INCENTIVES IN SERVICE
DEFINITION OF PRODUCTIVITY
Productivity is the amount of output per unit of input.
Input element in an organization consists of resources
used in the product creation process,such as
Output consists of a given product, service and the
amount of both.
In case of service sector the output has two aspects
quantitative and qualitative aspects.
Therefore definition of productivity in service sector
Quantity of output and quality of output
OUTPUT AND INPUT MEASUREMENT
Measure of the aggregate value of goods or
Gross Output - Intermediate Outputs
Involves using information on the relative prices
of the goods and services as weights.
While measuring productivity value measures of
output are then transformed into volume
measures using price indices.
The main input is labour, and the total hours
actually worked(THAW) is the preferred measure
of labour output.
Based on the assumption that the mix of different
kinds of job is much the same at different time
A possible approach to capture the differences
in the productivity is given by the indicator of
The weighting scheme adopted is of
simplified method to capture the quality of
input of labour.
TECHNIQUES FOR MEASURING
Productivity is typically measured relative to
Productivity measures include single factor
productivity and multifactor productivity measure.
A non- parametric technique
Includes Data Envelopment Analysis.
Takes data on organizations outputs and inputs
and measures the efficiency of a particular
organization by its distance from the ‘outer
envelope’ of the data.
The technique relies on the use of extreme
observations in the data.
5 WAYS TO IMPROVE PRODUCTIVITY
CONSEQUENCE OF PRODUCTIVITY
PRESENT REMUNERATION SYSTEM
The present wage system may be in the form of
Minimum and maximum annual increment
PRODUCTIVITY LINKED INCENTIVES
• INDIAN AIRLINES
WEAKNESS IN PRESENT
The general trend of wage increase is rapid and
not related to productivity improvement.
Annual increments are pre-determined and are
given automatically to all workers regardless to the
level of performance.
Remuneration is not related to company
REASON FOR LINKING PRODUCTIVITY
Linking productivity with remuneration
make the following thing possible
Higher wages for worker and higher profits for
Greater competitiveness for companies
In the productivity linked incentive model the
wage has two component. They are
Variable component linked with
Productivity and Performance
T= Wage increase
A= Annual increment
P=Variable productivity payment.
If basic wage is equal to Rs.2500 pm,
A= 5%, P=4%
Basic wage + A = Rs.2500 + 5% of
Rs.2500 = Rs. 2625 per month
P = 4% of Rs. 2500 12
= Rs.1200 per annum
Total increment = Rs. 225 per month.
In this model, the fixed component includes the
basic wage and an annual increment. The variable
component will be determined using a profit-
sharing formula where:
The formula is to be agreed upon between the
management and union and reviewed periodically.
Wage incentive is paid if profits exceed a pre-
determined or threshold level which can be
calculated based on absolute or relative form or
average profit earned over a number of years as
Absolute form :
Trading or operating profit
Net profit before tax
Profit after tax
Relative form :
Return on sales
Return on equity
Return on assets
MEASUREMENT OF INCETIVES
Incentive schemes in Public Sector
Budget based reward system, where the reward is
calculated on the bases of the comparison of objectives
FACTOR FOR SUCCESSFUL
Satisfactory labour management relationship.
Realistic annual increment.
Challenging and equitable variable payment.
Wage system should be
VII PILLARS OF PRODUCTIVITY IT
Move from analog to digital
Open information access
Empower the employees
Use merit based incentives
Invest in corporate culture
Recruit the right people
Invest in human capital
PRODUCTIVITY LINKED INCENTIVES IN
Staff of Indian Airlines getting PLI, the increase in its
fleet size will improve the aircraft-employee ratio.
Under this scheme employees are paid monthly
incentives depending upon the performance of the
Firstly, timely availability of aircraft for
Secondly, time taken by aircraft for
major maintenance purposes.
Thirdly, number of passengers carried
and on-time performance.
PRODUCTIVITY MEASURES OF BANK
Increase Of Productivity through strategic
1. Increase customer satisfaction.
2. Effectively manage production and
service delivery to exceed customer
3.To keep up with increasing technology
so as to remain competitive.
4.Identify overall and line of business
objectives and keep them in order.
5.Position people,process and technology to
Increase of productivity through
1.Identify line-of-business improvement
initiatives to increase productivity
2.Compare functional level performance
to institutions of similar asset size.
3.Develop industry performance
indicators that are specific,actionable
4.Reduce cost and improve income
through evaluation of alternatives.
5.Implement changes and measure
6.Ensure tasks are completed on-time
and within budget.
Increase of productivity through sales
1.Develop measurement-reporting structures to
track employee performance.
2.Develop measures,thresholds and weights that
clearly indicate expected performance levels.
3.Balance sales and service.
4.Ensure systems properly reward top performers.
5.Improve and standardize work
6.Balance staffing required and service
expected with predictive models and routines.