In order to elucidate this, let us first define productivity. This can be defined as the amount of product (goods and services) that can be produced using a set amount of resources. Typically, it refers to how much product a firm can make using a certain number of worker-hours. With this definition in mind, we can see how productivity can be a useful tool for determining whether the firm is moving towards a more efficient use of its resources.
Let us say that a firm is producing software. It will want to use its resources as efficiently as possible. This will mean that it will want to produce as much software as possible using a given number of workers who are working a given number of hours. The more it can produce using the same number of worker-hours, the more efficiently it is working. Productivity is the ideal measure to use to determine if the firm is working more efficiently. Productivity essentially measures efficiency because it measures how much is being produced by each worker-hour.
"Productivity is an important tool for managers as it helps to track progress toward the more efficient use of resources in producing goods and services."
In Simple words Productivity is Maximum output at minimum input. say maximum return on investment by use of minimum resources say land, man , money and labour and natural resources etc.
Productivity is really Important tool for managers to track progress towards the most optimum utilisation of resources by keeping check on returns and investments. As we all know that in many terms the resources are scarce and the condition is as is with all the economies and we are required to preserve the resources for our next generation.Improvement in productivity and that in efficient use of resources, may be considered one and the same thing.
Product could be any , say it could be physical good or a service, in every organisation wether it is dealing with the production of physical goods or services the resources are limited and if it get utilised in best way, the resources will be longer available for us.
However the measurements of productivity as a means of setting targets for and monitoring efficiency and performance. This definitely helps in improving efficiency.