You’ve probably had a conversation with friends about how productive your weekend was. Maybe you cleaned the house, worked on a personal project, did your taxes or renewed your car registration. Feeling productive is good, but it’s not the same as knowing how to calculate productivity.
No matter what it is you’re accomplishing, it’s important to understand how to calculate productivity as a metric. Once you know how productive you are over a given time period, you can begin to make conclusions about how to be more efficient.
Input and Output
In its simplest form, productivity is defined as the ratio of “units output” — or units produced — to “units input.” Usually, you’ll approach the equation with the “units output” being the number of jobs completed and the “units input” being hours.
If you were to look strictly at raw materials — if it took you two apples to make one jar of applesauce — you would be measuring the efficiency of your equipment, not yourself.
To give a better example, let’s say that a single unit of work is quantified as a jar of applesauce. There are eight hours in your workday and you can make eight jars of applesauce over the course of the day. You would receive a productivity score of one because the number of “units output” is eight, as is the number of hours in the “units input.”
Once you know how to calculate productivity and you’ve established a baseline like your eight jars a day rule, you can begin to understand how other factors affect productivity. A reasonable factor here could be you purchasing a stereo so the adrenaline of the music gets you pumped to crush more apples!
Now you’re making 10 jars a day and your productivity score improves to 1.25. That’s a 25 percent increase in productivity!
The stereo might have cost you a few bucks but based on the increased revenue from all that extra sauce, you’ll be able to cover its cost quickly. This means the stereo is providing a return on its investment, or ROI — and positive ROI is always a win.
Productivity and Efficiency are Different
Remember when we talked about equipment efficiency? The reason we differentiate the term is because machines are unlikely to work differently over time. Assuming you’re using the press right every single time, it’s probably not going to start making more sauce from a single apple.
This idea is known as efficiency and even though it’s different than productivity, efficiency can be improved.
Take, for example, the engine in your car. In the 20-some years between 1980 and 2004, engine technology has become more efficient — we have learned how to squeeze more power from a single drop of fuel. That has led to an 80 percent increase in the average power rating of engines in consumer cars.
Putting it All Together
So, if you want to have a lucrative business, or get a lot of stuff done, you need to be both productive and efficient. The formulas discussed here are simplified compared to what an economist or consultant might use, but they give you a good grasp of the concept.
In a real-world setting, you might calculate productivity with a multi-factor formula that incorporates other items such as capital and downtime between processes.
But even when you branch out into these more complex formulas, the basic question remains — how much are you getting out of the work put in? And what’s the right answer?
Begin by finding out how productive your competition is. The correct answer for you should always be, “more than the other guy.”
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