What is employee productivity? Definition, calculation and best practices for improvement - Spiceworks (2023)

"Employee productivity is defined as an assessment of the value created by an individual employee over a specified period of time."What is employee productivity? Definition, calculation and best practices for improvement - Spiceworks (1)

Fig. 1. Calculation of employee productivity

Table of contents

  • What is employee productivity?
  • Employee productivity calculation and benchmarks
  • 4 best practices to improve employee productivity in 2020
  • How does a performance appraisal affect employee productivity?

What is employee productivity?

Employee productivity is defined as an assessment of the value created by an individual employee over a specific period of time.

Productivity is directly related to business results (both short- and long-term) and return on investment (ROI). Without this correlation, an activity cannot be considered productive.

High or low productivity depends on an organization's internal average and where the employee, team, and department rank against that predefined baseline.

The overall success of an organization has everything to do with the efficient and effective productivity of the workforce.

Regardless of the business opportunity, investment, or strategic direction you take, execution and innovation on the ground depends on your people. This is why companies are so keen to increase the productivity of their employees and help them perform better in the workplace.

But before we dive into how you can improve productivity/performance, let's take a closer look at the concept of employee productivity and what it entails.

To understand exactly what the concept of employee productivity means for your organization, you must first identify the intended value of employee efforts. Let's look at three examples - a school, a contact center and a software development company.

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School staff (teachers, administrative staff, non-teaching staff, etc.) work towards meaningful education, which is defined by students' performance on exams and their students' extracurricular development. Staff will also seek to maximize the investment/income generated to keep the school running at a sustainable pace. There will also be marketing efforts to attract new students and help the institution grow.

Following this example, any activity that contributes to the achievement of any of these goals can be considered productive. The more productive an employee's activities are, the more valuable they become to the school.

Turning to a contact center, the concept of employee productivity is different. The basic value delivery expected from a typical contact center worker is a large volume of customer inquiries handled effectively with the expected level of satisfaction. Employees who handle large customer interactions with ease and effectiveness are considered to be the most productive.

After all, productivity for a software development company means hands-on programming/development, product design, marketing and sales, strategic decision-making, customer service, and many other side jobs. Each role has a unique opportunity to deliver value and ROI.

As these examples make clear, the concept of employee productivity can be very nuanced depending on the nature of your business and organizational structure. Let's see exactly how this metric is calculated.

Learn more:Top 10 Employee Productivity Tracking Software of 2020Opens a new window

Employee productivity calculation and benchmarks

Here is the formula for calculating employee productivity for easy reference:

Employee productivity by value metric = (employee goal / actual performance) x 100

Employee goals can be anything from hours worked to projects completed, depending on the type of work and the parameter that best describes the company's productivity.

Accurately calculating employee productivity depends on setting the right benchmarks from the start. In our contact center example, we used the number of customer calls as a productivity indicator—but volume isn't the only element to consider.

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Here are five benchmarks to remember when planning and calculating employee productivity:

1. Customer Impact

How are customers impacted by employee performance and outcomes?

This is one of the most important parameters to consider when measuring productivity. Metrics such as Customer Satisfaction Scores (CSAT) andNet Promoter Scores (NPS)Opens a new windowQuantify customer impact. Let's say the average NPS across the company is 8 out of 10. When an employee receives a 7.5 rating from their customers, it indicates an impressive 93.75% productivity level.

2. Quality of work

It is important to consider the quality of a person's work when calculating his productivity. Sometimes this is reflected by CSAT or NPS, but most often this is an internally calculated metric. For example, a manufacturer might use defects per unit (DPU) as a good quality signal, indicating that an employee with low DPU is highly productive.

In many cases, an employee's immediate manager has a better understanding of their qualitative productivity. Let's say a software development company employs a programmer whose total working time is below expectations - while this may be a hurdle from an HR process perspective and appears to be hampering productivity, only the manager can confirm where there is an actual impact on productivity metrics (usually programming date and code quality), which are often not tied to the actual working hours.

It is wise to identify quality benchmarks specific to your area (manufacturing, education, technology, public sector, etc.) as well as the employee's operational vertical (marketing, human resources, operations, administration, design, etc.).

3. Mental health and well-being

The sustainability of the productivity level is essential for an accurate calculation. A dissatisfied, stressed employee will not be able to perform optimally in the long term.

Actually theReports of the World Economic ForumOpens a new windowthat happier employees are more productive - a survey of 1,800 contact center workers at British Telecom found that positive employee health and happiness was 13% higher sales. We recommend that you carry out regular checks to keep track of the psychological well-being of employees.

4. Time Optimization

High productivity must go hand in hand with intelligent use of time and a central focus on work-life balance. Employees should not choose regular overtime hours to exceed productivity expectations. On the other hand, they should not spend large parts of the day on unproductive activities.

ASurvey of 1,989 office workers in the UKOpens a new windowfound that employees spend just 2 hours and 23 minutes each day being productive. By comparing productivity to hours spent, you can avoid this trap.

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Learn more:Manager Performance Review: 5-Step Guide with ExamplesOpens a new window

4 best practices to improve employee productivity in 2020

While productivity is related to an employee's personality and skillset, there are several ways companies can help maximize their potential. Here are four best practices to improve employee productivity.
What is employee productivity? Definition, calculation and best practices for improvement - Spiceworks (2)

Fig. 2. Four best practices to increase employee productivity

1. Equip your workplace with the latest productivity tools

Employees need sufficient technology to achieve their goals in a reasonable time frame. While basic industry standards are followed, the depth of automation/technology support depends on the amount of work required to achieve the stated business goals.

For example, a collaboration app like Slack or Microsoft Teams ensures easy access for and for all members of the organization and reduces the time spent creating new emails/internal phone calls.

ZensarsLiving Digital surveyOpens a new windowof over 1,000 US employees found that 76% of them are more productive when they have access to the necessary digital tools. You can conduct surveys asking employees what activities they find most time-consuming and see if any of those activities can be automated/technically supported.

2. Make the work environment productive

Businesses are investing heavily in office perks and wellness programs to increase productivity. However, research suggests that some simple actions can increase officer productivity.

ASurvey of 1,601 North American workersOpens a new windowfound that air quality and comfortable lighting are the top two factors that make employees happy in their work environment. And those who are happy are 16% more productive (not to mention 18% more retention-friendly).

In the future, companies should take a closer look at how they treat employees in order to increase productivity and recognize the voice of the employee. Smart office layouts, the use of fabrics to improve office acoustics, clean water and air can go a long way towards improving productivity – especially in offices with a large number of employees, where this often becomes a critical issue.

3. Offer instant learning opportunities

learn and developOpens a new windowis probably the most effective way to increase productivity over the long term. You can train employees to use productivity tools, you can improve soft skills that enable them to work better together, and you can increase their familiarity with the operational area, thereby accelerating the work process.

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But it is often difficult to find time for further education after a busy day at work. That's why in-the-moment learning is a key best practice for 2020. It's a process by which organizations use workplace learning for maximum productivity by embedding the learning modules into workflows. It also leverages mobile learning so employees can consume bite-sized content in their free time.

4. Provide instant access to time tracking tools

This is a productivity factor that is often overlooked: employees cannot improve their performance if they do not have insight into their efficiency. A time tracking tool solves this problem by monitoring the time invested in each activity, the value it generates, and any gaps in productivity.

Andtime trackingOpens a new windowdoes not need to be mandated by the company – it can be recommended as an employee-owned tool where your workforce uses a dashboard to self-monitor and improve time use.

You can invest in end-to-end project management platforms like Trello that also have powerful time tracking features. Or there are several free tools like Homebase, Toggl, and Google Calendar that can serve your purpose as well. The idea is to link an employee's time to their productivity and optimize the correlation for maximum work-life balance.

How does a performance appraisal affect employee productivity?

Appraisals are often used as a forum to discuss an employee's productivity and opportunities for improvement. Executives often focus on the impact of performance reviews on employee productivity in an organization - but this needs to be part of a larger conversation.

Here's how performance appraisal could play a role in transforming employee productivity at your organization:

  • First, use the benchmarks and formula we discussed to measure year-round productivity.
  • Next, determine concrete steps to improve productivity by following the four best practices mentioned.
  • Third, observe the impact of these actions on productivity levels and conduct a longitudinal study - to capture how a given employee's productivity has changed over time.
  • In this last step, you use a performance appraisal to influence employee productivity in your company. Share the results of the longitudinal study, highlight the most effective productivity drivers and steer employees in the right direction.

Learn more:How to phase out the annual performance review (and what to do instead)Opens a new window

There you have it! While the concept of employee productivity might seem complex at first, it can be surprisingly easy to understand and improve upon.

Businesses can leverage the latest technologies, strategies, and best practices to create a productivity-friendly workplace.person analysisOpens a new windowcan also help you measure productivity on a regular basis and process data from a variety of sources. Ultimately, it comes down to corporate culture and a keen eye on employee orientation.

This will help to continuously increase the health and productivity of employees andEngagementOpens a new window, even as you scale new heights of business success and corporate growth.

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What steps have you taken to improve employee productivity in 2020? Tell us moreFacebookOpens a new window,LinkedInOpens a new window, orTwitterOpens a new window. We look forward to sharing your insights with the world!


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