Evaluation of the productivity concept


Differing perspectives on productivity measurement

In practice both types of measures are widely used by people associated with the same organization. Problems arise when each individual uses different types of measures for different purposes and each user, whether viewing the company internally or externally, has his or her own perspective. Often measures are used because of tradition, or because they are operationally the most practical, not necessarily the best or the most appropriate.

As there is no one measure of productivity that will suit all circumstances most companies adopt a range of measures. In general, senior managers at the top of an organization hierarchy will need to incorporate ratios of inputs and outputs from all the resources used in the organization. As at this level planning horizons are also quite long, the requirement is for a systems measure of productivity.

Productivity viewed from the position of a first-line supervisor would include a much more limited range of inputs and outputs as the supervisor has no need to consider the total system. Still further down, at the level of the direct worker, the measurement of performance may well be limited to very simple ratios, and feedback will often be immediate, especially if payment is dependent upon performance. Methods of assessing performance therefore will not only depend on position, but also on the level of managerial responsibility.

Research and development departments provide a good illustration of the problems of measuring productivity. They receive heavy investment and new projects may have very long payback periods, requiring much risk and little measurable short-term benefit. How can the cost of such work be incorporated into a measure and, if it can, say, by yearly apportionment of cost, how can the risks and benefits be satisfactorily accounted for?

Individuals and bodies external to the organization also carefully view productivity of organizations. Governments insist on productivity to improve performance on a national basis, to control inflation or to improve the balance of payments.

Investors, too, have their interests. They are much more likely to consider the market price of shares in assessing risk and will be anxious to ensure that they receive acceptable returns on their investments.

Finally (although this list is not exhaustive), the customer will also judge companies' performances in relation to how well they satisfy their needs, whether it is the quality of the products, service or delivery. All will be looking for competitive value.

The lining-up of these perceptions and objectives, so that all personnel can contribute to a uniform direction and purpose, is one of the most important problems facing managers concerned with performance measurement. This particular phenomenon is called goal congruency.

If those people involved in line functions of the work process, plus those who manage it as well as the end users, are in agreement about the quality attributes of the work being done, then congruency exists. Crandall and Wooton (1978) point out that "if there is a lack of agreement about the outcomes of the work process however, efficiency-oriented criteria will not measure what is valued by the users of the work outcomes"

Next | Goal Based Performance Measures