THE CONCEPT OF PRODUCTIVITY & ITS IMPLEMENTATION

1. THE CONCEPT OF PRODUCTIVITY & ITS IMPLEMENTATION BY T.M.JAYASEKERA

2. THE CONCEPT OF PRODUCTIVITY & ITS IMPLEMENTATION PRESENTED BY T.M.JAYASEKERAB.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

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

4. 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

5. DEFINITION OF PRODUCTIVITY • Very simply, • Productivity = Output Input For any type of organization

6. 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

7. 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

8. 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.

9. 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

10. TYPES OF PRODUCTIVITY MEASURES • Single Factor productivity • Multi Factor Productivity • Total Factor Productivity

11. OTHER THOUGHTS ON PRODUCTIVITY • “Productivity is an attitude of mind” • “Productivity means doing something better today than yesterday” • “Productivity means continuous improvement”

12. 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

13. WHY PRODUCTIVITY IS IMPORTANT Higher standard of living • Higher GDP • per capita Higher Investment Higher Productivity

14. 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.

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

16. 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

17. 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

18. THE ‘SOFT’ ASPECTS OF PRODUCTIVITY • Productivity culture • Team work • Quality work • “Delighting” customers • Work ethic • Caring for the work force

19. 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

20. PRODUCTIVITY LEVELS • National Productivity • Industry Productivity • Company Productivity • Divisional Productivity • Branch Productivity • Individual Productivity

21. 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

22. PRODUCTIVITY OF SRILANKA • How do we compare with others in Asia • What inferences can we draw

23. 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)

24. 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

25. 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

26. MICRO-LEVEL PRODUCTIVITY INDICATORS • Ratios which measure: • Competitiveness • Labour productivity • Capital productivity • Business Returns & profitability • Process Efficiency

27. COMPARING PRODUCTIVITY • Cross sectional comparison • Time series comparison

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

29. 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

30. MISCONCEPTION - I • Productivity = Production • Productivity is merely a more “sophisticated” word for production

31. MISCONCEPTION - II Productivity means only Labour Productivity

32. 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

33. 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

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

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

36. MISCONCEPTION - 6 Productivity can be increased by cutting costs across the board

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

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

39. MISCONCEPTION - 9 Productivity is relevant only in an open economy

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

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

42. SO DO NOT GET MISLED BY THESE MISCONCEPTIONS

43. HOW DO WE IMPROVE PRODUCTIVITY First point to remember is the M I G cycle

44. THE M I G CYCLE GAIN SHARE MEASURE IMPROVE

45. THE PROFIT GOAL PROFIT = REVENUE - COSTS

46. MAJOR STEPS Analyze the Revenues Analyze the Costs And then Prioritize Find the Vital Few Components of cost

47. ANALYZE REVENUE SOURCES

48. ANALYZE COSTS

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

50. 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