Productivity vs Efficiency and How to Balance Both
What if I told you that you could strike a balance for your business that enables you to optimize your business to produce large volumes of high quality products from your current resources? Imagine how that would change the columns on your income statement. The good news is that you can achieve that with minimal struggle. The secret lies in two simple words: productivity, and efficiency.
Many people are under the impression that productivity is the same thing as efficiency. This is understandable, especially considering the fact that they are two things that every business owner would want to achieve in business.
Today, we are going to look at these two words and how you can revolutionize your business using both concepts. However, before we can go too deep into how you can balance these two for maximum effect, let’s take a step back and try to understand what each of these concepts mean.
Let’s start with productivity.
WHAT IS PRODUCTIVITY?
In most industries, productivity is measured by the output in a specific period. For example, if you produce 500 units in a week, and 700 in the next week, you were more productive in the second week than you were in the first one. It’s all about how much you are able to produce.
Of course, this depends on your industry. If you are a salesman, your productivity will be measured by the sales volume you are able to generate. For a service provider, productivitywill be measured by the number of clients they are able to serve and so on. You get the picture.
We have all had one of those days when we felt totally useless. No matter how much you try, you just can’t seem to get yourself to do any meaningful work. Even if you force yourself to work, the creative juices are just not flowing. You go back home feeling down and worthless.
Have you ever had one of those days?
Imagine a journalist who spends hours on a story she knows will do well, only to have it thrown to the trash by the boss. She would most likely start questioning her competence as a journalist. The result is that she won’t feel the motivation to work on more stories because she is not even sure if she is cut out for the job. A part of her feels that she might spend a lot of time on a piece and still not have it published.
What this journalist lacks, is productivity. She’s not able to produce what is expected of her as a journalist.
Let’s flip the coin.
You wake up early feeling energetic and alive. You have enough time to make your bed, take a nice warm shower and have a healthy breakfast. You get to work 15 minutes early and have time some to get things in order before you start your workday.
Everything just seems to work for you and when you are required to do some creative work, ideas seem to flow to you naturally. You end up producing impeccable results that you are proud to be associated with. Somehow, it doesn’t even feel like you struggled to get these good results so you leave the office feeling happy and in control. When you look back at your day, you can see tangible results.
On this day, you were productive and with it came many good emotions. More productivity means getting more output.
We all want to be productive in our day to day activities. When we are productive, our superiors are happy and we leave with a good sense of achievement. We are therefore happier and more confident in ourselves.
Now that we understand what productivity is, let’s take a look at efficiency.
WHAT IS EFFICIENCY?
While productivity is about the quantity of the results that we are able to produce, efficiency is about the quality. It looks at the production process, how resources were utilized in the production and the quality of the end products of the production process. Simply put, efficiency is about achieving maximum productivity with minimum waste.
So if your job involves processing of raw materials, your efficiency will be determined by your output, but also by the resources that you use in the production process.
Let’s look at an example. Two salesmen, Dan and Victor work for an insurance company. They both sell life insurance packages but each salesman has a different approach to selling. In April, Victor brought business worth $10,000 but spent $3,000 on travelling. Dan on the other hand, did all his selling on the phone and was able to sell $9,000. His phone bill was $50. When we consider the two salesmen, we find that Victor is less efficient than Dan because although the total volume of sales is higher, he uses more resources thus creating a smaller profit for the company.
Victor is more productive because he was able to bring in more, but Dan is more efficient because he used fewer resources.
There are several ways that you can increase your efficiencyand still achieve positive results. The first one is seen in the above example. You can decide to reduce your resource utilization. If your method of getting the job done involves large expenses, you can choose to look for a way to get the same work done without having to incur the expense like what Dan did.
The other method of increasing efficiency is reducing wastage. For example, if Victor analyzed his method and found that he visited an average of three clients per day, he can plan the visits in a way that allows him to talk to more people every day. For example, he can schedule appointments with all the clients in a specific area, say, a five block radius,on one day to minimize the time wasted getting from one client to the other.
This way, although his travel expenses will not go down, he will be able to meet more clients and as a result, he will stand a chance of increasing the volume of business he brings in a month.
If you work in a factory where your primary objective is to process raw materials, you can do this by reducing any wastage of raw materials or time during the processing. For example, measures can be taken to reduce spillages during transport. Another measure that can help is sending operators to another station when their machine breaks down.
Let’s now take a look at how you can improve each of these in your business by looking at the factors affecting productivity and efficiency.
FACTORS AFFECTING PRODUCTIVITY
- Management: It’s a well-known fact that management plays a big role in determining productivity. Good management often leads to good performance. Studies have shown that the training, development and encouragement managers give their employees will determine to a great extent how productive the employees become. Managers should keep their promises to employees and they should focus on encouraging the workforce.
- Office Design: Studies have shown that there is a direct link between productivity and the design of the office. One study showed that improving the physical environment in the office could improve productivity by up to 22%. In the same study, 89% of respondents blamed the office environment for their dissatisfaction with their job. Some of the important things to consider about the office environment include the furniture, lighting, temperature and noise.
- Breaks: If you are the kind of person who sits at your desk in the morning and work non-stop until evening, you are not getting the most out of your time at work. There are numerous studies that show a positive effect on your productivity from taking breaks. So take a break. You will not lose momentum. If anything, that break will help you stay focused for longer hence your performance on the task will be improved.
- Man Power: To be able to get the best results, then you need to make the best selection. You need to give the job to the right man. Don’t ask a doctor to do an engineer’s work or vice versa. The other important thing is training. You need to ensure that your workforce is properly trained for the job. Finally, you need to ensure that there are enough people to do the work.
- Technology: Although technology is often seen as a distraction, when properly it will significantly enhance office productivity. However, you need to also make sure that you pick the right tool for the job. You need to check to make sure that the new technology you are buying will integrate with your existing systems.
- Input Materials: This comes into play where there are raw materials used in the process. As the popular saying goes, garbage in, garbage out. When you don’t monitor the quality of materials going in, you can easily find yourself with too many defects. As a result, you will have fewer usable products from your raw materials.
- Vision and Strategy: Employees are generally more productive when they are in an environment where they are motivated to succeed. Having a clear vision for the company and a strategy for getting there makes employees feel involved in helping the company succeed and with that they are also inspired to achieve their personal goals. Involving employees in setting company goals will not only motivate them to be more productive, but it will also encourage innovation that will help the company adapt to changes in the markets.
- Incentives: When employees feel that the company has made a commitment to making them achieve their goals, they will work harder towards achieving these goals. Think about it. Where are you likely to perform better between a company that offers bonuses when you hit your targets and another one where there are no rewards for good performance? Incentives can be in form of bonuses, promotions or direct involvement in decision making.
- Employee Evaluations: Regular evaluation of performance is beneficial to both the employees and management. Evaluations should be interactive where the manager gives feedback – both positive and negative – on the employee’s performance and the employee gets a chance to talk about the lessons learned since the last evaluation and also to suggest improvements that they would like to see moving forward. Taking suggestions alone is not enough. Where possible, you should incorporate these suggestions in the decisions you make as a manager. This will make them feel happy, needed and as a result, they will be more productive.
- Stress: Stress also affects productivity but on the other side of the scale. If robs you of your concentration hence you are not able to focus on the tasks that you are supposed to be focusing on. When you are distracted, you are not able to make appropriate decisions at the right time and that will be seen in your output.
- Job Security: This is a very common cause of uncertainty in workers. This uncertainty is a big reason behind the lack of productivity in employees. Put yourself in an employee’s boots. How would you work if you feel that you can be sent home any minute? Chances are that you will not work to your full potential. Most of your time will be spent worrying because you are not sure when you will be sent packing. You will also second guess every decision that you make because who knows? It could be the one that causes your boss to send you home. Managers should avoid firings and layoffs unless they are absolutely necessary. If something like a layoff does occur, managers need to meet with the remaining employees and explain the circumstances and also to give them an assurance that no further layoffs are anticipated in the future.
- Heavy Workloads: Have you ever found yourself with so much to do that you end up doing nothing? If you are like most people, it becomes very difficult to focus and most of the time you find yourself worrying about the work on your to-do list. That is the same thing that will happen to your employees. In addition to reducing their productivity, it will leave them stressed out, demoralized, and also take a toll on their health.
- Inadequate Resources: When assigning a task to someone, you should ensure that you provide sufficient time and material resources for the task. This will encourage them to perform to the best of their ability and as a result, they will be proud of their achievements.
- Poor Health Conditions: An employee with deteriorating health condition will not be productive in the workplace. Every time this employee misses work, someone else will have to carry the workload and the end result is worse for everyone. To counteract this, invest in your employees’ health by providing health coverage for them. Investing in gym memberships and other holistic clubs for employees will promote your employees health and that will have positive results on the company’s performance in the long run.
Let’s now look at how you can improve efficiency.
FACTORS AFFECTING EFFICIENCY
- Working Hours: Long working hours with no breaks will quickly wear you down. After a few hours of continuous work, you will find yourself tired and mentally drained and as a result it will be hard to concentrate on your work. That’s where the problems start coming in. Your attention to detail will not be as sharp as it should be and as a result, you will miss details that will cause the quality of the output to drop.
- Compensation: Highly paid workers who receive their dues in full and on time will usually do a better job than their counterparts who are poorly paid. Workers who are poorly paid won’t feel appreciated by the company and in return, they will not put their hearts into the tasks they are assigned. They will always be grumbling since they will be trying to do only what they have to do. Anything that’s not their responsibility is none of their business so you can’t rely on them.
- Incentives: Just like it is with productivity, incentives can also encourage employees to work efficiently. This time, instead of rewarding high productivity, you focus more on efficiency. For example, rewarding the department with minimum wastes will encourage everyone to try and make the best use of the available resources. You just need to make sure that the method used to determine the department to award is fair and clear enough for everyone to understand.
- Relationship between employer and employees: There are cases where employers oppress their employees simply because they are in power and nothing can be done to them. In such cases, employees will usually feel that they are too weak to confront the employer. For that reason, the employees might resort to fighting back using other methods that don’t leave them exposed. Most of these methods affect the quality of output hence resources are wasted. For example, a machine operator can loosen a fastener deliberately so that the machine breaks down so that he can be allowed to rest as the machine is being fixed.
- Competence: Picking the right worker for the job is more beneficial to the employer. This is because the quality will be top-notch and they will usually not need to work under strict supervision. Defective outputs will also be at a minimum. So invest in training your employees and they will thank you with higher efficiency.
- Health: Healthy individuals are always more efficient than their counterparts with health problems. If the job environment exposes your employees to hazardous materials, make sure you invest in sufficient protective equipment to show that you are concerned about their well-being. There is nothing scarier than being sent to work on a station where the previous colleague left due to work related illnesses.
- Technology: Modern technology enables us to achieve much more than what we would have been able to achieve when working using conventional methods. Machines are able to produce a higher quality of output faster when compared to men working using their bare hands. Invest in new technology to save on labor and also to improve the quality of your outputs.
- Distractions: Every time you are distracted from your work, it can take you up to 15 minutes before your brain can go back to full concentration on the task. This back and forth switching between several tasks overloads your brain and as a result, you will get tired faster. Multitasking can reduce your efficiency by up to 40% so it’s important that you avoid distractions at all costs if your goal is to maximize efficiency.
- Work floor Layout: Sometimes we lose a lot of time moving back and forth around the work floor. This is time that can be put to good use and help increase out output. With this in mind, it is important to design the work floor in an organized and efficient manner. If it is a factory, the floor should be designed in the systematic flow of processes so that there will be no need to move materials long distances from one machine to the next one.
- Goals and Targets: Picture this: Employee A goes to work at 9 in the morning and knowing that she will be there until 5 in the evening. She knows her duties, but she doesn’t have specific goals or targets for the day. Employee B on the other hand knows that before the end of the day, she will need to have finished and handed in the report about last week’s activity. Which of the two employees will be more efficient? More likely than not, Employee B will achieve more. This is because she is well motivated towards achieving her goal for the day.
- Encourage employees to ask questions: Somebody once said that prevention is better than cure. It certainly is more efficient to prevent than to cure a problem. In most cases, employees are very reluctant to ask for guidance. Some of them don’t want to appear like they lack specific knowledge and others are just scared. Make sure you hammer the point home that it is okay to ask questions whenever someone is stuck. This will help you avoid costs associated with employees failing after trying to do something they are not conversant with.
HOW TO MAXIMIZE BOTH EFFICIENCY AND PRODUCTIVITY
Since both these things are beneficial to the business, the million dollar question is whether it is possible to maximize both in the same business. Maximizing efficiency requires deliberate focus on every single detail of your work and that will usually eat up more time. As a result, you will not be able to produce as much hence your productivity can be reduced.
With this in mind, it is important to strike a balance between the two that works best for your company. Here are some things that you can do strike this balance:
- Regularly assess your process to make sure that you are using the most effective methods for achieving the various tasks. Where possible, make improvements that will either improve product quality or reduce the turnaround time.
- Listen to your employees and identify any common obstacles that they encounter as they go about their duties. These common obstacles will be your starting point when looking for a way to improve your process. Instead of only tracking changes in output, you can also track improvements such as time saved on tasks like searching for documents.
- Identify the most profitable balance between productivity and efficiency and communicate the same to your employees. For example, having a quality check after each processing station in the manufacturing process will help identify defects early so no resources are going to be spent processing defective products that will eventually end up in the recycle bin. However, doing this will also cost you valuable time and valuable man hours. You therefore need to make a compromise and pick a few critical stations – depending on the length of your manufacturing process – where you will do the quality check. This way, you will still identify defects reasonably early without having to pay the full price of doing a quality check per station.
- Understand your market and build products for them. If your target market is looking for high end products and they are willing to pay a premium for it, then you’ll need to focus more on efficiency and quality. If on the other hand they are looking for the cheapest product, you can cut some corners and focus more on getting more output without incurring a high production cost. An example would be the luxury car market where a lot of attention is paid on the details sometimes to the extent of hand-making most of the components of the car vis-à-vis the other mass produced cars.
No matter the line of business that you are in, there will always be a benefit of working more efficiently and striving to improve your productivity. With the current trend, the business that will survive will be the one that makes the most out of the resources that are available to it. So make sure that you carefully analyze your processes and identify ways that you can improve the efficiency of your processes.