In today's dynamic business environment, which presents increasing threats to existing business models across industries, one of the key drivers towards sustained profitability is for businesses to focus more and more on internal efficiencies or productivity.

1. Productivity, Key to Sustained Profitability
Copyright @ 2016 Value Consulting Asia
Ramesh Narasimhan, Principal

2. Introducing the 3 ‘P’ Grid
Profitability
• Driven by what you do and
importantly “how” you do it.
Productivity
• Ensures business remains
competitive & sustainable
Process
• Fundamental to doing business
effectively
Copyright @ 2016 Value Consulting Asia
‘Quality of Processes’
drives Quality of
‘Productivity
Management’ which in
turn drives ‘Profitability’

3. Why ‘Process’?
A robust set of processes
helps:
improve financial control &
governance
prevent errors,
misrepresentations,
disputes
prevent revenue leaks, cost
indiscipline and frauds from
taking place.
Great companies delivering
sustained value to
‘customers’ are built upon
‘Best-In-Class’ processes
Copyright @ 2016 Value Consulting Asia
Foolproof processes are the foundation for establishing a successful
‘Productivity’ management framework

4. Why Productivity?
Copyright @ 2016 Value Consulting Asia
In most business models, profitability is a
function of productivity, price, and
volume. Productivity represents how
efficiently, i.e. with minimal or no waste, a
business uses its resources to produce its
product or service.
When comparing companies within a sector,
it is very important for investors to
understand the relative productivity
comparisons between companies producing
the same products.
Pricing
• Market driven
• Partly controllable
Volumes
• Demand, Supply
driven
Productivity • Controllable
Productivity, when managed well, ensures resources work efficiently, thereby
delivering increasing value per dollar spent
Profitability

5. Productivity = Output / Input
Output is expressed generally in physical quantity / units or financial
value
Input is expressed in terms of labour and capital measures, units or
financial value
Copyright @ 2016 Value Consulting Asia
Measuring Productivity
Industry Metric / Units P&L line impacted
Manufacturing Production units
per man hour
Cost, Revenue
F&B Customers per
Employee
Staff Cost
Banking (Call
Centre)
Calls per man hour,
Sales per Employee
per day
Staff Cost, Revenue
Ratio Description
Cost to Income Ratio Measures how much cost is incurred in
relation to income earned in the same period
Incremental Ratio (Jaws) Revenue Growth (minus)
Cost Growth
Revenue to Staff Cost Measures how much Revenue is earned per
dollar of staff cost incurred
Some Basic Metrics (Illustrative only)
Let us keep it simple!

6. Metrics based on Value Added
(illustrative only)
Copyright @ 2016 Value Consulting Asia
Labour
Productivity
Capital
Productivity
Value Added / Number of Employees
Value Added / Fixed Assets
(Sales – Cost of Materials ) / Number of Employees
(Sales – Cost of Materials ) / Fixed Assets
Further drill down to operational level to understand
Customers / Staff, Sales per customer etc.
Further drill down to operational level to understand
Customers / Staff, Sales per customer etc.
Value Added = Sales (–) Cost of materials & services purchased

7. Process-Productivity-Profit Chain
Copyright @ 2016 Value Consulting Asia
Robust Processes
Productivity Measured
& Managed
Sustained Profitability
Gains
Establish best-in-class
management tools to
measure & manage
profitability, across all
products & services,
towards delivering
significantly greater
value to shareholders

8. Takeaways
Copyright @ 2016 Value Consulting Asia
Ø Profitability is directly impacted by Productivity.
Ø A framework for measuring and managing Productivity needs to be
established to enhance efficiencies and reduce cost
Ø The foundation for Productivity is a robust set of processes across the
value chain. Without sound processes, productivity cannot be measured
easily.
Ø Start measuring productivity with simple metrics NOW

9. Question for you: How productive is your
organization?
Copyright @ 2016 Value Consulting Asia
Mail me @ ramesh.narasimhan@valueconsultingasia.com.sg
for a complimentary copy of “Productivity Self-Assessment Checklist”, which you can use to gauge how productive
your business is.

10. Let’s connect :
ramesh.narasimhan@valueconsultingasia.com.sg
www.valueconsultingasia.com.sg
Handphone: +65 90677851
Facebook: @ValueCFO
Twitter:ValueConsultin9
Ramesh Narasimhan, Principal
Copyright @ 2016 Value Consulting Asia
v We are dedicated to serving businesses in their mission to become more productive and more profitable
v We conduct workshops for corporates striving to significantly enhance internal efficiencies
v We provide advisory services on matters to do with profitability management but we do not just stop
there. We also work with businesses to implement the identified initiatives & action plans