The lost decade of productivity

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Written by Prof. Alan Brown, Professor in Digital Economy, Exeter Business School

During the last 10 years that I lived in the USA, working in a variety of high-tech companies across the country, I flew over one and half million miles on American Airways. Perhaps it is hard to remember after 2 years of travel restrictions, but for many people it was not unusual to spend 2, 3, or more nights every week in hotels in different cities across several countries. Sometimes I was visiting colleagues in remote offices around the world to discuss market strategy and review upcoming product releases. But more often I was at client sites to support sales teams or to hear first-hand the concerns from current product users. It was a stressful life, but I sure learned a lot.

The trouble started when people in my management chain began to insist that each month I provided them with data that described the scope of my activity and benchmarked my productivity. When I realized that I could no longer ignore their requests, I started sending them my American Airlines statements to track my airmiles. They did not think this was a valid measure of my contribution. So, each month I calculated my average velocity and maximum height above ground to send to them. Somehow, they didn’t get the joke. And so began my long journey struggling with a key question that many people face: How should I assess my contribution and measure productivity to define the impact of my work?

It is a question faced by many individuals and organizations. Yet in this digital era it seems it is becoming more difficult than ever to answer. General statements and platitudes abound. With many companies adopting broad perspectives on their digital progress and maturity. Perhaps it is time to take another look at how we view productivity.

 

The productivity dilemma

At the core of digital transformation initiatives is a need to drive more value to clients and stakeholders while supporting workers in their goals to be more effective and engaged in their activities. Achieving and balancing these twin objectives drives many of the key decisions at both an individual and an organization level. Yet, the frequent inability to make demonstrable progress in these areas is central to the growing tensions being experienced today in many digital transformation scenarios.

Accelerating productivity in the digital economy is a topic that has attracted considerable interest. However, at an organization and societal level, despite widespread digitization, reported productivity has been flat, creating “a lost decade” for productivity with no sign it will end soon. In what the Bank of England described as “the productivity puzzle”, increasing effort from a more digital workforce is not being seen in official figures of productivity improvement. An important issue here, is the productivity paradox being witnessed as organisations spend more and more on digital initiatives but are finding it difficult to recognize where these investments are making a difference. A challenge made more complex with the rapidly shifting balance between manual, digitally assisted, and fully automated processes.

Moving manual processes online has undoubtedly facilitated customer interactions and reduced costs in key areas. Yet, in a broader sense productivity has not seen the levels of improvement expected. One reason may lie in the way productivity is measured. Perhaps, traditional measures are inadequate, and a more value-focused approach would be more appropriate. Traditional measures of organization and individual productivity, and associated rewards and incentives, are frequently at odds with the digitally-driven initiatives in play. With increased pressure to reduce costs and deliver new kinds of services, tensions inevitably grow as organizations look to reshape their strategies to align these elements.

On an individual level, the impacts of digital transformation on personal performance are also brought into question. While many view the arrival of AI and other digital advances as a chance to remove unwanted repeated manual tasks, the pandemic has also highlighted that these changes cause many personal challenges and create unwanted stress on individuals. As new forms of work are defined and the workplace is disrupted, key roles are redefined and new ones created. Not only are the skills and activities of the workplace shifting, but also additional frictions arise due to the instabilities this creates.

The costs of dealing with workplace volatility and its effects cannot be underestimated. Concerns surrounding the negative impacts of technology in the workplace such as technostress have already received a great deal of attention. Yet, due to the accelerating impact of the pandemic, additional factors must also be taken into account that bring a variety of mental and physical health issues to the fore. All organizations are now facing the consequences of these challenges including lack of employee engagement, increased absenteeism, and delays in recruitment.

Initial indications from recent studies into the effect of the pandemic on UK productivity point to several issues. First, they highlight that the collection and analysis of performance data has been disrupted to such an extent that the figures may themselves be at best incomplete, and at worst unreliable. This makes measuring productivity unreliable during and after the pandemic. Second, the studies emphasize that we should expect large falls in output per worker and output per job metrics across all sectors. Finally, the data is beginning to indicate that the “great resignation” being experienced due to the pandemic is significantly changing job patterns, wage structures, on boarding costs, and much more. These will also bring pressures on future productivity figures.

 

Finding a way forward

All of this brings significant additional challenge to individuals and organizations looking to drive change and deliver effective digital transformation. The key dilemma they face is between deploying digital technology with the aim of optimizing traditional ways of measuring and rewarding productivity, or to look to new organizational approaches and incentive models to drive productivity in line with their broader digital transformation goals.

Organizations must therefore address several key questions, including: How do we define productivity? What productivity measures are meaningful in our digital transformation context? Where can our ambitions to drive productivity have the greatest impact without increasing the stresses and strains on our workforce? Such questions become both more urgent and yet more complex to answer in the disrupted world in which we live.

Whatever happens, I can’t see that I’ll soon be going back to counting my airmiles.


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