THE CONCEPT OF PRODUCTIVITY & ITS IMPLEMENTATION

BY K.K.V.V.L.W. KARUNATILAKA

THE CONCEPT OF PRODUCTIVITY & ITS IMPLEMENTATION

PRESENTED BY K.K.V.V.L.W.Karunatilaka
MBA,B.Com.SP(Hons), PGD in Bank Mgt Postgraguate in HRM Dip in HRM, Lecturer/Trainer NIBM,SLIM,University, Snr.Banker.

PRODUCTIVITY
What is it? Why do we need it? How do we measure it? How do we improve it? How do we implement it ?

RESOURCES OF AN ORGANIZATION
Whether Public or Private;The resources that are available to them are: Land & Buildings Materials Plant, Machines & Equipment Energy People Money

DEFINITION OF PRODUCTIVITY
Very simply,

Productivity = Output Input For any type of organization

 Productivity is defined as output over input. Output The value delivered. Input.
The resources(e.g;effort) spent to generate the output. Including environtmental factors.

EXAMPLES OF OUTPUT
Whether the organization is public or private the outputs are ; Accomplishment of a task Length of an output Distance travelled Number of pieces produced Weight of production

EXAMPLES OF OUTPUT(Contd.)
Volume of output Value of output No. of documents processed Time taken to carry out a job No of jobs attended No. of customers served

EXAMPLES OF INPUT
Labour force or man hours, man days. Etc.. Labour cost (Rs) Area of land(in hectares) Kg. Of material or material cost in Rs. Volume of material or fluid Length of material square area of space Units of power Time etc.

IMPROVING PRODUCTIVITY
Output = Input Methods of improving Productivity Increase output while input remains same Decrease input while output remains same Increase input resulting in a very large increase in output Decrease input by a very large amount with a resultant small reduction in output

TYPES OF PRODUCTIVITY MEASURES

Single Factor productivity Multi Factor Productivity Total Factor Productivity

OTHER THOUGHTS ON PRODUCTIVITY

Productivity is an attitude of mind Productivity means doing something better today than yesterday Productivity means continuous improvement

ACCORDING TO MICHAEL PORTER

The wealthy nations they are the productive nations
Productivity makes you wealthy, it allows you to support high wages, it allows you to support high returns on capital Michael Porter

WHY PRODUCTIVITY IS IMPORTANT

Higher standard of living
Higher GDP per capita

Higher
Higher Productivity Investment

ARE WE STILL THE SECOND HIGHEST IN ASIA IN LITERACY?

NO! We are not even in the first ten today. Countries with stronger economies have beaten us.

THE NEED OF THE HOUR Massive Investment ! Massive increases in productivity !

THE BASIC APPROACHES TO PRODUCTIVITY IMPROVEMENT

Investment in high output and modern plant & equipment and new technology - capital intensive approach Improving the efficiency and effectiveness of existing resources - better management approach

THE TWO ASPECTS OF PRODUCTIVITY

The soft or qualitative aspects - to create an environment conducive to productivity The technical or quantitative aspect

- to measure productivity

THE SOFT ASPECTS OF PRODUCTIVITY

Productivity culture Team work Quality work Delighting customers Work ethic Caring for the work force

The quantitative aspects of productivity

By this is meant the concepts behind productivity measurement and their application to performance measurement at the economy and company level

PRODUCTIVITY LEVELS
National Productivity Industry Productivity Company Productivity Divisional Productivity Branch Productivity Individual Productivity

NATIONAL PRODUCTIVITY

GDP EMPLOYED WORK FORCE

This is a single factor productivity measure and therefore wrong inferences may be made by comparing one country with another

PRODUCTIVITY OF SRI LANKA

How do we compare with others in Asia

What inferences can we draw

ORGANIZATION PRODUCTIVITY- HOW TO MEASURE ?

The best method is to use Added Value( as output) per single factor of output (Added value measures the wealth creation)

Calculating Added Value

The subtraction method: (Wealth Generation Approach) Added Value = Total output less Bought-in materials and services The Addition method (Wealth Distribution Approach) Added Value = Labour cost + Depreciation + Taxes + Interest + Profit

EXAMPLES OF ADDED VALUE

Added Value per employee Added Value per Rs of labour cost Added Value per Kg of material Added Value per KWH of power Added Value per litre of fuel

MICRO-LEVEL PRODUCTIVITY INDICATORS

Ratios which measure: Competitiveness Labour productivity Capital productivity Business Returns & profitability Process Efficiency

COMPARING PRODUCTIVITY

Cross sectional comparison Time series comparison

PRODUCTIVITY IS ALSO...
EFFICIENCY (Doing things right) + EFFECTIVENESS (Doing the right things) Do the right thing and do it right now

MISCONCEPTIONS ABOUT PRODUCTIVITY

People fear, hate, feel let down, complain about productivity, very often because they have misunderstood it.
There are several misconceptions about Productivity

MISCONCEPTION - I

Productivity = Production Productivity is merely a more sophisticated word for production

MISCONCEPTION - II

Productivity means only Labour Productivity

MISCONCEPTION - 3
Productivity can be increased by getting people to work harder TRUE TO SOME EXTENT But this is labour intensity NOT real productivity. Real productivity means working more intelligently not harder

MISCONCEPTION -4
Higher productivity causes retrenchment and large scale loss of jobs

This may happen in the short term but the long term benefits outweigh this disadvantage

Misconception -4(Contd.)
If there is low productivity then in the long term there will be severe, large scale loss of jobs.

MISCONCEPTION - 5
Productivity is relevant only in manufacturing and not relevant elsewhere

MISCONCEPTION - 6

Productivity can be increased by cutting costs across the board

MISCONCEPTION - 7
Productivity and Quality are trade offs. You cannot increase one without affecting the other

MISCONCEPTION - 8
Productivity is directly related to profits. In other words a profitable organization is always a productive one

MISCONCEPTION - 9

Productivity is relevant only in an open economy

MISCONCEPTION - 10
Productivity is only for commercial enterprises and not for the public sector

MISCONCEPTION - 11
Productivity is for organizations and not for you and me

SO DO NOT GET MISLED BY THESE MISCONCEPTIONS

HOW DO WE IMPROVE PRODUCTIVITY

First point to remember is the M I G cycle

THE M I G CYCLE
GAIN SHARE

MEASURE

IMPROVE

THE PROFIT GOAL

PROFIT = REVENUE - COSTS

MAJOR STEPS
Analyze the Revenues Analyze the Costs And then Prioritize

Find the Vital Few Components of cost

ANALYZE REVENUE SOURCES

ANALYZE COSTS

CLOSELY LOOK AT
Labour costs Material costs Energy costs Finance costs Overhead costs

IMPROVING LABOUR PRODUCTIVITY

Improving working conditions- lighting, ventilation, noise(music), temperature, work times Using appropriate and better tools Ergonomics and better work station layout. Improving factory, stores & office layout. Improving the method/process - use 5Ws & IH Improving the nutritional status of the worker Improving industrial housekeeping(5s) and safety Improving welfare facilities and worker motivation

USE THE BRAINS OF THE WORKER

Quality Circles Staff Suggestion Schemes Kaizen System(Seiri-sort,Seiton-Setorder, Seiso-clean-up-Shine Seiketsustandardize, Shitsuke-Sustain-Training & Discipline) Self Directed Work Teams 3 Mu -Muda(Waste), Muri(Strain),Mura(Discrepancy)

IMPROVING CAPITAL PRODUCTIVITY

Implement TQM Reduce Working capital Reduce floor space Utilize machinery & equipment better etc..

IMPROVING MATERIAL PRODUCTIVITY

Cheaper material Alternative material Cheaper sources Better utilization

IMPROVING ENERGY PRODUCTIVITY

Improve power factor Reduce wastage Change processes for less heating Study working procedures etc.

QUALITY OF WORK FORCE

Use A system of comparison based on Work force performance Work force characteristics Work force organization & practices

PRODUCTIVITY STARTS WITH YOU

Think of productivity every minute Be organized - do 5s Implement 1 is best campaign
One hour meetings One page memos One copy documents One minute telephone calls

IMPLEMENT
A Kaizen culture Staff suggestion scheme Small group activities 5s An environment which appreciates productivity Convince the work force of benefits

THIS IS THE NATIONAL PRODUCTIVITY DECADE

Remember! I996-2005 My effort is only to create awareness and to prepare a climate conductive to productivity improvement

MAKE PRODUCTIVITY A WAY OF LIFE

Think Productivity Talk Productivity Demonstrate Productivity Be Productive at Home, on the Road, and in Office

REMEMBER! Productivity starts with You !

-Essence of Productivity Improvement

WHAT IS IT ALL ABOUT !

COMPETITIVE LEVEL OF PRODUCTIVITY

NO ORGANIZATION CAN CONTINUE TO EXIST UNLESS IT MAINTAINS A COMPETITIVE LEVEL OF PRODUCTIVITY
ORGANIZATIONS WHICH DO NOT SUCCEED IN THIS ARE DOOMED TO FAIL THROUGH STAGNATION FOLLOWED BY BANKRUPTCY OR CLOSURE

WHAT IS PRODUCTIVITY IMPROVEMENT?

Productivity improvement is not just doing things better More importantly, it is doing right things better It is a process of change To improve Productivity it is therefore necessary to manage change

PRODUCTIVITY AS A MEASURE OF SUCCESS

Productivity is the most important long term resource Not only for the success of the organizations & individuals but also for national economic & social development It is also a measure of the efficiency of the Managers

IN A PERIOD OF EXPECTED ECONOMIC GROWTH ACHIEVING PRODUCTIVITY GAINS HAS ACQUIRED NEW SENSE OF URGENCY
THIS IS TRUE FOR OUR COUNTRY TOO

IMPACT OF PRODUCTIVITY IMPROVEMENT

IMPROVING PRODUCTIVITY CAN OFFSET THE IMPACT OF SOME OF THE PROBLEMS OF DEVELOPING COUNTRIES WHERE RAPID POPULATION GROWTH, GROWING INDEBTEDNESS & INFLATION ARE VERY COMMON .

IN FACT CREATING CONDITIONS FOR HIGHER PERFORMANCE IS THE ESSENCE OF

PRODUCTIVITY IMPROVEMENT

THE ROLE OF PRODUCTIVITY

The role of Productivity in increasing national welfare is now universally recognized In every country the main source of economic growth is an increase in Productivity & slackening of growth,stagnation & decline entail or are accompanied by a slowdown in Productivity improvement

But it is often more important for total productivity improvement to contribute to human development in its broadest sense

TO MANY PEOPLE EFFECTIVE USE OF RESOURCES CAN MEAN DEVELOPMENTOF TECHNOLOGY & ORGANIZATION,

THE PLACE WHERE PRODUCTIVITY IMPROVEMENT IS ACTUALLY CREATED

..Is the organization This is the context where the whole range of available resources come together in order to produce goods & services to satisfy the needs & wants of those who use this solar system for their existence as well as those of the generations to come

SO LET US FOCUS OUR BUSINESSES STRATEGICALLY TO IMPROVE PRODUCTIVITY FOR THE BETTERMENT OF THE MANKIND !

The quality of lives of ourselves ,our children & our childrens children hinges to a great extent on how well to-days &tomorrows managers go about solving this problem despite differing structures purposes to-days productive organizations face the same overriding problem-ie. How can we best use our limited human, financial& material resources to accomplish our objectives in a constantly changing environment As Indira Gandhi once quoted This land does not belong to us-- But to our future-To our children-To our childrens children----- We have only loaned this from them--For a very short term.So let us not misuse it . Use it very carefully& most productively. If not they will curse us

Indira Gandhi said My father once told me that there are two kinds of people in this world He told me to

They are; those who does the work & those who get the credit
be in the first category as there is no competition

in that - As only a very few are there So I know that all of you are not the trivial many but the vital few who do not fall in to the category 1 So let us get together & try to achieve an improvement in Productivity As in this world of fierce competition Productivity plays an important role

WHAT IS NEEDED IS THE HEAD, HEART & THE GUTS ANATOMY(as that of Jack Welch)
It will be hard for us to ease away from what seemed to be working well BUT THERE IS VERY LITTLE CHOICE

Isnt this improving productivity?

OF COURSE IT IS !

STRATEGIC MANAGEMENT WILL ANSWER TWO IMPORTANT QUESTIONS

OF WHAT THE ENTERPRISE IS TO BECOME If properly done IT HIGHLIGHTS WHICH BAGGAGE TO DISCARD IN ORDER TO FREE UP KEY PEOPLE &KEY RUPEES FOR REINVESTMENT As the other side of the river is deadly!!!

What is strategic Management?

It is Making things Happen Watch what is happening & Wonder what happened. -Prof. W Digman It is Pro-active,outward looking,& Externally oriented

Challenges of the next Millenium

GLOBAL COMPETITION DEREGULATION INFORMATION REVOLUTION & ACCELERATING TECHNOLOGICAL CHANGE -The horsemen of the Corporate Apocalypse (Fortune Magazine)

History shows us that ..

Being first is not enough in this complex world of business The list is very long of pioneering companies that stormed their markets Grabbed the gold Ring Later dropped it The list gets longer day by day

CAN YOU REMEMBER.

Apple Computer in the 1980s Ampex with the first Video Recorders Volkswagon with the Beetle A&W with its roadside Hamburgher Stands FOCUS, EXECUTION & REFOCUS ARE REQUIREDTO CONSTRUCT A GOING CONCERN THAT LASTS AS THE OPERATING ENVIROMENT EVOLVES.

FOCUS & REFOCUS ARE .

the products of solid strategic Planning that transcends Management Fashions In recent times Re-Engineering has come & gone Downsizing has bottomed out TQM has faded in to the background

Savvy people are back to the basics

They know that the trick to-day is getting bigger without getting fatter They need to adapt their ways & their managing practices BUT MAKE CHANGES BEFORE THE COMPANIES BREAK This is what they should do as their companies blossom

BUT IN THE HIGHLY CHARGED ATMOSPHERE OF GROWTH

You will not find time to position your company for continuing success beyond the current budget cycle Good intentions may evaporate in the heat of day to day pressures What is expedient drives out what is important

Lead Your Employees for Efficiency &

Effectiveness Todays Employees- No Good or Mismanaged?

Has the work values that made them great have disappeared or as not as intense as those of competition?
Research had proved that it is not the work ethic that is declining & that the Problem is not about todays employees But about how they are BEING LED

Management must increasingly be both effective & Efficient.

FOCUS IS REQUIRED TO DO JUST THE RIGHT THINGS

STRATEGIC PLANNING WILL GET THOSE THINGS DONE RIGHT

Whatever the way you practice ...

...There has to be objectives & the Objectives has to be developed under three categories MARKET PERFORMANCE FINANCIAL PERFORMANCE NON MARKET PERFORMANCE

Excel at one thing!

BETTER IS THE KEY WORD That means If a product or a service or Enterprise is better ,then another product or a service or a Enterprise is worse That is what competition is You may rise to the limelight because of the weak competition Such luck usually does not last As the company emerges the level of play escalates

Build the Company for Long Haul

Product superiority

LOOK AT THE COMPETITIVE TRIANGLE

Price

convenience

Application Expertice

EXCEL AT ONE THING!

KEEP STRATEGY SIMPLE !

There are six simple strategies to build a Business Home base Market Expansion Product line Expansion Forward Integration Backward integration diversification

WHAT ARE THEY

MAKE IT EASY TO UNDERSTAND!

As those who execute them are simple ordinary executives Support the decisions with commitment The trick is to pick a strategy& then stick to it & make it work

SUMMARY OF WHAT WE HAVE DONE UP TO NOW

Necessary Managing Practices to hold it together before they break The challenge is to continually adjust everything to fit the oncoming flow of New Realities

Understand the operating Environment(Internal & External) Set Expectations Decide on Strategy Adapt the Organization Design Adapt the Organization Processes Adjust their style-Managing & Leading Get better at working with People Cultivate a desired Culture

PLAN EXECUTION-1
We are the beginning of another great journey - Bill Gates Have a correct Vision which is inspirational Anchored in a big external Reality Indigenous Timely Trackable in the real world over time Simple

PLAN EXECUTION -2
HAVE A RIGHT MISSION WHICH SHOULD BE EDUCATIONAL
Who - the Enterprise seeks to serve What-the Output of the Business How - It is Done

NEVER FORGET
To AIM -At some things to some people To SET Expectations by deciding on what things to what People To Develop a VISION- A succinct word picture of why the Enterprise seeks to continue- Both Enduring & Inspiring To have a MISSION-An educational statement about the Business in the near future To set OBJECTIVES - Building Blocks of Day to Day Management

Finally, the Builders of emerging Companies need to...

...Understand the operating environment Set expectations Decide on Strategy Adapt the Organization Design Adapt the organization Practices Adjust their style Get better at working with People Cultivate a desired Culture