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Everything you need to know about measuring productivity

Georgina Guthrie

Georgina Guthrie

January 22, 2019

If you’ve had your fill of ‘how to be productive, rich, and amazing at everything’ articles, you’re in good company. Anyone who tells you a 4 am spirulina shake followed by a 10k run is the key to success is not to be trusted. Because being productive isn’t about who gets into work the earliest, who stays the latest, and who’s the most tired. It’s about using your time wisely, and showing that your efforts provide value.

As employees, we want to achieve more with our time. As an organization, we want to provide the maximum amount of value to our clients. And when an organization or employee uses certain software, they want to know it’s providing value that’s worth the expenditure.

Productivity can sometimes become just another empty business word, but in reality, it’s one of the most important things you’ll ever calculate. Working out 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 impacts productivity?

Sometimes, productivity is out of your hands. Recessions, inflation, and competition can all impact productivity. But you can control and measure employee performance by individual, team, or department.

Here’s how.

Measuring productivity the easy(ish) way

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.

Now we’re going to briefly look at ways to measure organizational productivity.

Partial factor productivity

Productivity is influenced by a whole host of inputs. And 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 (AKA 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 it 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 measure of productivity, but it’s also a little trickier to calculate. If you’d like to find out more, here’s a helpful video that explains it in a little more detail. And as an added bonus, it also involves cake!

Calculating productivity using office software

Technology has enabled team’s 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.’

You can also work this out in terms of employee time. For example, if this new software automatically does a job that an employee could do, then you’re essentially saving a salary’s worth per year. And 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.

5 quick and easy ways to improve productivity

If 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 know 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

From project management software that helps you track and schedule tasks in the cloud, to team chat apps that get everyone communicating in real-time, 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 Skype training sessions, so set aside some time for your team to take advantage of these. Once everyone is all set up and confident with the new processes, you should see a dramatic improvement to 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.



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