By Dr. Vijay Jog, President & CEO, CRGroup
In his book “The Rise and Fall of American Growth” Robert Gordon of Northwestern University, stated that we can’t blame time people spend on non-work related social media during work hours, which some estimates suggest can be as high as 30%. We may actually ask as to how employees are finding the time to allot such large portions of time to non-work-related tasks while deadlines continue to loom. Gordon sheds some light on this by noting that:
- Most businesses are operating by the same business methods and procedures that have been in place for at least 10 years.
- Daily practices of business methods are not being influenced by the recent innovations in terms of robots, smartphones, or the other things that have happened more recently that streamline business processes and reduce the time needed to perform certain tasks.
In parallel, many economists are concerned about the decline in productivity despite significant improvement in technology of doing business and after significant investments made in the technology as witnessed by the rise of companies like SAP, Oracle, Salesforce and Microsoft that are providing world class productivity tools. Moreover, many transaction based or standard activities are being outsourced to low wage counties such as China, India and Philippines and developed economies are moving from manufacturing to non-standard and complex knowledge based services. So why is it that the North American productivity numbers are so weak and CEOs are lamenting about efficiency?
Understanding Productivity in a knowledge-based service economy
I believe that the main culprit behind the decline in workplace productivity is the leadership’s inability to understand the actual work being done by staff and employees on a day-to-day basis.
If a company operates in an “assembly” manufacturing business, it is somewhat easier to measure and monitor productivity since a machine typically has a manufacturer’s rating for throughput and yield. Any deviation from the rating can be immediately identified, and the root causes instantly discovered, which could then be focused for improvements.
However, many think that it is not easy to achieve similar gains in the service sector where people are doing non-transaction-based so called “knowledge” activities, which require thinking, planning and doing tasks that cannot be easily measured. While some of it may be true, I believe that much can be salvaged and efficiency can be improved by at least 30%.
Let me start with a simple example. Suppose you run a firm that sells software applications. Once sold, clients continue to use them year after year. Some clients require ongoing maintenance and support, while others are self-sufficient and rarely call for support. Suppose acquisition of new client starts with 1000 automated emails, resulting in 100 calls, resulting in 10 demos, leading to three good prospects, and finally one new client. Let us now assume that you have acquired 300 clients in the past and aspire to acquire 100 clients each year. Now if you are serious about being highly productive and do not have millions of dollars from a VC firm to spend, you can manage this business just like a manufacturing business by making some simple but robust assumptions.
Assume that each existing client, on average, would consume 4 hours of support per year (note: some would never call). A call takes an hour of work (one may have to call multiple times to get a person on the phone). Arranging and doing the demo takes 3 hours, and then it takes up to 12 hours to actually acquire a client. Each implementation takes 40 hours. Assume now that a person works 1960 hours a month, and accounting for internal meetings, vacation, statutory holidays etc. means the available hours are 1500 per year per person. If so, then one can estimate that this set of activities would require no more than one person, which would be busy all 1500 hours of the time. In short, there are many work activities that can be modeled using engineering principles and can measure productivity using the same metrics.
Of course, one would argue that, although there may be some truth to this example, not many jobs can be modeled along these lines. Let’s not give up just yet. Let’s take a function like Human Resource Management (HRM). (Exclude Payroll for now since it will follow the logic above). It may come as a surprise, but HRM function can also be modeled along these lines. For example, American Productivity and Quality Council (www.apqc.org) has mapped HR function (and many others) and has codified it as having 9 services, 34 activities and 104 sub activities. Knowing the workforce composition and scale, this framework can be used for effective resourcing of the HR function and then measure productivity.
Perhaps you are saying that since it sounds too good to be true, it just can’t be true. Well, actually it is true. This was one of the key initiatives General Electric carried out under Jack Welch in the 1990s with the rubric of “Value Analysis”.
Answering these 7 Simple Questions Can Help Increase Productivity Across the Entire Enterprise:
- Who is the customer of the services that your department provides and what expectations do they have about the quality of that service and response time?
- What is the demand for those services (e.g., in HR, the demand depends on the number and type of employees; in accounting, it depends on #transactions and complexity)?
- What specific internal activities do you need to perform to provide these service that can be broken down in terms of “work time” and do you have a weekly/monthly tracking and monitoring mechanisms in place?
- How long (simple estimates are fine) does each activity take to perform on the level of satisfaction demanded by the customer and how much training and “management” is required to do so?
- Are there any special projects (e.g. R&D) that one must undertake to prepare for future needs?
- Are you hiring people with full disclosure? “we are high performance company, we have a great benefits plan, great social committee, nice colleagues but we all come here to work and are not afraid to be measured on output – we actually welcome it”
- Are you tracking metrics at all levels and incentivizing people accordingly through a simple but effective employee performance management system?
Answering these seven questions across the entire enterprise may allow you to increase your productivity by at least 30%, since everyone would know what is expected, what it takes to deliver and how it is being measured. Additionally, it can help plan for capacity (if you are growing) and implement a performance-driven culture in an enterprise where everyone is accountable. Last but not least, the answers to the questions may also point out whether you have effectively resourced your company, and/or have the right people on the right seats of your bus. It may also lead to figuring out who requires training and who can be successful elsewhere and what kind of technology implementations and improvements and management changes are required to get this done. Since Henry Ford invented the assembly line and improved manufacturing efficiency, time has come to adapt similar principles to improve service sector efficiency provided you care to create a performance driven enterprise where people are happy and delivering enterprise value.
Vijay Jog Ph.D. is the Founder and President of Corporate Renaissance Group (CRGroup) – a global firm that specializes in improving enterprise performance through innovative technology driven solutions. Dr. Vijay Jog is a leading authority in corporate value creation and performance improvement. With over two decades of experience in both the public and private sector, Dr. Jog provides a unique perspective and insight into what drives performance and business management. Read More…
For over 25 years, CRGroup has conducted these types of analysis and assisted firms by undertaking performance-based engagements. We continue to witness increased productivity and performance for each of our clients.
Please contact us to learn more about the services and solutions that CRGroup offers. From strategy and planning to execution – we have your business covered!