Measuring the productivity of your business is not limited to calculating labor productivity . That is why in this article we are going to talk about a formula to calculate productivity that you will be able to try with your business.
Remember that if you don’t have time to read this article, you can download the audio and listen to it in the car, at the gym, running or wherever you want:
If you are still wondering why it is important for you to know how to calculate productivity , I am going to write you a few sentences:
- I can not anymore
- I can’t cope
- I work too much.
What have you heard before?
Well, I am going to give you a totally objective tool so that you can have an answer and be able to say “you are right” or on the contrary “you are completely wrong”
To the previous ones, I am going to add one more phrase: “what is not measured, cannot be improved”
I share 100% of this sentence. To 100%.
If we don’t know how something works, we don’t know if we need to improve it, and if we measure something we will know at all times if it is necessary to act on it or not.
Assuming that measurement is therefore something very important, we would now move on to the next point.
The importance of knowing what to measure
On many occasions, if not always, it is better not to measure than to measure poorly. A bad measurement can ruin your business, by acting in an inappropriate way.
So we are faced with two issues that we need to resolve before talking about how to increase productivity at work.
- You must be clear about the importance of constant measurement.
- That you should know exactly what to measure.
One of the biggest mistakes you can make is focusing on the metric as the end goal when faced with measuring one of your business metrics, rather than what that metric is intended to measure.
This perverts the measurement and makes it useless
I have seen on many occasions how an attempt was made to manipulate a figure in a denominator, so that the ratio that was intended to be measured would come out better. And this doesn’t work.
Therefore, your commitment to measure the productivity of your business must go through calculating productivity and using that indicator not as an end in itself , but as your tool to act.
There are many tools to calculate your productivity: today I am going to talk about one, simple to calculate and easy to follow.
Sales in Euros per hour of work as a tool to calculate your productivity
It consists of dividing your total billing by the number of working hours used during a given period. Simple, right?
Indicators do not have to be something complicated. Indicators should be quick and easy to calculate and help you make decisions.
However. This indicator by itself does not say anything.
I mean, how do you know if it’s high or low, right or wrong?
Comparing. There is no other. And there are different ways to compare:
- If you have a business that belongs to a chain or a franchise. Then you can request information from stores similar to yours and compare with each of them and with the average of all of them.
- If, on the other hand, your store is independent. Then you will have to pull your own information, and see how that indicator has evolved. You can use as a reference a period that you know in which your sales reached the figure you want and in which your customers were perfectly served. That would be your reference.
Excessively high productivity can crush your business
Yes.
You didn’t expect this, did you?
Excessively high work productivity means that you are billing more than expected for the human resources you have. This will lead you to poorly serve your customers. Poor attention will cause your business to present problems such as delays, errors, lack of attention to detail. Finally, these problems will affect your income statement in the future.
Of course, low labor productivity will affect your bottom line as well. Low productivity means that you have more than enough media for your current sales volume. Therefore, your profitability will be low and it is even possible that you will make losses. I leave you here a link with several tools that can help you increase your productivity.
As you can see there are tools to measure employee productivity. Also to measure the productivity of your business. But both measurements will be impossible for you if you do not have what is essential: your commitment.
And now I ask you: What do you need to improve the productivity of your business?
Also Read: Choosing The Right Type Of Company For My Business