We explain what productivity is, what factors influence it, and how it can be measured. In addition, we discuss its importance and more.
What is productivity?
Productivity is the relationship between production and resources, that is, between the quantity of manufactured goods or services produced and the means and inputs used in that process, such as invested capital, employees, machinery, and time, among other resources.
A company’s production process involves several functional areas whose work processes can be measured and analyzed, such as human resources management, marketing and sales, accounting and finance, and IT, among other areas.
Measuring each area’s performance allows optimizing productivity through more accurate decision-making, so that the organization can grow and develop efficiently.
- Productivity is a business process that depends on the coordinated work of the different areas in the organization.
- Productivity performance can be measured with different tools.
- Achieving optimal productivity implies that the company makes an efficient use of resources.
- See also: Empowerment
Factors affecting productivity
Company productivity is affected by two types of factors:
- External factors. These are aspects that lie beyond the organization’s control, but which nevertheless must be tackled and overcome in order to maintain the normal activity of the business. For example: the availability of raw materials in the market, tax policies, or a country's economic adjustment measures.
- Internal factors. These are aspects both within the organization’s control, such as having adequate infrastructure, machinery and financial backup, as well as aspects which it cannot fully control but can influence, such as organizational climate and employee motivation.
In order to achieve optimal productivity, business management must act strategically considering the impact of both external and internal factors. There are various tools that allow for the proper management of the organization, such as a business plan, management control, employee motivation techniques, and project planning, among other necessary tools for organizational development.
How to measure business productivity
Business situation analysis tools make it possible to understand a business’ strengths and weaknesses. This information allows for the assessment of a company’s performance and its position in the market.
In addition, there are statistical methods and data analysis techniques, which through various productivity indicators measure the efficiency of the organization as a whole, its products and services, or a particular project.
- For example: Revenue per employee indicators, which identify the number of products a person can manufacture under certain conditions; customer satisfaction indicators, which allow assessing how well a product meets customer expectations as well as identifying areas of improvement, among other indicators.
With the data obtained from metrics and management control, it is possible to analyze a company's overall performance to detect opportunities for innovation and improvement.
- For example: A company that makes cardboard boxes has a production capacity of 1,500 boxes per day. Through indicators measuring productivity per employee per machine per day, it is possible to identify the process areas that need improvement to increase the number of boxes with available resources. It may also be concluded that the production system is operating at maximum capacity and it is necessary to invest in new machinery and more staff.
Importance of productivity
For a company to be productive, it must have clear objectives that are known to all employees, have management with a strategic vision, and an organizational culture that creates a positive impact on employees and the environment. Measuring business productivity allows optimizing a company's performance.
An organization's productivity is not an isolated factor, but is the result of a process in which different areas of the company interact with external factors. It is important to know and continuously optimize each stage of this process in order to achieve maximum productivity.
Nevertheless, the fact that a business is productive does not necessarily mean it is successful. In addition to generating economic profits, a company must engage in comprehensive business management known as corporate social responsibility (CSR), which contributes to creating a positive impact on society and the environment.
- Bettucci, F. & Pelaez, S. (2017). Análisis y optimización del proceso de producción de Río Cuarto S. A. https://ri.itba.edu.ar.
- Betancourt, D. F. (2017). Productividad: Definición, medición y diferencia con eficacia y eficiencia. https://www.ingenioempresa.com/.
- Drew (2022). ¿Qué es la productividad?. https://marketing.wearedrew.co/.