71485260.72501780.7127270.717097220.73150614
X2=Retained earnings/Total assets0.04335860.05566980.06968390.058534150.05388293
X3=Earnings before interest and taxes/Total assets0.019814890.02126550.02351450.017927570.01885658
X4=Book value of equity/ total liabilities0.00061490.00067640.0007620.000762770.00086561
Bank of  Baroda20152014201320122011
Current assets589793.9540657.7423288.6361770.56284836.83
Current Liabilities22329.417811.514703.3811400.469656.73
Total Assets692659.15641693.03532432.06435921.01348740.45
Net sales/Revenue42963.5638939.7135196.6531981.8423884.49
EBIT9915.109291.038999.156774.615932.72
Shares443.56430.68422.52412.38392.81
Reserves & Surplus393913555531546.9227064.4720600.3
Total Liabilities692659.15641693.03532432.06435921.01348740.45
WC567464.58522846.25408585.22350370.1275180.1
Z score5.80622625.46141745.34167675.580406425.48436168
X1=working capital/Total assets0.819255150.814791840.767394090.8037467610.789068489
X2=Retained earnings/Total assets 0.03855370.005637960.059250600.0620857210.059070578
X3=Earnings before interest and taxes/Total assets0.014314540.014478930.016901960.0155409120.017011849
X4=Book value of equity/ total liabilities0.000640370.000671160.000793560.0009459970.001126368
      
Canara Bank        20152014201320122011
Current assets395704.93358452.04288347.06269245.23249534.43
Current Liabilities16629.66 14348.2911325.458891.127804.64
Total Assets531370.9 477573.56401017.15365269.07328274.12
Net sales/Revenue43750.0439547.6134077.9432341.8224470.09
EBIT6950 6796.195890.014494.235062.76
Shares475.20 461.26443443443
Reserves & Surplus31384.04 29158.8524434.7920181.8217498.46
Total Liabilities531370.9 477573.56401017.15365269.07328274.12
WC379075.27 344103.75277021.61260354.11241729.79
Z score5.4113341 5.42011944.830130574.9398709575.109386324
X1=working capital/Total assets0.7133910 0.72052510.690797410.7127734910.736365663
X2=Retained earnings/Total assets0.19454160.183076800.060932030.0552519270.053304415
X3=Earnings before interest and taxes/Total assets0.0130793 0.01423060.014687680.0123038890.015422355
X4=Book value of equity/ total liabilities0.0089429 0.00096580.001104690.0012128050.001349482
      
      
Union Bank Of India20152014201320122011
Current assets284841 257449.25228551.35197512.08175292.53
Current Liabilities9625.15 8313.297005.776799.957442.67
Total Assets371990.78 345467.62304855.04255411.49228541.78
Net sales/Revenue32083.96 29349.3925124.722383.8917684.3
EBIT5823.47 5218.105582.73688.653091
Shares635.78 741.31707.79661.55635.33
Reserves & Surplus19125.10 17734.0516588.3912437.6810555.35
Total Liabilities371990.78 345467.62304855.04255411.49228541.78
WC275215.85 249135.96221545.58190712.13167849.86
Z score5.0826630 5.015420485.070200185.1567796155.06228725
X1=working capital/Total assets0.7398458 0.721155740.726724350.7466857890.734438403
X2=Retained earnings/Total assets0.0375089 0.055485800.054414030.0486966350.046185647
X3=Earnings before interest and taxes/Total assets0.0156548 0.015104450.018312640.0144419890.013524879
X4=Book value of equity/ total liabilities0.0017091 0.002145810.002321730.0025901340.002779929
      
YES BANK     20152014201320122011
Current assets89246.2167771.9655898.5445727.6640045.72
Current Liabilities7094.186387.755418.725677.282583.07
Total Assets129076.23102628.0493685.467984.8356423.92
Net sales/Revenue11572.019981.3582947123.714658.12
EBIT3249.582687.972141.691514.071158.76
Shares417.74360.63358.62352.99347.15
Reserves & Surplus11262.256761.115449.054323.653446.93
Total Liabilities129076.23102628.0493685.467984.8356423.92
WC82152.0361384.2150479.8240050.3837462.65
Z score4.469926614.21988713.7879874.11320644.5758533
X1=working capital/Total assets0.636461330.59812320.53882270.589107590.66394979
X2=Retained earnings/Total assets0.037472890.03573720.02928840.028696250.02327488
X3=Earnings before interest and taxes/Total assets0.025176660.02619140.02286040.02227070.02053668
X4=Book value of equity/ total liabilities0.0032360.0035140.00382790.005192180.00615253
 

 

ICICI

 

 

2015

 

 

2014

 

 

2013

 

 

2012

 

 

2011

Current assets454823.74412941.64360754309472.4266803.5
Current Liabilities31719.8634755.5532133.617576.9815986.35
Total Assets614409.44559886.03504661.1456070.1390247.3
Net sales/Revenue49091.1444178.1540075.63990632369.69
EBIT19719.9116594.5713199.238401.86825.65
Shares1159.661158.041158.121155.151152.11
Reserves & Surplus79262.2672051.7365547.8459250.0953938.82
Total Liabilities614409.44559886.03504661.1456070.1390247.3
WC423103.88378186.09328620.4291895.4250817.1
Z score4.84969245.15127144.8732724.7485294.787423
X1=working capital/Total assets0.68863500.67546970.6511710.6400230.642713
X2=Retained earnings/Total assets0.03514770.15915410.1298850.1299140.138217
X3=Earnings before interest & taxes/Total assets0.03209570.02963910.0261550.0184220.017491
X4=Book value of equity/ total liabilities0.00188740.00206830.0022950.0025330.002952
      
INDUSIND BANK20152014201320122011
Current assets83098.9764446.5452896.2142367.3331488.57
Current Liabilities3718.962718.732099.991810.81694.83
Total Assets105396.984307.271206.5255785.2743941.01
Net sales/Revenue9691.968253.536983.235942.394036.13
EBIT3098.222595.961839.461230.88915.67
Shares543.50536.66533.58478.65473.95
Reserves & Surplus10101.038506.37096.674043.723350.92
Total Liabilities105396.984307.271206.5255785.2743941.01
WC79380.0161727.8150796.2240556.5329793.74
Z score5.18635735.46218815.1860395.1627874.847906
X1=working capital/Total assets0.75315280.73217720.7133650.7270110.678039
X2=Retained earnings/Total assets0.01310470.1366570.0996630.0724870.07626
X3=Earnings before interest and taxes/Total assets0.0293950.03079160.0258330.0220650.020839
X4=Book value of equity/ total liabilities0.00515660.00636550.0074930.008580.010786
      
Axis Bank 20152014201320122011
Current assets327075.25267286.2224467.5190176.4168448.6
Current Liabilities15055.6713788.8910888.118643.288208.86
Total Assets446876.72369456.99329672.6276984.5234504.5
Net sales/Revenue35478.6030641.1627182.5727026.1719343.63
EBIT13385.4411456.099303.136492.035368.27
Shares474.10469.84467.95413.2410.55
Reserves & Surplus44202.4137750.6432639.9122395.3418588.28
Total Liabilities446876.72369456.99329672.6276984.5234504.5
WC312019.58253497.31213579.4181533.1160239.8
Z score4.83164565.17892294.7638034.7220194.896607
X1=working capital/Total assets0.69822290.68613480.6478530.6553910.683312
X2=Retained earnings/Total assets0.0150010.14361040.0990070.0808540.079266
X3=Earnings before interest and taxes/Total assets0.02995330.03100790.0282190.0234380.022892
X4=Book value of equity/ total liabilities0.00106090.00127170.0014190.0014920.001751
      
KOTAK MAHINDRA BANK20152014201320122011
Current assets74384.2860993.8554355.8443649.733303.62
Current Liabilities4857.973333.822789.812553.673032.36
Total Assets101154.1184251.4880903.8863112.847818.31
Net sales/Revenue9719.878767.128042.497032.284739.06
EBIT2997.452577.152156.611623.751170.93
Shares386.18385.16373.3370.34368.44
Reserves & Surplus13754.9111889.939091.197610.416464.95
Total Liabilities101154.1184251.4880903.8863112.847818.31
WC69526.3157660.0351566.0341096.0330271.26
Z score4.77545525.33237534.7314774.8437144.766181
X1=working capital/Total assets0.6873300.684380.6373740.6511520.633047
X2=Retained earnings/Total assets0.0194570.1940140.112370.1205840.135198
X3=Earnings before interest and taxes/Total assets0.0296320.03058870.0266560.0257280.024487
X4=Book value of equity/ total liabilities0.00381770.00457160.0046140.0058680.007705

 

Managerial Unionism

Dr. Manisha Shekhawat

Abstract-

We have outlined the evolution of managerial unions in India. We have attempted to give a general picture of the boundaries of a typical managerial association. We have briefly described the managements’ reactions to the managerial association. We have examined the main causes for the formation of managerial unions. We have given a brief account of the activities of the managerial associations in general.

Keywords-

                The Evolution of Managerial Unions in India, Boundaries of Managerial Associations, Managements’ Reactions to Managerial Associations, Why Managerial Unionism?, The Activities of Managerial Unions.

Introduction-

Managers and officers in India belonging to such diverse organisations as manufacturing enterprises, commercial banks, insurance companies, research and development laboratories, electricity boards, trading corporations, merchant navy and the civil service are increasing banding themselves into collectivities of associations, which are gaining the aspects of trade unionism. The word ‘manager’ is not the only possible label for this diverse group of people. Industry employs ‘managers’, the civil service and merchant navy have ‘officer’, as do the bank and insurance companies; research institutes and laboratories employ ‘scientists and technologists’, electricity boards and sections of commercial airlines have ‘engineers’. Although called by different names, and doing varied jobs, it is quite clear that these men and women have a great deal in common. They belong to the higher echelons of organisational hierarchy. They are different from the white-collar groups (such as clerks, draftsmen, technicians, salesmen and laboratory assistants whose tasks are routine and repetitive, although non-manual) and the blue-collar employees (who are paid for exertion of physical effort). They may be simply be titled ‘managers’.

In India, collectivities/organisations of managers are popularly known as ‘officers’ associations’. The officer’s associations as well as trade unions exist to protect and advance the work interests of their members. As such, the terms ‘association’ and ‘trade union’ can be used synonymously.

The following sections cover the evolution of managerial unions in India, the reasons for the formation of managerial unions, and the activities of these unions.

The evolution of managerial unions in India-

In India, no coherent chronological account is available of the evolution of managerial unionsim, much less its spread or density. Organisations of managers appear to have been existence for decades, with associations of merchant navy officers, airline pilots and flight engineers dating back to the period around Independence.

The managerial union movement is reported to have grown and spread during the seventies, especially in the coal, steel, petroleum, engineering, chemical, textile, electronics, banking and insurance industries.

Managerial unions, like trade unions is general, suffered a minor setback towards the mid-seventies on account of national emergency. In fact, during the Janata Government regime that followed the Emergency, several officers’ associations were registered as unions under the Trade Unions Act, 1926.

In 1978, the associations of officers in the public sector witnessed a major shift in their character and direction from a rather passive and non-assertive stature to an active and assertive style. This also led to a change in the relations between these associations and the management, which became more cordial in general, though bitterness continued in several cases.

In the public sector, the managerial union movement entered a new phase in the eighties. In the year 1983, the National Confederation of Officers’ Associations (NCOA) was formed mainly to protect the interests of the officers in the Central Public Sector Undertakings (CPSUs).

The economic and industrial policies of the new Government that came to power in June 1991 have created pressures and insecurities for all public sector employees including officers. As such, the role of the NCOA has become all the more important as well as challenging. Officers/managers of giant corporations like coal, steel, oil and power sector enterprises are not members of the NCOA, but they have come closer to the NCOA through their respective industrial federations of officers/managers/executives after the introduction of the New Economic Policy in 1991.

A major development that occurred June 1992 was the formation of a new organisation called the Professional Workers’ Trade Union Centre (PWTUC) to look after the interests of the managerial and supervisory staff, officers and scientific workers. Among the major organisations that have joined together to form the PWTUC are: All Indian Bank Officers’ Confederation, NCOA, All India Life Insurance Officers’ Associations, and Council of Scientific and Industrial Research Scientific Workers’ Association. These five organisations together represent about 4.5 lakh professional workers. The most important objective of the PWTUC is security of service for the managerial and supervisory staff.

The private sector managers both in the MNCs and the family-controlled enterprises, have formed their associations. The industries in which managerial unions formed in the MNCs include pharmaceuticals, engineering, chemicals, and consumer products (Glaxo, Guest Keen Williams, General Electric). Among the indigenously owned companies which have officers’ associations are: Grasim, Tata Electric, Mafatlal Group, Kamanis, etc.

Boundaries of Managerial Associations-

It is problematic to determine the limits of association constituency of managerial associations in India. Ramaswamy (1985) descrbies the boundaries of managerial associations with the caveat that his description presents only a general picture of the boundaries of a typical managerial association, and, as such, vast differences do exist in the managerial association boundaries in different organisations or even in different enterprises within the same industry.

According to Ramaswamy, at the base the managerial associations take up from where white-collar clerical and staff unions stop. At the apex, the managerial associations would evidently leave out the top layer of managers who may not join, or be acceptable to the associations. What lies in between these two points is association territory.

      Apex (where top layer of managers are left out)

     Base (where white-collar clerical and staff unions stop)

If we turn our attention to the differences in the boundaries of the managerial associations in different organisations/industries, we may notice white-collar workers (at the base) teaming up with managers in some banks. Similarly, at the apex the reach of the managerial association varies from one organisation to another. In some commercial banks, association membership normally stops at the Regional Manager. In the Life Insurance Corporation, the membership extends a title further, with the Zonal Managers also joining the association. The steel plants and coal mines probably represent the ultimate, with the association membership reaching right up to the level of General Manager.

Managements Reactions to Managerial Associations-

  1. Managements’ response to officers;/managers’ associations in public sector have varied over time. The initial response in almost all cases was one of antagonism and hostility. In the Post-Emergency period there was change in the attitude of the managements towards managerial associations.
  2. As the managements started dealing with the managerial associations, they discovered that the association of officers/managers is not an evil force. As such, many of them gave de facto recognition to these associations and a working relationship got established between managements and managerial associations.
  3. In the private sector, the attitude of the top management towards the managerial associations was in general hostile. Although the managerial associations do continue to exist in this sector, reportedly, they are not quite comfortable with their top managements.

Why managerial unionism?

Some of the major causes for the formation of managerial unions in India are:

  1. Narrowing Wage Differentials-There is a wide-spread feeling among the managers that compared to unionised cadre of workmen they are getting a raw deal from their employers in terms of remuneration. They complain about the narrowing differentials between the emoluments of junior officers and the wages of the senior workmen.
  2. Loss of Identity-Like workers, managers too experience a loss of power, a facelessness among the changes and reorganisation of enterprises in the modern world. Many managers, especially, the junior ones have little access to information pertaining to the company.
  3. Job Insecurity-While one of the hardest things in Indian industry is to terminate the services of a worker, it is not very difficult to remove the managers from their jobs. Even in the public sector, the junior and middle level managers do not have the job security.

Under the industrial Disputes Act, 1947, the workmen enjoy job security, and they are entitled to : a) Lay-off compensation, if laid-off; b) retrenchment compensation, if retrenched: and c) some sort of statutory compensation in case the establishment is closed down or its ownership is transferred.

  1. Perceived Need for Protection from Militant Trade Unionism-As the junior and the middle level managers are responsible for translating managerial decisions into action, they are in the direct line of union fire. The unionised workmen and staff could make it difficult for the managers to take work from them due to their unions’ support and the protection they enjoy from labour legislation.
  2. Bureaucratic Culture-The bureaucratic culture which characterises the working environment of all public enterprises is another factor contributing to the emergence of managerial unionism. In these organisation, the junior and the middle level managers feel lost, as the decisions are taken unilaterally by the higher authorities or concerned Ministries.
  3. Absence of Participative Forum-The government and the managements who are so concerned with the worker’s participation in management hardly give a thought to the managers’ need to participate in management. They use the collective negotiation/bargaining that takes place between their associations and the top management as a participative forum for being associated with the management as closely as possible.
  4. Promotion Policies-The promotion policies of organisations also have had their effect on association formation. The nationalised banks have to fill by promotion three-fourths of the positions at the lowest point in the officer category. The promotion policies in some organisations have a flipside-discrimination in promotion processes; promotions not based on merit etc. Thus, the promotion or lack of it or discrimination in the promotion process has been a major source of dissatisfaction among managers, particularly, public sector managers.
  5. To be a Third Force between the Working Class and the Management-The protection of labour laws, and the privilege of a real manager, the junior and middle level managers have gone for the only option left to them, that is, the formation of the officer’s associations. They would not like to be considered as part and parcel of either of the working class or the mangement, but as a ‘third force’ between these two groups.

The Activities of Managerial Unions-

The activities of managerial associations reflect the character and personality of managerial unionism. The day-to-day activities of managerial activities may be categorised as:

  • Protection, Preservation and Improvement of Occupational Interests-The main thrust of managerial associations is on protection, preservation and improvement of the occupational interests of their members, which include, among other things, opportunities for promotions, pay revision, greivance redressal, improvement of working conditions, and introduction or enhancement of various fringe benefits. While pursuing the occupational interests, some association resort to agitational methods such as strikes, demonstrations, gheraos, displaying posters in vile and objectionable language, processions in the streets etc.
  • Welfare Activities-The welfare activities of the managerial associations, in general, include: establishment and management of cooperative societies, management of officer’s clubs and canteens, organisation of cultural, recreational and sports activities, management of educational trusts, collection of a certain amount as part of managerial association subscription and financing the same for a Group Insurance Scheme of the Life Insurance Corporation, etc.
  • Organisational Interests-One of the important activities of managerial associations is to supplemtn the efforts of the management that are aimed at professional development of manager, by was of organising seminars, and talks on various topics. Another important activity is to help the management in improving the productivity of the organisation.
  • Channel of Communication-Managerial associations are proving to be an effective channel of communication in their respective establishments. By raising the concerns of officers before the management and by presenting the views of the management to the officers (members), a managerial association operates like a bridge for two-way communication.


References-

Mamkottam, Kuriakose. 1989. “Emergences of Managerial Unionsim in India”, Economic and Political Weekly, Vol. XIV, No. 43.

Ramaswamy, E.a. 1985. “Managerial Trade Unionsim”, Economic and Political Weekly, Vol. XX, No. 21, pp. M-75-M-88

Ramaswamy, E.A. 1986. Worker Consciousness and Trade Unions, New Delhi: Oxford University Press.

Sen, Ratna. 2003. Industrial Relations in India: Shifting Paradigms. Delhi: Mamillan India Ltd.

Sharma, Baldev R. 1993. Managerial Unionism: Issues in Perspective, New Delhi: Shri Ram Centre for Industrial Relations and Human Resources.

Ramaswamy E.A. 2002. Managing Human Resources: A Contemporary Text, New Delhi : Oxford University Press.

Sinha, P.R.N., Indubala Sinha, and Seema Priyadarshini Sekhar. 2004. Industrial Relations, Trade Unions and Labour Legislation, Delhi: Pearson Education.

Wial, Howard. 1993. “The Emerging Organisational Structure of Unionism in Low-Wage Services:, Rutgers Law Review, Vol. 45, No. 3 (Spring), pp. 671-738.

An Empirical Study on the application of Ergonomics Approach at Public Universities of Ethiopia with Special Reference to Adigrat University.

Tewelde Gebresslase

Abstract: It is obvious that either public or private institutions might be profit or service oriented in their nature and to achieve this; employee wellbeing should be primarily concerned. One move toward is to integrate the concepts of quality ergonomics which is the main human factors, and safety into such higher academic institutions experiences for all community that make the competitive in today’s working environments of the institutions. Literally speaking Ergonomics means the study or measurement of work therefore this paper focuses on the relationship between physical and logical environment setting and institutional performance with especial reference to Adigrat University. Hence, this paper is literature and personal observation based research article on the role of ergonomics approach of workplace in case of the stated University which is one of the third generation higher academic institutions in Ethiopia., the researcher tried to put a possible suggestions based on a practical observation on what is going practically. At the end with a proper plan of ergonomics approach the tangible and intangible costs due to unhealthy working condition could be reduced since the outcome of this paper could attract the attention of the management bodies in particular and community of the institution i.e Adigrat University in general.

 Key words: Professional safety, ergonomics, employees’ motivation, productivity, Adigrat University.

  1. Introduction:

Ergonomics is the study and means to enhance the compatibility between human beings and surrounding systems. Ergonomics satisfies some of the key needs of the operators including reduction of stress and fatigue, improvement in safety, comfort level and quality of the work life. It promotes the well-being of the operator by maintaining a safe, healthy and efficiency driven environment (Viraj Bakshi, 2016). Ergonomics is defined as the design of workplace, equipment, machine, tool, product, environment and system, taking into consideration the human’s physical, physiological, psychological capabilities and optimizing the effectiveness and productivity of work system while assuring the safety, health and wellbeing of the workers.rgonomics focuses on the work environment and items such as the design and function of workstations, controls, displays, safety devices and tools to fit the employee’s physical requirements, capabilities and limitations to ensure his/her health and well being.

Ergonomics is the study and means to enhance the compatibility between human beings and surrounding systems. Ergonomics satisfies some of the key needs of the operators including reduction of stress and fatigue, improvement in safety, comfort level and quality of the work life. It promotes the well-being of the operator by maintaining a safe, healthy and efficiency driven environment (Viraj Bakshi, 2016). Ergonomics is defined as the design of workplace, equipment, machine, tool, product, environment and system, taking into consideration the human’s physical, physiological, psychological capabilities and optimizing the effectiveness and productivity of work system while assuring the safety, health and wellbeing of the workers.

According to the collection literature for ergonomics concept the following are some of the definitions. Ergonomics is the scientific study of people and their working conditions, especially done in order to improve effectiveness (Cambridge dictionary). Ergonomics is the science of refining the design of products to optimize them for human use. (…) it is sometimes known as human factors engineering (whatis.com). Ergonomics is a science that deals with designing and arranging things so that people can use them easily and safely (Merriam-Webster Dictionary). Ergonomics is an applied science concerned with designing and arranging things people use so that the people and things interact most efficiently and safely —called also biotechnology, human engineering, human factors (Merriam-Webster Dictionary). Ergonomics is a study of capacities and limitations of mental and physical work in different settings. Ergonomics applies anatomical, physiological, and psychological knowledge (call human factors) to work and work environments in order to reduce or eliminate factors that cause pain or discomfort (business dictionary).

Although the term Ergonomics has many but mutually inclusive definitions, the following definition is taken from Peter Vink (2006) as operational meaning for this paper. Hence,   Ergonomics (or human factors) is the scientific discipline concerned with the understanding of interactions among humans and other elements of a system, and the profession that applies theory, principles, data and methods to design in order to optimize human well-being and overall system performance. Having this operational definition for Ergonomics, this paper is an empirical study on human and none human factors for unhealthy working condition and tried to put possible observations on how Ergonomics Approach for workplace could help as a solution for related problems at Public Universities of Ethiopia with Special Reference in Adigrat University.

  1. Research Rationality
S

ince human resources are the ultimate user of the workplace environment, therefore labor should consider designing and equipping the workplace setting to suit their comfort. In this case the physical and logical design of working environments has a direct impact on the healthy workplace vis-a-vise wellbeing of the workers. As Joan Burton cited in WHO Regional Office for the Western Pacific; defines a healthy workplace as follows:

 “A healthy workplace is a place where everyone works together to achieve an agreed vision for the health and well-being of workers and the surrounding community. It provides all members of the workforce with physical, psychological, social and organizational conditions that protect and promote health and safety. It enables managers and workers to increase control over their own health and to improve it, and to become more energetic, positive and contented.”

Either knowingly or unknowingly the management of one organization could follow any leadership philosophy; whatever the response of the followers. Besides to this, the management body could ignore the humanitarian aspect to maximize the organizational performance. As a result the working environment could affect negatively since the relationship between the top and lower management level could badly affect. In this regard, “It is unethical and short-sighted business practice to compromise the health of workers for the wealth of enterprises.” Evelyn Kortum, WHO (2014).

A healthy workplace can be affected through two factors which are human and non human. In this case, human factors identify what employees are being asked to do, who is doing it, and where they’re working and Non human factors identify the tangible and intangible features of the environments. According Kerm Henrikse (2010) Human factors research applies knowledge about human strengths and limitations to the design of interactive systems of people, equipment, and their environment to ensure their effectiveness, safety, and ease of use.

As Peter V. (2006) cited in Vink, (2005), participatory ergonomics is the discipline that studies how different parties should be involved in a design process. Participatory ergonomics is the adaptation of the environment to the human (that is ergonomics) together with the proper persons in question (participants). Besides, different authors also argued that “good ergonomics is good economics”. However, the concepts of ergonomics are not implemented properly. It is known that there are a number of hidden reasons why the employees who are working in Adigrat University (where the author is working) are not well satisfied in their day to day working style. Thus, it is believed to have a careful observation what is going practically and assessing to what extent the Ergonomics approach (human factors) for workplace is implementation otherwise to forward possible alternative solution for healthy, conducive and productive working environment to Adigrat University.

  1. Research Questions
  • What are the human factors for institutional performance in the university?
  • How the physical or logical working environs could influence the institutional performance of Adigrat University?
  • What are the bottlenecks against practicing ergonomic approach of workplace?
  1. Research Objective
    • General Objective

The general objective of this article is to assess the factors affecting the healthy working environs and forwarding ways of practicing ergonomics approach for workplace in Adigrat University.

  • Specific Objective
  • To determine the human factors those affect the institutional performance of the university.
  • To examine the relationship between factors of the physical/logical environment towards institutional performance.
  • To point out the major bottlenecks for practicing ergonomic approach.
  1. Institutional System Analysis

Historically, the age of modern Education in Ethiopia is almost 108 years since Emperor Menelik II opened the first modern school at Addis Ababa in 1908. Next to this, according to Alemayehu Bishaw; another important event in the expansion of modern education was the advent of the late Emperor Haile Selassie I, as Regent and Heir to the throne in 1916. He was a graduate of the first school established in Menelik II‟s palace. This foundation of higher institution also started during Emperor Haile Selassie I, with his name Haile Selassie I University (now Addis Ababa University) in 1950.

Currently, Ethiopia becomes the owner of 33 (excluding the 11 new universities to be built in second GTP period of the nation) higher academic institutions and 59 accredited Non-Government Higher Education Institutions under its Ministry of Education. Adigrat University (3rd generation) is one of the public higher academic institutions which is established in 2011.

This academic year the University has 6 colleges and one institute, 41 departments with a regular student population of more than14000 and nearly 5000 continuing education students. The total number of its academic staff has reached nearly 1000 (more than 300 of them on their further study at home and abroad). The support staff is expected to reach 1500 this academic year (www.adu.edu.et retrieved at 15/8/16).

According to Higher Education Proclamation No. 650/2009 no. 17/3, every public institution shall exercise its autonomy in ways that, at the same time, ensure lawfulness, efficiency and effectiveness, transparency, fairness, and accountability. Through this the MoE gives autonomous power to the university. That’s why different universities of the country could not have consistent institutional structure. Most of them are indifferent on their institutional structure, way of students evaluation, payment policy in which the MoE should follow up and adjust. The following is the current institutional hierarchy of Adigrat University.

As one can understand from the next hierarchy, the two vice presidents are over loaded. The majority divisions under Academic, Research and community Service vice president are colored yellow and it shows it should divided in to at least two units for research and academic purpose.

 

Figure 1 Current institutional hierarchy of Adigrat University

It is due to over responsibility and centralized management in these vice presidents that the majority employees complain more on lack of good governance in different semi annual meetings.  These same is true in the purchasing unit of the university that requested teaching materials could not deliver on time. Even if the university has more than 5000 students in continuing education, there is no responsible unit to overcome related issues. Hence, it is better to have such productive divisions instead of having the current bureaucracy such as quality assurance at college level. It is a symptom for its weakness campus assistant administrator under basic service unit; significant numbers of personal and institutional properties were stolen by thefts.

It is also due to lack of having a close linkage with the external community that domestic and foreign staff are suffering badly by home thefts in the town. When we see about the management system, individuals are treated as they are member of local political party rather than their merit. It is an example for that; not only for Adigrat University but also for almost higher institutions, the presidents and vice presidents are assigned from the local society rather than from any ethnic group. Not only this, directors, deans and head of center institutes of the university are assigned as they are member of local political organizations rather than through merit. This is against to article 9.2/a, of the legislation on the requirements to hold a position in the University which states as follows.

The candidate must have excellent communication and interpersonal skill and proven ability to participate successfully in a complex, highly professional organization, with demonstrated competence in leadership, motivation, collaboration and working with teams, teaching, research and community service activities relevant to the position;

Although fast physical expansion is one of the positive sides of the University, the internal environment is not well equipped rather lack of staff cafeteria and discount students hotel and entertainment service, shortage of pure water, too late of staff’s condominium.

  1. Research Methodology

It is obvious any research paper has its own methodology; this paper is also casual and descriptive by nature and it is literature and observation based. The researcher develops conceptual framework which assumed relevant to ergonomic approach. Then, after the theoretical or literal concepts are analyzed, the authors tried to see to what extent they are practicing in Adigrat University. Since the author is a permanent academic staff of the university, it is good opportunity to identify every aspects of the human factor and lastly the paper will have its own significant in enhancing institutional performance through overcoming the de-motivational factors of employees.

  1. The Theory Versus the Practice

As far as their appropriateness Hierarchy of Needs theory (Abraham Maslow) and Alderfer’s ERG theory of motivation are taken as a conceptual framework.   In this case the researcher tried to assess either these theories are practicing in Adigrat University or not; because, it is believed that these theories involves human factors relationship (ergonomics) and otherwise, these factors can related to the physical design (internal and external environmental features) and logical design (policies, working system and management philosophy…) of the institution. As to these theories the employee demands the following needs from their home and from their working institutions.

According to Maslow, we seek first to satisfy the lowest level of needs. Once this is done, we seek to satisfy each higher level of need until we have satisfied all five needs. Thus, related factors are arranged as a concept and their necessity in this case institution.

Need Home Job In Adigrat University
Physiological food water shelter and cloth Heat, air, base salary Cafeteria service or center of entertainments (for staff and students), discount business, attractive dormitory and office, on time payments and fringe benefits, pure water
Safety freedom from war, poison, violence work safety, job security, health insurance Internal (Teaching material, transport service, pleasant physical infrastructure, campus community safety), external (free fear of war, peace and stability, home) free of theft or creating risk free compound.
Belongingness family, friends, clubs teams, departments, colleague, clients, supervisors, subordinates Participative decision, decentralized management philosophy, two way communication, meritocracy of positions, feeling of ownership
Esteem approval of family, friends, community recognition, high status, responsibilities Encouragements, recognitions and moral, letting competent for higher management, confidentiality, achievement, reduce employees turnover
self-actualization education, religion, hobbies, personal growth education, religion, hobbies, personal growth Short bureaucracy of promotion, workers educational opportunity, encouraging for innovation and creativity, investigation and freedom

Table 1: Hierarchy of Needs Theory (yellow column) and author’s view (green column)

As to the human expectation, either in group or individually, it is assumed that every employee of Adigrat University needs to acquire and to satisfy these needs. According to the connotations of the hierarchy of needs theory, individual employees must have their lower level needs met by, for instance, safe working conditions, adequate pay to take care of one’s self and one’s family, and job security before they will be motivated by increased job responsibilities, status, and challenging work assignments. Despite the simplicity of application of this theory to Adigrat University, the human factors as to the ergonomics approach is not practicing.

ERG theory, developed by Clayton Alderfer, is a modification of Maslow’s hierarchy of needs. Alderfer’s theory also categorized work force needs into three categories and the related factors to these categories are summarized as follows. As one can observe from the table 1 and table 2, these theories are powerful to maximize the performance of the institution if well practiced. As to the factors for employee’s motivation, the factors could affect the institutional performance positively; because, institutional performance is the sum of departmental or individual performance.

Needs Implication To Motivating the employees

 

 To enhance institutional performance
Existence needs Include all material and physiological desires Ø  Pay one time (load and overtime)

Ø  Avoiding bad noise and sounds

Ø  Minimize meetings

Ø  Prioritize institutional goals

 Ø  Keeping clean area

Ø  Keeping quality and clean buildings and classrooms

Ø  Prioritize institutional before political goals
Relatedness needs Encompass social and external esteem; relationships with significant others v  Trust and Delegate both power and authority

v  Giving recognition and respect

v  Two way communication

v  Activity review day and celebrate success

v  Avoiding destructive informal groups

Ø  Avoid political agendas

 v  Create transparency

v  Creating external relation (within outside the country)

v  Creating and encouraging social friendship among employees

v  Care about safety
·         Growth needs

 

 Internal esteem and self actualization; these impel a person to make creative or productive effects on himself and the environment ü  Give motivational challenges

ü  Encouraging human needs

ü  Keep employees, students and stockholders well informed

ü  Know what motivates the employees

ü  Letting trained and educated/career development

ü  Avoid unproductive follow up for academic staff

 ü  Encourage creativity and innovation

ü  Avoiding unnecessary bureaucracy of promotion

ü  Apply decentralized management philosophy

ü   Promote meritocracy

ü  Promote computation

Table 2: Alderfer’s theory of needs and author’s view (green column)

Literally speaking motivation is one of the forces that lead to performance. Motivation is defined as the desire to achieve a goal or a certain performance level, leading to goal-directed behavior. As the human factor affect the institutional performance, environmental factors such as having the resources, information, and support one needs to perform well are critical to determine the performance the University.

According to human resource approach for motivation people want to contribute to organizational effectiveness and are able to make genuine contributions. The organization’s responsibility is to create a work environment that makes full use of available human resources. ERG theory’s implications for managers are similar to those for the needs hierarchy; top level management of the university should focus on meeting employees’ existence, relatedness, and growth needs, though without necessarily applying the condition that, say, job-safety concerns necessarily take precedence over challenging and fulfilling job requirements. Is so, the ergonomics or human factor of the institution become realized. And it directly implies the  performance could enhance since the workplace (internal and external) become healthy and safe.

  1. Summery Suggestions

Like any changes (BPR, TQM, BSC and Kaizen) which have being implementing through time in the University, Ergonomics could also practiced. Relatively ergonomics approach for workplace highly focuses on human factor of employees. It is rational implication that if human factor of the institution got primary attention, the employees’ motivation, individual performance and then institutional performance could be maximized in Adigrt University. For this, the two theories of motivation with their respective factors are a good example which needs especial emphasize at any institutional level. For easily applicable it is summarized as follows.

Hierarchy of Needs Theory ERG theory Human Factors

(Direct impact)

 Institutional Factors

(Indirect impact)

 Ladder for

practicing

Ergonomics
Physiological Existence needs Ignoring humanitarian aspects Bad physical and logical design Audit Human and Institutional needs (Team work): move from individual to the overall institutional system
Safety Healthy workplace Weak security

Inside & out side

 Verify logical and physical human and institutional needs’ gap (Team work)
Belongingness Relatedness needs Push factors: Bad relations Deficiency of Pool factors Re-structuring and  system Validation  (Team work)
Esteem Internal Weakness of formal groups Centralized Decision making Externalize and communication (Bottom-up) (Team work)
External Growth needs Less external competition Internal &External Competitiveness Action Realization through human development (Team work)
Self-actualization Narrow minded: focusing on minor things… Have Practical  and long lasting Vision Empowerment of the long lasting Human and institutional Achievement

Table 3: comparative of the theory and the practice in Adigrat University

The goals of ergonomics are to provide a positive working environment in which the design of equipment, work layouts and work environment matches the capabilities of people so they can lead healthy and productive lives. Thus, this indicates the application of Ergonomics starts from individual, departments then in to the institution.

According to the literal analysis and practical observation, the researcher believes to develop an alternative institutions hierarchy that could be pleasant to practice ergonomic concept in workplace of the institution. Hence, through its autonomous power from MoE, these which are ranked as too broad working units should divide or restructure in to sub-systems. In general the author needs to forward the following suggestions accordingly.

  • Presidents and vice presidents of the university should assigned merit based from all over the nation and the world since it is a national institution. Because, due to lack of diversity in ethnicity in the higher positions, meritocracy is not practicing.
  • It is recommended that the management philosophy of the university should participatory and decentralized. Tasks should fairly distribute among the institutional divisions.
  • Campus community especially students needs orientation to keep classrooms clean.
  • Supportive office materials like photo copy, papers, desks and chairs should nearly available.
  • Discounted business firms like separate cafeterias for staffs, commodity shops, and pure water and clean dormitory are mandatory for students. To do this intake capacity of the university should as to its resources.
  • Since the institution is across the border, the federal government should care and as much as possible unnecessary sounds from training of the fighters should out of the campus community.
  • The human factors should consider as institutional factors because the institution living which could grow, die like human as the employees feel discomfort.
  • The internal and external threat of theft could avoid by practicing article 7.2.9/a/ viii, of the legislation which stated “Establish contacts with external bodies (city administration, city police, nearby administration, security, and other relevant offices) that help maintenance of peaceful teaching in the campus.”
  • It is better for the employees and the institution if Ergonomics Approach of workplace could executed in collaboration with other changes or independently.

Finally, after the above suggestions are taking in to consideration it is easy to practice Ergonomics approach then after the University become benefited in reducing its tangible and intangible costs, it could easily improves its performance, quality, employees participation and creates better safety culture and healthy workplace.

Reference

Adigrat University Senate Legislation (2004 E.C) Adigrat, Ethiopia.

Alemayehu Bishaw Education in Ethiopia: Past, Present and Future Prospects: African Nebula, Issue 5, 2012 available at http://nobleworld.biz/images/5-Lasser_s_paper.pdf

Alderfer, C., & Guzzo, R. (1979, September). Life experiences and adults’ enduring strength of desires in organizations. Administrative Science Quarterly, 24(3), 347- 361. Retrieved from http://www2.johnson.cornell.edu/publications/asq/

Alderfer, Clayton P. (1972) Existence, Relatedness, and Growth: Human Needs in Organizational Settings. New York: Free Press; Available at: http://www.referenceforbusiness.com/management/Mar-No/Motivation-and-Motivation-Theory.html#ixzz4HTqkn5VC

Dickson, V., Fox C., Marshall K., Welch N., & Willis, J.(2014).”What really improves employee health and wellbeing”, International Journal of Workplace Health Management, Vol. 7.

Kerm Henrikse (…) Patient Safety and Quality: An Evidence-Based Handbook for Nurses: available at http://www.ncbi.nlm.nih.gov/books/NBK2666/

Habtemariam Markos (1970)., Amharic as the medium of instruction in primary schools in Ethiopia.‟‟ In T.P. Gorman, (ed.), Language in Education in Eastern Africa. Nairobi: Oxford University Press.

Maslow, Abraham H. (1954) Motivation and Personality. New York: Harper & Row;
Available at: http://www.referenceforbusiness.com/management/Mar-No/Motivation-and-Motivation-Theory.html#ixzz4HTqwCsrQ

Nour Eldin M. (2014) Role of Ergonomics on Sudanese higher education Institutions ICT class Rooms e-material available at http://www.ijaiem.org/Volume3Issue9/IJAIEM-2014-09-13-20.pdf

Viraj Bakshi (2016) Study to Implement Lean and Ergonomics Concepts in a Production Environment

Joan Burton (2010) WHO Healthy Workplace Framework and Model: Background Document and Supporting Literature and Practices. E-book available at http://www.who.int/occupational_health/healthy_workplace_framework.pdf

P.Vink, (2006) Positive outcomes of participatory ergonomics in terms of higher comfort and productivity

Additional visited websites

www.adu.edu.et official website of Adigrat University

www.businessdisctionary.com visited at 10/08/16

www.whatis.com visited at 12/08/16

www.Merriam-WebsterDictionary.com visited at 01/08/16