INDUSTRIAL OWNERSHIP

3.1. INDUSTRIAL OWNERSHIP:
To start a business enterprise the most important thing required is the capital if the capital is provided by single individual, it is known as individual ownership, if it is supplied by two or more persons, if refers to partnership organisaiton. If it is provided by many persons in the form of show to an institute with a legal entity, it is called a joint stick company.
Types of ownership
3.1.1. Single ownership (Sole proprietorship)
Business owned by one man is called single ownership. It is called single ownership when an individual exercises and enjoys these rights in his owner interest.
eg: Printing pears, auto repair shop, wood working plant etc.
Advantages:
Simple in nature and easy to manage. Beginning a business reeds no legal formalities. Owner is free to take quick decision and speedy action.
It is easy to maintain secrets of business. Better employee employee relationship is possible. The ..........takes all the projects-no need to share. More the owner works, more benefit he reaps. It is easy to liquidate this company.
Disadvantages:
Due to limited capital, it is not possible to expand the business, even if it is profitable. Life of single ownership is limited. Employees get no extra benefit from higher benefits small time business men cannot compute with big time business men.
3.1.2.Partnership
When the capital required to finance the business become too big or when the size of the enterprises grows, a single person may wish to associate himself with more persons either for male capital or for some skills and knowledge to run the business. A partnership business is owned by two or more person (up to 20) who share the powers, responsibilities and profit according to an agreement reached among themselves.
Partnership can be formed there verbally or written agreement, but to avoid any problems at a later stage, it is better to have a written agreement. The written agreement in called partnership deed, end has to be registered under the Indian partnership Act, 1932. Thus a partnership deed enjoys legal status and helps is setting day disputes in future between the partners.
General duties of partners
(i) be faithful to each other
(ii) Give true accounts and full information
(iii) Co-operate and accommodate each other
Types of partners:
(i) Active or managing partners:
They take part in the management of activities and formulation of policies. Some tines they get salaries in additon to the normal profits as partakers.
(ii) Sleeping or silent partners:
They do not take active part in the business. They simply get their share of profit from the firm according to their investment. But they are liable fare all the company debts.
(iii) Nominal Partners:
They lend their name to enhance company’s repetition. They do not invest money and do not take any active part in the management but enjoy a small predefined share of the profit. They are not liable for company debts.
Advantages:
Formation is easy. Registration is not compulsory. Adequate capital is available for investment and expansion programs.
Work is divided and responsibility is reduced among partners.
There is less possibility of errors in decisions. Persons having different abilities and skills may come together as partners giving specialization.
Partnership business can be dissolved easily.
Disadvantages:
Each partner has unlimited liability.
It is difficult to maintain the secrets of the company.
Possibility of misunderstanding between partners is high.
A partners cannot being in another person in his place, i.e. he cannot transfer his position and assets to anybody without the consent of all other partners.
Applications:-
For small and medium size business, eg, small scale industries, warehousing, transport services, more production trading in stock market etc.
3.1.3. Joint stock company:
With the advent of factory system and consequent mass production, the individual ownership and partnership firms with their limited capital, short life span and limited managerial skill could not meet the demand of the industry. This resulted in the evolution of joint stock company in England in 1855.
The person who purchase the shares are called share holders and the highest managing body known as Board of directors is elected by the shareholders.
The companies so forced have to be registered under the Indian Companies Act, 1956.
Types of joint stock companies.
(i) Private Limited Company
(ii) Public Limited Company
(i) Private Limited Company : A private limited company is a bigger and improved version of partnership. But here the member of share holders may be upto 50 excluding the employees. The registration of the company is also compulsory according to the Indian Companies Act, 1956.
The shows can be transferred only among the members and general public cannot involved in the purchase of shares. Normally the members of such a company are friends, relatives or employees of some organization. Secret of the business can be maintained to a certain extent in such a company.
A private limited company need not obtain a business commencement certificate from the Registrar of the joint stock companies. If also need not circulate the Balance sheet, profit and loss account etc, among its members. But it has to hold an annual general meeting and place the financial statements in such a meeting.
Application
Companies like Bharati Enterprises, Bata Shoe Company, House of Khodays etc.
(ii) Public Limited Company:- A private limited Company is formed where the capital is collected from general public by issuing Shares usually having a face value like Rs.10, 20, 50,100. The minimum number of persons required to form a public limited company is 7 but but there is no limit. Companies can advertise and attract the general public to buy its shares which are transferable and can be sold to anybody at any price without any price approval. The affairs of the company are managed by a group of members called. Board of directors who are elected by the shareholders. One of the directors usually is selected as the Managing directors who has enormous powers to been the company, but is answerable to the Board of Directors. The board of directors formulates the plans and policies of the company, takes for reaching decision and generally adviser the Managing director on the administrative aspects of the company. The managing director implements these plans and policies and is in charge of the major activities of the company like production, planning and sales. He is responsible for the smooth functioning of the company.
Advantages
Large amount of capital can be raised.
Shares are transferable.
Shareholders liability is limited to the shares they hold.
It create huge employment possibilities.
Risks of losses are spread out to many shareholders.
Share holders are protected by Government restriction on the company on the company.
Business can be run efficiently by employing professionals.
Disadvantages
A great deal of legal formalities are required to start the company.
Some decisions may be delayed because they have to be approved by the Board of directors who do not meet very often.
Labour related problems are difficult to solve.
It is difficult to maintain secrets of business.
The directors may select their own men for high posts and build up their power.
Application
Companies like infosys, TISCO, L & T, Hindustan lever, Reliance are all public limited companies.
Comparison between private and public limited companies
Particulars Private Ltd., Company Public limited Company
Membership Confined to close friends Open to general public
Limits to membership Minimum : 2
Maximum : 50 Minimum : 7
Maximum : No limit
Election of director No need of statutory meeting Statutory meeting
Transfer of shares Cannot be sold Can be resold
Minimum capital Can be started with any current Minimum working capital has to be showed before starting business
Number of directors Minimum : 2 Minimum : 3

3.1.4. Public Sector
If public sector organisation is one which is owned and managed by the state or central government. In some cases the public sector enterprises are also controlled and operated in association with private enterprises. But the ultimate control remains with the government.
Types of government owned or public sector organizations
(i) Government departments:
These are wholly owned and managed by the State or Central Governments and generally provide service to the nation in various areas. They come under their respective ministries.
eg: Indian railways, P & T, JSRO, BARC, et.
(ii) Government industries:
These are wholly managed and owned by the State or Central Governments but are in the manufacturing sector. They generally manufacture and supply products to the various government owned organisations like Indian Railways, Indian Navy, KEB, Indian Army etc.
(iii) Public Sector undertakings:
Public sector undertakings are those industries which are jointly owned by the Central Government and State Government. Normally the majority of the holdings rests with Central government, while the State will be a minor partner.
(iv) Public Corporation:
A public Corporation is exactly like a public sector undertaking in its structure but is normally in the service sector instead of in the manufacturing sector.
eg: Life insurance corporation, Indian finance corporation, Indian Airlines.
Advantages of Public Sector Organizations:
(i) Profit go to the government and the society at large is benefited.
(ii) Government can afford to wait for a long time before profit is realized unlike private sectors.
(iii) Consumer interests are better safeguarded.
(iv) Service to society is the motto, not a profit.
(v) Capital, fuel, raw material, power and transport all easily made available to them.
Disadvantages:
Public Sector can never reach the efficiency of the private sector.
Government officers and politicians interfere too much in the internal affairs of the company.
Promotion in government organisation is normally on Seniority, not on merit. Therefore government servant do not workhard.
Wastage of material and labour is very high.
In complete or corrupt officials may occupy top positions.



Comparison of Private Sector and Public Sector
Sl. No. Private Sector Public Sector
1 Motto is to earn more and more profit. Only the awares are benefited Motto is social services. Profit is given secondary importance society is benefited.
2 It is owned and managed by an individual or group of individuals. It is owned and managed by State or Central government.
3 If causes concentration of wealth in the hands of a few capitalists If leads to equitable distribution of wealth & income
4 Produce more of consumer goods Produces less of consumer goods
5 Workers can be exploited. Consumers can be taken for a ride Workers and Consumers are well protected
6 Private sector doesn’t undertake risky ventures or those having low profit margin. Government has capacity to wait and withstand failures. Hence can undertake risky ventures and start low profit margin industries, for public benefit.
7 Wastage is low Wastage is high
8 Competition may be high in private sector Government has no competition in certain sector, eg: insurance
9 Job security is low Job security is high

3.1.5. Co-operative societies:
Co-operative Society is a form of collective ownership where a number of people associate together for obtaining the necessities of everybody life at a rate less than the market rate.
The members of the Society Supply the capital, manage the business and share all profits and losses. Equality, mutual trust, mutual supervision, self reliance and laid works are the five pillars of a stable and successful co-operative organisation. If continues the features of large partnership as well as some features of joint stock company. This form of ownership was first developed in Germany due to two important reasons.
(i) The poor were exploited through long working hours poor wages, bad working condition etc; by the capitalists who owned large scale industries.
(ii) Too many middlemen between the producers and end users, increased the prices of the products and reduced the profit of the produces.
Types of Co-operative Societies:
(1) Producers Co-operative Society:- They manage their own business right from production upto retail sales their eliminating the middle area. They are their own bosses and they are theirown employees. They put in hand works and learn how to work in team spirit.
eg: Milk and dairy products Co-operative Society in villages.
(2) Consumers Co-operative Society:- In this form of co-operative consumers living in a particular area come together, open a stock, buy goods directly from the manufactures and sell it at wholesale late to its members.
eg: Malleswaram Co-operative Society, Bangalore
(3) Housing Co-operative Society:- In this form of Co-operative, employees of an organisation come together, buys large plots of land at a cheap rate, convert theme into sites, and help its members to build their own houses.
eg: B.E.L. Employees Housing Co-operative Society.
(4) Co-operative Banks:- In this form of co-operative members of the general public come together, contribute capital and start a bank. The bank accepts fixed deposits, extends loan facilities and encourages entrepreneurship among its members.
eg: Sir. M. Visvesvaraya Co-operative bank.
Advantages of Co-operative Societies
Daily needs of life are available at low rates.
It is a democratic form of ownership.
Middlemen are avoided and so both produces and consumers are benefited.
Holding of stocks and blade marketing are eliminated
Once head costs are reduced because of honorary services by the members.
3.1.6. Joint sector
Joint sector refers to the enterprise owned and managed by the private sector and government / public sector undertakings. According to Duff Committee, joint sector is defined in the following way ‘Joint Sector would in one view, include units in which both public and private sector, investments have taken place and where the slates takes an active part in direction and control.
The main objectives and advantages of joint sector are.
(i) To stop the concentration of economic power.
(ii) Social control of industry
(iii) Acceleration of economic development.
(iv) Promotion of mixed economy
(v) Widening the base of entrepreneurship.

3.3. WAGES AND INCENTIVES

Characteristics of good wage payment or incentive system:-
(i) This should guarantee an adequate minimum day wage.
(ii) It must have fee consent of the workers.
(iii) It must reward the worker according to his capacity and merit.
(iv) It must be simple in its working so that may be readily understood by
workers.
(v) It must not involve heavy clerical work and thereby increase the ultimate
cost.
(vi) It should aim at increasing production without affecting quality.
(vii) The system should be fair both to employers and employers.
(viii) Incentive, bonus etc should be payable along with the wages and not pit off for future.
(ix) It should reduce wastage of material and careless use of plants, tools and equipment.
Methods of wage payment:
(a) Time or Day rate system.
(b) Straight piece work rate system.
(c) Combination of time rate and piece rate system.
(d) Incentives.
(e) Profit sharing system.
3.2.1. Time or Day rate system:-
This is the most common system found in practice. Under this system worker is paid an hourly, daily, weekly or monthly rate of wages. Thus his remuneration depends upon the number of hours for which he is employed and not upon the amount of his production.
Advantages:-
(i) The wages are fixed from the very beginning, so there is no confusion about the amount of payment.
(ii) The quality of the work can be achieved very easily.
(iii) No rough handling of machinery.
(iv) There are no difficult calculations to made
(v) The interruptions to works due to breakdown of machinery or some other part of the plant will not wake workers to suffer from the loss of wages.
Disadvantages:-
(i) The employee bears the loss resulting from slow and sluggish workers as they are paid the same wages irrespective of their output.
(ii) Strict supervision is required.
(iii) The system tends to give higher production cost.
(iv) This is not suitable in case of lazy workers.
(v) In this system, efficient workers may also become inefficient by working with inefficient workers.
Suitability:
It is suitable for factory workers such as foreman, time keepers, cleaners, engineers, store keepers, watchmen etc.
3.2.2. Straight piece work rate System:
Under this, a fixed rate of wage is paid for each piece or unit produced. Hence this system is suitable only for the worker repeats a definite operation or produces the same type of products continuously.
Advantages:
(i) This system gives every worker an opportunity to earn more by putting more efforts and at the same time output also increases.
(ii) Simple in its working and they can easily calculate their wages.
(iii) Workers are paid on their merits.
(iv) As supervision will be less, workers for more independent.
(v) Output increases and higher profit can be earned.
Disadvantages:
(i) As workers put maximum effects, their health may reduce
(ii) It will cause an increase the waste of material, because the worker will always try to obtain the maximum output.
(iii) The quality of work may be reduced.
(iv) It may cause over production and may result in losses, if there is limited demand for the product in the market.
(v) Accident due to hasty work will be more.
(vi) Mis utilisation of machinery.
3.2.3. Combination of day rate and piece rate system:
Under this system minimum weekly wages are fixed for all workers, and the minimum weekly wages are paid to him irrespective of his output during the week, provided he has worked for the fell working hours required in a week. If a worker in absent for some length or time during a week, his wages will be deducted proportionately.
The piece works system is combined with the day rate system. A job card of each worker is maintained to show the number of pieces of job completed by the worker during a weeks. Piece work rate of each job is fixed in advance. If the piece work wages earned by a worker are in excess than the time wages, the balance is paid to the worker. If the worker is short of time rate, the worker shall have to make more number of products and cover the last weeks short fall.
Advantages:
It provides incentive to workers.
Overhead costs of production are lowered.
Disadvantages:
If needs check on quality.
The entire benefit of extra payment goes to the worker.
3.2.4. Profit Sharing System:
This system has been introduced by the employees in order to encourage their employees and by means of which the workers receive a share of the profit over and above their normal wages.
Advantages:
(i) Better cooperation may be easily expected.
(ii) Reduction of supervision, results in reduction of supervision cost.
(iii) Non productive labour cost will be reduced.
Disadvantages:
(i) Efficiency of individual is not taken into account, worker, for greater and better output, non financial incentives must also be enforced and worker will also enjoy richer and filler life.
Some of the nonfinancial incentives:
(i) Personal interest and pride in work to be created in workmen.
(ii) Opportunity for quick promotions.
(iii) Opportunity for technical training in other technical organisations as well as abroad.
(iv) Perfect confidence in the management.
(v) Provisions of children welfare, medical aid etc.
(vi) Provisions of canteens.
3.2.5. Methods of financial incentive payment:
(i) Piece rate system:
Under this system piece rate for completion of the job is fixed. If a worker, completes the job earlier, he can save his time, he can make more jobs and whatever the extra money he gets for the extra work, wholly goes to him. The employee will also be benefited by the savings in overheads for the extra output.
(ii) Cent per cent premium:
In this the standard time for completion of the job is fixed and its rate of completion during this period is also fixed. Now the worker completes the job in time is not given any incentive, but those who completes the job earlier, get full payment for the time saved.
(iii) Halsey Premium Plan:
In this system, an hourly rate or daily rate is guaranteed to the workers. A standard time is also fixed for the performance of each job. If a worker saved the standard time, then he will be paid hourly rate or daily rate plus 33.33% of time saved as incentive.
In this plan, incentive goes on increasing as the output increases. Here a part of the saving goes to the worker and remaining part of the saving to the employee.
(iv) Will premium Plan:
This is similar to Halsey premium plan, but in this worker gets upto 50% of his extra output along with standard day rate.
(v) Bedaux Premium Plan:
This is also like Halsey and Will premium plans. But in this workers are given at the rate of 75% of their extra output along with standard day rate.
(vi) Rowan Premium Plan:
In this, worker is again guaranteed his daily or hourly rate, A standard time is also fixed for job. /a premium is given to workers those who saved the standard time.

In this system, the increases upto certain output but decreases in the same ratio afterwards. The worker gets maximum incentive, when he completes the tasks in half the standard time.
(vii) Emerson efficiency plan:
In this systems, premium is given to those workers who attain more than of the standard output. The standard output for the day is so decided that the average worker an complete at least of the standard output. A basic day rate is fixed irrespective of their capabilities and every worker gets atleast his standard output.
If a worker performs upto 60% of the standard output, he gets no incentive.
If a worker performs upto 80% of the standard output, he gets 10% of the day wages as incentive.
Upto 100% – 20% of the day wages as incentive.
Upto 120% – 40% of the day wages as incentive
(viii) Gantt’s task and bonus system:
In this system, a careful study of the job is made and from that study best conditions for the performance of the job are determined. On the basis of these performances standard output to a given time is set. Now if a worker completes the job in a given standard time, he receives bonus equals to 25% of the time taken. When a worker fails to produce the required output he only gets his time rate without any bonus.
(ix) Merric’s multiple piece rate system:
Merric divided the workers into three categories, namely, beginners, averages and first class workers. The higher rates are paid to those who reach the standard, second rates for those who reach 80% of the standard, and a third rate is below the 80% output.
Advantages of Incentive System:
(i) Workers are encouraged to increase production to earn more.
(ii) Workers day wages are guaranteed to all workers.
(iii) Promotes good relations between employers and employers.
(iv) Cost of supervision are reduced, as workers themselves are motivated to work hard and improve performance.
(v) A spirit of mutual co-operation and team work is created among the workers.
(vi) Help to improve discipline and good relations.
(vii) Employers are encouraged to become innovative.
3.2.6. Fringe benefits:
In addition to pay, certain benefits are also provided to all the employers of organisation. Fringe benefits do not motivate the workers, as these are offered to all the employees. These help in maintaining cordial atmosphere in the organisation.
They are classified into two categories.
(i) Legally required benefits:
a) Social security: Insurance, PF, gratuity
b) Workers compensation on accident, retrenchment etc.
c) Holidays and rest periods as per factory act.
(ii) Voluntary benefits provided by the employee
a) Additional rest periods and holidays with pay.
b) Leave including sick leaves
c) Pension plans.
d) Health insurance, medical benefits
e) Housing
f) Cultural activities. (g) Educational facilities
h) Recreational activities
(iii) The distribution will normally take place only once a year, the worker may lose interest in it.
(iv) If the efficient workers are not selected as group leaders, the efficiency of the whole group suffers.
3.2.7. Incentives:
Incentives are referred to as performance linked compensation paid to improve motivation and productivity of the employer.
Incentive is a kind of monetary reward which is closely related to the performance of a worker, resetting increasing in wages corresponding to an increase in output.
Types of incentives:
Incentives are of two types.
(i) Financial incentives.
(ii) Nonfinancial incentives.
Financial Incentives:
These are extra payment given to workers in addition to their normal wages. For examples, it an employer friends that he will be earning an extra profit of Rs. 25, if a particular work is finished in 5 hours less than the prescribed time. Now if the workman is promised an extra payment of Rs. 10. This extra payment is called incentive.
Non-Financial Incentives:
The financial incentives must be supported by the nonfinancial incentives, since only cash wages cannot help in solving the problems of industrial productivity. Inorder to create interest in a
3.2.8. Bonus system:
Bonus system is used in continuous process and assembly lines, a number of workers are required to complete the job and is not practicable to assess the effort of individual worker. So the bones system is necessary to retain the incentive payment idea.
This bonus is given to workers on the basis of profits, production or productivity.
The method of payments are of two types.
(1) Collective bonus system:
In some big industries, a collective bonus of two of more months extra salary is given to all workers, if the profits of that business year is good.
If there are good profits, the bonus will be declared after six months or at the end of the year. That amount will be payable to workers at the time of declaration.
(2) Group bonus system:
Here, each department or section is offered a separate fixed bonus. The bonus is divided between the foremen and workers. The bonus is given to foremen also, because he is responsible for increasing the output and reducing the wastage.
Bonus act, September, 1965.
It states that, every factory employing 20 or more workers must give a minimum bonus of 8.33% of the annual wages in inclusive of dearness allowance or Rs. 80 to all workers, irrespective of if has made some profit or not.
It is applicable to all factories.
Once a factory is covered by this act, it will continue do so, even if there is reduction in the workers below 20.
Workers in newly established organisations will not be eligible for for bonus for the first five years.
Minimum bonus is 8.33% of wages inclusive of dearness allowance or Rs. 80 and a maximum is 20%.
After deducting all charges, 60% of the net profit is credited to bonus fund.
If any year net profit exceeds the maximum bonus excess amount will be carried forward to the next years bonus fund. Similarly when in any year, there are no profit, the defect will be set off in the following year.
Advantages :
It ensures stability of workman. At any time the an year, worker learning the job, shall have to mass some of the bonus.
Disadvantages:
No distinction between efficient and ordinary worker because same amount is given to all workers.
No immediate incentive to workers.
Sometimes a good worker may receive only a small amount of bonus in comparison to his efforts.
3.2.9.Total Quality Management:
According to this concept quality is not the job of quality control department only but other department like sales, procurement, material handling, accounting industrial relations, design, production, for casting, marketing, stores, after sales service have also to contribute substantially. That means quality is the responsibility of all the employees, output of every department and every employee.
Cleanliness, orderliness, pentalilties, customer service, standardization of works and continuous effects for their improvement are part of TQM.
Features
Voluntary participation of work people. Needs of customers are constantly monitored to improve the products and process to meet their requirements.
Advantages of TQM:
Greater customer satisfaction fever defaults, less waste, reduced costs, improved profitability, increased productivity customer satisfaction is the most important of TQM. Customer may be external or interval TQM process involves.
TQM process involves
Effective decision making
Problem solving
Integration of quality planning. It provides all an opportunity to all employees, to directly participate in their work and take decision concerning their works.
TQM is an approach of managing for total quality, effectiveness and competitiveness and involving each and every activity and person at all levels in the orgnisation.
Requirements of TQM are
(i) Sound foundation
Philosophy, policy, culture, leadership and commitment.
(ii) Sound infrastructure:
Organisation, systems, procedure, manuals, customer involvement, training, education total employees involvement.
(iii) Use of specific tools and techniques.
Aims of TQM: Conformance to customer requirements prevention of producing bad quality, measurement of cost of quality. Produce goods and services of good quality consistently.
To predict what the customer will want one year or 5 year from now.
Ways for TQM
(i) Adopt the policy not a allow defects to occur.
(ii) Improving production and quality should be a continuous process.
More quality improves, faster will be inversed in sales, because of inverted customer satisfactory Quality repetition arts as a major element in advertising and reduce the money required on advertisement.



Sales


Quality Improvement
In fig (1), achieving quality is expensive. Defects are reduced over time only by increasing cost through extensive inspection, checking and progress chasing. Most effect concentrated on correcting failure.
In fig (2) after certain time, the cost and defects both will be minimal. Using statistical quality control methods to control the quality of products. All employees should be trained, retrained. Average refresher course. Provide proper tools to all employees. Proper communication system. Encourage productivity. Encourage effective co-ordination between departments.
Adopt customer orientation, not production. To achieve increase in profit P though increased sales a significant increase in operating costs A. While the some profit P can be increased through quality improvement by increasing operating cost B, which diminishes through time.
3.2.10.Management by objectives:
This concept was first proposed by Peter Drucker in 1954 and was improved by several others. They all felt that include to obtain the best results, the management must provide objectives from the top level management to bottom level management. The performance of all the employees are measured against their achievement off these goals, so it as who called management by results or it is a result oriented approach.
The process of MBO consists of the following steps
(1) Establish the objectives of the whole organisatin
(2) Select an appropriate orgnisational structure.
(3) Set goals fare each department
(4) Set goals to subordinates and juniors.
(5) The performance of each employee is measured against the end results.
(6) The performance of each individual is appraised by his immediate
(7) Corrective measures are taken in case of deviation at any level.
Advantages of MBO:
(i) It is based on end results
(ii) Better relationship
(iii) Co-ordination
(iv) It gives meaning and direction to people in an organisation
(v) It helps in identifying the weak links in the organisation.
(vi) Reduces wastage: It prevents wasted efforts and unnecessary expenditures. Disadvantages.
(i) Measuring the performance of individuals only with respect to the end results makes MBO too rigid and without human values.
(ii) Employees always feel insecure because they are evaluated always against the end results.