Improving productivity

To fully appreciate productivity and improve it, organisations must concentrate on more than just labour. They must also concentrate on more than internal values of productivity, such as units per man hour.

I have previously discussed the need to understand the constraints that organisations have before developing units of measure. Lest they make errors, as I have, which make productivity worse by choosing a measure which did not reflect the nature of the constraint.

Consumer’s view

Now I want to look at productivity from a consumer’s point of view. Consumer’s view productivity as the benefits they receive compared with the costs they endure or the benefits they receive compared with expectations that they have.

For consumers purchasing a product or service the cost or “effort” will include items such as time, price, difficulty of use, financing costs, purchasing ease and unwanted functions. Consumers receiving a service as an internal customer or as a customer of a government service funded by taxes will have similar components to what they regard as their cost.

Both types of consumers will have expectations of what quality of service or products they will receive. The matching or otherwise of these expectations belongs also in the cost column or perhaps in the “emotional cost” column.

The benefits column for a consumer purchasing a product or service will include wanted functions, geographical availability, range, brand image and timeliness. For consumers receiving a service as an internal customer or as a customer of a government service funded by taxes the benefits column will include clarity, consistency, timeliness, expectation management and being fit for purpose.

Simplistically, improving productivity from a consumer’s point of view is easy. Either increase the benefits or decrease their cost, or both.

As consumers we have all experienced improvements in productivity defined this way many times over the last twenty years. DVD players which sold for over $1000 now sell for less than $200 with more features. We were unable to call anyone on the telephone unless we were near one. Now we can move about freely and stay in contact, albeit for a higher cost. My electricity bill now lets me compare my usage month by month and season to season to enable me to manage my usage.

As leaders of an organisation we need to understand productivity from a consumer’s point of view. To understand what they perceive as benefits and what they perceive as cost.

To understand consumer’s view of cost and benefits, organisations can conduct focus groups and undertake quantitative analysis of the output. Many people think that these techniques are restricted in use to branding and marketing, however they are useful in understanding what people think, and how many people think it, about any topic in any environment, including internal customers.

To develop an understanding of what the organisation does to cause the level of cost to be expended by consumers, techniques which are of use include value chain analysis and process mapping.

Value chain analysis maps the flow of the development of the service or products from its creation from raw materials until final consumption. For example in the case of a product, the value chain will follow from production through warehousing, transport, distributors, secondary transport and retailing. At each stage of the chain an analysis is performed to understand what cost and benefit is delivered in the consumer’s terms.

Process mapping involves mapping of activities to produce a business outcome. Process mapping includes understanding the impact of policy, competence of the people undertaking the process and systems on delivering the business outcome.

Isolating those segments of the value chain which deliver low benefit for the cost and mapping the processes used will reveal what processes need to be deleted, re-engineered or automated to improve the benefit to cost ratio.

An example of such analysis is where a major transport and distribution company employed 50 people to provide a “gold” service to high volume customers to keep them advised on delays to their orders. The benefit to the consumers in this case was small compared with actually getting the product on time. The cost was high with 50 people being employed. The root cause was a credit process that delayed loading and delivery.

Re-engineering the credit process to remove the delay in loading and delivery whilst maintaining financial control, eliminated the need for the cost of 50 people and delivered a real benefit to the consumers of reliable, predictable delivery.

Productivity is not as simple as units per man hour or other efficiency measures. At the detailed level, it is some times difficult to determine what productivity we need to measure. Analysing productivity from a consumer’s point of view through the value chain allows organisations to have an appreciation of productivity which better reflects their reason for existence.