Good employees can add an element of success to your business like nothing else. And one of the key characteristics of a good employee is the ability to be productive with their time. After all, when you pay an employee, you expect to receive financial benefits from the hours they work. Most experts agree that happy employees are more productive at work, but a recent study by Gallup shows that only 1 in 8 workers are “psychologically committed to their jobs and likely to be making positive contributions to their organizations.” In other words, productive employees, although rare, can significantly add to your business’ success—and your bottom line.

On the other hand, unproductive employees will quickly become a drain on your business’ fiscal health. In fact, that same study estimates that disinterested and unhappy employees cost U.S. businesses $450 to $500 billion a year.

Obviously, it pays to ensure your employees are as productive as they can be. But unlike in days past, simply paying them more just doesn’t cut it. Today’s employees place value on things other than just money, and interestingly enough, some studies show that when money is high on their priority list, the way they receive it is what matters. We’ll talk about all the ways you can change your work culture to ensure your employees are happy and productive, but first, let’s talk about how to set a baseline so you can measure you employee’s productivity in real numbers.

You Need a Starting Point to Measure Productivity

In order to truly grasp how productive your employees are, you’ll need to start with a baseline number so you can track them individually. To do this, you simply need to divide the number of employees you have by your daily output. For example, imagine that you run a pet grooming business and groom 30 animals a day. If you have 3 employees, your employee baseline number is 10. (30 animals divided by 3 employees equals 10)

Easy, right? But before you set that number in stone, you first need to identify any areas of redundancy that if eliminated, could increase employee productivity. Using the example of the pet grooming businesses from above, you may determine that your employees are spending too much time dealing with customers. In order to reduce that time, you could hire a front desk employee to deal with the customers, which allow the groomers to be more productive with their time. They could increase the number of their grooming appointments along with your profitability.

Use the Numbers to Track Your Employees

Now that you know what level of productivity your employees should be meeting, it’s time to begin tracking them individually. By keeping track of their output on a daily basis, you’ll quickly be able to determine which employees are meeting your standards, and which ones are lagging behind. The underperformers may require more training or encouragement, while the super stars should get some sort of recognition. It’s important that you maintain this system so if an employee’s productivity begins to slip, you can address it before it becomes a major problem.

How to Ensure Your Employees Stay Productive

Now that you understand the importance of employee productivity and have the tools you need to track their progress, let’s talk about some of the ways today’s employers use to keep their employee’s working smart.

• Create a compassionate company culture. According to Dr. Noelle Nelson, author of Make More Money by Making Your Employees Happy, one way to boost productivity is to ensure your employees know you take their concerns seriously. “When employees feel that the company takes their interests to heart, then the employees will take company interests to heart,” she said in an interview with Forbes. Nelson says that when a company values employees, they triple their return on equity and assets. This is accomplished by showing compassion for employees and following up on any promises you make to them. In other words, when employees know you are working to provide a compassionate and trusting environment, they will be more motivated to do a good job for you.
• Make employee goals public. A culture of accountability is important to ensuring that everyone meets their goals, and so you should make it a habit to set realistic goals for your employees, and then make them public. This way, everyone will be able to see each other’s goals and it will become a part of the company culture. Employees will respond even more if you also set goals for management because they’ll know that everyone in the company is working toward similar goals. When everyone is the company is clear about their goals, it creates a company-wide sense of purpose and helps keep employees focused.
• Keep your employees happy. A study by Bright Horizons shows that 89 percent of employees who have high levels of well-being said they are satisfied with their jobs, and two-thirds of them say they consistently put in extra effort on their jobs. Another study done by the University of Warwick shows that happy employees have a 12 increase in productivity, while unhappy workers are 10 percent less productive. Alexander Kjerulf, who is the founder of WooHoo, Inc, says “Happiness is the ultimate productivity booster.” He says that happy employees make better decisions, are better leaders, and are better at managing their time. And judging by the latest studies, he’s right. Happy people are better for your bottom line, so it benefits you as an employer to do all you can ensure your employees are happy in their jobs.
• Pay your employees well, but watch how you do it. A field study conducted by Harvard Business School is challenging the way people think about salaries and productivity. The study set out to answer the question of whether employees work harder when they are paid more, and the answer is surprising. The study showed that more pay only led to greater productivity when the pay was offered as a gift with no strings attached. The researchers hired 3 sets of people to do the same type of work. One group was offered $3 an hour, while another was given $4 an hour. There was no difference in productivity levels between the 2 groups. But a third group was initially promised $3 an hour, and immediately after being hired, they were told the budget was bigger than previously thought, so they were given a raise of $1 an hour. This group, who believed the company gave them the raise out of kindness, was 20 percent more productive than the other 2 groups. The takeaway from the study is that when employees believe they have been given a monetary gift because the company simply choose to give it, they feel the need to reciprocate for it, and they do that with higher productivity. Researchers say companies should “Think carefully not just about what to pay employees, but also how to pay them. The same amount of compensation can be structured in ways that will be more or less appreciated and reciprocated.”
• Reward productive employees in full view of their co-workers. When someone puts in extra effort, you should not only reward them, but do it publically so their efforts will be recognized company-wide. The reward can be monetary, more autonomy, respect, or recognition of some special kind.  What matters is that the employee feels acknowledged for their extra effort and knows the employer appreciates it.

You’re in business to make a profit, and your employees play a key role in that. But in order to have the most productive employees, you’ll need to think about their needs and happiness. Why not implement some of the suggestions listed above, and see whether or not your bottom line improves?