Evidence-Based Productivity Improvement

A Practical Guide to the Productivity Measurement and Enhancement System (ProMES)

Robert D. Pritchard, Sallie J. Weaver, Elissa Ashwood

• Éditeur: Routledge
• Année: 2012
• ISBN:
  9781136587771
• Édition: 1
• Sujet: Psychology
• Sous-sujet: History & Theory in Psychology

This new book explains the Productivity Measurement and Enhancement system (ProMES) and how it meets the criteria for an optimal measurement and feedback system. It summarizes all the research that has been done on productivity, mentioning other measurement systems, and gives detailed information on how to implement this one in organizations. This book will be of interest to behavioral science researchers and professionals who wish to learn more about the practical methods of measuring and improving organizational productivity.

I
THE PRODUCTIVITY MEASUREMENT AND ENHANCEMENT SYSTEM (ProMES): AN INTRODUCTION AND BACKGROUND

This first major section of the book has eight chapters. Chapter 1 presents information on the importance of productivity measurement and improvement. Chapter 2 is a discussion of the concept of organizational productivity. Desirable characteristics of a productivity measurement system are covered in Chapter 3. Chapter 4 is a description of how ProMES works, and Chapter 5 presents the theory behind ProMES. Chapter 6 compares ProMES with the desirable characteristics outlined in Chapter 3. Chapter 7 presents the results of past research evaluating ProMES. Chapter 8 presents a discussion of why ProMES is effective in improving productivity.

Chapter 1

The Value of Productivity Measurement

Productivity: Why So Important?

Productivity has received so much attention in recent years that it is now a household word. The advent of workplace technology has been touted as not just an aid to productivity, but a major factor in the recent gains in national U.S. productivity (Cobet & Wilson, 2002; FRBSF Economic Letter, 2005). The national news contrasts the productivity of one country with another. Companies search for programs to improve productivity in hopes of gaining competitive advantage and streamlining their daily operations.

Obtaining a grasp on the scope of the importance of productivity requires a historical look at national labor productivity in the United States. Historically, the United States was a leader in national labor productivity throughout the 1950s and 1960s. During this time there was little doubt that the upward productivity trends would continue without major changes to then-current industry practices. However, in the 1970s this superiority was threatened by the increasing productivity of Japan and some western European countries. While the United States was still the most productive country at this time, its rate of productivity growth was declining, and a number of other countries were improving their national productivity at a comparatively faster rate (Kendrick, 1984; Mahoney, 1988; Sink, 1985; Taira, 1988; Tuttle, 1983). The effects of these productivity changes started to be felt nationally. The success of the Japanese in U.S. automobile and steel markets led to plant closings and lost jobs. Major U.S. companies were in severe financial difficulties. Unemployment was rising. What had historically been a trade surplus became a trade deficit, and the deficit was increasing. While many causes were responsible for these problems (e.g., Kopelman, 1986), loss of clear U.S. superiority in productivity was seen as one of the major causes. Regaining the upward movement in productivity was formally identified by President Ronald Regan in 1985 as a national priority and received major congressional attention at this time (Tuttle & Weaver, 1986a).

Over 25 years later, productivity remains a focal national, industrial, and organizational priority and its importance will only continue to grow. The availability and cost of resources, both human and tangible, continue to exert mounting pressure on all industries. The demand to do more or produce more with fewer resources has put productivity improvement at the apex of many organizational strategic plans. In particular, the rapid integration of technology and automation of the workplace paired with a relatively imbalanced ratio of older workers phasing out of the workforce to younger workers entering the workforce raises questions regarding how to optimize productivity (Kudyba & Diwan, 2002).

The impact of technology on how organizations function in the last decade is undeniable. Due to heightened awareness of the importance of productivity, capital deepening, and a focus on what is economically termed multifactor productivity (MFP), national U.S. productivity began to rise again after 1996 (FRBSF Economic Letter, 2005). MFP includes all possible factors which influence productivity, but does not include capital investments or increases in worker skill. MFP is defined as the joint effects of factors such as innovation (research and development), improvements in management process and work design, and new technologies (USBLS, 2007). Much of the recent gains in U.S. productivity have been accounted for by MRP, as opposed to capital or increases in worker skill. One hypothesized mechanism proposed to explain the continued rise in the explanatory power of MFP is that firms are learning new and better ways to use the technology they put in place to become more productive.

Recent economic reports also underscore that gains in national productivity are largely a product of efficiency growth, which is described as “growth in how well labor and capital inputs are used” (Office of the President, 2007, p. 17).

The Effects of Productivity Growth

There are good reasons for this concern about productivity. Productivity has a major impact on our lives. Its effects can be broken down into effects at the national level, the industry and firm level, and the individual level.

At the national level, productivity is related to important economic outcomes. Productivity growth is an important factor in controlling inflation (Kendrick, 1984; Mahoney, 1988; Riggs & Felix, 1983; Tuttle, 1983; Tambalotti, 2003). In a market economy, the prices paid for goods are determined largely by the costs of the inputs used to produce the goods (such as the costs of labor, energy, raw materials, etc.) and the profit margin of the producer. There is a constant upward pressure on the cost of these inputs. For example, the price of labor regularly increases due to the pay raises we get each year. The rising cost of fuel is another example that has exerted visible upward pressure on production costs of almost all goods and negative effects on inflation (Leblanc & Chinn, 2004). If profit margins are roughly constant over time, then increases in the cost of the inputs must be offset by increases in productivity if the prices of the goods are to be kept constant. More output must be produced with the same, more expensive input. If the increases in the costs of inputs are not offset, the prices of the same goods must go up and inflation occurs.

Another way to look at this same process is to focus on wages. We all want higher wages. If higher wages are achieved without increased productivity, the cost of the goods goes up, helping increase inflation (Kendrick, 1984; Kopelman, 1986; Richter, 2007). If wages increase with a corresponding increase in productivity, no inflationary pressure is produced. This is confirmed when economists study growth in real income, that is, change in income relative to change in inflation. Studied over time, productivity growth appears to be one of the main factors responsible for increases in real income (Kendrick, 1984).

Productivity also influences the real cost of goods (Kendrick, 1984; Mali, 1978; Jorgenson, 2000). Productivity growth results in producing the same goods for lower costs. Again, assuming a roughly constant profit margin, the real cost of goods decreases as productivity increases (Fleishman, 1982; Mahoney, 1988).

Productivity growth also influences some very important noneconomic factors (Fleishman, 1982; Kendrick, 1984; Kopelman, 1986; Mali, 1978; Riggs & Felix, 1983). Increased productivity means generating the same goods and services with fewer inputs. Thus, it is a way of conserving societal resources ranging from oil to human labor. Looked at another way, increased productivity allows for more available outputs for the same inputs. Thus, we can be closer to a society of plenty while using fewer of our societal resources.

Productivity growth can also increase the quality of our lives. One can think of the financial resources to be distributed as a pie, with different interests getting a piece of that pie (Kopelman, 1986). Without productivity growth, the economic pie that is divided is constant in size. This means that one demand cannot be met without sacrificing another. For example, with a fixed-size economic pie, if Social Security or Medicaid is increased, the money must come from somewhere else such as education or defense. A fixed-size pie results in battles between factions fighting over the resources, for example, environmentalists versus manufacturers, workers versus retirees, majority versus minorities, etc. Productivity growth creates the money to continue to increase the size of the pie. Thus, the size of each slice can increase without taking resources from someone else.

Productivity and productivity growth play vital roles at the level of the industry and the individual firm. Organizational longevity and survival stand upon a base of productivity growth. If the productivity of an industry or a firm is higher than its competitors, that industry or firm survives better (Craig & Harris, 1973; Kendrick, 1984; Tuttle, 1983; Harris, 1994; Druckman, Singer, & Van Cott, 1997). Productivity growth within an individual firm that is higher than the average of its competitors results in lower costs and prices, consequently making those products and services more competitive. Productivity then has an important impact on improving the market position of the firm relative to competition (Hamel & Prahalad, 1994; Pfeffer, 1994). This leads to higher sales, higher profits, and more job opportunities (Nordhaus, 2005). The reverse is true for below average productivity growth. Another way to look at the relationships is from the cost of inputs. When increases in wages or increases in the costs of other inputs exceed gains in production efficiencies, the goods produced from labor and capital become more expensive. Competitiveness is then decreased in the world or national marketplace (Riggs & Felix, 1983).

Finally, productivity and productivity growth have important effects on individuals. Aside from the quality of life issues just raised, productivity gains will lead to better use of our time and more leisure time, as well as being key to advancement in organizations (Kendrick, 1984). Equally importantly, people like to be productive. Being productive allows individuals to satisfy both their needs and responsibilities in an efficient and effective manner (Pritchard & Ashwood, 2008). It is a central aspect of self-fulfillment and self-respect.

The Importance of Measuring Productivity

To improve productivity, it is necessary to measure it. Only then can an organization effectively deal with it. Measuring productivity has a whole host of benefits. In addition to the general benefits of improving productivity such as inflation control, industry financial health, competitiveness of individual firms, and improvements in our quality of life, there are a number of specific reasons for measuring productivity in an organization with a system like the one described in this book. These can be broken down into (a) general reasons why productivity measurement is important, (b) advantages that occur through the process of developing the productivity measurement, and (c) beneficial uses of the resulting productivity measurement. These points are presented in list form below.

General Reasons for the Importance of Productivity Measurement

Formal productivity measurement

1. Takes the guesswork out of observations about productivity

2. Assists in the efficient conduct of operations

3. Facilitates communication between members of the organization

4. Aids in evaluating progress toward improving productivity

5. Is perceived as being more accurate than informal productivity judgments by all members of the organization

6. Allows independent verification of level of productivity and productivity gains

7. Makes it much easier to assess changes in productivity over time

8. Defines and clarifies expected results and activities better than qualitative descriptions

9. Helps the image of the organization with a parent organization, with clients, and with external funding sources

Advantages Occurring Through the Process of Developing Productivity Measures

The process of developing productivity measures

1. Serves as a way to review existing assumptions, practices, and measures

2. Brings into the open those issues that are most central to organizational productivity

3. Reveals potential problems and identifies productivity improvement opportunities

4. Serves as a way to clarify roles and help with team building

5. Helps heighten the awareness of all employees regarding the need to optimize productivity

Beneficial Uses of the Resulting Productivity Measurement

The resulting measurement from a productivity measurement system can be useful for

1. A source of feedback to personnel

2. A source of motivation for increasing productivity

3. Promoting renewal of professional pride and enhancing employee involvement

4. Helping set priorities

5. Comparing and benchmarking the productivity of different units

6. Identifying problems before they become serious

7. Helping diagnose reasons for increases or decreases in productivity

8. Helping diagnose reasons for problems so that better decisions can be made about their solutions

9. Providing for statistical analyses of productivity

10. The basis for evaluating the effects of any organizational change on productivity

11. The basis for many other productivity-improving interventions such as goal setting, incentives, gain sharing, etc.

12. Helping with long-term planning

13. A basis for wage negotiations

14. Helping with decisions to continue or discontinue an organization, a function, or a program

15. Helping with decisions to allocate resources among competing organizations, functions, or programs

Chapter 2

Organizational Productivity: A Definition and Description

While there is agreement that productivity is important, there is little agreement on what the term productivity means (e.g., Bullock & Batten, 1983; Campbell & Campbell, 1988a & b; Craig & Harris, 1973; Kopelman, 1986; Tuttle, 1983; Campbell, 1983; Baker & Salas, 1996; Campbell, McCloy, Oppler, & Sager, 1993; Campbell, Gasser, & Oswald, 1996; Motowidlo, 2003; Pallak & Perloff, 2004). It has been used to mean the efficien...

Table des matières

• Cover Page
• Half Title page
• Series in Applied Psychology
• Title Page
• Copyright Page
• Dedication
• Contents
• Foreword
• Preface
• Authors
• Section I The Productivity Measurement and Enhancement System (ProMES) An Introduction and Background
• Section II How to do ProMES in Your Organization
• Section III Questions and Answers About ProMES
• Section IV Other Productivity Improvement Techniques and Other ProMES Applications
• Concluding Statement
• Appendix A Scholarly Work on ProMES
• Appendix B Description of the indicator Classification System Categories*
• Appendix C Examples of ProMES objectives and Indicators
• Appendix D Promes Contingency Worksheet
• Appendix E Template for Developing Contingencies
• Reference
• Author Index
• Subject Index