MODULE I

1.1.1 Explain the meaning of Management.

Management is a multipurpose organ of an organization that manages the work and
the people at work. Management is basically a human activity.
Management may be defined as the art of getting work done efficiently and
effectively through and by the people, with satisfaction of employer, employees and the
public.
The meaning management is shown schematically

Contributions of F.W. Taylor towards scientific management

 He developed the principal of breaking a task into small elements.
 He involved in exploring the causes of inefficiency and labour difficulties in the industry.
 He experimented to recognize losses of efficiency in industrial operations
 He involved in investigating work on scientific basis, selecting the best worker for a task,
training to acquire desired skill, developing co-operative sprit between management and
workers, equal division of work which led to the concept of scientific management.
 He introduced concept of “A Fair Day’s Task” while working on it Taylor studies on
fatigue incurred by the workers and the time necessary to complete a task.
 Taylor developed functional organization in which one foreman was made in charge for
each function
 Taylor suggested a wage incentive scheme known as Taylor’s differential piece rate plan
Henri fayol’s Principles of management
 Division of work- Dividing the work for different workers best fitted for different jobs
depending their aptitude and skill.
 Authority and Responsibility- Authority is the power of the manager to delegate and
control the subordinates. Responsibility is the duty of the manager to implement the
policies of the management. Responsibility without authority is meaningless
 Discipline – Discipline is obeying and working according to instruction and orders of
superiors.
 Unity of command – Employees should receive orders and instructions from one boss
only
 Unity of direction – Unity of direction implies that there should be one plan and one
head for each group of activities having the same objective.
 Sub ordination of individual interest to general interest – The interests of an
individual person should not be given more priority than the general interests of the
organization.
 Remuneration – The salaries and wages paid to the employees should be fair and bring
maximum satisfaction to both employees and employer.
 Esprit de corps- This is a French word which means “union is strength” This principle
implies that there should be co-operation and team work among the members of the
organization.
Comparison between the contributions of Taylor and Fayol
 F.W. Taylor is regarded as the father of scientific management Henri Fayol is described
as the father of modern management theory
 They both realized that the problem of personnel and its management at all levels is the
“key” to industrial success. They applied scientific method to this problem
 Taylor worked primarily on the operative level from the bottom to upwards. Fayol
concentrated on the managing director and worked downwards.
 Tayor believed that managing should be based on objective assessment of facts, on
measurement and no on guess work, which led to the concept of scientific management
 Fayol formulated 14 principles of management for the soundness and good working of
the management
Functions of management .
1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling
 6. Decision making
1. Planning
Planning helps in determining the course of action to be adopted. It is a decision in
advance ie what to do, when to do, how to do and who will do a particular job. Planning is a
process which involves “thinking before doing”. The primary objective of planning is to
achieve better results. It involves the decision regarding organizational objective and
developing policies, procedures, programmes, budgets etc.
Steps in planning
 Collecting information
 Laying down objectives
 Developing promises
 Examining alternative courses of action
 Evaluation of working
 Reviewing limitations of the system
2. Organizing
The function of organizing is to arrange co ordinates, direct or control the activities of
all factors of production ie men, materials, machines and money in order to achieve the
targets of organization
Organizing is defined as the “the process of identifying and grouping work to be
done, defining, and delegating authority and responsibility and establishing relationships for
the purpose of enabling people to work most effectively together in accomplishing
objectives”
Steps in organizing

 Identification of the work to be performed

 To group the work of similar nature
 To assign these groups of activities to individuals
 To delegate authority and fix responsibility at various levels
 To co-operate these authority responsibility relationship of various activities

3. Staffing

Staffing is a process of recruiting, selecting and training the right people to fulfill the
requirements of the organization. It is a continuous process because new jobs may be created
in the enterprise and existing employees may leave the organization. Every manager in an
organization has to perform the staffing function
Functions of staffing

 Manpower planning
 Recruitment, selection and training of manpower
 Placement of manpower in correct position
 Development, promotion, transfer and appraisal of manpower
 Determination of employee remuneration and incentives

4. Directing

It is a process by which actual performance of subordinates is guided towards common

goals of the enterprise. Direction is called management in action. Directing includes issuing
of orders and instruction guiding, teaching, supervising to the subordinates

Elements of Directing

 Leadership
It is the quality of the managers to inspire the subordinates to get maximum co-operation
from them and guide their activities to achieve the common objective
 Communication
It is the process by which ideas, instruction and information are transmitted, received and
understood by others for the purpose of effecting desired result. It may be verbal or
written
 Motivation
It means inspiring the subordinates to work and co-operate for the achievement of
common objectives. This is done by financial or non-financial incentives to the
subordinates
 Supervision
Supervision ensures that the work is going as per plan and the workers are doing as they
were directed

5. Controlling

It is the process that measures the current performance and guide it towards some per
determined goals. Controlling is a continuous process which measures the progress of
operations, verifies with the predetermined plan and takes corrective action, if required.
Planning is the beginning of management, process and controlling is the final stage

Steps in controlling process

 Setting standards of performance

 Measuring actual performance
 Comparing the actual and standard performance
 Finding deviations
 Taking corrective actions if required

6. Decision making

A decision making is an intellectual activity because it calls for both judgement and
imagination to select one from many activities. Before making any decision one should be
through with the past, present and plan for the future in formations. Some times to take long
term decisions the workers are involved in the process of decision making

Steps in decision making

 Defining the problem

 Analyzing the problem
 Developing alternative solutions
 Deciding upon the best solution
 Converting the decision into effective action
 Implementing and verifying the decisions

Scientific approach to decision making

It consist of the following steps

Step 1: The problem for analysis is defined and the conditions for observation are determined

Step 2: Observations are made under different conditions to determine the behaviour of the
system containing the problem

Step 3: based on the observations a hypothesis that describes what is the best solution to the
problem

Step 4: to test the hypothesis an experiment is designed

Step 5: The experiment is executed and measurements are obtained and recorded

Step 6: the result of the experiment are analyzed and the hypothesis is either accepted or
rejected

Different types of business organization.

Different types of ownership

1. Sole proprietorship
2. Partnership
3. Joint stock company
a) Private limited joint stock company
b) Public limited joint stock company
4. Co-operative societies

1. Sole proprietorship

The business which is owned and controlled by a single person with or without hired
labour is called sale proprietorship. The person who runs sale proprietorship is called as sale
trader. He starts the business with his own capital. He purchases the necessary equipment
required and appoints the workers for this organization. It is mostly suitable for small scale
industries like printing press, auto repair shop, wood working plant etc

2. Partnership

Certain limitations in the sale proprietorship as limited finance, limited managerial

skill, risk and difficulty in supervision, he is unable to expand his business beyond a certain
stage. In this stage individual owner associate with more persons with their capital, skill and
knowledge to make more profit. Such a combination of persons are called partnership.

The persons participating in the business are called individually as partners and the
business is called tirm.

Partnership is based up on a written agreement between the partner is called

partnership deed.

Minimum number of persons to start partnership is two and maximum number is ten in
case of banking business and twenty in case of other business.

Types of partners.

1. General or ordinary Partner-Equal liabilities

2. Active or managing partner-He takes achive part in business and manages. He gets
some salary in addition to profit.
3. Limited Partner-His liabilities are limited to his capital. He does not take any achive
part in the business.
4. Sleeping Partner- He simply invest the money, does not take any achive part, share the
profit or losses of the business.
5. Nominal Partner- He does not contribute any money and does not take part in the
business. Only considered only on the basis of their reputation.
6. Minor Partner- He is not attained the age of maturity. He cannot enter directly in the
partnership agreement, only with the consent of other partner. On attaining majority he
will treated as general partner

3. Joint stock company

 A join stock company is an association of individuals called stock holders

 The person who take initiative efforts in starting the business are called promoters
 The capital can be raised in the form of shares
 The person who purchases the shares are called share holders
 The share holders electing the managing body known as “board of directors”
 Board of directors responsible for policy making, financial and technical decisions for
efficient working of the business

There are two types of joint stock companies

a) Private limited joint stock company

b) Public limited joint stock company
a) Private limited joint stock company
 Capital is supplied by the promoters, their relatives and friends they are the owners of the
company
 Share not issued to general public
 The minimum number of persons required to start the firm is 2 and the maximum number
is 50
 No minimum subscription to start the firm
 They need not produce the prospectus, accounts, balance sheet to the public
b) Public limited joint stock company
 Shares issued to general public
 Minimum number of person is 7
 No restriction to maximum number
 To file with the registrar of joint stock companies with documents as consent of the
directors, list of directors, director’s contract etc
 Issue a public notice to invite shares
 Generally the directors of the company are subjected to rotation
 To conduct general meeting every year

4. Co-operative societies

 The main aim of co-operative society is to eliminate profit and provide goods and
services to the members at lesser cost

Definition

It is defined as voluntary organization of persons of same working class united

together with collectively own funds in order to get commodities of daily use

 Minimum number of person is 10

 Maximum number of person is unlimited
 Collect share capital ranging from Rupees 1 to10
 Application is submitted to the registrar of co-operatives
 Registrar will depute their officials to attend the first general body meeting
 Laws are framed and directors are elected

Different types of organizational structure .

Organization structure

Organization structure is the systematic arrangement of the people working for the
organization in order to achieve predetermined goals

This provides an appropriate frame work for authority and responsibility, relationship
between various persons.

Types of organization structures

1. Line, military or scalar organization

2. Functional organization
3. Line and staff organization
1. Line, military or scalar organization
 It is the simplest form of organization structure
 It is called military organization because it is resembled to old military organization
 The immediate superior gives orders to the subordinates
 The activities of any organization are divided into five groups sales, finance, production,
personal and marketing
 The authority flows from general manager to different department managers and from
production manager to foreman and foreman to workers

Advantages

 The structure is simple and easy under stand

 Authorities and responsibilities are clearly defined it leads to a disciplined work
 It is flexible and easy to expand and contract
 Communication to the workers are very quick
 Quick and prompt decision can be taken

Disadvantages

 Limited to small organizations

 No chances of expansion
 Chances of new innovations does not arise
 Top man over loaded with too many duties
 Neglects specialists advice due to which more wastage of materials and man hours

Functional organization
 In this organizational structure overall responsibility is divided according to the functions
to be performed
 Whole organization is divided unto number of functional areas such as production,
personal, marketing, sales, purchase etc
 Every functional area serves all other areas in the organization

Advantages

 Expert advice of specialists is used as workers

 It increases quality of work
 It provides relief to top executives
 It separates mental and physical work
 It increases over all efficiency of the organization

Disadvantages

 Not much co-operation among various specialists

 Difficulty to maintain discipline among workers
 Fixing of responsibility is difficult
 It may lead conflict among specialists of equal rank
 It is expensive

Line and staff organization

 Special executives to assist line executives are known as staff
 The line executives perform supervisory authority and control the work of their
subordinates
 Staff executives advice line executives
 Line executives are called “doers”
 Staff executives are called “thinkers”
 Line executives marked vertically
 Staff executives marked horizontally
 Broken line (- - - - -) indicates staff executives
 Unbroken line( __________ ) indicates line executives
Advantages

 Expert advice from specialized staff can be made use

 Line executives able t devote more attention towards production
 Less wastage materials, man and machine hours
 Product quality improved
 Advantages of both line and functional organization are used

Disadvantages

 Product cost will increase because of high salary of staff executives

 It may arise conflicts between line and staff personal
 Lack of co- operative between line and staff
 Tendency of blame to each other if anything goes wrong
 Line executives may loose their efficiency

HUMAN RESOURCE MANAGEMENT (HRM)

Personnel Management, also known as Human Resource Management, is concerned

with the proper use of human factor, and may be defined as that part of the management
process which is primarily concerned with the human constituents of an organization

Objectives of Human Resource Management

 To create and utilize and able and motivated work force, to accomplish the basic
organizational goals.
 To establish and maintain sound organizational structure and desirable working
relationships among all the members of the organization
 To secure the integration and groups within the organization by coordination of the
individual and group goals with those of the organization
 To create facilities and opportunities for individual or group development so as to
match it with the growth of the organization
 To attain an effective utilization of human resources in the achievement of
organizational goals
 To identify and satisfy individual and group needs by providing adequate wages,
incentives, employee benefits and social security and measures for challenging work,
prestige, recognition, security, status, etc
 To maintain high employee morale and sound human relations by sustaining and
improving the various conditions and facilities
 To strengthen and appreciate the human assets continuously by providing training and
developmental programmes
 To provide an opportunity for expression and voice in management
 To provide fair, acceptable and efficient leadership
 To provide facilities and conditions of work and creation of favourable atmosphere for
maintaining stability of employment

Functions of HRM

The functions of HRM can be broadly classified into two categories managerial
functions and operative functions

Managerial functions

1. Planning
2. Organizing
3. Directing
4. Controlling

Operative functions

1. Procurement of personnel
2. Development of personnel
3. Compensation of personnel
4. Employee’s Benefit Schemes
5. Maintaining good industrial relations
6. Record keeping
7. Personnel planning and evaluation
8. Personnel research and audit

MAN POWER PLANNING

Man power planning is the process by which management determines how the
organization should move from its current manpower position to its desired manpower
position through this planning, management strikes to have the right number and right kind of
people at the right places at the right time, doing things which result in both the organization
and the individual receiving maximum long run benefits.

Requirements of manpower planning

1. It should be done sufficiently in advance

2. It should be reviewed periodically, so that modification or alterations if any can be
incorporated
3. The planning should have top management support
4. It should be need based
5. It should be economic in nature
6. It should incorporate the elements of flexibility and elasticity
7. It should be efficient and effective in nature
8. It should be simple and easy to understand
9. It should provide definite instructions and methods
10. It should provide a suitable policy
11. To be more efficient, it should be rigid, but the elements to flexibility and elasticity
should not be ignored

Factors affecting manpower planning

Man planning is very complex, dynamic and complicated work. For an effective and
efficient manpower a number of factors should be considered. These are:

1. Working hours – Man power requirements is directly related to the total hours
worked per day by the employee in an industry.
2. Number of shifts – It is seen that production falls in the night shifts compared to day
shifts. This will consider for deciding man power requirements.
3. Nature of production – Nature of production means whether we are manufacturing
some machine component or chemical or gas or assembly items etc.
4. Product mix – Product mix means a production programme based on optimum
productive capacity and sales forecast.
5. Performance rate – Rate of performance of workers also affect on the manpower
requirement. If their performance is good then less workers will be needed and vice
versa.
6. Hours lost – Hours lost due to shortage in raw materials, breakdown of machineries,
power failure etc.

JOB ANALYSIS

The process of determining the requirements of personnel is known as “Job

Analysis”.

JOB EVALUVATION

Job evaluation is defined as “the procedure to determine the relative values of the job
in an organization and to determine the basic wages for that job”

Steps required for job evaluation

1. Select the job to be evaluated

2. Select the most suitable methods or technique to evaluate the selected job.
3. Analyse the job and select the major job characteristics, then minor ones.
4. Inform to all concerned workers, foremen, about the job to be evaluated.
5. Build definitions and their measuring scale, for comparison purpose.
6. Prepare job rating proforms and questionnaires and collect initial description.
7. Sort out initial description and establish grades or classes
8. Indentify and evaluate the key jobs
9. Evaluate the remaining jobs and award the job title to them.
10. While job rating, make sure that representation of workers should be considered
11. For key jobs only, make inter company survey, but try to find atleast one per grade.
12. Transfer the rating values in money values temporarily
13. Plot a scatter diagram, for more sure key job and end jobs.
14. Bargain on wage structure
15. Decide the range limits and line of reference
16. Re-adjust all rates relative to the line of reference, put into working forms and finally
fix all operation procedures.

Methods for Job Evaluation

Methods of job evaluation are

1. Non-quantitative or qualitative techniques

 2. Quantitative techniques

Non-quantitative or qualitative techniques

By simple ranking, classify the job from lowest to highest. This technique includes
the following methods:

1. Ranking methods
2. Classification methods

1. Ranking method

This is the oldest and simplest method of job evaluation. In this system a committee
of persons who are familiar with the jobs and job discrimination carries out the ranking.
They studies all the jobs and job description in the organization and they are arranged or
ranked in ascending order beginning with the one of minimum requirements and ending up
with the one of maximum requirement. While ranking the following factors are considered:
 Amount of work
 Supervision needed
 Responsibility required
 Difficulty in work
 Monotony of work
 Working conditions
 Knowledge and experience needed

Ranking system is suitable for smaller organizations where the raters are through with all
existing jobs in the enterprise

2. Classification (Grading) method

In this method all jobs are classified or graded in groups or levels of equal skills,
difficulties, responsibility, importance and other requirements. The job evaluation committee
goes through each job discrimination and classifies the jobs of similar skills, difficulties,
responsibilities under one group or grade. All jobs in the same grade should receive the same
wages
 By this system of evaluation the fitters may be graded as fitter I, fitter II fitter III or
workers in any workshops may be graded as skilled, semiskilled and unskilled, and clerks in
any office job may be graded as UDC, LDC, record assistance, etc

Quantitative techniques

Here point values are assigned to the various demands of a job, and relative value is
obtained by summing all such point values. This technique includes the following methods:

1. Factor comparison methods

2. Point rating method

1. Factor comparison methods

This method employees five factor scale for analysis, comparing and evaluating
different jobs. The five factors are:

1. Skill
2. Mental efforts
3. Physical effort
4. Responsibility
5. Working conditions

2. Point rating method

In point rating method each job is first divided into a number for factors which in turn
are further subdivide into grades or degrees. Each degree is awarded certain points and when
such points for all the degrees are totaled they indicate the importance of the job in the
organization, consequently a suitable wage rate proportional to the points is determined. The
steps involved in point rating method are given below:

I. Select a few key jobs which can be taken as representatives of the jobs to be evaluate in
the organization. Key jobs are those which can be cleared defined and are fairly paid
II. Establish and define job factors whose number may vary between five to ten. Both key
jobs and the jobs to be evaluated should have common job factors. A few job factors are
listed below:
1) Skill :
• Education and training
 • Experience
• Judgement and initiative
2) Effort :
• Physical effort
• Mental effort
3) Responsibility towards
• Material
• Equipment
• Machinery
• Tools
• Fellow workers
4) Working conditions :
• Exposure to hazards
• Dust, smoke, fumes and noise
• High temperature
• Glare and harmful radiations etc

Merit ranking or performance appraisal

Merit ranking is defined as “a systematic and orderly approach to assess the relative
worth of an employee working in an organization in terms of his job performance, integrity,
leadership, intelligence, behavior, etc”

Objectives of merit rating method

• It provides a record of the worth of the employees

• It help the supervisor in deciding which person is to be given which task
• Merit rating records from a basic for:
1. Wage-increase
2. Promotion
3. Special assignment
4. Training
5. Transfer
6. Discharge
• It protects the employees from discrimination, favouritism, etc
Methods of merit rating system

The different methods of merit rating are discriminated below:

1. Rating scale method

2. Checklist method

3. Employee comparison method

1. Rating scale method

The steps involved in rating scale methods are

1. Define the merit factors to rate the employees

Factors are

1. Standard of output
2. Quantity of output
3. Intelligence
4. Job knowledge
5. Leadership
6. Integrity
7. Dependabilty
8. Education and experience
9. Efforts and Initiative
10. Adaptability
11. Co-operation
12. Judgement
13. Character
14. Loyalty
15. Health and Apperance

2. Divide each factor into three to five different grades or degrees like excellence, very good,
fair and unsatisfied

3. Impart certain point(mark) to each grade

4. The worth of an employee can be determined from the total points he gets from all his
merit factors. on the basics of these points different workers can also be compared.

2. Checklist method

This methods employs a list of questions and several statements which are
concerned with the employee performance on various aspects of the job and which are
considered important for evaluating the merit of an employer for that job.

3. Employee comparison method

This method compares a worker on a job with all other workers on the same job, in
pairs. Suppose there are four workers namely A, B, C and D Then

Worker A is compared with Worker B and suppose A is Better

Worker A is compared with Worker C and suppose C is Better

Worker A is compared with Worker D and suppose D is Better

Next,

Worker B is compared with Worker C and suppose C is Better

Worker B is compared with Worker D and suppose D is Better

Then,

Worker C is compared with Worker D and suppose C is Better

The summary of the results shows that

A turned to be better in 1 times

B turned to be better in Nil times

C turned to be better in 3 times

D turned to be better in 2 times

Therefore, the worker C is taken to be the best worker.

Steps in selection of workers for a job

1. After conducting job analysis, prepare job description and job specification.
2. Determining the various sources of recruitment, such as employment exchanges,
newspaper advertisement, campus interviews etc.
3. Preparation of the application format
4. Calling for a selection test after preliminary filtration. The selection test may be
performance test, aptitude test, intelligence test, interest test etc.
5. Conducting the selection test where considered to be necessary
6. Performing the preliminary interview after selection test. The interview may be
informal or formal
7. Conducting the medical examination of the applicant, where it is to be required.
8. Conducting final selection interview with the candidates
9. Selecting and appointing the persons selected in final interview

Training

Training is the act of increasing the knowledge and skill of an employee for doing a
particular job.

Importance of training

 Training is the most important technique of human resource development

 Organisation can not get a candidate, who exactly matches with the job and the
organizational requirements. Hence training is important to develop the employee and
make suitable to the job.
 Job and organizational requirements are changed from time to time. The awareness in
the changes can be achieved through training
 Training develops human skills and efficiency
 Trained employees would be a valuable asset of an organization
 Organisational efficiency, productivity, progress and development can be increased
through training
 Organisational objectives like viability, stability and growth can be achieved through
training
 Advantages of training

1. Improves job knowledge and skill at organizational level

2. Identify organizational goals
3. Improves the relationship between boss and subordinate
4. Aids in organizational development
5. Aids in understanding and carrying out organizational policies
6. Provides information for future needs in all areas of the organization.
7. Aids in developing leadership skill, motivation, loyalty, better attitudes
8. Aids in increasing productivity and quality of work
9. Training eliminates fear in attempting new task
10. Improves communication between groups and individuals

Methods of training

Training programmes are classified into

1. On the job method

2. Off the job method

On the job method

Under this method, the individual is placed on a regular job and taught the skills
necessary to perform that job. On the job train methods are

1. Job rotation
2. Coaching
3. Job instruction
4. Committee assignment
1. Job rotation

This type of training involves the movement of the trainee from one job to another. The
trainee receives job knowledge and gains experience from his supervisor or trainer in each of
the different job assignments. Though this method of training is common in training
managers for general management positions, trainees can also be rotated from job to job in
workshop jobs. This method gives an opportunity to the trainee to understand the problems of
employees on other jobs and respect them
2. Coaching
The trainee is placed under a particular supervisor functions as a coach in training the
individual. The supervisor provides feedback to the trainee on his performance and offers him
some suggestions for improvement. Often trainee shares some of the duties and
responsibilities of the coach and relives him of his burden. A limitation of this method of
training is that the trainee may not have the freedom or opportunity to express his own idea.
3. Job instruction

This method is also known as training through step by step. Under this method, trainer
explains the trainee the way of doing the jobs, job knowledge and skills and allows him to do
the job. the trainer appraises the performance of the trainee, provides feedback, information
and corrects the trainee.

4. Committee assignment

Under the committee assignment, group of trainees are given and asked to solve an actual
organizational problem. The trainees solve the problem jointly. It develops team work.

Off the job method

Under this method of training, trainee is separated from the job situation and his
attention is focused upon learning the material related to his future job performance. Off the
job train methods are

1. Vestibule training
2. Role playing
3. Lecture method
4. Conference or Discussion
5. Programmed instruction
1. Vestibule training
In this method, actual work conditions are simulated in a class room. Material, files and
equipments those are used in actual job performance are also used in training. This type of
training is commonly used for training personnel for clerical and semiskilled jobs.
2. Role playing

It is defined as a method of human interaction that involves realistic behaviour in

imaginary situations. This method of training involves action, doing and practice. The
participants play the role of certain character, such as the production manager, mechanical
engineer, superintendents, maintenance engineers, quality control inspectors, foreman,
workers and the like.

3. Lecture method

The lecture is a traditional and direct method of instruction. The instructor organizes the
material and gives it to a group of trainees in the form of a talk.

4. Conference or Discussion

It is a method in training the clerical, professional and supervisory personnel. This

method involves a group of people who pose ideas, examine and share facts, ideas and data,
test assumptions, and draw conclusions, all of which contribute to the improvement of job
performance.

5. Programmed instruction

This method has become popular. The subject matter to be learned is presented in a series
of carefully planned sequential units. These units are arranged from simple to more complex
levels of instruction. The trainee goes through these units by answering questions or filling
the blanks. This method is expensive and time consuming.

Labour turn over

Labour turn over means that the establishment of a relationship between the number
of employees leaving during a period of time to the average number of employees during that
particular period.

𝑁𝑁𝑁𝑁.𝑜𝑜𝑜𝑜 𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 𝑡𝑡ℎ𝑒𝑒 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑡𝑡ℎ𝑒𝑒 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝

Labour turn = x 100
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑛𝑛𝑛𝑛 .𝑜𝑜𝑜𝑜 𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤 𝑖𝑖𝑖𝑖 𝑡𝑡ℎ𝑒𝑒 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑡𝑡ℎ𝑒𝑒 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
 WAGES AND INCENTIVES
Wages and Salaries
Wage is the principle source of income to workers for their labour or service. Wages
are the payments made by the employer for the efforts put by the worker in production.
Wages are the payments made to the labour engaged directly in production.
Salaries are the remuneration paid to the persons whose output cannot be measured
such as executives, supervisory or clerical staff.
Wages are paid to the workers on hourly or daily basis or piece wise basis. Salaries
are paid on the basis of month.
Importance of a good wage plan
 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 motivates a team spirit and co-operation
 It improves employee-employer relationship
Different types of wages
1. Nominal Wages -It is the amount of money paid to a worker in cash for the efforts
put in by him in an industry.
2. Real Wages – This is the additional facilities provided to the worker in addition to the
cash payment. For Example Uniform, Housing, Free electricity, conveyance etc.
3. Living Wages – To meet social requirements like education, food, cloth and
insurance
4. Fair Wages – It should provide him with other necessities of life in addition to food
for his family.
5. Minimum wages – Least amount of remuneration which a worker should be paid
Incentives
Incentive is a reward given to the worker for his efficiency and hard work.
Identify financial, non-financial and semi financial incentives.
Different types of incentives
1. Financial incentives
2. Non-Financial incentives
3. Semi Financial incentives
1. Financial incentives
 Financial incentives involve direct money payment for better performance of the
worker. In addition to the extra payment for the immediate work contribution, workers
may receive additional financial benefits in the form of bonus, premium and profit
sharing.
2. Non-Financial incentives
In order to create interest in a worker for greater and better output, non financial
incentives must also be enforced and workers will also enjoy richer and fuller life. Non
financial incentives include:
a) Job satisfaction
b) Opportunity for technical training in other technical organization as well as abroad
c) Security of job
d) Opportunity for promotions
e) Better and healthy working conditions and surroundings
f) Fair and sympathetic treatment with workers
g) Helpful and co-operative management
h) Respective and recognition in the organization
i) Housing, medical, recreational and educational facilities to workers and their
families.
3. Semi Financial incentives
These are combination of financial and non-financial incentives. They include
a) Provision of subsidized lunch, recreational and medical facilities to the workers
and subsidized educational facilities for their children.
b) Pension and other benefits
Different types of Financial incentive plans
1. Straight piece rate plan
2. Straight piece rate with guaranteed minimum wage.
3. Taylors differential piece rate system
4. Halsey premium plan
5. Rowan premium plan
1. Straight piece rate plan

Under this system, a piece rate and standard time for the completion of the job is fixed.
Now, if a worker completes the job earlier than the standard time, he can save his time and in
that saved time, he can make extra jobs, and whatever the extra money he gets for the extra
work, it wholly goes to him.

Earnings of a worker = No. of pieces produced x Rate per piece

2. Straight piece rate with guaranteed minimum wage.

The standard of output is set by the management, if a worker produces less than this
amount he still gets the minimum guaranteed 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
the straight piece rate.

3. Taylors differential piece rate system

In this system a standard time is fixed for the performance of standard output. Those
workers who complete the job in standard time or produce jobs earlier are paid at higher
wage rates and who do not complete the job in standard time are paid at lower wage rates.
Therefore this system divides the workers into two groups and they are paid with two wage
rates. This system is suggested by F.W. Taylor.
4. Halsey premium plan

Under this system, an hourly wage rate and the standard time for the completion of the
job is fixed by the management from previous records. In this plan, minimum base wage is
guaranteed. If the worker completes the job in just standard time, no extra remuneration is
paid to him. On the other hand, if he completes the job in less time than standard time, he is
rewarded with additional percentage of the total bonus for the saved time. The worker is paid
the agreed rate per hour for the time spent on plus a fixed percentage of the time he saved on
the job.

Thus the earnings of the worker is calculated by using the formula

𝑷𝑷
E = R X T + (S -T) X R X
𝟏𝟏𝟏𝟏𝟏𝟏

Where R = Hourly wage rate

T = Actual time taken to complete the job
S = Standard time
P = Fixed percentage on the time saved given to the worker
1
The fixed percentage of the total bonus for the time saved may vary from 33 % to 75 %, but
3

most commonly it is 50 %. The 50 % of the bonus in the time saved is given to the worker
and the other 50 % goes to the management. Then this plan is known as 50-50 Halsey plan.

5. Rowan premium plan

In this system, the worker is guaranteed a minimum base wage. A standard time is fixed
for each job and a premium is given in the ratio of the time saved to the standard time
multiplied by the time taken on the jo
 𝑆𝑆−𝑇𝑇
The total earnings of a worker, E = R X T + xRXT
𝑆𝑆

Where R = Hourly wage rate

T = Actual time taken to complete the job
S = Standard time

In Rowan premium plan, the bonus gradually increases with increase in percentage
time saved and reaches a maximum bonus at 50 % time saved. The bonus gradually decreases
above 50 % time saved and becomes zero when the time saved is 100 %. This is shown
graphically in figure.