Agriculture Management of Tea Industry

Agriculture Management of Tea Industry Introduction This chapter will give the reader with the clear background of research study, research question, research objectives, justification of research, organisation of study, research framework and brief overview of what will present later in the whole dissertation. 1.1. Background of research study: All organizations evaluate the performance of their employees to find out their relative worth for the job they are doing. Performance is being related to the productivity, it is crucial for the organization to achieve its goals and objectives. Effective performance for the organization means that output can be maintained with fewer numbers of employees. Performing effectively is also of crucial importance to the employee because organizations can no longer tolerate poor performance, they (employees) are more likely to be dismissed. The effective management performance, therefore, is not only vital for the long-term survival of the organizations but is also a moral obligation on the employees. Performance appraisal is considered as the systematic evaluation of individuals to their performance on the job and their potentials for development (Dale S. Beach, 1980: 290). Wendell French has defined performance appraisal as a systematic and periodic assessment of how employees are doing their jobs in relation to established norms and the communication of that kind of assessment to employees. It is a process of evaluation an employees job performance with respect to its requirements. A systematic performance appraisal provides information for making decisions about various issues such as promotions, pay increases, layoffs, training and development and transfers. It is managements powerful tool in controlling human resource and productivity. Managers can improve an employees job performance through clarifying expectations and evaluating performance. Employees also, in general, prefer having some kind of appraisal to develop an appropriate vision of their own effectiveness and opportunities (Wood, 1988). Formal performance appraisal can meet the three needs, one of the organization and the other two of the individuals within the organization: It provides systematic judgments to back up salary increase, transfer, demotion or termination. It is the means of communicating to subordinates the behavior, attitudes, skills or job knowledge and let him know where he stands. It is used as a base for coaching and counseling the individual by his superior 1.2. Selected organisation of study Beginning of tea plantation in Nepal dates back to the year 1863, when Mr. Gajraj Singh Thapa, the Badahakim (Chief Administrator) of Ilam, initiated tea plantation for the first time at Ilam. It is said that he was very much impressed by the taste of tea and fascinating beauty of tea gardens of Darjeeling. So he brought tea-technicians from Darjeeling and made local people join hands in tea plantation. His effort was later followed by planting tea in Ilam and Soktim in the year 1865 (both plantations are still under commercial production). It is believed that the tea seedlings were given by the Chinese government as gift to the then prime minister Jung Bahadur Rana. The first tea processing factory was established in the year 1872, in Ilam Tea Estate. But the further expansion of tea plantation lay virtually stagnant for about a century. No efforts were found to be made by the government or private sector in this direction. It was only in 1959 when Budhkaran Tea Estate was established at Rangiadanga (Maheshpur VDC, Jhapa), the first tea estate in private sector. Soon after this venture, a few other landlords also started tea plantation in Jhapa district, which gave birth to some tea estates such as Satighatta Tea Estate, Himalaya Tea Garden, Nakkalbanda Tea Estate, Mittal Tea Estate, Giribandhu Tea Estate. These tea estates are still among the leading private sector tea companies of Nepal. However, these plantations were done more with the motivation of saving the land from land ceiling being imposed under the Land Ceiling Act in 1963, because all the plantations during that period were started by big land holding families. This can be seen in some of the plantation fields of those days having the tea bushes at the distance of mor e than two feet. These ventures, however, opened the door for other entrepreneurs in tea sector. In the history of tea development in Nepal, the establishment of Nepal Tea Development Corporation (NTDC) is considered to be a landmark to augment the tea cultivation. NTDC was established in 1966, with the joint effort of the Government and Overseas Development Administration (ODA), Britain with the objective of making the country self-reliant in tea by producing more tea, thereby, substituting import of tea and earn foreign currency by exporting quality tea. Soon after its establishment, NTDC took over the first two tea plantations, namely, Ilam and Soktim tea estates. NTDC then extended tea plantation in Kanyam (Ilam) in the year 1971, with the aim of producing exportable quality tea. One year later, another tea garden was established in Tokia (Jhapa) in 1972. Keeping in view of the increasing internal demand of tea another tea estate was established in Barne (Shantinagar VDC, Jhapa). Later, two more tea estates, namely, Barradashi (Jhapa) and Chilingkot (Ilam) were established; making altogether seven tea estates under the ownership and management of NTDC. Despite its significant contribution for the development of tea cultivation, the only government owned corporation faced acute financial and managerial problems in the latter years, and eventually NTDC was leased out to the private sector in the year 2000. The management of NTDC was handed over for 50 years to Triveni Group, with the condition of keeping all workers in as it was form and terminating all staff under voluntary retirement scheme with extra two months salary as a golden handshake. Besides these plantations by government and private sectors, small growers started tea cultivation in the nearby VDCs of Kanyam, when NTDC established Kanyam Tea Estate. Some 40 small farmers started tea cultivation in some VDCs of Ilam district, such as, SriAntu, Kolbung, Kanyam, Fikkal, Pashupatinagar, Panchakanya, Laxmipur, and Godak. With the encouragement and technical support provided by NTDC, tea cultivation at small farmers level, expanded gradually in different parts of other districts, namely, Panchthar, Terhathum, Dhankuta, and Jhapa. In view of good prospect of tea cultivation in the Eastern Region, the Government declared these five districts as Tea Zone in the year 1982 and accordingly adopted a favorable policy to encourage tea farmers in private sector. The facilities incorporated in the policy included: providing easy loan to tea cultivators from Agriculture Development Bank with 50 percent subsidy in the interest on loan for the first 5 years in Terai and 7 years in hills, exemption from land-ceiling for tea cultivation and 90 percent rebate on land-tax. With the objective of extending technical services, seedlings and transport facilities, small farmers offices were established under NTDC in Fikkal, Manglabare and Jasbire of Ilam; Chilingden of Panchathar; Solma of Terhathum; and Hile of Dhankuta districts. All these efforts contributed quite positively to the expansion of tea cultivation, which consequently gave birth to the concept of Bought Leaf Factory. The first processing unit of this kind was established in the year 1989, at Fikkal of Ilam district. The enactment of Industrial Enterprise Act by the Government encouraged and facilitated more to the extension of tea cultivation. Industrial Enterprise Act, 1992 (amended in 1998) has an objective of encouraging the promotion of manufacturing industries in the country by making the environment of industrial investment more congenial and straight forward. The Act has categorized tea cultivation and processing industry as an agro-based industry which fall under national priority industries like horticulture and fruit processing, vegetable and seed farming, sericulture and silk production, animal husbandry etc. The Act has proposed some concessions to the agro-industries with an income tax exemption for a period of five years from the date of commercial production. If the tea industry wants to invest in the pollution controlling mechanism or equipment, then a reduction of up to 50 percent is granted in the taxable income. Such remission may be deducted on a lump sum or an installment with a period of three years. The Ninth Five Year Plan (1997-2002) gave a high priority to agro-based industries such as tea plantation and processing. The plan recognized agro-based industries as the basis of industrialization in the country. This plan emphasized on the plantation of high-valued Orthodox tea for export. Similarly it placed importance on the promotion of CTC tea for domestic consumption. During the plan period, total tea area was projected to be 4564 hectare and total tea production was projected to be 4101 mt. from 3156 ha. Agriculture Development Bank actively disbursed credit to the tea sector during 1996-1997. As a result, the number of CTC planters under tea estates and out growers category increased rapidly. The reasons for increase in plantations, as responded by the tea planters, were: Good rate of returns as compared to traditional farming. Availability of bank credit attracted tea plantation. High demand for tea in both domestic and foreign market (esp Orthodox tea). Peer pressures also motivated out growers to start tea plantation. The other reason was that other food crops could not be grown in the land adjoining tea plantation. By the use of insecticides and pesticides in the tea plantation, insects are flushed out and take refuge in the nearby land which devours the crops. 1.2.1. Types of Tea: Generally two types of tea are produced in Nepal. One variety that is grown in the hilly region is called Orthodox tea. Orthodox tea has a huge demand in overseas countries and its export is increasing over the years. The major markets of Nepalese Orthodox tea are Western Europe and North America. Similarly, tea grown in Terai (plain area) especially in Jhapa district is called CTC (Crush, tear and Curl) tea, which accounts for more than 95% of the total domestic tea consumption. 1.2.1.1. Orthodox Tea: Black tea, in the form of traditional leaf tea produced from hill grown tea, particularly Chinese type of tea is known as Orthodox tea. The Orthodox tea, particularly popular for its aroma, is considered as premium tea all over the world (Singh, 2001). This tea is produced from the leaves of tea bushes in the eastern hilly region. Despite its long plantation history, the production and productivity of Orthodox tea have been low due to lack of conducive govt. policy, high cost of production (and therefore expensive) lack of technical know-how, and CTC oriented domestic market. However, the increasing demand of hill-orthodox tea in the overseas market provides good prospect of tea cultivation in the hilly region of Nepal. 1.2.1.2. CTC Tea: CTC tea, commonly used by majority of tea consumers of the world (produced in Jhapa district) is popular for its color. The manufacturing process of CTC tea consists of withering of leaves, rolling, fermenting, and drying through mechanical devices. Furthermore, sorting is done with the help of machine in different grades such as brokens, fannings, and dust. 1.2.2. Present Status of Tea Industry: Tea Industry includes all Tea Estates, processing plants, small growers, Packeters and marketers that are directly involved in production and marketing of tea. National Tea Policy-2000 defines Tea Industry as the tea cultivation with the registration of industry in the land availed under the concession of land ceiling facilities and having ones own processing plant. Although tea industry has a long history of more than a century, in real sense it is only after the establishment of Nepal Tea Development Corporation. Ltd. in 1966, that tea cultivation flourished in Nepal. At present, there are 128 tea estates and 45 tea processing factories as registered in NTCDB. Out of these 24 tea estates have their own processing factories whereas 21 tea processing factories do not have their own tea gardens. In addition to these, there are 20 tea packaging industries and export import agencies related to tea marketing. Tea industry in Nepal has developed under three different ownership status and management, namely, Public Estates, Private Estates and Small Holders. The only government owned and managed, NTDC was privatized in the year 2000. All these three types of tea producers have contributed significantly for the expansion of tea cultivation. The efforts made by Government and private sector entrepreneurs including small farmers have been the driving force for the extension of tea in the hills and Terai. Some of the important steps taken by the Government over the last 25 years include establishment of NTDC, implementation of outgrows scheme, declaration of tea zone, and policy package including facilities like providing loan and subsidy on bank rate, exemption from land ceiling and land tax etc., establishment of NTCDB, and issuing of National Tea Policy-2000. The organization structure in all the tea estates under study was not presented clearly in the charts. However, the procedures and processes being practiced in carrying out the everyday tasks in tea industry are more or less similar in most of the cases. On the basis of the management system being adopted in the tea gardens consisting of different levels and statutory requirements, a common type of organization structure could be designed. The common structural pattern of tea estates is presented in Fig. 1.1. Fig. 1.1 Structural Pattern of a Tea Garden Owners / Board of Directors Managing Director Labor Welfare Officer Asst. Manager (Factory) Office Finance Officer Asst. Manager (Field) Factory Babu Main Mechanic Garden Babu Garden Clerk Head Clerks Accountant Computer Operator Asst. Health Worker Staff Nurse Sisters Electrician Mechanic Fitter Babu Main Sardar Sardar Dafadar Chaprasi Bajliwala Kalwalla Sardars Bahidar Main Sardar Munshi Weathering Rolling Storing Workers Workers Tea Maker Tea Worker Tea Maker Workers Manager Medical Officer Asst. L.W.O. Asst. Clerk Asst. Accountant Peon In practice the estates in Nepal were having typically a very simple line organization structure to administer the day to day routine operations. Fig. 1.2 exhibits a typical form of common organization structure found in all tea estates, though it was not formally exhibited in charts. Each tea estate consisted of a manager with whole responsibility to look after the garden and the factory both as routine work. His roles were more of a technician with the knowledge of tea gardening and processing than a manager. Under the manger were appointed an assistant manager or an officer known as factory in-charge whose main roles and duties were related with running the tea processing factory with the help of technical assistants. And in the garden there were a few assistants called Sardars to supervise the field work whereas in the office were an accountant/clerks. Attendance-keepers called Hazira-Babus and a peon. On the basis of field visits and observation in different tea estates the exis ting common organization structure could be drawn as under. Fig. 1.2 Organization Structure of Tea Estates Owners / Board of Directors Managing Director Mechanics, Fitters Sardars Asst. Fitters Peon Guards Field Workers Workers Manager Office Accountant Factory Incharge Field Incharge Senior Sardars Clerks Computer Operators Attendance Keeper Sardars Bahidars 1.3. Research question Is the performance appraisal practice key to pay rise, training and development, promotion or termination of the employee in the tea industry of Nepal? 1.4. Research objectives The specific objectives of this study were: To examine how employee performance is appraised in an organization. To evaluate the effectiveness of performance appraisal system in the organization. To analyze the relationship between performance appraisal and the factors like pay rise, training and development, promotion or termination of employee in an organization. 1.5. Justification of research Tea industry which occupies an important position in the national economy is growing extensively mainly in the eastern region of Nepal. It is, being one of the most labor intensive, agro-based industries; it involves a great deal of workforce, which provides direct employment to about 41000 workforces. After the privatization of Nepal Tea Development Corporation in 2000, the change in ownership is also accompanied by deep changes in organizational procedures and culture that could have a profound effect on enterprise behavior and performance (Manandhar, 2002: 37). There have been only a few research studies in the field of human resource management in private enterprises of Nepal. And there has not yet been any specific research conducted in performance appraisal in tea industry of Nepal. So, in view of the poor research-based on performance appraisal and the lack of knowledge existing in this field, the research work is virtually called for the streamlining of performance appraisal practices. Research can lead to an increased understanding of and improvement in performance appraisal practices. It can provide insights for managers as they attempt to increase employee productivity and satisfaction while reducing absences and turnover. Research can also identify potential problem areas related to performance appraisal Lack of specific research in this field has encouraged the researcher to take up the task of conducting a comprehensive research with the purpose of examining and analyzing the actual performance appraisal practices in tea industry of Nepal. This study will reveal a clear picture about the existing state of performance appraisal practices in tea industry. The outcome of the study may serve as a research infrastructure on which further researches can be built. And the information and conclusions derived from this study may be useful and helpful for practicing managers, as well as planners, policy makers and other agencies concerned, through better understanding of performance appraisal practices relating to tea industry. Thus, it is a modest attempt towards examining and understanding performance appraisal practices in tea industry of Nepal. 1.6. Structure of dissertation Chapter 1: Introduction: In the first chapter of dissertation covers with background information followed by the selected organisation of study, research question, research objectives, justification of study, structure of dissertation and end with research framework. Chapter 2: Literature review: The second chapter reviews relevant literature of performance appraisal consisting of academic and institutional researches, seminar and survey reports, and articles. Also it includes purpose of performance appraisal and methods of PA. The literature showed that there is positive and strong relationship between performance appraisal and pay rise, promotion or termination, and training and development of employee. Chapter 3: Methodology: This chapter deals with the general theories of research like phenomenology and positivism and shows the relevance of phenomenology for this research study. Apart from this, it includes the types of research like inductive and deductive research where the researcher applies the inductive research approach. Finally the data collection tools, techniques, analysis and interpretation methods are dealt briefly in this chapter. Chapter 4.Finding/result: This chapter presents all collected data from primary and secondary sources in tabular form for analysis in order to achieve the goal of the dissertation. Chapter 5: Analysis and discuss of finding: This chapter deals with the results of the data analysis and discussion on the findings. Chapter 6: Conclusion and recommendation: This chapter deals with summarizes major findings of the study and forwards some suggestions 1.7. Research framework Figure 1.3. Research framework: PROBLEMS LITERATURE REVIEW OBJECTIVES FINDINGS AND DISCUSSIONS PROBLEMS CONCLUSIONS PROBLEMS RECOMMENDATIONS PROBLEMS RESEARCH METHODOLOGY Primary Data Questionnaires Interviews Secondary Data PAS Model of Tea Industry Analysis of Organisations Operating Systems and Performance CHAPTER: TWO Literature Review 2.1. Performance Appraisal The essence of the concept of the HRM is that people working in the organization are viewed as a valuable resource. If these people are managed properly, they can boost productivity through commitment and capability. HRM lays emphasis on the importance of integrating personnel functions (recruitment, selection, appraisal, reward, development, industrial relations, grievance and discipline, retirement, redundancy, dismissal) into the overall strategic management of the organization obligation on the employees. The effective management of performance is not only vital for the survival of the organization but is also in the best interest of the employees. The underlying assumption of performance management is that the individual employees can satisfy their needs and objectives by contributing to the attainment of the organizations objectives. This may result in employees motivation and greater job-satisfaction which is at the core of HRM (Foot and Hook 2008).The performance appraisal process generally consists of the following six steps as depicted in Figure 1 (Decenzo and Robbins, 1998). Table 2.1. The Performance Appraisal Process Establishment of performance standards Communicate the performance expectations to employees Measure actual amount of performance Compare the actual performance with standards Discuss appraisal with the employee If necessary, take corrective action Performance appraisal begins with the establishment of clear and objective standards of performance evolved out of job analysis and job description. These standards need to be communicated to the employees. Subordinates have to receive and understand the information properly. The third step is the measurement of the actual performance. For this, four measures can be utilized by managers, namely, personal observation, satisfied reports, oval reports and written reports. The fourth step is the comparing of the actual performance with standards. If any deviations are found between standards and actual performance, the manager may proceed to the fifth step to discuss the appraisal with the employees. Final step of appraisal is taking corrective action when it requires The objectives of performance appraisal can be classified by different ways but according to (Harrison, 1995) to the objectives of performance appraisals are i. administrative: which determine orderly way of promotion, transfers and increase of payment. ii. Informative: supplying the relevant data to management team according to performance of subordinates and weakness and strengths of individual. iii. Motivational: create good environment to employee which motivate staff to develop themselves and to improve their performance According to (Randell, et al. 1972) the main purpose of staff appraisal is to evaluate, auditing, constructing succession plans, motivating staff, developing individuals and checking. Similarly according to (Lefton, 1997 ) performance appraisal can be defined by mainly four characteristics a. its formal b. it tries to find out why and how a subordinates is doing the job c. it tries to explore how subordinate can do better way in a job d.it always tries to produce benefits for subordinate, the organization and the superior. Performance evaluation systems in Nepalese organizations are mandatory. The results of performance appraisal are not used in terms of career development, reward management and employee training and development. The results are mostly used to decide whether to promote employees or not (Adhikari, 2006).The main purpose of performance evaluation in government and public enterprises is the promotion of employees. It is not used for performance feedback to employees, reward management and identifying the needs of training and development. In civil service, 40 percent of performance appraisal is confidential and thus non transparent to employee (Agrawal, 2001). Three different approaches exist for doing appraisals. Employees can be appraised against (i) absolute standards, (ii) relative standards, or (iii) objectives (MBO). However, no one approach is always best. Absolute standards are individual oriented whereas relative standards rank individuals. Management by objectives facilitates continuous improvement of performance results. Most of the private sector enterprises in Nepal lack systematic performance appraisal system. Personal judgment and subjective assessment of owner-manager serves as the key criteria for performance appraisal (Agrawal, 1982). Formal and systematic performance appraisal system was non-existent in tea industry of Nepal. Promotion is the vertical movement of an individual in an organizations hierarchy, enhanced status, accompanied by increased responsibilities, and usually with increased income, though it is not always so (Monappa and Engineer, 1999). It is the advancement of an employee to a higher job-rank in the organizational hierarchy accompanied by a pay rise (Pigors and Myers, 1981: 303). Employees consider their ultimate success of their career and performance in terms of the number and frequency of promotion they get during their service. Yoder et al observed that promotion gives incentive to initiative, ambition and enterprise, unrest and minimizes discontent, attracts capable personalities, appropriate logical training of advancement, and forms and effective reward for cooperation and loyalty, long term service, etc. (Yoder,1979). It increases satisfaction in the employees that their talents and capabilities are being recognized. In turn, they trust the organization and devote for the acco mplishment of organizational goals and objectives. In Nepal, the Civil Service Act was promulgated in 1956 which stated that promotion should be given to civil service personnel on the basis of work efficiency (Civil Service rule, 1993). Many changes have been done in the promotion system of the employee in the government organization since that time. The Administrative Reform Commission formed under the chairmanship of Mr. Vedananda Jha suggested that the promotion criteria for civil service personnel should include (a) seniority, (b) experience, (c) academic qualification and training, and (d) departmental performance report including co-operative attitude. Another Administration Reform Commission formed under the chairmanship of Mr. B.B. Thapa noted as promotion occupied special importance in the career development of employees, so capability to hold higher promotion and the capacity to perform the work satisfactory in the present position were the main criteria of promotion (Government of Nepal, 1996, Report of Commission). Amend ments were done in the Civil Service Rules in 1978 and 1983. Similarly the Administrative Reform Committee formed under the chairmanship of the then prime-minister Mr. G.P. Koirala in 1991 emphasized performance oriented promotion system. The new Civil Service Act, 1993 laid stress on performance ability with criteria such as past performance, seniority, work experience of remote area, and academic qualification. Similarly, the comparative weight-ages of promotion criteria of civil service employees were changed after 1992. NASCs study on promotion system of civil services stated that there was lack of clarity in its purpose and no consistency in the average promotion period between level and services. The risk of subjectivity in merit rating was a major apprehension in the minds of civil servants for giving more weight to merit rating. Even the performance evaluators views were in favor of no link of the promotion with the performance. Basic perquisites for sound performance appraisal practices, such as clear organizational and sectional objectives, individual job descriptions, adequate and reliable information system etc. were not properly provided in the civil service. Majorities were in favor of number allotting 50 percent of seats to the promotion by competitive examination as compared to the exiting 25 percent, in some cases even less. Williams (1972) ascertained that managers lacked adequate means or determination to control the motivation and productivity of their workforce. Job description, performance appraisal and output indicators were non-existent; rewards and sanctions were irrationally applied; salaries were not genuinely related to knowledge and or effort requirements; offices had inadequate facilities; poor co-operation and limited delegation. The top of the decision making level was congested by trivialities while middle-level staff were in a soporific frenzy over the responsibilities for complex planning and fiscal matter. The review presented above fairly indicates that the limited attempts have been made to study personnel / HR management practices in public and private enterprises of Nepal. Those studies have shed light on some aspects of personnel / HR management, however, the concluding remark indicates that personnel /HR management in the past remained neglected areas of management. This review a lso indicates that no systematic attempts have been made to study HRM practices in tea industry of Nepal. This knowledge gap has called for a systematic study which could bridge up such a gap. The present study is an attempt in that direction. 2.2. Purpose of performance appraisal It can be appeared at first glance that performance appraisals are applied for a kind id narrow purpose to assess who is doing a better job (or not). Even so genuinely performance appraisals are one of the most various tools available to managers. They may operate many purposes that profit both the employee whose performance is being appraised and the organisation. Table 2.2.Purpose of performance appraisal ADMINISTRATIVE DEVELOPMENT Decide on lay offs Describe individuals weaknesses and strengths Determine retention and termination Describe individual training needs Document personal decisions Provide performance feedback Find out promotion conditions Acknowledge individual performance Determine transfers and assignments Measure goal achievement Describe poor performance Assist in goal identification Evaluate training progress/program Determine the organizational training needs Personal planning Reinforce authority design