Operations Management and Strategic Management · Productivity Management and Quality Management

Factors Affecting and Improving Productivity in Operations

Updated 10 October 2026 · Fact-checked

Productivity is the ratio of output to input. Internal factors (technology, people, methods, materials, layout, management) are controlled by the firm. External factors (government policy, infrastructure, market, economy, resource availability) are not. To improve productivity, cut waste and raise output per unit of input using work study, automation, training, incentives, lean, quality control and maintenance.

Understand Factors Affecting and Improving Productivity

Productivity measures how well a firm turns inputs (labour, materials, machines, capital, energy) into outputs (goods or services). It is output divided by input. If you get more output from the same input, or the same output from less input, productivity has risen.

Factors affecting productivity are grouped into two sets. Internal factors are inside the firm's control. Examples: plant technology and equipment, plant layout, product design, method of work, quality of materials, skills and motivation of workers, wage and incentive systems, quality of supervision, production planning, maintenance and working conditions. External factors are outside the firm's control. Examples: government policy and taxes, labour laws, power and transport infrastructure, availability of raw materials and skilled labour, market demand, competition, the state of the economy and natural conditions.

The internal factors can be split further. Hard factors are tangible things such as machines, products, technology and plant. Soft factors are people and management things such as motivation, culture, leadership and organisation. Exams often ask you to classify a factor, so be ready for this split.

Techniques to improve productivity work on these factors. Typical ones are method study and work measurement, automation and modern technology, better layout, employee training and incentives, value analysis, quality circles and TQM, preventive maintenance, JIT and lean (removing waste), good production planning and control, and better materials handling.

Productivity is not the same as efficiency. Productivity is the ratio of output to input in physical or value terms. Efficiency compares actual output with a standard or expected output, or actual time with standard time. A firm can be efficient against its standard and still have low productivity if the standard itself is poor.

Key rules to remember

Productivity: Productivity = Output ÷ Input; Use the same period and consistent units. Output can be units or sales value.
Single-factor (partial) productivity: Labour productivity = Output ÷ Labour hours; Material productivity = Output ÷ Material used; Measures output against one input only.
Total-factor productivity: Total productivity = Total output ÷ Total of all inputs (in rupees); Convert every input to rupees before adding.
Percentage change in productivity: % change = (New productivity − Old productivity) ÷ Old productivity × 100; Always divide by the old figure.
Efficiency: Efficiency % = (Actual output ÷ Standard output) × 100; Equivalent time form: Standard time for actual output ÷ Actual time × 100.

How to solve Factors Affecting and Improving Productivity questions

Use this method for both theory questions and short numerical questions on productivity.

1Read the question and note the command word: classify, explain, discuss, suggest, or calculate.
2For theory, split your answer into internal factors and external factors. Add hard and soft groups if asked.
3Give each factor with a one-line effect on productivity, not just its name.
4For improvement questions, link each technique to the factor it fixes, for example training fixes skill, layout fixes movement waste.
5For numerical parts, write the ratio first, convert all inputs to the same unit or rupees, then compute.
6Compute percentage change on the old base and state whether productivity rose or fell.
7Close with a one-line interpretation or recommendation in the context of the firm given.

Quickest way: Internal-External then Technique Link

When to use it: Use this for 5 to 7 mark theory answers when time is short.

Write two headings: Internal (controllable) and External (uncontrollable).
List four to five points under each, with a few words of effect on each point.
Write a third heading: Improvement techniques, and match each to one internal factor.
For numbers, write output ÷ input, compute both periods, then find the percentage change.

Common mistakes in Factors Affecting and Improving Productivity

Treating productivity and efficiency as the same thing.
Both words describe doing work well, so they feel identical.
Fix: Say productivity is output per unit of input, while efficiency compares actual performance with a standard.
Listing government policy or market demand as an internal factor.
Students list everything that affects the firm without checking who controls it.
Fix: Ask if management can change it. If not, it is external.
Naming factors without explaining their effect.
Students memorise lists and skip the reasoning.
Fix: Add a short phrase to each factor, such as 'poor layout increases material handling time and lowers output per hour'.
Adding inputs in different units for total productivity.
Hours, kilograms and rupees are added directly.
Fix: Convert every input to rupees before totalling.
Calculating percentage change on the new figure.
The base of the percentage is confused.
Fix: Always divide the change by the old productivity.

Worked examples

Example 1

Classify the following as internal or external factors affecting productivity of a Pune auto-parts manufacturer, and suggest one technique for improving each internal factor: (a) outdated machines, (b) frequent power cuts in the industrial area, (c) untrained operators, (d) change in import duty on steel.

Show the solution

Check who controls each factor.
(a) Outdated machines: management can replace them, so internal (hard factor). Technique: modernisation or automation of machines.
(b) Power cuts: depend on public infrastructure, so external. The firm can only reduce the effect, for example with a standby generator.
(c) Untrained operators: management can train them, so internal (soft factor). Technique: skill training and incentive schemes.
(d) Import duty: set by government, so external.

Answer: Internal: (a) outdated machines, fix by modernisation; (c) untrained operators, fix by training. External: (b) power cuts and (d) import duty on steel.

Example 2

A Coimbatore pump unit made 6,000 pumps in March using 12,000 labour hours and 24,000 kg of material costing ₹50 per kg. In April it made 7,200 pumps using 12,000 labour hours and 24,000 kg of material. Compute the labour productivity and percentage change for April, and the total productivity in each month if labour costs ₹200 per hour (no other inputs).

Show the solution

March labour productivity = 6,000 ÷ 12,000 = 0.5 pumps per hour.
April labour productivity = 7,200 ÷ 12,000 = 0.6 pumps per hour.
Percentage change = (0.6 − 0.5) ÷ 0.5 × 100 = 20%.
Labour cost = 12,000 × ₹200 = ₹24,00,000. Material cost = 24,000 × ₹50 = ₹12,00,000. Total input = ₹36,00,000.
March total productivity = 6,000 ÷ ₹36,00,000 = 0.001667 pumps per rupee, or 1 pump per ₹600.
April total productivity = 7,200 ÷ ₹36,00,000 = 0.002 pumps per rupee, or 1 pump per ₹500.
Inputs were unchanged while output rose, so productivity improved.

Answer: Labour productivity rose from 0.5 to 0.6 pumps per hour, a 20% increase. Total productivity rose from 1 pump per ₹600 of input to 1 pump per ₹500.

Exam tips

Expect a 'discuss factors' question: structure it as internal and external, then hard and soft, to show clear classification.
For a numerical, always show the ratio, the unit and the percentage change on the old base.
When asked about improving productivity, link each technique to a specific factor and add a manufacturing example.
For the MCQs, watch for definitions and classification: output ÷ input is productivity, and factors outside management control are external.
Use the firm's context in a case question; generic lists earn fewer marks.

Practice questions from Productivity Management and Quality Management

Factors Affecting and Improving Productivity: frequently asked questions

What are the main factors affecting productivity?

They are grouped as internal and external. Internal factors include technology, layout, methods, materials, worker skill, motivation and management. External factors include government policy, infrastructure, market conditions and resource availability.

What is the difference between productivity and efficiency?

Productivity is output divided by input. Efficiency compares actual output or time with a standard. A unit can be efficient against a weak standard and still have low productivity.

How can a manufacturer improve productivity?

It can use work study, better layout, modern machines, training, incentives, preventive maintenance, quality control and lean or JIT methods. Each works by cutting waste or raising output per unit of input.

Are hard and soft factors the same as internal and external?

No. Hard and soft factors are a split within the internal group. Hard factors are tangible items like machines and plant. Soft factors relate to people and management.