Aggregate factor productivity: A measure of the efficiency for managers (Part 2)

A Science Direct study shows that microscopic, synthetic factor productivity (TFP) may not be proportional to labor productivity (LP). To use TFP parameters appropriately, business managers need to dig deep into the relationship of factors affecting productivity.

The above study considers overall factor productivity and labor productivity as different supporting factors for firm heterogeneity, although they are often used interchangeably in the literature. The author argues that the productivity metrics related to the integration strategies adopted by multinationals should reflect a different productivity classifications.

Using data sheets analyzed by Taiwan multinationals, empirical results show that the number of their investment sites increases with labor productivity but decreases with aggregate factor productivity. Multinationals company (MNEs) that typically have higher aggregate productivity are more likely to invest in countries with higher raw material prices or higher wages. The empirical results also show that China is the first choice for MNEs with increasing total factor productivity or labor productivity.

This shows that it is very important to choose the right yield metrics. In general, in terms of macro, TFP has many advantages because it not only simply shows output efficiency compared to input, but also a measurement method that can cover and capture a lot. side. TFP include factors such as changing thinking, using organizational structures and special management techniques, or profitability on scale. The components of TFP are often the main drivers of productivity change in the software development sector.

Currently, there are very few software development and maintenance organizations that take the time to calculate the TFP, but all those who have a management role or participate in implementation and evaluation of change need. must understand the concept and nature of TFP and its factors. These factors will often be the most effective levers for improving productivity in the software development and maintenance sector.

Some of these factors include: Innovating technology, improving social welfare, reforming management methods, and redistributing inefficient resources.

– Technological innovation: This is definitely a great contribution to improving productivity in the field of software development and maintenance.

– Improving social welfare: Including factors such as political stability, transportation infrastructure or general education system improvement.

– Management approach reform: This has the effect of creating a solid foundation for performance boost and productivity enhancement.

– Reallocating inefficient resources: Business Process Management (BPM) and Business Process Restructuring (BPR) are areas that can help improve business processes.

Cutting ineffective activities will help businesses save money, time, effort and other resources for more efficient activities. TFP measures the effects of all of these and more. However, this method has the disadvantage of being quite complicated. In software development, TFP represents many types of leverage that businesses need to use to drive productivity. The path to change management structure is probably not going to be simple, but at least we can see that there are some other simpler methods that still have the effect of change.

Productivity and Quality Office