How To Measure Productivity and Increase Efficiency in the Workplace

Updated November 30, 2022

Measuring the productivity of your company or department allows you to make operational changes, adding employees or equipment to meet deadlines. Understanding the productivity of your workforce also allows you to gauge overall efficiency and whether you can meet tight deadlines or take on new clients. There are a variety of ways to measure productivity and understanding which is best for your business can take some time and consideration.

In this article, we’ll discuss in-depth why it’s important to measure productivity in the workplace and share some strategies you could use to measure productivity right away.

Related: Guide to People Management: Definition, Tips and Skills

What is productivity?

Productivity is a measure of the efficiency of a machine, factory or person in converting inputs into useful outputs. To calculate productivity, you divide the average output per period by the costs incurred or the resources, such as personnel, consumed in that period.

Why productivity must be measured

There are several reasons it’s essential to measure workplace productivity.

Investment decisions are easier

A company needs to know how productive its operations are to make investment decisions. For example, you may work in a production plant making cars where outputs have slowed considerably over the past two years. Based on its productivity measurements, the company can conclude that the reduction of productivity is being caused by old equipment that requires updating.

Management, therefore, invests money in modernizing the plant. Continually measuring productivity allows a company to compare the efficiency of its operations over time and make adjustments accordingly.

Gauges employee effectiveness and abilities

Another important reason for measuring productivity is that it allows you to gauge the efficiency of your workforce. For instance, if your company has been asked by a client to accommodate a challenging deliverable, the only way you will know if you can meet the timeline is if you are consistently measuring the productivity of your workforce. Managers also need to know how each individual employee is performing.

This information helps them make important decisions that impact overall workplace efficiency. For example, understand how efficiently each employee performs helps managers determine who can take on additional responsibilities or who would be ideal for leading a team project.

Related: The Best Ways to Motivate Your Team

Allows for better operational decision-making

A further crucial reason for monitoring productivity is that it can help managers change the company. For example, the data gathered during the measuring process could reveal delays in the production process.

Alternatively, it may reveal problems in the customer lifecycle. Recognizing this could allow you to make operational changes like expanding your customer service team or investing in new production equipment.

Tips for measuring productivity

Each company has its own methods of measuring productivity. The variety of methods reflects the fact that every company is different in terms of its structure and focus. Therefore, companies typically tailor productivity measuring tools to best suit their needs. That being said, there are several broad categories of productivity measuring that you should expect to come across during your career.

  • Concentrating on profits

  • Getting the job done

  • Time management

  • Feedback and peer assessment

  • Comparing labor time to goods produced

  • Monitoring employee progress

  • Customer satisfaction

Concentrating on profits

One way you can measure profitability is to monitor the profitability and sales of the organization. For example, in simple terms, if one year your company profited by one million dollars and the next year it profited by two million dollars, there is a clear indication of increased productivity, although it would be necessary to perform a deeper analysis of the company’s profit and loss sheets to understand what caused the increase of profitability.

Focusing on profits can be a popular choice for companies operating in areas where it is often difficult to measure how long a specific activity will take.

Consider, for example, a team responsible for managing ad campaigns for several clients. The company may decide that it is more important to secure a few major clients by producing high-quality ad campaigns than it is to secure as many clients as possible.

In this situation, they may decide that the best way to assess how effective the team has been is to focus on profits they have brought into the company. They may compare the rate of profit against the total amount paid out in salaries for a more accurate measurement.

Getting the job done

Another approach concentrates on how many tasks are completed by the workforce. In this productivity measuring method, management is less concerned about the time that’s needed to complete tasks. Instead, they’re focused on completing the final product.

To run such a measurement of productivity, you may need to break up projects into smaller tasks. These tasks are then assigned to each employee to ensure that the full project is completed by the specified deadline. For larger projects, interim goals or targets may be included, so that everyone knows whether the work is running to schedule.

Related: How to Have Influence in The Workplace

Time management

An alternative option for measuring productivity is by monitoring the time you take to complete a task. To do this, use productivity measuring software or online programs.

One commonly used time management system requires employees to enter the time they spend on a task into a spreadsheet. The results can then be assessed by managers over time to see whether productivity is increasing, decreasing or remaining steady. The advantage of this method is that modern software allows companies to break down time into minutes and even seconds to ensure that labor time is being used effectively.

Feedback and peer assessment

If a small team or group of employees interact regularly, you may implement productivity measurements based on peer assessment and feedback. In such a system, you assess each employee’s productivity according to the feedback they get from others about their performance.

For it to be successful, every employee must know the different roles each member of staff in the team has and what they are expected to be doing. There must be a high level of communication within the team and employees must feel comfortable enough to offer an honest assessment of their colleagues’ performances.

Comparing labor time to goods produced

A popular method for measuring productivity in a factory setting is to compare total labor time, which is also called the input, with the number of products manufactured, or the output. By doing so, companies can calculate a ratio that shows them how efficiently their employees are working.

To measure productivity in this way, you will divide the total number of products made by the total number of hours worked by all employees. Then, you will use the result as a cost-benefit ratio, which you can monitor.

Monitoring employee progress

Various productivity measurement strategies involve monitoring employee progress regularly. These approaches allow you to stay on top of the work being done and make changes or set new goals when necessary.

One method is the daily check-in or team meeting. This involves meeting with your team daily to discuss workflow, issues that may have come up or new developments to your working procedures. By comparing how much work employees have completed during a day or a week, you will a general idea of how productive they are.

Customer satisfaction

A popular way of measuring productivity in a company offering services to customers is to use customer feedback. For instance, customers who call a service center may be asked once the call is over to complete a brief satisfaction survey. In it, they will explain whether the employee answered their query and whether they felt they were treated courteously.

The data obtained from customer surveys may then be combined with the number of customers the service center has handled over a fixed period. This approach enables you to get a more accurate sense of how productive the work you and your colleagues are doing is.

To illustrate potential results, consider two identical service centers. One may deal with 80 customers every hour while the second only manages 60. However, callers to the first service center complain in the customer survey that they rarely get the answers they want and feel like they’re being rushed. This leads to many repeat calls.

In this example, the company running the second service center could strongly argue that its employees are more productive even though they deal with fewer customer calls per hour.

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