Scopewise, productivity is defined in two different forms, though both are based on the same principles. According to its extensively recognized definition, it is “a rational way of doing the right thing in the right way and with an economic effort.”

  • • Productivity is a progressive thinking that aims for continuous improvement.
  • • It supports the belief that “today is better than yesterday, and tomorrow should be better than today.”
  • • It adopts economic and social lives to continuous changing conditions.
  • • It is an effort to apply new techniques and methods.
  • • It supports people development.

Since contemplating the productivity in such large dimensions precipitates identification and measuring issues, most implementers and researchers approaching the subject on the business level have favored using the concept of business organization performance instead of such a comprehensive productivity concept.

The second definition, which has never changed, is the classic definition (Coelli et al. 2005), “Reaching to the highest outcome with the lowest possible resource consumption.” If any production unit has acquired more and better output than in previous periods with the mix of material, energy, machinery, workforce, and management resources used in that unit, this is interpreted as an increase in the productivity of that unit. According to this definition, “productivity is the outcome in the input/output relationships of all changes generated by the methods implemented in the existing manufacturing processes, input quantities, production capacities and output variations” (Coelli et al. 2005).

Productivity shows how successfully the factors of production are used in production or in the overall economy. The rates found by dividing the quantities or values of the outputs of production by the quantities or values of the inputs used for this production are considered indicators of the productivity level.

Today, competition extends beyond national borders and real competition in the international arena has gained impetus and significance. If developing countries cannot help their own businesses to improve their productivities and decrease their costs, they will lose all of their competitive possibilities against developed countries and remain in the vicious cycle of poverty.

The importance of productivity in increasing a nation’s welfare is recognized by everyone. An increase in gross national income, based on an increase in labor effectiveness and quality rather than on the use of additional labor or capital, is very important. Accordingly, in case of distributing productivity gains according to their contributions, an increase in productivity directly enriches living standards. Changes in productivity influence rapid economic development, higher living standards, balance of payment, inflation control, and many other economic and social events to a great extent. These changes positively affect wage and salary levels, cost/price relationships, and capital investment and employment levels.

Competition and marketing strength of the economy are dependent on high and cheap production. High and cost-effective production, however, is a function of the productivity of factors used in production. Because of this, productivity influences the competitiveness of a country in the international market. Within the same goods-producing international market, if a country’s labor productivity decreases then its competition becomes imbalanced. Additionally, if increased production costs are exactly reflected in the prices, customers will be more attracted to suppliers providing more cost-effective goods and the sales of national industries may decrease. Where high costs are not reflected in the prices and are covered by the industries, profits will also drop. This situation will lead to keeping production costs fixed by lowering production or wages.

In short, by productivity

  • • Employees work in better conditions and gain more in a shorter working period.
  • • Investors create new investment opportunities by generating additional resources.
  • • Manufacturers achieve higher gains at lower cost.
  • • Consumers find less expensive goods.
  • • Within a healthy economy, the country achieves rapid growth.
  • • In summary, society reaches a higher level of welfare.
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