Labour productivity is often seen as the single most
important measure of how well a firm’s workers are doing.
It compares the number of workers with the output that they are
producing. The management of
human resources may lead to an improvement in labour productivity.
It is expressed using the following formula:
of employees per period
If a t-shirt
manufacturer employs 10 people per day and it is able to make 300 t-shirts,
then the productivity is 30 t-shirts per person per day (300¸10).
At its most
basic level, the higher the productivity of the workforce the better it is
performing. Any increase in the
productivity figure suggests an improvement in efficiency.
Lean production systems look for the greatest outputs from the least
inputs. Firms will attempt to
increase their output (production) using the same or fewer resources
of labour productivity lies in its impact on the labour costs per unit.
rate of pay
cost per unit
productivity of Margetts t-shirt manufacturer is able to achieve lower labour
costs per unit due to its higher labour productivity, therefore greater
competitiveness both here and against international rivals.
This will be true for all firms, particularly those firms where labour
forms a large part of the total costs. Even
capital intensive firms who improve their labour productivity will find that
their competitiveness improves.
It is important
to distinguish between productivity and total output. By hiring more employees it is able to increase total output,
but this doesn’t necessarily mean that productivity has risen.
Similarly it is possible to have less total output coupled with an
increase in productivity. This occurred in the UK in the early 1990 as firms faced with
high interest rates, a strong pound and a recession, many companies were
forced to rationalise their operations.
Many workers were made redundant and those who remained had to
increase their productivity in order to keep their jobs.
This is a measure of the rate of change of a firm’s
workforce, it is measured using the following formula:
of staff leaving per year
no. of staff
So a firm which has 20 people leave out a total staff
of 80 has a labour turnover or 25% (80¸20).
It is important to look at how these figures have changed over a
number of years rather than look at them in isolation.
of labour turnover
If the labour turnover rate is increasing, it may be a
sign of increasing dissatisfaction within the workforce.
These causes may be either internal or external.
Internal reasons could be:
poor recruitment and selection process that leads to a person being placed
within a job that they are not suited to.
Eventually that person will leave to find a job more suited to
leadership or motivation will leave employees with a lack of commitment to
the firm. They will feel no
sense of loyalty to the business, and they will tend to look elsewhere for
promotions or new opportunities. They
will not be interested in looking for new ways in which they could
contribute to the firm.
that are lower than those being earned by similar workers in local firms.
External causes could be as follows:
local vacancies arising, perhaps due to the setting up or expansion of
other firms in the area.
transport links making a wider geographical area available to workers.
of high labour turnover
There can be both negative and positive effects.
The negative aspects could be:
cost of recruitment of replacements
cost of retraining of replacements
time taken for new recruits to settle into the business and adopt the
loss of productivity while the new workers settle in.
Labour turnover can however have some positive aspects:
workers can bring in new ideas and enthusiasm
with specific skills can be employed rather than having to train existing
ways of solving problems can be seen by new workers who can offer a
On balance there is a need for firms to achieve the
right level of labour turnover rather than the lowest.
Absenteeism measures employees miss work as a
percentage of the total number of employees, it is calculated using the
of staff absent
no. of staff
If a firm employs 50 people and on one day 4 people are
absent, the the absenteeism rate for that day is 8% (4/50 ´
100). In order to calculate the
absenteeism rate for a year it is necessary to calculate the total number of
days that should have been worked.
genuine illness, the main causes of absenteeism are failures of the firm’s
human relations systems (part of HRM). Often
these can be linked to Herzberg’s hygiene factors, such as:
working conditions, making workers uncomfortable or even causing injury.
failure to respect individuals and to be concerned with their needs.
failure to respect individuals and be concerned with their needs.
failure of teamwork, leading to feelings of alienation or even bullying.
supervision, leading to stress or the feeling of not being trusted.
tasks, leading to stress as workers are unable to complete their tasks
rates that the employees feel are too low for their skills.
costs of absenteeism
For a firm the costs of absenteeism can be very high:
production as the worker is unable to catch up with the work that was
maybe necessary to offer extra overtime in order to complete an order on
time. This will increase the
costs of the firm and lower their overall profits unless they can raise
the price to compensate.
workers sense that there is a trend of absenteeism, they will tend
to take more days off themselves, this will lead to the problem
to reduce absenteeism
When a firm is faced with high levels of absenteeism it
will look to the HRM department for remedies, such as:
– allows workers some degree of control over the hours they are at work.
It can help to relieve
pressures caused by such things as child care and transport problems,
which would otherwise lead to workers taking time off as though they were
enrichment – a satisfying, challenging job will ensure that workers will
want to go to work.
HRM – making workers feel more valued will allow people to feel more
committed to the workforce. Employees
who feel part of a team will not want to let others down.
bonuses – these are paid to workers who attend regularly.
This is a controversial idea, recent studies have shown that they
may not actually increase attendance.