How to Measure Productivity in the Workplace: Complete Guide

By Indeed Editorial Team

Published 20 June 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Businesses regularly provide products or services to clients. There are many different ways to measure how productive a company is when providing these services in terms of its internal functionality. If you want to assess a company's productivity, it's beneficial to learn how to measure output, success and effectiveness in the workplace. In this article, we define productivity, explain why it's important to measure and discuss how to measure productivity in the workplace.

What is productivity?

Productivity is a measure of the efficiency of a machine, factory or person when converting inputs into useful outputs. To quantitatively calculate productivity, divide the average output per period by the costs incurred or by the resources (such as personnel) consumed during that period.

There are several different ways to measure the success of an employee, operational process or device. For example, you could determine the productivity of a machine by measuring how many resources it uses to produce 10 units of a product. Conversely, you might assess an employee in terms of their professional growth.

Related: 15 Ways to Help You Improve Performance at Work

How to measure productivity in the workplace

There are various methods that can help you learn how to measure productivity in the workplace. The different methods reflect the fact that every company varies in terms of its structure and focus. Therefore, companies typically tailor productivity measuring tools to best suit their own needs. There are several methods of productivity measuring.

The following are steps to help you implement the productivity measuring process:

1. Assess the company's needs

The first step in implementing a clear process is to assess the company's needs. Depending on the company's size, it may be easier to conduct regular one-to-one assessments with employees. Larger companies may not have the capacity to do this. Each company has different outputs, processes, policies and cultures that can impact the effectiveness of a productivity measurement process. It's best to assess the company's needs before implementing a new measurement method to ensure that it aligns with the workplace, culture and company outputs.

2. Choose a method of measurement

After assessing the company and determining what type of measurement may work best, you can choose a method. Regardless of which method a company uses, it's important that employees feel supported, have access to advice and receive regular evaluations to help them improve. You could choose from a few different methods depending on the company's needs. The following are three common methods that organisations might implement:

  • Objective-based measurement: You might measure an employee's productivity by determining how effectively they meet goals, achieve objectives and contribute to the overall success of the business. This type of measurement is best for companies that offer non-quantifiable services.

  • Quantitative measurement: The quantitative measurement involves assessing employees' use of time and overall productivity. A larger company that produces goods might implement software that calculates each employee's productivity rate per hour, day or month.

  • Profit-based measurement: This method involves tracking the total revenue of an organisation rather than tracking individual employees. This measurement is the simplest to implement and can relieve pressure and promote a collaborative environment, as when revenue is high, so is employee productivity.

Related: Understanding Objectives vs. Goals (Including Examples)

3. Set clear standards

After choosing a measurement, set clear standards for the organisation. Informing staff members about the standards for production and success allows them to prepare to meet their goals and objectives more effectively. In addition, setting clear standards from the beginning of the process can prevent bias, unclear feedback and unrealistic expectations for employees.

4. Define tasks

After everyone is aware of the new method and standards, the next step is to define tasks for each employee. For example, the sales team might have different tasks from the marketing team, depending on their responsibilities and objectives. Team leaders and managers can take responsibility for defining tasks and facilitating open communication. As employees gain a better understanding of their tasks and how to measure them, productivity may increase.

5. Create goals

It's common for organisations to have goals that focus on productivity, profits or client retention. The company might have overarching goals that apply to each department. Additionally, departments, teams and individual employees can have their own specific goals. Creating goals for the company at every level helps people take responsibility for their work, increasing productivity. If you implement an objective-based measurement scheme, these goals can supplement employee evaluations because reaching goals indicates productive employees.

6. Consider the culture of the company

When measuring productivity, it's important to consider the culture of the company. Company culture can impact the success of various organisational processes, so it's useful to determine how well a productivity measurement aligns with the pre-existing culture. If a measurement strategy is ineffective, consider testing a new method to see if it's more compatible with the company culture.

Related: Guide to Company Culture

7. Request updates and provide feedback

An important aspect of measuring productivity is requesting updates and providing regular feedback. Regardless of the method you implement, monitoring progress helps employees improve. An employee may request feedback from their team leader to better understand how they can meet their objectives. You can also write monthly reports regarding a machine's productivity to monitor how well it performs. There are various types of feedback that offer support for employees and increase productivity. These include peer assessment, quarterly reviews and individual meetings.

8. Acknowledge people's differences

Every employee brings a different set of skills to a company. These skills aren't always quantifiable. A certain type of productivity measurement may not suit all team members. Acknowledging that people operate differently and have unique skills can strengthen the organisation by allowing it to make space for all employees to thrive. It's also important to acknowledge that there may be challenges to productivity during the measurement implementation process. By acknowledging this, you can offer more intentional feedback that supports employees and makes them feel more welcome in the workplace.

Related: Guide to Workplace Diversity: Meaning, Benefits and Tips

9. Be consistent

One of the most important aspects of measuring a company's productivity is consistency. Rather than conducting an assessment once a year, it's beneficial for the organisation and employees to receive consistent feedback to help them improve. Consistency demonstrates that the company cares about its employees' success and wants to see them thrive, grow and develop. Regardless of the method you choose, try to implement consistent procedures for assessment, feedback and development to support employees.

The importance of measuring productivity at work

There are several reasons why it's important to measure workplace productivity. Not only does it help a company better understand its operational and organisational functionality, but it also provides an idea of how the organisation can operate effectively. The following are some of the reasons why productivity is important to measure:

Allows for easier investment decisions

It's important for a company to know how productive its operations are to help it make investment decisions. For example, you may work in a production plant making cars where productivity has fallen considerably over the past two years. Depending on its productivity measurements, the company may conclude that the fall in productivity results from old equipment that requires updating. Management can then invest money in modernising the plant.

Continually measuring productivity allows a company to compare the efficiency of its operations over time and make adjustments accordingly. You can also use productivity measurements to show shareholders and key investors why certain expenses are necessary to improve operations.

Related: What Is Project Success? (And How You Can Measure It)

Gauges employee effectiveness and abilities

This business process is also important because it allows managers to gauge the efficiency of the workforce. For example, if a client asks a company to work on a challenging project, the only way to know whether the team can meet the timeline is if managers consistently measure the productivity of their workforce. It's also important for managers to know how each employee is performing.

This helps them make important decisions that impact overall workplace efficiency. For example, understanding how efficiently each employee performs helps managers determine who can take on additional responsibilities, who has the time to lead a team project and which employees are to prioritise pre-existing assignments and projects.

Related: How to Manage Effectively (With Steps and Tips to Improve)

Allows for better operational decision making

Measuring productivity can also help managers change the company by making informed decisions. For example, the data a company gathers during the measuring process can reveal delays in production.

Alternatively, it may reveal problems in the customer life cycle. Recognising these incidents allows companies to make operational changes such as expanding their customer service team or offering training sessions that teaches employees new methods.

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