3.4.3 Making operational decisions to improve performance: increasing effciency and productivity

Question 1

Efficiency

Answer 1

Production is maximised based on given levels of capital, land, labour and enterprise

Question 2

Labour productivity

Answer 2

Concerned with the amount (volume) of output that is obtained from each employee

Question 3

Why does labour productivity matter?

Answer 3

-More products= more money
-Reward hardworking staff
-Remove under performing staff (allows training to be considered)
-Piece rate pay ( Employers pay piece-rate workers for the number of tasks they perform, or per unit of work they complete)
-Labour costs are a significant amount of total costs
-Business efficiency and profitability
-Remain competitive, keep costs low

Question 4

Labour productivity formula

Answer 4

output per period (units)/number of employees at work = output per employee

Question 5

What factors influence labour productivity

Answer 5

-Staff treatment
-Working environment/conditions
-Motivation levels
-Type of management
-Rewards
-Skills of the workforce/ability
-Methods of production organisation
-Training and support
-External factors
-Quality of technology/machinery

Question 6

Ways to improve labour productivity

Answer 6

-Motivate/train staff
-Offer rewards
-Contracts = job security
-Better quality equipment/tech
-Improve working conditions

Question 7

Potential problems when trying to increase labour productivity

Answer 7

-Costs
-Time consuming
-Employee resistance=doesn’t want change
-Might demand higher pay for improved productivity
-Potential ‘track off’ with quality

Question 8

Labour capital

Answer 8

Unit costs and resource intensity

Question 9

Labour intensive

Answer 9

Production relies on using labour resources

Question 10

Labour capital

Answer 10

Production relies on using capital resources

Question 11

Labour intensive examples

Answer 11

-Food processing
-Hotels/restaurants
-Hairdressing
-Fruit farming

Question 12

Capital intensive examples

Answer 12

-Oil extraction and refining
-Car manufacturing
-Web hosting
-Transport infrastructure

Question 13

Labour intensive benefits

Answer 13

-Fast production
-Supply jobs
-Customer service
-Easier to train staff
-Flexible staff
-Unit costs still low

Question 14

Labour intensive drawbacks

Answer 14

-Unreliable
-Unmotivated staff can lead to decrease in work
-Employee laws
-Expensive
-May be less productive
-Most likely to make mistakes

Question 15

Capital intensive benefits

Answer 15

-More reliable
-Don’t often make mistakes/no human error
-Cheaper in the long term
-Efficient increased productivity
-Low labour costs

Question 16

Capital intensive drawbacks

Answer 16

-Could break down
-Costly to buy machinery (short term)
-Constant maintenance
-Rely on electricity
-Generate resistance to change from labour force

Question 17

Operational efficiency

Answer 17

Involves maximising the output achieved from given inputs including machinery, materials and people

Question 18

Improving efficiency

Answer 18

-Better/improved technology
-Train staff
-Improve productivity
-Increase capacity utilisation
Optimal resource mix (labour intensive vs capital intensive)

Question 19

Low efficiency

Answer 19

Low output, not using all resources

Question 20

High efficiency

Answer 20

High output, using all resources, pushing to the max

Question 21

Importance of capacity

Answer 21

-Ability to match supply to demand
-Image/public perception
-Workforce motivation
-Ability to achieve business objectives
-Inverse relationship between capacity utilisation and unit costs

Question 22

Difficulties increasing labour productivity

Answer 22

-May impact negatively on quality and customer satisfaction
-Damage to long term reputation
-Increase waste affecting unit costs
-Employees may feel exploited
-Working harder for the same pay, may work with unions to negotiate higher pay
-Business benefiting but not the employees
-Increased workload leading to stress and demotivate