How to Measure Productivity in the Workplace?
Employee productivity is very important today due to high competition in the market. We offer you a complete guide to measuring productivity and using results wisely to grow your business.
Regardless of your field of activity, you are primarily interested in the results of your team’s work, which intermediate indicators can predict. Was the work process organized correctly? Is there enough space for technical and creative teams? Are all employees motivated to work for results?
You can form the answers to these questions based on specific, measurable indicators. For example, by measuring the performance of individual company departments, you can understand and optimize the workflow, as well as attract additional employees or equipment to reach the planned deadlines eventually.
But how to measure productivity? There are, in fact, an infinite number of different ways to measure productivity. To understand which is best for you, you need to spend some time and understand all the intricacies. The main thing is to understand from the beginning that measuring productivity is one of the basic components of doing business. Second, anything that can be measured can be improved.
But there is one problem, it is often difficult to accurately measure productivity due to the multiple deviations in the workflow that are quite natural to humans. In this article, we will try to look in detail at why it is important to measure employees’ productivity and share strategies that will help improve measurement accuracy.
What is Productivity?
Everyone knows the broadest definition of productivity. This is a measure of efficiency, which reflects the ratio of output (result) to non-spent means of production. In the creative and IT spheres, the means of production are, in fact, people and their well-organized work process. And as in most industries, IT performance is measured by the difference between team and development costs and revenue. That is why today, productivity is often the task of HR departments.
High productivity is important for any business because it reflects the ability of this business to increase profits and grow. Because of this, there are many ways to measure it in the world, and more are being invented every day. Large companies hire entire teams of highly qualified specialists and mathematicians to build realistic models of current staff productivity and ways to improve it.
But why and how to measure productivity? Let’s take a closer look at the reasons for the need to measure productivity.
Why It Should Be Measured?
As mentioned above, periodic performance measurement helps business leaders and managers understand when, how, and what needs to change to achieve better results. Let’s take a closer look at the reasons why performance calculation matters:
- Workforce optimization. Measuring productivity helps companies understand the state and efficiency of the current workforce and optimize it in various ways as needed. For example, based on productivity data, you can change the work schedules of employees and departments, reduce operating costs and optimize the workflow.
- Financial impact. Measuring productivity is the same as keeping an eye on your business. The market is quite dynamic, so it is important to adjust business processes and workflow constantly. This will make sure that your company is in the best position and you can think about increasing profits.
- Track productivity changes. By constantly measuring your performance, you can see if something changes after your improvements. In addition, it helps to see in advance the first signs of systemic problems that can lead to irreparable damage.
- Business management. A clear understanding of the level of productivity of your business allows you to make better decisions. In other words, it helps you stay on top of your business and manage customer expectations. Also, thanks to the obtained data, it is possible to identify business problem areas and decide whether to expand/reduce the team and implement a new operating model.
At first glance, it is logical that if you want to increase your business competitiveness, you must invest a lot of money in various methods of tracking the performance of your offices and production. Therefore, many full-time specialists or external consultants are involved, who usually play an important role in developing calculation methods. But often, these experts focus on the technical side of methods and statistics of performance indicators. In other words, they often use mathematically accurate methods but do not consider the real human problems faced by employees and managers.
So let’s talk about how to measure productivity of employees and what you should pay attention to in the first place.
Best Tips for Measuring Productivity
The higher the productivity, the better your company will be able to serve customers, which is why they are constantly growing, and your business is growing. Here are some tips on better measuring employee productivity to positively impact your earnings.
Identify Tasks for Measurement
It all starts with understanding, forming, and approving clear and, most importantly, achievable expectations from each employee. In this way, you set the basic performance and management indicators. Depending on the scope of your business, performance indicators can be:
- How many sales calls need to be made?
- How fast do you need to serve the customer?
- How many invoices need to be sent?
- How many orders need to be sent?
So, how do you measure productivity in this case? Instead of focusing only on the amount of time, it is better to measure productivity in clearly defined tasks. At the same time, it is important to be completely transparent in your expectations and clearly explain the goals of setting such tasks to your employees.
Set Clear Goals
Answer the question: can you expect your employees to constantly improve productivity if they do not know exactly what their bosses expect from them? Think clearly and realistically about how their work affects your customers and profits. You need to achieve your business goals, not the other way around.
Then break down big goals into smaller ones that can be achieved over specific periods. After a while, monitor performance to assess employee progress and productivity. A good option is to survey customers and process feedback. This lets you know your strengths, what your employees are strong at, and what you can improve on.
Monitor the Quality of Work
If employees systematically perform their tasks on time, it most likely indicates their high productivity. However, as we have already noted, time is not the only indicator that should be used to assess their effectiveness. Therefore, having established a standard of work performed for each position in the company, as we recommend in the first paragraph, start monitoring their work. Is the minimum being met, or is it possible that workers are constantly doing more and better than set?
It is regular assessments of the quality of employees’ work that allow us to identify weaknesses and strengths in their work. This will allow you to determine if you need extra effort.
Watch Out for Negative Trends
There are two well-known and very common trends that negatively affect overall productivity. It’s about presentism and absenteeism. Although they seem to be completely opposite, each can have an equally devastating effect on productivity.
For example, if an employee comes to work even during illness, it can and will negatively affect the quality of his work. In addition, it not only reduces productivity but also endangers the health of the entire office or industry.
On the other hand, if workers take too much time off due to illness, it may indicate excessive stress (or other pitfalls of increased productivity). Constant monitoring of the number of time offs and sick people on the ground will help you identify these trends and eliminate them before the company’s overall productivity level falls.
Use Auxiliary Software
As a business owner, you dedicate time not only to current affairs but also to the development and growth of the company. This requires less time to monitor your employees, but how to measure team performance in this case? That’s why there is a lot of different software that helps to collect basic indicators to measure performance. For example, to track the time spent by your employees at work and on the Internet and project management software.
By clearly defining projects, forming a pool of tasks for each, and tracking the time spent on their implementation, you can track how efficiently employees spend their working days. This will give you an overview of what the team is currently working on and how well it is progressing. It will also give you a clearer idea of what is being spent most of your time optimizing these vulnerabilities.
Time tracking and project management software are best for your team working remotely or abroad. This way, you can track employee performance, no matter where your team is.
Challenges in Measuring Productivity of Employees
But before you start, you need to understand that measuring productivity is never as simple as it seems. There are always pitfalls, and they are different in every business area.
Measuring physical labor productivity
An interesting approach was expressed by mechanical engineer Frederick Winslow Taylor, who lived in the 19th century and often worked with his hands. He looked at productivity as a process of constantly improving his skills. He closely monitored his work and noted actions that could be eliminated (without wasting time) or changed (find better tools or fix old ones) to get the best result.
But this method of eliminating unnecessary steps and improving tools is quite simple and is often used to increase the productivity of manual labor. But is it suitable for HR staff?
Measuring intellectual labor productivity
One of the main challenges for measuring productivity today is the complexity of what is called “knowledge work”. This includes education and all office workers globally and even health care. In all such professions, employees are constantly learning, have a lot of autonomy, and are engaged in innovation in the work process.
Then how do you measure productivity in this case?
Best Strategies for Measuring Productivity
As mentioned above, there are many different ways to measure employee productivity. Below we will consider some of the most popular, each of which corresponds to a certain type of relationship between managers and the team. Therefore, it will be convenient for you to choose the most suitable ones.
Basic Productivity Output Formula Strategy
This output/input method is basic and fairly simple. But most often, it comes to measuring the productivity of handicrafts. It is the easiest way to get at least some numbers, to begin with. Here’s how to use a simple productivity formula:
- Select output. For example, it is ready units of production or separate executed tasks.
- Next, you need input. Most often, it is spent working hours.
- Now divide the output by the input.
- Assign a certain value in dollars to the results to understand the cost-benefit ratio.
- It is better to measure non-productive productivity in dollars instead of units.
In many modern non-factory areas of business, this formula, as already mentioned, may not work because it does not take into account the variety of roles, complex creative work, and individual factors.
The 360 Degree Strategy
This strategy involves the active use of feedback from colleagues. You rely on the assertion that employee performance is measured by colleagues, including higher and lower in the chain. Sounds counterintuitive, but under certain circumstances, it can work. Feedback should be in terms of how significant they have contributed to the company’s goals. How to measure productivity using this strategy? There are two important points to consider:
- For this strategy, everyone on the team must clearly understand their roles and functions. You also need a clear expected outcome from these roles.
- The 360-degree strategy only works if your team communicates and interacts a lot. This allows them to form painfully clear comments about each other’s work.
Given all of the above, you need to prepare your team and workflows so that employees can provide the right feedback. Evaluations should be fair and relate exclusively to the employee’s contribution to achieving common goals and exclude personal feelings and subjective judgments.
Also, collecting feedback can help prevent potential personal insults.
“The Profit is Productivity” Strategy
Quite an outspoken strategy because, in the end, the business is done for profit. Therefore, measuring your company’s performance by profits is perfectly normal. Measuring productivity with this method is often considered best for small businesses because, in such cases, it is quite simple to do.
In various creative businesses, measuring profits can also work, as it reduces the pressure on employees for the time they spent not thinking creatively or creating the best product in the world for the world’s coolest customer. If a company makes good profits from its work and develops, they are valuable and productive.
The basic formula for calculating productivity is the “team efficiency ratio”. It determines how much profit the company received for each dollar invested in employees, including salary — some kind of ROI. This method is ideal for managers who value their team to work smart, not a lot.
The “Getting Job Done” Strategy
You can also measure performance simply by the result achieved. In this case, you should not care how much time was spent on the task or what period of the day this time was spent. The main thing is what tasks and how they were performed.
If using such a productivity tracking strategy, the project needs to be divided into separate, very specific tasks (which can be placed in different workflow management systems). These tasks are then entrusted to employees who can best handle them. This approach assumes that each person has their own KPIs for which they are responsible and keeps track of how much they can accomplish over a period of time.
It is important to build trust within the team and inform everyone about the goals and stages of the project. This will guarantee that the project will move on schedule, and the emphasis will be on each task rather than on the hours spent on the job.
Strategy for Service Business
How to measure productivity in service delivery? It can be quite complex and tricky. Of course, the team must respond to as many requests as possible, but it is also important to maintain high-quality customer service. Many companies use a combination of these indicators:
- The number of tickets answered in a certain period.
- Feedback: A measure of customer satisfaction based on customer feedback about that particular employee.
Of course, depending on your business, you can use any first indicator. The main thing is to set a baseline — what indicators your company should demonstrate in terms of service and adjust it according to the market situation and your situation. This will be the starting point for assessing employee productivity.
While measuring performance may seem simple in words, a lot of data needs to be collected and analyzed to use these and other strategies and tips effectively. Knowing how to measure productivity will help you make realistic conclusions about the team and the pace of its progress in projects and make the necessary adjustments. It will also help you understand your company’s real value to customers.
It is also important that open communication about performance with employees will help them understand how they work, their strengths, and what else they can improve. A smart and balanced approach to managing your employees and workflow can help you achieve more in business than you planned.
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