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Productivity
Measurement
Rationalization and
Application

By: Mushtaq Mangat

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Productivity Measurement Rationalization
and Application
By: Mushtaq Mangat
[email protected]

Abstract:
Generally productivity is defined as the ratio of output to input. There are many more definitions of
productivity available in academic literature and many ways and methods to measure productivity.
Productivity measurement process is quite significant for many reasons. In this article we have
discussed significance of the productivity measurement process and ultimately found that for better
productivity it is mandatory that one should measure the current level of productivity. Based on this
measurement any firm or organization or even a country can make do planning for improvement of
productivity. Since better productivity is the only perpetual survival point for individuals at personal
level and for firms at collective level. It was also significant in past but in current era its significance
has increased many folds.

Key Words: productivity, productivity measurement

Productivity Measurement Rationalization and Application
The simplest understanding of productivity measurement term is
to weigh up, find, analyse, and gauge the productivity of any
firm, organisation, and industry or as a whole economy of the
country. Hoque (2000, p. 1278) has defined productivity
measurement in the following words, “productivity measurement
is defined as a set of management tools that are associated with
the assessment of organisation’s productivity”. Many authors
have discussed the meaning of productivity measurement in
different manners. According to Lord Kelvin (as cited in Ali 1978,
p. 33) productivity measurement is to express observation or
knowledge in numbers, so that one can have its true meanings.

Management writer Peter Drucker has plainly expressed his

views (as cited in Parsons, 2001, p. 13) about productivity measurement in the following words,
“without productivity objectives, a business does not have direction. Without productivity’
measurement, a business does not have control”. This is manifest from the above-mentioned
statement that for control purpose there is a dire need to have productivity measurement system. In
their book “By What Method”, Morris and Sink (as cited in Parsons, 2001, p. 13) have announced,
“Measurement fosters organizational learning when management team becomes skilled at
converting data to information and information to knowledge”. Eli Goldratt, author of the best selling
book The Goal, put this succinctly when he said (as cited in Parsons, 2001, p. 13): “show me how
you measure me and I will show you how I behave”.

According to Parsons (2001, p. 13), “performance measurement system comprises a set of coherent
activities designed to enable management to determine, directly or indirectly, how an organizational
system is performing-improving or deteriorating, in or out of control”. Nagel (as cited in Ali 1978, p.
34) has defined measurement in the following way, “The delimitation and fixation of our ideas or
thought, so that the determination of what is to be a man or to be circle is a case of measurement”.

From the above discussion, it becomes perceptible that measurement is the convert of the ideas,
judgement, observation and assessment into some understandable numbers so that one can make a
sense about the observations.

According to Daniels (1997, p. 52), there are a number of approaches and techniques, which have
grown out of the productivity movement, like, work-study, operational research methods, etc. and to
undoubtedly deny or ignore their existence would be foolish. Daniels (1997, p. 52) has further
emphasised that such methods and techniques must be used as part of a structured and targeted
campaign aimed at examining and improving all the relevant factors that contribute to output-
enhancing productivity.
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Improvement is not possible without knowing the status as mentioned in previous pages. Assessing
the current level of productivity will facilitate improving productivity of the industry. In other words,
first step for improvement is measuring the status and measurement of productivity is not possible
without having a clear concept of productivity measurement phenomenon. In next pages, there is a
discussion about the significance of productivity measurement.

According to Gaynard (1997, p. 90), economic prosperity depends upon many factors and one of the
most significant factors is better productivity of the people, industry and as well as of government.
Particularly, in the current business scenario, survival of firms is concurrent with their productivity.
Furthermore, there are still many people on earth, which need food, shelter, and other life
necessitates and their requirement can only be fulfilled with better productivity of the business
community, and particularly, governments of the respective countries.

Gaynard (1997, p. 90) has further stated that the productivity movement throughout the world
means that many people are engaged in the pursuit of greater effectiveness, improved efficiency and
enabling their communities to seek a fuller life with a better standard of living. Furthermore, it is
insufficient to believe that we need only to address the notion of the time and cost of a product or
service now of its inception – competition is a continuous fact in the lifetime of a company and there
is a need for continuous improvement. It is only by adopting the strategy that “there is always a
better way of doing things” that the organization will survive and prosper.

“Increase your productivity has been the ‘catch cry’ of the 1980s and 1990s and appears certain to
continue into the twenty-first century” (Savery, 1998, p. 68). This observation is quite valid in current
scenario. It is the time when firms have to focus on productivity and it is well understood from the
above mentioned statement that catch cry of the current era is productivity. “Productivity
management has, in the past, mainly been practiced in an informal manner, yet, like any other
decision-making procedure, and there is the need for it to be formalized” (Stainer, 1995, p. 04).
Particularly, this notion becomes more sensitive in case of garment industry, which changes quickly
since it is a part of fashion.

Khan (2003, p. 374) has discussed the rationale of productivity studying in the current era. According
to Khan, 2003, p. 374, competition among companies operating in different markets has increased,
as advancements in telecommunications and information technology have broken down traditional
barriers to entry (e.g. geographical and trade barriers) and there is a dire need that firm should
improve their productivity to remain in the field.

Productivity measurement never remained inconsequential. Bernolak (1980b, p. 148) has described
the importance of productivity measurement in the following words, “objective of productivity
measurement is to find how to produce outputs of desired goods and services with the minimum
amount of human and physical resources, the measurement of output is the first major element in
productivity analysis”.

From the above statement, it is clear that productivity measurement is the basic need for the analysis
of the productivity. No one can make any comments on the proper utilization of the resources
without analysing the productivity. According to Sink (1985, p. 63), the purpose of productivity
measurement is to assist the organisation system with assessment, efficiency, quality, and
productivity, quality of work life, innovation and profitability. In some organisational systems,
measuring productivity might be critical to gaining insight into the management intervention needed
to improve productivity and perhaps overall performance.

This discussion clearly depicts that there are two major objectives of productivity measuring. One; to
facilitate organisations to gain the required profitability and the second; to make some basis for
intervention of the management to introduce some changes to improve productivity. Sink (1985, p.
63) has further explained it in the following words, “what you measure often what you get”. According
to Sink (1985, p. 63), “measurement is a natural part of analysis, control, evaluation and
management process. Manager must measure in order to manage and improve productivity”. In this
statement, another fact of productivity measurement has been elaborated. Lawlor (1985, p. 31) has
explained that productivity measurement creates awareness among the people, removes confusions
give a guideline to management for strategic planning.

Brynjolfsson (1991, p.01) has discussed productivity significance in the following way, “The
increased interest in the productivity paradox, as it has become known, has engaged a significant
amount of research, but thus far, this only deepened the mystery. Robert Solow, the Noble Laureate
economist, has aptly characterized the results: we see computers everywhere except in the
productivity statistics”.
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Ghobadian (1994, p. 37) has expressed his concern about significance of productivity
measurement in the following words, “the need for an alternative and more comprehensive
performance measurement system has encouraged several researchers to explore the alternative
possibilities”.

Ray and Sahu (as cited by Ghobadian, 1994, p. 38) argued that organizational performance was a
multidimensional entity and should be linked to the desired outcomes. This is one of the most
effective and suitable tools to achieve any goal. To follow a success path there is a dire need to copy
any success, which is not possible without measuring it.

“Performance measurement is looked upon as a prerequisite to performance improvement, and final

objective of all productivity surveys should be to induce productivity improvement” (Parsons, 1980,
p.60). In this statement prerequisite of performance improvement is performance measure. Author
has used the word performance as interchangeable with word “productivity”. According to above-
mentioned definition, performance improvement is not possible without measuring the current
performance.

Furthermore, Parsons (2001, p. 14) has put forward following three applications of productivity and
performance measure:

Raise awareness about productivity and performance;

Establish control to restore productivity and performance; and
Identify actions to improve performance.

Loggerenberg (1980, p. 71) has viewed productivity measurement from a different angle. According
to Loggerenberg (1980, p. 71), experience in recent years and the forecast for the future suggest
that inflation and productivity are the most important issues of our time. Productivity measurement is
important to make a relation between resources utilised and the output gained, because
improvement in productivity can also work as an effective tool to counter inflation. According to,
Loggerenberg (1980, p. 71), “productivity and inflation are the important issues of this time”.

Mahoney (1998, p.21) has described the worth of productivity measurement in the following words,
“productivity assessment becomes critical parameters in the projection of output targets and/or the
projection of input requirements to achieve output target”. This impression about the significance of
productivity measurement shows another side of productivity measurement.

According to this statement, productivity measurement is a critical parameter to achieve any target.
Mahoney (1998, p.21) has further stated that, “productivity measure, like all performance measures,
serves to provide direction and motivation, particularly when targets and objectives are specified”.
Author has emphasised the importance of productivity measurement as a source of guidance and
motivation. Since highly motivated people and proper guidance are the fundamental needs to
achieve any goal. “If the productivity to be viewed as a policy variable, it is important to know the
determinants of productivity of the system of concern in order to guide efforts to affect productivity
(Mahoney, 1998, p.21).

Above-mentioned two statements are establishing a link between guidance and productivity
measurement. According to these statements, productivity measurement provides guidance to the
organisation to plan for its success.

Guzzo (1998, p.63) has noticed the concern of American people in productivity issues and has
pointed out in the following words, “Concern with productivity turns deep in American society, taking
up much ink and airtime. Productivity causes, consequences, and statistics are debated regularly”.
This statement depicts a clear picture of the concern of most advanced and developed people about
productivity. It is generally believed that the American development is the outcome of high
productivity of their labour, management, capital and technology. After WW II, the main target of
Japan was to minimise the gap of productivity between America and Japan. So all developments in
Japan are the result of high productivity.

According to Sumanth (1998, p. 65), “productivity measurement is the critical first phase of the
productivity process”. This statement further clarifies the concept of productivity measurement.
According to this statement one of the most critical factors in productivity improvement is productivity
measurement. Daniels (1997, p. 52) has emphasized that Productivity improvement does not rely for
its success on the application of specific productivity techniques – it depends much more on the
commitment and creativity of all members of the organization.

Productivity measurement provides an excellent instrument to monitor the status of productivity and
to explicitly relate productivity to other strategic objectives of any organisation. With the help of
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quantitative measurement, it becomes easier to monitor progress to provide feedback, to evaluate
managerial performance and to set quantifiable productivity objectives (NPC, 1999, p. 04). According
to NPC (1999, p. 04), “productivity measurement is a tool to monitor the performance for strategic
purposes”.

Kolay & Sahu (1995, p. 57) have given another view of firm’s productivity and according to them “HR
value measure based on the total performance of an organization reflects the appreciating or
depreciating nature of its human resource”.

Gunn & Douglas (1940, p. 399) have discussed model presented by Cobb-Douglas in 1928 and
came to the conclusion that for over a decade one of the authors and his associates have been
attempting to measure statistically for various economies probable elasticities of the marginal
productivity curves of labour and capital. Until recently, these studies have been based upon time
series of the quantities in manufacturing in each of the series of the year of capital labour and
product.

From the above statement, it is evident that people were using some refined statistical model to
measure productivity in the early 1900s. This shows the significance of productivity measurement
and industrialisation. Hodgkinson (1999, p. 470) has highlighted significance or productivity
improvement with more clarity in the following words, “International competitive has become
synonymous with improved efficiency and productivity, facilitated by the introduction of new
technologies, which have reduced costs and improved the quality”.

In very simple words, to know where one is standing is the first and foremost requirement for any
development. No improvement can be made without measuring the current situation.
Ghalayini & Noble (1996, p. 63) have quoted that significance of performance measures was clearly
emphasized by the Foundation of Manufacturing Committee of the National Academy of Engineering
where one of the ten foundations of world-class practice states.

Gaynard (1997, p.91) has highlighted the significance of productivity measurement in the following
words, “ It is important to note that the measurement of work in itself will do nothing to increase
productivity – but the standards developed from a measurement programme can provide the basis
for instituting a control mechanism.” In addition to that, Sink (1985, p.87) elaborates importance of
productivity measurement in the following words, “You cannot manage something if you cannot
measure it. In addition, you cannot measure it if you do not understand it. In most of the cases
productivity measurement is very simple if management clearly defines and understand productivity
basics”.

All above discussion regarding significance productivity measurement can be summarized in the
following words:

1. It helps to identify the current productivity level

2. It provides information about the productivity of every factor
3. It helps in diagnosing the strength and weaknesses.
4. It guides us to make bench marking with other economies and companies
5. It assists us to make policies to deal with the lack of processes
6. Finally, this is the first step to improve productivity.

All above discussion is to elaborate the significance of productivity measurement phenomenon. It is

quite clear from the above discussion that productivity measurement is the most critical and first step
in productivity improvement process. This discussion reinforces the rational of studying current
productivity level. Since, without knowing the current situation, improvement is not possible.

About the author:

Mr. Mushtaq Mangat is assistant professor at University of Management and Technology, Lahore
and head of Garment Productivity Centre. In previous part, discussion was to elaborate the
significance of productivity measurement and it was concluded that productivity measurement
process is most crucial step in the process of productivity improvement. In this part of the paper
discussion is to elaborate the application of productivity measurement. This discussion would help in
application of outcome of productivity measurement process. Since productivity measurement is it
self not the objective of this research, where as, the main objective is application of the results to
improve productivity of PKGI, which is crucial for economic development of Pakistan.

Gharneh (1997, p. 02) has pointed out productivity measurement applications. According to
Garneh’s observations:

It is not only an indicator of actual performance, but also of potential areas of improvement
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Highlights the degree of efficiency in the use of economic resources and facilities of an organisation
and the ability to control these resources and facilities.

Helps to clarify linkages between strategic planning, capital allocation, and performance
Offers an opportunity to compare, forecast, analyse and control different operations
The above-mentioned four application of productivity measurement are much vital. Ability to point out
organisational potential is the most important among all because it helps one about to assess its
capacity to achieve a target. By measuring potential one can re-define his or her goals.

Industry Commission (1997, p. 29) has emphasised that recent experience is examined in some
details to determine how well it measures up to historical standard. According to this statement, past
productivity is measured to examine the performance of the organisation in the past, which is used
as a reference point to determine the current performance and productivity.
Brinkerhoff and Dressler (1990, p. 22) have given following six usages of productivity
measurement:

• Spotting productivity declines for early warning;

• Comparing productivity across individuals, units, organisations, and industry to make
management decisions;
• Linking management and labour productivity improvement efforts to build common
awareness and responsibilities;
• Demonstrate productivity gains to stakeholders;
• Conducting research and evaluation related to new or experimental methods;

Supporting incentives and bonus plans with objective productivity data.

Sink (1985) has given another aspect of productivity measuring. According to Sink (1985, p. 49),
managers use productivity measurement for the following purposes:
• Profit
• Customer Satisfaction
• Sales Revenue
• Market Share
• Costs
• Quality, defects
• Response time
• Units Produced
• There are number of other applications of productivity measurement outcome. Followings is
a list of such applications:
• For strategic purpose; in order to make a comparison with other firms
• For tactical purpose, to enable management to control the performance
• For planning purpose; to compare the relative benefit
• For internal purpose; so that management can take help for collective bargaining
• To measure the work content and reward for labour
• To determine the staffing level
• For appraisal of management performance
• To measure the organisation effectiveness

All above discussion is to elaborate the application of productivity measurement outcome. The
results of this research will be applied in various fields to achieve different objective and one of the
main objective is to help industry in making strategic decisions, since strategic decisions plays an
important role in the whole business process and productivity measurement results provide base for
such decisions.

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About the author:

Mr. Mushtaq Mangat is assistant professor at University of Management and Technology, Lahore
and head of Garment Productivity Centre.

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