Performance management is a means of getting better results from the organization, teams, and individuals by managing performance in line

with organizational strategy. It requires:

Knowing what priorities managers and their employees should be focusing on; Having clear targets and goals that focus on priorities; Measuring actual performance against agreed targets and goals; and Identifying and remedying performance problems.

Performance management may be defined as a planned and systematic approach to managing the performance of individual ensuring their personal development and contribution towards organizational goals.

Establishing performance standards Communicating standards and expectations

Measuring the actual performance

Comparing with standards Discussing results (providing feedback) Decision making (taking corrective actions)

The standard by which managers tie compensation to employee effort and performance. Refers to a wide range of compensation options, including merit-based pay, bonuses, salary commissions, job and pay banding, team/ group incentives programs. It is any type of financial reward that is provided only when certain specified performance results occur.

Performance motivating for employees behavior. Developing an ownership interest Improving employee retention Facilitating a greater role for employees in pay determination Individuals benefit from enhanced reward Organizations benefit from the cumulative boost in performance and productivity

Increase the commitment Reducing the labour cost

Reducing the time and cost of supervision

Discriminate equitably between employees based on performance.

Setting objectives for incentive programmes Determining the nature of reward and mode of payment Sharing goals with the employees Evaluating the actual performance of the employees Application of incentive plans feedback

Transparency Objectivity Measurability Attainability Flexibility Comprehensiveness Cost effectiveness Instant feedback

Straight piece rate Differential piece rate

Task and time bonuses

Merit ranking

The production of a worker is not taken into consideration in fixing the wages; he is paid at settled rate as soon as the time contracted for is spent. Merits:
Simple for calculation No time limit for the execution of a job. Jealousy among them are avoided. No rough handling of machinery Regular and stable income Less administration attention

Demerits:

Different abilities would be ignored. Curse for Efficiency. Systematic evasion of work by workmen. Assessment of Expenditure on Wages for a period is difficult. No record of an individual workers output is maintained.

Workers are paid according to the amount of work done or no. of units completed. The rate of each unit being settled in advance. This system is adopted in jobs of repetitive nature where task can be measured. A workers earnings (WE) = N x R
N is no. of units produced R is rate per piece.

Merits:
A workers efficiency is rewarded. Less supervision required. Optimum utilization of resources. Direct labor Cost per unit of Production is Fixed. Total unit cost of Production is reduced.

Demerits:
Piece Wage Rate is fixed by rule of thumb. High Cost of production & lower Profit. Trade Unions are often opposed to this system.

It is a combination of time & piece rate The worker is guaranteed an hourly or daily wage rate with an alternative piece rate. Calculation of wages is done by both time & piece rate method & he is paid using the method through which he earns more.

Individual

Group

Organizational

Taylors differential piece rate plan Merrick multiple piece rate plan Emerson efficiency plan Gnatt task and bonus system Bedeaux system Barth variable incentive plan Halsey premium plan Rowan incentive plan Haynes incentive plan

Earning= actual output* piece rate Efficiency level= actual output/normal output *100
Piece rate applicable
80% of the normal piece rate 120% of the normal piece rate

output
The actual output is less than the standard The actual output is equal to or more than standard output.

Example: weekly working hours= 48; hourly wage rate=7.50; piece rate per unit=3; normal time taken per piece=24 minutes Normal output per week=120 pieces; actual output for the week=150 pieces.

Piece rate applicable Normal piece rate 110%of normal piece rate
120% of normal piece rate

output The actual output is less than 83% of the standard output The actual output is between 83% and 100%
The actual output is above 100%

Standard output=120 units Piece rate=.20 Case (1) output=100 units Case (2) output=150 units Case (3) output=75 units

Hourly rate
Only the hourly rate (guaranteed day wage) is paid The hourly rate and step bonus rate (20 % of basic wage) are paid The hourly rate and step bonus rate(20 % of the basic wage )are paid along with an additional bonus rate of 1% of the hourly rate for every 1% increase in efficiency above 100%

output
Below 66 2/3% efficiency From 66 2/3 to 100 %efficiency Above 100% efficiency

Standard output=120 units Daily wage rate=Rs 80 Case (1): output=70 units Case (2) output=120 units Case (3) output=140 units

Remuneration payable Minimum guaranteed time rate

output The actual output is below the standard output (100%)

The actual output is equal to the standard output The actual output is more than the standard output

Time rate (100%) and bonus at the rate of 20% of the time rate Higher piece rate (120%of the piece rate)

In a factory, a standard time allowed for completing a task ( 50 units) is 8 hours. The guaranteed time wage is Rs 20 per hour. If a task is completed in less than the standard time, a high rate of Rs 4 per unit is payable. We shall now compute the wages of the employees and the rate of earning per hour if the task is completed by employee A in 8 hours and by employee B in 6 hours.

First step : determination of the standard time of various jobs. Standard time fixed in the bedeaux system is usually expressed in terms of minutes known as bedeaux points ( B points). Earning = actual time taken * time rate +(75/100) *(b points saved/60)*hourly rate

Example: the standard time for completing job X is 4 hours, which should be expressed as 240 B points (minutes). Now, employee A completes the job X in 3 hours and 30 minutes, which is equivalent to 210 B points. Employees A saves 30 B points by completing job X within the standard time. now, the B points are converted back into hours by dividing these B points by 60. As per the bedeaux system, 75 % of the earning from the time saved.

Rise in the employee earning need not be proportionate to the output. This scheme is better for trainees. Formula: earning= rate per hour*(SH*AH)

The standard time allowed for a job is 8 hours and the hourly rate is Rs 10. employee A took 6 hours to complete the job while employee B took 10 hours. Calculate the incentive ??????

In a factory, the ST allowed for producing 70 pieces of a product is 7 hours. Employee A produced 70 piece in 7 hours and employee B produced 70 piece of it in 5 hours. The hourly rate is Rs 4.

Merit is that it guarantees the time rate for all the employees . Earning= ?????

ST is expressed in terms of man-minute called MANT. DEPENDING UPON THE NATURE OF WORK about divide the earning.

Cost efficiency bonus plan Priestman bonus plan Rucker incentive plan Townes incentive plan Scanlon Incentive plan improshare

A factory has 400 employees in its metal work dividion. The standard production fixed for a normal month is 12,000 points and the actual production during the month is 15000 points. The compensation policy of the company permit the transfer of 75% of the increase in the efficiency to the employees in the metal division as a bonus.

The Rucker Plan :

The share of production plan, normally covered just production workers but may be expanded to cover all employees. The financial incentive of the Rucker Plan is based on the historic relationship between the total earnings of hourly employees and the production value that employees create. The bonus is based on any improvement in this relationship that employees are able to realize

Ability to develop collective interest among the group members in cost reduction initiatives. Limitation: absence of individual initiatives in goal accomplishment.

The Scanlon Plan :

The philosophy behind the Scanlon plan is that employees should offer ideas and suggestions to improve productivity and in turn, be rewarded for their constructive efforts. Financial incentives under the Scanlon plan are ordinarily offered to all employees (a significant feature of the plan) on the basis of an established formula.

A bonus incentive plan using employee and management committees to gain cost-reduction improvements

Improshare :

Improved productivity through sharing is another gain sharing program. A gain sharing program under which bonuses are based on the overall productivity of the work team. Improshare output is measured by the number of finished products that a work team produces in a given period. Both production (direct) employees and nonproduction (indirect) employees are included in the determination of the bonus.

Profit sharing plan The employee stock ownership plan (ESOP) Stock option plan

Profit-sharing Plans: In this plan the

employees receive or earn a share of the companys profit, which is calculated as a % of the total profit.
Distributive Plan: Annual or quarterly cash bonus is paid according to a pre-determined formula. Based on company profits. Deferred Plan: Employees earn profit-sharing credits instead of cash payment, which is distributed when the employee parts with the organization. Combination Plan: Combination of distributive & deferred Plan.

Employee

Employees are granted the right to purchase the companys stock at a pre determined price, which can be exercised in future. Under this scheme employees are given a part of ownership at a price lower than market price.

Stock

Ownership

Plan

Research shows that when employee ownership is combined with management style that encourages employees to share ideas and information, companies grows 6% to 11% faster per year.

Fringe benefits are those monetary and non monetary benefits that are given to employees during and post employment period. It covers bonus, social security measures, retirement benefits like PF, gratuity, pension, compensation, housing and so on

Retain people in the organization To stimulate them to greater efforts & higher performance Indirect Compensation to Employee Better known as Fringe Benefits, Welfare Expenses, Extra Wages, Hidden Payroll. Not Directly related to performance of employee. Monetary & Non-Monetary Benefits.

A worker enjoys in addition to the wages or salary he receives. Not given for any specific job but to stimulate their interest in their work. A fringe is never a direct reward .offered not on the basis of hard work but on the basis of length of service. It is a fringe benefit when it enjoys by all the employees. A fringe must constitute a positive cost to the employer and should be incurred to finance employee benefit.

Employee Demands Trade union Demands Employers Preference As a social security To improve human relations Companys ability to pay

Attracting the best talents Tax free for the employees Improving employee morale Improving industrial relations Concern for employee well being Reducing hr cost

Types of Fringe Benefits

For Employment Security For Old Age and Retirement For Personnel Identification, Participation and Stimulation

For Health Protection

Unemployment Insurance

Health Life and Accident Insurance

Pension

Birthday Awards

Overtime Salary

Sick Leave

Gratuity

Attendance Bonus

Bonus

Medical Care

Provident Fund

Canteen

Medical Benefits for Retired Employees

Education Facilities

Housing

Payment for Time not Worked.

Hours of Work Paid Holidays Shift Premium Holiday Pay Paid Vacation

Employee Security

Retrenchment Compensation Layoff Compensation Redundancy Outplacement

Safety and Health

Workmens Compensation Act (1923) Sickness Benefit Medical Benefits Dependents Benefit Group Insurance Policy Canteen Consumer societies Housing Credit Societies Employee Counseling Education Facilities Transportation

Welfare Facilities Employee Security

Old age and Retirement

Provident Fund Pension Gratuity Medical Benefits

Lack of Employee Participation. Same pension granted to all workers. Younger Employees see pension as irrelevant. Older Female Workers feel that Maternity benefits are not needed. Managers too have little interest in Benefits Programs, even not aware of the companys policy towards benefits and their contribution. Employee have little choice in their benefit package. Lack of knowledge in employees about their needs. Excessive Expenditure.

Establish Benefit Objectives

Assess Environmental Factors

Access Competitiveness

Communicate Benefit Information

Control Benefit Costs and Evaluation

Services related to type of work performed Eating Facilities Transportation

Subsidy for purchase and upkeep of work clothing & uniform Canteen, Cafeteria, Company restaurant, fully & Partial Subsidy Food Parking Lots, Bus Services etc Nurses and Day Care Centers for Children. Loan Funds, Credit Union, Insurance Plan Discount on Company products and Services

Child care facilities

Financial and Legal Services Purchasing Services

Social and Cultural Programs social clubs ,reading room and libraries

Employees in general are more educated and more demanding of remuneration including fringe benefits. So employers are required to devise newer benefit plans to attract and retain competent personnel and keeping a watch on the benefit costs

F.B should be looked as a worthwhile corporate instrument Any meaningful package of benefits must reflect some future planning Device new ways to involve workers Poor internal communication hurts the programme in these ways: more money spent on officers welfare excess money spent on corporate image priority to officers children in admission to school

Therefore make the internal communication system effective