How to Make Productivity Metrics Work for Your Business Goals

Every company wants to be more productive.

Measuring your productivity metrics is key. Your numbers tell you if your strategy is working or not. Those metrics are your early warning system if you start to get off track.

Measuring your remote team’s productivity is even more important if your team works remotely. Metrics give you more visibility into how your team operates.

Here’s the bottom line.

If you want to get more done and make more money with the resources you have right now, you want to improve team productivity.

Your productivity metrics are your early warning system. They tell you if you’re on track or on your way to a crash.

That means you need to get really good at understanding and tracking and your productivity metrics. We’re here to help.

Click these links to jump ahead or read straight through for the complete guide.

What are productivity metrics?

Ways to calculate productivity

1. Find the right data
2. Labor productivity formula
3. Revenue-per-employee ratio
4. Labor cost per project
5. Team effectiveness ratio
6. Customer satisfaction score

Productivity metrics examples for you team

• E-commerce productivity metrics
• Sales productivity metrics
• Productivity metrics in agile
• Customer service metrics

How to benchmark your productivity metrics

Next steps

What are productivity metrics?

Productivity metrics are data points that tell you whether or not you’re meeting your productivity goals. These numbers help you understand what kind of results your team generates from the work they do.

Monitoring your productivity metrics can help you answer questions like these:

• What types of projects created the most value and profit for our efforts?
• What projects are more expensive than they should be?
• What teams need better tools and resources to do their jobs effectively?
• Where should we focus our efforts to make the most money?

Productivity metrics are part of your key performance indicators (KPIs). They give you clues into how your business and your employees are performing.

Just like you track things like average order value and revenue per customer to tell you if your strategy works, you track productivity numbers to tell you if your team is healthy.

Why you should calculate productivity

In order for your team to be productive, they need to accomplish three things.

1. They finish a lot of tasks
2. Finished work is excellent quality
3. They work efficiently so tasks are finished in the shortest amount of time

Employee productivity is directly related to profit. By tracking your metrics, you can spot and fix problems before projects go over budget.

Having access to productivity numbers makes it easier to set and achieve realistic goals, too.

Individual metrics are powerful for remote teams. Managers have more visibility into how their distributed employees work. Changes in performance or habits can give leaders a hint that it’s time to check in.

Ways to calculate productivity

Productivity measurements should be based on data, not just observations.

Managers are more likely to think their employees are productive if they often see them at their desks. It’s natural to feel like someone is working harder and getting more done when you always see them at work.

That’s a dangerous assumption to make. Businesses that hire knowledge workers lose an average of $26,041 per employee every year because of poor communication. If you assume that your employees are productive because you can see that they’re busy, you won’t see those expensive problems.

Clear data can help you and your managers overcome that unconscious bias. That’s why the first step is to collect the right information.

1. Find the right data

You probably have access to most of the data you need to get accurate productivity measurements.

• Work hours – How do your employees track their time? Most companies already have some method for tracking hours, even if it’s just paper timesheets. The more accurate your time tracking data, the more accurately you can track productivity.
• Task completion – This information comes from your task tracking system. Whether you work from to-do lists or a project management tool, you need a reliable way to keep track of the tasks you start and finish. If you don’t keep close track of tasks, this is a good time to start. The lack of organization could be hurting your team’s productivity.
• Time spent on each task – This data point is important if you want to find and fix specific problems. To get this data, use a time tracker to record the amount of time your employees spend on tasks. Don’t just ask them to manually log this time. By the end of the day, they can’t accurately tell you everything they did and exactly how long it took.
• Overall revenue – You should already have this data on hand. Track your overall revenue by month and by product category. If you can, it’s wise to create reports that show you more specific information like revenue from each ad campaign and the percentage of your revenue from repeat purchases.
• Quality scores – Remember that productivity deals with quality and quantity. Data points like customer satisfaction scores, escaped defects, or click through rates are important. Think about objective ways to measure whether or not your team meets their quality goals. For example, instead of judging quality by whether or not you like an ad campaign, measure its performance.

With this data, you have all the raw information to calculate productivity. You know the quantity of tasks completed, the quality of completed work, and the efficiency of the hours that went into that work.

Data points like these can give you a picture of your team’s productivity.

On top of the raw data, productivity calculations help you understand how your whole team is doing.

2. Labor productivity formula

The employee productivity formula compares input to output. It’s one of the most common high-level indicators of productivity.

Most companies use this formula to compare their revenue to total labor hours. To figure that out, determine the total revenue from a specific time period and divide it by the total number of hours your team worked during that time period.

That metric gives you an overview of the average productivity across your entire company.

If you want to get a little more specific, you can still use this formula.

Imagine you own an online store, and you want to see which is more productive — phone support or chat support. Since your 5-person team tracks time by task, you have the data you need.

You use the labor productivity formula to compare the two.

First, you find the total tickets handled over the phone last month (2,397) and you divide that by the hours your team tracked as phone support time (133 hours). Output divided by input tells you that your team does about 18 tickets per hour over the phone.

Chat support is more popular because you promote it more heavily. Last month, your team handled 16,968 tickets and logged a total of 702 hours on chat support. The labor productivity formula tells you that your team handled about 24 tickets per hour from chat support. It’s 33% more productive than telephone support.

This is useful information, but be warned.

The labor productivity formula doesn’t give you any quality indicators. It can’t take into account that some tasks are more complex. You also won’t get an idea of individual employee productivity from this calculation since it considers all inputs equally.

Keep in mind that the basic calculation (overall revenue divided by total hours worked) can’t take into account the hours your team spends on personal development, administrative work, or other tasks that don’t directly contribute to revenue generation.

3. Revenue-per-employee ratio

Revenue per employee is similar to the labor productivity formula because it gives you a high-level look at how your team is performing. It’s not a good metric to measure individual performance.

To calculate this metric, divide your total revenue by the number of employees at your company.

Total revenue / number of employees = revenue-per-employee ratio

Marketing agencies and other performance-focused businesses find this productivity metric most valuable.

Revenue per employee is also useful for companies that focus on keeping labor costs low to maximize their profitability.

4. Labor cost per project

Labor is one of your biggest expenses. If your team isn’t as productive as you expect, you can quickly go over budget by paying for more hours than you expect.

To calculate the labor costs of each project, use a time tracking tool that assigns hours to tasks. Hubstaff is a good tool for this because it also calculates how much you spend based on your employees’ hourly rates.

Don’t wait until a project is finished to calculate your labor costs. If you go over budget, it’s too late to fix it after the project is done.

If you don’t have a dedicated project manager to keep track of this productivity metric, set up project checkpoints for yourself. At each checkpoint, check how much you’ve spent and estimate if you’re on track to stay within your budget.

This is an important productivity metric because it tells you how efficiently your team works. Make sure you track quantity, quality, and efficiency to get a true picture of your team’s productivity.

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5. Team effectiveness ratio

Team effectiveness ratio compares your profits with the amount you spend on employee salaries. Here’s how to calculate it:

Gross profit / employee payroll costs = team effectiveness

The goal of this productivity metric is to show you whether or not your investment in your employees is paying off.

Note that this calculation uses your gross profit, not your total revenue.

Team effectiveness ratio is a useful metric for all kinds of teams. If you are in a growth phase or you plan to grow your team soon, it’s a good idea to keep track of this productivity metric. You’ll be able to see if you’re growing too quickly and your profits aren’t keeping up.

6. Customer satisfaction score

Calculating your customer satisfaction score tells you if your customers are happy and whether they’re likely to keep shopping from you.

Gather this information using satisfaction surveys. After a customer makes a purchase, give them some time to receive the product and try it out. Then, send an email asking for feedback.

If you use a tool to automate your satisfaction emails, those tools will usually calculate the customer satisfaction score for you from the customers’ ratings.

Your customer satisfaction score tells you about the overall quality of your team’s work. As you work to improve the efficiency and quantity of your output, keep an eye on satisfaction scores to make sure quality stays high.

Productivity metrics examples for you team

Different types of companies define productivity in different ways. Even within your own company, teams have different functions and should measure the numbers that make sense for them.

Here are some more specific metrics to consider for your business.

E-commerce productivity metrics

Online store owners are often great at tracking and optimizing marketing campaigns, but they overlook all the back-office positions that keep that store running.

Even if you use a SaaS platform like Shopify, every online merchant needs someone to maintain their website.

You should track the time and financial investment needed to keep your site running smoothly. Pay attention to website performance. Cart abandonments and pages or categories with low conversion rates might be a hint that there’s a problem with your website.

The more sales you make, the more customers will contact you looking for help. Service is a big expense for e-commerce merchants, so merchants should pay special attention to their metrics.

Consider your revenue and average customer value when you decide how much to invest in customer service. Watch overtime hours carefully. Track return rate and repeat orders to help you determine if your service agents are a good investment.

Sales productivity metrics

For sales teams, one common way to measure productivity is to calculate the revenue per salesperson.

It’s a good metric because it measures results. Revenue per salesperson is directly related to the reason you have them on payroll. If you pay based on commission, you need to know this number.

That might not work for all types of sales teams, though.

Another option is to track outbound calls or customer contacts. This type of productivity metric focuses on the actions a salesperson takes instead of the results of the action.

You can use both types of metrics — actions and results — to give you a more complete picture of productivity.

In sales environments where results are more volatile and your employees have less control over the results and revenue, give more emphasis to activity-based metrics.

For environments where only some activities are productive and it’s easy for salespeople to do busy work, place more emphasis on results.

Productivity metrics in agile

Agile teams work in a structured, but flexible environment. Work is divided into projects and tasks with clear steps.

This structure creates some clear ways you can track productivity.

Agile productivity metrics include tracking cycle time, planned-to-done ratios, and escaped defects. These are excellent developer productivity metrics, but they apply to other agile teams, too.

Cycle time tells you how long it takes to complete a task. Measure it by tracking start and completion dates. If you start a task on March 1 and finish it on March 21, the cycle time is 20 days.

Compare your cycle time with project estimates to see if tasks take the time that they should. If tasks often take longer than you expect, you probably have some productivity drains like imbalanced workloads or problems with the workflow.

Planned-to-done ratio is exactly what it sounds like. This number tells you what percentage of projects you actually finish once they’re planned.

Your planned-to-done ratio is a good way to see if your strategy is solid. Your team has a hard time being productive when project plans change or get canceled frequently. If you have a lot of planned projects that never make it to the finish line, that’s a warning sign.

Escaped defects tell software teams about the quality of their finished work. Remember that productivity includes both quantity AND quality. By counting the number of bugs that get reported after release, you can track whether or not your team is doing quality work.

Agile teams that don’t make software can still track escaped defects. Instead of tracking bugs, try tracking customer complaints or other quality scores.

Customer service metrics

We already talked about customer service for e-commerce teams. Now, let’s take a step back and discuss some high level metrics that apply to most support teams.

Customer service is productive when they help all customers quickly and effectively. They should be able to solve problems and encourage customers to make another purchase.

Your productivity metrics should align with your main customer service goals.

Most companies measure the number of tickets closed or calls taken. They also measure the time it takes to reach a resolution.

If your support is phone-based, it’s wise to measure call times, time customers spend on hold, and how many times customers call in before their issue is resolved.

Chat-based support works a little differently. These teams often measure the time it takes from a customer submission to a resolution and the number of tickets completed in a day.

Watch your customer service ratings for another measure of quality. Teams that focus too much on call time and number of completed tickets can accidentally encourage their agents to rush customers off the phone or end chats too early. Make sure your team has the freedom to do a great job for as many customers as possible.

Drawing insights from your productivity metrics

You track metrics so that you can make informed decisions.

On an individual level, productivity metrics tell you how your employees are performing. Managers can use this information to assign projects to the right people and offer help to those who are struggling.

Business owners and top executives use productivity metrics to guide strategy. For example, if manufacturing productivity is low, it’s probably a bad time to expand the product line and introduce more complexity into that process.

To use your metrics wisely, start by setting good benchmarks.

How to benchmark your productivity metrics

Once you calculate a productivity metric, the next question is:

Is this good?

Metrics are only important because they tell you how well your business is doing. To get the insights you need, compare the actual numbers to your benchmarks.

A benchmark is a goal. You should have one for each productivity metric you monitor.

Benchmarks can come from industry averages or internal goals. It’s wise to use a combination of both.

You won’t always be able to easily find industry benchmarks since lots of companies protect their data.

Try looking in specialized trade journals to get recent data about companies like yours. Good trade journals won’t let you access information for free, but once you subscribe, they sometimes have a point of contact that will help you find what you want.

Set internal benchmarks by looking at your historical performance data. To figure out what you should aim for, calculate:

• The average number for your team as a whole
• The average number for your top performers
• The best numbers from your top performers
• The number you need to meet to meet your overall business goals

A realistic benchmark can be higher than your average performance, but it shouldn’t be too much of a reach. Don’t expect your team to immediately start beating your top performers.

If there’s a big gap between your current performance and the results you need to hit your business goals, that’s a warning sign. Your business goals might be unrealistic at this stage of growth. Your team might lack the right skills and experience. Dig a little deeper to determine if you need to move the benchmark or the bigger goal.

With the right productivity metrics and benchmarks, you’re ready to reach your company’s productive potential.

Next steps

It’s time to do the work. Here’s what you should do right now before you close this article.

1. Start a productivity dashboard. Decide what metrics you want to track on a weekly or monthly basis and list what raw data you need to calculate those numbers.
2. Get ready to examine your historical data. You need to know where you are now so can set smart goals to get you where you want to be.
3. If you don’t have all the data you need, create an action plan. Do you need a time tracker? Is it time to upgrade your project management strategy? Figure out what information you need and decide how you’re going to get it.

Here’s some recommended reading to help you get started right.

• The Ultimate Guide to Fantastic Team Communication
• The Top KPIs for Startups
• The Best Simple Productivity Techniques to Help Your Team Get More Done

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