Productivity

Productivity: Breaking It Down

The common core in the definition of productivity is the “ratio of output to input”, a ratio that reflects the efficiency with which resources are converted into outputs. —Jamal Khan, Gaining Productivity

Productivity is the ratio of output to input for a particular activity — the lower the ratio, the higher the level of productivity, reflecting the relationship between output and input.

In the same vein, productivity is relationship of real output (goods and services) to real input. It is a measure of efficiency—a ratio between output and input.

Likewise, it is a measure of the relationship between resources used and output produced. It is a ratio of efficiency in producing goods and services, and it is a ratio between effectiveness and cost.

Also, productivity is a measure of the relationship between output and input in a work situation. It is the effective use of resources in the generation of goods and services. It involves reaching the highest level of performance with a relatively low level of spending.

Having laid foundation for understanding the concept of productivity, we now look at a succession of definitions and conceptualizations to add more clarity.

  • Productivity is comparing the quantity of goods and services produced and the quantity of resources employed (Fabricant, 1969).
  • Productivity is the value of outputs generated which is divided by the amount of labor input (United States Bureau of Labor Statistics, n.d.)
  • Productivity is the ratio between the totality of outputs for a given time divided by the totality of inputs during the time (Mundel, 1975).
  • Productivity in the public sector is the efficiency with which resources are consumed in the effective delivery of services (Hatry, 1978; Mark, 1981; Prokopenko, 1989).
  • Productivity is a measure of how much output is provided per unit of resources employed (Holzer and Nagel, 1984).
  • Productivity also involves human endeavor (effort) to produce more and more with less and less inputs of resources so that the products can be purchased by a large number of people at affordable price.

Productivity is about managing time more effectively and eliminating waste in the pursuit of meeting goals (Lynch and Cross, 1991). It means how much and how well one produces from the resources used.

Conceptual Clarity Between Productivity & Related Concepts

There are numerous ambiguities and inaccuracies between productivity and a few related concepts.

Productivity and production are not to be confused with each other.

Whereas production is an act of productivity or creating a good, service, or information; productivity is the quality of goods and services produced without regard to the quantity of resources used.

Production is the amount of output reached, while productivity is concerned with the efficiency with which output is produced.

While it is true that production levels and productivity rates generally move in the same direction, productivity can increase or decrease independent of change in production.

Also, while production is concerned with the activity of producing goods and services, productivity is concerned with the effective utilization of resources in producing goods and services.

Currie and Faraday (1993) state that one can increase the actual volume of production and yet decrease productivity, and in seeking higher productivity one is concerned not only with increasing output but also with increasing output from the same or smaller use of resources.

Productivity is not to be confused with effectiveness.

While productivity is a measure of the resources consumed to produce work that contributes to mission attainment, effectiveness is the degree of accomplishment of objectives.

Whereas productivity represents the ratio of outputs to inputs; effectiveness is the relationship between output and effect.

Productivity and efficiency are not to be mistaken with one another.

Whereas productivity is an output-input ratio; efficiency is the level of output for a given volume of input (Bouckaert, 1992, 1993).

Productivity is concerned with the efficient utilization of resources or inputs in producing goods and services or outputs, while efficiency is the ratio of actual output attained to standard output expected.

Efficiency differs from productivity in that it incorporates the idea of making the best use of resources and continuing them in the best way, while productivity assesses a relationship between input of resources and delivery of outputs.

Many confuse productivity and performance.

Performance is a generic concept with many attributes or components, while productivity is a specific concept. Performance is not productivity and does not ensure productivity (Ilgen and Klein, 1990).

Performance refers to an employee’s actual manifest behavior at work, while productivity is the result, in terms of output, of that behavior, i.e. performance.

It is a mistake to believe that productivity and quality are contradictory.

In reality, improved quality is followed by increased productivity. If work is done right to begin with, less rework results and work gets done with less effort. With better quality and increased productivity, costs go down and customer satisfaction rises (Groocock, 1987; Hart and Hart, 1989).

Quality and productivity have a positive relationship. Improved quality reduces waste and reduced waste improves productivity (Daft, 1988).

Poor quality can adversely affect productivity if work is defective and has to be reworked, or if an employee has to try a number of measures before finding one that works properly, or poor quality in methods, procedures, tool and equipment can lead to errors, delays, injuries and defective output (Stevenson, 1986). Efforts to reduce the cost of poor quality almost always improve productivity.

Measuring Productivity

Measuring productivity serves a few strategic purposes. It provides a common language which can be examined across sectors and organizations. Management wants to know how personnel are performing and measurement can be effective in this respect.

The combined input of a number of factors such as land, materials, machines, capital, and labor gives an output in an industry. The ratio between output and one of these factors of input is usually known as productivity of the factor considered.

Productivity may also be considered as a measure of performance of the economy as a whole.

Mathematically,

Productivity
Factor productivity
= Output Value/Input Value
= Output due to the factor/Input factor employed

As it has been said severally within this literature, productivity measurement is the ratio of organizational outputs to organizational inputs (a ratio between output and input). Thus productivity ratios can be:

  • Partial productivity measurement
  • Multi-factor productivity measurement
  • Total productivity measurement
  1. Partial Productivity Measurement
    Partial productivity measurement is used when the firm is interested in the productivity of a selected input factor. It is the ratio of output values to one class of input.
    partial productivity measurement formulae
  2. Multi-factor Productivity Measurement
    This productivity measurement technique is used when the firm is interested to know the productivity of a group of input factors but not all input factors.
    multi-factor productivity measurement formulae
  3. Total (Composite) Productivity Measures
    A firm deals about composite productivity when it is interested to know about the overall productivity of all input factors. This technique will give us the productivity of an entire organization or even a nation.
    total productivity measurement formulae

The above measurement techniques can be grouped into two popular productivity measurement approaches the first uses a group-generated model and is called normative productivity measurement methodology.

The second is less participative in that one model can be modified to fit any organization scheme. It is called multi-factor productivity measurement model.

Improving Productivity

According to Johns and Wheeler (1991), there are two broad ways in which productivity can be improved. They include expansive (increasing output) and contractive (reducing output); and the following permutations are made:

  1. Work smarter, which means to hold inputs the same while increasing output.
  2. Manage growth, meaning to increase inputs while increasing output proportionally more.
  3. Cost reduction, meaning to hold output the same while decreasing inputs.
  4. Pairing down, which means to decrease output while decreasing inputs proportionally more.
  5. Innovative, meaning to decrease input while increasing output.

Points 1 and 3 are special cases of 2 and 4, since it is unlikely that changing either input or output will leave the other unaffected.

While recognizing that productivity can be improved during the lifetime of a business, it is important to emphasize that productivity is highly defined during the design stage of a building. Johns (1993) argues that if productivity is not considered in the design stage, subsequent efforts to improve productivity can be no more than remedial action.