The Top 8 Methods for Accurately Measuring Employee Productivity

No matter what kind of products or services your business offers, it's important to measure employee productivity, and to measure it as accurately as possible.

Ensuring productivity in the workplace can be challenging. A 2013 Gallup survey revealed that 70 percent of U.S. workers are disengaged from their workday. Distracted by smartphones, social media, personal emails and the demands of their personal lives, most employees find it hard to focus consistently and produce the best work they can.

This lack of interest and involvement often leads to low or mediocre productivity. Accurately measuring your employees' productivity is one clear way to gain insight into how skilled, engaged and productive your employees really are.

Creating High Expectations

Taking accurate productivity measurements can mean more than simply counting the number of products made or sold, or services performed.

A toy factory worker might produce 100 toys each day. But if most of those toys are defective and unsellable, that employee's productivity level is not very high, and both work time and materials are being wasted.

When you measure your employees' productivity and discuss your findings with them, you're letting them know that you expect them to care about their work, perform it as well as they can, and work toward achieving individual goals that are aligned with company goals.

In addition to revealing how individual employees are performing, these measurements can also reveal where the work flow gets slowed down or stopped due to equipment breakdowns, inefficient processes, poor job training, or lack of communication, among other problems.

When used correctly, accurate productivity measurements can also reveal how well your business is progressing towards its goals and targets.

What are Your Business Goals?

What are your company's short- and long-term goals? Are you looking to increase profits, innovation or efficiency? Tap into new markets and find new customers? Increase customer retention levels?

Studies have shown that employees who are able to see a direct connection between their productivity and company goals are far happier-and therefore more productive-than those who don't see how their work affects company goals.

Yet 2014 statistics show that only 40 percent of workers know what their employer's goals and strategies are.

Whatever your business goals, it's important to make them clear to employees. It's also important to find the methods of measurement that reveal how well employee output is bringing you closer to your business goals.

What Drives Your Business?

Before you can choose the most accurate productivity methods for your business, identify your key performance indicators (KPIs). These are your drivers-the profit-making, reputation-making parts of your organization.

Your KPIs must spring directly from your business's biggest goals, and must relate only to those aspects of your business that you have some control over.

If your store sells umbrellas in a very dry part of the country, the weather is not a KPI for you, because you have no control over it. Because you do have control over your inventory, sales for items such as sunglasses can be considered a KPI.

Choosing the Right Methods

Most employees perform several tasks, some of which will be easier to measure than others. When determining how profitable an employee's actions are, include factors that affect those profits, such as the cost of overtime, annual turnover rates, and overall job satisfaction.

Be open to different approaches, and be willing to try different methods at different times, to see which reveal the most accurate data, and reveal what's most important in terms of your business goals.

Here are seven top methods for accurately measuring employee productivity:

Method 1: Management by Objectives

To use the management by objectives method accurately, you must measure productivity in ways that reveal how well an employee's output is contributing to your company's goals and targets.

For this to work correctly, employees must first be given clear, individual productivity goals to work toward, as well as all the tools and information they need to meet those goals.

If your goal is to increase customer retention by 25 percent over the next year, you'll need to decide what kind of training and incentives you'll use to ensure employees are ready to help you achieve that goal.

Customer retention productivity will require them to deliver a high quality of service. To ensure accuracy of measurements, employee actions must be noted regularly, in addition to ongoing customer retention rates.

Annual or six-month employee evaluations should reveal accomplishments such as "reduced customer complaints by 20 percent" and "found solutions to customer problems on a consistent basis."

Employees should meet with their supervisors at regular intervals to discuss their progress and to solve problems as they occur. Measuring productivity throughout the year helps employees to stay focused on their goals.

The annual review then reveals how much progress was achieved toward individual and company goals. New goals are then created for the upcoming year.
Method 2: Measuring Productivity Quantitatively

The quantitative method measures productivity by the number of parts or products an employed produces in a particular period of time, such as per hour, day or month.

This method works very well for small businesses, but even if you're managing large groups, this kind of performance measurement is simple and time-saving.

Productivity can be quickly calculated with productivity software or on a spreadsheet, revealing the number of products an employee produces or contributes to in a given time period. Those numbers are then averaged out to reveal productivity gains or losses over time.

Output can be measured either by the volume or quantity of products created, or by the financial value of the product or service.

Interested in learning more? Why not take an online Business Skills course?

First, create your baseline-the average number of individual worker hours, days or weeks needed to create that part or product under usual working conditions, when the employee is working at optimal levels. Each employee in the production line is then measured against that ideal (but realistic) level of productivity.

This type of measurement must also factor in the amount of time that employees spend on activities such as job training, time spent waiting for materials to arrive or broken equipment to be fixed, and other factors not under their control. []

Method 3: 360-Degree Feedback

The 360-degree feedback method uses the feedback and comments of co-workers to measure productivity. This method can only be used if the employees in your organization interact with one another a great deal.

This measurement requires that the employee's productivity be evaluated by everyone they work or interact with daily, including those on, above and below their job level. All evaluators must know and understand their co-worker's overall role and function, daily work duties, professional credentials and communication skills.

This method works best in smaller departments or organizations where everyone knows and interacts with everyone else.

Everyone from managers to IT workers to receptionists give feedback on an employee's levels of productivity in terms of how well they have fulfilled their duties and contributed to overall company productivity. In a team appraisal, only members of that employee's team evaluate them, in terms of their contributions to team productivity.

To achieve best possible accuracy, employees must first receive training on how to offer input that is well-balanced and impartial. They must be trained to offer feedback that is based purely on their co-worker's professional abilities, not on their personal feelings or beliefs about that employee.

The accuracy of this method is based on the fact that it involves a good number of people, all of them trained in objective feedback, and all weighing in on how well the employee's productivity meets their team and company goals. []

Method 4: Measuring Sales Productivity

It can be challenging to measure a sales representative's productivity with complete accuracy. There are many factors that affect a salesperson's output.

Begin by recording the different aspects of their productivity within a given time period. Those numbers can include:

  • The total number of sales completed in that time period
  •   The total amount of sales made in dollars
  • The number of calls made to current customers
  • The number of sales made to current customers
  •   The number of new customers gained
  • The number of calls made to potential new customers
  • Expenses per sale/new customer acquisition

    These numbers should be regularly recorded by each member of your sales team, either on a spreadsheet or by using software tools.

    Before evaluating those numbers, first establish a baseline for sales productivity levels that suits your particular business size, market and product type. Researching the sales levels of successful businesses of your size selling the same or similar products will help you create a realistic baseline.

    Keep in mind that many factors will come into play. If a sales rep's expenses per sale amount to $3,000 when each sale only brings in $5,000, their work is not providing a good return on investment.

    Also factor in important elements such as current growth trends and shifts in your market. Note how much time your sales team is spending in non-sales activities, such as travel and internal meetings. They might also be busy re-negotiating terms with existing customers some weeks, leaving less time for acquiring new customers.

    Take these and any other important factors into account, to ensure that salesperson productivity levels are measured as accurately as possible. [ and]

    Method 5: Measuring Service Productivity

    Though measuring service productivity can be more challenging than measuring product output, accurate measurements can still be created.

    Some service businesses measure productivity by counting the number of tasks performed or the number of customers served in a day or an hour. Other businesses measure productivity by the speed of product or service delivery, customer feedback, or by individual and department self-evaluations.

    Some record the amount of time a service employee spends on each work duty. This can be recorded either by using the right software or by having individual employees fill out timesheets that specify work duties.

    Call centers often use end-of-call customer surveys to record how well employees have answered customer questions and solved problems.

    Customer service productivity can be measured in many ways, including:

  •  How long it takes for a customer to be served (such as call waiting times or in-person waiting times)
  • How long it takes for a customer's order to be completed
  • Customer retention rates-the percentage of customers who return at least once
  • How long those customers are retained
  •  How often products are returned
  • How many customer complaints are received in a given time period

    Whatever set of criteria you choose, first create your baseline-your business's best service level under current conditions-and measure employee productivity against that.

    Factor in the problems that keep your employees from delivering optimal service, and keep in mind that some aspects of service are performed more quickly than others. Decide what factors of optimal service apply to your business, such as quality, speed, politeness, cost-effectiveness, or a combination of those.

    Note the situations under your control that can slow service productivity, such as staff shortages and equipment breakdowns. Your employees may be also slowed down by having to fill out orders by hand, if they don't have a touch screen cash register to work with.

    Every six to 12 months, create a new baseline that accurately takes into account your current market and operating conditions, and re-evaluate employees based on those new standards. []

    Method 6: Measuring Time Management Productivity

    The time management method determines employee productivity by recording how they use their work time. Accurate measurement will reveal how much time is spent on accomplishing work duties in a timely way, as well as how much time is lost to illness or excessive time off, non-work-related conversations, and distractions such as texting and social media.

    Though this method can help employees and managers set goals for reducing time losses, the bigger your business gets, the harder it can be to accurately measure the time management of individual employees. []

    There are helpful software programs that accurately measure how much time employees actually spend (or don't spend) being productive. Some programs require daily updates from employees, which reveals their progress on a particular task or project. This keeps employees from procrastinating, and creates a record of how long it took them to accomplish certain tasks and projects.

    Research the features of different programs, to choose the one that collects the data you want to measure.

    iDoneThis is a software that sends an email to each employee at the end of every workday. Each employee then replies to the email, stating what they've accomplished that day. The next morning, everyone on that team receives a list of team accomplishments. Each person's productivity is tracked in a public way, keeping them accountable and ensuring that the weight of a project is pulled evenly.

    Knowledge Sync is another productivity-measuring software program. It sends management alerts, such as an email, fax, pop-up message or cellphone text when certain measurements step out of line. This might include customer complaints, overdue unpaid invoices, or employee timesheets not being submitted on time.

    TimeCorder is a handheld device that helps managers measure how much time employees are spending on a particular task. For example, the employee punches a particular number into the TimeCorder when they begin making calls to potential new clients, and another number when they switch to answering emails. Data is gathered for several weeks, then the results are analyzed. The manager or business owner can then make recommendations for spending time differently, to improve productivity.

    Notworking tracks exactly how much work time your employees are spending on Twitter, Facebook and other social media, while their work is neglected. The software is downloaded onto employees' desktops, to record wasted work time. It also keeps track of the amount of money that could have been made by the business, if the employee had been working during that time.

    Method 7: Measuring Productivity by Profit

    Profit can be used as an effective tool for measuring team productivity. In fact, measuring productivity purely in terms of profit gained is becoming the preferred type of measurement for many small to mid-size businesses.

    Rather than getting involved with data that tracks individual employee movements, measuring by profits involves watching only the bottom line. Only higher level functions are closely watched.

    This method ensures that productivity measurements don't keep employees from working creatively or take a great deal of management's time. As business consultant Roger Bryan of RCBryan & Associates says, "Watch the money and everything will fall in line."

    W. Michael Hsu, founder of DeepSky accounting firm, agrees. "Results and value-add trump hours of work any day of the week," he believes.

    "To measure results, one of the vital factors we rely on is the team effectiveness ratio. It measures how much gross profit the company gets for every dollar spent on salary. It's better than measuring profit against time [full-time equivalents], because we want the team to work smarter, not longer." []

    Method 8: Measuring the Quality of Tasks Completed

    Entrepreneur Doreen Bloch of Poshly Inc. prefers to measure productivity only by whether the work assigned actually gets done.

    She believes that because personal and professional lives are increasingly blending and overlapping, it's most accurate to base productivity measurements on completion of tasks, "not minutes spent at the office."

    Bloch tracks productivity by breaking down projects down into individual tasks. These are then assigned to employees best able to handle them. This continues until the projects are complete.

    Megan Berry, founder of social media startup LiftFive, agrees that the best productivity measurements are about "keeping an eye on outcomes" and employee progress, instead of on-the-job habits and behavior.

    There are a number of productivity software tools, such as Producteev and Atlassian , that aid managers in tracking projects and task completion.

    Other project management software includes Asana and Basecamp . These map out project goals, then delineate individual and group tasks. They then track employee productivity on each project, noting time spent on different tasks, and when each task is completed.

    Beyond reviewing an employee's job performance, productivity measurements can be an important part of helping employees understand how much they've done to help their company achieve its goals.

    Accurate productivity measurements can be one more step to ensuring not only greater profits, but increased employee motivation as well as job satisfaction and recognition of team and individual accomplishments.


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