Question

Productivity should be a concern of every business organization.

How is productivity defined?

How are productivity measures used?

Why is productivity important?

What part of the organization has primary responsibility for productivity?

How is efficiency different from productivity?

Answer 1

Productivity:

Productivity defines various measures of the efficiency of production.

A productivity measure is expressed as the ratio of output to inputs used in the process of production.

Productivity is the measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs.

It is computed by dividing average output per period by the total costs incurred or resources such as (capital, energy, material, personnel) consumed in that given period.

Productivity is a very critical determinant of cost efficiency.

Thus, productivity may be defined as the efficient use of resources, labor, capital, land, materials, energy, information, in the production of various goods and services.

Output/ Input = Productivity.

Productivity measures:

There are many different ways in which we can measure productivity as follows:

• Labor productivity based on gross output

Measured as = Quantity index of gross output / Quantity index of labor input

• Labor productivity based on value added

Measured as = Quantity index of value added / Quantity index of labor input

• Capital-Labour based on value added

Measured as = Quantity index of value added / Quantity index of combined labor and capital input

• Capital productivity based on value-added = Quantity index of value added / Quantity index of the capital input
• Multifactor productivity = Quantity index of gross output / Quantity index of combined inputs

Why is productivity important:

Productivity is important to have a clear picture of the business/organization at any given point in time and can be measured for various verticals/ departments within the setup. The main objectives and importance of productivity lie in measuring the following:

• Technology
• Efficiency
• Real Cost Savings
• Benchmarking production process
• Living standards

The manufacturing/operations and supply chain management are the departments which are solely responsible for the efficient run through of any business setup are responsible for productivity.

How is efficiency different from productivity:

Efficiency is defined as a well-organized and competent way on the other hand productivity means the organization etc is successful in producing a desired or intended result.