Everything you need to know about measuring productivity

If you’ve grown tired of articles promising productivity through early mornings and peculiar diets, you’re not alone. True productivity isn’t about who gets to the office first, stays the latest, or is the most tired; it’s about using your time wisely to provide genuine value. And you can’t know if you’re maximizing that value unless you’re measuring productivity.

As individuals, we want to achieve more with our time. As organizations, we want to deliver maximum value to our clients. And when using software, we want to know it’s providing value that’s worth the expenditure.

Productivity is one of the most important things you’ll ever calculate. Measuring productivity not only reveals whether a specific task or operation is profitable, but it also shows how to identify patterns that both improve or hinder your success.

What is productivity?

Productivity refers to the efficiency and effectiveness with which resources are utilized to generate valuable output. It encompasses the strategic allocation of time, energy, and resources to achieve meaningful results. Productivity entails the following.

1. Efficient Resource Utilization: At its core, productivity involves maximizing the use of available resources to achieve desired outcomes. This includes managing time effectively, allocating financial resources wisely, and optimizing the use of human capital. An organization or individual is considered productive when they can accomplish more with the same or fewer resources.
2. Goal-oriented Focus: Productivity is not about being constantly busy but about being purposeful in actions. It requires a clear understanding of goals and priorities. A productive individual or organization sets specific, measurable, achievable, relevant, and time-bound (SMART) goals and aligns daily activities with these objectives.
3. Quality Output: True productivity isn’t just about quantity; it also emphasizes the quality of the output. A high level of productivity implies delivering results that meet or exceed expectations. Whether it’s producing goods, delivering services, or completing tasks, the emphasis is on achieving excellence in the final outcome.
4. Continuous Improvement: Productivity is a dynamic concept that involves a commitment to continuous improvement. It’s not a one-time achievement but an ongoing process of refining processes, eliminating inefficiencies, and adapting to changes. Embracing a mindset of continuous improvement ensures sustained productivity over the long term.
5. Adaptability and Innovation: Productivity thrives in environments that encourage adaptability and innovation. Being productive means not only efficiently executing existing processes but also finding better ways to achieve goals. This requires a willingness to embrace change, explore innovative solutions, and stay ahead of evolving trends.
6. Balance and Well-being: Productivity should not come at the expense of well-being. Striking a balance between work and personal life is integral to sustainable productivity. Individuals and organizations that prioritize the health and happiness of their members understand that long-term success relies on maintaining a healthy work-life equilibrium.

Productivity is a multifaceted concept, and embracing a holistic understanding of productivity empowers individuals and organizations to thrive in today’s dynamic and competitive landscape.

What impacts productivity?

Productivity is influenced by a myriad of factors that extend beyond the realm of individual effort. Here, we delve into key factors that play a pivotal role in shaping productivity.

1. Work Environment: The physical and psychological attributes of the work environment significantly impact productivity. An ergonomically designed, well-lit, and organized workspace can enhance focus and efficiency. Conversely, a cluttered or uncomfortable environment may lead to distractions and hinder concentration. Moreover, the overall atmosphere, including factors like office culture and interpersonal dynamics, can profoundly influence individual and collective productivity.
2. Technological Infrastructure: In the digital age, technology is both a facilitator and a potential impediment to productivity. Access to reliable and efficient technology can streamline tasks and boost efficiency. On the flip side, outdated or malfunctioning technology can result in delays, frustration, and decreased output. Organizations need to invest in up-to-date and user-friendly technological infrastructure to empower their collaborative teams.
3. Leadership and Management: Effective leadership and management practices are integral to fostering a productive work environment. Clear communication, goal alignment, and supportive leadership contribute to a sense of direction and purpose among team members. Conversely, poor leadership, unclear expectations, and micromanagement can erode morale and hinder productivity. Leaders play a crucial role in setting the tone for productivity within an organization.
4. Employee Engagement and Satisfaction: Engaged and satisfied employees are more likely to be productive. Factors such as job satisfaction, recognition, and opportunities for professional growth directly impact motivation and commitment. Organizations that prioritize employee well-being, provide meaningful work, and foster a positive workplace culture are likely to experience higher levels of productivity.
5. Training and Skill Development: The skill set of individuals within an organization directly influences productivity. Investing in training and skill development programs ensures that employees possess the competencies needed to excel in their roles. Continuous learning opportunities not only enhance individual capabilities but also contribute to overall organizational productivity.
6. Task Complexity and Clarity: The complexity and clarity of assigned tasks can significantly affect productivity. Clear, well-defined tasks with explicit expectations empower individuals to focus and deliver results. On the other hand, ambiguous or overly complex tasks may lead to confusion, procrastination, and reduced efficiency. Ensuring that tasks are appropriately scoped and communicated is crucial for optimizing productivity.
7. Health and Well-being: Physical and mental well-being directly impact an individual’s capacity to be productive. Adequate rest, regular exercise, and mental health support contribute to overall well-being, positively influencing concentration and energy levels. Organizations that prioritize employee health through wellness programs and work-life balance initiatives often experience enhanced productivity.
8. External Factors (Economic, Social, and Technological Trends): Productivity is also subject to external influences such as economic conditions, societal trends, and technological advancements. Economic downturns, industry shifts, and emerging technologies can shape the landscape in which individuals and organizations operate, influencing the feasibility and efficiency of certain activities.

Productivity is a multifaceted outcome shaped by a complex interplay of internal and external factors. Sometimes, those factors are out of our hands. However, you can control and measure employee performance by individual, team, or department.

Here’s how.

Measuring productivity

Measuring productivity is a critical aspect of optimizing efficiency and performance within any organization. While the concept of productivity is straightforward, its measurement can take various forms, depending on the focus and goals of the assessment. Here, we’ll explore different methods and metrics commonly used when measuring productivity.

Labor productivity

First, we’ll take a look at employee productivity. You can measure this productivity by dividing total input by output.

Output / Input = Labor Productivity

To use a real-life example: say you’re a baker, and you sell $500 worth of cake, which took you 10 hours to make. To work out your labor productivity, simply divide 5000 by 10, which equals 500. This means you make 500 dollars per hour of baking. If it takes you another 10 hours to sell all that cake, then divide 500 by 20. Which equals 250 – so you make $250 an hour. Easy!

So what if you have a team of bakers and shop assistants, and you want to work out what each of their individual contributions is? Just do the same sum again, but instead of dividing by the number of hours, divide by the number of employees.

So if your bakery has a team of 20 people, and it generates $5000 over the space of 10 hours, then it’s 5000 / 20 = $250. Which means each individual generates $250 per hour.

If you want to measure organizational activity, then you’ll need to measure and manage your resources to ensure certain tasks are completed on time. This is a balancing act between your output and your input — if you want to improve productivity within an organization, you’ll need to either increase output or decrease input.

Next, let’s look at ways to measure organizational productivity.

Partial factor productivity

Productivity is influenced by a whole host of inputs. Partial factor productivity measures just one of these. This helps you work out if one particular element is profitable.

We represent this as a ratio:

single input : single output

Back to our bakery example: say you sell $5000 worth of cakes, and the total cost to produce those cakes (ingredients + salaries + electricity, etc) is $3000. Your partial factor productivity is, therefore, 5000 divided by 3000, which equals 1.6. So for every dollar you spend, you make $1.60. Profit!

Multifactor productivity (i.e., Total factor productivity)

This is where things start getting a little more complex. In a nutshell, multifactor productivity is a measure of your economic performance that compares your output to the combined subset of inputs used to produce those goods/services.

Here’s an example formula (though this may vary depending on your industry and the units used:

Productivity = Units of Output / Units of Labor + Units of Capital + Units of Materials

This formula combines the effects of all the resources and divides them into the output. It reflects changes in outputs, but it doesn’t show the interaction between each input and output separately.

This equation is a more comprehensive way of measuring productivity, but it’s also a little trickier to calculate. If you’d like to know more, here’s a helpful video that explains it in detail. And as an added bonus, it also involves cake!

Comparative analysis (before and after implementation)

Technology has enabled teams to reach levels of productivity we only used to dream of. But not all technology is created equal. So how do you decide if your new tool is generating enough ROI?

First, compare your metrics from before and after implementing it. To do this, you’ll need to collect data before you begin using the tool. If you’ve already implemented it, you could run a quick experiment and ask your team to stop using it for a week or so, collect the data, and use that as your ‘before.’

Comparing metrics before and after implementing a new tool or system is a practical method of measuring productivity. By assessing key performance indicators (KPIs) before and after the introduction of a new software or process, organizations can quantify the impact on efficiency and output.

Time savings calculation

In the digital era, where automation plays a significant role, measuring productivity can involve assessing time savings. If a new software tool automates tasks that would otherwise be performed manually by employees, the time saved can be translated into cost savings.

For example, if this new software automatically does a job that an employee could do, then you’re essentially saving that salary’s worth per year.

If the software saves a certain employee a certain amount of time, then work out how much you pay that employee per hour, add it up, and you’ll be able to calculate your savings per hour, week, month, or year. For example, if an automated process saves 10 hours of work per week for an employee, and that employee makes $25 per hour, the organization can save $250 a week, which is $1300 a year.

5 ways to improve productivity

If, after measuring productivity, you discover that your productivity is in need of a boost, here are the first places you’ll want to start.

Give your employees a clear set of goals

Direction and purpose are motivating. Make sure your team knows what’s expected of them, and make them accountable for those objectives. Be sure to provide clear, actionable, precise feedback regularly. And set out clear, measurable ways your team can improve.

Give them the right tools for the job

Give a designer a 10-year-old Mac that crashes every time they try to upload something, and you’ll not only lose time due to bad tech. You’ll also see a seriously grumpy designer not working to their full potential. Give your team (and yourself!) the tools required to get the job done right.

Incentivize your team (or organization)

Incentives include extra vacation hours, bonuses, vouchers, and recognition programs. Get creative, and reward often.

Show your team you trust them

Offer flexible working hours and home working opportunities. In return, your team will feel motivated, appreciated, and happy to work for a company that trusts them.

Invest in collaborative tech

Using collaborative, centralized tools can do wonders for your team’s productivity. But to get the most out of your software, you need to make sure everyone’s on the same page and knows exactly how to use your chosen tech.

Most software providers offer help videos, webinars, and training sessions, so set aside some time for your team to take advantage of these. Once everyone is set up and confident with the new processes, you should see a dramatic improvement in your team’s productivity. Just don’t forget to calculate your data before you start, just so you can prove your new tech’s effectiveness later on.

This post was originally published on January 22, 2019, and updated most recently on November 17, 2023.