Definition Of Productivity

What Is Productivity?

Productivity is subjective in its relation to the type of business or industry being mentioned for this definition. Productivity is mainly mentioned with how it relates to the aspect that is studied related to a business and it’s organizations.

Concepts In Productivity

Concepts relate to productivity according to input and output of a specifie system. A department will have different variables and other factors based upon the group it belongs to. It could be concerned with the function of the office, the manufacturing procedures, machinery systems and more.

It is similar to cause and effect. What causes an effect. In productivity it relates to how an input causes an output.

You are mainly looking for how resources being input into an organizational system cause what outputs over a period of time.

Variables And Their Meaning

Care must be taken in deciding which variables or input realistically affect the productivity or output. Similar to sunk costs, certain varibles or input factors such as labor sometimes are misleading.

Take into account that input factors cannot be studied by themselves. Variables causing productivity improvement are usually at the cost of another variable. Labor can be an input variable but usually managerial resources are not.

In the end, there is really just an output input relationship production system developed eventually as an accurate reflection of the productivity of the organization. Set input variables are used to determine the progress and health of a system.

What Are The Objectives?

Experts agree there are three objectives that should be taken when undertaking productivity measurements.

First, you must identify portential improvements. Secondly, decisions must be made to reallocate resources when necessary. Third, it must be determined how well the previoulsy established goals were determined.

Performance vs Financial Productivity

Performance productivity is bases on the actual production and the number of produced outputs.

In performance productivity, you are looking for increased outputs of units over set periods of consecutive time intervals.

Financial productivity is looking for increases in profits over consecutive periods of time. Price increases or decreases can result in misleading data that could cause inaccurate conclusions whether production is going up or down.

If you lowered the price and kept the output the same, it would look like sales were declining. If you raised the price and kept output the same, it would look like sales were increasing.

There would be changes in performance productivity and financial productivity that may not give the actual financial health of the organization.

Decisions On When To Make Changes

Each organization must determine the balance between production productivity and financial productivity to make accurate decisions on how to manage and continue to progress the organization or business. There are many factors and variables that must be taken into account to accurately determine the best path to follow.