Productivity is a hot topic in business and always in the news. Yet there is much confusion around what this buzzword actually means. It’s talked about conceptually, as though everybody knows what it means. But productivity is difficult to assess in practice.

In Australia today, we face an uncertain economic climate. According to a 2013 Productivity Commission Report, in an environment of poor productivity growth, Australia’s prosperity in the 2000s has been maintained by fantastic terms of trade. Now that the terms of trade have reversed, our immediate future is difficult without a focus on productivity. A key graph in the report shows the threat:

Contributions to growth in average incomes – same labour productivity growth as last ‘decade’

graph-david

Source: http://www.pc.gov.au/news-media/speeches/income-outlook/20130918-national-income-outlook.pdf

For many business leaders, productivity has become an unpopular term. It’s assumed that productivity is a passing catchphrase, and will disappear like many business concept fads do.

However, with Australia facing real economic threats, the word productivity will not disappear. We can no longer avoid thinking about Australia’s declining income growth. Productivity can vastly improve people’s lives — but for this to occur, it needs to be experienced at the personal and business level. It’s not enough to just talk about productivity in macro terms such as regulations, tax policies, and education.

Productivity doesn’t really deserve its uncool image.

Principles about productivity & how to make it work:

1. Productivity is not about working harder or longer

Contrary to popular belief, productivity describes how to work fewer hours with less effort. Working overtime doesn’t increase productivity and neither does taking a pay cut. Both these measures may drive down costs, but they are unrelated to productivity. Productivity is about maximising your time, skills, and energy, like getting all your work done by lunchtime and taking the afternoon off. It’s about doubling your income while giving your customers a price reduction at the same time.

2. Productivity can help solve operational issues

Maximising productivity at an individual and team level can help you overcome and eliminate operational problems. Such problems often mean disappointed customers, stressed staff, and added costs. Solve the crux of the issue through productivity, and you will see cost reductions as well as a less stressful workplace.

3. To maximise productivity, first understand and define your process

Before you can leverage productivity in measurable ways, it’s critical to understand what your process does, what your customers want, and how you can deliver that product or service. You must be able to measure it; particularly when it comes to output and your customers’ requirements for quality, service and/or delivery. A good, honest look at this may reveal significant opportunities, such as variable service levels.

4. Throughout the process, don’t ignore technology

While you’re reassessing internal structures and service offerings, it’s almost certain that your competitors will be improving their own offerings through technology. Powerful disruptive forces are at work against traditional ways of doing things. If you drive a taxi or manage a hotel, you will be experiencing this right now. A bus company that kept bus conductors would not be in business in our modern society today, and the possibility of driverless buses is no longer in the realm of science fiction.

5. Metrics are absolutely vital to productivity

Many CEOs and leaders see lost productivity as normal because they don’t separate operating problems from normal processes. Things go wrong so regularly that it is now the process. To combat this, put metrics into your process with a blue sky approach, and the opportunities will appear. Remember that metrics that highlight problems will be more difficult to get.

6. With measures in place, start taking action

Once you have made the necessary measurements, it’s time to implement new strategies and start taking action. Some of your variances will be difficult or virtually impossible to fix, while others will be straightforward and simple. Think outside the box and solutions may appear unexpectedly.

7. Create behavioural change to drive productivity

When it comes to driving productivity, behavioural change is absolutely crucial. In fact, at the heart of productivity are people — their emotions, relationships, personalities, skillsets, and so on. Tools, technology, and process redesign all play their part, but in the end, if human beings are involved, it’s the behavioural model you adopt that makes the difference.

Summary

Productivity is loaded with meaning because it has a profound impact upon people’s lives. In our current market economy, the challenge for all of us is to stay in business by leveraging productivity. Improving productivity is one of the most significant interventions that protect Australian jobs and businesses.