What is Productivity?

by bobroan on December 7, 2012

If we’re going to talk about productivity, what is it?  Here are some thoughts from the web

Per Wikipedia http://en.wikipedia.org/wiki/Productivity

Productivity is an average measure of the efficiency of production. Productivity is a ratio of production output to what is required to produce it (inputs of capital, labor, land, energy, materials, etc.). The measure of productivity is defined as a total output per one unit of a total input.

Per the BusinessDictionary http://www.businessdictionary.com/definition/productivity.html

A measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs. Productivity is computed by dividing average output per period by the total costs incurred or resources (capital, energy, material, personnel) consumed in that period. Productivity is a critical determinant of cost efficiency.
Per InvestorWords.com http://www.investorwords.com/3876/productivity.html

Th​e amount of output per unit of input (labor, equipment, and capital). There are many different ways of measuring productivity. For example, in a factory productivity might be measured based on the number of hours it takes to produce a good, while in the service sector productivity might be measured based on the revenue generated by an employee divided by his/her salary.

There seems to be general agreement that productivity is the ratio of output to input.  The numerator measures the value you create, and the denominator represents the resources you use to create that value.

The reason that productivity is important is that it goes directly to your income statement.  The value created maps to your sales and the resources you use goes to costs of goods sold.

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