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How to Measure Productivity in Dollars

By Small Business AllBusiness.com

How do we get more productive?  In a way, it’s the fundamental question behind the business social web, spawning millions of product and service productivity proposals. Use our brand new app! Leverage social media! Offer work from home options! Optimize your office! Multitask! Take it one thing at a time!  Outsource it!  Insource it! Whew…  It’s enough productivity talk to bog you right down again!

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To be sure, there is no shortage when it comes to legitimately useful productivity recommendations. Heck, I consider myself a kind of connossieur of the productivity tip and have the overflowing browser bookmark folders to prove it. But what’s the best way to evaluate all of these productivity suggestions bombarding us?

While we seem to have figured out how to propose productivity options in a nearly infinite number of forms, I’m not so sure we’ve really mastered the art of evaluating those options.    As you look to compare productivity-focused product and service pitches, remember there are only 3 fundamental ways to gauge productivity improvements.

1.  Consider the amount of time you’ll save to accomplish the same amount of work. 

This is the best approach to productivity improvements that target a finite amount of work.  For example, a new payroll program that automates time and attendance collection and input might save 2 hours a week on your weekly payroll run.  Identifying the amount of hours saved is useful because you’re almost all the way home to a dollar figure.  All you need to do is multiply the hours saved by the hourly rate over a given period of time.

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2.  Measure the impact of increasing the output with the same amount of work. 

Some productivity improvements target areas where you don’t want to spend less time–you just want to get more out of that same amount of time.  Think marketing efforts.  When you can’t just quantify a dollar value based on time savings, you need to look at the value of the additional results.  Can a new CRM system help get out an extra 20 cold-calls a day?  If so, how many cold-calls to a lead?  How many leads to a sale and what’s the value of a sale?  Usually answering a few simple questions like those, will help you quantify what might look like somewhat intangible benefits on the surface.

3.  Consider quality metrics as well as quantity.

Quality based productivity improvements tend to get overlooked, because, well, it’s hard to quantify quality.  It’s hard, but it’s not impossible.  How do you go about measuring quality based productivity improvements?  Generally, it’s a matter of finding the right metrics: cycle times, error rates, wastage, and a variety of other quality indicators.

If a new order management system helps you communicate inter-departmentally in real-time, removing bottlenecks and improving delivery times from 7 days to 5 days, have you not improved your productivity, even if you are spending the same amount of time on the same amount of shipments?  How many more customers will you retain as a matter of improved provisioning?  What’s the value of each of those customers?  Again, as you push forward into more granular questions about the value of each incremental improvement, the clarity with which you evaluate productivity claims sharpens.

Adam Bluemner is the Project Specialist Manager for FindAccountingSoftware.com, a service providing free software selection assistance. 

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