Concept of Productivity in Service Sector

Abstract

Productivity shows whether the activity of an organization is efficient and effective. Though the terms like productivity, efficiency and effectiveness are used together and practicians sometimes alternate their meanings, however we must not identify productivity with efficiency and/or effectiveness. Productivity requires both efficiency and effectiveness, because a certain activity will not be productive if it is only efficient, but not effective, or effective, but not efficient. Productivity in economic position is defined as the relation between output and input. Input element in an organization consists of resources used in the product creation process, such as labour, materials, energy. Output consists of a given product, service and the amount of both. Mostly productivity is analyzed in manufacturing sphere. Productivity in the service sector was not analyzed before the end of the twentieth century, while productivity in manufacturing has been analyzed for more than two hundred years. Many researchers argued that application of productivity concept in service sector is more complicated task than its application in manufacturing. Productivity concept in manufacturing is analyzed in the scope of organization, but in the service sector this scope is larger and involves an external element from the organizational position – customer. Some of the service organizations reduce an input element by including customer to their activity and thus boosting service productivity. The quality aspect in manufacturing is not gauged, because input and output are measured by quantity units which quality is seemingly the same. The quality in service sector is very important. Customers often evaluate a given service not only by its amount. If only one unit or package of service is purchased, output is mostly gauged only by the quality aspect. Input commonly is gauged both by the quantity and quality aspects. Quantity and quality aspects in the determination of productivity will differ in different spheres of service sector. Service sector input elements such as materials, machines and energy are not as important as in manufacturing. The main element in service sector is labour because service sector is more personnel-intensive comparing to manufacturing. Output in manufacturing is measured by quantity units and boosted by increasing the amounts of production, its realization. Service sector output usually has no high values by the quantity aspect, therefore it is mostly increased by the attempt to provide higher quality services to the customer, seeking for better customer satisfaction.