Reasons for Improving Business Productivity and the Best Ways to Do It

Productivity is what separates a great business idea from a great one. A less innovative but more diligent corporation can become extremely wealthy from that business model after their eventual demise. Finding methods to increase productivity, whether it be your individual productivity or the production of your firm overall, is necessary if you don’t want that to be the case. Come along for a 10-minute read as we examine what productivity is and how to boost it for success.

Definition of Business Productivity

The ratio of input volume to output volume is known as business productivity. Depending on the kind of productivity you wish to assess, the inputs can vary, even though the output is usually a measure of how much money an economy or firm makes. The ratio of gross sales to labor or your company’s capital are the most practical ways to define productivity for this topic.

What does business productivity mean?

The ratio of input to output volumes can be used to determine productivity for companies engaged in manufacturing. It’s hardly the ideal way to define it, though, because manufacturing accounts for barely 10% of the US economy, and the majority of readers are most likely not in charge of a production plant.

The ratio of sales to billed hours is a measure of business efficiency for a service-oriented corporation. Assume that your business earned $50,000 this month and that you compensated your staff for 1600 hours of labor. Your productivity is $31 per hour billed as a result.

Although this definition of productivity is helpful, it is rather constrained because it mostly relies on the output of your marketing and sales teams rather than merely the workers who deliver the services.

The number of tasks completed each day and the duration of projects is another approach to measure productivity in the corporate world. However, since different firms might have different standards for productivity, this term is fairly arbitrary.

Why does business care about productivity?

Instead of addressing the productivity problems in their company, entrepreneurs frequently concentrate on bringing new ideas to market or acquiring new customers. This is a legitimate strategy to boost a company’s profits, but in the end, you’re hurting yourself by undervaluing the significance of business productivity software in the corporate world.

You may have to deal with tens of thousands of dollars in overhead and needless costs if the business expands and the productivity problems persist. If you start by increasing productivity, you will see a rise in both profits and staff work hours without even attracting new clients.

Factors influencing the productivity of businesses

Because productivity is influenced by a number of factors, the definition varies slightly depending on what you’re trying to assess. These eight elements are listed by the majority of scholarly sources as the primary drivers of productivity:

• Materials and workflow optimization tools such as Controlio for Labor Organization
• Logistics by Time, 
• Capital
• Location

But not every firm is impacted by these in the same manner. For this reason, it is widely acknowledged that there are several forms of productivity. Since each kind is influenced by a slightly distinct set of characteristics, knowing them all may help you increase productivity at your business.

Types of business productivity

Productivity of capital

The degree to which your financial investments are yielding a return is known as capital productivity. The most popular method for figuring it out for a business is to divide the monthly sales figures by the working capital.

Productivity of Materials

The third kind, known as material productivity, is a ratio of the prices of the material inputs and outputs in the local currency. The majority of readers, however, are unlikely to find this kind of productivity particularly helpful because their line of work most often entails selling digital goods or services.

Although it is a rather challenging metric, total factor productivity attempts to characterize the connections between the various elements that may affect economic output as a whole.

How to gauge a company’s productivity

Even government statistics departments acknowledge that measuring productivity can be challenging at times. Use the calculations that determine how labor and capital inputs compare to sales figures if you prefer to take the conventional route.

Track the number of hours worked throughout your company and divide the sales amount by that number to determine labor productivity. The sales figures must be divided by the working capital in order to calculate capital productivity.

Assume that your company has $30,000 in assets and $20,000 in liabilities per month. As a result, $10,000 is the working capital. A monthly sales figure of $50,000 would indicate a 5% production rate, which isn’t bad but definitely needs improvement.

This method demonstrates that there are other ways to boost productivity outside raising sales. By reducing liabilities and increasing assets, you can also try to increase working capital.

You will have to rely on more subjective metrics to gauge your own or your workers’ productivity. The first method of calculating it is to divide the total number of hours worked by the number of hours spent on projects that were truly productive. But doing that takes a lot of honesty and the desire to log every hour of your week.

If your staff have little faith in you, that might not be totally feasible. Use a task management app such as Trello to monitor staff productivity and identify areas where workers frequently fall short on their assignments.

What steps may a company take to increase productivity?

The issue with boosting productivity in a company is that each one is unique. Strategies that are effective for one company might not be as effective for another, particularly if the two companies are very different in terms of size and industry.

Analyzing your company’s shortcomings is the best thing you can do for it. Until the diagnosis is correct, no remedy will work. This could take a long time and necessitate engaging a third-party auditor or putting in place new procedures that would demand a lot of your work.