Understanding What Productivity Means

Courtesy of The Right Time Is Now

Productivity, the old panacea of economic goodwill, is making a comeback yet again. Several of our leaders have cited its importance, and the latest budget to be unveiled on 22 Feb will announce measures to boost productivity. I am certainly excited about this outcome as it may be the only way forward in a natural resource constrained economy like ours.

In order to understand what productivity is about, let us look at its basic ingredients, which is Value Added. According to Wikipedia,

...the difference between cost of materials and labor to produce a product, and the sale price of a product is the value added. In national accounts used in macroeconomics, it refers to the contribution of the factors of production, i.e., land, labor, and capital goods, to raising the value of a product and corresponds to the incomes received by the owners of these factors... (emphasis mine)

In very simple terms measured in dollars,

Productivity = Total Output/Total Inputs (land,labour,capital, etc)

The computation of Value Added can be done in two ways, the addition method and the subtraction method.

In the addition method, total value added in any organisation is calculated as follows:

Value Added = Net Profits + Wages (including CPF, training costs) + Taxes + Depreciation + Interest

In the subtraction method, value added is derived as follows:

Value Added = Sales Turnover - Cost of Goods Sold - Operating Expenses (non manpower) - All Third Party Costs

To find out how productive your organisation is, you should divide the total value added over the resources employed. The most commonly used measure is labour productivity or Value Added Per Worker, ie

Labour Productivity = Value Added/No of Workers

The next category of productivity would be capital productivity, which is a measure of how efficiently your capital assets (land, building, factory, machinery) are deployed.

Capital Productivity = Value Added/Total Capital Costs

For those operating in the retail or service sectors where rentals are a premium in land-scarce Singapore, space productivity could be another measure. This could be calculated as follows:

Space Productivity = Value Added/Gross Floor Area (ie value added per unit area)

Naturally, there is a lot of flexibility in how precisely you want to measure your firm's output relative to its inputs. For example, some may argue that measuring labour productivity in a highly automated and capital-intensive business like wafer manufacturing may not be accurate as the bulk of investments are in machinery. The application of these measures should thus be adapted depending on one's business.

Having understood how productivity is derived, one should then look at ways to increase one's total output relative to one's inputs. Gunning for sales growth alone isn't enough if that increase comes at the expense of disproportionately higher third party costs (like rentals or utilities).

Similarly, cutting wages isn't the solution - in fact, the whole idea behind the productivity movement is to improve the quality of life for workers and not reduce them. As such, worker salaries and benefits (training, skills upgrading) are considered outputs rather than costs.

In my next post, I will attempt to tackle some of the possibilities in raising productivity as well as the issues involved in them.

Update: Check out this easily digestible book by my friend Chun See on how employee ideas can yield better productivity. He was one of the pioneers of the productivity movement during its heydays and should know a thing or two about it.

The Art of the (internal) Start-up

Courtesy of A Fresh Start (up)

As some of you may know, I am in the midst of switching portfolios in my organisation and heading to the National Art Gallery, Singapore to lead the corporate services function. Unlike my previous role at the National Heritage Board, this one covers a broader spectrum of responsibilities - from HR, Finance, Admin, Strategic Planning, Policy, Marketing & Communications, to IT. You can say that it stretches from conceptualisation, development, funding, and staffing to communication, reporting and implementation.

Due to the start-up nature of the institution (which just celebrated its first birthday), many things need to be put in place. It has certainly been an exhilarating couple of weeks thus far, and I look forward to more excitement ahead.

With the switch in focus of my day job, the contents of this blog would also take on a more expansive feel. While my principal chatter still remains largely focused on marketing, branding, PR and social media, there would be occasional forays into the wider dimensions of business like finance, strategy, and people management.

Perhaps the first area I would like to explore is that of Intrapreneurialism.

Ummm... what is that tongue twisting word all about? Well, according to Wikipedia:

..."A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation". Intrapreneurship is now known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques, that are more traditionally thought of as being the province of entrepreneurship...

To do so, several factors may be necessary:

First, executive and senior management sponsorship is critical. You need to ensure that top management buys in to any new scheme or idea so that experimentation occurs in an environment that is supportive and encouraging.

Second, one needs to seed new initiatives while limiting the risks that big hairy audacious projects may fail miserably. Intrepreneurship doesn't mean betting the house (factory or museum) in return for a potentially disproportionate gain. However, it does mean making small gambles now and then when perfect information isn't forthcoming.

Third, an organisation needs to have the right culture which encourages empowerment, independent thinking and accountability. Some degree of flexibility is needed in any ideation exercise, and traditional hierarchies need to be subverted to some extent. While a certain degree of control is still needed to mitigate failures, employees should be nudged to venture into new territories subject to budgetary limits.

Fourth is the ability to focus on the outcomes of the business as opposed to the processes or inputs. In other words, what is the raison detre of your firm or organisation as opposed to its traditional functions. For example, one could say that a hospital's role isn't just taking care of critically ill patients per se but also promoting long-term health and well-being.

Fifth is the encouragement of teamwork and cross-functional efforts in spearheading new initiatives. By promoting heterogeneous groups, diverse views and perspectives are sought. This cross-fertilisation of ideas and experiences could be useful in generating something more radical and game changing. However, special care must be taken to ensure that participants can contribute equitably.

Finally, the creation of an intrapreneurial culture can only be done by celebrating successes without despising failures. Inadvertently, there will be some projects that will fare better than others and this is a given. As the saying goes, "failure is the mother of success", and one cannot expect to have one's cake and eat it all the time.

To learn more about intrapreneurship, check out this excellent paper written about it.

Creating Exceptional Customer Experiences

Brilliant Smiles from Bangkok (courtesy of Fred@SG)

At the kind invitation of the Singapore Tourism Board, I recently attended a seminar by Dr Lynda Wee of Bootstrap which spoke about creating memorable and delightful customer experiences. Targeted specifically at senior managers in the tourism and lifestyle sectors, the session was full of memorable quotable quotes and smart one-liners, and provided a brief overview of the significance of delighting customers through engineering exceptional experiences.

Why Customer Experience?

According to Lynda, satisfied customers will buy more, spread the word around, and provide positive feedback. This helps to increase sales turnover and reduce marketing and selling expenses for retail businesses.

Loyal customers are also more likely to stay with a company in good and bad times, and they move along the following continuum from browsers --> buyers --> brand loyals.

From Customer Service to Customer Experience

In the traditional mode of lifestyle businesses, customer service was key. This revolved around the acronym GST which meant:

G reet

S mile

T hank

Citing Hertzberg's two factors - satisfaction and motivation - Lynda stated that there is a relationship between the degree of customer happiness and the degree in which they are satisfied and motivated.

However, in the new consumer space, customer experience which relates to how they feel takes precedence over service. Customers trust their experience more than what they hear the service providers say, and this is nicely captured by the following quotes:

"Companies spend millions creating and advertising their brands, yet the customer's experience is what drives customer perception." - John R Dijulius III

"Well done is better than well said" - Benjamin Franklin

Four Steps to Customer Experience

How then can retailers provide remarkable customer experience? There are four steps:

1) Think like the customer and create value.

2) Begin with the end in mind. Consider the outcomes, visualise and actualise them through deeds and not just words alone.

3) Go over and above what is required or anticipated at every customer touchpoint. We are talking about total brand immersion here.

4) Work on the power of one, ie teamwork where all hands work together in a seamless manner.

Blending Function with Emotion

Exceptional experiences comes from the interplay of functional and emotional factors like the:

Head - for sensing and observing what the best approach should be. Information should also be given readily.

Heart - to embrace a "will do" spirit and look at how everybody is treated humanely and warmly.

Hands - to ensure that employees "can do" the task that they are assigned through training, mentorship and guidance.

Lynda also created a 4 C Framework that helps to encapsulate the main points in choreographing and creating memorable experiences. These are as follows:

Crew Excellence

This has to start from the top, with the chief executives and senior managers setting the trail for others to follow. They should walk the talk, focus on the internal customer before moving on to the external customer, and act as role models for their crew to follow. An example is Jonathan Larsen, CEO of Citibank in Singapore, who serves on the shopfloor every Thursday and has computer screens that monitor phone calls and how long individuals take to respond to them.

A good start would be getting the right people on the bus, wrong people off the bus, and the right people in the right seats in the organisation.

Culture Excellence

An example of this is Starbucks (well at least in Singapore), who are in the "people business serving coffee". Some of the knowledge and skills needed to engender culture excellence include coffee knowledge, skills needed to brew a great cuppa, the showmanship involved in handling food and interaction with customers.

Two other well known examples are Ritz Carlton ("We are Ladies and Gentlemen serving Ladies and Gentlemen") and Singapore Airlines ("A Great Way to Fly").

Contact Excellence

This would look at the interaction points between an organisation and its customers. It should be clearly mapped out and defined every single step of the way. For example, at Disneyland, experience standards cover key areas like safety, courtesy, showmanship and efficiency. Achieving Contact Excellence is illustrated in its rules of behaviour:

1) Make eye contact and smile!

2) Greet and welcome each and every guest

3) Seek out guest contact

4) Provide immediate service recovery

5) Display appropriate body language at all times

6) Preserve the "magical" guest experience

7) Thank each and every guest

Even a park cleaner at Disneyland would be required not just to clean, but to learn how to take camera pictures and read maps.

Customer Metrics Excellence

Finally, one needs to have a way of measuring the impact of one's customer experience efforts. This can take the form of feedback forms that measure Customer Satisfaction Index or CSI, mystery audits, focus group sessions, repeat patronage figures as well as bottomline indicators.

The Customer Experience Process

To conclude, a process map for a company's customer experience journey was shared by Lynda. It looks like the following:

Identify sense of purpose --> Define customer experience vision statement --> Define customer experience standards --> Pilot-test customer experience standards --> Revise customer experience standards --> Train/coach and communicate on customer experience standards --> Conduct mystery audit --> Plan & implement Reward & Recognition system (which loops back to the beginning).

Do you have any tips on achieving customer experience excellence? Do share them with me!