Measuring productivity
Productivity measurement is one of the most important factors in the success of a business. It is vital, and sadly very few people know how to do it. If you want your employees to produce more, they need to know that their efforts are being rewarded with higher wages and better pay increases. The obvious solution is to measure productivity and encourage good performance through rewards. This is where many businesses fail. I've yet to come across a board that is correctly monitoring the organisation's productivity.
How do you know that your employees are productive? How do you measure productivity? Without measuring productivity, it is impossible to directly influence an organisation's culture and behaviours. It is also not possible to meaningfully set goals for management or evaluate performance. As a manager or leader in your business, one of your primary responsibilities is to manage your people. You need to get them focussed on achieving their objectives and moving towards the vision of the business. You can't accomplish this if they are not being productive.
I often hear the words effective and efficient used interchangeably with productivity. However, they are not the same.
Efficient means working in a well-organised way, with minimum wasted effort or expense. However, it's perfectly possible to work on tasks that have no value in a highlight-efficient manner.
Effective is defined as being successful in producing a desired or intended result. And if that result doesn't have value, this is also not productive. We've all head the adage of being a 'busy fool'. I've seen countless cases of highly effective teams working on the wrong tasks and therefore not contributing to overall productivity.
Productivity measurement is vital to gauge the effectiveness of a business. The most common measure of productivity is the cost or unit output divided by labour hours (productivity = average product output per labour hour). For example, if it takes 20 hours to assemble one unit in a factory and 60 units were built in 80 hours then the productivity would be: 20/80 = 0.25 units/hour = 50%
Again, this isn't the whole story. In the same way that words like effective and efficient don't take into account the type of work being done, the measurement of units/hour lacks a crucial factor; namely value.
Productivity is a measure of value. Being productive means generating work of value with minimal input. It isn't about units per hour, rather it's value created per hour.
And this means that any organisation can easily measure its productivity. All you need to know is the value created by the organisation within a period of time and the number of hours of people's time that were used to generate that value. Productivity is therefore a financial metric and is expressed as £000 per hour.
If you are curious about measuring your organisation’s productivity you can easily do so at www.productivity4.com
And if you’d like to find out what type of productivity culture you’ve got you can read more about the Secret to Solving the Productivity Puzzle here.