POM –PART 2
Unit 1 : Productivity and computation
• Productivity in this context means a a measure of the quantity of output per
unit of input . The input could be man hours spent or the amount of
materials consumeed. [ in number , kg , litre , Rs etc . ]
• Basically productivity is known as the ratio between the output and the input .
• Productivity = amount of output / amount of input
• Since in earlier days of industrial management , it was considered very critical
to control the labourers , the term productivity means labour productivity .
• The time study , method study , , incentive schemes , and the like were seen
as ways of manageing or controlling the labour .
• This is not to say that in the recent times human productivity has lost its
importance . Human input is major input in to any business , management ,
government and society
• Managemnent is after all by the people , and of the people .
Ratios of labour productivity measurement
• Worker’s productivity = [Workers output expressed in standard
hours ]/ number of hours [ man hours] worked by the workers
• A worker’s or a group of worker’s productivity = [Number of units of
output ]/[ number of days taken]
• Another example of labour productivity = [Number of toilets cleaned in
shift]/[number of cleaners]
• A group of worker’s productivity = Tonnes [ or kg] of output/[ number
of workers]
• Labour productivity = Worker’s output expressed in rupee value
/workers’ salaries and wage in Rupees
• Productivity represents the efficiency of the labour . These indices show
how efficiently is the labour being utilised . Labour productivity would
be looked at the same way the machinery productivity is viewed.
Ratios of labour productivity [continued]
• Worker’s productivity = [ worker’s output expressed in
standard hours]/number of hours (man-hours) worked by
the workers
• Group of worker’s productivity = number of units of
output/number of days taken
• Another example of labour productivity = number of toilets
cleaned ina shift / number of cleaners
• Labour productivity = worker’s output expressed in rupee
value /[worker’s salaries and wages in rupees ]
• Productivity , represents the efficieny of the labour
• These are the engineering indices of the labour productivity.
What is output ?
• While the productivity is seen as the ratio of output to input , it needs
to be understood as to what constitutes the numerator ‘output’.
• Table –
Output Year 1996-97 Year 1997-98
No. of tyres 16000 20000
produced
Life of a tyre in km 20000 15000
Price of a tyre in 2000 1600
rupees
• The output in the year 1996-97 was 320 million tyres – km as against only
300 million tyre-km in 1997-98. so the productivity , has gone down by
[320-300]/300*100=6.66%. If the output is viewed in monetary terms ,
then there is no change in the output and it is constant at Rs 32 million.
Measures to increase the productivity
• Be clear about your organisation’s mission
• Be customer oriented
• Be pro-active and chart out organization’s direction to provide services to
customer
• Have goals and values of common consent
• Empower the people involved
• Encourage creativity
• Express care and concern for all employees
• Make value based decisions
• Assign right people fro right job
• Learn from failures a and allow other to learn from experimentation and failures
• Keep things simple , avoid complexity and confusion
• Make the organisation as flexible as possible .
• Make the organization as much learning organisation as possible .
Multi-factor productivity
• It is right to say that the productivity measure should
represent or reflect the overall capability and not focus on only
one set of costs . The reason being that with the single factor
productivity measures , it is increase the productivity of one
factor by replacing it with another.
• Labour , capital and materials are all potential substitutes for
each other . Thus in a company where the Just in Time system
is improperly implemented , we may find that while the
inventory turnover is high , the fixed asset turnover is low
thus , in case of this company , the inventory is substituted by
capital.
Total factor productivity [ TFP]
• Total factor productivity [ TFP] measure could be ..
• TFP= Production at standard price / [labour + materials +
overhead + k( capital invested )] where labour, materials
overhead and capital constitute all the input factors . ‘k’ is a
fraction taking values below 1.0.
• Eg. If 180 pieces are produced ata standard price of rs 500
each, with a labour cost of Rs 4000, a material cost of Rs
20000, and overhead cost of Rs 12000, the multi-factor
productivity would be –
• Productivity = Quantity at standard price /[labour cost +
material cost + overhead]
• = 90000 INR /36000 INR = 2.5
Capital productivity
• Capital productivity = value added / capital
employed
• Another ratio of capital productivity = [total
sales in rupees] / [depreciation of capital
assets]
• Managerial productivity = labour efficiency =
standard hours / actual hours
Criteria for selection of a measure of
productivity
• The manager selects a measure that captures
something that he / she feels is important to
the competitiveness of the company . For
example , in a service industry , the quality of
the service is sometimes much more
important to the physical output.
• For example , food cooked by the chef is not
judged by the quantity but rather than the
taste i.e. quality .
Differences between efficiency and
effectiveness
Efficiency Effectiveness
Objective To produce quantity and To enhance the value of
quality the customer and
therefore to the society
Goal To improve the process To determine the right
and/or the product direction for the
organisation and the value
that needs to be
generated
Questions How to perform the task Why to perform sometging
and , so , what to
perform?
Satisfaction measure Is everything running Arewe aiming right ?/
well ?
Adapted from Kurt hanks , up your productivity , crisp publications
Inc , Menlo park, California , USA , 1990
Transforming the ordinary to the
extraordinary
• Productivity is not about using of manpower.
• It is generally misunderstood that the advancement of science and technology
is going to make the world more mecahnical by reducing dependence on
labour , staff , and the consequent problem that needs to be solved . Instead of
a zero sum relationship between technical and social systems , where ever
advance in technology would require reduction in human importance , a
positive sum relationship would emerge .
• It should a lso be realised that in the coming future , more and more workers
will demand supervisory tasks and supervisors will demand managerial tasks .
It is a challenge of te future that while cutiing down on the managerial
hierarchy , the organisation will have to meet the aspirations of the workers /
staff to be effective managers of the organisations.
• Improving productivity would mean would mean encouraging excellence .
• A commitment to excellence means to a constantly strive for producing the
highest possible results .
Case study – Home style cookies
William J Stevenson , 9th edition
