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Want to improve your business's productivity?
Productivity is not increasing at a desired rate despite improvements in technology.
Why?
No easy answer but latest research suggests that we may have reached a plateau due to years of flat management structures and higher rates of workforce turnover.
Management and leadership skills are also sadly lacking meaning efficient business processes have not been developed.
Productivity is a measure of how efficient you are utilizing your labor resource. If you have low productivity then your company is less competitive.
Typical symptoms include dissatisfied staff, higher costs, higher levels of overtime, and slow output. Poor productivity is a result of a number of factors, which are discussed later.
What is Productivity?
Productivity is typically measured as a ratio of output per labor-hour, an input.
So the two important aspects we must measure are;
- Labor hours
- Volume produced
Why Measure Productivity?
If you have low productivity then your company is less competitive.
If your labor hours per unit are higher that your competitors, then they can afford to offer better prices and achieve the same, or better, margin than you. Additionally more productive companies are usually better run and managed companies and have more efficient processes and happier employees.
Productivity is not just important for manufacturing businesses, it is equally important for services businesses.
In both cases you need to record the number of hours that your personnel work on a job and then record those hours that against the job.
So the key ‘driver’ is the direct labor. Without knowing what hours are actually conducted on a job you can not know what your productivity level is and this means you have no basis to improve your productivity.
Most managers are abundantly aware they are not productive however have no system in place to measure productivity. As a result management often put unnecessary pressure on their employees to drive production faster and cheaper rather than look at the systems and productivity measures that need to be put into place.
Poor management practices
Overall poor management of staff and systems causes productivity loss.
Common instructions like: “We need to get our work done faster”, often result in management and staff taking short cuts affecting quality and customer retention.
Another reactive management instruction is: “We need to get the product out by tomorrow”, meaning everyone works longer hours to get the job done, making employees more tired and consuming more labor hours per unit produced than desired.
Productivity is seriously affected by the following factors:
- Staff morale
- Poor processes
- Poor planning
- Poor product design
- Not having the competencies or skills to do the work
- Poorly designed or old equipment
Putting in productivity measures in place is the first thing you can do to see which of the above are having the most effect. BUT you need to have a system in place to accurately record productivity and the management and staff disciplines to ensure it is regularly measured.
What is the difference between productivity and efficiency?
Efficiency is a related measure which looks at the value of what is produced and the cost of inputs used. So you can be productive but not efficient. Efficiency takes quality and product costs into account whereas productivity is more focused on labor time utilization. Competing against low wage countries like China which has very low labor cost structure does not mean its manufacturers are more productive as they generally have older processes but their low labor rate makes them more efficient cost-wise, which gives them the competitive advantage.
This means it is easier for western countries to compete on differentiation and specialized services with higher level of labor productivity.
What will you do to become more competitive in your marketplace?
If you are unsure on how to approach improving productivity or efficiency then contact us for a free Fresh Ideas Session with a specialist adviser.
Or just ask a question here.
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