Management Techniques to Improve Productivity

Despite the almost constant push into new research on improving productivity, studies have shown that proven management techniques like setting targets and monitoring performance still help companies become more profitable and raise productivity.

Researchers from the London School of Economics, Stanford University, and the consulting firm McKinsey & Co. did a study in 2007 of more than 4,600 mid-sized factories in 12 countries to test these management techniques statistically. One conclusion was that the countries with the most productive factories were also the ones with the highest per capita incomes.

Another predictor of success was a company being multi-national. These companies tend to spread good management...

techniques better. One prime example of that is US multi-national companies adopting the lean manufacturing techniques pioneered by Japanese automaker Toyota.

But one place that managers consistently fell short was in thinking they were more effective than their workers thought they were. The study found little correlation between how managers assessed their management techniques and how productive the company was.

One management technique measured in the study was tracking of production. A firm would score highly in tracking if, for example, it had computer screens that displayed up-to-the-minute production totals and tracked progress toward targets. A firm that, say, tracked performance only when output clearly fell would receive a low score on tracking. The businesses that consistently tracked performance prevailed in terms of productivity.

The three broad categories of management practices studied were operations management, performance management, and people management. Regardless of country and industry, high scores in these three categories of management practices correlated with higher productivity.

A one-point increase in a company’s average rating on management practices in the survey translated into a 25% increase in productivity and a 65% increase in return on invested capital. Of these companies that were publicly traded, higher scoring ones had higher stock market valuations than publicly traded firms with worse management scores.

Technology, training, and motivation are three additional areas that successful companies invest in. Labor saving technology is an obvious booster of productivity. Proper training of workers also improves productivity. And keeping employees motivated, with competitive pay, incentives, rewards, and a clean and safe work environment are other productivity-enhancing management steps.

The bottom line results of the London School of Economics / Stanford University study showed that there’s no “secret formula” that makes companies more productive. In most cases it is simply putting into place well-known management practices such as tracking performance that makes the greatest difference to a company’s competitiveness.

This is excellent news for companies who make a commitment to improve productivity. It means that standard techniques that have been used for years are quite effective in making companies more successful.

Even the implementation of technology is rapidly becoming easier for companies with little capital to invest. Today there are plenty of free internet resources and web-based applications that allow even strapped companies to provide workers with the software they need for their work. The same is true for continuing training and education, with web-based applications widely available.

Productivity and good management practices are solidly linked, and any company can improve their standing by practicing solid management practices that have been proven to work.

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