Every business owner, manager and department head shares the concern of getting the maximum output with the minimum input. Outputs can be anything from furniture to software to hours of service. Inputs can range from raw materials to machine time to hours of labor. The ratio of outputs to inputs is known as productivity. The productivity percentage shows how much of the total available inputs are used to produce outputs.
Why Productivity Percentage Never Equals 100 Percent
Nearly every business experiences times when all its available inputs are not used toward producing outputs. Raw materials get wasted, machines go down and workers take time off. The productivity percentage measures the ratio between the total available inputs and the inputs used for productive purposes.
Calculate Labor Productivity Percentage
For example, Generic Games has an eight-hour workday. The day includes a 30-minute morning meeting, two 15-minute breaks and an hour for lunch. The total available inputs are the eight hours during the workday, but the inputs used for production total only six hours, for a production percentage of 75 percent (6 hours productive time/8 hours total time = 0.75, or 75 percent).
Calculate Machine Productivity Percentage
The same principle for calculating the productivity percentage of labor applies to determining the productivity percentage for machines. For example, Generic Games keeps its online game servers running 24 hours a day. The servers have to be taken offline overnight for maintenance, and then they're rebooted. This process takes three hours each night. The productivity percentage of the servers would be 87.5 percent (21 productive hours/24 total hours = 0.875, or 87.5 percent.)
Changing the Productivity Percentage
Companies can examine their current productivity percentage numbers and adjust as needed. In this example, Generic Games could eliminate the 15-minute breaks for workers, adding another 30 minutes of productive time. The new productivity percentage would be 6.5/8, or 81.25 percent. It could also shorten the maintenance and rebooting process on the servers to two hours, giving the company 22 hours of productive time. The new productivity percentage for the servers would be 22/24, or 91.68 percent.
Multiple Productivity Percentages
When several factors contribute to a company's overall productivity, the managers may look at the average productivity percentages of all these elements to determine an overall productivity percentage for the company. In the example above, the programming staff have a productivity percentage of 81.25 percent for eight hours a day, while the servers have a productivity percentage of 91.68 percent for 24 hours a day.
To ensure a fair comparison between the programmers and the servers, use the programmers' productivity percentage three times (3 x 8 hours = 24 hours) when computing the average. The average productivity percentage for Generic Games would be:
[ 81.25 + 81.25 + 81.25 + 91.68] / 4 = 83.86 percent