How to measure employee efficiency

29 of August, 2022

Measuring employee efficiency is a headache for the HR department. In this article, we will take you through the steps on how to measure employee efficiency and what can you do to increase efficiency in the workplace. As a business you need rigorous time tracking. That is the only way to know if your employees are efficient enough. 

Productivity vs efficiency

In order to understand how to measure employee efficiency, it is important to compare both terms: productivity vs efficiency. On one hand, productivity is measured in terms of a ratio of output over time; also referred to as the quantity. On the other hand, efficiency instead focuses on the quality of the work. That is the biggest difference between the two. However, both are necessary for a business to be successful. 

Types of efficiency

In Human Resources there are generally two types of efficiency:

Static efficiency relates to the re-organization of already existing resources within a company. For example, you may have no budget left to hire new employees. However, you could re-organize tasks between existing employees to be able to work more efficiently.

Dynamic efficiency relates to being able to increase efficiency via the acquisition of external resources. Most HR professionals are more concerned with this than static efficiency. You could also acquire a time management app to help increase efficiency.

How to measure employee efficiency 

There are numerous ways to calculate employee efficiency but the most basic one is to have a time clocking software to monitor the following aspects of employee behavior:

• The amount of time they spend in the office, in hours (essentially their schedule).
• The productivity of the worker, that is to say the time spent on working divided by their time in the office.
• The value of the work produce over the time.
• The amount of time spent doing the task that creates the most value, which is the efficiency of the worker.

Remember the key difference between being productive and being efficient is that when calculating productivity you are calculating the amount of hours you are able to deliver high output, whereas efficiency is more about your ability to deliver value in the least amount of time.

How to increase efficiency in the workplace?

Efficiency often relies on the proper training and management of your employees more than the sheer amount of hours put into work.

You must also keep in mind the law of comparative advantage in relation to labor. The classic example is that of a lawyer who is able to type faster than his clerk, but still lets his clerk do the typing anyway. Why? Because the lawyer derives more value from providing legal expertise than they do from type writing. They are more productive than their clerk at typewriting, but the team is less efficient overall if the lawyer sacks their clerk

Here are some other tips for improving efficiency in the workplace :

• Analyze which tasks an employee creates the most value in through a time management device, and allocate them more towards those tasks accordingly.
• Invest in managers that know how to approach people and organizational problems in an effective way. When hiring make them show how they are able to attract efficiency in the workplace through specific metrics.
• Create an environment that favors efficient work and creative solutions over slugging it out in raw hours per week. As Bill Gates said, he hired the lazy coders because they knew how to code shortcuts.

You already know that there are many digital solutions out there. With that being said, Sesame HR can give you quality reports and overviews of employee behaviors and how they use their time efficiently.