Introduction
1.4 PORT WORKFORCE: PRODUCTIVITY, GROWTH, AND EMPOWERMENT STRATEGIES
the superstructure is sold to the private sector, or the permit issued by a public port authority to a private business to develop and control a terminal, berth, or a designated port service (Trujillo and Nombela 1999). This type of privatization involves different forms of agreements, reflecting the time of lease or concession, the element of permanency, and the obligations of the private sector to invest, develop, and manage the segment of port facilities stipulated in the contract.
These contractual categories include the following:
• Concession agreement: Long-term facility lease, typically for 20–40 years.
• Service or leasehold contracts: A private operator performs specific opera- tional tasks, whereas the port authority retains ownership of the facility and equipment.
• Build–Operate–Transfer (BOT), Build–Own–Operate (BOO), and Build–
Own–Operate and Transfer (BOOT) arrangements. These agreements stipu- late that as a prerequisite for operating a port segment, the private sector must participate in financing, building, and managing of port facilities. Upon expi- ration of the agreement, the ownership is shifted back to the public sector.
On the basis of these models mentioned, it is worth noting that there is a great vari- ation in different privatization agreements, options, and the extent of ownership of differ- ent assets, services, and operations within the entire port area.
1.4 PORT WORKFORCE: PRODUCTIVITY, GROWTH,
The positive output of the above functions created by entrepreneurs, workers, capi- tal, and assets is called productivity growth, whereas any bottlenecks, delays, loss of life or property, or damage of the environment are counterproductive factors that hinder growth.
1.4.1 Measuring Productivity, Throughput, and Growth
In port management, productivity measures may be investigated within the entire supply chain or the entire port entity, or within departmental segments, that is, port sectors, ship types, and terminals. It is important to distinguish the three different indicators of growth: productivity is a combination of throughput and cycle time.
On the basis of the scientifically approved concept that productivity includes entre- preneurship, capital, and labor, it can be further divided into man-made and technologi- cal. This distinction will help us measure its two key elements: technology (output vs.
input) and labor (output vs. input). Productivity is calculated by dividing the average output per period by the overall resources utilized or costs incurred during that time:
output or the end service and/or product are typically measured in business earnings and inventories, whereas inputs comprise three (out of four) factors of production, that is, entrepreneurship, labor, and capital.
While measuring productivity, it is worth noting that in the modern era of service pro- viders, productivity may also encompass intangible, long-term benefits that in accounting principles may be considered as “accrued revenue,” such as establishing positive clients’
feedback, building company reputation, and attracting new business, all of which ensure business continuity.
For port authorities, economic growth is stimulated by investment capital, technol- ogy optimization, and increase in the volume and quality of labor. The shipping indus- try’s need for growth is a powerful incentive for technological advancements in ports and ships alike, which in turn elevate the quality of human labor and amplify the possibili- ties for productivity. The industry’s emerging concepts of promoting sustainability and regulatory compliance will eventually introduce new growth factors, that is, sound pro- cesses to promote occupational health, safety, security, environmental protection, social responsibilities, and quality. The industry’s motto—“Zero accidents, zero incidents, zero non-conformities”—suggests that regulatory compliance can also be measured and assessed and will eventually be included as inputs of production and components of productivity.
UNCTAD recommends two main types of port performance indicators: (a) macro performance, evaluating aggregate port outcomes on growth and financial activity, and (b) micro performance, assessing input/output ratio measurements of port operations (UNCTAD 1999).
Consequently, there are three major port productivity indicators:
1. Cycle time or physical factors, where service is measured in cycle time, such as a ship’s turnaround time, which includes waiting time owing to port traffic plus cargo loading time, and so on. Certain models include multimodal synchroniza- tion time, that is, time counts when the port interacts with other transportation modes or components of the supply chain, for example, cargo dwell time from entrance to port until it is loaded onboard the ship.
2. Factor productivity indicators, which comprise labor and capital input during ships’ stay at the port, for example, input for loading and unloading. (i) Labor productivity displays the employee’s overall performance and measures the individual’s value added in the production and sale of the output. (ii) Capital productivity pertains to the value added per dollar. It is measured from calcu- lating the output after maintenance of port equipment, as well as the labor’s skills that contribute to the value added throughout the process. The author wishes to add a third factor productivity indicator: (iii) Entrepreneurship, which, together with labor and capital, generates a by-product that is crucial to productivity and growth: (iv) Value added signifies the income generated from the port’s performance, including facilities and services provided. In this labor–capital arrangement, the port’s growth is produced by the merged efforts of its employees (labor) and those who supply the capital (government, share- holders, terminal operators, etc.). Value added has a higher percentage in the earnings of integrated port activities, for example, assembly lines, shipbuild- ing, ship repairs, and maintenance, and a reduced percentage of earnings to less integrated port activities, such as commercial and operational functions.
Value added is distributed among capital and labor (key factors of production), and this distribution may frequently be subjective or inconsistent. Value added also pertains to the supplementary functions and quality of performance, ser- vices, or labor, which exceed the client’s usual expectations and offer more with minimum or no extra charges. Most important, value-added services provide a port with the competitive edge that can significantly enhance growth and profitability.
3. Financial indicators pertaining to ships’ traffic and cargo volume at any given time (World Bank 1999). For instance, operating surplus or total revenue and costs associated with the ships’ charge, for example, charge per 20-foot equiva- lent unit (TEU) for container ships, or cargo volume, or ships’ gross tonnage (GT)/net tonnage (NT).
Port economic impact indicators can be assessed to evaluate a port’s socioeconomic impact at a regional, state, or global level.
Total factor productivity is frequently considered as the actual growth driver inside the market or an industry segment; although labor and capital are essential contributing factors, up to 60% of economic growth is due to total factor productivity.
While the methodologies and aforementioned indicators provide accurate evalua- tions of a port’s overall performance, inconsistent or inaccurate findings could derive from poor measurements of accountability, process sustainability, management/supervi- sion, and performance control.
As an example, induced employment has been increasing considerably, to the detri- ment of direct port employment. Considering that certain inputs have shifted from the regional economy or are acquired at an extremely low cost, the added value becomes increasingly reliant on direct and induced labor. This has a twofold impact in measuring port productivity: first, it affects the validity of measurements, as input labor calculations may not be accurate or consistent. Second, it distorts the overall port growth and pro- ductivity indices. As reflected in Figure 1.5, the factors of production, that is, entrepre- neurship, land, labor, and capital are utilized as the input that will determine the port’s growth, productivity, and output.
1.4.2 The Econometrics of Labor and Production
In the previous section, we established the significance of labor as a factor productivity indicator.
A simple aggregate production function is used to estimate how inputs produce goods and services:
Y = AF (K, L) (1.1) which takes into consideration four variables, whereby Y is the level of aggregate output, K represents capital, L is labor, and A measures total factor productivity. A is hereby considered to be exogenous to capital and labor inputs. Hence, any increases in the input of K or L will result to constant, decreasing, or increasing returns to scale. F signifies the functional association whereby Y, that is, the level of economic output, is modified by input variations of capital (K) and labor (L).
The translog production functions can also be expressed as:
y = α + αk + βl + γg (1.2)
which can be expanded in a geometric infinite distributed model as follows:
y= +α α1k+β1l+γ1g+α2k2+β l +γ g +ψ +ψ +ψ
22 2 2
klkl kgkg
lgglg (1.3)
Type of output measure
Optimum usage and allocation of factors of production
Productivity,
increased output Competitive
advantage Production
growth Financial
growth
National and regional benefits
Entrepreneurship
Entrepreneurship productivity (based on gross output) Entrepreneurship productivity
(based on value added)
Labor productivity (based on gross output)
Labor productivity (based on value added)
Capital productivity (based on gross output)
Capital productivity (based on value added) Labor
Type of input measure
Capital Entrepreneurship, capital
and labor Entrepreneurship, capital and labor and intermediate inputs (energy, material, services) EKLEMS multifactor productivity Gross output
Value added
MFP Labor input Capital input
Entrepreneurship Labor share Capital share
Output
Single factor productivity measures Multifactor productivity (MFP) measures
Total productivity = Value of goods/services produced Sum of all production cost or Output
Input
Enterpreneurship, capital and labor (based on gross output) Enterpreneurship, capital and
labor (based on value added)
Entrepreneurship
E/L productivity = Labor productivity = Q/L Capital productivity = K/L Multifactor productivity = Output Output Labor + machine*
Labor + energy
FIGURE 1.5 Port growth and main productivity models. (Courtesy of M.G. Burns.)
The time element can also be introduced among the production variables to cap- ture the dynamic nature of production and exogenous parameters, such as port traffic, extended cargo loading time owing to cargo volume, and so on:
Y = F (K (t), A (t) L (t)) (1.4) Other control variables may be included as input in the above equations, such as investment, the business cycle, and so on, which are also considered to have a positive correlation with output together with capital and technological innovation.
The above calculations focus on the level of aggregate output, and yet a port man- ager will also need to compare input to output, that is, estimate the productivity of each terminal, and on the basis of their findings, calculate the overall port productivity. A port is a complex corporate entity, composed of a multitude tnd exogenous factors that will hinder productivity, that is, a strike, or act of God.
The following regression models are calculated:
Terminal Productivity:
ln( / )Q LtT = + ln( )StT+ tT+ tT +
α α α α
α
0 1 2Strike 3Weather
44%ΔCargoTt +α5Terminal sizetT+α6time+ut (1.5) Port Productivity:
ln( / )Q LtP ln( )S
tP
tP
tP
= + + +
+
β β β β
β
0 1 2Strike 3Weather
44%ΔCargotP+β5time+ut (1.6) where
ln(Q/L) = natural log of labor productivity as measured by the output per worker within the port.
ln(S) = natural log of a salary rate index.
Strike = a dummy variable, 1 for strike years, 0 otherwise.
%ΔCargo = % alternation in the cargo value, that is, imports and exports, domestic and global, to evaluate the outcomes of the market cycle and cargo value on labor productivity, both locally and nationally.
T = terminal size = average annual output per terminal, that is, a proxy for dimin- ishing returns.
P = port size = average annual output per seaport, that is, a proxy for diminishing returns.
time = a linear time trend, designed to record any benefits of technological innovation on port labor productivity.
ut = unit root tests are useful to evaluate if trending data should be first differenced or regressed on deterministic time functions to render the data stationary. Unit root tests can be used to estimate which pairs of assets seem to exhibit mean- reverting behavior.
The suggested model of port labor productivity is calculated by the average outcome of labor and entails factors such as work effort, the market cycle, or cargo volume and port traffic, while downsizing marginal returns and technological change.
1.4.3 Port Growth, Productivity, and Empowerment
While observing today’s globalized businesses in the “Era of Abundance,” the collapse of powerful maritime companies and degradation of ports, despite their affluent technologi- cal and capital resources, can only be described as a paradox. On the other hand, organi- zations with inspired leaders and empowered employees seem to stand out in performance, production, and quality, by using the company’s assets to the maximum. And this can only be achieved by utilizing the main driving force an organization has: human resources.
As discussed in Section 1.4.1, port productivity is measured in terms of (a) cycle time;
(b) factors of production, which include entrepreneurship and labor productivity; and (c) financial indicators pertaining to ships’ traffic and cargo volume. In observing these three aspects of productivity, it becomes apparent that the human factor is the determin- ing factor that can substantially influence all the other parameters, that is, machinery and capital, and control the cycle time element, that is, the turnaround time, and so on.
The human factor is also the catalyst in terms of value-added services or products, which, again, is distributed among capital and labor.
Figure 1.6 demonstrates the timeline of productivity and the impact of global workforce:
• The first era covers the 1920s and the pre-World War I, till the post-World War II era of the 1950s: “Taylorism” was a factory management system introduced in the late nineteenth century, with the purpose of maximizing productivity through establishing a protocol for the industrial processes and increasing efficiency by assigning to each worker very specific, repetitive functions. These principles enjoyed a high demand in 1928, as they seemed to match with the prevailing “Fordism”
theories, which favored an industrialized, mass-production working environment.
• In the 1950s and 1960s, the Fordist production and logistics systems brought about the mass production assembly lines. A focus on cost reduction and the introduction of robotics and computerization commenced in the 1970s, as a result of a radical increase in oil price from $18 per barrel to $40+ per barrel, which increased industrial and domestic expenditure.
• From the 1970s till the early 1990s, the market’s focal points were quality stand- ards and optimum productivity. The oil market that typically serves as an indus- trial productivity and cost measurement fluctuated from $85 in 1979 to a gradual collapse of $20 through 1986. During this time, computerization, a wide use of satellite communication systems, cell phones, and the first tailor-made maritime software were introduced to replace the telex machine, challenging ship-to-shore communication and manual calculations for the ships’ loading, trim, and stow- age measurements.
• The 2000s impressive technological advancements introduced large-scale auto- mation and networks that not only enabled the wider use of advanced software and port handling equipment, but also facilitated a booming market and the radical increase of global waterborne freight.
• Finally, the 2008 economic crisis served as a wakeup call on the global mar- kets, as productivity had to be redefined through Triple E: Energy efficiency, Economies of scale, and Environmental integrity. This trend is expected to last through the 2020s.
While econometric formulas can be used to estimate the actual human factor’s input in terms of labor and entrepreneurship, social scientists would focus on empowering employees, in order to achieve optimum productivity.
Employee empowerment means different things in different organizations, based on culture and work design, all of which are based on the concepts of job enlargement and job enrichment. Employee empowerment also means giving up some of the power tra- ditionally held by management for time and efficiency purposes. It does not mean that management relinquishes all authority, but it may allow port operations to run with sustainable accountability, even in the absence of the top management. It requires a sig- nificant investment of time and effort to develop accountability and add to individuals’
capabilities, while developing clear agreements about roles, responsibilities, risk taking, and boundaries.
As modern ports are increasingly becoming diverse, multiethnic, and multicultural, it has become crucial to identify the core values that surpass national boundaries and cultures.
In today’s business, excessive competition and economic pressures require employees to take initiatives, be inventive, and offer a great deal of their time, skills, and imagina- tion to their business. To meet these new demands, micromanagement must be replaced by self-management and employee motivation. As the rigid corporate pyramid structure tends to fade, empowerment is considered as a key motivator and a vital tool for all orga- nization members.
Global workforce: Timeline of productivity
Ethics and
discipline Mass production
assembly lines Quality
optimization
Workflows and
labor productivity Cost reduction Productivity
optimization People and networks
Automation and networks
Management and productivity concerns:
Redefining productivity vs.
economies of scale Triple “E”: Energy, efficiency,
environment
Pre-world war I to post-world war II era:
Boom years with expanding markets:
increased demand.
Fordism/taylorism theories
are up.
Boom slows, income reduced.
High demand and need for reduced
costs.
Beginning of recession, increased production out of
fewer resources.
Low costs, higher productivity, and move to improve
quality.
Automation and networks replace the people and networks concepts. Jobs
are divided between professionals that give instructions to machines,
and workers who receive instructions from machines.—the former
being better paid.
1920s 1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s
1940s
FIGURE 1.6 Global workforce: timeline of productivity. (Courtesy of M.G. Burns.)
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