You can spend millions improving productivity and still end up with a less profitable business. Perhaps the problem isn’t the machinery.
Improving productivity in a waste processing plant doesn’t automatically improve profitability. A business can process more tonnes with fewer employees yet generate less gross profit if disposal costs, material recovery, operating expenses and capital investment aren’t managed together. The difference often comes down to the quality of the management systems connecting those decisions.
Britain has a productivity problem. We’ve known that for years.
Successive governments have promised to address it, economists have spent decades examining it, and businesses have invested billions in technology, automation and equipment designed to make us more efficient.
Yet British productivity continues to lag behind that of many comparable economies.
In a recent article[1], McKinsey management consultants offered an interesting explanation: they argued that Britain’s productivity problem is, fundamentally, a management systems problem.
Not computer systems. Not a shortage of talented people. But the everyday processes that allow businesses to organise themselves, coordinate activities, plan work, identify problems and continuously improve. And, according to the article, British businesses, particularly those operating outside London, are considerably less effective at implementing productive systems than their counterparts in Germany and the United States.
And that got me thinking about waste processing plants.
Because there’s probably no better example of the difference between improving the productivity of a process and improving the productivity of a business.
Congratulations. You’ve Doubled Your Productivity.
Imagine a waste company operating a relatively straightforward sorting facility.
It processes 75,000 tonnes annually, using a combination of mechanical separation and manual picking. It’s not particularly glamorous, but it works.
Then the owner decides to invest, say, £5 million in a new processing line.
The machinery supplier promises greater throughput, reduced labour requirements and improved efficiency. The new plant is installed, commissioned and eventually operates at its intended capacity.
And the results look impressive.
Annual throughput increases from 75,000 to 100,000 tonnes. Annual labour hours fall from 30,000 to 20,000. The business has doubled the number of tonnes processed per labour hour. A 100% improvement in physical labour productivity.
Everyone should be delighted. Shouldn’t they?
Productivity Isn’t Profitability
Let’s introduce another measure: gross profit.
Before the investment, our imaginary business generated £30 gross profit per tonne.
After the investment, it generates £22.
That gives us the following results:
| Before | After | |
| Tonnes processed | 75,000 | 100,000 |
| Labour hours | 30,000 | 20,000 |
| Tonnes per labour hour | 2.5 | 5.0 |
| Gross profit per tonne | £30 | £22 |
| Gross profit per labour hour | £75 | £110 |
| Annual gross profit | £2.25m | £2.20m |
Illustrative figures, using a consistent treatment of operating costs and depreciation.
Gross profit per labour hour is calculated by dividing the gross profit generated by the operation by the total labour hours worked. It’s a useful commercial performance measure, although it should be considered alongside gross profit per tonne, total gross profit and the return on capital invested.
The reduction in gross profit per tonne could reflect higher disposal costs, changes in the incoming waste mix, poorer recovery values or additional operating costs. For our example, the precise cause is less important than the fact that the business must understand it.
So, while tonnes processed per labour hour have doubled, gross profit per labour hour has increased by almost 47%. Yet the business is generating £50,000 less gross profit annually. And it’s spent £5 million achieving it.
Depending on how the investment is financed and how depreciation is accounted for, the consequences for overall profitability and return on capital could be considerably worse.
Of course, these are hypothetical numbers. But the point is real.
You can make your workforce substantially more productive without making your business any more profitable.
And that raises an important question: What exactly were we trying to improve?
Don’t Blame the Machinery
At this point, our imaginary business owner might reasonably object.
“Hang on. The machinery is doing exactly what it was supposed to do. It’s processing more waste with fewer people. The problem is that disposal prices have gone through the roof.”
Fair enough.
Rising disposal costs can destroy gross margins, even in well-run businesses.
And we shouldn’t judge the investment simply by comparing today’s financial performance with yesterday’s. Without the new processing line, the business might have performed even worse under current market conditions.
But that doesn’t make the management questions disappear.
What happens if the new plant produces more residual waste than anticipated?
What if its outputs are less marketable than expected? What if the business has to accept lower-margin material to keep the machinery operating at capacity? What if rising disposal prices expose weaknesses in the processing strategy that were always there, but weren’t particularly expensive when disposal was cheap?
The machinery may be performing perfectly. The business may not be.
And that’s where the McKinsey observations become even more interesting.
Who’s Managing the Whole Business?
One of the interesting observations in the McKinsey research is that British businesses can be reasonably good at setting objectives and monitoring performance, but less effective at identifying and addressing the operational causes of underperformance. In other words, knowing the numbers isn’t necessarily the same as understanding what’s driving them.
Think about the departments involved in running a typical waste company.
Sales wants to win customers and increase revenue. Transport wants to maximise vehicle utilisation and minimise collection costs. Operations wants to process more tonnes, reduce downtime and keep the machinery running. The processing team wants to improve recovery rates and reduce labour requirements. Finance wants to protect margins, control expenditure and generate cash.
And somebody needs to find commercially viable destinations for everything that comes out of the processing plant!
Each department has legitimate objectives. Each may have competent managers who may all be performing well against their individual targets.
So what happens when those objectives conflict?
Sales might be winning work that the processing plant cannot handle profitably. Operations might be increasing throughput by accepting material that produces expensive residual waste. The processing team might be achieving impressive recovery percentages while producing materials there’s no market for. Transport might be reducing collection costs while delivering the wrong mix of waste to the wrong facility.
And Finance might not discover the consequences until the management accounts arrive several weeks later.
Every department can be hitting its targets while the business is missing the point.
That’s not necessarily a failure of the individuals involved. It’s a failure of the management system connecting them. And if nobody is responsible for managing the relationships between departments, nobody is really managing the whole business.
The Missing Piece of Equipment
The management practices that enable people throughout an organisation to work together, understand what’s happening and continually improve are critical to business success. Things like operational planning, timetables, performance reviews and identifying what went wrong today so that it can be fixed tomorrow.
None of this is particularly glamorous. It’s whiteboards and spreadsheets and taking time to stop and think.
Nobody invites the local MP to unveil a new process for deciding which waste streams should be accepted. There’s no ribbon-cutting ceremony for an improved waste optimisation meeting.
And you won’t find many business owners proudly announcing on LinkedIn that they’ve finally got their sales, transport, operations and finance teams working towards the same commercial objectives.
But perhaps they should?!
Because a genuinely effective management system would connect those decisions.
Before committing £5 million to new machinery, the business would understand not simply how many tonnes the plant could process, but what those tonnes would cost to collect, sort, recover and dispose of. It would understand the markets for the materials it intended to produce. It would test what happened to profitability if disposal prices increased, input quality deteriorated or throughput fell below expectations. It would establish whether the additional gross profit justified the capital investment.
And, once the plant was operating, it would continually review those assumptions and adjust the business accordingly. Not through an annual strategy meeting or a spreadsheet prepared for the bank. Through the everyday management of the business.
What Should a Waste Processing Management System Measure?
An effective waste processing management system needs to connect commercial, operational and financial performance. At a minimum, management should understand:
- Input economics: Revenue and gross profit by waste stream, customer and collection type.
- Processing performance: Tonnes per labour hour, plant availability, recovery rates and processing costs.
- Output economics: The quantity, quality, market value and disposal cost of every material leaving the plant.
- Transport efficiency: Collection costs, vehicle utilisation and the relationship between routes, customers and processing facilities.
- Financial performance: Gross profit per tonne, gross profit per labour hour, total gross profit and return on capital employed.
The important thing isn’t simply to produce five sets of figures. It’s to understand how changing one affects the others, and to use that understanding to make better decisions.
You Can’t Automate Your Way Out of Poor Management
There’s nothing inherently wrong with investing in sophisticated processing equipment.
The right machinery, properly specified and operated, can deliver enormous improvements in efficiency, recovery and profitability. But machinery cannot compensate for a business that doesn’t understand how its different activities affect one another.
It cannot fix a sales team that prices work without understanding processing costs.
It cannot fix a transport operation that delivers the wrong material to the wrong place.
It cannot create a market for products nobody wants. And it cannot make an uneconomic tonne profitable simply by processing it faster.
Those are management problems.
Which brings us back to Britain’s productivity challenge.
If McKinsey is right that weaknesses in management systems are a significant contributor to our poor productivity performance, then perhaps we need to reconsider where we look for improvements. Because the answer isn’t necessarily another machine, another vehicle, another software package or another management appointment.
Sometimes it’s getting the people, equipment and resources we already have to work together properly.
And that requires something rather less exciting than a multi-million-pound production line. It requires leadership that allows good management to flourish.
So before spending millions on machinery to make your business more productive, make sure you’ve got the management system capable of making that productivity profitable.
Otherwise, the most expensive thing missing from your new production line might well be something the plant supplier could never have included in the specification.
[1] McKinsey, May 19, 2026, How management can drive UK prosperity
Frequently Asked Questions
Does automation always improve waste processing profitability?
No. Automation can increase throughput, reduce labour requirements and improve material recovery, but profitability also depends on the quality of incoming waste, the marketability of recovered materials, residual disposal costs, maintenance expenditure and the return on capital invested.
How can waste businesses improve productivity without investing in new machinery?
Improvements can come from better waste acceptance and pricing decisions, more effective labour and vehicle scheduling, improved maintenance, identifying recurring operational problems and closer coordination between sales, transport, processing and finance. The objective is to make better use of existing resources before assuming that additional equipment is required.
Associated Reading
Waste companies failing to design processing plants around their outputs
The risks of investing in machinery purely to chase additional tonnes
About Gerald Price
Gerald Price is a business change consultant and interim managing director specialising in business turnarounds, operational improvement and commercial performance, especially within the waste and recycling industry.
Having worked with operators across the sector, he regularly writes about leadership, strategy, waste policy and the commercial realities facing UK waste businesses.
More articles and insights can be found at www.gpcp.co.uk and https://www.linkedin.com/in/geraldprice/
