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Saturday, March 04, 2006

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Saturday Feature
 
How output can be raised at the wave of a wand
Richard Donkin from London
3/4/2006
 

          There we were, worrying about how we might work harder to plug the productivity gap between the UK and its biggest competitors and all the time the answer lay in a wave of an economist's wand.
Thinking, like most of us, that the key to greater productivity was to speed up the company treadmill, it warmed my heart when the Office for National Statistics announced recently that it had found a snappy answer in the way it calculated business investment in software.
Not only did it find another 10.5bn of investment in 2003, it found billions more in other years going back to 1992.
This means that those graphs showing UK productivity trailing that of France, US, Germany and the G7, have not changed their pecking order, but have bunched together just a little more.
The three successive labour governments under Tony Blair have been obsessed with raising UK productivity, using economic indicators as the stick that beats us all into trying harder.
Instinctively we know that the biggest productivity gains must lie in technology. The sort of software that performs hitherto complex tasks almost instantly or delivers a document by email that once took days by post, is saving billions of pounds. So software investment has to make a difference. It was just that, previously, our statisticians had not realised how much.
This unexpected statistical boost came on the same day that I saw a report claiming that poor performance among employees was costing some medium-sized to large British companies 32m a year.
My first reaction was that the figure looks a little shaky. To clear up any misunderstanding, the number is based on a model that supposes a company employing 9,100 people earning an average 22,000 a year. These averages were drawn from a survey of 796 companies carried out on behalf of Personnel Today and Chiumento, a human resources consultancy.
Among other things, the research asked respondents to rate employees on a four-point scale of effectiveness outstanding, excellent, good and poor. The average respective percentages came out as 10 per cent outstanding, 21 per cent excellent, 53 per cent good and 16 per cent poor. The 32m is 16 per cent of the average wage bill of 198m for those in the survey. Spread across all companies in the UK this so-called "burden on UK businesses" runs into trillions of pounds, according to the report. This seems an even shakier claim.
A quick glance should be enough to spot the flaws in these calculations. The first is that it assumes that some individuals are being paid 22,000 a year for doing nothing. While every employer has those it might categorise as slackers, few of these people do nothing at all. Indeed, some people would do more if they could but the nature of their job does not allow it.
How do you make a security guard more productive, for example? The security guard is a "just in case" sort of employee. One way is to give the employee more discretionary training so they double up as a first aider, for example, although the more non-security duties they get, the less they may be in a position to keep an eye on things. Yet another way may be to revise the way you think about security.
A problem with this kind of survey is that it seems to assume there is an optimum performance level for all businesses. Not one of us, not me, not you, not even Michael Johnson (the fastest man in history based on his average time over 200 metres) can perform at our best every minute of the day. We can try to do our best but there will be times when one job works better than another.
Then there are the jobs we do. How do we evaluate their worth? A large company may be making some sugar-based liquid that amounts to little more than a waste of energy and a fleeting taste sensation. How does that benefit the world apart from creating jobs and converting earned wealth into earned profits for the company and its investors?
One finding from the research -- that bad management is blamed more than poor work for under-performance -- is indicative of the way the productivity debate has been undermined by finger pointing.
The research also showed that perceptions of poorer productivity and performance in the public sector remain, not without justification. If the job for life concept survives anywhere it has to be in those public sector backwaters where any sense of accountability is to some remote ministry dependent, not on the market, but on the Treasury. The public sector never goes out of business.
Business, meanwhile, never seems to tire of worrying about costs. Not a week goes by without a piece of research that shows the cost to business of absenteeism, energy wastage, organisational inefficiencies, stock inventory, machine downtime, under-utilisation of office space, the list goes on and on. People, these days, tend to be the biggest cost, so they attract most of the attention.
Chiumento concluded that: "It's time to get tough on poor performers." But what does "getting tough" mean? Does it mean kicking some up the backside and sacking others? Does it mean paying people less or making them redundant when their work can be done cheaper in India?
Doug Crawford, Chiumento's head of employee engagement, says that what is really needed is a different expectation of managers. "If we're going to break out of the approach that looks at getting rid of slackers we need to change the role of the manager fundamentally to that of enabler."
As Mr Crawford points out, many employees fail to give of their best because they lack the training they need or they have a poor understanding of what is expected of them. "Managers tend to get put in their position because of their technical competence, not because they know how to get the best out of people," he says.
Sometimes, however, a managerial job involves admitting that people, even at their best, cannot always outperform machines. After two decades moving operations overseas to save on labour costs. a number of Japanese manufacturers have begun to repatriate production in automated plants.
Employees are used sparingly so that only highly trained technical staff do the specialised work that cannot be undertaken by machines. Increasingly sophisticated robotised lines are taking over the work once done by manual assembly. The machine tool maker, Yamazaki Mazak, for example, is installing robot assembly lines that can run continuously without supervision for up to 72 hours.
Performance will continue to be the number one concern of people management. But productivity improvement is about a far more sophisticated approach to the work of production than simply working harder. Sometimes it is about managing unnecessary work out of the workplace. On the evidence of the recent figures, it could even be regarded as a moveable feast, earned at the stroke of an economist's pen.

 

 
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