The Problems with Productivity Factors

by | May 7, 2018

Businesses are always coming up with resourceful ways to boost productivity. Naturally, we tend to want our employees to do more in a shorter amount of time and generate more revenue with fewer resources. But this kind of thinking never equates to a productive workforce.

Here in the UK, companies sometimes use what’s called a “productivity factor” (PF) when dealing with their labour standards. A PF is a percentage applied to the total hours generated by a labour model and used to show labour output that reflects investment in, or restriction of, labour spend. If businesses apply a PF to their labour model, it’s important that they see it in terms of cost planning over productivity.

When is a PF not a PF?
To start, let’s look at two factors that are often mistaken for a PF:

Activity Rating
When measuring activity, an analyst will sometimes rate the speed of work being carried out. So, for example, if the observed work is completed at a faster than normal pace, it may be recorded at 110 percent. Likewise, if the work being carried out is slower than normal, it could be recorded at 90 percent. These ratings are used in the final buildup of a labour standard so that the time value can be normalized.

Some businesses access this data for validation purposes and wrongly assume that if there is an overall rating below 100 percent, they can account for this slower than normal pace by reducing the time they calculate in the model.

Personal Time, Fatigue & Delay (PF&D)
Also part of a labour standard calculation is PF&D, which is an industry recognized allowance for a drop off in working pace over time. This can be mistaken for a PF in the same way as Activity Rating.

A labour standard is the average amount of time it takes the average worker to perform a task correctly. Therefore, a PF isn’t a labour standard adjustment, rather, it’s an adjustment to the total hour allocation of all labour standards + PF&D (that make up the labour model). PF&D is a percentage applied to the hour allocation of a certain job or department based on several factors including the intensity of the tasks within, and it shouldn’t be confused with a PF.

Using a PF
To calculate PF you apply a percentage factor to the labour hours number and you get an adjusted labour hours value. It will look something like this: “I want to spend x. My labor hours model tells me y. Therefore, I need a PF of z to get me to x.”

There are two ways of interpreting the PF calculation. One method is to assume that a lower PF means more hours to do the job. The other method is used when you want to see a resulting output that goes in the same direction as the input, so if you increase the PF it also increases the labour hours.

Global PFs
If a PF is implemented into a labour hours model, consideration is required as to where it should be applied. In some cases, a PF is applied to the final output to help the business achieve financial goals in a fair and equitable way. The belief is that all sites or stores are being adjusted by the same number and so therefore everyone is treated fairly.

However, this broad-brush approach can be detrimental as it indiscriminately alters the base labour values, even if they physically can’t be changed. In the end, the PF begins to erode the efficacy of the core labour standards already established. For example, if it always takes three minutes to cook an egg and if the labour value attributed to this is reduced due to a PF, then the time will have to come from somewhere else in the process.

Surgical PFs
Perhaps we should only be using PFs on process steps that we know can be adjusted for pace of work like walking. We could also apply a PF to service timings, customer interaction or cleaning and tidying. These are elastic tasks that are easily squeezed or stretched in the time allowed, but we must keep in mind that if we squeeze them it could impact quality of service.

If a labour hours model is generating a higher or lower level of hours required for the business, particularly older labour models, then the first port of call should be to revisit the labour standards. An activity sample would give a good indication of where all the hours are actually being used, which can be compared to the current output of the labour model. With this information the areas of the business that have the most variance can be targeted for lower level direct studies and/or video analysis.

Can PF be used in a positive way?
If a business can invest in labour hours, then a global PF can be a fair way of distributing this investment. However, this should only be a short to medium term fix, to ensure that the investment is being used in a targeted way. Ultimately, work studies and process reviews should be carried out so the labour model can be updated with new labour standards.

Overall, the key to applying a PF calculation to any labour model is to make sure you’re not masking your labour standards and consider it as more a budgeting tool rather than a means to improve workforce productivity.




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