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Determining Productivity Ratio

Apr 3, 2008
Drawing upon the business context, productivity ratio can be referred to as the determinant of the efficiency of an enterprise to convert its available resources into useful finished goods and services. In other words, productivity ratio is determined as the ratio between output and input. It can be between production output and effort or between returns and investment.

Measuring productivity is a matter that many businesses may have to perform to be able to search out problems and formulate solutions and/or improvements. Productivity is a concern of many enterprises wishing for business growth and development for the attainment of goals and objectives.

There are many factors affecting the productivity level of a business enterprise. The labour force is perhaps seen as the common factor for the increased, diminishing, or stagnant productivity of an enterprise. This is not only in the production area, but also in all other departments. Because of it, the direct labour hour is commonly used as a factor for measuring the productivity of many enterprises. This is in the case when an enterprise uses Partial Productivity as a measurement for coming up with a rate of production output to input.

Nevertheless, there are various factors that can influence the productivity ratio in many businesses. Aside from direct labour hours, many businesses may also have to consider the unit of production output of the production group and/or individuals for determining the productivity. Quality can also be used as a basis for assessing the accurate or proximate number or rate of productivity. Monetary capital is also a common factor for determining productivity. It should also be noted that structural forms of capital, such as technology and equipment, have also something to do with productivity.

Many enterprises can also use other indicators affecting productivity aside from the common ones. The capacity of labour force and machines used, the process of production, and the products or services themselves are other factors used for assessing productivity.

Moreover, enterprises can also consider outside influences as factors affecting their productivity. The customers' changing wants, business and political climate, and competition may be seen as factors for coming up with the numbers in the productivity report.

It is important to determine proper factors that have influences to productivity. It is, likewise, relevant to use appropriate indicators for measuring productivity.

There are three common measures for productivity. They are: partial productivity, total factor productivity, and total productivity. The least complicated type of productivity measure is partial productivity.

In partial productivity, a type of input can be used to determine the productivity ratio. Direct-labour hour or rate is a basic example of an input factor for determining productivity.

In total factor productivity, there is a combination of factors that are directly linked to productivity. The productivity measure resulting from the incorporation of different inputs used to manufacture a product or to render a service is a scope of total productivity.

Determining the productivity ratio can be made by employing productivity measures. In this way, there can be a theory or conclusion drawn on specific factors affecting the productivity.
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