Productivity and efficiency are easily among the most used keywords among business leaders and organizations. No matter which industry they operate in, organizations are obsessed with improving productivity or efficiency to become more successful.
However, the question remains. Is productivity the same, or is it different from efficiency? Are they simply two sides of the same coin? Is one more important than the other?
Let’s explore what these two metrics mean for organizations and how they can be leveraged for success.
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In layman’s terms, productivity can be defined as the output against a unit of a given input, such as a time period. If the organization or employee produces more output with the same resources, productivity increases. Similarly, productivity will also increase if the same output is produced by fewer resources.
Most organizations measure productivity by calculating output against time. Since measuring productivity is a relatively straightforward task, it is no wonder why this metric gets a lot of attention.
Formula for calculating productivity
There are various formulas for productivity, ranging from simple to complex. However, they all follow the same pattern given below.
Output / Input = Productivity
Consider an organization that produces $10,000 worth of goods or services in 1,000 hours. That $10,000 is the output and the 1,000 hours becomes the input. Using the formula given above, you end up with $10 per hour, which is the productivity level of the organization.
Efficiency is all about having the ability to create the desired output with minimal or zero waste. Waste, as used here, can be either materials, time, or both.
In other words, efficiency denotes the degree to which resources are being used to achieve the desired output. Being efficient means that you are achieving the same results but with fewer resources.
Formula for calculating efficiency
By improving efficiency, organizations can reduce the hours, budgets or labor needed to produce the same output. To calculate efficiency (in percentage), organizations can leverage the following formula:
(Expected Input / Actual Input) x100 = Efficiency
Take the example mentioned previously. The organization expects to do $10,000 worth of work in 1,000 hours. What if the organization achieves the same in just 800 hours? By using the above formula, it is understood that the organization has achieved an efficiency of 125%.
The relationship between productivity and efficiency
As seen above, productivity is all about getting more work done during the same time period. On the other hand, efficiency is about getting the same amount of work done but in a shorter time period.
As such, productivity and efficiency are interlinked. If productivity deals with the quantity of the organization’s output, then efficiency is about its quality.
Organizations cannot afford to ignore one in favor of another. If employees know what they must do and how to complete it quickly, the workflows improve. As a result, employees gain more time to focus on their tasks instead of spending time trying to understand the next set of tasks.
While efficiency may not always improve productivity, it ensures that the output meets expected requirements without errors. As a result, organizations no longer need to spend more time, labor, and resources to fix their mistakes.
In short, productivity and efficiency together will give the organization “true productivity”.
Therefore, productivity and efficiency must go hand in hand to ensure the success of an organization. While it can be challenging to achieve a balance between these two metrics, the benefits are considerable.
How to increase both productivity and efficiency
For an organization, it is imperative that measures are put in place to increase productivity as well as efficiency. Higher productivity and efficiency levels directly correlate to smarter use of available resources such as time and materials.
Of course, it also means the organization becomes capable of delivering more products and services at a higher quality. As a result, there is an improvement in revenue, profitability and growth for the organization. On the other hand, poor resource utilization can result in increased costs that can put a burden on the organization and its competitiveness.
Therefore, no matter how well an organization is performing, it is essential that they track and improve both productivity and efficiency. Here are a few tips for doing so:
Solicit feedback from employees
To better understand what employees need to do to improve their efficiency and productivity, the organization must seek to gather their feedback on a regular basis.
Surveys and team meetings are excellent ways to understand those needs. Of course, the organization must also focus on creating a safe environment. This allows employees to share their opinions and ideas without fear and risk of being penalized.
By gathering information, the organization gains a better understanding of the roadblocks that employees face in improving themselves and their output.
Clarify goals and responsibilities
It is difficult for employees to be productive without a clear understanding of what’s expected from them. By clarifying the goals and objectives, it becomes easier to achieve the results. Moreover, it encourages employees to work harder and even promotes teamwork. Therefore, leaders must try to establish clear goals at the outset of any project for optimal productivity and efficiency.
Ensure efficient resource allocation
Ultimately, the efficiency of employees is greatly influenced by their skills. Therefore, by allocating employees with the right skills to the right task, leaders can considerably improve their team performance. Efficient allocation of resources allows organizations to prevent issues such as increased costs and missed deadlines.
To ensure optimal resource allocation, leaders and managers need to understand the skills of their employees as well as their tasks. Efforts must be made to ensure that employees are not overallocated or under-allocated. Otherwise, their performance can drop drastically.
Leverage time tracking
Tracking employees’ time is useful in more ways than one. Time tracking certainly helps in monitoring and evaluating the performance levels of employees. Additionally, it provides insight into the daily activities and tasks of the employees, enabling leaders to improve task and work distribution to improve overall productivity.
In addition, time tracking allows organizations to achieve other benefits such as increased accountability, lower burnout and cost reduction. Employees are also able to focus on and prioritize their work better.
Implement automated tools
In today’s workplace, automation is a key enabler of productivity and efficiency. There are several kinds of automated tools available for different kinds of work. By leveraging these tools, organizations can automate many mundane and repetitive tasks such as administrative work. Since these tools take over those tasks, employees become free to focus their efforts on more complex endeavors. This improves productivity.
Moreover, automation tools are able to complete those tasks at a much faster rate and with a high degree of accuracy. Therefore, there is a corresponding rise in efficiency as well. Any organization looking to increase overall performance and become more competitive must seek out the right automation tools for its employees.
Ultimately, the fact is that productivity and efficiency must be inextricably linked for an organization to experience true productivity. As the benefits are considerable, organizations must seek to employ proper mechanisms and tools to improve these two critical metrics.
Of course, since both productivity and efficiency are interlinked with time, organizations will do well to invest in a robust time management platform. A global cloud-based time tracking system can help organizations capture every minute of work. With that data, leaders and managers can make the best decisions for improving productivity and efficiency levels across the board.
Guest Author: Arpan is an assistant content marketing manager at Replicon. He enjoys learning and writing about technologies that are making the world a better place. Arpan enjoys good books, traveling, and writing on a wide range of subjects, from coffee to technology.