How to Calculate the Productivity of an Employee (Or Yourself)
Updated on February 29, 2020
BusinessDictionary defines productivity as:
A measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs.
Productivity is computed by dividing average output per period by the total costs incurred or resources (capital, energy, material, personnel) consumed in that period. Productivity is a critical determinant of cost efficiency.
Measuring productivity tells us a lot about the work we’re doing. It can be an important factor in to tell us if we’re making efficient use of our time and if we’re using resources and materials wisely. It can also tell us if our employees are adding benefit to the overall company bottom line. Or, if you’re a freelancer or sole proprietor of a business, it can help you figure out how you and your business are really doing.
Productivity measures are more than just numbers and labor cost, although that’s a good place to start.
Measuring Productivity
At its core, productivity is a measurement, and measurements are usually best expressed as a number.
In general, labor productivity is output divided by input. In other words, it’s the result of the work divided by the amount of work done or the amount of resources used over a certain period of time.
A great deal has been written about calculating productivity from manufacturing or industrial viewpoints. Those calculations tend to be complex, taking into account multiple factors like production time, cost of labor, capital costs, product yield, machine uptime, etc.
The above is a pretty simple productivity formula widely used across all industries. But if you’re reading this, chances are you’re looking for ways to measure how effective your company’s production process is in a more entrepreneurial field, probably in a small business, and maybe even a business of one. If you’re looking for ways to measure your own productivity or that of your employees, you’re likely going to need less complex equations.
For example, in a newsroom, your output/input might be the total number of news releases generated divided by the time it took to generate those releases. For a blogger, it might be the total number of blog posts produced divided by the time it took to write and post those pieces.
The more complex your business model or the more complex your product, the more complex your productivity calculations may need to be. But even seemingly simple businesses may need something more than just ‘number of pieces created divided by creation time’. And, especially if you’re in business for yourself, you may need to get creative in how you measure productivity.
Creating Key Performance Indicators
Investopedia defines key performance indicators as “a set of quantifiable measures that a company uses to gauge its performance over time.” These indicators are measurements of how well a business is doing in achieving its goals.
Progress is tied to productivity. A company with non-productive employees is not likely to be a company making a lot of progress. But a company that is making progress may be able to find ways to be even more productive.
If you want to keep improving –– at business, at a personal endeavor, at anything –– you need to set goals. The only way you can tell if you’re reaching your goal is to assess your progress at certain points.
It might be the end result (write five articles in two days). It might be the checkpoints along the way (write one chapter each week; edit a previously written chapter each week; get feedback on one chapter a week).
Key performance indicators allow us to measure productivity by helping to define the input and output points we use in our calculations. Those indicators might not be as simple as the number of products divided by time; different types of businesses are going to need different ways to measure both output and input.
If you’re a chef, one measure of productivity might be how many biscuits you were able to cut out of one piece of dough before having to gather up the scraps and reroll out the dough.
If you’re a seamstress, it might be how many pieces of a garment you can get from one piece of cloth. For a software developer, it might be how few bugs are in a line of code you create.
How to Write Good Key Performance Indicators
Key performance indicators are like any other metric or goal: they work best when they are simple, clear, achievable, and useful. They work even better when you share them, review them, and keep them updated.
Simple means that everyone understands what the metric is. It also means that you can remember it. It’s like a good mission or vision statement; if nobody can tell you what it is without looking it up in the handbook, it’s probably not a simple, clear metric.
Specific means that it’s clear and well-defined. Asking who, what, when, where, and how many works well here as a method to develop good metrics.
Achievable is something you can accomplish. We tend to underestimate how much time it will take to do things and overestimate how much we can do in a certain amount of time. Be realistic.
But being realistic doesn’t mean your metric shouldn’t be an aspirational goal. If your metric is always measured at green, and if your goal is to improve, it might not be the best metric.
Useful gives you the information you need. Typing 70 words a minute is specific and doable. It might even be aspirational if you only type 60 words a minute at the time you make it a metric. But if you’re a graphic designer, knowing that you can type fast probably isn’t going to help you be more productive.
Good key performance indicators need a little maintenance to keep them current and relevant. When you’re first developing them, you might want to set a specific date to measure the effectiveness of the metrics. Tweak, or rewrite, as needed. After that, it’s beneficial to set up a process to maintain them.
Review them on a schedule that works for your business. It might be as part of an annual review; it might be more frequent. If you’re using them to tell the story of your business, you’ll start to see where holes are and what data isn’t useful.
Update them as needed. Perhaps what seemed like a useful metric in the beginning isn’t giving you the information you thought it would. Don’t change it just for change’s sake. Be thoughtful and look at the story. This isn’t about getting the result you want; it’s about getting the results you need. If your key performance indicators aren’t pointing out the good and the bad, it’s time to revise them.
Another piece of advice for good goal-setting is sharing your goal with others. It’s the same with key performance indicators.
Share them with your clients, your employees, and your peers. You can get valuable feedback by seeing what others have done. By being transparent during the process of creating your metrics, you can get buy-in from your employees, especially where the indicators are measures of their work. And as with other goals, being open about what you’re measuring creates a sense of responsibility for meeting that metric.
Better is the enemy of good when you’re developing key performance metrics. Yes, you want to have good, appropriate measurements. And, in keeping with your goal of increasing productivity, you don’t want to waste time measuring unimportant things.
But while some metrics are clear, others need more of a spiral development process. Get the best thing you can in place with the knowledge you have, then evaluate how it’s working once you get six months’ or a year’s worth of data points.
Be Pragmatic
This isn’t to say keep changing your metrics. Along that path lies the madness of change for change’s sake. To employees especially, continual “process improvement” can sometimes feel like the boss is throwing anything against the wall to see what sticks.
There is value even in imperfect metrics. Be deliberate, be thoughtful, and be transparent.
And if you’re developing key performance indicators to measure your own productivity, all these principles hold. Your metrics need to be simple and specific, achievable and useful.
You’ll want to review your metrics, too. It might help to think of it as your own performance review, but in addition to seeing what data the metrics give you, take some time to evaluate the metrics themselves.
Be thorough when developing your own key performance indicators. Chances are you can use less complex calculations, but that doesn’t mean measuring your own productivity should be taken any less seriously than measuring the productivity of an employee or a business as a whole.
Counterintuitive Measurements
Most of the time, coming up with a starting point for your key performance indicators is going to be easy because your input and your output will be clearly defined, tangible things.
But what happens when you need to measure something intangible? Or when you need the result of your metric to be a negative?
You might have a client who is drafting a critical partnership agreement with another high-profile company. It’s a long process and requires legal review, multiple funding rounds, many meetings, etc. But all parties agree that for the deal to work, absolutely no word of the partnership can be made public before all parties are ready for the big announcement.
Your metric here is zero. Success is measured by the lack of a visible result. I’ll note that zero is still a number and so can still be stated if you want to come up with an official equation. But if you are measuring your own productivity during this time, you might need to go a step further to show how much work you did to create that particular outcome.
It’s going to be one of those weird equations because normally zero divided by a number is zero. If your output is zero, then it’s going to look like your productivity is zero. And that’s definitely not the case.
For example, your key performance indicators might be the time you spend online tracking news stories that mention your client and the partner company. You might track the number of phone calls you make or emails you send answering questions that help your company maintain good relations with industry press while keeping this piece of news out of that press.
When you’re calculating your own productivity, or your business isn’t making a tangible thing, you may have to get creative in developing useful key performance indicators that give an accurate measurement of your productivity. But isn’t getting creative the reason we all went into business for ourselves anyway?
Getting your key performance indicators in place is the first step in figuring our your productivity. Without context, though, the resulting number isn’t going to mean that much. Context comes in two forms: comparison and quality.
Comparison
A number on its own is just a number. If I work in a newsroom, and we’ve put out 20 releases in a week, and it took us 20 hours to do the work, that’s an hour per release.
But that number doesn’t tell me that five of those releases required half of those 20 hours, and it doesn’t tell me that the week before, we did 25 releases in 20 hours.
To make the numbers mean anything, we have to stack them against other numbers. A snapshot may give you current data, but it’s not until you string the snapshots together that you can tell a story.
That’s why you need to have a productivity index as a way to measure productivity increases or productivity changes.
If your team decides that it takes an average of 20 hours to publish 20 releases each week, this productivity ratio of 1:1 is your baseline. From here, you measure the labor hours it actually took for 20 releases this week, which was 18. Divide 20 by 18, and your team’s productivity index for that week was 1.11.
Using these ratios can help you with your project management by measuring productivity changes easily. It also gives you a chance to forecast profitability based on the ratio of output compared to the number of hours worked.
Storytelling is useful in all kinds of businesses, not just those in the creative fields. (And by the way, this is a reason why writers and editors can find their place in all sorts of industries.)
While these types of productivity benchmarks seem useful, they don’t tell you a lot on their own. To understand your workforce’s productivity levels, you’ll need to look at the bigger picture.
When you measure productivity, think of phrasing it as a story with a beginning, middle, and end. Your beginning could be your baseline, or last year’s results, or last week’s results. But know where you’re coming from.
The middle is where you are now. What are you measuring and what do the numbers say?
The end isn’t The End. It’s the future. What are your goals and how do you plan to reach them?
It’s only when you line things up in a story that you can see patterns. When you see patterns, good or bad, you can make good decisions on how to proceed. Patterns show you where your problem spots are and the places you excel, and can give you valuable data on what changes worked in the past.
If you try to make improvements in your business without looking at the whole story, you’re just throwing things against the wall to see what sticks, like that impractical boss I mentioned before. At worst, you’re putting stress on yourself and your employees by continually making process changes.
Not doing anything is a decision, too. It may even be the right decision, but you won’t know until you compare your productivity metrics.
You need the context of comparing measurements to determine productivity, but you also need to look at more than just numbers.
Quantity Versus Quality
We tend to think of productivity as being efficient, or doing more with less. It might be less time, less money, or fewer resources used, but it’s almost always using less of your input to do more of your output.
Going back to our newsroom example, if your job is to edit articles, you want to edit as many articles as you can. If you want to be productive, you edit five or six or ten things a day.
But quantity isn’t everything. If you miss the glaring misspelling on page 14 or forget to change all the AMs to a.m., you’re not actually being productive.
If someone has to go back and redo your work, not only are you not being productive, but you’re also bringing down the productivity of the whole team.
One of my favorite things about the definition I quoted at the top is the phrase “useful outputs.” Outputs is just a number, a quantity of something you make or do.
Measuring the useful output, or quality, is more complex than simply counting units. It’s not always as simple as number of products divided by the number of total hours. You can measure quality numerically, but you may have to get creative about how you think about those measurements. A multifactor productivity formula can take into account the raw materials used but it doesn’t do a great job of reflecting the quality of the work.
For our newsroom editor, how much time is spent on someone redoing your work? For our chef, how many biscuits can be cut out of the dough without sacrificing the perfect round shape of your world-famous biscuits?
In the fashion world, couture takes as long as it takes. Is it possible to create high-quality couture garments in less time? I’d ask the contestants on Project Runway. Some of them are able to produce truly beautiful, well-crafted handmade pieces in the time allowed, but many of them send clothes down the runway with taped hems and unfinished seams. Those garments are still technically couture, but are they of a quality that anyone would want to wear on the red carpet?
The quality of your finished product matters, and that idea holds no less true for businesses with a less tangible product.
A company that hosts an exhibit at a trade show can measure the number of leads that come directly from that booth. However, a non-profit that hosts a similar exhibit at an event for the general public might be looking for awareness, not customers.
How do you measure awareness? Or a shift in public opinion? Seemingly intangible outcomes require us to come up with different kinds of measures.
Our non-profit might count the number of new donations it received in the month following the exhibit. It might look for examples of positive coverage in the media or see if there was an uptick in visitors to their website.
To measure quality in the context of productivity, think about the best possible outcome and work back from there. Define your useful output instead of simply counting how much of a thing you can create, and then you can figure out how to measure it.
Putting It All Together
Once you have your key performance indicators, you can use them to determine your input and output variables.
For example, let’s say your newsroom requirement, or total output, is to process 20 articles a week. Your goal is to have each of those articles proceed through all the editing checkpoints in no more than eight hours total. You can note the actual time for each article, and then you can calculate the overall productivity each week by the total time it takes to process 20 articles.
By comparing the result from week to week, you can see if you’re meeting your goal and if your overall productivity is increasing or decreasing. Then you can get into individual employee productivity. If you have three employees doing that work, what are their specific output/input results over that time period?
Some organizations tie the individual performance plans of their employees to the company performance plan. In other words, the key performance indicators for the individual feed into and support the overall goals for the company. As long as individual employee and company metrics are simple, specific, useful, achievable, and transparent, that’s a great way to make your employees feel like they are connected to the overall success of the business.
But in order for individual key performance indicators to help you get an accurate look at productivity, you have to get behind the numbers and figure out why. You can use that qualitative data to help create better indicators.
In our newsroom example, did the most productive employee only have short media advisories to edit and so was able to do double the number of the other two, who got long, jargon-filled news releases? Perhaps the key performance indicators need to be more detailed, reflecting not just total number of products but also a breakdown of product types and the time needed to process each one.
Creating better key performance indicators will help you get more useful output and input results and measure productivity more accurately.
It doesn’t matter what your product is or what your business field is. Using key performance indicators is an important factor in helping you measure the productivity of your employees, yourself, and your business will help you do better.