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.
Efficiency Rating Procedures
The three ratings distinguished
| Rates | Purpose | Asks | |
|---|---|---|---|
| Job evaluation | The job | To fix the wage for the post | What is this job worth? |
| Merit rating | The man, on personal qualities | To decide promotion, increment, placement | What kind of worker is he? |
| Efficiency rating | The man's output against a standard | To pay incentive and control cost | How much did he produce? |
Job evaluation happens before anybody is engaged. It compares one post with another on skill, effort, responsibility and working conditions, and produces a wage structure.
Merit rating judges qualities - regularity, initiative, co-operation, judgment, reliability - and is partly a matter of opinion, which is why it is done on a form with defined grades rather than left to a supervisor's memory.
Efficiency rating is arithmetic. Standard hours over actual hours, and no opinion enters it.
What it does NOT mean
Efficiency is not utilisation. Utilisation asks whether the hours were used at all; efficiency asks how much came out of them.
Efficiency rating is not merit rating. One is a percentage from a time study, the other an assessment of personal qualities.
A rating below 100 is not necessarily the worker's fault. Bad material, a worn machine and poor instructions all show up in his figure.
Quick revision
- Efficiency = standard hours for actual output ÷ actual hours worked × 100.
- The standard comes from work study: method study, then time study, plus allowances.
- Above 100 earns incentive; below 100 calls for training or investigation; everybody far above 100 means the standard is loose.
- Job evaluation rates the job to fix the wage; merit rating rates the man's qualities; efficiency rating rates his output.
- Efficiency rating feeds the incentive scheme, promotion, training and the revision of standards.
Test yourself
1. State the formula. Standard hours for the actual output divided by actual hours worked, times a hundred.
2. A worker takes 40 hours to make 5 units for which the standard is 10 hours each. What is his efficiency? 125 per cent: 50 standard hours against 40 actual hours.
3. Every worker in a department is rated at 140 per cent. What should management suspect? That the standard is loose and needs a fresh time study, rather than that the whole department is exceptional.
4. Distinguish merit rating from efficiency rating. Merit rating assesses the worker's personal qualities such as regularity, initiative and reliability, for promotion and placement; efficiency rating measures his output against the standard time, as a percentage, for incentive payment and cost control.
Efficiency Rating Procedures
Answer in one sentence
Explain efficiency rating procedures. Efficiency rating expresses the standard hours allowed for a worker's actual output as a percentage of the hours he actually worked, the standard being fixed by work study, so that a rating above a hundred earns incentive, one below it calls for training or an investigation of the conditions, and a whole department far above it indicates a loose standard; and it is distinct from job evaluation, which rates the job to fix its wage, and from merit rating, which assesses the worker's personal qualities.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.