Productivity

Productivity

 Productivity is a relationship between the output (product/service) and

input (resources consumed in providing them) of a business system.
The ratio of aggregate output to the aggregate input is called
productivity.
𝑂𝑢𝑡𝑝𝑢𝑡
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
𝐼𝑛𝑝𝑢𝑡

NOTE:
For survival of any organization, this productivity ratio must be at least 1.
If it is more than 1, the organization is in a comfortable position.
 Importance of Productivity

 It helps to cut down cost per unit and thereby improve the

profits.

 Gains from productivity can be transferred to the consumers in

form of lower priced

 More products or better quality products.

 It would generate more employment opportunity.

 Overall productivity reflects the efficiency of production system.

 Importance of Productivity (cont.)

 The proportional increase in output being more than the proportional increase in input

 These gains can also be shared with workers or employees by paying them at higher rate.

 A more productive entrepreneur can have better chances to exploit expert opportunities.

 More output is produced with same or less input.

 The same output is produced with lesser input.

 Multi-Factor Productivity

Productivity may be measured either on aggregate basis or on individual basis, which are called total
and partial measure.

𝑇𝑜𝑡𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡
𝑇𝑜𝑡𝑎𝑙 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐼𝑛𝑑𝑒𝑥/𝑀𝑒𝑎𝑠𝑢𝑟𝑒 =
𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑝𝑢𝑡

𝑇𝑜𝑡𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑎𝑛𝑑 𝑠𝑒𝑟𝑣𝑖𝑐𝑒𝑠

=
𝐿𝑎𝑏𝑜𝑢𝑟 + 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 + 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 + 𝐸𝑛𝑒𝑟𝑔𝑦 + 𝑚𝑎𝑛𝑎𝑔𝑒𝑚𝑒𝑛𝑡

Partial productivity indices, depending upon factors used, it measures the efficiency of individual
factor of production
 Productivity Measurement

Individual Factor
𝑂𝑢𝑡𝑝𝑢𝑡 𝑖𝑛 𝑢𝑛𝑖𝑡
𝐿𝑎𝑏𝑜𝑢𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐼𝑛𝑑𝑒𝑥/𝑀𝑒𝑎𝑠𝑢𝑟𝑒 =
𝑀𝑎𝑛 ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑
𝑂𝑢𝑡𝑝𝑢𝑡
𝑀𝑎𝑛𝑎𝑔𝑒𝑚𝑒𝑛𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐼𝑛𝑑𝑒𝑥/𝑀𝑒𝑎𝑠𝑢𝑟𝑒 =
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑚𝑎𝑛𝑎𝑔𝑒𝑚𝑒𝑛𝑡
𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡
𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐼𝑛𝑑𝑒𝑥/𝑀𝑒𝑎𝑠𝑢𝑟𝑒 =
𝑀𝑎𝑐ℎ𝑖𝑛𝑒 ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑
𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡
𝐿𝑎𝑛𝑑 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐼𝑛𝑑𝑒𝑥/𝑀𝑒𝑎𝑠𝑢𝑟𝑒 =
𝐴𝑟𝑒𝑎 𝑜𝑓 𝐿𝑎𝑛𝑑 𝑢𝑠𝑒𝑑
𝑂𝑢𝑡𝑝𝑢𝑡 𝑂𝑢𝑡𝑝𝑢𝑡 𝑂𝑢𝑡𝑝𝑢𝑡 𝑂𝑢𝑡𝑝𝑢𝑡
𝑃𝑎𝑟𝑡𝑖𝑎𝑙 𝑀𝑒𝑎𝑠𝑢𝑟𝑒 = 𝑜𝑟 𝑜𝑟 𝑜𝑟
𝐿𝑎𝑏𝑜𝑢𝑟 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 𝐸𝑛𝑒𝑟𝑔𝑦
 Example

 Problem: The input and output data for an industry given in the table. Find out
various productivity measures like total, multifactor and partial measure. Output and
Input production data in Rupees (₹)

Output Input

Finished units 10,000 Human 3,000

Work in progress 2,500 Material 153

Dividends 1,000 Capital 10,000

Bonds ---- Energy 540

Other income ---- Other Expenses 1,500

Total 13,500 Total 15,193

 Example

Solution:

𝑇𝑜𝑡𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡 13,500

𝑇𝑜𝑡𝑎𝑙 𝑀𝑒𝑎𝑠𝑢𝑟𝑒 = = = 0.89
𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑝𝑢𝑡 15,193
𝑇𝑜𝑡𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡 13,500
𝑀𝑢𝑙𝑡𝑖 𝐹𝑎𝑐𝑡𝑜𝑟 𝑀𝑒𝑎𝑠𝑢𝑟𝑒 = = = 4.28
𝐻𝑢𝑚𝑎𝑛 + 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 3,153
𝐹𝑖𝑛𝑖𝑠ℎ𝑒𝑑 𝑈𝑛𝑖𝑡𝑠 10,000
𝑀𝑢𝑙𝑡𝑖 𝐹𝑎𝑐𝑡𝑜𝑟 𝑀𝑒𝑎𝑠𝑢𝑟𝑒 = = = 3.17
𝐻𝑢𝑚𝑎𝑛 + 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 3,153
𝑇𝑜𝑡𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡 13,500
𝑃𝑎𝑟𝑡𝑖𝑎𝑙 𝑀𝑒𝑎𝑠𝑢𝑟𝑒1 = = = 25
𝐸𝑛𝑒𝑟𝑔𝑦 540
𝐹𝑖𝑛𝑖𝑠ℎ𝑒𝑑 𝑈𝑛𝑖𝑡𝑠 10,000
𝑃𝑎𝑟𝑡𝑖𝑎𝑙 𝑀𝑒𝑎𝑠𝑢𝑟𝑒2 = = = 18.52
𝐸𝑛𝑒𝑟𝑔𝑦 540
For multifactor and partial measures it is not necessary to use total output as numerator. Often, it is describe to create measures that represent
productivity as it relates to some particular output of interest.
 Example

Other fields for the measurement of partial measures of productivity are:

Business Productivity Measure

Restaurant Customers (Meals) per labour hour
Retail Store Sales per square foot
Utility plant Kilowatts per ton of coal
Paper mill Tons of paper per cord of wood
 Productivity Measurement

Let Aggregate output = O

Aggregate input = I
𝑂
Total Productivity (P) = ….(1)
𝐼
Let Profit (π) = O-I ….(2)
Dividing the equation 2 by I
𝜋 𝑂
= −1
𝐼 𝐼
𝜋
0r from 1 =𝑃−1
𝐼
For Zero profit (π =0), P =1
For a Loss, (π < 0), P<1
For a profit, (π > 0), P>1
 Principles of Management

 Henri Fayol, a French mining engineer and management theorist, developed 14 principles of

management principles in the early 20th century based on his experiences and used as a
foundation for modern management practices.

 Principles of management are broad and general guidelines for managerial decision-making and

behaviour.

 They provide a framework for managers to follow in order to achieve organizational goals

efficiently and effectively.

 Principles of Management

 Division of Work: The segregating work in the workforce amongst the workers will enhance the quality of the
product. The division of work improves the productivity, efficiency, accuracy and speed of the workers. This principle is
appropriate for both the managerial as well as a technical work level.

 Authority and Responsibility: These are the two key aspects of management. Authority facilitates the
management to work efficiently, and responsibility makes them responsible for the work done under their guidance or
leadership.

 Discipline: Without discipline, nothing can be accomplished. It is the core value for any project or any management.
Good performance and sensible interrelation make the management job easy and comprehensive.

 Unity of Command: This means an employee should have only one boss and follow his command. If an employee
has to follow more than one boss, there begins a conflict of interest and can create confusion.
 Principles of Management

 Unity of Direction: Whoever is engaged in the same activity should have a unified goal. This means all the people
working in a company should have one goal and motive which will make the work easier and achieve the set goal easily.

 Subordination of Individual Interest: This indicates a company should work unitedly towards the interest of a
company rather than personal interest. Be subordinate to the purposes of an organisation.

 Remuneration: This plays an important role in motivating the workers of a company. Remuneration can be monetary or
non-monetary. Ideally, it should be according to an individual’s efforts they have put forth.

 Centralization: In any company, the management or any authority responsible for the decision-making process should
be neutral. However, this depends on the size of an organisation. Henri Fayol stressed on the point that there should be a
balance between the hierarchy and division of power.

 Scalar Chain: Fayol, on this principle, highlights that the hierarchy steps should be from the top to the lowest. This is
necessary so that every employee knows their immediate senior also they should be able to contact any, if needed.
 Principles of Management

 Order: A company should maintain a well-defined work order to have a favourable work culture. The positive
atmosphere in the workplace will boost more positive productivity.

 Equity: All employees should be treated equally and respectfully. It’s the responsibility of a manager that no
employees face discrimination.

 Stability of Tenure: An employee delivers the best if they feel secure in their job. It is the duty of the
management to offer job security to their employees.

 Initiative: The management should support and encourage the employees to take initiatives in an organisation. It
will help them to increase their motivation and morale.

 Esprit de Corps: It is the responsibility of the management to motivate their employees and be supportive of
each other regularly. Developing trust and mutual understanding will lead to a positive outcome and work
environment.
 Organizational Structure

 Organizational structure is the systematic arrangement

of human resources in an organization to achieve

common business objectives. It defines how activities

such as task allocation, coordination, and supervision

are directed toward the achievement of organizational

goals.
 Types of Organizational Structures

 Hierarchical Structure:
 Description: A traditional structure where employees are grouped and assigned a supervisor. It resembles a pyramid
with the highest authority at the top.
 Example: Government agencies and military organizations.

 Flat Structure:
 Description: Fewer levels of management between staff and executives. It promotes employee involvement in
decision-making.
 Example: Startups and small businesses.

 Matrix Structure:
 Description: Employees report to multiple managers for different aspects of their work. It combines functional and
divisional structures.
 Example: Large multinational companies like IBM and Procter & Gamble.
 Types of Organizational Structures

 Divisional Structure:
 Description: The organization is divided into semi-autonomous units or divisions, each with its own resources and
objectives.
 Example: Companies with diverse product lines like General Electric.

 Functional Structure:
 Description: Employees are grouped based on their specialized roles or functions, such as marketing, finance, or
production.
 Example: Manufacturing companies and universities.
 Importance of Organizational Structure

 Defines Roles and Responsibilities: Clearly outlines who is responsible for what tasks,
reducing confusion and overlap.

 Facilitates Communication: Establishes clear lines of communication, ensuring information

flows efficiently throughout the organization.

 Enhances Coordination: Helps in coordinating activities across different departments and

divisions.

 Improves Efficiency: Streamlines processes and workflows, leading to better resource

utilization and productivity.
Thank you