Current measures of productivity become less and less useful the higher the level they go: Aggregation increasingly blurs the performance picture Apples get mixed with pears Specific inputs used for specific outputs and outcomes get …
According to Philip Aldrick, Economics Editor of The Times, Britain’s dismal productivity gap with much of the developed world is due not only to lack of investment, bad management and low interest rates as previously …
An article by Lalin Fernandopulle in Sri Lanka’s Sunday Observer, headed ‘Productivity policy vital for economic growth’, promotes the worth of all nations having a National Productivity Organisation Sri Lanka is the only APO (Asian …
The UK government’s ‘Industrial Strategy’ for making the UK more competitive and the economy better-balanced essentially involves increasing R&D investment and workers’ skills It considers five areas for productivity improvement – Ideas, People, Infrastructure, Places …
Barnes Wallis, the English scientist of ‘bouncing bomb’ fame, once said: “There is a natural opposition among men to anything they have not thought of themselves”
He might better have said ‘western men’ – ‘eastern men’ can be ‘all ears’
Once upon a time, just after WW2, three eminent American statisticians tried to convince US businesses of their radical new ways to improve productivity by reducing waste and improving output volumes and quality – ways which employed basic statistics at their heart
But those same US businesses chose to ignore them, preferring more obvious stuff like Work Study and O&M, then Mathematical modelling via Operations Research, then TQM for culture changes and employee engagement – and nowadays ICT systems rule the roost
Fed up with those deaf ears, the three statisticians – Doctors Edwards Deming, Philip Crosby and Joseph Juran – crossed the Pacific to Japan where they were listened to intently – the result was the Japanese economic miracle – a transformation over a decade from a reputation for widespread shoddy goods to one quite the opposite – and with exponential increases in profit margins and overall profitability
In the 80s and even 90s, the US, and West in general, could no longer ignore this huge change in their competition – they flew thousands of managers to Japan to discover their secrets – they also came back no wiser, thinking it must be something to do with culture differences and changes
Hence TQM (Total Quality Management) was born, and it took over a decade before most in the West realised it was not the answer – worse, it was an expensive failure given it produced few quantifiable and significant results yet cost a lot in time and effort
Meanwhile, productivity deaf ears continue in the West
Readily available common sense about productivity improvement is again being ignored whilst organisations believe it’s ICT systems plus digitisation of processes that will transform their financial accounts and improve their service levels
The first problem is productivity has been so downgraded in the minds of most managers that it no longer features on any boardroom agenda – some soul-searching is thus required straight-away
Then consider what’s on offer to organisations in the West if and when any of them do seek to improve their productivity – if only as a by-product of some other worthier aim:
Management organisations like the CBI and IoD offer no help via their websites and largely ignore the topic
UK business schools, to their everlasting shame, offer no courses on productivity improvement
And UK management consultancies that peddle good practical sense for big productivity improvements are as rare as hen’s teeth – but there are hundreds, including all the top ten, who do not – they prefer to address leading-edge thinking in more strategic or technical areas, which also command higher fees
And none dare offer their services to clients at a cost which includes a ‘payment by results’ element – as per investment advisers with their 2/ 20 formula i.e. 2% to cover their basic costs only, and 20% of resultant profits
It’s another example of an ‘elite’ bubble, all thinking and speaking the same way and blotting out pesky outsiders with their differing views
A question many managers often ask is “Why do so many big change projects fail?”
It’s not so much the steps they take – all follow the same basic steps when under way viz:
But, as detailed in the book ‘Productivity Knowhow’, where most go wrong is with other steps needed before, during and after the above i.e. they’re:
Badly set up – unclear terms of reference, unquantified targets, lack of obvious senior management support, no links to corporate plans
Badly manned – ‘he got us into this mess’ appointments, lack of people with past success – lack of the right skills, experience and attitude – consultants put in total charge
Badly project managed – lack of a timetable and accountabilities, no focus on the customers, deadlines allowed to drift, too little or too much time and resources made available
Badly implemented – employees are just told to implement changes without understanding why and what’s in it for them, little effort is made to ensure the changes work well after day one
Another interesting (and quick) read on this topic is ‘Who killed change?’ by Ken Blanchard of ‘One Minute Manager’ fame – his focus is on why implementing change stumbles so much, not on deciding what changes are needed in the first place, nor why they’re needed
He lists 13 pitfalls that stop major change in its tracks without attaching relative weightings to each one so the reader is left to decide his or her own:
Culture = The predominant attitudes, beliefs and behaviour patterns of the organisation:
The current culture is not fully understood at first
Any disconnect between actual values and those posted on the wall means the latter are ignored
Employees become cynical about leaders who say one thing and do another
One must determine how to leverage the current culture to support, enable and sustain the change
To change the culture requires leadership, measures and incentives
Commitment = Employees’ motivation to engage in the new behaviours required by the change:
Employees are far more likely to buy in to a change they’ve influenced than one imposed on them by others – their involvement may lengthen implementation but greatly increase the likelihood of success
Uncovering and addressing employees’ concerns about any change increases both trust and buy-in
Those ignored can derail all
“There’s no commitment without involvement”
So provide forums for people affected to express their views, listen to bosses, become involved, have doubts removed, not least by others converted – do you want compliance or commitment?
Sponsorship = The senior person pushing for the change and with authority over resources needed:
He must live and breathe the change in behaviours needed to show he is serious
Actions speak louder than words
He must assemble a well-qualified change team
He must not announce visions such as “To be the leading XYZ company” when all employees know it’s unrealistic given the company is nowhere near that position and steadily falling further behind
Change team = They have responsibility for deciding and making the changes – leading people through them and delivering the outcomes wanted:
They must speak with one voice ALWAYS and resolve employees’ concerns
Members should include advocates for the change – people who have been part of successful projects, have the time, have respect of peers, are highly skilled, will speak the truth, can communicate – people from different areas, and represent diverse points of view
They must involve, not ignore, employees affected
Communication = Essential dialogue between changers and those affected on why the change is needed:
Mixed messages from sponsors, other managers and the change team give employees excuses not to change
Don’t focus on getting words out – also listen i.e. take employees’ words in
Use all types of media, often
Urgency = How quickly employees must change:
Employees must be convinced that the status quo is not a viable option – what is wrong with now
Present them with the facts, show the gaps between what is and what could be, and then ask them why the need to change
Spend lots of time with apparent losers
Vision = A clear and compelling picture of the future after the change:
Go beyond a slogan and present a clear picture of what the future could look like
Ensure (most) employees can see themselves benefiting in future
Don’t invent a vision off-site at some exec retreat
Involve the maximum number of employees in the visioning process to maximise the number who will want to be part of it
Plan = A detailed programme of actions to fully integrate changes into the organisation:
Don’t focus on the big picture and ignore the detail, the main stumbling blocks for change projects
Always try to include ‘early wins’ – build a momentum of enthusiasm or naysayers will prevail
Always include employees affected in the planning process, especially the resisters who will identify what could go wrong
“Those who plan the battle rarely battle the plan”
Budget = The allocation of limited resources:
Ensure the project has enough resources for the change to succeed
Don’t let he who holds the purse strings run the whole show
Training = All employees affected have all the new skills needed:
Pilot the changes first – to learn who needs what training
Employ trainers whom employees respect and will learn from
Incentives = Rewards for desired behaviours and results:
They must be meaningful/ relevant – and not necessarily monetary
They must be on offer to all, not just a few
Employees must not forget their other roles
Performance management = Goals and expectations:
Track outcomes expected of people – provide feedback and coaching
Ensure they have the time and capacity for the extras needed for the changes
Some people want change but are not willing to pay for it
HR should be the most important division – (not a dumping ground for failures)
Accountability = Delegation, follow-up and consequences:
Leaders must ‘walk the talk’
Avoid lots of action then no follow-up
Need clear measures of success for all, not just the leaders – which are regularly reviewed
With so many important factors to consider, it makes one wonder about the chances of success for any big improvement initiatives, especially those sought at national level – each one is usually announced with considerable fanfare, just as many companies announce any big changes within – but initial enthusiasm for them soon wanes, effort becomes half-hearted and any measured results are usually meagre – hence interest moves on
In particular, over the last two years the UK has announced the following grand initiatives:
PLG – Productivity Leadership Group – aka ‘Be the Business’ – led by a group of business leaders – main output is inspiring others with ‘best practice’ stories – now well into its second year of existence, but to what quantifiable effect?
PIN – Productivity Insights Network – set up this year – sponsored by Sheffield University and Lord Jim O’Neill – no known output as yet
Andy Haldane, Bank of England chief economist, recently appointed to lead the UK government’s drive to improve UK productivity – given HMG can only impact some 20% of national productivity via investment in infrastructure, R&D and training, Andy’s chances of quick quantifiable wins are slim
And only today, New Zealand has announced a similar venture
Some of the biggest names in New Zealand business are to form a Business Advisory Council and advise Prime MinisterJacinda Ardern (see below) on how to supercharge the New Zealand economy
The council is designed to advise the Government on how to build a productive, sustainable and inclusive economy that improves the well-being of New Zealanders
“New Zealand needs a modern economy that has the investment, innovation and skills required to ensure we can all share in prosperity and opportunity in a sustainable way” Ardern said.
“To do that we need to work closely with business leaders, share ideas and consider solutions to overcoming barriers together”
A mix of six women and seven men with small to large business experience, from across New Zealand, have been selected to provide advice
The council is expected to meet three times a year with the prime minister and her representatives – it will provide high-level, free and frank advice on policies that directly affect business, harness the expertise of the private sector to inform government policy and build closer relationships between government and business
“I will also be asking the council to gather advice from their peers in the domestic and international business community on some of the most important issues facing New Zealand including how we best grow and share our prosperity, support regional development, and transition to a clean, green New Zealand” Ardern said.
Again, another grand, well-intentioned initiative, plus another feather-in- the-cap for those council members chosen – easy to set up and announce, easy to be seen to be ‘doing something’ about a well-known problem, easy for the government to park responsibility elsewhere, but unlikely to make any noticeable difference to the well-being of all
Why so cynical?
Because there are many other avenues of worthy advice that government ministers can and do tap before making their decisions – and re-election, not long term national health, is too often uppermost in many minds
The above national initiatives are a start, but improving productivity, even at organisation level, is invariably a long haul, not a quick fix
Once major initiatives are announced, few get down to the detail to ‘make the hard yards’ – and even fewer try to quantify what % difference they targeted or made
It reminds one of being a participant in the Fastnet race – there’s much publicity and excitement at the start off Cowes as thousands of spectators watch the 200 or so boats begin their adventure – however, soon after and when past the Needles, each boat usually finds itself all alone out at sea with some 600 miles to go – whether they reach their target, off Plymouth Hoe, depends on just the skipper, crew and boat – and that’s when most of Blanchard’s 13 pitfalls become relevant for their success
Everyone loves the glamour of grand new initiatives – few love the hard graft that must then follow to even finish the job, never mind come in ahead of others
The following are extracts from an article in the Huffingtom Post by Mike Clancy, General secretary of Prospect – one must involve all employees, all the time, for effective productivity improvement
The UK is not productive enough and we do not share wealth widely enough:
Unemployment may be historically low but public satisfaction with the economy is also low.
Nearly three-quarters of the public think that more should be done to improve the quality of jobs.
Less than one in ten think all jobs are fair or decent.
Eye-wateringly deep cuts over nearly a decade have failed to eliminate the deficit, growth is sluggish and against the RPI measure of inflation, real average hourly pay is almost 10% lower than it was in 2008.
UK productivity performance post-crash remains absolutely woeful, with a growth of 0.3% per year leaving us trailing behind other G7 economies whose output is now, on average, 20% higher per hour of work. This is not evenly spread across the economy, but on aggregate it is acting as a handbrake on our attempt to accelerate away from the financial crisis.
Growth forecasts were not rosy in 2015, but every year since the EU referendum forecasts have been downgraded as growth targets have been missed.
There is some recognition of this at the top of government, but the central economic challenge facing the country is something that requires more than episodic engagement and half-hearted policy initiatives.
What is needed is an understanding that poor productivity growth is not something that can be put right by pulling a few levers in Whitehall – it is intrinsic to our current economic model. If we want to change it, we need to change that model.
The appointment of the Bank of England’s Andy Haldane to lead the government’s work on productivity may herald the advent of some badly needed fresh thinking. In a forensic speech this summer Haldane explained what he sees as the root causes of our current malaise. There was a lot in the speech, but two themes stand out:
Lack of innovation
Lack of institutional economic infrastructure.
Simply put, the UK spends far too little on innovation, research, and development. Around a year ago the government announced an ambition to raise R&D spending from its current pitiful rate of around 1.7% of GDP to 2.4% over the course of a decade. The claim was that this would make us “the world’s most innovative economy”. In fact it would still leave us below the OECD average.
As we stand on the brink of a new industrial revolution with emerging technologies such as AI, robotics and breakthroughs in renewable power generation set to redefine what is possible, it is more essential than ever that the UK invests in innovation. This cannot be done without the public sector, which can generate around £1 in private sector R&D for every 30p invested. If the government is serious about innovation then they need to show that commitment with serious investment in public research spending.
But it is one thing developing new tech – integrating it into the workplace is a different challenge altogether. The potential human costs of getting this wrong are huge, yet the institutions that help to manage change at a national and company level have been dangerously hollowed out.
If the so-called fourth industrial revolution is something that is done to workers rather than with them then it will result in huge economic and political blowback.
It should not be revolutionary to suggest that companies that listen to their workforce are more productive and have more capacity to successfully manage the changes needed to increase that productivity further.
Most CEOs would pay lip-service to this idea. But moot the idea that companies should be compelled to listen to their workforce through compulsory collective bargaining and it is as if you have suggested ending capitalism itself.
It is time to call time on this top-heavy economic model and its defenders. The belief that all wisdom in a company is contained within the boardroom is central to our productivity and wages crisis.
If we are serious about ending it, we need to shake up the power imbalance in companies, reverse the decline of collective bargaining and involve everyone, government, employers and trade unions in a national mission to raise productivity.
According to an article by Michael Odell in The Times, Basecamp is a US software/ tech company that supposedly runs without the scourge of 80 hour weeks, unrealistic deadlines, weekend emails and meetings
Two American guys, Jason Fried and David Heinemeier Hansson, run Basecamp – they’re also authors of a new book called It Doesn’t have to be Crazy at Work covering their creation of a ‘calm office’ where everyone is happy and well paid, and stress doesn’t exist
The two brim over with iconoclastic views about work, including:
Meetings should be a last resort – pull your eight most talented people into a one-hour meeting and that’s eight hours of quality work lost
Sustained exhaustion is not a badge of honour, it’s a mark of stupidity
No-no’s re staff attendance:
Are they working? – Dunno
Are they taking a break? – Dunno
Are they at lunch? – Dunno
Are they picking up the kids from school? – Dunno – Don’t care
Adopt traditional workplace titles reluctantly – there’s often a lot of bullshit around them
40 hours a week is enough for anybody – workaholics who slave all hours out of loyalty to the mission are advised to “f*** the mission”
Staff benefits should include:
Pay the best rates in the US tech industry
Take proper holidays, not ‘fakecations’
While on holiday – “log out, delete the company app, go dark” and “here’s $5,000 towards your trip”
Only work four days a week in the summer
Have a paid sabbatical every three years
A free monthly massage at a spa
A free monthly fruit and veg delivery, to their homes
Our goal? – We have no goals:
No customer count goals
No sales goals
No retention goals
No revenue goals
No profitability goals (other than to be profitable)
People who say ‘doing nothing is not an option’ are dumb – nothing should always be on the table
If you’re the multi-billionaire gorilla in the room, why not pay good rates to your staff?
We make good money so why try to avoid taxes – why not set an example instead – it really rubs us up the wrong way when people don’t pay enough tax
Many of these views were prompted by a survey they conducted of 600 people, asking “who managed three to four hours effective work in a day?” – only 30 put their hands up
Such a result will come as no surprise to regular readers of our posts
And when, in 2016, Basecamp showed signs of booming sales and growth, they took action to slow things down, stopped hiring and tripled selling prices – it worked – they continue to exist but stopped growing
They say they don’t want to be the next Jeff Bezos and Amazon:
“I don’t want to meet the Canadian Prime Minister for lunch”
“Colonising space is not on my to-do list”
So what do they want?
“We don’t want a bigger company – and if that means leaving some money on the table, so be it”
The Financial Times reported on a study “Robots at Work,” written by Georg Graetz, a researcher at the Department of Economics, Uppsala University, and Guy Michaels, London School of Economics, which examines the impact of industrial robots on jobs, productivity and growth.
Industrial robots are programmable and are widely used for assembly, packaging, inspection and agricultural harvesting. In recent years, use of industrial robots has increased sharply, while the price of the robots has declined by about 80 per cent, taking into account increased quality.
A brief summary of their findings and conclusions follow – readers may disagree
Job opportunities and wages
“We can see that industrial robots increase employee wages and increase productivity and that the number of jobs for low-skilled employees, and also to some extent for the medium-skilled, decreases, while job opportunities for the highly skilled increase,” says Georg Graetz.
“Most likely the profits realised through the introduction of robots are divided among the company and its employees.” (an optimistic view)
The composition of the labour market is changing towards a higher proportion of highly educated employees while at the same time the study suggests that the total number of jobs is not affected by industrial robots.
Industrial robots increased the annual growth in GNP in the countries surveyed by 0.37%, and labour productivity increased by 0.36% (unbelievable accuracy)
“This means that without industrial robots, growth in labour productivity would have been about 5% lower during the 14 years we have studied.”
The contribution of robots to the economy is comparable to the economic importance of the railways in the 19th century or the more recent contribution from ICT (Information and Communication Technology).
“In this context, it is interesting to note that industrial robots account for only 2% of capital, which is much less than technological driving forces for growth in the past.”
Of the surveyed countries, the number of robots increased most in Germany, Denmark and Italy.
Countries that had a more rapid increase in the number of robots also had a greater increase in labour productivity.
Continued increases in productivity likely
The study suggests that:
An increasing number of robots produces a reduced increase in productivity – that is, there is a limited potential for utilising robots in production. ( we disagree – now is take-off, not slow-down, time – and what of the impact on all other sectors?)
Robots will continue to contribute to an increase in growth and productivity.
Industrial robots are evolving and will be able to do more.
At the same time, new types of robots are coming, such as medical robots that can perform surgery or different types of robots for transport.
This development will contribute to continued growth and production increases.
By refreshing contrast, consider the views expressed in an article by Kweilin Ellingrud who claims to cover ‘transforming large-scale companies and workplace diversity’ viz:
To date, the results of integrating automation and new technology in manufacturing operations have been promising
Their bottom lines have been improving via higher efficiency and greater employee productivity
There will be more automatic real-time data feeds and data monitoring
For employees, the mix of their work is changing to be less repetitive and more judgement-intensive
In addition, new and more exciting jobs are being created, rather than merely eliminating positions
Workers are or will be doing less predictable physical work, data processing and information collection – and, at the other end of the spectrum, making better decisions based on data collected, more managing of others and reacting better to what customers want
The result is manufacturing jobs are growing at the fastest pace for two decades
And, over all sectors, there are now far more people than ever before employed
In future, there will be a lot of job transitions and retraining needed
Kweilin then quotes MGI (McKinsey Global Institute) projecting that:
About 15% of the global workforce, or 400 million people, will be displaced by 2030
Another 8-9% of employees will work in categories that do not yet exist today (unknown unknowns?)
So there will have to be significant reskilling of workers
Kweilin and the MGI must surely trump the dismal views of Georg and Guy