Measurement and Interpretation of Productivity (1979) / Chapter Skim
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8 Measures of Productivity for Companies
8 Measures of Productivity for Companies
Pages 166-180
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From page 166... ...
The second section of this chapter reviews research based on company records collected by the Census Bureau. It also discusses how the confidentiality of company records prevents private researchers from gaining access to the data directly and so limits the scope and quality of this research.
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From page 167... ...
Many companies limit their measurement to labor productivity, but a complete set of multi-factor and partial productivity ratios is preferable, since it is advantageous to save any input. A company may nevertheless benefit greatly from even a single-factor measure such as labor productivity because the company may produce a labor-intensive product, or it may want to compare its performance with average output per hour for its industry as published by BES.i A company can also use productivity measures to forecast labor requirements and capital investment needs when expansion of output is planned, and in collective bargaining
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From page 168... ...
There could be even more incentive for a utility or other regulated firm to improve its productivity if the regulatory agency extended the productivity adjustment to cover other inputs (Kendrick 1975~. The Price Commission planned to use individual company measures for this purpose during phase II of the Economic Stabilization Program, in the early 1970s, but found that it could not rely on the rather hastily and inaccurately prepared estimates it received.2 MEASUREMENT PROBLEMS AND DATA SOURCES In preparing productivity measures, a company faces many of the same data needs and measurement problems associated with aggregate measures.
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From page 169... ...
If the multi-factor measure is chosen, labor and capital inputs must be measured and combined; for a more complete productivity accounting, materials inputs should also be included. Labor input may be a simple count of hours, but even in this case, a company should keep in mind that hours spent at the workplace are a better measure of actual labor input than hours paid for (see Chapter 6~.
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From page 170... ...
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From page 171... ...
The second example is United Airlines, a major domestic air carrier. The controller's office has the responsibility for labor productivity measures for the entire company for major divisions.
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From page 172... ...
172 at: c .
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From page 173... ...
The company comparison program as it is usually handled provides assessment mostly in terms of financial ratios and so functions as a means of evaluating the short-term performance of a company vis-a-vis its competition. For small- and medium-size firms, this kind of appraisal program is probably sufficient.
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From page 174... ...
The Census Bureau data are collected in the quinquennial economic censuses and by other special surveys and reports for manufacturing, wholesale and retail trade, services, construction, and agriculture. Most productivity research has been limited to manufacturing industries, probably because these data conform best to the underlying concepts of productivity measurement.
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From page 175... ...
Finally, the more productive plants are in two cases larger in terms of employment per establishment, so that economies of scale may be affecting their productivity. Based on the associations suggested in Table 8-1, Klotz tried to explain productivity dispersion within 200 4-digit manufacturing industries for which the specialization ratio was high, but he obtained no significant empirical results.
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From page 176... ...
Confidentiality restrictions have repercussions beyond their impact on research of private scholars; they also affect the quality of the basic data themselves, which are used in estimating price movements, GNP, employment, and productivity. The issue of confidentiality of company records has two major aspects.
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From page 177... ...
In addition to these sources, administrative and regulatory agencies collect much related information: the Internal Revenue Service obtains information in connection with corporate tax returns; the Social Security Administration obtains information from employers in connection with social security contributions; the Securities and Exchange Commission obtains quarterly income statements and balance sheets for all corporations listed on stock exchanges; and the Federal Trade Commission obtains line-of-business information from individual firms. There are also specialized sets of data collected by such agencies as the Federal Communications Commission, the Interstate Commerce Commission, the Civil Aeronautics Board, and the U.S.
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From page 178... ...
The classifications assigned by the Census Bureau are based on its report, in which establishments list their products and services. Unless a uniform establishment list can be made available to all federal statistical agencies, standardization of information collected by different agencies is not possible.6 The result of the high degree of decentralization of federal statistics coupled with confidentiality requirements has been that the integration of data needed for productivity measurement has not been achieved even at the industry level.
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From page 179... ...
Improved coordination would also promote cooperation among statistical and regulatory agencies in designing their statistical programs so that the data collected by different agencies would be complementary rather than conflicting or redundant. Under such conditions it should be possible to obtain production, labor input, and capital input information that would permit the computation of productivity measures at the establishment level.
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From page 180... ...
6. Even though agencies may have their industry classification verified by the Census Bureau, all differences in assignment of establishments cannot be resolved in this way.
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