↑ Return to Productivity

Why important for individuals

  •  In the private sector, managers first have to decide what to offer whom, when – what products or services to offer at what price to which markets at what time


  •  Then how to make and deliver their chosen products or services – what organisation structure and then processes and resources they need, how to maximise their effectiveness so that customers want to buy more and their efficiency so as to minimise unit costs and maximise profit margins


  •  Private sector managers can’t treat every possible investor, customer, product or service, or employee equally – they’ve limited money, time and resources – winners invest them where overall paybacks are highest and cut any losses elsewhere – they try to get the most out of them by offering better price, quality and/ or service levels at minimum cost – i.e. they try to maximise their productivity


  •  If and when they realise big profit margins in specific markets, such days usually don’t last long – alert competitors will soon spot this and invade with their alternative offerings – profit margins thus get squeezed, selling prices become keener so the pressure for lower unit costs, better quality and/ or service levels increases  


  • In the public sector, unit managers must treat all their customers equally so they spread their limited funds accordingly and try to keep up with ever-increasing demand, whoever it comes from


  •  Again, they try to get the most out of the resources they’re given, and satisfy both their ‘customers’, the general public, and their investors, the tax-paying public i.e. they try to be both effective and efficient


  • Hence they must also seek to maximise their productivity


  •  But, unlike their private sector equivalents, they’re ‘too important to fail’ – there’s little risk of their units not surviving if they don’t perform well so efforts to improve productivity are not as energetic as in the private sector


  •  It’s the moral hazard confronting all public sector managers when the nation wants ‘more for less’ from them

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