How to measure productivity in your company (and how to improve it)

Measuring productivity in a company seems, at first glance, to be a simple exercise: output divided by input. In practice, however, it is one of the most misunderstood topics of all. 

‍

All the indicators we measure ourselves by every day, such as hours worked, number of tasks completed, and revenue per employee, often tell only part of the story (and not always the most relevant part).

‍

The problem is not the lack of numbers, but their interpretation. In increasingly knowledge-based organizations, where value comes from skills, decisions, collaboration, and quality of work, productivity can no longer be viewed as a purely quantitative measure. It must be said, however, that many companies continue to base strategic choices on metrics that do not take into account roles, context, and the complexity of the work, with the effect of generating hidden inefficiencies that directly impact the reduction of business costs.

‍

If you work in HR and organization, understanding how productivity is actually measured is useful for evaluating performance and, at the same time, for effectively intervening in processes, skills, and working models. In this guide, we will look at which indicators to use, how to interpret them correctly, and, above all, how to improve productivity without increasing pressure, workloads, or inefficiencies.

‍

What is the productivity index?

‍

In business, the productivity index indicates the ratio between the value generated and the resources used to produce it. 

This value helps us understand how effectively an organization transforms inputs (i.e., time, people, capital, skills) into concrete results. 

‍

One aspect to consider, however, is that productivity is not solely about the quantity of work done: it measures the efficiency, quality, and sustainability with which that work is completed.

‍

For this reason, there is no single indicator that is valid for all companies. Productivity takes on different meanings depending on the sector, business model, and type of work performed. For example, in a manufacturing context, it may be linked to the volume produced; in a knowledge-based organization, it depends much more on decisions, problem-solving skills, coordination between teams, and quality of execution. 

‍

Using a single number therefore risks oversimplifying complex phenomena, especially in contexts where productivity is the result of skills, decisions, and collaboration, areas typically analyzed through people analytics approaches. people analytics.

‍

The main productivity indices used in the company

‍

When it comes to measuring productivity, the first mistake is to look for one "right" indicator. In reality, companies use different metrics depending on what they want to observe: human work efficiency, investment impact, trends over time. Looking at multiple indicators together allows you to avoid partial readings and connect the numbers to real organizational dynamics. Below are some of the most commonly used productivity indices , along with their meanings.

‍

Labor productivity

‍

Labor productivity measures the ratio between output produced and the amount of labor employed (hours worked or number of employees). It is one of the most widely used indicators because it allows us to understand how much value is generated, on average, by human labor. Specifically, when talking about labor productivity and formulas, the latter is often used to compare different periods or similar organizational units, rather than individual people.

‍

The formula for labor productivity is simple and has two main variants, depending on how you measure the labor employed:

‍

1. Labor productivity per employee

‍

Labor productivity = total output / number of employees

You can use this formula when you want to compare different departments, business units, or periods within the same organizational scope.

‍

2. Labor productivity per hour worked

‍

Labor productivity = total output / hours worked

‍

For HR and management, it is particularly useful for identifying structural inefficiencies: redundant processes, poorly distributed workloads, unclear roles. It does not say whether a person "works well," but whether the system as a whole allows people to work effectively.

‍

Employee productivity indices

‍

At a more granular level, we talk about employee productivity indices, which relate the results and contributions of individuals or teams. Here, caution is needed: measuringstaff performance indices can be useful for aggregate or role-based analyses, but it becomes risky if used in isolation or competitively.

‍

The real value of these indices emerges when they are interpreted at the team or function level, taking into account the context, objectives, and complexity of the work. Without this perspective, there is a risk of confusing productivity with hyperactivity or penalizing roles that are less "measurable" but strategic.

‍

Return on invested capital

‍

Return on invested capital relates the value generated to the economic resources employed (equipment, technology, infrastructure). Although it originated as a financial indicator, it has a strong link to people: inadequate tools, ineffective systems, or processes not supported by technology reduce the impact of invested capital.

‍

This is also relevant for HR: investing in skills, digitalization, and more efficient organizational models improves both day-to-day work and the overall return on corporate investments.

‍

Productivity rate

‍

The productivity rate does not measure an absolute value, but rather its variation over time. It helps to understand whether the company is improving, deteriorating, or remaining stable compared to a previous period. It is particularly useful in contexts of change: reorganizations, introduction of new technologies, new working models.

‍

For HR and leadership, it is a strategic monitoring tool because it allows organizational and development initiatives to be linked to measurable effects, avoiding the evaluation of productivity as a static snapshot rather than an evolving process.

‍

How to improve productivity in your company 

‍

Improving productivity does not mean asking more of people, but rather enabling them to work better. From an HR perspective, the greatest impact comes from structural interventions in skills, processes, and data use, not from one-off initiatives or tighter control.

‍

Working on skills and roles

‍

Productivity increases when roles and skills are consistently aligned. Many inefficiencies arise not from a lack of commitment, but from people being placed in unclear roles, overloaded with irrelevant tasks, or with skills that remain unused. 

‍

What you can do, as an HR professional, is work on skills and roles by intervening in the structure of work, even before individual performance.

‍

WHAT CAN AN HR DEPARTMENT ACTUALLY DO?

‍

• clarify what it means to "do well" in a role, specifying responsibilities, expected outputs, and critical skills;
• compare the skills required with those actually possessed by the people who occupy the role;
• identify wasted talent (overqualified people or strategic skills that are only partially utilized);
• Support reallocations, role enrichment, or targeted development paths when the problem is structural, not individual.
  
  

Optimizing processes and priorities

‍

Many drops in productivity are not down to individuals, but to the way work is organized. If processes are redundant, if priorities are constantly changing, and if low-value activities absorb time and energy, this leads to distraction, frustration, and inefficiency. 

‍

WHAT CAN AN HR DEPARTMENT ACTUALLY DO?

‍

• work with managers to map the most important processes in order to identify unnecessary steps, duplication, and bottlenecks;
• distinguish between high-value activities and "peripheral" activities that can be eliminated, automated, or simplified;
• support the definition of clear priorities, reducing forced multitasking and contradictory demands on teams;
• promote greater clarity regarding decision-making roles and responsibilities, in order to avoid delays and operational conflicts.

‍

Using data and indicators intelligently

‍

Measuring productivity also means selecting indicators that really help to understand how work functions. The risk, especially for HR, is to rely on "decorative" KPIs that are easy to calculate but not very useful for decision-making. 

‍

WHAT CAN AN HR DEPARTMENT ACTUALLY DO?

‍

• select a few key indicators that are consistent with the organization's objectives, avoiding redundant or purely quantitative metrics;
• read productivity data alongside performance, engagement, and workload data to gain a comprehensive and unbiased view;
• use indicators as a basis for comparison and improvement, not as a tool for individual control;
• Support managers and teams in interpreting data, transforming it into concrete actions on processes, skills, and priorities.

How Skillvue supports productivity improvement in companies

‍

Improving productivity does not mean asking more of people, but putting them in the right conditions to perform at their best. To do this, you need reliable data on skills, level of mastery, and actual contribution to daily work.

‍

Skillvue was created precisely for this purpose: to transform the assessment of skills and motivation into an objective basis on which to build more effective organizational decisions.

‍

Thanks to quick and standardized skill assessments, Skillvue provides a clear picture of how people really work, through:

‍

• situational questions based on the BEI (Behavioral Event Interview)methodology, which gather concrete evidence on problem solving, priority management, collaboration, and responsibility;
• technical tests to measure the hard skills relevant to the role, with an extensive catalog of customizable skill tests;
• structured assessments of transversal skills that directly affect productivity, such as autonomy, decision-making ability, work organization, and adaptability;
• indicators of motivation and career aspirations that help to understand who can take on more complex tasks or roles.
  
  

For HR and management, this translates into the possibility of:

‍

• identify mismatches between skills and roles that generate inefficiencies and overloads;
• realign people, responsibilities, and operational priorities in a more sustainable way;
• support decisions on internal mobility, development, and reorganization based on evidence rather than perceptions;
• view productivity as the result of skills, processes, and context, not simply as individual output.
  
  

If you want to improve productivity by leveraging real organizational drivers, Skillvue's Skill Assessments are the first step toward making HR decisions more effective and measurable. Start here.

‍