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Incentives

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  • 1. Introductory Note The National Productivity Council, since 1958, has conducted a large number of training programmes in the fields of Industrial Management, Industrial Relations, and Industrial Engineering. Its specialists have also been .carrying out an increasing number of consultancy assignments in a wide variety of organisations using different tools and techniques of productivity improvement. These experiences are being consolidated in the form of Training Manuals, .as they would be of benefit not only to its own specialists, but also to the Local Productivity Councils, and other training organisations in the country. The Training Manuals are just an attempt at systematising and consolidating the course contents, which would undergo progressive improvement from time to time. It is the experience of the Council that a good Training Manual in the field of productivity should be essentially practice-oriented, illustrating the applied aspects for effective communication to the trainees. It is hoped that the experience of the NPC specialists as trainers-cum-consultants would make the Training Manuals useful to the needs of Indian industries .and other organisations. 1
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  • 3. I. Theory of Incentives 1. INTRODUCTION 1.1 Incentives are measures to stimulate human effort; people are encouraged to give out their best by inducing them on to greater and more productive efforts. 1.2 Incentives may be positive or negative. A positive incentive rewards the employee for superior performance, whereas a negative incentive consists of some form of penalty for poor performance. Though the fear involved in negative incentives may be occasionally necessary for maintaining discipline, they are not long lasting, and are hence unsuitable for increasing production. 2. TYPES OF INCENTIVES 2.1 Positive incentives can be broadly classified into (i) Non-financial, (iii) Semi financial, and (iii) Financial Incentives. A strict classification is rather difficult, since some indirect monetary benefits may be there in any scheme. 2.2 Non-financial incentive schemes are those where there is absolutely no monetary benefit. G'Jod work is appreciated and praised. For example, many factories have the practice of publishing the names and/or photographs of good workers in their House Journals, or of exhibiting their photographs in the Reception Room, issuing certificates, etc. Non-financial incentives will be effective at the worker levels only as a supplement to financial incentives. However, for supervisors and those above them, such incentives serve as morale boosters, and spur them on to being more effective in their organisations. 2.3 Semi-financial schemes may be classified as those which have some monetary benefits, but not directly linked with output and wages. Promotions, increments, and provision of training and welfare facilities may be included in this. 1
  • 4. 24 All direct financial incentive schemes, which are also known as Wage Incentives and Payment by Results, may be classified under the financial schemes. Direct financial incentive schemes are the most effective among the different types of schemes, and provide the strongest motivation. 1 he discussions that follow relate mostly to Wage Incentives. 2.5 It should be remembered that incentive is only a means to an end. It is only one of the forms of motivation, and one of the techniques of increasing productivity. It does not automatically result in lower costs, and higher wages. It is not a panacea for all industrial problems. not it is a substitute for good management or good industrial relations At best it can only be a supplement to other management techniques, and we may regard it as one of the effective tools available at present, since it attempts to link wages with performance. 2.6 Individual and team-spirit are both essential to achieve an organisations objectives, and in this regard an industry may be compared to a game or sport. Individual incentives in the form of recognition and extra pay for superior performance encourage competitive spirit among workers, and result in the employees putting forth their maximum effort. Cooperation is an equally important incentive in many situations. Sometimes cooperation may conflict with competition, but in most of the cases they are complementary to each other. There are many situations in industry where work will be interdependent and a group of workers may have to work as a team for the completion of the job. Since the work is inter-related and each worker will have to cooperate with the other, a group incentive is given, so that by a coopera- tive effort better group performance is obtained. 3. WAGE PAYMENT 3.1 Wage incentive is a method of wage payment. The total wage for any job Would consist of the following components. (i) Basic Wage (ii) Dearness Allowance (iii) Other Allowances (iv) Incentive. The basic wage consists of a minimum wage and a job differential. Job differential is an addition to the minimum wage, and will be different for different jobs depending upon their relative worth which is determined by job evaluation. 3 2 some of the governing factors is determining the basic wage and allowance may be: (i) Statutory rules and regulations by the Government. 2
  • 5. (ii) Current wage levels in similar industries, area, etc. (iii) Cost of living index. (iv) Capacity of the company to pay. (v) Demand and supply position with regard to labour. (vi) Bargaining powers of the trade unions. 3.2.1. Thus the basic wage and the allowance are guided by the above factors and also a systematic evaluation of jobs, taking into consideration the various characteristics of the job like skil1, effort, responsibility, and working conditions. Wages are paid for certain quantities of output by the workers, and these are generally stablished at mutually accepted levels for the purpose of reckoning what is called 'a fair day's work'. The basis of fixation of these levels of output may be one of a combination of the following. (i) Output levels traditionally built up during the life of the organisations called the 'conventional standards'. (ii) Outputs obtained in similar or identical work situations in other organisations. (Hi) Output levels fixed by the application of Work Study techniques. Though theoretically it may mean that the wage is paid for an acceptable level of per- formance for the particular duration, in certain cases it does not work like that in practical when the payment is relay made only for the attendance. To ensure maximum application during the attendance time, some extra remuneration needs to be made to the worker, and this is done through wage incentives. 4. PURPOSE OF INCENTIVES 4.1. The main purpose of incentives is to motivate the worker to give his best. Incentives try to improve the efficiency of workers, by making them work more effectively with less wastage of time, at a greater pace, and with better application to the job without detriment to his health. 4.2. The philosophy of wage incentives may be expressed thus: leech and every individual possesses latent abilities, both mental and physical, in far greater abundance than he normalIy utilises. The dual rewards of individual recognition and material gain through wage incentives provide powerful encouragement to the use of those latent abilities" (Louden & Deegan). 4.3. Usually the objective of any incentive scheme is increased output consistent with certain quality standards. But there are many other objectives which incentives could achieve. These would vary depending on the conditions. Some of the objectives are: 3
  • 6. (i) Higher output (ii) Improved Quality (iii) Higher Workloads (iv) Reduced Waste, higher recovery, improved material utilisation (v) Higher Plant Utilisation (vi) Less maintenance down time (vii) Greater process efficiency (viii) Better Housekeeping (ix) Less accidents and greater safety (x) Reduced Absenteeism (xi) Economy in the use of service facilities. 5. ADVANTAGES & DISADVANTAGES OF INCENTIVES 5.1 All the objectives mentioned earlier may be counted as the advantages of incentives, when the scheme is well designed, and meets the required objective. Briefly, the main· advantages of an incentive scheme may be stated to be- (i) Increased output, (ii) Lower Cost of Production, and (iii) Higher earnings for workers. 5.2 Incentives may have certain disadvantages as well. (i) Quality of the products may deteriorate unless proper measures are instituted. (ii) Introduction of improved methods, better tools and machines, etc., may become difficult. Workers may resist such changes for fear that are-study of the job may result in lower earnings. (iii) Clerical work will increase due to the calculations involved in computing incentive earings. (iv) Workers may overlook safety precautions. and overwork for the sake of earning incentive which may effect their health. (v) Standards have to be fixed properly. Both too tight and to low rates will result in difficulties. (vi) In industries where there is a wide fluctuation in production, introduction of incentives becomes a difficult task. 5.3 Most of these disadvantages and difficulties could be avoided if the incentives are properly designed taking into consideration all the factors involved. Some of the characteristics of a well-designed scheme are given below: (i) The plan should be directly related to the factor or factors to be controlled. (ii) The plan should provide extra pay consistent with extra effort. (iii) The incentives should be adequate enough to stimulate the worker to put in extra effort 4
  • 7. (iv) The plan must be simple enough for the worker to understand, and be easily calculable. (v) The plan must be acceptable to the workers and the unions. (vi) Adequate minimum wages must be guaranteed. (vii Installation and maintenance of the scheme must be as easy and inexpensive as possible. (viii) Performance should be measured over as short a period as is possible under the circumstances. (ix) The payment period should be as short as possible. (x) The plan should be based on fair and proper standards. (xi) There must be adequate safeguards to maintain the desired quality standards. (xii) Standards should not be altered unless changes occur which may alter the work under question, in which case the plant should provide for modification of the standards. (xiii) The plan should cover as many operations and workers as practicable. (xiv) The plan should usually result in the reduction of unit labour costs. (xiv) Definite instructions covering policy and methods should be provided. (xvi) Adequate safeguards must be provided whenever there is a failure to meet the standards due to reasons beyond the control of employees. (xvii) As far as possible, there should be no restrictions no individual earnings. 6. INDIVIDUAL & GROUP INCENTIVES 6.1 Incentives could be broadly classified into (i) Individual, and (ii) Group Schemes. Under the individual scheme each employee is rewarded based on his performance, while the group incentive plan compensates a number of workers for their combined output. 6.2 An individual plan can be applied wherever the individual effort can be measured, and normally one worker is responsible for th~ completion of an operation or a task. There are many industrial situations where a group of workers have to work as a team for completing a job. In such cases individual incentives may not be practical either because the individual contribution cannot be measured or the work is so much inter-related that one worker's pace may be dependent upon the speed of the previous worker, and so on. Group incentives will be more suitable under such situations. To be effective, it is preferable to keep the groups as small as possible. 6.2.1 By and large, individual incentives have been found to be more effective. However, group incentives have certain advantages, and have definite applications which are discussed later. 5
  • 8. 7. PREREQUISITES FOR INCENTIVES 7.1 Incentives should not be used to compensate workers against low wages for as compensation towards rise in economic wage levels. The rate structure must be kept separate from incentives. Incentives will be fair and reasonable when the industry has established an equitable wage structure based on a systematic job evaluation. Thus, as far as practicable, Job Evaluation should precede the introduction of incentives. 7.2 To achieve maximum results from incentives, the production processes and methods should be first improved and standardised. Methods should be simplified, and delays and interruptions minimised through the application of Method Study techniques before an incentive is introduced. Safety precautions and working conditions must’ all be improved and controlled. Workers would not like their performance and thereby their incentive earning to be affected by unnecessary delays, interruptions, and breakdowns. Besides, if standards are set without improving methods, workers themselves would try to improve the methods and render the standards loose. 7.3 When the operations have been analysed and simplified, and the operators are trained in new methods, standards should be established based on Work Measurement techniques. 7:4 Above all, there must be sufficient amount of work available continuously to justify the introduction of an incentive scheme. 8. TRADE UNIONS & INCENTIVES 8.1 Any wage incentive plan will be successful only if it has the acceptance of the workers and their unions. Good labour relations are a prerequisite to successful operation of an incentive plan. Workers are likely to resist anything which they do to know or do not understand. It is advisable to take the workers into confidence, and explain fully all the benefits and implications of the scheme. 8.2 The main objections to wage incentives expressed by the trade unions are: (i) Working continuously at a high pace is injurious to the health of the worker. (ii) Incentives may result ultimately in the reduction of the total labour strength. 8.3 Incentives based on standards fixed by work measurement techniques, are fair and appropriate since all the factors affecting the job are taken into consideration. Adequate minimum wages 'should be guaranteed. It may also be necessary to give a guarantee that surplus labour, if any, would be absorbed on other jobs to allay the fear of unemployment. 8.4 Most of the difficulties can be overcome by providing for the participation of union representatives in the introduction of the incentive scheme. This participation may be in the timing of the job, in fixing standards, or in setting rates. 6
  • 9. 8.5 Most of the trade unions have realised the value of incentive schemes, and in many cases, welcome the introduction of incentives. 9. SCOPE OF APPLICATION 9.1 Though wage incentives could be applied with advantage in most of the cases, there may be certain limitations rendering the introduction of incentives difficult in some industries where: (i) high quality and precision are of Paramount importance; (ii) work is dangerous and adherence to safety precautions is essential; and (iii) work is such that measurement of either individual or group effort is extremely difficult. 10. DEVELOPING A COMPANY WAGE INCENTIVE PLAN 10.1 The broad procedure involved in developing an incentive plan for a company is : (i) Determining the objective of the Incentive Plan; (ii) Method Study of all the production processes and activities to be included in the plan; (iii) Quantitative measurement of the achievement and setting up of standards; (iv) Studying the company's operating conditions including the manner in which work is assigned and effort applied; (v) Selecting a suitable standard incentive plan or designing a special plan to suit the company's needs; (vi) Designing suitable paper work and information flow procedures; (vii) Reviewing the scheme from all angles to ensure fairness to all concerned; and (viii) Installation and maintenance of the scheme. 7
  • 10. II. Standard Financial Incentive Plans 1. INTRODUCTION 1.1 There are a number of incentive plans formulated by different persons from time to time. The basic differences between these plans are in the incentive levels, and the rate of payment. Some of the most commonly, used systems are discussed here. Though each .of these plans has been designed to fit a particular set of conditions, each plan has certain special features. It may be possible in many cases to select one of the standard plans for use or with some modifications. However, familiarity with the following representative plans will be helpful in designing a company incentive plan.* 2. THE STRAIGHT PIECE-WORK SYSTEM 2.1 The straight piece-work system compensates the worker directly in pro. portion to the output. The worker gets paid at a specified rate per unit of output. (There is. however. one modification to this system that the workers' time rate is guaranteed). Example: Rate per piece = Re. 0.10 Total number of pieces produced = 100 Earnings = 100 x Re. 0.10 2.1.1 Direct labour coets per unit of output remains constant above the standard, but the total unit costs decrease due to reduction in certain overhead costs. 3. THE STANDARD HOUR SYSTEM 3.1 Under this plan, the task standards are expressed in time. A definite * Summary of the standard incentive plans and the corresponding charts have been taken from Payments by Results. and reproduced by the kind permission of I.L.O., Geneva. 8
  • 11. hourly rate is paid for each task hour of work performed. The unit of payment is the task time. The worker is paid full value for the time saved. Example: If the standard is 20 units per hour, and the worker completes the work in 45 minutes, he gets the full hourly wage for 45 minutes of work. 4. THE HALSEY PREMIUM PLAN 4.1 A standard time is set for completing a job or a unit of work which is usually based on past production records. The worker gets the guaranteed wage if he· completes the job in the allowed time or more than the allowed time. If the job is completed in less than the standard time, the worker is paid at his time rate for the actual time taken, and, in addition, is rewarded at his time-rate for a definite percentage of the time saved. ~This percentage varies from 30 to 70 per cent of the time saved, the most common percentage being 50 per cent, and the other 50 per cent being the employer's share. Example: Standard time = 8 hours Worker's hourly rate = Re. 1 Actual time taken to complete the job = 6 hours Total earnings = (6 hours x Re. 1) + (1 hour x Re. 1) for 50 per cent of the time saved under 50:50 Sharing = Rs. 7 for 6 hours' work. 4.1. 1. Since there is a sharing and the bonus is modest, slight inaccuracies in time standards would not be too serious. A portion of the employer's share may be given to indirect workers and supervisors, thus encouraging overall performance. The plan is easy to introduce. The Halsey System can also be applied to indirect workers, such as maintenance, where the work can be estimated. 5. THE ROWAN SYSTEM 5.1 In this system also, a standard time is allowed for a job, and a bonus is paid if the job is completed in less than the standard time. The time saved is calculated as percentage of the standard time, and the same percentage of the workers' rate is credited as bonus for the time saved. Guaranteed time-rate will be paid for standard and below standard performances. Example: worker’s hourly rate = Re. 1 Standard time for the job = 8 hours Actual time taken to complete the job = 6 hours Time saved = 2 hours Time saved as a percentage of the standard = 25 % Time 9
  • 12. Bonus per hour = 0.25%XRs. 1 = Rs. 0.25 = 6 hours (1X0.25) = Rs. 1.50 6. THE BEDEAUX POINT SYSTEN 6.1 In the Bedeaux System, a standard time is allowed for a job based on work measurement. Each minute of the allowed time is called a "point or a "B". Thus a standard hour would consist of 60 Bs, or and a standard day of eight hours, 480 Bs. A standard number of Bs, or points is allowed for each job. A bonus is paid for the number of Bs, saved, i.e., the time saved. As per the original Bandeaux system, 75 Per cent of the number of points earned in excess of 60 per hour multiplied by one sixtieth of the workers' hourly rate is paid as bonus. Guaranteed time rate is paid to workers not reaching the standard. 6.2 This system may be convenient for application where workers are assigned different types of work. Since the output can be expressed in terms of points or Bs, the system would also be helpful for planning purposes. 7. THE TAYLOR DIFFERENTIAL PIECE-RATE SYSTEM 7.1 This system was developed by P.W. Taylor. There is a low piece-rate for output below standard, and a higher rate for output above standard. As high as 50 per cent of the time-rate is paid for standard output. Thus this system while rewarding handsomely the above-standard workers, penalises the below standard workers. 8. THE MERRICK DIFFERENTIAL PIECE RATE SYSTEM 8.1 This is a modification of the Taylor System with three steps, instead of two. Straight piece-rates are paid up to 83 per cent of standard output at which a bonus of 10 per cent of the time-rate is payable. At standard an additional 10 per cent bonus is paid with high piece-rates above standard. 9. THE GANTT TASK AND BONUS PLAN 9.1 At the standard performance, which is usually set at a high level, the worker is paid a bonus of 20 per cent of his time wages. High piece-rates are paid for performance about standard. Similar to Taylor and Merrick Systems, the Gantt 10
  • 13. Scheme also rewards workers for reaching the standard which is set at a high level. The scheme provides for a guaranteed time rate for performance below standard. 10 THE EMERSON EFFICIENCY PLAN 10.1 Standard time are set for the jobs. The actual times taken to complete' the jobs are recorded. - The individual efficiency is then calculated by dividing the standard time by the actual time. Up to 67 per cent efficiency the worker is, paid at, his time-rate. Above this and up to 100 per cent efficiency a bonus is paid. Theban is equal to certain specified fraction of one per cent of the hourly rate for each addition I one per cent of efficiency. At 100 per cent efficiency a bonus of 20 per c7nt is payable. Thereafter an additional one per cent bonus is paid for each additional one per cent efficiency. 11. IMPACT OF INCENTIVES ON PRODUCTlVITY 11.1 The National Productivity Council carried out a research project on “ Incentives in Industries" during the year 1970. The research project highlights the impact of incentives on productivity. It was found that except 5 companies which were severely hit by recession, in all other companies both production and productivity went up after the introduction of incentive schemes. The study with a coverage of 131 companies indicted an average increase of 60% and 40.85% in the levels of output and productivity. The range of increase in output and productivity falls between 1.7 to 265% and 1.0 to 158% respectively. 11.2 The following two tables included in the NPC Research Publication on Incentives in Indian Industries (Part III) exhibit the impact of incentives on productivity both statewide and industry wise.
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  • 15. EARNINGS AND DIRECT LABOUR COSTS FOR DIFFERENT TYPES OF INCENTIVE PLANS 13
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  • 24. III. Work Measurement Techniques 1. INTRODUCTION 1.1 The establishment of proper and fair standards is a fundamental requirement for the success of an incentive scheme. Though the incentive may be based on various factors depending on the objectives, the most commonly used unit of performance is time. When the unit of measurement is time, techniques of Work Measurement provide the best available means for setting standards for incentive payment. More sophisticated techniques involving mathematical and statistical analysis have also been developed of late. A very brief discussion of the common types of Work Measurement techniques is attempted here. 1.2 "Work Measurement is defined as the application of techniques designed to establish the work content of a specified task by determining the time required for carrying it out at a defined standard of performance by a qualified worker". The principal techniques of Work Measurement are i. Time Study ii. Standard data and predetermined motion time systems, iii. Analytical Estimation, and iv. Work Sampling. 1.3 Time Study is most extensively used for setting up standards. ,standard data, predetermined motion time system, and analytical estimation are used where direct measurement by Time Study is either difficult or time-consuming, Estimation being less accurate is used only where other techniques are not applicable. The Work Sampling technique for determining time standard, though possible, is rarely applied. But it is an extremely useful tool for determining accurately the. present 22
  • 25. efficiency of workers and, equipment, which may be required in designing an incentive system. 1.3.1 Prior to Work Measurement, a Method Study of all the jobs should be carried out, and the best methods under the prevailing circumstances installed. 2. TIME STUDY 2.1 Time study is a technique for determining the time required to carry out a specified job at a defined standard of performance. The work content of the job is expressed in terms of standard minutes. A standard minute of work is the amount of work to be expected in one minute from a normal worker, adequately qualified in all respect to do the job, arid working at normal speed under normal conditions, a certain percentage of relaxation allowance being included in that minute for personal needs and recovery from fatigue. Standard minute provides a common unit for the measurement of different kinds of human work. 2.1.1 In making a Time Study, the following steps are involved: i. Collecting and recording all the information about the job; ii. Breaking the job into elements; iii. Observing and recording the time taken for each element; iv. Rating the performance at which the work is being done, and computation of normal time; and v. Determining the allowances and computing the standard time for the job. 2.2 The first step in Time Study is to record all the relevant information regarding the job 0 This includes information regarding the method of working, sequence. of operations, tools and equipment, material and quality specifications, and working conditions. All this information is essential because the time values bold good for a particular set of conditions, and would have to be changed if there is any change ,in these conditions. 2.3 When all the data have been recorded, the next step is to break the job into "elements". An element is a constituent part of the activity selected for convenience of observation and timing. The main purposes of elemental breakdown are: i. To separate productive and unproductive work; ii. To facilitate accurate performance rating; iii. To provide proper rest and other allowances; iv. To build Up standard data; and v. To check method changes and standards by detecting additions and omis- sions of elements. 23
  • 26. 2.3.1 Some of the pornts" to be considered" in the selection of elements are: (i) they must be easily identified with definite beginning and ending; (ii) manual and machine time should be separate; (iii) constant, variable, occasional, and foreign elements should be separate; and (iv) the duration of an element in a repetitive job should be as short as to be able to be measured conveniently, the minimum duration being not less than 0.05 mts. An elemental time of about 0.15 to 0.20 minutes permits reasonably easy and correct assessment of the performance. 2.4 The time required for performing each element of the job is measured with the help of ,a' stop watch. The stop watch used for time study is a decimal minute type, one minute 'being divided into 100 equal divisions, with provision for stopping, starting and snapping back the hands. The time study details are recorded on time study forms .. 2.4.1 There are two methods of timing-(i) continuous timing, and (ij) fly back timing. In the continuous timing the watch runs continuously throughout the study; at the end of each element the watch reading is recorded. The individual elemental times are obtained by subtracting each reading by the successive ones. In the fly back method at the end of each element, the reading is recorded and snapped back to zero Thus the individual elemental times will be easily available. 2.4.2 Normally about 20 to 30 cycles would ce required to obtain a reasonable representative average time' for an operation with a duration of about one minute. However, the number of cycles to be observed would be governed by factors such as the, amount of variation in the elemental time between cycles, degree of accuracy required, and the coverage of occasional elements. 2.5 The time values' obtained from time study should be representative figures and should be capable of being achieved by a great majority of the workers in a plant. The majority of workers belong to the average group. Hence it is necessary to conduct time study only on average workers. The performance of a person varies from time to time, and depends upon varying factors like aptitude, training, physique, and mental attitude, and other external factors like quality requirements" condition of tools and equipment, working conditions, and a host of others. Thus it becomes impossible to find a worker who would give a consistently average performance. Some methods would be required by which the observed time values on any operator could be adjusted to a normal or an average performance. This is done by 'rating'. 2.5.1 Rating is the method of comparing the actual rate of working of an operator with the concept of a normal performance. Normal performance is the average rate of working which can be maintained consistently without undue fatigue. The normal would vary from job to job based on various conditions. 24
  • 27. 2.5.2 There are different scales of rating .. The scale that is extensively used in most of our industries is the one in which the normal performance is represented by 100. The actual rating is denoted by a figure either more or less than 100 in steps of five, depending on the judgement of the time study observer, whether, the actual rate of working is more or less than his concept of normal. Each element of the job is rated in each cycle, and the rating is recorded simultaneously with the recording of the time. 2.5.3 The normal time is obtained by multiplying the observed time by the rating factors. Normal Time = Observed Time x Rating 100 (normal) 2.6 It is impossible for any person to work continuously without rest. A certain amount of allowance would have to be made for attending to personal needs, and to recover from fatigue. This is known as "relaxation allowance", Land is expressed as a percentage and added to the normal time. The relaxation allowance will vary from job, to job, and depends upon the various conditions of the job. Different scales of allowances have been involved. But careful judgement based on experience is necessary to arrive at the proper percentage of allowance. 2.6.1 In addition to the relaxation allowance, several other allowances like contingency, interference and process allowances, may have to be added. Contingency allowance is given to cover those portions of the work which are not included in the normal time, but are a necessary part of the job. Interference allowance is given to an operator working several machines which are subjected to cyclic and random stoppages which may affect the earnings. Process allowances are added to compensate for enforced idleness on the part of the operator due to the character of the process or operation. Sometimes additional allowances to compensate for fluctuations in quality of raw materials may also be added. 2.7 The allowed time or the standard time for a job is the sum of the normal time and the allowances. Standard Time = Normal Time + allowances 3. STANDARD DATA 3.1 Standard data is a set of time standards built up from elemental times obtained from various time studies over a period of time, covering a wide range of conditions and specifications. Time formulae, curves, and charts are developed for elements which vary in duration according to certain physical and technical characteristics, and also those controlled by machines. Thus by dividing a job into convenient elements, and applying synthetic elemental data it would be possible to determine the time required to do the job. 25
  • 28. 4. PREDETERMINED MOTION TIME SYSTEM 4.1 The fundamental concept that all manual work consists of various basic motions of the human body has brought about the development of Predetermined Motion Time Standards (PMTS). These are mainly based on elementary movements of the 'therblig' type. All the basic motions involved in performing a job are recorded, and the assigned time values are applied to get the total time. Among the various methods available, the most commonly used are MTM (Methods time Measurement) and the work factory systems. 5. ANALYTICAL ESTIMATING 5.1 Analytical estimating is a technique adopted for setting time standards for non-repetitive type of jobs in the area of maintenance, construction, etc. Time study may be either not possible or uneconomical due to the non-repetitive nature of the jobs. The job to be estimated is broken down into elements. The elements are normally of longer duration than in time study, The normal time for each element is estimated. The estimation is done by persons who have adequate knowledge of the job and trained in work study, and have a concept of normal performance. Wherever possible elemental times may be derived from standard data and predetermined motion time systems. A blanket allowance is added finally to get the allowed time for the job. 6. WORK SAMPLING 6.1 Work Sampling is a sampling technique based on statistical methods. An estimate of the true situation is made on the basis of samples. The types of information that can be obtained from work sampling from the point of view of work measurement are: (i)the proportion of idle or delay time for each cause. Snap observations are made at random intervals of time noting the machines/men working, not working, and the causes for the same. Each snap observation is a sample, and if a sufficiently large number of readings are taken at random intervals the percentage of readings a machine/men working will tend to equal the percentage time it is doing so. The per cent activity is given by : Per cent activity = Number of readings observed of activity Total number of observations For example, if 100 snap observations are made on a machine, and 80 are recorded as working, Then the working time of the machine=80=80% 100 26
  • 29. EXAMPLE IN THE STUDY Operation: Stay rod threading Disengage & bring slide to Take out rod Element Pick up rod and Tighten chuck Start machine Chamfer starting point, Threading Check Threads Loosen chuck Description load in chuck & turn outside adjust, and and keep aside dia engage Cycle No. ET WR ET WR ET WR ET WR ET WR ET WR ET WR ET WR ET WR 1 18 18 IS 33 48 81 3 84 9 93 16 9 26 35 IS 50 9 59 2 17 76 13 89 60 49 7 56 10 66 II 77 23 0 16 16 10 26 3 16 42 12 54 53 7 6 13 12 25 14 39 13 52 IS 67 10 77 4 19 96 9 5 52 57 5 60 12 72 10 82 26 8 13 21 10 31 6 22 53 10 63 47 10 8 18 12 30 8 38 24 62 12 74 12 86 6 16 2 14 16 45 61 9 70 II 81 14 95 30 25 13 38 12 50 7 15 65 II 76 49 25 11 36 9 45 10 55 26 81 14 95 11 6 8 19 25 12 37 51 88 8 96 9 5 11 16 26 42 12 54 11 65 9 19 84 15 99 49 48 7 55 II 66 14 80 22 2 17 ]9 10 29 10 20 49 17 66 56 22 10 32 22 54 12 66 31 97 8 5 12 17 Total 144 102 394 55 68 96 203 127 107 Number of Observation 8 8 8 7 6 8 8 9 10 Average 0.18 0.127 0.493 0.08 0.113 0.12 0.254 0.140 0.107 Rating 115 100 110 95 105 90 100 100 IIO Normal time 0.2070 0.127 0.S423 0.076 0.1190 0.108 0.254 0.140 0.1187 Allowance II 12 13 12 12 14 12 12 II Std. Time 0.230 0.142 0.612 0.085 0.133 0.123 0.284 0.157 0.131 Std. Time/Piece 1.897/9 = 0.210 ET - Elapsed Time No. of Pieces/hours. 60/0.21 = 285 WR - Watch Reading Note: Figures In bold type are abnormal readings, either on account of wrong reading or wrong clicking of the stop watch, and are not to be considered for analysis. 27-A
  • 30. 6.2 The number of observations to be made depends upon the accuracy required, and is given by the formula 6.3 Work Sampling can also be used to derive time standards by rating the activity at the same time the snap observation is made. If the production during the period of the study is known, the normal time for unit of output can be calculated which is given by : Per cent efficiency x Rating factor Normal time per unit of output Production during the study period 6.3.1 In cases where the work involves activities of a different nature, like lifting weights, welding, hammering, lightening nuts, etc., which demand different levels of relaxations of allowances, it is necessary to extend the observations to record what activity the worker is enagaged in at the time of observation, so that the percentage of working time spent on such activities could be known. 6.3.2. By adding appropriate allowances, standard time for the job can be obtained. 27
  • 31. IV. Design of Incentive Schemes 1. PROCEDURE The basic steps involved in designing an incentive scheme are: (i) Selecting the objective of the Incentive Scheme and determining the factors that facilitate quantitative measurement of the objective; (ii) Measuring and developing performance standards for the selected factors; (iii) Determining performance-reward relationship; (iv) Determining payment period; (v) Designing suitable paper work and information flow procedure; (vi) Reviewing the scheme; and (vii) Installation and maintenance of the scheme. 2. SELECTING THE OBJECTIVE AND THE UNIT OF MEASUREMENT 2.1 As mentioned earlier, Incentives are designed to serve many objectives The objectives would obviously vary depending on the conditions, and the needs of the industry A careful and correct selection of the objective is essential if the scheme is to be successful 2.2 Usually the incentive schemes are designed for increasing the output consistent with certain quality standards. However, this may not be the case always. The objective in a chemical/process industry may be to increase process efficiency, or achieve higher recovery. In a maintenance organisation, the objective may be reduced maintenance down time, and increased machine utilisation. The objectives in some cases may be reduced absenteeism, or reduced accidents, etc. 2.3 Some of the considerations in selecting the objectives are: (i) should be of sufficient interest and importance to management; (ii) should be possible to measure quantitatively; and (Hi) Achievement should be within the control of the employees. 30 ..
  • 32. 2.4 It would be necessary to select certain factors which are easily measurable, and which denote the extent to which the objective has been achieved for the purposes of incentives. In the case of output, physical units such as quantity, volume, or weight could be selected e g. number of pieces, tons of castings, etc. Time, reject per cent, Yield per cent, equipment utilisation, and labour utilisation are other factors. 25 The National Productivity Council formed a Committee to study the illustrative models for sharing the gains of productivity on the basis of which certain guidelines and illustrative models were evolved. These are summarised in Annexure 1. 3. MEASURING AND DEVELOPING PERFORMANCE STANDARDS 3.1 Accurate setting of standards is absolutely essential if the. Incentive scheme is to operate satisfactorily. If the standards are too tight, workers will not be interested, whereas loose standards will work out to be uneconomical for the management. 3.2 Wherever the standards are in terms 'of time, output, the work measurement techniques provide a systematic basis for setting up standards. In the case of factors like safety, waste reduction, rejection, etc., past records and statistical analysis would have to be resorted to. 4. DETERMINING PERFORMANCE-REWARD RELATIONSHIP 4.1 When once the standard performance has been determined, the next step is to determine the incentive amount to be paid' for higher performance, at various levels. The incentive may start at level below the standard performance in many cases. The level at which the incentive should start depends upon the present performance and the conditions obtaining in the company and other factors, 4.2 The incentive rate is normally a certain percentage of the total wage in order that the same job differential is maintained between the jobs. 4 3 There are basically three types of performance-reward relationships-(i) Straight Proportional, (ii) Geared, and (iii) Variably Geared. 4.4 Some of 'the considerations to be borne in mind while determining the "performance-payment relationships are: (i) Payment should be in direct proportion to the increase in performance; (ii) Incentive should be adequate and fair; (iii) It should be simple to understand and calculate; (iv) Incentive should be above the basic wage which should be guaranteed. (v) As far as possible there should be no restriction on earnings unless special considerations demand the same; (vi) Unit labour cost should remain constant after the standard performance; and (vii) Payment should be determined in such a way that it is profitable to both management and employees. 31
  • 33. 5.1 The period over which the incentive earnings are calculated and payment made may be a day. week or a month, or any suitable period or on the completion of the ' job. But if the primp is too long the effect of incentive might diminish compared to a shorter period. The period should not be too short either. This may not give dufficient time lag, for the worker's to maintain a steady performance resulting in wide fluctuations 32
  • 34. in earnings, and besides may not be convenient for administrative' and accounting purposes. A week may be considered as a reasonably good incentive period for almost all the jobs. Many Indian industries adopt a month as the incentive payment period for incentives. 6. PAPER WORK PROCEDURES 6.1 Good paper work procedures and information flow systems are necessary if the incentive, scheme is to operate smoothly and efficiently. Informing workers of the standards, recording actual performances, calculations and payment of incentives, preparation of cost and other reports. handling of disputes and grievances with regard to standards, etc., require the design of suitable procedures. 1. REVIEWING THE SCHEME 7.1 After designing the incentive scheme the normal procedure is to review it thoroughly before implementation in' order to ensure whether it is properly designed, taking all the factors into consideration. During the review it should be ensured that (i) the scheme achieves the objectives, (ii) the reward is fair and equitable commensurate with the effort, (iii) the scheme is economical, (iv) reduces unit cost, (v) the scheme is beneficial to both management and employees, and (vi) ensures the safety and health of workers. 8. INSTALLATION AND MAINTENANCE 8.1 It is only with the active cooperation of the trade union and workers that an incentive scheme can be made to achieve its objective. The scheme is discussed thoroughly with the union at various stage of its development, and before implementation. They are taken into confidence from the very beginning. 8.2 Installation of the scheme is done on the basis of a union-management agreement. The agreement normally provides for a trial period. Based on the experience gained during the trial period, suitable modifications may be incorporated in the scheme. Incentive plans may be introduced gradually department by department, and in stages. 8.3 When once introduced the incentive scheme is a continuous affair. Unless carefully and properly maintained it may fail. It should be periodically reviewed and evaluated to ensure proper functioning. Incentive schemes may need modification after being in operation for some time. 33
  • 35. SHARING THE GAINS OF PRODUCTIVITY The models given below have been tried by various enterprises with considerable benefit which has accrued to the concerned organisation and their employees. The models are fairly representative of diverse industrial situations in our country. They may be used as a basis for formulating incentive schemes and sharing of productivity gains. Model No. 1 2 3 4 5 6 7 8 9 10 11 Description Gains Linked to sales value of production. Gains Linked to value added to production. Gains Linked to production and productivity indices. Gains linked to monthly productivity index and annual productivity bonus plans. Gains linked to multi factors of production. premium pay plan for measuring productivity gains. Productivity gains measured by saving in standard time. 'Productivity gains measured by group and plant performance indices. . Productivity gains measured by improvement in performance index or saving in standard time with extension or induction factor. Productivity gains measured by overall performance index of plant using fixed and variable bonus payments. Productivity gains linked to production and quality standards. For details please refer to "Sharing the Gains of Productivity" published by National Productivity Council. 34
  • 36. V. Incentive Schemes for Higher Output, Utilisation, Workload, etc. 1. INTRODUCTION 1.1 A majority of the incentive schemes in operation are for higher output. Wherever individual effort can be measured, these are designed as individual schemes. Work measurement techniques are used to measure the work content of the job, and setting of standards. The Standard Minute is the most common method of expressing the effort. Performance Indices can be established for all types of jobs with the help of standard time. 2. PERFORMANCE INDICES 2.1 For the sake of convenience, performance indices are used to express the performance of workers. When the unit is time the performance index is the ratio of standard time to actual time. 2.2 Before proceeding with the actual design of incentive schemes one should be familiar with the following terminology: Standard Index: When the actual time taken to do the job is the same as the standard or the allowed time, then the performance index becomes 100 and is called the standard index. This is the performance of an average employee adequately qualified, mentally and physically, to do the job, sufficiently experienced working at a normal pace without the stimulus of an incentive scheme. 35
  • 37. Reference Index: Normally it is found that the performance obtaining before the introduction of incentives is below the standard. This is known as the Reference Index. Base Index: This is the performance exceeding which the Incentive is Payable. This may be the same as the reference index or an index between reference and standard performance. Incentive Index: This is the average performance which the employees would attain and stabilise normally after being on incentive for some time. It is found by experience that workers increase their performance by about 33 per cent above the standard under the stimulus of an incentive scheme, the average incentive performance being 133. Attendance time: Total time spent by an employee at the place of employment when working or available for work for which payment is made, Unoccupied time: The period during machine or controlled time, when a worker is neither engaged on inside work not in taking authorised rest, the time for carrying out the work being calculated at a defined performance. Waiting time: Part of attendance time other than unoccupied time during which the worker is available, but a prevented from working. Unmeasured work: Work for which standards have not been determined directly or indirectly by work measurement. Diverted time: The part of attendance time when a worker is engaged on other than productive or ancillary work, e.g., committee work, accident, etc. 3. CHOICE QF INDEX 3.1 Each one of the above performance indices, viz., the operator performance and the overall performance, is applicable under certain conditions, and the choice of the particular index would have to be made accordingly. 3.2 The operator performance can be used only if the waiting time can be recorded or calculated. In chemical process, indirect work, maintenance jobs, etc., 36
  • 38. it might be difficult or uneconomic to record or determine the waiting time. When the amount of waiting time and unmeasured work is not known, the overall performance is applied. It is obvious that the overall performance index does not give an indication of the actual performance of the operators, since the actual time taken to do the job and the waiting time is not known. The performance payment relationships based on overall performance are designed in such a way as to compensate for the waiting and unoccupied time which are not measured. 3.3 The schemes based on operator performance should be used only when the amount of work available for each worker is reasonably high, and the number of workers on the job is optimum. 4. DETERMINING THE BASE INDEX 4.1 In most of the Indian industries it is found that before the introduction of incentives the average performance of workers is far below the standard of 100. Hence it becomes necessary to design the incentive scheme in such a way that the workers are motivated initially to reach the standard performance and then go beyond. 42 Thus the base index, invariably, is fixed at below 100. The actual figure would depend upon the present performance (reference index), and would necessarily vary from industry to industry. 4.3 There are many cases where the reference index or the performance before ,incentives is less than 50. In such cases it is preferable to raise the performance to at least around 50-60 by methods improvements, better supervision, and labour control, and then introduce the incentive Sharpe with the base index at 50-60. There have also been some industries where the base index is the same as the standard, i.e. 100 for the incentives scheme, though these are rather few in number. Gearing: Since an incentive has to be provided for reaching the standard performance, it is usual to have a gearing at 100 performances at which level the relationship may be straight proportional or any other depending on the circumstances. A second gearing may also be provided at a higher performance level, if necessary. The level at which the gearing is applied and the type of performance-payment relationship depends upon certain conditions such as - (i) Non-availability of work beyond a certain limit, (ii) Restrictions on increase in output. (iii) Risk of Safety and health hazards beyond a certain performance, and (iv) Restrictions on equipment utilisation and such other factors. 5. RATE AND AMOUNT OF INCENTIVE 5.1 1 he rate and amount of incentive should depend upon the savings accruing as a result of the incentive scheme. Introduction of the incentive scheme results in (i) savings in direct labour cost, and (ii) savings in overheads. 37
  • 39. 5.2 The above savings minuts the cost of installing and maintaining the scheme would be the net savings. In practice the rate is normally decided after collective bargaining, and based on the management and labour share in the savings. The incentive offered should also be adequate and fair, if the scheme is to work satisfactorily. 3.5 However an incentive of 20 per cent to 30 per cent of wages at the standard performance of 100, and 45 per cent of wages at the incentive performance of 133 may be considered as reasonable. It is to be emphasised that this cannot be taken as standard, and incentive rate is to be fixed taking all the factors into consideration; the primary consideration being the scheme should be economically advantageous to the organisation. EXERCISE DESIGNING AN INCENTIVE SCHEME Time Plan-Briefing Design of the Scheme by participants Review Total 38 10 minutes 120 minutes 20 minutes 150 minutes
  • 40. EXERCISE DESIGNING AN INCENTIVE SCHEME Part I You are required to set up an Incentive Plan for a section of shop involving' Lathe and Milling Machine Operators, the following standards having been set up for the four types of products manufactured in the shop (see Annexures 1,2,3& 4). From an Analysis of Records you can find that there are 5 similar lathes al).d 13 milling machines of similar types, each working &- hours a day. You can further find that during the month of June there were only 25 working days, and that all the machines were eommissioned during that period resulting in the following production 1. GEARS, 1800 2. SHAFTS 1800 3. BOLTS 675 4. NUTS 675 During the same period, the machines were idle due to unavoidable delays (not included in Std.) for a total period of 40 hours in the case of lathes, and 110 hours in the case of Milling Machines Discussion with the Management resulted in the agreement of sharing the savings in direct labour cost between labour and management in the Ratio of 1 : 9. No sharing was agreed by Management after achieving standard performance, thereby enabling the operatives for a cent per cent (l00 per cent participation. Part II Determine reference index and develop Bonus curves for Lathe and Milling Machine Operators. The total existing wages of lathe operators vary from Rs. 110 to Rs 150 per month with weighted average of Rs. 125, and that of Milling Machine Operators from Rs 150 to Rs. 200 with weighted average of Rs. 175. Prepare incentiveearning tables for the 2 types of operators with actual time varying from 1 to 8 hours with increment of 1 and performance index increasing by 5 up to 150. P.S. : In practice the performance should increase by 1 and actual time by 1/4 hours. 39
  • 41. 41
  • 42. VI. Group incentives I. INTRODUCTION 1.1 wage Incentive plans may be applied on an individual or group basis. Normally an individual incentive plan has a stronger appeal since payment is directly related to an individual's effort. However, there are many cases, where individual incentives are not applicable either because the individual contribution cannot be· measured or the work is interdependent. Some of the examples are assembly line operations, chemical processes, blast furnace operation, etc. In such cases group incentive schemes are applied. The output of all the workers comprising of the group is pooled, and the incentive earnings are computed and distributed among the individuals, at a certain proportion. Group schemes are also applicable to situation where the work and performance are not interdependent. The total achievement of the group is taken for incentive purpose. It is to be mentioned that the group system applies best when (i) there is a community of interest, and (ii) it is not possible to measure individual contribution. 1.2 Any of the incentive plans already covered may be adopted for the group scheme as well. The group output is computed and the group earning are worked out based on the type of performance-payment relationship adopted. The earning is distributed among the numbers of the group according to their contribution, in proportion to their wages, or according to specified percentages, or in proportion to the number of hours worked by each individual in the group. 1.3 Group incentive schemes are very popular, and widely employed because they are easier and cheaper to work than individual schemes. 2. ADVANTAGES OF GROUP SCHEMES (i) Better Cooperation: Normally in a group incentive scheme there is greater cooperation compared to individual incentive. A team spirit is built up, 42
  • 43. and each worker tries to help the other. Small delays and waiting times will be reduced. A worker will attend to some odd job, or help another man in the group during his enforced waiting time if any, and tendency to idling is less. An operator will be more careful in performing his operation when he knows it will help another man in the group. Difficult and more complicated tasks will be shared by all. Also, discipline and responsibility for accomplishment is assumed by all the members in the group. (ii) Less Supervision: The working group leader assumes most of the direction and control, and hence the supervisory effort required will be less. Besides, the supervisor has to deal with groups than the individuals. (iii) Lesser training time: The new workers are quickly trained by the group. The quicker the workers learn their job, the better it is for the group. And hence the group is interested in the new worker learning his job as quickly as possible. The new man would also pick up the job sooner being in the group than otherwise. Even the slow and Jazy workers improve being in the group. (iv) Reduction in Absenteeism: Each worker becomes conscientious of his work and realises that his absence will dislocate the work of the group, and consequently the earnings. (v) There may be certain other advantages like reduced clerical work and steady earnings of workers compared to the individual schemes. . 3. LIMITATIONS 1. An efficient and skilled worker may earn more when on. an individual scheme than in a group system. 2. It may be difficult to keep check on slow and inefficient workers in a large group. 3. When personal difficulties arise among the group members the functioning of the group may be disrupted. 4. SIZE OF THE GROUP 4 1 The size of the group is one of the important factors in the success of a group incentive plan. Generally smaller groups are better and more effective. However, the size of the group would depend on the type of group task. On a line operation larger groups may be equally effective since each worker is assigned a definite task. On certain jobs the group strength may be only two, as in the case of a fitter or a welder, and his helper. Thus the group strength depends upon the nature of jobs, area of work and similar factors. 43
  • 44. 5. DEPARTMENT AND PLANT-WIDE INCENTIVE SYSTEMS, PRODUCTION BONUS SCHEMES, ETC. 5.1 Incentive schemes may be applied to departments and even to the complete factor as a whole. These are extensions of the group systems where the strength of the group may be as big as the whole factor. Departmental and plant-wide incentive schemes based on certain easily determinable yardsticks are quite popular, and are common in Foundry, Heat treatment, Plating, etc. In a majority of the "plant-wide schemes, incentive is related to overall monthly production figures and are commonly known as production bonus schemes. The incentive payment is also normally done on a monthly basis,- though in a few cases it may quarterly or other convenient periods. Incentives based on factors such as rejection percentage, recovery percentage, maintenance down time, etc., may also be designed. The departments and employees are normally classified as direct, semi-direct, indirect, etc. A ratio is evolved for sharing the total incentive earnings based on their overall contribution. The bonuses are usually paid to the individual workers in proportion to their wages. Where the total incentive earnings are split for different classifications as per agreed ratios, the workers in each classification earn incentive in proportion to the hours put in by each worker. 5.2 In such overall incentive schemes development of accurate standards per each operation will not be necessary. Schemes can be devised in such a way as to include both direct and indirect workers. They are fairly easy to design and install. 5.3 But one of the difficulties with such systems is that the overall yardstick chosen may not bear a close relationship to performance. For example, in a gray iron foundry if the yardstick is tonnage of castings produced, the effort required to make a ton of intricate castings will be very much different from that of making a ton of rough castings. Thus if the product varies from period to period, the earnings may also vary. Secondly, when the group is large the individual worker cannot relate his effort to his earnings. 6. PROFIT-SHARING 6: 1 The Profit-sharing Scheme is based on the same principle. as the group system where incentive is related to the collective effort of the group. A certain percentage of the total profits is paid to the employees at the end of the year. The payment is usually related to the workers' monthly wages. The scheme has as its basis the recognition of' the importance of employees' contribution, and continued interest in the success of the company. 6.2 The Profit-sharing Scheme is comparatively easy and less expensive to adopt, while the profit-sharing plan has become successful in some cases resulting in increased production at lower costs. There are many instances where they have not 44
  • 45. made any significant contribution towards improving the overall efficiency of the company. Some of the main disadvantages of the profit-sharing plan are: (i) Employees see little connection between their efforts and the profitableness of a company. (ij) Group is too large, and the reward is too long deferred. (iii) With the introduction of the Bonus Act, the scope of profit- sharing plan as an incentive scheme may become limited. (iv) Workers may mistrust the profits declared. (v) Good and bad, and direct and indirect, workers share alike. (vi) Profit does not depend only on output, but on many other factors beyond the control of the worker or the management. Employees do not realise the influence of these outside factors when the profits go down, and consequently their earnings, 7. SCANLON PLAN 7.1 The scanlon Plan is a plantwide incentive scheme developed by Joe Scanlon in the United States around 1938. The scheme is based on a creative concept of Union Management relations 7.2 The objective of the plan is to devise a formula which will most adequately reflect the productive efforts of workers and management as a whole. The Bonus formula is devised to fit the particular operating conditions of the plant. One of the bonus formulas devised by Scanlon for the Laponite Machine Tool Company is briefly discussed. 7.3 The following steps formed the basis for working out the bonus formula: (a) Deciding on a normal labour cost and arriving at an acceptable ratio of labour cost to production or sales value; (b) Evaluating the performance in a given period and estimating the cost reduction, with reference to the decided ratio; and (c) Dividing the cost reduction benefit between the company and labour, and paying the work-group at the earliest possible period. 7.4 The process by which the formula was arrived at consisted of the following: Firstly, a mutually acceptable team from management and labour was formed. They freely discussed the three aspects of the plan mentioned above, and arrived at constructive conclusions. Initially, they arrived at the base ratio for performance measurement, i.e.- Total adjusted payroll Sales value of prodution 45
  • 46. Exhibit 1 illustrates how this ratio is arrived at, based on the previous year's <table performance. Here, the inventory changes include the work in process and finished stock, as raw materials are not considered as part of production. Also, the vacation and holiday pay are accounted to arrive at the total adjusted pay-roll. However, the factors which should go into the making of the numerator and the denominator are discussed, negotiated, and decided by the labour-management group representatives. The final ratio in the example cited in Exhibit 1 comes to 38:2. (2) Once this was arrived at, a 'memorandum of understanding' was prepared, wherein the terms, conditions; applicability of the ratio, and method of payment were clearly stated. This was signed by the management-labour representatives and notified to all the employees. (b) The first performance evaluation is done in the month just after the notification of the understanding. The labour and management representatives sit together, discuss the business trends, inventory changes, sales figures, and the pay-roll. Then the sales value of production is arrived at, and from the accepted ratio, the allowed pay-roll is calculated. The difference between this allowed pay-roll. and the actual pay-roll is the "economic gain". A reserve is kept out of these deficit months, and the rest is distributed to. labour and management as per the clauses of the 'memorandum of under- standing’. Exhibit 2 explains the calculations done. In the same company, the allowed pay-roll was calculated by using the agreed ratio of 38.2 of the sales value of production. The difference between this and the actual pay-roll represents the 'bonus pool'. There was an agreement to set aside 25 per cent for deficit months, and distribute the rest at 75 per cent to the employees and 25 per cent to the management. The employees' share is represented by a percentage of the total participating pay-roll. It was 10.5 per cent in the given case. Here, too, the method of working, the decision on reserve, and the employee- management share is subject to negotiation. (c) The cost-reduction benefit is distributed to the employees within a month, so that they are made aware that they get something for what they did. All, including the president of the company, are eligible to this benefit. Taking the company represented in Exhibit 2, the payment was calculated at 10.5 per cent of the emoluments of individual worker, and paid along with the next month's earning. The salient features at the Scanlon Plan are: (i) It encourages group work. 46
  • 47. (ii) There is high flexibility in the generation of decisions and the execution of the plan. (iii) It integrates the company's objectives with group activity. (iv) From a psychological angle the purpose of the organisation fits with the natural human tendency to collaborate when it is the sensible way to do things; and it is a remedy to 'resistance to change', because it involves people in the process of creating . Changes, rather than imposing it on them. (v) AII the improvements in the working of a factory are brought about through suggestions received from personnel, and the percentage of useful suggestions in companies where the Scanlon Plan is working is usually about 90 per cent, while in other companies where suggestion schemes are in operation without the plan, the percentage hardly goes over 7 per cent. (vi) Job evaluation is a necessary pre-requisite to avoid discontent regarding the share allotment to individuals. 47
  • 48. 49
  • 49. EXERCISE GROUP INCENTIVE SCHEME Time Plan-Briefing 20 minutes Development of Plan by participants in groups 180 minutes Review and Discussion 40 minutes . Total 240 minutes Key Points: (i) The participants will work on this exercise in small groups. (ii) With the data provided, each group will discuss, make any reasonable assumptions that are necessary, and arrive at a suitable incentive plan. (Hi) All the plans will be discussed and reviewed in the general session at the end, 50
  • 50. SYNDICA TE WORK GROUP INCENTIVE SCHEME The management of a paper mill is interested in introducing an incentive scheme in their factory. The objective is to improve the overall efficiency, and to reduce manufacturing costs. The savings made as a result of increase in paper production as well as improvements in the performance of each department will be shared between the management and the_ employees. Being a process type industry, improved recovery of chemicals in the soda recovery department, higher yield in the pulp department, reduction in the maintenance down time of certain critical equipment and various other factories would result in considerable savings in the manufacturing costs. It is also observed that the improvement in efficiency is dependent more upon the supervisory and the managerial personae in the department rather than upon the workers. It has been agreed that the standards would be fixed based on the past performance for which fairly accurate records are available. Paper Machine, Pulp Mill, Soda Recovery, Boiler House and Water Treatment may be considered as direct departments. All the others are service departments. All the data that may be required is given in Annexures 1 to 10. A suitable incentive scheme is to be devised covering all the employees in the factory. ANNEXURE 1
  • 51. 54
  • 52. 57
  • 53. CASE STUDIES Design of a few incentive plans operating in different types of industries are given below for illustration: A.Malleable Foundry The objective of the incentive scheme was to increase the production of malleable castings maintaining certain quality standards. Since measurement of individual contribution was difficult and time-consuming, a group plan was devised. The base index for incentive purpose was to be fixed based on work study, and also past data. The variation in production was between 30 and 60 tons, and the standard worked out to 45 tons. However, taking the furnace operation into consideration, an average production of 40 tons is fixed as the minimum for being eligible for incentive. In order to maintain quality and safety, a ceiling is fixed at S5 tons above which no incentive is payable. The cost of production per ton of Castings was Rs. 3,000 and the savings in labour and overhead costs worked out to Rs. 1,000 per ton. It was agreed that this would be divided between the management and the: workers in the ratio of 50:50. The total labour strength in the foundry is 200. A flat rate of Rs. 2.50 for every extra ton of castings produced above the minimum is payable as incentive to each worker. Supervisory staffs (5 Nos.) are paid an incentive of Rs. 2 per every extra ton from the management's share of the gains. Incentives are payable only for the good castings after the finishing is completed. B.Cast Iron Foundry-Hand-moulding section-Moulding of Head Stocks For incentive purposes each head stocks allocated 30 work units. For the payment of incentive, only good and acceptable castings duly passed by inspection are considered. A team strength of one moulder and one helper is taken, and payment of the incentive will be based on the total number of work units produced by this team. There will be a minimum level of production of 150 units below which no' incentive will be paid. For every 100 units produced in excess of ISO, a sum of Rs. 70 will be credited by the company to an incentive pool. This will be distributed to the moulder and to any casual worker engaged as a temporary replacement to this .58
  • 54. moulder, in proportion to the normal wages earned and the number of days worked by each worker during the month. The helper will earn the same percentage of normal wages as incentive as is earned by the moulder. In order to encourage the workers to produce castings to good and acceptable quality standard, an additional credit of 10% of the total units produced will be given in incentive calculations. C. A Chemical Plant Incentive bonus is paid depending on the performance Index of the group. Performance Index is calculated thus: For each group a base Performance Index corresponding to the normal production expected out of the group is fixed by time study. The performance of various groups is calculated every month. Bonus is paid as a percentage of the average total wage depending on the increase of the performance over the base index. In each group, the bonus is different for workers in different categories, but is the same for workers in the same category. The incentive scheme is so designed that at 100% Performance Index a worker gets 25% of his gross monthly wage as incentive. Weighted average Performance Indices of all the groups are taken to calculate the incentive for supervisors, 59
  • 55. D. A Paper Mill-Production Bonus Scheme The workers in the mills have been classified into production, semi-production, service, and non-production departments. The percentage of bonus proposed for semi-production service and non-production departments is 75, 50, and 25% respectively of the average percentage of the production departments. The percentage of production bonus payable shall be the percentage of basic pay wages. only exclusive of all allowances. The bonus for a month is to be calculated on the average monthly production, based on the production for that month and the preceding eleven months. Production bonus is payable only after the papers produced have been finally finished and accounted for, for the respective month. 60
  • 56. VII. Incentives for Indirect Workers, Supervisors, and Clerical Personnel 1. SYSTEM FOR INDIRECT WORKERS 1.1. Workers who are not directly engag8d in production may by classified broadly as indirect workers. Workers in departments such as maintenance, material handling, inspection and office would fall into this category. Indirect workers may be further classified depending upon the type of relationship their work has to output. For example, maintenance is more closely related to production, compared to Administration. 1.2 Almost all types of indirect work is in some way or other connected with production. It is with the combined efforts of direct and indirect workers that increased outputs are obtained in any industry. With increasing mechanisation the ratio of such indirect to direct workers is increasing, and it is important that all efforts be made to provide incentives to indirect workers as well, to stimulate their effort. 1.3 Incentives for indirect workers, besides ensuring improved service to direct workers, brings down indirect costs and also reduces the inequities in earnings between direct and 'indirect workers. 1.4 There are various types of schemes for indirect workers. Some of the simple types include 0) payment of a certain incentive based on the output or the performance of the department or the factory, and (ii) a specified percentage of incentive earned by direct workers. However, it is to be emphasised that the incentive payment must be related to some essential factors within the control of the indirect workers. Wherever possible, the schemes must be based on measurable factors which are easy to understand and calculate. Indirect work is comparatively difficult to measure, and consequently the setting up of suitable and accurate vardsticks is also 61
  • 57. difficult. Sometimes standards may have to be determined based on past records and experience. 1.5 Some of the factors selected as bases for designing schemes for indirect workers are-(i) volume of output expressed as units or standard time; (ii) departmental or factory performance; (iii) ratio' of direct to indirect hours; (iv) costs; (v) waste and rejection; (vi) shop cleanliness; (vii) accident rate, etc. Anyone or a combination of the above factors may be used. When the incentive is based on multiple factors the number of factors should be limited, and a suitable formula evolved for arriving at the incentive earnings. 2. INCENTIVES FOR MAINTENANCE WORK 2.1 Based on work measurement Generally setting up incentive schemes for maintenance workers presents certain problems. Some of these are; (i) Measurement of maintenance work: Most of the work is of a non-repetitive nature, and the elements of work may but recur very frequently. Thus the allowed times may have to be made up by using previously built up standard data, if available. It addition, analytical estimation may also have to be used. (ii) Variation in work content of jobs: Maintenance jobs vary in their nature and work content. The time taken for. the same task may very from time to time. There will be a wide variety and type of jobs and standadisation in rather difficult. The standard time for a particular job may not always be representative. (iii) Difficulty in supervision: Maintenance workers may be working at different a location which renders supervision difficult. Consequently there may be errors in recording the work done and the time taken. (iv) Quality of Work: Quality of work cannot be easily checked as in the case of production operations. At the same time, quality is an important factor in maintenance work. Expensive equipment may be involved, and poor workmanship may result in damage to the safety of the equipment as well as the worker. Thus, it may be necessary to impose certain restrictions on earning to ensure quality of work. Maintenance work can be broadly classified' into (i) Preventive Maintenance, and (ii) Repair and Breakdown maintenance. Preventive maintenance involves regular inspection of the various equipment and its critical parts and components, lubrication, checking and replacement of certain components, and also making emergency 62 J
  • 58. repairs where necessary. The job follows a particular pattern, and is repetitive over a period of time. Standard times for various tasks can be fixed using time study. In certain cases standard data and analytical estimation may also be used. In the case of repair and breakdown work, the type and nature of work may vary from time to time, and there may be a wide variation in the work content of the jobs. However, it may be possible to compute standard time for different jobs from standard data and analytical estimation. 2.2 Performance-payment relationships For certain types of maintenance work, where the work content does not vary for the same job between different occasions, a straight proportional scheme could be used. In most of the cases, however, the work content does not remain constant, and presents the problems discussed above. Hence a geared relationship would be more suitable. The following chart is an illustration of the geared relationship. 2.3 Based on other factors As already mentioned accurate measurement of maintenance work is a difficult and a time-consuming process. Building up standard data, for maintenance jobs 63
  • 59. will have to be done over a very long period, since all types of elements under various conditions have to be covered. There are many companies who have not adopted preventive maintenance procedures yet, and are continuing with breakdown maintenance. Even when preventive maintenance is in vogue there will be a certain amount of repair and breakdown work. Due to these and many other difficulties, many times maintenance incentives are based on factors such as machine down time, production Joss, maintenance costs, etc. In such cases standards may have to be fived based on past data and experience. More comedown in Indian industries are the schemes where the incentives for maintenance workers is a ratio or a percentage based on either the output of direct workers or the incentive earned by them. 3. Inspection Work Whether it is advisable to include inspection in an incentive scheme, has still remained a controversial subject. There may be some cases like inspection of certain aircraft components where incentive may definitely be not advisable. On the other hand, there are some cases where inspection incentives with suitable safeguards are easy to design and operate. Finishers and checkers in a paper mill is one of the examples. Incentive schemes for inspection work should aim at achieving a balance between quantity of work turned ont and quality of inspection. It may be possible to ensure quality of work by incorporating suitable penalties in the scheme. 4. CLERICAL WORK Many clerical operations lend themselves to the application of direct incentives. There are many jobs which are repetitive, and which could be measured by the techniques of time study and standard data. Typing, filing, time-keeping, kardex work in the store, punch card operation, duplicating, and similar jobs could be easily measured. In all these cases, any of the schemes already discussed may be employed either on an individual or a group basis. However, there are many more office jobs which are difficult to measure accurately. Besides, a clerk may be attending to various types of jobs in a day. In such cases the incentive for office personnel miY be a group system related to the output of direct workers or their incentive earnings. 5. SUPERVISORY INCENTIVES Incentives for supervisors and foremen are meant to motivate them to take maximum initiative and interest, to control costs, reduce wastage, increase production' and various other objectives. The aim is to measure the efficiency of supervision, and reward accordingly. The schemes may be based on only one factor or a com. bination of several factors. The following are some of the methods which could be adopted for defining incentives for supervisors and foreman : (i) Based on the output of the department, in units or in value. 64
  • 60. (ii) Based on the standard hours of work done or hours saved or the overall de partmental performance expressed in terms of actual 'and standard hours, (iii) Based on reduction in waste or rejects, reduction in costs, increase in yield or recovery. (iv) Fulfilment of delivery promises. (v) Based on reduction in machine down time for maintenance supervisors (vi) Reduction in shop overtime hours. (vii) House-keeping and accident rate. (viii) Combination of the above factors. Some of the above factors can be measured, whereas others can only be assessed. Schemes based on measurable factors are more acceptable. In all cases the reward must be related to factors over which the supervisor has control. 6. EXECUTIVE PLANS The objectives of an executive incentive plan are the same as those for other employees, i.e. improved performance. Rewards in the form of increments, promotions, free transport, accommodation, and other fringe benefits are more common and appealing at the higher levels. The schemes for middle management may be similar to supervisory plans based on similar factors discussed earlier. Incentives may be based on the profits earned by the company for top executives. 7. INCENTIVE SCHEMES FOR PROJECT WORKERS 7.1 As compared to production workers, design of incentive schemes for project workers is a difficult task. While production involves routine and repetitive jobs, project involves a one time effect. Under the heading of a project, activities like civil engineering jobs. Construction of bridges, dams, buildings, factories, installations and commissioning of plant and equipment etc, can be included. Since the jobs are not repetitive and there is bound to be considerable variability and uncertainty during the execution of the various activities it is not possible to set accurate time standards against which the actual performance can be measured However, time is an important factor in the execution of any project. The losses incurred or benefits lost due to the late commissioning of the projects can be phenomenal. In fact the management would be interested in commissioning the projects ahead of schedule. 7.2 When the project work is awarded on contract every agreement has a penalty clause normally to penalise the contractor for the delays. Sometimes bonus clauses also are included to reward the contractor for ahead of schedule achievements. The contractor or the company, whoever is executing the job would have to compute some suitab1e incentive method for motivating the workers to complete the 65
  • 61. Project early or on schedule. In order to be able to do this, there will have to be a proper planning of the whole project. Network techniques like PERT and CPM provide a very good basis for project planning. Through the network, schedules can be set for various activities. Critical activities can be identified. A workable schedule can be prepared for the project taking into consideration the costs and resources. With this schedule as the basis the loss or gain as a result of any ahead or behind schedule situation can be worked out. The gains whether financial or non-financial in nature may be shared with the project workers in terms of incentives. While completion of non-critical activities will not be helpful, any savings in time, achieved in the critical activities, will result in compressing the project durations 7.3 Like a production unit, a project will also have various functions like stores and purchasing, Accounts, personnel and execution. There has to be a proper co-ordination between all these functions. Resources have to be made available for the execution to proceed according to schedule. Delays can be caused due to non-availability of various resources, managerial shortcomings and other factors. A well designed incentive scheme should cover all the supporting functions so that there is a coordinated effort to complete the project on time. 66
  • 62. CASE STUDIES A. INCENTIVE SCHEME FOR GROUP LEADERS The group leaders are essentially working supervisors with six to ten direct labour operators. and a get-up man under their immediate direction. The group leaders have the same responsibilities as first-line supervision with regard to product, equipment, methods, and job training. The objectives of the incentive scheme were to (i) encourage more activity in thinking and leadership fields by using money as a stimulus; (ii) pay incentive bonus relative effectiveness; and (iv) maintain equitable pay relationship between incentive operators and the group leader. B. INCENTIVE PLAN FOR SETTERS IN CAPSTAN GROUP The overall efficiency of setters has a direct bearing on the final output of the department and the machining operations performed by the operators engaged on the machines served by these setters. Therefore, incentive is based on the monthly production as well as the incentive and daily wages earned by the operators engaged on various machines. For the purpose of incentive, unit values as following are allocated for the various items of production. Component I Component II 3 units/component 1 unit/component There will be a minimum level of production of 125 units/month below which no incentive is payable, and for each unit produced in excess a sum of Rs. 6 will be 67
  • 63. credited to the incentive poll. In addition, the total wages of all operators in the capstan group will be reckoned, and a sum of Rs. 30 for every thousand rupees earned as total wages by capstan operators during the month will be created to the pool. The pool amount is distributed to the setters in proportion to the number of hours worked by each setter during the month. C. INCENTIVES FOR RECEIVING AND SHIPPING DEPARTMENT Standard mandays have been fixed by the Industrial Engineering Department for different groups in the department. The groups whose Performance Index exceeds . 50 per cent will be awarded incentive. A maximum of 40 per cent bonus is awarded for 100 per cent performance. Performance Index is calculated as follows: Performance Index = Standard mandays x 100 Actual mandays 68
  • 64. VIII. Incentive and Quality One of the criticisms leveled against the incentive scheme is that it results in a deterioration of quality standards. This may happen if proper controls are not established over quality, wastage, rejections, and material utilisation factors It is important that quality aspects are fully considered in the development of incentive plans, and necessary safeguards are incorporated. There are many different approaches to this problem of controlling quality and waste. Some of these are listed below (i) Supervision and inspection: Supervision is made to concentrate more on quality than on quantity, and inspection is tightened to see that the required quality specifications are maintained. Control through supervision and inspection is commonly adopted in the operation of almost in the incentive schemes. (ii) Payment of incentives for good production: This is one of the most common type of controls incorporated in all the schemes. Incentives would be payable only on those parts which meet the required quality standards. Only time rates will be applicable for the rejected products. This type of control is suitable where the material costs are low or material shortage is unlikly Where it is possible to rework or salvage the rejected or spoiled materials then it is stipulated that the rework would be done by the worker. There work time is either paid at time rates, or added on to the production time of the concerned component, and the total time is taken for incentive calculation. (iii) Incentive Plans with Penalty for not meeting quality: A certain standard of quality is specified in the incentive plan. If there is a reduction in quality below this level, a corresponding deduction will be made in the production Incentive earned. For example, the rejection percentage may be fixed as 69
  • 65. 5 per cent for earning full production incentive. If the rejections go up, say to 7 per cent, a specified amount will be deducted from the incentive earnings. (iv) Incentive for improved quality or reduced waste : When the sole objective of the incentive plan is improvement in quality or improved material utilisation, such type of plans will be useful. However, even in schemes where the main purpose is increased output, control over quality can be obtained by providing an additional incentive based on quality factors. A certain allowable level of quality, material u tilisation or wastage may be specified, and any improvement over it may be rewarded as an addition to the production incentive earned. The amount of additional incentive would depend upon the savings expected from improved quality. This is a useful control when material costs are high. and the maintenance of quality depends on the skill of the worker. (v) Incentives to supervisors based on quality: In certain types of process and chemical industries the control of quality depends more on the supervisory staff than on the workers. There are also other cases where supervisors have to exercise careful control in order to check sub-standard production. A suitable incentive plan to supervisory staff based on quality would help in maintaining the prescribed quality level. 70
  • 66. CASE STUDIES A. INCENTIVE PLAN FOR SUPERVISORS FOR BETTER QUALITY In a tea estate, each supervisor controls a gang of 20 to 30 pluckers. The pluckers are covered by an incentive scheme based on the quantity of leaf plucked. The pluckers are allowed to sort out the coarse leaf. The payment is made only for the good leaf. Since most of the coarse half goes as waste in the manufacture of tea, it is necessary to control the coarse leaf content in order to see that the coarse leaf content is maintained at an acceptable level of performance, an incentive plan is introduced for the supervisors.' The acceptable level of coarse leaf content is 20 per cent. If this level is maintained, each supervisor is paid an incentive of Rs. 5 per month, and for everyone per cent reduction an additional incentive of Re 1 per month is given. B. GROUP SCHEME WITH OUTPUT AND QUALITY FACTORS In order to minimise the scrap and rejection, and at the same time increase production, a group scheme is introduced in the moulding section of a foundry. A taem size of 12 workers is reckoned, and the payment of incentive is made at the rate of 8.5 paise per box of 6 castings produced per day worker. To maintain the level of quality and reduce rejection and scrap, a proportionate increase or decrease is made in the incentive earnings depending upon the decrease or increase in scrap percentage as given below: A scrap level of 10 per cent is specified as acceptable. For every 1 per cent reduction in scrap, an additional payment of 1 per cent of the incentive earned is paid as an incentive. In the event of scrap being greater than 10 per cent, for every 1 per cent increase in scrap, I per cent of the incentive earned would be deducted. Hence rewards are well as a penalty is incorporated in the scheme. 71
  • 67. IX. Installation and Maintenance of Incentive Schemes 1. REPORT Once the incentive schemes to be adopted are finalised, it is important that the details of the scheme are properly documented, and all the terms and conditions are clearly specified. This is normally done through a report. The report should essentially contain the following information: (i) Details of the incentive scheme giving (a) the jobs covered, (b) performance standards, (c) employees involved with number, categories, and names if necessary, (d) basis of payment, (e) date of application, and (f) calculation of earnings and the terms and conditions of the scheme. Normally a specimen calculation is also given for an easy understanding of the scheme. Certain other information, such as calculation of savings and the expected savings at various levels of performance, should also be included. (ii) Work specification including (a) description of work, (b) "method or procedure, (c) machinery and equipment, (d) product specification and (e) working conditions. 2. PAPER WORK The operation of an incentive scheme involves flow of information between various departments, like production shops planning, accounts, and industrial engineering. In order that the requisite data is obtained at the right time, a system or a routine paper work procedure is to be devised. It should be a simple, but an accurate system. Some of the common forms and paper work used in the operation of an Incentive scheme are: 1. Time Dockets 2. Operational job cards 3. Time record sheet 4. Incentive Bonus hours statement 72
  • 68. Illustrated formats of job Card and Incentive payment Statements are shown in Exhibits 1 and 2. 3. INSTALLATION Incentive schemes are usually installed through· labour-management agreements. The proposed scheme is first discussed with the supervisory staff and the trade union representatives, who, in turn, would acquaint the workers with the necessary details. It is important that all the workers have adequate information before the introduction of the scheme. It is preferable to install the shelled on a trial period initially, at the end of which it may be reviewed and necessary modifications incorporated. 4. REVIEW AND MAINTENANCE An incentive scheme is dynamic. and needs constant review and follow-up. One of the main problems in maintenance is changes in the work, content of the job. The standards would have been set based on a specified method of working. Hence, whenever there is a methods change, the original standards would no longer be applicable. Such changes may be due to changes in methods of working, tools and equipment; working conditions, and other factors. The standard must be examined periodically, and kept up-to- date. All incentive agreements provide a clause regarding revaluation and changes in standards in case of methods changes. Method study of all the jobs before setting standards and proper documentation of the specified method for the purpose of the incentive scheme becomes very important in this context: In practice, however, re-measurement of jobs is done only when there are appreciable changes in methods. Frequent alterations in values would not be liked by the workers. Whenever. there is an upward revision in the work content of the job, due to certain extraneous factors beamed the, control of the operator, some companies pay average incentive earnings, particularly where these changes, are temporary. Regular reporting procedures covering all aspects of the scheme should also be evolved to facilitate the management to 6etan overall, picture of the working of the scheme. These may include performance report, labour cost report, and excess and waiting time reports. 5. SOME PROBLEMS OF INCENTIVE ADMINISTRATION Many practical problems arise in the administration of an incentive scheme. Solutions and safeguards to these problems vary from company to company, depending on the conditions obtaining. However, general policies with regard to these should be clearly laid down. Some of the common problems are briefly discussed below: (i) Transfer of a worker from an incentive to a non-incentive job, and consequent loss in incentive earnings. Such transfers are kept to a minimum, 73
  • 69. and some companies pay an ad hoc bonus or allowance to the affected employees. (ii) Difference in earnings between a non-incentive supervisor and a skilled worker on incentive, may be very less. Thus it may become necessary to include supervisors in the incentive scheme. (iii) Problem of new employee: All new employees should be fully trained before . they are engaged on incentive operations especially when they have to work with a group. A learning period may be specified depending upon the type of jobs, at the end of which only he would be eligible for incentive. Some companies have separate learner incentive schemes, based on learning curves. (iv) Absenteeism: In the case of group schemes, making incentive adjustments or providing relief becomes a problems. Introduction of attendance bonus may help to a certain extent. (v) Incentive during overtime work: There are different views on this problem. (i) Some organisation reckon production during overtime only on time rates, i.e., the incentive plan will not be applicable for work performed during overtime; (ii) Some companies pay incentives at single, i.e. normal rates for production during overtime; and (iii) Some organisations pay at double rates, i.e., overtime rates. It is to emphasised that with the introduction of incentives, overtime should be brought down to the minimum. An incentive at normal rates for oyertime work is more common. (vi) Bringing new jobs on incentives-the delay between the start of production of new item/job and the setting up of standards should be minimum. If the new job is being done by a worker who had been an incentive earner, then the average of his past incentive earnings may have to be ensured to him, till standards are set and corresponding production figures are achieved. 6. GRIEVANCE PROCEDURE Many disputes, clarifications, discrepancies, and grievances crop up in the operation of incentives. In an agreed grievance procedure for handling of disputes concerning standards, rates and other matters should be provided. Normally an incentive committee with representative from Industrial Engineering personnel and shop-floor is constituted for processing all major disputes regarding incentive schemes. 74
  • 70. REFERENCES 1. Armstrong, J. : Incentive and Quality, Chapman & Hall Ltd., London, 1950. 2. Currie, R.M. : Financial Incentives, British Institute of Management, 1963; Work Study, Pitman & Sons Ltd., 1961. 3. Gilmour, Robert W. : Industrial Wage and Salary Control, John Wiley & Sons, 1956. 4. Lesieur, F.G. : Scanlon Plan, John Wiley & Sons, New York, 1958. 5. Lintern, D.G; & Curtis, R.J S. : Work Measurement and Incentives, Pitman & Sons Ltd., 1958. 6. Louden, J.K. & Deegan, J. Wayne York, 1950. Wage Incentives, John Wiley & Sons, New 7. Lytle, Charles Walter: Job evaluation Methods & Wage Incentive Methods, Ronald Press, New York 1954 and 1942. 8. Maynard, H.B. (Ed.): Industrial Engineering Handbook, McGraw Hill, New York, 1956. 9. Singh, Duleep : Planning of Incentive schemes, National Productivity Council, New Delhi, 1967. 10. Employee Remuneration and Incentives, Institute of Cost and Work Accountants. 11. Report of the Indian Productivity Team on Incentives in Industry in West Germany, USA, and Japan, National Productivity Council, 1962. 12. Incentive Schemes in Indian Industries, Maharashtra State IPY Committee, Bombay, 1969. 13. Introduction to Work Study Geneva, 1959.Payment by Results, International Lab our Office, 14. Sharing the gains of Productivity, National Productivity Council, New Delhi, 1972. 15. Incentives in Indian Industries Vol. I, II and III, National Productivity Council, New Delhi, 1972 76

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