Operational Audit: Productivity

     Are you meeting your productivity standards? If you cannot answer this question—please read on. If you were able to answer this question here is a follow up? Is that good or bad and why? Here are the two points of this article: You have to have a productivity standard that you measure your team against—not just what they produce but also with how many team members (resources). You also need to know if these standards are the right ones. It is extremely important that as a leader you know exactly what your team is doing. Larry Bossidy and Ram Charan state in their book Execution that the first of seven essential behaviors a successful leader must have is to “…know your people and your business.” Without knowing what the productivity of your team is, you cannot know your business.
     When conducting an operational audit on productivity the first place you have to begin is to determine what standards you are trying to achieve and how do your actual results compare against them. If these do not exist, then you are operating in the dark. How can you know when improvements need to be made or if you’re excelling? Or just as important, how do you know that the resources (the team members) you’re utilizing are the correct amount?
     For example, in my departments I need to know what level of output I have per person. This enables me to determine if as a department we are focused and achieving our objectives or if we are spending too much time on facebook. Having this data also allows me to compare my team members against each other. Bottom line, it helps me identify who my performers and non-performers are. The second area that I need to know is at what FTE (Full Time Equivalent) level I’m operating at. If my total output is high, that data in a vacuum would make me happy. But if my high output is due to the fact that I have 30 employees producing a certain amount versus 20 or 25, my labor costs will be substantially impacted. Labor costs tend to be one of the highest line items in any budget so the bottom line profits can be considerably and negatively impacted.
     As a result, it is critical that I’m evaluating my productivity as a whole—how much of a good or service are we producing and with what level of resources. As leaders it is our responsibility to strike this balance. That can only be achieved if we have standards to manage against. So if you currently do not have productivity standards in place, you need to identify them and implement them as soon as possible. You may be losing a lot of money for your department or organization and not even realize it.
     A great place to start is to talk to your peers in your industry. Build relationships with other leaders and ask them how they are measuring their team’s productivity. Or start by doing the research yourself. There is tremendous amount of data and information for just about every industry. Sign up for industry associations and utilize the resources they offer. In today’s world of information I am yet to find where industry data has not been available.
     The second component is to make sure that the productivity standards you developed are the right ones for your team, department, or organization. This takes a little bit of effort but has to be done since every business is different. Industry figures are averages derived from many organizations. You have to begin to input the numbers and identify what impact it has on your output, costs, and ultimately your bottom line.
     As you work through this exercise the numbers will begin to speak to you and you will begin to identify the optimal balance and eventually the standard you want to shoot for. If you simply identify an industry standard or benchmark and work towards meeting it—you will be achieving the industry average. Meeting the industry average is probably not the recipe for great success. You have to run the numbers and determine the best productivity balance that will allow you to produce the highest quality level of good or service at the lowest cost. It is at this point that your leadership ability kicks in as you take your team to new heights of production and ultimately success!