4 Ways to measure and improve productivity and efficiency (Series 1)

It’s a well-known fact that we are not good at productivity in the UK. For example, our labour productivity measure is 26% lower than in Germany…

Some main factors that affect productivity have been identified as:

• Technological progress
• Worker skill level
• Worker health
• Worker morale

And we can attempt to improve those points by:

• Equipping staff with all the technology, software, systems, automation they need
• Training of staff to high standard, relevant to their job and your business
• Encouraging staff to have a good healthy lifestyle and access to quality healthcare
• Providing good working environment, good culture, good pay and good leadership

So how do we measure it?

We have been reminded recently as to the need to measure productivity. Here are four measures that are proven to help us do that:

Labour Productivity Factor

Example: Company A has a Turnover of £6 million, they have 20 staff all working 2000 hours per annum, so 40,000 hours in total. £6,000,000 / 40,000 = Labour Productivity factor of 150. (£Sales per man hour).

A target for our businesses could be 150+(Alternatively you could use GP per hour as a measure)

Productivity Factor

Example: The same business has a Gross Profit of £2.4 million, their cost of overhead wages including owner’s remuneration is £800,000. £2,400,000 / £800,000 = Factor 3. Target of 3 is acceptable, 4 is optimum.

Look out for the following two next week!

Click here for the link to Series 2.