Gauging productivity: the labor-per-hour equation often fails to hold true. (Management).

The term "productivity" is used universally to define how efficiently an economy as a whole, or a business in particular, is producing products and services. Strictly speaking, productivity is the wealth created by each labor-hour. In industrial models, it is relatively easy to measure productivity of the production process. The father of scientific management, Fredrick Taylor, became famous for his studies on the most productive way to gather carbon from mines and load it into trunks or trailers.

Once we get out of the process directly involved in production and get into the rest of the business--i.e., the work of a manager or the work of the information systems (IS) people--productivity becomes much more problematic. How do we analyze, for example, the work a manager does to reduce the time spent in conflicts among his/her subordinates?

MOVING FROM THE STANDARD APPROACH

The normal way has been to measure the total number of hours worked for a company or a division, and then figure out how much was produced or sold per each hour of labor. More sophisticated companies actually try to measure the "added value" work for each unit, and sometimes for each individual, to the overall level of profitability sought by the company.

That's easier said than done, of course. One way most companies have found to evaluate performance fairly has been management by objectives, in which the manager sits with each subordinate to define clear, measurable goals to be accomplished in the coming year. The evaluation rating is defined according to the accomplishment of those goals. And if we compare those accomplishments on a year-to-year basis, we can have some approximation of the degree to which productivity has increased at the individual level.

HE WITH THE MOST BAD IDEAS WINS?

The problem with this approach is that it assumes people do the same things over and over. That is true for some employees, but not for all. In changing times, when managers are supposed to generate new products, procedures and services, measuring productivity is not so simple. Some managers think it is as easy as asking their subordinates (or teams) to come up with new ideas.

A case in point occurs in certain editorial circles where journalists are asked to come up with new ideas for future stories. Some get rewarded for thinking up a considerable number of stories, although very few get chosen. But their "high participation" in brain-storming sessions where new ideas are generated get a lot more noticed than those participants who privately filter out ideas that will not work, and bring to the table ideas that are more likely to be accepted.

Similarly, for a manufacturer that has to create new toys every year, there might be individuals who offer ideas for 10 toys, while others only offer ideas for two toys. But if those two ideas end up bringing the same number of new toys as the 10 ideas presented by the first person, then defining who was more productive becomes difficult.

While both are equally productive (they bring similar levels of added-value to the company), one gets noticed more than the other. A second issue is the degree to which the new ideas become "big" or are considered "modest." That often takes time to measure. Some new ideas do not do well at first, but become blockbusters down the road. And finally, everything must be considered within the given market environment.

So while the concept of productivity is simple enough at the company level, at the individual or team level it is a complex notion. It must take into consideration expectations, comparisons to other companies, the environment and the length of time it will take before the true productivity of the actions become apparent.

llya Adler is a business professor at Alliant International University's Mexico City campus and a principal of Koshman Communications Consultants.