INDUSTRIAL MANAGEMENT AND SAFETY

Course Code: 5001

DIVESH KUMAR C
Lecturer in Mechanical engineering
GPTC, Mattannur
9447416269
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 MODULE I

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 LESSON I
PRINCIPLES OF MANAGEMENT

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 MANAGEMENT

 Management is a universal phenomenon.

 Skillful management is needed in our houses, schools, hospitals,
restaurants and social functions like marriages, picnics,
conference etc.
 The productivity of industries and customer satisfaction of
service sector are depending upon the quality of management.
 The effectiveness of management is a critical factor which
determines the growth and prosperity of an enterprise.

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  Management is managing men to attain the company objectives
or goals.
 Management is defined as the process of managing men,
materials, money, machinery, market, and methods.
 ie Management is managing six M’s.
 In an industry, managing men is the most important factor to be
considered.
 It is necessary to guide, direct, coordinated and control human
efforts towards the fulfillment of company objectives.
 Management can be defined as creating environment of an
enterprise where individuals working together in groups can
perform efficiently and effectively towards the attainment of
group goals.

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 DEVELOPMENT OF MANAGEMENT THEORY

 A group of persons such as F. W Taylor, Henry Fayol and others

contributed towards the process of the development of scientific
management.

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 TAYLOR’S SCIENTIFIC MANAGEMENT

 Frederick Winslow Taylor(F. W Taylor) regarded as the father of

scientific management.
 Essentially scientific management consists of the following.
a) Observing and analyzing each task.
b) Determination of standard work.
c) Selecting and training men to perform their jobs.
d) Ensuring that work is done in most efficient manner.

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 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 specialists 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.

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 HENRY FAYOL’S PRINCIPLES OF MANAGEMENT

 Henry Fayol known as the father of principles of management.

 According to Fayol the activities of industrial organisation could
be divided in to 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, organising, command, coordination and
control

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FAYOLS FOURTEEN PRINCIPLES OF MANAGEMENT

1) DIVISION OF WORK:
• Fayol recommended that all works must be subdivided (breaking a
task in to small elements).
• Each element is given to a individual employees which leads to
specialisation and increase the efficiency of individual employees.
• By repeating the small part of the work the individual acquires
speed and accuracy in its performance.
• Division of work increases the efficiency of every individual and of
the whole organaisation.

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 2) AUTHORITY AND RESPONSIBILITY:
• Authority refers to the right of a superior to give orders to
subordinates, take decision on specified matters, use resources of
organisation, guide and regulate the behavior of subordinates.
• Responsibility includes obligation with respect to the performance
of functions and achieving goals in a satisfactory manner.
• Authority and responsibility are correlated.

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 3) DISCIPLINE:
• Discipline is obedience, application, energy, behavior and
outward marks of respect.
• It means obeying rules and regulations of organisation.
• All personal should be disciplined in an organisation .

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 4) UNITY OF COMMAND:
• An employee should get orders and instructions only from one
supervisor.
• According to Fayol dual command leads to confusion to the
employees.

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 5) UNITY OF DIRECTION:
• According to this principle the effort of all the members of the
organisation should be directed towards common goals.
• This is to ensure,” unity in action, coordination of strength, and
focusing towards the target”.
• For this purpose there should be one head and one plan for each
group having the same objectives
• For eg., the production department should have a single plan and
all must work to achieve specified goals in terms of quantity and
quality of goods to be produced.

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 6) Subordination of individual’s interest to general interest:
• Common or general interest must be supersede the individual
interest.
• Incase of conflict between individual interest to general
interest, individual must scarifies in the general interest.
• For eg., Managing director needs Air condition rooms, but
workers don’t have proper sanitary needs.

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 7) REMUNERATION OF PERSONNEL:
• Remuneration of and method of payment should afford
maximum satisfaction to both employers and employees.
• Fayol did not favor the profit sharing plans for workers, but he
advocated such plans to managers.
• He also in favor of non financial benefits if possible.

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 8) CENTRALISATION:
• Centralisation is said to exist if top management retains most of
the decision making authority .
• Sharing authority downwards leads to decentralisation.
• Fayol says that an organisation should strive to achieve balance
between complete centralisation and decentralisation.
• In small organisation centralisation is possible and effective.
• In big organisation the degree of centralisation should be less.

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 9)SCALAR CHAIN

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 SCALAR CHAIN:
• It is the chain of superiors and subordinates from the highest level
to the lowest level for the purpose of communication.
• The scalar chain regarded as a chain of command or instructions
issued at higher level flow through intermediate managers.
• For eg., the production manager wants to communicate a worker
in foundry shop, he communicate to production engineer, he
directs to foundry foreman, he then directs to workers.

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 10) ORDER:
• Order relates to arrangement of things and people.
• Everything should be in its place and there should be a place for
everything.
• Every man in the organisation should be properly placed ie,, right
man in the right place.

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 11) EQUITY:
• To attain loyalty and devotion from personnel, manager should be
just and kind.
• Equity is the combination of kindness and justice.

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 12) STABILITY OF WORKERS:
• No employee should be removed unnecessarily within a short
period.
• Stability of tenure is necessary to get an employee accustomed to
doing a new work and to enable him in performing it well.

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 13) INITIATIVE:
• Managers should encourage their employees to take initiative
within the limits of their authority and discipline.
• Initiative is concerned with thinking out and execution of a plan.

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 14) ESPIRITE DE CORPS:
• This refers to the principle of unity of command.
• It is the principle that “Union is strength”.
• The managers should develop team spirit in his employees.

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 COMPARISON BETWEEN THE
CONTRIBUTION OF F. W TAYLOR &FAYOL
 SIMILARITY:
1. Universality of Management
2. Scientific Methods
3. Importance of personnel
4. Improvement of practice
5. Ideas through experience
6. Books
7. Mutual cooperation

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  DISSIMILARITY:
1. Shop floor v/s Manager
2. Bottom v/s Top
3. Productivity v/s Theory
4. Management v/s Administration

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 FUNCTIONS OF MANAGEMENT

 In every organisation managers perform certain functions in order

to achieve results.
 The various functions of management are
1) Planning
2) Organising
3) Staffing
4) Directing
5) Controlling
6) Decision making

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 1) PLANNING
CONCEPT OF PLANNING:
• Planning is concerned with future. Planning means thinking
before doing.
• Before starting the actual work it should be decided as
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?

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 STEPS IN PLANNING

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 2) ORGANISING

 After objectives and plans have been established management must

then organise human and physical resources of the firm.
 Organising includes the provision of physical facilities, capital and
personnel (material, men and machinery).

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 3) STAFFING

 Staffing involves the developing and placing of qualified people in

the various jobs.
 i.e Right people, Right place and at Right time.
 Staffing is concerned with manpower recruitment, selection,
training and placement of employees
 In large organisation this function is done by a separate department
is called personnel department.
 The personnel manager may be the head of this department.

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 FUNCTIONS OF SATFFING:
 1) Man power planning
 2) Recruitment, selection and training
 3) Placement of manpower
 4) Development, promotion, transfer and appraisal
 5) Determination of employee remuneration

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 4) DIRECTING

 Directing involves motivating, guiding, and supervising subordinates

towards the company objectives.
 Directing involves the following elements,
i) Giving instructions to subordinates
ii) Guiding the subordinates to do work
iii) Supervising the subordinates
iv) Integrate the activities of workers
v) Motivate the workers to meet the target

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 5) CONTROLLING
 The function of controlling is to match actual performance with
the plans and to point out defective work to rectify them and
prevent reoccurrence.
 The various forms of controlling are,
i) Quality control
ii) Cost control
iii) Inventory control
iv) Production control
v) Personnel control

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 STEPS IN CONTROLLING PROCESS:

1) Establishing standards of performance

2) Ensuring actual performance
3) Comparing the actual performance with standard
4) Finding the variance of deviations, if any and
5) Taking corrective actions or measures

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 6) DECISION MAKING
 Decision making is an indispensable component of the management
process.
 The decision making is done by Managers of the firm.
 Managers are evaluated on the basis of the number of and
importance of decision made.
 The problem may be lowering the profits or declining sales in
particular area or rising production cost or customer complaints or
lab our problems.
 Managers can conduct brain storming sections to solve a particular
problem.

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 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.
 There are mainly four types of ownerships
1) Individual or Sole proprietorship
2) Partnership organisation
3) Joint stock company
a) Private limited company
b) Public limited company
4) Cooperative society
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 1) INDIVIDUAL OWNERSHIP

 The business is owned by a single man.

 The owner invests capital, employees labour and machines.
 The owner is fully liable for all debts associated with the business.

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 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 organisation and expenses in starting are
minimum.
 4.The Owner can meet the customers 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.
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 DISADVANTAGES:
• 1) The owner can not be master of all techniques like management,
sales, engineering, process etc.
• If the business fails, creditors can take the personnel property as
well as business property of the owner to settle their claim.
• The capital is limited.
• The firm may stop with the death of proprietor.

Example:
Starting a printing press, auto repair shop, small
fabrication/engineering industry, wood working shop etc.

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 2). PARTNERSHIP ORGANISATION
 Some of the disadvantages of single ownership organization can
be eliminated by a well organised partnership organization.
 Partnership is the relationship between the persons who have
agreed to share profit of a business carried on by all or any one of
them acting for all.
 partnership organisation is an association of two or more persons
to carry on as co-owners of a business for profit (up to 20
persons in case of non-banking business and up to 10 persons in
case of banking business).
 The partnerships depends on mutual confidence, adjustment and
cooperation of partners.

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  To avoid any complication at a later stage, the constitution of the
company may be written in an agreement form. This agreement is
known as partnership-deed. The partnership deed contains the
following:
 1. Name of the firm.
 2. Name of the Business.
 3. Date of Starting Business.
 4. Money contributed by each partner.
 5. Allotment of management functions among partners.
 6. Salary if any, allowed to manage partners.
 7. Rate of Interests on capital invested, if any.
 8.The basis for the introduction of any new partner.

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 KIND 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
companies product/services.

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 4) SECRET PARTNERS:
Whose name do not appear any where, but they took part
in to the management secretly.
5) MINOR PARTNER:
Who has not attained the age of 18 years.
6) GENERALPARTNERS:
All the partners in the organisation is known as general
partners.

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  ADVANTAGES:
 1) Large capital can be collected than that of the sole trade.
 2) The firm posses 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 au losses there are more than one person to share.

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  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 modem 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:
Medium engineering firms, law firms, cinema theatres,
educational institutions, medical clinics, retail trades etc.

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 3). JOINT STOCK COMPANIES
 The introduction of advanced technologies, economies of large
scale production and other development in the field of industry
and commerce compelled business men to think in terms a
bigger form of organisation.
 It is suitable for large scale production.
 A joint stock company is an association of several persons called
share holders who joined together for profit.
 It comes in to existence only after registration under Indian
companies act.
 There are two types of joint stock companies.
a) Private limited company
b) Public limited company
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 a). PRIVATE LIMITED COMPANY
 Actually, a private joint stock company resembles much with
partnership and has the advantage that big capital can be collected,
than could be done so in partnership.
 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
can not be invited to subscribe the shares.
 The members only are entitled to receive a copy of the balance
sheet, and auditors report.
 The govt. does not interfere in the working of the company.

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 b). PUBLIC LIMITED COMPANY
 In public limited company the capital is collected from the public by
small shares of Rs. value 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’.
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  DISTINCTION BETWEEN PRIVATE AND PUBLIC LTD. COMPANY
 a) Numbers of members: In a private company there should be
minimum of two and maximum of 5O members, whereas in a public
company, there should be minimum seven members and there is no
upper limit to its membership.
 b) Commencement of business: A private company can commence its
business soon after getting the certificate of incorporation, but a public
company can not commence business unless it obtains the second
certificate, i.e. the Certificate of Commencement of Business.
 c) Issue of prospectus: A private company can not issue a prospectus
when inviting the public to subscribe to its shares and debentures, It
can collect the share only from its limited number of members in
advance. Where as a public company depends actively upon public
subscriptions and must issue a prospectus.

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  d) Transfer of shares: In private company the shares are not transferable,
Whereas the shares of a public company are freely transferable.
 e) Number of directors: A private company there is no limit of
directorship where as public company is limited to 20 directors.
 f) Statutory meeting: A private company is not required to hold statutory
meeting, but public company has to told its statutory meeting within a
specific period after the commencement of business.

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  ADVANTAGES OF JOINT STOCK COMPANIES:
 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 utilised.
 5. 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.

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  DISADVANTAGES OF JOINT STOCK COMPANIES:
 1. There are 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 can not 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.
 Applications: Fertilizer factories, steel mills, and heavy duty engineering.
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 4. COOPERATIVE SOCIETIES
 To achieve common economic objectives, a set of people may
associate together and form a cooperative society.
 They may be agriculturists, artisans, consumers, labourers etc.
 All these societies are registered are regulated by the cooperative
societies act of the concerned state.

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  PRINCIPLES OF COOPERATIVE SOCIETIES:
1) Voluntary association
2) Democratic management
3) Nor profit motive
4) Self help and mutual help
5) Open door policy
6) Distribution of surplus

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 ORGANISATIONAL STRUCTURE
 DEFINITION OF ORGANISATION:
Organisation is defined as the machinery which establishes
the coordination between administration and management.
Organisation combines the various factors of production
into the most effective coordination.
• A FEW COMMONLY KNOWN FORMS OFORGANISATION
STRUCTURES ARE:
1) Line or Military or Scalar organisation.
2) Functional organisation.
3) Line and staff organisation.

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 LINE ORGANISATION

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  This is the simplest form of organisation.
 This is also known as military organisation because it resembles to old
military 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 or military
organization.
 This is called military organisation because it explains a well defined
authority and responsibility for every position. It also assumes strong
discipline.

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  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.

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  DISADVANTAGES:
 1. Overloads few key executives.
 2. Chances of wastage, accident and labour turnover are more,
because of insufficient knowledge of all the work by one man.
 3. No means for rewarding good workers.
 4. Department heads are overloaded with various routine works,
hence no time to think for future expansion and planning.
 5. As the orders flow from top to bottom chance of loss and
distortion of information possible.
 APPLICATION:
 Suitable for continuous process industry like sugar, paper, oil
refinery and automatic plants.

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 FUNCTIONAL ORGANISATION

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  F . W. Taylor suggests functional organisation because it was
difficult to find all around expert persons qualified to work at
middle management level in the line organisation.
 Each functional foreman who is a specialist in an activity is in -
charge of one function.

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

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  DISADVANTAGES:
 It is difficult to maintain discipline.
 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.

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 LINE AND STAFF ORGANISATION

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

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  ADVANTAGES:
 1. It is a planned specialised system, so expert knowledge is
available.
 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 posses all the advantages of line and functional organisation.

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  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. 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.

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 REQUIREMENT OF GOOD ORGANISATION
 1. A good organisation makes administration easy by dividing duties and
responsibilities of individual worker according to his status in the
factory.
 2. By assigning duties and allotting paper work to individuals according
to suitability, education and experience. It promotes specialisation.
 3. It keeps coordination among the employees of different levels, which
results in a healthy relations and harmonious and smooth atmosphere.
 4. It allows sufficient time for top management and administration to
work for future expansion, planning and improvements.
 5. It increases margin of profit.
 6. It ensures discipline in all activities and prompt delivery.
 It promotes total involvement, commitment and mutual help.

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 LESSON 2
HUMAN RESOURCE MANAGEMENT

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 CONCEPT OF HUMAN RESOURCE MANAGEMENT

 The success of modern organisation is depend on the contribution

made by the employees as they perform the various tasks to which
they are assigned.
 Human resource management is also called as personnel
management and it is also known as Labour management,
Manpower management, Personnel administration etc.
 The wastage of material, money, time and energy can be minimised
if right person is placed at the right place.

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IMPORTANCE OF HUMAN RESOURCE MANAGEMENT

 It discovers the talented, experienced, qualified, competend

workers to take up various jobs.
 It ensures maximum productivity per worker by providing right
man on right job.
 It helps in foreseeing manpower requirements for the present and
for the near future.
 It develops personnel for higher positions with greater challenges
and responsibilities.
 It gives workers, job satisfaction and essence of happiness due
toproperplacement.

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 FUNCTIONS OF HUMAN RESOURCE MANAGEMENT

1) Performance appraisal
2) Feedback and performance coaching
3) Career planning
4) Organisational development
5) Rewards
6) Employees welfare and quality of work life
7) Human resource information
8) Training and development

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 MANPOWER PLANNING
 Man power planning ensures that the firm has enough of the right
kind of people at the right time. The major activities of manpower
planning are
1) Forecasting
2) Inventorying
3) Investigating
4) Anticipating
5) Planning
6) Selecting

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 OBJECTIVES OF MANPOWER PLANNING
 a) To ensure optimum use of human resources currently employed.
 b) To forecast future skill requirements.
 c) It provide control measures to ensure that necessary resources
are available as and when required.
 d) To determine the recruitment level.
 e) To determine optimum training levels.
 f) To cost the manpower in projects.
 g) To link manpower planning with organisation planning.
 h) To decide whether certain activities need to be subcontracted.

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 PROCESS OF MANPOWER PLANNING

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 JOB ANALYSIS
 Job analysis is the breaking up of a job into basic elements or
operations ,and studying in detail each of the operations to know
the nature and characteristics of the job.
 Further it is the study of the skill, duties, responsibilities, involved
in the job and the qualification required in the worker for the
better performance of the job.
 Thus, it is the study of the job and the employee.
 So it serves as the foundation for organisational planning and
manpower planning.
 It gives the complete requirements of different jobs.
 It also help in the process of recruitment and selection.
 It also help to find out the training needs.
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 JOB EVALUATION

 Job evaluation is a systematic way of determining the value/worth

of a job in relation to other jobs in an organisation.
 It tries to make a systematic comparison between jobs to assess
their relative worth for the purpose of establishing a rational pay
structure.
 Job evaluation needs to be differentiated from job analysis.
 Job analysis is a systematic way of gathering information about a
job.

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 METHOD OF JOB EVALUATION

1) Non quantitative type job evaluation

a) Ranking system b) Rating/Grading/classification system
2) Quantitative methods of job evaluation
a) Factor comparison b) Point or manual system

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 RANKING SYSTEM
 According to this method, jobs are arranged from highest to lowest, in
order of their value or merit to the organization.
 Jobs can also be arranged according to the relative difficulty in
performing them.
 The jobs are examined as a whole rather than on the basis of important
factors in the job; the job at the top of the list has the highest value and
obviously the job at the bottom of the list will have the lowest value.
 Jobs are usually ranked in each department and then the department
rankings are combined to develop an organizational ranking.
 The variation in payment of salaries depends on the variation of the
nature of the job performed by the employees.
 The ranking method is simple to understand and practice and it is best
suited for a small organisation.
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 In ranking of the 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

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 RATING SYSTEM
 A predetermined number of job groups or job classes are
established and jobs are assigned to these classifications.
1) Class I: Executives like office manager, Deputy office manager,
Office Superintendent etc
2) Class II: Skilled workers like Cashier, clerks, Purchasing assistant
etc
3) Class III: Semiskilled workers like machine operator, switch
board operator etc
4) Class IV: Semiskilled workers like file clerks, office boys etc

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 FACTOR COMPARISON SYSTEM
 A more systematic and scientific method of job evaluation is the
factor comparison method.
 Under this method, instead of ranking complete job, each job is
ranked according to a series of factors like mental effort, physical
effort, skill needed, responsibility, working condition and other
factors.
 Pay will be assigned in this method by comparing the weightage
of the factors required for each job.

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 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.

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 MERIT RATING OR PERFORMANCE APPRAISAL
 Merit rating assesses the merit of the person doing the job.
 It measures the loyalty, integrity, intelligence, leadership qualities,
dependability characteristics etc.
 Merit rating is done for the matters of
1) Wage increments
2) Promotions
3) Transfers
4) Special assignments
5) Training
6) Discharge

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 IMPORTANCE OF TRAINING
1) Ensure an adequate supply of properly trained employees at all
levels of industry.
2) Improve productivity and quality.
3) To promote team work.
4) To inculcate good work habits.
5) To improve the performance of each employee to the highest
level.
6) To inculcate a broad understanding of relevant science and
technology.
7) To boost employee morale, cooperation and good relations.

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 TYPES OF TRAINING
1) On the job training: Supervisor gives instructions to the new
worker
2) Apprentice training: is as per the apprenticeship act of the
central government. The trainee will get stipend from
concerned government.
3) Vestibule school training: Generally given in the vestibule (
Entrance hall) of the company before actual entry to the shop
floor.
4) Training by skilled, experienced and old workers

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 ADVANTAGES OF TRAINING

1) To increase the efficiency of workers.

2) To reduce the wastage of materials, machine and man hour.
3) To increase the productivity and production cost.
4) Improved product quality.
5) It gives job satisfaction.
6) Less fatigue to the worker.
7) It helps to built team spirit.

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 LABOUR TURNOVER

 This may be defined as the ratio of number of workers who have

left their job on their accord to the average number of workers
employed in a factory during a given time.

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 LESSON 3
WAGES AND INCENTIVES

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 IMPORTANCE OF GOOD WAGE PAYMENT SYSTEM

 In order to achieve organisational goals the management should

plan and establish a good wage system.
 A good wage payment system should provide financial and non
financial incentive which will motivate employees to better work
performance.
 A good wage policy can be capable of reducing the labour problems
in the industry to some extend.
 A good wage wage payment system is important to create a good
employer employee relationship.

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 OBJECTIVES OF GOOD WAGE PAYMENT SYSTEM
 It enable 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 encourage employees to use their initiative and discretion.
 It encourage 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.

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 TYPES OF WAGES

1) NOMINAL WAGES
2) REAL WAGES
3) LIVING WAGES
4) FAIR WAGES
5) MINIMUM WAGES

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 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.

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 2) REAL WAGES
 Real wages includes 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 eg: uniforms, essential commodities, housing with free water
and electric supplies and other 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.

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 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 insurances.

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 4) FAIR WAGES

 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.
 The rate for the fair wages ranges between the minimum wage and
living wage.

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 5) MINIMUM WAGES

 India government enacted minimum wage act in 1948.

 The main objectives of this acts are
1) To protect the low wage earners of the society whose conditions
are materially unsatisfactory.
2) To prevent exploitation of workers and to secure a wage
according to the value of work done.
3) To promote peace in industry.
4) To improve normal standards of living.

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 REQUIREMENT OF GOOD WAGE PAYMENT SYSTEM

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 INCENTIVE
 Incentive may be defined as something that encourages a worker
to put in more productive efforts voluntarily. or
 Incentive is an inducement or reward which is given to a worker
for his efficiency and hard work.
 There are mainly three types of incentives
1) Financial incentives
2) Non financial incentives
3) Semi financial incentives

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 1) FINANCIAL INCENTIVES

 Any incentive that pay off either directly or indirectly in money is

labeled as financial incentives.
 Methods of financial incentive payment
1) Straight piece rate system
2) Straight piece rate with guaranteed wage
3) Differential piece rate system
4) Halsey plan
5) Rowan plan
6) Gantt plan

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2) NON FINANCIAL INCENTIVES

 Token rewards like mementos

 Earning higher status
 Greater responsibility
 Chances of participation in decision making
 Recognition in group
 Better and healthy working conditions and surroundings
 Opportunity for quick promotion

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 1) STRAIGHT PIECE RATE SYSTEM

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 ADVANTAGES

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 DISADVANTAGES

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 PROBLEMS

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 2) STRAIGHT PIECE RATE WITH GUARANTEED MINIMUM WAGE

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  This method is an improvement over the straight piece rate system
as it guarantees a minimum hourly or daily base wage.
 If a worker produce less than a standard output per day he will get
a minimum wage and another worker exceeds this standard
output, he is given a wage in direct proportion to the number of
pieces produced by him.

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 3) DIFFERENTIAL PIECE RATE SYSTEM

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

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 4) HALSEY PLAN

1) In this an hourly rate or daily rate is guaranteed

2) Standard time is fixed for each job
3) The worker gets the agreed rate per hour for the time spend
4) An additional bonus or incentive is given to worker who
completes the work earlier than standard time
5) The rate of bonus will be 33 1/3 % of time saved or 50 % of time
saved

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 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
 Wages of worker = Nominal earnings + Incentives

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 6) GANTT PLAN
 A standard time is fixed for doing a particular task.
 Workers actual performance is compared with standard time and
his efficiency is determined.
 If a worker efficiency is less than 100%, he will get a guaranteed
minimum wage.
 If a worker taken a standard time to complete the job ( ie. 100%
efficiency), he is given a wages of standard time and a bonus of
20 % on the wages earned.
 If a worker efficiency is more than 100%, ), he is given a wages
of standard time and a bonus of 20 % of his normal earnings.
 This is also called as “ Progressive rate system”.

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