Five key levers to productivity improvement
–
every day
While cost reduction has been a pre-eminent business tactic for
improved profitability and share market performance for the past
5-7 years, it is rapidly approaching its use by date as businesses
find it harder and harder to make substantial one-off gains. Some
businesses are even being penalised in the share market for failure
to invest.
Improving productivity is now a complex process of manipulating
business levers in concert. Five key levers for every day productivity
improvement are:
1. Cost structure
While businesses are used to identifying areas of high cost, it
is equally important to examine the structure of the cost base (balance
between fixed and variable, labour vs IT, operations vs corporate
overhead, etc.) and trends in this structure over time. Operations
functions are traditional targets and have been significantly streamlined
whilst support functions (e.g. HR, IT, finance) and corporate areas
(e.g. product development and management, marketing, etc.) have
grown. The focus on operations functions tends to be because it
is easier to measure their productivity or value. Support and corporate
functions are harder to measure precisely because they are essentially
knowledge based functions. The key is to develop an appropriate
metric for the value that they bring and the investment that is
required.
2. Organisation of work
Organisational restructuring is an important tool to realign the
business with a new strategic direction or to improve productivity.
However, it can be disruptive and may not be the best way to address
productivity issues. Further analysis is necessary to determine
the optimum configuration of teams (skills and responsibilities)
and allocation of work (steps in a process). For example, a team
may work more efficiently and provide better customer service if
they complete the entire process for a particular customer. Alternatively,
developing expertise in a particular part of the process may result
in greater productivity and better service to customers. Your teams
are the experts in what works and doesn’t work. Encourage
them through a formal process and rewards to maintain a focus on
this aspect of business productivity.
3. Business processes
This lever continues to be used effectively by businesses and
more rigorous approaches such as Six Sigma have gained new currency
in recent years. However, with the increased availability of off
the shelf technology solutions and enabling technology such as middleware
and workflow, the challenge for business is how to maximise the
value-add from knowledge based activities as distinct from automation
of more standardised, repeatable activities. This requires new ways
of thinking regarding process, skills development and training of
staff in order to achieve productivity improvement across the business.
4. Knowledge management
We have referred to knowledge management several times. This is
a discipline and a process which is much talked about but often
relegated to the realms of information management which in some
businesses is viewed as a step above records management. Every business
now operates in a global, knowledge based economy. The lever to
manipulate for improved performance is the ability to make knowledge
an active ingredient in day to day operations. A current example
is product life cycle management software. This software not only
captures knowledge at every stage of a process for reuse but brings
diverse functions together, e.g. Marketing and Engineering, to share
information in a common format. Not only does this result in a better
product but it also delivers productivity improvement in the process.
5. Information Technology (IT)
IT continues to challenge business managers with its big promises,
big investment and big risk. In addition it seems to be increasing
in complexity. Business needs to take charge of this situation and
start to proactively integrate IT into its management processes
rather than leaving it to one side. Doman Vaughan has developed
a five step approach for business to better manage its investment
in IT. Refer to our article “IT Portfolio Management”
(http://www.domanvaughan.com/it-portfolio-management-and-planning.html
) .
Conclusion
These levers, unlike periodic or one-off cost reduction initiatives,
must be manipulated within the framework of an embedded continuous
improvement process. To achieve this goal, each of the levers needs
to be integrated into business as usual processes in the organisation
and not just visited or re-visited periodically in response to challenges
in the external business environment.
Summary - productivity improvement article
Improving productivity is now a complex process of manipulating
business levers in concert. This article describes five key levers
for every day productivity improvement.
For further information on the ideas outlined in this article please
contact us for an obligation free discussion.
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Donna Vaughan and Desne Doman are the authors of the e-book:-
"Corporate
Mercenaries - Manage your consultants or... they will manage you"
=> http://www.domanvaughan.com.au/
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Desne
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Productivity Improvement