Efficiency Measurement Using Traditional Productivity Indicators?

In empirical economic analysis efficiency measurement traditionally at the macro and micro level is based on a production model using profit maximization or cost minimization for a single representative entrepreneur as its foundation. Common indicators are ratios of an output-indicator and input-indicator. As output-indicator the value added or gross production value are common and as input-indicators labor or capital inputs, and the respective ratio are the respective partial factor productivities. If the composite indicator from multiple-inputs is used this ratio is known as multiple or total factor productivity. Using this approach the valuations of other agents related to this production process are ignored. Customer or employee satisfaction has no impact on the production outcome. The here presented new approach attempts to change this. In marketing research for quite some time customer satisfaction has been measured as an important indicator for single companies. The Socio Economic Panel (SOEP) regularly collects data since 1984 on the employee satisfaction in West Germany and since 1991 for East Germany. This information could be used as an important benchmark to make an assessment concerning efficiency changes based on the traditional approach. One way could be using Star-plots do show the conflict of interests between the three stakeholders or to develop a composite indicator which includes these two additional variables. The actual policy debate on the direction of economic development on life satisfaction shows that there is a need to take these dimensions into account. Labor productivity might increase but at the same time the satisfaction of employees decreases. The value added of a company might increase but at the expense of its customers. Therefore it might be the time to take these conflicts of different stakeholders into account to obtain a more complete picture on efficiency changes