I wish I had a dollar – or a couple of aspirin – for every time I heard someone claim “20 percent productivity improvement” when all they had really done was move the work to a less expensive location. When they make these claims, they’re confusing cost takeout and productivity.
Cost takeout certainly has its uses, including:
- Moving work to a talent model with a flatter pyramid
- Getting fewer people to work faster/harder
But cost takeout is not productivity, which is precisely what enterprises need to start thinking about, as most of them have already done all of the above, and then some.
As discussed in our recently released research report, “In Search of ADM Productivity,” productivity can be about (among myriad other things):
- Optimizing shared services organizational structures
- Standardizing and automating business processes, toolsets, and technologies
- Automating infrastructure and application deployment processes
In essence, productivity is an output-input ratio. Productivity improvement has been described as “doing more with less.” I believe a better definition would be “improved output-input ratio, by virtue of being done differently.”
Think about this distinction. Technology and sourcing leaders often talk about “the need to improve productivity.” And they then promptly start flogging the dead cost takeout horse, with roughly the same return as I get (exactly nothing) from listening to the “20 percent productivity gain from outsourcing” line.
The difference between the two is worth bearing in mind because identifying and focusing on the right productivity initiatives can bear startling benefits. Our research suggests as much as 20-50 percent incremental cost savings. More importantly, the emphasis on productivity can lead to increased agility and a focus on greater functionality as opposed to “managing the mess.”
The first step is to pick the right weapon, for the right battle. Or you could always stock up on more aspirin.