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Diffusion and Implementation of Forensic Accounting in Countries of Business Opacity

Introduction

The increasing awareness of financial crimes is growing the demand for forensic accountants to help detect illegal financial activity by companies, individuals, and organized crime rings. No matter how much fraud activities increase, there must always be an anti-fraud scheme to shield against it. To provide availability of balance and protection from illegal business acts is the main reason why Forensic Accounting (FA) exists.

With the pressing need for Forensic Accounting as a tool to fight fraud, this article studies its applicability in countries of opaque business practices, probes the accessible means that would help in introducing it to the culture, and spots the areas where it is radically needed especially in the countries of financial cloudiness and opacity. The results are based on quantitative and qualitative studies in Lebanon for being perceived as an opaque country, sharing the same characteristics that define nations with fraudulent financial behaviour suffering from a high level of financial corruption such as money laundering, lack of transparency or adequate financial disclosures as well as corruption at the level of management, supervisory boards and even governments themselves.

The results of the studies reveal that Forensic Accounting is perceived as a means to overcome fraudulent behaviour. Most of the respondents either agreed or strongly agreed on the need to incorporate it in order to prevent fraud and for detection purposes as a primary need. However, the respondents considered this to be new in Lebanon with a highest percentage of people (56.36%) reporting that it wasn’t used by Lebanese companies due to the lack of awareness, privacy issues, the nature and type of businesses (family businesses and SMEs), lack of guidance concerning the standards (local or international) that should be applied and lack for proper regulations. Yet respondents showed a positive attitude towards the implementation in Lebanon as financially corrupted country. Thus with such an encouraging perception amongst respondents, the issue remains in the introduction and diffusion of Forensic Accounting.

The outcomes of the studies also supported the idea of setting a law that mandates all sectors to submit a Forensic Accounting report. The idea of setting a law that enforces companies to file such a report was embraced by the majority of respondents who also considered that the best means of introducing this system in a country of opaque business country is through the educational curriculum via the graduate programs. DIFA (Diploma in Investigative & Forensic Accounting) as well as the CPA (Certified Public Accountant) were recommended as the certifications that should be granted in the corrupted countries as in the case of Lebanon.

Research Question and Hypotheses

The discussion of the study results are based on the research questions that investigated “To what extent is Forensic Accounting applicable? And how could it be introduced?” In order to answer these questions, there is a need to identify if such a scheme is known at any levels and sectors or if it is used or applied as a procedure by financially corrupted companies or governmental institutions.

The suggested hypotheses are analysed and evaluated according to the findings.

Hypothesis 1: Countries with Opaque Business Practices Need Forensic Accounting as a Tool to Fight Fraud and Corruption.

This study revealed that there is an eagerness to have Forensic Accounting in financially fraudulent countries due to the extensive corruptive acts that are committed and still are without any observation and punishment because the fraudster always gets away with it due to the absence the adequate and proper tool to identify and discover these acts. Hereby the urgent need to introduce it in countries with opaque business practices and to create awareness about this procedure in different fields and sectors mainly in the financial fields and governmental sectors.

This anti-fraud scheme was regarded as an appropriate tool to fight corruption since it has the legal accessibility and techniques needed to reveal fraud. An additional point is the positive perception towards it and the high acceptance to implement it in financially opaque countries, with a lot of encouragement to use it in institutions or companies.

Hypothesis 2: Forensic Accounting is Not a Common Practice at Present.

The findings indicate that Forensic Accounting is known in the countries of business opacity such as Lebanon, by practitioner accountants, educators, and auditing & accounting firms. Despite that the survey and interviews’ results proved that this practice is known, it is not commonly used or practiced by audit firms since it is not frequently requested.

On the educational level, there is no emphasis on the subject in the educational systems. FA is not given as a course or as part of a course in universities’ curriculum. Moreover, there are no certifications specialized in this field such as DIFA, but there are other well-known accounting certifications, such as CPA.

Therefore, what can be concluded is that there are no auditors or accountants, who are expert in this anti-fraud field in the countries where fraudulent business practices prevail. These countries lack the skills that could be acquired from the educational background and from the experience gained from working in this field.

The governmental and legal sectors suffer from a total absence of Forensic Accounting. That being the case, there is no regulation that imposes its use in solving financial issues or in evaluating financial statements, and there is no law that distinguishes the testimony of Forensic accountants from the testimony of any other audit. Forensic accountant in financially corrupted countries has no privilege on the credibility level inside courts, he/she is not used as an expert or reference inside courts.

Hypothesis 3: Different Means to Introduce Forensic Accounting in Countries with Opaque Business Practices

Respondents, as the results show, were very positive regarding introducing Forensic Accounting in countries with opaque business practices and they suggested many ways to be effectively executed in order to provide a good implementation of this new tool.

The suggested means involved many solutions and targeted different sectors. It even targeted the psychological factor, which was developed by cultural and social aspects, and which could play a major role in making the change to fight corruption and fraud in the financially corrupted countries.

Results and Discussion

Main changes should be performed to introduce Forensic Accounting in countries with opaque business practices. These changes must target four basic elements that would contribute in creating a solid ground and positive perception, the strategic plan includes:

I. Cultural & Sociological Changes:

“There Must Be a Change in the Culture of People in the Countries with Opaque Business Practices.”

The results of the conducted in-depth interviews showed that many respondents drew attention about the fact that the mentality of people in the countries with opaque business practices should be changed in order to increase the level of acceptance and consequently increase the commitment in applying Forensic Accounting.

The participants stressed on the importance to modify the culture of financially disrupted countries because they believe that having someone to look into their internal operations is a violation to their privacy. Besides, they don’t trust someone outside the company or institution to come and scrutinize their financials.

Another problem that exists in the mentality of people in the countries with opaque business practices is that the employees, managers or business owners feel unfairly paid and are stolen all the times by the government. For that reason, they believe that they have the right to steal back having the permissible excuse to commit fraud.

These facts that were expressed by the interviewees are also compatible with the findings of previous researches indicating that the cultural and sociological factors provide a solid platform for fraudulent activities, which created an acceptance for the corruptive acts that are considered as norms and justified practices in the societies of financially corrupted countries (Brownsberger, 1983; Adra, 2006; UN, 2001).

II. Changes in Educational Systems:

“Forensic Accounting Should Be Introduced in the Educational Sector.”

Almost all respondents conferred a high degree of importance for introducing Forensic Accounting in the educational sector in financially corrupted countries. Almost all respondents believed that it should be taught in universities as a course or a graduate major or as case studies in an audit related course. Suggestions also included considering it as a specialty in educational institutions that grant CPA or any other certifications related to auditing or accounting.

Respondents and interviewees also suggested introducing Forensic Accounting through workshops and seminars with the assistance of experts and skillful forensic accountants.

They also showed an acceptance for the online educational programs since DIFA is not available in most financially corrupted countries while it is available in USA. Therefore online education could shorten the distance to people who cannot leave work and are interested to be specialized in this field.

The participants also recommended that employees and managers who are responsible for the financials of the company should be educated and submitted to an intensive training to develop their skills to enable them to detect fraudulent activities within the company.

III. Changes in Governmental System:

“Forensic Accounting Should Be Introduced in the Governmental Sector.”

The National Integrity System Study, published by LTA in 2011, shows that corruption governs all sectors and all branches of financially corrupted governments. But in order to expose corruption and fraud there must be a tool or a law that could help to point out where these activities are occurring and a legal path to assure that this tool is effective.

Most of the participants in the study thought that it is important to introduce Forensic Accounting to governmental sector where the latter should give more attention and care about this subject, even though they didn’t give an importance to the governmental role in the introduction process.

They also recommended that the ministry of finance should launch an awareness campaign about the subject through media, road panels, and social media.

More importance is granted to the syndicate of accounting, whereby the participants believe that training sessions, workshops, and seminars should be set in order to train skillful forensic accountants who could practice Forensic Accounting, when it is requested. It is the role of the syndicate to spread awareness since it has the power, the knowledge, and the interest.

IV. Changes in Legal System:

“Forensic Accounting Should Be Introduced in the Legal Sectors.”

Respondents believe that Forensic Accounting should be introduced in the legal systems since the testimony of the forensic accountant is acknowledged in courts in other countries.

LTA (2011) highlighted on the importance to ensure that the current laws are sufficiently robust to prosecute even presidents and ministers when corruptive acts are revealed. There should be a law that acknowledge it is a legislative tool to fight corruption.

The participants also emphasized on the need of having court experts in this domain in the legal system since the fraudster is able to get away with his/her acts due to the difficulty to reveal the manipulation that happened, the associates, or the level of involvement in the fraudulent activities. The interviewees also stressed on the importance of changing the law to ensure a real punishment for the fraudster.

The necessity to track financial information and overcome opaque business practices is becoming a pressing need. Financial crimes are prevailing in different sectors in a single country and are committed by different parties. Another important point demonstrated in this study is that countries of opaque business practices tend to share similar characteristics that make them a magnet for fraudulent activities such as money laundering, tax avoidance/evasion and related corrupt workings are the products of some distant regimes and countries titles as tax havens.

Opaque business countries tend to have secrecy laws, poor regulations, artificial taxes, lack of public accountability and poor corporate governance in countries such as Luxembourg, Austria, Singapore, Switzerland and many others that in return facilitate economic uncertainty, instability, crime, flight of capital and damage to citizen-state contracts all over the world of course not to mention the damaging the social well-fare of the countries. Fraud has its roots in different government and companies mainly in managerial positions such as CEOs.

Conclusion

Financial crimes and fraudulent behavior is not new and citizens, though are aware of the disadvantages of the such practices, are not well informed about the counter measures that might otherwise put an end to these practices. This in turn highlights the importance of forensic accounting as a means to stop fraudulent practices. However, the adoption and implementation is not an easy process that can happen immediately. An understanding of the techniques can assist forensic accountants in identifying fraudulent behavior. It is “the application of accounting knowledge and investigative skills to identify and resolve legal issues. It is the science of using accounting as a tool to identify and develop proof of money flow. These tools and techniques can be invaluable for fraud and forensic accounting investigators” (Houck et al., 2006). Houck (2006) also talked about two major components, “litigation services that recognize the role of an accountant as an expert consultant, and investigative services that use a forensic accountant’s skills and may require possible courtroom testimony.” According to the definition developed by the AICPA’s Forensic and Litigation Services Committee, “forensic accounting may involve the application of special skills in accounting, auditing, finance, quantitative methods, the law, and research. It also requires investigative skills to collect, analyse, and evaluate financial evidence, as well as the ability to interpret and communicate findings.” In other words, it includes the different areas of litigation support, investigation, and dispute resolution and, therefore, is the intersection between accounting, investigation, and the law.

Fraud detection is a methodology and process to resolve the different types of fraud from embezzlement to money laundry, disposition, obtaining evidence, writing report and testifying. Therefore, forensic accountants who can apply such a process professionally and are able to detect, investigate and thus prevent fraud occurrence are needed.

However, the introduction and diffusion process requires work at the macro level via culture and the government and legislations (the primary facilitator) and at the micro level via educational institutions and management. It is the work of the entire community.

At first, the culture must be altered to create a higher level of awareness regarding Forensic Accounting. As the results of the quantitative research proved, people might be aware of it however they are unaware of the different practices, the required diplomas, or even the characteristics that make a person an eligible forensic accountant. The qualitative research also assures the results of the quantitative one regarding, but not limited to the need of having a law that requires companies to submit a Forensic Accounting report. Thus the need to change culture implies acquiring new knowledge, hence a change in values, norms, and practices. This concept implies that if a change is made in cultures of financially corrupted and opaque business practices, it will result in changes in the people’s practices, norms, and values, hence their behaviors; at the end, it will create an awareness and knowledge about fraud and how to fight it and the tools that could be used to inhibit it.

Governments should also strictly organize and control financial practices and set a law that mandates the submission of an FA report. It is worth mentioning, that according to the results of both quantitative and qualitative research, interviewees tend to view governments as the sector with the highest percentage of fraud. Educational institutions can have a great impact in the adoption and implementation process.

Interviewees viewed forensic accounting education as being relevant and beneficial to accounting students, the business community, the accounting profession, and accounting programs. It is not only restricted to university programs, there is also a specialized certificate that is concerned in this field, which is the Diploma in Investigative & Forensic Accounting (DIFA) program. DIFA is designed to provide a broad range of knowledge and skills to carry out financial investigations. Employee and management fraud, theft, embezzlement, and other financial crimes are increasing, therefore accounting and auditing personnel must have training and skills to recognize those crimes. In addition, high-visibility corporate scandals, such as Enron and WorldCom, demonstrate the need to better prepare entry-level accounting graduates and practicing CPAs in the areas of fraud prevention, deterrence, detection, investigation, and remediation (Houck et al., 2006).

Managements should also apply their own internal controls and to have a well-implemented corporate governance to control the falsified reporting. This, in addition to the mentioned law that requires the submission of a report to the government will definitely put an end to any fraud committed. For instance, terrorists of the September 11 attacks used the international banking system to fund their activities, transfer money, and hide their finances (Houck et al., 2006). This highlights the need to for investigators to understand how financial information can provide clues as to future threats. Due to these fraudulent practices, public awareness of fraud and forensic accounting came to highlight the need for financial professionals demonstrating the necessary training and skills to sense and act at any important evidence generated from financial information.

The following summarizes the results of the surveys done revealing the age group of the Lebanese respondents, their work experience, educational background, whether or not they heard about it and whether they consider it as vital in Lebanon being a country of business opacity. Also summarized is what respondents consider as the best way to introduce and implement Forensic Accounting in Lebanon.

Most respondents were Lebanese, aged between 18 and 30 years old, held a Master degree and worked in Finance with 6 years of experience and more. Most respondents also heard and read about forensic accounting but didn’t know if Lebanese companies use it, however, agreed on the importance of using it in Lebanon benefiting all the work fields, especially financial institutions. They also agreed about its positive advantages in providing better future, positive impact on business, and safer business.

Moreover, most respondents supported the idea of having a law that requires all sectors to submit an FA report. It’s important to mention that 75% of the respondents who didn’t encourage this action worked in the field of finance.

Furthermore, educational programs were considered as the best way to introduce Forensic Accounting (few have given a role to governmental efforts) believing in its ability to maintain its integrity, but not in all sectors. Respondents also agreed on the importance of the DIFA certification and that DIFA diploma should be included in Lebanese universities’ programs. Finally, most respondents thought the best means to acquire FA is to outsource audit firms that perform such services.

The Unbreakable Laws of the Universe

To live a harmonious life, you must not only abide by the laws of your country, but also by the natural Laws of the Universe. If we transgress, there will be consequences. Like any country, the universe is also governed by certain laws. We refer to these as Universal Laws or Laws of Nature, ‘whose content is set by nature and is therefore universal’ (Wikipedia).

The Law of Gravity is an example of a Universal Law. So is the Law of Conservation of Energy, that is, energy cannot be created or destroyed, only transformed from one form to another. However, unlike human laws, which can vary from country to country, Universal Laws are consistent and unchanging. You interact with these laws with every breath you take. They govern your existence.

Nothing about your life has been casual or accidental!

The Universal Laws seem to be mysterious. They have hidden truths. When you identify these hidden truths and utilise them correctly, miracles or amazing results occur in your life. It may manifest as suddenly having money when you need it the most, reversing a life-threatening disease, or succeeding in a particular endeavour. These ‘miracles’, no matter how incredible they might be, are not unbelievable outcomes. They are natural outcomes based on the correct application of specific laws of nature.

Unfortunately, some of the Universal Laws are not as clear-cut as they might seem. There are unnoticed subtleties to the Universal Laws which, when understood and applied, can make all the difference between happiness and misery, prosperity and poverty, peace and conflict, ease and struggle.

It’s easy to think that some people are born to affluence and all good things happen to them. The truth is, these people aren’t simply lucky; good things don’t just ‘happen’ to them. They’re just applying the Laws of the Universe more effectively, whether they’re aware of it or not. The laws are flawless; they work perfectly every time, all the time. If you seem to be doing all the right things, but your results are poor, consider the Laws of the Universe and how you are applying them. This book will help you.

How many laws are there? Many.

These laws govern every aspect of our existence. The supreme Law of the Universe is the Law of Cause and Effect, also referred to as karma or the parable of ‘reaping what you sow’. For every effect there is a cause; for every action there is a reaction. Positive action equates to a positive result. The Law of Cause and Effect transcends time, space or form.

It operates whether you are aware of it or not.

Every human thought, word or deed is a cause that sets off a wave of energy throughout the universe, resulting in desirable or undesirable effects. If there are undesirable effects, it simply means that at some time in the past, there was a thought, word or deed that caused a wave of undesirable energy. As normal, fully-functioning people we are quite literally responsible for everything in our lives. The following excerpt illustrates this concept.

This is the suggestion a man gave to his subconscious mind over a period of about two years: “I would give my right arm to see my daughter cured.” It appeared that his daughter had a crippling form of arthritis together with a so-called incurable form of skin disease. Medical treatment had failed to alleviate the condition, and the father had an intense longing for his daughter’s healing, and expressed his desire in the words just quoted.

One day the family was out for a drive. Their car was involved in a head-on collision. The father’s right arm was torn off at the shoulder. When he came home from the hospital, he discovered that his daughter’s arthritis and skin condition had vanished.

(Murphy, 2001)

Everyone is subject to these same natural Laws of the Universe, regardless of race, colour, creed or gender. The laws exert their influence without our consent or awareness. When we choose the behaviour, we choose the consequences. Interestingly, the people who are frustrated in life consistently try to defy the natural laws. And, not surprisingly, successful people live in harmony with the natural Laws of the Universe.

Deepak Chopra, an authority in mind-body medicine, identified these issues in his bestselling book, The Seven Spiritual Laws of Success, saying ‘no debt in the universe ever goes unpaid. There is a perfect accounting system in this universe, and everything is a constant “to and fro” exchange of energy’.

All of life is connected; what we do to others, we do to ourselves. According to the principle of karma, any negative or positive thought or action remains that way, until it expends (uses up) its energy by acting upon the originator. The energy you create through your thoughts, words and deeds – either negative or positive – will rebound and act on YOU. But, as it is the nature of energy to expand when it is put out into the world, you will at some point experience much more than you caused others to experience.

If you cause others to experience prosperity and wellbeing, it will come back to you and you will experience it as well, often multiplied. In like manner, if you hurt someone, the energy will eventually return and cause you even greater hurt, unless of course you make amends in some way.

Eighteenth-century German poet and philosopher, Wolfgang Von Goethe wrote:

Nature understands no jesting; she is always true, always serious, always severe; she is always right, and the errors and faults are always those of man. The man incapable of appreciating her, she despises and only to the apt, the pure, and the true, does she resign herself and reveal her secrets.

The Law of Cause and Effect is the IRON LAW of the universe. It is unyielding. If you defy this law, there will be consequences – no ‘ifs, ands, or buts’ about it. It’s fascinating (and often tragic) to observe how many of us try to defy this law, especially when we pursue quick and easy gains. Often we strive for what we want by doing the exact opposite of what is in our best interest.

This beautiful fable illustrates the mystifying and sometimes illusive nature of the Law of Cause and Effect.

The Secret to Creating Affluence

A young man went to the forest and said to his spiritual master, ‘I want to have unlimited wealth, to help and heal the world. What is the secret to wealth?’

The spiritual master said, ‘There are two Goddesses that reside in the heart of every human being: the Goddess of WEALTH and the Goddess of KNOWLEDGE’.

‘Although you love both, you must pursue one of them to the exclusion of the other. Pursue her, love her, and give her your attention. Understand that only the Goddess of Wealth can give you wealth, and you may pursue only one Goddess, not both’.

‘But, here is the secret: If you pursue the Goddess of Wealth, she will be pleased with you because she loves to be chased. The more you pursue her the more she will elude you. However, if you pursue the Goddess of KNOWLEDGE, the Goddess of WEALTH will become extremely jealous and pay more att ention to you. In fact, the more you seek the Goddess of Knowledge, the more the Goddess of Wealth will seek you. She will never leave you. She will constantly shower you with material blessings just to win your attention, and the wealth you desire will be yours forever’.

Adapted from (Chopra, 1993)

The human tendency is to pursue the Goddess of Wealth, which seems like the logical choice. However, wealth is simply an effect, and like any effect it has a cause. In the fable, pursuing one goddess gets you the best of both worlds; wealth comes from the acquisition and proper application of knowledge.

So let’s be clear: your goals and dreams will manifest when you and the Laws of the Universe are in harmony!

It’s a scientific fact that the universe operates in absolute harmony with IRREVOCABLE natural laws and principles that have NEVER varied throughout all time. These laws prevail regardless of whether we heed them or not. Those individuals who live in harmony with the Laws of the Universe will emerge victorious. Bestselling author, Bob Proctor, summed it up perfectly when he said,

You are living and working in a dynamic global marketplace that leaves little room for error. In future, only those individuals whose beliefs are sound, in harmony with the laws of the universe, and have been integrated with their behavior, will emerge as real winners.

(Proctor 2011)

This much we know with certainty: you have unlimited potential and you can tap into and harness this potential by combining:

1. a deeper understanding of yourself (your power of attraction) with

2. specific efforts towards a desired outcome (your power of action).

In other words, you’ll experience the rewards (the Law of Receiving) when you truly understand that you have immense, untapped ability, and you combine that understanding with deliberate application of the Law of Attraction and the Law of Action.

Leveraging Technology for Organisational Excellence

Technology & HR-Leverage one for the other: “Technology and HR are enablers of business. Integration of the two would mean not only harmonious co-existence but also leveraging one for the other. Leveraging of technology for HR would mean digitizing the mundane HR activities and automating the back office and transactional activities related to recruitment, performance management, career planning, and succession planning, training and knowledge management. Leveraging HR for technology implies managing change associated with technology by way of communication, training, hiring, retraining, stakeholder analysis and conscious keeping. Thus they can play complementary roles.”

Technology and HR both have one thing common i.e., both these are enablers of business.

In recent times, technology has become synonymous with information technology, as hardly any other technological development of the past would have impacted all spectrum of business as information technology has impacted. Irrespective of the kind of business you are in i.e., services or goods, commodity or branded, trading or manufacturing, contemporary or traditional deployment of information technology in one form or the other is a foregone conclusion. To manage and deploy technology in an effective way, all business Organizations would need knowledge workers. Managing of these knowledge workers is the responsibility of HR function. Hence the integration of technology and HR is an absolute must.

Having understood technology and HR in the present context we must understand integration in this context. Integration would not only mean harmonious co-existing but would also mean one enhancing and complementing the other i.e., technology is used to enhance effectiveness of HR and HR functions helps in adopting and managing change which technology deployment brings in.

Leveraging technology for HR

HR management as a function is responsible for deliverables like business strategy execution, administrative efficiency, employee contribution and capacity for change. All these are accomplished through what HR people do i.e., staffing, development, compensation, benefits, communicate organization design, high performing teams and so on. In majority of these areas technology is being deployed.

e-Recruitment

Recruitment is one area where all the companies worth their name leverage IT. There are two different models of e-recruitment, which are in vogue. One is recruitment through company’s own sites and the other is hosting your requirement on the other sites e.g., monster .com, jobsdb.com, jobsahead.com, naukri.com, and jobstreet.com and so on so forth. The first models is more popular with the larger companies who have a brand pull for potential employees e.g., G.E., IBM, Oracle, Microsoft, HCL, ICICI, Reliance, Mindtree consulting etc. Other companies prefer to go to the job sites. Some are adopting both.

E-recruitment has gone a long way since its start. Now these sites have gone global. Sites like jobsahead.com and monster.com have established global network, which encompasses separate sites for jobs in Australia, Denmark, Belgium, and Canada etc. Job seekers are able to search job by region or country and employers target potential employees in specific countries. For example, 3 Com recently posted a company profile on the Ireland site that highlights the contributions of 3 com’s Irish design team in its global projects.

In the early days e-recruitment was plagued with flooding the employers with low-quality bio-data’s. Again technology has come as a savior. Now pre-employment testing like the one introduced by Capital One, a US based financial company, help in filtering the applicants. These tools test online e.g., applicants for call centers. ‘Profile International’ a Texas based provider of employment assessments, has developed tools that allow instant translation of assessment tests between languages. Further developments like video- conference specialized sites, online executives recruitments and combining online and offline methods are leading to more and more companies adopting e-recruitment at least as a secondary recruitment method. Arena Knights Bridge, a US based IT company conducts video based interview of its prospective employees and only short listed employees are met in person. Even Cisco was to launch the same.

Employee Self Service

Employee self-service is perhaps one utility of IT, which has relieved HR of most of mundane tasks and helped it to improve employee satisfaction. Employee self services is a plethora of small activities, which were earlier carried out by employee through administration wing of HR. These are travel bookings, travel rules information, travel bills, leave rules, leave administration, perk administration, etc. Earlier all these rules and information were in the custody of HR. Every user employee was expected to reach out to HR and get it done. Now with deployment of ESS in most of the companies, employee can request for travel related booking online, fill his/her T.E. bills, apply for leave, log time sheet and see his perks value disbursed and due etc. E.g., in Ballarpur Industries Ltd. leave administration is completely digitized in its corporate office. It is working towards digitizing travel related activities, perks and even compensation management and performance management administration. ‘Digitize or outsource all the mundane and routine focus only on core and value add’ – Vineet Chhabra V.P. -PDC BILT.

Communication

Communication which is most talked about management tool has always been a gray area in HR management. In large companies with vast geographical spread communicating with all employees had really posed formidable challenge to HR professionals. Technology has again come for rescue. Starting with telephones, faxes, e-mails and maturing into video conferencing, net cast, web cast etc. communication is one area of HR, which has been greatly benefited by technology. Mouse & click companies like Oracle, IBM has an intranet which caters to most of the information needs of its employees. Brick & Morter companies like BILT also have made a foray into deploying intranet for internal communication, which has corporate notice board, media coverage, and knowledge corners.

Knowledge Management

Another area of HR, which is leveraging technology, is employee development. Programmed learning (PL) i.e. learning at its own pace is one of the most effective ways of adult learning. Use of technology for this purpose can’t be over emphasized. Aptech Online University and ‘The Manage mentor’ are some of the Indian sites, which are in this business knowledge management, which is an integral part of any learning organization, which cannot become a reality without technology. Companies can harness the knowledge of its employees by cataloging and hosting it on the intranet. Talk to ‘Big-5′ or not ‘so big’ consulting companies you will find that main stay of their business is the knowledge repository. Technology has enabled them to retrieve it swiftly. In the competitive environment where speed is the name of game technology driven Knowledge Management constantly provides a strategic advantage.

If you look at HR module of ERP solutions like people soft, SAP, Oracle and Ramco they provide you with a comprehensive package which helps in man-power planning, recruitment, performance management, training and development, career planning, succession planning, separation and grievance handling. A transaction happening in all these areas are digitized and form a closed loop ensuring employee database is always updated. E.g. a joining letter of a new employee is system generated. It will be printed only when all mandatory fields of information are entered. Similarly a transfer order or a separation letter is issued from the system only if that transaction has been carried out in the system.

For career planning, success planning, skill and competencies matrix methods are used by most of these systems. They search an employee with the required skills first in the in-house database of employees. Once put in practice in letter & spirit, this system not only enhances business results by matching the right candidate for right job but also improves retention of employees.

Processing payroll, churning out time office reports, providing HR-MIS are some other routine activities of HR which have been off-loaded to technology.

Leveraging HR for Technology

All HR professionals, preaching or practicing, learning or experimenting, teaching or studying have experienced leveraging technology for HR. But most of us come across a situation where we need to leverage HR for technology. Let us understand what do we mean by this.

Whenever technology is deployed afresh or upgraded it involves a change. The change may be at the activity level e.g., applying for leave through the intranet or at the mental model level e.g., digitizing the process succession planning which have been HR professionals forte. The people have always registered adopting change. This is one area where HR professionals are to deliver i.e., become change agents and lead the process of technology and change adoption. The resistance to change is directly proportional to speed of change. Now speed of change has increased and hence resistance.

Just to take an example, most of ERP implementation in the world have not been able to deliver all the expectations. Some of these have failed to deliver at all. While analyzing the cause of failure it has been observed that 96% of failures are because of people related issues and only 4% are because of technology.

It is the people who make the difference; hence HR should exploit its expertise to facilitate the adoption of technology. I would like to put together some of the thoughts on what HR should do for this.

At the time of recruitment, stop hiring for skills rather hire for attitude and a learning mind. Skills of today are no longer valid tomorrow. Managing ever changing change is the only criteria for success.

Functional or technical skills can be acquired during the job. Hence recruitment in the technology era needs to undergo a paradigm shift i.e., from a skill/competency based it needs to be attitude and learning mind/ ability based interview. That would translate into hiring for skills for future. In IBM every employee has to fill in his/her individual development plan where the employee commits its learning one/two new skills every year thus remaining competitive every time.

If we look at the chemistry of resistance to change it is either a skill issue or a will issue. To address the will issue we need to work at a comprehensive solution starting from recruitment (as discussed earlier), reward, compensation and leading to organization culture which promotes change. A living example is 3M, a US based company, where innovation is way of life, where 10% of revenue must come from new products every year. For them change becomes way of life.

To address the will issue further organization need to prepare a communication strategy which creates a ‘pull’ for the technology. For example, in Ranbaxy, when they went for SAP implementation they anticipated resistance. To address this they started a house journal, which was aimed at educating the employees on the benefits, which will result from adoption of ERP, SAP. This created a need rather a potential need or a latent need was brought out. Adoption of ERP did not become much of a problem.

At times adoption of technologies is perceived as a threat by the employees e.g., automation leading to reduction in workers, office automation leading to retrenchment of clerks etc. HR needs to be associated with the technical adoption right from the beginning till the end. At the selection of technical stage if HR is associated, it can map the skills required and create a pull during implementation and adoption. Post adoption it can release the excess non-re-allocatable employees.

To understand this process more clearly we can take example of ERP implementation. ERP is taken as an example as this is one technology adoption which effects employees across the org. irrespective of function and position. Any other automation may have affected only a segment of organisation. ERP implementation in any organization goes through the following stages.

1. Selection of package

2. Business analysis

3. Solution design

4. Configuration and customization

5. Conference room piloting (CRP)

6. Go-live and production

At each stage HR has to play a role, which will help in mitigating resistance to change.

During selection process, the change agent can understand the business benefit ERP would bring. This would help him to draw a comprehensive communication plant aimed at creating a ‘pull’ for the change. The communication plan may use its various weapons from the armory. The obvious examples are Newsletters, Newsflash. In-house journal, addressing by the top management, web cast, open house sessions, meetings formal and informal.

During the business analysis phase implementation team is supposed to analyse the existing business processes. At times this leads to surfacing of some data which is not very desirable by the process owners, leading to resistance at this stage, HR has to be again proactive and carry out a detailed stake-holder analysis. Such an analysis should give a lead to potential areas of problem and potential champions of change.

Solution design involves defining ‘To-be processes’ i.e., the way business would be carried out in future. At this stage HR has to play the role of catalyst to turn the heat on. The idea is to ensure to make maximum out of an opportunity of package enabled business transformation. HR can play a role by arranging to educate and train the right people on best business practices, just before this phase.

During the configuration and customization HR has to keep on beating the drum, the customization of a standard package is a big no-no. Similarly, during the conference room plotting (CRP) it should help in identifying the right persons to be involved in CRP. A thorough testing at this stage would result in lesser pain at the time of going live. This is also time to focus on training of end users, the employees who are going to use the system once implemented. Training- retraining -training to ensure all the prospective users are comfortable with usage of software before the system goes live.

During the go-live stage HR has to work over time to keep the motivation levels high. This is the time when management starts losing patience as one glitch after the other keeps appearing and virtually bringing the business to halt. At this stage, HR has to play ‘conscious keeper’ for the top management once into product relocating the surplus is a challenge for which it has to be prepared before it.

This examples makes it clear that involvement of HR during the entire life cycle of technology is valuable. ERP is not an isolated case. It is true for any other technology adoption only finer details may vary. Hence HR must play a proactive role rather than being just a silent spectator or mere executers of the wishes of business or chief technology officer in case of technological changes.

How to View Life Insurance As An Investment Tool

A lot of people have been approached about using life insurance as an investment tool. Do you believe that life insurance is an asset or a liability? I will discuss life insurance which I think is one of the best ways to protect your family. Do you buy term insurance or permanent insurance is the main question that people should consider?

Many people choose term insurance because it is the cheapest and provides the most coverage for a stated period of time such as 5, 10, 15, 20 or 30 years. People are living longer so term insurance may not always be the best investment for everyone. If a person selects the 30 year term option they have the longest period of coverage but that would not be the best for a person in their 20′s because if a 25 year old selects the 30 year term policy then at age 55 the term would end. When the person who is 55 years old and is still in great health but still needs life insurance the cost of insurance for a 55 year old can get extremely expensive. Do you buy term and invest the difference? If you are a disciplined investor this could work for you but is it the best way to pass assets to your heirs tax free? If a person dies during the 30 year term period then the beneficiaries would get the face amount tax free. If your investments other than life insurance are passed to beneficiaries, in most cases, the investments will not pass tax free to the beneficiaries. Term insurance is considered temporary insurance and can be beneficial when a person is starting out life. Many term policies have a conversion to a permanent policy if the insured feels the need in the near future,

The next type of policy is whole life insurance. As the policy states it is good for your whole life usually until age 100. This type of policy is being phased out of many life insurance companies. The whole life insurance policy is called permanent life insurance because as long as the premiums are paid the insured will have life insurance until age 100. These policies are the highest priced life insurance policies but they have a guaranteed cash values. When the whole life policy accumulates over time it builds cash value that can be borrowed by the owner. The whole life policy can have substantial cash value after a period of 15 to 20 years and many investors have taken notice of this. After a period of time, (20 years usually), the life whole insurance policy can become paid up which means you now have insurance and don’t have to pay anymore and the cash value continues to build. This is a unique part of the whole life policy that other types of insurance cannot be designed to perform. Life insurance should not be sold because of the cash value accumulation but in periods of extreme monetary needs you don’t need to borrow from a third party because you can borrow from your life insurance policy in case of an emergency.

In the late 80′s and 90′s insurance companies sold products called universal life insurance policies which were supposed to provide life insurance for your whole life. The reality is that these types of insurance policies were poorly designed and many lapsed because as interest rates lowered the policies didn’t perform well and clients were forced to send additional premiums or the policy lapsed. The universal life policies were a hybrid of term insurance and whole life insurance policies. Some of those policies were tied to the stock market and were called variable universal life insurance policies. My thoughts are variable policies should only be purchased by investors who have a high risk tolerance. When the stock market goes down the policy owner can lose big and be forced to send in additional premiums to cover the losses or your policy would lapse or terminate.

The design of the universal life policy has had a major change for the better in the current years. Universal life policies are permanent policy which range in ages as high as age 120. Many life insurance providers now sell mainly term and universal life policies. Universal life policies now have a target premium which has a guarantee as long as the premiums are paid the policy will not lapse. The newest form of universal life insurance is the indexed universal life policy which has performance tied to the S&P Index, Russell Index and the Dow Jones. In a down market you usually have no gain but you have no losses to the policy either. If the market is up you can have a gain but it is limited. If the index market takes a 30% loss then you have what we call the floor which is 0 which means you have no loss but there is no gain. Some insurers will still give as much as 3% gain added to you policy even in a down market. If the market goes up 30% then you can share in the gain but you are capped so you may only get 6% of the gain and this will depend on the cap rate and the participation rate. The cap rate helps the insurer because they are taking a risk that if the market goes down the insured will not suffer and if the market goes up the insured can share in a percentage of the gains. Indexed universal life policies also have cash values which can be borrowed. The best way to look at the difference in cash values is to have your insurance agent show you illustrations so you can see what fits you investment profile. The index universal life policy has a design which is beneficial to the consumer and the insurer and can be a viable tool in your total investments.

Start Up Business Ideas-some Low Budget Start Up Business Ideas

These days almost every one is looking for start up business ideas for variant budgets. The reason behind this is very simple: people want to increase their earnings.

There could be various start up business ideas. The real art is choosing from so many of them. There are different categories of businesses. For example the major categories are food business, retailer ships, whole selling, personal services, maintenance services, business services and the internet businesses.

For example in food businesses the start up ideas will not be opening up a restaurant, bar or club. If one is good at cooking then you might start from cooking at home and selling to friends and relatives. People can hire you to learn about the topic you are a specialist of or for any assignment related to your expertise. If you know a particular sport then you can take the classes for training people in that sport.

Selling your hobby is also a very budget friendly business start up idea. For example you are fond of writing. You can write for news papers, journals and different websites. There is a great demand today for the web content writers. Some web sites will publish your articles on which ever topic you write.

Once you think rather you are sure that you have the required marketing and PR skills then you can start looking for start up business ideas. In my opinion the start up business ideas should be the ideas of small businesses. This is because the large businesses need heavy investments. The rookie business owners of course do not know that much about the market and there is always a chance that the money invested initially might be lost.

Other low budget business “start up” ideas are either to render personal services or to use your creative skills as a business. The personal services can include baby sitting or child and toddler care. Other than that these services include style and image consultancy, being a wedding consultant or an event planner etc. The other business “start up” ideas which require creative skills are to sell your paintings or clay pots or other crafty things.

All of these businesses need no investment other than printing your business cards and flyers for marketing. You can even save on marketing initially by telling all of your friends and relatives about your latest business venture in person.