What Workforce Productivity Metrics Should Your Business Be Monitoring?
Get an idea of which employee productivity metrics you should track for the best results.
Tracking employee productivity metrics is key to understanding employee performance, identifying areas for improvement and recognition, and driving business success. Knowing which metrics you need to track in the first place can be confusing - many online resources give you an unorganized collection of formulas. While we started this journey with a guide on measuring productivity, here we’ll dive further into the different categories of metrics, how they can be measured, and how each relates to productivity.
Productivity Metrics: Meaning and Their Origins
Humans have been measuring worker productivity for thousands of years. Modern ideas about productivity began with Adam Smith's publication of Wealth of Nations in 1776, often considered the book that launched modern economic theory. Smith divided labor into two categories: productive and unproductive. Productive labor had an immediate economic impact, while unproductive labor did not.
Management has been struggling with what is productive and unproductive labor ever since. Optimists would say that any work that must get done for the business to operate counts as productive labor. Pessimists will maintain that only work that produces immediate financial returns, such as sales, is productive. The truth lies in the middle in the form of objective and subjective key performance indicators (KPIs).
What Productivity Metrics Are Not: KPIs
“Productivity metrics” and “KPIs” are sometimes used interchangeably. They are not the same thing, but they are related. A key performance indicator, as defined by Kate Gibson of Harvard Business School, is either an objective or subjective measure of overall business performance.
Objective measures include revenue, gross profit margin, and hard financial and quantitative numbers. Subjective measures include employee engagement, positive work culture, and customer satisfaction.
Productivity metrics are mainly used to measure subjective KPIs, but they can also be employed for some objective ones, such as total labor outputs. Think of KPIs as the umbrella term for what needs to be measured and productivity metrics as a subset of metrics used to obtain the information needed for some business KPIs.
The article suggests using diagnostic control systems as the measurement method. These include human resources technologies and employee productivity management platforms such as Prodoscore, which measures everyday productivity and workforce metrics. Once these metrics are collected, they can be used for data-driven decision-making, from small projects to fundamental organizational shifts.
Review the Guide to Key Performance Indicators by PriceWaterhouseCoopers (PwC) for a comprehensive guide to selecting KPIs. It provides helpful case studies of companies in various sectors and how they measure performance.
Main Types of Workforce Productivity Metrics and How to Measure or Calculate Them
Several metrics can be used to calculate aspects of productivity, from financial to time-based measurements. In this guide, we break some down at the company, department, and individual levels. Here, we’ll outline the various categories of metrics. We will only include metrics that directly relate to productivity at a general level; specialized metrics for particular departments (marketing, customer service, etc.) will not be used.
Financial Metrics
1. Revenue Generated per Employee
The more significant number can be derived by dividing the total company annual revenue by the number of employees. While each employee will not generate an equal amount of revenue, this gives you a baseline to quantify work for departments that aren’t as quantifiable, such as accounting or administration.
How to calculate: Calculate total annual or monthly revenue in accounting software and divide by the number of employees.
How it relates to productivity: We can use this number to get a good idea of the outputs of the entire team. Higher productivity should correlate to higher revenue over time.
2. Efficiency of Resource Utilization
This metric measures cash flow and can be calculated by individual, team, or department. It lets you see how much actual in-the-bank cash (rather than salaries or other ancillary costs) is being used by individual staff and departments
How to calculate: This one is a bit more tricky and requires regular expense logging. It is best calculated by managers weekly or monthly if the department doesn’t spend much per week. You will want to use an accounting system that logs accrual cash flow.
How it relates to productivity: As with revenue generated per employee, resource utilization shows the opposite regarding how much money each department and/or employee spends while doing their jobs. You can cross-check the data; if other metrics show that high-spending employees are more productive, they may use tools others could use to replicate the same results.
3. Average Investment in Employee Training
This refers to extra employee training rather than anything done with internal training resources.
How to calculate: As with revenue per employee, take your total costs of employee training and divide it by employees who participated in training (rather than the entire workforce).
How it relates to productivity: This number will help you decide whether dollars spent on training contribute to productivity and overall employee well-being, directly affecting productivity.
4. Total Workforce Cost
This number involves all salaries, training, benefits, and anything paid to your business's individuals.
How to calculate: Add up anything paid to an individual or the government on their behalf (taxes, etc.) to get this number.
How it relates to productivity: Subtracting this cost from your revenue per employee number will help you see if you are breaking even or making a profit on your employees. Being in the negative can reflect a lower revenue number, which could mean low productivity. It could also mean that the cost of benefits and/or salaries is too high, but employees generally don’t take it well if these are slashed.
Time Metrics
1. Time Spent in Tools
This metric shows how active or inactive your staff is in various tech tools, from email to accounting to productivity suites like Microsoft Office or Google Workspace.
How to calculate: Prodoscore is purpose-built to show tool utilization and offers robust integrations to various business tools
How it relates to productivity: If someone actively uses an office solution, they are working.
2. Overtime Hours
Overtime hours are extra hours spent outside of regular work hours.
How to calculate: Managers should regularly log overtime hours. Most workforce analytics programs will also log these times.
How it relates to productivity: Too frequent use can signal that an employee or team is on their way to being burned out. Overtime hours can also skew overall productivity metrics by making employees look more active than they actually are when they may just be putting in time rather than work.
3. Time Spent Collaborating
Time in tools can only take you so far. Collaboration with other employees is one of those “offline” considerations that is no longer offline.
How to calculate: Prodoscore can visualize time spent collaborating, such as time spent in Slack and meeting tools. It can also identify the frequency of collaboration and which employees are collaborating with each other.
How it relates to productivity: Collaboration is directly correlated with high performance and, as such, acts as a valuable metric.
4. Time to Complete Projects and Tasks
This metric is worth examining to understand how much time people spend on which tasks.
How to calculate: Project management tools such as Asana and Figma generally have time entries available. Make sure your staff are using them.
How it relates to productivity: Remember the distinction between productive and unproductive labor? This metric helps determine whether your people are too engaged with low-value tasks.
5. A Note About Budgeting for Offline Activities
When using time metrics in decision-making, include “offline” activities such as research, thinking, and anything someone’s fingers don’t touch a keyboard for. Nobody should ever be penalized for doing the parts of their job that can’t be easily quantified. However, it is worth noting if one of your staff members shows too much or too little time for tools or collaboration.
Human Resources Analytics
This set is included because it measures employee engagement, which is directly related to productivity.
1. Retention Rate / Employee Turnover Rate
Monitoring the hiring rate compared to the employee attrition rate will help you determine if you have issues with employee engagement.
How to calculate: Total number of employees at the start of the time period - employees left during the time period = total number of employees after attrition. You then divide your total number of employees post-attrition by the total number of employees at the start of the period to get your retention rate. Make it a percentage by multiplying it by 100.
How it relates to productivity: This won’t tell you much on its own. However, keeping track of it over time will result in lower or higher employee engagement, depending on whether it moves significantly up or down.
2. Employee Engagement
This refers to how much someone cares about their job and the company.
How to calculate: Most human resources software solutions have methods, such as employee surveys, for calculating employee engagement over time. Prodoscore also provides critical insight into engagement with objective data compared to subjective and potentially inaccurate measurements.
How it relates to productivity: Employee engagement isn’t just a buzzword. If employees don’t care about their jobs or the company, their outputs decrease.
Considering objective and subjective measurements should provide a good picture of how your staff feels about their jobs.
User Behavior Analytics: Track Your Employee Metrics Transparently With Prodoscore
Prodoscore doesn’t just track metrics that help you visualize activity in core tools such as email. It provides a firehose of workforce analytics data organized into easy-to-digest dashboards that you can use to make immediate decisions.
Unlike surveillance solutions that track mouse clicks or take pictures of employees' faces to ensure they are at their desks, Prodoscore runs in the background unobtrusively. Your employees play a vital part in using it because it gives them their own dashboard with metrics to measure and learn from their performance.
Prodoscore doesn’t encourage people to “work to the tools” - it just identifies patterns while they conduct their regular work. That data lets you build a blueprint for employee success by gauging what your high performers do and identifying employees needing coaching or training. It’s a gentler way of doing business that doesn’t put you in a parental position but still furnishes key insights about how your people work.
