How to Measure Productivity: Why Employee Productivity Matters

Productivity refers to the ability to work efficiently. In business and economics, productivity measures the efficient production of goods and services (total output) based on the number of hours, finances, and raw materials (total input) used in the process. You can express productivity as a ratio of output per unit of input, typically over a period of time.

Employee productivity is one crucial metric that companies can measure to see if their teams perform optimally. You can measure employee productivity by focusing on profits (money brought in per employee or team), output (tasks done per employee), or by using qualitative assessments (how well an employee or team performs, say, by looking at customer satisfaction or objectives met). Measuring employee productivity includes setting clear benchmarks, collecting productivity metrics, and leveraging project management software to reduce labor costs and increase labor productivity.

Measuring employee productivity can help managers better understand the workings of their team and ensure that each person can meet their goals and objectives. Tracking productivity is the first step to improving productivity, which can positively impact profits, investment decisions, operational strategy, and team morale.

Measuring and improving productivity go hand in hand. Here are some ways to assess productivity:

1. 1. Calculate productivity: Use the productivity formula to calculate the level of productivity of individual employees or the overall company. The formula is: Labor Productivity = Total Output / Total Input. This formula allows you to calculate the ratio of an employee’s output to the number of hours they work. You can then compare this ratio to the average for employees at your company.
2. 2. Don’t micromanage: While measuring productivity is critical to a company’s growth, you will have a hard time being as productive if employees feel constantly monitored, tracked, and micromanaged. Give employees a degree of autonomy about the exact time or way they approach tasks, and make sure they feel like they can take breaks and ask for support.
3. 3. Implement time-tracking tools: Time-tracking tools help managers keep track of the amount of time each individual employee spends working on a project in real time. Although managers need to establish trust with their employees and allow them a degree of autonomy, time-tracking can help managers see an employee’s overall productivity.
4. 4. Leverage project management software: Project management software can equip teams with tools for optimizing workflows, such as the ability to view tasks at a glance, communicate with coworkers, and submit timesheets. Managers can use project management software to view the number of tasks completed on a given workday or track the number of hours employees spend on specific tasks.
5. 5. Provide productivity-based incentives: Incentive programs boost employee productivity by giving workers an added bonus for their hard work. An incentive can have a monetary value—such as a cash prize or extra PTO and vacation days—or it could be as simple as an employee recognition program.
6. 6. Schedule regular employee check-ins: Recurring group meetings help team members get on the same page and share progress reports with their coworkers. Managers can also hold scheduled one-on-one check-ins, which can help provide a complete picture of team productivity.
7. 7. Set clear benchmarks for productivity: To measure productivity, managers must first establish a baseline for what qualifies as a productive work environment. You can then hold employees accountable to benchmark goals. Key performance indicators (KPIs) are the factors that drive your company’s goals and may include profit, employee retention, customer satisfaction, and other relevant metrics. Managers must provide clear expectations of the targets and a blueprint for how each individual employee can contribute to meeting these goals.
8. 8. Use the 360-degree feedback method: For 360-degree feedback, collect information from team members regarding their coworkers’ productivity. In this process, each team member reports on how they feel their team members perform, including those above and below them in the hierarchy. This creates a cycle of accountability that can help increase levels of productivity.

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