Definition of employee productivity

Written by diane chinn
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Definition of employee productivity
Productivity drives business success. (shutter_m/iStock/Getty Images)

Businesses live and die by productivity. A productive company has lower operating costs and can sell its products or services at lower prices, bringing increased volume and profits. Employee productivity is key to organisational success and to a country's economy. Employee productivity must increase if the overall standard of living is to increase, according to economists.

Productivity definition

Economists define employee productivity as the output per worker or output per hour. With the increase in part-time employment and temporary and contract workers, many businesses use hours worked rather than output per worker to measure productivity.

Measuring productivity

Employees are more or less productive based on a variety of objective and subjective factors, including the work environment, motivation, workflow processes and technology. Objective data -- such as billable hours, number of products sold, items assembled or claims processed -- measure employee productivity. Employers also use subjective measures. For example, a claims processor may have a high submission rate, but actual productivity may be lower than the data indicates because some claims are resubmitted to correct mistakes.

Work environment

Telecommuting, flexible working and online collaboration are changing how, where and when employees work. Regardless of their work environment, having the necessary materials and tools to do their work is vital to employee engagement and productivity, according to the Gallup employee engagement survey.

Employee motivation

Open and honest communication, positive feedback and shared performance expectations all affect productivity. Being able to see a project through to its completion or having a clear understanding of their role in the work motivates employees better than top-down management approaches.

Work processes

All work is a process -- a series of actions that bring about a result. Frequently, workers develop processes over time with little or no formal planning. Workflow processes affect employee productivity, and managers of productive work groups understand this and champion process improvement. Industry experts say that if a process has been used for two years, it should be re-evaluated for improvement opportunities.


Technology has improved productivity in areas such as supply-chain management and financial transactions. For example, an online banking transaction costs less than a penny, while the same transaction with a bank cashier costs approximately 70p. Technology can also reduce productivity, at least in the initial phases of implementation. Often, employees are expected to learn a new technology while doing their daily work. This reduces their immediate productivity and lengthens the learning curve for the new technology, which, in turn, delays the anticipated productivity associated with the new technology. A lag is created between technology implementation and increased employee productivity. Technology requires that employers revise their definition of employee productivity. When employees complain about the amount of time they must spend writing and responding to emails, they're viewing this as non-productive time. But in the information economy, sharing information via emails is part of the work and a component of productivity.

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