Types of Production

Systems
 Production System
• A transformation process which converts the
basic inputs like men, material, energy,
information etc into useful outputs like finished
products & services is called production.

• Thus a production system can be defined as

transformation system in which a saleable
product or service is created by working upon
certain inputs.
 Types of Production Systems
• There are different types of production
systems based on:
➢ Type of product
➢Rate of production
➢Type of equipment etc.
Types of Production Systems
 Intermittent Production System
• Intermittent means something that starts and
stops at regular or irregular intervals of time.

• Intermittent production systems are those

where the production facilities are flexible
enough to handle a wide variety of products
and sizes.
 Job Shop Production
• In this system products are made to satisfy a specific
customer order.
• It is characterized by its low volume production.
• Product variety is very high.
• Machines and methods employed should be general
purpose as product changes are quite frequent.
• Man power should be skilled enough to deal changing
working conditions
• Scheduling and routing are difficult
• Product cost is high because of low volume of production
• Process layout is used.
• Examples: Machine shops, Hospitals, Automobile repair
center etc.
 Batch Production
• In this system, identical products are made in
batches.
• It is suited for medium volume production
• It is suitable for products with moderate variety.
• Like job order production, general purpose
machines are used.
• Moderately skilled labor are required.
• Unit cost of product is high.
• Process layout is used.
• Examples: Medicines, paints, clothes etc
 Project type production
• This system produce a single bulk product at a
time.
• Generally work is carried out at the site of the
work rather than in a factory. ie., fixed-
position layout is used.
• It involves much administration work
• Examples: Construction of building,
fabrication of ship, fabrication of an aircraft,
making a movie etc.
 Continuous Production System
• In this system, the items are produced for the
stocks and not for specific orders.
• Here the inputs are standardized and a
standard set of processes can be adopted.
• Due to this routing and scheduling for the
whole process can be standardized.
• There are two types of continuous production
systems: Mass production and Process
production
 Mass/Flow production
• Standard product is produced in large volume.
• Special purpose machines or semi/fully automatic
machines can be used
• Fixed path material handling equipment can be
used
• Product layout is used.
• Low skilled workers can be employed
• Unit cost of product is low.
• Scheduling and routing are easy
• Ex: bolts, nuts, plastic items, automobiles etc
 Process or Continuous Production
system
• It is similar to mass production only.
• This system produces products having continuous
demand.
• The flexibility of production is almost zero as only
one type of product is produced.
• Special purpose machines are used.
• Product layout is used.
• Examples: Sugar, steel, cement, petroleum,
electricity, paper etc.
Which type
of
Production?
Which type of Production system??
 Plant
Location
 Plant Location
• Plant location refers to the choice of the region where men,
materials, money, machinery etc. are brought together for setting up
a business or factory.

• A plant is a place where the cost of the product is kept to low in

order to maximize gains.

• Identifying an ideal location is very crucial, it should always

maximize the net advantage, must minimize the unit cost of
production and distribution.

• Plant location decisions are very important because once the plant is
set up at a particular site then the organization has to face the pros
and cons of that initial decision.

• The need for location selection arises for new businesses as well as
existing ones
 Factors affecting Plant Location
• Nearness to raw materials
• Nearness to the market
• Cost of land
• Availability of transport facilities
• Availability of skilled labor
• Availability of water, power etc.
• Local Government rules and regulations
• Attitude of local community
• Weather conditions
• Availability of basic amenities like hospitals,
banks, schools etc.
 Factors affecting location of a retail
business
• Visibility & Accessibility
• Traffic pattern
• Demographics
• Nearness to competitor
• Parking facilities
Why IKEA India picked Hyderabad?
 Plant Layout
• Plant layout refers to the arrangement of
physical facilities such as machines,
equipment, tools, furniture etc. in such a
manner so as to have the quickest flow of
materials at the lowest cost and with least
amount of handling in processing the product
from the receipt of raw material to the
delivery of final product.
 Objectives of Plant Layout
• Efficient utilization of available space
• Reducing material handling cost
• Utilizing labor efficiently
• Reducing accidents
• Providing ease of supervision and control
• Improving productivity
 Process Layout

Types of Product Layout

Plant
Layouts Fixed Position Layout

Combination Layout
Process Layout (Functional Layout)
 Process Layout
• In this layout, similar machines or functions or
services are located together.
• This layout is suitable for intermittent production
systems such as job order production or batch
production.
• This layout is more seen in service organizations
and less seen in manufacturing plants.
• Examples: Hospitals, universities, banks, library,
machine shop etc
• This layout is also called functional layout.
 Advantages of Process Layout
 It has more flexibility ie., variety of products can be
made.
 Less vulnerable to shutdowns caused by mechanical
failure of machines
 Workers become skilled in handling the machines as
they attend to only one type of machine and variety
pf products.
 Workers in one section are not affected by the
operations carried out in the other section.
 Good quality products
 Disadvantages of Process Layout
 Material handling is inefficient.

 High labor cost

 Equipment utilization rate is low.

 More space is required.

 Routing and scheduling pose continual challenges.

 Product cost increases because of low volume of

production
 Product Layout (Line Layout)
• tt
 Product Layout
• In this layout, machines and services are arranged in a
sequence according to the processing of the product
• This type of layout is suitable for continuous manufacturing process
where standard goods can be produced in large quantities.
• It needs fixed path material handling equipment such as conveyors
to transport items between the operations.
• This layout is also known as assembly line or production line layout
because layout is arranged in the form of a line.
• The machines can be arranged in a straight line or U-shape or S-
shape or W-shape depending on the available space
• This type of layout is more seen in manufacturing organizations like
sugar factories, paper mills, automobile industries etc. but less seen
in service organizations.
• Example for product layout in service organization is
automatic car wash.
 Advantages of Product Layout
 High rate of output.
 Low unit cost due to high volume.
 Material handling is easy and effective
 Scheduling and routing are easy
 High utilization of equipment.
 Less space is required
 Low labor cost
 Disadvantages of Product Layout
 Repetitive jobs may create dullness in workers
 System is inflexible (standard items are made)
 High susceptibility to shutdowns due to failure of
machines.
 High periodic maintenance cost
• Workers can be affected by disturbance caused by other
works
• Low Quality.
 Fixed Position Layout
• In this layout the product or job remains stationary and
workers, equipment, materials are moved to the job.
• It is also called static layout.
• This layout is suitable for project type production.
• It needs variable path material handling.
• This layout is seen in construction projects (like buildings,
bridges, dams), ship building, aircraft repair etc.
• Actually administrative burden is more for this layout
because wide variety of equipment, wide range of skilled
labor is necessary for this layout.
• Administration has to coordinate various activities. So,
usually this layout is not justified.
• But compelling reasons like bulk size of the product bring
the workers, equipment to the site.
 Combination Layout
• Above three layouts are called basic layouts.
• Combination layout represents some combination of the
basic layouts.
• The most important type of combination layout is cellular
layout.
Cellular Layout
 Cellular Layout
• It is a combination of process layout and product layout.
• In this work stations are grouped into a cell that can process
items that have similar processing requirements.
• In cellular layout machines are arranged to handle all of the
operations necessary for a group of similar parts.
• This was developed based on the concept of group
technology
• Example: Manufacturing of different sub assembly
components required for assembly operartion.
 Unit-II

Work Study

Productivity has now become an everyday watch word. It is crucial to the

welfare of industrial firm as well as for the economic progress of the country. High
productivity refers to doing the work in a shortest possible time with least
expenditure on inputs without sacrificing quality and with minimum wastage of
resources.

The purpose of work study is to identify the most effective means of achieving
necessary functions. This work-study aims at improving the existing and proposed
ways of doing work and establishing standard times for work performance.

Work-study is encompassed by two techniques, i.e., method study and work

measurement.

“Work study is a generic term for those techniques, method study and work
measurement which are used in the examination of human work in all its contexts.
And which lead systematically to the investigation of all the factors which affect
the efficiency and economy of the situation being reviewed, in order to effect
improvement.”

“Method study is the systematic recording and critical examination of existing and
proposed ways of doing work, as a means of developing and applying easier and
more effective methods and reducing costs.”

“Work measurement is the application or techniques designed to establish the time

for a qualified worker to carry out a specified job at a defined level or
performance.”

Advantages of Work Study:

1. It helps to achieve the smooth production flow with minimum interruptions.

2. It helps to reduce the cost of the product by eliminating waste and unnecessary
operations.

3. Better worker-management relations.

4. Meets the delivery commitment.

5. Reduction in rejections and scrap and higher utilization of resources of the

organization.

6. Helps to achieve better working conditions.

7. Better workplace layout.

8. Improves upon the existing process or methods and helps in standardization and
simplification.

9. Helps to establish the standard time for an operation or job which has got
application in manpower planning, production planning

METHOD STUDY:

Method study enables the industrial engineer to subject each operation to

systematic analysis. The main purpose of method study is to eliminate the
unnecessary operations and to achieve the best method of performing the
operation. Method study is also called methods engineering or work design.
Method engineering is used to describe collection of analysis techniques which
focus on improving the effectiveness of men and machines.

According to British Standards Institution (BS 3138): “Method study is the

systematic recording and critical examination or existing and proposed ways or
doing work as a means or developing and applying easier and more effective
methods and reducing cost.”

Method study scope lies in improving work methods through process and operation
analysis, such as: 1. Manufacturing operations and their sequence. 2. Workmen. 3.
Materials, tools and gauges. 4. Layout of physical facilities and work station
design. 5. Movement of men and material handling. 6. Work environment.

Objectives of Method Study:

Method study is essentially concerned with finding better ways of doing things. It
adds value and increases the efficiency by eliminating unnecessary operations,
avoidable delays and other forms of waste. The improvement in efficiency is
achieved through:
1. Improved layout and design of workplace.

2. Improved and efficient work procedures.

3. Effective utilisation of men, machines and materials.

4. Improved design or specification of the final product.

The objectives of method study techniques are:

1. Present and analyse true facts concerning the situation.

2. To examine those facts critically.

3. To develop the best answer possible under given circumstances based on critical
examination of facts.

Steps or Procedure Involved in Methods Study:

The basic approach to method study consists of the following eight steps:

1. SELECT the work to be studied and define its boundaries.:

To carry out the method study, a job is selected such that the proposed
method achieves one or more of the following results: (a) Improvement in
quality with lesser scrap. (b) Increased production through better utilisation
of resources. (c) Elimination of unnecessary operations and movements. (d)
Improved layout leading to smooth flow of material and a balanced
production line. (e) Improved working conditions.
CONSIDERATIONS FOR SELECTION OF METHOD STUDY :
The job should be selected for the method study based upon the following
considerations:
1. Economic aspect 2. Technical aspect, and 3. Human aspect.

2. RECORD the relevant facts about the job by direct observation and collect such
additional data as may be needed from appropriate sources.

3. EXAMINE the way the job is being performed and challenge its purpose, place
sequence and method of performance.

4. DEVELOP the most practical, economic and effective method, drawing on the
contributions of those concerned
5. EVALUATE different alternatives to developing a new improved method
comparing the cost-effectiveness of the selected new method with the current
method with the current method of performance

6. DEFINE the new method, as a result, in a clear manner and present it to those
concerned, i.e., management, supervisors and workers.

7. INSTALL the new method as a standard practice and train the persons involved
in applying it.

8. MAINTAIN the new method and introduce control procedures to prevent a

drifting back to the previous method of work.

Recording Techniques for Method Study:

The recording techniques are designed to simplify and standardise the recording
work. For this purpose charts and diagrams are used.

Types of Charts:

1. Operation Process Chart: It is also called outline process chart. An

operation process chart gives the bird’s eye view of the whole process by
recording only the major activities and inspections involved in the process.
Operation process chart uses only two symbols, i.e., operation and
inspection.
2. Flow Process Chart:

Flow process chart gives the sequence of flow of work of a product or any part of
it through the work centre or the department recording the events using appropriate
symbols. It is the amplification of the operation process chart in which operations;
inspection, storage, delay and transportation are represented.

However, process charts are of three types: (a) Material type—Which shows the
events that occur to the materials. (b) Man type—Activities performed by the man.
(c) Equipment type—How equipment is used.

3. Two Handed Process Chart :

A two handed (operator process chart) is the most detailed type of flow chart
in which the activities of the workers hands are recorded in relation to one
 another. The two handed process chart is normally confined to work carried
out at a single workplace.
4. Multiple Activity Chart:
It is a chart where activities of more than subject (worker or equipment) are
each recorded on a common time scale to show their inter-relationship.
Multiple activity chart is made:
to study idle time of the man and machines,
to determine number of machines handled by one operator, and
to determine number of operators required in teamwork to perform the
given job.
Diagrams Used in Method Study:
1. FLOW DIAGRAM :
Flow diagram is a drawing, of the working area, showing the location of
the various activities identified by their numbered symbols and are
associated with particular flow process chart either man type or machine
type.
2. STRING DIAGRAM:
The string diagram is a scale layout drawing on which, length of a string
is used to record the extent as well as the pattern of movement of a
worker working within a limited area during a certain period of time. The
primary function of a string diagram is to produce a record of a existing
set of conditions so that the job of seeing what is actually taking place is
made as simple as possible.

Symbols Used in Method Study:

MOTION STUDY:

Motion study is part of method study where analysis of the motion of an operator
or work will be studied by following the prescribed methods.

Principles of Motion Economy :

There are a number of principles concerning the economy of movements which

have been developed as a result of experience and which forms the basis for the
development of improved methods at the workplace.

These are first used by Frank Gilbreth, the founder of motion study and further
rearranged and amplified by Barnes, Maynard and others. T

The principles are grouped into three headings: (a) Use of the human body,
(b) Arrangement of workplace, (c) Design of tools and equipment.

(A) USES OF HUMAN BODY :

When possible:
1. The two hands should begin and complete their movements at the same
time.
2. The two hands should not be idle at the same time except during periods
of rest.
3. Motions of the arms should be made simultaneously.
4. Hand and body motions should be made at the lowest classification at
which it is possible to do the work satisfactorily.
(B) ARRANGEMENT OF THE WORKPLACE :
1. Definite and fixed stations should be provided for all tools and materials
to permit habit formation.
2. Tools and materials should be pre-positioned to reduce searching.
3. Gravity fed, bins and containers should be used to deliver the materials as
close to the point of use as possible.
4. Tools, materials and controls should be located within a maximum
working area and as near to the worker as possible.
5. Materials and tools should be arranged to permit the best sequence of
motions.
(C) DESIGN OF TOOLS AND EQUIPMENTS:
1. The colour of the workplace should contrast with that of work and thus
reduce eye fatigue.
2. The hands should be relieved of all work of ‘holding’ the work piece
where this can be done by a jig or fixture or foot operated device.
3. Two or more tools should be combined where possible.
4. Where each finger performs some specific movement, as in typewriting,
the load should be distributed in accordance with the inherent capacities of
the fingers.

WORK MEASUREMENT:
Work measurement is the application of techniques which is designed to
establish the time for an average worker to carry out a specified
manufacturing task at a defined level of performance.

Objectives of Work Measurement:

1. Comparing alternative methods.
2. Assessing the correct initial manning (manpower requirement planning).
3. Planning and control.
4. Financial incentive schemes.
5. Delivery date of goods.
6. Identifying substandard workers.
7. Training new employees.
Techniques of Work Measurement:
1. Time study: A work measurement technique for recording the times and
rates of working for the elements of a specified job carried out under
specified conditions and for analysing the data so as to determine the time
necessary for carrying out the job at the defined level of performance. In
other words measuring the time through stop watch is called time study.
2. Synthetic data: A work measurement technique for building up the time
for a job or pans of the job at a defined level of performance by totalling
element times obtained previously from time studies on other jobs
containing the elements concerned or from synthetic data.
3. Work sampling: A technique in which a large number of observations are
made over a period of time of one or group of machines, processes or
workers. Each observation records what is happening at that instant and the
percentage of observations recorded for a particular activity, or delay, is a
measure of the percentage of time during which that activities delay occurs
4. Predetermined motion time study (PMTS): A work measurement
technique whereby times established for basic human motions are used to
build up the time for a job at the defined level of performance.

TIME STUDY:
According to British Standard Institute time study has been defined as “The
application of techniques designed to establish the time for a qualified
worker to carry out a specified job at a defined level of performance.
Steps in Making Time Study:
Stop watch time is the basic technique for determining accurate time
standards. They are economical for repetitive type of work.
Steps in taking the time study are:
1. Select the work to be studied.
2. Obtain and record all the information available about the job, the operator
and the working conditions likely to affect the time study work.
3. Breakdown the operation into elements. An element is a instinct part of a
specified activity composed of one or more fundamental motions selected
for convenience of observation and timing.
4. Measure the time by means of a stop watch taken by the operator to
perform each element of the operation. Either continuous method or snap
back method of timing could be used.
5. At the same time, assess the operators effective speed of work relative to
the observer’s concept of ‘normal’ speed. This is called performance rating.
6. Adjust the observed time by rating factor to obtain normal time for each
element
Normal time = Observed time ×Rating /100
7. Add the suitable allowances to compensate for fatigue, personal needs,
contingencies. etc. to give standard time for each element.
8. Compute allowed time for the entire job by adding elemental standard
times considering frequency of occurrence of each element.
Standard time = Normal time + Allowances
9. Make a detailed job description describing the method for which the
standard time is established.
10. Test and review standards wherever necessary.

Problem1:
Assuming that the total observed time for an operation of assembling an
electric switch is 1.00 min. If the rating is 120%, find normal time. If an
allowance of 10% is allowed for the operation, determine the standard time.
SOLUTION:
Observed time (or) selected time = 1.00 min
Performance Rating = 120%
Allowance = 10%
As we know that, normal time = Observed time × Rating /100
= 1.00 × 120 /100 = 1.20 min
Allowance @ 10% = 1.20 × 10/ 100 = 0.12 min
∴ Standard time = Normal time + Allowances = 1.20 + 0.12 = 1.32 min.

Allowances:
The normal time for an operation does not contain any allowances for the
worker. It is impossible to work throughout the day even though the most
practicable, effective method has been developed. Even under the best
working method situation, the job will still demand the expenditure of
human effort and some allowance must therefore be made for recovery from
fatigue and for relaxation.
Allowances must also be made to enable the worker to attend to his
personal needs. The allowances are categorised as: (1) Relaxation allowance,
(2) Interference allowance, and (3) Contingency allowance.

Work sampling: It is the statistical technique used for determining the

proportion of time spent by workers or machines in various defined
categories of activity. Other names used for it are 'activity sampling',
'occurrence sampling', and 'ratio delay study'.
Work sampling is a method in which a large number of instantaneous
observations are made at random time intervals over a period of time or a
group of machines, workers or processes/operations. Each observation
 records what is happening at that instant and the percentage of observations
recorded for a particular activity or delay/idleness is a measure of the
percentage of time during which that activity or delay/idleness occurs”.

Performance Rating & Rating Methods:

Performance rating is the process of comparing the actual pace of working with the
mental picture of pace (speed) of an operator working at a normal speed. (A
normal speed or a standard pace of work is defined as the speed to which a time
study analyst has been trained depending upon environmental conditions, the way
the work is being done, the effort required to do the work.).

In other words, Rating is the assessment of the worker’s rate of working relative to
the observer's concept of the rate called the standard rating. Standard rating is the
average rate of pace at which a qualified worker will naturally work for, if he is
motivated to apply himself to work ie., he is not being forced to work.

There are different methods/ systems used for assessing performance rating. They
are:

1. Speed Rating Method

2. Westinghouse system of Rating
3. Synthetic Rating Method
4. Objective Rating Method

Speed Rating Method:

• Speed of movement of a worker is the only factor considered in speed

rating
• Rating personnel observes the movement of worker against a standard
expected pace or speed and notes the relationship between them as a
rating factor.
• In this method, performance rating or rating factor = actual speed of the
worker/ speed expected from the worker

Westinghouse system of rating:

 • Westinghouse system of rating is based upon 4 factors - skill, effort,
conditions and consistency.
• These four factors are further divided into sub factors and have numerical
factors associated with them. Numerical values may be positive and/ or
negative. The sum of numerical values of these sub factors give the
performance rating of the worker.

Synthetic rating method:

• In the synthetic rating system, the speed or the pace of the operator is
evaluated with the help of predetermined time values.
• If the predetermined time is available for a work element, then we record
the actual time taken for completing that elemental work element and then it
is compared with the predetermined value.
• The formula for computing the performance rating is: R= P/A,
R is the performance rating factor,
P is the predetermined time for the element and
A is the average actual time for the same element

Objective rating:

• This system of rating involves rating the speed of the operator against a
standard pace, independent of job difficulty and then adding an allowance
depending upon the job difficulty.
• The job difficulty is decided based on different factors like the amount of
body used, using both hands, both legs, more foot movements, eye hand
coordination, weight moved or lifted and handling requirements etc.

Job Evaluation:

Once a right candidate is placed on a right job, the person needs to be duly
compensated for the job he/she performs. In the pursuit of equal payment, there
should be established a consistent and systematic relationship among base
compensation rates for all the jobs within the organizations. The process of such
establishment is termed job evaluation.
Different jobs in an organization need to be valued to ascertain their relative worth
so that jobs are compensated accordingly and an equitable wage and salary
structure is designed in the organization.

“Job Evaluation can be defined as a systematic and orderly process of determining

the worth of a job in relation to other jobs”.

The objective of this process is to determine the correct rate of pay.

In simple worlds, job evaluation is the rating of jobs in an organization. This is the
process establishing the value or worth of jobs in a job hierarchy and compares the
relative intrinsic value or worth of jobs within an organization.

• It is a comparative technique. So the standards of job evaluation are relative,

not absolute.
• It assesses jobs , not workers
• It is generally conducted by groups, not individuals
• Always some amount of subjectivity is present
• It doesn’t fix pay scales but provides a basis for fixing scales. (other factors
like labor market conditions, collective bargaining etc are considered for
finalizing pay scales)
• The starting point for job evaluation is job analysis. No job can be evaluated
unless and until it is analyzed.

Terminology related to Job evaluation:

Job description: It is an organized, factual statement of the duties and

responsibilities of a specific job. In brief, it should tell what is to be done,
how it is to be done, and why. It is a standard of function, in that it defines
the appropriate and authorized content of a job
Job specification: It is a statement of the minimum acceptable human
qualities necessary to perform a job properly. It is a standard of personnel
and designates the qualities required for acceptable performance.
Job Analysis: It is the process of studying and collecting information
relating to the operations and responsibilities of a specific job. The
immediate products of this analysis are job descriptions and job
specifications.
Objectives of job evaluation:

1. Establish a standard procedure for determining the relative worth of each job in
an organization;

2. Ensure equitable wage for a job and reasonable wage differentials between
different jobs in a hierarchical organization;

3. Determine the rate of pay for each job which is fair and equitable with relation
to other jobs in the plant, community or industry;

4. Eliminate wage inequalities;

5. Use as a basis for fixing incentives and different bonus plans;

6. Promote a fair and accurate consideration of all employees for advancement and
transfer;

7. Provide information for work organization, employees‟ selection, placement,

training and other similar purposes;

8. Provide a benchmark for making career planning for the employees in the
organization and;

9. Ensure that like wages are paid to all qualified employees for like work.

Methods of Job Evaluation:

As the job evaluation is mostly a judgmental process that would probably use one
of the job evaluation methods, which are commonly grouped into two major
categories: quantitative and non-quantitative methods.

The basic difference between these two methods lies in the sense that, under non-
quantitative methods, a job is compared as a whole with other jobs in the
organization, whereas in case of quantitative methods, the key factors of a job are
selected and, then measured.

Non-quantitative methods (Non analytical methods):

1. Ranking Method

2. Job classification or grading method

Quantitative methods (Analytical Methods):

1. Point rating method

2. Factor comparison Method

Ranking Method of job evaluation:

This is simplest form of job evaluation method. The method involves ranking each
job relative to all other jobs, usually based on some overall factor like „job
difficulty‟. Each job as a whole is compared with other and this comparison of jobs
goes on until all the jobs have been evaluated and ranked. All jobs are ranked in
the order of their importance from the simplest to the hardest or from the highest
the lowest. The importance of order of job is judged in terms of duties,
responsibilities sand demands on the job holder.

Merits:
• Simple
• Quite Economical
• Less time consuming

Demerits:
• There are no definite standards of judgement
• Unmanageable when there are a large number of jobs. It is suitable only for
small organizations.

Job Classification or Grading Method: This is a simple, widely used method. This
method of job evaluation was made popular by the U.S. Civil Service Commission.
In the ranking system there is no re-determined yardstick of values. In the job
grading approach there is one such yardstick constituting of job classes or grades.
Jobs are measured as whole jobs. Under this method job grades or classes are
established by an authorized body or committee appointed for this purpose. A job
grade is defined as a group of different jobs of similar difficulty or requiring
similar skills to perform them. Job grades are determined on the basis of
information derived from job analysis. The example of job grades may include,
depending on the type of jobs the organization offers, skilled, unskilled, account
clerk, clerk cum typist, steno-typist, office superintendent, and laboratory assistant
and so on.
Merits: The job classification method has several advantages.
1. This method is easy to understand and simple to operate
2. It is economical and , therefore, suitable for small organizations.
3. The grouping of jobs into classifications makes pay determination problems
easy to administer.
4. This method is useful for Government jobs.

Demerits:
1. The method suffers from personal bias of the committee members.
2. It cannot deal with complex jobs which will not fit neatly into one grade.
3. This method is rarely used in industries.
4. It is difficult to know how much of a job’s rank is influenced by the man on the
job.
5. The system is rather rigid and unsuitable for large organizations or for very
varied work.

Quantitative Methods: Quantitative methods divide jobs into component parts

and require absolute or relative value judgments about how much of a component
part a particular job requires. The two most popular types of quantitative systems
are the point rating and factor comparison methods.

Point Rating Method: This is most widely used system of job evaluation. The
method evaluates the compensable factors of each job. It involves a more detailed,
quantitative and analytical approach to the measurement of job work. Under this
method jobs are broke down based on various identifiable factors such as skill,
effort, training, knowledge, hazards, responsibilities and so on. Thereafter, points
are allocated to each of these factors. Weights are given to factors depending on
their importance to perform the job. Points so allocated to various factors of a job
are then summed. Then, the jobs with similar total of points are placed in similar
pay grades. The sum of points gives an index of the relative significance of the
jobs that are rated.

Merits:

1. It is the most comprehensive and accurate method of job evaluation

2. Prejudice and human judgement are minimised. The method can not be
manipulated.
3. Being the systematic method, workers of the organization favour this method.
4. The scales developed in this method can be used for long time.
5. Jobs can be easily placed in distinct categories

Demerits:

1. It is both time-consuming and expensive method.

2. It is difficult to understand for an average worker.
3. A lot of clerical work is involved in recording rating scales.
4. It is not suitable for managerial jobs wherein the work content is not measurable
in quantitative terms.

Factors Comparison Method:

This is a combination of both rating and point rating methods. It means rates jobs
by comparing them and makes analysis by breaking jobs into compensable factors.
This system is usually used to evaluate white collar, professional and managerial
positions.

Merits:
1. It is more objective method of job evaluation
2. The method is flexible as there is no upper limit on the rating.
3. It is fairly easy method to explain to employees.
4. The use of limited number of factors (usually five) ensures less chances of
overlapping and over-weighting of factors.
5. It facilitates determining the relative worth of different jobs.

Demerits:
1. It is expensive and time consuming method.
2. Using the same five factors for evaluating jobs may not always be appropriate
because jobs differ across and within organization.
3. It is difficult to understand and operate.

Performance Appraisal:

Performance Appraisal is the systematic evaluation of the performance of

employees and to understand the abilities of a person for further growth and
development.
Performance appraisal is generally done in systematic ways which are as follows:

1. The supervisors measure the pay of employees and compare it with targets
and plans.
2. The supervisor analyses the factors behind work performances of
employees.
3. The employers are in position to guide the employees for a better
performance.

Objectives of Performance Appraisal:

1. To maintain records in order to determine compensation packages, wage

structure, salaries raises, etc.
2. To identify the strengths and weaknesses of employees to place right men on
right job.
3. To maintain and assess the potential present in a person for further growth
and development.
4. To provide a feedback to employees regarding their performance and related
status.
5. To provide a feedback to employees regarding their performance and related
status.
6. It serves as a basis for influencing working habits of the employees.
7. To review and retain the promotional and other training programmes.

Advantages of Performance Appraisal

1. Promotion: Performance Appraisal helps the supervisors to chalk out the

promotion programmes for efficient employees. In this regards, inefficient
workers can be dismissed or demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation
packages for employees. Compensation packages which include bonus, high
salary rates, extra benefits, allowances and pre-requisites are dependent on
performance appraisal. The criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance
appraisal helps the supervisors to frame training policies and programmes. It
helps to analyse strengths and weaknesses of employees so that new jobs can
be designed for efficient employees.
4. Selection Validation: Performance Appraisal helps the supervisors to
understand the validity and importance of the selection procedure
 5. Communication: For an organization, effective communication between
employees and employers is very important. Through performance appraisal,
communication can be sought for in the following ways:
a. Through performance appraisal, the employers can understand and
accept skills of subordinates.
b. The subordinates can also understand and create a trust and
confidence in superiors.
c. It also helps in maintaining cordial and congenial labour management
relationship.
d. It develops the spirit of work and boosts the morale of employees.
6. Motivation: Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a person’s efficiency can be
determined if the targets are achieved. This very well motivates a person for
better job and helps him to improve his performance in the future.

Wages and Incentives:

A wage is monetary compensation or remuneration paid by an employer to an
employee in exchange for work done.
Types of Wage systems:
(a) Time based wage system: This is the oldest method of wage payment.
“Time” is made a basis for determining wages of worker. Under this system,
the wages are paid according to the time spent by workers irrespective of his
output of work done. The wage rates are fixed for an hour, a day, week, a
month or even a year (seldom used).
Time wage system is suitable under following situations:
(1) When productivity of an employee cannot be measured precisely.
(2) Where quality of products is more important than the quantity produced.
(3) Where individual employees do not have any control over production.
(4) Where close supervision of work is possible.
(5) Where work delays are frequent and beyond the control of workers.
Advantages:
1. Simplicity:
The method of wage payments is very simple. The workers will not find any
difficulty in calculating the wages.
2. Security: Workers are guaranteed minimum wages for the time spent by them.
wages are paid irrespective of output. They are sure to set certain wages at the end
of a specified period of time spent in working.
3. Better Quality of Products:
When workers are assured of wages on time basis, they will improve the quality of
products.If some artistic nature products are produced, then this method will be
most suitable.
4. Support of Unions:
This method is acceptable to trade unions because it does not distinguish between
workers on the basis of their performance.
5. Less, Wastages:
The workers will not be in a hurry to push through production. The materials and
equipment’s will be properly handled leading to less wastage.
Limitations:
1. No Incentive for efficiency:
This method does not distinguish between efficient and inefficient workers. The
payment of wages is related to time and not output.
2. Wastage of time:
Workers may waste their time because they will not be following a target of
production.
3. Low production:
Since wages are not related to output, production rate may be low.
4. Difficulty to determine labour cost:
Because wages are not related to output, employees find it difficult to calculate
labour cost per unit.
5. Difficult supervision work:
Under this system, workers are not offered incentives for production. To get more
worker from them, there will be need for greater supervision. In wage system
supervision cost goes up to a great extent.
6. Employer-employee trouble:
When all employees, irrespective of their merit are treated equally, there is likely
to be a trouble between management and workers. Those employees, who are not
satisfied with this method, may start disobeying order from their superiors.

(b) Output based wage system or piece rate system:

Under piece system of payment, wages are based on output and not on time.
There is no consideration for time taken in completing a task. A fixed rate is paid
for each unit produced, job completed or an operation performed. Workers are not
guaranteed minimum wages under this system of wage payment.
Advantages:
1. Wages linked to efforts:
Under piece wage system, wages are linked to the output of a worker. The higher
the output, higher will be the wages.
2. Increase in production:
Production goes up when wages are paid according to piece rate system. Workers
will feel encouraged to increase output because their wages will also increase. This
system is fair to both employees and employers.
3. Better utilization of equipment/machines:
The machines and other equipment’s are put to maximum utilization. Workers may
not like to keep the machines idle.
4. Distinction between Efficient and Inefficient:
As in time wages system, efficient and in efficient workers are not given equal
treatment in the piece wage system. Efficient workers will get more because of
their better results..
5. Less supervision required:
Since payments are on the basis of output, workers will not waste time. They will
continue to work irrespective of supervision.
6. Effective cost control:
The increase in output will result in reduction of overhead expenses per unit. Some
of the overhead expenses being fixed, increase in production will reduce expenses
per unit..
Limitations:
1. No guarantee or minimum wage:
There is a direct relationship between output and wages. If a worker does not
ensure certain productions, then wages may also be uncertain.
2. Poor quality of goods/products:
The workers will bother more about the number of units otherwise more
supervisors are appointed to keep watch on quality of products being produced.
3. Not suitable for beginners:
The beginners will not be able to produce more goods because of less experience.
They will earn much low wages as compared to experienced workers because their
rate of production will be low. Thus, this system is not suitable for beginners.
4. Deterioration in health:
Workers may try to work more than their capacity. This may adversely affect their
health..
5. Cause of dissatisfaction:
There may be difference in earning of various workers. Some may earn less and
others may earn more.. Thus, this system can see dissatisfaction among workers.
6. Opposition from unions:
Piece-rate system of paying wages is opposed by trade unions. It encourages
rivalry among workers and it may become a cause of disunity.
Suitability:
Piece rate system is suitable under following situations:
(1) Where production quantity is more important than the quality of the product.
(2) When the work is of repetitive nature.
(3) When the mass manufacturing system of production is followed and the work is
standardized
(4) When it is possible to measure the production output of worker separately.
(5) When strict supervision is not required and difficult.
(6) When the production is dependent on human efforts.

Incentive Plans:

Output-Based Plans:

I. Taylor’s Differential Piece Rate System:

This system was introduced by Taylor, the father of scientific management. The
main characteristics of this system are that two rates of wage one lower and one
higher are fixed. A lower rate for those workers who are not able to attain the
standard output within the standard time; and a higher rate for those who are in a
position to produce the standard output within or less than the standard time.

For example, if standard production in 8 hours is fixed at 10 units. The lower piece
rate is Rs.3 and higher piece rate is Rs.3.5. If a worker produces 9 units, his wages
= 9 x 3 = Rs.27. In case a worker produces 10 units, his wages = 10 x 3.5 = Rs.35.

Advantages:
a. Provides incentives to efficient worker.
b. Inefficient worker is penalized.
c. This system is simple and easy to implement.

Disadvantages:
a. Minimum wage is not assured,
b. There are chances that quality of work may suffer,
c. This system is not liked by below average workers, as they do not get any
incentive.
II. Merrick’s Multiple Piece Rate Plan:
To overcome the limitations of Taylor’s differential piece rate system, Merrick
suggested a modified plan in which, three-piece rates are applied for workers with
different levels of performance.
These are:
a. Workers producing less than 83% of the standard output are paid at basic rate.
b. Workers producing between 83% and 100% of standard output will be paid
110% of basic piece rate.
c. Those producing more than 100% of the standard output will be paid 120% of
basic piece rate.
Advantages:
a. Efficient workers are rewarded handsomely.
b. Minimum wages are guaranteed.
Disadvantages:
a. There is wide gap in slabs of differential wage rate.
b. Over emphasis on high production rate.

III. Gantt’s Task and Bonus Plan:

. The main feature of this plan is that it combines time rate, piece rate and bonus. A
standard time is fixed for doing a particular job.

If a worker does not complete the job within standard time i.e. he takes more time
than the standard time (efficiency below 100%), he will not receive any bonus but
he is given wages for the time taken by him.

If a worker completes the job within standard time (100% efficiency), he is given
wages for the standard time and bonus of 20% of wages earned.

If the worker completes the job in less than the standard time (i.e. efficiency more
than 100%), wages are paid according to piece rate.

Advantages:
a. Minimum wages are guaranteed.
b. It is simple to understand.
c. Efficient workers can earn more money.
Disadvantage:
a. Emphasis on over speed or high production rate.
Time-Based Plans:

I. Halsey Incentive Plan:

In this method a standard time is fixed for the completion of the job. A minimum
base-wage is guaranteed to every worker. If a worker completes his job in just the
standard time, he will not be given any incentive. If a worker performs his job in
less than standard time, he is given incentive. The incentive will be equal to 50%
of the time saved by the worker.
W=TR+(S-T)R/2
Where
W=Total Wages
S=Standard time
T=Time taken to complete the job
%=Percentage of wages of time saved to be given as incentive
R=Rate;
For example, if rate hour is Rs.3 standard time for completion of job is 10 hours.
A worker completes the job in 8 hours, his total wages will be:
W= 8x 3+ (10-8)3×1/2
= Rs.27
In the above example, worker is given an incentive of 50% (1/2) of time saved.
Advantages:
a. It is simple.
b. Each worker is guaranteed a minimum wage.
c. This is beneficial to efficient worker.
d. Causes no harm to new worker, trainee, or slow worker.
e. Management shares benefits of over-achievement by workers.
Disadvantages:
a. Workers get only a percentage of return on their over-achievement.
b. The quality of production may suffer as workers may do work in hurry,
c. There may be difficulties in setting standard time for different jobs.
II. Rowan Plan:
This plan is quite similar to Halsey plan. It differs only in terms of calculation of
incentive for time saved. The worker gets the guaranteed minimum wages. The
incentive for completing the job in time lesser than standard time is paid on the
basis of a ratio, which is time saved over standard time per unit standard time.
Incentive is calculated as:
Incentive or Bonus=[(S-T)/S]X T x R
Total wages=T x R+ incentive
=T x R+[(S-T)/S] x T x R
Where, W=Total wages
S=Standard time
T=Time taken to complete the job
R=Rate;
For example, if rate per hour is Rs.3and standard time for completion of job is 10
hours.
A worker completes the job in 8 hours, his total wages will be:
W=8×3+ (10-8)/10x 8x 3=Rs.28.4
Advantages:
a. This system checks over-speeding and overstrain by worker.
b. Each worker is guaranteed a minimum wage.
c. Efficiency is rewarded.
Disadvantages:
a. The workers find it difficult to understand.
b. Discourages workers to over-achieve.
c. Workers may not like sharing of profit for over-achievement.
III. Emerson’s Efficiency Plan:
In this plan, a minimum wage is guaranteed to every worker on time basis and
incentive is given on the basis of efficiency. Efficiency is determined by the ratio
of time taken to standard time.
Payment of bonus/incentive is related to efficiency of the workers. Incentive will
be given to those workers who attains more than 2/3rd i.e. 66.67% of efficiency. No
incentive will be given at 66.67% efficiency.
At 100% efficiency incentive is 20% of the hourly rate.
For efficiency exceeding 100%, 1% incentive/bonus is paid for every 1% increase
in efficiency.
For example, if standard time for a job is 6 hours and hourly rate is Rs.3. If a
worker completes a job in 6 hours, the efficiency of worker is 100%. His wages
will be 6 x 3 + bonus @20% i.e. Rs.18 + 20% of 18 = Rs.21.6
Advantages:
a. Minimum wages are guaranteed.
b. It is simple to understand.
Disadvantages:
i. Incentive after attaining standard is very low.