Financial performance of microfinance institutions

Financial performance of microfinance institutions Financial Performance of Microfinance Institutions Abstract The paper investigates the financial attractiveness of microfinance institutions (MFIs). With the use of CAMEL methodology is the performance of MFIs analyzed. A comparison with G10 commercial banks shows†¦. Secondly, the systematic risk factors of MFIs are identified. The study * VU University Amsterdam, Faculty of Economics and Business Administration, De Boelelaan 1105, 1081 HV Amsterdam Comments are welcome at: [emailprotected] Introduction This paper investigates the financial performance of microfinance institutions (MFIs) from the perspective of a foreign investor. Microfinance institutions offer a broad amount of financial products and services to people who lack access to traditional banking services, also called; ‘the unbankable. Starting from social driven performance measures, the microfinance industry has been arguably effective in reducing poverty worldwide. In the last decades the microfinance industry has developed into an alternative investment class. The sector is characterized by attractive returns, low default rates and an explosive growth. Nevertheless, there is only a small scientific basis about the promises microfinance offers as a financial investment class. The financial attractiveness of MFIs for investors is questioned within this paper. Through analyzing the performance of MFI with CAMEL ratings and identifying the systematic risk factors, enriches this paper the academic field of finance. The study starts from the findings of Krauss Walter (2008). Their empirical results show that MFIs have a low or non exposure with international commercial markets from developed nations. Microfinance investments are for investors thus useful for portfolio diversification. Besides the social benefit that social oriented investors gain, the question arises what is the potential financial gain for a foreign investor? Nonacademic sources present microfinance as a interesting alternative investment class for solely return oriented investors. Institutions as the Consultative Group to Assists the Poor (CGAP) are reporting profits twice as high as their local peers and returns on investments in some parts of the world between 117 and 847 percent (Little field Holtman, 2005). Gonzales Rosenberg (2006) presented evidence of MFIs that outperform commercial banks on the return on assets. The returns are combined with a repayment rate of loans of almost 100 percent. Group liability repayment systems realize the low default rates. The repayment schemes are typical for the microfinance industry since clients lack collateral for the provided loans. The numbers indicate a save investment with a high return for investors. Nevertheless, investors seem to be skeptic about investing in MFIs. As Krauss Walter (2008, p.6) righteously mention: â€Å" Investors appear to perceive microfinance as excessively risky relative to the returns it generates, partially due to a lack of viable foreign exchange hedges, absence of a solid track record, poor reporting standards, heterogeneous products and inadequate liquidity.† The Microfinance Exchange (MIX) tracks the performance of MFIs since 1998. The MIX is a platform which gathers and publishes financial and communal oriented (outreach) numbers of MFIs. The institutions deliver the data voluntary to the MIX. Of the approximately 10.000 MFIs worldwide, only a small percentage (around 8 percent) send reports to independent platforms as the Microfinance Exchange. The incentive to offer data is to attract more funds from investors (Hartarska Nadolnuak, 2008). The attraction of more funds leads to a higher amount of accessible capital for the low-income clients. A high return on investment is promised by MFIs to investors. In combination with the support to poor people, seems microfinance to be the commercial solution for worldwide poverty. In practice, this promise is only rarely fulfilled by the institutions, due to the high operating cost per client and the lack of knowledge and transparency within the institutions. Academic research is necessary to cl assify the sources of growth in microfinance institutions, thereby establishing a valid basis to assess the performance and risk of MFIs. The paper aims to increase the transparency and rationale behind the data of microfinance. Transparency is increased by presenting measures of performance of the institutions in relation with their domestic environment. MFIs are considered as emerging banks in developing countries. A comparison with commercial banks using adjusted performance methods is used as a starting point. Identifying the systematic risk factors within the domestic environment results in a valid basis to assess the performance of MFIs. The financial statements of the MFIs are downloaded from the MIX website. A drawback in microfinance related research is the low quality of the data. Although the MIX offers the best available set of data and puts serious efforts to increase the quality is the dataset relative young. The dataset contains annual data and is subject to subjectivity due to the voluntary basis and a lack of legislation and authorization in the nations were MFIs are effective. To deal with the low quality of the data this paper first checks till which extent the data makes sense. CAMEL ratings as an efficiency parameter are used SYSTAMTIC RISK The rest of the paper is organized as follows: section 1 reviews the literature of the microfinance industry and the recent developments. Section 2 describes the bank performance methodologies to assess the performance of banks. Section 3 describes a comparison of banking ratios between commercial banks and MFIs. Section 4 discusses the results on the performance drivers of MFIs as a result of the systematic risk of emerging nations. Section 5 concludes the paper with a discussion of the main findings found in this paper The Microfinance Promise The success of the book ‘Creating a world without poverty of Muhammed Yunus (founder of the Grameen bank in 1970 Nobel Prize Winner for the Peace in 2006), increased the awareness and popularity in microfinance. Microfinance refers to the financial products as savings, insurance, transfer services, microcredit loans and other products targeted at low-income clients. From origin is microcredit the key product of MFIs. Loans are used to develop local economies to banish poverty from the low-income communities. The difference between traditional banking and microfinance is the level of creditworthiness of clients. Low-income clients in microfinance lack collateral, structural employment and/or a verifiable credit history almost by definition. This disables them to meet the minimum creditworthiness requirements to gain access to traditional finance products and services. Microfinance clients are therefore often referred as: ‘the unbankable. The lending activities of MFIs are characterized as follows: 1) loans are solely available to members of the MFI; 2) loans are relatively small and generally unsecured; 3) assets and liabilities of the MFI are owned jointly by the members (the clients are the owners), 4) internal monitoring and social sanctions (group liability) are used to enforce the loan contracts (Skees Barnet, 2006). Microfinance institutions thus use group lending methods to guarantee repayment of the financial services which is a substitute for the lack of collateral. This innovative and reversed perspective on banking enables MFIs to provide financial support to the poorest people of the world. This considers 1 billion people worldwide or a potential of 1 billion clients. Reducing poverty worldwide is incorporated in the G8 millennium development goals. Microfinance is considered to be a proven way to realize this millennium goal. Judged against the profit maximization ideology of commercial banks in developed countries have MFIs a dual mis sion; reducing poverty worldwide while being financial sustainable (Drake Rhyne, 2002). The success of microfinance increased the interest of developed nations and the mainstream finance industry. Commercial organizations support initiatives in microfinance as an act of corporate social responsibility. For investors and financials is microfinance attractive for its low correlation with commercial markets. Real life examples are the diversification possibilities that pension and insurance funds find in microfinance (Krauss Walter, 2008). The balance between social and financial returns was studied by the Consultative Group to Assist the Poor (CGAP) in February 2008. The CGAP identifies a stream of private investors investing in microfinance with no particular interest in the social objective of MFIs since 2006. The entry of private investors in microfinance is seen as one the most important development since institutional investors noticed microfinance in the beginning of 2000. Before this period mainly governments, NGOs and charity funds invested and supported MFIs. In 2006 seventeen billion dollar of loans represented 10% of the potential microfinance market (Swanson, 2007). The money market return in that year was 5.8% in dollars and 3.2% in euros (Reille Foster, 2008). Although multiple sources report extreme returns on equity in microfinance, is investing in microfinance far from riskless. MicroPlace is the first online platform to trade in MFIs developed by Ebay. The average yield on a investment is 3% which matures in 3 years. In order to realize high net return on equity should organizations keep the operational cost low. Especially in the case of MFIs are operating cost high. Still lack of control and transparency makes investing in MFIs risky. Difficulty to comply with regulation standards, if any regulation framework is available MFIs act like banks, by collecting any in developed nations and from local communities and invest them in the area. Criticism is about the lack of transparency and knowledge in the sector. Databases consist of low quality accounting numbers and the absence of legislation, authorization in emerging economies aInsights in this industry will thus not only benefit the poor of the world, but also investors of the world as well as the lessons for the financial systems worldwide. The promise that microfinance offers is a reduction of poverty worldwide, with without any means of charity or subsidy (Cull, Demirguà §-Kunt Morduch, 2007). The poverty line is defined as having less than 2 dollar to spend on a daily basis. Group liability schemes are the response of MFIs to avoid the lack of traceable credibility and liquidity of clients. The group structure of loan repayment proves to secure high rates of repayment. Even with the lack of collateral or means of liquidity of the clients (Cull, Demirguà §-Kunt Morduch, 2007). The backside of this concept is that the industry is characterized by a high amount of transactional and operational cost due to monitoring cost. Also the high geographical distances and spread of clients, without technology standards or infrastructure to bridge these distance, increases the operational costs. A stereotype client of an MFI would be a woman (approximately 97% of all microfinance clients are woman), with a low level or non education. The idea that most clients are entrepreneurs is a biased view. Since microfinance believes in the strength and flexibility of people new entrepreneurial business arise, but everyone with a spendable income of less than 2 dollar a day, could be a client of an MFI. Grootte markt Although the loans and services provided are relative low is the amount of clients enormous. Ownership and governance (Call for legislation and authorization) Technology influences (Mobile phones) Microfinance for investors (brug naar bank performance en systematic risk) Portfolio diversification Return oriented (non academic article) not more than a T bill) Null hypothesis 3: MFIs dont generate excess returns more over equity indices. How to sustain credibility High fixed cost to monitor clients No collateral as a backup in case of default, so MFIs have to define risk management methods in order to control potential default rates. Bank performance From NGO to Commercial bank Null hypothesis 1: MFIs have the same banking ratios compared with commercial banks from G10 nations. Systematic risk of MFIs Impact of macroeconomic indicators on MFIs and visa versa Null Hypothesis 2: MFIs and macroeconomic indicators are not related. Microfinance business and investors MFIs have a different business model than traditional banks. This affects capital structure of the institution. The expectations of investors are also higher. A return hurdle is identified in †¦. Which state that investors expect return on equity of MFIs between 20-25 percent due to additional risk of the underdeveloped markets. Transaction costs are high for investors. Since most MFIs are not publicly tradable investors have to spend relative more time and effort to find, retrieve and monitor funds of MFIs. Exchange rates and effort to buy forgein shares in MFIs The lack of transparency creates information asymmetry Asymmetric information contributes to high transaction costs associated with underwriting, monitoring, and loss adjustment. The very same asymmetric information and transaction costs problems also plague financial markets in rural areas of low-income countries, contributing to high market interest rates. Market interest rates are also affected by default risk. Financial regulations can protect the interests of consumers by reducing information asymmetries. So Camel But for MFIs instead of commercial banks it is very difficult to diversify risk. Since most lenders have a business in agricultural oparetions a nature disaster or a change of policy within the domestic border affects almost the compete loan portfolio. For this reason it is important to understand the underlying sustamtic risk of an MFI with a nation. Bank Performance Measurement Measurement of the financial performance of banks increases the transparency of the banking sector in various ways. First, the performance indicators are warning signals for troubled banks. This increases the safety of the banking system. Secondly the indicators are useful tools for allocation decisions for investors. Especially in the case of MFIs, investors lack perfect information. Compared with developed nations the information asymmetry is greater, since commercial banks from industrialized countries have easy accessible and reliable performance indicators. Monitoring MFI performance decreases the information asymmetry gap for investors, which helps MFIs to attract more funds and increase their performances. A performance model assesses the efficiency of the organization. Efficiency is the ratio of the effective or useful output to the total input of a system. Different methods are available to measure the efficiency of banks. Statistical and intelligent techniques to model bank performance models are extensively reviewed by Kumar Ravi (2009). The most common approaches are data envelopment analysis (DEA) (Liu, 2009) and CAMEL analysis (Cole Gunther, 2008). DEA is a non parametric method which uses linear programming to measure multiple in- and outputs of business units. The business units are compared through creating an efficient frontier of best performing business units. DEA is mainly used to asses the internal efficiency of a bank. On-site examinations are the most precise way to monitor the performance of a bank. In developed nations are banks assessed between every 12-18 months. The ratings are known to CAMELS ratings according to their functional areas: capital adequacy, asset quality, management quality, earnings strength and liquidity. The performance of each area is rated on a 5 point scale (1 strong performance, 2 satisfactory performance, 3 performance that is flawed to some degree, 4 marginal performance that is significantly below average, 5 unsatisfactory performance that is critically deficient and in need of immediate action). From the 5 areas is a composite overall rating constructed. The Commercial Bank Examination Manual produced by the Board of Governors of the Federal Reserve System qualifies an institution consequently as; 1 an institution that is basically sound in every respect, 2 an institution that is fundamentally sound but has modest weaknesses, 3 an institution with financial, operatio nal, or compliance weaknesses that give cause for supervisory concern, 4 an institution with serious financial weaknesses that could impair future viability, 5 an institution with critical financial weaknesses that render the probability of failure extremely high in the near term. Although the CAMEL approach is widely used, Cole Gunther (2008) point out that the reliability of the ratings decays rapidly once published. To deal with the diminishing value of CAMEL ratings, they offer a method to create CAMEL rating based on accounting data. The off-site examination of the CAMEL rating performs better after two quarters since the last on site assessment. The CAMEL approach is a suitable starting point to asses MFI performance, since MFI data is only published annually. The rating enables to benchmark multiple MFIs and filter credible and well performing institutions from the dataset. CAMEL offers thereby the possibility to incorporate the social objective of MFIs within the performance model. Besides CAMEL are seven approaches established to measure MFI performance. The Global Development Research center describes all approaches which find their origin from private and commercial initiatives to rank MFIs. The ACCION Camel approach is comparable to the measuremen t as suggested above. An overview of the systems: PEARLS rating system. This is a rating system developed for credit unions by the World Council of Credit Unions (WOCCU). ACCION Camel. The evaluation guideline for MFIs developed by ACCION International. Girafe rating system. Developed by PlaNetFinance. MicroRate. Developed by Damian von Stauffenberg of MicroRate. MicroBanking Bulletin/ MicroBanking Standards Project. Funded by the Consultative Group to Assist the Poorest (CGAP). The Philippine Coalition for Micro-finance Standards.Developed a set of performance standards to serve as guidelines or benchmarks to assess the operations of NGOs involved in microfinance. Institutional Performance Standards and PlansDeveloped by the Committee of Donor Agencies for Small Enterprise Development and United Nations Capital Development Fund. CAMEL is suggested as most suitable for investors. The reliance on qualitative measurement through interviews with the MFIs management is a drawback of the above mentioned methods. Although interviews are useful to assess the performance of an institution, it does not allow investors to asses the institution based on free available information (for example from MIX markets). The CAMEL approach offers an objective evaluation method to assess the performance on quantitative measures. CAMEL is thereby widely recognized as a well performance rating method of financial institutions. The areas of the CAMEL approach are defined, but the indicators to generate the rating of the areas vary per organization or study. Microfinance has a different banking perspective compared with traditional banking. To adjust for this basic principle the set of accounting indicators for the CAMEL model is different, compared with models of traditional banks. ACCION is a rating agency which uses CAMEL to measure the performance of MFIs. A combination of qualitative (interviews) and quantitative (accounting data) analysis is used to rate the institutions. The present study solely uses quantitative measures to assess MFI performance. The indicators are adjusted to the amount of the gross loan portfolio to adjust for company size. Capital adequacy is measured by the amount of total equity and the amount of leverage within the organizations. A higher amount of equity reduces the probability of the occurrence of insolvency. A higher reliance on debt increases the financial pressure on the institution. Leverage reduces therefore the overall CAMEL score. Asset quality indicates the quality of the loans. The write of ratio of the loans and the not winnable loans in 30 days, reduces the quality of the assets. The ACCION model and the model of Cole Gunther (2008) do not include a quantitative measure of management. The current study measures the way the management uses the financial resources efficiently to provide as many loans with the same resources. Better management should be able to reach more clients (possibly with a higher amount of an average loan). Operational self-sufficiency is a measure of overall financial performance of the management. The ratio of operational expenses and loan portfolio presents how effective the management distributes loans to clients. This serves as a proxy for the objective of MFIs to reduce poverty. Secondly is the amount of active borrowers an absolute measure of how many clients the management reaches compared to the financial resources. The average loan balance divided by the GNI of the domestic nation indicates how much a MFI offers to clients within the local context. Earnings strength is the most important for return oriented investors. Return on assets and equity are a widely accepted measures of financial performance. Profit margin is included as a profitability measure of the services offered by the institution. Liquidity is a measure of how well an institution deals with short term cash flows and needs. Unfortunately the database only provides annual information of balance sheets. Specific (short term) cash flow information is not available. Liquidity represents the ability of an institution to meet obligations as they come due. In order to create a proxy for liquidity, data is gathered to determine till which extent institutions can meet loan requests of clients. Two ratios are calculated. The first represents the growth of the assets compared with the growth in the total loan portfolio. The second ratio focuses on the growth of equity compared with the growth in the total loan portfolio. If the ratios are above one, institutions are able to meet the obligations of new loans on a short term basis. An overview of the indicators used in the present study is given in table X, together with the expected effect on the overall CAMEL score. BEKIJK CLEAM Winker Tank, 2008 Exponential weighting is used to include past performances of institutions into the model. Other CAMEL models do not incorporate the time dimension, but past performances are a reliable proxy for future performance. Capital adequacy is for example calculated as: CA1 and CA2 are the camel scores on the indicators as discussed above, is the weight of the indicator within the specified CAMEL area. This will be normally equally distributed over the amount of parameters. The is the degree to which the past years taken into the equation. N is the amount of years of available data of MFI performance. The overall CAMEL score is constructed by an equal or adjusted weighting of the five performance areas. The sums of the weights of the indicators have a maximum of 1. Regarding the social objectives of MFIs a distinction is made between solely return oriented investors and more social oriented investors. A customized CAMEL rating on the preferences of an investor is created by shifting the weights of the areas, yielding the CAMEL rating which reflects the preferences of the investor. Within this study we will use an equal weight distributing, a distribution which stresses the financial performance (ES) and a rating which focuses on the social objectives (MQ). Two words of caution have to be made with the use of the current model. The comparability of the ratings is not straight forward when investors adjust weights to their preferences. Traditional CAMEL models use always an equal weighting over the areas, to grant comparability. Secondly, in line with Cole Gunther (2008) the CAMEL ratings are a not interchangeable with the CAMEL based on on-site visits. For investors the model designed for MFIs provides a reasonable indicator to determine the quality of MFIs on various aspects and should be seen complementary with the on site visits. Summarizing, CAMEL is used as a starting point to measures the financial performance of MFIs. Specific indicators are chosen to adjust for the special case of a microfinance institution. The ACCION CAMEL model provided a first start for the current model. The solely quantitative model incorporates proposes a measure for effective management of an MFI, as a reflection of the social objective of MFIs. Secondly the model also considers past performance of MFIs with the use of exponential weighting. Thirdly the model enables to provide weights according to the investor preferences. For MFIs the model presents indicators which could be embedded in the MFIs performance goals. This way MFIs could attract more funds necessary through establishing a better rating and so, become more attractive for investors. In the appendix are the CAMEL rating for the indicators specified. Systematic risk in microfinance Sentivity to market risk as a extension of the CAMEL model. Descriptive statics are used to compare the performance of MFIs with commercial banks. Banking ratios of commercial banks of the G10 are used as a benchmark. The comparison of banking ratios provides a glance of the performance of the MFIs. The return on assets (RoA) and on equity (RoE) is compared to give an indication of the profitability of MFIs. The outstanding loan portfolios and write off ratios, provide a view of the riskiness MFIs, since micro credit represents the largest product class with microfinance. Leverage is used as an additional proxy for the riskiness of the organizations. Operational costs are compared to get a feeling for the efficiency of MFIs. According to Krauss Walter (2008) is the performance of MFIs mainly driven by macroeconomic factors within the domestic borders. The drivers of the financial performance of MFIs are studied with the use of the arbitrage pricing model (APT). The asset pricing model is used to determine the risk premiums of the macro economic factors of MFIs within the nation. Roll Ross (1995) find that the return on assets or equity consists of a system of risk factors. The systematic risk factors are macroeconomic factors. The expected return on a portfolio of assets is given by The betas on the factors represent a risk premium for a systematic risk factor. The alpha, as a residual idiosyncratic factor is canceling out in large portfolios. By using the linear multi factor model an indication of the impact of the macroeconomic factors is revealed on the performance of MFIs. The factors incorporated in the model are the growth of GDP, GNI, inflation and the penetration of the financial sector within the nation. In line with the

How strong was Nationalism in the Second Reich?

In 1871, Bismarck unified Germany; however this great achievement did not mean that his job was done. Now, the ultimate threat for him was a revolution, so he needed to make sure that everyone was reasonably happy in the new unified Germany. The constitution of the German Reich was created on 19 April 1871. This aimed to please the upper class, middle class, working class and the German states. The upper class were pleased by the fact that they would be ruled by a German Emperor (William I) who was also the King of Prussia and Supreme Commander. This way, they could maintain an element of autocracy and social hierarchy. The Federal Council could over-rule the Reichstag if it wanted to so this helped to avoid democracy, again, pleasing the upper class. Having a constitution would please the middle class as it enables democracy to a certain extent. They would have been pleased by the fact that the constitution allows the middle class suffrage and in turn, gains them more power. Gaining the vote and power within the constitution also pleased the working class. Twenty-five confederal states made up the Federal Council, meaning that Prussia did not overrule everyone; this pleased the other German states. Prussia was only allowed seventeen representatives; however, the council had the power of veto, if they were supported by 14 votes. This meant that it would take only 14 of the 17 representatives of Prussia to overrule the other states. The careful planning of the constitution helped to encourage nationalism, as everyone in it was kept quite happy. The middle and working class got elements of democracy whilst the upper class had elements of autocracy. However, it was more absolutist than it appeared to be. Bismarck and Prussia still had subtle control over Germany. How did the government encourage the people to be good Germans? Nationalism throughout Germany was encouraged in areas such as education, industry and the monarchy. The writings of Heinrich Von Treitschke were very influential to the German people. He believed that Germans were driven by ideas such as nationalism rather than being practical. The acquisition of power was the key to a successful Germany, â€Å"only the truly great and powerful states ought to exist.† As he was such an influential writer, it was causing nationalism to grow amongst the German people. Treitschke also believed in conformity and wrote that â€Å"the individual has no right to regard the state as a means for attaining his own ambitions in life†, meaning that people should do as they are told by their government, and not revolt (like the French did.) Both the acquisition of power and conformity had created a replacement to absolutism known as authoritarianism. His writing showed that nationalism was becoming more and more conservative. To be a good German, you had to pure blooded and a militarist. Treitschke taught that war was a good thing and it makes you a better person. â€Å"The sacred power of love which a righteous war awakes† is an example of what he wrote about war. Germany was founded through three wars, so to Germans it must seem a very good thing. However, this all changed after WWI. Nationalism was also being encouraged through education. Textbooks would contain phrases such as â€Å"the ideal bearers of civilisation with an innate superiority and pureness of blood.† Introducing to children the ideas of the Aryan race. How serious was opposition to nationalism? The main opposition to nationalism consisted of the Catholic church, workers and women. Problems with the Catholic church arose because Bismarck tried to control the country through education. However, for Catholics, their education lies in the hands of their religion so what they were taught by their religion was very different to what Bismarck wanted to teach them. In 1870, the Vatican Council adopted the doctrine of papal infallibility, meaning that whatever the pope said or did was right, and no one was allowed to question it. This was a problem for Bismarck as he continued to try to gain control over German education. He passed many laws such as the May Laws (1873) which forbade catholic inspections of schools, but by 1887, a bill was passed to give the Church its old independence. The Catholics won the Kulturkampf so they proved to be a threatening opposition to nationalism. Socialism of the working class was the most serious form of opposition to nationalism. The social democrats were similar to communists in the sense that they wanted the abolition of classes and class rule. Bismarck tried to prevent them from growing, by introducing anti-socialist laws, but they continued to grow even faster. By 1912, the SPD were the largest party in the Reichstag with nearly 4million votes!! Bismarck even attempted to encourage working class nationalism by introducing state insurance and pension, however, this was simply mocked by socialists. They called it ‘state socialism.' The social democrats continued to be the largest party in the Reichstag up to the outbreak of WWI in 1914. Another form of opposition to nationalism was women. This was not as serious as the Suffragettes in Britain, although it still posed a threat to nationalism. Women were seen as second class citizens who were oppressed by the ruling classes, generally men. The women's movement achieved very little under Bismarck, however, they managed to get the right to get involved in politics. It was the most low key of the three main threats to nationalism, as it was not as significant as the Socialists or the Catholics. Out of the three, the biggest threat to nationalism seems to be the Social Democratic party, as they managed to become the largest party in the Reichstag, meaning that they would have quite an influence over parliament. However, the Federal Council could just simply dissolve the Reichstag if they felt it was necessary.

Key Skills of Management Essay

1. Introduction In this essay I have attempted to describe the key skills of management, in my opinion, and how working with others can develop them. I have drawn on my own experiences as a manager and reinforced my answers with research from the internet and other reference sources. There are various skills needed for good management, some skills are learned others are instilled as a part of that person’s nature. Within this essay I discuss these skills and the importance of good management behaviour. 2. Key skills – my viewpoint I manage four teams, each consisting of 15 members of staff. Within each team is a supervisor whose task is to monitor the running of the operation line and to inform me of any deviation from the norm. I am privileged enough to have a support team of a quality facilitator, two fitters, an electrician and a process engineer, who I direct to assist with the events of the day. Enthusiasm and motivation I am enthusiastic and self-motivated; I maintain this through seeing issues as a challenge and an opportunity to test my skills. If I am enthusiastic then my staff will be encouraged to be motivated too, ‘It’s hard to be productive without enthusiasm.’ (Gates B) Henri Fayol states that there are fourteen principles of management. In principle number seven (Remuneration) Fayol argues that ‘Workers must be paid sufficiently as this is a chief motivation of employees and therefore greatly influences productivity.’ I personally do not feel that this is a chief motivation even though it is a factor but that job satisfaction and also a sense of belonging are greater influences in productivity. Communication I believe it is important to have a pre-shift meeting with the supervisors and run through what is planned for the day. Any concerns are raised prior to the start of the shift, so we have a clear direction of how we are going to achieve these goals. I try to keep meetings informative, constructive yet light and brisk. I feel it is important that we start the day with a can-do attitude. It is important to me that the delivery of any communication is clear, precise and accurate. Communication works two ways and I feel that we only learn by listening. I operate an open door policy, where any member of staff at any level can speak to me. Encouraging growth of people and business I want to encourage growth within the company; in order to do this I develop people by encouraging them to learn new skills and keep up-to-date with processes on the line. The rotation of staff within the production line not only benefits the operator with skills and self worth but also protects the company when manning levels are low. Control of production is constantly developing and shifts with new products, technology and tools. Clear instruction is given to staff to embrace and use these as a way forward for the success of the company and maintain our position as leaders in the world market. Following policies I follow the company policies in all aspects of my work and with discipline. I feel I am firm but fair; I nip things in the bud and deal with conflict in a calm, mature and professional manner. I am trustworthy and always deal with matters with integrity. Respect Respect plays an important role in getting results from staff. I respect everyone and work hard to earn respect from my staff by being a team player and not taking my role for granted. I have worked on every process on each line to different skill levels and am aware of the requirements of each job. I would never expect any member of staff to complete a task I would not do myself. Understanding customers It is important to understand the expectations of customers, to achieve these within the budget and on time. In order to achieve this we work closely to a plan, delivering on time and in full (OTIF). Feedback It is important that recognition is given on a regular basis to staff that are doing well and like wise, support is given to staff who find things a struggle. It is easier to rectify any non-conformance at the very beginning than letting bad habits form. The ability to explain things that are incorrect and how to rectify them is an important management quality. Resolving issues Whenever a major problem comes to light, I tend to bring key skilled personnel such as quality facilitators, department manager, shift manager, manufacturing supervisors, process engineers, fitters, electricians or operators into a brain storming session. We utilise the skills we have developed and use management tools such as, the ‘Ishikawa diagram’, or known to myself as the ‘Fishbone diagram’. Each personnel would have a valuable input using the knowledge that they have obtained from their own perspective. Cause Cause Cause Cause Cause Figure 1: Fishbone diagram as based on the original by Kaoru Ishikawa. In these sessions, we systematically work through inputs that could cause the effect that we see and then place a frame around the problem to find out what is, and is not a possible factor. Further investigation is made into these probable causes until the root of the issue is found. It is extremely important to use all of the skills at hand to have a complete overview. 3. Conclusion Throughout this essay I have explored the use of what are in my opinion, the most important skills to have as a manager. It is not intended as an exhaustive list, but a sample of the many ways people manage. In my opinion the most important skills of management are being able to project manage and coordinate while also having leadership qualities, or personable skills. In the words of John C Maxwell, â€Å"Anyone can steer the ship, but it takes a leader to chart the course.† Within this essay I have explored the nature of the key skills and have shown that in working together with staff, results can be achieved by following these rules.

Essay on Comparison Between Frederick Douglass and...

Narrative of the Life of Frederick Douglass AND the Adventures of Huckleberry Finn Comparison Essay By: Evan Weinstock Period 7 3/11/13 During the period around The Civil War the country was in a major change and the issue slavery was at the forefront. Racial tensions were very high as most Northerners wanted the slaves to be free and all slaves wanted their freedom. During this time period of pre, during and post-Civil War many books and narratives of people’s lives and experiences where written and stories were past from generation to generation. During the Post-Civil War time both the Narrative of the Life of Frederick Douglass and the Adventures of Huckleberry Finn were written and published and both would become classics. In both†¦show more content†¦In Narrative of the Life of Frederick Douglass Fredrick is treated terribly by all of his masters and no one cares about him or any of the other slaves. The southerners act like they are disposable and that they can just go buy another one. All of his owners treat him like trash and beat him until he stand up to one and fights him af ter that he is left alone. Everyone in Frederick Douglass is a mean person who doesn’t care about anyone but themselves and how much money they can make. The biggest difference in both books is that the way you see the pain and struggles of the people in the story is through a fictional character in The Adventures of Huckleberry Finn and The Narrative of the life of Frederick Douglass. In The Narrative of the life of Frederick Douglass you hear about the horror of the South and slavery through the life story of Frederick, you learn about true events that actually happened and how bad the situation in the United States was around the Civil War Era. In The Adventures of Huckleberry Finn you hear about what happens through the made up stories of Mark Twain. Even though some of the stories in his book have some truth from his life experiences, he made all of them up and in the book there is truth about the time period from the way that people treated blacks andShow MoreRelatedCo mpare and Contrast the Representation of the Figure of the Slave, and of the Theme of Freedom, in Douglass’s â€Å"Narrative† and Twain’s â€Å"Adventures of Huckleberry Finn†.1445 Words   |  6 Pagesâ€Å"Narrative† and Twain’s â€Å"Adventures of Huckleberry Finn†. The two novels that I am studying are â€Å"The Adventures of Huckleberry Finn† by Mark Twain, and â€Å"The Narrative of Frederick Douglass – Written by Himself†. Both these texts give us an insight into the life of slavery and the societal beliefs of the South in America in the nineteenth century. The theme of freedom and the figure of the slave are two common aspects of the book that I shall be looking at. Frederick Douglass’ text gives us a first personRead MoreA Comparison Piece of Mark Twains the Adventures of Huckleberry Finn and Frederick Douglasss Narrative of the Life of Frederick Douglass, an American Slave834 Words   |  4 PagesMark Twains The Adventures of Huckleberry Finn and Frederick Douglasss Narrative of the Life of Frederick Douglass, an American Slave can be said to be comparison pieces. Despite that Huck Finn is a fictional character and Douglass was a physical being, certain characteristics and developmental processes are very sim ilar. Firstly, in the initial stages of their lives, both Huck and Douglass faced repression, though in different forms. While Huck is a character whose spirit longs to fly freely