Performance and Productivity Measurement

The Performance and Productivity Measurement is divided into two parts: ?

• Performance measurement and ?
• Productivity measurement.

Whilst productivity measurement is a subset of performance measurement, it is important that you not only consider various methods of measuring performance but also consider one of the driving forces in operations, which is to increase productivity. Productivity is calculated as a ratio. For example the ratio of resources employed to benefits obtained. This may simply mean sales value compared to cost of sales or it might mean number of student grades compared to number of teaching hours allocated. Generally, productivity is a widely used (and often abused) term, normally associated with reports of rising and falling national and international gross national product (GNP) values or concerned with how competitive one industry or another has fallen over a period of time. Often television reports refer to productivity in relation to labour efficiency. In particular direct labour may be highlighted. Despite the amount of media attention that the term productivity receives, the concept is not widely understood.

The second section, productivity measurement, considers the issues and approaches to productivity increase in greater depth. Today organisations compete or function in more competitive, more demanding environments than ever before. The establishment of organisational goals and the application of resources especially scarce resources is critical to survival. To ensure that organisations are moving in the correct direction, a performance measurement and reporting system is needed. Performance measurements quantify the degree to which established goals have been achieved, are usually linked to a rewards system. As a result, performance metrics have a significant impact at all levels in an organisation and among stakeholders. Metrics also impact behaviour.

It is often said that 'you get what you measure' and 'what gets measured gets done'. In public sector service organisations, stakeholders and the press demand information to enable them to construct rankings. Hospitals, schools, local councils and charities are among the organisations now scrutinised on an annual basis against a set of performance measures. With this comes the problem of misunderstanding or misinterpretation. With traditional accounting measures profit or return on investment are relatively easily understood. They represent one approach to performance measurement that is based on a few quantifiable financial measurements. The approach today require a proliferation of measurements and these measurements include dimensions that are quantitative as well as qualitative.