Productive Use of an Organization's Resources

One primary responsibility of a manager is to achieve productive use of an organization’s resources. The term productivity is used to describe this. Productivity is an index that measures output (goods and services) relative to the input (labor, materials, energy, and other resources) used to produce it. It is usually expressed as the ratio of output to input. Although productivity is important for all business organizations, it is particularly important for organizations that use a strategy of low cost, because the higher the productivity, the lower the cost of the output.

A productivity ratio can be computed for a single operation, a department, an organization, or an entire country. In business organizations, productivity ratios are used for planning workforce requirements, scheduling equipment, financial analysis, and other important tasks. Productivity has important implications for business organizations and for entire nations.

In nonprofit organizations, higher productivity means lower costs; for profit-based organizations, productivity is an important factor in determining how competitive a company is. In the case of a nation, the rate of productivity growth is of great importance. Productivity growth is the increase in productivity from one period to the next relative to the productivity in the preceding period.

Service productivity is more problematic than manufacturing productivity. In many situations, it is more difficult to measure, and thus to manage, because it involves intellectual activities and a high degree of variability. If you think about medical diagnoses, surgery, consulting, legal services, customer service, and computer repair work. This makes productivity improvements more difficult to achieve. Nevertheless, because service is becoming an increasingly large portion of our economy, the issues related to service productivity will have to be dealt with. It is interesting to note that government statistics normally do not include service firms. A useful measure closely related to productivity is process yield. Where products are involved, process yield is defined as the ratio of output of good product (i.e., defective product is not included) to the quantity of raw material input. Where services are involved, process yield measurement is often dependent on the particular process. For example, in a car rental agency, a measure of yield is the ratio of cars rented to cars available for a given day. In education, a measure for college and university admission yield is the ratio of student acceptances to the total number of students approved for admission. For subscription services, yield is the ratio of new subscriptions to the number of calls made or the number of letters mailed. However, not all services lend themselves to a simple yield measurement. For example, services such as automotive, appliance, and computer repair don’t readily lend themselves