Workshop Incentive scheme

Garima Tripathi
Kunda Pradeep Babu
L. R. Levin Prabhu
Vineeth Challa Reddy
WHAT IS INCENTIVE SCHEME
 Kind of Bonus system followed by Indian
Railways.
 Introduced to Improve productivity and to
Increase outturn.
 Incentive scheme viewed as “win-win solution”
between administration and staff of an
Organization.
Need and Benefits of Incentive scheme
For Workers
 It gives satisfaction of “earning more by working
more”
 More purchasing power
 End result: Organization is benefited with better
industrial relations & discipline.

For administration
 No requirement of additional manpower
 Higher and efficient machine utilization
 More productivity
 Less pilferage of working hours
Types of Incentive Schemes in Railways
 Existing Incentive scheme on Indian Railway Workshops
broadly grouped in two categories :
 Chittaranjan type (CLW)
 Based on Time Saving
 Group based incentive scheme
 Directly linked to Outturn given by a Group – (Tirupathi,
Kapurthala …), introduced on Workshops during Jan, 2002.
CLW Incentive Scheme
 First formal incentive scheme in Indian Railways.
Was introduced in CLW in December 1954.
 Time is basis of this scheme and the time standards
used are predetermined after systematic work
measurement.
 Also known as “The system of payments by results”.
 Scheme was a success and was extended to repair
Workshops in 1958
CLW Scheme in Simple Flow chart

Performance Allowance
Rating Fraction

Observed Normal Standard

Time Time Time
Salient Features
 Basic wages guaranteed to all the workers.
 Time is the yardstick for measuring work.
 The system envisages fixation of time standards for each operation
through ‘time study’.
 The ‘allowed time’ is so fixed that the average worker completes an
operation in 75% of the allowed time and thereby earn 33.33 % bonus.
 Allowed time includes allowances for fatigue(12.5% - 25%), general
handling(12%), gauging(5%) and production bonus
allowance(33.33%).
 Extra time above the allowed time can be allowed due to:-
 Excessive machining work
 Hard material
 Defects in the machine
 Change in the batch quantity against a work order.
 Job cards are the basic document to calculate the incentive.
(punched on or off with the aid of job recorders)
 The results will be determined on the total quantity passed by the
Inspector concerned.
Classification of Workers under CLW
incentive scheme
 3 categories –
Direct workers(DW) – work assessed through time studies.
Essentially Indirect Workers(EIW) – contribute to continuity of work but whose
work cannot be assessed through time-studies.
Indirect Workers(IW) – do not contribute directly or indirectly to the
production. THEY DO NOT GET INCENTIVE BONUS
CALCULATION OF INCENTIVE
 CLW Incentive scheme also known as “system of payment by results” and is
more in favour of employees than the output.

 DW incentive = Total Saved Hours X Hourly Rate

 (Total Saved Hours subject to maximum profit ceiling of 50% of time taken)

 Total Saved Hours = Total Allowed Time – Total Time Taken

𝑻𝒐𝒕𝒂𝒍 𝑾𝒂𝒈𝒆𝒔+𝑳𝒆𝒂𝒗𝒆 𝑺𝒂𝒍𝒂𝒓𝒚

 Hourly Rate of Pay =
𝑵𝒐. 𝒐𝒇 𝑯𝒓𝒔. 𝒐𝒇 𝑨𝒕𝒕𝒆𝒏𝒅𝒂𝒏𝒄𝒆+𝑵𝒐. 𝒐𝒇 𝑯𝒓𝒔. 𝒐𝒏 𝑳𝒆𝒂𝒗𝒆 𝒘𝒊𝒕𝒉 𝑷𝒂𝒚
Need for a New incentive or appraisal
mechanism
 Workshops are major cost centers for the Indian Railways.

 With the current state of the Railway finances need for broad rationalization
of processes and incentives to promote financial prudence

 Incentive or profit motive alone cannot be a sufficient motivation.

 With the political constraints in place

Observations from the Field

 Tacit understanding that there are a few who work and others that don’t

 Managers and Supervisors over reliance on a few trusted workers and

supervisors.

 Some exceptionally managed like the one in Pratap Nagar, where there is
presence of a strong work ethic,

 others where there is strong unionism.

Problems with the present incentive
scheme
 Focus is more on individual efforts and narrow consideration of ones own profit.

 The scheme creates disincentive for group based innovative thinking towards
greater problem solving.

 When there are reforms in the broader systems like Accounts and traffic, it
becomes essential that incentives are suitably aligned at the cost centers to
derive greater benefits of overall rationalization.

 People are not seen as an asset to be developed, rather as a means to an

end.
Study of TATA Motors

 Companies manufacturing base spread across India

Jamshedpur, Pune, Lucknow, Pantnagar, Dharwad and Sanand

Commercial vehicles, Military Vehicles, Electric vehicles, Buses etc

Good starting point: HR study of their workforce

Performance Appraisal Aspects
Performance Appraisal
Process and Limitations of Performance
Appraisal
Methods of Performance Appraisal

 Essay Appraisal – Not suitable

 Graphic Rating Scale – quality and quantity of work
 Field review
 Forced Choice rating
 Management by objectives (MBO)
 Ranking Methods
 Paired Comparison Ranking
 Alternation ranking
Rating Errors in performance appraisal

 Leniency or Severity
 Central Tendency
 Halo error
 Rater effect
 Primacy and regency effects
 Performance Dimension Order
 Spillover effects

 Normalization Committee: Should decide on the final bell curve for each
function in the respective business unit/circle.
Performance Rating

Exceptional Contributor Significant contributor Contributor

• Performs consistently • Performs above

and above expectation
expectations • Versatile in his/her area
• Proactive, spots and of operation
anticipates problems, • Sets example for others
implements solution • Takes ownership for
• Sees and exploits own development
opportunities • Coaches others
• Delivers ahead of time • Demonstrates business
• Sees the wider picture initiative
across the business • Is self motivated
x
 Initiatives that can be taken up from Performance appraisal
 Realigning Organizational culture on New visions and values
 Objective performance management and development system
 Career planning and promotion policy
 Competency mapping
 Continuous value addition to Professional Skill – Build a learning organization
 Internal communication
 Union Alignment
Best Incentive scheme

 It depends on the Production environment/Workshop

Production
Unit/Workshop

Conventional
Teams
Assembly lines
Best Incentive scheme ctd…

Individual Group
Incentive Incentive
Individual incentive scheme

 Different methods
 Straight piece-work system
 Standard hour plans
 Taylor plan and Merrick plan
 Halsey 50-50 method
 Best practice : Lincoln Electric’s Compensation system
Group incentive scheme

 Different methods
 Cash Profit Sharing
 Stock ownership or option
 Productivity/gain sharing
 Based on team/group performance goals or objectives and payout can be
more frequent than annual.
 This reinforces teamwork and team identity/results and is effective in
stimulating ideas and problems
Thank you