The Price of Efficiency

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Wonder how projections regarding productivity gains really translate in terms of money saved? Use our online calculator to do the math...

Call it the mathematics of slack: For each hour gained through productivity-enhancing software, less than an hour of additional labor usually gets done. Or, as Rebecca Wettemann, director of research at Wellesley, Mass.-based Nucleus Research, puts it, "Time saved does not equal time worked." Based on its observations of many real-life project implementations, Nucleus has created a trademarked database of "correction factors" to account for how well various kinds of employees actually make use of productivity gains. Not unexpectedly, the most efficient workers are usually those whose output is concrete, such as a line worker, or whose pay is tied to commission.

The formula below shows one way of using correction factors to adjust expected savings. In this example, a midsize packaged goods company plans to try out a knowledge-management system at a branch office. The company, using a straight, time-is-dollars equation, expects the system to save each marketing employee about four hours out of a 40-hour workweek (a 10% raw productivity gain).

Truth in Productivity Your
Number of staff affected

Average annual compensation
(Using fully loaded cost of 1.35 times the base salary)

Projected productivity gain

% 10%
Correction factor
For line workers, this is close to 100%. Sales representatives rate 70% to 90%, with marketing personnel at 50% or less

% 80%
Annual savings

$ $108,000
True savings

$ $86,400

Find out more in "How To Estimate Productivity"

This article was originally published on 2002-09-03
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