The most effective way to measure productivity in the workplace

April 4, 2016 Pavel Aramyan

“Productivity shows a company’s effectiveness level of producing a certain number of end products/services (outputs) having a certain number of resources (inputs) during a specific amount of time.”

This is the definition of productivity as most of the world knows it. One might think that it sounds pretty simple and reasonable, right? You have a specific amount of resources (like different tech, human resources, budget, etc.) and you produce a number of end products.

Then you just take the number of outputs, divide those by the number of inputs, multiply whatever you get by 100% and get the productivity rate of your workforce.

Easy.

Except there is a problem here. If it’s that simple, why do most companies (even the best ones) struggle with measuring it?

Well, the problem is…you know, EVERYTHING.

  • Number oneworkplace productivity depends on individuals as much as it depends on the team as a whole. Just because your team seems to be doing pretty well, doesn’t mean that it’s productive. For all you know, there could be just one guy doing 80% of the job and just dragging all the team forward.

  • Number two – the above formula has the potential to work, if we consider cyborgs for example. Machines, ready to serve, work every day with the same attitude with no crashes, no jitters, no illness, etc. Simply perfect workforce in other words. Sadly, we are humans :/ and we screw up all the time. Doesn’t work the same way with us.

  • Number three – The timeframes of output delivery have a lot of influence on productivity. Delivering a website design in a month might be okay, but delivering it in a week is much better, right? But the difficult part is actually deciding how much time is right for a certain project. How do you calculate that time?

  • Number four – Even if we consider that the quality of outputs (which is kinda the most important thing) is always consistently high, (which is technically impossible, but hey, just for the sake of argument) the number of those outputs can be considered satisfactory or not depending on the number of inputs. What I mean is one person who is able to deliver two products in one month, has higher productivity than two people delivering three projects in that same month.

All of this technically means that you might have the most productive team in the world, or you the worst possible productivity in your workplace (but still be profitable!) and never be able to tell. So how do you fix that?

Measuring productivity

Google suggests tons of content on how to measure productivity and most of it includes talking with your employees, discussing means, looking for solutions together, etc.

Studies suggest that the best way to measure productivity is to do it industry by industry.

I say that’s all bullshit.

And here is why.

People, I mean all people including employees, want to work less and get paid more. It’s the simplest, unspoken rule of life and if anybody tells you that it’s not true, they lie. Having a conversation with employees about productivity measurement isn’t the brightest idea. Most of them will just suggest what suits them best on an individual level.

Measuring productivity by industry makes a bit more sense, since you will have some kind of a non-subjective benchmark to base your opinion on and do comparisons. But this can’t be the best solution for every occasion.

Every business is different in its own regard, different businesses have different teams (and all teams are unique as well), teams have different skills, companies have different clients and so on. All of this happens in the same industry, with pretty similar companies, when utilizing close to the same amount of inputs to produce a certain number of outputs, in the same amount of time, (monthly/annually) and yet it’s never the same for each team. The best you can achieve with this approach is a rough estimate, which can be useful later.

To measure the productivity in the workplace though, each company has to have their own, personal approach and benchmarks to base their decisions upon and compare this with the industry estimates for maximum efficiency and precision.

Imagine an example.

Say we have two marketing teams with the same amount of monthly marketing budget, human resources and available time that have to complete the same project. But the first teams is exceptionally good at social media (thanks to individual skills of employees doing the social marketing) and average with the rest of the activities, while the other one is average with everything.

Well obviously, the first team will finish the project sooner and maybe deliver higher quality (thanks to the individual strengths of social media marketers), but does it mean that they are more productive than the other team?

Not exactly. Their productivities, both as a team and individual, should be measured by separate benchmarks.

This is what you need to do for your own team:

“Establish personal benchmarks on the team level that will tell you how many outputs per used inputs can be considered satisfactory for your workplace, and update those benchmarks on a consistent basis.”

Why?

Because the business world isn’t stuck in the same spot. It moves and evolves at ridiculous pace. With the amount of demands and client sophistication rising exponentially, productivity benchmarks have no option but to go up accordingly.

What’s considered good today, will be not good enough tomorrow. That’s an important point to keep in mind.

Setting the benchmarks

For this purpose, there are a number of things you can do:

  • Consider each of your team members on an individual level – as the manager, you should have a pretty solid understanding of the capabilities of each of your team members: what they do well, what they struggle with, etc. You don’t need to go into too much detail, just have a bit general picture about the matter.

  • Look at the teamwork – take a look at past projects. How much time it took to complete one on average, given the resources available? Try to take into account the difficulty of the project as well. Also, consider how long your team members have been working with you: some may have just joined (which technically means low productivity by default) and some are more seasoned workers and should be able to cope with the same work much quicker than before.

  • Identify your strong and weak areas – knowing what your team does easily and what they struggle with will help you understand what aspects need additional coaching/training to improve overall efficiency.

  • Draw a timeline – knowing all the answers above, you should be able to draw a timeline for an average project to be completed using the, more or less, same resources.

After you have your timeline, you can calculate how many such projects your team can handle monthly/annually, and knowing the average profit and cost numbers associated with each project, you should be able to define the number of projects, which after completion, will render your teams as productive.

After this, come the industry benchmarks. You can compare your own established benchmarks to the industry average and understand how you are doing on a more broad level, in addition to personal level. This is important for understanding whether you are competitive on industry level in terms of workforce productivity or not (again, regardless of being profitable).

how to measure productivity

For example, your industry average productivity might be something like 15%. Your team’s productivity on the contrary, could be around 18%. This means that you only need to worry about the future and improving the productivity continuously, to meet the rising demands of the business world.

On the other hand, if your team’s productivity is around 8%, then you are technically losing money, even if you are profitable at the same time. Knowing that most of the industry typically performs better than you is a hint that changes should be implemented in the areas where your team struggles (which you already found out before).

Measuring productivity is a very relative. It depends on so many things that one might get lost when trying to put it all together. This is why the personalized approach works best in this case. Figure out how your team is performing currently, and the next steps will be easy to decipher.

As Lord Kelvin, a wise man, once said “If you can measure something, you can improve it”. This is, by far, the best approach there is.

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About the Author

Pavel is a doctor who happens to have an MBA degree and a strong passion for writing. "I am a do-it-all kind of person: When I am not writing, I am busy curing people, when I am not curing people, I tend to kill WCG competitions. Life is fun, and full of wonders: Do what you enjoy most, even if it’s everything at once."

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