Advertising
Advertising

Last Updated on December 9, 2020

How the Productivity Formula Can Improve Employee Efficiency

How the Productivity Formula Can Improve Employee Efficiency

In 1911 Frederick Taylor, an American engineer turned management consultant, published a book, The Principles of Scientific Management, which revolutionized practices for workplace efficiency through the productivity formula.[1]

In the book, Taylor proposed the idea that employee productivity and motivation could be altered by changing specific variables. By optimizing these variables, companies could maximize workplace efficiency and profits, while minimizing costs and eliminating inefficiency.

Since Taylor’s ideas were published several decades ago, these important variables have been integrated into a simple equation that managers and leaders use to measure and improve employee motivation and productivity.

The simple equation is called the productivity formula, and here’s how it works.

What Is the Productivity Formula?

The productivity formula is a measure of the productivity of an economy, organization, team, or employee. In the context of a company, it provides a useful indication of how efficiently a company converts raw materials, machines, and groups of employees into useful goods or services.

This can be represented in the surprisingly simple productivity formula:

The Productivity Formula

    The productivity formula is a basic relationship between physical input and output variables. The most common inputs are labor productivity hours, capital, and materials, and the most common output units are sales and amount of goods produced.

    A company that produces more with a given variable of inputs (capital, labor, and materials) or uses fewer inputs to produce the same level of output has greater productivity. This creates a competitive advantage over a company that produces a lower amount.

    The productivity formula illustrates how a company can increase units of output produced per employee hour, machine, or material used.

    How to Use the Productivity Formula

    As an example, a manager may want to calculate the productivity of the employees of his/her company or team.

    Advertising

    In order to do this, employee productivity can be calculated by dividing the goods and services produced or sales revenue generated by the total number of hours the company’s employees worked in a given period of time.

    For example, consider an employee called Tom who made sales worth $2,000 in one week of 50 hours worth of work. Another employee called Jill worked 20 hours a week and made $1000 worth of sales. Using the productivity formula:

    Tom’s productivity: $2000/50hrs = $40/hour

    Jill’s productivity: $1000/20hrs =$50/hour

    In this hypothetical scenario, Jill is more productive than Tom, even though Jill generated less sales than Tom.

    Here’s another example:

    Imagine a retail company looking to measure its productivity. If the output of last month’s production was 20,000 units, and the total employees hours worked was 2,000 hours, then based on the productivity formula:

    Company productivity: 20,000 units/ 2,000 hours= 10 units/hour

    As a final example, consider a heavily automated production line with a small number of staff. If in a month, the production line produces $1 million dollars worth of goods with 1000 total hours worked, then the company productivity is:

    Company productivity: $1,000,000/1000 = $1000/hour

    Even though the labor cost is much smaller than the cost of equipment, a company that invests in the efficient use of technology will gain a competitive advantage and improve company productivity.

    Advertising

    Managers can use this formula to determine which employees are the most and least productive, or measure the efficiency of a company in using its resources and materials.

    Nevertheless, this version of the productivity formula is limited due to its simplicity and restriction in variables.

    As per the examples above, this productivity formula only uses single units for input and output to calculate the level of productivity, and that’s why it’s described as a partial factor productivity.

    For a more accurate measurement, a company will need more inputs and outputs to calculate its overall productivity.

    This is where the multi-factor productivity formula could be useful.

    The Multi-Factor Productivity Formula

    As previously noted, the partial or single-factor productivity formula is limited as a wholesome measure of productivity.[2]

    The multi-factor productivity formula helps managers measure the productivity of various departments across a company.

    With this formula, productivity is measured by comparing output to various inputs necessary for production. This includes ratios of units produced to materials, labor, and capital.

    For example, switching one variable for another, i.e. labor for capital, could produce a significantly different productivity figure. A more efficient measure of productivity should take into account the different substitutes for input and output and accurately represent how they affect company productivity.

    Whereas the partial factor productivity formula uses one single input, the multi-factor productivity formula is the ratio of total outputs to a subset of inputs. For example, an equation could measure the ratio of output to labor, materials, and capital. This method is a more comprehensive measure than partial factor productivity, but it’s also harder to calculate.

    For example, imagine a car manufacturing company that purchases advanced machine equipment to increase its production. Assuming this equipment enables the company to reduce the number of employees and costs 40% more than a standard machine, output will remain the same.

    Advertising

    But since the number of employees has reduced, the labor and capital productivity of the company will increase. And there will be a decline by 40% in material productivity since output is constant and purchased material has increased.

    As a further consideration, a Total Factor Productivity formula will take into account all inputs used in a production process and provide a more accurate assessment of company productivity and performance.

    How to Improve Employee Productivity With the Formula

    Here are 3 strategies based on the productivity formula to improve employee productivity:

    1. Measure and Improve the Efficient Use of Time

    Time, though not purchased, is often mistakenly ignored as a cost.[3]

    For example, if two companies have identical equipment, staff, products, and material, but one business takes two weeks longer than the other to ship order purchases, their productivity is not the same.

    Managers who work with employees to maximize the amount of time spent on tasks that align with their strengths and minimize time spent on everything else will improve employee productivity.

    2. Promote Employee Autonomy

    In his book, Management Challenges for the 21st Century, legendary management expert Peter Drucker writes that:

    “The demands that we impose the responsibility for their productivity on the individual knowledge workers themselves. Knowledge Workers have to manage themselves. They have to have autonomy.”

    Various studies have shown that human beings derive the greatest levels of motivation and satisfaction from achieving goals that are self-determined, so this is essential to think about regarding the productivity formula.

    Self-determined goals increase intrinsic motivation—i.e. the desire to do something for its own sake—rather than extrinsic motivation.[4]

    Intrinsically motivated people take more action on a given task, persist in the face of adversity, explore more creative ideas, enjoy their work, and perform better.

    Advertising

    The more autonomy and ownership employees have over their work role, the more productive they will be.

    Managers who include employees in setting goals and give them the autonomy to execute on them can significantly improve their productivity.

    3. Encourage Team Empathy

    In Smarter Faster Better: The Secrets of Productivity in Life and Business, author Charles Duhigg describes the story of how Google improved their team performance through “Project Aristotle,”[5] an extensive research project analyzing team productivity.

    At the end of their research period, Google discovered that the best teams weren’t necessarily a collective of individual top performers, but rather a collective of individuals who shared empathy with one other.

    Teams that encouraged members to listen to one another and show sensitivity to each others needs performed the best.

    That is why people with high emotional intelligence tend to be the best leaders in a group setting. They tap into the emotional component of human motivation to get the most out of the people around them.

    Final Thoughts

    The productivity formula is a simple, useful tool to quantify, measure, and manage employee productivity.

    As a standalone benchmark of productivity, it may not be sufficient as a measure of productivity that takes into account the complexities of a company. The best way for managers to use the productivity formula to motivate employees is to incorporate the people element.

    By maximizing time efficiencies and promoting employee autonomy and team empathy, managers can build a workplace culture that encourages long term productivity and satisfaction.

    More Tips on Improving Productivity

    Featured photo credit: Stanley Dai via unsplash.com

    Reference

    [1] New York Times: F. W. Taylor, Expert in Efficiency, Dies
    [2] Bureau of Labor Statistics. U.S. Department of Labor: Multifactor Productivity – Overview
    [3] Paul Krugman, The Age of Diminishing Expectations: “Defining and Measuring Productivity”
    [4] American Psychologist, 55, 68-78. Ryan, R. M. & Deci, E. L. (2000). Self-determination theory and the facilitation of intrinsic motivation, social development, and well-being.
    [5] New York Times: Project Aristotle

    More by this author

    Mayo Oshin

    Entrepreneur and write on building habits that stick and improving productivity

    Is It Possible to Multitask? 12 Reasons Why You May Not Want to How the Productivity Formula Can Improve Employee Efficiency

    Trending in Productivity

    1 How to Increase Willpower and Be Mentally Tough 2 How to Influence People and Make Them Feel Good 3 How to Be a Good Leader and Lead Effectively in Any Situation 4 Does the Pomodoro Technique Work for Your Productivity? 5 A Stress-Free Way To Prioritizing Tasks And Ending Busyness

    Read Next

    Advertising
    Advertising
    Advertising

    Last Updated on March 23, 2021

    Manage Your Energy so You Can Manage Your Time

    Manage Your Energy so You Can Manage Your Time

    One of the greatest ironies of this age is that while various gadgets like smartphones and netbooks allow you to multitask, it seems that you never manage to get things done. You are caught in the busyness trap. There’s just too much work to do in one day that sometimes you end up exhausted with half-finished tasks.

    The problem lies in how to keep our energy level high to ensure that you finish at least one of your most important tasks for the day. There’s just not enough hours in a day and it’s not possible to be productive the whole time.

    You need more than time management. You need energy management

    1. Dispel the idea that you need to be a “morning person” to be productive

    How many times have you heard (or read) this advice – wake up early so that you can do all the tasks at hand. There’s nothing wrong with that advice. It’s actually reeks of good common sense – start early, finish early. The thing is that technique alone won’t work with everyone. Especially not with people who are not morning larks.

    Advertising

    I should know because I was once deluded with the idea that I will be more productive if I get out of bed by 6 a.m. Like most of you Lifehackers, I’m always on the lookout for productivity hacks because I have a lot of things in my plate. I’m working full time as an editor for a news agency, while at the same time tending to my side business as a content marketing strategist. I’m also a travel blogger and oh yeah, I forgot, I also have a life.

    I read a lot of productivity books and blogs looking for ways to make the most of my 24 hours. Most stories on productivity stress waking up early. So I did – and I was a major failure in that department – both in waking up early and finishing early.

    2. Determine your “peak hours”

    Energy management begins with looking for your most productive hours in a day. Getting attuned to your body clock won’t happen instantly but there’s a way around it.

    Monitor your working habits for one week and list down the time when you managed to do the most work. Take note also of what you feel during those hours – do you feel energized or lethargic? Monitor this and you will find a pattern later on.

    Advertising

    My experiment with being a morning lark proved that ignoring my body clock and just doing it by disciplining myself to wake up before 8 a.m. will push me to be more productive. I thought that by writing blog posts and other reports in the morning that I would be finished by noon and use my lunch break for a quick gym session. That never happened. I was sleepy, distracted and couldn’t write jack before 10 a.m.

    In fact that was one experiment that I shouldn’t have tried because I should know better. After all, I’ve been writing for a living for the last 15 years, and I have observed time and again that I write more –and better – in the afternoon and in evenings after supper. I’m a night owl. I might as well, accept it and work around it.

    Just recently, I was so fired up by a certain idea that – even if I’m back home tired from work – I took out my netbook, wrote and published a 600-word blog post by 11 p.m. This is a bit extreme and one of my rare outbursts of energy, but it works for me.

    3. Block those high-energy hours

    Once you have a sense of that high-energy time, you can then mold your schedule so that your other less important tasks will be scheduled either before or after this designated productive time.

    Advertising

    Block them out in your calendar and use the high-energy hours for your high priority tasks – especially those that require more of your mental energy and focus. You also need to use these hours to any task that will bring you closer to you life’s goal.

    If you are a morning person, you might want to schedule most business meetings before lunch time as it’s important to keep your mind sharp and focused. But nothing is set in stone. Sometimes you have to sacrifice those productive hours to attend to other personal stuff – like if you or your family members are sick or if you have to attend your son’s graduation.

    That said, just remember to keep those productive times on your calendar. You may allow for some exemptions but stick to that schedule as much as possible.

    There’s no right or wrong way of using this energy management technique because everything depends on your own personal circumstances. What you need to remember is that you have to accept what works for you – and not what other productivity gurus say you should do.

    Advertising

    Understanding your own body clock is the key to time management. Without it, you end up exhausted chasing a never-ending cycle of tasks and frustrations.

    Featured photo credit: Collin Hardy via unsplash.com

    Read Next