How to increase productivity in business

Published Friday 20 March 2026

Table of contents

• What is productivity?
• Why productivity matters
• Types of productivity
• How to track productivity as it improves
• How to increase productivity
• Increase productivity checklist
• Boosting productivity is a mindset
• FAQs on increasing productivity in business

Key takeaways

• Document your current work processes in writing and involve your team to identify bottlenecks, double handling, and inefficiencies that slow down productivity.
• Invest in software tools that automate repetitive tasks like invoicing, bookkeeping, and inventory management, as research shows 81% of businesses report efficiency improvements from digital adoption.
• Provide comprehensive training to your team on their roles, tools, and processes, since workplace training explains 62.5% of the variation in employee performance evaluations.
• Track productivity metrics like revenue per employee and cost per unit before and after making changes to measure the actual impact of your improvements.

What is productivity?

Productivity measures how efficiently your business turns inputs into outputs. The more productive you are, the better you convert resources like labour, capital, and materials into products or services you can sell.

Why productivity matters

Productive businesses get more from less. This gives you more flexibility to protect profits, handle economic slowdowns, and stay competitive on price.

Higher productivity helps your business in several ways:

• Profit protection: More output per dollar spent means better margins
• Resilience: Efficient operations help you absorb cost increases and market shifts
• Competitive edge: Lower costs let you compete on price without sacrificing quality

Productivity gains are getting harder to achieve; according to Organisation for Economic Co-operation and Development (OECD) data, after a 0.2% drop in 2022, labour productivity across all OECD countries rebounded modestly to 0.6% in 2023. Small businesses have typically been thought to lag behind larger ones, a trend supported by OECD findings that larger firms achieve higher labour productivity, although a recent Xero report is challenging some of these notions.

Types of productivity

The three main types of business productivity are:

• Labour productivity: Measures how much work it takes to deliver products or services, commonly expressed as hours worked per dollar earned
• Capital productivity: Measures how well you monetise investments in assets like machinery, often calculated as return on capital invested (also a profitability ratio)
• Materials productivity: Measures how much you spend on materials like inventory or energy to generate sales

How to track productivity as it improves

Tracking productivity helps you prove that your improvements are working and identify where to focus next. Without measurement, you're guessing.

Start by establishing baseline metrics before making changes. Then measure the same things afterwards to see the impact.

Key productivity metrics for small businesses include:

• Revenue per employee: Total revenue divided by number of staff, showing overall workforce efficiency
• Output per hour: Units produced or jobs completed per hour worked
• Cost per unit: Total costs divided by units produced, revealing efficiency gains
• Time to complete: How long standard jobs take from start to finish

Simple ways to track productivity:

• Before and after comparisons: Measure a process before changes, then again afterwards
• Time tracking: Use timesheets or software to see where hours go
• Financial reports: Monitor revenue, costs, and margins over time using accounting software
• Regular check-ins: Ask your team what's working better and what's still frustrating

You don't need complex systems. Pick one or two metrics that matter most to your business and track them consistently.

How to increase productivity

There are four commonly accepted ways to increase business productivity:

• Better work tools (capital): Invest in equipment and software that amplifies your team's efforts
• Smarter methods (innovation): Refine your processes to reduce friction and waste
• Skilled workers (capabilities): Train and empower your people to work more effectively
• Entrepreneurship: Make strategic moves that unlock new efficiencies at scale

1. Better work tools (capital)

Tools are made specifically to amplify the efforts of their users. A carpenter can do a lot more with an electric drill than they can with a hand drill. So find the tools that'll amplify your work.

Sometimes it might be as simple as a piece of software that cuts down the double-handling of information, like a booking system that schedules a job straight into your calendar or accounting software that integrates with important business systems like payments or point of sale.

Why you haven't got better work tools yet

Upgrading work tools costs money. Professor Marc Cowling of Oxford Brookes University has investigated why small business owners don't (or can't) make that investment. Here are the top five barriers:

• Prioritisation uncertainty: Small businesses typically have about six capital investment opportunities in mind but struggle to choose which to pursue
• Unclear value: Few small businesses run financial analysis to estimate return on investment, making it hard to justify spending
• Risk aversion: Most owners only consider investments they estimate will pay for themselves within two years, causing them to shy away from bigger projects with bigger potential impacts
• Loan rejections: Roughly a quarter of businesses have been denied a loan application, and after a knockback, it takes up to four years before they apply again
• Perceived complexity: Many owners assume new equipment will be hard to learn, consume training budgets, and clash with existing systems

How to make a move

1. List your top capital investment ideas
2. Calculate the actual cost to implement each one
3. Estimate the expected return on each investment
4. Rank them by return on investment (ROI)
5. Work with your accountant or bookkeeper to identify the opportunity that makes the most sense for your situation

2. Smarter methods (innovation)

Many businesses develop a certain way of doing things then never really think about it again. In the meantime, plenty of other things change and the original processes and procedures become less and less effective (if they were effective in the first place). Review and revamp the way you work.

Write down your processes

Process documentation helps everyone understand what to do, when to do it, and how. Follow these steps:

1. Record the steps you follow to complete jobs
2. Set aside a little time each week and get staff to help, as their perspective will be hugely valuable
3. Use templated documents to capture the same information for all jobs

The simple act of writing it down will begin to highlight inefficiencies and missing information.

Look for blockers

Run through your freshly documented process looking for bottlenecks and roadblocks. Your employees will have great insights, so encourage them to be honest with you. Mapping your workflows visually can be a more intuitive way to spot issues.

Common inefficiencies to look for include:

• Double handling: Jobs being handed back and forth repeatedly, or work being duplicated
• Momentum loss: Jobs getting parked at the same point every time
• Poor sequencing: Tasks getting done in an illogical order
• Quality issues: The same mistakes or customer complaints recurring
• Distraction: Skilled workers being pulled away by low-value tasks

Redesign your workflow

Step through your list of inefficiencies and fix the problems. You can often make big improvements by:

• Clarifying roles and responsibilities
• Resequencing jobs into a more logical order
• Improving communication between functions
• Ensuring people know where to find the information they need

Consider outsourcing jobs you're not good at or excited by. An external provider will charge fees, but it may be money well spent if it makes your business more focused and efficient.

Consider digital adoption

Software can dramatically boost business efficiency by centralising information, speeding up communication, and automating repetitive tasks. In fact, research on operations-centred digital platforms found that 81% of respondents reported efficiency improvements. Yes, there's a learning curve, but afterwards you're free to focus on what you do best.

Software can help with:

• : Send bills faster and chase late payments automatically
• : Track what you owe and schedule payments
• : Monitor stock levels and automate reordering
• : Capture receipts and reduce manual data entry
• : Get real-time visibility into business performance

Check your work actually matters

Check you're focusing effort on things that customers actually care about. You don't want to invest a lot of time and energy into things that simply don't matter to your business.

Try out some surveys or even just some good old fashioned conversations with your customers. If aspects of your offerings aren't resonating, consider investing less into them.

3. Skilled workers (capabilities)

Big business can afford to hire specialists who are highly efficient at specific jobs. Small businesses tend to hire generalists and give them multiple hats to wear. But you can still set them up to succeed.

Onboarding and training

Proper training and resourcing directly increases team productivity. One study found that workplace training explained 62.5% of the variation in employee performance evaluations. When people understand their role and know how to use their tools, they work faster and make fewer mistakes.

Set your team up for success by:

1. Providing each employee with a clear job description outlining roles and responsibilities
2. Explaining how each part of the job gets done, both in person and in writing
3. Training employees thoroughly on all tools, including software
4. Sharing the values and priorities of the business so people can make good decisions

If employees can't use their tools properly, your capital investment is wasted.

Giving and receiving feedback

Feedback directly improves productivity by preventing repeated mistakes and surfacing better ways to work. Research shows that the quality of feedback is an important driver of productivity, with high-quality feedback leading to significantly higher average performance.

Take time to explain problems and solutions, otherwise you'll get stuck redoing work. Listen to what employees say too, as their perspective can help you optimise how work gets done.

Use these steps for giving and receiving feedback:

1. Ask employees what they did well, how, and why
2. Add to the positives by sharing what you observed going well, with specific examples
3. Ask for their ideas on how to speed up or refine the work
4. Workshop those ideas together and, if appropriate, set new goals

4. Entrepreneurship

Entrepreneurship is the ongoing process of optimising your business, not just the act of launching it. Entrepreneurs unlock productivity by finding better ways to combine the resources at hand. It involves some risk-taking, but the rewards can be significant.

Harness your inner entrepreneur to boost productivity

Here are ways to do this:

• Scale up: Increase output to lower the cost per unit of each product or service you produce
• Acquire strategically: Buy or merge with another business to gain scale, complementary workflows, or consolidated operations
• Specialise: Focus on a narrower niche to drive speed, expertise, and quality, and consider cutting services that don't earn much
• Rethink your supply chain: Switch to suppliers that provide superior goods or complementary services
• Hire entrepreneurial people: Encourage innovation by bringing in people who think like owners

Increase productivity checklist

Here's a recap of productivity-boosting steps to take in your business:

Better work tools

• List investments that would improve productivity
• Price each solution
• Calculate the expected return on each investment
• Choose the option that offers the best mix of affordability and impact
• Consult with your accountant or bookkeeper for greater certainty

Smarter methods

• Write down and map out your work processes
• Identify all friction points such as double handling, stall-outs, and do-overs
• Brainstorm solutions focused on clarifying roles, resequencing workflow, and fixing communication breakdowns
• Consider software for admin tasks that distract from high-value work
• Audit your process against customer preferences to ensure effort is well spent

Skilled workers

• Create an accurate job description for each role
• Explain how each part of the job gets done, both in person and in writing
• Provide comprehensive training on all tools
• Share the big vision of what the business stands for
• Meet regularly to give and receive feedback

Entrepreneurship

• Look for opportunities to scale up aspects of your work
• Stay alert to acquisition opportunities
• Consider focusing more on a niche opportunity
• Keep reviewing your supply chain
• Surround yourself with entrepreneurial people

Boosting productivity is a mindset

Small businesses can significantly improve productivity. Make it a habit to continually examine and refine your processes, improve your work tools, and watch for inefficiencies that creep in.

You'll need to invest in your team and technologies, but when done smartly, the benefits add up. Efficient businesses are less likely to suffer delays, confusion, communication breakdowns, and waste. Increased productivity often leads to increased satisfaction.

Xero's accounting software helps you automate routine tasks, track business performance, and focus on growing your business. Get one month free and see how much time you can save.

FAQs on increasing productivity in business

Here are answers to common questions about boosting business productivity.

How can productivity be increased in business?

Increase business productivity by investing in better tools, refining your processes, training your team, and making strategic decisions about how to combine your resources. Start by documenting your current workflows and identifying where friction slows things down.

How long does it take to see productivity improvements?

Small process changes can show results within weeks, while bigger investments in tools or training typically take three to six months to deliver measurable returns. Track your metrics before and after changes to see the impact.

What's the biggest productivity killer in small businesses?

Manual, repetitive tasks that could be automated are often the biggest drain on small business productivity. Data entry, chasing invoices, and reconciling accounts are common culprits that software can handle faster and more accurately.

Do I need expensive tools to increase productivity?

No. Many productivity gains come from better processes rather than expensive tools. Start by documenting workflows and removing friction points. When you do invest in software, many options cost just a few dollars per month and pay for themselves quickly through time savings.

How do I get my team on board with productivity changes?

Involve your team early by asking them to identify pain points and suggest solutions. People support changes they helped create. Provide proper training on new tools and processes, and celebrate early wins to build momentum.