The Financial Costs of Low Productivity: What You Need to Know

18 May, 2023 | Read in 4 minutes

Learn the financial costs of low productivity with this comprehensive guide.


Productivity plays a crucial role in the contemporary business landscape. But what if signs of low productivity exist in your team? 

When your team faces challenges in maintaining productivity levels, it can result in missed targets, errors, and missed opportunities. What's more, low productivity can have a worse impact on costs.

Keep reading to learn more about how low productivity impacts costs below:

An Overview of Low Productivity

According to Collins Dictionary, low productivity indicates that businesses are having trouble producing more with the same amount of resources.

In other words, there are various internal and external factors within businesses such as a lack of managerial support, inadequate resources, and poor office culture, which can cause it. 

Further, those reasons can severely impact operations, performance, and financial performance. 

One article showed that workplace productivity is only 60% of what it could be. So, leaders should actively identify the causes of low productivity and develop sustainable strategies to improve productivity levels.

Causes of Low Productivity

Here are several factors that contribute to low productivity:

Employee Factors

Employee factors arise from the characteristics, attitudes, and behaviours of employees.


Distractions are the most significant cause of low productivity. Employees can easily become distracted by social media, personal emails, and phone calls during work hours, leading to extended work hours, missed deadlines, and reduced output.

Job stress

Job stress is another significant cause of low productivity. A stressful work environment, increased workload, or unrealistic expectations from supervisors or colleagues can result in a loss of productivity.

Poor Health

Poor health, both physical and mental, can contribute to low productivity. Employees who are unwell may not be able to perform at their full capacity, resulting in increased absenteeism and requiring more motivation to perform at their best.

Managerial Factors

Managerial factors arise from the decisions and actions of managers.

Poor Management

Poor management decisions and practices can exert a significant impact on productivity. Micromanagement, lack of clear communication, ineffective delegation, or failure to provide adequate support can all contribute to low productivity.

Inadequate Resources

Insufficient resources can result in reduced productivity. This may encompass the failure to provide the necessary equipment, tools, or personnel required to complete tasks, thereby impeding the work process.

Environmental Factors

Environmental factors arise from external factors within the work environment.


Excessive noise levels can have a significant impact on productivity. Employees working in noisy environments may find it challenging to concentrate, leading to reduced productivity.


The temperature of the work environment can influence productivity. Research suggests that employees tend to work more effectively in cooler temperatures compared to warmer ones.

What are the Costs of Low Productivity?

Low productivity can have significant financial and performance implications for businesses. Here are the details:

The costs of low productivity on work performance

1. Reduced Output

When productivity is significantly low, output also decreases. This results in the production of fewer goods or services, leading to lower revenue and a diminished market share.

Moreover, a company's ability to meet customer demands is significantly compromised, resulting in lost contracts, clients, or customers.

2. Overtime and Missed Deadlines

Low productivity often causes overtime work to meet set targets. The additional hours of overtime incur extra wages, while the lack of productivity extensions can result in missed deadlines. 

Extended deadlines can leave clients feeling disheartened and provide inconsistent feedback.

3. Increased Stress

Low productivity naturally leads to heightened stress levels. Employees need more effort to catch up on assigned targets, often working in harsh and demanding circumstances. This additional stress strains their mental and physical health, contributing to a higher turnover rate, increased absenteeism, and struggles with mental well-being.

4. Decreased Morale

Employees working in a low-productivity environment tend to experience feelings of discouragement and overwhelm. Their motivation to complete tasks diminishes, resulting in demotivated workers and, ultimately, a decline in the quality of work. Over time, decreased morale becomes ingrained in the workplace culture.

The Cost of Low Productivity on Financial Performance

1. Reduced Profit Margins

Low productivity, especially when sales are strained, often leads to decreased output, resulting in lower revenues and reduced profit margins. This limitation in financial performance can restrict business finances, leading to negative cash flow and potential financial difficulties.

2. Increased Operational Costs

Low productivity can contribute to higher operational costs. For instance, running additional shifts or employing temporary staff can all lead to increased operating expenses, adding further financial burdens for the business.

3. Reduced Employee Retention

Low productivity can result in high employee turnover rates, rehiring expenses, and unnecessary training time and expenses. 

The real cost of low productivity caused by burnout and underwhelmed by their perceived value can’t be taken lightly. As this research shows that 46% of employees who quit voluntarily do so because they do not feel appreciated.  


Low productivity can have significant financial implications, from reduced revenues to increased operational costs. You must identify contributing factors to low productivity and develop plans to mitigate their effects. 

You can try to invest in employee morale, resources, and modern technology. So, it can create a healthy and productive work environment. Further, understanding and managing low productivity is crucial to the continued success of businesses as we advance.

Ready to grow your business with VirtualSpace?

One platform to manage and organise your teams, tasks, projects, and more.


Subscribe to our newsletter to stay updated

We'll keep you posted with everything going on in the modern working world.