Posts Tagged ‘productivity’

Despite the fact that we implement some very cool technology solutions – or perhaps because we do – we are ever-sensitive to the impact that technology has on people.  When our company began 30 years ago, we knew we could make companies much more efficient – the same principle that drives us today.  And a more efficient company has a much greater likelihood of staying that way, and staying in existence.

Still, as we flash forward thirty years hence, it’s important to pay attention to some of the job implications of technology.  Automation is a huge boon to the world’s workers, but only if companies and governments can manage the disruption that is often created.

According to a McKinsey Global Institute estimate, as reported recently in The Wall Street Journal, 375 million workers worldwide will “need to find new occupations or lose their livelihood to automation by 2030.”

That astounding figure represents roughly one in every seven workers on the planet, and the time line is only about a dozen years if the McKinsey folks are right.  One of its principals, Susan Lund, remarked that “The question is, what are we going to do to manage the transition for the people who do lose their jobs?”

While those of us in the tech sector bear responsibility to varying degrees for that displacement, it comes down to the choices made by policy makers and business owners about how to support those displaced workers.  This can take many forms, including investments in continuing education, training, new job-creation and the infrastructure-type projects that can support them.

Adopting automation tools, adjusting wages and reconciling regulatory issues all have an effect.  Ultimately, those higher wages create even greater incentives for companies to automate and innovate.  The transitioning of the affected workers creates a lot of potential for unrest – and remember, this isn’t just a national issue, but a global one.

In a sign of looking at the future in a whole new way, some countries are already experimenting with universal basic incomes – cash grants that provide a fiscal foundation in workers’ lives.  The idea is to see if, given a subsistence income, the basic support infrastructure can be put in place to free up workers to aspire to newer, higher or more entrepreneurial heights.  Or whether they’ll simply lose work incentive and just drop out altogether.

Support for displaced workers, Ms. Lund points out, can include guidance, career and skills coaching, and providing things like transportation and child care.

McKinsey estimates that about 15% of all hours worked globally could be automated by 2030 by using technology that is currently available.  “60% of all occupations could be at least partially automated with current tools,” though only 5% are at risk of total automation, they add.

Machine learning… artificial intelligence… and other advanced forms of automation are real, and arriving now.  Like past waves of technological evolution, they have the power to create more jobs than they replace.  As we noted in a recent post, it’s already happening as we transition from fewer retail workers to even more warehouse and logistic jobs.  This, as we noted, is already delivering higher paying jobs than the ones replaced, and more of them, which benefits all classes and sectors as the indirect result of technology’s contribution to higher productivity.

That increased productivity is what job growth, job creation and the benefits of automation are all about.  It’s why thirty years ago we made “Productivity” the first word in our company name.  And why the message is as important now as it was then.



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Annette Franz is a noted blogger who writes often (here) on “improving both the customer experience and the employee experience by utilizing their software platforms to facilitate listening to and operationalizing the voice of the constituent.”  That’s a mouthful, but in short, she is all about empowering people and consulting on improving customer and employee experiences.

In a recent article in the March/April issue of APICS Magazine, she reminds all of us who manage businesses of a few key tips for empowering our employees so that they become more productive – both for us and to our customers.  Following are a few of Ms. Franz’s suggestions:

  • Define what empowerment means at your company. Think ahead and set expectations and boundaries.
  • Outline what doing right means and what it looks like.
  • Describe and reinforce with your team what great customer experience is, and what it means for the customer and to the business.
  • Ensure employees have the knowledge and skills to do what you’re expecting of them. Train, communicate and provide a framework.  Then, let them do their jobs.
  • Make sure workers know how they affect business outcomes.
  • Confirm that your people have a clear line of sight to the customer. Let them lose the script – empowered employees don’t need one.  Trust them to make the right choices and decisions for the customer.
  • Remind employees that going the extra mile doesn’t have to cost a dime. Customers just want them to listen and act.  Allow for common sense, but don’t necessarily rely on it.
  • Evaluate progress and the business environment. If necessary, eliminate any vagueness and refine goals.
  • Provide feedback and coaching so people know if they’re on the right track.
  • When employees comprehend the vision and are allowed to execute on it, businesses realize numerous meaningful productivity enhancements in teamwork, creativity and overall satisfaction.

We’ve been in consulting long enough ourselves to have seen these principles put in play by smart companies with forward thinking managers.  Sadly, we’ve also witnessed the cold vibe of the highly secretive, micro-managed, non-empowered company.  Which would you rather work for?


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productivity dilbertWhen your first name is Productivity, you tend to pay attention to trends and new developments on the topic.  After all, at the core of tech, software, ERP and all their associated cohorts is the idea that they make business more efficient, hence upping productivity and returning their own investment, often many times over.  An August 17th article in the Wall Street Journal makes some interesting observations on business investment, global expansion and the changing face of “productivity.”

In the past, global expansions tended to bring along with them a sharp uptick in corporate investment in “new machines, factories and technologies.”  But the latest expansion shows little evidence of this.  Economists on both sides of the Atlantic point to “lackluster long-term investment to explain paltry productivity gains and meek economic growth.”

But, it’s now being argued, the data showing weak investment fail to capture some powerful new trends in tech and business practices.  Chief among these, according to the gist of the article, is that technology and connectivity are making machines more efficient.  Meanwhile, software… is “reducing the need for traditional capital-goods equipment.”

There’s a big shift on right now towards greater speed and flexibility, according to one German manufacturer of motors and fans.  It appears that businesses are increasing expenditures on intangible assets like research, skills and patents, which aren’t reflected in most productivity statistics.  As well, notes a recent Fed white paper, there is a trend in IT equipment and software in which (downward) “price trends have increasingly failed to capture quality gains in high-tech equipment.”

Even industrial powerhouses with export-based economies, like Germany, have been hit by the alleged “lackluster investment growth.”  A prominent Goldman Sachs economist points out after citing 20 years of evidence that “rising investment in software is crowding out machinery investment.”  Business managers say tech, software and data make machines more flexible today and keep them running around the clock.

Outsourcing and certain cloud computing developments are also eating into traditional “hardware” spending on IT equipment even as the benefits proliferate.  And so it happens that Ellen McGrattan, a Univ. of Minnesota economist, has found an explanation in the way official measures of economic activity are compiled.  Short version: she says that the accounting fails to measure “many investments in intangibles, including R&D, software, patents and advertising – all vital to a company’s performance.”

In other words, “innovation by firms – which is fueled in large part by their intangible investments – may be evident everywhere but in the production statistics.”

Companies today, the article notes finally, “tend to invest as much or more in knowledge based capital as they do in physical capital.”  When Germany added R&D to its investment statistics for the first time in 2014 it led to a “noticeable” shift up in GDP levels.  If recent research and the rise in R&D are valid, the article concludes, “the future could be brighter than thought – and productivity higher than currently estimated.”

[Cartoon copyright Scott Adams, 2004, Dilbert]

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Cotton_mill.0There has always been a certain tension between the notion of increasing workplace productivity – an eternal necessity in business – and the counter-argument that it often means lost jobs.  As the conventional wisdom often shows, improved productivity via machines, computers and advancing technologies can sometimes run counter to the cause of the workers they displace.

But it’s often the case that increased productivity and advanced technology solutions mean those old jobs are replaced by newer, better jobs.  From centuries ago when industrial farm equipment displaced farm workers that eventually led to a huge spurt in factory workers, one technology often displaces another, and one job is often replaced by another.  Collectively, historically, the new jobs gained always have seemed to be adequate to replace, at least in numbers, the old jobs displaced.  True, this did not occur without much pain, particularly if you were among the displaced, and it took time as well.

But over time, job counts and workers have risen pretty consistently.

Today some question whether our particularly intensive and rapid displacement of many common jobs can be replaced quickly enough by the higher-level jobs that commerce and progress demand that we create.  We alluded to this in an earlier post titled So When Will You Be Replaced by a Robot?

Now the debate continues with the publication of a new book by James Bessen of Boston University Law School entitled “Learn by Doing: The Real Connection between Innovation, Wages and Wealth.”

In brief, (notes a recent review in the May 21 Wall Street Journal) Bessen notes how robots at the distribution center have eliminated some jobs while creating new ones for production workers, technicians and managers.  Robots aren’t the problem, he says; it’s the lack of qualified workers, thus hinting at the larger problem today.  Those with “specialized skills” are in short supply.  His is a deeply contrarian view.

Conventional wisdom says that robots and technology do more harm than good by “destroying jobs and hollowing out the middle class.”  And we’ve seen how today in particular (again, note our earlier post) higher level jobs from bank tellers to truck drivers and warehouse workers are all at risk.  But then, we’ve also seen that, for example, when ATMs arrived, the ranks of bank tellers remained level for many years, as more branches required more people despite the ATMs to handle the increased and more complex business brought about.  In other words, things only sometimes – but not always – play out as expected by the so-called conventional wisdom.

In “Learning by Doing” Bessen “combines policy arguments with a practical sense of the workplace” as WSJ reviewer Tamar Jacoby points out.  Bessen points to the advent of desktop publishing, largely the result of innovation at Apple which, while eliminating keyboarding jobs at many firms, replaced them with jobs for programmers, product designers and customer service.

Historically, he recalls that Karl Marx wrote of the doom of the English handloom weavers as a “horrible tragedy” but which, in fact, begat the power loom, “the best thing that ever happened to the textile industry and its workers.”

And so the debate rages – far longer at least than a mere blog post can tally.  In the end, both the weavers and the desktop publishers did just as Bessen’s title suggests: they learned by doing.  They found ways to use technology more productively.  They adopted it to their specialized needs.  In a long and painful learning curve, jobs were displaced, but other, higher-skilled jobs replaced them.

Indeed, this time it may be “different.”  The pace of change may be simply too fast today.  But given historical precedent dating back centuries, it’s still hard not to be optimistic.

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bizcapinvestmentA recent article in Bloomberg Businessweek’s Global Economics section (Nay 19, 2014) points out that the U.S. is caught in a “productivity rut.”

The gist of the argument is that statistically, U.S. productivity is not keeping up with the pace of the past because businesses (especially large, public companies, in this case) are not keeping up their investments in their workers.  The growth of capital spending (basically, equipment and software) fell 25% during the recent recession and has never recovered to where economists had predicted.  In fact, growth of spending is about 30% behind the pace of five prior recoveries.

It appears that whether it’s a machine or a computer or a forklift, workers are stuck using outdated machines.  Equipment, including software, is aging.  Companies are preferring to take their profits and put them into dividends and stock buybacks, instead of those things that will help their firms grow and become more competitive.

The article points out that “over the past 30 years, no form of capital has made workers more efficient than the computer.”  The rate of such growth however has fallen from 40% between 1995 and 2000 to just 7% between 2007 and 2012.  Meanwhile, cash on balance sheets has increased by 70%, and profits are at or near all-time highs.

One spokesperson at Deloitte summed it up best after surveying CFOs: “We’re just seeing an abundance of caution.”

However, notes Businessweek, the situation could be set to change.  For the past four months (as of May) “companies with high levels of capital spending have outperformed those with low levels.”  Up until now, the reverse was true.  Companies with large share buybacks were among the best stock market performers over the past two years.  But this year, they’re among the worst, indicating that a slow turnaround in reinvestment may finally be occurring.

This turnaround is poised to lay the groundwork for higher productivity growth, the article notes.  And workers may finally get those new computers.


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productivity_bloombergA recent article in Bloomberg BusinessWeek (Sept. 2013) points out that the underpinnings for another in the never-ending cycle of productivity booms are taking shape.  Historically, productivity moves forward in fits and starts.  We saw big boosts in overall U.S. productivity as measured by output per labor unit at previous times, like the dawn of the PC era in the early 80s and the internet boom of the mid-90s.

Today’s boom is being fueled by intelligent machines.  We’ve written before about the efficiency gains being exploited by the new generation of robots.  Today, machines are increasingly communicating with each other.  BusinessWeek gives the example of the wind turbines you may have seen in Dwight, Illinois, which monitor their own performance, and each other’s, with sensors.  If one fails to meet its output goals, it reaches out to a General Electric office in New York which uses data from 19,000 other windmills to find the most efficient way to help.

At the same time, today’s computers are beginning to crunch not gigabytes but terabytes of data, as the dawn of Big Data era emerges.  Time will tell what insights will be gained from these activities, but their results have already been felt in fields from advertising to improved health care diagnostics.  Is the stage being set for a new productivity boom?

An econ prof at M.I.T., Erik Brynjolfsson, is optimistic: He sees leaps in productivity that would allow faster growth without generating higher inflation, and companies paying workers more while enjoying better earnings.  The rising tax revenues that result would certainly help the U.S. deficit.  But so far, the surge “is more forecast than fact.”  In the last year, employee output has gained a meager 0.3%.  That’s about one-tenth the gain during the Internet boom that began in the mid-90s. Some say U.S. innovation is faltering, and that the U.S. is not making the adjustments needed in high-tech equipment and software to spur it.  The supply of such equipment recently grew at about 3%, compared to historical averages above 8% (from 1984-2008).

But no less an authority than the Federal Reserve says otherwise: “Pessimists may be paying too little attention to the strength of the underlying economic and social forces that generate innovation in the modern world.  The number of trained scientists and engineers is increasing rapidly,” as are public and private resources for research, according to Fed Chair Ben Bernanke.  Other economists note that “we are still near the starting line” and that the next stage in innovation could lift annual productivity gains to about 2.5% compared to 1.6% over the past five years.  History has shown that productivity gains come in cycles, and that after innovation breakthroughs (think: electricity, computers, the Internet) that companies and consumers spend years learning to exploit them.

Salespeople… engineers… and even today’s top managers all have access to more and more data all the time.  The data allow them to make better, faster, more informed decisions.  As one CIO wryly noted, “I can be coaching baseball and doing work on my phone.  I’m not saying whether that’s good or not, but I know I’m a hell of a lot more productive than I used to be.”

Cisco Systems, the world’s biggest maker of networking equipment, estimates that productivity gains could hike revenue and lower costs by $14.4 trillion over the next decade, as supply chains are expanded, improved and connected, all of which will drive “an expanded customer experience and revenue.”

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In a twist on the famous Clinton-era line (“It’s the Economy, stupid”), I submit the truth about manufacturing, as pointed out recently by Mark J. Perry, an economics professor at the Univ. of Michigan, Flint and visiting scholar at the American Enterprise Institute, in a recent Wall Street Journal article.

Perry points out that the average American manufacturing factory worker today “is responsible for more than $180,000 of annual output, triple the output of 1972.”

While it is true that overall manufacturing jobs have declined, output has continued to increase since 1970 (save for recession-related decreases in 2001 ad 2008-09).  During every year since 2004, manufacturing output has exceeded $2 trillion (in ’05 dollars), twice the outpt of American’s factories in the early 1970’s.  Perry points out that, taken on its own, U.S. manufacturing alone would be the sixth largest economy in the world.

And these increases are the direct result of captial investments in productivity-enhancing technologies. 

Critics will say that increased production with fewer workers creates a net negative — fewer auto plant jobs mean fewer paychecks, for example.  But they fail to recognize that technological improvements are one of the key factors in economic growth.  Tech improvements that lead to higher productivity also portend larger paychecks and  a higher standard of living.  Displaced workers are disadvantaged greatly, no doubt, but often can and do learn new skill sets in new industries, “and a new generation of workers finds its skills put to more productive use,” notes Perry.

Agriculture provides a fitting model for today’s evolution in manufacturing.  The U.S. today produces more ag output than 100 years ago while utilizing just 2.6% of our workforce, compared to 40% back then.  Likewise, manufacturing output is double what it was 40 years ago — with about seven million fewer workers. 

The critics righly point out the often painful and jarring human costs of such job displacements.  It’s reminiscent of the old say that “a recession is when your neighbor loses his job… a depression is when you lose yours.”  But the economic truth underpinnning the reality is this: we cannot turn back the clock to a less efficient economy, or lower productivity.  That’s not the answer. 

The answer is to embrace the technology, cheer the productivity gains, and retrain and educate our workforces to participate in the new economy — one whose dynamism “still supports America’s status as the world’s leading manufacturer.” 

And that of course, is where the cheering must lead inevitably to the hard work and difficult choices inherent in the re-education of all those workers.  But then again, it is the only way forward.

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