It is defined as the relationship between productive activity and the means that are necessary to achieve it. Being these means of the technological, human or infrastructure type. It can also be understood as the production obtained by a productive system using certain resources for this purpose.
Productivity should be perceived primarily as an efficiency indicator that serves to relate the amount of resources used with the amount of production obtained.
There are a number of factors of influence or impact that must be known to understand the whole concept. These are:
- External factors: refers to all those aspects that do not depend on the company, that is, that are beyond their control. These factors include government legislation or the different regulations, competition or potential demand.
- Internal factors: are all those factors that do depend on the company. It comprises aspects in which the company has influence such as manufacturing processes, product or service quality, production circuits and its organization, administrative issues, human resources management, among others.
- Talent management: in addition to external and internal factors, it is directly affected or benefited by workers. The most important company asset is its human capital, since if he is not satisfied or motivated, there is a direct impact on the productivity of the organization.
Types of productivity
When talking about productivity management, people usually think only of processes. But this is a mistake, since this concept goes beyond this aspect. In reality, process productivity is just one of the many types that exist. These are some of the most important.
On an economic level, we can highlight:
- Labor productivity: Refers to the increase or decrease in the yield of a production based on the time invested per worker to obtain a final product.
- Partial Productivity: Quotient between the level of production achieved and the factors consumed to achieve it in a period of time.
- Marginal productivity: It is also known as Marginal Product in Microeconomic Theory. This is the additional amount produced by adding when adding an additional unit of a productive factor, leaving the rest of the factors constant.
- Total factor productivity (PTF): It is a measure of macroeconomic level calculation which measures the effect of scale economics in the economy at the aggregate level. In other words, how total production grows by increasing each productive factor in a unit. It is measured by calculating the difference between the growth rate of the production of an economy and the weighted increase in labor, capital and the rest of the productive factors.
At the business level, we can highlight:
- Process productivity: It implies the correct use of the different resources that are available in the organization such as technological, physical, management tools and human talent. By jointly managing these aspects, the company can reach high levels of quality in its production, achieve excellent customer service and add value to the organization.
- Marketing productivity: This is one of the most important sectors for modern business. We live in one globalized economy in which it is essential to generate good commercial strategies that allow companies to reach new markets. This way they can increase their customer base and then build loyalty. Remember that customers are the basis of all business.
- Productivity in innovation: With the broad competition that exists today, it is necessary to bet on innovation. This should be perceived in companies as something new and profitable and should be based on actions such as environmental monitoring, the benchmarking (comparison between companies), knowledge of the evolution of trends and be aware of new technologies.
- Knowledge Productivity: to remain competitive, the human talent of a company must have precise and especially updated knowledge of the area where it operates. This implies knowledge about issues related to tools, technologies, organizational processes, among others.
Importance of productivity
Productivity is the relationship between the amount of goods and services produced and the amount of resources used. Considering it Where does its importance really lie?
The objective of improving efficiency standards is to save resources during the production process, so that they can be reassigned to other tasks or simply become a benefit for the company. The only way that a business can follow to grow and expand sustainably, increase its profitability and competitiveness, is to increase its productivity.
That is why, the key to achieving this goal will always be focused on the instruments necessary to achieve this, which are the improvement of the methods, the elimination of superfluous activities, an adequate system of remuneration, improvement in communication between departments.
What is productivity in the company?
Improving business productivity is a work of outstanding importance and must be carried out daily. But what is business productivity? If you have that productivity is the relationship between a productive activity and those means necessary for this production, this term applied to the company corresponds to result of the actions that are carried out to achieve objectives in a business.
But these objectives must be achieved in a good working environment, as well as taking into account the relationship between the resources that are invested to achieve the objectives and the result of these. We must not forget that the increase in productivity is the business solution with more relevance for obtaining growth and profits.
The key to improve it, is in the application of a good business management; that which is capable of encompassing a set of techniques applicable to the whole of a company focused on working in a more efficient way. Its main objective should improve its productivity, sustainability and competitiveness indices, to guarantee the viability of said company.
Likewise, it is important to know that productivity is a crucial indicator that is often overlooked and needs to be measured in an objective and rigorous manner. Something that represents a serious error in itself.
Therefore, it is not exaggerated to say that all companies are responsible for knowing exactly how their productivity is, what it is based on and what is failing. Because with the productivity is facing an indicator, equal or more important than the company’s economic performance.
What is productivity in the economy
Productivity in the economy is the amount of production of a unit of product or service input for each factor that is used per unit of time. One of the most visible ways to increase the productivity of a company is that the entrepreneur invest in a capital unit to make work more efficient.
This will maintain the same level of employment or could even be reduced. But this form of productivity is widely criticized by workers, who believe that their jobs are put in danger. It is true that there are entrepreneurs looking for this, that is, more production and fewer workers, but it should also be noted that productivity goes much further than having a machine in your workplace. There are factors that determine this:
- The quality and natural resources in the production of products that need these resources.
- The structure of the industry and the changes in the sectors.
- The level of capital.
- The quality of its resources.
- Its macroeconomic environment and its microeconomic environment.
Difference between production and productivity
The basic differences between production and productivity They are:
- Productivity is an indicator of the efficiency of the productive system that takes time into account as a fundamental factor for its calculation (see example at the end)
- Production consists of a process where production factors are used to manufacture goods and services.
Is productivity the same as efficiency?
The truth is that the terms efficiency, effectiveness and productivity are widely used in daily activity. And although they relate to each other, their definitions are different.
It is had on the one hand that the Productivity is the product-input ratio over a period of time and with the correct quality control. While you have on the other hand that the efficiency is the achievement of goals with the least amount of resources possible.
Relationship between productivity and growth
Both terms have an important relationship, and that is that the economic growth It takes place when people are able to take existing resources and reallocate them to generate more value.
And when you want to increase productivity, the goal is make more efficient the way in which resources are organized. All this with the intention of producing more and better, in a nutshell, driving growth.
While it is possible to improve it with the proper use of the tools that are already available, it is the new ideas that are responsible for the sustained growth of a company.
Many times the concepts do not explain themselves, due to their complexity. Therefore, to better understand what productivity is, we present some general examples that could be very useful.
Think of the workers in a candy factory. The company has a certain structure to carry out its production processes. That is, they have a certain number of workers who work on a set schedule. Thanks to this a certain amount of candy is produced per day.
Now, the factory decides to buy new machines that automate a series of jobs. This results in a increased daily candy production.
Has productivity also increased?
Yes, in the same period of time, factory workers are able to produce a greater amount of candy per worker with respect to the previous period in which they did not have these machines.
Another example to understand productivity is as follows.
One company manufactures 40 pants in one hour, while another makes 50 pairs at the same time. The second has more staff or more machines.
Obviously, the second factory gets more production, but which one is more productive? I explain it to you in a simple way:
Productivity = Units produced / Production factors needed
Case 1. Both need 10 production factors
- Company A: 40/10 = 4
- Company B: 50/10 = 5
conclusion: Company B has higher productivity
Case 2. Company A needs 5 production factors and B 10
- Company A: 40/5 = 8
- Company B: 50/10 = 5
Conclusion: Company A has higher productivity.