The Basics

What are Real Productivity Gains?

Real productivity gains are the net benefits that your organization receives by doing work more effectively within the same budget, same staff allocation and same timeframes. These benefits can take the form of:

  • Increased revenue
  • Higher volumes of outputs
  • Bigger profit margins
  • Greater customer satisfaction
  • Better employee retention rates, and
  • Higher quality outcomes

Take, for example, a manufacturing plant that produces 1,600 machine parts per day at a daily cost of $5,600 for 12 staff, equipment, materials, facilities, etc. If that plant were to incorporate business processes and work practices that allow staff to work 14% more effectively, the company could be producing 1,824 machine parts per day with the same overhead costs. This increased output (224 machine parts) would provide greater revenue for the company without requiring additional budget dollars, staff members or time; which means that the additional machine parts (and the revenue that they generate) represent real productivity gains for the organization.

Similarly, an organization can achieve real productivity gains if its account management team is able to use more effective sales approaches to deliver an 8% increase in closed sales each month (using the same team members working the same hours). In this example, the organization is not expending any more budget dollars or funding more resources to do the work; it is simply finding ways to have staff do their jobs more effectively, which translates directly into higher business value outcomes.

Real productivity gains do not always appear as additional dollars coming into the organization. A company that puts in place employee loyalty programs to reward staff for their ongoing service can achieve real productivity gains by minimizing the overhead costs of employee turnover, as well as retaining the invaluable corporate knowledge of those long-term employees.

Equally, an organization that provides its customers with better services and higher quality products can receive real productivity gains in the form of customer retention rates, saving the significant costs of winning new clients.

But these definitions are far too simple….

What if the “improved business processes” in the manufacturing plant were achieved by reducing the number of quality checks in the production line? Or the “more effective sales approaches” involved withholding details about known issues until after the sale was completed? In both cases, the organization could lose customers, revenue and market credibility – and face increased overheads in rework, customer management, opportunity costs and public relations in the long term.

And what if the same employee loyalty program that rewards ongoing service also encourages ineffective (or dissatisfied) employees to stay with the organization much longer than they would have otherwise?

In effect, these circumstances are likely to result in long-term productivity (and revenue) losses for the organization.

So the true goal for organizations is in finding ways to generate real productivity gains that deliver both short-term benefits and long-term sustainability. The discussion forums on this site explore how organizations can realistically achieve this goal – and how to overcome the likely hurdles that they will face in the process. And the productivity resources section provides a hand-picked list of industry books, web sites and other information sources that can provide more detailed guidance on the best way to achieve real productivity gains in your organization.

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