Definition of Industrial Engineering

Industrial engineering is an engineering profession that is concerned with the optimization of complex processes, systems or organizations by developing, improving, and implementing integrated systems of people, money, knowledge, information and equipment.

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Industrial engineers use specialized knowledge and skills in the mathematical, physical and social sciences, together with the principles and methods of engineering analysis and design to specify, predict and evaluate the results obtained from systems and processes.

INTRODUCTION

• Buzz word in industrial engineering.
• Earlier days used to rate the workers according to their skill.
• Emphasis laid on to improve hourly output by analyzing & improving upon the technique applied by different workers.
• Machines were introduced to improve the productivity.
• New features incorporated in the machines (Computers) to make them powerful tools towards improving productivity.

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PRODUCTIVITY

• Productivity is defined as the ratio of output to input
• Productivity = Output values

Input

• = if goods/services

cost of resources consumed

(e.g. 100 units/machine-hour, in manufacturing,

20 customers/teller-hour, in service)

Resources/Inputs

Materials,

Capital,

Labor/Manpower → Performance

Technology

information

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AS VIEWED BY DIFFERENT PEOPLE

• Economist determines it from gross national product (GNP) & views it as ratio of output to input.
• Managers view it as cost cutting & speed up.
• Engineers think it as more output per hour, capital utilization, production per man hour, manpower efficiency.
• Behavioral scientist views it as labor utilization (Man days)

But generally accepted meaning is that it is the relationship between goods & services produced and the resources employed in the production.

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PRODUCTIVITY

It is a measure of how well resources are utilized to produce output. The term, productivity, symbolize the following:

• It relates output to input in any system, where some value addition is performed on the input resource.
• It is a quantitative measure of performance.
• It integrates performance aspects of quality, efficiency and effectiveness. 

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PRODUCTIVITY

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Case Study: Optimization of Man power using Time study for Mahindra HINO Motors

1. Raw material unloading Raw material is unloaded manually and it consumes a lot of time. unloading of single cylinder head they required 60 sec. to 80 sec

Solution: They installed hydraulic lifter cum trolley of conveyer height so that they can directly place the job on conveyer It reduces there efforts and time 80%.

• Inspection Inspection is the necessary operation in all the processes to neglect any defect before the machining. It takes 30 sec.

Solution: After some observation, time readings and discussion with shop floor supervisor and associates; This existing time is correct time to inspect the job that is 30sec.

• Number punching Number punching is done to identify the job From observations it takes 90sec. For 2 associates

Solution:They installed a pneumatic number punching machine which need only 1 associates per shift. Now the time reduced to 10 sec.

After the application of Industrial Engineering tool, TIME STUDY ( WORK MEASUREMENT) they obtained a solution which saves 2-3 man power per cycle.

Minimized excessive man power

Minimized the production time

Improved the production method

Effort is minimised

Improvement of ergonomics

Improved the relation between associates and managements

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Productivity measures are useful for

• Tracking an operating unit’s

performance over time

• Judging the performance of

an entire industry/country

Google uses the Goals/Signals/Metrics (GSM) framework to guide metric creation.

1. Start by defining the goal you’re trying to accomplish.

2. Define signals.

3. Select metrics.

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Why Productivity Matters

• High productivity is linked to higher standards of living
• As an economy replaces manufacturing jobs with lower productivity service jobs, it is more difficult to maintain high standards of living
• Higher productivity relative to the competition leads to competitive advantage in the marketplace
• Pricing and profit effects
• For an industry, high relative productivity makes it less likely it will be supplanted by foreign industry

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Typical Impacts of Productivity Improvement

As productivity improved Costs were decreased Wages increased

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Typical Impacts of Productivity Improvement

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Typical Impacts of Productivity Improvement

Kaizen initiatives are a set of actions that aim to improve a company's processes, products, and services. Kaizen is also known as Continuous Improvement.

Kaizen is core to lean manufacturing and the Toyota Way. It was developed in the manufacturing sector to lower defects, eliminate waste, boost productivity, encourage worker purpose and accountability and promote innovation.

DEFINITION

Productivity is formally defined by Organization of European Economic Cooperation (OEEC) as,

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Productivity is the quotient (ratio) obtained by dividing output by one of the factors of production. Thus, it is possible to speak productivity of capital, investment or raw materials according to whether output is being considered in relation to capital, investment or raw materials, etc.

OR

Productivity measures the efficiency with which resources such as labour or capital are employed �in the production process.

• Any particular value of productivity carries relevant meaning only when it is known how the productivity has been calculated. For example, the productivity of labor and productivity of capital should not be directly compared.

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Productivity---is the relationship between the output generated and input provided to create this amount of output during the measurement period. (Sink, 1985)

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Productivity---is the linkage between resources and results: how efficiently organizational resources are managed in achieving performance objectives. (Groff,1986)

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DIFFERENCE BETWEEN PRODUCTIVITY AND PRODUCTION

Productivity and production, though related in many ways, are different.

• Production is related to the activity of producing goods or services. It is a process (or system) of converting input into some useful, value-added output.
• Production is a measure of output produced.
• The emphasis is not on how well the input-resources are utilized.
• It is a value addition process.
• Productivity is related to the efficient utilization of input resource into produced in the form of value added goods or services. , puts emphasis on the ratio of output produced to the input used.
• Its focus is on how well the input resource is used for conversion into output.
• Productivity is a relative term where in the output is expressed in terms of inputs.
• Increase in production may or may not mean increase in productivity.

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Measures of Competitiveness

• Productivity
• GDP (Gross domestic

product) growth

• Market capitalization
• Technological infrastructure
• Quality of education
• Efficiency of government

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Economic System Transforms Inputs-Outputs

The main objectives of industrial engineering are:

1- Helping the organization achieving its goals by planning its operations and contingencies.

2- Improving the organization performance by increasing its productivity, quality and competitiveness.

3- Improving the effective utilization of resources and time. Eliminating waste.

Increase in Production = 30,000 – 24,000/24,000 * 100 = 25%

The labor productivity falls below the initial level of 1 component per man-hour if more than 25 workers are hired. This level of additional man-power may be termed as break-even level from the labor productivity point of view.

Three things have been understood from the above example:

1. Production and productivity are two different things.

2. Increase in production does not necessarily mean increase in productivity.

3. Productivity is always associated with the context in which it is calculated. For example, in the above case, it is calculated and interpreted as labor productivity.

If labor productivity has decreased due to some reason, it may not always mean that other forms of productivity, say material productivity, will also fall

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What is Productivity?

Productivity is a common measure of how well resources are being used or a measure of the effective use of resources usually expressed as the ratio of output to input

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Measures of Productivity

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Measures of Productivity

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Partial Output Output Output Output�measures Labor Machine Capital Energy

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Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy+ Overhead

Total Goods or Services Produced

measure All inputs used to produce them

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Examples of Partial Productivity Measures

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Typical Measures of Productivity in Different Organizations

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Example 1

7040 Units Produced

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Sold for $1.10/unit

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Cost of labor : $1,000

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Cost of materials: $520

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Cost of overhead: $2000

Which productivity

measures can be

calculated?

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What is the

multifactor�productivity?

MFP = Output

Labor + Materials + Overhead

MFP = (7040 units)*($1.10)

$1000 + $520 + $2000

MFP = 2.20

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Examples of Partial Productivity Measures

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Example 2

5,500 Units Produced

Sold for $35/unit

500 labor hours are used

Cost of labor: $25/hr

Cost of raw material: $5,000

Cost of overhead: 2 x labor cost

What is the labor productivity?

What is the multifactor productivity?

• 5,500 units/500 hours = 11 units/hour

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Or we can arrive at a unitless figure:

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• (5,500 units*$35/unit)/(500 hours * $25/hr) =15.4

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Solution 2: Labor Productivity

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Solution 2: Multifactor Productivity

MFP = Output

Labor + Materials + Overhead

MFP = 4.52

MFP = (5,500 units)*($35)

(500hrs.)*$25/hr. + ($5000) + 2*(500hrs.)*$25/hr.

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Example 3

• You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.
• Which productivity measure should be used?
• Answer: Could be classified as a Partial Measure.
• Is productivity increasing or decreasing?
• Answer: Last week’s productivity = 480/2000 = 0.24, and this week’s productivity is = 560/2400 = 0.23. So, productivity has decreased slightly.

EXAMPLE

• A company is manufacturing 24,000 components per month by employing 100 workers in 8 hour shift. The company gets additional order from government to supply additional 6000 components. The management decides to employ additional workers. What will be production and productivity level when the number of a additional workers employed are: (i) 30 (ii) 25 (iii) 20.
• Solution

Present productivity (of Labor) = Present Production (i.e., output)

Total man-hours (i.e., output)

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= 24,000 components

(100 workers) (8hour) (30 days of the month)

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= 24,000/24,000 =1 Component/man-hour

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WITH INCREASED ORDER

(i) When additional 30 workers are hired

Production = 24,000 + 6000 = 30,000 components

Productivity (of labor) = Increased total production/ Total man-hour

     = 30,000 / (100 + 30) (8) (30)

= 0.96 Component/man-hour

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BENEFITS FROM PRODUCTIVITY

• Misunderstanding that higher productivity means higher work load, higher efforts, more profit to owners and threat to job security.
• Productivity integrates the objectives of workers & owners.
• Contributes towards increase in production through efficient utilization of resources rather than making workers to work hard.
• It strives to minimize human efforts & human hazards with a view to utilize them to those area where they can contribute maximum to the output.

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Productivity coaching is a professional service that helps you optimize your productivity to meet your professional and personal goals. A productivity coach works closely with you to identify areas of inefficiency, develop personalized strategies for improvement, and provide the necessary support to implement these strategies.

Often, this type of coaching involves elements of time management, goal setting, and workflow organization. But that’s not all.

PRODUCTIVITY-EFFICIENCY AND EFFECTIVENESS

Efficiency and effectiveness are both commonly used management terms. Yet, while they sound similar and start with the same letters, they both mean different things.

Efficiency refers to doing things in a right manner. Scientifically, it focuses on getting the maximum output with minimum resources.

Effectiveness, on the other hand, refers to doing the right things. It constantly measures if the actual output meets the desired output.

�Since efficiency is all about focusing on the process, importance is given to the “means” of doing things whereas effectiveness focuses on achieving the “end” goal.

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• Efficiency is concerned with the present state or the “status quo”. Thinking about the future and adding or eliminating any resources might disturb the current state of efficiency. Effectiveness, on the other hand, believes in meeting the end goal and therefore takes into consideration any variables that may change in the future.
• In the earlier days of mass production, efficiency was the most important performance indicator for any organization. However, with consumers facing an increasing number of choices, effectiveness of an organization is always questioned. In order to be a successful organization, there needs to be a balance between effectiveness and efficiency.

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PRODUCTIVITY-EFFICIENCY AND EFFECTIVENESS

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Effectiveness vs Efficiency - Which is Important ?

1. If an organization is effective but not efficient, customers will be happy but costs will be higher.

2. If an organization is efficient but not effective, customers will be unhappy but costs will be lower.

3. If an organization is neither effective nor efficient, customers will go elsewhere and costs won't matter.

4. If an organization is both effective and efficient, customers will flock to the organization and profits will be high.

Customized Distribution Services is a great example of a company that found a way to win using the Veryable strategy. Effectiveness was the first order of businesses for CDS. They needed to get service levels under control by rapidly deploying labor resources to process their backlog of trailer unloading. Along the way, they deployed 30,000+ labor hours and built a 100+ person Labor Pool of skilled and highly rated workers. As service levels improved, the focus gradually shifted more to Efficiency, which involved deploying their Labor Pool to quickly react and match labor inputs to fluctuating daily demands. Veryable has a Workforce Management tool that can be used to help organize this process and make the “perfect” scheduling of labor easier.

SUMMARY: DIFFERENCE BETWEEN THE TWO

• Efficiency means doing the things right whereas Effectiveness is about doing the right things.
• Efficiency focuses on the process or “means” whereas Effectiveness focuses on the end.
• Efficiency is restricted to the present state whereas effectiveness involves thinking long term.
• Organizations have to be both effective and efficient in order to be successful.

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PRODUCTIVITY-EFFICIENCY AND EFFECTIVENESS

Productivity is very often confused with the terms, efficiency and effectiveness. Though related, all the three terms carry different meanings.

Efficiency (η): It is the ratio of actual output attained to the standard expected output.

Effectiveness indicates a measure of how well a set of targets or results are accomplished

Talking about productivity, actually productivity is nothing but effectiveness + efficiency.

OR

Productivity is an integration of both efficiency and effectiveness. It indicates a combined effect of resource utilization (i.e., efficiency) and performance (i.e., effectiveness). The combine effect of efficiency and effectiveness is used in defining a term called productivity index.

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PRODUCTIVITY-EFFICIENCY AND EFFECTIVENESS

Productivity Index = Performance achieved/Input resources consumed

Productivity Index = Effectiveness/Efficiency

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Since, effectiveness is difficult to measure quantitatively and productivity index decreases when efficiency increases at a given effectiveness (which is not acceptable), this definition is modified as follows:

�  Productivity Index = f₁ (Effectiveness)/

f₂ (Efficiency)

�Where, f₁, and f₂ are two different functions,

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PRODUCTIVITY-EFFICIENCY AND EFFECTIVENESS

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EFFECT OF BASE PERIOD ON PRODUCTIVITY

Base Period: A specific time period used as a benchmark in measuring financial or economic data is called as base period.

• Productivity is the ratio of the output produced for different kind of products divided by the resources, all divided by the same ratio for a base period.
• Productivity= Aggregated output in the measured period/ resource input in the measured period/ Aggregated output in the Base period/ resource input in the Base period

OR

• Productivity= Aggregated output in the measured period/ Aggregated output in the Base period / Resource input in the measured period / Resource input in the Base period.

The two relations give the same value but have different interpretation. (I) relation the numerator i.e. current performance index & the denominator i.e. base period performance index may be calculated on different time lengths. (II) relation the numerator & denominator should be calculated for the same time period, to carry some useful meaning.

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MEASUREMENT OF PRODUCTIVITY

• Productivity is an effective way to gauge how a system is performing over a period of time. It is important to measure it quantitatively.

Before Asking the How, Let’s Understand Our Own Goals

• Reduce cost e.g., Develop more valuable products for lower costs
• Support estimation e.g., Provide consolidated and parameterized history data
• Benchmark / assess design center or supplier capability e.g., Rationalize higher capital-to-staff investments
• Optimize processes e.g., Early defect correction
• Streamline software operations e.g., Identify production bottlenecks or underutilized resources

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MEASUREMENT OF PRODUCTIVITY

• Productivity measurement: important but difficult.

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• Measurement of output:

1. aggregate unit

2. sales

3. production volume

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• Measurement of input:

1. labor 2. capital

3. raw material 4. energy

5. information

Combine goal-orientation with decision-support and other operational management techniques.

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THE ESSENTIAL DIFFICULTY OF PRODUCTIVITY�MEASUREMENT

• Productivity is a derived metric:

function (output, input, environment)

• Input is easy to measure (e.g., activity-based

controlling)

• Output and environment are difficult to describe and measure.
• There are three commonly used approaches to measure productivity:
• Partial Productivity
• Total Factor Productivity
• Total Productivity

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PARTIAL PRODUCTIVITY

•  Partial productivity is defined on the basis of the class of the input being considered. For example, if the labor is increased by 18% during last financial year, its effect on the increased output is represented by productivity.

• Partial productivity index: (output/single input)

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labor productivity: output/labor hour

capital productivity: output/capital

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TABLE : DIFFERENT FORMS OF PARTIAL PRODUCTIVITY

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REASON FOR LABOR INPUT

Three reasons are sometimes put forward to justify the use of labor input for purposes of partial productivity measurement, these are:

(i) labor is regarded as the most important factor of production;

(ii) labor is the most easily quantified factor of production;

(iii) labor is the only factor of production that has conscious control over its contribution to output.

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ADVANTAGES OF PARTIAL PRODUCTIVITY MEASURE

• It is a good diagnostic measure to identify areas where improvements may be done.
• Easy to calculate as independent of other inputs.
• Easy to understand.
• Management finds it easy to understand and pin-point the logic for its improvement.
• It is easy to benchmark (compare) with other industries. For example, the labor productivity of a public limited company producing steel (Say SAIL) may be compared with labor productivity of a private sector steel producing company (Say, TISCO).
• Data may be easily generated for this.

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LIMITATIONS OF PARTIAL PRODUCTIVITY MEASURE

• It can be misleading if used out-of-context.
• It does not contain the overall effect of the system of performance.
• Focused areas of improvements are difficult to identify. Therefore, wrong areas of management control may be identified.
• It gives a myopic view of performance. This means, only limited factors are considered to effect the output or performance.
• It misses holistic (or totality) approach.

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TOTAL FACTOR PRODUCTIVITY

• Total factor productivity is a productivity measure combines that labor and capital, two of the most common input factors used in the partial productivity measure.
• This measure is often used at the national level, because many governments collect statistics on both labor and capital.
• Total Factor productivity index: (Net output/Labor input + Capital input)

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TOTAL FACTOR PRODUCTIVITY

Advantages

• Data from company records is relatively easy to obtain.
• Has value added approach

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Limitations

• No consideration for material and energy input.
• Difficult to relate value added approach to production efficiency.

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TOTAL PRODUCTIVITY MEASURE (TPM)

• Total productivity is a productivity measure that incorporates all the inputs required to make a product or provide a service. The inputs could be grouped in various categories as long as they determine the total inputs required to produce an output.
• Total productivity measure:

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TPM=output/all inputs (labor + capita l+

materials +……)

Total productivity= total tangible output/ total tangible input

Tangible = measurable

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TOTAL PRODUCTIVITY MEASURE

Advantages

• Easy & more accurate representation of total picture of the company
• Easily related to total costs.
• Considers all quantifiable outputs & inputs.

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Limitations

• Difficulty in obtaining data.
• Requirement of special data collection system.

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FACTORS AFFECTING PRODUCTIVITY

Controllable or internal factors

• Product: The extent to which the product meets the output requirement. The cost benefit factor of a product can be enhanced by increasing the benefit at the same cost or by reducing the cost for same benefit.
• Plant & Equipment: Play prominent role in enhancing productivity. The increased availability of plant through proper maintenance & decreased idle time increases productivity. Further increases by proper utilization, modernization , investment etc.
• Technology: Innovative & latest technology like automation & information technology improves productivity. Various aspects of technological factors are:
• Size & capacity of plant
• Timely supply & quality of inputs
• Production planning & control
• Repair & maintenance
• Waste reduction
• Efficient material handeling.

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CONTROLLABLE OR INTERNAL FACTORS

• Materials: Efforts to reduce material & energy consumption. Factors to be considered are:
• Selection & quality of right material
• Control of scrap & wastage
• Effective stock control
• Optimum energy utilization & energy savings
• Human Factors: Depends upon human competence & skills. Ability to work effectively depends upon training, education, experience, aptitude etc.
• Work Methods: Improving the way in which work is done. Work study & industrial engineering techniques & training improves the work methods which n terms enhances productivity.
• Management Style: Influences the organizational design, communication in organization, policy & procedure. A flexible & dynamic management style is a better approach to achieve higher productivity.

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UN -CONTROLLABLE OR EXTERNAL FACTORS

• Structural Adjustments ( economic & Social): Economic changes are (i) shift in employment from agriculture to manufacturing (ii) Import of technology (iii) Industrial competitiveness.

Social changes are women participation in labor force, education, attitudes & cultural values.

• Natural Resources: Manpower, land and raw materials are vital for productivity improvement.
• Government Policy & Infrastructure: Government policies & programs are significant to productivity practices of govt. agencies, transport & communication power, taxes & interest rates have a maximum influence on the productivity.

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WAYS TO IMPROVE PRODUCTIVITY

Some basic productivity improvement techniques are:

 1. Technology based:  

•  CAD, CAM, CIMS: CAD refers to design of products, process or systems with the help of computers.
• CAD has significant impact on the human productivity as it
• Minimizes the risk of functioning
• Reduces error
• Speed the evolution of alternate design
• CAM is useful to design & control the manufacturing system. It helps to achieve the effectiveness in production system by line balancing.
• Production planning & control
• Capacity requirement planning (CRP), Manufacturing Resource Planning (MRP II), Materials Requirement Planning (MRP)
• Automated inspection

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WAYS TO IMPROVE PRODUCTIVITY

• Computer integrated manufacturing (CIM) is characterized by automatic line balancing, machine loading/ scheduling & sequencing, automatic inventory control and inspection.
• Robotics
• Laser Technology
• Modern maintenance techniques
• Energy Technology
• Flexible manufacturing system (FMS)

2. Employee Based:

• Financial & non financial incentives at group & individual level
• Employee promotions
• Job design, job enlargement, job rotation, job enrichment
• Workers participation in decision making
• Quality circle (QC), Small group activity (SGA)
• Personal development

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WAYS TO IMPROVE PRODUCTIVITY

3. Material Based:

• Material planning & control
• Purchasing, logistics
• Material storage & retrieval
• Source selection & procurement of quality material
• Waste elimination
• Material recycling & reuse

4. Process Based:

• Methods engineering & work simplification
• Job design, Job evaluation & Job safety
• Human factor engineering

5. Product Based:

• Value analysis & value engineering
• Product diversification
• Standardization & simplification
• Reliability engineering
• Product mix & promotion

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WAYS TO IMPROVE PRODUCTIVITY

6. Management Based:

• Management style
• Communication in the organization
• Work culture
• Motivation
• Promoting group activity

7. Work Environment:

• Better lighting and illumination
• Better ventilation
• Safe work-place
• Total Quality Management (TQM) 

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CIRCUMSTANCES THAT� CALL FOR JOB EVALUATION

There is a dissatisfaction on salary structure, with claims that:

• similar work does not result in equal pay,
• equal pay is given to dissimilar work, or
• favoritism and other personal considerations are major factors in salary determination.

JOB EVALUATION

• Not a science
• Not a solution to salary problems
• Not a substitute for managerial decision making about individual salaries
• Not a cost cutting technique
• Not always consistent with the labor market

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JOB EVALUATION

• Employers are facing the challenge of retaining & maintaining the workforce under changing techno-economic scenario and wage parity amongst the organizations
• Job evaluation is the technique to systematically determine the worth of each job and help in establishing basic wage rates of jobs.
• Job evaluation is a process to determine in a systematic manner and analytically the worth of each job in the organization based upon the set of carefully selected factors such as skill, effort, responsibility demanded by the job and translating these worth of jobs into monetary terms ( i.e. pay & wages)

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DEFINITION

• As per international labor organization it is an attempt to determine & compare the demands which the normal performance of particular job makes on average workers, without taking into account the individual abilities or performance of the worker concerned.
• Job evaluation aims to provide a mean of establishing a wage structure acceptable to both workers & management.
• Job evaluation is a technique to rate the job not the worker.

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OBJECTIVES OF JOB EVALUATION

• To establish a sound wage and salary system by determining the worth of each job in the factory in relation to various factors like skill required, effort & responsibility involved.
• To eliminate the wage inequalities.
• To establish a general wage level for given factory.
• To define the line of authority, responsibility & accountability.
• To formulate an appropriate & uniform wage structure.
• To provide a sound base for recruitment, selection, promotion & transfer of employee.
• To identify the training needs of the employee so as to prepare them for the future positions.
• To promote cordial relations between management & union.
• To provide sound basis for wage negotiation & reduce the grievances of worker due to improper wages.

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PRE-REQUISITES OF JOB EVALUATION

• Facts related to job content: job specifications & job description.
• Top management support & commitment.
• Cooperation of union & individual worker.
• Comparison of jobs.
• Involvement of experts in job evaluation.

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Steps in Job Evaluation

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PROCEDURE FOR JOB EVALUATION

1. Job Analysis

Determine the detailed facts about the jobs.

2. Job Description

Describe clearly the requirement of jobs.

3. Job Specifications

Specify the attributes possessed by employee to complete the job satisfactorily.

4. Job Classification

Determine the relative worth of the job

5. Wage Determination

Compare jobs with predetermined job & arrive at suitable wage structure.

6. Evaluate Performance

based on job description& specification.

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BENEFITS

• Helps the management in establishing an objective rationale for acceptable wage structure.
• Takes into account many factors other than the skill difference.
• Helps in skill match with job. Thus helpful in the selection, training & promotion of workers.
• Helps in determining the rate of new job.
• Establishes cordial labor relationship.
• Helps motivation and morale
• Both employee and employer needs are addressed
• Job descriptions generated are useful for other activities

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LIMITATIONS

• Precision is missing as there is no standard table for all the activities.
• It does not account for many inter-related economic factors.
• No special attention is paid for exceptional merit, needed in the performance of the job.
• The change in production technology ( change from conventional lathe to CNC lathe), information system etc. severely affect the job content. Therefore job evaluation done few days back is not valid today. It is a dynamic process.
• The basic assumption of job evaluation is that the work of equal worth should be equally paid as both are equally attractive . But this is not so in real life. There are many examples in real life when the jobs of same worth ( say, a lecturer & an IAS) are not equally attractive to the job seekers.
• Assessment can be costly & time-consuming especially at the start

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JOB ANALYSIS

• It involves a systematic examination of the job to find out:
• Nature of task performed by the workers
• Purpose of the task
• Working conditions under which task is to be performed
• Responsibility, skills required
• Relationship between various jobs done in the department

The information gathered here is useful not only for job evaluation but also helps in performance review & appraisal, manpower planning

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STAGES IN JOB ANALYSIS

• Job Identification
• Job information Collection
• Qualification Requirement

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Methods of Job Analysis

• For existing jobs, interviews with employees
• Interviews with supervisors
• Observation
• Combination, interviews & observation
• Structured questionnaires
• Employee journals/logbooks

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JOB DESCRIPTION

• It gives all essential facts about the job like duties, responsibilities, working conditions & other required facts. It is composed of three parts:
• Job identification containing the details like job title, department, section, job code, name of the supervisor.
• Job summary gives the overall picture of all the duties performed
• Work performed gives the details of both regular as well as occasional tasks performed, machined & tools used, working conditions & hazards.

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JOB SPECIFICATION

• It is the statement of qualities & capabilities that an employee must possess to perform the job satisfactorily.
• It describes the extent to which each of the job factor such as education, experience, physical efforts, responsibility for other work, materials, machines & equipment etc. Present in the job & the degree of difficulty present.
• Outcomes: Job descriptions and job specifications impacts upon:
• Recruitment & selection
• Performance appraisal
• Remuneration
• Training & development
• Job design & redesign

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METHODS OF JOB EVALUATION

Job-evaluation methods are of two categories:

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(1)Non-analytical or non quantitative approach

• Ranking Method
• Job-Grading Method

(2) Analytical or quantitative approach

• Point- Ranking Method
• Factor Comparison Method

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RANKING METHOD

• Jobs are arranged or ranked in their importance i.e. from lowest to highest or vice versa.
• Committee assesses the worth of each job on the basis of its title or on its content, if the latter are available.
• Job Description can be used for ranking different jobs.
• Ranked jobs are classified into groups, and jobs under particular groups may receive the same salary or salary range.

ADVANTAGES

• Simplest, easy to adapt & easy to understand
• Inexpensive & takes less time than any other methods

DISADVANTAGES

• Subjected to chances of higher error
• No commonly accepted base is available for dealing with ranks
• Not suitable for large companies.

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JOB GRADING OR JOB CLASSIFICATION METHOD

• As in the ranking method, the Job-grading method does not call for a detailed or quantitative analysis of job factors.
• Facts about the job are collected and matched with the grades which have been established by the raters (Committee)
• Grades are arranged in the order of their importance
• Lowest grade may cover jobs requiring greater physical work under close supervision, but carrying little responsibility.

ADVANTAGES

• A large number of jobs can be handled easily after the grade description are documented
• Inexpensive & relatively simple
• Easy for people to understand in terms of grades

DISADVANTAGES

• Takes more time than ranking method & thus costs

more

• Does not uses the detailed job analysis
• Less accurate than point rating method

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ANALYTICAL METHOD OR QUANTITATIVE APPROACH

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• Attempt to establish relative worth
• Give the illusion of being more precise than non-quantitative approaches
• Easier to defend to employees and managers
• Tool should be tailored to job classification philosophy
• Point- Ranking Method
• Factor Comparison Method

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POINT- RANKING METHOD

Merill lott developed this method in 1925. The point system of job evaluation uses a point scheme based on the compensable job factors of skill, effort, responsibility and working conditions. The more compensable factors a job possesses, the more points are assigned to it. Jobs with higher accumulated points are considered more valuable to the organization.

Following steps are adopted:

• Select key jobs
• Identify the factors to all identified jobs such as skill, effort, responsibility etc.
• Divide each major factor into a number of sub factors. Each sub factor is defined and expressed in order of importance.
• Find the maximum number of points assigned to each job
• Once the worth of a job in terms of total points is known, the points are converted into money values, keeping the wage rates in mind.

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Step 1. Identify critical factors that determine the value of different jobs within the organization. Define degrees for each factor to standardize evaluation:

• Skill: 40% of total value
• Basic: High school diploma or equivalent, basic office skills (10 point)
• Intermediate: Some college or specialized training, higher technical skills (20 points)
• Advanced: University degree or extensive specialized training, high-level skills, and expertise (30 points)
• Responsibility (low, medium, high): 30% of total value
• Low: Follows basic procedures, has limited decision-making responsibility (10 points)
• Medium: Works independently, has some decision-making authority (20 points)
• High: Handles complex projects; makes critical decisions (30 points)
• Effort: 20% of total value
• Low: Minimal physical or mental exertion involved (10 points)
• Medium: Concentration needed or some physical effort (20 points)
• High: Intensive mental focus or significant physical exertion (30 points)
• Working conditions: 10% of total value
• Standard: Comfortable environment, minimal risks (10 points)
• Challenging: Some discomfort or occasional risks (20 points)
• Harsh: Regular exposure to discomfort or hazards (30 points)

Step 2: Assign points based on the job’s requirements and calculate the weighted points for each factor. Example for a Customer Service Representative:

Assign points

• Skill: Intermediate (20 points)
• Responsibility: Medium (20 points)
• Effort: Medium (20 points)
• Working conditions: Standard (10 points)
• Total points (unweighted): 20 + 20 + 20 + 10 = 70 points

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Weighted points

• Skill: 20 × 0.40 = 8
• Responsibility: 20 × 0.30 = 6
• Effort: 20 × 0.20 = 4
• Working conditions: 10 × 0.10 = 1

Step 3: Point calculation

Sum the weighted points to determine the job’s overall point value:

• Total weighted points: 8 + 6 + 4 + 1 = 19

Step 4: Job ranking

After you have the total weighted points for each job, you can rank the jobs based on their overall point values. The higher the points, the more ‘worth’ the jobs have within the organization.

Step 5: Review and validate results

Share the job evaluation results with key stakeholders for validation. Make any necessary changes based on feedback.

Step 6: Pay structure implementation

Use the job evaluation results to develop or update a pay structure that aligns with market trends and organizational objectives. Regularly review and update it to ensure it matches market standards.

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PROS AND CONS

Advantages

• Once factors and degrees are defined, plan is stable over time
• Perceived as valid by users
• High agreement with ratings if jobs are carefully defined
• Documented process

Disadvantages

• Time consuming and costly to establish
• Typically requires that pay grades be established although each point can be given an economic value resulting in continual pressure to upgrade individual positions or jobs in order to increase pay
• Analysis involves experienced persons
• Subjective assessment needed to establish point range for salary grades
• Typically relies on key jobs within the organization

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FACTOR COMPARISON METHOD

• Under this method, one begins with selection of factors .
• Each factor is ranked individually with other jobs.

E.g.:- Each job is ranked several times like,Skill requirements,Physical exertion, Responsibility, and Job conditions

A composite score is obtained for all factors. A refinement of whole job ranking. No detailed criteria

• Uses universal factors for defining jobs (e.g. skill, effort, responsibility, working conditions)
• Each factor can be weighted.Jobs are ranked within each factor
• Labor intensive - involves numerous judgments in order to build ranking (# jobs X # jobs X # factors = # of individual decisions needed)
• Example: 100 job titles X 100 job titles X 4 factors = 40,000 individual decisions that must be made to develop hierarchy

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ADVANTAGES

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• It uses wages of existing key jobs, which provide standard against which all other jobs are compared
• Direct comparison is used for determining wages
• Quantitative yet easy to apply once the factors & levels have been decided
• Relative value is easily understood

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DISADVANTAGES

• It is costly & time consuming to setup initially
• Needs to be re-established each time a new job is added to the structure or an existing job changes since these actions will affect the overall rankings
• If unfairly paid jobs are selected as key jobs, then the entire scaling of factors gives wrong results.
• Subjectivity in the grading is often challengeable. Different evaluator may give different wages for one factor.

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MERIT RATING

Merit rating is associated with performance appraisal of an employee. This is also called as performance appraisal, personnel rating, employee evaluation.

• Merit-rating is a formal, objective procedure for evaluating personality, contributions and potentials of employees in a working organization

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OBJECTIVES OF MERIT RATING

• Helps in executive decisions related to human resource department (HRD).
• Appraisal of workers.
• Continuous record for the worth of a worker.
• Tool for decisions related to training, placement, promotions, confirmation, increment, transfer and counseling of workers.
• Useful for understanding areas of improvement in a worker
• Helps in discovering special talent in a worker.
• Useful in personal research, validation of training objectives and training methodology.

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ADVANTAGES OF MERIT RATING

• Merit-rating plays very important role in the human resource administration of a firm. Its advantages are: 

(1)        Systematic evaluation of employees 

(2)        Facilitates matching of job with individual. 

(3)        Facilitates promotion related decisions

(4)        Facilitates training related decisions.

(5)        Helpful in identifying weakness of the employees which may systematically be removed.

(6)        Provides base for guidance and counseling for the employees.

(7)        Develops healthy competition among workers to improve performance.

(8)        Serves as motivational tool for employees

(9)        Provides objective basis for bonus, incentive wage, and salary related decisions.

(10)      Improves employee-employer relationship due to increased trust and confidence.

(11)      Sound base for negotiation with trade union.

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LIMITATIONS OF MERIT RATING

• Bias of rater may under-rate or over-rates an employee.
• Due to Halo Effect (which is the tendency of a rater to consistently rate under or above the average), the ratings may not be accurate.
• Assessment of irrelevant factors may result in deceptive rating.
• Due to improper weight age of factors, the ratings may be improper.
• Due to fear, negligence, insufficient time, insufficient information or temperament, the rater may play safe and give average rating to an otherwise good or unsatisfactory employee.
• Reward for employee may not follow immediately after a good rating due to organization constraints. This may lead to dissatisfaction.
• Many rating factors are very subjective. Due to this, exact rating may not be forthcoming. For example, innovativeness, drive, organizational loyalty, etc., are difficult to be quantified in exact terms.

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 APPROACHES OF MERIT RATINGS

Some specific approaches of merit rating are as follows:

(1) Ranking Method

This is the simplest method in which all the employees are compared with one another. They are ranked in descending order from best to worst.

This method has a serious limitation that it is not diagnostic to point the specific areas of weakness and strength of a worker.

The method is highly subjective. The difference in rank does not provide the exact nature of merit-differential. There are chances of personal bias of the rater.

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PAIRED COMPARISON METHOD

• Each member of the group is compared with remaining other members of the group. Each judgment is recorded in terms of score. These scores are added up to find the final ranking of each person
• It is a more rational and comprehensive method. The bias of the rater is minimized, yet it may not be over.
• The method involves large number of comparisons. For example, for a group of n persons, total number of comparisons is factorial (n — 1)!

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CHECKLIST METHOD

• In this method, the rater is given a set of statements related to the employee’s performance, attitude, behavior and shortcomings. The rater is asked to tick-mark either yes or no. Each yes/no carries certain points, which when added up, give final rating of the employee.

Statement

• Understands work
• Assumes responsibility
• Makes no mistakes
• Innovative in approach
• Keeps work area clean
• Does not need close supervision
• Very regular on work

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GRAPHIC RATING SCALE

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• In this method, the rater marks the rating on a graphic rating scale, the scale containing different degrees of performance in terms of phrases, such as: outstanding, excellent, good, average and poor. For each degree few numbers are allotted. Different performance measures are rated on this scale:

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RATING BY RESULT

• Rating is done on the basis of achievement of set objectives.
• Performance standards are set in advance. It is known to both rater and employee. Under achievement or over achievement is noticed by the rater.
• This method eliminates the personal bias of the rater.
• There is transparency in rating.
• Continuous review of rating is possible by both employee and his supervisor. Possibility for improvement may be explored at regular intervals.
• Since approach is participative, it instills confidence in employees. The method is more suited for executives and managers as it requires proper education and training on the path of employees.

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REQUIREMENTS FOR SUCCESS OF MERIT RATING SYSTEM

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A successful merit rating system should be objective. Standard for outputs should be set against which performance should be measured

For a merit rating system, these requirements are of prime importance:

• Commitment and support of top management
• Approval of employees and union
• Knowledgeable rater
• Education and training of employee to understand the rating system
• Continuous rating system and periodic review 
• Grievance redressal system
• Administrative support for generating and retrieving necessary information
• Sufficient time, fund and formats for the rating.

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INCENTIVE PLANS

Incentive: it is a reward or encouragement to an employee for the hard work & efficiency at job, assigned by the organization. It is for motivating employees to do better and harder.

Incentives may be direct or indirect. Direct incentives are given to individual & indirect are given to group. Direct or indirect monetary payment is termed as financial incentives, such as: bonus, profit sharing, etc.

Non-monetary payment of this type is termed as non financial incentives, such as: social benefits, recognition, appreciation, good work conditions, job satisfaction, chances for promotion, training, job security.

Some incentives are semi- financial, such as: subsidized ration, subsidized medical facility, subsidized education for children, pension, etc.

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OBJECTIVES OF A GOOD WAGE-INCENTIVE PLAN 

• Good employee-employer relationship.
• Helps in increasing productivity.
• Boosts morale of employee.
• Motivates employee to perform better.
• Controls absenteeism and labor turn-over.
• Basis for cost control.
• Improves quality of life.
• Helps organizations to better utilize the labor, machine, equipment and other resources.
• Improves the image of the organization.
• Flexible to meet the changing conditions of the enterprise.

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BASIS OF A GOOD WAGE-INCENTIVE PLAN

• Simple to understand, simple to use and administer
• Incentive as per accomplishment and should be paid without much delay.
• Standards: fair and comparable with other industries of similar type
• Agreement of both employee and employer
• Encourages workers to perform more and better
• Based on time-study information.
• No undue loss to workers due to uncontrollable reasons such as power-failure, machine break-down, etc.

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TYPES OF WAGES INCENTIVE PLANS

The compensation to an employee may be in three forms:

(i) Based on time spent on work, i.e., time rate system

(ii) Based on production in quantity terms, i.e., piece-rate system

(iii) Combination of (i) and (ii) both, i.e., wage-incentive system

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TIME RATE METHOD

The payment under this plan is made in accordance with the time spent on the job. The time may be on hourly, daily, weekly, fortnightly or monthly basis.

Advantages of Time Rate Method

• Simple to calculate
• Focus on punctuality, regularity and work
• Less wastages, as worker is not unnecessarily worried about very high production rate.
• Better quality of work due to above reason
• Advance knowledge about wage
• Easy to operate in different situation
• Consistency in calculation and approach
• Preferred by trade unions
• Workers feel assured of wages irrespective of machine failure, breakdown, etc.

Disadvantages of Time Rate Method

• Lack of motivation to do exceptional
• Requires close supervision as worker may waste production time
• Encourages inefficiency in workers

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STRAIGHT PIECE RATE SYSTEM   

• Wages are paid in this system in accordance with the output of production. This is independent of time spent on the job.

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STRAIGHT PIECE RATE WITH A MINIMUM GUARANTEED BASE WAGE

In this method, in addition to the payment in accordance with an individual’s output, a fixed guaranteed base-wage is also provided. However, for a production up to a certain level there is no incentive.

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DIFFERENTIAL PIECE RATE SYSTEM (OR TAYLOR’S PLAN)

In this scheme, upto a certain production level, which may be standard output, a piece rate (say R 1) is given. For anybody, who achieves more than this output, will get the payment for over achievement at a higher rate.

However, it does not guarantee minimum base wage. Standard output may be decided by careful time and function study procedure.

Advantages of Differential Piece Rate System

• Provides incentives to efficient worker
• Penalizes inefficient worker
• Focuses on high production rate
• Simple and easy to implement

Disadvantages of Differential Piece Rate System

• Minimum wage is not assured.
• No consideration for the machine failure,

power failure, etc.

• Over emphasis on high production rate
• There are chances that quality of work may

suffer.

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HALSEY PREMIUM PLAN

In this plan incentive is given to a worker, who is fast and completes work before the standard time to complete a job, However, a minimum base-wage is guaranteed to a worker, who completes the job up to the standard time, fixed for this job. It takes into account the total time saved by the employee, and is a useful method for computing the incentive, when accurate performance standards have not been established. The value of time saved by the employee is computed and the earning is shared by the employee and the organization.

• The standard notations used throughout this are:
• r = rate per unit�T = actual time worked�S = Standard time�= T x Number of units produced /Production standard�N = total number of units produced�P = premium percentage�E= total employee earnings
• The total earnings of the worker is computed by the formula given below:
• E = rT + P ( S – T ) r

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Example

• Suppose Standard time to complete a job = 10 hrs.
• Standard work in standard time= 30 units
• Wages per day = Rs. 5.00 or 50 paise per hour.
• Actual time taken = 8 hours.
• Time saved= 2hours
• Rate of Premium =33 1/3 %

The total wage of the worker shall be computed as wage for 8 hour @50 paise per hour

• Premium for two hours saved=Rs. 4
• Total wage for 8 hours= 33 1/3 % of Re. 1 = 33 Paise
• If worker continuous for 2 hours with the same speed, he will get the wage for another two hours on the above basis Rs. 1 and paise 8. the total wage for the day thus come to Rs. 5.41.

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Advantages of Halsey Premium Plan

• Simple
• Beneficial to efficient worker
• Causes no harm to new worker, trainee, or slow worker 
• Management shares benefits of over-achievement by workers
• Minimum base-wage is guaranteed.
• Disadvantages of Halsey Premium Plan
• Workers get only a percentage of return on their over-achievement (for example: 1% in above example).
• Due to undue importance on over-achievement quality suffers.
• Management gets wrong picture of worker’s ability

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ROWAN PLAN

    It is quite similar to Halsey plan except that incentive for completing the job in time lesser than standard time is paid to the worker.

    It was devised in Glasgow, Scotland. In this plan the bonus is calculated on the basis of the time worked. Thus the premium paid to the worker is a percentage of the time worked. This prevents unnecessary over speeding by a worker, which may be counter-productive to quality or group behavior.

Suppose, a worker should produce 50 units in 8 hours and he is paid at the rate of Rs 3 per hour. If he produces 100 units in 8 hours his total earnings for the day would be

E = rT + ((S – T) / S) x rT

• = 3 x 8 + (16 – 8 / 16) x 3x 8
• = 24 + (8 / 16) x 24
• = 24 + 12 = Rs 36.
• Thus the total earnings of the employee would be Rs 36/-
• It is worth noting that this plan is not easy to understand by the operative personnel and it also involves more clerical work.

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Advantages of Rowan Plan

• Checks over-speeding, overstrain by worker.
• Assured minimum base-wage
• Efficiency is rewarded

Disadvantages of Rowan Plan

• Discourages workers to over-achieve.
• Difficulty in ascertaining wages as it requires large data processing
• Sharing of profit for over-achievement may not be liked by workers

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 MERRICK MULTIPLE PIECE RATE PLAN

This is a modification over Taylor’s plan. In this, a minimum base wage is not guaranteed. A worker’s wage is calculated as follows:

• When output (O) is less than 83% of standard output (SO), scheme for wage (W) is equal to piece rate scheme.
• When 83% of (S) < O < 100% of (SO); W = 110% of piece-rate.
• When O > 100% of (SO); W = 120% of piece rate.

Advantages

•  Efficient workers are rewarded handsomely.

Disadvantages

• Wide gap in slabs of differential wage rate
• Over emphasis in high production rate

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GANTT TASK AND BONUS WAGE PLAN

    In this, a minimum wage is guaranteed. Minimum wage is given to anybody, who completes the job in standard time. If the job is completed in less time, then there is a hike in wage-rate. This hike varies between 25% to 50% of the standard rate.

Example

            Standard time =          S hour

            Actual time                 =          T hour (T < S)

            Time rate for wages    =          Rs. R per hour

            Bonus rate                   =          P% of hourly rate

                                                =          Rs. (PR) per hour

            Thus wage                   =          (RS + PRS) in T hours

                                                =         (RS + PRS)/T  per hour RS+PRST

Advantages

• Minimum wage in guaranteed
• Suited to efficient workers.

Disadvantage

• Emphasis on over speed or high production rate

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BEDEUX POINT PLAN

In this plan also, a minimum base-wage is guaranteed. In this plan, the calculation of wage is based on a term Bedeaux point (B). SH is divided into standard minutes & each standard minute is called Bedaux point or B.

A worker, who earns 1 B in one minute or 60 Bs in 1 hour, is 100% efficient. In this, incentive is paid for 75% of number of Bs exceeding 60 B per hour. The wage payment scheme is as follows:

(i) When actual Bs earned by worker (Bw) > Bs for standard time

            Wage = RS + [B(W) - B(s)] * 0.75R/60Bw-Bs60

(ii) When Bs caused by worker (Bw) < Bs for standard time

            Wage = RS

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Advantages

• Minimum base wage is guaranteed
• For time saved as compared to standard

time, 75% of the compensation is given

to worker. Rest 25% may be given to his

supervisor.

• Bedeaux point may be added up for a

worker even if his job requires different

assignments in a day.

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