One of the most valuable resources of any company is its workforce. To monitor the effectiveness of their application, use a system of indicators. The most important of these are labor productivity and labor efficiency. KPI indicators also allow you to build an assessment system. How the effectiveness of the use of labor resources is assessed will be discussed later.
Performance
To understand the basic principles of the presented analysis, it is necessary to define what is called labor productivity. It is the effectiveness of the company's use of its existing resources. In this case, we are talking about work. This resource is actively spent during the manufacture of products or the provision of services.
Performance reflects the relationship between quality andthe number of employees in the organization. With an increase in this indicator, we can say that the economic activity of the company has increased in volume. But this statement will be true only in the case of constant labor costs.
The concepts of "labor productivity" and "labor efficiency" are interrelated. They are used in the course of performance appraisal of employees. Labor efficiency will be the greater, the higher the productivity. The latter reflects the amount of products that workers produce per unit of time. A positive trend is the reduction of working time for the manufacture of one product.
The growth rate of labor productivity is directly related to such concepts as the intensity, degree of labor intensity. These indicators are measured per unit of time. They allow you to measure the amount of energy expended by a person in the manufacture of products. The higher the labor intensity, the greater the productivity.
Efficiency
The concept of labor efficiency is considered by the modern economy as the effectiveness of the professional activity of workers. It takes into account several social and psychological aspects:
- The degree of usefulness of the result of the activities of employees.
- The importance of labor costs both for the enterprise itself and for society as a whole.
- Moral satisfaction of employees from the process of their work.
During the evaluation of the use of labor resourcesorganizations are increasingly using the concept of the effectiveness of the professional activities of employees of the organization. This is due to the growing role of workers in the monetary system, as well as in the sphere of exchange. Efficiency is enhanced through science, engineering and innovation.
To assess the productivity of some categories of workers, it is not enough to use only the productivity indicator. It is suitable only for assessing the performance of industrial employees. If a person is engaged in activities in non-material industries, it becomes more difficult to measure performance.
Therefore, the classical methods of measuring labor productivity are not suitable in this case. To assess the level of employee performance, a system of complementary, interconnected cost and physical indicators is used. So, for example, to assess the efficiency of labor within one state, the GNP indicator is used. In other words, if labor productivity expresses a quantitative result, then efficiency is a qualitative indicator. It is used in industries where it is impossible to measure the quantity of finished products.
Calculation principle
High labor productivity allows the company to produce a large number of products. This indicator is relevant for organizations in the material sphere. It characterizes the average volume of products that an employee produces in a certain time. To measure productivity, it is required to determine the amount of work (turnover, production,services) that an employee performs per shift, hour, week, year or month. For this, a simple formula is used: P \u003d OR / CR, where OR is the amount of work performed per unit of time, and CR is the number of employees.
Instead of the number of people who are employed in production, an indicator of labor costs can be used for calculations. It is also worth considering that in the course of its core business, the company spends two types of resources presented:
- Live work. These are the actions that workers perform directly in the process of manufacturing a certain type of product.
- Past work. It is spent by other employees of the organization in the previous stages. It has a material expression in tools, structures, buildings, production of fuel and materials, etc.
Therefore, the calculation of labor productivity indices is required. Distinguish between individual and public. For each of these types of labor, productivity is calculated separately. This allows you to get more accurate numbers. Thus, the productivity of individual labor is an indicator of the result of living activity. It is calculated for both one employee and the whole team.
The productivity of social labor reflects the effectiveness of not only living, but also materialized labor. The total costs in the field of material production are taken into account.
Measurement methods
There aredifferent methods of measuring labor productivity. There are three main approaches:
- natural;
- value;
- labor.
They differ in units of measure. So, in the course of cost analysis, productivity is measured in monetary terms. This approach allows you to compare the indicator of representatives of different professions and qualifications. The advantage of the technique is a simple calculus. Productivity levels can be compared among themselves in completely different enterprises. This indicator is monitored at different time intervals. The disadvantage of the approach is the influence of non-price factors.
The natural method is used when it is necessary to evaluate the performance of homogeneous products. The volume of work performed in this case has a real expression. It can be pieces, liters, meters, etc. This is the most reliable, objective method for assessing the productivity of industrial production. You can compare this indicator for different departments, teams, as well as individual employees. Based on the information received, you can plan the composition of workers, their number and qualifications.
When using the natural method, the result will be the most obvious, and the calculation simple. But it cannot be used for areas where heterogeneous products are produced. Also, the methodology does not allow taking into account changes in inventories of work in progress.
One of the varieties of the natural method is an approach that involves the use of conventional units. The product must be homogeneous. It uses the systemcoefficients, which allows us to translate the results of the company's core activities into a comparable form.
Considering the concepts of labor productivity and labor efficiency, we should pay attention to one more technique. This is a labor or normative approach. It allows you to evaluate the ratio of the actual costs that were required for a certain amount of work, with the norm. For this, the result is measured in man-hours. Their number is calculated per unit of time. In this case, when calculating, the number of products or operations performed is multiplied by the labor intensity of a unit of production.
The advantage of this technique is its versatility. It applies to different types of services and works. To use the methodology, precise standards are needed, which can not be applied everywhere. This limits the scope of this approach.
Productivity Growth Factors
There are various factors that affect productivity. These are the reasons that contribute to the change in the level of the indicator. Knowing these factors, management can find room for performance improvement. According to the degree of regulation, they can be controlled and uncontrolled.
On the basis of the subject of economic relations, factors can be internal and external. The second type of causes refers to uncontrollable. Individual enterprises cannot influence the overall situation of the environment. Only internal factors can be controlled. They may be regulated by the organization.
To externalfactors include structural changes in the economy, labor force, or society. The activity of the government can also influence the indicator. Natural factors are also external causes.
What contributes to an increase in labor productivity within production? Knowing the answer to this question, management can pursue an effective policy to improve it. One of the directions is material and technical factors. These include the impact of scientific and technical progress, the modernization of technological cycles and equipment, the improvement of labor tools, as well as the improvement of their application.
The impact of these factors can be assessed using indicators of capital-labor ratio, capital productivity, the level of mechanization and automation of labor.
The second group of internal factors are organizational and economic reasons. They characterize the level of development of the company, as well as the approach to management. This can be thoughtful specialization, cooperation and division of labor, staff development, pricing improvement, and so on.
The third group of internal factors are socio-psychological reasons. They are directly related to the degree of human participation in social production. This category includes motivation, work adaptation, social and psychological climate in the team, selection of personnel, etc.
Performance Metrics
When analyzing labor productivity, analysts consider a range of indicators. This allows you to look at the efficiency of resource use from different angles. One ofsuch indicators is the complexity. This is an individual indicator that reflects the costs of exclusively live activities.
Such concepts as labor productivity and wages are closely related. With their help, you can calculate the profitability of the resources spent. This indicator is calculated as follows: P \u003d OP / ZP, where OP is the volume of products manufactured in the reporting period, and ZP is the salary of employees.
There are also direct and reverse indicators. In the first case, the coefficients are used to determine the effect per unit of labor costs. These metrics include production. It is calculated for one worker or the whole team. The formula for calculations is as follows: B=OP / ZRV, where ZRV is the cost of working time that is required for the production of products.
Reverse figures reflect the level and changes in dynamics per unit of output. One of these indicators is labor intensity. It is measured in standard hours. The formula for calculating is: T=ZRV / OP.
You can calculate the labor intensity for one shift, hour, month or other period of time. However, it should be noted that labor productivity and the mentioned coefficients cannot reflect the full range of the efficiency of using this resource in an enterprise. Qualitative indicators cannot be considered using this technique. Considering the problems of labor efficiency, it is worth noting that other, more modern approaches are also used in the course of the analysis.
KPIs
Today, many organizations in the course of evaluationuse of labor resources apply key performance indicators - KPI. What it is? This is a special technique, which is aimed at the formation of special indicators. Their choice depends on the goals of the company. This allows the most objective assessment of the company's position in the market, as well as its internal mechanisms in the course of its core business.
It should also be said that KPIs are such a special toolkit. With its help, qualitative and quantitative indicators are measured, as well as goals set before production. This is a sampling system. If a certain indicator does not meet the goal, it should not be used in the evaluation. This is the main principle that guides the use of this technique.
The modern approach to management, which the organization chooses on the basis of previously set goals and objectives, became the basis for creating the presented concept. Therefore, it was called “Management by Objectives.”
Advantages of the technique
Labor productivity and labor efficiency cannot provide such a complete description of the use of resources. The KPI scorecard provides a host of new opportunities for analysts. The main advantages of their use are:
- Increase employee motivation.
- Transparency and fairness of the results, their comparability. This allowsdetermine which of the employees works how much, what salary they receive for this.
- Adjusting the performance of each employee whose analysis will reveal low performance.
- Each employee contributes to the overall goal of the company.
- The quality of the performance of duties is controlled.
This enhances the active motivation of the workforce, which makes it possible to make comparable indicators.
Varieties
There are different types of KPIs that are associated with different performance measures:
- Costs. Reflect the amount of resources spent in monetary terms.
- Performance. The degree of capacity utilization involved in production.
- Efficiency. These indicators characterize the relationship of one category to another (for example, revenue and costs).
- Results. Expression of the number of company results.
Example of indicators
For example, you can develop KPI indicators for employees of different speci alties:
- Head of Sales - Percentage of Sales Target.
- Tax advisor - number of consultations provided by employee.
- Chief Accountant – no fines during inspections by tax authorities.
- Head of Legal - number of cases won in court (or percentage of total cases).
- Marketer of the online store - the number of site visitors attracted by the employee.
Such indicators are developed for representatives of allprofessions. This allows you to evaluate the productivity and labor efficiency of almost all categories of employees, which, in turn, will allow you to compare the contribution of each employee to the overall result.
