Is productivity something concrete or abstract?

Can we work less and produce more and better?

Some time ago, in a class of an Controller MBA, a student asked me:

- Professor, what is productivity? Everyone speaks, speaks, but no one explains. Is productivity something concrete or abstract?

I stopped, thought for a moment, and agreed that she was right. There is a lot of talk about productivity and, strictly speaking, few know exactly what it is, how it is calculated and what it is linked to.

To talk about productivity there are several steps that need to be understood, and that must be performed to increase it, because productivity is not one thing. There are approaches and calculations and conclusions about productivity at various levels and environments.

For example, before figuring out how to calculate the productivity of an employee, a company, an organization, or a business process, you need to better understand the definition of productivity.

The concept basically concerns the relationship between what was produced and the resources used for its production. However, it is not enough to produce, even though the organization is spending few resources, there is an imperative need to have formally documented and effectively managed business processes, so that the calculation of productivity is correct.

One day a director of a large state-owned company called me and said,

- Professor, I am director of planning and budget control and my question is whether these budgets that all areas send me are correct or are kicks?

I said: Do you have the business processes formally documented?

-No, Professor, we don´t.

-So I'm sorry to say, but no doubt, they're kicks. These operational budgets that the areas send to you are kicks. How will someone know what they spend without knowing how, when and why? No controls? This concept holds true even for our private life.

But ... Why could I be so emphatic in my answer?

Because there is only one way to operationally control any organization, through your business processes!

There is no other way to calculate productivity without knowing what each employee does, what resources he uses, how much time, and especially how he produces and delivers what has been promised to his client. Be internal, that is, mainly external.

In short, if I have two or more employees producing what one could do, I have low productivity and no competitiveness, because I will be spending more than I should spend to produce what should be produced by a single employee. Not to mention that both would be spending twice the resources that only one should spend.

How to calculate productivity.

In general you can use the following formula:

PRODUCTIVITY = value of useful outputs ÷ by the total costs to obtain the products.

And this formula a little more financial:

PRODUCTIVITY = total revenue ÷ by total cost.

As I said before, these are simplistic calculations, but they serve to give you a good idea of ​​how to start calculating productivity in any organization.

"Increasing productivity does not mean getting people to work more hours, but using resources more efficiently." Mark Dutz chief economist at the World Bank.

Exactly, to work less, but better, much better, through the efficient use of resources and technologies available to production. I usually say in my classes and books that the disorganized company knows what it earns but does not know what it loses.

According to the World Bank, Brazil has made the wrong decisions in recent years in an attempt to stimulate the productive sector and today is "inefficient in most of the activities it carries out." This is one of the conclusions of a 2018 World Bank study that looks at employment and productivity in the country. According to the document, Brazil has spent a lot of money on policies to support companies that are mostly inefficient.

In 2016, for example, 4.5% of the Gross Domestic Product (GDP) was destined for this purpose, among tax exemptions, subsidized credits and transfers to specific sectors. The number is nine times higher than that spent with the Bolsa Família program. The results of these actions, however, were limited in the World Bank's analysis.

For the World Bank, the excessive intervention of the government in the functioning of the market caused distortions in the Brazilian economy and created a scenario of companies that depend excessively on the government, besides discouraging the entry of new participants in the economy. Among the policies listed by the World Bank as misguided are the introduction of burdensome import barriers, local content requirements, differentiated rates, tax exemptions, and credit subsidies that have benefited only a few companies or regions.

The report shows that the Brazilian worker has evolved little in terms of productivity: he is only 17% more productive today than 20 years ago. In high-income countries, this proportion is 34%. On average, labor productivity in Brazil grows at a rate of 0.7% a year since the 1990s. Poor conclusion!

Brazil is disorganized, in a general way because its companies are disorganized. They are always, with rare exceptions, running after their own tail.

Also, with few exceptions, there is little or no concern with business process organization and management, nowadays they desperately seek to be agile, as if this would increase the productivity of their operations. I believe agilely they will be plunging into the abyss. Those who live will see or read upcoming World Bank productivity reports.

There is no magic!

There is only one way, one possibility of increasing the overall productivity of the Nation by being organized. Being organized in the production, in the studies, in the amusement, in everything, without this it is reviewed of a bad reputation attributed, mainly, by those who like to be disorganized.