Project Management

Project Management

PROJECT PLANNING AND MANAGEMENT
(Project Planning / Project Formulation / Project Implementation / Preparation of Project Proposal)
Compiled by
S.Rengasamy, Madurai Institute of Social Sciences One Of the most important administrative developments in the developed as well as in developing countries has been the initiation and growth of a large number of new programs projects in every field like Since the 1950s the development agenda has been agriculture, irrigation, industry, community characterized by projects and programs aimed at improving the quality of life of beneficiary communities, development and social welfare etc.. The principle be it in physical or qualitative terms. Despite significant aims and objectives of all these programs have been inputs of human and financial resources, many fell short to bring about overall changes in the existing socio- of expectations. Projects failed to meet the priority economic structure in the country providing thereby needs of communities; stated outputs were not achieved dignified way of life to a citizen as a unit and socio- or, if achieved, not sustained; target groups did not benefit in the manner intended; project costs escalated economic up liftment of the society. So most of the administrators are directly concerned with the program / project administration than other activities. The capability of administrative system to formulate and implement, relevant and in able programs effectively constitutes a crucial element in the process of development. Development requires planning and planning includes a lot of programs / projects. Plan requires projects and projects require a lot of planning.
and implementation dates slipped; and adverse outcomes were not anticipated. These failures were attributed in part to poor project management, such as inadequate opportunities for potential beneficiaries to participate in project identification, weak financial management, inadequate monitoring during implementation, poor linkages between project activities and project purpose, and insufficient attention to the external environment during project design. It was also recognized that projects were more likely to succeed when account was taken of the socio-economic context in which they operated. The rationale for using sound project management is to achieve sustainable development. The simplest definition of a project is "it is a unique set of activities with a beginning and an end, undertaken to meet some established goals, objectives and deliverables within defined constraints of scope, quality, time, cost and stakeholder or customer satisfaction." More than 2,500 years ago, the famous Chinese philosopher, Confucius, expressed this sentiment. "In all things, success depends upon previous preparation - and without such preparation there is sure to be failure." In modern parlance, this elementary observation translates into a simple two-step sequence: 'Plan before doing', or the more popular exhortation 'Plan Your Work, Work Your Plan!' This basic concept is the foundation of the project life cycle by which projects need to be managed. First plan, then produce.
As in the case of all definitions, the term program / project has a variety of meaning. Definition of a project 1. Programs / Projects are tools to achieve the plan goals. E.g. Plan goal – Removal of poverty. Plan tool – IRDP, JRY, TRYSEM etc. 2. A project is an investment of resources in a package of interrelated time found activities. Thus a project becomes a time found task. A Project should have definite beginning and an end. 3. A project can be defined as a scientifically evolved work plan devised to achieve specific objectives within a specific period of time. 4. An activity (or, usually, a number of related activities) carried out according to a plan in order to achieve a definite objective within a certain time and which will cease when the objective is achieved. 5. A collection of linked activities, carried out in an organized manner, with a clearly defined start point and end point to achieve some specific results desired to satisfy some clearly defined objectives. 6. A group of activities that have to be performed in a logical sequence to meet pre-set objectives outlined by the client.
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7.
A project is a temporary endeavor involving a connected sequence of activities and a range of resources, which is designed to achieve a specific and unique outcome and which operates within time, cost and quality constraints and which is often used to introduce change.
Categories of projects Based on time Based on the purpose Normal Experimental Crash Pilot Disaster Production / Service.
Based on levels Centralized Decentralized Partially decentralized
Characteristics of a project: 1. Each and every project should have a package of interrelated activities. Eg. IRDP Projects may stand-alone or be integrated a. Identification of the poor into a program, with several projects b. Knowing their choice contributing to one overall goal. c. Arranging bank assets A unique, one-time operational activity or d. Follow up / advisory activities effort e. Evaluation Requires the completion of a large number 2. Each activity is time found of interrelated activities 3. Each and every project should have a set of objectives to Established to achieve specific objective be achieved. Resources, such as time and/or money, are E.g. IRDP-Eradication poverty by distributing incomelimited generating assets. Typically has its own management structure E.I.P-Improving the environment in slums through Need leadership providing basic amenities like drinking water, drainage, street lights, toilets and community centers etc. 4. Each and every project should be operated with constraints. E.g. Eradication of poverty within a democratic framework, within a time frame, within a limited resource within the present bureaucratic setup. 5. Each and every project should specify the (clientele) target group. E.g. IRDP – Rural poor, SEPUP – Urban poor. 6. Each and every project should have well defined time sequence of investments. 7. Each and every project should have an in built arrangement to evaluate the program. Project Life Cycle Phases: All projects have to pass through certain phases. The attention that a particular project receives is again not uniformly distributed throughout its life span, but it varies from phase to phase. At a particular appropriate attention has to be paid. Following are the general phases of a project. 1. Conception phase 2. Definition phase 3. Planning and organizing people 4. Implementation phase 5. Project clean up phase The above phases won’t follow a sequence … rather they overlap; sometimes this overlapping is done deliberately in the interest of compressing the overall project schedule. There are others who would encourage natural growth.
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Conception phase: Phase in which the project idea germinates. This phase is also known as Identification of the problem, identifying the performance gap. It we avoid or truncate this phase, the project will have innate defects and may eventually become a liability for the investors. How to implement the project is not the botheration of this phase. It we start thinking about the implementation during this phase, it will unnecessary delays this phase. Definition Phase: The definition phase of the project will develop the idea generated during the conception phase and produce a document describing the project in sufficient details covering all aspects necessary for the customer or
investors to make up their minds on the project idea. Planning and organizing phase: This phase can effectively start only after definition phase, nut in practice it start much earlier, almost immediately after the conception phase. This phase overlaps so much with the definition and also with implementation phases. That is why no formal recognition is given to this by most organizations. Implementation phase: Period of hectic activity for the project. It is during this period, something starts growing in the field and people for the first time can see the project. Project clean up phase: Completion and handing over the project.
Need Analysis
Why?
Aims & Objectives Strategy or Methodology Plan of Activities
What For?
How? Where?
Implementation
With what with? The curve in the above diagram shows that effort to build Evaluation up a project is very slow, but effort to withdraw is very sharp. It can also be seen that time taken for the formative and clean up stage & implementation stage. While this Follow up pattern is true for all the projects, the percentage of effort in different phases would not be the same for all projects. However for the same class projects the curve may be more or less the same. A life cycle curve can thus represent a class of projects.
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Project Life Cycle Phases – II Project Planning: Planning in the context of projects is a means of organizing the work, deciding who does what, when, how and for whom, determining the resources required, allocating responsibility communicating among all those involved in a project, coordinating activities and people involved, controlling progress, estimating term of completion and handling unexpected events and changes. Planning is also a basis for the authority of a project manager, for the budgeting and financial control of a project manager, for the self analysis and learning, means of orienting people to look ahead of a project, and above all, a way of initiating and maintaining a sense of urgency i.e. time consciousness. Project Formulation: Project formulation means developing our ideas in a good shape so as to present it to decision-makers to take correct investment decisions. Thus, project formulation refers to a series of steps to be taken to convert an idea or aspiration into a feasible plan of action. Project Planning –Table
Methods
Project Identification
Definition Sources: Surveys, Published documents, Govt .agencies & policies, Credit institutions, Priority & Felt needs The identified project should be appraised in relation to the feasibility of technical, commercial, financial, managerial, social, environmental and other aspects of the project by raising various questions
Financial Analysis -Commercial profitability -Simple rate of Return -Pay back period -Social cost benefit analysis Implementation involves allocation of tasks to groups within the project. It means To carryout, Accomplish, Fulfill, To give practical effect. Levels of acceptance Total, Changes in man power, Changes in funding, Rejection Scheduling techniques Gantt Chart, Bar Chart Milestone Chart, Network Analysis Personnel Cost of manpower Type of manpower (Admn, Tech, Clerical)
Project Appraisal
Project Implementation
Initiating the project
Initiating involves obtaining approval of the proposed strategies, project plan, relevant budget and selection of the project manager and other functionaries Work break down structure.
Specifying & Scheduling the work Clarifying authority, responsibility & relationship Obtaining resources
Fixing the work responsibility, relationship within & between implementing & supporting authority
Finances and consumption of finances and its quantity in various stages Motivating the staff Definition and advantages
What and what not to control Tools of monitoring Normal, Non termination, Early termination, Late termination Types &Methods
Direction & Controlling Monitoring the project Terminating the project Evaluation of the project
Definition
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Techniques useful for Planning. Force Field Analysis. Program Evaluation and Review Technique (PERT) Delphi technique. Nominal Group technique. Force Field Analysis This technique is useful in identifying the current obstacles and current resources. As we plan and proceed towards our work, a number of contending forces operate in our arena of our action. Some of these forces drive us towards our goal, while some drive us away from our goal. A state of tension exists, producing a dynamic situation as forces act upon one another and maintain a relative balance. This balance represents the current state of affairs.
Helping Forces
Present Situation DEFEAT
Hindering Forces
GOAL
Brainstorm all the forces. These forces may be tangible items such as people or meeting rooms or intangibles like apathy or personal connections or skills. One can move towards the goal ether by increasing the helping forces, or by weakening the hindering forces. Sometimes the more pressure comes from the helping forces; the more resistance develops in the hindering forces. In such cases it is often best to start by reducing the hindering forces.
Project Monitoring Methods and Techniques of monitoring projects / Programs
Projects even with a good planning, adequate organizational machinery and sufficient flow of resources cannot automatically achieve the desired result. There must be some warning mechanism, which can alert the organization about its possible success and failures, off and on. Constant watching not only saves wastage of scarce resources but also ensure speedy execution of the project. Thus monitoring enables a continuing critique of the project implementation. Monitoring means keeping a track of implementation process. Monitoring involves watching the progress of a project against time, resources and performance schedules during the execution of the project and identifying lagging areas requiring timely attention and action. Monitoring is defined as a management function to guide in the intended direction and to check performance against pre – determined plans. Monitoring means periodic checking of progress of works against the targets laid down in order to ensure timely completion of the project. Purpose of Monitoring: Project monitoring helps to provide constructive suggestions like.
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Rescheduling the project (if the project run behind the schedule) Re budgeting the project (appropriating funds from one head to another; avoiding expenses under unnecessary heading). Re – assigning the staff (shifting the staff from one area to other; recruiting temporary staff to meet the time schedule) Steps in Monitoring: 1. Identifying the different units involved in planning & implementation 2. Identifying items on which feedback is required. 3. Developing proforma for reporting. 4. Determining the periodicity of reporting. 5. Fixing the responsibility of reporting at different levels. 6. Processing and analyzing the reports. 7. Identifying the critical / unreliable areas in implementation. 8. Providing feedback to corrective measures. Indicators for Monitoring: Projects are usually monitored against Whether the projects Running on schedule Running within the planned costs Receiving adequate costs. Methods / Techniques of monitoring. Project reporting, project appraisal, project monitoring project evaluation are inter – related terminology’s with minor differences in their meaning. In project evaluation monitoring is referred as interim or concurrent evaluation. So many of the methods used for evaluation can also relevant for monitoring the project. First hand information. Formal reports Project status report Project schedule chart Project financial status Report Informal Reports. Graphic presentations.
(Methods of monitoring & evaluation are similar.See methods of evaluation)
Evaluation
Meaning, Objectives, Scope, Principles, Functions, and Methods of Project Evaluation. Types (internal / external) of Evaluation. A guideline for evaluating Projects
Evaluation has its origin in the Latin word “Valupure” which means the value of a particular thing, idea or action. Evaluation, Thus, helps us to understand the worth, quality, significance amount, degree or condition of any intervention desired to tackle a social problem. Meaning of evaluation: Evaluation means finding out the value of something. Evaluation simply refers to the procedures of fact finding Evaluation consists of assessments whether or not certain activities, treatment and interventions are in conformity with generally accepted professional standards. Any information obtained by any means on either the conduct or the outcome of interventions, treatment or of social change projects is considered to be evaluation.
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Evaluation is designated to provide systematic, reliable and valid information on the conduct, impact and effectiveness of the projects. Evaluation is essentially the study and review of past operating experience. Evaluation primarily perceived from three perspectives. Evaluation as an analysis – determining the merits or deficiencies of a program, methods and process. Evaluation as an audit – systematic and continuous enquiry to measure the efficiency of means to reach their particular preconceived ends. In the agency context Evaluation of administration means appraisal or judgment of the worth and effectiveness of all the processes (e.g. Planning, organizing, staffing etc.) designed to ensure the agency to accomplish its objectives. Areas of evaluation: Evaluation report may be split into various sections, so that each area of the work of the agency, or of its particular project is evaluated. These may be, Purpose Programs Staff Financial Administration General. Purpose: The review the objectives of the agency / project and how far these are being fulfilled. Programs: Aspects like number of beneficiaries, nature of services rendered to them, their reaction to the services, effectiveness and adequacy of services etc. may be evaluated. Staff: The success of any welfare program / agency depends upon the type of the staff an agency employs. Their attitude, qualifications, recruitment policy, pay and other benefits and organizational environment. These are the areas which help to understand the effectiveness of the project / agency. Financial Administration: The flow of resources and its consumption is a crucial factor in any project / agency. Whether the project money is rightly consumed any over spending in some headings, appropriation and misappropriation. These are some of the indicators that reveal the reasons for the success or failures of any project. General: Factors like public relations strategies employed by the project / agency, the constitution of the agency board or project advisory committee and their contribution future plans of the agency are important to understand the success or failures of any project. Purpose of Evaluation: From an accountability perspective, The purpose of evaluation is to make the best possible use of funds by the program managers who are accountable for the worth of their programs. -Measuring accomplishment in order to avoid weaknesses and future mistakes. -Observing the efficiency of the techniques and skills employed -Scope for modification and improvement. -Verifying whether the benefits reached the people for whom the program was meant.
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From a knowledge perspective: The purpose of evaluation is to establish new knowledge about social problems and the effectiveness of policies and programs designed to alleviate them. Understanding people’s participation & reasons for the same. Evaluation helps to make plans for future work. Principles of Evaluation: The following are some of the principles, which should be kept in view in evaluation. 1. Evaluation is a continuous of the process. 2. Evaluation should involve minimum possible costs (inexpensive) 3. Evaluation should be done without prejudice to day to day work (minimum hindrance to day to day work). 4. Evaluation must be done on a co-operative basis in which the entire staff and the board members should participate (total participation). 5. As far as possible, the agency should itself evaluate its program but occasionally outside evaluation machinery should also be made use of (external evaluation). 6. Total overall examination of the agency will reveal strength and weaknesses. (Agency / program totality). 7. The result of evaluation should be shared with workers of the agency (sharing). Stages in Evaluation. 1. Program Planning Stage. Pre – investment evaluation or Formative evaluation or Ex – ante evaluation or Pre project evaluation or Exploratory evaluation or Need assessment.
Early / Formulation
Program Monitoring Stage : Monitoring Evaluation or Ongoing / interim. Concurrent evaluation 1. Program completion Stage : Impact evaluation or Ex- post evaluation or Summative / Terminal / Final Final evaluation. Steps in Evaluation:
Learning about the program Creating on evaluation plan & Evaluation indicators Briefing the concerned people about the evaluation plan & indicators Revising and elaborating the evaluation plan Initiating Evaluation Utilizing / Sharing the Information
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Types of Evaluation: Evaluation can be categorized under different headings A) By timing (when to evaluate) Formative Evaluation Done during the program -Development stages (Process Evaluation, ex-ante evaluation, project appraisals) Summative Evaluation Taken up when the program achieves a stable of operation or when it is terminated (Outcome evaluation, ex post evaluation etc.) B) By Agency. Who is evaluating? Internal Evaluation External Evaluation It is a progress / impact Unbiased, objective detailed Monitoring by the management it self assessment by an outsider (Ongoing / concurrent evaluation) On going During the implementation of a project Terminal At the end of or immediately after the completion of a project Ex – post After a time lag from completion of a project
By Stages Internal / External Evaluation: Internal Evaluation: (Enterprise Self Audit) Internal evaluation (or otherwise monitoring, concurrent evaluation) is a continuous process which is done at various points and in respect of various aspects of the working of an agency by the agency staff itself i.e. staff board members and beneficiaries. External / Outside Evaluation: (This is done by outsiders /Certified Management Audit) Grant giving bodies in order to find out how the money given is utilized by the agency or how the program is implemented sent experienced and qualified evaluators (inspectors) to assess the work E.g. Central social welfare Board Some donors may send consultants in order to see how far the standards laid down are put into practice. Inter agency evaluation. In this type two agencies mutually agree to evaluate their program by the other agency. Inter agency tours. Methods of Evaluation: (Tools / techniques) Over the years, a variety of the methodologies have been evolved by academicians, practitioners and professionals for evaluating any program / project. Some of the commonly used practices are given below. First hand Information : One of the simplest and easiest methods of evaluation by getting first hand information about the progress, performance, problem areas etc,. of project from a host of staff, line officers, field personnel, other specialists etc who directly associated with the project. Direct observation about the performance and pit falls further facilitate the chances of an effective evaluation. Formal / Informal periodic Reports. Evaluation is also carried out through formal and informal reports. Formal reports consists of Project Status Report
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Project Schedule chart Project financial status Report. Project Status Report: From this one can understand the current health, performance, schedule, cost and hold ups deviations from the original schedule. Project schedule Chart: This indicates the time schedule for implementation of the project. From this one can understand any delay, the cost of delay and the ultimate loss. 1) Project Financial Status Report: It is through financial report, one can have a look at a glance whether the project is being implemented within the realistic budget and time. 2) Informal reports: Informal reports such as anonymous letters, press reports, complaints by beneficiaries, petitions sometimes reveal the true nature of the project even though these reports are disserted, biased and contains maligned information. 3) Graphic presentations: Graphic presentations through display of charts, Graphs, Pictures, illustrations etc. in the project office is yet another instrument for a close evaluation. 4) Standing Evaluation Review Committees: Some of the organizations have setup standing committees, consisting of a host of experts and specialists who meet regularly at frequent intervals to discuss about problems and to suggest remedial measures. 5) Project Profiles : Preparation of the project profiles by the investigating teams on the basis of standardized guidelines and models developed for the purpose, is also another method of evaluation.
Rate of Return
In finance, rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of money gained or lost (realized or unrealized) on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment. ROI is usually expressed as a percentage rather than a fraction. Measure of profitability obtained by dividing the expected future annual net income by the required investment; also called Accounting Rate of Return or unadjusted rate of return. Sometimes the average investment rather than the original initial investment is used as the required investment, which is called average rate of return. For example, consider the following investment: Initial investment Rs.6500 Estimated life 20 years Expected annual net income Rs. 675 Then the simple rate of return is Rs.675/Rs.6500X100 = 10.4%.
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Cost Benefit Analysis (CBA)
Definition: Process of quantifying costs and benefits of a decision, program, or project (over a certain period), and those of its alternatives (within the same period), in order to have a single scale of comparison for unbiased evaluation. Unlike the present value (PV) method of investment appraisal, CBA estimates the net present value (NPV) of the decision by discounting the investment and returns. Though PVB (present value of benefits); employed mainly in financial analysis, a CBA is PVC (present value of costs); not limited to monetary considerations only. It NPV (PVB less PVC); often includes those environmental and social costs NPV/k (where k is the level of funds and benefits that can be reasonably quantified. available) and A technique designed to determine the feasibility of a project or plan by quantifying its costs and benefits.
BCR (benefit cost ratio, PVB divided by PVC).
A process by which business decisions are analyzed. The benefits of a given situation or business-related
The Simple Return on Investment Return on investment is frequently derived as the “return” (incremental gain) from an action divided by the cost of that action. That is “simple ROI”. For example, what is the ROI for a new marketing program that is expected to cost Rs.500,000 over the next five years and deliver an additional Rs.700,000 in increased profits during the same time.
action are summed and then the costs associated with taking that action are subtracted. Some consultants or analysts also build the model to put a dollar value on intangible items, such as the benefits and costs associated with living in a certain town. Most analysts will also factor opportunity cost into such equations Comparison of the cost of a solution and the economic benefits that would accrue if the solution is put into effect. This analysis is a prerequisite to the installation of an employee benefit plan. Questions to be answered include: (1) will the cost result in greater loyalty of employees? (2) will the cost result in greater productivity; and (3) will the benefits encourage employees to participate in their cost? Cost-benefit analysis sets out to do for government what the market does for business :add up the benefits of a public policy and compare them to the costs.
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Model Cost Benefit Analysis of PHC in Tamilnadu
By Dr. C Kannan Community Medicine Department, V.M.K.V. Medical College, Salem, Tamilnadu
Expenditure for public health services carried out by 32 primary health centers and 267 health sub-centers for the of Kanyakumari (13.4-lakh rural population) district of Tamil Nadu (1995-1996 (01.04.05 to 31.03.06). (in Rupees) Expenditure Salary and non salary expenditure for 830 public health staff 4, 48,00000 Cost of drugs for the 32 primary health centers. 25,00000 Cost of vaccines (approximate) 8,00000 Expenses for doing 7601 tubectomy operations (Rs.200 per sterilization) 15,20000 Other expenses (Approximate) 50,00000 Total 5,50,00000
Benefits
Various programs in curative, preventive and promotive sides are carried out through the primary health centers. For easy compilation, the following benefits were considered. The number of mothers who got antenatal care including tetanus toxic administration, natal care (only a few mothers, as most of them delivered in hospitals or nursing homes)
Benefits 1. Benefit under family welfare program a. Sterilizations done b. Copper T insertions (equivalent to sterilizations)
Benefi ciaries 7601 4428 9077
(Rupees) 116,00,00000
It was presumed that by each equivalent sterilization, two children were avoided in the lifetime of each woman, who benefited from the family welfare program. A child should be given food, shelter, clothes, education and health care by their parents at least up to the age of 15 years. On an average, the monthly expense per child was put at Rs. 300 and yearly at Rs. 3600 and for 15 years at Rs. 54,000. By acceptance of sterilization and copper T. The savings to every eligible couple was put at Rs. 108,000. The benefit to 9077 eligible couples was put at Rs. 98 crore. The savings to the nation by preventing 18,154 births was put at Rs. 20 crore, approximately Rs. 10,000 per child. Therefore, the total benefit under the family welfare program was put at Rs. 116 crore
2. Benefit for maternity and child health program
The benefit for the above services for each mother was put at Rs. 100 and thus the total benefit was put at Rs. 30 lakh. A total of 29,000 children got full immunization. The benefit for each child was put at Rs. 100 and thus the total benefit was put at Rs. 29 lakh consequently benefit under maternity and child health program was put at Rs. 59 lakh.
59,00000
3. Benefit on curative side a. New cases b. Old cases c. Inpatients
Beneficiaries
444,869 561,332 2208 72,00000 117,31,00000
For every new case, the benefit was put at Rs. 10 and for every old case, the benefit was put at Rs. 5. The benefit for the inpatients treated was excluded being small in number. Hence, the total benefit under curative side was put at Rs. 72 lakh.
Total benefits from above three programs
Benefit-Cost Ratio Benefit-cost ratio =Total benefit 117.31 crore/ Total cost 5.46 crore = 21.48 For every rupee spent by the Government of Tamil Nadu, the benefit was Rs. 21 to the people of that district. Thus, Tamil Nadu health program seems to be cost beneficial at the assumptions made in this study. The benefit will increase further when other preventive, promotive and curative services will be taken into consideration as expenditures on salary will remain the same.
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Ratio Analysis
Ratios are used to analyze financial statements and to explain relationships between individual amounts in the financial statements (i.e., revenues and expenses; assets and liabilities; revenue to assets; and expenses to liabilities). A ratio in isolation is typically of little value. Ratios become more meaningful when they are compared to: · Organization’s past performance. · Organizations of similar size. · Standards by charitable watchdog organizations (i.e., National Charities Information Bureau, Better Business Bureau). We have grouped ratios for discussion by their application in measuring liquidity, efficiency, leverage and profitability.
What is meant by accounting ratios? How are they useful? Answer: A relationship between various accounting figures, which are connected with each other, expressed in mathematical terms, is called accounting ratios. According to Kennedy and Macmillan, "The relationship of one item to another expressed in simple mathematical form is known as ratio." Robert Anthony defines a ratio as – "simply one number expressed in terms of another." Accounting ratios are very useful as they briefly summarize the result of detailed and complicated computations. Absolute figures are useful but they do not convey much meaning. In terms of accounting ratios, comparison of these related figures makes them meaningful. For example, profit shown by twobusiness concern is Rs. 50,000 and Rs. 1,00,000. It is difficult to say which business concern is more efficient unless figures of capital investment or sales are also available. Analysis and interpretation of various accounting ratio gives a better understanding of the financial condition and performance of a business concern. What do you mean by ratio analysis? What are the advantages of such analysis? Also point out the limitations of ratio analysis. Answer: Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures. According to Myers, " Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements." Advantages and Uses of Ratio Analysis There are various groups of people who are interested in analysis of financial position of a company. They use the ratio analysis to work out a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner: To workout the profitability: To workout the solvency: Helpful in analysis of financial statement: Helpful in comparative analysis of the performance: To simplify the accounting information: To workout the operating efficiency: To workout short-term financial position: Helpful for forecasting purposes: future line of action.
I. Liquidity Ratios Liquidity ratios, also referred to as solvency ratios, show the ability of a CDC to meet financial obligations over the short-term. These ratios help you assess the organization’s ability to meet such near-term obligations as accounts payable, or to maintain regular operations, with current assets that will become available in the near future (typically within one year). These ratios give information on the adequacy of unrestricted cash for seeding new community development projects, bridging cash shortfalls, and providing collateral for loans.
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Current Ratio
This ratio compares assets expected to be available as cash within the next year (i.e., cash, investments, accounts receivable, etc.) with current liabilities, or those liabilities that will become due within the same 12 month period (i.e., accounts payable, current portion of debt, etc.). The current ratio is calculated as follows: Current Ratio = Current Assets Current Liabilities 120 100
As a general guide, the current ratio should be 1.2:1 or higher. In the for-profit and government sectors, a current ratio of 2:1 is considered an indicator of reasonable financial strength. A ratio of less than 1.0 indicate that the organization does not have sufficient current assets to meet current payment obligations. Charting the current ratio over time provides useful information concerning trends in the CDC’s financial status. An analysis of the CDC’s current ratio requires some judgement. If the CDC has carried a receivable from an affiliated entity on its books (for example, a housing development limited partnership) for several years, in the same amount, this is most likely not collectible within a one year period. A more conservative approach in determining the current ratio would require deducting the amount of questionable receivables from total receivables reported.
Cash Ratio
This is a more conservative estimate than the current ratio since assets other than cash and cash equivalents are excluded from this ratio. The cash ratio relates current liabilities to an organization’s most liquid current assets. In essence, some assets are quickly convertible into cash. A CDC’s most liquid current assets exclude accounts receivable from this calculation, as these are Cash Ratio = Cash + Cash Equivalents frequently not immediately collectable. This ratio is an Current Liabilities important measure of the organization’s liquidity. This ratio should be at least .5 to .75, and clearly, the higher the better.
Days’ Cash
This is the number of days that the organization can pay its obligations without any cash inflows. This can be a very enlightening number and in some cases Days’ Cash = (Cash + Cash Equivalents) X 365 shocking. Days’ Cash is expressed in number of Operating Expenses - Depreciation days, and is calculated as given in the box: As a general guide, an organization should have at least 90 days (three months) of cash at its disposal. Working Capital = Current Assets - Current Liabilities This is the difference between current assets and current liabilities. It represents the pool of resources available to management to conduct daily operations, and is a significant indicator of the resources available to your CDC for equity investments in development projects. Working Capital is expressed as a dollar amount (not as a ratio) and is calculated as follows:
Working Capital
II. Efficiency Ratios
Efficiency ratios measure how successful the organization is in using the assets and capital at its disposal in order to maximize cash flow. Receivable Turnover - The receivable turnover ratio and the average receivable collection period provide information on the ability to collect receivables by examining how often they turn over (or are collected) per year and the number of days (on average) it takes to collect accounts receivable. The intent is to determine the liquidity Receivable turnover = Annual Revenue/Support* Average Receivables**
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of accounts receivable. The organization’s receivable turnover rate, stated in times per year, is computed as follows:
*Revenue and support amounts are located in the Statement of Activities. **The Average Receivables is calculated by adding the prior year’s accounts receivable and the current year accounts receivable from the Statement of Financial Position and dividing the total by two.
Once the receivable turnover rate is determined, the average collection period (in days) is calculated as follows: Because many CDCs have a number of Average Collection Period = 365 revenue and support sources (i.e., government Receivable Turnover grants, private grants, rental/developer revenue, etc.) it is appropriate to separately calculate the receivable turnover ratios and the average collection period for the major different sources of revenue/support. For example, you might want to look at the average collection period for government grants, if these grants are a major element of your CDC’s revenue. You would calculate your Grants Receivable Turnover (annual grants receivable/average grants receivable), and then divide 365 by that amount. If it’s taking the organization an extended period of time, let’s say more than 3 months, to collect the major source of revenue, perhaps the organization needs to explore diversifying its sources. Receivable turnover and the average collection period are meaningful statistics since they show how long it takes for an organization to convert its accounts receivable to cash. Comparing these to ratios to the Days’ Cash provides a powerful snapshot of a CDC’s efficiency and liquidity. A CDC with only 30 Days’ Cash, and a 90 day Average Collection Period, could be facing short-term problems. A reasonable time period to collect is 30 days for accounts receivable and 90 days for grants. A longer time period is indicative of billing or collection problems. Management & General Expenses as % of Total Expenses - This ratio measures what percentage of total expenses the organization is spending on management and general expenses (sometimes referred to as administration and overhead). This ratio is generally of great interest to the funders, as it is a reflection of the CDC’s proficiency in the use of funds for programmatic purposes. Charitable watchdog organizations set a standard for this ratio in the range of 20% - 25% of total expenses. This ratio is calculated as follows: Management & General Expenses Program Expenses Total Expenses Total Expenses Program Expenses As % Of Total Expenses - This ratio indicates what percentage of total expenses are devoted to program activities. Charitable watchdog organizations look for this ratio to be 60% or greater. This ratio is calculated as follows:
Program Expenses
Total Expenses III. Leverage Ratios Leverage ratios measure the difference between funds generated by the CDC’s activities (i.e., fees, developer’s profit, and unrestricted grants) as compared to funds supplied by outside lenders in the form of debt. Outside lenders are interested in seeing a high proportion of organizational equity to debt, to insure the CDC’s ability to fulfill payment obligations, as well as its ability to weather unexpected financial reverses. Debt To Net Assets Ratio - This ratio measures to what extent the organization’s operations are funded by debt. The principal amount of the CDC’s long term debt is the amount included in the computation. Commercial lenders frequently look at this ratio to determine their risk when they are considering lending to a new borrower. An excessive debt to net asset ratio may suggest that the CDC is over-leveraged. In the
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community development industry, a ratio above 5-to-1 is cause for concern. Younger CDCs, in particular, need to be very conservative in acquiring debt, until they have established stable and adequate revenue streams. In calculating this ratio it is important to consider: • Whether the organization has an explicit policy on what ratio is acceptable and where you stand in relation to this ratio. • The quality of the net assets, with an analysis of its composition (i.e., what portions of the net assets are unrestricted or questionable receivables. • The ability to service debt, or the net cash flow during the year. • The reliability and consistency of the sources of support and revenue. • How the CDC uses debt. Long-term debt to finance real estate investments is an acceptable use while long-term debt to finance organizational operations is cause for concern. This ratio is calculated as follows: Debt-to-Net Assets Ratio = Long-term Debt Net Assets
IV. Profitability Ratios
Ratios concerned with profitability may, at first consideration, not be relevant to the CDC industry. CDCs are nonprofit organizations with a charitable purpose; profit would seem to be antithetical to our work and purpose. At the same time, a CDC cannot afford to remain static, or stagnant, nor can it afford a long-term decline. An organization, which chronically runs deficits, is a poor candidate for outside investment or program expansion. For better or worse, a funder’s confidence in the effectiveness of the organization’s management will be determined and influenced by the results of these ratio calculations. Operating Ratio - This ratio can be used as an index of efficiency as well as profitability. It is frequently calculated as part of the underwriting of real estate projects, but also can be used as a measurement of how well the CDC can control operating costs. A CDC with a low operating ratio (and therefore a high level of revenues) is generally considered stable, and well managed. Trending this ratio is a useful analytic exercise. If the ratio is increasing over time, it may, for example, indicate that the organization’s net revenues are shrinking through the loss of an Operating Ratio = Total Operating Expenses Revenues + Support important source of funding. Return On Net Assets - This ratio is frequently referred to in the field of financial analysis, and is also known as Return on Equity. In nonprofit terms it compares the amount of change in net assets (or net revenue) to the net assets (or equity) of the CDC. Return on Net Assets = Change in Net Assets The composition of the CDC’s net assets is an Net Assets important consideration when analyzing this ratio. The net assets of many CDCs consist of real estate, which is fixed in value. Real property which has been designated for a particular use, or a restricted income group, will not necessarily generate a profit or return. On the other hand, a CDC whose net assets are substantially liquid may generate a high rate of return on its funds. Watching the trend of this ratio provides useful information to a CDC’s financial managers.
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PROGRAMME EVALUTION AND REVIEW TECHNIQUE (PERT) CRITICAL PATH ANALYSIS (CPM).
Nature of present day projects There is no denial of the fact that the present day projects are very complex in nature, involving huge investments over a period of time and come across multitude of problems. In order to accomplish the intended objectives as also to optimize use of scare physical and financial resources, it has been felt that the need to apply professional management techniques to plan, finance and schedule the projects on a scientific basis. One such widely used professional management technique is PERT
Origin of PERT & CPM
The network techniques (PERT and CPM) have their origin in the late fifties in U.S.A. Since older scheduling techniques have never enjoyed much success in connection with the development projects, networking is considered an important advance in project management. These (PERT and CPM) techniques were developed to facilitate planning, scheduling and controlling the projects in an integrated manner so that these could be completed within the constraints of desire time, cost and performance. The technique of critical path method was evolved in 1957 by the DU Pont Company to solve scheduling problems in the construction of projects. Similarly, Program Evaluation Review Technique was developed in 1958 by the U.S. Navy Department to coordinate the efforts of a host of agencies involved in the implementation of the project and thereby diminishing the chances of all uncertainties.
Though both these techniques have developed independently, they have a common base, i.e., optimum utilization of resources for the implementation of projects as per the predetermined time cost and performance. Some of the potential benefits of these techniques are given below: Net work techniques in India Potential Benefits of PERT & CPM
Net work is a managerial device advantageous over the earlier scheduling techniques History Critical Path Method (CPM) E I Du Pont de Nemours & Co. (1957) for construction of new chemical plant and maintenance shut-down Deterministic task times Activity-on-node network construction Repetitive nature of jobs Project Evaluation and Review Technique (PERT) U S Navy (1958) for the POLARIS missile program Multiple task time estimates (probabilistic nature) Activity-on-arrow network construction Non-repetitive jobs (R & D work)
a) Provides a logical thinking device for preparation of the project schedule and gives a working logical model: b) Helps to identify critical jobs to the completion of the project; c) Provides a method for scientific allocation of resources; d) Facilitate coordination of various efforts and improves communication at all levels; e) Understand the status of the project at any given time; f) Helps us to diagnose / detect problem areas for improvement. g) Helps in predicting schedule slippage and cost overrun ; h) Gives management a tool for supervision and control.
It is due to the inherent advantages of network techniques that of late, the developing countries like ours, have also started relying on their application in almost all important sector of economy such as irrigation, power, steel, fertilizers etc., both in private and government sectors. The various studies amply show that the results have also been quite spectacular, even the Administrative Reforms Commission way back in 1965 recognizing the potentiality of these techniques, stresses the need that once a project is approved, its systematic planning must invariably be undertaken by applying the network techniques. It may, however, be
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cautioned that network techniques are not a panacea in themselves. These are one of the most powerful tools for management to ensure effectiveness, efficiency and efficacy of our projects.
Critical Path Method A network analysis technique used to predict project duration by analyzing which sequence of activities (path) has the least amount of schedule flexibility (float) Float: Slack Amount of time that an activity may be delayed from its early start without delaying the project finish date Critical Path Analysis (CPA) Effective and powerful method of assessing: Identify what tasks must be carried out Identify where parallel activity can be performed The shortest time in which you can complete a project Resources needed to execute a project The sequence of activities, scheduling and timings involved Task priorities The most efficient way of shortening time on urgent projects PERT Charts – Definition Program Evaluation and Review Technique: An event-oriented network analysis technique used to estimate project duration when there is a high degree of uncertainly with the individual duration estimates Variant of Critical Path Analysis that takes a more skeptical view of the time needed to complete each project stage
Some of the salient features of the various components of the network are given below
1. An activity has a preceding as well as a succeeding event; 2. An activity cannot occur until its preceding events have been completed. 3. An activity has to culminate in the end as an event; 4. An activity consumes resources especially time. However, it may or may not consume other resources such as materials, money etc. 5. Each event / activity carries a distinct number’ 6. The same activity cannot be depicted by two arrows; 7. The arrows indicating the activities move in the direction from left to right and not vice versa; 8. The length of an arrow has no significance in terms of an activity. 9. An event having completed once cannot occur again. 10. An event does not consume any resource including time. 11. An event invariably indicates the program in the implementation process. 12. The dummy activities do not consume any resources; 13. A network may represent more than one critical path. It is this path which determent the shortest time required for the completion of the project. More so, any delay in an activity on critical path correspondingly affects delay in project completion.
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A MODEL PROJECT EXECUTION PLANNING USING NETWORK ANANYSIS.
Name of the Project: Establish a milk chilling plant. Assumptions
1. Feasibility and viability of a milk chilling plant with capacity of 5000 lits/ per day worked out, this feasibility analysis is final. 2. Based on that an execution plan for the project is ready. I t has to be approved by the dairy development corporation. 3. A building is available we can use it directly. 4. Staff need to be recruited they will be trained in another plant of similar size. 5. Machineries for the project have to be purchased. 6. Power line has to be obtained. 7. Electrical writing work has to be undertaken . 8. Running the plant for 4 weeks before handing it over to the manager
STEPS IN THE NETWORK PREPARISSION: 1. List all the activities to be executed and assigning code numbers to activities. 2. Specify a logical sequence of activities. a) Which activity / activities in the package should proceed? b) Which activity has to succeed? c) Which activity can be taken up concurrently / simultaneously? 3. Estimate / specify the time duration for each activity. 4. Assemble the activities in the form of a flow diagram. 5. Analyze the flow diagram.
STEP -1. LIST ALL THE ACTIVITIES TO THE EXECUTED AND ASSIHNING CODE NUMBERS.
1 2 3 4 5 6 7 8 Code A B C D E F G H Activity description Project plan approval (from Dairy. Development Corporation) Recruit staff Purchase machinery Obtain power supply line Training of staff Installing the machineries Electrical writing Pilot run.
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STEP-2. SPECIFY A LOGICAL AEQUENCE. For this indicate against each activity which activity / activities in the package should precede the given activity. Activity Code A B C D E F G H Activity description Project plan approval Recruit staff Purchase machinery Obtain power supply line Train staff Install machinery Electrical wiring Pilot run Immediate predecessor None A A A B C D E,F,G
STEP-3, ESTIMATE SPECFIY ACTIVITY DURATION: Estimate if you do the project for the first time using other project manager’s experience, who have done similar projects in the past under more or less identical conditions. Collect data on each activities time from more than 30 such project managers. (more than 30 samples will constitute a large sample according to statistics) any estimate based on large sample will be a reliable estimate. Example: Project Plan Approval – Sample Data (in weeks). 14 22 9 6 5 11 18 6 17 8 19 6 12 2 6 14 6 2 5 6 6 15 6 7 20 8 22 6 10 16 6 6 Maximum duration in the sample - 22 weeks – Pessimistic Time (tpe) Majority in the sample -6 weeks – Most Likely Time (tml) Minimum in the sample – 2 weeks – Optimistic Time (top) Time Estimate: te = top + 4tml + tpe Similarly for other activities arrive at the time ______________ estimates. 6 Using the methodology described above the In our example: te = 2+4*6 + 22 = 48 activities duration can be worked out as shown in __________ ____ = 8 weeks the box 6 6
(A note on the activity duration.The unit of measuring time should be the same for all the activities. It may in terms of months (for project having time span of 5 or 7 years) week (running nd to two years) days (short duration projects) or even minutes and 2 (as in the case of surgical operations.)
Acti- Code vity 1 A 2 B 3 C 4 D 5 E 6 F 7 G 8 H
Activity description Project plan approval Recruit staff Purchase machinery Obtain power supply line Train staff Install machinery Electrical wiring Pilot run
Immediate predecessor activity None A A A B C D E,F,G
Activity Duration (in months ) 2 3 5 2 2 4 2 1
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STEP -4 ASSEMBLE THE ACTIVITIES IN THE FORM OF A FLOW DIAGRAM.
Train Staff
2
Recruit Staff B
Project Plan Approval
E
5
2
3 Purchase Machinery Install Machinery
Pilot Run
0
0
A 2
1
D
3
H
8
1
Obtain Power 2
G
4
2 Electric Wiring
7
• • • • • •
Activities connected by critical events are called critical activities. The path connecting the activities is the critical path. Critical path is the longest path. There can be more than one critical path in a project; both paths will be of the same length. Critical path analysis tells us which events / activities need to be controlled. Knowledge of non-critical events and activities tells us the duration of time available to them as slack.
See the use of dummy activities in the above flow diagram. STEP-5. ANALYSE THE FLOW DIAGRAM. Assume that the project is started at time. That is the earliest occurrence time of the initial event, in this case `O`. Go forward to compute the Earliest Occurrence Time (EOT) of other events. EOT of the events are furnished in the flow diagram below the events. Let the EOT of the final / last event be the Latest Occurrence Time (LOT) of that event. To compute the LOT of other events go backward on the top of the events. Look at some of the events having the same LOT and EOT. They are 0-1-3-7-8. Such events are called critical events. The different between LOT and EOT is the surplus time available for the event to occur. This cushion is known as slack.
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Train Staff
2
Recruit Staff B
Project Plan Approval
E 2
5
3 Purchase Machinery Install Machinery
Pilot Run H
0
0
A 2
1
D
3
1
8
Obtain Power 2
G
4
2 Electric Wiring
7
Slack = LOT- EOT.On critical events Slack = 0. Other events are called non-critical events. eg event no 3 and 7.
Use of nodes and arrows Arrows An arrow leads from tail to head directionally Indicate ACTIVITY, a time consuming effort that is required to perform a part of the work. Nodes n A node is represented by a circle Indicate EVENT, a point in time where one or more activities start and/or finish. Activity A task or a certain amount of work required in the project Requires time to complete Represented by an arrow Dummy Activity Indicates only precedence relationships Does not require any time of effort
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Gantt Charts
Planning and scheduling more complex projects
How to use the tool:
Gantt Charts are useful tools for analyzing and planning more complex projects. They: Help you to plan out the tasks that need to be completed Give you a basis for scheduling when these tasks will be carried out Allow you to plan the allocation of resources needed to complete the project, and Help you to work out the critical path for a project where you must complete it by a particular date. When a project is under way, Gantt charts help you to monitor whether the project is on schedule. If it is not, it allows you to pinpoint the remedial action necessary to put it back on schedule.
Sequential and parallel activities:
An essential concept behind project planning (and Critical Path Analysis) is that some activities are dependent on other activities being completed first. As a shallow example, it is not a good idea to start building a bridge before you have designed it! These dependent activities need to be completed in a sequence, with each stage being more-or-less completed before the next activity can begin. We can call dependent activities 'sequential'. Other activities are not dependent on completion of any other tasks. These may be done at any time before or after a particular stage is reached. These are nondependent or 'parallel' tasks. Drawing a Gantt Chart To draw up a Gantt Chart, follow these steps:
1. List all activities in the plan 2. Head up graph paper with the days or weeks through to task completion 3. Plot the tasks onto the graph paper 4. Schedule Activities 5. Presenting the Analysis Key points:
Gantt charts are useful tools for planning and scheduling projects. They allow you to assess how long a project should take, determine the resources needed, and lay out the order in which tasks need to be carried out. They are useful in managing the dependencies between tasks. When a project is under way, Gantt charts are useful for monitoring its progress. You can immediately see what should have been achieved at a point in time, and can therefore take remedial action to bring the project back on course. This can be essential for the successful and profitable implementation of the project.
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SWOT Analysis
SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. The technique is credited to Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from Fortune 500 companies Strengths: attributes of the organization that are helpful to achieving the objective. Weaknesses: attributes of the organization that are harmful to achieving the objective. Opportunities: external conditions that are helpful to achieving the objective. Threats: external conditions which could do damage to the business's performance.
MODEL SWOT ANALYSIS OF INDIAN DAIRY INDUSTRY
Strengths: * Demand profile: Absolutely optimistic. * Margins: Quite reasonable, even on packed liquid milk. * Flexibility of product mix: Tremendous. With balancing equipment, you can keep on adding to your product line. * Availability of raw material: Abundant. Presently, more than 80 per cent of milk produced is flowing into the unorganized sector, which requires proper channelization. * Technical manpower: Professionally-trained, technical human resource pool, built over last 30 years. Weaknesses: * Perishability: Pasteurization has overcome this weakness partially. UHT gives milk long life. Surely, many new processes will follow to improve milk quality and extend its shelf life. * Lack of control over yield: Theoretically, there is little control over milk yield. However, increased awareness of developments like embryo transplant, artificial insemination and properly managed animal husbandry practices, coupled with higher income to rural milk producers should automatically lead to improvement in milk yields. * Logistics of procurement: Woes of bad roads and inadequate transportation facility make milk procurement problematic. But with the overall economic improvement in India, these problems would also get solved. * Problematic distribution: Yes, all is not well with distribution. But then if ice creams can be sold virtually at every nook and corner, why can’t we sell other dairy products too? Moreover, it is only a matter of time before we see the emergence of a cold chain linking the producer to the refrigerator at the consumer’s home! * Competition: With so many newcomers entering this industry, competition is becoming tougher day by day. But then competition has to be faced as a ground reality. The market is large enough for many to carve out their niche. Opportunities: "Failure is never final, and success never ending”. Dr Kurien bears out this statement perfectly. He entered the industry when there were only threats. He met failure head-on, and now he clearly is an example of ‘never ending successes! If dairy entrepreneurs are looking for opportunities in India, the following areas must be tapped:
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* Value addition: There is a phenomenal scope for innovations in product development, packaging and presentation. Given below are potential areas of value addition: Steps should be taken to introduce value-added products like shrikhand, ice creams, paneer, khoa, flavored milk, dairy sweets, etc. This will lead to a greater presence and flexibility in the market place along with opportunities in the field of brand building. Addition of cultured products like yoghurt and cheese lend further strength - both in terms of utilization of resources and presence in the market place. A lateral view opens up opportunities in milk proteins through casein, caseinates and other dietary proteins, further opening up export opportunities. Yet another aspect can be the addition of infant foods, geriatric foods and nutritionals. * Export potential: Efforts to exploit export potential are already on. Amul is exporting to Bangladesh, Sri Lanka, Nigeria, and the Middle East. Following the new GATT treaty, opportunities will increase tremendously for the export of agri-products in general and dairy products in particular. Threats: Milk vendors, the un-organized sector: Today milk vendors are occupying the pride of place in the industry. Organized dissemination of information about the harm that they are doing to producers and consumers should see a steady decline in their importance. The study of this SWOT analysis shows that the ‘strengths’ and ‘opportunities’ far outweigh ‘weaknesses’ and ‘threats’. Strengths and opportunities are fundamental and weaknesses and threats are transitory. Any investment idea can do well only when you have three essential ingredients: entrepreneurship (the ability to take risks), innovative approach (in product lines and marketing) and values (of quality/ethics). The Indian dairy industry, following its delicensing, has been attracting a large number of entrepreneurs. Their success in dairying depends on factors such as an efficient yet economical procurement network, hygienic and cost-effective processing facilities and innovativeness in the market place. All that needs to be done is: to innovate, convert products into commercially exploitable ideas. All the time keep reminding yourself: Benjamin Franklin discovered electricity, but it was the man who invented the meter that really made the money! MODEL SWOT ANALYSIS OF INDIAN TEXTILE INDUSTRY Strengths: Indian Textile Industry is an Independent & Self-Reliant industry. • Abundant Raw Material availability that helps industry to control costs and reduces the lead-time across the operation. • Availability of Low Cost and Skilled Manpower provides competitive advantage to industry. • Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry. • India has great advantage in Spinning Sector and has a presence in all process of operation and value chain. • India is one of the largest exporters of Yarn in international market and contributes around 25% share of the global trade in Cotton Yarn. The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the country’s total export.
• • •
Industry has large and diversified segments that provide wide variety of products. Growing Economy and Potential Domestic and International Market. Industry has Manufacturing Flexibility that helps to increase the productivity.
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Weaknesses: • Indian Textile Industry is highly Fragmented Industry. • Industry is highly dependent on Cotton. • Lower Productivity in various segments. • There is Declining in Mill Segment. • Lack of Technological Development that affect the productivity and other activities in whole value chain. • Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and transportation Time. • Unfavorable labor Laws. • Lack of Trade Membership, which restrict to tap other potential market. • Lacking to generate Economies of Scale. • Higher Indirect Taxes, Power and Interest Rates. Opportunities: • Growth rate of Domestic Textile Industry is 6-8% per annum. • Large, Potential Domestic and International Market. • Product development and Diversification to cater global needs. • Elimination of Quota Restriction leads to greater Market Development. • Market is gradually shifting towards Branded Readymade Garment. • Increased Disposable Income and Purchasing Power of Indian Customer opens New Market Development. • Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft and other segments of the industry. • Greater Investment and FDI opportunities are available. Threats: • Competition from other developing countries, especially China. • Continuous Quality Improvement is need of the hour as there are different demand patterns all over the world. • Elimination of Quota system will lead to fluctuations in Export Demand. • Threat for Traditional Market for Power loom and Handloom Products and forcing them for product diversification. • Geographical Disadvantages. • International labor and Environmental Laws. • To balance the demand and supply. • To make balance between price and quality.
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SWOT analysis of extension service providers
A SWOT analysis makes it possible to assess the various strengths, weaknesses, opportunities and threats (SWOTs) within an organization, or within the agricultural extension system as a whole. In this study, a SWOT analysis was carried out at the category level, and focused on the categories of extension service providers. The following table outlines the findings of that analysis.
Catego ry Strengths - Highly qualified, competent and experienced personnel. - Good in-house training programs have produced credible staff. - Extensive grassroots coverage with district and/or village-level representation. - Amalgamation of DR&SS and AGRITEX ensures collaboration between technology generators and disseminators. - Public research system has a broad spectrum of researchers. Weaknesses - Limited financial resources: more than 75 percent of budget goes on salaries; very little left for operational costs. - Poor logistical support: no transport and equipment. - Lagging technical knowledge in new enterprises (e.g. ostrich/crocodile farming). - Bureaucracy and long channels of communication. - Conflicts between line ministries and departments at the expense of rural development programs and intended beneficiaries. - Lack of self-discipline: few can work without supervision. - High staff turnover leaves some projects/programs unfinished. - Politically aligned line ministries (e.g. Ministry of Youth Development, Gender and Employment Creation) are viewed suspiciously. - Counterproductive policies (e.g. technical papers used for career promotion, no consideration of the groundlevel impact). Opportunities - Improved collaboration and efficiency through department mergers. - Collaboration opportunities among line ministries, departments and other system actors. - Potential for improved effectiveness and efficiency through transformations (e.g. commercialization and cost recovery programs). Threats - Inadequate budgets are declining in real terms (inflation). - Prevailing economic situation: unlikely that government will increase budgetary allocations. - Unstable macroeconomic and political environment. - Donors are withdrawing or scaling down. - Retrenchments usually start at the bottom with the community service providers.
Public agricultural extension service providers and public research organizations
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- Grassroots representation. - More grassroots contact: more aware of farmers' needs. - Member-based (district- and villagelevel), so effective twoway communication. - Specific interest groups provide specific, relevant information to clients. - Abundant financial resources. - Better logistical support (transport and equipment). - Use multidisciplinary teams and more holistic approaches. - Good networking skills. - Use of participatory and bottom-up approaches ensures effective grassroots and community participation. - Provide training, extension and finance from one source. - Greatly improved understanding of community needs (through accountability and demonstration of impact to donors). - Small independent decision-making units facilitate quick decisionmaking and greater flexibility in project and programme implementation. - Inadequate budgets (despite donor support). - Technical weaknesses. - Better services and more tangible benefits for members would improve the membership base. - Could be self-funding if membership base is improved. - Most are likely to be affected by donor fatigue and investment withdrawal (but not the Commercial Farmers' Union).
Farmers' associations
- Thin on the ground, so very limited coverage. - Lack integrated approach (despite the rhetoric). - Lack information and technical expertise. - Lagging technical knowledge in new enterprises (e.g. ostrich/crocodile farming). - Exist for financial benefits: are dollardriven. - Funds abused or not passed to the rightful beneficiaries. - Work is too localized. - Programmes that are too short to have much impact. - Programmes that are too narrow (sectorfocused) to have much impact. - Ineffective umbrella body: the National Association of NGOs (NANGO). - Overdependence on external financial resources and expatriate technical assistance.
NGOs and donor-supported rural development programs
- Potential for effective program implementation: cooperative NGOs involve everyone. - Donors will fund welldesigned programs with demonstrated impact.
- Unstable sociopolitical environment not conducive to normal operations. - Donor fatigue and investment withdrawal. - Political pressure to extend programs or projects beyond the available resources. - Programs may be overwhelmed as economic decline and retrenchment lead more and more beneficiaries to seek involvement. - Political pressure may force closures (e.g. NGOs accused of supporting opposition and banned from holding meetings in some areas).
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Environmental Impact Analysis
What is EIA? History of EIA in India The EIA process Forms of impact assessment Comparative review of EIA procedures and practices What is EIA? Environment Impact Assessment or EIA can be defined as the study to predict the effect of a proposed activity/project on the environment. A decision making tool, EIA compares various alternatives for a project and seeks to identify the one which represents the best combination of economic and environmental costs and benefits. EIA systematically examines both beneficial and adverse consequences of the project and ensures that these effects are taken into account during project design. It helps to identify possible environmental effects of the proposed project, proposes measures to mitigate adverse effects and predicts whether there will be significant adverse environmental effects, even after the mitigation is implemented. By considering the environmental effects of the project and their mitigation early in the project planning cycle, environmental assessment has many benefits, such as protection of environment, optimum utilization of resources and saving of time and cost of the project. Properly conducted EIA also lessens conflicts by promoting community participation, informing decision makers, and helping lay the base for environmentally sound projects. Benefits of integrating EIA have been observed in all stages of a project, from exploration and planning, through construction, operations, decommissioning, and beyond site closure. Evolution of EIA EIA is one of the successful policy innovations of the 20th Century for environmental conservation. Thirty-seven years ago, there was no EIA but today, it is a formal process in many countries and is currently practiced in more than 100 countries. EIA as a mandatory regulatory procedure originated in the early 1970s, with the implementation of the National Environment Policy Act (NEPA) 1969 in the US. A large part of the initial development took place in a few highincome countries, like Canada, Australia, and New Zealand (1973-74). However, there were some developing countries as well, which introduced EIA relatively early Columbia (1974), Philippines (1978).
EIA - Three core values • Integrity: The EIA process should be fair, objective, unbiased and balanced • Utility: The EIA process should provide balanced, credible information for decision-making • Sustainability: The EIA process should result in environmental safeguards
The EIA process really took off after the mid-1980s. In 1989, the World Bank adopted EIA for major development projects, in which a borrower country had to undertake an EIA under the Bank's supervision (see table 1: Evaluation and history of EIA). History of EIA in India
The
Indian experience with Environmental Impact Assessment began over 20 years back. It started in 197677 when the Planning Commission asked the Department of Science and Technology to examine the rivervalley projects from an environmental angle. This was subsequently extended to cover those projects, which required the approval of the Public Investment Board. Till 1994, environmental clearance from the Central Government was an administrative decision and lacked legislative support. On 27 January 1994, the Union Ministry of Environment and Forests (MEF), Government of India, under the Environmental (Protection) Act 1986, promulgated an EIA notification making Environmental Clearance
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(EC) mandatory for expansion or modernization of any activity or for setting up new projects listed in Schedule 1 of the notification. Since then there have been 12 amendments made in the EIA notification of 1994. The MEF recently notified new EIA legislation in September 2006. The notification makes it mandatory for various projects such as mining, thermal power plants, river valley, infrastructure (road, highway, ports, harbors and airports) and industries including very small electroplating or foundry units to get environment clearance. However, unlike the EIA Notification of 1994, the new legislation has put the onus of clearing projects on the state government depending on the size/capacity of the project. Certain activities permissible under the Coastal Regulation Zone Act, 1991 also require similar clearance. Additionally, donor agencies operating in India like the World Bank and the ADB have a different set of requirements for giving environmental clearance to projects that are funded by them. The EIA process The eight steps of the EIA process
Screening: First stage of EIA, which determines whether the proposed project, requires an EIA and if it does, then the level of assessment required. Scoping: This stage identifies the key issues and impacts that should be further investigated. This stage also defines the boundary and time limit of the study. Impact analysis: This stage of EIA identifies and predicts the likely environmental and social impact of the proposed project and evaluates the significance. Mitigation: This step in EIA recommends the actions to reduce and avoid the potential adverse environmental consequences of development activities. Reporting: This stage presents the result of EIA in a form of a report to the decision-making body and other interested parties. Review of EIA: It examines the adequacy and effectiveness of the EIA report and provides the information necessary for decision-making. Decision-making: It decides whether the project is rejected, approved or needs further change. Post monitoring: This stage comes into play once the project is commissioned. It checks to ensure that the impacts of the project do not exceed the legal standards and implementation of the mitigation measures are in the manner as described in the EIA report.
The stages of an EIA process will depend upon the requirements of the country or donor. However, most EIA processes have a common structure and the application of the main stages is a basic standard of good practice. The environment impact assessment consists of eight steps with each step equally important in determining the overall performance of the project. Typically, the EIA process begins with screening to ensure time and resources are directed at the proposals that matter environmentally and ends with some form of follow up on the implementation of the decisions and actions taken as a result of an EIA report.
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The overview of the EIA process is represented in the figure. Generalised process flow sheet of the EIA process
Different names for the same report An EIA report may be known by several other names such as: • Environmental impact assessment (EIA) • Environment impact statement (EIS) • Environmental statement (ES) • Environmental assessment report (EA report) • Environmental effects statement (EES)
Forms of impact assessment There are various forms of impact assessment such as Health Impact Assessment (HIA) and Social Impact Assessment (SIA) that are used to assess the health and social consequences of development so that they are
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taken into consideration along with the environmental assessment. One of the forms of impact assessment is strategic environment assessment, which is briefly discussed below i. Strategic environment assessment Strategic Environment Assessment (SEA) refers to systematic analysis of the environmental effects of development policies, plans, programs and other proposed strategic actions. This process extends the aims and principles of EIA upstream in the decision-making process, beyond the project level and when major alternatives are still open. SEA represents a proactive approach to integrating environmental considerations into the higher levels of decision-making. Despite its wide use and acceptance, EIA has certain shortcomings as a tool for minimizing environmental effects of development proposals. It takes place relatively late at the downstream end of the decision making process, after major alternatives and directions have been chosen (see table 3: Difference in EIA and SEA). Table 3: Difference in EIA and SEA Environment impact assessment Takes place at end of decision-making cycle Reactive approach to development proposal Identifies specific impacts on the environment Considers limited number of feasible alternatives Limited review of cumulative effects Emphasis on mitigating and minimizing impacts Narrow perspective, high level of detail Well-defined process, clear beginning and end Focuses on standard agenda, treats symptoms of environmental deterioration Strategic environment assessment Takes place at earlier stages of decision making cycle Pro-active approach to development proposals Also identifies environmental implications, issues of sustainable development Considers broad range of potential alternatives Early warning of cumulative effects Emphasis on meeting environmental objectives, maintaining natural systems Broad perspective, lower level of detail to provide a vision and overall framework Multi-stage process, overlapping components, policy level is continuing, iterative Focuses on sustainability agenda, gets at sources of environmental deterioration
SEA had limited development and implementation till 1990. However, after 1990, a number of countries in developed economies adopted SEA. Some countries such as Canada and Denmark have made provision for SEA of policy, plans and programs separately from EIA legislation and procedure. Other countries such as Czech Republic, Slovakia, etc have introduced SEA requirements through reforms in EIA legislation and in case of United Kingdom through environmental appraisal. While in New Zealand and Australia, it is a part of resource management or biodiversity conservation regimes. The adoption of SEA is likely to grow significantly in the coming years especially with directives by European Union and Protocol to the UNECE Convention on Transboundary EIA by signatory countries (with a provisional date of May 2003 for completion).
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Comparative review of EIA procedures and practices
Developed countries Well-framed EIA legislation in place. For instance, in Canada, Canadian Environmental Assessment Act regulates EIA while EU countries are guided by Directive on EIA (1985). In developed countries, active involvement of all participants including competent authority, government agencies and affected people at early stages of the EIA. This makes the process more robust and gives a fair idea of issues, which need to be addressed in the initial phase of EIA. Integrated approach to EIA followed. All aspects including social and health taken into account. Proper consideration of alternatives in EIA EIA in developing countries Lack of formal EIA legislation in many developing countries. For instance, EIA is not mandatory in many African countries Limited involvement of public and government agencies in the initial phases. This often results in poor representation of the issues and impacts in the report, adversely affecting the quality of the report. Mainly environmental aspects considered. Poor on social or health aspects. The consideration of alternatives in developing countries is more or less absent. In developing countries, screening practice in EIA is weak. In most cases, there is a list of activities that require EIA but without any threshold values. EIA in India Formal legislation for EIA. It has been enacted by making an amendment in the Environment Protection Act 1986. Limited involvement of public and government agencies in the initial phases.
No provision in place to cover landscape and visual impacts in the Indian EIA regulations Same as developing countries
The process of screening is well defined. For instance, in EU countries competent authorities decide whether EIA is required after seeking advice from developer, NGO and statutory consultees. In Japan, screening decision is made by the authorizing agency with respect to certain criteria. In Canada, federal authority determines whether an environmental assessment is required or not. Scoping process is comprehensive and involves consultation with all the stakeholders. In many countries like US, Netherlands, Canada and Europe, the involvement of the public and their concern are addressed in the scoping exercise. Besides this, funding organisations such as World Bank, ADB and ERDB have provision for consultation with the affected people and NGOs during identification of issues in scoping exercise.
Screening done on the basis of a defined list. Threshold values on the size of the project has been used to decide whether the project will be cleared by the state government or the central government.
Scoping process in most developing countries is very poorly defined. In countries where it is undertaken, there is no public consultation during scoping. Moreover, in most developing countries, scoping is often directed towards meeting pollution control requirements, rather than addressing the full range of potential environmental impacts from a proposed development.
Earlier scoping was done by consultant or proponent with an inclination towards meeting pollution control requirements, rather than addressing the full range of potential environmental impacts from a proposed development. However, the new notification has put the onus of scoping on the expert committee based on the information provided by the proponent. Consultation with public is optional and depends on the discretion of the expert committee. Most reports in English and not in the local language. In some case, executive summary is translated into local language. Same in India. Preparation of EIA is done by consultants. Therefore, the selection criterion for the organisation is fees/cost rather than the expertise of EIA team.
Most reports in local language
Most reports in English and not in the local language.
A multi-disciplinary approach. Involvement of expert with expertise in different areas.
Lack of trained EIA professionals often leads to the preparation of inadequate and irrelevant EIA reports in developing countries
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Two tier of EIA review, One conducted after the completion of EIA to check the adequacy and effectiveness of EIA and the second done before decision-making.
Poor review or monitoring.
Expertise in EIA: The International Association for Impact Assessment (AIA) and other organisations demonstrate that there are a large number of individuals with the capability to design, conduct, review and evaluate EIAs from countries of the North. The major portion of teaching about environmental assessment also takes place in industrial countries.
The expertise in EIA is slowly developing. In most cases, students from the developing countries go to the developed countries to gain knowledge of the subject.
In India too, EIA review is not upto the marks. The review agency called Impact Assessment Agency (IAA) lacks inter-disciplinary capacity. No representation of NGO in IAA, which is a violation of the EIA notification. Expertise in this area is developing.
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MANAGEMENT INFORMATION SYSTEM (MIS)
MANAGEMENT INFORMATION SYSTEM: An organization in grouping and interaction of men, materials machines and money, to achieve a set of aims and objectives of the organization. This is a common feature with any organization, be it small or a big social welfare organization or a private sector organization. As an organization grows in size and complexity, certain problems arise and communication and co-ordination become more important and more complex; with this the need for establishing an effective information system also arises.
of elements which operate in total harmony and unison. MIS: Means organized way of providing intelligence / knowledge /direction to get the things done. MIS: Intends to provide the needed information to the user in the form acceptable to him within the reasonable accuracy and reasonable time. MIS: Includes / relate to the whole gamut of data capture, verification, storage, processing, generation and retrieval of information.
MANAGEMENT: The act of getting things done, INFORMATION: Giving intelligence, knowledge and direction. SYSTEM: Organized way of performing ---Collection or assemblage
WHY MANAGEMENT INFORMATION SYSTEM? A majority of workers today are knowledge workers – they spend time creating, distributing, or using information. Example: bankers, coordinators, caseworkers, counselors, community organizers, programmers, etc About 80% of an executive’s time is devoted to information receiving, communicating, and using it. Information is the basis for virtually all activities performed in an organization Best use of two key ingredients in organizations – people and information Effective utilization of information systems in management. Productive use of information Information is a resource to increase efficiency, effectiveness and competitiveness of an enterprise
Some Examples of MIS
o Airline reservations (seat, booking, payment, schedules, boarding list, special needs, etc.) o Train reservation · Bank operations (deposit, transfer, withdrawal)
Any organization which is goal oriented requires a system which provides information to support the process of management and decision making at all levels. This system is commonly called as management information system. Quality of decision making depends upon the type of information available. Information is the most crucial resource –some call it as a material resource – of the decision making process. MIS is a system which provides the required information to each level of management at the right time, in the right form to form the basis of decision making and control.
Hierarchy Data Information Intelligence
MIS is a system of obtaining, abstracting, storing and analysis data in order to present organized information to aid a manager in carrying out his function of planning, decision making etc., There is a distinction between data, information and intelligence. DATA: Facts and figures lying on files, records and reports but not currently put to use for decision making- are usually termed as data.
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INFORMATION:
Scientifically gathered data when statistically manipulated from their original state of facts and figures into a more meaning full state of knowledge WHAT IS INFORMATION? assume the form of information, In other wards information Information is data presented in a form consists of classified and interpreted data that could directly he that is meaningful to the recipient. It adds used for decision making. to knowledge and is relevant for the
INTELLIGENCE:
situation. Two types of information are accounting information and management information. Data becomes information when they are transformed to communicate meaning or knowledge, ideas or conclusions. By itself data is meaningless. The attributes of an item of information are: accuracy, form, frequency, breadth (scope), origin, time, horizon. Attributes of a set of information are relevance, completeness and timeliness.
A sophisticated form of information is called intelligence which is the inherent characteristic of the system to seize essential factors from complex information about complex problems. Having classified some of the terminology, let us understand MIS from different angles.
MIS: A group of people, a set of manuals and data processing equipments (set of elements) select, store, process and retrieve data (operating on data and matter) to reduce the uncertainty in decision making (seeking a common goal) by yielding
Good Management Information System is no cure for bad management. Bad information always leads to bad management, but good information does not itself ensure good management. Information is only a tool for management. The ability to put information to work is what determines a successful manager. information for administrators at the time they can most efficiently use it (yield information in a time frame).
Steps in information system
Input data Information storage Analysis of data Output in the form of a. Reports b. Tables c. Graphs d. Charts Then the system displays a. Trends b. Relationship c. Problems d. Lacunae e. Variances for decision making etc
Qualities of a good information system
1. It should be relevant 2. It should available in time 3. It should be accurate 4. It should be selective 5. It should be economical 6. It should be flexible 7. It should flow within various parts of the organization 8. It should take the stresses and strains of the organization
MIS.
Provides information on the past, present and projected future and on relevant events inside and outside the organizations.
MIS. It means a system that collects, stores and process data and provides information to managers for planning, controlling and decision making. Robert G Murdick
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Information requirement by decision category
Characteristics of information Source Scope Level of aggregation Time horizon Currency Required accuracy Frequency of use Operational level (First line) Largely internal Well defined, narrow Detailed Historical Highly current High Very frequent Management control (Top & Middle) Both Both Both Both Both Both Both Strategic Planning (Top level) Largely external Very wide Aggregate Future Less current Low Less frequent
WHY ARE WE FOCUSING ATTENTION ON DEVELOPING MIS? • The information explosion – growing base of knowledge workers • The rapid pace of change (globalization, rapid social changes, legislative changes, downloading, funding cuts, job losses, tax reforms and so on) • The increasing complexity of Management (demands on quality, competitiveness, timely delivery, etc.) • The interdependence of organization units (finance, family welfare, fund-raising, personnel, etc.) • The improvement of productivity (better outreach, more clients, more programs, better accuracy, etc.) • The availability of computers for End-users (easy access, hand-on service, wide literacy and interest) • The recognition of information as a resource
TYPES OF INFORMATION SYSTEM Information system aims at processing data: to capture details of transactions, to enable people to make decisions, and/or to communicate between people and locations. 1. Transaction processing system Reasons for TP are recording, classification, sorting, calculation, summarization, storage and display of results 2. Management Information System (Management reporting system) Provide information for decision support where information requirements that can be identified in advance. Decisions supported by this frequently occur. 3. Decision Support System Assist with unique and non-recurring decisions, which are relatively unstructured. Mainly what factors to consider and what information are needed. 4. Office Information system Combines word processing, telecommunications and data processing to automate office information. Draws on stored data as a result of data processing. Includes handling of correspondence, reports and documents.
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TYPES OF MANAGEMENT INFORMATION Seven types of information are necessary for top-level managers. 1. Comfort information: informs about current situation or achievement levels that are tuned to expectations. (Clients served, target achieved, patients treated, operations conducted, etc.) 2. Status information or progress information: keeps abreast of current problem and crises and changes.(progress on office construction, status of research study, labor negotiation, grant application) 3. Warning information: signals that change for good or worse are occurring (stock price, turn over, client complaints, etc.) 4. Planning information: descriptions of projects/programs due in future, knowledge of anticipated developments (future of funding, future of federal/provincial support ) 5. Internal operations information: indicators on how organization/program is performing. 6. External intelligence: information, gossip, and opinions about activities in the environment of the agency. Competition, funding policies, political changes, emerging social policies, etc. 7. Externally distributed information: annual report before release, quarterly progress report for donors, press releases about the agency, publicity material before printing, etc. Among these, the first five are internal to the organization. Two are external to the organization WHAT COULD BE THE ROLE OF MIS COORDINATOR IN DEVELOPING A MIS? Interact with user groups Identify the needs of users of MIS Designing of reporting formats Identify systems of information flow Ensure smooth flow of information within and outside the organization Time management – tracking inputs/reports Act as interface among sections and management tiers Identify training needs of staff in MIS jointly with application developer Organize monthly/periodic meetings to assess performance, maintain minutes and follow-up on the decisions Interface with the various divisions/units in the organization for information sharing

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