Efficiency Rating Procedures
Chapter Twenty-Three
Syllabus topic 10, "Efficiency rating procedures"
Pages 64 to 66 of 82
In one line
Efficiency rating measures what a worker produced against what he was expected to produce, expressed as a percentage of standard hours to actual hours.
The formula
Efficiency percentage = standard hours for the actual output ÷ actual hours worked × 100.
The numerator is not the standard hours of the period. It is the standard time allowed for the work the man actually did. Getting this the wrong way round is the common error: a man who produces nothing in eight hours has an efficiency of zero, not of a hundred.
Where the standard comes from
Work study. A method study fixes the best way of doing the job, and a time study then measures how long that method takes for a qualified worker working at a normal pace, with allowances added for rest, personal needs and unavoidable delay. The result is the standard time, and it is the yardstick everything in this chapter is measured against.
A standard is a fact about the method, not about the man. If the method changes, the standard must be re-set, and a standard left unrevised after the machine was replaced will show everybody as brilliant.
Worked example
The standard time for a component is 10 hours. In a week of 40 hours a worker completes 5 components. Compute his efficiency.
| Standard hours for actual output, 5 × 10 | 50 hours |
| Actual hours worked | 40 hours |
| Efficiency, 50 ÷ 40 × 100 | 125 per cent |
A second worker completes 3 components in the same 40 hours.
| Standard hours for actual output, 3 × 10 | 30 hours |
| Actual hours worked | 40 hours |
| Efficiency, 30 ÷ 40 × 100 | 75 per cent |
Both men were paid for 40 hours. The first delivered 50 hours of work and the second 30, and no attendance record could have told management that.
Reading the rating
| Rating | What it usually means | What management does |
|---|---|---|
| Below 100 | Want of skill, poor tools, bad material, or an unwilling worker | Train, investigate the conditions, or move the man |
| About 100 | The standard is being met | Nothing |
| Above 100 | A skilled and willing worker | Reward under the incentive scheme |
| Far above 100, and by everybody | The standard is loose, not the men exceptional | Re-set the standard by a fresh time study |
The last row is the one worth remembering. A rating is evidence about the standard as much as about the worker, and a scheme that pays bonus on a loose standard costs money for output that would have come anyway.
What efficiency rating is used for
- Incentive payment, which is the next chapter: nearly every premium scheme pays on the time saved, which is the same information in another form;
- promotion and increments, on evidence rather than impression;
- identifying training needs, worker by worker and department by department;
- revising standards, where a whole section moves together;
- fixing the labour hour rate, because a department that runs at 80 per cent efficiency needs more hours, and more wages, for the same output.
The rest of this chapter
Module one is free. The rest of this chapter comes with the B.Com. (Accountancy) Semester 5 notes.
You are reading a chapter from a later module. Everything in module one of every subject stays free, and so does the syllabus.
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Free either way: the syllabus, and module one of every subject.
The rest of this subject
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