Concept and Definition of Productivity

Productivity is a common measure of how well a country,industry,or business unit is using its resources. In its broadest sense, It can be defined as:

According to International labour Organisation (ILO): ” The ratio between the volumes of output is measured by production indices and the corresponding volumes of labour input is measured by employment indices. The productivity is a measure of how much input is required to achieve a given output’”.

According to European Productivity Council: “Productivity is an attitude of mind. It is a mentality of progress,of the constant improvement of that which exists. It is the certainty of beings able to do better than yesterday and continuously. It is constant adaption of the economic and social life to changing conditions. It is the continual effort to apply new techniques and method. It is the faith in human progress”.

According to peter Drucker: “Productivity means a balance between all factors of production that will the maximum output with the smallest effort.

Measurement of Productivity

There are three major types of productivity  measures as listed below:

  1. Partial productivity: The final product in any activity has inputs of various resources such as manpower,materials, energy capital, plant and machinery, technology and information. Input of all these resources enables the production of products and services as required. The quantum of each input differs from case to case. Considering the input of one resources to produce the output gives a productivity value which is only a partial productivity related to that particular resources. The ratio of the output of the product and the input of that concerned factor would give us a partial productivity value related to that factor. It is very important for the management to evaluate the effectiveness of the utilization of each resources. In case, it is found from the measurement of partial productivity that any of the input resources are not effectively utilized, efforts are made to examine the issue to find out the reasons of low partial productivity of that particular resource and to decide on the possible solutions for improvement. A measure of partial productivity plays a very important role in improving the productivity.
  2. Total productivity: The concept of total productivity is defined as the ratio of total output to the sum of inputs of all resources. It is to be noted that the both the output and input are expressed in ‘real’ and physical terms in one currency of a reference period, often referred to as base period. It means that the output and input are presented in rupees or any other currency. The reduction to the base period is derived by dividing the values of output and input by reduction factor  or increase factor depending on whether the prices of output and inputs have gone down or gone up, representative. This would help in eliminating the effects of the impact of changes on the output and input at different points of time and view the effect on a common base period while computing of the productivity ratios. Therefore, total productivity is presented as:
  3. Total Factor Productivity: In any production process, many of the resources inputs are available within the organization, While a few others are purchased from outside. The net output in this case would be the difference of total output minus the value of the resources purchased from outside. As it is known, productivity is defined as the ratio of net output to the sum of associated labour and capital inputs and is represented as:


Factors Affecting Productivity Improvement

1. Technological Development:

  • Size of the plant
  • Research and Development
  • Plant and job Layout
  • Machine and Equipment Design
  • Production Process
  • Power, Raw Materials etc
  • Scientific Management Techniques

Improvement in Productivity

  • Product Development:
  • Specialization and standardization:
  • Market,Consumer and Product Research
  • Value Analysis:
  • Process Planning and sereach:
  • Method study:
  • Work Measurement:
  • Operator Training:
  • Production Planning and Control:
  • Maerial Control:
  • Plant Maintenance:
  • Improved Working Conditions:
  • Safety:
  • Personnel Policy:
  • Incentives:

Importance of Productivity

  • To Beat Competition
  • Guide to Management
  • Strategic
  • Tactical
  • Planning
  • Administration
  • Indicator of Progress
  • Maximum Utilization of Scarce Resources
  • Key to National Prosperity
  • Prosperity to Labour