Productivity – The Secret Ingredient

As an investor, I constantly read – searching for market drivers and trends related to my personal goals. The information I gather can also impact how Withum’s Management Consulting Team serves its clients. Information is abundant, and how people interpret and digest the information into data beneficial to individual causes matters. The Management Consulting Team works alongside companies to solve business challenges and essentially helps them Rethink How Work Gets Done. Productivity is the secret ingredient.

I recently read an article in Barron’s that contained Q&A excerpts from an interview with Ed Yardeni, President, Yardeni Research. What follows are comments covering productivity in the context of labor and unemployment. I translated these comments and identified them back to the many productivity projects we completed and have in flight.

Q: But the labor market is still tight.

A: We’ve run out of labor. Labor force growth, boosted in the ’70s and ’80s by the influx of the baby boomers, is behind us. Labor force growth is now less than 1%. Before the pandemic, unemployment dropped to 3.5%. Coming out of the pandemic, everybody was shocked that the labor market was so tight. You can make a list of pandemic-related reasons, but the underlying demographic profile is that we just don’t have workers. Overnight, workers have become extremely valuable. You want to hug them. And you want to keep them because it’s hard to get new ones. That means you’re going to have to pay them more. That’s only going to make sense if you can increase theirproductivity. If you do, that’s a win-win situation because it allows wages to rise faster than prices, which happens when productivity rises. Rising productivity is one of the reasons that profit margins soared to an all-time high in the first quarter and continued in the second quarter.

Q: What are you advising investors?

A: Own companies that are either providing technology or using technology heavily—to run their businesses, offset labor shortages, and increase their workforce’s productivity.Look at the profit margins of railroads: They have increased dramatically, partly because of consolidation, but also because of logistic programs that dramatically increase efficiency. Trucks are still viewed as low-tech, but they’re run by logistic programs on the cloud somewhere.

Whether you are a private or public commercial company or governed by a not-for-profit model, productivity should become one of your secret ingredients. Solving for and approaching this business challenge doesn’t have to overwhelm or cause a drain on working capital / free cash flow or prevent resources from accomplishing the overall mission. Our Management Consulting Team often finds that our clients have the tools and just need to be shown how to optimize their particular situation. We also meet clients who need to address modernization at a grander scale, but we have again shown how to tackle the problem in bite-sized chunks. There are many ways to help. We are practical business people first.

Removing the mystery and obstacles from what employees have to do daily is a win for the productivity team. Think about human nature and how most people like To-Do Lists and feel good about checking off items. Modern ERP, Accounting, CRM, Sales and Marketing software provide a dashboard filtered by employee role which lists their respective tasks. As it relates to productivity, we undoubtedly removed the many tasks that employees must do to locate, talk, email, secure information to start the task. How much time is saved depends on your situation but the point to emphasize is that productivity increased.

Other benefits derived from utilizing dashboards are improved audit trail, accountability, central access to data, improved transparency to transactions, and more. By the way, this is not a conceptual example as we have many clients loving dashboards.

Staying with real-life and practical client examples, below are some excerpts from ERP/Accounting Software project benefits:

• Enhanced financial management with 360-degree views
• Dashboard alerts for team members to complete activities, avoiding missed deadlines and potential non-compliance
• Utilize foreign currency automation inside of Oracle NetSuite, which saved 4 to 5 hours of manual effort every month to translate foreign currency in multiple worksheets
• Increased data access, transparency, and internal visibility, especially with sales tax audits as ERP Solution provided physical location record information with audit trails. The taxing authority auditor request to pull invoices substantially decreased
• Consolidated operations for traditional management reporting where someone logged into 19 separate legal entity instances then waited 3 hours to run all the Trial Balances, which were then exported to Excel to consolidate the numbers. This old process, which consumed at least two people for a minimum of one to two days every month, was changed to accessing real-time information contained in Consolidated Reports via Saved Searches
• Achieved automation through workflow, dashboard alerts, and saved searches, especially with processing vendor invoices and exposing the capability to view the invoice online and drill back to the General Ledger details
• Lessened the risks associated with a previous reliance on Excel worksheets to complete accounting and revenue recognition-based tasks
• Lessened the external auditor’s (e.g., USA and Statutory) work as audit trails were accessible and reliable along with improved financial internal controls through access/permissions and system inherent controls such as auto-generated invoice numbers with audit trail down to the record level

Glimpse into results of an ERP project with a retailer and auction house: