After reading this article you will learn about the calculation of productivity and factors affecting it.

Calculation of Productivity:

Productivity of a production system is analogous to the efficiency of a machine. Just as it is desired to increase the efficiency of a machine, it is also aimed at to raise the productivity within the available resources. Productivity may be defined as the ratio between output and input. Output means the amount produced or the number of items produced and inputs are the various resources employed, e.g., land and building, equipment and machinery, materials, labour, etc.


Calculation of Productivity

In the true sense, the productivity can be said as increased if more products can be obtained from the same amount of resources, i.e., available resources.

Factors Affecting Productivity:

(a) Factors Affecting National Productivity:

1. Human Resources:

The general level of education is an important factor in national productivity. The use of computers and other sophisticated equipment and systems requires better educated employees. Government can help by sponsoring more education, especially in fields that directly affect productivity. Employees need to be motivated to be productive. Pay is not enough; they need to have good, safe, working conditions and to be recognized as the most vital part of the enterprise. Labour unions and management may be adversaries in negotiating pay and benefits but can cooperate in seeking productivity improvements, to the benefit of all.

2. Technology and Capital Investment:

The major factor in long range continuing productivity improvement is technology, and new technology depends on Research & Development. For industry or services to put new technology into use they must invest in new machinery and equipment.


The government can do the following:

(i) Promote R & D in Industries and Universities.

(ii) Encourage personal savings and reduce taxes on profits so that people invest in new facilities.

(iii) Allow depreciation rates that will provide cash flow for new investment.


(iv) Directly encourage new investment through increased investment tax credits.

3. Government Regulation:

An excessive amount of government regulation may have a detrimental effect on productivity. Government can do much to eliminate unneeded regulations and to make cost-benefit analysis to determine the necessary regulations such as those on health and safety.

(b) Factors Affecting Productivity in Manufacturing and Services:

1. Product or System Design:


If through better product design, a product can be simplified by eliminating some of its parts, it is obvious that the material these pieces are made of will no longer be needed. Nor will the equipment, tooling, and labour to make them be required. Value Analysis can bring out many product design changes that improve productivity. R&D is a vital contributor to improved product design. Standardization of the product and the use of group technology arc other design factors that make possible greater productivity in the factory.

2. Machinery and Equipment:

Once the product is designed, then how it is made offers the next opportunity for productivity improvement. The equipment used-machines, tools, conveyors, robots, the way the factory is laid out—all are important. Computer has helped design the products (CAD), it helps operating complicated machine tools (CNC machines) and it controls the inventory of material and parts. It has become an essential ingredient in productivity improvement.

3. The Skill and Effectiveness of the Worker:


The trained and experienced worker can do the same job in a much shorter time and with far greater effectiveness than a new one. However, even the well-trained employees must be motivated to be productive.

4. Production Volume:

Assume that the volume of output is to be doubled. The number of direct workers would have to be doubled and a few indirect workers might also be needed. But there would probably not be a need for more engineers, research scientists, headquarters staff people or other support personnel. So if the output is doubled, the productivity of these support people is in effect doubled.