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Home » Productivity Definition | Formula | Types & Example

Productivity Definition | Formula | Types & Example

By Richard Daniels Reading Time: 4 mins
Updated February 14, 2017

Productivity is an economic measure that calculates how many goods and services have been produced by each factor used (worker, capital, time, costs, etc.) in their obtaining in a given period of time.

The objective of productivity is to measure the efficiency of production for each factor or resource used, meaning efficiency to obtain the best or maximum yield using a minimum of resources. That is, the fewer resources needed to produce the same quantity, the greater the productivity and therefore the greater the efficiency.

Productivity Formula

With this in mind, the formula for calculating productivity is the quotient between output and resources used.

Productivity = Output / factor used

For a company, an industry or a country, productivity is a determinant factor in economic growth, since it involves:

Saving costs: by allowing you to get rid of what is unnecessary for the achievement of the objectives.

Saving time: because it allows performing a greater number of tasks in a shorter time and dedicating that “saved” time to continue to grow through other tasks.

Types of Productivity

Depending on the factors we take into account, productivity can be classified into the following types:

Labor productivity: It relates the production obtained and the amount of work employed.

Total Productivity of Factors: The production obtained is related to the sum of all factors involved in production (labor, capital, land)

Marginal Productivity: It is the additional production that is achieved with the one additional unit of a production factor, keeping the rest constant. Here comes the law of diminishing returns, which states that in any productive process, adding more units of a productive factor, keeping the rest constant, will progressively give smaller increases in production per unit.

Productivity Example

If a company can manufacture 30 pairs of shoes in one hour (productivity = 30 shoes / hour) and another company manufactures 40 pairs in an hour (40 shoes / hour), we will say that productivity is higher in the second company, since Quantity of goods produced in the same period of time is greater.

That the second company is more productive than the first will depend on factors such as the following:

  • Training and experience of workers
  • Business organization
  • Technology used in the production process.

It will not be the same as an apprentice shoemaker, a person who has been doing the same activity for many years. Just as it will not produce the same amount a company that uses the best technological innovations, another that has a much more rudimentary production system.

Techniques to Improve a Company’s Productivity

In most companies, workers when they first enter work require a period of apprenticeship to acquire the knowledge and skills necessary to perform the job. However, do companies know how to teach their workers to be more productive?  Are companies prepared to increase the productivity of their company? Productivity is one of the main challenges and aspirations of companies.  The entrepreneurs want to achieve better results in the shortest possible time and using fewer resources. That is, do more with less.

Improving a company’s productivity is not always a big financial expense. To do this, you must analyze and measure what is actually done in the company and what the employees need. The 5 techniques to Improve Productivity

  1. Invest time in Training Employees in new Technologies

Permanently updated workers will give the company a competitive advantage. In addition, they will motivate them in their work and prevent the best ones from leaving the company. Often companies assume that employees know how to handle the technologies, and in turn, employees may not want to ask about their use for fear of showing low knowledge. Although employees have basic knowledge, it is important to educate them to make the most of technology.

  1. Internal Communication

Both among employees and by managers to their employees. This strategy can improve flexibility and encourage family and work-life balance of members of the company. For this purpose it would be convenient to hold meetings of no more than fifteen minutes to coordinate the team and meet their needs.

  1. Organization of Work

In all companies, hours of work are lost because of the lack of organization or coordination between departments. Thus, it would be desirable to establish workflows between the different departments or work teams in order to improve coordination. So you could make a list of tasks with the deadlines determined for its implementation and define the common objectives of the company.

  1. Motivation

Motivating workers is an indispensable task for companies and that favors the work environment in the company. For this, the entrepreneurs must work for the emotional and mental integration of their team, listening to their ideas and proposals so that they feel involved with the company. The recognition, the possibility of career plan in the company and the working conditions are some other factors that influence the motivation of the employee.

  1. Do not stay Outdated

Both in the way of work and in the material. It is important not to let computers and programs become obsolete, harming the productivity and patience of employees. In addition, companies could improve the productivity of the company with cloud services, which allows users to work from anywhere via the Internet, either from home with the computer or anywhere else with a Smartphone.

So the cloud favors remote work and job flexibility, as corporate applications or documents would be in the cloud and would also allow multiple people to be working on the same file at the same time. Some examples of such technologies would be the applications offered by Google, such as Google Drive, which has its storage service and tools to create documents, spreadsheets or presentations. Another similar application that also has corporate version is Dropbox. These are some key notions to increase productivity in the company, so if companies bet on new technologies and their workers can increase productivity.

Author at Business Study Notes
Richard DanielsAuthor at Business Study Notes

Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
Love my efforts? Don't forget to share this blog.

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Filed Under: Economics Tagged With: Productivity Example, Productivity Formula, Techniques to Improve a Company's Productivity, Types of Productivity

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