ZIMBABWE INSTITUTE OF MANAGEMENT

Presents
DIPLOMA IN GENERAL MANAGEMENT
Performance Management and Productivity
Improvement
PROMOTING THE ART, SCIENCE AND PRACTICE OF GOOD, SOUND MANAGEMENT
COPYRIGHT RESERVED
ZIMBABWE INSTITUTE OF MANAGEMENT

PRODUCTIVITY
PRODUCTIVITY AND THE STANDARD OF LIVING
1. The Standard of Living
By standard of living is meant the degree of material well being available to a person or class or
community, which is necessary for sustaining and enjoying life.
The standard of living of the representative person or family in the different countries of the world
varies greatly from country to country and even, within each country, from community to
community. Today, in spite of the immense efforts that have been made, both at the national and
at the international levels, a significant proportion of mankind continues to eke out an eistence in
conditions of acute poverty. !n too many parts of the world the ordinary man is still hardly able to
satisfy his basic needs.
". #e$uirements for a %inimum Satisfactory Standard of Living
&hat are the basic needs that must be met in order to attain a minimum decent standard of
living'
())*
+nough food every day to replace the energy used in living and working
,L)T-!./
+nough clothes to permit bodily cleanliness and afford protection from the weather0
S-+LT+#
Shelter which is if a standard high enough to give protection under healthy conditions and
which is e$uipped with certain household e$uipment and furniture0
S+,1#!T2
Security against robbery or violence, against loss of the opportunity to work, against poverty
due to illness or old age0 and
+SS+.T!3L S+#4!,+S
Such as safe drinking water, sanitation, medical care public transport, and educational and
cultural facilities that would enable every man, woman and child to develop to the full of his or
her talent and abilities
(ood clothing and shelter are generally things, which a man has to obtain for himself. !n order to
have them he must pay for them, either in money or work, Security and other public services are
generally matters for government and other public authorities have to The services of public
authorities have to be paid for, generally by individual citi5ens, so each man must earn enough to
pay his contribution to the common services as well as to support himself and his family
+ach nation or community must, in the long run, be self6supporting. The standard of living
achieved will be that which the representative citi5en is able to achieve through his own efforts
and those of all his fellow citi5ens.
The greater the amount of goods and services produced in any community, the higher its average
standard of living will be.
There are two main ways of increasing the amount of goods and services produced. )ne is to
increase employment0 the other is to increase productivity

!f in any community there are men and women who are able to work and who want work but who
are unable to find work, or who are able to find only part time work, the output of goods and
services can be increased if full time productive goods and services can be increased if full time
productive work can be provided for them, i.e. if employment can be increased. &henever there
is unemployment of underemployment, efforts to increase employment are very important and
should o hand in hand with efforts to increase the productivity of those who are already employed.
But it is with the latter task that we are here concerned.
&e can have7 6
more and cheaper food by increasing the productivity of agriculture0
more and cheaper clothing and shelter by increasing the productivity of industry
more security and essential services by increasing all productivity and earning power, leaving
more form which to pay for them.
8. &hat is 9roductivity'
9roductivity may be defined as follows7
Productivit i! t"# r$tio o% out&ut to i'&ut
This definition applies in an enterprise, an industry or an economy as a whole. 9ut in simpler
terms, productivity, in the sense in which that word is used here, is nothing more than the
arithmetical ratio between the amount produced and the amount of any resources used in the
course of production. These resources may be7 6
L3.*
%3T+#!3LS
9L3.T, %3,-!.+S 3.* T))LS
T-+ S+#4!,+S )( %+.
or, as in generally is the case, a combination of all four
&e may find that the productivity of labor, land, materials or machines in any establishment,
industry or country has increased, but the bare fact does not in itself tell us anything about the
reasons why it has increased. 3n increase inn the productivity of labor, for eample, may be due
to better planning of the work on the part of the management to the installation of new machinery.
3n increase in the productivity of materials may be due to greater skill on the part of workers, to
improve design and so on.
+amples of each type of productivity may make its meaning clearer.
9#)*1,T!4!T2 )( L3.*
!f, by using better seed, better methods of cultivating and more fertili5er, the yield of corn from
a particular hectare of land can be increased from " $uintals to 8 $uintals the productivity of
that land, in the agricultural sense, has been increased by :; per cent. The productivity of
land used for industrial purposes may be said to have been increased if the output of goods
or services within that area of land is increased by whatever means.

9#)*1,T!4!T2 )( %3T+#!3LS
!f a skillful tailor is able to cut 11 suits from a bale of cloth which an unskillful tailor can only
cut ten, in the hands of the skilful tailor the base was used with 1; per cent greater
productivity.
9#)*1,T!B!T2 )( %3,-!.+S
!f a machine tools has been producing 1;; pieces per working day and through the use of
improved cutting tools its output in the same time is increased to 1"; pieces, the productivity
of that machine has been increased by "; per cent.
9#)*,1T!4!T2 )( %+.
!f a potter has been producing 8; plates an hour and improved methods of work enable him
to produce <; plates an hour, the productivity of that man has increased by 88.88 percent
more.
!n each of these deliberately simple eamples output = or production = had also increased, and in
each case by eactly the same percentage as the productivity. But an increase in production
does not by itself indicate an increase in productivity. !f the input of resources goes up in direct
proportion to the increase in output, the productivity will stay the same. 3nd if input increases by
a greater percentage than output, higher production will be being achieved at the epense of a
reduction in productivity.
!n short, higher productivity means that more is produced with the same ependiture of
resources, i.e. at the same cost in terms of land, materials, machine time or labor0 or alternatively
that the same amount is produced at less cost in terms of land, materials, machine time or labour
used up, thus releasing some of these resources for the production of other things.

FIGURE 1 THE ROLE OF THE MANAGEMENT IN CO-ORDINATING THE RESOURCES
OF AN ENTERPRISE
THE MANAGEMENT
OBTAINS THE FACTS
PLANS
DIRECTS
CO-ORDINATES
CONTROLS
MOTIVATES
in o!" #o
$o!%&"
R E S O U R C E S
LAND
AND
BUILDINGS
THE SERVICES
OF MEN
MATERIALS
PLANT
MACHINES
E'UIPMENT
GOODS AND SERVICES
P R O D U C T S

<. #elationship Between !ncreased 9roductivity 3nd -igher Standards of Living
&e can see how more clearly how higher productivity can contribute to a higher standard of
living. !f more is produced at the same cost, or the same amount is produced at less cost, there
is a gain to the community as a whole, which can be used by members of the community to
ac$uire more and better goods and services and to improve their standard of living
:. 9roductivity !n !ndustry
The problems of raising the productivity of the land and of livestock are matters for the agricultural
epert.
,loth for clothes, many parts of houses, sanity ware, drainage and waterworks e$uipment, drugs
and medical suppliers, e$uipment for hospitals and for defence are all the products of industry.
So are many things necessary for living above the level of bare eistence. -ousehold utensils,
furniture, lamps and stoves generally have to be made in workshops, large and small. %any of
the goods necessary for running a modern community are too comple and too heavy to be made
by cottage or small6scale industry. #ailway engines and carriages, motor trucks, electric
generators, telephones, computer e$uipment, all re$uire epensive machines t make them,
special e$uipment to handle then and army workers of many different skills. The greater the
productivity of the establishment making these things, the greater are the opportunities of
producing them abundantly and cheaply in $uantities and at prices which will meet the
re$uirements of every family in the community.
The factors affecting the productivity of each organi5ation are many, and no one factor is
independent of the other. The importance to be given to the productivity of each of the resources
land, materials, machines or men depends on the enterprise, the industry and possibly the
country. !n industries where labor costs are low compared with material costs, or compared with
the capital invested in plant or e$uipment >as in heavy chemical plants, power stations or paper
mills? , better used of materials or plant may give the greatest scope for cost reduction. !n
countries where capital and skill are short, while unskilled labor is plentiful and poorly paid, it is
especially important that higher productivity should be looked for by increasing the output per
machine or piece of plant or per skilled worker. !t often pays to increase the number of unskilled
workers if by doing so an epensive machine or a group of skilled craftsmen are enabled to
increase output. %ost practical managers know this, but many people have been misled into
thinking of productivity eclusively as the productivity of labor, mainly because labor productivity
usually forms the basis for published statistics on the subject. The problem of raising productivity
will be treated as one of making the best possible us e of all the available resources.
@. The Background of 9roductivity
To achieve the greatest increases in productivity, action must be taken by all sections of the
community7 governments, employers and workers
/overnments can create conditions favorable to the efforts of employers and workers to raise
productivity. (or these it is necessary, among other things76
to have balances programmes of economic development0
to take steps necessary to maintain employment0
to try to make opportunities of employment for those who are employed or underemployed,
and for only who may become redundant as a result off productivity improvement in individual
plants.

This is especially important in developing countries where unemployment is a big problem
+mployers and workers also have vital parts to play. The main responsibility for raising
productivity in an individual enterprise rests with the management. )nly the management can
introduce and create a favorable climate for a productivity program and obtain the co6operation of
the workers which is essential for real success, through this re$uires the good will of the workers
too. Trade unions can actively encourage their members to give such co6operation when they are
satisfied that the program is in he interests of the workers, as well as of the country as a whole
A. The 3ttitude of the &orkers
)ne of the greatest difficulties in obtaining the active co6operation of the workers is the fear that
raising productivity will lead to unemployment. &orkers fear that they will work themselves out
of their jobs. This fear is greatest when unemployment already eists and a worker who losses
his job will find it hard to get another. +ven in economically developed countries where
employment has for years been a very high level, this fear is very real to those who have already
eperienced unemployment.
Since this is so, unless workers are assured of ade$uate assistance in meeting their problems,
they may resist any steps which they fear, rightly or wrongly, will make them redundant, even
though their period of unemployment may only be a short one, while they are changing jobs.
+ven with written guarantees, steps taken to raise productivity will probably meet with resistance.
This resistance can generally be reduced to a minimum if everybody concerned understands the
nature of and reason for each step taken and some say in its implementation. &orkersB
representatives should be trained in the techni$ues of increasing productivity so that they will be
able both to eplain them to their fellow workers and to use their knowledge to ensure that no
steps are taken which are directly harmful to them. %any of the safeguards mentioned above can
best be implemented through joint productivity committees and works councils.

PRODUCTIVITY IN THE INDIVIDUAL ENTERPRISE
!t has been aid that there were a number if factors affecting the productivity of an enterprise.
Some of these, such as the general level of demand for goods, taation policy, interest rates and
the availability of raw materials , suitable e$uipment or skilled labor, are outside and beyond the
control of any one employer. ,ertain other factors can be controlled from inside the enterprise,
and it is these that we are going to discuss.
1. #esources 3t The *isposal of 3n +nterprise
9roductivity was defined as Cthe ratio of output to input7 in an enterprise , an industry or and
economy as a whole
The productivity of a certain set of resources>input? is therefore the amount of goods or services
>output? which is produced from the. &hat are the resources at the disposal of a manufacturing
company' They are7 6
L3.* 3.* B1!L*!./S
Land is a convenient location on which to erect the buildings and other facilities necessary
for the operations of the enterprise, and the buildings erected on it.
%3T+#!3LS
%aterials that can be converted into products to be sold. They include fuel, chemicals for use
in the processes of manufacture, and packing materials
%3,-!.+S
9lant, e$uipment and tools necessary to carry out operations of manufacture and the
handling and transport of materials0 heating, ventilating and power plant0 office e$uipment
and furniture.
%3.9)&+#
%en and women to perform these manufacturing operations0 to plan and control0 to do
clerical work0 to design and to research0 to buy and sell.
The use which is made of all these resources combined determine the productivity of the
enterprise.
The resources consist of CrealD things and services. &hen they are used up in the process of
production, CrealD costs are therefore incurred. Their cost may also be measured in terms of
money. Since higher productivity means more output from the same resources, !t also means
lower money costs and higher net money returns per unit of output
". The Task )f The %anagement
&ho is responsible for making sure that the best use is made of all these resources' who is
responsible for seeing that they are combined in such a way as to achieve the greatest
productivity' The management of the enterprise.
!n any concern larger than on6man business >and to some etent even in a one6man business?
the work of balancing the use of one resource against another and of
co6ordinating the efforts of everyone in the organi5ation to achieve the best results is the job of
the management. !t the management fails to do what is necessary , the enterprise will fail in the
end. !n such a case the four resources become uncoordinated = like the efforts of four horses
without a driver. The enterprise, like a driverless coach, moves forward jerkily, now held up for
lack of material, now for lack of e$uipment, because machines are badly chosen and even more

badly maintained, or because employees are unable or unwilling to do their best. The key
position of the management may be shown by a diagram >figure1?E
This is not the place to discuss the activities >listed in the figure? by which the management
achieved the transformation of the resources at its disposal into finished products.
To CmotivateD means to provide a motive or reason for doing something. 1sed in the contet of
management it means, in effect, to make people want to do something. !t is of little use the
management carrying out the other activities of getting facts, planning, and so on, if the people
who are supposed to carry out the plants do not want to do so, although they may have to.
,oercion is no substitute for voluntary action. !t is one of the takes of the management and
perhaps its most difficult task, to make people want to cooperate0 the management can only
succeed fully by enlisting the willing and active participation of workers at all levels
8. The 9roductivity of %aterials
The relative importance of each of the resources mentioned above and shown in figure 1 varies
according to the nature of the enterprise, the country in which it is operating, the availability and
cost of each type of resource and the type of product and process. There are many industries in
which the cost of raw material represents @; per cent or more of the cost of the finished product,
the balance of <; percent being divided between labor and overheads costs. %any basic raw
materials and pay for them is scarce foreign currencies. 1nder either of these conditions the
productivity of materials becomes a key factor in economic production or operation0 it is likely to
be far more important than the productivity of land or labor or even plant and machinery.
3lthough the techni$ue of work study, with which this is concerned, deals primarily with like
improving the utili5ation of plant and of the services of labor, it can fre$uently contribute to
savings in materials, either directly or indirectly, as in saving the erection of buildings through the
better utili5ation of eisting space. !n general, however, savings in materials, direct o indirect are
effected in the following ways7
at the design or time specification76
by ensuring that he designs such that the product can be manufactured with the least
possible use of materials, especially whey they are scarce or dear0
by ensuring that plant and e$uipment specified for purchase is the most economical possible
in terms of materials consumed in its operation >e.g. fuel? for a given level of performance.
at the process or operation stage76
by ensuring that he process used is the right one0
by ensuring that it is being operated correctly0
by ensuring that operatives are properly trained and motivated so that they will not turnout
faulty work which has to be rejected, leading to loss of material
by ensuring proper handling and storage at all stages from raw materials to finished products,
first eliminating all unnecessarily handling and movement0 and
by proper packing to void damage in transit to they customers
The $uestion of material saving is also important to many countries
<. The 9roductivity of Land, Buildings, machines and manpower
The effective utili5ation of maimum productivity of land, especially when an enterprise is
epanding and needs increased working space. 3ny reduction in the original specification which

can be effected before land is purchased or buildings erected represents a saving in capital outlay
>or rental? of land and buildings, a saving in materials> particularly fittings, which may have to be
imported? and a probable saving in taes as well as a saving in future maintenance costs.
&e now come to consider the productivity of plant, machinery and e$uipment and of the services
of men and women. Let us take another look at the nature of productivity, which in simple terms
was described as the Carithmetical ratio between the amount produced and the amount of any
resources used in the course of production7D To do this we have to start thinking in terms of time,
since it is the output of good production from a machine or form a worker in a given time which is
used in calculating productivity.
9roductivity is fre$uently measured as the output of goods or services in a given number of Cman6
hours or Cmachine6 hours C.
:. -ow the Total Time of 3 Fob !s made 1p
3 man6hour is the labor of one man for one hour.
3 machine hours is the running of a machine or a piece of plant for one hour.
The time taken by a man or a machine to carry out an operation or to produce a given $uantity of
product may be considered as made up in the following manner, which is illustrated in figure ".
There is first76
the basic work content of the product or operation
&ork content means, of course, the amount of work Ccontained inD a given product or process
measured in man6hours off machine6hours. The basic work content is the time the product would
take to manufacture or the operation to perform if the design or specification were perfect, if the
process or method of manufacture or operation were perfectly carried out, and if there were no
loss of working time from any cause whatsoever during the period of the operation >other than
legitimate rest pauses permitted to the operative?. The basic work content is the irreducible
minimum time theoretically re$uired to produce one unit of output.
This is obviously a perfect condition which never occurs in practice although it may sometimes
be approached, especially in processing industries. !n general, however, actual operation times
are far in ecess of it on account of76
excess work content
The work content is increased by the following7
1. Work content added by defects in the design or specification of the product
This occurs primarily in manufacturing industries, but the e$uivalent in service industries such as
transport might be the specification of a bus service which demands operation in a way that
causes unnecessary additional transit time. This additional work content is the time taken over
and above the time of the basic work content due to features inherent in the product which could
be eliminated >See figure 8?.
2. Work content by inefficient methods of production or operation.
This is the time taken over and above the basic work content plus 3, due to inefficiencies inherent
in the process or method of manufacture or operation >see figure 8?.

FIGURE () HOW MANUFACTURING TIME IS MADE UP
B*+i& ,o-
&on#"n# o.
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The basic work content assumes uninterrupted working. !n practice, however, uninterrupted
working is eceptional, even in very well run organi5ations. 3ll interruptions which cause the
worker or machine or both to cease producing or carrying out the operations on which they are
supposed to be engaged, whatever may be the cause, must be regarded as ineffective time
because no work effective towards completing the operation in hand is being done during the
period of the interpretation. !neffective time reduces productivity by adding to the duration of the
operation. 3part from interruptions from sources outside the control of anyone in the
organi5ation, such as a power breakdown or a sudden rain storm, ineffective time may be due to
two causes76
3. Ineffective time due to shortcomings in the part of the management
Time during which man or man or machine or both, are idle because the management has failed
to plan, direct, co6ordinated or control efficiently >see figure <?.
4. Ineffective time within the control of the worker
Time during which man or machine or both are idle for reasons within the control of the worker
himself >see figure <?
The relative si5es of the different section of figure " have no special significance and will vary
from operation to operation and from ! undertaking to undertaking even for the same operation.
The application of work study has often made it possible to reduce operations times to one6half
or even one6third of their original values without by any means ehausting the ehausting the
possibilities of further reduction. Let us now eamine each of these sets of causes of ecess time
>ecess work content or ineffective time? in turn and look in detail at some of the reasons for
them.
Let us now eamine each of these sets of causes of ecess time >ecess work content or
ineffective time? in turn and look in details at some of the reasons for them.
@. (actors Tending To reduce 9roductivity
. Work content added due to the product !figure 3"
-ow can feature of the product affect the work content of a given operation'
There are several ways in which this can happen76
>1? The product and its components may be so designed that it is impossible to use the most
economical process or methods of manufacture. This applies especially to the
metalworking industries and most particularly where large6scale production is
undertaken. ,omponents may not be designed to take advantage of high6production
machinery >eample7 a sheet6metal part may be so designed that it has to be cut out and
riveted or welded instead of being pressed in one piece?.
>"? +cessive variety of products or lack of standardi5ation of components may mean that
batches of work have to be small and cannot be out to special = purpose high6production
machines but have to be done on slower general = purpose machines >see also ,"?
>8? !ncorrect $uality standards, whether too high of too low, may increase work content. !n
engineering practice close tolerances, re$uiring etra machining, are often put on
dimensions where they are $uite unnecessary. There will thus be more rejects and a
corresponding waste of material. )n the other hand, material of too low a $uality may

make it difficult to work to the finish re$uired or may make additional preparation of the
product, such as cleaning, necessary to make it usable. The $uality of material becomes
especially important in connection with automation
><? The components of a product may be so designed that an ecessive amount of material
has to be removed to bring them to their final shape. This increases the work content of
the job and wastes material as well >eample7 shafts with very large and very small
diameters designed in one piece?.
The first step towards raising productivity and lowering the cost of the product is therefore to
eliminate as far as possible all features in its design and specification that are likely to cause
ecess work content, including non6standard products demanded by customers where a standard
product would serve as well.
#. Work content added due to the process or method !figure 3"
-ow can inefficient operation of the process or inefficient methods of production or operation
affect the work content of the job'
>1? !f the wrong type or si5e of machine is used, one which has a lower output than the
correct one >eamples7 small capstan work put on a turret or center lathe0 narrow cloth put
on too wide a loom?.
>"? !f the process is not operating properly, that is, at the correct feed, speed, rate of flow,
temperature, density of solution or whatever conditions govern its operation or if the plant or
machine is in bad condition.
>8? !f the wrong hand tools are used.
><? !f the layout of the factory, shop or workplace causes wasted movement, time and effort.
>:? !f the working methods of the operative cause wasted movement, time or effort.
!t should be noted that the idea of work content in terms of time is based on the assumption of
operation at a steady average working pace. The additional time taken as a result of a slowing
down of the working pace might be considered as ineffective time, but this is unimportant for the
present discussion.
)ptimum productivity from the process will be reached only if it is operated with the least waste of
movement, time and effort and under the most efficient conditions. 3ll features which would
cause the worker to make unnecessary movements whether around the shop or at the
workplace, should be eliminated.
!t will be seen that all the items in the ecess work content may be attributed to deficiencies on
the part of the management. This is true even of bad working methods on the part of the
operatives if these are due to failure by the management to see that operatives are properly
trained and supervised.

$. Ineffective time due to the management !figure 4"
Let us now consider the ineffective time in the manufacturing of operating cycle. -ow can
shortcomings on the part of the management affect it'
>1? By a marketing policy which demands an unnecessarily large number of types of
product. This causes short runs of each type, and machines are idle while they are

being changed over to manufacture different products. The workers do not have the
opportunity to ac$uire skill and speed in any one operation.
>"? By failing to standardise component parts as far as possible between products or
within product. This has the same effect = that is, short runs and idle time.
>8? By failing to ensure that designs are properly developed or that customersB
re$uirements are met from the beginning. This results in changes of design, causing
stoppages of work and loss of machine = and man6hours as well a waste or material.
><? By failing to plan the flow of work and of orders, with the result that one order does
not follow immediately on another and plant and labour are not continuously
employed.
>:? By failing to ensure a supply of raw materials, tools and other e$uipment necessary to
do the work, so that plant an labour are kept waiting.
>@? By failing to maintain plant and machines properly. This leads to stoppage due to
machine breakdowns.
>A? By allowing plant and machinery to be operated in bad condition so that work is
scrapped or returned for rectification and has to be done again. Time spent in rework
is effective.
>G? By failing to provide working conditions in which the operative can work steadily.
>H? By failing to take proper precautions for the safety of workers. This causes lost time
due to accidents.
!neffective time within the control of the worker >figure <?
(inally, how can action >or inaction? on the part of the workers themselves cause ineffective time'
>1? By workers taking time off work without good cause7 by lateness, by failing to start
work immediately after clocking in, by idling at work or by deliberately working slowly.
>"? By careless workmanship causing scrap or making it necessary for work to be done
again. &ork which has to be done again means wasted time, and scrap means
wasted materials.
>8? By failing to observe safety regulations and by having or causing accidents through
carelessness.
!n general, far more ineffective time is due to management shortcomings than to causes within
the control of workers. !n many industries the individual worker has very little control over the
conditions under which he is re$uired to operate. This is especially true of industries using a lot
of plant and machinery and making a comple product.
!f all the factors enumerated under the four headings above can be eliminated >the ideal situation
which, of course, never occurs in real life?, the minimum time for the production of a given output
and hence the maimum productivity is achieved.
NOTE

FIGURE 8) THE WOR9 CONTENT DUE TO THE PRODUCT AND PROCESSES
BASIC
WOR9
CONTENT
A)1) B*! !"+i2n o. Po!%&# $"5"n#+ %+"
o. 3o+# "&ono3i& $o&"++"+
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FIGURE :) INEFFECTIVE TIME DUE TO SHORTCOMINGS ON THE PART OF
MANAGEMENT AND WOR9ERS
BASIC
? E@CESS
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WOR( STUDY
THE SYSTEMATIC E)AMINATION
OF ACTIVITIES IN ORDER TO
IMPROVE THE EFFECTIVE USE
OF HUMAN AND OTHER
RESOURCES

*+ WOR( STUDY
1. &hat !s &ork Study'
&hat is work study, and why should it be selected'
&ork study is a genetic term for those techni$ues, particularly method study and work
measurement, which are used in the eamination of human work in all its contets, and which
lead systematically to the investigations of all the factors which affect the efficiency and economy
of the situation being reviewed, in order to effect improvement.
&ork study therefore has a direct relationship with productivity. !t is most fre$uently used to
increase the amount produced from a given $uantity of resources with little or o further capital
investment.
&orks study was widely known for years as Ctime and motion studyD, but with the development of
the techni$ue and its application to a very wide range of activities it was felt by many people that
the older title was both too narrow and insufficiently descriptive.
". &ork Study7 3 *irect %eans of #aising 9roductivity
&e have already seen that the factors affecting the productivity of any enterprise are many, that
they vary in importance according to the nature o the activities undertaken, and that they are
dependent on one another.
Let us now look at the problem form a different angle. So far, in discussing the use of various
techni$ues to increase productivity, there has been no mention of major capital ependiture in
plant or e$uipment. !t has been assumed that productivity would be raised by suing eisting
resources. 9roductivity can almost always be greatly increased by heavy investment of money in
new and improved plant and e$uipment. -ow much can we epect to gain by using techni$ues
such as work study to improve the use of eisting resources as against investing capital in new
plant' 3ny comparison made in general terms will only be a rough guide. !t is convenient to do
this in the form of a table >table 1?.
!t will be seen that one of the effective ways of raising productivity in the long run is the
development of new processes, and the instillation of more modern plant and e$uipment.
-owever, such an approach usually re$uires heavy capital outlay, and can cause a drain in
foreign reserves if the capital e$uipment cannot be produced locally.
(urthermore, to tackle the problem of improving productivity mainly through the continuous
ac$uisition of advanced technology may hamper efforts aimed at epanding employment
opportunities. &ork study, on the other hand, aims at approaching the problem of increasing
productivity through the systematic analysis of eisting operation, processes and work methods
with a view to increasing their efficiency. &ork study therefore usually contributes towards
increasing productivity with little or no etra capital ependiture.

8. &hy !s &ork Study 4aluable
There is nothing new about the investigation and improvement of operations at the workplace0
good managers have been investigating and improving ever since human effort was first
organised on a large scale . %anagers of outstanding ability = geniuses = have always been able
to make notable advances. 1nfortunately, no country seems to have an ade$uate supply of
competent managers. The prime value of work study lies in the fact that, by carrying out its
systematic procedures, a manager can achieve results as good as or better than the less
systematic genius was able to achieve in the past.
&ork study succeeds because it is systematic both in the investigation of the problem being
considered and in the development of its solution. Systematic investigation takes time. !t is
therefore necessary, in all but the smallest firms, to separate the job of making work studies from
the task of management. The factor manager or the foreman, in their day6to6day work, with its
many human and material problems, are never free from interruption for long. -owever capable
he may be, a manager can rarely afford to devote a long time, without interruption, to the study of
a single activity on the factory floor. This means that it is almost always impossible for him to
obtain all the facts about what is happening in the course of that activity. 1nless all the facts are
known, it is impossible to be sure that any alternations in procedure which are made are based on
accurate information and will be fully effective. !t is only by continuous observation and study at
the workplace or in the area where the activity is taking place that the facts can be obtained.
This means that work study must always be the responsibility of someone who is able to
undertake it full time, without direct management duties7 someone in a staff and not a line
position. &ork study is a service to management and supervision.
&e have now discussed, very briefly, some aspects of the nature of work study and why it is such
a valuable CtoolD of management. There are other reasons to be added to the above. These
must be summarised as follows7
>1? !t is a means of raising the productive efficiency >productivity? of a factory or operating
unit by the re6organisation of work, a method which normally involves little or no
capital ependiture on plant and e$uipment.
>"? !t is systematic. This ensures that no factor affecting efficiency of an operation is
overlooked, whether in analysing the original practices or in developing the new, and
that all the facts about that operation are available.
>8? it is the most accurate means yet evolved of setting standards of performance, on
which the effective planning and control of production depends.
><? The savings resulting from properly applied work study start at once and continue s
long as the operation continues in the improved form.
>:? !t is a CtoolD which can be applied everywhere. !t can be used with success wherever
manual work is done or plant is operated. .ot only in manufacturing shops but also in
offices, stores, laboratories and service industries such as wholesale and retail
distribution and restaurants, and on farms.
>@? !t is one of the most penetrating tools of investigation available to the management.
This makes it an ecellent weapon for starting a n attack on inefficiency in any
organisation, since, in investigating one set of problems, the weaknesses of all the
other functions affecting them will gradually be laid bare.

This last point is worth further discussion Because work study is systematic, and because it
involves investigation by direct observation of all the factors affecting the efficiency of a given
operation, it will show up any short comings in all activities affecting that operation. (or eample,
observation may show that the time of an operative on a production is being wasted through his
having to wait for supplies of material or to remain idle through the breakdown of his machine.
This points at once to a failure of material control or a failure on the part of the maintenance
engineer to carry out proper maintenance procedures. Similarly, time may be wasted through
short batches of work, necessitating the constant resetting of machines, on scale which may only
become apparent after prolonged study. This points to poor production planning or a marketing
policy which re$uires looking into.
&ork study acts like a surgeonBs knife, laying bare the activities of a company and their
functioning, good or bad, for all to see. !t can therefore Cshow upD people. (or this reason it must
be handled, like a surgeonBs knife, with skill and care. .obody likes being show up, and unless
the work study specialist displays great tack in his handling of people he may arouse the
animosity of management and workers alike, which will make it impossible for him to do his job
properly.
%anagers and foremen have generally failed to achieve the saving and improvements which can
effected by work study because they have been unable to apply themselves continuously to
such thing, even when they have been trained. !t is not enough for work study to be systematic,
To achieve really important results it must be applied continuously and throughout the
organisation. !t is no use the work study may, doing a good job and then sitting back and
congratulating himself, or being transferred by the management to something else The savings
achieved on individual jobs, although sometimes large in themselves. 3re generally small when
compared with the activity of the company as a whole. The full effect is felt in an organisation
only when work study is applied everywhere, and when everyone becomes imbued with the
attitude of mind which is the basis of successful work study7 intolerance of waste in any form,
whether of material, time, effort or human ability0 and the refusal to accept without $uestion that
things must be done in a certain way Cbecause that is the way they have always been doneD.
<. Techni$ues )f &ork Study 3nd Their #elationship
!t has been indicated that the term work studyD embraced several techni$ues, but in particular
method study and work measurement. &hat are these two techni$ues and what is their
relationship to one another'
%ethod study is the systematic recording and critical eamination of eisting and proposed ways
of doing work, as means of developing and applying easier and more effective methods and
reducing costs.
&ork measurement is the application of techni$ues designed to establish the time for a $ualified
worker to carry out a specified job at a defined level of performance.
%ethod study and work measurement are, therefore, closely linked. %ethod study is concerned
with the reduction of the work content of a job or operation, while work measurement is mostly
concerned with the investigation and reduction of any ineffective time associated with it0 and with
the subse$uent establishment of time standards for the operation when carried out in the
improved fashion, as determined by method study. The relationship of method study to work
measurement is how simply in figure A.
Both method study and work measurement are themselves made up of a number of different
techni$ues. 3lthough method study should precede the use of work measurement when time
standards for output are being set, it is often necessary to use one of the techni$ues of work

measurement, such as work sampling in order to determine why ineffective time is occurring and
what is itBs etent, so that the management can take action to reduce it before method study is
begun. 3gain, time study may be used to compare the effectiveness of alternative methods.
:. Basic 9rocedure of &ork Study
There are eight steps in performing a complete work study. They are7 6
1. Select the job or processes to be studied
". #ecord from direct observation everything that happens using the most suitable of the
recording techni$ues so that the data will be in the most convenient form to be analysed.
8. +amine the recorded facts critically and challenge everything that is done, considering in
turn7 the purpose of the activity0 the place where it is done0 the person who is doing it0 the
means by which it is done.
<. *evelop the most economic method, taking into account all the circumstances.
:. %easure the $uantity of work involved in the method selected and calculate a standard
time for doing it.
@. *efine the new method and the related time so it can always be identified.
A. !nstall the new method as agreed standard practice with the time allowed.
G. %aintain the new standard practice by proper control procedures.
Steps 1, " and 8 occur in every study, whether the techni$ue being used is method study or work
measurement. Step < is part of method study practice while step : calls for the use of work
measurement techni$ues.

Wor, Stud
&)#I
ST1*2
METHOD STUDY
To
simplify the job
and
develop more
economical methods
of doing it.
WOR(
%+3S1#+%+.T
To
determine
how long it should
take to
carry out
HIGHER
PRODUCTIVITY

Table 1. *!#+,T %+3.S )( #3!S!./ 9#)*1,T!4!T2
399#)3,-
T29+ )(
!%9#)4+%+.T %+3.S
,)ST -)& J1!,IL2
,3. #+S1LTS
B+ 3,-!+4+*
+KT+.T )(
!%9#)4+%+.T
T-+ #)L+ )(
&)#I ST1*2
,apital
!nvestment
Better
!nvestment
1. *evelopment of new
basic process or
fundamental
improvement of
eisting ones
". !nstall more modern
or higher6capacity plant
or e$uipment or
moderni5e eisting
plant
8.#educe the work
content of the product
<. #educe the work
content of the process
:. #educe ineffective
time >whether due to
management or to
workers?.
Basic research
3pplied research
9ilot plant
9urchase
9rocess
#esearch
9roduct research
9roduct
*evelopment
Juality
%anagement
%ethod study
value analysis
9rocess research
9ilot plant
9rocess planning
%ethod study
)perator training
4alue analysis
&ork
measurement
%arketing policy
Standardisation
9roduct
development
9roduction
planning
3nd control
%aterial control
9lanned
maintenance
9ersonnel policy
!mproved working
conditions
)perator training
!ncentive
schemes
-igh
-igh
.ot -igh
,ompared
&ith 1
L "
Low
Low
/enerally years
!mmediately
3fter instillation
/enerally
months
!mmediate
%ay start
slowly
But effect
grows $uickly
.o obvious limit
.o obvious limit
Limited of the same
order as that to be
epected from < L
:. Should precede
action under those
heads
Limited, but often
of a higher order
%ethod study to
improve ease of
operation and
%aintenance at
design stage
%ethod study in plant
layout and to improve
ease of operation
when modernising
%ethod study >and its
etension, value
analysis? to improve
design for ease of
production
%ethod study to
reduce wasted effort
and time in operating
the process by
eliminating
unnecessary
movement
&ork measurement to
investigate eisting
practice, locate
ineffective time and
set standards of
performance as a
basis for =
a. 9lanning and
control
b. 1tilisation of
plant
c. Labour cost
control
!ncentive schemes
NOTE

WOR( STUDY
NOTE
















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NOTE

















SYMBOL
TITLE DESCRIPTION
O$"*#ion
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1+Productivit $'d I.&rov#.#'t Driv#r!
NOTE














CONTINUOUS
IMPROVEMENT
SERVICE BATCH
PROCESS
T'M
EIT TPM
RIGHT FIRST TIME
WASTEFZERO
MA@)E'UIP)
EFFECTIVENESS

B$!ic I.&rov#.#'t Po0ic
Co'ti'uou! I.&rov#.#'t
T#$.2or,
S,i00
d#v#0o&.#'t
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3IT


ISO4555
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E%%#ctiv#'#!!
C0#$'9 S$%# Wor,i'-
E'viro'.#'t

TOTAL PRODUCTIVE MAINTENANCE
%I& #I' ()%%*%
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S+T619S
%!.)# ST)993/+S
#+*1,+* S9++*E(++*
9#)*1,T *+(+,TS
#+*1,+* 2!+L*
NOTE
















AVAILABILITY
9+#()#%3.,+
+((+,T!4+.+SS
RATE OF 6UALITY

TYPES OF PRODUCTION
TYPES LABOUR MACHINES MATERIAL MAR(ET
DEMAND
FLOW
1.SI!LL+* T)
S+%!6SI!LL+*
31T)%3T+*
-!/- T+,-.
-!/- ,39!T3L
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NOTE














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NOTE
















9#)*1,T!).
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NOTE

JUST- IN - TIME
PHILOSOPHY
JIT is a philosophy that focuses
on the elimination of WASTE.
WASTE is defined as anything
that does not add value to the
poduct

3UST : IN : TIME ;3IT<
In t!e "road sense
3n approach to achieving
ecellence in manufacturing
company based on the continuing
elimination of waste and consistent
improvement in productivity.
In t!e narro# sense
F!T refers to produce good $uality
productsEparts in necessary
$uantity at necessary timing.

3UST : IN : TIME = (EY
ATTRIBUTES
1 9roduce the products the customer
wants
( 9roduce products only at the rate
customers want them
8 9roduce defect6free products
: 9roduce instantly 6 5ero unnecessary
lead time
; 9roduce with no waste of labour,
material or e$uipment

WHAT IS WASTE
G &aste is a non6re$uired by6
product in a transformation
process
G 3nything other than the
minimum amount of e$uipment,
materials, parts, space and
workerBs time, which are
absolutely essential to add value
to the product.

INVENTORY
!S 3. EVIL
!S .)T 3. 3SS+T
!S 3 L!3B!L!T2
-!*+S 9#)BL+%S
9+)9L+ T+.* T) 9#+93#+ ST),I
.)T ).L2 B2 +ST!%3T+, B1T 3LS)
%+#+L2 !. 3.T!,!93T!).

BY : PRODUCTS OF
PRODUCTION
E7#*
M*&4in"1
Waste of
Overproductio
E7#*
P"o$6"
E7#* H*n!6in2
E7#* S$*&" E7#*
In5"n#o1
E7#*
P*$" ,o-
E7#*
O5"4"*!
E7#*
D"."&#+
E7#*
In#""+#
C4*2"

> Po!itiv#!
i' M$'u%$cturi'-
G Buy only enough material to produce
what is needed now.
G Ieep material moving at all times
G 9roduce eactly what is needed in
mied combinations.
G %inimise human motion during value
added operations.
G %aterial should spend time at only value
added processes.
G %ake an order one time with perfect
$uality.
G %eet the customerBs needs with the
least amount of value added processing.

W$! To R#duc# W$!t#!
1 #e6arrange the plant layout, based on
shortest distance traveled by material
( %erge processes together to simplify
the flow
8 Balance production lines to eliminate
bottlenecks
: Level mi the production schedule to be
fleible to market changes
; Shorten change over times to allow a
level mi
A %ake e$uipment reliable through total
productive maintenance

Ru0#! i' Br$i'!tor.i'-
1 .ever critici5e other participants
opinionsEideas
" 1se otherBs ideas as a basis to develop
new ideas
8 Juantity of ideas is encouraged as
against $uality of ideas
< The group should not be too large
ideally from : 6 1; participants

BRAINSTORMING
M This is a method used to generate a
large number of ideas by helping a
group of people to think together.
M The method is based on the belief that
individuals are limited in coming up with
ideas, group6thinking will produce more
ideas.

Cause ad Effect Dia!ra"
H An*61+" &*%+"+ o. $o06"3
H An*61+" &4**&#"i+#i&+ o. 5*io%+ &*%+"+
H I!"n#i.1 .*&#o+ ,4i&4 &*n i3$o5" #4"
$".o3*n&" o. 5*io%+ &*%+"+

Lar!e
#oe
Midd$e #oe
S"a$$ #oe
Bac% #oe
F*&#o=C*%+">
E.."&#=R"+%6#>
MAN
MACHINE
METHOD MATERIAL
Di#1 4*n!+
Di"&#ion+
M*in#"n*n&"
A!I%+#3"n#+
M"*+%"3"n#
F6*#n"++
D"+&i$#ion
H*!n"++
C*6i0*#ion
Ho6"+ in 26o5"+
Po++i06" o#4"
&*%+"+
C*%+"+
E7$.&0#
C$u!# $'d E%%#ct Di$-r$.

T&e Pareto Pricip$e
H CJ K o. * $o06"3 i+ &*%+"! 01 (J K o. #4"
&*%+"+
Pareto Dia!ra"
H D"#"&# 5i#*6 .", .o3 #i5i*6 3*n1
H Co3$*" $*+# L $"+"n#

3n +ample of a 9areto
*iagram
;
"
<
@
G
1;
3 B , * + ( / - ! F
C$t#-ori#!
N
u
.
/
#
r
Ti5i*6 M*n1
Vi#*6 F",
Zi./$/2# I'!titut# o% M$'$-#.#'t
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
Co't#'t!
P#r%or.$'c# M$'$-#.#'t
Pr#$./0#......................................................................................."
Tot$0 P#r%or.$'c# M#$!ur#.#'tOOOOOOOOOOOOO..:
T"# P#r%or.$'c# Pr$.idOOOOOOOOOOOOOOOO...1A
9roductivity
Juality
9rofitability
V$0u# Add#d %easures OOOOOOOOOOOOOOOOO..."1
4alue 3dded Studies
S.$rt T$r-#t S#tti'-
1
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
P#r%or.$'c# M$'$-#.#'t
Pr#$./0#
-When you can measure what you are speaking about. and express it in numbers. you know something about it. #ut
when you cannot measure it and cannot express it in numbers your knowledge is of a meager and unsatisfactory kind/
&illiam Thompson >Lord Ielvin?, 1G"< =1H;A
%ost company performance yardsticks are too short, too rigid, or used more, like a teacherBs ruler
= to whack rather that to motivate. The time is long overdue to replace these outdated yardsticks
with a more dynamic measurement system. )ne that motivates continuous improvement in
customer satisfaction, fleibility and productivity = simultaneously. (or many companies
improvement in these areas will mean survival in the 1HH;Bs. Throughout this module we use the
world performance measurement in a specific contet. ! describes the feedback or activities with
respect to meeting customer epectations and strategic objectives. 1 C short we are concerned
with two simple $uestions7
3re functions and departments doing the right things'
3re they doing them well'
T"# &ur&o!# o% &#r%or.$'c# .#$!ur#.#'t i! to .otiv$t# /#"$vior 0#$di'- to co'ti'uou!
i.&rov#.#'t i' cu!to.#r !$ti!%$ctio'9 %0#7i/i0it $'d &roductivit
!n the book 3merican Business 3 two %inute &arning, , Fackson uses the analogy to let us know
that time is running out for 3merican business. 1sing football as an eample the metaphor can
be sued in performance measurement in business.
The yardstick is clear. Then yards is continuous improvement. The goal line is the objective.
The players on the field know eactly who their customers are. They see them in the stands and
hear from them when they do not meet their fan epectations. They are also keenly aware of the
need to satisfy the owners who have them under close scrutiny from the eecutive suite above
the stadium. (ootball pleats are also aware of the strengths and weaknesses of the competition.
The coaches have developed the game plan > usually a blend of basics with some innovative
surprise plays?, based on their training reports and knowledge of their teams advantages. The
plays are set and itBs time to kick off.
3s the game develops everyone pays attention to the measures. (oremost is how the team as a
whole is eecuting the game plan. That is reflected in the score. The players also have their
individual and group measures, depending on their specific role in the team, number of shots at
goad, meters run with the ball, number of tackles for defence, percentage of completed passes
and so on. ,oaches have immediate feedback on the game plan. ,ritical plays are analy5ed on
instant replays and make real time adjustments. The game goes on. &in or lose the coaches
and players know eactly what areas they need to improve.
-ow come the performance measures of many top companies are not clear'
(
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
The answer is simple, most performance measures do not reflect the game plan. (or instance,
$uality measures are measured and reported by the $uality department one week, delivery
measure report another week, cost measures are reported another and so on. The results are
that many of todayBs performance measures are promoting and rewarding behavior that hampers
over company performance.
9eter *rucker, one of the foremost eperts on management, has made two basic assertions
about performance measurement. (irst he maintains that few factors are as important to the
performance of organi5ations as measurement. Second he laments that measurement is the
weakest area in management today. #ecent data backs up *ruckerBs observation. !n a survey
sponsored by the .ational 3ssociation of 3ccountants and ,omputer 3ided %anufacturing =
!nternational >,3%61?, @;P of the "@; financial officers and @< operating eecutives in the 1S
said they were dissatisfied with their performance measurement systems. 1sers were far more
disappointed than prepare of the information. The study went on to say that Qthis response clearly
suggests the need to re6valuate and revamp long standing performance measurements systemsB
+ven in Fapan <@P of eecutive believe their formal measurement systems leave something to
be desired.
!f you are relying on traditional performance measures, you are probably not getting the answers
you need to help you become more competitive. +ven highly successful organi5ations have the
sense of succeeding in spite of = rather than because of = performance measurement problems
and issues.
+hibit 1.1 %easurement 9roblems7 -ewlett =9ackard %edical /roup
Too much emphasis on direct labor
Too much emphasis on accounting variances
Short term financial mentality
Juality is not uniformly driven
%easures are not strategic
%easures promote local optimi5ation
9oor cost feedback to design
1nclear link between short term measure and long term results
+ach organi5ation is viewed separately
%easures fed up to top management are irrelevant
-aving boiled down the various complaints of hundred of managers across a spectrum of
manufacturing and service companies and found several common them.
1nless the yardsticks are specifically tuned to your game plan, they may be yielding
either irrelevant or misleading information, or worse, provoke behavior that undermines the
achievements of your strategic objectives.
%easures that track each dimension in isolation distort managementBs understanding of
how effectively the organi5ation as a whole are eecuting the game plan
Traditional yardsticks do not take into account the re$uirements and perspectives of
customers >both internal and eternal?
8
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
Bottom line measures >such as profitability come too late for mid course corrections and
remedial actions
%ost yardsticks overlook key non6financial performance indicators.
2ardsticks are often used like a teacherBs ruler in the classroom0 for punishment rather
than to promote learning.
Like the yardstick, many measurement systems are infleible and limited to what they can
do.
3s noted earlier, even when established measures are aligned with the company strategy,
reporting of performance information to management is fragmented. The result is mied results
on overall performance. (or eample the $uality department might report improvement in product
acceptance, giving management a sense that things are improving. The finance department on
the other hand, might report separately the ecess costs >scrap, rework, inventory, etc? epended
to improve $uality. &ith this kind of feedback, trade6offs are had to identify, let alone understand.
These failures lead us to three conclusions about what a yardstick should do.
%easures must link operations to strategic goals. *epartments and functions should
know how they are contributing as individuals and together in meeting their strategic mission.
The system has to integrate financial and non0financial information in a way that is usable
by operating managers0 also managers and employees need the right information at the right
time to support decisions.
The measurement systemBs real value would lie in its ability to focus all business activities
on customer re$uirements.
%ost managers talked to never complained about getting too few reports' They generally get too
many. Therefore we want to achieve our objective while reducing the number of measurements
and reports.
%any companies have come to the reali5ation that they need to replace their yardsticks with
something new. But what new tool' Leading eperts say there are few pioneering eamples and
that you are basically Qon your ownB the performance pyramid represents a new paradigm of
performance. The model helps to promote organi5ational learning by relating actions to strategic
objectives and encourages different functions to think an act more as a team. !t also suggests a
more balanced view of market and financial performance.
Su..$r
!n an introductory fashion we have eplored the weaknesses of performance yardsticks. They
are too short, too rigid or used more like a teacherBs ruler = to whack rather than to motivate. The
new yardsticks must constitute a more dynamic measurement system0 one that motivates
continuous improvement in customer satisfaction, fleibility and productivity = simultaneously.
Specifically, performance measures must help managers and workers.
%easure what is the common to their customers
%otivate operations to continually improve against customer epectations
!dentity and eliminate waste in both time and resources
Shift the focus of their organi5ations from bureaucratic, vertical empire to more
responsive, hori5ontal business systems.
3ccelerate organi5ational learning and build a consensus for change when customer
epectations shift or strategies call for the organi5ation to behave differently
:
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
!t is the objective of this module to introduce participants to the challenges facing management in
terms of effective ways to measure their performance while also e$uipping them with knowledge
of the available techni$ues with which to direct change. !mproving productivity essentially
re$uires that we achieve greater results from the same resources or alternatively the same
performance with the same resources of men, materials and machines. This being the case there
will be a strong emphasis on those approaches both traditional and contemporary, which drive
improvement. !n this contet improvement being the activities, which result in Qbeneficial changeB,
2ou canBt improve what you arenBt measuringR
&e will incorporate discussions sessions and eercises to demonstrate the application of the
various approaches as well as view case studies. &hile this program does not attempt to create
instant practitioners it does provide a guide and tools with which to approach changes and
measurement systems in your own organisations.
;
+roductivity
Innovativeness
1uality
+rofitability
2lexibility
TOTAL PERFORMANCE MEASUREMENT
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
A
PRODUCTIVITY
-ow efficient is my workforce'
Sales E 9roduction employees
3m ! using my energy efficiently'
1nits produced E +nergy consumption
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
6UALITY
1. -ow acceptable are my products'
- .o of defective units E 1nits produced
". -ow satisfied are my customers'
- .o of complaints E )rders delivered
8. -ow much time am ! spending on rework'
- #ework time E %an6hours
B
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
C
PROFITABILITY
&hat is the return ! get on my investment'
)perating profit E Total assets
3m ! utilising my assets efficiently'
Sales E 3ssets
!s my profit margin sufficient'
)perating profit E Total sales
!s my production cost too high'
9roduction cost E Sales
Ho2 to 6u$'ti% 6u$0it
Co!t o% $ua%ity i! t"# do00$r co!t o%
M$,i'- !ur# cu!to.#r! -#t to&
6u$0it &roduct! $'d !#rvic#! ? $'d
T"# co'!#8u#'c#! 2"#' t"# do'@t+
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
Co!t o% 6u$0it Ic#/#r-
D
#ewrites
!nspection
+$uipment
(ailure
3bsenteeism
Low %orale
#eviews
%istakes
,hange
)rders
!dle Time
)vertime
Scrap
*efects
#ework
/rievances
%iscommunications
1nnecessary
#eports
#etraining
*uplication of
+ffort
+cess
!nventory
Time Lost
due to 3ccidents
,ustomer
*issatisfaction
Late ,harges
&ess
Visi"%e
Visi"%e
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
1J
FLE)IBILITY
-ow may different products can ! supply'
Sales E .o of products
-ow much time do ! take a changeover from one product to another'
,hangeover time E .o of products
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
11
PROFIT CENTRES
(or the divisions and departments which generate revenue by
selling productsEservices, productivity i'dic$tor! are relatively easy
to identify such as7
)34+34 7 Sales amount >S?
.umber of customers
9roduction volume
I5+34 7 3mount of materials
1sed
%an6hours spent
&ages re$uired
13(I46 7 *efects
#eworks
.umbers of complaints
7*(I8*96 7 .umber of failures in
)bserving deadlines
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
1(
COST CENTRES
!n the company, there are also divisions and departments
which provide internal services and do not have revenues as
such. 9roductivity indicators for such departments are more
difficult to identify.
!n such cases, &#r%or.$'c# i'dic$tor! should be measured
based on7
Juantity of service
Juality of service
Timeliness of service delivery
+ffectiveness ratios
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
18
'(MI&Y O' ME(URE
+.g. 9erformance measures of
Salesman Support /roup
!nternal+ternal
+roductivity)E! of main processes#elative cost
4s outside
4s Budget1uality+rror, interruptions, reverse loops#ight
productEservice, fills needs4imeliness)ur schedule,ustomer
schedule, backlog)thers3bsenteeism, turnover, change
orders!nnovation, creativity, awards, citations
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
S#0#ctio' o% I'dic$tor!
Step 1
Study closely duties and responsibilities of each department,
and identify major functions.
Step "
(or each function list all the performance indicators you can
think of in relation to output, input, $uality, etc
Step 8
)ut of the indicators listed, choose the most appropriate set
of indicators which are closely linked to performance of each
function
Step <
Test the identified indicators by using available data
1:
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
D#&$rt.#'t$0 P#r%or.$'c# I'dic$tor!
The approach to the performance indicators system
are as follows7
1. +stablish %easures
". *ata 3nalysis and computation of measures
8. +stablish 9erformance !nde
<. +stablish Benchmarks and Targets
1;
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
T"# P#r%or.$'c# Pr$.id
NOTE













1A

%3#I+T (!.3.,!3L
!.T+#.3L
+((!,!+.2
9#)*1,T!4!T2 (L+K!B!L!T2 ,1ST)%+#
S3T!S(3,T!).
#+*1,+
!.,#+3S+
+KT+#.3L
+((+,T!4+.+SS
,2,L+
T!%+ &3ST+ *+L!4+#2 J13L!T2
O/A#ctiv#! M#$!ur#!
,orporate 4ision
%arkets
(inance
,ustomer Satisfaction
(leibility
9roductivity
Juality
,ycle time
*elivery
&aste
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
Ov#r$00 E8ui&.#'t E%%#ctiv#'#!! ;OEE<
OEE B AV +r$t# 7 PERF r$t# 7 6UAL r$t#
343!L3B!LT2 T Total time = SE9 = BE* 1;;
Total Time
9+#()#%3.,+ T 3ctual )utput 1;;
+((+,T!4+.+SS Target )utput
#3T+ )( J13L!T2T Total products = defects 1;;
Total products
NOTE
















1B
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
DEFINITION OF VALUE ADDED
4alue added is the sales or operating
revenue of a company less the amount
paid by the company for materials
purchased or services rendered by
outside suppliers,
!%ingapore %ociety of ccountants"
1C
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
CREATION OF WEALTH
V$0u# $dd#d B S$0#! ? Bou-"t ?i' M$t#ri$0! C S#rvic#!
DISTRIBUTION OF WEALTH
V$0u# $dd#d B Pro%it! D L$/our co!t! D D#&r#ci$tio' D I't#r#!t!
D T$7#!+
CREATION OF WEALTH B DISTRIBUTION OF WEALTH
1D
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
WHY VALUE ADDED
1. +tensions of conventional accounting hence linked to profitability,
competitiveness, etc
". Linked to operational indicators at the shopfloor
8. ,ommunications toll since it is an economic pie compromising
profits and wages
<. 1sed at national, sectional and industry levels hence companies
can relate their performance to their industries and while economy
(J
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
COMPUTATION OF VALUE ADDED
Sales 4alue added
Less #aw %aterials T sales
9roduction )verheads 6 bought 6 in
Sub ,ontract &ork materials L
services
T /ross value added
Less /eneral administrative epenses
T .et value
Less *epreciation 4alue added
Labour cost T profit
U *epreciation
T )pening profit U Labour cost
Less Taes U Taes
*ividendsE!nterests U !nterests
9rofit after ta and interests
(1
3dditional
%ethod
Subtraction
%ethod
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
V$0u# Add#d C$0cu0$tio' Wor,!"##t!
Su/tr$ctio' M#t"od
S$0#!
Bou-"t i' .$t#ri$0! C !#rvic#!
M$t#ri$0! u!#d
#aw materials
(inished goods
&ork6in progress
Tot$0 ;.$t#ri$0! u!#d<
Productio' Ov#r"#$d!
Subcontract works
#ent
&ater L +lectricity
!nsurance
Transport charges
%aintenance of machinery
-ire machinery
Supplies L store epenses
%iscellaneous
Tot$0;Productio' ov#r"#$d!?
Ad.i'i!tr$tiv# C G#'#r$0 E7&#'!#!
#ent
&ater L +lectricity
Telephone and Trunk calls
9ostage L Stamps
9rinting, stationary and office supplies
1pkeep of vehicles
Transport and carriage
Travelling epenses
3dvertising
+ntertainment
.ewspaper L periodicals
!nsurance
/eneral repairs
Bank charges
3ccounting L audit fees
Legal L professional fees
,ommissions
/eneral epenses
Tot$0 ;Ad.i'i!tr$tiv# C G#'#r$0 E7&#'!#!<
Tot$0 ;Bou-"t:i' .$t#ri$0! C !#rvic#!<
V$0u# $dd#d
((
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
Additio' M#t"od
9rofit>loss?3fter taation
3dd .on operating +penses
Less .on )perating !ncome
AdAu!t#d Pro%it
(abour cost
Salaries and wages
,9( contribution
1niform
Staff &elfare
Tot$0 0$/our Co!t
Interest on borrowings
!nterest o loans
-ire purchase interest
Tot$0 i't#r#!t
7epreciation
(actory
)ffice
Tot$0 d#&r#ci$tio'
4axation
9roperty Ta
(oreign &orkers levy
Skill *evelopment fund levy
,orporate ta
Tot$0 t$7$tio'
VALUE ADDED
(8
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
PRODUCTIVITY RATIOS
!ndicator (ormula
Labour productivity 4alue added
.o of employees
,apital productivity 4alue added
(ied assets
Labour cost competitiveness 4alue added
Labour cost
9rofitability )perating profit
(ied assets
)perating profit T 4alue added
- Labour cost
- depreciation
(:
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
V$0u# $dd#d &#r #.&0o##
Significance of high ratio7
efficient labour and management
high capital investment
favourable price and demand for products
positive work attitudes
good labour
Significance of low ratio7
unfavourable manning levels
inefficient work procedures
(;
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
V$0u# $dd#d &#r do00$r o% %i7#d $!!#t!
Significance of high ratio
efficient asset utilisation
Significance of low ratio
inefficient asset utilisation
over investment in fied assets
(A
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
V$0u# $dd#d &#r do00$r o% 0$/our co!t
Significance of high ratio
more competitive in terms of labour cost
low wage rates
efficiencyEeffectiveness plus reasonable wage rates
Significance of low ratio
uncompetitive situation
low level of efficiencyE effectiveness
high wage rates not matched by efficiency
(B
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
O&#r$ti'- &ro%it &#r do00$r o% %i7#d $!!#t!
Significance of high ratio
investments have generated favourable returns
effective strategies on pricing, marketing, cost efficiency
Significance of low ratio
new investments have yet to generate favourable returns
ineffective strategies on pricing, marketing, cost efficiency
(C
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
Va%ue (dded Productivity Ratios
&a"our Productivity
4alue added
.o of employees
4alue added K Sales
Sales .o of employees
!Value added magin"
&a"our Cost Competitiveness
4alue added
Labour cost
4alue added K Labour cost
.o of employees .o of employees
!La#ou poductivity" !Aveage la#ou cost"
(D
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
Capita% Productivity
4alue added
(ied assets
4alue added K (ied assets
.o of employees .o of employees
!la#ou poductivity" !$i%ed assets intensity"
Profita"i%ity
)perating profitV
(ied assets
)perating profitV K Sales
Sales (ied assets
!opeating pofit magin" !fi%ed assets tunove"
8J
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
/+.+#3L +43L13T!).
,omparison with the !ndustry averages
3lthough ,ompany 3Bs sales per employee was low by the industryBs standards, its value added
per employee was above the industry average owing to its very high value added6to6sale ratio.
The low sale per employee was largely influenced by the very low capital per employee.
3nother reason for the companyBs high value added per employee was that its value added per
dollar of capital was way above the industry average. The very favourable value added per dollar
of capital was in turn accounted for by the high sales per dollar for capital and value added6to6
sales ratio. /enerally, ,ompany 3 achieved high product in terms of the favourable value added
registered relative to its labour and capital resources. This was because its high value added6to6
sales ratio and sales volume relative to capital employed relative to its workforce.
The company rated very well in terms of it labour cost competitiveness because its value added
per employee was above the industry average and its labour cost per employee was very much
lower than the industry average. 3lthough the companyBs profit6to6value added ratio was small in
absolute terms, it compared very favourably against the negative industry average. 3s for the
profitability of ,ompany 3, there is no industry average to compare with as he operating capital
could not be determined for the industry as a whole. -owever, one could surmise that ,ompany
3 rated favourably in terms of its profitability because the industry on the average registered a
negative operating profit .
Co.&$ri!o' 2it" t"# &r#viou! #$r@! &#r%or.$'c#
The decline in the value added per employee was largely due to the marked deterioration in the
value added6to6sales ratio, which even the si5eable improvement in the sales per employee could
not compensate for. The sharp decline in the value added6to6sales ratio, which could be
attributed to the increase in sales volume and the concurrent decrease in value added, was also
responsible for the drop in the value added per dollar of capital.
3lthough the labour cost per employee registered a slight decline, the greater magnitude o f the
decline in value added per employee resulted in the company becoming less competitive in terms
of labour cost. The decline in the profit6to6value added ratio, coupled with the drop in the value
added per dollar in the value added per dollar of capital, was responsible for the companyBs
decreased profitability.
Ov#r$00 R#.$r,!
3lthough ,ompany 3Bs profitability and productivity levels were high by the industryBs standards,
they were in fact lower than the previous yearBs levels. !f the decline in productivity in terms of
its value added relative to the number of employees remained unchecked, the companyBs labour
cost competitiveness would be gradually eroded. This was because a rise in the erstwhile low
labour cost per employee was inevitable in the long6run, if the company hoped to keep its
employees. The employees would want to keep improving their standard of living, and the only
way this could be achieved without undermining the companyBs competitiveness was through
increased productivity rather than prolonged wage restraint. 3ny company which could not keep
up with this would eventually have to fold up.
81
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
,omparison of #atios )vertime
.ame of #atio 1HG< 1HG8 #ate of ,hange >P?
1. 4alue 3ddedE.o of emp
". SalesE.o of +mp
8a. 4alue 3ddedE (ied 3ssets
8b. 4alue 3ddedE)perating ,apital
<. 4alue 3ddedESales
:a. SalesE(ied 3ssets
:b. SalesE)perating ,apital
@a. (ied 3ssetsE.o of emp
@b. )perating ,apitalE.o of emp
A. Labour ,ostE.o of emp
G. 4alue 3ddedELabour ,ost
H. )perating 9rofitE)perating ,apital
1;. )perating 9rofitESales
11. )perating 9rofitE4alue 3dded
S1@.:1;
S@",H1A
;.A<
;.8@
"@."P
".G"
1.8@
S"","G;
S<@.<;8
SA,@;8
".1A
8."P
".8P
G.HP
S1H,1<A
S:;,<;"
;.H;
;.<"
8G.;P
".8A
1.1;
S"1,"H:
S<:,AA8
S A,H11
".<"
11.8P
1;."P
"A.;P
- 18.G
"<.G
6 1A.G
6 1<.8
6 11.GPV
1H.;
"8.@
<.@
1.<
6 8.H
6 1;.8
6 G.1PV
6 A.HPV
- 1G.1PV
-
)ther !ndicators
1". Sales
18. 4alue 3dded
1<. Labour ,ost
1:. )perating 9rofit
1@. .umber of +mployees
SGG;.G<"
S"81,1<;
S1;@,<8A
S ";,::@
1<
A;:,@"<
S"@G,;:G
S11;.A:A
S A" "A1
1<
"<.G
6 18.G
6 8.H
6 A1.@
;.;
!nstead of using the percentage change for each of these < ration, the percentage point change
has been calculated. This is because these < ratios are already measured in terms of
percentages , and one cannot measure a percentage change of a percentage.
8(
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
!ndustry Standards for the ratios, 1HG<
>SS!, 881 = %anufacturing of &ood 9roducts other than (urniture?
#atios
Standards
4ery
low
Low 3verage -igh 4ery
high
!ndustry
3verage
1. 4alue 3dded E.o of emp>S?
H,;;;
and
below
H,;;;6
11,:;;
11,:;;6
1<,1;;
1<,1;;6
1@,@<;
1@,@<;
and
above
1",G;;
". SalesEno of emp>S?
:A,";;
and
below
:A,";;6
A8,:;;
A8,:;;6
GH,H;;
GH,H;;6
1;@,"1;
1;@,"1;
and
above
G1,A;;
8. 4alue 3ddedE (ied 3ssets
;."G
and
below
;."G =
;.8@
;.8@ =
;.<<
;.<< =
;.:"
;.:"
and
above
;.<;
<. 4alue 3ddedESales >P?
11.;
and
below
11.; =
1<.1
1<.; =
1A.8
1A.8 =
";.<
";.<
and
above
1:.A
:. SalesE(ied 3ssets
1.G
and
below
1.G =
".8
1.8 =
".G
".G =
8.8
8.8
and
above
".:
@. (ied 3ssetsE.o of emp>S?
"",@;;
and
below
"",@;;6
"H,1;;
"H,1;;6
8:,:;;
8:,:;; =
<",;;;
<",;;;
and
above
8",8;;
A. Labour ,ostE.o of emp>S?
G,;;;
and
below
G,;;;6
1;,8;;
1;,8;;6
1",:;;
1",:;;6
1<,G;;
1<,G;;
and
above
11,<;;
G. 4alue 3ddedELabour ,ost
;.G
and
below
;.G =
1.;
1.; =
1."
1." =
1.<
1.<
and
above
1.1
H. )pening 9rofitESales>P?
68.:
and
below
68.: =
68.;
68.; =
6".<
6".< =
61.H
61.H
and
above
6".A
1;. )perating 9rofitE4alue 3dded
>P?
6"".<
and
below
6"".< =
61G.H
61G.H =
61:.:
61:.: =
61".;
61".;
and
above
61A."
88
Nimbabwe !nstitute of %anagement
9erformance %anagement and 9roductivity !mprovement
+erformance ,anagement
8:
'acts a#out reduci! ti"e(((Did
)ou %o*+
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!"6i5"1 +1+#"3
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o +"5i&" #o oe 0uarter *n! 6*0o%
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dou#$e ,4i6" &o+#+ "!%&" *+ 3%&4 *+ (J K)
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"!%&in2 #4" 5*6%" !"6i5"1 +1+#"3 #i3")
Go,#4 *#"+ o. trip$e t&e idustr) avera!e
*n! dou#$e t&e idustr) avera!e profit
"ar!i *" *&4i"5*06")