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Productivity is only half the story

Tue, 28th Jul 2015

And another thing…

The pother over productivity has reached such a pitch that I make no apology for returning to it.

In one of the latest contributions, the newly-Japanese-owned FT recently carried an article suggesting that the solution for the UK’s low-productivity problem was to cancel August – in other words, everyone should take less holiday. I think it was meant seriously.

It brought irresistibly to mind W. E. Deming’s acerbic, ‘Having lost sight of our objective, we redoubled our efforts’, instantly putting a finger on what’s missing from the productivity debate: it’s all very well working harder, but to what end?

‘Productivity’ is about ‘efficiency’, and there is no argument that UK productivity/efficiency is historically poor, lagging that of many of our national competitors. But efficiency is a crude proxy for a more important and profounder measure, which is effectiveness. Like GDP, productivity is a measure of activity in general, irrespective of whether it is useful and beneficial for society or not. It measures outputs against inputs and is about means – doing things right. Effectiveness measures outputs against objectives and is about ends, or doing the right thing. Unless it’s related to the right thing, productivity is of secondary importance. As Peter Drucker decisively summed it up, ‘There is nothing so useless as doing efficiently that which should not be done at all.’

The economic story told by effectiveness differs in important ways from the one derived from the productivity figures. For example, the official narrative puts much emphasis on improving productivity through indirect supply-side measures such as investment in infrastructure and education, and hiving off as much activity as possible to the supposedly more efficient private sector.

Of course, functioning infrastructure, including education, is essential. But it has nothing to do with organisational effectiveness, which is not a private-vs-public-sector issue: it is one of system design. All over the economy people are being beaten up to do more efficiently stuff which shouldn’t be done at all – either because they are attempting to do the wrong thing righter, which, as systems guru Russell Ackoff points out, just makes them wronger, or because they are redoing something that wasn’t done or wasn’t done properly the first time round: ‘failure demand’, in John Seddon’s term.

The dirty secret is that the NHS and many public services are stuffed full of failure demand – in some cases 60 to 80 per cent of contacts are repeat calls from folk who haven’t had their problem solved the first time. But so too are the customer-service departments of banks, phone companies and other utilities which measure their activities in terms of efficiency (x number of calls per hour, x number of rings to answer the phone) rather than effectiveness (the overall time it takes to fix a customer’s problem). In other words, measured against their purpose, whatever the productivity figures say, they are hopelessly ineffective.

At a stroke, this nullifies a second part of the official narrative: in shorthand, the death spiral of public services. The conventional story is that services are unsustainable, groaning under ever-increasing demand and expectation, necessitating constant cost-cutting to make them more efficient. But this is a travesty of the truth. What they are groaning under is the weight of citizens failing to get routine problems fixed by a system that is designed against cost, not to meet predictable demand.

Nor is it true that there is an insurmountable resource crisis; or rather, there is, but it is caused by a work design in which jobs are so tenuously connected with needs that they mostly make things worse rather than better. That includes anyone working to internal service agreements or standards, having to meet numerical or time targets or quotas, managing demand (rationing) rather than meeting it, working in back offices, shared-service and most contact centres; central specifiers, commissioners, inspectors and regulators; and anyone managing the same, basically policing other people and administering the rules. That’s a lot of people.

The bad news is that all these are what anthropologist David Graeber has termed bullshit jobs, make-work employment offering no meaning or pride (no wonder levels of engagement are so dismal). The good news is that any improvement (doing the right thing, however imperfectly at first) brings a double benefit, reducing wasted work, and therefore cost, on one side, while freeing up capacity to do more on the other. Climbing morale as people are reconnected with a meaningful purpose adds a third whammy. So yes, there is a resource crisis – but it’s a crisis of management effectiveness, not individual productivity.

I recently came across an intriguing concept called ‘Eroom’s Law’ –  Moore’s Law backwards, if you haven’t got there, and it applies to processes that unlike computer computer processors get slower and more difficult over time. It was first applied to the seemingly inexorable slow-down in new drug discovery, but it also usefully illustrates what’s happening to management as it proliferates and slows under its own friction (I wrote a bit about how it happens previously here). Unless we can prise management out of the grip of Eroom’s Law, any increase in overall productivity will will be more than eaten up by the rising tide of bullshit and a corresponding decrease in effectiveness.





 

 


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User comments

Henning Sieverts :: 5th Aug 15
I couldn't agree more with this insightful piece, Simon. But we're not going to get an army of reformed "managers" if their employers focus only on shareholder returns or the public sector equivalent: reduced spending.
guest :: 25th Sep 15
Indeed! When optional ways of managing or addressing problems are suggested to 'managers' they seem to assume that no one but themselves could ever possibly understand what the problem(s) is/are and therefore only they have the know how or capability to go about making things right. Their arrogance is astounding. Dialogue? They don't know the meaning of the word. This is particularly true of political representatives.
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