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What is productivity and how can it be measured?

24 January 2023

Productivity is a frequently used term in business, but what does it actually mean? The Collins dictionary defines it by stating that ‘someone or something that is productive produces or does a lot for the amount of resources used’1

Employee productivity is particularly important in small businesses, where resources are more limited than they would be in a large company. According to one report, average SME worker productivity is up to 60% lower than the average UK worker.2

Before implementing strategies to improve workplace productivity, small business owners may wish to measure how their team are currently working in order to identify sticking points. 


Measuring workplace productivity

In a workplace context, productivity could be defined as the amount of work (or output) that an employee produces during their shift (their input). So put simply, the productivity of a baker could be measured by how many items they bake during their shift. 

There is a simple formula that is often used in businesses:

Productivity = output ÷ input

However, it isn’t always as simple to measure it in such a tangible way. The way in which you measure it within your business can depend on the industry that you operate in. Each industry and each job role within that industry would need a different method in order to measure how productively people are working. How can a firm of accountants, for example, measure it when they aren’t necessarily producing a physical product? Aside from setting your team a task and timing how long they take to complete it, is there a way to measure productivity in these non-tangible industries? 


Service industries

Assessing productivity in service industries, or in businesses that don’t produce a physical product, can be difficult. When the output of a day’s work isn’t as obvious as it might be in other industries, is there a way to measure how productively your team is working? 

Timesheets are a frequently used method in agencies to record the amount of time being spent on tasks for each client. The same principle could also be applied for measuring productivity in service-based businesses. Timesheets could be used as a way for employees to record how much time they are spending on particular tasks. This will not only show you how efficient they are during the working day, but it might also allow you to see if certain tasks are taking up too much of your team’s time. This might help you identify where team members need help with workloads. However, implementing a timesheet within your business can also come with its own set of challenges. Your team may feel that they are being watched by management and that their days are being heavily monitored which could impact staff morale. 

One way to measure staff efficiency may simply be to speak to your team. Asking them about their workloads and how they manage their time may identify areas that are taking up too much of their time. Some of these tasks may be unnecessary, such as certain admin requirements that they might be able to delegate in order to free up some of their time to focus on more productive tasks.


Performance reviews

Performance reviews can be one way to measure productivity levels within your business. Working with your team to set individual performance goals based on their own personal development as well as overall business goals can help to monitor how productively they are working. Employees who are regularly hitting their performance goals are potentially working at a highly efficient level, whereas people who are struggling to hit their goals might need more help to work more efficiently and productively.


Challenges of measuring productivity

Alongside the method of how it’s measured within a business, there can be other challenges that business owners may face when analysing how effectively people are working. 

In customer service roles, such as call centre staff, the traditional method of measuring productivity would be the number of calls that a customer service representative takes during their shift. However, this doesn’t take into account the level of service that was delivered to customers. Employees who have their productivity measured in this way may be tempted to rush through calls in order to fit as many as possible into their shifts without taking into account the quality of the service that they are providing. 

This is where the importance of monitoring efficiency comes in. While productivity looks at the output produced by an employee in comparison to their input (the amount of time they’ve spent at work, for example), efficiency looks at the quality of work that they produce as well as the output. As a result, some businesses might look to combine the measurement of the two by only including the output that is of a good quality.

Productivity can often be confused with the amount of hours that an employee working. If someone is staying logged on until gone 7pm when everyone else has finished for the day, it doesn’t necessarily mean that they are working harder than everybody else. Rather than monitoring the amount of time that someone is working for, productivity should be measured by the actual output that they are producing and the quality of their work.

 A work meeting at a computer

Benefits of measuring productivity

Measuring and monitoring productivity levels can have a number of benefits for small businesses.  Alongside giving you the opportunity to see output levels within your business, it also allows you to keep track of the service levels that your team is providing your customers. This can help you to maintain a consistent level of customer service across your business. 

Productivity measurement can also help you to identify particular areas or processes within your business that might be causing unnecessary delays to your team’s workflows. This can help you to streamline the processes within your business to ensure that your team is able to get the most out of their working days.

Measuring workplace efficiency may also have benefits for the employee as well as the business. The use of productivity measurement tools may highlight particular times of the day when people are the most focussed. Someone might be able to concentrate better in the mornings, for example, than they are past 3pm. This could mean that this particular person might favour a more flexible work schedule that allows them to start work earlier in the morning and finish earlier. This could benefit both the employee, as they are able to have a more flexible working structure, and the business, as they would be working during the time when they are the most productive.


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How to improve productivity

If there’s a need to improve productivity within your business, there are a number of measures that you can take:

  1. Limit meetings. Meetings can be a big cause of lost productivity at work. Try to limit the number of meetings that you and your team are having where possible. When you do have meetings, set a time limit for the length of the meeting and stick to it.
  2. Prepare a to-do list first thing. One way to ensure that you and your team get the day off to a positive start is to write out a to-do list and tackle your least favourite tasks first.
  3. Support your team. When we have things going on in our personal lives, it can be difficult to concentrate at work. Offering an Employee Assistance Programme to your team can provide them with the opportunity to speak to a trained professional about anything that might be bothering them, at a time that suits them.
  4. Feedback. Ensure that you are giving your team regular constructive feedback on the work that they are carrying out, and encourage peer to peer feedback too.
  5. Tools and systems. Invest in the relevant tools and systems for your business that could help cut out certain admin tasks for your team, freeing them up for the work that is more likely to benefit your business in the long run. TechRadar has compiled this list of top productivity apps.
  6. Benefits. It might come as little surprise that employees’ happiness affects their productivity. According to a study by Warwick University, happiness made people 12% more productive3. You could look for smaller, quick wins to boost morale such as providing a free breakfast for your team one morning or organising a team outing. Alternatively, you could look to implement a more comprehensive employee benefits package including perks such as private medical insurance.
  7. Flexible working. A standard 9-5 working day may not suit everyone. Some members of your team may find they are more productive in the mornings, for example, so would favour a more flexible working schedule.

There isn’t a one size fits all approach when it comes to measuring how productively your team is working. It requires a much more tailored and personalised method in order to be the best fit for your business and industry. While it comes with its own set of challenges, there are also a lot of benefits associated with measuring the productivity and efficiency of your team for both the business and your people.


How we can help

When you’ve got bold plans for your business, you need the right talent to help you realise them. Offering private health insurance can help you attract the best people to your growing business. And it can make it easier for you to keep them with you, and keep them well.

We think that the best way for you to get the healthcare cover that’s right for your business and your budget is to let you build your plan yourself. Perhaps your biggest priority is giving your staff access to mental health support. Or maybe you only want cover for therapies like physio. If that’s the case for you, then just buy the option you need, all on its own*.

Find out more about our small business health insurance, including what we do and don’t cover, and get a quote today.

*If you are buying cover for 1-2 people only, you will need to include either Treatment or Diagnostics Only in your plan.

 Sources and References

Collins Dictionary. Definition of Productive

Natwest, 2021

Warwick University, New study shows we work harder when we are happy

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