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Business fitness = productivity

Is productivity important? Put it this way-what's better for you, binging and crash diets or just staying in shape?

Economists have long pointed to productivity gains as a key driver for economic well-being. But many managers don't know what productivity is, and fewer still focus on it. Yet increasing productivity lies at the heart of a company's long-term health, sustainability, and success.

What is productivity? It's a measure of economic fitness, usually defined as total work output divided by total hours worked. Companies achieve higher productivity by getting more done with the same resources or getting the same done with fewer resources. Increasing productivity is necessary. Why? Costs, especially health care and energy, are always creeping up. Companies must raise productivity each year to just to keep pace or deal with continually eroding margins.

Productivity often seems irrelevant. In times of plenty, managers do the expedient thing to meet higher demand-they fatten up by adding more people. In lean times when reducing fixed costs becomes critical, managers thin the ranks. Staffing levels, like scales in bad weight loss program, tend to "yo-yo" with the times.

But productivity can become popular as things pick up. Reminded of the trauma layoffs produce, managers defer hiring and wage increases, using slogans such as "Do more with less!" They encourage employees to "work smarter, not harder." It doesn't help. Survivors respond by putting in more hours, keeping frustrations to themselves, and watching for job openings elsewhere. Businesses then spend money on "productivity tools," believing technology holds all the answers. But in these cases, productivity gains are superficial and unsustainable.

High performing companies act differently. Instead of gorging in times of abundance and crash dieting in times of scarcity, they adopt a healthy lifestyle. They list productivity metrics in their enterprise-wide goals and create action plans to improve. Rather than stress out their employees or buy gimmicky technologies, they examine their processes and find ways to get the work done better, faster, and cheaper.

They are slow to hire and slow to fire, continually developing people to fill more value-adding roles. As a result, top performers always stay in shape, relentlessly increasing productivity and protecting margins from insidious cost increases. Their approach leads to healthier growth; studies show these firms boost revenue and operating income at twice the rate of their competitors.

Concentrating on productivity, just like eating right and exercising regularly, starts with a personal commitment. Executives must look in the mirror and decide if they're satisfied with their current approach. If not, they must make healthier choices. With promises of growth from continuing economic recovery this spring, maybe it's time to do just that.
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Ed Powers

Ed Powers is the founder of Service Excellence Partners, a consulting firm in Fort Collins that specializes in seven essential management practices. He can be reached at 970-235-0078 or ed@se-partners.com.  

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