Employee Productivity

MODULE 4

EMPLOYEE PRODUCTIVITY

Productivity:

• Output relative to inputs

• Production refers to total output

• So, productivity is defined as the amount of goods and services produced with the resources used.

Quality of goods and services produced Productivity = ----------------------------------------------- Amount of resources used

Productivity can be increased in several ways

1. Increase production using the same or a smaller amount of resources.

2. Reduce the amount of resources used while keeping the same production or increasing it.

3. Allow the amount of resources used to increase as long as production increases more.

4. Allow production to decrease as long as the amount of resources used decreases more.

• Improved production means getting more from given

inputs

• Higher productivity means not adding more

resources but using resources better

• Not working harder but smatter

• Not just doing things rights but during right things

High and Low productive organisation

Production Function-Areas of Productivity

1. Improving volume of production. 2. Reducing rejection rates. 3. Minimizing rework rate. 4. Maintaining delivery schedules. 5. Controlling idle time of machines and men. 6. Establishing / updating / improving / setting industrial

engineering norms. 7. Updating processes and procedures. 8. Maintaining accuracy and timeliness of MIS. 9. Decreasing machine set-up time. 10. Controlling overtime.

11. Good house-keeping.

12. Checking, absenteeism, thefts and misconduct.

13. Eliminating accidents.

14. Effective grievance handling.

15. Efficient training and team building.

16. Minimising inventory and achieving better yields.

17. Enhancing customer satisfaction.

18. Total quality management (TQM).

19. Business process re-engineering (BPRE).

20. Automation.

Measuring Productivity:

1. Major inputs to production process is Capital , Labour, Materials and Energy

2. Productivity of each resource is measured separately which gives partial productivity

3. Which is called as multiple factor approach to measure productivity.

Output in a given periodPartial productivity = ----------------------------------- Labour hours used in a period

Total productivity =

Outputs in a given period ------------------------------------------------------------------------

( Labour+ Capital +Materials +Energy used in the same period)

Labour Productivity:

Output for man-hour, outputLabour productivity = ------------------ Man-hours used

Labour hours per unit of output,

Total labour hours usedLabour productivity = ----------------------------- Output

Added value per unit of labour cost,

Added value for the products Labour productivity = ----------------------------------------- Total wages

Factors affecting labour productivity

Improving productivity:

• To improve the productivity , understand the factors that influence the relationship between output and input.

• Both organization as well as workers are responsible for improving productivity

• Organization – getting all required machinery

• Workers- Dedication is required

Learning curves:

• organization gains experience in manufacturing product , the resources inputs required per unit of output diminishing over the life of the product

• Because when worker is in the learning stage a lot of raw materials are wasted so his performance is also less.

• The concepts of learning curve is based on the following:

I. Where there is life, there can be learning.

II. The more complex the life, the greater the rate of learning.

III. The rate of learning can be sufficiently regular to be predictive. Therefore it is easy to estimate

a) the average number of labour-hours required to produce n- units in a production run,

b) the total number of labour-hours required to produce n- units in a production run

c) the exact number of labour-hours required to produce the nth unit of production run.

Arithmetic Analysis:

As the number of units produced is doubled , the labour –hour per unit decline by a constant factor

Here we calculate for n-units and not for n-th unit for which we go in for logarithmic analysis.

Logarithmic Analysis:Time taken to produce the n-th unit is

Learning rate b 70% -0.515 75% -0.415 80% -0.322 85% -0.234 90% -0.152

Tn = T1(nb )T1 time taken to produce 1 unitb- slope of the learning curveb- depends on learning rate.

Uses and Limitations of Learning Curve:

Used in 1. Man-power planning2. Cash flow analysis

In job shop and custom service operations the learning curve theory is significantly used in

1. Products and services tend to be custom-designs that require workers to start near the beginning of small batches.

2. Batches tend to be small, thus labour-hours per unit improve dramatically from the first to the last unit.

3. Product/service designs tend to be complex; thus labour-hours per unit improve quickly.

Safety and Healthy:

Industry – accidents are common.

Management suffers 2 losses due to accidents

1. Direct cost – Compensation payable to the workers / dependents, Medical expenses incurred in treating the patients

2. Indirect cost – Down time of operationsSlowed up production rateMaterials spoiledDamage to equipment

Managers undertake prevention actions

Organization evolve elaborate safety program which consists of 5 elements

1. Development of policies, procedures and training systems

2. Creation of an organisation to ensure safety

3. Analysis of the causes and occurrence of accidents

4. Implementation of the safety programme

5. Evaluation of the effectiveness of the programme.

Health:

1. Health is wealth for employees

2. Affected by surroundingsE.g.: Job stress ,noise, alcoholism, drug and AIDS

3. It is legal requirement with sections 11 to 20 of factories Act 1948 , deal with Health of workers

Incentive Payments:

Given for outstanding performance

Advantages:

• Inducement and motivation of workers for higher efficiency and greater output• Reduced supervision• Better utilisation of equipment• Reduced scrap• Reduced lost time• Reduced absenteeism and turn over• Increased output

Disadvantage

• Product quality is deteriorated

• Added expensive to maintain the quality

• One of the greatest difficulty with this is setting of bonus rates (i.e.) problem in judgment , always risk of error.

Scope:a) Industries in which measurement of individual or group

output is rendered difficult or impossible either by technical consideration or by psychological circumstances which might be prejudicial to output

b) Industries in which the control of quality is necessary and is particularly difficult, or in the case of certain classes of workers, where high quality and precision of work is of prime importance

c) Industries in which the work is especially dangerous and is particularly difficult to ensure the observance of adequate safety precautions.

1. Incentives schemes where the workers earnings vary in the same proportion as output.

2. Schemes where earnings vary proportionately less than output.

3. Schemes where earnings vary proportionately more than output.

4. Schemes where earnings differ at different levels of output.

Type:

1. Incomes Varying in proportion to output:

In this method the labour is paid for the standard

hour although the time taken is less than the standard hour.

Standard Time = 10 hrsRate / Hour = Re 1Case 1: Time taken = 8 Hrs

Earnings = 10 X 1 = Rs 10

Case 2: Time taken = 12 HrsEarnings = 12 X 1 = Rs 12

2. Earnings varying proportionately less than the

output:

• This scheme is called as Gain Sharing Scheme.

• The common term is time.

There are four different systems

a. Halsey system b. Rowan system

c. Barth Variable sharing system d. Bedaux scheme

Under Halsey systemStandard time is fixed, If products are produced early then there is a guarantee for the payment in the standard timeBonus is given for the saved time as 50% of it.Standard Time = 10 hrsRate / Hour = Re 1Case 1: Time taken = 10 Hrs



Case 3: Time taken = 8 HrsEarnings = 8 X 1 = Rs 8Bonus ½ X 2 X 1 = Re 1Total = 9 Rs

Under Rowan systemStandard time and rate is fixed, if time is less ,% of bonus is given this percentage is equal to the proportion which the time saves forms of the standard time Standard Time = 10 hrsRate / Hour = Re 1Case 1: Time taken = 10 Hrs



Case 3: Time taken = 8 HrsEarnings = 8 X 1 = Rs 8Bonus (2/10) X 8 X 1 = Rs 1.60Total = 9.60 Rs

In Barth variable sharing systemThe pay is ascertained by multiplying the standard hour by number of hours actually taken to do the job, taking square root of the product and multiplying by the workers hourly rate Standard Time = 10 hrsRate / Hour = Re 1Case 1: Time taken = 12 Hrs

Earnings = 10 X 12 = Rs 10.95


Case 3: Time taken = 8 HrsEarnings = 8 X 10 = Rs 8.94

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In Bedaux systemStandard time of the job is fixed Each time is taken as B so in 1 hour = 60BIf the standard time is not met he, gets the actual + bonus of the difference in time by 60th of workers hour rate and 75% along with it.

Standard Time = 10 hrsRate / Hour = Re 1


Case 2: Time taken = 8 HrsTime wages = 8 X 1 = Rs 8

Bonus: Standard Bs = 60 X 10 = 600Actual B = 8 X 60 = 480Difference or Saved Time = 120Bonus = (75/100) X(120 / 60) X 1 = Rs 1.50Total earnings = Rs 8 + Rs 1.50

= 9.50Rs3. Earning varying proportionately more than the output: There are two methods.

a. High piece rate

b. High standard hour

4. Earnings Differing at Different levels:

a. Taylor’s Differential piece rate system

b. Merrick Differential piece rate system

c. Gantt Task system

d. Emerson Plan

a. Taylor’s Differential piece rate system:

• Developed by Taylor -1880

• Low rate of output below the standard

• High rate of output above the standard.

Standard Outputs = 100 unitsRate / Hour = 10 paiseDifferentials to be applied

120% of piece rate above standard80% of piece rate when below standard

Case 1: Output = 200 units

Earnings = 200 x(120/100)x0.10= Rs 14.40

Case 2: Output = 90 units

Earnings = 90 x(80/100)x0.10= Rs 7.20

b. Merrick Differential piece rate system

• Straight piece rates are paid upto 83% of standard output• Bonus of 10% of time rate payable• 10% bonus on reaching the standard output

Standard output = 100 Units Piece rate = 10 Paise

Case 1 : Output = 80 Units Efficiency = (80/100) X 100 = 80%

Since 80% less then 83% only the base piece rate is given.

Earnings = 80 X 0.10 = Rs 8

Case 2 : Output = 90 units Efficiency = (90 / 100 ) X 100 = 90 %

Since the efficiency is more then 83% and less then 100%So 100% of the base piece rate applies there fore

Earnings = 90 X (110 / 100) X 0.10 = Rs 9.90

Case 3 : Output = 110 units Efficiency = (110 / 100 ) X 100 = 110 %

Since the efficiency is more then 100% We get 120% of base piece rate applies there fore

Earnings = 110 X (120 / 100) X 0.10 = Rs 13.20

c. Gantt Task systemTime rate is paid if it below the standard, if it standard

output we get time wage + 20% of time wages bonus

Standard Outputs = 80 unitsTime Taken = 8 HrsRate / Hour = 50 paiseHigh Piece rate = 10 paise

Case 1: Output = 70 unitsEarnings = 8 x 0.50= Rs 4.00

Case 2: Output = 80 unitsEarnings = 8 x 0.50= Rs 4.00

Bonus = (20/100) X 4= Rs 0.80 Total = Rs 4.80

Case 3: Output = 110 unitsSince the output is greater the worker is paid with high piece rate

Earnings = 110 x 0.10 = Rs 11.00

d. Emerson Plan

• Standard time is set for each job

• Efficiency is determined by dividing the time taken by

standard time

• Upto 67% worker is paid at time rate after which a

granted bonus which amounts to 20% of 100% efficiency.

• Additional 1% is added for 1% of efficiency

Standard output in 10 Hours = 100 UnitsRate per hours = Re 1

Case 1 : Output in 10 hours = 50 Units Efficiency= 50% As efficiency is less then 67% the worker is given with time wages only. Earnings = 10 X 1 = Rs 10

Case 2 : Output in 10 hours = 100 Units Efficiency = 100% As efficiency is 100% the worker is given with time wages and 20% of time wages bonus.Time wage = 10 X 1 = Rs 10Bonus = (20/100)X10 = Rs 2Total = Rs12

Case 3 : Output in 10 hours = 130 Units Efficiency = 130%

As efficiency is more then 100% the worker is given with time wage + 1% increase in 1% of increase in efficiency and 20% of time wages bonus.

Time wage = 10 X 1 = Rs 10Bonus = (20/100)X10 = Rs 2Bonus = (30/100)X10 = Rs 3Total = Rs15

Group Incentive Plans:

• All of now we saw was for individual direct workers.

• In some works we have groups involved for particular

operations where individuals cannot be measured so

group

incentive scheme is followed.

• First total earning of the groups is calculated and then

divided for individual

• If individual contribution is different then the bonus is

divided proportionately according to their work they do.

Advantages:

1.Better co-operation among workers2. Less supervision3. Reduced incidence of absenteeism4. Reduced clerical work 5. Shorter training time

Disadvantages:

1. Efficient worker may be penalized for the efficiency of other members in the group.

2. Incentive may not be strong enough to serve its purpose.3.Ravilry among the members of the group defects the very

purpose of the team work and co operation.

Group Incentive Plans:

1.The Rucker Plan

2. The Scanlon Plan

3. The Profit Sharing Plan

The Rucker Plan:

• Encourage employees to involve in cost reduction plans

implemented by the management .

• The production value sharing plan attempts to establish a

relationship between earnings of hourly rated employees

and the net production values created.

• Production value = Sales revenue – { Cost of

materials , supplier , outside service used in production

and delivery of output }

• Labour Cost is represented as the percentage of production

value.

• If the ratio decreases to 15% the worker would get a bonus

in proportion to their earnings

The Scanlon Plan:

• Bonus to the worker for tangible savings in labour cost.

• Wages are determine as the ratio of sales revenue

• Different between wages due and wages paid is shared by

workers and management on mutually agreed basis.

• The purpose of the plan is to develop a sense of

improvement among workers and to generate a feeling

that everyone has take in productivity improvement .

The Profit Sharing Plan: The employer pays to all the

employees a share of profit earned in accordance with an

agreement .Three types of profit sharing plan are available.

a. Cash Plan – in which money is paid periodically

b. Deferred Plan – Monetary investments are made in PF of

employees and the benefits are got while their retirement

or when they are leaving the job

c. Combined Plan – Under which the above two are joined

i.e., the payment are partially made and others are invested

in employees PF.

Documents

Employee Productivity