Due to global exposure and business opportunities available to emerging markets like India, skill levels of workforce in India are improving rapidly with every passing day. Therein lays the imperative for Indian organizations to find ways and means to get the best out of their people for higher revenues, profits & business excellence, ascertains James Thomas, Country Manager (India), Kronos

Why is employee productivity so important today for Indian organizations?

Salaries are rising in India more than ever before and Indian companies are recruiting more than ever before. Due to global exposure and business opportunities available to emerging markets like India, skill levels of workforce in India are also improving rapidly with every passing day. This basically means that every hour and every day of the employee is more critical to the employer than it was yesterday, and will be even more critical tomorrow than it is today. Therein lays the imperative for Indian organizations to find ways and means to get the best out of their people for higher revenues, profits & business excellence.
Indian organizations are working over time to break the linear equation that their workforce has to generate higher revenues which are typical for developing economies, to do more with less. Adding more people to solve a problem or a business challenge to achieve higher revenues for an organization since people were inexpensive, needs to give way to doing more with less people and finding innovative ways to place the right people at the right place at the right time for maximum productivity and business benefit.

How are service and manufacturing industries different when it comes to employee productivity improvement?

The percentage of contribution of people to a service industry far outweighs the manufacturing sector. Payroll of service sector companies varies from 15 – 70% of the operating costs whereas in the manufacturing sector, it is still in single digits. Hence, employee productivity is at the root of creating a successful service business. It has a direct top line and bottom line impact. Therefore from a cost point of view, employees in a service industry are like raw material to a manufacturer. You cannot do anything without them being in the right number with the right skills at the right time. And making them more productive has a multiplier effect on both tangible and intangible business benefits to the service industry.
Having said that, for a manufacturer, it takes a different flavor altogether. While payroll costs represent only 5-10% of the operating costs of a manufacturer, his costly investments in machines and raw materials is put to effective use by people. So while today’s supremely efficient manufacturing technologies and machinery can give high productivity, the people behind those machines can pretty much make the difference between getting the best out of those machines or shutting them down! The bottom line is that there is no getting away from enhancing productivity of your people, no matter if they impact delivery directly in the service sector or indirectly in a manufacturing environment. The approach needs to be very different in the way you enhance productivity with thousands or lakhs of young people in a service sector versus a much smaller higher skilled workforce in a rapidly maturing manufacturing environment.

What are the major levers for employee productivity that organizations have at their control?

Organizations invest a lot in activities like employee training across industries so as to improve employee productivity. But a more effective way is to understand the key drivers to workforce productivity or effectiveness and measure them. And measure them real time in an integrated manner. Measuring just one of them or all of them using different tools in different ways does not always give you the clear view or visibility. At the core of employee effectiveness, is how effectively employees are utilizing their time while working. Are they at the right place at the right time? Are there lost opportunities which impact productivity adversely which are not getting measured?
One such lever which often gets a short thrift, is employee absence. Absence is the corollary to time that an employee works, and also gets paid on most occasions. Absence (both planned and unplanned) can represent up to 35% of payroll costs. This number reflects both the direct and indirect costs of employee absence. For example, a Kronos-Mercer research in the US suggested that a replacement worker for an absent employee is only 71% as productive at best the first time. Hence, measuring and tracking absence proactively in conjunction with time is a very strong lever.
Another one is, better workforce planning. Having the right person at the right place at the right time can do wonders for an organization’s output. For example, having 5 employees in a retail store in a morning shift serving 2 customers and having 10 employees in the evening shift serving 200 customers can result in either an over pampered customer who gets upset or an unattended customer who also gets upset – and both possibly resulting in lost business. Rightful planning based on forecasted customers/sales could have helped the store manager re-deploy those employees and achieve higher sales per labor hour. The same logic applies to almost every industry and customer experience. While organizations understand the value of having the right person at the right place, they are constrained due to lack of adequate automated tools that can give them actionable information proactively.
Levers such as the above are not measured accurately in real time in an integrated manner when calculating employee productivity, which is a ratio of output to the time taken for the output. The lost time due to absence, for example, is never included in these calculations. Organizations need to adopt tools to measure Overall Labor Effectiveness (OLETM) which is a balanced KPI, measuring employee utilization, efficiency and yield. Utilization gives an idea of the amount of time an employee worked productively versus the amount he/she was supposed to. Utilization combined with efficiency gives a more accurate view. Workforce management solutions like Kronos are tools in that direction providing organizations the ability to automate the tracking and monitoring of employee effectiveness thus providing the management with valuable insights on employee productivity and better decision making on one side and having a highly motivated productive employee on the other.