PRODUCTIVITY AND PRODUCTIVITY MEASUREMENT

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PRODUCTIVITY AND PRODUCTIVITY MEASUREMENT

• By
• Ir. Mah Lok Abdullah
• Malaysia
• Tehran, December 2004

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WHAT IS PRODUCTIVITY

• THE CONCEPT OF PRODUCTIVITY AND THE AIM OF THE
  NATIONAL PRODUCTIVITY AGENCIES WAS FORMULATED IN
  ROME IN 1959
• The Productivity Committee of the European
  Productivity Agency (PCEPA)

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DEFINITION OF PRODUCTIVITY

• PRODUCTIVITY IS , ABOVE ALL A STATE OF THE MIND.
  IT IS AN ATTITUDE THAT SEEKS THE CONTINUOUS
  IMPROVEMENT OF WHAT EXISTS. IT IS A CONVICTION
  THAT ONE CAN DO BETTER TODAY THAN YESTERDAY, AND
  THAT TOMMORROW WILL BE BETTER THAN TODAY.
  FURTHERMORE, IT REQUIRES CONSTANT EFFORTS TO
  ADAPT ECONOMIC ACTIVITIES TO EVER-CHANGING
  CONDITIONS, AND THE APPLICATION OF NEW THEORIES
  AND METHODS. IT IS A FIRM BELIEF IN THE PROGRESS
  OF HUMANITY
• SOURCE PCEPA

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DEFINITION OF PRODUCTIVITY MOVEMENT

• The Productivity Movement refers to the active
  and widespread commitment and participation of
  the whole nation particularly the government,
  employers and workers in activities that will
  develop in them an attitude of mind that seeks
  and achieves constant improvement. This attitude
  of the mind which results in action is called the
  Productivity Will

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THE THREE GUIDING PRINCIPLES OF THE PRODUCTIVITY
MOVEMENT

• In the long run, improvement in Productivity will
  increase employment. However during the
  transition, the government and people , in order
  to minimise temporary frictions which may disturb
  the national economy,must cooperate to provide
  suitable measures to prevent unemployment
• In developing concrete measures to increase
  productivity, labour and management, conforming
  to the conditions existing in the respective
  enterprises, must cooperate in discussing,studying
  and deliberating such measures
• The fruits of improved productivity must, in
  correspondence with the condition of the national
  economy, be distributed fairly among management,
  labour and the consumer.
• Source JPC

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8 FOUNDING MEMBERS OF APO 1961

• REPUBLIC OF CHINA
• INDIA
• JAPAN
• REPUBLIC OF KOREA
• NEPAL
• PAKISTAN
• PHILIPPINES
• THAILAND

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OTHER APO MEMBER COUNTRIES

• HONG KONG 1963
• REPUBLIC OF VIETNAM 1965
• ISLAMIC REPUBLIC OF IRAN 1965
• SRI LANKA 1966
• INDONESIA 1968
• SINGAPORE 1969
• BANGLADESH 1982
• MALAYSIA 1983
• FIJI 1984
• MONGOLIA 1992
• LAOS 2003
• CAMBODIA - 2004

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• APOs FOUNDATION IS THE SPIRIT OF MUTUAL
  COOPERATION AMONG ITS MEMBER COUNTRIES

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NATIONAL PRODUCTIVITY ORGANIZATIONSCHANGES IN
NAME

• FIJI FNTC TPAF
• INDONESIA DMPD DPD
• JAPAN JPC JPC-SED
• MALAYSIA NPC(Centre) NPC(Corporation)
• PAKISTAN PITAC NPO
• SINGAPORE NPB PSB SPRING
• SRI LANKA NIBM NPS
• THAILAND TMPDC FTPI

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NPOs SHARING OF PRODUCTIVITY DATA

• APO ASIA PACIFIC PRODUCTIVITY DATA ANALYSIS
  (including data and analysis of TFP)

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Forces Shaping Globalization
Governance on global trade and investment
ICT
Economy
Global market integration
Developed Economies
Social
MNCs
Multilateral Institutions
Environment
Foreign Perception
NGOs
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From The Leaders
if ever there is an issue that we must be
single-minded about, it must be about improving,
and continuously improving, our national
competitiveness, all our strategies, plans,
programs and policies must be directed towards
raising our productivity Y.A.B Dato Seri
Abdullah Ahmad Badawi Prime Minister of Malaysia
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From The Leaders
the quality of the Public Sectors delivery
system must be benchmarked against the best in
the world Y.B. Dato Seri
Rafidah Aziz Minister of International Trade and
Industry
Malaysia
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From The Leaders
The basic thrust of development policy during the
Seventh Plan period continues to be predicted
upon the concept of balanced development, the
strategies for achieving it will, however,
include several new ones. Among them is the
planned shift from the input or
investment-driven strategy for growth of the
economy on which Malaysia relied upon in the
previous plans, to one which is
productivity-driven. We will have to enhance
the competitiveness of the economy, strengthen
our economic resilience and improve our total
factor productivity
Tun Dr. Mahathir Mohamad Former Prime
Minister Malaysia
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PRODUCTIVITY
COMPETITIVENESS
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THE CURRENT PRODUCTIVITY FOCUS
Value creation
Output
Vs.
P

Input
Cost optimization
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PRODUCTIVITY REPORT
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PRODUCTIVITY REPORT

• International Productivity Comparison
• National Productivity Analysis
• Sectoral Productivity Analysis
• Subsectoral Analysis(Manufactuting)
• Box Items
• Productivity Measurement Methodology for TFP

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PRODUCTIVITY

• Productivity is basically an input-output
  relationship. i.e. the relationship between the
  quantity of output produced in relation to the
  quantity of input consumed .
• PRODUCTIVITY OUTPUT
• INPUT

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PRODUCTIVITY MEASUREMENT
GROWTH RATE ---------------------- Period of time
LEVEL ---------- Over time
CONTRIBUTION
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INPUT

• Input is the amount of resources used in
  producing the goods or services
• Inputs
• Labour
• Plant and Equipment
• Raw Materials
• Energy

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OUTPUT

• Output is the finished goods or services produced
  
• Physical Units
• No of TVs produced
• No of Customers served
• Value Units
• Gross Domestic Product
• Added Value
• Total Sales Value

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ADDED VALUE

• It measures the wealth generated by collective
  efforts of those who work in an enterprise( the
  employees) and the capital providers (e,g,
  investors and shareholders). Added value is
  different from sales revenue or value of
  production because it does not include the wealth
  created by suppliers to the enterprise.

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Partial Productivity and Total Factor Productivity
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TYPES OF PRODUCTIVITY MEASUREMENT

• PARTIAL PRODUCTIVITY
• MULTI FACTOR PRODUCTIVITY OR
• TOTAL FACTOR PRODUCTIVITY

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PARTIAL/SINGLE FACTOR PRODUCTIVTY

• Is the ratio of output to a single input
• Labour Productivity
• Capital Productivity

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Multi-Factor Productivity
Is the ratio of output to more than one factor
of inputs. For example, to measure productivity
by considering both labour and capital input
simultaneously. This is the basic approach
behind TFP
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What is TFP?
Consider There are two ways for a country to
grow. It can increase its output if
It increases the quantity of resources at its
disposal (i.e. more workers or more
machines)
Or
It uses its existing resources much more
efficiently.
TFP is a measure of the latter.
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• TFP reflects the efficiency and effectiveness
  with which factors of production are jointly used
  to produce the output of goods and services.
  
• TFP encompasses all the qualitative factors that
  enable existing resources to be used optimally to
  produce more output per unit of input.

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• TFP captures the effects of qualitative
  improvements that allow output to increase
  without any use of additional inputs. It means
  making smarter and better use of the resources
  available, such as
• The introduction of new technology or
  upgrading of
• technology
• Innovation
• Better management techniques
• Gains from specialization
• Improvements in efficiency
• Workers education, skills and experience
• Advancement in information technology

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Example

• Gains from specialisation
• Better Management Technique
• Workers education, skills and experience

Workers who work better and smarter
Result

• Improvement in Efficiency
• Upgrading of technology
• Innovation
• Advancement in information technology

Higher-yielding equipment
Result
Improved mgt. system
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PRODUCTIVITY FRAMEWORK
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International Productivity Performance
Greater Contribution of TFP to Productivity
Growth in Developed Countries (1960-1992)
70
58
60
50
40
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30
20
10
0
Latin America
East Asia
Developed Countries
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Changing Engines of Growth
Stages of Development I Labour Driven (
1970s below ) Employment G R II Invest
ment Driven O ( mid 80s 1990s) Capital
W T III Innovation Driven H (
2000 beyond ) TFP
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PRODUCTIVITY MANAGEMENT PROCESS
Create Awareness Understanding
Productivity Output ------------ Input
Productivity Improvement
Productivity Evaluation
Productivity Standards
Productivity Planning
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MEASURE WHAT IS MEASURABLE WHAT IS noT
MEASURABLE MAKE IS MEASURABLE
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CRITERIA FOR MEANINGFUL MEASUREMENT

• VALIDITY
• 2. COMPLETENESS
• 3. COMPARABILITY
• 4. TIMELINESS

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• PROMOTING PRODUCTIVITY

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• Push for Productivity
• Go for Quality

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• THINK DIFFERENT..
• BE RESOURCEFUL

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• Breakaway
• Change

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• Apply new technology
• be competitive

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• Explore new strategies
• Enhance growth

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THANK YOU