Maximising the production of a business's output requires specific elements and components, whether it is a tangible in intangible end product. Constant refinement, scrutiny and good organisation is essential to ensure a successful and profitable production.
Coming, as I do, from a production engineering & management background, I often find myself referring to the efficiency and productivity of businesses that I work with in industrial terms. In doing so, I often notice a somewhat glazed expression overtake the business owner’s face. They are clearly confused and thinking: "What the heck is he talking about. This is a law office not a widget plant.” or very much something like that. I obviously do clarify what I mean to them.
I would like to explain this to you in my first attempt at a blog as I would now like to share my years of experience and the knowledge gained with a wider audience.
When it comes to oiling the wheels of a well run business the key elements to address must include efficiency, productivity and profitability:
This is very much a measure of the efficiency of production - a ratio of production output to what is required to produce it (the inputs).
The measure of productivity is defined as the output per one unit compared to cost input.
Productivity is often a more difficult concept for the "non widget maker " to grasp than productivity when this is related to their own operation. However, consider that when using both terms we are not just measuring the effect of the outcome of the business transaction, getting it done and having the customer or patient reasonably satisfied with the result.
To determine profitability, we ultimately need to be able to measure the related time and use of cost resource that has been employed in achieving the objective, which of course is the “product".
Compare the similarity of the effect of a process machine producing 100 units per hour and that of one producing 130 units per hour. Or any office producing 4 successful objectives (called the product) per day and one producing 5 per day.
The resources and costs being equal, the improved output equals increased profitability.
Most have used or heard the expression that something is working like a well-oiled machine, this I imagine derives from our common laboring and industrial heritage.
Put simply, the production of a service or product should be regarded in a similar manner.
Efficiency and Productivity = Increased Profitability,
Improvement and Cost Reduction =Increased Profitability.
Review and Improve
To be a successful business in 2021 the product/service must meet the need/solve the problem, have added value and be viable to produce all at the same. If you need help getting the balance right in your business and your end product/service then do get in touch with Mervyn, The Business Doctor. You just might be surprised how a little objective insight can help. You can contact Mervyn on .......