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Keep your business on track by spotting the productivity warning signs and taking steps to boost your output.

Sign #1: You don't measure productivity

If your business doesn't know how to assess productivity, you won't get a true picture of how well you're doing – and where you can make gains. It's estimated that seven in 10 SMEs measure their productivity1 already. And it needn't cost you time or money.

How to deal with it

There's no one-size-fits-all when it comes to productivity measurement. Straightforward formulas can tell you your business productivity as a relation of outputs to inputs; how much is produced divided by how many hours and workers it took to produce it. What a good ratio looks like depends on your industry, but at a basic level a company that gets more output for less cost is going to have a competitive advantage over its peers.

More sophisticated project management and time management tools can track productivity around specific tasks and for specific projects, while performance management tools can measure productivity against wider company objectives.

An understanding of what to measure, and a knowledge of alternative methods will help you choose the tool or tools that are effective for your business.

Sign #2: No clear process for Absenteeism

People not coming to work is something most of us would associate with low productivity. Dealing with it can have a positive effect on business finances and staff morale too.2

In the UK absenteeism has declined. According to the latest figures from the Office for National Statistics (ONS), the average number of sickness absence days taken by UK workers has almost halved since 1993, standing at an average of 4.1 days in 2017. Despite this, most businesses will probably face the issue of absenteeism at some point.

How to deal with it

Acas emphasises the importance of having clear processes for dealing with absenteeism. These involve getting an understanding of why an employee is taking time off work. Absenteeism can be a symptom of other workplace issues, like bullying or poor management, or personal issues like mental health problems so these will need to be addressed to improve productivity.

Sign #3: You have a culture of presenteeism

Employees turning up for work when not fully 'present' – because of physical illness, mental health problems or sheer disengagement – has also been associated with poor productivity.3

According to Chartered Institute of Personnel and Development (CIPD) research4, a culture of presenteeism in British workplaces is rising year on year. Associated with presenteeism is 'leaveism' – employees using annual leave to work.

In contrast, many successful businesses are recognising the importance of employees taking time off when they need it. EventBrite and Dropbox5 are among an increasing number of businesses that offer their workforce unlimited holidays. And though it doesn't work for everyone, some businesses say this flexibility has seen them increase their productivity.6

How to deal with it

Tackling presenteeism can be about recognising when your management and leadership style is creating what's known as a 'jackets-on-chairs' culture. Measuring output and performance of teams and individuals will allow you to spot presenteeism. It can also be measured through staff surveys on engagement, wellbeing and morale.

Supporting employees' physical health and general wellbeing is key, according to the CIPD. “In order to encourage a healthy workplace, organisations need to look beyond sickness absence rates alone and develop a solid, evidence-based understanding of the underlying causes of work-related stress and unhealthy behaviour like presenteeism,” says Rachel Suff, the organisation's Senior Employment Relations Adviser.

Sign #4: Decline in product and service quality

Productivity is usually calculated by measuring outputs in relation to inputs. This can work well in some situations – bulk manufacturing, for example. But it's not so effective when measuring outputs in our modern knowledge and service industries. Here, quality is vital. For example, the productivity of waiting staff might be measured by how many tables they serve in an hour. But if they're muddling up orders or being rude and customers leave, or the restaurant ends up getting bad reviews, it isn't very productive.

Poor quality can lead to complaints – a clear warning sign and a productivity-sapper in itself. It's estimated that the UK could save £190 billion a year in lost productivity due to complaints.7

How to deal with it

Getting to the bottom of decline in quality means asking questions. Are employees capable of and trained to perform the jobs they have been tasked with? Do they have the time and tools they need to carry out their tasks? Is adequate management support in place? Once you know the answers to these questions, you can take steps to fix the issue.

Sign #5: There's low morale among staff

Research shows that productivity and competitiveness8 can improve with higher morale, as well as customer satisfaction and staff retention. Employees who are disengaged will put in less 'discretionary effort' - going above and beyond the minimum requirements of their role. As one report on the importance of morale says: 'the success and effectiveness of any firm depend to a large extent on how well employees are motivated.'9

Improving employee engagement can improve the bottom line. Gallup estimates the UK could save between £52 billion and £70 billion workplace costs per year by tackling active disengagement.10

How to deal with it

Recognition of employees' contribution to the business is key to boosting morale. This can be done by giving feedback and praise and by setting up more formal employee recognition and reward programmes. Peer-to-peer recognition programmes, where employees praise each other's contributions, can be particularly effective in building people's confidence and bringing teams together.

Sign #6: Lack of digital skills

Not taking advantage of digital technology can shut businesses out of opportunities to improve productivity, by working faster, smoother, and smarter. Digital skills, like being able to buy and sell goods online, use web-based accounting software, or developing a more effective website, allow for fewer inputs to generate the same outputs.

One example of how digital can boost productivity is at Dryden Farms in Durham. The business has increased yields by using GPS to optimise fertiliser application on their land. Plus, their new website means they can promote contracting agricultural machinery across the country.11

The Lloyds Bank Digital Business Index found that 60,000 charities and 655,000 SMEs have low digital capability. If they were to develop high digital capability, they could unlock an additional £84.5 billion in turnover.12

How to deal with it

Instead of accepting how things are, question what digital capabilities could do for every area of your business. What processes could be made faster and less labour intensive? How could digital help you widen your reach and open up new markets for your products? Training in digital skills is then key so you can start to implement the opportunities you've identified and make the right decisions.

Key takeaways on productivity

  1. Start measuring it
  2. Check your absence levels
  3. Watch for a culture of 'presenteeism'
  4. Benchmark quality
  5. Raise morale
  6. Grow your digital skills

Want to know more about improving your digital skills? Lloyds Bank is committed to training 1.8 million organisations and individuals in digital skills before 2020, for free.

The Power of Productivity: Measuring, understanding and improving productivity for SMEs - Close Brothers (PDF, 973KB)

Effects of Absenteeism on Company Productivity, Efficiency, and Profitability - Macrothink Institute

Presenteeism: A review of current thinking - The Institute for Employment Studies (PDF, 1.3 KB)

We need to watch out for unhealthy behaviour at work - The Chartered Institute of Personnel and Development

7 Companies That Give Employees Unlimited Holiday Time - Glassdoor

Unlimited holiday: A perk that comes with pitfalls - BBC News

Why complaining really does take all day - BBC News

The Effect of Low Morale and Motivation on Employees’ Productivity & Competitiveness in Jordanian Industrial Companies - Researchgate

9 State of the Global Workplace - GALLUP

10 UK Business and Charity Digital Index - Lloyds Bank

Raising UK competitiveness: Inside the mindsets of leaders of firms

This report, supported through our strategic partnership with Be the Business, brings to light the importance of attitudes in driving a company culture that celebrates productivity and its improvement

Read the report (PDF, 5.7MB)pdf opens in new window

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