Rohini Project Report itc

CHAPTER 1 INTRODUCTION The balanced scorecard, a framework that links business strategies with day-to-day activities, is one solution that has worked wonders for many. A balanced scorecard aligns measures with strategies in order to track progress, reinforce accountability, and prioritize improvement opportunities. A balanced scorecard integrates four related perspectives: financial, customer, internal business processes and learning and growth. Each of the four perspectives is inter-dependent - improvement in just one area is not necessarily a recipe for success in the other areas. But the fact is that, all the other perspectives are dependent on the learning and growth perspective. Measures in this perspective are lead indicators for improvements in the internal processes, customer and financial perspectives. The Learning & Growth Perspective focuses on the intangible assets of an organization, mainly on the internal skills and capabilities of the employees that are required to support the value-creating internal processes. The measurement of the level of satisfaction of the employees is an important factor. Everything stems from the vision of the company. Every employee must be aligned with the vision of the organization. This is what helps the organization in achieving its goals. This is a very important aspect as far as any organization is concerned, because employees are the key to success. The vision was closely studied and broken down in order to understand the objectives and measures taken by the organization to remain successful and competent. The main aspects of the balanced scorecard, that is, employee satisfaction, employee retention and employee productivity were also studied, giving special emphasis to employee satisfaction. 1.1 Statement of the Problem With more and more players emerging in the market, ITC needs to maintain its position and remain competent. In order to achieve this, the organization needs to identify new methods and initiative. It will be necessary to bring out effective learning and growth initiatives. The success of any organization depends on the level to which it is flexible and innovative. For this, the company‘s vision was studied closely and new measures were identified that will help the organization to remain the forerunner, in spite of the tough competition. In identifying new measures and in incorporating it, it was necessary to learn 1

about the present level of employee satisfaction as well as how they feel about the measures that are already followed in the organization. So the measurement of employee satisfaction is essential to the management. It was also necessary to understand the employee retention level as well as the productivity of the employees in order to get a clear idea about the learning and growth aspect of the organization. The various other aspects of learning and growth were also identified and analysed. 1.2 Objectives of the Study 1) To give an overview about Balanced Scorecard. 2) To evaluate whether ITC is successful enough in implementing its vision through current strategies. 3)To analyse how effectively ITC Ernakulam Division is harnessing its employee capabilities for achieving organizational goals using learning and growth perspective of Balanced Scorecard. 1.3 Scope of the Study The project provides a good understanding of the learning and growth aspect of the employees in the organization. So it helps to find out the effectiveness of the learning and growth process of the organization in achieving the goals of the organization. It also helps to study the measures that have already been taken towards achieving the vision of the organization. This also facilitates the understanding of employee satisfaction in the organization. The employee retention rate and the employee productivity were also measured. These aspects are very important as far as any organization is concerned, because employees are the key to success. 1.4 Research Methodology 1.4.1 Research Design : Research design provides the glue that holds the research project together. A design is used to structure the research, to show how all of the major parts of the research project work together to try to address the central research questions. This study is a descriptive study. Here the researcher goes through the state of affairs existing in the company. The design chosen for the study is descriptive research design.

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1.4.2 Research Approach : Research Approach refers to the approach or the methodology that is adopted to conduct the research. The research approach that was used in the study was survey research and observation. Since ITC has branches that are spread across India, it is not possible to collect data from all the branches. Hence the researcher conducted a sample survey. The employees of the India Tobacco Division, Ernakulam were taken for the study. The learning and growth initiatives taken by the Company towards achieving their Vision were also studied.

1.4.3 Data Sources: The data required for the research purpose was collected from: 1. Primary data source 2. Secondary data source Primary Data: Primary data are collected by the researcher using various methods. The key point here is that the data collected is unique to the researcher and the research, until it is published, no one else has access to it. Methods used for collecting primary data were: 1. Questionnaire and 2. Personal interview Secondary Data: Secondary data is the data that have been already collected and readily available from other sources. Such data are cheaper and more quickly obtainable than the primary data and also may be available when primary data cannot be obtained at all. The sources of secondary data were the HR department, annual report of the company, company website, journals, magazines and other published records of the company. 1.4.4 Research Instrument: The research instrument used for the study is questionnaire. A questionnaire is a research instrument consisting of a series of questions and other prompts for the purpose of gathering information from respondents. Although they are often designed for statistical analysis of the responses, this is not always the case. A structured questionnaire was developed to collect all the relevant information from the employees.

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The questionnaire contains ten questions that were asked to measure the level of satisfaction of the employees regarding the various aspects of the organization. This was measured on a five point scale. Through this questionnaire, the satisfaction of the employees regarding the working environment, superior-subordinate relationship, importance given by the Company towards the learning and growth activities, training, performance appraisal system, pay package, salary increment policy, promotion activities and value addition to their career, were measured. The questionnaire also includes demographic questions like age of the respondent, years of experience, academic qualification and marital status. Thus the questionnaire includes all the factors that are necessary for measuring the employees‘ satisfaction in their workplace. The other learning and growth aspect of the Company was studied by breaking down the Vision and then identifying the objectives and the measures taken by the Company for achieving the Vision. 1.5 Sampling Plan: The determination of sampling unit, sample size and sampling procedure are given in the definite form under sampling plan. 1.5.1 Sampling Unit: ITC has many marketing divisions which adopt the same managerial strategies. In order to study the learning and growth initiatives of ITC, we have selected the Ernakulam division as the sample. 1.5.2 Sampling Procedure: As there are only 74 members in the pay roll of the Ernakulam division, it was decided to do a census survey in the division. Thus questionnaire was provided to all the employees and managerial people in the division. The sampling procedure that is used here is the direct contact method. This is the method by which the researcher will have a direct face-to-face interaction with the respondents. 1.5.3 Research Period: The time period of the research is 2 months, that is, from 17/05/2010 to 17/07 2010. In order to study the employee retention and productivity, the data for the past three years were also used.

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1.6 Limitations of the Study a. Since it is not possible to study all the branches of the company, there may be variations in the measures adopted. b. The employees may be busy and so may not be able to give sufficient time for interview and for filling the questionnaire. c. Being an outsider may also limit what is revealed to me. The employees may be guarded in their conversations. d. Out of the four perspectives of the Balanced Scorecard, only the learning and growth perspective was studied. e. Since the study requires more time and the support of the top management, only the objectives and measures of the learning and growth aspect could be identified. f. Though it is a study on Balanced Scorecard, more emphasis is given to job satisfaction. g. Even though there are three principal categories for the learning and growth perspective, only employee capabilities is measured.

1.7 Chapter Scheme This project report is presented in 6 chapters. i.

First chapter contains introduction which includes statement of the problem, objectives of the study, scope of the study, research methodology, limitations of the study and chapter scheme.

ii.

Second chapter consists of industry profile which contains international scenario, national scenario and the state scenario.

iii.

Third chapter gives an overview about the profile of ITC Ltd which includes the history and growth of the company till now, future plans, financial performance of the company and the details of HR department etc.

iv.

Fourth chapter contains theoretical background and it gives an overview about the concept of balanced score card, learning and growth and the various aspects involved.

v.

Fifth chapter includes data analysis and interpretation of data collected for this study.

vi.

Sixth chapter contains the findings, suggestions and conclusion of the research.

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CHAPTER II PROFILE OF FMCG INDUSTRY 2.1 International Scenario The wide range of consumable goods provided by the FMCG industry turns over a large amount of money, while competition among FMCG manufacturers is become more and more fierce. Investors are putting more and more into the FMCG industry, especially in India, where the FMCG industry is the fourth largest sector, having a total market size of more than US$13.1 billion, and has doubled by 2010. In New Zealand as well, the FMCG industry accounts for 5% of Gross Domestic Product (GDP). The FMCG is an industry that is growing tremendously and has a lot of potential. The factors that made the FMCG industry a highly competitive one are low operational cost, solid distribution networks, and emergence of new FMCG companies. In addition, the growth of the world‘s population is another responsible factor for the huge success of this particular industry. Some of the leading FMCG companies all over the world are Sara Lee, Nestlé, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Mars etc. Fast Moving Consumer Goods Industry not only provide the necessary goods for day to day life, but the FMCG industry has also created tremendous job opportunities and careers. It is a stable, varied, and highly profitable industry, and the jobs it provide range from sales, supply chain, finance, marketing, operations, human resources, development, general management, and so on. The working force within FMCG manufacturing in the UK accounts for 14% of the total workforce in UK. Sales in the FMCG industry account for around £35.5 billion in 2010, spent on nonfood UK products alone, in grocery retail sectors in UK. Including sectors such as Food, Drink and Pharmaceutical the output registered by FMCG accounts for 19% of the UK's GDP. The market growth over the past 5 years has been phenomenal, primarily due to consumers‘ growing disposable income which is directly linked to an increased demand for 6

FMCG goods and services. Indeed, it is widely acknowledged that the large young population in the rural and semi-urban regions is driving demand growth, with the continuous rise in their disposable income, life style, food habits etc. On the supply side, the wide availability of raw materials, vast agricultural produce, low cost of labour and increased organized retail have helped the competitiveness of players. 2.2 National Scenario The Indian FMCG Industry The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13.1 billion. Well-established distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector. FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge. The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income.The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands. India - A Large Consumer Goods Spender An average Indian spends around 40 per cent of his income on grocery and 8 per cent on personal care products. The large share of fast moving consumer goods (FMCG) in total 7

individual spending along with the large population base is another factor that makes India one of the largest FMCG markets. Table 2.1 Showing the Top 10 Companies in FMCG Sector Sl. NO.

Companies

1.

Hindustan Unilever Ltd.

2.

ITC (Indian Tobacco Company)

3.

Nestlé India

4.

GCMMF (AMUL)

5.

Dabur India

6.

Asian Paints (India)

7.

Cadbury India

8.

Britannia Industries

9.

Procter & Gamble Hygiene and Health Care

10.

Marico Industries

The companies mentioned are the leaders in their respective sectors. The personal care category has the largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal care category. Cigarettes account for 17% of the top 100 FMCG sales, and just below the personal care category. ITC alone accounts for 60% volume market share and 70% by value of all filter cigarettes in India.The foods category in FMCG is gaining popularity with a swing of launches by HLL, ITC, Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat rice by HLL and pizzas by both GCMMF and Godrej Pillsbury. This category seems to have faster development than the stagnating personal care category. Amul, India's largest foods company, has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 8

FMCG brands, dominates the biscuits category and has launched a series of products at various prices. In the household care category (like mosquito repellents), Godrej and Reckitt are two players. Goodknight from Godrej, is worth above Rs 217 crore, followed by Reckitt's Mortein at Rs 149 crore. In the shampoo category, HLL's Clinic and Sunsilk make it to the top 100, although P&G's Head and Shoulders and Pantene are also trying hard to be positioned on top. Clinic is nearly double the size of Sunsilk. Dabur is among the top five FMCG companies in India and is a herbal specialist. Asian Paints is enjoying a formidable presence in the Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific, Caribbean, Africa and Europe. Asian Paints is India's largest paint company, with a turnover of Rs.22.6 billion (around USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200 Best Small Companies in the World. Cadbury India is the market leader in the chocolate confectionery market with a 70% market share and is ranked number two in the total food drinks market. Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380 Million) Marico is a leading Indian group in consumer products and services in the Global Beauty and Wellness space. There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Again the demand or prospect could be increased further if these companies can change the consumer's mindset and offer new generation products. Earlier, Indian consumers were using non-branded apparel, but today, clothes of different brands are available and the same consumers are willing to pay more for branded quality clothes. It's the quality, promotion and innovation of products, which can drive many sectors. Scope of FMCG Sector The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector in the economy. A well-established distribution network, intense competition between the organized and unorganized segments, characterizes the sector. This sector has a good growth potential. The FMCG sector in Indian has shown Rs 92,100 crores in 2010. Hair care, household care, male grooming, female hygiene, and the chocolates and confectionery categories are estimated to be the fastest growing segments, says an HSBC report. 9

Growth Prospects With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mind-set of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas. Indian Competitiveness and Comparison with the World Markets

The following factors make India a competitive player in FMCG sector: 1) Availability of Raw Materials Because of the diverse agro-climatic conditions in India, there is a large raw material base suitable for food processing industries. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits &vegetables. India also produces caustic soda and soda ash, which are required for the production of soaps and detergents. The availability of these raw materials gives India the location advantage. 2) Labour Cost Comparison Low cost labour gives India a competitive advantage. India's labour cost is amongst the lowest in the world, after China & Indonesia. Low labor costs give the advantage of low cost 10

of production. Many MNC's have established their plants in India to outsource for domestic and export markets. 3) Presence across Value Chain Indian companies have their presence across the value chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-processing sector. This brings India a more cost competitive advantage. For example, Amul supplies milk as well as dairy products like cheese, butter, etc. Analysis of Indian FMCG Sector Strengths: 1. Low operational costs 2. Presence of established distribution networks in both urban and rural areas 3. Presence of well-known brands in FMCG sector Weaknesses: 1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors 2. Low exports levels 3. "Me-too" products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market. Opportunities: 1. Untapped rural market 2. Rising income levels, i.e. increase in purchasing power of consumers 3. Large domestic market- a population of over one billion. 4. Export potential 5. High consumer goods spending

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Threats: 1. Removal of import restrictions resulting in replacing of domestic brands 2. Slowdown in rural demand 3. Tax and regulatory structure The performance of the industry was inconsistent in terms of sales and growth for over 4 years. The investors in the sector were not gainers at par with other booming sectors. After two years of sinking performance of FMCG sector, now the sector now the demand is growing. With the rise in disposable income and the economy in good health, the urban consumers continued with their shopping spree. Recent Developments in Fast Moving Consumer Goods (FMCG) Sector FMCG sector is no doubt registering an uptrend in growth. According to CNBC, FMCG sector growth story will continue because of the positive budget. Nevertheless, there are some barriers to the growth of the sector. Indirect taxes constitute no less than 35% of the total cost of consumer products - the highest in Asia.

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CHAPTER – III COMPANY PROFILE 3.1 ITC Corporate Positioning Statement ―Enduring value. For the nation. For the Shareholder.‖

3.2 ITC Vision ―Sustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Company‘s stakeholders.‖ 3.3 ITC Mission ―To enhance the wealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder value.‖ ITC is one of India's foremost private sector companies with a market capitalisation of over US $ 22 billion and a turnover of over US $ 5 billion. ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine, among India's Most Respected Companies by Business World and among India's Most Valuable Companies by Business Today. ITC ranks among India's `10 Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by the Economic Times. ITC also ranks among Asia's 50 best performing companies compiled by Business Week. As one of India's most valuable and respected corporations, ITC is widely perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a commitment beyond the market". In his own words: "ITC believes that its aspiration to create enduring value for the nation provides the motive force to sustain growing shareholder value. ITC practices this philosophy by not only driving each of its businesses towards international competitiveness but by also consciously contributing to enhancing the competitiveness of the larger value chain of which it is a part." ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution reach, superior brand-building capabilities, effective supply chain management 13

and acknowledged service skills in hoteliering. Over time, the strategic forays into new businesses are expected to garner a significant share of these emerging high-growth markets in India. 3.4 History of the Company ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of India Limited'. Its beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the centre of the Company's existence. The Company celebrated its 16th birthday on August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was historic in more ways than one. It was to mark the beginning of a long and eventful journey into India's future. The Company's headquarter building, 'Virginia House', which came up on that plot of land two years later, would go on to become one of Kolkata's most venerated landmarks. The Company's ownership progressively indianised, and the name of the Company was changed to I.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-Exports, Foods, Lifestyle Retailing and Greeting Gifting & Stationery - the full stops in the Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'. Though the first six decades of the Company's existence were primarily devoted to the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies witnessed the beginnings of a corporate transformation that would usher in momentous changes in the life of the Company. ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for ITC's Cigarettes business. It is today India's most sophisticated packaging house. In 1975 the Company launched its Hotels business with the acquisition of a hotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of ITC's entry into the hotels business was rooted in the concept of creating value for the nation. ITC chose the hotels business for its potential to earn high levels of foreign exchange, create tourism infrastructure and generate large scale direct and indirect employment. Since then 14

ITC's Hotels business has grown to occupy a position of leadership, with over 70 owned and managed properties spread across India. In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited, which today has become the market leader in India. Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002 and became a Division of the Company, Bhadrachalam Paperboards Division. In November 2002, this division merged with the Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers Division. ITC's paperboards' technology, productivity, quality and manufacturing processes are comparable to the best in the world. It has also made an immense contribution to the development of Sarapaka, an economically backward area in the state of Andhra Pradesh. It is directly involved in education, environmental protection and community development. In 2004, ITC acquired the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve customer service with reduced lead time and a wider product range. In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. Since inception, its shares have been held by ITC, British American Tobacco and various independent shareholders in Nepal. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited (Surya Nepal). In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing company and a major supplier of tissue paper to the cigarette industry. The merged entity was named the Tribeni Tissues Division (TTD). To harness strategic and operational synergies, TTD was merged with the Bhadrachalam Paperboards Division to form the Paperboards & Specialty Papers Division in November 2002. Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business Division for export of agri-commodities. The Division is today one of India's largest exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000 with Soya farmers in Madhya Pradesh. Now it extends to 9 states covering over 4 million farmers. ITC's first rural mall, christened 'Choupal Saagar' was inaugurated in August 2004 at

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Sehore. On the rural retail front, 24 'Choupal Saagars' are now operational in the 3 states of Madhya Pradesh, Maharashtra and Uttar Pradesh. In 2000, ITC launched a line of high quality greeting cards under the brand name 'Expressions'. In 2002, the product range was enlarged with the introduction of Gift wrappers, Autograph books and Slam books. In the same year, ITC also launched 'Expressions Matrubhasha', a vernacular range of greeting cards in eight languages and 'Expressions Paper Kraft', a range of premium stationery products. In 2003, the company rolled out 'Classmate', a range of notebooks in the school stationery segment. ITC also entered the Lifestyle Retailing business with the Wills Sport range of international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive stores later expanded its range to include Wills Classic formal wear (2002) and Wills Clublife evening wear (2003). ITC also initiated a foray into the popular segment with its men's wear brand, John Players, in 2002. In 2006, Wills Lifestyle became title partner of the country's most premier fashion event - Wills Lifestyle India Fashion Week - that has gained recognition from buyers and retailers as the single largest B-2-B platform for the Fashion Design industry. To mark the occasion, ITC launched a special 'Celebration Series', taking the event forward to consumers. In 2007, the Company introduced 'Miss Players'- a fashion brand in the popular segment for the young woman. In 2000, ITC spun off its information technology business into a wholly owned subsidiary, ITC InfoTech India Limited, to more aggressively pursue emerging opportunities in this area. Today ITC InfoTech is one of India‘s fastest growing global IT and IT-enabled services companies and has established itself as a key player in offshore outsourcing, providing outsourced IT solutions and services to leading global customers across key focus verticals - Manufacturing, BFSI (Banking, Financial Services & Insurance), CPG&R (Consumer Packaged Goods & Retail) and THT (Travel, Hospitality and Transportation). ITC's foray into the Foods business is an outstanding example of successfully blending multiple internal competencies to create a new driver of business growth. It began in August 2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002, ITC entered the confectionery and staples segments with the launch of the brands mint-o and Candyman confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the introduction of Sunfeast as the Company entered the biscuits segment. ITC's 16

entered the fast growing branded snacks category with Bingo! in 2007. In just six years, the Foods business has grown to a significant size with over 200 differentiated products under six distinctive brands, with an enviable distribution reach, a rapidly growing market share and a solid market standing. In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire value chain found yet another expression in the Safety Matches initiative. ITC now markets popular safety matches brands like iKno, Mangaldeep, Aim, Aim Mega and Aim Metro. ITC‘s foray into the marketing of Agarbattis (incense sticks) in 2003 marked the manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands include Spriha and Mangaldeep across a range of fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa. ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & body care products for men and women in July 2005. Inizio, the signature range under Essenza Di Wills provides a comprehensive grooming regimen with distinct lines for men (InizioHomme) and women (Inizio Femme). Continuing with its tradition of bringing world class products to Indian consumers the Company launched 'Fiama Di Wills', a premium range of Shampoos, Shower Gels and Soaps in September, October and December 2007 respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in the mass-market segment at select markets in October 2007 and Vivel Di Wills &Vivel range of soaps in February 2008.

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3.5 Management Structure

Figure 3.1 Showing ITC’s Three-Tier Management Structure At the top are Chairman and Board of Directors, who are responsible for the strategic supervision of ITC, its wholly owned subsidiaries and their wholly owned subsidiaries. The ITC board is a balanced board comprising Executive and Non-Executive Directors. The Board ensures that the Company has clear goals relating to shareholder value and its growth. It sets strategic goals and seeks accountability for their fulfilment. There are four board committees, namely, the Audit Committee, the Nominations Committee, the Compensation Committee and the Investor Services Committee. At the second level is the Corporate Management Committee, which is responsible for the

strategic

management

of

the

company's

businesses

within

Board-approved

direction/framework. It comprises all the Executive Directors and three or four key senior members of management. Third level consists of divisional CEOs of each business assisted by their own divisional management committees. Corporate Functions of the Executive Management Team includes Planning and Treasury, Accounting, Legal, Secretarial, Human Resources, Communications, Internal Audit and Information Technology. 18

The company‘s organizational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each of them." This three-tier governance structure ensures that: For and on behalf of the shareholders the company believes in incorporating strategic governance in its work culture so as to ensure that despite being free from involvement in the task of strategic management of the Company, it can be conducted by the Board with objectivity, thereby sharpening and ensuring accountability of management; With mundane tasks of everyday executive management being delegated the management remains focused on issues of immediate importance; The Executive management of the individual businesses that are free of handling strategic management responsibilities of ITC as a whole is then able to channelize their energies and time in enhancing the effectiveness and overall growth of their individual units. Corporate Governance as defined by ITC is a systemic process by which companies are directed and controlled to enhance their wealth-generating capacity. A company employs vast sums of societal resources during this process of wealth generation. ITC is of the firm belief that the governance process being followed should ensure that these resources are used optimally to meet the aspirations of its stakeholders and society. This is further reflected in the deep commitment of the company to contribute to the ‗Triple Bottom Line‘, which is the development of the nation‘s economic, ecological and social resources. The company believes in empowering the executive management. But corporate governance ensures a system of checks and balances to ensure that these powers that are bestowed upon the executive management are used in a responsible manner so as to meet shareholder and societal expectations. The core strengths of ITC's governance philosophy are trusteeship, transparency, empowerment and accountability, control and ethical corporate citizenship. The practice of each of these creates the right corporate culture that fulfils the true purpose of Corporate Governance. Design Looking at the structure and culture of ITC, it can be said that its design is based more or less on the Divisional Structure. ITC has a diversified presence in different industries and each of its businesses act as an autonomous unit which are coordinated by the top level, i.e.

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the board and corporate management committee. The divisional managers are responsible for performance and hold complete strategic and operating decision-making authority. The top management provides support services to the divisions. It acts as an external overseer, evaluating and controlling performance. Hence the top management is free from being concerned with the day-to-day operating details so they can pay attention to the long term. Big picture, strategic decision making is done at the top level. 3.6 Corporate Governance Over the years, ITC has evolved from a single product company to a multi-business corporation. Its businesses are spread over a wide spectrum, ranging from cigarettes and tobacco to hotels, packaging, paper and paperboards and international commodities trading. Each of these businesses is vastly different from the others in its type, the state of its evolution and the basic nature of its activity, all of which influence the choice of the form of governance. The challenge of governance for ITC therefore lies in fashioning a model that addresses the uniqueness of each of its businesses and yet strengthens the unity of purpose of the Company as a whole. Since the commencement of the liberalisation process, India's economic scenario has begun to alter radically. Globalisation will not only significantly heighten business risks, but will also compel Indian companies to adopt international norms of transparency and good governance. Equally, in the resultant competitive context, freedom of executive management and its ability to respond to the dynamics of a fast changing business environment will be the new success factors. ITC's governance policy recognises the challenge of this new business reality in India. Core Principles ITC's Corporate Governance initiative is based on two core principles. These are: (i) Management must have the executive freedom to drive the enterprise forward without undue restraints; and (ii) This freedom of management should be exercised within a framework of effective accountability. ITC believes that any meaningful policy on Corporate Governance must provide empowerment to the executive management of the Company, and simultaneously create a 20

mechanism of checks and balances which ensures that the decision making powers vested in the executive management is not only not misused, but is used with care and responsibility to meet stakeholder aspirations and societal expectations. Cornerstones Corporate Governance is the cornerstone of ITC's governance philosophy, namely trusteeship, transparency, empowerment and accountability, control and ethical corporate citizenship. ITC believes that the practice of each of these leads to the creation of the right corporate culture in which the company is managed in a manner that fulfils the purpose of Corporate Governance. a) Trusteeship : ITC believes that large corporations like itself have both a social and economic purpose. They represent a coalition of interests, namely those of the shareholders, other providers of capital, business associates and employees. This belief therefore casts a responsibility of trusteeship on the Company's Board of Directors. They are to act as trustees to protect and enhance shareholder value, as well as to ensure that the Company fulfils its obligations and responsibilities to its other stakeholders. Inherent in the concept of trusteeship is the responsibility to ensure equity, namely, that the rights of all shareholders, large or small, are protected. b) Transparency : ITC believes that transparency means explaining Company's policies and actions to those to whom it has responsibilities. Therefore transparency must lead to maximum appropriate disclosures without jeopardising the Company's strategic interests. Internally, transparency means openness in Company's relationship with its employees, as well as the conduct of its business in a manner that will bear scrutiny. They believe that transparency enhances accountability. c) Empowerment and Accountability : ITC believes that empowerment is a process of actualising the potential of its employees. Empowerment unleashes creativity and innovation throughout the organisation by truly vesting decision-making powers at the most appropriate levels in the organisational hierarchy.ITC believes that the Board of Directors are accountable to the shareholders, and 21

the management is accountable to the Board of Directors. ITC believe that empowerment, combined with accountability, provides an impetus to performance and improves effectiveness, thereby enhancing shareholder value. d) Control : ITC believes that control is a necessary concomitant of its second core principle of governance that the freedom of management should be exercised within a framework of appropriate checks and balances. Control should prevent misuse of power, facilitate timely management response to change, and ensure that business risks are pre-emptively and effectively managed. e) Ethical Corporate Citizenship : ITC believes that corporations like itself have a responsibility to set exemplary standards of ethical behaviour, both internally within the organisation, as well as in their external relationships. ITC believe that unethical behaviour corrupts organisational culture and undermines stakeholder value.

Figure 3.2 Showing the Governance Structure

22

The 3-tier governance structure thus ensures that: (a) Strategic supervision (on behalf of the shareholders), being free from involvement in the task of strategic management of the Company, can be conducted by the Board with objectivity, thereby sharpening accountability of management. (b) Strategic management of the Company, uncluttered by the day-to-day tasks of executive management, remains focused and energised; and (c) Executive management of the divisional business, free from collective strategic responsibilities for ITC as a whole, gets focused on enhancing the quality, efficiency and effectiveness of its business. Roles The core roles of various entities at the 3 levels of corporate governance are as follows. Board of Directors (Board): The primary role of the Board of Directors is that of trusteeship to protect and enhance shareholder value through strategic supervision of ITC, its wholly owned subsidiaries and their wholly owned subsidiaries. As trustees they will ensure that the Company has clear goals relating to shareholder value and its growth. They should set strategic goals and seek accountability for their fulfilment. They will provide direction, and exercise appropriate control to ensure that the Company is managed in a manner that fulfils stakeholder aspirations and societal expectations. The Board must periodically review its own functioning to ensure that it is fulfilling its role. Non-Executive Directors are expected to play a critical role in imparting balance to the Board processes by bringing an independent judgement to bear on issue of strategy, performance, resources, standards of Company conduct, etc. The Board shall meet at least six times a year and as far as possible meetings will be held once in two months. The annual calendar of meetings shall be agreed upon at the beginning of each year. Chairman – Yogesh Chander Deveshwar Executive Directors i) Anup Singh 23

ii) KrishnamoorthyVaidyanath iii) KurushNoshir Grant Non-Executive Directors i) Anil Baijal ii) Shilabhadra Banerjee iii) Angara VenkataGirija Kumar iv) SerajulHaq Khan v) Sunil BehariMathur vi) Dinesh Kumar Mehrotra vii) Hugo Geoffrey Powell viii) Basueb Sen ix) PillappakkamBahukutumbiRamanujam x) Anthony Ruys xi) BalakrishnanVijayaraghavan The Board have the following Committees whose terms of reference shall be determined by the Board from time to time: Audit Committee: To provide assurance to the Board on the adequacy of internal control systems and financial disclosures. The Head of Internal Audit will act as co-ordinator to the Audit Committee, but will be administratively under the control of the Director accountable to the Board for the Finance function. Compensation Committee: To recommend to the Board compensation terms for Executive Directors and the senior most level of management below the Executive Directors. Nominations Committee: To recommend to the Board nominations for membership of the CMC and the Board, and oversee succession for the senior most level of management below the Executive Directors.

24

Investor Services Committee: To look into redressal of shareholder and investors grievances, approval of transmissions, sub-division of shares, issue of duplicate shares, etc. 3.7 Corporate Strategies a) It sustains multiple drivers of growth, matching internal capabilities with emerging market opportunities b) It pursues World class competitiveness in all businesses and across the entire value chain c) Best-in-class in terms of: i) Internal Vitality ii) Market Standing iii) Profitability d) It follows a strategy of Organization and Governance processes, geared to manage multiple businesses. 3.8 ITC- Corporate Social Responsibility 1) Environmental a) ITC has been Carbon Positive 3 years in a row. b) Water Positive 6years in a row. c) 100% solid waste recycling 2) Social a) ITC's businesses generate livelihoods for over 5 million people. b) ITC's Social and Farm Forestry initiative has greened over 80,000 hectares creating an estimated 35 million person days of employment among the disadvantaged. c) ITC's Watershed Development Initiative brings precious water to nearly 35,000 hectares of dry lands and moisture-stressed areas.

25

d) ITC's Sustainable Community Development initiatives include women empowerment, supplementary education, integrated animal husbandry programmes. e) The first ITC Sangeet Sammelan showcasing the best in Indian classical music was held in Delhi in 1971. Being a responsible corporate citizen, ITC is doing so many activities for the welfare of society and darks as a responsible corporate leader without any gap. Some of its major societal activation for the welfare of different section of society is as followsa. Environment, health & safety (EHS) b. Reaching out to society c. Preserving national heritage. d. Supporting sustainable development a. Environment, health & Safety (EHS): As a responsible corporate citizen, ITC accords the highest priority to environment, occupational health, and safety. It is committed to protecting the environment in which it operates. It is equally committed to ensuring very high standard of safety at the work place. It is a relegations of ITC‖ high EHS standards that lit has been the recipient of several National and international awards- such as1) ISO 14000 2) Sword of honour 3) Royal society of prevention of accidents awards. 4) National safety awards. 5) The corporate Environment award. 6) The golden peacock environment management award. 7) Excellence in pollution control management. 8) Prashanna Patra Award. 9) National Award for excellence in energy conservation.

26

b. Reaching Out to Society: As a responsible corporate citizen, ITC promotes art, culture and education. Besides working for the protection and enrichment of the environment and over all social development, ITC also looks into: 1) Community development. 2) Education. 3) Protecting the environment. c. Preserving National Heritage: As a socially responsible corporate citizen, ITC endeavours to creates value for the Indian society in multiple ways, one of them being ―Preservation of India‖ rich culture heritage. ITC has made significant contribution to the promotion of Indian classical music, theatre, art and cuisine. 3.9 Social Initiative of ITC E-Choupal is one of the major initiatives of ITC Limited, a large multi business conglomerate in India, to link directly with rural farmers via the Internet for procurement of agricultural and aquaculture products like soybeans, wheat, coffee, and prawns. E-Choupal was conceived to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries. The programme involves the installation of computers with Internet access in rural areas of India to offer farmers up-to-date marketing and agricultural information. The e-choupal model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others. ITC‘s Agri Business Division, one of India‘s largest exporters of agricultural commodities, has conceived e-choupal as a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis. A powerful illustration of corporate strategy linking business purpose to larger societal purpose, e-Choupal leverages the Internet to empower small and marginal farmers – who constitute a majority of the 75% of the population below the poverty line. By providing them with farming know-how and services, timely and relevant weather information, 27

transparent price discovery and access to wider markets, e-Choupal enabled economic capacity to proliferate at the base of the rural economy. Today 4 million farmers use e-Choupal to advantage – bargaining as virtual buyers‘ co-operatives, adopting best practices, matching up to food safety norms. Being linked to futures markets is helping small farmers to better manage risk. e-Choupal has been specially cited in the Government of India‘s Economic Survey of 2006-07, for its transformational impact on rural lives. ITC‘s strategic intent is to develop e-Choupal as a significant two-way multidimensional delivery channel, efficiently carrying goods and services out of and into rural India. By progressively linking the digital infrastructure to a physical network of rural business hubs and agro-extension services, ITC is transforming the way farmers do business, and the way rural markets work. Table 3.1 Showing Details of E-Choupal e-Choupal

Now

States covered

10

Villages covered

40,000

No. of e-Choupals

6,500

Farmers e-empowered

4 million

ITC Limited has now provided computers and Internet access in rural areas across several agricultural regions of the country, where the farmers can directly negotiate the sale of their produce with ITC Limited. This online access enables farmers to obtain information on mandi prices, and good farming practices, and to place orders for agricultural inputs like seeds and fertilizers. This helps farmers improve the quality of their products, and helps in obtaining a better price. Each ITC Limited kiosk having Internet access is run by a sanchalak — a trained farmer. The computer is housed in the sanchalak's house and is linked to the Internet via phone lines or by a VSAT connection. Each installation serves an average of 600 farmers in the surrounding ten villages within about a 5 km radius. The sanchalak bears some operating cost but in return earns a service fee for the e-transactions done through his e28

Choupal. The warehouse hub is managed by the same traditional middle-men, now called samyojaks, but with no exploitative power due to the reorganisation. Indeed these middlemen make up for the lack of infrastructure and fulfill critical jobs like cash disbursement, quantity aggregation and transportantion. Since the introduction of e-Choupal services, farmers have seen a rise in their income levels because of a rise in yields, improvement in quality of output, and a fall in transaction costs. Even small farmers have gained from the initiative. Customized and relevant knowledge is offered to the farmers despite heterogeneous cultures, climates and scales of production. Farmers can get real-time information despite their physical distance from the mandis. The system saves procurement costs for ITC Limited. The farmers do not pay for the information and knowledge they get from e-Choupals; the principle is to inform, empower and compete. At the same time ITC Limited has obtained benefits from the programme: 1. elimination of non value added activities 2. differentiated product through identity preserved supply chains 3. value added products traceable to farm practices 4. e-market place for spot transactions and support services to futures exchange 3.10 Working Areas of ITC Ltd ITC is into eight (8) major areas of production, distribution and servicing. These are as followsA. FMCG - Cigarettes and Tobacco, Foods B. Hotels. C. Packaging D. Paper board & Specialty paper E. Information Technology (IT) F. Life style retailing G. Agro-Exports H. Group Companies 29

A. FMCG Cigarettes and Tobacco: ITC buys nearly 50% of all cigarettes types tobacco grown in India. It has been India ―single largest integrated sources of quality tobacco for customer‖ in 37 countries over the last 6 decades. ITC‘s Comprehensive and sophist6icated R&D facilities cover all aspects of cultivation. Processing and packaging. ITC processes and delivers 100 million Kg of high quality tobacco per annum. ITC also co-operates with government agencies to develop new varieties of tobacco and to develop new areas for tobacco cultivation. Tobacco Division The company started in the year 1910 with the cigarettes business and devoted the first six decades to the cigarettes business only which it later on expanded to other divisions as well. Today ITC Ltd is the market leader in this segment with its wide range of brands like Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake. Foods ITC made its entry into the branded & packaged Foods business in August 2001 with the launch of the Kitchens of India brand. A more broad-based entry has been made since June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments. The packaged foods business is an ideal avenue to leverage ITC's proven strengths in the areas of hospitality and branded cuisine, contemporary packaging and sourcing of agricultural commodities. ITC's world famous restaurants like the Bukhara and the Dum Pukht, nurtured by the Company's Hotels business, demonstrate that ITC has a deep understanding of the Indian palate and the expertise required to translate this knowledge into delightful dining experiences for the consumer. ITC has stood for quality products for over 98 years to the Indian consumer and several of its brands are today internationally benchmarked for quality. The Foods business carries forward this proud tradition to deliver quality food products to the consumer. All products of ITC's Foods business available in the market today have been crafted based on consumer insights developed through extensive market research. 30

Apart from the current portfolio of products, several new and innovative products are under development in ITC's state-of-the-art Product Development facility located at Bengaluru. Leadership in the Foods business requires a keen understanding of the supply chain for agricultural produce. ITC has over the last 99 years established a very close business relationship with the farming community in India and is currently in the process of enhancing the Indian farmer's ability to link to global markets, through the e-Choupal initiative, and produce the quality demanded by its customers. This long-standing relationship is being leveraged in sourcing best quality agricultural produce for ITC's Foods business. The Foods business is today represented in 4 categories in the market. These are: i)

Ready To Eat Foods

ii)

Staples

iii)

Confectionery

iv)

Snack Foods

B. Hotels: ITC entered into hotels field in 1975. ITC have 46 hotels across 42 destinations all over India. ITC-Welcomgroup - Redefining the Fine Art of Hospitality ITC's foray into the hotels business began in 1975. Inspired by the vision to promote India's rich tourism heritage and also contribute to the nation's then scarce foreign exchange earnings, ITC's hotels business set about to create a unique value proposition that would redefine the fine art of hospitality. Since then ITC-Welcomgroup has emerged as one of India's premier hospitality chains offering hotels, resorts and palaces. They have over 100 hotels in more than 80 destinations. A select few among ITC‘s hotel properties are also associated with Starwood‘s Sheraton brand with which ITC has enjoyed a three decade partnership. ITC-Welcomgroup properties are classified under 4 distinct brands: a) The Luxury Collection b) WelcomHotels

31

c) Fortune Hotels d) WelcomHeritage ITC Hotel – Luxury Collection World Class Hospitality with an Indian Soul Super deluxe and premium hotels, located at India‘s most important cities, offering an unmatched and unique blend of luxury and Indian hospitality. ITC‘s seven Luxury Collection hotels offer a luxurious window into the ambience and architectural splendour of ancient dynasties. The seamless amalgam of history, the cultural ethos of different regions in India and the mood of today‘s vibrant India, create some of the most enriching experiences anywhere in the world. WelcomHotels - Warm and Caring WelcomHotels, synonymous with customer centricity and efficiency, make stays special for today‘s discerning business and leisure traveller. Focussed on unique service design, the ITC-Welcomgroup Sheraton Hotels provide five-star comfort blended with warmth, reflecting the true essence of Indian hospitality. At ITC-Welcomgroup‘s Sheraton Hotels in Jaipur, Chennai and New Delhi, the warmth of personalised service makes every visit memorable. Hotels of ITC 1) ITC Maurya, New Delhi 2) ITC Maratha, Mumbai 3) ITC Royal Gardenia, Bengaluru 4) ITC Windsor, Bengaluru 5) ITC Grand Central, Mumbai 6) ITC Sonar, Kolkata 7) ITC Kakatiya, Hyderabad 8) ITC Mughal, Agra 9) Sheraton Rajputana Hotel, Jaipur 10) Sheraton Chola Hotel, Chennai 11) Sheraton New Delhi Hotel, New Delhi 32

12) Sheraton Park Hotel and Towers, Chennai 13) WelcomeHotel Rama International, Aurangabad 14) WelcomeHotel Vadodara, Vadodara 15) WelcomeHotel Grand Bay, Visakhapatnam C. Packaging: ITC also producing packaging items like- Flip top boxes, car board outers, shells and slides, soft cup and strap labels, bundle wraps, flap boxes, inner frames, coupon inserts and variety and folding crotons. The major unit (factory) which is producing packaging items- one is munger (Bihar) and other is Tiruvottiyar near Chennai. D. Paper Board and Specialty Paper:ITC has now integrates sits paperboard & specialty paper business into its newly created (PSPD), to how new strategic & operational synergies. ITC is one of the world‖ most modern and contemporary manufactures of packaging (paper board) boards, with a manufacturing capacity of over 2,00,000 tones par year (1) packaging board coasted folding box boards, solid bleached sulphates board, white unit chipboard, liquid packaging board (2) cast coated papers and boards. The division also produced quality(a) Printing & Writing papers (b) Eco- friendly papers (c) Photo copier papers. Specialty paper:-ITC is the premier manufacturer of specialty paper in India, with a diversified product. Range ITC‘s specialty paper are used in the manufacturer of cigarettes, decorative laminates. Electrical equipment, fireworks and automotive factory filters. They are also used for fire printing, packaging and carbonizing. The division pioneered the manufacturer of specialty paper for Indian cigarette industry in 1949. It currently offers a comprehensive range of cigarette Tissues; plug Wray, tipping base, printed tipping papers and metalizing base.

33

ITC's Paperboard products include: Packaging boards - coated folding box boards, solid bleached sulphate boards, white lined chipboards, liquid packaging boards, poly extruded coated boards for food and barrier packaging, cast coated papers and boards. E. Information Technology (IT):ITC has recently spun off its 20 year old information system division into a wholly owned subsidiary to aggressively pursue growth opportunities in this sector. ITC Infotech India Ltd offer a powerful customer value proposition based on its in depth domain‘s know ledge gained from the experience of servicing a range of internal & external customers across diverse domains. –FMCG, hoteliering, packaging, paper boards, specialty papers, international trading etc. ITC Infotech ITC's wholly owned information technology subsidiary, ITC Infotech, is one of India's fastest growing IT and IT-enabled outsourced solutions providers. The Company leverages domain knowledge from its parent's market-leading position in Manufacturing, CPG & Retail and Travel & Hospitality, as well as in other domains like Banking, Financial Services & Insurance, to devise business solutions for global customers. ITC Infotech is a US $ 64 million company with over 1,700 employees. In addition to IT Solutions, Services and Cosourcing, the Company has a joint venture with ClientLogic in the BPO space that offers a technical helpdesk with over 2,500 employees. ITC Infotech has offices in the United States, Europe and the Asia Pacific, serving Fortune-listed customers across 42 countries. F. Life Style Retailing: ITC also manufacturing readymade garments range of international quality of relaxed wear under the brand name ―wills sport‖. It has 48 retail outlet across 38 cities in the country. Recently he also lunched another brand name ―John Players‖ offers complete range of contemporary men‘s wear- like shirts, Trousers, t-shirts & denims. It also lunches in Nov. 2002 under brand name ―the Classes Collection‖. Lifestyle Retailing Business Division ITC‘s Lifestyle Retailing Business Division has established a nationwide retailing presence through its Wills Lifestyle chain of exclusive specialty stores providing the Indian

34

consumer a truly 'International Shopping Experience' through world-class ambience, customer facilitation and clearly differentiated product presentation. G. Agro-Exports:ITC international business division (IBD) is doing Exports activities of agriculture products and processed foods etc. They export the following items to UK, US and to other European countries- Soya meal, rice, aqua products, peanuts, coffee, wheat, sesame seeds, black pepper, processed and frozen fruits and vegetables. Agri Business In the year 1990, the company leveraged its agri – sourcing competency & thus set up the agri business division for export of agri-commodities. The Division is today one of India's largest exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000 now extending to 10 states covering over 4 million farmers & the company‘s vision is to have a network of 20,000 e-Choupals, thus extending coverage to villages representing one sixth of rural India. ITC's Agri Business Division is the country's second largest exporter of agri-products with exports of over Rs. 1000 Crores (Rs. 10 billion) . ITC's Agri business is progressively aligning its commodity portfolio with the sourcing needs of the Company's Foods business to generate higher order value from its agri procurement infrastructure. ITC's Agri Business Division is the country's second largest exporter of agri-products with exports of over Rs. 1000 Crore (Rs. 10 billion). Its domestic sales of agri-products are in excess Rs. 1500 Crores (Rs. 15 billion). It currently focuses on exports of: a)Feed Ingredients - Soyameal b)Food Grains - Rice (Basmati &Non Basmati), Wheat, Pulses c) Edible Nuts - Sesame Seeds, HPS Groundnuts, Castor oil d) Marine Products - Shrimps and Prawns e) Processed Fruits - Fruit Purees/Concentrates, IQF/Frozen Fruits, Organic Fruit Products, Fresh Fruits

35

f) Coffee & Spices - Coffee, Black Pepper, Chilly, Turmeric, Ginger, Celery and other Seed Spices H. GROUP COMPANIES Subsidiaries 1) ITC Infotech 2) Surya Nepal Pvt Ltd 3) Landbase 4) King Maker Marketing Inc., Usa 5) Technico Pty Ltd, Australia 6) Russell Credit Ltd 7) Wimco Ltd 8) Srinivasa Resorts Ltd 9) Fortune Park Hotels Ltd 10) Bay Islands Hotels Ltd 11) Gold Flake Corporation Ltd Joint Ventures 1) Maharaja Heritage Resorts Ltd 2) ITCFiltrona Associate Companies 1) Gujarat Hotels Ltd 2) International Travel House

36

3.11 Details of the Ernakulam Division This branch/division of ITC is called the Indian Tobacco Division (ITD). They have a number of other divisions all over India. This is a division mainly aimed at the marketing activities of the FMCG products of the Company. There are five sections and each section takes care of one of the five areas. The five sections are: Cigarettes, Foods, Personal Care, Modern Trade, and Stationary.

Branch Manager

Assistant Manager

Area Manager

Area Executive Figure 3.3 Showing the Hierarchy of the Division

37

ITC’s Distribution Channel

Figure 3.4 Showing ITC’s Distribution channel 3.12 Research and Development ITC is committed to delivering world-class products and services. This requires a clear focus on continuously striving to create a higher value to customers by achieving excellence in all Company's operations. Business excellence calls for a passionate focus on technology, products, services, processes and an operating environment firmly anchored to an impregnable foundation of Quality. ITC firmly believes that quality is not a specifically assignable task. It needs to be firmly rooted and institutionalized in the culture and value system of the Company. ITC nurtures a culture of striving for continuous improvement in quality, be it in products, services, systems or performance. The Company is committed to the establishment of systems and processes to promote organisational creativity and innovation. ITC's development of its Integrated Quality Management System (IQMS) is based on its strong foundation of implementing ISO 9001:2000, ISO 14001, OHSAS 18001, SA 8000, HACCP (for Foods) and IQRS (performance rating and benchmarking of the quality management system). Likewise, ITC's strategic initiatives for developing its people have 38

been based on participative management concepts like QC (Quality Control), TQM (Total Quality Management), KSS (Kaizen Suggestion Scheme), 5S, Six Sigma. All ITC manufacturing units have ISO quality certification. Almost all contract manufacturing units in the Foods Business and all large hotels have food safety and quality systems certified by accredited 'third party' in accordance with 'Hazard Analysis Critical Control Points' (HACCP) standards. Additionally, the quality of all FMCG products of the Company is regularly monitored through 'Product Quality Rating System' (PQRS). The Leaf Tobacco and Printing & Packaging businesses have achieved world-class ratings in the 'International Quality Rating System' (IQRS) for business excellence in which key processes are rated against international benchmarks and certified by accredited 'third party' independent assurance providers. Table 3.2 Showing the R and D Expense for the Year 2010 For the year ended 31st March, 2010

Expenditure on R & D:

(Rs. in Lakhs)

i)

Capital

874.98

ii)

Recurring

7708.34

iii)

Total

8783.32

iv)

Total R & D Expenditure as a % of: -Gross Turnover

0.33%

-Net Turnover

0.47%

39

3.13Future Plans of the Company i) ITC aims for 14 per cent share in the biscuits market. ii) Aashirvaad has been expanding the range and the latest offering includes its combo packs of rice and gravies. iii) ITC Foods has been quick to extend its range to unique offerings such as the Sunfeast Orange Marie apart from the usual fare of glucose and Marie Light variants. ITC Moves into Health and Education The company has tied up with Apollo to provide telemedicine services at its Choupal Sagars in Mhow and Sehore in Madhya Pradesh. These Sagars, which already have a doctor, pharmacy and pathological lab, are linked to Apollo‘s specialty clinics in Ahmedabad. Specialized consulting, when required, is done through this link. On the anvil are plans to train health workers in the villages to run tests on instant testing devices like those for blood sugar or blood pressure. IBD also plans to link the villages to Apollo‘s specialty clinic. 3.14 Financial Performance of the Company The financial performance of the Company for the past three years is taken to analyse the growth and profitability of the Company. Company's Share Capital 249,54,14,504 Ordinary Shares of the Company, representing 65.36% of the Company's paid up capital, as on 18th June, 2010 are in dematerialised form. The paid-up share capital of the Company is Rs. 381,81,76,790 (Rs.381.82 crores) divided into 381,81,76,790 Ordinary Shares of the face value of Re 1/- each. Total No. of Shareholders as on 18th June, 2010 :

: 3,46,645

No. of shareholders in dematerialised form

: 3,00,880

No. of shareholders in physical form

: 45,765

40

Table 3.3 Balance Sheet of the Company for Three Years (2008, 2009, 2010)

I. Sources of Funds 1.Shareholders’ Funds a)Capital b)Reserves & Surplus 2.Loan Funds a)Secured Loans b)Unsecured Loans 3.Deferred Tax-Net Total II.Application of Funds 1.Fixed Assets a)Gross Block b)Less: Depreciation c)Net Block d)Capital Work-inProgress 2.Investments 3.Current Assets, Loans and Advances

31st March, 2010(Rs. in crores)

31st March, 2009(Rs. in crores)

31st March, 2008(Rs. in crores)

381.82 13682.56

377.44 13357.64

376.86 11680.81 12057.67

107.71

11967.86 3825.46 8142.40 1008.99

14064.38

107.71 785.01 14957.10

11.63 165.92

10558.65 3286.74 7271.91 1214.06

9151.39 5726.87

13735.08

177.55 867.19 14779.82

8485.97

5.57 208.86

8959.70 2790.87 6168.83 1126.82

2837.75

4549.07 858.80 1126.28

4599.72 668.67 1032.39

4050.52 736.93 570.25

d)Other Current Assets

288.39

215.35

146.07

1304.54

1644.98

1515.50

8127.08

8161.11

7019.27

3498.30 4549.94 8048.24

2964.52 1740.49 4705.01

2786.97 1645.33 4432.30

Less : 4.Current Liabilities and Provisions a)Liabilities b)Provisions Net Current Assets Total

7295.65 2934.55

a)Inventories b)Sundry Debtors c)Cash and Bank Balances

e)Loans and Advances

214.43 545.07 12817.17

78.84

3456.10

2586.97

14957.10

14779.82

12817.17

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3.15 Global Honours ITC constantly endeavours to benchmark its products, services and processes to global standards. The Company's pursuit of excellence has earned it national and international honours. ITC is one of the eight Indian companies to figure in Forbes A-List for 2004, featuring 400 of "the world's best big companies". Forbes has also named ITC among Asia's'Fab 50' and the World's Most Reputable Companies ITC is the first Indian company and the second in the world to win the prestigious Development Gateway Award. It won the $100,000 Award for the year 2005 for its trailblazing ITC e-Choupal initiative which has achieved the scale of a movement in rural India. The Development Gateway Award recognizes ITC's e-Choupal as the most exemplary contribution in the field of Information and Communication Technologies (ICT) for development during the last 10 years. ITC e-Choupal won the Award for the importance of its contribution to development priorities like poverty reduction, its scale and replicability, sustainability and transparency. Some of the notable recognitions are: a) ITC Hotel Royal Gardenia, Bengaluru is the first Indian Hotel and world's largest, to get the LEED Platinum rating - the highest green building certification globally. b) The Company's Green Leaf Threshing plants at Chirala and Anapartiin Andhra Pradesh are the first units of their kind in the world to get ISO 14001 environment management systems certification. c) ITC‘s cigarette factory in Kolkata is the first such unit in India to get ISO 9000 quality certification and the first among cigarette factories in the world to be awarded the ISO 14001 certification. d) ITC Maurya in New Delhi is the first hotel in India to get the coveted ISO 14001 Environment Management Systems certification. e) ITC Filtrona is the first cigarette filter company in the world to obtain ISO 14001. f) ITC has won the Golden Peacock Awards for 'Corporate Social Responsibility (Asia)' in 2007, the Award for ‗CSR in Emerging Economies 2005‘ and ‗Excellence in Corporate Governance' in the same year. These Awards have been instituted by the Institute of 42

Directors, New Delhi, in association with the World Council for Corporate Governance and Centre for Corporate Governance. g) ITC Infotech finds pride of place among a select group of SEI CMM Level 5 companies in the world. h) The Corporate Social Responsibility Crown Award for Water Practices from UNESCO and Water Digest for its distinguished work carried out in the water sector in India. ITC also received the National Award for Excellence in Water Management 2007 in the 'beyond the fence' category from the CII Sohrabji Godrej Green Business Centre for its leadership role in implementing water and watershed management practices. i) The Corporate Award for Social Responsibility 2008 from The Energy and Resources Institute (TERI) in recognition of its exemplary initiatives in implementing integrated watershed development programmes across 7 states in India. The company also won the award in 2004 for its e-Choupal initiative. The Award provides impetus to sustainable development and encourages ongoing social responsibility processes within the corporate sector. j) The Best Corporate Social Responsibility Practice Award 2008 jointly instituted by the Bombay Stock Exchange, Times Foundation and the NASSCOM Foundation. k) The only Indian FMCG company to have featured in the Forbes 2000 list. The Forbes 2000 is a comprehensive ranking of the world's biggest companies, measured by a composite of sales, profits, assets and market value. The list spans 51 countries and 27 industries. l) The "Best Supply Chain Practices Award" for time-effective and cost-efficient Logistics Management in Organized Retail to ITC's Lifestyle Retailing Business Division (LRBD). The awards were organized by Retailers Association of India (RAI) in association with ITW Signode - the International leaders in packaging solutions. ITC's production facilities and hotels have won numerous national and international awards for quality, productivity, safety and environment management systems. ITC was the first company in India to voluntarily seek a corporate governance rating.

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3.16 SWOT Analysis of ITC ITC is one of India's biggest and best-known private sector companies. In fact it is one of the World's most high profile consumer operations. Its businesses and brands are focused almost entirely on the Indian markets. Strengths ITC leveraged it traditional businesses to develop new brands for new segments. For example, ITC used its experience of transporting and distributing tobacco products to remote and distant parts of India to the advantage of its FMCG products. ITC master chefs from its hotel chain are often asked to develop new food concepts for its FMCG business. ITC is a diversified company trading in a number of business sectors including cigarettes, hotels, paper, agriculture, packaged foods and confectionary, branded apparel, personal care, greetings cards, Information Technology, safety matches, incense sticks and stationery. Weaknesses The company's original business was traded in tobacco. ITC stands for Imperial Tobacco Company of India Limited. It is interesting that a business that is now so involved in branding continues to use its original name, despite the negative connection of tobacco with poor health and premature death. To fund its cash guzzling FMCG start-up, the company is still dependent upon its tobacco revenues. Cigarettes account for 47 per cent of the company's turnover, and that in itself is responsible for 80% of its profits. But now it has almost come out of this problem. So there is an argument that ITC's move into FMCG (Fast Moving Consumer Goods) is being subsidised by its tobacco operations. Its Gold Flake tobacco brand is the largest FMCG brand in India - and this single brand alone holds 70% of the tobacco market. Opportunities Core brands such as Aashirvaad, Mint-o, Bingo! And Sun Feast (and others) can be developed using strategies of market development, product development and marketing penetration.

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ITC is moving into new and emerging sectors including Information Technology, supporting business solutions. E-Choupal is a community of practice that links rural Indian farmers using the Internet. This is an original and well thought of initiative that could be used in other sectors in many other parts of the world. It is also an ambitious project that has a goal of reaching 10 million farmers in 100,000 villages. ITC leverages e-Choupal in a novel way. The company researched the tastes of consumers in the North, West and East of India of atta (a popular type of wheat flour), then used the network to source and create the raw materials from farmers and then blend them for consumers under purposeful brand names such as Aashirvaad Select in the Northern market, Aashirvaad MP Chakki in the Western market and Aashirvaad in the Eastern market. This concept is tremendously difficult for competitors to emulate. Chairman Yogi Deveshwar's strategic vision is to turn his Indian conglomerate into the country's premier FMCG business. Per capita consumption of personal care products in India is the lowest in the world offering an opportunity for ITC's soaps, shampoos and fragrances under their Wills brand. Threats The obvious threat is from competition, both domestic and international. The laws of economics dictate that if competitors see that there is a solid profit to be made in an emerging consumer society that ultimately new products and services will be made available. Western companies will see India as an exciting opportunity for themselves to find new market segments for their own offerings. ITC's opportunities are likely to be opportunities for other companies as well. Therefore the dynamic of competition will alter in the medium-term. Then ITC will need to decide whether being a diversified conglomerate is the most competitive strategic formation for a secure future.

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3.17 Details of the Human Resources Department Objectives of HRM a) Integration of HRM policy with business goals/objectives b) Attainment of organizational objectives through human capital c) Creation of flexible work hours/function d) Creation of a flexible environment to be responsive to market ambience, as per the need of the dizzily fast packed and changing environment. e) Integration of people related issues with business issues, while bringing people related issues to the fore and advocating primacy of business needs.

Human Resource Development The Company‘s employees rose to the challenges posed by the rapidly changing global economic landscape. Strongly aligned with the Company‘s Vision, they are committed to sustaining the Company‘s position as one of India‘s most admired and valuable corporations. The Company‘s unique employee value proposition backed by its strong corporate equity has enabled it to attract and retain quality talent. During the year under review, the Company made significant investments in developing talent across the organization, from frontline managers to business leadership. The Company‘s human resource management systems and processes are geared towards creating a responsive, customer-centric and market-focused culture that enhances organizational capability and vitality, so that each business is internationally competitive and equipped to leverage emerging market opportunities. The strategy of organisation, particularly its ongoing emphasis on developing and supporting distributed leadership, has ensured that each of the Company‘s businesses are managed by a team of competent, passionate and inspiring leaders, capable of building an organisation hinged on a culture of learning, innovation and world-class execution. The Company believes that alignment of all employees to a shared vision and purpose is vital for winning in the market place. It also recognizes the mutuality of interests with key stakeholders and is committed to building harmonious employee relations. The collaborative spirit across all sections of employees has resulted in significant enhancement in quality and 46

productivity. During the year under review, long-term agreements were successfully concluded at several of the manufacturing units and hotel properties. Smooth commencement of operations at Greenfield locations was ensured. In an increasingly competitive environment, the collective dedication of nearly 24,000 employees is enabling delivery of superior and sustainable stakeholder value. In its Centenary Year, the Company salutes the unflinching commitment of its dedicated team of employees, both past and present. ITC- HRM Policy a) ITC believes that all its employees must live with social and economic dignity and freedom, regardless of nationality, gender, race, economic status or religion. b) ITC upholds international human rights standards, does not condone human rights abuses, and creates and nurtures a working environment where human rights are respected without prejudice. c) The Corporate Human Resources function conducts non-discrimination reviews annually on a sample basis with unit heads and through on-site assessments. d) ITC Unit has appropriate systems and checks to ensure compliance with the Policy and statutory provisions, including means for filing of grievances, collective bargaining agreements and minutes from worker meetings. e) ITC does not employ any person below the age of eighteen years in the workplace. ITC prohibits the use of forced or compulsory labour at all its units. No employee is made to work against his/her will or work as bonded/forced labour. f) All major changes in operations involving work processes, manning norms and other productivity linked issues are carried out after discussions with the employees and the recognized unions at each location. g) ITC is committed to providing a safe and healthy work environment to all its employees. These policy guidelines on HIV/AIDS are an endorsement of this commitment and, in particular, of the Company's commitment to specific programmes and actions in response to the HIV epidemic. Staff ITC‘s greatest strength is its people- diverse and motivated people with the expertise and insight to tackle the toughest client issues. ITC does not discriminate due to sex, age, creed, 47

and colour. They promote drug free environment, encourage development with excellent training. Code of Conduct 1) Dealing with People in the Organization - In dealing with each other, directors, senior management and employees upholds the values which are at the core of the Company‘s HR Philosophy - trust, teamwork, mutuality and collaboration, meritocracy, objectivity, self respect and human dignity. Indeed, these values form the basis of its HR management systems and processes.ITC focuses on meritocracy, equity and upholding of Company values in all people processes including performance management systems, appraisals, remuneration and rewards. 2) A Gender Friendly Workplace - As a good corporate citizen, ITC is committed to a gender friendly workplace. It seeks to enhance equal opportunities for men and women, prevent/stop/redress sexual harassment at the workplace and institute good employment practices. Sexual harassment includes unwelcome sexually determined behaviour such as: unwelcome physical contact; a demand or request for sexual favours; sexually coloured remarks; showing pornography and any other unwelcome physical, verbal or non-verbal conduct of a sexual nature.

ITC maintains an open door for reportees; encourages employees to report any harassment concerns and is responsive to employee complaints about harassment or other unwelcome and offensive conduct. A committee has been constituted to enquire into complaints and to recommend appropriate action, wherever required. 3) Relationships with Suppliers and Customers - All directors, senior management and employees must ensure that in their dealings with suppliers and customers, the Company‘s interests are never compromised. Accepting gifts and presents of more than a nominal value, gratuity payments and other payments from suppliers or customers will be viewed as serious breach of discipline as this could lead to compromising the Company‘s interests. 4) Legal compliance - It is the Company‘s policy to comply fully with all applicable laws and regulations. Ensuring legal and regulatory compliance is the responsibility of the Chief Executives of the Businesses and the Divisional Management Committees. The Company does not accept practices which are unlawful or may be damaging to its reputation. Divisional Management Committees must satisfy themselves that sound 48

and adequate arrangements exist to ensure that they comply with the legal and regulatory requirements impacting each business and identify and respond to developments in the regulatory environment in which they operate. Personal Conduct All directors, senior management and employees have the obligation to conduct themselves in an honest and ethical manner and act in the best interest of the Company at all times. They are expected to demonstrate exemplary personal conduct through adherence to the following: i) Avoidance of Conflict of Interest - All directors, senior management and employees must avoid situations in which their personal interest could conflict with the interest of the Company. ii) Transparency and audibility - All directors, senior management and employees must ensure that their actions in the conduct of business are totally transparent except where the needs of business security dictate otherwise. Such transparency shall be brought about through appropriate policies, systems and processes, including as appropriate, segregation of duties, and involvement of more than one manager in key decisions and maintaining supporting records. iii) Protection of Confidential Information - No director, senior management and employee must disclose or use any confidential information gained in the course of employment/ association with the Company for personal gain or for the advantage of any other person. iv) Company Facilities - No director, senior management and employee should misuse Company facilities. In the use of Company facilities, care must be exercised to ensure that costs are reasonable and there is no wastage. v) Leading by Example - The organization‘s directors and senior management set the professional tone for the Company. ITC‘s directors, senior management and employees must constantly reinforce through their actions and behaviour that ITC‘s stated beliefs of responsible corporate citizenship are rooted in individual conviction and personal integrity.

vi) Protection of Confidential Information - No director, senior management and employee shall disclose or use any confidential information gained in the course of employment/ association with the Company for personal gain or for the advantage of 49

any other person. No information either formally or informally shall be provided to the press, other publicity media or any other external agency except within approved policies. Management Development ITC recognises that a comprehensive management development strategy is the key to enhancing individual, team and organizational effectiveness, as well as building strategic capabilities and processes for organizational vitality and renewal. In ITC, management development goes far beyond training and development as is commonly understood. Management development initiatives include, in addition to formal training and development programmes, a host of interventions such as cross-functional and multi-business exposure, developmental assignments/ secondments, membership of task forces, special assignments, systems and processes such as the appraisal system, the strategy of organization itself, etc. Core training and development inputs are imparted to every individual based on his level of responsibility, in addition to training and development interventions relating to his functional specialisation. A key focus of ITC's management development efforts is the development of business leadership across businesses in support of ITC's belief that an organization with a diversified business portfolio can be managed effectively only when competent and effective leadership is distributed across the organization. ITC's Core Values are aimed at developing a customer-focused, high-performance organisation which creates value for all its stakeholders: Trusteeship: As professional managers, they are conscious that ITC has been given to us in "trust" by all our stakeholders. They try to actualise stakeholder value and interest on a long term sustainable basis. Customer Focus: The employees are always customer focused and will deliver what the customer needs in terms of value, quality and satisfaction.

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Respect for People: The employees are result oriented, setting high performance standards for ourselves as individuals and teams. They simultaneously respect and value people and uphold humanness and human dignity. The employees at ITC acknowledge that every individual brings different perspectives and capabilities to the team and that a strong team is founded on a variety of perspectives. The Company want individuals to dream, value differences, create and experiment in pursuit of opportunities and achieve leadership through teamwork. Excellence: ITC do what is right, do it well and win. They strive for excellence in whatever they do. Innovation: ITC constantly pursue newer and better processes, products, services and management practices. Nation Orientation: They are aware of their responsibility to generate economic value for the Nation. In pursuit of our goals, they make no compromise in complying with applicable laws and regulations at all levels. Recruitment The human resources are the most important assets of organization. The success or failure of an organization is largely dependent on the calibre of the people working therein. Without positive and creative contribution from people, organization can‘t progress and prosper. In order to achieve the goals and perform the activities of an organization, therefore we need to recruit people with requisite, skills, qualification and experience. While doing so we have to keep the present as well as future requirements of the organization in mind. Objective 1) To effectively manage the manpower recruitment in coherence with long term and short term manpower planning of the organization through a standard recruitment and selection policy. 2) To proactively and systematically identify the recruitment needs in time. 3) To ensure that all the recruitment are within the manpower budget and as per the laid down policy. 51

4) To recruit people with required level of skilled and aptitude for learning and growth. Identification of Vacant Positions 1. Total permanent manpower strength/budget for organization has been sanctioned by the board of directors. 2. All the recruitment has necessarily to be made within the approved budget/strength only. 3. Vacancies against the sanctioned budget may arise due to: a) Retirement b) Turnover c) Natural Separation 4. Whenever a vacancy arise, the concerned department has to fill up the prescribed manpower requisition form clearly indication the job description and specification, time frame and send it to HR department. Methods of Recruitment a) Internal Method b) Direct Method c) Indirect Method Internal Method a) Promotion and Transfers b) Job Position c) Employee Referrals Promotion and Transfers: ITC prefer to fill vacancies through promotion or transfers from within wherever possible. Promotion involves movement of an employee from a lower level position to higher level position accompanied by changes in duties, responsibilities, status and value and value. It may lead to changes in duties and responsibility, working conditions, etc., but not necessarily salary. Internal promotions and transfers certainly allow people greater scope to experiment with their career, kindling ambitions and motivating them to take a shot at something they might otherwise never have considered. The system, of course, works best for young executives who are willing to take risks. 52

Job Position Job position is another way of hiring people from within. In this method, the organization publicizes job openings on bulletin boards, electronic media and similar outlets. Hindustan lever introduced its version open job position in early 2002 and over 40 positions have since been filed through the process. HLL even allows its employee to undertake career shifts, for example from technical position system. Employee Referrals Employee referral means using personal contacts to locate job opportunities. It is a recommendation from a current employee regarding a job applicant. The logic behind employee referral is that ― it takes one to know one‖ employee working in the organization in this case, are encouraged to recommend the name of their friends working in other organization for a possible vacancy in the near future. In fact, this has become a popular way of recruiting people in the highly competitive information technology industry now a day. Companies offer rich rewards also to employees whose recommendation are accepted after the routine screening and examining process is over- and job offers extended to the suggested candidates. Direct Method a) Campus Recruitment It is a method of recruiting by visiting and participating in college campuses and their placement centres. Here the recruiter‘s visits reputed educational institutions such as IITs, IIMs colleges and universities with a view to pickup job aspirants having a requisite technical of professional skills. Job seekers are provided information about the jobs and the recruiter‘s interne get a snap shot of job seekers through constant interchange of information with respective institutions. A preliminary screening is done within the campus and the short listed students are then subjected to the reminder of the selection process. In view of the growing demand for young managers, most reputed organizations visit regularly and even sponsor certain popular activities with a view to earn goodwill in the job market. Advantage of this method include: the placement centre helps locate applicants and provides resumes to organization; applicants can be pre-screened; applicants will not have to be lured away from a current job and lower salary expectation.

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Indirect Method 1) Advertisement 2) Head Hunters Advertisement This includes advertisement in newspapers; trade, professionals and technical journals; radio and TV etc. In recent time this medium became just as colourful lively and imaginative as consumer advertising. The ad generally gives a brief outline of the job responsibilities, compensation package, prospects in the organization etc. This method is appropriate when (a) the organization intends to reach a large target group and (b) the organization wants a fairly good no. of talented people who are geographically spread out. Head Hunters There is an influx of executive search agencies also known as head hunters who specialize in selection of professionals for very senior or top posts, where applicants are in short supply and employers have no time to go round in search of the best talents. Such vacancies are fewer and far between and organizations prefer hiring a head hunter who maintains confidentiality of the employer and are specialize in recruiting the best talent strictly as per the job specification. But, these specialists bodies charges hefty professional fees. However, the high cost is outweighed by the benefit of recruiting the best talent without going through the cumbersome and time consuming process of internal recruitment system. Selection Procedure 1. Screening of Application: a) All application received from various sources will be screened by the concerned department and HR based on the job description and specification and the applicant profile. b) Shorting of prima facile suitable candidates who should be called for test/interview shall be prepared. c) The ratio between the number of vacancy and the number of candidate to be called for test/interview should normally be 1:5.

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2. Test: a) Depending on the requirement of the job if required, management may conduct written/aptitude/psychometric/physical or any other test as deem fit. b) Short listed application will be send formal letter for appearing test at least 15 days in advance. c) Qualifying criteria for the test will be determined by the management depending on the nature and requirement of the job. 3. Interview: a) All the candidates short listed for interview will be informed through a formal call letter for attending interview at least 15 days in advance. b) The candidate will be interview by the interview panel.

4. Final Selection and Appointment: a) Recommendation of the interview panel will be put up before the MD by the HR Department for his approval. b) Candidates for the officer and above after interviewed by the panel will be finally interview by the MD. c) Selection of candidates will be strictly on the basis of merit. Other things being equal local candidate from state of Bihar will be given preference. d) Appointment letter will be issued to the finally selected candidates after duly approved by MD. However, in case appointment letter can initially be issued to the candidates and the detailed formal appointment letter can be issued at the time of joining. e) Before letter of appointment is issued to candidates HR department will ensure the following: 1. Check and verify all the personal details furnished by the candidates. 2. Verify the certificates and other credentials. 3. Make necessary reference/antecedents verifications whenever required.

5. Joining Formalities: (a)Employees joining shall first report in the HR department will facilitate in completing the joining formalities such as filling of joining report and other necessary forms. (b)HR department will ensure that the candidates will be allowed to join subject to their being found medically. 55

Entry Level Recruitment ITC visits premier Engineering and Management campuses every year to induct quality talent for its various Businesses. i) Manufacturing ii) Marketing and Human Resources iii) Trading, Sourcing and Logistics iv) Finance Manufacturing ITC inducts talent for the Technical function from the 5 IITs (Chennai, Delhi, Kanpur, Kharagpur, Powai) and some of the NITs. Engineers from disciplines such as Mechanical, Electrical and Electronics, Production Engineering, Chemical and Civil are considered for placement. The process starts in August each year with a campus visit and a pre-placement presentation. This provides an opportunity for young aspirants to learn more about the Company, its history and achievements, its corporate strategy, details of its various businesses and the kind of careers they can look forward to. The selection process is objective and robust. A range of selection tools are used. These include assessment centres, group tasks and in-depth personal interviews. Candidates found suitable for employment are immediately given offers to join ITC in July of the following year. After a comprehensive induction programme, they are assigned to various businesses of the Company.

Marketing and Human Resources ITC sources talent from the premier Management Institutes of the country for the Marketing and HR functions. These campuses include the IIMs, ISB, XLRI, FMS, IIFT, TISS, JBIMS and Symbiosis.

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The pre-placement presentation at campuses, normally in September/October each year, provides an opportunity for young aspirants to know more about the Company, its history and achievements, its corporate strategy, details of the various businesses and the kind of careers they can look forward to. During these visits, ITC also selects first-year students for Summer Internships during April to July of the following year. A team of ITC managers visits campuses once again between December and March for final placement. The process consists of group discussions and personal interviews preceded by psychometric tests and assessment centres. Employment offers are made to selected candidates immediately. On joining ITC in July, candidates undergo an induction programme before being assigned to one of the Company's businesses. Trading, Sourcing and Logistics ITC visits premier institutes such as IIMA, IIFT, IRMA and MANAGE to induct talent for its Agri Business Division. Pre-placement presentations at campuses normally take place in September/October each year. These presentations provide an opportunity for young aspirants to know more about the Company, its history and achievements, its corporate strategy, details of its various businesses and the kind of careers they can look forward to. During these visits, first-year students are selected for Summer Internships with ITC in April to July of the following year. A team of ITC managers visits these campuses once again between December and March for campus interviews. The process consists of group discussions and personal interviews preceded by psychometric tests and assessment centres. Employment offers are made to selected candidates immediately. On joining ITC in July, candidates participate in an induction programme. Thereafter they are assigned to responsibilities in Trading, Sourcing and Logistics in the Agri Business Division. Finance ITC recruits entry-level talent for the Finance function from amongst qualified Chartered Accountants and MBAs specializing in Finance.

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Candidates are short-listed for selection from a pool of applicants that apply to ITC on-line through the Company's portal at www.itcportal.com. Recruitment of entry level talent in the Finance Function takes place twice a year. Preliminary interviews are held at selected locations. The short-listed candidates are called to Kolkata for the final selection process which extends over two days. The selection process comprises psychometric tests, assessment centres, group tasks and personal interviews. The interviewing panel looks for a strong conceptual base in finance and accounting. Effective inter-personal skills, integrity, intellectual rigour, a "will do" attitude, creativity, leadership and high energy are other essential attributes. Candidates who receive offers of employment undergo a comprehensive induction programme before being assigned to the Internal Audit function. The tenure in the Internal Audit function normally extends over a period of 3 years. Following this, they are assigned operational responsibilities in one of the Company's businesses. Training and Education ITC's Human Resource philosophy focuses on meritocracy and capability development. The Capability Development Agenda aims at strengthening the organisational capability required in pursuit of ITC's Mission, its Strategic Agenda, the Three Horizon Growth Strategy and Vision 2010. In line with this agenda, several customised training and development interventions were offered at Corporate and Divisional levels aimed at developing functional, behavioural, leadership and management capabilities. Ongoing core programmes were also redesigned to reflect the new capability requirements. The development approach had elements beyond training, with the objective of increasing knowledge of systems and procedures, providing opportunities for on-the-job learning, encouraging employee participation, etc. The training is mostly online. The training matrix in the Company endeavours to provide a balance, with a strong functional bias in the early years, and an emphasis on managerial and business skills in the mid and late career stages. The programmes include high-level international training events at key points. Training also seeks to continuously build awareness of other functions at every stage of the process.

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Table 3.4 Showing Details of Training Training

Management

Unionised

No. of employees

6,705

13,657

Man-days of training provided

15,479

24,741

18

14

Average hours of training provided

During 2005-06, ITC invested over 40,000 man-days in training employees across categories. Apart from this, training was also provided to various employees of service providers at different locations. The Company, on an average, provided 2 person-days of training per employee in 2005-06. The Company Encourage its Managers to Take Sabbaticals for Higher Education The Company does encourage its managers to do so. In fact, the Company sponsors identified managers to pursue a full time MBA programme at the IIMs, ISB and other leading management institutes. Managers are identified on the basis of their performance and potential. Whilst the manager is away pursuing a full time MBA programme, he continues to receive his Consolidated Salary and is reimbursed the cost of his education to the extent of 75% of the expenditure actually incurred, subject to a maximum of Rs.10 lakhs. On completing the MBA programme, the manager returns to a challenging assignment. Specialists ITC recognises the need to nurture specialism and expertise in areas that give the Company a distinct competitive advantage. In keeping with this need, the Company has put in place a unique strategy to attract and retain "specialists" that is anchored in the following premises: a)

In each function, certain specific positions require nurturing of specialism and knowledge. These positions require possession of unique authority over a critical

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aspect of the business, are not easily replaceable and require knowledge and skills that are unique and not common across industries. b)

There are certain positions in any organization where longevity of the individual in that position leads to acquisition of in-depth knowledge and experience which would take another individual in that position years to acquire. Therefore, there is a need to retain individuals in these key positions for as long as is possible.

In keeping with this approach, certain positions have been identified to be "specialist" in nature. These include Scientist, Leaf Blender, Agronomist, Legal Resource in Trade Marks and Tobacco and Health, Paper Maker, Forex Dealer, Commodity Trader, Chef, Food and Beverage specialist, etc. The remuneration of individuals in these specialist positions is de-linked from the remuneration matrix applicable to the rest of the business and is determined by the criticality of skill, individual competence and experience. The Company strives to encourage individuals in these specialist positions to continue in them, by rewarding and recognizing their contribution in that position, rather than have them look to the traditional routes for career progression and enhancement. Performance Management System Cornerstones of ITC’s Performance Management System The cornerstone of the performance management system is the Appraisal System. The individual agrees his performance objectives at the beginning of the year with his boss. These objectives naturally flow from the objectives of the unit/business. At the end of the year his performance is assessed against the objectives set. The appraisal attaches as much importance to ''how'' results were achieved as to the results themselves. The rating is determined by the manager's boss and endorsed by his boss. Therefore, two individuals are involved in assessing a manager's performance. The appraisal process also gives the individual an opportunity to share in a formal manner his own career aspirations and what he needs from the organisation to enhance his own development. Based on an assessment of development needs, a development plan is drawn up for each manager.

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Remuneration changes are made once every year based on the performance rating of the individual. The entire process is transparent and objective. Performance Appraisal Performance appraisal is the process of 1) obtaining, 2) analyzing and 3) recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does. A performance appraisal, employee appraisal, performance review, or (career) development discussion is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost, and time) typically by the corresponding manager or supervisor. A performance appraisal is a part of guiding and managing career development. It is the process of obtaining, analyzing, and recording information about the relative worth of an employee to the organization. Performance appraisal is an analysis of an employee's recent successes and failures, personal strengths and weaknesses, and suitability for promotion or further training. It is also the judgment of an employee's performance in a job based on considerations other than productivity alone. Performance Ranking Method Ranking is a performance appraisal method that is used to evaluate employee performance from best to worst. Manager will compare an employee to another employee, rather than comparing each one to a standard measurement. This is one of the oldest and simplest techniques of performance appraisal. It is quite useful for a comparative evaluation. Useful when there are several reports from multiple assessors, but does not allow for individuals to pinpoint their strengths or weaknesses for improvement. This system works very much on global judgments of performance over all.

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Forced Distribution This method is based on the assumption that the distribution of employees performance is always able to be allocated in predetermined directions. Forced ranking is a method of performance appraisal to rank employee but in order of forced distribution. For example, the distribution requested with 10 or 20 percent in the top category, 70 or 80 percent in the middle, and 10 percent in the bottom. Rater is asked to select statement which is most or least descriptive of the employee. It is similar to grading on a curve. Predetermined percentages of ratees are placed in various performance categories. In a group of 20 employees, two would have to be placed in the low category, four in the below-average category, eight in the average, four above average, and two would be placed in the highest category. The proportions of forced distribution can vary. Even if all employees in a unit are doing a good job, the forced distribution approach dictates that a certain number be placed at the bottom of a graded continuum. Determination of Career Progression in the Company ITC believes the responsibility for career development rests both with the individual and the organisation. While the organisation provides opportunities for learning and growth, it is the individual's responsibility to ensure he enhances his competencies to shoulder higher responsibilities. Career development therefore is a two-way process. Above all, the key factor determining career growth is meritocracy and performance. Remuneration ITC believes that managerial remuneration is an important instrument in attracting and retaining talent and a key component of the performance management system. Three features of ITC's remuneration strategy are: a) Remuneration must leverage performance and therefore the need for a strong linkage between remuneration and performance when considering annual remuneration reviews as well as when periodically adjusting remuneration for market. b) Remuneration must be market-led. For this purpose remuneration is reviewed on an on-going basis in relation to identified benchmark companies to ensure that remuneration practices are in sync with the competitive situation.

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c) Remuneration must take into account "affordability" and the Company's capacity to pay and updation. The policy is implemented at all locations of hence cannot be divorced from business reality. Remuneration of Directors Remuneration of Chairman and other Executive Directors is determined by the Compensation Committee comprising only Non-Executive Directors. The recommendations of the Compensation Committee are considered and approved by the Board subject to the approval of the Shareholders. The Chairman and Executive Directors are entitled to Performance Bonus for each financial year up to a maximum of 200% and 150% of their consolidated salary, respectively, as approved by the Shareholders, and as may be determined by the Board on the recommendation of the Compensation Committee, based on qualitative and quantitative assessment of Company performance. Non-Executive Directors are entitled to remuneration by way of commission for each financial year, up to a maximum of Rs. 6,00,000/- individually, as approved by the Shareholders. Non-Executive Directors‘ commission is determined by the Board based, inter alia, on Company performance and regulatory provisions. Such commission is payable on a uniform basis to reinforce the principle of collective responsibility. Non-Executive Directors are also entitled to sitting fees for attending meetings of the Board and Committees thereof, the limits for which have been approved by the Shareholders. The sitting fees, as determined by the Board, are presently Rs. 20,000/- for attending each meeting of the Board, Audit Committee, Compensation Committee, Nominations Committee and Sustainability Committee and Rs. 5,000/- for each meeting of the Investor Services Committee. NonExecutive Directors are also entitled to coverage under Personal Accident Insurance. Equal Remuneration ITC's compensation philosophy does not differentiate on gender, caste or age. It is linked to responsibility levels of the role that the incumbent is performing and based on performance. As part of its compliance, ITC also ensures compliance with the Equal Remuneration Act which mandates every employer to pay equal remuneration to men and women employees for the same work or work of similar nature.

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Elements of the Compensation Package ITC's remuneration strategy is anchored in three basic principles: market-led, performance leveraged and the capacity to pay. Remuneration is bench marked with identified comparator organisations and reviewed periodically. Apart from the monetary component which comprises Consolidated Salary and Supplementary Allowance, managers are provided with quality accommodation, generous loans for asset creation, medical assistance for self and family, leave travel assistance, etc. at middle and senior levels. Managers are provided with company maintained cars and the facility of a club membership for business purposes. All managers are members of ITC's Retirement Funds, the Pension Scheme being one of the most attractive in the country. Other benefits include the facility of holiday homes, assistance for further education/self-development etc. Benefits Provided by ITC to its Employees a) Competitive Wages b) Vacation, holiday and sick pay c) Medical Insurance d) Domestic Partner Benefits e) Medical, dental and vision insurance f) Short and long term disability g) Employee assistance program h) Flexible spending account i) Business travel insurance j) Employee stock purchase plan k)Discounted access to fitness facilities Governance Bodies and Diversity ITC's approach to its human resource is premised on the fundamental belief of fostering meritocracy in the organization, which promotes diversity and offers equality of opportunity to all employees. ITC does not engage in or support direct or indirect discrimination in recruitment, compensation, access to training, promotion, termination or retirement based on caste, religion, disability, gender, age, race, colour, ancestry, marital status or affiliation with a political, religious, union organization or minority group. 64

The Board of Directors at the apex, as trustees of shareholders, is responsible for the strategic supervision of the Company. There are 9 Non-Executive Directors and 4 Executive Directors on the Board which is headed by the Chairman. An indicator of meritocracy is the appointment of the current Chairman as Director when he was only 37 years old. The NonExecutive Directors come from different fields, thereby ensuring multidimensional perspectives in setting the strategic agenda. The strategic management of the Company rests with the Corporate Management Committee comprising full time Executive Directors and 4 members drawn from senior management. The 4 members from senior management represent diverse functions like Technical, R&D, Human Resources and Corporate Affairs. The executive management of each business Division is vested with the Divisional Management Committee (DMC), headed by the Chief Executive. The DMC draws resources from different functions. Each DMC is responsible for and totally focused on the management of its assigned business. About 60 senior managers across different age groups and functional specialisations are represented on the DMCs and SBUs. Policy to Prevent Discrimination at Workplace ITC acknowledges that every individual brings a different and unique set of perspectives and capabilities to the team. A discrimination-free workplace for employees provides the environment in which diverse talents can bloom and be nurtured. This is achieved by ensuring that a non-discrimination policy and practice is embedded across the Company in line with corporate principles and benchmarked business practices. Diversity and Equal Opportunity ITC acknowledges that every individual brings a different and unique set of perspectives and capabilities to the team. A discrimination-free workplace for employees provides the environment in which diverse talents can bloom and be nurtured. This is achieved by ensuring that a non-discrimination policy and practice is embedded across the Company in line with corporate principles and benchmarked business practices.

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Policy on Freedom of Association ITC's culture is characterized by cooperative relationships and high employee involvement that relies on building partnerships and interdependence. Adhering to these principles has helped build, sustain and strengthen harmonious employee relations in the organisation. Policy Prohibiting Child Labour and Preventing Forced Labour from Workplace The foundation of ITC's "No Child or Forced Labour policy" is based on the Company's commitment to find practical, meaningful and culturally appropriate responses to support the elimination of such labour practices. It thus endorses the need for appropriate initiatives to progressively eliminate these abuses.

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CHAPTER IV LITERATURE REVIEW BALANCED SCORECARD 4.1 What is the Balanced Scorecard? The Balanced Scorecard is a performance management tool that enables a company to translate its vision and strategy into a tangible set of performance measures. However, it is more than a measuring device. The scorecard provides an enterprise view of an organisation's overall performance by integrating financial measures with other key performance indicators around customer perspectives, internal business processes, and organisational growth, learning, and innovation. Kaplan and Norton describe the innovation of the balanced scorecard as follows: "The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.‖[1] According to Kaplan and Norton (1996), ―The Balanced Scorecard provides managers with the instrumentation they need to navigate to future competitive success‖ [1]. Many books and articles referring to Balanced Scorecards confuse the design process elements and the Balanced Scorecard itself. In particular, it is common for people to refer to a ―strategic linkage model‖ or ―strategy map‖ as being a Balanced Scorecard. Although it helps focus managers' attention on strategic issues and the management of the implementation of strategy, it is important to remember that the Balanced Scorecard itself has no role in the formation of strategy. In fact, Balanced Scorecards can comfortably co-exist with strategic planning systems and other tools. The grouping of performance measures in general categories (perspectives) is seen to aid in the gathering and selection of the appropriate performance measures for the enterprise. Four general perspectives have been proposed by the Balanced Scorecard: 1) Financial perspective 2) Customer perspective 67

3) Internal process perspective 4) Innovation and learning perspective Financial Perspective The financial perspective addresses the question of how shareholders view the firm and which financial goals are desired from the shareholder's perspective. The specific goals depend on the company's stage in the business life cycle. Customer Perspective The customer perspective addresses the question of how the firm is viewed by its customers and how well the firm is serving its targeted customers in order to meet the financial objectives. Generally, customers view the firm in terms of time, quality, performance, and cost. Most customer objectives fall into one of those four categories. Internal Process Perspective Internal business process objectives address the question of which processes are most critical for satisfying customers and shareholders. These are the processes in which the firm must concentrate its efforts to excel. Learning and Growth Perspective Learning and growth metrics address the question of how the firm must learn, improve, and innovate in order to meet its objectives. Much of this perspective is employeecentred. 4.2 Cause-and-Effect Relationships The Balanced Scorecard relies on the concept of Strategy developed by Michael Porter [1]. Porter argues that the essence of formulating a competitive strategy lies in relating a company to the competitive forces in the industry in which it competes. The scorecard translates the vision and strategy of a business unit into objectives and measures in four different areas: the financial, customer, internal business process and learning and growth perspective. The financial perspective identifies how the company wishes to be viewed by its shareholders. The customer perspective determines how the company wishes to be viewed by 68

its customers. The internal business process perspective describes the business processes at which the company has to be particularly adept in order to satisfy its shareholders and customers. The organisational learning and growth perspective involves the changes and improvements which the company needs to realize if it is to make its vision come true. A strategy is a set of hypotheses about cause and effect. The measurement system should make the relationships (hypotheses) among objectives (and measures) in the various perspectives explicit, so that they can be managed and validated. The chain of cause and effect should pervade all four perspectives of a BSC

[1]

. For example, the strategy of an

engineering company could be to perform consultancy besides the regular work because it provides a higher return. Return-on-capital-employed (ROCE) may be a scorecard measure in the financial perspective. The driver of this measure could be expanded sales to new and existing customers as a result of a high degree of loyalty among those customers. Thus, new customers and customer loyalty is included on the scorecard in the customer perspective because it is expected to have a strong influence on ROCE. A market analysis may have revealed that there is a need for consultancy. In this case, providing consultancy is expected to lead to new customers and higher customer loyalty, which, in turn, is expected to lead to higher financial performance. So new customers, customer loyalty and consultancy (which could be measured by the number of consultancy projects that has been carried out) are incorporated into the customer perspective of the scorecard. The process continues by asking which internal processes for the engineering company are necessary in order to practice consultancy. To achieve this, the business may need new quality consultancy products. The new products must first be developed and afterwards tested on quality. Developed consultancy products and process quality on consultancy products are factors that could be scorecard measures in the internal perspective. The engineering company can develop consultancy products by training its operating employees in the required skills. If the company also engages experienced consultants, this will shorten the development time of the consultancy products. These experienced consultants can act as mentor for the trained employees. Experienced consultants and trained employees for consultancy are objectives that would be candidates for the learning and growth perspective.

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Because Kaplan and Norton assume the following causal relationship: measures of organisational learning and growth -measures of internal business processes - measures of the customer perspective - financial measures, the measures of organisational learning and growth are therefore the drivers of the measures of the internal business processes. The measures of these processes are in turn the drivers of the measures of the customer perspective, while these measures are the drivers of the financial measures. According to Kaplan and Norton a good balanced scorecard should have an appropriate mix of outcomes (lagging indicators) and performance drivers (leading indicators of the business unit‘s strategy [1]. Key Performance Indicators Metrics used in the BSC are typically called Key Performance Indicators (KPIs) because they measure how well the organisation performs against predefined goals and targets. There are two major types of KPIs: leading and lagging indicators. Leading indicators measure activities that have a significant effect on future performance, whereas lagging indicators, such as most financial metrics, measure the output of past activity. Leading indicators are powerful measures because it gives managers more time to influence the outcome. BSC Usage in Small Medium Sized Enterprises Nowadays, many large companies use a performance measurement system like the BSC but many smaller companies have no performance measurement system. In a recent study Sousa et al. indicate that the SMEs surveyed, recognise the importance of performance and a performance measurement system but their level of use was significantly lower

[2]

.

Speckbacher et al. found a significant association of size (measured as the number of employees) and BSC usage; larger companies are more likely to have implemented a BSC [3]. However, the examined companies are large and not small or medium sized organisations. Neely et al. pointed out that measurement is a luxury for SMEs. They concluded that the cost of measurement is an important issue to managers in SMEs

[4]

. Also, nowadays most SMEs

use an information system by which data for measures can easily be obtained, but the costs of implementing and purchasing a scorecard system can still be an issue to managers.

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4.3 Types of Balanced Scorecard Speckbacher, Bischof and Pfeiffer found in their large-scale research with high response under German companies quoted on the stock exchange a high support for ambivalence in the BSC concept [3]. They defined three types of BSCs: 1) Type I BSC: a specific multidimensional framework for strategic performance measurement that combines financial and non-financial strategic measures. 2) Type II BSC: a Type I BSC that additionally describes strategy by using cause-andeffect relationships. 3) Type III BSC: a Type II BSC that also implements strategy by defining objectives, action plans, results and connecting incentives with BSC. 50% of the examined companies that use the BSC appeared to work with a type I BSC, 21% with a type II BSC and 29% with a type III BSC. Only the companies that use type III BSC are in position to fully benefit of the BSC as a performance management system that bridges the gap between strategic plans and real activities. However, linking the reward system to the BSC has some risks

[1]

. The question arises whether or not measures on the

BSC are right. Are the data for the selected measures reliable? Could there be unintended or unexpected consequences in how the targets for the measures are achieved? Despite the risks of linking the reward system to BSC, it seems reasonable to assume that companies are able to steer the organisation according to the strategy (described by BSC measures and causeand-effect chains) if they reward managers on the basis of BSC measures

[5]

. The study of

Speckbacher et al. shows that companies implementing a more developed BSC (particularly Type III) rely more on the BSC approach and are more satisfied with their BSC than those with a less developed BSC. In the majority of organisations, the implementation of the BSC is a difficult process. The types defined can be interpreted as three typical evolutional steps in the process of BSC implementation [3]. Half of the companies that use the BSC were not able to obtain cause-andeffect relationships. One reason for this could be that those companies have only recently started the process of implementation. It is also likely that a large number of the companies, that are using the type I BSC, might find it too difficult to obtain cause-and-effect relationships.

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The Process of Building a Balanced Scorecard While there are many ways to develop a Balanced Scorecard, Kaplan and Norton defined a four-step process that has been used across a wide range of organizations. 1. Define the measurement architecture - When a company initially introduces the Balanced Scorecard, it is more manageable to apply it on the strategic business unit level rather than the corporate level. However, interactions must be considered in order to avoid optimizing the results of one business unit at the expense of others. 2. Specify strategic objectives - The top three or four objectives for each perspective are agreed upon. Potential measures are identified for each objective. 3. Choose strategic measures - Measures that are closely related to the actual performance drivers are selected for evaluating the progress made toward achieving the objectives. 4. Develop the implementation plan - Target values are assigned to the measures. An information system is developed to link the top level metrics to lower-level operational measures. The scorecard is integrated into the management system. Conditions for Implementing the Balanced Scorecard Nowhere in their books and articles do Kaplan and Norton describe the conditions an organisation must in order to be able to apply the Balanced scorecard. The way they describe organisations that applied the BSC in numerous examples suggests that this method is universally applicable. According to Kaplan and Norton, the Balanced Scorecard enables companies to modify strategies. Companies in a highly dynamic environment have to change their strategy constantly, which, leads to frequently changing the measures in the BSC. In general, it is difficult for an organisation to establish performance measures for activities with which the organisation has very little or no experience. Therefore, as measuring effects is particularly difficult in companies which constantly have to adapt to new situations, the BSC is not applicable for companies in highly dynamic environments. Implementing Balanced Scorecards typically includes four processes: 1. Translating the vision into operational goals;

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2. Communicating the vision and link it to individual performance; 3. Business planning; 4. Feedback and learning, and adjusting the strategy accordingly. 4.4 Learning and Growth Perspective The Learning & Growth Perspective focuses on the intangible assets of an organization, mainly on the internal skills and capabilities of the employees that are required to support the value-creating internal processes. The Learning & Growth Perspective focuses on: a)

Human Capital-Jobs and people issues

b)

Information Capital- Systems and technology issues

c)

Organization capital- Organizational climate and quality of work-life

The Learning and Growth objectives describe how the people, technology, and organizational climate combine to support strategy. Measures in this perspective are lead indicators for improvements in the internal processes, customer and financial perspectives. The diversity learning and growth perspective reflects a statistical summary of the organization‘s ability to maintain and enhance the capability of its diverse intellectual assets. It includes priorities to create a climate that supports organizational change, innovation, and growth. It enables the organization to ensure its capacity for long-term renewal by effectively developing and utilizing its diverse workforce for improved performance, a prerequisite for survival in the long run. In this perspective the organization should consider not only what it must do to maintain and develop the know-how required for understanding and utilizing its diverse workforce, but also determining what‘s needed to build a long-term sustaining infrastructure to enhance its core competency base. By doing so, the organization will be in a much better strategic position to satisfy its employee and customer needs as well as to sustain the necessary efficiency and productivity of its processes, which create financial value. Intense global competition requires that organizations continually improve their capabilities for delivering value to customers and share- holders. Organizational learning and growth come from three principal sources: people, systems, and organizational procedures. Scorecards typically reveal large gaps between the existing capabilities of people, systems, and procedures and what is required to

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achieve breakthrough performance. To close these gaps, businesses have to invest in reskilling employees, enhancing information technology and systems, and aligning organizational procedures and routines. An innovative idea or core competency skill level does not have a race, color, creed, or specific ethnicity. It simply reflects someone with this level of competency or skill. Depending on the organization‘s ability to manage diversity and to create an environment where people can do their absolute personal best work, employees will either stay or leave. The degree to which the organization is willing to invest in all employees through its training, career planning, mentoring, and succession planning efforts to build core capabilities and the like will heavily influence the employee‘s perception of the workplace and the organization‘s ability to meet its competitive challenges. This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems." The customer-based and internal business process measures on the balanced scorecard identify the parameters that the company considers most important for competitive success. But the targets for success keep changing. Intense global competition requires that companies make continual improvements to their existing products and processes and have the ability to introduce entirely new products with expanded capabilities. A company's ability to innovate, improve, and learn ties directly to the company's value. That is, only through the ability to launch new products, create more value for customers, and improve operating efficiencies continually can a company penetrate new markets and increase revenues and margins – in short, grow and thereby increase shareholder value. 74

An effective strategic learning process has three essential ingredients: 1. A shared strategic framework that communicates the strategy and allows each participant to see how his or her activities contribute to achievement of the overall strategy; 2. A feedback process that collects performance data about the strategy and allows the hypotheses about interrelationships among strategic objectives and initiatives to be tested: and 3. A team problem-solving process that analyzes and learns from the performance data and then adapts the strategy to emerging conditions and issues. The learning and growth perspective on the balanced scorecard develops objectives and measures to drive organizational learning and growth. The objectives established in the learning and growth perspective provide the infrastructure to enable ambitious objectives in the other three perspectives to be achieved.

Objectives in the learning and growth

perspective are the drivers for achieving excellent outcomes in the first three scorecard perspectives. The Balanced Scorecard stresses the importance of investing for the future, and not just in traditional areas for investment, such as new equipment and new product research and development. There are three principal categories for the learning and growth perspective: 1. Employee Capabilities 2. Information System Capabilities 3. Motivation, empowerment and alignment Employee Capabilities Core Employee Measurement Group The three core employee measurements are: 1. Employee retention 2. Employee productivity 3. Employee satisfaction

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Results

Employee Retention

Employee Productivity

Employee Satisfaction

Enablers

Staff Competencies

Technology Infrastructure

Climate for Action

Figure 4.1 Showing the Core Measurements Measuring Employee Retention Employee retention captures an objective to retain those employees in whom the organization has a long-term interest. The theory underlying this measure is that the organization is making long-term investment in its employees so that any unwanted departures represent a loss in the intellectual capital of the business. Long-term, loyal employees carry the values of the organization, knowledge of organizational processes and the sensitivity to the needs of the customers. Employee retention is generally measured by percentage of key staff turnover.

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Measuring Employee Productivity The simplest productivity measure is revenue per employee. This measure represents how much output can be generated per employee. Measuring Employee Satisfaction The employee satisfaction objective recognizes that employee morale and overall job satisfaction are now considered highly important by most organizations. Satisfied workers are a precondition for increasing productivity, responsiveness, and quality and customer service. 4.5 Employee Satisfaction Importance of Employee Satisfaction According to Marc Drizin, an employee loyalty specialist, ―Employees are assets with feet. They‘re the only resource companies who have made a conscious decision to return the next day‖

[6]

. A 2003 J.D. Power and Associates survey concluded that there is another

customer builders need to focus on satisfying besides the obvious customers. Builders need to focus on ―the rank-and-file managers and employees who work for them‖ [7]. The effects employee satisfaction has on an organization‘s business are numerous. Some of the most relevant and profitable effects are described below. Studies show that businesses that excel in employee satisfaction issues reduce turnover by 50% from the norm, increase customer satisfaction to an average of 95%, lower labor cost by 12% and lift pre tax margins by an average of 4% [8]. Not only are employee turnover, customer satisfaction, labor costs, and pre tax margins improved by addressing employee satisfaction, but customers, products, and the company itself are also positively affected. Profit and growth are stimulated directly (and primarily) by customer loyalty. Customer loyalty is a direct consequence of customer satisfaction. Customer satisfaction is heavily influenced by customer perceptions of the value of services they receive. Value is created by satisfied, loyal and productive employees.

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Employees who feel a sense of teamwork and common purpose, a strong commitment to communication, and managerial empowerment are most able, and willing, to deliver the results that customers expect [9]. Don Wainwright, president of Wainwright Industries, a winner of the Malcolm Baldrige National Quality Award, made the point in 2001 that ―Jack Welch uses only three indicators to run giant General Electric. He‘ll tell you that the most effective and only numbers he needs to know are, in order of importance: employee satisfaction, customer satisfaction and cash flow‖

[9]

. Studies completed in 1999 by the Hay Group for Fortune

magazine have shown that even the most admired companies – Intel, Coca-Cola, and GE to name a few – each embrace the same basic company cultural values: teamwork, customer focus, innovation, and fair treatment of employees [10]. Valued Employees Enabling employees to freely contribute in an organization can have a substantial positive effect on a company. Keeping employees informed and getting them involved in decisions that affect their work builds trust and feelings of self-worth. Involving employees helps employees feel that they are trusted and needed, which increases their contributions and production. Jack Welch, a retired CEO of GE once stated, ―A company can boost productivity by restructuring, removing bureaucracy and downsizing, but it cannot sustain high productivity without cultural change, without totally involving the individual who is closest to the work and therefore knows it better than those who manage it‖ (―The HighPerforming Contractor‖, 2004).

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CHAPTER V DATA ANALYSIS AND INTERPRETATION The success of any organization depends on its employees. The employees need to have a certain set of competencies to perform specific jobs. It is also necessary to have a clear understanding of the competencies required to successfully perform the job. Every employee must be aligned with the Vision of the organization. Learning and growth helps to find out that in order to achieve the vision of the organization, how should it sustain its ability to change and improve. It is based on the vision that their targets are fixed. If we break down the vision into still smaller parts, it will be possible to understand the objectives to be achieved, measures to be taken to achieve those objectives, targets to be met and the initiatives to be taken from the part of the management and the employees. Everything begins from the vision of the Company. There are certain aspects for the learning and growth. The important aspects in the learning and growth model that are to be analysed are: 1) Value Creation 2) To be highly competitive 3) To remain as the leader for years 4) Tax payment 5) Creating value for the stakeholders The Vision of ITC is: “Sustain ITC’s position as one of India’s most valuable corporations, through world class performance, creating growing value for the Indian economy and the company’s stakeholders”. When we break up the vision of the company and analyse it closely, there are various objectives that can be derived from it. The various objectives that are stated are: Objective 1

- To be one of India‘s most valuable and competitive corporations

Objective 2

-To maintain this position continuously over years to come and remain

competent

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Objective 3

- To serve the Indian economy through creating value

Objective 4

- To create value for the stakeholders of the organization and also to be loyal to

them These objectives are to be achieved in order to remain one of the most valuable company‘s in the years to come. There are certain measures that are taken by the company for achieving these objectives. So, the objective of this study is to find out the various measures that are necessary for achieving the objectives and to find out and create a learning and growth model for the company for seven years based on this. This will help to understand whether the steps taken by the company is sufficient for continuing as the leader in the market. Table 5.1 Showing the Objectives and the Measures Objective

Specific Measure

Sustain ITC‘s position as one of India‘s most

Financial Data analysis-ROI, ROCE,

valuable corporations

Dividend

Create value for the Indian economy

Tax payment, CSR activities, awards and recognitions received for these initiatives

Create value for its stakeholders

Dividend payout

Analysis of the Objectives I.

The first two objectives are taken and analysed together as both these are quite similar and same measures are used to achieve them. The first two objectives are:

Objective 1

- To be one of India‘s most valuable and competitive corporations

Objective 2

-To maintain this position continuously over years to come and remain

competent In short, the main components of these objectives are: a)Value Creation

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b) To be highly competitive c) To remain as the leader for years Value Creation From an accounting perspective, profit can be defined as the amount by which revenues exceed costs. In the simplest cases, this profit definition may be good enough to define value creation as well. In order for value to be created, the business must return economic profits. If the business is profitable from an accounting perspective but not profitable enough to provide economic profits, the business will be worth less that the amount invested in it and value will have been destroyed. Similarly, if the business is profitable and provides a fair return on the amount invested but nothing more, the business will be worth an amount equal to that invested and value will not have been created. Value creation is a never-ending cycle. Without Constant inspection, value will not be created at the maximum pace. Value creation can be viewed from two angles. It can be either: a) The Company respecting and giving value to its employees or b) The employees adding value to the Company

or

c) The Company creating and providing value for its customers Value creation is studied and understood in terms of profitability of the company that is, whether the Company is making profit year after year and shows a steady growth. Profitability is measured using: 1) Return on Investment (ROI) 2) Return on Capital Employed (ROCE) Return on Investment A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio. Return on Investment (ROI) is also called the rate of return (ROR) and is a measure of the performance of any investment. It is the ratio between the financial benefit or loss of an investment and the amount of money invested.

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The return on investment formula: ROI= (Gain from Investment – Cost of Investment) Cost of Investment Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken. Non-financial factors like innovation, people and ideas are difficult to quantify, rarely acknowledged in accounting methods and not adequately measured, managed or reported on by organisations. However, these are some of the critical sources of value that can be utilised by companies to improve their competitive advantage. Return on Investment of ITC shows a growing trend, which points towards greater profitability of the Company. The gross income of the Company is also growing year after year. The following graph shows the growing trend of the Company. The gross income has increased tremendously from 2001 – 2010. The gross income during the year 2009-10 is Rs. 26863 Crores.

Figure 5.1 Showing the ROI of the Company

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Return on Capital Employed ROCE compares earnings with capital invested in the company. It is similar to Return on Assets (ROA), but takes into account sources of financing. It is a ratio that indicates the efficiency and profitability of a company's capital investments. The formula for calculating ROCE is: ROCE =

EBIT Capital Employed

ROCE should always be higher than the rate at which the company borrows, otherwise any increase in borrowing will reduce shareholders' earnings.

Figure 5.2 Showing the ROCE of the Company

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The growth of a Company is determined by looking at its sales and the earnings growth rate. The following table shows the sales and the PAT of the Company for the five years: Table 5.2 Showing Sales and Profit for the Years 2006-2010 (Rs. in Crores) Year

2010

2009

2008

2007

2006

Sales

18,567.45 14,985.81

14,032.20

12,313.83

9,798.33

Profit After Tax

4,061.00

3,120.10

2,699.97

2,235.35

3,263.59

The financial health of a company is dependent on a combination of profitability, short-term liquidity and long term liquidity. Companies, which are profitable, but have poor short term or long term liquidity measures, do not survive the troughs of the trade cycle. Also firms, which are not profitable but are cash rich, do not survive in the long term either. Such companies are taken over for their cash flow or by others who believe that they can improve the profitability of the business. Thus, those companies that do succeed and survive over the long term have a well-rounded financial profile, and perform well in all aspects of financial analysis. Profitability ratios reflect the business environment of the time. The profitability ratios of the Company are given in the following table. Table 5.3 Showing the Key Profitability Ratios Return on Total Assets (ROTA)

22.55%

Return on Capital Employed (ROCE)

28.76%

Net Profit Margin

21.30%

The Company‘s profitability ratios show that the Company‘s position in the industry is quite strong and has the possibility of further growth over the years to come.

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Table 5.4 Sowing the Company’s Performance against its Competitors in the Cigarette Segment for the Financial Year 2009-10:

Company

Sales

(Rs PAT

(Rs Market Cap (Rs

cr.)

cr.)

cr.)

ITC Ltd.

18,567.45

4,061.00

114,537.58

Godfrey Philips India Ltd.

1,119.84

108.90

1,928.25

VST Industries Ltd.

470.54

62.05

857.88

Golden Tobacco Ltd.

86.82

0.25

179.08

RTCL Ltd.

1.20

0.16

5.39

This shows that the Company is way ahead of its competitors in terms of sales as well as profit. ITC alone accounts for 60% volume market share and 70% by value of all filter cigarettes in India. Earlier the tobacco business contributed to 100% of the Company‘s revenue. It was completely dependent on the income from tobacco business. But after the diversification of the Company into various other sectors, the dependence on the tobacco revenue has decreased greatly over the years. It has thus slowly overcome its weakness of complete dependence on the cigarette revenue. The next objective is regarding serving the Indian economy. The objective is: Objective 3

- To serve the Indian economy through creating value

ITC is a responsible citizen that gives great importance to serving the economy and making it better. It is committed to protecting the environment in which it operates. It also works for the development of the community and also to providing education for the children. As a responsible citizen, it works towards the betterment of the Indian economy. ITC's aspiration to create enduring value for the nation provides its employees the inspirational motive force to sustain growing shareholder value. This compelling vision is called "A commitment beyond the market". ITC practices this philosophy by not only driving each of its businesses towards international competitiveness, but by also consciously contributing to enhancing the competitiveness of the larger value chain of which it is a part.

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ITC, as a truly ‗Indian‘ company, whilst recognising the need to create a fair reward for shareholders, goes the extra mile, in partnership with other participants in the economy, to create conducive conditions for international competitiveness towards maximising value for the Indian society. The depth of ITC's commitment to the Indian economy is manifest in the way its diverse businesses contribute to strengthening their related value chains – through R&D, extension services, IT-enablement and the social and economic empowerment of the marginalised. The most telling example of this commitment is ITC's path breaking initiative in building sustainable rural partnerships, which carry the potential to transform the landscape of rural India and the lives of our rural population. ITC's "commitment beyond the market" encompasses the larger social canvas to include the preservation of India's cultural heritage. ITC is particularly proud of its pioneering contribution in the area of Hindustani classical music. As a concerned corporate citizen, ITC is committed to the highest standards in the key areas of Environment, Occupational Health and Safety (EHS). ITC strives to sustain and continuously improve its EHS standards to match the finest international benchmarks. The special feature that follows captures ITC's inspired commitment to create and sustain a model that harmonises service to society with enhancing shareholder value. The measures for achieving this objective are: 1) Tax payment 2) CSR activities, awards and recognitions received for these initiatives Tax payment The tax paid by the Company helps in the growth of the Indian economy. The tax payment of the Company has been increasing over the years. The tax paid by the Company during the years 2007, 2880 2009 and 2010 are as follows: Tax paid by the Company for the year 2007 – Rs.1226.73 Crores Tax paid by the Company for the year 2008 – Rs.1451.67 Crores 86

Tax paid by the Company for the year 2009 – Rs. 1562.15 Crores Tax paid by the Company for the year 2010 – Rs. 1954.31 Crores From the above data it is clear that the tax paid by the Company is increasing over the years. CSR Activities The Company is creating value to the Indian economy through its various CSR initiatives. There are a number of CSR initiatives that the Company has taken up and for this the Company has won numerous awards as well. Corporate Strategies are designed to create enduring value for the nation and the shareholder, through leadership in each business and the attainment of world-class competitive capabilities across the value chain. Being a socially responsible corporate citizen, ITC endeavours to create value for the Indian society in multiple ways, one of them being ―Preservation of India‖ rich culture heritage. ITC has made significant contribution to the promotion of Indian classical music, theatre, art and cuisine. As a responsible corporate citizen, ITC promotes art, culture and education. Besides working for the protection and enrichment of the environment and over all social development, ITC also looks into: i) Community development. ii) Education. iii) Protecting the environment. ITC‘s CSR initiatives include: A) Environmental i) ITC has been Carbon Positive 3 years in a row. ii)Water Positive 6years in a row. iii)100% solid waste recycling

87

B) Social i)ITC's businesses generate livelihoods for over 5 million people. ii) ITC‘s globally recognised e-Choupal initiative is the world's largest rural digital infrastructure benefiting over 4 million farming families. The e-choupal model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others. iii) ITC‘s Social and Farm Forestry initiative has greened over 80,000 hectares creating an estimated 35 million person days of employment among the disadvantaged. iv) ITC‘s Watershed Development Initiative brings precious water to nearly 35,000 hectares of dry lands and moisture-stressed areas. v) ITC‘s Sustainable Community Development initiatives include women empowerment, supplementary education, integrated animal husbandry programmes. vi) The first ITC Sangeet Sammelan showcasing the best in Indian classical music was held in Delhi in 1971. For its CSR initiatives, the Company has won several prestigious awards. These include: a) ITC has won the Golden Peacock Awards for 'Corporate Social Responsibility (Asia)' in 2007, the Award for ‗CSR in Emerging Economies 2005‘ and ‗Excellence in Corporate Governance' in the same year. b) The Best Corporate Social Responsibility Practice Award 2008 jointly instituted by the Bombay Stock Exchange, Times Foundation and the NASSCOM Foundation. c) ITC is the first Indian company and the second in the world to win the prestigious Development Gateway Award. It won the Award for the year 2005 for its e-Choupal initiative which has achieved the scale of a movement in rural India. The Development Gateway Award recognizes ITC's e-Choupal as the most exemplary contribution in the field of Information and Communication Technologies (ICT) for development during the last 10 years. ITC e-Choupal won the Award for the importance of its contribution to development 88

priorities like poverty reduction, its scale and reliability, sustainability and transparency. The company also won the award in 2004 for its e-Choupal initiative. d) ITC has won the inaugural 'World Business Award', the worldwide business award recognising companies who have made significant efforts to create sustainable livelihood opportunities and enduring wealth in developing countries. e) The Corporate Social Responsibility Crown Award for Water Practices from UNESCO and Water Digest for its distinguished work carried out in the water sector in India. ITC also received the National Award for Excellence in Water Management 2007 in the 'beyond the fence' category from the CII Sohrabji Godrej Green Business Centre for its leadership role in implementing water and watershed management practices. f) The watershed programme also won the Asian CSR Award 2007 for Environmental Excellence given by the Asian Institute of Management. The CSR activities of the Company and the various awards that the Company has won for these activities clearly indicate towards the fact that the Company is creating value for the Indian economy. This shows that the Company‘s objective of creating value for the Indian economy is necessarily undertaken and fulfilled. Objective 4: To create value for the stakeholders of the organization and also to be loyal to them This objective is determined by analysing the financial data of the Company. Shareholders are very important as far as any business is concerned. This objective helps to understand how the Company treats and value its shareholders. A company can be said to be creating value for its stakeholders if it declares maximum dividend. Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. In order to keep up the expectation of shareholders and also for a secure future so that their income increases, the Company has declared a dividend of Rs.3.50 per share (previous year: Rs.3.10 per share), for the year 2007-2008. 89

The dividend payout of the Company has been increasing over the years. The dividend payout for the year 2008 was 13% more than the previous year. In the year 2009, it was 6% more and in the year 2010, there was an increase of 23%. The following table shows the dividend history of the Company for the past five financial years. Table 5.5 Showing the Company’s Dividend History FINANCIAL YEAR

DIVIDEND

PER TOTAL DIVIDEND (RS.

SHARE(RS)

IN CRORE)

2009-10

10.00

3818.18

2008-09

3.70

1396.53

2007-08

3.50

1319.02

2006-07

3.10

1166.29

2005-06

2.65

995.12

Form the table it is clear that the Company‘s dividend has been increasing over the years. The Company declared the maximum dividend in the financial year 2009-10. ITC's Core Values are aimed at developing a customer-focused, high-performance organisation which creates value for all its stakeholders: 1) Trusteeship 2) Customer Focus 3) Respect for People 4) Excellence 5) Innovation 6) Nation Orientation Shareholder Satisfaction Survey The shareholder satisfaction survey is carried out to ensure the satisfaction of the shareholders. In the Shareholder Satisfaction Survey that is conducted during every year, the investors express a high degree of satisfaction towards the working of the Company. 90

Shareholder / Investor Complaints The Company attends to Shareholder / Investor complaints and other correspondence generally within a period of five working days except where constrained by disputes or legal impediments. The Company received just one complaint relating to non-receipt of share certificates during the financial year ended 31st March, 2010. This shows that the Company shows great interest in keeping the shareholders highly satisfied and also takes timely steps in resolving their complaints. Evaluation of Learning and Growth Perspective of ITC Ernakulam Division Learning and growth perspective of the balanced scorecard focuses in the internal activities of the organization, mainly the employees. The degree to which the organization is willing to invest in learning and growth (development) of employees through its training, career planning, mentoring, and succession planning efforts to build core capabilities and the like will heavily influence the employee‘s perception of the workplace and the organization‘s ability to meet its competitive challenges. All efforts in this direction will result in job satisfaction, loyalty to work for long and increased productivity of the workers. There are three principal categories for the learning and growth perspective: 1) Employee Capabilities 2) Information System Capabilities 3) Motivation, empowerment and alignment This study specifically covers the employee capabilities. For measurement of employee capabilities, Balanced Scorecard normally adopts the following measurements: 1) Employee Retention 2) Employee Productivity 3) Employee Satisfaction Therefore in order to understand the learning and growth aspect of the division, it is important to understand the level of satisfaction of the employees, the level of employee retention as well as the productivity of the employees in the division.

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Measuring Employee Retention Employee Retention involves taking measures to encourage employees to remain in the organization for the maximum period of time. Corporates are facing a lot of problems in employee retention these days. Hiring knowledgeable people for the job is essential for an employer. But retention is even more important than hiring. There is no dearth of opportunities for a talented person. There are many organizations which are looking for such employees. If a person is not satisfied by the job he‘s doing, he may switch over to some other more suitable job. In today‘s environment it becomes very important for organizations to retain their employees. The top organizations could reach the top and remain there on the top because they value their employees and they know how to keep them glued to the organization. Employees stay in an organization only if he feels that remaining in the organization will help him in attaining his career growth objectives. Employee retention is measured by using the percentage of key staff turnover. The formula for finding out the retention rate is:Total number of active employees during the year – Number of employees who left the division during the year

*100

Average active employees in the same year

Employee retention in the organization for the years 2008, 2009 and 2010 are measured in the following way: Total number of employees in the organization for the year 2008 was 68. The number of employees who left the organization during the year was 4. Average active employees in the year = 68+64 = 66 2 The retention rate for the year 2008 = 68-4/66*100 = 96% Therefore the percentage of retention for the year 2008 was 96%.

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At the starting of the financial year 2009, 7 more employees joined the Company. Therefore, the total number of employees in the organization for the year 2009 was 71. The number of employees who left the organization during the year was 4. Average active employees in the year = 71+67 = 69 2 The retention rate for the year 2009 = 71- 4/69*100 = 97% Therefore the percentage of retention for the year 2009 was 97%. At the starting of the financial year 2010, 7 more employees joined the Company. Therefore the total number of employees in the organization for the year 2010 was 74. The number of employees who left the organization during the year was 2. Average active employees in the year = 74+72 = 73 2 The retention rate for the year 2009 = 74- 2/73*100 = 98% Therefore the percentage of retention for the year 2010 was 98%. From this it is clear that the retention rate in the organization has been increasing over the years. The number of employees in the organization has also been increasing as well. Measuring Employee Productivity Creating a work environment in which employees are productive is essential to increased profits for your organization, corporation or small business. Principles of management that dictate how, exactly, to maximize employee productivity centre around two major areas of focus: personal motivation and the infrastructure of the work environment. One of the key factors in leveraging human resources to produce the most is found through motivational incentives. While the most obvious incentive for increasing employee productivity is often thought to be based on salary and promotions, this is not always the case. In fact, recent thought on the true nature of optimal human resource management has concluded that in a large number of cases, salary has less to do with motivation than do other important factors.

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The simplest method of measuring employee productivity is to find out the revenue per employee. The formula for calculation this is:Total turnover of the division during the year Average number of employees who worked in the division during the year The productivity per employee for the years 2008, 2009 and 2010 is calculated as follows: The total turnover of the division for the year 2008 was 87 crores. The total number of employees in the organization during the year was 68. The productivity per employee = 87/68 = 1.28 crores Therefore the productivity per employee during the year 2008 was 1.28 crores. The total turnover of the Company for the year 2009 was 91 crores. The total number of employees in the organization during the year was 71. The productivity per employee = 91/71 = 1.28 crores Therefore the productivity per employee during the year 2009 was 1.28 crores. The total turnover of the Company for the year 2010 was 94 crores. The total number of employees in the organization during the year was 74. The productivity per employee = 94/74 = 1.27 crores Therefore the productivity per employee during the year 2010 was 1.27 crores. From this it is clear that the productivity per employee has been fluctuating. It has not shown a steady increasing trend. It must also be noted that the number of the employees as well as the turnover of the division has been increasing over the years. Measuring Employee Satisfaction Satisfied employees are the most important aspect for the growth of any organization. Employee satisfaction is the terminology used to describe whether employees are happy and contented and fulfilling their desires and needs at work. Many measures purport that 94

employee satisfaction is a factor in employee motivation, employee goal achievement, and positive employee morale in the workplace. Factors contributing to employee satisfaction include treating employees with respect, providing regular employee recognition, empowering employees, offering above industryaverage benefits and compensation, providing employee perks and company activities, and positive management within a success framework of goals, measurements, and expectations. The best method for measuring employee satisfaction is by using employee satisfaction questionnaire. Measurement of Job Satisfaction at ITC Ernakulam Division In order to find out the satisfaction level of the employees at ITC, a questionnaire containing 10 questions were administered among the 45 employees of ITC. The respondents were asked to record their satisfaction on 11 aspects related to employee satisfaction and their responses were measured using a five point likert scale ranging from definitely agree to definitely disagree. As all the questions were framed as positive statements, scores ranging from 1 to 5 were awarded for definitely disagree to definitely agree respectively. Table 5.6 Showing Frequency of Work Experience at ITC Experience range

Frequency

Percent

0-1 year

13

28.9

1-2 years

13

28.9

2-3 years

9

20.0

More than 3 years

10

22.2

Total

45

100.0

Source: Sample Survey

This question is asked in order to understand how well the employee knows about the organization-the working environment, the pay package and so on. It is to know about the employee‘s level of understanding about the organization. The employees who have been working for quite a long time will have a better understanding of the organization. This will give a better insight into the climate of the organization.

95

The analysis of this question shows that 28.9% of the employees working in the organization are either freshers or the same percent have been working for 1-2 years. 20% of the employees have been working for 2 to 3 years. 22.2% of the employees have been working for more than3 years. This shows that most of the employees are have been working in the organization between 0 to 2 years. This means that the percentage of young population in the organization is comparatively greater. Table 5.7 Showing Frequency of Previous Work Experience Previous Experience

Frequency

Percent

Yes

25

55.6

No

20

44.4

Total

45

100.0

Source: Sample Survey

This helps to understand the level of understanding about the work and the work environment. Those employees having previous experience will have a better understanding of the work than those who does not have previous experience. This question is asked in order to understand what percentage of employees in the organization has had previous work experience. The analysis of this question shows that 55.6% of the employees have previous work experience, whereas 44.4% of the employees do not have previous work experience. Table 5.8 Showing Frequency of Satisfaction Level with Working Environment Response

Frequency

Percent

Definitely Disagree

2

4.4

Disagree

2

4.4

Neither agree nor disagree

8

17.8

Agree

12

26.7

Definitely Agree

21

46.7

Total

45

100.0

Source: Sample Survey

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Figure 5.3 Showing Frequency of Satisfaction with Working Environment This question is asked in order to understand the level of satisfaction of the employees regarding the working environment in the organization. The environment determines the performance level of the employees. Working environment is one of the major elements that determines the retention level as well as the success and performance of the organization. So it is important to know about the working environment in measuring the satisfaction level of the employees. This statement is also measured using five point scale. The analysis of this statement shows that 46.7% of the sample definitely agrees with the statement, 26.7% agree with the statement, 17.8% neither agree nor disagree with the statement, 4.4% disagree and 4.4% of the sample definitely disagree with the statement. 73.4% of the sample is satisfied with the working environment of the Company whereas, 8.8% of the employees are not satisfied with the working environment and 17.8% of the employees does not either agree or disagree with this statement. This shows that majority of the employees are satisfied with the working environment in the organization.

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Table 5.9 Showing Frequency of the Nature of Superior Subordinate Relationship Response

Frequency

Percent

Disagree

1

2.2

Neither agree nor disagree

13

28.9

Agree

19

42.2

Definitely Agree

12

26.7

Total

45

100.0

Source: Sample Survey

This helps to understand the level of satisfaction regarding the superior-subordinate relationship existing in the Company. This is one of the major aspects in determining the level of satisfaction of the employees. Only a good superior-subordinate relationship can lead to a progressive organization. This is necessary as it leads to a healthy and constructive working environment. So this gives an insight into how the organization treats its employees. This is also measured using five point scale. The analysis of this shows that 26.7% of the employees definitely agree to the statement, 42.2% agree to the statement, 28.9% of the sample neither agree nor disagree to the statement and 2.2% of the sample disagree with the statement. None of the employees in the sample definitely disagree with the statement. 68.9% of the employees in the sample are satisfied with their superiors as well as subordinates whereas, 2.2% of the employees are not satisfied with the relationship with their superiors and subordinates and 28.9% did not respond, that is, they neither agree nor disagree with the statement. This shows that majority of the employees are quite satisfied with the superiorsubordinate relationship existing in the organization.

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Table 5.10 Showing the Frequency of Staff Perception about Importance of Innovation and Learning Response

Frequency

Percent

Neither agree nor disagree

6

13.3

Agree

12

26.7

Definitely Agree

27

60.0

Total

45

100.0

Source: Sample Survey

Figure 5.4 Showing Frequency of Satisfaction with Innovation and Learning Activities This is to understand how much importance the Company gives to the innovation and learning activities. This helps to understand whether the Company gives chance for their employees to think freely and differently. It helps to find out whether the organization is improving through learning and growth activities and to find out whether new ideas are practiced for the betterment of the organization. The analysis of this statement shows that 60% of the employees definitely agree to this statement, 26.7% agree to this and 13.3% of the employees neither agree nor disagree to this statement. None of the employees disagree nor definitely disagree with this statement. This is a clear indication that the Company has definitely put in efforts to promote learning and 99

innovation activities. In short, 86.7% of the employees in the sample are satisfied and agree that the Company promote innovation and learning activities and 13.3% of the employees neither agree nor disagree with this statement. This shows that the Company definitely gives importance to learning and growth activities. This may be the reason for the success of diversification efforts of ITC. It could build many FMCG brands in a short span of time because of innovation and the ability of its people to learn quickly. Table 5.11 Showing the Frequency of Regularity of Training Programme Response

Frequency

Percent

Neither agree nor disagree

10

22.2

Agree

20

44.4

Definitely Agree

15

33.3

Total

45

100.0

Source: Sample Survey

This helps to know whether the Company is providing regular training to the employees. It also helps to understand whether the Company gives proper and regular training to their employees. It helps to improve the performance of the employees. This is measured using five point scale. 33.3% of the employees definitely agree with the statement, 44.4% agree with the statement and 22.2% of the employees in the sample neither agree nor disagree with the statement. There are no employees who disagree and definitely disagree with the statement. 77.7% of the employees agree with the statement that the Company provides them regular training whereas, 22.2% of them do not agree or disagree to the statement. So this shows that there are no employees who feel that the Company does not even provide training. Success of any corporation depends on the style of its staff. Staff can develop a common style only through dedicated training.

100

Table No 5.12 Showing Frequency of Training Effectiveness Response

Frequency

Percent

Disagree

4

8.9

Neither agree nor disagree

9

20.0

Agree

18

40.0

Definitely Agree

14

31.1

Total

45

100.0

Source: Sample Survey

Figure 5.5 Showing Frequency of Satisfaction with Training This helps to understand whether the employees are satisfied and happy with the training given by the organization. It is also a measure of the effectiveness of training given to them. It helps to understand whether the training procedure needs to be changed or the prevailing training is sufficient for the employees to cope up with the present competitive situations. The analysis shows that 31.1% of the employees definitely agree to the statement, 40% agree to this statement, 20% of them neither agree nor disagree and 8.9% of the employees disagree to the statement. There are no employees who definitely disagree to the statement. It is seen that 71.1% of the employees out of the sample are satisfied with the training provided 101

to them by the Company whereas, 8.9% of the employees are dissatisfied with the training given in the organization. But 20% of the employees do not have any opinion about this statement. So it is clear that the majority of the employees in the organization are satisfied with the training given to them. 77.7% of the employees agree that they get regular training in the organization whereas only 71.1% of the employees are satisfied with the training given in the organization. It means that the organization is providing timely training to the employees but some of the employees are not satisfied with the training provided to them. There is enough scope for improving training effectiveness at ITC. ITC should conduct a separate study on training effectiveness and out the factors which reduces the training effectiveness and do necessary changes in the present training programmes. Table 5.13 Showing Frequency of Effectiveness of Performance Appraisal System Response

Frequency

Percent

Disagree

2

4.4

Neither agree nor disagree

12

26.7

Agree

16

35.6

Definitely Agree

15

33.3

Total

45

100.0

Source: Sample Survey

102

Figure 5.6 Showing Frequency of Satisfaction with the Performance Appraisal System This gives an idea about the performance appraisal system followed in the organization. Performance appraisal system is one of the most important tools that help to measure and improve the performance of the employees in the organization. It is a part of guiding and managing career development of the employees. Appraisal not only takes productivity into consideration, but other factors affecting the employee in the workplace as well. A sound performance appraisal system helps the employees to meet their career development. So, this helps to understand whether the organization have a sound appraisal system. It is clear from the analysis that 33.3% of the employees definitely agree to this statement, 35.6% agree to this statement, 26.7% neither agree nor disagree to this statement and 4.4% disagree with this statement. None of the employees definitely disagree with the statement. That is, 68.9% of the employees are satisfied with the performance appraisal system followed in the organization and so feel that it will meet their career advancement needs. 4.4% of them are dissatisfied with the performance appraisal system and so they feel that it will not be of any help for their career development and 26.7% of the employees do not have any opinion regarding this statement. The analysis, thus, shows that the majority of the employees are satisfied with the appraisal system and hence feel that it will meet their career advancement.

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Since 31.1% of the employees are not fully satisfied with the present appraisal process, the organization must find a better appraisal system that can reflect the aspirations of all the employees. Table 5.14 Table Showing Frequency of Employee Satisfaction with Pay Package Response

Frequency

Percent

Neither agree nor disagree

12

26.7

Agree

20

44.4

Definitely Agree

13

28.9

Total

45

100.0

Source: Sample Survey

Figure 5.7 Showing Frequency of Satisfaction with Pay Package Pay package is one of the most important aspects that affect the satisfaction of the employees in the organization. It is certain that if an employee is not happy with his/her pay package, he/she will be dissatisfied. It is the reward they get for their performance. It is thus what drives them to perform well. The analysis of this shows that 28.9% of the employees definitely agree with this statement, 44.4% of them agree with this and 26.7% neither agree nor disagree. None of the employees definitely disagree with the statement. This shows that 73.3% of the employees 104

are satisfied with their pay package whereas 26.7% of them do not have any opinion about this statement that is they do not want to express their feeling towards this statement. Thus, it shows that though majority of the employees are satisfied with the pay, a considerable 26.7% need to be convinced that they are paid equitably. It is found that the younger generation is not fully happy with the pay package. This happens in most of the marketing firms where new employees feel that they are doing most of the hard selling work but are paid less compared to their seniors. Table 5.15 Showing Frequency of Level of Satisfaction with Salary Increments Response

Frequency

Percent

Neither agree nor disagree

9

20.0

Agree

16

35.6

Definitely Agree

20

44.4

Total

45

100.0

Source: Sample Survey

The employees need to get increment in their salary. The organization must have a proper salary increment policy so that the feel happy and satisfied. Or else it will lead to the dissatisfaction of the employees and hence will lead to the poor performance of the Company as a whole. So it is an important factor that affects the satisfaction of the employees. This statement asked whether the employees are satisfied with the salary increment policy followed in the organization. The analysis of this statement shows that 44.4% of the employees definitely agree with this statement, 35.6% of them agree with this and 20% neither agree nor disagree with this. There are no employees who completely disagree with this statement. The analysis shows that 80% of the employees are satisfied with the salary increment policy of the Company and 20% of them do not have any opinion about this statement. Therefore it is clear that majority of the employees are satisfied with the salary increment policy of the organization.

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Table 5.16 Table Showing Frequency of Level of Satisfaction with Promotion Policies Response

Frequency

Percent

Neither agree nor disagree

9

20.0

Agree

17

37.8

Definitely Agree

19

42.2

Total

45

100.0

Source: Sample Survey

Promotion is one of the non-monetary incentives that help to maintain the interest and satisfaction of the employees of an organization. There should not be any bias in the promotion activities carried out in the organization. This will definitely lead to the dissatisfaction as well as the employees will lose belief in the system of the Company. It shows that 42.2% of the employees in the sample definitely agree with the statement, 37.8% of them agree with this and 20% of them neither agree nor disagree. None of the employees feel completely dissatisfies as there are no employee who definitely disagree with this statement. Therefore, 80% of the employees in the sample are satisfied with the promotion activities followed in the organization and 20% of them did not respond to this statement. Thus it is clear that the majority of the employees are satisfied with the promotion activities of the organization. Table 5.17 Showing Frequency of the Employees’ Pride in Working for ITC Response

Frequency

Percent

Neither agree nor disagree

4

8.9

Agree

15

33.3

Definitely Agree

26

57.8

Total

45

100.0

Source: Sample Survey

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Figure 5.8 Showing Frequency of Satisfaction with Value Addition Value addition is an important aspect as far as any Company as well as employee is concerned. The organization must add value to the employees working in it. For this, the organization must have a value of itself. Only then can it add value to its employees. The employees must feel that they have inherited something valuable by working in the organization that will help in the further development of their career. They should have gained something from the organization. This helps to understand whether the Company has added value to the career of the employees. The analysis of this responses revealed that 57.8% of the employees definitely agree with the statement, 33.3% of them agree with the statement and 8.9% neither agree nor disagree with the statement. None of the employees completely disagree with the statement, that is, no employee feel that working in the Company has not added any value to their career. In fact, 91.1% of the employees agree that working in the Company has added value to their career whereas, 8.9% of the employees do not have any opinion regarding this statement. Thus it is clear that majority of the employees are happy and satisfied that they are working in a good organization and that working here has added value to their career. When employees take pride in working for a Company, the labour turnover comes down considerably.

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The researcher then tried to classify the respondents into 3 categories based on their level of satisfaction as a group with low level of satisfaction, medium level of satisfaction and high level of satisfaction. It was attempted in the following way. The frequencies of satisfaction level of each respondent were computed by adding the individual scores obtained by him for all the 11 questions. From the frequency distribution of the total score of satisfaction of each respondent, the mean score of total satisfaction and its deviations were found out. Then, the indexes for satisfaction for the three groups were computed in the following manner: First the mean and standard deviation were found out. Then the range is found using the mean and standard deviation, using the formulas – mean +standard deviation and mean – standard deviation. All those values which are falling below this range are considered to be low. Those values which are falling within this range are considered to be medium and all those values falling above this range are considered to be high. Table 5.18 Showing Mean and Standard Deviation

N

Minimum

Maximum

Mean

Std. Deviation

Satis

45

37.00

54.00

45.0444

3.19769

Valid N (listwise)

45

The mean and standard deviation were found to be 45.04 and 3.19 respectively. Mean + Standard Deviation = 48.23 Mean – Standard Deviation = 41.85 Thus, the range of the observations is from 41.85 to 48.23. So all the values falling below 41.85 were considered to be low, those values falling between 41.85 and 48.23 were considered to be medium and those values falling above 48.23 were considered to be high. The frequency of distribution of the satisfaction of respondents were recoded to get the new frequency of distribution of three classes of satisfactions namely low, medium and high and the recoded distribution is named as satisfaction coded.

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Table 5.19 Showing Frequency of Levels of Satisfaction

Level of Satisfaction

Frequency

Percent

1.00

4

8.9

2.00

35

77.8

3.00

6

13.3

Total

45

100.0

Source: Sample Survey

It was found that

8.9% of the respondents were having low level of satisfaction,

77.8% were having medium satisfaction and 13.3% were having high level of satisfaction thus proving that majority of the employees at ITC are having medium level of job satisfaction. In fact the majority of the employees working in the Company are below the age of 35 and have an experience of below three years. The young generation is highly ambitious and would like to reach heights very quickly. Since this is their initial job, the salary that they get is quite low. This definitely does not match their expectation. The Company also tries to extract maximum work from them so that they can extract more out of them as they are full of energy. This is also a reason for the majority of the employees in ITC having medium level of satisfaction. In order to analyse the nature of satisfaction, the level of satisfaction was cross tabulated with the demographic details such as age of the respondent, qualification and the years of service. The demographic characteristics are taken and tested whether any of these are the factors in determining the satisfaction of the employees. It was found that level of job satisfaction have no association with the demographic factors like age, educational level or experience of employees with ITC. Here an attempt was made to find out any association of these demographic factors on individual components of job satisfaction as detailed in the questionnaire. Thus it was found that age has association with satisfaction with working environment, good superior-subordinate relationship, opinion about effectiveness of performance appraisal system and perception of personal development.

109

It was also proved that educational qualification and opinion about effectiveness of performance appraisal system. Table 5.20 Showing Cross Tabulation of Age and Working Environment

Iam satisfied with my working environment Neither Definitely agree nor Definitely Disagree Disagree disagree Agree Agree Total Age of the respondent

Less than Count 25 % within Iam satisfied with my working environment 25-35

Total

2

1

.0%

.0%

25.0%

8.3%

1

0

4

10

50.0%

.0%

0

2

2

1

.0% 100.0%

25.0%

8.3%

Count % within Iam satisfied with my working environment

greater than 45

0

Count % within Iam satisfied with my working environment

35-45

0

Count % within Iam satisfied with my working environment

9

28.6% 20.0%

9

24

42.9% 53.3%

5

10

23.8% 22.2%

1

0

0

0

1

2

50.0%

.0%

.0%

.0%

4.8%

4.4%

2

2

8

12

21

45

Count % within Iam satisfied with my working environment

50.0% 83.3%

6

100.0% 100.0%

110

100.0% 100.0%

100.0% 100.0%

Table 5.21 Showing Result of Chi-Square of Age and Working Environment

Pearson Chi-Square

Value

Df

Asymp.Sig.(2- sided)

23.336a

12

.025

The Pearson Chi-Square value at 12 degrees of freedom and 95% confidence level is significant as f value is 0.025. From the cross tabulation table, it was found that employees in the 25-35 age group are more satisfied with the working environment than the older people. This might be because the Company gives them opportunities to express their opinion and also to bring out their innovative ideas. The Company is also an employee friendly one. They also bring out many contests where the employees can participate and win prizes. They are rewarded for their talent. Table 5.22 Showing Cross Tabulation of Age and Superior-Subordinate Relationship

Iam happy that I have good relationship with my superiors and subordinates Neither agree nor Disagree disagree Age of the respondent

Less than 25

Count

25-35

Count

% within Iam happy that I have good relationship with my superiors and subordinates

Agree

1

6

2

100.0%

46.2%

10.5%

0

4

11

.0%

30.8%

57.9%

0

3

6

% within Iam happy that I have good relationship with my superiors and subordinates 35-45

Definitely Agree Total

Count

111

0

9

.0% 20.0%

9

24

75.0% 53.3%

1

10

% within Iam happy that I have good relationship with my superiors and subordinates greater than 45

Total

.0%

23.1%

31.6%

0

0

0

2

2

.0%

.0%

.0%

16.7%

4.4%

1

13

19

12

45

100.0%

100.0%

100.0%

Count % within Iam happy that I have good relationship with my superiors and subordinates Count % within Iam happy that I have good relationship with my superiors and subordinates

8.3% 22.2%

100.0% 100.0%

Table 5.23 Showing Result of Chi-Square of Age and Superior-Subordinate Relationship Pearson Chi-Square

Value 21.320a

df 9

Asymp.Sig.(2- sided) .011

The Pearson Chi-Square value at 9 degrees of freedom and 95% confidence level is significant as f value is 0.011. On examination of the cross tabulation table, it was found that the 25-35 age group has demonstrated more loyalty with their superiors. In the Company all the employees are treated equally. There is no distinction between different levels of employees. Everybody has a friendly relationship with each other. The Company has a discrimination-free workplace for employees that provide the environment in which diverse talents can bloom and be nurtured. This is achieved by ensuring that a nondiscrimination policy and practice is embedded across the Company in line with corporate principles and benchmarked business practices. The 25-35 age group may be more loyal to the superiors because of the work environment and the empowerment that they get from the seniors.

112

Table 5.24 Showing Cross Tabulation of Age and Present Performance Appraisal System

I feel that the present performance appraisal system meet my career advancement Neither agree nor Disagree disagree Age of the respondent

Less than 25

Count

25-35

Count

3

1

.0%

25.0%

6.3%

0

4

12

.0%

33.3%

75.0%

2

3

3

100.0%

25.0%

18.8%

0

2

0

0

2

.0%

16.7%

.0%

.0%

4.4%

2

12

16

15

45

100.0%

100.0%

100.0%

% within I feel that the present performance appraisal system meet my career advancement

Count % within I feel that the present performance appraisal system meet my career advancement

greater than 45

Total

Count % within I feel that the present performance appraisal system meet my career advancement Count % within I feel that the present performance appraisal system meet my career advancement

Agree

0

% within I feel that the present performance appraisal system meet my career advancement 35-45

Definitely Agree Total

113

5

9

33.3% 20.0%

8

24

53.3% 53.3%

2

10

13.3% 22.2%

100.0% 100.0%

Table 5.25 Showing Result of Chi-Square of Age and Present Performance Appraisal System

Pearson Chi-Square

Value 18.377a

Df 9

Asymp.Sig.(2- sided) .031

The Pearson Chi-Square value at 9 degrees of freedom and 95% confidence level is significant as f value is 0.011. On examining the cross tabulation, it was found that the 25-35 age group is more satisfied with the performance appraisal system than the other age group employees. The present performance appraisal system is considered to be effective and suitable for the employees in the organization. This helps them to improve themselves and to advance further in their career. The appraisal process gives the individual an opportunity to share in a formal manner his own career aspirations and what he needs from the organisation to enhance his own development. The employees‘ career growth is given importance. It may be one of the other reasons for the 25-35 age group to show more loyalty to their seniors. Table 5.26 Showing Cross Tabulation of Age and Value Addition

I feel that working in ITC has added value to my career Neither agree nor disagree Age of the respondent

Less than 25 Count % within I feel that working in ITC has added value to my career 25-35

Count % within I feel that working in ITC has added value to my career 114

Definitely Agree

Agree

Total

0

3

6

9

.0%

20.0%

23.1%

20.0%

0

8

16

24

.0%

53.3%

61.5%

53.3%

35-45

3

3

4

10

% within I feel that working in ITC has added value to my career

75.0%

20.0%

15.4%

22.2%

greater than Count 45 % within I feel that working in ITC has added value to my career

1

1

0

2

25.0%

6.7%

.0%

4.4%

4

15

26

45

100.0%

100.0%

Total

Count

Count % within I feel that working in ITC has added value to my career

100.0% 100.0%

Table 5.27 Showing Result of Chi-Square of Age and Value Addition

Pearson Chi-Square

Value

df

Asymp.Sig.(2- sided)

14.104a

6

.028

The Pearson Chi-Square value at 6 degrees of freedom and 95% confidence level is significant as f value is 0.028. The cross tabulation shows that the 25-35 age group employees feel working in ITC has added value to their career. They are the ones who have gained more from the Company than the other employees. Most of them have been working in the Company for nearly 3 years. Within these years they feel that they have gained by working in the Company. This is because the Company gives them opportunities to improve and to learn more. They are given a number of development programmes which will help them to improve their performance and hence will add value to their career.

115

Table 5.28 Showing Cross Tabulation of Educational Qualification and Present Performance Appraisal System I feel that the present performance appraisal system meet my career advancement Neither agree nor Disagree disagree Educational Qualification of the respondent

Graduation Count

1

1

50.0%

8.3%

6.3%

1

11

15

50.0%

91.7%

93.8%

2

12

16

100.0%

100.0%

100.0%

Count % within I feel that the present performance appraisal system meet my career advancement

Total

Count % within I feel that the present performance appraisal system meet my career advancement

Agree

1

% within I feel that the present performance appraisal system meet my career advancement PG

Definitely Agree Total 7

10

46.7% 22.2%

8

35

53.3% 77.8%

15

45

100.0% 100.0%

Table 5.29 Showing Result of Chi-Square of Educational Qualification and Present Performance Appraisal System

Pearson Chi-Square

Value

Df

Asymp.Sig. (2-sided)

9.779a

3

.021

The Pearson Chi-Square value at 3 degrees of freedom and 95% confidence level is significant as f value is 0.021. 116

The cross tabulation shows that the employees who are post graduates are more satisfied with the present performance system than those employees who are graduates. This might be because the post graduate employees are able to better understand the usefulness and the effectiveness of the appraisal system. Factor Analysis There are certain variables that influence the satisfaction of the employees in their job. In order to find out these underlying factors that affect the satisfaction level of the employees, factor analysis was done. In factor analysis, different variables, which have correlation with the independent variables are combined together and are considered as a factor influencing job satisfaction. Rotated Component analysis was used for the purpose. The rotated component matrix provided 5 factors which are significantly correlated with job satisfaction as stated below. Factor 1: -

I am satisfied with the promotion activities

Factor 2: -

I am satisfied with the training given in the organization

-

I am happy with the pay package

Factor 3: -

I am satisfied with the salary increment policy

Factor 4: -

I am happy that I have good relationship with my superiors and subordinates

Factor 5: -

The Company gives importance to learning and innovation activities

The first factor in the rotated component matrix can be summarized as ‗Career Growth‘. Therefore the first factor is ‗Career Growth‘.

117

The second factor can be summarized as ‗Compensation and Development‘. The third factor can be summarized as ‗Incentives‘. The fourth factor can be summarized as ‗Relationship‘. The fifth factor can be summarized as ‗Learning and Development‘. Table 5.30 Showing the Rotated Component Matrix

Component 1 Iam satisfied with my working

2

3

4

5

.347

-.285

-.576

-.181

.149

.186

-.037

.033

.874

.204

-.024

-.099

.017

.036

.841

.354

.229

.015

-.623

.287

.145

.562

.435

.032

.472

-.542

.375

-.467

.196

.293

-.101

.860

-.020

-.201

-.166

.005

-.045

.791

-.037

.125

.791

.167

-.126

.192

-.133

-.808

.198

.019

.110

-.185

environment Iam happy that I have good relationship with my superiors and subordinates The Company gives importance to innovation and learning activities Iam getting regular training in the organization Iam satisfied with the training given in the organization I feel that the present performance appraisal system meet my career advancement Iam happy with the pay package Iam satisfied with the salary increment policy Iam satisfied with the promotion activities I feel that working in ITC has added value to my career

Career growth is an important aspect that determines that satisfaction of the employees. Promotions are also an important aspect of a worker‘s career and life, affecting 118

other facets of the work experience. They constitute an important aspect of workers‘ labor mobility, most often carrying substantial wage increases and can have a significant impact on other job characteristics such as responsibilities and subsequent job attachment. Firms can use promotions as a reward for highly productive workers, creating an incentive for workers to exert greater effort. Promotions will only be an effective mechanism for eliciting greater effort if workers place significant value on the promotion itself. Otherwise, firms would simply use pay increases to reward effort and productivity. Workers may value promotions because they carry an increase in job amenities such as a bigger office or spending account (factors which are observable but for which we do not have the information) or because they enjoy the acknowledgement of work well done and the ego boost that comes with a promotion (factors which are not easily observable). Some workers might enjoy the increase in authority over co-workers that often accompany a promotion. Given all of the dimensions in which promotions can affect workers‘ careers and compensation, more attention has been paid to the importance of promotions as a determinant of job satisfaction. The next factor contains two elements, namely, satisfaction with the training and satisfaction with the pay package. Training and Development is the framework for helping employees to develop their personal and organizational skills, knowledge, and abilities. The focus of all aspects of Human Resource Development is on developing the most superior workforce so that the organization and individual employees can accomplish their work goals in service to customers. Training leads to improving employee satisfaction and morale. All employees want to be valuable and remain competitive in the labour market at all times. This can only be achieved through employee training and development. Employees will always want to develop career-enhancing skills, which will always lead to employee motivation and retention. There is no doubt that a well trained and developed staff will be a valuable asset to the company and thereby increasing the chances of his efficiency in discharging his or her duties. Thus it can be said that training is one of the important aspect in determining the satisfaction of the employees. Pay is the main aspect that determines the satisfaction of the employees. It is the reward for the work done by them. If the pay package is not good, it will surely affect the satisfaction of the employees. So there is a strong relation between salary and satisfaction. 119

The next factor is incentives. This factor consists of one element, that is, satisfaction with the salary increment policy. As the nature of work increases, there should also be increase in the salary given to the employees. The salary must change and must be competitive. This will definitely have an effect on the satisfaction of the employees. The last factor is relationship between superiors and subordinates. All the employees must be treated equally and it must be a friendly environment. Good relationship with the superiors and subordinates is an important factor in determining the satisfaction of the employees. The next factor is learning and development. This is an important thing as far as an organization is concerned. This brings about changes in the organization that is useful for the improvement of the employees. This affects the satisfaction of the employees. Earning is not just important to ensure to keep up-to-date with developments in the particular field. It is also an important source of motivation, stimulation and job satisfaction. So it can be said that there is relation between learning and growth and employee satisfaction. The five factors that determine the satisfaction of the employees in ITC are:

COMPENSATION AND DEVELOPMENT

INCENTIVES CAREER GROWTH

JOB SATISFACTION

LEARNING AND DEVELOPMENT

RELATIONSHIP

Figure 5.9 Showing the Factors Affecting Employee Job Satisfaction 120

CHAPTER VI FINDINGS, SUGGESTIONS AND CONCLUSION Findings 1. The present study reviewed the performance of ITC on the basis of the perspectives provided in the Balanced Scorecard format. The study found that ITC is able to achieve its objectives of: (a) To be one of India‘s most valuable and competitive corporation (b) To maintain its market position continuously over the years (c) To serve the Indian economy through value creation (d) To create value for the stakeholders of the corporation through earnestly implementing its existing strategies 2. It was found that the Company‘s ROI and ROCE have been growing over the years. 3. The sales as well as the profitability ratios of the Company shows that the Company is very stable and has a very strong position in the industry and has a high growth potential to remain as the leader and as one of the most valuable corporations of the Indian economy for the years to come. 4. The tax paid by the Company to the exchequer is increasing year after year, thus contributing to the development of the Indian economy. 5. They are progressively reducing the contribution of their tobacco business in their total turnover by progressively diversifying their business, introducing many products in the FMCG sector and building many brands. ITC‘s entry into these new sectors has made those sectors of the economy very vibrant. 6. The Company is committed towards creating value for its stakeholders. The Company creates value for its shareholders as it declares maximum dividend. The dividend payout of the Company has been increasing over the years. 7. ITC is a high performance organization, which gives equal importance to both its customers and its shareholders. They have initiated several CSR activities. They believe that they have a commitment towards its customers, workers and general public. They have received a number of reward and recognitions for their CSR initiatives.

121

8. The employee retention of the division was analysed and it was seen that the retention rate has been increasing over the years. The employees are satisfied with their working environment and this is the reason for the retention rate to be quite high. 9. Employee productivity of the division is also quite high. The productivity per employee has not shown much fluctuation over the years. The turnover as well as the number of employees in the division has been increasing. 10. The result of the employee satisfaction survey suggests that by and large the employees of ITC are satisfied. But the level of satisfaction is not that high but above average. The factor analysis established that the five factors that affect the satisfaction of the employees in ITC were identified to be: career growth, compensation and development, incentives, relationship and learning and development. 11. The study found that ITC Ernakulam division has a considerable percentage of young employees. 12. The majority of the employees working in the division have previous experience. 13. The majority of the employees working in the division are satisfied with their working environment and are also satisfied with the superior-subordinate relationship of the organization. 14. It was found that the Company gives importance to their learning and growth activities. The people in the division have the ability to learn very quickly and are very flexible. This has helped ITC in achieving success in their diversification efforts and that they could build a number of FMCG brands in a very short span of time. 15. Majority of the employees are satisfied with the training given in the organization. But the number of employees who are not satisfied with the training in the organization is also high. 16. Majority of the employees are satisfied with the present performance appraisal system. 17. Even though majority of the employees are satisfied with the pay package, there are considerable number of employees who are not satisfied with their pay package. It is found that it is the younger generation who are not satisfied with their pay package. They also have only a medium level of satisfaction regarding their working environment. 18. The majority of the employees are satisfied with the promotion activities and also feel that working in ITC has added value to their career.

122

19. The analysis shows that the employees in the 25-35 age group are more satisfied with the working environment. 20. The employees in the 25-35 age group are also satisfied with the superior-subordinate relationship existing in the Company. 21. The employees are satisfied with the appraisal process and they feel that the Company is giving importance to their career growth and that the Company has added value to their career. Suggestions 1. The Company has to give more emphasis on the training activities. There is a high chance for improving the training effectiveness in the Company. ITC should conduct a study on its training activities and put efforts to find out the factors which are responsible for reducing the training effectiveness. 2. The considerable number of employees are not fully satisfied with the present appraisal system. So the organization may study the effectiveness of the different aspects of performance appraisal to identify the areas of weakness and if necessary, redesign the system to make it more employee friendly. After all, the success of any employee oriented system depends on employee perception and their co-operation. What is important is creating a perception among the employees that the system is useful and effective for their career advancement. 3. Many of the young employees who have prior experience are not happy with the pay package. It is a factor that the management should consider at the time of appointment of a new employee. It is not advisable to select youngsters with considerable prior experience at entry level salaries. They may accept the offer at the time of recruitment, but once they join the firm and find out that those people with lesser experience is drawing more than them, they will get dejected.

123

Conclusion Creating value for the stakeholders and the Indian economy is the cornerstone of the Company. The Company has a strong position in the market and has a good brand name and a very good customer base. The people relate the Company to quality and reliability, which are the most essential components of a business‘s success. So it is clear that they will grow stronger and will remain the most valuable and competitive corporations in the years to come. The Company has come forward to serve the Indian economy and environment. It has initiated a number of programmes that are advantageous to the Indian economy. It has also taken steps in preserving the essence of the Indian culture, which is really appreciable. The Company‘s most important and notable initiative is e-Choupal that provides a great deal of help to the rural society. Through all these initiatives, the Company is definitely serving the Indian economy and has added great value to itself. It is clear from the various awards and recognitions that the Company has received for these initiatives. All these are made possible because of its employees and its efforts to retain the best possible talent within the Company. ITC‘s greatest strength is its people- diverse and motivated people with the expertise and insight to tackle the toughest client issues. ITC does not discriminate due to sex, age, creed, and colour. They promote drug free environment, encourage development with excellent training. The Company has been supporting the best possible HR practices for this. It gives great importance to the career development of the employees. ITC believes the responsibility for career development rests both with the individual and the organisation. While the organisation provides opportunities for learning and growth, it is the individual's responsibility to ensure he enhances his competencies to shoulder higher responsibilities. The different measures of the learning and growth aspect of the organization were studied and were found that these were quite satisfactory, even though, some changes have to be brought about. The Company‘s Board and employees are inspired by their Vision of sustaining ITC‘s position as one of India‘s most admired and valuable companies through world-class performance, creating enduring value for all stakeholders, including the shareholders and the Indian society. It takes each step carefully to ensure that its strategic capability is upgraded so 124

that it can face the challenges proposed by increasing and intense competition in the market. Effective management of diversity enhances the Company‘s adaptive capability and provides the intrinsic ability to effectively manage business risk. The vision of enlarging the Company‘s contribution to the Indian economy is manifest in the creation of unique business models that foster international competitiveness of not only its businesses but also of the entire value chain of which it is a part.ITC is driven by its values and Vision and is committed towards building a much brighter future for its stakeholders, its customers and also the Indian economy.

125

APPENDIX A STUDY ON

EMPLOYEE SATISFACTION With special reference to INDIAN TOBACCO COMPANY LIMITED, ERNAKULAM

QUESTIONNAIRE

Respected Sir/Madam, I am a second year PGDM student at Bhavan‘s Royal Institute of Management, Thiruvankulam. In partial fulfilment of my studies, I have undertaken a project on ―A Study on Balanced Scorecard with special reference to ITC Ltd.‖ As a part of this, it is required to conduct a survey on employee satisfaction in the Company. I would be grateful if you would kindly make it convenient to spare a few minutes of your valuable time for filling up this questionnaire for me. I promise that the data collected through this questionnaire shall be kept confidential and will be used for academic purpose only. With warm regards, Rohini. S. Nair

126

1. How long have you been working in the organization? a) 0-1 year b) 1-2 years c) 2-3 years d) More than 3 years

2. Do you have previous work experience? (a) YES (b) NO 3. If yes, state the reasons for moving into ITC

Definitely agree (5)

No.

4.

5.

6.

7.

8.

9.

10. 11.

I am satisfied with my working environment I am happy that I have good relationship with my superiors The Company gives importance to innovation and learning activities I am getting regular training in the organization I am satisfied with the training given in the organization I feel that the present performance appraisal system will meet my career advancement I am happy with the pay package I am satisfied with the salary increment policy 127

Agree (4)

Neither agree Definitely Disagree nor disagree (2) disagree (1) (3)

Definitely agree (5)

No.

12.

13.

Agree (4)

Neither agree Definitely Disagree nor disagree (2) disagree (1) (3)

I am satisfied with the promotion activities I feel that working in ITC has added value to my career

Please provide your personal details 14) Age a) 45years

15) No. of year of service a) 1 – 2 years b) 3 – 4 years

c) 5 – 6 years d) > 6 years

16) Academic Qualification a) S.S.LC

b) H.S.C/Diploma c) Graduation

128

d) PG

BIBLIOGRAPHY [1] Robert S. Kaplan and David P. Norton, Balanced Scorecard: Translating Strategy into Action. Harvard Business School Press, Boston, MA, 1996 [2] Sérgio D. Sousa, Elaine M. Aspinwall, A. Guimarães Rodrigues. Performance measures in English small and medium enterprises: survey results. Benchmarking: An International Journal, 13(1-2): 120-134, 2006 [3] Gerhard Speckbacher , Juergen Bischof, Thomas Pfeiffer. A descriptive analysis on the implementation of Balanced Scorecards in German-speaking countries. Management accounting research, p 61, 2003 [4] Neely A., Gregory M., Platts K., Performance measurement system design, A literature review and research agenda. International Journal of Operations & Production Management, 80-116, 1995 [5] Malmi T., Balanced scorecards in Finnish companies: A research note. Management Accounting Research, 12(2):207-220, 2001 [6]

Modic,

Stan.

(n.d.).

Take

this

job

and

shove

it…

Retrieved

from

http://www.manufacturingcenter.com/tooling/archives/0304/0304straight_talk.asp [7] Kash, Wyatt. (2003). The other customer: Employee satisfaction deserves customer satisfaction-style scrutiny [Electronic version]. Big Builder, Nov 2003. [8] Carpitella, Bill. (2003). Make residential construction the industry of choice. Professional Builder, Oct 2003. [9] Employee satisfaction and opinion surveys. Retrieved from :http://www.infoquestcrm.co.uk/employee_surveys.html [10]

Clark,

Donald.

(2001).

Some

training

http://www.nwlink.com/~donclark/hrd/trainsta.html Company Websites www.itcportal.com

129

statistics

tidbits.

Retrieved

from