Saturday, August 9, 2014

How often do you think about Productivity?

Published in TISA July 2014

While operating your business, you think about margins, ROI, cost of capital/ borrowings, payables and receivables, “cost” in multiple terms but how often do you think of productivity? Maybe not as often as you should! Productivity lies at the core of any business; it can be a driver or an impediment, a source of curtailing waste or increasing it thus hitting your costs and margins. Productivity is simply a measure of output based on utilization of per unit input. It is the calculation of how quickly and efficiently can a system generate outputs. This can be based on man hours utilized or per kg of material used or even the capacity utilization of a machine.
For example: Tailor A is able to make a standard pre-defined design and size of school shirt in 60 minutes using a machine X. Tailor B is able to do the same in 55 minutes. The productivity of the second tailor is higher. Thus, for every 12 shirts, Tailor B can make one more.
This is no doubt a very simplified example. Businesses are more complex and there are too many variables but as long as our finger is on the “productivity” pulse, we can achieve some serious benefits, something that we seldom calculate in quantifiable terms.

What affects our productivity?
There are a large number of factors involved in enhancing or diminishing productivity. The following diagram is a list of few such factors.

Productivity is not standardized
As shown in the list above, there are many factors at play. Every individual is different. Thus, a fixed productivity formula may not work for all. There are people who can perform better at different parts of the day due to their biological composition. Professions requiring fixed set of activities in a time frame can be easily quantified but creative jobs are more about the final value addition. For example: a worker in a manufacturing company, his job role and salary can be used to come up with a reasonable benchmark to ascertain productivity. Work method study is a concept that many business owners can put in place to measure efficiency. However, a lawyer or an author/ script writer, sales person, or even a doctor’s productivity cannot be measured in a linear fashion. But there are some factors which are generic and applicable to all human beings,
For an individual, quality of sleep, diet and nourishment and daily exercise regimen plays a fundamental role in affecting productivity. The time to recharge and restart activities is important too. It is a misconception that prevails about how many hours are put into a job – rather we should be concerned about how much is the output. Just by sitting on a desk for ten hours a day – your accountant or logistics person is not achieving more. Is the job done perfectly? Have the material been dispatched on time as per the customer’s requirement? Is the quality intact? Did it require any rework? Did it help in the next process as an input? How much cost was saved?  
Loss of productivity is money out of your pocket straight and simple! And it definitely hits your bottom-line. Sometimes it is easy to quantify and in other cases not. It is upto your ingenuity to make estimations and calculate productivity in terms of time or money thus identifying impact – positive or negative. Think about it.

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