Description Module 07: Introduction In this module, you will learn about processes, facilities pla ...
Description Module 07: Introduction In this module, you will learn about processes, facilities planning, and work systems. Regarding processes, you will focus on process selection, process strategies, and process layouts. Regarding facilities, you will focus on facilities layouts and product layouts. Finally, regarding work systems, the focus will be on quality of work life, job design, motion studies, work measurement, and operations strategy. Discussion Topic Process Optimization According to Stevenson (2021), processes converting inputs into outputs are at the core of operations management and have strategic significance. Among the benefits of creating and using processes we can mention cost reduction, meeting customers’ expectations, and streamlining business operations. For this discussion, do the following: Identify what a business process is and discuss its benefits and disadvantages. Consider yourself a business owner. Discuss a process for one aspect of your businesses’ workflow. How many steps are in the process? How many people are in the process? Directions: Discuss the concepts, principles, and theories from your textbook. Cite your textbooks and cite any other sources if appropriate. Your initial post should address all components of the question with a 500 word limit. Learning Outcomes Evaluate the strategic importance of process selection. Examine the importance of process strategy. Weigh the value of effective work design to the organization. Readings Required: Chapters 6 & 7 in Operations Management Chapter 6 & 7 PowerPoint Presentations Tarver W, Savoy A, Patel H, Weiner M, Holden R. (2024).Inefficient Processes and Associated Factors in Primary Care Nursing: System Configuration Analysis JMIR Hum Factors. DOI: 10.2196/49691 Recommended: Zare, R., Kazemi, R., Choobineh, A., Cousins, R.,et al. (2024). Development of a work systems stress questionnaire to predict job burnout: A mixed methods study based on a macroergonomics approach. Heliyon, 10(23). https://doi.org/10.1016/j.heliyon.2024.e40226 UNFORMATTED ATTACHMENT PREVIEW Module 07: Introduction In this module, you will learn about processes, facilities planning, and work systems. Regarding processes, you will focus on process selection, process strategies, and process layouts. Regarding facilities, you will focus on facilities layouts and product layouts. Finally, regarding work systems, the focus will be on quality of work life, job design, motion studies, work measurement, and operations strategy. Discussion Topic Process Optimization According to Stevenson (2021), processes converting inputs into outputs are at the core of operations management and have strategic significance. Among the benefits of creating and using processes we can mention cost reduction, meeting customers’ expectations, and streamlining business operations. For this discussion, do the following: 1. Identify what a business process is and discuss its benefits and disadvantages. 2. Consider yourself a business owner. Discuss a process for one aspect of your businesses’ workflow. How many steps are in the process? How many people are in the process? Directions: • • Discuss the concepts, principles, and theories from your textbook. Cite your textbooks and cite any other sources if appropriate. Your initial post should address all components of the question with a 500 word limit. Learning Outcomes 1. Evaluate the strategic importance of process selection. 2. Examine the importance of process strategy. 3. Weigh the value of effective work design to the organization. Readings Required: • Chapters 6 & 7 in Operations Management • Chapter 6 & 7 PowerPoint Presentations • Tarver W, Savoy A, Patel H, Weiner M, Holden R. (2024).Inefficient Processes and Associated Factors in Primary Care Nursing: System Configuration Analysis JMIR Hum Factors. DOI: 10.2196/49691 Recommended: • Zare, R., Kazemi, R., Choobineh, A., Cousins, R.,et al. (2024). Development of a work systems stress questionnaire to predict job burnout: A mixed methods study based on a macroergonomics approach. Heliyon, 10(23). https://doi.org/10.1016/j.heliyon.2024.e40226 Process Selection and Facility Layout Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 6-1 You should be able to: LO 6.1 LO 6.2 LO 6.3 LO 6.4 LO 6.5 LO 6.6 LO 6.7 LO 6.8 LO 6.9 Explain the strategic importance of process selection and the influence it has on the organization and its supply chain Name the two main factors that influence process selection Compare the four basic processing types Explain the need for management of technology List some reasons for redesign of layouts Describe product layouts and their main advantages and disadvantages Describe process layouts and their main advantages and disadvantages Solve simple line-balancing problems Develop simple process layouts Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Process selection ? Refers to deciding on the way production of goods or services will be organized ? It has major implications for ? Capacity planning ? Layout of facilities ? Equipment ? Design of work systems LO 6.1 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Forecasting Capacity Planning Product and Service Design Technological Change LO 6.1 Facilities and Equipment Layout Process Selection Work Design Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Key aspects of process strategy: ? Capital intensity ? The mix of equipment and labor that will be used by the organization ? Process flexibility ? The degree to which the system can be adjusted to changes in processing requirements due to such factors as ? Product and service design changes ? Volume changes ? Changes in technology LO 6.1 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Two key questions in process selection: 1. How much variety will the process need to be able to handle? 2. How much volume will the process need to be able to handle? Job Shop Batch Repetitive LO 6.2 Continuous Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Repetitive/ Assembly Job Shop Batch Description Customized goods or services Semistandardized goods or services Standardized goods or services Highly standardized Goods or services Advantages Able to handle a wide variety of work Flexibility; easy to add or change products or services Low unit cost, high volume, efficient Very efficient, very high volume Disadvantages Slow, high cost per unit, complex planning and scheduling Moderate cost per unit, moderate scheduling complexity Low flexibility, high cost of downtime Very rigid, lack of variety, costly to change, very high cost of downtime LO 6.3 Continuous Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? There is increasing pressure for organizations to operate sustainable production processes ? According to the Lowell Center for Sustainable Production: ? “Sustainable Production is the creation of goods and services using processes and systems that are: nonpolluting; conserving of energy and natural resources; economically efficient; safe and healthful for workers, communities, and consumers; and, socially and creatively rewarding for all working people.” LO 6.3 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Reduce/recycle waste and ecologically incompatible parts and byproducts ? Eliminate hazardous chemicals/physical agents ? Conserve energy and materials ? Redesign workspace to minimize hazards to the workers and the environment LO 6.3 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Process and information technology can have a major impact on costs, productivity and competitiveness: ? Process technology ? Methods, procedures, and equipment used to produce goods and provide services ? Information technology ? The science and use of computers and other electronic equipment to store, process, and send information LO 6.3 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Process technology and information technology can have a profound impact on: ? Costs ? Productivity ? Competitiveness LO 6.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Automation ? Machinery that has sensing and control devices that enable it to operate automatically ? Fixed automation ? Programmable automation ? Flexible automation LO 6.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Programmable automation ? Involves the use of high-cost, general-purpose equipment controlled by a computer program that provides both the sequence of operations and specific details about each operation ? Computer-Aided Manufacturing (CAM) ? The use of computers in process control, ranging from robots to automated quality control ? Numerically Controlled (N/C) Machines ? Machines that perform operations by following mathematical processing instructions ? Robot ? A machine consisting of a mechanical arm, a power supply, and a controller LO 6.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Robots that follow a fixed set of instructions ? Programmable robots ? Repeat a set of movements after being led through a sequence ? Follow instructions from a computer ? Collaborative robots, also known as cobots LO 6.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Flexible automation ? Evolved from programmable automation. It uses equipment that is more customized than that of programmable automation. A key difference between the two is that flexible automation requires significantly less changeover time. ? FMS (Flexible Manufacturing System) ? A group of machines designed to handle intermittent processing requirements and produce a variety of similar products ? CIM (Computer Integrated Manufacturing) ? A system for linking a broad range of manufacturing activities through an integrated computer system LO 6.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? FMS ? A group of machines designed to handle intermittent processing requirements and produce a variety of similar products ? Have some of the benefits of automation and some of the flexibility of individual, or stand-alone, machines ? Includes supervisory computer control, automatic material handling, and robots or other automated processing equipment LO 6.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? A system for linking a broad range of manufacturing activities through an integrated computer system ? Activities include ? Engineering design ? FMS ? Purchasing ? Order processing ? Production planning and control ? The overall goal of CIM is to link various parts of an organization to achieve rapid response to customer orders and/or product changes, to allow rapid production, and to reduce indirect labor costs ? Internet of Things (IoT) further enhances connectivity of devices through internet LO 6.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Layout ? The configuration of departments, work centers, and equipment, with particular emphasis on movement of work (customers or materials) through the system ? Facilities layout decisions arise when: ? Designing new facilities ? Re-designing existing facilities LO 6.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Inefficient operations ? High cost ? Bottlenecks ? Accidents or safety hazards ? Changes in product or service design ? Introduction of new products or services ? Changes in output volume or product mix ? Changes in methods or equipment ? Changes in environmental or other legal requirements ? Morale problems LO 6.5 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Basic objective ? Facilitate a smooth flow of work, material, and information through the system ? Supporting objectives ? Facilitate product or service quality ? Use workers and space efficiently ? Avoid bottlenecks ? Minimize material handling costs ? Eliminate unnecessary movement of workers or material ? Minimize production time or customer service time ? Design for safety LO 6.5 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Product layouts ? Process layouts ? Fixed-position layout ? Combination layouts LO 6.5 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Product layout ? Layout that uses standardized processing operations to achieve smooth, rapid, high-volume flow Raw materials or customer Material and/or labor Station 1 Material and/or labor Station 2 Material and/or labor Station 3 Station 4 Finished item Material and/or labor Used for Repetitive Processing Repetitive or Continuous LO 6.6 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. A job shop A batch process A repetitive process A continuous process Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Advantages ? High rate of output ? Low unit cost ? Labor specialization ? Low material handling cost per unit ? High utilization of labor and equipment ? Established routing and scheduling ? Routine accounting, purchasing, and inventory control LO 6.6 Disadvantages ? Creates dull, repetitive jobs ? Poorly skilled workers may not maintain equipment or quality of output ? Fairly inflexible to changes in volume or product or process design ? Highly susceptible to shutdowns ? Preventive maintenance, capacity for quick repair, and spare-parts inventories are necessary expenses ? Individual incentive plans are impractical Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Process layouts ? Layouts that can handle varied processing requirements Dept. A Dept. C Dept. E Dept. B Dept. D Dept. F Used for Intermittent processing Job Shop or Batch LO 6.7 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Advantages Disadvantages ? Can handle a variety of processing ? In-process inventories can be high requirements ? Not particularly vulnerable to equipment failures ? General-purpose equipment is ? Routing and scheduling pose continual challenges ? Equipment utilization rates are low often less costly and easier to maintain ? Material handling is slow and ? It is possible to use individual ? Reduced spans of supervision incentive systems inefficient ? Special attention necessary for each product or customer ? Accounting, inventory control, and purchasing are more involved LO 6.7 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Fixed position layout ? Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed ? Large construction projects ? Shipbuilding/aircraft manufacturing ? Space mission LO 6.7 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Some operational environments use a combination of the three basic layout types: ? Hospitals ? Supermarket ? Shipyards ? Some organizations are moving away from process layouts in an effort to capture the benefits of product layouts ? Cellular manufacturing ? Flexible manufacturing systems LO 6.7 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Cellular production ? Layout in which workstations are grouped into a cell that can process items that have similar processing requirements ? Groupings are determined by the operations needed to perform the work for a set of similar items, part families, that require similar processing ? The cells become, in effect, miniature versions of product layouts ? Enables companies to produce a variety of products with very little waste LO 6.7 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Group technology ? The grouping into part families of items with similar design or manufacturing characteristics ? Design characteristics: ? Size ? Shape ? Function ? Manufacturing or processing characteristics ? Type of operations required ? Sequence of operations required ? Requires a systematic analysis of parts to identify the part families LO 6.7 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Service layouts can be categorized as: product, process, or fixed position ? Service layout requirements are somewhat different due to such factors as: ? Degree of customer contact ? Degree of customization ? Common service layouts: ? Warehouse and storage layouts – minimize item movement ? Retail layouts – influence customers into buying more ? Office layouts – increase employee interactions LO 6.7 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? The goal of a product layout is to arrange workers or machines in the sequence that operations need to be performed LO 6.8 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Line balancing ? The process of assigning tasks to workstations in such a way that the workstations have approximately equal time requirements ? Goal: ? Obtain task grouping that represents approximately equal time requirements, since this minimizes idle time along the line and results in a high utilization of equipment and labor ? Why is line balancing important? 1. It allows us to use labor and equipment more efficiently 2. To avoid fairness issues that arise when one workstation must work harder than another LO 6.8 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Cycle time ? The maximum time allowed at each workstation to complete its set of tasks on a unit ? Cycle time also establishes the output rate of a line Operating time per day Cycle time = Desired output rate Operating time per day Output rate = Cycle time LO 6.8 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? The required number of workstations is a function of ? Desired output rate ? Our ability to combine tasks into a workstation ? Theoretical minimum number of stations N min = ?t Cycle time where N min = theoretical minimum number of stations ? t = Sum of task times LO 6.8 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Precedence diagram ? A diagram that shows elemental tasks and their precedence requirements LO 6.8 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Some heuristic (intuitive) rules: ? Assign tasks in order of most following tasks ? Count the number of tasks that follow ? Assign tasks in order of greatest positional weight ? Positional weight is the sum of each task’s time and the times of all following tasks LO 6.8 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? Balance delay (percentage of idle time) ? Percentage of idle time of a line Balance Delay = Idle time per cycle ?100 N actual ? Cycle time where N actual = Actual number of stations ? Efficiency ? Percentage of busy time of a line Efficiency = 100% - Balance Delay LO 6.8 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? The main issue in designing process layouts concerns the relative placement of the departments ? Measuring effectiveness ? A major objective in designing process layouts is to minimize transportation cost, distance, or time LO 6.9 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ? In designing process layouts, the following information is required: 1. 2. 3. 4. 5. 6. LO 6.9 A list of departments to be arranged and their dimensions A projection of future work flows between the pairs of work centers The distance between locations and the cost per unit of distance to move loads between them The amount of money to be invested in the layout A list of any special considerations The location of key utilities, access and exit points, etc. Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Distance between locations in meters To From A A B C 20 40 B 30 C Interdepartmental work flows (loads per day) To From 1 1 2 2 3 30 170 100 3 LO 6.9 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 30 1 170 A 100 2 B C Dept. Loads Location Distance (meters) Load Distance Score 1 to 2 170 A to B 20 170 × 20 = 3,400 1 to 3 30 A to C 40 30 × 40 = 1,200 2 to 3 100 B to C 30 100 × 30 = 3,000 Total LO 6.9 3 7,600 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Work Design and Measurement Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior 7-1 written consent of McGraw-Hill Education. You should be able to: LO 7.1 LO 7.2 LO 7.3 LO 7.4 LO 7.5 LO 7.6 Explain the importance of work design Compare and contrast the two basic approaches to job design Discuss the advantages and disadvantages of specialization Describe behavioral approaches to job design Discuss the impact of working conditions on job design Compare the advantages and disadvantages of time-based and outputbased pay systems LO 7.7 Explain the purpose of methods analysis and describe how methods studies are performed LO 7.8 Describe four commonly used techniques for motion study LO 7.9 Define a standard time LO 7.10 Describe and compare time study methods and perform calculations LO 7.11 Describe work sampling and perform calculations LO 7.12 Compare stopwatch time study and work sampling Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-2 ? Job design ? The act of specifying the contents and methods of jobs ? What will be done in a job ? Who will do the job ? How the job will be done ? Where the job will be done ? Importance ? Organizations are dependent on human efforts to accomplish their goals ? Many job design topics are relevant to continuous and productivity improvement ? Objectives ? Productivity ? Safety ? Quality of work life LO 7.1 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-3 ? Efficiency School ? Emphasizes a systematic, logical approach to job design ? A refinement of Frederick Winslow Taylor’s scientific management concepts ? Behavioral School ? Emphasizes satisfaction of needs and wants of employees Specialization is a primary issue of disagreement between the efficiency and behavioral approaches LO 7.2 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-4 ? Specialization ? Work that concentrates on some aspect of a product or service Advantages For management: 1. Simplifies training 2. High productivity 3. Low wage costs For employees: 1. Low education and skill requirements 2. Minimum responsibility 3. Little mental effort needed Disadvantages For management: 1. Difficult to motivate quality 2. Worker dissatisfaction, possibly resulting in absenteeism, high turnover, disruptive tactics, poor attention to quality LO 7.3 For employees: 1. Monotonous work 2. Limited opportunities for advancement 3. Little control over work 4. Little opportunity for self-fulfillment Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-5 ? Job Enlargement ? Giving a worker a larger portion of the total task by horizontal loading ? Job Rotation ? Workers periodically exchange jobs ? Job Enrichment ? Increasing responsibility for planning and coordination tasks, by vertical loading LO 7.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-6 ? Motivation is a key factor in many aspects of work life ? Influences quality and productivity ? Contributes to the work environment ? Trust is an important factor that affects motivation LO 7.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-7 ? Teams take a variety of forms: ? Short-term team ? Formed to collaborate on a topic or solve a problem ? Long-term teams ? Self-directed teams ? Groups empowered to make certain changes in their work processes LO 7.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-8 ? Benefits of teams ? Higher quality ? Higher productivity ? Greater worker satisfaction ? Team problems ? Some managers feel threatened ? Conflicts between team members LO 7.4 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-9 Expert Robert Bacal has a list of requirements for successful team building: 1. Clearly stated and commonly held vision and goals. 2. Talent and skills required to meet goals. 3. Clear understanding of team members’ roles and functions. 4. Efficient and shared understanding of procedures & norms. 5. Effective and skilled interpersonal relations. 6. A system of reinforcement and celebration. 7. Clear understanding of the team’s relationship to the greater organization. LO 7.4 7-10 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. Scientific discipline concerned with the understanding of human interaction with the elements of a system. An ergonomically designed system or part • Increases productivity • Reduces worker’s discomfort and fatigue • Reduces to injuries to the back, neck, arms, etc. LO 7.4 7-11 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. ? Quality of work life affects not only workers’ overall sense of well-being and contentment, but also their productivity ? Important aspects of quality of work life: ? How a worker gets along with co-workers ? Quality of management ? Working conditions ? Compensation LO 7.5 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-12 ? It is important for organizations to develop suitable compensation plans for their employees ? Compensation approaches ? Time-based systems ? Output-based systems ? Incentive systems ? Knowledge-based systems ? Management compensation Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-13 ? Time-based system ? Compensation based on time an employee has worked during the pay period ? Output-based (incentive) system ? Compensation based on amount of output an employee produced during the pay period Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-14 TIME-BASED Advantages Disadvantages OUTPUT-BASED Advantages Disadvantages Management Worker • • • • Stable labor costs Easy to administer Simple to compute pay Stable output • • Stable pay Less pressure to produce than under output system • No incentive for workers to increase output • Extra efforts not rewarded • • Lower cost per unit Greater output • • Pay related to efforts Opportunity to earn more • Wage computation more difficult Need to measure output Quality may suffer Difficult to incorporate wage increases Increased problems with scheduling • • Pay fluctuates Workers may be penalized because of factors beyond their control (e.g., machine breakdown) • • • • LO 7.6 Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-15 ? Individual incentive plans ? Straight piecework ? Worker’s pay is a direct linear function of his or her output ? Minimum wage legislation has reduced their popularity ? Base rate + bonus ? Worker is guaranteed a base rate, tied to an output standard, that serves as a minimum ? A bonus is paid for output above the standard ? Group incentive plans ? Tend to stress sharing of productivity gains with employees Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-16 ? Knowledge-based pay ? A pay system used by organizations to reward workers who undergo training that increases their skills ? Three dimensions: ? Horizontal skills ? Reflect the variety of tasks the worker is capable of performing ? Vertical skills ? Reflect the managerial skills the worker is capable of ? Depth skills ? Reflect quality and productivity results Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. 7-17 ? Many organizations used to reward managers based on output ? New emphasis is being placed on other factors of performance ? Customer service ? Quality ? Executive pay is increasingly being tied to the success of the company or division for which the executive is responsible Copyright ©2021 McGraw-Hill Edu
