Measuring Productivity in the Workplace

Setting Goals for Productivity Module 2: Productivity in the Workplace Measuring Productivity in the Workplace

Measuring productivity is important because it can provide businesses with a better understanding of employee productivity. It is important that employee productivity is measured so that businesses can modify operations where necessary. For example, a business might need to employ more staff to complete certain tasks. Measuring employee productivity will indicate whether employees are working effectively. It will also indicate if business operations can be expanded. Businesses are also able to make more informed decisions about business goals and finances if they have a clear understanding of employee productivity.

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Types of productivity measures Productivity measures are used to track efficiency, help with employee performance, and determine areas for improvement. Productivity measures compare resources used over work produced.
Types of productivity measures include:

Capital productivity

Capital productivity is used to measure how efficiently a business utilises physical capital to produce goods and services. Physical capital refers to tangible items such as labour, materials, warehouse supplies, computers, and vehicles – items used to create products. Capital productivity is calculated by subtracting liabilities from physical capital and then dividing sales by that number.

Material productivity

Material productivity is used by businesses that provide services, rather than products. Material productivity is calculated by subtracting liabilities from material capital (natural resources) and then dividing sales by that number.

Labour productivity

Labour productivity measures how productive each employee is. It considers the ratio of output per person. It is calculated by dividing the value of goods/services by the number of hours employees took to make them.

Refer to the Image Below: Labor Productivity

Total factor productivity

Total factor productivity looks at production levels using the weighted average of labour and capital. It is calculated by dividing the total production by the weighted average of time and capital. Total factor productivity focuses on the effect of labour and capital.

Task: True/False Completion of the In-Lesson Task does not contribute to the assessment grading and serves as preparation for the final assessment.

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Measuring Productivity in the Workplace