Improving labour productivity can be like dealing with a bubble under the linoleum: you push down in one place and it pops up in another. Something that makes sense on paper – say, having workers complete assemblies faster – can easily backfire, with higher staff turnover costs (for example) cancelling any benefits gained.
Genuinely improving labour productivity means getting right down into the details, to find what’s bringing labour productivity down – then applying specific fixes.
So that’s what we’ll do in this article. Below are 13 different factors known to reduce labour productivity, followed by how to improve them. By identifying those that match your particular business situation, you can then make changes that will see your labour productivity rise.
1. A distant workforce
Labour productivity suffers when the workforce you need has to travel long distances before clocking on. For the employer, this isn’t an obvious disadvantage, but for workers employment will come with greater travel costs, and more time away from family – meaning a lower effective pay rate. This can affect morale and engagement – and lower the employer’s ability to attract the best staff. Getting broken equipment repaired or serviced may also take longer and cost more.
Relocating is not always a realistic option, but your proximity to the workforce you need should be a consideration when adding a location – or when the lease on your current premises comes up for negotiation. Alternatively consider working with your staff on managing their transport costs, for example by supporting a mini-van service from residential areas that gets your staff to work on time and at reduced cost.
Too many specialists on a job can affect labour productivity.
2. Overlapping expertise
When a production process requires two or more sets of differently skilled workers to be in the same space at the same time, productivity can fall. Requiring access to the same tools at the same time – or competing for space for two different sets of equipment – can disrupt the smooth flow of work and lead to frustration in the workforce.
Plan your production to avoid these overlaps, and schedule your projects so that your different teams are used as efficiently as possible – including any required contractors – making sure access to limited tools, or limited spaces is accounted for.
3. Flawed components / poor quality components
A simple matter of ordering a low grade of screw fastening can lower the productivity of your workforce. For example even if a particular grade of fastener is sufficient for its assembled role, it may end up dragging on your labour productivity if it tends to jam in machinery, or if the soft metal drive strips out regularly. Conversely over-specced materials might be increasing wear and tear on your machinery, leading to higher costs or more time spent changing broken drill bits and cutting tools.
Gather feedback from your workers on which materials are holding up production or difficult to use and try to source better alternatives. Pay most attention to parts used most often and in the greatest volume.
Comfort, as well as safety, is important for labour productivity.
4. Hazardous material, dust, noise
Excessive noise, dust or danger is not just a problem in itself – it also limits the ability of staff to complete their tasks, frustrates communication, and hampers morale. Constantly wearing safety equipment can be unpleasant and restrictive and make certain work stations an unpopular choice.
Look beyond simple compliance when considering environmental nuisances and hazards. Is dust or noise wearing your workers down, or limiting their ability to work quickly and easily? A more expensive installed solution such as noise dampening or air filters may be better in the long run compared to fixes such as personal earmuffs or dust masks when you consider the productivity benefits of a comfortable working environment.
5. Excessive overtime
Overtime affects manufacturing productivity in two ways. Firstly, paying more for your staff in order to get a big job out generally raises your costs relative to output, which drops your capital productivity. And while a few extra shifts will often be welcomed as bonus income, too many extra hours too often will wear down your staff and lower their performance.
Take a long term view of your overtime hours to see what it’s costing you. Does it make sense to hire another extra few hands – or to add a production line – to avoid over reliance on overtime? If either option is roughly cost-equivalent to your status quo, then the answer is almost definitely ‘yes’ as your workforce will be less stressed and more productive if they stick to regular hours.
6. Staggered or alternating rosters
When workers are scheduled for, say, 10 days on then 6 days off, labour productivity is often affected. Workers can take time to get back to full speed when returning after an extended break – while errors are more likely to creep in as staff tire at the end of long periods on the job. Similarly, rotating rosters where staff switch between day, evening and night shifts is disruptive to productivity.
Use your business intelligence toolset to check if shift changes are affecting your productivity. How many units are completed on days one and two, versus the average? What’s the error rate at the end of a long period of continuous work, versus a 4 or 5 day week?
With a business intelligence toolset built into your core production and inventory management software you will be able to spot – and address – shift-related productivity slumps that cost your business.
Business intelligence tools can help you spot labour productivity issues
7. Workplace morale
Low workplace morale kills labour productivity like nothing else. A culture of bullying, poor communication from management or between staff, lack of job security and poor working conditions will all sap morale.
The solution can be as simple as passing on your hiring and staff-support to professionals. A well resourced People & Culture team will vet new hires to ensure your new workers have a constructive attitude, set the tone for workplace communication and expectations on behaviour, and deal with tricky situations before they get out of hand.
8. Late production rescheduling
Just because a change to a planned production run happens before the run is set to start, doesn’t mean it won’t be disrupted. Prep work will need to be rushed – and any work already done towards the cancelled or delayed project becomes wasted time.
A brewer, for example, might decide to create a new short-run sour ale in response to an overnight interest from their market. Doing so quickly will let them take advantage of the opportunity. But a change at the expense of a planned production run will waste the efforts of the art department who have already designed the labels, and drain the budgets of supply managers who will need to buy in ingredients expensively at short notice. Meanwhile a new vat will need to be cleaned, while the other one sits idle.
Managers looking to find a balance between flexibility and planning should always consider the disruption and inefficiencies that come along with a very responsive work environment. Manufacturers using cloud inventory management software enjoy far greater flexibility and can be more responsive, because there’s so much less admin work needed to set up production. Meanwhile specialist forecasting tools such as Inventory Planner can be easily integrated to help get production runs just right.
9. Sub-optimal team size
A team of the right size and with the right skill mix finds a natural rhythm and efficiency that gets work done faster and better. Asked to shift a room full of pallets, a team of two can be more than twice as fast as a disconsolate single staffer. Yet a team of four may well get under each other’s feet and be slower.
Experience plays a big part in picking optimal team size. Pay attention also to ‘key man risk’, so that teams aren’t overly disrupted when a skilled worker is ill or on leave.
Halting a production run because a key component runs out is devastating to labour productivity. Not only do workers sit idle, but the break-down and set-up time of machinery and equipment is doubled if the production line has to switch to a different product – and then switch back to complete the original run when stock arrives.
Inventory management software makes stock outs a thing of the past, with features like low stock alerts and never-diminishing items. It also helps you manage the other side of the risk equation: over-stocking for fear of running out.
11. Poor site access
Are you relying on a single lift to get your workers back on the shop floor after break times or at change of shift? Then you’re one breakdown away from major disruption to your labour productivity.
Even something as simple as a congested stairway – or functioning but slow lift – can have a surprising effect on your labour productivity if staff are regularly delayed when trying to resume or begin work.
Be meticulous about ensuring safe site access, and the regular servicing of lifts. If you’re having issues a solution can be as simple as telling your landlord that the current access-ways aren’t fit for purpose, and that improvements are needed on the site.
12. High staff turnover
Every new hire goes through an onboarding stage where they ramp up to full production over time. During this stage they are effectively earning double their wage if they produce half as much as a fully ramped worker – so are a major drag on your labour productivity.
It’s vital to keep staff turnover low. If you run a big operation, set KPIs around staff turnover for your managers, even when this metric isn’t immediately obviously connected to their role. You’ll also want to support them with an experienced People & Culture team, and be paying your workers sufficiently that they aren’t churning out in search of better pay or conditions, thereby negating all your wage spend savings through diminished productivity.
Ensure your on-site security is unobtrusive.
On sites where theft, IP protection, or personal safety are an issue then security checks may be an unfortunate necessity. However this can limit labour productivity as free access in and out of the plant is slowed.
When weighing security options, consider what impact any system will have on labour productivity. For example a factory creating sensitive electronics might find a pat-down on arrival or departure is the cheaper option. Yet a discreetly installed sensor at entrances could be a better option if it does the same job without disrupting (and upsetting) workers, even if it’s costlier in the short term.
Article by Greg Roughan in collaboration with our team of inventory management and business specialists. Greg has been writing, publishing and working with content for more than 20 years. His writing motto is ‘don’t be boring’. His outdoors motto is ”I wish I hadn’t brought my headtorch’, said nobody, ever’. He lives in Auckland, New Zealand, with his family.