Labor productivity numbers report the ratio of the cost of production and value of results. How does your business measure up and how can you increase the productivity of your small business?

Recently, the US Department of Labor reported a >0.3% decline in labor productivity. Although output and hours worked rose, the rate of productivity fell against increases in compensation. In brief, workers do not produce as paid.

Is this your experience? What can small business owners do?

  1. Look to your past experience to set a future baseline. Determine an average day’s output over a period, say a quarter; then, divide this by the number of people working on that product or service, for example, retail sales, patient visits, well repairs.
  2. Expect to be dissatisfied, then realize it has little to do with the people; it has more to do with the process. Study the process – with staff input (where this involves employees). Figure out what is in the way of increasing the speed and quality of work. For example, filling out sales receipts manually will add time to every transaction, as will manually writing notes in a patient record, or waiting to order parts that are common to gas & oil well repairs.
  3. Lay out your future metrics. Now that you have a baseline, keep records on what happens in the following three months. If you see little change or do not see the change you want to, revisit the process.
  4. Repeat this path or process and adjustment without failure. Share results with employees to let them know you are watching and to motivate improvement. Find a way to provide incentives for improvement.

Such an approach keeps you on your toes, driving you as well as staff. It educates you and redirects your energies and purpose. And, finally, it creates a record for planning, as well as a baseline for providing employee incentives.


by Steven Schlagel