THE MEANING OF PRODUCTIVITY

WITH EXAMPLES

By,
Aarav Singh Hora - 21011347 Joshua Varghese - 21011234
Nalin Karthik - 21011334
Shreya Sorcar - 21011242
Shivaali Rai - 21012457
Vania Kapoor - 21011281
Productivity is an extensive topic with more than one definition since it is used in one field. People
tend to think that just because a specific person or friend is very busy or their schedule is packed,
they are productive. That is a myth and, in this assignment, we will be discussing the various types
of productivity, definitions and explanations of what productivity truly is. The primary reason for
choosing this assignment is that we are getting to the apex of our educational career when we have
numerous deadlines. Cultural activities and social functions balance with multiplying our
knowledge. What better way to do all this than to understand what it means to be productive and to
use and understand the information and research taken to complete this assignment. There are
numerous kinds of productivity, and most people think that productivity is only related to workers
and that only workers can change productivity, but productivity is so much more. Productivity is a
simple topic. Although it is wide, it is the output we receive for the amount of input we invest into
activities. We want to talk about ways to multiply your productivity and the numerous examples in
this group assignment. People like the majority, primarily referring to employees, tend to waste the
valuable time available to them on irrelevant things and give them no return, or they try their best to
utilise the time they get on their assignment of work, but using your time for something useful does
not make you effective. Being able to use the time you have wisely is what makes you a practical
and functional person. The COVID-19 crisis that affected the productivity of businesses and the
livelihood of numerous workers/employers is another reason we chose this topic. We would like to
see the ways the employers can bring back the same level or higher levels of productivity in their
employees like how it was before the pandemic and after such a long hiatus.

Productivity in business management can be better defined with the following example: Which can
be better explained with the help of a model.

Let's consider Tina, a girl who has started a business of making and selling birdhouses. Before Tina
began, she felt external factors that would affect her profit, such as raw materials, time, workforce,
space, energy, and capital. To make a birdhouse, Tina requires wood, nail, paint, tools (raw
materials) and personal labour (energy) or her "inputs". In simple words, input is any resource
required to create goods and services. Suppose it takes Tina an hour to build each birdhouse or her
"output". However, she realises that her productivity is below average and to increase productivity,
she hires Tom, who is skilled in making birdhouses. Still, Tina provides Tom with all the raw
materials and pays Tom for his skills or his "manpower" in this context. Ergo, by rearranging her
production process, Tina's business can build four birdhouses in the same amount of time. By
increasing her output without increasing the time she has worked, Tina has been considerably able
to bring up her business's productivity average.
Cause of this, Tina can decide she wants to stop building more birdhouses after building five
birdhouses. Therefore, if Tina can increase her outputs with no change to the inputs, Tina can
quickly increase her productivity and maintain a profitable business, ultimately improving her
everyday living.

Labour productivity is a significant fraction of productivity for two reasons. Firstly, labour
productivity is an effective industrial outcome. It is defined as the total output divided by labour
inputs (i.e., work hours). Second, the relationship between human capital and productivity are
relatively direct. The overall profit or growth of any organisation depends on the productivity of its
workers, irrespective of the classification of the industry. Still, it is essential to consider the
mutually inclusive relationship productivity and various industry stakeholders play. In due course of
this paper, we will explore the stakeholders affecting overall productivity. But firstly, let's
understand how capital affects productivity.

It was hypothesised that industry capital intensity would moderate the relationship between high-
performance systems and labour productivity, where the association is seen stronger in industries
having lower capital intensity. This apparent discrepancy is the persistent power gap that hinders
smooth decision-making along with all levels of employees. To further understand, let us compare
small businesses to big businesses. Logic would dictate that small businesses should follow the
same management and productivity principles as big businesses. However, something to consider is
that small firms differ from their counterpart in terms of assets, number of employees and overall
capital. According to the Office for National Statistics (ONS) findings, companies employing more
than 2500 employees still have lower productivity than small businesses operating fewer than 10-20
people, who have seen the fastest productivity growth since 2009. Considering this, the ONS
theorised that the changes in working patterns and power dynamics helped eradicate the power gap
that most big businesses seem to be struggling with. Furthermore, productivity depends on various
stakeholders.

Employee Productivity
Productivity in terms of a business organisation is often referred to as the productivity of its labour
or employees. It ranges from working permanently in a large business organisation to working
temporarily in a small factory. For every worker, productivity means the same the only aspect
different is the outcome. Employee productivity can be defined as the amount of work (or output)
produced by an employee in a specific period.
A hypothetical case of employee productivity –
1] In a sugar factory, three workers produce 250 grams of sugar in 4 hours. This means the
productivity of the ten workers is to produce 100 grams in the given time. Now, two workers A and
B, produce 100 grams each, and one worker C, produces 50 grams. Therefore, employee
productivity of A and B is more than that of C.

Management
Management plays a crucial role in determining the productivity of any organisation. The main task
of the administration in a company is decision making. Top management professionals are most
concerned with profit because their earnings are the outcome of the company's profit, and their
decisions directly affect the organisation's growth. Even though there is a clear hierarchy amongst
managers in a business, the middle and lower-level managements are also involved in the decision-
making process. Therefore, the management must make decisions that lead to maximum overall
productivity, which would then increase the business's productivity. This means that they need to
formulate policies that increase employee productivity. A way of doing so is "incentivisation".
Conventionally, incentives act as a bonus and motivate individuals to work better. The same was
also proven in an experiment with airline captains. In this experiment, captains were randomly
allocated one out of four groups subject to (1) performance monitoring, (2) informational
performance feedback, (3) target setting and, (4) prosocial incentives. The experiment provided an
opportunity to measure the cumulative effects on each aspect of productivity. The captains were
told that they would receive specific incentives if they managed to use aircraft fuel efficiency. The
experiment yielded three primary results. First, what is measured is improved. Within-subject
analysis of behaviour before versus during suggests that performance monitoring can induce
productivity improvement. The captains who were aware that they would be monitored and
successfully performed efficient flight metrics increased by nearly 50% compared to pre-
experimental data.

Second, while all three groups led to significant increases in one of the measured behaviours,
captains who received personalised targets did considerably better than ones who did not. Third,
performance monitoring leads to productivity beyond the experiment. This means that the post-
experiment baseline remains improved even after six months, indicating that captains still believe
they are monitored, or the monitoring has pushed them to make low-effort efficiency changes.
Finally, the survey results prove that management practices can improve an employee's overall
well-being and productivity.
Hence, for the top management in an organisation, the meaning of productivity is to formulate
policies and make decisions from time to time that increase their employee's productivity and
increase profits of the organisation. Just like we looked at employee productivity, we will now look
at labour productivity, which measures productivity for a country.

Labour productivity
Labour productivity represents the total volume of output (measured in terms of Gross Domestic
Product, GDP) produced per unit of labour (measured in terms of the number of employed persons
or hours worked) during a given time reference period. This context directly means the production
of goods from the available resources. This is measured in terms of labour hours. The formula for
labour productivity is total output\total input. This essentially measures how productive a nation is
with its workers and time.
Example – A labourer in Japan can produce 20 units of Y commodity, whereas a labourer in India
can only make ten units of Y simultaneously. This means that the worker in Japan is more
productive than the worker in India. There could be various factors such as human capital
availability and the worker's health that have made the worker in Japan more productive. Still, I
would not dwell on it right now since that would focus more on the meaning of productivity.

Labour productivity vs Employee productivity

Employee productivity is measured on the individual level. For instance, units produced by person
W of an organisation is employee productivity.
It should not be confused with labour productivity which is the productivity of labourers in a
country. Employee productivity is used to derive labour productivity.

However, the meaning of productivity is not the same as efficiency. In terms of labour productivity,
it is essential to compare the importance of productivity with efficiency to correctly understand
what productivity stands for because people often tend to use both productivity and efficiency
interchangeably. Productivity is getting the work done or making the maximum out of the available
resources. On the other hand, efficiency is trying to get the job done using lesser resources.
Productivity can help an organisation measure its efficiency Productivity is a measure of the
efficiency with which resources, both human and material, are converted into goods and services.
For example, companies A and B had the task to produce 100 goods in 24 hours. Both the
companies completed the work. However, in company A, ten workers completed the work,
whereas, in company B, it was completed by five workers. Therefore, both companies A and B
were productive since both could complete the task. However, company B was also efficient in
completing their work. Productivity in its meaning highlights the quantity of the work, and
efficiency focuses on the resources used to complete that work.

So far, in this paper, we have talked about the different forms and the importance of productivity in
an organisation. Now, we would like to bring your attention to the overall benefits to an
organisation (monetary and non – monetary) which can be achieved through productivity.

1) Reduced Labour Turnover

Labour Turnover measures the rate at which employees are leaving an organisation. It is measured
by – number of employees leaving in one year/average number of people employed x 100.
Increased productivity will lead to greater fulfilment and job satisfaction for the employees. This
will reduce the number of employees leaving the organisation and will thus directly contribute
towards a low labour turnover.

2) Reduced training costs:

A great monetary benefit to an organisation that increases its labour productivity will be reduced
training and recruitment costs. Since increased productivity directly contributes towards reduced
labour turnover, it would also reduce the training and recruitment costs of a company significantly.
With fewer employees exiting the company, the organisation's need to recruit and train new
employees would reduce. Thus, reducing the average resources and finances spent on training and
recruitment costs by the company significantly.

3) Reduced absenteeism:
Absenteeism measures the rate of workforce absence as a proportion of the employee total. It is
measured by – number of employees absent/total number of employees x 100. Staff absenteeism is
disruptive to any business, especially one providing consumer services. It is expensive for a
company to employ extra staff to cover for staff away from work or ask other workers to work
overtime. Absenteeism occurs due to low employee morale and low workforce motivation.
Measures to increase labour productivity will also combat such problems. Hence, an overall
increase in labour productivity will help the organisation achieve reduced absenteeism. As a result
of which, the company will be able to save costs significantly.

4) Reducing Waste and Environmental Impact:

The environment suffers when people aren't efficient. If the employees are not organised and take
ten hours to do work that could be done in six, they use four hours of extra electricity that doesn't
need to be used. When the business is not doing things productively, time, money, and other
resources are wasted. For example, Heating can be optimised and not wasted. Good building design
that maximises natural light leads to a reduction in lighting costs and an increase in workers'
productivity and well-being due to good levels of daylight in the building. Lighting levels can
significantly impact productivity and the mood of the people who work in the office.
Similarly, a loss in productivity will affect the costs of the company and contribute to other
environmental concerns. For example, using more fossil fuels like coal than required in the
manufacturing process because of lower productivity could be seen as irresponsible allocation of
resources. It could be argued that the company does not care about the environment. Hence, to
actively take care of the environment and reduce the wastage of resources, the organisation should
increase productivity, significantly reducing the impact of such concerns.

5) Improving competitiveness and achieving growth:

The connection between productivity and improved competitiveness of a company is multi-fold.
Increasing productivity will improve the competitiveness of an organisation in many ways. Some of
them are – reduced costs, better customer service, less internal troubles, more attention to other
aspects of the business etc. The increased overall productivity in an organisation would ultimately
lead to reduced operational costs. This would essentially mean that the company can produce its
goods or services lower than its competitors. This would enable to company to lower its price.
Thus, it gives a competitive advantage over the other companies because of their ability to price
their products competitively. Increased productivity would also mean that the company can focus
more on their customers than their workforce, improving their customer service. This will prove to
be an essential competitive advantage to the company, especially if the company produces services
for the consumer. An increase in productivity will also lead to the management having more time
and resources to allocate towards the other aspects of the business since they will not have to spend
as much time worrying about their workforce anymore. This would enable the organisation to focus
more on growth which will eventually be a competitive advantage.

So, with productivity growth, an economy can produce and consume more goods and services
increased for the same amount of work. The concept of productivity is of great significance for the
undeveloped and developing countries. In both situations, it is important that there is productivity
and efficiency because there are limited resources that should be used to get the maximum output.
That is, there should be a tendency to perform a job cheaper, safer and quicker. The aim should be
the optimum use of resources so maximum satisfaction with efforts and expenditure can be
provided.

Any successful business understands the importance of productivity in the workplace. Being
productive can assist the company in increasing and maximising the capability of its human
resources. Employees who are happy and healthy are the foundation of a successful organisation in
the majority of cases. Productive businesses perform better and tend to last longer in business. Here
are some of the important areas where productivity has the greatest impact:
Finances
If employees are unproductive for even a few hours per week, it can significantly impact corporate
overheads in the long run. The greater the impact, the larger the company. Unproductive work is
frequently caused by a lack of expertise or a failure to provide employees with the necessary tools
to accomplish their jobs. However, ensuring that employees are trained regularly and in accordance
with industry best practices keeps them interested. It allows them to advance both professionally
and personally, boosting productivity and helping a company's finances.

Customers
When products and services are delivered precisely and with minimal delays or defects, businesses
build long-term connections with their consumers. Employees who are productive help to make this
happen and leave a positive impression on the other businesses they interact with, which leads to
more prospects for the firm they represent. Staff who behave in this manner also assist in the growth
of the new business through positive word-of-mouth in the industry due to the experience they
provide others. When employees are productive, they can perform more efficiently, completing
more tasks in less time and at a higher standard. When customers see how something affects them
firsthand, it can only be a good thing.

Time
Productivity is not just determined by staff performance but also by the methods of operation
employed. It cannot be fixed simply by asking employees to complete more work in less time.
Actions to improve the work process should be explored as well. Improving this aspect of the
business leads to increased productivity, which saves time. Employees can use their saved time to
do things like plan ahead and create work plans, which will benefit them in the long run. It's a self-
feeding cycle that makes the company run more smoothly in the end.

Morale
Productivity and morale have a mutually beneficial relationship. Productivity suffers when morale
is low. Productivity rises when morale is good. Stress is a huge element in the job, and when one
person sees another slacking off, it affects their morale and productivity. This might become a
deadly cycle, with one employee's morale depressing the morale of another. One strategy to sustain
high production levels is to run productive operations and put up a system that increases morale.
Employees will be satisfied if they can complete their work in a particular period. Not doing so, on
the other hand, may irritate them. Improving corporate morale can be accomplished by
implementing a work structure that keeps them productive to complete their tasks.
Not only this, but productivity is vital in day to day life of an individual also. Being productive
helps individuals focus on their goals; it helps them plan their day properly. Productivity also
motivates individuals to overcome their day to day life obstacles which further brings joy to one's
life.

Citations
1. Datta, D. K., Guthrie, J. P., & Wright, P. M. (2005). Human Resource Management and Labor
Productivity: Does Industry Matter?, The Academy of Management Journal, 48(1), 135.
2. Datta, D. K., Guthrie, J. P., & Wright, P. M. (2005). Human Resource Management and Labor
Productivity: Does Industry Matter?, The Academy of Management Journal, 48(1), 137.
3. Productivity Better in Bigger Companies?, BBC, Jan. 8, 2016,
https://www.bbc.com/news/business-35261308.
4. Greer K. Gosnell, et al., The Impact of Management Practices on Employee Productivity: A Field
Experiment with Airline Captains, 128, J. of Political Economy, 1199.
5. Greer K. Gosnell, et al., The Impact of Management Practices on Employee Productivity: A Field
Experiment with Airline Captains, 128, J. of Political Economy, 1200-1202.