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Productivity Drivers: Technology? Skills? Individuals?

One of the most common assumptions made about productivity is that it is to do with process technology. It stands to reason that a worker with an expensive machine can crank out more stuff than one who does everything by hand. Therefore, it seems obvious that more investment in technology will lead to more productivity.
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For a government, this means that the productivity challenge might be countered by measures which could, for example, give tax breaks to encourage firms to introduce automation. Technology is progressing at breakneck speed, and firms need to keep up; the winners in the global race will be those who have leveraged their human capabilities by the maximum application of the latest machines. It’s the age of robots, big data, the Internet of Things and instant communication. For the UK, it’s a time when we must learn the lessons of the past: the British textile industry used to dominate the world, but decades of underinvestment in new machinery at the start of the twentieth century led to catastrophic decline.

Our route to productivity is through the technology of how we make things and provide services (process technology); only with a reinvention of our productive base can we generate the new gizmos (the product technology) that we can sell (and export).

There is undoubtedly truth in this view. But the difficulty is that for every great example of brilliant investment in technology, there are several tales of catastrophic disaster. Technology investment is necessary, but it clearly depends on how you do it.

Real capital investment in UK business – despite some notable exceptions – has not been strong in recent years; some observers have pointed to a systemic shift in investment patterns towards releasing capital from manufacturing operations (for example, by outsourcing and offshoring) rather than making long-term commitments in plant and equipment. Even where investments have been made, many businesses – and perhaps particularly the public sector – have found that the payoffs have not been as planned

Non Productive Investment

A good example of this phenomenon is found in the way in which organisations invest in large-scale information technology systems (often called Enterprise Resource Planning systems, ERP). One of the classic cases of non-productive investment in technologies is provided by the ill-fated efforts of General Motors in the 1980s and 1990s to embark on ambitious schemes to integrate its automation efforts; the project is viewed as a classic failure of its kind. The UK National Health Service’s experience with its doomed national patient records systems provides another example. The benefits from these projects are consistently over-estimated, and the costs and time required consistently under-estimated. If technology investment is the route to greater productivity, the map of how to get there is not always clear. Nevertheless, this does not stop politicians and opinion-formers from stressing the urgent need for increased investment in technology: no-one wants to be seen as against progress, and the technology solution has a cheering, future-facing, optimistic feel to it. But the mantra, productivity = technology actually stymies critical thought. And, of course, a great many technology providers have a vested interest in selling inspiring visions of high-tech solutions.

But if technology is not the answer, then what about skills? Perhaps problems with productivity can be addressed by equipping the workers with better capabilities, more appropriately tuned to the needs of the modern world. Again, this is something that is very difficult to argue against – who could not be enthusiastic about the idea of a highly-skilled workforce? As with investment in technology, good arguments can be made that not enough training is happening, and around the world governments are struggling to design systems which encourage employers – and employees – to focus on the acquisition of skills. This includes the encouragement of apprenticeships for young workers, the idea of everyone learning how to programme computers, and long-running schemes for developing attitudinal changes in young people to increase employability.

The problem, however, is that the evidence that training per se is an automatic route to improved productivity is at best shaky. One obvious problem is ensuring that the training provided is appropriate, or of sufficient quality.

Context-Dependant Skills

A more profound problem is that although generic skills may be important, it is often highly specific, context-dependent skills that are needed to actually improve productivity. Furthermore, because the context of work is constantly changing (as technology and markets change), those detailed skills that are needed are not static.

For years, banks and insurance companies focussed on generic customer service and sales skills for people selling financial products; they found (to their great cost, after mis-selling scandals piled up) that what they really needed to have in place was far more exacting financial expertise.

Finally, skills training finds a natural ceiling when what is needed is actually better education: you can teach basic spreadsheet skills, but it’s much more difficult to overcome limited numeracy; you can train people in inter-cultural sales methods, but sometimes the need is for people who can actually speak Chinese. Throwing money at skills training while ignoring these issues is unlikely to do much for productivity.

But a more significant problem is that a concentration on skills smuggles in a notion of individuality into the discourse: skills are things acquired by individuals, but work is normally something that happens collectively. In fact, in many cases, what matters is not so much the skills of the individual, but the skills of the team, and the actual work being carried out. Translating training and skills acquisition into realised benefits requires a close understanding of the actual jobs people do, and how those jobs work in practice.

Personal Characteristics

An over-emphasis on the personal characteristics and capabilities of the individual is probably the greatest mistake people make about productivity. This way of thinking can be seen in three ways in contemporary life: personal attitude, personal technology, and personal markets.

An increasingly influential brand of pop psychology relates to individuals’ ability to achieve ‘flow’ or ‘focus’ at work. Do you need to be ‘on task’? Endless books emphasise that the solution to productivity problems is within the psyche of the individual worker. It’s an interior problem, to be solved with some quasi-religious conversion to a new mental attitude. This individuated view also leads to a dysfunctional emphasis on supporting technology.

Recent years have seen an explosion in the availability of personal ‘productivity tools’, often associated with smartphones and mobile computing. This is not new: the fetish for ‘time management’ has its roots in the efficiency movements of the early twentieth centuries, and, before the arrival of portable electronic technology, found its expression in the Filofax™ and card-index systems.

It does not take much observation to see these personalised, technical fixes can be frequently counter-productive, and, in some cases, almost risible. The problem is that technology is double-edged: computers and smartphones allow people to do amazing things, but also waste time in hitherto unprecedented ways.

It’s not just that staff may find Internet shopping or Facebook a distraction from their official work; constant communication encourages a type of intensive quasi-managerial activity divorced from the value-adding activities of the organisation.

Because meetings can be scheduled so easily, meetings happen that do not need to happen in the first place; because PowerPoint is so easy to use, presentations are prepared that have a dysfunctional effect on the conduct of business. Managers’ jobs can become dominated by the processing of email. Because every document can be stored, managers burn off energy storing documents. Paradoxically, the very tools that were supposed to have a positive effect on productivity become part of the problem. Obsessing about personal productivity ends up being terrible news for effective business processes.

The third expression of the individuated view of productivity is the idea that businesses need to have better mechanisms for drawing on the ‘right people’, and only deploying them for the right amount of time.

It’s a model perhaps exemplified by the idea of the zero-hours contract and the various ‘Uber-ized’ models in which electronic markets mean that the best (i.e. most productive) workers can be used without the inconvenience of an employment relationship. But even in non-electronic markets, the same idea has come to dominate many organisations; work is progressively casualised, outsourced, and freelanced. For the employer, there is no more need to hold onto unproductive labour when there is a lull in work to be done, and workers who don’t deliver need not be selected.

These responses to the question of productivity – more training! more skills! better people! – are three of the most common reactions to concerns about productivity, and all of them are deeply problematic. They sound great, but they don’t get to the heart of the matter. To really address productivity, it’s necessary to think about three other fundamental issues: collectivity, dignity and experimentation.

This article is part of a serialisation of the white paper "Productivity: A better way; A look at solving the productivity puzzle".

Download and read the white paper in full >

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