Loyalty, Honesty, and Productivity

Jeevaka Bupendra Lalith Kotelawela used to emphasise, during his board meetings, that he prioritized loyalty over the efficiency or cleverness of his lieutenants. Loyalty is a quality that could be easily feigned dishonestly. Let’s delve into the story of misguided loyalty, embodied by a very devoted monkey who served as a pet to a king. In this tale, the loyal monkey, without a second thought, swatted a bothersome fly with its master’s sword while the king rested nearby. This narrative serves as a poignant illustration of blind allegiance, where unwavering loyalty can result in unintended and potentially adverse consequences.

However, this perspective came with its own set of risks. While loyalty can be a valuable trait, it shouldn’t overshadow competence and wisdom. Blind loyalty, from individuals who may be genuinely devoted but lack critical thinking or discernment, can lead to disastrous outcomes. Today, we can observe the consequences of this approach in the life of Lalith Kotelawela, once one of Sri Lanka’s most prominent business tycoons. He now finds himself living under almost house arrest, with only a few loyal individuals by his side to offer assistance. This situation serves as a cautionary tale about the potential pitfalls of valuing loyalty above all else in the business world.

Efficiency, on its own, is not a sufficient measure of success. Efficiency is often described as “Doing Things Right.” However, if the “Things” being done are inherently incorrect or not the right things to do, then even executing them with the utmost efficiency can lead to wasted efforts, time, and resources. In other words, efficiency should be coupled with the wisdom to ensure that the tasks being performed are the right ones, aligning with the broader goals and objectives, to truly achieve meaningful outcomes.

Indeed, the effectiveness of the selected “Thing” or task is crucial, as it represents the concept of “Doing the Right Things.” When you combine efficiency (Doing Things Right) with effectiveness (Doing the Right Things), you create the conditions for a productive and successful project. In this context, a productive job entails not only executing tasks efficiently but also ensuring that these tasks are the correct ones to achieve the desired goals and outcomes. This holistic approach to work maximizes the use of resources and efforts, leading to meaningful and impactful results.

The Bureau of Labour Statistics (US) defines productivity as “a measure of economic performance that compares the amount of goods and services produced (output) with the amount of inputs used to produce those goods and services.” When people think of “being productive,” they often think about what they’re personally getting done. For many people, that means checking things off the “to-do” list. That type of personal productivity reflects how efficient you are at completing tasks. But not all tasks are created equal.

Source: https://www.betterup.com/blog/what-is-productivity

Measuring productivity

Measuring productivity can indeed be more complex in various contexts beyond straightforward processes, like the one mentioned above. However, the basic principle of productivity, which is output relative to input, remains a foundational concept. Here are some ways to measure productivity:

Output/Input Ratio

: As mentioned earlier, the output-to-input ratio is a fundamental gauge of productivity. It involves dividing the achieved output by the resources, time, or effort invested. For instance, if you yield 69kg of coconut oil from 100kg of copra, your productivity ratio stands at 69%. However, it’s worth noting that this measure primarily pertains to the productivity of raw materials.

Value-added per Hour or Resource

: In service-based industries or knowledge work, you can measure productivity by looking at the value added per unit of time or resource. For instance, in software development, you might measure lines of code written per hour or features developed per week.

Revenue per Employee

: For businesses, a common measure of productivity is revenue generated per employee. This can indicate how efficiently the company is utilizing its workforce.

Cost per Unit

: In manufacturing, you can measure productivity by analyzing the cost per unit of the product. Lowering the cost per unit, while maintaining quality, can signify increased productivity.

Customer Satisfaction

: In service industries, customer satisfaction surveys and feedback can be used to gauge productivity. Higher customer satisfaction often indicates that resources are being effectively utilized to meet customer needs.

Time-Based Metrics

: For project-based work, tracking time spent on tasks and comparing it to the outcomes achieved can help measure productivity. Time-based metrics include lead time, cycle time, and turnaround time.

Quality Metrics

: In many cases, productivity should not come at the expense of quality. Measuring defects, errors, or rework can help ensure that productivity gains do not compromise the final product or service’s quality.

Employee Engagement and Retention

: High employee turnover or disengagement can be detrimental to productivity. Monitoring these metrics can provide insights into the work environment’s effectiveness.

Return on Investment (ROI)

: In investment-related contexts, ROI measures how effectively resources have been used to generate returns. It’s often used in marketing and capital investment evaluations.

Key Performance Indicators (KPIs): Businesses often track specific KPIs relevant to their industry and objectives, such as customer acquisition cost (CAC) in marketing or inventory turnover in retail.

Ultimately, the choice of productivity measurement depends on the specific industry, goals, and activities being assessed. It’s essential to select metrics that align with the desired outcomes and provide actionable insights for improvement. Additionally, productivity measurement should be dynamic and adaptable, evolving as circumstances change and new challenges arise.

By integrating various productivity measures, it’s possible to formulate more comprehensive productivity metrics. Historically, banks have often relied on the Cost to Income (C/I) ratio as a primary measure of their operational efficiency.

However, this ratio does not capture essential factors, like growth rates, reach, and return on investments. Recognizing this gap, Seylan Bank introduced a more intricate productivity formula in its Annual Report in the 1990s. This formula took into account a broader range of factors, providing a more holistic assessment of the bank’s performance.

Productivity = Combination of C/I ratio, Loans/Deposit ratio, Reach and assets growth and Net Interest Margin

Forensic audit and fraud detection

Productivity ratios serve various functions and are valuable for many aspects of business and decision-making, including: identifying areas where improvements can be made to optimize resource utilization; comparing with industry standards or competitors and identify areas for improvement; controlling costs by identifying inefficiencies; evaluate the performance and provide feedback and/or incentives for improvement, etc. Indeed, productivity ratios can be invaluable in detecting fraud and mismanagement within organizations. For example; Productivity ratios can reveal unusual patterns or anomalies in financial performance. Significant deviations from historical norms or industry benchmarks may raise suspicions of financial mismanagement or fraud. Also, forensic accountants often use productivity ratios as part of their investigative work to uncover financial irregularities, including fraud schemes.

Now that you see how your personal productivity affects the whole system, you’re likely feeling inspired to become more productive at work. It helps to know that your role makes a difference!