• Why should a department head, marketing or branch manager, chief constable or fire officer, CEO or government minister bother about productivity?

  • Because, in the private sector, productivity determines profit margins and sales revenue, and hence whether an organisation succeeds or fails

  • In the public sector, productivity determines unit costs and so the volume and quality of services that can be provided for the tax-payers’ money allocated

  • And, nationally, productivity determines the average prosperity level and standard of living of everyone living there

  • Hence, Paul Krugman, Professor of Economics at Princeton University and Nobel Prize winner said “productivity is not everything but in the long run it’s almost everything”

Productivity Improvement

There are three basic stages involved in any productivity improvement  “Productivity improvement will start a virtuous cycle of growth as goods and services offering better value provide for rises in income which fuel demand for even more and better, resulting in robust future growth and prosperity” – McKinsey’s  

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‘New’ productivity

‘Old’ productivity was measured using the single ratio of output volumes divided by direct labour inputs – both were the main output and input factors in manufacturing when it was the dominant sector in any G8 economy No longer, however Service sectors now dominate economies – quality and service level outcomes have become as important …

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Effectiveness v Efficiency

  Effectiveness and efficiency are words often confused  Effectiveness measures how well a supplier’s present efforts and methods meet its customers’ needs – what customers think of what a supplier offers them     Effectiveness  =  Customers’ ratings of actual outcomes  =  60% say                       …

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‘Old’ productivity

For most of the 20th century, when labour-intensive manufacturing industry dominated developed economies and direct labour was the main input resource, measuring ‘how much you got out’ of ‘how much you put in’ was usually not a problem: Output volumes were easy to count  Input resources were covered (mostly) by counting the number of direct …

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Why important for individuals

In the middle of the last century, nearly half of G7 family expenditure went on food and clothes – today, average families spend less than 15% on such basics Productivity improvement has not only increased incomes but also released more discretionary income to buy non-basic stuff – goods and services that people ‘like to have’ …

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Why important for organisations

Productivity improvement has had an enormous impact on most people’s lives, at least in the G7 nations – office workers and carpenters, teachers and taxi drivers, all earn on average so much more than they do in India or Africa, say  In the middle of last century, over 40% of G7 family expenditure went on …

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Why important for nations

National productivity is the single most important gauge of an economy’s health – nothing matters more for long-term living standards than improvements in the efficiency and effectiveness with which an economy employs and combines its capital and labour And national productivity growth is the only sustainable source of improvement in the standard of living – …

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Scope to improve

In G7 nations, the evidence suggests there are many more organisations performing below rather than above the median: 80% never seek to improve by much at all Most of the other 20% only target the next performance level up and, once that is achieved, elect to stick Most G7 organisations, across both public and private …

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