The productivity ratio is an index in the form of a coefficient or percentage, which interprets staff performance in terms of monetary gains.
How to Calculate a Productivity Ratio?
A productivity ratio is calculated according to the following formula:
Productivity ratio = Turnover or added value ÷ Number of employees
Calculating a company’s productivity ratio provides an assessment of its efficiency and allows comparison with other companies. This indicator can be used by any type of company, regardless of its business sector.
A productivity ratio calculated according to hours worked is called an hourly productivity ratio. To obtain an hourly productivity ration, turnover is divided by the number of hours worked.
Why Calculate a Productivity Ratio?
Calculating a productivity ratio allows for a better assessment of employee performance and helps companies forecast growth.
The productivity ratio allows company managers to make strategic decisions using tangible data.
It can also be used by investors to assess a company’s potential.
How Is a Productivity Ratio Interpreted?
To accurately interpret a company’s productivity ratio, you should compare it with other organizations in the same industry.
The productivity ratio must also be used in context. It cannot be analyzed unilaterally. The economic, political, and even salary context must be taken into account.
