How do I measure and improve the productivity of my business?

February 3rd, 2020     Improve Your Business, News

The “productivity puzzle” continues to stump experts and businesses alike.

The UK is among the worst in Europe for productivity levels, with output-per-hour falling at its fastest annual pace (0.5 per cent) in the five years to June 2019. This follows two previous quarters of zero growth.

Commenting on the figures, Tej Parikh, chief economist at the Institute of Directors (IoD), says poor productivity reflects “uncertainty” in the business community.

“Unsure of what’s around the corner, businesses’ investment in the new equipment and technology that drives up their performance has been stifled. Many companies are also trimming their investment pipelines for the year ahead to build up a cash cushion in anticipation of challenging economic conditions ahead.”

So, what is the solution to the productivity puzzle? We’ve been working with small and medium-sized businesses for over two decades now, and we think we may have cracked it. To help your business overcome poor productivity, here are just five ways you can boost output and lift profits.

Measure productivity effectively

In the UK, productivity is measured by the amount of work produced per hour, known as output-per-hour. But how do we measure that? And how do we know what high levels of productivity look like?

The answers are management accounts and benchmarking.

Management accounting is the driver behind some of the world’s most successful, and most productive, businesses. At its core, management accounting helps you understand what and why something is happening in your business, which empowers you to make better-informed decisions.

So, what sort of information can management accounts help you digest?

By drafting up accounts on a monthly or quarterly basis, we can identify key information such as your most profitable customers, which products move the fastest, sales by region or office, and importantly, productivity.

By understanding how we convert input (such as labour, materials and capital) into output (such as goods and services), we can analyse trends and ratios and optimise where resources are best allocated.  For example, if we know that factory X is producing more goods than factory Y, we can investigate why and plan how factory Y’s output can be improved. It may be that Factory X has received advanced training, has more supervisors on the floor, or has implemented more efficient controls.

To learn more about management accounts and how they can help your business, click here.

Incentivise improvement

According to one study, incentive programmes can increase performance by an average of 22 per cent, while team incentives can increase performance by some 44 per cent. Separate research, meanwhile, found that 85 per cent of workers felt “more motivated to do their best” when an incentive was offered.

But to encourage your workforce to work more efficiently, we first need to identify what makes them tick. Everyone is different; some workers may prioritise more time to spend with their family, while others will benefit from cash motivation.

Experiment and be creative with incentives. A night out to reward the completion of a major project or for meeting an annual target could boost team morale before jumping into the next assignment. A monthly bonus for the most productive worker could spur on employees to work harder and with more intent. Stock incentives, meanwhile, help employees feel connected to the company, especially when they also have a hand in its success.

Here are a few more creative ways you could incentivise productivity in your business:

  • Promotions and long-term career prospects
  • Flexible and remote working
  • Company benefits, such as gym memberships and bicycle schemes
  • Introduce healthy competition and employee recognition schemes
  • Break up the working week with workshops, team building activities and employee lunches


The workplace is constantly evolving, with the latest innovations automating and streamlining processes which we used to spend hours of our time deliberating over.

To truly take advantage of the technology available to us and boost productivity, we need to invest in our business. And there is no better time than now.

Between January 2019 and December 2020, the Annual Investment Allowance (AIA) has been temporarily increased to £1 million. We have encouraged businesses to capitalise on this special allowance by making capital purchases, such as plant and machinery, to make thousands of pounds of additional tax savings.

Capital purchases include tools, construction equipment, factory fixtures, office equipment and lorries and vans (cars do not qualify), and much more.

For more information about how to take advantage of this scheme, get in touch with our expert advisory team.

Take advantage of cloud technology

While making significant cost savings, cloud technology also enables us to instantly access our data and collaborate anywhere, and on any device. The productivity benefit is clear to see.

From cloud accounting and virtual meeting rooms to cloud storage solutions and digital assistants, cloud technology automates and modernizes time-consuming and resource-heavy processes within all areas of business.

For example, Xero, a popular accounting software provider, estimates that cloud accounting can save finance professionals up to “three hours a day” by using helpful features such as automatic invoice generators, automated payroll programmes, expenses management tools and more.

Another software provider, meanwhile, found that 47 per cent of companies are more productive because of cloud computing, while a further 40 per cent said the technology allows them to be more flexible.

Remove productivity killers

Social media, instant messaging and endless browsing can kill efficiency. But simply blocking access to these distractions is not the answer. Blanket bans can feel oppressive and breed distrust – and besides, employees know how to use a smartphone.

The solution, therefore, is mutual respect and balanced boundaries. For example, some businesses have found that operating a strict “no phone policy” in the working environment, but allowing employees to take short breaks at will to address personal matters, helps workers prioritise time.

Finding the right balance is key, so always consult with experts, HR personnel and staff before taking drastic workplace measures.

After all, productivity is highly dependent on the happiness, morale and wellbeing of your workforce.

We work with business owners to build the businesses they need to have the life they want, so if you want to talk about how to grow business, get in touch with me on 01803 296678 or email