UNDERSTANDING PRODUCTIVITY TO DRIVE BUSINESS PERFORMANCE AND ROI

A decline in Productivity was recently identified in a white paper as Australia’s biggest issue to be resolved at a macro-economic level to enable Australia to remain competitive.[1] The Policy Institute of Australia’s publication (Match Fit – Reinvigorating Competition in Australia) stated that higher Productivity, i.e. more outputs for the same inputs, require better allocation of labour and/or capital while recommending more competition and dynamism to reform productivity.

The Australian government has responded with policies to improve productivity focus on creating a more dynamic economy, building a skilled workforce, and accelerating digital adoption. Key initiatives include a 10-year National Competition Policy reform ($900M fund), banning non-compete clauses to enhance labour mobility, reducing red tape, investing in clean energy, and streamlining occupational licensing.[2]

At Realign Consulting, we’ve seen firsthand how productivity increases and been able to measure and implement these metrics into KPI’s can help drive business performance and growth.

1.     Why is Productivity important?

At a macro economic level, Productivity is the primary driver of long-term economic growth and improved living standards, allowing more goods and services to be produced with fewer resources. It increases real wages, lowers consumer prices, and boosts national income, ultimately enabling better public services and allowing individuals to achieve a higher quality of life with less working time.

At a micro economic level, i.e. business level, productivity improvements are vital to remain competitive, either to thwart local competition or imports.

2.     What can be done by individual businesses to improve productivity?

Most companies address productivity through labour cost reductions and automation of processes, while recently the advent and adoption of AI has started playing a significant role as a productivity tool.

In our opinion however, very few companies have a corporate-wide view of productivity strategies, and even less companies actively measure Productivity as a performance metric (KPI). Globally, Best in Class companies typically have operational strategies that cascade down to KPIs on the “shop floor”, with all employees engaged in continuously improving productivity as a key KPI.

Common Productivity KPIs and Examples:

·       Financial & Output Metrics:

o   Revenue per Employee: Total revenue divided by the number of employees.

o   Unit Production Rate: Number of products produced per hour or day.

o   Project Completion Rate: Percentage of projects completed on time and within budget.

o   Days Sales Outstanding/Days Payables Outstanding: Measures how quickly cash is collected from customers and long it takes the company to pay its own bills

·       Time & Efficiency Metrics:

o   Employee Utilization Rate: Percentage of total working hours spent on billable or core tasks.

o   Average Handling Time (AHT): Time taken to resolve customer service or support tickets.

o   Cycle Time: Time taken to complete a specific, repeatable process from start to finish.

·       Quality & Operational Metrics:

o   Error Rate/Quality of Work: Percentage of defects, rework, or customer complaints.

o   Absenteeism Rate: Number of working days lost to unplanned absence.

o   System Downtime: Amount of time production systems are inactive.

·       Individual & Team Metrics:

o   Goal Achievement Percentage: Percentage of set KPIs or OKRs (Objectives and Key Results) reached.

o   Focus Hours Per Day: Time spent on deep work without interruptions. 

o   Process Improvements: Measuring how many manual processes were improved through automation

3.     How to Measure Productivity
For instance, to measure Labor Productivity, divide total output by total hours worked. Using a dashboard to track these metrics over time helps identify areas for improvement.

Companies that are serious about productivity will select KPIs that measure metrics that move the needle, and will use the KPI as a continuous improvement tool to continuously enhance productivity.

4.     AI as productivity tool?

It is important to remember that Technology is only an “enabler”. The business still needs the right People (requisite Knowledge/Skills) and the appropriate Culture (willingness to improve) to collectively and effectively exploit the potential of the technology. In the case of AI technology, the business will still require the right People to select, design and implement the appropriate AI technology and to then use effectively (interpret outputs and decision-making), while a collective Culture of continuous improvement focused on Productivity improvement is essential throughout the organization to realise the business’ Productivity goals and aspirations.

Building on the need for the right people, the specific skill sets required are evolving from traditional process management towards analytical and interpretive expertise. In an AI-enhanced workplace, employees are less frequently the primary "doers" of repetitive tasks and more often the "supervisors" and "strategists" of automated systems. This means the business needs people who possess not only the technical knowledge to train and maintain these systems but, more importantly, the critical thinking skills to question the outputs. An AI model might identify an efficiency opportunity based on data, but it requires a human with contextual knowledge and business acumen to determine whether that opportunity is viable, ethical, and aligned with the company’s broader strategy. Therefore, upskilling your workforce to become proficient in data literacy and exception handling is just as vital as the initial implementation of the software itself.

Furthermore, while a culture of continuous improvement has always been valuable, AI demands that this culture be underpinned by a mindset of trust and adaptability. Because AI tools can sometimes operate as a "black box"—delivering recommendations without clear explanations—the workforce must be willing to experiment with and trust these insights, even when they challenge traditional ways of working. This requires a psychological safety net where employees are encouraged to test AI-driven recommendations, fail fast if necessary, and learn from the outcomes without fear of blame. When an organization successfully marries this experimental culture with a skilled workforce, AI transforms from a simple automation tool into a true partner in productivity—one that augments human creativity and frees up your people to focus on high-value, strategic work that drives the business forward.

5.     How can Realign can assist companies with implementation of Productivity improvements?

• ·       Assist in diagnosing the business to identify the primary productivity levers;

• ·       Design KPIs to effectively improve Productivity;

• ·       Assist in implementation:

o   Advise on Strategy/Structure/Systems, i.e. work with the business to identify the appropriate productivity strategies and then the design of the Organisational Structure to enable to effective deployment of strategies, as well as the design and selection of appropriate Systems (Business Processes and Technologies) to support the organization;

o   Advise on benchmarking targets to measure key KPI’s against best in class companies; and

o   Execution of Strategy: Provide experienced interim executives to assist with the focused execution of Strategy/Structure/Systems to supplement the business needs for skills or bandwidth, i.e. enable the rest of the organisation to focus on their important day-to-day activities while participating in the deployment of productivity reforms.

Examples / Case Studies:

Realign experts have assisted companies in productivity improvements in the following areas:

• Manufacturing (plastic packaging): introduced a KPI system that measured OEE (overall equipment efficiency) in real time and converted production data to financial data to enable real-time profitability to the ERP system;

• Mining (ore processing): introduced an AI system that provided real-time condition monitoring and enabled predictive maintenance capabilities to minimize operational downtime for breakdown maintenance.

• Carpet Manufacturer and Wholesaler: Introduced a KPI for Sales staff to improve their effectiveness in retail store sales. Sales Reps KPIs changed from number of stores visited per week to in-store conversations and display management to enhance sales revenue and sales margin.

• Motor Claims TPA – Introduced a KPI dashboard that gave visibility of how metrics were tracking over time and against benchmarks. New cases per team member, revenue per case, recoveries generated per team member. This was able to help identify productivity issues and put in place measures to correct these issues.

Key Consideration: The Interplay of People, Culture, and Technology

While macro-economic policy and technological adoption, particularly AI, are critical enablers of productivity, the primary determinant of success for individual businesses lies in a more nuanced human equation. The common pitfall is viewing productivity solely through the lens of cost reduction or new software implementation. The real challenge, and opportunity, is in fostering a culture where continuous improvement is a shared responsibility and where the workforce is equipped with the skills to not just use new tools like AI, but to supervise, interpret, and strategically act upon their outputs. Without this internal alignment of people and culture, technology remains an underutilized asset, and productivity gains remain elusive.

Realigns Consulting’s Perspective

At Realigns Consulting, we believe productivity is not a one-off project or a simple matter of cutting costs—it is the ultimate measure of a business's strategic health. Our perspective is grounded in the practical reality that most companies possess untapped potential, not in their machinery or software, but in the alignment of their operations. We see productivity as a function of three interlocking elements: Strategy, Structure, and Systems. You can have the best AI tool (System), but if your organisational structure creates silos that prevent data sharing, or if your culture doesn't reward the curiosity to question a machine's recommendation, the investment is wasted. We help businesses move beyond generic metrics to design and implement KPIs that truly "move the needle," embedding them into the daily rhythm of work. By providing the expert diagnosis, strategic framework, and even the interim leadership to execute, we partner with you to turn productivity from a daunting national challenge into a tangible, measurable, and sustainable competitive advantage for your business.

If you would like to discuss further, please reach out to Neville Read at neville@realignconsulting.com.