As productivity levels stagnate to below pre-financial crisis levels, is time running out for traditional measures, such as output? Will businesses need to focus on new areas to see improvements?
It feels like a week cannot pass without seeing a new story on the productivity crisis faced by many organisations. And the headlines are not unfounded. Deloitte analysis of International Labour Organization data shows productivity growth has failed to beat the 3.9 per cent peak it reached in 2006, before falling off sharply after the 2008 financial crisis. In 2016, global productivity grew just 1.8 per cent and Dr Rumki Majumdar, a manager and economist for Deloitte Services in Bengaluru, India, who conducted the analysis, says little has changed since then.
Furthermore, a June 2019 survey of 400 business leaders in the UK and US with more than 1,000 employees, commissioned by Concentra Analytics, revealed that 86 per cent of Britain’s largest businesses are worried about their ability to raise their productivity levels, with 39 per cent describing their productivity as “very concerning”.
Why does this matter? Because, says Majumdar, productivity is one of the two main drivers of business and economic growth – the other being increases in the number of people working. While ageing populations are presenting opportunities in this area for many employers, the importance organisations place on improving productivity remains. The persistence of low productivity is leading many to question the current globally accepted ways of measuring productivity, which focus more on output, meaning many organisations are simply trying to squeeze more out of their existing operations.
Some argue that there is much more at play here, including organisational and people factors. Is it time for businesses and policymakers to refocus their attention on a broader range of drivers to not only get a more balanced picture of productivity performance, but also to have a better chance of improving it?
Global learning company Pearson has seen its productivity levels improve since the business moved away from the traditional focus of output per hour, says Kevin Lyons, its Senior HR Manager in London.
Pearson’s heritage is as a publisher of printed educational materials, but as customers focus less on print and more on digital, less on ownership and more on access, the company has undergone a corresponding digital transformation.
As part of that customer-led change, Pearson now focuses on the quality of customer service as a driver of productivity.
“Measuring yourself against quality of customer service keeps you nimble, reviewing your processes and looking at your culture and, therefore, you’re less likely to lapse into lower productivity,” says Lyons.
Reviewing processes and linking to outcomes has led Pearson to outsource a number of activities in pursuit of delivering better customer service, which has already led to higher productivity levels. One example is the offshore outsourcing of the help desk for the 30,000 assessment associates Pearson employs each year, who assess examinations set by Pearson.
The move has transformed the service the business is able to offer to its associates, Lyons says. First-line support has improved significantly, with 90 per cent of calls now being resolved at first stage, compared with a much lower percentage when the help desk was in-house.
The business is also able to better manage peaks in demand for the service. And, while there are now fewer employees in the UK, they are able to focus on higher-skilled work such as helping associates with queries about exam performance and management, boosting productivity in house. The outsourced operation is also excelling in customer service, which is its core competence. “Productivity is key to what we’re talking about here,” says Lyons. “It runs right through the outsourcing approaches that we’ve undertaken.”
While outsourcing is one way of reorganising processes to boost productivity, pharmaceutical giant Pfizer has tried a different tack. When new CEO Albert Bourla joined, he tasked managers with finding a way to simplify processes, structures and governance to create a more productive organisation that empowered colleagues and drove faster decision-making.
A leadership team launched a corporate-wide online platform project which crowdsourced colleagues’ experiences of overly complicated processes that were taking up time and energy. Meetings and emails emerged as the biggest drains on productivity. A team of volunteers was engaged to help come up with practical and quickly implementable solutions.
“The key to this initiative was the involvement of colleagues in the assessment and solution finding,” says HR Business Partner of Pfizer in Russia. “This boosts the level of engagement as we feel that we are all part of the process. The changes have helped to free up capacity for growth and liberate our time to focus on what really matters – delivering value to patients and people who need us.”
Freeing employees up to focus on higher-value work is an example of another technique many companies are using to boost productivity – reassessing roles and responsibilities.
Research from Bain & Company reveals compelling links between this type of talent management and productivity. It finds that the best companies are more than 25 per cent more productive than the rest, thanks to the way they manage their best talent, including the roles and responsibilities they assign to them. This involves identifying and tracking the progress of star talent, assembling all-star teams and putting them to work on mission-critical initiatives, removing obstacles to the team working effectively together, and controlling team member egos.
The Concentra Analytics research also finds a clear correlation between organisations that are most productive and that have macro and micro insight into profit per worker. It calculates that if large companies in the UK were to improve their insight into their human capital in this way, UK productivity could witness a 0.5 per cent or £10.4 billion boost.
Rupert Morrison, CEO of Concentra Analytics, explains: “The reality is that most large companies don’t know enough about their employees or what they do, so it’s hardly surprising that there’s this much potential upside in getting a greater insight into what’s going on with your human capital.
“For organisations that are investing in their future, getting better information on people and what they’re working on improves productivity by making sure the right people are in the right place at the right time to deliver the operating plan.
“It’s making sure people are clear about their roles, have the competencies for the job and can make a difference that inspires them, not a Friday beer fridge and a pool table.”
In their book Now, Discover Your Strengths, US management gurus Marcus Buckingham and Donald Clifton analyse a Gallup study of 2 million people and argue that by identifying the strengths of individual employees – rather than trying to fix their weaknesses – organisations can place them in the most suitable roles allowing them to flourish. This reduces turnover and boosts morale and business performance.
At Pearson, Lyons says employees are really benefiting from the motivation gained from doing higher-value work in the wake of the company’s outsourcing exercise. It’s a result that’s been achieved by reviewing work processes, setting clear goals for people and having a clear performance management framework in place. This means that employees know what’s expected of them and their roles are intrinsically rewarding and interesting because the effort has been made to make them so.
Lyons urges organisations to strike a balance between performance management and people development, which means investing across the talent agenda in areas such as learning and development, diversity and inclusion, wellbeing and mentoring.
If you can get these things right, employees are less likely to experience the job insecurity that productivity-gain initiatives can sometimes engender.
Looking beyond organisational roles and responsibilities to the personal needs of employees can also help to boost productivity.
Juliet Turnbull is Founder and CEO of 2to3days, a start-up whose purpose is to advance women’s equality in the workplace through the power of flexible working. It connects progressive companies with highly capable women who want to pursue their careers on a flexible basis. Set up four years ago, the company now has a community of more than 30,000 candidates.
Turnbull says that companies that are willing to adapt to accommodate flexible workers – through, for example, a change in working hours or the provision of technology to accommodate remote working – are much more likely to have happy workers who are more productive and loyal. This, in turn, pushes down recruitment costs, immediately impacting on the cost side of the productivity calculation.
Meeting the personal needs of employees isn’t something that organisations necessarily need to take sole responsibility for. Dorset, a region located on England’s south coast, has been experiencing falling productivity levels in recent years. One major obstacle to boosting productivity is an ageing population.
The Dorset Local Enterprise Partnership (LEP) is responsible for coordinating a local industrial strategy for the region that will help to boost productivity. It is currently working with local stakeholders, including employers, to devise this strategy.
As part of this work, it will be looking at how the region measures ‘productivity’ – a point raised by many respondents to a public consultation, who want to see Dorset’s natural and cultural capital considered.
LEP Director Lorna Carver explains: “We’re not saying that economic methodology around productivity is going to fall away – productivity is still about value – but how do you balance that with some of these things that are increasingly important to people around health, wellbeing, social value and cultural capital?
“How you measure those wider factors is the tricky thing and that’s something we’re looking at currently,” Carver says.
In its 2017 report – A future that works: automation, employment and productivity – the McKinsey Global Institute highlights automation as a way of offsetting the impact of a declining share of working age population. According to its scenario modelling, automation could raise productivity levels by 0.8 to 1.4 per cent annually.
Pearson’s Lyons describes automation as a great way to remove mundane processes and increase quality with error-free results. He sees it providing a future boost to productivity as outsourcing providers embrace sophisticated chatbots to provide first-line support, for example. But, he warns, organisations should follow a strict process when deciding what to automate: review the activity; re-engineer it if you can; and only then automate it. If you automate rubbish, you’ll produce rubbish, so it’s important to get it right, Lyons says.
“Technology can transform the working environment because it can allow you to lift yourself from that mundane, process stuff that technology does much better anyway and allow you to do the strategic and more emotional work that technology can’t cover,” says Lyons. “That blend of humans and technology working together is how the future is likely to evolve.”
At Pfizer, automation is part of a transition to becoming a growth company. The Pfizer Digital project is designed to identify the technological capabilities needed to operate more efficiently internally, among other things. As part of this, the company has automated HR processes via Workday HMRS.
How can companies deal with the unsettling effect that automation might have on employees? “You need to allow colleagues time to adapt to new technology and see its advantages,” says Novoderezhkina. “Once they understand the gains, they will use it effectively. The simpler and more intuitive your technology solution is, the better effect you will see in its implementation and further use.”
Whether they’re thinking about automation, outsourcing, revising roles and responsibilities or adapting workplaces to the changing needs of employees, employers need to flex their old ways of boosting productivity to include a much wider range of drivers.
What’s clear is that people are a major influencer on productivity and so it will be important to get their buy-in to any productivity gain activities. Novoderezhkina offers some valuable advice: “Provide as much information as possible about any changes, concentrate on the good things, treat colleagues with respect and support them on their change journey.”
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Christian joined Hays in 1997 as a graduate from the University of Mannheim and during this time he has held a number of senior positions. Christian started as an account manager and then went on to develop the Hays office in Germany. He is now a member of the Management Board in our GSCNR region and is responsible for the entire People Management at Hays Germany.
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