Uncovering the Secrets to Higher Productivity
If you could use some hopeful business news these days, then we've got just what the doctor ordered: an injection of higher confidence in future labor productivity.
Why is this such good news? Nobel Prize-winning economist Paul Krugman has stated, "Productivity isn't everything, but in the long run it is almost everything."
Confidence in productivity is, to a large degree, confidence in the future of the economy. And results from i4cp's latest Productivity Confidence Index (PCI) show an index increase from 20.3 in April to 22.1 in July. Specifically, respondents were asked to predict the degree to which they thought their organizations' productivity rates would rise six months into the future. The study found that, overall, 62% of respondents expect productivity to rise in the coming six months, compared with only 53% the last time we did the study.
Meanwhile, U.S. government data has also shown positive productivity news, with productivity in the nonfarm business sector rising by a 6.6% annual rate in the second quarter, up from .3% the quarter before. That was the highest rate of increase of any quarter since 2003.
Especially critical in this equation is a sharp upturn in output per hour in U.S. manufacturing, which had previously seen four consecutive quarters of decline.
i4cp's research suggests that larger organizations are especially optimistic about productivity over the next half year. In fact, the larger the company, the higher the expectations. Organizations with 10,000 or more employees saw the largest growth in workforce productivity expectations.
Of course, such data begs the question "Why are productivity and productivity confidence on the rise?"
There's no single right answer to this question, but the PCI study does shed some light on it. The classic economic answer is that productivity is rising because many employers have conducted downsizings, requiring more work to be done per employee. No doubt, this explanation has some validity. But downsizings alone don't explain rising confidence about productivity. In fact, among respondents who expect productivity to rise in their companies over the next six months, "reduction in headcount but maintenance of production levels" was only the sixth-ranked reason for productivity increases, cited by 21% as a factor.
The most commonly cited factor was "redesign of work process" (39%), followed by "quality and/or continuous improvement efforts" (35%). In other words, many organizations are rethinking their work processes to enhance both efficiency and quality.
But the study also shows that enhancing productivity isn't all about reengineering or Six Sigma. In fact, the next two factors are "strong leadership" and "increased employee engagement," cited by 33% and 29%, respectively. Among respondents from organizations with 10,000 or more employees, the issue of leadership was seen as being just as important as work redesign for productivity increases (40% in both cases).
One interpretation of the data is that, compared with their smaller counterparts, larger companies are more dependent on leadership as a tool for boosting productivity. Perhaps that's because strong leadership becomes an increasingly powerful lever in companies with more workers to manage and engage. In a large organization, leadership can be just as effective as, if not more effective than, work redesign because such redesigns can take longer to implement on a grander scale.
The idea that work redesign, leadership and engagement are all critical aspects of raising productivity came across loud and clear in a recent i4cp interview with David Whitehorn, VP of HR at Pelco by Schneider Electric, an i4cp member company and a world leader in the design, development and manufacture of video and security systems.
Like many companies, Pelco by Schneider Electric has taken steps to reduce costs, including cutting back work for some employees to four days per week. But it has also focused hard on everything from lean manufacturing endeavors to engagement and leadership initiatives. For example, Pelco has recently done the following:
i4cp's 4-Part Recommendation:
Why is this such good news? Nobel Prize-winning economist Paul Krugman has stated, "Productivity isn't everything, but in the long run it is almost everything."
Confidence in productivity is, to a large degree, confidence in the future of the economy. And results from i4cp's latest Productivity Confidence Index (PCI) show an index increase from 20.3 in April to 22.1 in July. Specifically, respondents were asked to predict the degree to which they thought their organizations' productivity rates would rise six months into the future. The study found that, overall, 62% of respondents expect productivity to rise in the coming six months, compared with only 53% the last time we did the study.
Meanwhile, U.S. government data has also shown positive productivity news, with productivity in the nonfarm business sector rising by a 6.6% annual rate in the second quarter, up from .3% the quarter before. That was the highest rate of increase of any quarter since 2003.
Especially critical in this equation is a sharp upturn in output per hour in U.S. manufacturing, which had previously seen four consecutive quarters of decline.
i4cp's research suggests that larger organizations are especially optimistic about productivity over the next half year. In fact, the larger the company, the higher the expectations. Organizations with 10,000 or more employees saw the largest growth in workforce productivity expectations.
Of course, such data begs the question "Why are productivity and productivity confidence on the rise?"
There's no single right answer to this question, but the PCI study does shed some light on it. The classic economic answer is that productivity is rising because many employers have conducted downsizings, requiring more work to be done per employee. No doubt, this explanation has some validity. But downsizings alone don't explain rising confidence about productivity. In fact, among respondents who expect productivity to rise in their companies over the next six months, "reduction in headcount but maintenance of production levels" was only the sixth-ranked reason for productivity increases, cited by 21% as a factor.
The most commonly cited factor was "redesign of work process" (39%), followed by "quality and/or continuous improvement efforts" (35%). In other words, many organizations are rethinking their work processes to enhance both efficiency and quality.
But the study also shows that enhancing productivity isn't all about reengineering or Six Sigma. In fact, the next two factors are "strong leadership" and "increased employee engagement," cited by 33% and 29%, respectively. Among respondents from organizations with 10,000 or more employees, the issue of leadership was seen as being just as important as work redesign for productivity increases (40% in both cases).
One interpretation of the data is that, compared with their smaller counterparts, larger companies are more dependent on leadership as a tool for boosting productivity. Perhaps that's because strong leadership becomes an increasingly powerful lever in companies with more workers to manage and engage. In a large organization, leadership can be just as effective as, if not more effective than, work redesign because such redesigns can take longer to implement on a grander scale.
The idea that work redesign, leadership and engagement are all critical aspects of raising productivity came across loud and clear in a recent i4cp interview with David Whitehorn, VP of HR at Pelco by Schneider Electric, an i4cp member company and a world leader in the design, development and manufacture of video and security systems.
Like many companies, Pelco by Schneider Electric has taken steps to reduce costs, including cutting back work for some employees to four days per week. But it has also focused hard on everything from lean manufacturing endeavors to engagement and leadership initiatives. For example, Pelco has recently done the following:
- implemented a new internal communication program using a variety of ways to communicate with employees globally, including quick turnaround to improve and speed up all-company internal communication
- organized social events that include activities from “dunk your boss” to soccer tournaments
- leveraged a program that allows workers to present new ideas and to get feedback on those ideas within a week or less
- provided monthly recognition and rewards for employees who have given excellent service to customers (both internal and external)
- involved employees in the company’s Green and Community Partnership programs
- implemented a special vacation donation program for employees who had been placed on furlough status
- ensured that the executive team is very much engaged in new strategy and innovation initiatives
- implemented a program for identifying performance issues, one of which tries to address these issues with specific employees
- modified its vision and mission statement to emphasize fresh ways of looking at its business and establishing its priorities
- started work on new initiatives to help it raise the company’s profile as an Employer of Choice
i4cp's 4-Part Recommendation:
- Try to gauge the efficiency and effectiveness of your current work processes.
- If those processes can be improved, put together a team or teams to decide which issues should be addressed and which practices can be used to optimize them.
- Ensure that leadership is engaged not only in any redesign efforts but also in achieving “buy-in” for those efforts from the employee population as a whole. Leaders must be both motivators and change experts.
- Emphasize engagement efforts during tough times. Improving productivity means winning hearts as well as redesigning processes and operations.
