Tuesday, March 5, 2013

Problems in Measuring Productivity - Difficulties

The difficulties or problems in measuring productivity are listed below

Image Credits © Prof. Mudit Katyani.
  1. Difficulty in barometer achievement : The achievement of an industry may be abstinent in agreement of aggregate (units) or amount (dollars). It is actual difficult to amalgamate both these factors.
    1. If the achievement is constant (similar), again the abundance can be abstinent in agreement of volume.
    2. If the achievement is not homogeneous, again the abundance can be abstinent in agreement of value.
    3. However, if some units are constant and added non-homogeneous, again the industry will face difficulties in barometer productivity.
    Similarly, it is actual difficult to acquisition out whether the by-products and work-in-progress should be included in achievement or not. If it is included, again it is actual harder to acquisition its value.
  2. Difficulty in barometer inputs : Most industries do not accept able annal of the inputs of land, labor, basic and machines. Even if such annal are available, it is actual difficult to account the exact amount of man hours formed i.e. the ascribe of labor.
  3. Factorial abundance :
    • Factorial Abundance agency to account the abundance of altered factors of assembly separately.
    • Some administration experts say that a individual agency of assembly cannot aftermath annihilation by itself. Therefore, it has no productivity. A individual agency of assembly has abundance alone if it is accumulated with added factors of production.
    • Therefore, according to these administration experts, the abstraction of factorial abundance is meaningless.
  4. Changing altitude : There is a connected change in the amount of inputs and outputs, superior of raw-materials, machines and tools, superior of labor, etc. All this creates difficulties in barometer productivity.
  5. Account area : It is actual difficult to admeasurement the abundance of account sectors like Banking, Insurance, Education, etc. This is because the achievement of the account area is intangible.
  6. Altered periods : It is actual difficult to analyze the abundance of two altered periods. For example, allegory of abundance during a war aeon with a accord aeon is meaningless.
  7. Difficulty in barometer man-hours : It is difficult to acquisition out the exact amount of advantageous man-hours. This is because accomplishment paid to the advisers aswell includes the amount of abandoned time.
  8. Technological change : Changes in technology will could cause a change in the attributes and superior of output. Therefore, altitude of abundance will become difficult.

Nine Main Benefits of Higher Productivity

Benefits of higher productivity

The following image depicts a list of nine benefits of higher productivity.
Image credits © Prof. Mudit Katyani.

The nine main benefits of higher productivity are:
  1. Higher profit,
  2. Employees welfare,
  3. Better return
  4. Nice relations,
  5. Customer satisfaction,
  6. Good credit rating,
  7. Goodwill,
  8. Better credit terms, and
  9. Low turnover.
Now let's discuss briefly these important benefits of higher productivity.
  1. Higher profit : Higher productivity enables the company to produce more output. This results in more profit to it. This profit can be used for expansion and other activities.
  2. Employees welfare : Higher productivity brings more profit to the company. This profit can be used to provide better facilities and working conditions to the employees. So, it results in welfare of the employees.
  3. Better return : The company gets better return on investment due to higher productivity. So, they pay a better dividend (share of profit) to the shareholders. The market price of the share will also increase.
  4. Nice relations : Higher productivity results in nice relations between the management and the employees. Good working conditions, facilities and incentives motivates employees to give their best to the organization.
  5. Customer satisfaction : Higher productivity results in better customer satisfaction. This is because customers are provided with good-quality products at low prices. Satisfaction of customers will result in their loyalty towards the company.
  6. Good credit rating : Higher productivity results in a good credit rating by financial institutions. This will enable the company to get cheap funds from the market to meet working and fixed capital requirements.
  7. Goodwill : Due to higher productivity, the company will have a good corporate image (goodwill) in the minds of social entities. This includes: The shareholders, government, suppliers, financial institutions, customers, etc.
  8. Better credit terms : Higher productivity helps the company to get better terms from the suppliers. The suppliers may give better credit terms due to its goodwill.
  9. Low turnover : Higher productivity enables the company to provide better facilities and working conditions to the employees. This will make the employees loyal. Hence, employee turnover and absenteeism will reduce.