Problems in measuring productivity
Following image lists main difficulties or problems in measuring productivity.
Image credits © Prof. Mudit Katyani.
Important challenges or difficulties in measuring productivity:
- Difficulty in measuring output,
- Difficulty in measuring inputs,
- Factorial productivity,
- Changing prices of inputs and outputs,
- Intangible output of service sector,
- Comparison of productivity of different periods,
- Difficulty in measuring man-hours, and
- Changes in technology.
Now let's discuss these constraints in measuring productivity.
- Difficulty in measuring output : The output of an industry may be measured in terms of volume (units) or value (dollars). It is very difficult to combine both these factors.
- If the output is homogeneous (similar), then the productivity can be measured in terms of volume.
- If the output is not homogeneous, then the productivity can be measured in terms of value.
- However, if some units are homogeneous and other non-homogeneous, then the industry will face difficulties in measuring productivity.
- Difficulty in measuring inputs : Most industries do not have proper records of the inputs of land, labor, capital and machines. Even if such records are available, it is very difficult to calculate the exact number of man hours worked i.e. the input of labor.
- Factorial productivity :
- Factorial Productivity means to calculate the productivity of different factors of production separately.
- Some management experts say that a single factor of production cannot produce anything by itself. Therefore, it has no productivity. A single factor of production has productivity only if it is combined with other factors of production.
- Therefore, according to these management experts, the concept of factorial productivity is meaningless.
- Changing conditions : There is a continuous change in the price of inputs and outputs, quality of raw-materials, machines and tools, quality of labor, etc. All this creates difficulties in measuring productivity.
- Service sector : It is very difficult to measure the productivity of service sectors like Banking, Insurance, Education, etc. This is because the output of the service sector is intangible.
- Different periods : It is very difficult to compare the productivity of two different periods. For example, comparison of productivity during a war period with a peace period is meaningless.
- Difficulty in measuring man-hours : It is difficult to find out the exact number of productive man-hours. This is because wages paid to the employees also includes the cost of idle time.
- Technological change : Changes in technology will cause a change in the nature and quality of output. Therefore, measurement of productivity will become difficult.