Employees are considered assets of a company as much as a company's product or service portfolio, and they can make or break a company. As such, a company should invest in its employees but also expect to get a return on that investment through their employees' productivity.


Ultimately, the importance of employee productivity lies in the fact that the amount of money a company spends on employee wages should be less than what the employee earns the company through his work.

Defining Employee Productivity

Employee productivity, also called workplace productivity, is an assessment of an employee's or a group of employees' efficiency. It is evaluated by looking at the total workforce or employee output in a given time. In most cases, the productivity of an individual will be assessed in comparison to the average output of other employees doing similar work.

Productivity vs. Effectiveness

A lot of people, even people who regularly discuss workplace productivity, confuse the terms productivity and effectiveness. However, these terms are not interchangeable. Effectiveness is how much effort an employee puts in, whereas productivity is how much work is completed. Some employees can be very productive but not very effective, whereas some employees can be effective without being very productive.

As an example, imagine there is a spreadsheet of names that needs to be sorted alphabetically. Employee A tediously takes over an hour copying and pasting the names until they're in order. Employee B takes on the same task and uses Excel's sort function to alphabetize the names in a matter of minutes. She then spends 20 minutes on Facebook. Employee A was effective in that he focused on the task at hand until it was completed, but he wasn't productive in that he didn't achieve as much in an hour as Employee B. That being said, while Employee B was productive in that she did the work in less time, she was ineffective in that she wasted 20 minutes doing a task that was not work related.

Just about everyone has worked for a company that refuses to streamline processes, making their employees ineffective, but good workers will still strive to maximize their productivity even when they cannot be as effective as they would like. Ideally, a workplace should strive to maximize both productivity and effectiveness in order to get the best return on investment in their employees.

Importance of Productivity

In order for it to make financial sense for a business to hire employees, employees must produce value for the business that exceeds the cost of employee wages. In this way, an employee is an investment, and the investment should, in theory, provide a worthwhile return to the company. This can only happen if an employee is productive. Thus, the importance of productivity in an organization lies in the difference between an employee making the company profit and the employee costing the company money.

Other Benefits of Employee Productivity

Of course, when an employee is productive, it also contributes other benefits to the company. For one thing, lazy employees who do not get disciplined and are otherwise treated the same as hard-working employees demotivate the others. To the same purpose, a highly productive employee, particularly one who is rewarded for his hard work, can motivate other employees, boosting morale and making a better environment for the company as a whole.

When employees are productive, it can increase the company's revenue, and in turn, a company may choose to offer incentives to its employees. Failing to reward a productive staff can demotivate the whole team. If a company shares some of its success with employees in the form of pay raises, bonuses and improved benefits, employees can become more motivated and increase productivity. Additionally, this increased revenue can result in the company growing and bringing on even more employees.

Productive employees can also benefit customers because highly productive employees provide speedier and higher-quality customer service than those who are unproductive. If employees are rewarded for their productivity and are highly motivated, this can result in even better customer service and interactions. Naturally, great customer service can result in customer loyalty and word-of-mouth advertising, which can in turn bring further revenue for the business.

Measuring Employee Productivity

Measuring the productivity of a workplace is important when you have employees, but it can be difficult to do. After all, simply measuring total production means nothing if the production is shoddy. For example, if your company sells toasters, you might want 500 toasters to be finished in the factory per day, but if 25 percent of those toasters are defective, the end result of 375 functional toasters is worse than if the employees simply made 400 fully functional toasters a day. A few popular measurements of employee productivity are quantitative, service productivity, objectives, time management, profit and quality of work.

To use quantitative measurements, you must know your company's normal output. You can then average it over the span of a month or year and then divide it by the number of employees. At this point, you'll have an objective standard to which you can compare each individual employee's productivity. When using this method, it's important to be reasonable. Don't expect every employee to meet the average all the time. New employees will take some time to get up to speed. Some employees may have personal problems that slow them down. Sometimes broken equipment or other factors beyond an employee's control might slow her productivity. Setting up productivity quotas that cannot be met may end up discouraging employees more than motivating them.

A company that offers services rather than products may not be able to measure output as easily, but it can still measure service speed or quality by evaluating how many clients an employee sees or through the use of customer surveys.

To use the objectives method, set out clearly defined, well-explained goals for your employees. To ensure goals are met and employees are held accountable, set up regular meetings between the employees and their managers.

For time management, you need to ask employees to track how they use their work hours. By making them accountable for their time, you can reduce wasted time spent on activities like chatting, texting or using social media. You can ask employees to track their time multiple ways. You can install time-tracking software, ask employees to make daily reports to their supervisors or ask your workers to check in or out of projects while they work on them via time clocks or computers. When using this method, it is important to ensure your employees do not feel micromanaged, or this can result in a loss of productivity.

Profit and quality of work are both good ways to evaluate a whole team if you don't want to micromanage. To use either of these methods, you simply need to look at the overall profits or quality of work produced. If you're happy, then that's the end of it. You can't evaluate individuals based on your overall profits, and you can only evaluate the quality of work for an individual if she works alone on projects, but these methods can be a good option for those who only care that their team is helping the business overall.

The method you use to measure your employee's productivity should vary based on your specific business and the employees being evaluated. After all, productivity measures for a meat-packing factory should be much different than those used to evaluate a team of customer support agents.