How your company can solve the ‘productivity paradox’

Commentators are urging government and others to do whatever they can to improve productivity in Australia because it is a key driver of prosperity, living standards and national wealth.

While recent reports show that Australia’s national productivity has stalled, and that it is no longer high compared to many other industrial and other countries (Australia was recently ranked 50th), very few people have a strategy or even any tactical answers as to how to solve the problem.

The productivity issue was labelled as a paradox some 30 years ago by Harvard Business School Professor Wickham Skinner, who noted that the harder one works directly at improving productivity through additional exertion, the more difficult it seems to improve productivity.

My recent research with Tom Bevington has shown that there is an answer, and that it lies directly and fully at the enterprise level. Indeed, that it requires implementation on the shop floor – not in the “top floor”.

Our research illuminated that organisations on average fully waste one third of their efforts and time (and associated costs) on “noise” activities that occur at the interfaces between process steps and these are rarely documented. On the shop floor (which could be in a bank, factory, hospital, call centre, or indeed every operation), operations are rarely smooth, but much more usually some of the items being processed suffer from “noise”: variation that cause rework, workarounds and wasted “chasing up”. While these individual items and matters are often small, some go viral and wreak havoc downstream.

Firstly, let me expose our unusually granular research material, where 13,657 people employed in 117 organisations documented – without exception – all of the 395,832 activities which they routinely undertook in their day to day jobs. So who were these 117 organisations that we carefully researched? Most are household names in the private and public sectors. They include two of the most respected names in the world, two organisations in Australia’s top-10 listed companies as well as recognisable medium and small enterprises.

Comparisons with existing documentation, such as job descriptions, procedures and process maps yielded the first shock. Staff often report that much of what they routinely do is never documented. The comparison showed that their assertion is correct: only one in every four activities carried out had been previously documented. The activities rendered invisible by this oversight, usually associated with interfacing between defined and documented processing steps, occupy on average 49% of everyone’s time.

We classified these interfacing activities, which included checking, chasing, correcting, completing and dealing with the consequences of earlier failure, as “interfacing activity noise”. Of real concern is that organisations must be undertaking major change blindfold, unaware of how their people spend half of their time.