I would say that productivity improves motivation because of the confirmation it gives. The notion of investing time, money, energy, and toil in a financial endeavor from any level requires a leap of faith. All signs can point to success, but there can be many more elements that subvert the process of making money and posting financial gains. When productivity does result, and profitability does present itself, it emanates throughout the organization that the individuals who invested in it were right and that their hunches and faith paid off in both profit and success. Productivity, in this light, helps to improve morale and motivation because it is a confirmation that individuals were correct and helps to bring a more cohesive notion of the good where individuals identify with one another in recognition of this success.
In my opinion, increased productivity will usually lead to increased worker motivation because it should usually lead to increased worker pay. When workers are paid higher wages, they are likely to be more motivated.
Productivity leads to higher wages because it increases the quantity of products produced per worker hour. If that happens, each worker is producing more revenue for the firm and can be paid more. When this happens, workers will generally be happier and more motivated.
So, when productivity goes up, each worker is worth more to the company and is likely to be better paid and feel as if the company values him.
In general increased motivation of people improves their productivity. However, increased productivity may also increase motivation. This will primarily result from the encouragement provided by earlier improvements.
As stated in the post above, increased productivity will led to increased prosperity of the employee, which may then motivate to try to earn even more by improving productivity further. However, there are situation which are quite opposite of this also when the policies followed by the organization are faulty. These there is no dearth of instances the employees, deliberately produce less because they fear that fruits of better productivity will be fully apportioned by employers with nothing left for the employee but the harder work.
However at times the better productivity itself becomes a reward in itself. People do take pride in and feel satisfied with their own achievements irrespective of whether or not they receive external physical reward for it. There are many people who are motivated by just the recognition, and public knowledge of increased productivity is a form of public recognition of good performance. There are still others who may be motivated by need for self actualisation. Such people are motivated by their own achievements, even when these are not recognized or appreciated by others.