Measurement of productivity

Productivity:

Productivity can be measured by the following formula: Value of outputs divided by value of inputs.

If the result is more than one, then it means positive productivity. If it is less than one, then productivity is negative. To increase productivity, the outputs must increase or the inputs must decrease or both must take place simultaneously.

Labour:

So, for labour it will be as follows: Value of labour outputs divided by labour cost. In other words, the big question to be asked about any particular employee, is whether he or she is monthly contributing more value than the “cost to company” for that person.

Capital goods:

For capital goods the formula is: monthly income generated, divided by monthly cost (installment cost or cost of finance).

Labour and capital mix:

The efficiency of machinery or a system can sometimes compensate for the inefficiencies of people. This means that unproductive employees can sometimes just ride along with the productive machinery.

It also means the organisation is not running on peak productivity or peak performance.

Machinery does not have feelings, emotions, fears or thinking capabilities, which can distract it from its course of operations. As long as it is maintained in good shape, it can deliver a constant production rate, without getting tired.

Human beings, on the other hand, are diverse and complex beings, with their own interests, attitudes, personalities, perceptions and agendas, which they bring with them to work. That is why we study psychology, to treat, motivate, manage and lead them in spiritual ways. In doing so, we must bear in mind the main purpose of the organization for being in existence.

So, however diverse and complex us human beings are, we are bound by the common goals of our organization. That is why you hear about goal setting, benchmarking, performance and appraisals; all instruments to encourage us to achieve job goals. But all these things are not about the person, but the tasks at hand by that person.

If you do not have a good control mechanism over tasks at hand, people will dwindle off in their own directions, because of their complexities as human beings. If we prefer not to control, it is synonymous with being disloyal to our employer, who is paying for our services to curtail unproductiveness.

So, how are you fulfilling your control responsibility?

There is a direct relationship between productivity and performance management. See it here.