Not quite a Google bus

Not quite a Google bus

Labor, raw material, and capital productivity are easy concepts to understand.  For example, labor productivity is the ratio of the products delivered per unit of effort.  Increasing the efficiency of labor will either increase the amount of product delivered or reduce the amount of labor needed.  Raw material or capital productivity follow the same pattern. The issue is that while labor, raw materials, and capital explain a lot of the variation in productivity, they do not explain it all. And in software product development other factors often contribute significantly to productivity improvement. Total factor productivity (TFP) is not a simple ratio of output to input, but rather is a measure that captures everything that is not captured as labor, capital or material productivity. Factors included in total factor productivity include attributes such as changes in general knowledge, the use of particular organizational structures, management techniques, or returns on scale. The components in TFP are often the sources of productivity changes in software development.  (more…)