Work smarter, not harder.
This new productivity mantra does make sense, but as a manager, you have to make sure your employees don’t bend this advice in their favour.
But let’s not forget the other side of the coin – swamping your employees with useless, mundane, repetitive tasks and meetings that don’t bring any value to your organization and only reduce their productivity.
The latest Gallup Employee Engagement Survey shows that 39% of U.S. workers are engaged while 14% are actively disengaged. Although this has been almost a steady trend for the last couple of years, the truth is that the majority of employees tend to slack off while they’re at work.
Since the pandemic started, remote working has become the new normal. Hence, it’s obvious that you need to closely monitor and analyze employee productivity if you want to keep your business objectives and outcomes on the right track.
What Is Productivity?
Oddly enough, many managers and decision-makers whose job is to improve employee efficiency don’t understand the concept of productivity very well.
And yet, they expect their employees to be more productive. According to an established formula, productivity is defined as output divided by input.
To put it differently, “input” refers to the money, time, materials, resources, and effort you invest in producing “output,” that is, the number of items or goods or the amount of provided services.
The fewer units of input an organization uses to produce a given set of outputs, the more productive it is. We can conclude that productivity is using your resources efficiently to produce the output.
For example, a productive employee will spend, say, 2 hours on a report that the unproductive one will complete in 4 hours. Productivity can also be used to put a price tag on somebody’s work and see how much revenue they bring to their company using the same formula.
Let’s say you want to calculate the sales productivity of your team over the last quarter. If they generated $100,000 (output) in revenue and there are 4 of them on the team (input), then their productivity calculation would work out to $25,000 per sales rep.
However, this is a pretty straightforward and generalized definition, which is why you should take different factors into consideration in order to be able to analyze employee productivity more accurately.
Why Does Employee Productivity Matter So Much?
The importance of the employee productivity analysis isn’t only about keeping your workforce in check.
It’s also about the following benefits:
- Better allocation and utilization of resources. Understanding your employees’ skills, strengths, and weaknesses will help you spot if certain resources are underutilized and give you new ideas for improving processes.
- Identifying redundancies. By identifying and eliminating unnecessary steps, you allow your employees to save their time and focus their energy on necessary high-level tasks. As a result, they will be happier and more motivated, and therefore, more productive.
- Cutting costs. Overall productivity starts with your employees. When they’re productive and generate greater output with the same amount of, or even less, input, you’ll get more bang for your bucks. This way, you can optimize processes, manpower, and resources, and save a lot of money.
How to Measure Employee Productivity?
The above mentioned definition of employee productivity is a formula that you need to expand and adjust to your particular needs.
It would be virtually impossible to implement it without factoring in numerous variables.
For example, not all employees perform the same tasks, so you can’t simply compare someone who works in the manufacturing department with an office worker and see how they stack up against each other.
Here are some tips for establishing the right conditions if you want to analyze employee productivity properly.
- Set Benchmarks
The first step is establishing a baseline measurement for every individual position and team. That way, you’ll have a predefined set of expectations so that you can compare your employees’ efforts and productivity.
In other words, the expected output for every position should be determined.
Remember that this transparency is necessary because your employees also need to know what’s expected of them. So, creating a point of reference for every role, together with setting a specific target for certain tasks where it’s applicable, will allow them to keep track of their performance in terms of productivity.
- Define Tasks
A task means something different for every role or position in an organization.
As Peter Drucker, dubbed the man who invented management by Business Week, stated in his seminal work “Management: Tasks, Responsibilities, Practices,” work on productivity starts by asking a simple question - What is your task?
For example, an administrative worker’s task is preparing and sending invoices, a sales rep has to send emails and call prospects, while a customer support agent takes calls to handle the issues customers are having.
By defining what a task is for every individual role, you can attach a precise measurement system for tracking and measuring employee productivity to each one of them.
Using the previous examples, this translates into the number of invoices sent, outreach attempts made, or calls with customers taken.
Measure and identify how much an average worker can accomplish within a given time frame and set it as a standard.
- Factor Quality In
While the number or amount of outputs within a given time frame matters and is an indicator of productivity, it won’t do any good to your organization if you don’t insist on the quality of the work done.
A sales rep might hit their daily quota of prospecting calls and emails, but if none of them results in the desired outcome, then, this kind of productivity is futile, as it boils down to a waste of resources.
That’s the reason why maintaining the quality of service and production is equally important.
- Watch Out for Absenteeism and Presenteeism
These two workplace issues are on different ends of the same spectrum, and both of them have a huge impact on employee productivity.
No matter how productive and hard-working an employee is, if they’re frequently absent from work, your bottom line will be affected. It’s essential to pinpoint what lies beneath this problem because you might be losing your best-performing workers due to work-related stress or too much workload.
According to a report, the costs of unscheduled absenteeism amount to about $3,600 per year per hourly worker and $2,660 per year per salaried worker. On the other hand, presenteeism, or the phenomenon of showing up for work despite being ill.
As you can guess, they make a lot of mistakes, and their productivity suffers as they’re not capable of fulfilling their duties properly. Not to mention that they’re also infecting their coworkers, thus additionally hurting overall productivity.
No wonder stats say presenteeism costs 10 times more than absenteeism, so take all this into account during employee productivity monitoring. A key takeaway here would be that you should encourage and improve employee wellbeing.
How to Pick the Right Methods to Measure Employee Productivity?
As you can see, the concept of employee productivity is complex and multi-faceted, which is why there’s no single method for measuring it. Here’s a list of some of the most popular and commonly used methods so that you pick the one that suits your needs.
Method 1: Management by Objectives (MBO)
A prerequisite for using this method to analyze employee productivity is setting specific goals and targets that will be given to each employee.
For this method to be valid and accurate, you also need to provide your employees with all the necessary tools and information they need for working successfully towards their assigned goals and targets.
MBO allows you to see how much every single employee’s output contributes to your organization’s objectives, and based on that, their productivity is measured.
This means that you should train your employees to meet these goals, perform regular evaluations to track their progress and offer them all the support they need.
Method 2: A Quantitative Approach
The quantitative method measures employee productivity based on the quantity of their output.
It’s pretty straightforward as it shows you how many items, parts, or products an employee processes or produces within a predefined time frame - per hour, day, week, month, or year.
It’s worth mentioning that, using this method, productivity can also be measured by the volume of output or even the financial value that a single employee generates. All this makes it easy to determine gains or losses, which is why this approach is suitable for employee productivity monitoring over time.
You can use productivity software or even a spreadsheet.
For your analysis to be accurate, it’s important to account for the training time, parts that came defective, lunch breaks, and other factors that might interfere with or hamper employee productivity and which they can’t control.
The key is in setting realistic expectations.
Method 3: Measuring Through Time Management
One of the most common methods of measuring employee productivity is through time management or how they’re using their work time.
Research has revealed that the average worker is productive for only 2 hours and 53 minutes out of their entire 8-hour workday. This issue has been additionally aggravated due to the work-from-home policies imposed by COVID, leaving companies to find ways to monitor how diligent their remote workforce is.
Using time management to analyze employee productivity will give you an insight into how much time they spend on specific tasks, breaks, and non-work-related activities like social media or texting.
If you have field workers or those who are frequently on the go, it can be even more challenging to hold them accountable and know whether they’re working or goofing off.
Time-tracking tools like Timeero simplify this entire procedure for both you and your employees.
Given that it comes as a web and mobile app, your workers can clock in and out no matter where they are. Their hours are automatically recorded so that you can see how much every employee worked in real time and stay on top of all your expenses at any moment. It also seamlessly integrates with popular payroll software so that you don’t have to worry about making payments.
Plus, Timeero is equipped with a GPS system so that you can always check the exact location of your field workers. Finally, there’s a useful feature that allows you to keep track of your workers’ breaks and stay compliant.
Method 4: The 360-Degree Feedback
This method relies on collecting feedback from coworkers to analyze employee productivity.
It’s obvious that the 360-degree feedback approach can be effective only if your employees work closely and interact with each other a great deal. Only by spending time together will they be able to notice whether their coworkers are productive or not and share their insights with you.
Both an employee’s superiors and subordinates can provide feedback, but the condition is that they understand their co-worker’s exact function, role, tasks, responsibilities, and communication skills.
Some employees are concerned about the objectivity of this method since some of their co-workers might be biased. To overcome this obstacle, you should provide training for implementing this method and introduce strategies for preventing a toxic work environment.
Method 5: Measuring Productivity by Profit
Small and mid-size businesses prefer this method because it’s simple and doesn’t require tracking individual employees. Instead of that, only high-level functions and the bottom line are monitored.
In addition to being uncomplicated, measuring productivity by profit also doesn’t take up too much of management’s time or limit employee creativity. What matters is that the company generates profit steadily.
For example, if your organization earns a profit of $1 million one year, and $3 million the next, it’s obvious that the productivity of your employees is on the rise. However, it would be a good idea to trace this increase back and establish what’s been working so well that it resulted in such an outcome.
That’s why you need to establish KPIs for every department and as your managers to maintain a spreadsheet for every quarter. Using this method, it will be relatively easy to determine, for example, how much leads marketing brought, how their campaigns are progressing, or how many deals every sales rep closed, and what the size of the deal is.
Pros of this approach include the ability to identify bottlenecks and underperforming departments/individuals that should put some more effort into their work. It also establishes a clear chain of command, so that every employee understands who their direct report is.
On the other hand, some employees might feel frustrated if their current level of skill doesn’t stack up to the established standard. Also, implementing a new process is usually met with resistance and reluctance on the part of employees, especially if it requires them to learn new things quickly and do something that’s new to them.
Not to mention, that people might feel uncomfortable and worried that this new approach will threaten their jobs.
The best way out of this is an open conversation with your employees about their responsibilities and offering them the necessary training and support so that they can improve their performance.
Are your employees productive? Is there a way to additionally optimize their efforts and ensure they're working towards your mutual success?
Despite the simple “Productivity = Output/Input” formula, measuring and analyzing employee productivity encompasses a lot of different areas. Using one or more of these methods for employee productivity monitoring will help your organization thrive while helping employees understand how much they contribute to your mutual success.
These insights will result not only in a revenue increase but also improved employee motivation and drive.