Productivity

Published Jan 16, 2023

Definition of Productivity

Productivity is defined as the ratio of output to input. That means it measures how efficiently an organization or individual uses its resources to produce goods or services. Or in other words, it is a measure of how much output is produced with a given amount of input.

Example

To illustrate this, let’s look at a small bakery. Let’s say the bakery produces 12 loaves of bread per hour with two bakers and one oven. That means the bakery’s productivity is 12 loaves of bread per hour. Now, if the bakery adds another baker and oven, it can produce 24 loaves of bread per hour. That means the bakery’s output doubles if it hires a second baker.

Why Productivity Matters

Productivity is an important measure of an organization’s performance. It is closely related to profitability because the more output an organization can produce with the same amount of input, the more money it can make. That means organizations can increase their profitability by improving their productivity.

In addition to that, productivity is also important for economic growth. That is because an increase leads to an increase in the output of goods and services, which in turn leads to an increase in economic growth.