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Productivity Concepts and Definitions

By: Mushtaq Mangat

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Productivity Concepts And Definitions
By: Mushtaq Mangat mushtaq.mangat@gmail.com

Abstract Productivity is one of the most common terms under used of people. Particularly, business community is more concerned about this term. Historically this term never remained out of the dictionary of the human being. There are many definitions of productivity. But widely it is considered as ratio of output to input. There is a constant change in the generic concept of productivity. There are many concept related to productivity. In different periods, people focused on different facets of productivity. Some time labour productivity is important and other time resource productivity becomes significant. In this article we have systematically examined different definition and generic concepts of productivity and ultimately conclude that productivity is a concept to do more with less by keeping all stake holders smiling and making this planet safer for coming generations. Keywords: Productivity, labour productivity, resource productivity, green productivity Productivity Concepts and Definitions The word productivity first time appeared in literature in 1766. According to Sumanth (1990, p. 01), “the term productivity was probably first time used by French mathematician in an article in 1766. In 1883, another French man, Littre, defined productivity as the faculty to produce”. Many organisations have defined productivity in different ways. Hereinafter, diverse meanings of productivity coined by different people and organisations in different periods will be presented. Sumanth (1990, p. 04) has given a list of nine different organisations and people who have given definition of productivity. A list of different meanings has been prepared with the help of definitions proposed by Sumanth (1990, p. 04), some more definitions have been added and eventually a conclusion is given based on research. Fabricant defines productivity (as cited in Ali 1978, p. 55) in the following words, “always a ratio of output and input”. This is the most common definition of productivity. Kendrick and Creamer have proposed two definitions of productivity (as cited in Afzal, 2004, p. 07). They specifically expressed in the following words, “a-Functional definitions for partial, total factor and total productivity, b-Loose description of relationship usually in ratio form, between outputs and all of the associated inputs in real terms”. In these definitions, authors have differentiated partial productivity from total productivity. Nevertheless, their focus is on relationship between the output and input. Mali has proposed the similar concept of productivity (as cited in Afzal, 2004. p. 06). According to Mali, “Productivity is the measure of how well resources are brought together in organisations and utilised for accomplishing a set of results. Productivity is the name of reaching the higher level of performance with the least expenditures of resources”. Sumanth (1990, p. 04) believes that productivity is a family of ratios of output to input. The living standard of the country is measured by the productivity. Productivity is measured by the goods and services produced by per unit of national resources. Sink (1985, p. 15) has further clarified productivity with reference to time and application of generic system of calculation. According to Sink (1985, p. 15), “ the concept that productivity is a relationship between outputs from a given system during or over a given period in time, and inputs to that system during that same period, should be generic and universal”. Lawlor (1985, p. 33) has also given two concepts of productivity. According to Lawlor (1985, p. 33), “a- at its simplest meaning productivity is the relationship between goods produced and sold or service provided – the out put, and the resources consumed in doing it (Output/input= productivity). bProductivity is a comprehensive measure about how efficiently and effectively organisations satisfy the following five aims: • • • • • Objective achievements Efficiency of the process EffectivenessComparability with other organisations Trend- productivity measured over a period”.

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Campbell & Campbell (1998a, p. 01) have viewed this issue in a different manner. According to them productivity is a concept that has captured the imagination and energy of managers and behavioural scientist for decades. In this statement, productivity looks a concept more than a definition. Baig (2002, p. 08) has defined productivity in the following words, “doing things right at the least possible cost in least possible time with the highest possible quality and to the maximum level of satisfaction of the customers and employees”. Chen; Liaw & Chen (2001, p. 378) defines productivity in the following words, “productivity is often used to evaluate the aggregate performance of a business unit, generally defined as the ratio of outputs to inputs. However, for different applications and research domains there are different definitions of productivity”. This definition supports the established fact discussed in previous pages that productivity has different meanings in different situations. Vittal (2002, p. 28) has attached another concept with productivity and that is the objective of the organisation. Vittal (2002, p. 28) says that, “productivity, at a very element level can be defined as output by input. But mere increase in output is of no value unless the output also has a bearing on the objectives of the organisation or the environment under which the transaction takes place”. Srinivasan (2002, p. 74) is looking productivity with another angle. According to Srinivasan (2002, p. 74), “the concept of productivity has undergone a sea change with the advent of the e-Age. In the new business paradigm, the traditional definition has to be modified; in fact it has already been redefined in this knowledge era”. Srinivasan (2002, p. 74) has further stated, “It has become to be recognized that there are several intangible, nevertheless vital ingredients, that constitute the sum of productivity”. In the above statement, it is clear that simple output and input ratio is not the true meaning of productivity, firms produce some intangible things, which are also vital. In addition, there is a need to measure intangible out put too while measuring productivity.

Productivity Meaning with Reference to Context In previous paragraphs, the concept of productivity has been discussed with reference to the time. It has been observed that meanings of productivity transformed over a period of time with the change in business practices. Hereunder meanings and concepts of productivity will be discussed with reference to the context. According to Sink (1985, p. 15), “Engineers, Psychologists, Economists, Politicians, Sociologists, Organisational behaviourists and Managers all have different perception on the concept of productivity”. Baig (2002, p. 09) has defined productivity in another way. According to Baig (2002, p. 09), “Productivity has different meanings to different people. A summary of the Baig’s (2002, p. 09) presentation is given hereunder: • For employers: Improve competitive position in the market • For Employees: An increase in compensation, development of skills and other capabilities • For Customers: Lower price, high quality, timely delivery, • For Society: Low inflation, improvement in living standards, environmental protection • For Government: More revenues, more resources for social services

As it has been widely discussed in previous pages, that productivity is primarily a topic for the economists. However many industrial engineers have also worked on this subject. Productivity is also a matter of concern for government officials. Today other people are also discussing productivity including environmental engineers, social scientists as well as industry itself. The meaning of productivity is different for every sector of life. For example, industrial engineers want more with less and on the other hand, environmental engineers are focusing to save the environment by attempting to lessen pollution. There is a subtle difference of understanding of productivity among all the people concerned. Productivity Meanings Diversification Ali (1978, p. 55) has divided productivity definitions into following eight groups. Ali (1978, p. 55) has given the names of different authors who are in favour of these definitions. According to Ali (1978, p. 55) these are eight different groups to describe productivity: Group # 01 Productivity is a ratio of output to input Group # 02 Productivity is generally interpreted as efficiency in industrial production measured by some relation of output to input.

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Group # 03 Productivity is the relationship between the amount of goods or services produced and one or more input used to produce that product. Group # 04 Productivity is a measurement or the efficiency with which input can be converted into output over some given period of time. Group # 05 Productivity is the attainment of goals verses all relevant inputs. Group # 06 Productivity is a management problem, involving how best to manage excess capacity. It is true that management is ultimately responsible for all of the functions of any firm. Group # 07 Productivity is primarily a function of company's effectiveness to meet the need of the market. Group # 08 Productivity is most conveniently expressed as an index number in current period as compared to the performance in a base or reference period, which is quoted to 100. From the above-mentioned discussion, it is evident that there is a wide range of productivity definitions available in the academic literature. In the next pages few more concepts of productivity are being given. Performance and Innovation Unit (2001, p. 25) has defined productivity in the following words, “productivity is the efficient and effective use of resources by the organisation”. This is a modified shape of the approaches mentioned under Group # 2 and 4. In this approach effectiveness has also been taken into account along with efficiency. This approach seems more comprehensive when compared to others. The main focus of this approach is on resource utilisation. It also ignores other factors like, market satisfaction and environment. Overall, this approach is more suitable to assess the productivity of the firms. Nevertheless, this approach ignores the quality factor of products or services. Productivity also covers the quality aspects of the production. Industrial Engineers can use this approach to calculate the productivity focused on resource utilisation. Environmental Engineers are more concerned with depletion of natural resources. However, it does not mean that other people are not concerned with the safety of nature. However, environmental engineers are more concerned about the environment. This approach is the most popular in the current age. In current period the major point of discussion among the industrialists, economist and all other related authorities is to save environment. Some decades back it was not that much important as it is today. The main reason of such ignorance was slow pace of industrial activities in the past. This approach seems to be one of the most suitable approaches. On the other hand, industry is facing a tough situation due to compliance on environmental issues. According to Porter and Linde (1995, p. 134) companies can achieve higher productivity by adopting the environmental protection laws. However, this approach is only a survival point for the nature. Firm's productivity should be judged with reference to the loss it makes to the nature. National Productivity Centre [NPC] (1999, p. 03) has defined productivity more specifically. According to NPC (1999, p. 03); “productivity compares the amount of output with the amount of input resources used to produce the output at any given period of time”. Lawlor (1985, p. 20) given a list of eight factors related to productivity. According to Lawlor (1985, p. 20): The productivity issue as now described is a complex one involving many factors. Therefore, we can focus our attention on the following eight factors that have been selected as having the greatest bearing on productivity: 1. 2. 3. 4. 5. 6. 7. 8. Economic climate Markets Change Organisations People Rewards Information Technology

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According to Bernolak (1980, p. 03), “ productivity is the relationship between the quantity of goods and services produced and the quantity of one or all of the resources utilised in turning out these goods and services. It is usually expressed as a ratio”. It seems that Bernolak (1980, p. 03) is also in favour of the general definition, which is about the ratio of output and input. Monga (2000) comments on productivity in a changed manner. According to Monga (2000, p. 13), “productivity is a multidimensional and dynamic concept”. Bernolak has projected another view of the productivity (as cited in Monga, 2000, p. 13) that most manager do not know (1) what productivity really means (2) how much vital it is for them and for their organization (3) that, it can be improved significantly (4) how to measure and analyse it, (5) what factors affect it (6) how to improve it. Mahoney (1998, p. 18) gives his comments on productivity definition in the following words, “productivity is an efficiency concept generally cast as ratio of output o input into some productive process”. Mahoney (1998, p. 18) has further explained productivity concept in these words, “productivity is also a performance variable and it is perhaps best illustrated in comparison with other performance variables”. There were many studies conducted to evaluate productivity by comparison. According to the above-mentioned statement, comparison of performance, efficiency or effectiveness is the best way to illustrate productivity. It seems that the best use of productivity is in its comparison, and for comparison purpose, there should be some criteria with which comparison is done. This may be the previous record, common industry output or any other benchmark available. Campbell & Campbell (1998b, p. 83) are of the view that efficiency and productivity are interchangeable words. According to them, “there is a clear consensus that it is useful to reserve the term productivity for efficiency indices. That is the indicator in question is a ratio of outcomes, measured in some way, to inputs, also measured in some way”. This is a very narrow concept of productivity. One can have more efficient system with bonded labour or making planet polluted. However, in some particular situation this term is acceptable. Gharneh (1997, p. 01) has widened the concept of productivity. According to Gharneh (1997, p. 01), “productivity is a road to competitive enterprises, the economic development of countries and welfare and well being of nations”. In this statement, productivity is some thing else and it is other than ratio. It is a way, method or technique to have more with less. Brinkerhoff and Dressler (1990, p.16) have given their conclusion about productivity in the subsequent words: In a nutshell, productivity reflects results as a function of effort. If productivity improves, it means that more results are being gained from a given amount of effort. In a classical sense, productivity is defined as a ratio such that the output of an effort under investigation is divided by the input required to produce the output. In the above mentioned statement two major concepts have been elaborated: a- productivity is a result of effort and b- ratio of output to input. This definition is a modified shape of the previous given statements. Wilson (1994, p. 50) has defined productivity more precisely in the following words, “productivity is the ratio of outputs produced to the input resources utilized in their production. Typically, productivity is also measured against a “base period” so as to facilitate trend analysis of the productivity measure. Therefore, the dollar value of outputs and inputs are adjusted for monetary inflation. Productivity for period i (with respect to base period b) can then be represented as:

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Output i /Input i Productivity=------------------------*100”. Output b/Input b Industry Commission (1997, p. 03) has defined productivity more precisely in the following statement: Productivity is a measure of the capacity of individuals, firms, industries or entire economies to transform input into output. More specifically productivity is a measure of the rate at which output (of goods and service) are produced from given amount of input. In this statement productivity is not the simple ratio rather it is capacity of the organisation and individuals who take part in the production process. Sink (1985, p.03) has advocated the term productivity in the following words, “productivity is simply the relationship between outputs generated from a system and the input provided to create those outputs”. Traditionally productivity is considered as a ratio between input and output. Productivity is often confused with efficiency and rationalisation or profitability. In reality, the modern understanding of productivity is doing things right at the least possible cost, in the least possible time with the highest possible quality and to the maximum level of satisfaction of the customers and employees. In this sense productivity is a total business concept rather than a “rationalisation of production” and the productivity has social dimensions, not only economic ones (Prokopenko, 1999, p. 10). Prokopenko (1999, p. 10) has added some other dimensions in the concept of productivity. This looks a more comprehensive statement when compared to all those mentioned above. Daniels (1997, p. 52) has indicated another avenue of productivity in the following words, “the approach and attitude to productivity improvement is much more important than the type or nature of any techniques”. Nachum (1999, p. 943) has defined productivity in the following words: Productivity is defined as the level of output produced by per unit of input. Changes in productivity reflect changes in the ratio between input and output, e.g. increase/decrease in output produced from a given input, or same output produced with more/less input. In a scenario where product life cycle is becoming short every day, significance of innovation is one of the fundamental requirements for high productivity. Taylor; English & Graves (1994, p.13) have stated the importance of new product development in the following words, “as product life cycles have decreased and manufacturers are facing with increasing global competition, engineering designs play an increasingly important role in the successful manufacture of products”. This obviously definitely shows that survival of firms mainly depends upon innovation. Marketing gurus are readily agreeing on one point that buying decisions are much influenced by the extrasensory perception of the brand or firm in the minds of buyers. Every firm is trying to create a better image in the minds of customers and buyers about their products and as well as firms. All efforts are done to improve their images. One takes goods and services from others to improve his or her productivity. Brand perception is directly related with the contribution of service or goods in significantly improving buyer's productivity. In the current scenario, every firm should try to be major contributor in the useful enhancement of buyer's productivity. Furthermore, firms have to be much careful in their operations. People are more concerned with social practices of the firms. They will never prefer a firm, which is using child labour, creating high-level pollution or involve in anti social activities. It is the call of the day that firms should

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ultimately prove that their operations are as per business ethics and they are contributing in up lifting of the society as a whole. This is also part of productivity and ultimately this would help in increasing the image of the firm and that is the major tool for better profits. All above discussion is to understand the meaning of productivity. Still there is no precise meaning of the productivity. It is highly complicated and has many dimensions. There is a bleak chance that people would have a common meaning of productivity. This is due to many factors associated with productivity as discussed above. Based on all above discussion we have reached to the following conclusion:
Productivity is an approach, a mindset, and a way of thinking to do more with less by observing the business ethics, caring the risk of stakeholders and keeping the planet clean. References: Afzal Muhammad (2004). Measurement of Productivity in the Large Scale Manufacturing Sector of Pakistan. Ph.D. Thesis, The University of Lahore, Pakistan. Ali K J (1978). Labour Productivity in Iraqi Economy. Unpublished Master’s Thesis, University of Manchester Institute of Science and Technology, UK. Baig Ayesha (2002). Your Productivity is National Prosperity. Productivity Journal, National Productivity Organization Pakistan, Islamabad, 8-9. Bernolak Imre (1980). Interfirm Comparison in Canada. In Bailey David and Huber Tony (eds.) (1980). Productivity Measurement: An International Review of Concepts, Techniques, Programmes and Current Issues, Gower, UK. Brinkerhoff Robert O and Dressler Dennis E (1990). Productivity Measurement: A Guide for Managers and Evaluators. Sage Publication Newbury Park London- New Delhi. Campbell John P and Campbell Richard J (1998a ). Introduction: What Industrial –Organizational Psychology Has to Say about Productivity. In Campbell John P, Campbell Richard J and Associates (Contributors). Productivity in Organizations. Jossey- Bass Publishers, USA. Campbell, John P. & Campbell, Richard J. (1998b). Industrial –Organizational Psychology and Productivity: The Goodness to Fit. In Campbell, John P., Campbell, Richard J. & Associates (Contributors). Productivity in Organizations. Jossey- Bass Publishers. USA. Chen Liang-Hsuan, Liaw Shu-Yi and Chen, Yeong Shin (2001). Using financial factors to investigate productivity: an empirical study in Taiwan. Industrial Management and Data Systems. 101/7,MCB University Press [ISSN 0263-5577], 378-379. Daniels Shirley (1997). Back to basics with productivity techniques. Work Study, Volume 46 · Number 2 © MCB University Press · ISSN 0043-8022, 52–57. Gharneh Shams Naser (1997). The measurement of productivity and Performance in Textiles: The UK and Iran. PhD Thesis, University of Manchester Institute of Science and Technology UK. Industry Commission (1997). Assessing Australia’s Productivity Performance: AGPS, Canberra. Lawlor Alan (1985). Productivity Improvement Manual. Gower Aldershot, UK. Mahoney Thomas A (1998). Productivity Defined: The Relativity of Efficiency, Effectiveness, and Change. In Campbell John P., Campbell Richard J. (eds.)(1998). Productivity in Organizations. JosseyBass Publishers, USA. Monga R C (2000). Managing Enterprise and Competitiveness. Working paper PMD-3 International Labour Organization. Nachum Lilach (1999). Measurement of productivity of professional services an illustration on Swedish management consulting firms. International Journal Operations and Production Management, Vol. 19 No. 9, pp. # MCB University Press, 0144-3577, 943-948.

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National Productivity Corporation (1999). Handbook on productivity –linked wage system. Malaysia. Performance and Innovation Unit (2001). London. Resource Productivity. Cabinet Office UK Government

Porter Michael E and Linde Class van der (Sep- Oct 1995) Green and Competitiveness. Harvard Business Review, 128-134 Prokopenko Joseph (ed.) (1999). Productivity Promotion Organizations: Evaluation and Experience. International Labour Organization Geneva. Sink D Scott (1985). Productivity management: Planning, Measurement and Evaluation, Control and improvement. John Wiley and Sons. Canada. Srinivasan C (2002). Productivity in the e-Age. Proceedings of APO International Conference on Productivity in the e-Age, New Delhi. Sumanth David J (1990). Productivity Engineering and Management. Delhi India: Tata McGraw-Hill Edition. Taylor G Don English, John R and Graves Robert J (1994). Designing New Products: Compatibility with Existing Production Facilities and Anticipated Product Mix. Integrated Manufacturing Systems, Vol. 5 No. 4/5, 1994, © MCB University Press Limited, 0957-6061, 13-20. Vittal N (2002). The Productivity Paradigms and Strategies for the e-Age: Focus Government. Proceedings of APO International Conference on Productivity in the e-Age, New Delhi. Wilson Rick L (1994). An Improved Goal-oriented Method for Measuring Productivity. International Journal of Operations and Production Management, Vol. 14 No. 1, © MCB University Press, 50-58. About the author: Mr. Mushtaq Mangat is assistant professor at University of Management and Technology, Lahore and head of Garment Productivity Centre. To read more articles on Textile, Fashion, Apparel, Technology, Retail industries and General related topics, please visit at www.fibre2fashion.com/industry-article/

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