Key Takeaways:

‍

• Many company leaders don’t have the right system for calculating productivity within their organization

‍

• Without a reliable productivity calculation system, managers can’t know which areas of business need improvement, so the company stagnates

‍

• You can ensure your company is going in the right direction by implementing a simple productivity formula along with several additional calculations

‍

• To ensure the most accurate and time-efficient calculations, rely on Insightful—specialized software that can generate productivity reports in a click of a button

‍

Read time: 7 minutes

Productivity is among the hot topics in today’s business world, especially now that remote work takes precedence over office-based work.

‍

CEOs are worried about the productivity of their remote employees. Managers are pressured into finding new ways to improve team members’ productivity.

‍

But are they just taking shots in the dark? Many leaders will find they need to take a step back and reevaluate how they approach the whole productivity question.

‍

So how to calculate productivity and get a straightforward and reliable answer?

‍

This article covers the top six methods for accurately calculating productivity and identifying areas in your business that need improvement. You will also learn how to avoid mistakes and automate these calculations through software for monitoring employee productivity—Insightful.

‍

Why Calculate Productivity?

‍

Calculating productivity can help your company in more ways than one:

‍

• With the right data, managers and leaders can make better-informed decisions for improving productivity.

‍

• Sharing a team’s productivity stats and their impact on the company’s success boosts motivation and engagement.

‍

• Understanding the changes in productivity can help businesses adapt, improve their productivity, and generate additional revenue.

‍

And that’s just to name a few. Learning to calculate and measure productivity correctly is the gift that keeps on giving. According to a study by the Harvard Business Review, organizations that effectively measure and manage productivity are 21% more profitable than their peers. 

‍

What is Productivity in Business Terms?

‍

Productivity is a measure of a company’s economic performance. It is calculated by dividing the amount of produced product/service (output) by the amount of resources required for production (input).

‍

An explanation closer to knowledge workers is that productivity is the number of tasks finished (output) relative to work hours spent (input).

‍

What Is the Productivity Formula?

‍

The basic productivity formula is:

‍

Total Output* / Total Input** = Productivity

‍

The unit in which you want to express your productivity depends on your industry as well as your targets.

‍

*Output = What is produced. Output can be the number of products or services, finished assignments, or the amount of revenue you earn.

‍

**Input = What is invested to enable the production process. Input can be expressed in the amount of raw materials, invested money, or the number of hours that are spent working.

‍

What does it look like in practice?

‍

Let’s take a look at an IT company that creates websites. It needs altogether 300 hours (input) to build one website and it makes $30,000 per project (output). This means that organizational productivity amounts to $100 per hour of work.

‍

Here’s an example of how to calculate individual productivity. An employee at a car cable company inspects 240 pieces of cable in their eight-hour shift. Their output is 240 pieces of cable and their input is 8 hours. This means that their productivity is 30 pieces of cable per hour.

‍

What Are The Top 6 Methods for Calculating Productivity?

‍

1.  Relying on the Standard Productivity Formula

‍

The standard productivity formula involves dividing the number of goods or services produced by the total number of hours worked.

‍

Here’s an example:

‍

• Your company produced 12,000 items last month
• The total number of work hours it took is 1,200
• This means that the productivity of your organization is 10 items for an hour of work

‍

Some people will point out one flaw of this method: the lack of attention it pays to the quality of products.

‍

2. Using the Total Sales Method

‍

Another way to get a better understanding of your company’s productivity is to use the total sales method.

‍

To do this, divide the total sales over a period of time by the number of hours worked during that period.

‍

Let’s say your company earned $50,000 in ten days. You have ten workers and they all worked all their shifts in this period. That means you have a total of 800 worked hours. Your productivity is then:

‍

$50,000 / 800 hr = $62.5 / hr

‍

3. Calculating Revenue per Employee

‍

This method allows you to calculate the productivity of one employee expressed in earned revenue.

‍

If your company has 5,000 employees and generates $40 million per year, the revenue per employee would be:

‍

$40 million / 5,000 = $8,000 per employee

‍

Yet, these calculations cannot be taken as definite. The actual productivity can vary considerably from employee to employee. To calculate each employee’s productivity accurately, you need to rely on more robust employee productivity monitoring tools.

‍

4. Looking at Objectives & Goals

‍

Some industries don’t allow measuring exact quantities of output. In these cases, it’s more practical to rely on the percentage of targets that your employees managed to achieve.

‍

Customer support teams are often evaluated via this method. For example, you have set a goal for them to answer 300 customer inquiries per day. If they manage 390 inquiries, their productivity is 130%.

‍

For this method to work, the team needs to have clearly defined objectives and deadlines.

‍

5. Collecting Employee Feedback

‍

This method is otherwise known as 360-Degree Feedback. It focuses on evaluating one employee by talking to everyone who works with them daily. This includes asking peers, subordinates, as well as managers to rate a person on their contributions.

‍

The evaluation process can include written and verbal feedback, as well as training on how to review your team members.

‍

The downside of this method is that the knowledge of other people’s work can be limited. Personal biases can also affect the feedback.

‍

6. Productivity Tracking Software

‍

If your company employs remote workers, simple attendance monitoring software cannot give you a real representation of your employees’ productivity.

‍

Monitoring remote workers' productivity requires powerful productivity-tracking software, like Insightful. This is one of the most scalable remote monitoring apps and it’s designed to automatically collect and analyze employee productivity data.

‍

Insightful can:

‍

Tally every resource that an employee uses (app, website, etc.)

‍

Track the amount of time an employee spent using each resource

‍

Immediately calculate productivity based on the way you marked the resources (useful/unuseful)

‍

Take screenshots—snaps from certain apps (messaging) can be blurred for privacy reasons

‍

Track idle, active, break time

‍

Its InsightsAI feature simplifies everything from reporting to minute analysis of productivity trends both on team and individual level. This is what makes it a great computer monitoring software for employers who need to save time on reading through long reports. 

‍

With Insightful employee monitoring software, employee monitoring efforts also contribute to creating healthy work habits. This comprehensive approach leads to improved efficiency and productivity across teams.

‍

Extra Tips for Calculating Productivity

‍

Here are a few other valuable pieces of advice when looking into your company’s productivity:

‍

Calculate the Productivity Index: Productivity measurements cannot tell you a lot if you don’t have a reference. This is why you should create a productivity index.

‍

To do this, you need to pinpoint your base period and calculate your company’s productivity during it.

‍

The productivity index for one period is the ratio between the productivity for a period you are analyzing and the base period productivity.

‍

Example:

• Your base period productivity is 4
• Your productivity for period B is 4.5
• The productivity index for the period B is:

4.5 / 4 = 1.125, i.e. 12.5% productivity improvement

‍

By looking at each period's productivity index you can learn more about your productivity trends and explore what influences it most.

‍

Measure Value Added: To calculate the value added, subtract the total cost of production expenses from the value that the end user pays. High value-added typically leads to increased profits.

‍

Gauge Utilization: Utilization shows how well the labor resources (work time) are used. If an employee has eight work hours, and they have spent seven working dedicatedly, their utilization is 87.5%.

‍

How to Improve Productivity?

‍

Once you have a clear picture of your company’s, teams’, and employees’ productivity, you can start looking at ways to improve it.

‍

Here are several fail-proof ways to get your company’s productivity to the next level:

‍

✅Define the Goals: When employees have a clear aim in sight, they can more effectively organize their time and achieve better results.

‍

✅Provide Feedback: Make sure you provide clear feedback that focuses on an action, not the person. Properly delivered feedback can improve employee engagement and motivate them to do their best.

‍

✅Provide the Necessary Equipment: Talk to your employees and ask if they need any additional equipment. Provide them with all the necessary work tools and ensure they are in good condition.

‍

✅Start an Incentive Program: An incentive program can be anything from additional days off to a pay bonus. The idea is to show appreciation for your employees which should improve employee loyalty and motivation.

‍

✅Allow Flexible Schedule: Remote work or flexible work hours are much better for overall productivity than rigid hours and obligatory office work. With these benefits, employees will feel more energized and deliver better quality work.

‍

By applying these tips, you can effectively calculate productivity and make informed decisions to improve your organization’s efficiency and performance.

‍

Automate productivity tracking and have a clearer understanding of your team’s engagement in seven days with the best remote employee monitoring software. Start your Insightful free trial now!