What Is Productivity? Definition and How to Measure it

Importance of Productivity

1. The Major Propellant of Economic Growth

Higher productivity is indeed the macroeconomic engine of economic development. Countries that record higher productivity as a norm will enjoy success and better living standards.

2. Greater Efficiency for Business

Being productive in organizations may mean having an increased output for lesser input. It then makes the organization more ambitious, lucrative, and competitive.

3. Better Personal Living Standards

At an individual level, being productive means less stress, more confidence, and hence more accomplishment. Individuals can now balance their work and personal lives effortlessly.

Different Sorts of Productivity

There is a concept of productivity considering its various forms in diverse socio-cultural and environmental contexts. Some of the types are:

• Labor: It expresses the result of the production of goods or services by a worker during a specific period of time. As a matter of fact, it is commonly used in measuring the efficiency of manpower in industries.
• Capital: This productivity type focuses on how the business is efficient in using their capital like machinery, equipment, or investment in terms of output.
• Multifactor: Multifactor productivity accepts labor, capital, and energy as multiple inputs in analyzing the general efficiency of a system.
• Personal: This is the most acceptable form of productivity in an individual case. The way every individual understands and uses his time, resources, and energy to meet personal goals differs from one person to another.

What Impacts Productivity

• Innovation: Progress in innovation, in the form of automation and software tools, has changed and is changing the way human beings accomplish tasks, improving work as well as reducing errors.
• Strengths and Capabilities: A proficient workforce is able to handle all kinds of complicated work much faster, resulting in better productivity.
• Workplace Setting: An environment at work that is well organized and has positive vibes encourages concentration, creativity, and motivation.
• Physical and mental health: Both of these are crucial for keeping the productivity lines going. Healthy individuals or employees stay active and focused.
• Effective Planning: Time can be managed so that priorities get addressed without excessive delays or interference.

How do you measure productivity?

Evaluation of performance and increased overall performance is assessed through productivity measurements. Measurement of productivity is in different contexts as follows:

Measuring productivity must depend on a lot of other things and not just costs alone. It’s inclusive of how well your company piles up raw materials, machines, paperwork, and groups of employees and then spits out goods or services. This is what, as much as possible, a productivity index would be about: a relationship between all kinds of physical inputs and outputs. (Chew, 1988)

The basic formula of Productivity is:

Productivity = Units of output/Units of input

Measuring Productivity in 4 other ways:

1. Labour Productivity

Labor productivity is a common metric that emphatically measures units of goods or services produced per unit of labor input.

Labour Productivity = Total Output/Total Labour Hours

For example, labor productivity of a team producing 100 units in 10 hours will be:

Labour Productivity = 100/10 = 10 units per hour

It is labor productivity that measures the extent to which employees contribute to overall output and helps decide on staffing, training, and resource allocation issues.

2. Multi-Factor Productivity

Multifactor Productivity takes a much broader view than just measuring output – it considers multiple inputs: labor, capital, and raw materials used in the production of goods and services (final products). This definition is a more comprehensive definition of organizational or systems productivity.

Multi-Factor Productivity = Output Units/ (labour input + capital input + materials input)

Analyzing the data related to MFP helps an organization to identify improper inputs and, thus, make the best use of all inputs, not just labor.

3. Calculating Output

Simply put, calculating the output means measuring productivity by measuring the output of a task, process, or system. So, this is a relatively easy and good measure of performance.

Output Per Hour = Total Output/Total Hours Worked

If a copywriter pens 5 blogs or articles in 10 hours, then the output calculation would be:

Output/Hour = 5 Articles/10 Hours = 0.5 articles per hour

4. Time Tracking

Tracking time is crucial for identifying how well people and teams are performing. Evaluating how time is spent can aid in pinpointing where products or activities can be eliminated so that time is focused on value.

Tools such as Trello and Asana track how long you are occupied with a single task.

Suppose a project takes 5 hours more than it’s meant to; a proper time-tracking parameter can assess the actual reason for the delay in delivery.

How Can You Improve Productivity?

• Define your Goals

If your goals are sorted, then you’re moving in the right direction. You can use frameworks to make sure that your goals are realistic, for example by using SMART goals (S-specific, M-measurable, A-achievable, R-relevant, and T-time-bound).

• Efficient Management

Settle on high-value activities. For example, the Eisenhower Matrix sorts out urgent and important from not-so-important.

• Usage of Tools

Bring some productivity applications that will smoothen your work course, such as Trello, Asana, or Notion.

• Workspace Values

Create and plan uninterrupted time periods of work in a time-blocked manner of working for an interruption-free workspace.

• Leverage Recess

Design short breaks from working to concentrate but not be drained. The practice can be marked, for example, using the Pomodoro system in which one works for about 25 minutes and then takes a 5-minute break to recharge.

Limitations

• Quantitative measures are the main criteria of productivity assessment; however, metrics for measuring quality must also definitely be taken into account in order to achieve success in the long run.
• Especially under knowledge-based or creative functions, the most difficult aspect of productivity measurement is that it is not output-oriented.
• Burnout can easily be induced by the single-mindedness of productivity and thereby affect overall productivity in the long run. It is, therefore, important to have a balance between productivity and wellness.

Conclusion

Doing better is not just doing more. Whether improving processes in a business or even working toward one’s own personal growth, the understanding of productivity and measurement is important.

One can achieve and sustain productivity over the long haul by having clearly stated objectives, utilizing appropriate tools, and balancing the amount of effort used with well-being.

Having understood what productivity means and how to measure it, it’s now time to apply these thoughts to one’s daily life or work environment. To deep dive in the concept, enroll in Intellipaat’s Product Management course and get a master’s in the product management domain.