Developing a good productive strategy

I like to view strategy in simple terms. You can have three strategic focus areas - a revenue driven growth strategy (grow revenue faster than profits), a productivity strategy (grow profits faster than revenue), or a market share strategy (grow market share at the cost of profitability). Today I am going to focus on a productivity strategy.

In high growth markets, it is very easy to hide the sins of a lack of productivity and cost. Sooner rather than later it catches up with you. The rapidly growing compensation and other cost in the Middle East that is resulting in operating cost exceeding New York or Chicago will sooner or later come home to roost. So, while the going is still good, I recommend that you put in a productivity oriented framework. Remember focusing on high productivity does not mean low cost or low investment.

Productivity is driven from the standpoint of more effectively (not efficiently), selling your products and services and delivering them. At the end of the day it is focused on making your processes more efficient. Processes in our view are in three broad buckets - innovation, operational effectiveness (selling and delivering products/services), and service quality. Processes are delivered by people and enabled by technology.

Process

A process may not be effective for a number of reasons - the process itself is flawed, the authority levels are inappropriate (slowing the process down), it may not be automated when it could be, or the process is strategically unnecessary but is still being done. On the last one, I remember having a leading luggage manufacturer as a client who had a large service organisation repairing zippers, when you would think that it is in the organisation's interest to not repair the zipper after a reasonable period of time so that the customer could buy a new suitcase.

Understanding why the process is necessary and not working is key, and the resulting ineffectiveness and cost. If the process could be automated, then the solution obviously is to understand the cost and benefits of the automation, and without going crazy on the complexity of automation, getting the automation done. Let a business case be made, which must include a head count reduction, and let the project sponsor be held accountable for ensuring the headcount benefits are achieved.

Reassigning resources

Productivity improvements of people can result from automation, from simplifying or eliminating processes, or from simply asking people to deliver to certain productivity targets. Again the Parkinson's rule comes into good use. Safe to assume that at least 20 per cent of cost and head count can be released. The key word here is released - released to be reassigned to areas that the firm can leverage the additional resources, or released from employment.

Executing productivity strategies will not win you popularity in the short run. Leadership does not only come with popularity. It comes with the ability to take the easy and hard decisions. Executing a productivity strategy will definitely separate the men from the boys.

- The author is the managing director of Cedar Management Consulting International, LLC.