Whether you run your own business or are simply employed by a company across all industries, you’re likely familiar with the terms productivity and profitability. In today’s age of countless distractions, businesses are constantly in search of ways to boost employee engagement to ensure productive work days. Profitability is essential for the success of a company. While most of us have a strong grasp of what each of these terms mean individually, you may not have stopped to explore the relationship between the two. Can you truly have profitability without productivity, and vice versa? Below we’ll explore in depth what both productivity and profitability mean, and the strong relationship between productivity and profitability that ultimately determines if a business will thrive.
What is Productivity?
In the simplest of terms, productivity can be defined as a way to measure efficiency. To take it a step further, it is how we measure the output that results from units of input. To provide an example, let’s take a look at farming. Utilizing one acre of land, the input, to produce 50 stalks of corn, the output, is not very efficient. On the other hand, utilizing one acre of land to produce 3,000 stalks of corn is much more efficient and therefore productive. Translating this example to an office environment, business owners will want to see that the time and effort their employees spend on specific tasks, such as making phone calls to potential clients, performing research, or in meetings with colleagues, is helping to achieve the overall goals of the company. Ultimately, the goal of organizational productivity is to achieve the results wanted with a minimal amount of time and effort expended. So how is productivity measured? Unfortunately, there isn’t a simple answer to this question, as every business’ benchmarks for productivity are different. It is important to develop goals for your business that are measurable, so you can track productivity. In a sales environment, productivity could be defined as three meetings scheduled for every 20 cold calls. For a doctor, productivity could be defined as administering care to at least 10 different patients on a daily basis.
What is Profitability?
Now that we’ve explored productivity, let’s take a look at profitability. Whether you have an advanced degree in business or know the basics, you’ve likely encountered the term profitability. It is, after all, the primary goal for all businesses. Measuring organizational profitability is essential for every company, because without it the business will not survive. The way we measure profitability is, of course, by weighing income against expenses. For example, to run a business, you will put in a great deal of expenses such as the costs to manufacture a product if your business sells a material good, the costs of employee salaries, costs associated with renting and maintaining and office space, and much more. All of these expenses your business incurs needs to be less than the amount of income you bring in. Only in this case are you truly profitable.
The Productivity and Profitability Relationship
Understanding the importance of both productivity and profitability is key to running a successful business, as it is difficult to have one without the other. Research has shown that the most successful work environments are those that maintain a high level of employee engagement through continuous support, security, and making each team member feel valued. In work environments like this, employees are more likely to feel a vested interest in the success of the business, and are inspired to perform at a high rate of productivity. They’ll want to go above and beyond, feel comfortable sharing innovative ideas, and form important, trusting relationships with coworkers. All of this positivity, in turn, ensures a company is profitable. Looking at the flip side, cut throat work environments with little employee engagement do not support profitability, as employees care little about how well the overall business is performing. Because they do not feel valued, they don’t feel the need to go the extra mile, are prone to giving in to distractions, and are not inspired to share innovative ideas, thereby decreasing profitability. Overall, the relationship between productivity and profitability is one that is dependent on the way in which employees are treated. Ensuring your company provides the support your employees need, fosters a healthy work/life balance, and makes clear the important contributions of each member of the team, will help to keep your business operating a profitable pace.
New York Office Spaces from Corporate Suites
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