The productivity myth

Mar 19 2003 by Philip Whiteley Print This Article

Is high productivity always a good thing? This question may seem poorly timed as well as heretical, coming just a few weeks after Professor Michael Porter's assessment of the UK economy and its failings in closing the 'productivity gap', often estimated at up to 50% compared with the US, France or Germany.

Like the Darien Gap that separates Central from South America, and used to thwart the attempts of explorers to reach the famed lost city of El Dorado; the Productivity Gap has assumed mythical proportions in the minds of legislators and business analysts.

The quest, however, comes at a time when the usefulness of productivity as a yardstick Ė at least under some of its definitions Ė is being seriously questioned by some thinkers as part of a fundamental reappraisal of organisational theory.

Productivity is traditionally measured as output per worker, and has its roots as a key indicator in manufacturing. But most of the UK economy deals with services where 'output' is difficult to gauge, and profits depend upon customer satisfaction.

Productivity improvements save costs for businesses. The important matter is to distinguish between saving business costs in order to improve matters for the customer, and saving costs only to pass these on to the customer. The problem with the traditional measure of productivity is that it does not distinguish between the two.

It seems possible that there is such a thing as 'good' high productivity and 'bad' high productivity.

As an example of 'good' high productivity, the Defence Aviation Repair Agency has introduced teamwork, and involved shop-floor workers in the design of work processes. It used to take, for example, 52 weeks to repair the main rotor gear-box for a Lynx helicopter. It now takes 16 days.

'Bad' high productivity is more likely to feature in the service sector. Take the average call centre in a bank. Calls are measured and monitored. Lower skilled, lower paid workers take the place of experienced local bank managers, while technology is used to increase speed. But what happens is that the cost is passed on to the customer.

Customers hear the refrain 'Your call is important to us; you are held in a queue and will be answered shortly'. But when they are (eventually) answered, the call centre worker typically does not have the expertise or authority to deal with the query.

The productivity-wallahs who have designed these call centres are assuming that it is better to annoy 10 customers than to please one. They are wrong, and it is a reasonable conclusion that the decline of the financial services sector in the UK has been partly the fault of copying 'high productivity' models from industry in the past two decades in a rather slavish, mechanistic way.

US consultant and author Niels Kjellerup complains that too many call centre operators seek high productivity on the 'Galley Slave' model, in which productivity is measured in seconds and minutes of talk-time, idle time, and so on. 'Management pegs in a productivity figure of, say, 20, and threatens to fire anyone who falls below 18.5. The staff retaliate by ensuring that productivity never goes above 22,' he says.

This approach is deeply ingrained in management, where one of the commonest refrains is 'what gets measured, gets done'. This is actually illogical. Most things that are measurable are not important, and most things that are important are not measurable. You can measure a call centre telephone conversation. You cannot measure customer happiness.

Michael Porter addressed these matters, but only indirectly and in macro terms. His recommendations concerned primarily the infrastructure, referring to the need for better management training, more investment and better links between universities and industries.

This does not call into question Professor Porter's conclusions, but rather to ask whether they were too general and whether it was an opportunity missed. What is not evident from his analysis was an acknowledgement that a drive for high productivity can weaken a business as well as improve it, if it is done in isolation from the real experience of customers and employees. More management training is of no use if it encourages more rigorous 'Galley Slave' approaches.

A more imaginative appointment would have been Henry Mintzberg or Jeffrey Pfeffer, two North American gurus who are reshaping the way we think about organisations, management, and work itself. There is a silent revolution going on, that is overturning the century-old model of Henry Ford, Frederick Taylor and the production-line mentality.

Mintzberg and Pfeffer argue that, as the company comprises people, there needs to be a Copernican shift putting the onus on the way we manage people, rather than how we analyse systems and processes. This would not prevent the spectacular productivity improvements in industry, at places such as the Defence Aviation Repair Agency referred to, because this was the result of getting people management right.

Steve Hill, chief executive of the Defence Aviation Repair Agency, told a BBC Newsnight programme last November that it was only when the shop-floor workers were themselves involved, with the help of a facilitator who got them working closely together, that improvements were so startling. 'With top-down approaches we drove the process down to 13 weeks. It was only when the guys themselves were involved that we drove it down to 16 days,' he said.

In the new Mintzberg/Pfeffer model, high productivity becomes a means to an end Ė improving the life of the customer, by improving the motivation of the workers Ė rather than a statistical objective in itself. It sounds like a minor change. It is not. It is fundamental.

© Payroll World 2003