How to Measure Productivity At Work

Why Measuring Productivity Is Important

Before we talk about how to measure productivity, we need to discuss why you should be doing it.

One clear reason why is that the success of your organization is reliant on the output of your workforce. If each employee isn’t fulfilling their obligations to the desired standard, then the whole organization suffers.

But, it goes deeper than that.

Underperformance could be the result of poor employee well-being, a lack of training, inefficient workflows, or time-consuming administrative tasks.

If you don’t identify these problems, then they grow, causing an even greater drop in productivity. By understanding the output of each individual you can determine where the issues lie and then set the wheels in motion for making improvements.

Understanding the Methods of Productivity Measurement

There are lots of different ways to measure productivity, but they broadly fall into two key categories:

• Quantitative
• Qualitative

Quantitative Measurement

Quantitative methods focus on using numerical data to assess productivity levels. The great thing about using quantitative data is that it provides objective metrics that can be easily tracked and analyzed over time.

As well as an insight into current productivity, the data also produces benchmarks that can be used to create performance standards for future productivity. It’s also vital for monitoring progress toward specific goals and spotting trends.

Several industries are well-suited to quantitative productivity measurements, including:

• Manufacturing: An example of this is the number of units produced per labor hour.
• Sales and retail: Tracking revenue per employee or units sold per hour, for instance.
• Construction: Number of square feet built per labor hour, for example.

Qualitative Measurements

Qualitative measurements are the opposite of quantitative and focus on non-numerical data to evaluate productivity. Some examples of this include employee behavior, feedback, observational studies, and performance reviews.

You could say these are non-tangible aspects of productivity since they are not backed up with cold-hard data. Therefore, they are somewhat more challenging to measure.

However, the benefits of this type of measurement make it a worthwhile exercise. You get a unique perspective on employee satisfaction as well as a contextual understanding of why certain metrics are as they are.

Crucially, this data is how you spot areas for improvement that aren’t so easily identifiable through quantitative data.

Some industries that benefit from qualitative productivity measurements include:

• Service industries: Healthcare, hospitality, and consulting, for instance, rely heavily on customer interactions and satisfaction.
• Creative industries: Marketing, design, and media, for example, where the output is subjective and driven by creativity.
• Knowledge-based industries: Research and development, education, and coaching rely on qualitative data to evaluate the effectiveness of problem-solving and innovation.

Quantitative or Qualitative: Which Should You Use?

The answer to this question is not so black and white because it is often necessary to employ both methods to gain a full picture of your workplace productivity.

Even if your industry has quantitative outputs, there are still other qualitative factors that contribute to them. A lack of employee motivation, a low customer service score, and an increase in absenteeism will all hinder productivity.

On the other side, an industry with more qualitative outputs will also have quantitative measures. For instance, educational organizations may have exam or assessment results while some creative industries may have to produce a certain number of units per hour.

Use Both Methods for the Best Results

Our recommendation is to analyze everything that can be measured within your organization to gain a holistic view of what influences the performance of your workforce.

Quantitative data offers clear, objective metrics, while qualitative insights capture your employees’ sentiments and other intangible aspects of productivity. Both will provide a balanced assessment and make it easier to make decisions and implement improvements.

Quantitative Methods of Measuring Productivity

Now we understand the different types of productivity measurements, how can you actually carry them out?

Well, there are a few quantitative methods available to you.

Output/Input Ratio

This is probably the most straightforward way to measure quantitative productivity. It represents the relationship between the resources used and the goods or services produced.

The formula to determine the output/input ratio is as follows:

Productivity = Output/Input

Inputs are defined as the resources used in the production process, including:

• Labor: Hours worked by employees
• Materials: Raw materials used in manufacturing
• Capital: Equipment, machinery, and technology
• Energy: Electricity, fuel, and other energy sources
• Information: Data and intellectual resources

Outputs are the final products or services produced. They are measured in a variety of ways, depending on the industry:

• Units Produced: Number of products manufactured
• Revenue: Sales generated
• Services Delivered: Number of clients served or projects completed
• Quality: Standards met or defects reduced

Labor Productivity

Labor productivity is the simple act of measuring the amount of goods and services produced within one hour of labor. It’s commonly used in manufacturing and helps you understand how effective your workforce is, how it’s being utilized, and identify opportunities for optimization.

You can determine your labor productivity by performing this formula:

Labor productivity = Total output/Total labor hours

Output refers to the quantity of goods or services produced, such as:

• Units produced: Number of products manufactured
• Revenue generated: Useful in a services industry where tangible goods aren’t created
• Tasks completed: Examples of this could be clients served or customer service tickets resolved 

Total labor hours include ALL the hours worked by employees during the measurement period. We’re not just talking about direct labor here (those directly involved with the product or service). You must also include indirect labor such as supportive roles, admin, HR, finance, etc.

Total Factor Productivity

Total factor productivity measures the efficiency of all inputs used in a production process. Unlike labor productivity which focuses solely on labor hours, total factor productivity considers multiple input factors alongside labor like capital, materials, and technology.

Although it’s trickier to measure, it gives you the most comprehensive overview of the overall productivity within your organization.

The basic formula for calculating total factor productivity is:

Total factor productivity = Total output/Weighted average of all inputs

Typical outputs for this method are the same as the output/input methods – number of products, revenue, service, quality, etc.

Common inputs for this method include:

• Labor: The number of hours worked or the number of employees.
• Capital: Machinery, buildings, and other physical assets.
• Materials: Raw materials and intermediate goods used in production.
• Technology: Technological advancements and innovations that contribute to production efficiency.

The Challenges of Using Quantitative Methods

Nothing is perfect, and even though quantitative productivity measurements give you solid data, they’re not without their fair share of drawbacks.

Perhaps the biggest challenge is collecting the data itself. Ensuring precision, consistency, and reliability can be difficult, especially if your organization has multiple departments.

Another issue lies in the fact that quantitative methods rely solely on data. While data is great, there are less tangible factors at play (innovation, morale, creativity, etc) that are more difficult to quantify and are generally ignored by this way of measuring productivity.

Quantitative data also tends to focus on short-term results and ignores long-term sustainability. While this may boost immediate productivity, it doesn’t help long-term growth or strategic goals.

Finally, quantitative data does not take external influences into account. Market fluctuations, economic conditions, etc., can have a big influence on productivity – in both a positive and negative way.

So, what’s the solution?

• Use software and systems to capture accurate data. For example, a digital time-clocking system will give you reliable insights into how long and often your employees are working.
• Don’t just rely on the data. Use a mix of quantitative and qualitative methods to gain a true perspective of productivity.
• Align the data with your organization’s long-term goals. Measure regularly to ensure continuous alignment.
• Consider external events when analyzing data. For example, a retailer would expect productivity to skyrocket during the holiday season and then dip significantly in the new year.

Qualitative Methods of Measuring Productivity

Now, let’s look at some ways you can get qualitative data.

Employee Feedback

Employee feedback is exactly as the name suggests and involves collecting insights directly from each of your workers. You should gather information on their work experiences, challenges, and feelings about their roles and ask how the organization can improve.

A few ways in which you can get feedback include:

• Structured questionnaires and surveys such as 10/10 ratings and multiple choice questions.
• Face-to-face interviews for more in-depth feedback.
• Anonymous suggestion boxes if you feel that your employees aren’t being fully open or honest about their feelings.

Performance Reviews

These dig deep into each individual employee’s job performance. They typically include the setting and reviewing of goals so you can analyze their productivity on an ongoing basis.

• “Key performance indicators” (KPIs) are used to define an individual’s goals or the expected performance of their role.
• Feedback and discussion sessions should happen regularly to discuss performance in line with the KPIs.
• Development plans are put into place to help the individual reach their goals. This could be improvement measures, additional training, help, and support.

Observational Studies

On-the-job observations scrutinize individuals as they work. This might involve an external consultant or – more commonly – leaders and supervisors watching their employees.

• Direct observation is the act of watching employees perform their tasks to understand their work processes and methods.
• Shadowing follows a specific employee throughout the day to gain deeper insights into their daily activities and challenges.

Peer Reviews

A peer review is feedback that is given by one employee about another. This contributes to what’s known as “360 feedback,” where you gather information about a specific individual from several sources (managers, colleagues, etc.).

This method is useful for gaining different perspectives on an individual’s conduct and contributions.

Peer feedback can be gained by using one of the feedback methods above, or, you may like to have a team discussion where everyone provides feedback on each other. This can be a more open and transparent way of doing things if everyone is comfortable with it.

Focus Groups

A focus group is a select number of employees who have been brought together to discuss specific topics or issues related to productivity.

These usually consist of facilitated discussions guided by a moderator and a clear agenda to help stay focused.

Customer Feedback

Another feedback method, this time from the client or customer’s perspective. This will tell you how your products or services are (or aren’t) meeting their needs and what they think needs to change for things to improve.

Attendance and Absence

Your workforce attendance records can have a huge effect on productivity so you should be taking steps to measure this as part of your qualitative dataset.

The good news is that this is one of the few methods that straddles both qualitative and quantitative data collection.

Utilizing time-clocking systems will give you the solid data you need to understand where time and attendance are an issue. Then, you can use feedback sessions and discussions to dig into the reasons why attendance might be bad.

For example:

• Frequent absenteeism can indicate underlying issues such as job dissatisfaction or lack of training.
• Regular absences can disrupt team dynamics and workflows, creating productivity bottlenecks.
• Large amounts of overtime could signal burnout and stress among staff and an issue with workloads, staffing levels, or scheduling.

The Challenges of Using Qualitative Methods

In most cases, qualitative methods rely on subjective judgments and biased opinions, which can skew the results. Additionally, different observers may interpret the data in different ways, which can impact the reliability of the results.

Gathering qualitative data is time-consuming, especially if you are running face-to-face meetings. It’s also incredibly resource-heavy. If you have a large organization, implementing this can be a real headache.

Unlike quantitative methods, qualitative data collection lacks standardized measures, which can make it challenging to compare to historical data or to create benchmarks.

These challenges can be overcome, though, if you take the time to put the following measures in place:

• Create standardized policies and processes for collecting and analyzing qualitative data. Provide training for those collecting the data to help reduce subjectivity and bias.
• You might want to get an external body in to evaluate your workforce. Although this carries an investment, it addresses the time issue and helps avoid biased opinions.
• Use automated software and tools to streamline the process.
• If you can, identify where the key issues lie and focus on those areas first. Look at the departments with the lowest productivity levels and start there.

12 Steps to Implement a Successful Productivity Measurement Process

Now we understand all the different ways in which we can measure productivity, the final step is to implement them into your organization:

 

1. Define your objectives: What do you want to achieve by measuring productivity (e.g., reduce costs, improve efficiency, increase employee motivation, etc.)? Ensure these objectives align with the overall goals of the business.
2. Select which metrics you want to measure (qualitative and quantitative).
3. Select the appropriate qualitative and quantitative measurement methods.
4. Determine which tools you need for the job (e.g., task management systems, time-clocking software, survey systems).
5. Implement the data collection tools and processes, including how often the data should be collated and reported.
6. Train relevant staff on the new productivity measurement processes to ensure consistency across all departments.
7. Conduct regular reviews to analyze the data and spot inefficiencies.
8. Use the historical data to set internal productivity benchmarks. Use industry standards or competitor data to set external benchmarks and performance targets.
9. Communicate the results with your workforce and engage employees in finding solutions for achieving better results.
10. Implement improvement measures and continue collecting productivity data to analyze their effectiveness.
11. Regularly update your organization’s productivity goals to reflect changing business needs and feedback.
12. Treat productivity measurement as an ongoing process that must be continuously monitored and adjusted.

Final Thoughts

Addressing your organization’s productivity levels may seem like a lengthy and costly process, but the truth is that ignoring the issue will cost you far more in the long run.

Measuring productivity should be part of the culture with everyone understanding how they contribute toward the success of the business. When everyone is facing the same direction, success becomes a shared goal, leading to higher efficiency, morale, and overall organizational performance.