Measuring and Improving Productivity in Services

Measuring and Improving Productivity in Services

Issues, Strategies and Challenges

Services, Economy and Innovation series

Faridah Djellal and Faïz Gallouj

The definition and measurement of productivity in services raises important conceptual, methodological and strategic problems. This book aims to provide a critical review of the main debates on productivity in the domain of services. The first part examines the theoretical consequences of services specificities on the concept of productivity and reviews the attempts to measure it. The second part is devoted to the main determinants of productivity growth and the strategies to increase productivity in service firms and organisations.

General introduction

Faridah Djellal and Faïz Gallouj

Subjects: economics and finance, industrial economics, services

Extract

The productivity of a firm, organization or nation is a gauge of the relationship between its production of goods and services and the factors of production used (labour, machinery, raw materials and so on). Thus it measures the ratio of outputs to inputs or a firm’s productive efficiency. It is a basic analytical tool used in economics and management, since any increase in its value indicates that scarce and expensive human and material resources are being used more efficiently. In ‘The Great Hope of the 20th Century’, Jean Fourastié (1949), drawing in particular on the work of Clark (1940), established this concept as the intrinsic technical criterion that made it possible to distinguish between the primary, secondary and tertiary sectors. Thus Fourastié argued that services were, by their very nature, characterized by a rate of productivity growth that was low in comparison with agriculture and, particularly, manufacturing industry. Although it does not altogether call into question the hypothesis that productivity in services is low, the development of modern service economies does cast some doubt on the ‘naturalness’ or ‘technical nature’ of this low productivity. Other interpretations have also been put forward; in particular, some question the validity and relevance of the traditional methods of measuring productivity, which are regarded as too ‘industrialist’ and unsuited to the distinctive nature of services. Thus, it is argued, productivity in services is not necessarily always low but tends in many cases to be poorly measured, sometimes even in ways that are conceptually...