Realistic Productivity Reporting: Metrics & Tips on Tracking Performance

“How to measure productivity?” is a question every business owner and team lead has to ponder sooner rather than later. It’s pertinent in every new scenario, whether it’s changing industries, teams, or projects, as the definition of productivity changes from one context to another.

Tracking and then reporting on productivity is a continuous process that needs to be broken down into specific metrics, tools, and protocols. What’s even more important than establishing metrics is making sure performance tracking doesn’t step into the territory of employee monitoring. Like any unethical practice, it’ll cost you more than you’ll get out of it.

So how do you measure productivity and report on performance without pissing off your employees? Read on to find out.

Let’s roll.

What’s wrong with productivity reporting

Tracking productivity is not a bad idea in and of itself. In fact, there are many benefits to measuring productivity, which is why companies do it in the first place.

All of these require an understanding of how productive employees are. We say it often on this blog, but only because we strongly believe it: work-hours is the biggest and most costly resource for the majority of service businesses. Therefore, measuring productivity is indispensable in optimizing your biggest expense.

In the broadest sense possible, productivity is the ratio of “productive hours” against “total hours”. This can also be defined as billability or utilization (more on that later).

The trouble starts when trying to define “productive hours”. Is it only revenue-generating tasks? Does it include administrative tasks? What about learning and development? What about time in work messengers coordinating team activities or simply keeping in touch with colleagues?

If you try and use a broad definition of productive hours and include all these small activities and interactions, how do you measure them without engaging in workplace surveillance? The only answer is, by getting the entire team on board with it.

In most cases, the definition of productive hours is either too narrow and includes only billable or revenue-generating work, or there’s no buy-in from the team to report on every small task that’s accomplished during the day. The result is obsession with numbers and BS data that’s no use in real profitability optimization.

Productivity metrics that make sense

The fact that productivity reporting is flawed doesn’t mean it shouldn’t be done. It just means that you need to think carefully about the metrics you’ll use, the tools you’ll need to adequately measure your KPIs, and how you’re going to talk to your team about it to make sure they cooperate.

Let’s review some of the no-nonsense metrics for productivity reporting.

1. Employee utilization

Let’s start with the obvious. Employee utilization is what most organizations and stakeholders want to know about. If your task is to report on productivity and performance, you can’t avoid the utilization question, especially if you’re a service provider.

There are two caveats to calculating employee utilization:

• Figuring out if you want to measure only billable utilization or productive utilization at large, as well as which tasks fall under which category.
• Setting a realistic utilization target if you use it as a KPI – otherwise you’ll get timesheets with 100% utilization, which is unusable data.

The most important part of calculating employee utilization is getting employees on board with the idea. This requires an honest conversation with your team and full transparency about how you use their utilization data.

2. Revenue per employee (RPE)

Another metric you can’t skip is revenue per employee or RPE. Depending on your industry, it can be referred to as revenue per lawyer, profit per partner (PPP), or some other name. Regardless of the terminology, revenue per employee is a ratio that signifies how much revenue is generated per employee on average.

The logic behind using RPE to measure productivity is very simple: the more revenue can be generated by the same number of employees, the more productive they are. The goal is to have revenue per employee grow over time, especially as you’re scaling and hiring new people. Or scaling while the number of employees remains the same.

3. Planned-to-done ratio

Planned-to-done ratio, as the name suggests, is a metric that shows the % of completed tasks against the total assigned tasks per employee. This productivity metric was borrowed from the Agile methodology used in software development, as it was originally meant to illustrate how much was done in a sprint. Planned-to-done ratio is also known as task-completion rate.

It’s worth noting that being an Agile metric, planned-to-done was conceptualized with story points as a unit of measurement. Rather than assessing tasks based on how much time they will take to complete, story points are assigned based on difficulty.

For most businesses, not all tasks are created equal. It’s more relevant to calculate planned-to-actual hours of work on tasks or projects. On the one hand, you assess the accuracy of your estimates. On the other, you measure how productive employees are based on whether or not they can meet their estimates.

4. Average time per task

Average time per task is a follow-up metric to planned-to-done. It’s meant to illustrate how much time on average is required to complete a task, at the level of each employee. Unlike planned-to-done that rests on the assumption that all tasks are of relatively similar complexity, average time per task allows team leads to measure performance on tasks of varying difficulty.

If this is the case, it only makes sense to benchmark employees against their own results from the past. Here’s why.

Let’s say an employee receives various tasks over the course of a project. Some can be completed in a matter of minutes while others take hours or even days to complete. Then the employee’s time per task is a gross average. It wouldn’t make sense to compare this number to that of a person in a different role, unless their roles and tasks are identical.

Meanwhile, benchmarking average time per task against the employee’s own data from the past is a good measure of productivity. If over time this number goes down, it means that the person got faster at performing the same variety of tasks, i.e., they became more productive.

5. Focus hours per day

Focus hours per day is a less conventional measure of productivity. However, it makes tons of sense if you take a more reality-based approach to performance tracking.

First off, most of us working in 2024 are dealing with meeting creep. By simply looking at a person’s calendar, it’s easy to predict how much focus time they’re getting that day. If you’re looking at 5-7 hours of back-to-back meetings or meetings with less than 30 minutes in-between them, it’s safe to assume the person won’t engage in deep focus work that day.

Even if the number of pre-scheduled meetings seems reasonable, there’s the issue of meetings taking longer than planned, which results in less time to focus on tasks. Measuring focus hours per day is about determining how productive a person can be.

Then, there’s the issue of multitasking and the lack of focus even during short 15-minute intervals, never mind hours of uninterrupted work. Focus hours per day is an eye opener metric that gives real insight into productivity in the workplace.

6. Overtime hours

Overtime hours is a straightforward productivity metric as it allows you to do two things:

1. Make sure employees are compensated fairly for all the extra hours they put in.
2. Determine which teams are over- or underworked and plan capacity accordingly.

While in some industries overtime is a given – think consultants or attorneys – most teams don’t thrive on being overworked. As is often the case with service businesses, habitual overtime is a symptom of bad resource allocation, underestimating, and overservicing clients. This is not sustainable, especially in the context of optimizing productivity.

With precise, automated time tracking, overtime is easy to uncover. The trick is to keep it above a certain threshold and readjust workload promptly after this threshold has been reached. Use the following formula to calculate and keep an eye on your overtime rate.

7. Employee turnover rate

Last but not least, we have the employee turnover rate. The reason it’s a productivity metric is that employee turnover directly affects team performance and productivity of individuals, especially those involved in onboarding new employees or taking on the tasks previously handled by the colleagues who resigned.

Another way to look at the employee turnover rate as a productivity metric is by using it to assess performance of managers and team leads. When you benchmark employee turnover across teams and projects, you can see which leadership is better at retaining talent.

If you’re wondering what a “healthy” turnover rate is, there’s no universal number. It’s always a good idea to look at your industry, e.g., marketing agencies have higher turnover rates than, say, law firms.

Final thoughts on productivity reporting

Like any other type of reporting, productivity reporting is a numbers game. As long as the numbers are “good”, everybody is in the clear. Until the ever-growing resource allocation backfires as overallocation and burnout…

My point is, optimizing performance by only a handful of metrics, especially when those metrics are quantitative rather than qualitative, can have an adverse effect on the actual performance and productivity.

Using the above-mentioned example of setting an unrealistic utilization target, working to hit a certain number will likely get you near-perfect data that’s likely incomplete or entirely inaccurate.

Instead, focus on using productivity reporting for the sake of solving real profitability problems. E.g. tracking focus hours per day may give you more insight into productivity than just looking at your planned-to-done ratio. In a similar fashion, employee utilization only makes sense when looked at in conjunction with overtime rate and employee turnover rate.

Ultimately, no performance metric is useful when isolated from the bigger picture. Growing productivity is about creating team effort and a stake for everybody in solving profitability issues. And this is only possible if you resort to ethical methods and tools described in this article.

Give ethical time tracking a try to see a difference in your productivity reporting. Memtime is free to use for 14 days, no risk involved. Get started today and take your performance tracking to the next level.