Advertising

Last Updated on December 9, 2020

How the Productivity Formula Can Improve Employee Efficiency

How the Productivity Formula Can Improve Employee Efficiency
Advertising

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 7 Effective Ways To Motivate Employees in 2021 2 How a Project Management Mindset Boosts Your Productivity 3 5 Values of an Effective Leader 4 How to Motivate People Around You and Inspire Them 5 The Importance of Reminders (And How to Make a Reminder Work)

    Read Next

    Advertising
    Advertising

    Last Updated on July 21, 2021

    The Importance of Reminders (And How to Make a Reminder Work)

    The Importance of Reminders (And How to Make a Reminder Work)
    Advertising

    No matter how well you set up your todo list and calendar, you aren’t going to get things done unless you have a reliable way of reminding yourself to actually do them.

    Anyone who’s spent an hour writing up the perfect grocery list only to realize at the store that they forgot to bring the list understands the importance of reminders.

    Reminders of some sort or another are what turn a collection of paper goods or web services into what David Allen calls a “trusted system.”[1]

    A lot of people resist getting better organized. No matter what kind of chaotic mess, their lives are on a day-to-day basis because they know themselves well enough to know that there’s after all that work they’ll probably forget to take their lists with them when it matters most.

    Fortunately, there are ways to make sure we remember to check our lists — and to remember to do the things we need to do, whether they’re on a list or not.

    In most cases, we need a lot of pushing at first, for example by making a reminder, but eventually we build up enough momentum that doing what needs doing becomes a habit — not an exception.

    Advertising

    From Creating Reminders to Building Habits

    A habit is any act we engage in automatically without thinking about it.

    For example, when you brush your teeth, you don’t have to think about every single step from start to finish; once you stagger up to the sink, habit takes over (and, really, habit got you to the sink in the first place) and you find yourself putting toothpaste on your toothbrush, putting the toothbrush in your mouth (and never your ear!), spitting, rinsing, and so on without any conscious effort at all.

    This is a good thing because if you’re anything like me, you’re not even capable of conscious thought when you’re brushing your teeth.

    The good news is you already have a whole set of productivity habits you’ve built up over the course of your life. The bad news is, a lot of them aren’t very good habits.

    That quick game Frogger to “loosen you up” before you get working, that always ends up being 6 hours of Frogger –– that’s a habit. And as you know, habits like that can be hard to break — which is one of the reasons why habits are so important in the first place.

    Once you’ve replaced an unproductive habit with a more productive one, the new habit will be just as hard to break as the old one was. Getting there, though, can be a chore!

    Advertising

    The old saw about anything you do for 21 days becoming a habit has been pretty much discredited, but there is a kernel of truth there — anything you do long enough becomes an ingrained behavior, a habit. Some people pick up habits quickly, others over a longer time span, but eventually, the behaviors become automatic.

    Building productive habits, then, is a matter of repeating a desired behavior over a long enough period of time that you start doing it without thinking.

    But how do you remember to do that? And what about the things that don’t need to be habits — the one-off events, like taking your paycheck stubs to your mortgage banker or making a particular phone call?

    The trick to reminding yourself often enough for something to become a habit, or just that one time that you need to do something, is to interrupt yourself in some way in a way that triggers the desired behavior.

    The Wonderful Thing About Triggers — Reminders

    A trigger is anything that you put “in your way” to remind you to do something. The best triggers are related in some way to the behavior you want to produce.

    For instance, if you want to remember to take something to work that you wouldn’t normally take, you might place it in front of the door so you have to pick it up to get out of your house.

    Advertising

    But anything that catches your attention and reminds you to do something can be a trigger. An alarm clock or kitchen timer is a perfect example — when the bell rings, you know to wake up or take the quiche out of the oven. (Hopefully you remember which trigger goes with which behavior!)

    If you want to instill a habit, the thing to do is to place a trigger in your path to remind you to do whatever it is you’re trying to make into a habit — and keep it there until you realize that you’ve already done the thing it’s supposed to remind you of.

    For instance, a post-it saying “count your calories” placed on the refrigerator door (or maybe on your favorite sugary snack itself)  can help you remember that you’re supposed to be cutting back — until one day you realize that you don’t need to be reminded anymore.

    These triggers all require a lot of forethought, though — you have to remember that you need to remember something in the first place.

    For a lot of tasks, the best reminder is one that’s completely automated — you set it up and then forget about it, trusting the trigger to pop up when you need it.

    How to Make a Reminder Works for You

    Computers and ubiquity of mobile Internet-connected devices make it possible to set up automatic triggers for just about anything.

    Advertising

    Desktop software like Outlook will pop up reminders on your desktop screen, and most online services go an extra step and send reminders via email or SMS text message — just the thing to keep you on track. Sandy, for example, just does automatic reminders.

    Automated reminders can help you build habits — but it can also help you remember things that are too important to be trusted even to habit. Diabetics who need to take their insulin, HIV patients whose medication must be taken at an exact time in a precise order, phone calls that have to be made exactly on time, and other crucial events require triggers even when the habit is already in place.

    My advice is to set reminders for just about everything — have them sent to your mobile phone in some way (either through a built-in calendar or an online service that sends updates) so you never have to think about it — and never have to worry about forgetting.

    Your weekly review is a good time to enter new reminders for the coming weeks or months. I simply don’t want to think about what I’m supposed to be doing; I want to be reminded so I can think just about actually doing it.

    I tend to use my calendar for reminders, mostly, though I do like Sandy quite a bit.

    More on Building Habits

    Featured photo credit: Unsplash via unsplash.com

    Advertising

    Reference

    [1] Getting Things Done: Trusted System

    Read Next