How is labor productivity measured and made more efficient?

Labor productivity is a fundamental indicator to evaluate the efficiency with which a company transforms its resources into goods and services. Therefore, it is essential to optimize processes, and an effective way to do so is through specialized consulting.

The International Labor Organization (ILO) defines productivity as the capacity of a country to take advantage of its resources and generate economic growth, boosting its competitiveness and improving the standard of living of its population.

In this article, you will learn how labor productivity is measured, what factors influence it and how strategies can be implemented to make it more efficient.

How is labor productivity measured?

Labor productivity has a direct impact on a company's profitability, so it is essential to develop strategies to optimize it.

The first step is to understand how it is measured. A basic formula is as follows:

Productivity = Products or services produced / Labor resources consumed.

Let's look at an example to compare productivity between two companies in the same sector:

Factory A produces 1,000 pairs of shoes per day, with a price of $1,200 USD per pair. It has 20 employees working 8 hours a day.

(1,000 × 1,200) / (20 × 8) = 1,200,000 / 160 = 7,500

Productivity per worker is $7,500 USD per hour.

Factory B produces 500 pairs of shoes per day at $2,000 USD each. It has 15 employees who also work 8 hours per day.

(500 × 2,000) / (15 × 8) = 1,000,000 / 120 = 8,333

In this case, productivity is $8,333 USD per hour per worker.

This type of calculation makes it possible to evaluate operational efficiency and make strategic decisions to improve it. Some of its main benefits are:

• Increased knowledge of internal functioning: it helps to understand how resources are used and team performance.
• Identification of problems and opportunities for improvement: it helps to detect the causes of low productivity and design effective solutions.
• Evaluation of business strategies: Measuring the impact of policies and decisions on overall performance.

Improving productivity not only boosts the company's growth but also increases its competitiveness in the marketplace.

What factors influence labor productivity?

Employee productivity depends on several factors that can enhance or limit it. These are some of the most relevant:

Monetary salary

A competitive salary is key to attracting and retaining talent. When employees feel that their work is well remunerated, their commitment and performance increase.

Working conditions

The physical environment directly influences efficiency. Aspects such as safety, ergonomics, and work flexibility affect daily performance.

Emotional pay

Non-monetary benefits such as recognition, growth opportunities, flexible schedules, and work-life balance generate greater satisfaction and productivity.

Work climate

A positive and collaborative environment improves communication, reduces stress, and fosters teamwork, translating into better performance.

Motivation and commitment

When employees feel valued and aligned with the company's objectives, their willingness to innovate and take responsibility increases.

The quality of leadership

Leaders who inspire, communicate clearly, and provide support promote a favorable environment for team development and efficiency.

Product or service design

Efficient design facilitates production, reduces errors, and improves the process, directly impacting productivity.

Quality of raw materials

Low-quality materials cause rework and waste. Using the right inputs optimizes yield and reduces costs.

The machinery and technology used

Equipment maintenance and modernization are essential to avoid downtime and ensure efficient and continuous operation.

How to make labor productivity more efficient

Productivity improves when value added is maximized by efficiently using the factors of production. In simple terms, the more value produced with less time and effort, the higher the productivity.

This can be achieved through technology, automation, waste reduction, and ongoing training. Here are some key strategies:

Turn to business consulting services

Firms specializing in productivity and operational efficiency provide strategic external insight to identify areas for improvement.

Through data analysis, proven methodologies and customized recommendations, companies can increase performance and reduce costs.

Investing in human capital

Training and developing personnel increases their capacity to produce with quality and adapt to change. A well-trained team is more versatile, efficient, and autonomous.

Investing in physical capital

Having modern machinery and adequate tools allows tasks to be performed more quickly and accurately, optimizing each stage of the process.

Investing in psychological capital

Fostering employees' emotional and mental well-being is also key. Skills such as resilience, emotional intelligence, and stress management positively influence individual and collective performance.

Invest in research

Innovation drives productivity. Investing in research enables new technologies to be developed, processes to be improved and more efficient solutions to be found.

Improving labor productivity not only reduces costs and streamlines operations, it also strengthens the company's ability to achieve its goals in a sustainable way.

Consulting to raise labor productivity with London Consulting Group.

At London Consulting Group we transform labor challenges into opportunities for improvement. As a multinational consulting firm, we specialize in optimizing team productivity and aligning processes, talent, and resources to maximize performance.

Our methodology identifies the barriers that affect productivity, implements customized strategies and ensures that each adjustment translates into tangible improvements.

We focus on helping your team reach its full potential, generating measurable results in the short term.

The impact of our solutions is evident from the first year: improvements in efficiency, profitability, and return on investment of up to 5 to 1, thanks to a more effective talent management, a better allocation of resources and the elimination of activities that limit growth.

Our commitment goes beyond the immediate: we seek a sustainable impact on your company's productivity and growth.

Contact us and find out how to take your team's performance to the next level.