Your employees, your organisation’s ‘most valuable asset’, work 225 days a year after annual leave, weekends and bank holidays. However, 87 of these are used unproductively, costing the British economy £88bn annually, representing almost 10% of GDP.
Productivity is a key issue for the UK, as the significant productivity gap between the UK and its main competitors continues. Gordon Brown is not alone in the belief that boosting productivity is fundamental to increased profitability and improving the UK’s economy.
But the debate on economic and productivity performance at a national level is often at the expense of understanding and tackling productivity at the microeconomic level. And yet this is essential if business is to be competitive.
Even though many businesses recognise that existing customers are their best prospects, the majority do not focus enough on their existing workforces and processes to spur on productivity and profitability.
Proudfoot Consulting’s annual productivity study, conducted in October across seven countries (UK, US, Germany, Spain, France, Australia and South Africa), demonstrates that companies of all types, across all sectors and in all countries, are still operating at levels well below their true capacity.
The study – Missing millions: how companies mismanage their most valuable resource – is based on more than 10,000 hours of observation of people across 1,440 companies in the private sector at all responsibility levels going about their work.
It is highly likely that productivity in the public sector, where control mechanisms are weak and competition is largely non-existent, is lower.
The good news is that companies across Britain have done a relatively good job of improving productivity over the last two years with staff spending 60% of their time productively in 2003 compared to just 48% 2001.
In reality the figures are slightly skewed as this is in part a result of the significant downsizing across many sectors in the UK.
And yet there is still much work to be done. It is realistic to expect staff to be productive for 85% of the time they spend at work. Yet no country is anywhere near this. Of those surveyed, the most productive are Germany and the US, both of which are operating at levels of 63% productivity, while South Africa is the least productive at 59%.
Our research shows that the key reason for low productivity is poor management and inadequate planning. A recent project to redesign the inter/intra company accounting processes of a large aircraft systems manufacturer is a case in point.
The four major divisions buy and sell products and services to one another on a daily basis but the procedures were so complicated that mistakes were common and very costly. Staff and line management had given up trying to get things right first time and were concentrating on solving problems.
Procedures had not been carefully thought through and communicated leading staff to ‘workaround’ the few systems that were in place. As a result, mistakes crept in.
Data was re-keyed rather than imported and processes become convoluted because there were so many different ways a transaction could be handled.
In a nutshell, the internal accounting was a mess.
The situation was compounded by a lack of management information and skills training, which meant that effective procedures could not be put in place or monitored by senior staff. Management time was focused on fixing problems in the billing process rather than anticipating and solving them before they caused costly delays to the business.
By reducing processes from 23 to three, significant savings were achieved.
It also allowed the headcount to be reduced by 200.
It is a fairly common problem that individual staff members decide what is acceptable and expected of them. The result is that processes evolve to suit their personal needs rather than those of the business.
But with accounting practices so key to an organisation’s cash flow and profitability it is essential that managers who have a better and broader picture of the business are responsible for setting the rules and providing feedback.
Team leaders who are constantly fighting fires, no matter how effectively, are not controlling the business efficiently.
Standard processes are just one side of the story. Other factors that contribute to low productivity identified in the Proudfoot study include poor working morale (11%), inappropriately qualified workforces (9%) and IT-related problems (7%).
The study also highlighted a mismatch between managers’ perception of the principal causes of lost productivity and reality. Although 6% of the time spent unproductively was due to ineffective communication, managers spend almost a third of their management time focusing on this issue.
Communication is important, but executives and management need to spend more time on strategic thinking, planning, monitoring and measuring rather than on telling audiences, internally and externally, what they are doing.
Staff intuitively know when things are overly time consuming or unproductive.
As a first step to improved planning and measuring it is essential to step back, talk to staff and understand what the root causes of the problem are; for example whether it’s an inefficient process or because staff are unmotivated.
Once the underlying problem is identified and a solution implemented, it is essential to ensure that this is visible to staff.
Any effective planning process has to be broken down into its key elements.
Using white boards with visual flow charts can highlight the changes to the process and help staff understand how their measures of success relate to the success of the business.
Improved processes and better management planning helps staff appreciate how they are able to do their jobs more effectively.
As things improve, so does morale. This reduces the amount of time wasted by staff complaining or feeling demoralised as a result of uninspired management.
Does Darwin's theory apply to taxation? Colin ponders...
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Accountancy watchdog the FRC has dropped its investigation into the former chief financial officer of Tesco, nearly two years after the supermarket was engulfed in an accounting scandal
Colin imagines how Apple's logo might change in the wake of the EC's ruling over its Irish tax arrangements