How to Measure Productivity and Performance in Service Sector

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SERVICE INDUSTRY

Measuring Productivity
and Performance in
Service Industry
Term Paper

2012

SERVICE INDUSTRY

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Table of Contents
1. INTODUCTION ........................................................................................................................... 3 2. PRODUCTIVITY MEASURES ....................................................................................................... 4 2.1 India: The Growth Imperative .……………………………………………………………………………………….4 2.2

2.3
2.4
2.5

The concept of productivity in service sector………………………………………………………………….5 The quantity aspect of service productivity…………………………………………………………………….5 The quality aspect of service productivity……………………………………………………………………….6 Substantial and measurement issues in productivity………………………………………………………7

3. PERFORMANCE MEASURES……………………………………………………………………………………………….8 3.1 Is variance difficult to measure……………………………………………………………………………………….9 3.2 Principles of service management…………………………………………………………………………………..9 3.3 Measurement system……………………………………………………………………………………………………11 4. CONCLUSION…………………………………………………………………………………………………………………..12 5. REFRENCES………………………………………………………………………………………………………………………13

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1. INTRODUCTION
In the past two decades, the Indian economy has evolved quite differently from most other advanced industrialized economies. The paper focuses on the issues faced during measuring productivity and performance in service sector. Unlike economies which have experienced a large increase in unemployment. The Indian unemployment rate in 2010-11 has been little different than in previous years.

This paper surveys the literatures on the difficulties of measuring productivity in the service sector in general and the IT industry in particular. In the service sector, the practical and conceptual problems associated with constructing appropriate indexes to measure productivity are substantial. Productivity shows whether the activity of an organization is efficient and effective. For measuring performance the industry have different performance standards. Such standards are critically analysed against any performance measures, to value the appropriate measure. Productivity is more concerned about how efficiently a firm or an industry can turn its inputs, such as labour and capital into outputs.

Mostly productivity is analyzed in manufacturing sphere. Productivity in the service sector was not analyzed before the end of the twentieth century, while productivity in manufacturing has been analyzed for more than two hundred years. Many researchers argued that application of productivity concept in service sector is more complicated task than its application in manufacturing. Service sector input elements such as materials, machines and energy are not as important as in manufacturing. The main element in service sector is labour because service sector is more personnel-intensive comparing to manufacturing. Output in manufacturing is measured by quantity units and boosted by increasing the amounts of production, its realization. Service sector output usually has no high values by the quantity aspect; therefore it is mostly increased by the attempt to provide higher quality services to the customer, seeking for better customer satisfaction. The origin of productivity and performance management is deeply rooted with respect to bulk production; therefore issues of productivity are mainly analyzed in this paper. Service organizations are recognized as the largest and fastest-growing segment of the economy in the world (Sahay, 2005). Johnston and Jones (2004) states, that despite the importance of productivity management in service organizations it is surprising that there is relatively little empirical research on this topic.

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2. PRODUCTIVITY MEASURES
In the early twentieth century, Church talked about the efficiency measures with his unit cost in his 1908 work. Organisation by Production Factors. According to Diewart(2003),...
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