How to calculate the productivity of a company? Method and examples

This concept helps us to understand how efficient a worker in a company is. How to calculate it?

Productivity is an aspect that allows us to know how a company is doing.. By means of this indicator, it is possible to know if the organization is running according to plan and if there is an adequate distribution of tasks among the members of the company.

From the psychology of work it is known that to increase productivity it is necessary that the organization provides a set of elements.

Not only the material aspects allow the production of goods and services to be achieved more efficiently, but also the well-being of the workers and the environment in which they perform their work.

Today we are going to see what influences the productivity of a company according to organizational psychology, as well as explain how to calculate this indicator by means of an example.

• Recommended article: "Staff turnover: what it is, types, and how to study it".

What influences the productivity of a company?

The psychology of work has shown and helped to understand that companies, their offices, factories, and other workplaces, are more than spaces in which the worker performs his job.

The way these places are physically organized, the relationships with other workers, the facilities available at the time of performing their function in the company, among many other aspects, are key to understand how efficient a company is and how productive it is.

1. The social factor

One aspect that many employers usually overlook are the relationships between workers. Human beings are social animals, so they need to interact with other people. The workplace is no exception. A correct relational dynamic can imply that workers are motivated to go to work, since going to the office or factory will not only be going to work, but will also be going to work.In the workplace, going to the office or factory is not just about going to work, but also about seeing colleagues with whom they can share pleasant moments.

In a workplace where there is a purely working relationship between employees, without even knowing each other's names, or even hostility, it can be very detrimental to the organization. This has a negative influence on the company's productivity, since employees will not give their best and will even feel fatigued as soon as they enter the office.

2. Psychological/motivational factors

Another factor to take into account is the employees' state of mind.. A person who is going through a bad situation will not come to work at ease. This will influence not only the degree of individual productivity, but may also affect the rest of the people, spreading a generalized discouragement and pessimism.

The ideal thing for companies, when they discover this type of situation, is to offer the person who is going through a bad time to go to a psychologist or take a few days off if the problem is very serious. This way, he/she will be able to come back with more energy and a more motivating attitude.

3. Organization and leadership

The productivity of an organization depends to a large extent on how the different types of workers are organized.. There are employees who act as leaders, others as dynamizers in the company, others facilitate communication, and many more types. A good distribution of this type of employees, taking into account their levels of training and what they have specialized in, will allow to obtain the maximum degree of productivity in the organization.

For example, it is possible to hire a person who knows a lot about accounting, but if this person lacks leadership skills, it would not be appropriate to place him/her as a manager in the company. Thus, personality is another aspect that influences good production dynamics in the organization.

4. Work climate

The work environment is often underestimated, but it turns out to be fundamental in the well-being of the employees.. Work climate is understood as the relationship between the physical and emotional environment of workers. Aspects as simple as the color of the walls, the temperature of the room, the degree of illumination, among others, can make the difference between a pleasant and enjoyable workplace and one in which you are uncomfortable, wishing for the workday to end as soon as possible.

How to calculate productivity?

Every company is managed through processes, in which there are inputs and outputs.

By inputs we mean the company's labor force, the money spent, the resources and machinery used, the energy required, the time spent and, basically, everything that has been invested in the process. On the other hand, the outputs are the results of the process, i.e., the goods obtained, the services offered and the sales.

Productivity, mathematically speaking, measures the relationship between outputs and inputs.. Basically it is the result of the division between the outputs obtained from the process and the inputs invested to generate those outputs.

Formula for calculating productivity

Labor productivity is the ratio between outputs and human resources, i.e. the personnel involved in the production of products or the supply of services.

Basically this would be the formula:

• Outputs / inputs = productivity.

Where:

• Inputs: units of labor factor employed.
• Outputs: Production obtained.

Examples

To better understand this concept, we present the following example.

A dry cleaner has washed 100 suits in a week, paying its employees 10 € per hour, working 56:

To find out the labor productivity in terms of labor and labor cost two calculations would be made.

Labor productivity in hours would be:

• Productivity = 100 suits / 56 hours = 1.78 suit/hour.

The value 1.78 refers to the number of suits cleaned per hour in this company, being this value the labor productivity.

The productivity taking into account the labor cost would be:

• 56 hours x 10 €/hour = 560 €.

• Productivity = 100 suits / 560 € = 0.178 suit/€ = 0.178 suit/€.

This means that for every euro invested in labor, 0.178 suits have been cleaned..

Example with more factors

The previous example only took into account the money invested per worker. Now let's look at one in which more factors are taken into account, which allow us to know more accurately the degree of productivity of the company.

We have a dairy products company, in which there are 10 workers who work 8 hours a day. Each of them produces about 20,000 yogurts per day, which they sell at 1.25 each.

There are 40 machines used to produce the yogurts and about 10,000 liters of milk are needed as raw material. The workers are paid €10 per hour, the machines cost about €20 per day for maintenance as a whole and the milk costs €1.50 per liter.

To calculate the productivity index in this case, we would use the following formula:

• Productivity = 20,000 yogurts x 1.25 €/yogurt / (10 workers x (10 €/hour x 8 hours/day) + 20 € maintenance + (10,000x1.50 €/liter of milk)) =. 1,6

The value obtained indicates productivity. Values greater than 1 mean that there is positive productivity, and less than this number, it is negative.

Bibliographical references:

• Black, S. E. and Lynch, L. M. (2006). How to Compete: The Impact of Workplace Practices and Information Technology on Productivity. The Review of Economics and Statistics, 83(3), 434-445.
• Kompier, M. and Cooper, C. (1999). Preventing stress, improving productivity. European case studies in the workplace. London, UK: Routledge.