Productivity and employees in context of operations


The terms production and productivity are often used interchangeably. But there is a difference between the two. Production refers to the total output. Productivity refers to the output relative to the inputs. Stated more clearly, productivity refers to the amount of goods and services produced with the resources used. Productivity is measured with the help of a formula which runs as follows:

Productivity = Quantity of goods and services produced / Amount of resources used

The equation indicates, there are two variables in measuring productivity—the amount of production and the amount of resources used. Productivity varies with the amount of production relative to the amount of resources used. Productivity can be increased in several ways, namely,

1. Increase production using the same or a smaller amount of resources.

2. Reduce the amount of resources used while keeping the same production or increasing it.

3. Allow the amount of resources used to increase as long as production increases more proportionately.

4. Allow production to decrease as the amount of resources used decrease more proportionately.

Irrespective of the method productivity needs to be improved. Increased productivity contributes to the competitive advantage of an organization. When productivity increases, the company can pay higher remuneration to its employees without boosting inflation. Increase in earnings without corresponding increase in inflation, improves the standard of living of people.

Improving productivity also means getting more from the same inputs. Higher productivity does not mean adding more inputs but using the resources better. Improving productivity does not mean working harder; it means working smarter, not just doing things right but doing right things. Today’s economy demands that, we do more with less-fewer people, less money, less time, less space and fewer resources in general.

Productivity benefits the whole economy, besides contributing to the success of the organization. Any economy is made up of multiple organizations and if all organizations prosper because of increased productivity, economy itself tends to benefit.

Productivity in countries like India and other Asian countries is lower and this factor explains the reason why our economy continues to lag behind those of the developed ones.

Measuring Productivity:

Productivity refers to the output relative to the inputs. Inputs in any production process comprise capital, labor, materials and energy. Productivity of each resource can be measured separately. Such measurement gives partial productivity. Productivity of all resources put together gives productivity on the total factor basis. This method of calculating productivity considering all resources is called multi-factor approach to measuring productivity. Following are the two formulas for calculating partial productivity and total productivity:

Partial productivity = Output in a given period / Labor hours used in the period.

Total productivity = Output in a given period / Labor + Capital+ Materials + Energy (used in the same period)

In practice, partial productivity is mainly calculated for purposes of analysis and remedial actions. Among all the inputs, it is the direct labor, which is mainly used as the denominator for calculating partial productivity. This is so, because labor continues to occupy a place of pride in manufacturing systems, not withstanding automation. Certain operations cannot be automated because of extreme product variability, the variable nature of some duties (such as material handling), the nature of the materials being processed and similar reasons. For these operations, either it is simply not cost effective to automate them or capital is not available in plenty for automation. Moreover, most services remain labor intensive.