Fundamentals of Management, 8th ed

The Importance of Productivity

Managers consider it important that their firm maintains high levels of productivity for a

variety of reasons. Firm productivity is a primary determinant of an organization’s level

of profitability and, ultimately, of its ability to survive. If one organization is more pro-

ductive than another, it will have more products to sell at lower prices and have more

profits to reinvest in other areas. Productivity also partially determines people’s standard

productivity

An economic

measure of efficiency

that summarizes

what is produced

relative to resources

used to produce it

Chapter 15: Managing Operations, Quality, and Productivity

4 7 9

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of living within a particular country. At an economic level, businesses consume resources

and produce goods and services. The goods and services created within a country can be

used by that country’s own citizens or exported for sale in other countries. The more

goods and services the businesses within a country can produce, the more goods and

services the country’s citizens will have. Even goods that are exported result in financial

resources flowing back into the home country. Thus, the citizens of a highly productive

country are likely to have a notably higher standard of living than the citizens of a country

with low productivity.