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 (see part 1)
Smarter methods (see part 1)
Skilled workers
Entrepreneurship mindset
Three: Skilled Workers (Capabilities)
Big business can afford to hire specialists who are super-efficient at specific jobs. Small businesses tend to hire generalists and give them multiple hats to wear. But you can still set them up to succeed.
Onboarding and training. Properly training and resourcing your people is a critical step to increasing productivity. Make sure each employee has a job description with clear roles and responsibilities. Explain how the job should be done and provide supporting documents that reinforce the in-person instruction. Give your employees careful training so they know how to use all the tools (including software) they need to. If they can’t use those tools, then the capital investment is wasted. And regularly share the values and priorities of the business. When people understand the big picture, they’re better equipped to make the right decisions for the business.
Giving and receiving feedback. Feedback is vitally important to productivity, and it’s a two-way street. When something’s not done quite right, take the time to explain the problem and the solution. Otherwise you’ll get stuck in a habit of redoing work and you don’t want that. You want to delegate with confidence. Similarly, listen to what your employees say. They’ll have a different perspective and expertise that can really help you optimise the way work gets done.
Use these steps for getting and giving feedback:
Ask employees what they did well, how, and why. Add to the positives by telling them what went well, with examples.
Ask for their ideas on how to speed up or refine the work. Workshop those ideas with them and, if appropriate, set new goals.
Four: Entrepreneurship Mindset (Optimisation)
Entrepreneurship is not just the act of launching a successful business, it’s the process of optimising it. Entrepreneurs unlock productivity by better combining the resources at hand. It generally involves a bit of risk-taking but the rewards can be great.
Harness your inner entrepreneur to boost productivity.
Scale up: Increasing output often lowers the marginal cost of each product or service you produce.
Acquire another business: Buying or merging with another business can deliver scale or efficiencies, such as complementary workflows, consolidated operations, or logistics.
Specialisation: Doubling down on a narrower niche can drive speed, expertise and quality to improve productivity. So think about cutting out services that don’t earn much money.
Rethink supply chains: You could increase productivity by switching to suppliers that supply superior goods, or provide complementary services.
Hire and empower entrepreneurial people: Foster a culture of innovation in your business.
Increase Productivity Checklist
To recap, here are some productivity-boosting steps to take in your business:
Better tools
List investments that would improve productivity. Price each solution. Calculate the expected return on each investment. Make the move that offers the best mix of affordability and impact (consult with us for greater certainty).
Smarter methods
Write down (and map out) your work processes. Circle all the friction points (eg, double handling, do-overs). Brainstorm solutions and focus on clarifying roles and responsibilities, resequencing workflow, fixing communication breakdowns. Consider software for repetitive admin tasks that distract you and your people from high-value work (consider outsourcing, too). Audit your process against customer preferences to ensure you’re investing time and effort wisely.
Here are some apps that can help you and your team work smarter:
Trello: Great for project management and keeping your team on track.
Slack: Enhances communication within your team.
Skilled workers
Ensure there’s an accurate job description for each role. Explain how each part of the job gets done (in person and writing). Provide comprehensive training on the tools. Give them the big vision of what the business stands for. Meet regularly to give and receive feedback.
Entrepreneurship mindset
Look for opportunities to scale up aspects of your work. Stay alert to acquisition opportunities. Consider going harder on a niche opportunity. Keep interrogating your supply chain. Surround yourself with entrepreneurial people.
Boosting Productivity Is An Attitude
Small businesses have huge potential to improve productivity. Make it part of your mindset by continually examining and refining your processes, improving your work tools, and watching for inefficiencies that creep in. You’ll need to invest in your team and technologies but when done smartly, the benefits add up. As a bonus, efficient businesses are less likely to suffer delays, confusion, breakdowns in communication, distractions and waste. And that means there’s a good chance increased productivity will go hand in hand with increased satisfaction and profit.
Get in touch if you want help to improve your productivity.
