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Productivity in the Context of PM

Definitions of Effectiveness and Efficiency

Types of Productivity

White Collar Productivity

Critical Barriers/ Problems to Productivity

Causes of Productivity Decline in Organizations

Productivity Improvement

Categories of Productivity Factors

Soft Factors

39.1 Competitiveness:

Competitiveness emerged strongly in new era of globalization describes “economic strength”

of any “organization” or position of certain company” with respect to its competitors in market


Competitiveness is process by which one entity strives to outperform another. Competitiveness

in Organization is Ability to get customers to choose your prod or svc over competing

alternatives on sustainable basis.

Competitiveness continually “sustained incorporated in productivity” resulting in high wages

and living standards competitiveness - demonstrated by “ability to meet, rest of free

international markets” while “expanding real income."

39.1.1 Indicators of Competitiveness:

Macro level competitiveness of nations reflects standard of living of their citizens. National

competitiveness consolidation of micro-level performances of company’s and individual is true

“Agents of Economic Growth”.

Competitiveness depends on productivity:

"Standard of living is determined by productivity of a nation's economy which is measured by the value

of goods and services (products) produced per unit of the nation's human, capital and natural resources".

Indicators of competitiveness:

Productivity: Efficiency with which goods and services are produced and provided and determined by:

  • Previous investments
  • Quality and performance of workforce,
  • Technology innovation
  • Quality of plant and equipment
  • Efficiency with which these factors of production are utilized

Productivity of “local” industries is of fundamental importance to competitiveness. It depends on:

1. Sophistication with “which company’s compete”

2. Quality of “microeconomic business environment".

When productivity and quality considered together competitiveness can be enhanced. Definition of

productivity successful project management organization create surplus through productive output,

productivity is output input agreement on consideration “quality and time”.

Productivity = Outputs (Time /Quality) Inputs

39.2 Productivity in the Context of Project Management:

39.2.1 Definition of Productivity:

1. Ratio of output to input by large number of professionals.

2. ILO Definition: “Ratio between “output of wealth produced” and “input resources used up” in

“process of production”.

3. Comparative tool for managers, industrial engineers, economists, and politicians.

Figure 39.2: Project Management System

39.2.2 Difference between Production and Productivity:

Production: Concerned with activity of “producing goods and or services”.

Productivity: “Efficient utilization of resources” (input) in “producing goods/services” (output).

The basic differences between production and productivity are as follows:

  • Production is quantity of output produced.
  • Productivity “ratio of output produced in input (s) used”.
  • Higher productivity means accomplishing more with same “amount of resources” or achieving higher output In terms of volume/quality for same input.

39.2.3 Messages of Productivity:

Taylor’s Message of Productivity:

Various pay plans based on output for surplus increase labor productivity not possible work


a. Provided ample reward

b. Adequate targets

c. Managerial help

Careful advance planning by manager

Managers to design work system for worker to do their best.

Fredrick Concluded:

Low productivity is matter of ignorance on part of labor and management ignorance. “Fair day’s

work” and “fair day pay” productivity enhancement answer to high wages/profits.

Peter Drucker Says:

Problem faced in developing countries is problem not of “underdevelopment but rather of under

management”. Actually productivity is most serious challenge confronting management.

39.2.4 Perspectives on Productivity:

Productivity – Manager’s Perspective:

Use “accounting ratios” for management-usually interested in productivity measures that enable it

to easily assess the present profitability of company.

Productivity – Engineer’s Perspective:

o Seek measures of physical assets and other resources. For example: Production/hour.

o Man hours/unit

o Material required/unit, material/consumption, utilization,

o Space utilization

May fail to relate to overall productivity.

Productivity – Behaviorist’s Perspective:

View productivity of people in organization in terms of time they spend at work versus total time

available a misleading measure.


Productivity – Accountant’s Perspective:

“Costing and budgeting” approach to productivity budget figure, rather than optimum achievable

values, used as standards can be a false impression of high productivity.

Productivity – Economist’s Perspective:

Partial measures, such as “labor productivity” employed by economists, total factor and total

productivity but again definitions do not agree.

39.3 Definition of Effectiveness and Efficiency:

Productivity implies effectiveness and efficiency both individual and organization performance.

Effectiveness is “achievement of objectives”. It entails promptly achieving stated objective.

Efficiency is “achievement of ends with least amount of resources. Resources to achieve

objective weighted against what is actually accomplished.

39.3 Types of Productivity:

1. Partial Productivity

2. Total Factor Productivity

3. Total Productivity

Total – Factor Productivity:

Ratio of “net output to sum of associated labor and capital” (factor) inputs net output- total output

minus intermediate goods and services purchased.

Finding of Survey in Different Industries

o Average, only 4.4 hours per day used productively

o 1.2 hours lost due to personal and other unavoidable delays

o hrs are simply wasted because of management’s inability to effectively “plan and control”

the worker’s tasks.

Productivity Loss:

Percent due to poor: “Planning and scheduling” of work.

25 Percent due to: “Unclear and untimely instructions”.

Percent due to: “Inability to adjust staff size” and duties during “peak and valley workload


25 Percent due to: “Poor co-ordination” of material flow, unavailability of needed tools, excess

travel time.

39.5 White-Collar Productivity:

Productivity of “white-collar workers” is no less important than that of direct labor or manufacturing

employees. It is usually least known, least analyzed, and least managed of all factors of productivity.

White collar employees are productive only 50% of time. Remainder is non-productive time and can

be traced to personal delays (15%) and improper management (35%).

Examples of White Collar Waste:

  • Poor staffing
  • Inadequate communication
  • Unproductive meeting and telephone conversations
  • Poor scheduling
  • Slack start and quiet times
  • Lack of communication between function
  • Information overload

39.6 Critical Barriers/Problems to Productivity:

  • Family-controlled industry
  • Earning easy money
  • Monopolistic market, in some segments, some high competitive
  • Erratic inflow of orders
  • Lack of productivity and quality culture
  • Shortage of funds low level codification
  • Automation -not encouraged
  • Low priority of market and commercial activities
  • Poor after service
  • Complicated government policy, rules and regulations
  • Poor infra structure support/road transport
  • Energy shortage
  • Poor working conditions, light, ventilation, safety, housekeeping
  • Non availability of basic material components (to be imported)
  • Unreliable suppliers

39.7 Causes of Productivity Decline in Organizations:

o Inability to measure, evaluates, and manages productivity of white collar employees. This

causes shocking waste of resources.

o Rewards and benefits given without requiring equivalent in productivity and


o Diffused authority and inefficiency in complex organizations, thereby, causing delays and

time lags.

o Organization expansion lowers productivity growth result in soaring costs.

o Low motivation among rising number of affluent workers with new attitudes.

o Late Deliveries caused by schedule have been disrupted by limited materials.

o Unresolved human conflicts difficulties in teamwork, resulting in project inefficiencies.

o Include legislative intrusions antiquated laws, resulting in constrained “management

options and prerogatives”.

o Specialization in work processes resulting in monotony and Boredom.

o Rapid technology changes and high costs, resulting in decline in new opportunities and


o Include demand of leisure time causing disruption in operations.

o Project manager’s inability to keep pace with the latest information and knowledge.

39.8 Productivity Improvement (PI):

o How can projects improve their productivity?

Productivity is composed of:

o People

o Operations variables

To improve productivity, management needs to focus on the following two points:

o Productivity does not just happen by “trying harder”. It must be planned.

o But how do you plan for productivity, and what factors are involved?

Improvement means “increase ratio of output of goods and services produced divided by input used to

produce”. Ratio can be included by either increase output, reducing input or both.


Financial and social benefits of “productivity improvement strategy” in project manager should be

greater than “implementation cost”, in long run.

Task of project manager is to evaluate those factors that have bearing on productivity and take

appropriate measures to use effectively. In order to raise productivity and to reduce cost, we must

eliminate bad features in design and specifications that cause excessive work contents.

Figure 39.3: Productivity Wheel

39.8.1 Productivity Improvement Factors:

Productivity improvement (PI) is not just “doing things better”, but more importantly, it is “doing

right things better”. Inter-relationships between labor, capital and socio-organizational environment

are important in a way that they are balanced and co-ordinate into integrated whole.

Three Main Productivity Factor Groups:

There are three major productivity factor groups:

o Job-related

o Resource-related

o Environment-related

39.9 Categories of Productivity Factors:

There are the two following major categories of productivity factors:


o External (not controllable)

o Internal (controllable)

External Factors: Beyond control of individual enterprise. Understanding of them can motivate

certain actions which migrates change enterprise’s or project behavior and its productivity in LR.

Internal Factors: Within its control first step towards productivity improvement is to identify

problem areas within these factor groups.

Figure 39.4: Integrated Model of Project Productivity Factors

39.10 Soft Factors:

People: Principal resource central factor in productivity improvement, drives people in organization

all have role to play as workers, engineers, managers, entrepreneurs, trade union members.

Each role has two aspects:

o Application

o Effectiveness

Application: Degree to which people apply themselves to their work. People differ not only in their

ability but also in their will to work.

Law of Behavior: Motivation decreases if it is either satisfied or blocked from satisfaction. Workers

may do their jobs work order working hard (no motivation), but even if they work to their full

capacity they would not be satisfied (motivation is blocked from satisfaction).

Motivation is basic to all human behavior and to efforts in productivity improvement. Material needs

predominant, but does not mean that non-financial incentives not effective or have no place.

Project manager see what stimulates and maintains motivation to bring about changes in attitude of

managers, engineers and workers. Develop set of values conducive to higher productivity.

Workers’ success in increasing productivity by:

  • Rewards
  • Improving recognition
  • Involvement
  • Learning Opportunities
  • Elimination of negative rewards

Execute effective incentive schemes, result significant improvement in productivity. Wage incentives

related to amount of change accomplishes.

Project manager should work to encourage workers to apply their creative talents by taking special

interest in their problems by promoting favorable social climate.

2. Effectiveness: Effectiveness is extent to which application of human effort brings desired results in

output and quality. It is the ability to do productive job improved through:

  • Training and development
  • Job rotation and placements, systematic job progression (promotion)
  • Career planning

Key approaches, methods and techniques to improve labor productivity:

  • Wages and salaries
  • Training and education
  • Social security – pensions and health plans
  • Rewards
  • Incentive plans
  • Participation or co-determination
  • Contract negotiations
  • Attitudes to work, to supervision and to change
  • Motivation to higher productivity
  • Co-operation
  • Organization development
  • Improved communications
  • Suggestion systems
  • Career planning
  • Attendance
  • Turnover
  • Job security

Financial Incentives (Individual and Group):

Individual plan is made to give financial incentives on basis of individual performance.

Types of Individual Plan:

  • Piece work plan
  • Standard hour plan
  • Measured day work plan
  • Emerson plan

Group plan is made to give financial incentives on basis of group performance.

Types of Group Plan:

  • Scanlon plan
  • Ruker plan
  • Kaiser plan
  • Tonnage plane
  • Dollar sales plan
  • Profit sharing
  • Improshare

Fringe Benefits:

Some intangible means of rewarding and encouraging management employee. These are referred to as

“fringes” and include the following:

  • Free Medical
  • Insurance
  • Free Air
  • Fares
  • Entertainment
  • Company Car
  • Telephone
  • Subsidized education etc.

Employee Promotion:

Both financial and non-financial form of motivation: Up gradation of employee status is

natural way to recognize skill knowledge, proficiency, and efforts to job.

Maslow’s Hierarchy of Needs.

Only dissatisfied needs can motivate workers to high productivity,) physiological, safety, security,

belongingness, self esteem, self actualization (realizations of one potential)

  • Japanese on basis of seniority
  • USA on basis of extra ordinary performance
  • Debatable issue

Job Enrichment:

Non-financial-motivation technique that provides

  • Variety in assigned tasks
  • Employment autonomy and discretion in performing talks
  • Feed back on performance
  • Herzberg’s two-factor theory applied

Two Factors Theory:

“Motivators” factors leading to job satisfaction. Achievement recognition, nature of work responsibility,

growth etc. Factors leading to dissatisfaction avoidance are Hygiene, Company’s policy, admin,

supervision, pay status

Job Enlargement:

  • Enlargement of responsibilities associated with job.
  • Enhanced scope and responsibility. Proponents say job get to be boring and monotonous, causing high absenteeism, high turnover, and low morale, with consequent low productivity.
  • Volvo Sweden. Worker could stamp name on engine.305

Job Rotation:

Involves rotation of workers in different jobs for short periods of time provide “all-rounder” in

company’s op –for which - not originally hired for:

Relieves boredom by flexibility in job assignments.

Not retraining conscious -on going basis effort to provide opportunity to exercise freedom in

staying on a job for a fixed period.

Workers Participation and Empowerment:

Over coming resistance to change through employee involvement in planning and implementing change,

mental and emotional involvement in groups encourage workers to contribute in group goals sharing of


Workers Participation Approaches:

Following are the approaches for workers participation in quality culture change and empowerment:

  • Quality control circles
  • Productivity quality teams
  • Productivity action teams
  • Productivity circles
  • Productivity maintenance group
  • Employee participation group

Skill Enhancement:

Formalized techniques to increase skills needed to perform job. Skill training needed for employee when

employee’s attitude is positive but his abilities are low.

In information age there is a great need for skill at all levels.

Management by Objectives (MBO):

Managerial motivation techniques, aids motivation on all participation by having superior and subordinate

managers jointly identify common goals, carefully define them. Together monitor progress towards

achieving results to both employer and employee.

  • In setting up goals care must be taken.
  • Set simplistic goals.
  • Set goals without adequate resources.
  • Not set harsh goals that cause resentment.
  • If properly administered, MBO can create joint goals and can help in team building.
  • MBO goals provide fairness to both employee and employer.

Working Condition Improvement – Quality of Work Life (QWL):

It is often emphasized but rarely applied technique that involves detailed audit of working conditions

designing improved conditions of working installing and maintaining improvements in working


Designing Improved Factors:

They include:

  • Temperature, light and humidity
  • Noise
  • Colors of surroundings
  • Extent of handling hazardous material, parts or product
  • Extent of manual handling of heavy items


  • Seeks to achieve improved human productivity by increasing ability levels of workforce
  • Seeks to meet demands of growth and change
  • Training may actually decrease total productivity initially
  • Some type of training
  • On the job targets
  • Apprenticeship
  • Internship
  • Outside course
  • Visitation training

Role Perception:

  • Refer to manner in which individual defines his or her job
  • Type of effort employee believes is essential for effective job performance.
  • If workers see high or low productivity as path to attainment of one or more of their personal goals in work situation, they will tend to be high or low processors.

Quality of Supervision:

  • Concerned with work of creating and maintaining environments in which people can accomplish goals efficiently and effectively.
  • In order to improve supervision quality itself, supervisors must be trained in
  • Interpersonal skills
  • Human management
  • Group dynamic
  • Other behavioral tools


Management shows acknowledgement of employee’s outstanding performance in terms of improved

productivity, ideas, or any act of good workmanship. They include:

  • Pay raise
  • Bonus
  • Awards
  • Certificate of appreciation
  • Special highlights in company newsletter
  • Special parking provision
  • Engraving on plaque in cafeteria


  • Punishment contingency attempt to decrease likelihood of particular behavior occurring by making punishment contingency on behavior.
  • Common punishment contingencies used in work organizations include:
  • Disciplinary layoffs
  • Transfer to undesirable jobs
  • Withholding salary increases

Quality Circles: Group of employees who voluntarily cooperative to solve problems related to

production, quality, work environment, maintenance scheduling, or anything that affects these


Productivity and Quality Teams:

Small groups of people doing similar tasks meet regularly to select, investigate, and solve problems

related to workplace, products, and services. Effective means of improving employee morale, quality,


and productivity in organizations. Team spirit, positive thinking, and philosophy of achieving

excellence are three important characteristics of productivity and quality teams.

Zero Defects:

Zero defects program attempts to improve quality by changing workers attitudes. Their theme, “do it

right first time” stresses error free performance. It relies on workers to identify error prone situations

with assumption that people best prepared to eliminate errors are those who create them.

Time Management:

  • Powerful technique, particularly for white collar, supervisory and management personnel
  • Time management involves minimization of wasteful elements of person’s administrative work.
  • Interruptions by drop-in visitors (without appointment)
  • Attending lengthy and unnecessary meetings that accomplish very little
  • Inability to say “no” for some tasks
  • Procrastination and lack of decisiveness
  • Inability to delegate work
  • Taking on much more than can be handled
  • Lack of responsibility and authority to do certain jobs
  • Delayed, inaccurate or inadequate information
  • Taking orders from too many people
  • Handling too many “crisis” situations
  • Lack of organization of tasks by priority or target dates
  • Lack of determination to complete tasks assigned
  • Lack of organization on and around desk
  • Unnecessary socialization
  • Poor filling system
  • Making unnecessary trips to people, departments, copy machines etc.
  • Excessive conversation time
  • Too many rescheduling of meeting, personal engagements etc.

To minimize these “time-wasters”, time management applies simple, common-sensible but very effective

programming rules to very item of work, one of which is: “never handle same paper twice”. Time

management always improves human productivity. It is too often ignored, particular by management

people who preach productivity to their subordinates.

  • Flex Time:
  • Employees are given freedom in determining their hours of work
  • Core time (hours when all employees must be at work)
  • Flexible time (hours when employees can vary their time of arrival and departure)

Compressed Work Week:

  • Working for same number of hours but for fewer days week
  • Hours
  • 08 hours 05 days
  • 10 hours 04 days


Integration of interest of stockholders, board of directors, management at all levels and all employees in

consistent manner both within and outside physical boundaries of organization.

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