solving productivity puzzle

Solving productivity puzzle

A look at solving the productivity puzzle by Steve New Associate Professor at Oxford University’s Saïd Business School

Introduction

Productivity. What’s your response to this word? Maybe it makes you think smugly of that day when you managed to hit all those deadlines, and you found yourself operating without distraction or deviation from your plan. Or perhaps, in contrast, it recalls that day when the siren call of Twitter pulled you away from the task at hand and you ended up losing an evening just to catch up.

If you run a business, maybe it reminds you of the constant struggle to hit budgets and deadlines. Or if you once studied economics, maybe it conjures misty memories of complex equations and obscure acronyms.How to solve productivity puzzle

In this paper, I want to show how the concept of productivity acts as a mirror and a mantra: a mirror which reflects our assumptions, and a mantra that can actually block critical thought about how organisations work.

I will set out why some common assumptions about productivity are mistaken, and, worse, how they can misdirect policy makers and business leaders. I then want to provide a better vision of productivity, drawing on a growing body of evidence from varied settings. The discussion will take in some ideas from the research literature and my own experience of working with a wide range of organisations.

 

Productivity as a mirror: A ratio for all seasons

As every textbook tell us, productivity is a very simple concept: a ratio which sets output over input. The simplicity is beguiling; it’s clear that more output for the same or less input is obviously more ‘productive’. Increasing productivity must be a good thing.

At the level of macro-economy, a productive economy means wealth; tracking the changes in overall productivity is a major pre-occupation of policy makers, journalists and academics. In recent times, the concept has attracted several narratives.

In the UK, the story of the moment is that the historical rise in productivity is tailing off. In other words, the source of our steadily increasing prosperity over many decades has seemed to stop working, particularly since the financial crisis. This ‘productivity puzzle’ is interesting not least for the fact that most economists will confess to being baffled.

Without increased productivity, it is argued, the nation will fail to recover from its current struggles and fall behind our competitors. The demographic shifts mean that a relatively smaller working population needs to be creating more wealth to support the growing burden of the elderly, but the curve of improvement is too slow to avoid future penury.

In other parts of the world, the productivity narrative is slightly different: in the US, productivity figures look a bit more promising, but seem to have become disconnected from employment growth.

The traditional connection between productivity and prosperity – the happy rising tide on which all boats bob – seems to be weakening. The result is an increasingly unequal distribution of the benefits of advancing technology.

Productivity improvements are leading some to think that, after all, the robots will come and take our jobs. This development follows a longer period in which economists puzzled as to why the huge developments in information technology appeared to have little impact on productivity; intuitively, people thought all those computers would be making firms super-efficient, but the evidence appeared muted at best. But now the technology seems to be having its effect, but at the cost of equality. The new productivity seems to be delivering new wealth to the educated and powerful, and stripping away the less skilled jobs that have supported the ordinary worker.

These developments are driving a wide range of policy responses, all of which zero in on the need for ‘better’ productivity. There is no shortage of prescription and there is a growing sense of urgency. Something must be done! But in fact the debate mostly acts as a vehicle for commentators to air their prejudices.

 

You can download the full text of this paper below (.pdf)

Productivity: There’s a Better Way – Whitepaper

This paper shows how the concept of productivity acts as a mirror and a mantra: a mirror which reflects our assumptions, and a mantra that can actually block critical thought about how organisations work.  Why some common assumptions about productivity are mistaken, and, worse, how they can misdirect policy makers and business leaders.

Gary Tharme
    I am a member of the consultancy’s leadership team at Unipart Group responsible for building long-term relationships through selected strategic opportunities with existing and new clients, including targeted international expansion.I have operated in the UK, USA, Greece and Switzerland helping secure and manage enterprise-wide operational/process/performance excellence programs (Lean/Six Sigma) in transactional and service environments within Power and Utilities, Health, Financial Services, Retail and Public sectors. Furthermore, I have also built successful alliances with several of the world’s top Tax/Advisory firms.Since October 2013 I have been leading Unipart Expert Practices' USA operations with a mission to help Unipart clients create a sustainable and engaging culture of continuous improvement.

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