Productivity rate is an important economic concept that measures the efficiency of a production process which is basically the transformation of inputs into certain outputs. It may be affected by factors such as technological advancements, change in firm size and other changes in the organizational structure.
Some economists simply define productivity as the ratio of the return or output to the investment or input. Inputs of production may be material or immaterial. These pertain to the factors of production which are labor, energy, capital, services and raw materials. These are combined through the production process to create tools for consumption. Output, on the other hand, pertains to the number of services and goods that result from production. Productivity is not the same as production output although they may be related. In fact, gains in productivity may be obtained even without an increase in output if inputs are utilized efficiently.
Productivity can be measured in two ways. It can be measured by using a combination of all factors of production or it can be measured from the standpoint of one production factor alone. When all production factors are considered, it is called multifactor productivity. When only one productivity factor is measured, it is called partial measure of productivity. Among all partial measures, labor productivity is the most frequently used. Multifactor productivity refers to the output per unit of a combination of all production factors. On the other hand, labor productivity refers to the output per hour worked. In terms of data, it is more demanding to measure multifactor productivity. This is because sufficient data on output and input volume and value would have to be obtained. A method to aggregate all production factors into a common index may also have to be devised.
According to economists, there are three ways to improve productivity. This can be done by increasing the output rate on the same input rate or it could be done by reducing the input rate on the same output rate. The same is also the result when the cycle time, or the time needed to complete a process or a sequence, is reduced on the same productivity rate. Productivity gains stand to benefit a lot of people. They will translate to wage increases and increased purchasing power of workers. They will also mean higher profits for businesses and higher tax revenues for the government. Aside from increasing profits for businesses, productivity gains will also mean an increased competitiveness for them because it reflects the correlation between prices of resources or inputs and productivity.
Several productivity studies have already been undertaken to identify ways on how to increase the productivity rate of organizations. It has been revealed from these studies that efficiency or the value of output vis a vis the input costs, has a tremendous effect on productivity. In addition, these studies revealed that automation and computerization have allowed companies to increase their productivity. Social experiments conducted also revealed that steps undertaken by companies to make the working environment more comfortable such as air-conditioning systems, ergonomic designs, influenced their employees to be more productive.
Related Articles
Factors That Affect Productivity Metric Determination
By: Sam Miller | 30/01/2008 | Management
Productivity Metrics are an important part of determining a company's productivity level. Metrics are the units that are to be measured, they are what kilograms are to weighing and miles are to measuring length. Without an accurate assessment of the appropriate Productivity Metric, it then follows that the rest of...
Breaking Down Elements Of Productivity Metrics
By: Sam Miller | 23/12/2007 | Management
In any company, productivity metrics is a necessity that you just cannot do without. This is because productivity metrics is all about measuring the productivity of employees in a company. Each employee does have his or her own contributions in a company, regardless of the position held. From the management...
Identifying The Right Type Of Productivity Benchmark For Your Company
By: Sam Miller | 29/01/2008 | Management
Productivity benchmarks are as diverse as any performance and productivity metrics. The different benchmarks need to be customized to the goals of the company or organization that will be using them. Identifying the proper benchmark for you and your company will help in determining how to improve company productivity and...
Pros And Cons Of Aided Productivity Metrics Determination
By: Sam Miller | 30/01/2008 | Management
Productivity Metrics are an important determining factor for the success of a company. A positive result from the measurement of the productivity metrics would mean that a company is doing well. An inversely negative one would not sit well with company owners and share holders because they will have to...
Got a Question? Ask.
Ask the community a question about this article:
Q&A Powered by:
Latest Management Articles
Process Improvement Teams For Six Sigma Success
By: Tony Jacowski | 24/07/2008
Very often, the managers of the company devote their time to fighting fires and find little time to carry out daily responsibilities or improvement initiatives. The Six Sigma approach uses cross-functional dedicated teams to initiate improvements in the existing organizational processes.
Guidelines For Six Sigma Healthcare Project Selection
By: Tony Jacowski | 24/07/2008
Six Sigma can be an effective approach to the improvement of services by any health care organization. Its utility can be advantageous to the betterment of services like those of the administration department, housekeeping, emergency and operating processes and so on.
7 Reasons Why Six Sigma Benchmarking Efforts Fail
By: Tony Jacowski | 24/07/2008
Benchmarking is comparing the results of other organizations for the superior processes and results achieved by them with that of your organization. It is comparing your own processes with the best practices of the top-level companies. It is not mere goal setting, but evaluating the approach of these companies to achieve the sustained results.
Imagination.io
By: ryan | 24/07/2008
With the right guidance, an Internet business can start generating income almost immediately. A home internet business can be very successful for people who have the dedication, skills and patience to await agradual increase in business and income. There are several ways how an internet business can be started. However, no matter which internet business is being initiated, it won't make an impact at first.
Commercial Landlords May Offer 1 Month Agreements
By: Gary Howes | 24/07/2008
Commercial landlords have backed a campaign by the British Retail Consortium to offer retailers a helping hand during the economic downturn.
Unknown Facts About Leadership Revealed
By: Steven Sonsino | 24/07/2008
Do charismatic CEOs have any effect on business performance?
Two Questions to Help You Change Your Leadership Style
By: Steven Sonsino | 24/07/2008
There are ways you can overcome resistance to changing your leadership style.
Grow Your Physical Therapy Business With Focus and Clarity
By: Erika Trimble | 24/07/2008
In collaboration with PABC, I recently interviewed clinic owners to determine their biggest challenges in growing their private practice. During these interviews, I learned that the four key challenges are: recruiting physical therapytherapists, time to dedicate to business growth, lack of business, and marketing skills. In this article, I’ll help you tackle one of these challenges.
More from Sam Miller
Tips on Choosing Effective Service Outsourcing KPI
By: Sam Miller | 14/07/2008 | Management
When you are in the process of developing service outsourcing KPI, then you will surely have to deal with what is known as the SLA, or the Service Level Agreement. This is actually the contract or the agreement both the outsourcer and the client enter, with all the stipulations, terms,...
The Six Metrics in an Effective KPI Methodology
By: Sam Miller | 14/07/2008 | Management
In the late 1980s, there was a revolution made on how businesses are managed and this is through the usage of the balanced scorecard. This is a management tool whose target is to see if the simple activities of the rank and file employees affect the overall goals of the...
Three KPI Examples
By: Sam Miller | 14/07/2008 | Management
There are many ways to measure an employee's performance. However, the most popular tool of today that is also used by many managers all over the world is the employee scorecard. This scorecard contains metrics with specified targets and these are called KPIs. KPI means key performance indicator. As the...
Top Issues in Programmer Productivity
By: Sam Miller | 14/07/2008 | Computers
A software program is something that anyone can be trained to use. Pretty easy if one will think about it. However, very few people have an idea how many hours are put in just to complete and develop software. There is a big issue in programmer productivity in the world...
What to Include in a Balanced Scorecard PPT Presentation
By: Sam Miller | 29/06/2008 | Management
Amongst the many business and management tools in the corporate world right now, one of the most effective ones would certainly be the balanced scorecard. This is because the tool exists to measure a company's present status against the goals and objectives that the company had planned to achieve in...
Software Interface Testing and Other Types of Software Testing
By: Sam Miller | 23/06/2008 | Computers
Software interface testing is just one among the many types of software testing that are used by software engineers for software development. Automated testing is one of the most common software test approaches these days. With this, engineers would not have to perform tests or quality assurance manually.
Nonetheless, automation of...
System Testing Approach: Black Box Testing
By: Sam Miller | 02/06/2008 | Computers
Almost every aspect/phase of the Software Development and Testing life cycle finds application of Black box testing.
The attempt is to find errors. These errors can be broadly categorized as:
· The user interface contains errors.
· The methods (functions) used are either syntactically incorrect or missing.
· The data structures used in the...
Gas Production Key Performance Indicators
By: Sam Miller | 02/06/2008 | Management
There are key performance indicators (KPIs) to use that can help spotlight the benchmarks being reviewed. A system for easily monitoring KPIs on a real-time basis helps gas and oil executives make the kinds of informed decisions that enhance productivity and cut costs.
Real-time, accurate, comprehensive, at-a-glance access to this information...
Business 
