Australia’s productivity has slipped to its second lowest level in 15 years, according to a report from PricewaterhouseCoopers. Productivity is not the responsibility of workers – it’s up to managers.
Productivity is now the biggest challenge for Australian managers. What steps do they need to take to lift it?
There are some obvious things they can do. Running better meetings, creating more targeted reporting lines, making sure there is proper follow through and delegating better are a good start. But companies first need to think strategically. They also need to bring in active management methods and systems to ensure productivity is running smoothly. The rest would follow.
Still, productivity is hard because it means relentless focus. It requires companies to do things they normally wouldn’t do. Like, for example, using lean management tools.
Kevin Dwyer, who runs the management consultancy the Change Factory, recommends companies look at these tools, all easily available and used by companies everywhere from Toyota to Motorola. These include concepts like error and mistake proofing, lean visioning, and lean Six Sigma. Workers and managers come together to work through them and identify trouble spots and how to improve them.
This allows them to create tighter reporting lines, unclog the system so there is proper follow through and work out whether they need so many meetings, or at least improve the ones they have to ensure they actually deliver something. Experts say you get better meetings when you go in with an outcome in mind that is understood by everyone involved, you plan it in advance, summarise at the end and suggest follow ups and next actions, and always confirm the meeting the day before. Also, look at whether the meeting is even necessary. If a phone call would suffice, go with that instead.
While these tools have been used in the manufacturing sector, they could apply anywhere.
“They are transferrable out of manufacturing,” Dwyer says. “You can apply them to financial institutions, hospitals, consulting firms and media firms. It’s surprising how few organisations have used these tools over the last 20 to 30 years.”
Dwyer says companies could also boost productivity by choosing teams more carefully. Teams need to be diverse because they take in different ideas that help identify productivity roadblocks.
“Quite often teams are built in the image of the boss and that is a killer of productivity,” he says.
“You really want people from diverse backgrounds challenging each other. Looking at things in different ways and perspectives adds value. Too much sameness in the team means you always run the risk of thinking the same way, never having original ideas and not tackling problems that are undermining productivity.”
He says companies need to do better with delegating. “With too many organisations, it is hierarchical with few people wanting to take authority for making decisions. They’re always looking upwards to get approval,” he says.
Even when things are delegated, the rules are often unclear.
“Even if people have authority to spend $100,000 of revenue or approve $50,000 of capital without having to talk to anybody, an application for $30,000 might land on their desk and they’ll go and ask for permission and that permission will take two weeks to get,” he says.
“Companies need to delegate all the way through. You would want to ensure you have good experienced people being able to take that authority and make the decisions and have the competency to execute it.”
Too many companies have cut back support staff, he says, and that is hurting productivity. Good support staff might not generate revenue but they save costs by reducing the amount of wasted time. In a 60-hour working week, for example, they might save 10 hours a week, or two hours a day. That amounts to a 17% increase in productivity. Unfortunately, many companies don’t see it that way and focus instead on the costs. As a result, everyone is taking on more work that is not relevant to their role and that is unproductive.
“What I’m finding now is that senior managers are doing what the manager should be doing, managers are doing what the supervisors are doing, supervisors are doing what the team leaders are doing and everything gets cascaded down a level. People should do in their role what’s appropriate for the level they’re being paid,” Dwyer says.
Tim McLean, chief executive officer of lean manufacturing and project management company TXM Lean Solutions which works as a consultancy to the manufacturing industry says the first thing companies should do is work out their objectives. This then has to be communicated down the line.
“Just to say I have to improve productivity is too vague,” McLean says. “You need to decide what you want to improve, by how much and by when. Then as you get into it, you will have something you can refer back to. Everyone working on the project then understands why they are doing it, and what they are doing, what the benefits are and why it’s necessary.”
“It’s far better to take the management team and say we need to increase productivity. What exactly does that mean? It means we have to increase the output on this product line by X. We have to reduce our labour costs by Y and the reason we have to do that is because our competitor is attacking this market share. You really need to have a clear idea of what you want to achieve.”
He says the second step is to then look at the service or product in terms of the value stream, that is to say, all the steps that are taken to deliver it to the customer.
“In a manufacturing sense that would be a product line, so you look at all the steps you take from raw materials to finished goods to get that product to the customer. In the service industry, it might be a particular service and you look at all the steps involved in delivering that service.”
It’s at that point, he says, where the company starts looking at issues like organising better meetings, streamlining reporting lines, making sure there is total follow through and accountability and delegation.
The important point, however, is that this needs to be done with the value stream, not individual departments. That means making sure, for example, there are clear reporting lines in the process to ensure the customer gets what they want. Those reporting lines might come from all over the organisation. It requires meetings to be focused on the process itself which means they could involve people from different departments.
This is a radical departure for most organisations that tackle their operations in terms of vertical silos, or departments. It’s also very much the approach that companies like Toyota and Motorola have taken. Their productivity work focuses around value streams, what it takes to give the customers the goods that they want.
McLean says companies should set themselves productivity targets of no more than six months. “You might have a high level three year vision but in terms of practical implementation, you only set targets and plan for six months so you bite off what you can chew rather than trying to set a long-term vision where everyone will lose focus along the way.
“Your strategy might be long-term but your tactics need to be shorter-term.”
David Hand, the chief executive office of Newport Consulting and founder of the Productivity Hub, says companies need to develop systems that change behaviour to drive productivity. He compares it to Australian safety standards. In recent years, safety at Australian companies has improved beyond all measure because companies brought in systems that changed behaviour.
“These days, you don’t wait for someone to die because he wasn’t wearing a seat belt,” Hand says. “Everyone has to wear a seat belt and we will fine you, sack you and discipline you if you don’t. What Australian companies did was manage the behaviour of wearing a seat belt. You do exactly the same on the business side.”
So if for example a truck driver runs out of petrol and comes up with excuses – it was a longer route, I had to take a new truck – the company brings in a system where every truck has to be filled with petrol when it’s brought back. This is different from hauling the truck driver over the coals when things go wrong, something that Hand describes as the “blame culture”.
“The blame culture is one of the great killers of productivity in our society because managers work hard to ensure the blame does not end up on their desk and that’s where a lot of energy goes. What also happens is that companies water down their KPIs so that everyone hits them. So the whole company has KPIs, it just doesn’t make any money.”
“What we need to do instead is change the process so that there won’t be human error.”
This also requires be someone monitoring that this happens.
Similarly, when work goes through slow periods and when there is hold up in production, when customers are left waiting, there needs to be a system that monitors it and tackles it straight away.
“An active management system is going and looking at things and looking at indicators during the time when the work is being done. It can be mid-month, or mid-shift. You’re looking at things that enable you to take action on problems that make you unproductive. The alternative is waiting for the crisis to come busting in your door demanding attention,” he says.
An active management system develops more streamlined reporting lines. It creates accountability and follow through. And it also ensures that everyone knows what they’re doing, and that people have sufficient authority to delegate.
It means not only bringing in company-wide KPIs to ensure productivity. It also means having the right metrics. “You can look at your overtime bill at the end of each month. But if you do it each week or every day it means you can manage it daily or weekly rather than wait until the end of the month. You will then be able to see that we are working too many over-time hours because you’re looking at it more frequently,” he says.
“A company doing that will tend to have lower overtime because they will manage it more effectively. That will occur at any level, through an active management method rather than simply waiting for something to hit your desk and hit you in the face.”
Consultant Joel Barolsky says productivity comes down to three elements in every company: culture, leadership and structure.
“Organisations that have high performing productivity cultures are hardwired into how they think and behave in a more sustainable and authentic way for driving productivity. Organisations need to create a value set for high performance and effectiveness and improvement,” Braolsky says.
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
