Productivity, as defined in a dictionary, is a quality or state yielding or furnishing results, benefits, or profits. Operationally it involves a relationship between the input of resources and the output of resulting goods and services. Resource input encompasses time, money and materials. Input can be reduced by cutting down on the time taken to produce something, the cost to produce it, or the amount of material used. Output can be measured in terms of such things as meals served, customers served and rooms cleaned. The role of management is to develop and organize a system that increases the value of the output faster than the cost of the input.
Traditional measures of productivity have focused on the effectiveness of the labor force. Typically they have been such things as:
- payroll ratios: payroll costs divided by sales;
- sales per employee: sales divided by number of employees;
- sales per hour: sales divided by the number of hours of operation;
- sales per employee-hour: sales divided by departmental employee-hours.
If productivity were defined as sales per employee, then it could be increased simply by raising, say, menu prices. A restaurant may be serving fewer customers, but the increase in prices could camouflage both that and inefficiencies in management as well.
Inflation-proof measures
The best measures of productivity are those that are inflation-proof and measure the performance of output. Productivity increases when more output results from the same or less input. For example, productivity could be measured as the number of customers, rooms occupied, or meals produced divided by the number of employee hours required. Alternatively, the number of employees per one hundred rooms could be used.
The US Bureau of Labor Statistics defines productivity as output per employee-hour. It defines output as sales receipts adjusted for inflation and indexed to a base year to facilitate year-to-year comparisons. Input is the number of hours worked by all employees, both supervisory and nonsupervisory. The resulting ratios are productivity indices that are not affected by increases in prices or wages.
Contemporary trends
Traditional views of how to increase productivity, focusing on such things as producing more with the same or fewer employee-hours, have been too narrow. Are employees more productive if they serve more meals per hour, but in a slipshod, surly manner? Is a restaurant more productive if convenience foods are used to reduce employee preparation time, but food costs are thereby increased to the point that contribution margin is less? A broader view of productivity must be taken.
The traditional focus has been on the producer's role in increasing output. How can we service more rooms, pour more drinks, serve more meals, or process more guests at registration time? To this must be added an equal emphasis on satisfying the consumer of our products and services. If we register more guests but in a mechanical, impersonal way that may affect their return, are we being more, or less, productive?
While the US economy has moved from a situation in which most of the working population was engaged in manufacturing to one in which services dominate, insufficient attention has been paid to the management of service productivity. In large part this is because service is so difficult to measure.
Professional managers realize that bottom-line results are achieved through the company's employees. An emphasis on efficient production that omits consideration of the role employees play is doomed to failure. Attention must also be paid to the quality of the work. Management must set performance standards of both quantity and quality and then manage employees in such a way that these standards are met.
A traditional method of increasing productivity has been to divide a job into specialized fragments and increase the efficiency of the pieces. The modern view sees work in holistic terms and seeks to humanize the job, to integrate employee and job to produce a satisfied employee who is performing productively. If jobs were less specialized and employees were better rounded by performing several jobs instead of just one, would the productivity of the whole increase? This is the modern view.
The values of employees are changing. They are becoming more demanding. While money is still important as a short-term motivator, many employees want more than a paycheck. They look for the job itself, where they might spend eight to twelve hours a day, to give them satisfaction. Management's task is to design jobs that can provide the enrichment employees are seeking.
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