Learn how to calculate productivity in the company by defining which rates can really make you sell more.
Knowing how to calculate productivity is a very important knowledge for entrepreneurs and managers. After all, without knowing how to measure the efficiency of what is being produced, whether services or products, it is not possible to assess whether the results are adequate in terms of the resources used, nor to compare its performance with other companies and with the market.
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But after all, what is productivity?
Productivity is a relationship between what was produced and the resources used to achieve this goal. Productivity measures the efficiency of production in your business.
In a simplistic view, it could be said that the more that is produced with fewer resources, the greater the productivity. But you have to take into account the quality. Producing goods or offering services in large quantities with a reduced staff and deficient inputs does not necessarily mean high productivity.
Correctly define the best indicators to calculate productivity
It is necessary to make a balance between the quantity and the desired quality, both of what is produced and of what is used in production, to properly define how to calculate the correct productivity index for your company.
For example: a restaurant that has one waiter per table will certainly have a much better service level than another that uses one waiter for every 4 tables. But what about the costs that will come from that decision?
So, before thinking about how to calculate productivity and efficiency in your company, you need to define what your customer values and determine how to achieve this result with the desired quality and the least amount of resources possible, without displeasing your audience or ruining your finances or the profit margins.
How to calculate productivity and efficiency in your company
As we mentioned, it’s no use defining dozens of productivity indices without having a specific objective and a clear vision of what you are analyzing with them.
The first step is to define your company’s differential that benefit offered to your customers that makes them choose your products and services over competitors’ products and services. It is this differential that adds value to your product!
Then yes, knowing this, see how to calculate a productivity index that portrays this important part of your process! Not that other steps in the process shouldn’t be measured, but this one is the most important!
For example: Let’s say that your customers highly value your company’s after-sales service and the service provided whenever necessary.
Productivity is a relationship between what is produced and an employed resource
Remember: productivity will be the relationship between a deliverable and a resource used to achieve that deliverable.
Therefore, you need to define these elements properly to know how to calculate productivity and efficiency for that specific case, creating a representative relationship for your business.
Let’s say that if you chose this way, in the case of after-sales productivity:
- Delivery: number of customers served in one month
- Resource: number of employees working this month
Productivity Index 1 = Number of customers served / Number of employees
You would divide the number of calls by the number of employees and you would have an index that would measure the efficiency of serving many customers. But would this number reflect a relevant value for your customers? Wasn’t it said that they value the quality of care and not its speed or quantity?
Not that this index should simply be abandoned, but there are ways to calculate productivity and efficiency (in this case, quality of care) in a more useful way to analyze team performance in relation to something that adds more value to the company and is valued by the customer.
Average service time per customer:
Productivity Index 2 = Number of customers served / Hours worked in the period
And in this case, it might be interesting to impose a minimum threshold, below which the quality of service is being left aside in favor of speed of service. An ideal interval could be defined, neither too fast nor too long (and unproductive) in the service.
But couldn’t we improve this even more? What if we could measure customer satisfaction in relation to hours worked? In this case, it would not even be necessary to define a minimum time for each service, as only satisfactory results would enter the account.
Of course, for this, a satisfaction survey would have to be carried out after each service or by sampling. Or, if it is not feasible to do this, it is possible to use the number of complaints about service and after-sales in relation to the available service hours. See how to calculate service productivity using these two suggestions:
Productivity Index 3 = Number of satisfactory services / Hours worked in the period
Productivity Index 4 = Number of complaints about service / Hours worked in the period
Note that there is no way to calculate productivity using these indexes without taking into account that they are inversely proportional, that is, the greater the number of satisfactory services per hour (Productivity index 3), the better the productivity. On the other hand, for Productivity index 4, the fewer complaints per hour, the lower the index result, indicating better productivity.
Therefore, it is necessary to make sure, in each case, how to calculate productivity correctly for that point in your company’s production process. What’s more, you can use multiple indexes. Just don’t exaggerate the number so you don’t get lost when controlling the results.
The best productivity rates are related to customer satisfaction
Below is a short summary of the entire process:
How to calculate productivity and efficiency in the company step by step
- Understand who your customers are.
- Determine what they value in your outputs that is, what they want to see in your products or services (competitive differentiators).
- Analyze wherein the process this can be measured.
- Define two quantities to be mediated: an inbound resource and an outbound result.
- Analyze the relationship between these quantities.
How to calculate the productivity in hours?
Productivity in hours can be calculated using the following formula: productivity index = number of tasks performed / hours worked in the period. Of course, it is necessary to take into account the type of service provided, which can be customer service, for example, in addition to quality.
How to do productivity analysis?
Follow the tips below to do a good productivity analysis.
- Get to know your business and your goals in depth;
- Understand the role and activities of your employees;
- Define productivity indicators, the focus of analysis;
- Choose the time to measure such factors (hours, days, weeks etc.);
- Determine the two measures to analyze (service/hours or sales/employee, for example.).
How to control team productivity?
- Monitor the schedule of tasks and activities;
- Communicate goals and deadline expectations;
- Implement good project management;
- Make good planning for unforeseen events;
- Create checklists by priority level;
- Use the productivity analysis index;
- Automate redundant tasks;
- Keep in touch and be present.