How to Measure Productivity to Improve Employee Efficiency
Do you know how to measure the productivity of employees? Perhaps this is one of the age-old concerns of managers and business owners. It can be challenging to assess how productive an organization is, especially if we’re talking about a service-based company. Nonetheless, productivity is a crucial factor in determining the efficiency of employees and the overall performance of a business. What’s more, measuring it helps in defining the progress of a company.
What Is the Importance of Measuring Productivity?
An article on JustBusiness.com collated data from various studies related to starting a small business. The cost of opening a business depends on its size and the industry it will operate in. However, on average, a startup company will need around $10,000 to get moving. Of course, that is serious money.
The data presented in the article illustrates that 10% of the initial capital goes to marketing and 25% is allocated to inventory. Aside from that, 15% goes to miscellaneous expenses, and a whopping 50% is spent on the payroll. This is also the reason why performance management is critical if you want to get a good return on investment (ROI).
Data collated by JustBusiness.com
When you offer feedback that is backed by data, it is easier for you to show your employees their strengths and areas of improvement. You can determine whether they are consistently hitting targets for specific types of tasks but are lagging behind in other areas. This way, you can guide them into considering where they need to spend more effort and time. Consequently, you are improving employee morale, which can be great for your company’s overall performance. Here are other reasons why measuring productivity is important:
With productivity metrics available, you can properly plan for future projects. By knowing who’s responsible for certain tasks and whether deadlines are met, you can efficiently allocate work.
If you’re operating under a parent company or you’re planning a new partnership, having data-backed productivity analysis can improve your business’ credibility. The data will be proof of your organization’s successful performance.
Of course, the obvious benefit of productivity measuring is eliminating wastage. By having accurate data, you’ll determine where you’re wasting your company’s resources.
Better and Easier Contract Negotiations
When your proposals are backed by data, you can have the confidence to go into negotiations that give you the upper hand. What’s more, you can refuse certain work because you’re aware that it won’t be profitable for your company.
What Are the Best Methods for Measuring Productivity?
Now that we’ve explained the importance of taking productivity measures, let’s look at the different methods you can use for gathering data. You may also wonder, “Which of the following is a correct way to measure productivity?” Well, the truth is, you need to determine which strategy works best for you. Don’t worry because we will explain all the methods in detail.
Method 1: Using the Productivity Formula
Productivity equations are excellent tools for measuring the success of a company, a team, or an individual employee. In the context of an organization, using them can help in identifying the efficiency of a company in terms of converting machines, raw materials, and skills into useful services or goods. Surprisingly, this method can be illustrated by a basic productivity formula:
This productivity formula shows the correlation between input and output. Some of the common types of input are capital, labor hours, and materials. Meanwhile, the most common types of output include the number of goods created and sales. If you compare two subjects, you’ll know which of them delivers greater productivity by looking at these factors:
- Producing more with the same number of inputs (labor, capital, and materials)
- Using fewer inputs to generate the same level of output
Let’s say you want to calculate the productivity of your sales agents. Their labor hours will represent the input in the formula, while their sales amount will be their output. Adam works for 40 hours per week and brings in $3,700 in his first week. Meanwhile, Daisy works 25 hours a week and generates $3,000 worth of sales. Let’s see who has a better productivity level:
Adam: $3,700/40 hours = $92.5/hour
Daisy: $3,000/25 hours = $120/hour
A manager can use this formula to determine which of their employees are less productive. It will also help them determine why they aren’t working efficiently.
The illustration we used above represents partial factor productivity. This refers to the process of computing productivity using a single unit of input. What’s great about this method is that it makes it easier to calculate productivity. Moreover, you can easily gather the necessary data, which makes this method ideal for individual assessment. However, it is not advisable for companies that want to evaluate the overall productivity of their organization or their service departments.
Now, if you’re measuring the productivity of different departments within an organization, you’ll need multi-factor computations where productivity is calculated by relating the output to a collection of inputs provided during the production phase. In this case, the productivity formula will contain the ratio of units of labor, capital, and materials.
Meanwhile, if you’re calculating the overall productivity of a business, you’ll need more than a multi-factor formula. After all, this method only uses a subset of inputs employed during production. In this case, a manager will use the total productivity formula. When it comes to Total Factor Productivity calculations, the manager considers all inputs used in the production process. As such, this method is ideal for evaluating the overall performance of an organization.
Method 2: Using a Time Tracker for Measuring Productivity
Time trackers like Traqq have sophisticated algorithms that let you monitor productivity levels. Employees can use this tool to submit timesheets automatically. What’s more, it tracks the activity levels based on mouse scrolls, clicks, and keyboard presses. Aside from that, it monitors the time spent on specific apps and websites. As a result, managers can see how their team members are performing. They can even generate reports for the whole team to determine who is getting overworked or is underperforming.
If your team is composed of individuals working remotely across the globe, using Traqq will be a great solution for you. It lets you gather accurate data no matter where your staff members are. Besides, Traqq is a foolproof time tracker that cannot be cheated.
Method 3: The 360-Degree Feedback Method
With this method, an organization can measure the productivity of an employee by gathering feedback from their co-workers. It may seem like an odd strategy, but in certain situations, it has proven to be effective. Every team member’s productivity will be measured based on the evaluation given to them by their peers. They will be assessed according to how efficiently they fulfill their responsibilities. Moreover, they will be reviewed based on how they contribute to the growth of the company.
This can only be executed successfully if everyone in the team has an understanding of the different functions and roles. They should also know what to expect from those roles in terms of the level of output. Keep in mind that the 360-Degree Feedback Method is applicable in work environments where there is constant interaction among team members. So, if you don’t have a tight-knit team, this strategy may not work for you.
Before you start the program, you must organize training sessions to ensure that every employee knows how to provide objective feedback. You must orient them about providing an honest evaluation of a worker’s overall contribution towards the goals of the team. What’s more, they should not let their personal biases cloud their judgement.
Method 4: Profit = Productivity
Profit is undeniably everything in the business world. So, it only makes sense to measure the productivity of a company by the amount of profit it generates. This method is simple and cost-effective, making it an ideal option for small businesses. What’s more, it’s a no-nonsense strategy for assessing productivity, allowing managers to get the information they need immediately.
Now, for businesses offering services as goods, measuring productivity through profit can also be beneficial. For instance, in creative agencies, staff members can spend all the time they need on creative planning. As long as they satisfy the requirements of their biggest client, they won’t be penalized for that. Instead, the value or profit they bring to the business will be the basis of their productivity.
Also known as the ‘team effectiveness ratio,’ the productivity = profit measurement evaluates how much profit a business earns for every dollar that goes into payroll. If you aim to get your team to work smarter and not longer, this is the best option for you. After all, this method does not measure profit against time.
Method 5: Social Media Monitoring
Some companies require that their employees’ Facebook and other social media accounts be monitored by their direct managers. These organizations follow the belief that those who post online during work hours are less productive than their peers who stay off these platforms. After all, research reveals that people spend an average of 153 minutes a day on social networking. As a result, these companies have strict rules about how their employees browse the Internet on company time. Moreover, they monitor social media usage during office hours and call out individuals who are violating their policies.
Here at Traqq, we believe that this approach is too confrontational and controlling—even bordering on unethical. Many companies find this effective, but there is still a better way to measure productivity. For instance, you can use a time tracker that promotes ethical monitoring. With Traqq, you can still have an idea of how your employees spend their time at work while giving them ownership of their duties.
Traqq generates visual reports of the websites and apps that your employees use. The tool will also show you how much time they spend on these activities. The app can take screenshots and videos of the user’s screen while keeping everything blurred, which means sensitive information, like passwords and private messages, will be totally illegible. As such, managers can monitor their employees without infringing their privacy.
Method 6: Daily Check-Ins
If you’re more concerned about keeping your employees on track than their actual output, then the daily check-in method is your best bet. You can ask your team for updates on a day-to-day basis, asking them what they’ve achieved and what’s still in their basket. What’s great about this method is it can flow into initiatives for weekly and monthly goal-setting. There are various ways to do this:
- Over a Zoom video conference
- In a Slack channel dedicated to daily updates
- Via a quick group email
- Through team huddles in the morning
Conducting daily check-ins is ideal if you have employees who struggle with procrastination or those who need constant validation. Even so, remember that this method may not be effective for personality types that find daily meetings overbearing. If you overdo it, employees may feel that you are micromanaging them—something that you should avoid at all costs. Daily check-ins are best used alongside a system of ownership and trust. Let every staff member be responsible for setting their own deadlines and schedules.
Method 7: Monitoring Milestones
You can also measure productivity by the number of milestones that an employee achieves. It doesn’t matter how many minutes a staff member spends on a task. Instead, what’s important is the types and number of tasks that were completed. You can monitor productivity by splitting projects into separate tasks. There are tools that you can use for task allocation and tracking. For instance, you can manage tasks via Jira or Trello.
You can assign tasks to suitable employees. What’s more, you must be clear about every person’s KPIs. Ensure that they monitor how much they can accomplish for every hour, day, week, and month. Moreover, you must inform everyone about the project milestones and goals. Emphasize the deadlines and highlight every completed task instead of the number of hours put into work.
Method 8: Quantifying ‘Smiles’
If you’re handling service staff, you know how tricky it can get to measure productivity. Of course, it’s crucial that your workers close as many support tickets as possible to prevent backlogs. However, you don’t want to neglect customer service. A quick response time is not so efficient if your clients find your agents condescending and rude.
When it comes to productivity assessment in service centers, most companies use a combination of the following:
- Output – How many tickets were answered within a specific period?
- Feedback – What is an employee’s customer satisfaction score?
You can use automated phone surveys or support ticket reviews to gather this data.
Choose an equation that will represent the tasks that your team accomplishes, highlighting excellent customer service over the number of closed tickets. Also, you should establish a benchmark that will determine how staff members must perform in terms of service. Every year, you can modify the baseline according to the current market environment.
As a business owner or manager, you should keep in mind that any productivity measure you take will help you achieve your goals in a shorter period of time. The methods we shared in this article will give you a glimpse into the value your company offers to the market. They will also show you how motivated your team is in terms of achieving your company’s goals. Moreover, measuring productivity will foster leadership skills and accountability among your staff members.