6 Sigma Categories
Business & Career Improvement
The Importance of Productivity in Business
Business Productivity is the ability of an organization to utilize its available resources in order to produce profitable goods or services as desired by customers or clients. It is the productivity that measures the performance of an organization, and it can also be used for companies themselves in order to assess their own progress. The importance of productivity in business can be summarized as follows.
Productiveness increases the overall efficiency of an organization. When the efficiency of the organization increases, the production capacity of the company is utilized to the optimum level. Thus, all resources are used in an effective and efficient manner to get the best possible results. As is often indicated by business, the more products you make, the lower your overhead, and the higher your profits.
Enhanced production lowers the cost per unit of a product which in turn, results in lower prices for better quality, which enhances a business’ competitiveness in the market. In the current turbulent world, every organization faces stiff competition from their counterparts. Hence, lower prices as a result of enhanced production give an edge to businesses to sell products at more competitive prices. If the rates are competitive, the business is in a better position to attract more customers and make more sales. This is the primary motive of any business organization.
Increased production due to efficient utilization of organizational resources leads to a lower cost production resulting in better sales and profits. If the profits of an organization shoot up, it increases the confidence of investors in the organization. Moreover, the share value of the company increases. Due to this, the reputation and goodwill of the organization increases.
Similarly, the business can share a portion of its profits as a result of enhanced production with its employees. This boosts the morale of the employees as they get to enjoy a part of the profits and the satisfaction of a job well done. As a result, their working efficiency tends to increase which in turn, further increases the production of the company. As you can start to see, there is a snowball of business success that starts with increased productivity.
Productivity is much more important than revenues and profits of the organization because profits only reflect the end result whereas productivity reflects the increased efficiency as well as effectiveness of business policies and processes. Moreover, it enables a business to find out its strengths and weaknesses. It also lets the business easily identify threats as well as opportunities that prevail in the market as a result of competition and changes in business environment.
A company can increase its own business productivity by making suitable changes in its business process and policies in order to improve the weak areas and capitalize on strengths for betterment. Similarly, an organization can formulate strategies to turn threats in to opportunities. This results in increased profitability and stability which is vital for the continued success of any business organization.
The importance of productivity can never be ignored by any diligent business owner. Successful ventures are often those that give priority to productivity compared to solely looking into revenues and profits of the company. On the other hand, businesses that do not pay attention to productivity pay a huge price in terms of reduced production and high cost of production, resulting in reduced sales and low profits. Thus, a productivity level can be considered a measure of success or failure for any business.