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A Guide toProductivity Measurement


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Published by SPRING SingaporeSolaris, 1 Fusionopolis Walk,#01-02 South Tower, Singapore 138628Tel : +65 6278 6666Fax : +65 6278 6667www.spring.gov.sg

SPRING Singapore 2011

All rights reserved.No part o this publication shouldbe reproduced, stored in a retrievalsystem, or transmitted, in any orm orby any means, electronic, mechanical,photocopying or otherwise, without priorpermission o the copyright holders.

Whilst every eort has been made toensure that the inormation contained

herein is comprehensive and accurate,SPRING Singapore will not accept anyliability or omissions or errors.

ISBN 978-981-4150-27-9


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CONTENTS1. INTRODUCTION

2. WHY MEASURE?

3. HOW TO MEASURE

4. WHAT IS VALUE ADDED?

5. AN INTEGRATED APPROACH

TO PRODUCTIVITY MEASUREMENT

6. WHAT DO YOU DO WITH

PRODUCTIVITY MEASURES?

7. CONCLUSION

ANNEX: Common Productivity

Indicators

3

4

5

7

13

19

22

23


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5/323A Guide to Productivity Measurement

INTRODUCTION

Integrated Management o Productivity Activities

Productivity is critical or the long-term competitiveness and protability o organisations.

It can be eectively raised i it is managed holistically and systematically. The Integrated

Management o Productivity Activities (IMPACT) ramework provides a guide to how this

can be done.

Figure 1.1 shows an overview o the IMPACT ramework. Details o the ramework can be

ound inA Guide to Integrated Management of Productivity Activities (IMPACT), published

by SPRING Singapore. The guide is available on the Productivity@Work website atwww.enterpriseone.gov.sg.

1

Implement

Measurement

System

Implement

Perormance

Management

System

Establish

Productivity

Management

Function

PHASE IPHASE II

PHASE III

PHASE V PHASE IV

Diagnose

Develop Road

Map

Figure 1.1 : IMPACT Framework

Measurement System: A Critical Component o IMPACT

This guide ocuses on Phase IV Implement Measurement System o the IMPACT

ramework.

The guide introduces you to productivity measurement concepts and provides steps on how

to set up a measurement system and the practical applications o productivity measurement.



Productivity measurement is a prerequisite or improving productivity. As Peter Drucker,

who is widely regarded as the pioneer o modern management theory, said:

Without productivity objectives, a business does not have direction.

Without productivity measurement, a business does not have control.

Measurement plays an important role in your management o productivity. It helps to

determine i your organisation is progressing well. It also provides inormation on how

eectively and eciently your organisation manages its resources.

Set goals and create awareness

Set overall productivity goals or your organisation

Raise awareness and garner commitment rom employees

Plan the journey to your destination

Set targets and ormulate strategies

Implement specic actions

Know where you are now

Assess your organisations current perormance

Identiy gaps and areas or improvement

Monitor and reinorce perormance

Monitor and review plansAccount to various stakeholders

Link eort and reward to motivate employees

WHY MEASURE?2

Establish

Productivity

Management

Function

PHASE I

ImplementPerormance

Management

System

PHASE V

ImplementMeasurement

System

PHASE IV

IMPACT FRAMEWORK USES OF MEASURES IN PRODUCTIVITY MANAGEMENT

PHASE II

Diagnose

PHASE IIIDevelop Road

Map



HOW TO MEASURE3

Productivity is the relationship between the quantity o output and the quantity o input

used to generate that output. It is basically a measure o the eectiveness and eciency

o your organisation in generating output with the resources available.

Productivity is dened as a ratio o output to input:

PRODUCTIVITY =

Essentially, productivity measurement is the identication and estimation o the appropriate

output and input measures.

Measures o Output

Output could be in the orm o goods produced or services rendered. Output may beexpressed in:

Physical quantity

Financial value

Physical Quantity

At the operational level, where products or services are homogeneous, output can be

measured in physical units (e.g. number o customers served, number o books printed).

Such measures refect the physical eectiveness and eciency o a process, and are not

aected by price fuctuations.Financial Value

At the organisation level, output is seldom uniorm. It is usually measured in nancial value,

such as the ollowing:

Sales

Production value (i.e. sales minus change in inventory level)

Value added

Measures o InputInput comprises the resources used to produce output. The most common orms o input

are labour and capital.

OUTPUT

INPUT



LabourLabour reers to all categories o employees in an organisation. It includes working directors,proprietors, partners, unpaid amily workers and part-time workers.

Labour can be measured in three ways:

Number o hours workedThis measure refects the actual amount o input used. It excludes hours paid but not worked

(e.g. holidays, paid leave).

Number o workers engaged This measure is more commonly used, as data on hours worked may not be readily

available. Part-timers are converted into their ull-time equivalent. An average gure or aperiod is used, as the number o workers may fuctuate over time.

Cost o labourLabour costs include salaries, bonuses, allowances and benets paid to employees.

CapitalCapital reers to physical assets such as machinery and equipment, land and buildings, andinventories that are used by the organisation in the production o goods or provision oservices. Capital can be measured in physical quantity (e.g. number o machine hours) or

in nancial value, net o depreciation to account or the reduced eciency o older assets.

Intermediate InputMajor categories o intermediate input include materials, energy and business services.Such input can be measured in physical units (e.g. kilogrammes, kilowatt per hour) ornancial units (e.g. cost o energy and materials purchased).

Productivity Indicators

Productivity indicators measure the eectiveness and eciency o a given input in thegeneration o output. Labour productivity and capital productivity are examples o productivityindicators.

Labour ProductivityLabour productivity, dened as value added per worker, is the most common measureo productivity. It refects the eectiveness and eciency o labour in the production andsale o the output.

Capital ProductivityCapital productivity measures the eectiveness and eciency o capital in the generation

o output. It is dened as value added per dollar o capital. Capital productivity results romimprovements in the machinery and equipment used, as well as the skills o the labourusing the capital, processes, etc.



Value added is commonly used as a measure o output. It represents the wealth created

through the organisations production process or provision o services. Value added

measures the dierence between sales and the cost o materials and services incurred

to generate the sales.

The resulting wealth is generated by the combined eorts o those who work in the

organisation (employees) and those who provide the capital (employers and investors).Value added is thus distributed as wages to employees, depreciation or reinvestment in

machinery and equipment, interest to lenders o money, dividends to investors and prots

to the organisation.

WHAT IS VALUE ADDED?4

Goods and services romexternal suppliers

Sales to customerValue added creation

process

Wages toemployees

Interest tolenders o money

Depreciation orreinvestment inmachinery and

equipment

Dividends toinvestors

Prots retainedby organisation



Why Use Value Added?

Value added is a better measure o output or the ollowing reasons:

It measures the real output o an organisation

Sales measures the dollar value o the output generated by the organisation. Value added,

on the other hand, shows the net wealth created by the organisation. It is the dierence

between sales (what the customer pays to the organisation or the products or services)

and purchases (what the organisation pays to suppliers or materials and services to

generate the sales). Value added excludes supplies that are not a result o the organisationseorts. It provides a customer-centric perspective and ocuses on the real value created

by the organisation.

It is practical

Value added is measured in nancial units, which allows the aggregation o dierent

output.

It is easy to calculate

Value added can be easily derived rom an organisations prot and loss statement.

There is no need to set up a separate data collection system.

It is an eective communication and motivation tool

Value added provides a common bond between employers and employees to achieve

the goal o increasing the economic pie shared by both parties. The higher the value

created by the collective eort, the greater is the wealth distributed to those who have

contributed to it.

It is applicable to both manuacturing and service industries

Value added is calculated in the same way or both the manuacturing and service

industries. Unlike physical indicators, value added can measure the output o service

industries which is oten intangible.

How to Calculate Value Added

Value added can be calculated using either the Subtraction Method or the Addition Method.

Subtraction Method

The Subtraction Method emphasises the creation o value added. It measures the dierencebetween sales and the cost o goods and services purchased to generate the sales.



Addition Method

The Addition Method emphasises the distribution o value added to those who have

contributed to the creation o value added.

Value added = Labour cost to employees + Interest to lenders o money +

Depreciation or reinvestment in machinery and equipment +

Profts retained by the organisation + Other distributed costs (e.g. tax)

Value added = Sales Cost o purchased goods and services

Component Signifcance

Sales Reers to revenue earned rom products sold or services

rendered by the organisation. It excludes miscellaneous and

other non-operating income.

In manuacturing, not all goods sold are produced in the

same period. The change in inventory level should be

subtracted rom sales or a better refection o the value o

output produced during that period.

Purchased goods

and services

Purchases include raw materials, supplies, utilities and services

(e.g. insurance, security, proessional services) bought rom

external suppliers.

Component Signifcance

Labour cost Wages and salaries, commissions, bonuses, allowances,benets and employers contribution to CPF and pension

unds.

Interest Interest expense incurred or borrowing.

Depreciation Value o xed assets attributed across its useul lie.

Includes amortisation o intangible assets.

Prot Reers to operating prot beore tax. Non-operating

income and expenses are excluded.

Tax Reers to indirect taxes, excise duties and levies.

4 What Is Value Added?



Value added does not arise as a result o paying out wages, interest charges, taxes, accountingor depreciation and generating prots. On the contrary, it is the creation o value added

that allows such amounts to be paid or set aside. An increase in salaries alone will not

increase value added as there will be a corresponding decrease in prots.

Figure 4.1 underlines the point that the creation and distribution o value added are two

sides o the same equation. Hence, both the Addition and Subtraction methods should

generate the same result. They are oten used together to validate that value added has

been calculated accurately.

Figure 4.1 : Creation and Distribution o Value Added

SALES

VALUE

ADDED

Proft

Creation oValue Added Distribution o Value Added

Labour cost

Depreciation

Interest

Tax

PURCHASES

E.g.

- Raw materials

- Utilities

- Rental

Dividends

Retained Earnings



Value Added StatementFigure 4.2 shows an example o a value added statement, and underlines how the inormation

can be easily obtained rom a prot and loss statement.

Figure 4.2 : Prot and Loss Statement and Value Added Statement

Proft and loss statement Value added statement

Sales

Less: Cost o sales

Opening stock

Purchases

Less: Closing stock

Gross proft

Non-operating income

Less: Operating expenses

Advertising and marketing

Audit ees

Depreciation

Directors ees

Rental

Repairs and maintenance

Sta costs

Sta welare and development

Foreign worker levy

InterestOfce and other supplies

Utilities

Transport, postage &

communications

Other operating expenses

Total operating expenses

Non-operating expenses

Proft beore tax

Income tax expense

Proft ater tax

$

450,000

200,000

300,000

(120,000)

380,000

70,000

10,000

5,000

8,000

2,000

5,000

8,000

500

36,000

4,000

300

2,000800

3,200

2,000

200

77,000

1,000

2,000

(130)

1,870

Sales

Less: Change in inventory levelOpening stock

Closing stock

Gross output

Less: Purchase o goods and

services

Purchases o stock

Services and administrative

expenses

Value added

Distribution o value added:

Sta costs and other benefts

Depreciation

Interest

Tax

Proft beore tax

Less: Non-operating incomeAdd: Non-operating expenses

Value added

$

450,000

(200,000)

120,000

370,000

(300,000)

(27,700)

42,300

45,000

2,000

2,000

300

2,000

(10,000)1,000

42,300

4 What Is Value Added?



Proftability and ProductivityOrganisations commonly regard prots as a

key measure o their success. Using prots

as a measure may seem to imply that the

organisation will benet more i costs such as

salaries and depreciation or capital reinvestment

are reduced. However, lowering salaries to

increase prots tends to lead to conficts in

the relationship between employees and

management. Minimising capital investment

oten has a negative impact on the eciency

o operations, and eventually aects prots.

Thereore, increasing prots by reducing such

expenses is only a short-term measure.

The only viable way to increasing prots in a

sustainable manner is to increase the economic

pie or value added through higher productivity.This can be done with better cooperation rom

employees, higher investment in capital, and

optimal use o capital.

In return or your employees eorts, your

organisation should share the additional

wealth generated in the orm o higher wages

and improved beneits. This will reinorce

and encourage them to urther improve their

perormance.

To sum up, productivity is key to sustaining

prots in the long run.



3 The IMPACT Framework

As manpower is the key resource in many organisations, labour productivity (or value

added per worker) is oten used as the overall measurement or productivity. However,

a single indicator does not provide a complete picture o your organisations productivity

perormance. Rather, an integrated approach to productivity measurement should be adopted.

What is an Integrated Approach to Productivity Measurement?In an integrated approach to productivity measurement, the various dimensions o an

organisations operations are linked to show how each o them aects overall perormance.

Figure 5.1 shows an example o a amily o interlinked measures used by a retailer.

Figure 5.1 : Example o an Integrated Approach to Productivity Measurement

The key management indicators at the top are broad indicators that relate to the organisations

goals. Such indicators are usually nancial, value added-based ratios that provide management

with inormation on productivity and protability. They are then broken down into activity

and operational indicators.

AN INTEGRATED APPROACH TOPRODUCTIVITY MEASUREMENT

5



Activity indicators provide a snapshot o costs, activity levels and resource utilisation rates,which are particularly useul or middle and higher management.

Operational indicators are usually physical ratios that address the operational aspects that

need to be monitored and controlled.

Why Adopt an Integrated Approach?

An integrated approach to productivity measurement:

Providesacomprehensivepictureoftheorganisationsperformance

Highlightstherelationshipsamongdifferentratiosandunits,andallowstheorganisation

to analyse the actors contributing to its productivity perormance

Helpsdiagnoseproblemareasandsuggestsappropriatecorrectiveactions

Enablestheorganisationtomonitoritsperformanceovertimeandagainsttheperformance

o other organisations

Using the example shown in Figure 5.2, labour productivity (value added per worker) may

be broken down into two ratios sales per employee and value added-to-sales ratio ora better understanding o the actors that aect it.

Figure 5.2 : Analysis o Labour Productivity

A decline in labour productivity could be due to a lower sales per employee ratio as a

result o a new competitor, or a lower value added-to-sales ratio as a result o an increasein product costs. The analysis helps management to better decide on the appropriate action

to take in order to improve productivity.



5 An Integrated Approach To Productivity Measurement

How to Develop an Integrated Productivity Measurement SystemFigure 5.3 illustrates the steps or developing an integrated productivity measurement

system. The structure o the measurement system varies, depending on the needs and

operations o the organisation.

Step 1: Form a Measurement Task ForceProductivity measurement is an integral part o productivity management. A dedicated

task orce should be ormed to develop a productivity measurement system. The task

orce could be led by a member o senior management or a productivity manager, with

representatives rom dierent departments and levels who have good knowledge o the

organisations operations and processes.

Various stakeholders, such as customers and suppliers, should be engaged or consulted

to obtain buy-in and to ensure that their needs are taken into consideration. Employees

should also be involved in the design and implementation o productivity measures to give

them a sense o ownership in the process.

Step 2: Determine What to Measure

The productivity measurement task orce should rst dene the objectives o measurement.

- Albert Einstein

Not everything that counts can be counted, and not everything

that can be counted counts.

Figure 5.3 : Steps to Develop a Productivity Measurement System



At the management level, the objectives are based on the organisations overall productivitygoals and key productivity levers. Productivity levers are areas or actions that an organisation

can ocus on to improve productivity signicantly. Examples include obtaining higher value

rom products through service excellence and optimisation o labour through eective

deployment o manpower.

Objectives at the organisational and management levels are cascaded down to the objectives

o specic unctions and individuals. Figure 5.4 shows examples o objectives o the various

unctions and their relationship with the organisations productivity goals.

Step 3: Develop Indicators

The ollowing should be considered in developing productivity measures:

Indicators should measure something signifcant

Only elements that have a signicant impact on the organisations perormance and its key

productivity levers should be measured.

Indicators should be meaningul and action-oriented

Indicators must be relevant to the organisations objectives and operations. They should

explain the pattern o perormance and signal a course o action.

Component parts o the indicators should be reasonably related

The output (numerator) and the input (denominator) should correspond with each other.

Indicators used by the industry or benchmarked organisations

Tracking indicators used by other organisations in the same industry or organisations that

you have benchmarked against helps to acilitate uture comparisons o your organisations

perormance against others.

Figure 5.4 : Examples o Productivity Goals and Objectives



Reliability o dataData should be reliable and consistent. The indicators should provide an accurate refection

o what they are supposed to measure.

Practicality

Indicators should be easily understood by employees and practical to obtain.

There are 10 key management indicators commonly used to gauge an organisations

overall productivity perormance. They measure the perormance o key productivity levers

as shown in Figure 5.5.

Details o the 10 indicators and other common productivity indicators used by the

manuacturing and service sectors are given in the Annex. The productivity indicators

listed are not restricted to the usual output per unit o input ratios. They include other

perormance indicators that measure the eciency and eectiveness o the operations.

Step 4: Design and Implement

Ater selecting the appropriate indicators, the productivity measurement task orce should:

Establishaccountabilitiesandresponsibilitiesfortheprovisionanduseofdata

Linktheindicatorsanddeterminehowtheperformanceofvariousdepartmentsaffects

the organisations overall perormance

Decidehowtheindicatorsmaybeusedinproductivityimprovementplans.

Figure 5.5 : Key Management Indicators

5 An Integrated Approach To Productivity Measurement



The next step is to establish a system, using appropriate technology, to collect, analyse andreport the perormance o the indicators, taking into account the needs o the employees

providing and using the data.

An eective productivity measurement system should be an integral part o your organisations

daily operations and management inormation system. It should be fexible and adaptable

to changing requirements.

Adequate training should be provided to sta to ensure a common understanding o the

objectives and measures used, how the system works and how the measures relate to

their work.

Step 5: Monitor and Review

Productivity measurement is not a one-o project. The productivity measurement task

orce should review the eectiveness o the measurement system periodically and solicit

eedback rom users to urther enhance the system and ensure its relevance.

The only man I know who behaves sensibly is my tailor:

he takes my measurements anew each time he sees me.

The rest go on with their old measurements and expect me

to t them. - George Bernard Shaw



6ConclusionWHAT DO YOU DO WITHPRODUCTIVITY MEASURES?

Productivity measures allow you to monitor the perormance o your organisation and

compare it against some standard to identiy areas or improvement and actions to be

taken. They also serve as a useul communication tool to motivate employees and reinorce

perormance.

Productivity Level and Growth

Organisations should monitor and analyse their productivity perormance in terms o

theproductivity levelmeasured by the various productivity indicators. Productivity levels

refect how eciently and eectively an organisations resources are used. Comparisons o

productivity levels must be made between similar entities, such as two companies within

the same industry.

In addition, organisations must track theirproductivity growth, which is an indicator o the

change in productivity level over time. Productivity growth indicates dynamism and thepotential or achieving higher productivity levels in the uture. It is expressed as a percentage.

Comparison o Perormance

To know how well your organisation is aring, you may compare and evaluate its productivity

perormance against targets or past perormance.

A comparison can also be made against your competitors using the Inter-Firm Comparison

(IFC) tool, as well as against benchmarks and best-in-class perormers or urther improvement.

Inter-Firm Comparison

Inter-Firm Comparison (IFC) studies involve comparisons o a common set o key productivity

indicators identied or organisations in the same line o business. The identities o the

Without a standard there is no logical basis or making a

decision or taking action.- Joseph M. Juran



organisations are not revealed to maintain condentiality. Data provided by the organisationsare aggregated and presented in terms o percentage changes, indices and ratios.

Organisations may also compare their productivity perormance against the industry

average. Industry data or the manuacturing sector are available rom statistics published

by the Economic Development Board in its annual Report on the Census o Manuacturing

Activities. Services sector data are available rom the Economic Surveys Series published by

the Singapore Department o Statistics. Industries are classied by the Singapore Standard

Industrial Classication (SSIC), which is based on the basic principles used in international

statistical standards to acilitate comparison with other countries.

Benchmarking

Benchmarking is a systematic process o comparing processes and perormance against

others, to improve business practices.

Benchmarking may be perormed internally by comparing similar operations or unctions

within an organisation, or externally against other organisations. These could includecompetitors or organisations with exemplary practices in other industries. Table 6.1 shows

the common types o benchmarking used by organisations.

Unlike IFC, which ocuses on comparing indicators, benchmarking compares indicators

and processes or unctions that are critical to an organisations competitive advantage.Based on the benchmarking ndings, organisations can put in place specic action plans

to adapt and implement the best practices to improve their perormance.

Table 6.1 : Types o Benchmarking

Type Defnition

Internal Compare similar activities within an organisation.

Competitive Compare against direct competitors within the same industry.

Functional / Process Compare against other organisations identied to be leaders

o that particular unction or process. Such organisations

need not be rom the same industry.

Generic Compare against organisations recognised as having world-

class products, services or processes.



Use o Productivity Measures to Guide and Change Behaviour

Productivity Measures as a Communication Tool

Productivity measures may be used by management as a communication tool to direct

employees eorts towards the common goal o improving productivity. The measures

provide inormation on current perormance, goals, and what it takes or the employees

to reach them.

Productivity Measures to Motivate and Reinorce Perormance

Productivity measures quantiy and acilitate an objective assessment o employees

perormance. They provide inormation on perormance gaps and help to identiy the

training needs o employees.

To motivate and reinorce productivity perormance, productivity measures may be used to

recognise and reward perormance. This can be done by giving out awards to individuals

or teams based on their contributions to productivity eorts.

In addition, productivity measures play a key role in productivity gainsharing schemes.Based on a ormula agreed upon by both management and the employees, a proportion

o the value added or wealth created by the organisation is distributed to employees in

the orm o a bonus or incentive payout. Productivity gainsharing promotes teamwork and

osters a culture o continuous productivity improvement.

Employees should have a clear understanding o how they are being appraised and the

type o behaviour and perormance that is recognised by the organisation.

6 What Do You Do With Productivity Measures?



CONCLUSION7

Productivity measurement is an important means to an end. It provides valuable inormation

on how an organisation is perorming, where it would like to be, and how it can achieve

its goals.

Productivity measures are only useul i they refect the goals and objectives o the organisation,

and used to bring about action and productivity improvements. This requires commitment

rom senior management, teamwork and participation rom all employees.

Data becomes inormation only when it is viewed in an idea

or context.

- Edward de Bono



Some indicators are commonly used by management to measure the overall productivity

perormance o an organisation. The indicators are shown in Table 1 in relation to the key

productivity levers and objectives o measurement.

The indicators should be analysed by taking into account the organisations operation, and

the perormance o other indicators.

Common Productivity Indicators

ANNEX

Indicator Unit Formula What It Measures

Signifcance o aLower Indicator

Signifcance o aHigher Indicator

Productivity

1 Labourproductivity

$ Value

added

Number oemployees1

Eciency andeectiveness oemployees in

the generation ovalue added

Poormanagemento labour and/

or other actorswhich aect theeciency andeectiveness olabour

Ecient andeectiveutilisation and

managemento labour andother actors togenerate valueadded

Increase Sales

2 Sales peremployee

$ Sales

Number oemployees1

Eciency andeectivenesso marketingstrategy

Inecient orpoor marketing

Ecient orgood marketingstrategy

Table 1 : 10 Key Management Indicators

Note1 Employees refer to all categories of employees, including working directors / proprietors/ partners, unpaid familyworkers and part-time workers. Part-time workers should be converted to their full-time equivalent.






Increase Output Per Unit Cost o Production

3 Value added-to-sales ratio

% Valueadded

Sales

Proportion osales created bythe organisationover and abovepurchasedmaterials and

services

Ineciency in theuse o purchases,unavourableprices or productsand purchases,or poor control o

stocks

Eciency in useo purchases,avourable pricedierentialsbetween productsand purchases, or

good control ostocks

4 Prot margin % Operatingprot

Sales

Proportion osales let to theorganisation aterdeducting allcosts

Costs are too highand are erodingprots

Ability togenerate highreturns rom agiven amount osales

5 Prot-to-valueadded ratio

% Operatingprot

Valueadded

Operating protallocated tothe providers

o capital as aproportion ovalue added

Low sales and/or high costs,which need to

be rectied.However, it mayjust refect labour-intensiveness.

Ability togenerate highsales and/

or low costs.A avourablesituationprovided thatemployees areremuneratedadequately

Optimise Use o Labour

6 Labour cost competitiveness

Times Valueadded

Labourcost

Eciency andeectiveness othe organisation

in terms o itslabour cost

Low levels oeciency andeectiveness, or

high wage ratesnot matched byeciency andeectiveness

High eciencyand eectivenessaccompanied by

reasonable wagerates

7 Labour cost per employee

$ Labourcosts

Number oemployees1

Averageremuneration peremployee

Low remunerationto individualemployees

Highremunerationto individualemployees

Table 1 : 10 Key Management Indicators (Contd)

Note1 Employees reer to all categories o employees, including working directors / proprietors/ partners, unpaid amilyworkers and part-time workers. Part-time workers should be converted to their ull-time equivalent.



Notes1 Employees refer to all categories of employees, including working directors / proprietors/ partners, unpaid familyworkers and part-time workers. Part-time workers should be converted to their full-time equivalent.

2 Fixed assets should be stated at net book value, and exclude work-in-progress.

ANNEX Common Productivity Indicators




Optimise Use o Capital

8 Sales perdollar o capital

Times Sales

Fixedassets2

Eciency andeectiveness oxed assets inthe generation osales

Inecient use ocapital or poormarketing

Ecient capitalutilisation or goodmarketing

9 Capitalintensity

$ Fixedassets2

Number oemployees1

Extent to whichan organisation iscapital-intensive

Labour-intensive Capital-intensive

10 Capitalproductivity

Times Valueadded

Fixedassets2

Eciency andeectiveness oxed assets inthe generation ovalue added

Inecient assetutilisation or over-investment in xedassets

Ecient utilisationo xed assets

Table 1 : 10 Key Management Indicators (Contd)



Tables 2 and 3 show other productivity indicators commonly used by the manuacturingand services sector (e.g. retail, ood services and hospitality) to supplement the 10 key

management indicators. The indicators listed are not restricted to the usual output per unit

o input ratios. They include other perormance indicators that measure the eciency and

eectiveness o the operations.

Table 2: Common Indicators or the Manuacturing Sector

Key Productivity Lever Indicator Formula What It Measures

Increase sales 1 Delivery-on-time No. o ordersdelivered on time

Total no. o ordersdelivered

Eciency indelivering orders

2 Return MaterialAuthorisation (RMA)Turn Around Time(TAT)

Time taken to handleRMA request (timetaken rom whenRMA request isreceived to thetime when RMA is

resolved)

Eciency in handlingand resolvingcustomer requests,and level o customerservice

3 Innovation or ideaconversion rate

No. o suggestionsimplemented

Total no. osuggestions

Rate at which newideas are assessedand implementedsuccessully throughimprovementinitiatives

Increase output per unitcost o production

4 Cost-to-sales ratio Cost o goods sold

Sales

Cost eciency oproducing goodsrelative to sales

5 Deect rate No. o deects

Total no. o goodsproduced

Eectiveness oquality control andsystem

Optimise use o labour 6 Capability or fexibilityo workorce

No. o roles or jobsper worker

Total no. o roles orjobs

Ability o workorceto multi-task, andfexibility o theorganisation todeploy its manpower



ANNEX Common Productivity Indicators

Table 3: Common Indicators or the Services Sector


Optimise use o labour 7 Employee variablepay-provision

Amount operormance-relatedrewards

Sales

Facilitates strategicdecision-makingrelated to variablepay levels

8 Product yield peremployee

No. o good output

No. o employees

Eectiveness omanuacturingprocess andproductivity oemployee

Optimise use o capital 9 Manuacturing cycletime or throughputtime

Time taken toproduce a product

Eciency andeectiveness omanuacturingprocess

10 Overall equipmenteectiveness

Availability xPerormance xQuality

Eectiveness oequipment inmanuacturing aproduct


Increase sales 1 Sales per customer Sales

No. o customersserved

Eciency andeectiveness omarketing strategy

2 Waiting time per mealor customer served

Time taken rom thepoint that customerenters to the point anorder is lled

Eciency in servicedelivery and level ocustomer service

3 Compliment tocomplaint ratio

No. o compliments

No. o complaints

Level o customerservice

Table 2: Common Indicators or the Manuacturing Sector (Contd)




Increase output per unitcost o production

4 Cost per customer Operating expenses

No. o customersserved

Cost eectiveness inservice delivery

5 Inventory turnoverratio

Cost o sales

Average inventory

held during period

Eectivenesso inventorymanagement

Optimise use o labour 6 Employee to customerratio

No. o employees orservers

No. o customers

Service quality andemployee eciencyin service delivery

7 Investment in trainingper employee

Amount o trainingexpenses

No. o employees

Level o investmentin training. This canalso be measured interms o the numbero training hours peremployee.

Optimise use o capital 8 Equipment eciency No. o jobs done

Total working hours

Eciency andeectiveness oequipment suchas dishwasher andbaking equipment orrestaurants, and bed-rame liting systemor hotels.

9 Income or expensesper square metre

Income or expenses

Total foor area

Eciency o spaceutilisation

10 Customer-to-seat ratio No. o customers

Total no. o seats

Eciency o spaceutilisation

For more inormation on productivity and sel-help tools, visit the

Productivity@Work website at www.enterpriseone.gov.sg

Table 3: Common Indicators or the Services Sector (Contd)


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SPRING Singapore

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Documents

guidebook_productivity_measurement.pdf