NORDSCI Conference proceedings 2018, Book 2

Finance

VALUE ADDED AS THE BASIS FOR MEASURING LABOUR PRODUCTIVITY

Ph. D., M.Sc. Eng. Anna Kijewska

ABSTRACT

Productivity is generally defined as a ratio of output to input and may be expressed in physical quantity or financial value. At the organizational level, the financial value may refer to sales, value of production or value-added. Value-added (VA) indicates the wealth created through the organisation’s production process or provision of services. According to the definition VA can be calculated as the difference between sales and the cost of materials and services incurred to generate the sales. This method is called the subtraction method or the VA creation method. Another way of calculating VA is by adding personnel cost (e.g. salaries and wages), management, cost of maintaining the business (e.g. interest from loans, depreciation), and profit. This method of calculation is called the subtraction method or the VA distribution method. If we assume that manpower plays key role in creating the wealth of an organisation, labour productivity (i.e. value-added per employee) may be used as the overall measurement of productivity. However, to investigate what affects labour productivity, disaggregation of this ratio should be made to the levels of activity and operational ratios. In this way, several indicators can be obtained, which allow the board to assess the productivity of its company. These levers are areas or actions that organisation can focus on to improve productivity, although the analysis shows that these levels are not autonomous. Improvements at one level require simultaneous action at some other levels to achieve the effect. A set of indicators used to assess productivity of the company can be called value-added productivity measurement.
The aim of the study is to assess the productivity of the Polish mining company based on the generated value-added and on indicators obtained from disaggregation of VA on the activity and operational levels. The analysis of results will allow showing in which areas improvements should be made.

KEYWORDS

value-added, productivity, labour productivity, activity indicators, productivity indicators

REFERENCE

NORDSCI Conference Proceedings 2018, Conference Proceedings, ISSN 2603-4107, ISBN 978-619-7495-01-0, VALUE ADDED AS THE BASIS FOR MEASURING LABOUR PRODUCTIVITY, 259-266 pp, DOI paper 10.32008/nordsci2018/B2/V1/38