Imagine what your company could achieve if it were radically more productive. What sorts of business results would be possible if your employees routinely worked with superb efficiency? The sky really would be the limit.
Of course, this enticing vision may strike you more as “pie in the sky” than “the sky is the limit.” Most firms fall far short of maximum productivity, and to get anywhere close to that seems a daunting challenge indeed. Yet most businesses don’t even make the attempt. If yours were among the few to make a wholehearted effort to do so, you could gain a big advantage over your rivals—even if you don’t quite attain perfection.
Taking your productivity game up several notches is increasingly urgent as technology reduces barriers to entry in more and more sectors, and as globalization further multiplies the number of rival firms. With the business battle intensifying, doing more with less is the price of admission. This may protect or improve your margins, but it won’t give you a competitive advantage. That requires doing way more with less.
Fortunately, you don’t have to start from scratch. Productivity specialists have identified the key barriers you’ll run into and the key drivers you can harness to break away from the pack. You’re likely to be surprised by some of the factors that matter the most. And you’re likely to be pleased at how much low-hanging fruit exists within your firm—including the gains to be had simply by teaching your staff better ways to deal with email, organize files or run a meeting.
What’s holding you back
Why isn’t your business more efficient to begin with? Asking yourself this big question can gird you for the challenges you’ll face as you try to improve your company’s ROI. One likely answer: people are most comfortable with the status quo. After all, if your staff preferred change, wouldn’t they already have fixed whatever’s broken in your business?
Dave Kawula, CEO of TriCon Technical Services Inc., a Calgary-based IT consultancy, discovered this when his firm, spurred by the recession, made sweeping changes to its business processes in order to boost productivity. As part of this process, it adopted performance-based compensation and stopped accepting employees’ excuses for not meeting the minimum mark. “The mistake we made was trying to change people, but some weren’t willing to change,” says Kawula. “Over the past two years, we’ve replaced upwards of 40% of our staff.” Kawula says this allowed TriCon to grow by 25% to 35% per year through the slump, even while reducing head-office staff by 25%.
Another hurdle you’re likely to run into is employees who, while open to change, fear that as they become more efficient at their current tasks you’ll just pile more on their plates. Veteran chief operating officer Cameron Herold, president of BackPocket COO, says this fear is often well founded—”And it’s a built-in demotivator.” The trouble, says the Vancouver-based business coach and mentor, is that North American businesses have traditionally distrusted employees and feared they’ll slack off. Herold favours the opposite approach, a results-only environment: “If you allowed people to leave when they got their tasks done, they’d figure out how to do that.”
Jason Jennings, Tiburon, Calif.-based author of Less is More, a book about the world’s 10 most productive companies, highlights other disincentives for employees to get with the productivity program. One is the fear that it’s a precursor to layoffs. Jennings insists productivity isn’t about slashing jobs, and points to a remarkable fact about the firms he profiled: “Not one of them has had a layoff in its history.” And all of them have shared productivity gains with their staff—in contrast to the general economic trend since the 1980s. “If the only people who benefit from the company doing well are the shareholders, then employees become completely disconnected,” says Jennings. “Inequality of income is the No. 1 destroyer of productivity.”
Jennings began identifying productivity leaders by having his research team crunch data on 44,000 firms globally. The team ranked each on five equal metrics: revenue per employee, operating income per employee, return on invested assets, cash flow and return on capital. Next, the researchers culled the list to reach the world’s 10 most productive companies, which included such familiar names as IKEA, Harley-Davidson and Southwest Airlines. Finally, Jennings analyzed what these firms had in common. “The big discovery about productivity,” he says, “was that the only thing that counts is the soft’ stuff—anything to do with people.”
Jennings says the trouble with “hard” stuff, such as switching to new materials, controlling costs or eliminating waste in your supply chain, is that it’s easy for rivals to copy. It’s the soft stuff, such as an achievement-focused culture, a commitment to the growth of your people and a highly engaged workforce, that’s tough to match. In such a culture, it’s routine for staff to spot and try to eliminate inefficiencies.
Even if a high-performance culture is the ultimate source of competitive advantage, as Jennings claims, it’s not the be-all and end-all for productivity. Your business can generate impressive gains by adopting one or more of the following strategies. As well as increasing profits, these strategies will free up more of your employees’ time to focus on tasks that will truly differentiate your company from the competition.
Teach “getting things done”
Now, all you have to do is answer the question: where should I start? Productivity specialist Kerry Gleeson offers an unexpected answer. The president of the Boca Raton, Fla.-based Institute for Business Technology and author of The Personal Efficiency Program concludes from 30 years of work in this area that the biggest gains come from teaching staff personal skills for the “getting things done” part of their jobs. These are the individual tasks that fill much of the day, such as managing their time, handling documents, using search engines and spreadsheets, dealing with email and attending meetings. “At university or college, they don’t teach you how to work, so you develop your own way of doing things,” says Gleeson. Most employees have no idea that there are far more efficient ways to handle such tasks.
Gleeson advocates applying “management by walking around” to spread best practices in this area: “If someone has a huge stack of papers on her desk and you ask for one and she struggles to find it, tell her that Joe down the hall has created a fantastic colour-coded file system she should look into.” Asking questions such as “Are you running into problems?” or “Why are you having to stay until 8 o’clock?” creates an opening to share ideas for how to get things done—and to identify resources or changes in processes that will help your staff do their jobs better. And, urges Gleeson, if you see someone spending time organizing her files so she can operate more efficiently, you should applaud, not ask “Why are you doing that instead of working?”
Jim Estill, a veteran entrepreneur who blogs about “time leadership for CEOs,” says his experience has shown how much low-hanging fruit exists in teaching people better ways to handle individual tasks. Asked about the biggest barriers to productivity, the first two Estill cites are mismanaged email and meetings. As the founder and longtime CEO of SYNNEX Canada, a Guelph, Ont.-based computer distributor, Estill made a big impact by coaching staff on matters such as email etiquette: cc only if necessary, end long exchanges by picking up the phone to resolve the matter, don’t routinely mark messages as urgent and set up a good folder system to clear your inbox.
Staff education can also help stop meetings from being such productivity killers. Estill’s pointers include keeping the attendee list to a minimum, having the organizer take 15 or 20 minutes to prepare properly, starting on the dot rather than wasting time waiting for latecomers and keeping meetings as short as possible. “We once bought a failed company that was meeting-mad,” he says. “I mandated no meetings of more than one hour unless I approved them, because you rarely need to meet for that long.”
Estill is also keen on “to-do list management.” Almost every day, he reviewed a direct report’s to-do list, deleting tasks that didn’t fit a key company priority and, when possible, offering help to execute the remainder. And Estill shared his own to-do list with managers, explaining how it fit his priorities. “People worked much better once they knew what my goals were,” he says.
Routinize the dull stuff
Drudge work—boring but essential processes such as handling purchase orders, client-service requests, invoicing and accounts receivable—is another area ripe for gains. To spot inefficiencies, “Staple yourself to a customer order and see what happens as it moves through your company,” suggests Becky Reuber, a strategic management professor at the Rotman School of Management in Toronto. “Whose hands touch it? Whose desk does it get stuck on? This makes it easier to spot bottlenecks.”
The lean operating processes pioneered by Toyota, which some service firms have begun to adopt, are powerful tools for handling routine tasks far more efficiently. As reported in October (see “The Service Company Diet” at PROFITguide.com/lean), Nurse Next Door applied lean methods to slim its head-office staff by a third through attrition while quadrupling revenue. The Vancouver-based franchisor of home health-care services for seniors did so by systematically analyzing which steps it could drop from repetitive processes. For example, it slashed the time spent biweekly processing billings and payroll from 686 minutes to 240.
You may wish to bring in an efficiency expert to help with this sort of thing. The many incremental changes suggested—such as minimizing wasted steps by moving a shared printer closest to whomever prints the most—will add up to sizable gains.
The idea, says Mike Hulbert, isn’t to process-map your entire business—just the boring bits. Hulbert, a former CEO who is now principal at Kendall Advisors LLC, a New York-based productivity consultancy, advises explaining it this way to your staff: “We want to spend as little time as possible on the routine things we do in our business, allowing us to focus more on growth and making customers happy.”
Tap into “cloud power”
Big companies, although prone to bureaucracy, are generally more productive than SMEs if measured by revenue per employee, says Hulbert. One longtime source of this gap has been inferior IT infrastructure and ERP systems at smaller firms. Even now, says Hulbert, it’s common to see SMEs managing tasks such as order management, payables and receivables using suboptimal tools such as off-the-shelf accounting software. But there’s no longer a good excuse for this. With the explosion of cloud-based software, SMEs now have access to a wide array of sophisticated, affordable applications that can yield striking productivity gains.
Scott Billows, president of BelMar Consulting Group, says his firm employed one such application to help grow its revenue by more than 30% in each of 2009 and 2010 while keeping its staff count flat at 10. The Vancouver-based CRM consultancy used Salesforce.com, not just for the usual purpose of managing sales but also to transform its handling of customer relationships “in the baton pass’ from the sales team to our service-delivery engine.”
BelMar used to manage this process manually. The firm crammed up to 20 paper documents, including printouts of electronic files, into a bulging file folder for each client, and tried to track 30 or 40 client-service projects at once on a giant whiteboard, updated weekly. A single staffer fielded all client calls reporting a problem, assigning each to a service person who would record his progress in resolving it on scraps of paper, in his calendar—or in his head. Clients often called back for assurances that someone was working on their issue.
These days, clients can directly log a case on BelMar’s website, or call and have the receptionist log it. Salesforce.com auto-emails each client with the status of its case, who’s working on it and how to reach that person. Billows can easily see on his computer each case’s status and use filters to spot problems, including projects at risk—”such as if we’re 80% of the way to the due date but have done only 30% of the work.”
Billows says the new system has turned customer service into a competitive advantage for BelMar, whose rivals offer nothing comparable: “Our customers say, We love this. We don’t have to phone you because we know something is being done.'” Billows says superior customer service has yielded a very low client-attrition rate, even though BelMar’s clients aren’t locked into any long-term service agreements.
Rebalance your workforce
Hulbert identifies other areas in which SMEs can score big productivity gains by addressing challenges particular to businesses of their size. It’s common for a fast-growing SME to expand from, say, 50 to 100 employees within a short period, but rare for a big company to double its workforce that quickly. The problem for the SME, says Hulbert, is that it’s tricky to forecast how each department’s workload will grow with sales, leading to overstaffing in one area and understaffing in another.
The resulting imbalances can create major bottlenecks. Hulbert advises reviewing your workflow at least annually to spot these. One warning sign: everyone in a department is putting in a lot of overtime. To fix imbalances, you may have to reallocate staff, invest in a specific type of IT or hire people with skills needed to end the bottlenecks.
Hulbert suggests an opportunity to fix another productivity killer especially acute at SMEs: staff who wear too many hats. These people feel productive because they’re so busy. Yet, as they jump repeatedly from, say, HR to finance to software development to fight fires, this lack of focus impairs their efficiency. That’s where SMEs should emulate big firms by adopting a proper division of labour—”Not a 500-page book on how to do a given job, but a distillation of the key tasks and how to measure whether you’re achieving what you expect to,” says Hulbert.
Craft a mega-workback sked
Herold says the great majority of SMEs come up short on productivity because they don’t clarify their revenue, client and profit goals to their staff: “It’s like playing hockey in the dark: Let’s go out and skate hard and shoot.’ But where’s the goal?’ Don’t worry about it—just keep shooting.'” This means employees can work hard and efficiently—and even complete their tasks early—yet be unproductive because they haven’t focused on what matters most.
To avoid this, CEOs need to turn the vision inside their heads of what the business will look like in three years into a “painted picture” easy for every employee to grasp. Herold says this picture must be highly visual, such as a giant flow chart or a storyboard like one used to map out a TV commercial. It should include goals for revenue, profit, customer satisfaction and employee satisfaction—with the last two measured by a “net promoter score,” a methodology devised by Fred Reichheld, a consultant at Boston-based management consultancy Bain & Co. You can measure your NPS for customer satisfaction by asking clients how likely it is—on a scale from 0 to 10, with 10 being “extremely likely”—that they’d recommend your firm to a friend or colleague. From the “promoters,” who scored you a 9 or 10, you’d subtract the “detractors,” who scored you at 0 to 6.
Next, advises Herold, apply a technique he learned at College Pro Painters and has taught such successful entrepreneurial firms as Nurse Next Door, 1-800-GOT-JUNK? and I Love Rewards: work backward from your goals to detailed plans to achieve them. “At College Pro, we’d start with a profit goal, then work backward to the revenue needed to achieve that, the number of jobs we’d have to do, how many people we’d need to hire, how many sales leads we’d need, where we’d get the leads and so on,” says Herold. From there, the team would write a series of workback plans, starting three years out, then one year, one quarter and one month—with each goal broken into bite-sized pieces, right down to individual jobs.
If one of your goals were to raise your customer satisfaction NPS from 30 to 80 by 2014, you’d sit down with staff to discuss what you’ll need to do in marketing, finance, operations, PR and HR to achieve that. You’d then identify the most crucial projects, breaking these down into quarterly goals for each employee. “People will get things done only if there’s a clear plan in place to get them done,” says Herold.
Rally behind a cause
The most important thing the productivity all-stars got right, says Jennings, was having an inspiring reason for existing, a noble cause that staff adopted as their own. IKEA’s cause, “Furniture for the many,” fuels a relentless drive to offer regular folks ever greater value for their money and a steadfast refusal to take the otherwise obvious step of expanding into upscale furniture. Jennings says that IKEA’s cause is the fundamental source of the chasm between the firm’s US$2 million revenue per employee and the perhaps US$300,000 at a typical furniture retailer.
“It’s not what you’re doing that matters,” says Jennings. “It’s why.” Imagine the difference in productivity if a company, rather than state matter-of-factly that “We make carbon-monoxide detectors,” were to define its purpose as “We’re in the business of saving lives.” Employees aren’t likely to dilly-dally if lives are at stake.
Some common themes emerge when people who’ve analyzed how to become a productivity paragon suggest the best ways to do so. One is that no single tactic will transform things. Instead, you must employ a variety of approaches that in combination will induce a quantum leap. Another theme is that incentives matter. Your staff could become your best source of ideas for how to do things better—but not if you reward your most productive people by piling ever more work on them, and not if the owners hog all the profits from any productivity gains.
A final theme is that raising your game dramatically takes a sustained commitment. “Customers and products are always changing, so you need to keep revisiting this,” says Estill. “You don’t do it for a while and then stop doing it.”