Wednesday, December 01, 2010

Ready for a Period of Great Productivity?

Well, if the government statistics are to be believed, we're in the early stages of an economic recovery in the U.S.

A little bit at a time. We'll have ups and downs. Over time the ups will win over the downs. (That doesn't make it fun to go through.)

If you haven't been in business through a couple of recessions, let me give you a heads up on one of the unique experiences of a recovery: Productivity will peak.

What is productivity?

There are few different ways to measure productivity. One measure of productivity is the amount of work produced per person. You want this to go up. Another is the amount of money raised per employee. You want this to go up. Another is the number of hours of labor it takes to produce a specific result. You want this number to go down.

As you - and your clients - get ready to come out of the recession, you will gradually see productivity increase. There's a simple reason for this: You will delay hiring someone as long as you can.

Since one of the key variables is the "per person" part of the equation, you increase productivity by having more work done by the same number of people.

You can measure this in your PSA system. My favorite measure is billable labor per employee. Some people primarily measure billable labor per technician. In either case, you should be measuring this now so that you can set a base.

You will see improvement in this measure until you hire someone.

NOTE: As soon as you hire someone, productivity goes down. Period. It's built into the equation.

Here's the pattern:

- Set the base so you know where you stand. For example, if you have two techs billing 20 hrs/week, that's roughly 50% bill-ability.

- Productivity will increase as you take on more work but avoid hiring. Let's say one tech stays at 20 hrs/week and the other manages to eke out 30 billable hours/week. So now you're at 62.5% bill-ability.

- Then you hire someone and productivity plummets. Let's say you have Tech 1 at 20 billable hrs/week, Tech 2 at 30 billable hrs/week, and the new tech starts with a whopping 5 billable hours/week. If everyone's working 40 hours, you're now at 45.8% bill-ability.

- Assuming the new hire gradually makes it to 10, 20, and 30 hours of billable labor, your productivity will go back up. This also assumes you have the workload.

Practical Considerations

Now that you know this, what actions should you take in order to take advantage of this change you know is coming?

1. Delay Hiring

The longer you delay hiring, the more productivity and money you'll have. While you don't want to work yourself to death, you also don't want to hire someone just because you have a big migration project coming. If you don't also have more work after that, hire someone from your local I.T. Pro user group to help you out during the crunch. That way you don't make a long term commitment and have no work.

2. Expect the Bump and Start Slow

Now that you know it's coming, put plans in place. You might see if you can hire someone part time. That way you can train them on your processes and procedures, and you can increase their hours when the work shows up consistently.

Hiring the right person at the right time is very difficult. You might have an increase in work followed by a decrease. Like all economic forecasts, you'll know the recession is over only when you look back. When you're in the middle of it, it's hard to see the end.

One of the reasons that productivity increases nationwide at the end of a recession is that millions of small businesses are in this same predicament. They are delaying hiring someone until there's enough work to guarantee the position. Or they're hiring part timers rather than full timers. In either case, millions of companies are squeezing just a little bit more out of the people they have.

3. Understand Your Clients

Your clients are going through the exact same thing. They are seeing rumblings of more work, but they don't know whether they have the money to hire another person full time. So their productivity is increasing just as yours is.

The word "understanding" is very important here. When people are squeezed to the max with work, they will be a little stressed and short tempered. They will sometimes make irrational decisions. They will do what's urgent before what's important.

So they need your patience and understanding.

Interestingly enough, the best thing you can do for clients sometimes is to let them know that you're going through the same thing. Take them to lunch and whine about how hard it is to run a small business. And how it's better to fret over a recovery than a deeper recession!


Join me on the:
Intel Hyrbrid Cloud Roadshow
New York - December 8, 2010
Charlotte - January 4, 2011
Ft. Lauderdale - January 6, 2011
Portland, OR - January 11, 2011

No comments:

Post a Comment

Feedback Welcome

Please note, however, that spam will be deleted, as will abusive posts.

Disagreements welcome!