Productivity as Strategy

To what extent does your organisation build productivity into its strategy?  For that matter, to what extent does the public sector overtly plan productivity into its longer term plans?  The NHS has productivity targets, but this is not quite the same as building productivity into your strategy.

Look at some of the high-tech companies.  They build a new device – the prototype is expensive.  A key part of their strategy is to lower the manufacturing cost dramatically over as short a period of time as they can.  This will be a combination of people, technology and almost certainly supply chain. Every aspect of the manufacturing process is subjected to  a review of how can something be done, purchased, delivered most cost effectively!

Then there is the other side of the coin – organisations that suddenly realize that they are no longer competitive and need to reduce cost.  The result is a flurry of activity aimed at improving their price competitiveness and increase productivity.  This process is nearly always reactive.  By definition, intervening in a process to do something that has not been planned will take longer and be less effective in the short-term.  For those who have a significant export market, the quick fix is a cry to the Chancellor to let the pound slip thereby reducing cost in foreign currencies.  Sadly, this always makes things worse in the long-term, because the root cause of low productivity is not addressed.  Fortunately, many UK companies are highly productive.  They are usually the successful ones and are not difficult to spot.

What are the ingredients of a productivity strategy?  Put simply, they are really no different from any other part of a strategy.  You need a set of targets along the time of the strategy and specific plans to turn them into reality.  It is the latter element that is most often missing.  Raise productivity by 7% year on year is a good idea, but only likely to happen if there are clear plans and specific accountability to make them happen.  These should be built into the strategy at the start, not left to operational managers to try to work out (although they should probably be involved in the strategy process).  One of the hardest parts of establishing a productivity strategy will be to get the board to treat productivity as a strategic issue.

One way out of the issue is to make and sell products and services with a high margin. The higher the margin, the less important productivity becomes.  However, in this increasingly international and competitive world there will always be new entrants to a high margin business, so sooner rather than later, productivity will become an issue.  Can you afford not to have productivity as part of your strategic plan? Better to have a strategy for productivity up front before you have to deal with the monster at the gates!