What is labor productivity and how to increase it?

The increase of labor productivity is one of the most requested tasks in the workplace, both to get the best out of the company and to better manage work teams.

In this article, we'll introduce you to what it is and how you can motivate your organization to maximize productivity.

What is labor productivity?

Labor productivity is the degree of efficiency of economic output per hour worked. It can be measured by the number of goods a company produces in a given time or the services it provides.

Labor productivity is an important economic indicator that is closely linked to an economy's economic growth, competitiveness and living standards.

Labor productivity represents the total volume of output produced per unit of labor (measured by the number of employees) during a specific reference period.

It is also a factor that is needed in all departments of a company as well as in the area of ​​human resources in order to increase them across the board.

Learn more about the Work performance.

Benefits of good work productivity

Good labor productivity increases a company's growth, meaning it is able to produce more goods or services with the same amount of resources or even with fewer resources.

For companies, higher productivity means higher profits and the ability to make more investments.

For a company's employees, higher work productivity can translate into better pay and a better working environment.

Other benefits of good work productivity include:

• Greater profitability: When employees are productive, they can complete more tasks in less time, which can increase a company's overall profitability.
• Improved work ethic: When employees feel like they can do their jobs efficiently, they are happier and more motivated to continue working at high levels of productivity.
• Higher customer satisfaction: When a company is able to produce goods and services quickly and efficiently, customers are more likely to be more satisfied with the products and services they receive.
• Competitive advantage: High labor productivity can give a company a competitive advantage over other companies in the same sector because it can produce goods and services more efficiently and at a lower cost.
• Increased Innovation: A productive and task-oriented workforce is more able to find and seek innovative solutions to problems, which can lead to new products, services and business processes.
• Less waste: A productive business is able to minimize waste and inefficiencies, which can help reduce costs and improve the bottom line.

How is labor productivity calculated?

Labor productivity is calculated by dividing gross income by the number of employees, that is, by the number of employed employees, family helpers and workers.

If all employees are fully employed, it is relatively easy to calculate the number of employees.

If some of the employees are seasonal or part-time workers, add the total number of months those employees or workers worked and divide by 12 to get the final number of employees.

How can work productivity be measured?

Labor productivity can be measured in several ways, including:

• Output per worker: Measures the output produced by each worker, usually expressed in units of output per hour worked.
• Output per working hour: Measures a company's total output divided by the total number of hours worked by all employees.
• Multifactor productivity: Measures the efficiency with which a company uses labor, capital, and materials to produce goods and services.
• Gross domestic product (GDP) per capita: Measures a country's total economic output divided by its population and provides an overall measure of labor productivity at the national level.
• Value creation per employee: Measures the value that each employee adds to a product or service and reflects the value that each employee brings to the company.

It is important to note that labor productivity measures should be carefully selected and tailored to the specific company and sector, as different sectors and companies may have different factors that influence labor productivity.

How can you increase work productivity in your company?

Yes, it is possible to increase labor productivity. Some recommendations to achieve this are:

1. invest in the best tools

To increase work productivity, a company must invest in tools and systems that promote employee engagement while providing better management of the Organisational communication enable in real time.

Technology is a driving force for workplace productivity, whether it is face-to-face or remote employee productivity.

2. Efficient allocation of resources

Companies need to consider how efficiently they manage their work teams. In the case of manufacturing companies, it is important to set business goals and expectations.

If these are not met, it must be examined whether the inefficiency lies in the production processes and whether the company needs to be expanded to better utilize the workforce.

It is imperative that firms use the optimal mix of inputs as the scale of production increases, often referred to as using expansion path proportions.

3. Increase in physical capital

The impact of increasing physical capital or acquiring assets has two dimensions. The first has to do with technical efficiency, which refers to an organization's ability to produce efficiently given a given level of inputs.

Second, there is cost efficiency, which measures an organization's ability to produce outputs at the lowest cost per unit. It is important to ensure that the benefits of any fixed investment exceed the costs.

Increasing investment in capital assets, including infrastructure, can contribute to productivity and reduce the cost of doing business.

It can also help prevent workplace burnout caused by placing too high demands on the results of a small number of workers.

4. Invest in employee training

Providing employees with training opportunities to update their skills and offering training and education at an affordable cost helps increase the productivity of a company and an economy.

For example, it is much more cost-effective to invest in retraining an employee who has been with the company for years and knows a large part of the work processes than to hire new employees who need a considerable amount of time to acquire all the necessary knowledge and skills.

5. Promote technological change

The introduction of technology often promotes more efficient use of labor and leads to economies of scale and competitive advantages, for a number of reasons.

First, companies that introduce technologies early tend to benefit disproportionately.

Second, companies that fail to adopt beneficial technologies become increasingly inefficient. This suggests that technological change is an important driver of labor productivity and profitability.

6. Promote job satisfaction and motivation

Promoting job satisfaction and work motivation through a variety of initiatives that go beyond simply expecting employees to “do their jobs” is critical today.

For many Millennials, being part of a company that offers monthly activities, incentives, growth plans and cares about the well-being of its employees is more important than earning more to stay with a company.

Conclusion

While we can understand labor productivity as the result of a company's collective efforts to generate more revenue, increasing it goes beyond demanding higher KPIs.

Keeping talent in top shape intellectually, emotionally and physically is one of the ways that the fastest growing companies have relied on in recent years, especially in the face of crises and global change phenomena such as those we have experienced in recent years.

A company without a good work environment, with dissatisfied employees and high turnover is unlikely to have high work productivity for long.

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KEYWORDS OF THIS BLOG POST

labor productivity | work | Productivity