Productivity: a key concept in Economics
Economic productivity is the value of output obtained with one unit of input. contracts, formal and informal agreements, communication, trust, reputation, etc.; in productivity, a fall in employment will take place (as a matter of definition!). Read chapter 2 Defining Productivity for Higher Education: Higher education is a linchpin of But, by focusing on output and input volumes alone, it becomes difficult to have achieved widespread agreement and acceptance among economists, .. Mode of attendance may affect the relationship between transcript and. Define productivity and direct behavior: The measurement system provides an purchasing, contracting, delivery scheduling, and many other activities in the industrial cycle. layoffs, and disciplinary actions, inputs and outputs of the measures must be These relationships are illustrated in the model shown as Figure
While there has been debate about whether student effort should be treated as an input or an output, the emergent field of service science moots the question by recognizing that the process of consuming any service including education requires the recipient to interact with the provider during the production process and not only after the process has been completed as in the production of goods.
As applied to higher education, it means student effort is both an input and an output. This is consistent with the view that a primary objective of a university is to encourage strong engagement of students in their own education.
Equally fundamental, institutions of higher education service a highly diverse student population, and many institutions and programs within those institutions have devoted great effort to sorting students by ability. In the absence of information about the aptitude levels of incoming students, comparing outcomes across institutions and programs may not provide a useful indication of performance.
Improving Measurement of Productivity in Higher Education. The National Academies Press. Thus, the contribution of capital to production is best measured as a service or rental flow the cost of using it for one period and not by its purchase price. Because many forms of capital cannot be rented for a single production period, the rental or service price must be imputed. This is done by assuming that a unit of capital must earn enough to cover its depreciation and a real rate of return comparable to similar investments.
These rental rates are comparable to a wage rate and can be used in the same way to aggregate across different types of capital services and as a measure of capital income in aggregating the various inputs to production. The role of capital in the measurement of productivity in higher education is virtually identical to that for a profit-making enterprise. Assets are either purchased in markets or valued in a fashion similar to that in the for-profit sector.
Thus, the standard measurement of capital services should be appropriate for higher education. The education sector may exhibit a particular emphasis on information and communications capital because of the potential to use such tools to redesign the education process and by doing so to achieve significant productivity gains.
The more significant problem at the industry level is that there is very little information on the purchases and use of capital in higher education. The sector is exempt from the economic census of the U. Census Bureau, which is the primary source of information for other industries.
However, the Internal Revenue Service Form returns filed by nonprofit organizations do contain substantial financial information for these organizations, including data on capital expenditures and depreciation. Energy, Materials, and Other Purchased Inputs Productivity measures require information on intermediate inputs either as one of the inputs to the calculation of multi-factor productivity or as a building block in the measurement of value added.
In some measures, energy, materials, and services are identified separately. Such a disaggregation is particularly useful in the calculation of meaningful price indexes for purchased materials. Page 29 Share Cite Suggested Citation: Lack of relevant information on purchased inputs continues to be a major shortfall for estimating productivity in higher education.
This kind of data is particularly important for analyses attempting to control for the effects of the outsourcing of some service activities. As with capital, the primary problem in measuring the role of purchased inputs in higher education is the lack of a consistent reporting system.
The information is known at the level of individual institutions, but there is no system for collecting and aggregating the data at the national level for the purpose of establishing performance norms. Instructional and Noninstructional Elements of the Higher Education Production Function For the purposes of this report, it is essential to distinguish inputs and outputs along functional lines.
In particular, an effort should be made to identify the inputs that go into each of the multiple outputs produced by the sector. These inputs can be designated: Instructional, including regular faculty, adjunct faculty, and graduate student instructors. Noninstructional and indirect costs including, for example, administration, athletics, entertainment, student amenities, services, hospital operation, research and development, student housing, transportation, etc.
Mixed, including other capital such as instructional facilities, laboratory space and equipment, and IT. The best way to distribute the cost of such inputs across instructional, administrative, and research categories is not often clear.
Looking for other ways to read this?
In the model presented in Chapter 4we attempt to identify all the inputs associated with the instruction function, while recognizing the difficulty of separating instructional and noninstructional costs or inputs. The main concern is to distinguish inputs associated with instruction from those designated for research.
As faculty are involved in a range of activities, it is difficult to assign their wages to one category or another. Instructional costs can also vary greatly. On the faculty side, per unit e. At the institutional level, costs can be subject to large-scale activity-based costing studies.
Costs can also be disaggregated to the department level. Nevertheless, some way of controlling for these variations will be essential to ameliorate significant distortions and criticisms. For administrative and other purposes, universities typically track inputs along other dimensions, such as by revenue source. For our purposes, the only reason for classifying inputs according to revenue source is to separate the inputs associated with organized research and public service as described in Chapter 4.
University accounting systems assign costs to funds. This practice tends to differentiate among payers, but obfuscates productivity unless specific outputs also are assigned to the fund. Differentiating inputs among payers departs from the idea of productivity as an engineering concept relating physical inputs and outputs. Further, not all revenues are fungible; they cannot all be used to increase production of undergraduate degrees Nerlove, Higher education costs may also be identified and categorized according to their source: For some policy purposes it is important to distinguish between trends in tuition and trends in cost per full-time equivalent FTE student.
Some analyses dispute the common notion that the cost of higher education is rising faster than consumer prices broadly; rather, the composition of who pays is changing. Even when the total cost of a college education is relatively stable, shifts occur in the proportions paid by different players and what activities the revenues support.
Organizations are set in the context of a changing, competitive environment in which strategies are developed to guide the efforts of management and workers toward a common vision and set of objectives. Even the best-designed processes will fail without a supportive culture within the organization that values change, continuous improvement, goal commitment, group cohesion, and respect for people.
Every concept in this chapter assumes that the individual worker and the work group are set in an organizational context that is internally consistent and environmentally consonant. It is also important to note that productivity, although a major concern, is not the only indicator of individual or organizational performance. Productivity interacts with other aspects of employee performance, financial controls, innovation, and competitive effectiveness—any one of which can lead to organizational failure.
In Chapter 6 Sink and Smith identify seven related but separable performance criteria for an organizational system: Other authors, such as Pritchard Chapter 7 and Campbell Chapter 8have slightly different ways of relating or combining these performance dimensions. For the purposes of this chapter, my definition of productivity includes effectiveness producing the right products or servicesefficiency prudent utilization of resourcesand quality meeting technical and customer specifications.
My purpose in this chapter is to assimilate knowledge about the measurement and management of individual productivity in order to provide a link in the chain of understanding regarding how individual productivity contributes to group productivity, which in turn contributes to organizational productivity.
My intent is to aggregate existing knowledge and propose some theoretical foundations in order to reveal areas in which theory development and empirical research are needed. Throughout, I make an effort to bridge the gap between the concerns of researchers and the needs of practitioners in industry. Page Share Cite Suggested Citation: The measurement system provides an implicit definition of productivity for the operation.
It communicates to the worker, the supervisor, and others the common expectation from the task.
The productivity measurement provides specific direction and guides the worker toward productive activities. Monitor performance and provide feedback: The measurement system provides a means to check progress toward an objective. In addition, it can be a major part of the employee's performance evaluation leading to rewards or disciplinary action. Productivity analysis, particularly the examination of trends, helps identify problems before they become crises and permits early adjustment and corrective action.
Like any other indicator, productivity measurements do not necessarily identify the source of the problem, only that one exists. Facilitate planning and control: Productivity measurement provides information on costs, time, output rate, and resource usage to allow decision making with respect to pricing, production scheduling, purchasing, contracting, delivery scheduling, and many other activities in the industrial cycle.
Productivity analysis, together with other elements of a competitive strategy, may determine which products or processes should be expanded and which should be phased out. Productivity analysis, combined with cost data, aids in the evaluation of proposed changes to existing products or processes and the introduction of new ones.
It is one of the primary foundations for the continuous improvement efforts that are both popular and necessary for survival in business firms today. The purpose of the measurement system is critically important in determining the specific measures to be used. For example, if the measures are to be used only for planning and control purposes, the inputs into the measures and the outputs may be imprecise aggregate figures that provide guidance for setting schedules and future capacity requirements.
If, however, the measures will be used as a basis for an employee evaluation system leading to bonuses, pay raises, layoffs, and disciplinary actions, inputs and outputs of the measures must be more precise and accurate for shorter time periods, and they must exclude factors outside the control of the worker.
Questions of equity and interaction among individual jobs become evident. The functions of monitoring performance and providing feedback, diagnosing problems, facilitating planning and control, and supporting innovation are common to many types of measures, and productivity is no exception. The function of defining productivity and directing behavior, however, warrants more explanation because it is important to Page Share Cite Suggested Citation: A simple example of a waiter in a restaurant can be used to explain how measures of productivity can direct behavior.
If the measure of productivity is customers served per hour, the emphasis is on speed and throughput, and the waiter will try to complete each transaction as quickly as possible. On the other hand, a measure of dollars of food served per customer would lead to totally different behaviors; the waiter would suggest more expensive items and would encourage the customer to have appetizers, wine, and dessert, regardless of the time taken.
In this case, time is not a factor; the quick turnover of customers would be a disadvantage. Other possible measures could each lead to a different set of behaviors. One way to view individual productivity is to consider how the efforts of an individual contribute to the productivity or success of the organization.
Whether the actions of the waiter in each of the examples above would be productive or counterproductive depends on the type of restaurant and, specifically, its goals and objectives.
A downtown delicatessen would have one set of goals and circumstances; speed in serving customers would be a distinct advantage. A fine restaurant in the suburbs would operate in a different milieu; speed in this case could be a detriment. The fundamental question is not, what productivity measures should be used? The fundamental question is, what are the organizational objectives? The secondary question is, what set of individual productivity measures will direct the behavior of employees to meet those objectives as they work toward their own personal goals?
The aim of the organization is to align work behavior with organizational goals. It is the responsibility of management, therefore, to develop measures that will elicit organizationally desirable behaviors. These relationships are illustrated in the model shown as Figure Werther et al. The law of effect, the cornerstone of operant psychology, says that behavior is a function of its consequences; positive outcomes reinforce behaviors, which leads to their being repeated and expanded.
Simply establishing a measure and feeding back the results to the employee can be regarded as a form of reinforcement; employees tend to work on the basis of the measure in any circumstances.
If there is a net incentive for high performance, the link between behavior and the measure will be stronger. The greater the incentive, the stronger the relationship between the two. The term net incentive indicates that many incentives and disincentives may operate in a given set of circumstances.
Worker motivation is a complex issue; in taking all of that complexity into consideration, the model suggests that the net incentive should be positive and tied to performance.
Unfortunately, many organizational incentive systems are based on productivity or other performance measures that are not in line with organizational goals. Programmers, for example, may be measured and rewarded for lines of code written per hour. Accountants may be evaluated on the number of reports produced, and maintenance personnel on the number of routine equipment overhauls performed. In each instance and many moremaximization of the measured criterion would likely be counterproductive to the organization.
Following the same logic, the productivity measurement system at each level of analysis should be developed to direct behaviors and performance at one level of the organization to the goals at the next higher level.
What is output? definition and meaning - jogglerwiki.info
These relationships are depicted in their ideal state in my Goal Alignment model, Figure Across the top of the model, the organization attempts to make business unit goals at all intermediate levels congruent with organizational goals. Since the organization has no control over the individual's goals or the non-work-related goals of the group, it must accept them as given and design the organization to be compatible with them.
Productivity measures at the individual or group level direct behaviors to the business unit goals, if properly aligned. That is, the individuals or groups will work to the measures; it is the responsibility of the organization to ensure that the measures are in line with the goals. Reading horizontally across the bottom of Figurethe model indicates that the productivity performance of a business unit is a direct function of the productive behavior of each of the individuals and groups within the unit.
In turn, organizational productivity is a function of the productivity of each of the units. The degree to which this is true depends on the definition of productivity at each level and the interactions among the elements. Also, in this ideal model, the individual or group productivity results would sum to the productivity of the next higher business unit and ultimately to the productivity of the organization.
- Use 'output' in a Sentence
- Popular 'Industries, Manufacturing, & Technology' Terms
- IN ADDITION TO READING ONLINE, THIS TITLE IS AVAILABLE IN THESE FORMATS:
At the business unit level, managers will direct activities, allocate resources, and make other decisions to maximize performance as specified in the measurement system especially if rewards are tied to performance.
At each intermediate level of analysis, therefore, productivity measures should be selected and positioned such that the performance of the unit directly contributes to the goals at the next higher level. The Goal Alignment model suggests that individuals, groups, and business units are not goal driven, but measurement driven.