THE CONCEPT OF PRODUCTIVITY & ITS IMPLEMENTATIONBY T.M.JAYASEKERA

THE CONCEPT OF PRODUCTIVITY & ITS IMPLEMENTATIONPRESENTED BY T.M.JAYASEKERA B.Sc. Eng. MBA,C.Eng. FIE,FCIWEM,FIM.,FIMGT,MSLIM, MICE(Lond)Managing Director -Innovative Skills (Pvt.) Ltd291/50.Havelock Gardens ,Colombo -6-Tel/Fax594378

PRODUCTIVITY

What is it?Why do we need it?How do we measure it? How do we improve it?How do we implement it ?

RESOURCES OF AN ORGANIZATIONWhether Public or Private;The resources that are available to them are:Land & BuildingsMaterialsPlant, Machines & EquipmentEnergyPeopleMoney

DEFINITION OF PRODUCTIVITY

Very simply,Productivity = Output InputFor any type of organization

EXAMPLES OF OUTPUTWhether the organization is public or private the outputs are ;Accomplishment of a taskLength of an outputDistance travelledNumber of pieces producedWeight of production

EXAMPLES OF OUTPUT(Contd.)

Volume of outputValue of outputNo. of documents processedTime taken to carry out a jobNo of jobs attendedNo. of customers served

EXAMPLES OF INPUTLabour force or man hours, man days. Etc..Labour cost (Rs)Area of land(in hectares)Kg. Of material or material cost in Rs.Volume of material or fluidLength of materialsquare area of spaceUnits of powerTime etc.

IMPROVING PRODUCTIVITY

Output = Input Methods of improving ProductivityIncrease output while input remains sameDecrease input while output remains sameIncrease input resulting in a very large increase in outputDecrease input by a very large amount with a resultant small reduction in output

TYPES OF PRODUCTIVITY MEASURES

Single Factor productivityMulti Factor ProductivityTotal Factor Productivity

OTHER THOUGHTS ON PRODUCTIVITY

Productivity is an attitude of mindProductivity means doing something better today than yesterdayProductivity means continuous improvement

ACCORDING TO MICHAEL PORTERThe wealthy nations they are the productive nations

Productivity makes you wealthy, it allows you to support high wages, it allows you to support high returns on capital Michael Porter

WHY PRODUCTIVITY IS IMPORTANT

Higher standard of living Higher GDPper capitaHigherInvestment HigherProductivity

ARE WE STILL THE SECOND HIGHEST IN ASIA IN LITERACY?

NO!

We are not even in the first ten today.Countries with stronger economies have beaten us.

THE NEED OF THE HOUR

Massive Investment !Massive increases in productivity !

THE BASIC APPROACHES TO PRODUCTIVITY IMPROVEMENTInvestment in high output and modern plant & equipment and new technology - capital intensive approachImproving the efficiency and effectiveness of existing resources - better management approach

THE TWO ASPECTS OF PRODUCTIVITY

The soft or qualitative aspects - to create an environment conducive to productivityThe technical or quantitative aspect - to measure productivity

THE SOFT ASPECTS OF PRODUCTIVITYProductivity cultureTeam workQuality workDelighting customersWork ethicCaring for the work force

The quantitative aspects of productivity

By this is meant the concepts behind productivity measurement and their application to performance measurement at the economy and company level

PRODUCTIVITY LEVELS

National ProductivityIndustry ProductivityCompany ProductivityDivisional ProductivityBranch ProductivityIndividual Productivity

NATIONAL PRODUCTIVITY

= GDP EMPLOYED WORK FORCE

This is a single factor productivity measure and therefore wrong inferences may be made by comparing one country with another

PRODUCTIVITY OF SRI LANKA

How do we compare with others in Asia

What inferences can we draw

ORGANIZATION PRODUCTIVITY- HOW TO MEASURE ?

The best method is to useAdded Value( as output) per single factor of output(Added value measures the wealth creation)

Calculating Added ValueThe subtraction method:(Wealth Generation Approach)Added Value = Total output less Bought-in materials and services The Addition method(Wealth Distribution Approach)Added Value = Labour cost + Depreciation + Taxes + Interest + Profit

EXAMPLES OF ADDED VALUE

Added Value per employeeAdded Value per Rs of labour costAdded Value per Kg of materialAdded Value per KWH of powerAdded Value per litre of fuel

MICRO-LEVEL PRODUCTIVITY INDICATORSRatios which measure:CompetitivenessLabour productivityCapital productivityBusiness Returns & profitabilityProcess Efficiency

COMPARING PRODUCTIVITY

Cross sectional comparison

Time series comparison

PRODUCTIVITY IS ALSO...

EFFICIENCY (Doing things right) + EFFECTIVENESS (Doing the right things) Do the right thing and do it right now

MISCONCEPTIONS ABOUT PRODUCTIVITYPeople fear, hate, feel let down, complain about productivity, very often because they have misunderstood it.

There are several misconceptions about Productivity

MISCONCEPTION - I

Productivity = Production

Productivity is merely a more sophisticated word for production

MISCONCEPTION - II

Productivity means only Labour Productivity

MISCONCEPTION - 3Productivity can be increased by getting people to work harder TRUE TO SOME EXTENT But this is labour intensity NOT real productivity. Real productivity means working more intelligently not harder

MISCONCEPTION -4

Higher productivity causes retrenchment and large scale loss of jobs

This may happen in the short term but the long term benefits outweigh this disadvantage

Misconception -4(Contd.) If there is low productivitythen in the long term there will be severe, large scale loss of jobs.

MISCONCEPTION - 5

Productivity is relevant only in manufacturing andnot relevant elsewhere

MISCONCEPTION - 6

Productivity can be increased by cutting costs across the board

MISCONCEPTION - 7Productivity and Quality are trade offs. You cannot increase one without affecting the other

MISCONCEPTION - 8 Productivity is directlyrelated to profits. In other words a profitable organization is always aproductive one

MISCONCEPTION - 9

Productivity is relevant only in an open economy

MISCONCEPTION - 10

Productivity is only for commercial enterprisesand not for the public sector

MISCONCEPTION - 11

Productivity is for organizations and not for you and me

SO DO NOT GET MISLED BY THESE MISCONCEPTIONS

HOW DO WE IMPROVE PRODUCTIVITY

First point to rememberis the M I G cycle

THE M I G CYCLEMEASUREIMPROVEGAIN SHARE

THE PROFIT GOAL

PROFIT = REVENUE - COSTS

MAJOR STEPS

Analyze the Revenues Analyze the Costs And then Prioritize

Find the Vital Few Components of cost

ANALYZE REVENUE SOURCES

ANALYZE COSTS

CLOSELY LOOK ATLabour costsMaterial costsEnergy costsFinance costsOverhead costs

IMPROVING LABOUR PRODUCTIVITYImproving working conditions- lighting, ventilation, noise(music), temperature, work timesUsing appropriate and better toolsErgonomics and better work station layout.Improving factory, stores & office layout.Improving the method/process - use 5Ws & IHImproving the nutritional status of the workerImproving industrial housekeeping(5s) and safetyImproving welfare facilities and worker motivation

USE THE BRAINS OF THE WORKER Quality CirclesStaff Suggestion SchemesKaizen System(Seiri-sort,Seiton-Set-order, Seiso-clean-up-Shine Seiketsu- standardize, Shitsuke-Sustain-Training & Discipline)Self Directed Work Teams3 Mu -Muda(Waste), Muri-(Strain),Mura(Discrepancy)

IMPROVING CAPITAL PRODUCTIVITY

Implement TQM Reduce Working capitalReduce floor spaceUtilize machinery & equipment betteretc..

IMPROVING MATERIAL PRODUCTIVITY

Cheaper materialAlternative materialCheaper sourcesBetter utilization

IMPROVING ENERGY PRODUCTIVITY

Improve power factorReduce wastageChange processes for less heatingStudy working proceduresetc.

QUALITY OF WORK FORCEUse A system of comparison based onWork force performanceWork force characteristicsWork force organization & practices

PRODUCTIVITY STARTS WITH YOUThink of productivity every minuteBe organized - do 5sImplement 1 is best campaignOne hour meetingsOne page memosOne copy documentsOne minute telephone calls

IMPLEMENT A Kaizen cultureStaff suggestion schemeSmall group activities5sAn environment which appreciates productivityConvince the work force of benefits

THIS IS THE NATIONAL PRODUCTIVITY DECADE Remember! I996-2005 My effort is only to create awareness and to prepare a climate conductive to productivity improvement

MAKE PRODUCTIVITY A WAY OF LIFE

Think ProductivityTalk ProductivityDemonstrate ProductivityBe Productive at Home, on the Road, and in Office

REMEMBER!

Productivity starts with You !

-Essence of Productivity Improvement

WHAT IS IT ALL ABOUT !

COMPETITIVE LEVEL OF PRODUCTIVITYNO ORGANIZATION CAN CONTINUE TO EXIST UNLESS IT MAINTAINS A COMPETITIVE LEVEL OF PRODUCTIVITY

ORGANIZATIONS WHICH DO NOT SUCCEED IN THIS ARE DOOMED TO FAIL THROUGH STAGNATION FOLLOWED BY BANKRUPTCY OR CLOSURE

WHAT IS PRODUCTIVITY IMPROVEMENT?Productivity improvement is not just doing things betterMore importantly, it is doing right things better It is a process of change To improve Productivity it is therefore necessary to manage change

PRODUCTIVITY AS A MEASURE OF SUCCESS Productivity is the most important long term resource Not only for the success of the organizations & individuals but also for national economic & social developmentIt is also a measure of the efficiency of the Managers

IN A PERIOD OF EXPECTED ECONOMIC GROWTH ACHIEVING PRODUCTIVITY GAINS HAS ACQUIRED NEW SENSE OF URGENCYTHIS IS TRUE FOR OUR COUNTRY TOO

IMPACT OF PRODUCTIVITY IMPROVEMENTIMPROVING PRODUCTIVITY CAN OFFSET THE IMPACT OF SOME OF THE PROBLEMS OF DEVELOPING COUNTRIES WHERE RAPID POPULATION GROWTH, GROWING INDEBTEDNESS & INFLATION ARE VERY COMMON .

IN FACT CREATING CONDITIONS FOR HIGHER PERFORMANCE IS THE ESSENCE OF PRODUCTIVITY IMPROVEMENT

THE ROLE OF PRODUCTIVITYThe role of Productivity in increasing national welfare is now universally recognizedIn every country the main source of economic growth is an increase in Productivity & slackening of growth,stagnation & decline entail or are accompanied by a slowdown in Productivity improvement

TO MANY PEOPLE EFFECTIVE USE OF RESOURCES CAN MEAN DEVELOPMENTOF TECHNOLOGY & ORGANIZATION,But it is often more important for total productivity improvement to contribute to human development in its broadest sense

THE PLACE WHERE PRODUCTIVITY IMPROVEMENT IS ACTUALLY CREATED ..Is the organizationThis is the context where the whole range of available resources come together in order to produce goods & services to satisfy the needs & wants of those who use this solar system for their existence as well as those of the generations to come

SO LET US FOCUS OUR BUSINESSES STRATEGICALLY TO IMPROVE PRODUCTIVITY FOR THEBETTERMENT OF THE MANKIND !

The quality of lives of ourselves ,our children & our childrens children hinges to a great extent on how well to-days &tomorrows managers go about solving this problemdespite differing structures purposes to-days productive organizations face the same overriding problem-ie. How can we best use our limited human, financial& material resources to accomplish our objectives in a constantly changing environmentAs Indira Gandhi once quoted This land does not belong to us-- But to our future-To our children-To our childrens children----- We have only loaned this from them--For a very short term.So let us not misuse it . Use it very carefully& most productively.If not they will curse us

Indira Gandhi said My father once told me that there are two kinds of people in this world - They are; those who does the work & those who get the credit He told me to be in the first category as there is no competition in that - As only a very few are thereSo I know that all of you are not the trivial many but the vital few who do not fall in to the category 1 So let us get together & try to achieve an improvement in ProductivityAs in this world of fierce competition Productivity plays an important role

WHAT IS NEEDED IS THE HEAD, HEART & THE GUTS ANATOMY(as that of Jack Welch)It will be hard for us to ease away from what seemed to be working well BUT THERE IS VERY LITTLE CHOICE

Isnt this improving productivity?OF COURSE IT IS !

STRATEGIC MANAGEMENT WILL ANSWER TWO IMPORTANT QUESTIONS

OF WHAT THE ENTERPRISE IS TO BECOME If properly done IT HIGHLIGHTS WHICH BAGGAGE TO DISCARD IN ORDER TO FREE UP KEY PEOPLE &KEY RUPEES FOR RE-INVESTMENTAs the other side of the river is deadly!!!

What is strategic Management?It is Making things Happen Watch what is happening &Wonder what happened. -Prof. W Digman- It is Pro-active,outward looking,& Externally oriented

Challenges of the next MilleniumGLOBAL COMPETITIONDEREGULATIONINFORMATION REVOLUTION &ACCELERATING TECHNOLOGICAL CHANGE -The horsemen of the Corporate Apocalypse (Fortune Magazine)

History shows us that ..Being first is not enough in this complex world of businessThe list is very long of pioneering companies that stormed their marketsGrabbed the gold RingLater dropped itThe list gets longer day by day

CAN YOU REMEMBER.

Apple Computer in the 1980sAmpex with the first Video RecordersVolkswagon with the BeetleA&W with its roadside Hamburgher StandsFOCUS, EXECUTION & REFOCUS ARE REQUIREDTO CONSTRUCT A GOING CONCERN THAT LASTS AS THE OPERATING ENVIROMENT EVOLVES.

FOCUS & REFOCUS ARE .the products of solid strategic Planning that transcends Management FashionsIn recent timesRe-Engineering has come & goneDownsizing has bottomed outTQM has faded in to the background

Savvy people are back to the basics

They know that the trick to-day is getting bigger without getting fatterThey need to adapt their ways & their managing practicesBUT MAKE CHANGES BEFORE THE COMPANIES BREAKThis is what they should do as their companies blossom

BUTIN THE HIGHLY CHARGED ATMOSPHERE OF GROWTHYou will not find time to position your company for continuing success beyond the current budget cycleGood intentions may evaporate in the heat of day to day pressuresWhat is expedient drives out what is important

Lead Your Employees for Efficiency & Effectiveness Todays Employees- No Good or Mismanaged?Has the work values that made them great have disappeared or as not as intense as those of competition?

Research had proved that it is not the work ethic that is declining & that the Problem is not about todays employees But about how they are BEING LED

Management must increasingly be both effective & Efficient.

FOCUS IS REQUIRED TO DO JUST THE RIGHT THINGS

STRATEGIC PLANNING WILL GET THOSE THINGS DONE RIGHT

Whatever the way you practice ......There has to be objectives & the Objectives has to be developed under three categoriesMARKET PERFORMANCEFINANCIAL PERFORMANCENON MARKET PERFORMANCE

Excel at one thing!BETTER IS THE KEY WORDThat means If a product or a service or Enterprise is better ,then another product or a service or a Enterprise is worse That is what competition is You may rise to the limelight because of the weak competitionSuch luck usually does not lastAs the company emerges the level of play escalates

Build the Company for Long HaulProduct superiority

Priceconvenience

Application ExperticeLOOK AT THE COMPETITIVE TRIANGLE

EXCEL AT ONE THING!

KEEP STRATEGY SIMPLE !There are six simple strategies to build a Business

WHAT ARE THEYHome baseMarket ExpansionProduct line ExpansionForward IntegrationBackward integrationdiversification

MAKE IT EASY TO UNDERSTAND!As those who execute them are simple ordinary executivesSupport the decisions with commitmentThe trick is to pick a strategy& then stick to it & make it work

SUMMARY OF WHAT WE HAVE DONE UP TO NOW

Necessary Managing Practices to hold it together before they breakThe challenge is to continually adjust everything to fit the oncoming flow of New RealitiesUnderstand the operating Environment(Internal & External)Set ExpectationsDecide on StrategyAdapt the Organization DesignAdapt the Organization ProcessesAdjust their style-Managing & LeadingGet better at working with PeopleCultivate a desired Culture

PLAN EXECUTION-1We are the beginning of another great journey - Bill Gates

Have a correct Vision which is inspirationalAnchored in a big external RealityIndigenousTimelyTrackable in the real world over timeSimple

PLAN EXECUTION -2HAVE A RIGHT MISSION WHICH SHOULD BE EDUCATIONAL

Who - the Enterprise seeks to serveWhat-the Output of the BusinessHow - It is Done

NEVER FORGETTo AIM -At some things to some peopleTo SET Expectations by deciding on what things to what PeopleTo Develop a VISION- A succinct word picture of why the Enterprise seeks to continue- Both Enduring & InspiringTo have a MISSION-An educational statement about the Business in the near futureTo set OBJECTIVES - Building Blocks of Day to Day Management

Finally, the Builders of emerging Companies need to......Understand the operating environmentSet expectationsDecide on StrategyAdapt the Organization DesignAdapt the organization PracticesAdjust their styleGet better at working with PeopleCultivate a desired Culture

A VERY BIG THANK YOU TOALL OF YOU

-T.M.Jayasekera