Improving productivity

What is meant by “productivity”?

- Productivity is a measure of output for some measure of input

• Maintenance visits per hour of direct labour
• Cakes sold per hour of shop assistant labour
• Boxes produced per square metre of steel
• Helpdesk calls closed per man-month

- It can apply to a person, a department, a company, an industry or even a country

• For your business you can choose whatever measures are most useful

Why is productivity important?

- Productivity has huge impact on profitability as shown in the table

• The company has 8,000 hours per year of productive labour. The budget is based on these hours producing 100 items which results in a 10% profit.

 

 

• A 10% improvement in productivity (each person on average producing 10% more in a given period) results in a doubling of profit
• A 10% deterioration in productivity results in no profit being made at all

- The same model would apply if the cost were raw material (the efficiency in this case being yield or, conversely, wastage) or machine time (utilisation)
- This approach applies to services as well as products

How can productivity be improved?

- Decide what it is you produce (the output) – this may not be obvious in a service business
- Identify the main costs or resources utilised in production (the inputs)
- Define your productivity measure(s) – in the above table it is labour hours/item
- Monitor productivity over time and between different employees or resources
- If the main productivity factor is labour then improvements can be made in training, supervision, communication, standardisation, documentation, tools, systems or support
- For non-labour measures examine product or process design

 

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