This article throws light upon the top five factors affecting organisational productivity. The factors are: 1. Change in the work force 2. Change in industrial composition 3. Change in capital-labour ratio 4. Decrease in research and development spending 5. Government regulation.
Factor # 1. Change in the Work Force:
Over the past few decades, various major changes have occurred in a country’s industrial work force. The recent gains in productivity in industrially advanced countries like America and Japan is largely attributable to higher level of education or investment in human capital formation.
By contrast, in those countries where the preparation of workers with higher education has levelled off, productivity gains have also tended to slow down.
In a like manner, in most developing countries, the work force has absorbed many new and inexperienced employees during the last decade, as women and younger workers have joined the active labour force. Until these employees gain sufficient experience, they are likely to be less productive.
Factor # 2. Change in Industrial Composition:
Secondly, shifts in industrial composition often move a large number of workers from one industry to another that is more productive. Such a change would, of course, affect the productivity growth rate.
Factor # 3. Change in Capital-Labour Ratio:
A third factor affecting productivity is change in capital- labour ratio. This ratio reflects the extent to which an organisation invests in capital (new equipment, technology and so on) rather than labour (for example, more employees).
Factor # 4. Decrease in Research and Development Spending:
Another factor contributing to declining productivity growth rates has been reduced spending on research and development. These breakthroughs often play a major role in improving productivity. This means that a decline in the number of breakthroughs — almost by definition — has an adverse effect on productivity growth.
Factor # 5. Government Regulation:
Another factor affecting productivity is increased in government regulation and control. The private sector in India has been subjected to excessive government control. This is often thought to be a major cause of productivity slow down in Indian industries since 1965-66.