Productivity is a term associated with strong economies, robust businesses and the efficiency gains of clever staff. If only businesses were efficient, then we would have fewer of them failing, more employment and better incomes for owners and workers alike.

In New Zealand, according to The Xero Small Business Insights Special Report, Small Business Productivity: Industry and Regional Trends 2023, Kiwi business productivity fell by 6.1% in 2023.

Unfortunately, not all businesses get to the heady heights of maximum productivity. Not for lack of will, it’s hard to take a step back from the day to day pressures of running a business to look objectively at what can be done better. Or as the saying says …”When you are up to your neck in alligators it’s difficult to remember that your initial objective was to drain the swamp”

So, What Actually Is Productivity?

Productivity measures how efficiently a business turns inputs into outputs. The more productive you are, the better you are at turning resources like labour, capital or materials into products (or services) you can sell.

Three general areas of productivity:

People productivity
How much work it takes to deliver products or services to customers. It’s commonly expressed as hours worked/dollars earned.

Financial productivity
How good a business is at monetising its investments in assets such as machinery. It will often be measured as the return on capital invested.

Materials productivity
How much a business spends on materials in order to generate sales. Materials can include things like inventory or energy.

Why Productivity Matters

Businesses with increased productivity get more from less. As a result, they have more potential to turn a profit, deal with inflation or slowdowns, and absorb price competition. After decades of continuous improvements, productivity gains are getting harder to come by. Small businesses have typically been thought to lag behind big businesses in productivity, but with the advent of many digital tools access to productivity insights, tools and processes are now also available to smaller businesses.

How To Increase Productivity

There are four commonly accepted ways to become more productive:

Better tools

Smarter methods

Skilled workers

Entrepreneurship mindset

One: Better Work Tools (Capital)

Tools are made specifically to amplify the efforts of their users. So find the tools that’ll amplify your work.

Sometimes it might be as simple as a piece of software that cuts down the double-handling of information, like a booking system that schedules a job straight into your calendar or software that integrates with payment systems or point of sale.

Why you haven’t got better work tools yet.

Of course it costs money to upgrade work tools. Professor Marc Cowling of Oxford Brookes University has investigated why small business owners don’t (or can’t) make that investment. Here are his top five reasons:

Businesses aren’t sure how to prioritise: Small businesses have about six capital investment opportunities in mind at any one time, but they can’t back them all and don’t know how to choose.

It’s hard for them to see the value: Relatively few small businesses run a financial analysis to estimate the return on investment, so they struggle to justify making moves.

They’re risk averse: Most small businesses will only consider a capital investment if they guesstimate it’ll pay for itself within a couple of years. As a result, they tend to shy away from bigger projects that might have bigger impacts.

They can’t get loans: Cowling found that roughly a quarter of businesses have been denied a loan application. After receiving a knockback, it takes them up to four years to bother applying again. They need help building confident financial cases for investments.

Technology feels hard: Many business owners assume new equipment will be hard to learn, will chew up training budgets, and will clash with existing systems. They don’t have a solid ROI number in their head to counter these perceived hurdles.

Two: Smarter Methods (Innovation)

Lots of businesses develop a certain way of doing things then never really think about it again. In the meantime, plenty of other things change and the original processes and procedures become less and less effective (if they were effective in the first place). It’s a good idea to review and revamp the way you work.

Here’s how:

Check your work actually matters
Check you’re focusing effort on things that customers actually care about. You don’t want to invest time and energy into things that simply don’t move the dial for your business. Try out some surveys or even just some good old fashioned conversations with your customers. If aspects of your offerings aren’t resonating, consider investing less into them.

Write down your processes
Record the steps you follow to complete jobs. Put a little time aside each week and get staff to help as their perspective will be hugely valuable. Use templated documents to ensure you’re capturing the same information for all the jobs. This will help everyone understand what to do, when to do it, and how. Plus the simple act of writing it down will begin to highlight inefficiencies and missing information.

Look for blockers
Run through your freshly documented process looking for bottlenecks and roadblocks. Again, your employees will have great insights on this so empower them to be honest with you. It may help to map your workflows visually as that can be a more intuitive way to see it. You might find a few of these common things in your audit:

Double handling: jobs being handed back and forth a lot, or repeated.

Momentum loss: jobs getting parked at a certain point every time.

Sequence: things getting done in a weird order.

Quality control: the same mistakes or customer complaints keep happening.

Distraction: skilled workers are being distracted by low-value tasks.

Redesign your workflow
Step through your list of inefficiencies and work out the kinks. You can often make big steps simply by clearing up roles and responsibilities, resequencing jobs, and improving communication between certain functions. Make sure people know where to find the information they need to perform tasks or deal with customers.

Look for opportunities to outsource jobs that you’re just not very good at, or excited by. An external resource will charge fees, of course, but it may be money well spent if it makes your business more focused, efficient, and happy.

Consider digital adoption
Software can be a massive boost to business efficiency. It can be used to request and track jobs, centralise information, speed up communication, and automate unloved tasks. Yes, you have to go through a learning curve but on the other side of it you’re free to focus on the things you do best. There’s software for all sorts of things from invoicing to paying bills, managing inventory to managing staff, and bookkeeping to reporting.

Asana: For tracking tasks and projects. Zapier: Automates repetitive tasks.

Next month we’ll look at the last 2 ways to become more productive.  In the meantime, get in touch if you want help to improve your productivity.