CASE STUDY NO.

2: SETTING WORK STANDARD FOR CLERICAL SERVICE ORIENTATED ENVIRONMENT

Sivakumar Nadaraja (SP21087)

Master in Engineering Management

Universiti Tenaga Nasional

Operation Management (MGTM623)

September 24, 2010

Dr. Daram
Executive Summary

This paper presents a methodology of setting standard for clerical orientated environment.

As we know, measuring performance clerical staffs is very difficult task to be done. Never the less

performance needed to be measure in order to provide a control mechanism for manager to keep

track on staffs and work on improving the productivity. In this case study the particular clerical

system presented was preparation of invoice. The number of invoices sets produced by the system

was recorded for every working hour of each day. Following this several assumptions were made

prior to attempting to set standard. This is done in order to be sensitive to the clerical working

environment and to serve as a justification for the finding. Statistical approach was chosen for data

analysis particularly descriptive statistics due to the simplicity to summarize and describe a

collection of data. Using this method the standard of 42 invoices per hour was derived. Form the

derived standards a measurement of efficiency of the current system was conducted. The finding of

the efficiency was more than 70% and less than 85%. This efficiency was one of the justifications for

the standard set because if the efficiencies were relatively high, then the standards is too

comfortable for the system and does not serve its purpose which is ultimately to increase

productivity.

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Table of Contents

EXECUTIVE SUMMARY I

LIST OF TABLES II

LIST OF FIGURES II

1.0 INTRODUCTION 1

1.1 Purpose 1

1.2 Scope 1

1.3 Method 1

1.4 Assumptions 1

1.6 Background 2

2.0 FINDINGS 3

2.1 Derivation of Standard 3

2.2 Measure of Efficiency & Effectiveness 5

3.0 DISCUSSION 6

3.1 Justification of the standard set 6

3.2 Comment on Efficiency 7

4.0 CONCLUSION 8

List of Tables
Table 1: Number of invoice sets produces by the system in every working hour of each day. 3
Table 2: Histogram of data set 3
Table 3: Calculation of efficiency & effectiveness. 5

List of Figures
Figure 1: Distribution pattern of the data set compared to normal distribution with the same mean and
standard deviation. 4
Figure 2: Total number of invoices per hour for the week 6
Figure 3: Efficiency & Effectiveness 7

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1.0 INTRODUCTION

1.1 Purpose

The purpose of this report was to measure performance in a clerical service orientated environment

and to derive a standard.

1.2 Scope

While deriving standards it was important to consider their suitability for those operating the system

and reasonable in terms of cost

1.3 Method

The method chosen for setting standard was based on experienced workers standard. The concept

of this standard is to determine the number of invoice 68% of the population could do and chose a

standard higher than that. The standard set then will be used to calculate the efficiency. The

calculated efficiency should be preferably lesser than 85% to ensure the standards set is fair and

reasonable to both workers and cost terms.

1.4 Assumptions

i. Data provided is an average from a group of workers preparing invoice.

ii. Invoice is done using computer system.
iii. The number of inputs to invoice is limited (Ex. Per product per invoice).
iv. System will generate the description & unit cost, once part number for the product is
entered and to complete the invoice only quantity needed to be filled.
v. Workers are subjected to only preparing invoice duly and no other administrative tasks.
vi. Lunch time is divided to 2 sessions (12pm till 1pm & 1pm till 2pm), with staffs divided
equally per session.
vii. Allowance of 1 hour given for lunch break, personal needs, & rejection.

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1.6 Background

Measuring performance is the best way to make improvement. In order to be able to make

improvements we must be able to measure the process in a quantitative manner. Quite simply, if we

don't measure, we don't really know what's going on. Psychologically, most people believe they're

performing in the upper 25% of performers until a measurement teaches them that this belief is not

true.

Measuring manufacturing process is very easily done because there always a quantitative

variable involved such as cost, or number of unit done per hour and so on. Where else in the clerical

service orientated environment it is often hard to measure and therefore even difficult to properly

control clerical work. Secondly the idea of measuring and controlling diverse activities to be found in

the office is to doubt the staffs and could result in low morale and motivation. This would greatly

reduce productivity.

Even though it is difficult to measure clerical staffs, management and staff together could

come up with a mutual agreement which could benefit to both if a methodology of measuring, able

to provide relevant information about productivity of staffs. Benchmarking is one form of easy

measurement. We measure what people do, find out who does it best and then extract the lessons

from that. Standards can be set according to benchmarking data then.

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2.0 Findings

2.1 Derivation of Standard

From the below table, the data set can be represented by a normal distribution curve. Then base on

the pattern of the curve, the standards could be identified.

Table 1: Number of invoice sets produces by the system in every working hour of each day.

TIME FOR THE DAY 9-10 10-11 11-12 12-1 1-2 2-3 3-4 4-5 TOTAL
MON 35 36 33 21 19 33 31 29 237
TUE 34 37 34 19 18 34 32 28 236
WED 34 36 35 20 19 35 33 26 238
THU 33 35 34 19 19 33 32 26 231
FRI 35 35 30 19 17 30 27 23 216
TOTAL 171 179 166 98 92 165 155 132 1158

With the use of Microsoft Excel 2007, the histogram and bell curve for the above population of data

was plotted based on the calculated mean and standard deviation.


Mean of the data =
∑   
    
 28.95

Standard deviation =   ∑!"
      1  6.555288

Table 2: Histogram of data set

HISTOGRAM (normal ) HISTOGRAM(data)

Bin Frequency Bin Frequency
9.284137348 3 9.284137 0
15.8394249 51 15.83942 0
22.39471245 276 22.39471 10
28.95 683 28.95 5
35.50528755 682 35.50529 22
42.0605751 253 42.06058 3
48.61586265 50 48.61586 0
More 2 More 0

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 BELL CURVE OF DATA
800 25
700
20
600
500 15
400
300 10

200
5
100
0 0
0 1 2 3 4 5 6 7 8 9

Normal Distribution Curve Estimated Curve Proposed Shift

Current Mean Data Distribution Curve

Figure 1: Distribution pattern of the data set compared to normal distribution with the same mean and standard
deviation.

Based on the mean and standard deviation obtained, the following curves were plotted. The

blue line represents the normal distribution curve with the said mean and standard deviation; where

else the red line represents the curve of the data sets in the table.

From the plot it can be seen the plot of the data sets is skewed to the right. This means that

most of the workers are able to produce more than the average of 29 invoices. Also from the

histogram it can be noticed that the number of frequency is the highest, which is 22 for the bin

range of 29 to 30 invoices. Therefore based on these observations I would set the standard to be 42

invoices per hour.

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2.2 Measure of Efficiency & Effectiveness

From the standard derived, the efficiency and the effectiveness of the group is measured.

Efficiency (η) is the ratio of actual output attained to the standard expected output. Therefore,

efficiency indicates a measure of how well the resources are utilized to accomplish a target or result.

Effectiveness (Ø) is the degree of accomplishing the objectives. Therefore, effectiveness indicates a

measure of how well a set of targets or results are accomplished.

Table 3: Calculation of efficiency & effectiveness.

Days Total Available Applied Earned Efficiency, Effectiveness,

Invoice Hours Hours Hours η Ø
Mon 237 8.00 7.00 5.71 82% 71%
Tue 236 8.00 7.00 5.69 81% 71%
Wed 238 8.00 7.00 5.73 82% 72%
Thu 231 8.00 7.00 5.57 80% 70%
Fri 216 8.00 7.00 5.20 74% 65%
** Allowance of 1 hour given for lunch break, personal needs, & rejection.

Available hours – Total number of hours an employee is available or better known as working hours.

Applied Hours – Total number of hours the employee is dedicated to getting the job done or

$%%&'
( ) *  $+$'$ &
) *  $&& ,$-
 ) * .'+


Earned Hours – Number of outputs produced divided by the standard.

$
( ) *  
  % (-/ % (-
(  */$($( *
/   /)
% (-/

0'-'
-1, η  earned hours  applied hours @ 100%

0
-/'+

**, Ø  earned hours  available hours @ 100%

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3.0 Discussion

3.1 Justification of the standard set

The standard of 42 invoices per hour was derived from properly studying the current

behavior of the workers according to the available data. Figure two and figure three below shows a

very predictable pattern that is mostly found in an office environment. For instance, from figure two

it can be seen that the lowest number of outputs according to the hour of the days are, from 12pm

to 2pm. This is so because, following the assumption, there are two groups for lunch. The output is

around 19 to 20 invoice for these hours each, which corresponds as almost half of the standards.

Therefore the standards set are very much fair for those operating the system because if half the

group is comfortable producing half the invoice for lunch hour, then it is pretty much attainable by

all. Moreover this is the period of the day staffs are least motivated and will be looking forward for

the break. Under this low morale situation, if they are able to produce at least half of the standard, I

believe that the standard set would not be a burden to the workers.

TOTAL NUMBER OF INVOICE PRODUCED

PER HOUR PER WEEK
200 40
Total number of invoice

150 30

100 20

50 10

0 0
Week

9- 10 10- 11 11- 12 12- 1 1- 2

2- 3 3- 4 4- 5 Average

Figure 2: Total number of invoices per hour for the week

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 As far as cost is concern, the more productive the workers are the higher the profit

margin because unit cost will be lower. This theory could be applied to this case study as well. Since

we are imposing a standard of 42 invoices per hour, the staffs need to achieve this in order to meet

their key performance index (KPI). The concern of staffs becoming demoralized due to having their

performance measured could be traded off by having a good reward and remuneration scheme.

3.2 Comment on Efficiency

The standard was set such that the efficiency of the workers is below 85% and above 70%.

This lower and upper limit is to allow a wider variation workers performance. Once the efficiency of

the workers reached 85%, it is time for the standard to go higher, so that the workers are within this

band gap again. This will ensure continuous improvement of the worker’s performance and yield a

higher productivity rate. From figure three, it can be seen a linear declination of efficiency and thus

effectiveness from Monday till Friday. This pattern is such because generally workers are less

motivated as it gets nearer to Friday. Therefore the standard set is able to push this efficiency levels

higher progressively as workers get used to the new standard system.

Efficiency & Effectiveness Of The

Standard Set
90%
85% Efficiency

80%
81% 80% 81%
75% 79% Effectiveness

70% 73%
71% 70% 71%
65% 69% Optimum Efficiency
64% before new standard
60%
change
Mon Tue Wed Thu Fri

Figure 3: Efficiency & Effectiveness

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4.0 Conclusion

The above study shows the methodology for setting standards for clerical service orientated

environment, whereby the task of the workers were to produce invoices. By taking statistical

approach, the pattern of distribution of the data set was able to provide sufficient information to set

a standard. As a conclusion, I believe that the standard of 42 invoices per hour will be comfortable to

the workers and very much be reasonable in terms of cost. Never the less this would also greatly

benefit the managers to track the performance of their workers and departments. The

implementation of the standards too would provide relevant information to manager for making

decision when it comes to appraisal of the workers. This would be very fair system for both the

management and staffs.