Productivity measurement

Productivity can be measured by two types which are following below :

  • By aggregate basis 
  • On an individual basis
which is called total and partial measure. 

Total productivity Index / Measure = Total output / Total input 

It can also be measured by Total production of goods and services / Labour + material + capital + Energy + management 

Labour productivity Index / Measure = Output in unit / Man hours worked 

Machine productivity Index / Measure = Total output / Machine hours worked 

Management productivity Index / Measure = Output / Total cost of management 

Land productivity Index / Measure = Total output / Area of land used 

Partial measure can be measure by :

  • Output / Labour  
  • Output / Capital 
  • Output / Materials 
  • Output / Energy

Benefits of productivity

For the survival of any industrial organization productivity ratio must be at least 1. If it is more than 1 the organization is in a comfortable position. The ratio of output produced to the input resources utilized in the production.

Benefits derived from higher productivity are as follows :

  • Improve profits because productivity helps to cut down cost per unit. 
  • Gains from productivity can be transferred to consumers in the form of lower-priced products or better quality products. 
  • Paying workers or employees at a higher rate because gains can be shared with them.
  • A more productive entrepreneur can have better chances to exploit expert opportunities. 
  • Generate more employment opportunity. 
  • Overall productivity reflects the efficiency of the production system. 
  • More output is produced with the same or less input. 
  • The same output is produced with lesser input. 
  • More output is produced with more input. 
  • The proportional increase in the output is more than the proportional increase in input. 
  • It is greatly helpful in achieving overall prosperity and growth of an economy.