Aggregation hides info needed

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 lost in the mix

At national level, this aggregation problem is at its worst, compounded by much output and most input being uncounted or uncountable rendering official statistics useless for managing the economy and meaningless for any manager struggling within it

At organisation level, different outputs in the private sector can be counted either separately or together if converted into cash

However, the latter is not possible in the public sector where outputs (of most services) are provided free at the point of delivery and so have no price attached – hence official statisticians employ estimates and assumptions to complete their calculations, thereby introducing considerable errors which further blur the picture

And, in all sectors, costly inputs counted are confined to volumes of labour (hours or FTE numbers being easily measurable) whilst quality of that labour (skill levels, experience, morale), raw materials, SFGs (semi-finished goods), capital investments, IT systems and corporate knowledge are all ignored

The result is most national productivity figures cannot be trusted for an ‘accurate fix’ on the current national position, nor trends being followed, nor relative productivity gaps with other nations

Dare to claim this in public and the only credible defence one hears is: “They’re the best and only measures we have”

One response heard is: “If that is so, then ignore them – better to stick your finger in the air and just hope”

We say: “Surely it is not beyond the wit of man to find a set of measures useful to those on any bridge which helps them avoid rocks ahead, take advantage of wind-shifts and compete with the rest of the fleet”

CONCLUSIONS:

  • Officials should accept that, at the macro level, it’s impossible to measure productivity in any useful way
  • What ministers at national level and managers at organisation level need is first, an alarm bell system to warn of dangers and opportunities ahead – then a framework of measures enabling them to drill down to levels where productivity measures are meaningful and useful
  • Only then, would ‘officers on watch’ have a suite of productivity measures which put them in good control for navigating their ships safely

 

UK productivity gap half-explained?

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 thought

Another significant causal factor has been found

The UK’s ONS – Office for National Statistics – asked the Paris-based OECD – Organisation for Economic Cooperation and Development – to look into the consistency of national data produced by 40 different countries and they found ‘the maths used leads to misleading results’

It turns out there are differences in the adjustment of official figures used to calculate hours worked and employment levels – different countries make different adjustments for their self-employed, overseas workers, prison workers and even drug traffickers and sex workers – and for workers’ tendency to underestimate holiday time taken

For example, France marks down employees’ reported hours by nearly 20%

Hence, comparisons of national labour productivity levels – national output (GDP) divided by national hours worked – end up being ‘apples with pears’ comparisons

If the UK made the same sorts of adjustments, it is estimated their labour productivity would increase by 10%

And actual labour productivity gaps between the UK and France, Germany and the USA would be much smaller than officially thought viz:

     . 16%, not 24%, less than USA

     . 14%, not 22%, less than Germany

     . 11%, not 19%, less than France

So, whilst the finding of these errors does not explain away the apparent productivity gaps between the UK and other developed nations, nor cover the errors that abound when assembling all national productivity data, it does suggest things may not be quite as bad as once thought, at least in the UK 

So let’s leave the last words to Richard Heys, deputy chief economist at the ONS: “This research reveals some striking differences in the way different countries estimate the amount of work taking place – however, they don’t explain why productivity growth has been so stubbornly low for so long”

     . 

Work hard or work well?

Many say the secret for a good life is ‘work hard and play hard’

Leila Hock, in an article for Career Contessa, disagrees – ‘work hard’ apparently “makes my eyes roll a little”

She believes we’ve become too preoccupied with “the grind” and it’s actually bringing us down – “It has a negative effect on productivity”

When people say they’re working hard they mean they’re putting a lot of time in – this mindset is because our economies once hinged on time:

  • Workers ran machines or performed rote tasks, and those machines and tasks would give a pretty static output per hour
  • Occasionally, someone would find a way to increase output per time unit but, usually, more time spent led to more productivity

 

Nowadays, developed economies have transformed into knowledge economies, and they require brainworkers/ thinkers to produce new/ better ideas, decisions and results

The problem is that appropriate performance measures to monitor their progress at work have not been developed – instead, the old familiar industrial-age measures and thinking continue to be used for the new economies

People still tie time to the value of work, not least because measuring time is easy – it’s a number and numbers can be easily compared

Hence, when most managers see someone arriving early at the office, leaving late and responding to emails at all hours of the night, they usually think said employee is committed to her work and trying hard – why would she spend all that time that way otherwise?

What most managers need to do is start measuring the value of employees’ work – and that means truly understanding why they were hired and what they were required to produce – and it’s not just the quantity but the quality of their output that now matters

Few managers do this at present, however, not least because it would take considerable time – and as hours input wins their attention more than productive work, such an exercise is deemed ‘a waste of valuable time’

Consider also the professions that still bill clients solely by their time inputs rather than ways which reflect quantifiable results achieved – and who value their employees by the hours/ days billed regardless of the value obtained by the clients – for example:

  • Lawyers
  • Management consultants
  • Accountants
  • Marketing and PR consultants

 

Leila ends up saying that, instead of such archaic thinking, what’s needed nowadays is a focus on ‘working smarter, not harder’ for the benefit of both customers and employees

Conclusions:

  • Success is no longer determined by hard work and long hours
  • Success comes from using time productively and being effective
  • That requires a focus on what one is trying to accomplish each day and week
  • And, once completed satisfactorily at least, one should relax

All nations need a National Productivity Centre

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 Productivity Organisation) member country which does not have an NPO (National Productivity Organisation).

Company director Sunil Wijesinghe says: “Setting up a fully-fledged stand-alone NPO is the way forward for industrial and overall economic growth in Sri Lanka”

He said their National Productivity Secretariat (NPS) is still only a unit under a Ministry while in Singapore and Malaysia they are powerful statutory bodies.

The USA was the most productive nation at the end of the World War 2 – Japan realised Asian countries lagged behind in economic growth and initiated the Asian Productivity Organisation (APO) in 1961 with Asian member countries – Sri Lanka too joined, albeit a few years later

Most other Asian countries had open economies at that time, and developed their productivity programmes fast

For example, the Japanese Government carried out a massive program to inculcate good productivity habits and promote productivity techniques and practices in the 1960s through radio and TV programmes but later it was the private sector that carried it forward through the Japanese Union of Scientists and Engineers (JUSE) and the Japan Productivity Centre for Socio Economic Development (JPC-SED).

At the start of the National Productivity decade in 1996 Sri Lanka started emulating Singapore but later the focus changed.

Singapore claims their productivity programmes have helped economic growth substantially – they had the highest patronage with former Prime Minister Lee Kuan Yew initiating the programme when the annual productivity theme was launched each year – the initial focus of the program was to make government institutions more productive.

A few Sri Lankan enterprises have adopted good productivity practices while others lag. We need a massive re-launch of productivity enhancing programmes in Sri Lanka.

Not only industrial growth but also overall economic growth can be influenced by productivity because productivity improvement techniques can be applied not only in factories but also in offices, plantations, schools, government offices and even homes

Sri Lanka lags behind in industrial growth since economic policies are not consistent – frequent policy changes wreak havoc on the strategies of private companies.

What is needed is for policy makers to prepare a comprehensive medium-term strategic economic plan, in a similar way to strategic corporate plans – Singapore prepared a Strategic Economic Plan in 1990 and stuck to it.

Thereafter we need to communicate it to the people using tried and tested change management programmes so that the population buys in to it.

The ideal would be economic policy stability even with changes of government.

During a productivity study tour to Singapore in the 1980s, and following a briefing at the then Singapore Productivity Board, one of our Sri Lankan colleagues visited the wash room and, having seen a notice there which said “20 dollar fine if you don’t flush”, came back and asked the Director conducting the briefing how they could identify who the culprit is. His response was: “How come only Sri Lankan visitors ask this question? The notice in the toilet is a mere deterrent,” he said.

He said having observed the happenings in Sri Lanka, Singaporeans believe that Sri Lankans are overly legalistic, and this hampers progress.

Today every newspaper, radio and TV channel gives pride of place to (anything other than) coverage of management, productivity, or economics

We should focus on building up our economy and improving the productivity of our enterprises

And setting up a properly resourced NPO would be a good start

N.B. The same void exists in the UK where there is no well resourced/ well-known UKPC – Why?

UK industrial strategy

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 and Business environment – and recognises four grand challenges:

  • Artificial intelligence and machine learning
  • Clean growth
  • Future mobility
  • Ageing society

In particular, UK Prime Minister Theresa May has since confirmed her commitment to raise R&D spending to 2.4 % of our national income – an increase of £22 bn over the next 12 years when it increased by just £6.6bn over the last 12 – her aim is to help the UK become “the ideas factory of the future”

So is the strategy working?
The biggest challenges for smaller (SME) manufacturers are poor cash flow, high energy costs, reduced margins, competition from Asia, lack of skills and an ageing workforce i.e. most not listed in the grand strategy
So what help is on offer to these vitally important SMEs?
  • The HVMC – High Value Manufacturing Catapult:
    • The HVMC is a network of seven centres who work with industries, large and small, to prove and de-risk technologies that can be adopted in their own factories to improve productivity and quality
    • It’s funded through the BEIS – Business, Energy and Industrial Strategy Department – and Innovate UK – the national innovation agency
    • It’s tasked with engaging SMEs and measuring the impact of the Catapult on improving SME competitiveness
  • The ‘Made Smarter’ programme, led by Siemens CEO  Jürgen Maier:
    • The programme facilitates the adoption of digital manufacturing technologies such as robotics and automation, augmented and virtual reality, artificial intelligence and machine learning
    • The aim is to unlock big improvements in productivity
    • The approach is to link with existing growth hubs
    • However, some say that while it may eliminate duplication, its success will depend on getting people in post who understand industrial digitalisation and the challenges of change-averse business cultures
  • And, only recently, an independent council has been set up to oversee the delivery of the ‘Industrial Strategy’, headed by Andy Haldane, chief economist at the Bank of England:
    • Haldane is not a manufacturer but qualifies, apparently, because he’s ‘familiar with monitoring government performance on key economic indicators’
    • The council will scrutinise R&D spend, seek to keep the UK economy on track and assess whether the strategy’s aims are being delivered
So the UK might be said to have a productivity plan, albeit one which addresses a mere 15% of its total economy i.e. the manufacturing sector alone

Expert advisers are in place, universities are being encouraged to join in, professional monitors are watching key indicators, billions have been allocated

What could possibly go wrong?