October 23, 2017


















Article 2.2

IMPROVING PRODUCTIVITY; PRIORITY AREAS AND LASTING RESULTS

"Productivity" has multiple meanings. An economist would like to see an improvement in the output of a system divided by the input of a system; a financial example would be the ratio of the operating profit of a firm divided by it's total assets. A leader might be biased towards people productivity where two or more folks get passionately persistent in a coordinated and directed way. A customer might see productivity as great service!

Almost any program should increase some type of productivity within a firm, unless the organization's resistance to change eventually rejects the solution (homeostasis). How do we choose the best productivity improvement opportunities and implement them in a way that insures lasting benefit?

The biggest productivity improvements can come from leadership and strategic changes. Good leaders who replace bad ones can achieve, for example, dramatic personnel productivity in short order with the same team players. Turnaround artists, besides being new leaders, must be good at strategic refocusing and discipline. They often: identify the 20% of the core customers who generate 120%+ of the operating profit; serve them better; and then retain and penetrate them at a greater rate. They may also identify the customers who cost profits, and invite them to do business on a win/win basis or leave to paralyze a competitor. By pruning customers and supporting assets and employees who do not strategically fit, resources are freed to flow to the best customers to allow them to bloom even more. A new broom can sweep clean in multiple ways.

Department and functional area productivity can improve with systems re-engineering. By - streamlining systems; making sure that they flow seamlessly across department boundaries; goof-proofing them; making sure that they are user-friendly to customers first and employees second; assigning systems managers to and performance standards for them; and finally automating them - big productivity gains are possible.

Individual performance productivity will improve if: we pay enough to get enough of the right aptitude and horsepower in the job; provide necessary training to develop necessary skills; provide good tools and lots of measurable feedback; and have a match between the employees' written definition of "a job well done" and that of the managers'. When these two groups define the job separately on paper and compare the overlap is supposedly only about 30%.

A checklist for productivity opportunities from most important to the least, which also serves as an implementation guide for lasting benefit, is my "kinetic-chain, or seven steps for profit power" below.

To explain this model, first appreciate that good financial or productivity numbers are symptoms of underlying causes. If a firm is managed by the numbers today, it is quickly harvested. The most important underlying cause is great management/leadership (#1). Out of their minds comes a focused, articulated strategy (#2) that will allow the firm to achieve sustainable competitive and profitable advantages over competition. Great strategy implemented by poor generals, we might note, does not work.

From strategy all of the necessary and best systems can be designed (#3). Great people must be step #4, because they can not be attracted to and kept productive at a firm if there is poor management; ineffective strategy; or poor systems that victimize the employees instead of making them consistently exceptional.

Given steps #1-4, education (#5) will result in skill improvement. Only skilled talent can appreciate good assets/tools (#6); world class tools don't do much for monkeys. Incentives (#7) may work if employees are already receiving 110-115% of the going market wage for their particular job. We must pay good wages upfront to attract and keep achievers who will respond to education to be able to leverage the assets, because it is a seller's market for achievers. Marginal, desperate, or opportunistic, short-term people are the ones who are apt to work for below average wages plus at-risk incentive pay.

The magnitude of productivity potential is the most with leadership improvement (#1) and decreases to incentives (#7), because the success of a change within any step is dependent upon the prerequisites below it. If any prerequisite step is weak or all of the steps are not harmoniously consistent with the specific change, then there will be no lasting productivity benefit; homeostasis will win.

To use the model as an implementation checklist, assume we want to introduce a new incentive plan (step #7) for tired-blood selling. Who will be - leading the targeted employees by example and challenging them and helping them to be all that they can. A good incentive plan can't overcome poorleadership (#1). If the strategy (#2) is poor or the incentive plan is not consistent with a good strategy, poor results will happen after the initial two to six weeks of pay-change anxiety and hope wear off.

Poor systems (#3) will demotivate people before and after the incentive change. Some people (#4) are not truly, sustainably motivated by money anyway. Like heaven, everybody wants it, but few want to die for it. If steps #1-4 exist, but people don't know how to do what they must to earn more pay (ed. #5) or they are lacking the tools (#6) to do the job, then there will be no results either.

CONCLUSIONS

We can post productivity numbers and set productivity goals for the troops, and maybe people will try harder for a few weeks before dropping back to a standard pace and set of practices. We must instead change one or more of the seven cause areas in the model above and modify the rest to make sure that they are all harmoniously aligned and mutually reinforcing; otherwise, homeostasis will win, and we must depend on a good economy, fading competitors, or luck to make us look better.

Merrifield Consulting Group, Inc., Article 2.2