Compensation and Benefits: Minimizing the Employee Turnover

Compensation and Benefits: Minimizing the Employee Turnover CHAPTER 1 INTRODUCTION 1.1 Background of Studies Employee turnover is the hottest and current issue that always discusses by the government, since we are confronted with the global economic crisis on 2008. The crisis of economic is directly affected to the corporation, especially the production line and manufacturing company. The unexpected crisis will arise in the employee turnover rate happened no matter for the voluntary or involuntary case and it achieved the highest rate within the past 20 years in Malaysia as well. Therefore, other than the efforts and measurements had been taken by the government like donated sustention fund to secondary industry, the efforts of employers are vital to minimize the employee turnover. On the other hand, the advance knowledge likes the significant of the compensation and benefits package toward the employee and the preference of employees toward the different types of the compensation and benefits package are necessary to implant and infuse to all the employers in order to retain their quality workers. There are some factors are directly influenced to the employee turnover in the real working environment. The employers will enjoy the benefits if they manage to retain their employees or minimize the employee turnover problem by implementing the felicitously compensation and benefits package. The higher employee turnover rate is considering the severely problem to a particular country because it is absolutely bringing negative effects in progressing development. The employee turnover rate definitely cannot be terminated, but I sincerely wish that this problem can fully minimize. I strongly believe that the compensation and benefits ways might be able to minimize the employee turnover in the working place. 1.2 Introduction Turnover rate is considering the severely problem to a particular country because it is absolutely bringing negative effects in progressing development. The employee turnover rate definitely cannot be terminated, but I sincerely wish that this problem can be fully minimized. I strongly believe that the compensation and benefits ways might be able to minimize the employee turnover in the working place. This research is related to how the compensation and benefits way in minimizing the employee turnover rate. In fact, compensation and benefits play a vital role in retaining the employees in an organization. Compensation and benefits can be defined as the process that taken by the Human Resource Management on every single day like setting the rules and procedures around the salaries, a direct way as cash paid and indirect way like given benefits to the employees. This element is highly mentioned in the employment contract and concerned by the employees as well. On the other hand, compensation and benefits can be taken as different meaning from the perspective of a member of society, a stockholder, a manager, or an employee. Therefore, let us recognize the meaning by each perspective of the group. Compensation and benefits can be seen as a reflection of justice in society; stockholders are also interested in how employees are paid. Some believe that using stock to pay employees creates a sense of ownership that will improve performance, which will, in turn, increase stockholder wealth; for managers compensation influences their success in two ways. First, it is a major expense and second is the power to influence employee behaviors and to improve the organizations performance; the pay individuals receive in return for the work they perform is usually the major source of their financial security. Hence, pay plays a vital role in a persons economic and social well-being. Employees may see compensation as a return in an exchange between their e mployer and themselves, as an entitlement for being an employee of the company, or as a reward for a job well done (Milkovich and Newman, 2008). Employees will emphasize more to the compensation and benefits that provide by the organization or company because they contribute their times, efforts, talents and they wish to get better return in compensation and benefits. The compensation and benefits package for the employees is like the exchange value between the employer and employee. The employers offer the benefits packages such as health care, dependent care, income protection and so on to mitigate t employees no matter for current or future risk. The employees contribute their efforts in order to appreciate the compensation and benefits package that offered by the employers. Compensation and benefits include pay received directly as cash (for example: base, merit, incentives, cost-of-living adjustment) and indirectly as benefits (for example: pensions, medical insurance, program to help balance work and life demands, brightly colored uniforms (Milkovich and Newman, 2008). Nowadays, the employees are more emphasizing to cash compensation but there are still quite numbers of employees prefer to non-cash compensation like benefits. Employees may concern to what packages have been offered by the employers and ultimately increase their self-wealth. Employees may have different preferences towards the compensation and benefits package because it takes as the motivation tool to them if it can suit or fit to them. It is crucial to all the employers in understanding the preferences of employees toward the compensation and benefits package because they are come from various genders, religious, geographic location, and age and so on. The employers might be able to retain the workers if apply the proper compensation and benefits to the employees. Employees often desire to get a liberally and fair compensation and benefits package for their own expectation because it will directly influence to employees job satisfaction. Meanwhile, this factor will lead to employees turnover if they thought they didnt deserve expectation returns. Therefore, compensation and benefits is the deep knowledge that should implant to all the employees because it will definitely assist them to retain their workers. Apart from that, employee turnover can be defined as the number of permanent employees leaving the company within the reported period versus the number of actual Active Permanent employees on the last day of the previous reported period (physical headcount). The number of leavers, that are included in Employee Turnover, only includes natural turnover (resignations, termination, retirement, etc.); it does not reflect any redundancies. Planned redundancies are reported and explained separately if relevant for employee turnover (Laurus Nobilis, 2008). Mobley (1982) defines employee turnover as the common voluntary cessation of membership in an organization by an individual who receives monetary compensation for participating in that organization. This definition primarily focuses on separation from an organization rather than on accession, transfer, or other. Besides, employee turnover can be also defined as the number of workers who leave from their workplace under certain circumstanc es. All the organizations will definitely encounter with the employee turnover because it is unavoidable and inevitable but manageable. Employee turnover can be categorized as voluntary and involuntary turnover. Voluntary turnover occurs when employees leave the organization deliberately (i.e. quitting); this can be contrasted with the involuntary turnover, which occurs when employees leaving the organization without choosing to do so (i.e. being fired or laid off) (Lee, Weller, Trevor, 2008). Sometimes voluntary turnover happened because the employees desire to seek more salary, while the involuntary happened when they are considered as redundant capital. Therefore, compensation and benefits might be able to influence the voluntary turnover as the cost and expenses will be incurred or increase if voluntary turnover happened in particular organization. The organizations have to spend more costs to provide training and development and seeking for the new employees if they are not able to retain their employees. 1.3 History In English, â€Å"compensation† means something that counterbalances, offset, or make up for something else. However, if we look at the origin of the word in different languages, we get a sense of the richness of the meaning, which combines entitlement, return, and reward. In China, the traditional characters for the word â€Å"compensation† are based on the symbols for logs and water; compensation provides the necessities in life. In the recent past, the state owned all enterprises and compensation was treated as an entitlement. In todays China, compensation takes on a more subtle meaning. A new word, dai yu, is used. It refers to how you are being treated- your wages, benefits, training opportunities, and so on. When people talk about compensation, they ask each other about the dai yu in their companies. Rather than assuming that everyone is entitled to the same treatment, the meaning of compensation now included a broader sense of returns as well entitlement. â€Å"Compensation† in Japanese is kyuyo, which is made up of two separate characters ( kyu and yo), both meaning â€Å"giving something.† Kyu is an honorific used to indicate that the person doing the giving is someone of high rank, such as a feudal lord, an emperor, or a samurai leader. Traditionally, compensation is thought of as something has given by ones superior. Today, business consultants in Japan try to substitute the word hou-syu, which means â€Å"reward† and has no associations with notions of superiors. The many allowances that are part of Japanese compensation systems translate as teate, which means â€Å"taking care of something.† Teate is regarded as compensation that takes care of employees financial needs. This concept is consistent with the family, housing, and commuting allowance that are still used in many Japanese companies. These contrasting ideas about compensation- multiple views (societal, stockholder, managerial, employee, and even global) and multiple meanings (returns, rewards, entitlement) add richness to this topic (Milkovich and Newman, 2008). That is the reason why compensation and benefits are more emphasized by the employers because it is essential in minimizing the employee turnover. 1.4 Research Objective 1.4.1 To identify the relationship between compensation and benefits in minimizing the employee turnover. The research conducted on the link between dissatisfaction with the pay and voluntary turnover appears to be inconclusive. Tang (1991) recommended that the most crucial reason for voluntary turnover is regarding to higher wages/career opportunity. There is an inverse relationship between relative wages and turnover (i.e. establishments with higher relative pay had lower turnover) (Martin, 2003). Salary growth had a pronounced effect on turnover in the studies that related to compensation. Particularly, salary growth effects on turnover were greatest for high performers, that is, high salary growth significantly reduced turnover for high performing employees. Compensation and benefits package are defined in this study as it helps to retain the workers and minimize the turnover rate (Park, Ofori-Dankwa, Bishop, 1994; Trevor, Barry, Boudreau, 1997). 1.4.2 To identify the preference of components of compensation and benefits toward the employees. According to Milkovich and Newman, (2008) the employees contribute their efforts in order to appreciate the compensation and benefits package that offered by the employers. Compensation and benefits include pay received directly as cash (for example: base, merit, incentives, cost-of-living adjustment) and indirectly as benefits (for example: pensions, medical insurance, program to help balance work and life demands, brightly colored uniforms. The employees might have different types of preference based on their requirements. Some of them will prefer to directly as cash but some of them will prefer to indirectly as benefits. The preference of components of compensation and benefits are defined in this study as it helps to distinguish their desired needs and retain the talented workers in an organization. 1.4.3 To identify the significant of the compensation and benefits package toward the employees. Pay and pay-related variables have a modest effect on turnover (Griffeth et al, 2000). Their investigation also integrated studies that examined the relationship between pay, a persons performance and turnover. They concluded that when high performers are inadequately rewarded, they will choose to leave an organization. Milkovich and Newman (1999) stated that where collective reward programs substitute individual incentives, their introduction may tend to higher turnover among high performers. The significant of the compensation and benefits package toward the employees is defined in this study as the turnover will definitely incur higher cost expenses if an organization may not be able to retain their workers. 1.4.4 To identify the advantages if the company able to retain their employees. Employee turnover is a topic of immense importance to public and private sector organizations. In part, this importance reflects the tremendous costs—financial and otherwise—often associated with the turnover (Staw 1980; Balfour Neff 1993). Financially, turnover may lead to increased personnel expenses—particularly in the areas of recruitment and training (Staw 1980; Balfour Neff 1993). However, employee turnover can also bring about a loss of organizational knowledge, history, and memory (Staw 1980; Moynihan Pandey 2008). Therefore, all those consequences will not happen if an organization success to retain their employees. The advantage to retain employees is defined in this study as it guarantees to help the process of development. 1.4.5 To recognize the satisfaction and expectation of employees in diversified industry that may influence the employee turnover. A theory stated that there are two basic types of needs, which are the need for psychological growth or motivating factors and the need to avoid pain or hygiene factors (Herzberg, 1973). The motivating factors comprise the essentials like achievement and advancement. These are positive elements that contribute towards job satisfaction and motivation. Hygiene factors such as company or organizational policies, quality of supervision, working condition, salary, relationship with peers and subordinates, status and security are negative elements in Hygienes factors that could cause dissatisfaction at work. The satisfaction and expectation of employees are defined in this study as it plays a vital role in manipulating the employee turnover. 1.5 Problem Statement How to implement compensation and benefits package in order to minimize employee turnover? How to recognize the preference of employees toward the compensation and benefits package? How the important role of the compensation and benefits package to the employees in their real working environment? What benefits for a particular company if the employee turnover rate is low? How to examine the satisfaction and expectation of customers toward their compensation and benefits package? 1.6 Scope of Studies The scope of studies is focused on the compensation and benefits package that implemented to the employees at several industries because it is efficiency in minimizing the employee turnover. Besides, this research is a tendency to the theoretical factors but not technological way. Moreover, this research also discussed with the preference of the compensation and benefits package by the employees because everybody has different demands in the real life. This research provides the knowledge about the factors that lead to employee turnover and the significant of implementing compensation and benefits in retaining the employees. Therefore, the employers must take actions in order to prevent the increment of employee turnover. 1.7 Organization of Research This research is basically divided into three main areas; The first part is literature review and the journals that have been collected will be used. Besides, the journals will assist to identify the role of compensation and benefits to minimize the employee turnover. There are some other independent variables will be examined toward the employee turnover. Moreover, through the reviews, a framework will be developed, a framework will be developed and to understand the variables. Once the framework is being done, a questionnaire will be created to understand the preferences of the compensation and benefits package toward the employees. This questionnaire will then be distributed for results. It will present the significant of the compensation and benefits package in the real working environment. The third part of the research will be analyzed once the collected result of the questionnaire comes with scientifically conclusion and reasons. After that, I will formulate some measures in order to make the situation become more favourable. CHAPTER 2 LITERATURE REVIEW 2.0 Introduction This chapter discussed about the relationship between compensation and benefits toward the employee turnover. The literatures of the research relevant to this area of study are explored and the same are organized based on the topic of discussion, compensation and benefits, organization culture, supervisor, Job Analysis and job characteristic, and working condition. 2.1 Employee Turnover According to Campion, (1991) the turnover principle includes various dimensions with the most obvious being whether it is voluntary or involuntary. Although the turnover decision might be classified, but it seems failed to fully consider because it might hide with several but complexity reasons. Additionally, there are some troubles with turnover dimension and lack of agreement on the explanation of ‘voluntary because it depends on who you ask as to why the employee left his or her job. Maertz and Campion (1998) defined the voluntary turnover as the management aspect agrees that the employee had the physical chance to continue employment with the company and at the time of termination as well. There was no impediment to continued employment from physical disability or from corporation management through the conveyed of voluntaries, such as non-mandatory retirement, quitting for family resettlement, or quitting for a self-perceived more desirable job. That is, even though the em ployee may know to stay is extremely costly but he/she still does the same decision because employee turnover implies with an individual choice. The limitation of article is the further investigation should be carrying out to examine the factors that lead to voluntary turnover because it is extremely incurring more expenses if an organization desire to employ new workers. Besides, this article didnt list out the main reason of involuntary turnover which is reluctant to workers especially during the recession period. The employees were being informed that their organization encountered with this problem severely and forced to leave the organization eventually. Sometimes the employees could be able to contribute more to an organization, but they couldnt to do so. This issue supposes to discuss with all the readers as well as the public. Grifeth and Hom (1994) stated that employee turnover will definitely contribute to the potential benefits and disadvantages for an organization. For instance, dislocation of poor performance, infusion of new knowledge and technology, reducing labor costs when facing stiffer competition, maintaining ties with exiting employees and providing new business ventures, or enhancing promotional opportunities for the remaining staff can be considered as positive ramifications. The negative effects cover economic costs, productivity losses, impaired service quality, lost business opportunities, increased administrative burden and loss of morale among the remaining staff. Employee turnover incurred some influences toward the organization but basically negative effect will definitely more than the positive effect and this is the main reason some organizations are implementing the compensation and benefits package to retain their workers. In addition, employee turnover costs are not only monetary but the company may have also lost the ‘knowledge possessed by the departing employee (Gomez-Mejia et al, 2001). Intelligence and knowledgeable workers are really hard to acquire in the market nowadays. Knowledge not only plays the role as the core of competence but is also a value-created device, especially for those organizations that face the global competitive challenges in the market. The knowledge that is embodied in human beings (as human capital) and in technology has always been central to companies visibility and economic development. Harnessing new technologies and innovation will be the source of long-term employment and productivity growth for companies and countries in a knowledge-based economy (Noe et al, 2002). The limitation is this article is the negative effect of employee turnover didnt explain widely and brief. We strongly agree that the negative effect is definitely more than the positive effect because it extremely influenced to the development of parti cular organization. The negative effect has incurred no matter in monetary or non-monetary aspects. The publics are interesting to know how the negative effects affect an organization if they didnt retain their talented employees. Hence, the author might list some latest examples to readers about the negative effect toward an organization regard to turnover problems. All the managers of particular organization definitely take some measurements in order to prevent the employee turnover. According to Abassi and Hollman (2000) turnover is the circle of rotation of workers around the labor market between the firms, jobs and occupations; and between the states of employment and unemployment. This workforce activity can be diversified into two categories which are voluntary and involuntary turnover. Involuntary turnover can be defined as the dismissal of employees, whereas voluntary turnover occurs when employees resign. Voluntary turnover often results in departing employees migrating to competing firms, creating an even more critical situation, since this knowledge can now be used against the organization. In conformity to Kransdorff (1996) voluntary turnover has in fact been accelerating over the past decade, as recent studies have shown that employees on average switch employers every six years. This situation demands senior management to consider the repercussions of voluntary turnover, and immediately create contingency plans. The turnover of best performers will d irectly cause the senior management been caught unprepared. Johnson et al (2000) said that functional turnover such as bad performers left and good performers stay can help to reduce sub-optimal organizational performance; excessive turnover can be detrimental to the firms productivity. This can result in the loss of business and relationships, and can even make vulnerable the realization of the firms objectives. To compound the negative side-effects of turnover, not all the departing employees are considered sub-optimal performer. According to Abassi and Hollman (2000) dysfunctional turnover (i.e. good performers leave, bad performers stay) damages the organization through decreased innovation, delayed services, sluggish implementation of new programs, and degenerated into productivity. Such activity can radically affect the firms ability to flourish in todays competitive economy; leaving even the most striving firms unable to succeed due to the inability to retain the right employ ees. If it is presumed that the smartest and most talented employees are often the most upwardly mobile, then strong organizations may become unable to actualize strategies and complete key business transactions, if they do not proactively manage their turnover. The limitation in this article is it didnt state out of the measurement to solve the employee turnover. In this study, it just examined to us about the voluntary turnover and sorted as functional and dysfunctional turnover. As what the author mentioned in this article, the managers were caught unprepared once this issue happened to them. Therefore, the author supposes to discuss some measurements to deal with the turnover problem after explain the definition and effect to each turnover. Employee loyalty is the foundation of customer satisfaction in the organization (Abassi and Hollman, 2000). While employee loyalty has often enabled firms to retain strong employees, senior management cannot be longer relying on relationships to incentive good workers to stay. Abassi and Hollman (2000) said that eroding employee loyalty is highlighting the importance of attracting and maintaining good people as the key to strategic staffing in the modern workplace. This is forcing organizations to revisit their HR practices to meet the diverse needs of the workforce in order to retain strong employees, and therefore, maximize the overall success of the firm. Abassi and Hollman (2000) highlighted five reasons for employee turnover in the organization: Hiring practices; Managerial style; Lack of recognition; Lack of competitive compensation systems; and Toxic workplace environments. Morrell (2001) examined that turnover means voluntary cessation of membership of an organization by an employee of that organization. Besides on that, turnover intention is broadly defined as attitudinal (thinking of quitting), decisional (intention to leave), and behavioral (searching for a new job) processes proceeding with voluntary turnover (Sager et al., 1998; Khatri, 2001). According to Dess (2001) employee turnover incurs some significant costs, both in terms of direct costs (replacement, recruitment and selection, temporary staff, management time), and also (and perhaps more significantly) in terms of indirect costs (morale, pressure on remaining staff, costs of learning, product/service quality, organizational memory) and the loss of social capital. Apart from that, employee turnover is a major concern for companies in many Asian countries such as Singapore, Hong Kong, South Korea, Malaysia, and Taiwan (Khatri, Chang, Budhwar, 2001). Global Reporting Initiative (GRI) has re cognized the importance of workforce turnover as a sustainability issue, which has included turnover as a core social performance indicator in its Sustainability Reporting Guidelines (GRI 2002). Moreover, employee turnover is giving restless nights to human resource managers in the textile sector of Pakistan. There are two reasons to explain why the textile sector has been selected. Bohla and Hameed (2001) analyzed there is an alarming employee turnover rate i.e. 12%. The textile industry represents Pakistans biggest employer as well as the key sector for the economy having almost 68% of total export income is the largest sector of Pakistan. The limitation in this article is the author didnt list out the employee turnover rate that occurs in Malaysia. The data and statistic are important because it can alert how severely for the case of unemployment that caused by voluntary and involuntary turnover. Besides on that, the author may discuss why the turnover problems occur severely in Asian countries if compare to Europe? Is it the Asian people encounter with certain troublesome? This issue must fully examine in order to minimize until the lowest percentage. DeBare (2001) examined that one of the major reasons for employee turnover in the retail sector is that stores have established to be a training ground, allowing the employee an opportunity to gain valuable skills. All new hires of employees such as cashier and general manager that stand in different levels are given extensive training at a majority of larger companies in todays market. Meanwhile, manyâ€Å"mid-career† individuals are less likely to change directions; there has a tendency showed that the criteria such as money, better scheduling, increased or better hours are preferred most by younger employees and experience is their tool to secure a position at elsewhere. Besides on that, there has an outlook which determined that the moving from one job to another is perfectly conducted among the majority of employees especially those younger than 30 if it allows for more pay, and continued growth and development. In addition, the high turnover rate in retail stores attract s potential hires due, mostly to the â€Å"revolving door† effect. There are always employees coming and going, which allows for opportunities to exist. The limitation in this article is low-career individuals didnt discuss by the author regard to their turnover problems. Most of them desire to seek better pay and benefits package if they feel dissatisfied to what they received currently. The young teenagers are not only seeking for better pay in their job, they also desire to get a more challenging job if compare with those who are 40 years old and above. Lane et.al (1996) discussed that it is interesting to note that even though retail and services consist of 20 percent of U.S. jobs, those same sectors create nearly 50 percent of worker turnover. In addition, Lane, (2000) had analyzed that only 16.6% of cashier jobs are created as new positions, the remaining 82.4% is related to turnover while 11 low-skill occupations with 6.5 million job openings per year and only 1million are new jobs. Jovanovic (1979) examined that some turnover is required under economic theories of job matching. Therefore, some positive turnover must be beneficial, since it is rational for both employers and workers to continue an employment contract only if the workers productivity is matched by their pay, while mismatches should separate. Dess and Shaw (2001) noted that no organization-level studies have yet supported the curvilinear, inverted U-shaped, cost-benefit prediction. Much more common is the finding of a negative link between turnover and performanc e. Glebbeek and Bax (2004) said that the position has some diverse today because it just with having found signs even though not statistically significant ones, of an inverted U-shaped relationship. According to Harris et.al (2006) found a curvilinear relationship, but at an aggregate level in a cross-firm study using Australian data. Moreover, there is an existing of usual negative relationship (Shaw, Gupta, Delery, Duffy, Johnson, and Lockhart, 2005). However, â€Å"unobservable† such as the management ability, affect performance and confound the true turnover-performance link are the difficulty of testing these theories empirically. The limitation in this study is the author do failure in testing other theories that influence to turnover. All the level of publics can understand more toward the factors that lead to turnover if the author success to examine it. In addition, the study cant deliver a clear picture to the public about the U-shaped, cost-benefit prediction and s o forth. The public couldnt catch the real meaning about this if they just simply glance through the article. According to Gimpelson and Lippoldt (2001) the total turnover rate around the world was 46% in 1998. Besides, the turnover of unskilled workers was high in the mid of 1990s while firms seem that hoarded white-collar labor. Brown and Earle (2003) correspondingly find that labor flows, particularly job destruction and separation in the Russian industrial sector increased in magnitude during the 1990s. The total worker flows were nine percentage points higher in 1999 than in 1990. In addition, the churning rate which defined as the worker flows less the absolute value of employment change was 30-40% during the 1990s. Gimpelson (2004) examined a survey of 304 Russian industrial enterprise Designing a Research Study: Types of Research and Methods Designing a Research Study: Types of Research and Methods Basic Concepts of Research 1.1 INTRODUCTION: During the last two decades and more, the socio-business environment of the world has witnessed dramatic changes in its nature and scope. Emerging from a historically economic role, the business organization has evolved in response to the social and political stigma of national public policy, explosive growth in technology, price struggle, competition of new entrants, frequent change in customers taste and desires etc. These factors and more have created new knowledge needed for the manager and new problems for social/managerial decision making. In such a complex and uncertain environment, business managers (or social scientists) need to understand how to identify information and to find out the emerging problem to make prompt and effective decision making. The studies of research methods provide the knowledge and skills that the managers/social scientists need to solve the problems and meet the challenges of a fast-paced decision-making environment. In recent years, exploring the research output particularly in the areas of humanities (management studies) and social sciences (economics, commerce, history, sociology, etc.) have been treated as an increasing concern among the researchers. Management is said to be in practice with the dawn of civilization. As a discipline, it is hardly a century old. Starting off as a scientific approach to the organization of things, it borrowed heavily from disciplines like economics, sociology, psychology, mathematics and statistics. Now it is a distinct body of knowledge having the potential for theory and practice. Though management in general is said to encompass the aspects like planning, organizing, staffing, directing and controlling, the discipline has spread itself to the specialized areas recently. Thus there are management concepts as applied to finance, production, human resources, information technology, rural management, operations and marketing. Each of these areas have grown to be a major discipline for research and teaching. In fact, there are number of institutions situated across our countries which are dealing with such issues but still lots of work have to be done. The pre-occupation with methodology is largely peculiar to any discipline of research, particularly in humanity and social science research in India. The first staging post in the life of a young academician is to produce some evidence of creativity. Not only can the route to this be taught, but also attempts to do so take away from the spirit of independent research. On the other hand, the young researchers need to be fitted out with the basic tools of analysis. Before analyzing the definitions of research, it is worthwhile to discuss some basic concepts related to decision-making. 1.2 PROBLEMS OF DECISION-MAKING: For a common man, decision-making problem requires a choice among alternative course of action so as to achieve the objective(s). The word ‘problem, in a general meaning, reflects that something has gone wrong. There are numbers of alternative course of action among which choice has to made are often called in management discipline as ‘management strategy and in economics as ‘economic decision-making. Presently, the business applications of economics and commerce are attracting more and more intellectuals to its fold. No wonder, the queen of social sciences has emerged as the heart of business sciences. Economics and commerce applies its traditional tools and concepts for the better and efficient management of business. Hence, the tools of applied economics and commerce are basically concerned with the application of economics in management decision-making. There is no doubt that it enables the new age managers- the managers of 21st century business enterprises to p erform their role of convincing and executing complex strategies. While managers have considerable information about the outcome for many decisions, they must frequently make decisions in situations in which the outcome of a decision cannot be known in advance. A manager may decide, for example, to invest in a new product development or to increase the level of technology or to change the price of a product and/or any other similar alternatives to increase profits and sales. Even after studying hundreds of technical reports, numbers of annual reports of different companies, available case studies in the literature etc., a manager may still not be in a position with confidence to choose the appropriate alternative(s). Managerial decision making leads to problems like: which products are to be produced?; what price is to be charged?; what quantity of the products are to be produced?; what should be the promotional expenditures?, how much would be the investment expenditures?, etc. Thus, decision making is a process of selection from a set of alternat ive courses of action which is thought to fulfill the objectives of the decision problem more satisfactorily than others. Similarly, a social science researcher at the beginning of a research projects not only in a position to decide which subject area to choose (whether to choose consumer behaviour by analyzing household consumption pattern and household budget or to analyze the effectiveness of various government policies that are meant for removing poverty, unemployment, etc., and/or number of such related alternatives like dowry deaths, women empowerment, women crime, sex ratio etc.), but also what should be the subject area, what should be the methodology, what is the amount of budget available for research, how much time is available with the researcher and so on. It is a widely accepted fact that business decision-making process has become increasingly complicated due to the over growing complexities in the business world more particularly soon after the adoption of the concept of globalization by major economics of the globe. Thus, it requires that the decision maker (s) has to follow some basic rules and processes which will help them to make efficient decisions under conditions of risk, uncertainty and complexities. Hence, decision-making problem may be defined as ‘a task of identifying the alternative courses of action among a number of alternatives available of achieving given objective(s), then to analyze all the alternatives by collecting required information and at the end choosing the best alternative to achieve the desired objective in most efficient way. The elements of decision making process may be: The decision maker himself/herself Identification of the decision problem Identification of the source or the environment in which the problem exists and need solution Selecting some alternative courses of action among the feasible alternatives and The final selection of the choice of the alternatives 1.3 STEPS OF DECISION-MAKING PROCESS: The researcher (pronounced for decision-maker who may be an executive or research team) while going for decision-making always gets confused, thinking from where to start in order to identify the alternative. Systematic inquiry of the problem is a common and fundamental threat. The process of systematic inquiry requires careful planning of an orderly investigation. But there is no hard and fast rule that the decision maker should follow all the steps in a sequence that is derived below rather he/she can choose few important ones based on their convenience and requirements of the study. Following are some fundamental steps which may help the decision maker to get the path of searching the alternatives. 1. Analyzing the objectives: At the initial stage of going for identification of a problem the decision maker has to understand completely the mission, vision and the objective of the concerned organization i.e., he/she has to first understand what their organization wants from them (in case of business problem). For instance, if the decision-maker is associated with a private enterprise then he/she has to understand that the motto of their organization is to maximize profit or sale and/or both for achieving rapid growth. On the other hand, a public enterprise not only based on profit maximization but also is based on welfare criteria. Where as in case of social science research the research has to analyse what is the basic purpose of research? Who is the funding agency and what it wants? What the associated persons or institutions expect?, and a number of such related problems. 2. Defining the problem: The second step, after the objective(s) been identified, is of defining or identifying the problem. Problem identification is the top most tasks in the process of decision-making. It justifies the adage that ‘a problem well defined is a problem half solved. This adage emphasizes that an orderly definition of the problem (which ultimately leads to decision-making) gives a sense of direction to the existing problem. 3. Identifying possible alternative solutions: The third step in the process of identifying the alternative course of action is of specifying few alternative(s) among the numbers of alternatives selected at the initial stage of research (as discussed in point 1 above). But due to a number of reasons the decision maker cannot choose all the alternatives that is possible to solve the problem rather he/she has to limit the horizon and should concentrate on a limited alternatives. This requires considering the variables that may put more impact on the problem identified. In such a way, relationship among the variables and with the problems has to be established. Here, various hypotheses can be formulated which will at the end serve as alternative solution of the existing problem. Box-1.1: Narottam Paper Limited and Economic Recession The ripple effects of the 2008 Global economic meltdown had begun to hurt the Rupees 2,556 crore of Narottam Paper Ltd. Like all other business houses in India, Narottam Paper Ltd., was also finding the growing tough. The general trend of soaring prices and contraction in demand had started affecting the sale of the company products. Its customers were also focusing on correcting their inventory positions (using existing stocks of materials to keep production lines and marketing activities rolling). Consequently, they were not buying much from the company. Even the investors did not like when they saw- Narottam Paper Ltd., stock fell from Rs. 63.50/- on 1 January, 2008 to a low of Rs. 12.08/- on 18 January 2009. The company was in the midst of Economic crisis. In such a chronic situation of the company, Mr. Partha Sarathi, Managing Director of the company, realized that some strong means must be taken to extricate the company from its present crisis. To this end, Mr. Partha Sarathi held several brainstorming sessions with the companys Research and Development team and finally, identified the focus areas on which decision is needed. The identified areas are: Necessity of changing companys strategic planning policies Managing working capital flows Cutting various costs Paying attention to employee productivity Searching new market potentials Thus from the above case study it is clear that the company in wrongly in the trap of economic recession. To combat this recession, the company had identified five alternatives. Solution of each of the five alternatives may help the company to achieve its desire objective(s). 4. Evaluating alternative course of action: Now, among these alternatives, some alternative requires long time to execute, some may be expensive for the decision-maker to execute, some may go beyond the limit of the decision-maker and the one which satisfies all the criteria of the decision maker. Thus, the decision-maker has to collect relevant data or information on each possible alternative those satisfy all the requirements of the decision-makers, hence, are finalized to solve the existing problem. Data are regarded as the basic input to any decision-making process in both business studies and social science. The processing of data gives statistics of importance of the study. Some data may be available in form of reports published by various government departments, annual reports of the industries, thesis/research publications in various libraries of institutes/universities, etc., are called as secondary source of data. Where as, in some case the decision-maker has to collect the fresh information with the help of various tools of data collection like questionnaire, door-to-door interview, focal group discussion, field study, etc., which are called as primary source of data. The collected data are then coded and entered in computer for execution of the result. Proper tools and techniques of optimization are used for classification and analysis. Techniques such as regression analysis, multivariate analysis and operation research techniques like linear programming, simulation techniques, etc., are used to obtain a desirable solution. This solution may be one that helps the decision-maker to achieve the desired objective. Now, with this process the decision maker gets optimal solutions to all the possible alternatives that he/she has been identified in the initial stage of research. 5. Validation of the results: After the course of action is finalized, now it is time to execute the action in reality i.e., called as decision-making. The process of validation of results ensures the credibility of the results. This requires constant monitoring so as to achieve the desired result. For this, the decision maker has to consult with the experienced professionals in the related area of study, consultants who are closely associated with such studies, academicians who are carrying on research in the related area(s), etc. The figure 1.1 derived shows the flow chart of the decision-making process showing how the process of decision-making moves in research. 1.4 WHAT IS A RESEARCH? Research is a diligent enquiry and careful investigation for new knowledge through systematic, scientific and analytical approach in any branch of knowledge. Constant search and research are the guiding factors of research which helps to discover new facts (Kumar, 2002). The search for new knowledge also helps to accept or reject or modify existing fact or knowledge that is already available in the existing literature. For a common men, the word research implies a detailed study of a subject especially in order to discover (new) information or to some it implies in search of a new finding. Where as, the Oxford Advanced Learners Dictionary defines the word as, ‘a careful investigation or inquiry especially through search for new facts in any branch of knowledge. The Random House Dictionary of the English language defines ‘research as diligent and systematic inquiry or investigation into a subject in order to discover or revise facts, theories, applications etc. The definition of research gets its real meaning with the words of Clifford Woody, who defines it as ‘research is a careful inquiry or examination in seeking facts or principles, a diligent investigation to ascertain something. John W. Best in his contribution titled ‘Research in Education opines research as ‘the systematic and objective analysis and recording of controlled observations that may lead to development of generalizations, principles, or theories, resulting in prediction and possibility ultimate control of events. P.M. Cook defines research as ‘it is an honest, exhaustive, intelligent searching for facts and their meaning or implications with reference to given problem. It is the process of arriving at dependable solutions to problems through the planned and systematic collection analysis and interpretation of data. The best research is that which is reliable verifiable and exhaustive so that it provides information in which we have confidence. M. H. Gopal opines as ‘it is essentially a systematic inquiry seeking facts through objective verifiable methods in order to discover the relationship among them and to discover from them broad principles or laws. K. V. Rao visualizes the concept as ‘research is an intensive and purposeful search for knowledge and understanding of social and physical phenomena. It is a method for the discovery of true values in a scientific way. It is not merely an accumulation of knowledge but a critical and scientific analysis of social facts and formulation of generalizations as a basis of action and foresight. The encyclopedia of Social Sciences (Mc-Million) defines research as, ‘Research refers to a critical and exhaustive investigation of experimentation having as its aim the revision of accepted conclusions in the light of new discovered facts. Where as, the word ‘methodology is the combination of two words ‘method which implies a particular way of doing something plus ‘logus the Latin word which implies ‘study thus, ‘methodology implies ‘a systematic way of studying something. The research method may be defined as all those methods and techniques that are used for conducting the research or search. Hence, it refers to the behavior and instrument used in selecting and conducting research techniques and research design. Some experts, who are continuously associated with research methodology since a long, have categorized the research methods in three categories. They are: First category is one where those methods are included which relates to the collection of data or information. In the second category, different statistical techniques are used for establishing relationships between variables. Where as, the third category consists of those methods which are used to evaluate the accuracy of the results obtained. Where as, Dhondyal (1994) defines research methodology as ‘a procedure designed to the extent to which it is planned and evaluated before conducting the inquiry and the extent to which the method for making decisions is evaluated. According to C.R. Kothary (1990), research methodology is, ‘when we talk of research methodology we not only talk of the research methods but also considers the logic behind the methods we use in the context of our research study and explains why we are using a particular method or technique and why we are not using others so that research results are capable of being evaluated either by the researcher himself or by others. There exists large numbers of definitions in research literature defining the term research methodology. All the definitions are defined differently by different experts based on their need and requirements of their study. Few properties can be summarized as below: (1) Research is a scientific process. (2) It leads towards the solution of an existing problem. (3) It directs towards the development of new principles of theories or modifies the existing literatures that will be helpful in predicting future occurrences. (4) It is based upon observable experiences or empirical evidence. (5) The process of search for new knowledge demands accurate observations and descriptions of the fact(s). (6) It involves gathering new data for new purposes. (7) It is characterized by patience and unhurried activities. (8) It is carefully recorded and reported. (9) It is the task of experts or specialists in the related discipline of the study. (10) It is an intellectual task. From the above derived definitions and more other such definitions that already exist in the literature, research methodology may be summarized as a way to systematically solve the research problem. Research methodology constitutes research methods used in context of research study and explanation of using of a particular method or techniques and the why other available techniques are not used. So that research results are capable of being evaluated either by the researcher him self or by other persons who have keen interest in the study area. Hence, research is a systematic approach consisting of enunciating the problem, formulating hypothesis, collecting the facts in relation to the problem, and reaching certain conclusions, either in the form of solution towards the concerned problem or in certain generalizations for some theoretical formulation. 1.5 OBJECTIVE OF RESEARCH: Like that of every discussion, research is also having some basic objectives. The purpose of research is to discover answers to questions through the applications of scientific procedures. Young (1988) has analyzed some important objectives of research as follows: No two human beings behave equally. Human psychology is the most complicated matter to predict in the society. There are always fluctuations found in their behaviour. Hence, in order to maintain equilibrium and stability, it requires understanding the human behaviour. Thus, research helps to explore and understand human behaviour and their social life. Research helps in portraying accuracy in the characteristic of a particular individual, situation or a group in the society / organization and leads to designing the strategies of development. Test of human beings for a particular good is always changing. Thus, human nature is to search for new things. Research helps to extend, correct or verify knowledge that is either in hidden or not discovered, Two kinds of explanations for unexplained social phenomena, It helps in predicting the frequency with which a certain thing occurs or with which it is associated with something else. To provide new insights into organized society and its social structures. To test or challenge existing theories and revise them in the light of new evidence(s). Here existing theories are either tested or new theories are developed or are modified. To understand the organizational culture, social life, social environment, decision making process, etc., and there by to gain a greater measure of control on other human behaviour in the organizational and socially context. 1.6 FEATURES OF RESEARCH: Every research has its specific features or characteristics. Some important features are cauterized below: Research gathers or collects new knowledge or data from either primary or first hand sources and secondary or already existing sources. The process of research is systematic and accurate. Research secures experts or skilled personnels for any investigation. Research is characterized as logical and objective, applying every possible test to verify the data collected and the process employed. There is no question of biasness in research. Research eliminates personal feelings and references from the activity. It is the process of investigating new knowledge. Research endeavors to organize data in quantities terms as far as possible. Research in some cases where the research scope is broader is time consuming. Research redlines courage and hard work, hence, it requires patience. The process of research is highly purposive and pin pointed. It generally deals with a significant problem which demands a solution. The process of research usually involves, a pre-determined step, formulation of one or more hypothesis, research design, methods of data or information collection and presentation of data and is carefully recoded order reported. 1.7 FACTORS REQUIRE FOR A SCIENTIFIC/ GOOD RESEARCH: A good research follows the standards of the scientific methods. Hence a research team while executing any research work should consider following factors carefully. Purpose clearly defined: The problem or the decision to be made should be clearly defined by the researcher. The decision statement should include its scope, limitations and the summery (meaning) of all words /terms that are significant to the research. The researcher should be clear about the purpose of his/her study (research) to match with the mission of his/her organization for whom the research is meant for. 2. Should be based on ethics: Ethics is defined as a system of moral principles or rules of behaviour. While going for study, proper care should be taken at designing the research procedure i.e., the issues related to study. Safeguards against causing mental or physical harm to participants should be considered. It should not hamper religious and sensitive norms while conducting research and interacting with the respondents. For example, if the researcher has keen interest to know the behaviour of a particular group of people who are affected by HIV+. Now while interacting with these people, the researcher should ask questions very carefully in a simpler manner without causing any harm to their sentiments. 3. Research design/methodologies should clear and planned: The research should also have clear understanding about the objective of the study. In other words, the nature of data required, the behaviour of the respondents, the procedure of data collection, sample coverage, methods of data collection, models to be used, computer software to be implemented etc., should be explained clearly. 4. The Researcher should be a skilled expert: The person involved in the research should be an expert in the concerned field of study. He/She should be clear about the procedure, objectives, methodologies and techniques of research. They should be capable enough to handle the respondents. The behaviour of the researcher should be calm and saver. Necessary care should be taken in case where the study is based on some sensitive issues. The researcher should have a clear command on the sample area, the language, the mature of the respondents. The most important requirement is that they should have enough patience and keen interest in the study. 5. Unbiased analysis of results: There should be no biased decision after getting the results of study. No question of sympathy, kindness, relationships, etc., should be involved in the research process. No political interferences should be there in the process of analysis of the study. For example Mr. X is doing some research work (let it be a Ph. D) under the guidance of Mr.Y and they are relative. Now, if they do the research work in normal process it may take several years and it may have some value addition in the shape of outcome of the study. But, since Mr. X is Mr. Ys relative, the basic objective of such research may be only getting a degree. Thus they will try to finish the work very early without doing a proper work. In such cases Mr. X may be awarded the degree but the result may not have any value addition to the existing literature. 6. The conclusions should be justified: The conclusion should be specific and to the point as per the purpose of study. The objective(s) derived and hypotheses formulated at the beginning of the study and conclusion drawn at the end of study shows the gap between â€Å"What was to be done and what you performed†. This helps in gap analysis. The exact findings should be represented without biasness. The validity of the conclusions should be specified. 7. Scope for further research: The research procedures used should be described in sufficient details and there should be ample scope for the other researcher for further research, if necessary. The limitations of the study should be clearly mentioned. Problem identification is the top most tasks in the process of decision-making. As it is a known fact that, solution of one problem, gives birth to a number of related other problems, thus, the researcher should clearly mention about the limitations of the study. The limitation may be in the form of limited or small sample, less budget, less time span, parameters that have been identified are less in quantity, the study is narrow in scope, methodology chosen may be purposive, etc. 1.8 TYPES OF RESEARCH: Researches are of various types. It is basically categorized on the nature of work. Professor R. Panneerselvam has classified some important types of research as follows: 1. Exploratory Research: Exploratory research is the fundamental one and is of an initial research type which the researcher carried out at the initial stage of study. In other words, here the researcher analyses the data and explores the possibility of obtaining as many relationships as possible between different variables without knowing their end-applications. A general study is conducted without having any specific objective(s) of study. Here a number of hypotheses are developed for an existing problem. There are three sources from which exploratory research develops in the mind of a researcher. They are survey of literature, experience survey and study of existing case(s). a. Survey of Literature: The very beginning phase of searching a problem is the survey of literature. Survey of literature is the study, involves collection of available literatures in the required area of research where the researcher has limited experience, and critical examination and comparison of the above materials is needed for better understanding of the concept. This research also helps the researchers to update with the past data, data sources and results, which are useful for related researcher in future. Some examples of survey of literature are searching a problem from available journals, books, periodicals, reports published by different government and non-government agencies etc. b. Experience Survey: Experience survey gathers the experiences of skilled specialists in terms of their skill, expertise and knowledge. Hence this survey is the survey of experiences of experts/specialists in a particular field which acts as a data base for future research. These expertises have been developed over a period of time or through some other related studies. Some of the examples of the experience survey are materials planning, demand forecasting, man power planning, union / state government budget analysis, investment decisions analyzing the employment and unemployment situation etc. c. Study of case(s): This is a special kind of study oriented to have insight into research topics. This kind of study is mainly case study oriented. It lays emphasis on reviewing the available real story cases in the literature. Based on the available real case histories, a researcher can proceed in his/her own research study. Two real case stories which are based on effective service facility provided by two multinational companies to gain customer loyalty are analysed in Box-1.2 and Box-1.3 below. Box-1.2: IFBs Home Demo IFB Industries Limited has been adopting the strategy of home demo to build a good will among its customers. Mr. Satyanarayan has purchased a micro-oven of this company in the month of November, 2008. Soon after the purchase, one sales manager came to him to his house and explained the couple about a number of operations of the microwave with live demos. He has spent more than 20 minutes with the couple and made them aware about a number of functions, instructions, procedures regarding the handling of micro-wave with life demos. This is how IFB is attracting the customer by providing them some service satisfactions at their door step. By identifying such more real life experiences, the researchers can develop some new studies based on the similar line. Box-1.3: Whirlpools Marketing Research Strategy Whirlpool of India Limited is giving considerable emphasis on marketing research. The company strategy shows that it believes in planning research in advance. Even though this process seems to be difficult in reality, but for achieving its objective, the company is maintaining complete