How to Measure Employee Productivity: Best Ways to Measure and Tips for Thoughtful Metrics

January 12, 2023 Ryan Stoltz
identify-best-ways-to-measure-employee-productivity

According to the U.S. Small Business Association, small and medium-sized businesses account for 44% of the U.S. economy. They also make up 99.9% of U.S. businesses. Hence, every company should measure its productivity to keep up with the competition.

Generally, there are various ways you can measure employee productivity. You can measure productivity by evaluating the profit, measuring the quantity, or setting objectives.

This article will look at how to measure employee productivity, including its importance and challenges.

Why is it important to measure employee productivity?

Employee productivity measurements can improve company management and allow the organization to strengthen its workforce.

That said, here are the major reasons why measuring employee productivity is important:

1. Company-wide benefits

The success of your organization relies on the individual efforts of your employees. Hence, productivity evaluation is a great way to measure your company’s overall performance. 

Regular employee feedback can help you develop organizational strategies and improve them if necessary.  

2. Benefits for employees

Checking the productivity of your employees creates a transparent workplace environment. When employees make mistakes, you can offer feedback to improve their productivity.

3. Benefits for HR

Evaluating your employees’ productivity is a valuable component of HR. By assessing the workplace, the HR department can come up with best practices to enhance the workflow. After all, employees work more productively in a healthy environment. 

4. Benefits for managers

Another benefit of productivity evaluation is the insight it gives managers. This way, they’ll know how to enhance the service to the clients.

What is challenging about measuring productivity?

While measuring productivity offers several benefits, you should keep in mind the challenges you may encounter along the way.

Here’s why measuring productivity can be challenging:

Manual work

The industry type can impact the difficulty in measuring your company’s productivity. For instance, industries involved in manual work, such as mass production companies, can base their employees’ performance on the quantity of the output.

Moreover, employees use the company’s resources to enhance their skill set. However, if they leave the company, they’re leaving the resources and the skills behind.

Knowledge work

On the other hand, organizations that focus more on knowledge will have more difficulty evaluating their productivity. Aside from quantity, the company must also assess performance based on quality. Some great examples are the health sector, like doctors or nurses.

While the company provides training resources, employees are responsible for improving their learning and skill set. Other than that, the company gives them more autonomy. Hence, when they leave the company, they take their knowledge and experience with them.

Best methods for productivity measurements

measure employee productivity

Evaluating your employees’ productivity is essential to determining the best practices you can apply to achieve or maintain a desirable profit. Here are methods you can use to measure workplace productivity:

1. Use the employee productivity calculator

Using business tools, like Staff Productivity Calculator and Employee Productivity Calculator, can help you measure your company’s performance using the number of employees, the hours they dedicate to work, and the monthly company profit.

Based on that information, the calculator will give you the productivity rate of each employee per hour.

However, remember that an employee productivity calculator can’t measure your employees’ personal development and time spent on administrative work.

2. Quantitative method

Unlike the employee productivity calculator, the quantitative method utilizes a simple productivity formula. This way, the company can measure employee productivity based on the input-to-output ratio. 

In the quantitative method, you can calculate the performance based on your employees’ hours to deliver an output. For instance, an employee takes three hours to complete at least four drafts for a design company. 

Therefore, the total input the employee produces is 1.3 drafts per hour.

However, it would help if you also considered uncontrollable factors such as the time it takes to fix broken equipment, training time, and lunch breaks. In this method, you can use productivity software to measure the average productivity of your employees per month, day, or hour.

3. Objectives method

As the name implies, this method uses specific objectives or targets for employees. In addition, the company will provide the resources and tools to complete its objectives. 

Once the employees meet their individual goals, the company can evaluate their productivity based on the output.

However, for this method to work, you need to supervise your employees to offer them support and solutions for every problem they encounter in completing their tasks.

4. Task tracking method

Unlike other methods that calculate the time employees spend to produce the input, the task tracking method focuses more on the number of completed tasks per employee. 

The track tracing method is suitable for companies that use excel spreadsheets to plan projects and assign tasks to employees. You can also keep track of employees’ progress.

5. Measuring productivity by profit

Another simple method of measuring productivity is monitoring the company’s profit. Most small and medium-sized companies measure their companies’ performance by tracking revenue instead of their employees’ productivity.

Measuring productivity by profit means that if revenue increases, the employees become more productive.

How to measure employee productivity

productivity metrics

Although productivity evaluation isn’t easy, the task can be rewarding once you work through the challenges.  

Here’s a step-by-step guide to measuring the productivity of your employees:

Step 1: Set up a standard for your employees

The first step in employee productivity evaluation is setting a standard output for individual tasks. This way, your employees will understand what you expect from them.

Step 2: Measure tasks instead of hours

After creating the standards, explain to your employees the measurements or targets you set for their tasks. For instance, focus on how many drafts your employees can submit in one day. 

Then, measure the least number of tasks an employee can produce and make it the standard target.

Step 3: Get client feedback

Collecting client survey data can help you track the good performances of your employees. At the same time, you can identify bad performance issues and improve them.

Overall, you can get good insights into how you can enhance the service you provide.

Step 4: Carry out surveys 

A company’s culture or moral values play a big role in the company’s productivity. Hence, it’s good to survey how your employees feel about working for the company.

For instance, you can use Moodtracker® to gain insights from your employees and address their concerns within the workplace. 

See how Moodtracker can help your leaders get the insights they need to stop disengagement in its tracks. Learn more today!

Step 5: Identify uncontrollable factors

Setting standards is a good choice for your company. However, you should also consider uncontrollable factors if the employees fail to achieve the goal.

For instance, a standard 50 calls per day in customer service might not be a reachable goal for some employees due to the number of hours customers take per call. As a result, you need to adjust your standards.

Step 6: Request daily updates

Requesting daily updates can help you track the individual progress of your employees. This way, you can keep them motivated to complete the tasks.

In addition, they can reach out to you for support if they encounter conflicts with the task/project. 

Step 7: Reward hard-working employees

The most valuable asset of your company is the human factor. Although the capabilities they offer vary greatly from employee to employee, you can encourage them to do their best in the form of reward and appreciation. 

For example, Social Recognition® allows employees to nominate one another for their admirable performances. This can become measurable if you gamify it by giving out rewards once employees or teams hit certain milestones along the way.

Step 8: Maintain increased performance

Once you’ve established standards that result in a desirable output, you should encourage your employees to maintain their performance.

That said, maintaining productivity can be in the form of monthly, quarterly, or annual evaluations. This way, you can reward hard work and provide assistance where needed.

Step 9: Monitor absenteeism and presenteeism

Another vital component of measuring the productivity of your employees is monitoring absenteeism. For instance, an employee performing brilliantly when at work results in a positive impact on the profit. 

However, if the employee takes a significant amount of time off work due to work stress, it can also affect the company’s overall productivity.

On the other hand, presenteeism means that employees attend work even if they’re ill. While it might sound like a good thing, presenteeism can hurt company performance. Once an employee goes to work sick, they can’t perform well.

On top of that, they are going to the office while sick, risking infecting other staff and extending their recovery time.

What are the differences in measuring productivity based on the industry?

productivity level

The process of measuring employee productivity can vary depending on the industry. Here’s why:

Manufacturing industry

Typically, the manufacturing industry utilizes the qualitative metric. It measures productivity based on the number of outputs per employee and the time it took to produce each product. The more products an employee can complete, the more productive they are.

Service industry

Unlike the manufacturing industry, the service sector doesn’t have tangible output. Therefore, the service industry should focus on something other than quantity. Instead, it focuses more on how employees deliver the service to the client. 

Hence, customer satisfaction plays a big role in measuring employee productivity. For example, you can evaluate the performance of a customer service representative by carrying out a client survey.

Health sector

In the healthcare industry, giving quality care is essential. Although it doesn’t have tangible products, you can measure employee productivity by evaluating the quality of the service. You can solicit feedback through an informal interview with patients or online email forms.

Moreover, patient retention rates can also help evaluate performance. Patients who are satisfied with the service are inclined to return whenever they require medical support. 

Frequently Asked Questions

Conclusion

Companies of all sizes should always seek innovative ideas to measure employee productivity. You can use employee productivity indicators and quantitative, objective, and task-tracking methods. You can also track productivity by evaluating the profit. 

It would help if you remembered that measuring your employees’ performance can be challenging depending on the industry. Still, its benefits to your company and employees make it worth considering.