• For most of the 20th century, when labour-intensive manufacturing industry dominated developed economies and direct labour was the main input resource, measuring ‘how much you got out’ of ‘how much you put in’ was usually not a problem:
    • Output volumes were easy to count
    • Input resources were covered (mostly) by counting the number of direct labour employees used or the hours they worked
  • Productivity was defined as: Output volumes/ Labour inputs
  • This partial ratio was taken to be a good measure of the total productivity of any manufacturing company
  •  It was also used at process or task level, when most work was either ‘blue-collar’ or highly repetitive clerical ‘white-collar’ – most workers were wanted for their hands, not heads – their brawn, not brains
  •  The issue facing most companies at the time was how to maximise output volumes from the input resources available in order to maximise profits – they assumed all output could be sold, no matter how shoddy or late it was
  •  Then, in the second half of the twentieth century, service industries came to dominate western economies plus quality and service levels became the big issues  – together, they pushed the ‘old’ productivity ratio to the sidelines
  •  It took many years to realise that productivity was still the most important issue facing any organisation, but the ‘old’ ratio missed much of the new picture
  •  The ratio of outputs to inputs still mattered but:
    • ‘Outputs’ somehow had to include quality and service level outcomes – effectiveness in other words
    • ‘Inputs’ had to include other increasingly important physical inputs such as indirect labour, materials, energy and capital (e.g. factories, production lines, machines, equipment, systems, ICT) – plus mental inputs of corporate knowledge and employee motivation levels
  •  Better measurement of productivity has been needed ever since
  • And a single measure will no longer suffice – a set of measures is needed to provide the big picture of any organisation’s performance level
  • This set is made up of at most 10 measures per manager, whatever his level – it covers the most important outcomes, outputs and inputs employed by any manager and his team, whatever their level viz:
    • Financial outcomes – Revenue, Costs, Profitability
    • Customer outcomes – Price, Quality, Service levels
    • Physical inputs – Productivity and Waste levels 
    • Mental inputs – Employee Motivation and Corporate Knowledge levels
  • When the same set of measures is used by all managers at all levels, this provides them with a common language for understandable communications both up and down levels of the organisation, and side to side
  • Each of the above measures is defined in the following pages



Effectiveness v Efficiency

Effectiveness and efficiency are words often confused   Effectiveness measures how well a supplier’s present efforts and methods meet its customers’ needs – what customers think of what a supplier offers them Effectiveness  =  Customers’ ratings of actual outcomes  =  60% say                           …

Cardinal measures

If you want to manage productivity well, you first need to measure it well and ensure your team understand the measures you use   Every organisation, whatever its size, has plenty happening by the hour, week or year – customers seen, calls taken, transactions made, incidents attended, press releases written, widgets produced – so which …

Leave a Reply

Your e-mail address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.