HomeProductsHRM/PayrollWhat is The Meaning of Productivity?

What is The Meaning of Productivity?

Productivity meaning according to Cambridge Dictionary is the rate at which a company produces goods or services, usually judged in relation to the number of people and the time necessary to produce them. The workforce’s productivity is critical to the company’s profitability and competitiveness. Input is the level of output per unit of labor, capital, and equipment.

To assess the productivity of a factory, we can measure it by calculating the time it takes to make a certain product. In the service sector, however, where units of products do not exist, measurement is more challenging. Some service firms focus their evaluations on the amount of money each employee earns. They then multiply that figure by their annual wage. This article will explain productivity meaning and how it may benefit your business.

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Productivity Meaning

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Productivity meaning is a measure of economic or commercial performance that demonstrates how efficiently people, businesses, and industries can measure or turn inputs (labor and capital) into outputs (goods or services). It is frequently computed for the economy as the ratio of GDP to hours worked. In general, it may be quantified at one of these five levels. There are five degrees of productivity: personal, labor, sector, department, and national or global productivity.

Related articles: Improving Employee Productivity with ERP Software- Best Practices You Must Employ 


Why is Productivity Important?

Productivity is critical to the economy because it allows individuals to achieve more. It can also assist them in doing more with fewer resources. Furthermore, because it is a measure of efficiency, it also becomes the key to success in a competitive market. You may earn more money by boosting your productivity. However, if your productivity falls, you may be unable to run financially and face delayed development.


Productivity and Investment

Investment is one of the factors that drive economic growth. This is backed up by a company’s strong productivity. The presence of investment indicates that production capacity has increased, allowing the pace of economic growth to expand. When it does not increase at a considerable rate, potential advances in wages, business profits, and living standards are limited.

The rate of investment in the economy must be equal to the rate of saving. This is due to the fact that investment must be financed through savings. If the saving rate is low, the investment rate will be low, resulting in low labor productivity and real pay growth. Furthermore, low savings rates will impede future product development in the economy. Available technology and management’s willingness and understanding of how to improve processes also play a role.


How to Calculate Productivity?

Productivity calculations are straightforward. This may be accomplished by dividing the firm’s output by the inputs utilized to create that output. Labor hours are the most often utilized input, whereas the output is recorded in units produced or sales. For example, if a manufacturer made 10,000 widgets last month but was only paid for 5,000 hours of labor, productivity would be two widgets per hour (10,000 / 5,000). 

Source: Canva.com

Sales may also be used as a metric for production. 10,000 widgets, for example, equals $1 million in revenue for that manufacturer. To calculate it, simply divide the $1 million number by the 5,000 hours worked: $20 in sales per hour worked. Meanwhile, national productivity is generally measured in terms of a country’s GDP (GDP). It is usually calculated as the total value of all completed products and services produced inside a country’s boundaries over a specific time period.


How Does Productivity Work?

Having a high level of productivity has a number of advantages for your company. It will rise when output rises faster than inputs or when enterprises can create the same output with fewer resources. Here are four solutions that can help people accomplish more than just work hard.


Increasing scale

The expansion of your operations will have an impact on increasing your company’s productivity. For example, if you want to double the output of production, then this may require you to double the size of the premises, human resources, and even machines to carry out the production. However, this does not require you to build a second headquarters or offer more human resources. This will result in your company’s output doubling, but not your input.


Technical efficiency

Companies may enhance technical efficiency by incorporating technology into their operations. When opposed to employing only labor to produce, technology may be able to quadruple productivity. Workers, on the other hand, have limits and maximums in terms of completing their tasks in a timely manner. In an apple orchard, for example, productivity will be increased in a single day compared to workers picking apples by hand.


Technological improvements

The company will increase output above demand as technology improves. Improving production technologies will improve the company’s production performance. For example, if the company has an apple-picking machine, the productivity of the workforce will be doubled. The addition of inputs in the form of technological advances increases output while lowering costs.


Organizational improvements

The work system will be more efficient with the rearrangement of the team of workers. This usually changes according to the worker’s skills and knowledge of the task. You may, for example, boost your hourly production by reorganizing your apple picking staff so that they can cover the entire orchard more effectively.



productivity meaning

As a result, it is critical for company executives to understand how to evaluate productivity and then utilize that data to identify and overcome impediments to increasing the productivity of their staff. Employee productivity (also known as a workforce) is a measure of the efficiency of a single worker or a group of workers. Many companies are already using ERP software to boost staff efficiency. Hashmicro’s HRM is employee productivity software that may be used to improve staff productivity in your company.

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