Productivity indicators: what they are and how to calculate

Productivity indicators: what they are and how to calculate

productivity

productivity indicators

Is keeping the team at high performance a challenge for you right now? Then you can find good support in your management by using productivity indicators! They are parameters used to analyze the production generated by a team, a process or a specific employee. The information provided by them makes it possible to identify bottlenecks and points of continuous optimization.

Thus, these metrics provide several benefits to the organization, ensuring more quality, conversion and profit.

So, to help you apply it to your company or team, we explain in this text the main productivity indicators:

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  • Conversion rate;
  • Technological degree;
  • Production capacity;
  • Profitability;
  • Turnover index.

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What are Productivity KPIs?

Productivity KPIs are metrics that make it possible to quantify what is being delivered, whether by a process, by a team, or by an employee. For this, most of these indicators use the comparison between what was delivered and the resources consumed (time, money, etc.).

But, if you don’t work with indicators yet, let’s take a step back before delving into the subject: what is KPI?

This is the acronym for Key Performance Indicator, which is basically a tool used to measure something that is important for the success of the company.

With this definition, it is possible to understand the importance of productivity KPIs, as they make it possible to understand something fundamental for any organization: whether production is compensating for the resources that are being invested.

Furthermore, it is through the analysis of productivity indicators that it is possible to identify process optimizations, training needs and even problems in the organizational culture.

What are the productivity indicators?

There are a large number of productivity indicators, each of which facilitates the visualization of different data.

Therefore, it is essential to analyze your organization’s objectives before defining which indicators will actually be measured. In this way, it is possible to understand which ones fit into the organizational context.

In fact, there are so many productivity indicators that it is possible to classify them into three main groups:

  • Capacity indicators: refer to the production capacity of the business and can be measured using various factors, such as, for example, the number of employees, availability of raw materials and financial income;
  • Strategic indicators: make it possible to collect and analyze information related to the company’s objectives, such as profitability and growth;
  • Quality indicators: measure the quality of the product or service being delivered, showing the need for optimization.

Below we list and detail some of the productivity indicators that can have a great impact on the organization, bringing several benefits. Check out!

1. Conversion rate

At first glance, conversion rate may not seem like an indicator of productivity. However, it is critical to understanding whether the efforts and processes of the sales team—and other sectors—are going well.

This metric is of great help in identifying failures and points that require optimization. And, as we said, it goes beyond the commercial department, as it can help find problems in marketing or in the product itself.

If there is any failure and the rate is low, productivity will also be affected. After all, the investment in resources will not be bringing the corresponding results.

To be calculated, you need to have access to the total number of leads and how many actually closed the purchase. From this information, the following formula is used:

(# of closed purchases ÷ # of leads) × 100 = % conversion

2. Technological degree

The company’s technological degree refers to the level of influence of technologies on process automation and optimization.

Nowadays, many tasks have become more practical and agile to be performed due to technological evolution.

However, it is useless for the technology to have advanced if the organization does not advance along with it and look for ways to implement them, ok? You have to be willing to do a digital transformation.

The technological degree can be calculated comparing the productivity of processes with and without certain technologies, as well as it can be evaluated in a qualitative way, analyzing all the details that bring gains.

3. Production capacity

Production capacity is a classic productivity indicator, especially for industries and other companies that involve production. This is because it makes it possible to visualize the demand capacity that the business supports.

Therefore, it is an essential KPI to understand the production limit of a company, which is very relevant.

After all, failure to deliver something that has been agreed is not good for customer retention, is it?

And it is noteworthy that it can be applied in different types of companies, not just those that have a manufacturing system. This is because organizations are made by people, who have a production limit.

Therefore, this metric can be monitored either by evaluating the production limit of something or by the delivery capacity of a team.

In addition, production capacity can also help to evaluate processes. For this, it is enough to compare the resources that are being invested in it and the results that are being delivered.

4. Profitability

Profitability is an indicator that makes it very clear the company’s productivity level in a given period.

After all, this indicator shows whether the revenue that is coming in is more than enough to cover all costs. Something that is necessary for a company to be successful.

The formula for calculating profitability is as follows:

(Net profit ÷ total revenue) × 100 = % profitability

If the percentage of this metric turns out to be negative, it’s time to turn on the warning signal, because there is a bottleneck that is affecting productivity.

5. Turnover index

Although the turnover index is mainly considered an indicator of people management, it also makes it possible to visualize the level of productivity.

But what is turnover? Basically, it is the employee turnover rate in the company. And what does this impact on productivity? People are the core of organizations and are directly related to productivity.

It is essential to maintain a team that identifies with the organizational culture and knows the processes so that productivity is high.

In addition to not retaining talent, the frequent change of employees generates a constant need for training and adaptation, which also impacts costs. And, as we know, in sales there is also ramp-up time, a period until the professional can bring financial return from their work.

To calculate the turnover rate, it is necessary to select data from a period of time and apply them in the following formula:

(Dismissed employees ÷ total employees) × 100 = % turnover

A good turnover rate will be below 5%. A result equal to or greater than this means that there is some problem related to salary, organizational culture or other factors.

How to increase productivity in sales?

Have you started planning how to increase sales productivity with indicators? We can help you with this! We have two great materials that can help you apply KPIs to the sales team.