“With productivity as low as 20% you are bleeding cash and sinking in a sea of lost opportunity”

For the record, labour productivity is:  “The output of products or services per unit of labour input.”

Companies without objective productivity management will have performance levels in the range of 20% to 60% (very few will be at 60%). If you don’t know where you currently stand on productivity we suggest you assume 40% until proven otherwise. In reality, you’ll be lucky to be even that good!

To put some flesh on this, consider a company making R100,000 profit on a turnover of R1 million per month with a monthly wage bill of R120,000 and a direct material cost of 30%.

We consider at least 80% productivity to be readily achievable, so at 40% productivity:

• The company is spending R60,000 per month in wages for nothing.
• To extend turnover by R250,000 the company will have to work 25% extra hours at a cost of around R45,000 plus additional costs associated with the extended hours of work which we’ll limit to R5,000 for this example. Thus the extra turnover will yield around R125,000 profit.

If we assume an increase in productivity from 40% to 60%:

• The company has reduced lost wages by R30,000 per month.
• The company now has a monthly normal time capacity of R1.5 million sales.
• The turnover increase of R250,000 can be easily handled without overtime and will yield additional profit of around R175,000. Turnover can further increase to R1.5 million and yield R350,000 extra profit with current resources.

Even if this imaginary company can only reach 50% productivity from a base of 40% it will still have the capacity to increase turnover by R250,000 and generate roughly R175,000 extra monthly profit without incurring any extra monthly costs.

So how do you sort out productivity?

Managing productivity can be reduced to three distinct elements:

1. Measure what a worker or team of workers actually produce over a period of time.
2. Develop a realistic expectation of the rate of work that should be achieved.
3. Manage workers (and managers) according to the difference between 1 and 2 above.

Of course, in practice each of these 3 elements must be handled in a way that will “stand up”, you need to be objective, reasonable and fair at all times. However, you still have the right to expect a good day’s work from everyone in your business!

BMT – Productivity breaks with tradition and instead of starting with a long and expensive academic exercise to develop time standards and then figuring out how to make use of them, we take a faster and more direct approach.

Anyone who has managed production will know that when you pay attention to an area of your business it will generally show an improvement. BMT – Productivity  is designed with this in mind, so instead of completing a traditional “Work Study” or “Time and Motion Study” before implementing productivity management, use BMT – Productivity to “pay attention” to your business and develop work standards as you go!

If you already have good production standards just put these into BMT – Productivity and get started, otherwise, involve the workers and make a few informed initial estimates and begin the process of reporting what happens. Critically review and revise your estimates and discuss with all involved until you have good working standards. Human magic comes into play and you will find that even before you have refined and completed your work standards, you will be making productivity gains!

At the heart of any productivity improvement project is the challenge of how to keep track of all the information that must be processed. Manual systems (with or without spreadsheets) are doomed from the start as they take too much time and become completely unwieldy as the volume of data increases. You don’t want to solve factory productivity by hiring an army of clerical staff to process data!

BMT – Productivity was written from scratch to keep track of all your productivity information and keep the cost of implementing productivity management to a minimum. You don’t even have to waste time shopping around – there is simply nothing like BMT – Productivity out there that will make productivity manageable for any size business!