Productivity

Rethinking the productivity puzzle

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In 1987, 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 percent in labor productivity between 1990 and 1995, while the figure fell to just 0.31 percent between 2010 and 2015. During the same period, Japan’s average moved from 2.27 percent to 0.93 percent. Even the best-performing country, Australia, managed an increase of only 0.06 percent.

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 percent. Realizing 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 reorganized 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.

Organizational productivity vs. individual productivity

Productivity on the organizational level is different than the sum of team members’ individual outputs. Employees may do their jobs extremely well, making them highly productive from a basic management perspective. However, those same employees may have negligible or negative productivity on an organizational level – performing well alone but missing out on the wider picture.

Organizational self-awareness is crucial. Companies that utilize both organizational 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 who is most capable of doing it independently. Other times, the goal is productivity on the organizational level. In the latter case, think carefully about assigning tasks to those who are 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 that they are working toward. Therefore, company leaders must be connected to staff at all levels in order 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 also be defined by rapid innovation and disruption. From drone delivery systems to super-fast transport between cities, workers can expect to see big changes. As those changes take hold, ensure that your organization thrives by understanding productivity on a broader level.