Investopedia offers the following productivity definition: An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in revenues and other GDP components such as business inventories.
So what is productivity in real terms? Perhaps it is easiest to explain when thinking about investments. Imagine you have $1,000 to invest, your input. The money you earn on top of your investment is the output. If one investment would earn $100 and another $50, the $100 investment would be more productive. (This simple example does not take risk-adjustment into account, but that is a whole separate topic.)
Why does productivity matter to your small office?
Like every entity, your company and office have limited resources. Your operating budget and the number of people to perform work – your primary inputs – are probably limited. Resource limitations feel like a bigger challenge in small offices. This is where scrappiness and maximizing productivity are especially important in competing with larger competitors.
A manager’s job is to get the biggest return from those inputs. Return could be measured in widgets produced, hours billed, perceived value of your product, revenue or other results. Generally though, profit, or the return on capital invested into the business, is the ultimate productivity goal. (Note that maximizing return does not mean overworking employees or treating them badly. Morale is a major factor in maximizing their effort.)
So the ultimate answer to what is productivity improvement – better results for your business.
What is productivity improvement: A case study
For a concrete example, imagine your office before email. There may have been numerous typewriters, dictation devices and secretaries just to facilitate communications within the office and with outside partners. Then came word processors and the secretaries got faster.
The real breakthrough though was the personal computer. Now every employee had access to tools to help themselves. After an investment in personal computers, email allowed for communications to reach other parties before they could even be typed in the old system. It freed up manpower to work on more valuable tasks. Rooms filled with filing cabinets full of carbon copied memos made way for more functional office space. Plus a host of other benefits we can hardly imagine working without today. Today's digital office is full of office automation technologies that allow workers to focus on value-add projects.
Conclusion - Productivity matters
In summary, productivity is the amount of output (profit, revenue, units) from your inputs (money, manpower). Increasing productivity means using the same input resources to generate greater results for your business.
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