Chapter - VII

HRM Practices, Labour Productivity and Financial

Performance - A Study of Interrelationship

• Introduction

• HRM Practices

01. Identification of Best Practices

02. HRM Practices in SRTCs - An Evaluation

• Labour Productivity

01. Improving Productivity

• Financial Performance

01. Improvement of Service Quality

02. Customer Satisfaction and Retention

03. Financial Performance of SRTCs in Kamataka

• A Study of Interrelationship

• Conclusion
Introduction

Human Resource (HR) is expected to make a substantial contribution to the

overall performance of an organisation and it is undoubtedly the most important
of all the resources. Optimum use of this resource contributes a great deal
towards achieving financial viability of any organization. This is more so in the
case of SRTCs as they are more labour intensive. It is very difficult to obtain
higher labour productivity unless the corporations follow the best HRM practices.
However, the difficulty is how to determine the best practices in various HR-
related decisions. Another point is people are the most difficult asset to be
managed - they are unpredictable, they have their own plans, they are influenced
by both the internal and external environmental factors. But people are the source
for the competifive advantage of any organizafion. It is recognized today that
the seeds for success lie in getting the best out of the people.' In this
background, an attempt is made in this chapter to study the inter-relationship
between the HRM practices, labour productivity and the financial performance of
the corporations.

HRM Practices

It is an irrefiitable fact that the success of any organisation depends mainly on the
quality of its human resources. The quality of human resources is influenced by a
large number of activities relating to human resources such as ascertainment of
human resource needs, recruitment and selection procedure, training and
development of selected candidates, creation of proper working environment,
suitable and attractive pay package to retain the efficient employees, settlement of
labour disputes, etc. In all these cases, the HR managers have important roles to
play. The practices pursued by the HR managers in each of these activities
influences the labour productivity which in turn influences the overall
performance of the organisation including its financial performance. Hence,
obtaining and retaining efficient employees is an important function of HR
managers. To appoint the right people, HR managers must undertake extensive
research/survey to ascertain human resource required for the organisation and to
search for right people whom the organisation can select. Even after the
selection, necessary training is to be imparted to develop them to be efficient.
Further, it is not a one time exercise but a continuous process. These form the
operational base for the HR role, the practices that needed to be performed.^

The SRTCs in Kamataka have succeeded in acquiring the right kind of people for
different kinds of roles keeping in view even the socio-economic and legal
aspects. However, developing these people to achieve the desired result is not
satisfactory. The persons who are selected for different jobs are not provided
proper and adequate training. This is evident from their behaviour with the
passengers. This shows the need for providing right type of training to the
persons who are selected and/or working in the corporations. Because, the way in
which the employees behave with the passengers has a direct impact on a number
of aspects which determine the overall performance of the corporations.
Therefore, the corporations should make attempts to develop their human
resources in such a way which will inspire and motivate them to contribute their
best for the corporations and to serve the general public.

01. Identification of Best Practices

High quality HRM is expected to contribute to the overall performance of the

organisation. Therefore, HRM function has a positive impact on the overall
organizational performance. What is more important to achieve the desired result
is the identification and adoption of best practices in all the functions/activities
pertaining to the development and management of human resources. Of course,
the SRTCs in Kamataka have succeeded, to some extent, in improving their
financial performance. But this improvement cannot be attributed only to the best
practices in HRM. Because, a number of other measures taken by the
corporations enabled them to improve their performance year after year. Had the

155
corporations emphasized more on best HRM practices, the results would have
been much higher.

It is an established truth that there is a strong link between employee selection,

development, satisfaction, productivity and financial performance. As the
passenger road transport is highly labour intensive, the SRTCs have to develop
and follow effective and efficient human resource development and management
practices to improve morale and satisfaction of their employees. Therefore, the
corporations have to find the best practices which can lead to higher productivity.
Different welfare measures undertaken by the corporations may help to improve
the performance. Proper and speedy implementation of these measures is the
right solution in this direction. As a strong correlation exists between
employee satisfaction and profitability, suitable mechanisms suggested are
motivation, morale, satisfaction and loyalty as key elements of profitability.^
This may also result in customer satisfaction, service quality and empowerment.

02. HRM Practices in SRTCs - An Evaluation

An analysis made in the previous chapters about the employee perception of

different HR-related policies and practices reveals a number of things. Of these,
four aspects deserve mention here.

• Majority of the respondent-employees of all the four corporations put

together (more than 70% with respect to majority of the
parameters/questions) have expressed satisfaction meaning the practices
are good.

• About 5 - 10% of the respondents (average) have expressed their

displeasure about different aspects of HR policies and practices by giving
negative reply. Hence, this is to be taken seriously to ensure the employee
satisfaction which in turn contributes to the improvement in the overall
performance.
• Some respondents (again about 5%, average) have not given their opinion
to majority of the questions. This shows, among others, they are not
oriented properly about various aspects of HRM which is not proper.
Because, everyone should have a complete idea about the activities which
156
 have a direct bearing on their welfare. This is another area wherein the
corporations have to concentrate in future.

• The survey also reveals wide difference in the corporation-wise employee

perception of various aspects. For instance, in the case of KSRTC, less
%age of respondent-employees are positive in their response to various
questions. On the other hand, for the same questions, higher %age of
respondent-employees of NEKRTC have given positive response. This
shows the difference in satisfaction level of employees of one corporation
and that of others.

With this, an attempt is made to evaluate some of HR practices followed by the

corporations.

a. The recruitment and selection process followed by the corporations in

these days is laudable. Acquiring right persons for the right job using
acceptable method of recruitment procedure is one of the best practices
prevailing in the corporations. Besides, it evaluates competence, attitude
and aptitude of the candidates. It makes the selection process more
objective and ensures that only competent persons are recruited. The line
managers of the corporations participate in HR planning, recruitment,
selection and orientation. Further, the corporations follow their Cadre and
Recruitment Rules besides ensuring social justice. The corporations are
trying to make this process more objective and scientific. The experts
fi-om different fields are involved in this process. One can also find more
woman-candidates selected for the post of conductors and others. And
they are performing well.

b. Training and Development of the selected candidates begins with the

induction-training programme. Majority of the respondent-employees are
of the opinion that induction-training programme is given importance by
the corporations and they also believe that it provides an opportunity for
new entrants to learn comprehensively about their corporation and also
about the nature of their work. In this regard, it is necessary for the
employer-corporations and the employees to take these induction-training
157
 programmes seriously but not as just completing the formality. If this is
not taken seriously, the very purpose of organising the training
programmes will be defeated. It should enable the trainees to acquire
technical knowledge and skills. Further, to make the training more useful
and effective, it should be evaluated periodically and the revision should
be done based on the evaluation.

c. Besides the induction-training programmes, the corporations are also

arranging for other kinds of training programmes through their training
institutes. SRTCs in Kamataka have established their own training centres
and through these centres, they are organising training programmes
continuously to different categories of employees. The corporations are
also organising specific training programmes in the light of changes in the
environment. For instance, the corporations have trained majority of their
conductors to machines to issue tickets to the passengers. They have also
made arrangements for advance booking of tickets using network system.
What is important is, the corporations have imparted necessary training to
their staff members as to how to work with the systems. And this system
is working in the State smoothly and won the appreciation of the
passengers.

d. Majority of the respondents agree that the employees are also deputed and
sponsored for training programmes organised by external specialized
agencies such as Central Institute of Road Transport, Pune, etc. This
deputation is made on the basis of carefully identified developmental needs
of the employees/officers. Further, they opine that HRD Departments of
the corporations conduct briefing and reviewing sessions for employees
sponsored for training programmes - prior to deputation about the purpose
for which they are deputed, and after the training to assess the utility of
training programmes. Besides, the senior line managers take initiative and
help their juniors to develop their skills, capability, etc through training.

158
 External training programmes are carefully chosen after collecting
adequate information about their quality and suitability. There is a well-
designed and widely shared training policy in the corporations and
therefore, these training programmes organised by the corporations are
successful.

e. The primary objective of training is to educate the human resources about

the nature of work, ways of performing the same or new functions more
effectively, working in the changed environment which in turn help the
organization to achieve its objective. Therefore, the corporations should
ensure that the employees are adding to the value. Because, the
corporations are investing a sizeable amount of financial resources on the
training programmes organised by them internally or by external
specialized institutions. Hence, the corporations have to plan for training
programmes properly so that they derive the desired benefits from them.
They should understand that they live in a world where competitive
advantage is achieved by having higher-quality people than other
firms employ, and this need will not be satisfied unless they invest in
developing the skills and competence of their people."*

f Manpower utilization in SRTCs plays a significant role in achieving higher

productivity and profitability. Using autocratic nature by the corporations
cannot serve the purpose. The employees should be satisfied with their job
and they should be proud to say about it. All the training and development
programmes should ultimately aim at, and result in, higher labour
productivity and the productivities of all other input factors as they are
influenced by the man-power. If this is ensured, then the corporation can
expect higher financial performance.

g. The union-management relations should be cordial and the employees

should be allowed to express their feelings with their superiors freely.
Majority of the respondents expressed their satisfaction in this regard.
159
h. Besides, the respondent-employees opine that initiatives of the
corporations are directed towards clean, healthy and safe working
environment. It is also said that HR policies of the corporations enable
them to grow to their full potential. The respondents are happy about the
infrastructural facilities provided by the corporations, personnel policy,
facilities for leisure and entertainment, their prospects and recognition for
doing the job well, etc.

i. Labour welfare measures undertaken by the SRTCs in Kamataka are one

of the best HRM practices. Various labour laws are being enacted and
implemented to provide different types facilities to the employees. It is
also opined by the majority of the respondents that the industrial disputes
are settled at the earliest. All employees of the SRTCs are covered under
different Labour Acts for the purpose of getting paid holidays, gratuity,
provident fund, medical aid, compensation in case of injury, etc. Besides,
the employees are getting festival advance, housing loan facility,
educational loan facility for higher studies to the children of the
employees, etc. It also important to note that MoU entered with ILO for
technical assistance with regard to de-addiction project is working well.
Though majority of the respondents are happy about the welfare measures
undertaken by the SRTCs, it is not adequate and their implementation is
not satisfactory.

j. In addition to the above, the corporations have separate departments to

maintain discipline among the employees. The Security and Vigilance
Departments of the corporations have been successful in protecting both
the movable and immovable property of the corporations. The theft of the
corporations' property has been considerably reduced because of the
cautions and vibrant approach of the Department. Majority of the
respondents opined that the misuse of the corporations' property by the
employees has become a rare phenomenon because of the watchful attitude

160
 of the Department. It is also worth to note that the departmental action is
initiated against erring employees engaged in the use of fake tickets, mis-
appropriation of resources/assets and pilferage of traffic revenue. The role
of line checking squad in reducing the loss of traffic revenue is appreciated
by the respondent-employees.

k. Safety measures for the travelling public are given more importance by
taking steps to avoid/reduce accidents. These steps have yielded goods
results with the introduction of a scheme for identification alcoholics and
their treatment. A programme of de-addiction called Work Place Alcohol
Prevention Programme and Activities (WAPPA) has produced good result.
Majority of the respondents opined that Award and Reward Scheme
initiated by the corporations for safe driving (this award is for the drivers)
and other employees enabled to boost the morale of the drivers and other
employees. Collection Bonus Scheme, Fuel Efficiency Awards, Best
Division Award for Divisional Controllers, Independence Day Meritorious
Service Award Scheme are some of best practices adopted by the
corporations. Because of these practices, performance, efficiency,
competitive spirit, dedication and commitment, etc have increased to a
considerable extent.

The above analysis reveals that the corporations have been doing their best to
provide good working environment to its employees and the employees are also
responding positively by producing higher results which is commendable. Of
course, there is still scope for further improvement. And the corporations have to
do lot to win the confidence their stakeholders such as employees, passengers,
government-owners, etc and to ensure customer satisfaction. Further, they have
to provide cheaper transport services linking remote rural areas with urban centres
through cost reduction/control and by providing proper amenities to the travelling
public. Provision of effective and efficient transport service to the travelling
public is a challenging task before the SRTCs. Good and innovative HRM
161
practices act as better mechanism to tackle this challenge and to succeed in this
competitive era. Of course, at present, the HRD departments are trying hard to
achieve success by means of scientific selection, training and development.
However, this is not adequate considering the rate of change in the environment.
There are other areas of HRM like welfare measures, dispute settlement
mechanism, etc and necessary care should be taken by corporations to improve
their performance in these areas.

Labour Productivity

The efficient use of human resources to achieve the organizational objectives is

undoubtedly an important alternative and/or avenue. Because, this resource
provides a number of opportunities to improve the overall performance of the
corporations. For example, by improving the HRM practices, it is possible to
improve the labour and other productivities which imply two things - one,
reduction in costs and two, improvement in the quality, quantity, performance,
etc. SRTCs in Kamataka have to work in this direction to improve the labour
productivity and their overall performance. As these corporations are labour
intensive, motivating the work force plays a significant role in increasing the
productivity. In general, productivity is a measure of the output of goods and
services relative to the input of labour, capital and equipment. The more
productive an industry, the better its competitive position because its unit
costs are lower. When productivity increases, business can pay higher wages
without boosting inflation.^

It is important to note that the cost per employee per day is to be reduced in all the
corporations in order to improve labour productivity. Besides growing
competition and incidence of high tax rates, huge personnel cost is often
considered as one of the reasons for growing losses of the SRTCs. It is estimated
that, around 45% of the total cost of operation is manpower cost. Therefore, it is
high-time that SRTCs took a serious took at these growing costs and develop
162
ways and means to optimally utilize the human resources to notch higher
productivity.^ The corporations have to consider the factors which can lead to
improved labour productivity. Care should also be taken to see that increase in
the salary is commensurate with the increase in labour productivity.

01. Improving Productivity

Productivity is an attitude for developing the habit of improvements and a

set of practices to put this attitude into action.^ There is a need to develop
certain healthy habits/practices/attitude among the employees which can lead to
overall development of the personnel. According to an ILO study, the
productivity can be improved by reducing work content, process research,
planning, training, etc.^ Japanese have achieved greater heights through Kaizen,
i.e., changes for improvements. The corporations can take initiative in this
direction to achieve greater productivity.

Technological innovations play a significant role to check the growing cost of

personnel. Computerisation has taken place in many organizations to reduce the
requirement of administrative staff It is said that computers in the corporations
are used more as a typewriter than anything else. It is possible to make the depots
linked to divisional and regional offices and the head office through networking
which will help in reducing the duplication of data compilation at different levels,
thereby reducing the requirement of administrative staff. E-mails could be
extensively used to pass the messages in order to reduce administrative expenses
of letters, reports, etc. Innovation in Information Technology should be taken
advantage of and the routine administrative jobs should be handled by computers
which in turn will go a long way in reducing unproductive staff and improving
manpower productivity. The staff thus declared excess should be retrained to
handle traffic function and justify their existence in the organization.

163
Another area where the productivity can be improved is through harnessing the
innovations in vehicle technology. The modem buses, if acquired by the
corporations, will reduce the cost of maintenance and also reduce the requirement
of maintenance staff. The concept of multi-skilling should be pursued with
greater vigour. Many trades could be clubbed together so that manpower could
be reduced extensively. This approach should not only be for maintenance staff,
but also for some of the categories such as clerks, typists, stenographers, etc
which could be clubbed together to reduce the number of administrative staff It
is also possible to reduce traffic staff by introducing conductor-less buses.

Reduction in the number of employees to reduce the personnel cost is possible

only to a certain extent and beyond a point, it might be counter productive. In
case of transport corporations, heavy cut in traffic personnel could lead to
cancellation of services and thereby reduction in revenue earnings. Therefore,
along with downsizing efforts, it becomes imperative to develop the human
resources in order to boost manpower productivity.

The methodology of using the appropriate HR practices to enhance the labour

productivity is a significant factor. The recent report on human development
emphasizes strongly on skill development for better productivity.^ The report
reiterates the point that enterprises have to invest in training to remain
competitive. Though the corporations are investing in training continuously, the
result is not upto the mark. Therefore, they should give more attention for
training which can inculcate new skills which should be relevant. Traditional
skills may no longer be relevant if the corporations adopt modem technology.

The age-old strategies practiced by the corporations would not pay much dividend
in the prevailing competition. It is, therefore, important that steps are taken to
equip the manpower with skills for combating the fierce competition. Training
and retraining on a continuous basis is the answer to overcome the situation. It is

164
also important to note that the skill development training is not restricted to the
working class alone, but is required at all levels. The skills of the supervisors and
the managers are also to be developed in order to enhance the productivity at the
desired level. The investment made on training should not go wasted. Therefore,
constant reviewing of the performance of the trained personnel is necessary.

Re-orientation and restructuring the organization is one of the steps to make the
corporations more efficient with competition. It is time for the corporations to re-
orient their goals towards profitability for which strategies need to be changed
and the structure needs to be rationalized. The existing middle level managerial
personnel may be given more authority and responsibility to manage the depots
independently. The top heavy layer of executives should concentrate on larger
issues rather than on day-to-day functioning of the depots. To make the
corporations productive and to utilize the manpower optimally, the structure of
the organization is required to be reviewed at regular intervals and tuned to the
need of the hour. It is also important to train the excess manpower for marketing
to improve productivity. Besides, bringing in a culture of aggressive marketing
throughout the organization by introducing the concepts of branding, high value
services, etc. There must be a continuous training of the manpower to make them
marketing agents of the organization.

Financial Performance

The Transport Corporations have to improve their competition effectively to face

competition from private players and other competing modes of transport. It is
unfortunate to note that these corporations do not enjoy financial and managerial
autonomy to bring about the required changes in their ftinctioning to improve
their competitiveness. Besides, these corporations have been run as bureaucrafic
organizations rather than service organizations that respond to consumer
demands. They suffer from a deep-rooted hierarchical orientation which is in
total contrast to the much needed customer orientation to face the competition.
165
The objective should be of an efficient monopoly and therefore, the entire focus
of their efforts should be on streamlining their operations to drive down the costs.
It is true only to a certain extent. But there is only certain costs that can be
reduced and the organisations can not continually shrink their way to
profitability.'° At the end, they need profitability growth which is possible only
if they serve their customers effectively.

In order to improve the financial performance, the corporations have to formulate

clear and coherent goals focused on delivering good/services and use their vast
experience and scale of operations for competitive advantage. The present
situation demands that the corporations should change their narrow focus and
become truly market driven. It is important to note that the introduction of Volvo
bus services is truly market driven and the corporations are reaping the advantage
of customer satisfaction. Coping with future challenges involves much more than
taking an inventory of the existing facilities and assets, and augmenting them
based on the past trends. What is to be done in the present situation to tackle
inefficiency in all areas to respond effectively to commuters demand, need to be
answered. In addition to the expansion of quantity of assets, the corporations have
to improve the quality of infrastructure and service delivery. A highly efficient
operation with effective service strategy is a sure recipe for slow decline and
inevitable collapse for any organisation. Therefore, care should be taken by the
corporations to see that appropriate service strategy is adopted to satisfy the
customers.

01. Improvement of Quality of Transport Service

The corporations have to provide a kind of service which should be generally

accepted by the users. The kind of service valued by users depends on such
attributes as quality, quantity, reliability, etc. Matching supply to what is
demanded is essential. The corporations have to take into account the earlier
errors together with new opportunities and have a new look at all the facets of

166
business in providing a more efficient and responsive transport service. The role
of HRM in achieving the ultimate goal which is directed towards improving
the service quality, customer satisfaction and loyalty, is a significant factor.''
In order to manage the public transport more efficiently, the corporations have to
understand certain characteristics of transport service that pose challenges
requiring special attention.

• Simultaneity: The response of the customer during the service

delivery process implies a direct link between the employee's
feelings and the behaviour, and the customer perception of service
quality.

• Perishability: Has implication for managing the service delivery

system and the available capacity.

• Intangibility: Poses challenges to the communication and

marketing effort.'^

These characteristics and challenges greatly influence the corporations to navigate

the ever changing landscape of customers' desires and demands in respect of the
following.

• The benefits of customer retention, customer loyalty and their

consequent effects on profitability.
The vital relationship between service quality, customer satisfaction
and customer loyalty.

• The decisive role of employees (more so, the front-line employees such
as conductors, drivers, traffic inspectors, etc) in delivering quality
service, customer satisfaction and profitability.

The challenges before the corporations are many and they have to gear up to face
the same on a war footing basis. The quality of the service will have a direct
impact on the profitability and financial performance of the corporations. To
provide efficient, reliable and safety transport service to the travelling public, the
corporations have to develop highly motivated, vibrant and self driven work
force. Besides, the corporations will have to develop effective HRM practices to

167
improve the morale and satisfaction of their front-line employees. It is true that a
strong link exists between their satisfaction and profitability. Therefore, serious
efforts should be made by the corporations to satisfy the employees. There is an
urgent need to re-orient its management culture from production oriented to
customer focussed which is imperative for any service provider in the
transportation sector.'^

02. Customer Satisfaction and Retention

Customer satisfaction is a function of customers' perception of service quality

and their expectations of service. If the quality matches with the expectations, the
customer will be satisfied and if it exceeds the expectations, the customer will be
delighted. Therefore, the corporations have to find ways and means to satisfy the
customers. A delighted customer will form an emotional bond with the
organization resulting in high customer loyalty and assured profits. It should be a
continuous process of delighting the customers and the new service mantra is, try
exceeding customer expectations than merely meeting them. It is the front-line
employees who will be meeting the customers and they have to be trained in such
a manner to delight the customers. The SRTCs must find out the needs of their
customers and try to meet them to retain customers. Therefore, there is need to
bring service quality, customer service and marketing into close alignment
leading to long-term and mutually beneficial customer relationships.

In these days of buyers' market, the customer has many alternatives to choose to
satisfy his needs. To compete and succeed in this competitive world, the
corporations (SRTCs) have to begin with a clearly defined value proposition - a
very strong offers that a potential customer finds compelling and interesting. In
order to do this, they have to find their customers, what they value and how the
services should be optimized or designed to deliver the value. Because of the
changing preferences and expectations of the customers, one can not have the
same old pattern of service quality. They must continuously listen to their

168
customers through surveys and other methods to know their expectations and re-
evaluate their offerings to respond to the dynamic competition. Other modes of
transport particularly the Indian Railways are posing stiff competition in terms of
quality of service and cost. Even the airways are becoming competitors by virtue
of their increase in service and cost.

It has been the experience of majority of the passengers that most of the
expectations are not met, though they are very modest. They are happy with the
adequacy of state transport buses but were choosing other services mainly
because of the rude behaviour of the crew, buses not stopping at designated bus
stops, lack of cleanliness, overcharging for luggage from rural passengers and a
general apathy towards the passengers. Therefore, the corporations have to train
their crew in order to improve their behaviour, provide comfortable seats and
offer clean and well-maintained buses. It is worth to note that the private
operators are generally rated high on crew behaviour, cleanliness and speed but
not on safety. If these factors are taken care of by the corporations, the results
will be higher. The figure presented below highlights the customer experience
framework.

The Customer Experience Framework

Figure -7.1

Source: Creating a High-Impact Digital Experience - An HT Keamey White Paper

169
Attracting and re-attracting customers is one way of customer retention. The
revenues of the corporations come from two groups - new customers and repeat
customers. One estimate is that attracting a new customer can cost five times as
much as pleasing an existing one. And it might cost sixteen times as much to
bring the new customer to the same level of profitability as the existing customer.
Customer retention and loyalty are thus more important than customer
acquisition. Given the tremendous competition in today's market place, the
most successful firms are those that built customer loyalty and enthusiasm.
And what better way to do this than through a positive customer
experience.''*

Looking at the current cost of customer defection further substantiates the

importance of positive experience. According to one estimate, it was estimated
that one per cgnt reduction in Occupation Ratio results in declining the revenue of
the corporation by almost Rs.40 crore. This clearly indicates the importance of
customer retention. Therefore, attempts should be made to retain them.
Customers defect for various reasons but the primary reason is poor or little
attention from the service provider. Hence, the corporations should devise means
for reducing defection rate of customers by constantly listening to the customers.
It would be a good idea to have an on-going programme that keeps senior
managers constantly in touch with the customers. But it is unfortunate that none
of the corporations are listening to the customers' bitter experience. Often we
find, in newspapers, the customers narrating their bitter experience during travel.

What is to be done to overcome this lacuna in SRTCs is a vital question. They

have to concentrate on strategies that are aimed at increasing the customer loyalty
and they should be put in place. They should be committed to enhancing
customer satisfaction and delighting them since this has a vital link to customer
retention and profitability. Besides, it is also important to win the loyal
customers. Though it is hard, it is worth the trouble and investment. It is possible

170
 by providing innovative services, pricing and an exceptional service delivery. It
is said that loyalty cannot be brought, but earned. The creation of superior value
for the customer is the key drive of satisfaction and loyalty. This requires highly
motivated and committed employees. Hence, there is a link between employee
satisfaction, customer satisfaction and profitability. The Service Profit Chain
Model which is presented below clearly illustrates this relationship.

Service-Profit-Chain Model

t
Growth
Employee Turn
Retention over
V J

Quality f \
of Employee Value of
Internal Satis- Customer Customer
External Satisfaction Loyalty
Service faction Service
Delivery
System
Employee
Productivity - 1 ' . Profit

Figure - 7.2

Source: Putting Service - Profit Chain to Work., Harward Business Review, March-
April 1994

The above figure shows the significance of service quality which links with
employee satisfaction, retention and productivity and also the kind of delivery of
service links with customer satisfaction, loyalty and growth turnover of the
organization. All these factors directly influence the profit and ultimately the
financial performance of the corporations.

171
03. Physical and Financial Performance of SRTCs in Karnataka

The recent statistics about the financial performance of SRTCs show that they are
slowly rolling out of the red. Further, efforts are being made by the government
to set right the issues which are causing threat to the growth of the corporations
such as stiff competition faced in some areas in respect of fare and other factors,
etc. Inspite of the competition from other modes of transport, the financial
performance and physical performance of the corporations are improving
gradually year after year as evident from the following tables.

Table-7.1: Physical Perl ormance of SRTCs in Karnataka

Parameters A^ariables Year KSRTC NWKRTC NEKRTC BMTC
Number of Schedules 2005-06 4,984 3,753 2,424 3,957
2006-07 5,478 4,367 2,535 4,326
New Schedules Added 2005-06 369 71 136 130
2006-07 494 614 111 369
New Vehicles Added 2005-06 1,190 447 498 426
2006-07 1,263 964 327 794
Fleet Strength 2005-06 5,384 4,191 2,582 4,106
2006-07 5,902 4,551 2,672 4,606
Percentage of 2005-06 1.3 5.3 7.4 3.5
Cancellation
2006-07 3.5 4.6 5.9 3.0
Vehicle Utilization 2005-06 362 321 317 229
(kms/day)
2006-07 362 331 333 232
Staff Ratio per 2005-06 4.19 5.34 4.49 4.80
Schedule
2006-07 4.98 5.16 4.52 4.75
Source: Anilkumar Sastry and Nagesh Prabhu., STUs Slowly Rolling out of the
Red, The Hindu, May 25, 2007, p. 4.

It is obvious from the above that the corporations have been able to improve their
physical performance during 2006-07 when compared to 2005-06 in the case of

172
majority of the parameters such as number of schedules, vehicle utilization, etc.
Two corporations viz., NWKRTC and BMTC have succeeded in lowering the
staff ratio per schedule. These improvements in their physical performance have
enabled them to improve their financial performance which is evident from the
following table.

Table - 7.2: Financial Performance o • SRTCs in Karnataka (Rs. crore)

Variables Year KSRTC NWKRTC NEKRTC BMTC
Traffic revenue 2005-06 989.11 611.42 367.50 765.16
2006-07 1,174.60 692.38 425.49 871.13
Other revenue 2005-06 96.57 88.46 19.60 80.06
2006-07 79.93 106.66 32.44 129.89
Gross revenue 2005-06 1,085.68 699.89 387.10 841.63
2006-07 1,254.53 799.04 457.93 1,051.28
Cost 2005-06 1,058.91 730.08 409.13 721.80
2006-07 1,229.07 786.87 469.80 820.17
Margin on 2005-06 -69.79 -118.66 -41.63 39.76
Traffic Revenue
2006-07 -54.46 -94.49 -44.31 50.95
Margin on 2005-06 26.77 -30.19 -22.02 119.82
Gross Revenue
2006-07 25.46 12.16 -11.87 231.10
Source: Anilkumar Sastry and Nagesh Prabhu., STUs Slowly Rolling out of the
Red, The Hindu, May 25, 2007, p. 4.

It is evident from the above table that, three of the four SRTCs viz., BMTC,
KSRTC and NWKRTC have together earned and reported a profit of Rs.286
crore during 2006-07 while the NEKRTC has shown signs of recovery by
reducing its loss from Rs. 22 crore in 2005-06 to Rs.ll crore during 2006-07.
The NWKRTC which suffered a loss of 30 crore during the previous year has
come out of the red by earning a profit of Rs.l2 crore. While the KSRTC has
made a profit of 25 crore, the BMTC has posted a profit of Rs.231 crore. All
these indicate the improvement in the financial performance which in turn is

173
influenced by the improvement in physical performance. According to the
Transport Minister, reduction in the %age of cancellation of trips, reduced
accidents, lower staff ratio per bus and improved vehicle utilization had helped
the corporations to perform better. Also, induction of more new buses (3,348
during 2006-07 compared to 2,561 during the previous year) helped the
corporations to further build their image.

However, except the BMTC, the other three corporations have incurred and
reported operational losses i.e., KSRTC Rs. 54 crore; NWKRTC Rs.94 crore; and
NEWKRTC Rs. 44 crore. Only BMTC has reported an operational surplus of
Rs.77 crore. Both KSRTC and NWKRTC were able to set-off their operational
losses and report profit due to higher other revenues of Rs.79 crore and Rs.l06
crore respectively.

With the improvement in their financial performance, the corporations were able
to induct 3,348 new passenger vehicles. This helped them to double the
introduction of new routes from 706 during the previous year to 1,588 during
2006-07. Of course, the decreased productivity per bus, increased number of
accidents and breakdowns have affected the performance of these corporations
adversely and to some extent.

It is necessary to note that SRTCs in Kamataka have the lowest staff ratio per
schedule in the country and this has helped them to improve their performance.
While the Corporations in Kamataka have 4.9 staff per schedule, the figures for
some other states are, Rajasthan, 5.09; Uttar Pradesh, 5.16; Andhra Pradesh, 6.05;
Tamil Nadu, 6.35; Maharashtra, 7.04; Gujarat, 7.24; and Kerala, 9.11. Inspite
of the improvement in financial and physical performance over these years,
lower productivity, increased accidents and breakdown of buses remain
bugbears.'^

174
A Study of Inter-Relationship

Optimum use of human resource contributes a great deal towards achieving the
financial viability of any organization. As this resource is a valuable asset of the
organization, it must be used to the maximum extent to achieve the desired result.
Getting best out of this resource ensures organisational success. This is possible
through innovative HRM practices. High quality HRM is expected to contribute
to the overall performance of the organization. The overall performance of the
corporations is influenced both directly and indirecfly by the labour productivity.
Hence, there is a definite relationship between these three. The transport
corporations are highly labour intensive and the front-line employees of the
corporation are directly in touch with the passengers. Therefore, they, in a way,
market the services of the corporations. In order to market the services, these
employees should be more loyal to the organization. The creation of superior
value for the customer is the key drive of satisfaction and loyalty. This requires
highly motivated and committed employees. Motivated employees are the ones
who can create a positive experience that keeps customers coming back and also
telling others about it. On the other hand, a poor customer experience can be
devastating for the organisation. Disgruntled customers relate their bad
experience to more people than satisfied customers do about their good
experience. Therefore, care should be taken by the corporations to see that
customers are satisfied about the quality of the service.

Productivity, on the other hand, depends on the commitment, satisfaction and

empowerment of the employees. Empowerment of employees is a way of
improving their performance which can be defined as increasing one's autonomy
and degree of freedom to perform one's job. To empower employees, new forms
of leadership styles should be developed. The four generic leadership styles
followed by organizations are illustrated below.

175
 Integrated Framework of Leadership and Empowerment
>
Overpowering Leadership Power-building Leadership

Leader Behaviour Leader Behaviour

01. Coercion 01. Guidance and
02. Reinforcement and Encouragement
Punishment 02. Delegation
03. Autocratic Decision Making 03. Reinforcement
04. Initiating Structure 04. Culture Development

Team Reactions Team Reactions

01. Compliance Conformance 01. Learning, Skill
Skepticism Development, Team
Building
Outcome Outcome
01. Submissive Teams - Teams > Self-managing Team - Teams
> acquiesce to Supervisor I cntrol how work is carried
Control out
a Powerless Leadership Empowered Leadership
a
Leader Behaviour Leader Behaviour
01. Intermittent initiation of 01. Modelling
Structure 02. Boundary Spanning
02. Enforcement of Sanctions 03. Assisting
03. Psychological Distancing
Team Reactions
Team Reactions 01. Self-direction, Strategic
01. Lack of Direction, Power Planning, Ownership
Struggles, Frustration
Outcome Outcome
>^ 01. Alienated Teams - Teams > Self-leading Teams - Teams
'vi
en and Supervisors struggle for control what work is and how
control it is carried out
Autocratic Democratic
Leadership Power Orientation
Source: Stewart G and Manz (1995)., Leadership for Self-managing Work Teams:
A Typology and Integrative Model., Human Relations.

Transport corporations are following the first two types of leadership practices
even today which are not compatible with the notion of empowerment. This type
of leadership styles results in demotivating the employees. To create empowered
organization, the corporations have to move away from the present practices

176
which have distanced the employees from the management leading to a climate of
mistrust and strained relations. They have to adopt a more democratic leadership
and a change in the present mindset which is policing and controlling and
controlling to coaching and developing the skills of employees is desired.

The commitment and satisfaction among the employees results in higher

productivity which in turn will improve the financial performance of the
corporations. It requires improving skills and competencies to handle the job and
with the latitude can certainly increase employees' commitment and satisfaction.
Monetary reward in the form of increased basic pay to justify the increased
responsibilities shouldered by employees has to be given due consideration.
Therefore, empowerment of employees is one such measure which can improve
the performance of the corporations. It is also said that empowerment not only
motivates employees but it also increases the span of control of the manager.
Empowered employees are generally more satisfied and committed and will
contribute more to productivity, quality of service, customer satisfaction and
loyalty, and ultimate to profitability.

Conclusion

Even after more than five decades of nationalization of passenger transport, lot
has to be done to improve the quality of service. At the same time, appropriate
transport policy has to be evolved at the national level to compete with other
modes of transport. It is the question of survival of these corporations in the long
run and it depends on their financial performance. This requires motivating and
satisfying employees which is a key to survival and for prosperity. The
corporations must constantly strive to improve employee morale since it is the
employees who deliver service to the passengers and face competition
successfully from other modes of transport. The corporations must build
competencies of their employees in order to gain customer satisfaction.
Therefore, there is a need to re-orient the front-line employees towards the

177
passengers in the present competitive environment. And all these can be achieved
by following good HRM practices as the productivity and performance of all
input factors, divisions, etc are influenced by the human force.

References
1. Dr. Yohuda Baruch., 'Walking the Tightrope: Strategic Issues for Human
Resources', p. 467.
2. Ibid., p. 468
3. G. Somayajulu., 'Employee Satisfaction - A Mantra for Profitability in the
Transport Sector', Indian Journal of Transport Management, July-
September 2002.
4. Michael Armstrong., A Hand Book of HRM Practice, p. 545.
5. Wayne F. Cascio., Managing Human Resources, p. 25.
6. S.K. Ghosh., 'Manpower Utilisation in State Transport Undertakings', Indian
Journal of Transport Management, July-September 2002, p. 431.
7. Man John (1992), Public Sector Productivity: Employee Participation
Schemes, Productivity, 33(1), pp. 28-33.
8. ILO (1964), Introduction to Work Study, International Labour Organisation,
Geneva.
9. Op. cit., S.K. Ghosh, pp. 435-7.
10. Op. cit., G. Somayajulu., p. 440.
11. Panduranga Murthy C., "Customer Service in Bus Passenger Transport",
Indian Journal of Transport Management, November 1999.
12. Op. cit., G. Somayajulu., p. 442.
13. G. Somayajulu., "Customer Value Management - A Key to Success in Public
Transport Services", Indian Journal of Transport Management, Vol. 27,
Issue No. 1, January-March 2003.
14. Frederick. F. Reichheld., "'The Loyalty Effecf\ Harward Business School
Press, Boston, 1996, p. 454.
15 Anil Kumar Sastry andNagesh Prabhu., "STUs Slowly Rolling Out of the
Red", The Hindu, May 25, 2007, p.4.

178