Lessons in lean from high-productivity companies
Find out what lessons you can learn from the best in the businessMatt Scott
There’s a great irony about Britain’s productivity problem.
While, on a national economic level, Britain struggles with productivity; on an individual organisational level, we are home to some fit-as-a-butcher’s-dog companies that have doing less with more in their blood.
So, over the past three months, working with leading company-data provider Jordans, Professional Manager has been unearthing unheralded examples of productivity in action.
Using proprietary methodology – drawing on Companies House filings to identify profitable, growing, financially solid companies that deliver high levels of turnover per employee – we discovered a seam of UK companies (mainly privately owned) that live and breathe productivity.
Often their productivity isn’t an overthought characteristic. Many of these companies bear the imprint of a visionary founder.
As they’ve grown and built up their infrastructure and operational capacity, they’ve managed to hold on to the rollup-your-sleeves culture of the start-up.
What do we mean by ‘productivity’? Some companies, particularly in intrinsically high-revenue sectors such as wholesale or finance, generate high levels of output per employee, but this is often just right-place-right-time syndrome.
For others, productivity can be acquired – but usually only for a brief period – by cutting costs to the bone. For us, however, real productivity is about clear strategy and hands-on management; it’s about maximising the market opportunity in front of you.
Every year in our Future Forecast study, CMI members express their desire to ramp up productivity in their own organisations, whether through changing their culture, investing in technology or – the big one – improving their organisation’s management and leadership skills.
For this project, having identified a clutch of productive companies, we then interrogated their leaders about exactly these issues.
The result is eight lessons in how to do less with more.
We see these lessons as a conversation-starter. We’d like to hear from CMI members about how you’re realising productivity in your own organisation. Which new ways of working are keeping your performance keen? What processes and practices have you ditched? How do you do less with more?
Over the coming weeks and months, we want to share and debate best practice at managers.org.uk/insights, as well as on Twitter: @cmi_managers.
So these lessons are the hors d’oeuvre to what we hope will become an informed national process to raise the performance of UK companies that aspire to, but haven’t yet reached, high productivity.
Let’s not kid ourselves. This is a big problem. And it’s urgent. British productivity lagged behind that of G7 counterparts by an average of 18 percentage points at the last count.
This productivity deficit means Britain has never been further behind other leading nations in the world; the measly 0.5% increase in productivity reported over the first three months of 2016 will have done little to instil confidence into political leaders trying to solve our national productivity puzzle.
We think we know where the root of the problem lies – analysis from the OECD has blamed the UK’s poor productivity on inadequate management and leadership skills.
It has been estimated that British businesses will need 1.9 million new managers by 2024.
So now is the time to step up to the plate; to assemble best practice as a guide for other organisations; to bring evidence into the discussion; and to deliver top-class training for tomorrow’s leaders.
Otherwise, the next generation may fall through the same productivity trapdoor. So let’s get started.
1. Don’t do everything yourself; put yourself at the centre of a nexus of excellence
Through all our research, one message stood out: being a jack of all trades does not sit comfortably with high productivity.
If you want to drive strong growth and value from a small employee base, it pays to be specialist and work in a niche market. Then find the right business partners to plug any gaps in your capability.
The Leisure Pass Group is a great example of such focus.
To repeat its own company description, “The Leisure Pass Group is a sightseeing and tourism technology specialist, which develops and manages city passes in some of the world’s top destinations.”
This is not some broad-based conglomerate. But it is tremendously successful at what it does.
With only 16 employees, the company, based in London’s West End, is generating top-line revenues of just over £58m. It’s tech-savvy and works in several international markets. It’s almost a blueprint for the kind of company that the UK needs to nurture.
And, for CEO Darran Evans, it’s partnerships that are “at the heart” of Leisure Pass’s success.
“We worked out what we did well and then partnered with other companies in order to sub-contract out work that they do well,” says Evans. “That has been an important part of our productivity. When we know what we do well, we have been able to leverage our skills into other markets internationally.”
Leisure Pass operates city passes in London, Dublin, Paris, Vienna and Berlin. In other markets around the world, it has tweaked its model, offering web marketing solutions to other sightseeing city-card providers. What marks out its partnership model is the depth of Leisure Pass’s relationships.
“When you partner with companies, you have to create sturdy contracts, but the key is getting good long-term partners in, where you can go and run through the contract if you need to, but the reality is you get to know how each other works and you trust each other,” says Evans.
It’s vital to keep lines of communications open and, in Evans’ words, to give your partners “an optic” on what is going to happen over the next year so there aren’t any surprises down the line.
And, if something does go wrong, you need to be very transparent about it on both sides, he says.
“Don’t engender a culture of people not telling you what they did wrong. No-one should get scared about raising an issue, because they know it is part of our learning cycle – you’ll get it right next time.”
Indeed, this acceptance, that failure can be instructive, has been integral to the extraordinary innovation and productivity within the best new technology companies.
2. Get the infrastructure right, whatever it takes
Motability Operations runs the Motability Scheme, which provides affordable and worry-free ways for people with disabilities to lease a vehicle – whether a car or scooter.
It’s an organisation that’s grown steadily – in 2015 it accounted for more than 10% of the total UK new-car market. Today it has more than 650,000 customers, with varying needs and disabilities, across the UK. Annual turnover is £2.9bn.
And this significant organisation is run with a relatively lean workforce of 830. None of this impressive productivity happened by accident. In recent years, Motability has taken a hard look at itself and its operations.
Back in 2002, the company embarked on a four year cost-cutting programme aimed at boosting efficiency and customer-service levels. The results were striking: Motability reduced overheads per customer by 28% in real terms; customer satisfaction scores rose to 98%; and the number of vehicles available through the scheme with no advance payments has climbed to 490 from just 62.
Motability’s head of marketing, Delia Ray, says this new infrastructure was key to the long-term sustainability of the scheme, which reinvests all profits into improving the service for customers.
“The scale of the Motability Scheme enables us to leverage efficiencies, offering customers affordable mobility wherever they live and whatever their household circumstances,” she says. “We are highly cost-efficient, with tight management of costs such as insurance, overheads and depreciation, as well as being financially stable, with a prudent approach to risk management.
“We’re also proud of our strong relationships with suppliers, manufacturers and dealers. This means we can keep costs down and pass the savings to our customers.”
3. Employee ownership can help
There’s a strong body of evidence that shows a connection between employee ownership and high performance. CMI’s 2016 study The Moral DNA of Employee-Owned Companies: Ownership Ethics and Performance found that nine in 10 people working in employee-owned companies described the leadership style as ‘high-performing’, ‘visionary’, ‘democratic’ and ‘coaching’.
This is corroborated in this latest research. At Leisure Pass Group, long-term employees are rewarded with a stake in the company. Not only does this ensure staff are motivated to give their all, but Darran Evans insists it also helps improve retention.
“If you can create that bond between the company and the staff, not only do you incentivise people to do well, but you create a stability within that company because you maintain a core number of very competent, very good people. That has helped us in terms of productivity,” he says.
With this bond, you can trust people to prioritise and get things done, and you’ll know that they will put in the extra hours when an urgent project arises. And, equally, onto this solid framework you can introduce options such as flexible working.
The flip side of having such aligned employees can be very costly, says Evans: “Staff turnover is often a hidden cost; you are constantly having to retrain staff to an acceptable level. Where you can identify good people, keep those good people and reward those good people. Then you create a virtuous circle.”
4. Empower your people to achieve miracles
Anesco helps organisations to improve energy efficiency and drive carbon reduction. It’s twice been named the fastest-growing company in the UK, in 2013 and 2014.
In its most recent accounts, Anesco hit a turnover of £213.7m with a mere 111 employees. By anyone’s measure, this is a highly productive business.
For CEO Kevin Mouatt, it all boils down to creating an environment where people can “develop, grow, learn, enjoy, meet and beat their personal aspirations”.
Dedication, drive and passion to make a difference are the qualities he nurtures. “We believe great companies are people-led companies,” he says.
Motability Operations measures its performance on employee engagement and satisfaction against the best-run companies every year. This year it outperformed the Towers Watson index of ‘High Performing Organisations’ in all 11 categories analysed.
Unlike in many traditionally hierarchical businesses, employees are encouraged to get involved in company policy and direction, and to think commercially about key business decisions.
Edinburgh-based veterinary buying group Vetcel also takes employee engagement and empowerment seriously, although it has an unconventional approach to monitoring it.
While he was being interviewed by us, MD Chris Bainton called out to his office: “How empowered do you all feel?” Reaction was extremely positive...
On a serious note, Bainton insists that you’ve got to empower people to do their jobs. “There is absolutely no point in giving someone a title and no ability to do their job,” he says.
He adds: “We are still small enough that we can have lively discourse and still stay friends. All points of view need to be considered.”
5. Build a customer-driven structure
Veterinary buying company Vetcel offers a subscription service for its products and, until recently, even required all members to physically attend at least one quarterly meeting every year to remain a member.
The size of the organisation’s customer base has since grown so that this is impractical, but MD Chris Bainton’s team have turned to technology to maintain this customer-centricity.
“We now televise our meetings and broadcast them on our intranet, and we then get feedback from our members that way,” he says. “Our long-term plans and objectives are influenced greatly by our members. We have a board that controls our strategy, surveys and meetings to ascertain what customers want from us, and it is the board’s job to distil that down to me, and it is my job to deliver that vision.”
This continuous listening and learning loop means Vetcel is constantly on top of what customers want.
When the company does fail to deliver the optimum, says Bainton, “we have sufficiently close contact with our members to explain to them why we haven’t delivered the gold standard they have come to expect. The secret to our success is having two ears and one mouth, and using them accordingly.”
He adds: “Our success comes down to the fact that we are driven by our members, and they determine what it is that we do – and how we do it.”
Motability Operations is similarly tuned into its customers – so much so that it ditched its old interactive voice-recognition system so that customers could reach a real person more quickly when they called the contact centre. And it’s doubled the information available on its website.
6. Have a strategy for potential
If you want to achieve less with more, you’ll need to recruit great people, and then engage and inspire them. That’s a given. But you’ll also need a strategy that’s focused on your future talent and potential.
Motability Operations, for example, has launched a graduate programme and a scholarship for students with disabilities, which means that it’s investing in future potential and giving itself a healthy pipeline of leadership talent.
“[Our graduate scheme] involves an intense 18-month programme that includes rotations in a number of areas of the business,” says Delia Ray. After this period, graduates are expected to move into key line-management or specialist roles.
The organisation also offers a scholarship programme that provides financial help and work experience to the most talented and highly motivated disabled students.
Placements include mentoring and advice during both the work placement and academic year, and there is the chance of a permanent role on graduation.
“Through the recruitment and retention of the right people we can ensure this strong performance is sustained for the long term. We plan for the future by investing in the training and development of our people, and also through a comprehensive approach to succession planning,” says Ray.
“This helps to ensure we have the right people and skillsets to underpin our long-term success and sustainability,” she adds.
7. Think like a platform
Platforms are the most powerful force in the global economy. Trillions pass through them every day, as we describe in ‘The irresistible rise of the platform economy’.
While your organisation may never be an Amazon or a Facebook, you can learn from how they think.
The Leisure Pass Group, like many effective companies, has established, developed and invested significantly in its own systems. It’s also close to its markets and so knows quickly whether it needs to make changes to those core systems.
And, because the company can then sell those systems to third parties, there is a huge advantage to be gained.
“When we are in our offices running passes for large cities, we can go to smaller cities and say: ‘These are the systems running cities like London, Paris and New York, and they could run your city,’” Evans says.
He observes: “We are a technology-centric company, but we don’t employ traditional IT people. We employ a lot of web marketers and people who run the systems interface with our partners, but we don’t employ technologists.
“Instead, we partner with those specialists and get them to develop systems on our behalf – leveraging our core competence with their core competence is what is important to us.”
Evans adds: “We are a very web-enabled company, and productivity can be accelerated through use of the web – if you get your proposition right. You can get it out to a global market and that does make a difference.”
8. Encourage a learning culture
Google may have parked its famous ‘20% Time’ scheme, whereby employees were encouraged to devote 20% of their working hours to useful side projects, but, on a wider level, productive companies tend to see the value of continuous learning and questioning.
The CEO of global lubricant business WD-40, Garry Ridge, recently told the Harvard Business Review: “One of my huge learning moments in life was getting comfortable with those three magic words: ‘I don’t know.’
“It’s great to hear people across the company, anywhere in the world, say ‘I just had a learning moment’, and share it with other people. Or to hear one of our people say [they need help], knowing they have permission to ask about something they need to know or learn. My dream is for this organisation to be viewed as a leadership-and-learning laboratory for business.”
At Leisure Pass Group, Darran Evans couldn’t agree more. “You need to have a learning environment, because people will make mistakes,” he says. “What I say to my team is: ‘Look, as long as you don’t make the same mistake twice, then I’m pretty comfortable.’ In an entrepreneurial environment, a company that is not making mistakes is not really going forward – you can’t grow without being prepared to make mistakes.”
“We don’t foster a prudent, conservative environment,” adds Evans. “It is entrepreneurial, but learning from mistakes is a big part of that.”
And one final thing...
When it comes down to it, productivity is also something that you wear on your sleeve. It’s a set of behaviours that are conveyed and reinforced every day by an organisation’s leaders.
Yes, you should be in a healthy, growing market; of course you must have a robust strategy to meet that opportunity; and you’ll need the capital base to invest and grow. But it’s also about getting on with it.
For this research, we contacted dozens of companies whose financials indicated a productive culture.
The companies featured here were happy to share their secrets and their culture. Some, however, were less keen to talk to us – for example, the West Midlands-based construction company that, on a top-line level, showed average per-capita output of several million pounds.
When we contacted the company’s head office and asked to speak to a senior executive about its productivity levels, the person answering the phone said simply: “Oh, sorry, there’s no-one here for you to talk to; they’re all out working.”
It’s a powerful lesson in itself...
Thank you to Jordans for its data skills and helping us to identify this group of highly productive UK companies. www.jordans.co.uk
Illustration by Charles Williams