Professional Documents
Culture Documents
Productivity Linked in Service Sector
Productivity Linked in Service Sector
SERVICE SECTER
DEFINITION OF PRODUCTIVITY
PRODUCTIVITY ASPECTS
Output Measurement
1.Fixed component
2.Basic wage
3.Annual increment
4.Variable component linked with “productivity”&
“performance”.
FORMULATION
T=A+
P
Where,
T= Wage increase
P=Variable productivity payment.
A=Annual increment
EXAMPLE
If basic wage is equal to Rs.2500 pm, A= 5%, P=4%
PROFITABILITY MODEL
Absolute form:
1.Trading or operating profit
2.Net profit before tax
3.Profit after tax
Relative form:
1.Return on sales
2.Return on equity
3.Return on assets
MEASUREMENT OF INCETIVES:
*Incentive schemes in Public Secto
*Budget based reward system, where the reward is
calculated on the bases of the comparison of objectives and
results.
1.Staff of Indian Airlines getting PLI, the increase in its fleet size will
improve the aircraft-employee ratio.
2.Under this scheme employees are paid monthly incentives depending upon
the performance of the airline.
3.Parameters
4.Firstly, timely availability of aircraft for flying.
5.Secondly, time taken by aircraft for major maintenance purposes.
6.Thirdly, number of passengers’ carried and on-time performance.
Benefits of PLWS:
1.The system will ensure that employees obtain fair share of the gains form
Productivity / Performance improvement
2. Provides motivations or good performance.
3. Provides a more flexible wage structure that is able to withstand economic
uncertainties.
4.Enhances competitiveness in the global economy.
5.Ensures job stability and reduces the likelihood of retrenchment in bad
times.
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CASE EXPERIENCE 1
Profitability-liked bonus
(Extracted from a collective agreement concluded)
Fixed Bonus:
The Company shall pay an annual guaranteed bonus equivalent to one
month of the last drawn basic salary
Variable bonus:
Should be company make a profit of Rs. 4,000,000/= to Rs. 2,500,000/=, the
company shall pay one half (1.5) month of the last drawn basic salary bonus
Profits exceeding Rs. 3, 000,000/=, bonus payment shall be two months of
the last drawn basic salary Notwithstanding the above, the guaranteed bonus
of one month, base on last drawn basic salary, shall continue to be
applicable.
Example 1
Allied Signal is a highly diversified worldwide company that develops and
manufactures components and systems for the aerospace, automo¬tive,
chemical, fibers and plastics industries. As part of their growth and
manufacturing improvement strategy, Allied Signal implemented a program
called: “Winning Together” in order to increase both employees’
productivity and their vested interest in the company. Since its inception, the
“Winning Together” Program has been expanded to many of Allied Signal’s
plants and has generated over $250 million in savings, over 40 times its
costs.
Example 2
Avid Technology revolutionized the entertainment industry by changing the
way motion pictures, commercials, broadcast news and TV shows were
edited. However, internal structure was sacrificed at the expense of extreme
growth until Avid began losing stock value and saw decreased customer and
employee satisfaction. Under new leadership, Avid re-pieced together its
compensation plan, which included a plan based on earnings-per-share, a
profit-sharing program (the former and the later both based on ROIC - return
on invested capital) and a restructured stock option program. In order to
retain critical hardware and software development talent, base salaries and
retention bonuses were adjusted based on the productivity of individual
employees. As a result, turnover fell dramatically and profitability soared,
aptly reflected in the quintupling of Avid’s stock price.
Example 3
Blanchard Training & Development Inc. (BTD) is a management training
and consulting firm located in Escondido, California. Founded in 1979 by
Ken Blanchard, coauthor of The One-Minute Manager (New York: Berkeley
Publishing Group, 1986), and his wife, Margie, BTD employs a particularly
effective form of recognition to keep employees motivated called “Eagle
Awards”, which are presented to individuals who have gone above-and-
beyond their job roles to assist a customer or a co-worker. Though incentives
do not include monetary awards, customer service has become the number 1
priority of BTD as company employees (who have become invested in the
program) have begun to recognize one another for their achievements, which
has led to overall improvement for the company.
Example 4
Burke, Inc. is a leading international business research and consulting firm
helping manufacturing and service companies understand and accurately
predict marketplace behavior. As an incentive to retain its top performers,
Burke decided to develop a performance-focused plan benefiting the senior
consultants who provide a direct link between Burke, Inc. and its customers.
Senior level consultants were provided with the resources to effectively “run
their own business” within the organization. As a result, costs and turnover
have decreased and profitability and management capabilities have
increased.
Example 5
The Coca-Cola Company leads the global beverage industry in volume,
profitability, growth and innovation. The company is managed from an
economic value added (EVA) and economic profit viewpoint to keep profits
high and maintain a high return to investors. Compensation programs were
realigned to give value to stockholders by creating variable pay programs to
focus on economic profit. Two compensation programs were designed. The
annual incentive program provides rewards to high performing divisions,
while the stock option program provides options, based on a percentage
scale, to all employees depending on performance. Both programs have led
to increased profitability for the company and an amplified stock price for
investors.