How to track employee productivity the right way (+ examples)

May 17th, 2022

If you own a company that is based on service delivery or is in any way labor-driven, listen up – I wrote this article for you.

Your ability to run a profitable business depends on your ability to effectively track employee productivity. At a high level, you can’t manage anything you don’t measure. But more simply, if you know you’re currently not tracking employee productivity accurately, you’re losing money, guaranteed.

As a fellow business owner I wrestled with the same challenges at my roofing company. In fact, it was my needs as a business owner like you that led me to found Labor Sync, because labor tracking solutions on the market failed to meet my needs.

But don’t worry, this article isn’t a sales pitch. Instead, my goal is to help you to achieve this critical mindset shift of what it really means to effectively track employee productivity, so your business stays healthy. Because if you don’t adopt the right approach to employee productivity and labor tracking, there is no technology that can help you.

First, let’s define what “effective” labor tracking is

Before we dig into more direct tactics and guidance, there is one thing we need to clear up. When I say you need to be able to “effectively track” employee and labor productivity to keep your business profitable and thriving, we need to agree on what “effectively tracking” is not.

If either of these statements resonate with you …

  • “On a daily, weekly, monthly basis, I can reasonably estimate with a likely small margin of error how many hours each employee is working or how many hours were spent on a specific job/task.”

  • “I am 95% confident that the labor tracking data I’m currently collecting from my employees is accurate and can be trusted.”

… you have a problem.

Being reasonably certain about your labor tracking estimates or data is not effective labor tracking. While fractional miscalculations or seemingly tiny margins of error seem negligible on their face, their cumulative impact can be very costly for your company’s bottom line.

An example of what “small” labor tracking errors can cost your company

Years ago, when I evaluated the effectiveness of my old punch-in-punch-out systems of labor tracking, I noticed a ton of inconsistencies.

Often there were missing job locations or names, on top of the fact that every member of my crew was clocking in and clocking out at the exact same time every day. Even if you have the most reliable crew in the world, I knew that last one simply wasn’t possible.

Did I think the members of my crew were trying to deceive me or were being grossly dishonest? No. But the margins of error allowed by old labor tracking strategies made inaccuracies in that “data” an absolute certainty by encouraging and creating space for over-reporting, shortcuts, and other variances in productivity tracking.

I recognized immediately that my lack of confidence in the numbers I had in front of me was a big problem, because even the smallest inaccuracies were extremely costly.

For instance, let’s say that (hypothetically) every single guy on my crew over-reported their working hours by only 15 minutes per day. On its face, 15 minutes doesn’t sound like that big of a deal, right? But over a year, that’s $3,000 I’ve overpaid to a single employee for work that wasn’t done.

So, again, the first step you need to take to effectively track your employee productivity is to understand exactly what “effective” labor tracking means.

Labor tracking technology is a must-have

To achieve this level of efficacy in your employee productivity and labor tracking, you can’t rely on analog or human solutions. Period. So, if you’re still relying on punch cards or worse, the honor system, to track hours on a project, you’re going to have to make a big, big change.

Technology is the only reliable way you can guarantee you’re eliminating the costly vagaries in your labor tracking. (Of course, not all labor tracking solutions are created equal, but we’ll get to that in a minute.)

Is it worth the cost though? That’s a question I’m sure many of you may be thinking, and I get it. You need to be smart about how much money you’re putting into the business, because today’s economy isn’t terribly forgiving if you make a bad or unnecessary investment.

Still, the answer is yes, it’s worth it.

I can’t speak to the number breakdown for other solutions, so I’ll just use Labor Sync as an example. The average Labor Sync customer (business owners like you) pay around $2,400-$3,600 per year.

Now, let’s say they’ve got an employee who costs them $35 an hour. If they work a full 40-hour week, that comes out to a gross total of $1,400. But what if that employee, for innocent reasons, over-reports their hours worked by 30 minutes per day.

Thirty minutes daily at $35 an hour is $87.50 per week. That’s $393.75 roughly per month. But over the course of that month with Labor Sync, you’re only spending $10 on them to track their time more efficiently and accurately, eliminating those types of costly discrepancies. (And that’s assuming they’re only off in their reporting by 30 minutes.)

Of course, not all labor tracking solutions are created equal

I can’t tell you what the right solution is for you, because that’s going to depend on what your business is, your unique needs and challenges, and so on. That being said, I can make a few recommendations on features you should look for, particularly if you’re a labor-driven company:

  • Foreign language support, particularly if you have a multilingual workforce where English is not always the first language. The more support you have from your technology in this area, the better your adoption will be because your employees will find whatever you choose easier to use.

  • Time zone adjustments are crucial if your business isn’t exclusively local. You might be surprised, but many solutions on the market today don’t have time zone support. If you have crews or employees that work in different time zones, you need to have this support in whatever system you choose.

  • Pricing that supports seasonal ebbs and flows in how many people are working can save you a lot of money. Some solutions have a flat monthly fee, no matter how many employees you have. Others, don’t allow for changes once you pay out, particularly if you have to invest up front. Labor Sync, however, only makes you pay for the number of workers that are actually active in a given month. If that number goes up or down, your subscription cost will automatically adjust up or down.

  • Speaking of pricing, be mindful of solutions that require a full upfront payment. While one-and-done pricing may seem nice rather than carrying a subscription payment month to month, it lacks flexibility like I noted above. More importantly, if you invested in the wrong solution that fails to pick up adoption, you likely won’t be able to get a refund. Subscription services, on the other hand, will hurt your bottom line less if you need to make a change.

You need an adoption strategy for your labor tracking solution

The benefits to your business of investing in great employee productivity and labor tracking technology are immeasurable. That being said, the success of whatever you choose is directly tied to your preparation and commitment to a successful adoption process.

For instance:

  • You need a rollout strategy defined before you bring anything in-house, because the lack of one is the No. 1 reason why labor tracking solutions fail to get adopted. Your rollout strategy could include deciding on a point person to oversee the transition and guarantee the consistent use of your new technology.

  • Do not wait to talk about the new solution with your employees until the day you want to start using it. It may be smart to include some people early on in the process of picking a solution that works for your business, or gaining feedback on what currently is or isn’t working. Whatever approach makes sense for you, the worst thing you can do is surprise your people.

  • Consider a pilot program with a specific crew or team before rolling out the solution to the rest of your company. We’ve seen a lot of success with this adoption strategy, because you get the kinks out in a controlled setting rather than at scale and it addresses challenges with regional companies with employees scattered across different locations.

Much like choosing the labor tracking solution itself, the strategy you develop will be unique to your company. The point I’m making here is that you must have a strategy of some kind.

Technology won’t fix management shortfalls

This last point isn’t a fun topic, but it’s an important one we need to address because no best practice or bit of technology can overcome it. If you have a problematic relationship with your employees, that needs to be addressed independently of any technology or strategy you attempt to adopt for labor tracking.

Yes, you can expect some level of friction in labor tracking technology adoption no matter how healthy your company culture is. Change, no matter how positive and welcomed by all, is disruptive by its very nature. But there is a big difference between expected change management challenges and inverted power dynamics between owners/managers and employees.

I’m speaking to the extreme cases here, but I have seen cases with our customers where employees held all the power. If you’re not the authority on what goes in your business, that is something you need to solve first, as bringing in a labor tracking solution will only amplify those issues rather than mitigate them.

Now, if you are dealing with this kind of challenge under your roof, bringing in a labor tracking app or software may feel like the last thing you want to do. Potentially, you may not want to create more problems for yourself. I disagree. I’d say these circumstances underscore that such a change in how you track productivity is essential to the health of your business.

The future of your company depends on getting this right

I know there are a lot of other articles out there that list out specific tactics you can adopt to improve your employee productivity. I’m not saying those folks are wrong, but guidance about employee productivity misses the point if it doesn’t start with this conversation.

If you don’t have a bulletproof labor tracking solution in place, you’re losing money and no other tactic or strategy you implement will ever address that costly shortcoming.

Will you need to invest the time, resources, and money to make such a solution work for you? Absolutely. But not only will the right labor tracking partner work with you to make that transition as seamless as possible, you’ll also reap the benefits of having more control over your labor and the costs of running your business.