What is employee efficiency and how do you measure it?

Guest Author 5.05.2020
how do you measure employee efficiency

Today, we’ll explain to you what employee efficiency is and how to measure it. 

But before we do that, we will need to explain and understand the difference between productivity and efficiency.

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What does efficiency mean?

The dictionary defines efficiency as “the state or quality of being efficient, or able to accomplish something with the least waste of time and effort.” To translate this into a real-world example, we’ll use cars.

While there are many types of efficiency depending on what is doing work, in cars there’s what’s called “thermal efficiency.”

Thermal efficiency is a simple concept: it’s how much of the heat is converted to energy that moves the car. Of all the energy produced by gasoline, up to 88% of it is lost.

Now you’re probably thinking, “But people don’t run on gasoline!” And that’s correct, they don’t—they run on time and money with a confluence of a variety of other factors that can affect their “mileage.”

What efficiency looks like (credit: Denys Nevozhai)

So, the concept of efficiency stays the same:

How efficient a person is, depends on where the resources and energy are going and how much of them are being used to obtain a certain result.

As for why it’s important for employees to be efficient, it all comes down to functionality (work put towards a goal) and money. Businesses see time as money and money as time. Hence, whenever employees are inefficient, they cost the company more in the same way that a gas guzzler hits an owner’s pocket.

All this translates gains from an employee’s potential into realized losses for a company. The good news is that there are ways to improve this if you know what types of efficiency to look for and measure.

What does productivity mean?

Productivity is defined as “the rate at which goods and services having exchange value are brought forth or produced.”

In its essence, it measures how much work (quantity) is being done over a certain period of time. A good example of this would be a car factory.

Car factories are just like people in that they have a certain level of output. It might be five thousand cars per month, ten thousand cars per month, or some other number. 

What productivity looks like (credit: Waldemar Brandt)

People, too, have a certain number of tasks that they can accomplish per month (or per week or day). But unlike factory outputs, people’s outputs are rarely consistent—one person may get much more done than another person in the same timeframe.

In such cases it may make more sense for a company to value one employee over another other despite the differences in output when taking into account other factors like efficiency.

What’s the difference between efficiency and productivity, and why’s it important?

If we know that productivity is the relationship between output and time, then efficiency and productivity are opposites of each other.

Put in other words, one is related to quantity and the other is related to quality. As quality goes up, quantity goes down and vice-versa. And because employees are not pre-programmed machines that perform tasks as fast as physics allow, they have a maximum level of productivity and efficiency that can be attained.

The ideal situation is to maintain a balance between these two because top quality may be highly efficient but unproductive, although this depends on priorities because lower productivity isn’t necessarily a bad thing.

On the same line of thinking, a large amount of work can be “done” (productivity) but be highly inefficient (e.g., someone must waste more time and resources by revisiting what’s been done to correct offending mistakes).

Only a balance can achieve optimal results (credit: Martin Sanchez)

What pertinent types of efficiency are there?

In the case of white collar workers, many economic and manufacturing efficiencies can be applied to them even if they aren’t a machine that creates a consumer grade good. For our intents and purposes, we only need to care about the two most relevant types of efficiency: static and dynamic.

The first of two that we have is static efficiency.

Static efficiency is a type of efficiency that relates to an existing environment in which the work gets done. This usually means improving upon an existing process or product and taking advantage of existing opportunities.

One example of this is making the switch from clocking in manually to using DeskTime’s core feature of automatic time tracking as a way to clock in when the company already uses DeskTime. We can say that it improves static efficiency by making the existing process of clocking in more efficient for employees and management. This is one way to reduce time waste and obtain an increase in this type of efficiency.

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The second of two that we have is dynamic efficiency.

The word dynamic here refers to improvements and developments of new processes and products in relation to time. This can also apply to creation of new opportunities for oneself to improve long-term profitability.

Using DeskTime again as an example, we can say that investing into it for the first time to make the process of project tracking easier is a time-dependent process that may have a high upfront cost, but with it comes the increase of profitability in the long run because manual calculations are no longer necessary. Here we access new resources and make new improvements, all resulting in an observable increase in dynamic efficiency.

If you’re still confused, don’t be. Let’s sum it up like this: 

  • static efficiency concerns itself with the right combination of resources already at hand (e.g., as a DeskTime user, don’t ignore the new features!), whereas 
  • dynamic efficiency concerns itself with the acquisition of the right resources over time for improved profitability (e.g., if you’re not a DeskTime user, signing up to make its features work for you is one way to increase this efficiency!).
Static efficiency: an existing door to opportunity (credit: Matthew T Rader)

Now let’s talk about employees and how to measure their specific performance individually and as a team.

What is efficiency analysis and how can it help you?

For efficiency analysis, we turn to DeskTime’s internal metrics to show you an example of what this is and how it works. 

Consider the data that DeskTime gathers: DeskTime time, productive time, productivity, and effectiveness. The two metrics that belong to efficiency analysis are productivity and effectiveness, displayed as a percentage. Let’s define all of them:

  • DeskTime time is the time spent on the computer.
  • Productive time is time spent on productive (work-related) apps.
  • Productivity is time spent on productive (work-related) apps divided by the total time spent on the computer.
  • Effectiveness is the amount of time spent doing the right thing (productive time) for a predetermined amount of time (e.g., productive hours and set office hours).

Here we can see that DeskTime gathers information as it relates to an employee’s spent time and performs internal calculations to show you easy-to-read percentages, completely eliminating the need to do any analysis manually.

When it comes to applying these percentages, they can be used to inform you about the efficiency of any one employee. If an employee has a high percentage of DeskTime productivity and effectiveness, then the employee can be said to be efficient because he or she is using all his and her time and resources to work towards a goal.

Note that employee efficiency is idiosyncratic in that it is a measurement against one’s own total capacity relative to a set amount of time (this is what DeskTime’s metrics measure). For this reason, it’s good for correcting behavior based on past performance.

Additionally, it’s important to not mix efficiency and speed together (more on this later) because people work at different rates. Regardless, this measurement is useful for comparing teams and individuals in the workplace to find if their time is being used productively (as is defined by DeskTime).

Efficiency is like climbing to the top – you’re up against yourself (credit: Zack Callahan)

Having all this information at your fingertips means that you can compare individual employee metrics to determine if there is an issue, and if there is one, figure out what strategies can be used for optimizing their performance.

What other efficiency metrics are there and how to use them?

As we know so far, comparing an employee’s efficiency tells about the employee’s time use, but it speaks nothing of the profits an employee or a team of employees loses.

To know the potential losses in relation to costs in detail, we must use some math. The following formula works for figuring out these losses as a result of inefficient use of time:

Let’s plug in the numbers, assuming a project cost (can be any job/task in general) of $9000 and an employee’s or a team’s efficiency value of 87%:

This final number tells us that 13% of $9000 is the equivalent of doing a project that costs $1170 less (or $7830 compared to the full $9000) if efficiency were at 100%. Although this is an example of theoretical losses (many factors decide whether the effect is strong or not), it highlights that time management is very important.

How do you improve employee efficiency?

As for why employees aren’t very efficient, disengagement, known as the commitment and belief in an organization, plays a big role.

Besides finding out and trying to fix what’s wrong (e.g., distractions at work, micromanagement, not enough breaks, overload, employee family problems), companies and owners can increase engagement and retain talent by:

  • Supporting employees to make sure that they can do their job well (e.g., upgrading to comfortable chairs and tables, buying modern technology, etc.)
  • Respecting employees as one would respect a neighbor to show that you and your company cares
  • Investing in your managers and training all levels of them
  • Giving meaningful feedback that is encouraging and shows thoughtful consideration
  • Making senior managers good role models for other employees to aspire to.

Carrying out all of these actions is sure to result in higher efficiency and productivity.

Now that you know everything about efficiency, give DeskTime a shot if you haven’t already, and let it elucidate to you where your employees are falling short!

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