Productivity

Lecture outline
 Productivity
 Types of Productivity
 Measurement of Productivity,
 Productivity improvement techniques.
 Productivity improvement programme.
 Productivity meaning

 Definition:-

Productivity = Output/Input

- Productivity is an attitude of mind. It is the mentality of progress,

of the constant improvements of that which exists. It is the
certainty of being able to do better today than yesterday and
continuously. It is the constant adoption of economic and
social life to changing conditions. It is continual effort to apply
new techniques and methods. It is the faith in human progress.
 Definitions of Productivity
1. Productivity is a function of providing more and more of
everything to more and more people with less and less
consumption of resources.
2. The volume of output attained in a given period of time in
relation to the sum of the direct and indirect efforts extended in
its production.
3. Productivity is the measure of how well the resources are
brought together in an organisation and utilised for
accomplishing a set of objectives.
4. Productivity is concerned with establishing congruency
between organisational goals with societal aspirations through
input-output relationship.
5. Productivity is the multiplier effect of efficiency and
effectiveness.
Production and Productivity
Example on Productivity
A company produces 160 kg of plastic parts of acceptable quality
by consuming 200 kg of raw materials for a particular period.
For the next period, the output is doubled (320 kg) by
consuming 420 kg of raw material and for the third period, the
output is increased to 400 kg by consuming 400 kg of raw
material. Calculate productivity of each period.
Ans:- For 1st Period, Productivity = Output/ Input
= 160/200 = 0.8 or 80%
For 2nd Period, Productivity = Output/ Input
= 320/420 = 0.76 or 76%
For 3rd Period, Productivity = Output/ Input
= 400/400 = 1 or 100%
 Workers Fear about Productivity

“Workers fear that increase in productivity lead to

unemployment” – Comment.
Dynamics of Productivity Change
Types of Productivity
 Total Productivity (Total Factor Productivity)

Total Productivity= Total Output/ Total Input

 Partial Productivity

Partial Productivity = Total Output / Individual Input

e.g. Labour Productivity, Materials Productivity, Energy
Productivity.
Advantages and Disadvantages
 Productivity Measurement Models
1. Craig and Harris Model
P= O/(L+C+R+Q)
where, P = Total Productivity
L = Labour input Factor C = Capital input Factor
R = Raw material and purchased parts Q = Othe Misc.

2. Taylor - Davis Model

TFP= (S+C+MP-E)/{(W+B)+[(KW+KF)Fb*df ]}
where, S = Net sale adjusted C = Inventory change
MP = Manufacturing plant E = Exclusions
W = Wages and salary B = Benefits KW = Working Capital
KF= Fixed Capital Fb = Investors contribution df = Deflection factor
 Productivity Measurement Models
3. APC Model
Profitability = Revenue/Cost
= (Output Quantities * Sales Price)/ (Input Quantities* Unit Cost)
= (Output Quantities / Input Quantities)*(Sales Price/ Unit Cost)
= Productivity * Price recovery
Factors Influencing Productivity
Productivity Improvement Techniques
Numericals
Numericals
Productivity Improvement Programmes (PIP)

 Definition
 Programme objectives
 When to use productivity improvement programmes
 The main elements of productivity improvement
programmes
Productivity Improvement Programmes (PIP)-
Definition

 Performance improvement planning is a total system effort,

involving top management, with the goals of increasing
general organisation effectiveness and health and helping in
the accomplishment of specific organisation objectives and
targets by means of planned interventions in the
organisation's structure and processes using the behavioural
and management sciences and any other relevant
knowledge.
 Programme objectives
Some more specific objectives of the programme could be:
 to improve managerial, planning and problem-solving skills;
 to improve teamwork and human relations;
 to set up an effective productivity information system;
 to trigger a breakthrough to a higher level of organisational
performance;
 to help revitalise the organisation and its climate.
 PIP Benefits
 increased awareness of the factors affecting productivity among
workers and management;
 the creation of a link between existing accounting procedures,
productivity measurement and regular performance monitoring;
 the establishment of new competitive standards;
 gaining commitment to the need for continuing attention to
productivity improvement;
 more extensive and conscious use by the participants of
productivity improvement techniques.
 When to use PIP
To use PIPs effectively, certain favorable conditions should exist.
Among them are the following:
(a) Pressure for change
(b) Intervention at the top
(c) Diagnosis and participation
(d) Invention of new solutions
(e) Experimentation with new solutions
(f) Reinforcement from positive results
 Main Elements of PIP
· Top management must be wholly committed to the programme.
· An effective organisational arrangement headed by someone
responsible to top management for the programme is essential.
· Full awareness and understanding of the programme objectives
must exist at all organisational levels. Good labour-management
relations are vital.
· There should be free-flow communication between different
structural elements of the organisation.
· Recognition of the key role played by workers is crucial and must
be demonstrated through a sound productivity gains-sharing
system.
 Main Elements of PIP
· The programme should be linked with measurement processes
that are practical and easily understood. Goals should be set on
the basis of feasibility as well as desirability.
·The productivity improvement techniques (technical, behavioural
and managerial) chosen for the programme have to fit the
situation and needs.
· Monitoring, evaluation and feedback processes to identify results
and barriers provide a basis for design improvements.