Imagine a world with no computer, no smart phones (or even cell phones!), and very limited access to TVs and vehicles. News would come to you via an actual physical newspaper (and likely be around a day old) unless you commit to listening to the radio. This is how we lived 80 years ago, and while it’s hard to quantify how much easier these amenities have made our lives, there is another stat that is pretty amazing – a worker’s average pay. Let’s say you worked in the manufacturing sector; your pay would have been around 2.5 times less than what you would be paid now. That’s AFTER accounting for inflation!

It’s easy to see we are better off than we were even a short 80 years ago. How did it get this way? Well this is where the history lesson becomes a business lesson. It’s all about productivity. Over these 80 years, businesses have been honing their processes and implementing new technology. The results are that the average worker can produce WAY more per hour. Case in point, the average worker in manufacturing is 2.4 times more productive now than they were in 1987.

So, what’s the moral of the story? Increased productivity equals higher output per hour. Higher output per hour equals less marginal cost. Less marginal cost equals greater flexibility between managing the balance of price and profit. In the end it’s a situation where, the customer, the employees, and the businesses are all better off.

If business owners are smart, they will take these lessons and try to apply them within their organizations. One of the most important things you can focus on is how to increase productivity. The good news is that there are plenty of resources out there on how to leverage processes and there has never been better access to great technology. Here’s a tip on how to make it go as smoothly as possible: involve your key laborers on implementation. If they are involved in streamlining and implementing technology and/or processes, you will have greater buy in from your key people and reap even greater returns from your investments.

So how big can the return be? A 10% increase in your productivity could mean an immediate 30% bump in your bottom line.*

 

-Nino

 

 

* This assumes a 10% net profit margin and a 30% ratio of labor to sales.