Pathways to productivity improvement

A study of productivity in the Machine Tool industry has just been published by the Engineering Employers Federation (EEF). As a member of the Productivity Steering Group, information was available to one of the authors, in an unusually detailed and validated form for the twenty or so individual companies, (though they remain anonymous). It was thought worthwhile to apply methods developed in the Economics and Statistics Department of British Aerospace to this data in order to give pointers to the factors explaining productivity differences. The particular methods referred to were those of the Diagnostic Chart, though considerably simplified to match the data available, and multiple regression analysis. Particular care is necessary in applying the latter technique in productivity analysis if spurious results are to be excluded. The conclusions were as follows: the most favoured path to improved productivity is via increased turnover; changes in productivity are reflected mainly in changes in the ‘profit’ element of value added rather than in the labour cost element; the major factor distinguishing low from high productivity companies is an excess of the manual work force in relation to turnover; increased fixed assets favours increased labour productivity; increased commitment to R & D favours increased labour productivity; these conclusions are, of course, deduced from a study of the machine tool industry in particular, but may well be of applicability to other industries.