Importance of Productivity for Businesses
Irrespective of the industry fields in which they operate, the primary purpose of businesses is to generate profit and share it while creating added value. A business needs to be productive to become profitable, and the major issue determining the relationship ofproductivity and profit is losses.
As measurement units referred to as inputs and outputs of productivity measurement are hard to calculate because they vary and are not intended for improvement purposes, key performance indicators are used to better focus improvement efforts on productivity goals (Parmenter 2010). Although key performance indicators provide some advantages in the calculation of productivity, they pose the following problems.
- • They require financial data, which is often either unclear to the personnel in charge of productivity implementation or the personnel do not have sufficient information to interpret the data.
- • Top management objectives are financial and it is hard to transfer them into technical levels as performance indicators.
- • Most of the time achievements in performance indicators do not turn into financial gains.
• At times, even though key performance indicators leave the impression of a successful productivity effort, a loss may occur even with excellent productivity results. In fact, benefit/cost relationships are sometimes ignored.
As a result
- • In using an academic and classical approach to productivity, one can derive several definitions and formulas. However, productivity itself is a result, and improvement efforts should be tailored in regard to root causes forming the results rather than the results themselves.
- • Classical productivity measurements reveal the results created; however, they do not allow one to make future-oriented improvement plans.
- • Engineers are action-oriented individuals and are interested in the root causes affecting productivity.