Generally productivity is defined as the ratio of output to input. There are many more definitions of productivity available in academic literature and many ways and methods to measure productivity. Productivity measurement process is quite significant for many reasons. In this article we have discussed significance of the productivity measurement process and ultimately found that for better productivity it is mandatory that one should measure the current level of productivity. Based on this measurement any firm or organization or even a country can make do planning for improvement of productivity. Since better productivity is the only perpetual survival point for individuals at personal level and for firms at collective level. It was also significant in past but in current era its significance has increased many folds.
Key Words: productivity, productivity measurement
Productivity Measurement Rationalization and Application
The simplest understanding of productivity measurement term is to weigh up, find, analyse, and gauge the productivity of any firm, organisation, and industry or as a whole economy of the country. Hoque (2000, p. 1278) has defined productivity measurement in the following words, productivity measurement is defined as a set of management tools that are associated with the assessment of organisations productivity. Many authors have discussed the meaning of productivity measurement in different manners. According to Lord Kelvin (as cited in Ali 1978, p. 33) productivity measurement is to express observation or knowledge in numbers, so that one can have its true meanings.
Management writer Peter Drucker has plainly expressed his views (as cited in Parsons, 2001, p. 13) about productivity measurement in the following words, without productivity objectives, a business does not have direction. Without productivity measurement, a business does not have control. This is manifest from the above-mentioned statement that for control purpose there is a dire need to have productivity measurement system. In their book By What Method, Morris and Sink (as cited in Parsons, 2001, p. 13) have announced, Measurement fosters organizational learning when management team becomes skilled at converting data to information and information to knowledge. Eli Goldratt, author of the best selling book The Goal, put this succinctly when he said (as cited in Parsons, 2001, p. 13): show me how you measure me and I will show you how I behave.
According to Parsons (2001, p. 13), performance measurement system comprises a set of coherent activities designed to enable management to determine, directly or indirectly, how an organizational system is performing-improving or deteriorating, in or out of control. Nagel (as cited in Ali 1978, p. 34) has defined measurement in the following way, The delimitation and fixation of our ideas or thought, so that the determination of what is to be a man or to be circle is a case of measurement.
From the above discussion, it becomes perceptible that measurement is the convert of the ideas, judgement, observation and assessment into some understandable numbers so that one can make a sense about the observations.
According to Daniels (1997, p. 52), there are a number of approaches and techniques, which have grown out of the productivity movement, like, work-study, operational research methods, etc. and to undoubtedly deny or ignore their existence would be foolish. Daniels (1997, p. 52) has further emphasised that such methods and techniques must be used as part of a structured and targeted campaign aimed at examining and improving all the relevant factors that contribute to output-enhancing productivity.
Improvement is not possible without knowing the status as mentioned in previous pages. Assessing the current level of productivity will facilitate improving productivity of the industry. In other words, first step for improvement is measuring the status and measurement of productivity is not possible without having a clear concept of productivity measurement phenomenon. In next pages, there is a discussion about the significance of productivity measurement.
According to Gaynard (1997, p. 90), economic prosperity depends upon many factors and one of the most significant factors is better productivity of the people, industry and as well as of government. Particularly, in the current business scenario, survival of firms is concurrent with their productivity. Furthermore, there are still many people on earth, which need food, shelter, and other life necessitates and their requirement can only be fulfilled with better productivity of the business community, and particularly, governments of the respective countries.
Gaynard (1997, p. 90) has further stated that the productivity movement throughout the world means that many people are engaged in the pursuit of greater effectiveness, improved efficiency and enabling their communities to seek a fuller life with a better standard of living. Furthermore, it is insufficient to believe that we need only to address the notion of the time and cost of a product or service now of its inception competition is a continuous fact in the lifetime of a company and there is a need for continuous improvement. It is only by adopting the strategy that there is always a better way of doing things that the organization will survive and prosper.
Increase your productivity has been the catch cry of the 1980s and 1990s and appears certain to continue into the twenty-first century (Savery, 1998, p. 68). This observation is quite valid in current scenario. It is the time when firms have to focus on productivity and it is well understood from the above mentioned statement that catch cry of the current era is productivity. Productivity management has, in the past, mainly been practiced in an informal manner, yet, like any other decision-making procedure, and there is the need for it to be formalized (Stainer, 1995, p. 04). Particularly, this notion becomes more sensitive in case of garment industry, which changes quickly since it is a part of fashion.
Khan (2003, p. 374) has discussed the rationale of productivity studying in the current era. According to Khan, 2003, p. 374, competition among companies operating in different markets has increased, as advancements in telecommunications and information technology have broken down traditional barriers to entry (e.g. geographical and trade barriers) and there is a dire need that firm should improve their productivity to remain in the field.
Productivity measurement never remained inconsequential. Bernolak (1980b, p. 148) has described the importance of productivity measurement in the following words, objective of productivity measurement is to find how to produce outputs of desired goods and services with the minimum amount of human and physical resources, the measurement of output is the first major element in productivity analysis.
From the above statement, it is clear that productivity measurement is the basic need for the analysis of the productivity. No one can make any comments on the proper utilization of the resources without analysing the productivity. According to Sink (1985, p. 63), the purpose of productivity measurement is to assist the organisation system with assessment, efficiency, quality, and productivity, quality of work life, innovation and profitability. In some organisational systems, measuring productivity might be critical to gaining insight into the management intervention needed to improve productivity and perhaps overall performance.
This discussion clearly depicts that there are two major objectives of productivity measuring. One; to facilitate organisations to gain the required profitability and the second; to make some basis for intervention of the management to introduce some changes to improve productivity. Sink (1985, p. 63) has further explained it in the following words, what you measure often what you get. According to Sink (1985, p. 63), measurement is a natural part of analysis, control, evaluation and management process. Manager must measure in order to manage and improve productivity. In this statement, another fact of productivity measurement has been elaborated. Lawlor (1985, p. 31) has explained that productivity measurement creates awareness among the people, removes confusions give a guideline to management for strategic planning.
Brynjolfsson (1991, p.01) has discussed productivity significance in the following way, The increased interest in the productivity paradox, as it has become known, has engaged a significant amount of research, but thus far, this only deepened the mystery. Robert Solow, the Noble Laureate economist, has aptly characterized the results: we see computers everywhere except in the productivity statistics.
Ghobadian (1994, p. 37) has expressed his concern about significance of productivity measurement in the following words, the need for an alternative and more comprehensive performance measurement system has encouraged several researchers to explore the alternative possibilities.
Ray and Sahu (as cited by Ghobadian, 1994, p. 38) argued that organizational performance was a multidimensional entity and should be linked to the desired outcomes. This is one of the most effective and suitable tools to achieve any goal. To follow a success path there is a dire need to copy any success, which is not possible without measuring it.
Performance measurement is looked upon as a prerequisite to performance improvement, and final objective of all productivity surveys should be to induce productivity improvement (Parsons, 1980, p.60). In this statement prerequisite of performance improvement is performance measure. Author has used the word performance as interchangeable with word productivity. According to above-mentioned definition, performance improvement is not possible without measuring the current performance.
Furthermore, Parsons (2001, p. 14) has put forward following three applications of productivity and performance measure:
Raise awareness about productivity and performance;
Establish control to restore productivity and performance; and
Identify actions to improve performance.
Loggerenberg (1980, p. 71) has viewed productivity measurement from a different angle. According to Loggerenberg (1980, p. 71), experience in recent years and the forecast for the future suggest that inflation and productivity are the most important issues of our time. Productivity measurement is important to make a relation between resources utilised and the output gained, because improvement in productivity can also work as an effective tool to counter inflation. According to, Loggerenberg (1980, p. 71), productivity and inflation are the important issues of this time.
Mahoney (1998, p.21) has described the worth of productivity measurement in the following words, productivity assessment becomes critical parameters in the projection of output targets and/or the projection of input requirements to achieve output target. This impression about the significance of productivity measurement shows another side of productivity measurement.
According to this statement, productivity measurement is a critical parameter to achieve any target. Mahoney (1998, p.21) has further stated that, productivity measure, like all performance measures, serves to provide direction and motivation, particularly when targets and objectives are specified. Author has emphasised the importance of productivity measurement as a source of guidance and motivation. Since highly motivated people and proper guidance are the fundamental needs to achieve any goal. If the productivity to be viewed as a policy variable, it is important to know the determinants of productivity of the system of concern in order to guide efforts to affect productivity (Mahoney, 1998, p.21).
Above-mentioned two statements are establishing a link between guidance and productivity measurement. According to these statements, productivity measurement provides guidance to the organisation to plan for its success.
Guzzo (1998, p.63) has noticed the concern of American people in productivity issues and has pointed out in the following words, Concern with productivity turns deep in American society, taking up much ink and airtime. Productivity causes, consequences, and statistics are debated regularly. This statement depicts a clear picture of the concern of most advanced and developed people about productivity. It is generally believed that the American development is the outcome of high productivity of their labour, management, capital and technology. After WW II, the main target of Japan was to minimise the gap of productivity between America and Japan. So all developments in Japan are the result of high productivity.
According to Sumanth (1998, p. 65), productivity measurement is the critical first phase of the productivity process. This statement further clarifies the concept of productivity measurement. According to this statement one of the most critical factors in productivity improvement is productivity measurement. Daniels (1997, p. 52) has emphasized that Productivity improvement does not rely for its success on the application of specific productivity techniques it depends much more on the commitment and creativity of all members of the organization.
Productivity measurement provides an excellent instrument to monitor the status of productivity and to explicitly relate productivity to other strategic objectives of any organisation. With the help of quantitative measurement, it becomes easier to monitor progress to provide feedback, to evaluate managerial performance and to set quantifiable productivity objectives (NPC, 1999, p. 04). According to NPC (1999, p. 04), productivity measurement is a tool to monitor the performance for strategic purposes.
Kolay & Sahu (1995, p. 57) have given another view of firms productivity and according to them HR value measure based on the total performance of an organization reflects the appreciating or depreciating nature of its human resource.
Gunn & Douglas (1940, p. 399) have discussed model presented by Cobb-Douglas in 1928 and came to the conclusion that for over a decade one of the authors and his associates have been attempting to measure statistically for various economies probable elasticities of the marginal productivity curves of labour and capital. Until recently, these studies have been based upon time series of the quantities in manufacturing in each of the series of the year of capital labour and product.
From the above statement, it is evident that people were using some refined statistical model to measure productivity in the early 1900s. This shows the significance of productivity measurement and industrialisation. Hodgkinson (1999, p. 470) has highlighted significance or productivity improvement with more clarity in the following words, International competitive has become synonymous with improved efficiency and productivity, facilitated by the introduction of new technologies, which have reduced costs and improved the quality.
In very simple words, to know where one is standing is the first and foremost requirement for any development. No improvement can be made without measuring the current situation.
Ghalayini & Noble (1996, p. 63) have quoted that significance of performance measures was clearly emphasized by the Foundation of Manufacturing Committee of the National Academy of Engineering where one of the ten foundations of world-class practice states.
Gaynard (1997, p.91) has highlighted the significance of productivity measurement in the following words, It is important to note that the measurement of work in itself will do nothing to increase productivity but the standards developed from a measurement programme can provide the basis for instituting a control mechanism. In addition to that, Sink (1985, p.87) elaborates importance of productivity measurement in the following words, You cannot manage something if you cannot measure it. In addition, you cannot measure it if you do not understand it. In most of the cases productivity measurement is very simple if management clearly defines and understand productivity basics.
All above discussion regarding significance productivity measurement can be summarized in the following words:
1.It helps to identify the current productivity level
2.It provides information about the productivity of every factor
3.It helps in diagnosing the strength and weaknesses.
4.It guides us to make bench marking with other economies and companies
5.It assists us to make policies to deal with the lack of processes
6.Finally, this is the first step to improve productivity.
All above discussion is to elaborate the significance of productivity measurement phenomenon. It is quite clear from the above discussion that productivity measurement is the most critical and first step in productivity improvement process. This discussion reinforces the rational of studying current productivity level. Since, without knowing the current situation, improvement is not possible.
About the author:
Mr. Mushtaq Mangat is assistant professor at University of Management and Technology, Lahore and head of Garment Productivity Centre. In previous part, discussion was to elaborate the significance of productivity measurement and it was concluded that productivity measurement process is most crucial step in the process of productivity improvement. In this part of the paper discussion is to elaborate the application of productivity measurement. This discussion would help in application of outcome of productivity measurement process. Since productivity measurement is it self not the objective of this research, where as, the main objective is application of the results to improve productivity of PKGI, which is crucial for economic development of Pakistan.
Gharneh (1997, p. 02) has pointed out productivity measurement applications. According to Garnehs observations:
It is not only an indicator of actual performance, but also of potential areas of improvement
Highlights the degree of efficiency in the use of economic resources and facilities of an organisation and the ability to control these resources and facilities.
Helps to clarify linkages between strategic planning, capital allocation, and performance
Offers an opportunity to compare, forecast, analyse and control different operations
The above-mentioned four application of productivity measurement are much vital. Ability to point out organisational potential is the most important among all because it helps one about to assess its capacity to achieve a target. By measuring potential one can re-define his or her goals.
Industry Commission (1997, p. 29) has emphasised that recent experience is examined in some details to determine how well it measures up to historical standard. According to this statement, past productivity is measured to examine the performance of the organisation in the past, which is used as a reference point to determine the current performance and productivity.
Brinkerhoff and Dressler (1990, p. 22) have given following six usages of productivity measurement:
Spotting productivity declines for early warning;
Comparing productivity across individuals, units, organisations, and industry to make management decisions;
Linking management and labour productivity improvement efforts to build common awareness and responsibilities;
Demonstrate productivity gains to stakeholders;
Conducting research and evaluation related to new or experimental methods;
Supporting incentives and bonus plans with objective productivity data.
Sink (1985) has given another aspect of productivity measuring. According to Sink (1985, p. 49), managers use productivity measurement for the following purposes:
Profit
Customer Satisfaction
Sales Revenue
Market Share
Costs
Quality, defects
Response time
Units Produced
There are number of other applications of productivity measurement outcome. Followings is a list of such applications:
For strategic purpose; in order to make a comparison with other firms
For tactical purpose, to enable management to control the performance
For planning purpose; to compare the relative benefit
For internal purpose; so that management can take help for collective bargaining
To measure the work content and reward for labour
To determine the staffing level
For appraisal of management performance
To measure the organisation effectiveness
All above discussion is to elaborate the application of productivity measurement outcome. The results of this research will be applied in various fields to achieve different objective and one of the main objective is to help industry in making strategic decisions, since strategic decisions plays an important role in the whole business process and productivity measurement results provide base for such decisions.
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About the author:
Mr. Mushtaq Mangat is assistant professor at University of Management and Technology, Lahore and head of Garment Productivity Centre.
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