Productivity Calculation
The output variable of the productivity formula is usually expressed as a dollar amount. In theory, another measure of output could be used such as a count of production units or service interactions.The input variable of the productivity formula is usually hours worked. Hours is typically used even when measuring productivity for a year. This can be based on an assumption such as 37.5 hours a week.productivity = total value of work / total hours workedExample 1
The productivity of a nation is measured using GDP per worker of $90,000 and average annual hours worked of 1600.productivity = $90,000/1600 = $56.25 / hourA high productivity rate indicates a nation that produces high value goods and services. It also indicates extensive use of technology, automation and capital.Example 2
A craftsperson creates handmade canoes from wood. The craftsperson measures their productivity on a particular project by taking gross revenue of $4400 and the 32 hours spent on the project including sales and administrative tasks.productivity = $4400 / 32 = $137.5 / hourAs the craftsperson is self employed, they have costs for electricity, rent, materials, parts, marketing and tools. As such, the productivity rate should not be confused with an hourly wage.Example 3
A production line is heavily automated such that a small number of workers can handle a shift. As such, labor is a small cost compared to the cost of capital equipment, parts and materials. In a month the production line produces goods worth $24 million dollars with 1600 total hours worked.productivity = $24,000,000 / 1600 = $15,000 / hourAs companies invest in technology and equipment productivity typically rises.Similar Calculations
The efficiency of business processes and machines is measured with the efficiency formula. It is common for knowledge work to be measured using revenue per employee as opposed to productivity.| Overview: Productivity Formula | ||
Type | ||
Definition | A basic measure of the productivity of an economy, industry, organization, team or individual. | |
Formula | productivity = output / input | |
Related Concepts | ||
