Financial methods have been proven to increase labour productivity. Schemes such as the piece-rate system where the payment method involves the employee receiving an amount of money per each unit that he or she produces. This method is directly linked with productivity levels of employees.
Financial methods used in the workplace are used to boost morale of employees; motivation is strongly linked to increasing productivity. Other financial techniques include commission, profit sharing, performance related pay and share ownership. Along with the piece-rate system all these methods encourage employees in to being more creative and productive.
This view can also be criticised because even though it has good points it also has its bad points. One of the most important reasons for disagreeing with this view that some managers have is that it is very expensive for a business to run financial reward schemes. What's more financial incentive formats can be hard to operate and group schemes make individual rewards difficult to quantify.
Other ways of increasing labour productivity should be taken into consideration so that a business can overcome these problems. One solution could be to encourage the workforce into being more productive using non-financial methods of motivation. Job empowerment gives employees more control and power over their work. Also job enrichment is another non-financial method that could be used to increase productivity. Job enrichment stimulates workers to be more dynamic as it gives workers the opportunities to use their abilities and their own initiative; it also gives them more responsibility. Job rotation increases variety of tasks and skills for employees, it is another motivator.
Teamwork and socialisation in the work place is said to be one of the main motivators by management theorists such as Mayo and Maslow. Teamwork is the opposite production technique to an assembly-line which uses an extreme division of labour. Teamwork involves a number of employees combining to produce a product, with each employee specialising in a few tasks. Cell production is an example of teamworking. Also the training and recruitment of staff can increase labour productivity.
Another approach into increasing labour productivity is to increase the capacity utilisation of the business. By escalating capacity utilisation it means a business can produce more products for the same amount of money.
Moving away from labour productivity, capital productivity is a key factor when a business is attempting to increase productivity. Capital productivity can be increased by again increasing capacity utilisation, also by investing in technologically advanced equipment. This would be a good for any business as it will increase productivity because products can be made quicker and to a better quality and in the long run it would work out cheaper for the business. In addition investing money into research and development would enlarging productivity as more efficient production procedures could be found.
In conclusion, increasing the wages of employees can be effective in increasing productivity but may not be the most efficient method as it can have its problems and drawbacks therefore other methods should be considered by a business wanting to increase productivity. In my opinion I think that both financial and non-financial techniques should be used side by side to increase the productivity levels of a business and if a business is seriously looking into increasing their productivity by large amounts it should look into escalating productivity through its capital.