Capturing Productivity

Whether IT or process based, improvement programs promise increased productivity. An example comes from the actual business case for a new IT program. It proposed that implementation of their software would, “save everyone in operations fifteen minutes a day”. Using the head count of the affected employee population and an average hourly rate, the promised savings were over $4.5 million a year.

Another example didn’t promise any quantifiable objectives. The stated objective was “optimization”. The proposed project would “transform” the organization, “optimizing” all its business processes. Large contracts were signed on these promises.

The important question here is what the client organization will do with increased productivity and optimization. How will they know they have “it” when they get “it”? Specifically, what line items will change by how much on the P&L statement? What can stockholders be told in black and white?

Long experience has taught Convergent Results that, unless you have a specific, actionable plan for what you’re going to do with increased productivity or optimization, the benefits will escape the organization. Will you improve customer service, eliminate backlogs, reduce overtime, increase reliability work (and therefore uptime…which is useful only if you have enough sales orders to fill the increased uptime), reduce headcount?

In reality, with no plan in place, the workforce will gain the benefit. As one client put it, “Everyone gets an additional 15 minutes a day”. And, as the proverb coined by the twentieth-century British scholar C. Northcote Parkinson says, “Work expands to fill the time available”.

Productivity is a simple calculation: output (work) divided by input (resources). When one increases productivity either output increases, input decreases, or, both. In any case, you must have specific plans on what’s going to happen, how, and when, to capture the change. And these plans must go into action immediately on implementation. Otherwise, the fruits of your effort are lost.

Convergent Results’ improvement projects always include these action plans. During our Business Analysis, we work with our client leadership to define how they want to use productivity increases and, therefore, how the benefit will be measured in their financial statements.