Analysis and Measurement of Productivity at the Workplace

Abstract

The Australian Industrial Relations Commission is now committed to the development of productivity bargaining as an integral part of the formal industrial relations system. Its ‘Enterprise Bargaining Principle’ makes future wage increases contingent upon measures designed to effect ‘real gains’ in productivity. Yet there is no agreed approach to measuring productivity gains at the workplace, let alone the contribution of employees to productivity gains, for the purpose of determining the size and distribution of wage increases. This paper analyses the rationale of productivity bargaining, and presents two possible approaches to productivity measurement in this context. The first is the conventional approach based upon the neoclassical production function, and the second is an alternative approach based upon performance indicators. The conclusion of the paper is that a ‘balanced scorecard’ of performance indicators can be used to provide not only a superior approach to measurement but also a more effective strategy for workplace bargaining and productivity improvement.