In resources there are a few things we know to be true:
- Productivity and efficiency are often talked about interchangeably but they aren’t the same thing
- Mining cycles typically result in disproportionate focus on one or the other, compromising sustainability
- Long-term success comes down to consistent performance
Productivity and efficiency are often paired together but in contexts that typically tackle only one of them. Productivity is about production levels over a defined period of time (eg tonnes of coal per annum) and may consider factors such as the quality of material produced. A plan to improve productivity might look at a pit’s design or a mining method. Efficiency looks at the resources required to achieve that level of production (eg labour and equipment) and whether there’s any waste in the process. A plan to improve efficiency might look at a haul road’s design or team workflows. If Company A produced 1Mt of coal with 50 personnel, they would be more efficient than Company B also producing 1Mt of coal with 100 personnel over the same timeframe.
The danger of a single focus
The difference between the two ideas is significant. If they are not tracked and managed correctly, it can have detrimental effects on a business’s bottom line. The choice to focus on improving productivity or efficiency often depends on the current business environment. In economic booms, it’s common to find resource companies honing in on increasing productivity to maintain market share. In busts, that focus switches to improving efficiencies to achieve maximum productivity with fewer resources.
Ideally both productivity and efficiency are considered through booms and busts. This improves the likelihood of sustainable performance in either economic climate. For example, during a boom, rather than purely focus on productivity growth, it’s essential to consider the efficiency of achieving that growth. It may feel like doing that holds back productivity relative to other companies but, when the inevitable downturn comes, those companies are positioned to sustain their new level of productivity. Meanwhile, their competitors will be cutting costs and personnel to remain viable. Tackling both targets helps to smooth out the volatility of booms and busts.
Furthermore, regardless of the economic climate, if you focus only on productivity, success means output trends are increasing over time. However, if the cost to produce that output follows the same trend, is the business going to be in a better position when the economic cycle changes? Equal focus on productivity and efficiency ensures that output increases over time but costs do not rise on the same trend. In other words, while a business is generally rewarded for what it produces, efficiency ensures profit margins are maintained. Resources that are not wasted can then be saved or invested back into the business to increase productivity. Similarly, a sole focus on improving efficiency might lead to a sharper team but a lot of missed opportunities to gain greater absolute value.
We suggest there’s a better approach still. To improve performance, rather than focus on efficiency and productivity, the strongest strategy is to focus on standardising the process of improvement itself. Standardising how a site or business approaches improvement in general creates a framework that means you can firmly know the effects that changes are actually having. When a process is unstable, you can’t know if improved results stem from intentional change or luck. A stable process is the only way to know whether planned change has been achieved – and to create a base from which you can analyse and identify new productivity and efficiency improvement opportunities. Another underlying power of standardisation is that you can truly identify and understand the problem you are trying to solve because you’ve created a level playing field for analysis.
Slower but steady
Leaders and teams can become disillusioned with standardising the improvement process because it often results in uninspiring results and, at times, negative performance short term. Communication with leaders and workgroups is critical so they understand the value in getting the process right – and are prepared for initial setbacks. Standardising means:
- Defining the best way to perform the current process
- Ensuring those steps are consistently followed by everyone
- Putting measures in place to monitor variance of key inputs and outputs
- Having a trigger point and response plan to manage variances if they are identified
Standardising improvement will provide a strong foundation for long-term gain because everyone will be moving from the same starting position. You’ll also have the best visibility of where the next improvement opportunities exist – whether productivity or efficiency – and you’ll have the ability to sustain improvements under all economic climates.