Topic 16 - Productivity and Efficiency

Productivity

Output per unit of input (usually labour)

Productivity Formula

Total Output ÷ Number of Workers (or Hours Worked)

Efficiency

Producing goods or services at the lowest possible cost

Technical Efficiency

Using the best production methods to minimise waste

Allocative Efficiency

Using resources to produce what consumers want

Productive Efficiency

Producing at the lowest average cost possible

Training (to improve productivity)

Improves worker skills and output; can be on-the-job or off-the-job

Motivation (to improve productivity)

Use of financial and non-financial incentives to increase efficiency

Capital Investment (to improve productivity)

Use of new machinery or tech to automate and increase output

Better Organisation of Work

Redesigning workflows, using teams, and setting clear targets

Benefits of Improved Efficiency

Lower unit costs, higher profit margins, competitive pricing