Is my company as productive as it can be?
The answer to that question is probably “no.”
Are you currently perplexed by lower profitability, or a perceived high cost of service delivery, or are you just striving to be as good as you can be? If so, step back for a moment and measure your organizational productivity and apply those results to improvement.
Now you might say in response—that is a wonderful idea, but how do I measure organizational productivity?
In our experience, there are a number of metrics that can be used to measure or monitor the productivity of an organization. Six common examples are shown below:
- Size of the total workforce when compared to sales volume or profit contribution;
- The ratio of direct (sales, direct-client contact or line plant-manufacturing staff) to support and/or overhead employees;
- Various direct or support departmental expenses as a % of sales or profit;
- The throughput of your “manufacturing” facility—e.g. tonnage processed per unit of labor or lines of programming code produced per programmer;
- The support cost to produce and process a sales transaction or order; or
- The average size (revenue and “lines”) of customer orders or shipments.
While there surely may be other metrics on the tip of your tongue, these are representative of how productivity can be measured—and a good place to start an investigation.
With these metrics or other metrics more specific to your organization selected, we suggest that you embark on a simple 3-step research and analysis plan.
- Measure your performance metrics. Look at the current performance of each selected metric and go back at least three years to seek any trends (good or bad) that may exist. Some metrics may be hard to get at or discern from company reports or systems, but the extra effort will be worth the cost. Accept no “too-hard to find” excuses if you are serious about this. Trust me, unless you measure this stuff already, the outcome of this 1st step will be very revealing.
- Find comparative or industry survey benchmarks, if they exist. If you can find some industry or other credible comparative benchmarks, measure your results (for select metrics) versus survey data for similar organizations. Where you rank against other organizations is always a great (and unassailable) way to see how productive you are.
That being said, finding this type of survey data is easier said than done. A good place to look for these types of surveys are trade associations or industry publications. You may also be able to find some information in governmental publications. If you are a public institution—like a municipal government or park district—more comparative information may be available because of wider (and required) budgetary reporting and the lack of survey-participant caution based upon competitive advantage or factors. Getting comparative data is a real plus, but by no means necessary. [You can also do your own survey if you want, but it is no small enterprise to undertake.]
- Establish internal productivity improvement goals based upon the metrics and results gathered in Step #1 whether you can find industry benchmarks or not. Yes, just say we can do better—and you probably can. For example, establish an annual goal this year to increase organization productivity by +5% by year’s end. Assign achievement of the expectation to the appropriate senior officer, and measure progress each month. In response, someone in your organization is likely to say something like: “We should apply 6 Sigma.” Well you can go about applying all that stuff (fish bone diagrams & the lot), but we believe the +5% improvement demand will get you to the same result in the end through hard work and institutional knowledge. And do not forget, you will need another improvement goal for next year.
Some might say you can skip right from Step #1 to Step #3, and we would agree—in fact, Step #3 is designed that way. But external data is always valuable to establishing improvement goals and truly defining excellence.
Do you want to benchmark and improve the productivity of your organization? Follow our simple 3-step plan.
And, as an added benefit, you might just drop another point or three to your bottom line in the process. Now have I got your attention?
Do it, and tell us what you find.