Quality experts such as W. Edwards Deming have stated that quality is positively associated with productivity because as the quality of a product or service increases, there is less need for correcting work or fixing mistakes, so productivity improves. However, many experts disagree with Deming's view and instead believe that as quality improves, the cost of production goes up. The result is higher prices and reduced productivity.
Other experts believe that quality can only be increased through Total Quality Management (TQM), a process that requires an overhaul of systems and behaviors. The idea is to make organizations more competitive through improving the quality of the product or service and to improve the organization's ability to meet the customer's needs through continuous improvement of the process. TQM is a process that aims to improve productivity, quality, and customer satisfaction. Therefore, to increase both quality and productivity, an organization can use a process of continuous improvement that addresses both goals simultaneously.
Kontoghiorghes, C. (January 2003). "Examining the association between quality and productivity performance in a service organization." Quality Management Journal, Vol. 10 (1).
Productivity can be defined as the ratio of total output to total input (raw materials, man-hours, capital cost, etc.). Quality is a measure of excellence and can be defined as the overall performance (reliability, durability, serviceability, etc. ) as compared to customer expectations. There is a positive correlation between the two in any business environment.
Better quality sets the product apart and increases sales. It also results in lesser defects, increases production efficiency, reduces replacement/repair costs and increases overall customer satisfaction. The decrease in defects and repair costs decreases the input cost and increases the overall productivity. In fact, better quality serves as the best advertisement (through word-of-mouth advertising by satisfied customers) and decreases the cost incurred in sales/marketing. In manufacturing industry, quality can also be enhanced by use of computers and machines (instead of manual operation). In such a manufacturing environment, standardization and precision will likely reduce production time and defects and enhance productivity.
The exception to this positive correlation would be in the case of more time and resources spent in quality production, esp. in manual production.
Hope this helps.