UNIT-V HUMAN RESOURCE MANAGEMENT

In any organization employees are the pillars. Maintaining relation with employee is critical.
Hence every company manages a separate department for maintaining employee relations.
That department is known as Human resource Management or personal Management.

The Human Resource Manager is a part of the organizational management. So he must

perform the basic managerial functions of planning, organizing, directing and controlling in
relation to his department.

Planning – The manager has to plan the future requirement of employees and should act
accordingly

Organizing – After planning manager has to design a system which shows the relation
between jobs, personal and physical factors to attain the company objectives

Directing, Motivation or Actuation – Should motivate the employees for working with
willingness and effectively

Controlling- It deals with regulating activities in accordance with personal plan

Procurement – It means of recruiting proper kind and size of personal necessary

Development – Increasing of employee skills through training for effective job performance

Compensation- Adequate or Equivalent remuneration of personal for their contribution to

achieve organizational goals
Integration- it is concerned with the attempt to effect a reasonable reconciliation of
individual and organizational interest.

Maintenance - Means sustaining and improving the conditions that have been established

AIM / OBJECTIVES/ FUNCTIONS OF PERSONAL MANAGEMENT

 Determining needs and effective utilization of human resources in the organization
 Educating executives and managers of the organization regarding the human resource
policies
 Establish and maintenance of working relations among the member of the
organization
 Providing maximum opportunities for advancement and development
 Creating healthy climate in the organization
 Motivating the employees towards the loyalty of the company
 Recruitment, selection, placement and promotion
 recognition and satisfaction of individual and group goals.
 Training and development of individuals to improve skill
 Evaluate the performance of the employee
 Maintaining and improving team spirit

JOB EVALUATION
One of the main reasons for industrial disputes is inequality in the wages for similar jobs.
Hence the management is to eliminate any wage inequalities for same jobs.

Jo evaluation is the technique used to correct inequalities in wages to install systematic

method of paying wages for the jobs for relative worth of various jobs in the organization.

Objectives:

 Estimation of wage inequalities

 Deciding relative value of different jobs in the organization and there by establishing
wage differential between various jobs
 Formulate appropriate wage structure
 Classify the responsibilities and authorities
 Need of training for the employees

Advantages:

 It develops fair wages and salary structure

 Reduces the wage inequalities
 Management can handle wage disputes effectively
 It provides basis for the selection, recruitment and training
 It indicates the line of authority and responsibility
Limitation
 It does not take into account the supply and demand for Labour
 If the wages are not at par market, it provides dissatisfaction among employees

JOB EVALUATION PROCEDURE

 Determining the requirement about job (Job analysis)
 Describe the requirements of the jobs (Job description)
 Specify the qualities required by an employee to perform the job (Job specification)
 Determining worth of the job (Job classification)
 Prepare a suitable wage structure (Wages administration)
Job Analysis is the process of determining the facts and work content about the job. It
involves collection of data relating to the tasks, skills, knowledge, abilities and
responsibilities
Job Description consists of written statements of the duties, responsibilities, materials and
tools to be used, working conditions and other required facts about the jobs.
Job Specification is a written statement of minimum human qualities required for the
successful performance of the job. It helps in finding the right person for the right jobs
METHODS OF JOB EVALUATION
There are primarily four methods of job evaluation
(i) Job Ranking Method (ii) Job Classification Method
(iii) Factor Comparison Method (iv) Point Method
Job Ranking Method: It is the simplest and oldest method of job evaluation. Based on the
nature of difficulties in performance, individual department gives the ranking to each job and
the same thing will be passed to the central committee who gives common grades.
In smaller organizations this is useful. Based on the difficulties ranking will be given to jobs.

Rank 1 2 3 4 5 6
Job C A B E D F

Job Classification or Grading Method

 In this the experts sorts the jobs based on their importance. The grading will be as
follows
 Deciding the number of grades
 Writing grade description
 Listing the jobs to be evaluated
 Preparing the job description
 Comparing the job description with grade level and assigning the same to the grades

Ex: Grade 5 deals with the job which requires no experience and training.
Factor Comparison Method

This method involves detailed analysis of the jobs based on the skill, physical effort, mental
requirements, and responsibilities and working conditions

Example:

Key job Skill Mental Physical Responsibility Working Total

Effort Effort Condition Salary
Ji 200 100 500 100 100 1000
J2 200 200 300 300 100 1100

The Point Method:

This method is most popular method of job evaluation. It was developed by Merill Lott.
Under this the job are evaluated based on certain factors. This consists of following steps

Determine the jobs to be evaluated: List the jobs to be evaluated

Select the factors: Generally the following factors are used for the evaluation

Experience, Education, Skill, Physical Effort, Mental Effort, Responsibility of material,

Responsibility for tools and equipment, Responsibility for work, safety of others, Working
conditions
Defining the factors: The selected factors and their degrees will be clearly defined.
Depending on the type of company, factors are to be selected.
Analyzing the values to the job factor Job factors are assigned by the weightage
Ex: Education -60 points: Experience -60 points; Skill – 100 points; Physical Effort – 60
MERIT RATING (PERFORMANCE APPRAISAL)
It is a systematic process of evaluating employees performance on a job. It is defined as “ a
systematic process for knowing how effectively and efficiently the assigned work is
carried out by employees”

OBJECTIVES AND BENEFITS OF MERIT RATING

1. It is useful in judging the effectiveness of employee selection, placement and training

programs. The poor performers can be transferred or send them for training for improvement.
2. This can be used for promotion or increment
3. It will be used for the confirmation of a trainee after the completion of training
4.It reveals the strengths and weakness of employees
5.It identifies the special talents in the employees
6. It reveals the methods of trainings needed for employees
7. It helps the management to keep right person in the right place
 MERIT RATING FORM
Name of the employee Department
Job Title Date of Rating
Performance Factors Grades/Degree
1 2 3 4
(i) Quantity of Work
(ii) Quality of Work
(a) Accuracy
(b) Neatness
(c ) Time Consumption
(iii) Dependability
(a) Attendance
(b) Ability to follow
Instructions
(c ) Safety Habits
(iv) Work Behavior
(a) Team sprit
(b) Work Attitude
(c) Loyalty
Results
Total Performance Poor Fair Good Best
Rating Below Standard Above

METHODS OF MERIT RATING

Some commonly used merit rating methods are

Ranking Method:

This is the simple and oldest method of evaluation. In this the employees performance is
marked from best to worst. The rankings are based on the judgment of the observer or rater.
But it won’t discuss about the strengths and weakness of the employee. This will be suitable
for smaller firms.

Paired Compensation Method: This is the modified method of ranking method. In this the
employees of each groups will be compared with remaining employees. The superior
performer will be given highest points and all the remaining people will be allocated based on
the aggregate scoring.

Choice Method:

In this for each behavior number of statements are given and the rater is asked to select only
one statement which describes particular behavior of employee being evaluated. For each
statement the options will be selected and finally the score will be calculated based on their
total weightage given to all the statements. In this method the rater have to select any one of
the option forcefully and he should mention any remarks.
Critical Incidents Method: Under this method, employees are rated on the basis of their
behavior (Psychology test) during and exceptional incident i.e critical incident. The
employees showing desirable behavior will be given highest raking.

Ex: During Fire people will (i) Inform fire station (ii) Inform supervisor (iii) Use of safety
device (iv) Complaining on poor electrical wiring

WAGES AND INCENTIVE ADMINISTRATION

Wages: Remuneration paid to an employee working on daily basis is called wage

Salary: Remuneration paid to an employee working on monthly basis is called salary

SALARY WAGE
Remuneration will be per month Remuneration will be daily or weekly
These people receive full salary if they These people will lose their salary if they
attend late occasionally come late
More number leaves will be available Less number of leaves and after that loss of
pay
The work for the salaried people will be work will be of same nature and workers will
varying in nature and complex be called whenever quantity is important
rather than quality

Factors determining wages

 Demand and supply of workers

 Economic and financial condition of an employee
 Bargaining capacity of employee and employer
 Wages in surrounding company
 Nature of Job
 Workers quality and experience

Method of fixing wage

 Should guarantee minimum wages

 Should be easy, simple and to understand and operate
 Should resembles the workers effort
 Should have linkage with incentives or bonus
 Fair to both employee and employer
 Should be based on quality and quantity produced
 Standard and normal time should be varied when work changes
Methods of wage payment

Time Rate system – This is based on the time spent by an employee in the company
irrespective of output

Piece rate system—In this method wages are paid on the basis of production (output) by
them. The workers will be awarded wage are two types

 (Straight Piece Rate Method) Wages will be given straight based on the number of
products the workers produced.
 (Merrick’s Differential Piece Rate Method) Wages will be different for different
level of operation or output. Less number of pieces will be one rate and high level will
be other. This is to reward efficient worker and to penalize the inefficient.

Generally

Upto 80% of actual output – basic rate per piece

Over 80% to 100% output – 1.10 * Basic rate per piece
Over 100% -- 1.20* Basic rate per piece

Earning = Basic rate * Number of items produced

Ex: A worker has produced a single item in a work of six days as follows
Monday- 280 items; Tuesday-340; Wednesday-360; Thursday- 260; Friday—300; sat-
390
Standard output will be 320 per 8 hrs and labor rate per hr is 10/-. Calculate earnings of
worker
Standard Output = 320; Standard O/P per hr= 320/8 =40 pieces
Labour rate per hr = 10/- Labour rate per piece = 10/40 = 0.25/-

Day Standard Actual Actual O/P in Rate Applicable Earnings (Rs)

O/P O/P %
Mon 320 280 280/320=87.5 1.10*Base rate 1.1*Basic rate* number products
produced= 1.1*0.25*280 = 77
Tues 320 340 340/320=106.2 1.2* Basic rate 1.2*0.25*340=102
Wed 320 360 112.5 1.2* Basic rate 1.2*0.25*360=108
Thurs 320 260 81.2 1.1*basic rate 1.1*0.25*260= 71.5
Fri 320 300 93.7 1.1*Basic rate 1.1*0.25*300=82.5
Sat 320 390 121.8 1.2*Basic rate 1.2*0.25*390=117
Total Earnings 558
INCENTIVE / BONUS SCHEMES
Workers will not produce to their full capacity unless they are not awarded. The award is
called as incentive. Incentives are given to a worker for his better performance. The award
given to employee/ worker is called incentive.
BONUS SCHEMES
Emerson’s Efficiency Plan:
 Day wages irrespective of output performance
 Standard output is considered as 100% efficiency

% Efficiency = (Actual Output/ Standard Output) * 100

Mode of Payment

Below 66.66% - Time wage Only

66.66% to 100% - Time wage + Bonus at different % increase in to 20% at 100% efficiency
Above 100% -- Time Wage + 20% Bonus + 1% bonus for each 1% increase in efficiency
beyond 100%

The Halsey System

This plan provides the guaranteed time wage plus incentive bonus at fixed percentage of
earning for the time saved.
Features
 Standard time for each job is specified
 Guaranteed minimum wages are paid along with bonus incentive
 Simple and easy yo understand

Time Saved = (Ts-Ta)

Bonus Earned = I/2 (Ts-Ta)*R
Total Wages earned = I/2 (Ts+Ta)*R
Where R-Hourly rate; Ts-standard time ; Ta- actual time

Example: Standard time for a job is 8 hrs and the actual time taken by an operator is 6 hrs. If
operator is paid at the rate of Rs.10 per hour, Calculate bonus and total wages earned.

Standard time Ts = 8hrs ; Actual time taken by an operator = Ta= 6 hrs; Hourly rate=10/-
Time saved = (Ts-Ta) = (8-6) = 2 hrs
Bonus Earned = ½(Ts-Ta)*R = ½(8-6)*10 = 10/-
Total Wages earned = ½(Ts+Ta)*R = ½(8+6)*10 = 70/-
The Rowan’s Plan
The plan provides each worker a guaranteed minimum wages plus incentive bonus for certain
portion of time saved. The incentive time is the ratio of actual time taken to the standard time.
This system provides good incentive for leaners, less experienced and aged workers

Incentive Bonus Earned = Ta/Ts (Ts-Ta)*R

INSPECTION AND QUALITY CONTROL

Most of the customers will be more amount of money for higher quality products. Hence the
marketing department must take care of customer needs. Generally the quality standards are
classified into two types

Quantitative Characteristics which are directly measureable Ex: Size, Weight, Diameter etc.,
Qualitative Characteristics which are not directly measurable Ex: Crack, Colour.
One these characteristic only the products either will be accepted or rejected.
Quality Control: It is a mechanism by which products are made to measure upto the
specifications determined from customers demand. It is concerned with making things right
than discovering and rejecting those made wrong
OBJECTIVES / FUNCTIONS OF QUALITY CONTROL
 Maintain required quality at minimum price
 The design of the product should be in such a way that it should satisfy max. people
 Provide acceptable product to customer in functioning, Price, Life and Service
 Avoid Processing of faulty goods.
 Quality checking is to be done at different stages of the production process
 Recommend the corrective action if the product quality differs from standard
 Reduce wastage of material
 Create quality awareness in the organization
 The quality control department should ensure right material for the right product
INSPECTION:
Manufacturing process is the area where inspection is carried out to maintain quality of
product. Following principles must be maintained during inspection.
 Cent percent sampling should be done on the incoming material, semi-finished
goods which are brought out from outside before they use. So that the time and money
will not be wasted on defective items
 After setting the machine, first machine should be inspected against predetermined
standards. Then first one product is to be made and inspect for standards. If there is
any discrepancy, one should adjust the machine.
 After checking the inspection process of the machine against drawings, a trial run is
to be done on single piece and if it meets the standard, allow them for production.
  Randomly the semi-finished goods should also be checked.
 Finally the finished goods quality is to be checked. If all are in par with standards,
then allow them to the market, otherwise recheck once again the process.
 In any company post sale evaluation is needed because some defective items might
have reached customer because they may be damaged in transportation and it may
give bad name on the company. Hence it is to be taken serious. Final satisfaction of
the product by the customers will be attained by the following information

 Extent of complaints by the customers

 Extent of replacement of product in guarantee period.
 Extent of repairing defective items
 Extent of return policy.

Features
 Reduces the wastage of material
 Avoids processing of defective items
 Handling cost and time of moving semi-finished items from production to centralized
department will be reduced.
 Promptness in inspection may result in increased rate of production
Quality Control is a process by which one can check the product quality to meet the desired
standards.
Inspection is only a part of this process used to identify quality defects in products.
.
STATITICAL QUALITY CONTROL (Process Control)
The fundamental aim of process control is to evaluate system and improve quality of the
product. For evaluating the process generally control charts are used.
Control Chart: A control chart consists of three lines central line (Which designates Mean
Value x-bar), Upper Control Limit (UCL) and Lower Control Limit (LCL). For the
construction of the chart quality characteristics will be taken on Y-axis and Time variables on
X-axis.
The UCL will be drawn at 3 Standard Divisions (3σ) above the central line and LCL will be
drawn 3 standard divisions (3σ) below the central line.
Generally the values of the samples are drawn on the chart and if the sample points are with
in the UCL and LCL, then it is said that the process will be under control. If any points are
outside of the control limits, it indicates that these things are to be corrected.
Basically the control charts are classified based on
1. For Variable ( x chart and R Chart ) 2. For Attributes (P Chart, np chart and C chart)

CONTROL CHARTS FOR VARIABLES

X- bar Chart: It is also called as average chart and is used to control the mean value of
the characteristics. It shows changes in process average and is affected by change in process
variability. Generally it is to be used along with R chart.
 It controls the quality of the incoming material
 It provides information in establishing or modifying processes, specifications or
inspection procedures.
R-Chart: It is also called as range chart. It controls the variability of the process and is
affected by changes in process variability. It generally used along with x-chart.
R= (x-max) - (x min)

PROCEDURE FOR X bar -R CHART

Step 1: Collect sufficient number of samples and record its measurements
Step 2: Calculate mean X and Range R of each sample.( If Five samples are considered)
Mean x bar= (x1+x2+x3+x4+x5)/5 and the range is calculated as the difference
between highest and lowest value of the sample.
Step 3: Calculate grand average (X-bar) and mean range (R)
Step 4: X- bar-chart: Draw a central line at x, UCL and LCL. Locate all the points
UCL = X-bar+A2R LCL = X-bar-A2R
Step 5: R-chart: Set up central line as R and UCL above central line and LCL below central
line. Plot all the range points.
UCL= D4R LCL = D3R
If all the points are with in control limit, the process is under control. If any point is outside
the limits, remove that point and prepare new control limits. Repeat the same process until all
the points will be under control limits.
Example: Five jobs are selected at the end of every hour of the total 10 hours. The design
specifications are 10 ± 0.10. Plot X-bar and R chart. Given A2=0.577, D3=0 and D4=2.115

Sample x-bar
1 2 3 4 5
.No (Athematic Mean) R (Range)
1 10 10.01 10 10.03 10.01 10.01 0.03
2 10 10.03 10 10.04 10.03 10.02 0.04
3 10.01 10.02 10.02 10.03 10.02 10.02 0.02
4 10.01 10.02 10.02 10.01 10.04 10.02 0.03
5 10.02 10.02 10.03 10.03 10 10.02 0.03
6 10.06 10.03 10.02 10 9.99 10.02 0.07
7 9.99 9.98 10.02 10.02 9.99 10.00 0.04
8 10.02 10.01 10.01 9.99 10.02 10.01 0.03
9 10.03 10.01 9.97 10.01 10.03 10.01 0.06
10 10.02 9.99 9.97 9.98 9.96 9.98 0.05
X-bar= 10.01 R-bar= 0.04

x-bar = (x1+x2+x3+x4+x5)/5
= (10+10.01+10+10.03+10.01)/5 = 10.01
R= x max – x min = 10.03 -10.00 = 0.03
X-bar Chart
Central Line = X-bar = 10.01
Upper Control Limit (UCL) = X-bar + A2R = 10.01 + 0.577*0.04 = 10.03
Lower Control Limit (LML) = X-bar –A2R = 10.01 – 0.577*0.04 = 9.99
10.04

10.03

10.02
X-bar Length

10.01

10.00

9.99

9.98

9.97
1 2 3 4 5 6 7 8 9 10
Sample No

It is observed that last point is out of control. Hence remove that point and recalculate once
again all the table and redraw it.
 Sample No 1 2 3 4 5 x-bar R (Range)
1 10 10.01 10 10.03 10.01 10.01 0.03
2 10 10.03 10 10.04 10.03 10.02 0.04
3 10.01 10.02 10.02 10.03 10.02 10.02 0.02
4 10.01 10.02 10.02 10.01 10.04 10.02 0.03
5 10.02 10.02 10.03 10.03 10 10.02 0.03
6 10.06 10.03 10.02 10 9.99 10.02 0.07
7 9.99 9.98 10.02 10.02 9.99 10.00 0.04
8 10.02 10.01 10.01 9.99 10.02 10.01 0.03
9 10.03 10.01 9.97 10.01 10.03 10.01 0.06
10.01 0.0389

10.04
Sampl
10.03
e
10.02
X-Bar

10.01
10
9.99
9.98
1 2 3 4 5 6 7 8 9
Sample No

Now all the points are within the control limits.

R-Chart: Central Limits = CL = 0.0389
Upper Control Limits = UCL= D4R = 2.115*0.0389= 0.0823
Lower Control Limit = LCL = D3R = 0*0.0389 = 0

0.08
0.07
0.06
0.05
Range

0.04
0.03
Sample
0.02
X-bar
0.01
0
1 2 3 4 5 6 7 8 9
Sample No

All the points are within the control limits. Hence the process is in control
Example2: Five jobs are selected at the end of every sub groups of the total 10 sub groups.
The design specifications are 100 ± 0.5. Plot X-bar and R chart. Given A2=0.577, D3=0 and
D4=2.115

CONTROL CHARTS FOR ATTRIBUTES

This type of charts is used whenever quantitative measurements are not possible like
scratches, damages, matching of colour against standards.
(i) Control Charts For Fraction Defectives (P Chart)
This chart is used where the products are manufactured in the plant or received from vendors
are inspected and classified as ‘accepted’ or ‘Rejected’. Therefore, it is necessary to
maintain record of accepted or rejected items during inspection.
Record of number of items rejected to the number of items inspected is called as Fraction
defectives.
Procedure to construct p chart
 Collect the data of defective items rejected from a sample
 Calculate proportion p of defective items from each sample by following formula
P= Number of defectives/ number of pieces inspected
 Calculate the grand defectives (p-bar) by the following formula
p-bar = Ʃ Sample wise % defectives / Number of samples
 Standard deviation = √ p-bar(1-p bar)/n
Control limits can be calculated as
Central Line =CLp= p-bar
Upper Control Limit = CLp + 3√ p-bar(1-p bar)/n
Lower Control Limits = CLp - 3√ p-bar(1-p bar)/n
 Since the value of p can never be negative, hence if LCLp is zero take it as zero
 Control the p chart and check whether all the points are within control limits are not.
If not remove the points out of control and reconstruct the chart.
 Example 1: 8 samples of 100 items were taken whose inspection results are as

Sample No 1 2 3 4 5 6 7 8

No. Defectives 5 3 6 2 7 0 1 2

The sample wise fraction defectives are as follows:

Sample No 1 2 3 4 5 6 7 8

No. Defectives 5 3 6 2 7 0 1 2

Fraction defective (p) 5/100 3/100 0.06 0.02 0.07 0 0.01 0.02
=0.05 =0.03

Sum of all fractions are = 0.05+0.03+0.06+0.02+0.07+0+0.01+0.02=0.26

Average fraction defectives (p-bar) = sum of all fractions/ number of samples
= 0.26/8 = 0.0325
Number of samples =8
Total number of items (n) =100
Central Line = p-bar = 0.03
Upper Control Limit = CLp+ 3√ p-bar(1-p bar)/n
= 0.0325 + 3√ 0.03(1-0.03)/100 = 0.08368
Lower Control Limit = CLp - 3√ p-bar(1-p bar)/n
= 0.03 - 3√ 0.03(1-0.03)/100 = --0.0211 (As it is negative consider it as zero)
Control Chart for fraction defectives
0.08 UCL=0.08
sample No
0.07
0.06 Fraction
Fraction defectives

defectives
0.05
0.04
0.03 CL=0.03
0.02
0.01
0 LCL=0.0
1 2 3 4 5 6 7 8
Sample No

As all the points are with in control limits (LCL=0 and UCL=0.08). The process is under
control
Control Chart for Number of defective (np chart)
 This chart records the number of defectives instead of fraction or proportion
defectives
The benefits of np chart are
 It is convenient to construct number of defectives rather than fraction defectives
Control Limits = p-bar = Number of defectives/ Number of pieces inspected
Central Line = CLnp= n(p-bar)
UCL = n(p-bar)+ 3√ n*p-bar(1-p bar)
LCL = n(p-bar) -- 3√ n*p-bar(1-p bar)
Example 1: 8 samples of 100 items were taken whose inspection results are as

Sample No 1 2 3 4 5 6 7 8

No. Defectives 5 3 6 2 7 0 1 2

Total number of defectives = 5+3+6+2+7+0+1+2 = 26

p-bar = total number of defectives / total number of items inspected
= 26/(8*100) = 0.03
Control Limits are
Central Line = CLnp= n*p-bar = 100*0.03 =3
UCL = CLnp+ 3√ n*p-bar(1-p bar)
= 3 + 3√ 100*0.03(1-0.03) = 8.11
LCL = CLnp-- 3√ n*p-bar(1-p bar)
=3 - 3√ 100*0.03(1-0.03) = -2.1 ( As it is negative Consider it as zero)
8
UCL=8
7
Number of defectives

6
5
4
CL=3
3
2
1
LCL=0
0
1 2 3 4 5 6 7 8
Sample No

As all the points are within control limits, the process is in control
Control Chart for Number of Defects (c- chart)
Some of the industrial products are accepted or rejected on the basis of number of defects per
unit and control chart is drawn to exhibit counted data is called c-chart. If the numbers of
defects are within the specifications, the products are accepted otherwise rejected.
Ex: The quality of a glass will be identified by the number of bubbles in it.
Fiber is tested based on the weak spots in the given length.
Control Limits are
Central Line = CLc= C-bar
UCL = CLc+ 3√ c-bar
LCL = CLc -- 3√ c-bar
c-bar = Average number of defects

Ex: 8 fixed lengths of coil windings were inspected. The number of defects in each coil is
given as below
Coil Number 1 2 3 4 5 6 7 8

No. Defectives 2 1 0 5 3 2 4 3

Construct control chart for number of defects and comment of the result
Total number of defects = 2+1+0+5+3+2+4+3= 20
Control Limits are:
Central Line = CLc = c-bar = Total number of defects / Number of coils = 20/8 = 2.5
UCL = CLc+ 3√ c-bar = 2.5 + 3√2.5 = 7.2
LCL = CLc -- 3√ c-bar = 2.5- 3√2.5 = -2.2 (As it is negative consider it as zero)
Control Chart for number of defects (c chart)

8
Number of defectives
7 UCL=7.2
Number of Defectives

6
5
4
3
2
CL=2.5
1
0
1 2 3 4 5 6 7LCL=0.0 8
Coil Number

As all the points are within control limits, the process is in control
ACCEPTANCE SAMPLING
In order to maintain good quality for the final product, it needs pre inspection of raw material
and semi-finished goods. Depending on the type of organization, either 100% item inspection
or sampling inspection will be done.
100% Inspection
In this method every raw material and semi-finished goods will be inspected and the items
which are defective will be rejected. But it is time consuming process.
Advantages:
 With the complete inspection, defective items can be prevented.
 It reduces the number of defective items
 High quality products can be produced
 Needs less service
 Helps in maintaining the good will on the company
Disadvantages
 It is time consuming process
 It is uneconomical and needs more labour
 Handling of large quality is difficult
Ex: 100% inspection of compressors are needed as it is important component in A/C
Acceptance Sampling
100% inspection is always difficult. When the decision regarding acceptance or rejection of
entire lot of products, material or components are taken on the basis of sample and is called
as Acceptance Sampling. In this method, a sample number of items are taken and is tested
and if these are under control, entire lot will be treated as under control.
Advantages:
 Less expensive
 No time consuming
 Sampling plan will always give better results than 100% inspection.
 Small inspection staff is sufficient
 Due to quick inspection, scheduling and delivery becomes fast.
Disadvantages
 Since the conclusion is based on lot, there is a risk of ‘accepting bad lot’ or ‘rejecting
good lot’
 The successes of sampling depends on sample selection, quality characteristics, lot
size etc.,
PRODUCER’S RISK AND CONSUMER RISK
The acceptance or rejection of the sample depends on the type of sample selected. It always
have the chance of accepting bad lot or rejecting good lot. Because of this there are two types
of risks: Consumer risk or producer risk.
Consumer Risk
In the sampling process, if bad lot is accepted, then the defective items will be issued to
consumers.
Producer Risk
In this sampling process, if good lot is rejected, then the producer will lose the lot which
contains less defective items.
The consumers and producers will have always in opposite views. Consumer needs quality
product at less price whereas producer will be in opposite view.
OPERATING CHARACTERISTIC CURVE (OC CURVE)
Acceptance sampling is a statistical measure used in quality control that allows a company
to measure the quality of a batch of products by selecting a specified number of products for
testing.
It is a graph of fraction defective in a lot against the probability of acceptance. The shape of
the curve depends on the following parameters.
 Lot size from which samples are drawn (N)
 Sample size (n)
 Acceptance number (c )
The shape of the OC curve varies with the changes in parameters N, n and c in different
samples. The OC curve is as shown in the following figure

Here AQL (Acceptance Quality Level) is the maximum proportion of defective which
consumers will accept. LTPD (Lot tolerance percent defective) represents the portion of
defectives which are definitely unacceptable to the consumer.
Sampling Procedure
The sampling procedure consists of the following steps
 Decide about lot size: The lot size should be small so that the inspection can be done
economically
 Arrange Homogenous Lot: The lots should be homogenous i.e these should be made
from one machine and one raw material
 Allowable percent defective: In mass production, 100% perfection is not possible
and hence it needs certain percent defective accepted.
Generally the sampling plans are classified into Single sampling plan and Double sampling
plan.
Single sampling Plan
In this only one inspection will be done for accepting or rejecting the sample lot. If the
number of defective items is equal or less than acceptance limit then the lot will be accepted
otherwise it will be rejected.
Let N= lot size; n= Sample size ; c= Acceptance number ; r = c+1= Rejection number
Ex: If Lot size N=4000 and sample size n=75 and acceptance number c=2 then rejection no=
2+1=3
If the number of defectives equal to or greater than 2 then the lot will be rejected.
Procedure
 Collect random sample (n) from the lot to be inspected
 Inspect the sample for required qualities
 If the number of defectives are equal or less than the acceptance number, lot will be
accepted
Double Sampling
In this the acceptance or rejection of the lot will be based on the two samples. If the first
sample is defective, we should not reject the total lot instead of that another sample can be
taken into consideration.
Procedure
 Collect the random sample n1 from the lot and inspect it for the specific
characteristics
 If the number of defective items are less than or equal to acceptance number c1,
accept lot
 If the rejections are more than or equal to rejection number r1, reject the lot
 If the defectives are more than c1 and less than r1, consider the second sample n2
 If the total number of defectives in both the samples are less than or equal to
acceptance number c2 accept the lot
 If the total number of defectives in both the samples is greater than rejection number
r2, reject the lot.
Ex: Let N=4000 and n1=50, n2=50, c1=1, c2=4, r1=3 and r2=8
If the number of defectives are equal to or less than c=1 accept the lot. If the number of
defectives are equal to 3 or greater than 3 (equal to r1=3) reject the lot otherwise accept the
total lot.
TOTAL QUALITY MANAGEMENT (TQM)
TQM is the cost effective system for integrating the continuous quality improvement of the
products and to deliver products and services which ensure customer satisfaction.
Dr. Deming has recommended 14 points as the basis for transformation of any industry will
to change towards quality and productivity. These points are applicable for all the industries
from small to big, manufacturing and servicing etc.,
 Constancy of Purpose: One should always create constancy towards the improvement of
products and services. The organization should always improve their quality constantly in
the preparation products
 New Philosophy: Industries should not accept delays, mistakes, defective materials,
defective workmanship, handling damages etc.
 Cease dependence on mass inspection: Should not run towards the mass production
instead improve quality in the product.
 End Lowest tender Contract: In the organization, the lowest tender contract should be
avoided because in order to have margins the supplier will always reduce the quality.
Hence organization should provide right price for the supplier to have good quality
materials.
 Improvement in Process: In order to have improvement in the quality, organization
must find out problems and prevent them from recurring.
 Institute Training on the Job: Every employee needs new skills to keep up with the
changes in the materials, methods, product design, machinery and service. Hence the
organization should give training on the skills to employees
 Institute Modern methods of Supervision: In any organization immediate action is
needed on defects, maintenance and repair requirements otherwise it may reduce the
production. Hence it needs suitable managers and supervisors.
 Drive Out Fear: Employees should be encouraged to express their views to top
managements freely, so that two way communications will develop and will not have
criticism.
 Breakdown barriers between departments: Inter department rivalry causes material
wastage and effect the production. Hence top managements should treat all the
departments as same.
 Eliminate numerical goals, posters and slogans: The top management should not
provide new goals for the employees without completing the existing one. This may
reduce the concentration and effects the production.
 Eliminate Numerical Targets: More number of targets are the barriers for the good
quality. So avoid it.
 Permit Pride of Workmanship: Every employee from worker to top management should
feel pride of their workmanship
 Encourage Education: Management should provide an opportunity for the employee
self-improvement
 Create management structure so that every employee will be pushed up with promotion.
BENEFITS OF TQM
 Greater customer satisfaction
 Lower cost of product development & manufacturing
 Lower inventory investments
 Reduction in the production time, inspection etc.,
QUALITY CIRCLES
Quality circle is a group of 8 to 10 members of similar areas who come together voluntarily to
solve work related problems like productivity, quality, safety, efficiency and effectiveness
etc.,
If more members are there, more than one quality circle is formed. Members are not forced to
join in the circle.
Ex: If 35 members are there, 4 quality circles will be maintained.
Benefits:
To Organization:
 Improve employee-employer relationship
 Improves morale and team spirits
 Improves productivity by reducing work related errors and thus reduces the cost of
production
 Improves quality of the product
To Employees
 Provide opportunity for the employees to participate in the decision making related to
work problems.
 It develops and improves problem solving capability
 Provides good communication through the employees
 Improves working conditions and working methods
TECHNIQUES OF QUALITY CIRCLE TO SOLVE PROBLEMS
Brain storming: In this group of people discuss about the problem and come up with
imaginative and creative ideas. Brain storming can be used to
 Select problems from working area
 Establishing root cause of the problem
 Finding various alternatives to the problem
 Select the best alternative
Data Collection: For solving the problem, the data relates to the problem is to be collected
from various resources like producers, suppliers and Internet etc.,
Ishikawa diagram: This diagram is also known as “Cause and Effect” diagram or
“Fishbone” diagram. It was developed by Dr. Kaoru Ishikawa

The diagram represents the main and sub causes of the problem in a systematic manner. The
diagram consists of main line indicating the actual problem. It also consists of diagonal lines
representing major causes like material, machine, method etc,. Again the horizontal lines with
arrow marks touching the diagonal lines represent the sub-causes.

Ex: Main causes – Workers; Sub causes --- Careless working, non-loyalty, arrogant behavior
Main Causes- Management; Sub cause—Lack of facilities, over supervision, strict control.
Main Cause – Trade Union; Sub causes—Political Leadership, wants to control
management and workers
BIS & ISO STANDARDS
BIS standards (ISI): The bureau of Indian standards (BIS) is the national standards
Body of India working under Ministry of Consumer Affairs, Food & Public Distribution,
Government of India. The ISI (Indian standards Institution) certification means of quality
standard et by the Indian government. Now BIS is authorized to issue ISI product
certification. For every product in India ISI certification is mandatory. If a foreign company
needs to export products to India, BIS certification is needed
ISO standards: ISO is the acronym for international organization for standardization which is
the standard for 91 countries. For exporting and importing the goods from or to countries,
uniform standards should be used for all the products.
Benefits of Implementation and Certification of ISO
 Improve competitiveness in national as well as international market
 Provides guarantee performance to customers
 Enhance customer’s confidence in product
 Provides proper material handling and storage
 Provides company-wide awareness on quality
 Motivate employees strongly
MARKETING MANAGEMENT
Marketing Management is the process of planning and executing the conception, pricing,
promotion and distribution of goods and services to satisfy the customer.
Marketing is the process of identifying needs of customers and satisfying them effectively
than competitors.

Decide Target Market

Marketing Concept
Understand Customer Needs

Ensure
Coordinated Market

Achieve Profitability through

Customer satisfaction

Activity – Who is a customer --- Needs and Requirements of customers--- Offer a product to
satisfy customer needs ---- Sell a product which will satisfy the customers
Target Market: Every customer may have their own needs and requirements. It is not
possible to produce items which will satisfy all of them. Hence the company should select the
customers for whom they want to satisfy.

Ex: Increased pollution and dust are responsible for hair problems like hair loss, dandruff etc.
Previously shikakai was using as shampoo. But preparing of this is time consuming activity.
Then the manufacturers decided to prepare a readymade shampoo which will reduce the hair
loss, remove dandruff, silky hair etc., Every customer will not have same hair problem. So
they started to develop different shampoos which may soot for everybody.

Customer Needs: Before the production of any product, companies should understand the
needs of customers and satisfy them

Ex: The companies are manufacturing different shampoos with chemicals or with auyurvedic

Coordinating Marketing: For coordinating the marketing and production separate sales
force is needed who look after the products. The sales force department is to take feedback
from the customers and must report the same thing to the finance and R& D department.
Based on the financial budget, the proposal may be accepted or rejected

Ex: Auyurvedic shampoo (Ex: Nyle, Ayur)

Antidandruff shampoo (Ex: Head and Shoulder) .

Profitability: The major aim of the company is to provide customer satisfaction and achieve
profit. Company with different shampoos may get maximum profit.

SELLING CONCEPT MARKETING CONCEPT

 Main focus on products  Main focus on customer needs
 Emphasis on seller needs  Emphasis on customer needs
 Company make product first and then  Company first understand the
try to sell it requirements of the customer and try to
satisfy customer
 Seller decides what product is to be  Buyer decides what product is to be
offered offered
 Selling concentrates on small term  Marketing concentrates on long term
objectives objectives
 Customer is the last link in the business  customer is having highest priority
 Top priority is for increasing the sales  Top priority is to have profit
maximization through customer
volume rather than profit
satisfaction