Typically, calculating productivity involves a labour productivity equation which measures total output and input. However, it isn't always that simple. Read on to learn critical considerations for measuring productivity for any business.
Before we can tackle measuring labor productivity, we must define what overall productivity means.
Today's modern environment is filled with endless 'life hacks' and productivity tips -- every small business wants to increase productivity and do more with fewer employees, fewer resources and less time.
It's easy to get fixated on a creating a standardised number or productivity rating. Measuring productivity should focus on the overall performance of the organisation, not on total cost analysis.
Do your teams produce the desired results? Can they take a heap of raw materials and ideas and turn them into useful products and services? Do they meet goals on time and produce quality work? Do your employees have effective time management skills? These are the real factors that generate maximum productivity.
Calculating productivity necessitates knowing the main responsibilities, desired outcomes and key indicators of each individual position and developing ways to track activity, which can be more difficult for some positions than others.
For example, to measure sales productivity, focus on tracking a range of sales activities, or outputs. Measure the total number of new accounts acquired, the number of cold calls made, and of course, an increase or decrease in revenue.
To measure productivity for a marketing team or individual, be sure to track outputs such as website conversions, social media reach and email opens and click-through rates.
Investopedia calls key performance indicators 'a set of quantifiable measures that a company uses to gauge its performance over time.'
Progress towards measurable goals is directly correlated to productivity. An organisation full of team members that aren't productive isn't going to get very far, especially if they never identify their key performance indicators that lead to reaching company goals.
Key performance indicators give managers the ability to measure productivity by defining the input and output measures of each employee and team.
For human resource managers, a productivity measure could be how many qualified applicants or accepted job offers they received in a month or quarter.
For recruiters, it could be how many qualified leads they placed in jobs over the course of a year that retained the position for at least six months.
For a software developer, productivity could be measured by how many software updates they create that eliminate bugs in a program, or new features they develop in a certain period of time.
Your workforce and materials are your common inputs and the work tasks team members perform are the outputs. Measure them against one another to develop a productivity formula.
Once you've created the key performance indicators, develop ratios to calculate productivity levels.
For example, overall productivity is calculated by the amount of revenue generated, but sales productivity in efficiency measures is calculated by total sale dollars divided by the total number of sales, which gives you the average per cost per sale.
A sales rep who generates $100,000 in sales in 20 sales per month averages $500 for each sale. Develop standards like these for every department and position to create competition and track them in a public place, such as a physical scoreboard in the office or with online software, especially if you have remote teams.
As you analyse progress and productivity trends over time, you'll be able to compare how individual team members perform against their co-workers. You can identify productivity changes, high performers who may be ready for promotion and training needs for low performers. If training doesn't resolve the issue and improve productivity, you can assess if you need to bring in new talent to reach productivity goals.
Most business leaders view productivity as the ability to do more work with fewer resources. That could mean less time or fewer employees, but cutting back on your input can reduce the quality of your output.
The quantity of work isn't king. If a marketing specialist produces three new email campaigns, a whitepaper and a new blog in a one-week production process but there are glaring typos and mistakes, they aren't being productive. They are simply producing content that dilutes your brand and company reputation, and someone has to take valuable time to go back and correct their work, reducing their productive time.
A sales representative that knowingly makes a sale to a client that won't benefit from the product just to get a sales will most likely create an unsatisfied customer due to lack of product-customer fit. Similarly, if a human resources manager places a poorly qualified candidate in a position and they turn over in three months, you'll lose revenue due to attrition.
Be sure to review the quality of your team’s work, not just the quantity. If the quantity is high and quality is low, you might need to reconsider your productivity expectations.
The most successful organisations measure productivity with tools that make it easy. Samewave is social performance management software that helps companies calculate productivity by giving team members the ability to create and collaborate about goals while building accountability, transparently tracking progress towards tasks and targets.
Our software also features robust, automatic reporting so you can know where your employees and teams stand at the click of a button. Best of all, Samewave is free, so introduce it to your team today and start maximizing productivity levels across your organisation.
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