One of the first challenges I set a leadership team is what do they mean by innovation in your business.

Everyone know what it is is the usual reply.

When we go around the room and everyone offers their definition it soon becomes apparent there are many different perspectives on this key driver of performance.

Productivity, I suspect is much the same.

We all agree that improving it is important but unless the leadership team has a crystal clear definition of what it is how can it be measured.

And unless it gets measured how will anyone knows if it is increasing or decreasing?

For many managers, productivity is often ‘code’ for cutting costs, which usually involves people (note the irony: we want our people to do more with less at the same time as leaders retrench them).

These managers are still stuck in the idea of measuring activity, not outcomes.

I have spoken to many leaders who talk about the number of meetings they have as a sign, presumably, of how important they are to the organisation. Yet this is a measure of activity, not outcome.

Hours worked is not the key measure anymore;  it is what you have achieved in the day that is far more important.

This emphasis on outcomes rather than activity will require a mindset shift for many leaders who have been brought up with 40-50 hour weeks or 9-10 hour days. This used to be considered a sign of commitment – now it’s perhaps a signal of inefficiency.

So what we mean by productivity?

It is not just a function of inputs and outputs.

It is a strategic decision. An example of the new thinking required is suggested by Jim Collins in his book, Good to Great – Why some companies make the leap and others don’t (Random House, 2001).

His research suggests that ‘great’ companies try to determine a single answer (or at least a few) to the question: what drives your economic engine?

For example, with Gillette, the key metric became profit per customer rather than profit per division, thus reflecting the idea of a customer’s lifetime value.

Hence it makes sense to have a productivity measure for all managers and leaders around improving this key metric (whatever it might be).

In a world of ‘more with less’, productivity improvement is a strategic and creative process that involves the work of the most senior leaders.

It can make the difference between success and failure.

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