The productivity formula: How to calculate it at work

Published on 26/03/2024

The productivity formula: How to calculate it at work

Published on 26/03/2024
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The productivity formula: How to calculate it at work

The productivity of a company’s employees is a determining factor and can only be accurately known with the help of tools like performance management tools , WorkMeter  productivity software.

 In this article, we explain why it’s so important to measure and analyze it correctly. The formula for improving productivity exists, and we detail it here.

What is employee productivity?

Before we begin, we must define what productivity really is, as it has a different meaning for each company: Productivity consists of the relationship between the quantity of goods and services produced and the quantity of resources used. In terms of employees, productivity is synonymous with performance and efficiency. Achieving these concepts should be a priority for any company

The purpose of any business, regardless of its type, should be to optimize productivity. This will be responsible for generating the greatest possible economic benefit, as well as enabling all kinds of improvements and advancements. Ignoring such a crucial factor as this will not benefit the company in any way, regardless of its size, sector, or age. Neglecting this aspect is as serious as neglecting income, budgets, or the company’s image.

How to calculate productivity

This leads us to the following question: What exactly should be done to calculate the productivity of a company’s employees? There are countless types of businesses, chains of command, activities per employee and per team. How then to determine the optimal formula for our particular company? Very simple: by simplifying. 

The diversity of companies and sectors is infinite, but they all have some points in common. These points are generic and applicable to any business. They basically boil down to two concepts:

  • What is produced.
  • What is used to produce.

That’s it. There’s nothing else we need to consider. If we understand these two concepts clearly, we can obtain a clear result regarding the state of productivity in our company. To do this, we must correctly identify both. There may be cases where, at first glance, they may seem ambiguous, but they are not at all. Perhaps you have a consultancy, and you think that nothing is really produced. You don’t produce anything tangible, but you do provide a service. This concept is fundamental to the identity of any company. By offering a product or service, you address a need of any kind with your company.

What is the productivity formula?

There is a formula that will be the key to measuring your employees’ productivity, provided that the factors that build it are clearly identified. The productivity formula is as follows:

The productivity formula: How to calculate it at work

Once both points are identified, we must divide what we produce, whether it’s a product or service, by the resources we have used to produce it. With some examples, everything becomes much clearer, so let’s think about the following:

Suppose you have a company that sells T-shirts. You handle distribution, and you have a worker who produces them. This employee produces 10 T-shirts every day, but the demand is increasing; you need to sell 20 T-shirts a day. The worker already works full time, and even though you’ve optimized the process to the maximum, no more than 10 T-shirts are produced per day. So, you hire a new worker. They work the same hours, with the same technology and conditions, but still, after a while, only 12 T-shirts are produced per day.

Every person is different. It may be that the employee who has been there longer is faster, and while he makes 10, the other only makes 8 or 9. Okay, that’s understandable, you think. But just two T-shirts? That’s very little.

Your company’s productivity has decreased because you’re investing more resources than before, but producing less, so something is needed: managing workers’ productive activity correctly. What was happening before was that demand was high, but your productivity was excellent.

The same formula applies if you only want to find the productivity of a particular aspect of your company.

Relationship between productivity and activity

Companies are concerned with establishing parameters that allow them to calculate the productivity of employees and work teams. The productivity of a resource is not easy to measure because its impact on results is not always visible. If the resource in question is a person, it is even more complex because we must consider other factors that are difficult to quantify. 

To fill this gap, indicators are usually established to measure attendance, punctuality, attitude at work, and time management. Nowadays, there is much talk about productivity, perhaps because it is low in Spain compared to our direct competitors, despite being one of the countries that works the most hours. But of course, more hours at work do not necessarily mean better productivity numbers. Activity and productivity do not usually go hand in hand in this aspect.

More and more companies are implementing software and programs that allow them to have comprehensive information on how each employee moves within the organization. These systems are used to evaluate employee productivity. From the first click when starting the day’s session on their terminal, everything is recorded. 

The applications used, the time spent, the periods of inactivity. Internet queries, everything is quantified. What matters most before acquiring these systems (in addition to their correct configuration) is that from an ethical and moral point of view, they are respectful of the privacy and intimacy of their workers.

It is clear that nowadays, the system we must use to calculate the productivity of the work performed by employees must incorporate technology that allows generating productivity metrics and objective data, capable of analyzing, qualifying, and quantifying work. When employees see their behavior reflected numerically in the company’s results, it encourages a positive change in their work habits.

Automatic and objective metrics achieve significant improvements in the performance and dedication of professionals within their activities, demonstrating a high level of productivity. 

Moreover, they teach how to manage work time much better, accommodating initiatives such as flexible hours or telecommuting, thus helping to reconcile professional and personal life to improve employees’ final productivity.

One must not forget the need to measure an individual’s or a company’s productivity from various perspectives and take into account other business or personal performance indicators. It is also necessary to consider that not all responsibility falls on employees. 

Aspects such as management style, people’s commitment, transparency, values, or the sense of teamwork are key to achieving a high level of productivity, and all of this is the responsibility of the company.

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