Industrial Management and

Safety
Subject Code: 5001

Module#1
Management
• Process of Planning, Organizing, Directing and Controlling the resources of an organization in
the efficient and effective way to achieve specified organizational goal.
• Process of getting the work or the task done that is required for achieving the goals of an
organization in an efficient and effective manner.
• Process of managing 6M’s

• Men
• Materials

• Money
• Machinery
• Market

• Method
Administration

• According to Theo Haimann, “Administration means overall determination of policies, setting

of major objectives, the identification of general purposes, and laying down of broad
programs and projects”.

Key Differences Between Management and Administration

1. Management is a systematic way of managing people and things within the organization. The
administration is defined as an act of administering the whole organization by a group of
people.

2. Management is an activity of business and functional level, whereas Administration is a high-

level activity.

3. While management focuses on policy implementation, policy formulation is performed by

the administration.

4. Functions of administration include legislation and determination. Conversely, functions of

management are executive and governing.

5. A group of persons, who are employees of the organization, is collectively known as

management. On the other hand, administration represents the owners of the organization.

6. Management is all about plans and actions, but the administration is concerned with framing
policies and setting objectives.

Theories of Management
Frederick Wilson Taylor’s Scientific Management Theory

4 principles of Scientific Management:

1. Develop a science of work- The science of work would be achieved by measuring output, and
by performing detailed studies of time and human movement. With these studies,
 improvements could be made to the tools and workstation designs used by workers, which
would increase effectiveness.

2. Scientific selection and training- Workers should be scientifically selected and trained.
Frederick Taylor theorized that workers had different aptitudes, and that each worker should
be fitted to the job. The task of management was therefore to select the workers fitting to
the specific job, and also to scientifically train every worker in the most productive way of
performing the specific task. By doing this correctly, every worker would be selected and
trained to achieve his/her utmost potential.

3. Educate workers and managers in the benefits of Scientific Management- Both workers and
managers should be educated in understanding the benefits of scientific management.

4. Specialization and collaboration between workers and managers - Management should focus
on developing, designing and supervising improved systems, whereas workers should
concentrate on performing their manual duties. If everyone fulfils their respective role, no
conflict would arise between management and workers, since the Scientific Management
approach would find the best solution for all parties concerned.

Contributions of F.W Taylor

a) He developed the principles of breaking a task into elements for timing the same.

b) He conducted time study to recognize losses of efficiency in industrial operations.

c) He defines 'A fair days task', and undertook studies on fatigue incurred by the worker and
the time necessary to complete a task.

d) He evolved the principles of - Investigate a work on scientific basis, selecting the best worker
for a task, and training him to acquire desired skill, developing cooperative spirit between
management and workers.

e) He developed the functional organization in which each specialist or foreman was made in-
charge for each function.

f) He establishes work standards through time study.

g) He introduced a wage incentive scheme known as "Taylor's differential piece rate system".

h) He introduced and operated various costing systems.

Henri Fayol’s Principles of Management

Henry Fayol, also known as the ‘father of modern management theory’

According to Fayol the activities of industrial organization could be divided into six categories:

1. Technical (Production and Manufacturing)

2. Commercial (Buying, Selling and Exchange)

3. Financial (Acquiring and using capital)

4. Security (Protection of Property and persons)

5. Accounting (Stock taking, Balance Sheet, Cost and Statistics)

 6. Managerial (Planning, Organizing, Command, Coordination and control)

14 Principles of Management

1. Division of Work - Henri believed that segregating work in the workforce amongst the
worker will enhance the quality of the product. Similarly, he also concluded that the division
of work improves the productivity, efficiency, accuracy and speed of the workers. This
principle is appropriate for both the managerial as well as a technical work level.

2. Discipline - Without discipline, nothing can be accomplished. It is the core value for any
project or any management. Good performance and sensible interrelation make the
management job easy and comprehensive. Employees good behavior also helps them
smoothly build and progress in their professional careers.

3. Discipline - Without discipline, nothing can be accomplished. It is the core value for any
project or any management. Good performance and sensible interrelation make the
management job easy and comprehensive. Employees good behavior also helps them
smoothly build and progress in their professional careers.

4. Unity of Command - This means an employee should have only one boss and follow his
command. If an employee has to follow more than one boss, there begins a conflict of
interest and can create confusion.

5. Unity of Direction - Whoever is engaged in the same activity should have a unified goal. This
means all the person working in a company should have one goal and motive which will
make the work easier and achieve the set goal easily.

6. Subordination of Individual Interest - This indicates a company should work unitedly

towards the interest of a company rather than personal interest. Be subordinate to the
purposes of an organization. This refers to the whole chain of command in a company.

7. Remuneration - This plays an important role in motivating the workers of a company.

Remuneration can be monetary or non-monetary. However, it should be according to an
individual’s efforts they have made.

8. Centralization - In any company, the management or any authority responsible for the
decision-making process should be neutral. However, this depends on the size of an
organization. Henri Fayol stressed on the point that there should be a balance between the
hierarchy and division of power.

9. Scalar Chain - Fayol on this principal highlight that the hierarchy steps should be from the
top to the lowest. This is necessary so that every employee knows their immediate senior
also they should be able to contact any, if needed.

10. Order - A company should maintain a well-defined work order to have a favorable work
culture. The positive atmosphere in the workplace will boost more positive productivity.

11. Equity - All employees should be treated equally and respectfully. It’s the responsibility of a
manager that no employees face discrimination.

12. Stability - An employee delivers the best if they feel secure in their job. It is the duty of the
management to offer job security to their employees.
 13. Initiative - The management should support and encourage the employees to take initiatives
in an organization. It will help them to increase their interest and make then worth.

14. Esprit de Corps - It is the responsibility of the management to motivate their employees and
be supportive of each other regularly. Developing trust and mutual understanding will lead
to a positive outcome and work environment.

Functions of Management

1. Planning: Planning is concerned with future. Planning means thinking before doing. It determines
the objectives of the firm and means for achieving them. It is choosing an effective/beneficial course
of action from among various alternatives. Before starting the actual work it should be decided

What is to be produced?

How much is to be produced?

How to be produced?

When to be produced?

Who are to produce it?

Where is the market?

2. Organising: After objectives and plans have been established management must then organize
human and physical resources of the firm. Organising includes the provision of physical facilities,
capital and personnel (material, men and machinery) and establishing a frame work in which
responsibilities are defined and authorities are laid down. In short, the process of organising
involves:

Divide the work into component activity.

Assign people to task.

Define responsibility.

Delegate authority.

Establish structural relationship

3.Staffing: Staffing is the process of selecting, training, promoting and retire the work force. Staffing
involves the developing and placing of qualified people in the various jobs (right people, right place
and at right time in the organisation.

Functions of staffing:

. Manpower planning, i.e. assessing manpower requirements in terms of quality;

. Recruitment, selection and training

. Placement of manpower

. Development, promotion, transfer and appraisal

. Determination of employee remuneration.

4. Directing: It means the process by which the plans are guided and performed into operation.
Directing involves motivating, guiding and supervising subordinates towards company objectives.
Directing thus involves the following elements:

. Giving instructions to subordinates.

. Guiding the subordinates to do the work.

. Supervising the subordinates to make certain that work done by them is as per the plans
established.

. Finding variance of deviations, if any; and

. Taking corrective actions or measures.

5.Controlling: The function of control is to match actual performance with the plans and to point out
defective work to rectify them and prevent reoccurrence. Controlling process set standards to
measure the performance and take corrective action if required. The various forms of controlling are
Quality Control, Cost Control, Inventory Control, Production Control, Personnel Control. The process
of controlling involves the following steps:

. Establishing standards of performance

. Ensuring actual performance

. Comparing the actual performance with the standard

. Finding variance of deviations, if any

. Taking corrective actions or measures.

6.Decision making: Decision making is the process by which a course of action is consciously chosen
from available alternatives for the purpose of achieving desired results. It is the most important job
of management and we can say that good decision-making ability is key to a successful carrier in
management. Scientific technics and new concepts are to be practiced by the managers to enable
them to take effective decisions

Types of Organization

Organisation is defined as the machinery which establishes the coordination between administration
and management.

This machinery fixes the responsibility and authority to the workers and managerial people and
makes them linked in a particular structure.

The industrial activity demands that each and every employee should be performed in a systematic
and organised method.

The structure of one industrial organisation depends upon:

➢ Size of the organisation

➢ Nature of product.

➢ Complexity of problems being faced.

Types of Organisational structure

1. Line or Military or Scalar organisation.

2. Functional organisation.

3. Line and Staff Organisation.

1. Line or Military or Scalar organisation.

. In this type of organisation, the authority flows directly from top to bottom.

. Line organisation is direct and people at different levels know to whom they are accountable.

. The supervisor (boss) gives orders to subordinate officers, assign duties, take disciplinary
actions against them, i.e. each department head is in sole control over his section.

. Since the authority flow and communication is from top to bottom in a vertical line, this is
also called line or scalar organisation.

. This is called military organisation because it explains a well-defined authority and

responsibility for every position. It also assumes strong discipline.

Advantages

1. It is simple and very easy to understand.

2. It is flexible.
3. It gives clear division of authority and responsibility.
4. It permits quick decisions and speedy actions.
5. Strong in discipline like in military.
6. Shifting of responsibility is not possible.
7. It is capable of developing the all-round executive at the higher levels of authority.
8. It gives increased efficiency and operations.

Disadvantages

1. It neglects specialist role.

2. Overloads few key executives.
3. Chances of wastage, accident and labour turnover are more, because of insufficient
knowledge of all the work by one man.
4. No means for rewarding good workers.
5. Department heads are overloaded with various routine works, hence no time to think for
future expansion and planning.
 6. As the orders flow from top to bottom chance of loss and distortion of information possible.

Application

It is suitable for continuous process industry, like sugar, paper and oil refiner and automatic plants.

It is also suitable for educational institutions and industries which are free from complexities.

2. Functional organisation.
FW. Taylor suggests functional organisation because it was difficult to find all-round expert persons
qualified to work at middle management level in the line organisation.

In this type specialist people like chemist, designer, repair boss, speed boss, inspector, rout clerk,
disciplinarian etc. are having direct and equal authority over the workers.

Each functional foreman who is a specialist in an activity is in-charge of one function.

Advantages

1. It is based on expert knowledge

2. Experts’ guidance leads to better quality products and reduces wastage, accidents and man-
machine hours.
3. Unnecessary overloading of responsibilities will not be there, so top executives get time for
planning for future expansion.
4. No special knowledge of workers is required as the instructions are supplied by experts.
5. Since foreman is responsible for one function, he can perform his duties in a better manner.
6. If any operation needs improvements, it can be improved even up to the last moment.
7. It helps mass production by standardisation and specialisation.

Disadvantages

1. It is difficult to maintain discipline.

2. Functional experts may feel himself to be superior than the others, so that coordination of
the effort of various experts is difficult.
3. Workers always remain confused about the authority and activity of each foreman.
4. Shifting of responsibility is possible.
5. Overlapping of responsibility is possible.
6. Failure of one expert will largely effect the production
 7. As the workers are not given opportunity to make use of their ingenuity, initiative and drive
their full capacity cannot be utilised

Application

In practice a pure functional organisation is rarely found. A combination of line and functional
organisation can be seen, where responsibilities are divided into functional basis and keeping a line
relationship.

3. Line and staff organisation

In large organisation operating on a big scale, managers cannot give careful attention to every part of
the management. They are unable to think and plan. They are busy with ordinary task of production
and sales.

Hence some staffs are deputed to do the work of investigation, research, recording and advice to
managers. Thus, staff brings specialisation by assisting the line officers.

The line maintains the discipline and stability. Staff provides expert information and helps to improve
the overall efficiency. Thus, the staff are the thinkers and the line are doers.

Usually, the staff reports to the executive and gives advice on the subject of his speciality.

Advantages

1. It is a planned specialised system, so expert knowledge is available.

2. Line executives are relieved of some of their loads and are thus able to devote more
attention towards production.
3. Less wastage of material, man and machine hours.
4. Quality of product is improved.
5. Discipline problem is solved because of line relationship
6. There is no confusion as in the functional organisation.
7. It possesses all the advantages of line and functional organisation.

Disadvantages

1. Product cost will increase because of high salaried staff executives.

 2. In case functions are not clear it may create confusion.
3. Friction and jealousies if developed between line and staff executives may cause harm to the
enterprise.
4. Line executive if they start depending too much on staff executives may lose their initiative
drives and ingenuity.
5. Sufficient expert knowledge and guidance is not available as compared with functional type
organisation.

Application

Line and staff organisation is very common among medium and large enterprises

TYPES OF OWNERSHIPS
Ownership of business is represented by the right of an individual or a group of individuals to
acquire legal title to assets, and to enjoy the gains or profits from such possessions and controlling
them.

TYPES OF OWNERSHIPS
1. Individual or sole proprietorship
2. Partnership
3. Joint stock company
(a) Private Ltd. Company.
(b) Public Ltd. Company
4. Cooperative Society.

1. Individual ownership or Sole proprietorship

▪ This type of business is owned by a single man.
▪ The owner invests capital, employees labor and machines, hence he enjoys all the benefits.
▪ The owner has the rights to determine the plans and policies of operation.
▪ The owner is fully liable for all debts associated with the business.
Advantages
1. Easy for formation as it does not require to complete any legal formality.
2. Owner is free to make any decisions.
3. Simplicity in the organization and expenses in starting are minimum.
4. The owner can meet the customer's taste directly.
5. The secrecy can be maintained (material, process, method etc.)
6. It is more flexible and product variety can be changed.
7. The efforts and rewards are directly related.
 8. Minimum legal restrictions.
9. Since the supervisor is the proprietor himself, the overhead expenses are very less and
products can be obtained cheaply.
Disadvantages

1. The owner cannot be master of all techniques like management, sales, engineering, process
etc. Hence work suffers.
2. If the business fails, creditors can take the personnel property as well as business property of
the owner to settle their claim. So, this involves unlimited liability for debts and losses.
3. The capital is limited, therefore modem firms with sophisticated machines cannot run with
this type of organization.
4. The firm may stop with the death of the proprietor.
Application
This type of ownership is suitable in the following cases,
1) When the business can be taken care by one single person in all functions of management.
2) Enterprises requiring small capital.
3) For business which don't involve high risk or failure. Example: Starting a printing press, auto
repair shop, small fabrication/engineering industry, wood working shop etc.

2. Partnership organization
▪ Partnership organization is an association of two or more persons to carry on as CO-owners
of a business for profit

▪ The partnerships depend on mutual confidence, adjustment and cooperation between the
partners. Every partner is liable for the acts of partners.

▪ To avoid any complication at a later stage, the constitution of the company may be written in
an agreement form.

Kinds of Partners

1. Active Partners: Who take active part in the management of the business enterprises.

2. Sleeping Partners: Who do not take any active part in the business process, but invest their
money.

3. Nominal Partners: Who do not invest money and do not take part in the management, but
they lend their reputed name for the company’s product/service.

4. Secret Partners: Whose name do not appear anywhere, but they took part into the
management secretly.

5. Minor Partner: Who has not attained the age of 18 years.

6. General Partners: All the partners in the organization is known as general partners.
Advantages

1. Large capital can be collected than that of the sole trade.

2. The firm possess much better talent / skills from different partners.

3. There is a definite legal status.

4. Partnership can borrow money easily from various financial institution.

5. Incentive for success is high.

6. Partnership associates tax advantages with it.

7. Not subjected to strict government supervision.

8. For all losses there are more than one person to share.

Disadvantages

1. Mistake of one partner may cause a big loss to all the partners.

2. Due to unlimited liability, risk involved is more.

3. Chances of misunderstanding among partners which affect adversely on the efficiency and
expansion of business.

4. It is unsuitable for modern industries because they require huge capital.

5. Partnership comes to an end if a partner dies.

6. Investors and lenders hesitate to provide money because of lack of stability of a partnership
firm.

Application

7. Medium engineering firms, law firms, cinema theatres, educational institutions, medical
clinics, retail traders etc.

3. Joint stock companies

▪ Because of the various limitations of sole trade and partnership firms like Lack of capital and
managerial resources, and the burden of risk and unlimited liability, the company form of
business emerged.

▪ Apart from these limitations, the introduction of advanced technologies, economies of large-
scale production and other developments in the field of industry and commerce compelled
business men to think of a bigger form of organization.

▪ A joint stock company is an association of several persons called shareholders who joined
together for profit and agree to supply capital divided into shares that are transferable for
carrying a specific business.

There are two types of joint-stock companies,

a) Private limited company.

b) Public limited company.

 a) Private limited company

▪ Actually, a private joint stock company resembles much with partnership and has the
advantage that big capital can be collected.

▪ The capital is collected from the private partners (Maximum members 50); Some of them are
active while others being sleeping.

▪ Transfer of shares is limited to members only and general public cannot be invited to
subscribe the shares.

▪ The company need not make the prospectus, accounts and other particulars open to public
but it must get its accounts audited.

▪ The members only are entitled to receive a copy of the balance sheet, and auditor's report.

▪ The government does not interfere in the working of the company.

b) Public limited company

▪ In Public Limited Company, the capital is collected from the public.by small shares of value of
Rs.5, 10, 20, 50 etc.

▪ The number of shareholders should not be less than seven, but there is no upper limit.

▪ Shares are transferable in part or full without requiring any prior approval.

▪ The affairs of the company are managed by an elected body known as 'Board of Director. The
directors of the company (Maximum 7 directors) are subject to rotation.

▪ A public company has to issue a prospectus, to public and it should send the financial
statements to all members and to the registrar.

▪ It must get its accounts audited every year by registered auditors.

▪ It can start only after receiving the 'Certificate to Commence Business'.

Distinction between private & public limited company

➢ Numbers of members

➢ Commencement of business certificate

➢ Issue of prospectus

➢ Transfer of shares

➢ Number of directors

➢ Statutory meeting

Advantages of joint stock companies (public limited company)

1. The liability being limited, the shareholders bear no risk and more and more persons are
encouraged to invest capital. So huge amount of capital can be collected to run modern
industries.

2. It has great potentialities for expansion.

 3. Shares are transferrable.

4. Specialist services can be utilized.

5. Risk or loss is divided among many shareholders.

6. It can bear big salaries and thus better administration.

7. Not affected by the death or retirement of the shareholders.

Disadvantages of joint stock companies (public limited company)

1. There is sufficient scope for the management for their personnel profits, because they know
the financial position of the company, therefore they can purchase or sell the shares
accordingly.

2. A good deal of legal formalities is required for the formation of joint stock company.

3. The team spirit with which partnership works, is lacking in a joint stock company.

4. It is difficult to preserve secret in these companies.

5. High paid managers cannot have high interest in the company as the proprietor can have.

6. People can commit frauds with the company.

7. Company is managed by big shareholders only.

Application

Fertilizer factories, steel mills and heavy-duty engineering concerns etc.

4. Cooperative societies
▪ A cooperative organization does not aim at the maximization of profit.

▪ The idea is to stop the exploitation of customers, workers, agriculturists and society in
general by business man and money lenders.

▪ Philosophy of the cooperative form of business organization: mutual help, service to society,
no profit maximization, working together, Equality of opportunity etc.

▪ The slogan of cooperation is "one for all and all for one"

Principles of cooperative societies

▪ Voluntary association.

▪ Democratic management.

▪ Not profit motive.

▪ Self-help and mutual help.

▪ Open door policy.

▪ Distribution of Surplus.
PERSONNEL MANAGEMENT
What is personnel management?

▪ The wastage of material, money, time and energy can be minimized if right person is placed
at the right place.

▪ In short managing man is the personnel management.

Functions of Personnel Management

▪ Discovers the talented experienced, qualified, competent workers to take up various jobs.

▪ Ensures maximum productivity per worker by providing right man on the right job.

▪ Keeps the management informed of the present and future requirements due to transfers,
promotions, labor turnover, or death etc.

▪ Develop personnel for higher positions with greater challenges and responsibilities.

▪ Enables best possible utilization of human resources resulting in reduction of labor cost per
unit of production.

▪ It gives workers, job satisfaction and essence of happiness due to proper placement.

▪ Ensures attractive pay which provides mental satisfaction to workers.

MANPOWER PLANNING

▪ Manpower planning may be defined as a strategy for the acquisition, utilization,

improvement and preservation of human resources of an enterprise.

▪ This involves ensuring that the firm has enough of the right kind of people at the right time
and also adjusting requirements to the available supply.

Objectives/requirements of manpower planning

1. To ensure optimum use of human resources currently employed.

2. To forecast future skill requirements.

3. It provides control measures to ensure that necessary resources are available as and when
required.
 4. To determine the recruitment level.

5. To determine optimum training levels.

6. To cost the manpower in projects.

7. To assist productivity bargaining.

8. To link manpower planning with organization planning.

9. To decide whether certain activities need to be subcontracted.

Factors Affecting Manpower Planning:

1. Exciting Stock of Manpower: By studying the position of total stock of manpower, by dividing
it into groups on the basis of function, occupation, level of skill or qualification, we can
analyze the existing stock of manpower.

2. Wastage: For a good planning, appropriate adjustment in the existing stock of manpower
should be made for the possible wastage of manpower caused by any foreseeable changes in
the organization. Labor turnover rate, labor stability rate etc. can be studied to analyze the
wastage of manpower.

3. Future Manpower Requirement: We can easily measure the future requirements of

manpower, after assessing the existing stock of manpower and analyzing the several factors
of wastage.

JOB EVALUATION
➢ In every organization there are different types of jobs having different characteristic.
Depending upon the job characteristics factors like qualification, skill, experience physical
ability, aptitude may vary.

➢ Therefore, the various jobs in an industry are to be analyzed and classified into different
grades based on their requirements and varying factors. This process is known as job
evaluation which helps in rewarding the job according to its real value.

➢ It is the measuring of monetary worth of a job and determining the wages for the job.

➢ It enables to maintain a high degree of standardization in wage levels in all its plants.

➢ It also eliminates wage disparities for similar jobs in the same department or different
departments.

Job Evaluation Process

1. Job Description

2. Approval

3. Review

4. Evaluation

5. Confirmation
Methods of job evaluation

➢ Non-quantitative type

➢ Quantitative type

1. Non-Quantitative type job evaluation

a. Ranking system

b. Rating or Grading or Classification system.

a. Ranking system:

• This is the simplest method. The job to be evaluated are ranked according to the value of the
work as judged by the rankers.

• The ranking may be done by a trained analyst or by a committee of competent men. In

ranking a job, the following factors may be considered.

1. Volume of work.

2. Difficulty of work.

3. Working conditions

4. Responsibility involved

5. Monotony of work.

6. Working conditions.

Procedure for ranking the jobs

1. List all jobs that are to be evaluated.

2. Competent persons are selected as rankers and a committee is constituted.

3. The ranking is done independently by the committee members.

4. The ranking done by the individuals is reviewed by the committee. The discrepancies found is
discussed and set right.

5. Similar procedure is adopted a number of times with an interval of 2 to 3 days. Total number
of observation is given by the formula as follows: N (N -1) / 2, where N is the number of jobs
to be evaluated. If the number of jobs to be evaluated-is 5, then the number of observations
to be made is 5 (5-1) /2 =10.

6. The ranking thus made are averaged and the final ranking job is determined.

b. Rating or Grading or Classification System

• In ranking system, each job is ranked as higher or lower than the other. In few cases, there
may not be much difference between any two ranking of jobs in requirement of skill,
knowledge, responsibility, difficulty etc.,
 • All such jobs of equal or of little difference are grouped together and classified into a single
grade. This method of evaluation is known as Rating or grading system.

• Thus, here each job family can be broken into number of grades. For example, welding job
may be graded as class A, Class B and Class C. Where Class A is welding of pressure vessels
which requires high skill and responsibility. Class B is welding of Normal joints which requires
medium skill and performance. Class C may deal with welding furniture which requires less
skill and responsibility. Each Grade or class carries an appropriate scale of pay.

2. Quantitative methods of Job evaluation

a. Factor Comparison

b. Point or Manual System.

a. Factor comparison system

This method uses the following 5 factors for evaluating different jobs

1) Skill required

2) Mental effort required

3) Physical effort required

4) Responsibility

5) Working conditions

Procedure for factor comparison system

➢ Find out some key jobs in the organization and note their wages.

➢ Analyze the key jobs in terms of 5 factors above.

➢ Allocate the salary for each of the key jobs considering 5 factors (For example Key job A- -
Skill - Rs 150, Physical effort-40, etc.)

➢ Now compare the job to be evaluated with the key job (For example the work to be
evaluated- Skill- Rs 120, Physical effort Rs 75)

➢ Continue this process in all other jobs in comparison with the key jobs.

b. Point system

In the system, the value of the job is expressed in terms points.

This method is very popular, systematic and accurate.

This method consists of,

1. Divide the job into number of factors.

2. Award certain points for each job.

3. Arriving at total points for each job.

4. Determining a suitable wage rate proportional to the total points.

 5. Classify the total points into grades as given below.

For the above hypothetical example, the total points vary from 180 to 300, This range may be divided
into four grades:

Grade – I 150 - 199 points

Grade – II 200 - 249 Points

Grade – III 250 - 299 Points

Grade – IV 300 - 349 Points

MERIT RATING

MERIT RATING

➢ As explained earlier the job evaluation measures relative worth of jobs without considering
the merits of the person doing the job.

➢ Here merit rating assesses the merit of the person doing the job like loyalty, integrity,
intelligence, leadership qualities, dependability, character etc. i.e., it measures the extent to
which an employee meets job requirements.

➢ The first determines the wage structure for the job and the second (merit rating) decides the
rewards an employee should get in addition to his wages, depending upon his merits. Merit
rating gives a basis for determining wage increment, promotion, training transfer, special
incentives etc.

➢ Merit rating is commonly known as employee rating, employee appraisal, performance

appraisal or staff reporting.

Method of merit rating

Rating scale method is generally used for merit rating.

The steps involved in this method are,

Merit factors to rate the employees are decided. The different factors are,

1.Standard output 7.Job knowledge 13.Education

2.Character 8.Cooperation 14.Dependability
3.Quantity of output 9.Enthusiasm etc. 15.Leadership
4.Integrity 10.Reliability 16.Experience
5.Loyalty 11.Creative ability 17.Judgment
6.Intelligence 12.Initiative. 18.Organizing ability
 ➢ Six to ten factors, depending on the nature of job, may be used for rating an employee.

➢ Each factor is divided into different grades like excellent, very good, good, fair, poor etc..,

➢ For each grade certain points or marks are fixed.

➢ Merit factors are selected for an employee to be rated.

➢ Marks are awarded by the raters, for each factor.

➢ Total marks obtained is the rating of that employee.

TRAINING
The training of Employees is essential in order to:

1. Improve productivity and quality.

2. Ensure an adequate supply of properly trained employees at all levels of industry.

3. To reduce wastage, accidents, fatigue, labor turnover, absenteeism and overtime.

4. To boost employee morale, cooperation and good relations.

5. To inculcate a broad understanding of relevant science and technology.

6. To teach standardized work methods.

7. To promote team work.

8. To inculcate good work habits.

9. To improve the performance of each employee to the highest level.

TYPES OF TRAINING

Major methods of training:

1. On the job training.

2. Apprentice training.

3. Vestibule school training.

4. Training by skilled, experienced and old workers.

1. On the job training

➢ Under this method, supervisor gives instructions to the new worker about the job to be
made.

➢ Supervisor explains the use of machines and tools and the procedure for the performance of
the job.

➢ Then the new worker is asked to try himself and make the job.

➢ Mistakes, if any, committed by new worker is kept under constant watch until he develops
correct work habits.
 2. Apprentice training

➢ A person under training is called apprentice.

➢ This training includes an academic side as well as practical one. i.e., trainee attend certain
theory class or courses as well as practical training.

➢ For this, special instructor may be employed or the supervisor of the shop floor gives
training.

➢ The trainee may be rotated in different department to gain full understanding of all the
function.

➢ The trainee will get a stipend from the concerned government.

3. Vestibule school training

➢ This type of training is generally given in the vestibule (entrance hall) of the company, before
actual entry to the shop floor.

➢ The trainees will be admitted to the training school where they undergo a plan course of
instructions and practice in a similar type of machines of that of shop floor.

➢ After the trainees achieve proficiency, they are transferred to production floor to take up
regular production work without delay.

Advantages of Vestibule school training

1. A large number of trainees can be given similar training.

2. This training does not damage actual production like on the job training.

3. Instructors are not worried about the production, because they are not directly related to
production.

4. Wastage, spoilage of raw materials and damage to production machineries are eliminated.

Disadvantages of Vestibule school training

1. It is costly affair and so small industries cannot afford the training expenditure.

2. Production machines need be duplicated.

4. Training by skilled, experienced and old workers

➢ The new worker is attached with an old, skilled and experienced worker.

➢ The new worker watches the experienced worker while he works and then tries to do the
same himself in the same way.

➢ From time to time he gets instructions from the skilled worker also.

ADVANTAGES OF TRAINING

1. To increase the efficiency of workers/supervisors.

2. To reduce wastage of materials, machine and man hour.

3. To increase productivity and reduces production cost.

 4. Reduced supervision and improved product quality.

5. It gives job satisfaction.

6. It reduces labor turnover and chances of accidents.

7. Less fatigue to the workers.

8. Increased organizational stability and flexibility.

9. Specialization and standardization is easy.

10. It can boost the morale, cooperation and good relation.

11. It helps to build team spirit.

LABOUR TURNOVER

Causes of Labor Turnover

1. Voluntary withdrawals (by the worker) Due to,

• dislike for the present job

• better job available elsewhere

• conditions at home

• ill-health

• poor working conditions

• bad treatment from the boss

• lower wages and excessive hours of work

• job being hard and hazardous

• poor training and induction

• dirty politics prevalent in the industry

• partiality in making promotions and transfers

• due to ineffective and inefficient management.

2. Lay-offs due to seasonal nature of industry, shortage of power, fuel, raw material, etc.

3. Discharges due to undesirable activities of the employees, insubordination or they being

found unsuitable for the job.

2. Retirement.

3. Death.
 WAGES

Importance of good wage payment system

➢ It enables the employee to earn a good and reasonable salary or wage.
➢ It pays equitable sums to different individuals, avoiding anomalies.
➢ It should be understandable and acceptable to the employee.
➢ It rewards and encourage high quality work.
➢ It encourages employees to accept the changes in methods of working.
➢ It encourages employees to use their initiative and discretion.
➢ It encourages employees to develop better methods of working.
➢ It rewards and encourage high level of outputs.
➢ It motivates a team spirit and cooperation.
➢ It improves employer-employee relations.
➢ It gives job satisfaction and job enrichment.
➢ It promotes peace and harmony in the organization.
➢ A good wage system will make the administration easier.
➢ It improves overall efficiency of the organization

TYPES OF WAGES

1. Nominal Wages

➢ It is the amount of money paid to a worker in cash for the effort put in by him in an industry
and no other advantage to the worker is made.

➢ This is also called money wages.

➢ The amount of payment is calculated from the actual worth of his service.

➢ This rate varies from place to place and the availability of labor.

2. Real Wages

➢ Real wages include the amount needed to meet the necessities, comforts, luxuries and cash
payments which a worker can get in return of his effort and work.

➢ For example, uniforms, essential commodities, housing with free water and electric supplies,
conveyance and other such facilities are generally provided by the factory, in addition to the
money in cash.

➢ All these amount as a whole is considered as Real wages.

 3. Living Wages

➢ The rates of the wage are in such a way that they can meet some of the requirement of the
family, like education, food, clothes and some insurance against the more important
misfortunes along with prime necessities of life are called "Living Wages".

4. Fair Wages

➢ It is actually the wage which must be fair for the work of a worker and should provide him
with other necessities of life in addition to food for his family.

➢ It reduces the resistance to change such as computerization, Installation of advanced

sophisticated machines etc.

➢ It discourages wastage of man hour, machine hour, and material

➢ The rates for the fair wages ranges between the minimum wage and living wage but between
these two wages the actual wage will depend on,

a. Production capacity of the worker

b. Rates in the surrounding area

c. The level of national income and its distribution

d. The place of industry in the economy of the country

e. The bargaining power of the employee and employer

5. Minimum Wages

➢ The labor is a human being, and from the humanitarian point of view, he is to be protected
from the cheating of the employer.

➢ But at the same time the wages cannot be raised beyond a certain limit because the financial
position of the industry to pay should be considered.

➢ So, by considering two important factors, India govemment enacted Minimum wage Act in
1948.

➢ According to this act wages have been fixed for different parts of the country and this has
forced employers to give not less than this fixed minimum wages to any of the workers.

TYPES OF WAGE INCENTIVES PLAN

INCENTIVE

➢ Incentive may be defined as something that encourages a worker to put in more productive
efforts voluntarily

➢ Incentive is a reward which is given to a worker for his efficiency and hard work.

➢ Incentives are in addition to the normal hourly rate and are in some proportion to the
workers contribution towards production.
Types of incentives

1. Financial incentives

2. Non-Financial incentives

3. Semi-Financial incentives

1. Financial incentives

➢ Any incentive that pays off either directly or indirectly in money is labelled as financial
incentives.

➢ The idea behind the financial incentive is that the money is a strong motivator to control the
human behavior and environment.

➢ For example, if an employer finds that he will be earning an extra profit of Rs.50, if a
particular work is finished in 5 hours less than the prescribed time. Now if the worker is
promised to an extra payment of Rs.25, if completes the job five hours early, he becomes
motivated. This extra payment is known as financial incentive.

2. Non Financial Incentives

Non-financial incentives may take the form of

a) Earning higher status.

b) Greater responsibility.

c) Chance of participation in decision making.

d) Token rewards like mementos.

e) Recognition in group.

f) Job satisfaction and security.

g) Better and healthy working conditions and surroundings.

h) Opportunity for quick promotion.

i) Training and future study opportunities.

j) Helpful and cooperative management.

3. Semi - Financial Incentives

This is a combination of financial and nonfinancial incentives such as:

a) Provision of canteen at a subsidized rate.

b) Recreational and medical facilities to the workers.

c) Subsidized educational facilities for their children.

d) Cooperative societies for workers where subsidized consumable items will be obtained.

e) Conveyance facilities to employees at a concession rate.

f) Pension and other benefits etc.

 Methods of Financial Incentive Plans

1. Straight Piece Rate System

➢ Under this, a fixed rate of wage is paid for each piece or unit produced.

➢ Earnings of a worker = No. of Pieces produced × Rate per piece

➢ Example: If a worker fabricates 10 steel chair per day and for each chair the wage rate is Rs.
10. Then he earns at the rate of Rs. 100 per day (8 hours).

➢ The wage rate per piece is decided as follows:

1. Find out the standard time required to fabricate one steel chair by any appropriate
method of work measurement technique.

2. Find from the local or national market the wages of such type of job and fix the piece
rate appropriately.

Advantages

1. The method is simple, easy to understand and operate.

2. Workers are paid on their merits.

3. The administrative works are reduced.

4. It helps in boosting production and thus reduced the overhead expenses per unit of
production.

5. Due to increased production profit is increased and selling price reduced.

6. The employer is enabling to know his labor cost easily.

7. The relationship of the employer and employee improves and no dispute takes place for
wages, as the workers get satisfactory reward for their work.

Disadvantages

1. A worker is not guaranteed minimum wage

2. It is difficult to fix accurate and satisfactory piece rate.

3. With a high speed of work to produce more (and thus to earn more) the worker may not give
proper attention towards the following:
 a) Maintaining required quality.

b) Effective utilization of materials, equipment and tools etc.

c) His health

4. When the worker earns more, the employer may try to reduce piece rate, which may cause
labor problems.

5. It may cause increased accidents.

6. This cause displacement of labor as with increase in production, the number of workers
engaged will be reduced hence no job security.

7. It causes over production and may result loses.

8. The entire benefit to the extra wages goes to the worker and no direct benefit to employer.

Application

➢ This system is only suitable where repetitive types jobs are taking place and the job can be
identified easily and output can be measured.

➢ If the management wants to boost the production this method can be selected.

Straight Piece Rate with guaranteed minimum wage

➢ This method is an improvement over the straight piece rate system as it guarantees a
minimum hourly or daily base wage.

➢ Suppose that the standard output set by the management is 10 pieces per day. If a worker
produces less than this amount, he still gets the minimum wage and if another worker
exceeds this standard, he is given a wage in direct proportion to the number of pieces
produced by him at straight piece rate.

Advantages

1. The system provides a guaranteed minimum wage.2.

2. It takes some care of the enforced idleness beyond the control of the workers.
Disadvantage

1. A worker who produces 8 pieces per day will get Rs 80 per day (minimum wage) i.e., he earns
80/8 i.e., Rs. 10 per piece where as a worker producing 15 pieces gets only Rs 120 only i.e.,
120/15 i.e., Rs. 8per piece. This shows that the system does not offer sufficient incentive for
a worker who exceeds the standard output.

3. Differential piece rate system

➢ This system suggested by F.W. Taylor, in which a standard time is fixed for the performance of
a piece work and those who complete the Job within standard time or produce the job
earlier are paid at higher rates and those who do not complete the job in standard time are
paid at lower rates.

➢ This system, therefore gives an encouragement to active workers but punishes lazy workers.

➢ This system has the disadvantage that fresh workers, who are unable to reach output
standard could earn very little and hardly service.

4. Halsey Plan

➢ In this an hourly rate or daily rate is guaranteed.

➢ Standard time is fixed for each job.

➢ The worker gets the agreed rate per hour for the time spend.

➢ An additional bonus or incentive is giver to worker who completes the work earlier than
standard time.

➢ The rate of bonus will be 33.33 % of time saved or 50% of time saved.

➢ Wage of the worker = Normal earnings + Incentive

= RT + (P/100) x (S-T) x R

➢ Where, R = Hourly wage rate

S = Standard time

T = Actual time taken to complete the job

➢ for a 50-50 Halsey plan

 ➢ Wage = RT + (50/100) x (S-T) x R

= RT + (S-T)/2 x R

➢ for a 33.33% i.e., 100/3 % Halsey plan

➢ Wage = RT + (S-T)/3 x R

Advantages

1. It guarantees minimum wage.

2. It is simple to understand and operate.

3. It does not consume time on expensive time studies.

4. Management also shares a percentage of bonus.

Disadvantage

1. Workers do not like that management should share the bonus on the time saved solely
because of their efforts.

2. Output standards or standard time is based upon past production records (and not in time
study) may not be accurate and fair or just to all workers

5. Rowan Plan

➢ This system also guarantees an hourly rate or daily rate.

➢ Standard time is fixed based upon past production record similar to Halsey plan.

➢ The worker gets an agreed rate per hour for the time spend.

➢ An additional incentive is given = (S-T)/S rather on (S – T) of Halsey

➢ In Rowan Plan Wages of worker = RT + (S-T)/S x RT

➢ Where, R = Hourly wage rate

S = Standard time or allowed time

T = Actual time taken to complete the job

Advantages

1. It can be employed when output standard is not accurate.

2. It provides a guaranteed minimum wage.

3. Inferior and fresh workers are not penalized.

4. Management also shares the bonus.

Disadvantage

1. The worker does not like this plan because they do not get the full benefit of time saved.

2. To some extend it does not demark an efficient worker and less efficient worker.

3. It is not easy to understand and operate.

4. High productive workers get less incentive.

• Similar to the Halsey plan Rowan plan is criticized by the workers on the ground that they do
not get the full benefit of the time saved by them.

• Rowan plan has another drawback that two workers, one very efficient the other not so
efficient, may get the same incentives.

• Suppose standard time fixed for a job is 20 hours, worker A finishes the job in 8 hours and
worker B in 12 hours and labor rate per hour is Rs. 1.50.

• Incentive of worker A = (S-T)/S x RT

= (20-8)/20 x 1.5x8 = Rs.7.20

• Incentive of worker B =(S-T)/S x RT

= (20-12)/20 x 1.5x12 = Rs.7.20

• Thus, the two workers get the same amount of incentive.