Productivity

Question 1

What is Productivity?

Answer 1

Measures the amount of output produced by a business in a given time period.

Labour productivity
Capital productivity

Question 2

Labour productivity.

Answer 2

Examines the average output produced per worker in a given time period.

Equation = Total output (Time p.) / No. workers employed (Time P.)

Question 3

Capital productivity

Answer 3

Shows the average output produce per unit of capital (such as a piece of machinery)

Equation = Total output (Time p) / Amount of capital used (Time p)

Question 4

What are the advantages of increased productivity

Answer 4

• More output produced per time period. This is beneficial to businesses keeping up with demand as a greater quantity of goods can be sold.
• Lower costs. If a worker is now capable of producing more on average in a given time period, fewer employees are required to produce the firm’s output target. This means labour costs can be reduced, driving down unit costs of producing each product.
• Greater product price competitiveness. Lower costs can be passed down onto consumer product prices, meaning a business can achieve greater sales revenue and experience greater profit margins.

Question 5

Methods to improve productivity

Answer 5

1. Better training
2. Financial and Non-financial methods of motivation
3. Specialisation
4. Kaizen Groups
5. Mechanisation and investment in new technology

Question 6

Better Training

Answer 6

More training should improve the skills of workers, allowing them to be more productive.

Investment into staff should also improve motivation, reducing absenteeism and labour turnover.

However, there is a high financial cost attached to training as well as the lost production when staff are being trained. There is also the risk staff may demand higher wages with their newly earnt skills or move to a rival organisation.

Question 7

Financial methods of motivation

Answer 7

Theory X attitude used by Taylor. Piece rates, output bonuses and profit-sharing schemes may boost motivation to work harder.

However, they incur a financial cost to the business and quality maybe jeopardised by workers to achieve the highest output as possible for the possibility of greater pay.

Question 8

Non-Financial methods of motivation

Answer 8

Studied by Mayo, Herzberg and Maslow. Conditions in the workplace, opportunities for promotion, feeling valued by the business. Job rotation, empowerment and enrichment. Keeping workers motivated increases their productivity.

Question 9

Specialisation

Answer 9

Focusing workers on a few certain skills can increase their efficiency when conducting tasks.

Division of labour along production lines – workers focus on one or two tasks throughout the production process. However, Short term productivity gains buy long term losses as repetitive nature of the tasks lead to low motivation levels, high labour turnover and absenteeism.

Question 10

Kaizen Groups

Answer 10

Philosophy that businesses should be constantly making small, incremental improvements to the business to improve the productivity of the organisation.

Workers meet in small groups at all levels of command and production to discuss initiatives that may change how work is organised and may be completed

Question 11

Mechanisation & investment in new technology

Answer 11

Mechanisation boosts productivity as machines can operate 24/7, may produce fewer defects and don’t require breaks or absences, unlike human labour.

However, set up costs and breakage costs are very high and there is a lack of flexibility involved. Workers have an inherent capacity to find solutions to complex problems.

Question 12

What is the best method of improving productivity?

Answer 12

• For businesses that are already highly mechanised – investing in updated technology is the best bet. However, can the firm afford this?
• Firms with large work forces may do better to invest in training and gradual mechanisation. However, the appropriateness of mechanisation depends on the history and culture of the organisation. A company with a historic culture of retaining and valuing its workforce may suffer from heavy resistance associated with mechanisation job losses.
• In organisations with a highly motivated workforce, initiatives such as the division of labour will do more worse than good. Appropriate actions here may be more on kaizen operations or non-financial methods such as job enrichment and empowerment