In my many years of working with organizations in every industry, I have found that perhaps no issue cuts closer to the heart of business success than workforce productivity. High tech, low tech; global, local; large, small; B2C, B2B: every business depends on its people. If people are not producing enough goods and services, if they are not generating new ideas and innovations, if their efforts are not resulting in superior customer satisfaction, then the business cannot meet its business goals.

You have no doubt seen the topic of workforce productivity in numerous headlines over the past couple of years. A few stand out in my mind:

• “The Mystery of Declining Productivity Growth” in the Wall Street Journal
• “Productivity Crisis Haunts the Global Economy” in the Financial Times

These articles point out that, despite advancements in technology and automation, the rate of growth in productivity has actually declined over the last two decades.

This trend is causing concern among businesses, such that finding a strategy to increase productivity is an imperative for anyone with responsibility for the success of an organization – and that includes human resources (HR), finance, risk, and business operations leaders.

This blog is the first in a series, with the goal of helping organizations understand workforce productivity and how to improve it. I begin by discussing the first step to unlocking the secrets of workforce productivity: measurement.

Measuring productivity

Although most HR leaders talk about improving workforce productivity through their talent initiatives, few are actually measuring it. Many HR leaders think of productivity in terms of employee engagement or retention. While engagement and retention both impact productivity, they are not the same as productivity. And they are clearly not how business and other functional leaders think about productivity – just ask your finance and risk colleagues.

Measuring productivity involves calculating the level of output for a given level of input.

• Think of outputs as tangible goods and services, transactions, revenues and financial outcomes, and other outcomes such as customer satisfaction scores, error rates, or new product ideas.
• Think of inputs in terms of labor hours, labour dollars or compensation, number of workers, or time.

When we take outputs divided by inputs, we get a productivity measure. 

Productivity measurements can vary from industry to industry. Yes, you could use a general metric like revenue per employee, and that metric might make an interesting benchmark or when trended over time. But it is too general to be useful in understanding what is really driving productivity and for pinpointing any gaps or problem areas.

Five Categories of Productivity Measures

So we advise companies to identify productivity measures that are relevant to their industry in one or more of the following five categories:

1. Efficiency
2. Quality
3. Innovation
4. Customer service
5. Brand

Efficiency

Efficiency is the area that most people associate with productivity. For a manufacturing company, a productivity metric related to efficiency might be the number of goods produced per labour hour. Other metrics might be

• the number of overtime hours as a percentage of total hours worked
• the cost of rework as a percentage of the original cost estimate
• the percentage of project or product delivery goals met

Again, the actual metrics will vary based on your industry.

Quality

Quality metrics related to productivity will similarly vary by industry. For a product company or manufacturer, these metrics might be the error rate per batch or the number of product recalls as a percentage of total products shipped. For a health care organization, the metrics might include

• patient satisfaction scores per physician
• the number of readmissions per hospital compensation spend
• the number of preventable mistakes by hospital full-time employee

Innovation

Innovation metrics are important within a number of industries – particularly high tech, biotech, and pharmaceuticals – but they are certainly not limited to only these sectors. Today just about every business has innovation at the forefront of its strategy.

Productivity metrics related to innovation might include

• the number of patents per research and development (R&D) dollar spent
• the number of new products shipped per R&D staff
• the number of new discoveries or inventions in a given time period

Again, the nature of the discoveries or inventions will differ by industry.

Customer service

Customer service metrics touch just about every company in every industry. The customer service metrics related to productivity might be

• the customer retention rate per account manager
• the amount of new business closed per labor dollar
• customer Netpromoter scores per account rep

For call centers, metrics such as the percentage of first-call resolutions per call center rep and the average transaction length per service rep are useful productivity measures.

Brand

Finally, brand metrics may also relate to productivity. These might include

• the number of page views per online ad dollar spent
• the number of brand mentions per marketing dollar spent
• the number of news release pick-ups per public relations full-time-employee

These are all productivity measures related to a company’s brand presence or market appeal.

Next Steps

That’s just a high-level view. I won’t attempt in this space to cover all of the ways to measure productivity in each of the five categories across every industry. But hopefully I have given you a better idea of what productivity means and how to measure it for your organization.

In my next post, I will address the next step on determining priorities and focus, i.e., which job functions and roles in your organization will have the greatest impact on productivity. Stay tuned for that.