How do you Measure Productivity and why is it important?
How do you measure productivity?
This is perhaps one of the age-old questions facing businesses today.
And when your cost is not a consumable but in fact time, as is the case for professional service-based companies, it gets harder and harder to measure how productive your business really is.
Measuring time as your workplace output is an obvious way to measure your overall productivity- a ratio of inputs (time) versus outputs (money). The goal being to become as efficient as possible so that your input declines as your output increases.
Most firms will turn to time tracking tools to measure their costs and indeed there are many out there that can do the job. However, while time tracking software can give you the people analysis of who is working on what it then misses the bigger picture of how this relates to your profit margins.
Why is knowing and measuring your productivity important?
Going back to people related data. Productivity metrics can help with Performance management. Feedback backed up by data is an easy way to show an employee their own personal strengths and where they need to get better. If they are consistently hitting deadlines for certain types of work but further behind in others, it can help them consider where they need to spend more time and effort. It also helps with personal motivation.
Planning is another reason for having productivity metrics to hand. Knowing when and what deadlines are coming up and who might have resource/ time available is important for planning upcoming projects and work allocation.
Demonstrating productivity to parent company/ partner businesses. Data-backed productivity analyses are consistently requested from parent companies or in the event of new partnerships/ mergers. If your business is considering a long term partnership, having this data to hand to show not just how well you performed in the last quarter but the how and why can help further discussions.
Increasing efficiency. An obvious benefit to measuring productivity is knowing where and how you can eliminate wastage. If your company is spending a lot on flowers for client x every week, your productivity measurement should be able to show you where your costs are high, why and if you should take action. (Perhaps company x would be happy with a box of chocolates instead).
Better client relations. Metrics are a great tool for getting your client to understand exactly what a project or engagement costs your company. It also increases transparency and confidence in them knowing you are able to show and prove everything you bill them for.
This leads to easier and better contract negotiations. Or, in most cases, contract re-negotiations. With data-backed proposals, you can go into negotiations confident that you can demand higher fees or refuse certain work because of how much it costs you.
So now we come to the how… what’s the best way to measure productivity for service based firms?
Simple accounting software doesn’t cut it as this may show that revenue is up but it doesn’t actually give you insight into the how and why. For example, why did this project cost more than another, why did this one go over budget and who was working on it?
Simple time tracking tools will do the job as they will show you who is spending time on what but again, you will miss the overall picture of how this relates to your company profit margins.
There are solutions out there that will do both time tracking and simple accounting. With Seegad you’re able to manage your people productivity but also see how this relates to your overall productivity, costs and planning.
Seegad specialises in offering a 3-in-1 solution for businesses wanting more than just a timesheet solution but needing business insight and project planning as well.
If you would like to know more about your business productivity and be able to make informed decisions, try Seegad free for 30 days. It could completely change how you run your business.