Productivity measurement through multi-criteria decision making

The selection of factors or variables constituting various performance criteria, such as productivity, effectiveness, efficiency, etc. is an important step in developing a performance/productivity measurement system in an organisation, conceived essentially as multi-criteria decision making. The construction of the utility value function for variables on the basis of identification of a number of desirable outcomes and decision makers’ preference leads to quantification of so called ’intangibles’, measurement of these criteria in explicit terms, establishment of degree or relationships among them, and estimation of total performance of an organisation, manufacturing or service. In this paper, four criteria of performance, viz., productivity, effectiveness, efficiency and quality of an organisation are defined in terms of specific outcomes the decision makers seek from them. The utility function of each variable is constructed by administering questionnaires on desirable outcomes to a group of managers/supervisors in a division of an organisation. Significance of productivity in its ability to explain the changes of values of other performance criteria over time periods is tested, and explanations are provided. The relationship of a number of objectives of the division with the factors of the recommended Overall System Performance Model is also explained.