We’ve asked Dan Keto, a productivity expert from Easy Metrics, to provide an example to illustrate one possible multifactor productivity equation. Whereas the partial factor productivity formula uses one single input, the multifactor productivity formula is the ratio of total outputs to a subset of inputs.
To calculate your company’s labor productivity, you would divide 80,000 by 1,500, which equals 53. This means that your company generates $53 per hour of work. Our world-class consulting team is here to help your organization realize the lasting advantage of Smartsheet.
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A salesperson may have “calls made” or “deals closed” as his or her UOS, while a housekeeper in a hotel might have “rooms cleaned per shift” as her UOS. You could also look at labor productivity in terms of individual employee contribution.
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This allows you to identify trends that may impact how you organize staff, or hire and remove employees. While productivity measures quantity, efficiency measures quality. You could calculate a very high productivity number per employee, but that number alone doesn’t give you any insight into the quality of work .
In this case, instead of using hours as the input, you would use number of employees. Let’s say your company generated $80,000 worth of goods or services utilizing 1,500 labor hours .
For example, an equation could measure the ratio of output to labor, materials, and capital. This method is a more comprehensive measure than partial factor productivity, but it’s also harder to calculate. To calculate partial factor productivity, let’s say that a company produces $15,000 worth of output and the weekly value of all inputs is $8,000. You would divide 15,000 by 8,000, calculating a partial factor productivity of 1.8. The biggest benefit to measuring employee efficiency is in longitudinal reporting, where you calculate efficiency over a period of time.
The industry paradigm is to look at the production metric for the workers handling the freight in terms of cases per hour . Over a longer period of time, this is a reasonable metric. However, to manage operations daily per employee, it is not effective.
And, based on these benchmarks, you may decide to change the target productivity. In many jobs, like customer service jobs, employee don’t have much control over their own productivity (i.e. it depends on how many calls they receive, which they can’t control). In that case, it’s unrealistic to say they should target 100% productivity, so you may lower the target. For example, the unit of service will change depending on the job. The labor productivity formula doesn’t require a UOS, but defining it can be helpful to add context to the output.