Article #2 in a series.
In 2020 a revolution has unfolded in the workplace, with millions of jobs moving from the office to the home. This has enormous implications for employers. My second article in the series offers a guide for measuring the productivity of your remote workers, and how to make it a net win for everyone.
The Link Between Productivity and Operational Excellence
While one can measure the productivity of any role, the need for a productivity KPI is most pressing for a function with an explicit need to achieve scale. A scalable activity meets three conditions:
a) Each unit of output is highly consistent and repeatable.
b) Each employee is able to deliver a similar quality of output, such that there is not significant variation in quality from one employee to the next.
c) The cost of delivering one additional unit of service drops with increased volume.
A function that is not scalable has high levels of exception processing, manual workarounds and customization, or low levels of documentation, training rigor, automation and standardization. It is almost impossible for service and operations teams to achieve sustained operational excellence in that situation, especially in a high growth environment. Costs are high, ramp time for new hires are long, quality is inconsistent, risks are uncertain, customer experience is uneven and forecasting future needs is very difficult.
When most of the workforce is remote, these challenges are amplified. New hires are physically isolated during critical training and ramp phases; managers are missing the opportunity for informal “drive-by” talks that often provide invaluable insight into what is going well, what isn’t, and why; and it’s very difficult to know how busy each employee is, and what they are busy with.
And yet, most non-manufacturing organizations don’t have a rigorous system in place for measuring productivity, for reasons noted in my first article. Now, more than ever, organizations that want scale and predictability need to implement a productivity KPI. These five steps offer a roadmap to doing that.
Five Steps to Implementing a Productivity Measurement System
Step 1: Choose a productivity metric matched to your needs
There are three popular ways to measure non-manufacturing labor productivity: Throughput Rate, Utilization Rate and Productivity Rate.
· Throughput Rate is time required to complete one unit of work as a percentage of target time. A unit can be a single call, chat, email, work item, research item, report, transaction, invoice, etc. This is an excellent KPI for a high-volume front-office or back-office operations such as a customer service team (call handle time as % of target).
· Utilization Rate is total hours of production as a percentage of target output. It can be applied in many different ways. This is an excellent KPI for functions that closely track hourly billing or hourly effort, such as IT developers (billed hours as % of target), or functions that closely track production time, such as call centers (hours in call/available mode as % of target). Utilization is usually easy to measure and can be a powerful leading indicator.
· Productivity Rate is total volume of output as a percentage of target volume, using standard throughput assumptions for each activity and expected production capacity for each employee. Let’s look at a very simple example, inside a call center: If target handle time (standard throughput) is 0.1 hours per call, and target production capacity of each associate is 5 hours a day, target volume is 50 calls a day. If, over a month, an employee averages just 45 calls a day, their productivity rate is 90% (45÷50). It gets much more complicated in real life, with employees working on many different production and non-production activities, personal disruptions, PTO, overtime, etc. While the implementation of a system that measures productivity rate is not trivial, it pays dividends in the richness of the data it produces, allowing managers to discover outlier trends and broken processes.
Step 2: Build your productivity KPI from the ground up
Your productivity KPI can roll up to a function or department as long as the building blocks are at the individual employee level. If your inputs start at a higher level, you may have incorrect assumptions or bad data in your model, and you may miss important learnings about your people, processes, technologies and clients.
Step 3: Don’t read too much into small sample sizes
Productivity data should span at least one week, if not a month, and trends start to be meaningful with several months of data. The reason for this is high variability in work mix, complexity and external factors. While these anomalies tend to wash out over time, the data can look very skewed in shorter time periods. A highly productive employee can appear to have a very unproductive week due to a work project that was unexpectedly long and complex.
Step 4: Manage to a balanced scorecard
Measuring productivity in isolation can causes teams to prioritize productivity at the expense of other goals. A balanced scorecard measures KPIs like quality, customer satisfaction and employee engagement, ensuring that productivity is only one of several important metrics.
Step 5: Be transparent and clear in your messaging
Don’t underestimate the change management challenges when establishing a productivity measurement system. It’s important to communicate clearly why you are measuring productivity, and that the other KPI’s in your balanced scorecard, like quality and customer satisfaction, are of equal if not greater importance. Make sure your productivity measurement system is data-based, fair, and free of subjective inputs.
Benefits to your Remote Workforce
Regardless of the method you use, a robust productivity KPI will allow you to have a better understanding of how efficient and productive your remote employees are.
1. Identify quick wins. By tracking the productivity of your remote employees, using an accurate baseline, you will find a whole gamut of low hanging fruit that will be quick and easy to convert to significant productivity gains. Examples include:
Employees who need explicit, written rules and guidelines that, when followed, will lead to
Employees who need to make modifications to their workspace.
Employees who need to set a stricter boundary with non-work distractions and responsibilities.
Employees who immediately change behavior once they see their productivity results.
Employees who need to be paired with a senior employee for extra assistance.
2. Some employees naturally thrive when working remotely and some don’t, even after correcting for some of the drivers described above. This means that when a large number of employees switch to remote working, some will have higher productivity and some will have lower productivity. Eventually, the ones with lower productivity will either make the necessary adjustments to improve their productivity, or they will return to the office once it is safe to do so, thereby improving overall productivity.
3. Outlier activities drive outlier results. By carefully tracking productivity at the activity level, employers will discover some inefficient, custom processes that are putting a drag on productivity, and then work to standardize and simply those processes, thereby improving overall productivity. Some of those inefficiencies may have been present all along, and some may be new, driven by changed workflows and habits caused by the shift to an all-remote workforce.
4. Some end-to-end processes may become less efficient when each team member is working remotely. Your productivity data will point to bottlenecks, over/under-staffing and other inefficiencies that only emerged since the workforce shifted to all-remote.
5. There is a natural bell-curve, or normal distribution, of employee productivity. The bell curve exists whether employees are working in a home or office environment. The new environment may cause the entire curve to shift a little, and it may cause some employees to plot differently on the curve, but the overall shape of the curve will be the same. Employers have an opportunity to identify and lift up their low producers in both the office and home environments, thereby improving overall productivity.
The last benefit is likely to bring about the greatest gains in overall productivity. Let’s say, for example, you have 20 employees who shifted to remote due to the pandemic. Your productivity data shows that most are faring well, however 4 are at just 75% of target. By lifting those 4 back to 100%, where they were before the pandemic, you gain 1-FTE worth of productivity. Or, to put it another way, the other 16 are picking up an extra person’s worth of work, and so by addressing this, you prevent errors and burn-out caused by the extra work falling on the rest of the team.
The above example illustrates how measuring productivity can be a win not just for employers, but also for employees. Employee stress and struggle can be brought to light and addressed in a compassionate, thoughtful and impactful manner, helping them return to their prior levels of performance while still taking appropriate health safety precautions. The simple act of a manager noticing that an employee is not herself and genuinely asking what the organization can do to help, can be uplifting to the employee, improving her morale, engagement and performance.
In summary, a system for measuring productivity is critical, now more than ever, for service and operations functions that benefit from scale. By following a structured roadmap and choosing the appropriate productivity metric, managers will discover which of their remote workers are struggling, and can implement improvements that drive higher productivity and happier employees. Speaking of happy employees, the next article in the series examines how the switch to remote work and the shuttering of offices can negatively impact employee engagement, morale and creativity, and offers practical solutions to addressing this challenge.
Greg Lipper is the Founder of Lipper Solutions, a consultancy that specializes in improving the productivity and quality of global delivery teams. Greg@lippersolutions.com or www.lippersolutions.com.