PRODUCTIVITY LINKED INCENTIVES IN SERVICE

SECTER

FORMULATION,MEASUREMENT ANDIMPLEMENTION

GROUP MEMBERS

JOYDEEP ROY

KRITI ARUN KOMAL RAJDEV

MANJIS KUMAR MANSI ARORA KRATI RASTOGI

DEFINITION OF PRODUCTIVITY

Productivity is the amount of output per unit of input.

Input element in an organization consists of resources used in the product creation process,such as labour,material,energy.

Output consists of a given product, service and the amount of both.

In case of service sector the output has two aspects quantitative and qualitative aspects.

Therefore definition of productivity in service sector

Quantity of output and quality of output

Productivity =

Quantity of input and quality of input

PRODUCTIVITY ASPECTS

OUTPUT AND INPUT MEASUREMENT

Output Measurement

Measure of the aggregate value of goods or services sold.

Gross Output - Intermediate Outputs Involves using information on the relative prices

of the goods and services as weights. While measuring productivity value measures of

output are then transformed into volume measures using price indices.

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Input Measurement

The main input is labour, and the total hours actually worked(THAW) is the preferred measure of labour output.

Based on the assumption that the mix of different kinds of job is much the same at different time examined.

A possible approach to capture the differences in the productivity is given by the indicator of THAWCP.

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The weighting scheme adopted is of

simplified method to capture the quality of

input of labour.

TECHNIQUES FOR MEASURING PRODUCTIVITY

Productivity is typically measured relative to some benchmark.

Productivity measures include single factor productivity and multifactor productivity measure.

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A non- parametric technique

Includes Data Envelopment Analysis.

Takes data on organizations outputs and inputs and measures the efficiency of a particular organization by its distance from the ‘outer envelope’ of the data.

The technique relies on the use of extreme observations in the data.

5 WAYS TO IMPROVE PRODUCTIVITY

CONSEQUENCE OF PRODUCTIVITY IMPROVEMENT

PRESENT REMUNERATION SYSTEM

The present wage system may be in the form of

Salary scale

Salary range

Minimum and maximum annual increment

Collective bargaining

PRODUCTIVITY LINKED INCENTIVES IN AIRLINES

• INDIAN AIRLINES

WEAKNESS IN PRESENT REMUNERATION SYSTEM

The general trend of wage increase is rapid and not related to productivity improvement.

Annual increments are pre-determined and are given automatically to all workers regardless to the level of performance.

Remuneration is not related to company performance.

REASON FOR LINKING PRODUCTIVITY WITH REMUNERATIONLinking productivity with remuneration

make the following thing possible

Higher wages for worker and higher profits for companies

Greater competitiveness for companies

PRODUCTIVITY LINKED REMUNERATIONSYSTEM

In the productivity linked incentive model the wage has two component. They are

Fixed componentBasic wageAnnual incrementVariable component linked withProductivity and Performance

PRODUCTIVITY MODEL

FORMULATION

T = A + P

WhereT= Wage increaseA= Annual incrementP=Variable productivity payment.

EXAMPLE

If basic wage is equal to Rs.2500 pm,

A= 5%, P=4%

Basic wage + A = Rs.2500 + 5% of

Rs.2500 = Rs. 2625 per month

P = 4% of Rs. 2500 12

= Rs.1200 per annum

Total increment = Rs. 225 per month.

PROFITABILITY MODEL

In this model, the fixed component includes the basic wage and an annual increment. The variable component will be determined using a profit-sharing formula where:

The formula is to be agreed upon between the management and union and reviewed periodically.

Wage incentive is paid if profits exceed a pre-determined or threshold level which can be calculated based on absolute or relative form or average profit earned over a number of years as follows:

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Absolute form :Trading or operating profitNet profit before taxProfit after tax

Relative form :Return on salesReturn on equityReturn on assets

MEASUREMENT OF INCETIVES

Incentive schemes in Public Sector

Budget based reward system, where the reward is calculated on the bases of the comparison of objectives and results.

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FACTOR FOR SUCCESSFUL IMPLEMENTATION

Satisfactory labour management relationship.Realistic annual increment.Challenging and equitable variable payment.Wage system should be Specific Measurable Achievable Realistic.

VII PILLARS OF PRODUCTIVITY IT

Move from analog to digital processes

Open information access

Empower the employees

Use merit based incentives

Invest in corporate culture

Recruit the right people

Invest in human capital

PRODUCTIVITY LINKED INCENTIVES IN INDIAN AIRLINES

Staff of Indian Airlines getting PLI, the increase in its fleet size will improve the aircraft-employee ratio.

Under this scheme employees are paid monthly incentives depending upon the performance of the airline.

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Parameters Firstly, timely availability of aircraft for

flying.Secondly, time taken by aircraft for

major maintenance purposes.Thirdly, number of passengers carried

and on-time performance.

PRODUCTIVITY MEASURES OF BANK

Increase Of Productivity through strategic delivery assessment:-

1. Increase customer satisfaction.

2. Effectively manage production and

service delivery to exceed customer

needs.

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3.To keep up with increasing technology

so as to remain competitive.

4.Identify overall and line of business

objectives and keep them in order.

5.Position people,process and technology to achieve results.

Increase of productivity through

performance improvement:-

1.Identify line-of-business improvement

initiatives to increase productivity

and efficiency.

2.Compare functional level performance

to institutions of similar asset size.

3.Develop industry performance

indicators that are specific,actionable

and measurable.

4.Reduce cost and improve income

through evaluation of alternatives.

5.Implement changes and measure

their success.

6.Ensure tasks are completed on-time

and within budget.

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Increase of productivity through sales

force development:-

1.Develop measurement-reporting structures to track employee performance.

2.Develop measures,thresholds and weights that clearly indicate expected performance levels.

3.Balance sales and service. 4.Ensure systems properly reward top performers. 5.Improve and standardize work processes. 6.Balance staffing required and service expected with predictive models and routines.

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