Productivity is limited by the scope of your products. If you have 100 Work years of work available to do but have 500 employees then each employee can only do 0.2 work years worth of work per year. People want to be productive but if there's not enough productive work do then people start doing unproductive work because it's all that is available.

Solution: You need to either increase the scope of products: get into new industrys like Tesla and Amazon are doing OR cut head count massively.