Moving from Productivity to Efficiency

Productivity is a key performance indicator, yet, writes Jim Bilton, it should always be assessed in the context of the wider business.

By Jim Bilton

Moving from Productivity to Efficiency

‘Productivity’ is a word that conjures up many images – most of them negative. Time & Motion studies. Bean-counters with clipboards. Stripping cost out of factory processes. Reducing people and creativity to numbers and ratios, before trying to make staff work harder than ever before. Or getting rid of them completely. Squeezing until the pips squeak.

Yet one of the figures that has generated most interest in this year’s mediafutures benchmarking survey relates to this whole issue of productivity. We take a very topline measure, mainly because it is simple and can be used to compare companies easily across different markets. It is total company turnover divided by the number of full-time staff. The average figure across all the companies taking part in this year’s survey is £160,000 of revenue per head.

Now, that number needs a lot of qualification, with two key provisos. Firstly, it is an average across a wide range of companies that have very different business models and organisational dynamics. Secondly, it is a simple, topline metric which is the end product of a whole range of more granular efficiency ratios deeper within the organisation.

Behind that £160,000 revenue per head average lies a range that stretches from a staggeringly low £27,000 up to a high of £460,000. The high figure is from a medium-sized company (simple scale is a key driver in achieving strong productivity ratios, as one would expect). Yet this company has a number of other important characteristics. Firstly, it outsources a lot of its activities. Secondly, it is based in the provinces with lower wages. Yet its location also means a smaller talent pool to draw on, less staff churn, an older staff age profile and a different employee take on the work-life balance to being in London. Thirdly, it is family owned. This means that the company has a long-term view, running a business that is intended for the next generation. It is also built on a more paternalistic “family” work culture which is very different to a quoted company or a private equity funded operation.

Or take another example. One major company in mediafutures has a number of divisions with a range running from a £250,000 ratio in one division down to a £130,000 figure in another. Same company, same organisational structures, processes and culture: yet very different figures. The major difference is the scale of the brands in the portfolios of each division. The one with the highest ratio has a collection of big, lifestyle brands, the other a portfolio of niche, specialist interest verticals with little overlap in their audience demographics. The big brands are actually more vulnerable in terms of their limited spread of revenue streams and their high exposure to advertising. By contrast, the niche portfolio has a more diversified range of revenue streams, more emotional “glue” with their audiences, but simply does not have the scale at brand level to match the other division’s productivity figures.

Being an efficient company is no longer a ‘nice to have’. It is a fundamental prerequisite for survival in the modern world of media.

Covid impact

Another trend from the mediafutures project is how productivity has changed through time. In the past, this ratio has tended to shift slowly upwards from year to year: the result of progressive efficiency tweaks in companies that have a relatively stable shape, in terms of organisational structure and culture. In the 2020 survey, there are two distinct groups of company:

  • Those whose productivity has remained very stable year-on-year. This is usually where headcount has been reduced in response to falling revenues. So, the ratio itself remains steady.
  • Those whose productivity has improved significantly. This is usually the result of very fast cost-cutting sparked by the pandemic disruption. It is clear that many of these companies have simply not had the time or intention to take a more detailed look at fundamental structural change to the way the business works.

Overlay WFH (Working-From-Home) on top of all this and the cost complexities of furloughing and the picture is very complex and varies from company to company. However, many businesses are confusing ruthless cost-cutting with real improvements in efficiency. Robust and lasting improvements usually demand more investment into areas such as tech and automation, staff reskilling, staff support and wellbeing programmes, more structured staff feedback, etc.

There are other observations from the mediafutures assessment:

  • Editorial teams tend to be much further down the route of radical process change than commercial teams where the old “ad sales” mentality and personality types are still widespread and are slowing down progress.
  • There are also some surprises as to which individuals actually buy into change – and those who don’t.
  • Finding the right metrics for non-revenue generating service functions is more of a challenge, but still possible. As is tracking the softer, staff-related issues that create a healthy, living organisation.
  • Some companies have blown apart years of hard work in building a culture of openness, cooperation and transparency by panic cost-cutting and cack-handed redundancy programmes. Trust has been trashed. And trust is the glue that holds any organisation together.

So, if 2020 was all about ‘productivity’ – sometimes squeezing so hard that the pips really did squeak – then 2021 is about ‘efficiency and working smarter. Being an efficient company is no longer a ‘nice to have’. It is a fundamental prerequisite for survival in the modern world of media and it should be seen as a positive activity which can release talent, creativity and a sense of shared involvement. In future features, we shall look at more detailed examples of how this works in practice and what the key metrics are.

mediafutures is an annual benchmarking survey of the industry undertaken in partnership with InPublishing. It maps the key drivers and metrics that are transforming the shape and direction of the media business. This year, mediafutures has gone international with Colin Morrison’s Flashes & Flames and FOLIO in the USA as our two new partners.

This article was first published in InPublishing magazine. If you would like to be added to the free mailing list, please register here.