Managing Productivity

“Productivity is not villain – It is the hero”

-Business week, Nov-17, 2003
 Introduction
• US average individual working hours per year reduced from 3000 hours
to 1800 hours while output increased several times
• Improving productivity means reducing resources
• Higher productivity increases competitive advantage also earn higher
than average returns and command long-term success.
• Improve the productivity the organisations may use strategies of cost
leadership and product differentiation.
What is productivity?
• Productivity can be defined as the application of the various
resources (inputs) of an organization, industry or country,
in order to achieve certain planned and desired results
(outputs).
• Productivity is the ratio of output to input
Output
Productivity= Input
Example: A company spends 5days to produce 100 units has
the productivity of 20 units.
 Productivity improvement
• Addressing methods and implications:
• high labour turnover – can be tackled by introducing a loyalty bonus may be
effective in the short term.
• Almost certainly, however, the longer-term effectiveness is in doubt.
• We need to do
– understand the reasons for the current high levels of turnover and investigate them until
the underlying problem is solved.
– the management style and culture of the organization,
– problems with one or more key supervisors,
– dissatisfaction with the working conditions - or any one of a number of causes.

• Identify the exact reasons and solve permanently

 Productivity measurement

• It helps in productivity improvement programme.

• It helps an organization to formulate clear goals and targets with regard to
productivity and to identify problem areas of the organization.
• It should specify the desired outputs and output levels, and work through
to the required inputs and input levels.
• Key, relevant performance indicators such as delivery times, quality, lead
times, equipment utilization and so on may be part of the overall
measurement programme.
Productivity measurement
• A measure of productivity can be either operational or a
financial productivity measure
• Operational productivity
= Output (units)/ input (units)
Example: Number of tables made from a sheet of plywood
• Financial Productivity
= Output (Rupees)/ input (Rupees)
Example: The amount of sale of tables/plywood
Productivity measurement
• A productivity measure may include all production factors or focus
on a single factor or part of the production factors that the firm uses
in manufacturing.
• A productivity measure that focuses on the relationship between
one or part of the input factors and the output attained is a partial
productivity measure.
• The following are the example for partial productivity
– Direct materials yield (output/units of materials)
– Workforce productivity such as output per labour hour or output per person
employed.
– Process (or activity) productivity such as output per machine-hours or
output per kilowatt-hour
Measuring productivity
• A productivity measure that includes all input resources used in
production is a total productivity.
• Example: The cost per table produced in rupees is a total
productivity measure because the denominator, manufacturing
costs, includes all manufacturing costs incurred to make the tables
• Productivity
– Partial productivity (Partial operational productivity + Partial financial
productivity)
– Total productivity (financial productivity)
Partial Productivity
• Compute and interpret operational and financial
productivity
• Partial productivity = Number of units or value of output
manufactured/ Number of units or cost of single or part of
the input resources
– Denominator is the number or cost of a manufacturing factor such
as direct- material, labour hours, or selected input resources; the
numerator is the number of units or the value of the goods or
services produced.
Making the change- Productivity strategy

• Share knowledge about up-to-date activity and results - including

background knowledge about changes in products, processes,
services and systems which might be outside the direct scope of the
programme.
• This helps the workers appreciate the role they play in making the
organization successful.