ASSESSMENTOFFI

NANCI
ALMANAGEMENTSYSTEM
ONHUMANRESOURCEUTI
LIZATI
ONI
NCASEOFFI
NOTE
SELAM TOWNMUNI
CIPALI
TY

HABESHACOLLEGE
DEPARTMENTOFMANAGEMENT
RESEARCHPAPERSUBMI
TTEDTOTHEDEPARTMENTOFMANAGEMENT
FORPARTI
ALFULFI
LLMENTOFTHEREQUI
REMENTOFBACHELOROFART
DEGREE(
BA)I
NMANAGEMENT

PREPAREDBY:
NAME I
DNO
1.AZI
MERATEMESGEN HCMR012/
2014
2.BEREKETLI
YEW HCMR009/
2015
3.RAHELKI
NDE HCMR026/
2015
4.YESHEMEBETDEGU HCMR048/
2014
5.YONASYSI
MAW HCMR035/
2014

ADVI
SORNAME:
AYAL(
MBA)

Jun,
2025
Fi
not
esel
am,
Ethi
opi
a
 Decl
arat
ion
Thi
sist
odecl
aret
hisr
esear
chwhi
chwasdev
elopedundert
hesuper
visi
onofMr
.Ay
al
hav
ing t
it
le”Assessmentoff
inanci
almanagementsy
stem on human r
esour
ce
ut
il
izat
ioni
ncaseofFi
not
esel
am muni
cipal
i
tySubmi
tt
edbyt
her
esear
cher
sfort
he
awar
doft
hedegr
eeofbachel
orofbusi
nessmanagementi
sanor
igi
nal
wor
kcar
ri
edout
byt
her
esear
cher
sandi
thasnotbeensubmi
tt
edpr
evi
ousl
yinpar
torf
ullt
othi
sort
o
anyot
hereducat
ionali
nst
it
uteorot
her
wisef
ort
heawar
dofanydi
ploma,degr
eeor
r
ecogni
ti
on.
 Cer
ti
fi
cat
e
Thi
sist
ocer
ti
fyt
hatt
hist
hesi
sent
it
ledasAssessmentoff
inanci
almanagement
sy
stem onhumanr
esour
ceut
il
izat
ioni
ncaseofFi
not
esel
am muni
cipal
i
tysubmi
tt
edt
o
HabeshaCol
l
agef
ort
heawar
doft
hedegr
eeofbachel
orofbusi
nessmanagementi
sa
pi
ece ofbenef
it
ed r
esear
ch wor
k car
ri
ed outby t
he gr
oup member
s underour
super
visi
on.Ther
efor
e,wer
ecommendt
hatt
hest
udent
shav
eful
fi
ll
edt
her
equi
rement
andhenceher
ebyt
heycansubmi
tther
esear
cht
othedepar
tment
.

Nameofadv
isor Si
gnat
ure Dat
e
_
___
___
___
___
___ _
___
___
___ _
___
___
_

Nameandsi
gnat
ureofmember
sofexami
ningboar
d

Name Si
gnat
ure Dat
e

1.
___
___
___
___
___ _
___
___
___ _
___
___
_
2.
___
___
___
___
___ _
___
___
___ _
___
___
_

i
i
Acknowl
edgement

Fi
rstandf
ormostwewoul
dli
ket
othankoural
might
yGodf
orhi
spr
otect
ionand
hel
pforev
eryst
epofourl
i
feandsuccessi
nourwor
k.

I
naddi
ti
on,wewoul
dli
ket
oexpr
essourdeepgr
ati
tudet
oouradv
isorMr
.Ay
alof
onl
yforspendi
nghi
sval
uabl
epr
eci
oust
imei
nreadi
ngev
erypor
ti
onoft
hepaper
,
butal
sof
orhi
sval
uabl
ecomment
s,suggest
ions,andcr
it
ici
sm t
hatgui
dedusi
n
doi
ngt
her
esear
ch.Wi
thouthi
ssuppor
tandco-
oper
ati
on,t
hiswoul
dnothav
ebeen
f
inal
i
zed.

Fi
nal
l
y,wewoul
dli
ket
othanksourbel
ovedf
ri
endsf
ort
hei
rval
uabl
emor
alunt
ilt
he
st
udyhasbeenf
ini
shed.

i
i
i
Abst
ract
Thi
sst
udywasf
ocusedont
heassessmentoff
inanci
almanagementsyst
em onhuman
r
esour
ceut
il
izat
ioni
nFi
not
esel
am muni
cipal
i
ty.Themai
nobj
ect
iveoft
hisst
udyi
sto
i
nvest
igat
ethe assessmentoff
inanci
almanagementsyst
em on human r
esour
ce
ut
il
izat
ion i
n Fi
not
esel
am muni
cipal
i
ty.I
n or
dert
o answert
he above ment
ioned
obj
ect
ivest
hest
udyusedbot
hpr
imar
yandsecondar
ysour
ceofdat
a.Thesepr
imar
y
dat
awascol
l
ectbyst
ruct
uredquest
ionnai
reandi
nter
views,wher
eassecondar
ydat
a
f
rom BookesCompany’
sjour
nalanddi
ff
erentdocument
scol
l
ectt
hroughdocument
anal
ysi
s(documentr
evi
ew)t
echni
ques.Themet
hodofsampl
i
ngIusewassi
mpl
e
r
andom sampl
i
ngbecausei
tgi
vesequalchancef
oral
lempl
oyeesandf
reef
rom bi
ases.
I
nor
dert
oanal
yzeandpr
esentt
hedat
acol
l
ect
edf
rom di
ff
erentpar
ts,t
her
esear
cher
usedescr
ipt
ivet
ypeofdat
aanal
yzet
hroughper
cent
ageandt
abul
ati
ons.Fi
nal
l
ythi
s
st
udyi
sbel
i
evedt
opr
ovi
deval
uabl
einf
ormat
ion,t
omi
nimi
zesomepr
obl
emst
hat
r
elat
edt
ofi
nanci
almanagementsyst
em i
nhumanr
esour
ceut
il
izat
ion.

i
v
Tabl
eofCont
ent
s
Decl
arat
ion i
Cer
ti
fi
cat
e i
i
Acknowl
edgement i
i
i
Abst
ract i
v
Abbr
evi
ati
onandAcr
ony
ms v
ii
Chapt
erone 1
1.I
ntr
oduct
ion 1
1.
1.Backgr
oundoft
hest
udy 1
1.
2.St
atementoft
hepr
obl
em 2
1.
3Resear
chquest
ion 2
1.
4Obj
ect
ivesoft
hest
udy 2
1.
4.1.Gener
alobj
ect
ive 2
1.
4.2.Speci
fi
cobj
ect
ives 3
1.
5Si
gni
fi
canceoft
hest
udy 3
1.
6Scopeoft
hest
udy 3
1.
7.Li
mit
ati
onoft
hest
udy 3
1.
8Or
gani
zat
ionoft
hest
udy 4
Chapt
erTwo 5
2.Rev
iewoft
heRel
atedLi
ter
atur
e 5
2.
1Anov
erv
iewoff
inanci
almanagement 5
2.
2Basi
cpr
inci
plesoff
inanci
almanagement 7
2.
3Ev
aluat
ionoff
inanci
almanagement 7
2.
4Funct
ionsoff
inanci
almanagement 10
2.
5Obj
ect
ivesoff
inanci
almanagement 11
2.
6Humanr
esour
ceut
il
izat
ion 12

v
 2.
7Responsi
bil
i
tyofhumanr
esour
cedepar
tment 13
2.
8Funct
ionofhumanr
esour
ce 13
2.
9Ef
fect
iveut
il
izat
ionofhumanr
esour
ces 14
2.
10Obj
ect
ivesofhumanr
esour
ce 15
Chapt
ert
hree 17
3.Resear
chmet
hodol
ogy 17
3.
1St
udyar
ea 17
3.
2Resear
chdesi
gn 17
3.
3Resear
chappr
oach 17
3.
4Tar
getpopul
ati
on 17
3.
5Sour
ceofdat
aanddat
acol
l
ect
ionmet
hod 17
3.
6Sampl
esi
zedet
ermi
nat
ion 18
3.
7Sampl
i
ngmet
hod 18
3.
8Met
hodsdat
aanal
ysi
s 18
Chapt
erFour 19
4.Dat
aPr
esent
ati
on,
Anal
ysi
sandI
nter
pret
ati
on 19
CHAPTERFI
VE 32
5.Summar
y,Concl
usi
onsandRecommendat
ions 32
5.
1.Summar
yoft
hef
indi
ng 32
5.
2.Concl
usi
on 32
5.
3.Recommendat
ion 33
Ref
erences 35
Appendi
x 36

v
i
Abbr
evi
ati
onandAcr
ony
ms
FMS=f
anat
ical
managementsy
stem

SMART=Speci
fi
c,Measur
abl
e,Achi
evabl
e,Rel
evant
,andTi
me-
bound

EVA=Economi
cval
ueaddi
ng

HR=humanr
esour
ce

v
ii
 Chapt
erone
1.I
ntr
oduct
ion
1.
1.Backgr
oundoft
hest
udy
Fi
nanci
almanagementi
samanagementf
unct
ionwhi
chencompassest
hepl
anni
ng,
sour
cing,depl
oyi
ng and cont
rol
l
ing oft
he f
inanci
alr
esour
ces ofa f
ir
m.I
n many
compani
es,f
inanci
almanagementi
snest
edi
nsi
det
heaccount
sandf
inancef
unct
ion
and v
ice v
ersa,due t
o whi
ch i
tis of
ten conf
used wi
th account
ing.Fi
nanci
al
managementconcer
nsi
tsel
fwi
thr
aisi
ngl
ongt
erm andshor
tter
m capi
tal
,i
nvest
ingor
depl
oyi
ng i
tef
fi
ci
ent
ly,asset– l
i
abi
l
itymanagement
,st
rat
egi
cfi
nanci
alpl
anni
ng,
per
for
mancemanagementet
c.(
Singh,
2008)
Fi
nanci
almanagement
sar
emostconcer
nedwi
thmanagi
ngt
hef
low off
undi
ntoand
outoft
heor
gani
zat
ionand hel
pto det
ermi
nehow company
’sf
und canbemost
ef
fect
ivel
yused.I
ndi
vi
dualmanageri
nthi
sfunct
ionalar
eaar
eresponsi
blef
orgr
ant
ing
and usi
ng t
hei
r company
’s cr
edi
t,i
nvest
igat
ing company
’sf
und,saf
eguar
ding
company
’sasset
,keepi
ngt
rackoft
hecompany
’sf
anat
icalheal
thandpr
epar
ingbudget
.
(
Plunket
t,1999)
Humanr
esour
ceut
il
izat
ioni
sthehumanpowerorempl
oyeest
ousepr
oper
lyandwi
sel
y
i
ntheor
gani
zat
ionandal
soi
tist
hepol
i
cies,Pr
act
iceandsy
stemst
hati
nfl
uence
empl
oy’
s behav
ior
,at
ti
tudes and per
for
mance and i
timpl
i
es t
hatempl
oyees ar
e
r
esour
ceoft
heempl
oyer
.Iti
scr
it
icalt
othesuccessofor
gani
zat
ionbecausehuman
capi
tal
hascer
tai
nqual
i
tyt
hati
tmakesv
alue.(
Noe,
2004)
Humanr
esour
ceut
il
izat
ioni
stor
ecr
uit
,dev
elopandut
il
izet
heor
gani
zat
ionalper
sonnel
ont
hewaywhi
chmostappr
opr
iat
etot
heachi
evementoft
hef
ir
m’sai
m andobj
ect
ives.
I
nter
msofbusi
nessst
rat
egyanor
gani
zat
ioncansuccessi
fithassui
tabl
ecompet
it
ive
adv
ant
ageandi
tist
heor
gani
zat
ionempl
oyees,descr
ibedi
nter
msoft
hei
rtr
aini
ng,
exper
ience,
judgmenti
ntel
l
igence,
rel
ati
onshi
pandi
nsi
ght
s.(
Etal
)
1.
2.St
atementoft
hepr
obl
em
Fi
nanci
almanagementi
sthepar
toft
het
otalmanagementf
unct
ionwhi
chi
sconcer
ned
wi
tht
heef
fect
iveandef
fi
cientr
isi
ngandut
il
izat
ionoff
unds.I
tmustbeoper
atedwi
th
t
hef
ramewor
kofcl
ear
lyunder
stoodobj
ect
ivesandwi
tht
hebasi
sofl
ogi
calconcept
.
Fi
nanci
almanagementi
srecogni
zedorav
eryi
mpor
tantbr
anchofmanagement
,iti
s
dy
nami
csubj
ect
,andr
esponsi
blef
oroper
ati
ngcompany
’sr
esour
ceef
fi
cient
ly.I
thas
al
sot
owor
kamongconf
li
cti
nggoal
sof equi
tyandpr
ofi
tabi
l
ityi
nacompanyandal
so
f
inanci
almanagementcov
ersdi
ff
erentf
unct
ionalar
easi
naf
ir
m i
ncl
udi
ng suppl
y
f
unct
ion,pr
oduct
ion f
unct
ion,di
str
ibut
ion f
unct
ion,and per
sonnelf
unct
ion.(
Singh,
2008)
.
Human r
esour
cei
sthemostst
rat
egi
cand cr
it
icaldet
ermi
nantf
orgr
owt
h ofany
or
gani
zi
ngandhumanef
for
tisr
equi
redt
omobi
l
izeanduset
hoser
esour
cesef
fect
ivel
y
andef
fi
cient
lyt
oachi
eveor
gani
zat
ional
obj
ect
ives.(
Jon.R,
1987)
Humanr
esour
ceut
il
izat
ioni
scr
it
icalt
oor
gani
zat
ionbecausei
tcanser
veast
oimpr
ove
t
heov
eral
lpr
oduct
ivi
ti
esandmi
nimi
zeanycost
.(Etal
)
Theassessmentoff
inanci
almanagementsy
stem onhumanr
esour
ceut
il
izat
ioni
n
Fi
not
esel
am muni
cipal
i
tyhasnotbeensuf
fi
cient
lyassessed.Sot
hisr
esear
chi
svi
tali
n
f
il
li
ngt
hisgap,
besi
det
hisi
nmypr
eli
minar
yst
udyi
nFi
not
esel
am muni
cipal
i
tyIhav
egot
t
her
eisapr
obl
em r
elat
edwi
thpr
operuseoff
inanci
almanagementsy
stem onhuman
r
esour
ceut
il
izat
ion.
Sot
hisr
esear
chwasconduct
edsoast
ofi
l
lthi
sgap.
I
nthi
sresear
ch,t
her
esear
cherwoul
dtr
ytoi
nvest
igat
etheassessmentoff
inanci
al
managementsy
stem onhumanr
esour
ceut
il
izat
ioni
nFi
not
esel
am muni
cipal
i
ty.
1.
3Resear
chquest
ion
1.Howt
hef
inanci
almanagementsy
stem wor
ksi
nFi
not
esel
am muni
cipal
i
ty?
2.Whatar
ether
elat
ionshi
pbet
weenf
inanci
almanagementsy
stem andhuman
r
esour
ceut
il
izat
ioni
nFi
not
esel
am muni
ci
pal
i
ty?
3.Whatar
etheassessment
soff
inanci
almanagementsy
stem onhumanr
esour
ce
ut
il
izat
ioni
nFi
not
esel
am muni
cipal
i
ty?

2
1.
4Obj
ect
ivesoft
hest
udy
1.
4.1.Gener
alobj
ect
ive
Theov
eral
lobj
ect
iveoft
hisst
udyi
stoassesst
hef
inanci
almanagementsy
stem on
humanr
esour
ceut
il
izat
ioni
nFi
not
esel
am muni
cipal
i
ty.
1.
4.2.Speci
fi
cobj
ect
ives
 Toexami
net
hef
inanci
almanagementsy
stem onFi
not
esel
am muni
cipal
i
ty.
 Toi
dent
if
yther
elat
ionshi
pbet
weenf
inanci
almanagementsy
stem andhuman
r
esour
ceut
il
izat
ioni
nFi
not
esel
am muni
ci
pal
i
ty.
 Toexami
net
hef
inanci
almanagementsy
stem onhumanr
esour
ceut
il
izat
ioni
n
Fi
not
esel
am muni
cipal
i
tyi
sSMARTornot
.
1.
5Si
gni
fi
canceoft
hest
udy
 Fort
her
esear
cher
:-Pr
imar
il
ythi
sresear
chwoul
dconduct
edasr
equi
rementi
n
par
ti
alf
ulf
il
lmentt
oacqui
reabachel
ordegr
eei
nmanagementandBenef
ici
ary
on get
ti
ng knowl
edge aboutt
he st
udyand exper
ience on conduct
ing such
assessmentt
ogetsat
isf
act
iont
hatwhent
hest
udyi
sthesol
uti
onf
orpr
obl
em t
o
pr
act
icet
het
heor
eti
cal
par
twi
thi
naddi
ti
onpr
act
icei
nther
eal
wor
ld.
 Fort
heor
gani
zat
ions:-Af
tert
heconductoft
hisr
esear
cht
heor
gani
zat
iont
obe
benef
ici
aryt
hatenabl
escer
tai
nideat
obehav
ebet
terunder
standi
ngaboutwhat
f
inanci
almanagementsy
stem on human r
esour
ce ut
il
izat
ion act
ivi
ti
es and
r
ecommendpossi
blesol
uti
ont
othepr
obl
em off
inanci
almanagementsy
stem.
 Forot
herr
esear
cher
s:-Resear
chercan t
aket
hisst
udyasa r
efer
encef
or
conduct
ingot
hersi
mil
arassessmentandmayuseasabaset
oconductand
i
dent
if
yresear
chgaps.
1.
6Scopeoft
hest
udy
Thest
udywasdel
i
mit
ed t
othei
nvest
igat
ionoff
inanci
almanagementsy
stem on
humanr
esour
ceut
il
izat
ioni
nFi
not
esel
am muni
cipal
i
tybecauseoft
imeandf
inanci
al
Const
rai
nt.I
tal
so bel
i
eved t
hatt
he st
udyar
ea was av
ail
abl
eforget
ti
ng r
eli
abl
e
i
nfor
mat
ion f
rom manager
s and empl
oyees oft
he or
gani
zat
ion.Thi
sresear
ch i
s
conduct
edt
oassessonl
ytheexecut
ionoft
hef
inanci
almanagementsy
stem onhuman
r
esour
ceut
il
izat
ionsuchasper
for
mancepl
anni
ng&agr
eement
,feedbackpr
ovi
sion,

3
per
for
manceev
aluat
ion&per
for
mancer
evi
ew.I
twasnotdealaboutot
herf
act
orst
hat
mi
ghthi
nderi
mpl
ement
ati
onoff
inanci
almanagementsy
stem onhumanr
esour
ce
ut
il
izat
ionhumanr
esour
cepl
anni
ngonFi
not
esel
am muni
cipal
i
tyl
i
ker
ewar
dsy
stem
andot
her
s.

1.
7.Li
mit
ati
onoft
hest
udy
Thepossi
blel
i
mit
ati
onst
hatencount
eredi
nthi
sst
udyar
eli
stsofasf
oll
ows:
-
 Ti
mewasoneoft
hebasi
cli
mit
ati
onst
hatputi
tsr
est
ri
cti
onont
hei
nvest
igat
ion
ar
ea.
 Budget
aryl
i
mit
ati
onwasal
soamongt
heexpect
edl
i
mit
ati
ont
hati
sresul
tinl
ackof
st
ati
onar
yty
pingandedi
ti
ngpr
obl
emsabsenceoft
ranspor
tat
ioncostandt
hel
i
re.
 Lackofadequat
edat
afr
om t
heor
gani
zat
iononwasal
soanot
herpr
obl
em.
 Dur
ingdat
aanal
ysi
ssomer
espondent
sgav
elessat
tent
iont
othequest
ionandi
t
r
esul
teddat
alose.
 Lackofexper
iencef
rom r
esear
ch.
1.
8Or
gani
zat
ionoft
hest
udy
Thest
udyi
scomposedoff
ivechapt
ers.Thef
ir
stchapt
erdeal
swi
tht
hei
ntr
oduct
ion
par
tincl
udest
hebackgr
oundoft
hest
udy
,st
atementoft
hepr
obl
em,obj
ect
ivesoft
he
st
udy
,si
gni
fi
canceoft
hest
udy
,li
mit
ati
onandscopeoft
hest
udy
.Chapt
ert
woi
ncl
uded
r
elat
edl
i
ter
atur
erev
iew wher
edet
aildi
scussi
onaboutt
het
opi
chasbeenunder
taken.
Thet
hir
dchapt
eri
spr
esent
edt
her
esear
chdesi
gnandmet
hodol
ogy
.Int
hef
our
th
chapt
erdat
apr
esent
ati
on,anal
ysi
sandi
nter
pret
ati
oni
sdi
scussed.Thel
astchapt
er
cov
eredt
hesummar
yofmaj
orf
indi
ngsandconcl
usi
onsdr
awnf
rom t
hef
indi
ngsand
al
sot
hepossi
bler
ecommendat
ionsi
sfor
war
dedbyt
her
esear
cher
.

4
 Chapt
erTwo
2.Rev
iewoft
heRel
atedLi
ter
atur
e
2.
1Anov
erv
iewoff
inanci
almanagement
pl
unket
t,(
1997)def
inedas“
fi
nancei
sthef
unct
ionofabusi
nesst
hatacqui
resf
unds
f
rom t
hef
ir
m andmanagest
hosef
undswi
thi
nthef
ir
m andmanagementi
sthepr
ocess
ofpl
anni
ng,or
gani
zi
ng and cont
rol
l
ing t
o achi
evet
he l
i
mit
ed r
esour
ces oft
he
or
gani
zat
ionalgoal
sandal
sof
inanci
almanagementi
sthej
obofmanagi
ngaf
ir
ms
r
esour
cesoi
tcanmeeti
tsgoal
sandobj
ect
ives.
”
Fi
nanci
alsmanagerexami
net
hef
inanci
aldat
apr
epar
edbyaccount
ant
sandmake
r
ecommendat
ion t
ojob execut
ives r
egar
ding st
rat
egi
es f
ori
mpr
ovi
ng t
he heal
th
(
fi
nanci
alst
rengt
h)oft
hef
ir
m.(
MCKUgh.2005)
Fi
nanci
almanagementi
sthepar
toft
otalmanagementf
unct
ionwhi
chi
sconcer
ned
wi
tht
heef
fect
iveandef
fi
cientr
aisi
ngandusesoff
unds.I
tmustbeoper
atedwi
tht
he
f
ramewor
kofcl
ear
lyunder
stoodobj
ect
ivesandont
hebasi
sofl
ogi
calconcept
s.(
Jon.
R,
1987)
Fi
nanci
alsmanagementi
sbr
oadl
yconcer
nedwi
thacqui
sit
ionofanduseoff
undsby
or
gani
zat
ion.Thusi
tdependsont
hesy
stem ofanor
gani
zat
ion.(
Singh,
2008)
“
Financi
almanagementi
nmuni
cipal
i
tyi
sdi
ff
erentf
rom t
hatofbusi
nessandot
her
pr
ofi
tmaker
sandor
gani
zat
ionbecausei
tismuchconcer
nedwi
thsoci
alr
etur
nsoft
he
ser
vicet
heypr
ovi
ded.Andi
tusedt
opr
ovi
dei
nfor
mat
ionandanal
yzedt
omanager
wi
thi
ntheor
gani
zat
iont
oassi
sti
ndeci
sionmaki
ngandi
fconcer
nedwi
thmeasur
ing
and r
epor
ti
ng costofpr
oduct
ion,mar
ket
ing and ot
herf
unct
ion pr
epar
ing budget
(
planni
ng)andchecki
ngwi
therornotuni
tsar
est
ayi
ngwi
thi
nthei
rbudget(
cont
rol
l
ing)
anddesi
gni
ngst
rat
egi
est
omi
nimi
zet
axes.
”(HodderandSt
ought
on,
2001)
5
Fi
nanci
almanagementi
srecogni
zedorav
eryi
mpor
tantbr
anchofmanagement
.Andi
t
i
sady
nami
csubj
ectandr
esponsi
blef
oroper
ati
ngaccompanyef
fi
cient
ly.Tr
adi
ti
onal
f
inanci
alsmanagementsubj
ectwast
reat
edwi
thav
erynar
row f
unct
ionbutnow t
he
moder
nconceptoff
inanci
almanagementhaswi
decov
erage.I
thast
urnedi
ntosubj
ect
i
ntobr
ingi
ngaboutanal
ysi
s,pl
anni
ngandcont
rol
l
ingoff
unds.Fi
nanci
almanagement
hast
owor
kamongstconf
li
cti
nggoal
sofequi
tyandpr
ofi
tabi
l
ityi
nacompany
Fi
nanci
almanagementi
nvol
vedt
radi
ti
onal
l
ywi
tht
heappr
oachofr
isi
ngf
undsf
oran
ent
erpr
ises.Themoder
nappr
oachoff
inanci
almanagementconsi
stsofdeal
i
ngwi
th
manager
ialpr
obl
emsbot
hofl
ongt
ermsanddayt
odaynat
ureofacompany
.Andi
tis
someofi
tsf
unct
ionsi
ncl
udedet
ermi
ningf
inanci
alr
equi
rement
soff
ir
ms,det
ermi
ning
sour
ce off
unds,f
inanci
alanal
ysi
s,est
abl
i
shi
ng opt
imum capi
talst
ruct
ure,pr
ofi
t
pl
anni
ngandcont
rolr
esear
chpl
anni
ngandev
aluat
ionandcor
por
atet
axat
ion.(
Singh,
2008)
Fundsar
eani
mpor
tantr
esour
cef
orconduct
inganybusi
nessact
ivi
tywhet
heri
tisday
t
odayoper
ati
ons,expansi
onr
esear
chs,i
nor
gani
cgr
owt
het
c.Fi
nancei
sti
ght
lywov
en
i
nal
lbusi
nessdeci
sionsandpl
aysacr
uci
alr
olei
nthepr
ior
it
izat
ionofconf
li
cti
ng
busi
nessgoal
s.Si
tuat
ionsoft
ightf
inanci
alcont
rolwar
rantdi
ff
erentst
rat
egi
est
o
sur
viv
eandgr
ow,wher
eassi
tuat
ionsofabundantf
inancespursev
eralnew r
esear
chs
andpr
ogr
amswi
thi
nthecompany
.Inf
actst
rat
egi
cpl
anni
ngi
sincompl
etewi
thout
i
ncor
por
ati
ngast
rat
egi
cfi
nanci
almanagementpl
an.Fi
nanci
almanagementcanbe
seenoper
ati
ngatdi
ff
erentl
evel
sinanor
gani
zat
ionasdepi
ctedi
nthef
igur
ebel
ow
Lev
elofFi
nanci
almanagementonor
gani
zat
ions

6
2.
2Basi
cpr
inci
plesoff
inanci
almanagement
Ri
skandr
etur
n:-ev
eryf
inanci
aldeci
sionhast
woaspect
sas“
ri
skandr
etur
n”.Ev
ery
deci
si
oni
nvol
vesar
isk.Thi
sri
skmaybebr
oadspect
rum ormar
ketr
isk,whi
chi
s
uncont
rol
l
abl
e.I
tcanbesy
stemat
icalr
isk,whi
chi
sspeci
fi
ctot
hef
ir
m andcanbe
cont
rol
l
ed.Thedegr
eeofr
iskwi
thbecomesdi
ff
erenti
neachcasedependi
ngon
weat
heri
tiscont
rol
l
abl
eoruncont
rol
l
abl
eri
sk.Fi
nanci
almanagementdeci
sionsar
e
t
akent
oopt
imi
zer
etur
nthr
ought
hecal
cul
ati
onofr
iskandr
etur
n.
Ti
mev
alueofmoney
:-i
tisev
aluat
ecashf
lowsexpect
edt
obegener
atedatdi
ff
erent
t
imes.I
tist
het
imi
ngofcashf
lowsbecausemoneyr
ecei
vedt
odayi
swor
kmor
ethan
t
heamountr
ecei
vedataf
utur
edat
e.
Cashf
low concept
:-f
inanci
almanagementi
sbasedont
hei
nfl
owsandoutf
lowsof
cash.I
tdoes notdealwi
th none cash i
tems l
i
ke depr
eci
ati
on,amor
ti
zat
ion of
pr
eli
minar
yexpense.I
tusescashr
evenueandeachexpenset
ofi
ndoutt
her
etur
neei
ts
i
nvest
ment
.
7
I
ncr
ement
alcashf
low anal
ysi
s:-cashf
low i
smeasur
edoft
hePaper
swhi
char
ean
addi
ti
ont
otheal
readyexi
sti
ngr
esear
ch’
s.Thi
sconcepthel
psi
njudgi
ngwhet
hert
he
newr
esear
chi
sgoodf
ort
hef
ir
m.Thef
easi
bil
i
tyi
nter
msofcostandbenef
it
scanbe
consi
der
ed.
Weal
thmaxi
mizat
ion:-maxi
mizat
ionofshar
ehol
der
’sweal
thconsi
der
sacashf
low
per
tai
ningt
ofut
uredeci
sion.I
tist
heconceptbasedoncashf
low t
omeasur
ethe
economi
cval
uesoff
ir
m pr
ofi
tmaxi
mizat
ionmaybeconsi
der
edasapar
tofweal
th
maxi
mizat
ion.(
Signh,
2008)
2.
3Ev
aluat
ionoff
inanci
almanagement
The ev
aluat
ion off
inanci
almanagementcan be di
scussed undert
wo di
sti
nct
appr
oaches t
hose ar
ethe t
radi
ti
onalappr
oach and t
he moder
n appr
oach.The
ev
aluat
ionoft
hesubj
ectst
art
edi
nthe20th c.i
tcanbedev
isedi
ntot
woper
iods.The
t
radi
ti
onalphasewasf
rom 1920–1950andt
hemoder
nappr
oachal
socal
l
edi
nsi
der
appr
oach.(
Etal
)
Tr
adi
ti
onalappr
oach
Thet
radi
ti
onalappr
oacht
ofi
nanci
almanagementcanal
sober
efer
redi
nthecont
extof
cor
por
atef
inanceasusedi
nmanyf
ir
ms.Ast
henamesuggest
sitposi
tst
hatf
inanci
al
managementi
spr
imar
il
yaboutpr
ocur
ingadequat
efi
nancesf
ort
hef
ir
mtooper
ateand
gr
owi
nthef
orm ofcapi
tal
,resear
chf
inanceet
c.Tr
adi
ti
onalmet
hodsoff
inanci
ngar
e
gener
all
yusedi
nthi
sappr
oachl
edbybankf
inanci
ngi
nthef
orm ofl
oans,
funded&non-
f
undedl
i
mit
s,mar
ketf
inanci
ngi
nthef
orm ofdebtandequi
tyi
nst
rument
s,f
inanci
al
i
nst
it
uti
onf
inanci
ngi
nthef
orm ofl
ong-
ter
mresear
chf
inanceet
c.Thef
unct
ionof
cor
por
atef
inancei
nthi
sappr
oachi
sver
yev
entdr
ivenandi
sdependentont
hef
inanci
al
r
equi
rement
soft
heot
herbusi
nessf
unct
ionsort
hepr
omot
erswi
thl
i
ttl
esayi
nthe
act
ualdepl
oyment
,al
l
ocat
ion and end-useoft
hosef
unds.Thi
sappr
oach i
sst
il
l
pr
act
icedi
nmanyf
ir
msev
ent
odayev
ent
houghi
tsuf
fer
sfr
om somel
i
mit
ati
onsas
gi
venbel
ow
Out
side-
ori
ent
edappr
oach–Theact
ivi
ti
esoff
inanci
almanagementi
nthet
radi
ti
onal
appr
oachr
evol
vepr
imar
il
yar
oundr
aisi
ngcapi
talf
rom ext
ernalsour
cesSuchasbanks
andmar
ket
swhi
chmakest
hisav
eryout
side-
ori
ent
edappr
oach.Mai
ntai
ningwor
king

8
r
elat
ionshi
pswi
tht
heseent
it
ies,managi
ngt
heper
cept
ionoft
hef
ir
m andal
i
gni
ngwi
th
t
heov
eral
lmar
ketscenar
ioar
ekeydet
ermi
nant
sinsuchanappr
oach.Thef
inance
f
unct
ioni
squi
tedet
achedf
rom t
hei
nter
nal
wor
kingoft
hef
ir
m.
Ev
ent
-dr
ivenengagement–Tr
adi
ti
onalappr
oachi
slar
gel
yev
entdr
iven.I
tisr
equi
red
whent
hef
ir
m needscapi
talsayf
orset
ti
ngupanew f
aci
l
ityoracqui
ri
nganot
her
busi
nesset
c.Thi
sagai
nisol
atest
hef
inanci
almanagementact
ivi
tyf
rom t
heday
-to-day
act
ivi
tyandgoal
soft
hecompany
.Thus,t
het
radi
ti
onalappr
oachi
snotv
erysui
tabl
ein
t
he cur
rentbusi
ness cl
i
mat
e whi
ch i
s char
act
eri
zed byl
otofi
nter
-dependenci
es,
compl
exi
tyanduncer
tai
ntyofbusi
nessoper
ati
ons.I
nnov
ati
vef
inanci
ali
nst
rument
s,
accesst
o adv
anced anal
yti
cst
o manageand i
mpr
oveper
for
manceand deci
sion-
maki
ngar
eeasi
l
yav
ail
abl
etof
inancemanager
stoday
.Si
mpl
ydi
sengagi
ngf
inancewi
th
day
-to-
daywor
kingorwi
thst
rat
egi
cpl
anni
ngi
snott
hei
dealwayt
orunabusi
ness.
Hav
ingsai
dthatt
hisappr
oachi
sst
il
lfol
l
owedbycompani
esespeci
all
ythesmal
l
erwel
l
-
est
abl
i
shedpr
omot
er-
dri
venbusi
nesses.Tr
adi
ti
onal
appr
oachexami
nes:
I
. Pr
ocur
ementoff
und:-t
hisappr
oachwasconcer
nedwi
tht
hepr
ocur
ementof
f
undst
hroughanal
ysi
soff
inanci
ali
nst
rument
,inst
it
uti
onsandsour
ceoff
unds.
I
I. Out
siderl
ooki
ngappr
oach:-i
thadal
i
mit
edscopebecausei
temphasi
swason
t
hesuppl
i
eroff
unds.
I
II
. Fi
nanci
ali
nst
rument
s:-t
het
radi
ti
onalappr
oachi
tsf
unct
ionf
orpr
ocur
ingf
unds
wast
rought
hei
ssueoff
inanci
ali
nst
rument
sli
keequi
tyshar
e,pr
efer
enceshar
e
anddebtsecur
it
ies.
I
V. St
atusoft
hesubj
ect
:-f
inanci
almanagementwasnotpar
toft
hemanager
ial
f
unct
ion.I
twasoper
ati
onali
nnat
ure,l
i
mit
edt
opr
epar
ingaccount
s,r
epor
ts,and
pr
ocur
ingf
unds.

Moder
nappr
oach
Asst
atedear
li
er,
thecur
rentbusi
nesscl
i
mat
eisqui
tecompl
exwi
thi
nter
playofi
nter
nal
andext
ernalf
act
orsassessmentt
heor
gani
zat
ionalper
for
mance.St
udent
swascov
er
t
hese i
n det
aili
nthe uni
t on env
ironment
almanagement (
par
t of st
rat
egi
c

9
management
).Suf
fi
cet
oment
ionher
ethatt
hef
ir
mst
odayar
eoper
ati
ngi
nav
ery
t
ight
lyi
ntegr
atedenv
ironment
,faci
ngcompet
it
ionf
rom t
radi
ti
onalandnon-
tr
adi
ti
onal
sour
cesandar
econst
ant
lyundert
hreatoft
echnol
ogi
caldi
srupt
ion.AYal
eUni
ver
sit
y
st
udyhasf
oundt
hat
,theav
eragel
i
fespanofanor
gani
zat
ioni
nUSAhasdecr
eased
f
rom 67y
ear
sint
he1920’
stoabout15y
ear
sint
he2000’
s.Thus,
int
hecur
rentcont
ext
opt
imum l
evelofef
fi
ci
enci
esandr
esour
ceopt
imi
zat
ionsi
ncl
udi
ngf
inanci
alr
esour
ces
ar
eanecessar
yel
ementofsur
viv
al.Fi
nanci
alper
for
mancemanagementhasr
isenf
rom
cor
por
atef
inanci
ngt
oamanager
ialandst
rat
egi
clev
eli
nor
gani
zat
ions.Thi
sist
he
moder
nappr
oacht
ofi
nanci
almanagement
.Iti
sabr
oaderappr
oachsi
gni
fyi
ngani
nter
-
r
elat
ionshi
poff
inanceasacr
it
icalr
esour
cedr
ivi
ngandassessmenti
ngot
herbusi
ness
f
unct
ionswhet
hermar
ket
ing,
product
ion,
technol
ogyorhumanr
esour
ces.I
tal
soseesa
pl
acei
nthest
rat
egi
cpl
anni
ngpr
ocessi
ndet
ermi
ningt
her
ightcapi
talst
ruct
ure,r
isk
management
,assetal
l
ocat
ion,maxi
mizi
ngpr
ofi
tabi
l
ityet
c.Fi
nanci
almanagementi
n
manyf
ir
mshasbecomeapr
ofi
t-
cent
erwi
thi
tsowngoal
sandt
arget
s.Thi
smoder
n
appr
oachheav
il
ylev
eragesdat
aandanal
yti
csasi
tscor
edr
ivi
ngengi
nes.Mul
ti
ple
scenar
io anal
ysi
s,f
orecast
ing,bal
ancescor
ecar
d ar
esomeoft
het
ool
sused i
n
f
inanci
almanagementt
oday
.Thus,
ther
oleoft
hef
inancemanagerordi
rect
orr
equi
res
notonl
yanast
uteknowl
edgeoff
inance,
butal
soot
herski
l
lssuchasadmi
nist
rat
iveand
management ski
l
ls, st
rat
egi
c t
hinki
ng, cr
it
ical t
hinki
ng and deci
sion- maki
ng.
Consi
der
ingt
hemoder
nmor
ehol
i
sti
cappr
oacht
ofi
nanci
almanagement
,thef
inance
f
unct
ionr
est
son3keypi
l
lar
s:
 I
nvest
ment
 Fundi
ngorf
inanci
ng
 Shar
ehol
derr
etur
nssuchasdi
vi
dendset
c.
Takeanexampl
eofacapi
tali
nvest
mentdeci
siont
obemadebyanor
gani
zat
iont
o
maxi
mizeshar
ehol
derv
alue.Acor
por
atemayev
aluat
emul
ti
pler
esear
chopt
ionsont
he
basi
sofnetpr
esentv
alueandi
ncor
por
ateanappr
opr
iat
edi
scountr
atet
ofact
ort
her
isk
el
ement
.Subsequent
lyf
inanci
ngoft
heser
esear
chsneedt
obewor
kedoutandt
hecost
off
inanci
ngi
ncor
por
atedi
nthenetexpect
edr
etur
nsf
oreachr
esear
chbei
ngev
aluat
ed.
Resear
chsmusty
iel
dtheexpect
edr
etur
nsf
ort
heshar
ehol
derel
set
hecompanymay
r
ejectal
lresear
chsandr
etur
nthecasht
oshar
ehol
der
sint
hef
orm ofdi
vi
dends.
10
The moder
n appr
oach t
o f
inanci
al management gav
e t
he subj
ect i
ncr
eased
r
esponsi
bil
i
tyandbr
oughtaboutani
ntegr
atedandanal
yti
cal
scopeoff
inance.
I
nmoder
nappr
oacht
hef
oll
owi
ngaspect
sar
econsi
der
ed
 I
ntegr
atedf
inancef
unct
ion
 Managementf
unct
ion
 St
atusposi
ti
on
 Techni
ques
2.
4Funct
ionsoff
inanci
almanagement
Li
qui
dit
yoff
unds:-f
inanci
almanagerhast
omat
chi
nfl
owsandoutf
lowsandt
hose
cr
eat
eli
qui
dit
ycont
inuousl
ybymanagi
ngt
hef
lowoft
hef
undsi
nthef
ir
m cont
inuousl
y.
Pr
ofi
tabi
li
ty:-af
inanci
almanagerhast
omeasur
ethecostofcapi
talr
aisedwi
thbyhi
m
asasour
cef
ort
hef
undsofcompanybecausecostofcapi
tali
sli
nkedwi
thpr
ofi
tabi
l
ity
oft
hecompany
.
Management
;-t
hef
inanci
almanagerhast
o coor
dinat
edi
ff
erentact
ivi
ti
esoft
he
company
.Ithast
odeal
wit
hlongt
erm andshor
tter
m act
ivi
ti
esoft
hecompany
.
Bal
anceconf
li
cti
nggoal
:-f
inanci
almanagementhast
hescopeoff
inanci
aldeci
sion
maki
ngf
oral
onggr
oupofpeopl
e.Thi
sgr
oupconsi
stsofshar
ehol
der
s,debti
nvest
ors,
empl
oyees,
cust
omer
s,suppl
i
ers,
publ
i
c,gov
ernmentandmanagement
.
Economi
cval
ueaddi
ng/EVA/
:-i
sfi
nanci
alt
ool
,whi
chpr
ovi
dest
otheor
gani
zi
ng
knowl
edgeofhowmuchv
aluet
hecompanyi
saddi
ngabov
ethet
otal
costofcapi
tal
.

11
Thef
inanci
almanagermayasameasur
eofper
for
manceal
sof
unct
ionst
ofi
ndoutt
he
r
etur
nonequi
ty,
mar
ket
,capi
tal
i
zat
ionandear
ningspershar
ebyaddi
ngt
heconceptof
mar
ketv
alueaddedcapi
tal
.
Fi
nanci
aldeci
sionmaki
ng:-Fi
nanci
almanagementi
sthest
udyoff
inanci
aldeci
sion
maki
ng.Andi
tisanar
tandski
l
lofdev
elopi
ngt
echni
quest
ocr
eat
eef
fect
ivenessi
nthi
s
pr
ocess.Ther
ear
ethr
eebasi
cfi
nanci
aldeci
sionsmaki
ng:
A.I
nvest
mentdeci
sion:-i
tisdeal
swi
thl
ongt
hem andshor
tfi
nanceofaf
ir
m.Thi
scan
bet
ermedasf
ixedasset
sandcur
rentasset
.
Thel
ong t
erm pr
ocesscov
ert
hear
eaofcapi
talbudget
ing.Fi
xed assetar
ecost
i
ntensi
veandt
hepr
ofi
tabi
l
ityoft
hef
ir
m dependsont
hecomposi
ti
onoff
ixedasset
s.
Shor
tter
mfi
nanci
ngi
stot
hedayt
odaycov
erageandusageoft
echni
quesf
oreach
f
lows,
inv
ent
orymanagementandbul
lrecei
vabl
eandpay
mentonadayt
odaybasi
s.
B.Fi
nanci
ngdeci
sion:-f
inanci
almanagemental
sodeal
sisf
inanci
ngi
ssues,suchas
maki
ngt
hebusi
nesspr
ofi
tabi
l
ity
,byanal
yzi
ngbr
eakev
enpoi
nt,
fixedcost
sandv
ari
abl
e
cost
s.
C.Di
vi
denddeci
sion:-f
inanci
almanagementi
sal
soappl
i
edt
other
equi
rementoft
he
shar
ehol
der
s.I
fis concer
ned wi
tht
he amountofpr
ofi
tthatcan and shoul
d be
wi
thdr
awnt
odecl
aredi
vi
dendst
otheowner
soft
hecapi
tal
soft
heshar
ehol
der
s.
2.
5Obj
ect
ivesoff
inanci
almanagement
Fi
nanci
almanagementr
efer
stot
heappl
i
cat
ionoff
inanceandmanagementpr
inci
ples
t
opl
an,
organi
ze,
anddi
rectt
hef
inanci
alaspect
sofanor
gani
zat
ion.I
tty
pical
l
yhast
he
f
oll
owi
ngobj
ect
ives:
 Mai
ntai
naheal
thyl
eveloff
undi
ngi
nthef
ir
mforbot
hshor
t-
ter
m andl
ong-
ter
m
r
equi
rement
s
 Achi
evehi
ghshar
ehol
derr
etur
ns
 Cr
eat
esoundi
nvest
mentoppor
tuni
ti
es
 Ensur
eopt
imum ut
il
izat
ionoff
undsatt
hel
owestcost
 Managet
hef
inanci
alr
iskpr
ofi
l
eoft
hef
ir
m wi
thi
naccept
abl
elev
els
2.
6Humanr
esour
ceut
il
izat
ion
Human r
esour
ces (
HR)r
efert
othe depar
tmentwi
thi
n an or
gani
zat
ion t
hati
s

12
r
esponsi
blef
ormanagi
ngper
sonnel
-r
elat
edf
unct
ions.Thepr
imar
ygoalofHRi
sto
ef
fect
ivel
yut
il
izeanddev
elopt
heor
gani
zat
ion'
shumancapi
talt
oachi
evei
tsst
rat
egi
c
obj
ect
ives.HRpr
ofessi
onal
spl
ayacr
uci
alr
olei
nov
erseei
ngv
ari
ousaspect
soft
he
empl
oyeel
i
fecy
cle,f
rom r
ecr
uit
mentandonboar
dingt
oper
for
mancemanagement
,
t
rai
ning,
andempl
oyeer
elat
ions.YuhaoLi
(2010)
Humanr
esour
cei
sper
hapst
hemostst
rat
egi
candcr
it
icaldet
ermi
nant
sorgr
owt
hof
anyor
gani
zat
ionandhumanef
for
tisr
equi
redt
omobi
l
ize,or
gani
zeanduset
hose
r
esour
cesef
fect
ivel
yand ef
fi
cient
lyf
ort
hepr
oduct
ion oft
her
equi
red goodsand
ser
vices(
Ahmed,
1999)
.
Humanr
esour
ceut
il
izat
ioni
scr
it
icalt
oor
gani
zat
ionbecausei
tconser
veast
oimpr
ove
t
heov
eral
lpr
oduct
ivi
tyandmi
nimi
zepenal
ti
est
otheor
gani
zat
ionbyobser
vingt
he
humani
ti
esl
awsr
elev
antt
otheut
il
izat
ionofhumanr
esour
ce(
Etal
).
Accor
dingt
o(Ahmed,1999)booksNal
dersay
sthathumanr
esour
ceut
il
izat
ionwhi
ch
componenti
ncl
udi
ngr
ecr
uit
ment
,sel
ect
ion,pl
acement
,appr
aisalandcompensat
ion.
Accor
dingt
o(Ahmed,1999)bookspar
celandr
oesay
sthathumanr
esour
ceut
il
izat
ion
hasf
ourmaj
orar
east
hisar
e:
 Pl
anni
ngadmi
nist
rat
ion
 Humanr
esour
cedev
elopment
 Jobandsal
ary
 Wor
keraf
fai
rs
Humanr
esour
ceut
il
izat
ioni
stor
equi
te,dev
elopandut
il
izet
heor
gani
zat
ionper
sonal
on t
hewaywhi
ch i
smostappr
opr
iat
etot
heachi
evementoft
hef
ir
m ai
msand
obj
ect
ives(
HhodderandSt
ought
on,
2001)
.
Qual
i
tiesofhumanr
esour
ce
 Humanr
esour
cei
sval
uabl
e:-hi
ghqual
i
tyempl
oyeepr
ovi
desancededser
viceas
t
heyper
for
m manycr
it
ical
funct
ions.
 Humanr
esour
cei
srat
e:-i
nthesenseaper
sonhi
ghl
eveloft
heneededski
l
land
knowl
edgei
snotcommon.
 Humanr
esour
cenott
obei
mit
ated:-t
omi
tehumanr
esour
ceatahi
ghper
for
ming
compet
it
or,y
ou woul
d hav
etof
igur
e outwhi
ch empl
oyees ar
e pr
ovi
ding t
he
adv
ant
ageandhow.
13
 Humanr
esour
cehav
enogoodsubst
it
ute:-whenpeopl
ear
ewel
ltr
ainedandhi
ghl
y
mot
ivat
ed,
theyl
ear
n,dev
elopt
hei
rabi
l
iti
esandcar
eaboutcust
omer
s.
2.
7Responsi
bil
it
yofhumanr
esour
cedepar
tment
1.j
obanal
ysi
sanddesi
gn:
-
 Jobanal
ysi
s:-t
hepr
ocesssof
ret
ti
ngdet
ail
edi
nfor
mat
ionaboutj
ob.
 Jobdesi
gn:-t
hepr
ocessofdef
ini
ngt
hewaywor
kwasbeper
for
medandt
he
t
askst
hatagi
venj
obr
equi
res.
2.r
ecr
uit
mentandsel
ect
ionofempl
oyees
 Recr
uit
ment
:-i
sthe pr
ocess oft
hrough whi
ch t
he or
gani
zat
ion seeks
appl
i
cantf
orpot
ent
ial
empl
oyment
.
 Sel
ect
ion:-i
sthe pr
ocessofwhi
ch t
he or
gani
zi
aon at
tempt
stoi
dent
if
y
appl
i
cantwi
tht
henecessar
yknowl
edge,ski
l
l,abi
l
ityandt
hei
rchar
act
eri
sti
cs
t
hatwashel
ptheor
gani
zat
ionachi
evei
tsgoal
s.
3.t
rai
ninganddev
elopmentofempl
oyees
 Tr
aini
ng:-i
sa pl
anned ef
for
tto enabl
eempl
oyeest
olear
njob r
elat
ed
knowl
edge,
ski
l
landbehav
ior
.
 Dev
elopment
:-i
sthe acqui
sit
ion ofknowl
edge,ski
l
land behav
iort
hat
i
mpr
oveanempl
oyeeabi
l
ityt
o meetchangei
njob r
equi
rement
sand i
n
cust
omerdemand.
4.Managi
ngper
for
mance:
-ist
hepr
ocessofensur
ingt
hatempl
oyeesact
ivi
ti
esand
out
putmat
cht
heor
gani
zat
iongoal
s.
5.Pl
anni
ngandadmi
nist
eri
ngpayandbenef
it
s:-t
hepayandbenef
it
sthatempl
oyees
ear
npl
ayani
mpor
tantr
olei
nmot
ivat
ingt
hem.Thi
sisespeci
all
ytr
uewhensuchas
bonusesar
eli
nkedt
othei
ndi
vi
dual
sorgr
oupachi
evement
s.
6.Humanr
esour
cepl
anni
ng;
-ist
hepr
ocessofi
dent
if
yingt
hemember
sandt
ypesof
empl
oyeest
heor
gani
zat
ionwasr
equi
rei
nor
dert
omeeti
tsobj
ect
ives.
2.
8Funct
ionofhumanr
esour
ce
Humanr
esour
ceconsi
stsofsev
eral
int
erl
eaf
edact
ivi
ti
es.
Thesear
etwof
unct
ionst
hosear
e
1.manager
ial
funct
ion

14
 2.oper
ati
vef
unct
ion
Manager
ialf
unct
ion:ar
eper
for
medbymanager
sthr
ought
hepeopl
einor
dert
oachi
eve
desi
redgoal
sahumanr
esour
cemanagerper
for
mthef
oll
owi
ngmanager
ial
funct
ions.
 Pl
anni
ng:i
sthef
ir
stf
unct
ionofmanagementwhi
chconsi
stedofbr
oadr
angeof
i
deasandpr
ogr
amsr
elat
ivet
ovar
iousact
ivi
ti
esofpeopl
eint
heor
gani
zat
ion.
Andi
tist
heconsci
ousdet
ermi
nat
ionoff
utur
ecour
seofact
ions.
 Or
gani
zi
ng:i
sthegr
oupofpeopl
ewor
kingt
oget
hert
oachi
evecommongoal
s.
Peopl
e ar
e or
gani
zed i
n an ef
fect
ive manner
.Or
gani
zi
ng i
sthe pr
ocessof
al
l
ocat
ing t
asks among t
he member
s oft
he gr
oup,est
abl
i
shi
ng aut
hor
it
y
r
esponsi
bil
i
tyr
elat
ionshi
pamongt
hem andi
ntegr
ati
ngt
hei
ract
ivi
ti
est
owar
ds
t
hecommentobj
ect
ives.
 Di
rect
ing:
ist
hepr
ocessofmot
ivat
ing,
leadi
ngandsuper
visi
ngofpeopl
eandi
tis
t
hehear
toft
hemanagementpr
ocessbecausei
tisconcer
nedwi
thi
nit
iat
ing
act
ion.
 Cont
rol
l
ing:i
sthepr
ocessofcont
rol
l
ing.Ver
ythi
ngi
ssi
mpl
i
fiedandconf
ormed
based on t
he br
oad obj
ect
ive ofan or
gani
zat
ion.And i
timpl
i
es checki
ng,
v
eri
fyi
ngandr
egul
ati
ont
oensur
ethatev
ery
thi
ngoccur
sinconf
ormi
tywi
tht
he
pl
ansadapt
edandt
hei
nst
ruct
ioni
ssue.
Oper
ati
ngf
unct
ion:
-al
soknownas“
ser
vicef
unct
ionalmanagement
”thesef
unct
ioni
s
per
for
medt
oensur
ethatt
her
ightmanf
orr
ightj
ob,atr
ightt
imeandr
ightpl
ace.Thi
s
f
unct
ioni
sdi
vi
dedi
ntof
ourt
ypest
hesear
e:-
I
. Empl
oyment
:-i
sthef
ir
stf
unct
ionofoper
ati
vef
unct
ion.I
finv
olv
esr
ecr
uit
ment
,
sel
ect
ion,
andpl
acementet
c.oft
heper
sonnel
.
I
I.Compensat
ion:-t
hisf
unct
ionconcer
nwi
thwageandsal
aryofempl
oyees.I
t
deal
swi
thdet
ermi
nat
ionofadequat
efort
hei
rcont
rapt
iont
otheor
gani
zi
ng
goal
s.Theper
sonnelcanbecompensat
edbot
hint
ermsofmonet
aryaswel
las
non-
monet
aryr
ewar
ds.
I
II
.Human r
esour
ce dev
elopment
:-i
sthe pr
ocessofdev
elopi
ng t
he ski
l
land
knowl
edge,
abi
l
ityandt
alent
sandv
alueandat
ti
tudesoft
heempl
oyees.
V.Hu
I manr
esour
cer
elat
ion:
-ist
hepr
ocessofassoci
ati
onamongt
hepeopl
e.I
tis
t
hear
eaofmanagementi
nint
egr
ati
ngpeopl
eint
owor
ksi
tuat
ioni
nwayt
hat
15
 mot
ivat
est
hem empl
oyeest
owor
ktoget
herpr
oduct
ivi
tyandj
obsat
isf
act
ioni
n
or
gani
zat
iont
oful
fi
ll
bot
hpsy
chol
ogi
cal
andsoci
alneeds.
2.
9Ef
fect
iveut
il
izat
ionofhumanr
esour
ces
Thef
oll
owi
ngar
efi
vemeasur
est
oensur
eef
fect
iveut
il
izat
ionofhumanr
esour
cesi
n
i
nst
it
uti
ons:

1.Pr
operi
dent
if
icat
ion ofhuman r
esour
ce r
equi
rement
s:The f
ir
stst
ep t
owar
ds
ef
fect
ive ut
il
izat
ion ofhuman r
esour
ces i
stoi
dent
if
ythe r
equi
rementofhuman
r
esour
cesi
nani
nst
it
uti
on.Thi
scanbedonebypr
epar
ingamanpowerbudgetwhi
ch
wasgi
venacl
earpi
ctur
eoft
henumberandt
ypeofempl
oyeesneededt
ocar
ryout
v
ari
ousact
ivi
ti
es.
2.Ef
fi
cientr
ecr
uit
mentand sel
ect
ion:Oncet
hehumanr
esour
cer
equi
rement
sar
e
i
dent
if
ied,t
henextst
epi
stor
ecr
uitandsel
ectempl
oyeeswhoar
ebestsui
tedf
ort
he
j
ob.Thi
scan bedonet
hrough di
ff
erentmeanssuch asadv
ert
isement
s,per
sonal
cont
act
s,agenci
es,
etc.
3.Tr
aini
nganddev
elopment
:Tr
aini
nganddev
elopmentofempl
oyeesi
sver
yimpor
tant
t
oensur
ethei
ref
fect
iveut
il
izat
ion.Tr
aini
nghel
psempl
oyeest
oacqui
ret
her
equi
red
ski
l
lsandknowl
edgewhi
l
edev
elopmenthel
pst
hem t
oappl
ytheseski
l
lsi
nthei
rjobs.
4.Per
for
manceappr
aisal
:Per
for
manceappr
aisali
sanot
heri
mpor
tantt
oolt
oensur
e
ef
fect
ive ut
il
izat
ion ofhuman r
esour
ces.I
thel
ps t
oident
if
ythe st
rengt
hs and
weaknessesofempl
oyeesandt
akecor
rect
ivemeasur
esaccor
dingl
y.
5.Pr
opercompensat
ionandmot
ivat
ion:Pr
opercompensat
ionandmot
ivat
ionar
eal
so
v
eryi
mpor
tantt
oensur
eef
fect
iveut
il
izat
ionofhumanr
esour
ces.Empl
oyeesshoul
dbe
pai
daccor
dingt
othei
rper
for
manceandgi
venpr
operi
ncent
ivest
omot
ivat
ethem t
o
wor
kmor
eef
fi
ci
ent
ly.
2.
10Obj
ect
ivesofhumanr
esour
ce
 Tohel
ptheor
gani
zat
iont
oat
tai
nit
sgoal
sbypr
ovi
dingwel
ltr
ainedandwel
l
-
mot
ivat
edempl
oyees.
 Tout
il
izet
hehumanr
esour
ceef
fect
ivel
yint
heachi
evementofor
gani
zat
ional

16
 goal
s.
 To manage changes t
othe mut
ualadv
ant
age ofi
ndi
vi
dual
s,gr
oups,t
he
or
gani
zat
ionandsoci
ety
.
 Tomai
ntai
nhighemployeesmoralandsoundhumanr
elat
ionsbysust
aini
ngand
i
mprov
ingthevar
iouscondi
ti
onsandfaci
li
ti
es.

 Toenhancej
obr
ati
fi
cat
ionandsel
f-act
ual
i
zat
ionofempl
oyeesbyencour
agi
ng
andassi
sti
ngev
eryempl
oyeest
oresi
zehi
s/herf
ull
pot
ent
ial
.
 Toest
abl
i
shandmai
ntai
npr
oduct
ive,sel
f-
respect
ingandi
nter
nal
l
ysat
isf
ying
wor
kingr
elat
ionshi
pamongt
heent
ir
ememberi
soft
heor
gani
zat
ion.
 To r
ecogni
ze and sat
isf
yindi
vi
dualneeds and gr
oup goal
s by of
fer
ing
appr
opr
iat
emonet
aryandnon-
monet
arybenef
it
s.
 Todev
elopandmai
ntai
naqual
i
ty’
sofwor
kli
fewhi
chmakesempl
oymentoft
he
or
gani
zat
ioni
ndesi
rabl
eper
sonal
andsoci
alsi
tuat
ions.(
Chandr
ami
han,
2008)
.

17
 Chapt
ert
hree
3.Resear
chmet
hodol
ogy
3.
1St
udyar
ea
Thi
sst
udyi
sconducti
ninFi
not
esel
am t
ownmuni
cipal
i
ty.Whi
cht
hecapi
talci
tyof
westGoj
j
am zone.Fi
not
esel
am muni
cipal
i
tyi
slocat
edi
nwestGoj
j
am par
tofEt
hiopi
a.
3.
2Resear
chdesi
gn
Ther
esear
chdesi
gnIusedwasdescr
ipt
ivesur
veymet
hod,
becausei
tist
heappr
opr
iat
e
r
esear
chdesi
gnt
oident
if
ytheassessmentoff
inanci
almanagementsy
stem onhuman
r
esour
ce ut
il
izat
ion t
hrough v
ari
ous i
nfor
mat
ion r
egar
ding Fi
not
e sel
am t
own
muni
cipal
i
ty.
3.
3Resear
chappr
oach
Thecol
l
ect
ionofessent
ialdat
awasbef
aci
l
itat
edt
hrought
heuseofquest
ionnai
res,
whi
char
econsi
der
edhi
ghl
yef
fect
ivet
ool
s.Par
ti
cipant
swer
epr
ovi
dingi
nfor
mat
ionv
ia
cl
osed-
ended quest
ions.Thepr
edomi
nanceofcl
osed-
ended quest
ionnai
resi
nthi
s
st
udyi
sdue t
othei
rconv
eni
ence i
nreachi
ng a br
oad par
ti
cipantbase and t
hei
r
sui
tabi
l
ityf
orgener
ati
ngr
elat
ivel
yuni
for
m dat
aper
ti
nentt
other
esear
chpr
obl
em,
giv
en
t
heav
ail
abl
eresour
ces.
3.
4Tar
getpopul
ati
on
Thest
udy
'st
argetpopul
ati
onconsi
stedofal
lempl
oyeeswi
thi
ntheFi
not
esel
am t
own
muni
cipal
i
tydepar
tment
.Asr
epor
tedbyt
heFi
not
eSel
am t
ownAdmi
nist
rat
ionandt
he
per
sonnel
oft
hemuni
cipal
i
tydepar
tment
s,t
her
ear
eat
otal
of72empl
oyees.

18
3.
5Sour
ceofdat
aanddat
acol
lect
ionmet
hod
To col
l
ectt
her
esear
chdat
atwo dat
asour
cewer
eused t
hesewer
epr
imar
yand
secondar
ysour
ces.Thepr
imar
ydat
apr
ovi
desf
ir
sthandi
nfor
mat
ion,mor
einf
ormat
ion
i
ndept
handmi
si
nter
pret
ati
onoft
heanswerf
ort
hequest
ioni
seasi
l
yav
oided.
And
t
hesepr
imar
ydat
awer
ecol
l
ect
ed t
hrough st
ruct
ured quest
ionnai
reand i
nter
view.
Addi
ti
onalsecondar
y dat
a was col
l
ect
ed by usi
ng document anal
ysi
s(r
evi
ew)
t
echni
ques.Thequest
ionermet
hodwasusedsoast
ogetadequat
einf
ormat
ionf
rom
t
her
espondent
sandi
twascov
eral
argenumberofpopul
ati
ons.Byusi
ngi
nter
view
met
hoddet
ail
edandadequat
einf
ormat
ioncoul
dbecol
l
ect
ed.ThusIusedi
tsoast
o
getmor
eandadequat
einf
ormat
ionf
rom manager
sandsubor
dinat
es.

3.
6Sampl
esi
zedet
ermi
nat
ion
Thet
otalsampl
esi
zedet
ermi
nat
ionf
rom amongdi
ff
erentmet
hods,
andt
heonewhi
ch
wasdev
elopedbyChav
il
o(1884)
,andZel
alem (
2005)wasused.Themet
hodi
s
pr
esent
edi
ntabl
ebel
ow.
Tabl
e1.
1Sampl
esi
zedet
ermi
nat
iont
abl
e

Popul
ati
onsi
ze Low Medi
um Hi
gh
51-
90 5 13 20
91-
150 8 20 32
151-
280 13 32 50
281-
500 20 50 80
501-
1200 32 80 125
1201-
10,
000 50 125 200
10,
001-
35,
000 80 200 315
35,
001-
150,
000 125 315 500
Basedont
heabov
etabl
emyr
esear
cht
otalpopul
ati
onwasgetf
rom t
her
angebet
ween
51-
90t
hatwas72t
aket
hehi
ghest20empl
oyeesi
nnumber
.
3.
7Sampl
ingmet
hod
Ther
esear
cherusedt
wosampl
i
ngmet
hodssi
mpl
erandom sampl
i
ngandpur
posi
ve
sampl
i
ng.Iusedsi
mpl
erandom sampl
i
ngt
osel
ectt
heempl
oyeesbecauseofi
tgi
ve

19
equalchancet
oal
lempl
oyeessav
eti
meandcostandf
reef
orm bi
as.Ot
hermet
hodt
he
r
esear
cherused waspur
posi
vesampl
i
ng met
hod so ast
o sel
ecta sampl
efr
om
manager
sandsubor
dinat
esbecausei
tinv
olv
espar
ti
cul
aruni
tsoft
heuni
ver
seandi
n
addi
ti
onmi
sleadi
ngandi
nappr
opr
iat
einf
ormat
ionwasel
i
minat
ed.
3.
8Met
hodsdat
aanal
ysi
s
Af
tert
hedat
acol
l
ect
ionact
ivi
tyaccompl
i
shedt
hedat
aanal
ysi
scomes.Thedat
a
col
l
ect
ed t
hrough st
ruct
ured quest
ionerand i
nter
views wer
e anal
yzed by usi
ng
t
abul
ati
on,
andper
cent
ages.
A. Tabul
ati
on:-t
heal
readypr
ocesseddat
ahasbeenar
rangedor
der
lyi
ntabl
eand
ot
hersummar
yfor
ms.
B. Per
cent
age:
-thedat
ahasbeenexpr
essedr
elat
ivev
ari
abl
esamongcat
egor
ies.
Andf
inanci
alst
atement
swer
eanal
yzedbyusi
ngf
inanci
alev
aluat
iont
echni
ques.

Chapt
erFour
4.Dat
aPr
esent
ati
on,
Anal
ysi
sandI
nter
pret
ati
on
Thi
sanal
ysi
sisbased on bot
h pr
imar
yand secondar
ydat
a.Thepr
imar
ydat
ais
col
l
ect
edt
hroughquest
ionnai
ref
rom empl
oyeesandi
nter
view f
rom manager
sand
subor
dinat
es.Thesecondar
ydat
aincl
udesi
nter
nal
l
ygener
ateddocument
sbyFi
not
e
Sel
am muni
cipal
i
ty.Thedocument
sar
eor
gani
zat
ion’
spr
ofi
l
e,annualr
epor
tsaswel
las
ot
herr
elat
eddocument
s.Thesampl
esi
zei
s20andal
lwer
efi
l
ledandr
etur
ned.
Thei
nfor
mat
ionaboutt
her
espondent
sar
eshownbel
ow.
IAnal
ysi
sfordemogr
aphi
cchar
act
eri
sti
csofr
espondent
s
Tabl
e4.
1SexRat
ioofRespondent
s
Respondent
s
Sex No %
Mal
e 8 40%
Femal
e 12 60%
Tot
al 20 100%
Quest
ionnai
resur
vey
,2017
Asi
ndi
cat
edi
ntheabov
etabl
e,f
rom t
het
otalnumberofr
espondent
s8(
40%)ar
emal
e

20
andt
her
est12(
60%)ar
efemal
es.Thi
sindi
cat
est
hatt
her
espondent
s’sexr
ati
ofemal
es
ar
ehi
ghesti
nnumber
.
Tabl
e4.
2.Agegr
oupoft
her
espondent
s
Respondent
s
I
tem No %
19-
25 7 35%
26-
30 6 30%
31-
36 4 20%
>37 3 15%
Tot
al 20 100%
Sour
cequest
ionnai
resur
vey2017
Asshownf
rom t
heabov
etabl
e,f
rom t
het
otalnumberofr
espondent
s7(
35%)ar
efound
i
nbet
ween19-
25age,6(
30%)ar
e26-
30agei
nter
val
,4(
20%)ar
e31-
36agei
nter
val
,and
t
her
emai
ningonei
s3(
15%)abov
e37age.
Thi
stabl
eindi
cat
est
hatmaj
ori
tyager
ati
oofr
espondent
sar
eli
esbet
ween19-
25
i
nter
val
.
Tabl
e4.
3.Mar
it
alst
atusofRespondent
s
Respondent
s
i
tems No %
Mar
ri
ed 6 30%
Di
vor
ce 3 15%
Si
ngl
e 11 55%
Tot
al 20 100%

Sour
cequest
ionnai
resur
vey2017
Ascl
ear
lyshownf
rom t
heabov
etabl
e4.
3fr
om t
het
otalnumberofr
espondent
s6(
30%)
ar
emar
ri
ed,
3(15%)ar
edi
vor
cedt
her
emai
ning11(
55%)ar
esi
ngl
e.Sof
rom t
hiswecan
under
standt
hatsi
ngl
eempl
oyeesar
ehi
ghesti
nnumber
.
Tabl
e4.
4.Yearexper
ienceofRespondent
s
Respondent
s
i
tems No %

21
 1–5 6 30%
6–10 5 25%
11–15 3 15%
16–20 3 15%
21-25 2 10%
>26 1 5%
Tot
al 20 100%
Sour
cequest
ionnai
resur
vey2017
Per
tai
ning t
othe l
evelofeducat
ion,6(
30%)ofr
espondent
s do hav
e 1-
5year
s’
exper
ience,5(
25%)do hav
e6-
10 y
ear
s’exper
ience,3 (
15%)do hav
e11-
15 y
ear
s’
exper
ience,3(
15%)al
sodohav
e16-
20y
ear
s’ex
per
ience,2(
10%)dohav
e21-
25y
ear
s’
exper
ienceandt
her
emai
ning1(
5%)dohav
eabov
e26y
ear
sofexper
ience.Sot
his
i
ndi
cat
est
hatr
espondent
swhodohav
e1-
5year
s’exper
iencear
ehi
ghesti
nnumber
.
Tabl
e4.
5.Lev
elofeducat
ionofRespondent
s
Respondent
s
i
tems No %
Cer
ti
fi
cat
e 2 10%
Di
ploma 14 70%
Degr
ee 3 15%
Ot
her 1 5%
Tot
al 20 100%
Sour
cequest
ionnai
resur
vey2017
Asshownf
rom t
heabov
etabl
e4.
5outoft
het
otalnumberofr
espondent
s2(
19%)ar
e
cer
ti
fi
cat
e hol
der
s,14(
70%)ar
e di
ploma hol
der
s,3(
15%)degr
ee hol
der
s and t
he
r
emai
ning1(
5%)r
efl
ect
sashe/
shehasot
herl
evelofeducat
iont
hati
sseconddegr
ee.
Thusf
rom t
heabov
etabl
eonecanunder
standt
hatt
hemaj
ori
tyofr
espondent
sar
e
di
plomahol
der
s.
Tabl
e4.
6.Wor
kingsect
ion/uni
tofr
esponsi
bil
i
ty
Respondent
s
i
tems No %

22
 Fi
nancedepar
tment 2 10%
Humanr
esour
cedepar
tment 5 25%
Pur
chasi
ngdepar
tment 5 25%
Ot
her 8 40%
Tot
al 20 100%
Sour
cequest
ionnai
resur
vey2017
Aspr
esent
edf
rom t
heabov
etabl
e4.
6fr
om t
het
otalnumberofr
espondent
s,2(
10%)
ar
efi
nancedepar
tmentwor
ker
s,5(
25%)ar
ehuman r
esour
cewor
ker
s,5(
25%)ar
e
pur
chasi
ngdepar
tmentwor
ker
sandt
her
emai
ning8(
40%)r
efl
ect
sthatast
heyar
e
wor
kingi
not
hersect
iont
hanl
i
stedabov
e.Thoser
espondent
sref
lectt
hatt
heyar
e
wor
kingasi
nvest
mentwor
ker
s,mar
ket
ingdepar
tmentwor
ker
,inv
ent
orymanagement
wor
keret
c.
Thus,i
tindi
cat
es t
hatmostr
espondent
s ar
e wor
king i
n ot
herdepar
tment(
i.
e.
i
nvest
mentwor
ker
s,mar
ket
ingdepar
tmentwor
ker
,inv
ent
orymanagementwor
ker
)than
l
i
stedt
heabov
e.

I
. Budget
ingpr
act
ices
Tabl
e4.
7.Thesour
ceofmuni
cipal
i
tybudget
Respondent
s
i
tems No %
Regi
onal
stat
e 9 45%
Feder
algov
’t 2 10%
Soci
ety 5 25%
NGO’
S 3 15%
Ot
her 1 5%
Tot
al 20 100%
Sour
cequest
ionnai
resur
vey2017
Accor
dingt
odocument
sthatshowsbudget
ingpr
act
icef
rom Fi
nancedepar
tmentand
pr
esent
edi
ntheabov
etabl
e,among t
het
otalnumberofr
espondent
s9(
45%)
oft
hem

23
depi
ctst
hatsour
erofmuni
cipal
i
tybudgeti
sregi
onalst
ate,wher
easf
iver
espondent
s
(
25%)st
atest
hatsour
ceofmuni
cipal
i
tybudgeti
sfr
om t
hesoci
ety
,whi
l
e 2(
10%)
poi
ntedt
hatt
hesour
ceofmuni
cipal
i
tybudgeti
sfr
om f
eder
algov
ernment
,theot
her
t
hree(
15%)
respondent
sci
tedt
hatsour
ceofmuni
cipal
i
tybudgeti
sfr
om NGO’
sandt
he
r
emai
ning1(
5%)depi
ctst
hatt
hesour
cesofmuni
cipal
i
tybudgeti
sforot
hersour
ce,
that
i
sci
tyadmi
nist
rat
ion.Thusmaj
ori
tyoft
hesour
ceofmuni
cipal
i
tybudgei
sregi
onal
st
ate.
Tabl
e4.
8.Thesour
ceofmuni
cipal
i
tybudget
Respondent
s
I
tems No %
Yes 19 95%
No - -
Idon’
tknow 1 5%
Tot
al 20 100%
Sour
cequest
ionnai
resur
vey2017
Asi
ndi
cat
edi
ntheabov
etabl
e,amongt
het
otalnumberofr
espondent
s19(
95%)
r
efl
ect
sthatast
her
eisy
ear
lybudgetpl
anandt
her
emai
ningi
s1(
5%)ofanswer
edt
hat
i
sIdon’
tknow,
thi
simpl
i
est
hatt
hemuni
cipal
i
tyhav
eyear
lybudget
.