How to make your service company more productive

It’s not just the manufacturers that can improve their productivity

9-minute read

Productivity is often associated with companies producing goods. But boosting productivity is just as important for businesses that deliver services.

Service industry businesses may not manage production lines or put out measurable units, but they are certainly capable of implementing operational efficiency principles.

Whether it’s tech support, veterinary care or advertising, your business is just as vulnerable to inefficiency and waste as other companies. And low productivity or poorly run systems can eat up your profits and overtax your employees.

What is productivity?

Productivity measures an organization’s ability to produce a good or a service. It is often measured using labour productivity, the added value divided by the labour required to create it.

Increasing productivity means working smarter: keeping the same service quality without increasing resources.

One of the biggest challenges to improving productivity for service companies is measurement. How do you measure the quality and impact of a teacher’s lesson, a doctor’s diagnosis or a lawyer’s advice?

Inputs can vary. The skill and motivation of the employees, costs and competition, regulations and available technology all help your business thrive or can hamper you from achieving success.

How to increase productivity in the service sector

There are several steps you can take to boost productivity in the service sector:

1. Invest in employee training: Employee training programs can help improve the knowledge and skills of employees. It can also help standardize their work or facilitate the use of technology, which can positively affect their productivity.

2. Use technology and automation: Investing in technology and automation can allow you to optimize your processes, remove repetitive tasks and ensure employees focus on value-added work. Adopting technologies can also enable smoother customer engagement (e.g., helping customers find the information they need) or be used to manage complex tasks (e.g., scheduling, quality control, design).

Xioadan Pan, Associate Professor, Supply Chain and Business Technology Management at Concordia University’s John Molson School of Business, says the most successful strategies involve both human and digital solutions. “The objective is to create a synergy between digital platforms and human interaction. Service businesses should invest in enhancing both the human touch and digital presence.”

She offers examples, including AI chatbots complementing human customer service, partnerships between restaurants and on-demand delivery platforms, and merging traditional hospitals with virtual health services.

3. Set clear goals: Setting clear goals can help employees stay focused and motivated, leading to increased productivity. You can download our employee goal-setting template to get started.

4. Improve communication: Effective internal communication is essential for improving productivity in a service business. Encourage open communication between employees and management to ensure everyone is on the same page.

5. Delegate tasks: Entrepreneurs can often become a bottleneck in their own business. Delegating tasks can help reduce your workload and increase productivity. Make sure to assign tasks to employees based on their strengths and expertise.

6. Track progress: Tracking progress can help identify areas for improvement. Use metrics to measure productivity and identify areas where the company can improve.

7. Reward employees: Rewarding employees for their hard work can help boost morale and increase productivity. Consider offering incentives such as bonuses, promotions or other rewards.

Remember that every business is unique; what works for one company may not work for another. Therefore, it is crucial to experiment with different strategies to find what works best for your business.

Measuring productivity in the service sector

Jim Taylor spends time showing companies in the hospitality industry how to measure and find efficiencies to become more productive.

“The margins in the hospitality industry are so tight to begin with that the industry is at a point where it can’t continue to just push harder on its people to get results,” says the CEO of Benchmark Sixty, who helps restaurant managers and owners go beyond just working harder to try and fit working smarter into their business model.

“There has to be an increase in productivity, or those rising costs will put restaurants out of business.”

He says the restaurant sector is accustomed to measuring productivity in their kitchens. Chefs and managers often look at how staff can quickly prepare a dish or streamline a process. “They think about it from a sales-per-labour-hour perspective, which in the kitchen makes sense.”

The dining area of a restaurant, however, offers a less straightforward method for measuring efficiency. That’s where Taylor concentrates his efforts and suggests changes for his clients.

He gives the example of a restaurant line-up. “We recommend to every restaurant operator, if you’re trying to improve productivity, don’t let anyone leave the restaurant. If they’re waiting in line, find a way to get them to stay.”

But the problem, he says, is that it’s usually the least trained and youngest employee running the front door.

“They might be a 16-year-old high school student making minimum wage, and they’re in charge of keeping all these customers,” he says. “If I’m the manager and I spend all my time at the front door with that person, the chances of our losing guests at the door are reduced. Our productivity has increased if we seat one more customer or table.”

Taylor suggests you stop thinking strictly about the revenue you’re bringing in and start thinking about key metrics.

“We encourage metrics like customer-per-labour-hour because it removes the dollars and cents from the conversation. So, if I have 100 customers and 10 staff working, I’m serving 10 customers per hour worked. If I add another staff member and now have 11, I can then serve two more groups and my efficiency and speed have improved.”

Review your existing process

Process mapping is a technique used to visually map out workflows and processes.

Process mapping aims to quickly and effectively communicate how a process works. It allows any team member to quickly understand how to complete a given process without lengthy verbal explanations.

By mapping out a process from start to finish, you can better understand how it works and identify inefficiencies or make improvements. You can use process mapping to visualize any process.

Here are some tips to create a process map for a service business:

1. Identify the process you want to map out. You could be receiving a call in customer service, selling a service and creating a quote, or any other approach you want to visualize.

2. Gather the information you need about the process. Look at the steps and people involved and the tools and resources required.

3. Create a flowchart that outlines the process from start to finish. Use symbols to represent each step in the process, and connect the symbols with arrows to show the flow of the process. An even more straightforward way to map your strategy is to put pieces of paper on a board.

4. Review the process map and refine it as necessary. Ensure that the process map accurately represents the process and is easy to understand.

5. Share the process map with your team and other stakeholders. Use the process map to identify areas to improve and train new employees.

Implement a continuous improvement approach

The best businesses adopt a continuous improvement mentality. Here are some suggestions to help create a continuous improvement culture in your company:

Start by assessing the competition and the best practices in your industry, also known as benchmarking. But don’t copy plans of other businesses—develop one that works for your company.
Get external help to assess your business’s weaknesses and strengths. That kind of help gives you an objective viewpoint from which you can improve productivity and redesign processes.
Take a step-by-step approach rather than tackling everything at once. Focusing on a few priorities will enable you to see results faster.
Assign specific teams to specific problems or processes for redesign.
Put a formal suggestion system in place for employees.
Look for breakthrough accomplishments. Minor improvements can transform into major increases in productivity.
Measure your results.

Productivity has its limits

Taylor offers a cautionary tale for businesses trying to improve productivity but may miss out on some metrics.

One restaurant chain he was helping noticed a revenue spike for a specific day. “And the district manager said, ‘That looks really good. Let’s do more of that.’”

“But they were talking about how profitable the business was that day. And the manager was sitting there shaking their head, saying it was actually the worst shift they had had in weeks.

“He said the restaurant was short-staffed; they worked a double shift, and two people quit because of the stress.”

“So, they looked really profitable, but the productivity level was so good that it was damaging. So, the manager at that point said, ‘Let’s make sure that level of productivity never happens again.’”

Taylor says businesses must find an optimal productivity zone where employee experience and customer service are good, and burnout is avoided.

Next step

Identify wasteful practices in your business, set new KPIs and build dashboards to measure and optimize your business with the free BDC guide, Create a Leaner Business.