Productivity

Rethinking the productivity puzzle

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In 1987, the Nobel Prize-winning economist Robert Solow declared: “You can see the computer age everywhere but in the productivity statistics.” His statement still rings true 30 years later, and has been especially apt over the past 20 years.

According to the OECD, the US had an annual growth average of 1.24 per cent in labour productivity between 1990 and 1995, while the figure fell to just 0.31 per cent between 2010 and 2015. During the same period, Japan’s average moved from 2.27 per cent to 0.93 per cent. Even the best-performing country, Australia, managed an increase of only 0.06 per cent.

Researchers at Northwestern University argue that this productivity slump reflects the stagnation of technology in today’s world. Recent advances such as instant messaging and video games just don’t result in the same efficiencies that electricity or jet engines once provided – at least in terms of wide-scale productivity enhancement.

Emerging technologies, however, are predicted to result in productivity gains. From self-driving cars to customer service chatbots, artificial intelligence is expected to double annual economic growth rates in 12 advanced economies by 2035, according to Accenture. By radically restructuring workplaces and enabling people to make better use of their time, this technology is predicted to increase productivity by up to 40 per cent. Realising these efficiencies won’t happen automatically, though.

According to Stanford economic historian Paul A. David, fresh innovations almost always create productivity reductions at first. When electrical motors replaced steam engines in factories, whole systems and processes faced disruption and had to be reorganised from the ground up. Productivity fell as a result, but not for long. It simply takes time for the productivity gains of new technology to appear.

Organisational productivity vs individual productivity

Productivity on the organisational level is different than the sum of team members’ individual output. An employee may do their job extremely well, making them highly productive from a basic management perspective. However, that same employee may have a negligible or negative productivity on an organisational level – performing well alone but missing out on the wider picture.

Organisational self-awareness is crucial. Companies that utilise both organisational and individual productivity can achieve better overall results and gain advantages over their competitors. Three simple strategies can assist leaders in moving forward successfully.

Firstly, encourage employees to collaborate with each other and communicate about their work. Individuals may perform well in their own role, but if team members or entire teams are pushing in different directions, the result will be overall inefficiency. Breaking down silos will help avoid this, so schedule time regularly for management to check in with team members and report back.

Secondly, dedicate resources to getting the best out of staff. Some individuals are more productive when working on their own, while others thrive in a team environment. Sometimes you want to hand the task to the person most capable of doing it independently. Other times, the goal is productivity on the organisational level. In the latter case, think carefully about assigning tasks to those most likely to achieve the kind of productivity required.

Finally, being cut off from leadership makes it difficult for teams to understand the overall vision they’re working towards. Therefore, company leaders must be connected to staff at all levels to make team members aware of more than just their own tasks.

Over the past three decades, stagnating productivity has emerged as a key challenge for the global business community. The next three decades will be defined by rapid innovation and disruption too: from drone delivery systems to superfast transport between cities, workers can expect to see big changes. As those changes take hold, ensure your organisation thrives by understanding productivity on a broader level.