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MGTA01H3 (583)
Chapter 2

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 2: Increased Productivity and Quality The Productivity-Quality Connection - productivity: a measure of the efficiency that compares how much is produced with the resources used to produce it - by using resources more efficiently, the quantity of output will be greater - quality: a product’s fitness for use in terms of offering the features that consumers want Responding to the Productivity Challenge - a nation’s productivity should increase as rapidly as that of competitor nations - four factors interact in this process: customers, quality, productivity, and profits Measuring Productivity - labour productivity: partial productivity ratio calculated by dividing gross domestic product by total number of workers - most countries keep accurate records on employment and hours worked - firms that compete internationally have more incentive to be more productive Productivity Among Global Competitors - the answer lies in many factors: technologies, human skills, economic policies, natural resources, and even in tradition - Canada’s competitiveness is a concern because we have been living off our rich diet of natural resources Manufacturing Versus Service Productivity - manufacturing productivity is higher than service productivity - it was believed than the service sector suffered from “Baumol’s disease” - since the service sector focussed more on hands-on activity that machines couldn’t replace, it would be more difficult to increase productivity services - many service sectors have increased their productivity by becoming more like factories, and they use modern information technology to eliminate inefficiencies Industry Productivity - they now use more sophisticated technology and superior nature resources - new processes have meant immense savings in both labour and energy Company Productivity - high productivity gives a company a competitive edge because its costs are lower - it can offer its product at a lower price (and gain more customers), it can make a greater profit on each item sold or pay workers higher wages without raising prices - productivity of companies is important to investors, workers and managers - comparing the productivity of several companies in the same industry helps investors in buying and selling stocks - managers use information about productivity trends to plan for new products, and funds to stay competitive in the years ahead Total Quality Management - companies must take quality into account - Juran’s “Quality Trilogy”, quality planning, quality control, and quality improvement, was the first structured process for managing quality - without employee participation, real quality improvements would never happen - Ishikawa developed “fishbone diagrams” aka “cause-and-effect diagrams”: helped teams of employees track down cause of quality problems Managing Quality (quality assurance) - total quality management (TQM): a concept that emphasizes that no defects are tolerable and that all employees are responsible for maintaining quality standards - includes all the activities necessary for getting high-quality goods and services into the marketplace - begins with leadership and the desire for TQM - this approach involves getting people’s attention, getting them to think in an entirely new way about what they do, and then getting them to improve both processes and products - customer focus is the starting point - involves planning, organizing, directing and controlling Planning for Quality - planning for quality should begin before products are designed or redesigned - performance quality: the features of a product; how will the features of a product meet consumers needs and how well the product performs - performance quality may or not be related to quality reliability in a product - quality reliability: the consistency
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