How to set up a Productivity Index

A Productivity Index is a tool for measuring process performance within your organization. It makes it possible to compare the performance between different parts of the organization. This is called Internal Benchmarking. It makes it also possible to compare the performance of your organization with other organizations, this is called External Benchmarking. These comparisons can be done between different parts of an organization but also between different years.

The typical figures measured in a productivity index are non-financial key figures. For a sales process, these would be key figures like the number of customer contacts, number of emails, number of quotations, number of sales orders, number of invoices, headcount, etc.

A productivity index can be set up using only a spreadsheet and simply counting manually the number of quotations, orders, etc. For small organizations and small departments, this can be a practical way of working. For larger organizations, a productivity index can be derived from systems. This can be done by counting the number of documents via some reports in an ERP or CRM system and manually entering this into a spreadsheet.

More efficiently, a Productivity Index is implemented in a Business Intelligence (BI) system. This offers the possibility to automatically generate the overviews with data from ERP or CRM systems. Of course, this is always a trade-off, if a Productivity Index is only made once, for a smaller organization it is more efficient to do it just in a spreadsheet. If it is used more often, it might be worth the investment and it might be a useful addition to a Digital Boardroom.

To conclude, a Productivity Index can be a very useful tool to get insight into the performance of your organization. If two departments perform very differently on the same process, this might mean that there are bottlenecks in the process and there is room for improvement. This can trigger changes in the way of working, the organization and the systems used.