Research and Development Activities (R & D)

After reading this article you will learn about Research and Development Activities (R & D):- 1. Features of Research and Development Activity 2. Appraisal and Evaluation of Research and Development Activities.

Features of Research and Development Activity:

Research and Development constitute, fundamentally, two important phases of pre-production activity. The former is a planned experiment to review, analyse and revise the accepted or established principles and conclusions wherever thought necessary, or to rectify already known facts of knowledge if required; whereas the latter is the next phase in which the results of the former activity are put to practical application so as to obtain production either by developing new or improved products, or new uses of current products or of methods or all.

Thus, the ‘Research and Development spectrum’ includes all facets from the start of fundamental research to the stage of pilot manufacture or run.

These facets are classified as under:

(a) Research:

(i) Basic or fundamental,

(ii) Applied; and

(b) Development:

(i) Exploratory—involving prototype design,

(ii) Advanced—covering production design, and

(iii) Production—devoted to pilot manufacture.

The distinctive features of R & D activities are:

1. Seemingly, basic or fundamental research has no immediate pay-off to its sponsor. But it is the fountain-head of new technology from the long-range point of view.

2. Applied research, on the other hand, is the intermediate activity between the discovery of the basic phenomenon (research) and the generation of the final product or method.

3. “The (applied) research proposal must state—what is to be done, how it will be done, how much it will cost and finally what results are expected to be.”

4. Sizeable amount of investment does not necessarily guarantee efficient performance or ultimate success of R & D programme because of inherent risks.

5. In R & D management, two separate skills are involved:

(i) Scientific or technical and

(ii) Managerial. Traditional managerial skills are inappropriate for maximisation of scientific effort.

6. R & D professional/manager is essentially interested in technical performance but he cannot ignore the constraints of time and funds.

7. R & D is conducted under the auspices of different organisations, viz., military, government, national laboratories, institutions of advanced learning, research institutes and industries. The problems and characteristics of each of these organisations are also different. So, R & D professional’s role varies with the type of organisation.

8. R & D activity for the most part is non-repetitive. So very little guidance is available from past experience.

9. R & D differs from most other business activities in that this type of work is one of the least predictable of human activities. Its planning, programming and actual performance poses unique problems. “The plan is formed largely from ideas obtaining within the R & D Group and is characterised by a low predictability of its outcome.”

10. R & D process often deals with intangibles which are difficult to be measured, correlated with, and evaluated against very tangible operational costs.

11. For manufacturing and marketing activities in an organisation, profit is used as a parameter to measure organisational effectiveness; but in R & D, profit cannot be taken as the absolute performance indicator. “Measurement of relation between R&D input and output is inexact.”

12. Various factors, like unpredictable technical problems, uncertainty of the time cycle, etc. complicate the costs estimation of R & D activity.

13. R & D activities necessitate regular monitoring, and need necessary support and appreciation of the top management.

14. R & D is a collaborative effort. Hence, inter-personal skills in obtaining the co­operation of other departments (such as production, maintenance, marketing, projects, finance) are equally necessary for a successful activity plan.

15. R & D management calls for a culture distinctively suited to its environment.

Appraisal and Evaluation of Research and Development Activities:

With the steady evolution of management practice, it has been increasingly realised that somewhat different techniques and approaches are required for management audit of R & D activity as a separate area of business.

Successful management of R & D requires, apart from innovativeness and a futuristic outlook, familiarity with other functions, such as project identification and evaluation, project management and monitoring, budgetary techniques and controls, market research and development, technical strength in related areas, technology forecasting, etc.

However, a management auditor of a company can appraise and evaluate the activities of R and D by seeking appropriate answers to the following questionnaires:

1. What is the output-input ratio?

2. What are the major achievements?

3. Do the R & D scientists/technicians have actual operating experience in industry in order to visualize what they are developing?

4. What is the extent of inter-action between the industry’s in-house R&D and national research laboratories?

5. How does the time frame for a research project compare with a similar one in abroad (in case of multi-national concerns)?

6. What are the deficiencies revealed and experienced if case studies are made of past projects taken up, and what are the remedial measures adopted in those situations?

7. (i) What are the strategic issues formulated at the Board level relating to industrial research?

(ii) Do they consider the inter-relationships between the research approaches and vital matters such as:

a. the overall company plan?

b. the size of outlays on R & D?

c. the R&D structure and importance in the overall company organisation?

d. the type of research activities and their time frame?

e. the success ratio expected from these activities?

f. the risks that the company is willing to take in commercialisation of its in- house research reflecting, in turn, its level of confidence in R & D and a long-term view on R & D as an independent profit centre for taking up sponsored or commercial R & D for licensing of technology?

8. (i) How does a corporate body formulate its approach on the annual capital outlay on R & D?

(ii) What are the criteria adopted by the Board for fixation of outlay?

Is the outlay:

a. a fixed sum?

b. a percentage of sales or of profits?

c. a percentage of capital investment or cash flow?

d. based on industry average?

e. based on the size of the outlay of its major competitor?

f. based on an extrapolation of past funding?

g. based on specific projects selected?

h. based on future tax liabilities?

i. determined as a result of decision analysis on the basis of a combination of more than one criteria above?

9. (i) Does the Board identify or endorse the broad ‘types of research’ to be undertaken in order to ensure that the efforts are concentrated in line with the defined goals?

(ii) Are their relative weightages reviewed periodically in line with the changing environment and the overall strategic plan?

10. (i) Is the in-house R&D considered as an independent department by the company?

(ii) If so, what are the long-term plans? Is it viewed as a separate profit centre?

If it be so, what is the level and extent of contribution to the company’s profits through sale of technologies?

11. (i) Does the R & D manager possess several skills and traits to enable him to succeed in his task? That means, whether he possesses, apart from sound technical skill in his area backed up by actual operational experience, a sound commercial sense in order to identify promising projects for research.

(ii) Is he a realist, who should know when to terminate a project?

(iii) Is he an optimist, capable of encouraging his team at times when promising results are not forthcoming?

(iv) Are the traits, like commitment, perseverance, self-confidence, communication, etc., present in him?

12. (i) How is the co-ordination maintained between the R & D cell and corporate planning cell?

(ii) Are the guidelines (from the Board or top management) clear and succinct?

13. What is the extent of the Board’s role in striking a balance between:

Short-term projects (in which the uncertainty elements are lower and the results are quicker—reflecting higher visibility); and

Long-term projects (which might result in greater benefits for the company)?

14. (i) How is the R & D Budget or Capital plan formulated?

(ii) Is it prepared after initial probing experiments?

(iii) Does the Budget take into consideration all pertinent aspects, for example,

Research & development technicians and staff?

Raw materials and equipment?

Stages of research?

Time frame (total and stage-wise)?

Market potential?

Ultimate capacity and capital outlay at various stages, etc.?

(iv) What are the assumptions made at the initial stages, and how these are refined as the research projects progress?

(v) How are the corporate decisions made for each of the research projects with regard to the need for and extent of involvement of outside agencies, such as engineering consultants, analytical laboratories or other research centres to supplement the in-house R&D work?

15. (i) Are the R & D results properly recorded, classified and analysed?

(ii) If so, do the records reveal the extent of studies made for various solutions to a problem before identifying the optimum one and cost consciousness for all decision stages?

16. How are the following areas of activity (illustrative and not exhaustive) accom­plished:

(i) Monitoring of the on-going projects?

(ii) Periodic reviews of the viability of projects in order to assign priorities to them and to expedite or terminate some projects?

(iii) Synchronization and alignment of plans for technology development through various stages?

(iv) Transfer of technology to the project and operations department?

(v) Creation of the infra-structure required for R & D?

(vi) Liaison with other departments and with outside agencies (e.g. CSIR, Research Institutes, etc.)?

(vii) Inter-action with future customers in order to develop products suited to their requirements?

17. Is the control scheme for a particular R&D programme realistic and effective in relation to?

(i) Long-term programme (i.e. the aims, etc.)?

(ii) Short-term programme (i.e. individual phases, time-element and others to the overall project)?

(iii) Operating budget showing the admissible expenses, their scope and method of sanction?

(iv) Periodical assessment of results with the pre-determined budgets and correlated ideas?

How does the management assess the necessity for the continuance of the R & D on the budgeted lines or in the pre-determined directions?

How does the management modify and adjust the scope, aims and methods?

(v) Authorisation of expenditure (i.e. whether top-level management is authorised in this regard; how does the management exercise its discretion, etc.)?

(vi) Cost-effectiveness analysis (i.e. whether the procedures for collection of costs, cost analysis, and comparison between the actual performance and the budget are adequate)?

(vii) Critical factors, like delay, slow progress, cost over-runs (i.e. whether the techniques applied are compatible, whether each phase of the projects is continually improved both as regards progress as well as bottle-necks ahead, whether the communication system among the departments of production, sales and marketing, R & D are effective with regard to the changing needs of the company)?