All companies need to know what's productivity. Productivity is the capacity of carrying out tasks at a specific time and with the number of resources our business has. To optimize our processes, it's important to take into account the productivity values our company has.
On this page, you'll find what productivity is for, how it's calculated, how you can improve it, among other aspects.
Productivity is defined as an economic measure that allows you to calculate how many goods and services were produced per factor. It's the capacity of doing more tasks in less time; therefore, if a company is capable of improving its productivity, it means that the value of its products grows at a higher rate than the raw material with which those products are being manufactured. In this case, we would be talking about plant productivity.
When we ask ourselves what productivity is we have to keep in mind that a company can't be productive if its strategy is not clear, its goals are not shared with its staff, there's a lack of infrastructure, and responsibilities are not shared.
What's the aim of productivity?
Productivity allows us to measure what's produced in our company from the resources we're using to manufacture them; therefore, its goal is to optimize that amount of the used resources to get better results. This helps us to know if we're being efficient or if we have to adjust the processes we carry out (if they need to be improved or changed). The ideal result is to get the greatest number of results using the least number of resources: that'd be maximum efficiency.
Why is productivity important?
Productivity increase in our company is important because it allows us to improve the quality of our work. Productivity is a determining factor in the economic growth of a company (and even of a country). Taking into account our levels of productivity allows us to know how our growth will be in the long term; it's also important to establish the goals and processes in our industry. A thorough analysis of productivity involves saving money and time. A good result involves combining all the resources that allow us to produce a particular good or service perfectly.
Factors that help improve productivity
Launching new products constantly.
Improving customer service.
Reaching new markets.
Opening new business units.
Lowering costs by slashing prices.
Identifying the resources used for each task.
Having formalized processes.
Improving productivity in industries
It's also important to measure productivity in every industrial sector:
- Substituting manual work.
- Adding new technologies and updating processes.
- Keeping a record of all the necessary information in one place.
- Investing in training employees.
- Investing in maintenance.
The items previously mentioned are very important to know the productivity in different industries from the construction industry to the metalworking industry, among others.
To improve the productivity in our factory there are also some general tips to keep in mind:
1. Analyze the workflow
2. Update production processes
3. Invest in training workers
4. Set realistic goals
5. Invest in smart machinery
6. Invest in maintenance
7. Keep procedures organized
8. Foster collaboration among peers and teams
Types of productivity
There are different types of productivity, even though they focus on the same concept: Doing more with less. From a theoretical point of view, productivity is divided into three types that we identify below:
- Workforce productivity refers to the productivity obtained according to a specific workload used for it.
- Total factor productivity is related to the productivity obtained taking into account all the resources used for its production (both work and capital).
- Marginal product refers to the additional productivity obtained thanks to adding a factor in the production and keeping all the others constant.
As we explained before, these are the main types of productivity defined by the general theory; however, we know that productivity is present in every area of our company that requires a process that combines the resources used to create a good or provide a service. That's why next we'll mention some types of productivity we can find in a company:
It is the more extensive use because of the type of resources: physical, technological, management tools, and especially, human resources. The correct combination of these aspects makes it possible to reach high-quality levels in the standards of production, add value and accomplish excellent customer service.
In the society we now live in, it is necessary to create commercial strategies to get to new markets to increase the number of potential customers and, eventually, forge ties with them and gain their loyalty.
Innovation needs to be perceived as something new and profitable within the organization. To achieve this, we need to carry out actions for controlling the environment, knowing the evolution of tendencies, using benchmarking processes, and being very much aware of new technologies we can use.
Companies need to possess exact, high-quality, and updated knowledge of every aspect regarding their activity: technologies, tools, management processes, quality improvement tools, among others. This will allow you to reach a leading position, even over your competitors, and position the company as a role model in the industry.
Work teams productivity.
Productivity in work teams is a key element we need to consider. We can help our team be more productive by fostering communication among the other members, collaboration and transparency at work, and establishing deadlines for deliveries and processes.
We must talk about remote work because of the situation we're living. For some years now, this way of working has been implemented in big companies and, then, most companies had to adapt to it due to the pandemic. Remote teams can be very productive and even have advantages over teams that work at the office. It involves having online meetings, perhaps not every day but now and then. We must make the most of this new way of working since it can be beneficial for both the company and the employees. Technological tools will be very helpful for communicating virtually.
There are some tools that we can use in our company to increase productivity and decrease the time and resources for each task. Below, you'll find some tools we have chosen since we have used them at some point; however, you can find many more on the Internet.
This software is very similar to Trello, also based on Kanban methodology. The difference is the possibility of managing teams in a simpler way and even communicating through the platform. We used it for some time but it was a little bit difficult for us to move all the tasks and be able to have a clear organization (it's our personal opinion).
In general, Wunderlist is a personal organizer for tasks and projects. We tried it when there was a boom in task organization tools but we think it's very good to make shopping lists (to carry out specific tasks); however, at that time, we had fewer integrations with other tools so it was difficult to keep on using it.
It is a blend between Wunderlist and Trello which allows you to have boards with different tasks and activities; however, we also think that it is useful for personal things. We used it at the beginning to determine which tool would be right for our company.
A different type of software; we define it as a mind-organizing tool. At Drew, we use it alongside Monday for more creative tasks or those which require specific organization. It is THE software to brainstorm at an accessible price.
Monday.com (the one we use at present)
After trying many tools for several years, we found Monday.com: a type of software that allows us to have our company aligned and organized.
- Time: it's one of the most important indicators. Managing time is very important to measure productivity since it will allow us to know how much time we will need to achieve our goals.
- Money: it's also a very common productivity indicator. It's present in all industries and it's vital for them to work. By measuring how much money we will spend on a particular process, we will be able to establish a budget for all our processes and goals.
- Resources: it's another important indicator we need to pay attention to. The resources we have in our company must be used to their fullest so we can talk about efficiency and high productivity. In case resources are wasted, we would be also wasting time and money.
This simple technique will help you know what group of customers adds more value. In general, you'll be able to see that a small part of your customers adds more to your company than others so, thanks to this technique, you can focus on them and leave the elements that don't add value behind. You can also know who your main customers are, those that you need to keep. The same technique can be applied also to suppliers, sales, and any other aspect you want to measure in our company.
This tool is perfect for managers since it's a good method to study and design strategies that allow the company to beat its competitors. This inventory control system has proved to be very helpful to study and know the demand of the products that are being sold.
How to measure productivity
Measuring productivity is necessary for every area of the company to be on the same page. It is probably the best indicator (KPI) to assess the performance of the different areas that make up a company from production processes, accounting, marketing, to sales, among others. Knowing this number helps us know how "productive" each area is and allows us to make informed decisions about it.
The way of calculating productivity is easy: we just need to know some information and divide it. In some areas, it will be easier than in others, but it basically functions as follows:
Production in $ / (Time in $ + Costs + Expenses)
With this equation, we can calculate the general productivity of our company in order to know how productive it is.
Calculation of sales productivity
The average number of sales that your employees make is a good measure of productivity since it helps you determine how much your sales have to increase so as to justify hiring a new employee. In order to get the productivity average of all your employees, you have to divide the net sales by the number of employees. For instance, if your net sales are worth US$10,000 and you have 10 employees, then US$10,000/10 = US$1,000. This means that your sales must increase by US$1,000 in order to justify the cost of hiring a new member for your team.
Sales productivity per team member
In order to measure the level of productivity of each employee, you need to calculate the individual net sales and divide them by the number of hours worked by each employee. Team members that have more individual sales in the same working hours are more productive than those with fewer sales. For instance, you have two employees that work the same 8-hour shift, Andy and Alice. At the end of the shift, Andy has net sales worth US$2,400 and Alice has net sales worth US$1,600. Andy's productivity is US$2,400/8 = US$300. This means that Andy sells overall US$300 per hour while Alice's productivity is US$1,600/8 = US$200; therefore, Alice is less productive than Andy is.
Working productivity of the employees
If you manufacture a product for selling, you can measure the productivity of the whole plant by dividing the number of manufactured products by the total number of worked hours for a specific period of time. For instance, in January you have 10 employees that work an 8-hour shift, five days a week for 40 hours a week. That equals 400 hours a week and 1,600 hours a month. Your plant produces 24,000 products during January. 24,000/1,600 = 15. This means that your employees manufactured a total of 15 products per hour during that month.
Individual working productivity
Measuring the individual working productivity of each employee helps us assess the performance of each of them. The equation we have to do is to divide the working hours of each employee by the number of products manufactured by that employee during a period of time. For instance, you have two employees: John, who does 8-hour shifts for 40 hours a week, and Jenny, who does 5-hour shifts for 20 hours a week. John and Jenny work in the same machine that produces screws. At the end of the week, John's individual production is of 1,000 screws and Jenny's is of 800. John's personal level of productivity is 1,000/40 = 25 while Jenny's is 800/200 = 40. Even though Jenny is a part-time worker, she is more productive than John is, since her personal level of production is higher.
Technological revolution and its impact on productivity
Technology is a tool that simplifies many daily tasks we carry out in our lives. It has always been part of productive processes and it has become a business ally since it makes all tasks easier. Since 2020, when the pandemic emerged and lockdowns began, technology has helped many companies to enter the digital world and adapt to it, even though it wasn't on their plans. What's important about this is that the companies that adopted technology realized that it was beneficial for the productivity and profitability of their businesses.
The use of technology influences our business every day since it's something that needs to be developed and updated constantly. Therefore, some changes in the way we work, in how we communicate, and in the physical organization of places be more visible thanks to it.
Some of the advantages that technology gives to the business world are:
- increase in productivity
- increase in the number of tasks we can carry out
- decrease in the number of errors made
- increase in competitiveness in the market
- decrease in costs
- automation of processes
All these factors add value to our company and make positive changes in all teams which also favor the development and growth of our business.
To include technology in our business is important that you have into account what type of tools you need, in which areas you're going to implement the biggest changes and what processes you're going to modify. Therefore, it's necessary to know all the available tools perfectly, and do some research on the supplier of the tool you want so you can talk to him/her if you have questions about its functioning; also, it'll be helpful if you know how it works and how it's implemented beforehand.
The automation of processes thanks to technological tools allows us to:
- avoid keeping tasks waiting.
- avoid waiting time by making operative decisions.
- avoid losing unfinished tasks.
- have better access to information.
- avoid losing documents or important information.
- know the status of processes and the functioning of the company in real-time.
Causes of low productivity
We've seen that we need to pay attention to processes and other factors that make our business be highly productive. We also need to take into account some factors that cause low productivity:
- Deficient management
- Old software tools.
- Employee discontent.
- Untrained employees.
- Underqualified employees.
- Lack of communication between employees and managers
Now, we have to talk about SMEs (small and medium-sized companies) that are part of the business world. Many SMEs have stated they had low productivity due to the pandemic and they had to implement emergency protocols. Employees said that factors such as mental burnout, lack of motivation, hyperconnectivity, lack of process automation, among others, led them to be less productive.
Bottlenecks are stages that affect your productivity. They are activities that reduce the production process, make waiting time increase, and, therefore, decrease productivity. It's very important to identify the causes of these bottlenecks so you can work on them and eliminate them. Some of these causes can be:
- Lack of organization in some area or process
- Human errors due to not knowing how production processes work
- System flaws
- Lack of internal communication
- Problems with suppliers
- Lack of physical space to store the products
- Outdated inventory
- Lack of interest of managers in the processes of the company
It's important to identify the causes of bottlenecks since if you don't realize where you're failing, you'll never be able to work on that problem and solve it. Bottlenecks also harm your earnings since you'll have to use more resources than you need.
In general, we can suggest some steps that will help you solve bottlenecks:
1. Identify the problem
2. Detect the characteristics of the problem
3. Detect the causes of the problem
4. Plan actions to solve the problem
5. Analyze how actions will be carried out
6. Modify the process according to the actions taken
7. Check activities and processes constantly
How to solve low productivity
Low productivity is a common problem that companies have to face. It's important that you pay special attention to the causes of this low productivity so you can resolve them. Some of the signs of low productivity in teams have to do with:
- Unmet deadlines
- Complaints about defects in the quality of the product
- Low motivation of employees
- Work priorities are not clear
- Decrease in profitability
- Technological backwardness
It's widely known that productivity increases when the team is collaborative, therefore, it's important to foster this feature; there are some digital tools you can use to encourage collaboration among teams. Sharing files on the cloud with other users is very helpful; you can also use apps for cellphones, add individual and group calendars, and invest in the security of the system to protect the information of the company. These are some of the tools that improve internal collaboration.
There are some other strategies you can implement in your company to improve productivity and are directly related to the employees. Some of them are: providing the team with the right tools; improving collaboration activities; fostering autonomy; communicating clearly; allowing remote work. These are some of the strategies that help employees to feel better; if they are happy, they are more productive and your company benefits from it.
On the other hand, we can mention some strategic solutions for the company to foster productivity as well.
1. Think about your company's future
It's important you use and take advantage of technology. There are no static companies so they have to adapt to changes: technology is very important for it.
2. Company innovation
Innovation is key for the growth of your company and to prove it's competitive. It's also related to technology and it helps us adapt to the changes in the environment.
3. Improvement of productivity by training employees
Training your employees is key so they don't waste time and resources carrying out tasks they are not prepared for.
4. Better time management
The organization is key to making the most of time without wasting resources and increasing efficiency.
5. Entering new markets
Spreading to new markets is important for your company because it fosters growth and your employees feel more motivated.
6. Work flexibility
It's important to relieve the pressure and stress of your employees. A friendly environment is better for working and staying focused.
7. Improvement in communication and teamwork
Communication is a key factor in productivity. Having the right communication tools and using them correctly avoid losing important information and help you save time.
Key factors to increase our personal productivity
As we have previously explained, productivity is a factor that can be measured in our companies but it's also important for us to know that there're some actions we can take to improve our personal productivity.
Self-careGood sleep, a balanced diet, and vacation days are three key factors to keep in mind if we want to be productive. It's very important not to keep a lifestyle that stresses us too much.
TimeIt's also important to manage our time and not take care of extra tasks. We're not going to be more productive if we carry out more tasks.
BalanceIt's related to time and self-care. Keeping a balance between our jobs and our daily activities outside of work is necessary for our health and our health is the base of our productivity.
Something we should pay attention to to increase the personal productivity of each employee is knowing about the ultradian cycle since it's directly related to our body and productivity. Each person has a particular time for each task and this is also related to the production process. It has been confirmed that between a period of 50 to 90 minutes of action employees need to stop for 10 to 17 minutes to increase their productivity. The specific time depends on each person so everybody must know their limits and moments of greater concentration, distraction, and relaxation to make the most of them.
Productivity is a great tool we have in our companies to measure the efficiency of our processes, establish goals related to the areas we want to improve, and take actions to achieve them. It's important that we have detailed information about our employees, resources, and the products that work correctly in our company to choose the right indicators and base on information that allows us to make efficient changes to grow every day.