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Published on October 10, 2018

How the Productivity Formula Can Motivate Employees to Work Efficiently

How the Productivity Formula Can Motivate Employees to Work Efficiently

In 1911 Frederick Taylor, an American engineer turned management consultant, published a book, The Principles of Scientific Management, which revolutionized practices for workplace efficiency.[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 efficiencies and profits, whilst minimizing costs and eliminating inefficiencies.

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.

And this can be represented in the surprisingly simple productivity formula:

    The productivity formula is a basic relationship between physical input and output variables. The most common inputs are labor 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 and a competitive advantage over a company that produces a lower amount.

    The productivity formula illustrates how a company can produce more units of output 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 company or team.

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

    For example, if an employee called Tom, made sales worth $2,000 in one week of 50 hours worth of work and another employee called James works 20 hours a week and made $1000 worth of sales, then using the productivity formula:

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

    James’ productivity: $1000/20hrs =$50/hour

    In this hypothetical scenario, James is more productive than Tom even though James 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 say 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 than otherwise.

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    Managers can use this formula to determine which employees are the most and least productive, or 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 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 to measure the productivity of various departments across a company.

    With this formula, productivity is measured by comparing output to a 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. labour 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 which 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 cost, output will remain the same.

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    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 their 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 chosen by themselves or ‘self determined.

    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.

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    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 into team productivity.

    At the end of their research period, Google discovered that the best teams weren’t necessarily a collective of individual top performers, 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.

    The People’s Productivity Formula

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

    Featured photo credit: Stanley Dai via unsplash.com

    Reference

    [1] New York Times. March 22, 1915.: F. W. Taylor, Expert in Efficiency, Dies
    [2] Bureau of Labor Statistics. U.S. De partment of Labor. Retrieved 11 March 2017: Multifactor Productivity – Overview
    [3] Paul Krugman, The Age of Diminishing Expectations (1994): “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

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    Mayo Oshin

    Entrepreneur and write on building habits that stick and improving productivity

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    Last Updated on April 23, 2019

    How to Set Stretch Goals and Keep Your Team Motivated

    How to Set Stretch Goals and Keep Your Team Motivated

    Stretch goals are a lot like physical fitness. When you adopt a physical sport such as running, continual practice leads to increased stamina, growth and progress.

    While commitment to the sport improves performance, true growth happens when you are stretched beyond your comfort zone. I know this from personal experience.

    For years, I was an avid runner. I ran with a variety of running groups in the Washington, D.C., area and in Columbus, Ohio, where I lived prior to moving to the nation’s capital in 2011.

    While I was initially fearful about slacking off on my exercise habit when I moved to D.C., running enthusiasts in the area provided continual motivation, inspiring me to lace up my shoes day after day. Much to my surprise, many of the area’s running stores (including Pacers and Potomac River Running) boasted running groups that met in the mornings and evenings. So, it was relatively easy for a newcomer like me to connect with like-minded peers.

    I was never a particularly fast runner, but I enjoyed the afterglow of the sport: being completely drained but feeling a sense of accomplishment; setting and reaching goals; buying and wearing out new tennis shoes. The sound of throngs of feet pounding the pavement in semi-unison is still enough to bring tears to my eyes. Yes, I sometimes tear up at the start of races.

    Of all the groups I ran with, the Pacers Store group that met on Monday nights in Logan Circle boasted the fastest runners. I met up with the group week after week only to be the slowest runner. It was difficult to muster the courage to get up every week and meet the group knowing what was waiting for me: sweating and watching the backs of fellow runners.

    Each time I joined the group, I was stretching myself without even realizing it. Instead of feeling like I was transitioning into a better running, for a long time I felt I was torturing myself.

    Then something remarkable happened. I went for a run with a different set of runners and noticed my time had improved. I was running at a faster pace and doing so with ease. What was once uncomfortable for me I now handled with ease.

    The reason I was becoming a better runner was because I was taking myself out of my comfort zone and challenging myself physically and mentally. This example illustrates the process of growth.

    Fortunately, we can create situations that stretch us in our personal and professional lives.

    What Is a Stretch Goal?

    A stretch goal – as authors Sim B. Sitkin, C. Chet Miller and Kelly E. See detail an article “The Stretch Goal Paradox” in Harvard Business Review[1] – is something that is extremely difficult and novel. It is something that not everyone does, and it’s sometimes considered impossible.

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    In general, you establish stretch goals by doing things that are difficult or temporarily challenging.

    For instance, when I was first promoted to a senior communications management role, I knew I needed to beef up my relationships with media personalities. I set a goal to once a month book a day of media interviews in New York City – which is home to many media outlets, including SiriusXM radio, CNN, NBC News, HuffPost, VIBE.

    This was a huge goal because it meant not only identifying the right people to meet with but convincing them to meet with me and my team. While I didn’t end up meeting the goal of doing a full day of media interviews in New York City, I met more people than I would have met had I not established the goal and instead stayed in the comfort of my D.C. office.

    It is important to note that just because you establish a stretch goal doesn’t mean you’ll achieve the goal each time. However, the process of trying is guaranteed to provide some level of growth.

    The Importance of Creating Stretch Goals

    The beginning of the year is a perfect time to assess where you are excelling and where there is room for you to grow. I typically start the year by creating a yearlong strategic plan for myself.

    I think about the things that are necessary to do and things that would be cool to do. I assess the people I should know and think through how to meet them. Then I ask myself if the goals are realistic and what would need to happen for me to achieve them.

    Over time, I have learned that there are five things I can do to set stretch goals:

    1. Get Outside of Your Head

    If I exist within the confines of my imagination, I imperil my own growth and creativity.

    If I examine my accomplishments and celebrate them in isolation of others’ accomplishments, my vantage point is limited.

    I want to be comfortable with what I accomplish, but I also want to be motivated by watching others. In some respects, stretching is about expanding your network of friends, associates and mentors. These are the people who will propel or slow your growth and development.

    Since two are better than one, I always value being able to share my progress with others, seek feedback and then map a plan for success.

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    2. Focus on a Couple Areas at a Time

    When setting goals, it is important to focus on a couple of areas at a time. Most of us are only able to focus on a few things at a time, and if you feel you are unable to tackle all that is before you, you may simply disengage.

    I see this in so many areas of life:

    When people get in debt, if they believe the debt is insurmountable, they refuse to look at incoming bills for fear of facing down the debt. Unfortunately, many businesses go awry when setting stretch goals.

    In “The Stretch Goal Paradox,” Sitkin, Miller and See note:

    “Our research suggests that though the use of stretch goals is quite common, successful use is not. And many executives set far too many stretch goals. In the past five years, for example, Tesla failed to meet more than 20 of founder Elon Musk’s ambitious projections and missed half of them by nearly a year, according to the Wall Street Journal.”

    Goal-setting is like a marathon, not a sprint. It doesn’t all need to happen at the same time, and pacing is extremely important if you want to get to the finish line. It is better to focus on a couple goals at a time, master them and then move on to the next thing.

    3. Set Aside Time Each Year to Focus on Goal-Setting

    When I was a managing director for communications for the Advancement Project, I spent the first part of every year facilitating a communications planning meeting.

    The planning meeting began with the team members assessing the goals the team had established in the preceding year, and whether those goals were realistic or not. If we failed to meet certain goals, we broke down why that happened. From there, we brainstormed about possibilities for the current year.

    For instance, one year we set a goal of pitching and getting 24 opinion essays published. This was audacious because no one on the eight-person team had the luxury of focusing exclusively on editing and pitching opinion essays to publications around the world. We would need to focus on pitching in between the rest of our work.

    We hit this goal within the first eight months of the year. Remarkably, in total, we ended up getting 40 opinion essays published that year, which was an indication that our original goal was too low. We upped the goal to 41 the next year, and amazingly, we hit 42 published opinion essays or guest columns.

    From this experience, we not only learned what was feasible, we also learned the power of focus.

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    When we focused as a team on getting the commentary on our issues out in the public domain, we were successful. The key in all of this is that there was a ton of discussion around which goal we’d pursue and why.

    Equally important, as a manager, I didn’t set the goals alone; the team members and I established the goals collaboratively. This ensured buy-in from each individual.

    4. Use the S.M.A.R.T. Goal Model to Set Realistic Goals

    S.M.A.R.T.

    is a synonym for specific, measurable, attainable, realistic and time-bound. For the sake of this article, the realistic portion of the acronym is most important.

    While you want to set audacious goals, you want to ensure that they are realistic as well. No one is served by setting a goal that is impossible to accomplish.

    Failing to meet goals can be demoralizing for teams, so it’s important to be sober-eyed about what is possible. Additionally, the purpose of setting goals is to advance and grow, not depress morale.

    For instance, my team would have been discouraged had I begun the year asking it to pitch and place 40 opinion essays if we didn’t already have a track record of placing close to two dozen essays.

    By using the S.M.A.R.T. formula, we were able to achieve all that we set out to do.

    5. Break the Goal up into Small Digestible Parts

    I am a recovering perfectionist. As a writer, being a perfectionist can be counterproductive because I can fail to start if I don’t see a clear pathway to victory.

    The same is true with goal-setting. That’s why I join Lifehack’s fellow contributor Deb Knobelman, Ph.D., in noting that it is critically important to break goals into bite-sized chunks.

    When I had a goal of doing daylong media meetings in New York City, I had to think through all the barriers to achieving that goal and all the steps required to meet the goal.

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    One step was identifying which reporters, producers and hosts to engage. Another step was writing a pitch or meeting invitation that would capture their attention. Another step was thinking through the program areas I wanted to highlight and the new angles I could offer to different reporters.

    Since reporters want to cover stories that no one else has written, I needed to come up with fresh angles for each of the reporters I was engaging. An additional step was thinking through who from my team I’d take with me to the various meetings.

    I was clear that, as a talking head, as public relations reps are sometimes called, I needed the right spokesperson in order to land repeated meetings with different outlets.

    A final step was thinking through what I needed to bring to each meeting and which reports, videos and testimonials would buttress our claims and be of interest to media figures.

    As I walked through what was needed to bring my goal of doing daylong meetings to reality, I realized that not only was the idea within reach, but I was excited to tackle the challenge.

    From that point until now, I have learned to break down goals into smaller parts and tackle the smaller parts on the path to knocking the goal out of the park.

    The Bottom Line

    These are my recommendations for setting stretch goals, and there are a ton of other resources to support you in the workplace and in your community.

    For instance, LinkedIn’s Lynda.com platform has a wonderful suite of leadership development videos, including ones on establishing stretch goals. This is a paid resource but may be worth the investment if you lead a team or want to invest in tools for your own growth and development.

    Featured photo credit: Avatar of user Isaac Smith Isaac Smith @isaacmsmith Isaac Smith via unsplash.com

    Reference

    [1] Harvard Business Review: The Stretch Goal Paradox

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