Improve Productivity By Getting Better At Being Better

Some practical suggestions follow from Peter Bendor-Samuel , a c

Companies spend time getting work done. Leaders focus attention on getting through the backlog and responding to today’s challenges. Teams focus on executing the work. Leaders evaluate teams on whether they completed the work, the quality of the work, whether it was timely, whether it pleased customers and whether it drove the desired results. Almost all energy and time in the company focuses on these factors.

But we do not spend enough time on getting better at doing all that.

The tyranny of the urgent – to just get the work completed – especially in difficult COVID-pandemic circumstances – is what drives the focus. Companies do not set aside time or resources to get better at being better. Consequently, they are in a rat race.

So, how can your company get better at being better?

Typically, the first remedy companies look to when seeking to be better is technology. And that has a lot of validity. The story of human progress is one of technology innovation resulting in increased productivity.

Consequently, large-scale technology investments typically take many years before an organisation fully leverages its technology investments (and sometimes it never happens). To the extent that they do leverage the technology, it often takes quite a few years for the organisation to fully understand how to do that and change its operating model to fully benefit from technologies.

All experienced executives were involved in major technology investments in the past when they felt like they took a step back in productivity as the new technology came in. These investments seldom yield the promised results that the vendors or people sponsoring them hold out as the potential.

The same phenomenon happens when companies implement outsourcing, managed services or as-a-service solutions. The service provider comes in and changes the status quo. The provider takes over a process or function the client was doing and leaves the rest of the organisation trying to figure out how to fully utilise that service. It often happens that the client ends up duplicating functions that it pays the service provider to do – not because the service is inadequate but because the client organisation has not yet accommodated fully relying on that managed service. So, the technology comes up short on the promise of delivering better value.

So what’s the answer to how to get better at being better?

It requires time, resources and discipline, particularly on how the organisation implements technology and subsequently changes its processes or services.

Underpinning the effort to be better is the concept of a team – the group that is responsible for delivering value or doing the work – they must take responsibility for getting better at doing that work. This goes beyond receiving training to use technology.

First, leaders must challenge team members with how to improve what they do because only they can really see all the steps required to fully utilise it. But, and often, leaders distract teams by piling more work on them and focusing on getting more throughput, rather than giving them the challenge to get better or giving them the resources to do that.

Second, leaders must recognise that the challenge of getting better at being better is a journey, not a destination. There is always the opportunity to get better at being better. Leaders often make the mistake of thinking about this as a large project to run through to completion and that the result of completing the project will be being better. That mindset is a mistake. Rather, leaders need to think of efforts to get better at being better as a continuous journey in which every month they invest some part of the company’s time and resources so that the team can get better at being better.

The formula for your company getting better at being better is simple. Just follow these steps:

1.     Measure the results you want the team to accomplish (not the team activities, because the activities will need to change).

2.     Trust and empower the team to focus on those results and allow the team to build ownership in driving towards the results.

3.     Work monthly with the team to devote a portion of their time and provide them with resources so they can get better at being better.

4.     Recognize this effort as an ongoing journey that can give the company tremendous return on its investment and your time.

5.     Be patient.

6.     Be consistent in doing something to improve every month.

7.     Be consistent in inspecting or working with the team monthly.

By following this strategy, your company will achieve remarkable progress in getting better at being better.

 

The Silver Lining of 2020*

More reasons to be optimistic on this great day when the UK regulator passed the Oxford CV19 vaccine which could enable billions to look forward to a more normal, even better, life – this time from Tyler Cowen, economics professor at George Mason University, writing for Bloomberg.com – despite the pandemic, Tyler believes 2020 saw great scientific progress which will be of great benefit to all in the coming decade – Happy New Year

Maybe they had the right idea.

For obvious reasons, 2020 will not go down as a good year. At the same time, it has brought more scientific progress than any year in recent memory — and these advances will last long after Covid-19 as a major threat is gone.

Two of the most obvious and tangible signs of progress are the mRNA vaccines now being distributed across America and around the world. These vaccines appear to have very high levels of efficacy and safety, and they can be produced more quickly than more conventional vaccines. They are the main reason to have a relatively optimistic outlook for 2021. The mRNA technology also may have broader potential, for instance by helping to mend damaged hearts.

Other advances in the biosciences may prove no less stunning. A very promising vaccine candidate against malaria, perhaps the greatest killer in human history, is in the final stages of testing. Advances in vaccine technology have created the real possibility of a universal flu vaccine, and work is proceeding on that front. New CRISPR techniques appear on the verge of vanquishing sickle-cell anaemia, and other CRISPR methods have allowed scientists to create a new smartphone-based diagnostic test that would detect viruses and offer diagnoses within half an hour.

It has been a good year for artificial intelligence as well. GPT-3 technology allows for the creation of remarkably human-like writing of great depth and complexity. It is a major step toward the creation of automated entities that can react in very human ways. DeepMind, meanwhile, has used computational techniques to make major advances in protein folding. This is a breakthrough in biology that may lead to the easier discovery of new pharmaceuticals.

One general precondition behind many of these advances is the decentralized access to enormous computing power, typically through cloud computing. China seems to be progressing with a photon method for quantum computing, a development that is hard to verify but could prove to be of great importance.

 

Internet access itself will be spreading. Starlink, for example, has a plausible plan to supply satellite-based internet connections to the entire world.

It also has been a good year for progress in transportation.

All this will prove a boon for the environment, as will progress in solar power, which in many settings is as cheap as any relevant alternative. China is opening a new and promising fusion reactor. Despite the absence of a coherent U.S. national energy policy, the notion of a mostly green energy future no longer appears utopian.

In previous eras, advances in energy and transportation typically have brought further technological advances, by enabling humans to conquer and reshape their physical environments in new and unexpected ways. We can hope that general trend will continue.

Finally, while not quite meeting the definition of a scientific advance, the rise of remote work is a real breakthrough. Many more Zoom meetings will be held, and many business trips will never return. Many may see this as a mixed blessing, but it will improve productivity significantly. It will be easier to hire foreign workers, easier for tech or finance workers to move to Miami, and easier to live in New Jersey and commute into Manhattan only once a week. The most productive employees will be able to work from home more easily.

Without a doubt, it has been a tragic year. Alongside the sadness and failure, however, there has been quite a bit of progress. That’s something worth keeping in mind, even if we can’t quite bring ourselves to celebrate, as we look back on 2020.

Something more to look forward to in 2021

Ed Conway, economics editor of Sky News, recently wrote a positive article in The Times – in essence, his views were:

  • For decades, developed world economies have lacked ‘oomph’
  • Productivity is the ‘silver bullet’ viz:
    • The more we earn for each hour worked (an old school view) the more is spent on every other bit of the economy, the more governments receive in taxes
    • Hence, there’s more to spend on public services or redistribute to those who need it
  • Productivity growth would make most people better off – and it would help us repay pandemic debts incurred
  • But, in recent years, productivity growth has been ‘disappointingly weak’ (according to ONS statistics)
  • And proposed solutions such as improving infrastructue, boosting education and supporting entrepreneurs have not emerged with much success
  • Some experts even think we’ve become trapped in a ‘great stagnation’
  • We’ve plucked the low-hanging fruit and the great life-changing innovations of the industrial era are all behind us
  • “But what of fruit already on the ground, aka waste – and high-hanging fruit we’ve yet to pick to any great extent?”
  • Then, reading on, he agrees with the potential of my ‘high-hangers’
  • Vaccines are promising a return to something like normality – more likely a supercharged normality as a wall of savings made by many locked-down families is unleashed – indeed, a retail boom is in the offing for many who can manage to survive the next few months
  • And a host of innovations have appeared during this pandemic which have the potential to create not just a few new products but whole new sectors which could launch thousands of new products and even more thousands of new jobs viz:
    • The first mRNA vaccines have opened up the possibility to treat other diseases, including cancer
    • Deepmind has used AI (Artificial Intelligence) to predict the structure of proteins
    • Quantum computing, the next frontier in technology, came a step closer to reality – and from China
    • Nuclear fusion is said to be ‘close at hand’ according to MIT
    • GPT-3, an AI algorithm, can now write poetry or prose and sound uncannily human (i.e. pass the Turing test)
    • Apple have unveiled computer chips which are leagues faster and more efficient than their equivalents from Intel
    • Waymo has rolled out self-friving cars to consumers in Arizona
    • Singapore has approved the sale of ‘chicken bites’ grown in the lab without the death of a single hen

 

Add to the above the fact that businesses have been forced to become leaner, and so less wasteful, during the pandemic, and there is much hope

Conway, being an economist, then has to balance this optimism with a cautionary note (after President Truman’s quote: “Find me an economist with just one hand!”)

He finishes by saying it’s early days for much of the above – interest rates will not stay so low for ever, and for businesses and governments that have borrowed big, they will be hit hard when they do rise – and a bounce next year will not fully heal the scars suffered by  millions who have lost their jobs

Add in Brexit uncertainty (even if a deal is reached) and the fact that the UK market is focused on the kinds of business that have been hit hardest – banks, oil, Rolls-Royce and airlines for example – and one might worry that the world is on the brink of a productivity leap, but the UK could be left behind

Four-day week could boost jobs in Spain

Adam McCulloch reports in ‘Personnel Today’ on a proposed initiative being considered in Spain – to reduce their working week in order to boost employment, health and productivity – in our view, a 4 day working week is inevitable, and soon, just as a 7 day week became 6, and then pressure grew for 5 – the pandemic has dramatically accelerated this need, with widespread WFH showing that, for most, 5 days a week in the office is unnecessary.
One cautionary note, however – more and more employees are rightly being judged on their results, not their ‘presenteeism’ record –  that means they cannot simply ‘knock off’ when the clock chimes 5pm – their brains continue ticking 24/ 7 as they kick around problems chasing solutions – they’re paid a specific total per week, regardless of the official hours input expected – it’s their ability to ‘switch off’ and give their weary grey cells time to recover that is likely to become of serious concern – the current rise in mental health problems at work suggests this has started already

 

Spain’s parliament building in Madrid

 

Spain’s deputy prime minister Pablo Iglesias Turrión said a cut in working hours, without loss of pay would “undoubtedly” lead to the expansion of employment opportunities.

Spain has a complex multi-party political system based around coalitions so often leaders of smaller parties – many of which are chiefly regional – can have significant influence over policy outcomes. Among those smaller parties is Más País (More Country) whose leader, Íñigo Errejón, has also voiced support for a shorter working week.

He said: “Now that we have to rebuild our economy, Spain has the perfect opportunity to go for the four-day or 32-hour week.”

“It is a policy for the future that allows for an increase in the productivity of workers, improvements to physical and mental health.”

He added that a four-day working week could contribute to less pollution and a reduction of energy consumption with less commuting and a reduced need to light, heat and cool office buildings.

The move is being considered by the Spanish Treasury as part of negotiations ahead of budget talks. It is thought that any roll out would be limited to a small number of companies initially. Indeed, a small number of companies have already independently adopted a four-day working week, reportedly leading to an increase in productivity.

This is all in the global context that Unilever has begun trialling a four-day week in New Zealand, with employees allowed to select which four days they would prefer to work.

And a four day week was also trialled by Microsoft last year in Japan – the company found it led to more efficient meetings, happier workers and, it claimed, a 40% productivity boost.

France planned to reverse globalisation but is still bleeding jobs

Today, a smattering of schadenfreude is permitted to lighten the mood of all our British readers, especially after the last, rather heavy, post on the future economic needs of developed nations – the following extracts are from an article by writing in the New York Times about our old enemy France, soon to be the butt of contempt for all other EU nations due to their negotiating tactics over Brexit

“It’s a catastrophe,” said Mr. Chabance, who is worried the layoffs will fuel a broader economic malaise in the area. “The government is calling for a renewal of ‘Made in France.’ But in reality, we are going to be grappling with a stricken industrial region.”

When the coronavirus began sweeping through China and then Europe, disrupting global supply networks, Mr. Macron declared that the pandemic could be “a game changer for globalisation.” He said he wanted to create opportunities to secure supply chains and reverse a decades-long trend of companies sending production to low-cost countries. But the jobs are continuing to leave, as multinational firms relocate production from France to countries with cheaper labour and higher productivity.

At a Bridgestone factory in northern France, over 860 jobs will be cut as the Japanese tire maker moves production to Eastern Europe. Nokia, the Finnish telecommunications company, will relocate some research and development activity from hubs outside Paris and in western France to India and Poland, threatening around 1,000 positions.

In southern France, Zodiac, a maker of inflatable boats, plans to move some production to Tunisia, citing the need to save money after bringing jobs back from a plant in China just two years ago. Other companies are mulling similar moves to rein in costs.

“The Covid crisis has brutally highlighted our vulnerabilities and reinforces the urgency to succeed in a policy of industrial reconquest,” Agnès Pannier-Runacher, the Secretary of State for Economy and Finance, said. “France must once again become a great productive nation. Whether the government can succeed in restoring even a fraction of production lost from France over decades is far from clear.”

“In the context of the coronavirus, the government has talked about providing aid to bring production back to France, so people think that jobs will be returning,” said El Mouhoub Mouhoud, vice president of the University of Paris-Dauphine and a specialist on globalisation. “If anything, companies are continuing to offshore production.”

Despite political pressure, multinational firms that have closed European factories in favour of areas with cheaper labor costs appear hesitant to reverse these moves. A recent survey by the consulting company Ernst & Young found that 37% of business leaders were considering bringing manufacturing services back to Europe, down from 83% in May. As Asia recovers from the pandemic, businesses have decided “not to cause further disruptions to their supply chain,” Ernst & Young said.

Manufacturing has shrunk to 10% of the French economy from over a quarter in the 1960s. From steel mills to auto factories, the loss of hundreds of thousands of jobs to globalisation has created social distress — and proposals by a succession of politicians to fix it.

Mr. Macron wooed voters during the 2017 presidential campaign by arguing that globalisation could be a “great opportunity” if managed correctly. He promoted business-friendly policies as a way to shield France from globalisation’s threat. And there were signs that some of his policies had begun to pay off before the pandemic, especially a landmark overhaul of France’s strict labour code to create more flexibility for companies to hire and fire. Such measures helped draw pledges for billions of euros in foreign investment from companies including Coca-Cola and the drug maker AstraZeneca.

But executives say the changes didn’t address one of France’s lingering competitive drawbacks — labour costs that are higher than in other countries, thanks to steep payroll taxes levied to fund the generous social safety net.

At Europhane, a maker of industrial lighting in northern France, the parent company in Austria recently relocated production of a type of light bulb requiring significant labor to Britain, where labour costs were 25% cheaper. The bulb, used in streetlamps, represented 20% of the value of production at the French site. “The paradox in France is that we have a fantastic social security system, but it comes at a cost,” said Mr. Papoular, Europhane’s president. “The charges imposed on companies are so high that labour costs lead to uncompetitiveness.”

“Covid has led to a deterioration in the financial situation of companies,” said Patrick Artus, chief economist of the Paris-based Natixis bank. “They will try to improve their profitability and their financial situation, which will lead them to move production to the most attractive countries in terms of labor costs, taxes, regulations and skills.”

France regularly appears at the top of labour productivity comparisons with other European economies. Yet companies with far-flung operations say output can lag behind lower-cost, more productive manufacturing sites, creating another incentive to shift production.

For Mr. Chabance, managing the fallout seems a herculean task.

“The domino effect will be huge,” he said. “We’re not just talking about  layoffs at specific companies, but the job cuts that will come at small firms that supply those companies,” he said. “Two jobs here, three more there — little by little it all adds up.”

As more jobs go, he fears that skilled workers may leave the area in search of more stable employment, placing further stress on the region.

“What is happening here is diametrically opposed to the government’s promises,” Mr. Chabance said.

“We’re going to find ourselves in an industrial wasteland,” he said.

Liz Alderman is the Paris-based chief European business correspondent, covering economic and inequality challenges around Europe. 

 

The post-pandemic brave new world

The following views from Martin Sandbu, the Financial Times’ European economics commentator, are well worth reading – in my case, at least twice to get the broad span of them on board – there is no doubt that CV-19 has created a major watershed for businesses worldwide and it now needs leaders to grasp the opportunities presented, for the benefit of all

The pandemic struck a global economy that already was profoundly unsustainable—socially, environmentally, even intellectually.

Over the past four decades almost all advanced economies have become more polarised, with increasingly unequal income distributions. Developing economies lifted billions of people out of poverty, but in the process they, too, created their own rising inequalities and social tensions.

The global economy’s lopsided growth has brought us to the edge of catastrophic climate change – and  political upheavals in one country after another meant the world could not expect to go on as before.

This pressure for change was reflected in economic policy thinking that was rapidly challenging old orthodoxies about public spending, central banking, and government intervention in the economy.

Then the coronavirus brought the most dramatic societal disruption and economic collapse in peacetime memory. Greater policy shifts took place in days or weeks than the most ambitious politicians could have dreamed of achieving in a lifetime. The enormity of the crisis made unintended radicals out of many political leaders as they intervened drastically in economic activity and took the risks of both workers and businesses onto the state’s shoulders on a massive scale.

We are now far enough past the initial onslaught to lift our gaze to the future, even if the pandemic’s course remains uncertain. It is time to consider how current policy choices will—and how they should—shape the long-term path for the world’s economies. This year’s transformation of both the economic and political landscapes—what economic risks and rewards we can realistically foresee and what is newly considered politically possible—means that things will never be the same. But how they will change is wide open, and policy choices made over the next few years will make a big difference to whether the post-COVID world favours broadly shared prosperity more than the status quo ante.

Sharpened societal contradictions

The fundamental economic fact about the pandemic is that it intensified existing societal fault lines. The preexisting policy debates about them have intensified too.

Concerns about rising inequality have been given new fuel because lockdowns entailed much greater hardship for people in jobs that could not be done from home. White-collar jobs, especially knowledge-intensive ones, already were increasingly well rewarded relative to manual jobs—in terms of pay, but also job security and predictability. Workers in most manual service jobs—hospitality and tourism, delivery, retail, and basic care—had long been getting a rougher deal, which worsened in the pandemic. Because they require physical proximity, these are the jobs most exposed to either lockdowns (when judged non-essential) or contagion (when essential). Women and the young are hit particularly hard because they are over-represented in many of these sectors.

A second, related economic impact of the pandemic is an accentuation of the policy challenge from gig work and other irregular labour. It was already clear that in rich countries, non-conventional forms of employment and contracting were fitting ever less well with established welfare states. Informality continues to be an obstacle to developing safety nets in poorer countries. The lockdowns demonstrated the shortcomings of even well-developed state bureaucracies in reaching workers outside regular jobs. Politics and legislation often progressed at lightning speed to establish income-support programmes, but the support sometimes failed to reach its target because governments could not identify the workers most in need.

Large, informal labour markets have long been a feature of poor economies. But the growth of a “precariat” of service workers—those with insecure employment and income and ill served by public services — is a principal reason why shockingly many people in the world’s richest countries have exceedingly thin financial buffers. Workers in sectors relying on low-paid and precarious work, hit disproportionately hard by the pandemic, were also less equipped to absorb such a shock to begin with.

Moreover, even unprecedented government steps to protect incomes have generally been insufficient to offset the disproportionate damage to those already worse off. As a result, the pandemic is likely not only to have reinforced chronic economic polarisation, but to have intensified public awareness of it as a problem.

The economic fallout from the pandemic interacts with the underlying pressures of inequality in a third, less obvious, way. The sudden shift to remote working amounts to a steep change in business use of digital technology that is bound to affect production patterns and the distribution of economic surplus. While these effects may be hard to foresee, it is plausible that they could increase the productivity of those who already have the most “modern” jobs, intensive in cognitive skills and suitable for remote working. That could exacerbate the bifurcation of good and bad jobs.

The pandemic also played into political rifts over economic geography. Most obviously, it raised new questions over globalisation—how interconnected countries can cope with contagion that spreads with travellers; with production disruptions from lockdowns in a global supply-chain manufacturing hub, as in Wuhan in January 2020; and with a sudden scramble for imported medical equipment.

Less obvious are the pandemic’s geographic effects within countries. Regional inequality has been one of the most toxic forms of economic polarisation: starting about 1980, the post–World War II process of regional catch-up stagnated or even reversed as industrial jobs across national territories gave way to a concentration of knowledge services in their biggest cities. Now, while COVID-19 has spread in leading and declining cities alike, the economic disruption has temporarily changed how and where white-collar work is carried out—and could potentially be used by policymakers to alter permanently the geographic distribution of prosperity.

What is to be done?

For all these reasons, the pandemic is forcing policymakers to confront problems neglected for too long. But if things cannot go on as they were, the question remains – ‘what policies should be implemented to change them and with what goals in mind?’

This is no easy question but two things seem clear. The first is that the nature and quality of work are central, and any reform programme must focus on creating higher-quality jobs for more people in more places. The second is that it must be big in scope and scale—something with ambition and motivational power comparable to the New Deal or the Marshall Plan.

Work must be central because it is where many of the chronic and pandemic-related economic challenges intersect: inequality, precarity, and the new informality; geographic disparity; and technological change. A much greater availability of high-quality jobs is also the main common yardstick to measure the success or otherwise of a comprehensive range of policies.

What these policies should be is, of course, the big question, and one that ought to be democratically anchored.

A programme is needed that embraces the following:

  1. Productivity growth and the technological upgrade of jobs by demanding more from employers . It is when unproductive jobs give way to more productive ones that work becomes safer, more pleasant, and better paid. In the European Nordic economies, wage egalitarianism has spurred productivity growth by making low-productivity labour uneconomical and incentivising investment in productivity-enhancing capital. This approach can be adopted elsewhere to combat chronic low-paid, low-productivity work in lightly and rigidly regulated labour markets alike (both the United Kingdom and France have their precariats, for example) and to direct the reallocation about to take place as COVID-19 makes some activities unviable. Concretely, this means ambitious minimum wage increases and strong and strictly enforced workplace standards.

2. Produces a high-pressure economy with strong demand growth to give productive firms reason to expand and ensure new jobs appear as bad jobs disappear. High demand pressure is necessary to benefit those on the margins of the labour market—the young, ill-educated, and minorities—who tend to be fired first in a recession and hired last in an upturn. Concretely, this means running macroeconomic policy “hot,” calibrating monetary and fiscal policies to keep demand always slightly ahead of the economy’s capacity, to encourage companies to pull more people into the labour force and seek productivity-enhancing improvements. This is admittedly more easily done in large, rich economies, especially reserve currency issuers—which also puts the onus on their policymakers to lead global demand growth.

3. Lowers the cost of leaving a bad job and finding a better one . This requires a panoply of policies, including greater spending on skills, well-resourced active labour market policies, and social security reform to untie benefits from jobs. Changing jobs and upgrading skills are costly for workers, and are not undertaken if people have low buffers to live on between jobs. Direct and unconditional payments, including a basic income or negative income tax to avoid low-income traps in the benefit system, are ultimately the only way to overcome these obstacles. They are also the most effective and quickest way to improve living conditions for the worst off, especially when more targeted approaches are unable in practice to reach those most in need.

4. Reforms tax systems to encourage high-quality work. This means shifting taxes away from labour to encourage job-switching and hiring. The tax revenue loss must be made up elsewhere. This requires that a greater tax burden fall on capital, ideally through a net wealth tax, which is more productivity-friendly than other capital taxes. In addition, carbon taxes should be significantly increased to reallocate labour and capital in a green direction. The proceeds should be redistributed as a “carbon fee and dividend” or “carbon checks.” Finally, international corporate taxation must be fixed to level the competitive playing field between multinational and locally employing firms, and to allow governments more room for manoeuvre in taxing capital.

5. Reforms financial systems and tax rules to be less favourable to debt and more favourable to equity-type funding, which is both more conducive to productivity growth and restores an appropriate balance of risk between workers and investors. Governments should convert COVID-related rescue loans to companies that struggle to repay into tradable equity stakes.

6. Incentivises a broader geographic spread of the highest-value-added jobs . The goal of policy should be to make more places host a critical mass of high-paying jobs. This is easier said than done, but at a minimum requires greater investment in transport and IT connectivity, local infrastructure, and amenities to make places attractive to live in, and policies to make financing available for new ventures in declining areas. The change to remote working provides a promising opportunity to use tax or regulatory incentives to shift good jobs from large central cities to more remote locations.

Reinterpreting the world

All of this may seem a tall order. The devil will be in the details – implementing large-scale reforms depends on solving myriad trade-offs and logistical difficulties at the micro level. But the challenge our economies face is so big that incremental policies are unlikely to achieve much—and are easy for vested interests to defeat. So any programme with a hope of success must be of great scale and broad scope. Given that enormous policy changes have already happened, that no longer seems unrealistic.

The old macroeconomic rules have been thrown out. Politicians who not long ago intoned about fiscal responsibility preside over record-breaking deficits, actively choosing to open the budgetary floodgates to sustain people’s incomes and companies’ liquidity.

The structure of public spending has also undergone a big shift, especially in countries with Spartan welfare states to begin with. The United Kingdom, in a matter of months, designed a European-style wage subsidy from scratch. The United States allowed people to lose their jobs, but sharply boosted unemployment benefits. And every advanced economy has put in place extraordinarily generous loan programmes for businesses, in some cases taking all credit risk off banks’ hands. In many countries, the state is back in a big way, and this shift is qualitative as well as quantitative: governments are taking on risks previously borne by the private sector.

Some of these policy shifts are unprecedented. Others are an acceleration of pre-existing trends. A reset of several fundamental premises for central bank policymaking had already emerged from the sluggish recovery after the global financial crisis. Central banks largely, if grudgingly, accepted mounting evidence that low interest rates are here to stay. The Federal Reserve, in particular, has embraced a greater tolerance for “running the economy hot,” no longer worrying that inflation might threaten as soon as unemployment comes down. Both shifts in thinking have helped central banks act early and comprehensively to sustain demand, cheap funding, and financial market functioning in the pandemic—a dovish shift in central bank thinking that is likely to continue.

Then there is the significant change in technology used by companies, which suggests that new remote work practices are here to stay. Surveys suggest that many companies plan to retain at least some work-from-home practices even after the pandemic. In any case, the technological and organisational know-how employers have had no choice but to accumulate at breakneck speed this year cannot be unlearned. It almost certainly will create permanent change in how people work.

And this holds not just for employers, but for consumption patterns. The pickup in online retail and substitution of online connectivity for physical travel are unlikely ever to be fully reversed, even if a vaccine eliminates the virus. A dramatic restructuring of the economy is underway.

These changes are easier to respond to in richer than in poorer economies. But there are opportunities even for lower-income economies. If nothing else, policy revolutions in rich countries will be a learning experience for the world and ought to affect the policy conditions attached to financial aid and debt relief for the poorest economies. And some developments provide direct opportunities for emerging economies: the embrace of remote working improves the prospect of attracting outsourced high-value-added service jobs.

Revolutionary questions

Ordinarily, policymakers can at most hope to tweak their governing systems. Mostly their job is to keep things running. At rare moments, however, leaders’ decisions help reset the course of their societies for a long time. This is such a moment.

Leaders now face three big questions about how they envisage their countries’ economic future.

  1. The first is: reallocation or restoration? National economies have been knocked out of joint, leaving companies and workers uncertain about the future—whether a job viable before the pandemic will be again, whether a line of business is worth investing in or should be wound down. The nudge—or not—of policy can make a big difference to whether capital and labour shift into new activities or the allocation of economies’ resources retains its pre-crisis pattern. Even if COVID-19 makes some activities permanently less profitable, reallocation may not happen—or not to the necessary extent—without policies to promote it, because of the risk and uncertainty involved. Even if the existing economic model is broken, a new one will not build itself.

 

2. The second, more stirring, question is, “building back better or back to business?” There is a big difference between using the disruption to build something different and wishing to get things back on track as fast as possible. These two orientations lead to different policy considerations—roughly, whether to keep resource reallocation to the minimum necessitated by the pandemic or use the disruption to re-engineer the economy more fundamentally. Building back better will demand more of businesses and people—for example, by doubling down on climate change goals or raising pay and work standards, using the dislocation to move to a different path. The alternative “back to business” approach will aim to make as minimal, quick, and painless as possible any adjustment economic agents have to undertake.

3. The final question is whether states are ready to once again embrace planning—using intervention to consciously shape the economy over time. Having a policy goal of sectoral reallocation, or regional convergence, or “building back better” presupposes some confidence in the ability of the state to coordinate and steer private sector behaviour and a willingness to establish a desired destination. The loss of both confidence and will caused planning to fall out of fashion in the 1980s. As a result most governments today are neither used to strategic planning nor all that good at it.

Yet there are signs that planning is back. Climate change, geopolitical upheavals, rapid technological transformations, and now the pandemic have increased pressure on politicians to lead their economies to a better place, rather than simply freeing the animal spirits of the private sector. Even before COVID-19, economics and economic policy advice were becoming increasingly sympathetic to more active intervention to make economies work better.

Most leaders vow to “build back better” and to oversee a reallocation of resources to more COVID-safe, greener, and more productive activities. At least implicitly this entails a commitment to a more active and strategic state role in the economy than most have engaged in recently. Whether many states have the capability, or their leaders the temperament, to govern the economy more actively and more strategically than before, we are about to find out.

Microsoft software criticised as workplace surveillance

Alex Hern, writing in the Guardian, raises serious concerns about Microsoft software and a ‘Big Brother’ return to office work, especially when time inputs are, at long last, being recognised as far less important to efficiency and effectiveness success than results output

Microsoft has been criticised for enabling “workplace surveillance” after privacy campaigners warned that the company’s “productivity score” feature allows managers to use Microsoft 365 to track their employees’ activity at an individual level.

The tools, first released in 2019, are designed to “provide you visibility into how your organisation works”, according to a Microsoft blogpost, and aggregate information about everything from email use to network connectivity into a headline percentage for office productivity.

But by default, reports also let managers drill down into data on individual employees, to find those who participate less in group chat conversations, send fewer emails, or fail to collaborate in shared documents.

“This is so problematic at many levels,” tweeted the Austrian researcher Wolfie Christl, who raised alarm about the feature.

In a statement, a Microsoft spokesperson said: “Productivity score is an opt-in experience that gives IT administrators insights about technology and infrastructure usage. Insights are intended to help organisations make the most of their technology investments by addressing common pain points like long boot times, inefficient document collaboration, or poor network connectivity. Insights are shown in aggregate over a 28-day period and are provided at the user level so that an IT admin can provide technical support and guidance.”

“We are committed to privacy as a fundamental element of productivity score,” wrote Jared Spataro, the corporate vice-president for Microsoft 365, in online documentation. “Let me be clear: productivity score is not a work monitoring tool. Productivity score is about discovering new ways of working, providing your people with great collaboration and technology experiences … For example, to help maintain privacy and trust, the user data provided in productivity score is aggregated over a 28-day period.”

But the response has not reassured all critics. “The word dystopian is not nearly strong enough to describe the fresh hellhole Microsoft just opened up,” tweeted David Heinemeier Hansson, co-founder of the office productivity suite Basecamp. “Just as the reputation of a new and better company was being built, they detonate it with the most invasive workplace surveillance scheme yet to hit mainstream.

“Being under constant surveillance in the workplace is psychological abuse,” Heinemeier Hansson added. “Having to worry about looking busy for the stats is the last thing we need to inflict on anyone right now.”

Employee surveillance “has really ramped up” alongside remote working during the coronavirus pandemic, as companies seek more oversight of workers away from the office, Dr Claudia Pagliari, a researcher into digital health and society at the University of Edinburgh, told the Guardian in September.

The future of work?

Citrix is an American software company helping organisations to simplify cloud transformation and speed adoption of digital workspaces and virtual desktops to enable greater agility, productivity, and security – Darren Fields, their Vice President UK & Ireland, contributed the following article, published in the HR Director magazine

What does the future of work hold?

In a world where it’s impossible to predict what will happen tomorrow, it’s a tough question to answer. But businesses that hope to emerge from the global pandemic in a stronger, better position need to be thinking about – and planning for future models – today.

What will the workforce, work models and the work environment look like in 2035? And how will technology shape them?

To find out, Citrix teamed up with futurist consultancy Oxford Analytica and business research specialist Coleman Parkes to survey over 1,000 employees within large corporations and mid-market businesses across the United Kingdom, United States, Germany, France and the Netherlands on current and future workforce strategies and work models. And here’s what was learned:

Robots will not replace humans
But they will make us smarter and more efficient. Three-quarters (74%) of UK respondents believe that in fifteen years, artificial intelligence (AI) will significantly speed up the decision-making process and make workers more productive.

New jobs will be created
New roles will emerge to support a technology-driven workplace and the changing relationship between humans and machines. Here are the positions UK respondents believe will be created:

  • Robot / AI trainer (78% of leaders/42% of employees)
  • Virtual reality manager (85% of leaders/34% of employees)
  • Advanced data scientist (76% of leaders/28% of employees)
  • Privacy and trust manager (74% of leaders/24% of employees)
  • Design thinker (49% of leaders/20% of employees)

 

Work will be more flexible
Technology that allows for seamless access to the tools and information people need to collaborate and get work done wherever they happen to be will fuel flexible models that the future of work will demand.

  • 59% of UK professionals (business leaders and workers combined) believe that a “platform” model – which creates value by facilitating exchanges between groups or individuals using digital technology – will dominate work in the future.
  • 56% of UK workers believe permanent employees will become rare by 2035.
  • 75% of UK leaders believe that technology platforms will provide instant access to the highly specialised, on-demand talent required to power future organisations and accommodate rapid changes in business and customer needs.
  • 54% of UK leaders believe that in 2035, the majority of high-value specialist workers will work as on-demand and freelance contractors.

 

Leadership will have a new look
More than half of UK respondents (57%) believe AI has the potential to make the majority of business decisions by 2035 and potentially eliminate the need for traditional senior management teams.

  • 69% of UK professionals think most organisations will have a central AI department overseeing all areas of the business.
  • 63% of UK respondents believe that the CEO will work in a human-machine partnership with a Chief of Artificial Intelligence (CAI).

 

Productivity will get a major boost
Technology, closely integrated with humans, will drive step changes in productivity as workers are supported by solutions that enable them to perform at their best. “AI-ngels” – digital assistants driven by AI – will draw on personal and workplace data to help employees prioritise their tasks and time and ensure mental and physical wellness. These worker augmented assistants will, for example, schedule meetings to take place at the most effective time based on factors ranging from the blood sugar levels of participants to their sentiments at different times of day. And while the meetings are taking place, they will monitor concentration levels and attitudes and adjust as necessary to drive optimal outcomes.

Professionals in the UK are the most sceptical of technology’s potential to make workers more productive. Yet, on average, they still believe that technology will increase productivity by 87% by 2035, as opposed to a global average of 102%. Among the solutions they believe will be commonplace:

  • AI that anticipates and performs tasks based on habits and preferences
  • AI nudges
  • AI personal assistants
  • AI-guided digital wellness to ensure employees’ mental and physical wellbeing
  • Wearable technology to interact with systems
  • Augmented reality glasses
  • Neuro-linked technology for controlling devices
  • Exoskeletons to enhance performance-related tasks

 

Employee engagement will improve

As technology and AI takes over time-consuming, mundane tasks, work will become more strategic and employees more engaged.

  • 82% of UK professionals believe that by 2035, technology will automate low-value tasks, freeing workers to focus on the meaningful work they want and are paid to do.
  • 72% of UK professionals say it will be a significant factor in upskilling human workers, creating new opportunities for personal development and career growth.

 

Innovation and growth will soar
Organisations will invest more in technology and AI than human capital. This will open the door to unprecedented levels of innovation and new revenue streams and fuel sustainable growth – particularly among small businesses.

  • 93% of UK business leaders believe that in 2035, AI technology investment will be the biggest driver of growth for their organisation.
  • 58% of UK leaders believe that by 2030, AI will generate more revenue for their organisation than human workers.
  • 59% of UK professionals believe that technology will level the playing field and convey advantage to small companies.

 

Businesses that embrace technology’s potential to boost productivity, improve employee engagement and drive innovation today can get a head-start on creating the more intelligent workplace of the future.”

“By adopting more flexible work models and using technology to better support workers, organisations can not only empower staff to work more productively in the way that suits them but also free employees up to focus on more meaningful and rewarding work.”

WFH results = Productivity Up, Innovation Down

      • Interesting findings about WFH (alone) follow from Wharton’s Management Professor Michael Parkes, reported in the Wharton Business Daily, and Mark Golan, a top Google executive – despite their lack of clarity on precise measures used, their good news  is (labour) productivity has not stalled due to CV19, counterbalanced by the bad news that innovation has suffered and, for this to recover, a partial return of employees to offices is vital to restore essential collaboration

 

A new study finds that productivity has remained stable or even increased for many companies that shifted to remote work during the coronavirus pandemic. However, innovation has taken a hit as both leaders and employees feel more distant from each other.

Businesses tend to spend less money and take less risks during uncertain times, but researchers also attribute the current innovation deficit to the difficulty with collaboration that often comes with working from home. Videoconferencing and instant messaging apps can’t perfectly replicate the dynamics of being together in the same room, hashing out ideas and feeding off the energy of co-workers.

“It’s a challenge to feel connected, confident and communicate effectively with the team, and we know from a lot of research that creativity and innovation largely happen through collaboration,”

“Given that context, we tried to see what were some of the benefits and what were some of the challenges, and how workers adjusted to those challenges,” Parke said.

Productivity impact?

Significantly, the study shows that fears about lost productivity during the pandemic are largely unfounded.

Employees haven’t slackened off just because they are at home. In fact, some home comforts are helping many employees stay at the same level of productivity or reach even higher. They enjoy dressing down, having their pet nearby and personalising a workspace they don’t have to share with nosy neighbours peeking over the cubicle.

“Employees can really focus; they can be comfortable in their own setting,” Parke said. “They’re gaining things like less commute time, not having to get ready or dressed up for work. A lot of those factors, just the comfort and casualness of working from home, came through [in the survey].”

Another positive in the productivity column — at least for those without young children to care for — is less disruption while working. “Think about all the meetings, all the times you’re interrupted, which we know historically has been a major source of people’s lack of productivity,” Parke said. “You can structure your work a little bit more effectively when it’s just you in the office.”

Innovation impact?

The dip in innovation is the biggest downside to remote working, according to the survey.

But Parke said there are three simple steps that managers can take to overcome this hurdle:

  1. The first is to make sure that employees have access to a wide range of collaborative tools. Don’t limit them to Zoom or email, but onboard a number of different platforms so that each employee can find what suits them. “The reasoning here is that when people have the flexibility and variety, they can pick tools that work better for them and their own personality and communication style,” Parke said.
  2. Second, train employees on how to work remotely. It’s not an inherent skill, so a little guidance can go a long way. Training was “another major factor that contributed to employees’ collaboration effectiveness, their empowerment and their ability to share information across their team.”
  3. Finally, establish a routine way of connecting with your team, and stick to it. Workplaces where managers had regular meeting routines — town halls, one-on-one reviews, brainstorming sessions, etc. — were better at transitioning to remote work because they maintained those routines.

 

Researchers fully expected to find a drop in productivity. Instead, they found a surprisingly different problem with keeping innovation high.

“The pandemic is showing that employees are able to be productive, and there are some things they really enjoy about that autonomy, so that trust is something organisations should really increase,”

“At the same time, organisations should be developing ways to maintain good collaboration in this remote working environment, because  we know from a lot of research that innovation and creativity often happen through collaboration.”

Ingrid Fuary-Wagner, a reporter for the Australian Financial Review, also wrote under the following heading:

“Collaboration works better in the office” – says Google chief

Google may be at the forefront of enabling people to work from home effectively, but the technology company warns remote working in the long term will be detrimental to the productivity and culture of businesses.
While the COVID-19 pandemic had shown just how efficient employees could be working from home, there were long-term negative effects, said Mark Golan, Google’s chief operation officer of real estate investments and development.

People are very efficient doing their work at home in their home office, once they know what they are doing. The problem is when you have to decide what to do next.”

“The act of creating a new product, or programme … where the ‘figuring out’ part is very messy and requires input from a lot of different people from a lot of different backgrounds generally through very ad hoc interactions, that’s where, if you don’t have physical co-location, I think we are all going to struggle. You run the risk of being very efficient at doing the wrong work, and I think over time that’s the risk that we run.”

Golan acknowledged the irony of the tech giant, which builds and sells cloud computing and software products that allow people to work and collaborate online, fundamentally believing in the importance of physical offices.

“Physical co-location still allows people to collaborate better and, I think, relate better,” he said.

“Traditionally, relationships are formed in person. They are formed when you are in the office together, when you’re leaning over a shoulder talking to [someone], when you go to lunch with them.

“So when you go into this kind of environment like we’ve seen with COVID, you can then lean on these relationships. But if you’ve never had a chance to form them, there is nothing to lean on.”

Balancing teams and individuals

Golan said over time there would be a deterioration in relationships and company culture if people, especially younger employees, weren’t physically brought together.

“Companies are going to have to find a way to rekindle that feeling of culture and teams that comes from the formation of personal relationships.”

He said the challenge for Google in the future was working out how to strike the balance between the needs of the team and the wishes of the individual.

“Individuals have lots of different reasons for why they want to work remotely or from home, and often times those reasons don’t necessarily enhance the team.”

“For Google as a company, there has always been this interesting dichotomy because at one level we’ve probably been one of the foremost companies that produces technology that allows people to be efficient from wherever they are, and yet we still fundamentally believe in the concept of physical co-location as the driver of productivity and culture.”

“How do you innovate when you’re sitting by yourself and you’re not able to leverage off the people around you?”

 

 

Knowledge workers are more productive from home

An interesting study has come up with the above headline finding – it was published in the Harvard Business Review and conducted by Professor Julian Birkinshaw  and Pawel Stach of London Business School, and Jordan Cohen of Lifelabs Learning – extracts follow

For many years, we have sought to understand and measure the productivity of knowledge workers, whose inputs and outputs can’t be tracked in the same way as a builder, shelf-stacker, or call centre worker.
Knowledge workers apply subjective judgment to tasks, they decide what to do when, and they can withhold effort (by not fully engaging their brain) often without anyone noticing. This make attempts to improve their productivity very difficult.
In 2013, we presented research showing that knowledge workers spent two-thirds of their time in meetings or doing desk-based work, even though they found these activities mostly tiresome. We proposed some steps people could take to shift time to more worthwhile activities, such as talking to customers or coaching subordinates. Of course, we all get stuck in patterns of activity reinforced by the routines of office life.
But, then, in March 2020, the pandemic struck. Suddenly, many of us were sent home and forced to develop new ways of working. After several months, we now have a good sense of how our own day-to-day schedules have changed.  But we don’t know how generalisable our experiences are. So we decided to replicate the 2013 study, using the same questions as before and interviewing respondents with similar profiles.

About the Research

The individuals were selected randomly, subject to a few specific criteria: They had to have at least a bachelor’s degree, five years of full-time work experience, and a job in which effectiveness is determined by the use of brainpower and their capacity to make sound judgments. The age, sector, and experience of the respondents varied.
We broke down activities done into six categories:
  1. Desk-based work – alone
  2. Externally facing work – interacting with anyone outside the company, talking to customers
  3. Managing down – interacting with subordinates, coaching and supporting them
  4. Managing across – interacting with peers and colleagues, in meetings, often with many colleagues
  5. Managing up – interacting with the boss or other senior people
  6. Training and development

A. How Do Knowledge Workers Now Spend Their Time?

There have been two significant shifts:
  • 12% less time managing across through meetings
  • 9% more time doing externally focused work.
  • Desk-based work continues to take a third of our time.
  • Other changes — a little less time managing up and a little more time on training and development — were not statistically significant.

 

Conclusion:

The evidence suggests lockdown has helped us more effectively prioritise our work. We still need to get through our emails and report-writing, but we are significantly less likely to get drawn into large meetings, and this leaves us more time for client or customer work and for training and development, which most people would argue is a good thing.

However, lockdown doesn’t seem to have helped with hierarchy-spanning activities (managing up and down), presumably because it’s impossible to have the short, spontaneous meetings that used to be possible.

B. How Do Knowledge Workers Decide What to Do?

While most knowledge workers have a written job description somewhere, it is well understood that they take responsibility for choosing what to do and when to do it based on a variety of factors, including tasks outside of their formal role when it appears sensible to do so.
To get a sense for how these decisions are made, we asked study subjects to choose among four options for every activity:
  1. It’s a standard part of my job
  2. My boss asked
  3. A peer or colleagues asked me
  4. I did it spontaneously, or it was important and I found time

In 2013, respondents said 52% of their activities were standard, 18% requested by a peer , 24% independent but important, and 3% independent and spontaneous.

In 2020, we are still spending half our time on standard activities, but we are doing only 8% because a colleague asked, and a full 35% because we thought the activity was critical.  Spontaneity rose to 6% but this difference was not statistically significant.

Conclusion:

It seems we have been taking more direct charge of our time during lockdown.  Working from home gives us a bit of breathing space: We don’t have colleagues or bosses badgering us, and we don’t get drawn into meetings by force of habit, just because we happen to be around.  The result is a reassuring increase in us making time for work that matters most to us.

C. How Effective and Valuable Were These Activities?

Finally, we asked respondents about how important and energising they found each activity. The differences are striking.
In 2020, respondents say their work is more important, less tiresome, less easily offloaded and contributes to the company’s objectives.  Not only is their work important, they feel important as well!
Of course, there is some self-justification going on here: When we think our work is important, we are more likely to gain personal utility from it and less prone to delegate it. But it seems there is also some reprioritisation occurring, with people stopping some of the less-important activities they used to do and focusing their energy in a more effective way.

Conclusion:

The findings here are consistent with the notion that knowledge workers are more intrinsically motivated — and taking more personal ownership — during lockdown, in large part because of the increased degrees of freedom they are getting.

Overall – Concerns and Challenges:

Working in lockdown has helped us to focus and to take responsibility – but that’s not the whole story.
Follow-up interviews revealed some of the areas of concern that we as individuals — and as leaders of others — need to understand:
  • Some respondents cited the potential for shirking: “I am worried there is some slackening of effort. People are starting to get a bit too comfortable working from home,” said one. In our view, this is not a huge problem: There are many ways of informally monitoring how much time your colleagues are putting in via Outlook, Slack and other tools, and we should really be evaluating knowledge workers on their outputs not their inputs anyway.
  • The bigger areas of concern were around the things people couldn’t do well in a virtual environment:
    1. Take managing across first: It’s not so hard for an existing working group to stay on course when working remotely, but the challenges of getting started on something new (the forming/storming stages of team development) or resolving internal conflicts are enormous. Of course, these activities can be done over Zoom – just not as well. Few people are energised by informal online get-togethers. As one person said, “We are slowly losing the social glue that holds us together.”
    2. Managing up and down are no less tricky under lockdown. Most respondents had instituted regular one-on-one catch-ups with their teams and bosses, but they usually focused on immediate task and personal well-being issues, rather than longer-term development. They missed the opportunity to bottom out difficult issues: “You cannot challenge a person quite so well over Zoom. You tend to hold back,” said one. They also lamented the loss of growth opportunities for their teams: “I used to throw people into new assignments, where they learned on the job, watching and learning from experienced colleagues. That’s almost impossible to do in a virtual setting.
  • Finally, some people worried about their own training and development. While time spent on self-education went up during lockdown, this was mostly due to online webinar and course attendance — which helps build knowledge but doesn’t encourage the active experimentation and personal reflection that help us really grow.
For many of us, the new socially distanced mode of working may continue for some time.  The good news for knowledge workers from the first phase of this experiment is that lockdown has helped us better manage and prioritise our schedules to favour the most value-added work. The challenge — as we move into the next phase where some face-to-face meetings are allowed — will be to bring back the informal and social elements of office life that are so vital to organisational and individual success.

Is the pandemic making us more productive?

A big-picture, easy-to-read article just in from the antipodes, published in the Australian ‘Financial Review’ and written by Nathan Sheets, chief economist and head of global macroeconomic research at PGIM Fixed Income – essentially, he agrees with our view that the pandemic, when eventually over, will be seen to have ushered in a sea-change in the way working lives are structured and digital tools used

 

To reap the full benefits of newly-found virtual tools, it’s vital to find ways to establish boundaries between work and other parts of our lives. Consider the factors in play

First is the ongoing pandemic – with case counts spiking in many parts of the world, the grim realities of the virus and the steps required to fight it continue to create challenges and shape our lives.

It has changed the way we work, socialise, educate our children, and do business. We have converted in-person events into virtual events, face-to-face meetings into video calls and crowded lecture halls into virtual classrooms.

In the process, we have learned that our virtual tools are surprisingly powerful. We have been able to complete our tasks while sparing the time, stress and expense of commuting. We have avoided the wear and tear of business travel and the sometimes interminable jet lag that came with it. In parallel, employers have beefed up their connectivity and virtual communication platforms.

The reality is that through the pandemic, workers around the world have put in the time and effort to learn new virtual tools. We have found ways to do business differently and, in some cases, even better than before.

In a recent survey of 1,200 chief information officers by Enterprise Technology, nearly half judged that productivity has improved since workers went home, with less than 30 % reporting a decline.

Of course, as the virus recedes, we are likely to return to the office and get back on airplanes, trains and subways. The virtual world will not fully supplant the physical. This episode has underscored that face-to-face contact is both a critical human need and necessary for some industries and occupations.

But a portion of these adjustments are likely to be permanent. Some business trips or meetings will be converted into virtual events, and some conferences will be done online.

Similarly, many workers will have split schedules – spending several days a week in the office but also working part of the week at home. The same survey of chief information officers found that remote work is likely to be twice as frequent as it was before the pandemic.

Perhaps in anticipation, workers have sharply increased their outlays on home improvement projects.

The economic implications are significant. These virtual technologies have the capacity to drive lasting “process innovation” and higher levels of productivity.

For example, if they enable us to convert just two hours a week from lost commuting or other transportation time into productive work time (which may be an underestimate for some), this would translate into a hefty 5 % productivity gain on a 40-hour work week.

These efficiency gains could also have effects on our lives more broadly. They may allow us to spend more time with family, relaxing, exercising or even sleeping – with benefits for our physical and mental health and overall happiness. A reduction in travel could bring benefits for the environment as well.

We see higher productivity as a potential legacy of the pandemic. This higher productivity, in turn, would expand the size of the overall economic pie – raising wages, profits and global GDP. Indeed, for economists, stronger productivity is as close as it gets to a free lunch.

But this admittedly optimistic assessment should be tempered by several offsetting concerns.

The first is the consequences for employment.

It’s not clear whether the winning sectors will be able to absorb the workers shed by the losing sectors, which include travel and transportation, hotels and bricks-and-mortar retailers.

The losing sectors tend to be labour-intensive, and the skills of these workers may not be a good fit for other parts of the economy. The upshot could be a slower-than-expected return to full employment.

Second, to the extent that these tools benefit higher-paid workers more than lower-paid workers, they may widen inequalities in income and wealth.

Sophisticated professional services, which involve the exchange of ideas, are likely to translate more naturally into the virtual world than lower-paid jobs in food preparation and personal services. There is no virtual application that allows food to be cooked or that provides daily care to the elderly and infirm.

Third, these technologies have the capacity to make us more efficient – but there is a potential downside for our personal lives. This risk is best captured by the quip: “Are we working from home or living at work?”

If left unfettered, these virtual tools could make work omnipresent and inescapable. To reap the full benefits of these tools, we must find ways to establish boundaries between work and other parts of our lives.

In summary, one surprising side effect of the pandemic has been the coordinated adoption and diffusion of powerful technologies.

These technologies hold the promise of higher levels of productivity and more balanced lifestyles. For this to happen, however, we must remain firmly in control of these technologies – and not allow them to control us.

Potential £145bn productivity boost for UK economy

 

New research published by Sage plc and Capital Economics has found that unlocking SME digital investment will be critical in helping small and medium size businesses remain resilient as a wave of local lockdowns trigger ongoing uncertainty – it could also deliver major benefits to the UK economy.

According to the research, Covid-19 has had a transformational effect on attitudes to technology among UK SMEs – 73% of them have turned to technology during the pandemic to keep their business functioning –  only 17% were planning such investment before the crisis.

  • 43% say the pandemic has made technology investment more urgent in order to remain competitive and boost productivity
  • 72% believe further investment into key areas of technology would deliver performance improvements and support recovery

This increased appetite presents an opportunity to underpin fundamental long-term productivity improvements among UK businesses.

However, Covid-19 has dramatically reduced their capacity to invest – over three-quarters say financial constraints are preventing the necessary investment in technology.

If these barriers can be overcome, and this untapped appetite for investment unlocked in fullUK SMEs could deliver major benefits to the economy, including:

  • £145 billion in annual economic output as a result of improved productivity, equivalent to:
      • 140 million working weeks per year – or 8 working weeks per employee per year
      • More than double the total estimated cost of the Job Retention Scheme
  • £325 billion additional annual revenue
  • Supporting, creating and protecting 2.7 million jobs across the UK private sector

 

There is widespread support among businesses for Government-backed financial incentives to accelerate technology investment, including digital vouchers, digital adoption grants and tax benefits.

Steve Hare, Sage CEO said, “As businesses across the country face the threat of tighter lockdowns, the need is to place firms on a more sustainable footing by giving them confidence and support to invest – the only certainty for SMEs right now is uncertainty – we must do everything we can to ensure firms can stand effectively on their own two feet through a challenging period.

“We are on the brink of a once-in-a-generation digital revolution among SMEs – one that will power job creation and growth at a time when it’s most needed, as well as helping to crack the UK’s long-standing productivity puzzle. But the UK stands to lose out on these massive gains if we do not encourage this investment now. Currently, businesses do not believe they can deliver even half of the technology investment they need in order to position themselves for recovery and growth.

“So, in addition to targeted and local support, SMEs in all sectors across the UK need a strong message from Government that they can invest in technology with confidence. Our research shows that policy incentives like vouchers and tax breaks would pay for themselves within a year, driving a tech-led recovery that will underpin greater resilience, productivity, and job creation for decades to come.”

Felicity Burch, CBI Director of Innovation and Digital said: “Against the Covid pandemic, UK business has demonstrated extraordinary levels of adaptability by forging new working methods and routes to market. Much of this innovation has been underpinned by an accelerated move towards new technology.

“But cash is now tight, and this will hold firms back as they seek solutions to help them grow out of the current crisis, and on to a successful future beyond Covid.

“It is clear the Government needs to step up the support available for innovation adoption. This will be vital to ensure the UK builds back better, with a more productive, sustainable and green economy in all parts of the country.”

The Key to solving the Productivity Puzzle

A very interesting approach has just been published in project-syndicate.org for solving the ‘Productivity Puzzle’ – it was written by Professor Diane Coyle, University of Cambridge who is also a member of the newly formed UK Productivity Institute

Although the factors contributing to stagnant productivity are well known, economists and policymakers have so far paid little attention to figuring out how to address these problems in a coordinated way. But the need to deliver broad-based prosperity is more pressing than ever, and this shortcoming must be rectified without delay.

In a 1996 lecture entitled “Big Bills Left on the Sidewalk,” the late American economist, Professor Mancur Olson, made a powerful observation: an individual from a poor country – say, Haiti – who migrates to a richer country like the United States immediately becomes vastly more productive and earns a far higher wage than before. The individual has not changed overnight, so their skills or cultural attitudes cannot explain their improved situation. The answer must instead lie in their new country’s environment

Olson therefore concluded that many (or most) economies are not socially efficient. A better institutional and social context, and higher stocks of assets from past investments, can make an enormous difference to individuals’ productivity, and hence to their living standards.

The challenge, as Olson pointed out, is that individuals cannot change the overall context in which they live and work, except by moving elsewhere. The improvements needed to raise an entire economy’s productivity require coordinated, collective action. Olson’s own well-known research on the logic of collective action explored why this is so difficult to achieve.

Unfortunately, Olson’s “big bills” insight about the need for coordination rarely features in the current productivity debate. Instead, the discussion – why output per worker hour has been virtually flatlining in many OECD countries since the mid-2000s, or which targeted policies might help to revitalise left-behind towns or regions – has focused on numerous potential contributory factors, rather than the need for coordinated action.

For example, policymakers typically undertake cost-benefit appraisals of potential infrastructure investments on a project-by-project basis. But the returns to any project will be affected by other decisions, both private and public. If a new railway line opens, will local bus timetables change to coordinate people’s journeys? Will developers build houses nearby, and will other government agencies open schools in the area? Without coordinated decision-making, investing in new projects where more of the other pieces are already in place will generally look like the better value-for-money option. Unfortunately, government agencies appraising projects are rarely tasked with conducting a holistic survey of the policy landscape.

Regional or local low-skills traps present a similar problem. If there are no high-paying jobs in a particular area, then individuals have no incentive to invest in their own education. And if the local pool of available skilled labour is small, employers have no incentive to open offices or factories there. The only option for people who want to move up is to move out.

Bundle2020_webSuch examples have now attained almost motherhood-and-apple-pie status among economic researchers, given the widespread acceptance that “institutions” are important for growth and development. But economists need to connect their analysis with an understanding of the political potential for change, the sociology of organisations, and the psychology of decision-making. Simply urging regions to “be more like Silicon Valley” is useless. The challenge for researchers and policymakers is to understand – in each specific context – exactly what coordination is needed to increase productivity, and what actions (and by whom) can achieve this.
Vast inequalities between places, and therefore in people’s life chances, are a critical political issue almost everywhere, as election upsets and increasing polarisation in recent years clearly indicate. Moreover, the COVID-19 pandemic, the likelihood of economic turmoil owing to extreme weather or civil conflict, the existential requirement of shifting to a zero-carbon economy, and widespread digital disruption will make delivering broad-based prosperity an even more pressing imperative.

Although the obstacles to increased productivity are nearly universal, the solutions will be specific to each place and reflect its asset legacy, industrial history, location, and local politics. There is no science – yet – regarding what kinds of decisions need to be taken at different levels of government, or how to coordinate choices across departmental silos and budgets. (That is why these issues are central to the agenda of the United Kingdom’s recently established Productivity Institute.)

Nobody would be surprised that the factors contributing to low or stagnant productivity include lack of investment in physical and intangible assets, skills shortages, inadequate infrastructure, poor management, and a weak macroeconomic environment. More surprising is the lack of attention paid so far to finding a recipe that addresses these problems in tandem. Economists and policymakers must begin to rectify this without delay.

Debt may be cheap, but the UK’s poor productivity will cost us dear

Margaret Thatcher outside 10 Downing Street

The strangely easy agreement between economists of right and left that the chancellor should set aside concerns about Britain’s rising debt levels still holds seven months after the first Covid-19 lockdown was imposed.

Thatcherite free-market thinktanks sing the same carefree song as Keynesian academics when debate turns to the size of this year’s public spending deficit. There are differences in tone and it goes without saying that all would want money spent wisely, but their efforts focus on competing proposals for growth.

If only that were true inside the Tory party, be that members or backbenchers. Listen to what they say about the economy, and it is like the 2008 financial crash never happened. Public sector spending is still being likened to a household’s finances, where the aim must be a balanced budget.

 

On its own, though, it is not enough. There remains the gloomy assessment of Britain’s productive capacity. Leftist economists will point to the period of expansion after the last world war and argue that it justifies renewed high levels of public spending, nationalisation and state-backed industrialisation, though the 2020 version would be a climate-friendly initiative.

 

A second wave of growth took hold from the 1980s to the early noughties. While there is much to say about this period – from Thatcher’s fire sale of assets to the consumer borrowing binge in the early part of this century that artificially boosted growth – the main point today is that many of the industries that drove this growth are now dying or in retreat. From the oil and gas sector to the carmakers and previously stellar finance industry, the UK relies on wealth generators that have either a limited future or none at all.

From the Treasury’s perspective, the launchpad for recovery is in a terrible state – worse than most ministers, and many thinktanks, realise. Whether it is finding new industries to supersede the old, rescuing those affected by Covid or supporting firms through a tough Brexit transition, the cost of aiming billions of pounds at a particular target and missing will be too high.

The Institute of Economic Affairs has urged the chancellor to use business tax cuts to rekindle the entrepreneurialism of the Thatcher decade, arguing that that would generate enough growth to bring down the deficit, and pay for extra welfare, investment in the regions and all the other things on MPs’ wish list.

According to the left, the same trick can be pulled off by lashings of government investment. Yet when so much growth has been generated by foreign managements and foreign investment, the Treasury view is that spending must be careful. As such, it is almost inevitable that recovery will take a decade or longer.

So while the price of debt is important, glib and uninformed exhortations for tax cuts or extra spending won’t reassure the Treasury unless deep-seated weaknesses in the UK’s engine of private sector growth are tackled too.

AI will unlock USD 15.7 trillion in global productivity by 2030

India is taking the potential for AI – Artificial Intelligence – to improve productivity very seriously indeed – their government is pushing hard to build on its existing IT strengths and become a world leader in AI – this will give a massive boost to its economy and standard of living whilst helping to solve many international as well as national problems – there is no doubt that AI has already become a major driver of productivity improvement in many sectors globally, and these are only ‘early days’ 

 

Speaking at the inauguration of RAISE 2020 – ‘Responsible AI for Social Empowerment 2020’ – and a summit meeting of hundreds of his nation’s finest brains and businessmen, Indian Prime Minister Shri Narendra Modi said:

  • “At every step of history, India has led the world in knowledge and learning
  • India has proved to be the powerhouse of the global IT services industry – we will continue to digitally excel and delight the world
  • We want India to become a global hub for AI
  • Many Indians are already working in this area – I hope many more do so in the times to come
  • India’s national programme on AI will be dedicated towards the rightful use of AI in solving societal problems
  • We must ensure that human intellect should always be a few steps ahead of AI
  • Let us have no doubts that human creativity and human emotions continue to be our greatest strength – they are our unique advantage over machines – even the smartest of AI cannot solve mankind’s problems without blending with our intellect.”

 

Shri Ravi Shankar Prasad,  Minister for Electronics & IT, Communications & Law & Justice, elaborated on  developing AI capabilities in the country:

  • “The government has set up AI centers of excellence and more such centers will be set up to train the youth
  • Technology at times overwhelms us, but we welcome AI to generate development and promote equity
  • India’s demographic dividend will play a key role in promoting pools of skilled professionals to take the country’s AI ecosystem forward
  • India’s application of AI will become a beacon for the world.”

 

In his address, Mr. Mukesh Ambani,  Chairman, Reliance Industries Ltd, said:

  • “India has the power of data generated by over a billion Indians that would catapult it to becoming a leading global AI player
  • When 1.3 billion Indians are digitally empowered, they will unleash proliferation of digital enterprises that will create faster growth, better standards of living and superior opportunities across society.”

 

Dr Arvind Krishna,  CEO, IBM India, said:

  • “According to independent studies, AI has the potential to raise India’s annual growth rate by 1.3% and add USD 957 billion (i.e. around 1,000 billion) to the country’s economy by 2035
  • At a global level, AI will unlock USD 15.7 trillion in productivity by 2030 and it has the potential to not only boost economic growth but improve the livelihoods of millions around the world.”

 

Professor Raj Reddy, Turing Awardee, emphasised the benefits of AI in bridging language barriers and for managing pandemic situations:

  • “Today, we can do things which were impossible to do 50 years ago
  • Using AI, anyone can translate from any language to any language, ride in a self-driving car and play chess at grandmaster level
  • Looking forward, we can expect AI to help eliminate lockdowns, replace one-size-fits-all education by personalising education based on individual student capabilities and interests, watch any movie and talk to anyone in any language and empower the people at the bottom of the pyramid.”

 

From agriculture to fin-tech, from healthcare to infrastructure, India is witnessing rapid development in the integration of artificial intelligence. On the back of its technological prowess and the richness of its data, India believes it can become the AI laboratory of the world and achieve its vision for social transformation, inclusion and empowerment through responsible AI.

Website: http://raise2020.indiaai.gov.in/

 

£300 million to boost UK manufacturing productivity by 30%

Businesses with creative ideas to boost the UK’s manufacturing capacities are set to receive £300 million of joint government and industry funding according to the

 

Businesses with creative ideas to boost the UK’s manufacturing capabilities, including using robotics, AI and augmented reality, are set to receive £300m of joint government and industry funding

Through the Manufacturing Made Smarter Challenge, the government will invest £147 million – backed by further funding from industry – to support businesses implement new tech to boost their manufacturing productivity, helping them reach new customers, create thousands of new highly skilled jobs, slash carbon emissions and reduce prices for consumers.

The first £50 million of the funding is being allocated to 14 cutting-edge manufacturing projects involving around 30 small or medium businesses, 29 larger enterprises and nine universities, with the rest of the funds due over the next 5 years.

A company behind one winning project – the Digital Designer Robot – aims to offer machine-to-person ‘digital assistance.’ When a business needs a bespoke product, it will be able to use a digital robot to help design it and upload the design quickly onto a supplier’s website – so the product can then be sampled, prototyped and manufactured by the supplier.

The virtual assistant would also offer expert advice and guidance, by ‘conversing’ with businesses to ask questions, listen to feedback, and provide suggestions. This could reduce the time it takes to manufacture products, as well as cut costs and waste thanks to a more precise design process.

Another is developing super lightweight, aluminium bikes for children using robots, whilst another is pioneering the use of AI to help businesses design new products.

Business Secretary Alok Sharma said:

Increasing productivity is vital for any business, and having the right new technologies in place can help manufacturers make better products to compete and thrive.By helping manufacturers to reduce costs, cut waste, and slash the time it takes to develop their products, this multi-million pound uplift will help fire up the cylinders of productivity as we build back better from the pandemic.

Other winning projects include:

  • WeldZero – This project will explore the use of robots, sensors and automation to improve accuracy when welding metal parts on a production line. The machines will also collect and feedback valuable data to help improve the manufacturing process, leading to stronger and higher-quality parts, as well as quicker production, in industries including automotive and construction.
  • Smart Connected Shop Floor – Real-time data integration with multi-sector applicability – GKN Aerospace is leading a cross-sector team trialling digital technologies, including augmented reality headsets for engineers, so manufacturing businesses can guide them through repairs – the project will also use ‘smart’ devices to exchange information between old and modern computer systems.
  • The Digital SandwichRaynor Foods Ltd, a leading UK sandwich supplier who helped supply the NHS during the coronavirus pandemic, is creating a major piece of software where food and drinks businesses can connect online to share valuable data – this information exchange will increase productivity, improve cashflow, help boost food quality and reduce waste within the supply chain – the platform includes small and medium sized enterprises (SMEs), who don’t usually have access to this kind of technology and will benefit sectors including pharmaceutical, aerospace and automotive.
  • Dialog – this project, led by Atlas Copco IAS UK Limited, brings together affordable, automatic and human-interacting robots to help machines make quicker and better decisions, making production more efficient.

The Manufacturing Made Smarter programme will also support technology SMEs through growth accelerators – partnerships between the government and the private sector where experts will work with businesses to identify barriers to growth and ways to overcome them – it will also create a national network of innovation ‘hubs’ where businesses can partner or share advice, to help spur growth and creative ideas.

The government has committed to raising productivity and earning power in the UK by spending 2.4% of GDP on R&D across the UK economy by 2027.

Rich Ingram, Director of funding recipient Account Management Online Ltd, said:

Moving beyond ready-made products available from online stores, AMO’s Digital Designer Robot provides the opportunity to define made-to-order products and get a price in real time including bought in tooling, sub-assemblies and parts. We are excited how this capability delivers benefits in many industries where design requirements are unique, bringing faster, more available and resilient sales resource to customers to help them buy. Automation cutting costs and creating competitive advantage by immediate service response. Discontinuous innovation generates high rewards for taking high risks – we are proud to be working in partnership with Government helping us manage risks and supporting our R&D in this ground-breaking area to help us turn our ambitious ideas into real world solutions for selling to the benefit of UK PLC.

 

Hamid Mughal, MMS Industrial Advisory Group chair said:We have tremendous manufacturing capability in the UK and recent events have reinforced the importance of strengthening this sector for national resilience and economic growth. Rapid advances in Digital and disruptive Manufacturing technologies provide us with the perfect opportunity to shape this outcome. By harnessing the potential of this technology, we will be able to make a transformational improvement in productivity, sustainability and global competitiveness and create new products and services that forge modern digital enterprises. 

Why Software Won’t Eat The World

An interesting article from Greg Satell offered by Medium.com which supports the argument that technology, artificial intelligence and computers in general are NOT poised to take over our lives and run the world

In 2011, technology pioneer Marc Andreessen declared that software is eating the world. “With lower start-up costs and a vastly expanded market for online services,” he wrote, “the result is a global economy that for the first time will be fully digitally wired — the dream of every cyber-visionary of the early 1990s, finally delivered, a full generation later.

Yet as Derek Thompson recently pointed out in The Atlantic, the euphoria of Andreessen and his Silicon Valley brethren seems to have been misplaced. Former unicorns like Uber, Lyft, and Peloton have seen their value crash, while WeWork saw its IPO self-destruct. Hardly “the dream of every cyber-visionary.”

The truth is that we still live in a world of atoms, not bits and most of the value is created by making things we live in, wear, eat and ride in. For all of the tech world’s astounding success, it still makes up only a small fraction of the overall economy. So taking a software centric view, while it has served Silicon Valley well in the past, may be its Achilles heel in the future.

The Silicon Valley Myth

The Silicon Valley way of doing business got its start in 1968, when an investor named Arthur Rock backed executives from Fairchild Semiconductor to start a new company, which would become known as Intel. Unlike back east, where businesses depended on stodgy banks for finance, on the west coast venture capitalists, many of whom were former engineers themselves, would decide which technology companies got funded.

Over the years, a virtuous cycle ensued. Successful tech companies created fabulously wealthy entrepreneurs and executives, who would in turn invest in new ventures. Things shifted into hyperdrive when the company Andreessen founded, Netscape, quadrupled its value on its first day of trading, kicking off the dotcom boom.

While the dotcom bubble would crash in 2000, it wasn’t all based on pixie dust. As the economist W. Brian Arthur explained in the Harvard Business Review, while traditional industrial companies were subject to diminishing returns, software companies with negligible marginal costs could achieve increasing returns powered by network effects.

Yet even as real value was being created and fabulous new technology businesses prospered, an underlying myth began to take hold. Rather than treating software business as a special case, many came to believe that the Silicon Valley model could be applied to any business. In other words, that software would eat the world.

The Productivity Paradox (Redux)

One reason that so many outside of Silicon Valley were skeptical of the technology boom for a long time was a longstanding productivity paradox. Although throughout the 1970s and 80s, business investment in computer technology was increasing by more than 20% per year, productivity growth had diminished during the same period.

In the late 90s, however, this trend reversed itself and productivity began to soar. It seemed that Andreessen and his fellow “cyber-visionaries were redeemed. No longer considered outcasts, they became the darlings of corporate America. It appeared that a new day was dawning and the Silicon Valley ethos took hold.

While the dotcom crash deflated the bubble in 2000, the Silicon Valley machine was soon rolling again. Web 2.0 unleashed the social web, smartphones initiated the mobile era and then IBM’s Watson’s defeat of human champions on the game show Jeopardy! heralded a new age of artificial intelligence.

Yet still, we find ourselves in a new productivity paradox. By 2005, productivity growth had disappeared once again and has remained diminished ever since.

The Platform Fallacy

Today, pundits are touting a new rosy scenario. They point out that Uber, the world’s largest taxi company, owns no vehicles. Airbnb, the largest accommodation provider, owns no real estate. Facebook, the most popular media owner, creates no content and so on. The implicit assumption is that it is better to build software that makes matches than to invest in assets.

Yet platform based businesses have three inherent weaknesses that aren’t always immediately obvious. First, they lack barriers to entry, which makes it difficult to create a sustainable competitive advantage. Second, they tend to create “winner-take-all” markets so for every fabulous success like Facebook, you can have thousands of failures. Finally, rabid competition leads to high costs.

The most important thing to understand about platforms is that they give us access to ecosystems of talent, technology and information and it is in those ecosystems where the greatest potential for value creation lies. That’s why, to become profitable, platform businesses eventually need to invest in real assets.

Consider Amazon: Almost two thirds of Amazon’s profits come from its cloud computing unit, AWS, which provides computing infrastructure for other organisations. More recently, it bought Whole Foods and opened its first Amazon Go retail store. The more that you look, Amazon looks less like a platform and more like a traditional “pipeline” business.

Reimagining Innovation For A World Of Atoms

The truth is that the digital revolution, for all of the excitement and nifty gadgets it has produced, has been somewhat of a disappointment.

Since personal computers first became available in the 1970s we’ve had less than ten years of elevated productivity growth. Compare that to the 50-year boom in productivity created in the wake of electricity and internal combustion and it’s clear that digital technology falls short.

In a sense though, the lack of impact shouldn’t be that surprising. Even at this late stage, information and communication technologies only make up for about 6% of GDP in advanced economies. Clearly, that’s not enough to swallow the world. As we have seen, it’s barely enough to make a dent.

Yet still, there is great potential in the other 94% of the economy and there may be brighter days ahead in using computing technology to drive advancement in the physical world. Exciting new fields, such as synthetic biology and materials science may very well revolutionise industries like manufacturing, healthcare, energy and agriculture.

So we are now likely embarking on a new era of innovation that will be very different than the digital age. Rather than focused on one technology, concentrated in one geographical area and dominated by a handful of industry giants, it will be widely dispersed and made up of a diverse group of interlocking ecosystems of talent, technology and information.

Make no mistake. The future will not be digital.

Instead, we will need to learn how to integrate a diverse set of technologies to reimagine atoms in the physical world.

Greg Satell is bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017.

CV-19 provides a giant leap for creative destruction

As the world focuses on ‘track and testing’ whilst medics internationally race to prove their CV-19 vaccine/ treatment stops people dying or suffering badly, there are many positives emerging from this damned pandemic – especially given it probably won’t be the last one, and some in the future may even be man-made

Creative destruction of our ‘old norm’ way of living, both socially and at work, has gained massive impetus in just about all quarters of our lives – Schumpeter discontinuities abound – the status quo is being challenged – ‘custom and practice’ has been forcefully questioned – work processes have widely and successfully adopted new technologies in a matter of months, not years as expected

We undoubtedly needed a massive shock to our system – the one we’d all got used to and followed – the one where most people lived the same way, worked the same way, produced the same way and served the same way – we’d become averse to radical change, to any rocking of our comfortable boat

Hence, up until now, the full benefits of identifying and removing obvious waste from our systems was largely ignored

The same could also be said about the benefits on offer from making much better use of  existing resources – resources we’d already paid for – and when a few tried to ‘do something’ in response to competitive threats, say, some of them would call in outside experts, only to be peddled latest, leading-edge and expensive ‘management fads’, not the business common-sense they needed

Consider where we are now today:

  • The fact is most developed economies have (rightly) run up devastating debt to counter the pandemic, the effects of which will last for decades, not a year or so – and sclerotic productivity growth rates before it struck have inevitably worsened since, not improved
  • But where’s the long term economic plans which all can find inspiring, exciting even – what might the population be enthusiastic to put our shoulders behind? – where’s the light at the end of the tunnel?
  • In particular, where’s the panacea for those sectors and regions which have been particularly scarred by the pandemic?
  • Overall, where’s the ‘big ideas’ to get national productivity growth back on the upward slopes again – and not just to ‘level up’ everyone, which hardly inspires the vanguardians we all rely on, but to benefit all, unequally included?
  • All we ever hear about are latest numbers on Covid, latest firefighting rules and latest failures to stall it

 

So what next?

  • A fundamental societal change is under way – ‘old norms’ of working are no longer ‘acceptable norms’
  • Workers will be judged mostly on ‘results output’, not ‘hours input’ i.e. effectiveness, not presenteeism
  • The previous wish for a better social/ work balance will become widely implemented, at least for most office workers viz:
    • 2 to 3 days working alone from home (or a boat or beach?)
    • 3 to 2 days working in an office, with others – for casual meetings and conversations, developing relationships, assessing others,  socialising and gossiping, sparking new ideas etc.
    • Keynes’s forecast, that we would be working a ‘3 day, 15 hour working week’ by now, will become a reality for many, recognising knowledge workers are effectively ‘switched on’ 24/ 7, not for the hours they’re paid for
  • Hours wasted commuting, on business air travel, or in pointless meetings, will be decimated:
    • Less road capacities and developments will be needed – rush hour volumes will be less, rush-hour periods will be widened – rail travel will be greatly reduced, the need for HS2 must be  revisited
    • Business air travel to ‘press flesh’ and sign deals will be unnecessary – Heathrow’s third runway may be redundant
    • And the lockdown has clearly demonstrated that most meetings at work achieved little or nothing, so most will be cancelled in future
  • In addition, inefficient or non-use of costly resources will, at long last, become a major concern i.e. resources already paid for but often left idle e.g. skyscraper offices, hospital operating theatres or school classrooms and sports facilities for most of the 24 hour day
  • There will be a growing exodus of ‘townies’ who will grasp the opportunity to live where they want to, not near their work – many Londoners will cash in on their ‘grossly inflated’ house valuations and move out
  • Demand for city and town-centre offices will thus plummet – likewise, thousands of small businesses, which rely on serving those office workers, will fail – but much of the surplus office space will be converted to meet housing shortages, and new demand for pied-de-terres, so a whole new set of small businesses will be needed to support them

 

And that’s just a sample for starters!

Indeed, one might say CV-19 has become a massive ally of productivity improvement – so long as none in your family catch it

Long-term planning for remote work

      • Extracts about WFH follow from an article in the HBR (Harvard Business Review) by Mark Johnson and Josh Suskewicz

Mark Zuckerberg recently shared his plans for the future of remote work at Facebook. By 2030, he promised, at least half of Facebook’s 50,000 employees would be working from home. “We are going to be the most forward-leaning company on remote work at our scale,” he declared in a follow-up interview.

A few days before, Jack Dorsey had announced that Twitter and Square’s employees would be allowed to work “where[ever] they feel most creative and productive…even once offices begin to reopen.”

After spending the last two decades building amenity-filled campuses that maximise the ”collisionability” of talent and ideas while enticing their workers to stay in the office for as much time as they can, Covid-19 has shown these leading-edge technology companies that their workers can be just as productive — or in some cases, even more so — when they stay at home.

And it’s not just tech. Executives in traditional industries who spent days and weeks on the road are discovering that a well-managed Zoom meeting can be as effective as a face-to-face — and a lot easier (and less expensive) to organise.

Will Apple’s new $5 billion HQ – aka The Spaceship – turn out to be a white elephant? Will Google abandon its Googleplex? Will corporations empty out their office buildings everywhere and shrink their physical footprints? Are we on the brink of a new paradigm for work?

Microsoft’s Satya Nadella isn’t so sure. Switching from all offices to all remote is “replacing one dogma with another,” he said in a conversation with The New York Times. “One of the things I feel is, hey, maybe we are burning some of the social capital we built up in this phase where we are all working remote. What’s the measure for that?”

We suspect that the workforces of Twitter and Facebook will be less remote in 10 years than their leaders are predicting today, but much more remote than they could have imagined six months ago.

The real issue, however, is not whose predictions turn out to be right or wrong (no one has a crystal ball), but whether those leaders are thinking deeply enough about what they want their new work paradigm to achieve — and whether they can architect and construct systems that will allow them to meet their objectives.

WFH is helping them muddle through the immediate crisis, but what do they want from it in the long run? Higher productivity? Savings on office space, travel, and cost-of-living adjusted salaries for workers in cheaper locations? Better morale and higher retention rates?

To know what’s “best” for your organisation’s future when it comes to remote work, you have to put it in the context of all the things that you are looking achieve. In other words, you have to have a conscious aspiration. Then you need to envision the “workforce system” that will make those things possible.

Having more or less remote work is not a “point change” in an otherwise stable system — work from home is a system in and of itself, with many interfaces and interdependencies, both human and technological. These include:

  • The technologies (existing and yet to be created) that you will need to make your system workable, including collaboration, creativity, and productivity tools.
  • The resources (your physical footprint, people, and the technology interfaces you use to organise them) and the policies, practices, and processes your system needs to function. These include HR considerations like travel, talent development, and compensation; operational issues like office design and logistical challenges like “hoteling”— making temporary desks available to remote workers when they need to work on site.
  • The rules, norms, and key metrics you will need to prescribe to preserve and enhance your culture and values.

 

While you can model such a system up to a point, its design specs will inevitably need to be revised as they come into contact with reality; as such, experimentation and learning will be key — you cannot expect to have a one-time rollout.

Ridding ourselves of the productivity fetish will help us combat climate change

Simon is an ecological economist, trying to understand the current economy in order to build a better one. He is also a co-investigator on the ESRC funded ‘Powering Productivity‘ project, exploring links between energy, wellbeing and the UK’s productivity puzzle and a Research Fellow with the Centre for the Understanding of Sustainable Prosperity. 

 

Climate action is often about sacrifice: eat less meatdon’t fly, and buy less stuff. These things are essential. But climate action can also be about gain. Many causes of climate change make our lives worse. So transforming our societies to stop climate change offers us the chance to make our lives better.

Take work, for example.

Work can be “shit” or it can be good. Sociologists and psychologists have developed various frameworks to explain what makes a job good or bad. And we’ve identified a few common factors. A good job is socially useful, it provides material security, it is varied and creative, and it offers us a degree of autonomy. A shit job does nothing for society, fails to help us meet our material needs, is repetitive, and offers little autonomy.

The characteristics of shit jobs often come from chasing productivity growth. Productivity is a term economists use, which refers to the amount of output you get from a set of inputs. Usually the output is measured in terms of money. Your boss cares how much profit they make from your work. The government cares how much money you generate for “the economy”. Productivity growth is the process of squeezing the inputs to get more outputs. Squeezing you to get more profit for the same salary.

An age-old problem

Since Adam Smith in the 18th century, economists have known that productivity growth is improved by making jobs more specialised. This might make us more productive, but it often also makes work shit. Specialisation means spending as much time as possible doing the same thing in the same way. Specialisation is death to autonomy and creativity.

Specialisation is also death to social purpose and leads to alienation from our work – something Karl Marx warned of in his critique of capitalism. Most of us are now so specialised that we don’t get to see the end product of our work. We probably don’t even know how the thing we make or service we provide ends up being used.Economists have also known this since Smith. Smith himself wrote that specialisation would make us more productive but also more stupid.

In the modern economy, the production of even the simplest product has many steps, spread across many countries. Production of a t-shirt involves growing, cutting, dyeing and sewing cotton. But it also involves the production of fertiliser to grow the cotton, the mining of metals to build machinery to process the cotton, the extraction of oil to power the ships that transport the cotton around the world, and many more such steps. The whole system is unfathomably complex. So your work could be socially useful, but how on Earth would you know if you don’t see the end product?

So why chase productivity? One reason is money. Productivity growth measures monetary value. This means that making money is the priority.

Productivity growth keeps us chasing the production of stuff we don’t need. Profit goes up when more stuff is sold. As William Morris, the famous designer and activist, put it, profits are maintained by the production of a “mountain of rubbish … things which everybody knows are of no use”.

Chasing productivity growth sends us down the alley of working to produce the things people can be convinced to buy, rather than the things we actually need. Why do you think we have a teaching crisis, and a care crisis, but not a marketing crisis, or a plastic flower crisis?

An endless treadmill

What’s more we’re caught in what the ecological economists Tim Jackson and Peter Victor call a “productivity trap”. If the economy becomes more productive, that means fewer people are needed to produce the same amount of stuff. Which is great, unless you’re one of the people who’s no longer needed.

For most people, as long as productivity growth happens, the only way they keep their jobs is if more stuff is produced. This is another way productivity growth creates a treadmill of production and consumption: keep buying the stuff you don’t need otherwise you’ll lose your job.

The endless treadmill of production and consumption is how the pursuit of productivity growth drives climate change. Chasing productivity growth means chasing continual expansion of production. All production requires energy. So chasing endless productivity growth means endless energy use.
This makes it very hard to decarbonise the economy.

Fossil fuels are very high quality sources of energy. There is reason to believe that it will be impossible to produce the amount of stuff we have right now, using only renewable energy. Even if it is possible, if we keep chasing productivity growth producing what we produce today won’t be enough. In the productivity trap, we don’t just need to produce the same, we have to produce more.

But suppose we stopped chasing productivity growth. What might happen?
It would make it easier to decarbonise. We’d no longer be stuck on the production-consumption treadmill. It would mean less stuff too. But do we need all the crap we have?

And although less productivity might mean less stuff overall, it could mean more of the really useful stuff. More nurses, more teachers, more care workers. If we stop chasing productivity, we’re freed up to chase the things that really matter, rather than the things that make money.

This would be the first step in moving from shit jobs to good jobs. Roll back specialisation. Free us to be creative and autonomous at work. Let’s work on problems we think are important, that contribute to our communities rather than generating sales. Let’s work in different areas doing different things.

Yes, we’ll be less efficient. But we’ll be happier, more useful and better able to tackle climate change.

 

 

 

The ‘Circular Economy’ to boost national productivity

When talking about productivity, most focus on labour productivity and seemingly ignore how well other costly input resources are used – hence the following article by Rémy Le Moigne, MD of Gate C, and published by Greenbiz, is most welcome

As businesses reopen, they face potential shortages of their own as well as an unprecedented economic meltdown. The European Union is expecting the deepest recession in its history while, in the United States, roughly one in four people who had jobs in February are now unemployed.

To rebuild the global economy, businesses need to rethink models and operational processes.

By keeping materials and products in use, and by designing out waste and pollution, a circular economy could help address both the short-term economic crisis and a persisting climate and ecological crisis. Using circular economy principles, businesses will be able to build more resilient supply chains, to reduce materials costs and create new customer value propositions while reducing their environmental impacts.

Build resilient supply chains

Over the years, to avoid environmental standards or save labor costs, global companies have moved their manufacturing facilities to emerging economies, creating extended and dispersed supply chains. Materials, components and products travel all over the world, sometimes senselessly – for example, codfish caught off Norway and traveling to China, from France, solely to be turned into fillets before returning to France to be sold.

Leveraging a sustained trade liberalization, a continued technological progress in transport and communication, and a massive vertical industrial specialisation, these global supply chains are very efficient – or were, until now – the COVID-19 pandemic has disrupted manufacturing in China, increased trade restrictions and grounded commercial flights, creating major shortages in the face of soaring demand.

To face this crisis and those to come, businesses will need to build more resilient supply chains – they will have to design supply chains that are probably shorter and more distributed, that reuse materials and components – they will need to move away from an intensive consumption of virgin materials and remotely manufactured components – they probably will have to establish, in the long run, new partnerships and non-traditional collaborations.

Reduce materials costs

Businesses have long focused on improving labour rather than material productivity.

In Germany, for instance, labour productivity increased 3.5 times between 1960 and 2000, while material productivity only doubled. Yet, material resources are finite and sometimes scarce.

Businesses have many opportunities to improve resource productivity and reduce their costs:

  • In Europe, for instance, the average office was at least 40% unoccupied during office hours and this percentage is likely to increase with the fast growth of teleworking/ WFH.
  • Chemicals used in industrial processes, such as solvents, often have a chemical yield of less than 50% – that is, half of the chemical becomes waste without being used once.

 

To develop resource-productive operations, many manufacturers have long used lean manufacturing methodology, mostly to minimise waste, but few have leveraged circular economy strategies such as managing industrial waste as a resource, using recycled materials or refurbishing industrial equipment.

That’s changing.
By using refurbished and upgraded medical equipment rather than new ones, hospitals are reducing costs and improving services – for example:
  • Philips has established a healthcare imaging systems refurbishment facility in the Netherlands. The facility takes back old CT scanners that hospitals have been using for nine to 10 years, gives the system a hardware and software update so the scanners work like new, and then sends them back to the hospital.
  • During the pandemic, hospitals used CT scanners that allow doctors to quickly take pictures of people’s lungs to help determine whether they have coronavirus. Leveraging a short supply chain, Philips has been able to refurbish customer scanners in only two weeks.

 

Improving material productivity will be especially critical for manufacturing firms that spend on average about 40 percent on materials. For them, closed-loop models could increase their profitability, while sheltering them from resource price fluctuations.

Design for durability to create new customer value propositions

Today, most producers make products that break down too quickly, cannot be easily reused, repaired or recycled, and many are made for single use only. They often have little incentive not to do so. But dramatic shifts in industry structure, customer expectations and demand patterns will change these incentives.

For customers, durable goods often offer a lower total cost of ownership as well as a lower environmental impact. For businesses, durable goods can help increase revenue from rental, repair and refurbishment as well as reduce costs of raw materials and energy.

Global supply chains are a major source of pollution, including air pollution, which accounts for 7 million deaths around the world every year. Air pollution can be caused by resource extraction (20 percent of health impacts from air pollution), shipping (400,000 deaths a year) or production of goods in China for Western countries (100,000 premature deaths). Therefore, after having shut down economies to save lives, returning to business-as-usual cannot be an option anymore.

Conclusions

Businesses should leverage a circular economy to not only create economic value, but also preserve resources, reduce carbon emissions and cut pollution.

Because today, resilience, sustainability and health matter.

Academics to boost productivity growth and level-up living standards

Here we go again – our leaders announce the supreme importance of productivity growth to the improvement and levelling up of UK living standards – then they have to be seen to be ‘doing something’ – so three years ago they set up a PLG (Productivity Leadership Group), but that has had no notable success – so, last year, they launched a  PIN (Productivity Insights Network) – and now, £37 million has been found to build on the PIN with a PI (Productivity Institute) believing academics from prestigious universities will be able to solve the UK’s persistent productivity puzzle

Read below the press release fanfare from the DBEIS (

A new institute in Manchester will boost ground-breaking research to explore how to increase productivity, boost wages and support the economic recovery across the UK backed by a £37 million investment, the government announced today (21 August 2020).

This new state-of-the-art Productivity Institute, based at the University of Manchester, will be supported by £32 million of government and industry funding to identify barriers to increase productivity levels across the UK following the coronavirus crisis.

From September, over 40 researchers from leading UK institutions are to work directly with policy makers and businesses to examine the UK’s productivity levels and the issues that impact productivity, such as working from home, workers’ well-being and lack of diversity in the workplace to identify key policies that could be implemented to unlock growth and deliver jobs.

Areas of research could involve understanding the supply and demand for labour and skills across regions and sectors, looking at how companies can implement new technologies and efficient processes to increase competition, improve working conditions, and accelerate the transition to a low carbon economy to future-proof industry and lower prices for consumers.

It comes alongside a new £5 million research programme at the London School of Economics (LSE) to accompany the Institute, which will identify ways that the UK’s most innovative products and services can be distributed more evenly across each sector of the economy to increase productivity.

Science Minister Amanda Solloway said:

  • Improving productivity is central to driving forward our long-term economic recovery and ensuring that we level up wages and living standards across every part of the UK.
  • The new Productivity Institute and LSE’s innovative research will bring together the very best of our researchers, boosting our understanding of the different drivers of productivity and helping people and businesses earn more in every area of our economy.

 

Led by esteemed economist Professor Bart van Ark of the Alliance Manchester Business School, the Productivity Institute will seek to identify solutions that address imbalances in productivity between sectors and regions, as well as improving management practices:

  • The institute will include eight partner institutions across the country: University of Sheffield, University of Glasgow, University of Cambridge, King’s College London, Queen’s University Belfast, Cardiff University, University of Warwick, and the National Institute of Economic and Social Research (NIESR).
  • It will include over 40 co-investigators who are world-renowned experts in their fields, including Professor Anthony Venables of the University of Oxford, Professor Philip McCann of the University of Sheffield, and Professor Diane Coyle of the University of Cambridge.
  • It  also complements the ESRC’s existing investments in the Productivity Insights Network, the Enterprise Research Centre, the What Works Centre for Local Economic Growth, and the Productivity Outcomes of Workplace Practice, Engagement and Learning (PrOPEL) Hub, a multi-disciplinary hub at Strathclyde Business School. (none of which I’ve ever heard of apart from PIN)

 

Economic and Social Research Council (ESRC) Executive Chair, Professor Jennifer Rubin, said:

  • The Institute at Manchester and the LSE research programme address what is arguably the UK’s biggest economic challenge.
  • This funding represents the largest economic and social research investment ever in the UK, befitting its enormous potential to improve lives for millions of people.
  • The aim is to ensure that advances in knowledge inform the significant decisions and interventions that policy makers, businesses and individuals must make to improve productivity, and to achieve the attendant improvements in wages and living conditions that doing so can drive.

 

Professor Dame Nancy Rothwell, President and Vice-chancellor of the University of Manchester, said:

  • This is a landmark investment by the government.
  • It demonstrates how serious the government is about solving the UK’s productivity puzzle and importantly, it signals a commitment to help create an economy that works for everyone, with growth that is sustainable, inclusive and regionally distributed.
  • We are proud to lead a group of some of the UK’s most prestigious institutions to tackle what is perhaps the greatest economic challenge of our times and to do so from our region, with its rich heritage in productive growth.

 

Professor van Ark of the Alliance Manchester Business School said:

  • For many years the UK has grappled with how to create better jobs and boost productivity, thereby increasing people’s prosperity around the country.
  • The COVID-19 recession makes it time for a fresh look at these challenges.
  • If we are to reboot the economy, we need jobs that create high value, use economic and natural resources efficiently, and drive sustained growth through technological change and innovation.
  • Productive jobs will pay more and improve people’s well-being.
  • Working closely with businesses, policymakers and other stakeholders across the nation and sharing insights with other countries, we aim through our research and engagement to develop practices and policies to encourage more productive and inclusive growth across the UK.

 

The new Programme on Innovation and Diffusion (POID) at the London School of Economics (LSE) will be led by world-leading economist Professor John Van Reenen.

The Programme will work to identify ways in which the UK’s most innovative products, services and technologies can be distributed more evenly across the economy to industries that have been slower to adopt modern practices that will help increase productivity.

So greater prosperity and equality is nigh at long last – the academic cavalry are coming to the rescue of UK productivity improvement – managers who actually work on the productivity front-line, continually adapting to market and technological changes, deciding where best to act, taking effective action and monitoring results, can go take a back seat – panaceas are on their way – meantime, move over all the major management consultancies, business schools and CBI whom you might expect to focus on productivity improvement but don’t – as for the guys who have long-term pressed for a properly funded UK Productivity Centre, manned by front-line people from all sides of business who have practical experience of ‘what works’ and what does not – they might as well go WFH (Weep From Home?)

COVID brings productivity into sharp focus

An article follows which was published by the ICAEW – Institute of Chartered Accountants in England and Wales – it helps explain what the strangely named ‘Be the Business’ organisation is actually doing to improve UK SME productivity levels – after three years of trying, maybe COVID can explain their lack of any quantified success (that they publish) to date

If we can restart the economy with the productivity gap in mind, we can recover stronger, according to Be the Business Director of Programmes, Louise Sunderland.

The UK was already flagging on the productivity front way before COVID struck, and was the primary reason why Be the Business was set up: to deliver training and mentoring in this area.

Sunderland is the Director of Programmes for Be the Business, a charity sponsored by BEIS as an independent organisation to support companies and their boards reach their full potential. She took up the role a matter of weeks before the pandemic struck. Her brief is to oversee all programmes to do with leadership, management and tech adoption, having done something similar for KPMG.

Be the Business was established three years ago off the back of a UK Commission led by Sir Charlie Mayfield, on productivity – which has been in decline in the UK for more than a decade and will now, of course, be severely impacted by COVID.

“Our core focus is all around improving productivity in SMEs,” says Sunderland. “Since COVID, we have refocused our attention to be on recovery and restart for SMEs. There are a number of things we have now put in place to do so, largely around leadership and management capability, and the adoption of technology.”

So, what is the desired outcome for the charity? “At a macro level, there is the desire to enhance productivity and for that GVA [gross value added] and GDP [gross domestic product] are the core measures,” she responds. “But fundamentally, we care about businesses and we are looking for changing behaviour within SMEs with the ultimate aim of improving businesses.”

She continues: “We work very closely with business, both in terms of (our) product development to make sure what we are doing meets clients’ needs, and in terms of creating SME ambassadors who bring the voice of our customers into everything that we do. This helps us keep our programmes relevant and make sure we understand the challenges they are facing on a day-to-day basis.”

In essence, Be the Business looks for improvement within clients’ businesses. “If someone comes onto one of our training courses, or they undertake to make a change within their business, we are looking at the change this brings and at the impact that change has had. We look to see whether it has increased revenue, made a difference to production and perhaps even whether the senior management has been able to spend more time at home,” she says.

Be the Business’s model is based on working in partnership. It has put in place a regional strategy and, through it, works with local support organisations such as Chambers of Commerce and Local Enterprise Partnerships to deliver its programmes. It also works very closely with client companies. “Creating the right network is vital. It gives us reach,” says Sunderland.

Commenting on owner-managed businesses and the myriad imperatives that drive them, Sunderland says: “If you look at it through the government lens, the government has predominantly focused on growth. But many business owners, managers and senior leaders often think that the business is doing OK or they don’t have the aspiration to grow.”

She continues: “But if you look at the situation from the point of view of being more effective and more competitive, that is something else. We try to help businesses understand that by making a small change in their businesses, that can have a fundamental impact on their turnover, but it has little impact on them as individuals in terms of committing more time and resources.”

Be the Business’s Rebuild platform is an example of the help that is on offer in the COVID environment, but there are all sorts of offers to suit different circumstances. “We have a portfolio of offers for both the individuals and the businesses,” she says.

“The right offer depends on the maturity of the businesses. In terms of leadership and management training, we go from providing peer-to-peer networks, to action learning sets, to a master class, to a mini MBA,” she says. “We also signpost to wider resources available from elsewhere.”

Clearly, face-to-face activity has receded in the light of COVID and training/mentoring is being delivered online. A reasonable online presence prior to COVID has certainly assisted the transition. The organisation’s recently rebuilt site is a case in point but there has also been a Facebook campaign amongst other resources.

“People access information in different ways, so we have created multi-media assets for a lot of the programmes being delivered so we serve up support differently to different clients to make sure it is accessible for all,” she says.

Largely, Be the Business is sector agnostic but there are some specific sectors that have come into focus such as technology, construction and hospitality – especially in the light of recent events. Leisure and retail will also be on the radar going forward.

When Sunderland came into this role, the issue was very much productivity. Now, lots of companies are focused on survival, but the productivity challenge has not gone away, she says. The crisis has given Be the Business the opportunity to focus further on the issues. Sunderland points out that technology has been brought further into business processes, innovation is being forced and decisions are having to be made because of the crisis.

“People are needing support more than ever,” she says. “They are truly accessing support service. The appetite is there.”

She continues: “If we can restart the economy with the productivity gap in mind, we can recover stronger, with better skills and the opportunity to accelerate tech adoption. Productivity has to be embedded in restart. Not every business in every sector will be in the same place. Some have hibernated, others have battled through and some will need to be restructured or may fail. Be the Business and other support mechanisms are there to catch them.”

So, with Louise and ‘B the B’ refocused on ‘changing behaviour’ to achieve the productivity recovery needed, and armed with a regional strategy, SME ambassadors and training courses on leadership and management – what could possibly go wrong? It reminds one of the early evangelical claims made for TQM in the 80’s, and we all know how successful that was! 

How much does bad management really cost the UK?

By Kristy Dorsey, Business Correspondent, writing in The Herald, has spotted that middle management inadequacies explain much of the ‘productivity puzzle’ before CV-19 struck, and most of them remain in their jobs

Would you hire a solicitor who had never been to law school, or take your car to a mechanic who had no automotive training? How about a visit to a doctor who hasn’t been to medical school?

Of course not.
And yet here in the UK, there are literally millions of people undertaking the dynamic and complicated task of management who have been given absolutely no guidance as to what they should be doing.
Known as the “accidental managers”, they’ve been promoted to mid-ranking positions on the mistaken assumption that being good at a certain job – engineering, let’s say – makes them capable of running a team of engineers. The unfortunate truth is that too many find themselves out of their depth. And taking pot shots at hapless middle managers is a much-loved pastime, as proven by the enduring cult popularity of programmes like ‘The Office’. David Brent makes us wince and guffaw in equal measure, but the true cost of weak middle management is no laughing matter.

Even before Covid-19 started wreaking turmoil, there were serious question marks over the UK’s economic performance. Much was rightly attributed to uncertainty around Brexit, and knock-on effects from the first december General Election to be held in the UK in nearly 100 years. But there’s a further key economic indicator – productivity – which has been a persistent headache dating back much further than the first inklings of a split between Britain and Europe.

Productivity – the output generated by each hour of work – is important because it determines living standards. The more efficient an economy is, the more that can be produced in a sustainable fashion. And the more productive an employee is, the more he or she is likely to be paid.

Historically, UK productivity has grown by about 2% per year, but this has stagnated since the 2008 financial crisis. Referred to as the “productivity puzzle”, this slowdown in UK growth during the past decade is the worst since the start of the Industrial Revolution, and has left economists casting about to identify its origins.

One group of culprits is the 2.4 million accidental managers currently operating in Britain, whose poor operational skills are costing employers approximately £84 billion a year, according to the OECD – Organisation for Economic Co-operation and Development.

Some surveys have suggested that with the right training, these wayward line managers could be up to one-third more productive. Similarly, a study in 2018 by the ONS – Office for National Statistics – found that improving a company’s management prowess score (defined how???) by a mere 0.1% would lead to a near-10% increase in productivity.

Almost anyone can learn to be an effective leader, if they are willing to try. (Really?) Unfortunately, very few organisations in the UK seem prepared to invest in this at middle-management level – one study found 71% of firms don’t provide any sort of training for first-line managers. (Proof indeed)

This failure is to a large extent due to expediency and cost.

Managing people is a complicated skill, and learning it is not a short process. A one- or two-day course is the equivalent of dipping a toe in the water, especially as the focus increasingly shifts towards “soft skills” such as listening, collaboration, and heightened emotional intelligence. (Tad counter-intuitive to the above?)

But here’s where we get to the brutal facts (at last): there are some people who simply aren’t capable of learning how to be an effective manager, and will actively resist any efforts towards improving on that front.

A study from (the well-known?) Binghampton University in the United States identified two types of bad line managers: the “dark” and the “dysfunctional”:

  • Researchers described dark bosses as having narcissistic and psychopathic traits – folk who exhibit destructive behaviours and hurt other people for their own gain. Think of those managers who bluster, badger, reject all new ideas and take credit for other people’s work.
  • They described dysfunctional managers as “relatively harmless”; in other words, just not very good at their job.
  • The Binghampton researchers really should have added a third category: the hybrid dark/dysfunctional model. They are thankfully rare, but those who have been unfortunate enough to work for this kind of boss know the extent and speed of the destruction that a dark dysfunctional can unleash.

 

The evidence is clear that the leadership qualities of a poor manager exert a heavy toll on employees’ health. Those who work for a bad boss have a greater risk of high blood pressure, chronic stress, clinical depression, anxiety, sleeping disorders, and a host of other health problems. Under such conditions, it is obviously impossible for people to perform at their best.

Dysfunctional bosses may be less intimidating than their dark counterparts, but they too come at significant cost.

Waffling managers (as against business correspondents) fail to provide clarity for their team, which translates into wasted effort as work must be repeatedly revised to meet an unspecified target.

These are the bosses that are quick to say “that’s not what I wanted”, yet struggle to convey what it is they’re actually after.

If a bus driver, chef or salesperson was bad at their job, they would most likely be offered training to up their performance. If there was no improvement, then they’d be out of work.

Yet not only do we put unskilled managers into the role, but we also keep them there, even when we know they’re bad at their job. In any rational context, this would be viewed as corporate suicide.

Put it this way: at £84bn annually, the cost of lost productivity through poor management is £9bn more than the Institute for Fiscal Studies has estimated could be lost every year by 2030 if the UK leaves the EU single market.

When the current health crisis abates, the road to recovery in the post-Brexit era will be far easier travelled if we successfully crack the UK’s productivity conundrum.

Kristy’s solution?

It’s time to get training to the many middle managers who need it, and get rid of those who won’t – or can’t – up their game.

Sorted

 

The Occam’s Razor Of Productivity

Good practical sense from Professor Jim Woods in stockinvestor.com for all busy executives out there – and stock investors too

Want to achieve more in life? Of course, you do. Yet for most of us, the idea of achieving more comes with the corollary notion that we are going to have to do a lot more, put in more hours, work harder and generally take on more and more tasks and responsibilities.

Yet what if doing less could allow you to achieve more? Now, when I say, “doing less,” I am not talking about slacking off and just letting fate’s wind sail you across life’s lake. What I am referring to here is taking on fewer overall tasks and really concentrating on getting the critical things in life right.

Another way to describe this principle in action is to hone your focus on the most important tasks at hand, and thereby become a “master of selectivity.” You see, it is by concentrating your efforts on the most important priorities needed to achieve your goals, and letting go of extraneous and often distracting tasks, that you can enhance your performance in business and in life.

This idea of mastering selectivity and prioritizing tasks was the subject of a Wall Street Journal article titled, “How to Succeed in Business? Do Less,” by Morten Hansen, former management consultant and now professor of management at the University of California, Berkeley.

In the article, Hansen explained how his strategy for success at his “dream job” at Boston Consulting Group was to work exorbitant hours, a practice which he said often resulted in 90-hour workweeks. Yet despite all his time and hard work, there was one colleague he had that put in far fewer hours, yet always had better solutions to problems than he did. Moreover, this co-worker put in a normal 8 a.m. to 6 p.m. day, never stayed late and never worked nights or weekends.

So, was this outperforming co-worker just that much smarter and talented than Hansen (as well as the rest of his colleagues)?

What Hansen discovered later in his academic research is it’s not a case of “talent” or “natural ability” or the willingness to “work hard” that can result in successful outcomes. Rather, researchers have found that what is even more important to success is the ability to master selectivity.

“Whenever they [top performers] could, they carefully selected which priorities, tasks, meetings, customers, ideas or steps to undertake and which to let go,” wrote Hansen. “They then applied intense, targeted effort on those few priorities in order to excel.”

Hansen’s research also found that just a select few critical work practices accounted for as much as two-thirds of the variation in performance among the subjects in a 2011 research study. “Talent, effort and luck undoubtedly mattered as well, but not nearly as much,” wrote Hansen.

So, how did the best performers in his study do this?

According to Hansen, “Rather than simply piling on more hours, tasks or assignments, they cut back.” Hansen then likened this ability to cut back and focus on what really makes the most difference to the philosophical principle known as Occam’s Razor (aka the law of parsimony – entities should not be multiplied without necessity). Named after the English philosopher and theologian William of Ockham, this principle stipulates that the best explanation in matters of philosophy, science and other areas is usually the simplest. (Why razor? For shaving away the unnecessary)

“At work, this principle means that we should seek the simplest solutions — that is, the fewest steps in a process, fewest meetings, fewest metrics, fewest goals and so on, while retaining what is truly necessary to do a great job,” wrote Hansen. “I usually put it this way: As few as you can, as many as you must.”

I like to apply this principle to my own life via something called the “minimum effective dose.” What this means is you want to concentrate on doing the things that have the most impact on your results, and that have the fewest extraneous elements and/or time commitments.

For example, in the realm of fitness, I engage in what’s known as high-intensity training, or HIT (Jim, is the acronym really necessary?) to get the best strength and conditioning results in the briefest period of time, and in the safest, most efficient manner.

And when investing and selecting top-performing companies for my Successful InvestingIntelligence Report and Bullseye Stock Trader newsletter advisory services, I concentrate on finding stocks with the strongest earnings, strongest relative share-price performance and stocks that are in the strongest industry groups. By focusing on these key components and filtering out much of the “noise” of extraneous data, I am better able to make good investment choices.

Finally, the principle of focusing more on less, i.e. focusing your effort on the most critical elements of a task or objective rather than becoming sidetracked by the superfluous, is something we can all apply to nearly every part of our lives. (It’s what others call ‘cutting waste’)

So, if you want to achieve success in any walk of life, focus on the critical elements — and then get them right. Once you do that, you’ll often find the rest tends to fall into place.

Are You Leading Through the Crisis … or Managing the Response?

A thoughtful article in the Harvard Business Review by Eric McNulty and Leonard Marcus which our current leaders might do well to note

The coronavirus crisis, like every crisis, is unfolding over an arc of time with a beginning, middle, and end. It is useful to think what distinguishes what wasis, and will be. There was a past of relative stability and predictability. There now is chaos and disruption. There will be … a different state. As this future unfolds, some organizations will be resilient. For others, this future will be catastrophic. The actions of executives and their teams now, in the midst of this crisis, will significantly determine their fate.

Crises, replete with both complexity and change, require executives to both lead and manage effectively. Addressing the urgent needs of the present is the work of management. You need to make immediate choices and allocate resources. The pace is fast, and actions are decisive.

Leading, by contrast, involves guiding people to the best possible eventual outcome over this arc of time. Your focus needs to be on what is likely to come next and readying to meet it. That means seeing beyond the immediate to anticipate the next three, four, or five obstacles.

For nearly two decades, we’ve researched and observed public and private-sector executives in high-stakes, high-pressure situations. What we’ve learned is that crises are most often over-managed and under-led. The best leaders navigate rough waters deftly, saving lives, energizing organizations, and inspiring communities. However, we’ve found that many leaders fall into one or more of the following leadership traps:

1. Taking a Narrow View

The human brain is programmed to narrow its focus in the face of a threat. It’s an evolutionary survival mechanism designed for self-protection. The trap is that your field of vision becomes restricted to the immediate foreground.

Leaders need to intentionally pull back, opening your mental aperture to take in the mid-ground and background. It is what we call meta-leadership — taking a broad, holistic view of both challenges and opportunities. Properly focused meta-leadership fosters well-directed management.

U.S. Coast Guard Rear Admiral Peter Neffenger (Ret.) was deputy national incident commander during the Deepwater Horizon oil spill. We were with him during that event and distilled his insights into a situation connectivity map — a visual representation of the many situations unfolding around the spill. They included legal issues, political fallout, business continuity concerns, the economic and social health of affected communities, environmental impact, inter-agency coordination among responders, and more.

With this wider view, Neffenger discovered that his most pressing job was not managing the response to the spill itself — it was leading through the thicket of political implications consuming federal, state, and local officials. His efforts helped create space and top cover for the operators on the ground and water to succeed.

2. Getting Seduced by Managing

For leaders who have risen up through an organization or in a single industry, managing a crisis can feel thrilling. The trap is that you’re often returning to your operational comfort zone. Your adrenaline spikes as decisions are made and actions are taken. You experience a feeling of adding tangible value. However, it is like a sugar high that is quickly followed by a crash.

Leading through a crisis requires taking the long view, as opposed to managing the present. You need to anticipate what comes next week, next month, and even next year in order to prepare the organization for the changes ahead. You need to delegate and trust your people as they make tough decisions, providing proper support and guidance based on your experience while resisting the temptation to take over.

Knowing that a crisis can emerge at any moment, organizations in high-risk industries, such as energy and aviation, have robust health, safety, security, and environment (HSSE) functions to manage crises. When senior executives have deep trust in those in the HSSE function, they can focus their efforts on what’s necessary to emerge from the crisis stronger than before. When they do not, they micro-manage the response, disrupting the operating rhythm of the response managers, and subverting their own desires for a positive result.

3. Over-centralizing the Response

Risk and ambiguity increase during a crisis because so much is uncertain and volatile. The trap for leaders is trying to control everything. Suddenly, you’ve created new layers of approval for minor decisions. The organization becomes less responsive and frustration grows with each new constraint.

The solution is to seek order rather than control. Order means that people know what is expected of them and what they can expect of others. Leaders must acknowledge that you can’t control everything. Determine which decisions only you can make and delegate the rest. Establish clear guiding values and principles while foregoing the temptation to do everything yourself.

The response to the Boston Marathon bombings was the most collaborative and synchronous we’ve studied. Among our findings was the wise leadership taken by then-Governor Deval Patrick. As he and others told us, he most often would enter the command center asking how he could be useful, rather than telling people what to do. He was clear that the FBI was in charge of the investigation, the mayor of Boston wanted to “run his streets,” and that the professionals in the many organizations involved were best suited to make most moment-by-moment calls.

Where Patrick realized he could contribute the most was as a communicator — giving people hope for the future as the public face of government and serving as a trusted intermediary with the White House. He also spearheaded efforts to ensure that Massachusetts’ communities had the support to be resilient through significant adversity.

4. Forgetting the Human Factors

While it may seem obvious, crises are crises because they affect people. However, leaders can instead become trapped by focusing on the daily metrics of share price, revenue, and costs. These are important, but they are the outcome of the coordinated efforts of people. Organizations exist in order to accomplish together things that individuals cannot do alone.

The solution is to unite people in their efforts and goals as valued members of a cohesive team. This starts with a common, clearly articulated mission that infuses the work with purpose. The mission is then animated through an inclusive leadership approach where each person understands how they can contribute—and that their contribution is recognized. This gives deeper meaning to even the most menial tasks.

James “Jimmy” Dunne was one of three managing partners of the investment bank, Sandler O’Neill (now Piper Sandler). Their offices were in the World Trade Center on 9/11. The firm lost 40% of its personnel in that attack, including the other two partners. Dunne told us that the firm’s survival became his personal mission because he wanted to deny the terrorists a victory.

Dunne visualized his mission, looking at his two hands: In one hand, he held his business concerns; in the other was taking care of Sandler O’Neill’s people and their families. He said that the more he led on the people issues —personally attending funerals, continuing salaries and benefits, and other efforts — the more the business issues seemed to take care of themselves. Dunne created an environment in which people were collectively motivated to contribute to their shared success.

***

Imagine leading and managing as two circles in a Venn diagram. At the moment crisis strikes, the two circles largely overlap. As the event unfolds over the arc of time, the two activities move apart. The two circles are never fully separate because the present and the future are interdependent.  The most effective leaders in crises ensure that someone else is managing the present well while focusing their attention on leading beyond the crisis toward a more promising future.

Are office clusters as crucial to productivity as they once were?

More grist for the pandemic mill from Paul Ormerod writing for cityam.com

 

The Prime Minister is now demanding that offices reopen to revive economic activity in the centres of towns and cities.

But there is not yet much sign of a return to work.

The preferences of the workforce are an important factor in the very slow pace of return.  Fears expressed about the safety of public transport may or may not be genuine, but it is certainly true that many prefer to avoid the time spent commuting and enjoy the extra leisure time this brings.

But why do offices cluster together in urban centres anyway?

It is easy to see that in the old days industries such as steel and coal clustered geographically. One was a key supplier of the other. Being near at hand minimised transport costs.

Today’s offices span a wide range of diverse industries, from consulting to law to oil companies. The reasons why they locate in close proximity are more subtle.

The views of economists on this are still shaped by the writings of Alfred Marshall. He established the faculty of economics at Cambridge in 1903 and was then probably the world’s leading economist.

Marshall described the tendency of businesses to cluster near each other as “agglomeration”. He gave three key reasons why this colocation is observed. In addition to the savings on the costs of transporting the materials needed in industrial processes, Marshall developed a theory of labour market pooling, in which firms located near one another can share labour. Further, he believed that “intellectual spillovers” were important. Firms locate near each other in order to learn and speed up the process of innovation. Think of Silicon Valley, formed nearly a century after Marshall wrote.
A large number of detailed studies in recent decades confirm that these are not just mere theories. They have strong empirical support –  The Harvard economist Ed Glaeser, for example calculated that in the US in the 2000s each of Marshall’s three reasons were of roughly equal importance.

There have been very distinct benefits to agglomeration. Throughout the developed world, the greater the density of employment in an area, the higher is its productivity. Head offices contain more highly skilled staff and so will be more productive than the average. But in city centres, their productivity is even higher than their skill levels suggest they should be.

Has Covid-19 changed all this? Or more specifically, has the crisis enabled people to see that new technology could overturn two centuries of experience in urban centres in industrialised countries?

Certainly, tech platforms such as LinkedIn offer the potential for efficient hiring of relevant skills and for employees to discover opportunities through their networks. But new recruits need to be integrated. And younger people probably still need a combination of social and remote interaction to develop their own professional networks.

It is less clear that remote working can encourage innovation in the same way. Much of the informal contacts needed for this cannot be captured by video conferences.

Yes, there will be an increase in working from home.

But Marshall’s insights into the benefits of agglomeration still hold true.

How Fed Policy Is Wrecking the Economy

Of all known government interventions in the U.S. economy, the most insidious and dangerous is regulation of the price of money (interest rates).

Years of Federal Reserve Bank monetary stimulus and quantitative easing, promulgated for the purpose of easing or avoiding a recession, is wrecking the U.S. economy in ways that are only dimly understood.

In the most important essay you can read this month — perhaps this year — Ruchir Sharma, chief global strategist for Morgan Stanley Investment Management, shines light on the problem in a Wall Street Journal op-ed, “The Rescues Ruining Capitalism.”

The op-ed is must reading for anyone who seeks to understand the direction of the national economy

 

Here follows Sharma’s key points;

  • A growing body of research shows that constant government stimulus has been a major contributor to many of modern capitalism’s most glaring ills.
  • Easy money fuels the rise of giant firms and, along with crisis bailouts, keeps alive heavily indebted “zombie” firms at the expense of startups, which typically drive innovation.
  • All of this leads to low productivity — the prime contributor to the slowdown in economic growth and a shrinking of the pie for everyone.
  • At the same time, easy money has juiced up the value of stocks, bonds and other financial assets, which benefits mainly the rich, inflaming social resentment over growing inequalities in income and wealth. …
  • The rising culture of government dependence is, in fact, a form of socialism — for the rich and powerful. …
  • In 2008 the Treasury stepped in to save an entire sector — banks at the core of the mortgage crisis — with $200 billion.
  • Unable to do much more to cut rates, which were already close to zero, the Fed launched its first experiments in “quantitative easing,” buying up tens of billions of dollars in assets each day, including mortgage-backed securities, to calm the credit markets.
  • The rest of the world followed the Fed. …
  • In the 2010s, as easy money continued to flow from central banks, the global economy staged a recovery that was unusual for its length but also for its frustratingly slow pace of growth and for how few nations were allowed to suffer a moment’s pain. …
  • As governments stepped in to do whatever it took to eliminate recessions, downturns no longer purged the economy of inefficient companies, and recoveries have proven weaker and weaker, with lower productivity growth. …
  • After the global financial crisis of 2008, households and financial firms in many capitalist countries felt pressure to restrain their borrowing.
  • Governments did not.
  • The world’s total debt burden plateaued at a historic high of 320% of global GDP by the end of 2018, but within that total, government debt rose most rapidly. …
  • The idea of government as the balm for all crises is appealing in the short term, but it ignores the unintended consequences.
  • Without entrepreneurial risk and creative destruction, capitalism doesn’t work. 
  • Disruption and regeneration, the heart of the system, grind to a halt – deadwood never falls from the tree – green shoots are nipped in the bud.
  • Low rates give big companies a strategic incentive to grow even bigger, in large part because securing a dominant position in the market promises outsize financial rewards.

 

Here I would interject to mention a book by French economist Thomas Philippon, “The Great Reversal: How America Gave Up on Free Markets,” which documents this very trend.

His thesis is that over the past 20 years or so, American industries are increasingly dominated by fewer, larger corporations that exercise greater market power. Reduced competition leads to slower productivity growth, less innovation, and greater inequality of wealth.

Now, back to our regularly scheduled programming…

  • As the large grew increasingly entrenched, they sucked up talent and resources, crowding out the little guys.
  • Startups represent a declining share of all companies in the U.S. and many other industrialized economies. 
  • Before the pandemic, the U.S. was generating startups — and shutting down established companies — at the slowest rates since at least the 1970s.
  • The number of publicly traded U.S. companies had fallen by nearly half, to around 4,400, since the peak in 1996.
  • And many of them started running up massive debts, in part as a desperate effort to grow in the shadow of the giants.
  • Today an astonishing number of the survivors are, quite literally, creatures of credit.
  • In the 1980s, only 2% of publicly traded companies in the U.S. were considered “Zombies,” a term used by the Bank for International Settlements (BIS) for companies that, over the previous three years, had not earned enough profit to make even the interest payments on their debt.
  • The zombie minority started to grow rapidly in the early 2000s, and by the eve of the pandemic accounted  for 19% of U.S.-listed companies. …
  • With every crisis, more of these creatures of debt survive. …
  • Each new U.S. recession has been met with more bailouts and easy money, leading to a lower rate of corporate defaults.
  • Over the last 20 years, the falling default rate has also closely mirrored the slowdown in U.S. productivity. …
  • “Zombie congestion” in any industry lowers the productivity of rival companies — and blocks the entry of new companies — by raising labor costs and making it difficult to attract capital. …
  • The question is how much further capitalism will be deformed by government intervention on this scale.
  • When government is willing to buy just about anything, it distorts market prices, which normally guide people to buy into profitable, promising companies.
  • Now investors are simply buying what the Fed buys.
  • The process of competitive capital allocation, which is critical to raising productivity, has broken down. …
  • Governments need to recognize that constant intervention to prop up the economy and financial markets is not achieving its intended purpose.
  • After 2008, the Fed and the Treasury were praised to the moon for “saving the world,” but the Fed’s “experimental” forays into quantitative easy continued long after the crisis was over. …
  • Its interventions are doing more to boost the stock market than the real economy. …
  • Easy money is … inflating stock and bond prices, encouraging inefficient firms to take on more debt, and seeding financial instability.

 

Unless the Fed drastically shifts course — at the expense of considerable pain, analogous to the sharp “Volker recession” that broke the back of inflation in the 1970s and early ’80s — the United States can look forward to increasingly concentrated industries dominated by fewer big companies, more debt-ridden zombie companies, lower productivity growth, less innovation, slower wage growth, and a host of other ills.

Sadly there is no sign that America’s political class — much less our president, who has agitated for more cheap, easy  money — is remotely aware of the damage that Fed policy is doing to the economy.

Without such awareness, there is zero chance of that policy changing.

 

How to reverse the productivity slowdown

Thought-provoking views follow from Alistair Dieppe,  Lead Economist in the Development Prospects Group at the World Bank – he considers how global economies got to their current low point, and then ventures some broad solutions, but one has to question who will act on them and be able to make the big quantifiable productivity improvements needed by people everywhere, especially the poverty-stricken

 

There has been a broad-based slowdown in labor productivity growth since the 2007-09 global financial crisis that is likely to be compounded by the effects of the recession triggered by the COVID-19 pandemic.

The pandemic may leave lasting economic scars through multiple channels, including lower investment, erosion of human capital due to job destruction and loss of schooling, and a retreat from global trade and supply linkages. These setbacks are likely to further delay convergence of emerging market and developing economies (EMDEs) to advanced economy productivity levels and will have profound, and worrisome, implications for poverty alleviation efforts.

To rekindle productivity growth, a comprehensive broad-based approach will be necessary (and there’s the rub).

First, consider the facts

 

1. The productivity slowdown since the 2007-2009 crisis has been steep and prolonged

The COVID-19 pandemic has plunged the global economy into its deepest recession since the Second World War – (some say it’s the worst for 300 years)

This follows the steepest, longest, and broadest multi-year slowdown in labor productivity following the 2007-09 global financial crisis.

Since the global financial crisis, improvements in many key correlates (a new one on me) of productivity growth have slowed or gone into reverse

Overall:

  • Working-age population growth has decelerated
  • Educational attainment has stabilized
  • The pace of expansion into more diverse and complex forms of production has lost momentum as the growth of global value chains has stalled.

At the sectoral level:

  • Labor reallocation to more productive sectors from less productive ones has also weakened since the global financial crisis
  • Mobility restrictions due to COVID-19 may slow the reallocation of workers to higher-productivity firms from lower-productivity ones
  • Steep income losses and disruptions to education could cause an erosion of human capital.

 

3. COVID-19 is only the latest in a series of shocks that have dampened productivity
Over the past decade, the global economy has been buffeted by a series of shocks of which COVID-19 is only the latest.

Natural disasters, wars, and major economic disruptions such as financial crises and deep recessions tend to be accompanied by declines in labor productivity.

(En passant, one has to wonder how well prepared we are for the next pandemic – including one maybe caused by some nutter having noted the global scale of the financial and human chaos an invisible, unknown, virulent germ can cause)

 

4. Effects of COVID-19 on productivity will likely be drawn out

In addition to the health crisis, the uncertainty about the duration of the COVID-19 pandemic will weigh on investment and hinder trade and foreign direct investment.

Previous epidemics left lasting scars on labor productivity (causing a 4% cumulative decline after three years).

COVID-19 will likely compound the erosion caused by an undercurrent of weakening fundamental drivers of productivity growth.

 

5. The productivity gap between developing and advanced economies may be harder to narrow

  • The pace of convergence of EMDEs has slowed since the global financial crisis.
  • Output per worker in EMDEs remains less than one-fifth of that in advanced economies on average.
  • In low-income countries (LICs), the corresponding figure is just one-fiftieth.

 

EMDEs with a strong foundation of education provision, institutional strength, and more diverse production structures have had relatively faster convergence to advanced-economy productivity levels.

However, countries seeking to replicate earlier successes, or continue along rapid convergence paths, face a range of headwinds, including a more challenging environment to gain market share in manufacturing production as well as to deepen global value chain integration.

 

6. Deceleration of Productivity Growth Will Impede Development Goals

The likely adverse impact of the pandemic on productivity is of concern because labor productivity growth is the main source of lasting per capita income growth, which is in turn the primary driver of poverty reduction.

The broad-based productivity growth slowdown is likely to impede progress toward development goals, and the global recession triggered by COVID-19 may amplify many of these headwinds.

 

7. Policies can boost productivity

To rekindle productivity growth, a comprehensive approach is necessary:

  • To facilitate investment in physical and human capital
  • To encourage reallocation of resources toward more productive sectors and enterprises
  • To foster firm capabilities to reinvigorate technology adoption and innovation.

 

The pandemic may encourage the adoption of new technologies and accelerate the automation of production. However, polices are needed to ensure these productivity gains are evenly distributed.

In addition, steps are needed to limit the damage of adverse events:

  • Countries with ample fiscal space and transparent governance are better able to provide reconstruction effects, and to use it efficiently and in a timely manner as well as to support vulnerable sectors with policies that can boost long-term productivity growth
  • Well-designed policies and regulations concerning the prudent management of financial institutions, construction, and environmental protection can help reduce the likelihood and impact of adverse shocks.

How a Fully Distributed Company Keeps Its Team Engaged

Mullenweg lives in Houston while overseeing a fully distributed team of about 1,100 employees operating in 77 cities around the world.

During a Real Talk Business Reboot webinar on Wednesday, Mullenweg told Inc. editor-at-large Tom Foster that any person, or company, can adjust to post-office-life if they try – “It can work for everyone, but I’ve seen people give up before they’re there,” he said.

Working outside of the office, Mullenweg explained, has “an incredible impact on the individuals,” and ultimately empowers them to lead richer lives. “That leads them to be able to bring more creativity to the work.”
Here are more takeaways from their conversation:

Beware “false proxies.”

Asked how businesses can track the productivity of employees working from home, Mullenweg noted that even in the office “measuring productivity is actually really, really hard.”

“It’s way easier to slack off in the office as opposed to home,” he continued. “When you’re working from home, and all your colleagues are seeing are the results of your work, if you don’t do the work, it’s very obvious.”

Mullenweg considers certain habits employees may use to signal hard work in a traditional office environment – showing up early and staying late, for example – as “false proxies,” saying that “where you work and how you work don’t really matter.”

The most important thing: “Can you create something great in an amount of time?”

Make meetings worth the time.

While most meetings aren’t great, Mullenweg said, “a great in-person meeting is a little better than a great remote meeting, but not much.”

Here are Mullenweg’s tips for effective meetings:

  • Have a clear agenda.
  • Invite the right number of people and no more.
  • Ensure no distractions or people looking at their phones.
  • Make sure it lasts as long as needed and has some outcome.

Mullenweg is also a fan of meetings with some movement:

  • When he can be in person, he likes to walk and talk.
  • When he’s remote, he suggests meeting participants get good headphones and meet on the go.

Find the tools that work for your company.

According to Mullenweg, Automattic barely uses email except to communicate with people outside the company. Instead, the team uses an in-house blogging platform called P2, which it’s beginning to make available to other companies.

Blogging “really elevates the written word and allows writing to be the way of collaborating,” Mullenweg says. It also cuts back on the interruptions from email and Slack notifications.

That’s not to say Automattic doesn’t use the popular chat app – Mullenweg said he was an early adopter of Slack and cites it, along with Zoom, Google Docs, and other apps, as part of a functioning distributed workflow. Ultimately, it’s about “whatever is effective for y’all,” Mullenweg said. “It’s all about managing these tools so they don’t manage you.”

Create a distributed culture.

“Your culture is not the Ping-Pong table,” Mullenweg says.

Instead, it can be found in the principles and values of your company. Even without an office and in-person meetings, those can and should be shared.

“My belief is that your culture is always happening,” Mullenweg says. Working from home under extraordinary circumstances for the foreseeable future, that’s something to keep in mind.

Next CBI boss finds ray of hope in coronavirus crisis

A dash of optimism from NEIL CRAVEN for the MAIL ON SUNDAY – however, given the track record of the CBI and ‘Be the Business’ summarised below and their evident failure to date to improve UK productivity, we note the lack of practical support and ideas for UK managers in the following piece- but nevertheless wish the new man every success

 

 

Danker, who joins the CBI in November replacing Dame Carolyn Fairbairn, has spent the past three years spearheading an organisation charged with solving Britain’s productivity crisis ‘from the bottom up’ – he admits that this is an issue on which ‘Britain hasn’t done very well for the past 12 years’ since the 2008 financial crash.

‘Most of the policy levers weren’t fixing the problem, or would take a generation to take effect,’ says Belfast-born Danker, currently chief executive of Be The Business, a Government and industry-funded body, with a mandate to improve productivity – he names infrastructure spending and improving skills as two important, but slow-burning, boosters for productivity.
His conclusion? ‘Government can’t fix the productivity problem; business has to.’
The figures are stark – a report in February detailed how the slowdown in productivity over the past decade – measured as economic output per worker per hour – has been the worst since the industrial revolution began 250 years ago. Economists worry that sluggish productivity growth, barely above zero and more pitiful even than in the 1970s, has held back improvement in living standards in the UK.

Two thirds of firms have changed their approach to technology since March, according to a Be The Business study – a third have adopted new technologies or intend to ‘soon’. As well as video conferencing, that includes project management and customer relationship management systems, e-commerce, cloud-based HR and data analysis software.

 

Any gains are likely to be masked by huge drops in overall economic output. But Danker wants to turbocharge the revolution, tying up with Facebook to encourage small and medium-sized enterprises (SMEs) to learn from each other. A regional roadshow – digital, of course – targeting 11 big cities is to follow soon.

 

‘What’s really interesting about the last three months, talking to business owners, is that they have exerted more leadership in decision making than in years – they are also ferocious about finding productivity gains – cutting costs, being smarter about the use of premises, thinking about tech. I think that’s the low hanging fruit – and there’s a lot of money in it.’

 

But he says: ‘Now there is a set of really complicated decisions for each of these firms as we restart – harder than lockdown – don’t underestimate what a big deal this is – there are 1.4million small business owners with some big calls. I think they are going to make the decisions that affect employment and they are going to be the judge of whether or not anything the Chancellor does has worked.’

 

Danker reels off anecdotes from small firms he’s spoken with – a Cornish pub, a Cumbrian manufacturer, an HR consultancy – with myriad conundrums. But he suggests: ‘There’s a realisation now how much SMEs are the backbone of the economy – 60% of private sector employment and even greater outside the South East.’

He says a 10% rise in productivity in the smallest 75% of all firms – the ‘long tail’ – could add £130 billion to the economy. ‘I’m not pretending that’s easy but you just need tar manufacturers to be better tar manufacturers. We need to help hospitality businesses find a path back to growth. ‘Three years ago we were talking of the importance of high growth sectors – life sciences, high tech – now I think we’ve realised that the high employment sectors of retail, construction, hospitality – these are vitally important sectors to the economy, to recovery, to jobs.’

 

With a cautious nod to his agenda in his next role, which he joins at a pivotal time, he suggests Government needs to be sensitive to the slow awakening from lockdown many small firms face. He says: ‘It’s why organisations will talk of a tapered end to support rather than a sudden end to lockdown. Restarting is complicated – cost comes back straight away but demand doesn’t – if the Chancellor is to proceed with a levelling-up agenda that’s only about public investment it won’t be enough.’

 

He says business sector recovery needs to reach those parts of the country which have the lowest productivity and high unemployment, adding: ‘London has superb levels of productivity but it’s the regional economies that have fallen behind – the risk is they fall behind more.’

Can COVID-19 solve the UK productivity puzzle?

A thought-provoking article in Raconteur by Nick Easen

It’s no wonder the Bank of England’s chief economist Andy Haldane called it the “single most pressing issue” for the UK economy prior to the pandemic.

However, if you take the long view, this great reset has the potential to boost the output that a British worker could generate and increase productivity. There are parallels in history.

The Great Depression of the 1930s, when a quarter of the US workforce were out of work, was also a time of rapid automation. It saw the fastest productivity growth in American history. Yet President Roosevelt at the time tried to slow down the pace of automation with a bill that included 36 restrictions on machines.

“Just over half the jobs in the United States today are possible to perform at distance with digital technology,” says Frey. “The coronavirus will accelerate digitalisation and automation. Businesses want to cut costs during downturns. This also spurred automation during the financial crisis and contributed to a jobless recovery. Today, cash-strapped consumers also trade down to cheaper, less labour-intensive goods and services, which also increases the level of automation in the economy.

“Looking forward, ecommerce, telemedicine and online learning are likely to finally fulfil the productivity promise of the internet, which has been disappointing so far. Estimates also show that high-income earners are five times more likely to be able to work during the pandemic, while we find low-income jobs are at much higher risk of automation.”

Upskilling the workforce is crucial

More low-skilled jobs could evaporate after the pandemic subsides. Retraining will be crucial. Yet companies will be in a perilous state after lockdown. With high levels of indebtedness, many won’t have enough money to invest in skills, training, capital equipment or automation. However, those companies that do invest could be longer-term winners.

“New technology adoptions really require initial investment upfront and changes in business models. During this crisis, businesses are unlikely to be in the position to do this due to financial pressure and uncertainty,” says Dr Jun Du, professor of economics at Aston Business School.

“As a nation, developing automation technologies to replace low skills and retraining workers into higher-skilled work would be a sensible strategy. This crisis will continue to push many people out of jobs. This is a golden opportunity to retrain them to prepare for that future.”

With record low interest rates and strong government assistance, nimble businesses could look to save costs elsewhere and invest in upskilling their workforce, as well as digitalising further. This could be transformative for the UK and increase productivity.

“Lockdown has created legitimacy for certain ways of doing things now that we thought would never be productive, for example the assumption that our working culture is based on a need for people to have a physical space where they must be monitored physically to be productive. Coronavirus has forcefully shaken up this concept,” says Sahasranamam at the University of Strathclyde.

“A big benefit could be savings in capital expenditure and real-estate costs. Businesses won’t have to expand office spaces or have an office at all. Employees no longer have to work and live in high-priced, real-estate congested cities either and they will also save on commuting time.”

A catalyst to increase productivity?

The pandemic has exposed the vulnerability of overstretched, globally expansive, just-in-time supply chains or call centres in the Philippines or India. This could lead companies to onshore business, with a 21st-century digitalised focus and upskilled workforce. Corporates are already getting a taste of what consumers expect. Some will want to go further.

“In this locked-down environment, productivity is being boosted in various sectors through the use of automation to deliver savings and time back to businesses so staff can be liberated to refocus on delivering higher value,” explains Peter Walker, chief technology officer, Europe, Middle East and Africa, at Blue Prism, a robotic process automation software developer.

“The key challenge for organisations will be to strategically adopt automation solutions to make the enterprise smarter, more agile or efficient rather than focusing on short-term tactical savings.”

If British grandparents in their 70s and 80s aren’t now afraid of digitalised services from banking to online grocery shopping, nor should unions, businesses or employees be. COVID-19 reset is occurring right before our eyes. It is also happening globally, even in China and elsewhere in Asia, where labour is a lot cheaper.

If the pandemic can be used as a reason to get more people to use more sustainable forms of transport, such as bicycles and walking, or tackling the climate crisis, it could also be used as a catalyst to increase productivity in the UK.

“The main risk to any coming productivity revival is a Luddite backlash against automation, in which fears over its immediate social costs end up denying us its long-run benefits,” Oxford University’s Frey concludes.

Tolerance is good for all

Given the current demonstration marches ongoing worldwide following the shocking killing of George Floyd, there are many issues being raised to be faced by all – and, in particular, as far as this website is concerned, by many people at work regarding how they treat each other there:

  1. The overall mantra should be ‘ALL lives matter, regardless of colour’ – but that would be unlikely to lead to any change
  2. Inequality has always existed, and always will – each of us is different and should be proud of it                                  
  3. However, inequality of opportunity is the problem – ‘class and club’ systems, not merit, still ensure far too many ‘better’ jobs go to such ‘better’ people – whole swathes of society are thus prevented from climbing ladders too far
  4. If you are to build an efficient and effective team, organisation, even nation, all members must treat each other as equals who just have different jobs
  5. N.B. ‘You can do what I cannot do – I can do what you cannot do – together, we can do great things’ said Saint Mother Teresa of Calcutta
  6. In particular, managers of teams must always act with ‘tolerance of others’ – difficult though many will find this versus their daily back-stabbing, competitive rivalry, data-hoarding and power-politicking activities – and there’s the rub!  

Hence, they might well consider the following anecdote told by Nelson Mandela:

“After I became president, I asked one day some members of my close protection to stroll with me in the city, have lunch at one of its restaurants. We sat in one of the downtown restaurants and all of us asked for some sort of food.”

“After a while, the waiter brought us our requests, I noticed that there was someone sitting in front of my table waiting for food”

I told one of the soldiers: “Go and ask that person to join us with his food and eat with us”.

The soldier went and asked the man so. The man brought up his food and sat by my side as I asked and began to eat. His hands were trembling constantly until everyone had finished their food and the man went.

The soldier said to me: “The man was apparently quite sick. His hands trembled as he ate!”

“No, not at all,” I said.

“This man was the guard of the prison where I was jailed. Often, after the torture I was subjected to, I used to scream and ask for a little water. The very same man used to come every time and urinate on my head instead”.

“So I found him scared, trembling, expecting me to reciprocate now, at least in the same way, either by torturing him or imprisoning him as I am now the president of the state of South Africa.”

“But this is not my character nor part of my ethics”

“The mentality of retaliation destroys states, while the mentality of tolerance builds nations.*

Dramatically improve customer service so as to cut costs

I have no connection with John Seddon and his Vanguard consultancy company – indeed, many moons ago, I worked for one of the ‘big consultancies’ that he criticises so much in his books and the following podcast – nevertheless, I have long since thought he peddles powerful ‘productivity improvement advice’ which produces astonishing results, in stark contrast to the management fad failures forever being rolled out by others e.g. Total Quality Management, BPR,  Balanced Scorecards, Lean, Agile – frankly, I’m amazed that his ideas have not become much more popular with all businesses, especially services in both the private and public sectors – decades ago, it used to be said that a manager would never get fired if he chose IBM as his supplier – nowadays, it seems the same attitude applies  as managers blinkeredly follow each other when they ‘need to do something’ and buy whatever the ‘big consultancy boys’ are peddling at the time

The following was in an email which introduced Seddon’s podcast

The last few years have seen a rush to digital services, but how well is it going? In this podcast John Seddon illustrates the two big mistakes being made with the rush to digital, which result in poor-quality services and higher costs, and he explains how to approach digital services to ensure they work brilliantly for customers (and cost a lot less).

You can listen for free: https://www.patreon.com/posts/john-seddons-36199816

Hang on in there – listen again to make sure you understood what is being said – then change your ways, or stick!

Why working from home is bad for productivity

An interesting article in the Sydney Morning Herald by James Adonis, somewhat contradicting what many managers are starting to believe

They’re no doubt already preparing themselves for the inevitable conversation with the boss. If working from home has been OK during months of social distancing, why not make it permanent? After all, there’s little arguing with decades of research demonstrating the benefits that accrue such as lower absenteeism, less staff turnover, stronger job satisfaction and greater productivity.
Wait a second. Greater productivity?
Well, according to a fresh study, that doesn’t actually appear to be the case. The scholars analysed the performance of nearly 9000 employees in more than 800 teams working for 250 organisations across nine countries to test their theory that the lack of social interaction among employees is detrimental to their productivity.
Writing in the New Technology, Work and Employment journal, the researchers go further by stating “even a small amount of working from home, less than one day a month, negatively affects employee performance”.

That’s because much of the knowledge, information and assistance people depend on is cultivated by the spontaneous and informal conversations they have with colleagues in shared workspaces, the absence of which diminishes their efficiency. It requires extra effort to access those essential resources when each team member is in a different location.

To determine the impacts on productivity, the scholars took into account not only the managers’ perceptions but also what the employees themselves had to say about their own performance:
  • That performance worsens when it’s not just the employee working from home but their colleagues as well.
  • If it’s happening more than one day a week, they are 70% less likely to receive a positive evaluation when compared to teams where everyone’s in the office.
The solution is not that working from home should be discouraged or prohibited. It’s more so an evidence-based lesson to be conscious that interaction has to be ramped up the more that employees are adopting what is an in-demand work arrangement, one that’s clearly here to stay.

“Employees do not exist in a vacuum as they work,” conclude the researchers. Irrespective of erroneous managerial interpretations, it’s tougher for colleagues to build effective relationships when they don’t see each other frequently enough and it’s challenging for them to notice a teammate has a problem when they can’t observe the signs that indicate they need support.

While many business professionals believe web conferencing can bridge that gap, the results of this study reveal the opposite to be true, that “digital presence cannot really compensate” for what is a fundamental human need: the need to interact in real life with other human beings.

CBI a closed-shop for McKinsey alumni?

The CBI (Confederation of British Industry) claims to be the UK’s largest employers’ group, although the IoD (Institute of Directors) might dispute this claim – they assume to be the mouthpiece for British management, forever putting their views for change to the UK government

They have just announced that Tony Danker – apparently ‘a business productivity chief’ – is to be their next director-general,  replacing Carolyn Fairbairn as CBI head at the end of this year – Danker is currently the chief executive of ‘Be the Business‘, a strangely-named non-profit business organisation set up to help drive productivity in the UK by Charlie Mayfield  (ex McKinsey), the former John Lewis chairman.

So how successful has this business productivity chief been in his current role as head of this ‘Productivity Leadership Group’ (PLG)?

Official UK productivity has stalled over the last two years or so since its inception – and we are unaware of any quantified claims for any productivity improvements made by the PLG – and that was before the pandemic struck

And how effective has another ‘productivity chief’, current Director-General, Carolyn Fairbairn, been over the last five years given, early in her CBI reign, she stated that her top priority was ‘to make a positive impact on productivity’?

Again, official UK productivity has stalled over her time in charge – albeit causes of this stagnation are now called a ‘puzzle’

So, taking a longer view, ask just what difference the CBI, our self-appointed productivity leaders, have made to UK productivity ever since the national study I led in 1987, with CBI support – the first of its kind – which focussed on determining the UK’s current productivity level, the need to ‘close the gap’ with our G7 competitors, and ways to go about it

Sadly, the result over the subsequent 30 plus years is ‘the UK productivity gap remains largely unchanged’ and our productivity growth rates have even trended downwards

Nevertheless,  gongs have been dished out to nearly all CBI bosses over this same period, regardless of this record, viz:

  • Sir John Banham (ex McKinsey)
  • Sir Howard Davies (ex McKinsey)
  • Lord Adair Turner (ex McKinsey)
  • Lord Digby Jones
  • Sir Richard Lambert
  • John Cridland (why not Sir?)
  • Dame Carolyn Fairbairn (ex McKinsey)
  • Tony Danker (ex McKinsey) – a knighthood pending, surely?

So what are the common features between these heavyweights that distinguish them from we mere mortals? – certainly, they’re all bright, they can all ‘talk the talk’, they know management and consultant-speak backwards, they sound and look good on the telly or public platforms

But we also find five of the last eight DGs are ex McKinsey consultants, a consultancy renowned for recruiting the best of the best – but one also steeped more in strategic and structural business issues rather than the practical needs of productivity improvement and obtaining quantifiable results

The fact is official UK statistics suggest national productivity performance levels have been poor over the last 30 plus years – waste is still rife, existing resources could be used a lot better and new investment in new technology has been far too little – and this applies to all private and public sector organisations – and the CBI, in its role as a productivity leader, must bear much responsibility – but when do we hear the them banging any of these three drums of potential, especially the first two? – indeed, ask which of their services or website pages advise on action needed for major productivity improvements?

The mantra for the post pandemic  ‘new norm’ UK economy must surely be ‘outputs matter most, not inputs’ – and if our productivity leaders can’t produce the results needed, then others should be given a chance to do so, and be rewarded accordingly

So, let the last words go to Karan Bilimoria, the Cobra Beer boss, who is expected to succeed Tesco chairman John Allan as CBI president: “Tony has the experience and skills needed to help lead the CBI in what will then be a critical term ahead as Britain recovers from this shock and returns to growth and competitiveness.”

We sincerely hope Karan is right, and wish Tony well as DG, albeit hoping he will break the mould and make a positive difference

5 Questions About China That Boards Should Be Asking Right Now

Another thought-provoking  HBR article follows, this time by William J. Holstein and Roger M. Kenny

 U.S.-China relations have not been so tense since before President Jimmy Carter and Chinese leader Deng Xiaoping agreed to exchange ambassadors in 1979. Attitudes have hardened especially in the last two months, in part because of the Covid-19 pandemic, and in part because of the troubling developments in Hong Kong. Some voices in the Washington establishment are even advocating a “decoupling” of the deep, complex business connections between the two countries that have been built up over decades.

Because many U.S. companies give their China operations a large measure of autonomy, top management and boards often do not have a good grasp of the risks they face. Based on a review of 75 confidential board assessments conducted over the past 15 years, we can report that almost no board possesses a complete picture of its company’s operations in Greater China, including Hong Kong. Management may make presentations about international sales in general, but very few details about China surface at the board level.

When business was prospering in China, boards could afford to turn a blind eye to the details. But that’s a mistake now, given the impending storm clouds. Disruptions in their access to the Chinese market or in their supply chains and procurement channels would spell disaster for many companies, including household names such as General Motors, Apple, and Intel.

To understand their China risks, U.S. executives and boards need to start a discussion. As we see it, the agenda should include the following five questions:

Are we too dependent on Chinese supply chains?

There has been a great deal of talk about reducing U.S. dependence on China That’s why some companies have moved some of their production to Vietnam or Mexico. But these have been relatively small in scale and significant moves to “re-shore” manufacturing from China to the United States would be expensive and difficult, partly because of a shortage of skilled manufacturing workers in the United States. Any such move also would risk backlash from Chinese authorities.

What’s more, China has cornered the market in many critical components. As New York Gov. Andrew Cuomo found in seeking to respond to the Covid-19 pandemic, crucial reagents for testing kits come from only one place: China. Certain kinds of masks and protective gear come from only one place: China. Nearly every computer and smart phone in use in the United States comes from China or at least has some component in it that is manufactured in China.

Perhaps even more seriously, China dominates production of many of the critical raw materials that go into the products of the new economy – from smartphones to wind turbines. These include critical “rare earth minerals” like yttrium (used for charging electronic devices like smartphones), cerium and lanthanum (used for touch screens), and neodymium (used in electric car batteries).

Are we too dependent on sales to China?

If a company has a significant percentage of its sales in China, say 10–20%, it obviously is going to fight, on all levels, to maintain those sales. In many cases that will mean the company cannot maintain critical distance from the Chinese government.

But closeness to the Chinese government could create problems elsewhere, including the domestic U.S. market. “Do CEOs and boards really want to help the Chinese smother Hong Kong, erase Xinjiang and Tibet and sink all the non-Chinese fishermen in the South China Sea?” asks Clyde Prestowitz, author of the forthcoming book, The World Turned Upside Down: China, America and the Struggle for Global Leadership. “At some point, it seems to me, that kind of acquiescence is bound to look pretty bad.”

The risk is especially serious for companies like American semiconductor manufacturer Nvidia, which provides products used in facial recognition technology that could be used by the Chinese government to enable human rights violations.

What is our exposure to legal changes in Hong Kong?

China is signaling that it intends to introduce its own version of justice in the former British colony, which hosts the Asian regional headquarters for many American companies. Tens of thousands of Americans live there. Hong Kong is critically important for many U.S. companies because of their partnerships and relationships with Hong Kong Chinese players, who help them navigate their way in China itself. Some companies have located IP and other sensitive financial and legal functions in Hong Kong, in large part because Hong Kong law affords businesses stronger legal protection and property rights, which could be compromised.

If the legal system in Hong Kong deteriorates, as seems inevitable, a financial analyst working in Hong Kong for a Wall Street firm might come under pressure from mainland authorities for writing a negative research report about a Chinese state-owned enterprise. International companies could also be pressured to make management changes, of the sort already imposed on some Hong Kong corporations; last year the Chinese government forced the ousting of two senior executives of Cathay Pacific airlines for issues related to support of the pro-democracy movement by Cathay employees.

The possibility also looms that Hong Kong Chinese, Chinese, or even Chinese Americans working for U.S. companies in Hong Kong could be detained or arrested. “The people of Hong Kong should prepare to cope with the varieties of arbitrary detention that have been inflicted on compatriots elsewhere in China,” Jerome Cohen, director of the U.S.-Asia Law Institute at New York University, recently wrote.

Finally, if the Trump administration concludes, as the president has announced, that Hong Kong no longer has a high degree of autonomy from China, then the U.S. Congress may withdraw the island’s current special status as a privileged trading partner. This would mean, amongst many other things, that tech exports from the United States, which now flow freely to Hong Kong, would be subjected to the same export controls as on goods shipped to China and the Hong Kong dollar would no longer be pegged to the U.S. dollar. Depending on the details of what Congress and the Administration enact, U.S. travelers to Hong Kong might also require visas, which they currently do not.

How much should we collaborate with Chinese companies?

In the open international research environment that American scientists cherish, U.S.-based researchers often collaborate remotely with Chinese counterparts. That could prove problematic, because the findings and insights they share may go further than their research partners in view of the Chinese government’s civil-military “fusion.”

“Should American researchers be working with Chinese researchers on such technologies as facial recognition technology in low-light environments?” Samm Sacks, a senior fellow at Yale Law School’s Paul Tsai China Center and a cybersecurity policy fellow at New America, asked on a recent Zoom call sponsored by the U.S.-Asia Law Institute. “I think probably not … How do you know that your technology is not being used, even indirectly, to incarcerate hundreds of thousands of Uighurs?”

China also has a track record of research espionage: the Ministry of State Security is known to have targeted Chinese and Chinese-American employees at U.S. companies to obtain access to their technology or to penetrate their companies’ decision-making process. American law obviously prevents companies from discriminating against people on the basis of their ethnicity, but there are policies and procedures that can be put in place to better safeguard IP and key decisions. One practical but costly step would be asking all employees to disclose international travel, disclose other sources of income and reveal contacts with foreign governments.

How secure are our company’s IT systems?

It’s not just approaches to their people that companies have to watch for. In 2018, Bloomberg Businessweek published an article revealing that China’s People’s Liberation Army had covertly installed  microchips in components that had been sourced from China for use in IT products used by many companies internally, including Apple, which vehemently disputed the report.

China’s software hacking capabilities are also highly sophisticated, as evidenced by the work of the state-sponsored APT10 group in Tianjin (APT stands for Advanced Persistent Threat), which was able to penetrate American cloud computing systems and remain inside them for four years, as disclosed by the Department of Justice in December 2018.

APT10, which federal officials said was acting in concert with the Chinese government, was able to penetrate the systems of dozens of companies and government agencies in at least 12 countries, as documented in a book recently published by one of us (Holstein), The New Art of War: China’s Deep Strategy Inside the United States. Other recent disclosures suggest that government-affiliated groups in China have developed malware that can be attached to Microsoft Word documents and is virtually undetectable.

Our confidential soundings suggest that some chief executive officers and their chief information officers have either chosen not to discover Chinese bugs or hackers or have been willing to accept the possibility that their systems have been compromised. The reason is that proofing their IT systems against intruders would cost millions of dollars and detract from short-term earnings. And if any breaches were to be disclosed publicly, that might irritate the Chinese government and call into question a company’s continued access to the Chinese market.

***

Responding to these issues will require sustained, structured discussions between entire boards and top managements. No single board committee can carry the full load. The issues extend beyond the ability of an audit committee, whose job is to focus on the numbers, which is only one part of the overall challenge. Human resource committees also need to be part of the equation to respond to the espionage risk. Compensation committees need to find creative ways of retaining top managers if quarterly and annual earnings begin to suffer. The discussions will also need to be held under the tightest security. Zoom calls are not a good idea. The goal should be to identify and manage issues before they explode into the public domain.


William J. Holstein, a former Editor-in-Chief of Chief Executive magazine, is a journalist and author.  His most recent book is The New Art of War: China’s Deep Strategy in the United States (Brick Tower Press, 2020)


Roger M. Kenny is managing partner of Kenny Boardroom Consulting, based in New York.

Chinese Companies’ Response to Covid-19

A very interesting article just published in the HBR by Das Narayandas, Vinay Hebbar and Liangliang Li – it offers many  lessons for western companies, big and small

 

The past four months have provided an opportunity to study a once-in-a-lifetime moment — how companies function during an unprecedented global pandemic while also navigating an accelerated shift to digital operations.

China was weeks ahead of the rest of the world in dealing with the pandemic and its fallout, so their experience is of interest. We conducted a series of 20 in-depth, in-person interviews, as well as a large-scale survey of more than 350 senior executives, to ascertain how the Chinese corporate world has adapted, innovated, survived — and even thrived — through this uncertain time. The companies we looked at, which ranged from state-owned enterprises to multinational corporations to local private companies, were forced to quickly:

  • Leverage digital technologies so that they could adapt and innovate
  • Try out novel business models
  • Stitch together solutions to address emerging and previously unrecognized customer needs
  • Develop new business processes and practices
  • Redefine models for collaboration and teamwork.

As China emerges from its Covid-19 lockdown, it is becoming clear that many of the challenges they faced are here to stay – and that some of the changes they introduced should be, as well.  We identified 11 lessons to help inform business leaders throughout the rest of the world.

1. Be transparent about your challenges.

Leaders in our survey who reported their firms had successfully managed the crisis told us they regularly kept their teams up to date on the state of their organizations, as well as the priorities and principles that would guide decisions at all levels. These leaders said they plan to sustain this higher level of transparency and information sharing going forward with more frequent, direct, frank, and personal communication.

For example, when asked during a meeting with employees why his company decided to shut down one of its global R&D centers, which symbolized the future of the business, the CEO of a major engineering and technology company replied: “If we cannot survive the next three months, we will have no future at all.”

The increased transparency wasn’t always easy. Multiple leaders told us that they felt their actions were under a microscope, with employees watching to see whether their behavior aligned with stated corporate values. They truly had to “walk the walk and talk the talk.”  They also had to accept that not all employees would be pleased with their decisions. But ultimately these leaders reported that the majority of employees adopted a feeling of “we are all in this battle together and fighting the same enemy” that seemed to exceed localized employee dissatisfaction.

2. Adopt new modes of communication.

Leaders we spoke with reported that communication during the pandemic, although less “in-person,” tended to be more personal. Many avoided email and used audio apps such as Dingtalk or WeChat instead, or internal apps developed to facilitate information sharing and employee interaction. Interestingly, a number of leaders of multinational companies said that they felt handicapped by the incompatibility of their global communication channels with some of the popular local communication technologies used by Chinese companies.

We were surprised to hear that virtual video meetings have continued to be the norm since the return of employees to the workplace — sometimes even when all attendees are physically present in the same office.

Many of the leaders we interviewed expect to convene fewer large, in-person gatherings and are planning more virtual events, believing them to be more efficient, direct, goal-oriented, and brief than in-person meetings. Most acknowledged, however, that video meetings are more intense and reduce opportunities for personal conversations and small talk, which have traditionally served to strengthen relationship bonds among colleagues.

3. Accelerate digital transformation.

The sudden, unforeseen economy-wide lockdown forced firms to switch literally overnight to completely digital models. Speed was of the essence: they needed to find creative solutions for emerging customer needs, overcome process barriers imposed by the lockdown, and find cost savings. Industries that would otherwise have taken years to realize their digital transformation agendas accelerated their efforts dramatically.

 

For example, New Oriental Group, a leading education company, had struggled for two years to convince parents, students, and educators to move to a live-streaming platform capable of supporting one million students simultaneously. The pandemic led to a rapid, widespread adoption of the platform — even in cities not previously served by the firm.

4. Re-organize to enhance decision making

Traditionally, decision making in Chinese companies has tended to be top-down with numerous reviews and approvals at many levels. During the Covid crisis, many of our respondents reported a diminished role for mid-level managers. Speeding up digital transformation led to automation of some routine activities across a broad set of business sectors.

Ping An Bank, for example, has taken its “data-oriented operation” to the next level, transforming its organization from the traditional hierarchical pyramid to a dumbbell-shaped organization by increasing the number of senior executives focused on digital transformation and IT; keeping the number of middle-level managers flat despite rapid growth; and expanding the scale of front line market-facing teams. The firm has encouraged senior leaders to directly manage larger front line teams using digital tools and data, changing their primary mode of working from “managing with experience” to “managing with data.” The firm’s business performance reached record high levels in April 2020 despite the crisis.

With leaders able to directly engage the entire organization through digital channels, mid-level managers were no longer vital communication conduits between leadership and the front line. Senior managers were forced to become more deeply involved in strategy and policy decisions to ensure a speedy response to rapidly shifting business conditions. A high degree of variation in local conditions, moreover, drove more real-time execution decisions by empowered front line teams closer to customers and more familiar with the local laws and conditions.

Yili Group, a leading dairy company, faced unprecedented logistics and transportation challenges during the shutdown. It had to reach out to farmers, milk factories, transportation companies, and local governments, as well as other partners in locations across the country, to keep the supply chain moving. Regional front line employees were authorized to take action to resolve unexpected problems such as road blocks, health checks for drivers, and community shutdowns.  This ensured that they were able to continue to deliver to even the most remote locations across China.

Leaders we interviewed believe that this reduction in organizational bureaucracy will facilitate increased collaboration and execution, crucial enablers of innovation at speed and scale.

5. Find new ways to collaborate.

Achieving desired changes in a timely manner often required collaborating in new ways with external partners, including customers, suppliers, regulators, and even competitors.

Movie studio Huanxi Media Group stood to lose millions on “Lost in Russia,” a film timed to release in theaters during the peak Chinese New Year holiday season. With movie theaters closed, the company struck a deal within 24 hours with Bytedance (owner of TikTok and other video streaming apps in China) to livestream this movie and other content across its platforms, earning Huanxi $91 million and netting the film more than 600 million views within two days.

Our respondents also noted the need for swift internal reorganizations with leaders and employees cutting across traditional silos to set up agile project teams to solve problems as they cropped up.

Trip.com Group, a leading travel agency, felt the impact of Covid-19 early, with millions of travelers cancelling their travel plans during the country’s peak travel season. Stepping up to the challenge, each department —IT, customer service, commercial, legal affairs, finance, and communications — played an important role in responding to the evolving situation. IT streamlined cancellation requests by developing a new “one-click” application, while the commercial team reached out to partners across the world to standardize cancellation policies for users. The communications department worked closely with IT to ensure the latest information and policies were made available to users in a timely fashion, while finance coordinated refunds to users. Throughout this, the facilities team worked to ensure the safety of employees who had to come into the office to access certain systems. This cross-departmental collaboration was critical in helping the firm respond, with its reputation intact.

We heard from many firms that leadership and HR are striving to sustain their newfound agility by redefining job responsibilities and work processes to encourage collaboration across functions.

6. Formalize and enable remote work.

Remote working was rarely practiced or supported in China prior to the pandemic.  Given that the 9-to-5 work day was unlikely to transfer from office to home environments, managers needed to accommodate, within reason, varying work schedules based on personal circumstances and constraints. More self-motivated and outcome-focused individuals were able to make the transition seamlessly, but others who were more comfortable operating in a traditional command-and-control mode needed training to be effective.

The Chinese division of Bosch, a global technology and services supplier, had to instill a new understanding of trust”, training its managers to work and manage remotely, and emphasizing a results-driven approach over the outmoded presence-driven model.

7. Support lifelong learning at scale.

Most of the leaders we interviewed believe that lifelong learning and a growth mindset will be crucial for employees of the future, especially as work continues to move on-line.

Because of reduced travel and better communication tools, many of the C-suite leaders in our study reported greater involvement as teachers and change managers within their organizations. They reported being actively engaged in developing talent and ensuring organizational alignment.

New Oriental, a private education provider, moved all of its training online, allowing the CEO and other executives to share their experiences directly with trainees across the country. The change worked out well. Previously, it was challenging to schedule in-person visits to employee training groups in local settings across the country.  Conducting training online from their homes or office removed this hurdle and enabled rapid scaling of this effort.

8. Rethink how you evaluate employee performance.

According to most of the leaders in our study, the pandemic presented a unique opportunity to observe how senior and mid-level managers responded to new challenges and allowed them to form preliminary judgments about managers’ future leadership potential.

The demands of crisis leadership forced leaders to delegate routine work to teams in order to refocus their own efforts on big-picture thinking. Top management was able to see which leaders busied themselves with routine work and failed to develop broader leadership competencies.

Moving down the chain, managers reported a shift to objective metrics, such as number of sales calls made, customer service calls attended, hours logged on, or tickets closed. They used online dashboards and digital data to assess staff workload and performance. However, the quest for daily objective measures risks overemphasizing short-term results. Daily dashboards should ideally be balanced with medium- to long-term, albeit perhaps less task-oriented, metrics. High levels of uncertainty and change, moreover, dictate that managers operate against agile, flexible goals rather than fixed targets.

9. Identify volunteer opportunities.

We heard repeatedly from leaders about the power of employing a “volunteering” approach to identify, motivate, and engage front line employees. Especially when confronting new business initiatives with social impact, they found that individuals assigned to a task did not operate with the same degree of willingness, ownership, and motivation as individuals who volunteered.

Yum China, a fast food chain that closed most of its outlets in Wuhan, decided to keep a few open to serve medical staff. Aware that some employees and their families would be concerned about the high risk of working at these outlets, the company decided to ask for volunteers, unsure whether they would get the requisite numbers. To their surprise, within two hours of putting the word out they had 900 volunteers, far exceeding requirements.

Several firms reported that their younger, digitally savvy employees subsequently shared touching videos of their volunteer efforts with friends and colleagues on platforms like TikTok, helping to boost team morale and allay the oppressive mood during difficult periods.

Multiple leaders reported plans to deploy future volunteer-led initiatives to identify and execute complex business model changes, enhance staff engagement, and support a more ambitious social impact agenda.

10. Help your employees build resilience.

Many of the leaders we surveyed reported that employees were experiencing high levels of anxiety and lack of motivation. This was particularly true of millennials whose careers had been fueled by the tailwinds of China’s meteoric and consistent growth over the past three decades; they are fearful that the future will be less bright, with growth opportunities significantly reduced relative to their parents’ generation.

11. Foster a more connected organization.

The leaders we spoke with expressed a near-universal agreement that the shared experience of coping with the pandemic had engendered higher levels of tolerance, patience, and empathy within their organizations. Seeing colleagues on video calls in their homes, dressed casually, with family members and pets making appearances, for example, made interactions more personal. Most organizations in our study anticipate greater cohesiveness and camaraderie among teams that worked together through the crisis.  

Planning for the Post-Covid World 

We identified two additional findings from our research. First, the market-leading firms in our study — which had strong reserves to weather the storm — actively invested in the short term with the sole focus of extending their long-term advantage over less endowed competitors. The leaders of these firms responded to tough times not by preserving resources, but by investing their reserves in strengthening their firms’ competitive position in the market.

Our second finding is that these firms were aggressively speeding up and expanding their digitization strategies, and implementing systems to ensure that new skills, practices, and behaviors are integrated into their organization’s muscle memory. They further recognized that considerable discipline will be required to ensure that employees do not revert to pre-crisis habits.

Covid-19 kickstarts gigification of knowledge work

The term “gig economy” was coined by the former New Yorker editor Tina Brown in 2009. It described how workers in the knowledge economy increasingly were pursuing “a bunch of free-floating projects, consultancies, and part-time bits and pieces while they transacted in a digital marketplace.”

The received wisdom of the time was that the gig economy would redefine white-collar jobs and call into question the very existence of professional service firms: Why would you need to hire a data analytics firm (or management consultancy) for a project  when you could have unrestricted access to a bunch of experts, connected by a digital platform with global reach, who could work together for you?

For a time, it certainly looked like things were headed that way: the Netflix million dollar challenge in 2009 for developing the best recommendation algorithm was won by a team that didn’t belong to a single firm — or even geography.

But Brown turned out to be only half right. There has been tremendous growth in the gig economy, but most of it can be attributed to unskilled work such as driving (Lyft and Uber), delivering (food, parcels, etc. through DoorDash, Postmates), and doing simple errands (TaskRabbit).

A vibrant gig economy for knowledge workers — engineers, consultants, management executives — has not really materialized (yet).

What Went Wrong?

The work of Nobel laureate Ronald Coase on transaction costs provides an explanation. According to his theory, now almost a century old, firms won’t be necessary if there are low costs (money or time) to a customer (individual or business) in searching for alternative providers, assessing their quality, contracting with them, and overseeing and coordinating their work. Clearly, if the work is simple, repeatable, standardized, easily measurable, and controllable, these costs will be low, which explains the success of gig platforms concentrating on work such as ride-sharing, accommodation, and deliveries, largely at the expense of the firms that used to perform these services.

But imagine you’re a U.S. citizen living in Singapore looking for tax advice. If you want to get this through the gig economy, you have two options:

  • Either find an accountant competent in both Singapore and U.S. taxation systems, which could be challenging
  • Or use two freelance accountants, one specializing in Singapore tax law and the other in American law.

 

If you choose option two, you’d need to make sure that the two coordinated properly with each other, which might not be easy. In either scenario, you’d have to find a way to figure out if they were as competent as they claimed to be, and you’d be responsible for drawing up the contract.

All of these relatively high transaction costs (search, coordination, and contracting) would largely fall away if you hired KPMG instead, which is precisely why firms like KPMG are still very much with us.

Is the persistence of these costs for high-end, complex services simply because the technology isn’t quite there yet? We don’t believe so:

  • New technologies have significantly lowered transaction costs across the board.
  • The unlocking of information flows due to the advent of Web 2.0 has significantly lowered the cost of finding a freelance service provider.
  • Digitization of knowledge work has allowed for more objective evaluation, which not only makes it easier to have more reliable customer feedback and ratings, but also makes it easier to create performance-based contracts.
  • Rapidly developing AI algorithms have the capability to help in cost-effective matching of demand with appropriately skilled individuals.
  • Products like Slack have the ability to significantly lower coordination costs.
  • And technologies like blockchain that enable smart contracts can significantly lower the costs of contracting.

 

Given all this, in order to understand why the knowledge-based gig economy hasn’t grown, we will need to look beyond technology and economics, and consider instead the role played by organization and culture.

The Culture Factor

Gig workers in the knowledge economy will have to work with and for firms that have pronounced values, incentives, practices, and preferences. But they do not assimilate easily into these organizations (unless they join them) as they often work at arms-length with them and are seen by people in the organizations as outsiders — or even threats —impeding effective cooperation and creating the potential for conflict. In this context, gig workers often struggle to understand, let alone accept, the larger organizational processes, people, and politics of many of the people they have to work with. Performance assessment may also be problematic, especially if the gig worker is hired by a firm to do a job that the traditional metrics of most organizations still cannot properly capture.

When you start listing these problems, it becomes less of a mystery why the firms still prefer to hire knowledge workers as full-time employees or other firms with knowledge workers rather than contract directly with gig workers, despite the ability of tech to reduce many of the more obvious costs.

This may, at last, be about to change. But not from the advent of any new technology — it’s from the global pandemic that is forcing the global economy to its knees. The organizational factors that act as barriers for knowledge-based gig work are the same ones that in the past have inhibited remote work by full-time employees. If these issues can be resolved, whether a remote worker is full-time or gig-based is simply a matter of contractual documentation. Clearly, the experience of working during the pandemic provides useful insights on how to successfully contract knowledge work to external contractors. But we need to approach these lessons carefully.

Knowledge work is not uniform and, to the extent that you can even talk this way, a given “unit” of knowledge work is itself highly complex. A university, for example, educates students for degrees. A unit, therefore, could be the degree that a student comes out with. But a lot of very different tasks go into creating that unit. So what does “gigification” mean in this context?

Universities could certainly consider using gig workers for graders, teaching assistants, or for pre-recorded online lectures. But it is unlikely that the majority of milestone classes (face-to-face or virtual) that need to be delivered live at specific moments will be delivered by gig workers. Since any degree will inevitably involve both kinds of classes, university teaching will always be hybrid between the two, at least at the course level, possibly even at the class level.

The lesson is that all knowledge-based work can be unpacked into a set of different tasks.

To figure out the future of the gig economy for knowledge workers, therefore, we need to analyze things at the task level rather than at the work level. We have found figuring out which kinds of tasks are amenable to gigification involves asking three basic questions about each knowledge-intensive task involved in delivering a product or service.

1. Is the task codifiable?

We first distinguish between structured tasks that can be easily specified and measured more objectively, and unstructured tasks that can’t be. Codifiable tasks are definitely contractable to gig workers, and the organizational processes that involve such types of tasks are usually easy to reengineer. Gigification of non-codifiable tasks is not straightforward and understanding which such tasks can enter the gig economy will involve answering the second question.

2. Is there a delay between value creation and value consumption?

In some tasks, value creation and consumption need to be simultaneous, such as when a physician conducts a patient’s physical exam. If such a task is customer facing, it is a big risk to “gigify” it, as these tasks have no possibility of quality checks and re-work. And if that customer is internal, a further layer of complication is added because dealing with internal customers usually requires a high degree of familiarity with the culture of an organization.

But for many tasks there is — or can be — a gap between creation and consumption of value.  For example, auditing a firm (value creation) and sharing the results with the board (value consumption) can happen at distinct points in time. In fact, a delay between the two instances is useful, as it provides a window of opportunity to insert a quality check process. Moreover, having such a delay makes it possible for the workflow to follow a more modular design, reducing the need for collaboration, and with it the need for a worker to understand the power and politics of the organization. All this, of course, means that the task will need to be reconfigured, which poses no mean challenge and brings us to the third question.

3. Can the task be done remotely?

Before the pandemic, the firms most comfortable with remote working were software companies like GitLab, which has more than 1,200 employees working remotely. GitLab has put together what it calls a “remote manifesto”, which identifies where remote practices differ from workplace ones. According to this document, remote working favors “flexible working hours over set working hours,” “writing down and recording knowledge over verbal explanations,” “asynchronous communication over synchronous communication.” Note that all these practices would be difficult to implement if there were no gap between the creation and consumption of value.

Before the pandemic, outside of the software industry, firms like GitLab were few and far between, which meant that there was a certain amount of risk to non-software firms in adopting approaches like GitLab’s. But the Covid-19 crisis has forced businesses in industries previously impervious to remote working to re-engineer their work processes and bolster their technology support systems, which have been the traditional barriers to alternate work arrangements.  This provides a wide variety of natural experiments, many of which are more relevant to a given firm’s need than the experience of software firms and will provide a good starting point to firms contemplating a switch to the gig economy model.

The Covid-19 epidemic could well prove to be a pivotal point in the gigification of knowledge work, and many firms will be attracted by the prospects of the direct and indirect cost savings that the gig economy model seems to offer.  But given the complexities of knowledge work there’s also a risk of overreach and wasted investment.  The simple task-based categorization we propose will help managers make smarter choices about  just what tasks should be contracted to gig workers.

Rebuilding the Economy Around Good Jobs

In countries hit by the Covid-19 pandemic, customer-facing service businesses don’t just face a tough two to three months; they face a tough two to three years. Because people will still be nervous about catching the disease until a vaccine is widely available, demand is likely to be depressed, while costs — due to measures needed to keep employees and customers safe — will be higher.

Making the challenge even tougher, many of these businesses rely on a “bad jobs” model for front-line workers whose hallmarks are low wages, low productivity, high turnover, and difficulty adapting to changing customer needs and technologies. Now more than ever, they need a new labor approach. They need a “good jobs” system that combines investment in people with operational choices in order to maximize employee motivation, contributions, and productivity.

Bad Jobs = Bad Performance  

As the tussle over federal pandemic assistance in the United States has made clear, many service companies, even those whose financials looked fine, were already in trouble. A big part of that trouble was a focus on labor-cost minimization, which led to low wages and benefits, inadequate staffing, and as few full-time positions as possible. In this “bad jobs” system, front-line employees are inadequately trained, often under-equipped, and disrespected. They can’t focus on the job when they constantly worry about paying medical bills or putting food on the table. They leave when there’s another job that pays $1 more an hour. Unit managers are busy fighting fires due to high turnover and operational problems, with too little time to develop staff and really manage the business. This bad jobs system keeps customers under-served (and, in some contexts puts them at risk), deprives the company of a compelling value proposition and prevents it from adapting to changing customer needs. Combined with a weak balance sheet these reasons drove many bankruptcies, including BordersToys “R” UsSears, and most recently Neiman MarcusJ. Crew, and J.C. Penney.

For retailers, there is an extra layer of post-pandemic danger. Lock-downs have forced a massive shift to online shopping. Some customers will go back to store shopping once they can, but many will have established new shopping habits. When stores reopen, retailers will need to adapt quickly to a new intensity of e-commerce, which comes with many operational challenges.

Further, the in-store experience will need to provide clear value that the customer cannot get online. That value requires capable and motivated workers whose work design enables them to serve customers well. The more their company invests in them through a good jobs system — with higher wages and benefits, more training, more hours and a regular schedule, a work design that maximizes employee productivity and contributions, and sufficient staffing — the more they will repay that investment through higher in-store sales and customer loyalty and improvements in products, services, and work processes. A bad jobs system that was muddling through before the pandemic may well fail under these new stresses.

A Moment for Change

The widespread use of the bad jobs system has long been a costly (and sometimes fatal) problem, but the pandemic offers a unique chance to do something about it. Why?

For a little while, there is a spotlight on front-line workers because so many have kept working — even at risk of their own infection — and kept so many useful parts of the economy running. At the same time, news coverage of strikes at meatpacking plants, Whole Foods, and Amazon has made customers aware of widespread bad working conditions. Customers may now find it unacceptable to buy from companies that treat their workers poorly — especially if there are competitors that offer just as low prices but also good jobs.

The bad jobs system is now going to prove fatal to many hard-hit companies if they don’t change. They’ll need their front lines fighting for them, working hard to serve every customer as well as possible, to improve every product, service, and process as much as possible, and to identify new ways to attract customers. They’ll need to be adaptable because so many things are going to be different in ways we can’t begin to predict.

One thing we can predict: Customers who are struggling economically will be looking more than ever for good value. This will give the companies that start building a good jobs system a competitive advantage over those that don’t. After the financial crisis of 2008, Mercadona — Spain’s largest grocery chain and a model good jobs company — reduced prices for its hard-pressed customers by 10% while remaining profitable and gaining significant market share. Hard work and input from empowered front lines had a lot to do with it.

The pandemic is likely to accelerate the ongoing shakeup of U.S. retailing. The United States has 24.5 square feet of retail space per person versus 16.4 square feet in Canada and 4.5 square feet in Europe. This is almost certainly too much and the mediocre — the ones that don’t make their customers want to keep coming back — will not survive.

There is an alternative: A good jobs system that has already proven successful. Long before the pandemic, there were successful companies — including Costco and QuikTrip — that knew their front-line workers were essential personnel and treated and paid them as such. Even in very competitive, low-cost retail sectors, these companies adopted a good jobs system and used it to win.

There’s a strong financial case for good jobs. Offering good jobs lowers costs by reducing employee turnover, operational mistakes, and wasted time. It improves service, which increases sales both in the short term and — through customer loyalty — in the long term. All these improvements can more than make up for the large investments in better wages, benefits, training, and scheduling. Indeed, in a recent paper, Hazhir Rahmanidad and I show that above-average wages can be a profit-maximizing approach even in low-cost service businesses. In addition, a good jobs system makes a company more resilient and more adaptive, as companies like Costco, Mercadona, QuikTrip, and H-E-B demonstrate. These qualities will be much called upon during and after the pandemic.

It Can Be Done

But is it possible to offer good jobs — to seriously increase labor spending and improve work — when companies are already in a financially precarious situation and when demand won’t snap back to normal for a while?

Yes, it is.

An extended period of low demand will actually make it easier to make and then tinker with operational changes with less risk. A period of low demand will also be a period of low performance pressure; Amazon, for example, just announced that it will likely make no money next quarter. These may be just the circumstances in which CEOs and boards can undertake a transition that will not boost earnings in the next quarter or two and explain why.

Granted, like most change efforts, it takes time to implement a good jobs system and to reap the benefits. But as the recent good jobs journey at Sam’s Club shows, smart sequencing of the changes can allow a company to make significant wage investments without raising prices or lowering profits. Sam’s Club raised the wages of thousands of employees from around $15 an hour to as high as $22 an hour. At the same time, they simplified operations by reducing their product variety by as much as 25% and redesigning work processes to make employees more productive and customers more satisfied. This is what made the higher wage investments possible for a retailer that already has tight profit margins. Mud Bay, a regional pet retailer, raised employee wages by 30% and significantly improved employee benefits while operating with less than 2% profit margins.

At a moment when trust in businesses and institutions is particularly low and when many criticize the gap between executive pay and workers’ pay, this is the time for more leaders to have the courage and commitment to rebuild their businesses with good jobs. We know now that they already have great people working for them.

Zeynep Ton is a professor of the practice at MIT’s Sloan School of Management and co-founder and president of the nonprofit Good Jobs Institute. She is the author of The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits.

Will companies shift from China to India?

A tectonic shift in global business supply chains may be about to happen according to an article in the Harvard Business Review by Vijay Govindarajan and Gunjan Bagla

 

America’s (and other developed nations’) relationship with the two most populous countries in the world, China and India, is undergoing a stark, rapid and perhaps permanent transformation.

In April, a Pew Center survey found that two-thirds of Americans say they have an “unfavorable” view of China; according to Pew it was “the most negative rating for the country since the Center began asking the question in 2005.” But if China is falling in attractiveness, what is filling its place?

The answer, it seems, is India, where on the same day the Pew survey was released, Facebook, Inc. announced that it invested $5.7 billion into India’s largest telecom company, Reliance Jio, instantly valuing Jio to being among the top five companies in India, were it an independent entity.

That this investment happened during a time when both California and India were locked down with Covid-19-related “shelter-in-place” orders raised eyebrows in boardrooms and capital markets across the globe. Global deals between two large publicly traded entities typically require much travel, face to face contact and joint public appearances, but Mukesh Ambani, chairman of Reliance, made this major announcement all alone from his home.

While the Facebook-Jio deal is largely digitally driven, we believe that 2020 could mark an inflection point in the bilateral trade of goods between the United States and India. The shift can be attributed — at least in part — to the stresses from Covid-19 and the tariffs imposed on Chinese goods by the Trump administration. Following our article on India as an attractive manufacturing destination, we look at India as a sourcing partner for goods, becoming a partial replacement for imports from China.

Exodus From China

Companies in the United States, Canada, Europe, and Australia have been hit with supply chain shocks as the flow of materials from China was disrupted by the pandemic. CEOs are confidentially asking their supply chain teams to develop additional sources that are completely independent of China. In addition, in the United States there is pressure from employees who are wary of traveling to China, from customers who are concerned (rationally or not) about the safety of foods and other items from the country, from investors who worry greatly about over-dependence on any one country, and increasingly from politicians as well as State Department leaders who want companies to rapidly decouple from China.

More than 20 years ago, electronics companies from Taiwan led the way into mainland China, but now in the wake of Covid-19 as Bloomberg reported in March 2020, “electronics makers are past the point of no return in their gradual migration from China.” Chinese billionaire Cao Dewang, of Fuyao Glass Industry echoed a similar thought in response to the pandemic, saying that “the global industrial chain will reduce its dependence on China.”

Why India?

In 2019, the United Stated imported a staggering $452 billion of goods from China. Only five low-cost countries have GDPs larger than that: India, Mexico, Indonesia, Brazil, and Thailand. India is the biggest economy among these candidates and has the largest untapped potential for filling part of the supply chain vacuum that is created by exodus from China.

In a recent virtual meeting with the American Chamber of Commerce in India, Thomas Vajda, deputy assistant secretary for South Asia was quite blunt. “India can quickly become a favorable jurisdiction for more of the industrial activities that are happening currently in China,” he told them according to The Economic Times.

Dr. Mukesh Aghi, CEO of the trade group, U.S.-India Strategic Partnership Forum, declares “While U.S. companies are looking for alternatives to China, India becomes a natural destination. You have an English speaking workforce, highly skilled, the cost of labor is cheap and more important it is a growing market of 1.3 billion people whose disposable income is growing.”

Already, “The United States is India’s top trading partner, ahead of China today,” adds Nisha Biswal, President of the U.S. India Business Council (USIBC), which is part of the U.S. Chamber of Commerce in Washington. Indeed, she says, a lot of top American companies have their biggest or second biggest bases in India.

Traditionally American executives have thought of India as a source of spices, textiles, apparel, jewelry and handicrafts.

While India does export billions of dollars of these products to the United States, India has moved much further up in the value chain. The cabin of Marine One, the presidential helicopter is fabricated for Lockheed Martin’s Sikorsky unit in India, according to Aghi and he goes on to add “The Ford EcoSport is manufactured in Chennai, India for the U.S market.” NASA’s Jet Propulsion Laboratory in Pasadena, California is collaborating with the Indian Space Research Organization on the most expensive imaging satellite ever to be launched, NISAR. This probe will be built and launched in India and will study hazards and global environmental change more accurately than ever before.

India exports shrimp, processed foods, and agricultural products to the United States. Aghi says that 3.2 million Apple iPhones built in India will be exported from the country. Biswal of USIBC asserts that India can supply medical devices, energy efficient green transportation, power semiconductors, switches, and rectifiers for American needs. India already provides almost 40 percent of the generic drugs sold in the United States, produced at factories inspected and approved by the U.S. Food and Drug Administration.

We call this phenomenon “India Inside,” where much of what is imported from India goes unnoticed by both American consumers and the media, but is nonetheless crucial to the fabric of the U.S economy. In particular we are confident that factories in India can scale up volume production to meet the domestic Indian, American, and global demand for devices, disposable and drugs to diagnose, treat and vaccinate against Covid-19.

Unlike export-driven China, India’s companies grew rapidly by serving pent-up domestic demand since the economy liberalized in 1991. In the process, Indian managers and entrepreneurs acquired the management skills and quality standards to expand globally, but they first turned to markets in the Middle East, ASEAN, Africa and Eastern Europe.

According to detailed current data from India’s Ministry of Commerce, Indian companies export billions of dollars each in categories as diverse as: furniture, medical and surgical instruments, electrical machinery, ships and boats, vehicles, boilers, parts made of plastic, steel and aluminum, organic and inorganic chemicals and more. We believe that many of these Indian suppliers are ready for first world markets. American companies can source these and other goods from their Indian corporate counterparts; unlike in China, these suppliers are not affiliated with the government.

China Plus One

How do you go about sourcing from India? We recommend an incremental approach in bringing on Indian suppliers; we call this “China Plus One.” Carefully select some low-risk or high-reward programs to try out in India, while maintaining your Chinese base. Work with multiple Indian partners as you get started. Very soon you can fine tune and amplify your successes.

What you learned in order to succeed in China may not serve you well in India, so it is important initially to approach India with humility and curiosity. Indians love America and American culture but react strongly to what they perceive as American arrogance. Despite Prime Minister Narendra Modi’s efforts to improve the ease of doing business, India still poses obstacles due to practices relating to both land and labor. Foreign companies wishing to build their own factories occasionally feel discouraged by these factors. But here are some ways that most American companies can overcome these challenges:

First, in order to leverage India as a source of supply, most American companies don’t need to invest in land and buildings, and they don’t need to hire employees in India. In our experience it is often best to start our as a buyer than as an investor. This gives more flexibility, reduces overhead, and limits initial risk.

Second, keep in mind that India is a diverse country with a federal structure. Many rules that affect industry vary from state to state. Some of India’s 28 states are more eager to help local and global entrepreneurs than others. The states of Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, and Telangana are generally reputed to be friendlier toward local and global companies. But for specific industries and sectors, it is fine to do business in other states, as long as you do your due diligence. One of us (Bagla) has successfully taken clients to Uttar Pradesh for high-end floor coverings, such as rugs, and to Himachal Pradesh and Uttarakhand in the Himalayan foothills for personal care and consumer health products.

Third, when you do business in China, you know you need a language translator. While Indians do speak English, you still need a cultural interpreter and business guide helping you. While the U.S. Department of Commerce helps American companies to sell to India, they are not set up to guide companies who want to source from India. Someone inside your company who has current experience in doing business with today’s India is ideal (and not just any employee who just happens to be of Indian origin). Alternatively you can turn to external trusted advisors who specialize in U.S.-India business.

Finally, accept that India is a messy democracy and that the flow of goods can still be a challenge. Success in sourcing from India takes time and patience. Mukesh Aghi of USISPF is optimistic: “As new roads are built, harbors are expanded, and airports are enlarged, logistics will get more efficient.” In the meantime you may find that Indian companies are quite enterprising and can often encapsulate these complexities from their overseas customers.

Today, India permits 100% foreign direct investment in most sectors, so you don’t have to share your intellectual property or trade secrets with a local partner. Many American companies have had factories in India for decades and some have invested recently, such as Amway’s $100 million plant in Tamil Nadu.

As one of the top Asia-facing executives at a major American retailer put it to us, “Given amount of dependence on China, the only alternative country that can have the scale, the skills and the space to service American demand effectively is India.”

Vijay Govindarajan is the Coxe Distinguished Professor at Dartmouth’s Tuck School of Business and Faculty Partner at the Silicon Valley incubator Mach 49. He is the author of The Three Box Solution. Follow him on Twitter and LinkedIn.


Gunjan Bagla is Managing Director of Amritt Inc, a California consultancy that advises American companies on doing business in India and the author of Doing Business in 21st Century India (Hachette, 2008). Follow him on LinkedIn.

A clear vision for the post-crisis future?

An HBR article by Mark W. Johnson and Josh Suskewicz follows – we called this approach ‘normative forecasting’ back in the good ol’ days

 

As the Covid-19 pandemic shakes the global economy and disrupts the way we live, work, and conduct business, leaders are scrambling to manage the immediate fallout. But, as history proves, it’s also necessary to prepare for what’s next.

Visionary leaders like Abraham Lincoln, FDR, Winston Churchill, and Nelson Mandela didn’t simply react to the most imminent threats confronting them; they also looked beyond the dark horizon. They were guided — and guided their people in turn — by their vision for a better future, after those challenges had been overcome.

Vision is especially urgent during a crisis as global and systematic as this one. Inflections that you might have had five years to anticipate in a normal environment might unfold in a matter of weeks or months. Trend lines, such as those towards telecommuting, tele-medicine, online shopping, and digital media consumption, are suddenly much steeper. Global supply chains are broken. Healthcare delivery is likely to change in ways that will make the last decade’s adoption of Obamacare look trivial. Many of your B2B customers may be shut down; millions of consumers are out of work. Some of the fundamental assumptions underlying your current business model may have been (or may soon be) upended.

In short, the business environment that you land in when the pandemic comes to an end — which could be one to two years from now — may be very different from what it was before the crisis began.

You need to begin preparing for it now. And to do that right, you need to have a longer-term vision of what you aspire to become in five or even 10 years — a north star that will focus and help shape your thinking about the short and the mid-term. It may be hard to see now, but the seeds of the next great growth industries are taking root now. Think back to Apple 20 years ago, which famously envisioned and started to plan for the iPod and iPhone as its computer business came under enormous strain during the dotcom crash.

Of course, nobody has a crystal ball (even Steve Jobs didn’t); if such a thing existed, we wouldn’t be in this fix. But while you can’t predict what’s coming with perfect certainty, you can develop much more clarity than you might imagine about what you could and should become, create a plan to live into it, and then set it into motion. Here’s our process, as detailed in our new book Lead from the Future, for doing exactly that.

Spend time envisioning your future. Ideally, you should dedicate about 10 to 20 percent of your time on a weekly basis over the next few months to exploring and envisioning where you want your organization to be when the crisis passes. This aspiration, of course, should be consistent with your longer-term vision.

Given the urgent demands of the present, some leaders may be tempted to delegate the responsibility for this kind of thinking to others, but it is critical that the CEO, CFO, CSO, and other key line leaders — the people who sign off on major resource allocation decisions — do this work themselves.

Interrogate what is likely to change about your customers, markets, and operating environment, and what isn’t. Focus on what your customers will require, how you’ll meet their new and evolving demands, the resonance of your products and services, and your overall capabilities.

Ask how resilient your core businesses will be in the light of these changes. Consider both threats and opportunities, and pinpoint elements of your portfolio that may no longer make sense and that will need to be sold off or shut down, as well as opportunities to accelerate new growth offerings.

Develop a strategy to walk back your envisioned future to today. Working backwards, lay out a path from your long-term aspiration to the mid-term (your post-crisis focal point), and from there to today. Reverse-engineer a series of benchmarks and milestones at regular intervals along the way. The reason to start in the future and “walk” backwards is that:

  1. It allows you to “clean-sheet” what you could become without being overly constrained by the way things are today
  2. It forces you to think concretely and in terms of dollars and cents
  3. This helps you decide which investments should be given priority.

To give you an example of how this works, suppose you are the president of a university. You know that online learning will be a major part of your future and anchored in new models that seamlessly blend online and in-person offerings. That future – already burgeoning before the crisis, and now being rushed into prime time – has accelerated. Step back from the mad dash to move this year’s courses online (an admirable feat, no doubt) and imagine what you’ll roll out at the start of the new academic year in the fall of 2021.

Then ask yourself what would have to be true, and by when, for it to happen in the best possible way. Systems will have to be in place, curriculum locked down, integration with conventional offerings worked out, people trained and hired. Perhaps you can meet all your benchmarks if you create the program internally, or maybe you need to partner with a developer or buy something off the shelf. The fall 2020 semester, starting a few months from now, will be a prime opportunity to pilot key elements of your envisioned program.

Be prepared to learn and pivot. Given the rapidly changing environment that you are working in, make sure to measure, monitor, and formally review your progress. Initially, you will be working off assumptions. As you test them in the real world, you will have more data and experience to prove or disprove them. Based on what you learn, adjust both your vision and your strategy.

As you work toward your mid-term and long-term goals, you must be attentive to both the strong and faint signals you receive. That requires a certain degree of humility, as you will likely have to surrender some of your certainties after they are tested against reality and fail. Speed and agility are key; you must learn quickly, constantly pivoting and adjusting. In doing so, you’ll also revisit your vision and continue to shape it.

Rally your team around your vision. Your people and stakeholders will have to make sacrifices, so you want them to believe in your view of the better future that they can achieve. Ideally, you already have a long-term vision of what you want to be which is inspiring, imbued with purpose, and relatively stable, compared to the roller coaster you are on today. While a business can succeed without having an explicit mission, there is a close association between missions and margins.

In 2019, our firm Innosight identified the 20 global companies that had achieved the highest-impact transformations of the decade. A newly strengthened sense of purpose, we found, was their common denominator:

  • Siemens, for example, had recently embraced an explicit mission to serve society
  • China’s Tencent had announced a quest to create “tech for social good”
  • Denmark’s Ørsted transformed itself from a struggling natural gas business to a cutting-edge wind energy company, increasing its net profits by some $3 billion per year – Ørsted’s long-term vision of itself as a green company not only inspires its people to perform, it helps its leaders keep its strategy on target

 

It is impossible to overestimate gravity of the present crisis. Many of you are wrestling with existential challenges; virtually all of you will have to adopt what amounts to a wartime footing. You may feel that you simply can’t afford to carve out the time that it takes to set out a vision and build a strategic path to it. But the leaders who manage the day-to-day and lead with vision will emerge from the crisis with companies that are stronger and more resilient than they were before.

Mark W. Johnson is co-founder and senior partner of the strategy consulting firm Innosight and author of Lead from the Future (HBR Press, 2020).


Josh Suskewicz is a partner at Innosight and the co-author of Lead from the Future (HBR Press 2020)

FILE – Productivity, Credit and Debt

A great 30 minute YouTube video – “How the Economic Machine Works” – is well worth watching
It was made some years ago by Ray Dalio, Co-Chief Investment Officer & Co-Chairman of Bridgewater Associates
He explains the fundamentals behind how national economies work, how human nature makes credit and debt cycles inevitable, and how, ultimately, economic growth depends on productivity improvement
It’s great for non-economists like myself in helping understand, if only partially, how economies tick – I suspect there will be many economists who will also benefit from reading what he says

The post-pandemic world?

An article by Hubert Joly in the HBR  (Harvard Business Review) raises some interesting thoughts on human needs that leaders should consider once we’re through this pandemic and past these ‘watershed times’

 

During the Covid-19 crisis, I’ve spoken with many CEOs who have said that a key priority for them, naturally, has been the safety and well-being of their employees. And there are many examples of inspiring actions taken by CEOs and companies in support of their employees. But, as we’ve come to recognize that this crisis will last more than a few short weeks, companies are now defining their approach for the long haul.

I’ve seen two crucial ideas take hold with corporate leaders.

  1. Given the magnitude of the shock and the challenges that this crisis represents, companies must consider the full breadth of their employees’ needs as people. Safety is essential, of course, but it’s also important to address higher-level needs such as the want for truth, stability, authentic connections, self-esteem, growth, and meaning in the context of the crisis.

2. Many CEOs have begun thinking about this crisis in three phases. They may assign different names or specific lengths to these phases, but they all roughly map to three distinct time horizons: the shelter-in-place phase, the re-opening phase, and the post Covid-19 phase.

When these two ideas are combined, leaders can operate and lead more effectively by dynamically adjusting how they take care of their employees through the unique challenges of each phase. What follows is a discussion of how companies are and could be addressing workers’ needs in each phase.

Human Needs in the Shelter-in-Place Phase

During this first phase, companies have sought to ensure their workers’ physical safety. They’ve implemented work from home measures and sanitized work areas in cases where work is essential, and shifted operating models — adopting contactless delivery, for example.

Beyond safety, they’re working to ensure security as well. Many have worked to keep people on the payroll for as long as possible — even if that required furloughs — and increased pay for front-line workers. Some have established employee relief funds to address urgent needs. At some companies, senior executives and board of directors took pay cuts; many have provided back-up childcare solutions and fronted their workers time off to take care of loved ones.

Ever higher up the needs chain, they’re trying hard to create connection and support the mental health of their workers. They have communicated with their employees in ongoing, frequent, transparent, and honest ways, seeking out approaches with a human touch — using video rather than just written communication, establishing office hours, instituting a regular coffee time or happy hour, and providing direct access to leaders and colleagues. Importantly, some companies have put in place mental health support options for leaders and employees, including yoga and meditation sessions, to help employees navigate these unprecedented times while keeping some level of sanity.

How are leaders able to address their workers’ higher-level needs during this phase? Often during a crisis, we think the masculine superhero leader is the one to get us through troubled times: Be the strongest; be convicted; project infallibility; lead with a kind of singular force. A key observation I would make is that this may not be the best model of leadership here. Of course, we need leaders who have great analytical and problem-solving minds, leaders who are great at making decisions based on facts. But we also need leaders who can demonstrate vulnerability and empathy. It’s interesting to observe that many countries that seem to be going through this crisis the most effectively (Germany, Taiwan, New Zealand, Iceland, Finland, Norway, and Denmark) are all women-led and that their leaders seem to combine a science-based approach with a more human touch.

Last, but not least, even now in this shelter-in-place phase, I’m seeing many companies ensuring that the actions they take connect with the company’s purpose. As an example, at Best Buy, where I was CEO for seven years, the stated purpose is to enrich lives through technology and so it has focused on enabling its customers to work and learn from home. Many companies are also mobilizing their resources in support of the community in a way that is tied to their purpose, even if it’s not entirely obvious at first. Ralph Lauren, whose purpose as a company is to inspire the dream of a better life, may not seem like it has role to play here, but it has mobilized supplier relationships to produce masks and gowns for front-line healthcare workers.

Human Needs in the Re-Opening Phase

Cautiously, but hopefully, many companies have begun planning how to re-open their businesses — a process we now know will likely be long and drawn out. As they prepare for this next phase, they should continue to consider the broad spectrum of their employees’; needs, beyond just creating a physically safe workplace. For example, companies are considering the following measures that span the full range of human needs from basic to advanced:

  • Defining the conditions that will ensure a safe reopening of their operations, from in-home services to offices and stores.
  • Bringing back as many people as possible. Companies will of course need to decide how many employees they are able to call back in and how they will communicate with other furloughed employees at that time
  • Ensuring ongoing, honest communication with existing and furloughed employees, in a way that is truthful, humane, and caring. Conveying that the world is changing, encouraging the organization to “reset” vs. just “restart,” and highlighting that some things are not changing such as the company’s core focus and values.
  • Paying special attention to the ongoing communication with furloughed employees.
  • Helping the employees on the payroll deal with “survivor’s guilt” — the guilty feeling stemming from the fact that the employee is employed (and compensated) while many of their friends and colleagues are not. It will be important to highlight the role they can play to help bring as many of the furloughed employees back to work.
  • Celebrating inspiring news. Good news helps workers’ mental health, which is likely compromised right now. As an example, Best Buy has transformed its process to post company news in the elevators of its headquarters, previously called The Lift to a digital posting now called The Uplift.
  • Highlighting how the company’s activities contribute to the common good and are making a difference in people’s lives. Defining how the company is able to continue to support the local community.

A key requirement for companies in this phase will be to avoid broad policies that don’t take into consideration the very different circumstances different employees face. For example, companies must ask themselves, which employees are above the age of 60 and therefore more vulnerable at re-opening? How are they being served? Which employees do not have the necessary space and infrastructure in their home to be able to work productively, and would therefore be candidates to come back to the office sooner rather than later? How many employees suffer from mental health issues that may be aggravated by social isolation? To what extent do some employees have a deep need for social interactions which makes it more important for them to be with other workers sooner? A deeper understanding of workers’ needs, even individuals, beyond just safety will make for a better re-opening phase.

Human Needs in the Post-Covid-19 Phase

It will be some time until we reach this phase, but companies are beginning to consider it and prepare for it. For some companies, like those in the travel sector, this can be a challenging phase as declines in consumer demand has the potential to dramatically impact certain businesses, which could translate into significant revenue, cost, and headcount reductions.

The risk for many companies will be to lose hope in their ability to do more than move to being a smaller company.

This is where they can tap in the talent and sense of purpose of their employees to do better than that. As companies begin work on inventing a future that does not exist yet, they would be wise to mobilize the business understanding and sense of purpose of their employees as input to their planning process.

One hypothesis I have is that a strong focus on the purpose of the company, as opposed to its existing business model, can uncover and unleash significant new growth. This is what Best Buy — which during its turnaround faced an existential crisis of its own — experienced when it embraced its purpose of enriching lives through technology. The company unlocked latent demand it didn’t know was available to it by deploying an in-home advisor program and new tech support services. The company also entered the health market, deploying tech to help aging seniors live longer at home. At the time, the company could have looked at its situation and turned immediately to cost cutting and personnel reduction. Instead it found new growth and ways to retain and grow headcount. Similarly, in the current crisis, companies may find it’s a time to find those new areas of demand for fulfilling its purpose.

As a final thought for this phase, staying connected with furloughed employees will enable the companies to re-hire these employees as new job opportunities emerge, either based on growth or on turnover.

How companies and leaders approach the three phases of this crisis and treat all their stakeholders — starting with their employees and the whole range of their human needs — will be real “moments that matter” for their employees, contributing to the level of attachment (or not) the employees will have to the company in the future and to the ability of the company to thrive coming out of the crisis.

How to make ‘remote work’ more productive

It might seem like the glorious era of remote work is upon us, driven by a pandemic push. Zoom! Slack! Who needs the office? The promise of uncompromised productivity paired with freedom is alluring.

Let’s start in a not-so-obvious place – habits.
Work gets us to do small things (show up on time, respond to boring emails) and big things (launch new products that never existed before). It helps us create habits and track progress. It allows us to learn hard things quickly.
Do you ever hear your friends complaining that:
  • “I just can’t muster up the energy to get my presentation done for tomorrow’s meeting.”
  • “I’m supposed to send this weekly update and I keep forgetting. I think I’ll skip it.”
  • “I told my team I’d deliver this project, but I think I’ll ghost.”

 

These are just not things we typically say.

Why are we productive machines in some domains – like work – but fall flat on our faces in other domains like diet or meditation?

We tend to take this incredibly salient productivity gap for granted. We assume it’s all related to money. My work pays me to do work, so I do work. We assume it’s the money that makes us highly productive, reliable, and consistent worker bees.

But let’s take a look at what work actually is – basically, a giant group accountability system.

  • We sit next to our team members every day from 9 a.m. to 5 p.m. – we work on different tasks–right next to each other.
  • We have daily or weekly meetings that ask team members to report everything they did yesterday and will do today.
  • We have team meetings with key stakeholders that require presentations to be prepped weeks in advance.
  • We have progress trackers that send out status reports on the project timelines.
  • We have shared deadlines that make us look bad if they’re missed.
  • We are part of quarterly and annual goals that are published to the company.
  • We have performance reviews to ensure we hit these goals. But if we don’t hit the goal? We debrief after it to change our strategy next time.

 

The craziest thing? At almost every corporation worldwide, work looks like this – regardless of culture or domain, most companies have agreed on this structure.

Most people call it accountability. Work helps solve our self-control problems with incredibly effective accountability systems.

What’s at the root of this?

At work, our behaviour is public. Work makes our behaviour visible to other people to help get us to get things done. Want to launch an incredibly complex product that requires building new innovations? Create a small team and commit to a public launch with aggressive timelines. This is what every tech startup in San Francisco does. Just look at Google’s Developer Day or Apple’s Keynote launches. Apple committed to launch iOS 13 on June 3, 2019, and, by golly, they did it. These are really just massive accountability systems that help employees to do something they said they would do.

Personal goals are in the private sphere. In the private sphere, we struggle.

In the public sphere, we understand there is an underlying norm about what should happen (“I should show up to this meeting prepared”). We self-regulate on the basis of anticipated consequences of going against that norm.

Accountability is really just expecting you might have to justify your actions to others in relation to a preexisting norm. And it works.

Accountability systems (making behaviour public) have been shown to work within voting, school attendance, handwashing, charity donation, and many other domains.

  • In Ely, Iowa, voters were told that if they didn’t vote, their names would be published in the newspaper. This drove voting rates up by 6.9%.
  • A YMCA told their members how much their peers were going to the gym. They then told these members that their attendance would be publicized next month. This increased attendance by 17% to 23%.

 

When we know our behaviour is in the public sphere, we anticipate what others will think, and we end up modifying our behaviour.

As office work moves to remote work while the coronavirus continues to spread, work habits that were previously public will become more private. Is this a good thing? How will our productivity change?

It’s a nice idea to say that it won’t. This is the popular opinion. But the reality is that the nature of work shifts as it moves from public to private.

The very thing that allows us to be productive is changing.

Meetings that once were in person will be on Zoom or online. People often keep their video on for the first five minutes and then they turn it off. This reduces accountability and may lead to more distraction.

Workdays that were once coordinated and public (we all get in around 9 a.m. and say hello) will now become uncoordinated and private. This freedom may be glorious, but it reduces accountability and may lead to fewer hours worked.

Deadlines like conferences and public PR launches have been cancelled. This relieves the public pressure and delays a key motivator for getting stuff done. This reduces accountability and may increase procrastination.

Here are five ways to stay on track.

KEEP VIDEO ON–FOR THE WHOLE MEETING

If you’re in person, you’d likely avoid checking email or surfing the web. Keep the same norms alive for remote meetings. This will also prevent the inevitable downfall of conference calls.

ARTICULATE AND COORDINATE START AND END TIMES OF THE WORKDAY

This creates a norm for when people should be on. While ‘working hours’ may feel implicit to your team, it should be re-articulated to ensure people are aligned in the new coronavirus quarantine era. As a bonus, this also helps people set boundaries on their work and not work late nights.

POST PUBLIC UPDATES ABOUT DAILY OR WEEKLY PROGRESS

Engineers have operationalised this for years. It’s called a daily standup–a 15-minute check-in to discuss blockers and the day’s priorities. It may be time for non-engineers to jump on the bandwagon. An easy way to start is with a Slack (or other messaging) channel devoted to updates.

ADD MORE DEADLINES AND DECISION POINTS

We’re all really good at procrastination–like, really good. But there is a solution. Deadlines help drive action. They help us focus and avoid getting distracted by nonessential tasks. One easy hack: Ensure meetings focus on making a decision. The meeting will become the deadline for teams to prepare their input.

GROUP YOUR MEETINGS INTO BLOCKS

Put meetings back to back instead of scattered throughout the day. Research says it will make you more productive because your blocks of time feel less scarce. This applies when in the office or not, but is especially important for work-from-home life since distractions may be higher.

As the nature of work changes in the coming months, we should understand how to optimise work conditions. Work is something that ties us to other people in such an intricate way that we have no choice (or think we have no choice) but to achieve our goals. Work is just an elaborate accountability system. It’s a proven system that has been shown to motivate us across domains and across cultures.

In times of coronavirus quarantine (but also for your personal goals in life), there is very simple advice one should consider: Don’t go it alone.

Or, if that’s too hard, just act like someone is always watching you.


Kristen Berman cofounded Irrational Labs, a behavioural economics design company, with Dan Ariely and was on the founding team for the behavioural economics group at Google.

Pandemic offers a productivity boost?

 An interesting article by Chris Dillow was recently published in the Investors’ Chronicle

Has the coronavirus solved the UK’s problem of stagnant labour productivity?

A productivity boost?

 

It’s a strange question, but one posed by Office for Budget Responsibility (OBR) forecasts.

It expects that in 2021 we’ll be producing 2.8 per cent more than we did in 2019, as this year’s 12.8 per cent drop in gross domestic product (GDP) is followed by a 17.9 per cent rebound next year. But we’ll be doing that with half a million fewer workers. This means that, if the OBR is right, productivity will grow more in the two years from  2019 to 2021 than it did in the 12 previous ones.

Of course, all economic forecasts now must be taken with a ton of salt. But this poses the question: how could Covid-19 raise productivity?

One possibility is a compositional effect across sectors. If the downturn disproportionately hits low-productivity sectors while the recovery benefits higher productivity ones more, then aggregate productivity will rise as a mathematical fact. I’m not sure. Yes, some low-productivity industries have seen output collapse, such as pubs and restaurants. (We can, roughly gauge productivity from average wages). But also, some high-tech manufacturers have also been hit. And the high-productivity health sector is expanding now but will (we hope) contract next year.

A second possibility is that this recession will have a cleansing effect. It will drive inefficient businesses to the wall and so give more efficient ones space to expand. This certainly happens in some recessions – although it didn’t in the 2008-09 one. But it might not be the case this time. People are staying away from good shops and restaurants as much as from bad: they have no choice. Whether a company survives this recession will depend a lot on its balance sheet: cash-rich companies have a better chance than heavily indebted ones. But the correlation between balance sheets and productivity is weak: companies can be cash-rich because they are too inefficient to expand.

This leaves a third possibility. In the early phase of the upturn companies will respond to stronger demand not by taking on extra workers but by working existing staff harder. This will raise GDP per worker, probably by more than GDP per hour. It’s only when companies can be confident that demand will persist that they’ll start hiring.

Indeed, this third possibility is what the OBR expects. It foresees productivity falling back in 2022 as employment returns to – and in fact above – its 2019 peak.

Of course, the OBR’s numbers could well be wildly wrong – but this rough pattern looks right to me. The coronavirus, then, will give only a temporary stimulus to productivity.

This shouldn’t be surprising, as the fundamental determinants of productivity – the capital stock, skills, innovation, management quality, product market competition and so on – will not improve as a result of this crisis and some might even deteriorate.

Many people like to think that this crisis will change things permanently. One thing it is unlikely to change, however, is our lamentable productivity record.

Coronavirus statistics: what can we trust?

The flurry of figures, graphs and projections surrounding the pandemic is confusing. An article in The Guardian by two experts, Sylvia Richardson and Professor David Spiegelhalter, guides us through the maze

The coronavirus, Covid-19.

The past few weeks has seen an unstoppable epidemic … of statistics. The flood threatens to overwhelm us all, but what do all these numbers mean?

Here are eight statistics you may see, with some warnings about how much we might trust them.

1 The number of new cases each day

This can be a very poor reflection of the number of people who have actually been infected, as it depends crucially on the testing regime – up to 9 April, 1.3 million tests had been carried out in Germany, versus 317,000 in the UK.

2 The number of new deaths each day

The range of sources is bewildering. The daily announcements should be treated with caution as they only include deaths in hospital of those who have tested positive for coronavirus, and there is generally a delay in reporting deaths of a few days or even longer. For example, while on 27 March the government announced that 926 Covid-19 deaths had so far taken place in English hospitals, NHS England now reports that the true figure was 1,649. The gold standard is the number of death certificates collated by the Office for National Statistics: it report at least 1,568 mentions of Covid-19 for all deaths up to 27 March, but this will increase as registrations come in.

3 The total number of deaths

Graphs of accumulating deaths are shown at the daily government press conference, but they are a hopeless tool for spotting trends: we need daily counts to see whether we have reached a plateau (which will not be a “peak”). But the daily counts are volatile, and so need some smoothing to bring out the underlying trends: World in Data uses a three-day moving average.

4 Numbers recorded on a logarithmic scale

This will have a vertical axis labelled 1, 10, 100, 1,000. These are useful for comparing trends, but useless for getting an impression of the magnitude of the problem.

5 Predictions from models

Computer models come in two types.

The first tries to model the epidemic itself, by making simplified assumptions about the mechanism by which a virus spreads through a community. Key quantities, such as how many people an average case will infect, are highly uncertain at the start of an epidemic but are refined as more data is gathered. Such models have formed the basis for predicting the consequences of policy decisions in the UK.

6 “Excess deaths”

The number of extra deaths that will be recorded in this period, due either to Covid-19 or the lockdown, is hotly contested. Lives will be lost because of the illness, reduced medical care for everyone, domestic violence and the effects of unemployment and poverty; and lives will be saved through fewer accidents and, particularly, improved air quality. A (disputed) fraction of those dying would have died anyway in the coming year, a phenomenon known as mortality displacement or even “harvesting”. But the overall effect is hard to predict, and confident claims should be treated with scepticism.

7 The lethal risks of being infected

These vary dramatically with age and frailty, just as “normal” risks do. In fact the current estimates for the general public (rather than healthcare workers) seem remarkably similar to the risks we face anyway each year – but all packed into a few weeks.

8 The “accuracy” of an antibody test

Even apparently accurate antibody tests can lead to many false assurances of immunity. But a less accurate test may be fine if we are testing a representative sample to estimate the proportion of a population who have immunity.

Finally, it’s tempting to link a country’s statistics to the measures they have taken to control the virus: for example, has Sweden’s more relaxed policy been as effective as lockdown? But countries differ in so many ways: basic demographics, compliance and social networks, testing capacity and policy, health service characteristics and so on. Former prime minister Carl Bildt has joked that Swedes “have a genetic disposition to social distancing anyway”.

Sylvia Richardson, director, MRC Biostatistics Unit, president elect of the Royal Statistical Society

David Spiegelhalter, chairman, Winton Centre for Risk and Evidence Communication

 

Coaching Your Team Through Uncertain Times

An interesting article all locked-down managers should read by Francesca Gino and Dan Cable, and published by the Harvard Business Review

As they try to ride out the coronavirus pandemic, people are stressed and scared — nervous about others’ and their own health and the state of the world. For those lucky enough to be healthy and working from home in quarantine, their jobs can seem trivial and irritating. Separated physically from their colleagues, customers, and normal workplace, they find themselves alone with their computers, sporadically touching base remotely with those they used to see regularly. Many feel lost. Leaders of organisations can help their people get through these trying times by coaching them as they reevaluate their lives and rethink what they add to the world.

Here’s how.

Think about how you can serve the people you lead. Take time to reach out to those you lead in phone and video calls. Ask them how they’re doing and how you can help. Then do whatever you can to get them what they need, even if it has nothing to do with work. “Servant leaders” view their key role as serving employees as they explore and grow, providing tangible and emotional support along the way. Research shows that they create greater engagement and help employees bring more of themselves to work.

Help employees discover their own personal purpose. In this new work-from-home environment, free from the normal work scripts, many of us need to ask some basic questions: “What is my job now? How do I go about helping my organisation succeed? What do I want out of my career?” The answers might not be the same as they were a month ago. Discuss with employees whether any of the basic elements of their work have changed or will change. Get them to prioritise whom they are trying to serve and what they need from you in order to be effective. This type of conversation can provide the clarity needed to personalise our work’s purpose better than an organisation’s vision or mission statement, which is often so grand that employees have difficulty connecting it to their daily tasks.

In their research, Antonio Freitas of State University of New York and his colleagues demonstrate the value of questioning employees about their job tasks and then asking, “Why does it matter?” four times after each response. This exercise can connect a person’s daily activities to a higher-level goal.

Suppose a manager is in charge of completing performance evaluation forms for each employee. In response to the question, “Why does completing these forms matter?” she might answer, “I want to let my people know where they stand.” Next, she’s asked, “Why does it matter that people know where they stand?” The answer might be, “So that people can know how they can reach their career goals.” And a third time: “Why does it matter if people know how to reach their career goals?” The answer might be: “They may focus their energy at work differently.” Then a fourth question will follow: “Why does it matter whether people focus their energy at work in a different way?” A possible answer might be: “So that people feel like they are thriving while helping the company thrive.”

Analyzing decision-making at NASA during the 1960s, Wharton professor Andrew Carton found that similar steps helped employees see a stronger connection between their work and NASA’s ultimate aspirations: “I’m building electrical circuits” or “I’m mopping floors” becomes “I’m putting a man on the moon.” The more we think about why we’re performing a task, the more motivated and persistent we’ll be — especially when the task becomes hard. And as Carton found in his studies of NASA, this sense of purpose also boosted employees’ coordination and collective enthusiasm.

Encourage employees to reflect on opportunities to recraft their jobs. Leaders should go out of their way to talk with employees about their strengths and how they can use them in their new way of working. What abilities and talents would they like to use more in their work in the weeks, months, and years ahead? What would they like to learn?

This type of job crafting allows us to play to our strengths — letting our unique interests, perspectives, and background guide how we do our work and the value we add to the organisation. Your “best self” starts to determine the way you work, and work becomes more exciting.

Managers are often nervous about letting employees bring more of themselves to work and breaking away from the usual way of working more generally. They worry that important tasks will go undone or that employees will goof off. But now that working at home is a necessity, employees are already trying to cope with an unprecedented amount of autonomy. Use this as an opportunity to give employees the freedom to be themselves and explore their talents and interests. When leaders encourage employees to highlight and express their unique strengths on their jobs, their performance improves and burnout rates drop.

When employees can bring their best selves to work, they feel more autonomous, and their work feels more meaningful. Even when they’re working in their living room, their engagement has a chance to soar. Work feels like it matters more when we get to decide how it’s done.

The current crisis may likewise serve as a trigger for individuals to reflect on who benefits from their work and how they are making a difference. With the help of their leaders, they can make adjustments to bring more meaning to their work during this time of crisis and beyond.

NB HBR adds the following at the end of the above – ‘If (the above) free content helps you to contend with these challenges, please consider subscribing to HBR. A subscription purchase is the best way to support the creation of these resources.’

It’s output results, not input hours, that matter

A piece by Jared Lindzon of Fast Company follows – at long last, some in the outside world are now saying what this website has been banging on about for years – the pandemic has reinforced how foolish it is to compare input times with output volumes, especially when it comes to knowledge-based work.

In a 1996 episode of NBC’s Seinfeld, George discovers that he’s accidentally fooled his bosses, Steinbrenner and Wilhelm, after locking his keys inside his car outside his office.

Since the period of industrial revolution, we’ve used one primary scale to measure productivity: hours. As Seinfeld demonstrates, however, it’s not always an effective way to gauge actual performance or output.

Measuring productivity in hours alone can discourage workers from being more efficient with their time. In some instances it rewards those who are perceived to be working more hours, even when they’re not accomplishing much, as demonstrated by George.

Now that many workplaces have closed their doors and allowed employees to work from home, there is a unique opportunity to experiment with a different—and far more effective—scale.

HOW WORK BECAME TETHERED TO TIME AND SPACE 

For nearly a century productivity has been closely tied to time and space, measured in terms of how many hours a worker spends at a designated workstation. It was a convenient measurement tool for a period defined by standardisation, where the vast majority of jobs valued physical presence over cognitive output.

“It probably started with the industrial revolution, but came to its fruition in the 1920s assembly line when Henry Ford set up a factory system where work is commoditised and the content is mainly physical,” explains Robert Pozen, a senior lecturer at MIT Sloan School of Management and senior fellow at the Brookings Institution.

While the system was designed to fit the working culture of the era in which it was created, however, Pozen believes it doesn’t translate well into the modern reality.

“Hours are a relic of the past that might be appropriate for assembly line work, but in a knowledge economy doesn’t make any sense,” he says. “The problem is that for most organisations, they’re not willing to just get off hours, because they don’t have a good replacement.”

IN SEARCH OF A VIABLE ALTERNATIVE

In his 2012 book Extreme Productivity: Boost Your Results, Reduce Your Hours, Pozen offers an alternative productivity measurement system that he calls “performance objectives with success metrics.”

“People should spend real time figuring out what their goals, priorities, and objectives are, and agree on success metrics on how you can tell, after a week or a month, whether you have achieved those,” he says.

Pozen’s system empowers workers to work on their own schedules, so long as they’re able to complete the agreed upon tasks within the agreed upon timeframe. Though it may require extra effort on behalf of employers and managers, however, Pozen believes that the practice of defining goals helps organisations better focus their efforts and better utilise their human resources. “It’s more than just replacing hours; it helps develop consensus on what the organisation is trying to achieve, and how they measure success,” he says.

ORGANISATIONS GOING REMOTE HAVE A CHOICE

Redefining how you measure productivity can be a daunting task, but maintaining the status quo is often more difficult in the face of today’s remote working reality.

“A lot of entrepreneurs are learning that you can’t have that stringent control that you used to have when you were all in one space, but that it really doesn’t matter if someone works nine to five or four to midnight, as long as they get the job done,” explains small business consultant Marla Tabaka.

Tabaka adds that there are remote jobs that require a strict adherence to hours, such as customer service. In other roles, however, employers have been given a choice; use somewhat invasive tools to remotely track employee screens and maintain strict working hours, or offer employees greater flexibility and control over their own schedules.

While the former might provide employers with greater oversight, Tabaka argues that the latter breeds a stronger work culture and in turn more productive employees. “I’m seeing more CEOs begin to learn that letting go of that control gives them more control,” she says.

A CULTURE OF TRUST 

Moving from a workplace that emphasises hours to one that emphasises output is no small feat, and requires employers and managers to have a number of systems already in place. Chief among them, according to Tabaka, is a culture of trust.

“Having a culture of trust breeds accountability,” she says. “When it’s just about numbers people begin to feel like just another number; when its tied to that broader company vision and goals, people feel like they’re part of something bigger, and they’ll work harder for you, because it becomes a part of their life.”

Tabaka adds that an engaged employee “can do more in six hours than an employee who is stressed can do in 12.”

Another important prerequisite is for managers to unlearn much of how they’ve traditionally approached their oversight role and evaluated employee productivity.

“There has to be some level of manager training that helps managers refocus on productivity and goals and results and processes, and really get down into the details of, what does productivity ultimately look like? How do you know, outside of hours worked, when someone is productive on your team? What are the main goals on your team? What does each individual have to do to reach those goals?” says Brie Reynolds, the senior career specialist for FlexJobs.

THE FUTURE OF WORK?

Reynolds believes the system of monitoring and compensating staff based primarily upon hours worked has long been ripe for disruption, and while the coronavirus pandemic provides a unique opportunity to consider alternatives, she doesn’t expect companies to stop counting hours anytime soon. “I think there will always be some sort of time element to it, but I don’t think it will continue to be this eight hours a day standard,” she says.

One of the biggest roadblocks to adopting a new scale for measuring productivity, even during this seemingly ideal opportunity, may be tied to basic human psychology.

“I think we will make progress toward people being judged more on their productivity than hours present the more people are working remotely, but I don’t think it will replace it, because it’s just counter-human,” says Johnny C. Taylor Jr., CEO of the Society for Human Resource Management.

Taylor explains that if an employer asks a staff member to complete a task, they likely prefer that they do so in 10 minutes, rather than an hour. On the other hand, if one of his colleagues worked for 10 minutes and took the rest of the hour off while he continued to work, Taylor says he wouldn’t be comfortable with that.

“Even if they get all their work done, fundamentally that does not feel fair,” he says. “As much as we know this is theoretically the right thing to do—I absolutely agree it should be productivity-based—there’s that human part of us that says it doesn’t fundamentally feel fair.”

Taylor adds that the already delicate issues of gender, race, identity, and privilege in the workplace would only further complicate our sense of fundamental fairness.

“Then you get into this conversation of, ‘well he’s a faster typer, because he lived in this neighbourhood and they had better typewriters than I did growing up,’” he says.

In a remote setting, however, making those side-by-side comparisons becomes more difficult. While Taylor encourages organisations to continue seeking better solutions, however, he doesn’t see the traditional system of measuring productivity in hours going away anytime soon.

“Do I think it will change significantly? No, because of this fundamental concept of human fairness,” he says. “But should it? Yes, and I’m hoping the move to more remote work—which I think will persist beyond the COVID-19 crisis—will move us further in that direction.”

Office productivity

OFFICES ARE ABOUT TO CAUSE PRODUCTIVITY TO EXPLODE

So claims Mike Phillips in one of Bisnow.com’s featured series on the ‘Future of Work’ – it’s more realisation that the pandemic has given a massive kick-start to many business changes needed given the enabling technology has been around but not used well for many years now 

The way we work has changed beyond comprehension in the past 200 years. But the way we use offices is pretty much still the same.

There have been changes in design: Closed individual offices were the norm, cubicles came and have now largely gone, and today the open office and agile working reign supreme. But the idea of a place where you travel to work, nine hours a day, five days a week, hasn’t changed since the idea was invented during the Industrial Revolution. Until now.

“Processes get locked in place: The only reason schools have such a long summer holiday is because children used to have to go and help bring in the harvest,” Stanford University Professor of Economics Nick Bloom said. “Ideas can be very hard to shift. But I think we could be about to see an explosion in growth.”

The way we use offices is at the centre of that.

Offices Are About To Cause Productivity To Explode

 

The way companies use offices was already changing, and that change has only been accelerated by the coronavirus pandemic and the switch to home-working it has forced upon the world. So office space is going to have to change to mirror the way companies are now working.

Experts believe in future, companies will want less space, but better space. They will want space that allows different teams within their company to achieve different objectives, with the physical environment helping company goals. Office space will need to seamlessly bring together those working in the building and those working from home.

Companies will want to experiment with different physical environments, trying and testing in the same way they would a new website. Office owners, developers and operators will need to provide the physical infrastructure and technology that allows all this to occur. Those that do will help companies tap into this potential growth in productivity, and are likely to be richly rewarded.

For Bloom, who specialises in productivity and the factors that influence it, the change in the way we work and how we use offices is akin to the change that occurred in factories when they switched from steam power to electricity. It took decades for the increases in productivity to be seen, not because factory owners didn’t want to switch from steam to electricity, but because it took a long time to work out how factories and production process should be organised to take advantage of the new technology. Companies had to change shape, and so did the buildings they occupied.

“[Nobel Prize-winning economist] Robert Solow famously said in the 1980s you can see computers everywhere except in the productivity figures,” Bloom said. “We haven’t seen the miracle that IT was supposed to produce, but new ways of working, accelerated by COVID-19, could spur that. We now have the processes and technology up and running to be able to work flexibly and increase productivity.”

Bloom sees the coronavirus accelerating the trend for employees to work remotely, either from home or from smaller satellite offices away from city-centre HQs, as companies that may have doubted the wisdom of this practice had their hand forced. Companies have had to reorganize at least temporarily in a way that embraces flexibility, and Bloom believes those that stick with it will see increased productivity long term. The combination of office and home work is expected to reduce the inefficient elements of office life: stressful commutes, rigid working patterns and unnecessary meetings.

Offices Are About To Cause Productivity To Explode
Stanford’s Nick Bloom

 

An increase in working from home would decrease the need for fixed desk space in an office, because the kind of quiet, internally focused work someone might once have done in the office can now be done at home. The result could be more space given over to collaborative areas where colleagues can interact.

Because what is an office actually for? Its role in business and society has changed, and while some businesses have grasped that and reaped the productivity benefit, others haven’t. Once you had to go to an office to do your job, and employers wanted you there to keep an eye on you and make sure you were doing it.

Now, it is a social space, where ideas are swapped and new ideas created, a place where loneliness is staved off.

“It’s a place for cumulative cultural knowledge to be exchanged,” AXA IM — Real Assets Head of UK Development Harry Badham said. “If I know something and you don’t know I know it, that piece of knowledge is essentially useless. An office is the best way to share knowledge around a company and to create a culture.”

How offices influence collaboration, creativity and culture in practice is subtle and nuanced, and companies have often been treating it with too broad a brush.

“The way we work has never changed more quickly, but the place we work hasn’t,” Humanyze President and co-founder Ben Waber said. “For a long time companies have been paying lip service to these ideas, but not really embraced them. But we have the opportunity to experiment and adapt.”

Offices Are About To Cause Productivity To Explode

 

Humanyze undertook research alongside academics from Harvard University which showed that, far from increasing collaboration among staff, companies that transitioned from fixed offices or cubicles to an open-office plan saw interaction between staff decrease, as people hid behind headphones and were afraid to have conversations in a setting where everyone could hear them.

Waber said companies should treat office space like they would a new website, testing out various layouts to see which achieves their desired outcomes. But first it is important to know what those outcomes are.

It is a bit more complex in practice, but if you have a team that needs to work in a tight-knit way on a specific project with a deadline, give them their own fixed office or space within a wider office, or even temporary space in a flexible office. Even putting the coffee machine in the centre of the team rather than in a peripheral kitchen can make teams turn inward instead of outward.

By contrast, if you need different teams to start interacting with each other, put them together in a shared seating area.

Hot desking is all well and good, but letting people randomly pick seats doesn’t allow you to control outcomes.

“The design you choose should depend on the networks you want to create,” Waber said.

As artificial intelligence is able to undertake more of the repetitive processing work that was once a major part of office life, the average office worker will spend more time on different types of task, requiring different types of creative thinking. And this will require offices to be organised differently.

Offices Are About To Cause Productivity To Explode

 

“Different tasks and ways of working will require different types of space,” Convene’s Zampini said. “You need an office where you have head-down space like a library, collaborative space, social space, space for board meetings or town hall meetings, and to access those different types of space at the touch of a button.”

For developers and operators, it is a cliche that they need to build flexibility into their buildings. But that doesn’t make it any less true.

“Companies need to be able to adapt their space as their businesses adapt,” said Nick Searle, a partner at Argent, which is developing HQ buildings in London for Google and Facebook. “For all the businesses we work with, whether they are banks, professional firms or tech firms, they all need to be able to morph their space internally. There is only so far we can go, as most of our tenants will fit out space themselves, but we need to give them that ability to change their environment.”

On an operational level, the technology offered by a building can be vital in enabling companies to adopt those flexible working practices that can increase productivity.

“If you think of a meeting room, it might be smaller because not all of the people in the meeting are going to be physically present, but it needs to have great and easy-to-use technology to allow that kind of hybrid working that distributed teams need,” Zampini said.

AXA’s Badham pointed out that if companies are going to have a greater proportion of their teams working remotely more of the time, then building systems need to allow people to access an office using their phone, rather than having to go through a cumbersome signing-in process if they are coming in once or twice a week. And that means building owners employing people and systems to keep up to date the registers of who can and can’t access a building.

Offices Are About To Cause Productivity To Explode
Meeting rooms now need to be able to bring together disparate teams using technology.

Many of these trends will come together to have one overall result: The average company will have less office real estate, but it will be better.

“It will be about the quality, not about how much of it you have,” Zampini said.

“It is a journey we have been on for several years, but I think the average company will just consume less real estate,” Deutsche Bank Managing Director for Corporate Services Kathryn Harrison-Thomas said. “[People working from home amid the pandemic] is a chance for us to reset our strategy. I don’t think many companies will just go back to what they were doing before.”

She pointed out that the vast majority of the world’s financial services professionals are working from home, and financial markets are still functioning, even if they are looking decidedly downbeat.

Badham said about 80% of the occupiers AXA signed for its 1.3M SF 22 Bishopsgate skyscraper in London took less space than they previously occupied.

“If you have less space you want better space, and that means better amenities, and being smarter in how it is operated,” he said.

In his book 50 Things That Made The Modern Economy, economist Tim Harford argued it took almost 50 years for the productivity benefits from electrification to be truly felt. Hopefully it won’t take as long for new trends in work to have an impact, but for companies to harness the potential benefits that new ways of working can bring, it will take a change of mindset in how they organise their businesses, and how they utilise their office space.