Measuring employee productivity can bring vital changes to how a company operates. It positively influences both the micro (employee) and the macro (company) level of work.
In this in-depth guide, we’ll address which methods and metrics to use for measuring employee productivity.
- You can measure employee productivity with the labor productivity, the hours worked, time management method, but also goals and milestone method, performance evaluations, and the 360-degree feedback method.
- The baseline for measuring employee productivity should include input, output, and productivity formula.
- Companies can benefit from measuring productivity because it helps them allocate resources, have fewer unnecessary tasks, and fewer costs on all levels.
- Individual employees can benefit from measuring productivity because it helps them avoid wasting time, be more productive, improve their skills, and be more motivated.
How to create a baseline for tracking employee productivity
You first need to create a baseline — the reference point against which you’ll measure your productivity results.
That means comparing your acceptable, expected costs (how much money, energy, manpower, and hours go into production) to the real results.
Your baseline should include:
- Input. Decide on what aspect of productivity you want to assess. It can be labor hours, units produced, productive hours, or cost per hour.
- Output. The output is the end result, or the final product. It can be a marketing project, client acquisition, successful sales in a month, revenue, etc.
- Productivity formula. The formula is: Output/Input = Productivity.
Since there are differences between manual and knowledge work, let’s compare both types, so you’ll know what to focus on when setting the baseline for measuring productivity.
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| Type of work | Manual work | Knowledge work |
|---|---|---|
| Focus | Focuses on quantity while aiming to achieve the minimum quality requirements. | Focuses on quantity and quality equally. |
| Industry | Plants, factories, assembly lines, and any kind of mass production. | Education, health. |
| Tools | The worker is provided with tools and the know-how, employing skills they already know. | While they are given tools to work with, knowledge workers are responsible for their own learning, skill sharing, innovating, and are given more autonomy. |
How to measure productivity
Here are 6 methods you can use to measure productivity.
#1: The labor productivity method
Depending on the type of labor being performed, labor productivity can be measured by using 3 different sub-methods:
- Partial labor productivity. This method calculates the ratio of a single input to the total output. Labor hours are the most common input, but inputs can be manpower/labor, energy costs, material used, or capital.
- Multifactor labor productivity. This productivity method calculates output in relation to labor and capital, since those 2 are usually treated as the most important inputs.
- Total labor productivity. This method includes all tangible values of the output, not just the monetary value or number of items/products/services. It also includes the number of finished products, dividends, interest, and other income.
| Method | Partial labor productivity | Multifactor labor productivity | Total labor productivity |
|---|---|---|---|
| Formula | Total output ÷ Single input = Partial Labor Productivity | Output/Labor input (hr worked) + Capital input ($ invested)) = Multifactor Productivity | Total output/All inputs (materials + labor hours + energy + capital + other expenses) = Total Factor Productivity |
| Benefit | It calculates one input independently of the collective; the data is easy to interpret, improve, and compare to other industries | It helps you identify output taking more important inputs into account | This method is excellent when a company needs to see its overall productivity |
| Drawback | It doesn’t show productivity in the context of the whole performance, which can give misleading results | It still leaves out other inputs, so you can never get an accurate picture of overall company productivity | It can be difficult to compute and can’t pinpoint how much each individual input affected productivity |
#2: The hours worked method
The hours worked method has 2 subcategories:
- Productive hours
- Units per hour
To measure productivity through productive hours, you have to focus only on the time employees spend on the tasks they were given. The only way to accurately collect this information is to employ a time tracking system.
You introduce company-wide time tracking software and have people start to time themselves when working. Clockify by CAKE.com is a time tracker that lets you add tags to label each task to an appropriate category (overtime, EUR, invoiced, etc). And you can filter these tags to see how much time was spent on specific tasks, vs. time spent on those that don’t contribute to the project progress.
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Tagging tasks can provide really detailed productivity reports, as long as they’re used accurately. You can find guides on the topic here:
To measure units per hour, we need to use the total input formula:
Number of employees x timeframe x work days per month x work hours per day = Total input
For example:
15 employees x 4 months x 22 days x 8 hours = 10,560 hours (total input for 15 employees)
It took employees 10,560 hours to produce the capital/output.
A company had generated $130,00 in products (output) in 4 months.
To get the units per hour value, we need to divide output with total input:
Output of $130,000 (all products) ÷ total input of 10,560 hours = 12.31 units per hour
So, 15 employees produce 12.31 units per hour in the span of 4 months.
This kind of calculation is usually used by complex manufacturing companies, like Sony, Volkswagen, Siemens, Bosch, etc.
⏬ Download our calculator for calculating units per hour
#3: Time management method
Time management method helps us understand whether employees take more or less time on specific tasks, how much time is spent on menial things, or wasted. The studies on time wasting activities are astounding, and reveal a lot about our time management habits — for instance, we spend about 8 years and 4 months of our lives watching TV.
With a digital time tracker such as Clockify by CAKE.com, you can assign employees to a project and let them track time on each of their tasks.
Then, you can go to Reports to view more details. For example, with Clockify’s Weekly report, you can see tracked time for each team member and each day of the week, specific tasks they’ve been working on, and their duration. You can also export reports in CSV, Excel, and PDF.
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#4: Goals and milestones method
To measure productivity by setting goals, you should:
- Set milestones that push the organization closer to the goal.
- Set smaller deadlines, achievable chunks of time for each department.
- Observe the employees’ workload management.
If the milestone has been reached, you’re on the right track. But if it wasn’t, you can start identifying the issues in every department and find ways to bring employees back on track.
#5: Performance evaluations
Performance evaluations involve tracking and observing an employee’s overall job performance.
The metrics used in performance evaluations can range from attendance tracking to inter-office relationships and agreeableness. These evaluations give you a more empirical sense of employee productivity.
The measurements are largely descriptive, use specific objectives, and rely on regular 1:1 evaluations (every 1, 3, or 6 months).
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We’ve written an archive on performance tracking that we feel can be useful when using this method:
#6: The 360-degree feedback method
The core idea of the 360-degree feedback method is that a person’s productivity is evaluated by people they work with on a daily basis. And not just from their own departments.
The first company that used this method was Esso Research and Engineering Company back in the 1950s, and since then it has undergone numerous adaptations and changes.
This method is recommended for small businesses only, as employees will have more opportunities to collaborate and connect.
Expert opinion on how to measure employee productivity
To get firsthand experience, we’ve interviewed some of CAKE.com’s team leads for their opinions on measuring productivity, and how they approach it.
Our former colleague and Customer Support Lead at CAKE.com, Jovana Kandić, explains how they observe productivity, and the factors that are measured and analyzed:
“Generally, productivity in customer support is measured by the number of tickets resolved, first resolution time, first reply time. We also look at the number of accepted chat messages, missed or dropped calls percentage, average response time, and the like.”
Jovana says it’s possible to measure productivity this way; however, “there’s also the risk of losing the core point in all the data.”
VP of Human Capital at CAKE.com, Biljana Rakić, says that they look at quantitative values, such as how many employees they’ve approached for consultation and evaluation in a month:
“We also take into account the overall satisfaction, and how many training sessions and courses we can provide within a year. Additionally, we monitor and measure the recruitment process — the number of candidates contacted, the response rate, and the like.”
Biljana also says that they’ve started including satisfaction surveys, where potential candidates can rate the experience with the HR representative.
Our former colleague and VP of Engineering at Clockify, Ljubomir Simin, points out that they use quantifiable metrics, such as the number of code commits, operations on GitLab, or source control activity (number of changes, reviews, etc) — as a baseline. He also adds:
“On the other hand, there are result-driven metrics — whether the person met the deadlines, how many bugs were there, etc. I personally prefer measuring productivity based on larger deadlines, when they concern more major features that we want to implement. Smaller tasks, like the ones you do several per day, have very little impact.”
Large-scale benefits of measuring productivity
Here are some benefits of measuring employee productivity for company management.
Better resource allocation
Knowing how your employees work and what software they use can give you an idea of where your resources are underused or if you need to introduce something new.
You’ll know whether to get new software, provide additional training and courses, if there’s too much overtime, etc.
Fewer unnecessary tasks
Measuring productivity will help you realize if some employees are doing tasks that can be eliminated or delegated to someone else.
Unburdened employees are more productive, happier, and eager to work harder (not more, though — so don’t use this opportunity to add to their workload).
Fewer costs on all levels
When you calculate productivity based on the ratio of output to capital invested, over time you can see where to make budget changes. Maybe some processes cost you more than necessary, which you wouldn’t be aware of without the productivity data you’ve gathered over a course of time.
The same goes for the costs of time, energy, and manpower.
Individual benefits of measuring productivity
Let’s see the main individual benefits of measuring productivity.
Less wasted time
Measuring productivity can reveal if you’re delaying finishing tasks or you’re wasting time some other way.
While you can turn a blind eye to some wasted time if it happens infrequently, too much of it can cause heavy procrastination, which results in rushed work and stress because of impending deadlines.
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If you’d like to learn how to track employee hours and identify wasted time, check out the following blog posts:
Productivity increase
Knowing their work is being evaluated and rewarded accordingly, employees are more likely to feel fulfilled and motivated to work harder.
More satisfaction at work leads to less stress and fewer turnovers for the company.
More skilled employees
Productivity measurements can quickly point out workflow gaps and accurately identify the reasons behind them. Sometimes, productivity declines because employees lack skills. In this case, managers can organize proper training and provide reading materials or mentors to help bridge knowledge gaps.
More driven employees
Measuring productivity means you can evaluate your employees more frequently. This is an opportunity to remind them of the company’s direction, and let them know their role in it. So, you’re helping workers set professional objectives that align with the company’s.
Use Clockify by CAKE.com to measure employee productivity
To measure employee productivity, you need a time tracking system that can show how your workers allocate their time versus how much time they spend on each task.
As an all-in-one time tracking software, Clockify by CAKE.com allows you to track work hours, projects, tasks, breaks, and much more. Once you create a workspace in Clockify, you can invite your team members, and they can start logging their work hours.
Once your team members have joined the workspace, you can manage your team by:
- Assigning different roles (Admin, Team manager, Project manager, Regular user)
- Setting billable rates, costs, and capacity
- Assigning tasks to team members
With Clockify Activity features, you’ll be able to see how much time each team member has spent on which projects and which tasks. The feature will also show the project that had the most hours tracked during a week.
You can also customize how your employees track their time and which fields are mandatory, such as task descriptions or tags.
By using a time tracker like Clockify, you’ll boost your team’s performance and measure employee productivity in a stress-free way.
Clockify is also part of the CAKE.com Bundle, together with Pumble for team communication and Plaky for project and task management.
How we reviewed this post: Our writers & editors monitor the posts and update them when new information becomes available, to keep them fresh and relevant.
