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What is 'Productivity'?

The concept of productivity has become generalized and is used in relation to any type of activity in order to measure its effectiveness, productivity, originally, is linked to production. In other words, we speak of productivity taking into account the variations in products produced or services performed, and the variations in the means used to achieve it. The means of production, as we know, are land, labor and capital, and productivity is closely related to an efficient association of means, as well as to the time it takes for production to take place.

Ultimately, it's about producing as much as possible, making the most of available resources, and therefore wasting as little as possible. In this way, there is also greater profitability for the company. Understood in a broad sense, the productivity of a company isn't only related to the production process itself, but also to the rest of the functions and departments of the company, although they are transversal in nature.

The reason is that these departments also constitute means and resources whose costs must be attributed to the products or services produced in their proportional part. Therefore, if there are inefficiencies in any department of the company, such inefficiencies translate into an increase in the fixed or variable costs of the company, which, in turn, results in an increase in the costs of the products. And, unless the company is willing to assume the difference, also in an increase in the prices of the products.

Keeping track of the productivity of the company also allows making improvements and changes, in order to make it more profitable and productive. As far as possible, it may also be useful to take into account the productivity of competitors. In this case, to determine if it's necessary to make any important change in the company, in its position in the market, or simply to apply ideas that improve or make the production process more effective.

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