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AUSTRALIAN BUSINESS BLOGS – WHAT IS PRODUCTIVITY Part 1

What is productivity exactly? It is tempting to say that it is hard to define, but I know it when is see it. But even that is misleading. We may see something as being productive, only to realise latter that it achieved very little. We would do well to have a good definition, a good yardstick, to measure our businesses by; yet we must be careful, as a false definition could completely mislead us.

Definitions are meant to make matter easier to understand. But it is a trap to assume that an easy to understand definition is always an accurate one. It is easy to compare dollars spent per hour, and think fewer dollars is better; but this is not productivity. It is just as easy, but far more accurate, to compare dollars spent versus products and services produced. If productivity has a formula it is how much output there is for over the input.

Sometime the lines between definitions get blurred. We could push the labourers to achieve more with the time they have, and if they do achieve more there is increased productivity. This fits both the ‘dollars per hour’ understanding of productivity; it also fits the ‘dollars compared to how much is produced’ concept or productivity, provided there is an improvement. But the ‘dollars per hour’ tends to look at how hard people work, and give this as increases productivity even if there is the same end result. The ‘dollars compared to productivity’ is a better indication of the situation; this simply say; we made a change, and produced more – that is productivity.

But it is misleading to think that working harder is the key, and misleading to think that this will always yield an improvement. As IBM have said: work smarter, not harder! If you can find a better way to organize a company or system, if you find a better technology, then you may achieve more with the same resource and time spent. That increases productivity, just supplying more product or services.

 

 

 

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