1. Firstly, calculate your current level of productivity. An easy way to do this
is to look at the last 12 month’s sales value (exclude VAT in all figures) subtract
the material content in those sales. That leaves what I call your contribution. (Contribution
is simply what pays all the other bills)
2. Divide that number by the total cost of employing all of the people that created
the contribution above. (Office staff and sales people should be included but management,
in this example, are considered Overheads and do not form part of this number unless
a proportion of their hours is hands on. In which case add that portion). That number
will be between 1 and 4. 4 is brilliant but unlikely, 2 is OK, 1 means you have a
very big problem.
3. Now that you know where you are on an annual basis decide what is a reasonable
period of time on which to base a target. If your goods or services are produced
or supplied daily then a weekly target will be ideal. If your work has a weekly turnaround
then a monthly target will be better. If you have work that spans more than a week,
divide the work value into theoretical week long chunks, value it and stick with
a monthly target.
4. Now you are ready to test what happens to productivity levels when you make changes
in systems, procedures, supply of information, management of employees, factory or
office layout, workflow, quality etc. etc. (In my factory increasing quality increased
5. Do keep in mind that fluctuations in sales will impact on productivity just as
much as work carried out. Without question the most important thing is that you sell
all that you can produce. To make an accurate judgment on how effectively your workers
are performing do not add downtime through lack of sales to your calculations. To
see how your company is performing you must add the downtime
Download a free simple spreadsheet to show the effects of increasing productivity.
Click on the Download Button
The ‘What If’ scenario. Click the Download button. Open it up in Excel and use these
guidelines to see the effect that a certain percentage productivity increase will
have on your business.