Why Productivity Matters and What You Can Do About It
Productivity is often associated with strong economies, thriving businesses, and the efficiency of skilled workers. If more businesses were productive, we’d likely see fewer failures, higher employment, and better incomes for both owners and employees.
According to the Xero Small Business Insights 2023: Industry and Regional Trends report, wholesale trade was the most productive industry in Australia, generating $214.20 per hour. In contrast, the hospitality sector lagged at $40.20 per hour. While productivity declined across all sectors, industries such as manufacturing, agriculture, and construction outperformed the national average of $100.30 per hour. Western Australia topped the state productivity charts at $102.50 per hour, 15% higher than Tasmania’s $89.00 per hour, the lowest in the country.
What Is Productivity?
Productivity measures how effectively a business converts inputs, such as labour or materials, into outputs (goods or services). In simpler terms, the more productive you are, the better you are at maximising your resources.
There are three main types of productivity:
- People productivity: Measured by how much work is required to deliver products or services.
- Financial productivity: Assessed by how effectively a business monetises its investments in assets.
- Materials productivity: Looks at how much a business spends on materials to generate sales.
Why Productivity Matters
Increasing productivity means businesses can achieve more with less. This allows them to weather economic challenges like inflation, respond to competition, and ultimately turn a higher profit. While small businesses have traditionally lagged behind large corporations in productivity, digital tools have made it easier for smaller enterprises to boost efficiency.
Four Ways to Increase Productivity
There are four key strategies to improve productivity:
1: Better Tools
Investing in tools and technology can amplify efforts. For instance, integrating software that automates processes or links booking systems to payment platforms can streamline operations. However, many small businesses hesitate to make these investments due to perceived high costs or uncertain returns.
2: Smarter Methods
Regularly reviewing and updating processes can lead to significant productivity improvements. Document workflows, identify bottlenecks, and focus on tasks that matter most to customers. Software solutions like Trello or Asana can assist in project management and team coordination.
3: Skilled Workers
Training employees thoroughly ensures they can use tools and resources efficiently. Clear job descriptions, ongoing feedback, and skill development are essential to empower your team and avoid productivity losses.
4: Entrepreneurship Mindset
Productivity isn’t just about getting more done—it’s also about optimising how you use resources. Adopting an entrepreneurial mindset can help you scale your business, find new efficiencies, or specialise in a profitable niche.
Productivity Checklist
Here’s a quick summary of steps to enhance productivity:
- Better Tools: List potential investments, estimate returns, and prioritise based on impact.
- Smarter Methods: Document processes, streamline workflows, and explore automation.
- Skilled Workers: Provide comprehensive training, set clear expectations, and foster a feedback culture.
- Entrepreneurship Mindset: Stay alert for growth opportunities and continually refine processes.
Improving productivity should be an ongoing effort. By refining processes, investing in the right tools, and empowering your team, you’ll boost efficiency and enhance satisfaction and profitability. Efficient businesses are better equipped to avoid delays, miscommunication, and waste, paving the way for sustainable growth.
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