Productivity is a measure of the efficiency of production, expressed as the ratio of output to inputs used. Performance is defined as the accomplishment of a given task measured against preset standards of achievement, such as accuracy, completeness, cost and speed.
In the wider context of performance management, productivity is measured against productivity KPIs. In their simplest form, productivity KPIs, such as # Units per man-hour, stand at the basis of both modern and older performance evaluation systems. However, it is only but natural that we ask ourselves the following question: How much productivity is there left to both measure and reflect on performance?
In her book, The Measurement Nightmare: How the Theory of Constraints Can Resolve Conflicting Strategies, Policies, and Measures (1999), Debra Smith talks to her readers about a real-life situation, based on one of the most common productivity KPIs in use: # Units per man-hour. And it all starts with defining the KPI. According to her, # Units per man-hour is a “summary of standard costing’s use of standard labor hours and standard labor rates, resulting in labor variance analysis and decisions designed to improve.”
“There is not one productivity indicator that does not reflect on performance. And there is not one neglected faction of performance that does not impact productivity in one way or the other.”
From here on, Debra Smith describes this particular situation in which, on an intuitive basis, some executive manager from a manufacturing company decides to increase # Units per man-hour by cutting labor costs with highly automated machines. So, instead of six loom operators, four were assigned to tend to one loom per shift.
And the effect was as expected…at first. # Units per man-hour had increased at the loom. However, because of the downtime of the looms which now increased, the total output of the looms had decreased.
Due to a lack of attending operators, the downtime of the machines escalated up to a point where it impaired all subsequent processes. When that happened, all downstream processes began to suffer from starvation. % On-time delivery of products declined, $ Labor costs went up due to # Overtime and, instead of going up, $ Net profit went down.
Debra Smith’s account of the negative side effects one productivity measure can propagate, when taken out of the context of performance, stand to show that there is more to productivity in performance than counting outputs per unit of input. And this is more visible when dealing with the most popular dimension, which is labor productivity.
In the context of performance management, labor productivity can be translated through individual KPIs. When dealing with employee performance, individual productivity KPIs become part of a more complex performance evaluation system. The overall individual performance index simulates an average between the score of the individual performance scorecard, the individual competencies score, and the employee behaviors score.
Where do KPIs fit into this equation? Productivity KPIs are mindfully incorporated into the individual performance scorecard, to best reflect the quantitative aspects of employee performance. And this is where everything gets tricky and we start asking ourselves: How much of one employee’s performance should be measured in terms of quantity?
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Let’s take, for example, the automotive industry. With automotive manufacturing, productivity is a key performance indicator that measures the total production volume of the actual manpower, while taking into consideration the effective days officially scheduled for each automobile.
The core performance indicator of the automotive industry is # Hours per unit or # HPU, and it reveals the number of hours required to build a car. However, at its basis, this # HPU cannot be measured outside # Available manpower, # Effective working time, and # Individual production volume. Let’s add % Absenteeism rate to this reasoning.
When dealing with target production volumes it is important that the plant works at its full throttle to achieve those targets. Given this requirement, % Absenteeism rates should not be overlooked, as they have a major impact on the # Effective working time, which here on, impacts the # Production volume, and, ultimately, the # HPU.
However quantifiable, % Absenteeism rates also reflect on less quantifiable variables. This further takes us to the issue of % Employee engagement: a roughly quantifiable, uncontrollable driver of not only productivity but of performance as well.
So, how much productivity is there left, to both measure and reflect on performance? A great deal. And maybe the best way to look at it is by envisioning this revolving cartwheel…this continuous circle, which turns productivity into performance and vice versa.
All things considered, there is not one productivity indicator that does not reflect on performance. And there is not one neglected faction of performance that does not impact the former in one way or the other.
For more articles on productivity improvement, click here.
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Editor’s Note: This article has been updated as of September 18, 2024.
Remote work and the implications of continuing the process, including its potential impact on employee performance, are widely discussed. However, there is no right answer, and it is not one-size-fits-all.
The future of work includes flexibility, employee experience, agility, and the responsible use of artificial intelligence (AI)—these significant shifts impact where and how employees work. With an increase in remote work options, we have seen positive trends in work-life balance, employee empowerment, inclusivity, and an increase in diverse talent. These factors are also known to increase employee productivity and retention. According to BCG, a considerable population of employees are ready to leave their jobs if they find their flexible work arrangements unsatisfactory. Based on their survey, approximately 90% of women, caregivers, individuals identifying as LGBTQ+, and those with disabilities, deem flexible work options as crucial in determining whether they will continue or resign from their current employment.
Remote work productivity is subject to debate due to various factors that must be considered. Some suggest remote work can increase productivity due to a flexible schedule, no commute, and fewer interruptions. While many employees thrive in a remote work environment, some find it challenging due to the discipline it demands.
Remote work was on the rise even before the COVID-19 pandemic. A July 2023 report from Stanford University found that working remotely has doubled every 15 years. Then, when the pandemic occurred, although devastating, it provided a new perspective for those previously constrained, forced to relocate, or live in less favorable locations to work for a specific company and advance their career. Worldwide ERC states that around 56 million Americans moved to new residences between December 2021 to February 2023 due to COVID-19-related shutdowns and the surge in remote work and online education. With such a huge increase in their number over the past few years, this begs the question: do employees working remotely demonstrate productivity?
Taking a deeper look into the study by Standord University, researchers shared that remote work employees’ productivity differs depending on perceptions—the nature of the research and the conditions under which it was conducted. The report revealed that workers believed productivity was higher at home (approximately 7% higher), while managers perceived it lower (around 3.5% lower). Another example, according to a poll by the video presentation applications mmhmm, 43% prefer office work and 42% favor working from home for peak productivity. Moreover, 51% of employees stated that working asynchronously or having the flexibility to set their schedules contributed positively to their productivity. Perceptions aside, the Stanford analysis found a 10% to 20% reduction in productivity across various studies.
The bottom line is today’s company culture is crucial. Ensuring work-life balance and putting the employees in the driver’s seat are the best ways to retain and increase productivity because they will feel valued and empowered. In a 2022 Microsoft employee engagement survey, 92% of employees say they believe the company values flexibility and allows them to work in a way that works best for them. An even higher percentage (93%) are confident in their ability to work together as a team, regardless of location. People have different preferences—some individuals opt for a hybrid approach, while others choose either remote or in-person work exclusively.
Regardless of the work setup, company leaders and human resources (HR) or human capital management (HRM) executives should ensure that they can still make a lasting impact on employee performance. One measure involves establishing key performance indicators (KPIs) that assess innovation, program, project, and product success—the output, not the physical location. Another crucial step is developing a strategy that includes all future work options, such as in-person, hybrid, and remote choices. Employees tend to be more productive if there is a level of empowerment that allows them to decide where to do their best work.
Planning in person events makes a difference. Leaders who bring new hires and internal transfers, new to the team, on-site for several days should see an uptick in productivity post-gathering. In-person team or company-wide gatherings 1-4 times per year provide employees an opportunity to reset and socialize. Moreover, managers should bring teams together for major program and project kick-offs. When onsite in person, people being present makes a difference. Discourage using Teams or Zoom when employees are in the general vicinity. I have seen companies spew the importance of in-person just to fly employees into a specific location and have people take meetings from their desks or in a different on-site building-conference room, defeating the purpose of in-person interaction.
Having organizations foster all work options is critical and foregoes having to decide which is best. There is no right or wrong answer to this challenge; it should be considered a new way of working and requires future-forward ways of thinking, just as we do with emerging technologies.
Interested in more articles on productivity improvement? Click here.
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About the Guest Author:
Dr. Malika Viltz-Emerson is a Senior Global Human Resource Leader at Microsoft. She has over 20 years of experience in human capital management. Her mission is to identify and address the real-world challenges and opportunities for employees and the company, and design and implement optimal solutions that leverage the latest tools, technologies, and processes.
Editor’s Note: This article has been updated as of September 18, 2024.
People have been working from home even before the pandemic, but their number significantly increased when the health crisis led to lockdowns and travel restrictions. Companies were forced to send their employees home to work remotely to comply with social distancing measures and keep the workforce healthy. Statista shows that before the pandemic, only 17% of US employees worked remotely for five days or more weekly. However, the number grew to 44% during the outbreak in 2020.
When the pandemic subsided and governments eased travel restrictions, some companies asked their workforce to return to the office while others offered the hybrid set-up. However, most employees still prefer remote work.
A poll conducted by Pew Research Center with 5,889 workers in America in January 2022 found that 61% of those who work from home said they avoid going to work by choice and 38% claim their office is closed. It represents a shift from October 2020, when 64% of people worked from home because their office was closed and 36% did so voluntarily.
In spite of that, 50% of leaders in information worker roles want to pursue getting employees back to the office full-time next year, based on Microsoft’s Work Trend Index 2022 report. Still, 52% of respondents say they highly consider becoming remote or hybrid in the year ahead and 80% claim that since remote or hybrid work arrangements were implemented, their productivity has increased.
According to the popular job site Flexjobs, one of the benefits of working from home is it increases “productivity and performance” as employees encounter fewer interruptions, have a quieter work environment, and have increased workplace comfort, resulting in more focused time.
In a research conducted in Latin America, they explored the relationship between remote work, work stress, and work-life during pandemic times. Researchers found out that by having flexible work schedules, the employees’ engagement and productivity levels increased because they could work at their most productive time. Privacy also plays a big role in employees’ efficiency. However, the productivity level is negatively affected when the worker is constantly interrupted by children or adults that need assistance.
A case study published in the Journal of Occupational and Environmental Medicine investigated the impact of family-work conflict, social isolation, distracting environment, job autonomy, and self-leadership on employees’ productiveness, work engagement, and stress experienced when working from home during the pandemic. The authors discovered that excellent self-leadership skills and autonomy positively impact the time assessment in a WFH scenario.
Results from a qualitative study by Danielle Tinneveld of Radboud University also show that productivity tracking facilitates the identification of process bottlenecks. The affected staff gets less anxious and annoyed when these difficulties are resolved, and overall production efficiency improves.
How Employees Can Track Their Productivity at Home
On a remote workday, people have to manage work and non-work-related tasks. To be productive, they have to master the art of time planning. Effective time management involves planning each activity in a time frame, considering priorities such as urgent work tasks and eating breaks. Individuals should fit their activities into 16 hours to get 8 hours of sleep each day to achieve great productivity. By monitoring the duration of their tasks, they can observe which actions can be improved.
To see if their time management strategy is effective, remote workers can use key performance indicators (KPIs). Some KPIs they can consider are:
By monitoring the percentage of tasks performed as planned, individuals can see if they reached their target or not. By knowing the percentage of time spent working, people have insights into the free time left for non-work-related tasks, such as going on a walk, relaxing, cooking, eating, and other housework activities (washing clothes and dishes, drying clothes, cleaning floors).
It’s a different story for employees whose companies have return-to-office schemes. Their organizations should rethink their performance management system to consider the new ways of working that employees gained during the pandemic. Evaluating the relevance of KPIs has become important now more than ever. To better understand KPIs, its nature, characteristics, and implementation, enroll now to The KPI Institute’s Certified KPI Professional and Practitioner course.
About the Guest Author:
