What is Productivity?

1. ITC-ILO/ACTRAV Training Workshop for ACFTU A3-01396Negotiating Productivity linked agreements in Entreprises

2. What is Productivity? • Productivity v/s Work Intensity • Productivity does not only mean increasing working time; it can also mean finding ways to produce more output within the same time or same output within lesser time thru - - Technological improvement - Methods & Systems improvement - Line balancing

3. Factors influencing Enterprise Productivity External: • Availability of raw material • Availability of skilled manpower • Government policies towards taxation, credit, interest rates, economic policies, labour laws • Overall economic health of the country and the industrial sector Organization may have very less controls over these

4. Factors influencing Enterprise Productivity Internal: • Land, building, factory lay out and location • Raw material quality, choosing a good vendor/ supplier of material • Energy: type of energy used, costs of energy (wind, solar, gas, electricity, coal, diesel, etc) • Machine and equipment • Human resources: trained to perform operational activities/managerial capabilities/administration etc • work norms & organization within the factory Organization has much control over these

5. General problems within the Company • Out dated and rigid work norms • Restrictive and narrow job descriptions • Too many non value adding activities • Idle manpower on one hand & high incidents of overtime on other hand • Maladjusted production schedule • Shortages of critical items on one hand & growing inventory on the other hand • Unbalanced work load and bottlenecks • Break-downs • Rejection and reworks • Absenteeism and labor turn over • Lack of accountability • Discontent, low morale and responsibilities. • Mismatch between authority and responsibilities

6. Remedial Approaches A. Organizational: • Promoting transparency and participation • Role enrichment and flexible job description • Integrating functions like quality control and maintenance with production function • Flat and lean organization • Information and communication systems • Job rotation and group working

7. Remedial Approaches B. Normative: • Instead of fixed targets, agreeing to overall work load levels and rest periods • Day to day target modifications as per incidence of forced idle time and outside the cycle work • Continuous rebalancing of work load for fair distribution and removal of bottlenecks • Making traditionally non measurable work measurable

8. Remedial Approaches C. Technical: • Effort reducing techniques • Minimum transport layout • Multiple operative facilities • Ergonomic improvement • Health and safety measures D. Economic: • Evaluation of individual contribution • Sharing gains and loses with various stakeholder, especially employees • “Make or buy” decision

9. Remedial devices used for these approaches: • Work measurement devices like: time and motion study, MOST etc • KAIZAN, Lean manufacturing, 5 S, TQM, etc. • Collective Agreement as a vehicle of participation • Productivity linked remuneration schemes • Company performance linked schemes • Crisis situation plans • Monitoring the economics of a firm

10. Considerations before signing productivity agreement • Work intensity differs from worker to worker, from dept to dept, some workers put in 5-6 hours of effective working time, some work for 7 or 8 hours - When management asks for 20% higher production – - workers working for less hours have no problem but those who already put in 8 hours at work, their workload increases intolerably - management demand for 20% increase is based on the highest working time – which means that workers as a whole end up giving much more while being paid for only 20% need for work study & line balancing to bring down overloaded workers while bringing up under loaded workers.

11. What should Union do? Before productivity linked wage agreement can be signed, Union should demand: • Work Study– systematic examination of the methods & time taken for carrying out activities at work place so as to improve use of resources (human, machine, material) & set up performance standards – joint participation of union & management required in this process Note: It is not only labour but also machine & methods productivity that needs to be looked into.

12. Work study should aim at - • Simplifying or modifying the methods of operation • Reduce unnecessary or excess work, reduce ineffective time spent by workers in doing things due to poor design, layout of the workplace or in material handling, etc • Stop wasteful use of resources • Contribute to industrial safety by identifying hazardous work and developing safer methods • Cut down the time for performing certain activities after introducing systems & methods improvement & line balancing. work study includes not only labour but also period required to recover from fatigue.

13. Commonly used methods of work measurement • Time & Motion studies - to reduce the number of motions in performing a task in order to increase productivity • (MOST) Maynard Operation Sequence Technique - pre determined motion time standard – used to set the standard time in which a worker should perform a task. Work = Force + Distance Task is broken down into individual motion elements, & each is assigned a numerical time value in time measurement units (100,000 TMUs = 1 hour). All the motion element times are then added together and any allowances are added, and the result is the standard time

14. Working Time in a day General Norm: • Out of 480 minutes (8 hours), at best 420 minutes of working time should be there – 60 minutes are set aside for rest, lunch break (half hour) and 2 breaks of 15 minutes each for tea-coffee, etc • Out of 420 minutes available for work, following deductions from working time need to be considered: - personal needs allowance - fatigue allowance – differs for different job stations - hazard allowance – for certain hazardous jobs • down time (disturbance in production cycle due to material not available, machine break down, etc – record should be kept of this by the workers)

15. Negotiating Productivity- pre-requisites • Work study & line balancing – joint union-mgt exercise & decision making – not just consultation • Deciding on allocable time in a shift, taking into account rest period, lunch, time off for personal needs, fatigue, hazardous jobs, down time and material handling time • Commitment of the top mgt to invest in changes needed for improving productivity • Sharing in the gains from productivity – share in value added, company performance allowance (over & above the CB agreement)

16. Financial information required for preparing charter of demands • 1. Sales/turn over, • 2. Capital employed/capital size, • 3. Employment size, • 4. Value Added = Income – Non Factor Expenditure. (non-factor expenditure means expenditure other than employee cost, depreciation and interest). • 5. Material intensity/input intensity = sales -------------- value added • 6. Capital intensity/capital output ratio = Capital --------------- value added • 7. Value added per manday • 8. Return to capital per manday

17. 9. Rate of profit = Share of Capital ------------------------ Capital employed • 10. Employee cost (Bargainable/unionized) per man day • 11. Prize mark up i.e., value added per unit, • 12. Trend of output prices and input prices. • 13. Capacity utilization of the plant and machinery, • 14. Market share of the firm, • 15. Ratio of financial result/ratio of operational results, • 16. Ratio of debt/ratio of equity, • 17. Percentage of non-operational income, • 18. Break even point of sales and output, • 19. Balance Sheet & Profit & Loss Account of Last 3 Years of the Company. • 20. Productivity Data for each workstation including all elements.

18. Issues covered under CBA • WAGE STRUCTURE • Consolidated Monthly Wage Grades • Fitment • Annual Increments • Service Increments • Classification • Dearness Allowance • Productivity Bonus Scheme • WORKING HOURS & LEAVE • Hours of Work • Holidays • Closed Days and Holidays • Leave

19. Issues covered under CBA • ALLOWANCES • Education Allowance • Conveyance Allowance • House Rent Allowance • Personal Pay • Leave Travel Assistance • Medical Benefit Advance • Shift Allowance • Overtime • Officiating Allowance • Work on Weekly Off Day • Lunch / Dinner Allowance • Local Travel • Outstation Transfer Allowance • Outstation and traveling Allowance

20. Issues covered under CBA • PROTOCOLS / PROCEDURES • Working Protocol • Promotion Procedure for Workmen • System of Wage Grade Promotion • NEEDS OF THE ORGANISATION • Working System • Productivity Committees • Conversion • Work Measurement • Multi – Machine

21. Issues covered under CBA • MISCELLANEOUS • Protective Equipment • Retirement Age • Provident Fund • Gratuity • Canteen Facilities & Subsidized Food • Saving Scheme • Recruitment Policy • Workmen Welfare Schemes • Temporary Workmen • Transfer of Wages Through Bank • Recognition • Existing Rights and Privileges • Application of the Settlement • Payment of Arrears • Duration of the settlement • Implementation Committee

22. GFC, Companies & Response In one Company Management, taking advantage of Global Financial Crisis, asked Union to accept wage cut of 20% or reduce workforce by 20%. Union analysed company balance sheet and found the following: • Material Cost ......... 78% Energy Cost .........  10% • Admn. Cost ..........   4% Labour Cost........     8%  • Reduction by 20% head count or wages meant only 1.6% savings (20% of 8%) BUT targeting saving in material & energy costs by 10% would give 8.8% cost.  Management had no answer but to accept union’s proposal and in this way Union saved the jobs as well as wages.