Measuring and understanding productivity

For those who missed it, Management for Design were mentioned by PSMJ in relation to the productivity insights gleaned from our Business Conditions Survey. Data shows that many firms don’t have a true understanding of what productivity means or of the most effective ways of achieving it. Getting to grips with how you define and measure productivity in your business can present real opportunities for productivity growth.

What is productivity?

39% of architecture and engineering firms surveyed are not measuring productivity in line with this ratio. These businesses are either unable to define productivity or think that productivity is derived from sales and growth, but that’s putting the cart before the horse. As PSMJ point out, cost reduction (indicated by 6% of respondents) rarely increases productivity, and we think cost reduction in and of itself is not a clear way of defining productivity as cost reduction may actually be an indication of staff attrition or a number of other significant factors that have potentially contributed to a decrease of productivity within the business.

How do you measure productivity?

Respondents who identified more capability (19%) as a measurement for productivity were closer to the money and the 39% of respondents who measured productivity as a way of doing more with less or the same resources are ahead of the curve. These businesses recognise that productivity and — as a direct result — profitability, are best measured by analysing the balance between output volume and input volume. These firms incorporate productivity into their business analytics, where data can have a real impact on strategic plans and growth strategies.

Measuring productivity

Firms who are failing to accurately measure productivity are missing out on huge business insights and growth opportunities, allowing competing firms to out run you. These insights present an opportunity for architecture and engineering firms to take a closer look at how productivity is measured, how it should be measured, and how to maximise the potential for productivity gains and financial growth.

PSMJ define productivity “as the ratio of output volume to input volume”. Firms should be measuring billable and non-billable hours alongside actual client billings. Productivity growth is best achieved when more hours are billed for less staff time, e.g. fees/hours worked.

Many firms don’t measure non-billable hours. We think this is an oversight. All hours spent on client work should be logged. This includes rework and out-ofscope tasks that often don’t end up charged to the client. Measuring all areas of input is the first step to ensuring that your analytics are truly meaningful. Once that stat is captured you can measure it with output and compare this ratio over time to get an accurate picture of productivity gains and losses in your organisation.

Improving productivity

Our annual Business Conditions Survey always asks business leaders to let us know how they plan to improve productivity in the year ahead. Looking at the most popular responses can help your firm gain insight into what competitors are doing to enhance productivity and what options you should consider to keep up and remain competitive in the market.

The main strategies for improving productivity identified in our latest survey include:

1. More accountability for performance:

2. Implement improved management systems:

3. Improve utilization of resources:

4. Identify and reduce inefficient work practices:

If business leaders implement these four strategies over the next 12 months, productivity will increase and useful insights will be gained into how to maintain and improve productivity in your architecture and engineering firm into the future.