New index promises to boost productivity

Food manufacturers could increase productivity by 10% by motivating workers and analysing their progress using the newly launched Total Factor Productivity (TFP) index, according to one of its creators.

Professor emeritus Shlomo Maital, formerly of the Massachusetts Institute of Technology, teamed up with business performance specialist Trinity Horne to compile the index, which lists the FTSE 100 companies in order of productivity.

Trinity Horne chief executive Brendan Cahill said: "The index will provide a consistent record of how companies perform. It is the ultimate benchmarking yardstick. Successful firms will grow revenues without incremental increases in labour or capital and the index will demonstrate this."

The index would change the way food manufacturers operate because it could distinguish physical capital from human capital, said Maital. "If you can produce and sell more stuff without investing in more capital and without a higher head count, your profitability increases."

Maital said the index would be useful for investors by showing whether a company's profit was due to cost cuts or value creation.

The index grew by 5.7% last year. Unilever ranked 40th with a score of 10.5%, while Scottish & Newcastle ranked 41st with 10.2%. Further down, SABMiller witnessed a decrease in productivity and ranked 89th with -7.2%.