How do you define productivity as a metric?
When you’re looking to measure productivity, it’s worth making your definition clear. That’s because it’s likely your analytics team or HR team will be looking at measuring productivity as a metric. There are lots of different ways to measure productivity depending on context, from industrial output to productivity in the office. This can even vary from business to business, with some behaviours considered more or less productive from one to another. Overall, however, the one concept that usually unifies these definitions is that productivity means how effective your output is.
How do you define a metric?
When you’re looking to create a metric, it’s worth thinking about how easy it will be to collect the data you’re receiving. It’s also important to create a clear, stable definition of the metric you’re measuring. If you decide to change the definition, it’s useful to be able to communicate this. It’s also useful to be able to use your metric to create useful actions, such as a people strategy.
Calculating productivity
If you’re looking for how to measure productivity, a simple formula is productivity = total output / total input. Here’s an example of how you might look at calculating productivity in a workplace:
Lucy works in a warehouse where she packs 160 customer orders during each eight hour shift. With this information, you can work out that:
160 customer orders / 8 hours = 20 customer orders per hour.
With this data set, the company can then find out how individual employees perform when compared with the average productivity of their position or that of the company. You can look at productivity over time to find out whether this changes or whether it improves when new policies or strategies are introduced.
Gathering data
Calculating productivity involves gathering data on your employees. What data you gather will depend on what outputs you’re looking to measure, such as revenue, how much of an item has been produced, time spent on a task or how many tasks have been completed.
This way of measuring productivity comes with the caveat that it’s only useful if you’re measuring human labour productivity. You might want to assess other kinds of output such as per machine or by quantity of material rather than by person.
What’s more, defining productivity is often a lot more complex than looking at the quantity of items that an employee can produce or tasks that they can complete a day. Productivity calculators like the one above do not factor in the quality of your employee’s output. These are therefore all points to consider when you’re looking to define your own productivity metric.
By itself as well, productivity measured in this way does not tell us the full story. It doesn’t tell us why an employee is perhaps more productive than others, or why an employee’s performance is declining over time.
Why is it useful to measure productivity?
Measuring productivity can help you find both strengths and weak points in your business’s production processes. This can include areas like:
- Current time management strategies;
- The current allocation and delegation of tasks;
- How you can increase your outputs or services.
Productivity combined with other metrics helps you to tell a story about your employee’s engagement. Many workplaces that use a soft HRM style look at how the employee experience can effect productivity as well. They might take an approach to productivity that involves putting people first, which might actually in turn improve productivity levels anyway.
This involves looking at how to encourage employees to work harder by offering perks, promotions or training opportunities. By offering incentives to increase productivity, companies can encourage enthusiastic work while improving their retention rates.
However, companies using a hard HRM will likely focus more on their employee productivity without being as concerned about their retention rates. This is because companies focused on productivity run the risk of their employees burning out.
Recruitment and turnover productivity
Aside from using productivity as a metric for labour output, you can also measure the productivity of your recruitment processes. A good recruitment process often involves finding candidates who are likely to stay in your business for a long period of time. This is known as low turnover , and it’s a sign that employees are happy working for you. If you have a high turnover rate, it means that your business is having difficulty retaining staff.
To measure turnover rate, think of an appropriate time period to measure. This is usually month by month for most employers. Then, take the number of employees who have left your business and divide this by your number of current active employees within the time frame you’ve specified.
Marketing productivity
Another kind of productivity modern businesses might be looking to measure is marketing productivity. There are a few different ways to measure this. One way is via goal conversion rate. Goal conversion is when a customer takes an action on your site that provides a desired outcome. The goal you’re measuring might include purchasing a subscription, signing up to a trial or creating an account with you.
To measure goal conversion rate, take the total number of successful goal conversions divided by the number of user sessions, times 100. Your goal conversion would be any positive outcome you’re measuring that involves a customer taking an action on your site. So, this goal conversion number will depend on the specific conversion you’ve chosen to measure in this case.
Another way of marketing productivity involves looking at the lead to marketing qualified lead (MQL) ratio. A MQL is anyone your marketing team decides is a great potential customer on the basis of their criteria. This effectively means your marketing team has decided that they’re likely to become a customer. To find good leads, your marketing team will employ tactics like paid search, open source intelligence gathering or social media to generate leads. If your team decides that a lead meets the right criteria, they’ll be defined as a MQL.
The lead to MQL ratio is therefore how many MQL your marketing team manages to find per lead. The more MQLs you have per total number of leads you have, the more successful your marketing team is at finding great potential customers.
Combining productivity metrics with workload balance metrics
One way to find out whether tasks are being allocated to the right employees and as effectively as they could be, is to look at workload balance. You can find out a lot about whether an employee is coping with their current workload by looking at metrics such as errors made, response times, task completion and the number of tasks assigned to them. Therefore, you’re looking at task completion as a productivity metric alongside how the employee responds to their workload overall.
Learning how to measure productivity is a great way to find out how well your business is performing in terms of labour output. However, as productivity is a broad term that covers many different types of production, it’s worth considering how the metric can be used to monitor the success of your retention rates or marketing strategy. When measuring productivity, it’s useful to look at defining your metric clearly so you can gather and read your data with ease.
Finally, combining productivity metrics with other metrics can give you a much broader picture of employee engagement, including what drives them and keeps them enthusiastic about their work.
