CAN WE HAVE TOO MUCH PRODUCIIVITY:
This was the question asked by the Harvard Business School. Some of the replies are presented below.
I believe that the economic definition of the word "productivity" needs to be revisited. I believe that the existing definition in your article was not conceived in the Internet age, where the back-office labor can occur in one country (such as India) and the service outputs in another (such as the U.S.). Some economists have expressed concern about what appears to be a "jobless recovery" in 2003. I think the record shows that there are plenty of new jobs--they just happen to be in Bangalore, India. So, in a global economy, productivity improvements improve life somewhere in the globe, but not necessarily in the U.S.A.
John van Heteren
Manager, System Engineering
InVision
I think there is an assumption that increased productivity means that any individual has to do more and must maintain his or her current work hours. A potential outcome could be keeping the same number of people employed, performing more efficiently, and working fewer hours. What kind of impact would that have on the society as a whole? Would people be able to spend more time volunteering in their children's classrooms? Would stress levels decrease? Would workplaces become more enjoyable? Would health and safety costs decrease? Let's review our assumptions on the outcomes carefully—there is a potential for a new emergent paradigm here, and we should be exploring it in a more creative manner.
Mary Richardson
Consultant
WorkLife Resources
Increased productivity, combined with readily and globally available technology, combined with the developing world's longing to industrialize, all suggest that overcapacity may become a chronic problem, not just a business cycle event. We examined this issue with HBS profs in a February 1999 HBS Bulletin article. ("Too Much of a Good Thing?" See www.alumni.hbs.edu/bulletin.) It does seem to be a problem, and getting more serious. I didn't dare use the word "deflation" back then regarding the United States for fear of being dismissed as hopelessly alarmist. Look how things have changed.
Garry Emmons
Senior Associate Editor
HBS Bulletin
It all depends on how you define productivity. Savings for one group but detriment for another are just a math calculation. Take this simple example: We used to have a carpark attendant in our nearby shopping center. For productivity's sake (i.e., to save some money), the management decided to replace him with an automatic system.
For the users, it is more inconvenient. And the parking tenant is now on welfare, therefore costing something to society. As to the savings, I was told the system has a five-year pay-back. I don't even know if you would call that productivity. From one angle, yes ... but the total impact to society is negative.
Anonymous
I don't think it's possible to have too much productivity improvement. "Reengineering" is a healthy process by which redundancies are eliminated and non-essential tasks are pared. It's incumbent upon employees to keep their skills current.
Lyle Pirnie
Director of Logistics
IBM's Microelectronics Division
Too much productivity? Good or bad? This may become similar to the question of whether or not too much money is a good or bad thing. Personally, I do not think so but it depends upon what you do with the money. Increased productivity does allow for product and service improvements, cost reductions, or increased flexibility; but it also carries with it a responsibility to use this "currency" wisely.
I suggest this be used towards ensuring that those who provide the productivity gains are well rewarded and that new wealth is used to improve working conditions for all. Sounds strange coming from a staunch Republican, but the difference between theory and reality, when it comes to rapid increases in productivity, can often mean real pain for thousands.
Sean C. Allen
Marketing
Dow Corning Corporation
As Professor Heskett rightly points out, the mindless pursuit of productivity is contributing today to our problems. Productivity improvement without commensurate increased demand leads to deflation—which we all agree is bad. Demand cannot increase in an environment when people are losing or fear losing their jobs.
We talk about people as assets, but we treat them as costs and will continue to eliminate them in the pursuit of higher productivity. An economic system that does not serve people first is not sustainable.
Anonymous
You have your finger on the key—the tremendous excess capacity in just about every business and industry: more supply than demand.
The paradigm upon which all of our thinking for decades has been based is the idea that shortages, limitations of supply, of product, skills, information, everything, are natural and normal. Now, however, we have created an abundance—an easy availability of everything.
So, this excess of supply at every level has undermined the whole system by which people are paid more than survival wages, which depends on the relative shortage (greater demand than supply) of what they know and can do. When you project this into the future, with globalization especially, it's not a pretty picture.
I've been a management consultant for over twenty years and have watched this trend in a conscious way since about 1990, as the globalization trend gathered momentum. Everyone assumes that the U.S. will always be THE market, customers for the whole world; but what will our people do to earn money above survival levels? We're running out of the ability to sustain spending by going into debt, refinancing our homes, and cashing in IRAs and annuities.
Trade with China is a one-way street, for example. We buy stuff from them. Their people are not paid enough to ever buy anything from us, with their wage caps. Where does this lead? I don't think anyone is really thinking much about these life-determining issues. Thanks for the opportunity to comment, and keep up the good work!
Paul Deis
Consultant
Essex of Oak Park, Inc.
Theoretically, the efficient market should enable labor markets and demand to adjust in the long term to increases in productivity and lower demand for labor. Throughout most of business history, this theory has held somewhat true. However, automated high technology for process improvements in combination with the Internet have vastly accelerated productivity gains within a relatively short timespan of only the past several years. Certainly, this phenomenon has had some impact on current unemployment rates, although the leading causes are terrorism attacks and downturns in the high-tech, Internet, and airline industries.
Such advances in productivity cannot continue at the rate of the past several years. The business community must have faith that markets will once again bring labor back into equilibrium. Certainly, some social programs for retraining in certain industries may be necessary, but the alternative of suppressing advances in efficiency is not within the realm of reason.
Chris Waller
VP, Acquisitions / Partner
Garrett Development Corp.
First one has to ask, "What is productivity?"
Is it speed?
Is it knowledge?
Is it experience?
Is it innovation?
Is it relationships?
Is it ethics?
Is it values?
Is it price?
In truth, productivity is all of the above.
Productivity without one or more of the above eventually fails.
Anonymous
Productivity improvement may not be good for all, but it is good and essential for the ongoing vitality of corporations. ...
The FUD (fear, uncertainty, and doubt) that Ephraim Schwartz mentioned in his article on the Oracle takeover bid for PeopleSoft ("Oracle Plays Hardball with PeopleSoft," InfoWorld, June 20, 2003), which employees face in this age of unbridled and unabated change management, is an outgrowth of the evolutionary vortex of process improvement demands that corporations place at every employee's doorstep.
Comply, execute brilliantly, and you may be out of a job in the not-too-distant future. Fail to comply, resist, and you are much likelier to be out of a job even sooner. On the other hand, "to the victor go the spoils" stills rings true on occasion, and those who are fortunate enough to remain "on the team" after a process improvement/redesign initiative runs its course are often touted as the newest heroes in the organization. However, they are doing more with less and feel even less secure as a result, despite the accolades they may temporarily enjoy.
Too much productivity? With survival at stake, how can we say there is such a thing? But for the individual, it's a sharp, double-edged sword that cuts not only the fat, but also the tendons of loyalty and performance they once felt had securely held them to their employer.
Scott Huntley
Manager, Customer Administration
CNF, Inc.
I believe that increases in productivity are ultimately good for the economy and the vast majority of its members. The process is not a smooth one. Unfortunately, there is pain along the way for those who lose their jobs as a result of the changes. In the end, however, I believe the standard of living of the majority rises as a result of productivity.
Amy Savin
President
Savin Management Group
As long as the productivity you speak of produces a high-quality result focused on exceeding the true needs of the customers in the marketplace, I don't believe it is bad because it creates more demand (a bigger pie) ... at least for the organizations that are responsible.
For me it is the process of natural selection in the marketplace. Quantum leaps are nothing new, business history is full of similar situations, and the holistic marketplace has always shifted and adjusted. I think we have a long way to go before productivity gets to the point where everyone is at Six Sigma. There is always the bleeding edge and there are laggards that take ten years to catch up. There will probably be fewer laggards in the future, but is that a bad thing?
Anonymous
If "productivity" increases at the cost of research and development, training, and service to the customer, it is not a real increase of productivity; it is just cost cutting.
A true increase in productivity will lead to growth and improvement, but will also have a social cost unless we gain the new skills needed to function in the new arena.
C.J. Cullinane
Ryanair's plan will fail unless it also shares the fruits of increased productivity with the employees to maintain the increase. The downward price spiral and many other disruptive social and psychological consequences are inevitable as science and technology make progress while economic thought marches in place.
The ultimate answer lies in the alignment of economic practice with the science and technology progress. Progress in behavioral economics will point the way.
Anonymous
The problem may not be with productivity improvement itself as much as the mismatches in the elements which go into productivity measurements.
Let us consider two examples. First, a fully automated factory which employs only a few people and produces large quantities of a high-value product. This is no longer in the realm of imagination. The people productivity of this factory would be enormous; the customers might benefit too from lower prices; and yet the societal costs of such a venture would be enormous, too. In fact, taken to its logical conclusion, if every enterprise were to attempt such a business model, there might be chaos and even anarchy in society.
Second, a low-cost labor economy that produces huge quantities of mass consumption products and markets them at ridiculously low prices: this ia a reality today. This may sound attractive in the short-term, but might be catastrophic due to its potential to create social convulsions, perhaps even a revolution, in the long term.
A major reason for the imbalances could be the proliferation of technology for its own sake. How many of us can really use the processing capacity of a 3.2 GHz microprocessor? Does it really matter whether a car can zoom from 0 to 100 mph in 11 seconds?
Obviously, we may not have right or wrong answers to these questions. However, the collective wisdom of humankind must seriously ponder this and strive to strike a balance between productivity improvements of any kind and enhancing the quality of life for EVERYONE. We just cannot afford to think in compartmentalized isolation of any one section of society. The doctrine of the greatest good for the largest number must guide our actions in every field. Therein might be an answer to the dilemmas we face today.
B. V. Krishnamurthy
Executive Vice-President and Professor of Strategy
Alliance Business Academy, Bangalore, India
In Mexico, productivity in the housing construction industry has been growing due to both administration staffs and workers, but this is the result of eliminating or firing thousands of employees. ... so I think that productivity improvement [should mean], "How much more can we do with the people and resources that we already have?" and not "How can we make more with less?"
Alejandro Ocaña
Business Consultant
Productivity gains are a blessing in societies with clamoring, expanding markets of affluent consumers. They are a disaster in societies with soaring populations or increasing unemployment, both leading to diminishing per capita incomes. ...
In a stagnant market economy or a society where growing populations surpass per capita income growth, there is no demand for increased goods or services. The paramount need is for jobs. Productivity improvements lead to more unemployment and the death spiral of more goods competing in a diminishing market.
Henry Ford realized this eighty years ago, when his assembly lines increased productivity to an unprecedented level. By raising wages, he attempted to create demand in a society experiencing reduced employment because of incredible productivity improvements.
Currently, we seem to be allocating all the fruits of productivity improvements to the "capitalist" class and ignoring the need to share these gains with the people who will create demand. Henry is spinning in his grave as we embark on a "trickle down" path, ignoring middle class consumers: those who should be sharing the benefits of productivity improvement, but are instead harvesting the bitter fruit of productivity improvements: unemployment.
John Apen
Editor
Manheim Auto Auctions
It will be a difficult for businesses across the world to determine the threshold limit of productivity. Technology and the service improvements lead from innovation of one product/service to another, which will keep generating a chain of services.
Shahab
Senior Manager
NASSCOM
There is the story of the farmer who fed his mule 10 percent sawdust to cut down on the price of feed. He kept increasing the percentage until, finally, the mule died. The irony was, the farmer was surprised and shocked.
Christopher Strang
CEO
Agon Trask Media
As long as you do not trade off on product/service quality and reliability and customer and employee safety, I would conclude that continuous productivity improvement is a good thing. In the short run, it leads to dislocations (individual income and employment upsets), but in the longer run it contributes to general economic success.
The key question, particularly in a prolonged recession like this one, is, how do you help individuals make it through these dislocations? Unemployment insurance, retraining, and job advertising and recruiting systems are a few of the obvious "structural helpers" to get through both normal and abnormal dislocations.
Anonymous
We risk losing customers when we become too productive. Productivity is extremely important in every business, but when you ignore or rush the people you are trying to serve, you counteract productivity. When you are dealing with servicing people's needs, it is more important to focus on those people and build stronger relationships with them, than miss opportunities because you were not tending to their needs and were just thinking of the next person in line.
Charlie Girardi
Senior Buyer
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