“We need to increase productivity!” What sounds very reasonable on a country scale could be damaging on a company level.
Now, after nearly two years of recession the economy is back on track, i.e. companies of all sectors sell more. This is good news, isn’t it? It brings our productivity to new heights, meeting and even surpassing the levels we had seen before the recession. Stop! This is not really good news. This is expected news. Every company – well managed or not – will be able to show these figures. The question is: have companies used the time of low productivity to expand the productivity potential in preparation for the future?
Selling more increases productivity only, if we don’t need to accumulate resources proportionally with the new volume. Unfortunately, recent statistics published by Ministry of Manpower show that we usually do exactly this – adding resources.
Over the past decade, Singapore’s economy grew by an average of 5% per annum. Singapore’s productivity growth over the same period averaged about 1% per annum.
Ministry of Manpower, July 2010
During good times, business leaders manage their company by top line first and by bottom line second. Growth is driving business decisions. In order to stay competitive or even get an advantage, cutting costs is requested along the way. The task of reducing some percentage of resources every year is ubiquitously. This usually means all departments have to review all kind of cost drivers and identify room for reduction. Often, there is none. However, there will be a way to cut. This frequently results in employee frustration and high turn-over, process problems and consequentially customer dissatisfaction and complaints.
There are ways to avoid this consequence. The most powerful levers for lifting productivity are hidden in our processes, in our efficiency. Across all industries, productivity seems to be high, in some companies and industries it feels productivity has reached the ceiling. The truth is that efficiency is hardly higher than 20%. Mostly it is far lower. In service industries like banking and insurance, efficiency is less than 10%. Innovating and improving the way we market, sell, design, produce and deliver products and services is a powerful way for increasing the productivity potential – that will be available when sales grows even further.
Increase in productivity can be achieved in multiple ways. One of the most powerful ways is raising efficiency. Focussing on the processes, rethinking the way the work gets done, redesigning and improving the flow of activities in all kind of functions will most likely produce results. This needs leadership that goes beyond P/L and balance sheet into the details of all processes. In addition, this needs some proven methodology and leaders who understand their power and application. And, this needs staff who is enabled, empowered and motivated to review their own processes and act upon findings.
As cases show again and again, the result is improvement potential you have not even thought of before.