The Ultimate Guide to Calculating Workplace Employee Productivity
Calculate workforce productivity at the organization, department and individual level with the metrics and advice in this guide
Measuring workplace productivity is a necessity. Employee productivity directly impacts a company's profitability, competitiveness, and overall success. By effectively measuring it, businesses can identify areas for improvement, optimize resource allocation, and enhance employee performance. This comprehensive guide will provide you with the knowledge and tools to accurately measure employee productivity at the organizational, departmental, and individual levels.
What is Productivity?
Productivity, broadly defined, refers to worker outputs. This can be measured in a number of ways, from time spent in tools to the total number of completed projects. The basic calculation for productivity is:
Total Output (or Sales)/Total Input (Hours) = Productivity
“Total Output (or Sales)” is the amount of money your business has generated in a given period, and “Total Input/Hours” is the amount of hours it took to get there. This formula gives a very basic way to assign a dollar value to staff hours.
If only it were that easy. Sticking with this equation, you could divide your total payroll by the total amount of time worked to get your “Total Input/Hours” then use your gross sales for “Total Output (or Sales).” That basic exercise is a great starting point, but there is more nuance to the “Total Input/Hours” number.
According to a survey of more than 2,000 office workers at various tech companies in May of 2023, almost 45% of employees work four hours or less per day. This means that in most cases, an employee is not putting in a full eight hours - even when they are paid for them - on work-related tasks.
Most employee monitoring solutions focus on the number of hours an employee spends working in order to get a more accurate picture of “Total Input/Hours” for that basic productivity formula, but are they looking at the right metrics?
Productivity Measurement Has Changed for the Modern Workplace
In an appearance on the, We’re Only Human podcast, the former Chief Strategy Officer for Prodoscore discussed how to effectively measure productivity in the current workplace climate and how productivity metrics have changed over time. First, the traditional model of equating presence with productivity is outdated since workers are not spending their entire eight-hour day producing pure outputs.
Additionally, managers often lack the training and tools to manage performance effectively. Many “great employees” are promoted to management without adequate training in performance evaluation and coaching, leading to a reliance on subjective observations and potential biases to determine the productivity of their team members
Data is the solution; numbers don’t have a bias, and there are many different productivity-adjacent metrics that can enable your business to make the right decisions about staffing, costs, employee engagement programs, and much more. The trick is choosing the right ones.
How to Choose The Right Employee Productivity Metrics
The metrics you choose to measure should be relevant to your industry, business model, and specific job functions. You’ll want to measure productivity in three tiers:
- Organization (Entire Company)
- Departments
- Individuals
Luckily, it’s not as complicated as it sounds with the right technology in place.
The metrics you choose should directly feed into your company’s Key Performance Indicators (KPIs). There are several metrics to choose from, including:
Output Metrics: Quantity of work produced, such as sales volume, units produced, or projects completed.
Efficiency Metrics: Time and resources used to produce output, such as time to complete a task, cost per unit, or error rates.
Quality Metrics: Quality of work produced, such as customer satisfaction ratings, product defect rates, or project success rates.
Employee Engagement Metrics: Employee satisfaction, motivation, and commitment, such as employee turnover rates, absenteeism rates, and employee engagement survey results.
The following are suggestions for each level, but you may want to add additional metrics from the above list if they are relevant to your KPIs.
Level 1: Organization Metrics for the Entire Company
There are three important metrics that provide an overall picture of what’s happening productivity-wise within an organization, according to the Academy to Innovate HR. They are:
1. Revenue Per Employee (RPE)
This is a simple calculation of total revenue divided by the number of employees. A higher RPE ratio usually means higher productivity, but only in a very general sense.
2. Employee Utilization
You can only calculate your employee utilization rate if your final client invoices are based on billable hours. Lawyers, consulting firms, and similar businesses can use this formula:
Billable Hours / Eligible Working Hours
This is necessary to know because, as discussed above, no employee works on billable client tasks for their full salaried hours.
3. Total Cost of Workforce
This number requires more work and should be calculated by the Human Resources department if you have one. It involves adding up all costs, from salaries to contractor fees to training- any internal labor expenses.
Level 2: Productivity Metrics by Department
The following are examples of metrics you may want to consider for each department.
1. Sales
While every department is important, management often focuses on sales executive productivity because it directly relates to the company’s short-term growth. An episode of the Revenue Insights by Ebsta podcast hyperfocused on measuring results in a sales setting, with insights from Prodoscore’s Chief Operations Officer, Mike Perrone. Two of the most interesting observations, based on an analysis of 4.7 million sales opportunities, were:
Growing disparity between top performers and everyone else: Perrone observed that four out of five reps were underperforming and that the gap between the top reps and the rest of the team was widening.
Disappointing ROI of sales technology: Technology solutions, including AI solutions, designed to boost sales are everywhere. These products are often supposed to help underperformers, but they don’t always do that.
To calculate departmental productivity, use the following formulas suggested by the Academy to Innovate HR.
a) Sales Growth
This is the number which projects sales growth in a particular period of time. It is frequently broken down by month, quarter, and year.
Formula:
Sales Growth Rate = (Current Period Sales – Prior Period Sales) / (Prior Period Sales * 100)
b) Revenue per Sales Representative
This number will give you the department average.
Formula:
Average Revenue per Sales Rep = Revenue from Sales / Number of Sales Reps
2. Customer Service
The goal of customer service is to solve customer issues as quickly and effectively as possible. Companies frequently mistake valuing resolution speed over the quality of the customer experience, and nearly all of the standard formulas speak only to speed. To measure quality, consider incorporating customer feedback surveys into your customer service workflows.
Speed formulas include:
Average resolution time: Total Resolution Time for All Tickets Resolved / Number of Tickets Resolved
First-Call Resolution: 100 x (Issues Resolved the First Time / Issues Handled by Customer Service Agents)
3. Marketing
We’ll use marketing as an example of a department without cut-and-dried productivity formulas like sales or service. To gauge your marketing department’s productivity, you’ll want to consider metrics such as:
- Total number of qualified leads provided to sales
- Total number of campaigns completed
- Total number of events organized
You can extend the logic provided here to other departments, such as accounting or administration. Only your team leaders will know which department-level metrics directly relate to their goals, and then you can design a system for measuring them with employee productivity monitoring software like Prodoscore.
Level 3: Individual Productivity Levels
At the individual level, the metrics you choose come down to personal preference and the employee’s job function. On the whole, you’ll want to look at data such as:
- Time spent in tech tools (email, spreadsheets, CRMs)
- Time spent on the phone (measurable with cloud telephony tools)
- Time spent collaborating with colleagues
- Time spent in meetings
- Time taken to complete tasks
While the above looks like a simple list, the right monitoring tools can produce a wealth of data that paints a more complete picture of each employee’s workday.
You will also want to use the department formulas at the individual level. For example, for your sales department, you will want to know the individual Revenue per Sales Rep so you can reward top performers and use the other data points to gauge why they are more successful than other employees.
Don’t Forget the Human Side When Collating Employee Productivity Metrics
When measuring productivity, we can focus on numbers and leave quality and empathy out of the equation. If a customer service agent spends an hour on the phone with an elderly client, for example, mechanisms should be built in so that the call doesn’t affect their metrics. Consider building in a “quality” bell curve for your metrics which takes this human element into consideration.
Measuring Productivity With Prodoscore: The Non-Invasive Productivity Monitoring Solution
You can get one tool to help you make all of these calculations at the organizational, departmental and individual levels. That tool is Prodoscore. It gives managers valuable dashboards and powerful workforce analytics that offer employees instant feedback. AI-powered insights help provide a blueprint for success, pinpoint training gaps, the role of internal collaboration, and more.
Best of all, it is non-invasive and only captures business-related insights. We believe in transparency, not surveillance. The data is not meant to be punitive or have a negative impact on employee engagement but, instead, to drive success. With Prodoscore, you can access the data you need about workplace productivity without impacting culture.
Measuring workplace productivity is an ongoing process. By following this guide and measuring your data inputs with Prodoscore, you can accurately measure employee productivity, identify areas for improvement, and create a more engaged workforce.
