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Productivity vs. Efficiency: Differences and Formulas

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Productivity and efficiency may seem interchangeable, but they’re very different in practice. Learn about productivity vs. efficiency and the importance of balancing the two.

When we talk about productivity vs. efficiency, what do we mean? The distinction between these two separate but related concepts may seem small, but understanding the difference between productivity and efficiency is essential to running any successful organization.

Exploring this distinction is at the heart of what we do at ActivTrak. We believe in helping employees work smarter, not harder. In this article, we’ll explain the difference between productivity and efficiency, break down the productivity formula, and share ways to improve these aspects of your organization simultaneously.

What is productivity?

Productivity is a basic measure of output per unit of time. It reflects the quantity of work, not quality, so you get a sense of employee productivity levels by looking at total output over a given period of time. This makes productivity a raw measure, since it only reflects how much was done with no consideration of the underlying cost or profit related to that output. Many organizations put their focus towards productivity instead of  efficiency measures.

Many factors can impact productivity levels — a few common ones include:

  • Management: Studies show that the training, development and support managers offer significantly impacts an employee’s productivity level. Managers should proactively encourage their workforce and use workforce analytics to gather data-driven insights to help employees work wiser. Managersupport goes hand in hand with high productivity. Check out these resources for guidance on how managers can increase productivity.
  • Breaks: Employees who spend their entire workday glued to their desks or working non-stop, aren’t getting the most out of their work hours. Taking breaks can increase productivity, helping employees stay focused for longer without losing their momentum.
  • Technology: While some technology undoubtedly interferes with labor productivity, workplace technologies like automation and collaboration tools can lead to high productivity if implemented correctly. Just make sure you’re using the right tool for the right purpose and that employees get the training they need to use it effectively.
  • Stress and workloads: Stress makes it harder for employees to concentrate on their tasks, which can negatively impact productivity. While many factors can cause stress, an unmanageable workload is a common one.
  • Vision and strategy: An employee’s productivity is typically higher in an organization where they feel motivated to succeed. Having a clear vision and strategy in place can help team members feel like they’re on the right path and contributing to the company’s vision and success as a whole. Managers boost productivity levels by aligning individual and company goals without increasing labor hours.

    The productivity formula

    You can calculate and measure productivity in a variety of ways, but the standard productivity formula is:

    Total Output / Total Input = Labor Productivity

    Use this formula to calculate productivity levels for individual team members, full teams, departments and more.

    It’s important to remember that while this is the widely accepted productivity formula, at ActivTrak we believe there is far too much emphasis on outputs when using a formula like this. It’s important that organizations analyze inputs as well as outputs in order to move the needle on overall productivity. In short, in order to achieve higher overall productivity, organizations should look more toward measures of efficiency instead of measures of productivity alone.

    What is efficiency?

    While the dictionary definition of productivity is a measure of output per unit of time, efficiency is the best possible output for each unit in a period of time. The focus is on quality output rather than quantity of work. Efficiency is a refined measure because it considers the amount of productivity that actually generates profit rather than raw productivity alone. So, efficiency takes underlying costs into account under the assumption that high-quality work will take longer, but can cost less in the long run compared to low-quality outputs produced quickly.

    Several factors can impact efficiency levels, including:

    • Work hours: A full workday of focused labor hours can quickly tire an employee out, decreasing concentration and reducing their level of efficiency. Managers should encourage breaks when needed and ensure that workloads are balanced across teams, so no one suffers from burnout.
    • Preparedness: Managers must pick the right worker for the job and give them the training they need to succeed. Without that, any employee is likely to make errors.  translates into a low level of efficiency.
    • Distractions: Every time a person gets distracted, it takes an average of 23 minutes and 15 seconds to get back on task. That can reduce efficiency levels and reduce an employee’s quantity of work. Managers can help reduce distractions by encouraging employees to schedule blocks of “focus time,” limiting unnecessary meetings, and planning time for breaks.

    The efficiency formula

    Since calculating efficiency means taking a qualitative measure, the efficiency formula is a bit more complicated than the productivity formula. You need a way to determine the quality of work aside from an employee’s productivity, and to do that, you need a benchmark against which you compare each employee’s work.

    Finding that benchmark means determining the standard level of effort necessary to achieve a specific outcome. You can then compare current productivity levels to that benchmark to calculate efficiency. It’s easiest to do this by calculating the standard labor hours for a task and comparing them to the amount of time it took to work on that task. The efficiency formula written out is:

    (Standard Labor Hours / Amount of Time Worked) x 100 = Efficiency

    After calculating this, the higher the final number is, the more efficient an employee is. For example, if your company’s standard labor hours for a task is 70, but the actual amount of time worked is 82 hours, you can calculate efficiency using the formula (70 / 82) x 100, which gives you 85. That means your team is working at 85% efficiency.

    Of course, it’s important to keep in mind that this formula is a rough estimate and that a mathematical formula will never quantify quality for you. Only you can determine exactly what counts as quality work and determine efficiency levels.

    The differences between productivity vs. efficiency 

    Productivity is a measure of how much work can be done with a set amount of resources, while efficiency refers to the quality of those outputs given the resources. Other distinctions between productivity and efficiency include:

    • Quantity vs. quality: This is the crucial difference between productivity and efficiency. Productivity measures the total output in a given period of time, while efficiency measures how much of that total output is of high quality. Both quantity and quality are necessary for a business to succeed.
    • Underlying costs: Efficiency, unlike productivity, takes underlying costs into account. Sometimes an organization can be more productive without being more efficient which can create unexpected costs if quality is low. For example, if an auto manufacturing facility produces 60 cars per hour but many of them have issues, the brand may have to do a recall and pay to fix them. Meanwhile, a plant that produces 30 flawless cars per hour would be less productive, but more efficient with fewer underlying costs. Productivity may need to take precedence over efficiency in some cases, but it’s essential to take efficiency into account when calculating the cost of a project.
    • Refined vs. raw measurement: Efficiency is a refined measure, while productivity is a raw measure. Raw productivity tells you how much was accomplished, while efficiency indicates the amount of productivity that generates profit. Although efficiency might be a slower path to success, there’s no doubt that producing high-quality outputs saves organizations time, money and resources in the long run.

    Example of the difference between productivity and efficiency

    To understand the distinction between productivity and efficiency, it’s useful to consider an example. Imagine that two employees are creating presentations for an upcoming conference.

    • Employee #1: The first employee makes all four presentations in a week, but they are full of errors and will require hours of editing before the team can use them.
    • Employee #2: The second employee manages to create three of the four presentations in a week, but these presentations are top-notch and ready to be used immediately with less time in editing.

    In this example, the total output of the first worker is higher, meaning they can be considered more productive. However, the second worker has higher quality output, meaning they’re more efficient. Efficiency is all about working smarter, not harder — and that means taking the time to produce high-quality work instead of rushing to get the most amount of work done in the shortest amount of time.

    Finding a balance between efficiency and productivity in the workplace

    To achieve true productivity, you need both productivity and efficiency working hand in hand. Still, finding that perfect balance is much easier said than done. Try following these tips:

    • Use a workforce productivity monitoring tool to gather relevant metrics and establish a productivity baseline for your employees. Productivity tools help you understand each employee’s productivity and give the necessary information to calculate efficiency. Then you can gain insight into which approaches work well and implement them across your organization.
    • Assess your workflows regularly to ensure you use the most effective methods and tools to achieve your tasks. Outdated processes can reduce both productivity and efficiency.
    • Listen to your employees when they call out efficiency and productivity challenges. Perhaps time management is the biggest concern or a smaller team has fewer resources than another and is struggling to do more with less. Dig deep, and use employee productivity data to support their concerns. Collect metrics and compare productivity and efficiency levels before and after the change to see if your interventions are working.
    • Identify the balance between productivity vs. efficiency that works best for your organization. Share that balance with your employees so they can be active participants in the company’s goals.

    Improve productivity and efficiency with ActivTrak

    Finding the right balance between productivity vs. efficiency can feel like walking a tightrope, but it’s essential to delivering high-quality work. Before making adjustments to achieve true productivity, you must first understand your current productivity and efficiency levels. ActivTrak can help.

    With ActivTrak’s productivity management solution, you can unlock key productivity and efficiency insights in the workplace by taking a data-driven look at how your employees work. Average Daily Productivity, Past 30 Days: Utilization Levels, and Productive Time Composition: Focus, Collaboration and Multitasking are the three metrics that will give you the most comprehensive view of your workforce. Find out what’s typical for your team and what stands out from the norm, then create data-driven productivity goals that are unique to each employee or team.

    You need insight into the metrics that matter to find the perfect balance between productivity and efficiency that delivers quality results while maintaining a healthy work environment. Contact the ActivTrak team today to learn how we can help your team work wiser.

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