Why Is Employee Productivity Important?

Last updated on November 29th, 2022

Throughout my career, I have met many different business owners who have different opinions on employee productivity. They usually fall into two categories – those who view it as something minor, and others who laser focus on it so much that they end up angering their employees. 

Because I’ve been writing a bit about employee productivity lately, including causes of low productivity (see also, ‘What Causes Lack of Productivity?‘) and how you can raise productivity back up, I thought I’d talk a little bit about why employee productivity is important. 

Why Is Employee Productivity Important?

What Is Employee Productivity?

First, I just want to talk about exactly what employee (see also, ‘The 4 Phases of the Employee Onboarding Process‘) productivity is. This is because I’ve met a lot of people who use productivity and efficiency interchangeably when in reality, they refer to different things. 

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Employee productivity is a type of assessment which works out the value of each individual employee within a period of time (usually their hours of work for a single day or week).

It directly correlates with business outcomes and return on investment (ROI). As a result, many businesses strive for efficiency and effectiveness when it comes to employee productivity. 

I’ve seen a lot of business owners mix up employee productivity and efficiency, so here’s the difference. Productivity is about doing more work in a set amount of time, while efficiency is about doing the same amount of work in less time.

To improve both, you need to try different tactics and methods. For example, 66% of businesses offer incentives to their workers to boost efficiency, while 75% of businesses reward their employees to help boost productivity.  

Engagement is another term I’ve seen some business owners use instead of employee productivity. Employee engagement refers to how an employee interacts with the company and their role within it. Do they understand what they are doing?

Do they know the company’s goals and purpose? Do they have the opportunity to speak up and share their thoughts? Are they actually excited and happy to get up and go to work in the morning?  

Basically, employee engagement refers to the employee’s attitude towards the business and their work, while productivity is more about how much work they actually get done during their work hours.

These two are very closely linked and I have found them to have a cause-and-effect relationship, meaning that if you boost one, you tend to boost the other too! 

Now that’s clear, let’s move onto why I think employee productivity is so important for businesses.

The Benefits Of Employee Productivity

More Revenue For Businesses

This benefit is a bit of a no-brainer as the more tasks your employees complete during their work hours, the more revenue your business will be able to generate.

Low employee productivity means that businesses are usually wasting money on things like power, equipment, and pay while their employees are actually doing any work. 

The average office worker is only really productive for 2.5 hours each working day, meaning that most of an employer’s money is wasted. Another report from Gallup states that businesses globally lose $7 trillion through lost productivity. 

Studies have found that companies with more productive employees are more successful. This all means that if you want to boost your business, finding ways to make your employees more productive is a great way to do that. 

The numbers (see also, ‘What is a Neutral Tandem VoIP number?‘) are different for freelance workers. They reportedly are much more productive than average US office workers with an average of 35 hours per week.

So, it may benefit businesses to hire freelancers rather than look for permanent employees due to higher levels of productivity. 

So, it’s clear that by focusing on employee productivity, businesses can find easy and simple ways to boost their revenue.

I’ve seen businesses be able to boost their employee productivity without even spending a cent just by giving their employees more verbal recognition and praise, enforcing breaks, and holding fun mini group exercises in the middle of the day. 

Alternatively, I’ve also seen businesses boost their revenue even by spending a little more to help boost employee productivity.

For example, this study here discusses how Amazon managed to boost employee productivity by raising their minimum wage to $15 an hour instead of $7.35.

How To Improve Employee Productivity

Another study found that boosting employee engagement investments by 10% saw an increase of profits by $2,400 per employee. This means that even when you spend to improve employee productivity, you are likely going to earn that back through revenue with a profit. 

Improved Customer Service 

The more productive and engaged your employees are, the better your customer service will be. This is shown through how customer retention rates are 10% higher with companies that have engaged and productive employees. 

We all know the benefits of better customer service: 89% of consumers are more likely to make another purchase due to positive customer service experiences, 64% of business owners agree that good customer service has positively impacted their company’s growth, and 84% of companies which improve their customer service see an increase in their revenue. 

And, according to various studies, businesses can achieve all this simply through improving employee productivity. 

Happier Employees

Studies have shown that unhappy employees are 10% less productive than happy employees so by trying to boost productivity in your business, you will likely end up with happier employees. 

Reducing workplace stress also helps boost productivity as 65% of employees find that stress affects their ability to work. According to APA (the American Psychological Association), businesses lose $500 billion each year due to low productivity caused by workplace stress.

So businesses who look to reduce stress also end up boosting productivity by making their employees overall happier. 

Happier employees also help reduce staff turnover. This report claims that 69% of employees think recognition would keep them in their current job and 53% of workers say they would stay longer with a company if they feel appreciated.

So, simply recognizing your workers more is proven to boost productivity, engagement, and reduce turnover – so your business spends less time looking for workers and more time on their tasks! 

Less Healthcare Costs

One study found that workplace stress also costs companies as companies with stressed employees have 50% higher health care costs.

Another report from Gallup found that engaging employees (and thus improving productivity) also helps reduce the chances of workplace accidents. 

So, boosting your employee productivity can help keep your employees safe while reducing healthcare costs. 

My Warning: Don’t Go Overboard

Although I’ve seen business owners who don’t pay a lot of attention to their employee productivity, I’ve also seen business owners who do the exact opposite.

However, being controlling and overbearing with your employees to try and boost productivity can have the opposite effect

Employees with bad bosses waste between 20% and 52% of their work time, meaning that they purposefully drop productivity if they feel pressured by their boss. In the same study, 48% of employees admit to intentionally decreasing their efforts at work due to their boss’s behavior. 

So, be careful with the methods you use to try and boost employee productivity. I recommend trying to keep your employees happy, but each workplace will have its own best methods for increasing employee productivity. 

Final Thoughts

I hope this has helped you understand why employee productivity is so important. 

It’s closely tied to employee engagement which means that focusing on boosting productivity can lead to more revenue for your company and happier employees who are more likely to stick with your business. 

So, I think it’s definitely something all businesses should pay attention to – but don’t obsess over it, or you may end up having the opposite effect!

By Ramunas Berkmanas

As a full-stack marketer, I have been actively involved in the digital marketing industry since 2014. Over the years, I have gained extensive experience in various areas such as SEO, media buying, and performance marketing. Read my story

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