The Performance and Productivity Index: A Practical Way to Link People Practices to Financial Performance
- Svetlana Gurevich
- Dec 29, 2025
- 5 min read
Updated: 6 days ago
Across industries, organisations are investing significant time and resources into strategy, talent and performance improvement. Yet productivity growth has slowed in many sectors, and leadership teams often struggle to explain why performance has plateaued despite sustained effort and investment.
Large-scale research by firms such as McKinsey, BCG and the World Federation of People Management Associations consistently shows that while leaders recognise people as a critical driver of performance, only a minority of organisations can clearly articulate how their people practices translate into productivity, profitability and growth. Financial metrics describe outcomes and HR metrics describe activity but the connection between the two is not always obvious.
This challenge is particularly acute in people-driven and knowledge-intensive sectors such as professional services, where human capital is the primary source of value creation. In these environments, small differences in performance management, capability and culture can translate into significant differences in revenue per employee and margin.
Our Performance and Productivity Index (PPI) was developed to address this gap and give businesses some direction as to where to invest to achieve higher financial results.
Why the Performance and Productivity Index exists
The Performance and Productivity Index is designed as a structured starting point for organisations seeking greater clarity on how people practices influence business performance. Rather than focusing on isolated HR metrics or abstract maturity models, the PPI integrates organisational capability with financial logic. It provides a clear, evidence-based view of how effectively an organisation’s people and performance systems support strategy execution, productivity and financial outcomes.
In practical terms, the PPI helps leadership teams move beyond questions such as:
Why has productivity stalled despite sustained investment?
Which of our people practices are helping performance and which are holding it back?
Where should we focus to achieve measurable commercial impact?
The Index produces:
a single score on a 0–100 scale,
an associated people practices maturity band (Reactive, Developing, Integrated, Future Ready), and
a clear diagnostic view of how performance is enabled (or constrained) across the organisation.
Importantly, the PPI does not claim to predict or guarantee outcomes. Instead, it draws on extensive research showing that organisations with more mature people and performance systems are significantly more likely to achieve stronger financial results over time.
McKinsey’s Performance Through People research, which analysed thousands of organisations across industries, found that organisations with strong people development and performance systems are over four times more likely to outperform peers financially, and can achieve around 30% higher revenue growth. While this evidence is cross-industry, the underlying dynamics are particularly relevant to professional services, where performance is driven primarily by human capital.
Why the PPI focuses on five dimensions
Our Performance and Productivity Index is built around five dimensions based on research and practical experience consistently showing that these practices explain a significant proportion of the variation in productivity and financial performance across people-driven organisations. Rather than measuring activity, the PPI focuses on organisational practices that create the right conditions conditions and enable strategy to be executed effectively and performance to be sustained over time.
Strategic alignment
Strategic alignment determines whether people effort is focused on value-creating outcomes or dispersed across competing priorities. Research by BCG shows that organisations with strong alignment between business strategy, leadership behaviour and people systems are up to 60% more likely to outperform peers on revenue growth and around 40% more likely to sustain margin performance. In professional services, misalignment often results in high levels of activity without corresponding improvements in revenue per employee or profitability. The PPI therefore examines how clearly strategy is translated into people priorities, leadership expectations and performance outcomes. This dimension acts as a multiplier: when alignment is weak, improvements elsewhere rarely translate into financial results.
Performance and productivity
Performance management is one of the most direct levers linking people practices to financial outcomes. Studies across industries, including knowledge-intensive environments, show that organisations with effective performance and productivity frameworks achieve 10–25% higher productivity per employee than those relying on ad-hoc or compliance-driven approaches.
In professional services, weak performance systems allow underperformance to persist, reduce utilisation and erode profit per employee. The PPI assesses whether:
performance expectations are clear and consistently applied,
productivity and contribution are actively monitored, and
performance data informs commercial and resourcing decisions.
Capability Building
Constant capability assessment and building for the future represents organisational ability to stay resilient and future earning potential. Research by McKinsey, BCG and Gartner indicates that organisations with structured capability and skills management experience up to 30% faster time-to-productivity for new hires and generate 20–30% higher returns on learning investment. Where capability is unmanaged, organisations incur higher recruitment costs, longer ramp-up periods and increased delivery risk. The PPI evaluates how effectively critical skills, leadership capability and succession are identified and developed, linking this dimension directly to time-to-productivity and human capital ROI.
Culture and engagement
Culture and engagement have a measurable impact on financial outcomes, particularly in people-intensive businesses. Large-scale studies consistently show that organisations with high engagement levels deliver 20–25% higher productivity and experience up to 50% lower voluntary turnover. In professional services in particular turnover and disengagement create both direct costs and indirect losses through reduced client continuity and lower discretionary effort. The PPI therefore assesses whether leadership behaviours and cultural norms reinforce performance expectations and support sustainable productivity.
HR infrastructure and enablement
Even strong strategy and leadership cannot be sustained without effective systems and data. ISO 30414, the international standard for human capital reporting, highlights the importance of reliable people data and productivity metrics in enabling organisations to improve revenue per employee and return on people investment. Research also shows that organisations with digitally enabled HR processes can reduce administrative effort by up to 30%, freeing capacity for value-adding activity. The PPI evaluates whether HR infrastructure enables insight, efficiency and scalability.
What clients gain from using the PPI
The Performance and Productivity Index gives leadership teams a clear, objective view of current HR practices maturity, without relying on anecdote or intuition.
Clients use the PPI to:
diagnose the maturity of their people practices,
understand how different dimensions contribute to overall productivity,
identify where value is being lost or constrained, and
prioritise investment efforts leading to greater potential commercial impact.
While no diagnostic can guarantee financial outcomes, research consistently shows that organisations that strengthen these five dimensions are significantly more likely to improve productivity, profitability and growth over time. The PPI provides a practical, evidence-based starting point for those improvements helping organisations move from broad intent to informed action unlocking higher financial performance.
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