Key Points

• Productivity targets are a set of expected outputs from a given input.
• Expectations for your productivity targets should align with overall quality demands from your customers.
• Establishing productivity targets can lead to increased overall process efficiency.

Despite the elegant simplicity and apparent innocence of the term, productivity targets are a deadly serious subject in business management. These seemingly arbitrary goalposts set the stage for the ultimate success or failure of streamlining and efficiency drives in a business. Developing useful, accurate, and achievable targets for your operational productivity can be a lot more complicated, and much more important than you think.

Overview: What Is a Productivity Target?

In its most basic and technical definition, this term describes the expected ratio of output versus input. Every operation in a company has an expected outcome or desired result. A set amount of input materials, power consumption, and direct labor is expected to yield a certain number of viable products per day.

Depending on the nature of the operations in question, the success rate can vary significantly depending on many different factors. Failures in the process, flawed material, and operator error can all impact overall productivity. Non-conformant products, or those that don’t meet designated quality standards, do not count towards the target goal. Problems that arise may temporarily halt or slow down operations, which also impacts productivity within that period.

3 Benefits of Setting Productivity Targets

There are many reasons for companies to carefully evaluate and establish productivity targets in their workplace. Setting these goals ensures consistency across operations, which is a basic foundation for establishing standards, embracing new initiatives, and measuring overall improvement across an organization.

1. Establish Expectations for Employees

Establishing and communicating goals for individual and collective productivity can focus on managers and workers. Understanding what’s expected of them in a given hour, day or week helps individual employees budget their time and evaluate their own performance. It may even encourage them to adjust their own behavior to reach these goals without intervention, oversight, or discipline.

2. Set a Baseline for Metrics

Another key reason to adopt productivity targets is that they give you a standard to measure against. In the age of data management, there’s no excuse for not leveraging information whenever possible. You should always measure your inputs and outputs, no matter what they are, and compare them from period to period. Comparing results to an established standard is a fast and easy way to determine if things are going well in a particular day, week, month, or even year.

3. Improve Overall Efficiency

Ultimately, setting productivity targets is all about improving organizational efficiency. When rates fall below target lines, it’s a sign that there is a consistent problem or breakdown in a specific process. Setting targets at individual, divisional, and corporate levels allows you to isolate the specific operations producing a tangible negative impact.

Why Are Productivity Targets Important to Understand?

As a key element in any kind of efficiency evaluation or improvement initiative, business leaders and decision-makers need to understand this concept. Setting targets for specific and general productivity is a basic management practice that should be instituted regardless of company size or industry.

1. Eye on the Prize

A firm grasp on the full dimensions of productivity targeting is essential for actually using them effectively in your company. You should set targets with an eye on the final prize, which is the ultimate consequence of your short and long-term profitability. Arbitrary objectives don’t help anyone. Productivity goals should focus on total value addition to your business, not just the efficiency of a particular process or maximizing employee work time.

2. The Details Matter

Understanding how to set targets for productivity also means developing a better understanding of each part of your value-adding processes. These processes are what drive your company’s income and long-term viability, so it’s always a good thing to have a firm grasp on these issues. Lean business management lives or dies on attention to detail.

3. Lasting Implications

You need to understand productivity targets before you establish and apply them because they do matter. Basing all of your efficiency goals and prioritizing procedural renovations based on incomplete data is a huge waste of time. Your posts should be planted firmly in the ground before you start fixing the fence.

Industry Examples of Productivity Targets

While productivity targets are appropriate in any kind of business environment, they are frequently used and easily illustrated in the manufacturing industry. For example, a particular process line in a chocolate factory may be expected to produce 100 viable candy bars every hour. This encompasses the mixing and pouring of ingredients, packaging of products, and final quality checks, which include labor and material input from various machines, conveyors, and personnel.

You can also apply these concepts to services and indirect processes outside of manufacturing. A furniture warehouse may set productivity targets for its salespeople as well as the entire site. Each full-time salesperson may be expected to finalize at least one sale for every ten customers they interact with. Likewise, the store itself may have a target of selling at least $200,000 worth of furniture every quarter.

3 Best Practices When Thinking About Productivity Targets

If there’s one thing you need to know about productivity targets, it’s that they are very easy to abuse and misuse. These goalposts are essential for any kind of meaningful quantification of your efficiency, but they are useless if you don’t understand how to use them properly.

1. Consider All Factors

One of the most common mistakes with productivity targets is oversimplification. It’s easy to fixate on a particular type of input, like materials, and lose track of the big picture. Metrics for efficiency should always include all the major, relevant factors and not prioritize some at the expense of others. This should cover all sources of operational costs, both immediate and long-term.

2. Think Beyond Labor

Over-emphasis on direct labor is particularly hazardous because it can hamper employee morale and create tense work environments all based on a faulty premise. There are times when worker input is the cause of poor efficiency, but sometimes it’s better to focus on working smarter, not harder. Employers should examine the tools available and the procedural guidelines alongside their policies regarding direct labor to strike a positive balance.

3. Seize the Opportunity for Innovation

Identifying and evaluating production targets opens the door to innovation opportunities, which you can leverage for serious benefits at all levels of your organization. In the process of researching and implementing these standards, you are likely to realize some of the hurdles that you never really thought about in the past. Take these opportunities to implement lean and smart solutions that help workers work more efficiently.

How Can You Meet Productivity Targets?

Meeting your goals is a complex thing in and of itself. However, as with any aspect of work, you need to work as a team. Input should come from everyone involved, from team leaders down to the people performing the work. Take a closer look at the quality of your employees, the tools in use, and the procedures impacting work daily.

Other Useful Tools and Concepts

Looking for some other concepts to improve your business? You might want to consider the quality program report. These reports work right alongside something like your productivity target to make sure you’re hitting the grade for your production’s outputs.

Further, understanding the impact of the hidden factory on your production is vital. Defects are going to happen, that’s just part of life. However, learning to adjust and compensate for these workarounds can lead to greater overall efficiency in your production.

Set Goals to Keep You Moving Forward

Productivity targets are essentially just goals for your business. Goals only have one real purpose: to give a definite purpose and destination point for daily activity. Reaching a goal is a way of verifying that you have performed as you should in the given circumstances. Failure to reach the goal means there is room for improvement.

Ultimately, setting these goals is a way to drive ambition and motivate a company as a whole to keep moving forward. Urgency and competitiveness drive innovation and progress. However, it’s important to balance this kind of impetus with the human need for a sense of achievement, completion, and success. It can take some trial and error to find the targets that keep your team moving forward without driving them to exhaustion and despair.

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