Monday, May 7, 2012

Improving Productivity – A CEO’s most pressing issue!

Every day we read articles about the declining productivity of the nation.  This decline in productivity has been occurring over the last 10 years. National productivity is only a reflection of the declining productivity of individual businesses and government. So, improving productivity needs to be a key focus for Australia’s private and public sector leaders.

Three reputable organisations:

          -Grattan Institute
        -Australian School of Business – University of NSW
·      -Telstra Productivity Indicator – 2012
have recently conducted surveys and interviews with thousands of Australian employees and senior managers on productivity.

They define productivity for service industries as the efficiency with which inputs are converted to outputs. This means revenue charged for services divided by cost of labour.

The Australian School of Business Report suggests 18 performance measures that provide a High Performing Workplaces (HPW) index score. These can be used to identify High Performing Workplaces (HPWs) and Low Performing Workplaces (LPWs).  As you might expect HPWs are more productive than LPW.

Some interesting findings:

LPWs have an average profit margin of 5.44% whilst HPWs is 15.63%

The profit margin difference is large and averages $8.8m per organisation or $40,051 per full time employee

HPWs are better at achieving their stated financial targets than LPWs by 34%

HPWs outperform LPWs in the following areas:
·         Innovation
·         Better employee experiences
·         Higher levels of fairness
·         Leadership capabilities
·         Customer service and customer experiences

The culture in HPWs includes shared values and beliefs where:
·         People welcome and seek to introduce change and innovation
·         Leaders care for their employees and foster collaboration
·         There is ambition to deliver results and focus on achieving goals

The reports underpin how critical it is to measure productivity improvement.
Productivity Leaders use KPI indicators or other metrics to measure productivity and reported productivity gains.
Productivity Followers do not use measurements and did not report productivity gains.

The Telstra report identified the three most important business issues over the next 12 months as being:
  1.          Improving customer service experience
  2.          Creating an engaged workforce
  3.          Improving productivity
If you would like more information or a preliminary discussion on how you can improve the productivity, engagement and alignment of your workforce just give me a call.

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