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7 Examples of Productivity Analysis

 , April 27, 2022
Productivity analysis is the modeling and measurement of the value created in a unit of labor such as a work hour or month. The following are illustrative examples.

Revenue Per Employee

At the highest level, productivity can be measured as revenue per employee. For example, a firm that generates net revenue of $2 million per employee is generally more productive than one that generates $200,000 per employee.

Productivity Rate

A productivity rate is the amount of value created in an hour of work. This is calculated with the productivity formula. For example, a bakery that averages baked goods worth $540 in an hour of work.

Overhead Cost

Calculating overhead cost per employee or per dollar of revenue. For example, calculating the cost per employee of human resources. All else being equal, an HR department with a lower cost per employee is more productive.

Performance Management

Productivity analysis can examine the value created by individual employees. For example, an order picker at fulfillment center that picks 20 orders per hour. This type of measurement may be used as one factor in a well rounded set of employee objectives whereby employees are rewarded for high productivity and are tasked with improving low productivity.

Business Processes

Productivity analysis can look at the labor consumption of business processes. For example, the time it takes a kitchen employee to make a hamburger. With measurement, processes can potentially be improved with approaches such as increased automation or rationalization of steps.

Time Management

Time management is the process of looking at productivity for work that isn't systematized as a business process. For example, a salesperson who engages in various communication with customers and produces customer documents such as presentations, proposals and quotes. At a high level, this can be measured as revenue per week, month or year per salesperson depending on the sales cycle. Details can also be measured such as how much time salespeople spend on customer communication [revenue generating] versus performing administrative tasks [overhead].

Administrative Tasks

Measuring the time consumed by administrative tasks. For example, a government that is required to measure the time consumed by red tape imposed on individuals, small businesses and professionals such as doctor's offices. This would then be regularly published with feedback from those impacted and a cycle of reducing this overhead. For example, if family doctors are doing 2.3 hours paperwork for every 20 minutes with a patient, that may be a crushing overhead that ends up closing doctor's offices.

Productivity Myopia

Productivity myopia is a condition whereby you over-optimize a productivity metric in a way that is detrimental to your business. For example, if you measure software developers by how many lines of code they produce in a month, they may simply write less efficient code that is artificially long. Likewise, productivity is often a tradeoff with other aspects of your business such as quality or customer experience such that measuring productivity alone without balanced metrics tends to be a bad idea.
Overview: Productivity Analysis
Type
Definition
Modeling and measurement of the value created in a unit of labor such as a work hour or month.
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Productivity

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