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Employee productivity: How to measure, increase, & improve internal business productivity.

15 min read
Understanding employee productivity helps business leaders make decisions and plan ahead. It can also help them improve the employee experience, benefiting both employees and the bottom line.

What is employee productivity?

Employee productivity is the amount of work an employee can accomplish within a certain period of time.

This relationship is neatly summed up by the productivity formula, which you can use to calculate employee productivity:

Productivity = output (what is created) / input (hours spent and resources used)

When we think about measuring employee productivity, it’s often in relation to individuals and their achievements. But from a big-picture perspective, employee productivity is about the health of an organization and its ability to thrive and grow.

What are the benefits of high employee productivity?

The most obvious benefit of high employee productivity is that more work is being done within your business. That might mean more products are being manufactured, more services delivered, more customers helped, and so on.

Another important benefit is the efficiency of your business. If productivity is high, it means your systems and processes are likely to be set up well, and that your employees have everything they need to maximize their potential.

Achieving high workforce productivity is something employees can feel proud of, and it can relate positively to employee engagement, since employees feel highly motivated to maintain their team’s productivity, and feel ownership over their high standards of performance.

Measuring employee productivity

You can measure employee productivity by comparing the amount of work done to the time spent working. For example, if you have to draft a report that typically takes 3 hours and you complete it in 2 hours, your productivity is better than expected. If you were to increase productivity, you might finish the job in an hour.

You need plenty of data

As you can see from the example above, measuring employee productivity only makes sense when there are multiple instances of work being done. You need to be  so that you can establish what is typical and what is high productivity or low productivity relative to that norm. That could mean one employee performing similar tasks again and again – think of a runner trying to beat their personal best – or a team of employees engaged in the same kind of work.

You need to compare like with like

Measuring productivity also requires that the work done is more or less like-for-like. For example, you may have two employees working on writing reports, but one might take longer than the other because there is more data to include and more analysis to be done. If everyone is doing the same job and their tasks are very routine, for example taking customer enquiries within the service industry, you can get a measure of employee productivity by counting how many tasks are done per day or per hour.

You need to consider more than just output

Other types of productivity data can tell us about quality as well as quantity, taking into account efficiency, output, and effectiveness.

  • Efficient employees use fewer resources to accomplish more work
  • Effective employees are able to meet their objectives using the resources you give them and/or their own initiative
  • Employees with great output produce high-quality work, either efficiently or effectively.

Ways to measure employee productivity

We looked earlier at the productivity formula, a simple equation that can measure productivity. In fact, this equation measures a specific metric known as labor productivity – it’s specific to the amount of work put in and the amount of output produced as a result.

The four types of productivity

  1. Labour productivity

Labor productivity is one of four types of productivity that have traditionally been used to measure productivity in business.

  1. Material productivity

Alongside labor productivity is material productivity, which measures the level of output against the amount of raw materials consumed.

  1. Capital productivity

Then there is capital productivity – which you can use to measure productivity by how much output is delivered per unit of capital expenditure.

  1. Total productivity

Summing up all three of the above is total productivity, which can measure productivity by taking all of them into account.

How useful is measuring productivity?

Because it’s measured in terms of tangible output per hour, or per day, employee productivity is a useful metric but not one that can capture everything an employee contributes to the business, particularly at a time when a lot of production activities are being automated.

When you think about how to measure employee productivity, it’s also important to consider what an employee offers in terms of their knowledge, their support of others, their contribution to the culture of the business, and their loyalty and engagement.

That said, measuring productivity is important for businesses to be able to plan ahead and set expectations on which they can build. If you’re considering expanding your business, moving into a new sector or market, or considering an investment in new tools or premises, being able to forecast based on measuring employee productivity is extremely valuable.

It’s true that there is no such thing as an ‘average worker’, but you can use employee productivity measurements across a large number of employees or a long period of time to get a handle on what is typical for your business. This will help you identify when there are outliers.

Your most valuable employees might have productivity rates higher than the norm. Where someone’s productivity is reduced, there may be an issue you need to address, or something preventing them from improving productivity in or outside the workplace.

How to measure employee productivity in a post-industrial world

The ability of an employee to work fast and well has an obvious impact on how much profit a business can expect to turn. Likewise, a team’s productivity, or the overall productivity of a business (company productivity), should track with how much money is earned in a particular period. But these days, it’s no longer quite that simple.

Historically, labor productivity has been extremely important in measuring employee productivity.

This type of employee productivity measurement, along with the other three types noted above – material, capital, and total – has its roots in the era when employees predominantly worked manually, clocking in at a certain time, using skill and strength to complete physical tasks, then clocking off and heading home.

In this scenario, the most valuable employees were those who did the most work in the time between arriving and leaving the workplace, and measuring employee productivity in terms of time and output made perfect sense.

However, as time goes on and more of our work becomes automated, different kinds of employee effort have become more important than labor.

Knowledge workers, who use their brains rather than their physical power to do the majority of tasks, don’t need to be sitting at their desks to perform. They may get a bolt of inspiration or come to a decision while outside work, or provide knowledge gained during their studies, long before they were employed.

Their output is ideas, opinions, language, solutions, even relationships and empathy. None of these contributions fit neatly into input/output measures of employee productivity.

So far, there is no generally accepted way to measure productivity in workers who use their hearts and minds at work, but there are some promising suggestions. For example, there may be correlations between learning and intellectual capital in a business and the level of productivity among its knowledge workers (Ramezan, 2012).

Which factors affect employee productivity?

The productivity formula may be simple, but the causal factors that influence employee productivity are anything but. Here are a few of the drivers likely to be affecting workforce productivity in your organization.


Factors like stress, mental health, physical health, housing, finances, and relationships with others inside and outside the workplace can all have an impact on employee productivity.

Management relationships

Relationships between employees and their immediate managers have been shown to have huge impact on the quality of the employee experience, which in turn can positively or negatively affect employee productivity.

Work environment

Noise, temperature, natural light, and the quality and availability of workstations can all hamper or improve productivity at work. This factor is especially relevant in the case of remote workers, who may not have access to a space that is built for, or dedicated to, boosting employee productivity.

Company culture

The culture of an organisation sets norms for what level of productivity is expected among employees, how much effort they put in, how much work matters, and how competitive employees feel with one another. It’s hugely influential on employee productivity.

Facilities and equipment

When the tools and technologies employees need to do their jobs are unreliable, unintuitive or slow and unwieldy, they can slow down employee productivity despite the employee’s best efforts. Conversely, the right equipment can help increase productivity.

Communication software

In today’s hybrid workplaces, communication software is a vital link between employees who may be located remotely from one another. The design quality, speed, and versatility of the communication channels in use can speed up or slow down employee productivity.

How to make your employees more productive

Measuring employee productivity naturally goes hand in hand with improving employee productivity. After all, measuring productivity gives you the information you need to discover what will improve productivity and what may be getting in the way.

Beyond motivation

The first thing most of us think of when we think about improving employee productivity is motivation. And it’s true that encouraging employees and motivating them to work hard is an important aspect of building business productivity. However, this approach is only the tip of the iceberg. It will only work if your employees are supported in doing their jobs in the most efficient way possible.

If they are blocked by slow processes, an unhelpful work environment, a culture of high stress or poor-quality tools, they will be unable to fulfil their potential. It’s also likely that they won’t enjoy their jobs and will be less engaged at work – which in itself could create a negative effect on overall employee productivity due to low employee morale.

Each individual employee will have a different skills and personality profile, too. So what works for one person may not be right for someone else. One person’s motivating pep-talk is another person’s stressful conversation. Yes, you could get around this by filling your business with employees who thrive under pressure, but you would end up with quite a homogenous company culture, and you would miss out on the diversity of skills and approaches to work that you might get with a more mixed workforce.

Instead, make room for everyone’s work style by adopting a coaching and development mindset towards employee productivity. This will help you maximise productivity and job satisfaction by bringing out the best in each person and understanding what they have to offer in your business.

Setting objectives

Identifying goals and setting a timeframe for achieving them is a powerful way to increase employee productivity. You can do this as part of an employee performance management or development program, with regular and structured check-ins between employees and their managers.

This approach gives employees a sense of clarity about what is expected and what they have already achieved, and can also encourage employees to visualise their future in the company.

Job performance management is an employee productivity tool that’s about much more than just positive or negative feedback. It’s a way of building the relationship between employee and business, getting to know your people’s professional skills and goals better and planning with them for the future.

Time-tracking software

Time-tracking software allows you to measure employee productivity on a very granular level. Employees who use time-tracking tools are able to note down their productive hours during the working day, and set timers to measure specific tasks. Time-tracking tools often come bundled with other forms of employee productivity software too.

Time-tracking is not the same thing as employee monitoring software. Rather, it’s a tool employees themselves use to better organise their time and to collect data on how long tasks are taking, so that they can better plan a given time period, e.g. the working day. The data can also help employers to measure employee productivity when combined at scale.

AI tools

AI has now reached a level of sophistication that can be transformative for the employee experience, and increase employee productivity too. AI tools can act as a helpful ‘sidekick’ during work tasks, giving employees what they need to get the job done in a responsive way. They can also listen, analyse and report on the larger patterns in employee productivity data in ways that help leaders make good business decisions.

For example, a customer service representative can be assisted by AI that recognises the identity of the customer on a phone call, and pulls up the relevant account data automatically. The AI can also listen to the conversation and offer helpful prompts to remind the employee what to cover during the call.

AI tools can even surface relevant information from the company’s wider knowledge base, so that the customer receives the answers they are looking for during their call, rather than having to wait for the employee to seek out the information and get back in touch with them.

This is just the start of what AI can do to improve employee productivity – we can expect the capabilities and applications of AI tools to continue evolving.

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