MANAGERS ON MANAGEMENT:OUR ECONOMIC woes are many: the collapse of the property market, the implosion of the banking sector, a dramatic contraction in credit, and a fall-off in consumer demand – to all of which Liam Murphy would add productivity or, more precisely, the lack of it.
While the speed of the downturn has inevitably hogged the headlines, Murphy, who is managing director of Henkel Britain and Ireland, believes the continuing erosion of productivity will not only worsen our circumstances – it will actually impede recovery.
“Our problems may have started with the banking crisis, which then spilled over into the general business environment,” he argues, “but competitiveness and the ability to withstand rapidly decelerating markets are challenges ultimately for productivity.”
Henkel is a 130-year-old German consumer goods giant, quoted on the Frankfurt Stock Exchange. It is still controlled by the founding Henkel family.
Its survival and success over the decades have been built on a formidable work ethic and tight financial control.
Two years ago, well in advance of any pressure from the marketplace, it introduced what it calls its “lean manufacturing process”, which delivered significant productivity gains.
“While it’s true that we reduced our core employment,” concedes Murphy, “the key outcome was that we moved up the tree in terms of the value of that employment and secured our future here.
“That’s why my advice to any other business now is to ride the recession and use it as an opportunity to examine fundamentally every single element of your operation from a productivity viewpoint. Because costs are more important now than ever, there has never been a better time to do it.
“And I don’t mean some sort of casual overview. This is essentially a productivity audit which starts when you get up in the morning and finishes when you turn out the light in your office at night. It is that thorough.”
It starts with the value chain.
“The first thing is a comprehensive review of every element of your value chain for its value contribution. The next thing you need to do is to look at your talent pool. That means being tough and demanding, but being rewarding as well. It means asking the hard questions when it comes to staff: who will carry me through this recession and who will bring me added value?
“That is not something we have been very good at in the past.
“From there, you need to look at your cost base,” Murphy continues. “Energy has become very expensive, our infrastructure is very expensive, the cost of living is very expensive.
“Everything that contributes to indirect costs needs to be looked at. We do have a tendency to become complacent in this country. And I believe we’ve become complacent when it comes to looking for value.”
Murphy’s message for managers in the public sector is equally forthright.
“We had struggled for decades as semi-Third World country, down at the bottom of the pile in Europe, and when the Celtic Tiger came along we decided that all of a sudden we were entitled to all the services we’d been missing – and at the very top level.
“The problem is that in our rush to deliver those services, we have added a lot of cost – but what we have failed to add are efficiency, productivity, value or accountability.
“I’m not saying that productivity is the panacea for getting through the recession. What I’m saying is that, to succeed, productivity has to be a continuous process running every minute of every day, every week, every month and every year. It should never be taken for granted, whether times are good or bad.”
Name: Liam Murphy
Company: Henkel
Job: managing director, Britain and Ireland
Management advice: Productivity in both the public and private sectors is the key to success and to recovery.
Next week: Maurice Bergin, founder of the Green Hospitality Awards, on good environmental management
