Productivity Calculator

1. Productivity formula
2. How to calculate labor productivity?
3. Productivity - practical examples
4. Worker productivity vs machine productivity

    Productivity formula

Productivity is a measure of a company’s efficiency regarding its production process. It takes into account the input and output of different factors which are obvious from the inputs required by our workforce productivity calculator. They could be employees, machines, software tools, and so on.

One of the core purposes of every business organization is to produce more goods or services while using fewer resources. This efficiency is a goal which can be achieved by improving productivity and one way of measuring this is as workforce productivity. Business owners analyze this parameter in order to find ways to boost their operations - increase production and minimize resource expenses.

In order to calculate productivity, you can use the formula:

Productivity = Output / Input.

We categorize resources as input - materials, capital, working hours, etc. Output on the other hand is the ready product - realized sales, units produced, number of service interactions, and so on.

Productivity may be affected by different socio-economic factors, such as competition, inflation, or recession.

We are going to look into the labor factor as a key aspect of any business initiative, and its analysis as a starting point to any manager’s efforts regarding optimization of the working process.

    How to calculate labor productivity?

To estimate the average labor efficicency over a time period one needs to find the total labor and the total workforce output. This can be done in terms of units produced or sales realized, by using our calculator or by hand following these formulas:

Labor productivity = Total units produced / Total hours worked;

Labor productivity = Total net sales / Total hours worked.

Let’s say a company employs 12 people, 8 of which are part-time workers while the other 4 are full-timers. The company's sales last January, February and March amount to $25,500, $36,000, and $29,000 respectively.

In order to calculate the overall worker productivity of your employees over the first trimester of the year, add up the sales and divide them by the product of the months, weeks, and hours worked each week:

Productivity = total sales / total hours worked = (25,500 + 36,000 + 29,000) / 3 x 4 x (8 x 20 + 4 x 40) = 90,500 / 12 x (160 + 160) = 90,500 / 12 x 320 = 90,500 / 3,840 = 23.57.

The calculation makes it clear that in the first three months of the year the company’s productivity was equal to $23.57 per hour of work.

Labor productivity is often used as a trusted economic indicator that provides accurate information about the current situation on the job market. It signals whether or not there is growing competition, what is the expected GDP, and helps estimate a country’s living standard ^[1].

    Productivity - practical examples

We will now look into a few practical examples, where work efficiency is measured.

Example 1#:. In this first situation, we are examining a local brewery. The owner has hired 7 people to bottle up the beer he produces. Each of them works 40 hours a week. At the end of the week the number of bottles ready to be sold is 19,600. Let’s calculate the productivity of the workers per hour:

Productivity = 19,600 / (7 x 40) = 19,600 / 280 = 70 bottles

Evidently, the employees of this brewery managed to produce 70 bottles per working hour

Example #2: For our next example, we will look into and compare the productivity of 2 workers - Maria and Jane. Maria is a full-time employee, working 40-hour weeks. In a month she realizes sales of $25,000. Jane works only 4-hour shifts. Her monthly sales amount to $16,000.

Maria’s productivity = 25,000 / (40 x 4) = 25,000 / 160 = $156.25 per hour worked

Jane’s productivity = 16,000 / (20 x 4) = 16,000 / 80 = $200 per hour worked

Even though Maria works more hours and generates greater cash flow, her productivity of $156/hour is at a minor level than that of Jane - $200/hour. The above worker productivity calculations can be verified using our calculator.

    Worker productivity vs machine productivity

While workforce productivity and machine productivity may seem different at first glance, the intrinsic concept is the same. The mathematics are the same whether you are estimating worker productivity or machine productivy so the same equation can be used to find out both, depending on your particular needs.