What is productivity? Productivity is simply the amount of output you get per unit of input. It is a way to compare the cost of something to its benefit. So if you have an input of 5 and output of 5, your productivity is lower than something with an input of 5 and an output of 10. Productivity is kind of like the miles per gallon on your car. It tells you how far you can go on a given amount of input (gasoline for your car). In this article, we are going to look at productivity from your boss’ perspective and then talk about personal productivity.
In mathematical terms, productivity is output divided by effort. So if O = output, I = input then P = productivity:
O/I = P
If you make widgets, the boss is probably going measure your output in terms of how many widgets you make and input in terms of how much you cost him. So, if you can make 100 widgets per hour and he pays you $15 per hour, your productivity is going to be 100/15 or 6.6. Now let’s say you have a coworker who makes 75 widgets per hour, but only costs the boss $10 per hour. Who is more productive from your boss’ viewpoint?
75/10 = 7.5. So your coworker is actually more productive in terms of the amount of output the boss gets for a given level of input.
This is surprisingly important to understand. If a worker needs to be let go, it makes sense lay you off even though you make 33% more widgets per hour than your coworker. (This assumes all other factors are equal and you have a rational boss.)
When you work for an employer, it is easy to focus on your output and not your cost. This makes it easy to over-value your contribution by not looking at the true productivity value you bring. Understanding your productivity from your boss’ perspective can keep you from being blindsided during an economic downturn.
So, what about your personal productivity? Is it measured in the same way? Probably not. You may not be particularly concerned about how many widgets you make beyond how it contributes or detracts from your paycheck. Chances are, you see personal productivity in terms of how many dollars you get for an hour of work. But even that, I would suggest, is short-sighted.
Let me give you an example: Dave Givens works for Cisco as an electrical engineer. Let’s say he makes $100,000 per year. This works out to about $48 per hour. So if Dave looks at his personal productivity in terms of how much he makes for an hour’s worth of work, $48 per hour probably doesn’t seem too bad–or does it? Dave lives in Mariposa, CA. Cisco is in San Jose. San Jose is 186 miles away from Mariposa. Dave spends seven hours on the road each day. So, suddenly, he is only making $25 per hour. Now when we consider depreciation and gas costs of $0.50 per mile (IRS standard that includes gasoline, insurance, maintenance, depreciation, etc.), Dave’s wage comes to $13.24 per hour.
Now, maybe Dave makes more than $100,000 per year and maybe he drives a Geo Metro with 500,000 miles on it, so his actual costs are lower than $0.50 per mile. On the other hand, maybe he makes $80,000 per year and he drives a nicer, more expensive car since he spends more waking hours in his car than he does at home.
Regardless, there is much more to the picture than simply looking at how much money he makes per year and dividing it by the number of hours he is at the office. Oh, and just in case you think I made up this example, Dave won $10,000 from Midas for having the longest commute back in 2006. The really really sad part is that he had been doing this since 1989. As of June 2008, he was still doing this. (Dave needs to read our article on asking your boss to let you work from home.)
There are other aspects to your personal productivity as well, and income is only one part of the equation. Another useful metric is to look at how many hours of your life you have to trade for enough money to buy particular items. This can vary greatly depending on where you live. An average house in the town where I live is around $80,000. In San Francisco, you’ll probably pay 12 times that. If you make $50,000 in small town rural Kansas, you’d have to make $150,000 to live comparably in San Francisco.
There are many other facets and ways to look at your personal productivity, but it really comes down to how much time you must expend doing things that matter less in order to be able to do the things that matter most. This requires a balance of your particular priorities. You only have one life, so spend it wisely.
Craig Thomas says
Nice post, the formula is very interesting. But, so you think its that straight-forward to value productivity? Nice examples on personal productivity btw.
Mark Shead says
Well there are other ways to make it more complicated, but if nothing else this gives people a framework to think about how their boss views their work.
Interesting post about productivity.
I have been a consultant for many years and the interesting thing to me is that often prospective clients will talk with several other consultants and will mistakenly think that all consultants get the same amount of work done in an hour and therefore make their decision based on hourly rate. They think that they is going to be their least expensive solution and many times it can be the most expensive because the person they select either can’t get the job done at all or it takes them much longer to do it.
Just my two cents on this topic.
Mark Shead says
Very good point. I once came into a consulting job where someone else had been working on some technical issues for 6 months. I remember one particular issue that they had been trying to fix for the past half a year that I fixed in 45 seconds. Even if I made 1000x what the other person did, I was still a better deal.
And even that isn’t as bad as the people who do real damage and put you in a position that is worse than where you started.