Wednesday, December 17, 2008

(34).---TYPES OF PERFORMANCE STANDARD.

Types Of Performance Standard.
The setting of standards raises the problem of how demanding the standard should be, Should the standard represent a perfect oerformance or an easily attainable performance.There are four types of standard.
(1)-Ideal Standard.
These are based on perfect operating conditions: no wastage , no spoilage , no inefficiencies , no idle time , no breakdowns. Variances from ideal standards are useful for pinpointing areas where a close examination may result in large savings , but they are likely to have an for unfavourable motivational impact because reporter variances will always be adverse. Employees will often feell that the goals are unattainable & not works so hard.
(2)-Attainable Standard.
These are based on the hope that a standard amount of work will be carried out efficiently, machines properly operated or materials properly used , some allowance is made for wastage & inefficiencies, If well-set they provied a useful psychological incentive by giving employees a realistic , but challenging target of efficiency.The consent & co-operation of employees involved in improving the standard are required.
(3)-Current Standard.
There are standard based on current working conditions (current wastage , current inefficiencies).The disadvantage of current standards is that they do not attempt to improve on current levels of efficiency.
(4)-Basic Standard.
These are standard which are kept unaltered over a long period of time , & may be out of date they are used to show changes in efficiency or performance over a long period of time basic standards are perhaps the least useful & least common type of standard in use.
Revision Of Standards.
In practice standard costs are usually revised once a year to allow for the new overheads budget , inflation in prices & wage rate , & any changes in expected efficiency of material usage , labour or machinery.
Some argue that standard should be revised as soon as there is any change in the basis upon which they were set. Clearly , for example , if a standard is based on the cost of a material that is no longer available or the use of equipment which has been replaced, it is meaningless to conpare actual performance using the new material & equipment with the old standard.
Frequent changes in standard can cause problems.
  • They may become ineffective as motivators & measures of performance , since it may be perceived that target setters are constantly "moving the goal posts".
  • The administrative effort may be too time consuming.
The most suitable approach would therefore appear to be a policy of revision the standards whenever changes of a permanent & reasonably long-term nature occur but not in response to temporary "blips" in price of efficiency.

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