Definition of Productivity:« Back to Glossary Index
Productivity isn’t just about producing physical items, even though that’s the simplest context for understanding it. Ultimately, the term describes the relationship between the input and output in any kind of commercial process.
Overview: What is productivity?
Productivity is the result of comparing the resources invested in production with the value of the produced result. A simple example is a person mowing their lawn. If it normally takes an hour for them to mow the entire yard, then finishing in only 50 minutes means they were more productive with regards to time. Spending less time for the same result without sacrificing quality or quantity is more productive.
3 benefits of productivity
Every business should want to be more productive. There’s really no downside to maximizing productivity in a workplace as long as the methods are sound.
1. Do more with less
Taking a productivity-centered approach is basically adopting the same position as you would in lean manufacturing. Focusing on people and processes first allows you to start being more efficient and profitable before investing in larger scale operations.
2. Reduce waste
Maximizing productivity also cuts down on most types of waste, which is good for several reasons. The cleaner and more efficient the company runs, the better its environmental impact and reputation. Running with low waste also helps create a positive culture internally.
3. Continuous improvement
Analyzing and addressing productivity concerns should be an eternal process for businesses. It’s an effective way to make continuous improvement, which integrates lean management principles into the company’s DNA.
Why is productivity important to understand?
On an organization level, productivity is always the result of many different variables. It’s important to appreciate the differences in these variables and how it should affect your thinking.
1. It is the bottom line
A true measurement of your company’s productivity is a better indicator of success than just measuring yearly profit margins. Productivity is the potential for profit, both now and in the future. It reflects the real health, capability and direction of the company.
2. Pick good battles
Another reason productivity is important to understand is the sheer number of variables and factors to consider. There are hundreds of things you could try to change to improve efficiency. You should start by picking the changes that make the biggest positive change for the smallest effort.
3. A finger on the pulse
Every decision a business leader makes is either about improving productivity or capacity, so it’s something you need to know about. Tracking productivity and related metrics is like keeping your finger on the pulse. It allows you to stay on top of situations and trends as they develop.
An industry example of productivity
An automotive manufacturing facility produces 100 cars every day from start to finish by means of an extended assembly line. Since they already produce enough to satisfy market demand, the company looks for ways to boost productivity by using less resources.
Leaders come up with a 4-day work week schedule and a few other policy changes that allows the facility to continue producing the same number of cars per week. These changes allow the company to save money on power costs and employee overtime without sacrificing quality or quality, so it’s a solid increase in productivity.
3 best practices when thinking about productivity
There are a lot of right ways and wrong ways to think about productivity. The best thing to do is break it down and keep everything in perspective when making decisions.
1. Focus on productivity types
It’s very difficult to make sense of total productivity, especially in larger companies. That’s why it’s usually broken down into specific types, like labor or capital, for clarity. This distinction is more for the sake of the analysts than the data, since individual factors often intertwine and span different categories.
2. Plan for higher productivity
A few words and a bright idea is a good start, but it is not the end point. You can’t expect real change from a momentary initiative. You should opt for specific changes based on productivity priorities and set a realistic schedule for achieving them.
3. Don’t stop after one success
Every business should engage in continuous development. If you aren’t moving forward, then you aren’t going in the right direction. Consistent and incremental improvement in efficiency often defines the difference between a success and failure in commerce.
Frequently Asked Questions (FAQ) about productivity
1. What are different types of productivity?
Productivity can be considered in a general sense or tailored to a specific factor by limiting the scope of the context. Labor productivity compares output to input of manpower and man hours. Capital productivity compares output to total financial investment.
2. How should you define productivity?
The definition of productivity in a specific situation really depends on what you make and how you make it. Sometimes long-term productivity is preferred over short-term.
3. How to improve productivity in the workplace?
Improving productivity is the professional pursuit for business management consultants around the world. Lean management practices are a great place to start improving operational efficiency.
Prioritize, plan and produce
Every successful business has growth pains. Methods become less efficient, communications slow down and things slip through the cracks as things get busier. Companies have to actively counter stagnation by examining their productivity metrics so they can prioritize new initiatives, plan for change and start producing more efficiently.« Back to Dictionary Index