How to Estimate Labor Productivity

by Charmayne Smith

Labor productivity measures the amount of output that results from input. In business, the input is the work completed by staff and employees and the output is the products and services that result from their efforts. Identifying the rate of labor productivity allows businesses to ascertain their most productive workers, establish salary ranges and predict the business’s generated revenue.

Determine the rate at which each staff member or employee completes his production. Identify the number of units completed by each staff member during a set period of time, such as an eight-hour shift or during a 40-hour week.

Use the established set period of time as the input factor to determine the labor productivity rate. Divide the output of produced units by the set period of time to determine the individual labor productivity rate for each employee.

Determine the overall labor productivity rate for the department or company. Total the accumulated produced units for all employees and staff within a set period of time to determine the volume of output. Divide the volume of output by the set period of time.

Use the individualized labor productivity rate to identify the most-productive employees within the department or business. Analyze the highest-producing individuals to determine how these individuals maintain such high rates. Analyze the lowest-producing individuals to determine why their productivity is low as compared to other employees. Look at aspects such as break time, absences and product knowledge.

Utilize the labor productivity ratio of the entire department or business to establish metrics for improvement and quality. Review this ratio regularly to identify if the business is improving its productivity rate or struggling in its efforts.

Analyze factors that affect the productivity rates of both individuals and the entire team. Look at factors such as technology, equipment, company training, skill level, continuing education and even the labor itself. Make department or company-wide adjustments to ensure that labor productivity levels are at an acceptable rate. Consider changes such as improving equipment quality, updating technology, implementing company training requirements and structuring employee break times.

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