Importance of Labor Productivity and

Its Measurement

by

Siddharth Mantri

ABSTRACT

The current global economic situation and the effect of the negative consequences of inefficiencies

in major construction projects in India have made construction productivity improvement more

and more important. In the construction industry, onsite labor is one of the most variable and

important factor which affect project profits. Due to the variable nature of construction labor and

its correlation with profits, construction managers require a comprehensive understanding of the

activities of workers onsite.

Productivity improvements achieve higher cost savings with minimal investment. Due to the fact

that profit margins are small on construction projects, cost savings associated with productivity

are crucial to becoming a successful contractor. Dearth of qualified workers and excess

availability of unskilled labor have motivated to analyze labor productivity specifically. This

report describes about the learnings of productivity, work study and work measurement methods.

Introduction

Need of productivity

On a construction site, productivity can be classified as labor productivity, material

productivity, equipment productivity, etc. Traditionally productivity is defined as the ratio of

output/input and is thus a measure of efficiency. For example, labor productivity gives us the

relative efficiency and effectiveness of workers at a construction site doing their specified work.

Construction productivity has been decreasing in the last decade. In the view of the construction

industry, productivity improvement is particularly important because inadequate change in

productivity will mean sharper changes in overall construction costs. Construction work is

generally complex and inter-dependent such as that in major projects; and is hard to quantify

when assessing and measuring productivity. This technical difficulty arises due to the fact that

the sector is influenced by many external factors such as economic situations (recession

periods), political changes (government commitments or effects of legislations) or innovations

in the work methods. Therefore, productivity measures must be treated with care, and to

improve productivity it is important to record relevant data on various inputs (resources,

equipment, labor, etc.) and output produced in the process. Productivity growth contributes to

growth in products, services, income & living standards.

GDP is both a measure of income and output, and since GDP per hour worked is a measure of

labor productivity, growth in productivity will raise the income per person. Productivity growth

is important to the organization because it means that it can meet its responsibilities to workers,

shareholders, and governments in form of taxes and regulation (National Research Council,

1979).

(i) Labor productivity

The simplest measure of labor productivity is output per worker. An increase in output per

worker can be observed either by requiring workers to produce more in the hours they work.

The second measure of labor productivity is output per hour worked. The advantage of this

measure of economic growth, competitiveness and living standards within an economy.

Labor productivity is one of the least studied areas within the construction industry.

Construction labor productivity has become a big problem in construction industry. In most

countries, labor cost comprises of 30% to 50% of the overall project’s cost, and thus is regarded a

true reflection of the economic success of the project.

Every project has some difficulty in construction like material, money, tools and local

contractor’s construction cost overruns. Looking at the current scenario of downfall in

construction labor productivity, it has become necessary to identify the factors that affect it.

(IJEAT, April 2013) [1].

Though labor productivity is measured and monitored on few construction projects across the

world, majority of the construction firms not initiated productivity measurement on their

construction sites, and hence very often productivity losses go unnoticed. It is important that

labor productivity is measured and productivity records are maintained and compared within

and across projects so as to maintain it and make improvements in it.

(ii) Rationale for measuring labor productivity

Some of the common reasons for decrease in productivity are:-

a) Lack of experience of owner and contractors

b) Ineffective organizational structures

c) Inappropriate methods used by the contractors

d) Improper management and deviation from responsibilities

e) Customization of owner specification requirements

f) Lack of familiarity with the climate, safety requirements, environmental constraints,

governmental regulations, construction practices

g) Lack of qualified craft workers and high labor cost

h) Negligence of adhering to the quality standards

i) Deviations from the original project plan

j) Ineffective supervision and leadership

The above-mentioned reasons are related either directly or indirectly to workers; hence we can

generalize it under labor productivity. Therefore, measuring labor productivity makes an

excellent weapon for starting an attack on the inefficiency in any construction organization.

Current Scenario

In developing countries like as India, where the economy is growing at 6-8% per annum, there

is a very significant and continual investment in infrastructure projects. However, as indicated

by numerous reports of organizations such as the World Bank, there are overruns in cost and

time in most projects; coupled with challenges of quality and poor engineering.

A recent Project Management Institute-KPMG report inferred that the systemic problem in such

a situation is the dearth of qualified and capable professionals across all facets of construction

engineering and management. The study of labor productivity in the construction industry is

gaining increasing attention as the industry faces multiple problems related to its workforce.

The construction industry in India is valued at two lakh forty thousand crore rupees and is

galloping ahead at a rate of 7 to 8% per annum. Over next ten years, the government has planned

in infrastructure roads, irrigation, and water supply, housing ports, energy, and

telecommunication etc., tohe tunes of twenty lakh crore rupees. Of this total amount nearly 40%

to 50% would be spent on construction activities. Today construction activity serves to catalyze

the economic growth of the country. A vibrant construction industry is essential in a developing

economy like India to meet the need of efficient infrastructure facilities. Moreover, investment

in construction has a positive domino effect of the supplier on industries thereby kick starting

economic development. With the demand for labor and increase in labor rates, there is a need

to have looked into entire construction activity and its impact on the final project cost.

Background

Introduction

This chapter includes the background of the productivity and its importance, and emphasizes

on the need for measurement of labor productivity. The concepts of work-study, method study,

and work measurement, different techniques for the work measurement that have been further

used for analysis, have also been explained.

Productivity

Productivity as a measure of efficiency, effectiveness and a means of improving the quality of

life is generic from achieving the highest output from limited resources. Increasing productivity

means increasing the efficiency of various resources of production or better results with lesser

efforts. Therefore, measurement of productivity to some extent indicates the performance and

efficiency of any construction organization.

The construction industry contributes to about ten per cent of the Gross Domestic Product

(GDP), with the figure likely to be higher in developing than developed countries. Although

most developing countries tend to adopt the manufacturing industry as the sector for

stimulating employment and creating job opportunities, they still place importance on the

construction industry for supporting economic development. Unlike several other industries,

the level of technology in the construction industry has remained relatively unchanged over

several decades. The lower pace of technological development in construction industry in

India, is a disadvantage when compared with other industries, where enhanced productivity is

achieved through the use of modern technology. As the construction industry is a diverse sector

of the national economy that involves a wide range of scarce resources, productivity is not only

concerned with many individual activities, but the industry as a whole.

Productivity measurement is a complex issue and there is no universal formula to measure it

under all conditions. Indeed, there still exist operational areas in industry where the methods

of measuring productivity have yet to be established. A proper productivity measuring system

must:

1. be simple and easily understood;

2. be usable at various levels of organizations; and

3. Possess a sound database structure and permit tracking over time.

(Ewe Chye LIM, March 1996)[2].

Importance of Measuring Labor Productivity

The simplest measure of labor productivity is output per worker. An increase in output per

worker can be observed either by requiring workers to produce more in the hours they work or

if they work longer hours. The second measure of labor productivity is output per hour worked.

The advantage of this method is that it takes into account variations of number of hours worked

per worker, rather than the numbers of employees, as the measure of labor input.

Variations in the construction labor productivity can naturally make a great impact on national

economy and productivity. Lack of safety, lack of skills, improper quality of materials,

inadequate wages and communication barriers mainly raise the psychological stress levels of

the workers. This affects the production efficiency of the workers to a large extent.

Construction labor productivity has only been gaining importance lately and is one of the

frequently researched topics in the construction field now. In most countries, labor cost

comprises 30 to 50% of the overall project’s cost, and thus is regarded as a true reflection of

the economic success of the operation. Horner et al. indicated that a 10% increase in

construction labor productivity would yield annual savings of about £1 Billion to the British

economy; a similar conclusion was echoed by Stoekel and Quirke (1992). Since construction

is a labor intensive industry, the significance of this effect not only justifies the concern over

its labor productivity, but it can also be argued that labor power is the only productive resource.

Also labor productivity is one of the least studied areas within the construction industry.

Productivity improvements achieve higher cost savings with minimal investment. Due to the

fact that profit margins are small on construction projects, cost savings associated with

productivity are crucial to becoming a successful contractor. (IJEAT, April 2013) [1].

Measurement of labor productivity provides us with sources of reference to benchmark

productivity of organizations. Measured productivity, in terms of statistics of the historical data

collected, is made available from any trade and professional associations. For example, the US

Department of Labor, US Bureau of Labor Statistics, Contractors Associations, independent

contractors, universities, and other organizations. Even though the lists of the labor factors are

different from different groups, they carry a similar range of impacts on the productivity and

most of them are very common to many lists. As stated above, measurement of productivity is

imperative to finally improve it. Hence, we must be able to measure the advantageous as well

as disadvantageous effect of changes adopted on the methods, efforts, and systems. The

measured values can then be compared either to those used to compile the estimate or to some

production standards that have been formulated.

Need for Labor Productivity Measurement

As construction is a labor-intensive industry, the significance of this effect not only justifies

the concern over its labor productivity, but it can also be argued that labor power is the only

productive resource, hence construction productivity is mainly dependent upon human effort

and performance. Labor productivity is a revealing indicator of several economic indicators as

it offers a dynamic measure of economic growth, competitiveness, and living standards within

an economy. Every project has some difficulty in construction like material, money, tools and

local contractor’s construction cost. Looking at the current scenario of a continuous downfall

of construction labor productivity, it is necessary to identify the factors that affect it. Though

labor productivity is measured and monitored on construction projects across the world,

majority of the Indian construction firms have not initiated productivity measurement on their

construction sites, and hence very often productivity losses go unnoticed. It is of paramount

importance that labor productivity is measured and productivity records are maintained and

compared within and across projects so as to maintain and improve it.

Work Study

Introduction to Work Study

As defined by the International Labor Office, Work Study is the systematic examination of the

methods of carrying on activities so as to improve the effective use of resources and to set up

standards of performance for the activities being carried out. Work study is a means of

improving the production efficiency (productivity) of the construction firm by elimination of

waste and unnecessary operations. It is the only accurate and systematic procedure oriented

technique to establish time standards. Method study and work measurement is part of work-

study. Work measurement is also called by the name ‘Time study’.

Work-study is made up of mainly two techniques:

Method Study - Method study is the systematic recording and critical examination of

ways of doing things in order to make improvements.

Work Measurement - Work measurement is the application of techniques designed to

establish the time for a qualified worker to carry out a task at a defined rate of working.

Method study and work measurement are closely linked. Method study is concerned with the

reduction of the work content of an operation, while work measurement is mostly concerned

with the investigation and of any ineffective time associated with it; and with the subsequent

establishment of time standards for the operation when carried out in the improved fashion, as

determined by method study.

Work-study can be classified as Method study, which has a role of simplifying the job and,

Work Measurement that includes determining how long it should take to carry the job out (refer

Figure 2.1) both when effectively and efficiently achieved result in high productivity.

Following are the advantages of work study:

1. It helps to achieve the smooth production flow with minimum interruptions.

2. It helps to reduce the cost of the product by eliminating waste and unnecessary operations.

3. Better worker-management relations.

4. Meets the delivery commitment.

5. Reduction in rejections and scrap and higher utilization of resources of the organization.

6. Helps to achieve better working conditions.

7. Better workplace layout.

8. Improves upon the existing process or methods and helps in standardization and

simplification.

9. Helps to establish the standard time for an operation or job which has got application in

manpower planning, production planning.

Figure 2.1: Work Study

(Source: ILO, 1992)[3]

Method Study

According to British Standards Institution (BS 3138):“Method study is the systematic

recording and critical examination of existing and proposed ways of doing work as a means

or developing and applying easier and more effective methods and reducing cost.” Basically

method study involves breakdown of work into its component elements and their systematic

analysis. In carrying out the method study, right attitude of mind is important. Method study

scope is improving work methods through process analysis, such as:

1. Construction operations and their sequence

2. Workmen

3. Materials, tools and gauges

4. Layout of physical facilities and work station design

5. Movement of men and material handling

6. Work environment.

Objectives of Method Study

Method study is essentially concerned with finding better ways of doing things. It adds value

and increases the efficiency by eliminating unnecessary work content, avoidable delays and

other forms of waste of time. The improvement in efficiency is achieved through:

1. Improved layout and design of workplace.

2. Improved and efficient work procedures.

3. Effective utilization of men, machines and materials.

4. Improved design or specification of the final product.

Procedure Involved in Method Study

1. Selection of the work to be studied.

2. Record the relevant facts about the work by direct observation.

3. Examination of the method of the performance.

4. Development of the most practical, economic and effective method.

5. Evaluate different alternatives to developing a new improved method comparing the cost-

effectiveness of the selected new method with the current method with the current method of

performance.

6. Define the method, as a result, in a clear manner and present it to those concerned i.e.,

management, supervisors and workers.

7. Install the new method as a standard practice and train the persons involved in applying it.

8. Maintain the new method and introduce control procedures to prevent a drifting back to the

previous method of work (ILO, 1992) [3].

Recording Techniques for Method Study

The recording techniques are designed to simplify and standardize the recording work. For this

purpose charts and diagrams are used. For the recording techniques of method study (refer

Figure 2.2.)

Fig. 2.2 Recording techniques for method study

(Source: Ralph M Barnes, 1968)[4]

Work Measurement

Work measurement is also called by the name ‘Time Study’. Work measurement is absolutely

essential for both the planning and control of operations.

Objectives of work measurement

The use of work measurement as a basis for incentives is only a small part of its overall

applications. The objectives of work measurement are to provide a sound basis for:

1. Comparing alternative methods.

2. Assessing the correct initial manning (manpower requirement planning).

3. Planning and control.

4. Realistic costing.

5. Financial incentive schemes.

6. Delivery date of goods.

7. Cost reduction and cost control.

8. Identifying substandard workers.

9. Training new employees.

Various techniques of work measurement

1. Time study (stop watch technique),

2. Synthesis,

3. Work sampling,

4. Predetermined motion and time study.

Methods used for measuring and analyzing labor productivity

Labor productivity measurement is a complex issue and there is no universal formula to

measure it under all conditions. Indeed, there still exist operational areas in industry where the

methods of measuring productivity have yet to be established. A proper labor productivity

measuring system must be simple to use and easily understood. Also it must be usable at

various levels of organization.

Considering the complexity of measurement issues and labor productivity measuring system

requirement, following methods can be used to measure and analyzing the labor productivity:

1] Time study using elemental work breakdown structure

2] Work Sampling

3] Method study (with the help of flow process chart)

4] Field survey - Structured Interviews for foreman & craftsman

Time study using elemental work breakdown structure

Time study is a work measurement technique for recording the times of performing a specific

job or its elements carried out under certain decided conditions, and then analyzing the data so

as to obtain the time necessary for a worker to carry it out at a defined rate of performance. The

data for measuring productivity using time study can be obtained by means of equipment like

stop watch , motion picture camera, study boards , time study forms.

The Stopwatch method

An electronic stop-watch performs exactly the same role as a mechanical one: the recording of

element durations. One of the main advantages is that it allows fly back timing to be performed

without any loss of accuracy. (With a mechanical watch the time taken for the hand to return

to zero is "lost". With an experienced practitioner, this time is minimal but with a trainee or

inexperienced observer, it can be significant and can jeopardize the accuracy of a time study.)

With an electronic watch the timing device is running continually and it is only the display that

is updated as the "fly back" button is pressed to reset the display to zero. At the end of the time

study with most watches it is possible to read off the total elapsed time. Electronic watches can

often be used in a number of calibration modes they can be set to record in fractions of seconds,

minutes or hours. Figure 2.3 shows typical electronic stop watch having a data recorded in the

lap format.

Fig 2.3 Electronic Stop

Watch (Source: ILO, 1992)[3]

Steps involved in time study

Collect all the information available about the job, the worker and the surrounding

conditions, which is likely to affect the carrying out of the work.

Carefully observe the work process and apply work break down method to divide the

work into elements.

Determining the sample size with the help of some preliminary readings.

Measure with a timing device like a stop-watch and recording the time taken by the

worker to perform each element of the work.

At the same time, observe the effective speed of working of the worker relative to the

observer's concept of the rate corresponding to standard rating.

Extending the observed times to 'basic times'.

Identify and add some allowances to be made for basic time for the operation.

Determining the standard time for the operation using above process.

This statistical method gives different sample sizes for different element depending upon

the duration of each element. Thus based on total number of minutes per cycle, work

study: ILO defines the average sample size which is required to be taken during data

collection phase. (refer: Table 2.1)

Minutes

per cycle

To 0.1

To

0.2

5

To

0.5

To

0.7

5

To

1

To

2

To

5

To

10

To

20

To

40

Over

40

Number of

cycles

recommended

200

100

60

40

30

20

15

10

8

5

3

Table 2.1-Number of recommended cycles for time study

(Source: ILO, 1992)[3]

Advantages of Work Sampling over Time Studies

Compared to time studies which require continuous observation, work sampling costs less

and requires less time in terms of labor hours to complete

Time studies can only monitor one or two operators or machines at one time; work

sampling has the added benefit of monitoring several subjects at one time.

When work sampling studies are completed across several days or weeks, short term

abnormalities are avoided.

The work sampling method is more representative to the actual conditions than the direct

time study.

Due to the simplicity of work sampling, training observers is relatively short.

Work sampling is less tedious than the constant observation that is required in the direct

time study.

Work sampling is less interruptive and uncomfortable for the operators than direct time

study, because in work sampling the operator is viewed once, and then the observer moves

on.

Work sampling is suitable to activities with lots of tasks at a low repetition rate. Work

such as this is difficult to measure using direct time studies.

References

[1] Mistry Soham, Bhatt Rajiv (April 2013), “Critical Factors Affecting Labor Productivity in

Construction Projects: Case Study of South Gujarat Region of India”, International Journal of

Engineering and Advanced Technology (IJEAT) ISSN: 2249 – 8958, Volume-2, Issue-4, p.g.1-

38

[2] Ewe Chye Lim, (March 1996), Southborough University of Technology, Southborough.

[3] International Labor Organization (ILO), (1994), Introduction to work study, fourth edition,

Universal Publishing Corporation, Geneva.

[4] Ralph M. Barnes, (1968), Motion & Time study: Design and Measurement of work, Wiley

International Editions, New York.

[5] Dr. O. P. Khanna, (2006), Work study, Dhanpat Rai Publication, New Delhi

[6] Thompson, S. K. (1987), “Sample size for estimating multinomial proportions”, Journal of

Construction Engineering and Management, vol. 112(2), p.g.245-270.

[7] Thomas, H. R., Guevara, J. M., & Gustenhoven, C. T. (1984), “Improving productivity

estimates by work sampling”, Journal of Construction Engineering and Management, vol.110

(2), 178-188.