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Chapter 1 of The Productivity Paradox also available on CNET
If there were a Productivity Hall of Fame, John Deere would definitely occupy a place of prominence. The 19th century inventor introduced his cutting-edge steel plow with a polished and curved blade in 1837, at a time when cast-iron plows were used to till America’s rich, fertile soil.
Deere’s sharp innovation revolutionized agriculture. Tilling an acre of land with a spade required 96 hours; plowing an acre with a yoke of oxen and a crude wooden plow took 24 hours; Deere’s steel plow reduced the time to 5-8 hours; and by 1998, a 425-horsepower John Deere 9400 four-wheel-drive pulling a 15-bottom plow tilled an acre every 3.2 minutes – about 1,800 times faster than the person who spaded each acre.
Fred Smith would also be inducted into the Productivity Hall of Fame. On the night of April 17, 1973, the Yale-educated logistics master sent the first FedEx narrow-body Dassault Falcon jet roaring down the runway at the Memphis airport. From that moment on, packages were delivered more rapidly – absolutely, positively overnight.
Another sure-fire member of our pantheon of productivity would be Andy Grove, the former CEO of Intel. Under Grove’s leadership, Intel brought out a new generation of microchips that powered the first wave of PC’s in the 1980’s. Those PC’s with Intel inside spelled the demise of typewriters and paper account ledgers, and ultimately set the stage for digital time-saving tools like email.
Deere, Smith and Grove each made it possible – and easier – for us to do more work faster.
That’s the nature (and informal definition) of productivity. And productivity is the life-blood of a nation’s economy. It always has been and always will be.
Throughout history, the world leaders have also been the productivity leaders. During the 15th and 16th centuries, for example, Northern Italy’s merchants consistently outpaced their Renaissance rivals when it came to output per unit of input; in the 17th and early 18th centuries, the traders of Rembrandt’s Dutch Republic were the global productivity powers who got more than anyone else from less; the manufacturers of Great Britain seized that mantle in the late 18th and 19th centuries; and America’s assembly line culture, spurred by Henry Ford and General Motors’ Alfred Sloan, took charge in the 20th century.
Once the Model-T’s started rolling, America’s labor productivity growth started surging, averaging about 2 percent each year. That growth rate helped double the U.S. standard of living every 35 years. In 1850, for instance, one farm worker could feed four people; by 1980, one farm worker was feeding 78 people.
As the hyper-prosperous high-tech 1990’s unfolded, Americans were living better than at any time in our history. Indeed, the Internet truly accelerated the U.S. productivity revolution, pushing annual labor productivity growth up to 2.5 percent between 1995 and 2000, and 2.8 percent between 2000 and 2004.
Productivity growth has slowed since 2004, however, and nobody is quite sure why.
Certainly, technology has done its job. In the wake of downsizing, budget cuts, re-engineering and outsourcing, it has stepped up and filled in the gaps at company after company. As a result, supply chains are efficient and lean, the financial services industry is automated, and manufacturing processes are flexible. Corporate management has also bought into productivity-enhancing technology to buttress employees. Indeed, the average company in America now spends between $5,000 and $10,000 per knowledge worker on hardware and software designed to boost productivity.
One theory that may help explain declining productivity growth has been advanced by McKinsey consultants, who believe that companies have finally cut all the non-complex transactional positions that benefit from productivity-stimulating technology. All that’s left are complicated and nuanced jobs requiring experience, expertise, judgment, interaction and collaboration – or tacit knowledge. In fact, 70 percent of the jobs created since 1998 – a total of 4.5 million positions – fit this description. Increasing productivity for these employees, whose jobs can’t be automated, has thus far proven to be a major challenge for software developers around the world.
Another way of explaining the decrease in productivity is to admit that much of the productivity-enhancing technology now in use simply hasn’t made us more productive. This is a painful – but necessary – truth worth pondering.
According to Basex, a research firm focusing on the knowledge economy, interruptions from email, cell phones, instant messaging, text messaging and blogs eat up nearly 30 percent of each day; on an annualized basis, this represents a loss of 28 billion hours for the entire U.S. workforce, or a $588 billion cost to the American economy. Basex also points out that we spend 15 percent of each day searching for content on the Internet, but 50 percent of all searches actually fail to deliver the material we seek. When endless meetings that go nowhere are factored in, says a Microsoft analysis, 17 of the 45 hours we work each week are unproductive.
An equally sad truth is that even though we now have the technological ability to do faster work, we may not be doing better work. More problematic is the fact that we’re generally not working easily or happily – in groups or on our own.
In other words, there are serious questions about whether information technology has actually increased employee well-being. In far too many cases, the answer is no. Technology has definitely filled the gaps in margin-conscious companies that have hollowed themselves out over the past two decades – but there has been a significant human cost attached to this digital triage.
A 2006 research study conducted among sales and marketing teams at Intel indicated that 54 percent of those surveyed believed email had a negative impact on their stress levels. And a number of other studies show that productivity-enhancing hardware and software has helped heighten distraction and discontinuity in the workplace at the expense of critical and creative thinking.
These are clearly unintended consequences. But they must be confronted and dealt with. Technology connects us – and keeps us in constant contact – but for the most part it doesn’t allow us to fully and constructively collaborate with one another. This is a large and looming problem because, as McKinsey says, we are entering an Interaction Revolution that will require employees to truly and sensitively come together in order to achieve top- and bottom-line goals in a hyper-competitive global economy.
To succeed in this Interaction Revolution, executives, managers and individual contributors need to put productivity in perspective. That means understanding its limits and liabilities as well as its awesome potential. It also means developing and harnessing broad next-generation technology that fosters smooth and seamless collaborative efforts that save time and wear and tear on employees.
Automating the knowledge economy sensitively and smartly – as difficult as it may be – is essential to our nation’s health. And when this technological turn of the wheel takes place it will almost certainly drive productivity growth back up – but in the right way that makes sense for well-meaning companies and the hard-working people within them.