How To Measure Employee Productivity The Right Way

You know that employee productivity is essential to the success of your business. But how do you measure it? And what are the best practices for doing so? 

Assessing employee productivity can be a tall order, especially in this modern, hybrid work environment where 69% of HR leaders feel managers have less visibility into employee work patterns (in a hybrid environment). [1] 

That same research found that due to reduced in-person interactions between employees, managers, and leaders, the top two hybrid work policy concerns among CEOs are culture and productivity.

Using insights from Gartner [1] and our own research, we'll dive into strategies, metrics, and best practices to help your business figure out how to measure employee productivity.

What is employee productivity, and why should you measure it? 

Employee productivity, also known as workforce productivity, is a measure of how efficiently workers complete their tasks. More specifically, employee productivity is a measure of how much work employees get done in relation to the amount of expended time and effort.

For an employer, measuring employee productivity brings several operational benefits:

• Pinpoint specific areas where employees need more support and training, then develop a training program around those key areas.

• Figure out how and why certain employees are excelling so you can replicate their success across teams.

• Identify connections between employee productivity and overall business progress to adjust leadership strategies to be more effective.

• Make data-based decisions regarding who to hire or fire, resulting in a more effective workforce overall.

To realize these benefits, it’s important to establish exactly why you’re measuring employee productivity. By defining a clear objective for evaluating employee performance, leaders can effectively communicate the reasoning behind productivity metrics and KPIs to their teams. 

It can also help managers more effectively evaluate employee work patterns and determine how to enhance productivity across their team.

How do you measure employee productivity?

Measuring employee productivity involves three productivity metrics: activity, productivity outcome, and predictive productivity.

Activity metrics

Activity metrics give you the ability to assess how employees perform while in a remote work situation. They measure the amount of time spent or number of incidents associated with specific productivity-related activities. You can better assess productivity by identifying patterns around the kinds of tasks performed and how employees invest their time.

Measurable activity metrics can include:

• How many hours each day employees spend in front of their screens

• The amount of time they spend performing routine or non-routine tasks

• The ratio of overtime hours to regular work hours 

• The average amount of time spent using communication apps

• The time they spend using business-critical apps

When tracking activity, it can be easy to step on employees’ toes, be perceived as a micromanager, or affect employee morale. It's important to balance your activity metrics strategy with good judgment. 

Take the time to explain exactly what you're tracking and why, including how it will benefit both individuals and the business. Otherwise, employees may feel you’re keeping tabs on what they do simply because you don’t trust them.

Productivity outcome metrics

You can use productivity outcome metrics to measure the results of each employee’s work. Typically, you use a combination of initiative-based and ad hoc work to get a comprehensive picture of the results of their efforts. 

Useful productivity metrics vary by industry, and can include:

• Revenue generated by each salesperson

• Amount of new revenue individual employees are involved in creating

• The number of new contracts each person helps initiate

• Rate at which support staff is able to resolve tech issues on the first call

• Number of prospecting calls each employee makes over a certain time period

Productivity outcome metrics are often congruent with some of the most common employee performance goals. Employees may even expect you to use these metrics, and they’re often easy to align with individual employee goals.

For example, a salesperson who is compensated via a combination of a set salary and commission may aim to close 10% more contracts per month than they did the previous year. This could be tied to a productivity metric that tracks how often they land new accounts.

However, it’s important to maintain a sense of balance when working with productivity metrics because they can be a two-edged sword. For example, a manager may hyper-focus on how much time employees spend reaching out to prospective clients instead of considering the impact of each interaction.

To avoid this tendency, teach managers how to set balanced goals, which consider both what workers do and how it benefits—or hinders—progress toward overall business objectives.

Predictive productivity metrics

Predictive metrics focus on measuring factors that could influence productivity in the future. While many organizations use retrospective metrics to monitor productivity, you should also focus on tracking leading indicators, especially those that could highlight productivity difficulties. 

This is where predictive metrics can be particularly useful. Possible metrics include: 

• The number of times individuals shift projects between team members 

• The ratio of project managers to employees

• The average amount of time it takes to complete projects

• The frequency and types of technology issues that occur 

For instance, to encourage optimal productivity among your remote staff, you can identify external factors that could impact their performance, as well as their overall experience.

Evaluate the effectiveness of communication channels that enable them to connect with their on-premise colleagues. If there are issues with your collaboration software, this could predict potential productivity drops, especially among workers who need to regularly collaborate with other team members.

By reducing the friction employees have to push through to complete their jobs effectively, you place them in a better position to meet their goals and, in turn, feel better about their work experience, which can lead to better business outcomes.

Key considerations for measuring employee productivity

It’s easy to put the cart before the horse when measuring productivity and jump to specific metrics. But even though a metric provides interesting information, the reasons behind it often carry more import. 

To gain an objective view of why you’re measuring employee productivity (which will make the metrics you choose to measure more impactful), answer the following questions:

• What is the importance of measuring employee productivity?

• In what ways can the collected data help us achieve organizational goals?

• What productivity-related metrics will provide the most useful data for our goals?

• Which stakeholders will this process impact the most, and how will they be able to use the data?

While productivity metrics provide valuable information, they can also become sources of work friction, making it important to proactively watch for tension or key red flags. 

How work friction manifests varies across roles and departments, making a single set of work friction metrics difficult to determine. However, these common friction points could impact productivity and job satisfaction:

• Misaligned work design: This may include when employees have to create new systems just so they can accomplish their jobs or deal with work processes that get in the way of achieving business goals.

• Overwhelmed teams: Teams may feel overwhelmed when they have more and more work piling up without getting more time, staff, or help to do so. They may also get weighed down by the pressure of having to find the info they need to carry out certain job functions.

• Insufficient or trapped resources: A lack of money or the right team members due to static operating budgets that stay the same, regardless of what happens over the course of the fiscal year, can be a significant deterrent to productivity.

• Rigid processes: Rigidity can result in delays that impact productivity, especially if processes aren't regularly reviewed and adjusted as needed.

Teach your managers to have ongoing conversations with both in-person and remote employees to discuss productivity metrics, their context, and any pain points affecting their roles. Keeping the lines of communication open will make your productivity metrics efforts more effective overall.