Cambridge O Level Business Studies · Syllabus 7115 · Operations Management
Productivity
What is Productivity?
A measure of output relative to the inputs used to produce it. Labour productivity is output during a period divided by the number of employees, and is expressed as output per employee per period. Productivity can rise while total production falls, and can rise while quality falls, so it must always be interpreted alongside other evidence.
This definition is part of the Operations Management chapter in Cambridge O Level Business Studies.
Productivity in context
Operations management is the work of turning inputs into goods and services that customers will actually buy. Chapter 4 asks four questions about that work: how much output do we get from the resources we use (productivity), how should we organise the making of it (job, batch or flow, and how much technology), what does it cost and at what level of sales do we stop losing money (costs, economies of scale and break-even), and where should the work happen (location). The examinable skill is not reciting the definitions. It is calculating a figure, interpreting it in the business in front of you, and reaching a decision you can defend.
Common mistakes with Productivity
- “Production and productivity mean the same thing.” Correction Production is total output. Productivity relates that output to the input used to make it. A factory that doubles its workforce and increases output by 50% has raised production and lowered labour productivity.
- “The lowest-wage country is the lowest-cost location.” Correction Wage per hour is not cost per unit. Low wages with low productivity, long supply lines, tariffs, unreliable power or political instability can raise total cost per unit above the higher-wage alternative.
Questions students ask about Productivity
What is the difference between production and productivity?
Production is the total output a business makes in a period. Productivity relates that output to the resources used to make it, such as output per worker or per machine hour. A business can raise production simply by hiring more staff while productivity actually falls, so the two figures must be read separately rather than assumed to move together.