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What is productivity in the workplace? And why is it important?

By: Jill Huettich

The importance of productivity in an organization cannot be overstated—which is especially alarming when you consider that according to Gallup, 53% of employees only give the minimum effort required.

Worse, actively disengaged employees are estimated to cost the US between $483 – $603 billion a year in lost productivity. Furthermore, those actively disengaged employees make up 13% of the workforce, so they’re hardly an insignificant number.

Workplace Productivity 101

Workplace productivity is the efficiency with which tasks and goals are completed at an organization. It’s calculated using the following formula:

Productivity = Units of Output / Units of Input

By contrast, IBM found that satisfied employees work almost twice as hard (95%) as those who’ve had less positive experiences (55%) at work. As a result, companies with engaged employees have been shown to outperform those without by a whopping 202%!

As you can see, the numbers really speak for themselves–the difference in productivity across various organizations can be astonishing. Of course, this leads to the question, “What do we actually mean when we talk about workplace productivity and how is it measured?”

That’s what this brief introductory guide will answer. In it, we’ll discuss how productivity in the workplace is defined, what employee productivity means, and we’ll look at some other key research that’s been done on the topic of productivity.


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What is productivity in the workplace, exactly?

Simply put, workplace productivity is the efficiency with which tasks and goals are accomplished at an organization.

As Harvard Business Review explains, workplace productivity answers the question, “How good is your company at taking a pile of raw materials, a bunch of machines, stacks of paperwork, and groups of employees, and turning out useful goods and services?”

To make that determination, workplace productivity is typically calculated using the following formula:

Productivity = Units of Output / Units of Input

As an illustration, let’s say that a company manufactured $150,000 worth of goods over the course of 750 hours. Labor productivity would be calculated as $150,000 / 750 hours. This works out to $200 worth of goods per hour of work.

If we wanted to, we could take this illustration even further by calculating how productive our hypothetical company is per employee. So, let’s say that in addition to the numbers we’re already working with, we know this manufacturer has 50 employees.

In this case, we’d calculate labor productivity as $150,000 / 50 employees. This works out to $3,000 worth of goods per employee per week.

Having explained how these figures are calculated, let’s look in greater depth at what we mean when we discuss employee productivity.

What is employee productivity?

Employee productivity refers to the output employees produce on an individual basis. So, if someone works an 8-hour day, you might expect them to be productive somewhere in the range of 6-7 hours a day.

Actually, that’s generous, because employees who put forth that much effort are few and far between. In fact, the research shows that US employees only work about 2 hours and 53 minutes a day!

Instead of diligently tackling work-related tasks, they’re more likely to spend an hour reading the news, 44 minutes on social media, 40 minutes talking to coworkers, 26 minutes job hunting, 23 minutes on smoke breaks, and so on.

To complicate matters, employee productivity is especially difficult to determine in a knowledge economy. After all, most companies aren’t measuring the number of bushels that employees are picking per hour.

Instead, they’re often trying to measure the intangible. Take, for example, computer programming. How do you truly measure the productivity of a software developer?

Do you make that determination by calculating how many lines of code someone’s written? Well, you could, but you’re likely to run into problems.

Computer programming leaves room for a lot of flexibility, so lines of code can vary tremendously from programmer to programmer. Worse, once programmers realize their productivity is being measured by lines of code, they’re incentivized to create long, confusing blocks of code, rather than doing things as simply as they can.

While traditional methods of measuring productivity don’t take quality into account, there’s no denying that productivity can make or break an organization. We’ll delve into that in greater detail in the next section.

The importance of productivity in an organization

To sum up the importance of productivity, here are a few more key statistics:

  • Each year, America’s vices (i.e. smoking, hangovers, fantasy football), health problems, and distractions cost companies $1.8 trillion in lost productivity.
  • Although surfing the Internet is often believed to be the main culprit of lower productivity, workplace distractions play a big role as well. For instance, Microsoft found that information workers switch windows, on average, 373 times a day while completing tasks–that’s about once every 40 seconds.
  • Worse, once someone is interrupted at work, it takes them an average of 23 minutes and 15 seconds to get back on task.
  • Generally speaking, large companies and small companies take about the same amount of time to complete tasks. By contrast, companies with 51 to 10,000 employees are consistently the least productive.

While it’s easy to identify where and how productivity is likely to be lost, it’s much tougher to reverse those trends to maximize output. The reality is that every company manages and maximizes productivity in different ways, and with different levels of success.

Why are some companies more productive than others?

While there are a number of reasons one company might be more productive than another, one interesting finding is that the most productive companies have more star players.

For instance, Google and Apple determine which positions in the company are mission-critical, then fill them with A-level players. Other organizations are less deliberate, spreading their star players across the board, rather than selecting them specifically for strategic roles within the company.

Michael Mankins, author of the book Time, Talent, Energy: Overcome Organizational Drag and Unleash Your Team’s Productive Power, illustrates the difference between these two strategies by comparing Apple and Microsoft in the early 2000s.

“It took 600 Apple engineers fewer than two years to develop, debug, and deploy iOS 10,” he says. “Contrast that with 10,000 engineers at Microsoft that took more than five years to develop, debut, and ultimately retract Vista. The difference is in the way these companies chose to construct their teams.”

This is a perfect example of why productivity is so critical to business success. But that, of course, raises the questions of how to increase the productivity of employees. If you want your team to be as productive as possible, it’s important to have the right productivity tools and strategies in place.

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