Obtaining accurate and complete information on the company's performance with a productivity formula is essential.l for various aspects. Such as determining the starting situation, the position vis-à-vis the competition, the obstacles that hinder evolution and the failures committed in order to establish possible solutions and design the company's future strategy.
Therefore, at the business level there is a formula for calculating productivity that provides this overall picture on business efficiency.
When we talk about overall productivity, we are referring to how well the resources of an economy are being used in the production of goods and services. In other words, what is the Management efficiency and management of said resources.
“We can define it as a Relationship between resources used and products obtained y denotes the efficiency with which human resources, capital, land, etc. are used to produce goods and services in the market”, according to the definition collected in Productivity: A Case Study in a Claims Department by Erica Felsinger and Pablo Manuel Runza.
In contrast to other partial indicators, which focus on a certain aspect of business activity (such as the worker productivity, of machinery or a process), the overall productivity index provides a comprehensive picture of the company's situation.
This way, you avoid falling into misconceptions about the state of the business that harm decision-making due to a lack of an effectiveness formula.
For example, the workforce might be highly productive, but this doesn't mean the company is, as perhaps the advantage brought by the workers could be destroyed by serious inefficiency in the distribution channels.
As Julián Jiménez and Carlos Paredes point out, in the work Factors influencing the level of productivity of the Dypers company, The total productivity measure reflects the combined impact of all inputs in the production of products”.
How is this global productivity index calculated? The productivity formula is ‘a priori’ simple and consists of dividing the productivity obtained by the consumption of all factors used for it.
Global Productivity Output / Inputs
For example, a car factory has 5 workers (with a daily wage of 100 euros each) who manufacture 10 vehicles per day, with a selling price of 30,000 euros each. To do this, the company uses large machinery, which costs 50,000 euros per day, plus another 25,000 euros in raw materials.
This way, in the calculation of productivity, the formula for this assumption would be:
10 (cars) * £30,000 / (5 workers * £100) + (£50,000 of machinery) + (£25,000 of materials) = 3.9
This figure indicates that productivity is positive if it is greater than 1 (as is the case) or, conversely, negative if it is below 1.
However, if we want to get the most accurate reflection of the organisation's reality, lThe attainment of global productivity is not configured in such a simple algorithm.
Numerous factors must be taken into account which affect business activity and which are not always expressed in the same magnitude (currency, time, numerical valuations...).
So, first of all, we would have to Perform a conversion of different units into a homogeneous magnitude, normally money. But what about those intangible aspects like reputation, brand image, organisational culture, Employee satisfaction index…
Its quantification can be more complex and subjective. This is why achieving an exact result on global productivity is very complicated, with a clear understanding of what the productivity formula should be.
