Management Of Capital Adequacy In Indian Commercial Banks Finance Essay - Free Essay Example

The banking system is a vital part and decides the progress of the nations economy. Banks play an important role in the mobilization and allocation of resources in an economy. The sound financial position of a bank is the guarantee not only to its depositors but equally important for the whole economy of the nation. Several committees have emphasized the need to improve the performance of the commercial banks. In India, the priorities in banking operations underwent far reaching changes since the banking sector reforms have been set in motion. In this paper, an effort has been made to evaluate the capital adequacy of the commercial banks in India with especial reference to the public sector, private sector and the foreign bank. The study is diagnostic and exploratory in nature and makes use of secondary data. The study finds and concludes that the above mentioned banks have significantly improved their capital adequacy norms. I. Introduction Capital adequacy is a mirror of the inner strength of a bank, which would stand it in good stead during the times of financial crisis. Capital adequacy may have a bearing on the overall performance of a bank, like setting up of new branches, fresh lending in high risk but profitable areas, manpower recruitment and diversification of business through subsidiaries or through specially designated branches, as the Reserve Bank of India (RBI) could think these operational dimensions to the banks capital adequacy achievement. As per the RBI norms, through its direction in 1992, whereby each bank in India was required to meet the capital adequacy standard of 8%, the norms were fixed on the basis of the recommendation of the Basel Committee. Many researchers like Tyagarajan, M. 1975, Chidambaram and Alemelu (1994), Kaur and Bhatia (1998), Padmanabhan, K.1998, Desai and Farmer (2001), Edirisuriya and Fang (2001), Mittal (2001), Reddy (2004), Mohanty (2006), Syed Ibrahim, M.2010 and Mohi- ud-Din Sangmi and Tabassum Nazir (2010) have attempted to make a contribution in the field. Among all these researchers, no one has attempted to make the study of capital adequacy analysis exclusively up to the years 2009. It is against this backdrop that the present study has been undertaken to fill up this gap. II. Statement of the Problem Bank capital plays a very crucial role in the safety and soundness of individual banks and the banking system. Basel Committee for Bank Supervision (BCBS) has prescribed a set of norms for the capital requirement for the banks in 1988 known as Basel Accord I. Basel Committee has revised the guidelines in the year 2001 known as Basel II norms. These norms ensure that capital should be adequate to absorb unexpected losses or risks involved. If there is higher risk, then it would be needed to back up with capital and vice versa. All the countries establish their own guidelines through their central banks for risk based capital framework known as capital adequacy norms. Hence, capital adequacy measures the strength of the bank. III. Objectives of the Study The primary objective of this study is to analyze the capital adequacy of public sector bank (State Bank of India); to analyze the capital adequacy of private sector (Bank of Rajasthan); to analyze the capital adequacy of foreign bank (ABN Amro Bank) ; and to suggest measures, on the basis of the study result, to improve further the capital adequacy of the banks under study. IV. Hypotheses of the Study Hypotheses framed for the study are as follows; There is no difference in performance of CAR among these three banks (Ho); There is difference in performance of CAR among these three banks (H1). V. Methodology of the Study Methodology describes the research route to be followed, the instruments to be used, universe and sample of the study for the data to be collected, the tools of analysis used and pattern of deducing conclusions. For the purpose of the present study, ratios are used to evaluate the capital adequacy of the three banks. As far as the sample of the study is concerned, three banks were selected. The first one is State Bank of India (SBI) representing the public sector banks, the second one is Bank of Rajasthan (BOR) representing the private sector banks and the third one is ABN Amro Bank representing the foreign banks operating in India. The present study is diagnostic and exploratory in nature and makes use of secondary data. The relevant secondary data has been collected mainly through the data bases of Reserve Bank of India (RBI), various reports and other studies. Journals such as the Banker and the Journal of Indian Institute of Bankers have also been referred to. An attempt has be en made in this paper to examine the capital adequacy of the above mentioned three banks. The study, as limitations, is confined only to the capital adequacy ratios, for the recent six years period starting from the year 2004 to the year 2009. In order to analyze the data and draw conclusions in this study, various statistical tools like Descriptive Statistics and ANOVA-Single Factor have been done using EXCEL and SPSS Software. VI. Analysis and Discussion 1. Capital Adequacy Ratios of Tier-I and Tier-II Capitals of State Bank of India For computation of the capital adequate ratio, capital is classified Tier-I and Tier-II capitals. Tier-I capital comprises the equity capital and free reserves, while Tier-II capital comprises subordinated debt of 5:7 year tenure. The capital adequacy ratios of the bank (SBI) under study are given in Table-1. Table-1. Capital Adequacy Ratios of Tire-I and II Capitals of SBI Years Tier-I Capital Tier-II Capital 2004 8.34 5.19 2005 8.04 4.41 2006 9.36 2.52 2007 8.01 4.33 2008 9.14 4.40 2009 9.38 4.87 Mean 8.711667 4.405 S.D. 0.653006 0.928152 C.V. (%) 7.49 21.65 Source: Databases of Reserve Bank of India, 2009. It is exhibited in the table 1 that CAR of the Tier-I capital of State Bank of India has been increased from 8.34% in 2004 to 9.38% in 2009. But the Tier-II capital of CAR has been declined from 5.19% in 20041 to 4.87% in 2009. Tier-I capital of the CAR is found to be more consis tent as its CV is less than that of Tier-II capital. Hence, it is concluded that SBI has been quite successful bank so far as its Tier I and II capitals are concerned. In order to test whether the Tier-I Capital of the State Bank of India has the linear relationship with the Tier-II Capital, the CORRELATION tool was performed. The results are furnished in Table-2. Column 1 Column 2 Column 1 1 Column 2 -0.38145 1 The Tier-I and II Capitals of the SBI is very strong negative correlation as the linear correlation co-efficient is -0.38145. 2. Capital Adequacy Ratios of Tier-I and Tier-II Capitals of Bank of Rajasthan The year-wise CAR of the Tier I and II capitals of the Bank of Rajasthan are furnished in Table-3. Table-3. Capital Adequacy Ratios of Tire I and II Capitals of BOR Years Tier-I Capital Tier-II Capital 2004 8.35 2.83 2005 7.84 4.91 2006 6.90 3.70 2007 6.62 4.70 2008 6.10 5.77 2009 6.19 5.31 Mean 7 4.536667 S.D. 0.91089 1.086088 C.V. (%) 13.01 23.94 Source: Databases of Reserve Bank of India, 2009. The analysis in table 3 reveals that the Tier-I and II capitals of the CAR have not been successful. The Tier-I capital ratio has been decreased from 8.35% in 2004 to 6.19% in 2009. Whereas, the Tier-II capital ratio of the Bank of Rajasthan have shown up from 2.83% in 2004 to 5.31% in 2009. Tier-I capital seems quite consistent as standard deviation being only 13.01%. 3 Capital Adequacy Ratios of Tier-I and Tier-II Capitals of ABN Amro Bank The year-wise CAR of the Tier I and II capitals of the ABN Amro Bank are presented in Table-4. Table-4. Capital Adequacy Ratios of Tier I and II Capitals of ABN Years Tier-I Capital Tier-II Capital 2004 11.49 1.99 2005 7.89 2.66 2006 7.18 3.26 2007 7.33 4.01 2008 7.24 5.68 2009 7.48 5.23 Mean 8.101667 3.805 S.D. 1.679255 1.448485 C.V. (%) 20.72 38.06 Source: Databases of Reserve Bank of India, 2009. It is exhibited in the table 4 that CAR of Tier I capital of the AMN Amro Bank has been decreased from 11.49% in 2004 to 7.48% in 2009. But Tier-II capital ratios have been steadily increased from 1.99% in 2004 to 5.23% in 2009. The year 2008 registered a higher rate. It is found that Tier-I capital ratio is more consistent as its CV (20.72%) is less than that of Tier-II capital ratio (38.06%). 4. Overall Capital Adequacy Ratios of SBI, BOR ABN Amro Bank Capital Adequacy Ratio (CAR) is the ratio which determines the capacity of a bank in terms of meeting the time liabilities and other risk such as credit risk, market risk, operational risk etc. It is a measure of how much capital is used to support the banks risk assets. Table-5 provides the CARs of the banks. Table-5 Capital Adequacy Ratios of the three banks Years SBI BOR ABN 2004 13.53 11.18 13.48 2005 12.45 12.75 10.55 2006 11.88 10.60 10.44 2007 12.34 11.32 11.34 2008 13.54 11.87 12.92 2009 14.25 11.50 12.66 Mean 12.99833 11.53667 11.89833 S.D. 0.908568 0.726104 1.294765 C.V. (%) 6.98 6.29 10.88 Source: Databases of Reserve Bank of India, 2009. Table 5 highlights the overall capital adequacy ratios of all the three sectors of banks. Both the public sector bank (SBI) and the private sector bank (BOR) have improved progressively but the foreign bank (A MN Amro. Bank) shows the unhealthy sign as it has been decreased from 13.48% in 2004 to 12.66% in 2009. Even though, CAR of SBI seems to be higher than that of other two banks in 2009, the BOR which seems quite consistent as the standard deviation being only 6.29. To test the differences in the CAR of the public sector bank (SBI), the private sector bank (BOR) and the foreign bank (ABN Amro Bank), Single Factor ANOVA has been performed. The Hypotheses framed are as follows: Ho: There is no difference in performance of overall CAR among these three banks; H1: There is difference in performance of overall CAR among these three banks. The test results are given in Table-6. Table-6 ANOVA-Single Factor. (CAR of SBI and BOR) SUMMARY Groups Count Sum Average Variance Column 1 6 77.99 12.99833 0.825497 Column 2 6 69.22 11.53667 0.527227 Column 3 6 71.39 11.89833 1.676417 ANOVA Source of Variation SS df MS F P-value F crit Between Groups 6.954544 2 3.477272 3.443821 0.058775 3.68232 Within Groups 15.1457 15 1.009713 Total 22.10024 17     The mean level of private sector bank- BOR, (11.53667) is less than that of other two sectors of banks namely foreign bank- ABN Amro (11.89833) and the public sector bank-SBI (12.99833). According to the test result, F=3.443821, with a critical value of. .05, the critical F=3.68232. Therefore, since the F statistic is less than the critical value, we fail to reject the null hypothesis that there is no difference in performance of CAR among theses three sectors of bank. VII. Findings and Suggestions The analysis and discussion in the proceeding pages reveal that the State Bank of India (SBI) ,being a public sector bank, has managed to do well in relation to the Tier-I and Tier-I capitals. It was found that there is no significant association between the Tier-I and Tier-II capitals of SBI. As far as the Tier-I and Tier-II capitals of the Bank of Rajasthan, being a private sector bank and the ABN Amro Bank, being a foreign bank is concerned, they have not shown significant performance. The performance of BOR and ABN Amro have been just the opposite as that of the SBI. Regarding the overall Capital Adequacy Ratio (CAR), the SBI registered increased percentage especially in the year 2007 and after. But, compared to SBI and foreign bank of ABN Amro, the Bank of Rajasthan seems quite consistent. It was also found that there is no significant difference in performance of CAR among these three sectors of banks. As far as the CAR is concerned, the managements of both the Bank of Rajasthan and ABN Amro Bank needs to increase the level of Tier-I and II capitals so that these banks could be at-par with the performance of capital adequacy of the SBI. VIII. Conclusion Banks have to disclose Tier-I and II capitals under disclosure norms in the balance sheet. They also have to submit a report on capital funds, conversion of on and off balance sheet items, calculation of risk weighted assets and capital to risk asset ratio. Under Basel II norms the prescribed capital adequacy norms in the case of scheduled commercial banks should be9%; for new private sector banks and the banks undertaking, the insurance business should be 10%. The higher the capital adequacy ratio (CAR), the stronger is the bank. However, a very high CAR indicates that the bank is conservative and has not utilized the full potential of its both the capitals. So far as CAR is concerned, all the three sectors of bank have managed their capital adequacy ratio well above the minimum standard 10% fixed by the Reserve bank of India (RBI). IX. Scope for Further Research Capital Adequacy ratio (CAR) is a ratio that regulators in the banking system use to watch banks health, specifically banks capital to its risk. Regulators in most countries define and monitor CAR to protect depositors, thereby maintaining confidence in the banking system. This research paper and its findings may be of considerable use to banking institutions, policy makers and to academic researchers in the area of banking performance evaluation with special reference to capital adequacy. X. References Avkiran, N.K. 1999. The Evidence of Efficiency Gains: The Role of Mergers and the Benefits to the Public. Journal of Banking and Finance, Vol. 23, 991-1013. Bhatia, S. and Verma, S. 1998-99, Factors Determining Profitability of Public Sector Banks in India: An Application of Multiple Regression Model. Pranjan, Vol.XXVII (4), 433-445. Chidambaram, R.M. and Alamelu, K. 1994. Profitability in Banks, a matter of Survival. The Banker, May, 18, 1-3. Das, Abhiman, 2002. Risk and Productivity Change of Public Sector Banks, Economic and Political Weekly, February 2. Dasgupta, D. 2001. Profitability of Indian Public Sector Banks in the light of Liberalization of Indian Economy: An Overview. The Management Accountant, Vol.36 (9), 693-698. Desai, B.H. and Farmer, M.J. 2001. Taxonomic Evaluation of Banks Profitability Perfornmance, ICWAI-The Management Accountant, 36 (12), 885-891. D Souza, Errol, 2002. How Well Have Public sector banks done? A Note. Ec onomic and Political Weekly, March 2. Edisurya, P. and Fang, V. 2001. Financial Deregulation and Financial Performance: A Comparative Study of Indian Banks and selected OECD Banks. 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Approaches To Management Structure And Culture Business Essay - Free Essay Example

In the twenty-first century the world of work in which a manager operates is one of continuous change and the most important management skill is the management of change. The strategic importance of management to national economies has grown considerably over the last quarter of century (Cole.G.A, p.87) Organisations as well as Flower Power have to deal with the consequences of ever more rapid innovations in technology, which has revolutionised many of the processes by which goods and services are made available to customers and they have to face with increased expectations of customers for the quality and variety of goods and services (Hannagan, T., p.5) Since the second half of the 19th century, when the economy is the leading European countries (Britain, France , Germany) entered the stage of monopoly capitalism, the issues of organizational management acquire independent value, and interest has since consistently high. By that time, organizational management stands out as an independent science, where introduced the first theoretical works in this area of expertise. The scientific management approach developed by Frederic Taylor, pioneered scientific management,is based on the concept of planning work to achieve efficiency, standardisation, specialization and simplification. Frederic Taylor, suggested that systematic investigation could indicate proper methods, standards and timings for each operation in an organisations activities. The responsibility of management was to select, train and help workers to perform their jobs properly. The job of management was to plan and control the work. The responsibility of workers was simply to accept the new methods and perform accordingly. The practical application of this approach was to break each job down into its smallest and simplest component parts or motions: each single motion in effect became a separate specialized job to be allocated to a separate worker. Workers were selected and trained to perform s uch jobs in the most efficient way possible, eliminating all wasted motions or unnecessary physical motion. The philosophical foundation of Taylor was the concept of so-called economic rights, received in the same period widespread. The basis of this concept laid the claim that the only motivation driving people are their needs. Taylor believed that with the help of a feasibility wage system can achieve maximal productivity. Scientific management developed towards the end of the 19th century, concentrated on how was work organised on the factory floor, while administrative management considered the organisation as a whole. This developed into bureaucratic management where the emphasis has been on designing an impersonal, rational basis for managing an organisation with clearly defined structures and lines of authority and accountability and the uniform application of standards rules (Hannagan.T, p.273). French engineer and manager Henri Fayol laid down the principles of manage ment, which asked to be guided in solving administrative problems and carrying out the functions of management. Fayol formulated 14 principles of management to the activities of senior management such as authority and responsibility, discipline, equity, scalar chain necessary for effective management of the company. Principles Fayol divided into three groups: structural, procedural and effective. Fayol pointed out that their use should be flexible and take into account the situation in which control is exercised. Summing up his long-term observations, Fayol created a theory of administration. The aim of the school administrative Fayol was the creation of universal principles of management, following which, the organization would undoubtedly succeed. Fayol believed that with scientific forecasting and proper methods of management, satisfactory results were inevitable. Compared with Taylor,Fayol had a comprehensive view of management very similar to modern ideas(Hannagan,T.p714) By de finition, A. Fayol control means to anticipate, organize, manage, coordinate and supervise Fayol suggested that control means to lead the organization to its goals, deriving the maximum possible from all available resources at its disposal. The control occupies a significant place in the activities of senior management personnel and a much smaller in the activities of personnel directly engaged in production, or junior management staff. Specifically emphasizes that managerial activity is universal for any organization. Fayol was first proposed to consider the proper management activities as an independent object of research. He identified five key elements which, in its opinion, consist of administration functions: forecasting, planning, organization, coordination and control. Fayol theory gives a clear overview of the tasks of the head: look to the future (someone in the organization must plan, make a prediction), organize, coordinate their offerings to the heads of other departmen ts, manage a team, therefore, always maintain contact with his subordinates to know their needs and desire to help, to implement in their hopes and aspirations. For the effective functioning of the organization needed a plan that has the unity, continuity, flexibility and accuracy. Fayol was convinced that the administrative abilities cannot develop, receiving only special education. Not only knowledge but also the ability, individual characteristics contribute to the manager. A manager is a combination of intellectual power and emotional impact. Administrative School has had a major impact on management practices, as its representatives for the first time an extensive effort to develop and put into practice the principles that are suitable for all levels of management. Many management principles still have practical value. For example, the Japanese company. Mitsusita Electric is guided by the following seven management principles: objectivity, fairness, solidarity, accomplishment, humility, harmony, score they resonate with the principles developed by Fayol. Max Weber developed a theory of authority structures and gave attention to the significance of large organisations.He described an ideal type of organisation that he called a bureaucracy,characterizide by division of labor,a clearly defined hierarchy,detailed rules and regulations,and impersonal relationships. Weber also believed that technical competence should be emphasized and that performance evaluations should be made entirely on the basis of merit.His theory became the design prototype for many of todays large organisations. In early twentieth century writers such as Mary Parker Follett and Elton Mayo recognised the limitations of the scientific management perspectives(Boddy.D,p.54)Classical management thought took the organisation to be a machine and the formal, designed organization as the only thing of importance. It took human behaviour within the organisation to be rational in the sense of the economist and it took hierarchy and rules at their face value (Puxty.A, p.29).Follet was the first who defined management as enforcing work with others. Follett introduced many new elements to the classical management approach especially in the areas of human relations and organizational structure. Follett recognized that organizations could be viewed from the perspective of individual and group behaviour. She was convinced that no one could become a whole person except as a member of a group; human beings grew through their relationships with others in organizations. The managers job was to harmonize and coordinate group efforts. Follett asserted that managers and workers should view themselves as partners as part of a common group. She proposed that managers should rely more on their expertise and knowledge to lead subordinates rather than on the formal authority of their position. Follett addressed issues that are timely today, such as ethics, power, and how to lead in a w ay that encourages employees to give their best. The schools human relations,focuses on the psychology of attitudes, behaviors and needs of individuals, social interaction and group interests. There are three field areas: human relations, human resources, and behaviorism. E. Mayos impact on the replacement of the concept of rational worker concept social worker. Mayo concluded that behaviour and sentiments are closely related, that group influences significantly affect individual behaviour that group standards establish individual worker output and that money is less a factor in determining output than are group standards, group sentiments, and security.Elton Mayo stated that employees would work harder if they believed management was concerned about their welfare and supervisors paid special attention to them. This phenomenon was subsequently labelled the Hawthorne effect. These conclusions led to a new emphasis on the human factor in the functioning of organizations and the attain ment of their goals. The Hawthorne studies stimulated an interest in human factors. Current organizational practices that owe their roots to the Hawthorne studies include attitude surveys, employee counselling, management training, participative decision making, and team based compensation systems. The behavioural approach is also known as the neo-human relations perspective. The human resources perspective combines prescriptions for design of job tasks with theories of motivation. In the human resources view, jobs should be designed so that tasks are not perceived as dehumanizing or demeaning but instead allows workers to use their full potential.The best-known contributors to the human resources perspective are Abraham Maslow, Douglas McGregor, and Frederick Herzberg. Abraham Maslow , a practicing psychologist, proposed a hierarchy of five needs: physiological, safety, social, esteem, and self-actualization. In terms of motivation, Maslow argued that each step in the hierarc hy must be satisfied before the next level can be activated and that once a need was substantially satisfied, it no longer motivated behaviour. Douglas McGregor formulated two sets of assumptions Theory X and Theory Y about human nature.Theory X presents an essentially negative view of people. It assumes that they have little ambition dislike work, want to avoid responsibility, and need to be closely supervised to work effectively.Theory X formulates the philosophy of management and control of traditional management. Manager tells people what to do, and often resorted to incentives or penalties in the course of work.Theory Y is a new approach to management. Theory Y offers a positive view, assuming that people can exercise self-direction, accept responsibility, and consider work to be as natural as rest or play.The point of theory Y is that organizations can take advantage of the imagination and intellect of all their employees. Employees will exercise self-control and will contri bute to organizational goals when given the opportunity. Frederick Herzberg suggested that only higher psychological needs for growth, challenge, responsibility, and self-fulfillment can positively motivate employees to improved performance.Another category within the behavioral approach encompasses the behavioral science approach, which relies on the scientific method for the study of organizational behaviour.Behavioral science draws from sociology, psychology, anthropology, economics, and other disciplines to understand employee behavior and interaction in an organizational setting. This approach can be seen in organizations even today when, for example, a firm conducts research to determine the best set of tests, interviews, and employee profiles to use when selecting new employees. The behavioral approaches contributed an important awareness of the influence of the human factor at work on organizational performance and the need to offer job   Ãƒâ€šÃ‚  Modern management practices are based on consulting people and giving them responsibility for their work,while scientific management was based on telling people how to increase their earnings,training them and then expecting them to go ahead and do it(Hannagan.T,p.713) In the present time there is no single approach to management. In various companies have different approaches, directions, concepts of business management. Management is a fundamental discipline, who need to know any entrepreneur. The process of strategic planning involves a number of important operations: planning, costs, production planning, sales planning, and finally, the Finance plan. Preparing todays managers-professionals is impossible without knowing the history of management development. Main role of management is to unite people together in order to accomplish achievable goals. Management mobilize or allocate resources to different department like Human resource, Finance, IT department and organize these resources in such a way that organizational strategic goals are accomplished easily in the long run. Management also takes vital part in planning,leading and controlling. In short, it takes part in each and every step of the organization. It gives direction, aligns and achieve organization goals with available resources.Every organization requires planning, direction, organization and control for it to set off and continue to grow. It is the role of management to perform such duties for the perpetual existence and increased productivity of the organization.Management plays a crucial role in business by doing planning. A business must have goals and objectives, as well as the course of action that must be taken to achieve them. Management make this happen. They set goals and objectives for the business. At the same time, they plan on how they will achieve them, and offer guidelines to the rest of the team members.Management also has important role in organizing.Management determines the internal stru cture of the organization, such as assigning roles to different people in different departments. After determining the course action, management must determine what kind of management structure they need to follow. This is where they design organizational charts and assign roles to different titles or people.Also management play role in staffing. Managers are tasked to recruit, hire and train people to perform various functions in the business, as laid out in the organizational structure. They also make decisions regarding how much they should pay the employees as well as their benefits, if any. Control is one of the major roles of management. It is necessary to set performance standards based on the established goals and objectives of the organization. This is to be used as a yard stick to measure the performance and compare it with the projected outcome. And if deviations should occur, it is managements responsibility to take necessary action. A business cannot perform without some form of control and this is where management comes in. An important role management must play is the decision maker. This applies to financial, budgetary, personnel, policy and security judgments. These are not always easy decisions, but they must be made and management takes on that dutGood manager realizes the value of a companys employees and leads with the intent to motivate their staff. Manager understands how to properly delegate and empower employees, and also recognizes and acknowledges good performance by offering regular feedback and praise. Over the years the role of management has evolved. In years past managers were frequently controlling, privileged, authoritative, and aloof; for the most part out of touch with their employees working on the floor. Todays managers recognize the value of a team-oriented environment and as a result act more as a facilitator and a mentor. In this approach they offer guidance and leadership to staff instead of working behind closed doors. Nowadays managers are moving towards participating as hands-on team members themselves rather than putting their focus solely on supervision and directives. Most businesses still work on a hierarchal structure, but many are navigating towards flattened, or horizontal structures. This structure is becoming more popular among smaller businesses and within singular divisions in larger companies because it allows employees to have a level of involvement in decision making processes. This is done with the anticipation of productivity increasing. In larger companies management cannot effectively function in this way simply because of their size, but within individual divisions, this way of thinking often yields success. In todays business atmosphere managers are learning how to successfully integrate the traditional key functions with new organizational concepts to achieve a good balance which works within their company. As a part of the managerial toolbox, successf ul managers possess the technical and administrative knowledge necessary to execute company objectives and use this to evaluate strengths and weaknesses, liabilities and monitor quality management and control. To stay competitive manager today illuminate goals, generate innovation and creativity. They also know how to maintain strong communication both externally and internally in their organization and how to integrate these skills within the decision making process. Management plays a central role in business. The Keiths approach mainly based on instruction and observation of employees.Many managers have been promoted internally without any training or support to help them understand role and activities of management. There is an on-going search for alternative approaches to Flower Power management. The human relation approach, which seeks the human relations pertains to motivating people in organisations in order to develop teamwork which effectively fulfils their needs and leads to achieving oganisational goals could be a suitable option in Flower Power situation. In co-operation with training company Flower Power management could organise a training course Alternative approaches to management . This course would be aimed at staff of Flower Power departments working in management . The course would give participants the chance to reflect on current and traditional Flower Power management approaches, and learn about new approaches to management. Special attention would be given to advantages and disadvantages, to social and science aspects of Flower Power management. Management should reflect new thinking if the available resource is to be well maximized. Of the 6,700 businesses, around 80% of these belong to a relay organisation such as InterFlora, Teleflower or Flowergram. The benefit of belonging to such an organisation is that by providing support in marketing and sales, and product and design, and as a result of their international links, they al low the business to compete with multi-national firms, and respond to a changing market. (For example, approximately 80% of Dutch-imported flowers in the UK now go to supermarkets.)A relay organisation allows a person in one part of the country to send flowers to a person in another part of the country by using a network of florists. The operation is relatively straightforward. There is always competition, and the floristry industry is no exception. Management should handle all aspects of planning, purchasing, sales, personnel, promotion, and production. As the company grows, a more formal management hierarchy should be developed. Manager should be able to select a management approach that is most appropriate to the desired need or goal. Managing and leading are two different ways of organising people. The manager uses a formal, rational method whilst the leader uses passion and stirs emotions. William Wallace is one excellent example of a brilliant leader but could never be thou ght of as the manager of the Scots! Decentralization The Washington Post Company operates in a decentralized manner. While sharing common goals and values, each of the Companys divisions has its own identity, workplace culture and way of doing business. Division management is responsible for its operations.