How to boost employee productivity and profitability in business services

Strategies to optimize workforce performance and increase profit margins in a labor-intensive sector

Nov 07, 2023

Key takeaways

Business service companies should strive to improve productivity 

The strategic implementation of technology can improve employee productivity

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Automation and AI solutions are powerful tools for boosting productivity

Companies should develop well-defined plans that take into account their unique circumstances


Labor and workforce Business services

In every industry, companies are facing heightened levels of margin pressure. Everything from rising costs to geopolitical uncertainty can reduce an organization’s profit margin.

This pressure is especially strong in business services, which is a labour-intensive sector. These companies rely heavily on employees to deliver value to customers, making it imperative that they optimize their workforce's efficiency and effectiveness. For this reason, employee productivity is top of mind for executives in business services.

The power of workforce

Success in business services depends heavily on the knowledge, skills, and dedication of the company’s employees. Any variation in employee productivity can profoundly affect an organization's bottom line. This makes it essential for organizations to develop a coherent approach to managing and enhancing employee productivity.

However, employee productivity has stagnated even while labour costs have continued to rise. Historically, these two factors have aligned in that when one goes up or down, the other matches it. This is no longer the case, leading to widespread frustration in the business services sector.

So how can companies increase productivity and, by doing so, improve their profitability? There is no one-size-fits-all solution to this challenge. Each company must tailor its approach to its specific business needs, goals, and opportunities. However, certain strategies are often successful across all types of business service companies.

Focus on employees

Recognizing that employees are the cornerstone of productivity, organizations should invest in their development and training. Providing opportunities for skill enhancement, continuous learning, and career growth not only boosts productivity but also enhances employee satisfaction and retention.

In addition, worker productivity can be significantly increased through the strategic implementation of technology.

Investing in productivity-enhancing tools and software can streamline operations, reduce manual work, and improve accuracy. For example, technology solutions can optimize routes for field services or formulate maintenance programs for facilities services.

Digital tools

Many companies are embracing digital transformation and data analysis to enhance productivity. Upgrading to more advanced platforms can speed up projects. Utilizing more relevant and precise data can minimize costly mistakes. Digital tools can solve problems and accelerate the company’s overall growth.

Automation and artificial intelligence (AI) solutions are particularly powerful for boosting productivity. These solutions replace repetitive, time-consuming tasks with efficient, technology-driven processes. This approach reduces labour costs and enhances overall productivity by freeing employees to focus on higher-value tasks that require human skills, creativity, and decision-making. For example, experienced employees are irreplaceable when researching and developing new products or services. And building customer relationships or offering remediation are highly human-centric duties. There are certain tasks that a computer cannot do, and for those, businesses need well-trained, talented, and motivated workers.

Other solutions

Another way for organizations to alleviate pressure on profit margins is to outsource operational functions. By delegating non-core functions to third-party providers, businesses can reorientate their internal staff to focus on the tasks that really matter to the organization. For example, a managed service provider can handle back-office functions such as IT support, human resources, and financial accounting. Companies that work with managed services providers also gain access to specialized expertise and achieve a level of scalability that is difficult to realize otherwise.

Finally, when faced with tight profit margins, some companies simply pass these increased costs on to their customers. However, this is not always a viable solution, as it can lead to customer dissatisfaction and a loss of market share, particularly in competitive markets.

Creating a plan

Regardless of the specific approach, business service companies must develop a well-defined plan that considers their unique circumstances. Such a plan should encompass the following key elements:

  • Current productivity levels: The first step is to evaluate the existing level of employee productivity. This involves identifying bottlenecks, areas of inefficiency and opportunities for improvement. Many firms are researching better ways to assess productivity. Data analytics and performance metrics can be invaluable tools in this process.
  • Cost drivers: Companies must understand the factors driving their labour and operating costs. This includes analyzing cost structures, labour force composition and external market dynamics. By pinpointing cost drivers, leaders can make informed decisions about areas to target for improvement.
  • Competing factors: Labour productivity has often been in line with labour costs, but that may no longer be true. Therefore, as organizations strive to boost productivity, they should also implement measures to control and optimize labour expenses.
  • Monitoring and adaptation: The business environment is dynamic, and what works today may not be as effective tomorrow. It is crucial to regularly reassess the organization's strategies, adjust course as needed and remain agile in response to changing conditions.

In summary

To minimize margin pressure, companies should maximize employee productivity. Rising operating and labour costs necessitate a strategic and adaptable approach. Companies that implement sound plans tailored to their unique needs and opportunities are more likely to achieve success. Whether through employee development, technology adoption, automation, or outsourcing, the journey requires commitment, innovation, and a keen understanding of the constantly evolving business environment.

RSM contributors

Learn more about what’s driving the middle market talent gap, what companies are struggling with most and how it’s affecting organizations and their staff. Request our June 2022 research study, “What’s driving the middle market talent gap?”

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