Improved Productivity Means Increased Profitability

Abstract

This article comments on the effect of improved productivity on profit both in large and small business in the U.S. Without a good rate of productivity, a business will at best have only a low rate of profitability. There is much evidence that this kind of participative management works well when skillfully applied within reasonable limits of authority, responsibility, and accountability in small business as well in large business. Plans and processes developed with reasonable participation by management and workers are usually translated into production activities with greater ease and fewer snafu's than those which are dictated from on high. This is the point at which higher profitability is conceived. In other words, the technical knowledge and competence of lower level employees is as much an asset as cash, inventory, and buildings. Unfortunately, their value is not reflected in the traditional balance sheet because human resource accounting has not yet gained wide acceptance. Nevertheless, these resources must be utilized in all aspects of operations if success is to be attained. Indeed, when the participative approach is carried forward from planning into the productive processes, more often than not spoilage and defective/reject rates decline and higher product quality is achieved. Consequently, output increases and unit costs drop. These gains are better assured when workers are involved in the design and execution of quality control processes. They must be simultaneously provided with the means and incentives to turn out the perfect product.