How to Calculate Manpower Productivity
By quantifying manpower productivity, business owners and managers see how employees' efforts translate to income and profits. Evaluating the factors that affect productivity can help business organizations make any necessary changes to boost the bottom line.
Although the word "manpower" is used traditionally, many businesses now opt for gender-neutral terms such as "workforce," "worker" or "labor" productivity.
Productivity can be defined as the amount of output that is generated with a given amount of input. Depending on the industry, the output may be goods, services or sales; the manpower productivity formula is essentially the same. To calculate manpower or labor productivity, you divide the value of goods and services produced by the total hours worked by employees over a specified period. You can also calculate labor productivity by dividing the total sales by the total amount of hours worked.
Here are the step-by-step instructions for running a manpower calculation:
Determine the total hours that employees worked. For employees who work a specified number of hours each day, subtract the hours or fractions of hours allocated to lunch and break times. You may need to ask employees to keep a log of tasks and times over a given period.
Time management software calculates work hours automatically for employees who punch a time clock. In some small companies with few employees, employees maintain time cards with manual entries. Calculate hours worked by subtracting the start time from the end time. Make manual calculations easier by using a 24-hour clock. For example, noon is designated 12:00. One o'clock is 13:00, two o'clock is 14:00, etc..
Determine the unit of measurement for your employees' work product. For example, if you employ salespeople, use either the number of sales or the dollar value of sales. If you employ factory workers, look at the number of units of an item produced. Evaluate customer service employees on the number of phone calls answered or the number of people served. Employees who work one-on-one with clients can be evaluated according to their billable hours.
For a given period, add the work units produced by each employee. Add the individual numbers to arrive at the total number of work products produced by all members of the organization.
For the same period, total the total number of hours worked by all employees. If time management software calculates the hours, you may want to round the number to the nearest hour.
Divide the number of hours by the number of units produced to get the number of work units produced by the organization in one hour.
Divide the number of work units produced in an hour by the total number of employees. The resulting figure tells you how many employees it takes to produce the number of work units in an hour.
ABC Company manufactured 75,000 units of product for the quarter. During the same period, employees logged 7,500 hours of labor. Divide output (product) by input (labor). 75,000/7,500 = 10. Employees produced 10 units of product per hour.
XYZ Company had total sales of $2 million for the fiscal year. Employees worked 5,000 hours. Divide output (sales) by input (hours worked). 2,000,000/5,000 = 400. Each hour of work results in $400 in sales for the company.
Project management and online time-tracking software track productivity automatically using electronic timesheets that gather data in real time. It is easy to use this data to create performance reports for every employee. It's a good solution for companies that employ remote workers. The downside is that time is the only measure of productivity. The software cannot track how time is spent or the quality of the output.
The manpower productivity formula can track trends over time. Businesses can often improve productivity with new production and service techniques, including automation. Experienced employees tend to be more productive than newcomers, and productivity typically falls when companies experience turnovers. Training and incentives can help retain employees and minimize turnovers. Money spent on training and incentives can boost a company's bottom line over the long term.