Measuring Employee Productivity | 5 mins read

How to Properly Measure Employee Productivity

how to properly measure employee productivity
Dakota Sheetz

By Dakota Sheetz

Insights Into Productivity

Productivity is defined as a measure of a company's efficiency in production usually calculated by dividing output (money) with input (time).

It's no surprise then that there are a lot of time -tracking apps you can use to measure employee productivity. However, time is not an accurate metric for productivity. It's only a surface-level view of a more complex concept.

How many hours are you actually productive each workday? Research shows that the average worker is only productive for two hours and 53 minutes in an eight-hour day. And that only applies to normal circumstances. In times of strife, the number dips even lower. Still, the Bureau of Labor Statistics reports that Americans work an estimated 8.8 hours every day.

For most companies, the goal of tracking time is to reduce input and increase output. Unfortunately, time tracking tools miss out on other factors outside time which affect productivity and your profit margins.

Why Measuring Productivity Matters

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Measuring productivity can help you improve operations. Having people-related data like employee productivity also allows you to identify their strengths and weaknesses which you can use to set reasonable targets. Sharing productivity metrics to employees can also help with motivation and engagement.

These are just some of the main reasons why measuring employee productivity is essential to business-

Increased Efficiency
As mentioned, productivity is linked to efficiency. Measuring productivity lets you know exactly where and when resources are wasted. Getting a clear view of each of your employee's strengths and weaknesses can inform your staffing decisions. Perhaps one is particularly skilled in upselling, put them in client-facing duties.

Better Performance Management
Data-backed feedback during performance evaluation gives your employees a better handle on their progress. They will know exactly where they excel and areas for improvement. This way you are also giving them agency over their work which is good for personal motivation.

Aides Operational Changes and Investment Decisions
Productivity metrics also informs your decision-making regarding operations and investment. If kitchen productivity is down, you may need to upgrade equipment or appliances. Increased mistakes in order taking as business pick up can prompt you to digitize your system to reduce errors.

Better Partnerships and Client Relations
If the company needs to partner up with a supplier or trying to attract investors, they will have more confidence in you if you have the data to make your case. You will have more credibility and stakeholders will also appreciate transparency during your regular presentations.

A Tool for Negotiations
You can secure better deals with productivity metrics. Using your data, you can ask for higher fees to clients or negotiate for lower third-party fees by what you bring to the table.

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How to Accurately Measure Your Employees Productivity

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Focusing on finances and forgetting about the people can quickly backfire and send your business long term. On the other hand, if you measure employee productivity in highly restrictive terms, they may feel like mere machines which could damage engagement and motivation.

Fortunately, there are several ways to measure employee productivity without alienating your staff or killing the bottom line-

  1. Use the Quantitative Method for Benchmarks- The quantitative method is good for setting benchmarks. However, as mentioned, make sure you consider other factors that can affect productivity to make your baseline more realistic.

    For example, calculating server benchmarks like Per-Person Average (PPA) or Server Errors Per-Guest should account for equipment condition, delays in the supply chain, and other variables that out of an employee's control.

  2. Set Defined Goals- Setting defined performance objectives for your employees with associated key performance indicators (KPIs) directly contributes to the company's bigger goals.

    They need to be communicated properly to your employees so that they'll know how valuable they are in achieving those objectives. Communicating objectives can also be empowering for employees and increase their sense of responsibility and accountability.

  3. Time Management- For front-of-house and kitchen staff, this can mean tracking table turn time or the amount of time from taking the order and serving the customer. There is software for tracking or POS system to collect this data. You can also use attendance and scheduling tools for better deployment of your staff.

  4. Service Productivity- This is a multi-faceted metric. The number of customers served for a given time, for instance, is one way to measure service productivity. You can also divide total earnings with customers served. Owners must learn how to calculate productivity based on the goods and services offered.

  5. Profitability- If time tracking is too complex for your small business, you can simply check your profits and compare that to your employee's paycheck. This way you can decide whether your staff needs more training or find people who are a better fit for your business.

  6. Customer Feedback- The service may be fast, but are they providing quality work? Sometimes, the best people may be spending more time with customers, but they are selling more products in the process. Servers who take their time customers could also lead to returning or loyal customers.

    Different employees have different skills, so you as the owner must be able to recognize their unique contributions. Therefore, customer feedback is important. Customers can provide you with insights about their experience and how your employees are performing.

Key Takeaways

  • Employee productivity refers to the overall value an employee contributes to the company in a given amount of time.
  • Measuring productivity is important because it can increase efficiency, improve performance management, influence decision making, forge better relationships with stakeholders, and help with negotiations.
  • Measuring employee productivity should be both quantitative and qualitative.
  • Quantitative measures of employee productivity include time tracking, benchmarking, service productivity, and profitability.
  • Qualitative measures of employee productivity include goal setting and customer feedback.

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