How to Calculate Partial Productivity Ratio

by Chirantan Basu, studioD

Productivity measures the ratio of output to input. Small-business owners are concerned with productivity because it ties into operational efficiency and profitability. Productivity measurement can be actual or prospective. Actual measurements allow managers to collect and assess real-time data, while prospective measurements are projections used for strategic planning. Total productivity measures the joint impact of all inputs on the output. Using partial productivity measurements, managers can focus on one input at a time and compare current results to historical trends and results at other companies.

Select the input variable for the partial productivity calculation. For example, if you own a car repair business, labor could be an input variable. If you operate a restaurant, labor and raw materials are possible input variables.

Calculate partial operational productivity, in which both input and output are in physical units. For example, if you've hired a new employee for your small-appliance repair business, divide the number of appliances repaired by the number of work hours to determine his labor productivity. If he repairs 10 appliances every five hours, his productivity is two appliances per hour. If his productivity numbers are low relative to the company average, consider skills training to improve his productivity. If his productivity numbers are high, assign him to your preferred clients or put him on a supervisory track.

Calculate partial financial productivity, in which both input and output are in dollars. For example, if you own two pizza franchises, you could divide the sales by the staff members' salaries to calculate the partial financial productivity ratio for each store. If the numbers are significantly different in the two stores, try to find out the reasons. It could be a quality issue, which might call for training, or it could be a product mix issue, which might require changes in marketing and pricing strategies.

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