What does "productivity" mean to you? If you can’t quite put your finger on the definition or recall the last time you measured it, you aren’t alone. Research by the Institute of Directors suggests that few SMEs (which comprise 99.9% of all businesses in the UK) are aware of their own productivity and where there might be gaps.

Measuring productivity simply means assessing your business’s performance in terms of effort and outcomes. There isn’t a one-size-fits-all approach to calculating if your productivity is high, low or somewhere in between. Instead, it’s about choosing the best techniques for your business type, products, workflow, and sales process.

Here are four tips on how to transform "productivity" from a vague buzzword into a meaningful metric in your business operations. 

1. Use a formula to establish productivity benchmarks

A good place to start when measuring productivity is with this straightforward formula:

Productivity = output ÷ input

Input is the amount of time, effort, and money put into producing and delivering your product or service. Expressed in terms of time, this could be one salesperson spending four hours making calls. In money, it could be the cost of four hours of their wages.

The output is the product of your effort. Again, you can think in terms of situational outcomes or finances. For example, let’s say 100 calls are made in 10 hours by two salespeople. The 100 calls lead to 10 sales with an average value of £100 each. In this case, the calculation would be:

Output (10 sales) ÷ Input (10 hours of calls) = Productivity (1 sale/hour)

or

Output (£1,000 in sales) ÷ Input (10 hours of calls) = Productivity (£100/hour)

Productivity formulas like this one work best for quantitative scenarios, in which the inputs and outputs are easily represented by time and money. In other situations – where inputs involve creativity, human judgement and complex decision-making, and outputs include customer experience and employee performance objectives – you should measure productivity using a variety of approaches.

2. Track time to analyse employee productivity

Time tracking can be a useful addition to your productivity measurements in scenarios where it’s more important how much employees get done than how many product units they produce in a given time (e.g. creative agencies, sales, marketing, architects, service industries).

Fortunately, digital time tracking apps have made using spreadsheets for this purpose obsolete. Toggl is an app that works by defining a task, then hitting "start" when work begins and "stop" when it pauses. Everything in between is recorded and analysed automatically. By looking at weekly reports, you can compare the productivity of employees in identical roles and break down your hours by projects, clients, and tasks to see what’s making you money and what’s holding you back.

3. Use daily updates and milestones to stay on track

If you wait too long between check-ins with your team, you risk losing sight of what they can achieve in specific timeframes. That means quantifying the value of employees’ efforts and gauging productivity is more difficult. After all, if you have little idea what they achieved over the last two days (output), you have nothing to contrast the expenses with (input) over the same period.

Gathering daily updates over the phone, in "huddle" meetings or even via a quick email can be an effective way to validate employees’ hard work while keeping an eye on on-going productivity. Project management apps like Asana, Podio, and Trello can also be useful. You can set daily, weekly, and monthly milestones with granular delivery dates for major and minor tasks within projects. That way, it’s easy to see which aspects of projects are delivered on time, then feed the numbers into your productivity calculation.

4. Use 360-degree feedback to measure productivity from the inside

You can gain a lot from traditional performance reviews, but for deeper insights into employees’ productivity, it’s sometimes worth seeking their views on each other’s performance. This increasingly popular technique is called 360-degree feedback. After training employees on the correct way to give their opinions, each person provides honest feedback on their peers based on their contributions to relevant goals. To avoid personal feelings getting in the way, feedback is given anonymously through feedback forms, rating scales, and written responses. Each person also submits a self-rating survey comprised of the same questions they answered about others.

360-degree feedback doesn’t replace performance reviews. For instance, it shouldn’t try to measure attendance or sales quotas. Instead, it’s a way to get a feel for the "softer" aspects of productivity from the inside, including job satisfaction, teamwork, character, planning and goal-setting.

You might want to reward your team for their dedication to the company's goals. Check out how a Card like the American Express® Business Gold Card could help you earn points from all your business spend that you can use to treat your employees to gifts, upgraded business travel and unique experiences.