How to Measure Productivity (and What to Do Next)

Wondering how to measure productivity? This blog post is sure to answer your questions.

We are living in the Information Age. Everything we’ve ever wanted to know – and many things we didn’t – are now at our fingertips, waiting to be discovered. And for business owners, that means data. Cold, hard analytics, like those used to record, track, and report on virtually anything. Data that answers the very question you just googled: how to measure productivity?

It’s a great question to ask, right? Why wouldn’t you want to measure and monitor your every everything?

Because, as this article would argue, all this visibility indicates that we’ve forgotten what early-20th-century physicists taught us: The act of measuring something changes what you’re trying to measure. And in doing so professionally, we inadvertently tell our employees what’s important by selectively measuring certain things while ignoring others, which only serves to reinforce three messages:

1. Your employee is a unit of production to you and, by that standard, expendable;

2. Only quantifiable outputs matter; and

3. Any thoughts or activities not explicitly measured and monitored are wasted effort and energy, especially if those thoughts and activities detract from production – even if they could revolutionize ‘how it’s always been done.’

In spite of the pitfalls, however, we’d still argue that measuring – and subsequently improving – productivity is critical to increasing revenue. In fact, according to a Gallup Survey, companies with engaged employees outperform companies without by 202 percent – providing a huge boost to the bottom line.

So how, exactly, can a business owner measure productivity without landing squarely on the slippery slope of counterproductive micromanagement?

Here are a few strategies we’ve found that may work – without sending the wrong message.

1. The Simple Math Strategy

This strategy calls on a simple mathematical formula that can be applied, with slight modifications, to every department in your company.

Productivity = Units of Output / Units of Input

Simply put, it’s how much was accomplished divided by how much it cost you. But to apply this formula and strategy, you first must:

  1. Choose the output you want to measure

  2. Determine your input, such as capital, labor, and materials

This formula works well in, say, a manufacturing business where each unit is typically equal in size and value. But for other industries, it can fail to factor less quantifiable elements so this strategy provides a good baseline which you can supplement with additional productivity measurement strategies.

2. The Peer Evaluation Strategy

This strategy asks, at its simplest, for employees to measure each other’s productivity. But before you keep scrolling, convinced this will erupt into Lord of the Flies mutiny, it can actually work exceptionally well – in certain circumstances, that is. Each employee has their productivity evaluated by their colleagues, including those above and below them, to determine how well they’ve fulfilled their duties and contributed to the greater company goals.

For this strategy to work, however, everyone needs to understand the various roles and functions of everyone in the company for whom they will be providing an evaluation, as well as an understanding of how to provide constructive feedback. And since you’d collect commentary from a large group, you can be sure that personal relationships and interpersonal issues won’t skew any data gleaned from this process.

3. The Tracking-Software Strategy

While time-tracking and project management software programs offer only one measurement of productivity, they can provide a baseline – much like using the Simple Math Strategy above – that can be supplemented with a more subjective, qualifiable approach like the Peer Evaluation Strategy.

With online time-tracking and project-management software, you can run performance-based reports to see which employees or contractors are completing the most jobs or logging the most hours. This is an especially effective productivity-tracking method if you have a remote team, allowing you to collect accurate data regardless of the time zones and miles that may separate you.

4. The Completed-Tasks Strategy

This strategy takes a bottom-up approach in that rather than measuring all of the metrics that lead to productivity, it instead measures only that which is produced as a direct result of the productivity. So instead of measuring how many minutes are spent on a task, it only measures how many tasks were completed.

It’s the destination – not the journey – that matters for this strategy.

Each employee is assigned certain KPIs for the tasks for which they’re responsible and productivity is then determined by how many tasks they can complete in a timeframe of your determination, be it an hour, day, week or even month.

Not seeing the level of productivity you want? Not to worry! Productivity measures aren’t just static numbers; they’re living, breathing metrics that can be improved upon as they help you and your employees understand their strengths, weaknesses and areas for improvement.

Because once you’ve identified the metrics that matter to you – like customer service call times, for example – it’s easier to identify opportunities in which an employee can improve in any of those areas to increase their productivity andwin-win – your company’s profitability!