How to measure employee productivity

Did you know that in a study of 2,000 workers in the UK, it was found that 33% of the day is lost to performative work? Employees were undertaking tasks completed to appear productive, without actually being productive (research by Slack). 

But what is productivity? And how can it be measured? In this blog, we get into how to measure - and improve - productivity in your SME. 

Skip to:

• What is productivity?
• Why we need to improve
• How to measure employee productivity
• Tips to improve your business’ productivity

What is productivity?

Productivity is a performance measure that essentially compares the output of a product with the resources and input that were needed to create the output. 

How can productivity be measured?

Productivity can be measured in a few different ways. 

• Measuring the time spent on performing and completing tasks

• Comparing input (resources, time, costs) and output (results/completed tasks, etc)

• Look at profitability - how much profit you're making should be a direct signifier of how productive your team are

Why does productivity matter?

Given that there are around 5.6 million SMEs in the UK, productivity inefficiencies have a substantial impact on the UK economy.

And productivity in the UK is slowing down, according to research by the London School of Economics and Political Science. 

UK labour productivity historically grew around 2% per year, but since the 2008/2009 recession, productivity has been rising more slowly (according to ONS data).

The ONS reports that in Q4 2023, productivity was roughly 0.3% lower than the year before (Q4 2022). 

Our research found that 75% of SME decision makers are happy with their business productivity and one in five (22%) businesses are not measuring productivity at all.

And the more productive a business is, the more profit it can make - especially important during the current economic climate and cost of living crisis.

How can SMEs measure productivity?

Accurate productivity measurement is fairly complex but can be helped using productivity calculators. In most cases, it is not a simple case of counting up how many widgets are produced by each employee in a day. Many tasks are difficult to measure and quality of work also has needs factoring in.

A factory worker may turn out 100+ products each day, but if the products aren’t made to a sufficient standard, both time and materials are being wasted. It goes without saying that quality is the hardest aspect of employee productivity to measure.

There are obvious issues around unquantifiable tasks. One hour spent on the phone resolving a query from an unhappy customer could be worth a lot more than one new sales’ call. Why? An unhappy customer can do more damage to your business than you think.

Tips for measuring employee productivity

So how do you chart employee productivity to gain a better understanding of how your business is performing?

1. Establish a baseline

First and foremost you need to establish some baseline metrics to measure against. You will need to identify expected work outputs for each position. While it may be easy to apply productivity metrics to roles with specific tasks, it may be less clear how you apply the same metrics to more general roles, such as receptionists and administration staff.

However, expectations should be set for every role. This provides clarity for both employer and employee. It creates a reference point for the baseline measurement of performance and holds the employee accountable.

2. Define and measure tasks (not hours)

Define measurements that relate to key functions of the job or use broader measures. Useful measurement include how quickly customers are served, how many invoices are sent out, how many sales calls are made, how many orders are dispatched and so on. In some cases it may be easier to measure group output.

3. Set clear objectives and goals

Consider how your employees’ performance is contributing to your business’s goals and targets. Set clear objectives and use regular performance reviews to evaluate progress.

4. Conduct surveys

Poor employee performance ultimately has an impact on your customers. A client survey can be a good way of getting feedback and tracking back to individual employees when a particular order or service hasn’t gone to plan. Outstanding performance can also be identified and praised.

5. Place a value on quality of work

The timely completion of tasks to a high standard is a key indicator in measuring employee performance. By monitoring quality of work, as well as quantity, training needs can be quickly addressed.

6. Monitor absenteeism & presenteeism

Monitoring absenteeism is an essential component of measuring employee performance. If an employee performs brilliantly when at work, but takes an excessive amount of time off sick due to work stress, productivity overall will be affected.

Presenteeism (employees who attend work when they are ill) impacts significantly on performance. Putting a value on presenteeism is extremely difficult, but it is worth addressing. In the long term, employees who attend work whilst they are ill have a negative impact on overall productivity. Attending work while sick also increases the chances of infecting other staff and extends recovery time.

Measurement difficulties relate to identifying episodes and relating those to productivity. Employee surveys can be helpful. For example, ask employees ‘When over the past 12 months did you work when you were sick?’ Workplace well-being programmes can help to identify and address presenteeism.

7. Consider culture

Company culture is the sum of what you and your staff do and say, how you act within a business, how customers, products and services are treated. It's the everyday organisational structure and it defines you and your business.

You can then get creating relevant goals for your company and industry. These will reflect your dreams for the business, your vision and purpose. Poor or toxic company cultures are proven to lower productivity, generate a higher staff turnover as well as larger recruitment and retention costs.

The importance of understanding employee engagement

Productivity is obviously one of the pathways to success. Employees are central to driving your business forward, so equal attention should go into understanding employee engagement and managing change. Measuring employee productivity is crucial if SMEs want to identify problem areas and support staff to be the best they can be.

Breathe's employee recognition tool, Kudos, & performance management system can help to boost your company culture. Why not trial for free for 14 days?