Productivity, as it is commonly understood, means many things in many other different fields. Even in business where it has its nearest relations, productivity is defined variously according to the aspect that is studied. (Reportedly, there are around 20 definitions of productivity related to business.)
Most of these concepts relate to productivity as a relationship between output and input to the studied systems. It contains variables and other inter-relationships within the precise group it belongs to (office, manufacturing plant, machinery systems, etc).
It is also regarded as a stimulus-response model that an input causes an output. Universally, for purposes of simplicity, it is output divided by input. However, there is some confusion to this view.
Formally, in most circles productivity is “strictly a relationship between resources that come into an organizational system over a given period of time and outputs generated with those resources over the same period of time.”
In a factory, for example, productivity measures connected with input factors (labor, capital, etc) are inadequate and can be misleading sometimes.
On one hand, input factors cannot be studied while isolated by themselves. Productivity improvement in one aspect is generally at the cost of the other. Also, labor as an input factor is present in all phases. On the other hand, managerial resource (another important input factor) is not counted in such measures.
However, the rest of the many concepts consign productivity in an output-input relationship, mostly relevant to a production system. This implies that there is an organization that works as a physical system with variables and other inter-relationships within.
Experts Sardina and Vrat declared that those who will undertake productivity measurements should have three objectives.
One, potential improvements must be identified. Two, a decision must be made to reallocate resources. And three, it should present how well the previously established goals were determined.
Performance and financial productivity
There is a difference between these two factors. Performance productivity is based on the number of produced outputs.
For example: company X had produced 100 units of products in one week, and in the next, was able to come with 120 units. The performance productivity would have increased by 20%.
In comparison, the focus on the output value is grouped as a financial productivity. Suppose that company X had produced 100 units of products in the first and second week.
However, the selling price was raised from $1.00 to $1.20 per unit in the second week. The financial productivity would have been increased by 20% but with no increase in output.
This is misleading, too. If, on the other hand, the company sells 120 product items at $1.20 each but in the second week the price is dropped by 16.7%, the result is still $120 in sales.
From a financial viewpoint, there is no change while from a performance point there had been change. (They had to produce 20 more items.)
Thus far, managers cannot pinpoint productivity’s definitions, measurements and improvements. On the same vein, they cannot define the performance’s concepts, measurements, and improvements as well.
This demonstrates that there might be a number of perspectives in viewing productivity. Following that viewpoint, there could also be a number of different measures in assessing productivity.