Workplace productivity dropped in each of the last three quarters–the longest decline since 1979. This is a problem for the economy, as over time, greater productivity leads to higher incomes and better living standards–and technology (or a lack thereof) might be to blame.
Since 2006, workplace productivity in major sectors has largely remained stagnant year over year, according to the US Bureau of Labor and Statistics. “America is not doing as well as it could do in productivity levels, especially compared to other OECD countries,” said Iwan Barankay, associate professor of business economics and public policy at the University of Pennsylvania’s Wharton School. But why is this productivity down?
Economists offer different explanations. Northwestern University professor Robert Gordon posits in his book, The Rise and Fall of American Growth, that the drop is due to a lack of truly new, time-saving technologies. Not much has changed since the rise of the internet in the 1990s, and companies are not yet tapping the potential of smartphones, robots, or other recent innovations, he wrote. While tech companies continue to innovate, the largest impact of the tech revolution may have already happened, according to Gordon’s book.
On the other hand, the advent of social media presents a workplace problem. “Facebook and electronic devices are productivity killers in the workplace,” said Al Crispo, retired professor of organizational change and change leadership at Purdue University. “We’re addicted to electronics.”
Constantly communicating via email and social networking also takes away from worker leadership and communication skills, Crispo said. “If people don’t talk to each other and problem solve, it will have an effect on the economy,” he added.
Worker productivity is determined by the output of service produced for each hour worked. US workers’ ability to continually increase output has shaped the economy’s output and therefore wealth, said Andrew Oswald, professor of economics and behavioral science at the University of Warwick in the UK.
Productivity rose rapidly in the 1990s with the rise of computers. But today, companies have not invested in new technology equipment to continue the upward trend.
“If productivity is not high in the US, the immediate next step for companies is to go abroad and look for talent there,” Barankay said. “It has a lot of implications for the local labor market. In the end, what makes a company profitable or a country rich, is doing something that hasn’t been done before. For that to happen, you need to find people to work on an innovative task.”
So how can we help our workers produce more value for the company? Baranakay’s research focus is on incentivizing workers to perform complex tasks to the best of their abilities.
When asked to perform a complicated task, in tech and other fields, humans often use heuristics, or shortcuts, to help them get through it. In that case, the work performed is adequate, but not optimal. For the best results, companies need to steer that worker’s focus and motivation to complete the tasks carefully, and might do so by attaching a reward. “But because people use heuristics, many will not react to the incentive, because they say ‘I’ve got my system, I know how to do it, I don’t want to change my routine.’ People may not be easy to manipulate,” Barankay said.
The best way to inspire employees to complete a difficult task is to offer a simple incentive, Barankay’s research found. For example, a furniture company that wanted to increase its sales team’s results added a 10% commission to every sale made, which worked better and saved time over adding different percentages to different items. “With a simple incentive, they worked harder,” Barankay said.
Happiness is also key to employee productivity. In one of Oswald’s studies on the subject, he found that happier workers were 12% more productive, while unhappy workers were 10% less productive.
“In randomized control trials, it is possible to prove that happiness leads in a truly causal sense to high productivity,” Oswald said. Therefore, tech companies should take steps to determine what will make their employees happier, he added. “It will likely pay off with compound interest,” Oswald said.
Organizational vs. individual productivity
Part of the productivity problem may be that companies tend to focus on the personal productivity, with the expectation that increasing each individual worker’s output will add up to increasing the company’s output. But this is not always the case, said Anthony DeCaria, continuous improvement strategy group manager for DTE Energy in Detroit.
“We’ve been focused on how to reduce the waste in people’s individual jobs and make them more productive,” DeCaria said. “But when you have strategic plans that aren’t aligned with daily work plans at various levels, you often find that people are working on inconsequential things that don’t add to the key drivers of a business.”
This disconnect often occurs due to lack of communication. If executives hold a strategy session and determine a five-year plan for the company, they need to work with lower level vice presidents and managers on how to reach these goals and what measurements will be used to ensure progress is made. “People aren’t good at measurements of success,” DeCaria said. “Everyone is focused on the next big special project, but not the daily stuff that drives the business.”
One of DTE Energy’s overall goals is reducing the amount of time it takes to restore power to houses and businesses after an outage. This is represented as a high-level number, and technicians reported feeling that their individual work did not have an impact on overall progress. Managers determined other measureable statistics, including the amount of time it takes a technician to get to the outage site after receiving a request. With that data, technicians could see where they need improvement, which ultimately impacted the higher-level number, DeCaria said.
“It’s a double-edged sword,” DeCaria said. “If companies are becoming more productive, it creates stability and gains for the company. But at the same time, the more productive we get, the fewer workers we need, which can mean a smaller workforce and fewer people with jobs.”
The AI factor
Robots and other AI devices will almost certainly impact workplace productivity more in the future, economists said. Barankay said he predicts that interactions in the workplace will be very different with the rise of VR and AI.
Machines have been aiding, and in some cases replacing, human workers for the last two centuries, Oswald said. “Machines slowly put people out of business,” he added. “But the upside is, when we look at history, it is always that the displaced workers go on to do something more useful that the machines cannot yet do. And so, through the centuries, it goes on and on, and always will. AI is just the latest incarnation of a very old process.
“Human innovation will one day put your business out of business,” Oswald said. “It pays to keep an eye on the horizon rather than focus on your past successes.”
The 3 big takeaways for TechRepublic readers
- While workplace productivity has remained largely stagnant in the past 10 years, it dropped in the last three quarters, which could have a major impact on the US economy.
- Some economists suggest that the problem is due, in part, to the distraction of social media in the workplace, while others say it may be that we have not seen a major innovation since the advent of the internet in the 1990s.
- Robots, VR, and other AI devices will very likely impact workplace productivity going into the future, but it remains to be seen how many jobs will be lost.