Team 6 Section B

TEAM SECTION BY25.NANDINI R 26.NANDINI RAJA 27.NANDITHA 28.NAVEEN MADIVAL 29.NAYANA

6 B

Incentive payments . Meaning of incentive plans: incentive plans are the monetary benefits paid to workmen in recognition of their outstanding performance.

Features of incentive plans. A feeling of secured income fails to evoke

positive response. Positive response will surely come when incentives are included as a part of the total remuneration. Earnings of employees would be enhanced due to incentives. There are instances where incentive earnings exceed two to three times rated wages or salaries. Increased earnings would enable the employees to improve their standard of living.

Advantages of incentive plans Reduced absenteeism. Better utilization of equipment. Reduced scrap. Reduced lost time. Incentive packages are a very attractive

proposition for managements because they do not affect employer’s contribution to the provident fund and other employee retirement benefits.

Types of incentive plans. Incentive schemes where the workers’ earnings

vary in the same proportion as output. Schemes where earnings vary proportionately less than output. Schemes where earnings vary proportionately more than output. Schemes where earnings differ at different levels of output.

1.Incomes varying in proportion to output. The chief characteristic of this scheme where

incomes vary in proportion to output is that any losses or gains resulting directly from a worker’s output accrue to him or her ( leaving to the employer any gains or losses in overhead costs per unit of output).

Earnings varying proportionately less than output. These schemes are called as ‘gain sharing

schemes” as both employer and employee share the gains resulting from the time saved. The worker may be paid for half ( or any other fraction ) of the saved, the employer getting the balance.

Earnings varying proportionately more than output. This category includes two methods, the high

piece rate and the high standard hour system. Under the former, the earnings of the worker in proportion to his or her output, as in straight is greater. The higher rates start applying after the standards have been reached. Similarly the same logic applies to the high standard hour system.

Earnings differing at different levels of output. These systems can best be explained by

describing how earnings vary from minimum to maximum at different levels of output. Earnings for part of the range may vary proportionately less than output and for another part proportionately more or more usually in the same proportion as output.

Group incentive plans. The most common system where in group

incentive plans are applied is piece work system. The total earnings of a group are first determined in accordance with the incentive method which is followed, and the earnings are then distributed among the members of the group on some equitable basis. If the group consists of members with equal skills, the earnings are divided equally among them.

Continued… When the members are of unequal skills, the

earnings of the group may be divided among the members in proportion to their individual time-rates, or according to specified percentages, or in some cases only among a certain number of members of the group.

Advantages of group incentive plans. Better co-operation among workers. Less supervision. Reduced incidence of absenteeism. Reduced clerical work. Shorter training time. 

Disadvantages of group incentive plans. An efficient worker may be penalized for the

inefficiency of the other members in the group. The incentive may not be strong enough to serve its purpose. Rivalry among the members of the group defeats the very purpose of team work and co-operation.

Productivity

Production and productivity are often used

interchangeably. Production refers to the total output and productivity refers to the output relative to inputs. Productivity refers to the amount of goods and services produced with the resources used.

Quantity of goods and



services produced

  

Productivity = Amount of resources used

 Two variables are the amount of production

and amount of resources used.

Productivity can be increased by Increasing production using the same or

smaller amount of resources. Reducing the amount of resources while keeping the same production or increasing it. Allowing the amount of resources used to increase as long as production increases more. Allowing production to decrease ass long as the amount of resources used decreases more.

Increased productivity contributes to the

competitive advantage of an organisation.



When productivity increases, the company can

pay higher remunerations to its employees without boosting inflation.



Increased earnings without corresponding

increase in inflation adds to the standard of living of the people.

Improving productivity does not mean working

harder; it means working smarter. 

Not just doing things right but doing right

things. 

Today’s economy demands that, we do more

with less people, less money, less time, less space and fewer resources in general. 

High productivity organisations  





Men Goods Money and Machines Services

 

INPUTS OUTPUTS

more productive

organisations

Low productivity organisations 





Men Goods Money and Machines Services

 

INPUTS OUTPUTS



less productive

organisations

MEASURING PRODUCTIVITY

Input resources of the production process

comprises of capital, labour, materials and energy.  Types of productivity measurements are  

1. Partial productivity 2. Multi factor approach

PARTIAL PRODUCTIVITY The resources of productivity when measured

separately are called partial productivity.  

output in a given

period Partial productivity= 

labour hours used in period

Partial productivity is calculated for the

purposes of analysis and remedial actions.  Among all the inputs, direct labour is mainly

used as the denominator for calculating partial productivity as they occupy a pride place in the manufacturing systems.

MULTI FACTOR The method of calculating productivity

considering all the resources is called multi factor approach.  output in a given period Total productivity =  labour+ capital+materials+  energy used in same period

Labour Productivity

Labour Productivity There are at least 3 ways of measuring labour productivity: i.) Output per man- hour  Labour Productivity = Output  Man –hours used ii.) labour hours per unit of output:  Labour Productivity  = Total labour hours used  Output 

Labour Productivity iii.) Added value per unit of labour cost: Labour Productivity 

= Added value for the product



*

Total wages.

 

*



(Sales values – cost of bought out items)

Problems of Labour Productivity: Problem in numerically expressing the related

factor.



Productivity measures need to be selected

carefully. Example ‘number of citations issued per inspection day’ is an inappropriate measure to judge the productivity of a pollution control board.

Problems of Labour Productivity:  Non clarity regarding how productivity ratios

reflects the change over a period of time. 

Work processes are complex and unwieldy

Ways of Improving Productivity: Understand the factors that influence the



 

relationship between output and input such as 1.) Considering with regard to increase or decrease the productivity. 2.) Considering the cost. 3.) Considering the influence of the work environment.

Ways of Improving Productivity: Check the quality of human resources and

provide enough T&D to bridge the gap between the standard and the actual productivity. Capital investment in newer and better machinery, equipment, facilities.

Ways of Improving Productivity: Scientific management.      

1.) 2.) 3.) 4.) 5.) 6.)

production planning. Production control. Inventory control. Operation research. Cost control. Budgetary control.

Production function- Areas of productivity. Improving volume of production. Reducing reduction rates. Minimizing rework rates. Maintaining delivery schedules. Controlling idle time of machine and men. Establishing/upgrading/improving/setting

industrial engineering norms. Updating processes and procedures.

Production function- Areas of productivity. Maintaining accuracy and timeliness of MIS. Decreasing money set up time. Controlling overtime. Good house keeping. Checking absenteeism, thefts/pilfers age

and misconduct. Eliminating accidents.

Production function- Areas of productivity. Effective grievance handling. Effective training and team building. Minimizing inventory and achieving better

yields. Total quality management. (TQM) Business process reengineering (BPRE) Automation.

Learning Curves

Learning Curves:  The Learning Curve analysis based on the premise that as an organization gains experience in manufacturing a product, the resource inputs required per unit of output diminish over life of the product. 

 In the beginning of production runs, workers are unfamiliar with there tasks and the amount of time required to produce the first few units is high. 

 As the workers learn their tasks, their performance improves. The performance time drops off rather dramatically at first, and it continues to fall at some slower rate until a performance plateau or levelling-off is reached. This learning pattern applies to group and organizations as well as



The learning curve concepts are based on:

a)Where there is life, there can be learning. b)The more complex the life, the greater the life of learning. c)The rate of learning can be sufficiently regular to be predictive.  

It is possible to estimate:

1)The average number of labour-hours required to produce “n” units in a production run. 2)The total number of labour-hours required to produce “n” units in a production run. 3)The extra number of labour-hours required to produce the “nth ” unit of production run.

4)



There are three approaches of learning curve analysis:

  

1. Arithmetic Analysis.

 

2. Logarithmic Analysis.

  

3. Learning Curve Table



1.Arithmetic Analysis.

 This is the simplest approach to learning curve problems.  It is based on this fundamental concept: –

As the number of units produced doubles, the labour-hours per unit decline by a constant factor.

 It is useful when we want to find out the labourhours required to produce “n” units and “n” just happens to be a number that is one of the double values.  If we want to find the labour-hours required to produce the seventh unit, Arithmetic analysis does not help us then we have to look for Logarithmic Analysis for help.

2. Logarithmic Analysis.



In Logarithmic Analysis the time taken to

produce the nth unit(Tn) is given by the formula:  Tn = T1 (nb)  where,  “T1” is the time taken to produce the first unit,  “b” is the slope of the learning curve. The value of ‘b’ is depend on the learning rate.

Uses Of Learning Curve:  It is useful in man-power planning and cash flow analysis.  Cash flow analysis involves the timing of cash outlay and inflows associated with a new product.  It is possible to calculate labour-hours required to produce every additional unit of output.  It is possible to estimate cash inflow needed to produce the new product.  The learning curve theory also used to Industrial engineers and other staff specialist to develop labour cost estimates for new products and services.  Cost estimates are highly useful for bidding purposes.

Continued…  In job shops and custom service operations, learning curve-theory is highly significant, because, 1. Product and services tend to be customdesigns that require workers to start near the beginning of small batches. 2. Batches tend to be small; thus labour-hours per unit improve dramatically from the first to the last unit. 3. Product/service designs tend to be complex; thus labour-hours per unit improve quickly.

Limitations Of Learning Curve:  Learning curve analysis almost impossible to develop prices labour-hour estimates for the first unit or to determine the appropriate learning rate.  These difficulties limit the uses of learning curve analysis.  Learning curve depicts improvement in productivity over time, productivity does not improve exclusively because workers are learning.  The reason for the improved productivity are numerous, including changes in work methods, product engineering, facilities layout, equipment design, employee trainings and others.  Learning curve analysis is generally of the greatest benefits in labour-intensive conversion processes.

T H A N K YO U