Scope of Incentive Schemes

Apparel Industry Management 3(3+0)

Lesson 29 : Incentives

Scope of Incentive Schemes

Although the incentive payments have a universal appeal, their application is confined to certain important industries. Stated differently, payment-by-results schemes are difficult to apply in:

  1. Industries in which measurement of individual or groups output is rendered difficult or impossible either by technical consideration or by psychological circumstances which might be prejudicial to output
  2. Industries in which the control of quality is necessary and is particularly difficult, or in the ease of certain classes of workers, where high quality and precision of work is of prime importance; and
  3. Industries in which the work is dangerous and it is particularly difficult to ensure the observance of adequate safety precautions

Barring the above three categories, incentive schemes can be applied to all industries. Specifically, they are being successfully employed in the textile and metallurgical industries, the metal trades, mining, and many branches of clothing, leather and rubber industries. Incentive schemes have also been successfully applied in certain countries and in certain circumstances in the building industry and in chemical and other industries.

Generally speaking, systems of payment by results can be most successfully employed in the large companies which can afford to employ administrative and engineering staff needed to ensure an efficient organization of production, quality and measurement of work. However, such systems frequently yield appreciable results in smaller undertakings which may, incase of need, take recourse to the services of experts for the design of incentive schemes.13.

It is often argued that incentive schemes are more desirable in labour-intensive manufacturing processes. Their application in fully automated plants is doubted. It may be stated that the schemes of payment by results have their role in mechanized enterprises too. But the justification comes for the wrong reasons. It would be easy for an operator to damage a CNC machine or for a programmer to plat virus in the computer if incentive earnings are denied to him or her. It is mainly to prevent such damages that incentive schemes are recommended in fully automated plants.

As a rule, incentives must not be introduced in a newly set-up unit. Workers must be content with time-rated earnings, atleast during the first four to five years. This time period is necessary for the unit to carve a niche for itself in the market. This being achieved, it would be easy for the unit to sell the increased output brought in by incentives. Furthermore, as was noted earlier, incentives are likely to affect the quality of output. Any defect in quality would seriously affect fortunes of the newly set-up unit, particularly in its formative years.

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Last modified: Thursday, 24 May 2012, 6:38 AM