Productivity is a term linked to strong economies, successful businesses, and the efficiency of clever staff. If businesses were more efficient, we’d see fewer failures, more jobs, and better incomes for everyone.
According to the Xero Small Business Insights special report in Australia, the most productive industry in 2023 was wholesale trade ($214.20/hour), while hospitality lagged at $40.20/hour. Though productivity dipped across all industries, ten sectors, including manufacturing, agriculture, and construction, outperformed the national average ($100.30). Western Australia was the most productive state ($102.50/hour), with productivity 15% higher than Tasmania ($89.00/hour), the least productive state.
What is Productivity?
Productivity measures how efficiently a business turns inputs into outputs. The more productive you are, the better you turn resources like labour, capital, or materials into products or services you can sell.
Types of Productivity
- People Productivity: How much work it takes to deliver products or services to customers, usually measured as hours worked per dollar earned.
- Financial Productivity: How well a business monetises its investments in assets like machinery, often measured as the return on capital invested.
- Materials Productivity: How much a business spends on materials to generate sales, including inventory and energy.
Why Productivity Matters
More productive businesses get more from less. This boosts their potential to profit, handle inflation or slowdowns, and withstand price competition. Productivity gains are harder to come by nowadays, but digital tools have levelled the playing field, allowing small businesses to compete with larger ones.
How to Increase Productivity
There are four main ways to boost productivity:
- Better Tools: Tools amplify efforts. Invest in software or equipment that reduces manual work. For instance, a booking system that integrates with your calendar and payment systems.
- Smarter Methods: Continuously review and improve your processes.
- Skilled Workers: Invest in training and development.
- Entrepreneurship Mindset: Embrace optimisation and innovation.
Increasing Productivity Checklist
- Better Tools:
- List potential investments and their costs.
- Estimate the return on each investment.
- Choose the best mix of affordability and impact.
- Smarter Methods:
- Map out and document your work processes.
- Identify and address friction points.
- Implement software for repetitive tasks.
- Align processes with customer preferences.
- Skilled Workers:
- Ensure clear job descriptions and training.
- Regularly provide and receive feedback.
- Entrepreneurship Mindset:
- Look for scaling opportunities.
- Stay open to acquisitions.
- Focus on niche opportunities.
- Continuously improve supply chains.
- Hire and empower entrepreneurial staff.
Boosting Productivity is an Attitude
Small businesses can significantly improve productivity by constantly refining processes, investing in tools, and eliminating inefficiencies. With smart investments in teams and technology, the benefits will add up. Efficient businesses experience fewer delays, miscommunications, and wasted efforts, leading to increased satisfaction and profit.
