Unlocking Hidden Productivity | Leicester Productivity Programme

At the Leicester Productivity Programme, we understand the important role that multi-factor productivity (MFP) plays in the success of a small to medium-sized enterprise (SME). By examining MFP and drawing from our experience of delivering over 100 SME productivity improvement plans, along with 30 years in the field, we explore how productivity can significantly impact local businesses within a region.”

Explaining Multi-Factor Productivity

MFP encompasses more than the typical single-factor productivity measures to which many are accustomed. It offers a comprehensive assessment of how efficiently an organisation combines various inputs to create value. The main elements include:

Capital – Infrastructure, machinery, and equipment.
Technology – in the form of Innovations and processes that enhance production.
Labour – Workforce and Skills.
Raw Materials – Inputs required for manufacturing.
Energy- Fuel used in production.

Measuring Efficiency:

MFP evaluates the effectiveness of combining various factors to produce output. It considers both technical efficiency (using inputs optimally) and technological progress (innovations to enhance productivity).

The importance of MFP for SMEs:

Unlocking the full potential of our resources boosts our edge in the market. MFP empowers SMEs to measure up against industry benchmarks.
To boost their performance, SMEs can enhance their productivity by embracing innovation, integrating new technologies, optimising their workflows, and making smart investment decisions.
Ensuring sustainable growth involves finding the right balance of factors such as labour, capital, and technology.
SMEs frequently work with tight resources. That’s where MFP comes in – it helps them pinpoint opportunities to make the most of their resources.

Challenges for SMEs when considering MFPs:

Lack of data: At times, SMEs may not always have all the data they need to accurately calculate their MFP. That’s where our Productivity Diagnostic tool comes into play – bridging this information gap and providing a starting point along with actionable insights. We analyse 30 different productivity measures and then determine which area to focus on for the most significant impact.

Sector Variations: MFP differs across industries due to unique production processes – with our organisation’s combined experience, working with hundreds of clients across a wide variety of sectors LPP is well-positioned to understand the requirements and unique challenges that each SME faces.

Complexity: Considering multiple factors requires sophisticated analysis, which is why we rely on our decade’s worth of experience providing SMEs with business support to deliver practical business insights and a productivity improvement plan which is tailored to each business’s needs.

Insights for SMEs:

By using our unique diagnostic tool, we can help SMEs identify inefficiencies and use their resources more effectively. What we’ve discovered is that before diving into productivity programs involving investment in technology and capital, SMEs should focus on establishing a strong framework of productivity measures. Our research indicates that SMEs must first understand the specific productivity factors impacting their business, region, and industry. By improving fundamental areas such as training and skills, SMEs can lay the foundation for enhanced productivity. Once they’ve elevated their baseline productivity, they can advance even further by embracing innovative practices and leveraging new technology. This may involve implementing digital tools, and automation, and optimising supply chains for enhanced efficiency.