How to Measure Workplace Productivity (and Why It’s a Good Idea)

Why Measure Workplace Productivity?

Measuring workplace productivity is a key component of human resources. This tracking can help you:

• Gauge employee effectiveness
• Manage team performance
• Make better use of available resources
• Adapt to industry and market changes
• Identify blockers and redundancies
• Make better operational investments

In short, it can help the people in your organization improve their business decision-making.

Three Ways to Measure Employee Productivity

Productivity can be measured in different ways. One isn’t necessarily better than another, you simply want to find the best method for your work environment.

The Quantitative Method

The quantitative method uses a formula to calculate workforce performance based on output per unit of input. Output is the goods or services your workforce produces in a given time. The input is the amount of time it takes to produce the output. This method is helpful if you’re tracking product-based productivity metrics like manufacturing or construction.

To calculate your productivity rate, divide output by input, like so:

Productivity = Output / Input

Consider a team that can build 10 bicycles in eight hours. The per-hour productivity formula would be 10 divided by eight, which in this case comes out to 1.25 bicycles per hour. 

You can also use this formula to calculate productivity per employee. Say that team producing 10 bicycles in this single eight-hour work day has six employees. The per-employee productivity formula here would be 10 divided by six, which equates to 1.67 bicycles produced per employee a day.

To evaluate whether or not this is a good productivity rate, you can compare this number to a pre-established baseline. This could be an industry benchmark or organizational average, or a projection based on necessary productivity rates to reach annual production or profitability goals.

The Objectives Method

This approach compares employee performance to specific targets and goals. It tends to work well for knowledge workers, who typically work toward objectives instead of specific outputs.

If you’re managing a software engineering team, for example, you could set the goal of introducing eight software features in four weeks. Then you would measure their productivity based on whether or not they meet (or exceed) that goal. 

It may be necessary to break up an employees’ projects into smaller tasks that are easier to measure to accomplish. In the software development scenario, for example, the first task might be for each engineer to come up with two feature ideas.

The number of objectives and the time frame will depend on your employees. You want to keep them realistic and achievable, so your staffers can succeed in their roles, but challenging enough to maximize your organization’s impact.  

Productivity by Profit

This method tracks your company’s performance by its profits rather than overall productivity. To calculate profit, you take the amount of revenue generated and subtract your production expenses. The higher your profit, the higher your productivity.

Also known as the profit productivity method, small and medium-sized businesses often use this approach. It’s particularly helpful if measuring output or objectives is challenging in your industry. Take, for example, a small marketing agency where you have multiple clients with different requirements. What’s productive for one client may not be for another — what matters is the overall profit you generate.

Whichever method you use, keep in mind: The purpose of measuring employee productivity is to help them work smarter — not harder.

Tips for Improving Workplace Productivity

Setting clear goals and connecting them to the company’s mission can help your team members focus on what’s important. In fact, having goals that align with their needs and company objectives can increase employee productivity by up to 22%, according to Gartner research.

With that in mind, here are a few more ways to boost your team’s productivity:

• Conduct regular reviews. Employees who set and discuss goals frequently are the most engaged, according to a Lattice survey. And companies with an engaged workforce outperformthose without.
• Reward good performance. Recognizing team members for their hard work is an effective way to motivate them and increase their performance. You can provide incentives such as praise, perks, or monetary bonuses.
• Cut unnecessary meetings.Unnecessary meetings can be a major drain on employee productivity, so try to keep any meetings focused and limited. Leverage asynchronous communication (like email or instant message) where possible to encourage efficient collaboration. 
• Add a wellness programto your benefits package.Less than 50% of U.S. workerssurveyed strongly believe their company cares about their wellbeing. Investing in employees’ physical and mental health can help you retain talented workers, and retention can enhance productivity. Plus, research shows that employees who eat a healthy diet and exercise regularly are more likely to have better job performance.
• Give them time off.Experts say taking vacations can increase employee productivitylevels. When people have time away from their job, they come back feeling refreshed. In addition to paid time off, respect when employees log out at the end of the day. Most situations can wait to be addressed until they log back on in the morning, so there’s no need to risk burnout by asking employees to consistently burn the midnight oil.
• Offer professional development opportunities.Professional development opportunities help your employees learn new skills and improve their performance. Supporting their career development can also increase their engagement.
• Consider company culture. Companies with low employee engagement experience lower productivity. Try to foster a workplace culture focused on open communication, flexibility, and teamwork.
• Survey your employees and customers. Asking for employee feedback can help you identify areas where your team needs additional resources. Surveying your customers can highlight problems within your workflows that you may not have known existed.

Healthy Workforce, Productive Workforce

Measuring workplace productivity is an invaluable tool for any organization. It helps you ensure your teams are working efficiently and identify areas needing improvement.

One proven way to improve your company’s productivity is by supporting your employees’health and wellness.Companies that invest in the right wellbeing strategies tend to have better business outcomesthan others.

Beyond the standard healthcare benefits, you can offer your teams access to classes, stipends, fitness centers, and other resources to support their work-life wellness. Talk to a wellbeing specialistto get started!