How to Measure Lost Productivity

How to Measure Lost Productivity

What factors most affect your company’s lost productivity? Do they include…

  • Illness
  • Caregiving
  • Employee malaise
  • Inability to execute on the assigned tasks
  • Distractions like the Internet

All business owners have experienced lost productivity at one time or another. Quantifying the impact of this loss can be very difficult, however, especially for service organizations where productivity is not measured by the output of hard goods. Nonetheless lost productivity is felt by all business across the board and it impacts the bottom-line.


“Poor health costs the US economy $576 billion a year. Of that amount 39 percent, or $227 billion is from ‘LOST PRODUCTIVITY’ from EMPLOYEE ABSENTEEISM.”

As we move into fourth quarter and closer to year-end, we can evaluate with greater clarity how our year is progressing. We should ask ourselves:

  • Are we profitable?
  • Have we retained our clients?
  • Are we staffed appropriately for continued client satisfaction and growth?
  • And perhaps most relevant of all:

Have we experienced lost productivity that has adversely impacted our employees, clients and/or corporate profitability? Can we quantify the additional expenses or lost revenue caused by this lost productivity?

The Impact on Your Employees

Absenteeism due to illness or caregiving responsibilities may cause issues of employee burnout and diminished morale for those missing workdays and those “picking up the slack.” Employees who are tasked with performing multiple jobs will not be able to sustain the added responsibilities for very long, or at least without a reduction in their overall quality of work. While no one can predict the onset of illness or the need to be a caregiver, a wise company will establish policies to manage and control absenteeism and how to handle such situations should they arise.

The Impact on Your Clients

Lost productivity caused by any of the above factors will undoubtedly impact your clients too. The negative result may be reflected in work submitted after a deadline as passed or projects executed with low quality. The loss of productivity will be detrimental to your clients-and your business relationship-and may even weaken their loyalty, encouraging them to seek out alternative suppliers.

The Impact on Profitability

Employee and client retention is a key element of operating a sustainable and profitable company. Excessive employee absenteeism may precipitate a need to hire and train temporary staff as well as force you to pay out overtime expenses to those employees picking up the slack of their missing colleagues. Both will be detrimental to your revenue growth and overall profitability.


While we don’t plan for lost productivity, we can minimize the impact by engaging the follow action points:

Develop and maintain company policies that will allow you to handle absenteeism.

Illness and caregiving responsibilities arise unexpectedly. Despite the unpredictability, you would be wise to set up processes and procedures for what to do when employees are out of the office. A bit of foresight and protocol will ensure that your clients’ needs are met and that the work is evenly distributed amongst the rest of the staff, thereby eliminating potential burnout and employee dissatisfaction.

Create rules that govern use of the Internet.

The Internet can be both a blessing and a curse. While it helps us to run our businesses-and can help us to attract new clients-it is also a great distraction for employees. Most companies should establish parameters that cover when and how employees can access the Internet. This should also include guidelines on personal cell phone use during work hours.

Create an environment in which employees are cross trained and can perform other jobs without missing a beat.

There’s nothing worse than being asked to do a job and learning you do not have requisite skills to execute it successfully. Cross training helps for when absenteeism forces an employee to multitask, but is also an opportunity for job enrichment and potential advancement.

Train your supervisors to recognize the signs of employee dissatisfaction.

Diminished quality of work or inability to meet deadlines may be indicative of a larger systemic problem, and supervisors must be trained and skilled on how to identify the situation and effectively address it before it grows and potentially impacts other employees. Many supervisors are “home grown” and are experts at executing their jobs but may be less-than-comfortable managing a diverse staff. Being a good supervisor is a learned skill and a trained supervisor will be able handle the issue of lost productivity before it becomes a problem.

Helpful Links:

Absenteeism – The Bottom-Line Killer
How Much is Employee Absenteeism Costing You?
Caregivers in the Workforce


Taken from the October 2015 Unique Business Solutions Newsletter

February 24, 2016