Measuring Operational Performance

To manage operations effectively, a business must be able to measure its performance. Quantitative data allows managers to set targets, monitor progress, identify problems, and make informed decisions about resource allocation. AQA's specification requires students to understand and calculate several key measures of operational performance.

Key Definition: Operational performance refers to how well a business uses its resources to produce goods and services, measured through indicators such as labour productivity, unit costs, capacity, and capacity utilisation.

---

Labour Productivity

Labour productivity measures the output per worker over a given period. It is a key indicator of workforce efficiency and has significant implications for unit costs and competitiveness.

Formula:

Labour Productivity = Total Output ÷ Number of Workers

Example: A factory produces 50,000 units per month with 200 workers.

Labour Productivity = 50,000 ÷ 200 = 250 units per worker per month

If the business can increase this to 300 units per worker (through training, better equipment, or improved processes), total output rises without hiring additional staff — reducing unit labour costs.

Factors affecting labour productivity: