How to Overcome the Flaws in Traditional Employee Productivity Measurement

According to Gallup’s 2017 State of the American Workplace report, only one-third of all US employees are engaged at work.

Let that figure sink in for a moment: only one in every three people in the average workplace cares about the work they do. The other two either hate their jobs or are just there for a paycheck.

In his intro to the report, Jim Clifton—Gallup’s chairman and CEO—suggests that declining national productivity is directly linked to these low engagement rates:

“The very practice of management no longer works. The old ways—annual reviews, forced rankings, outdated competencies—no longer achieve the intended results. . . . If American companies were simply to double the number of engaged workers from one-third to two-thirds, spirited employees would reverse our seriously declining national productivity.”

This connection between engagement and productivity isn’t just speculation on Clifton’s part. Research shows that companies with engaged employees outperform those with disengaged employees by 202%.

With increased engagement comes increased productivity. On the flip side, low productivity can be a signal of low engagement. This makes employee productivity measurement crucial in the modern workplace.

But in many cases, productivity measurement itself is the cause of employee disengagement.

While traditional productivity metrics provide a means of measuring performance, they fail to motivate employees. Gallup’s research found that three major factors lead to a lack of employee motivation:

  • Unclear and misaligned expectations
  • Ineffective and infrequent feedback
  • Unfair evaluation practices and misplaced accountability

All of these reasons point back to ineffective and demotivating productivity measurement practices.

Employee productivity measurement can no longer be a means of simply measuring employee performance. Effective, modern performance measurement systems must be designed to motivate employees to become more engaged—and therefore more productive.

To achieve this, companies must first take a step back, rethink the goals of productivity measurement, and develop a new approach that measures productivity, motivates employees, identifies problems, and inspires performance.

Table of contents

  1. The problem with traditional productivity metrics
  2. The first step in employee productivity measurement
  3. Quantitative measures of employee productivity
  4. Measuring with employee productivity-tracking software
  5. Measuring by deliverable
  6. Measuring by objectives
  7. Measuring by revenue generated
  8. Qualitative measurements of employee productivity
  9. The 360-degree feedback method
  10. Measuring by quality of work
  11. There is no one-size-fits-all solution to measuring employee productivity
  12. How to increase employee productivity

The problem with traditional productivity metrics

The traditional way to measure employee productivity is to divide output by input. It was designed when manufacturing was the most prominent industry in the US.

If an assembly line worker produced 500 widgets in 10 hours, his/her rate of productivity was 500 divided by 10, or 50 outputs per one-hour input.

Then, that value could be compared to other workers in similar positions. This enabled companies to determine low, average, and high productivity rates. Highly productive employees could be incentivized or promoted, and managers could intervene with (or replace) less productive employees.

The problem with this approach in the modern workplace is that few modern jobs have discrete, definable, and isolated outputs.

Take, for example, the role of an editor. At a glance, the editor’s job seems simple: he edits articles. You could measure his productivity by number of articles edited per week. And if you multiple editors, you could use that calculation to identify low-, average-, and high-performance values.

But editors don’t just edit articles. They fact-check, rewrite, manage writers, coordinate assets, brainstorm topics, and monitor results. There’s not a single output; there are multiple outputs.

To solve this problem, employers commonly bring in consultants—mathematicians, economists, and statisticians—to form complex calculations that can be used to account for every potential impact on productivity.

A major manufacturing company went through this exercise back in the 1980s. The company hired a mathematician who developed a sophisticated model that could predict and measure productivity. The result: company leaders discovered that productivity was much lower than it should be.

That sounds bad—but the company found that, in many cases, there were good reasons for that productivity decline. In several cases, it looked like bad management was to blame for a decrease in productivity. After taking more factors into account, however, it became obvious that the lower productivity numbers were sometimes a result of particularly good management.

And their measures just couldn’t account for that.

The problem with traditional productivity metrics is that they don’t explain why productivity is higher or lower than expected. They can identify the problem, but they can’t provide a solution. They can’t improve employee productivity.

Going back to the role of an editor: it’s possible that the highest-performing editor can edit the most articles because her writers are outstanding. The lowest-performing editor, on the other hand, has to conduct significant rewrites of every submitted article.

If a simple calculation of the number of articles edited is the only measure of performance, the editor with terrible writers will always be considered a low-performer. This destroys the editor’s engagement with his work and masks the underlying problem—his writers aren’t producing quality work.

Discovering the issues that affect productivity is the ultimate goal of productivity measurement, and that’s a problem math can’t solve.

By rethinking the goals of employee productivity measurement, companies can move away from approaches that are designed to measure, judge, and incentivize performance. In doing so, they can move to a more sophisticated model that works to highlight operational inefficiencies, pinpoint individuals who are unhappy, and inspire collaborative solutions.

The first step in employee productivity measurement

The wonderful thing about abandoning traditional employee productivity metrics is that the solution to the problem isn’t outside consultants and complicated calculations: it’s conversations.

Measurement systems should be designed through a collaborative effort between individual contributors and their managers—the people who understand the business and know what complicates, expedites, or delays work.

In a 1999 article for California Management Review, Peter F. Drucker argues that the first step is having managers and their employees sit down with their team and answer one question: “What is the task?”

“The first requirement in tackling knowledge work is to find out what the task is so as to make it possible to concentrate knowledge workers on the task and to eliminate everything else—at least as far as it can possibly be eliminated. This requires that the knowledge workers themselves define what the task is or should be—and only the knowledge workers themselves can do that.”

Drucker encourages managers to work with their teams to answer the following questions:

  • What is your task?
  • What should it be?
  • What should you be expected to contribute?
  • What hampers you in doing your task and should be eliminated?

He tells a story about a group of nurses who struggled to define their core responsibility, but they all agreed on the answer to the question “What hampers you in doing your work?”

The answer: side tasks like paperwork and answering phone calls. The hospital’s response was to hire clerks—who were paid a much lower rate—to perform these tasks instead of nurses.

With this one change, the productivity of the nurses more than doubled, and turnover rates for that position were significantly reduced.

When managers and employees—at all levels of the organization—work together to establish the goals, expectations, and challenges of their jobs, productivity and engagement rates soar. (This is especially important when you’re managing remote employees.)

The first step in developing a motivating system of productivity measurement is to align on goals and expectations. Then, teams can work together to establish measurement systems that accurately reflect true performance.

Start by working with your team to define tasks and goals. Then consider these different ways to measure employee productivity that cater to the specific requirements of each individual task and goal.

Quantitative measures of employee productivity

The quantitative method is the traditional approach of output divided by input. While this approach is ineffective as a sole means of measurement, it can be effective for specific tasks within specific roles.

Say you work for the Department of Agriculture, and your team’s primary task is to call farmers and ranchers and get them to answer surveys about their crops and livestock. By dividing the number of surveys each representative completes by the hour, day, or month, you can form a baseline for low, average, and high performance.

These values can then be shared—and discussed—with your team. This lets your team know what is expected of them, and it gives them the opportunity to disagree with the figures.

It also provides a basis for a discussion about issues and impediments when certain individuals aren’t meeting performance expectations.

Measuring with employee productivity-tracking software

Another way to measure productivity is to track how employees spend their time during working hours.

Employers can use a time-tracking tool to measure how much time employees are spending on different tasks, learn at what times of the day they’re most productive, and identify which employees may not have enough work.

This can help identify employees that are disengaged with their work. If a team member is spending a significant amount of time on social media, news, or entertainment sites—and being on those sites isn’t part of her job—it may signal that the employee isn’t happy with her work.

This information can be used as a catalyst for a discussion about more appropriate roles for the employee within the company, enabling managers to engage in more effective professional development discussions, and reducing the high cost of turnover within the organization.

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Measuring by deliverable

Using a Kanban approach and a task board like Trello, managers can measure how many deliverables each team member is producing, and see a visual representation of where delays happen most often.

In many teams, work is completed by one party before being sent to another. Like an assembly line, each item must be completed before it can be handed off for the next set of tasks.

In the modern workplace, this example can describe the process of producing content for a company blog:

  • The idea is generated by a writer, editor, or company leader
  • Keyword research is conducted by an SEO
  • A writer writes the content
  • An editor edits the content
  • A graphic designer adds images
  • The editor inputs the content to a CMS and schedules it for publishing
  • A social media experts promotes the content

Each step must be completed before the next can occur. Using a Kanban board, each task has its own card, and each team member has his/her own lane for tasks to be passed into and out of. At the end of a week, month, or year, the deliverables completed can be counted to measure progress toward goals.

But the real benefit of the Kanban approach is that it allows managers to identify where tasks are commonly being delayed. If most lanes have one card in them, but one lane—say the design lane—has five cards in it, there could be a capacity problem (in this case, with your designer).

He may be disengaged, or he may just have more work than he’s capable of doing. Knowing this allows you to solve the problem by hiring more design help or finding a more appropriate role for the disengaged designer.

Measuring by objectives

Unclear and misaligned expectations is one of the biggest demotivating factors for employees. By connecting performance and productivity to company goals, employees can begin to understand how their day-to-day work impacts the overall business.

In this method, managers and teams sit down with a list of annual company goals, and together they brainstorm achievable and realistic ways for their team to make progress toward or support those goals.

If one company goal is to increase the satisfaction of customer support calls by 25%, a team of developers can’t impact that goal directly, but it doesn’t mean they can’t help achieve that goal in other ways.

Maybe the team takes on the challenge of working with customer service reps to understand the subject matter of most calls. Then they come up with a plan to develop functionality for the website that’s designed to reduce the number of calls that the call center takes related to that issue.

This provides employees with a firm understanding of how their daily tasks support overall business objectives, and provides them with clear objectives that need to be completed to meet annual goals.

Measuring by revenue generated

For sales and marketing teams, measuring productivity by amount of revenue generated can be an effective approach. However, it requires a reliable and accurate method of connecting conversions back to sales and marketing activities, which is typically achieved with marketing automation software.

Teams should establish a goal for the year on percentage ROI increase or amount of revenue generated. This encourages team members to focus on meeting that goal throughout the year by revising campaigns, reviewing metrics, and discussing impediments that are preventing revenue generation.

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Qualitative measurements of employee productivity

Not all positions are amenable to quantitative measures. Sometimes you need to get a view of employee productivity that isn’t just based on numbers—and that’s where qualitative measures come in.

You might be able to quantify some parts of the methods below, but they’re essentially qualitative, which means there’s some interpretation necessary. That doesn’t mean they’re not reliable or repeatable, though.

And if you can combine quantitative and qualitative methods, you’ll end up with a much more comprehensive view of how your employees are performing.

The 360-degree feedback method

The 360-degree feedback method measures productivity and performance by surveying employees’ coworkers and/or customers.

A survey is sent out to multiple parties, and the questions asked are consistent across the team. Final ratings for the entire team can be averaged to determine a baseline for productivity rating levels of needs improvement, meets expectations, and exceeds expectations.

This method is particularly effective for customer service and account representative roles whose core responsibility is to satisfy and delight customers. It also works well for roles where all deliverables are highly dependent on other team members and areas, like an agile product owner.

A product owner can influence—but not directly control—when projects are delivered, because they’re entirely dependent on developers to write the code.

What they can control is unquantifiable: being available when developers have questions, answering those questions adequately and accurately, and making sure developers have everything they need to complete their work.

By surveying a product owner’s development team, managers can get a better sense of how adequately each team member is satisfying the needs of the team. This is achieved by asking questions like “How would you rate the responsiveness of your product owner?”

As a means of making compensation decisions, the 360-degree feedback method can be destructive to engagement. Factoring opinions into raises is a quick way to create resentment between coworkers, teams, and managers.

Instead, this method is best used as a way of identifying poor team compositions.

In collaborative workplaces, performance is directly linked to team composition. The highest performing teams are those where everyone shares the floor in conversations, and where group members display high levels of social sensitivity (they’re good at recognizing each other’s emotions).

Low 360-degree feedback results can signal unproductive team dynamics. This provides managers with the evidence needed to recompose teams and seek more productive partnerships.

Measuring by quality of work

Going back to traditional productivity measurement, output divided by input is only effective if the quality of the output is both high and consistent.

If you measure a developer based on how many lines of code he writes, he’ll focus on writing as many lines of code as possible. But the likelihood of that code being riddled with defects is very high.

Instead, you could measure the developer by the quality of code written. How many defects were found after the code was completed? How many incidents were discovered in production after new functionality was launched? How critical were those issues—was the functionality entirely unusable, or were the issues minor design defects?

In the earlier example of the editor who was doing major rewrites of each article submitted by his writers, a measure of quality for writers could highlight the underlying issue with the editor’s low performance. If five writers need one revision per article on average, but one writer commonly needs three revisions, it could signal a quality problem that needs to be remedied.

There is no one-size-fits-all solution to measuring employee productivity

The fault with most approaches to employee productivity measurement is that company leadership dictates a single approach that every department must adhere to.

This approach fails because it doesn’t account for the specific tasks a department is responsible for. As a result, it’s inadequate in measuring actual performance and meeting the goal of the process: improving productivity by highlighting impediments and issues that impact progress.

Managers and their teams must decide on goals and objectives together, and determine collaboratively how progress will be measured. It’s not effective to measure every task using the same methodology. Instead, teams should choose the measurement that most accurately reflects the work being done.

In an article for Harvard Business Review, W. Bruce Chew refers to this as multifactor productivity, and tells the story of how one company conducts this exercise:

“A department develops several performance ratios (no fewer than three, no more than seven) that it believes capture the essence of its mission. . . . Next the department identifies current performance, long-term goals, and interim goals for each ratio. Finally, managers assign weights to the ratios to reflect their relative importance, with the sum totaling 100. Thus the index produces a single productivity “score” (a weighted average of the ratios) that measures progress towards agreed-on goals in a way that everyone can understand.”

When team members and managers form their goals and measurements together and individually, it creates an environment for discussion. Issues can be identified and rectified, employees better understand their responsibilities and expectations, and people become happier and more engaged.

How to increase employee productivity

Only 33% of American employees are engaged at work, and national productivity is on the decline. Traditional employee productivity measurement systems seek to quantify and incentivize productivity, but they fail to inspire the true progress that can only be achieved when employees are engaged, happy, and excited about their work.

Only 30% of employees strongly agree that their managers involve them in setting goals at work. Leaving employees out of this process leads to unclear expectations, ineffective feedback, and misplaced accountability—the biggest factors that drive lack of motivation in the workplace.

In essence, traditional productivity measurement practices oppose the goal of the process. Rather than improving productivity, they inhibit and diminish it.

Modern productivity measurement must be more personal, more collaborative, and more obvious. Managers and team members—at all levels of the organization—must set their goals and measurements together. This inspires engagement, creates a space for productive discussion, brings to light issues that need to be resolved, and creates a shared understanding of expectations.

All of which leads to the true goal of performance measurement—improving productivity.

Does your company have a creative approach to productivity measurement? We’d love to hear about it in the comments below!