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Productivity – Why Should We Care?

By Richard Elmitt, Sustainable Scale Up Cluster Operations & Productivity Lead

We hear plenty about productivity in the media, usually in the context of the UK’s relatively poor productivity record in comparison to other nations. But do we really understand what it means? If we don’t, then we can’t really measure it, which means we won’t know whether we can improve it. So, going back to basics, the Cambridge dictionary defines productivity as “the rate at which a company or country makes goods, usually judged in connection with the number of people and the amount of materials necessary to product the goods.”

Taking this definition, we can measure the amount of labour and inputs/materials required to make our products, although its not quite as simple as it may look when we consider direct costs versus overhead costs. Do we only include factory floor team members in our labour cost of production? Do we include non-productive labour, such as cleaning or changeovers? Or do we add in labour costs of staff in sales and marketing, HR, finance, administration, etc which might be viewed as overhead costs? Depending on how we define labour, our productivity rate will be different, as will the margins on our product lines.

Input/material costs are similarly nuanced and will need to be defined in order for us to understand our productivity rate.

What is clear though, is that once we have defined what we measure and how we measure it, we are well on the way to identifying where improvements can be made. Some measures may need to be tracked at different frequencies such as hourly, daily, weekly, monthly. Taking the long view is also beneficial to see what trends emerge and need to be tackled. The adage what gets measured gets managed is true and measuring is the first step along the productivity improvement journey.

If you want to understand more about productivity, what, how and when to measure key factors, then join us at our Shape Up to Scale Up conference in February.

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