Are You Winning at Productivity?
In the professional services industry, where salary costs usually represent the largest overhead, even a small improvement in employee & partner productivity could enhance business value significantly.
But are firms doing enough to drive improvements in this area and enhance their competitiveness? Martin Atkins, lead partner for Advisory Services at Menzies LLP, explains for CEO Today.
According to the latest figures from the Office for National Statistics, UK productivity growth has fallen in recent years and this is particularly evident since the financial crisis. However, the most recent forecasts predict that it is expected to increase by 1.3 per cent by 2023.
Based on this data, the recent revelation that a French worker achieves as much in four days as a British worker does in a five-day working week has caught the attention of many employers. At a time when many are considering cost-cutting strategies to improve operational efficiency, they are now realising that improving productivity could boost profitability and improve their overall competitiveness.
With Brexit on the agenda, it is likely that considerable disruption lies ahead for many industries, not least for the financial and professional services sectors. To guard against this, firms should be reviewing their service offerings to ensure they are aligned with market demands. They should also be looking for ways to improve productivity, whilst investing in future-proofing technologies and pushing ahead with sales and marketing strategies.
Before exploring ways to improve productivity, employers should make sure it is being measured accurately. In the professional services sector, this is usually measured in terms of ‘resource utilisation’ or ‘chargeable time’. When applying either of these measures, employers should start by calculating each employee’s total working time – it is generally assumed that a full-time worker has 37.5 hours of working time available to them each week, for 44 weeks of the year, allowing for five weeks of holiday, eight bank holidays and other absence such as sick leave and training. Based on this, employers will be able to set realistic and achievable targets for increasing workers’ chargeable time.
Armed with a measure of the firm’s productivity, employers should carry out a firm-wide audit to identify any productivity pressure points – as these are likely to differ from business to business. There are seven key pressure points which could be undermining a firm’s productivity – technology; access to skills; health and wellbeing; morale and motivation; remuneration; regulation and infrastructure. Depending on the structure and culture of the firm, some or all these factors may require attention.
For example, an employer may believe the firm’s people costs are too high and that job cuts are required to drive productivity improvements. Closer examination of these costs, alongside an analysis of the firm’s skills base, will ensure employers are better informed to take such decisions, based on an understanding of whether they have the right people doing the right jobs and whether demand for certain skills is forecast to increase in the future.
Another pressure point that is commonly found relates to a lack of access to meaningful and timely data. In this instance, a firm-wide audit of accounting and financial management processes should be carried out to identify areas for improvement. Professional advice should be taken before investing in technological changes or upgrades, and employers should bear in mind that relatively simple changes, such as using automatic time recording and electronic signatures, can make a big difference when streamlining operational processes.
One area which is often overlooked when considering ways to improve productivity is poor transport infrastructure and the impact this can have on worker wellbeing. If commuting times are excessive or routes are prone to disruption, this can undermine productivity and make it harder for the firm to attract talented people. These issues can be addressed by introducing flexible working, which may include introducing flexible start and finish times, and benefits and rewards could also be designed to relieve pressure on those with transport issues.
Winning at productivity can add significant business value and improve a firm’s resilience in challenging times. As welling as boosting profits, it can improve workplace morale and help workers to achieve a better and more fulfilling work-life balance. Investing in strategies to drive productivity could also bring benefits in less obvious ways, by freeing up resources to invest in exploring new demand-side opportunities.