Running a business today is a tough gig. It’s fair to say that the combination of two global economic catastrophes in two decades, rising inflation, increasing competition and widespread employee disengagement has business leaders looking for ways to manage costs.
But there’s growing evidence that shows cost-cutting is bad for productivity. Not only do budget cuts lead to lower-quality outputs and worse customer experiences, but there’s often no net gain in efficiency or productivity.
Why? There are two parts to the answer.
Part 1: Cost-cutting negatively impacts the employee experience
Employees are often not involved in the decision to implement cost-cutting measures, not informed of the impact on their job security, or not confident that leadership is making the right calls.
As well as frustrating employees, shortsighted cost reductions are a huge barrier to growth. Blanket expense reductions leave managers short-staffed and employees without the resources they need to perform – let alone innovate.
Part 2: Employee engagement equals efficiency
When employee interests and organizational expectations align, great things happen. Engaged employees are up to 18% more productive and 23% more profitable, while shrinkage (theft/loss) decreases by 28% and quality improves by up to 41%.
In fact, on the strength of the evidence, many organizations measure employee engagement as a proxy for productivity.
What do organizational leaders do with this information? For starters, it’s worth questioning whether hiring freezes and budget cuts are good for business long-term. It’s also essential to consider the employees’ perspectives.
In both cases, organizational data holds the insights to unlock greater productivity without compromising quality or the employee experience. Understanding how people spend their time, optimizing the resources they use (and need) to do a good job, and identifying opportunities to improve efficiency all arise from employee productivity data.
Employee efficiency in modern businesses
The simplest definition of employee efficiency is the ability to get work done quickly and accurately. It measures how well people use the available time and resources to achieve their goals.
Efficiency results from time management, prioritization, skill utilization and willingness to work. It’s not about pushing people to their limits or implementing punitive actions. Rather, an organization’s ability to identify, analyze and operationalize efficiency signals is what sets them apart from the competition.
Most distractions are a waste of time and money, so eliminating them is a relatively easy win for efficiency. Employees who excel at efficiency are able to avoid these distractions and focus on the task at hand. This isn’t always an innate behavior, as we discussed in another blog on the topic of distractions.
Distractions are a common concern among remote work skeptics, despite the data showing that open offices are more distracting and most people work better at home.
Clarity around priorities helps employees to avoid feeling overwhelmed and stressed. Although employees can take some accountability, for example, by creating to-do lists and breaking projects into smaller tasks, the ultimate responsibility lies with managers to control the pipeline of work.
Establishing clear priorities and managing task adherence means projects flow better and work gets delivered faster.
Employees who work to their strengths are more productive and more likely to be satisfied with their work. The trouble is that employees may be hesitant to speak up when they encounter challenges, or they might be doing a good enough job that managers miss the opportunity to improve.
For example, SmartSites were building great websites. So, until they implemented Time Doctor, they didn’t think there would be an opportunity to improve productivity by 35% and save 80 hours of development work simply by assigning people based on their strongest coding language.
Traditional time management techniques focus on optimizing efficiency at work. However, a more holistic approach to productivity considers that pushing employees past their limits brings on burnout, which increases attrition rates.
Employee engagement isn’t about free lunches or one-time bonuses; it’s about performance management activities, development opportunities and positive collaboration.
Managers who make their employees feel like part of the organization’s future tend to see efficiency signals improve across the board. According to Gartner’s research, employees who are “largely satisfied with their experience” are:
52% more likely to work hard
69% more likely to be a high-performing team member
48% more likely to meet customer satisfaction targets
89% more likely to be innovative
56% more likely to uphold a company’s good reputation
Efficiency metrics modern organizations should be tracking
Organizational efficiency is complex. It’s more about maximizing productivity than minimizing costs – although reducing waste is a cost-saving measure. However, this means that modern businesses rarely monitor a single “efficiency metric”. It’s not a valuable exercise.
Instead, high-performing organizations track many interrelated metrics that paint a holistic picture of performance and generate actionable insights for continuous improvement.
“Time Doctor helps increase our productivity because my team focuses more on their tasks since they know I’m aware of their activities on their computers,” said Rob.
And the benefits for Bertholf were immediate. “On that very same day [we installed Time Doctor], I recorded screenshots and saw that some of our employees were using Facebook and YouTube. I was able to warn them and remove the logged time. This has increased our team’s efficiency and accountability,” said Rob.
For Rob Bertholf, this holistic view of project data is mission-critical.
“Time Doctor allows me to monitor the team’s efficiency,” said Rob. “By using Time Doctor, I’m able to monitor my team’s work timeline – what they are working on, what they are viewing, and what they have accomplished so far.”
Comparing task metrics between teams or individuals
Overtime or re-work hours
Identifying an employee’s strengths is essential to improving productivity without investing in new talent or tools. Managers can use the insight to allocate resources more effectively, redistribute work more fairly, and alleviate bottlenecks.
Working late into the evening
The early signs of burnout and quiet quitting can be hard to spot. But the data is there – you just need to know where to look. Time Doctor’s Work-Life Balance widget presents a snapshot of employee wellbeing and work-life balance issues, with customizable metrics to help managers get granular insights and provide individual support.
Productive vs unproductive time
Idle (inactive) time
Work-life balance metrics
Customer satisfaction and retention
Engaged employees are more efficient and effective. Organizations that focus solely on financial outcomes and forget employee wellbeing see lower productivity, lower profits and poorer performance. We’re not suggesting to ignore costs but rather to analyze the holistic impact of cost-cutting measures using employee engagement metrics balanced with financial outcomes.
Rather than dwelling on the current challenges, we’re encouraging clients to see the opportunities. We have the tools and technology to solve just about any business problem, including cost efficiency.
As a productivity partner trusted by 250,000+ employees, we believe the solution is to make strategic investments in technology that support employee engagement. Our latest guide,Cost Saving Through Productivity Analytics, goes into detail on these opportunities and provides a playbook for using workday insights to sustainably reduce costs while also improving efficiency.
It’s a comprehensive guide for organizations looking to trim costs while sharpening their competitive edge.
There are lots of practical strategies backed by real-world case studies, including two of the most effective methods: reducing turnaround times and increasing task completion.
Reducing turnaround time
Streamlining resource allocation, optimizing processes, automating time-consuming tasks and removing bottlenecks are all factors in reducing the time it takes to complete value-adding tasks. The key is to implement strategies that stick.
Streamline resource allocation by comparing team or individual performance to identify your employees’ strengths and stumbling blocks
Optimize processes by looking for time-consuming tasks that appear often, such as burdensome administrative processes or unnecessary re-work due to poor communication
Automate time-consuming tasks strategically, based on a value-add equation that considers the cost of investing in automation technology against the efficiency gain
Remove bottlenecks by analyzing workday data to find the shared barriers to efficiency, such as under-resourced departments or underperforming employees
Technology is certainly helping to balance the cost equation by automating time-consuming manual tasks. But for automation and AI to deliver value, the organization must first analyze internal data to uncover hidden productivity gaps.
Increasing task completion
Providing employees with the resources they need to be successful means giving them the tools and information they need to do their jobs well. When employees are able to complete more tasks, they are able to generate more revenue.
Establish clear priorities so people know what to focus on first
Use workday data to have productive (and regular) check-ins with employees
Implement waste-reducing strategies like distraction alerts to help employees maintain focus
Analyze productivity data to optimize team allocation
Monitor work-life balance to ensure employees aren’t working overtime to complete projects
Delivering more work in less time with the same resources is the definition of efficiency. However, just like expenditure isn’t the only indicator of cost optimization, output isn’t the only way to track efficiency.
Monitoring customer satisfaction metrics (like NPS, customer complaints, returns or re-work) alongside output signals (like project completion, task completion, schedule adherence and productive time) builds a more complete picture of efficiency and quality.
Striking the balance: Fostering efficiency without burnout
We’ve touched on the trade-off between efficiency and burnout a couple of times already, but it’s worth revisiting before wrapping up.
Burnout leads to decreased productivity, increased absenteeism, higher employee turnover and even health problems. And while an overloaded schedule is one of the factors contributing to burnout, it’s far from the only culprit. Ultimately, burnout arises from a mismatch between job demands and job resources; that is, an employee’s inability (real or perceived) to do their best work with the tools they have.
Temporary pressure Interpersonal conflicts with clients and colleagues Task complexity Job insecurity Unfavorable schedule changes Qualitative and quantitative work overload Personal occupational hazards
Individual Technical knowledge and skills Socio-emotional skills Positive psychological capital (self-efficacy, optimism, hope and resilience) Creativity Organizational Time flexibility Job security Supervisor and peer support Material resources Autonomy Rewards
Source: Edú-Valsania, Sergio et al. “Burnout: A Review of Theory and Measurement.” International journal of environmental research and public health vol. 19,3 1780. 4 Feb. 2022, doi:10.3390/ijerph19031780
Employee disengagement is at an all-time high worldwide due, at least in part, to the sudden and shortsighted cost-cutting that occurred in the wake of the COVID-19 pandemic.
Burnout isn’t just bad for the individual. It’s bad for business. The direct and indirect costs of replacing an employee add up fast, and productivity takes a measurable hit. So, while analyzing organizational data and looking for cost-saving opportunities, it’s vital to consider the impact on employee experience.
A reliable productivity analytics system is essential for efficiency initiatives
Time Doctor’s Work-Life Balance dashboard and granular productivity data, together with organizational data from other sources (financials, customer data and output metrics), give managers the full picture of productivity.
With this balance of organizational insight and productivity analytics, you can make informed decisions that boost efficiency and save costs. Not just once but for good. And not just in one department but across the entire organization.