P
roductivity is a word often aligned with union negotiations, political posturing, or corporate announcements, as when a bank off-loads jobs. Small business operators work so hard, the idea of thinking about 'productivity' never occurs to them. It should!
How has your productivity changed? What structural changes have been made to increase your productivity?
Columnist Ross Giitings, (in a recent column in Melbourne’s The Age newspaper) points out the very basic meaning of productivity, and warns against several common misconceptions that cloud our judgement.Neil Plumridge, Head of Advisory, Oceania, Ernst & Young, comments in his opinion piece a day or two later: “After a decade of declining productivity growth, it is clear that business cannot sit on its hands while it waits for government to pull the magic levers.”
So, how does this discussion about ‘productivity’ affect you, and your SME enterprise?
It is quite clear that manufacturers are struggling with the high dollar, and retailers have been hit by the end of a 30-year period in which consumer spending grew faster than household income. While the data shown in the next column suggests we might be at the end of the pain for some retailers, it isn’t all retailers that are “out of the woods”. For many, globalization via the internet continues to break down established supply lines and reduce trading margins. Greater productivity is required.
Productivity is quite simple to define - it is measured as ‘output per unit of input’. However, it is important to remember, as Gittings points out, that “productivity ..is about comparing quantities, not prices or values."
Put this a different way for small businesses: “productivity improvements are about doing more with less”. That is pretty hard for small enterprises. If the business is a micro business, and employs only five people, doing the same work with only four is just about unthinkable.
At the very least, it means each person has to increase their own output (or productivity) by 25% just to stay as things were, and that leaves nothing for growth, holidays, or sickness. Only a change in the structure of how things are done can bring about such a massive change in productivity!
Perhaps that’s why changing things is so hard. This ‘structural change’ is very hard when you know only one way to do things. The quotation from Dyer at the bottom of this page is symbolic in this situation!
Example:: An enterprise which had rewarded its trades employees well during the ‘good times’ has been left with a very significant overhang of high pay rates now that the market has tightened. There has also been a very significant increase in competition, driving prices down below the total cost for this business. Yet there has been no corresponding change in the way things are done, and no increase in productivity.
Higher pay rates have not translated into higher employee loyalty or higher outputs. Structural change has been needed, but it has not been happening. The future is bleak, and regrettably, this example is not an isolated instance.
Look back over the last ten years. Your sales value should be up about 35% up from ten years ago - without taking any account of growth in activity or change in product mix. Add in the other things you have done to get growth. Have you doubled turnover in the last ten years?
Run this measuring stick over your business, and see if you are a candidate for structural change - so you can increase your productivity.
Survey Shows Small Business Sales In Strong Start to 2012
The January ANZ Small Business Sales Trends report showed small business sales increased in January by 7.5%, measured on a “year on year” basis. This means that overall small business growth has now been positive since May 2011.While the sector has done well across the board, retail-related small business sales remain flat. Sales in this sector for January were just 3.4% when compared with January of the previous year.
It was clothing and fashion outlets, along with and homewares and furniture that experienced difficult conditions. Sales for 2011 were down 2.8% in clothing and fashion, while homewares and furniture fell 1.1% over the year.
Mining states outperformed the others, with WA small business up by 8.8%, Queensland up by 9.8%, and NT up by 8% - all year-on-year figures. Small business sales growth in NSW and Victoria improved in January, but remain weaker than in the mining-based states.
On a sector-by-sector basis, services and trades sectors again outshone retailers, with automotive up by13.0% and business services up16.9%. Within retail, restaurants retain the highest growth rate for the month at 13.4% growth year-on-year in January.
Interestingly, the gap between metropolitan and regional small businesses is narrowing, with recorded year-on-year growth rates for January of 7.3% in metro areas, and 7.8% in the regionals.
ANZ General Manager Small Business Nick Reade said: "The critical issue for small businesses this year will be to maintain these growth levels as best they can.¨ Commenting further on the data, ANZ Senior Economist, Julie Toth said: "January's sales might be starting to show the benefits of two interest rate cuts in November and December 2011. The pick up in small business sales in January is also consistent with a range of other indicators that are pointing to a promising start to 2012s.
These data show a large gap between retail-related small businesses, compared with the non-retail and services businesses. This mixed pattern of growth is expected to continue through 2012 as the increased mining activity increasingly dominates Australia's growth profile.
[Notes on the data sources: The survey data is based on the value of credit, debit and EFTPOS
transactions processed through ANZ merchant terminals and all ANZ card
transactions processed through other systems for businesses at least
two years old with annual turnover less than $5 million. ANZ has
approximately 20% market share of all card transactions.]
Productively painting a light pole. Structural Change?
"If you change the way you look at things, the things you look at change.” - Dr Wayne Dyer
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