What is the importance of productivity measurement in an organization?
its the question from the subject "PRINCIPLES OF MANAGEMENT".... i need an answer which cud b written in the T.Y.B.A.F (university) exam....
Productivity of an organization is defined as the ratio of outputs produced by the organization and the resources consumed in the process. Thus we can describe productivity mathematically as:
Productivity = Output / Inputs
Here the output refers to the quantity of and services produced by the company, and inputs refers to the quantities of resources such as labor, material, physical facilities, and energy consumed for producing the same.
Productivity is used to assess the extent to which certain outputs can be extracted from a given input. We can measure productivity for a single input resource such as manpower used, or for multiple resources. There can be many different types of productivity measurement depending on the type of resources considered. Some of the most common types of productivity measurements include labor productivity, machine or capital productivity, material productivity, and land productivity. Here the term ‘land’ is used to denote all natural resources rather than just land.
When it is desirable to determine productivity involving more than one type of inputs and/or outputs, we can use some weighted measure of input and output quantities.
Productivity may be measured for all the factors of production taken together. This measure of productivity, called total factor productivity, is generally used for measuring changes in productivity due to reasons other than those of factors employed. For example, the climatic variations may affect the agricultural production of a country. The most widely used measure of this type is in monetary terms. Thus, combined productivity of all the materials used in manufacture of steel may be measured in terms of cost of raw materials per ton of steel produced.
Measures of productivity describe how well the resources of an organization are being used to produce input. They are very useful in achieving and maintaining high level of performance in any organization, particularly in improving the efficiency of various operations within the organization as well as for the total organization. Productivity measures are also used for planning, monitoring, and improving performance at national levels.
Productivity measures provide a means to managers to ascertain, plan control and improve efficiency at different levels of organization. The also facilitate comparison of performance of different companies within a market or industry. This helps manager set improvement targets for organization’s long term strategic plans, and in developing suitable competitive strategy.
Productivity measures are also essential for motivating employees through payment of incentive for high productivity. In addition, the availability of comparative performance data itself becomes a tool for self motivation of employees.
In summary we can say that measures of productivity are not just important for good performance in all organizations – they are essential. No organization can continue to operate for long without using some productivity measures, and their performance is influence by the nature of productivity measures used.