We often talk about improving productivity in a business, but what does that actually mean? How do you measure productivity? And is that something you should even be doing?
Business owners and managers place a lot of importance on productivity. Team members are encouraged to improve their own personal productivity, and this is often tied to performance incentives. One of a main benefits of tracking time with an application like WorkflowMax is the ability to easily view productivity stats for different jobs and team members. Each employee can review their hours worked and the amount of time they spend on each project, and gain benchmarks from which they can improve.
But is this a valuable tool for business, or is it placing emphasis on the wrong metrics? Are we so worried about how fast we work, how many units we push, how many calls we answer, that we neglect other important factors?
Why you need performance metrics
Performance metrics are, first and foremost, for your team. Employees like feedback. They want to know areas where they can improve, and they also want to be able to see where they’re doing well. It’s a great feeling knowing you have strengths in a particular area.
Feedback is best when it’s backed up with data. Otherwise, it can be based far too much on heresy and personal judgements. And we all know these can be wrong from time to time. If you, as the manager, only ever see a certain employee coming back from lunch or coffee and joking around, then you might assume they are slacking off. In reality, they could be the most high-performing team member you have, and those breaks are a vital part of their process. But without metrics, you don’t know.
Performance metrics can also help you create a snapshot of your team, which can be valuable when it comes to performance reviews. Also, you can use the data to plan ahead, by understanding what your team is capable of. Keeping on top of performance metrics provides you with important benchmarks for strategic planning.
Calculating the Productivity of an Employee
So how do you measure an employee’s productivity?
- Choose the output you’re measuring. Usually this is “jobs completed.”
- Select a period of time to measure. This could be a workday, a week, or – for longer jobs – a month.
- Measure the amount of output over this time period for each of your employees. Gather enough data to provide an average sample.
- Now you need an input figure. This is the number of hours (or other time unit) your employee has spent on production.
- Divide the output by the input to arrive at a per-hour figure (or other time period). – eg. 20 units per week.
- You can then assign a value. This enables you to measure cost-benefit ratio.
You can find a more detailed description of this method over on Chron Small Business.
Hubspot shares secrets on how to be more productive.
Other Success Metrics
As well as a basic per-employee productivity rate, there are other metrics you can look at that also show the strength of your company:
Revenue Per Employee: Divide total revenue by total number of employees. This number can help you understand what your team contribute to the bottom line and the value of each team member to the company, and also the cost of losing an employee.
Total cost of Workforce: This is the sum of all your compensation, benefits, contractors, and other expenses relating to keeping your team. This metric gives you insight into your workforce spend and can be effective when making important strategic decisions.
Effectiveness Ratio: This is one of my favourite metrics (is it possible to have a favourite metric?) To calculate, figure out how much gross profit your company makes for every dollar spent on your workforce (see Total Cost of Workforce, above). This measure is particularly effective because it isn’t tied to time. It gives an insight into the effectiveness of your team as a whole.
Metrics don’t have to be set in stone, either. For example, in America’s Next Top Model the judges have a preset range of metrics that they use to arrive at a final score for a candidate – which determine whether they will progress to the next round or not. But in recent seasons the show introduced a new metric, the so called “social score”, where candidates were judged on their social influence in addition to the traditional metrics.
Key takeout: Taking a flexible approach, depending on the projects undertaken and the technology available, means you’re able to revise and adapt your systems regularly to ensure you’re measuring the right outputs in the most equitable way.
Are You Measuring the Right Thing?
Calculating productivity is as simple as making a quick calculation of output divided by input. But is it the right thing to measure? Does it give you an accurate picture of performance?
The truth is, your team aren’t working all the time. They have other tasks to do during the day that contribute to their value to the company. For instance, time spent learning new skills or otherwise improving intellectual capital doesn’t produce any tangible outputs, at least not immediately. One team member helping another also doesn’t reflect in the first member’s numbers. Yet we can all agree these are positive things.
Simple productivity metrics don’t take into account different types of projects. They assume each job is on unit, when in reality some jobs could be twice as involved as others. Measuring productivity based on how many jobs are completed is not taking into account that increased value of those higher-paying, more complex jobs.
And lastly, focusing on simple output metrics encourages your team to look to quantity for indicators of performance. Employees may feel pressure to choose smaller jobs or cut corners in order to get larger projects finished in less time. Employees who work slower but continually produce quality work may feel marginalised by such a system.
So what’s the answer?
Does your team need productivity metrics?
That depends entirely on your team, what they’re doing, and how they manage projects.
In the case of sales teams working on commissions, for example, these metrics help salespeople to understand how big their paycheck will be, so they can plan accordingly.
In other types of roles, productivity metrics could be a distraction, or could encourage competition among employees for the wrong reasons. Speed doesn’t equal quality.
In most cases, though, people like to see how they perform – not in a high pressure environment like a performance review, but day-to-day and week-to-week. It can be helpful to glance at the numbers and say “I may have had an OK day today, but yesterday was a great day.”
In the end, knowing how much time different types of projects take, and the average productivity numbers of your team, are only going to benefit your business. The key comes in creating a culture that doesn’t prize speed over other factors like quality and customer satisfaction – metrics which are much harder to measure, but even more important.
Measuring Customer Satisfaction
How do you measure happiness? That’s like asking how you measure snowflakes.
While you can’t exactly measure happiness, there are ways to gauge customer satisfaction with your services. This isn’t as scientific as logging hours, but it can be a great way to provide some kind of metric on performance that isn’t based on time spent on the job.
Create workflows to collect customer feedback. This can be done in an automated way (such as sending out a survey via email after your support team have closed a ticket), or in a more manual way (leaving a feedback form on the bottom of your invoice). Create multiple ways for customers to interact and monitor and record their responses.
It helps to collect customer satisfaction data over a long period of time. Customers can be skewed by a recent bad experience or sale event, and with a small sample size this can make it difficult to get an accurate picture of overall performance.
Quality Can’t Be Measured
The reason so many managers cling to productivity metrics, is because they’re easy to measure. They provide tangible, real-world facts. The quality of someone’s work and performance can be much harder to assess.
In a recent interview with Inc. magazine, management professor Matthew Bidwell from the University of Pennsylvania’s Wharton School discussed the problem of using what he termed “crude numeric tools” to inspire desirable behaviour in employees. Bidwell points out that most managers like to anchor their judgements to something.”If they can’t measure your outputs, they may measure your inputs, such as how long you’re spending at work, where what is important is that you are in the office, not what you actually achieve.”
Companies tackle this issue in different ways. Some use peer-feedback in performance reviews, as peers tend to be closer to the actual working process than managers. Others have objective ways of measuring quality – such as compliance to industry standards. Still others encourage their staff to be proud of their achievements by entering projects they’re particularly proud of into industry awards or submitting to a high-profile blog.
Work with your team to set clear goals for their work and career progression. Give them ample opportunity to take ownership for projects and to learn new skills. Place some metrics around these goals and focus on those, instead of day-to-day performance.
Talk to Your Team
And lastly, when it comes to the metrics for which their performance will be measured, it makes sense to consult your team. Determine what numbers are important to them, and how they might use metrics in order to improve their own work. How do they want to track their metrics (for example, in a manual system, or a dashboard representing this visually).
Your team may have some clever ideas on how to gain more visibility and clarity over different performance metrics. You never know until you ask!
Productivity metrics are a valuable way to provide you with useful data about your business and your projects. But productivity should never be used in isolation as a tool for motivating staff or assessing individual performance.
Remember, the more you measure certain aspects of the business, the more your team will pay attention to those areas. After all, everyone wants to do well at their job. So think carefully about the message you’re sending to your team with your current focus – do you practice a culture of quality, or are you too focused on speed?
Maybe it’s time to slow down.