Mem Work Systems 844

Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 137

PRE 844

Question One
i. Can an employer or employee quit his / her job at will discuss?
ii. What factors would you consider in determining the salary structure of an organization?

Question Two
i. Do you agree that an organization must be customer based to succeed? Discuss.
ii. Discuss how individual productivity can affect an organization’s productivity?

Question Three
i. How does a worker’s attitude influence his work output?
ii. What influence does a worker’s personal life style have on his work productivity?

Question Four
i. in the eyes of world leaders, the Nigerian Government has lost his credibility because of an
epidemic rampant corruption among government officials. Corruption from the Government has a
negative impact on the workers because they don’t trust the Government. Is there enough trust
among the Employees themselves in the Public sector sufficient for them to build the required
confidence to enhance productivity? Discuss.
ii. Discuss the controversy between job satisfaction, life satisfaction and job performance.

Can an employer or employee quit his / her job at will discuss?

Why do employers recruit persons to work? In the spirit of capitalism, people are recruited to
turn around the investments of the employer for his common good. In so doing, the employer
recruits the employee under certain conditions which they both enter an agreement by signing off
that they both understand the grounds which they must remain together. Where this is not
feasible, they terminate the agreement they both enter and go their separate ways.
Why do employee work?

The labour law sanctifies that an employer can ask his employee to quit in the event of an
offence such as stealing or punishable offence tantamount to a sack or termination of
appointment by giving him a fair hearing in the form of a query. In cases where the Union plays
a crucial role in the recruitment of employee, collective bargaining plays a major determinant in
the fate of the employee.

Employers can seek redress in the event where an employee quits his job without following the
due procedure as recognized by Labour courts, the Trade Union or the Federal Government
though the Federal Ministry of Labour and Productivity.

There are certain circumstances that the Union have made the employer to restructure its board
(ownership) in the case of a liability corporations. Where the owners of a company violates the
laws that sets up a company, the Union can on behalf of its colleagues protest the continuance of
the employer and ensure that the persons that make up the board are restructured after the Union
have been able to establish their case in the presence of the Shareholders during their General
Meeting.

The Board of Directors in their own right can vote out any erring Director and replace with
another Director. The composition of the Board can be altered to suit the strategic purpose

In the case of an “At-will employment”, a term used in U.S. labor law for contractual
relationships in which an employee can be dismissed by an employer for any reason (that is,
without having to establish a "just cause" for termination), and without warning. [1] When an
employee is acknowledged as being hired "at will", courts deny the employee any claim for loss
resulting from the dismissal. The rule is justified by its proponents on the basis that an employee
may be similarly entitled to leave his or her job without reason or warning. [2] In contrast, the
practice is seen as unjust by those who view the employment relationship as characterized by
inequality of bargaining power.[3]

At-will employment is generally described as follows: "any hiring is presumed to be 'at will'; that
is, the employer is free to discharge individuals 'for good cause, or bad cause, or no cause at all,'
and the employee is equally free to quit, strike, or otherwise cease work."[6] In an October 2000
decision largely reaffirming employers' rights under the at-will doctrine, the Supreme Court of
California explained:

[A]n employer may terminate its employees at will, for any or no reason ... the employer may act
peremptorily, arbitrarily, or inconsistently, without providing specific protections such as prior
warning, fair procedures, objective evaluation, or preferential reassignment ... The mere
existence of an employment relationship affords no expectation, protectable by law, that
employment will continue, or will end only on certain conditions, unless the parties have actually
adopted such terms.[7]

At-will employment disclaimers are a staple of employee handbooks in the United States. It is
common for employers to define what at-will employment means, explain that an employee’s at-
will status cannot be changed except in a writing signed by the company president (or chief
executive), and require that an employee sign an acknowledgment of his or her at-will status. [8]
However, the National Labor Relations Board has opposed as unlawful the practice of including
in such disclaimers language declaring that the at-will nature of the employment cannot be
changed without the written consent of senior management.[note 1][9]

Since employees like to be in control of their lives, they think they can quit an employer any
time it suits them. But woe to the employer who feels the same way about terminating
employees. Somehow employees think employers cannot freely dismiss employees but
employees can dismiss employers as they choose.

As it turns out, there is more legal mutuality in the relationship than employees would like. They
also have to be careful about quitting employers. Employers have historically been reluctant to
pursue former employees who leave them in a lurch without adequate notice. That is changing as
they invest significantly in selection and training and much work is highly specialized. Usually,
employers can and will think ‘good riddance’ to disloyal workers and find replacement ones
rather quickly. They rarely pursue employees who quit them. But this is changing.

This article considers what obligations the employee has to the employer when he or she quits.
Does an employee need to provide notice? If so, how much notice must the employee provide to
avoid liability for breach of the employment contract?
The Basics of Quitting
Employment law is found in legislation and the common law.

Labour Relations Codes

Labour relations legislation sets out the framework for unions and management to negotiate a
collective agreement which governs the working relationship between employees and employer.
Quitting the relationship by employer or employee is often regulated in the collective agreement,
which is enforceable by grievance and ultimately arbitration.

Employment Standards Codes

The approximately two-thirds of employees who are not part of a labour union enjoy an array of
minimum employment protections, as well as a few legal duties, in employment standards
legislation.

Alberta’s Employment Standards Code, RSA 2000, c E-9, (Part 2, Division 8) is typical. It
covers the subject of termination of employment by both employee (quitting or resignation) and
by the employer (dismissal).
Section 58 states that to terminate employment an employee must give the employer a written
notice of termination of at least one week if the employee has been employed between three
months to two years, or at least two weeks if the employee has been employed for longer than
two years. The approximately two-thirds of employees who are not part of a labour union enjoy
an array of minimum employment protections, as well as a few legal duties, in employment
standards legislation. This short written notice of quitting is not onerous for most employees, yet
many still quit on shorter notice, including no notice when they choose to never return to work.

Even then, section 58 notice is not required if:

 there is an established practice in the industry to give less quitting notice;


 the employee is quitting for personal health or safety reasons;
 the job has become impossible for the employee to perform due to causes beyond the
employee’s control;
 the employee is temporarily laid off or does not have work due to a strike or lockout at the
job site; or
 the employee is quitting due to the employer’s denial of his or her legal minimum rights.
For probationary employees working their first three months, no quitting notice is legally
required.

It is natural for an employer to resent a quitting employee. The employer may think ‘well, if you
are going to quit anyway, why not just go now?’ Firing workers who are quitting is how
vindictive employers demonstrate their ultimate power over employees.

The legislation also addresses that scenario. Section 59 says once an employee gives proper
minimum notice and the employer wants to dismiss that employee sooner, the employer must
still pay the employee salary to the end of the employee’s notice period. It is natural for an
employer to resent a quitting employee. The employer may think ‘well, if you are going to quit
anyway, why not just go now?’ Firing workers who are quitting is how vindictive employers
demonstrate their ultimate power over employees. To discourage employers’ retaliation in this
way, if the employee gave longer than minimum notice, and the employer asks her to leave
before then, the employee is entitled to the much longer notice (or damages in lieu) that the
employer would have needed to furnish in order to dismiss that employee.

Another way for employers to retaliate against quitting employees is to reduce their wages or
hours (or any other term) after the quitting notice has been received. Section 61 also prohibits
this. The employer, however, can still give full termination pay or terminate for a legitimate
reason. A written quitting notice has no effect if somehow the quitting employee continues to
work for the same employer after the stipulated quitting date.

Common Law
It is very important to remember that these statutory notice periods are the legal minimum.
Occasionally, employer and employee may have contracted to be bound by this minimum legal
notice, but most often they will not have made any such agreement. In many circumstances,
employees will be expected to provide the employer with more notice of quitting. This is called
reasonable notice.

A fundamental principle of contract interpretation is that if there is no endpoint to the contract, it


may be brought to an end by either party giving reasonable notice to the other party of that
intention. It is very important to remember that these statutory notice periods are the legal
minimum. The courts have held that quitting employees generally need to give less notice to
employers than employers need in order to dismiss employees.

In most cases, an employee’s reasonable notice of quitting will be longer than the minimum
statutory notice set out in section 58. The difficulty now lies in prescribing how much quitting
notice should be, because that depends on several factors.

Today workers in highly complex jobs are more indispensable; harder to replace. How much
time would an employer need to find a suitable replacement employee? This is the standard of
what reasonable notice ought to be given. It includes:

 the nature of the work;


 the experience and seniority of the worker;
 availability of replacements; and
 the time it takes to train new employees to a satisfactory level.
In the 1992 case of Tree Savers International Ltd. v. Savoy, 1992 CanLII 2828 (AB CA),
although the employee had provided the two-week minimum period of notice, the Alberta Court
of Appeal found that 18 months (or $146,200 in lieu) was appropriate reasonable notice.

In Bradley v. Carleton Electric Ltd.,1998 CanLII 7140 the Ontario Court of Appeal determined
three months of quitting notice should have been rendered by a key employee who resigned after
18 months on the job. Perhaps the most famous case is GasTOPS Ltd. v. Forsyth, 2012 ONCA
134. Four employees were ordered to pay nearly $20 million in damages to the employer for
breaching fiduciary duty, soliciting existing employees and business from the employer, and
quitting without reasonable notice, which was determined to be 10 to 12 months.
Conclusion
Employers have historically been reluctant to pursue former employees who leave them in a
lurch without adequate notice. That is changing as they invest significantly in selection and
training and much work is highly specialized. Statutory minimum quitting notice triggers
protection for the departing employee. Employees should also consider the employer’s interests,
as well as their own reputation, when departing. As far as possible in the circumstances, they
should supply generous and reasonable quitting notice.
At-will employment
From Wikipedia, the free encyclopedia
Jump to: navigation, search

At-will employment is a term used in U.S. labor law for contractual relationships in which an
employee can be dismissed by an employer for any reason (that is, without having to establish
"just cause" for termination), and without warning.[1] When an employee is acknowledged as
being hired "at will", courts deny the employee any claim for loss resulting from the dismissal.
The rule is justified by its proponents on the basis that an employee may be similarly entitled to
leave his or her job without reason or warning.[2] In contrast, the practice is seen as unjust by
those who view the employment relationship as characterized by inequality of bargaining power.
[3]

At-will employment gradually became the default rule under the common law of the
employment contract in most states during the late 19th century, and was endorsed by the U.S.
Supreme Court during the Lochner era, when members of the U.S. judiciary consciously sought
to prevent government regulation of labor markets.[4] Over the 20th century, many states modified
the rule by adding an increasing number of exceptions, or by changing the default expectations in
the employment contract altogether. In workplaces with a trade union recognized for purposes of
collective bargaining, and in many public sector jobs, the normal standard for dismissal is that
the employer must have a "just cause". Otherwise, subject to statutory rights (particularly the
discrimination prohibitions under the Civil Rights Act), most states adhere to the general
principle that employer and employee may contract for the dismissal protection they choose. [5]
At-will employment remains controversial, and remains a central topic of debate in the study of
law and economics, especially with regard to the macroeconomic efficiency of allowing
employers to summarily and arbitrarily terminate employees.

Contents
[hide]

 1 Definition
 2 History
 3 Public policy exceptions
 4 Implied contract exceptions
 5 Covenant of good faith and fair dealing exceptions (a.k.a. "implied-in-law" contracts)
 6 Statutory exceptions
 7 Controversy
 8 See also
 9 Notes
 10 References
 11 External links

Definition[edit]
At-will employment is generally described as follows: "any hiring is presumed to be 'at will'; that
is, the employer is free to discharge individuals 'for good cause, or bad cause, or no cause at all,'
and the employee is equally free to quit, strike, or otherwise cease work."[6] In an October 2000
decision largely reaffirming employers' rights under the at-will doctrine, the Supreme Court of
California explained:

[A]n employer may terminate its employees at will, for any or no reason ... the employer may act
peremptorily, arbitrarily, or inconsistently, without providing specific protections such as prior
warning, fair procedures, objective evaluation, or preferential reassignment ... The mere
existence of an employment relationship affords no expectation, protectable by law, that
employment will continue, or will end only on certain conditions, unless the parties have actually
adopted such terms.[7]

At-will employment disclaimers are a staple of employee handbooks in the United States. It is
common for employers to define what at-will employment means, explain that an employee’s at-
will status cannot be changed except in a writing signed by the company president (or chief
executive), and require that an employee sign an acknowledgment of his or her at-will status. [8]
However, the National Labor Relations Board has opposed as unlawful the practice of including
in such disclaimers language declaring that the at-will nature of the employment cannot be
changed without the written consent of senior management.[note 1][9]

History[edit]
The original common law rule for dismissal of employees according to William Blackstone
envisaged that, unless another practice was agreed, employees would be deemed to be hired for a
fixed term of one year.[10] Over the 19th century, most states in the North adhered to the rule that
the period by which an employee was paid (a week, a month or a year) determined the period of
notice that should be given before a dismissal was effective. For instance, in 1870 in
Massachusetts, Tatterson v. Suffolk Mfg Co[11] held that an employee's term of hiring dictated the
default period of notice.[12] By contrast, in Tennessee, a court stated in 1884 that an employer
should be allowed to dismiss any worker, or any number of workers, for any reason at all.[13] An
individual, or a collective agreement, according to the general doctrine of freedom of contract
could always stipulate that an employee should only be dismissed for a good reason, or a "just
cause", or that elected employee representatives would have a say on whether a dismissal should
take effect. However, the position of the typical 19th-century worker meant that this was rare.
The at-will practice is typically traced to a treatise published by Horace Gray Wood in 1877,
called Master and Servant.[14] Wood cited four U.S. cases as authority for his rule that when a
hiring was indefinite, the burden of proof was on the servant to prove that an indefinite
employment term was for one year.[15] In Toussaint v. Blue Cross & Blue Shield of Michigan, the
Court noted that "Wood’s rule was quickly cited as authority for another proposition."[16] Wood,
however, misinterpreted two of the cases which in fact showed that in Massachusetts and
Michigan, at least, the rule was that employees should have notice before dismissal according to
the periods of their contract.[17]

In New York, the first case to adopt Wood's rule was Martin v New York Life Ins Co[18] in 1895.
Bartlett J asserted that New York law now followed Wood's treatise, which meant that an
employee who received $10,000, paid in a salary over a year, could be dismissed immediately.
The case did not make reference to the previous authority. Four years earlier, in 1891, Adams v
Fitzpatrick[19] had held that New York law followed the general practice of requiring notice
similar to pay periods. However, subsequent New York cases continued to follow the at-will rule
into the early 20th century.[20]

Some courts saw the rule as requiring the employee to prove an express contract for a definite
term in order to maintain an action based on termination of the employment.[21] Thus was born the
U.S. at-will employment rule, which allowed discharge for no reason. This rule was adopted by
all U.S. states. In 1959, the first judicial exception to the at-will rule was created by one of the
California Courts of Appeal.[22] Later, in a 1980 landmark case involving ARCO, the Supreme
Court of California endorsed the rule first articulated by the Court of Appeal.[23] The resulting
civil actions by employees are now known in California as Tameny actions for wrongful
termination in violation of public policy.[24]

Since 1959, several common law and statutory exceptions to at-will employment have been
created.

Common law protects an employee from retaliation if the employee disobeys an employer on the
grounds that the employer ordered him or her to do something illegal or immoral. However, in
the majority of cases, the burden of proof remains upon the discharged employee. No U.S. state
but Montana has chosen to statutorily modify the employment at-will rule.[25] In 1987, the
Montana legislature passed the Wrongful Discharge from Employment Act (WDEA). The
WDEA Act is unique in that, although it purports to preserve the at-will concept in employment
law, it also expressly enumerates the legal bases for a wrongful discharge action.[16] Under the
WDEA, a discharge is wrongful only if: "it was in retaliation for the employee's refusal to violate
public policy or for reporting a violation of public policy; the discharge was not for good cause
and the employee had completed the employer's probationary period of employment; or the
employer violated the express provisions of its own written personnel policy."[26]

The doctrine of at-will employment can be overridden by an express contract or civil service
statutes (in the case of government employees). As many as 34% of all U.S. employees
apparently enjoy the protection of some kind of "just cause" or objectively reasonable
requirement for termination that takes them out of the pure "at-will" category, including the 7.5%
of unionized private-sector workers, the 0.8% of nonunion private-sector workers protected by
union contracts, the 15% of nonunion private-sector workers with individual express contracts
that override the at-will doctrine, and the 16% of the total workforce who enjoy civil service
protections as public-sector employees.[27]

Public policy exceptions[edit]

U.S. states (Blue) without a public policy exception

Under the public policy exception, an employer may not fire an employee if it would violate the
state's public policy doctrine or a state or federal statute.

This includes retaliating against an employee for performing an action that complies with public
policy (such as repeatedly warning that the employer is shipping defective airplane parts in
violation of safety regulations promulgated pursuant to the Federal Aviation Act of 1958[28]), as
well as refusing to perform an action that would violate public policy. In this diagram, the pink
states have the 'exception', which protects the employee.

As of October 2000,[29] forty-two U.S. states and the District of Columbia recognize public policy
as an exception to the at-will rule.[30]

The 8 states which do not have the exception are:

 Alabama
 Georgia
 Louisiana
 Maine
 Nebraska
 New York
 Rhode Island
 Florida – three limited conditions can override an at-will agreement[31]

Implied contract exceptions[edit]


See also: Implied in fact contract
U.S. states (pink) with an implied-contract exception

Thirty-six U.S. states (and the District of Columbia) also recognize an implied contract as an
exception to at-will employment.[29] Under the implied contract exception, an employer may not
fire an employee "when an implied contract is formed between an employer and employee, even
though no express, written instrument regarding the employment relationship exists."[29] Proving
the terms of an implied contract is often difficult, and the burden of proof is on the fired
employee. Implied employment contracts are most often found when an employer's personnel
policies or handbooks indicate that an employee will not be fired except for good cause or
specify a process for firing. If the employer fires the employee in violation of an implied
employment contract, the employer may be found liable for breach of contract.

Thirty-six U.S. states have an implied-contract exception. The fourteen states having no such
exception are:

 Arizona [32]
 Delaware
 Florida
 Georgia
 Indiana
 Louisiana
 Massachusetts
 Missouri
 Montana
 North Carolina
 Pennsylvania
 Rhode Island
 Texas
 Virginia

The implied-contract theory to circumvent at-will employment must be treated with caution. In
2006, the Texas Court of Civil Appeals in Matagorda County Hospital District v. Burwell[33] held
that a provision in an employee handbook stating that dismissal may be for cause, and requiring
employee records to specify the reason for termination, did not modify an employee's at-will
employment. The New York Court of Appeals, that state’s highest court, also rejected the
implied-contract theory to circumvent employment at will. In Anthony Lobosco, Appellant v.
New York Telephone Company/NYNEX, Respondent,[34] the court restated the prevailing rule that
an employee could not maintain an action for wrongful discharge where state law recognized
neither the tort of wrongful discharge, nor exceptions for firings that violate public policy, and an
employee's explicit employee handbook disclaimer preserved the at-will employment
relationship. And in the same 2000 decision mentioned above, the Supreme Court of California
held that the length of an employee's long and successful service, standing alone, is not evidence
in and of itself of an implied-in-fact contract not to terminate except for cause. [7]

Covenant of good faith and fair dealing exceptions (a.k.a.


"implied-in-law" contracts)[edit]
See also: Quasi-contract

U.S. states (pink) with a covenant-of-good-faith-and-fair-dealing exception

Eleven US states have recognized a breach of an implied covenant of good faith and fair dealing
as an exception to at-will employment.[29][35] The states are:

 Alabama
 Alaska
 Arizona
 California
 Delaware
 Idaho
 Massachusetts
 Montana
 Nevada
 Utah
 Wyoming

Court interpretations of this have varied from requiring "just cause" to denial of terminations
made for malicious reasons, such as terminating a long-tenured employee solely to avoid the
obligation of paying the employee's accrued retirement benefits. Other court rulings have denied
the exception, holding that it is too burdensome upon the court for it to have to determine an
employer's true motivation for terminating an employee.[29]

Statutory exceptions[edit]
Although all U.S. states have a number of statutory protections for employees, most wrongful
termination suits brought under statutory causes of action use the federal anti-discrimination
statutes which prohibit firing or refusing to hire an employee because of race, color, religion,
sex, national origin, age, or handicap status. Other reasons an employer may not use to fire an at-
will employee are:

 for refusing to commit illegal acts – An employer is not permitted to fire an employee
because the employee refuses to commit an act that is illegal.
 family or medical leave – federal law permits most employees to take a leave of absence
for specific family or medical problems. An employer is not permitted to fire an
employee who takes family or medical leave for a reason outlined in the Family and
Medical Leave Act of 1993.
 in retaliation against the employee for a protected action taken by the employee –
"protected actions" include suing for wrongful termination, testifying as a witness in a
wrongful termination case, or even opposing what they believe, whether they can prove it
or not, to be wrongful discrimination.[36] In the recent federal case of Ross v. Vanguard,
Raymond Ross successfully sued his employer for firing him due to his allegations of
racial discrimination.[37]

Examples of federal statutes include:

 Equal Pay Act of 1963 (relating to discrimination on the basis of sex in payment of
wages);
 Title VII of the Civil Rights Act of 1964 (relating to discrimination on the basis of race,
color, religion, sex, or national origin);
 Age Discrimination in Employment Act of 1967 (relating to certain discrimination on the
basis of age with respect to persons of at least 40 years of age);
 Rehabilitation Act of 1973 (related to certain discrimination on the basis of handicap
status);
 Americans with Disabilities Act of 1990 (relating to certain discrimination on the basis of
handicap status).
 The National Labor Relations Act provides protection to employees who wish to join or
form a union and those who engage in union activity. The act also protects employees
who engage in a "concerted activity".[38] Most employers set forth their workplace rules
and policies in an employee handbook. A common provision in those handbooks is a
statement that employment with the employer is "at-will." In 2012, the National Labor
Relations Board, the federal administrative agency responsible for enforcing the National
Labor Relations Act (NLRA), instituted two cases attacking at-will employment
disclaimers in employee handbooks. The NLRB challenged broadly worded disclaimers,
alleging that the statements improperly suggested that employees could not act
concertedly to attempt to change the at-will nature of their employment, and thereby
interfered with employees’ protected rights under the NLRA.[39]

Controversy[edit]
On the one hand, the doctrine of at-will employment has been heavily criticized for its severe
harshness upon employees.[40] It has also been criticized as predicated upon flawed assumptions
about the inherent distribution of power and information in the employee-employer relationship.
[41]
On the other hand, conservative scholars in the field of law and economics such as Professors
Richard A. Epstein[42] and Richard Posner[43] credit employment at will as a major factor
underlying the strength of the U.S. economy.

At-will employment has also been identified as a reason for the success of Silicon Valley as an
entrepreneur-friendly environment.[44]

In a 2009 article surveying the academic literature from both U.S. and international sources,
University of Virginia law professor J.H. Verkerke explained that "although everyone agrees that
raising firing costs must necessarily deter both discharges and new hiring, predictions for all
other variables depend heavily on the structure of the model and assumptions about crucial
parameters."[27] The effect of raising firing costs is generally accepted in mainstream economics
(particularly neoclassical economics); for example, professors Tyler Cowen and Alex Tabarrok
explain in their macroeconomics textbook that employers become more reluctant to hire
employees if they are uncertain about their ability to immediately fire them. [45]

The first major empirical study on the impact of exceptions to at-will employment was published
in 1992 by James N. Dertouzos and Lynn A. Karoly of the RAND Corporation,[46] which found
that recognizing tort exceptions to at-will could cause up to a 2.9% decline in aggregate
employment and recognizing contract exceptions could cause an additional decline of 1.8%.
According to Verkerke, the RAND paper received "considerable attention and publicity."[27]
Indeed, it was favorably cited in a 2010 book published by the libertarian Cato Institute.[47]

However, a 2000 paper by Thomas Miles found no effect upon aggregate employment but found
that adopting the implied contract exception causes use of temporary employment to rise as
much as 15%.[27] Later work by David Autor in the mid-2000s identified multiple flaws in Miles'
methodology, found that the implied contract exception decreased aggregate employment 0.8 to
1.6%, and confirmed the outsourcing phenomenon identified by Miles, but also found that the
tort exceptions to at-will had no statistically significant influence.[27] Autor and colleagues later
found in 2007 that the good faith exception does reduce job flows, and seems to cause labor
productivity to rise but total factor productivity to drop.[27] In other words, employers forced to
find a "good faith" reason to fire an employee tend to automate operations to avoid hiring new
employees, but also suffer an impact on total productivity because of the increased difficulty in
discharging unproductive employees. Other researchers have found that at-will exceptions have a
negative effect on reemployment of unemployed (but not already employed) workers, and that
hedonic regressions on at-will exceptions show large negative effects on individual welfare with
regard to home values, rents, and wages.[27] Verkerke also explains that several international
comparative studies have found that "job security has a large negative effect on employment
rates."[27]

See also[edit]
 Employment Rights Act 1996, for the UK approach to employment protection. See also,
Contracts of Employment Act 1963, for the first modern UK law on the requirement to
give reasonable notice before any dismissal.
 Creen v Wright (1875–76) LR 1 CPD 591 and Hill v C Parsons & Co [1972] 1 Ch 305
 Employment agency
 Protected concerted activity
 European Social Charter
 UK agency worker law
 Worker Adjustment and Retraining Notification Act (WARN Act)
 Bammert v. Don's Super Valu, Inc., 646 N.W.2d 365 (Wis. 2002)

Notes[edit]
1. Jump up ^ The NLRB's concern is that such language may cause an employee to believe
erroneously that activities such as collective bargaining through unionization would have no
ability to change the at-will nature of the employment.

References[edit]
1. Jump up ^ Jay Shepherd, Firing At Will: A Manager's Guide (Apress Media, 2011) 3-4.
2. Jump up ^ See, e.g., Richard Epstein, In Defense of the Contract at Will, 57 U. Chi. L. Rev. 947 (1984).
3. Jump up ^ See Coppage v. Kansas, 236 U.S. 1 (1915) (Holmes, J., dissenting).
4. Jump up ^ See, e.g., Adair v. United States, 208 U.S. 161 (1908).
5. Jump up ^ "At-Will Employment - CEDR". CEDR. Retrieved 2016-01-26.
6. Jump up ^ Mark A. Rothstein, Andria S. Knapp & Lance Liebman, ''Cases and Materials on Employment
Law'' (New York: Foundation Press, 1987), 738.
7. ^ Jump up to: a b Guz v. Bechtel National, Inc., 24 Cal. 4th 317, 8 P.3d 1089, 100 Cal. Rptr. 2d 352 (2000).
8. Jump up ^ Poyner Spruill LLP (July 17, 2011). "NLRB Attacks Employment At-Will Disclaimers". The
National Law Review. Retrieved September 1, 2012.
9. Jump up ^ Neal, Gerber & Eisenberg LLP (October 8, 2012). "Labor Law: NLRB finds standard at-will
employment provisions unlawful". The National Law Review. Retrieved October 2, 2014.
10. Jump up ^ William Blackstone, 1 Commentaries on the Laws of England 425 (1755).
11. Jump up ^ 106 Mass. 56 (1870).
12. Jump up ^ See also, Franklin Mining Co. v Harris, 24 Mich. 116 (1871) and Beach v. Mullin, 34 N.J. Law
343.
13. Jump up ^ Payne v. Western & Atlantic Railway, 81 Tenn. 507, 518 (1884) ("May I not refuse to trade
with any one? May I not dismiss my domestic servant for dealing, or even visiting, where I forbid? And if
my domestic, why not my farm-hand, or my mechanic, or teamster? And, if one of them, then why not all
four? And, if all four, why not a hundred or a thousand of them?").
14. Jump up ^ H.G. Wood, Master and Servant, § 134 (1877).
15. Jump up ^ Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 601; 292 N.W.2d 880, 886
(1980).
16. ^ Jump up to: a b Id.
17. Jump up ^ See CW Summers, ‘The Contract of Employment and the Rights of Individual Employees: Fair
Representation and Employment at Will’ (1984) 52(6) Fordham Law Review 1082, 1083, fn 7
18. Jump up ^ 42 NE 416 (1895)
19. Jump up ^ 125 NY 124, 26 NE 143 (1891)
20. Jump up ^ See Watson v. Gugino, 204 NY 535, 98 NE 18 (1912). However, note Fox v Cody, 252 NYS
395 (1930) in relation to company directors.
21. Jump up ^ Id. at 603, 292 N.W.2d at 887.
22. Jump up ^ Petermann v. Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen, & Helpers of Am., Local
396, 174 Cal. App. 2d 184, 344 P.2d 25 (1959)
23. Jump up ^ Tameny v. Atlantic Richfield Co. 27 Cal. 3d 167 (1980).
24. Jump up ^ Gantt v. Sentry Insurance, 1 Cal. 4th 1083 (1992).
25. Jump up ^ Robinson, Donald C., "The First Decade of Judicial Interpretation of the Montana Wrongful
Discharge from Employment Act (WDEA)", 57 Mont. L. Rev. 375, 376 (1996).
26. Jump up ^ Mont. Code. Ann. § 39-2-904 (2008)
27. ^ Jump up to: a b c d e f g h J.H. Verkerke, "Discharge," in Kenneth G. Dau-Schmidt, Seth D. Harris, and Orly
Lobel, eds., Labor and Employment Law and Economics, vol. 2 of Encyclopedia of Law and Economics,
2nd ed. at 447-479 (Northampton: Edward Elgar Publishing, 2009), 448.
28. Jump up ^ Green v. Ralee Engineering Co., 19 Cal. 4th 66 (1998).
29. ^ Jump up to: a b c d e Muhl, Charles (January 2001). "The employment-at-will doctrine: three major
exceptions" (PDF). Monthly Labor Review. Archived (PDF) from the original on March 22, 2006. Retrieved
2006-03-20.
30. Jump up ^ In Adams v. George W. Cochran & Co., 597 A.2d 28 (D.C. App. 1991), the District of
Columbia Court of Appeals carved out a narrow public policy exception to the at-will employment
doctrine. The appellate court held that the exception is "when the sole reason for the discharge is the
employee's refusal to violate the law, as expressed in a statute or municipal regulation." 597 A.2d 28, 32. In
1997, this exception was expanded in Carl v. Children's Hospital, 702 A.2d 159 (D.C. App. 1997). The
court held that, in addition to the exception articulated in Adams, wrongful discharge would also include a
violation of public policy if the public policy is "solidly based on a statute or regulation that reflects the
particular public policy to be applied, or (if appropriate) on a constitutional provision concretely applicable
to the defendant's conduct." 702 A.2d 159, 163.
31. Jump up ^ Section 448.102, Florida State Statutes 2010
32. Jump up ^ A.R.S. § 23-1501(2)
33. Jump up ^ 49 Tex Sup J 370, 2006 Tex LEXIS 137
34. Jump up ^ 751 N.E.2d 462 (2001)
35. Jump up ^ It is unclear whether courts in the District of Columbia recognize a good-faith covenant
exception. In Kerrigan v. Britches of Georgetowne, Inc., 705 A.2d 624 (D.C. App. 1997), the District of
Columbia Court of Appeals ruled against the plaintiff, who alleged that his employer had violated a
"covenant of good faith and fair dealing" in conducting sexual harassment investigation against him. It is
unclear if the Court of Appeals recognized the good-faith covenant but that the plaintiff did not prove a
violation of the covenant, or whether the court did not recognized the good-faith covenant exception at all.
36. Jump up ^ US: Equal Employment Opportunity Commission. "Retaliation". Retrieved January 5, 2015.
37. Jump up ^ US: Equal Employment Opportunity Commission. "Vanguard Group to Pay $500,000 for
Retaliation". Archived from the original on May 6, 2009. Retrieved 2009-04-18.
38. Jump up ^ Haymes, John; Kleiner, Brian H. (2001). "Federal and state statutory exemptions to At-Will
employment". Managerial Law. 43 (1/2): 92–8. doi:10.1108/03090550110770381.
39. Jump up ^ Greenberg Traurig, LLP (August 8, 2012). "At-Will Employment Disclaimers - The National
Labor Relations Board's Next Target?". The National Law Review. Retrieved September 11, 2012.
40. Jump up ^ Clyde W. Summers, Employment At Will in the United States: The Divine Right of Employers,
3 U. Pa. J. Lab. & Emp. L. 65 (2000). In this article, Professor Summers reviews examples of how courts
have upheld the at-will doctrine by making it very difficult for employees to sue employers on theories like
intentional infliction of emotional distress and invasion of privacy, thereby giving employers significant
leeway to terrorize their employees (the "divine right" referred to in the article title).
41. Jump up ^ John W. Budd, Employment with a Human Face: Balancing Efficiency, Equity, and Voice
(Ithaca: Cornell University Press, 2004), 86–88.
42. Jump up ^ Roger Blanpain, Susan Bison-Rapp, William R. Corbett, Hilary K. Josephs, & Michael J.
Zimmer, The Global Workplace: International and Comparative Employment Law – Cases and Materials
(New York: Cambridge University Press, 2007), 101–102.
43. Jump up ^ Richard Posner, Overcoming Law (Cambridge: Harvard University Press, 1995), 305–311.
44. Jump up ^ Alan Hyde, Working in Silicon Valley: Economic and Legal Analysis of a High-Velocity Labor
Market (Armonk, NY: M.E. Sharpe, 2003), xvi and 92–97. Hyde's book explores "how high-velocity work
practices contribute to economic growth," including and especially the dominant American high-velocity
work practice of at-will employment.
45. Jump up ^ Tyler Cowen and Alex Tabarrok, Modern Principles: Macroeconomics (New York: Worth
Publishers, 2010), 202.
46. Jump up ^ James N. Dertouzos and Lynn A. Karoly, Labor Market Responses to Employer Liability
(Santa Monica: RAND, 1992).
47. Jump up ^ Timothy Sandefur, The Right to Earn a Living: Economic Freedom and the Law (Washington,
D.C., Cato Institute, 2010), 235–236.

 CW Summers, ‘The Contract of Employment and the Rights of Individual Employees:


Fair Representation and Employment at Will’ (1984) 52(6) Fordham Law Review 1082

Quitting and Giving Notice: What Employees Need to Know

May 7, 2015 By Peter Bowal and Stephen Moore

Print This Post

Introduction
Since employees like to be in control of their lives, they think they can quit an employer any
time it suits them. But woe to the employer who feels the same way about terminating
employees. Somehow employees think employers cannot freely dismiss employees but
employees can dismiss employers as they choose.

As it turns out, there is more legal mutuality in the relationship than employees would like. They
also have to be careful about quitting employers. Employers have historically been reluctant to
pursue former employees who leave them in a lurch without adequate notice. That is changing
as they invest significantly in selection and training and much work is highly specialized.
Usually, employers can and will think ‘good riddance’ to disloyal workers and find replacement
ones rather quickly. They rarely pursue employees who quit them. But this is changing.
This article considers what obligations the employee has to the employer when he or she quits.
Does an employee need to provide notice? If so, how much notice must the employee provide to
avoid liability for breach of the employment contract?
The Basics of Quitting
Employment law is found in legislation and the common law.

Labour Relations Codes

Labour relations legislation sets out the framework for unions and management to negotiate a
collective agreement which governs the working relationship between employees and employer.
Quitting the relationship by employer or employee is often regulated in the collective agreement,
which is enforceable by grievance and ultimately arbitration.

Employment Standards Codes

The approximately two-thirds of employees who are not part of a labour union enjoy an array of
minimum employment protections, as well as a few legal duties, in employment standards
legislation.

Alberta’s Employment Standards Code, RSA 2000, c E-9, (Part 2, Division 8) is typical. It
covers the subject of termination of employment by both employee (quitting or resignation) and
by the employer (dismissal).

Section 58 states that to terminate employment an employee must give the employer a written
notice of termination of at least one week if the employee has been employed between three
months to two years, or at least two weeks if the employee has been employed for longer than
two years. The approximately two-thirds of employees who are not part of a labour union enjoy
an array of minimum employment protections, as well as a few legal duties, in employment
standards legislation. This short written notice of quitting is not onerous for most employees, yet
many still quit on shorter notice, including no notice when they choose to never return to work.

Even then, section 58 notice is not required if:

 there is an established practice in the industry to give less quitting notice;


 the employee is quitting for personal health or safety reasons;
 the job has become impossible for the employee to perform due to causes beyond the
employee’s control;
 the employee is temporarily laid off or does not have work due to a strike or lockout at the
job site; or
 the employee is quitting due to the employer’s denial of his or her legal minimum rights.
For probationary employees working their first three months, no quitting notice is legally
required.
It is natural for an employer to resent a quitting employee. The employer may think ‘well, if you
are going to quit anyway, why not just go now?’ Firing workers who are quitting is how
vindictive employers demonstrate their ultimate power over employees.

The legislation also addresses that scenario. Section 59 says once an employee gives proper
minimum notice and the employer wants to dismiss that employee sooner, the employer must
still pay the employee salary to the end of the employee’s notice period. It is natural for an
employer to resent a quitting employee. The employer may think ‘well, if you are going to quit
anyway, why not just go now?’ Firing workers who are quitting is how vindictive employers
demonstrate their ultimate power over employees. To discourage employers’ retaliation in this
way, if the employee gave longer than minimum notice, and the employer asks her to leave
before then, the employee is entitled to the much longer notice (or damages in lieu) that the
employer would have needed to furnish in order to dismiss that employee.

Another way for employers to retaliate against quitting employees is to reduce their wages or
hours (or any other term) after the quitting notice has been received. Section 61 also prohibits
this. The employer, however, can still give full termination pay or terminate for a legitimate
reason. A written quitting notice has no effect if somehow the quitting employee continues to
work for the same employer after the stipulated quitting date.

Common Law

It is very important to remember that these statutory notice periods are the legal minimum.
Occasionally, employer and employee may have contracted to be bound by this minimum legal
notice, but most often they will not have made any such agreement. In many circumstances,
employees will be expected to provide the employer with more notice of quitting. This is called
reasonable notice.

A fundamental principle of contract interpretation is that if there is no endpoint to the contract, it


may be brought to an end by either party giving reasonable notice to the other party of that
intention. It is very important to remember that these statutory notice periods are the legal
minimum. The courts have held that quitting employees generally need to give less notice to
employers than employers need in order to dismiss employees.

In most cases, an employee’s reasonable notice of quitting will be longer than the minimum
statutory notice set out in section 58. The difficulty now lies in prescribing how much quitting
notice should be, because that depends on several factors.

Today workers in highly complex jobs are more indispensable; harder to replace. How much
time would an employer need to find a suitable replacement employee? This is the standard of
what reasonable notice ought to be given. It includes:

 the nature of the work;


 the experience and seniority of the worker;
 availability of replacements; and
 the time it takes to train new employees to a satisfactory level.
In the 1992 case of Tree Savers International Ltd. v. Savoy, 1992 CanLII 2828 (AB CA),
although the employee had provided the two-week minimum period of notice, the Alberta Court
of Appeal found that 18 months (or $146,200 in lieu) was appropriate reasonable notice.

In Bradley v. Carleton Electric Ltd.,1998 CanLII 7140 the Ontario Court of Appeal determined
three months of quitting notice should have been rendered by a key employee who resigned after
18 months on the job. Perhaps the most famous case is GasTOPS Ltd. v. Forsyth, 2012 ONCA
134. Four employees were ordered to pay nearly $20 million in damages to the employer for
breaching fiduciary duty, soliciting existing employees and business from the employer, and
quitting without reasonable notice, which was determined to be 10 to 12 months.
Conclusion
Employers have historically been reluctant to pursue former employees who leave them in a
lurch without adequate notice. That is changing as they invest significantly in selection and
training and much work is highly specialized. Statutory minimum quitting notice triggers
protection for the departing employee. Employees should also consider the employer’s interests,
as well as their own reputation, when departing. As far as possible in the circumstances, they
should supply generous and reasonable quitting notice.

What factors would you consider in determining the salary structure of an organization?

7 Factors to Consider for Determining Wage and Salary Structure of Workers

Article shared by

The following factors should be taken into consideration in determining wage and salary

structure of workers:

(i) Labour Unions:


The labour unions attempt to work and influence the wages primarily by regulating or affecting

the supply of labour. The unions exert their influence for a higher wage and allowances through

collective bargaining with the representatives of the management.

If they fail in their attempt to raise the wage and other allowances through collective bargaining,

they resort to strike and other methods where by the supply of labour is restricted. This exerts a

kind of influence on the employees to concerned test partially the demands of the labour unions.

(ii) Personal perception of wage:

Whether the wage is adequate and equitable depends not only upon the amount that is paid but

also upon the perceptions and the views of the recipients of the wage. Even though the wage is

above the going wage rate in the community if it is lower than that of fellow worker deemed

inferior, it will be regarded as inequitable in the eyes of the recipients of the wage. A man’s

perception of the equity of his wage will undoubtedly affect his behaviour in joining and

continuing in the organisation.

(iii) Cost of living:

Another important factor affecting the wage is the cost of living adjustments of wages. This

approach tends to vary money wage depending upon the variations in the cost of living index

following rise or fall in the general price level and consumer price index. It is an essential

ingredient of long term labour contracts unless provision is made to reopen the wage clause

periodically.

There are measurement problems both in ascertaining productivity and cost of living increases.

This problem may lead to lack of understanding and unanimity on the part of the management

and the workers.

(iv) Government legislation:


The laws passed and the labour policies formed by the Government have an important influence

on wages and salaries paid by the employees. Wages and salaries can’t be fixed below the level

prescribed by the government. The laws on minimum wages, hours of work, equal pay for equal

work, payment of dearness and other allowances, payment of bonus, etc. have been enacted and

enforced to bring about a measure of fairness in compensating the working class.

(v) Ability to pay:

Labour unions have often demanded an increase in wages on the basis that the firm is prosperous

and able to pay. However, the fundamental determinants of the wage rate for the individual firm

emanate for supply and demand. If the firm is marginal and cannot afford to pay competitive

rates, its employees will generally leave it for better paying jobs. However, this adjustment is

neither immediate nor perfect because of problems of labour immobility and lack of perfect

knowledge of alternatives. If the firm is highly successful, there is little need to pay for more

than the competitive rates to obtain personnel.

(vi) Supply and demand:

As stated earlier, the wage is a price for the services rendered by a worker or employee. The firm

desires these services, and it must pay a price that will bring forth the supply, which is controlled

by the individual worker or by a group of workers acting together through their unions. The

practical result of the operation of this law of supply and demand is the creation of “going- wage

rate”.

It is not practicable to draw demand and supply curves for each job in an organisation even

though, theoretically, a separate curve exists for each job. But, in general, if anything works to

decrease the supply of labour such as restriction by a particular labour union, there will be a

tendency to increase the wage. The reverse of each situation is likely to result in a decrease in

employee wage, provided other factors, such is those discussed below, do not intervene.
(vii) Productivity:

Increasingly there is a trend towards gearing wage increases to productivity increases.

Productivity is the key factor in the operations of a company. High wages and low costs are

possible only when productivity increases appreciably. The above factors exercise a kind of

general influence on wage rates. In addition, there are several factors which do affect the

individual difference in wage rates.

The most important factors which affect the individual differences in wage rates are:

(a) Worker’s capacity and age;

(b) Educational qualifications;

(c) Worker experience;

(d) Hazards involved in work;

(e) Promotion possibilities;

(f) The prevailing wage in the community;

(g) Stability of employment;

(h) Demand for the product; and

(i) Profits or surplus earned by the organisation.

Analyzing the Top-Paying IT Jobs for 2013


By Ed TittelApril 11, 2013 9:49 AM

2. Key Factors in Determining Salary

Though there are undoubtedly other factors that will play into specific salary offers for IT
positions, most experts agree that the following factors exercise incredible influence over the
dollar amounts that employers offer with their positions:

Employer Industry/Market Focus: This sets the overall stage for everything, because it reflects
the market in which the employer operates. Industries with vigorous, active, and profitable
markets – think luxury goods, medical equipment, energy production, or smartphones for
example – are going to pay much better than industries with slow, inactive, or unprofitable
markets – think non-profits, education, or food services, for example. Simply put, those
industries that are growing and making money will pay more than those that are static or
shrinking and not making money.

Job classification/rating/pay grade: Most organizations work with HR or compensation


professionals to set salary ranges for the positions they seek to fill. Some organizations are more
flexible than others when it comes to going outside such ranges, but these ranges basically define
the pay scale that comes with any given position to be filled.

Job experience: The closer your documented experience comes to the kinds of skills and
knowledge an employer is seeking to acquire, the higher your offer will go within the range that
comes with the job. Extraordinary experience might lead to out-of-range pay, but it might also
lead them not to make an offer because of over-qualification.

Location: Geography plays an astounding role in pay rates, and can make as much as a 100%
difference in offers (jobs in Des Moines don’t pay as well as those in New York City, San
Francisco, or Chicago, in large part because of cost of living differentials). Don’t think that the
highest dollar amount is always the best pay: you must also consider the cost of living when
determining how much a salary is really worth.

Salary History: What you were making in your last several positions sets the floor for what you
will make in your next job, both for good and for ill. This is an area where those seeking a career
change may find themselves “over-compensated” and ineligible for positions they seek because
of prior salaries earned.

Educational Attainment: Most jobs come with baseline education requirements, but those who
exceed them can expect to be compensated more than those who don’t. That said, the institution
that conferred your degree(s) matters, as does how recently they were earned. But those with
Master’s degrees usually make more than those with Bachelor’s, while those with advanced
degrees (PhD, JD, MD, and so forth) make the most overall.

Certifications held: If a certification is relevant to your position, a current credential can boost
pay among IT job holders. For those competing for new positions or promotions, certifications
can help hiring managers differentiate between the good ones and the great ones. Some
organizations recognize and compensate for IT certification directly and explicitly; the majority
takes credentials into account but their role in salary calculations is seldom transparent.

Demonstrable Soft Skills: The best employees are those with track records or overt
accomplishments (see next item) that attest to their ability to write and speak well, and to
manage themselves and other people, as well as complex projects. Certifications like the Project
Management Professional (PMP) can play in here, but a well-documented track record is key to
demonstrating good development of soft skills.

Publications, honors, awards: Those who have published in their fields, or who have earned
honors or awards from professional societies or associations can offer additional proof of skills,
knowledge, and professional accomplishments. This can also help differentiate between good,
great or job promotion candidates. This value is mostly in terms of prestige, however, and may
not make big differences in salary.

Do you agree that an organization must be customer based to succeed? Discuss.


Marketing theory

Why customers are important

Customers are the most important people for any organisation. They are the resource upon which
the success of the business depends. When thinking about the importance of customers it is
useful to remember the following points:

1. Repeat business is the backbone of selling. It helps to provide revenue and certainty for the
business.

2. Organisations are dependent upon their customers. If they do not develop customer loyalty and
satisfaction, they could lose their customers.

3. Without customers the organisation would not exist.

4. The purpose of the organisation is to fulfill the needs of the customers.

5. The customer makes it possible to achieve business aims.

Customer satisfaction

Customer satisfaction is at the heart of the selling process. One estimate is that it costs five times
as much to attract new customers as it does to keep an existing one. The relationship between the
customer and the organisation is, therefore, an important one.

Building customer relationships can be seen as moving up a ladder. At the top rung of the ladder
are your loyal customers (advocates).

The ladder consists of four main rungs (with 4 being the highest):

 4 - Advocates
 3 - Regular customers
 2 - Occassional users
 1 - One-off purchasers

The extent to which customers move up the ladder depends on how well they are treated by the
organisation. Well focused sales methods and attention to individual detail is likely to encourage
customers to move up the ladder.
The Times 100 focuses on organisations which illustrate excellence in building relationships
with customers over time such as Argos, which spends a lot of energy, and time on finding out
what customers want. Other organisations like Nestle and Cadbury Schweppes place great store
on building strong links with all their stakeholder groupings and with their customers through
extensive market research.

Read more: http://businesscasestudies.co.uk/business-theory/marketing/why-customers-


are-important.html#ixzz4NdqwXM3a
Under Creative Commons License: Attribution Non-Commercial Share Alike
Follow us: @BizCaseStudies on Twitter | bizcasestudies on Facebook

The 10 strategy tenets for developing a customer-driven workforce

Turning a customer service strategy into reality is a key challenge for organizations. Today, most
senior managers realise that customer service is the competitive strategic weapon but achieving
this is sometimes a major challenge. Organizations are their people, and developing a customer-
driven workforce has to be the key role of customer service leaders and managers… so how can
they do this?

Peter Drucker famously said: “The purpose of business is to create and keep customers,” so
every business needs to organise its service delivery system around the needs of its customers.
This means firstly designing a customer service strategy that will put customers at the heart of
your business. Senior managers need to ask themselves, “Are we doing everything we can to
create the best possible experience for our customers?” Perhaps some senior managers assume
that because their marketing departments communicate that the organisation’s service delivery
“exceeds customer expectations,” that they actually do. I call this corporate arrogance! It is
suicidal for businesses.

Your people are the ones to leave a first impression - and a lasting impression - on your
customers. They also intimately understand customers’ frustrations and they often know how
issues can be resolved, but are not empowered to make the necessary changes.
In the UK we are now predominantly a service economy, so we increasingly need high
performance people to keep our customers loyal. Poor customer service is costing UK business’s
£15.3bn per year as customers defect! Companies that increase customer interaction investments
during a recession can improve profit margins, sales and market share over complacent
competitors. It is critical for organisations to retain every customer and maximise their lifetime
value.
Institute of Customer Service research shows that organisations with a reputation for service
excellence have on average a 24% higher net profit margin than same-sector rivals who do not
have the same standing – and they can achieve up to 71% more profit per employee. Are
businesses listening?
Let’s assume there are still many organisations out there that still do not know how to establish a
strong customer base, so what do they have to do? Lets get customer-centric and here are my ten
key components, tried and tested, which will help organisations get started.

Components of customer-centricity

1. Customer insight – Get to know your customers and understand what they expect from
you. How many organisations conduct mystery shopper activities for themselves? Where
they do it can be scary but enlightening. Get to know your internal customers too - your
workforce. Customer service managers need to focus on all their customers consistently
and there are many ways of gathering customer intelligence. This does not mean the odd
customer satisfaction survey, which I am personally not in favour of; not because most
organisations disregard the feedback or do not interpret them properly, but because many
organisations create them with a primary intention of achieving good results! They
sometimes only ask the questions that will highlight their good practices.

Also, where satisfaction surveys are concerned doesn’t the customer experience depend a
lot on customer expectations in the first place? Easyjet might score highly because we
have low expectations, but we might score British Airways lower because we have high
expectations. Organisations need more reliable methods of evaluating the customer
experience and they need their people to make this happen. I really believe that before
you decide what your customer service strategy should be you need to talk to your
customers and your people, your internal customers, before you put pen to paper.

Trending

 Who should own customer journey mapping?


 Infographic: How to avoid service staff burn out
 9 sample customer journey maps to learn from

I remember one such company that impressed me which has now been taken
over. Portman Building Society’s top executives travelled the length and breadth of the
country to speak to their customers and their staff to identify what was important to them
and what needed to be in place to satisfy all their requirements. When they analysed all
the information they developed their customer service strategy, created new service
standards and then went back on the road to communicate their new vision to employees
and customers alike. Absolutely the right way to go which is why they proved to be a
great acquisition.

2. Create the service vision or service personality – This is an identifiable set of service
characteristics that define how an organisation service proposition is different from that
of its competitors. Some organisations have their own credo, others have a service
promise or a customer charter but whatever method you have of communicating your
service standards to your customers it is important to make sure those promises are
achievable and shared by all teams in the organisation.

3. Develop a customer service strategy - This determines the overall direction of the
organisation, and, in particular, how the organisation will go about delivering customer
service excellence.This is a high level plan that communicates to everyone involved with
the organisation how it will develop relationships with its customers, in order to
maximise customer satisfaction and customer loyalty, and achieve business success. It is
commonly used to prevent non-aligned and disjointed activities between departments and
drives everyone towards the same service goals. It includes a service/operational plan to
ensure the strategic objectives are met and this should be shared with employees as
everyone is going on the same journey. Communication is key; if you do not keep your
people informed, rumours and gossip spread fast which can lead to negativity and once
embedded it is hard to eliminate.

4. Build an appropriate customer service framework - A learning and development


framework will help identify how the organisation is going to go about delivering service
excellence. Reward and recognition, celebrating success are key motivators for
employees so use them to deliver your service strategy. Customer service performance
will improve when organisations provide support through valued reward and recognition
systems. This level of recognition results in higher levels of employee satisfaction which
translates into better customer service for your customers.

5. Deploy executive service leaders and managers who will become the organization’s
service champions - Service leaders and managers can make or break an organization’s
values; a leader who successfully creates a customer-focused culture will have a huge
impact on business success through employee retention and customer loyalty. Ensure that
your leaders and managers have the right skills, dedication and passionate about service
excellence, customer focused and are results-driven. Leaders should possess a strong
business acumen, be strategic, but lead by example, inspiring trust and embedding a no-
blame culture within the organisation. Critically, they must encourage positive
teamwork.
6. Recruit high-performance, intelligent and well-motivated people with a 'can-do
attitude' - You want people with a customer-focused mindset. Once in place, develop
their knowledge and skills for delivering service excellence against competencies that are
customer focused – good communication skills, tolerance, empathy, good judgement and
the ability to interpret service issues and respond appropriately according to the
organisations rules.

7. Create innovative products and services with the support of all your people - Inspire
your organisation to develop a culture of continuous improvement and innovation for the
benefit of your customers. Employee suggestion schemes have helped many
organisations implement change which has improved service delivery for customers but
even those organisations that have the answers today cannot assume they know what their
customers will want tomorrow. Customer’s expectations have become demands and
successful organisations will already be anticipating customer’s demands tomorrow to
stay ahead of the competition.

8. Design and implement customer-centric processes that make purchasing easy for
customers - Processes should be seamless, designed from the customers’ viewpoint and
be consistently reviewed to make transactions simple and stress free. This includes
making it easy for customers to complain, remember complainants are your most loyal
ambassadors if their complaints are handled professionally. Organizations seldom
achieve competitive advantage through their technology and processes alone; it may add
value but only if there is a parallel investment in their people who have to work with the
technology to assist customers.

9. Create performance metrics so that the organisation can routinely and accurately
assess its effectiveness for customers - Use appropriate tools, proven methods, for
measuring your customer satisfaction, remember that customer service as a whole
includes a wide range of specific service characteristics and there are many touch points
where customer transactions take place. It is important to check on customers`
perceptions of your service levels at each of these touch points and compare the results
with what actually takes place. In other words, identifying your gaps!

10. Manage customer relationships - Products and service alone will not develop
relationships with customers. The organisation must deliver something of value to ensure
loyalty. Loyalty is created when you provide a level of service that exceeds expectations
and which delights your customers. Managing customer relationships is about
establishing, maintaining and enhancing relationships with customers for mutual benefit.
This takes us back to the beginning, to learning more and more about our customers in
order to deliver what they expect. If your people can be encouraged, not only to deliver
the promise, but also to go the extra mile, this goes a long way towards sustaining a
fantastic relationship with your customers. You will reap the rewards in loyalty, increased
reputation and business success. I must emphasise at this point that although CRM is a
term given to the management of customer relationships in high volume consumer
services its prime objective is to collect data from different departments to enable the
tracking and analysis of customer’s transactions and trends. Although particularly
valuable it does not replace the personal touch.

By successfully implementing all these components you will begin to create a customer-focused
culture. There is no quick fix, but eventually you will influence the behaviours of all your people
so that when new recruits join the organisation the service culture dictates: “This is the way we
do things around here”. The customer determines what Best Practice is and they expect the
highest possible service, the most innovative products at the right price and they want them now.

To achieve service excellence organisations must make excellent service a priority and ensure
that their service leaders and customer service managers posses the necessary skills to support all
customer facing teams, whether front-of-house or back office; they should all interact in a
carefully designed way to ensure that the customer has a fantastic experience with your
organisation.

It is no longer appropriate to simply focus on product and/or services. Instead, organisations


must truly understand the emotional interactions between their team leaders and mangers,
employees and customers, because this is what determines whether an organisation achieves
business success or not.

Product Focused vs. Customer Focused 1

Product Management: What’s the


difference?
On the other hand, a Customer Focused organization is one where decisions about the product
are made based on aligning customer needs and wants with the overall goals of the organization.
Simple as. Customer feedback via surveys, customer service emails, Tweets, blogs and more in-
depth qualitative research are golden nuggets in these organizations.
Increasing Employee Productivity: The
Strategic Role That HR Essentially Ignores
By Dr. John SullivanMay 16, 2011ERE

Tweet9
Share22

Share63

Email

Increasing productivity is one of the most critical goals in business. Unfortunately, it’s an
activity seldom accepted by HR professionals as a legitimate mandate. While most HR
professionals acknowledge that their job entails establishing policy, procedures, and programs
governing people management, few attempt to connect such elements to increasing employee
output (volume, speed, and quality) per each dollar spent on labor costs (or as an easier to
measure alternative, revenue per employee).

Bonus programs are typically enacted that keep total compensation in line with market trends,
regardless of the value of work warranting incentive comp. Training tools are often secured via
the lowest-cost provider method with minimal consideration given to which provider would be
most effective. Recruiting practices too are more often managed with the primary goal of
minimizing cost, not enabling business capability/capacity. Regardless of the function you look
at, in the typical organization, HR is more concerned with executing transactions instead of
delivering productivity solutions.

If you believe as most should that the combined efforts of the human resource function should
positively influence the performance capability of the workforce instead of hindering it, you
should understand the factors that influence performance.

22 Factors That Influence Individual/Team Performance


Based on more than 30 years of observational research into what drives high performance
organizations, I’ve identified the following 22 factors, broken into six categories that
significantly influence (positive/negative) individual/team productivity.

Foundations of Productivity

1. High-performing and innovative employees are the foundation of productivity — by far the
most impactful factor in workforce and team productivity is hiring and retaining employees with
exceptional capabilities and self-motivation. Working together, managers and HR can attract, hire,
develop, and retain individual employees who are agile, high-performing continuous learners and
innovators. Unfortunately, even the best employees cannot perform without great managers, proper
direction, support, tools, and resources.
2. Effective managers and leaders set direction and execute — a great manager/leader is the
second-most important productivity factor. Leaders and managers play a critical role in defining
the direction, purpose, priorities, goals, and roles of the workforce. The capability of the manager
(with the support of HR) to develop plans, hire effectively, coach, motivate, and develop
employees is crucial to success. Unfortunately, many managers are the weak link in the
productivity chain, so HR must accept the role of developing great leaders/managers and
identifying/removing the ineffective ones.

Direction and Guidance Factors

1. A corporate strategy and plan that builds commitment — a competitive business strategy and
strategic plan increases the chances that an organization will be successful and success builds
commitment. In addition, if the plan and the strategy are clear and well communicated, not only
will your employees be more motivated, but knowing the strategic direction will help them remain
focused. Corporate values that are measured and rewarded can also align behavior and build
commitment.
2. A defined purpose for teams make roles clear — every business unit and team needs to
understand its role. Managers and leaders need to develop a clear and communicated purpose that
is both compelling and that makes members feel important. Understand that employees are more
likely to be committed to the purpose of the unit or team if they are involved in creating it. An
unclear mission will result in a lack of focus and a low level of “engagement” and commitment
toward achieving it.
3. Team and individual goals — having clear operational goals lets everyone know what is
expected. If these goals are communicated and measurable, employees will understand precisely
what is important and what is not. If stretch but reachable goals are set, employees are less likely to
become complacent.
4. Prioritization for impactful resource allocation — setting clear priorities helps to ensure that
time and resources are allocated to the most important and impactful tasks. Employees must be
made aware of both high- and low-priority goals, tasks, processes, and customers. Processes must
be developed to ensure that resources are allocated disproportionately to high priority tasks.
5. Performance metrics for continuous improvement — having effective metrics and reporting
processes reinforces both team and individual goals. Because whatever is measured and reported
gets done, metrics provide focus, feedback and result in continuous improvement.
6. Effective rewards drive performance — when monetary rewards are tied directly to performance
and the metrics for each goal, you doubly reinforce the message about what is important.
Individual and team monetary rewards, coupled with nonmonetary excitement factors, can play a
major role in ensuring focus and consistent performance.

Support Factors

1. Team member support increases individual performance — few tasks in this modern age can
be completed by an individual employee working without support. Unless your employees are
provided with complementary teammates, as well as the support of managers and employees
outside the team, productivity is bound to suffer.
2. Best-practice sharing and collaboration improve productivity — learning by trial and error
slows progress and leads to mass duplication of effort and higher error rates. Productivity improves
dramatically when others who are outside the team freely collaborate and proactively share best
practices and ideas. It is HR’s role to develop formal methods to increase cross-function
collaboration and sharing.
3. Support for innovation can dramatically increase productivity — in most industries, the yearly
increase in the level of productivity that is required to maintain a dominant position in the industry
has increased dramatically. The new reality is that productivity increases of between 10 and 25%
are now required each year. What is needed is a continuous level of innovation both in products
and in business processes. Increased efficiency for continuous improvement processes are not
sufficient to provide that level of double-digit gain, so HR must develop processes, training,
measures. and incentives that result in continuous innovation workforce wide.
4. Control and authority can enhance or hinder decision-making — a lack of control and
excessive freedom can result in waste, duplication, and a lack of focus. In direct contrast,
micromanagement and excessive rules can slow decision-making and employee development.
Productivity is maximized when there is enough balance so that employees have enough control,
authority, and permissions to make most operational decisions.
5. Non-monetary factors can also excite employees — in addition to formal rewards, managers,
leaders, and teammates can provide nonmonetary factors that increase employee excitement,
energy, motivation, and loyalty. These factors can include praise, recognition, exposure, challenge,
feedback, and learning opportunities. It is HR’s role to ensure that managers know how to
effectively use these nonmonetary factors.
6. Not having the appropriate inputs can hinder productivity — in most cases, team and
employee work is dependent on the inputs provided from other processes. It is the manager’s role
to ensure that these inputs are provided on time and of the right quality. Make sure that the team’s
output meets the standards set by the team responsible for the next step in the production process.
7. Barriers to productivity can limit success — often, even when every one of the positive
productivity factors are present, productivity can be slowed or stopped by real or imagined
barriers. These roadblocks can include individuals resistant to change, corporate politics, personal
jealousies, corporate rivalries, as well as powerful people. In addition, there may be perceived or
imaginative barriers that keep employees from even attempting any effort aimed at increasing
productivity or innovation. In both cases, HR needs to work with managers in order to develop
processes for identifying and eliminating any real or imagined barriers to productivity.

Skills, Communications, and Information Factors

1. Employee skills and knowledge must be continually updated to maintain productivity —


global competition has created a rapid pace of change which means that current skill sets must be
continually updated. It is the manager’s job to identify employees with less than optimal skills.
HR’s role is to develop processes to continually increase employee learning, knowledge, and skill
development, while minimizing the amount of time that employees are away from their work.
2. Effective communications and feedback reduce errors and frustration — a lack of
communications can frustrate employees and make them feel unimportant. Failing to provide
effective feedback can lead to wasted efforts, increased error rates, and lower productivity.
Communications and feedback mechanisms need to be developed in conjunction with employees
to ensure that they fit both the needs of the manager and the employees.
3. Providing the right information improves decision-making — managers and employees need
access to all relevant information and data in order to be productive and to make effective
decisions.

Resourcing Factors
1. Insufficient budget resources can hamper productivity — even a great team with a great
manager will produce lower levels of productivity when with insufficient budget to complete the
job.
2. Technology, tools, and equipment can limit or bolster productivity — even highly trained,
motivated, and engaged employees can’t be very productive when they are provided with
insufficient tools and equipment to do their job. In an era where technology dominates almost
every function, a failure to provide the technology, updates, or sufficient training can dramatically
slow productivity.

Miscellaneous Factors

1. Integration can increase productivity — when business processes operate independently and not
in unison, it can inhibit the work flow and increase delays and error rates. Part of any productivity
effort should include integrating interdependent processes, breaking down the silos and barriers,
and making interconnected processes appear “seamless” to those involved.
2. Outside-the-workplace factors — although most factors that impact productivity are internal to
the organization, on occasion, employee productivity is negatively impacted by things that happen
outside of the firm. These factors could include changes in employee’s personal life and external
economic, social, political, and even weather-related factors. Excellent productivity processes need
to be flexible so that they can adjust when these external factors begin to impact individual or team
productivity.

Final Thoughts

Article Continues Below

Managing workforce productivity involves accepting responsibility for optimizing the ROI
(return on investment) for labor expense, just as other functions do for their activities. While
some in HR would argue that it’s the manager’s role to increase productivity, it’s safe to assume
that managers are not experts, nor are they knowledgeable about how to do so.

If you work in HR or talent management and you are looking for an opportunity to have a major
strategic impact, consider setting up an internal productivity consultant team that provides the
same kind of high-quality expert advice that a McKinsey or BCG might provide (only with better
knowledge of the company problems, opportunities, and culture).

No one in any organization has complete control over these 22 factors, but the HR function can
use its well-known relationship-building and persuasive skills to “influence” those outside their
direct span of control. Since no one in the organization currently “owns” productivity
improvement, you won’t have a lot of competition for the role, at least until you start to make
progress!

Get the best of ERE, delivered right to your inbox. Subscribe to our daily e-
newsletter.
Share this Entry
TWEET 9
SHARE 22

SHARE 63
EMAIL

About the Author

5
Measuring and Managing Individual Productivity
William A. Ruch

As important as productivity is to the continued economic development of the world, it is


surprising that so little is known about measuring and managing it. Part of the problem
may lie in the unit of analysis industry uses to measure productivity and in a failure to
recognize the complexity of the relationships between the productivity of the individual
worker and the total performance of the organization. The body of research knowledge
provides little help. A multitude of micro studies of individual work behavior exist, but
the measure of productivity used is seldom comparable to those developed in industry.
Organizational studies generally focus on the total performance of the organization, but
even those that are centered on organizational productivity rarely attempt to disaggregate
findings to the business unit, work group, or individual level in any systematic way.

In a general sense, the productivity of the world is a function of the productivity of each
of the world's economies; the economies, in turn, are as productive as the organizations
within them. Within the organization, individual workers performing specific jobs form
the base level for all productive endeavor. In modern, complex organizations, however,
the linkage between individual productivity and the productivity of organizational
systems becomes blurred. For a variety of reasons, the linkages are seldom one to one.
Only by understanding the individual level of productivity, however, can practitioners
and researchers begin to build the theories and models that deal with the dysfunctions

Page 106 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 106 6

Save
Cancel
and synergies that occur when individuals are grouped into work teams, departments,
organizational systems, and economies.

It is important to note at the outset that focusing on individual productivity measures


provides a myopic view of the organizational world. Organizations are set in the context
of a changing, competitive environment in which strategies are developed to guide the
efforts of management and workers toward a common vision and set of objectives. Even
the best-designed processes will fail without a supportive culture within the organization
that values change, continuous improvement, goal commitment, group cohesion, and
respect for people. Every concept in this chapter assumes that the individual worker and
the work group are set in an organizational context that is internally consistent and
environmentally consonant.

It is also important to note that productivity, although a major concern, is not the only
indicator of individual or organizational performance. Productivity interacts with other
aspects of employee performance, financial controls, innovation, and competitive
effectiveness—any one of which can lead to organizational failure. In Chapter 6 Sink and
Smith identify seven related but separable performance criteria for an organizational
system: (1) effectiveness, (2) efficiency, (3) productivity, (4) quality, (5) quality of
working life, (6) innovation, and (7) profitability (profit center) or budgetability (cost
center). Other authors, such as Pritchard (Chapter 7) and Campbell (Chapter 8), have
slightly different ways of relating or combining these performance dimensions. For the
purposes of this chapter, my definition of productivity includes effectiveness (producing
the right products or services), efficiency (prudent utilization of resources), and quality
(meeting technical and customer specifications).

My purpose in this chapter is to assimilate knowledge about the measurement and


management of individual productivity in order to provide a link in the chain of
understanding regarding how individual productivity contributes to group productivity,
which in turn contributes to organizational productivity. My intent is to aggregate
existing knowledge and propose some theoretical foundations in order to reveal areas in
which theory development and empirical research are needed. Throughout, I make an
effort to bridge the gap between the concerns of researchers and the needs of practitioners
in industry.

PRODUCTIVITY MEASUREMENT AND GOAL


ALIGNMENT
In industry, the measurement and analysis of individual-level productivity serves the
following five major functions:

Page 107 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 107 6

Save
Cancel
1. Define productivity and direct behavior: The measurement system provides an
implicit definition of productivity for the operation. It communicates to the
worker, the supervisor, and others the common expectation from the task. The
productivity measurement provides specific direction and guides the worker
toward productive activities.
2. Monitor performance and provide feedback: The measurement system provides a
means to check progress toward an objective. In addition, it can be a major part of
the employee's performance evaluation leading to rewards or disciplinary action.
3. Diagnose problems: Productivity analysis, particularly the examination of trends,
helps identify problems before they become crises and permits early adjustment
and corrective action. Like any other indicator, productivity measurements do not
necessarily identify the source of the problem, only that one exists.
4. Facilitate planning and control: Productivity measurement provides information on
costs, time, output rate, and resource usage to allow decision making with respect
to pricing, production scheduling, purchasing, contracting, delivery scheduling,
and many other activities in the industrial cycle. Productivity analysis, together
with other elements of a competitive strategy, may determine which products or
processes should be expanded and which should be phased out.
5. Support innovation: Productivity analysis, combined with cost data, aids in the
evaluation of proposed changes to existing products or processes and the
introduction of new ones. It is one of the primary foundations for the continuous
improvement efforts that are both popular and necessary for survival in business
firms today.
The purpose of the measurement system is critically important in determining the specific
measures to be used. For example, if the measures are to be used only for planning and
control purposes, the inputs into the measures and the outputs may be imprecise
aggregate figures that provide guidance for setting schedules and future capacity
requirements. If, however, the measures will be used as a basis for an employee
evaluation system leading to bonuses, pay raises, layoffs, and disciplinary actions, inputs
and outputs of the measures must be more precise and accurate for shorter time periods,
and they must exclude factors outside the control of the worker. Questions of equity and
interaction among individual jobs become evident.

The functions of monitoring performance and providing feedback, diagnosing problems,


facilitating planning and control, and supporting innovation are common to many types
of measures, and productivity is no exception. The function of defining productivity and
directing behavior, however, warrants more explanation because it is important to

Page 108 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 108 6

Save
Cancel
managers in the successful operation of their business units, and because it is important to
researchers in the design of studies that shed light on human behavior at work.

A simple example of a waiter in a restaurant can be used to explain how measures of


productivity can direct behavior. If the measure of productivity is customers served per
hour, the emphasis is on speed and throughput, and the waiter will try to complete each
transaction as quickly as possible. On the other hand, a measure of dollars of food served
per customer would lead to totally different behaviors; the waiter would suggest more
expensive items and would encourage the customer to have appetizers, wine, and dessert,
regardless of the time taken. In this case, time is not a factor; the quick turnover of
customers would be a disadvantage. Other possible measures could each lead to a
different set of behaviors.

One way to view individual productivity is to consider how the efforts of an individual
contribute to the productivity or success of the organization. Whether the actions of the
waiter in each of the examples above would be productive or counterproductive depends
on the type of restaurant and, specifically, its goals and objectives. A downtown
delicatessen would have one set of goals and circumstances; speed in serving customers
would be a distinct advantage. A fine restaurant in the suburbs would operate in a
different milieu; speed in this case could be a detriment.

The fundamental question is not, what productivity measures should be used? The
fundamental question is, what are the organizational objectives? The secondary question
is, what set of individual productivity measures will direct the behavior of employees to
meet those objectives as they work toward their own personal goals? The aim of the
organization is to align work behavior with organizational goals. It is the responsibility of
management, therefore, to develop measures that will elicit organizationally desirable
behaviors. These relationships are illustrated in the model shown as Figure 5-1 (Werther
et al., 1986).

The law of effect, the cornerstone of operant psychology, says that behavior is a function
of its consequences; positive outcomes reinforce behaviors, which leads to their being
repeated and expanded. Simply establishing a measure and feeding back the results to the
employee can be regarded as a form of reinforcement; employees tend to work on the
basis of the measure in any circumstances. If there is a net incentive for high
performance, the link between behavior and the measure will be stronger. The greater the
incentive, the stronger the relationship between the two.

The term net incentive indicates that many incentives and disincentives may operate in a
given set of circumstances. For example,

Page 109 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 109 6

Save
Cancel

FIGURE 5-1 Goals, measurement, and behavior model. SOURCE: Werther et al.
(1986:230).

peer pressure not to exceed production standards, the desire by some for an easy job, and
the tendency to socialize at work interact with such positive incentives as financial
rewards for high performance, opportunity for promotion, satisfaction from a job well
done, and many others. Worker motivation is a complex issue; in taking all of that
complexity into consideration, the model suggests that the net incentive should be
positive and tied to performance.
Unfortunately, many organizational incentive systems are based on productivity or other
performance measures that are not in line with organizational goals. Programmers, for
example, may be measured and rewarded for lines of code written per hour. Accountants
may be evaluated on the number of reports produced, and maintenance personnel on the
number of routine equipment overhauls performed. In each instance (and many more),
maximization of the measured criterion would likely be counterproductive to the
organization.

Following the same logic, the productivity measurement system at each level of analysis
should be developed to direct behaviors and performance at one level of the organization
to the goals at the next higher level. These relationships are depicted in their ideal state in
my Goal Alignment model, Figure 5-2. Across the top of the model, the organization
attempts to make business unit goals (at all intermediate levels) congruent with
organizational goals. Since the organization has no control over the individual's goals or
the non-work-related goals of the group, it must accept them as given and design the
organization to be compatible with them. For the sake of simplicity, this model does not
consider

Page 110 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 110 6

Save
Cancel
FIGURE 5-2 Goal Alignment model.

the compatibility of individual goals with group goals, or the resultant effects on
performance, but it assumes that the behavior of one or the other, individual or group, is
the basic unit of analysis determined by the process.

Productivity measures at the individual or group level direct behaviors to the business
unit goals, if properly aligned. That is, the individuals or groups will work to the
measures; it is the responsibility of the organization to ensure that the measures are in
line with the goals.

Reading horizontally across the bottom of Figure 5-2, the model indicates that the
productivity (performance) of a business unit is a direct function of the productive
behavior of each of the individuals and groups within the unit. In turn, organizational
productivity is a function of the productivity of each of the units. The degree to which
this is true depends on the definition of productivity at each level and the interactions
among the elements. Also, in this ideal model, the individual or group productivity results
would sum to the productivity of the next higher business unit and ultimately to the
productivity of the organization.

At the business unit level, managers will direct activities, allocate resources, and make
other decisions to maximize performance as specified in the measurement system
(especially if rewards are tied to performance). At each intermediate level of analysis,
therefore, productivity measures should be selected and positioned such that the
performance of the unit directly contributes to the goals at the next higher level.

The Goal Alignment model suggests that individuals, groups, and business units are not
goal driven, but measurement driven. The old saying that ''you get what is inspected, not
what is expected" is rel-
Page 111 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 111 6

Save
Cancel
evant here. It is one thing for a firm to establish and communicate goals. It is quite
another to devise and implement measurement systems that can be maximized only by
behavior and performance that lead directly to goal accomplishment.

Organizations are real, not ideal. The Goal Alignment model, as well as many of the
other models and concepts in this chapter, represent targets toward which organizations
should strive. The degree to which they can achieve these targets, resolve the related
issues, and design perfect productivity measurement systems determines their probability
of survival and success. Researchers can help in this effort by empirically testing the
relationships suggested in the Goal Alignment model.

TWO MODELS OF INDIVIDUAL PRODUCTIVITY


From one perspective, virtually everything that is known about technology and the
behavior of people at work is a factor affecting individual productivity. Attempts to
amalgamate all of that knowledge into a comprehensive, unified theory of individual
productivity would likely prove fruitless. What is needed is a framework that will provide
guidance for theory development, model building, empirical studies, and other forms of
research. One such framework is the separation of the factors affecting individual
productivity into five distinct, but interacting, sets of variables: (1) individual
characteristics (e.g., size, strength, stamina); (2) psychological variables (e.g., individual
attitudes and beliefs); (3) sociological variables (i.e., factors that come into play when
individuals interact in groups of various sizes); (4) technological variables (e.g., tools,
equipment, materials); and (5) system variables (e.g., policies, management style,
communication systems).

Each of these sets of variables involves one or more disciplines; together they approach
the boundaries of the body of knowledge of work. Obviously, they overlap and interact.
But somewhere within the complex interactions of all of these variables lie the
determinants of individual productivity. Development of a comprehensive theory of
individual productivity is too much to ask, but perhaps it can be approached as would
building a cathedral—one stone at a time. To develop a theory or build a cathedral, one
needs plans and models. In this section, I discuss two models of individual productivity
that encompass a wide range of variables.

A Conceptual Productivity Model


Ruch and Hershauer (1974) developed the Conceptual Schematic Productivity model to
diagram the major influential relationships of a

Page 112 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 112 6

Save
Cancel

FIGURE 5-3 A conceptual model of individual productivity. SOURCE: Adapted from


Ruch and Hershauer (1974).

number of variables that affect individual productivity. They categorized the variables as
primary factors, secondary factors, individual factors, organizational controllables,
individual and organizational demographics, and bodies of knowledge or files of
information. In this section, I use a revised and greatly simplified version of their model
(see Figure 5-3) as a basis for explaining the principal influences on the productivity of
the individual worker.

In this Conceptual Productivity model, productivity is a function of four major factors:


task capacity, individual capacity, individual effort, and uncontrollable interferences.
Taken together, the first two factors establish the potential productivity of the task. When
this potential meets the individual effort, moderated by possible interferences, the actual
productivity of the task for a given time period results. Interference cannot be controlled
by the individual worker, and it may or may not be controllable by the organization. For
example, material shortages and machine breakdowns might have been prevented by
better

Page 113 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 113 6

Save
Cancel
scheduling or maintenance, but a general power outage caused by a storm cannot be
avoided except through backup procedures that are not cost justified.

The basic components of each of the first three factors in the model are identified in
highly simplified form in Figure 5-3. Task capacity is a function of the level of
technology employed (the technological variables referred to earlier); the design of the
task (one of many system variables); and physical inputs (which span technological and
systems variables). Individual capacity is a function of the individual characteristics that
constitute the knowledge, skills, and abilities an individual brings to a task. Finally,
individual effort is a function of attitudes and beliefs covering all of the cognitive
characteristics of the individual that motivate a person to productive behavior on the job.

In the original model from which this version is derived, Ruch and Hershauer (1974)
discussed direct and indirect causal relationships, interactions among factors, feedback
loops, possible trade-offs, and a number of other refinements. One can easily see, even in
the reduced version of the model used here, that a change in the workplace, such as the
introduction of a more sophisticated data management system (technology), can have
resounding effects for almost every element of the model. Individual knowledge is
suddenly obsolete, which leads to the need for training by the organization. Attitudes and
beliefs of the worker (e.g., resistance to change, fear of job loss, the challenge of a new
job) will almost certainly be affected by the way the change is introduced and
implemented, the training provided, and the way postimplementation activities are
handled by management. But the degree and direction, positive or negative, of these
rippling effects are difficult to predict. The resulting effect on individual productivity,
given incomplete knowledge of the interactions of these many variables, is far from
certain.

The primary purpose of this model is to organize and enhance understanding of the
complex interactions of many variables operating in the workplace. It keeps the larger
picture in view and thereby helps to avoid the myopia of focusing on one variable and
assuming that everything else remains unchanged.

One important aspect of this model is that it separates potential productivity (determined
by the first two factors) from the achievement of that potential (a function of the second
two factors). It is one thing to increase the potential productivity of a task through higher
levels of technology, better equipment and materials, more training, and the selection of
employees with excellent skills. It is quite another matter to realize that potential in the
form of sustained productivity increases by all employees. From a problem-solving point
of view, cases of "poor" productivity should first be diagnosed as lack of potential, then a
fail-

Page 114 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 114 6

Save
Cancel
ure to meet potential, or some combination of the two. The optimal corrective action for
one condition may fail if the other condition ensues.

Similarly, if the capacity of the task is increased and productivity remains constant or
declines, one should look to the antecedents of individual effort or to instances of
interference that could be corrected through changes in system variables. If an incentive
system has little or no effect on productivity, one should explore the determinants of the
capacity of the task and the individual to see if they are at their technological limits.

This Conceptual Productivity model is a simplistic representation of a highly complex


system of interrelated variables that influence the productivity of individual workers and,
in turn, the productivity of higher levels of the organization. It is intended as a framework
within which existing and future research can be organized with the aim of making
research results more meaningful and relevant to the needs of industry. To some extent,
this type of analysis, using even a simple framework such as this one, may help explain
the paradox of the lack of productivity improvement from investments in information
technology noted in Chapter 2.

The Productivity Servosystem Model


Whereas the Conceptual Productivity model attempts to relate a few major antecedents of
productivity but with little emphasis on the nature of their relationships, the Productivity
Servosystem model developed by Hershauer and Ruch (1978) attempts to present a
normative model that illustrates the interaction of factors influencing worker performance
(see Figure 5-4). As with the previous model, I use a simplified version of the
Servosystem in this discussion. Thus, many of the factors shown in Figure 5-4 could be
disaggregated into several levels of analysis. The term performance is used in this model
to indicate productivity as well as other work-related behaviors.

Individual worker performance is shown as the focal point of the model; organizational
and individual factors either directly or indirectly affect this performance. Any factor
shown can be traced through the model as an input to worker performance. In fact, many
factors can also be traced to performance as an output. Because of this feedback effect
and the time delay mechanism in the model, the model is called a Servosystem.

The factors influencing worker performance are indicated in the model in several ways.
First, individually controlled factors are distinguished from organizationally controlled
factors. Second, factors that
Page 115 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 115 6

Save
Cancel

FIGURE 5-4 Productivity Servosystem model. SOURCE: Hershauer and Ruch (1978).
Page 116 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 116 6

Save
Cancel
may be changed significantly only in the long run are identified separately. Third, some
factors that control the rate of transfer of one or more of the other variables are identified.
Fourth, the model includes time as an implicit factor since the feedback would take place
over time. The time factor is also explicitly included by the time delays shown at a
number of places in the model. These delays indicate that changes in the factors to which
they relate will affect performance rather gradually over time.

My colleague and I developed the Productivity Servosystem model based on inputs


derived from a review of the literature and information we gathered during visits with
several productivity-conscious organizations. The models by Lawler (1971) and
Sutermeister (1969) were particularly useful in forming the version of the model
presented here. In addition, the modeling procedures of industrial dynamics as developed
by Forrester (1961) have guided the form we used.

Elements of the Model


A brief walk-through will help explain the elements of the model and their relationships.
Worker performance leads to reported measures of performance, buffered by the
measurement system and methods of data collection. Performance data lead to various
positive or negative rewards, which along with other factors, influence job satisfaction.
Within each individual there exists an effort/satisfaction ratio that reflects the equitable
balance of effort expended and rewards received. Correspondingly, the organization has
an implicit effort/pay ratio (a fair day's work for a fair day's pay). These two ratios
combine with other factors to determine the functional effort the worker brings to the job.

The factor interaction block in Figure 5-4 indicates that the functional effort of
individuals is a complex phenomenon representing more than a simple addition of the
levels of factors that are direct inputs to the individual. It is some function of the
effort/satisfaction and effort/ pay ratios, the individual's personal goals and general level
of energy, and work-related elements (e.g., working conditions and supervisory
methods). Also, different levels of performance elicit reactions within the individual and
among coworkers that may encourage or retard future efforts, and that becomes part of
the factor interaction.

The mental and physical energy of the worker can be directed to making suggestions for
improving the process (methods change effort), moderated by organizational systems
(e.g., suggestion programs), or it can be directed toward functional effort. In routine,
repetitive jobs, some worker effort may be directed to impact-modifying behavior to

Page 117 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 117 6

Save
Cancel
relieve boredom. These actions may be nonproductive (e.g., taking unauthorized breaks),
or antiproductive, (e.g., stopping an assembly line or damaging equipment). Impact-
modifying behavior is moderated by the degree of contention in management-labor
relations.

The organization's selection of capital, level of technology, and job design combines with
the worker's abilities and skills to establish the attainable performance level or potential
productivity of the job. The functional effort of the worker, in simplest terms, determines
the degree to which the potential is realized in actual performance.

Summary
The Servosystem model is intended to provide a theoretical foundation for understanding
and analyzing worker performance. Because of the complex interactions represented by
the variables and relationships in the model, it may never be totally validated, nor is it
likely that "the formula" for the factor interaction block will ever be expressed as an
equation. The model does provide, however, a conceptual framework for organizing
current knowledge and directing research efforts toward understanding individual
productivity.

WHEN INDIVIDUALS BECOME GROUPS


Four considerations are key when combining measures of individual productivity into
evaluations of group or team performance and, ultimately, organizational performance.
The considerations are (1) the complexity of group analysis, (2) differing inputs included
at the individual and group levels, (3) problems of aggregation, and (4) the need to align
measures with goals.

Complexity
As workers are formed into groups (independent members) or teams (interdependent
members), the factors affecting productivity become more complex. Even in groups of
workers who are loosely connected, group dynamics begin to affect performance both
negatively and positively; in interdependent teams those forces are intensified.
Bottlenecks, unbalanced work loads, inability to cooperate, feelings of inequity, and the
"committee phenomenon" (in which all members gravitate to the average) are just a few
of the detrimental effects that can emerge.
Conversely, teamwork can have positive, synergistic effects through cooperation, mutual
stimulation, combined skill and capability, sup-

Page 118 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 118 6

Save
Cancel
port, and mentoring. Some tasks can be performed only by a cooperating team, in which
case individual contributions are obscured. For other tasks, work is divided and assigned
to team or group members by matching the difficulty of the work with the seniority of the
member. Under any circumstances, the group level of analysis involves all of the
influencing variables of the individual level of analysis plus the variables associated with
group dynamics. Much research has been done on the behavior of individuals within
work groups, but often the dependent variables include effectiveness, performance, goal
achievement, satisfaction, output, or other measures that may or may not be clearly
defined. It is difficult to review these studies to determine if the findings relate to the
productivity of the group as it would be measured in an output to input ratio.

Input Factors
At the individual level of work, the primary focus is on labor input; it is difficult,
sometimes impossible, to identify all the other inputs (material, capital, and energy)
associated with a specific job. At the organizational level, total productivity measurement
systems demand that all inputs be considered. In between (in work groups, departments,
divisions, and so on), the other factors of production may or may not be considered in the
measurements as circumstances dictate. The fundamental differences between total and
partial measures of productivity reduce the ability of decision makers to plan and control
operations across levels. Researchers experience similar barriers in attempting to design
studies in which individual productivity rates can be aggregated to form measures of the
productivity of work groups or business units.

At higher levels of analysis, such as departments within an organization, interactions


among business units become relevant and the very concept of productivity becomes
more complex. For example, the purchasing department may be very productive in its use
of resources to buy raw materials, according to the measures applied. However, if the
materials purchased do not meet specifications or arrive late, the productivity of the
fabrication department may be severely affected. Few productivity measurement systems
in place today would capture both the productivity of the purchasing department (i.e.,
internal productivity) and the contributions (positive or negative) of the purchasing
department to the rest of the organization (i.e., external productivity). Conceptual
research on organizational theory could be reframed in a productivity context to help
explain the effects of the many intraorganizational relationships on the aggregation of
productivity data from the individual to the organizational level.

Page 119 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 119 6

Save
Cancel

Aggregation
Individual measures of productivity can be summed to form group productivity data only
if the group members are working at independent, parallel jobs. Such is seldom the case,
however. To the extent that the members of the group are interdependent or performing
different tasks, aggregation of the measures is problematic. It may make more sense to
identify the inputs and outputs of the group, which may be different from the inputs and
outputs of any individual, and form a unique measure for evaluating group productivity.

Although unique group measures are feasible and useful, they may lead to discontinuities.
If individual productivity rates are high but group productivity is low, explanations are
difficult to derive, and managerial control becomes an onerous task. The problem is most
likely based in the incompatibility of the measures used at different levels of analysis, but
it is also possible that group dysfunctions and interferences are influencing factors.
Research on the development of internally consistent measurement systems is needed to
supplement and clarify existing knowledge of work behavior and interactions within
groups. A first step in this direction is taken in the section below on productivity
linkages, which outlines seven possible types of linkages that should be considered
before attempting to aggregate measurement data.

Goal Alignment
As noted above, measures of individual productivity or other dimensions of performance
should be selected to align behaviors with organizational goals. The same should be true
of business units (e.g., departments and divisions) within the organization. Strategic
planning involves ensuring that the goals at one level of the organization are consistent
with those at each higher level so that the elements of the organization do not work at
cross-purposes. An ideal productivity measurement system for an organization would
align individual behaviors with group and organizational goals.

WORK GROUP STRUCTURES AND


PRODUCTIVITY LINKAGES
As discussed above, the aggregation of productivity measures is one of the major
considerations in the study of the relationships among individual, group, and
organizational productivity. If the mathematics of aggregation is ever to be determined,
the nature of the linkages within the work group must be identified and classified.

Page 120 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 120 6

Save
Cancel

Types of Work Group Structures


McGrath's (1984) comprehensive work on the interaction and performance of groups
provides many insights as to why the output of the group may not be a simple summation
of the output of the members. In his review of Steiner's (1966, 1972) work, McGrath
stated:

[Steiner] notes that groups seldom perform up to the level of their best member. Often,
the quality or quantity of their performance is about what the second best member's
ability would predict. Steiner considers the combined abilities of individual members—
combined according to whatever rule is suitable for that type of task, disjunctive,
conjunctive, or additive—as representing the group's potential productivity. Actual
group productivity, he argues, falls below potential productivity because of ''process
losses," losses incurred in the process of performing the task. He identifies two main
types of process losses: motivation losses (or, potentially, gains) and coordination losses
(p. 58, emphasis in original).
Much of the work of McGrath and others he cites has dealt with the type of task or the
interaction of the group with the type of task to be performed. McGrath classified tasks
into eight basic types: planning tasks, creative tasks, intellective tasks, decision-making
tasks, cognitive conflict tasks, mixed-motive tasks, conflicts/battles, and performances.
He then related the types of tasks to the conceptual or behavioral skills needed for task
accomplishment and the conflict or cooperation required within the group.

Separate from the type of task assigned to the work group, however, is the structure of the
group itself. Structure refers to the roles that each member of the group plays and the way
in which the elements of the task are assigned to the members of the group, that is, the
organization of the work within the group. Attempts to aggregate individual measures of
productivity meet with varying degrees of success depending on the structure and
relationship of the workers in the group. Different structures create different linkages
between individual and group productivity, and those linkages must be recognized in the
aggregation process.

A simple example illustrates alternative structures for the accomplishment of a given


task. Imagine a bucket brigade composed of five members whose objective is to transfer
water from vat A to vat B. In the classic bucket brigade, team member 1 dips from vat A
and passes the bucket through successive stationary members to member 5, who empties
the bucket into vat B. (Assume that there is an unlimited number of buckets or that empty
buckets can be tossed back to member 1.) With

Page 121 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 121 6

Save
Cancel
this structure, the productivity of the group is dependent on the slowest member, and if
anyone on the team stops, the entire process stops.

An alternative structure would be to assign each member the job of dipping from vat A,
walking with the full bucket to vat B to empty it, and then returning to vat A with the
empty bucket. In this case, the team members are decoupled (they become a cooperating
group rather than an interdependent team) so that a change in the productivity of one
member does not affect the productivity of the others directly (indirect effects on the
motivation of the others may occur). The productivity of the group is the simple
summation of the productivity of the members.

Consider one other alternative structure: Team member 1 dips from vat A and sets full
buckets on the ground. Team members 2, 3, and 4 pick up the buckets two at a time and
carry them to a staging area near vat B, where they leave them and pick up two empty
buckets for the return trip. The job of team member 5 is to pour the water from the full
buckets into vat B. In this structure, performance of the team members is not as
inexorably linked as in the first structure, but it is not as independent as in the second.
The productivity of the group is dependent partly on the productivity of each member but
also on the proper balance of the three different jobs of dipping, carrying, and emptying.

Several conclusions follow from these examples:

1. Many alternative structures exist for the accomplishment of a given group task.
2. The structure of the group creates linkages from individual productivity to the
productivity of the group that determine the effect of changes in one member's
output on total group output.
3. Productivity measures at the individual level concentrate on the number of
repetitions of a job within a time period (number of buckets passed per hour). At
the group level, measures focus on task accomplishment (amount of water
transferred from vat A to vat B) and on the total resources used (number of person
hours and number of buckets used). (Note that each of the three structures used as
examples above requires a different number of buckets.)

In an effort to help explain the relationship of group structure to productivity linkages, in


the next section I identify seven basic types of linkages. In practice, many combinations
of the basic types of linkages are possible and lead to a large number of variations.

Page 122 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 122 6

Save
Cancel

Types of Productivity Linkages


Direct
The simplest, but perhaps least common form of work group structure is one that is
directly linked, that is, an increase or decrease in the productivity of one individual has an
immediate and corresponding effect on the productivity of the group. This can happen
when the work group is essentially a composite of independent workers considered as a
collective. Examples include salesmen, postal carriers, some maintenance personnel, and
others who can determine their own pace and are essentially independent of
intraorganizational influences.

Indirect
Often, some members of a work group do not create the group's output directly (the
accounting classification of "indirect labor" may or may not apply, depending on the
level and unit of analysis). For example, a team formed to create computer software may
be composed of six programmers, two clerical support personnel, and a project manager.
The productivity of the programmers is directly linked to the output of the team, but the
effect of the clerical personnel and the project manager is indirect, albeit necessary and
important.

Proportional
In many instances, an increase in the productivity of one member of a work group will
have an amplified or dampened effect on the productivity of the group. For example, in a
competitive atmosphere, a productivity increase by one member may spur others to
higher levels of performance. Conversely, a drop in productivity by one member may
make the job of the other members more difficult by creating an imbalance in the work
load.

Unidirectional
Sometimes, a change in the productivity of one member affects the productivity of the
group in only one direction of change. For example, in an assembly line or any directly
interdependent work team, an increase in productivity of one member may have the effect
of creating additional idle time for that worker but have no effect on the output rate of the
group. A decrease in productivity by that worker, however, could create a bottleneck that
directly lowers the productivity of the entire group.

Page 123 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 123 6

Save
Cancel
Temporal
The effect of the change in productivity of one worker may be realized in the productivity
of the group or organization only after a time delay. For example, a decrease change in
productivity of a worker creating a component of a composite product (such as an
automobile or computer software) may not be felt until the stage in the process when the
complete product cannot be assembled because of a shortage of that component.

Stochastic
Some work groups are loosely coupled and the degree of interdependence among the
members varies. In this circumstance, and perhaps in many others, the effect on the group
from the change in productivity of one worker can be estimated only in a probabilistic
relationship. For example, in a construction crew, one member's increase in productivity
may have little or no effect on group performance in one instance, and a direct or even
amplified effect in another instance, depending on the nature of the task.

Nominal
To make the classification complete, the case of "no effect" must be included. Many jobs
within a group or organization are necessary but have no direct effect on the measurable
output of the unit; they enable the direct workers to be productive. Security, custodial
services, and food services are examples of such jobs. For each of these jobs (security, for
example), the productivity of the workers can be measured, but the linkage to
organizational productivity is difficult, if not impossible, to establish.

RESEARCH NEEDS
Despite the widespread use of productivity measurement systems in all types of
organizations today, many unresolved problems remain. In this section I discuss a
number of the important problems in order to stimulate further study of ways to reduce
the adverse effects of these problems on the measurement of individual productivity.

Determining the Unit of Output


Ideally, the output being measured should be physical units of a valued finished product.
For some standardized manufacturing opera

Page 124 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 124 6

Save
Cancel
tions, counting the units produced approaches this ideal. For most jobs, however,
problems of combining dissimilar outputs and identifying intangible outputs arise.

Dissimilar outputs can be combined by using a common surrogate unit or through some
form of weighting. Beech Aircraft, for example, aggregates across different types of
airplanes by using tons of aircraft produced. As strange as this may sound, the company
found that, generally, a plane that weighed twice what another plane weighed was more
complex and took twice as many resources to produce (personal communication between
author and Beech Aircraft executives). In many instances, this same reasoning can be
applied to individual production jobs.

Programming operations, in an effort to get away from counting lines of code, have
experimented with "function points" (i.e., number of functions performed within a
program) as a measure of output. Computer manufacturers may use units of computing
capacity produced to enable them to aggregate large and small systems delivered. If
engineered standards are available, total production expressed in standard hours is a
legitimate measure of output, no more or less accurate than the standards used. Price
weighting, using discounted prices, may be the most common form of combining
dissimilar outputs.

Identifying intangible outputs common to many white-collar and service jobs requires
ingenuity and a clear knowledge of objectives and process parameters. Transactions
completed, customers served, and reports processed are common measures in these
circumstances. Often, the measures of output are unique to the particular job, as in briefs
filed, claims processed, or copy machines cleaned. Knowledge work, such as supervision,
management, R&D, and consulting, presents special problems in measuring output.
Although some progress has been made in this area, much productivity measurement
research remains to be done to develop relevant measures of output for nonmanufacturing
applications.

Determining the Unit of Input


Individual jobs require labor, material, capital, and energy. As noted above, however, at
the individual level of analysis the focus is generally on the labor component. Energy is
seldom associated with an individual job because of the difficulty of identifying energy
use for a particular operation. Capital and material may be ascribed to the individual level
(as in units produced per machine-hour or per pound of raw material) if the capital and
material are dedicated to the individual

Page 125 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 125 6

Save
Cancel
job and are under the control of the operator. Mainly, the unit-of-input problem centers
on the appropriate way to measure labor.

Labor can be measured in physical terms as hours worked, hours at work (includes
breaks, for example), or hours paid (including vacations, holidays, and time off),
depending on the purpose and the time horizon of the measurement system. Like outputs,
labor inputs can be weighted by their discounted wage rates to reflect the different skill
levels of workers and to permit aggregation.

Limiting individual productivity measures to the labor input is commonly accepted.


However, it must be understood that the productivity of labor can be profoundly
influenced by changes in capital, material, or energy, which are not captured by the
measure. Research using only labor productivity as a dependent variable should establish
controls for possible effects on productivity of other factors of production.

Productivity versus Quality


The productivity-quality debate often stems from definitions of the two terms. If quality
is defined in its broadest sense as meeting or exceeding customer expectations, then a
document printed on a laser printer is of higher quality than one printed on a dot matrix
printer even though both documents are error free. An alternative definition of quality,
meeting technical specifications, would count errors in the document as defects but
would consider the laser-printed document as a completely different product from the one
printed on a dot matrix printer. The productivity paradox in information systems may
derive to a great extent from this point. The investment in information technology may
not increase the quantity of documents produced (it may, in fact, greatly reduce it), but
the quality (in both meanings of the term) of the information may have been improved
greatly. If the information is more timely, more accurate, and in a more meaningful and
usable form, has productivity increased? Resolution of this debate will depend on better
definitions and measures of output that take into account changes in customer
expectations for quality.

If quality is limited to the definition of meeting technical specifications, the idea that
improved productivity is achieved only at the expense of reduced quality is a
misconception. First, the definition of productivity and its associated measures must
reflect the production of acceptable products and services meeting all quality
specifications. Reduced quality, therefore, would automatically reduce productivity.
Second, reduced quality leads to returns, scrap, rework, and production disruptions, all of
which consume resources without producing valued

Page 126 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 126 6

Save
Cancel
outputs. Elimination of the causes of defective products and services releases resources
for more productive uses.

Although this idea is now well understood, industry's measures of productivity at the
individual level seldom contain a quality component. As firms accept quality as a higher
priority and redesign jobs to include quality checks, this problem will be relieved
somewhat. But many individual productivity measurement systems should be revised to
account for defects that are produced but not detected until later in the process.

The controls afforded the researcher in the design and conduct of experiments permit the
development of productivity measures that systematically account for quality variations
on a number of dimensions. Omission of quality as an integral part of productivity
measurement is a serious flaw in the research design.

Productivity versus Performance


At the individual level, productivity measurement tracks how well the worker applies
talents and skills, using materials and equipment, to produce products and services within
a specified time period. Although this is fundamental to success, it is not total
performance. If the design of the jobs, the measurement systems, and the evaluation and
reward systems are not aligned with the corporate strategy and reinforced at all levels of
management, productivity is hollow. It is at best efficient, but it may also be inconsistent
with the overall direction of the organization and therefore useless in the long run.

Even if jobs are properly aligned with organizational strategies, counterproductive


behaviors by workers, such as poor attendance, tardiness, unauthorized breaks,
socializing, and performing personal work, may not be captured by a particular
productivity measure. Absenteeism, for example, may not be counted as an input even
though the firm pays for the hours missed.

On the positive side, however, every employee has the opportunity to make contributions
to the organization that may be recognized only by observation. Workers may make
suggestions for improvement or may be exceptionally effective at satisfying customers in
direct contact positions, yet those contributions may not be reflected in the productivity
measure. "Has a positive influence on fellow employees" and "has an outstanding record
of problem solving" are examples of factors that should be recognized over and above
basic productivity.

Productivity research should take these basic differences into account. At the very least,
the research study should clearly delineate

Page 127 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 127 6
Save
Cancel
between measures of productivity and measures of performance rather than using the
terms as vague synonyms.

Productivity Measures versus Financial Measures


At the organizational level, a firm may be highly productive but fail because of its
inability to manage prices, costs, cash flows, and debt. A firm, therefore, will track many
aspects of performance besides total firm productivity.

At the individual level, however, the emphasis usually is on productivity and cost per unit
produced. Currently, a major thrust in cost accounting research is attempting to revise
methods for assigning overhead costs to products and services produced (Cooper and
Kaplan, 1991). These efforts may make the connection between productivity and cost
more compatible and more meaningful at the individual level of analysis. Productivity
researchers, however, should continue their efforts to develop individual-level
productivity measurement systems that can be integrated with these new developments in
unit cost analysis.

Measurement Error
No measurement system is perfect; a variance between actual and measured results will
likely always exist. The variance can be reduced, however, by reducing simple errors (not
counting correctly), reducing conceptual errors (not counting the right things), checking
the reliability and validity of surrogate measures, and verifying the logic of using
pseudoproductivity measures (such as measuring activities as an indicator of results).

Two dangers arise in attempting to reduce measurement errors, however. First, by trying
to meet all criteria, the measurement system may become so complex that it loses its
practicality. Second, the nearperfect measurement system may generate such high
demands for data gathering and analysis that the cost of the system is not justified and the
results are not timely enough to be useful. Although reducing measurement error should
be a continuing goal, a compromise between this goal and the usability of the measure is
generally in order.
Misuse of Measures
Much has been written about developing systems for measuring individual productivity;
less has been said about how the results of the measures are to be used. A number of the
considerations raised in this section imply misuses of productivity data, such as
measuring a worker

Page 128 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 128 6

Save
Cancel
for factors outside his or her control. Other common misuses include using the results as
a whip to speed the pace of work or to place blame on a worker for poor performance.
Unfair comparisons, such as using the same measure under vastly different
circumstances, can also cause problems.

Research into the development of a system for measuring individual productivity should
not stop when the system is implemented. The integration of productivity measures with
other measures of performance should be documented, and the effective and ineffective
uses of productivity data should be explored.

CONCLUSION
The challenge before researchers and practitioners is to develop internally consistent and
comprehensive productivity measurement systems that account for the productivity of
individual workers, work groups, business units, and organizations. The degree to which
this goal can be achieved will determine the ability of organizations to manage resources
effectively and direct human effort toward organizational goals. It may help them regain
the industrial leadership they have lost and understand the apparent paradoxes that ensue
when expected productivity gains are not realized. Consistent productivity measurement
systems will enable researchers and practitioners to speak a common language as they
each play their role in solving the problems associated with poor productivity growth.

The difficulty in developing a comprehensive productivity measurement system stems


from a number of factors, in particular the following:

 The concept of productivity is still often misunderstood; discussions of the


relationship of productivity to effectiveness, efficiency, quality, innovation, and
financial or behavioral measures of performance take the form of debates. A
common definition of productivity, at all levels of organizational analysis, is a
prerequisite for the development of a comprehensive measurement system.
 Attempts to aggregate individual productivity measures or to disaggregate
organizational measures are thwarted by the dissimilarity in measures of output.
At the individual level, output is often counted in physical units of product
produced or service provided. At higher levels of analysis, different outputs from
different sources are combined in some form of weighting scheme, sometimes
using cost or price data that are incompatible with financial measures at the
individual level, given current cost accounting methods.

Page 129 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 129 6
Save
Cancel
 On the input side of the productivity ratio, individual productivity is often
measured only against labor input, and labor may be counted in a number of
different, but acceptable, ways. At the organizational level, a total factor approach
is often used, that is, inputs consist of labor, materials, capital, and energy.
 In most organizations today, the amount of indirect or managerial work far
exceeds the direct labor associated with producing products and services. The
productivity of indirect labor and, to a lesser extent, managerial efforts can be
measured in terms of results achieved and resources consumed. Often, however,
the contribution of these activities to the productivity of the organization is
unclear. If the organization was evaluated strictly by the value of products
produced relative to inputs, it would have, for example, no training function; but
such myopic views would never be accepted by the enlightened manager. Current
productivity measurement systems suffer from an inability to capture and integrate
the contribution of indirect functions, such as training, into the productivity
equation for the organization.
 When individuals are formed into work groups or teams, linkages are formed
between the effort of the individual and the output of the group. The nature of the
linkage is dependent on the structure of the group, characteristics of the
individuals, psychological factors, sociological factors, technological variables,
and system variables. The complex interactions that take place in cooperative
productive behavior, however, are seldom captured in common productivity
measurement systems. In their efforts to understand and control work group
behavior, managers and researchers alike are hampered by inadequate
measurement systems.

Progress toward the goal of developing internally consistent and comprehensive


productivity measurement systems will require a joint effort between practitioners and
researchers. Greater understanding of the concept of productivity, common definitions of
terms, and the building of conceptual models of productivity provide the requisite
framework to develop and refine productivity measures. Better productivity measurement
will help to organize and unify the building of a common body of knowledge on
productive behavior.

REFERENCES
Cooper, R., and R.S. Kaplan. 1991. Profit priorities from activity-based costing. Harvard
Business Review 69:130–135.
Forrester, J.W. 1961. Industrial Dynamics. Cambridge, Mass.: The MIT Press.

Page 130 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 130 6

Save
Cancel
Hershauer, J.C., and W.A. Ruch. 1978. A worker productivity model and its use at
Lincoln Electric. Interfaces 8:80–89.

Lawler, E.E., 1971. Pay and Organizational Effectiveness: A Psychological View. New
York: McGraw-Hill.

McGrath, J.E. 1984. Groups: Interaction and Performance. Englewood Cliffs, N.J.:
Prentice-Hall.
Ruch, W.A., and J.C. Hershauer. 1974. Factors Affecting Worker Productivity. Tempe:
Arizona State University.

Steiner, I.D. 1966. Models for inferring relationships between group size and potential
group productivity. Behavioral Science 11:273.

1972. Evils of research—or what my mother didn't tell me about sins of academia.
American Psychologist 27:766.

Sutermeister, R.A., 1969. People and Productivity, 2nd ed. New York: McGraw-Hill.

Werther, W.B., Jr., W.A. Ruch, and L. McClure. 1986. Productivity Through People. St.
Paul, Minn.: West Publishing.

Page 105 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 105 6

Save
Cancel

Page 106 Share Cite


Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 106 6

Save
Cancel
Page 107 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 107 6

Save
Cancel
Page 108 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 108 6

Save
Cancel
Page 109 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 109 6

Save
Cancel
Page 110 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 110 6

Save
Cancel
Page 111 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 111 6

Save
Cancel
Page 112 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 112 6

Save
Cancel
Page 113 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 113 6

Save
Cancel
Page 114 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 114 6

Save
Cancel
Page 115 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 115 6

Save
Cancel
Page 116 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 116 6

Save
Cancel
Page 117 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 117 6

Save
Cancel
Page 118 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 118 6

Save
Cancel
Page 119 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 119 6

Save
Cancel
Page 120 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 120 6

Save
Cancel
Page 121 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 121 6

Save
Cancel
Page 122 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 122 6

Save
Cancel
Page 123 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 123 6

Save
Cancel
Page 124 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 124 6

Save
Cancel
Page 125 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 125 6

Save
Cancel
Page 126 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 126 6

Save
Cancel
Page 127 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 127 6

Save
Cancel
Page 128 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 128 6

Save
Cancel
Page 129 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 129 6

Save
Cancel
Page 130 Share Cite
Suggested Citation: "5 MEASURING AND MANAGING
INDIVIDUAL PRODUCTIVITY." National Research
Council. Organizational Linkages: Understanding the
Productivity Paradox. Washington, DC: The National
Academies Press, 1994. doi:10.17226/2135.
×
2135 130 6

Save
Cancel
Next: 6 THE INFLUENCE OF ORGANIZATIONAL
LINKAGES AND MEASUREMENT PRACTICES ON
PRODUCTIVITY AND MANAGEMENT »
The National Academies of Sciences, Engineering, and
Medicine
500 Fifth St., NW | Washington, DC 20001
© 2016 National Academy of Sciences. All rights
reserved.
Terms of Use and Privacy Statement

Workforce productivity
From Wikipedia, the free encyclopedia
Jump to: navigation, search
[hide]This article has multiple issues. Please help improve it or discuss these
issues on the talk page. (Learn how and when to remove these template messages)
This article needs additional citations for verification. Please help
improve this article by adding citations to reliable sources.
Unsourced material may be challenged and removed. (June 2011)
(Learn how and when to remove this template message)
This article lacks historical information on the subject. Please help
to add historical material to help counter systemic bias towards recent
information. (January 2009)
(Learn how and when to remove this template message)

Economics

World GDP (PPP) per capita by country (2015)

 Index
 Outline
 Category

 History
 Types
 Classification

 History of economics
 Economic history (academic study)
 Schools of economics

 Microeconomics
 Macroeconomics
 Methodology
 Heterodox economics
 JEL classification codes

 Concepts
 Theory
 Techniques

 Econometrics
 Economic growth
 Economic system
 Experimental economics
 Mathematical economics
 Game theory
 Market
 National accounting

By application
 Agricultural
 Behavioral
 Business
 Computational
 Cultural
 Demographic
 Development
 Digitization
 Ecological
 Education
 Environmental
 Evolutionary
 Expeditionary
 Geography
 Health
 Industrial organization
 Information
 International
 Knowledge
 Labour
 Law
 Managerial
 Monetary / Financial
 Natural resource
 Personnel
 Public / Welfare economics
 Regional
 Rural
 Service
 Urban
 Welfare

Lists
 Economists
 Publications (journals)

 Business and economics portal

 v
 t
 e

Labour productivity levels in Europe. OECD, 2012

Labour productivity US, Japan, Germany

Workforce productivity is the amount of goods and services that a worker produces in a given
amount of time. It is one of several types of productivity that economists measure. Workforce
productivity, often referred to as labor productivity, is a measure for an organization or
company, a process, an industry, or a country.

Workforce productivity is to be distinguished from employee productivity which is a measure


employed at individual level based on the assumption that the overall productivity can be broken
down to increasingly smaller units until, ultimately, to the individual employee, in order be used
for example for the purpose of allocating a benefit or sanction based on individual performance
(see also: Vitality curve).

The OECD defines it as "the ratio of a volume measure of output to a volume measure of input".
[1]
Volume measures of output are normally gross domestic product (GDP) or gross value added
(GVA), expressed at constant prices i.e. adjusted for inflation. The three most commonly used
measures of input are:

1. hours worked;
2. workforce jobs; and
3. number of people in employment.

Contents
[hide]

 1 Measurement
 2 3 things that can affect the quality of labour
 3 See also
 4 References
 5 External links

Measurement[edit]
Workforce productivity can be measured in 2 ways, in physical terms or in price terms.

 the intensity of labour-effort, and the quality of labour effort generally.


 the creative activity involved in producing technical innovations.
 the relative efficiency gains resulting from different systems of management,
organization, co-ordination or engineering.
 the productive effects of some forms of labour on other forms of labour.

These aspects of productivity refer to the qualitative dimensions of labour input. If an


organization is using labour much more intensely, one can assume it's due to greater labour
productivity, since the output per labour-effort may be the same. This insight becomes
particularly important when a large part of what is produced in an economy consists of services.
Management may be very preoccupied with the productivity of employees, but the productivity
gains of management itself is very difficult to prove. While labor productivity growth has been
seen as a useful barometer of the U.S. economy’s performance, recent research has examined
why U.S. labor productivity rose during the recent downturn of 2008–2009, when U.S. gross
domestic product plummeted.[2]

The validity of international comparisons of labour productivity can be limited by a number of


measurement issues. The comparability of output measures can be negatively affected by the use
of different valuations, which define the inclusion of taxes, margins, and costs, or different
deflation indexes, which turn current output into constant output.[3] Labor input can be biased by
different methods used to estimate average hours[4] or different methodologies used to estimate
employed persons.[5] In addition, for level comparisons of labor productivity, output needs to be
converted into a common currency. The preferred conversion factors are Purchasing Power
Parities, but their accuracy can be negatively influenced by the limited representativeness of the
goods and services compared and different aggregation methods.[6] To facilitate international
comparisons of labor productivity, a number of organizations, such as the OECD, the Groningen
Growth Centre, International Labor Comparisons Program, and The Conference Board, prepare
productivity data adjusted specifically to enhance the data’s international comparability.

3 things that can affect the quality of labour[edit]

U.S. productivity and average real earnings, 1947–2008

In a survey of manufacturing growth and performance in Britain and Mauritius, it was found
that:

“The factors affecting labour productivity or the performance of individual work roles are of
broadly the same type as those that affect the performance of manufacturing firms as a whole.
They include: (1) physical-organic, location, and technological factors; (2) cultural belief-value
and individual attitudinal, motivational and behavioural factors; (3) international influences –
e.g. levels of innovativeness and efficiency on the part of the owners and managers of inward
investing foreign companies; (4) managerial-organizational and wider economic and political-
legal environments; (5) levels of flexibility in internal labour markets and the organization of
work activities – e.g. the presence or absence of traditional craft demarcation lines and barriers to
occupational entry; and (6) individual rewards and payment systems, and the effectiveness of
personnel managers and others in recruiting, training, communicating with, and performance-
motivating employees on the basis of pay and other incentives.”[7]

It was further found that:

“The emergence of computers has been noted as a significant factor in increasing labor
productivity in the late 1990s, by some, and as an insignificant factor by others, such as R.J.
Gordon. Although computers have existed for most of the 20th century, some economic
researchers have noted a lag in productivity growth caused by computers that didn't come until
the late 1990s.”[7]

See also[edit]
 Overall Labor Effectiveness

References[edit]
1. Jump up ^ OECD Manual: Measuring Productivity; Measurement of Aggregate and Industry-Level
Productivity Growth. (2002)
2. Jump up ^ Federal Reserve Bank of Minneapolis, The Labor Productivity Puzzle, May 2012
3. Jump up ^ International Labor Comparisons Program International comparisons of manufacturing
productivity and unit labor costs trends. Bureau of Labor Statistics
4. Jump up ^ Susan Fleck International comparisons of hours worked: an assessment of the statistics.
Monthly Labor Review, May 2009
5. Jump up ^ Gerard Ypma and Bart van Ark Employment and Hours Worked in National Accounts: a
Producer’s View on Methods and a User’s View on Applicability Groningen Growth and Development
Centre, University of Groningen and The Conference Board
6. Jump up ^ International Labor Comparisons Program International comparisons of GDP per capita and
per employed person. Bureau of Labor Statistics
7. ^ Jump up to: a b Manufacturing In Britain: A Survey Of Factors Affecting Growth & Performance,
ISR/Google Books, revised 3rd edition. 2003, page 58. ISBN 978-0-906321-30-0 [1]

External links[edit]

Wikimedia Commons has media related to Labour productivity.

 Lebergott, Stanley (2002). "Wages and Working Conditions". In David R. Henderson


(ed.). Concise Encyclopedia of Economics (1st ed.). Library of Economics and Liberty.
OCLC 317650570, 50016270, 163149563
 Figures for the US from BLS
 Works management
 Society for Industrial and Organizational Psychology
 Performance feedback: its effectiveness in the management of job performance
 Providing Formal Feedback on Job Performance
 Employee Productivity and How to Reduce Distractions at Work

<img src="//en.wikipedia.org/wiki/Special:CentralAutoLogin/start?type=1x1" alt="" title=""


width="1" height="1" style="border: none; position: absolute;" />
Retrieved from "https://en.wikipedia.org/w/index.php?
title=Workforce_productivity&oldid=742748691"
Categories:

 Index numbers
 Workforce
 Industrial and organizational psychology
 Performance psychology

Hidden categories:
 Articles needing additional references from June 2011
 All articles needing additional references
 Articles lacking historical information
 Commons category with local link same as on Wikidata

Navigation menu
Personal tools

 Not logged in
 Talk
 Contributions
 Create account
 Log in

Namespaces

 Article
 Talk

Variants

Views

 Read
 Edit
 View history

More

Search

Special:Search Go

Navigation

 Main page
 Contents
 Featured content
 Current events
 Random article
 Donate to Wikipedia
 Wikipedia store

Interaction
 Help
 About Wikipedia
 Community portal
 Recent changes
 Contact page

Tools

 What links here


 Related changes
 Upload file
 Special pages
 Permanent link
 Page information
 Wikidata item
 Cite this page

Print/export

 Create a book
 Download as PDF
 Printable version

In other projects

 Wikimedia Commons

Languages

 Български
 Čeština
 Deutsch
 한국어
 ‫עברית‬
 Қазақша
 Lietuvių
 Nederlands
 Polski
 Русский
 Slovenčina
 Українська
 Žemaitėška

Edit links

 This page was last modified on 5 October 2016, at 15:12.


You are here: Home / Employee Survey White Papers / 5 Factors That Affect Your Employee’s Productivity

5 FACTORS THAT AFFECT YOUR


EMPLOYEE’S PRODUCTIVITY
Free eBook
Compare Vendors

YOU MAY ALSO LIKE


 10 THINGS EMPLOYEES DISLIKE MOST ABOUT THEIR EMPLOYERS
 THE RELATIONSHIP BETWEEN EMPLOYEES, CUSTOMERS, AND
BUSINESS SUCCESS
 SURVEY RESEARCH YIELDS DATA ON EMPLOYEE TURNOVER
 THE TRUTH ABOUT MOTIVATING EMPLOYEES TO BE MORE
PRODUCTIVE
 10 EMPLOYEE BEHAVIORS BOSSES HATE MOST

<img width="300" height="203"


src="https://cdn1.nbrii.com/wp-content/uploads/2011/03/Bigstock_-53612159-Three-male-
employees-discussing-working-plans-at-meeting-300x203.jpg" class="attachment-medium size-
medium wp-post-image" alt="5 Factors That Affect Your Employee&#039;s Productivity"
srcset="https://cdn1.nbrii.com/wp-content/uploads/2011/03/Bigstock_-53612159-Three-male-
employees-discussing-working-plans-at-meeting-300x203.jpg 300w, https://cdn1.nbrii.com/wp-
content/uploads/2011/03/Bigstock_-53612159-Three-male-employees-discussing-working-
plans-at-meeting.jpg 900w" sizes="(max-width: 300px) 100vw, 300px" />
If the competition is doing more with less, then employee productivity may be the issue. Low-
output workers indicate a serious problem within any organization, forcing companies to adapt
innovative techniques to increase employee productivity.

Does March Madness really drive employers crazy? It all depends on what you believe. The
term “lost productivity” is always kicked around this time of year. Are millions of employees
checking in on the NCAA Tournament while checking out of their responsibilities at work? Using
employee surveys to gauge employee productivity is wise because anything that gets in the way
of workers’ ability to produce a quality product or service should concern employers. A recent
calculation by consultant John A. Challenger received much media attention when he predicted
a productivity meltdown during the NCAA Tournament.

Challenger estimated that March Madness, video streamed this year by CBS, will cost
employers $3.8 billion or more in lost productivity because workers will watch, gab, bet, and
read stories about the NCAA Tournament instead of tending to their responsibilities at work.
Challenger put the price tag at $260 million for just the first two days. The $3.8 billion estimate is
based on a formula of 58 million viewers whose average wage is $18 an hour, watching 13.5
minutes online on each of the 16 business days of the tournament. That’s a lot of madness. But,
according to some, so are Challenger’s lost productivity numbers.

“I would say that in most cases, this is over blown by the media,” said John Henning, Director of
a California-based Business Development Group. “I think the actual percentage of professional
workers that spend a significant amount of time during their workday paying attention to the
Tournament is minimal.” Henning has plenty of company when it comes to detractors. Slate
magazine calls Challenger’s lost productivity numbers, “junk economics,” that wasted time is
built into every workday, and that “NCAA tourney fans merely reallocate to the games the time
they ordinarily waste elsewhere.”

Wall Street Journal columnist Carl Bialik and Forbes writer Hannah Clark have also challenged
Challenger, calling the numbers impacting employee productivity skewed and far-fetched. Clark
writes that, “For the first time, most games in the 2006 National Collegiate Athletic Association
tournament will be broadcast online for free. That’s one reason why consulting firm Challenger,
Gray & Christmas has estimated March Madness will cost $3.8 billion in lost productivity. But
that estimate should be taken with a boulder of salt.”

Whatever the case, the debate over employee productivity costs and March Madness will likely
continue to rage since the NCAA Tournament and the workplace will continue to mesh.
Nevertheless, what workers do at work remains a central part of any company’s successful
business plan.

1. Attitude Is Everything: Happy employees are productive employees. And it doesn’t take a
rocket scientist or a consulting firm to figure that one out. Negative attitudes can torpedo
employee productivity much faster than nonstop basketball being streamed over the Web.”An
employee with a positive attitude usually enjoys the work that they do and feels empowered
and recognized for their contributions,” said Henning. “An employee that is complacent and
does not really enjoy their work, but is simply there for a paycheck usually does not produce
at a high level, develops a bad attitude and generally drags a team down.”
2. Boss Is the Barrier: How can you improve employee productivity when the boss stinks? A
recent poll found that, among other things, an employee’s productivity is determined by their
relationship with their immediate supervisor. When the bad boss fails to keep promises, never
gives credit when due, makes negative comments, or blames others for their mistakes, the
productivity level of their employees is significantly impacted.”A poor supervisor is definitely
the No. 1 factor that causes low productivity,” said Barry L. Brown, President of a Florida-
based consulting group. “It’s been my experience that a good supervisor will motivate,
inspire, encourage and reward good performance. Poor management , of course, is just the
opposite, only in multiples. Employees who do not have a direct connection with the company
begin to lose all the reasons for wanting to do that little bit extra and take the additional time
to make something right.”
3. Productivity: In Sickness and in Health: Health concerns, naturally, are a big drain on an
employee’s ability to be productive, and companies know it. At the SHRM Conference and
Exposition last June in Washington, D.C., a survey showed that 85 percent of U.S. employers
said they were interested in services to increase employee productivity, minimize absences
and enhance the health of their employees.Estimates show that 18 to 20 million American
adults age 19 to 64 are not working due to a disability or chronic disease, or are not working
because of health reasons. Roughly 69 million workers reported missing days due to illness
last year, for a total of 407 million days of lost time at work.
Along these same lines, nearly 40 percent of U.S. workers experience fatigue, according to a
study in the January “Journal of Occupational and Environmental Medicine.” Researchers
noted that the effects of fatigue, most related to a wide range of physical and mental health
problems, on health-related lost productive time is not just absenteeism, but also days the
employee is at work and is performing at less than full capacity because of health reasons.
For U.S. employers, fatigue carries overall estimated costs of more than $136 billion per year
in health-related lost productivity, $101 billion more than for workers without fatigue. Eighty-
four percent of the costs were related to reduced performance while at work, rather than
absences.
4. It’s the Tech Tools, Stupid: All the feel-good, psychological methods of improving employee
productivity are great, but they’re useless without the right tools. And the right tools mean the
right technology. For an employee to be efficient and productive in today’s job environment
means equipping employees with the right gear. Companies that don’t upgrade or ignore the
necessity for tech tools like PCs, Blackberries, cell phones and other 21st century tools, run
the risk of diminished employee productivity.Intel, the world’s largest semi-conductor maker,
found that wireless notebook PC users increased their productivity by 100 hours per year.
They studied the work habits and productivity of more than 100 Intel employees who were
upgraded to wireless notebooks and found a gain of more than two hours per week, more
than paying for the cost of the upgrades in the first year. They also found that when workers
were able to control more of their time, that productivity increased as well.
5. Downsizing and Outsourcing Morale Ever vigilant of saving a buck and satisfying Wall
Street, corporate America has turned to cutting corners by downsizing and outsourcing.
Simply put, downsizing expensive labor while outsourcing a cheaper version. For employees
remaining in those offices and factories, their morale and motivation can take a big hit.
Translation: Will the moves to save money be contradicted by a loss in productivity from
disgruntled employees? In most cases, employers fail to recognize that if they downsize or
outsource, they need to provide support to the employees that remain. The psychological
impact on employees can directly impact productivity, forcing many to focus on their second
careers instead of the job at hand.

RELATED EMPLOYEE SURVEYS

Employee Satisfaction Survey – Fairness factors into many of the key topics associated with an
employee satisfaction survey. This key factor will play a significant role in improving productivity,
job satisfaction, and loyalty.

View all Employee Surveys by NBRI.

You might also like