This article discusses operations productivity and measuring business productivity.
The founder of Godaddy.com is famous for saying that anything watched and measured tends to go up. Keeping track of company productivity is essential to running a successful business venture.
Productivity is a measure of the effective use of resources, usually
expressed as the ratio of output to input.
Productivity measures are useful for tracking an operating unit’s performance over time. Productivity tracking is also used to rate the performance of an entire industry or country.
Process yield is the ratio of output of good product to input. Defective products are not included in the output.
Process yield is also used in service orientated industries. For example the ratio of hotel rooms sold to rooms vacant.
Higher productivity in another company is a key reason organizations outsource work. Improving productivity may reduce the need for outsourcing.
There are other considerations as well. For example, a company may take a PR hit if they outsource jobs to another country.
Managing the Finance Side
It is very important that a business have an intimate understanding of what they are getting per dollar invested in the company. This is the responsibility of the finance department.
Once a business is able to accurately track what a dollar is worth to them than they are able to easily make common financial decisions involving loans, debt, and proposed investments.