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Introduction
In an effort to measure the productivities of their organizations and departments, industrial managers frequently face difficulties in devising suitable methods for determining how effectively resources are being utilized. Partial productivity parameters (represented by the ratio, total output/single input) go only part of the way in meeting the requirement, since partial ratios often fail to convey a reliable picture of the actual situation. This is because partial measures tend to be affected by inputs other than the ones considered. For example, labour productivity can be significantly improved by the introduction of capital equipment, and so can capital productivity through the employment of additional workers.
A solution to the problem of one resource influencing the performance of another is provided by a measure of productivity incorporating the totality of all outputs and all inputs. Craig and Harris first suggested a model with this end in view[1]. Their algorithm determines the total productivity of an organization by dividing the total production of goods and services by the total resources consumed. Later, Sumanth modified the model to apply to "operational units" as well[2]. Total productivity of an organizational system or department thus captures the impact of aggregate inputs on aggregate outputs, utilizing the definition given below. (Here the word "tangible" denotes the exclusion of factors such as brand image, goodwill and motivation.)(Definition omitted)
Dissimilar outputs are converted to uniform monetary figures by multiplying quantities of each item produced by prices prevailing during a certain fixed base period. Inputs are similarly weighted by base period unit costs.
An alternative model takes into account the value added in the system. Based on the thinking that only the effort of the production facility under examination should be considered, the value-added model excludes raw materials, parts and services purchased from outside the organization on the premiss that these represent the fruits of someone else's labour and as such are "an obfuscation of one's own productivity efforts"[3].
Compared to partial productivity, measures of total productivity have been less used in industry. In 1987, Stainer surveyed 500 large organizations in the UK and found that only 16.7 per cent of the industrial units surveyed were using total productivity parameters, compared to 57.3 per cent which utilized only partial ratios[4]. According to an earlier...