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Defining and measuring employee productivity can be challenging. Here’s how to measure and improve workforce productivity at your company in the modern workplace.

In today’s fast-paced business environment, productivity is key to achieving a competitive edge. For HR and business leaders, understanding and managing workforce productivity is crucial. However, defining and measuring productivity can be tough, especially in a world where traditional measures may no longer suffice. That’s where an effective skills and competency management program can help. Here’s how to measure and improve employee productivity at your company in the modern workplace.

Defining Employee Productivity

Productivity at work encompasses more than just the output of tasks completed. Employee productivity – also known as workforce productivity or labor productivity – is also about achieving optimal results, efficiency, utilizing resources effectively, and driving continuous improvement. At its core, employee productivity measures the balance of inputs and outputs, where the focus is on working smarter for the best results.

There are technical definitions out there (see this one from Investopedia, for example), but we like IBM’s definition, “Employee productivity measures how efficiently and effectively a worker or a group of workers contribute to accomplishing organizational goals. It is a key performance indicator (KPI) that measures the output of work in relation to the inputs of time, effort and resources.”

Establishing Productivity Metrics

To measure employee productivity effectively, HR and business leaders must establish clear metrics that align with organizational goals and objectives. KPIs should be both qualitative and quantitative. Quantitative metrics measure outputs and factors that can be counted, such as volume of work completed, time spent, error rates, deals closed, etc. Qualitative metrics measure the quality of a work product and may be captured through satisfaction surveys and peer reviews.

Ideally, you are measuring more than simple output. A person can be tremendously efficient at their output, but if that work product isn’t valued or aligned with company goals, that’s a miss. Likewise, if someone is individually efficient and productive but is also difficult to work with, they may have a negative impact on a team’s overall productivity.

Here are steps to guide you through the process of establishing employee productivity metrics at your company:

  • Identify Key Performance Indicators: Establish KPIs that reflect productivity drivers specific to your organization. In a manufacturing company, for example, some employees may have goals to produce X number of widgets or products every month. For a sales team, measuring new sales is key. An account management team for a services company may be measured by customer satisfaction metrics or customer renewals.
  • Align Metrics with Business Objectives: Ensure that the chosen metrics align with broader business objectives and strategic priorities. For example, if your goal is to increase customer satisfaction, consider metrics related to service quality and responsiveness.
  • Consider Leading and Lagging Indicators: While lagging indicators (such as last quarter’s production level, customer satisfaction, sales) reflect past performance, leading indicators (such as market demand and technology adoption) provide insights into future productivity trends. Balance both types of indicators to be sure your objectives are realistic and achievable.
  • Customize and Align Metrics by Roles: Though each team and individual will have their own metrics, you’ll want to ensure that each role is clearly aligned to meaningfully contribute to the company’s overall goals and objectives.

Key Factors Influencing Productivity

Employee productivity isn’t something that happens in a vacuum. People work with other individuals and groups, in person and online, often in geographically dispersed environments. In today’s dynamic work environment, productivity is influenced by a variety of factors, including:

  • Leadership: To contribute meaningfully, employees need a clear understanding of how their roles and responsibilities feed into company goals. Strong leadership and management practices make that alignment clear and create a culture where people are motivated to work and succeed.
  • Collaboration and Communication: Seamless collaboration and open communication help to foster productivity by eliminating silos, streamlining workflows, and promoting knowledge sharing. Good communication uses consistent accessible communication channels for individuals and teams to receive direction and feedback. On the other hand, lack of communication or negative communications can quickly demotivate employees and negatively impact productivity.
  • Skills and Competencies: Employee capabilities and levels of expertise play a significant role in determining productivity. Employees may struggle to perform if they lack the necessary skills or training. Instead, a workforce equipped with the right skills can perform tasks more efficiently and innovate effectively. When skills are aligned with company goals, workforce productivity will power company successes.
  • Technology and Tools: Leveraging the right technology and tools can enhance communications, automate the capture of a range of metrics, enhance decision-making, and empower employees to accomplish more in less time. Strategic use of generative AI, for example, can be a time-saver for employees and managers who use tools such as ChatGPT to draft business communications, plans, or protocols. Companies with a skills-based approach to workforce management often use skills management software such as Avilar’s WebMentor Skills™ to assess employee skills, so individuals and managers have clear visibility into essential skills progression.

Measure and Improve Employee Productivity in the Modern Workplace

How and where we work has changed dramatically in the past few years, arguably accelerated by business adaptations to the COVID-19 pandemic. Remote and hybrid work are the norm in most white-collar industries. The gig economy continues to grow – especially with younger workers. Technology advancements such as generative AI are also changing how people work and the skillsets employees need today.

Of course, measuring employee productivity has changed, as well, to keep up with monitoring and managing a distributed workforce. Skills management software can help you measure and improve workforce productivity. Here’s how:

  • Skills Assessment and Gap Analysis: Identify the skills required for optimal productivity within each role or department. Conduct skills assessments to evaluate current proficiency levels and identify skill gaps. This insight helps identify targeted training and development initiatives to bridge gaps and improve workforce productivity.
  • Performance Tracking: Use the software to track employee performance against predefined goals and objectives. Seeing progress and achieving milestones is rewarding to employees.
  • Management and Coaching: Be sure your managers are adept at supporting remote and in-person individuals and hybrid teams. Provide ongoing feedback, recognizing and celebrating accomplishments. Good coaching will empower employees to continuously improve their productivity levels and set new goals for continued success.
  • Learning Resource Allocation and Optimization: Analyze the data you have for individuals, for teams, and across the organization to determine how well your learning and development program is supporting skill development and productivity improvements. Adjust your classes, instructors, mentorships, internships, and other learning opportunities, as needed, to optimize results.
  • Succession Planning and Talent Mobility: Plan for future productivity by identifying high-potential employees and fostering talent mobility within the organization. Develop succession plans to ensure a smooth transition of critical roles and responsibilities, minimizing disruptions to productivity.

Measuring productivity in the modern workplace requires a strategic approach that goes beyond traditional metrics. By leveraging skills management software and adopting a holistic view of productivity, you can drive sustainable performance improvements across your organization. With the right tools and metrics in place, you can unlock the full potential of your workforce and achieve your business objectives.

If you’re working to focus your organization on how your employees can do the right things efficiently, download our Competency Management Toolkit. It has valuable insights to show you how a skills and competency-based approach to workforce management can help. Or contact us to see if Avilar’s WebMentor Skills™ skills management system can help with your initiative.


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