Improving productivity can help businesses better manage inflation, economic slowdowns, and price competition. While large enterprises have traditionally led in productivity gains, digital tools now offer small businesses similar opportunities for improvement.
The Xero Small Business Insights Special Report 2023 revealed some interesting trends in UK industry productivity. Construction led the pack at £54.30/hour, while education and training lagged at £19.00/hour. London showed the highest regional productivity at £47.90/hour, 53% higher than the North East at £31.20/hour.
Productivity is essentially how efficiently a business converts inputs into outputs. It’s about getting more from your resources, whether that’s labour, capital, or materials.
There are three main areas of productivity to consider:
- People productivity: How efficiently labour translates into deliverables.
- Financial productivity: The return on capital investments.
- Materials productivity: How effectively materials are used to generate sales.
Productivity is a key driver of economic growth. It helps businesses to be more competitive, which in turn boosts the economy.
Productivity is also a key driver for business success. It helps companies to be more profitable, which in turn enables them to invest in new products, resources and services that will generate even higher returns.
Here are four key strategies to boost productivity:
1. Better work tools (capital)
Invest in tools that amplify your efforts, such as software that streamlines information handling or integrates various business functions. However, be mindful of common barriers to investment, such as difficulty in prioritising opportunities or assessing their value.
2. Smarter methods (innovation)
Regularly review and refine your processes. This will help you identify areas where you can improve efficiency and productivity. For example, if your sales team is spending too much time on administrative tasks, consider automating some of these processes.
Consider these steps:
- Ensure your efforts align with customer priorities
- Document your processes
- Identify bottlenecks and inefficiencies
- Redesign workflows to address issues
- Explore digital solutions to automate tasks
Automating mundane admin workflows can save significant time, improving efficiently at the same time as reducing human error.
3. Skilled workers (capabilities)
Investing in your team’s skills and knowledge is crucial for improving productivity. Well-trained employees are more efficient, make fewer mistakes, and can often innovate within their roles.
The key is to set up your employees for success through comprehensive training, clear communication, and ongoing support. Here’s how you can enhance your team’s capabilities:
- Provide clear job descriptions and thorough training
- Ensure employees can effectively use all necessary tools
- Provide ongoing learning opportunities
- Foster open communication and regular feedback
By focusing on these areas, you can build a skilled, motivated workforce that’s well-equipped to drive productivity improvements across your business. Remember, your employees are your most valuable asset – investing in their capabilities is investing in your business’s future.
4. Entrepreneurial mindset (optimisation)
An entrepreneurial mindset is crucial for driving productivity improvements in small businesses. It’s not just about starting a business, but about continuously seeking ways to optimise operations, innovate, and create value. This approach can lead to significant productivity gains and competitive advantages.
Cultivating an entrepreneurial mindset within your business involves encouraging innovation, calculated risk-taking, and a constant drive for improvement. It’s about looking at your business with fresh eyes, questioning established processes, and being open to new ideas and opportunities.
Continuously look for ways to optimise your business:
- Consider scaling up to lower marginal costs
- Explore acquisition opportunities for efficiency gains
- Specialise in profitable niches
- Optimise your supply chain
- Foster a culture of innovation
By adopting this entrepreneurial approach to productivity, you can create a dynamic, adaptable business that’s always looking for ways to improve and innovate. Remember, some of the most significant productivity gains often come from thinking outside the box and being willing to challenge the status quo.
Productivity improvement plan
A productivity improvement plan aims to boost overall business performance by making better use of resources, streamlining processes, and maximising output. Benefits often include reduced costs, increased profitability, improved quality, and enhanced employee satisfaction.
To implement these strategies, your productivity improvement plan should include:
- List potential productivity-enhancing investments
- Assess their costs and expected returns
- Implement the most promising solutions
- Document and map out work processes
- Identify and address inefficiencies
- Explore software solutions for repetitive tasks
- Align processes with customer preferences
- Provide comprehensive training and support for your team
- Regularly seek and provide feedback
- Stay alert to opportunities for scaling, specialisation, or acquisition
Remember, improving productivity is an ongoing process. Regularly examine and refine your methods, invest wisely in tools and people, and remain vigilant for inefficiencies. By doing so, you’re likely to see improvements not only in productivity but also in overall business satisfaction and profitability.
We’ve spent many years providing guidance and consultancy for businesses of all shapes and sizes. So, if you need any assistance with stepping back from your business in order to assess and improve your business’ productivity, then let’s talk.