EKLAVYA ACADEMY

COMMERCE & MANAGEMENT

BUSINESS MANAGEMEN

By,
Mrs. Abhilasha. N
M.Com, MPhil, NET-JRF,SET, (Ph.D. in commerce),
Contact No: 9620925899
 INCENTIVES
“Positive motivational influences on a person that helps to improve his performance”. It may
be monetary or non-monetary.

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 INCENTIVES

Labour is rewarded by way of payment of money, called wages. Wages may be paid either on
the basis of time spent on work or on the basis of output. Thus, there are two methods of
remunerating labour – time rate system and piece rate system.
1. Time rate system: It related to the number of hours of work done by a worker. Thus under
this system, wages = Labour hour * Labour hour rate. The payment depends solely upon the
time spend on work irrespective of the quantity of output.
2. Piece rate system: Under this system, each unit, job, operation or process is known as a
“Piece”. A piece rate is fixed for each such unit, job, operation or process. The worker is
paid on the basis of the pieces completed by him. Thus, wages = pieces completed * piece
rate. The payment depends solely upon the number of pieces completed, irrespective of the
time spent by the worker on the job.

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1. HALSEY INCENTIVE PLAN:
In this method a standard time is fixed for the completion of the job. A minimum base-wage
is guaranteed to every worker. If a worker completes his job in just the standard time, he
will not be given any incentive. If a worker performs his job in less than standard time, he
is given incentive. The incentive will be equal to 50% of the time saved by the worker.

W=TR+(S-T)R%
Where, W=Total Wages, S=Standard time, T=Time taken to complete the job, %=Percentage
of wages of time saved to be given as incentive, R=Rate;

For example, if rate hour is Rs.3 standard time for completion of job is 10 hours.
A worker completes the job in 8 hours, his total wages will be:
W= 8x 3+ (10-8)3×1/2
= Rs.27
In the above example, worker is given an incentive of 50% (1/2) of time saved.
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2. ROWAN PLAN:
This plan is quite similar to Halsey plan. It differs only in terms of calculation of incentive
for time saved. The worker gets the guaranteed minimum wages. The incentive for
completing the job in time lesser than standard time is paid on the basis of a ratio, which is
time saved over standard time per unit standard time.

Incentive or Bonus=S-1/SX T x R

Total wages=T x R+ incentive

=T x R(S-T)/S x T x R
Where, W=Total wages, S=Standard time, T=Time taken to complete the job, R=Rate;

For example, if rate per hour is Rs.3and standard time for completion of job is 10 hours.
A worker completes the job in 8 hours, his total wages will be:
W=8×3+ (10-8)/10x 8x 3=Rs.28.4
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3. TAYLOR’S DIFFERENTIAL PIECE RATE SYSTEM

➢ This system was introduced by Taylor, the father of scientific management.

➢ The main characteristics of this system are that two rates of wage one lower and one
higher are fixed.
➢ A lower rate for those workers who are not able to attain the standard output within
the standard time; and a higher rate for those who are in a position to produce the
standard output within or less than the standard time.

For example, if standard production in 8 hours is fixed at 10 units. The lower piece rate
is Rs.3 and higher piece rate is Rs.3.5. If a worker produces 9 units, his wages = 9 x 3 =
Rs.27. In case a worker produces 10 units, his wages = 10 x 3.5 = Rs.35.

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3. MERRICK’S MULTIPLE PIECE RATE PLAN:

➢ To overcome the limitations of Taylor’s differential piece rate system, Merrick suggested
a modified plan in which, three-piece rates are applied for workers with different levels
of performance.These are:
a. Workers producing less than 83% of the standard output are paid at basic rate.
b. Workers producing between 83% and 100% of standard output will be paid 110% of
basic piece rate.
c.Those producing more than 100% of the standard output will be paid 120% of basic piece
rate.

4. Barth Variable sharing plan: In the system, the total earnings are calculated as follows:

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5. GANTT’S TASK AND BONUS PLAN:

➢ This plan is based on careful study of a job. The main feature of this plan is that it
combines time rate, piece rate and bonus. A standard time is fixed for doing a
particular job. Worker’s actual performance is compared with the standard time
and his efficiency is determined.
RULES:
➢ If a worker does not complete the job within standard time i.e. he takes more time
than the standard time (efficiency below 100%), he will not receive any bonus but
he is given wages for the time taken by him.
➢ If a worker completes the job within standard time (100% efficiency), he is given
wages for the standard time and bonus of 20% of wages earned.
➢ If the worker completes the job in less than the standard time (i.e. efficiency more
than 100%), wages are paid according to piece rate.
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6. High wage plan: This plan was first introduced by Ford Motor company in USA in order to
induce workers to exercise extra effort in their work. Under this plan, worker is paid a wage rate
which is much higher than the rate prevailing in the area or in the industry. In return he is expected
to maintain a very high level of performance, both quantitative and qualitative.

7. Measured day work: Under this method, the hourly rate of the time worker is made up of two
parts such as fixed and variable. The fixed rate is based on the job requirement. The variable
portion varies for each workers depending upon his merit rating and the cost of living index. The
total of fixed and variable part for a day is measured days work rate fo a workers.

8. Differential time rate: Under this method, different hourly rates are fixed for different levels of
efficiently. Upto certain level of efficiency the normal time is paid. Based on efficiency level the
hourly rate increases gradually.
Up to 75% efficiency normal (Rs. 100 per hour)
From 76 to 80% efficiency (Rs. 110 per hour)
From 81 to 90% efficiency (Rs. 120 per hour)
From 91 to 100% efficiency (Rs. 130 per hour)
From 101 to 120% efficiency (Rs. 140 per hour)
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9. Emerson’s efficiency system: Under this system, minimum time wages are guaranteed. But
beyond a certain efficiency level, bonus in addition to minimum day wages is given. A worker who
is able to attain efficiency, measured by his output equal to 2/3rd of the standard efficiency, or
above, is deemed tobe an efficient worker deserving incentive. The worker is paid bonus at a rising
scale at various level of efficiency, ranging from 66.67% to 150%. For a performance below
66.67% only time rate wages without any bonus is paid. Above 66.67% to 100% efficiency, bonus
varies between 0.01% to 20%. Above 100% efficiency bonus of 20% of basic wages plus 1% for
each 1% increase is efficiency is paid.
10. Bedeaux system: Firstly the quantum of work that a worker can perform is expressed in
Bedaux points. These points represents the standard time in terms of minutes required to perform
the job. Those who are able to improve upon the efficiency rate are paid a bonus, equal to the
wages for time saved as indicated by excess of B’s earned (standard minutes for work done) over
actual time. Workers are paid 75% of the time saved.
11. Hayne’s system: Here, standard is set in minutes. The standard time for the job is expressed in
terms of the standard man minutes called as MANIT. Manit stands for man minute. In the case of
repetitive work the time saved is shared between the worker and the foreman in the ratio of 5:1. If
the worker is non-repetitive nature, the worker , the employer and the foreman share the value of
time saved in the ratio of 5:4:1.
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 GROUP BONUS PLANS
1. Budgeted expenses bonus: Bonus is based on the savings in actual total expenditure
compared with the budgeted expenditure.
2. Cost efficiency bonus: Standards are set for expenses like material, labour and overhead. The
actual expenditure against these standards is measured and if there is a savings in actual
expenditure as compared to the standards, a portion of such savings is distributed as bonus
amongst the worker.
3. Pristman system: Production standards are set in units and actual production is compared with
the standards. If the actual production exceeds the standards, the workers are paid additional
wages equal to the percentage of output over standards. No bonus is payable if actual
production does not exceed the standard production.
4. Towne profit sharing plan: Standards are set for costs and the actual cost is compared with
the standards. If there is a saving in the cost, the saving is shared by workers and supervisory
staff in agreed proportion.
5. Waste reduction bonus : Bonus is based on savings in the material cost. If there is a saving in
the material cost, the workers share the same in the agreed proportion. The system is generally
used in industries where the cost of material is very high.
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 GROUP BONUS PLANS

6. Rucker plan: The amount of bonus is linked with value added in this system. The value added is
obtained by deducting the cost of material and services from sales value. In other words, value
added is the total of labour, overheads and profits. Under this plan, employees receive a constant
proportion of value added. For example: if the target ratio of labour cost to value added is 70% and
the actual ratio comes to 68%, 2% of the actual value added is distributed as group bonus, so that
the ratio of direct labour cost to value added is maintained at 70%.

6. Scanlon plan: This method is similar to the Rucker plan except that the ratio of labour cost to
the sales is taken instead of direct labour to added value. Normally bonus is paid based on average
of last three years ratios. A part of the bonus may be transferred to bonus equalization fund for
future use when the workers do not get bonus under this scheme.

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 INDUSTRIAL DISPUTES
➢ Industrial disputes act 1947
➢ Industrial disputes means any dispute or difference between employers & employees or
between employers & workmen or between workmen & workmen’s which is connected
with the employment or non- employment or terms of employ

➢ METHODS OF SETTLEMENT OF DISPUTES

A)CONCILIATION : Process by which representatives of workers and employers are

brough together before the third party to resolve the disputes
B) ARBITRATION : Process by which third party listens to disputing parties then takes
decisions which is binding by both the parties.
C)ADJUDICATION : Ultimate legal remedy for the settlement of industrial disputes. It
means intervention of a legal authority appointed by the government to make a
settlement which is binding on the parties.

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COLLECTING BARGAINING
➢ It is a technique adopted by the organization of workers and employers collectively to
resolve their differences without the assistance of a third party.
➢ “Collective bargaining is a process of discussion and negotiation between two parties, one or
both of whom a group of persons is acting in consent.
➢ Types of Bargaining:
a) Conjunctive/distributive/bargaining: Parties try to maximise their respective gains. They
try to settle economic issues such as wages, benefit, bonus etc. Unions negotiate for
maximum wages.
b) Co-operative bargaining: When companies are hit by recession, they cannot offer the kind
of wages benefits demanded by works.
c) Productivity bargaining: Workers wages and benefits are linked to productivity. If
employees able to exceed the standard productivity norms workers will get substantial
benefits.
d) Composite bargaining: It focuses on a number of elements that are not related to pay.
They are generally related to employee welfare and job security. For instance, it covers
factors such as working conditions, policies, recruitment, and disciplinary processes.
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BCG MATRIX
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help
with long-term strategic planning, to help a business consider growth opportunities by
reviewing its portfolio of products to decide where to invest, to discontinue or develop
products. It's also known as the Growth/Share Matrix.
 JOB INSTRUCTION TRAINING (JIT)
• It means “Step-by-step” training. It is a four step instructional process
involving preparation, presentation, performance try out and follow up.
WORKERS PARTICIPATION
➢ ‘It is a mental and emotional involvement of a person in a group situation,
which encourages him to contribute to goals and share responsibilities its
them.’’
MANAGEMENT BY OBJECTIVE (MBO)
➢ ‘Management by objectives (MBO) is a strategic management model that aims to improve
the performance of an organization by clearly defining objectives that are agreed to by
both management and employees. Also, called as MANAGEMENT BY RESULTS.
➢ According to the theory, having a say in goal setting and action plans encourages
participation and commitment among employees, as well as aligning objectives across the
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MBO follows the mnemonic S.M.A.R.T while setting objectives. ‘SMART’ objectives are-
•Specific - Target a specific area for improvement.
•Measurable- Quantify or suggest an indicator of progress.
•Assignable - Specify who will do it.
•Realistic - State what results can realistically be achieved, given available resources.
•Time-bound - Specify when the result(s) can be achieved.

MANAGEMENT BY EXCEPTION

➢ Its given by Lester R. Bittel. It is a system of identification and communication that

signals the manager as to when and where his attention is needed.
➢ The main object of this system is to enable the manager to identify and isolate the
problems that call for decision and action, and avoid or ignore or pay less attention to
less critical problems which better be handled by his subordinates.

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 OTHER IMPORTANT CONCEPTS
➢ Functional leadership: Influences positively
➢ Dysfunctional leadership: Influences negatively
➢ Formal : Autocratic leader
➢ Informal: Participative and democratic leader
➢ Leadership as a continuum: Given by Tannenbaum and Schmidt. Boss centred
(Authoritarian) at the one end to subordinate centred (free reign) at another end.
➢ Locus of control: Refers to alternative benefits whether employees achievement are the
product of his own efforts (Internal locus of control) or result of outside forces (external
locus of control)
➢ Charismatic theory: Given by Pluto’s Republic and Confucius Analects. God gifted
quality or leader is born (Great man theory/Inspirational leadership)
➢ Group Cohesiveness: Refers to attachments of members with the group.

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 IMPORTANT ACTS
1. Industrial disputes Act, 1947
2. Factories Act, 1948
3. Mines Act, 1952
4. Labour welfare Act, 1969
5. Workers compensation Act, 1923
6. Employees state insurance Act, 1948
7. Gratuity Act, 1972
8. Maternity benefit Act, 1961
9. Employees provident Act, 1952
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1. Which of the following are covered under the scope of Human Resource Management?
(i) Forecasting Human Resource Needs
(ii) Replacement Planning
(iii) Human Resource Dynamics
(iv) Human Resource Development Planning
(v) Human Resource Audit
(A)(i), (iii), (v)
(B) (i), (ii), (iii), (iv)
(C) (iii), (v)
(D) (i), (ii), (iii), (iv), (v)

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2. Which one of the following is not the fundamental procedure that should be considered
for the collective bargaining?

(A) Prenegotiation phase

(B) Selection of Negotiators

(C) Tactic and Strategy of Bargaining

(D) None of the above

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3. Who among the following developed the technique of Management by
Exception?
(A) Joseph L. Massie
(B) Lester R. Bittel
(C) L.F. Urwick
(D) Peter F. Drucker

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4. Which of the following are sources of ethics?
(i) Religion
(ii) Legal system
(iii) Economic system
(iv) Culture
(v) Family system
Select the correct answer from the codes given below :
(A)(i), (ii), (iii), (v)
(B) (i), (ii), (iv)
(C) (i), (iv), (v)
(D) (i), (ii), (iii), (iv), (v)

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5. According to the Boston Consulting Group, a business which has a high
growth rate but a weak market share is referred to as a

(A) Cash Cow

(B) Dog

(C) Question Mark

(D) Star

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