Within the walls of Amerigroup, the total claims that 30 employees process on a daily basis equals the total output of the company by all employees combined. Employees are required to process between 250 (7500) and 300 (9000) claims daily. Therefore, Amerigroup’s marginal product shows there is an increase or extra output added by hiring 12 additional employees to increase production. Unfortunately, the more employees added to the production cycle declines the per unit output of employees. What this entails is that every employee process nearly 250 claims daily and adding 12 more people increases productivity to average between 10,500 and 12,600 claims every day. Although the numbers look good there is a problem that may arise; the company may find themselves with limited equipment or other resources may become bottlenecked, and not to mention physical limitations if an employee becomes ill. This problem is called, diminishing marginal return resulting in employee work production to decline. In other words, marginal product will be positive, but declining, as the input increases McConnell, Brue, & Flynn, 2015).
Therefore, as a manager one practical method to raise marginal product per employee and that will help Amerigroup begins with offering on-the-job education and training; doing so will increase not only employee productivity and income but improve profits for the company. The company may also rely on motivation tools such as rewards instead of hiring new employees. Employees who are motivated and who receives rewards normally produce at a productive rate. If productivity falls and products are not up to par the company loses money, have unsatisfied customers and will eventually lose some good workers.
References
McConnell, C. R., Brue, S. L, & Flynn, S. M. (2015). Businesses and the costs of production. In Economics, 20th ed. (pp. 196-219). New York, NY: McGraw Hill