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Productivity improvement in both the private and public sectors is more important now than ever because the current budget reductions are placing severe demands on businesses and Federal agencies. As foreign markets are less willing to accept higher prices and volume, U.S. businesses are faced with increasing labor and supply costs as well as heightened international competitiveness. This dilemma has forced these businesses to look inward and find ways to reduce costs and improve productivity. Although each firm has its own approach to organizing a formal productivity program, seven elements are needed in any productivity effort in either the public or private sector. These include: (1) providing top level support and commitment to productivity improvement; (2) establishing a high-level manager to serve as a focal point for productivity to ensure program success; (3) generating an awareness of productivity's importance and involving all employees in the effort; (4) identifying productivity objectives and goals and developing an organization-wide productivity plan; (5) developing productivity measures that are meaningful to the organization; (6) using the productivity plan and measurement system to hold employees accountable for productivity improvement; and (7) providing a mechanism for examining productivity problems and developing recommendations for their resolution. In the public sector, many Federal agencies have only small, narrowly conceived productivity efforts that encompass few, if any, of these elements. Although there are several positive actions for productivity improvement in the Government, more can be done. In this time of inflation and budget reductions that force agencies to do with less, productivity and efficiency should be a high prioriy. GAO believes that Congress can help foster an increased concern about productivity by encouraging agencies to use productivity data in their budget requests and by then using these data in the appropriations process. GAO found that Congress and the Office of Management and Budget are often more concerned about effectiveness and overall budget levels than about efficiency. It must be made clear to Federal agencies, at all levels, that productivity is a matter that deserves to be of high priority and that they will be held accountable for the productive utilization of resources.