Saturday, February 20, 2010


The more productive an organization, the better its competitive advantage, because its costs to produce a unit of output are lower. Better productivity does not necessarily mean more is produced; perhaps fewer people (or less money or time) were used to produce the same amount. A useful way to measure the productivity of a workforce is the total cost of people per unit of output. In its most basic sense, productivity is a measure of the quantity and quality of work done, considering the cost of the resources it took to do the work. It is also useful to view productivity as a ratio between input and output. This ratio indicates the value added by an organization or in an economy.
GLOBAL COMPETITIVENESS AND PRODUCTIVITY At the national level, productivity is of concern for several reasons. First, high productivity leads to higher standards of living, as shown by the greater ability of a country to pay for what its citizens want. Next, increases in national wage levels (the cost of paying employees) without increases in national productivity lead to inflation, which results in an increase in costs and a decrease in purchasing power. Finally, lower rates of productivity make for higher labor costs and a less competitive position for a nation’s products in the world marketplace.
ORGANIZATIONS AND PRODUCTIVITY Productivity at the organization level ultimately affects profitability and competitiveness in a for-profit organization and total costs in a not-for-profit organization. Decisions made about the value of an organization often are based on the productivity of which it is capable.
Perhaps none of the resources used for productivity in organizations are so closely scrutinized as human resources. Many of the activities undertaken in an
HR system deal with individual or organizational productivity. Pay, appraisal systems, training, selection, job design, and compensation are HR activities concerned very directly with productivity.
Another useful way to measure organizational HR productivity is by considering
unit labor cost, or the total labor cost per unit of output, which is computed
by dividing the average cost of workers by their average levels of output. Using the unit labor cost, it can be seen that a company paying relatively high wages still can be economically competitive if it can also achieve an offsetting high productivity level.
INDIVIDUAL PRODUCTIVITY How a given individual performs depends on three
factors: ability to do the work, level of effort, and support given that person.
Recruiting and selection are directly connected to the first factor, innate ability, which involves choosing the person with the right talents and interests for a given job. The second factor—the effort expended by an individual—is influenced by many HR issues, such as motivation, incentives, and job design. Organizational support, the third factor, includes training, equipment provided, knowledge of expectations, and perhaps a productive team situation. HR activities involved here include training and development and performance appraisal.
INCREASING PRODUCTIVITY U.S. firms have been on a decade-long crusade to improve organizational productivity. Much of the productivity improvement efforts have focused on the workforce. The early stages included downsizing, reengineering jobs, increasing computer usage, and working employees harder. These approaches have done as much good as possible in some firms. Some ideas for the next step in productivity improvement include:
-Outsource: Contract with someone else to perform activities previously done
by employees of the organization. For instance, if UPS can deliver products at
a lower cost than a manufacturing company can internally, then the firm could outsource shipping to UPS.
-Make workers more efficient with capital equipment: A study of productivity in
four countries found that in each country the less spent on equipment per worker, the less output per worker.
-Replace workers with equipment: Certain jobs are not well done by humans.
The jobs may be mindless, physically difficult, etc. For example, a ditch usually is better dug by a person operating a backhoe than by a person with a
-Help workers work better: Replace outmoded methods and rules, or find better ways of training people to work more efficiently.
-Redesign the work: Some work can be redesigned to make it faster, easier, and possibly even more rewarding to employees. Such changes generally improve productivity.
The need for productivity improvement will never end. With global competition
there will always be a need to produce more at less cost, which entails working
both harder and smarter in many situations .

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