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HomeArticle: Productivity Equation
How well has your company understood its
Productivity Equation?

 

By Ravi Kathuria
            
As a leader, your most fundamental job is to drive and derive the maximum possible productivity from your team and organization. Driving productivity is a sophisticated management of levers and shifting of gears, involving a lot of moving parts. Success is a direct result of consistently delivering high productivity in the short and long term.

 

What is Productivity?

At the most general level, productivity is getting the right things done right. Overall corporate productivity is typically measured by outcomes and results. Consider the table of sample productivity goals and metrics:                                           

 Area

Sample Productivity Goals/Metrics   

Financial ·Consistent Return on Investment
·Consistent Revenue Growth
·Consistent Profit Margin Growth
 
Market
·Increasing Market Share
 

Customer

·Increasing Customer Loyalty/ Retention 
·Increasing Customer Referrals
 

Marketing

·Increasing Brand Awareness  
             
Productivity is a result of two factors: effectiveness and efficiency.
           
Effectiveness

Effectiveness is doing the right things. Ask yourself, does your company understand which are the right markets, customers, messages, products, competencies and processes. Does it understand why they are right? Does it focus relentlessly on doing the right things, and has the discipline to not expend resources and time on aspects that do not fit the company's core business model and strategic principles? Consider the table of sample effectiveness goals and metrics:                                              

             

 Area

Sample Effectiveness Goals/Metrics   

Financial
·Ensuring Deployment of Financial Capital for Highest ROI and Lowest Risk
 
Market
·Ensuring Focus on Market Segments with Maximum Growth and Fastest Returns

Customer

·Focusing on Customers with Greatest Strategic Match and Value
·Earning Customer Acknowledgement on Value Created
 

Marketing

·Generating the Right Leads  
 

Sales

·Pursuing the Right Prospects (Sales Pipeline)
 

Product/ Service Development

·Developing the Right Products/ Features
·Driving the Right Product Innovation and Differentiation
 

Talent

·Ensuring the Right Culture and Talent
·Ensuring Effective Development and Growth of People
 
Efficiency            
Efficiency is doing things right. Your company may be focused on the right things, but to succeed in the long term it still has to do them in an efficient manner. Efficiency involves getting things done in a manner that is cost-effective, with the highest quality, and the lowest cycle-time. Consider the table of sample efficiency goals and metrics.
             

 Area

Sample Efficiency Goals/Metrics   

Financial
·Reducing Cycle time between Capital Invested and Profits Generated
·Finding the most Cost-Efficient Financing
 
Market
·Increasing Market Penetration Velocity
 

Customer

·Optimizing Customer Acquisition Costs
·Optimizing Customer Service Costs
 

Marketing

·Optimizing Brand Building Costs
·Increasing Lead Generation Volume
·Optimizing Lead Generation Costs
 

Sales

·Increasing Sales Velocity & Success Ratio
·Increasing Sales Pipeline Volume
 

Product/ Service Development

·Optimizing Cost of Innovation
·Increasing Product Development Velocity & Optimizing Costs
 
Product/ Service
Delivery
·Optimizing Product/Service/ Manufacturing/Delivery Cost
·Increasing Product/service/ Manufacturing/Delivery Quality
·Increasing Operations Scalability & Flexibility

 

Productivity = Effectiveness * Efficiency

Productivity Equation

You can calculate productivity by multiplying your effectiveness and efficiency. If your company is effective 90% of the time and its efficiency is 80%, your productivity is only 72%. In other words, a quarter of your company's time and resources is not producing a bang-for-the-buck. While, 100% productivity is probably utopian, any incremental progress in effectiveness and efficiency can produce a big impact on your company's productivity.

As a leader, you must facilitate an internal dialogue at all levels about the goals and metrics around productivity, effectiveness and efficiency, and how they impact each other. Once you build this map, you will be able to articulate your company's productivity equation. Then and only then will your organization be in a position to understand productivity, what drives it, and how to manage it. If your organization fails to appreciate and manage the critical drivers that impact productivity, effectiveness and efficiency, it will never win the race.

 


Ravi Kathuria 
A recognized thought leader, Kathuria has been quoted in various publications including The Wall Street Journal, Barron's, WorldNews, and featured on the BusinessMakers show, CBS Radio, Nightly Business Report, TEDx, and is a monthly columnist for the SmartBusiness Magazine.


Kathuria is the author of the highly acclaimed book, How Cohesive is your company?: A leadership parable. It is a realistic and intense story of how a CEO struggles to transform the business and, in the process, struggles with his personal transformation.

Kathuria is the founder and president of  Cohegic Corporation, a management consulting, executive coaching and sales coaching firm. Halliburton, Hewlett-Packard, St. Lukes Episcopal Health System, AT&T, and Imperial Sugar Company executives have co-published seminal business articles with Kathuria in the Houston Business Journal on sales effectiveness, performance, corporate culture, and change management.

Invited to speak at large conferences and corporate meetings, Kathuria is a thought provoking and vivacious speaker. He has spoken at the 5th Annual Veterans Entrepreneurship Conference, Rice University, Business Forum on Emerging Markets, University of Houston's Wolff Center For Entrepreneurship, University of Texas' Fleming Center for Healthcare Management, Institute of Internal Auditors, Dover Club, Galleria Chamber of Commerce, American Business Women's Association, French American Chamber of Commerce, Business Resources Group, Financial Executives Networking Group, Silver Fox Advisors, Houston Technology Center and the 2011 SPE Americas E&P Health, Safety, Security, and Environmental Conference.