How to Calculate Labor Productivity

Simple way to measure and track labor productivity in your company with examples:

 

Labor productivity ratio metric

How to calculate labor productivity?

 

Business managers and analysts frequently talk about the business performance with regard to productivity. The actual labor productivity metric measures the quantity of output the company gets out of each and every unit of labor that the employees put in their particular work.

Organizations can easily measure their own labor productivity metrics in general, just by division or even simply by certain job task. Companies may then use these kinds of metrics and evaluate precisely how well they will compare versus all their rivals.

The initial step throughout calculating the actual labor productivity metric or ratio can really be identifying how you can calculate the output in your case.

Fill-in-the blank Excel KPI templates, dashboards, scorecards:

Here are some examples for calculating labor productivity that you can apply to various situations, companies or even industries:

Example 1

In the standard production environment, the business can easily determine the output through the quantity of items assembled or manufactured.

Example 2

With regard to sales personnel, you could determine the output through the amount of product sales as well as total quantity of products sold.

Example 3

For research and development departments, output could be calculated by the number of new products and services developed or brought to the market within a specific period.

 

The above examples are all about being able to calculate the output. Now let’s take a look on the input side of the labor productivity formula or calculation and see how you should determine your input.

 

Another element which goes straight into figuring out your labor productivity ratio will be the quantity of input your employees contribute. In the majority of settings, the quantity of employee input could be corresponding to the amount of working hours of the employees. You might find examples and scenarios where the strategy to measure input aren’t instantly associated with hours worked.

Examples of calculating labor productivity by using spreadsheet

Calculate labor productivity spreadsheet examples

 

The calculation solution to the actual labor productivity is the quantity of output in your case divided by the quantity of input. The employment of reliable metrics with regard to output, input as well as time frame allows you to compare your metrics among personnel and business units that perform the same or similar activities.

Examples

For the typical worker on the manufacturing plant floor, the actual output may be 100 pieces each week as well as the input may be 2 hours weekly on that job assignment. The normal labor productivity ratio is 100/2 = 50 items each working hour. For the sales rep who produces $5,000 on 1 appointment each month, the actual labor productivity metric will be $5,000/1 = $5,000 for every scheduled appointment.

Typically the labor productivity percentage could evaluate the performance of the employee, the division, an organization or even the industry. Division management may use labor productivity metrics inside their division to find out which staff members are usually performing around the desired anticipations. Business management may analyze productivity numbers to assess which divisions usually are adding essentially the most towards the net profit. And also shareholders are able to look at which organizations within the certain market make by far the most on their labor.

Tip: Keep in mind that by definition labor productivity means actual output for every work hour. If you need to calculate growth in your labor productivity to compare different time periods or departments, business units or teams you need to measure the difference in output for each work hour within the outlined time period.

Now Absolutely FREE:

Mr Dashboard