Productivity Knowledge Base: Productivity vs. Efficiency

The Federal Government is reporting some pretty high productivity statistics. They measure productivity by dividing the total output by the number of workers.

Now, think about this. Bill works 30 hours and makes 100 widgets. Mike works 60 hours and makes 101 widgets. According to the government, Mike is more productive than Bill. Yet, Bill is more than twice as efficient as Mike. How can Mike be more productive? The quantity the government is measuring isn't productivity. It's a meaningless number that nobody can use for managerial or economic purposes.

The correct way to measure productivity is to divide the total output by the labor hours used to produce that output.

How do productivity and efficiency differ?

Productivity measures the total product out the door--completed work.

Efficiency measures the amount of work done, regardless of how much completed product there is--it is process-oriented.

Productivity and efficiency move in the same direction. Thus, you cannot have the disparity logically arrived at by the government's method of calculation.

When you raise efficiency, productivity will necessarily improve--provided that efficiency increase does not come at the cost of efficiency elsewhere in the productivity chain. That's an issue we cover in our productivity seminars. We help you learn the secrets of the  masters.