The Ultimate Productivity Metric

November 18, 2011

Agile leadership understands the advantage in maximizing the performance of a team as a whole, avoiding problems with sub-optimization:

“If each subsystem, regarded separately, is made to operate with maximum efficiency, the system as a whole will not operate with utmost efficiency.” - (Lars Skyttner) General Systems Theory

When dealing with complex knowledge work such as software development where there is a high degree of uniqueness and variability with each and every project—plus the need to leverage the functional skills and abilities of knowledge workers across multiple disciplines, we need to focus greater attention on outcomes, not functional outputs.

Driving the performance of the organization as a whole means that we need to connect the individuals, teams, departments, and divisions in ways that are both meaningful and in alignment with the organization’s overall goals and objectives. This requires us to focus on how well the organization is working together as a whole to produce a particular outcome.

There needs to be a clear, top-down vision and mission of what the organization wants to accomplish, and the constituent parts of the organization—right down to each individual—needs to be asking, “How are we (or how am I) contributing to the goals and objectives of the company?” In other words, what results are you generating, and are you making a difference?

An excellent test—and one that can be easily used to compare your company against other companies in the same industry—is the revenue per employee metric:

This is strictly a measure of efficiency—typically categorized in investment information as a measure of management efficiency, but it is not by itself a complete gauge on how well the business is operating. Costs, for example, are not taken into account in this metric. This means that you can be doing very well in terms of revenue generated per employee compared to your competition, but you may be losing money in the process.

This metric is all about how much you are generating from your people. It is a great starting point to determine how your organization as a whole is producing outcomes that customers value and pay for and what it is taking you on a per-employee basis to produce that outcome. It your employees are focused more on meaningless activities (outputs) versus meaningful outcomes, your number is likely to be lower than your competition. This isn’t the only metric that you should use, but it is the ultimate productivity metric, in my humble opinion.