Question

What better way to start the fall semester but with a discussion of the importance of productivity (see Chapter 1, pages 13-18). There we write: “only through increases in productivity can the standard of living improve.” For well over a century, the U.S. has been able to increase productivity at about 2.5% per year, meaning U.S. wealth doubled every 30 years. But in the past decade, the news is not good. As The Wall Street Journal’s (Aug. 10, 2016) front page headline declares: “Productivity Fall Imperils Growth.”

This longest slide in worker productivity since the late 1970s is haunting the U.S. economy’s long-term prospects. Productivity in the 2nd quarter was down 0.4% from a year earlier, the first annual decline in 3 years. That was a further step down from already tepid average annual productivity growth of 1.3% in 2007 through 2015, itself just half the pace seen in 2000 through 2007, and the trend shows little sign of reversing. Productivity has slowed dramatically since the information technology-fueled boom of the late 1990s, when strong productivity gains translated into robust growth for household incomes and the overall economy.

Adds Fed Chair Janet Yellen: “the outlook for productivity growth is a key uncertainty for the U.S. economy and a very difficult question that has divided the economics profession. Some are relatively optimistic, pointing to the continuing pace of innovations that promise revolutionary technologies, from genetically tailored medical therapies to self-driving cars. Others believe that the low-hanging fruit of innovation largely has been picked and that there is simply less scope for further gains.”

Throughout our text we examine how to improve productivity through operations management.

Classroom discussion questions:

1. Why is productivity important to OM managers?
2. What can be done to raise productivity levels in a company? In a country?

Answer 1

Why is productivity important to OM managers?

As per the article, productivity impacts financial growth. In the article, the importance of productivity is discussed with reference to an economy. The same concept stands right for an organization and operational managers. Productivity is the ratio of output to input, so mathematically, productivity increases when output increases without increasing the inputs or decreasing inputs. Operation manager has to utilize limited resources to produce products for the organization. Operation manager needs to use different strategies to increase profits, reduce cost, and improve efficiency. Productivity increases profitability, and as an operation manager, the individual should focus on profitability. Increased profitability increases the capability of the organization to expand, which is necessary to sustain in the competitive market. For sustainability and growth, productivity is important for operation manager.

What can be done to raise productivity levels in a company and in a country?

In a company to increase productivity, the following ways can be used.

1. The company should focus on product development and innovation. This will result in new ways to finish tasks with more efficiency.

2. The company should encourage creativity.

3. The company should focus on safety in the processes, as the accidents in the organizations decrease productivity.

4. The organization can adopt a customer-centricity approach that will help to reduce errors and increase efficiency in the operations.

5. The company should focus on training and development of employees, so employees can learn and implement new skills.

To improve productivity in a country, the following ways can be used.

1. The country should focus on innovation and creativity, and invest in the research and development.

2. The country should encourage an entrepreneurial mindset in citizens, so more people can get employment.

3. The country should design the policies to encourage maintaining health, as healthy minds and body are more productive.