Final LS-productivity

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Final LS-productivity

  1. 1. Whither Goest Our Productivity? Our Silent Crisis
  2. 2. Presentation to the 2nd Annual Distinguished Alumni Series Arthur Lok Jack Graduate School of Business 2nd February 2012 by Lennox Sealy BSc MBA PhD
  3. 3. The ChineseConnection
  4. 4. The Little Red BookOn the Correct Handling of ContradictionsAmong the People (February 27, 1957), 1stpocket ed., pp. 10-11. Within the ranks of the people, democracy is correlative with centralism and freedom with discipline. They are the twoopposites of a single entity, contradictory as well as united, and we should not one-sidedly emphasize one to the denial of the other. Within the ranks of the people, we cannot do without freedom, nor can we do without discipline; we cannot do without democracy, nor can we do without centralism.Based on these principles, the people enjoy extensive democracyand freedom, but at the same time they have to keep within the bounds of socialist discipline. Mao Tse Tung
  5. 5. THE PRESENTATION FLOW 1.0 Why Productivity - My Top Five2.0 Productivity – of What Importance 3.0 Why – Our Silent Crisis 4. 0 National Productivity - Anybody 5.0 Organizational Productivity – Not Enough Measurement & Reporting 6.0 Personal Productivity – In Dire Need of Focus 7.0 Possibilities and Solutions5
  6. 6. 1.0 Why Productivity?We have gone farenough in the focus onskills. We entered thiscentury forgetting thatunless skills areconverted into outputskills remain merelycredentials
  7. 7. 1.1 My Top Five Observations5. Focus on Financial management rather than Customer Service Management4. Focus on training rather than process improvement3. Local optimization – Global talk 2. Hands-Off rather than Hands on management 1. Failure to address low factor productivity
  8. 8. THE PRESENTATION FLOW 1.0 Why Productivity - My Top Ten 2.0 Productivity – Of what importance 3.0 Why – Our Silent Crisis 4. 0 National Productivity - Anybody 5.0 Organizational Productivity – Not enough Measurement & Reporting6.0 Personal Productivity – In dire need of focus 7.0 Possibilities and Solutions 8
  9. 9. Productivity ….isn’t everything, but in the long run it’snearly everything –Paul Krugman – The Age of DiminishedExpectations (1994)
  10. 10. 2.0 Productivity – Of what ImportanceA measure of howeffectively and efficientlya nation, a business or aperson uses the resourcesat their disposal toproduce goods andservices that add value tothe lives of the people whoconsume them.
  11. 11. Economics & ProductivityIn Economics the fundamentalrelationship for productivitymeasurement is the production function:Y = A F (K,N).This function says that we get higher outputfor three reasons: because more people areworking (higher N), because they have moreequipment & technology to work with (higherK), or because capital and labour are used moreefficiently (higher A). 1-11
  12. 12. ProductivityMeasure of process improvementRepresents output relative to input Productivity = Units produced Inputs usedProductivity increases the standardof living in every country 1-12
  13. 13. Productivity Variables Productivity = Output(Labor + material + energy + capital )* national productivity index (NPI)NPI – Determined by the work ethic and the country culture ( between 10- 90%) 1-13
  14. 14. THE PRESENTATION FLOW 1.0 Why Productivity - My Top Five 2.0 Productivity – Of What Importance 3.0 Why –Our Silent Crisis 4. 0 National Productivity - Anybody 5.0 Organizational Productivity – Not Enough Measurement6.0 Personal Productivity – In Dire Need of Focus 7.0 Possibilities and Solutions 1
  15. 15. 3.0 Why – Our Silent CrisisA Crisis - An unstable condition, as in political, social, or economic affairs due to an abrupt or prolonged decisive change. (Free On-line Dictionary)
  16. 16. Sample Labour productivity growth by Country - (GDP perhour), 1995-2006
  17. 17. A Two- Sector Analysis – Public & Private Public Sector Measurement – US Federal Agency Productivity Measurement System Civil Service Reform in Latin America and the Caribbean: Proceedings of a Conference (World Bank Technical Paper) (No 259) [Paperback] Shahid Amjad Chaudhry, Gary James Reid and Waleed Haider MalikLow productivity growth is the main reason mostcountries in Latin America and the Caribbean havelagged growth rates of advanced countriesIADB News Release Mar 20, 2010
  18. 18. Caribbean Crisis?In the IADB’s publication – “The Age ofProductivity – Transforming economies from thebottom up” – the authors analyzed how efficientlynations are utilizing their productiveresources, and looked into productivity gains andlosses, relative to the United States, for a sample of76 countries, including 17 from Latin America andthe Caribbean. Chile was the only country in theregion to increase its productivity against theUnited States since 1960.Half of the 20 worst performing countries in termsof productivity in the sample are from LatinAmerica and the Caribbean
  19. 19. Caribbean Crisis?• According to a 2009 Central Statistical Office report productivity as measured by an Index of Domestic Production divided by the Index of Man Hours Worked showed an increase in productivity over the period 2004 to 2008• Low productivity growth remains the main reason most countries in Latin America and the Caribbean have lagged growth rates of advanced countries - IADB News Release Mar 20, 2010
  20. 20. T&T Attempts at Addressing Productivity On 25th August 2009, the National Productivity Council was launched in Trinidad. The Council will comprise 15 members from the private sector, trade unions, civil society, academia and government.
  21. 21. THE PRESENTATION FLOW 1.0 Why Productivity - My Top Five 2.0 Productivity – Of What Importance 3.0 Why –Our Silent Crisis 4. 0 National Productivity - Anybody 5.0 Organizational Productivity – Not Enough Measurement & Reporting6.0 Personal Productivity – In Dire Need of Focus 7.0 Possibilities and Solutions 2
  22. 22. 4.0 National Productivity - AnybodyOutput per unit of labour - Labourproductivity orOutput per unit of Labour andCapital services input –Multifactor Productivity
  23. 23. The Productivity Hit Parade Counties on the list are in four groups – Old World , New World , Energy Rich, & Rapidly Developing1. The “Old World” nations which have held their positions on the productivity hit parade for decades if not centuries include Germany, Austria, Denmark, and to a lesser extent France. 1-23
  24. 24. The Productivity Hit Parade2. The “New World” includes Canada, Australia, and the United States characterized by a broad range of raw materials, high levels of intellectual capital and strong agricultural economies 1-24
  25. 25. The Productivity Hit Parade3. The “Energy Rich” include Norway, which is the most productive country, and Middle East nations, including Kuwait and the United Arab Emirates. Their countries have small populations, particularly in relationship to their vast oil and gas wealth. 1-25
  26. 26. The Productivity Hit Parade4. The “Rapidly Developing/Developed ” include Japan , Singapore, Korea , China, India i.e. countries that also have either small or large populations but their intellectual capital and labour productivity is a major source of GDP
  27. 27. Productivity Growth – Three Selected Countries 1971- 1992 5 4.5 4 3.5% per year 3 United States 2.5 West Germany 2 Japan 1.5 1 0.5 0 Whole Economy Labor
  28. 28. Investment and Productivity in Selected Nations 10 U.S. 8 U.K. Percent increase in productivity Canada 6 Italy Belgium (Mfg) 4 France Netherlands 2 Japan Best fit 0 10 15 20 25 30 35 Nonresidential fixed investment to GNP (%)
  29. 29. THE PRESENTATION FLOW 1.0 Why Productivity - My Top Five 2.0 Productivity – Of What Importance 3.0 Why –Our Silent Crisis 4. 0 National Productivity - Anybody 5.0 Organizational Productivity – Not Enough Measurement & Reporting6.0 Personal Productivity – In Dire Need of Focus 7.0 Possibilities and Solutions 3
  30. 30. 5.0 OrganizationalProductivity – Not EnoughMeasurement & Reporting Organizational productivity is normally measured in terms of some specific output e.g. no. of computers produced per day
  31. 31. Major Internal Factors Affecting Organizational Productivity1. People (HR) Management systems2. Money management Systems3. Organization of machinery and equipment4. Technological capacity5. Organizational cultural norms
  32. 32. Measuring OrganizationalProductivity Using the Concept of VAVA is computed as sales less purchasesfrom outside (e.g., materials, energy,outsourced services) plus change ininventory of work-in-process andfinished goods. This method ofcomputation is called the subtractionmethod (or the VA creation method).
  33. 33. Measuring Organizational Productivity using VA
  34. 34. Measuring Organizational ProductivityThe Concept of Value-addedproductivity measurement (VAPM)then becomes a useful measurementtool to consider in determining theproductivity performance of anorganization It involves eleven (11) ratios - a combination of the five profitability and six labour productivity ratios
  35. 35. THE PRESENTATION FLOW 1.0 Why Productivity - My Top Five 2.0 Productivity – Of What Importance 3.0 Why –Our Silent Crisis 4. 0 National Productivity - Anybody 5.0 Organizational Productivity – Not Enough Measurement & Reporting6.0 Personal Productivity – In Dire Need of Focus 7.0 Possibilities and Solutions 3
  36. 36. Personal Productivity
  37. 37. Personal Productivity TimeThe extent to which spent ontime is effectively and priorit iesefficiently spent on 20%the things thatmatter most in one’s 80% Timepersonal and spent onprofessional life unimport ant things
  38. 38. “Productivity is perhaps first personal then organizational and ultimately national” – LSA Consultants
  39. 39. THE PRESENTATION FLOW 1.0 Why Productivity - My Top Five 2.0 Productivity – Of What Importance 3.0 Why –Our Silent Crisis 4. 0 National Productivity - Anybody 5.0 Organizational Productivity – Not Enough Measurement & Reporting6.0 Personal Productivity – In Dire Need of Focus 7.0 Possibilities and Solutions
  40. 40. Necessary Reforms Tackle the high rates of informality in the business sector. These firms survive because they evade taxes, utilizing productive resources that would otherwise go to more efficient sectors of the economy.
  41. 41. Necessary Reforms Government must therefore exert a higher degree of control over regulatory and business policy while allowing the free market to operate with more structured guidelines
  42. 42. The Power of Institutional Partnership for Innovation - A Key Driver of Competitiveness Government and public agencies Finance and Research and venture education capital institutions Enterprises and workplaces
  43. 43. The Potential Impact of Proper Management Practices
  44. 44. Direct Strategy Implementation EXTERNAL FORCES PRODUCTIVITY ACTIONS•Increased demand for services by citizens •Develop formal productivity•Financial prudence programs in all departments•Population stability •Measure everything•Increased interest in business activity •Set goals and standards for all•Political /cultural limiting options departments •Reorganize functions into Direct Strategies process1. Limit union demands INTERNAL ACTIONS2. Cut inefficient services •Use appropriate technology3. Monitor capital expenditures •Implement stricter accounting4. Increase penalties where necessary procedures5. Make dramatic cuts in unnecessary •Contract out for service delivery spending •Implement program budgeting6. Cooperate with other jurisdictions to bring pressure to bear in all •Study and document problems and sectors for productivity needs and implement solution type improvements hands on approaches
  45. 45. IN SUMMARY1.Growth in output comes from increases infactor inputs and growth in productivity (theletter A in our production function). A majorreason why Japan has grown more rapidlythan the US over the last thirty years has beentheir larger rate of investment in physicalcapital (I/Y).2.Productivity is related to investment ineducation, research and development,management techniques, and simpleexperience...
  46. 46. IN SUMMARY3. There are a number of examples ofsocieties that were technologically butnot economically advanced. Evidentlytechnology is not enough, you also need asocial/political/cultural/legalenvironment that fosters its application.
  47. 47. IN SUMMARY4. Analogously, many productivity increases at the firm level reflect management and organization of people more than advances in technology5. A variety of national policies are likely to lead to higher productivity: education, transportation and communication infrastructure, basic and applied research, but within a clearly defined disciplinary framework.
  48. 48. Thank You For Your AttentionAnd Let’s Continue Improving Our Productivity

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