The idea of productivity is fairly simple: generate as much output as possible with minimum input. And yet for every single business, the idea of productivity, and specifically how to measure it, is much more complex and nuanced.
It would be great if there was one metric which could be captured to definitively measure how productive each and every employee was, but this is rarely the case. We might be able to measure how many products are made each day in a factory, but that doesn’t tell us how well the marketing or finance teams are performing, for example.
So, it’s logical that we look to evaluate productivity different across each time – but we need to make sure it’s the right measure which showcases the quality of work being undertaken. The marketing team might be measured on the number of social media posts they produce, but then if none of these posts garners any engagement then they’ve had precisely zero impact on the profitability of the business – in fact they’ve cost the business money and generated no result, precisely the opposite of productivity.
Business productivity v team productivity
Different scales of measurement suit different contexts: on a national level, productivity could be measured using GDP per hour worked; and at a business level, we could potentially look at revenue, profit or costs per hour worked. By tracking these figures over time, we can assess the impact of changes at a company level – but where we run into problems is when we start zooming in on different areas of the business.
Trying to take metrics that work at a whole-company level and apply them to a single team is where organisations often go wrong when defining productivity. For example, we can attribute costs and revenue to the sales team, but they can’t sell anything without the rest of the organisation. The finance or customer service teams don’t directly generate profit, but you’d struggle to operate without them.
So, we need to let go of the idea that we can use the same metric to measure each team’s performance as we do for the organisation as a whole; instead, we need to put in the work to assess productivity at a team level, or even within sub-teams if there’s no meaningful team-wide measure. We also can’t rely on being able to produce a daily number for every team – it might be that alternative sensible outputs need to be analysed, like the number of hours spent by the finance team to produce the signed-off month-end numbers.
Beware the vanity metrics and incentives
Just because something is easy to measure, doesn’t mean it’s worth it. For instance, the number of calls answered by a customer service agent is almost meaningless, because there will be people dealing with very complex cases that take much longer to resolve.
Instead, we need to dig right down into the details – potentially tailoring our measurements to individual roles and also accepting there might be some parts of the business where there’s not one neat number that represents productivity. Don’t fall into the trap that any number is better than no number – you cannot and do not have to measure productivity everywhere at a micro level.
Alongside producing vanity metrics which mean very little, companies can also fall into the trap of assigning targets based on productivity measures, which end up incentivising behaviour that doesn’t actually help the business. As Goodhart states: ‘When a measure becomes a target it ceases to be a good measure’.
If we decide productivity in our customer service team relates to how many tickets have been closed, we are essentially rewarding closing tickets (especially if there is a financial incentive for reaching a certain target). So, the team closes tickets as quickly as possible to hit their target, they’re seen as more productive – but we’re not actually analysing whether they’ve solved a customer’s problem satisfactorily.
The one number conundrum
Among a sales team, there may be several factors which define success: the number of new customers, number of returning customers, new leads generated, upselling products or services, attaining reviews or referrals, and total revenue achieved.
It might be tempting to cite revenue as the most important among these. But what if the new leads come to fruition and ultimately make the company more profitable in the long run? What if the referrals lead to the company’s most lucrative contract to date?
A hard and fast rule that only one metric should define productivity ignores the fact most jobs have multiple goals, and trying to measure their efficiency (or that of your entire organisation) can have the opposite effect: demoralising staff who may feel like a target is unattainable, especially if it doesn’t align with their job role (like the example of using revenue generated to define productivity across the business, when some departments like payroll or IT won’t be able to quantify that number).
Even when the metric does directly relate to their role – like the number of lines of code being written by a software developer – this narrow focus can encourage ways of working which aren’t genuinely helpful for the business. There are easy changes that can be made so one line of code takes up multiple lines, without containing any additional information. So, it’s hardly surprising that some technology companies where productivity targets have been introduced which solely focused around line numbers have swiftly reversed this policy, as soon as they realised how simple it was to manipulate that figure without actually being more productive.
The cost of productivity
Some companies spend an inordinate amount of time and money trying to measure productivity, effort which is of course wasted if they’re trying to over-simplify it or apply the same sweeping targets across their entire company.
It’s very difficult, almost impossible, to agree on one metric that every team can work towards that is realistic, achievable and motivational for every person within those teams. So, the approach needs to be much more individualistic. Asking the question: ‘what does productivity look like for this team?’ or even ‘what does productivity look like for this individual?’ can yield much more beneficial answers.
If you’re going to invest in exploring productivity, then you need a return on that investment – which should be supported by a stream of data which helps you identify areas of concern, high performers within teams, training needs, and future plans for your business.
Once you have all of that information, then you can begin looking at how processes and technology can support your people to become even more productive. But you have to truly investigate and interrogate what productivity looks like in relation to all of your job roles, otherwise you’re sending your people on an impossible mission, and that’s never productive!
Author: Founder of Outlier Technology, David Tyler