Productivity is, in simple terms, an overall measure of how well the resources (inputs) are utilised to produce goods or services (outputs).

Productivity must not only be defined, it must be measured. “What you cannot measure, you cannot manage.” Management expert Peter Drucker states: “Productivity means that balance between all factors of production that will give the greatest output for the smallest effort. This is quite a different thing from productivity per worker per hour of work, it is at best distantly and vaguely reflected in these traditional standards.”

Productivity as a social concept means: an attitude of mind. It is the mentality of progress, of the constant improvement of that which exists. It is the certainty of being able to do better today than yesterday. It is the will to improve on the present situation, no matter how good it may really be.

When it comes to measurement, productivity is essentially the effort needed to produce output and is calculated by dividing output quantity by input quantity. Organisations have many options for use of this formula by calculating, labour productivity, machine productivity, capital productivity, energy productivity, and so on.

A productivity ratio may be computed for a single operation, a department, a facility, an organisation, or even an entire country.

The productivity process has two components; the conversion processes itself, and the environment in which it operates. Typical examples of such a process could be a manufacturing process which acquires and converts materials into useful products, or the retail store which buys and sells men’s trousers and shirts.

In fact the productivity process applies to any business (or department) that uses resources to provide products or services. When talking about productivity, most people focus on the conversion process.

The conversion process in turn is influenced by efficiency, which is the rate of conversion of resources into products or services, and utilisation which is the portion of the available resource that is actually used.

The combination of these two performance factors will determine the productivity level of the conversion process. An improvement in efficiency and or utilisation will therefore have a positive impact on productivity. However, all improvements in productivity within the conversion process will be to no avail if market needs are not met.

Another vital performance factor is that of effectiveness. Hence, there are a number of ways to increase productivity:

• Increase the numerator (output) while resources (input) reduce,
• Increase the numerator (output) while resources (input) remain constant,
• Decrease the denominator (input) while output remain constant,
• Input and output increased, but output increased faster than input; or if
• Input and output decreased, but input decreased faster than output.

It is obviously more favourable in situations where volume increases and which result in an increase in productivity as it is a sign that the business is growing.

The level of productivity has a direct impact on a company’s profits. The more work completed or products produced in a certain period of time, the better resources are utilised and the bigger the impact on profits during that period.

Bongani Coka is the CEO of Productivity SA.