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Productivity - the Essence of Successful Business

A recent BBC report has picked up on the latest figures from the ONS (Office of National Statistics).  This report indicated that, in the last quarter:-

‘The productivity of UK workers has dropped back to pre-financial crisis levels, according to official figures. Hourly output fell 0.5% in the first three months of the year’.

The report goes on to say:-

‘The UK has seen a steady economic recovery since the financial crisis, but it has been helped by longer hours and more people working’.

It might be worth revisiting a definition of productivity:-

‘A measure of the efficiency of a person, machine, factory, system etc. in converting inputs into useful outputs. Productivity is a critical determinant of cost efficiency’

So, in terms of the statistics what is going on here? To a large degree the reduction is probably the flipside of high employment and is a symptom of more people being taken on in business but then outputs remaining pretty much the same – i.e. not enough growth. The SME sector plays a big part in this and from our experience we see a number of crucial mistakes made that certainly will contribute to this productivity reduction, for example:-

  • When a ‘gap’ is spotted in a business unit or process a knee jerk reaction occurs ‘we need another body to cover that’
  • The ‘body’ is recruited but no one has clearly defined the role, the accountability and  responsibilities and therefore the precise skills and experience required
  • Without scoping the role first and all other roles within the unit/ process the business cannot be absolutely sure that additional manpower is the solution
  • Individuals are taken on and ‘shown the ropes’ but are not clear on what their accountabilities are, what success for them would look like and how they fit into the team effort
  • As a result the business cannot be as productive as it should be and the individual concerned cannot make the contribution they should versus the cost of hiring and employing them. Cost efficiency suffers which will have a detrimental effect on profitability for sure

While it is good news and a good feeling to be in a position to employ people and nice to see the country enjoy such high employment figures it cannot last unless, as a result of these efforts, businesses start to become more productive and GROW.

Businesses should think carefully about new employment and take a few steps before determining that it really is a ‘new body’ they need – for example:-

  • What is the work undertaken by the business unit or process in question?
  • Does the unit/ process team all have clear roles and responsibilities and if so what areas of the work are not already covered?
  • Is it really another body we need? What about the digital transformation that is going on in all markets? Are we ‘up to speed’ with options here and could these do what we need more efficiently?
  • If gaps exist that cannot be covered by existing manpower or digital assistance – what will the responsibilities be for the new incumbent and what ADDITIONAL output can/ should we expect from them that can contribute to the GROWTH of the company – e.g. contact more potential customers, add to marketing activity, deal more effectively and efficiently with more of the supplier base, free up senior management time to negotiate key deals more effectively and add gross profit accordingly.

Taking a sales scenario as an example. Do you really need an additional salesperson to make more customer calls? Or could the customer contact process be just as effectively and possibly more effectively run if:-

  • You applied the 80/20 rule and made sure that the main focus was on the 20% of customers who give you 80% of your business
  • You recognise that these customers (arguably) have more scope to be grown if more time can be spent on them
  • You calculate how much you would ACTUALLY lose if your sales team only made physical calls on these customers while the balance is handled by mail/ telephone etc.

 It may be that your conclusion is that you do need an extra body – but it could be a telesales person. This will cost you a lot less than a ‘fully fledged’ salesperson so the ‘cost efficiency’ will be better all round. 

To be productive businesses have to think clearly about what each role within their business needs to deliver and tell the incumbent what is expected of them. It is great to recruit and add people but the growth of the business, as a result, is the major requisite – that cannot happen with knee jerk reactions. Getting on the path to real sustainable and significant growth by hiring the right people at the right time and defining the net extra they need to deliver prior to their employment is crucial in the process.

If you feel that a free/ no obligation two hour discussion with us might benefit your business get in touch.

Contact us at: ignite@tinderboxbusinessdevelopment.co.uk or call us on 0116 232 5231

David Turner

Managing Director

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