THE CONCEPT OF PRODUCTIVITY

& ITS IMPLEMENTATION

BY
T.M.JAYASEKERA

THE CONCEPT OF PRODUCTIVITY

& ITS IMPLEMENTATION

PRESENTED BY

T.M.JAYASEKERA B.Sc. Eng. MBA,C.Eng.

FIE,FCIWEM,FIM.,FIMGT,
MSLIM, MICE(Lond)
Managing Director -Innovative Skills (Pvt.) Ltd
291/50.Havelock Gardens ,Colombo -6-Tel/Fax594378

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

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?
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

TO MANY PEOPLE EFFECTIVE

USE OF RESOURCES CAN MEAN
DEVELOPMENTOF TECHNOLOGY
& ORGANIZATION,

But it is often more important for

total productivity improvement
to contribute to human
development in its broadest
sense

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 todays &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

They are;
those who does the work & those who
get the credit

are two kinds of people in this world -

He told me to 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 RE-INVESTMENT
As the other side of the river is deadly!!!

What is strategic
Management?
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

WHAT ARE THEY

Home base
Market Expansion
Product line
Expansion
Forward Integration
Backward
integration
diversification

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

A VERY BIG THANK YOU

TO
ALL OF YOU
-T.M.Jayasekera