We have to stop being obsessed with productivity growth

We have been told time and again that without increased productivity, companies will lose competitiveness and be less able to sell their products or services. Poor productivity is the convenient scapegoat for low wages, job stagnation and even retrenchments.

The charge although not incorrect, puts an improportionate amount of focus on supply and not enough on demand. Productivity matters only when people want what you’re producing.

We know how fast whole industries gets disrupted in this modern age, there is no need to belabour that fact. The optimist in me sees it as a good thing: there are new markets, new industries and new opportunities to explore every single day.

The question we need to ask ourselves is: Is the labour force well equipped to exploit these opportunities?

It won’t be if we are merely obsessed with supply side issues, such as being productive. A productive worker would probably keep his job, but it won’t grow his salary. A productive factory would stay in business for the short run, but it won’t guarantee it will remain in business.

The Government has been aggrieved about the state of productivity in Singapore for a very long time now. They do so because it is a tool administrators use to regulate the amount of manpower in this country.

Is this the correct policy direction though? To use productivity merely as a means of population control? Here are several points to argue against it.

a.) Technology is good at replacing workers permanently. But it is hard to teach an old human new tricks. If Malcom Gladwell is correct, it will take a person 10 years to be good at a piece of skill. There aren’t too many decades in a person’s life to keep changing careers.

b.) The measurement of productivity suffers from methodological errors. Workers actually do want to be as unproductive as possible. More hours worked either leads to more income, or more perceived employment value.

c.) Productivity translates the the layman as “doing more for less”. This leads to a business culture where the central focus is on speed and quantity. Whilst this may be useful practice, it is not the element that will keep a business in business. In some industries, this practice may even be detrimental – imagine being rushed out of a restaurant because they want to serve more people.

d.) By regulating out foreign manpower, you would create artificial wage increases, artificial demands that are not sustainable.

Singapore today is becoming a service oriented economy. In such an environment, it is improper to measure service merely by means of productivity when the output is measured by other KPIs, such as satisfaction and quality. For example: having the ability to educate X’thousand number of students in a school with as few trainers as possible is productive, but is not related to recurrent business and consequently, not related to improving wages.

An obsession with productivity might even result in a “productivity vortex”, where the manager has narrowed his focus into ever improving output, but this output did not result in better sales, better profit and consequently, better wages.

We are no longer a contract manufacturing based economy, but why do we still subject ourselves to a unit of measure that was used in the 20th century to measure goods?

So what should we measure?

In addition to productivity, the nation should also track and measure other factors that go into business profit: quality, satisfaction, confidence and innovation. It may even make sense to weigh measure employee capabilities such as skills, morale, happiness and wages.

To meet these KPIs, companies can design policies that would ultimately improve their profitability. The nation would also get a better sense on the health of the economy and policymakers can then make better recommendations for wage and skills growth.

By taking away the obsession with productivity, workers ought to reorientate themselves towards real contribution to the company. The question each worker must ask themselves is not “how can we be more productive”, but rather how can we add value to the company? How do we build better products, improve sales, expand existing markets and explore new ones? Questions that couldn’t be answered by productivity alone.

Businesses do not fear giving wage raises. They fear not being able to sustain them. The answer to this is to sharpen the innovative streak of your colleagues and watch them contribute to business growth.

And the way to measure all of this is through a combined business growth monitor.

 

 

About the author

Benjamin Chiang

Benjamin Chiang is an enthusiast of good advertising, deep thinking, labour issues and chocolate. He writes also at www.rangosteen.com and occasionally on Yahoo!

The views expressed are his own.

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