Organisational Productivity Different ways productivity can be interpreted and applied

David Alman December 2013

Version 5

David Alman December 2013 Page 2

Contents

1. Why is Productivity so important? ........................................................................................ 3

2. What is productivity? ............................................................................................................ 4

2.1 Productivity as an Efficiency Model. ................................................................................ 4

2.2 Productivity as a Quality Model. ...................................................................................... 6

2.2.1 Productivity as a Quality Model (internal focus). ...................................................... 6

2.2.2 Productivity as a Quality Model (external focus). ..................................................... 6

2.3 Productivity as a Complex Sociotechnical System (CSS) Model....................................... 7

2.4 Productivity as a SEE Sustainability Model ...................................................................... 9

3. Productivity Improvement Methodologies ......................................................................... 11

4. National Productivity Measurement ................................................................................... 13

Phase 1. The Economic Model ............................................................................................ 13

Phase 2. The Quality of Life Model. .................................................................................... 13

Phase 3. SEE Sustainability Model. ...................................................................................... 13

Conclusion ................................................................................................................................ 14

Productivity Improvement Methods referred to in Table 1 .................................................... 15

References ............................................................................................................................... 16

About the Author ..................................................................................................................... 18

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1. Why is Productivity so important?

Everything private and public sector organisations do or want to do relates to productivity,

for there is not one top priority that cannot be tracked back to the search for productivity.

That is how fundamental and essential the concept and its application is.

For example, for the:

Private Sector the Top 10 Business Priorities for 2012 are [1]:

o Increase enterprise growth o

o Attract and retain new customers o

o Reduce enterprise costs o

o Create new products and services (innovation) o

o Deliver operational results o

o Improve efficiency o

o Improve profitability (margins) o

o Attract and retain the workforce o

o Improve marketing and sales effectiveness o

o Expand into new markets and geographies o

Public Sector the Structure and function of Government covers [2]:

o Whole of government approach to policy and service delivery

o Efficiency and effectiveness of initiatives

o Governance in different types of agencies

o Changing dynamics in relations between different levels of government

More specific examples include [3]

o Rebuild the Economy

o Return quality Services

o Renovate Infrastructure

o Strengthen our Local Environment and Communities

o Restore Accountability to Government

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2. What is productivity?

There are many definitions of productivity, and because the concept is also applicable to

such a wide range of issues a clearer understanding of what is meant by the term

productivity and how productivity can be applied is covered in this paper

In terms of productivity definitions some of the most embracing definitions include:

Productivity is “anything that makes an organisation function better“[4]

Productivity improvement is “doing the right things better” [5]

Using the term partial definitions is helpful in looking at specific areas covered by

organisational productivity [6].

In this paper partial organisational productivity definitions are considered within four

productivity models.

2.1 Productivity as an Efficiency Model.

In this model productivity can be referred to as, simply:

This can be expanded and illustrated as an Efficiency Model of Productivity as shown in

Diagram 1.

Diagram 1 Efficiency Model of Productivity

Input e.g. resources Transformation Output

Output Input

Productivity

Efficiency (Quantitative measure, asks “how much?”)

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Here the focus of productivity is on a change in quantity (e.g. volume, cost etc). This can be

in terms of higher (or same) output for the same (or less) input of resources, or same (or

increased) output with less (or same) input. Inputs in this case can include labour; capital

assets; materials; and energy. Outputs relate to products provided.

In addition both input and output measures can be viewed differently. For example, there

can be a focus on ratios between inputs to outputs (referred to as a technical perspective),

or the relationship between actual and potential output (referred to as an engineering

perspective), or the efficiency in the resources allocated (referred to as an economist

perspective) [7].

An example of an economic focus on less resource input is shown below from the Australian

Federal Government where attention is on reducing input resource costs [8]:

Reducing input costs – better management of the acquisition of goods and services

required for government business, including in areas such as ICT, travel, stationery supplies and property leasing.

More efficient delivery – reducing the costs of delivering specific outcomes through

innovation and standardisation of processes.

Improved organisational efficiency – better use of resources through improving business integration and streamlining organisational practices.

Removing duplication – consolidation of programs and agencies to reduce

administrative overheads. Writers on productivity have recognised for some time that there is an inherent weakness in

looking at productivity improvement as only from an efficiency perspective, as this can lead

to adverse effects on quality, for example from defective or low quality outputs [9].

This has lead to viewing productivity as measuring and addressing both efficiency and

effectiveness issues. Productivity in terms of organisational efficiency and effectiveness is

referred to in this paper under the Quality Model of productivity.

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2.2 Productivity as a Quality Model.

2.2.1 Productivity as a Quality Model (internal focus).

In this quality model efficiency can be considered in terms of the minimum resources

needed, or how much is used (i.e. degree of utilisation), while effectiveness can be viewed

in terms of:

Doing the right things at the right time, with the right quality

Degree of outputs accomplished

Extent to which customer requirements are met

In this approach productivity measures output in terms of what is valued and expected by

the organisation, sometimes referred to an a “inside-out” approach to the provision of

outputs.

Diagram 2 illustrates the Quality Model, which, while still basically the same as the Efficiency

Model in Diagram 1, also highlights the addition of an effectiveness perspective.

Diagram 2 Quality Model (adapted from the McGee Productivity Model [10])

2.2.2 Productivity as a Quality Model (external focus).

The Quality Model, as an efficiency and effectiveness model also reflects a “cost/benefit”

perspective of productivity [11]. In this respect, for example, input as an efficiency measure

Input e.g. resources Transformation Output

Productivity

Efficiency (Quantitative measure, asks “how much?”)

Effectiveness (Qualitative measure, asks “How well?”)

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can be related of cost effectiveness and output extended to taking into account the value of

an output as a benefit from a recipient’s (e.g. customer) perspective [12].

In this Quality Model the term output is changed to outcome. While outputs can be viewed

as designed to produce expected outcomes of value to recipients from an organisations

perspective, using the term outcome allows for recognising and measuring expected or

unexpected impacts and consequences of an output. Assessing outcomes helps identify

issues from a recipient’s perspective – from an “outside-in” approach. Refer to Diagram 3

the Quality Model (outcome focus).

Diagram 3. The Quality Model (outcome).

2.3 Productivity as a Complex Sociotechnical System (CSS) Model.

In the Quality Model of Productivity the focus is on direct, linear, cause and effect

productivity such as production and service systems. Using a Complex Sociotechnical

System Model [13], refer to Diagram 4, introduces non linear systems that contrasts with

previous direct linear cause and effect system models. Both in different ways improve the

efficiency and effectiveness (productivity) of organisations.

Input e.g. resources Transformation Outcome

Productivity

Efficiency (Quantitative measure, asks “how much?”)

Effectiveness (Qualitative measure, asks “How well?”)

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For example, such factors can include the effects of leadership; alignment and clarity of

organisation structures, accountability issues, and cultural and social relationship issues, risk

systems such as health and safety; role capability and workplace conflicts.

Diagram 4. Complex Sociotechnical System Model

Referential Level

Values and priorities that provide meaning and the basis of decisions and actions

Governance Level

How resources are organised, directed, coordinated, and structured such as management systems and organisation structures.

Transactional Level

Interactions covering, for example, designed work processes, practices, activities, behaviours, and social relations.

Physical conditions such as built and natural environments

Outcomes

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2.4 Productivity as a SEE Sustainability Model

SEE Sustainability refers to a focus on an integrative approach to productivity extending

beyond technical, social, and environmental based systems as found in the soft productivity

model. While it may initially be seen as similar to factors in soft productivity, there is a shift

in focus from managing risks that effect the efficiency and effectiveness of productivity to

sustainability.

In Diagram 5 the cost/benefit and efficiency and effectiveness concepts that underpin what

productivity is based on. This now reflected in a (productivity) dimension covering waste

reduction and value adding. To this is added a further dimension covering Social,

Environmental and Economic (SEE) Sustainability. In Diagram 5 these dimensions, together,

cover direct and indirect areas that support sustainable productivity. An example of the

shift in productivity measures can be found in the search for a life cycle sustainability, and

renewal, approach to resources.

Diagram 5 SEE Sustainability Model (internal focus)

Productivity: Process & network

efficiency

Productivity: Outcomes e.g

Recipient value

Resources e.g waste &

emissions reduction

Employee well-being e.g

physical, social, &

mental health

Environmental & Social Sustainability

Economic Sustainability

Waste reduction

Value Adding

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In Diagram 6, the SEE Sustainability Model is extended further to link to external factors as

well, such as supplier productivity issues and impacts on stakeholders (e.g. customers and

the natural environment) and social impacts on community well-being [14].

Diagram 6. SEE Sustainability Model (Internal & External focus)

Productivity: Process & network

efficiency

Productivity: Outcomes e.g

Recipient value

Resources e.g waste &

emissions reduction

Employee well-being e.g

physical, social, &

mental health

Environmental & Social Sustainability

Economic Sustainability

Waste reduction

Value Adding

Stakeholde

rs Natural environment

Community well-being

Resources: Supplier Services

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3. Productivity Improvement Methodologies

Productivity has been referred to by Pritchard as “how well a system uses its resources to

achieve its goals” [15], and a systems approach to productivity is exampled in Table 1.

Productivity Models

Focus of Productivity

Systems

Productivity Systems

Human Designed Systems Social Systems

Natural Environment Systems

1. Efficiency Model

Internal focus Management Control Systems such as:

o Financial systems e.g. ratios & scorecards

o Production and Service system measures

2.1 Quality Model (Outputs)

Internal focus Continuous improvement to standards based systems such as ISO 9000

Improvement to system activity and interaction value, such as

o Human Performance Technology (HPT)

o Lean manufacturing o Six Sigma

2.2 Quality Model (Outcomes)

Customer and stakeholder focus

Improvement to system activity, such as:

o Lean Service o Vanguard method

Improvement to system activity and interaction value, such as:

o Service Blueprinting

Value Network Analysis

Improvement to system activity and interaction value, such as:

o Touchpoint Value Mapping

3. Complex Sociotechnical Model

Non linear interactions and consequences

Improvement to system activity and interaction value, such as:

o Human Activity Systems (HAS)

Theory of Constraints (recent evolved modelling)

4. SEE Sustainability Productivity Model

SEE Sustainability Focus (internal and external)

Sustainability improvements to, for example, processes, well-being, & natural resource value:

o Organisational sustainability

Continuous improvement system such as ISO 14000

Continuous improvement system such as ISO 26000

Table 1 Productivity Models and related Productivity Improvement methods.

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In Table 1 Productivity Systems are divided into three sub categories: Human Designed

Systems; Social Systems, and Natural Environment Systems. Beneath these three system

sub categories are shown a range of productivity methodologies that are aligned against

each of the 4 Productivity Models.

Productivity methodologies address a wide range of subject areas such as production and

service systems; quality assurance systems; organisational frameworks; safety and

environmental systems; teamwork; role and leadership performance. In addressing

productivity, methodologies can and do cover more than one sub system category.

Productivity methodologies listed in Table 1 are provided with references for further

reading in Productivity Improvement Methods referred to in Table 1 at the end of the

paper.

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4. National Productivity Measurement

At a national level the concept of measuring productivity can be seen as evolving through

phases, or not, depending upon one’s perspective. This is because means of measuring

national productivity are not so much replaced, but added to in different ways.

Phase 1. The Economic Model. As with the organisational efficiency model the Economic

Model measures volume (or growth), as in Gross Domestic Product (GDP) [16]. This model

developed during a time in the last century when there was a greater emphasis on

manufactured goods, and has not been adjusted to take into full account the subsequent

development of service industries. It remains, however, a major means of comparing

national prosperity.

Phase 2. The Quality of Life Model. The quality of life model measures aspects that include

those relating to a nation’s life expectancy; level of education; and standards of living as

reflected under the United Nations Human Development Index [17]. In organisational

productivity terms there is no real comparison, though the closest might be the Soft

Productivity Model where elements of governance on employee well-being issues are

reflected.

Phase 3. SEE Sustainability Model. To date this model has yet to be established on an

international level, though a number of nations operate legislative and supporting

regulatory practices under Environmental Protection Agencies [18] or equivalent. At an

organisational level there is progress on developing international standardised SEE

Sustainability reporting measures through the Global Reporting Initiative (GRI) [19].

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Conclusion

The term productivity can be viewed from many perspectives, as is reflected in “partial”

productivity measures that are used. However, there are common characteristics that are

linked to the term that are missing in the broader term of performance. For productivity

covers the measurement of the efficiency with which resource inputs were used, and the

effectiveness of outputs. The term also reflects a cost efficiency and a benefits of outputs

and outcomes perspective. By using outcome measures productivity can be yet more

broadly applied as measures of quality and sustainability.

Organisational Productivity pulls together into themes a wide range of productivity

measures and concepts, and from this it can be seen that the concept of productivity

continues to evolve to address contemporary issues facing organisations.

Organisational productivity is linked to ways of improving productivity through the systems

upon which they rely. In improving organisational productivity there are a wide range of

system based improvement methodologies can be drawn on that cover productivity

improvements.

There is also a general but not necessarily always a direct nexus with the idea of National

productivity measurement, though in very broad terms the concepts of productivity at

organisational and national levels show a common trending in identifying additional

perspectives to be considered. In this respect productivity can be seen to have taken an

economic/efficiency; then Quality (though in different ways); then a SEE Sustainability

perspective.

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Productivity Improvement Methods referred to in Table 1

1. Efficiency Model

Financial systems e.g. ratios & scorecards Du Pont Analysis http://en.wikipedia.org/wiki/DuPont_analysis Downloaded 28/7/12

Strategy Maps http://en.wikipedia.org/wiki/Strategy_map Downloaded 28/7/12

Production and Service system measures Manufacturing

http://www.datacard.com/downloads/ViewDownLoad.dyn?elementId=repositories/downloads/xml/Manufacturing_Efficiency.xml&repositoryName=downloads&index=1 Downloaded 28/7/12

Services Productivity in the Service Sector http://www.apo-tokyo.org/00e-books/IS-12_ProdMeasure/IS-12_ProdMeasure.pdf Downloaded 28/7/12

2.1 Quality Model (outputs)

ISO 9000 Quality management systems http://en.wikipedia.org/wiki/ISO_9000 Downloaded 28/7/12

Human Performance Technology (HPT) http://www.slideshare.net/JoanneRein/the-dynamic-principles-of-human-performance-technology Downloaded 29/7/12

Lean manufacturing http://en.wikipedia.org/wiki/Lean_manufacturing Downloaded 28/7/12

Six Sigma http://en.wikipedia.org/wiki/Six_Sigma Downloaded 28/7/12

2.2 Quality Model (Outcomes)

Lean Service http://en.wikipedia.org/wiki/Lean_services Downloaded 28/7/12

Vanguard method http://www.systemsthinking.co.uk/1-1.asp Downloaded 28/7/12

Touchpoint Value Mapping http://proventivesolutions.wordpress.com/2012/07/09/touchpoint-value-mapping-user-focused-improvement/ Downloaded 29/7/12

Service Blueprinting http://en.wikipedia.org/wiki/Service_blueprint Downloaded 28/7/12

Value Network Analysis http://en.wikipedia.org/wiki/Value_network_analysis Downloaded 28/7/12

3. Complex Sociotechnical Systems

Human Activity System (HAS) Mapping http://www.slideshare.net/davidalman/human-activity-system-has-mapping Downloaded 6/12/13

Theory of Constraints (in recently evolved form) http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CEoQFjAD&url=http%3A%2F%2Fsystemsintelligence.aalto.fi%2FwesterlundF.doc&ei=NpmhUprdOIbckQXq4YGYBA&usg=AFQjCNHs07c1QTkHzZTe_LHi6s68PM1wzQ&sig2=P8-ZwkQR-vTOuAV0gZhyzQ Downloaded 6/12/13

4. SEE Sustainability

Organisational sustainability http://www.slideshare.net/davidalman/organisational-sustainability Downloaded 27/7/12

ISO 14000 Environmental Management http://en.wikipedia.org/wiki/ISO_14000 Downloaded 28/7/12

ISO 26000 Social Responsibility http://en.wikipedia.org/wiki/ISO_26000 Downloaded 28/7/12

David Alman December 2013 Page 16

References

[1] Gartner Executive Programs (January 2012). Website: http://www.gartner.com/it/page.jsp?id=1897514 Downloaded 24/7/12 [2] Adapted from slide 9 “Mapping Research Agendas: The Australian Government’s Assessment and priorities”. Website: http://anzsog-research.anu.edu.au/pdfs/Future%20Research%20agenda%2004/APodger%20presentation%20Feb04.pdf Downloaded 24/7/12 [3] The NSW Government has a plan to make NSW number one. Website: http://www.premier.nsw.gov.au/content/priorities Downloaded 24/7/12 [4] [6] [9] Defining and measuring productivity in the public sector: Management perceptions. Website: http://www.emeraldinsight.com/products/first/pdf/public_sector.pdf Downloaded 24/7/12 Downloaded 24/7/12 [5] Productivity management: A practical handbook (p9, 1992). Prokopenko. J. International Labour Office, Geneva. [7] Demystifying productivity and performance. Website: http://woxencentrum.iip.kth.se/documents/publications/articles/art_Tangen2005-DemystifyingProductivityAndPerformance.pdf Downloaded 24/7/12 [8] Driving Efficiency in the Australian Government. Website: http://www.financeminister.gov.au/publications/docs/driving_efficiency_in_the_australian_government.pdf Downloaded 24/7/12 [10] Measurement and Evaluation in Corporate Universities. Website: www.internetraining.com/.../Measurement%20and%20Evaluation%20in%20Corporate%20Universities... Downloaded 28 September 2010 [11] A Value Model for the Public Sector Website: http://www.accenture.com/Global/Research_and_Insights/Outlook/By_Alphabet/ASector.htm Downloaded 15 October 2010 [12] Service productivity: A literature review and research agenda. Website: http://reser.net/materiali/priloge/slo/balci_et_at.pdf Downloaded 28/7/12. [13] Human Activity System (HAS) Mapping. Website: http://www.slideshare.net/davidalman/human-activity-system-has-mapping Downloaded 6/12/13 [14] Organisational Sustainability. Website: http://www.slideshare.net/davidalman/organisational-sustainability Downloaded 27/7/12 [15] Prichard, R.D. (1990) Organisational Psychology in Handbook of industrial and organizational psychology. Consulting Psychologists Press.

David Alman December 2013 Page 17

[16] Gross Domestic Product (GDP) Website: http://en.wikipedia.org/wiki/Gross_domestic_product Downloaded 28/7/12 [17] Human Development Index (HDI). Website: http://en.wikipedia.org/wiki/Human_Development_Index Downloaded 27/7/12 [18] Environmental protection Website: http://www.unep.org/ Downloaded 27/7/12 [19] Global Reporting Initiative Website: https://www.globalreporting.org/Pages/default.aspx Downloaded 28/7/12

David Alman December 2013 Page 18

About the Author

David Alman writes on the subject of Systems Thinking which includes assessing and

improving organisational productivity. His other publications may be found on his website

at https://sites.google.com/site/proventivesolutions/

David lives in Brisbane, Australia and may be contacted through Contact Details available on

the website.