4 and simplify.
Regarding, number 1 all unnecessary activities have to be eliminated,
number 2 combine if elimination is not possible,
number 3 change sequence of the activities when potential,
number 4 simplify the activities through reducing the number of operations
in order to improve the work methods.
5. Define the new method
The work method has to be defined in detail in order to introduce it later easily to other and to make it simple to adopt the new method for the worker.
6. Install the new method
To install the new method it has to be accepted first by the managers, supervisors and as well by the workers. Afterwards an appropriate way of implanting the method has to be found where the steps of the new work method are shown to the workers carrying it out moreover the time study which is involved. To adopt the new method training and learning time has to be taken into consideration what is more an appropriate way of doing this has to be developed.
7. Maintain the new method
At last when the method is introduced it has to be cultivated no changes should be made as well as a check from time to time if it is carried out properly to insure satisfaction with the intention of preventing disputes, maintain the earnings and let the work method not be compromised by related activities.
Work measurement and work standards
Work measurement is defined in British Standard 3138 as the application of techniques designed to establish the time for a qualified worker to carry out a specified job at a defined level of performance. Time study is essential for the contrast of work methods, for operation scheduling, for capacity planning, and for use in payment-by-result schemes.
Work measurement is split up in direct work measurement and indirect work measurement. The two major aspects of direct work measurements are time study and activity sampling whereas time study is the most common measurement. It is a technique for recording the work time which is necessary to do a specific job.
A t first you have to get all information about the job and dived the job into elements (О = Operation, ▼ = Storage and □ = Inspection). We observe the working process to time and rate the elements.
Finally we can calculate the standard time throughout the formula which measures the output:
Standard time = (observation time * rating % /100) * ( % total allowance/ 100)
Activity sampling is similar to time study besides a group of machines, processes or workers are observed. We divide the job into activities and conduct the pilot study afterwards the time for each activity has to be determined. The reasons for activity sampling is to gain information about the time spend on each activity.
Referring to indirect measurement, synthetic timing is a technique to get the time for a job by totaling element times from previous time studies or synthetic data. The accuracy depends on prier time studies.
Analytical estimating is another technique whereby the time required to carry out elements of a job is estimated from knowledge and practical experience. Collect all information concerning the job measurements divide it into elements. Lastly determine allowance and calculate standard time for the job.
To put up a standard we have met a professional barkeeper and set up a time table.
Time operation appellation
3.2 sec 1 Put ice in the cocktail shaker
3.8 sec. 2 Put tequila in the cocktail shaker
4.6 sec. 3 Put orange juice in the cocktail shaker
8.6 sec 4 Shake the cocktail
13.3 sec 5 Pour the cocktail in the glass.
4.8 sec 6 Add grenadine to the cocktail.
4.4 sec 7 Put a piece of lemon on the brim.
5.6 sec 8 Put a straw in the glass and serve.
Total: 48.30 sec
Payment by results
Pay is probably the most efficient way to motivate employees, but you have to keep in mind that pay and financial benefits are not the only methods how to motivate people. It depends to a high extend on the level and the distribution of pay and benefits how efficient and productive a workforce can be and which kind of morale will be developed. Pay systems can be seen as methods to reward employees for their contribution, their knowledge, performance, skills and abilities to the organisation.
Basic rate schemes have the advantage, that they are clear, understandable, and easy to administer which allows that labour costs could be forecasted with a high grade of accuracy, but they do not offer any incentives for increased performance or quality, or for recruitment of new workers. Employees feel, that their own abilities are not specifically rewarded.
Jan as the owner of the sunrise club was aware of those points and has chosen a combination of systems, because he saw in the combination the best opportunity to meet his particular requirements.
Schmalen, said in terms of wages, that they should be, compared to others, fair and should include a relation what a person does and what the person receives.
A performance-related payment have to take into consideration, whether the employee is performing better or worse then the norm. Non productive workers are faced with decreasing wages and productive employees with increasing wages. These ideas of fair payment has crucially influenced Payment by Results Schemes. Jan as the owner of the club wished to install a Payment System which includes Payment by results schemes and he is another time willed to share with the audience his gained knowledge in the theory of payment by results systems.
PBR is one instrument to achieve fair wages in order to motivate employees. The aim of any PBR-systems is to provide a direct link between pay and output. The idea is very simple, if the employee works effectively more, his payment is increasing in correlation to his more done work. PBR-Systems could reward employees individually and/or collectively
The intention of PBR is the reduction of waste and increasing efficiency which consequently leads to an increase of productivity and profits. A better performance-related morale and an improvement of work effort is wished as well.
What are the benefits of PBR Systems?
The installation of PBR-Systems leads to a reduction in fixed labour costs, because the base rate is lowered.
The System shifts a part of the financial risks from the employer to the employee.
It motivates effective performance and is able to attract and retain high performers. This leads to the fact, that poor-performing employees hand in their notice and high performers still stay in the enterprise, where the manager is head of a highly motivated working force. The combination of different organisation targets which influences individual and/or group pay, like weighting quality, keep in time e.g. very high, enables employees to focus their attention on key strategic objectives of their companies, which will hopefully have the great impact to reinforce their desired behaviours, skills and attitudes
The disadvantages of the implementation of PBR systems are basically seen in the danger of judging the performance of employees subjectively instead of being objective. A human failure which cannot be abolished completely- not even by the most advanced payment system interacting with an equally advanced work measurement system.
Some Employees feel, that the proportion of money being paid out, based on PBR schemes is to small if you compare the amount of money the enterprise earns more, because of decrease in costs, increase in turnover and profits, caused only because of the improved work effort of the motivated staff. Individual PBR schemes have the negative impact, that it destroys and undermines the advantages of team work, as well as group PBR could lead to dysfunctional disparate goal settings which could lead to an isolation of certain organisational units under one company.
With crucial changes in business, traditional bonus, piecework and work measured schemes, some of those will be described later, have declined in recent years, while many organisations have skipped their simple results/output related pay towards an all-round performance pay system. PBR is nowadays often used in group payments in form of gain sharing and profit sharing . Nowadays many payment systems include quality measurements or customer service indicators with the sense to avoid the likelihood behaviour of workers to cut corners, or to compromise safe working methods in order to increase output.
To implement a PBR-systems successfully you have to consider which of the many and often complex payment systems would fit best into the organisation and which of these would meet the individual demands of the Sunrise Club. We would like to introduce you to some payment systems and we will monitor them, whether the implementation in our case would make sense.
Individual schemes
100% participation or one for one schemes:
This is one of the simplest and most widely used incentive payment systems
One sets a guaranteed minimum wage at a certain degree of performance. This is the normal standard performance stamina a worker should have. No matter how the worker performs, he receives this payment. For any extra produced output in a given time, the worker gets a directly proportional increase in wage. A 100% increase in performance would therefore give a 100% increase in wage. For example our Barkeeper Franz gets 8 Euro guaranteed payment per hour, and it is said that 20 Tequila Sunrise should be mixed in one our. He was able to mix 30 Tequila Sunrise per Hour which is 50% above the standard, which leads to a wage increase of 50%. In total he earns 12 instead of 8 Euro per hour. We haven’t chosen this performance related payment system because, things like quality measurement, group work, customer service and waste which is of certain importance to run a bar successfully, wasn’t included.
Less than 100% participation or geared schemes:
A large number of different schemes have been developed. They differ mainly in the extent to which workers gain extra money for extra performance. In the 50/50 scheme the worker does not gain a directly proportional increase in wage. His wage increases only by the half of one extra union of performance. It is also possible to set a ceiling for wages. No matter how good the performance is, the worker will not earn more money after the certain point. If Franz would also produce 30 Cocktails per hour he would only earn,10 Euro per hour, 2 euro less compared to the 100% participation scheme. The argumentation why Jan has not chosen the less than 100% participation scheme is similar to the argumentation done for the 100% participation scheme.
Piecework
This is the simplest method of PBR - The worker gets paid per item he produces. Like in the other schemes, a minimum wage, which the employee definitely receives, is set. At least the national minimum wage must be paid to pieceworkers. One purpose of Piecework payment is, that it is clear, understandable, and easy to administer which allows that labour costs could be forecasted with a high grade of accuracy
The system is straightforward to understand, but also open to the disadvantages that quality and safety may be compromised in order to achieve a higher output
You have to differentiate between the Straight piece-rate system in which wages are determined by multiplying the number of units produced by the piece rate for one unit and the Differential piece rate system. In this system is the employee paid one piece-rate wage for units produced up to a standard output and a higher piece-rate wage for units produced over the standard.
We use for example the Straight piece rate system on the example of the barkeeper Nils. He gets 3 euro base pay and each cocktail he produces will be rewarded with 0.35 Euro. He has produced 25 cocktails and earns per hour 3 euro + (25 x 0,35= 8,75) = 11,75. This payment scheme is the most performance related pay system but the disadvantage of this system is, that quality is not measured, which leads to a reduction in quality. Especially for cocktail bars it is extremely important that the distributed cocktails taste delicious.
Secondly is waste increasing because this isn’t measured either. Thirdly could it be possible, that Piecework could impose higher absenteeism grades and illness in between the employees. Workers are set under permanent stress and the piecework system will oblige the employee to work at a pace which is unnatural or even dangerous to safety and health. At whole Jan thought that this payment scheme wouldn’t meet his demands of a payment system either.
Measured day work
Measured day work is a form of an incentive wage system, it is an hybrid between individual PBR and a basic wage rate scheme. It is used to establish standard times for various jobs and negotiating the pay rate for such jobs at different levels of performance.
- If a worker is able to achieve consistently a given level of performance, a regular weekly wage is guaranteed.
- If a worker is still able to maintain a level of performance over a minimum period, he will get paid an appropriate wage.
- If not it results first in some form of discipline or review by management, and subsequently in a reduction to a lower wage level.
To run a Measured day work system successfully, performance standards are required as well as some kind of work measurement. Motivation of the employees comes from good and objective supervision, a certain form of goal setting and fair monitoring of the worker’s performance The disadvantage of Measured day work lays in the costs to set up and to maintain.
In order to run this system successfully total commitment of management and workers is required. Beside that it is crucial to install an effective work measurement plus efficient planning, control and inventory control systems. Measured Day Work wouldn’t fit to Jan’s Sunrise Club because the effort to run this payment scheme is far to high and to expensive for the small enterprise.
Group PBR schemes:
The importance of incentive group payments is rising especially in big firms. Such group incentive schemes might be applied to teams engaged together on a task and working interdependently, to departments, and in some cases to whole organizations. Is a group to large, workers think that they can’t influence incentive pay anymore. Individual motivation gets lost as well as the sense of payment by results. Group pay schemes are based on the performance of the team. With the increasing importance of teamwork in recent times, team based pay has increased either.
Teamwork may be most effective in tasks involving a high grade of creativity and dependability of other colleagues in team such as in cocktail bars. The aim of group PBR schemes is to strengthen the team and to build up a coherent, mutually supportive group of people with a high grade of involvement. Most organisations combine individual payments based on job performance, individual competencies and capabilities with team based rewards.
The advantages of team-based pay are following:
- it can encourage teamwork and support cooperation between workers
- organisational objectives and team goals can be combined
- less effective performers are feeling encouraged to do more work effort for the team, and the team is constantly willing to improve their performance
- workers are not narrow-minded because team work encourages the worker to gain multi-skills, as well as being more flexible.
Group PBR schemes basically consist of team profit sharing and team gain sharing.
- Team profit sharing: -employees and the organization do share the financial benefits of increased profits
- Team gain sharing: employees and the organization share the financial benefits of reduced costs
Disadvantages of team-based pay are following:
- It could take time, since the team is well-defined and could work efficiently together
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Some employees may feel, that their working effort is, compared to colleagues not rewarded appropriately and they may feel that their personal self-worth is diminished
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Team pressure can be oppressive and may lead to conformity rather than creativity. Team members could be seen as not suitable to the group which can degenerate into bullying and/or harassment.
- Inter-team competition in between an organisation can be contra-productive.
- Problems may arise if a new member will be introduced to a team, because they may think, that their earnings could decrease caused by a “less” skilled operator
The concept of people working in teams seems to be beneficial for employers as well as for employees. But it is evident to say, that employees still expect to be paid based on their individual performance. For the Sunrise Club it is quiet important to include a factor which ensures good and efficient team work, so it was clear to Jan that his payment system has to include a factor related to teamwork.
Selecting and installing a payment system for the Sunrise Club:
Jan, as the owner of the Sunrise Club has examined many different and sometimes complex payment systems. He knows that the installation of a program inevitably will involve costs. It is important to include the workforce in his planning’s to avoid problems or conflicts, for example in understanding or disagreeing. The system has to be open for changes, so a certain grade of flexibility is demanded to find the most suitable payment system. Before you select your individual payment system you have to be aware of your individual needs.
But what are the needs of Jan’s Sunrise Club?
The overall need of this enterprise, equal to any other private enterprise is the achievement of profit. Jan’s goals for running this club successfully are similar to the intention of PBR-schemes:
- reduction of waste
- increase in efficiency
- improvement of productivity
- increase in profits
- recruit, retain and motivate suitably qualified workers
- encourage team work
But we have to keep in mind certain specialities of the service sectors, especially for bars and clubs.
The factor quality is very important as well as demands in hygienic standards and in customer service.
It is obvious, that making cocktails in time is quiet important in order to reach the goal to improve the output. Our bar is very small, which means that the working space for each barkeeper is quiet limited. Problems may arise because working in the team isn’t fulfilled in the way where it could create advantages for the enterprise. It was crucial to Jan to implement beside the individual pay also group payment in order to enhance the team working with all its benefits.
In his opinion, a mixture of his most important factors, such as improvement of quantity, high quality, team work etc. would be the best way to meet the enterprises needs. Jan would also like to relate his payment to the individual output of his barkeepers, which has lead to the installation of a time study scheme, which allows him to pay his barkeepers partly related to their individual performance.
Lastly he has to ensure, that his measures and standards are free from any elements of bias or discrimination and can comply with the law on equal pay, the prevention of discrimination in employment and the national minimum wage. If you keep a payment system simple it is the best opportunity to make it successful. The payment system has at least to be so simple, that an average skilled worker is able to understand how its wage is calculated. The payment systems which would fit best to Jan’s requirements, as the owner of the Sunrise Club is the Multiple-factor scheme.
Multiple-factor schemes:
- These incentive payment schemes are based on multiple performance or achievement criteria.
- Multi-factor schemes will provide the reward of quality, attendance and time-keeping achievements etc.
- It can be used for individual as well as for group payments, although it becomes more useful for group incentive payment.
- Factors such as output (or throughput) as well as quality, resource utilization and customer service criteria will be accommodated.
- These incentive earnings are usually calculated on a points basis, which have been awarded for a level of achievement on each factor.
- Some factors are more important then others, so that these factors are weighted to a total of 100 %
- The total incentive earning should be obtained by adding the weighted points achievements for each factor and converting the total to a money equivalent, to be added to the base pay.
The advantages of Multi-factor incentives are:
- Multi-factor incentives have a broad base and the purpose, that they could be designed more readily in order to meet the organizational needs.
- Despite to piecework payment overall performance and work effort is rewarded, which decrease the risk of high achievement on one factor (e.g. quantity) at the expense of another (e.g. quality)
- The combination of factors and their different weighting related to their different importance towards the company, offers the great chance for the participation of all groups involved.
The scheme allows a high grade of flexibility because the weighting of factors can be easily changed.
Now, as we have chosen an appropriate payment system we have to install this program.
Jan has split the payment system into two basic parts.
The individual pay weighted with 75 % and the group payment with 25%. It is clear that the most working effort comes from the individual effort of the barkeepers, which is the reason why individual payment is much higher weighted compared to group payment. This individual payment is split into 20 % payment, related to the performance in time study which has been introduced by Jules, 15% quality- because it is the basis of customer satisfaction in a cocktail bar. The quality will be estimated by spot checks done by Jan and the intensity of customer complaints. Customer service is similar handled as quality . If our barkeepers are not friendly to our customers it will lead to less customer satisfactory which affects negatively the revenue. This factor will be weighted with 10%, because the contact to clients will mostly be done by the waiters and waitresses. The base pay is weighted with 30 % which will be paid out independently from the performance.
For an efficient performance of a bar we have certain factors which are to expensive to measure or monitor individually, but still very important for a successful running bar. Jan thought that it would be best to pay these factors in form of group payments out. On the one hand to avoid extraordinary costs and on the other hand to support group cohesions. First we have the factor waste, if there is a crucial disharmony between the input measured in litres and the output easily measurable in litres, the payments of the barkeepers will decrease 5%, if not 5% will be paid out.
If the revenue is equal to the average of comparable days or nights 15% of the wage will be paid out, if the turnover is higher or less then the average a proportional increase or decrease will paid out. Lastly which is very important for bars the hygienic grade of working place should be rewarded or penalised by the last 5%. The grade will be measured equal to the quality by spot checks, done by the owner.
In total looks our pay like this:
30% base pay
20% work performance
15% quality
10% customer satisfaction
75% individual pay
15% revenue
5% waste
5% hygienic requirements
25% group payment
100% total
To visualize this PBR scheme and the relationship between PBR and work study we will show you the calculations of the four different performed barkeepers, Florian, Franz, Jules and Nils. To keep the calculation understandable and simple for his employees Jan fixed 10% to a value of 1 Euro.
Relationship between PBR-Systems and work study:
The strongest relationship between payment by results and work study is that the implementation of PBR would only make sense if work study has already taken place. On the other hand it is possible to install PBR individually, but work study helps to objectify the evaluation of performance. In contrast to PBR, work study can be applied individually but the combination of both systems is more effective. The motivation results from the fact that employees earn more money if they perform better than the standard.
The advantage of both systems is the reduction of waste and costs and an increasing efficiency is the result of it. Another big advantage of work study and PBR is the consequent increase of productivity and profits. The establishment of standards done by work study leads to an increase of performance because of group cohesion and motivation effected by PBR. Changes in technology always lead to changes in work study and PBR-Systems. The implemented systems have always been able to improve constantly. In former times the PBR-Systems were mostly based on individuals and nowadays it is the group performance which counts.
Another relation is that both systems lead to minimization of the costs of labor, machinery and equipment. Work study and PBR-Systems have a brought base and should be designed more individually to reflect the organization’s needs to achieve success.
Relationship between work study PBR-system and managers
Chief Executive Officer (CEO)
The chief executive officer has the main accountability for several different aspects of an organization such as the strategy, operations, marketing, or public relations. Generally the CEO has a board of directors in which she or he is the president. In other organizations it might be possible that the president of the board and the chief executive officer are two individuals. The Chief Executive Officer's most important role and duty is to set a strategy for the organization. It is her or his responsibility to help the organization with budgets, partnerships, making final decisions on product or service lines, and industries.
Another very important duty of a CEO, is to establish a good working condition amongst the worker. Even though this duty is often over seen.
The chief executive officer is well aware that work study and the PBR (Pay By Result) system are two very important factors in improving the reduction of waste and costs. Through these systems it is possible to check the ability of individuals and group performance and the CEO can agree for suggestions of improvement of their performance.
Almost every organization use performance reviews which are important factors, in work study and the PBR System, to evaluate the performance and working condition of individual workers and groups. Some of the Chief Executive Officers do not accept this reviews because they do not like to be judged by their subordinates. And in some cases it even has happened that a proposal of improvement has led to drastically change in the leadership of an organization. A disadvantage of these performance reviews which are focused on the Chief Executive Officer are based on the fact that the subordinates are basically only interested in the improvement of their pay and not really on the performance and leadership of their CEO. Resulting from the continuing desire to improve the pay system, communication between the CEO and their subordinates disapproves. An example of this can be seen in the demission of Gilbert Amelio a Chief Executive Officer at Apple Computer. He was fired because none of his subordinates told him that he was in trouble and were simply interested in their pay. Therefor this example shows that it is very important to establish a good working condition to cancel out the possibility of a bad communication within the organization. On the other hand it has also occurred that through applying this systems a CEO was told at one of his appraisals that he needed to demand more accountability from the subordinates. Some time later he was fired because of a dramatic decrease in sales. The reason for this was told to be based on the fact that the CEO made mistakes in making the subordinates more accountable.
This example makes clear that these systems are not only advantages for the Chief Executive Officers but in general they help to improve the productivity and work efficiency.
The past years has shown that work study gave a clear explanation on how the low budget worker to the CEO are performing, so that they can adjust their working methods and more and more organizations tend to emphasize with these systems.
Operations manager:
According to Koontz, management is the process of designing and maintaining an environment in which individuals working together in groups efficiently accomplish selected items. It includes planning, organizing, staffing, leading, controlling and assessing.
The operations manager has to manage the resources necessary to produce and deliver the products and services required by customers. These include labor, materials and capital equipment. Operations management is concerned with the design and the operation of systems for manufacture, transport, supply or service. The operating manager must try to realize the company’s goals but he also has to look if these goals are feasible. In former times different sections of a company have worked very independent but nowadays where departments grow together more and more, the responsibility of the operating manager has become much bigger. He has a lot of responsibility for the success of the product because he has to deal with the resources.
When work study is successful, time can be saved and a higher profit will be reached. If unnecessary time is wasted because the production process is not optimized, the warehouse costs increase; for instance a product which is made of two different parts that are produced in two different machines cannot be finished if the production for one part takes longer than the other. If the working process is optimized throughout work study, the product will be finished sooner and costs can be saved.
The operation manager has to choose the best way of using the machines. He has to evaluate the work study, define the perfect way of using the machine and he has to arrange the way how the employee has to do the job. He must calculate the use of financial, human and material sources but the process of work study itself is done by another person. Work study brings a lot of advantages for the operating manager. The employees work more efficient and it is much easier and more effective for the operating manager to plan his department. When everybody has his special job and is always doing the same moves, the supervision of labor is easier.
If every single employee is working on one product until it is finished, it is not easy to survey if everybody is doing his best job.
The best way to fight this problem is a PBR-System. The operating manager has the power to control if a work station brings profit or not. Employees always work the same and if they do more they receive a bonus. They suffer from this system, but the big disadvantage is that the quality probably goes down. The operating manager has the goal to make as much profit as possible and optimize the working process. Another aim is to satisfy the customer. The customer demands that the good has a cheap price compared to a good quality. The only way for the operating manager to get very closely to this request is to save costs at the production. If the quality suffers from this, the customer will be more disappointed than by paying some more money for the product. He has to find an ideal solution for this problem.
Finally that’s why a PBS System brings advantages and disadvantages for the operating manager. With a PBS System it is much easier for him to plan. He knows exactly how many products will be finished at which time so that he can plan the exact date to sell them. This is very important if a company sells products which will be used for another production i.e. selling tires to Daimler-Chrysler. When a date is set and the company does not reach the goal of producing x products, the customer cannot produce and charges compensation. But it is never possible to satisfy all customers’ needs. You either produce fast or you want to get 100% quality. You cannot reach both goals.
Although PBS-Systems bring a lot of advantages and disadvantages, work study is always a very useful tool for everybody, especially for the operating manager. With the ideal use of machines and working processes, the customer service is getting better and better. Unnecessary work is reduced so that the company can cut costs and the customer has to pay less. The employees will be more satisfied and their security is higher, too. The operating manager can supervise all processes a lot easier and the income will increase.
But the operating manager also has a lot of duties. He must decide if the change is useful or not, what the most processing problems are and what results he would like to attain. He has to keep the work study staff informed if there are any changes in method, material or layout in his section. He also has to support the work study staff with his experience and knowledge and maybe correct them if he thinks a certain method would not work.
He should advise the work study staff before the work study starts i.e. discussions about safety and guarantees. The operating manager is therefore one of the most important persons in the whole work study process.
He can make a profit out of it and increase the turnover but if his decisions are not right and the company will make losses he is the one to blame.
Cost Control Manager:
The cost control manager has to insure a profitable performance for the company. He achieves this goal by monitoring the budgetary performance, which is the money, available to the organisation. From there on, he has to develop a plan how and where the budget will be spent over a period of time. Actually, there are no requirements by the state to have a cost control manager but the following shows that this job is needed for an efficient run company.
Anyone here has probably already been a kind of “cost control manager “ in his all day life. For example by planning some event. A main question which jumps up in between the planning process is “ How much will it cost”. Whether it is a birthday party to plan or a small company, there is normally only a fixed budget which can be distributed. Within a large manufacturing organisation, the right budget relocation gets more complex . The manager has to consider the individual costs of premises, machinery, equipment, advertising, employee wages etc. With all activities it is essential to figure out the costs and see if the production is affordable or whether one has to consider the production of other items, which will be approximately more profitable. This research can be supported by Records from past events. Techniques have been developed that allow managers to examine the financial consequences of alternative courses of action and to predict the financial consequences.
Primarily the cost control manager has to rely on numbers ,data and individual costs from the different departments. Those detailed costs can be provided by the Accounting specialists which records every spending and earnings and shows the actual costs of operations, departments or products.
The cost control manager, evaluates the information with the purpose to provide financial information to managers that will help them to plan the activities, control the activities for which they are responsible and see the financial implications of any decisions they may take. For example “ policies can be formulated, activities planed and controlled and decisions of alternative courses of action can be taken” In other words, those information of costs is required to run a company successfully. The work also has a pleasant side effect because the evaluated data can be published to show the activities of the company in order to attract investors. With a good cost reputation for the public more money will flow in the company which indeed helps the cost control manager to support new projects.
The cost control manager has the also the overall function to maintain low costs in the production. This can only be achieved, if a low waste and very efficient work is performed. Looking at our case study you can see that one has to handle with different kind of costs. The Fixed and Variable costs.
Some of the costs you will incur will stay the same each month, while others may vary. For example, if select to lease a building to house our Sunrise club, the lease payment may be such that you pay the same amount for each month of the lease. In other instances, the amount you pay for an expense will vary based on the success of your business. Expenses you incur for cocktail facilities used at the club ,for example, will increase as the number of guests you serve increases and decrease as the number of guests you serve decreases.
A fixed expense is one that remains constant despite increases or decreases in sales volume, for example the lease of the location. A variable expense is one that generally increases as sales volume increases, and decreases as sales volume decreases.
As an effective cost control manager, it is important to recognise the difference between costs that are fixed, and those that vary with sales volume. Fixed costs have to be regarded separately because most of the time, it is difficult to make cuts on them.
Regarding the Work study the cost control manager can at first just examine costs with no direct short run feedback. A Team for work study has to be formed or employed from outside of the company. They will than perform a research which will take some time to be evaluated. After the evaluation changes have to be taken and maybe workers need some time to get used it or even go to special training to understand the new technology. But regarding a cost-benefit analysis the cost manager has to identify if it is a revenue-generating opportunity which improves efficiency ratios and maximises the benefits of costs.
Through the work study the payment by results system can be established. This is an other point the cost control manager has to regard as an benefit for supporting the work study because both system together leads to minimise the costs of labour. The only payment which has to be made is the guaranteed minimum wage. If the employees perform better than the standard they will earn more money. This extra earning motivates employees to work even harder which means in other words that the company gains more profit. This reflects one of the cost control managers main work to insure profitable performance for the company.
There is a large amount and variations of incentive payment schemes. They are ranging from simple piece rates to very complex arrangements. Sometimes they are hard to understand even for the expert which establish the System. Indeed the cost control manager must have excellent mathematical, analytical and accounting abilities to handle his tasks. He or she must also have strong communication, organisational and leadership skills.
This multi characteristics are need because of the strong interaction with other managers. Most of the time he can not take over the role of a boss because in the hierarchy he is mostly on a equal stage as the other managers.
Trade Union Representative:
The ideological father of trade unions was Karl Marx (1818-1883). It was clear to him that changes in technology would lead to higher productivity on the one hand, and on the other hand to a decrease in the need of human labour as well as an increase of unemployment rates. His points of criticism were that the penniless working class would be exploited and suppressed by the capitalists and that only those productions would be supplied which were profitable and not products demanded by workers or demanders.The so called Manchester-liberalism was the basis for the crash of interests between capitalists and workers. The foundation of trade unions in the middle of the 19th century was the direct answer to the negative impacts of the industrial revolution described by Karl Marx. The Keywords of the trade unions in those days were self support and unity The Keywords of those days have stayed the same in our days. The means of trade unions are the “Bündelung” of the workers' interests to improve their financial and social standing as well as the safeguarding of equal rights for workers. The Unions have to ensure that workers are not exploited and / or suppressed. As a lawyer of millions of workers, trade unions should fight for higher payment, better working conditions and less working time for their clients. Trade Unions with their lived solidarity are collective interest groups in a pluralistic society and a basic element for a working democracy. The role of a trade union representative is to ensure consistency of the treatment of its members, to persuade solidarity and to reject proposals which would seem to be conflict-ridden
Point of view of a trade union representative:
A trade union representative is the advocate of a worker and should stand for the interests of workers. In our case we have a slight problem - different workers have different interests. Many workers do benefit from these schemes, because they are rewarded for their good and better performed work than the standardised norm. Others do earn less than they would without the implementation of PBR-Systems and they offend this system.
This is the reason why we have within the trade union movement , powerful arguments for and against incentive payment schemes.
As a trade union representative you look first and in some cases almost exclusively at the size of the wage, if the wage is high enough, considerations how these wages are earned are not appropriate. Problems would arise if wages decreased with the introduction of incentive payment systems. A unionist would also monitor and prove systems of pay, whether schemes would discriminate against men and women, whether they were fair and objective and whether earnings might fluctuate without fault of the employee.
Another negative impact of PBR-systems could arise because of used “accounting tricks”. If Incentives are related to Output or profit, employers might take into consideration the use of a few “accounting tricks” in order to decrease the profit. If this was done, employees would get less money than they would be entitled to.
Another problem is that the variations of incentive payment schemes are enormous, they are ranging from simple piece rates to very complex arrangements, which are even for experts not easy to understand. Systems which are not easy to understand for experts are very often incomprehensible for workers. In the point of view of a trade union representative, should the aim of a PBR-system be to keep the system as simple and straightforward as possible. There is a crucial need, that employees are able to calculate their earnings, or at least to understand how they have been calculated It is the right of the worker to know what of his wage can be deducted and for what reason, and he or she must know about the possibilities of how he or she can improve his or her wage.
Trade Unions do differentiate between different kinds of incentive pay schemes. Payment after the Piecework system is mostly abolished by trade unions, because they see in this payment form a possibility to exploit employees. Many studies have shown, that Piecework may be responsible for higher absenteeism grades and illness among the employees. Workers are set under permanent stress and the piecework system will oblige the employee to work at a pace which is unnatural or even dangerous to safety and health. The employee feels to be in constant competition with his colleagues, which undermines the feeling of solidarity and unification of workers. The critic points for piecework can also be used for some other kinds of PBR-systems but have to be rethought for each monitored scheme.
Less harmful from a Trade Unionist's point of view are group incentive schemes, under which, a bonus is paid out to a Barkeeper team according to the results achieved. Actually a trend can be seen, going away from Individual Incentives and going forward to the implementation of Team-based incentives. The advantages of team based incentives compared to individual incentives seen with the eyes of a trade unionist is the reduction of stress, the support of team spirit and more solidarity.
Selecting or changing a pay system could affect the wages of employees in a negative as well as positive way. Consultation between management, workers and trade union representatives should identify any potential problems in this area before the system is installed.
A 100%-trade unionist is an offender of PBR-Systems and Work Study, because he sees in PBR a chance to exploit employees and in work study an inappropriate way of supervising and monitoring employees.
But he has one big problem, he, as an offender of these schemes is an advocate of clients where a big share of them do appreciate the purposes, basically monetary terms. Therefore he accepts PBR-systems and work study to a certain extent. As a trade union representative you should still have an eye on the right proportion of incentive components and the basic rate. If the incentive component is higher or equal to the basic rate the proportion is for an unionist socially seen not acceptable. If an employee, who works all the time at his maximum and better than the standard norm, will become ill, or temporally unproductive caused by private problems, it should be, in the opinion of a unionist tolerable to pay him the equal amount of money, which the employee earns when his problems are gone. Incentive payment should be seen as an additional payment to the basic pay, but not the other way round.
The main critics of a trade union representative can be found in the Payment by Results Sector. Work study on its own is not really appreciated by unionists either. A way of organising work study was first introduced 1924 with the foundation of REFA – Reichsausschuss für Arbeitszeitermittlung. Nowadays trade unionist and employer-associations have a seat and vote in the renamed Refa-Verband für Arbeitsstudien und Betriebsorganisationen e.V.. The main task of the trade union representative in this association is, to ensure that work study keeps human dignity, and ensures not only the maximised grade of efficiency. In the point of view of an unionist it is unreasonable for workers being monitored and for that reason not comparable with the idea of an independent worker. The sense of a work study is the objective evaluation of individual performance, which leads to advantages for well- and disadvantages for poor-performing workers.
The conception of trade unions is to intervene in every thinkable case which will not lead to a financial and social improvement for the worker. It lays in the nature of successful work studies that they increase the efficiency of working processes. This increase consequently leads to more done work at the same time. Which means that the worker is doing more work, or working processes in the same time, because saved time will be used to implement more working processes. It seems to me that Trade Unions believe that more work at the same time cannot be tolerable for workers. Another effort of trade unions is, to set the 100% - standard as low as possible, in order to ensure that every worker is able to (over)-perform the standard set. Work studies should also include provisions which cover the effects of downtime or other non-productive time on pay. Trade union representatives have to be concerned, whether time studies are fair and regularly reviewed.
Operations Management by Ray Wild
Operations Management by Ray Wild
Operations Management , Ray Wild
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