IMPROVING LABOUR PRODUCTIVITY: CHALLENGES AND SOLUTIONS IN INDIAN CONTEXT

Abstract

The importance of productivity especially, labour productivity has evolved in terms of both scope (breadth) and impact (depth) in today’s era of global supply chains, distributed and networked workforce and ever increasing technology penetration. Moreover, the labour productivity in manufacturing sector especially in developing countries has attained huge significance as manufacturing not only has the potential to employ a huge number of people but also has a multiplier effect on number of jobs created in related supply chain and services industries. Thus, manufacturing contributes to significant portion in building the GDP of any developing country. Poor labour productivity is one of the root causes of cost inefficiency, quality defects, time overruns and service ineffectiveness. This research integrates the literature available on labour productivity to propose a new model, that is, FLOPACE model, which addresses the challenges of labour productivity in Indian manufacturing organisations. This research has been carried out in four stages: Stage1: Exploratory research design: This phase involved the following steps. First, using the extensive literature review and keywords, several dimensions of labour productivity were identified and a working definition in Indian context is arrived upon. Secondly, extensive literature review was carried out to explore the potential enablers and measures of labour productivity in manufacturing enterprises. This led to identification of 108 factors that impact labour productivity. Then, using a panel of 3 industry experts and 3 academia experts, these variables were grouped together into 20 enablers which included health, education, attitude, motivation, work environment and conditions, pay, organization structure and culture, training & development, HR policies, technology adoption, communication, focus on improving productivity, sharing of best practices, number of competitors and presence of regulatory body in the industry, government policy, macroeconomics of the country, migration of skilled labour and macroeconomics of the world. The third step was to identify barriers to labour productivity. Two Focus Group Discussions (FGD) were conducted. First FGD was conducted in a Maharatna Public Sector Unit in Uttarakhand with 10 participants. The participants were in the age group of 28 to 38 years with average experience of 8.4 years. The FGD lasted two hours and seven barriers were identified from this group. The second FGD was conducted with 10 participants from public and private sector companies in the age group of 27 to 38 years with average experience of 9.8 years for 2 hours. This group identified ii 9 barriers out of which 5 barriers were common as identified by group 1. The barriers included Rigid Environment, Lack of learning and training opportunities with new technology adoption, Improper work distribution, Lack of cohesiveness, Poor Incentive System, Lack of Motivation, Lack of Job Recognition, Improper Postings, Lack of Multiskilling, absence of Ownership, Physical and Mental Health. In the next stage, using Interpretive Structural Modelling (ISM) and a panel of 3 industry and 3 academia experts, a multilevel hierarchal structure was created and factors were classified into 5 levels which were Employee Related, Organisation Related, Industry Related, Nation Related and International factors. Stage 2: Scale Development: The enablers so developed in the first phase were used as measures of scales for our research. The scale items were finalized using the expert opinion of 2 academicians and 10 industry specialists and 20 item scale was finalized and preliminary questionnaire was developed. We conducted pretest mechanism with 35 practitioners to access the face validity of the questionnaire and based upon the suggestions gathered, changes were made including altering and rephrasing certain ambiguous words and phrases which led to further refinement of the scale items. The questionnaire was constructed based on a final list of 20 scale items and a write-up on labour productivity in manufacturing sector was prepared. The scale has been validated in terms of construct, content, criteria and the reliability has been checked. Stage 3: Descriptive research design: The questionnaire developed was mailed to employees in 14 companies and 640 responses remained after sanitization of data. Exploratory Factor Analysis (EFA) was performed on the sanitized data. Out of 20 scale-items, only 15 loaded on to 3 dimensions. Using the same data, Confirmatory Factor Analysis was performed and a measurement model was obtained with 3 dimensions namely Individual Characteristics (IC), Firm Characteristics (FC) and External Characteristics (EC). The labour productivity measurement model thus obtained has been tested for reliability and validity. Stage 4: In this phase, the strategies were developed using the findings of the research in first three objectives and another focus group was done to validate the strategies by manufacturing firms for bringing about improvement in labour productivity. For the purpose of clarity, coherence and generating wider interest, the thesis has been organized as follows: The first chapter “Introduction” presents the background of the study. It briefly discusses about the Indian manufacturing sector, the focus of our study and discusses the importance and need of iii measurement and improvement of labour productivity in Indian manufacturing organisations. The chapter further presents the concept of labour, the research problem, research objective, research questions and thesis structure. The second chapter “Literature Review” elucidates the methodology of the systematic literature review and identify the research articles important for this study. An attempt has been made to cover all the broad definitions of labour productivity which are significantly different from each other. Then, it discusses the evolving nature of labour productivity and how the definition of labour productivity has evolved over time. It further discusses the various models that have been used for measurement of labour productivity. This chapter also highlights the major research areas of labour productivity. It then identifies the factors affecting labour productivity in the form of enablers and barriers and provides a brief discussion of the identified factors. The third chapter “Research Methodology” presents the detailed research design comprising both qualitative and quantitative methods. This chapter discusses the questionnaire design, target population, sample size, data collection method and tools used for analysis. The fourth chapter “Data Analysis, Findings and Results” outlines the findings of the researcher and explains the accomplishment of the research. It prioritizes the factors identified in the literature review using ISM technique which provides the relative importance of enablers and classify the enablers into 5 categories. Next, a scale is developed and using factor analysis, a model is built having three dimensions namely Individual Characteristics (IC), Firm Characteristics (FC) and External Characteristics (EC). The fifth chapter “Discussion and Recommendation” presents the detailed analysis of the research findings and elaborates on key strategies for improving labour productivity. It further provides the key recommendations to managers, policymakers and academicians for improving labour productivity. It then briefly discusses the FLOPACE model which addresses the challenges posed by productivity issues in Indian manufacturing organisations. A brief summary of steps taken by an organisation to improve employee productivity have also been presented as case study. The sixth chapter “Summary, Conclusions, Limitation and Future Scope” discusses the summary of the findings and conclusions arrived at in this research and examines its limitations along with suggesting the future research directions.