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    IEMS Module 5

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    Venkatramanan
    1000 pcs/line x 3 lines = 3000 pcs Additional production by having 100 more workers = 3000 pcs If average price of each piece is Tk. 50, additional revenue by the factory = 3000 pcs x Tk. 50 = Tk. 1,50,000 So net additional cost for the factory = Tk. 6,00,000 - Tk. 1,50,000 = Tk. 4,50,000 Therefore, increasing attendance bonus is beneficial for the factory.

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    IEMS Module 5

    Uploaded by

    Venkatramanan
    44 views31 pages
    1000 pcs/line x 3 lines = 3000 pcs Additional production by having 100 more workers = 3000 pcs If average price of each piece is Tk. 50, additional revenue by the factory = 3000 pcs x Tk. 50 = Tk. 1,50,000 So net additional cost for the factory = Tk. 6,00,000 - Tk. 1,50,000 = Tk. 4,50,000 Therefore, increasing attendance bonus is beneficial for the factory.

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    1000 pcs/line x 3 lines = 3000 pcs Additional production by having 100 more workers = 3000 pcs If average price of each piece is Tk. 50, additional revenue by the factory = 3000 pcs x Tk. 50 = Tk. 1,50,000 So net additional cost for the factory = Tk. 6,00,000 - Tk. 1,50,000 = Tk. 4,50,000 Therefore, increasing attendance bonus is beneficial for the factory.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    44 views31 pages

    IEMS Module 5

    Uploaded by

    Venkatramanan
    1000 pcs/line x 3 lines = 3000 pcs Additional production by having 100 more workers = 3000 pcs If average price of each piece is Tk. 50, additional revenue by the factory = 3000 pcs x Tk. 50 = Tk. 1,50,000 So net additional cost for the factory = Tk. 6,00,000 - Tk. 1,50,000 = Tk. 4,50,000 Therefore, increasing attendance bonus is beneficial for the factory.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 31

    WELCOME

    TO
    BGMEA-SEIP TRAINING INSTITUTE
    Module 5: Incentive system design
    MOTIVATING PEOPLE

    A little push in the right direction can


    make a big difference…
    10 STEPS TO ACHIEVE HIGHER
    MOTIVATION

    1. Achievable goals.
    2. Create expectations
    3. Provide feedback.
    4. Design jobs
    5. Good use of the organization’s
    reward system
    10 STEPS TO ACHIEVE HIGHER
    MOTIVATION

    6. Recognition and praise.


    7. Communicate the link between
    performance and reward.
    8. Effective leadership.
    9. Guidance and training
    10.Opportunities for learning and
    development.
    Training and
    Developmen
    t
    6

    EMPLOYEE MOTIVATION
    Abraham Maslow’s
    Pyramid of Human
    Needs

    Self-
    actualization
    Esteem
    Social
    Safety/Security
    Physiological (financial)
    EMPLOYEE MOTIVATION
    Douglas McGregor’s
    Theory X and Theory Y

    •Theory X Employee
    • Dislikes work
    • Must be forced
    • Shirks responsibility
    • Little ambition
    • Security top motivator
    •Theory Y Employee
    • Work is natural
    • Self-directed
    • Controlled
    • Accepts responsibility
    • Makes good decisions
    EMPLOYEE MOTIVATION
    Frederick Herzberg’s
    Hygiene/Motivation
    Theories

    •Hygiene Factors
    • Company policies
    • Supervision
    • Working conditions
    • Interpersonal relations
    • Salary, status, security
    •Motivation Factors
    • Achievement
    • Recognition
    • Job interest
    • Responsibility
    • Growth
    • Advancement
    Incentivizing
    Raise your hand if…

    You have a production-based incentive scheme

    You have an attendance incentive scheme

    Any other incentive scheme?


    Incentivizing

    HR Production
    Efficiency
    Loyalty
    Productivity
    Stability
    Quality

    The principles to link Pay & Performance and


    Incentivise better performance
    Incentivise better attendance
    Incentivising

    WHY HAVE AN INCENTIVE


    SCHEME?
    Incentivizing Production

    Lets go through the steps for setting up a incentive scheme!

    Mechanism Target & Explain to Explain to


    Monitor
    Payment supervisors workers
    Incentivizing Production
    What are the advantages and disadvantages, if I set my target
    according to…

    Efficiency Number of pieces


    Advantage Disadvantage Advantage Disadvantage

    What is easy to calculate for the production department / I.E. ?


    Does it depend on style, on standard time?
    What is easy to understand for workers?
    Incentivizing Production
    Setting a realistic target and reward

    Describe the carrot! The carrot


    has to be:
    Achievable
    Realistic
    Understood
    Motivating
    Checklist
    Mechanism Target & Explain to Explain to
    Monitor
    Payment supervisors workers

    • Clear design with written policy and procedure


    understood by implementers
    • Workers understand it
    • At least 80% of workers achieve it on a regular basis
    • Linked to limited hours
    • Benefits for supervisors
    GUIDELINES FOR
    PRODUCTION
    INCENTIVES
    MEASURE CURRENT LEVEL
    • IE dept. will measure the efficiency level of each
    and every production line.

    • Try to analyze data for last 3-6 months, to be


    familiar with product category and line efficiency
    trend.
    SET BASE INCENTIVE LEVEL
    Product Current Up to 6 After 6 After 1 After 1.5
    Category efficiency month month year year

    Basic
    35% >40% >46% >53% >60%
    Style

    Semi-
    33% >38% >43% >48% >55%
    critical

    Critical
    30% >35% >40% >45% >50%
    Style

    • Need to analyze last 6 month’s style & decide Basic, Semi-


    critical & critical styles based on SMV.
    • IE department needs to clearly calculate the no. of
    pieces/style for achieve production incentive at target
    efficiency level and communicate rightly to production
    department.
    SET BASE INCENTIVE LEVEL
    Product Production /Day
    Basic
    Category (10 hr.)
    Current
    35% 1050
    efficiency
    Production Incentive will start if this line can achieve 41% at
    least.
    Target Production
    Efficiency SMV MP WH increase
    Output
    41% 7 35 10 1230 180
    42% 7 35 10 1260 210
    43% 7 35 10 1290 240
    44% 7 35 10 1320 270
    45% 7 35 10 1350 300
    DEFINE PAY STRATEGY
    • CPM based
    • CM based
    DEFINE PAY STRATEGY
    (CONTD.)
    • CM based
    • Need to know Average CM for Basic, Semi-critical &
    Critical style.

    • Decide what percentage of earned CM for efficiency


    improvement will be shared.
    DEFINE PAY STRATEGY
    (CONTD.)
    • Example:
    Basic Knit item having CM of $5. Agreed share
    percentage is 50% of CM. If efficiency increases
    by 1% (from incentive base efficiency), then
    production will be increased 30 pcs (10 hrs.) in 1
    line. What will be the amount fit for the line to get
    as production incentive?

    Calculation:
    = (30x$2.5x80)/12
    = 500 BDT. (Extra CM earned for incentive)

    US $1 = 80 BDT
    JUSTIFICATION
    • In this case, we got the production (30 pcs) equal
    to nearly half an hour production of OT hour.

    • OT calculation
    • If average OT/hr = 35 BDT
    • 39 manpower with average OT cost
    = 39 x35 x 0.5 = 683 BDT.
    WEEKLY / MONTHLY
    INCENTIVE CALCULATION
    • Daily Calculation of production incentive based on
    performance should take place by IE personnel.

    • The money earned by the line as ‘production incentive’


    needs to be paid weekly (preferable).

    • Coordination between HR, IE, Production, Quality &


    Accounts department is highly expected for a
    successful Production Incentive system.
    INCENTIVE DISTRIBUTION
    • Who will be under Incentive coverage?
    • Input man, supervisor, Line workers & line QC.
    • How Line earning will be distributed?

    Supervisor= 2 Operators
    Helper= 0.5 operators
    QC / input man = 1 Operator

    Calculation:
    2x Sup+1x operator+1x QC+ 0.5 x helper+1x input man = (Extra CM
    earned for incentive)
    => (2x1)+ (30x1)+ (3x1)+ (5x0.5)+(1x 1) operator= 341.5 BDT
    => 38.5 operator = 341.5 BDT
    => 1 Operator = 8.85 BDT/ day.
    INCENTIVE
    CALCULATION/OPERATOR/
    DAY
    Earned
    Production
    Target Output Incentive/
    Efficiency (%) increase
    (Pcs.) operator/ day
    (Pcs.)
    (BDT)
    40% 1200 - -

    41% 1230 30 13

    42% 1260 60 26

    43% 1290 90 39

    44% 1320 120 52

    45% 1350 150 65


    Incentivizing Attendance
    Reasons for taking leave are multiple. For workers they can
    be:
    • Caring for someone
    • Go to the bank / send money home
    • Social functions
    • Sickness
    • Production & work pressures
    • Supervisors miss behaviour

    What would be the benefits of better / more regular


    attendance on production?
    Attendance Bonus
    Scenario: A SIMPLE CALCULATION
    Total manpower (worker) of factory is [2000] & daily absenteeism in
    the factory is [10%] where Attendance bonus in the factory is [tk. 200].
    which means [2000 x 10% = 200] workers are absent daily.
    If [50%] workers receive attendance bonus, factory cost will be;
    2000 x 50% = 1000 x tk.200 = 2,00,000
    Now factory decides to increase attendance bonus & make it [tk.500]
    which will decrease absenteeism by minimum [5%], that will make
    [2000 x 5% = 100] additional workers present in the factory daily.
    If [80%] workers receive attendance bonus, factory cost will be;
    2000 x 80% = 1600 x tk.500 = 8,00,000
    What is the additional costing by the factory from previous on
    attendance bonus:
    Tk. 8,00,000- tk. 2,00,000 = tk. 6,00,000
    Attendance Bonus
    However, we now have additional [100] workers in the
    factory. Considering 30 workers in a line, we can make
    minimum 3 lines out of those 100 workers.
    If, each line production out put is 1000 pcs/day, 3 line will
    produce
    1000 pcs X 3 = 3000 pcs/ daily.
    What would be additional monthly production?
    3000 pcs X 26 days = 78,000 pcs
    What would be the earning by factory? If FOB is $1.5/pcs
    78,000 x $ 1.50 = $ 1,17,000 = tk. 93,60,000
    What will be the profit? Consider 15% profit of FOB-
    $ 1,17,000 x 15%= $ 17,550 = tk. 14,04,000
    Attendance Bonus
    RETURN ON INVESTMENT (ROI) FOR AN
    ATTENDANCE BONUS?

    • What was the additional cost for attendance


    bonus (Tk. 500 vs Tk. 200 )? --------Tk. 6,00,000.

    • What would be the earning by factory for reducing


    Absenteeism----- Tk. 14,04000

    • What is the nit profit-


    • Tk.14,04,000- 6,00,000 = 8,04,000 taka
    Share Your Knowledge
    If you are interested share your IE & Planning or Textile related knowledge or articles & any method or
    process development video or any kind of information.
    If you are interested, you can send article at [email protected] or [email protected]
    N.B: You have to attach your name, Profession & profile picture with file.

    THANK YOU

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