Increasing Productivity Without Increasing Compensation

Updated: April 02, 2008


Productivity may be defined as output per unit of labor costs. With this definition in mind, it is obvious that productivity cannot increase if pay keeps pace with output. Companies have to increase output while keeping compensation the same, or increasing slowly. Fortunately, employees can be motivated by more than just money. There are many ways to boost output without increasing labor costs.


Simple recognition of outstanding productivity is an excellent motivator. That's why so many companies have an employee-of-the-month program to recognize outstanding staff members. It may cost you a plaque and a nameplate, but such a program motivates the recognized employees as well as their co-workers, who also want to receive the award.

A good employee-suggestion program can additionally improve productivity. It is important that suggestions have the option to be submitted anonymously or with employee attribution. Some people will have ideas about which they are unsure, and would prefer not to be identified with them. But when a good idea comes with a name, it pays to recognize the person who submitted it. Rewards for good suggestions can take many forms, from gift cards to a percentage of the savings realized.

Simply setting higher standards of productivity can also motivate employees to meet them. It does not need to involve more pay, but can remind staff that the company is in a competitive environment and needs to operate as efficiently as possible.

An excellent training program additionally pays off in increased productivity. New hires are not the only ones who need training. Veteran employees may need refresher courses or advanced training to realize their full potential.

Another idea to consider is employee competitions. Competitions between teams of employees can boost everyone's productivity, at least in the short term. Again, rewards can be inexpensive or even free, such as an afternoon off for the winners. But competitions may inspire friction between teams, and their influence on productivity may last only as long as the competitions.

Sometimes employees' privileges need to be limited in order to increase productivity. Personal use of corporate IT resources, for instance, is a great time-waster in almost every organization. Studies have found that employees will spend up to a third of their days just surfing the Web, checking personal stock portfolios, playing games and otherwise goofing off - if they are allowed to do so. Managers need to implement IT acceptable-use policies and software-filtering systems to block access to unauthorized Web sites. Desktop PCs should be audited to ensure that only work-related applications are installed. Users can also be prevented from installing their own software through group-policy access-control restrictions. Internet access should be restricted to those who truly need it to do their jobs. Others may only need access to internal-network email and the corporate intranet.

Change Starts at the Top

Management is responsible for rooting out wasted effort, too. Review all of the business processes under your command to see where they can be streamlined. Brainstorming sessions with other managers can help you find ways in which productivity can be increased.

Sometimes an outsider's perspective can identify productivity enhancers that are overlooked by those who deal with the company every day. There are consultants for almost every industry and niche market out there. They can review your operations and recommend how to improve productivity.

Improve the Work Environment

Healthy employees are more productive employees. It may be necessary to review and upgrade your sick-leave policy to encourage employees to seek medical attention when they need it. An ill employee not only suffers lower productivity individually, but the illness may also affect others in the organization. Of course, a good health-benefits plan is essential. In-house wellness programs can help employees learn how to live healthier life styles. Recognition of employees who have gone several months without taking sick leave is another way to motivate staying healthy.

A flexible work environment is another key to enhancing productivity. Studies have shown that employees work harder when they perceive control over when and where they work.

When possible, implement flextime to give employees more control over their working hours. It is better to have someone come in late and work late than to arrive on time and worry about a sick child.

Telecommuting can additionally be a great productivity enhancer. Employees work without the stress of the daily commute, and have the opportunity to take care of issues at home. The key to a successful telecommuting program is to focus on the results produced and resist the urge to monitor how an employee spends every single minute. A little investment in telecommuting technology may be necessary, but the pay-off in productivity is well worth it.

Of course, fun should be an integral part of work. Schedule the occasional office party and use humor with employees to help boost productivity.

Finally, set a good example. Show the kind of dedication to your job that you expect from your employees. When they see the boss working late, they are more inclined to do so themselves.

The Bottom Line

Increasing compensation is simply not an efficient way of boosting productivity among your employees. As illustrated above, however, several strategies can help you motivate and boost output among your staff. Make sure that your organization can support these methods before implementing them; for instance, be sure to have VPN support available before offering telecommuting as an option for staff. That way, you can avoid unnecessary roadblocks in improving your employees' productivity.

For more information on HR issues, consult our HR Resource Center, where you can find in-depth research, community-contributed content and advice from Focus Experts.

Featured Research
  • Best ERP Features and Benefits for Your Business

    Are you considering investing in ERP software for the first time? Or maybe you already have an ERP solution but you’re worried it’s becoming dated. If either of the above apply to you, read our latest guide on the top ERP features and benefits based on the size of your business. You may be surprised at how versatile and cost-effective it is becoming - regardless of if you own a small business or run a large enterprise. more

  • 9 Spooky Signs You Need a Contact Center Upgrade

    When was the last time you evaluated the performance of your current contact center and the software you are using? The results may be frightening! If it’s been awhile since you invested in contact center software, there is a good chance that your needs have changed or that there are better options available now. Fortunately, it’s relatively easy to determine if you need an upgrade or not. more

  • 7 Ways the Wrong Phone System Can Haunt Your Business

    The wrong phone system could be haunting your business - and we’re talking about problems more serious than ghosts and ghouls. From increased costs to issues with scaling, we’ve identified seven important ways that a less than ideal phone system could be holding you back. You’ll be surprised at how much of a difference this can make to your bottom line too. more

  • Ditch Your Fax Servers

    An in-house fax server gives an IT department centralized management and monitoring over the entire enterprise's faxing. This can help your company track usage and better maintain records for auditing and record keeping. However, there are serious drawbacks that come with utilizing an in-house fax server solution and these range from security to cost-prohibitive pricing. more

  • The IT Manager's Survival Guide

    As an IT manager, maintaining physical fax servers and infrastructure is not a high priority. However, fax capability remains a business need simply because chances are your industry is dependent on its security. What if there was a way to reduce the amount of time spent handling fax complaints and maintaining physical servers? And this way took into account security, cost savings, and freed up your IT resources. Would you be interested? more