Wednesday, August 29, 2012

Financial Administration: Monetary and fiscal policies; Public borrowings and public debt; Budgets - types and forms; Budgetary process; Financial accountability; Accounts and audit.


Today we are to talk about Financial Administration which is the fuel for all Administrative activities. As Kautilya said famously in his renowned book ' Arthashastra' that all undertakings depend on finance and so foremost attention should be paid to the treasury. Therefore, one can very well understand the immense value attached to this aspect of Public Administration.
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Let us begin.


FINANCIAL ADMINISTRATION: MEANING & IMPORTANCE -
As per the definition given by the USA Census department, Financial Administration involves all the activities of finance and taxation. Includes central agencies for accounting, auditing, and budgeting; the supervision of local government finances; tax administration; collection, custody, and disbursement of funds; administration of employee-retirement systems; debt and investment administration; and the like.
So,in simple words Financial Administration is an all encompassing term for all those functions /operations having the objective to make funds and finance available to the government for its duties and responsibilities to be carried out smoothly and also all those activities that ensure the lawful and efficient use of those funds/finance.
And these functions are collectively performed by the Executive(asks for funds),Legislature(that has the sole power to grant those funds),Finance Ministry(controls those funds) and the Auditor(to audit whether the funds were used for what they were demanded).
The steps involved are preparation of the budget for the ensuing financial year,getting it passed by the legislature,executing the budget and collecting the funds for it,managing those funds via the treasury and the audit of the Centre and State executive accounts by the Audit authority.

So one can understand the importance of Financial Administration in its element. A balanced and precise financial administration is the base as well as the means to attain successfully all goals of development as well as growth of a country.






MONETARY POLICY:
Monetary Policy is the process by which monetary authority(an authority that controls all matters relating to money) of a country, generally a central bank controls the supply of money in the economy by exercising its control over interest rates in order to maintain price stability,reduce inflation and achieve high economic growth. A sound monetary policy ensures that various sectors of the economy have sufficient tokens/authority to carry out their transactions. It provides the basis to the fiscal policy and the fiscal policy influences the monetary policy and gives it a direction to proceed in. Monetary policy helps in keeping the money supply and economy of a nation stable whereas the fiscal policy is more involved in development and infrastructural work and policy making and enactment of budget. A monetary policy is changed from time to time to combat inflation,deflation,price rise,imbalance in demand and supply,etc by mopping up excess money or infusing money in the market as the requirement may be. A sound monetary policy helps the government determine its fiscal policy and how much it will collect as revenue and spend as expenditure. The fiscal policy helps bring money into the market whereas the monetary policy helps in managing that money supply and keeping it stable. In India the monetary policy is managed by the RBI which is the central bank as well as monetary authority of the country.

The major operations/techniques of the RBI to implement its monetary policy for furthering the goals of economic growth are:
1) Supply of money/money supply : Printing currency or facilitating foreign inflow of the same.
2) Interest rates : By rising it or dropping it the bank controls money supply in the market.
3) Open Market Operation: Buying and selling of government bonds/securities from or to the public and banks as and when it wants to mop up excess money supply in the market or infuse money supply into the market.
4) Cash Reserve ratio: It is a certain percentage of bank deposits that a bank needs to keep reserve with the RBI. A high CRR is when the RBI wants to mop up excess liquidity in the market and a lower CRR is when the RBI wants to infuse liquidity into the market.
5) Statutory Liquidity ratio: Every financial institute needs to maintain a certain amount of liquid assets in the form of cash,precious metals,bonds,etc from their time and demand liabilities with the RBI. A high SLR is to mop up excess liquidity in the market and a lower SLR is the opposite.
6) Bank Rate Policy: Also known as discount policy. It is is the rate of interest charged by the RBI for providing funds or loans to the banking system.
7) Credit ceiling: RBI issues prior information or direction that loans to the commercial banks will be given up to a certain limit.This is done when the priority sectors need assistance support is given to limited sectors. It saves up funds for priority sector funding of government.
8) Credit Authorization scheme: RBI as per the guidelines of this scheme authorises banks to advance loans to desired sectors.
9) Moral suasion: RBI requests banks not to indulge in loan giving to unproductive sectors and maintain discretion so that the economy benefits.
10) Repo Rate and Reverse Repo Rate: Repo rate is the rate at which RBI lends to commercial banks against government bonds and securities and Reverse Repo is the opposite of the former. An increase in repo rate means that the banks have to pay more interest on loans taken from the RBI and thus excess liquidity is mopped up and a decrease in the repo rate means more money at a cheaper rate of interest to the banks. An increase in reverse repo infuses liquidity into the banks for the RBI pays a higher interest to the banks upon borrowing loans from them and a decrease in reverse repo rate ensures the opposite of the former.





FISCAL POLICY:
It is the policy taken out by the government regarding the use of revenue (taxation) and expenditure among various sectors to influence the country's economy and achieve welfare objectives like economic growth and development full employment,price stability and balanced demand and supply system within and outside. The fiscal policy is a statement of the same. And the most visible tool of the fiscal policy in action is the 'Budget'. Monetary policy and Fiscal Policy are complementary and equally necessary in managing a nation's economy as is already explained above under Monetary Policy.

There are three possible ways of Fiscal policy in the Public domain-
1) Neutral Fiscal policy - It implies a policy for a balanced budget where government spending is equal to the revenue/tax collected and so there is status quo in the economy.
2) Expansionary Fiscal Policy - Where govt. spending exceeds taxation revenue leading to a larger budget deficit.
3) Contractionary fiscal policy - Where govt. spending is less then what is collected as revenue. It is usually associated with a budget surplus remaining with the govt.






PUBLIC BORROWING:
When there is a deficit in the budget that means expenditure is more than income/revenue for the government then the government resorts to borrowing from the Public in the form of government issued treasury bills, post office savings certificates, National Saving Certificates,Provident Fund,Fixed deposits,etc as instrument of Public borrowings for the time period that the person takes it for and that is why we see attractive advertisements taken out from time through Public as well as private sector banks and institutions with good rates of interest to attract investors to invest with them, and all this is paid by the government through its fiscal policy in order to garner more funds year after year for their development activities and economic growth.Public borrowing also helps in curbing inflation and seize away the excessive and unnecessary purchasing power from the public during an inflationary period.However,when even that is exhausted to an extent then the government borrows from the Reserve Bank Of India when it wants to meet the remaining part of deficit in the budget and thus it is also known as deficit financing. Deficit financing helps the government meet their resource crunch expeditiously and also the interest that the government pays back to the RBI upon returning those borrowings actually come back to them in the form of profits so it is a beneficial tool for the government. However,deficit financing involves printing of new currency through RBI to give to the government and that leads to infusion of excess money supply into the market through government activities leading to money getting concentrated in the hands of a few who can afford and thus consumption increases leading to less supply and so prices rise which in short is inflation. Therefore deficit financing leads to inflation.





PUBLIC DEBT:
The money and interest/debt that the government has to pay back to the Public when it borrowed from it(please look above for the instruments used in Public Borrowing)  is known as Public debt. It has been on a constant rise in developing countries since a long time due to haphazard budgets and unforeseen circumstances that lead to a not so proper implementation of even a proper budget. Public debt can be both internal as well as external. Internal has been discussed above. External debt is when the government of a country borrows from global institutions like the World Bank and International Monetary Fund,etc.






CLASSIFICATION OF PUBLIC DEBT:
1) Reproductive and Unreproductive debt - Reproductive debt is when money is borrowed to invest in an infrastructural project like railways,irrigation,etc which when finished will be used by the public and provide revenue through taxes and be profitable for the government. On the other hand unreproductive debt refers to those borrowings that are done for meeting expenditures like war,etc which will not yield any direct revenue upon completion.

2) Voluntary and compulsory debt - Voluntary debt is when the public is free to decide whether they want to provide loans to the government or not and compulsory is when the public is legally compelled to provide funds like in 1971 the ' Compulsory deposit scheme' was introduced.

3) Internal and External debt - It has already been detailed above.

4) Long term and short term debt - Long term debt is when the debt has to be repaid after a year and short term debt is when it has to be repaid within a year.





BUDGET:
Budget is an estimate of income and expenditure for a set period of time in India's case it is of a year. It is the detailed implementation plan of the fiscal policy of the State in hard figures and facts and activities to be pursued for executing and implementing the same for socio-economic development of a country by the executive. It is defined as a series of goals with price tags attached. Where a line item is detailed and a price/cost is mentioned next to it.





UTILITY AND IMPORTANCE OF A BUDGET:
1) As a tool of financial control of the legislature over the executive.
2) As a tool of administration for carrying out its functions as per specified and approved budget.
3) An instrument of Public Policy for development and welfare as well as economic and social growth and development.
4) As a tool of accountability for the legislature over the executive.
5) Budget helps getting five year plans into action.






TYPES AND FORMS OF BUDGETS:
1) Short term - annual - long term Budget : If a Budgetary proposal happens to be for less than a year then it is considered to be a short term budget. Proposal for a year is classified as an Annual Budget and proposals for more than a year are classified as long term budgets.

2) Surplus - Balanced - Deficit : A proposal is considered to be a surplus budget if revenues in a year exceed the expenditure of the same year. A balanced budget is that where both the sides are equal. And a deficit budget is one where the expenditures for the year exceed the revenue for that year.

3) Cash Budget - Revenue Budget : That form of budget where the proposals are based on cash that means in terms of actuals and not based on accruals (increasing or projected increase). It is in practice in India,U.K and USA. Under this type of budget there is a 'rule of lapse' which means that once the validity of the budget appropriation is over,all remaining or unutilised funds will lapse and a fresh proposal will have to be put forward to the legislation for receiving further grants. This kind of budget is considered suitable because it allows re-prioritization of activities of the executive and is a more comprehensive format.
Revenue budget refers to that form of budgeting where proposals are based on accruals and appropriation for their authorization are linked to the completion of the activities and not the validity or life cycle of the budget.

4) Lumpsum Budget: It is a proposal where expenditures are not provided heading wise rather an overall estimate is presented for the approval of the legislature. It is considered useful when funds are required to be appropriated for some unspecified or unclear activity/area which is in the process of determination.

5) Line - Item Budget: It is considered as one of the most popular format as it is simple in approach as well as in understanding. It is that technique of budgeting where every item has a dedicated separate line and column for its complete description along with its rate and the total quantity required as well as the funds required for it are clearly specified. It helps in more accountability of the executive as well.
The drawback of this technique is that it fails to link expenditure with performance after such expenditure as the focus is totally on the expenditure and all the detailing goes into that. It is not comprehensive in its outlook.

6) Performance Budget: A result of the First Hoover Commission in 1949 ( refer - http://en.wikipedia.org/wiki/Hoover_Commission ) it was first applied for federal budgeting in 1950 by President Truman. It is a technique under which allocation of funds are based on functional classification. It specifies the demands with the heading as well as the objective it sets out to achieve. Thus the legislature has total control over the executive actions and knows what it is to expect at the end of the Budget life cycle and can evaluate it and hold them accountable. This type of budget shows a clear relation between inputs and outputs. It helps the legislature hold the executive accountable in a better manner,helps head of departments of administration as communication for activities is clear from top to bottom and they find it easier to direct subordinates and achieve the specified goals,it helps the auditor as well as he has a clear idea of each and every detail as mentioned above. This technique was first recommended by the Estimates Committee in 1956,however,it was introduced in Parliament for the first time in 1968-69 on recommendation of the first Administrative Reforms Commission.
The limitations to this technique are:
i) Difficult to measure performance of various activities of govt./executive for it is quite vague and cannot be directly measured.
ii) Expenditure made by govt. under number of heads do not present themselves in the form of results that are objective enough to be directly measured.
iii) For various govt. activities,it is not easy to determine the unit cost of such activities.
iv) Not easy to establish links between development heads and accounting heads.


7) Planning Programming Budgeting System (PPBS) :
This system was first developed by General Motors in 1920's for managing financial matters and then implemented in the department of defense. Impressed by the results it was first introduced into political fray for Federal budgeting in 1966 by President Johnson of USA as a replacement for the shortcomings of the Performance Budget system.
It incorporates planning function where basic goals of the organisation are determined along with the selection of programmes that are best suitable to achieve them. Programming encompasses the scheduling and execution of those programmes efficiently through clearly defined projects.Budgeting then takes over to convert the goals,programmes and projects into monetary estimates for a review of the administrative heads and then to be presented to the legislature for appropriation. This technique thus seeks to incorporate all functions of Planning,Decision Making and Budgeting of government goals and objectives/policies.
Limitations of this technique are :
i) Tries to incorporate different departments and agencies work together thus making the process cumbersome.
ii) Periodic reviews and evaluations needed to check its effectiveness along with good and clear coordination between different agencies like planning,bureaucracy,accounting/finance ministries and departments,etc.
iii) Analytical in nature and not practical.
iv) Socio economic objectives are difficult to follow in a calculated manner as a lot of variables come into play.


8) Zero Based Budgeting : This technique was developed at the Texas Instrument Company in USA by Peter Phyrr and adopted for the Federal Budget calculation in 1977 by President Carter.
It is an evaluation of all programmes and expenditures of every year requiring each manager/administrator/executive head to justify his entire budget request in detail.
Evaluation of operational activities are done in terms of costs and benefits. It is based on a comprehensive analysis of priorities,goals and objectives making it more realistic and practical. Targets are specified through efficient planning and control functions.It helps enable better communication and personnel development in organisations.
Limitations are:
i) Effective administration and communication is necessary to implement this technique.
ii) Requires a lot of investment and updated infrastructure and properly trained personnel.
iii) Large data processing and making.
iv) Human biasedness in selection of decisions cannot be overlooked.






BUDGETARY PROCESS:
There are two types of budget presented to the legislature for passing - General Budget and Railway Budget at the central level. They were separated in 1921 to preserve the business approach to the railway policy and after paying the annual contribution the Railway can keep their profit and keep the profit for their development.

 Once requisite data is collected from all ministries and departments and scrutinized in tandem by the controlling officers and the Accountant-General and the administrative departments,it is then reviewed by the Finance Ministry and again the same process is followed by the Union Cabinet. That is why there is collective responsibility of the cabinet for the budget in Parliament.

The budget is then framed by the Finance ministry in the proper format after consulting the Planning Commission for including the Plan priorities and the help of CAG is also taken for getting previous years data of accounts. All this work begins in September of the current year for preparation of budget for the next financial year beginning on April 1st.

The States have their own budget and the same procedure is followed but done by the State Finance Department following the same procedure as in the Centre and has to be approved by the respective State Legislature.

After compiling the budget then the Finance Minister presents the same in the Lok Sabha for the Parliament approval. Whether this much fund is actually required or not once put in front of the parliament for passing is sent to the Estimates Committee to do the scientific financial assessment of the same and report to the legislature whether funds demanded are estimated precisely or not. A general discussion then pursues in parliament over the budget document and then a voting on the demand of grants take place,it is then considered again and the Appropriation Bill is then passed for the government to incur expenses from the Consolidated Fund of India then another round of consideration takes place for the revenue/taxation proposals of the budget and after that the Finance Bill is passed authorising the govt. to collect taxes and revenue.
For more refer to - http://parliamentofindia.nic.in/ls/intro/p4.htm

Once the process of passing the bill is completed then the execution of the budget begins. The Finance Ministry then takes over as it has the charge of the treasury of funds. It then calls in the respective administrative ministries and departmental heads to present their plan of outcomes for the appropriated/granted funds and write the reasons for the amount to be disbursed to their departments/ministries. Once that is prepared and the scheme is presented to the Finance ministry then the ministries are provided with certain guidelines/instructions that they need to pursue in regards to their spending and the funds being disbursed to them from the treasury through the Finance Ministry. Regular check is kept on them from them on to ensure accountability.

If a Finance Bill is rejected in the House then the whole cabinet has to resign based on the principle of Collective Responsibility.






FINANCIAL ACCOUNTABILITY:
Financial Accountability or accounting refers to the system of recording and maintaining data of all financial transactions of both the Centre and State. It is a means of the legislature as well as executive to exercise financial control over funds granted. It gives the details of the financial health of the government and also provides a clear account of loss as well as profit to the exchequer and whether the funds granted by the legislature were utilised for the same purpose as demanded and whether the goal was accomplished or not.





CLASSIFICATION OF PUBLIC ACCOUNTS:
1) Control Accounts -  It contains data of all expenditure and revenue as well as funds receipts/financial transactions of the government.
2) Proprietary Accounts - Maintained for the purpose of internal control and are not subject to external audit and is helpful for departments and ministries in decision making process.
3) Supplementary Detailed Accounts - Prepared for providing information to the general public about government functioning in terms of various department spending. It is prepared after 2-3 years of actual funding and is so formatted to be easily comprehensible for public viewing.






COMPTROLLER AND AUDITOR GENERAL ROLE IN ACCOUNTING:
All accounts of the Centre as as well as States are maintained by the office of the Comptroller and Auditor General. Under the CAG there is an Accountant General appointed in each state who keeps that particular state's records in his office and then it is passed on to the CAG at the time of auditing.
Railway accounts are maintained separately under the Financial Commissioner of Railways and the Defence accounts are maintained by the Finance ministry through the Financial Adviser ( Defense) and Military Accountant-General.






ACCOUNTING SYSTEMS IN INDIA:
1) Initial Entry : It takes place in the administrative office where the actual spending takes place. It is done in real time.
2) Monthly compilation in the office of the Accountant General (AG): Every month all the details of financial transactions done through initial entry step of the respective administrative office is forwarded to the AG office where it is classified properly and maintained under specific account heads like capital expenditure,revenue expenditure,revenue receipts,etc.
3) Annual compilation in office of AG: Annual compilation of all monthly reports sent by respective administrative offices are classified and maintained in AG office.
4) Final compilation in the office of the CAG.






AUDIT:
Audit is a Union subject and it refers to the systematic examination of accounts carried out for the objective of verifying validity of the financial transactions carried about by the administrative depts under the executive to determine the correctness of its process as specified in the budget approved by the legislature.
The audit function is performed by the CAG which is an autonomous constitutional body under the govt. of India act 1935 and is appointed by the President under his warrant and seal. Indian Audit is governed by not by legislature/law but by an executive order - The Government Of Indian Audit and Accounts Order 1936.
At presents receipts of Income tax collected are not open to audit by the CAG,rest all are.
Once the CAG compiles the Audit reports it then presents it to the President and the Governor of respective States to be presented before the Parliament and State legislatures via the two respectively.
Once that is received by the legislature it is then sent for another audit and review to the Standing committee called Parliamentary Accounts Committee consisting of both the houses representatives,the same committee is present in each state legislature and performs the same function.Once that is done then its recommendations and findings are then presented back to the House for debate and suitable action to be taken.

This article ends here.

IGNOU notes - http://www.scribd.com/doc/39747412/IGNOU-s-Public-Administration-material-Part-5-Financial-Administration

And,the series of posts/articles covering the complete study of Administrative Theory completes here.

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The next post on this blog will be the first in the series of articles that sets out to cover the study of INDIAN ADMINISTRATION. 

So, the next article will be detailing:

Evolution of Indian Administration:
Kautilya’s Arthashastra; Mughal administration;
Legacy of British rule in politics and
administration - Indianization of public services,
revenue administration, district administration,
local self-government.

Tuesday, August 28, 2012

Techniques of Administrative Improvement: Organisation and methods, Work study and work management; e-governance and information technology; Management aid tools like network analysis, MIS, PERT, CPM.

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Administration or to be very specific,the Bureaucracy from a traditional point of view has always been change resistant,opaque and rigid. Therefore,in today's times,where the world is become a global village and the concept of Welfare State and Good Governance looms large it has become imperative to transform the administrative machinery and reform it for the best results in order for it to remain important and not become obsolete.


Therefore, administrative improvement and reforms are a priority. So, today we will discuss this very important aspect of administration.



 ADMINISTRATIVE IMPROVEMENT:
It is an artificial inducement of administrative transformation against resistance.
A.F Leaman asserts that Administrative reforms are an effort to mitigate the gap between reality and what is desirable of the administration. And this transformation is for a value laden and moral purpose or can be for the purpose of changing with the times to maintain continuity, or both of these.

Lets understand some terms associated with and collectively form Administrative improvement, and should not be misunderstood as meaning the same.
1) Administrative change - spontaneous,based on continuity,value-neutral,incremental that means small changes from time to time which are imperceptible or not noticeable.
2) Administrative reform: Periodical,value laden,and the change is substantial(large and important in size/value) and noticeable.
3) Administrative reorganisation: It is in house effort,which means within the administration itself and not necessarily serving a larger purpose.
4) Administrative revolution: A phenomena that brings about a radical change in the administration and its nature.

Any of the above when takes place,either in isolation or in continuum is administrative improvement.





OBSTACLES TO ADMINISTRATIVE REFORMS:
1) Excessive tolerance to maladministration.
2) Political and bureaucratic inertia.
3) Lack of funds and infrastructure.
4) Lack of research,knowledge and opposing ideas/ideologies,etc.
5) Reports on the same are considered to idealistic and not implementable practically.






INSTRUMENTS / TECHNIQUES OF ADMINISTRATIVE IMPROVEMENT:

I) ORGANISATION AND METHODS- Also used synonymously with Organisation and management. It originated from the pioneers of scientific management that is Taylor and Gilbreth and is the base for this technique. It is the systematic examination of activities in order to improve the effective use of human and other material resources. It is highly technical and is conceptualised and implemented by the specialists/top level officers of an organisation to eliminate delay,wastage and overlapping,etc. It is an in house mechanism that is undertaken to accommodate and implement administrative changes and reforms in Organisation and methods.

The basic steps involved in O&M(Organisation and Methods) are:
1) Select the area/process that requires attention (done by the strategists of the organisation)
2) Record the current situation prevailing in it.
3) Examine and analyse the existing scenario.
4) Develop,design and evaluate alternative solutions and recommend improvement opportunities.
5) Implement the chosen solution.
6) maintain and monitor the implementation of that solution to ensure adherence and benefits and whether it is effective or not.


Now lets go into the details/techniques used to follow these steps in O&M:

1) Work Study - The scientific and systematic study of the work being done or to be improved(refer to Taylor's scientific management).

Work Study's types or sub techniques are:
i) Method Study: Related to the the tools and techniques as well as path being used in the work which is being studied. It is a systematic scrutinizing of all aspects like what,when,how,why,where,who etc is studied of the work case in order to get a proper understanding of the same and develop a suitable strategy for improvement to avoid delay and wastage of resources.
ii) Work Measurement: It is a supplement of the Method study where a study is done on the type of work at hand and its content.
iii) Organisational analysis: It takes a holistic view by placing the work at hand as an integral part of the organisation and its contribution to the working of the whole organisation and how it affects the same.It helps understand how a single improvement in the work at hand will affect the entire organisation and how other work will automatically improve in tandem with this one,etc. Negative and positive affects,both are seen.




2) Work management - It is the integrated process that enables the manager to access efficient ways to do a particular work. It strategies in detail the work within the organisation to make work simpler,better and efficient.

Its important sub techniques are:
i) Task based design : It is the detailed outline of the overall work of the organisation in the form of a simple work chart.
ii) Work queue : Substantially arranging various activities within a particular task. It also includes the ' to do ' list of the organisation.
iii) Work management Groups: It is the group in charge of outlining tasks,queueing the work,performance evaluation,setting standards,etc.

Work management can be taken up at both the upper as well as mid or lower levels of an organisation/administration and takes into account not only the work at hand but also the personnel in charge and the skills they possess and what is required. Thus it is a very extensive as well as significant method.




3) Forward Engineering Process - It advocates that along with contemporary change,an organisation/administration must also look into the future and anticipate changes to remain ahead of others and that is to be done through the BOW(Barriers,Obstacles and Weaknesses) analysis,CINE MATRIX ( Controllable Internal factors and Non controllable external factors) analysis, SWOT ( Strengths,Weaknesses,Opportunities and Threat) analysis,SPOT (Space,Pace,Opportunities and Threats) analysis.









II) E- GOVERNANCE & INFORMATION TECHNOLOGY:
E-Governance is the term used for a technology driven governance. It is the usage of Information and communication technology(ICT) to deliver government services,exchange of communication transactions,government to citizen and government to business as well as govt. to govt. interaction through fast paced,accurate and transparent electronic medium. .It is based on the theory that the State can increase its capacity in the changing environment/ecology through the use of Information Technology.It helps eradicate boundaries. E-government refers to a government that employs ICT in administrative machinery together with organisational changes and improvements and support public and democratic processes as well as bettering public policies. E-governance on the other hand is related to a broader term where the govt. wants to reach out of their organisations to the people and communicate with them and eradicate boundaries.

This has been reinforced and advocated via many theorists and scholars of Public Administration as well as Management like Luther Gulick,Herbert Simon(refer to his decision making model and his views on the use of computers under the Programmed and Non Programmed decisions for the same - http://publicadministrationtheone.blogspot.in/2012/07/process-techniques-of-decision-making.html), Pfiffner and Sherwood ( who conducted a case study in 1960's and found that IT converted organisations into better models), Allen Schich ( theory of cybernetics),etc.

Let's discuss the view of Dr. Arie Halachmi on E-Governance and IT in Administration/Organisation on the same.
Dr. Halachmi in his paper/essay " E-governance - theories and practices" studied the Tennessee Valley Authority organisational system and put forward five models of e-governance based on the study:
i) Dissemination Model - The administration through use of ICT can place information into the public domain.
ii) Critical Flow Model - Only certain clientele in society are required to be intimated about a policy/change and so IT helps in selectively doing so.
iii) Comparative Analysis Model - Best practices of other systems can be efficiently and accurately and collectively shared through IT.
iv) E-advocacy/Mobilisation and lobbying Model - IT empowers people with knowledge and only empowered people/citizens with the required knowledge can ensure good governance.
v) Interactive State Model - Grievances of people can be communicated,addressed and resolved efficiently and without delay through interactive IT systems.
vi) Practical Aspects - Enables efficient delivery of government services,exchange of communication transactions,government to citizen and government to business as well as govt. to govt. interaction through fast paced,accurate and transparent electronic medium. It will reduce red tapism due to hierarchy and enables decentralisation of information and services,enable transparency,increase capacity of administration to bring about rapid socio-economic and political development,skilled manpower enters into organisation and is a boon,proper and timely performance appraisal is done to avoid delay and demotivation,etc.




Let's look at the concept of E-governance and IT in the Indian context:
IT enabling began in the 1970's and during the new economic policy time of :LPG in 1990's IT and E-Governance(1997 Chief Ministers conference on Good Governance) was given an impetus.
The National Information Technology Act,2000 gave this concept a legal identity and formal structure and power/authority. The act was subsequently modified in 2001 to adapt to new changes and demands of the society and globalisation.
The National E-governance Plan was brought out as well to bring about socio-economic development and consolidate culture and IT. The Finance Ministry,Railway ministry,Health ministry,etc are trend setters as well as rely heavily on IT and ICT.
At the state level, Andhra Pradesh first of all took the lead by inaugurating the SMART project ( Simple,Moral,Acceptable,Responsible,Transparent) of administration and its services to the people.
Kerala started the FRIENDS(Fast Reliable Instant Efficient Network for Disbursement of Services) project and Karnataka started the E-Bhoomi(on-line delivery and management of land records in Karnataka) project.









III) MANAGEMENT AID TOOLS - NETWORK ANALYSIS, MIS, PERT, CPM:
Management aid tools are those tools/techniques that help in work simplification and efficiency of management processes.

Let's discuss each one of them in detail.

1) Network Analysis : It is a method for studying communication and socio-technical networks within a formal organization. It is a quantitative descriptive technique for creating statistical and graphical models of the people, tasks, groups, knowledge and resources of organizational systems. It is based on social network theory and more specifically, dynamic network analysis. It helps identify local and global patterns, locate influential entities, and examine network dynamics.




2) Management Information System(s) or MIS: It is an integrated entity/system of information technology where interaction between different parts/department/projects of an organisation is enabled for better and efficient management practices (POSDCORB and others) and skills to solve problems that occur between the parties obstructing work and communication through systematically managed and stored information/knowledge. It helps automation.
MIS helps managers in extracting information of the organisation and its different departments for coordination in order to carry out his functions and responsibilities in a cost effective and time effective as well as efficient manner.
It helps the managers in conducting simulations and decision making as well.

MIS come in different formats suitable to the particular department it is used and the nature of work in question in like Accounting MIS,Human Resources MIS,Financial management MIS,Marketing and Sales MIS,Customer Service MIS,etc. The top most management however have models of MIS that incorporate all departments and processes of the organisation for their analysis.

MIS helps in decentralisation,democratisation, and participation by all through proper management of information and its sharing subject to the condition that the information is accurate and updated from time to time and the personnel are educated and trained regarding it and then asked to use it in order to harvest all its benefits.




3) Performance Evaluation and Review Technique or PERT: It is a relatively new planning and control system designed to help top management with planning,research,problem solving,decision making and control of organisational processes. It analyses the tasks involved in completing a particular project,especially the minimum time needed to complete the same. It is quite similar to CPM. It is probabilistic in nature as in it is based on the theory of probability that an event or situation or activity is likely to happen/be completed in future if things are done and followed in the very same rigid way as anticipated or designed , but not a 100% surety.

Its disadvantages are that :
i) There can be potentially hundreds or thousands of activities and individual dependency relationships and it is not possible to ensure things to happen the way it is designed as we are dealing with human beings and there can be any amount of natural as well as induced disasters in between.
ii) PERT is not easily scalable for smaller projects
iii) The network charts tend to be large and unwieldy requiring several pages to print and requiring special size paper
iv) The lack of a time frame on most PERT/CPM charts makes it harder to show status although colours can help (e.g., specific colour for completed nodes)
v) When the PERT/CPM charts become unwieldy, they are no longer used to manage the project.

However if planning is done well and and all pessimistic and optimistic factors are studied as well as a most likely time design based on experience of PERT can help overcome the above.



4) Critical Path Method or CPM : Brought out by chemical company Dupont in 1950's.It is essential for effective project management. It is an algorithm for scheduling a set of project activities. It was originally brought out for plant construction and maintenance purposes but now is used in various projects of different natures like aerospace and defense,construction,engineering,software development,etc.
The essential technique for using CPM is to construct a model of the project that includes the following:
  1. A list of all activities required to complete the project (typically categorized within a work breakdown structure),
  2. The time (duration) that each activity will take to completion, and
  3. The dependencies between the activities.
Using these values, CPM calculates the longest path of planned activities to the end of the project, and the earliest and latest that each activity can start and finish without making the project longer. This process determines which activities are "critical" (i.e., on the longest path) and which have "total float" (i.e., can be delayed without making the project longer). In project management, a critical path is the sequence of project network activities which add up to the longest overall duration. This determines the shortest time possible to complete the project. Any delay of an activity on the critical path directly impacts the planned project completion date (i.e. there is no float on the critical path). A project can have several, parallel, near critical paths. An additional parallel path through the network with the total durations shorter than the critical path is called a sub-critical or non-critical path.

As compared to PERT,it is deterministic and not probabilistic as it does not look into circumstantial factors while completing activities of a particular project,but is only bothered about specifying how a activity is to be done and within what time it should be done.

Advantages of CPM:
i) It helps in scheduling, monitoring, and controlling projects.
ii) Project manager can determine actual dates for each activity and compare what should be happening to what is taking place and react accordingly.
iii)The activities and their outcomes can be shown as a network.
iv) Displays dependencies to help scheduling.
v) Evaluates which activities can run parallel to each other.
vi) Determines slack and float times.
vii) Widely used in industry.
viii) Can define multiple, equally critical paths.
ix) CPM determines the project duration, which minimized the sum of direct and indirect costs.


Disadvantages of CPM:
i)   CPM's can be complicated, and complexity increases for larger projects.
ii) Does not handle the scheduling of personnel or the allocation of resources.
iii) The critical path is not always clear and needs to be calculated carefully.
iv) Estimating activity completion times can be difficult.





CPM Vs. PERT - AN ANALYSIS:
Both CPM and PERT (Program Evaluation and Review Technique) provide the user with project management tools to plan, monitor, and update their project as it progresses. There are many similarities and differences between the two, however.

Similarities between PERT and CPM :
i) Both follow the same steps and use network diagrams.
ii) Both are used to plan the scheduling of individual activities that make up a project.
iii) They can be used to determine the earliest/latest start and finish times for each activity.


Differences between PERT and CPM:
i) PERT is probabilistic whereas CPM is deterministic.
ii) In CPM, estimates of activity duration are based on historical data.
iii) In PERT, estimates are uncertain and we talk of ranges of duration and the probability that an activity duration will fall into that range.
iv) CPM concentrates on Time/Cost trade off.
This article concludes here.


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The next post on this blog will cover:

Financial Administration:
Monetary and fiscal policies; Public borrowings
and public debt Budgets - types
and forms; Budgetary process; Financial
accountability; Accounts and audit.

Monday, August 27, 2012

Public Policy: Models of policy-making and their critique; Processes of conceptualisation, planning, implementation, monitoring, evaluation and review and their limitations; State theories and public policy formulation.

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This article is on Public Policy which is the heart,soul and identity of governments everywhere. It is the major reason on the basis of which they are voted to power by the sovereign(citizens of a country). Potential Policies advertised by them during election campaigning as well as the previous work/policies brought out and their implementation/non implementation by the party in question when they were in power are the reason people would like to see or not see them again at the helm of political affairs of the country.

And in the era of Welfare State it assumes all the more importance both as an activity as well as a discipline of study known as Policy Science.

We begin.






PUBLIC POLICY - CONCEPT & MEANING:
Public Policy in the broad term refers to the policy (plan of what to do) that is formulated and implemented for the benefit of the public. If read in light of the narrow view of Public Policy then it relates to plan of action to be pursued by the Govt.(because Public is also used as a synonym for Government in many places).

There is no unanimity on the definition of Public Policy. However,Public Policy can be described as the overall framework within which the actions of the government are undertaken to achieve its goals. It is a purposive and consistent course of action devised in response to a perceived problem of a constituency, formulated by a specific political process, and adopted, implemented, and enforced by a public agency.

Goals,policies and programmes are different and should not be used as synonyms of each other or interchangeably. Policies are devised to achieve certain goals by the government,for example the Sarva Shiksha Abhiyaan is a govt. programme to achieve the Policy of Free and compulsory education to all children between 6-14 in India that was established through the Right to education act 2009 which is a part of meta policy of  Education For All by UNESCO. Another example is the policy of poverty alleviation for which several programmes have been designed like the Integrated Rural Development Programme,MGNREGA,etc. Poverty alleviation also comes under a bigger goal of overall socio-economic growth of the country. Each of these programmes have their own goals to achieve which then all taken collectively achieve the unified goal of the original policy. There can be a number of programmes established for achievement of a single policy goal. And there are a number of policies that are formulated as well to achieve the goals of the govt.
Once a policy is declared(statement of goals) then programmes are devised within/under it to take action through it to achieve those overall goals.

Public Policy is a document that contains the broad outline as well as the detailed description of formulation as well as implementation of various govt. programmes and plans that are taken out for the goal/objective of public benefit and implemented through the constitutional authorities,bureaucracy and government organisations/institutions in collaboration with civil society organisations. It takes a variety of forms like law,ordinances,court decisions,executive orders,decisions,etc.

It is the authoritative declaration of the intentions of the government of what it intends to do and to not do & the success of Public Administration as well as government in a country is linked with the success of its Public Policy.

Once a goal is determined then the government has to develop a broad outline/policy document to show how it will be worked towards and then once that is done,programmes are developed which are the executive wing of the govt. to achieve those goals. Then organisations and institutions are set up to house those programmes and organise personnel in it to achieve the particular programme's goals which will in cohesion with other programmes and their organisations under the same policy help achieve the policy's goals and that will help achieve the overall goal of the govt.











TYPES OF PUBLIC POLICIES:
1) Substantive Public Policy - These are the policies concerned with the general welfare and development of the society like provision of education and employment opportunities,economic stabilisation,law and order enforcement,anti pollution laws,etc are its examples. It does not cater to any particular or privileged section of society and have to be formulated dynamically keeping in mind the goals and characteristics of the constitution and directive principles of state policy as well as the current and moral claims of society.

2) Regulatory Public Policy - These policies are concerned with regulation of trade,business,safety measures,public utilities,etc performed by independent organisations working on behalf of the government like LIC,RBI,SEBI,STATE ELECTRICITY BOARDS,etc. Policies pertaining to to these services and organisations rendering these services are known as regulatory policies.

3) Distributive Public Policy - These are the policies meant for specific segments of society especially the needy ones. Public assistance and welfare programmes,adult education programme,food relief,social insurance,vaccination camps,public distribution systems,etc are all examples of such policy.

4) Redistributive Public Policy - These policies are concerned with rearrangement of policies concerned with bringing basic social and economic changes. Certain assets and benefits are divided disproportionately amongst certain segments of society and so those need to be redistributed so it reaches where it is needed and does not lie about surplus somewhere else.

5) Capitalisation Public Policy - These policies are related to financial subsidies given by the Centre to state and local governments and central and state business undertakings,etc and is not directly linked to public welfare as the others listed above. it does contribute but indirectly. It is basically infrastructural and development policies for govt. business organisations to keep functioning properly.

6) Constituent Public Policy - It is the policies relating to constituting new institutions/mechanisms for public welfare.

7) Technical Public Policy - It relates to the policies framed for arrangement of procedures,rules and framework which a system shall provide for discharge of action by various agencies on the field.










IMPORTANCE OF PUBLIC POLICY AND ITS STUDY:
As listed above one can understand the significance of public policy and how it is the oxygen for growth and development of a country and its people. Good policies take a country to great heights and without a detailed policy no goals of a country and its govt can ever be achieved. Without Public Policy and Planning a country would become stagnant and lag behind the rest of the world and never evolve and keep up with the ever changing times and global scenario.
Policy studies are therefore of utmost importance as it helps scholars,administrators,politicians and political scientists analyse every policy in depth and its pros and cons and help improve its choices,formulations,implementation and feedback process immensely and help it be at par with its contemporaries.










MODELS OF POLICY MAKING AND THEIR CRITIQUE:
1) Institutional Model: Under this model certain institutions in society are seen as competent institutions for determining public policy objectives and processes. The institutions are chosen on the basis of democratic participation,bureaucratic specification and judicial adjudication and the functions performed by these certain institutions are the most major determining factor to implement various policies. This model also specifies and suggests the relationship between various institutions and how they all work together and collectively contribute to a successful policy implementation.


2) Systems Model: Proposed by David Easton. Already discussed in a previous post on this blog under the article title of "Organisations",please refer: http://publicadministrationtheone.blogspot.in/2012/07/organisations-theories-systems.html


3) Rational Model: Discussed under the article posted on this blog with title " Process and Techniques Of Decision Making",please refer to Herbert Simon part - http://publicadministrationtheone.blogspot.in/2012/07/process-techniques-of-decision-making.html


4) Bounded Rationality Model: Refer again to the same post again under Herbert Simon part : http://publicadministrationtheone.blogspot.in/2012/07/process-techniques-of-decision-making.html


5) Incrementalism Model: Refer to Charles E. Lindblom's part in http://publicadministrationtheone.blogspot.in/2012/07/process-techniques-of-decision-making.html


6) Game Theory : Refer to the Game Theory in the article http://publicadministrationtheone.blogspot.in/2012/07/process-techniques-of-decision-making.html


7) Optimal-Normative Model: Refer to Yehezkel Dror's part in http://publicadministrationtheone.blogspot.in/2012/07/process-techniques-of-decision-making.html


8) Elite Model: Public Administrators and politicians belong to the elite club of knowledge possessing group that is fully equipped to frame and implement policies and people are to follow it as they are not equipped to understand and know the same.


9) Group Theory : A few groups and lobbies possessing power and organised stronghold over the bureaucracy and legislature get their way in policy selection and implementation.


10) Market Exchange Model: It believes in a free market with minimum regulations by the State in the affairs and a lot of public-private partnership as well as a lot of private organisations taking over the government's functions and directing the policy making. It is believed that this will lead to higher competition and thus higher economic growth and this will in turn benefit the government in funds for its policies.









CRITIQUE OF THE ABOVE MENTIONED MODELS OF PUBLIC POLICY:
1) Institutional Model: It is possible when all institutions are studied thoroughly and the relationships it shares with other organisations and also in a developing society where one organisation provides overlapping services with another organisation then it becomes difficult to segregate and duplication occurs wasting money and resources of the country people.

2) Systems Model: Though considered useful still has various limitations. Thomas Dye points out that in the Systems Model significant characteristics of the political system,which plays a very important role in the policy process of transforming decisions into policies has been lacking. Furthermore,the the environmental inputs that influence the political systems have also not been clearly defined and described. It is also seen as too simple an approach to explain the complex cycle of policies. It employs value laden techniques of welfare economics and other factors like rationality,power,personnel and institutions,etc have been neglected and not shown as integral ingredients in the policy cycle.

3) Rational Model: Problems arise when put into practice since social and environmental values can be difficult to quantify and gather a consensus on the same . Not totally practical as it is based on the principle that the decision maker is aware of all facts and statistics that are to be considered in the current situation and knows the best way to deal and take a completely rational decision.

4) Bounded Rationality Model: It is only goal pursuing and does not take in a very detailed account of the means to attain it.

5) Incrementalism Model: It only looks at immediate problems and short term solutions by taking one step at a time and leaves behind the overall issue for which the root has to be pulled out otherwise whatever little work is done will be undone very soon. And also it gives way to steps that enter quietly and were never thought of in the first place which may or may not be useful.

6) Game Theory Model: It justifies selfishness in the name of self interest and values are extremely variable so you cannot say that everyone will behave/respond in the same manner as everybody is not completely rational as claimed by the concept of the Games Theory Model.

7) Optimal-Normative Model: it is based on a combination of rational and non rational factors but those factors have not been clearly specified. It also rests on the assumption that true optimality could be possible only in such cases where inter-relationships between various aspects of knowledge have been established and analysed. That means the decision maker has to have knowledge of two or more areas of concern regarding the situation to take a better decision and that is not feasible neither is practical in most situations.

8) Elite Model: Here it is stated that only a few people who are referred to as elite,who are the public administrators and politicians are the only ones who possess the knowledge to make policies and hence no need to interact with others who are not equipped in this matter. It does not take into account the importance of civil society organisations and other non profit and voluntary associations possessing grass root knowledge of issues and solutions to the same.

9) Group Model: It states that a few groups and lobbies who have stronghold on organised agitation and means to influence bureaucracy and legislature get their way in view of lack of other organised opposition.

10) Market Exchange Model: It is a very capitalist approach and leads to concentration of wealth and very rarely economic and social development of the people especially the lower rungs and underprivileged. It leads to crisis in welfare policy making as the market is only bothered about profit and will influence the legislature to pass policies that benefit them monetarily and not socially uplifting.


However,lets remember that all of these models of policy making are still in use and are very useful. A mix and match/blend of the right characteristics of each that is suitable to the environment and ecology of a country in question should be applied for best results.










                                                                   POLICY CYCLE


1) Policy Formulation : Out of all the options brought forward by different parts of society like interest and pressure groups,civil society,mass media,international organisations,etc as well as political parties in front of the govt. for action,the agenda(list of possible issues to be converted into policy) for policy formulation is then set. Then the goal and objective setting for the same is prepared realistically. It is then passed to enact a law by the legislature and give it legal status and authority to carry out its duties.And then the strategy of implementation is devised as well as the machinery needed to do the same.
Limitations are - paucity of time with legislature,corruption,not in session always,emergency needs to be addressed first.

Role of Bureaucrats in the Indian context: Due to the major information base,knowledge and experience,permanent service and advisory expertise ambits possesed by the bureaucrats in policy matters, it makes them instrumental to the formulation of public policy. The major role in the policy formulation part of the policy cycle of Indian bureaucrats is that of the middle level ones - ranks three and four from the top who are actively engaged in the above activity. They are the ones who fill in the details to the draft skeletons of bills/proposed amendments to existing legislations,etc. Their proposals are then scrutinised by the top level bureaucrats who are closer to the ministers who may accept them with or without alteration or resend it to them for changes,adjustments,etc while making policy decisions. However at times, these top level bureaucrats also perform the duties of executor as well where they themselves correct the drafts proposals sent to them by their subordinates and then pass it on to the minister for approval.



2) Policy implementation and monitoring: Machinery is developed and Bureaucracy is strengthened to implement the selected policy and every aspect of the same is taken care of like getting the knowledgeable and skilled personnel,proper organisational and infrastructural setup,technology,technical and financial aid. Decisions making is done at every stage to choose the best alternative out of available ones  by the administrators while carrying out the tasks allotted to each. Mid term appraisals are held of policy development and senior officers keep monitoring and directing the juniors at every stage of policy implementation to make it error free.
Limitations are - bureaucratic(nepotism,red tapism,etc) and rigid behaviour of administrators,lack of expertise and knowledge,lack of funds and infrastructure,citizens not cooperative.

3) Policy Education : People/target groups are made aware of the objectives of the policies and how it will be of help to them now and in the future and garner their support so that implementation is smooth without any roadblocks. This will also help in increasing participation of people in the policy process to provide true feedback and curb nepotism and corruption in implementation as well as provide their own expertise. This helps in the decision making of the administrator as well and helps in improving/bettering the policy implementation at the same time so that there is no conflict at a later stage.
Limitations are - lack of trust of people in bureaucracy,hostile attitude between both parties,etc.


4) Policy Evaluation and review : In order to determine the success and failure of any policy this step is necessary.Policy evaluation is weighed in many ways like cost benefit,welfare of the people,achievement of goals and objectives set,etc. The legislature,bureaucracy,judiciary(through its powers of judicial review) and voluntary and non profit organisations and associations play a huge role in policy evaluation.Policy studies help in reviewing the policies and improving them.
Limitations are- lack of will,lack of resources,data issues,ambiguous policy staements,equity or economical dilemma,etc.









THEORIES OF STATE AND PUBLIC POLICY FORMULATION IN SUCH STATES:
Theories of State and public policy formulation will help us understand the different kinds of State's and how policies are formulated under them.

The four major theories of State are:

1) Pluralistic theory of State: It is a liberal theory of State and states that the State acts as a referee and umpire who as and when required steps in to arbitrate between issues occurring. It believes that every individual of the society knows what is best for him and has mutually agreed into a social contract with other individuals to protect their interests and the duty to referee that social contract is in the hands of the State,so as and when that social contract stands violated by anybody the State will punish them neutrally.
This theory states that since the State is non partisan, and unbiased it brings out only altruistic,universal and benevolent Public policy.

i) Neo-Pluralistic State theory - However,the new or neo-pluralistic State theory state that the State is not completely insulated from influence and is influenced repeatedly by groups whose relative strength caused by huge investments like corporates,etc and so the State also bows down many a times and misuses its powers. therefore Public Policy formulated in such a State is influenced by these groups and many a times goes against the majority's will.

2) Marxist Theory Of State: Marx claimed in his theory of State that the State is an institution created to cater to the interests of the bourgeois (rich/upper middle class) and to perpetuate their vested interests. State wears the mask of the protector of the proletariat/peasants/poor but actually has a different face , that of catering only to the bourgeois.
Public policy formed in such a State will be coercive towards the proletariat and will be pleasing to the bourgeois or the dominant group.

i) Neo-Marxist or new-Marxist theory of State: Gramsci through his phrase " Ideological hegemony" states that Bourgeois does not only use the State for its vested interests but also uses other instruments like education,religion,etc to do the same. Public policy formulation in such a State tries to take care of religion,culture,education,etc. through public policy to perpetuate the bourgeois interest.

ii) Contemporary Marxist theory of State: Miliband and Poulantzas challenged the two class model of Marx and stated that even the bourgeois class consist of different levels. And beyond the two classes of bourgeois and proletariat there are also other classes like white collar jobs,etc. Miliband argued that the State will formulate policies that act like an instrument to serve the interests of business class and will also serve the poor and vulnerable but under the aegis of the business class. That is why Miliband is also called as an instrumentalist.
Poulantzas states that the role of the State is the outcome of the balance of the power of the society thus the public policy formulated in such a State arrangement is influenced by the balance of power in the society. Thus it is a structure that is formed on the basis of benefit of both opposing factors. Thus,he is also called the Structuralist.


3) Leviathan State: State is all powerful and having all potentialities and is all encompassing. Leviathan means Gigantic and powerful and was coined and theorised by Thomas Hobbes.
This state has two sides - Demand and Supply
Demand side refers to the demands of the society brought about by the big state and supply side refers to initiation of the State to become a big State.
Public Policy formulation in this kind of a State relates to all areas including developmental and non developmental. People get a chance to voice their view (demand side) and State on its own brings public policy which it feels is beneficial for people(supply side of State).


4) Patriarchal State: It is a feminist view of State as they believe that the State is exploitative towards females and justifies male values and orients towards males.

It has two approaches to it - Radical and Liberal Feminism
i) Radical feminism: These are radicalists and revolutionary ideas and do not believe in reform or gradual change. They believe in confronting the State and demanding their rights at the very moment.

ii) Liberal feminism: This view believes in gradual reform and states that the traditional sphere is believed to be for females and the public sphere is believed to be for males and the State supports this imbalance. However,they believe in taking one step at a time to rectify the gender imbalance in both sectors.


Now since we have studied the theories of State. Now let's move to the practical aspect of State and its various typologies.









TYPOLOGIES OF STATE / ROLE OF STATE & PUBLIC POLICY FORMULATION IN THEM:
1) Minimalist State: Believes in Laissez Faire "leave us alone" policy where state takes up only regulatory role and a non-development role.
Public policy here will be regulative,facilitating (New Right Philosophy).

2) Developmental State: It does allow private players in the public field but the State is proactive in developmental activities and there is private public partnership to achieve the same.
Public policy here is very detailed and gives a clear explanation of each issue.

3) Social Democratic State: Here the State focuses on equity instead of economy and democratic methods are used to achieve the same.
Public policy here is socially oriented.

4) Collectivised State: Private sector is majorly sidelined and the economic planning and development is centralised and in the State's hands.
Public Policy here will do the same and enforce the principles the State follows.

5) Totalitarian State: Here every aspect of society is centralised and controlled by the State totally like education,culture,religion,etc.
Public policy here is made on every aspect and the State performs all the functions alone.


IGNOU Notes - http://www.scribd.com/doc/41289471/Public-Policy


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The next post on this blog will cover:

Techniques of Administrative Improvement:
Organisation and methods, Work study and
work management; e-governance and information
technology; Management aid
tools like network analysis, MIS, PERT, CPM.

Friday, August 24, 2012

Personnel Administration: Importance of human resource development; Recruitment, training, career advancement, position classification, discipline, performance appraisal, promotion, pay and service conditions; employer-employee relations, grievance redressal mechanism; Code of conduct; Administrative ethics.


 
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Today we are to discuss Personnel Administration which is a very important aspect of Public Administration as well as Private Administration,in fact it is the very backbone.


PERSONNEL ADMINISTRATION / HUMAN RESOURCE MANAGEMENT - CONCEPT, MEANING & IMPORTANCE OF ITS DEVELOPMENT:
Personnel Administration is also popularly known as Human Resources Management.Just as people of a country are its whole and sole the same way personnel ( employees) are for an organisation to make it successful. However, manpower(raw labour/people who are able to do work) itself does not contribute to the success/development of the organisation,it has to be converted into human resources through systematic planning,adequate training and proper education. Human resource is converted to human capital through adequate administration and human resources are the most important and valuable asset and part of an organisation as over time their value never depreciates,in fact it only increases with the passage of time unlike other assets and resources of an organisation. Adequate usage of human resources/personnel automatically ensures optimum utilisation of financial,physical and technological resources.

With the emergence of democratic institutions and the welfare state,government as well as corporates' tasks are on a steep increase and so there is an increased demand for personnel at every level in terms of efficient discharge of their duties,and it is the job of the Personnel Administration department to assure that this demand is met at the right time with the suitable candidates.

Personnel Administration does not have a standard definition but still there is unanimity among writers on one that is as put by Flippo " Personnel function is concerned with the procurement,development,compensation,integration and maintenance of the personnel and their inter-relationships in an organisation for the purpose of contributing toward the accomplishment of that organisation's major goals and objectives.

Thus,Personnel Administration deals with recruitment,placement,training,disciplinary measures,curbing nepotism and favouritism,monetary and non-monetary incentives and retirement benefits of the personnel within an organisation as well as handle the nature of personnel relationships in the organisation as well as assisting the top management in negotiating with labour unions. Personnel administration also includes all those activities and functions relating to policy formulation,planning,policy implementation,social change and modernisation,administrative reforms and public relations in an organisation.

Personnel Administration is affected by the socio-economic-political environment as well. For example,in the era of welfare and developmental programmes,personnel/employees are now expected to be more efficient,effective,sympathetic and competent. People's involvement in administration is also increasing via NGOs,NPOs,Civil Society and other policies and programmes of the government.
Personnel are to perform 'line' and 'staff' functions,line functions refer to those activities related to the primary activity of the organisation and the staff functions are those which facilitate and assist the performance of line work. Like staff perform the functions of processing and supplying required number of personnel and training and development of personnel whereas those personnel perform the field and executory works of the organisations goals and objectives.

It is not a simple area of management in today's times as Personnel management/administration has to keep the motivation and morale of the personnel high every time for them to whole heartedly perform the humongous tasks they have at hand efficiently and competently as well as sympathetically.

Thus we can see that without an efficient personnel management/administration or more popularly as it is called Human Resources management contributing to Human Resources/Personnel Development, it is impossible to achieve organisational goals and become a successful organisation.







EVOLUTION AND THEORETICAL DEVELOPMENT OF PERSONNEL ADMINISTRATION:
Though the concept and theory of Personnel Administration has its germination in the West,in India the scene developed via motivation by governmental efforts and managerial preoccupation with welfare concept and frustration with unsystematic recruitment practices,loss making Public Service Undertakings,growing labour unrest,loss of production,etc. It led to establishments of posts like Labour Welfare Officer/Personnel Officer in public as well as private organisations that have evolved over time since the early 1930's.

Taylor's Scientific Management was the foundation stone for the development of this field through his principle of scientific selection and systematic training and development of the worker and Gantt later emphasised on it by adding that together with the above there was also a need for obtaining the willing cooperation of the worker. The same was also emphasised by M.P Follett.

The biggest watershed came with the advent of the Human Relations revolution which made the study/theory of this field interdisciplinary by integrating sociology,psychology,industrial psychology,social psychology,etc that brought in the approach of motivation and morale.
Also a lot of events led to its growth in the practical sense like the shortage of labour and labour issues during the world wars,the Great Depression of 1930's warranted efficient personnel administration for elimination of wastage and maximum utilisation of resources for maximum benefit.







FUNCTIONS OF PERSONNEL ADMINISTRATION / HUMAN RESOURCE MANAGEMENT-

1) MANPOWER PLANNING:
Before the process of Recruitment begins,Manpower Planning precedes it. Now first lets understand what is Manpower Planning. Manpower planning as one of the functions of Personnel Administration is of utmost importance.It is the process of assessment of an organisation's requirements in terms of number of personnel needed for a job,job definition/description,skills and specialisation it incorporates,duration for which the personnel is required,nature of work,objectives of the job in line with the objectives and goals of the organisation,etc. It is a sound manpower planning that gives adequate time for recruitment,selection and training of such personnel,in short it lays down a full blueprint/chart of processes to follow and the time period it should follow.







2) RECRUITMENT:
Once Manpower Planning is done,the process of recruitment begins. Recruitment is the process that entails the search for prospective workers and stimulating them to apply for the jobs put up by the personnel administration on behalf of the organisation. It is based on selection of the best principle where a number applicants are invited for a single job opening and then the unwanted are eliminated selecting the one for the job who suits all the prerequisites suitably. Recruitment can make a break an organisation because even a brilliant training module cannot repair a faulty recruitment. The recruitment process consists of attractive recruitment literature and publicity,finding out target sector and people,usage of scientific tests for ability and aptitude testing of prospective candidates,tapping right candidates from within the organisation as well as outside as the requirement be(sometimes only one way or combined),placement of the right man for the right job and effective probation period process and proper induction into the organisation.







3) TRAINING:
Training is the continuous process of imparting and upgrading/developing professional knowledge,broader vision,correct,ethical and novel patterns of behaviour,habits and aptitudes,awareness of organisational as well as societal objectives,increasing morale and motivation and the employee's potential contribution to the same. It is a ongoing process of response to a need.


Types of Training:

There are two types of training - Formal and Informal.

a) Informal Training - Trial and error method is used and lessons are learnt from the mistakes by employees. The success of this technique of training lies on the experience and seniority of the senior officer and his/her interest in the new entrant.

b) Formal Training - It is the inculcation of administrative skills in the personnel through well defined courses. Examples are - Pre entry training,orientation training,in-service training,vocational training,etc.

Informal training helps in improving the quality of administration whereas formal training helps in the broadening the faculty of the personnel.

Other methods of training can be the lecture method,case-study method,syndicate method (group of individuals or organisations combined or making joint effort to undertake some specific duty/transaction,in this case training purpose),etc.

Every organisation and system of personnel administration must pay immense and minute attention to the training needs of employees of the organisation as it is the heart of the system.







4) CAREER ADVANCEMENT:
Career advancement as a function of personnel administration is concerned with the activities that promote job growth or expansion of job roles/responsibilities.It is how an individual /employee manages his/her career within the organisation(promotion,internal job postings,etc) and between different organisations( shifting jobs,changing organisations for career growth and development/advancement) as well as providing refinement of skills opportunities and knowledge to the employees together with identifying options of growth for them. It is an ongoing and dynamic process.

The Personnel Administration dept/Human Resources management dept has the responsibility to encouraging and supporting in reviewing and re-assessing their goals and activities as well as to provide valuable feedback and learning activities or resources and can contribute significantly to the staff member's career development by supporting career development activities within the department.

The support for career development via the Personnel/Human Resource dept.is important because:
  • Current information about the organization and future trends helps employees create more realistic career development goals .
  • Focus on skill development contributes to learning opportunities .
  • Opportunities for promotion and/or lateral moves contribute to the employee's career satisfaction .
  • A greater sense of responsibility for managing one's own career contributes to self-confidence
  • Career planning and development clarifies the match between organizational and individual employee goals .
  • It's cost-effective to use the HRD(Human Resource dept./Personnel Administration) staff talent to provide career development opportunities within your department .
  • Career development increases employee motivation and productivity
  • Attention to career development helps the HRD attract top staff and retain valued employees
  • Supporting career development and growth of employees is mandated by the Philosophy of Human Resources Management .
Career development can be supported by:
  • Referring to the Employee Development & Training catalog for the career development course listings.
  • Annually, conduct an individual development plan and career discussion with employees and require other supervisors in the concerned department to do the same.
  • Hold supervisors in the respective department accountable for supporting employee development efforts.
  • Create programs and activities to provide skill development, such as job rotation, cross-training, mentoring, internships, coaching, and career strategy groups.
  • Recognize that HRD's role includes providing support and/or release time for staff members' development beyond their current jobs. Refer to the Education and Development Leave policy and the Flextime Scheduling: Guidelines and Procedures policy.
  • Support requests for alternate work schedules from staff members.
  • HRD should serve as a role model by participating in career and professional development opportunities.
  • See staff members' applications for other positions as a healthy sign of a dynamic workplace.
  • Support lateral moves within the organization.
  • Refer employees to the Staff Internship Program to explore opportunities to apply for career development internships or self-initiate an internship in an area of special interest.
  • Create job vacancy listings that allow for the most diverse applicant pool while honoring transferable skills.
Roles the department can play to attain the goal of career development/advancement of employees:

COACH: Helps employees identify strengths, weaknesses, interests, and values by maintaining open, effective communication and ongoing encouragement. Coaching can be improved by:
  • Encouraging two-way dialogue
  • Showing employees how to identify their skills, interests, and values
  • Scheduling uninterrupted career development discussions

ADVISOR: Provides organizational information, realities, and resources to employees. Can improve  advising by:
  • Helping employees develop realistic career goals based on HRD department's needs and their individual development plans
  • Helping employees understand the current opportunities and limitations on the campus
  • Advising employees on the feasibility of various career options

APPRAISER: Evaluates employees' performance in an open, candid way and relates this to potential opportunities. Can improve the appraisal skills by:
  • Providing frequent feedback in a way that fosters development
  • Conducting performance appraisals that define strengths, weaknesses, and career development needs
  • Relating current performance to future potential in realistic ways
  • Using an individual development plan as a tool for continual feedback and development

REFERRAL AGENT: Helps employees meet their goals through contacts with people and resources. You can improve your referral agent skills by:
  • Helping employees formulate development plans and consulting on strategies
  • Providing opportunities for experience, exposure, and visibility, such as committees and task forces)
  • Using personal resources who HRD would know and what the dept. knows to create opportunities
  • Assisting in seeking employees' placement lateral or vertical






5) POSITION CLASSIFICATION:
In Personnel administration position classification means grouping of various positions on the basis of the commonality of responsibilities and duties. It started with the movement of equal pay for equal work. It brings orderliness into the system and makes treatment uniform to people irrespective of their caste,status,birth,age,gender,etc. It also is handy as a functional tool since it makes clear even to the incumbent about his responsibilities and duties as well as hierarchical systems formally associated with his/her position.

A set of similar/identical positions and having identical qualifications,functional and salary structure when put together form a 'class'. In India classes are further grouped into broader occupational groups called 'services' like All India Service,Central and State Services.

The Grade system of position classification is used to denote all 'classes' of positions which (though different in subject matter or kind of work) are sufficiently similar as to the level of difficulty and responsibility and level of qualifications for the job like civil engineer,accountant,geologist,etc.
Each position classification is placed under a 'class' and each class should be placed in the appropriate 'Grade'.

Advantages of position classification:
a) Facilitates Division of work.
b) Removes arbitrary standards.
c) Promotes employee equality and motivation.
d) Ensures effective Manpower planning and utilisation.
e) Lays down uniform work standards.
f) Speeds up recruitment process and indicates training needs.
g) Helps in maintaining updated personnel records.

Disadvantages of position classification:
a) Introduces element of rigidity in personnel system.
b) Under it,it is difficult to shift an employee from one position to another in the interest of the administration.
c) Tends to get stale rather soon and a lot of effort is needed to keep it up to date.
d) Constant pressure from employees to upgrade their positions.







6) DISCIPLINE:
Discipline in simple terms can be stated as the force that prompts individuals,organisations,nations,etc to observe rules and regulations and policies stipulated by the above mentioned which are deemed necessary for the effective running of the same.

How disciple is instilled in an organisation:
a)Clearly stated rules,regulations, objectives and code of conduct of the organisation which are constantly updated and reviewed.
b) No discrimination in enforcing the above.
c) Proper communication among all levels.
d) Strong disciplinary action so that indiscipline is not committed the second time.
e) Practices that breed indiscipline should be discouraged and prevented like favoritism,lack of communication,lack of leadership,low morale and motivation among staff,irregularity and non-punctuality.

Disciplinary actions to be taken and sequence of actions followed from trivial offences to serious:
a) Oral warning
b) Loss of entitlement/incentive
c) Suspension
d) Demotion
e) Appointment termination
f) Dismissal







7) PERFORMANCE APPRAISAL:
A performance appraisal (PA) or performance evaluation is a systematic and periodic process conducted by the human resource/personnel administration that assesses an individual employee’s job performance and productivity in relation to certain pre-established criteria and organizational objectives. It happens annually in most organisations. It also considers other factors as well like behaviour,potential for future improvement,strengths and weaknesses,etc. That is it looks into professional as well as personal accomplishments within the organisation but the focus being on the former more.
It uses a number of techniques to do so like forms to fill in and rate the criteria mentioned on it,one is done by the employee of himself and what he thinks of his management and the other is filled in by the manager or superior officer of the concerned employee which then is followed by an interview with the human resource/personnel administration and the higher management.
It can lead to promotions,higher pay and job responsibilities,etc.
It helps in establishing clear communication and also informs and updates both parties of factors that can be improved upon,goal setting,performance improvement and determination of training needs of the employees.
The personnel administration should ensure a fair,transparent and just performance appraisal system to get out the positive effects of it and promote morale and  motivation by excluding arbitrary actions of higher management.








8) PROMOTION:
Promotion is derived from the Latin word  meaning 'to move forward'. It can be a horizontal (same level) promotion or vertical (higher position) promotion along with higher emoluments and responsibilities.
It is necessary for rewarding an employee for accomplishments and boosting morale and motivation and retain his/her services.
It should be just,fair and equal for the true spirit and benefits of the same to be yielded for the organisation.
The standard specifications should be made clear to all employees of the organisation setting forth the duties,qualifications,merit factors and ways of determining the same should be clearly outlined and specified beforehand so that there is no ambiguity regarding the same in any body's mind.
Promotion as a process is required because from time to time there are vacancies that need to be filled up in an organisation and the best are to be selected for the same from within. There are few posts and many contenders therefore the personnel administration has to be very careful and alert while carrying out the same as a bad promotion policy has major negative ramifications for the whole organisation.

Principles of promotion are:
a) Seniority principle - The employee having the maximum length of service  should be promoted once the senior officer retires/leaves. The merits are that it is easy to follow,promotes equity,filters out nepotism and favouritism,reduces unhealthy rivalry. Its drawbacks are that it does not necessarily select the best and most deserving,it leads to demoralisation of employees in matters of work and initiatives because all they will be concerned about is maximising their tenure and nothing else,etc.
 It has been agreed by many that for promotion to higher posts the principle of merit should be followed,in promotion to secondary posts there should be merit first and secondary should be seniority.and in promotion in lower level positions the principle of seniority works well because higher positions need qualities more than age to be carried out.

b) Merit Principle: It is the opposite or counter view to the seniority principle and advocates the technique of tests like aptitude and personality,etc and specific criteria to determine the best candidate for promotion amongst the respective class/grade/service/rank,etc.
There are various methods used to determine merit which are Written exams,Direction of the head of department(like the recent appointment of Cyrus Mistry as head of Tata group on the methods prescribed by the owner Mr. Ratan Tata),Efficiency ratings like production/work records and personality potential,etc. And the last is the interview method that brings out the personal as well as professional characteristics of the person spontaneously in front of distinguished panelists.

For a sound promotion system there should be a sound and just promotion policy outlined and clearly communicated to the employees and they should be provided with all the opportunities to bring them on equal footing with the other contenders as well as there should be a promotion grievance board setup with a representative if the head of organisation presiding over to hear appeals against the same.







9) PAY AND SERVICE CONDITIONS:
Pay is one of the mainsprings of motivation in a society and together with appropriate working conditions it is the base of a sound organisational system and it's functioning.
A salary scale should be determined on the basis of the current and expected cost of living of an individual and his family.There should be equal pay for equal work with no discrimination at all in the same.The minimum wages benchmark should be religiously followed. Public and private jobs should have less salary disparity as possible between each other as well as within their respective same sectors. A sound and attractive incentive scheme to boost efficiency and production.

SERVICE CONDITIONS Proper leave structure,holidays list and hours of work,rest periods,staff welfare and office accommodation conditions,health care policy and housing policy should be clearly defined and communicated to the employee. The hygiene factors that affect the productivity of the employee like proper ventilation,lighting and noise reduction premises as well as proper sanitation should be taken good care of. Drawbacks like unnecessary documentation,complex policies and delay due to the same should be checked and avoided for it to function properly and keep the employees charged.

There should also be a neutral and just board/system set up for grievance redressal regarding the same in the organisation for the above process and function so that it is kept up to date and relevant with the current needs and changing times and does not become redundant leading to employee dissatisfaction and attrition at times.







10) EMPLOYER - EMPLOYEE RELATIONS:

Employer employee relations can be amplified and made better through the following mechanisms that are already being followed:

A) Employee Unions: From private organisations right to civil servants there have always been associations of all co-workers who come together for collective bargaining and negotiations on their behalf where an individual voice could be drowned out. This is encouraged by the govt. as well a employers in other organisations as it helps maintain that they have a concern for the employees with a view for transparency and open communication and that team work and relations are bettered leading to better quality of work and efficiency. As civil servants under the civil services rules and regulations have been denied the right to strike and participate in political activities given their sensitive positions and tremendous importance in the service of the country,therefore this is the recourse they have taken to protect themselves and make the govt. hear their grievances and solve the same. These associations have been recognised by the govt officially under central Civil service(Recognition of service association) rules,1959.


B) Joint consultative machinery: It consists of representatives from both sides of parties,that is,from the employer side as well as from the employees' side who sit across to get a means of clear communication between the two and work towards a solution unitedly and in the benefit of both. Staff councils at various ministries of govt,departmental councils in various departments,etc are examples of the same. It is a voluntary machinery where on a particular subject of disagreement the both parties sign a joint intent agreement and enter into a joint discussion machinery mode. Sometimes the respective parties also form committees to study the matter and advise them or arbitrate on their behalf if the final authority which is the cabinet rejects the joint declaration and sends back for reconsideration. Most of the times the arbitration is done by a Compulsory Arbitration Board consisting of three members where one is drawn from a panel of five names submitted by the official side that is the parties concerned,second from similar panel submitted by staff side of the National council(apex body of all joint councils in all ministries and departments in the nation consisting of 85 members,25 of whom are nominated by the govt. and rest by the staff of various associations/unions/federations,etc), and the chairman is an independent,just and neutral candidate having no connection with anyone. All of them are selected by the Ministry of Labour and the first board was set up in 1968. It adjudicates in matter relating only to pay and allowance,weekly hours of work and leave of a class or grade of employees. No individual cases are taken. Its guidelines are binding on both parties for five years until repealed by parliament on grounds of national economy or social justice.

C) Rights of public servants: Fundamental rights from article 14 to 32 listed under part 3 of the Indian constitution, can refer to link: http://en.wikipedia.org/wiki/Fundamental_Rights_in_India

D) Motivation and Morale: We have discussed this in the previous article on this blog with the heading "Administrative Behaviour" , refer to link :
http://publicadministrationtheone.blogspot.in/2012/07/process-techniques-of-decision-making.html







11) GRIEVANCE REDRESSAL MECHANISM:
This topic has been discussed in a previous article of this blog (read Tribunals CAT and SAT,etc) under the heading "Administrative Law" , refer to link : http://publicadministrationtheone.blogspot.in/2012/08/administrative-law-meaning-scope-and.html






12) CODE OF CONDUCT:
 A right code of conduct should be prescribed by organisations to put the employees/personnel on the right track and get the goals of the organisation realised because if left to the employees to do the same each one will have their own way of doing so and that will lead only to disharmony and chaos.
Code of conduct of civil servants:
a) restrictions on political activities.
b) Political neutrality.
c) Restrictions on relation with mass media,outsiders and indulging in criticism of government as well as public demonstrations and accepting gifts/presents.
d) Restrictions on matter of private business/employment,property apart from government sanctioned ones,and investments speculation that he is privy to that could cause him or any pvt organisation undue benefit(like stock market trading,etc).
e) No disclosure of Official documents/information to anyone not authorised to receive the same.

Any deviation from the above will invite strict disciplinary action which has been discussed above under the sub title of " Discipline".






13) ADMINISTRATIVE ETHICS:
Manipulation and lack of ethics lead to humongous negative effects and reduce efficiency in an organisation. Therefore the enforcement and development of administrative ethics in public servants in today's welfare state times as well as the sensitive position they occupy is of utmost priority and urgency.
The essentials to ensure the practice of ethics in administration are:
a) Faith,determination towards pursuit of excellence of service in their professional activities via methods of training and sensitisation.
b) Infusion of ethics into politics through trainings,etc so that it is passed on to their sub ordinates that are the civil servants.
c) Relations between citizens and personnel to create favourable opinion of society and people towards public services and servants.
d) Need for character building in public servants through education,adult education and functional or job responsibility literacy.
e) Impartiality should be practiced and encouraged.
f) Political neutrality in civil servants.
g) Education of people and society regarding their rights the work of public servants and redressal mechanisms available to the people against them and the government.







14) LEGAL FRAMEWORK TO CHECK EROSION OF ETHICS AND CORRUPTION:
a) Prevention of Corruption act 1947 and 1988. Please refer: http://en.wikipedia.org/wiki/Prevention_of_Corruption_Act,_1988 & http://www.lawyersnjurists.com/resource/legal-documentations-litigations/laws-of-bangladesh/1943-1956/the-prevention-of-corruption-act-1947/


b) Civil Servants Conduct Rules like All India Service Conduct Rules 1954,Central Civil Services Conduct Rules 1955,Railway services conduct rules 1956. Refer to: http://vigilance.bsnl.co.in/Acts_and_Rules/CCS(Conduct)_Rules_1964_20.1.2006.pdf


c) Santhanam Committee . Refer: http://arc.gov.in/arc_12th_report/ARC_12thReport_Ch7.pdf


d) Central Vigilance Committee & State Vigilance Committee (already discussed in previous articles) , refer to link :
http://publicadministrationtheone.blogspot.in/2012/08/accountability-and-control-concepts-of.html


e) Central Bureau Of Investigation , refer to : http://cbi.nic.in/history.php


f) Lok Pal and Lok Ayukta (discussed in previous articles) , refer to link :
http://publicadministrationtheone.blogspot.in/2012/08/accountability-and-control-concepts-of.html


For a clear and detailed understanding if the Administrative Reforms Commission and their recommendations till date please refer : http://darpg.nic.in/ArticleContent.aspx?category=106






15) RETIREMENT :
Retirement as a function of Personnel Administration as well as from an organisational point of view is extremely necessary as it helps increase efficiency of public services and organisations by eliminating employees from services due to old age,infirmity,inability to perform duties anymore,etc. It is essential to maintain the system of promotion as the employees have to retire at a certain age and also this policy helps bring in new and fresh blood and ideas. A sound system of pension and retirement benefits help attract and retain the best talents as they do not have to worry about their future. The basic guidelines,rules and regulations of the same have been laid down and prescribed by the state/govt. and updated from time to time and proper adherence is mandatory.

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The next article on this blog will cover:
 
Public Policy:
Models of policy-making and their critique;
Processes of conceptualisation, planning,
implementation, monitoring, evaluation
and review and their limitations; State theories
and public policy formulation.