Seems like a slam-dunk, doesn’t it?
But a 2016 survey of more than 1,500 Canadian entrepreneurs by the Business Development Bank of Canada (BDC) showed that less than half of Canada’s small and medium-sized enterprises (SMEs) measure their productivity. And only a fraction adopt formal processes designed to boost productivity.
“Measuring and improving productivity generates tangible benefits,” writes the BDC in its publication, Productivity Matters: Benchmarking Your Company to Up Your Game. “The positive impacts will extend beyond the company … to have a direct positive impact on the national economy as a whole.”
The BDC has collaborated with Statistics Canada to develop a productivity benchmarking tool that allows Canadian companies to see a general overview of their productivity. It’s a free online tool the BDC says is easy to use.
The tool allows you to see metrics on five specific indicators that reveal your productivity health and to compare your performance with industry peers. The five indicators are:
- Overall level of productivity;
- Revenue per employee;
- Profit per employee;
- Labour productivity;
- Capital productivity.
Why do you need to improve productivity?
Productivity is a performance indicator that, in its simplest form, is a calculation of the ratio between the added value in dollars and the labour hours required to produce that value.
When your business is able to produce goods and services more efficiently and increase productivity, it will lead to a stronger competitive position, increased revenues and profits, higher quality goods and services, and it will open the door to new business opportunities.
So here are six key ways you can improve productivity:
Measuring productivity is the first step to improving productivity. You might think you’re as productive as possible, but measuring often reveals opportunities for improvement you didn’t know were there.
To use BDC’s new productivity measurement tool, which was developed using the tax data from more than 600,000 companies across nearly all business sectors, you’ll need to enter information from your federal business income tax return. This serves two purposes: it’s more factual than estimates and it allows an oranges-to-oranges comparison with competitors in your industry.
Training and development budgets are often the first to be trimmed during an economic downturn or in simple tough times.
However, from a productivity perspective, that’s counterproductive. When times are tough is precisely when you want to motivate and equip your people to perform with optimum efficiency.
A number of studies conclude that training – general and specific – results in increased productivity, and training ranks higher than investment in new equipment.
Trimming waste may seem an obvious way to improve productivity.
Overproduction, waiting, transport, inefficient operations, holding more inventory than you can sell in a single season, unnecessary motion in your processes and systems, poor quality and poor design are all areas prone to wastage.
Once you start measuring your productivity, you will soon see where you have an opportunity to trim and tighten up.
Improve the processes for operations management.
You can choose to pursue a continuous improvement approach such as Lean certification, hire a consultant to help you re-engineer, or establish an internal team to examine and recommend process improvements for all of your operations.
Extend the continuous improvement approach to your suite of products and services.
Can you improve your current offerings?
What new products or services can you develop to introduce to the market?
The investments that make some of the biggest impacts on productivity are those in information and communications technology.
In the last three decades, the BDC reminds us, Canadian companies have consistently invested less in information and communication technology than their counterparts in the U.S. Lack of technological currency will leave a company lagging well behind its competitors.
And according to the BDC, if we’re going to improve our lagging productivity position compared to the U.S., we have some work to do.
Who doesn’t dream of and aim for more profits? Pay attention to productivity and reap the benefits.
Between them, Boni and John Wagner-Stafford have five decades of experience as entrepreneurs and/or providing consulting services to other small businesses across Canada. Boni and Joni are the authors of Rock Your Business: 26 Essential Lessons to Plan, Run, and Grow Your New Business From the Ground Up.