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Productivity or Efficiency-
Measuring What We Really Want
Ellee Koss and David A. Lewis
Most productivity measures are geared toward easy quantification,
tending to evaluate the efficiency of an individual, group, organization, or
country. But to help ensureproductivity and quality, organizations need a
new definition ofproductivity that takes into account a multitude of factors
beyond inputs and outputs. These factors and their relative importance
must be solicited from management. This article details a new, improved
definition ofproductivity and explains how organizations can apply it totheir own situations.
Productivity(Latin: producere; proforward;ducereto lead or
draw out. the quality or state of bring forth, of generating, of causing to
exist, of yielding large results or yielding abundantly.
Efficiency(Latin: efficereto accomplish) the ability toproduce the
desired effect with a minimum of effort, expense, or waste.
In the last ten years, much has been written about productivity. Falling
produc ti vi ty has been blamed fo r the lo ss of U.S. le adersh ip and
competitiveness in the global arena. At least thirty individual produc-tivity centers have been established across the United States alone.
Although there is no universally accepted definition of productivity, most
measurements are geared toward easy quantification, and most researchers
define productivity as a ratio of inputs to outputs.
To date, most books and articles on productivity measurement have
Ellee Koss, Ph.D., is an organiza- focused on quantitative measures of productivity. These measures tend to
tional consultant specializing in evaluate the efficiency of an individual, group, organization, or country.the transformation to high per-
formance and organizationalAlthough there has been increased attention paid to what it takes to create
learning. Currently an associatean environment in which people can be more productive, the issue of
of the HumanResources Man-whether current measures of productivity are, in fact, appropriate measures
agement Group in San Francisco, has generally been ignored. But some progress is being made in thisshe has written articles on the role
direction. At the university level, for example, industrial engineering and
of vision in organizations and or- production management curriculatraditionally designed for efficiencyganizational transformation.
David A. Lewis Ph.D., is anexper t sare gradually abandoning strict Taylorism. Course titles are
associate pofessor of operationsbeing changed from work methods and measurement to productivity
management at the University ofmeasurement. The essence of this research lies in exploring the gap
. . . . . . .
Massachsetts at Lowell. He hasbetween the use or "standard measures or prductivity and the creation
writen numerous articles in the of appropriate measures of productivity, measures that enhance the
fields of quality and production ability to positively and structurally affect competitiveness and regain
leadership.
Ingeniera de la productividad
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Careful observationreveals that our
discussions andmeasurements ofproductivity until
now have actuallybeen aboutefficiency."
In considering these current measures of productivity, we are struck
by the sterility of the numbers and their implications. The typical statement
that productivity goes up when inputs per unit of output go down, which
is mechanistically based and seemingly free from cultural bias, is very
appealing. A universally accepted definition makes comparisons-some-
thing that we, as human beings, seem to need-very easy. We can compare
individuals and groups within and across companies, as well as acrosscountries and across time. However, quality and other important ingredi-
ents of productivity are conspicuously absent from the formula. Moreover,
there appears to be a resistance to addressing the question, What do we
really mean by productivity? Careful observation reveals that our discus-
sions and measurements of productivity until now have actually been
about efficiency. If thats the case, then several important questions arise:
1. Why measure productivity?
2. What is productivity?
3. How can productivity be measured?
4. How does productivity relate to quality?5. How does productivity relate to efficiency?
THE SEARCH FOR A NEW DEFINITION OF PRODUCTIVITY
The desire to measure productivity in traditional ways seems to stem
from our desire to better ourselves and to understand how we are doing
(particularly compared to our competitors). Often, we need this confirma-
tion to come from external sourcessuch as a pat on the back, raise,
acknowledgment, or concrete proof. We are not satisfied to look inside
ourselves and examine, from our sense of self, where we are and how we
are doing. We have not been sufficiently trained to self-explore in this
manner. But because measuring up to someone elses standards seems tobe at the root of many psychological problems, why should we continue
to try to do that within work organizations? Perhaps, in rethinking the
process, we can invent a way to define and generate productivity that
reflects an organizations essence and desire to be true to itself. And, when
used as a reflexive exercise, it can support an organization, not only by
increasing its productivity, but also by acting as a mechanism to keep the
organization on track with its ultimate purpose.
Given the shift from an industrial to a service economy that many
Westrern countries are experiencing, along with an increasing emphasis on
quality and worker satisfaction, two questions arise. First, can traditional
measures of productivity be applied in the new environment? Second, even
if traditional definitions of productivity can be applied, are they still
appropriate? If we ask the question What does it mean and take to be
productive? a whole host of variables previously not considered in the
measurement of productivity are introduced.
For example, let us assume that commitment and determination may
be required by certain individuals or groups to be productive, But how can
National Productivity Review/Spring 1993274
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Productivity or Efficiency-Memuting what We Really Want
..,we need to askthe question Whatthe question What
does it mean to bedoes it mean to beproductive?productive?
they be measured? How can they be compared from one company to
another? Should they even be compared? Asking the question What does
it mean to be productive elicits culturally-based answers that are likely to
be different at personal, company, and societal levels. It also makes
measurement of productivity a very personal and specific issue. This is less
appealing, as it makes productivity measurement not generalizeable and
comparisons more difficult. Continuing along this same vein, productivity
becomes a way to tell how well youre doing against ones own appropriate
standards rather than those set outsidethe operating system. Productivity
measured solely in traditional input-output terms ceases to be sufficient in
this context.
To get a clear understanding of the measure of productivity, we must
first understand the process on which the measure is based. That is, we
need to ask the question What does it mean to be productive? Being
productive is a personal and organizational issuethat is, what it means
to one person or organization can be very different from what it means toanother. For example, at an ad agency, brainstorming and discussing ones
work usually are highly valued as productive endeavors because they can
lead to new ideas. But at a high-tech consulting firm, this sort of behavior
may be frowned upon and considered counterproductive. Productivity on
a manufacturing assembly line is distinct from productivity among leading
software designers. If an organization structures itself around individuality
and personal autonomy, teamwork and consensus building may be
considered wasteful and counterproductive. In an organization whose
founding beliefs value these attributes, the same behavior is considered
productive. Successful companies are realizing that there is value in dealing
with these soft issues and recognizing their impact. Quality, customerservice, excellence, and job satisfaction have become vitally important
aspects of productivity and deserve inclusion in its measurement. Given
these examples, we come to realize that definitions of productivity are also
culture-specific at the individual, organizational, and societal levels. What
kind of definition, then, may be general enough to encompass all of
productivity, yet specific enough to allow for accurate measurement? Let
us consider mathematical representations of both the traditional and new
definitions of productivity:
Traditional definition:
PR = f(I/O)
That is, productivity is a function of the ratio of inputs to outputs.
New definition:
PR =f(X1, X2, Xi,....,Xn)
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In the process of
both defining
and measuring
productivity a
change in an
organizations
productivity will
tend to occur.
The Xis indicate a series of factors agreed upon by individuals, an
organization, or a country as important in determining productivity.
These factors may also have a time dimension.
Let us consider an aspect of productivity to be that which enables one
to generate something real or the act of bringing forth something new.
There is the time-honored notion that pregnancy is a time when a womangets to be productive by doing nothing. Extending this metaphor to
organizations, that which happens during a gestation period (for example,
R&D), as well as that which occurs during manufacturing, is productive.
Similarly, a chief executive recently reported that some of his most
productive thinking occurs when he takes an hour to jog. When viewed
in this light, productivity can mean the process as well as the end result.
Productivity may be something other than efficiency.
With this definition of productivity, measurement also needs to be
culture-specific. Organizationally, there is a need to reflect on what it
means to be productivewhat is valued, what is not, and what is the
organizations vision of productivity. (This process, in itself, may effect ashift in productivity within an organization,) Against these standards we
can measure the productivity of individuals and organizations. By nature,
the measurement would be time-specific and mission-based. In the
process of both defining and measuring productivity, a change in an
organizations productivity will tend to occur. This is especially true if the
process involves participation, ownership, and commitment throughout
the organization. It will not tend to work if it is interpreted as an edict from
above. As the vision or culture of an organization changes, so too do its
definition and measurement of productivity. The systemic nature of this
evolution can be seen in Figure 1. Figure 2 presents an outline of a specific
process for both measuring and shifting productivity within an organiza-
tion. It is the focus on the process as much as the measure that enables the
desired shift in productivity.
In the actual measuring, one could create a scale and/or an index that
includes all the variables that comprise an organizations productivity. For
example, in a company that values relationships among employees and
efforts to forge new ground, productivity many be measured, in part, by
the following equation:
PR = time spent communicating with other employees + timespent
creating new possibilities for the organization + number of organiza-
tional problems solved + percentage ofproduction goals reached.
One would expect these measures to include goals regarding com-
pany values as well as production. To further clarify how this method
may be applied, let us consider a case study of a computer software
company.
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Productivity or Efficiency--Measuring What We Really Want
Figure 1: Evolution of Productivity Concept
VISION OF ORGANIZATION
MISSION/PURPOSE
CULTURE
VISION REGARDINGPRODUCTIVITY
DEFINITION PRODUCTIVITY
GOALS RESPONSE
DEFINITION
GOALS
MEASUREMEASURE
PRODUCTIVITY
RESPONSE
APPLICATIONAPPLICATION
THE NEW FORMULA IN ACTION
The mission of the ABC Software Company is to be the leading provider
of goods and services that help people build better systems more
efficiently. Furthermore, this vision includes becoming the most productive
company in the software industry through the creation of an organizational
and management structure that promotes teamwork and embraces change,
and a culture that fosters a balance between personal and company growth
and satisfaction. Incorporating this vision into the new definition of
productivity and assuming that productivity is composed of three factors
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Figure 2: Measuring and Shifting Productivity in an Organization
KEY QUESTTONS: WHAT IS PRODUCTIVITY? WHAT IS OUR VISION OF PRODUCTIVITY? HOW
WILL WE KNOW WE HAVE INCREASED (OR DECREASED) OUR PRODUCTIV-
ITY?
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technology, management structure, and people/culturewe can arrive at
the following mathematical expression:
PI = (T+ M + C/ 3, where
PI = productivity indexT = technology factor
M = managerial factor
C = people/culture factor
Through discussions with upper management. four possible measur-
able components are identified to represent performance on each factor.
Performance is measured by comparing current results to those obtained
in a previous specified period. In this way, the absolute value of the
productivi ty index is no t as important as its rela tive value. Using
hypothetical data, we have defined the individual components to illustrate
the value of the model in the following sections.
F a c t o r I - T e c h n o l o g y
T1: Let productivity in technology be partially measured by what it
enables the end userthe customerto do. In this case, let us define it as
the average number of new lines of code per programmer per month.
T2: Productivity as expanding the boundaries of the effort of a new
system for a customer. Let us define it as the average time it takes to design,
develop, and integrate a new system.
T3: Productivity as functionality. Let us define this by using the average
number of useful functions per application design.
T4: Productivity as accurate processing. This can be defined as thenumber of bugs or errors reported per time period.
Each of these components is measured by comparing this years
performance to that of the previous year: [t/(t-1,)]. In cases in which a
decrease in the measure is a positive indication, we have taken the inverse
to capture the increase in productivity: [(t-1)/t]. Consider the following
scenario:
This year = time t. T1 = 200 lines of code
T2 = 4 months
T3 = 40 functionsT4 = 7 bugs per month
Last year = time t-l. T1 = 150 lines of code
T2 = 5 months
T3 = 35 functions
T4 = 10 bugs per month
Thus, T= (T1 + T2+ T3+ T4), where
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T1 = T1(t)/Tl(t-I) = 200/150 = 1.33
T2 = T2(t-l)/T2(t) = 5/4 = 1.25
T3 = T3(t)/T3(t-1) = 40/35 = 1.14
T4 = T4(t-l)/T4(t) = 10/7 = 1.43
so that T = (1.33 + 1.25 + 1.14 + 1.43) / 4 = 1.29
Thus, lookingat the technology component of the productivity index,we could say that the ABC Company is doing 29 percent better this year
than last year. But note that for the sake of simplicity, we have assumed
that all factors are weighted equally. In reality, this may not be the case;
however, the index may be adjusted appropriately by weighting each
factor by the agreed-upon weights and then dividing by the sum of the
weights.
Factor II: Management
As with the technology factor, four measures of performance were
identified that are consistent with the companys vision and goals. They
are:
Ml: Productivity as proactive management. This could be measured
through the hours per week spent reflecting on and planning for present
and future internal and external developments.
M2: Productivity as working together. This could be defined as the
number of crises in the past year due to redundancy, duplication of effort,
or lack of teamwork.
M3: Productivity as communication. This may be represented by the
percentage of employees who can articulate the organizations mission and
goals.
M4: Productivity as the ability to embrace change. This may be definedas the average amount of time it takes for the company to return to normal
(as defined by the organization) after a crisis situation. Again, each of these
components is measured by comparing this years performance to that of
the previous year. Consider the following:
This year = time t. Ml = 6 hours/week
M2 = 8 crises
M3 = 70 percent
M4 = 5 weeks
Last year = time t-l. Ml = 8 hours/weekM2 = 7 crises
M3 = 60 percent
M4 = 7 weeks
Thus, M = (M1 + M2 + M3 + M4)/4, where
MI = M1(t)/M1(t-1) = 6/8 = 0.75
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M2 = M2(t-l)/M2(t) = 7/8 = 0.88
M3 = M3(t)/M3(t-1) = 70/60 = 1.17
M4 = M4(t-l)/M4(t) = 7/5 = 1.40
which gives us M=(0.75+0.88+1.17+1.40) / 4 = 1.05
According to this computation, the ABC Company is performing 5percent better in the arena of management than it did last year.
Factor III.- People/Culture
Again, four measures of performance were identified. These are:
Cl: Productivity as a balance between personal and work life. This may
be measured, by proxy, through the percentage of personal goals achieved.
Professional goals and company goals are captured in other measures.
C2: Productivity as a working condition that satisfies and empowers.
Long-term (beyond five years) turnover rate may be an appropriate
measure.C3: Productivity as the appropriate match between employer and
employee. In this case, turnover rate may be an appropriate measure.
C4: Productivity as having the right people to accomplish the mission
and goals of the organization. This can be measured by the percentage of
company goals met in the last year.
Comparing this years to last years performance, consider the follow-
ing:
This year = time t. Cl = 40 percent
C2 = 20 percent
C3 = 12 percent
C4 = 50 percent
Last year = time t-l. Cl = 30 percent
C2 = 35 percent
C3 = 15 percent
C4 = 45 percent
Thus, C= (Cl + C2 + C3 + C4) / 4, where
Cl = C1(t)/C1(t-1) = 40/30 = 1.33
C2 = C2(t-1)/C2(t) = 35/20 = 1.75
C3 = C3(t-1)/C3(t) = 15/12 = 1.25
C4 = C4(t)/C4(t-1) = 50/45 = 1.11
which yields C= (1.33+ 1.75+ 1.25+ 1.11)/4= 1.36
One can then say that in the domain of people/culture, this company
was performing 36 percent better this year than last year.
Putting the three factors together, the overall productivity index for the
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has led to a decrease in productivity. In other words, our definitions of
productivity have the power to transform our organizations into whatever
we want them to be or to limit them to production houses that simply turn
inputs into outputs.
LEARNING TO ASK THE RIGHT QUESTIONS
The focus on productivity and the desire to measure it are products of
being human, of looking outside ourselves to discover how we are doing,
of never being fully satisfied and always wanting more. As competition and
complexity have increased dramatically, so has our need to know. Issues
concerning productivity and its measurement have flourished in this
environment. But has this additional energy expended on research and
discussion actually affected productivity? We fear not. As the twenty-first
century dawns and a global orientation becomes necessary, the concept of
survival of allrather than just the fittest gains more validity. As this happens,
we need to crack the marble block of productivity by redefining what itis that we truly want to measure and to speak about it differently. We need
to create something that is culturally and individually based, not something
to be compared across the board. We need to look inwardly and ask
ourselves, What do we really want? Only when we learn to answer the
following question will we be able to create a tool that begins to include
all the ingredients necessary to promote true productivity:
What is it that, when measured, will have an impact on our individual
well-being and our accomplishments in a way that we, our organizations,
and society as a whole can move forward and flourish?
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