Are you a productivity expert?

If you want to find out something new, the last people to ask are experts. Experts predicted that television was a fad, that mobile phones would have a market of less than 1 million users, and that getting big was the best strategy in business. Experts know things and therefore are less likely to learn things. I’m a student -- an enthusiastic learner who likes to do research, make new connections, and provoke innovation.

And, just like the other 73 million business owners and managers in the US, I’m a businessperson who has spent a career trying to figure out how to increase productivity, motivate employees, deal with bad bosses and greedy investors while trying to increase profits. It’s the great American business juggling act: trying to do more with less.

Exactly what do you mean by productivity?

Productivity is the simple act of increasing output while maintaining or decreasing input. For example: if McDonalds can figure out a way to serve an extra 25 customers an hour (output) without increasing staff (input) they’ll have increased productivity. Anytime someone can create, make, sell or ship the same amount or more for less, they’ve increased productivity. Some companies have cracked the code, and that’s what this book is about.

How did you select the companies you feature in the book?

First, I assembled a research team of three recent Berkeley, Stanford and Princeton graduates and we spent months examining more than 4000 companies around the world, searching the most productive relative to their industry categories and peers. Eventually, we were able to develop a list of about 100 outstanding examples of productivity.

Then, we put each through the grinder and examined revenues per employee per year (including part-time and outsourced workforces), operating income (profits derived only through business activity) per employee per year and return on assets and equity per employee.

In total we conducted more than 15,000 web searches, generated and compiled 8,000 pages of research, traveled 46,000 miles, conducted more than 200 background and primary interviews and produced nearly 3000 pages of transcripts. This was a very careful process. By selecting the top ten we believe we ended up with a group of the world’s most productive companies.

Name some of the companies you found to be among the most productive in the world today.

Here are four of the companies whose secrets we reveal the book.

World Savings has been led by a dynamic husband and wife team for more than forty years. They routinely achieve 40% more revenue per employee per year than the average bank, spend half as much as other banks running the company, have grown 20% annually for decades and their average branch hauls in 50% more deposits than their nearest competitor. They are a remarkable company.

Nucor Steel has an absolutely flat leadership structure and they’ve never had a layoff. Yet Nucor has achieved an annualized rate of return of 18% for thirty-one years, while slashing the time it takes to make a ton of steel by more than ninety percent and paying their workers fifty percent more than the industry average. Their performance is unprecedented.

Ryanair leaves every airline in the world inhaling their contrail. Based in Dublin, Ireland, this low fare superstar generates 40% more revenue per employee per year than other airlines while earning three times the profit per employee of Southwest. Even 9/11 didn’t slow them down. They responded by slashing fares, giving away a million free tickets, and placing the world’s largest aircraft order while turning in their biggest profit quarter ever.

One of my other favorites is The Warehouse, a New Zealand based chain of discount stores. Founded by Stephen Tindall in 1982 with just $30,000, it invested two-thirds of its start-up capital into technology, and the rest is history. In terms of efficiency and productivity, The Warehouse beats Wal-Mart big time. While Wal-Mart makes a profit of 3.3 cents on every dollar that comes in the doors, this feisty 75-outlet chain doubles that, putting 6.6 cents of each dollar to the bottom line. And while Wal-Mart delivers a stunning 24% return on equity, The Warehouse returns more than 40%.

You argue that a company can’t be productive unless they tell the truth. Isn’t truthfulness more commonplace than not?

Truth, in business, is as uncommon as snowflakes in July. Most companies have institutionalized a lack of truth and turned the practice of half-truth, deceit, trickery and hidden agendas into an art form. Not telling the truth is so pervasive that the management of most companies has no problem lying to vendors and suppliers, employees, shareholders and to each other. Often it’s done with a wink and knowing nod to their colleagues and frequently boasted about to their cronies.

Productivity ultimately comes down to human behavior -- which begs an interesting but simple question. Why would anyone bust their butts for a company that doesn’t tell them the truth? When workers see management spreading manure waist-deep it’s obvious to them, that at some point, they’ll also be a victim.

By contrast, the authenticity and truthfulness we encountered at each of the companies we investigated was palpable. The air actually lacked the smell that hangs in the oxygen of many other companies.

You write that productive companies don’t lay people off. How is that possible? Don’t companies need the flexibility to reduce their workforce when necessary?

Businesses only need to reduce the workforce when they’ve added people unnecessarily. In the companies we studied if you add people unnecessarily you’ve failed as a boss. Layoffs are an "F" on any boss’s report card.

Also, layoffs break the promise that productive companies make when they say, "help us do more with less and it will be better for everyone". When you break promises people get cynical and they put in less effort. So you loose productivity when you allow yourself to rely on layoffs for flexibility.

Compare the typical American business with Nucor, America’s largest steelmaker. While more than 40 steel companies have gone bankrupt in the past several years, and Moody’s ranks the bonds of 13 of the 14 companies they cover as junk, Nucor has been profitable for 31 consecutive years and has had never had a layoff, in the world’s most cyclical and commodity driven business.

You write that most companies are unproductive is because they focus on the wrong things. What do you mean?

Most companies spend their time focusing solely on pleasing their lenders and the analysts instead of trying to become more productive. Wall Street and the CEOs and CFOs who get sucked into playing their insidious little game are the real enemies of productivity.

When analysts demand guidance as a condition of covering a company’s stock, and they relent, any hope of increased productivity is DOA. The company’s sole focus becomes hitting their quarterly numbers. Then the game gets nastier. If they don’t promise to increase their profits every quarter, their stock will be promptly downgraded and hammered. And if they promise a number and don’t deliver they’ll also be hammered. Because one quarter isn’t sufficient for any business to implement and see results from any productivity initiative, most CEO’s and CFO’s spend their time in desperate, furtive searches for quick fixes and, as we’ve seen, will do almost anything – including lie, cheat and steal – to have their financial statements please the people following the company.

By contrast, highly productive companies like World Savings say to their analysts, "Look, we’re going to run our company as best we can, but we’re not going to play your game. You’ll get our results when our shareholders get them," That position doesn’t make them a darling of Wall Street, but it has made their shareholders happy and rich.

No company will ever increase their productivity by focusing on their financial statement. Companies become more productive by paying attention to customers and being focused on their business.

Would the WorldCom, Arthur Andersen, Xerox, Enron and Adelphia debacles have occurred had those companies followed the advice in your book?

In a word…no!

The people who led these companies made a choice and became criminals because they did what we just discussed; they become totally preoccupied with issuing financial statements that would be pleasing to Wall Street.

When these companies found out the real numbers wouldn’t please Wall Street, each began to systematically create artificial revenue. Not one of their leaders had the courage to step to the front and say, "I’m sorry, we’re not going to ht the numbers we promised and we’re going to fix it." Instead, each made a choice to become involved in criminal conduct. We can only hope that each of them ends up doing serious time in the pokey.

You write that highly productive companies keep everything simple. In today’s complex world, isn’t that naive?

If you define simple as being, "easily understood and not elaborate," then the most productive companies in the world are all indeed simple businesses and fight ruthlessly to keep them that way.

Consider Ryanair, the world’s fastest growing and best financially performing airline. They run a very simple business. You buy a ticket. They fly you safely, in a spiffy new plane, but that’s it.

They offer no baggage transfers; if you want a soft drink onboard you buy one; you can’t change reservations; you’ll fly to a secondary airport; and you’ll purchase your ticket by phone or Internet but not through a travel agent. In return, the cost of your ticket will be a small fraction of what you’d pay with any other European carrier and, in most instances, cheaper than a bus or train ticket.

What’s naïve is to believe that businesses don’t require the laser focus of a simple business proposition.

What are the most important steps a business can take to increase productivity?

Here are seven that are among the many discussed in the book:

• Create a simple and authentic BIG objective that everyone can understand and relate to.
• Quickly get rid of every executive and manager who doesn’t share complete support for the BIG objective. Time will not bring them around.
• If a layoff is required to fix the business, do it ONCE, and then enter into a covenant with your workers that, in return for their productivity, there will never be another one.
• Figure out the real "drivers" that will allow higher productivity to be achieved, and then measure them hourly, daily and weekly, and have them posted for everyone to see.
• Ask WTGBRFDT – What’s the good business reason for dong this – each time you have to make a decision and instill that mentality in everyone. Let that simple question become the culture of the company.
• Turn every facet of the operation into a system, and work continuously to improve the process by involving the people who do the actual work in the creation of the systems.
• Put everyone on a team – whether in manufacturing, retail, or services – and pay the team for what it produced, sold, shipped or serviced the previous week. The best team members will be more effective at dealing with slackers and non-performers than managers or HR could ever be.