How to Measure Productivity: Metrics and Tools That Work

Improving levels of productivity is something every business should aspire to if they want to maintain a competitive edge. But, you can’t do that without first knowing how to measure it.

Overall, there is no uniform way of doing this because the definition of what productive is will differ between jobs, companies, and industries.

However, in this post, we’ll provide an overview of what businesses mean when they talk about productivity and what metrics they can use to gauge how productive they are.

What do you mean by productivity?

In the context of business, productivity refers to how efficient a business’s production process is.

It is generally established by measuring the number of product units produced in relation to the man hours it takes to make them, although sometimes it can be measured by net sales against labor hours.

Productivity levels are usually directly linked to corporate profits and shareholder returns.

What are productivity metrics?

Productivity metrics are the measures you use to identify and quantify your company's efficiency in its overall production processes.

These metrics can either be qualitative or quantitative and often take the form of key performance indicators (KPIs) that track employee productivity in relation to their goals.

They are considered a particularly good way to discover new opportunities to increase operational efficiency and improve a business across the board.

However, in many corporate jobs, such as social media managers or data analysts, it can be difficult to measure productivity. Additionally, while the goal of measuring productivity is to improve the efficiency of your business, setting unreasonable metrics could be detrimental to your employees' engagement, motivation, retention levels and productivity levels.

Ways to Measure Productivity

There are several different ways to measure productivity, and which ones you use will depend on the nature of your business and the industry you operate in.

However, here are some of the more popular metrics companies might adopt to monitor their organization's productivity levels.

1. Revenue per employee

One of the most common metrics companies use to monitor their productivity levels is revenue per employee (RPE), which is a ratio that estimates how much revenue a company generates per staff member.

The way to determine this is to simply divide the number of employees by the organization's revenue. Obviously, businesses want as high an RPE ratio as possible, as this will indicate higher levels of productivity — which usually translates into profit.

Incidentally, it is in the employees' interests to keep this high because if they do, they have a better chance of getting a pay rise!

2. Planned-to-done ratio

The planned-to-done ratio evaluates an employee’s workload and the percentage of it that is completed within a specific timescale.

It is formulated by dividing the number of tasks a staff member has been assigned by the number of tasks they have managed to complete. Typically, it is presented as a percentage, as this is a good way to measure how productive an employee is compared to others with the same role.

Companies can also use this data to track how productive employees are in certain areas of their remit to determine whether they need more learning retention training.

3. Focus hours per day

Many employees face regular distractions throughout their days, so calculating focus hours per day is a good way to determine exactly how much uninterrupted work time they have available.

Essentially, this measures ‘dedicated work’, in other words, when they are able to devote their undivided attention to a particular task. It can be a very good metric for discovering how much time is wasted through potentially unproductive office activities, such as meetings. Additionally, it can also determine if there is a difference between how effective an employee is when working in the office as opposed to working from home.

If you are going to use focus hours per day as a metric, you should really make a distinction between ‘important work’ and ‘operational work’. The former can be considered as strategic and more critical activities that have a specific impact on the company’s bottom line.

Operational work relates to aspects like replying to emails or taking customer enquiries, which can impact the time an employee has to do their ‘important work’.

4. First-call resolution

As customers are the lifeblood of every business, every business should measure its ability to deal with customer inquiries swiftly and efficiently. One way to do this is by tracking first-call resolution, which is also referred to as first-contact resolution.

As its name implies, it refers to an organization’s ability to quickly manage and resolve a customer's query at their first contact point. It is considered an important part of CRM because companies can waste a lot of time if someone is passed through multiple employees to have their issue resolved.

To determine your effectiveness at dealing with customer inquiries, divide the number of issues resolved the first time by the number of issues your customer service agents handle and then multiply by 100. This figure will come out as a percentage.

One of the main reasons companies seek to establish their first-call resolution is that they can work towards improving it to the point where their staff can serve more customers and take on more calls.

5. Sales growth

Sales growth is another popular metric many companies employ, as it reveals their ability to generate revenue over a particular period of time.

This is vital information because extensive data analysis can help you discover trends and formulate marketing plans based on sales figures.

They can also help you budget better and predict busier times, which is useful if you want to hire freelancer staff to help you during those periods.

Conclusion

If they want to survive and thrive, all businesses need to measure how productive they are.

While the metrics they use will depend on their company's nature and industry, the key factor to consider is how they will use the data generated from them.

Once you get a handle on this, you will really be able to streamline your operation.

FAQs about how to measure productivity.

Here are some answers to questions that are frequently asked about how to measure productivity.

How can you effectively measure productivity?

The best way to measure productivity is to divide output by the inputs required to create it.

Overall, the fewer resources it takes to create an output, the higher your productivity will be.

What is productivity best measured as?

In the context of business, productivity measures how efficient a company’s production processes are.

To calculate it, you can measure the number of units of a product made relative to the number of labour hours required to make it or measure net sales against labor hours.

What are some good productivity metrics?

Some good metrics to measure your company’s productivity are revenue per employee, planned-to-done ratio, focus hours per day, and sales growth. The better you can track these, the more you can identify ways to streamline your business processes.