The interview is about what defines real productivity in a business: the choices and actions that lead to growth.
Christine: The topic we’re going to be talking about today is “Real Productivity.” I'm wondering if you can define the meaning of productivity in a business.
Clemens: Within a business my formula for productivity is very simple. Basically anything can be defined as being productive when it generates value. So if it’s generating value for your business you’re being productive.
Christine: So Real Productivity then is the activities that are generating income.
Clemens: Well not necessarily income. Yes I would rate revenues as one the top two or three things. [But] the value can be marketing value. It can be generating relationships. It can be strategic planning. So it can be sustaining the long term health of your business. There are many values that we need to tend to in a business. And as long as whatever activities you are engaged in are generating value then you’re being productive.
Christine: Ah, so part of this being productive in “Real productivity” would be knowing how to delegate. Is that correct?
Clemens: Absolutely.The first thing you need to do is define a concept of “Real Productivity” What does that really mean? The question is: are you spending most of your time on what generates most of the value for your business?
Before you start anything, before you start delegating, before you start figuring out what changes you need to make, the first thing you need to do is do an assessment of what kinds of activities generate the most value. Because this is where the disconnect happens.
We talk about people being engaged in busyness rather than productivity. People ask “What’s the difference?” The difference is knowing where the value lies in your day, and in your hour. And in the activities of your employees. That very first step, before we do anything: having a good look at your business, and asking “Am I spending 80% of my time in ways that generate 80% of the value. Or as many people do are [you] spending 80% of [your] time on activates that only generate 5, 10, 15, 20% of the value your business requires to grow and survive?
Christine: You know it’s really great to hear you put it into percentages.
Clemens: I take that from the Pareto distribution because what the Pareto distribution says is that generally the minority of something is responsible for the majority of something else. It’s often called the 80/20 rule. It doesn’t always but it often tends to breaks into 80/20 so the distribution says 20% of our sales force generates 80% of sales. It’s the top 20% performers who do the majority of the work. The top 20% of our customers generate 80% of our value typically.
Within our businesses it’s the same thing. We tend to spend, unfortunately, only about 20% of our time (frankly I often see it less than that about 5, 10% of our time) on the things that are returning the largest value back to our businesses again. The other 80% percent of our time or more there is a steeply declining slope in terms of return on value. If we’re working 10 hours a day, 2 hours of those typically tend to be highly productive. And then because people don’t spend time really making sure they’re aligning value and action, or value and the behaviours and action and instructions to employees, the other [8 hours] tend to be not particularly productive because people haven’t done that analysis.
[Clemens' note: you cannot usually shift the Pareto distribution in a system. The minority of your time will always yield the majority of your productivity. All you can do is commit to continual review to ensure that the activities you are engaged in are reflective of your greatest value to the business.]
Christine: Isn’t that amazing. And here we think we’re working SO hard in our business and wondering why we’re not making any money.
Christine: My Goodness. So Clemens how do you keep your concentration on one thing at a time when you have to keep so many balls in the air?
Clemens: One of the things I tell my clients (it’s in “Great Performances.”) [is] “Everything must be done but you must not do everything.”
Christine: I love it!
Clemens: We talk about business owners, but really it’s anyone responsible for running anything. I don’t care whether it’s organizing an arts institution, volunteering for something, or managing an organization. There is this enormous sense that "everything must be done, therefore I must do everything."
We tend to feel like we’re doing very well when we’re very, very busy. There've been the cartoons and the jokes for decades about the big boss with his feet up on the desk. Well what we don’t know is that some of those big bosses with their feet up on the desk are actually planning. They’re thinking; they’re reflecting. That slower reflective time is so critical. And if you don’t take that [reflective time] at the risk of feeling unproductive, all of your subsequent actions are not going to be productive because you’re just spinning your wheels. They’re not actually connected with what really needs to be done.
So your questions is how do you manage that? Well the first thing again is that you need to take that reflective time to plan wrap your head around all the things that need to be done to make your business sustainably successful. The next thing is figure out whether you can hire, delegate, contract out or in some fashion find others to take those tasks on.
So the real answer is first of all the reflective piece. The second piece is if you want to operate a business that doesn't have a ceiling you can’t do it alone. There’s no way of keeping all those balls in the air alone. Someone needs to keep them all in the air but it can’t be just you. Many small business owners have a resistance to this or find it a real challenge. And it is often financially a real challenge. People have a hard time letting go. But if they are serious about operating a business without a ceiling [they] need to find a way to let go and bring others into [the] organization.
There’s no silver bullet: no magical solution of making one person infinitely productive. It’s just can’t happen.
Christine: Well I can see because I've been there myself, trying to do everything myself and you burn out.
Clemens: You do, you burn out and you hit the ceiling. There is a declining productivity curve. There’s a point at which, particularly at the beginning of a business, where the hours you work do yield a return. You put in 100 hours you’re going to get a hundred hours of value. But if you’re still doing that 3 to 5 years later and you’re still putting that in? I bet you a productivity analyst would come in and say you’re still putting in the same number of hours, the same energies, the same calories but your return is 60% of what it was 3 years ago. Your capacity as a one-person show with your limited energies has hit the ceiling. This is all you’re ever going to do and the harder you work the less productive you are going to be at this point. You need to change the way you are doing things.
Christine: Isn't that amazing. And we tend to think to think the opposite.
Clemens: We get caught in the busy trap. We get trapped conceptually, mentally and emotionally into feeling safe when we’re busy. We feel like at least we’re getting something done. It’s scary to stop and slow down and bring in others. There’s a lot of fear in that.
Christine: Yes but one of the things I've learned, you need to ask for help.
Clemens: Yes, absolutely.
Christine: And so your idea of getting help and delegating is huge.
Clemens: Yes, it’s huge. You need to find a way to do it. You must find a way to do it. There are two kinds of business. Perhaps someone has had a successful career, they have their financial lives in order but they want to get out of the corporate rate race or they don't want to be employees any longer. They want to take on a business doing something they love. They are basically happy being self-employed (which is different from being a business owner). For those people none of this is necessarily an issue. If you want to restore cars for a couple of decades and you just make a little extra money and you’re comfortable with what you’re doing you’re fine.
If however your ambitions are different than that, if you want to take the ceiling off of your business, you want to create an enterprise that is actually growing and constantly acquiring long term value, then at some point you’re going to have to cross this bridge of bringing others on board in one fashion or another.
Christine: Oh I agree. Now as I'm listening to you here Clemens I'm hearing that yes we need to get other people to help us and we need to start delegating and we need to do some planning. What suggestions do you have for business owners? Like how do we do this, step one, step two. Is there a formula?
Clemens: Yes, you bet there is. It’s a generalized one [a heuristic if you want the technical word. cr]. One of the things I was saying is that you have to throw the book out because each business is unique as a thumb print. The owner, the market, the location, the economic cycles we live through. Every moment of every business is unique enough. We need to be careful about cookie cutter solutions. But there are some larger principles. Absolutely.
The first one is you have to know your whys. You have to know why you’re in business. You have to know why people come to you as customers. You have to know why are you here. Why would I do business with you rather than someone else? That why question must have really, really clear answers. It’s the heart; it’s the philosophical guts of a business. And without it you’re just a very busy spinning shell. So the first thing is to answer that question.
The second one is to understand value. What kinds of things generate value for your business? Obviously the one that floats to the surface right away is sales. We need to sell something to generate financial value to a business. But there’re many others in terms of creating long term sustainability for a business. Relationships are an enormous value. Building a great team is an enormous value. Planning time, taking the time to plan and think and strategize returns great value to a business.
The thirds step is defining your best personal contribution. What are you good at? How do you add the most value to your business? I've given a very simple example of that I use for people to help them understand. When they say to me that I can’t afford an employee. I say "Well what if you are a designer of some kind. What’s your value to your business when you are actually at your design desk working? They say 75 to 125 dollars an hour. Ok wonderful. So every time you write an email. Every time you’re doing your bookkeeping or you’re running around buying supplies or any one of the hundreds or thousands of the other things that must be done in a business. Do you realize that you are costing your business 75 to 125 dollars an hour when you are buying stacks of paper from Costco? I will often use the example of a bookkeeper. A basic bookkeeper will set you back $30-$45 an hour. So why are you doing your bookkeeping when you know your value to the business is $100 per hour. So when you look at netting that out, you’re actually costing your business every time you’re doing things that you shouldn't be doing. Those things that could be moved onto someone else at a much lower cost."
The final one is defining those things that are not your strengths, the things you don’t love to do, so you avoid them. Now begin to look at your environment and ask "Can I recruit someone to do this? Can I delegate this to someone? Can I contract this out to someone? Is there some way? Can I bring in university interns, co-op programs?" There are so many ways. There are things like EI subsidy programs available in our province. There are so many ways of finding ways to get other people to do what you need to do once you wrap your head around the idea that you can’t do everything without it costing you your business.
Christine: This is fabulous. Absolutely fabulous. I wish we had an hour to spend with you or more.
Clemens: This is great stuff. I love talking about this because I see the costs when I'm moving out in my world working with the clients I love. My eyes are always open and my ears are always perked and I see where this value is falling under the sofa cushions. Where people are just losing so much value from their business. Just engaged in such busyness. It’s personally upsetting. I'm a designer and I love to see things beautifully built, beautifully designed, including businesses. So I could talk about this stuff forever because I love to see things well done.
Christine: There is so much material that we've covered in this brief interview this morning. Can you narrow it down to one special message that you would like our listeners to take away from this inspiring interview?
Clemens: Yes, I think so. I would say if you wanted to look at this from "Where do you start all this?" I would say that the one thing I would like people to take away is that the obstacles to doing this successfully are fear and ignorance. We’re afraid of letting go. We’re afraid of not doing everything. It makes us feel powerless. It makes us afraid we’re missing something. We don’t won’t to spend the money. There are lots of reasons and they’re all fear based.
If we want to be successful we need to grow some courage and get the support of those around us to help us build that courage and realize that some things matter more than others. They really do. And that some things you are simply going to have to let go. Either to delegate or to simply say “I can’t get to this.” So facing your fears around that is really important.
And then the ignorance: what I mean by that is take the time to plan. Don’t run your business blindly. Don’t be afraid to slow down. Take a weekend or an afternoon or a week or whatever it takes to sit down with some people. Because this is tough to do alone. And really go through your business and understand what adds value. What kinds of actions and activities should you be looking at. Deal with the fears and ignorance that are blocking you from going forward.
If you want to create a business that has no ceiling, with unlimited growth potential you are going to have to confront those fears and those unknown areas of your business.
Christine: So Clemens am I right, I know I’m right. I’m sure I’m right.
Clemens: I’m sure you’re right Christine.
Christine: The question I want to ask you is: can we call you? When we’re sitting there in ignorance stuck in the forest can’t see the forest for the trees?
Clemens: Beautifully put Christine.
Christine: So we can call you. You can sit down with us do a planning session. And help us to open our eyes to the potential of what could happen with our business?
Clemens: Absolutely. It’s something I love to do.
At the Great Performances Group we improve the success of small and medium business anywhere in the English-speaking world. Check us out to find out how. Read Clemens’ book “Great Performances – the Small Business Script for the 21st Century.” Leave a comment or question! A Facebook “Like” is sweet too.