Productivity Formula (Table of Contents)
What is the Productivity Formula?
The term “productivity” refers to the performance metric that is usually used to measure the efficiency of the production process of a company during a given period of time. It can be used to measure the efficiency of human capital or machine.
The formula for productivity is very simple and it can be expressed as output produced divided by input provided. Mathematically, it is represented as,
The above formula is the underlying principle for various productivity metrics, such as revenue per employee, revenue per hour, units produced per hour, etc.
Examples of Productivity Formula (With Excel Template)
Let’s take an example to understand the calculation of Productivity in a better manner.
Productivity Formula – Example #1
Let us take the example of a production manager who wants to assess the productivity of all the employees in the company. According to the accounts department, the company had produced 150,000 units last quarter, which required 20 labors to work for 22 days a month and 8 hours per day. Calculate the productivity of the employees in terms of units produced per hour.
Input of Man Hours is calculated using the formula given below
Input = No. of Labors * No. of Months * No. of Working Days per Month * No. of Working Hours per Day
- Input = 20 * 3 * 22 * 8 hours
- Input = 10,560 hours
Productivity of the Employees is calculated using the formula given below
Productivity = Output / Input
- Productivity = 150,000 units / 10,560 hours
- Productivity = 14.2 units/hour
Therefore, during the last quarter, the employees produced at a rate of 14.2 units/hour.
Productivity Formula – Example #2
Let us take another example where the senior management of the company wants to calculate the productivity of its employees in terms of revenue generated per employee. During 2018, the company generated $35.0 million as revenue and the company started the year with 200 employees and ended the year with 220 employees. Calculate the revenue per employee for the company based on the given information.
Average No. of Employees is calculated using the formula given below
Average No. of Employees (Input) = (Opening Employee Count + Closing Employee Count) / 2
- Average No. of Employees (Input) = (200 + 220) / 2
- Average No. of Employees (Input) = 210
Revenue per Employee (Productivity) is calculated using the formula given below
Productivity = Revenue (Output) / Average No. of Employees (Input)
- Productivity = $35.0 million / 210
- Productivity = $166,666.67 per employee
Therefore, the company generated $166,666.67 per employee in 2018.
Productivity Formula – Example #3
Let us take another example to illustrate the use of productivity in a corporate set-up. Let’s assume that a team lead at a financial services company, decides to assess the level of productivity of his three newly recruited financial analysts – Jason, David, and Henry. He decides to use the no. of months in the company as the input and no. of cases executed as the output to calculate the productivity ratio. The following information is available:
Based on the given information, Calculate who is the most productive analyst.
Productivity is calculated using the formula given below
Productivity = No. of Cases Executed / No. of Months Served
- Productivity Jason = No. of Cases Executed Jason / No. of Months Served Jason
- Productivity Jason = 16 / 4
- Productivity Jason = 4.0 cases per month
- Productivity David = No. of Cases Executed David / No. of Months Served David
- Productivity David = 25 / 7
- Productivity David = 3.6 cases per month
- Productivity Henry = No. of Cases Executed henry / No. of Months Served Henry
- Productivity Henry = 19 / 5
- Productivity Henry = 3.8 cases per month
Therefore, from the above analysis, it can be seen that Jason is the most productive analyst with an execution rate of 4 cases per month.
The formula for productivity can be derived by using the following steps:
Step 1: Firstly, identify what you want to consider as the input for the production process and then determine the value of the input used. The input is the initial resource provided for the production. Examples of input can be human labor in terms of a number of labor or man-hours.
Step 2: Next, determine the value of the output produced in the process. The output is the final intended product of the process, which can be revenue, number of units produced, etc.
Step 3: Finally, the formula for productivity can be derived by dividing the output (step 2) produced by the input (step 1) provided as shown below.
Productivity = Output / Input
Relevance and Use of Productivity Formula
The concept of productivity is both important and interesting as it is being used in so many different kinds of processes to assess production efficiency. Each productivity ratio can have an atypical input that differs from another ratio. As such, despite having the same basic underlying formula, the productivity ratio for different forms of production looks different. Some of the most common examples of inputs are labor hours, materials, capital, etc. whereas common examples of output include sales, amount of goods produced, etc.
Productivity Formula Calculator
You can use the following Productivity Formula Calculator
This is a guide to Productivity Formula. Here we discuss how to calculate Productivity along with practical examples. We also provide a Productivity calculator with a downloadable excel template. You may also look at the following articles to learn more –