Everybody understands what productivity is. It’s basically doing more with less. The former chairman of Procter and Gamble once said productivity is everything in every business. Sean Hutchinson, CEO/Partner of SVA Value Accelerators, talks about the productivity accelerator which is the fourth out of seven value accelerators. Sean says the reason that it’s in the middle is that it provides an important inflection point built on what’s happened before and it’s a predictor of what happens in the future. Learn more about productivity as Sean talks about the tools for productivity, the value-added process mapping, quality control, risk reduction, and more.

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Productivity: Creating The Path To Higher Valuation with CEO/Partner Sean Hutchinson

Creating The Path To Higher Valuation with CEO/Partner Sean Hutchinson

We’re doing a continuation deep dive from an original podcast. We did it with Sean Hutchinson of http://buildvaluetoday.com/ (SVA Value Accelerators). What we’re going to be talking about is part of the Value Acceleration methodology. We’re going to be talking about the productivity portion of that. Sean, thanks again.

The former chairman of Procter and Gamble once said, “Productivity is everything in every business.” This particular piece of our Value Accelerator, the Productivity Accelerator, comes four out of seven. The reason that it’s in the middle is that it provides an important inflection point built on what’s happened before and it’s a predictor of what happens in the future. Value creation and value acceleration tend to not be linear. It’s more of a slow climb and then there’s an inflection point where it takes off. The exponential value curve is a scoop. One of the things that inflects that curve and gets it to move into a steep incline is increases in productivity. Everybody understands what productivity is but it’s doing more with less. There are a couple of different places in your numbers that you’re going to see it on your financial statements, but one place is in the gross margin. Not the net margin necessarily.

The gross margin is the indicator of financial productivity in the organization, of essential throughput of the assets. How quickly did they get through the organization? How quickly did they produce income cash? How quickly did they generate margin? Productivity is about not just efficiency, but it’s also about velocity. It’s also about the efficient use of capital within the organization. What are the tools that we use? One tool is called $50 to $5,000. It is a concept that came out of Rob Slee’s book, https://www.amazon.com/Midas-Managers-Rob-Slee/dp/0979047803 (Midas Managers). It’s an amazing concept and it’s been effective with our clients. If I go into a management team for instance or even talking to an owner and I say, “How much of your day do you spend doing $50 an hour work?” If they don’t land immediately on a percentage, which tends to be in the 90% of the day or above then the answer is way too much. That’s an immediate acknowledgment that productivity in the organization even at the top is dampened. It’s restricted. The reason for that is that not just the CEO, but everybody else in the organization is working on the wrong stuff.

There may be delegation problems. There may be process problems. There may be culture and communication problems. At the end of the day, stuff’s getting stuck in the organization. What we want in order to create economic value is for the highest-level strategic thinkers in the organization to be doing $5,000 an hour work. That’s where the juice gets put into the deal. Being aware is one piece of it. How much $50 an hour work are you doing?