Productivity is an overall measure of the ability to produce a good or service. More specifically, productivity is the measure of how specified resources are managed to accomplish timely objectives as stated in terms of quantity and quality. Productivity may also be defined as an index that measures output (goods and services) relative to the input (labor, materials, energy, etc., used to produce the output). As such, it can be expressed as:
Hence, there are two major ways to increase productivity: increase the numerator (output) or decrease the denominator (input). Of course, a similar effect would be seen if both input and output increased, but output increased faster than input; or if input and output decreased, but input decreased faster than output.
Organizations have many options for use of this formula, labor productivity, machine productivity, capital productivity, energy productivity, and so on. A productivity ratio may be computed for a single operation, a department, a facility, an organization, or even an entire country.
Productivity is an objective concept. As an objective concept it can be measured, ideally against a universal standard. As such, organizations can monitor productivity for strategic reasons such as corporate planning, organization improvement, or comparison to competitors. It can also be used for tactical reasons such as project control or controlling performance to budget.
Productivity is also a scientific concept, and hence can be logically defined and empirically observed. It can also be measured in quantitative terms, which qualifies it as a variable. Therefore, it can be defined and measured in absolute or relative terms. However, an absolute definition of productivity is not very useful; it is much more useful as a concept dealing with relative productivity or as a productivity factor.
FACTORS AFFECTING PRODUCTIVITY
Factors influencing productivity can be classified broadly into two categories:
- Controllable (or internal) factors
- Un-controllable (or external) factors.
Controllable For Internal Factors
(I) Product factor: In terms of productivity means the extent to which the product meets output requirements product is judged by its usefulness. The cost benefit factor of a product can be enhanced by increasing the benefit at the same cost or by reducing cost for the same benefit.
(II) Plant and equipment: These play a prominent role in enhancing the productivity. The increased availability of the plant through proper maintenance and reduction of idle time increases the productivity. Productivity can be increased by paying proper attention to utilization, age, modernization, cost, investments etc.
(III) Technology: Innovative and latest technology improves productivity to a greater extent. Automation and information technology helps to achieve improvements in material handling, storage, communication system and quality control. The various aspects of technology factors to be considered are:
- Size and capacity of the plant,
- Timely supply and quality of inputs,
- Production planning and control,
- Repairs and maintenance,
- Waste reduction, and
- Efficient material handling system.
(IV) Material and energy: Efforts to reduce materials and energy consumption brings about considerable improvement in productivity.
- Selection of quality material and right material.
- Control of wastage and scrap.
- Effective stock control.
- Development of sources of supply.
- Optimum energy utilization and energy savings.
(V) Human factors: Productivity is basically dependent upon human competence and skill. Ability to work effectively is governed by various factors such as education, training, experience aptitude etc., of the employees. Motivation of employees will influence productivity.
(VI) Work methods: Improving the ways in which the work is done (methods) improves productivity, work study and industrial engineering techniques and training are the areas which improve the work methods, which in term enhance the productivity.
(VII) Management style: This influence the organizational design, communication in organization, policy and procedures. A flexible and dynamic management style is a better approach to achieve higher productivity.
Uncontrollable (Or) External Factors
(I) Structural adjustments: Structural adjustments include both economic and social changes. Economic changes that influence significantly are:
- Shift in employment from agriculture to manufacturing industry,
- Import of technology, and
- Industrial competitiveness.
(II) Natural resources: Manpower, land and raw materials are vital to the productivity improvement.
(III) Government and infrastructure: Government policies and program are significant to productivity practices of government agencies, transport and communication power, fiscal policies (interest rates, taxes) influence productivity to the greater extent.
“Work study is a generic term for those techniques, method study and work measurement which are used in the examination of human work in all its contexts. And which lead systematically to the investigation of all the factors which affect the efficiency and economy of the situation being reviewed, in order to effect improvement.”
Advantages of Work Study
- It helps to achieve the smooth production flow with minimum interruptions.
- It helps to reduce the cost of the product by eliminating waste and unnecessary operations.
- Better worker-management relations.
- Meets the delivery commitment.
- Reduction in rejections and scrap and higher utilization of resources of the organization.
- Helps to achieve better working conditions.
- Better workplace layout.
- Improves upon the existing process or methods and helps in standardization and simplification.
- Helps to establish the standard time for an operation or job which has got application in manpower planning, production planning.
- Total Productivity Measure (TPM)
It is based on all the inputs. The model can be applied to any manufacturing organization or service company.
Total productivity =Total tangible output +Total tangible input
Total tangible output = Value of finished goods produced + Value of partial units produced + Dividends from securities + Interest+ Other income
Total tangible input = Value of (human + material + capital + energy+ other inputs) used. The word tangible here refers to measurable.
The output of the firm as well as the inputs must be expressed in a common measurement unit. The best way is to express them in rupee value.
- Partial Productivity Measures (PPM)
Depending upon the individual input partial productivity measures are expressed as
Partial productivity =Total output% Individual input
Labor productivity =Total output%Labour input (in terms of man hours)
Capital productivity =Total output% Capital input
Material productivity =Total output% Material input
Energy productivity =Total output% Energy input
One of the major disadvantages of partial productivity measures is that there is an over emphasis on one input factor to the extent that other input are underestimated or even ignored.