Final LS-productivity

Whither Goest Our
Productivity?
Our Silent Crisis

Presentation to the 2nd Annual
Distinguished Alumni Series
Arthur Lok Jack
Graduate School of Business
2nd February 2012
by
Lennox Sealy BSc MBA PhD

The Little Red Book
On the Correct Handling of Contradictions
Among the People (February 27, 1957), 1st
pocket ed., pp. 10-11.

Within the ranks of the people, democracy is correlative with
centralism and freedom with discipline. They are the two
opposites 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 democracy
and freedom, but at the same time they have to keep within the
bounds of socialist discipline.
Mao Tse Tung

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 & Reporting

6.0 Personal Productivity – In Dire Need of Focus

7.0 Possibilities and Solutions
5

1.0 Why Productivity?

We have gone far
enough in the focus on
skills. We entered this
century forgetting that
unless skills are
converted into output
skills remain merely
credentials

1.1 My Top Five
Observations
5. Focus on Financial management
rather than Customer Service
Management
4. Focus on training rather than
process improvement
3. Local optimization – Global talk
2. Hands-Off rather than Hands on
management
1. Failure to address low factor
productivity

1.0 Why Productivity - My Top Ten
2.0 Productivity – Of what importance

Not enough Measurement & Reporting

6.0 Personal Productivity – In dire need of focus

8

Productivity ….isn’t
everything, but in
the long run it’s
nearly everything –
Paul Krugman – The
Age of Diminished
Expectations (1994)

2.0 Productivity – Of what
Importance

A measure of how
effectively and efficiently
a nation, a business or a
person uses the resources
at their disposal to
produce goods and
services that add value to
the lives of the people who
consume them.

Economics &
Productivity
In Economics the fundamental
relationship for productivity
measurement is the production function:
Y = A F (K,N).
This function says that we get higher output
for three reasons: because more people are
working (higher N), because they have more
equipment & technology to work with (higher
K), or because capital and labour are used more
efficiently (higher A).
1-11

Productivity

Measure of process improvement
Represents output relative to input
Productivity = Units produced
Inputs used
Productivity increases the standard
of living in every country

1-12

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

2.0 Productivity – Of What Importance

3.0 Why –Our Silent Crisis
Not Enough Measurement


1


A Crisis - An unstable condition, as
in political, social, or economic
affairs due to an abrupt or
prolonged decisive change.
(Free On-line Dictionary)

Sample Labour productivity growth by Country - (GDP per
hour), 1995-2006

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 Malik

Low productivity growth is the main reason most
countries in Latin America and the Caribbean have
lagged growth rates of advanced countries
IADB News Release Mar 20, 2010

Caribbean Crisis?
In the IADB’s publication – “The Age of
Productivity – Transforming economies from the
bottom up” – the authors analyzed how efficiently
nations are utilizing their productive
resources, and looked into productivity gains and
losses, relative to the United States, for a sample of
76 countries, including 17 from Latin America and
the Caribbean. Chile was the only country in the
region to increase its productivity against the
United States since 1960.

Half of the 20 worst performing countries in terms
of productivity in the sample are from Latin
America and the Caribbean

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

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.




2

4.0 National Productivity
- Anybody

Output per unit of labour - Labour
productivity or
Output per unit of Labour and
Capital services input –
Multifactor Productivity

The Productivity Hit
Parade
Counties on the list are in four
groups – Old World , New World
, Energy Rich, & Rapidly Developing
1. 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

Parade
2. 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

Parade
3. 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

Parade
4. 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

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

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 (%)




3

5.0 Organizational
Productivity – Not Enough
Measurement & Reporting

Organizational
productivity is
normally
measured in terms
of some specific
output e.g. no. of
computers produced per
day

Major Internal Factors
Affecting Organizational
Productivity

1. People (HR)
Management systems
2. Money management
Systems
3. Organization of
machinery and
equipment
4. Technological capacity
5. Organizational cultural
norms

Measuring Organizational
Productivity Using the Concept
of VA
VA is computed as sales less purchases
from outside (e.g., materials, energy,
outsourced services) plus change in
inventory of work-in-process and
finished goods. This method of
computation is called the subtraction
method (or the VA creation method).

Productivity using VA

Productivity

The Concept of Value-added
productivity measurement (VAPM)
then becomes a useful measurement
tool to consider in determining the
productivity performance of an
organization
It involves eleven (11) ratios - a
combination of the five profitability and
six labour productivity ratios

Personal
Productivity
Time
The extent to which spent
on
time is effectively and priorit
ies
efficiently spent on 20%
the things that
matter most in one’s 80%
Time
personal and spent on
professional life unimport
ant
things

“Productivity is perhaps
first personal then
organizational and
ultimately national” –
LSA Consultants

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.

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

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

The Potential Impact of Proper
Management Practices

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 process

1. Limit union demands
INTERNAL ACTIONS
2. Cut inefficient services
•Use appropriate technology
3. Monitor capital expenditures
•Implement stricter accounting
4. Increase penalties where necessary procedures
5. Make dramatic cuts in unnecessary •Contract out for service delivery
spending
•Implement program budgeting
6. 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

IN SUMMARY

1.Growth in output comes from increases in
factor inputs and growth in productivity (the
letter A in our production function). A major
reason why Japan has grown more rapidly
than the US over the last thirty years has been
their larger rate of investment in physical
capital (I/Y).
2.Productivity is related to investment in
education, research and development,
management techniques, and simple
experience...

IN SUMMARY

3. There are a number of examples of
societies that were technologically but
not economically advanced. Evidently
technology is not enough, you also need a
social/political/cultural/legal
environment that fosters its application.

IN SUMMARY

4. Analogously, many productivity increases
at the firm level reflect management and
organization of people more than advances
in technology

5. 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.

Thank You
For
Your Attention
And Let’s Continue Improving
Our Productivity

Final LS-productivity

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