Return to Productivity

‘Old’ productivity

  • 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 – plus mental inputs of corporate knowledge and employee motivation levels
  •  Better measurement of productivity has been needed ever since

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