Home
Articles
Productivity Analysis For HR: What...

Productivity Analysis For HR: What To Track

Written by Shani Jay

9 minutes read

Productivity analysis and metrics are of great concern to HR teams and business leaders worldwide. Product inefficiencies have a significant impact on the success of an organization and can mean the difference between a business that thrives and is profitable and a business that has to eventually close its doors.

Research by Opus Energy found that 86% of UK small and medium enterprises (SMEs) believe that productivity is an issue. With SMEs making up 99% of the UK’s businesses, productivity inefficiencies can negatively impact the overall economy. Further research conducted by Close Brothers of 1,400 SMEs across Western Europe found that of those who don’t currently measure productivity, 28% don’t know how to.

Contents
Why should HR measure productivity?
Conducting a productivity analysis

Why should HR measure productivity?

Productivity refers to the output of an individual employee within a specified input (cost) and duration. It’s how effective, able, and committed an employee is as an individual and a team member.

Harvard Business Review found that, during the pandemic, the most effective companies have become between 5-8% more productive. However, most organizations have suffered an overall reduction in productivity rates between 3-6% due to a decline in engagement, wasteful ways of working, and inefficient collaboration.

This illustrates that it’s more important than ever for HR to measure productivity and take a proactive, data-driven approach to improve it. It wasn’t long ago that only global organizations had access to key data and metrics, but now that this is widely accessible through software and technology advances, every organization can start to measure and closely monitor their productivity rates and adjust accordingly.

There are many benefits of measuring productivity including:

Better utilization of resources (money, time, equipment)
Creating more efficient workflows and systems
Reducing costs
Market agility
Improving the skills of employees
Boosting employee’s drive and motivation

What affects employee productivity within the organization?

Employee engagement: Employees who are engaged will work quicker and more efficiently.
Work environment: A positive, inspiring work environment filled with good people leads to higher productivity.
Training and career development opportunities: Employees with more training and career development opportunities are likely to be more efficient and engaged at work, and, therefore, more productive.
Systems and processes: More efficient systems and processes lead to more efficient employees and less time wasted.
Organizational culture: The organizational culture of a company (its beliefs, values and attitudes) influences the behavior of its employees. For example, an attitude of overworking employees and encouraging them to come to work even when they’re sick will create a toxic organizational culture where employees feel like their health and well-being is not a priority, which will ultimately lead to a loss in engagement and productivity.
Pay structure: A clear, fair and equal pay structure leads to happier employees who feel well-treated by their organization and are more likely to be engaged and productive at work.
Employee wellness: Employees who feel their organization makes their health and wellness a priority are likely to be happier and healthier at work which leads to higher productivity rates.
Diversity: A diverse organization that has diversity policies in place to ensure fair and equal treatment of all employees as well as non-discrimination and bias during the hiring process leads to increased morale, engagement and productivity.
Technology and production factors: Employees who have access to the best technology (and know how to use it) are likely to be more productive at work.
Appropriate tools available: Employees who have the necessary tools to complete their work efficiently and effectively will be more productive.
Workplace ergonomics: Poor worksite design leads to fatigued, frustrated and potentially injured workers.
Strong people management practices: Managers and leaders who know how to professionally and personably engage with their team, mentor and guide them, and pick up on when they become disengaged are more likely to have productive employees.

Conducting a productivity analysis: Metrics to track

There are various types of productivity metrics to track when conducting a productivity analysis:

1. Employee productivity rate (EPR)

EPR helps you understand how much time employees spend on their work, and is a good metric for managers to look at and understand if they need to hire more or less workers to achieve their goals. It can also be used as a measure to evaluate employee performance.

To calculate total EPR, divide the total hours worked in one week by the number of employees during a set period. You can also calculate the EPR for a single employee.

Employee productivity rate (EPR) metric example

Let’s say 10,000 hours are worked in one week and you have 100 employees. 10,000 / 100 = 50

2. Employee absenteeism rate (EAR)

EAR refers to the percentage of employees absent from work due to sickness or personal reasons. This can be measured for an individual employee, a team, or the entire organization.

A certain percentage of absences is normal as people get sick. In fact, an unusually low EAR could indicate that employees feel unable to call in sick when they are, which suggests a lack of concern for their health and well-being. On the other hand, a high EAR can have a major effect on your productivity levels. A healthy EAR is around 1.5%, while anything above 4% is high.

To calculate EAR, take the number of absent days and divide them by the number of available workdays in a set period, then multiply it by 100 to get a percentage.

Employee absenteeism rate (EAR) metric example

Let’s say an employee has 5 absent days over a year in which there are 260 working days.
5 / 200 = 0.0192
0.0192 x 100 = 1.9%

3. Employee attrition rate

Attrition rate is also known as termination rate or exit rate. It’s a measure of how many employees have left an organization over a set period. This includes voluntary and involuntary exits.

Attrition rate is an important metric for HR to know because it helps them understand how many people are leaving the company. While it’s normal to lose a certain number of people, abnormally high attrition rates indicate a poor people strategy or organizational culture. Losing too many good people can lead to a loss in productivity and team morale. Plus, it’s expensive to replace employees with new hires.

To calculate attrition rate, you divide the number of people who have left over a given period by the average number of employees in that same period, then multiply it by 100 to get a percentage.

Employee attrition rate metric example

Imagine you have 25 employees who leave your business over a year, and your average number of employees during that time is 500.
25 / 500 = 0.05
0.05 x 100 = 5%

4. Employee task completion rate (ETCR)

ETCR refers to the percentage of work an employee completes within a set period. This helps you understand how well employees are performing in their roles and if they’re meeting expectations. High-performing teams could suggest that there isn’t enough work for employees to complete. Low-performing teams could suggest that certain team members aren’t pulling their weight and completing tasks consistently. This metric can help you make more informed decisions about new hires, training initiatives for existing employees, and managing overall productivity.

To calculate ETCR, divide the number of completed tasks for all employees during a set time by the total number of assigned tasks for those same employees during the same time.

Employee task completion rate (ETCR) metric example

Imagine 30 tasks are completed in a month, while 40 tasks were assigned during that same month.
30 / 40 = 0.75
0.75 x 100 = 75%

5. HR expenses per employee

HR expenses per employee refers to the expenses incurred by Human Resources per employee. This can help HR keep track of their costs. If HR expenses per employee increase along with a drop in hiring manager satisfaction and HR effectiveness, this suggests that the efficiency of HR has decreased, and that HR are not taking good care of their employees, which can negatively affect employee productivity.

To calculate it, divide the total salary and benefits of the HR department by the total number of employees in the organization.

HR expenses per employee metric example

Let’s say your total salary and benefits costs of the HR department are $500,000 per year, and you have 100 employees in the organization.
500,000 / 100 = $5,000

6. Billable hours per employee

Billable hours refers to the amount of time an employee spends working on a project, which can then be charged for. It’s only applicable if an employee is working for a client, and will receive money for the company in exchange for that work, e.g. responding to a client’s email or meeting with them in person.

This is a common metric used by HR in legal and IT consulting firms. It gives you a good sense of how much revenue your employees can potentially make you, which can then be compared to how much they actually bring in. This shows you how productive and effective your employees are. It’s also a good way to determine if an employee will be able to generate more revenue for the company than they are costing the company in way of their salary.

This can be calculated before making a hire to see if it makes financial sense, as well as anytime you need to determine how productive an employee is at work.

To calculate this, you must:

Determine how many billable hours your employees have each year
Set an hourly rate for each employee
Figure out if an employee is able to earn more for the company than they cost
Figure out if they are actually generating as much money as they should be

Billable hours per employee metric example

Let’s say an average employee works 40 hours per week. But not all of these are billable hours because there’s lunch breaks, admin, and other tasks that cannot be billed for. This results in 30 billable hours per employee.
There are 52 weeks in a year, but minus vacation weeks and holidays and an average employee probably has 49 working weeks per year. The company charges them at $200/hour.
49 x 30 = 1,470 billable hours per employee per year.
1,470 x $200 = $294,000
If this figure is higher than the employee’s annual salary and benefits package, then that employee is making money for the company.

7. 360-degree feedback

360-degree feedback (also known as multi-rater or multisource feedback) is a tool used to get performance ratings and feedback from employees, customers, suppliers and supervisors. This is typically rolled out once each year and is a valuable tool for gaining feedback from a variety of sources and pinpointing areas for improvement. Most often, it’s used to provide feedback to leaders and managers.

360-degree feedback can be a way to build a competitive advantage, it can also, among other things, lead to an increase in satisfaction and engagement and a decrease in turnover in the team.

360-degree feedback metric example

After leading a team through a project at work, a manager could ask their team for feedback on their performance. The manager can select specific competencies they want feedback on, e.g. leadership, making timely decisions, self-awareness, etc. Those completing the survey will be given an option to select that closest matches the behavior.
E.g. Self-awareness:

Controls their emotions even under pressure

Answer:

Strongly Agree

Agree

Neither agree nor disagree

Disagree

Strongly disagree

There should also be an option at the end to provide a qualitative response to expand on answers given.

Key takeaways

Productivity matters now more than ever: Product inefficiencies have a great impact on the success of an organization and can mean the difference between a business that thrives and is profitable, and a business that crumbles.
A data-driven approach: It’s more important than ever for HR to measure productivity and take a proactive, data-driven approach to improve it.
Select the right way to measure productivity: The four main types of productivity analysis that can be used to measure productivity are: capital productivity, material productivity, labor productivity and total factor productivity. Choose the right one for your organization and what you specifically want to measure.
Track key metrics: There are many key metrics HR can track to understand and improve employee productivity within the organization

FAQs

How do you conduct a productivity analysis?

Select your type of productivity measure: capital, material, labor or total factor, then select the most relevant and suitable metrics to track and improve productivity in your organization. Look at benchmarking figures to see where you should or want to be, and clear KPIs so that you can achieve your productivity goals.

Why is productivity analysis important?

Productivity analysis is important because it uses data and metrics to help you gauge how productive your individual and collective employees are at work, how much money they generate for your business, and if they are effective at their job and engaged at work.
The productivity gap between highly productive companies and others is widening. It’s more important than ever that HR teams and business leaders take a proactive approach to improve productivity and utilize the readily-available technology and data to help them do this.

Subscribe to our weekly newsletter to stay up-to-date with the latest HR news, trends, and resources.

Weekly update

Stay up-to-date with the latest news, trends, and resources in HR

Shani Jay

Shani Jay is an author & internationally published writer who has spent the past 5 years writing about HR. Shani has previously written for multiple publications, including HuffPost.