You hear the phrase a lot these days ‘The UK has a productivity problem’, ‘5 steps to become more productive in your workspace’ and the ‘Work smarter and not harder’ mantra. However you need to understand what productivity is before you stand a hope of trying to improve it.
Andre Alford Founder and CEO of My Marketing Dept pulls apart this rather nebulous of business challenges.
Go on then what is it?
To be precise it is the rate of output per unit of input. Therefore a process or person is described as twice as productive if the output can be doubled per unit of input.
An example of this in action would be if someone that cost the business £10 per hour, generated services that could be sold for £20 an hour was replaced with someone else on the same pay who’s activity generated services that could be sold for £30 an hour.
You can see in the above example, that if you want to keep the original person you had but still wanted to double productivity, you would have to reduce their cost to £5 per hour. Certainly an awkward conversation to have!
What productivity isn’t about
Productivity should not be confused with company profits or revenue. Using the example above you can see a business could triple it’s revenue and profits simply by hiring another two people like the first one. Their productivity hasn’t changed but their revenue and profits have gone up.
Productivity is also not necessary how something is done. One of the highest margin consumer products in the last decade was packaged grated carrots, often sold for 99p when all it costs to make is 1p. Fantastic stuff, but the people preparing the product didn’t radially do anything different when it came to packing bananas, a much lower margin product.
Why does productivity matter?
Productivity matters because with all other factors remaining the same, it helps your profits to be higher. It also makes your business more resilient against external shocks such as cheaper competitors entering your market or increasing problems with staff retention. A highly productive business will always hold out longer in adverse trading conditions compared to a business with poor productivity.
Productivity is how you spend your time and not what you do
Using the fruit packing example above, if that was all the company did then it could increase it productivity significantly simply by dropping the banana packing activity. However, it’s revenue and profits would drop a bit and it would have to let staff go. If though, the clever directors of the business redeployed those staff to double the packed grated carrot output, then productivity would increase significantly and the revenue and profits would double. Of course this is a very simplest example and in reality other factors would come into play.
What’s the next step
Next week I will explore how you can become more productive by Maximising Your Worth.
If you would like a 1-2-1 with me so that I can help your business specifically become more productive then book an appointment here https://mymarketingdept.co.uk/free-1-2-1-advice/