Productivity - A Competitive Tool

8/2/2019 Productivity - A Competitive Tool

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PRODUCTIVITY: A COMPETITIVE TOOL

It's important for today's organizations to be productive and further use this productivity

as an effective tool to beat competition.

Business is where things change in the blink of an eye. Today's right strategy may not be right

tomorrow, i.e., it may become obsolete in a short span of time. So the adage, "old is gold", does

not hold true at least in business. But, in this fast moving business environment where nothing isstatic, one thing that has remained constant is the goal of the organization, i.e., profit-making,

irrespective of its nature and size.

The performance of the organization has been traditionally linked to profitability in one way or

other. Profitability means gain, advantage, improvement or that output which results from the

employment of capital, which is usually expressed or interpreted in financial terms. JasonJennings (Jason), a California-based management consultant and the author of the best seller,

Less is More: How Great Companies use Productivity as a Competitive Tool in Business, definesprofitability as the simple act of increasing the output while maintaining or decreasing the input.

Jason further cites an example to explain the meaning of productivity. According to him, if

McDonald's can figure out a way to serve an extra 25 customers an hour (output) without havingto increase the staff (input), they'll have increased productivity. Now, if the definition is so

simple and straight, then why are we making a fuss over productivity? As a matter of fact,

productivity is not as simple as it sounds; that's why only a few names feature in the list of

productive companies, which have been successful in retaining this magical word with them on aconstant basis.

The competitive edge

The old days when businesses used to run on mediocricity and laid down sticky traditional rulesare gone. Today, it has become vital for an organization's long-term stability, survival and

growth to understand the true cost of doing business and the sources of profit. Productivity plays

the role of a sheet anchor for today's companies by giving them the much needed edge in the

market. Most productive companies, however, take a slightly different path from the usual run-of-the-mill approach, focusing on the overall productivity aspects of their businesses, rather than

merely looking at profitability in terms of financial statements. There is an old saying: "Smart

people don't do different things, rather they do the same things differently." This is very much

applicable in the case of the most productive companies. They take different routes to achieve

the same goal, and it is the selection of these different routes/paths by these companies, whichbrings a lot of difference to the end result.

The first thing which differentiates a productive company from a non-productive one is the

company's ability to understand the true meaning of strategy and tactics. According to Jason, it is

this realization that enables these companies to stay more focused on their goal.


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There are several companies which put themselves into trouble by mixing their strategies and

tactics together. In productive companies, the goals to be achieved by a particular group ofpeople are kept very simple and easy to understand. It is the employees who have to perform; if

they are confused and not clear of what exactly they have to do, they will not be able to give

their 100% to the job. It is this power of simple and clear objective which made Ikea, a Swedish

furniture superstore chain, achieve 50% more profit per employee, that too, in the low-margindiscount furniture business. It is the power of this simplicity which enabled the New Zealand-

based warehouse chain of discount stores to score over the world's No. 1 retail, Wal-Mart, on

many different counts. Focus is vital for profit maximization. However, many corporate leaderstoday lack this attention to focus. Kmart, the US retailer, went bankrupt due to its management's

inability to focus on its core competencies. Other major firms which collapsed due to lack of

focus are: Arthur Anderson, WorldCom, Enron, and Xerox, to name a few. Any organizationwhich complicates its business by concentrating on needless issues tends to lose its focus and

purpose in the market, which negatively affects its production, and thus the business as a whole.

Managing your employees is an important aspect in increasing productivity. It is only when a

company manages to get its employees focused towards a particular goal that it can think ofobtaining more with less. Openness to the company's goal or mission helps in achieving thepurpose more easily. The organization should be transparent with its ideas, goals andexpectations from its employees. It is this openness which made Yellow Freight, the world leader

in transportation services. This is what made SRC holdings, a diversified manufacturing holding

company, post 15% growth each year, irrespective of the slow growth rate in the industry.

Gillette also achieved the tag of the most innovative company in the world because of its

approach to offer the customers innovative products. Moreover, it is this openness towards itsemployees which made Nucor, a major steel producing company of the US, one of the most

efficient steel producers in the world for decades.

One should encourage suggestions from the bottom line of the workforce. One need not be

amused by this idea, for the quality of their suggestions can improve the firm's productivity.

Openness can go a long way in improving productivity and the most productive companies havethis distinct competitive advantage from their rivals. It has been observed that in many

companies when revenues go up, bureaucracy too follows. Bureaucracy in any sense and form is

always a bad sign for the firms, as it complicates and paralyzes the organization. Complexityusually crushes the flexibility of the firm and this further becomes a hindrance to change. So,

there is no place for bureaucracy in productive companies.

Change is inevitable and that is applicable here also. Productive companies are always willing tochange their strategies and tactics according to the changing needs and demands of the

customers. For them, continuous improvement and a dedication to becoming more efficient day

by day, is a way of life.

Jason opines, "Unless a company is constantly creating new offerings to solve a customer's

problem, its future will be short-lived." There are companies like Gillette, Dell, 3M, P&G,Disney, Microsoft, Nucor, GE, Infosys, Wipro, Hero Honda, Bajaj and Maruti, to name a few,

which have mastered the art of change and innovation. These companies have learnt to be highly


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productive from their initial days. It is the sheer power to change and the ability to think out-of-

the-box that led to the emergence of Air Deccan, which has brought in a new chapter in aviation.Air Deccan is able to provide the lowest fares and still remain viable in this highly price-

competitive Indian aviation industry. It is the power of innovation which helped Rasna to hold

approximately 93% market share in the concentrated soft drink segment of the country despite

the fact that it has stiff competition from big players like Coca-Cola, Hindustan Lever and KraftFoods. Further, the innovative attitude not only helped Ujala challenge the market leader, Robin

Blue, but also create its own identity in the liquid whitener market. There are companies like

Coca-Cola, Nike, Revlon, LIC, etc., which lost their market share because they failed to innovateat the right time or they resisted change. A productive company follows a method of continuous

improvement all the time.

A productive company has a "No Lay-off" tag attached to it. For such companies, employees are

the most valuable assets and they are treated with dignity. In true sense, productive companies

never face the need to lay-off people, because they know better ways of dealing with a crisis thanjust firing people. According to Jason, "Lay-offs destroy a company's ability to be more

productive." A perfect example here is of Nucor. It reduced its production time of producing aton of steel from 11 hours to 30 minutes. It pays its employees much higher than the averageindustry standards. The company has never laid-off an employee in its history.

According to Dan DiMico, Nucor's CEO, "When business is bad, as it's bound to be in a highlycyclical industry like ours, the first thing to go is every executive's perk and bonus, followed by

every plant manager and supervisors giving up theirs. Only then are the workers affected, we'll

reduce the workweek to five days and then four and on some rare occasions even three, but we

never lay-off people."

Nucor has been following these guidelines since its inception. Jason further adds, "Lay-offs are a

management fad used by untalented CEOs and managing directors." It has been observed thatmany companies follow their financial statements to judge how profitable they are, instead of

focusing on the customers and the day-to-day running of the business. Focusing on these will

automatically bring revenues for firms. Running after financial statements will lead companiesnowhere.

Conclusion

Most productive companies focus on the customers to retain them and further to be productive.It's true that they don't do different things rather they do things differently. They have in them the

ability and the guts to think of how they can change the traditional ways of doing things. All

productive firms mentioned here have achieved the top slots not merely by fluke but by their

strong willpower, hard work, dedication, taking calculated risks and making things happen ratherthan waiting for things to happen. Jason list's some points which every company that wish to

achieve its full economic potential must do. The list includes:

Have a 'cause' that unites everyone in the company in pursuit of a common objective. Make certain that everyone within the organization-from the CEO down to the last

employee-is constantly interfacing with customers.


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Strive relentlessly to eliminate wasted effort, work and process. Brilliant companies offer solutions to their customers; they don't sell stuff. Becoming productive

is a difficult task and difficult still is sustaining the position. But in this overcrowded business

world the only option left for firms is to become as productive as they can.

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Productivity - A Competitive Tool