How to Measure Productivity

But with all this visibility comes questions. What should you be tracking? What data is most valuable to you? What should you be doing with all this information you’re collecting? And nowhere are there more questions than around productivity.

Editor’s note: This blog post has been updated from its original version to May 21, 2020.

Strategy 1: The simple productivity output formula strategy.
This method requires an extremely simple formula that can be applied in a similar way to different departments in your organization. It is the most basic definition of “productivity” and one of the easiest ways to get some actual numbers.

Here’s how to use the simple productivity formula:

Select the output you want to measure. Usually these are complete units or completed jobs.
Find your input number, i.e. hours worked that go into production.
Divide the output by the input.
Assign a dollar value to the results to measure your cost-benefit ratio.
Measure non-production productivity in dollars instead of units.
This formula works well in a factory setting where each unit is equal in size and value. However, in other types of businesses, complex jobs, different types of roles and work styles, and other factors may not be considered. For this reason, it is usually advisable to mix this simple productivity formula with another productivity measure.

Strategy 2: The 360-degree feedback strategy.
In this strategy, you use employee feedback to measure an employee’s productivity. It sounds crazy, but in certain circumstances it can be an excellent strategy. Each employee has their productivity rated by their peers-including both up and down the chain-in terms of how well they performed their tasks and contributed to broader company goals.

To do this successfully, everyone on the team needs to have an understanding of the different roles and functions, as well as an expected level of spend required for those roles.

The 360-degree feedback strategy only works in an environment where your team interacts a lot, usually a smaller, close-knit team. They need to be able to give you accurate comments on each other’s habits. Before you start a 360-degree feedback program, you need to do some training to make sure employees are familiar with the right way to give feedback. Each person must give feedback based on their honest assessment of an employee’s overall contribution to team goals and not allow personal feelings to influence their judgment. Gathering feedback for the larger group also helps offset potential personal resentment.

There are many templates available to help you create parameters around your 360 feedback. One we love is Start/Stop/Keep-you can find a great template from Manage Fearlessly.

Strategy 3: Time tracking & project management software
Smart online time tracking and project management software like WorkflowMax helps you track productivity at a glance. By submitting timesheets electronically, employees track data more accurately and you get an accurate view of your team’s performance. With WorkflowMax, you can even use this data to run performance-based reports to see which employees or contractors are completing the most jobs or logging the most hours.

If your team works on-site or remotely around the world, online time tracking and project management software is a great solution because you can collect accurate data no matter where your employees are located.

Of course, tracking time is only one measure of a productive and contributing employee, and depending on your type of business, it may not be your best productivity measure. For more information, check out our recent article on productivity metrics.

Strategy 4: Monitor social media strategy.
Several managers – like Erika London at iAdventure, who “friends” her employees on FB – follow the wisdom that any employee who posts on social media or otherwise plays around online during their workday contributes less than their colleagues who may stay away from Facebook. These companies take a hardline attitude toward personal computer use on company time, and will strictly monitor social media and Internet time and individual people who they believe are using it.

Personally, we do not support this strategy, as we believe it requires a confrontational approach to productivity, rather than working with employees to put them in charge of their own work.

Strategy 5: The Profit = Productivity Strategy.
In the business world, profit is everything. After all, we all know that money changes the world. (Or is that the gravitational pull of the sun?).

So it makes perfect sense to measure productivity in your business by the profit you make. For small businesses, measuring productivity in terms of profit is often considered the preferred method because it’s simple and goes straight to the chase.

In service businesses like creative agencies, measuring profit also ensures that employees aren’t penalized for thinking creatively or working to produce the best possible product for the biggest client. Instead, their results are measured by the value (profit) they bring to the company.

The main productivity = profit measurement is the “Team Effectiveness Ratio,” which measures how much gross profit the company earns for every dollar spent on salary. This can be better than measuring profit against time, as the goal is to get your team to work smarter, not longer.

Strategy 6: The “Getting Shit Done” Strategy.
Can you measure productivity simply by how much gets done? Some – including Doreen Bloch of Poshly Inc, – believe you can. She doesn’t care how many minutes are spent on a task or when those minutes were spent, just which tasks are completed.

You can track productivity in this way by breaking projects down into individual tasks (which are performed within the WorkflowMax project management system). These tasks can then be assigned to the employee who can best handle them. Each person has their own KPIs related to the tasks they are responsible for and can track how many they can check off in an hour/day/week/month.

Keeping everyone up to date on project goals and milestones will keep projects on schedule and focus on completing each task instead of hours logged for the week.

Strategy 7: The Daily Check – In Strategy.
Some business owners just want to keep their team on task, and are not as concerned with spending as much as the ability to stay on task. So they have their team give daily updates on what they are working on and what has been accomplished. These daily updates also feed into weekly and monthly goal setting and planning.

How you do this in your organization is up to you. You can do a check-in:

Over the phone or a conference call.
Via Google Hangouts – you can even schedule a daily event on your calendar
In a dedicated Slack channel
Via a round robin – style Morning Meeting (US companies) use this method for their Monday morning ” huddles”)
In a quick email
Daily check-ins can work wonders for employees who need validation for hard work and who struggle with procrastination, but beware that certain personality types find this type of system quite overbearing. If done incorrectly, it can get into the territory of micromanagement, which you want to avoid at all costs. It is best used alongside a system of trust and ownership, when each team member can be responsible for setting their own schedules and deadlines.

Strategy 8: The Service With a Smile Strategy.
Measuring productivity in the service workforce can be difficult. Of course, you want your team to respond to as many support tickets as possible to avoid a backlog. However, you also don’t want to promote speed over good customer service. It’s no good having a fast response time if your answers are rude and condescending, right?

When you think about measuring service center employee productivity, most companies use a combination of measurements:

Output: the number of tickets answered in a given time period.
Feedback: a customer satisfaction rating derived from customer feedback about that particular employee. You can use your support tickets or automated phone surveys to collect this data
You can use the equation you believe best represents the tasks your team performs and the importance of good customer service versus ticket volume. Depending on the nature of your product, other factors may be included in your equation, such as:

How long a customer has to wait
Retention – the number of customers who return to the company after a support call
How long it takes for an order to be fulfilled
The number of customer complaints
When considering an equation for your support team, it’s important to establish a baseline on which your company should perform in terms of service. This will help you measure the performance of your staff. You can adjust this baseline each year to reflect the current market.

As a business owner, these productivity measurements not only help you reach your goals faster. They also provide valuable insight into the value your business provides in the marketplace and the talent and drive of your team. In addition, productivity measures can help your employees and contractors understand how you work and improve areas where they are weak. You can improve focus and foster ownership and leadership in your team.

Improving productivity starts with getting the right data.

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