COMPANY PRODUCTIVITY MEASUREMENT AND USAGE IN THEORY AND PRACTICE (MANUFACTURING)

H. EDWARD FENTON, Pace University

Abstract

The productivity growth rate decline has jeopardized our standard of living and contributed to many of the countries economic ills. It has damaged U.S. industries' competitive position in the world and domestic markets. It isn't the 'United States' which is experiencing comparatively low rates of productivity growth; rather it is the individual firms which in aggregation make up the economy. The purpose of this study was to analyze those companies which are measuring their productivity to determine how they are coping with the concepts of productivity and its measurement problems. A survey instrument was developed based upon a review of the literature relating to productivity and its measurement and by attending an American Productivity Center seminar. Eighty-five of the Fortune 500 companies returning the questionnaire measure their productivity. These returns formed the basis for the study's analysis. These companies use their productivity measures for a multiplicity of purposes. Some of the many uses reported included increasing awareness among employees, assisting in long and short range planning and for operational purposes. To meet their diverse needs the firms have developed many measures of productivity. Nearly all use several different measures of labor productivity. Nearly two-thirds use sales to represent output, while over three-quarters use some other value to represent output. It is evident that many firms use more than one value for output. All firms measuring labor productivity included hourly employees, however a decreasing number included salary, supervisory, management, engineering or R & D personnel. Among the firms measuring capital productivity all included equipment and machinery among their capital inputs, nearly all included land and building but the firms including inventories, account receivables, leased fixed assets or cash declined steadily. The survey revealed a number of aspects of productivity measurement where many companies have departed from the theoretical concepts of productivity. Perhaps the most significant departure is that many firms fail to adjust the outputs and inputs for the effects of inflation and are obtaining spurious results. Most of the firms are not adjusting sales to reflect production in the time period under study. In many cases it appears that firms are using values which are readily available from accounting or production without attempting to refine the numbers. (Abstract shortened with permission of author.)

Subject Area

Business costs

Recommended Citation

FENTON, H. EDWARD, "COMPANY PRODUCTIVITY MEASUREMENT AND USAGE IN THEORY AND PRACTICE (MANUFACTURING)" (1985). ETD Collection for Pace University. AAI8516454.
https://digitalcommons.pace.edu/dissertations/AAI8516454

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