Productivity is all about strong economies, thriving businesses, and the smart moves of capable staff. If businesses were more efficient, we’d see fewer failures, more jobs, and improved incomes for everyone involved.
In New Zealand, as per The Xero Small Business Insights Special Report, Small Business Productivity: Industry and Regional Trends 2023, Kiwi business productivity took a hit of 6.1% in 2023.
Unfortunately, not all businesses reach peak productivity. It’s tough to step back from the daily grind of running a business and see where improvements can be made. Like the saying goes, “When you’re knee-deep in alligators, it’s hard to remember that your original goal was to drain the swamp.”
So, what actually is productivity?
Productivity is all about how well a business transforms inputs into outputs. The more productive you are, the better you get at using resources like manpower, money, or materials to create products (or services) for sale.
Three key areas of productivity:
People productivity: This is about how much effort it takes to get products or services to customers. It’s often shown as hours worked/money earned.
Financial productivity: This is all about how good a business is at making money from its investments in assets like machinery. It’s usually measured as the return on capital invested.
Materials productivity: This is about how much a business spends on materials to make sales. Materials can be things like inventory or energy.
Why productivity matters
Businesses that amp up productivity achieve more with less. This gives them an edge to boost profits, tackle challenges like inflation and slowdowns, and handle price competition. While productivity gains are becoming trickier to achieve over time, small businesses now have access to digital tools that were once reserved for larger companies.
Boosting productivity – Here are four key ways to up your game:
- Use better tools
- Implement smarter methods
- Have skilled workers
- Embrace an entrepreneurial mindset
1. Better work tools (capital)
Tools are crafted to boost your efforts. So, seek out tools that will enhance your work. It could be as simple as software that streamlines tasks, like a booking system that slots jobs into your calendar or software that links with payment systems or point of sale. Wondering why you haven’t upgraded your work tools yet? Upgrading tools costs money. Professor Marc Cowling from Oxford Brookes University delved into why small business owners hesitate to make this investment. Here are his top five reasons: Small businesses often struggle to prioritise among the numerous capital investment opportunities they have in mind. They find it challenging to discern the value without conducting a financial analysis to gauge the return on investment. Risk aversion leads them to prefer capital investments with a quick payback period, discouraging them from taking on larger projects with potentially greater impacts. Difficulty in securing loans also hinders them, with a significant portion facing rejection and taking years to reapply. Technology can seem daunting, as business owners fear the learning curve, training costs, and system integration issues. Lacking a clear ROI figure exacerbates these concerns.
2. Smarter methods (innovation)
Loads of businesses get into a routine and then forget to give it a second thought. Meanwhile, plenty of stuff changes, making the old ways less effective. It’s smart to take a look at how you do things and freshen them up.
Try this:
Make sure your work really counts: Focus on what your customers actually care about. Don’t waste time on stuff that doesn’t boost your business. Try surveys or just chat with your customers. If something’s not hitting the mark, invest less in it.
Jot down your processes: Note down the steps for each job. Set aside some time each week and get your team involved – their perspective is key. Use templates to keep info consistent. This helps everyone know what to do and when. Writing it down can reveal inefficiencies.
Spot the hurdles: Go through your process to find bottlenecks. Your team can give great insights, so encourage them to be honest. Visual mapping can help. Watch out for common issues like double handling, momentum loss, odd sequencing, quality control problems, and distractions.
Revamp your workflow: Tackle the inefficiencies. Clear up roles, reorder tasks, and improve communication. Ensure easy access to task-related info. Consider outsourcing tasks you struggle with. It may cost, but if it streamlines your business, it’s worth it.
Think about going digital: Software can boost efficiency – from task tracking to automating repetitive jobs. There’s a learning curve, but it frees you up to focus on what you do best. Explore software for invoicing, managing staff, and more. Examples: Wrike for task and project tracking or Zapier to automate tasks.
3. Skilled workers (capabilities)
Big businesses can afford to hire specialists who are super-efficient at specific jobs. Small businesses usually go for generalists and give them lots of different hats to wear. But you can still set them up for success.
Onboarding and training. Making sure your people are trained and resourced properly is key to boosting productivity. Each employee should have a job description with clear roles and responsibilities. Show them how the job should be done and give them supporting documents to back up the face-to-face training. Train your employees carefully so they know how to use all the tools (including software) they need. If they can’t use those tools, then your investment goes to waste. Also, keep sharing the values and priorities of the business regularly. When everyone understands the big picture, they’re better able to make the right decisions for the business.
Giving and receiving feedback. Feedback is crucial for productivity, and it goes both ways. When something isn’t quite right, take the time to explain the issue and the fix. Otherwise, you’ll end up redoing work, and that’s not what you want. You want to delegate confidently. Likewise, listen to what your employees have to say. They may bring a different perspective and expertise that can really help you optimise how work is done.
Follow these steps for giving and getting feedback: Ask employees what they did well, how, and why. Boost the positives by telling them what they did right, with examples. Get their ideas on how to speed up or improve the work. Workshop those ideas with them and, if suitable, set new goals.
4. Entrepreneurship mindset (optimisation)
Entrepreneurship isn’t just about launching a successful business; it’s about fine-tuning it. Entrepreneurs boost productivity by cleverly combining available resources. It usually involves taking some risks, but the payoffs can be huge.
Unleash your inner entrepreneur to amp up productivity. Here are some ideas:
Scale up: Increasing output often reduces the cost per product or service.
Snap up another business: Merging with or acquiring another business can bring scale and efficiency gains, like streamlining workflows, operations, or logistics.
Specialise: Focusing on a narrower niche can ramp up speed, expertise, and quality to enhance productivity. Consider ditching low-profit services.
Revamp supply chains: Boost productivity by switching to suppliers offering top-notch goods or complementary services.
Recruit and empower entrepreneurial folks: Cultivate an innovative vibe in your business.
Increase productivity checklist
To sum up, here are some steps to boost productivity in your business:
Better tools:
- Identify investments that can enhance productivity.
- Price each solution.
- Calculate the expected return on each investment.
- Choose the option that balances affordability and impact best (you can consult your accountant or bookkeeper for more certainty).
Smarter methods:
- Map out your work processes.
- Identify any friction points like double handling or rework.
- Brainstorm solutions focusing on clarifying roles, resequencing workflow, and fixing communication breakdowns.
- Consider using software for repetitive admin tasks (outsourcing is an option too).
- Review your process based on customer preferences to invest time wisely.
Skilled workers:
- Ensure each role has a clear job description.
- Explain tasks in person and in writing.
- Provide comprehensive tool training.
- Share the business’s big vision.
- Have regular feedback sessions.
Entrepreneurial mindset:
- Explore opportunities to scale your work.
- Stay alert for acquisition opportunities.
- Consider focusing more on a niche opportunity.
- Continuously assess your supply chain.
- Surround yourself with entrepreneurial-minded individuals.
Boosting productivity is an attitude
Small businesses hold great potential to boost productivity. Get into the habit of consistently reviewing and refining your processes, enhancing your work tools, and keeping an eye out for any inefficiencies sneaking in. It’s important to invest in your team and technologies wisely, as the rewards will accumulate. Efficient businesses are also less likely to face delays, confusion, communication breakdowns, or waste. This often leads to improved satisfaction and profits alongside increased productivity. Get in touch to see how we can help.
