Productivity is affected by various factors. These Factor Affecting Productivity in Operation Management can be divided into.

  1. External factor
  2. Internal factor

1. External factors

External factor are those factors, which are beyond the control of management or individual enterprises. They affect organizations productivity level but organization cannot control them. These external factors are also called macro-productivity factors. They can be listed as follows:

  • Structural adjustment
  • Natural resources
  • Government and infrastructure

Structural adjustment: Changes in social, economic, political, demographic structure of nation directly influence national and industrial productivity. However the change in national and industrial productivity later has long term affects on the socio, economical, political and demographic structure of nation.

Natural resources: Natural resources like manpower, land energy, raw material are important for improving productivity at international, national, industry and firm level. In order to improve productivity all these sources should be utilized efficiently and effectively with proper policy and strategy.

Government and infrastructure: National and organizational roductivities are directly affected by governmental policies, strategies and programmers.

The underlying factors under government and infrastructures are as follows: 

  • Practices of government agencies
  • Rules& regulations like pricing, income and wages policies
  • Transportation and communication
  • Power supply
  • Financial measure and incentives such as interest rates and tax rates etc.

2. Internal factors

Internal factors could be adjusted with some ease compared to external factors. However these factors very significant role in improving productivity of an organization.

Internal factors also known as micro- productivity factors. These factors can be classified into following two groups.

  • Hard factors
  • Soft factors

I) Hard factors: Hard factors are internal factors which are quite inflexible towards change, compared to soft factors. These hard factors are as follows.

  1. Product
  2. Plant/equipment
  3. Technology
  4. Material and energy

1. Plant and equipment: The plant and equipment is another important hard factor influencing productivity of organization. Unless and until the adequate plant and machinery are installed, it is impossible to increase productivity compared to other similar organizations of industry.

Similarly the maintenance of plant and machinery is also crucial for increasing organizational productivity.

Few plant and equipment parameters affecting productivity are as follows: 

  • Good maintenance
  • Operating the plant and equipment in optimum process conditions
  • Increase in plant capacity by eliminating bottlenecks and by Op corrective and preventive measures.
  • Reducing idle time and making more effective use of available machines and plant capacities
  • Modernization and expansion
  • Cost control in work process
  • Inventory control and production planning

2. Technology: Technological innovations are another important source of high productivity. Automation and information technology help to increase the existing productivity level of organizations.  Similarly these technology help for better service as well as improved marketing for customer satisfaction.

3. Material and energy: Attempt to reduce the use of material and energy is vital to improving productivity. A material productivity factor includes.

  • Achieving higher material yield by selecting right material, its process control and quality control
  • Use and control of wastage and scraps
  • Upgrading the use of material in process
  • Cost control in material
  • Import substitution
  • Developing continuous source of supply of materials

II) Soft factors: Soft factors are those internal factors which can be changed as required by management. Some of the soft factors are as follows: 

  1. Manpower
  2. Organization and systems
  3. Work methods
  4. Management styles

1. Manpower (human): People (human resources) are the central factor in productivity improvement program. People in organization play an important role in using their creative skills and talents to achieve efficiency and effectiveness for getting the desired results.

They must be motivated to be productive. Only a motivated employee could achieve standards of performance and have the feeling of belongingness. So, it is very vital to consider psychosocial values, economic and cultural background of the employees working in an organization.

Various methods and techniques such as financial schemes like wages and salaries, training and education, social security, rewards, incentive plans participation in management, control negotiation, attitudes to work, supervision to change, co-operation, organization development, planning attendance turnover and job security etc. are the few motivational techniques often used by managers for increasing the productivity. 

2. Organization and system: Well organization and system of working are important for smooth, uninterrupted and dynamic functioning towards the achievement of objectives of an enterprise. The principle of good organization such as unity of command, delegation of authority and span of control are intended to provide frame wok for better productivity.

However organization and system should be designed in such a say that it is dynamic and flexible, so that any change in the system can be carried out in order to maximize productivity. 

3. Work methods: Work method is another internal factor affecting productivity. Application of improved technology often decreases the number of labor hour required for the work increasing the labor productivity.

However, whit out changing technology, existing work methods could also be improved by the use of various techniques, thus increasing productivity.

Improvement in work process, human movement, tools used, work place, handling of materials and machines used, work study, industrial engineering and training are the mains tools of improving work methods. 

4. Management styles: Management is the driving force for improving productivity by way of effective use of all scare resources under enterprise control.

Effectiveness depends upon the management styles and practices include all the major aspect of an organization such as planning, organizing, budgeting and controlling.