May 02

AI and productivity

Extracts follow from a ‘cover story’ just published in the Financier Worldwide Magazine

The global AI market has rocketed in recent years:
  • According to UBS, the AI industry was a $5bn marketplace by revenue in 2015. By 2025, the size of the AI software market is forecast to reach $126bn
  • McKinsey Global Institute reckons AI techniques could create between $3.5 and $5.8 trillion in value annually across nine business functions in 19 industries in the coming years. This accounts for about 40% of the overall $9.5 to $15.4 trillion annual impact potentially enabled by all analytical techniques.
  • Accenture claim that by 2035 AI will double growth rates for 12 developed countries and increase labour productivity by as much as a third.

 

Automation evolution

AI itself has evolved dramatically, particularly over the last 10 years.

“Machine learning, a subset of AI, has been an area of research for over half a century but has only achieved transformational success with recent increases in processing power and memory and the availability of very large training data sets, sometimes by-products of the internet age,” explains Matt Hervey, a partner and head of artificial intelligence at Gowling WLG. “This has vastly improved computer vision and language processing, in turn enabling unprecedented automation of previously human-only tasks. High-profile examples include self-driving cars and medical diagnosis, but vision and language perception enable automation of a vast range of low profile, menial tasks across all sectors.

“The effects of such automation are unclear to experts and the public alike, so current attitudes to AI may not last,” he adds. “What is abundantly clear is that governments, regulators, lawmakers and companies around the world are conscious of both the economic potential of AI and the risks to society, including fake news, mass unemployment, loss of privacy, and challenges to human autonomy and dignity.”

More recently, the coronavirus pandemic has had a significant impact on adoption of AI, as companies responded to the challenges of worker productivity during the crisis. “COVID-19 has accelerated AI and its applications by decades,” says Clare Lewis, a partner at McGuireWoods. “With the unprecedented move online, from tele-medicine, e-learning and remote working, the demand for AI and machine learning has never been greater.” Indeed, AI can help remote workers stay focused on their most important duties by eliminating tedious tasks.

Sector-specific trends have also emerged during the COVID-19 crisis, with healthcare one obvious beneficiary. “The beauty of AI is that it can benefit all sectors that rely on data,” says Giles Pratt, a partner at Freshfields Bruckhaus Deringer LLP. “But the healthcare sector, and particularly pharmaceutical and biotech, may have the most to gain, as ‘failure rates’ in drug research and development (R&D) remain high and costly. “AI is increasingly being used in drug development, analysing and learning from large data sets to identify suitable compounds and to predict efficacy and side effects of new treatments,” he continues. “Reducing the time and cost involved in R&D can make a tangible difference in this space – and the importance of efficient drug development has really been put in the spotlight during the COVID-19 pandemic.”

In manufacturing, AI can monitor and analyse equipment to issue alerts when a service is necessary. This predictive maintenance enables businesses to cut out scheduled services. In turn, downtime and overall maintenance costs are reduced.

Across a range of industries, automation is being targeted to replace specific tasks within a role, particularly repetitive tasks considered ‘low-value’. “AI can make certain jobs more efficient and interesting,” says Ms Lewis. “In the legal realm, for example, lawyers use AI tools for mundane document review and due diligence tasks which previously needed to be reviewed manually. When workers are freed up from menial tasks, they can focus on increased client service and innovation.”

 

Cyber strength

Cyber security is another key area of AI application – indeed, it is the leading area according to the Consumer Technology Association, with 44% of all AI applications being used to detect and deter security intrusions. AI can provide an ‘always on’ solution to help protect businesses from malicious attacks. It can monitor systems to identify and fix vulnerabilities, allowing the IT team to concentrate on key risks.

“The scale and complexity of large organisations’ IT environments means the task of monitoring systems for irregularities is becoming increasingly difficult,” points out Mr Pratt. “As part of a multi-layered cyber security strategy, we see AI playing a significant role in detecting and responding to threats by first learning what is ‘normal’ for a specific IT environment, and then identifying anomalies. That makes AI an important line of defence against attack, and in managing the legal and regulatory risks associated with cyber security incidents,” he says.

Workforce worry

There is, however, so much that we do not know about the implications of AI. One thing is increasingly clear, however: AI will be profoundly disruptive. Some already view the proliferation of AI and its potential future applications in a negative light.

In terms of productivity and employment, for example, robots have been depicted as taking jobs from workers. Concerns about AI making human labour obsolete are understandable. According to a recent study from MIT and Boston University, robots could replace as many as 2 million workers in manufacturing alone by 2025.

“Whenever you have a leap in efficiency, there are large strides made in terms of economic growth,” says Ms Lewis. “However, the dark side to AI is that some workers, such as truck drivers for example, will need to re-tool their skills very quickly and be able to relocate to find new jobs. Software developers around the world are developing software specifically geared to replace well-paid managers who perform repeatable tasks. The AI technology being developed is very exciting, but the collateral damage will have long-term repercussions in terms of poverty and inequality. Innovative solutions are needed for those who fall through the cracks.”

COVID-19 has exacerbated this issue. In the US, for example, around 40 million jobs were shed at the height of the pandemic, and according to the University of Chicago, around 42% of those losses will be permanent. With many companies in survival mode for the foreseeable future, the pandemic has provided further incentive to increase automation levels. AI, after all, does not need to socially distance.

On the other hand, there are suggestions that AI will actually have a net positive impact on jobs. According to PwC, for example, AI is projected to create as many jobs as it displaces in the UK over the next 20 years – in absolute terms, around 7 million existing jobs could go, with around 7.2 million engendered.

In the short- to medium-term, AI is more likely to automate certain tasks within a role, rather than the entire role itself. There will be a focus on AI for complex calculations, routine processes and pattern recognition, for example, which can boost profitability and free up employees. Ultimately, AI can exist symbiotically with humans. The technology does not operate in a vacuum; it requires humans to function properly and deliver the desired efficiency and productivity gains.

Implementation hurdles

To date, AI has typically been deployed in the form of industrial and collaborative robotics, as well as machine vision and machine learning. But it is continually evolving. For example, industry leaders expect significant growth in predictive systems which use AI to manage intelligent supply chains. Manufacturers also predict increased use of robotic process automation (RPA) in their operations.

At present, the most significant barrier to deployment of AI solutions is that many organisations lack clarity on how to implement them. There is also a lack of employees with the necessary digital skills to implement AI, or even to define what skills are needed.

To overcome such issues, companies must adopt a holistic approach. This may entail a workforce transformation strategy which considers what AI-specific jobs need to be created and how to provide relevant AI training to employees at every level.

“Some companies are proposing their own ethical frameworks to protect workers,” explains Mr Hervey. “Rolls-Royce recently launched its Aletheia Framework for AI. This requires the company to consider the impact of AI on its workers, such as to deploy AI ‘shown to improve the well-being of employees, such as improved safety, working conditions, job satisfaction’, to analyse ‘potential job role changes or potential human resource impacts and the opportunities for retraining’, to explore ‘upskilling opportunities’ and so on.

Currently, the topic is a source of debate and speculation, with competing arguments on all sides. “The impact on labour markets remains to be seen,” says Mr Hervey. “Some futurists predict mass unemployment, some predict that new forms of work will be invented, while others predict that AI will be used to ‘augment’ rather than replace human employees.

Thinking regulation

As with any disruptive technology, the dawning of the age of AI has sparked calls for greater regulation. The need for increased regulation is becoming clearer, given the speed of AI development and uptake.

The European Commission is currently developing a regulatory framework that could have an impact on any company looking to do business in the EU. It hopes to promote a human-centric approach, where AI primarily services people and increases their wellbeing.

In anticipation of regulatory developments, it is prudent for companies to pre-emptively introduce a vetting process for AI products and services, to reduce disruption and drive productivity.

Rewards

AI stands to play an increasingly significant role in the day-to-day operations of many businesses, helping them to create value by generating profit, reducing costs and improving customer experience.

Increased integration of AI into workstreams seems inevitable, enabling companies to eliminate tedious tasks and focus employees on more productive activities, boosting speed, efficiency and accuracy.

Overall, AI-enabled technologies have the potential to dramatically increase economic output.

Apr 27

How We Work Has Changed Forever

Keir Weimer pens his thoughts in a Forbes magazine article – he adds that he is founder of Keir Weimer Multimedia, a real estate & lifestyle entrepreneur, No. 1 bestselling author, keynote speaker & high-performance coach.

The following are three trends I have seen emerge and that I predict will continue to grow in the coming months and years.

Individualism and self-productivity will rise in importance.

Never before has there been such a spotlight and a focus on the individual work and output of singular members of an organization. Many of us have been working remotely and have been on our own island creating, interacting and collaborating through Zoom and other technology with our teams and companies, all scattered across the country and the world. We had to find new ways to stay motivated, foster our creativity, stay organized and continue to be productive members of our companies.

However, many people have felt more of a spotlight and added pressure to prove themselves and make sure their bosses and teams know that they are staying productive and focused on the goals even though there’s nobody looking over their shoulder anymore. The level of accountability and the system of accountability has changed. It’s more important for us to be proactive and take initiative in making sure our work and our output are not only valuable, but it’s also acknowledged and recognized in ways that we didn’t have to before. This will likely only continue. The focus on our individuality and singular individualism has never been more apparent.

Deliberate and intentional connectedness will be more valued and rewarded.

Another trend we’ve seen emerge and appears to be growing is the value of leadership, proactive communication and work by individual team members. It’s a lot easier to hide behind a computer screen on a Zoom meeting with your camera off than it is to show up prepared to an in-person meeting where you’re expected to contribute meaningfully and positively to the dialogue and the solutions that are to come from that meeting.

Those that get ahead in this new remote world will be those that possess and prioritize a level of deliberateness in their connectedness to management, to their colleagues and to their organizations’ missions. This will be what is rewarded and noticed, and a class of so-called digital leaders will continue to emerge.

In-person team retreats will grow in importance and frequency.

Something else I predict will start to grow in popularity and importance is the need for in-person team retreats and other organizational events to bring people together in person again. It doesn’t matter how good the technology and the remote infrastructure are; at the end of the day, we’re all still humans, and we need the human and emotional connection that being together with our peers brings. This will continue to grow in importance and influence, and so too will companies’ and organizational budgets for event space and services to provide a creative venue and outlet for teams to get together, even when they aren’t working in a physical office.

Even before the pandemic, it was well-documented that social interaction is good for our physical and mental health. This trend of in-person team retreats will likely pick up steam as we start to head into this next chapter of reorganizing the working world with new priorities and new frameworks guiding the organizational behavior and patterns of tomorrow.

While the landscape of how we work has fundamentally changed and will continue to be altered for years to come, it represents unique opportunities for organizations and their employees if they are identified and creative solutions implemented in a proactive way that fosters connectedness, collaboration and productivity.

 

Apr 23

Productivity After The Pandemic

Interesting views  expressed in the Financial Advisor magazine from Laura Tyson, former chair of the U.S. President’s Council of Economic Advisers, is Professor of the Graduate School at the Haas School of Business and Chair of the Blum Center Board of Trustees at the University of California, Berkeley. Sadly, as ever, they all hinge on the flawed national labour productivity statistic, even though most forecast growth will be due to capital investment 

Summary:

After years of disappointing productivity growth, the Covid-19 pandemic has shaken something loose, with surveys of business executives showing most reporting increased investments in technology. The danger now is that the pandemic-era acceleration of automation and digitalization impedes growth in labor income and consumption.

 

With Covid-19 vaccines being rolled out and supportive fiscal and monetary policies fueling aggregate demand, the U.S. economy is poised to return to its pre-pandemic output level later this year. The labor-market recovery, however, will be much slower and unevenly distributed, with employment unlikely to return to its pre-pandemic peak until 2024.

If output growth exceeds employment growth over the next few years, productivity will increase (at least temporarily). The Congressional Budget Office’s most recent forecast predicts labor-force productivity growth of 1.5% per year for the 2021-25 period, up from an average of 1.2% per year between 2008 and 2020.

In response to the pandemic, many firms—but especially large ones—have made significant strides toward boosting productivity through automation, digitalization, and the reorganization of operations, including a rapid shift to at-home work, to boost efficiency and resilience.

 

In a December 2020 McKinsey & Company survey of business executives in North America and six European countries representing about 40% of global GDP, 51% of respondents said they had increased investment in new technologies in 2020, and 75% said they planned to do so in 2020-24.

By contrast, just 55% reported increased investments in 2014-19. Moreover, a 2020 survey conducted by the World Economic Forum (WEF) found that 80% of firms plan to increase the digitalization of their operations and expand their use of remote work, and 50% intend to accelerate the automation of production tasks.

More broadly, recent research by the McKinsey Global Institute (MGI) (N.B. still the only big consultancy interested in productivity issues and improvement) identifies opportunities for incremental productivity growth across a wide variety of sectors that account for about 60% of the non-farm economy. These include health care (telemedicine), construction (digital twins and offsite modular construction), retail (e-commerce and warehouse automation), banking (digital payments and hybrid remote working), manufacturing (robots, digital channels, and connected autos), and even the hard-hit travel industry (more agile working).

If all of this potential is realized, annual labor productivity growth in the United States and several European economies could increase by about a percentage point between 2019 and 2024. But achieving such a dramatic supply-side improvement requires that the productivity-driving changes spread from the large firms where they have been concentrated to small and medium-size enterprises.

Many in this latter group have so far been unable or reluctant to increase their investment in automating or digitalizing their supply chains, operations, and delivery models. And without such investment, the productivity gap between big “superstar” firms and a long tail of lagging competitors will increase, diminishing economy-wide productivity gains and exacerbating the post-2008 trends toward greater inequality in economic performance across firms and regions and more market concentration.

Equally important is the trajectory for aggregate demand, which will depend on what happens to employment and income growth. The most convincing explanation for the disappointing productivity growth in the decade following the 2007-09 global financial crisis was chronically weak consumption and investment demand. While the pandemic-era acceleration of automation and digitalization may boost productivity on the supply side, it could have a detrimental effect on demand, by hampering growth in labor income and consumption—a major determinant of economic growth generally.

During the next year, consumption growth is likely to be strong, owing to the post-pandemic release of pent-up demand and massive injections of fiscal stimulus. But, over time, the effects of efficiency-focused productivity measures and accelerated digitalization could dampen employment and income growth, cause polarization within labor markets to deepen, and eliminate middle-skill jobs, thereby constraining consumption growth among those with the highest propensity to spend.

The long-run effects could be substantial. About 60% of the productivity potential identified in the most recent MGI report reflects efficiency-boosting cuts to labor and other costs. The WEF survey found that 43% of the businesses surveyed anticipate net reductions in their workforce as a result of pandemic-accelerated automation and digitalization. In a related report, MGI estimates that an additional 5% of workers (eight million) could be displaced by automation/digitalization by 2030, on top of the 22% of workers estimated to be vulnerable before the pandemic.

In the U.S. and other industrialized economies, the largest negative impact of the pandemic on jobs and incomes has been in food services, retail, hospitality, customer service, and office support. Many of these low-wage jobs could disappear altogether if pandemic-induced reductions in professional office time and business travel diminish demand for myriad services such as office cleaning, security and maintenance, transportation, and restaurant and hospitality services. Prior to the pandemic, these occupations accounted for one in four U.S. jobs and a growing share of employment for workers without a post-secondary education.

Weak investment poses another demand-side risk to potential productivity growth. Business investment rates overall were already in long-run decline before the pandemic (hence the post-2008 productivity slowdown), and investment has since contracted further, owing to a decrease in private non-residential investment from its 2019 peak. That said, the decline in investment during the Covid-19 recession has not been as large as that of the 2007-09 financial crisis.

To realize the potential for higher productivity growth, fiscal and monetary authorities should shape recovery policies with two broad goals in mind: fostering strong and inclusive income and consumption growth, and boosting public and private investment in physical capital (infrastructure and affordable housing), human capital (education and training), and knowledge (research and development).

Given the significant shortfalls in public infrastructure that have developed over decades of under-investment, the Biden administration’s infrastructure plan could crowd in private investment, boosting overall investment in the short run and increasing the economy’s long-run potential productivity growth.

 

Apr 22

Counting hours worked isn’t cutting it anymore

A bang-on article in Fortune magazine by Robert Pozen, senior lecturer at MIT Sloan School of Management 
Commentary-Hours Clocks-Measuring Success

If you are reading this, do you really care how many hours I took to write it? Or do you just care about the freshness of my ideas and the clarity of my writing?

As this example illustrates, counting hours is not a sensible way to gauge the productivity of professionals in knowledge-based industries like finance, software, biotech, or journalism. Those professionals may generate a great idea in a few hours, or take days to come up with a mediocre one. A much better measure is the quality of their results.

Yet many companies are still counting hours spent working—traditionally enforced through timesheets and standard office hours. When the pandemic struck, some companies even inserted software into the home computers of their employees to monitor how many hours they stayed online each day.

The pandemic and its aftermath should ring the death knell of hours as a useful proxy for productivity. With most employees working from home, the boss no longer can walk around the office to check on who is sitting at their desk. And, going forward, the boss will not be able to monitor the hours of the team as they move to a hybrid model, working sometimes in the office and sometimes at home.

As counting hours becomes less relevant, managers are searching for alternative ways to hold their team members accountable for doing a good job. After all, how can the manager know whether team members are working diligently from home, or using the time away from the office to practise their golf swing? In other words, to replace the counting of hours, organisations need a more effective system of accountability tied to results.

Both new and old companies are moving to systems emphasising results rather than hours.
For instance, Matt Mullenweg, the founder of Automattic, says that its employees are accountable for what they accomplish rather than the number of hours they log. Similarly, the new mobile work policy of Siemens focuses on outcomes rather than time spent on the job.

To provide accountability based on results, I’ve developed an approach called success metrics. Under this approach, the manager sets objectives for their team as part of the effort to fulfill the organisation’s goals. Then the manager and team members discuss how they will know at the end of the relevant period whether they have been successful in achieving these objectives. That discussion should lead to an agreed-upon list of specific deliverables with time targets.

Using success metrics has many benefits. First, it forces a clarification of objectives. When I headed two investment organisations, I was constantly amazed by the failures of communication among dedicated, smart, and loyal colleagues. These communication glitches are minimised when the manager and the team must agree on specific deliverables.

Second, using success metrics helps maintain a high level of job satisfaction and productivity. Once the managers and team members agree on a list of specific deliverables, it’s up to the team to decide how, when, and where they get the work done. This high degree of autonomy and flexibility not only frees up team members to do their best work, but also promotes their work/life balance.

Third, with general objectives translated into a set of specific deliverables, the manager no longer needs to micromanage the activities of their team every day or every hour. As long as the team members deliver the scheduled results, it does not matter how they utilise every day or hour. Instead, managers can use their time more constructively to find new clients or develop new products.

Nevertheless, a good manager won’t ignore the team and just wait for the scheduled results. A good manager should meet with the team every week to ascertain their progress and offer assistance if needed.

For example, the manager might help solve difficult analytic problems, assign more resources, or persuade other units to cooperate with the team. At the end of the project, the manager should celebrate the team’s victories and understand any deficiencies to prevent them from happening again.

In short, while we should all applaud the demise of the eight-hour workday as a relic of a bygone era, we need to replace it with a productivity measure more relevant to a knowledge economy. Out with timesheets and in with success metrics!

 

Apr 11

Flexible work schedules are attractive to many remote employees. 

Jesper Schultz is  CEO of BasicOps, a San Francisco internet-platform, who allowed his remote employees to set their own working hours and found they were way more productive and much happier as a result. During the pandemic, he allowed his small team to adjust their preferred working hours. The flexibility encouraged workers to prioritise their own wellness and be more motivated and productive while working.

Jesper Schultz is the CEO and cofounder of BasicOps

A year of postponed weddings, torn-up plane tickets, and far too many Zoom calls has forced us all to adapt to a new way of life. Beyond personal changes and too much time spent perfecting the art of sourdough bread baking, the workforce has also adapted.

For better or worse, we’ve said goodbye to long commutes and water-cooler chats. A new era of remote work has taken its place, bringing far more flexibility than the traditional 9-to-5 ever gave us.

While juggling childcare and crafting an office out of your bedroom closet probably wasn’t your idea of work-life balance, there are two sides to every coin, and the pandemic has forced some positive changes in the way we work, too.

Flexibility has become a necessity rather than a luxury. After permitting work schedule flexibility, I’ve seen positive shifts in our employees’ overall mindsets and productivity.

Here are the top five benefits of this flexibility that I’ve witnessed reshaping our workplace.

 

1. Flexibility leads to higher productivity

There’s a myth perpetuated by traditional office culture that our most productive hours happen between 9 a.m. and 5 p.m. This schedule may work for a portion of the population, but there’s growing evidence that at least half of us operate on an altogether different productivity timeframe — and much that is calculated by our circadian rhythms.

In “Why We Sleep,” sleep researcher Matthew Walker describes how up to 50% of us aren’t programmed to wake up early. Our genetics determine our circadian rhythms: While you might have no trouble turning in at 10 p.m. and rising at 7 a.m., these hours may force your colleague to wake up far earlier than their natural sleeping patterns.

Losing early morning sleep has been linked to poor memory recall, trouble concentrating, poor communication, and lost productivity. Beyond the cognitive difficulties, it’s also costly for companies: In a study across four large US companies, researchers found insufficient sleep costs employers almost $2,000 per employee per year.

Companies including Nike and Google allow employees to time their work hours to match their circadian rhythms. Employees at these companies are even encouraged to take cat naps during their workdays, with “nap pods” scattered throughout corporate headquarters. Other than scheduled meeting times, my employees can plan their days as they please. If they’re tired after lunch and need a nap, I’m totally fine with that.

2. Remote workers take fewer sick days

The standard workday leaves very little room for the unexpected. The 9 a.m. punch-in doesn’t account for a feverish child at home or a rough night of sleep, meaning it’s likely your employees will opt to call in sick.

With flexible scheduling, your employees will feel comfortable starting later to get a few extra hours of sleep or tend to a sick child at home. Rather than losing an entire day, employees can start when it suits them.

Rigid working hours lead to higher stress levels, and higher stress weakens our immune systems. One powerful way to help keep your employees healthy is by providing flexibility — that alone will decrease stress and anxiety in their daily lives. They’ll take fewer sick days, and you’ll likely see more motivated workers, too.

3. Flexible schedules lead to happier employees

If you’re sceptical that a flexible schedule can improve happiness levels, look no further than Finland, the happiest country in the world.

Finnish workplace culture is a far cry from the American standard: For nearly 25 years, the Finns have been able to set their work hours — by law. The Working Hours Act, put into law in 1996, allows most workers in Finland to adjust their hours as needed. With that much flexibility and control over their lives, it’s not surprising that the Finns are happier than, well, everyone.

By offering a working agreement that mimics the Finns, you’re allowing your employees to incorporate personal errands such as picking up the kids, attending courses, or exercise, all of which will make it far easier for your employee to juggle life and work. They’ll be less stressed, more productive, and feel more balanced.

At BasicOps, all employees have the opportunity to take weekdays off and make up the time over the weekend if that works better for them. One of our employees takes hikes every Wednesday, which I think is great.

4. Communicate more effectively with flexible work

This may come as a surprise, but communication is far more efficient when an employee works from home or works on a flexible schedule. Between excessive coffee breaks and idle chit-chat, there’s a surprising amount of time wastage in the office place.

With the pandemic has come a heavy adoption of workflow management software programs. While these programs existed pre-pandemic, the work-from-home mandates made them all the more necessary to keep projects and collaboration flowing.

Flexible and remote workers are far more likely to use these platforms to connect with colleagues than those who are in the office on a rigid schedule. By adopting such platforms, communication among teams becomes far more streamlined and efficient, saving everyone time and energy.

5. A flexible work culture improves employee retention

Work-life balance is the Holy Grail of today’s professionals. Millennials , who now make up the largest generation in the US workforce, and Gen Z both place a high value on achieving that balance, so finding and retaining new talent will be likely more successful with flex work.

Perhaps most importantly, a flexible working agreement indicates trust and transparency between employee and employer. That not only puts employees at ease but also improves productivity.

While flexibility has been somewhat forced upon all of us during these pandemic times, it’s become clear that there is a silver lining for both business and employees.

The era of micromanagement is dying and flexibility must be embraced in order to keep moving forward.

 

Apr 01

U.S. May See Post-Pandemic Productivity Surge

Rich Miller pens an optimistic article for bloomberg.com – welcome stuff after the past year plus – he refers to a McKinsey & Co. report which makes a lot of good sense for what may happen out there – indeed, only they, of all the management consultants in the world, publicly recognise the importance of productivity to global standards of living and quality of lives – it’s just a pity  they still base all they say on the flawed and out-of-date national productivity statistic – a single ‘GDP/ Labour’ number ignores most outcomes now important to us all, focuses on labour numbers and not their skill and quality levels, and completely ignores the massive difference capital investment in new machines and IT now makes

The U.S. has a good chance of shucking off the secular stagnation of the last decade and entering a period of markedly faster economic growth as companies take advantage of lessons learned during the pandemic and strong demand fueled by the government to become more efficient.

That’s one of the takeaways from a new report by the research arm of global consultants McKinsey & Co. that takes an in-depth look at prospects across a swathe of industries, from construction to health care. It sees the potential for a 1 percentage-point acceleration in annual productivity growth over the next four years, roughly doubling the average increase seen in the post-financial-crisis expansion.

“It’s quite an optimistic picture,” Jan Mischke, a partner at the McKinsey Global Institute in Zurich and one of the authors of the report, said in an interview.

The super-charged federal budgetary boost championed by President Joe Biden plays a key role in the more upbeat future envisaged by McKinsey, as the high-pressure economy it fosters encourages companies to boost capacity by increasing research, development and investment.

“This is about getting on a virtuous cycle where higher productivity fuels incomes and investments and that again fuels higher productivity,” Mischke said, adding that increased efficiency lessens the chances of the economy overheating by boosting its capacity to grow.

The 108-page report sees “early evidence of dynamic changes” to the economy as businesses were forced to take extraordinary measures to deal with the fallout from efforts to contain the pandemic. They range from increased automation of warehouses and more online marketing to wider use of telemedicine and digitization.

“The pandemic pushed companies to reorganize and become more agile,” the report said.

More than half of North American and European company executives contacted in a December survey by McKinsey said their speed of making and implementing decisions was somewhat or significantly faster compared with December 2019.

“The crisis has unleashed” more rapid change, Mischke said. “Digitization is happening in some instances 20 to 25 times faster than was thought possible prior to the crisis.”

While the advances in the U.S. have so far been concentrated among larger companies, the McKinsey Institute partner voiced hopes that they could spread to other firms, including small and medium-sized businesses. The industries with the biggest upside, according to the report, are health care, construction, information and technology, retail and pharmaceuticals.

“As the disruption eventually recedes, significant productivity acceleration could be possible if action taken by firms enhances productivity, if the action spreads, and if demand strengthens,” McKinsey Global Institute said, in summing up the results of its report.

Mar 11

Looking To The Future: Redefining Work

Aruna Ravichandran, a Forbes Councils Member, offers a very readable and sensible article on the way work must be radically re-organised in future – and emphasises our regular drum-beat that “it’s outputs that matter most, not inputs and presenteeism”

 

More than 10 years ago, a beer commercial captured the essence of how to look busy. Staged as a scientific lab, the humorous spot described its new invention, the fake steaming cup of coffee. This innovation allowed a bored employee to sneak out of the office to catch a baseball game or go to the bar, while co-workers and, most importantly, the boss remained impressed by the employee’s so-called dedication. Even though the employee was not at his desk, his steaming mug of coffee was, and that was enough to convince everyone he was there.

As with most humor and parody, there is a kernel of truth in this commercial. It focuses on the inaccurate definition of work as being equal to face time: If you’re in the office, you are working, but if you’re elsewhere, you can’t possibly be.

This concept has always been a fallacy, and there are myriad examples of how people have found ways to not work at the workplace. There’s even an entire subgenre of articles on how to look busy at work. And the reverse of this was also true — if you weren’t at the office, you couldn’t possibly be working. In fact, there were even pointers on how to do that effectively.

To be fair, for much of the last century, office work centered around desks, telephones and computers. It was essential for employees to come to a central location, and it was equally inconvenient and counterproductive for them to try to do the same work at home. The technology just wasn’t able to balance these two scenarios out.

But here we are, emerging from a year in which almost everyone was sent home and companies had to review every aspect of their operations in light of a pandemic. It was a turning point.

Prior to 2020, we were already well on the way to establishing virtual workspaces with improvements in meeting and collaboration technology that allowed people to work from anywhere and connect with clarity.

But what has been slower to evolve is the definition of work. As employees struggled to do their work from their home office, kitchen or bedroom, many were forced to contend with the needs of children, pets and other family who had no concept of the traditional 9-to-5workday. This did not sit well with some managers, who believe that work cannot be done in pockets of time but must fit the contiguous 9-to-5framework.

But the 9-to-5model never worked. Physiologically, it is not possible for any human to deliver eight hours of consistent, high-quality output per day. Even those who try will succumb to the natural rhythms of the body, which delivers peaks and troughs of energy. According to Inc, “Research suggests that in an eight-hour day, the average worker is only productive for two hours and 53 minutes.” The rest is filler, disguised as overly long meetings, excessive emails and checking social media.

Kaizen For Knowledge Workers

To redefine work, we should first look back to the scientific studies done by Toyota in the development of continuous improvement (kaizen), just-in-time manufacturing and lean manufacturing, all of which focused on the smoothing of the workflow through the identification and elimination of muda (wasteful habits), muri (unreasonable work placed on people and operations) and mura (unevenness and irregularity).

These concepts can be applied to knowledge work delivered in the modern office.

We’ve had a transitional year that proves that work can be done in locations other than the office. We are still able to meet, communicate and collaborate. And the opportunities provided by virtual workspaces allow individuals to curate a schedule to deliver their best work while addressing muda, muri and mura.

Resetting And Redefining Work

This last year also offers itself as an opportunity to reset; an opportunity to redefine work. Managers and staff can look at the nature of work as blocks of focused time that may occur at different times of the day — and in which the outcome is valued more than any number of contiguous hours elapsed.

Such a change demands heightened amounts of trust, genuinely felt and copiously demonstrated, with managers empowering employees to deliver. That, too, is possible in a dynamic and virtualized workspace.

One final point: Part of the aforementioned commercial’s humor came from the fact that the “steaming coffee mug” was being marketed to employees who really did not want to be at the office. The work held no appeal. The mug was their tool for escape.

This bodes the question as to why a job should represent 40 hours a week of boredom, when engagement and empowerment generate far superior output.

A new definition of work can be one that embraces the human elements of passion, respect and autonomy — and these become the new raw materials for quality deliverables, even if the hours worked by each team member vary to better fit their own lives.

The technology exists to make this happen. It is now up to management to envision work in terms of output rather than process. This is how we redefine work for the future.

Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?

Mar 03

Now is the time to embrace a four-day workweek

Brad Badelt is a freelance science and environment writer – a Canadian based in Vancouver – his article below adds weight to the increasing momentum for a reduction in working hours per week for most employees – albeit not all – for example, brainworkers work 24/ 7

In 1930, at the onset of the Great Depression, British economist John Maynard Keynes made two bold predictions:
  • Within a century, the standard of living in Europe and the United States would increase 400% to 800%
  • And with technological advances, we wouldn’t have to work much any more more – only three hours a day.

“We shall endeavour to spread the bread thin on the butter – to make what work there is still to be done to be as widely shared as possible,” he wrote in his essay “Economic Possibilities for our Grandchildren.”

On the first prediction, he was remarkably accurate. The standard of living in the West has increased fivefold since 1930 (as measured by inflation-adjusted GDP per capita). But despite leaps in technology, the three-hour workday has yet to pan out.

Our workweek today, in fact, isn’t that different than in Keynes’s time. The five-day, 40-hour week is standard in Canada and many other countries and goes back to the 1920s, when it was introduced by Henry Ford for his assembly lines. It was a radical shift at the time, as most factory employees worked gruellingly long hours six days a week. By giving workers a proper weekend, Ford saw an immediate return: increased productivity.

A century later, the five-day workweek is still with us.

Since the onset of the pandemic, however, there have been calls for change. A number of companies, faced with financial challenges, have imposed shorter workweeks coupled with pay cuts as a way to avoid layoffs. Others have compressed their 40-hour workweeks from five days to four to give staff more flexibility for child care and homeschooling duties. But with the end of the crisis hopefully in sight, we should be looking at the four-day week not as a temporary fix but as a permanent shift in the way we work.

Last May, New Zealand’s Prime Minister, Jacinda Ardern, floated the idea of a four-day workweek as a way to bring back her country’s economy. Ms. Ardern, who was speaking via live video on Facebook, pointed to the importance of tourism, which employs 15% of New Zealand’s population and gets a large portion of its revenues domestically. A post-pandemic four-day workweek, she suggested, would give people more opportunity to travel within New Zealand and spend money.

It’s an intriguing idea that Canada should consider as well. And not just to support our own domestic tourism industry, which has been similarly hard hit by the pandemic. A compressed workweek – in which employees retain the same income – has been shown to improve employee well-being and reduce workplace stress. It’s been correlated with improved productivity. And, to a lesser degree, it’s a way to reduce traffic congestion and carbon emissions.

Some of the resistance to a four-day workweek has been rooted in the long-held belief that working longer hours means getting more accomplished. But research has shown that’s not necessarily the case. A study from Stanford University, for example, noted a significant drop in productivity and creativity when employees worked more than 45 hours in a week. After 55 hours, the researchers found, productivity dropped so much that it was relatively pointless to keep working.

According to the OECD, Canadians work about 1,670 hours a year. That puts us about average for developed countries, just below the U.S. and significantly less than hard-working South Korea. But compared with Northern European counties such as Denmark (1,380 hours) and Norway (1,384 hours), we’re working almost 300 hours more every year. Yet both Norway and Denmark have significantly higher productivity rates than Canada. They also rank above us in the latest World Happiness Report.

The most widely reported corporate trial of a four-day workweek was that of Microsoft Japan. The company tested it in 2019 and reported a productivity boost of 40%, as well as cost savings in several areas, including electricity, which fell almost a quarter. The trial wasn’t strictly about reducing the number of workdays; it was also about working more efficiently. The standard duration of meetings was cut from 60 minutes to 30, and attendance was capped at five employees.

Perpetual Guardian, a New Zealand trust management company, likewise saw a 20% boost in productivity when it shifted to a shorter workweek. Perhaps more importantly, though, the company also reported a 45% increase in employee work-life balance and measurable improvements in job satisfaction and staff retention.

The Henley Business School at the University of Reading found similar results in 2019 when it surveyed some 250 companies in the U.K. that had adopted a four-day week. “A shorter working week (on full pay) could add to businesses’ bottom lines through increased productivity and an uplift in staff physical and mental health,” the study’s authors wrote.

It’s these employee wellness outcomes that may be the most compelling argument of all.

In Canada, workplace stress and burnout are rampant. In many ways, the pandemic has only heightened that – blurring the lines between home and work and leading many of us to check our laptops and phones at all hours. For this reason alone, a three-day weekend every week may be just what this country needs right now.

A recent survey by the Angus Reid Institute suggests that Canadians are ready for a break. 53% of survey respondents said it’s a good idea to make a 30-hour workweek standard in Canada, while just 22% were opposed (the remainder were undecided). “The concept of a shorter work week, much like that of the universal basic income, finds its highest levels of support among younger Canadians, with six-in-ten of those aged 18-34 saying a four-day work week would be a good idea,” the study reported.

A compressed workweek may not be for everyone – or for every employer. But, with the end of the pandemic almost in sight, we have a unique opportunity to try something different. And as Ford discovered a century ago, we might be pleasantly surprised by the results.

 

Feb 18

The Pandemic Is Widening a Corporate Productivity Gap

Bains claim to recruit the ‘best of the best’ to its consultancy ranks – so bear this in mind when reading the following extracts from an article by Eric Garton and Michael Mankins, both Bains partners – they claim the pandemic has widened the gap between top performers and other companies

 

During the Covid-19 pandemic, most businesses have adopted new ways of working. Many employees have gone remote, interacting with customers and coworkers virtually. Others continue to go to a workplace each day, but perform their jobs very differently. Everyone is doing their best. But how productive have companies actually been during the pandemic relative to where they were before Covid-19?

The short answer: It depends on the company.

Some have remained remarkably productive during the Covid-era, capitalizing on latest technology to collaborate effectively and efficiently. Most, however, are less productive now than they were 12 months ago. The key difference between the best and the rest is how successful they were at managing the scarce time, talent, and energy of their workforces before Covid-19. The companies that are the very best at managing these three factors are 40% more productive than the rest.

Claim 1 – The best companies have minimised wasted time from excessive e-mails, meetings and processes – the rest have not.  

Stay-at-home orders liberated time previously spent commuting and created flexibility in work schedules, enabling many employees to devote additional time to their jobs.

We estimate that the best organizations have seen productive time increase by 5% or more.

However, for companies that struggled to collaborate productively before the pandemic, work-from-home orders only made matters worse. Time consumed in virtual meetings exploded. Poor collaboration and inefficient work practices reduced productive time by 2% to 3% for most organizations.

Claim 2 – The best have capitalized on changing work patterns to access new talent.

Exceptional talent ― people with the ability to bring creativity and ingenuity to their work ― is a scarce and valuable resource. Our research suggests that the best companies are 20% more productive than the rest due to the way they acquire, develop, team, and lead such talent.

Remote work has created opportunities for organizations to access talent that may have been out of reach prior to Covid-19. Physical proximity to work is no longer a primary factor in determining the pool of available labor for most companies. The best companies are capitalizing on new and different sources of talent to build the capabilities they will need to win in the future.

Remote work has also enabled an organization’s most skilled workers to engage virtually in a broader range of initiatives and teams than they could physically — multiplying the influence these individuals have on performance.

However, most companies have struggled to tread water during the pandemic. A dearth of demand for products and services has kept them out of the labor market, unable to capitalize on opportunities to acquire new talent. Meanwhile, their current employees have faced mounting pressures at home, as they juggle work and family. As a result, some organizations have seen many of their star performers leave the workforce — at least temporarily — reducing overall productivity.

Employee engagement and inspiration matter. According to our research, an engaged employee is 45% more productive than a merely satisfied worker. And an inspired employee — one who has a profound personal connection to their work and/or their company ― is 55% more productive than an engaged employee, or more than twice as productive as a satisfied worker. The better an organization is engaging and inspiring its employees, the better its performance.

However, most organizations have struggled to engage their employees during the pandemic.

As Covid-19 and work-from-home orders persisted, regular surveys revealed that employees were growing tired, balancing the new realities of work and home. In response, Adobe, for example, gave all employees an extra day off — the third Friday of each month — to unplug and recharge.

Conclusion:

The productivity gap between the best and the rest has widened during the pandemic. We estimate that the best companies — those that were already effective in managing the time, talent, and energy of their teams — have grown 5% to 8% more productive over the last 12 months. Additional work time, access to new star talent and continued engagement have bolstered productivity at these companies. Most organizations, however, have experienced a net reduction in productivity of 3% to 6% (or more) due to inefficient collaboration, wasteful ways of working, and an overall decline in employee engagement.

This all sounds logical and sensible – just don’t ask for details about how they actually measure the productivity of any one company (you can’t) in order to establish the above % differences – nor how they can ignore other drivers of productivity such as management quality, process efficiencies, invention and innovation from any source, capital investment in machinery/ IT/ AI/ robotics and not just Zoom – and luck

 

Feb 09

We’re Productive, But Are We ‘Okay?’

Rick Western, CEO at Kotter, is an expert in transformational change in complex global organizations and has spent more than 35 years assisting Fortune 100 companies with strategic initiatives, leading development activities and managing business units – he raises some interesting points about human capital well-being in an article for the ‘Chief Executive’ magazine which should be the concern of all organisations as they work through the CV pandemic 

Rick Western

Rick Western

 

Your company may appear to be functioning heroically in the midst of a pandemic, but it pays to look under the surface to make sure all is truly well

Leaders across industries have done a miraculous job in shifting to a virtual work model, while keeping productivity high, IT functioning and customers served.

 

Yet this leads me to ask: are we spending enough time understanding the deeper psychological needs of our human capital, who now find themselves in a fully remote working environment? Are we, as leaders, too focused on keeping the engine running and therefore failing to ensure the emotional needs of our employees are being met during this strange and difficult time?

From what I have seen over the past year, the following themes have risen to the forefront:

• A “Them vs. Us” phenomenon. Some people who must continue to work from a physical location, such as construction, manufacturing or healthcare workers, hold concerns about safety. These employees might even envy those who can work from home. Yet the employees who are working from home may long for the kind of structure and social interaction that a physical work venue might provide. This has the potential to create a “them vs. us” division within the workforce—a rather odd cultural issue that leadership needs to address, to ensure they aren’t unknowingly creating two competing cultures within the same organization, with each group of employees thinking the grass is greener on the other side.

• Your valuable female employees may be “flight risks.” A startling result of the impact of Covid-19 is that women are leaving the workforce at a significantly higher rate than men. Recent data released by the U.S. Department of Labor indicates the rate could be as much as four times that of men. The burden of parenting, running a household, schooling and caring for elderly relatives has taken a disproportionate toll on women. Many women are finding that this burden, coupled with career demands, is simply too great and are making the difficult decision to withdraw from the workplace. If unaddressed, this talent drain could have a devastating impact on organizations and set back decades of achievements in diversity efforts across corporate America.

• The interplay between isolation & low morale. That palpable sense of team spirit we once felt while hanging out around the water cooler is harder to cultivate when connecting through a screen. Regardless of the business you are in, physical distance makes it more difficult for human beings to foster a true collaborative spirit. We can no longer feed off each other’s energy in the room, and meetings have become more transactional in nature. With video as our primary mode of communication, we see each other only in little boxes. We spend less time wandering off the agenda and checking in with one another on a personal level. But—at what cost? Are employees feeling increasingly isolated? How is their morale?

• Blurring of work & personal lives—Rather than packing up one’s bags and commuting to work, most now start their day by turning on the computer at the crack of dawn. What’s more, workdays often stretch longer into the evening than they did pre-Covid-19. The fact that work and personal lives are being experienced by many in the same physical setting can make it hard to create that much-needed separation between career and personal life. Commuting time, which many of us used to complain about, has, in many cases, become an “extension” of the workday. Yet that time we once spent listening to music while driving or reading a book on the train provided a psychological barrier between life inside and outside of the office which has now dissipated.

So, how can leaders chip away at these issues, all while being constrained by a relatively inflexible set of pandemic-related factors which fall outside of their control?

• Pull down the veil.

Many leaders may shy away from having open conversations with their employees about their feelings and needs, for fear that they will be unrealistic in their requests and, if not properly addressed, employees will grow even more unhappy. But this pattern of thinking and behavior creates a vicious cycle of leaders not listening to employees, and employees, in turn, not approaching leaders with their questions and concerns. Yet, at the end of the day, everyone knows what we are going through—everyone knows this is hard. Rather than seeking to get every problem solved, what employees might be looking for from their leaders is simply a listening ear, to feel heard. They want someone to share in their experience and perhaps brainstorm potential solutions for incremental improvement. Now more than ever, employees are longing for that sense of community and to see the human side of those leading them through this crisis.

• Show how the grass is green (and a little brown) on both sides.

To me, the “us vs. them” culture issue can be addressed by making sure people understand that whatever their needs are, based on their work situation, those needs are actively being addressed. For example, if safety arises as a key concern among on-site workers, taking steps to create a safer work environment will add comfort to those employees’ lives. Similarly, taking steps to address isolation can be comforting to remote workers. Rather than talking to each group in isolation, transparency across the entire organization can work in leaders’ favor. If one group of employees understands what the other group’s needs are, and how they are being met, leaders can subliminally communicate that the grass isn’t necessarily greener on the other side—that no situation is perfect—and that there’s reason on all sides to be grateful.

• Address the burden Covid-19 has placed on parents.

At Kotter, we recognize the disproportionate burden Covid-19 is placing on our employees who are parents of younger children or caring for elderly parents. As a result, we have offered any employee in this situation the ability to take off up to 20% of time with full pay and benefits. We are hoping this additional flexibility will be sufficient to allow these valuable employees the ability to manage the increased demands of family and career and remain a critical component of our workforce. We fully recognize the perception of treating one employee group more favorably than another, but we see it as treating people “differently” as opposed to “favorably,” based on their needs and circumstances. This may also result in the need to hire additional resources. But, in the end, we believe we are doing what is best for the entire organization and employees.

• Create small opportunities for change.

The more leaders truly understand what challenges their employees are dealing with, the more likely they will be able to imagine relatively easy-to-implement, but impactful, changes that could improve the lives of their employees. At Kotter, our consultants were complaining about their workdays being filled with back-to-back calls, with every moment scheduled. As leaders, we raised the idea to consolidate calls where possible, making 30-minute calls 20 minutes and hour-long calls 45 minutes, to intentionally create moments of space when people could catch their breath, get a snack, use the restroom or walk outside. Yet we wouldn’t have identified this obstacle or implemented a solution if we didn’t have an open conversation with our employees to begin with.

• Take advantage of the flexibility.

We have encouraged people at Kotter to take advantage of the flexibility of working from home by blocking out personal time—time which would otherwise fall within the “normal” workday—to run an errand, go for a walk, or take an uninterrupted lunch break. If it’s true that we are signing on earlier and powering down later, why couldn’t we take advantage of this more flexible schedule to take some time for ourselves in the middle of the day for self-care, cleaning, cooking, or walking the dog? If leaders merely give employees permission for these types of mid-day breaks, and if workers give permission to their fellow workers to step away from their computers, we could collectively shift those “unwritten rules” that were followed in a pre-Covid-19 setting to take advantage of the more flexible, virtual environment.

Ultimately, by addressing these issues, leaders can differentiate themselves in a time of crisis, showing compassion for their employees’ emotional wellbeing, which could result not only in higher productivity, but also, more importantly, in greater loyalty, collaboration and retention in the long-term. When the Covid-19 crisis is finally behind us, workers will long remember, and much will be written about how organizations responded on their behalf.

Leaders, begin writing your legacy today.

Jan 30

It’s time to redefine workplace productivity

By rienne Gormley – an article in Techradar.pro fully supporting our view that, apart from the huge increase in the amount of time available for productive work caused by the pandemic, there’s also a huge increase in productivity on the way as people focus on why they’re paid, not the time they input

Business leaders and futurists have been talking about how we need to change the way we work for some time. This is because, long before the Covid-19 pandemic swept across the world, working life was already in transition, with the ability to work from home increasing both attractive and practical for managers and employees alike. Our relationship with work has been reshaped by social, economic and political influences—and, of course, by technology.

Millennials are now the largest generation in the US workforce; in England, there are over a million more mothers in the workplace than there were 20 years ago; and freelancers are now the fastest-growing group in the European labor market.

But despite these wide-ranging changes, the way we measure our work has largely stayed the same. We are still disproportionately focused on the hours we spend at work or online, and many of us are used to joining back-to-back meetings and sharing status updates or internal notes, as it creates the sense that everyone is ‘getting things done’. But are we actually? Not according to a study Vanson Bourne carried out for Dropbox at the start of 2020, which found we waste 29% of time at work on tasks that don’t add critical value to the business.

Today, however, the pandemic is creating anxiety and an increase in background noise – in fact, before lockdown even began in the UK, more than six in ten people said they’d felt anxious about coronavirus. It’s not just the constant news alerts, but millions of employees worldwide are juggling their work with always-on childcare, homeschooling, or other caregiving responsibilities.

This creates an imperative for businesses to acknowledge employees’ reduced bandwidth and to ensure precious time is spent on only the most important tasks. For too long, we have been bound to an hours-based model of work that puts too much focus on the how of getting things done, rather than what is ultimately accomplished.

Let’s measure what matters

Today, however, we have entered a moment that calls for managers to be supportive of their teams as they work in a fully distributed environment for (what is likely) the first time—and innovative with how they get things done. Now is the time to upend our traditional ideas about productivity and embrace an output-based way of working.

Expecting employees to be “logged on” for fixed office hours has become senseless and, likely, impossible; asking them to churn through tasks that don’t have a discernible impact on business objectives will be a waste of the precious time we have left, between looking after ourselves and others.

Instead, we’ll turn to what truly matters when it comes to our business goals: output. What has been achieved? How does a task take us closer to our goals? What do we need to do next? These should be the key questions that measure our progress and help us choose how to spend our time.

Ruthless prioritization and freedom to focus

To prioritize effectively, business leaders will need to ensure that everybody is aligned on the goals, building in touch-points that enable team members to stay on the same page. Leaders also need to interrogate team to-do lists and OKRs, and ask themselves ‘what can we not do?’ to drill down into what’s really necessary.

Once we’ve aligned on our goals, managers need to prioritize the requests we are making of our team’s time so they have the space for deep work. Heading into April, we at Dropbox saw an over 2,000% increase in usage of our Zoom integration compared with February levels. People have rushed to find solutions for the many synchronous communications we still need to have in this new world, but it’s imperative to strike a balance to allow for focus.

I suggest asking ‘can this meeting be an email?’, so that we schedule meetings only when absolutely necessary. I find the “inform, discuss, or decide” model a useful guide. If you are ‘informing’—i.e. giving an update or providing information—this should be an email. If you are ‘discussing’—multiple parties sharing feedback or perspectives—this can be done via collaboration tools like Dropbox Paper or Slack. If you are ‘deciding’—making a key decision with a number of stakeholders—a meeting may be warranted. But use this time wisely and ensure everyone has the information they need in advance.

Trust in our teams

Once teams are aligned on the major milestones, and we’ve prioritized the asks we’ve made of people’s precious time, we need to allow our team members to work in the ways that work for them. This means trusting them to manage their own schedules, knowing that the expectations are clear and check-ins are in place to ensure results.

And if we’re allowing employees to manage their schedules, we should also allow them to use the tools that work best for them. Today, the average employee is innately more aware of the tools that are available to them in the world outside of work; as demonstrated by a recent survey that found that 41% of UK workers have used Whatsapp for work purposes.

Once employees feel they are trusted to manage their own time and tools in order to reach their business goals, we will have cleared a path to optimal output, and these results in turn will lead to an increase in trust from their managers—it’s a virtuous circle.

The end of presenteeism

If we can adopt an output-based approach, these difficult times could bring about a positive in the workplace—a broad realization that not everyone has to be physically present to make their professional and personal presence felt, and to move the dial on a company’s goals.

This will be a welcome change, signalling an end to an outdated stigma around remote-workers’ contributions. A third of remote and flexible workers surveyed by Deloitte in 2018 felt that they were regarded as having less importance, while a quarter felt they were given access to fewer opportunities and missed out on progression and promotion opportunities.

This could mean more opportunities for parents, freelancers, and anyone who wants flexibility—as well as more varied and distributed teams, where everyone works towards the same goals, beyond the restrictions of a traditional office environment.

The way we measure our work lives in terms of hours spent at a desk and boxes ticked is an outdated concept that is no longer fit for purpose. It reminds me of our QWERTY keyboards. There are actually more efficient and faster ways to type, but the reason the keyboard is setup this way today is because, on old-style typewriters, the keys that were used the most often couldn’t be beside each other or they would catch. Now that keys no longer catch, it’s actually a highly inefficient set up, but we’re used to it so we don’t change it.

We have an opportunity to go back to the drawing board on productivity. Let’s not waste it.

Adrienne Gormley, Head of EMEA & Vice President of Global Customer Experience at Dropbox.

Jan 24

COVID’s creative destruction is cause for productivity optimism

Positive thinking from across the pond – Business in Vancouver, by Jock Finlayson and Ken Peacock 

Amid the human carnage and economic pain caused by the COVID-19 calamity, it is tempting to search for silver linings.

One that is attracting interest among some economists is the prospect of a productivity resurgence once the pandemic is firmly in the rear-view mirror.

At first glance this may seem unlikely. Among the casualties of the economic slump of 2020 and the ongoing challenges posed by rising global infection rates has been a drop in business investment and a related slowdown in capital formation. This trend will dampen upside growth potential as the recovery from COVID-19 unfolds. Because investment in many categories of capital has fallen in 2020, two and three years from now the economy will be operating with a smaller and less up to date “capital stock” than if COVID-19 had never happened. Productivity growth is essential to delivering sustainable increases in real incomes and living standards over time. Reduced investment and slower capital formation due to the pandemic will serve as a headwind to these gains.

But adopting a longer-term view may suggest a more hopeful scenario.

History furnishes numerous examples of job-destroying economic shocks that – eventually – help to lay the foundations for significant advances in productivity and business innovation. The latter years of the long Depression of the 1930s saw an impressive surge in economy-wide productivity growth in both the United States and Canada. What the great economist Joseph Schumpeter called “creative destruction” plays an important role in this process by fostering the rise of new firms and reallocating resources from declining to expanding industries. Creative destruction tends to be most visible in the aftermath of extended periods of economic dislocation.

Certainly, a great deal of change is afoot in today’s economic environment. As the pandemic rages, the pace of digitization has accelerated as workers, consumers and organizations have quickly turned to digital platforms. New and improved digital communications tools and other technologies are allowing firms to serve customers in different ways and enabling many employees to remain productive, connected and engaged without the need to congregate at central work sites. By the end of 2020 hundreds of millions of people were toiling remotely. In most cases, they and their employers have learned to adapt and even thrive in an increasingly digital world.

McKinsey estimates that once COVID-19 is under control, 15% to 20% of employees will continue to work remotely at least half of the time, a dramatically higher share than in pre-pandemic times. This should generate sizable cost savings for businesses that want to scale back their real estate footprint. Savings on physical space can then be redirected toward more useful productivity-enhancing investments. The spread of remote work will also make it easier for companies to access dispersed pools of talent – which should provide a further productivity boost.

Beyond remote work, the pandemic also looks to be speeding the development and take-up of new technologies and innovations more broadly. This can be seen in the progress being made in fields like artificial intelligence, robotics, data analytics, new materials, 3D/4D printing, genomics, biotechnology, and low-carbon energy. In addition, the COVID-19 crisis has led to the production of multiple targeted vaccines in record time. Advances in all of these areas hold the promise of faster productivity growth in the coming decade and beyond.

There are forces that could militate against a productivity revival, however. One is deglobalization – a mix of mounting trade restrictions, slower growth in international commerce, thicker borders and less travel. Some recalibration of far-flung supply chains makes sense given the need to lessen reliance on China and to respond to the difficulties many countries encountered in securing key inputs as COVID-19 took hold. But a widespread retreat from participation in international markets would not be positive for productivity.

Another development that could undermine a hoped-for productivity rebound is bigger and more intrusive government. Governments have had a central role in battling COVID-19, and in the post-pandemic era they may assume a larger place in economic and social affairs. Huge public sector deficits incurred in 2020 suggest that governments will be hungry for new sources of revenue once the virus fades. The risk is that policymakers will lose sight of the necessity of creating the right conditions for businesses, entrepreneurs and innovators to invest in assets and activities that are critical to building a high-productivity economy.

Jock Finlayson is the Business Council of British Columbia’s executive vice-president and chief policy officer; Ken Peacock is the council’s chief economist.

Jan 18

Productivity is almost magical, but don’t forget the side effects

Ross Gittins, economics editor of the Sydney Morning Herald, highlights the benefits of national productivity improvement in his article below – in particular, he applauds the effectiveness of Australia’s  very own ‘Productivity Commission’ – however, he rightly reminds all that mental wellbeing is at least as important as material wellbeing 

When you put the word “productivity” into the name of a government agency, you guarantee it will spend a lot of its time explaining what productivity is – a lot of people think it’s a high-sounding word for production; others that it means we need to work harder – and why it’s the closest economics comes to magic.

Earlier this year the NSW Productivity Commission issued a green paper that began with the best sales job for the concept I’ve seen. Its title said it all: Productivity drives prosperity.

The hidden consequences of a drive to greater productivity are often overlooked.
 

Its simple definition of productivity is that it “measures how well we do with what we have”. In other words, productivity is the most important tool we have for improving our material wellbeing

“Our productivity grows as we learn how to produce more and better goods and services using less effort and resources. It is the main driver of improvements in welfare and overall [material] living standards.

“From decade to decade, productivity growth arguably matters more than any other number in an economy . . . Growth in productivity is the very essence of economic progress. It has given us the rich-world living standards we so enjoy.”

Productivity improvement itself is driven by increases in our stock of knowledge and expertise (“human capital stock”) and by investment in physical capital (“physical capital stock”)

The biggest long-term driver of productivity is the stock of advances known as “technological innovation” – a term that covers everything from new medicines to industrial machinery to global positioning systems

Technology’s contribution to overall productivity growth has been estimated at 80 per cent, the paper says

“Our future prosperity depends upon how well we do at growing more productive – how smart we are in organising ourselves, investing in people and technology, getting more out of both our physical and human potential”

The Productivity Commission has pointed out that on average it takes five days for an Australian worker to produce what a US worker can produce in four. That’s not necessarily because the Yanks work harder than we do, but because they have fancier equipment to work with, and better organised offices and factories – not to mention greater economies of scale

The paper notes that productivity improvement hinges on people’s ability to change. “Unwelcome as it has been, the COVID-19 pandemic has shown that when we need to, we can change more rapidly than we thought. There is no reason we can’t do the same to achieve greater productivity and raise our future incomes”

Technological innovation is the process of creating something valuable through a new idea. You may think that new technology destroys jobs – as the move to renewable energy is threatening the prospects of jobs in coal mining – but, if you take a wider view, you see that it actually moves jobs from one part of the economy to another and, because this makes our production more valuable, increases our real income and spending and so ends up increasing total employment.

“All through history,” the report adds, “technological innovation has been a huge source of new jobs, from medical technology to web design to solar panel installation. And as these new roles are created and filled, they in turn create new spending power that boosts demand for everything from buildings to home-delivered food”

But the thing I liked best about the NSW Productivity Commission’s sales pitch was the examples it quoted on how technology-driven productivity has improved our living standards

Medicine:

“The French king Louis XV was perhaps the world’s richest human being in 1774 – yet the healthcare of the day could not save him from smallpox. Today’s healthcare saves us from far worse conditions every day at affordable cost.”

 

Farming:

“In 1789, former burglar James Ruse produced [Australia’s] first successful grain harvest on a 12-hectare farm at Rose Hill. Today, the average NSW broadacre property is 2700 hectares and produced far more on every hectare, often with no more people.”

(Pre-pandemic) travel:

About “67 years after the invention of powered flight, in 1970, a Sydney-to-London return flight cost $4600, equivalent to more than $50,000 in today’s terms. Today, we can purchase that flight for less than $1400 – less than one-30th of its 1970 price.”

Communications:

“Australia’s first hand-held mobile call was made at the Sydney Opera House in February 1987 on a brick-like device costing $4000 ($10,000 in today’s terms). Today we can buy a new smartphone for just $150, and it has capabilities barely dreamt of a third of a century ago.”

There are just two points I need add:

  • The first is that there’s a reason we’re getting so many glowing testimonials to the great benefits of productivity improvement: for the past decade, neither we nor the other rich countries have been seeing nearly as much improvement as we’ve been used to
  • Second, economists, econocrats and business people have been used to talking about the economy in isolation from the natural environment in which it exists and upon which it depends, and defining “economic wellbeing” as though it’s unaffected by all the damage our economic activity does to the environment.
As each month passes, this blinkered view of “the economy” is becoming increasingly incongruous, misleading and “what planet are you guys living on?”

What’s more, the growing evidence that all this year’s “social distancing” is having significant adverse effects on people’s mental health is a reminder we should stop assuming that ever-faster and more complicated economic life is causing no “negative externalities” for our mental wellbeing.

 

Jan 11

Improve Productivity By Getting Better At Being Better

Some practical suggestions follow from Peter Bendor-Samuel , a contributor to Forbes magazine – he certainly reads like a guy who has been on the front line, experienced the problems many organisations find when they seek quantum leap panaceas for their lack of productivity progress, and find their often expensive solutions don’t live up tp expectations – it turns out  he’s a devotee of ‘continuous improvement’ (aka kanban), a powerful approach mostly ignored by companies in the West, to the benefit of those in the East – it’s a process which involves everyone, from boss to tea-lady, in every-day seeking productivity improvements, no matter how small – make hundreds of them and they can add up to very substantial benefits

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.

 

Dec 30

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.

Dec 22

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

Dec 11

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.

Dec 06

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 Liz Alderman 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. 

 

Dec 04

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.

Nov 27

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.

Nov 19

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.”

Nov 12

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?”

 

 

Nov 08

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.

Nov 03

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.

Oct 31

Potential £145bn productivity boost for UK economy

An LLB – LondonLovesBusiness.com – finance reporter has just announced some good news – the potential for some very big and positive numbers concerning UK SME sectors which would do much to dispel the gloom currently darkening the lives of so many in the UK – if the report is anywhere near being right, one can only hope those in charge of the nation’s finances agree and take appropriate action

 

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 full, UK 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.”

Oct 15

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.

 

Oct 12

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

Thinktanks urging cuts in business taxes to rekindle the entrepreneurialism of the Thatcher decade seem to forget that many industries which once powered growth are now dying”
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.

Oct 08

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/

 

Oct 06

£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 Department for Business, Energy & Industrial Strategy, UK Research and Innovation and The Rt Hon Alok Sharma MP in the announcement below – on the plus side, any such investment has to be welcome, especially during these extraordinary times – but one can’t help wondering what similar growth investments are forthcoming or being made for the other 85% of the UK economy i.e. the service sectors

 

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 Sandwich – Raynor 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. 

Sep 30

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.

Sep 21

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

Sep 14

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.

Sep 08

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

The following article by Simon Mair was published in  The Conversation  – despite some non-academic language, he highlights some of the productivity issues now afflicting more developed economies. 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 meat, don’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.

 

 

 

Aug 26

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

During the COVID-19 pandemic, many hospitals faced a major shortage of personal protective equipment, ventilators and other essential medical supplies. By applying circular economy principles, various businesses actively helped hospitals face this shortage. They extended the life of single-use masks, designed reusable masks, refurbished ventilators, gave access to their internal repair manuals and printed spare parts to repair life-saving equipment.

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.

Aug 23

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 (Department for Business, Energy & Industrial Strategy), ESRC (Economic and Social Research Council), UKRI (UK Research and Innovation), and Amanda Solloway MP – it’s enough to make one weep

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?)

Aug 21

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! 

Aug 14

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

 

Aug 07

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 Investing, Intelligence 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.

Aug 04

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 was, is, 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.

Jul 28

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.

Jul 27

How Fed Policy Is Wrecking the Economy

The following insightful article was posted by James A. Bacon of baconsrebellion.com – it makes one wonder about the quality of thinking of those on national bridges steering all economies, not just the USA’s

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.

 

Jul 24

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.

Jul 21

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.

Jul 06

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.’

Jul 02

Can COVID-19 solve the UK productivity puzzle?

A thought-provoking article in Raconteur by Nick Easen
The coronavirus-induced shutdown has caused a revolution in how we work. Overnight bricks-and-mortar stores shuttered, while agile businesses shifted online to survive. Countless collaborative tools, from Zoom to Microsoft Teams, meant remote workers have to show real output to justify their jobs, rather than just turn up to a physical desk. Could this pandemic increase productivity long term?
“Even traditional government services sectors, which have had strong reservations about tech adoption throughout their workforce, have figured out what digital transformation means and are now working from home. They’re getting the same kind of work done, with minimal or no commute,” explains Dr Sreevas Sahasranamam, research fellow at the Hunter Centre for Entrepreneurship at the University of Strathclyde.
COVID-19 has dragged many kicking and screaming into the digital era – even the Queen is on Skype. “For everyone, technology is now being viewed as a source of real value, rather than simply as an enabler,” says Andy Stanford-Clark, chief technology officer for IBM UK and Ireland. “The changes we are experiencing today are a preparation for the future.”
Consumers, whatever their age, are also being forced to utilise online services rather than face-to-face ones. Remote learning is used en masse, while home delivery apps and big tech are thriving. Here lie nascent answers to the UK productivity puzzle.
“I think we could expect a brief productivity revival as social distancing requires companies to adopt more digital technologies, automation, even robots,” explains Dr Carl Benedikt Frey, Oxford Martin Citi fellow at the University of Oxford. A silver lining, perhaps, as warnings of the worst recession on record cloud the UK economy.
UK productivity has stagnated ever since the 2008 financial crisis. It’s the single most important indicator of a nation’s living standards. Brexit uncertainties late last year caused a further slump; the worst performance since the 1800s. A lack of productivity growth limits a country’s ability to boost wages and become richer.

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.

Jun 27

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.*

Jun 25

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!

Jun 20

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.

Jun 18

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

Jun 12

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.

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