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Productivity Measurement Methods

Productivity Measurement Methods

What is Productivity?

Before we discuss further about how to measure productivity, it's good to first know what Productivity is. In economics, productivity measurement is measuring output per unit of input, such as labor, capital, or other resources. It is often calculated as the ratio of gross domestic product (GDP) to hours worked.

Labor productivity can be further subdivided by the industry sector to examine trends in labor growth, wage rates, and technological improvements. Corporate profits and shareholder returns will be directly related to productivity growth.

At the company level, productivity is a measure of the efficiency of a company's production process. The productivity is calculated by measuring the number of units produced against employee hours worked or by measuring the company's net sales against employee hours worked.

One example of extraordinary productivity is automotive giant Toyota and online marketplace king Amazon. Productivity at work simply refers to how much "work" is done over a given period of time.

Productivity Measurement Method

The following are Productivity Measurement Methods, namely:

Productivity measurement can use monetary units of measure of Output and Input, such as Dollars and others, or physical units of measurement of Output and Input, such as, length, weight etc.

Partial Productivity 

Partial Productivity is often referred to as Single Factor Productivity. Partial Productivity is a method of measuring the productivity of one of the factors or inputs used to produce output. These factors or inputs include labor, raw materials (materials), energy, capital and other inputs.

Partial Productivity Measurement Formula:

Output/Input (one of the Inputs)

Total Productivity

Total Productivity is a method of measuring the productivity of all factors (Inputs) used to produce Outputs (Outputs).

Total Productivity Measurement Formula:

Total Output/Total Input

 Productivity Measurement Example

Example This productivity measurement uses a monetary unit of measure:

Company XYZ has a production capability with a production value of $ 500 in 1 week, with labor costs of $ 55, materials of $ 40 and machinery of $ 12.5 

How to measure the productivity of each Input and the total productivity of the entire Input in 1 week at Company XYZ?

From the example above, the following data are obtained:

Productivity Measurement Results:

Partial Productivity Measurement of

Labor Productivity = 500/55 = 9.09

This means: In monetary units of measure, every $1 (one dollar) of labor used is produced worth $ 9.09

Productivity of Materials (Raw Materials) = 500/40 = 12.5

Meaning: In monetary unit of measure, every IDR 1 (one rupiah) of Material use produces a product worth $12.50

Machine Productivity = 500/12.5 = 40

Meaning: In monetary units of measure, for every R$ 1 (one dollar) the use of Machines produces a product worth $ 40.

Measurement of Productivity Total Productivity 

Total Productivity

= 500/(55 + 40 + 12.5)

= 500/107.5

= 4.65

Meaning: In units of measure monetary, for every $1 (one dollar) the use of Total Inputs (Labor, Materials and Machines) produces a product worth $4.65

The example of productivity measurement above is a very simple example, where the data is made as simple as possible with the aim of making it easier to understand the Productivity Measurement Method. But in fact, sometimes data is presented in different forms and requires analysis and calculation first, before measuring productivity.

Remember:

"An increase in company profits is not always followed by an increase in productivity, but on the contrary, an increase in productivity is definitely followed by an increase in profit"

Reference:

https://www.investopedia.com/terms/p/productivity.asp

https://masenputra .co.id/productivity-measurement methods/

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