One of the most important indicators of any company is labor productivity. It reflects the efficiency of performance of duties by individual employees, the quality of work of the department and the entire company. Thanks to this indicator it’s possible to assess the optimality of labor costs and draw conclusions about the rationality of their use under certain conditions.
Let’s talk about why and how to calculate labor productivity, how to evaluate and improve it, we will analyze the main factors of influence, as well as give answers to other management questions on the topic.
What Is Labor Productivity
Labor productivity is a quantitative (measurable) indicator that characterizes the performance of an employee, department, shop, enterprise or an entire industry for a certain time.
In economics, labor productivity is inextricably linked to concepts such as output and labor intensity. Output is characterized by the amount of output produced by one worker, workshop, or enterprise per unit of time, and corresponds to actual labor productivity.
The inverse of labor productivity is labor intensity. In simple terms, it’s the time it takes to produce a unit of product.
Labor productivity as an economic category was first mentioned in his works by William Petty. He argued that the working time spent on the production of a product by employed employees determines its value, which directly depends on labor productivity.
Labor productivity can be calculated for:
- An individual worker.
- A company.
- Industry.
- State.
A person spends energy and time working. Labor itself can be physical or mental. If the result of the work is a specific thing, service or product produced, we can say that the labor put into it takes an objectified or “frozen” form, which is difficult to measure by conventional indicators.
Why You Need a Productivity Calculation
An employee with low labor productivity negatively affects the performance and efficiency of the entire company. He occupies a job, gets paid, but doesn’t perform the full scope of production tasks assigned to him by his employer.
By regularly calculating and analyzing labor productivity, a company can:
- Determine the level of efficiency of the technologies used.
- Optimize and improve workflow.
- Reorganize the work of departments and structural divisions.
- Reduce the number of employees for failure to meet plans, reducing the total amount of wages.
- Understand how much time employees spend on activities, like playing at Tonybet casino India, having lunch, or just doing nothing.
- Allocate candidates for promotion and bonuses.
- Minimize the timing of tasks and output.
- Identify and eliminate inefficient work practices.
- Find out which departments and employees employ the most efficient production practices.
- Collect data for subsequent production planning, forecasting the overall performance of the company.
All this allows the company to:
- Improve the quality of goods and services produced.
- Increase the volume of products.
- Become more competitive in the market.
- Increase the volume of gross income.
- Expand and develop the business.
Types of Labor Productivity
There are several scientific classifications of labor productivity taking into account different factors. Let’s consider the most common types.
Depending on the scale of evaluation, there are three types of labor productivity:
- Labor productivity of a single employee (individual). The labor activity of each employee is analyzed separately, i.e. personal productivity (the amount of material goods produced by the employee) is calculated. This is relevant mainly for the head, managers, and management bodies whose task is to take the company out of crisis. Only two criteria are evaluated: the quality and quantity of products manufactured or services provided, and the study itself takes a minimum of time. Thanks to it, in the shortest terms the company management can find out which part of employees works effectively and which one does not comply with the plan.
- Local labor productivity. The productivity in a particular location is evaluated. It can be a department of production, a separate enterprise or an entire industry. By analyzing the local productivity you can define the state, position and development of the location in comparison with other similar structures.
- The national average of labor productivity. The largest sector of evaluation, which requires data on local labor productivity of a number of companies in different countries around the world. If the calculation results in a high figure, it indicates that there is no monopoly in the country, there is high competition among national producers who produce quality products.
Another classification suggests a division of labor productivity into two types:
- Individual labor productivity – takes into account the expenditures exclusively of a particular worker’s live labor for the output of a product.
- Productivity of social labor – includes in the sphere of material production the expenditures of both human labor and social labor, i.e. all subjects and means of labor. In this case the growth of labor productivity is provided by means of aggregate economy of means of production and personal labor resources.
Increasing Labor Productivity
To increase productivity, these principles should be followed:
- Openness for new ideas. Their sources can be the employees of the enterprise themselves which will help the management to understand how the tasks should be performed to achieve the maximum result.
- Discipline. Reducing distractions is a measure of the positive impact on the pace, intensity and productivity of work. Fewer social media and phone calls, but enough time for employees to relax.
- Application of modern technology. Equipment and systems should help automate routine processes or facilitate them to save employees time and energy.
- Employee training. Employees who take regular refresher courses and improve the quality of their knowledge help the company become more competitive in the marketplace.
- Improving working conditions. Only in comfortable conditions employees can perform their functions most effectively. Working premises should be equipped taking into account seasonal features of the region.
- Optimization of logistics. Improving transportation and inviting qualified personnel helps to eliminate the causes of downtime, significantly reduce costs, and optimize prices.
- Setting achievable goals. If you set goals that are extremely difficult to implement, the staff will waste time and effort, because getting the desired result in the current time will be impossible. Any goal set must be such that it can be accomplished.
- Motivating employees. This is one of the most effective ways to increase productivity. Well-motivated personnel work better and faster.
If the enterprise management takes into account the listed principles and reduces the negative factors of influence, it will be possible to find reserves and create a springboard to increase the level of labor productivity, improve the dynamics of key indicators.
