Why productivity matters
Productivity is a term associated with strong economies, robust businesses and efficiency gains of clever staff.
If businesses were efficient then fewer would fail, generate more employment and better incomes for owners and workers alike.
The small business productivity results are in, and we uncover the results in our Small Business Insights special report.
The 2023 winners & losers, by industry:
> Wholesale trade was the most productive industry at $214.20/hour.
> Ten sectors, such as manufacturing, agriculture, and construction, surpassed the national average of $100.30/hour.
> Hospitality least productive, $40.20/hour.
> Western Australia led in state productivity with $102.50/hour.
> Tasmania was the least productive state at $89.00/hour, 15% below WA.
Understanding productivity is essential
Productivity measures how effectively businesses convert inputs like labor and capital into saleable products or services. Higher productivity equates to greater profitability, resilience against economic fluctuations, and enhanced competitiveness. However, achieving and sustaining high productivity levels requires strategic focus and deliberate effort.
There are three primary areas to target for productivity improvements:
1. **People productivity**: This measures how efficiently work is delivered in relation to resources invested, typically quantified as hours worked per dollar earned.
2. **Financial productivity**: Focuses on optimizing returns from capital investments, such as machinery and equipment.
3. **Materials productivity**: Involves minimizing costs associated with materials and resources used in production.
To boost productivity effectively, businesses can adopt several strategies:
1. **Invest in better tools**: Upgrading tools and technologies can streamline operations and reduce inefficiencies. Despite the benefits, small businesses often hesitate due to perceived costs, difficulty in prioritizing investments, and risk aversion. Overcoming these barriers requires clear financial analysis and possibly seeking expert guidance.
2. **Implement smarter methods**: Regularly reviewing and refining operational processes can uncover inefficiencies and improve workflow. This includes documenting procedures, identifying bottlenecks, and optimizing task sequences. Digital adoption, through software solutions like Asana and Zapier, can automate tasks and improve communication, freeing up resources for more strategic activities.
3. **Develop skilled workers**: Proper training and clear job descriptions empower employees to perform efficiently. Regular feedback sessions foster a culture of continuous improvement and alignment with business objectives. Investing in employee development ensures they can effectively utilize new technologies and contribute to overall productivity.
4. **Cultivate an entrepreneurial mindset**: Encouraging innovation and risk-taking can lead to breakthroughs in productivity. Opportunities such as scaling operations, acquiring complementary businesses, or refining supply chains can significantly enhance efficiency and competitiveness.
Enhancing productivity requires a holistic approach that addresses tools, methods, workforce capabilities, and entrepreneurial thinking. By strategically investing in these areas, businesses not only improve their operational efficiency but also enhance profitability and resilience in an increasingly competitive market landscape.
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