Will companies shift from China to India?

A tectonic shift in global business supply chains may be about to happen according to an article in the Harvard Business Review by Vijay Govindarajan and Gunjan Bagla

 

America’s (and other developed nations’) relationship with the two most populous countries in the world, China and India, is undergoing a stark, rapid and perhaps permanent transformation.

In April, a Pew Center survey found that two-thirds of Americans say they have an “unfavorable” view of China; according to Pew it was “the most negative rating for the country since the Center began asking the question in 2005.” But if China is falling in attractiveness, what is filling its place?

The answer, it seems, is India, where on the same day the Pew survey was released, Facebook, Inc. announced that it invested $5.7 billion into India’s largest telecom company, Reliance Jio, instantly valuing Jio to being among the top five companies in India, were it an independent entity.

That this investment happened during a time when both California and India were locked down with Covid-19-related “shelter-in-place” orders raised eyebrows in boardrooms and capital markets across the globe. Global deals between two large publicly traded entities typically require much travel, face to face contact and joint public appearances, but Mukesh Ambani, chairman of Reliance, made this major announcement all alone from his home.

While the Facebook-Jio deal is largely digitally driven, we believe that 2020 could mark an inflection point in the bilateral trade of goods between the United States and India. The shift can be attributed — at least in part — to the stresses from Covid-19 and the tariffs imposed on Chinese goods by the Trump administration. Following our article on India as an attractive manufacturing destination, we look at India as a sourcing partner for goods, becoming a partial replacement for imports from China.

Exodus From China

Companies in the United States, Canada, Europe, and Australia have been hit with supply chain shocks as the flow of materials from China was disrupted by the pandemic. CEOs are confidentially asking their supply chain teams to develop additional sources that are completely independent of China. In addition, in the United States there is pressure from employees who are wary of traveling to China, from customers who are concerned (rationally or not) about the safety of foods and other items from the country, from investors who worry greatly about over-dependence on any one country, and increasingly from politicians as well as State Department leaders who want companies to rapidly decouple from China.

More than 20 years ago, electronics companies from Taiwan led the way into mainland China, but now in the wake of Covid-19 as Bloomberg reported in March 2020, “electronics makers are past the point of no return in their gradual migration from China.” Chinese billionaire Cao Dewang, of Fuyao Glass Industry echoed a similar thought in response to the pandemic, saying that “the global industrial chain will reduce its dependence on China.”

Why India?

In 2019, the United Stated imported a staggering $452 billion of goods from China. Only five low-cost countries have GDPs larger than that: India, Mexico, Indonesia, Brazil, and Thailand. India is the biggest economy among these candidates and has the largest untapped potential for filling part of the supply chain vacuum that is created by exodus from China.

In a recent virtual meeting with the American Chamber of Commerce in India, Thomas Vajda, deputy assistant secretary for South Asia was quite blunt. “India can quickly become a favorable jurisdiction for more of the industrial activities that are happening currently in China,” he told them according to The Economic Times.

Dr. Mukesh Aghi, CEO of the trade group, U.S.-India Strategic Partnership Forum, declares “While U.S. companies are looking for alternatives to China, India becomes a natural destination. You have an English speaking workforce, highly skilled, the cost of labor is cheap and more important it is a growing market of 1.3 billion people whose disposable income is growing.”

Already, “The United States is India’s top trading partner, ahead of China today,” adds Nisha Biswal, President of the U.S. India Business Council (USIBC), which is part of the U.S. Chamber of Commerce in Washington. Indeed, she says, a lot of top American companies have their biggest or second biggest bases in India.

Traditionally American executives have thought of India as a source of spices, textiles, apparel, jewelry and handicrafts.

While India does export billions of dollars of these products to the United States, India has moved much further up in the value chain. The cabin of Marine One, the presidential helicopter is fabricated for Lockheed Martin’s Sikorsky unit in India, according to Aghi and he goes on to add “The Ford EcoSport is manufactured in Chennai, India for the U.S market.” NASA’s Jet Propulsion Laboratory in Pasadena, California is collaborating with the Indian Space Research Organization on the most expensive imaging satellite ever to be launched, NISAR. This probe will be built and launched in India and will study hazards and global environmental change more accurately than ever before.

India exports shrimp, processed foods, and agricultural products to the United States. Aghi says that 3.2 million Apple iPhones built in India will be exported from the country. Biswal of USIBC asserts that India can supply medical devices, energy efficient green transportation, power semiconductors, switches, and rectifiers for American needs. India already provides almost 40 percent of the generic drugs sold in the United States, produced at factories inspected and approved by the U.S. Food and Drug Administration.

We call this phenomenon “India Inside,” where much of what is imported from India goes unnoticed by both American consumers and the media, but is nonetheless crucial to the fabric of the U.S economy. In particular we are confident that factories in India can scale up volume production to meet the domestic Indian, American, and global demand for devices, disposable and drugs to diagnose, treat and vaccinate against Covid-19.

Unlike export-driven China, India’s companies grew rapidly by serving pent-up domestic demand since the economy liberalized in 1991. In the process, Indian managers and entrepreneurs acquired the management skills and quality standards to expand globally, but they first turned to markets in the Middle East, ASEAN, Africa and Eastern Europe.

According to detailed current data from India’s Ministry of Commerce, Indian companies export billions of dollars each in categories as diverse as: furniture, medical and surgical instruments, electrical machinery, ships and boats, vehicles, boilers, parts made of plastic, steel and aluminum, organic and inorganic chemicals and more. We believe that many of these Indian suppliers are ready for first world markets. American companies can source these and other goods from their Indian corporate counterparts; unlike in China, these suppliers are not affiliated with the government.

China Plus One

How do you go about sourcing from India? We recommend an incremental approach in bringing on Indian suppliers; we call this “China Plus One.” Carefully select some low-risk or high-reward programs to try out in India, while maintaining your Chinese base. Work with multiple Indian partners as you get started. Very soon you can fine tune and amplify your successes.

What you learned in order to succeed in China may not serve you well in India, so it is important initially to approach India with humility and curiosity. Indians love America and American culture but react strongly to what they perceive as American arrogance. Despite Prime Minister Narendra Modi’s efforts to improve the ease of doing business, India still poses obstacles due to practices relating to both land and labor. Foreign companies wishing to build their own factories occasionally feel discouraged by these factors. But here are some ways that most American companies can overcome these challenges:

First, in order to leverage India as a source of supply, most American companies don’t need to invest in land and buildings, and they don’t need to hire employees in India. In our experience it is often best to start our as a buyer than as an investor. This gives more flexibility, reduces overhead, and limits initial risk.

Second, keep in mind that India is a diverse country with a federal structure. Many rules that affect industry vary from state to state. Some of India’s 28 states are more eager to help local and global entrepreneurs than others. The states of Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, and Telangana are generally reputed to be friendlier toward local and global companies. But for specific industries and sectors, it is fine to do business in other states, as long as you do your due diligence. One of us (Bagla) has successfully taken clients to Uttar Pradesh for high-end floor coverings, such as rugs, and to Himachal Pradesh and Uttarakhand in the Himalayan foothills for personal care and consumer health products.

Third, when you do business in China, you know you need a language translator. While Indians do speak English, you still need a cultural interpreter and business guide helping you. While the U.S. Department of Commerce helps American companies to sell to India, they are not set up to guide companies who want to source from India. Someone inside your company who has current experience in doing business with today’s India is ideal (and not just any employee who just happens to be of Indian origin). Alternatively you can turn to external trusted advisors who specialize in U.S.-India business.

Finally, accept that India is a messy democracy and that the flow of goods can still be a challenge. Success in sourcing from India takes time and patience. Mukesh Aghi of USISPF is optimistic: “As new roads are built, harbors are expanded, and airports are enlarged, logistics will get more efficient.” In the meantime you may find that Indian companies are quite enterprising and can often encapsulate these complexities from their overseas customers.

Today, India permits 100% foreign direct investment in most sectors, so you don’t have to share your intellectual property or trade secrets with a local partner. Many American companies have had factories in India for decades and some have invested recently, such as Amway’s $100 million plant in Tamil Nadu.

As one of the top Asia-facing executives at a major American retailer put it to us, “Given amount of dependence on China, the only alternative country that can have the scale, the skills and the space to service American demand effectively is India.”

Vijay Govindarajan is the Coxe Distinguished Professor at Dartmouth’s Tuck School of Business and Faculty Partner at the Silicon Valley incubator Mach 49. He is the author of The Three Box Solution. Follow him on Twitter and LinkedIn.


Gunjan Bagla is Managing Director of Amritt Inc, a California consultancy that advises American companies on doing business in India and the author of Doing Business in 21st Century India (Hachette, 2008). Follow him on LinkedIn.

A clear vision for the post-crisis future?

An HBR article by Mark W. Johnson and Josh Suskewicz follows – we called this approach ‘normative forecasting’ back in the good ol’ days

 

As the Covid-19 pandemic shakes the global economy and disrupts the way we live, work, and conduct business, leaders are scrambling to manage the immediate fallout. But, as history proves, it’s also necessary to prepare for what’s next.

Visionary leaders like Abraham Lincoln, FDR, Winston Churchill, and Nelson Mandela didn’t simply react to the most imminent threats confronting them; they also looked beyond the dark horizon. They were guided — and guided their people in turn — by their vision for a better future, after those challenges had been overcome.

Vision is especially urgent during a crisis as global and systematic as this one. Inflections that you might have had five years to anticipate in a normal environment might unfold in a matter of weeks or months. Trend lines, such as those towards telecommuting, tele-medicine, online shopping, and digital media consumption, are suddenly much steeper. Global supply chains are broken. Healthcare delivery is likely to change in ways that will make the last decade’s adoption of Obamacare look trivial. Many of your B2B customers may be shut down; millions of consumers are out of work. Some of the fundamental assumptions underlying your current business model may have been (or may soon be) upended.

In short, the business environment that you land in when the pandemic comes to an end — which could be one to two years from now — may be very different from what it was before the crisis began.

You need to begin preparing for it now. And to do that right, you need to have a longer-term vision of what you aspire to become in five or even 10 years — a north star that will focus and help shape your thinking about the short and the mid-term. It may be hard to see now, but the seeds of the next great growth industries are taking root now. Think back to Apple 20 years ago, which famously envisioned and started to plan for the iPod and iPhone as its computer business came under enormous strain during the dotcom crash.

Of course, nobody has a crystal ball (even Steve Jobs didn’t); if such a thing existed, we wouldn’t be in this fix. But while you can’t predict what’s coming with perfect certainty, you can develop much more clarity than you might imagine about what you could and should become, create a plan to live into it, and then set it into motion. Here’s our process, as detailed in our new book Lead from the Future, for doing exactly that.

Spend time envisioning your future. Ideally, you should dedicate about 10 to 20 percent of your time on a weekly basis over the next few months to exploring and envisioning where you want your organization to be when the crisis passes. This aspiration, of course, should be consistent with your longer-term vision.

Given the urgent demands of the present, some leaders may be tempted to delegate the responsibility for this kind of thinking to others, but it is critical that the CEO, CFO, CSO, and other key line leaders — the people who sign off on major resource allocation decisions — do this work themselves.

Interrogate what is likely to change about your customers, markets, and operating environment, and what isn’t. Focus on what your customers will require, how you’ll meet their new and evolving demands, the resonance of your products and services, and your overall capabilities.

Ask how resilient your core businesses will be in the light of these changes. Consider both threats and opportunities, and pinpoint elements of your portfolio that may no longer make sense and that will need to be sold off or shut down, as well as opportunities to accelerate new growth offerings.

Develop a strategy to walk back your envisioned future to today. Working backwards, lay out a path from your long-term aspiration to the mid-term (your post-crisis focal point), and from there to today. Reverse-engineer a series of benchmarks and milestones at regular intervals along the way. The reason to start in the future and “walk” backwards is that:

  1. It allows you to “clean-sheet” what you could become without being overly constrained by the way things are today
  2. It forces you to think concretely and in terms of dollars and cents
  3. This helps you decide which investments should be given priority.

To give you an example of how this works, suppose you are the president of a university. You know that online learning will be a major part of your future and anchored in new models that seamlessly blend online and in-person offerings. That future – already burgeoning before the crisis, and now being rushed into prime time – has accelerated. Step back from the mad dash to move this year’s courses online (an admirable feat, no doubt) and imagine what you’ll roll out at the start of the new academic year in the fall of 2021.

Then ask yourself what would have to be true, and by when, for it to happen in the best possible way. Systems will have to be in place, curriculum locked down, integration with conventional offerings worked out, people trained and hired. Perhaps you can meet all your benchmarks if you create the program internally, or maybe you need to partner with a developer or buy something off the shelf. The fall 2020 semester, starting a few months from now, will be a prime opportunity to pilot key elements of your envisioned program.

Be prepared to learn and pivot. Given the rapidly changing environment that you are working in, make sure to measure, monitor, and formally review your progress. Initially, you will be working off assumptions. As you test them in the real world, you will have more data and experience to prove or disprove them. Based on what you learn, adjust both your vision and your strategy.

As you work toward your mid-term and long-term goals, you must be attentive to both the strong and faint signals you receive. That requires a certain degree of humility, as you will likely have to surrender some of your certainties after they are tested against reality and fail. Speed and agility are key; you must learn quickly, constantly pivoting and adjusting. In doing so, you’ll also revisit your vision and continue to shape it.

Rally your team around your vision. Your people and stakeholders will have to make sacrifices, so you want them to believe in your view of the better future that they can achieve. Ideally, you already have a long-term vision of what you want to be which is inspiring, imbued with purpose, and relatively stable, compared to the roller coaster you are on today. While a business can succeed without having an explicit mission, there is a close association between missions and margins.

In 2019, our firm Innosight identified the 20 global companies that had achieved the highest-impact transformations of the decade. A newly strengthened sense of purpose, we found, was their common denominator:

  • Siemens, for example, had recently embraced an explicit mission to serve society
  • China’s Tencent had announced a quest to create “tech for social good”
  • Denmark’s Ørsted transformed itself from a struggling natural gas business to a cutting-edge wind energy company, increasing its net profits by some $3 billion per year – Ørsted’s long-term vision of itself as a green company not only inspires its people to perform, it helps its leaders keep its strategy on target

 

It is impossible to overestimate gravity of the present crisis. Many of you are wrestling with existential challenges; virtually all of you will have to adopt what amounts to a wartime footing. You may feel that you simply can’t afford to carve out the time that it takes to set out a vision and build a strategic path to it. But the leaders who manage the day-to-day and lead with vision will emerge from the crisis with companies that are stronger and more resilient than they were before.

Mark W. Johnson is co-founder and senior partner of the strategy consulting firm Innosight and author of Lead from the Future (HBR Press, 2020).


Josh Suskewicz is a partner at Innosight and the co-author of Lead from the Future (HBR Press 2020)

Productivity, Credit and Debt

A great 30 minute YouTube video – “How the Economic Machine Works” – is well worth watching
It was made some years ago by Ray Dalio, Co-Chief Investment Officer & Co-Chairman of Bridgewater Associates
He explains the fundamentals behind how national economies work, how human nature makes credit and debt cycles inevitable, and how, ultimately, economic growth depends on productivity improvement
It’s great for non-economists like myself in helping understand, if only partially, how economies tick – I suspect there will be many economists who will also benefit from reading what he says

The post-pandemic world?

An article by Hubert Joly in the HBR  (Harvard Business Review) raises some interesting thoughts on human needs that leaders should consider once we’re through this pandemic and past these ‘watershed times’

 

During the Covid-19 crisis, I’ve spoken with many CEOs who have said that a key priority for them, naturally, has been the safety and well-being of their employees. And there are many examples of inspiring actions taken by CEOs and companies in support of their employees. But, as we’ve come to recognize that this crisis will last more than a few short weeks, companies are now defining their approach for the long haul.

I’ve seen two crucial ideas take hold with corporate leaders.

  1. Given the magnitude of the shock and the challenges that this crisis represents, companies must consider the full breadth of their employees’ needs as people. Safety is essential, of course, but it’s also important to address higher-level needs such as the want for truth, stability, authentic connections, self-esteem, growth, and meaning in the context of the crisis.

2. Many CEOs have begun thinking about this crisis in three phases. They may assign different names or specific lengths to these phases, but they all roughly map to three distinct time horizons: the shelter-in-place phase, the re-opening phase, and the post Covid-19 phase.

When these two ideas are combined, leaders can operate and lead more effectively by dynamically adjusting how they take care of their employees through the unique challenges of each phase. What follows is a discussion of how companies are and could be addressing workers’ needs in each phase.

Human Needs in the Shelter-in-Place Phase

During this first phase, companies have sought to ensure their workers’ physical safety. They’ve implemented work from home measures and sanitized work areas in cases where work is essential, and shifted operating models — adopting contactless delivery, for example.

Beyond safety, they’re working to ensure security as well. Many have worked to keep people on the payroll for as long as possible — even if that required furloughs — and increased pay for front-line workers. Some have established employee relief funds to address urgent needs. At some companies, senior executives and board of directors took pay cuts; many have provided back-up childcare solutions and fronted their workers time off to take care of loved ones.

Ever higher up the needs chain, they’re trying hard to create connection and support the mental health of their workers. They have communicated with their employees in ongoing, frequent, transparent, and honest ways, seeking out approaches with a human touch — using video rather than just written communication, establishing office hours, instituting a regular coffee time or happy hour, and providing direct access to leaders and colleagues. Importantly, some companies have put in place mental health support options for leaders and employees, including yoga and meditation sessions, to help employees navigate these unprecedented times while keeping some level of sanity.

How are leaders able to address their workers’ higher-level needs during this phase? Often during a crisis, we think the masculine superhero leader is the one to get us through troubled times: Be the strongest; be convicted; project infallibility; lead with a kind of singular force. A key observation I would make is that this may not be the best model of leadership here. Of course, we need leaders who have great analytical and problem-solving minds, leaders who are great at making decisions based on facts. But we also need leaders who can demonstrate vulnerability and empathy. It’s interesting to observe that many countries that seem to be going through this crisis the most effectively (Germany, Taiwan, New Zealand, Iceland, Finland, Norway, and Denmark) are all women-led and that their leaders seem to combine a science-based approach with a more human touch.

Last, but not least, even now in this shelter-in-place phase, I’m seeing many companies ensuring that the actions they take connect with the company’s purpose. As an example, at Best Buy, where I was CEO for seven years, the stated purpose is to enrich lives through technology and so it has focused on enabling its customers to work and learn from home. Many companies are also mobilizing their resources in support of the community in a way that is tied to their purpose, even if it’s not entirely obvious at first. Ralph Lauren, whose purpose as a company is to inspire the dream of a better life, may not seem like it has role to play here, but it has mobilized supplier relationships to produce masks and gowns for front-line healthcare workers.

Human Needs in the Re-Opening Phase

Cautiously, but hopefully, many companies have begun planning how to re-open their businesses — a process we now know will likely be long and drawn out. As they prepare for this next phase, they should continue to consider the broad spectrum of their employees’; needs, beyond just creating a physically safe workplace. For example, companies are considering the following measures that span the full range of human needs from basic to advanced:

  • Defining the conditions that will ensure a safe reopening of their operations, from in-home services to offices and stores.
  • Bringing back as many people as possible. Companies will of course need to decide how many employees they are able to call back in and how they will communicate with other furloughed employees at that time
  • Ensuring ongoing, honest communication with existing and furloughed employees, in a way that is truthful, humane, and caring. Conveying that the world is changing, encouraging the organization to “reset” vs. just “restart,” and highlighting that some things are not changing such as the company’s core focus and values.
  • Paying special attention to the ongoing communication with furloughed employees.
  • Helping the employees on the payroll deal with “survivor’s guilt” — the guilty feeling stemming from the fact that the employee is employed (and compensated) while many of their friends and colleagues are not. It will be important to highlight the role they can play to help bring as many of the furloughed employees back to work.
  • Celebrating inspiring news. Good news helps workers’ mental health, which is likely compromised right now. As an example, Best Buy has transformed its process to post company news in the elevators of its headquarters, previously called The Lift to a digital posting now called The Uplift.
  • Highlighting how the company’s activities contribute to the common good and are making a difference in people’s lives. Defining how the company is able to continue to support the local community.

A key requirement for companies in this phase will be to avoid broad policies that don’t take into consideration the very different circumstances different employees face. For example, companies must ask themselves, which employees are above the age of 60 and therefore more vulnerable at re-opening? How are they being served? Which employees do not have the necessary space and infrastructure in their home to be able to work productively, and would therefore be candidates to come back to the office sooner rather than later? How many employees suffer from mental health issues that may be aggravated by social isolation? To what extent do some employees have a deep need for social interactions which makes it more important for them to be with other workers sooner? A deeper understanding of workers’ needs, even individuals, beyond just safety will make for a better re-opening phase.

Human Needs in the Post-Covid-19 Phase

It will be some time until we reach this phase, but companies are beginning to consider it and prepare for it. For some companies, like those in the travel sector, this can be a challenging phase as declines in consumer demand has the potential to dramatically impact certain businesses, which could translate into significant revenue, cost, and headcount reductions.

The risk for many companies will be to lose hope in their ability to do more than move to being a smaller company.

This is where they can tap in the talent and sense of purpose of their employees to do better than that. As companies begin work on inventing a future that does not exist yet, they would be wise to mobilize the business understanding and sense of purpose of their employees as input to their planning process.

One hypothesis I have is that a strong focus on the purpose of the company, as opposed to its existing business model, can uncover and unleash significant new growth. This is what Best Buy — which during its turnaround faced an existential crisis of its own — experienced when it embraced its purpose of enriching lives through technology. The company unlocked latent demand it didn’t know was available to it by deploying an in-home advisor program and new tech support services. The company also entered the health market, deploying tech to help aging seniors live longer at home. At the time, the company could have looked at its situation and turned immediately to cost cutting and personnel reduction. Instead it found new growth and ways to retain and grow headcount. Similarly, in the current crisis, companies may find it’s a time to find those new areas of demand for fulfilling its purpose.

As a final thought for this phase, staying connected with furloughed employees will enable the companies to re-hire these employees as new job opportunities emerge, either based on growth or on turnover.

How companies and leaders approach the three phases of this crisis and treat all their stakeholders — starting with their employees and the whole range of their human needs — will be real “moments that matter” for their employees, contributing to the level of attachment (or not) the employees will have to the company in the future and to the ability of the company to thrive coming out of the crisis.

How to make ‘remote work’ more productive

It might seem like the glorious era of remote work is upon us, driven by a pandemic push. Zoom! Slack! Who needs the office? The promise of uncompromised productivity paired with freedom is alluring.

Let’s start in a not-so-obvious place – habits.
Work gets us to do small things (show up on time, respond to boring emails) and big things (launch new products that never existed before). It helps us create habits and track progress. It allows us to learn hard things quickly.
Do you ever hear your friends complaining that:
  • “I just can’t muster up the energy to get my presentation done for tomorrow’s meeting.”
  • “I’m supposed to send this weekly update and I keep forgetting. I think I’ll skip it.”
  • “I told my team I’d deliver this project, but I think I’ll ghost.”

 

These are just not things we typically say.

Why are we productive machines in some domains – like work – but fall flat on our faces in other domains like diet or meditation?

We tend to take this incredibly salient productivity gap for granted. We assume it’s all related to money. My work pays me to do work, so I do work. We assume it’s the money that makes us highly productive, reliable, and consistent worker bees.

But let’s take a look at what work actually is – basically, a giant group accountability system.

  • We sit next to our team members every day from 9 a.m. to 5 p.m. – we work on different tasks–right next to each other.
  • We have daily or weekly meetings that ask team members to report everything they did yesterday and will do today.
  • We have team meetings with key stakeholders that require presentations to be prepped weeks in advance.
  • We have progress trackers that send out status reports on the project timelines.
  • We have shared deadlines that make us look bad if they’re missed.
  • We are part of quarterly and annual goals that are published to the company.
  • We have performance reviews to ensure we hit these goals. But if we don’t hit the goal? We debrief after it to change our strategy next time.

 

The craziest thing? At almost every corporation worldwide, work looks like this – regardless of culture or domain, most companies have agreed on this structure.

Most people call it accountability. Work helps solve our self-control problems with incredibly effective accountability systems.

What’s at the root of this?

At work, our behaviour is public. Work makes our behaviour visible to other people to help get us to get things done. Want to launch an incredibly complex product that requires building new innovations? Create a small team and commit to a public launch with aggressive timelines. This is what every tech startup in San Francisco does. Just look at Google’s Developer Day or Apple’s Keynote launches. Apple committed to launch iOS 13 on June 3, 2019, and, by golly, they did it. These are really just massive accountability systems that help employees to do something they said they would do.

Personal goals are in the private sphere. In the private sphere, we struggle.

In the public sphere, we understand there is an underlying norm about what should happen (“I should show up to this meeting prepared”). We self-regulate on the basis of anticipated consequences of going against that norm.

Accountability is really just expecting you might have to justify your actions to others in relation to a preexisting norm. And it works.

Accountability systems (making behaviour public) have been shown to work within voting, school attendance, handwashing, charity donation, and many other domains.

  • In Ely, Iowa, voters were told that if they didn’t vote, their names would be published in the newspaper. This drove voting rates up by 6.9%.
  • A YMCA told their members how much their peers were going to the gym. They then told these members that their attendance would be publicized next month. This increased attendance by 17% to 23%.

 

When we know our behaviour is in the public sphere, we anticipate what others will think, and we end up modifying our behaviour.

As office work moves to remote work while the coronavirus continues to spread, work habits that were previously public will become more private. Is this a good thing? How will our productivity change?

It’s a nice idea to say that it won’t. This is the popular opinion. But the reality is that the nature of work shifts as it moves from public to private.

The very thing that allows us to be productive is changing.

Meetings that once were in person will be on Zoom or online. People often keep their video on for the first five minutes and then they turn it off. This reduces accountability and may lead to more distraction.

Workdays that were once coordinated and public (we all get in around 9 a.m. and say hello) will now become uncoordinated and private. This freedom may be glorious, but it reduces accountability and may lead to fewer hours worked.

Deadlines like conferences and public PR launches have been cancelled. This relieves the public pressure and delays a key motivator for getting stuff done. This reduces accountability and may increase procrastination.

Here are five ways to stay on track.

KEEP VIDEO ON–FOR THE WHOLE MEETING

If you’re in person, you’d likely avoid checking email or surfing the web. Keep the same norms alive for remote meetings. This will also prevent the inevitable downfall of conference calls.

ARTICULATE AND COORDINATE START AND END TIMES OF THE WORKDAY

This creates a norm for when people should be on. While ‘working hours’ may feel implicit to your team, it should be re-articulated to ensure people are aligned in the new coronavirus quarantine era. As a bonus, this also helps people set boundaries on their work and not work late nights.

POST PUBLIC UPDATES ABOUT DAILY OR WEEKLY PROGRESS

Engineers have operationalised this for years. It’s called a daily standup–a 15-minute check-in to discuss blockers and the day’s priorities. It may be time for non-engineers to jump on the bandwagon. An easy way to start is with a Slack (or other messaging) channel devoted to updates.

ADD MORE DEADLINES AND DECISION POINTS

We’re all really good at procrastination–like, really good. But there is a solution. Deadlines help drive action. They help us focus and avoid getting distracted by nonessential tasks. One easy hack: Ensure meetings focus on making a decision. The meeting will become the deadline for teams to prepare their input.

GROUP YOUR MEETINGS INTO BLOCKS

Put meetings back to back instead of scattered throughout the day. Research says it will make you more productive because your blocks of time feel less scarce. This applies when in the office or not, but is especially important for work-from-home life since distractions may be higher.

As the nature of work changes in the coming months, we should understand how to optimise work conditions. Work is something that ties us to other people in such an intricate way that we have no choice (or think we have no choice) but to achieve our goals. Work is just an elaborate accountability system. It’s a proven system that has been shown to motivate us across domains and across cultures.

In times of coronavirus quarantine (but also for your personal goals in life), there is very simple advice one should consider: Don’t go it alone.

Or, if that’s too hard, just act like someone is always watching you.


Kristen Berman cofounded Irrational Labs, a behavioural economics design company, with Dan Ariely and was on the founding team for the behavioural economics group at Google.

Pandemic offers a productivity boost?

 An interesting article by Chris Dillow was recently published in the Investors’ Chronicle

Has the coronavirus solved the UK’s problem of stagnant labour productivity?

A productivity boost?

 

It’s a strange question, but one posed by Office for Budget Responsibility (OBR) forecasts.

It expects that in 2021 we’ll be producing 2.8 per cent more than we did in 2019, as this year’s 12.8 per cent drop in gross domestic product (GDP) is followed by a 17.9 per cent rebound next year. But we’ll be doing that with half a million fewer workers. This means that, if the OBR is right, productivity will grow more in the two years from  2019 to 2021 than it did in the 12 previous ones.

Of course, all economic forecasts now must be taken with a ton of salt. But this poses the question: how could Covid-19 raise productivity?

One possibility is a compositional effect across sectors. If the downturn disproportionately hits low-productivity sectors while the recovery benefits higher productivity ones more, then aggregate productivity will rise as a mathematical fact. I’m not sure. Yes, some low-productivity industries have seen output collapse, such as pubs and restaurants. (We can, roughly gauge productivity from average wages). But also, some high-tech manufacturers have also been hit. And the high-productivity health sector is expanding now but will (we hope) contract next year.

A second possibility is that this recession will have a cleansing effect. It will drive inefficient businesses to the wall and so give more efficient ones space to expand. This certainly happens in some recessions – although it didn’t in the 2008-09 one. But it might not be the case this time. People are staying away from good shops and restaurants as much as from bad: they have no choice. Whether a company survives this recession will depend a lot on its balance sheet: cash-rich companies have a better chance than heavily indebted ones. But the correlation between balance sheets and productivity is weak: companies can be cash-rich because they are too inefficient to expand.

This leaves a third possibility. In the early phase of the upturn companies will respond to stronger demand not by taking on extra workers but by working existing staff harder. This will raise GDP per worker, probably by more than GDP per hour. It’s only when companies can be confident that demand will persist that they’ll start hiring.

Indeed, this third possibility is what the OBR expects. It foresees productivity falling back in 2022 as employment returns to – and in fact above – its 2019 peak.

Of course, the OBR’s numbers could well be wildly wrong – but this rough pattern looks right to me. The coronavirus, then, will give only a temporary stimulus to productivity.

This shouldn’t be surprising, as the fundamental determinants of productivity – the capital stock, skills, innovation, management quality, product market competition and so on – will not improve as a result of this crisis and some might even deteriorate.

Many people like to think that this crisis will change things permanently. One thing it is unlikely to change, however, is our lamentable productivity record.

Coronavirus statistics: what can we trust?

The flurry of figures, graphs and projections surrounding the pandemic is confusing. An article in The Guardian by two experts, Sylvia Richardson and Professor David Spiegelhalter, guides us through the maze

The coronavirus, Covid-19.

The past few weeks has seen an unstoppable epidemic … of statistics. The flood threatens to overwhelm us all, but what do all these numbers mean?

Here are eight statistics you may see, with some warnings about how much we might trust them.

1 The number of new cases each day

This can be a very poor reflection of the number of people who have actually been infected, as it depends crucially on the testing regime – up to 9 April, 1.3 million tests had been carried out in Germany, versus 317,000 in the UK.

2 The number of new deaths each day

The range of sources is bewildering. The daily announcements should be treated with caution as they only include deaths in hospital of those who have tested positive for coronavirus, and there is generally a delay in reporting deaths of a few days or even longer. For example, while on 27 March the government announced that 926 Covid-19 deaths had so far taken place in English hospitals, NHS England now reports that the true figure was 1,649. The gold standard is the number of death certificates collated by the Office for National Statistics: it report at least 1,568 mentions of Covid-19 for all deaths up to 27 March, but this will increase as registrations come in.

3 The total number of deaths

Graphs of accumulating deaths are shown at the daily government press conference, but they are a hopeless tool for spotting trends: we need daily counts to see whether we have reached a plateau (which will not be a “peak”). But the daily counts are volatile, and so need some smoothing to bring out the underlying trends: World in Data uses a three-day moving average.

4 Numbers recorded on a logarithmic scale

This will have a vertical axis labelled 1, 10, 100, 1,000. These are useful for comparing trends, but useless for getting an impression of the magnitude of the problem.

5 Predictions from models

Computer models come in two types.

The first tries to model the epidemic itself, by making simplified assumptions about the mechanism by which a virus spreads through a community. Key quantities, such as how many people an average case will infect, are highly uncertain at the start of an epidemic but are refined as more data is gathered. Such models have formed the basis for predicting the consequences of policy decisions in the UK.

6 “Excess deaths”

The number of extra deaths that will be recorded in this period, due either to Covid-19 or the lockdown, is hotly contested. Lives will be lost because of the illness, reduced medical care for everyone, domestic violence and the effects of unemployment and poverty; and lives will be saved through fewer accidents and, particularly, improved air quality. A (disputed) fraction of those dying would have died anyway in the coming year, a phenomenon known as mortality displacement or even “harvesting”. But the overall effect is hard to predict, and confident claims should be treated with scepticism.

7 The lethal risks of being infected

These vary dramatically with age and frailty, just as “normal” risks do. In fact the current estimates for the general public (rather than healthcare workers) seem remarkably similar to the risks we face anyway each year – but all packed into a few weeks.

8 The “accuracy” of an antibody test

Even apparently accurate antibody tests can lead to many false assurances of immunity. But a less accurate test may be fine if we are testing a representative sample to estimate the proportion of a population who have immunity.

Finally, it’s tempting to link a country’s statistics to the measures they have taken to control the virus: for example, has Sweden’s more relaxed policy been as effective as lockdown? But countries differ in so many ways: basic demographics, compliance and social networks, testing capacity and policy, health service characteristics and so on. Former prime minister Carl Bildt has joked that Swedes “have a genetic disposition to social distancing anyway”.

Sylvia Richardson, director, MRC Biostatistics Unit, president elect of the Royal Statistical Society

David Spiegelhalter, chairman, Winton Centre for Risk and Evidence Communication

 

Coaching Your Team Through Uncertain Times

An interesting article all locked-down managers should read by Francesca Gino and Dan Cable, and published by the Harvard Business Review

As they try to ride out the coronavirus pandemic, people are stressed and scared — nervous about others’ and their own health and the state of the world. For those lucky enough to be healthy and working from home in quarantine, their jobs can seem trivial and irritating. Separated physically from their colleagues, customers, and normal workplace, they find themselves alone with their computers, sporadically touching base remotely with those they used to see regularly. Many feel lost. Leaders of organisations can help their people get through these trying times by coaching them as they reevaluate their lives and rethink what they add to the world.

Here’s how.

Think about how you can serve the people you lead. Take time to reach out to those you lead in phone and video calls. Ask them how they’re doing and how you can help. Then do whatever you can to get them what they need, even if it has nothing to do with work. “Servant leaders” view their key role as serving employees as they explore and grow, providing tangible and emotional support along the way. Research shows that they create greater engagement and help employees bring more of themselves to work.

Help employees discover their own personal purpose. In this new work-from-home environment, free from the normal work scripts, many of us need to ask some basic questions: “What is my job now? How do I go about helping my organisation succeed? What do I want out of my career?” The answers might not be the same as they were a month ago. Discuss with employees whether any of the basic elements of their work have changed or will change. Get them to prioritise whom they are trying to serve and what they need from you in order to be effective. This type of conversation can provide the clarity needed to personalise our work’s purpose better than an organisation’s vision or mission statement, which is often so grand that employees have difficulty connecting it to their daily tasks.

In their research, Antonio Freitas of State University of New York and his colleagues demonstrate the value of questioning employees about their job tasks and then asking, “Why does it matter?” four times after each response. This exercise can connect a person’s daily activities to a higher-level goal.

Suppose a manager is in charge of completing performance evaluation forms for each employee. In response to the question, “Why does completing these forms matter?” she might answer, “I want to let my people know where they stand.” Next, she’s asked, “Why does it matter that people know where they stand?” The answer might be, “So that people can know how they can reach their career goals.” And a third time: “Why does it matter if people know how to reach their career goals?” The answer might be: “They may focus their energy at work differently.” Then a fourth question will follow: “Why does it matter whether people focus their energy at work in a different way?” A possible answer might be: “So that people feel like they are thriving while helping the company thrive.”

Analyzing decision-making at NASA during the 1960s, Wharton professor Andrew Carton found that similar steps helped employees see a stronger connection between their work and NASA’s ultimate aspirations: “I’m building electrical circuits” or “I’m mopping floors” becomes “I’m putting a man on the moon.” The more we think about why we’re performing a task, the more motivated and persistent we’ll be — especially when the task becomes hard. And as Carton found in his studies of NASA, this sense of purpose also boosted employees’ coordination and collective enthusiasm.

Encourage employees to reflect on opportunities to recraft their jobs. Leaders should go out of their way to talk with employees about their strengths and how they can use them in their new way of working. What abilities and talents would they like to use more in their work in the weeks, months, and years ahead? What would they like to learn?

This type of job crafting allows us to play to our strengths — letting our unique interests, perspectives, and background guide how we do our work and the value we add to the organisation. Your “best self” starts to determine the way you work, and work becomes more exciting.

Managers are often nervous about letting employees bring more of themselves to work and breaking away from the usual way of working more generally. They worry that important tasks will go undone or that employees will goof off. But now that working at home is a necessity, employees are already trying to cope with an unprecedented amount of autonomy. Use this as an opportunity to give employees the freedom to be themselves and explore their talents and interests. When leaders encourage employees to highlight and express their unique strengths on their jobs, their performance improves and burnout rates drop.

When employees can bring their best selves to work, they feel more autonomous, and their work feels more meaningful. Even when they’re working in their living room, their engagement has a chance to soar. Work feels like it matters more when we get to decide how it’s done.

The current crisis may likewise serve as a trigger for individuals to reflect on who benefits from their work and how they are making a difference. With the help of their leaders, they can make adjustments to bring more meaning to their work during this time of crisis and beyond.

NB HBR adds the following at the end of the above – ‘If (the above) free content helps you to contend with these challenges, please consider subscribing to HBR. A subscription purchase is the best way to support the creation of these resources.’

It’s output results, not input hours, that matter

A piece by Jared Lindzon of Fast Company follows – at long last, some in the outside world are now saying what this website has been banging on about for years – the pandemic has reinforced how foolish it is to compare input times with output volumes, especially when it comes to knowledge-based work.

In a 1996 episode of NBC’s Seinfeld, George discovers that he’s accidentally fooled his bosses, Steinbrenner and Wilhelm, after locking his keys inside his car outside his office.

Since the period of industrial revolution, we’ve used one primary scale to measure productivity: hours. As Seinfeld demonstrates, however, it’s not always an effective way to gauge actual performance or output.

Measuring productivity in hours alone can discourage workers from being more efficient with their time. In some instances it rewards those who are perceived to be working more hours, even when they’re not accomplishing much, as demonstrated by George.

Now that many workplaces have closed their doors and allowed employees to work from home, there is a unique opportunity to experiment with a different—and far more effective—scale.

HOW WORK BECAME TETHERED TO TIME AND SPACE 

For nearly a century productivity has been closely tied to time and space, measured in terms of how many hours a worker spends at a designated workstation. It was a convenient measurement tool for a period defined by standardisation, where the vast majority of jobs valued physical presence over cognitive output.

“It probably started with the industrial revolution, but came to its fruition in the 1920s assembly line when Henry Ford set up a factory system where work is commoditised and the content is mainly physical,” explains Robert Pozen, a senior lecturer at MIT Sloan School of Management and senior fellow at the Brookings Institution.

While the system was designed to fit the working culture of the era in which it was created, however, Pozen believes it doesn’t translate well into the modern reality.

“Hours are a relic of the past that might be appropriate for assembly line work, but in a knowledge economy doesn’t make any sense,” he says. “The problem is that for most organisations, they’re not willing to just get off hours, because they don’t have a good replacement.”

IN SEARCH OF A VIABLE ALTERNATIVE

In his 2012 book Extreme Productivity: Boost Your Results, Reduce Your Hours, Pozen offers an alternative productivity measurement system that he calls “performance objectives with success metrics.”

“People should spend real time figuring out what their goals, priorities, and objectives are, and agree on success metrics on how you can tell, after a week or a month, whether you have achieved those,” he says.

Pozen’s system empowers workers to work on their own schedules, so long as they’re able to complete the agreed upon tasks within the agreed upon timeframe. Though it may require extra effort on behalf of employers and managers, however, Pozen believes that the practice of defining goals helps organisations better focus their efforts and better utilise their human resources. “It’s more than just replacing hours; it helps develop consensus on what the organisation is trying to achieve, and how they measure success,” he says.

ORGANISATIONS GOING REMOTE HAVE A CHOICE

Redefining how you measure productivity can be a daunting task, but maintaining the status quo is often more difficult in the face of today’s remote working reality.

“A lot of entrepreneurs are learning that you can’t have that stringent control that you used to have when you were all in one space, but that it really doesn’t matter if someone works nine to five or four to midnight, as long as they get the job done,” explains small business consultant Marla Tabaka.

Tabaka adds that there are remote jobs that require a strict adherence to hours, such as customer service. In other roles, however, employers have been given a choice; use somewhat invasive tools to remotely track employee screens and maintain strict working hours, or offer employees greater flexibility and control over their own schedules.

While the former might provide employers with greater oversight, Tabaka argues that the latter breeds a stronger work culture and in turn more productive employees. “I’m seeing more CEOs begin to learn that letting go of that control gives them more control,” she says.

A CULTURE OF TRUST 

Moving from a workplace that emphasises hours to one that emphasises output is no small feat, and requires employers and managers to have a number of systems already in place. Chief among them, according to Tabaka, is a culture of trust.

“Having a culture of trust breeds accountability,” she says. “When it’s just about numbers people begin to feel like just another number; when its tied to that broader company vision and goals, people feel like they’re part of something bigger, and they’ll work harder for you, because it becomes a part of their life.”

Tabaka adds that an engaged employee “can do more in six hours than an employee who is stressed can do in 12.”

Another important prerequisite is for managers to unlearn much of how they’ve traditionally approached their oversight role and evaluated employee productivity.

“There has to be some level of manager training that helps managers refocus on productivity and goals and results and processes, and really get down into the details of, what does productivity ultimately look like? How do you know, outside of hours worked, when someone is productive on your team? What are the main goals on your team? What does each individual have to do to reach those goals?” says Brie Reynolds, the senior career specialist for FlexJobs.

THE FUTURE OF WORK?

Reynolds believes the system of monitoring and compensating staff based primarily upon hours worked has long been ripe for disruption, and while the coronavirus pandemic provides a unique opportunity to consider alternatives, she doesn’t expect companies to stop counting hours anytime soon. “I think there will always be some sort of time element to it, but I don’t think it will continue to be this eight hours a day standard,” she says.

One of the biggest roadblocks to adopting a new scale for measuring productivity, even during this seemingly ideal opportunity, may be tied to basic human psychology.

“I think we will make progress toward people being judged more on their productivity than hours present the more people are working remotely, but I don’t think it will replace it, because it’s just counter-human,” says Johnny C. Taylor Jr., CEO of the Society for Human Resource Management.

Taylor explains that if an employer asks a staff member to complete a task, they likely prefer that they do so in 10 minutes, rather than an hour. On the other hand, if one of his colleagues worked for 10 minutes and took the rest of the hour off while he continued to work, Taylor says he wouldn’t be comfortable with that.

“Even if they get all their work done, fundamentally that does not feel fair,” he says. “As much as we know this is theoretically the right thing to do—I absolutely agree it should be productivity-based—there’s that human part of us that says it doesn’t fundamentally feel fair.”

Taylor adds that the already delicate issues of gender, race, identity, and privilege in the workplace would only further complicate our sense of fundamental fairness.

“Then you get into this conversation of, ‘well he’s a faster typer, because he lived in this neighbourhood and they had better typewriters than I did growing up,’” he says.

In a remote setting, however, making those side-by-side comparisons becomes more difficult. While Taylor encourages organisations to continue seeking better solutions, however, he doesn’t see the traditional system of measuring productivity in hours going away anytime soon.

“Do I think it will change significantly? No, because of this fundamental concept of human fairness,” he says. “But should it? Yes, and I’m hoping the move to more remote work—which I think will persist beyond the COVID-19 crisis—will move us further in that direction.”

Office productivity

OFFICES ARE ABOUT TO CAUSE PRODUCTIVITY TO EXPLODE

So claims Mike Phillips in one of Bisnow.com’s featured series on the ‘Future of Work’ – it’s more realisation that the pandemic has given a massive kick-start to many business changes needed given the enabling technology has been around but not used well for many years now 

The way we work has changed beyond comprehension in the past 200 years. But the way we use offices is pretty much still the same.

There have been changes in design: Closed individual offices were the norm, cubicles came and have now largely gone, and today the open office and agile working reign supreme. But the idea of a place where you travel to work, nine hours a day, five days a week, hasn’t changed since the idea was invented during the Industrial Revolution. Until now.

“Processes get locked in place: The only reason schools have such a long summer holiday is because children used to have to go and help bring in the harvest,” Stanford University Professor of Economics Nick Bloom said. “Ideas can be very hard to shift. But I think we could be about to see an explosion in growth.”

The way we use offices is at the centre of that.

Offices Are About To Cause Productivity To Explode

 

The way companies use offices was already changing, and that change has only been accelerated by the coronavirus pandemic and the switch to home-working it has forced upon the world. So office space is going to have to change to mirror the way companies are now working.

Experts believe in future, companies will want less space, but better space. They will want space that allows different teams within their company to achieve different objectives, with the physical environment helping company goals. Office space will need to seamlessly bring together those working in the building and those working from home.

Companies will want to experiment with different physical environments, trying and testing in the same way they would a new website. Office owners, developers and operators will need to provide the physical infrastructure and technology that allows all this to occur. Those that do will help companies tap into this potential growth in productivity, and are likely to be richly rewarded.

For Bloom, who specialises in productivity and the factors that influence it, the change in the way we work and how we use offices is akin to the change that occurred in factories when they switched from steam power to electricity. It took decades for the increases in productivity to be seen, not because factory owners didn’t want to switch from steam to electricity, but because it took a long time to work out how factories and production process should be organised to take advantage of the new technology. Companies had to change shape, and so did the buildings they occupied.

“[Nobel Prize-winning economist] Robert Solow famously said in the 1980s you can see computers everywhere except in the productivity figures,” Bloom said. “We haven’t seen the miracle that IT was supposed to produce, but new ways of working, accelerated by COVID-19, could spur that. We now have the processes and technology up and running to be able to work flexibly and increase productivity.”

Bloom sees the coronavirus accelerating the trend for employees to work remotely, either from home or from smaller satellite offices away from city-centre HQs, as companies that may have doubted the wisdom of this practice had their hand forced. Companies have had to reorganize at least temporarily in a way that embraces flexibility, and Bloom believes those that stick with it will see increased productivity long term. The combination of office and home work is expected to reduce the inefficient elements of office life: stressful commutes, rigid working patterns and unnecessary meetings.

Offices Are About To Cause Productivity To Explode
Stanford’s Nick Bloom

 

An increase in working from home would decrease the need for fixed desk space in an office, because the kind of quiet, internally focused work someone might once have done in the office can now be done at home. The result could be more space given over to collaborative areas where colleagues can interact.

Because what is an office actually for? Its role in business and society has changed, and while some businesses have grasped that and reaped the productivity benefit, others haven’t. Once you had to go to an office to do your job, and employers wanted you there to keep an eye on you and make sure you were doing it.

Now, it is a social space, where ideas are swapped and new ideas created, a place where loneliness is staved off.

“It’s a place for cumulative cultural knowledge to be exchanged,” AXA IM — Real Assets Head of UK Development Harry Badham said. “If I know something and you don’t know I know it, that piece of knowledge is essentially useless. An office is the best way to share knowledge around a company and to create a culture.”

How offices influence collaboration, creativity and culture in practice is subtle and nuanced, and companies have often been treating it with too broad a brush.

“The way we work has never changed more quickly, but the place we work hasn’t,” Humanyze President and co-founder Ben Waber said. “For a long time companies have been paying lip service to these ideas, but not really embraced them. But we have the opportunity to experiment and adapt.”

Offices Are About To Cause Productivity To Explode

 

Humanyze undertook research alongside academics from Harvard University which showed that, far from increasing collaboration among staff, companies that transitioned from fixed offices or cubicles to an open-office plan saw interaction between staff decrease, as people hid behind headphones and were afraid to have conversations in a setting where everyone could hear them.

Waber said companies should treat office space like they would a new website, testing out various layouts to see which achieves their desired outcomes. But first it is important to know what those outcomes are.

It is a bit more complex in practice, but if you have a team that needs to work in a tight-knit way on a specific project with a deadline, give them their own fixed office or space within a wider office, or even temporary space in a flexible office. Even putting the coffee machine in the centre of the team rather than in a peripheral kitchen can make teams turn inward instead of outward.

By contrast, if you need different teams to start interacting with each other, put them together in a shared seating area.

Hot desking is all well and good, but letting people randomly pick seats doesn’t allow you to control outcomes.

“The design you choose should depend on the networks you want to create,” Waber said.

As artificial intelligence is able to undertake more of the repetitive processing work that was once a major part of office life, the average office worker will spend more time on different types of task, requiring different types of creative thinking. And this will require offices to be organised differently.

Offices Are About To Cause Productivity To Explode

 

“Different tasks and ways of working will require different types of space,” Convene’s Zampini said. “You need an office where you have head-down space like a library, collaborative space, social space, space for board meetings or town hall meetings, and to access those different types of space at the touch of a button.”

For developers and operators, it is a cliche that they need to build flexibility into their buildings. But that doesn’t make it any less true.

“Companies need to be able to adapt their space as their businesses adapt,” said Nick Searle, a partner at Argent, which is developing HQ buildings in London for Google and Facebook. “For all the businesses we work with, whether they are banks, professional firms or tech firms, they all need to be able to morph their space internally. There is only so far we can go, as most of our tenants will fit out space themselves, but we need to give them that ability to change their environment.”

On an operational level, the technology offered by a building can be vital in enabling companies to adopt those flexible working practices that can increase productivity.

“If you think of a meeting room, it might be smaller because not all of the people in the meeting are going to be physically present, but it needs to have great and easy-to-use technology to allow that kind of hybrid working that distributed teams need,” Zampini said.

AXA’s Badham pointed out that if companies are going to have a greater proportion of their teams working remotely more of the time, then building systems need to allow people to access an office using their phone, rather than having to go through a cumbersome signing-in process if they are coming in once or twice a week. And that means building owners employing people and systems to keep up to date the registers of who can and can’t access a building.

Offices Are About To Cause Productivity To Explode
Meeting rooms now need to be able to bring together disparate teams using technology.

Many of these trends will come together to have one overall result: The average company will have less office real estate, but it will be better.

“It will be about the quality, not about how much of it you have,” Zampini said.

“It is a journey we have been on for several years, but I think the average company will just consume less real estate,” Deutsche Bank Managing Director for Corporate Services Kathryn Harrison-Thomas said. “[People working from home amid the pandemic] is a chance for us to reset our strategy. I don’t think many companies will just go back to what they were doing before.”

She pointed out that the vast majority of the world’s financial services professionals are working from home, and financial markets are still functioning, even if they are looking decidedly downbeat.

Badham said about 80% of the occupiers AXA signed for its 1.3M SF 22 Bishopsgate skyscraper in London took less space than they previously occupied.

“If you have less space you want better space, and that means better amenities, and being smarter in how it is operated,” he said.

In his book 50 Things That Made The Modern Economy, economist Tim Harford argued it took almost 50 years for the productivity benefits from electrification to be truly felt. Hopefully it won’t take as long for new trends in work to have an impact, but for companies to harness the potential benefits that new ways of working can bring, it will take a change of mindset in how they organise their businesses, and how they utilise their office space.

A shorter work week?


Microsoft recently granted its workers in Japan five Friday’s off in a row, resulting in a 40% productivity jump. Similar recent experiments have resulted in healthier, happier more efficient workers. 

Around the world the idea of reducing working hours is a topic of debate and discussion once more.

The first major victory that achieved an 8-hour working day, with no loss of pay, was won in Melbourne by building workers in 1856. Prior to that 10 and 12-hour working days were normal.

But the working week was still 6 days long, 48 hours a week. From that time on there were many campaigns across industries to further reduce the amount of time people were forced to spend at work.

It wasn’t until 1928 that an 8-hour day, 6-day week was established in national law, and it was another 20 years before a 5-day week was achieved.

All of these achievements were won through organising and campaigning. The strongest action was taken ‘on the job’.

But since then the 8-hour day has been eroded for many. Lots of workers now do very long and unhealthy hours. Others struggle to get enough hours to pay the bills, or even to get a job at all.

The struggle for shorter hours has been stalled since the 1970s. The decline of union membership because of poor leadership of the workers movement in recent decades is the reason.

Bosses are always scheming to make us work harder, for longer, for less. They say we need a rise in productivity to do less work. But the truth is worker productivity has increased an enormous amount over the last decades.

Technology and efficiency have increased dramatically since there was any real reduction in standard working hours.

In fact, human labour has never been so productive in all of history. The problem is that the overwhelming bulk of the ‘productivity gains’ have turned into fat CEO bonuses and turbo-charged corporate profits.

In 1930 the famous economist John Keynes predicted that a 15-hour work week would be standard by now.

Metal workers in Melbourne regularly occupied the intersection outside Flinders Street Station on Friday nights in the 1970s. They were protesting for a 35-hour working week. They believed that microchips, computers and robotics would lay the basis.

Scary stories from bosses allege less time working would mean higher unemployment or even economic catastrophe.

Whenever workers ask for anything you can expect to hear these kinds of doom and gloom predictions from the honest, responsible corporate captains of Australia.

Really the question is how we divide the up the wealth and the benefits that are produced by the collective efforts of all working people in society?

Reducing working hours without reducing pay means that workers would keep more of the wealth we produce. That means cutting into corporate profits. No wonder the bosses are opposed!

Instead of more luxury cars, mansions and yachts for the 1%, we want society’s wealth used to provide more time for leisure, health and community.

A shorter working week without loss of pay would also mean that more people could be employed to take up any slack left over.

There are millions of workers in Australia living from one pay day to the next, who want to work more to earn more. There are more people again who are unemployed.

Both these problems could be addressed right away by shortening the working week and sharing out the available work.

That’s why Socialist Action calls for a 35-hour week with no loss of pay, as an immediate step toward reducing working time further.

Building workers in 1856 won a 25% pay rise combined with a 20% cut in their working hours all at once. They didn’t have the benefits of the communication technology we have today, or as much time outside work to organise.

It’s possible to revive those traditions and have big wins like that today. What’s required is to rebuild determined working class organisations with socialist ideas and bold leadership. We have to reject the arguments of the bosses and the logic of the profit driven system.

Capitalists say they can’t afford shorter working hours. We respond that working class people can’t afford their profit-driven system. We need a society that puts the needs of the majority above the profits of the 1%. We need a democratic socialist society.

By Kirk Leonard

Steve Jobs’ advice on becoming more productive Is quite brilliant

Inc.com published an article by Marcel Schwantes, founder and Chief Human Officer, Leadership From the Core
Steve Jobs is most famous for founding Apple and turning it into one of the biggest and most valuable brands ever.
One may think that Jobs juggled lots of massive projects at once to reach the pinnacle of success. But he actually credited much of his success to one word: focus. At the 1997 Apple Worldwide Developers Conference, Jobs shared this brilliant piece of advice:

“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done.”

Business should not be confused for busyness. As our productivity increases, and we spread ourselves thin in an attempt to accomplish all our goals, Steve Jobs had a different approach. He said, “Innovation is saying no to 1,000 things. You have to pick carefully.”
Without focus, your ability to think, problem-solve, and make decisions will suffer. You just can’t maximize your efficiency if your mind is wandering off into multitasking land. Rather, the focus should be on single-tasking — placing your full attention on one thing, one business problem, one big task, one important conversation.

Say no to these things.

Jobs’ advice of saying no mirrors my own counsel to coaching clients who struggle with productivity. To simplify, I often tell them to say no to these things in particular:

Doing all the work themselves

Getting as much done as possible in a day means delegating. This may be challenging for controlling types to take on, but it’s absolutely essential.

To Jobs, the first step is to surround yourself with bright people. The next is to step back and let them work: “It doesn’t make sense to hire smart people and tell them what to do,” he said. “We hire smart people, so they can tell us what to do.”

Interruptions and distractions

Technology is one of the greatest gifts of productivity and one of the biggest obstacles to maintaining good focus. The constant distractions from notifications can easily take you off track.

One study found that if all interruptions were eliminated, workers would recapture three to five hours a day every day, which equals 40-60 percent of the standard workday.

Instead of letting tech manage you, manage your tech by avoiding jumping into email when you start your day; you may get sucked into a whirlpool of others’ needs, so do this last. Then, when doing work that requires flow and sharp focus, go airplane mode or turn off notifications, and place your smartphone in another room nearby.

Setting unrealistic goals

As you think of the countless tasks you’re likely to face this week, avoid ​setting goals you won’t likely be able to accomplish or you just can’t take on. Be realistic about what and how much you put on your plate.

For example, while planning out your day, come up with one or two primary goals you want to accomplish before close of business. These should be goals that will propel you forward, not sidetrack you from your MO.

To ensure success, break these down into smaller tasks in support of those goals, so it doesn’t feel like you’re staring up at Everest when you begin your day.

As Jobs reminds us, “Focusing is about saying no.” It isn’t easy, but the payoff can be quite rewarding. As Jobs said, “I’m actually as proud of the things we haven’t done as the things I have done.”

M/S says “Remote working is here for good”

An Inc.com report by Jason Aten follows – with only a few changes:

If nothing else, in these past few weeks, we’ve learned that as a whole, people are quite resourceful when it comes to figuring out how to adapt and stay productive, even in extraordinary circumstances. You have to admit that it’s impressive how well millions have adjusted to working from home. OK, maybe “adjusted” is a little generous, but we’ve made it work for the most part.

One of the biggest questions is what happens when things get back to “normal?” Or, maybe more important, what will normal even mean? A report Microsoft just released suggests remote work is here to stay, and the company has the data to back it up.

Some of that data is pretty incredible. For example, Microsoft says it saw an increase of 12 million users in the first week of stay-at-home orders. That means there are now over 44 million people using Microsoft Teams to stay connected to their, well, teams.

At the end of March, Microsoft says the number of minutes of meetings held with Teams increased threefold over March 15, for a total of 2.7 billion minutes. In one day. That’s a lot of meetings.

It’s also a lot of people getting a lot of work done, all without the structure of an office. There’s no doubt that while the shift to working remotely has been a challenge, tools like Slack, Zoom, and Microsoft Teams have made it relatively easy to stay connected and productive. And those same tools are likely to play a big role in how companies figure out how to keep their employees productive.

Microsoft points out that in areas of the world that have started to return to work, many people continue to work remotely. There are probably a variety of reasons, including that people may just be hesitant to return to an office when it’s hard to know if it’s truly safe to do so.

But there’s also a case to be made that if we’ve proven many types of work can be done remotely, why go back? Working remotely just works. It is, in many cases, better for both the employees and the company. It allows people the freedom to choose the type of schedule and work environment that helps them thrive.

There are plenty of small and mid-size businesses that were already mostly, if not entirely remote. There’s no question technology has provided us with tools that make many of the reasons for an office mostly obsolete. For example, I manage a fully remote team, and we are able to collaborate and communicate as well as if we were working in an office–maybe even better.

I tend to think Microsoft is right, that the shift is more than just a trend, but rather a rethinking of what it means to be productive. We’ve reconsidered how to balance productivity and flexibility. At some point, life will return to some form of normal. Like Microsoft, I won’t be surprised if that doesn’t necessarily mean that we’ll all return to the office.

Will the Pandemic make us more productive?

The following thoughts, published by Bloomberg Opinion, are from Karl W. Smith, a former assistant professor of economics at the University of North Carolina and vice president for federal policy at the Tax Foundation.

The Great Suppression will continue to cause enormous economic and personal hardship for scores of millions of Americans. It is possible, however, for the U.S. to emerge from this pandemic with a stronger and more productive economy.

To be clear, the base case is not rosy. The next few months will be difficult as the U.S. and the rest of the world struggle to contain and cope with the loss of life associated with Covid-19. The shutdown of vast swathes of the world economy is both necessary (to slow the virus) and tragic (for those whose livelihoods it will ruin). It is important never to lose sight of the enormity of the suffering caused by this pandemic.

At the same time, crises can sometimes force nations and leaders to take steps that they might otherwise be afraid of. In the U.S., two critical transformations have taken place that could yield long-term benefits.

The U.S. and other advanced economies have been suffering from low productivity growth since 2001. In part, that’s because the U.S.’s fastest growing sectors — health care and education — were relatively late to make use of the efficiencies enabled by the internet.

The internet has had a huge impact on the few sectors of the economy that it affected. But it did relatively little to improve productivity in health care and education.

The pandemic has the potential to change that.

Telemedicine is being practised at an unprecedented scale so that patients can see doctors without risking exposure to Covid-19. That not only eases the delivery of services, but it also helps to expand the market available to health-care providers.

In education, there is a similar trend towards embracing distance learning. There have been experiments in the past, but they suffered from lack of scale and adverse selection. Because most students and professors were reluctant to abandon traditional in-class instruction, there were few resources for online learning and only a handful of often disadvantaged students took advantage of it.

Again, the pandemic has changed the calculus. As the number of participants explodes, both the technological barriers and the stigma associated with online education are falling. At the same time, best practices can spread widely, lowering costs and increasing effectiveness.

These kinds of returns to scale can reverberate across the economy. The Great Suppression has forced employers and employees to use technology to work from home. If successful, those efforts can carry forward into the economy as it is rebuilt after the pandemic has passed.

Perhaps the greatest obstacle to long-term growth is land-use restrictions, which drive up the cost of housing in areas with the fastest jobs and wage growth. The result is that millions of Americans must either take lower-paying jobs outside the major cities or lose time and money with long commutes.

Telework has the potential to radically alter this dynamic. If an increasing percentage of the high-productivity workforce can operate remotely, then the pressure to live in or near major cities will decrease.

None of these developments, it almost goes without saying, is certain. First, the U.S. will have to contain the pandemic. Then it will have to retain the policies, both public and private, that allowed Americans to continue working and studying from afar.

(N.B. The above does not necessarily reflect the opinion of Bloomberg LP and its owners.)

How to boost office productivity

The following article is by Constantine Von Hoffman, published by Computerworld and sponsored by Microsoft – it offers important advice for all office managers nowadays

Upgrading to new applications and tools can do so much for a business. Up-to-date software can improve efficiencies and boost productivity, leading to both top-line and bottom-line gains. But getting that payoff means getting people on board with the change and comfortable with the new systems.

Unfortunately, a lot of companies struggle with this critical step.

Consider a PwC study in which 90% of executives believe their company pays attention to people’s needs when introducing new technology, but only 53% of staff members agree. Additionally, only 50% of staff members say they’re satisfied with the resources available at their company to learn how to use new technology.

Moving to a new platform or productivity suite can be highly disruptive to individuals and administrators. Often the new software is installed overnight or over the weekend, and when employees come into work the next day, they have a new system that they’re expected to start using right away.

Too often, there’s no process for helping users to understand the new functions they need for their job and how the new platform can help them. When people aren’t aware of the range of collaboration tools they have access to, they default to the programs and processes they’re already comfortable with.

Behavioural change and a baseline of training

The reality is that successful adoption of any new technology—including Microsoft 365, which brings new functionality and new ways of working—requires behavioural change and a baseline of training to ensure it’s used most effectively.

If traditional training methods – or no training at all – have hampered technology adoption at your organisation, consider a new approach. For Microsoft 365, Robert Crane, principal at technology consultancy CIAOPS, recommends a “learning path” that features staged, short-burst training on each application in the suite, including showing users new and better ways to accomplish their day-to-day tasks.

Employees are likely familiar with Microsoft Office and Windows, but Microsoft 365 includes a much broader set of functionality and tools that can overwhelm users—or be ignored entirely if individuals don’t discover them on their own or know how to use them.

A typical learning path might include the following:

  • Begin with basic lessons around core functionality, such as adding an attachment or uploading a file to a shared workspace. This training, delivered in short tutorials or 2-minute videos, allows users to learn about new features or functions while still getting their work done.
  • Consider grouping these lessons by app – for example, five lessons on OneDrive, followed by five lessons on Teams, etc.
  • Next, you can provide lessons on how the apps integrate with one another. “Show them the whole environment and how all the tools work together,” says Crane. “Because they don’t know what they don’t know.”
  • More advanced training involves helping users to rethink traditional processes. For example, “you don’t want to just transfer an F drive into Microsoft collaboration solutions,” says Crane. “You need to think about what’s the best tool for the job—some of those files may go to OneDrive, others will go to SharePoint, some will go to Teams. You want to rethink and reorganise to get the most from the tools.”

 

While some people will be very quick to understand the value of new technology, others won’t immediately grasp it. They need to see how specific features or tools will save time and make them more productive. This type of training pays for itself by getting people working sooner and better on the new system.

Proper training “makes a big difference in getting over the initial hump,” Crane says. “I generally don’t see businesses giving their employees the time and the training to get comfortable in their new space. When they do, they start to see the benefits—and that’s when the magic happens.

The economic impact of CV-19?

An article in the Harvard Business Review by Philipp Carlsson-SzlezakMartin Reeves and Paul Swartz follows – the bulk that I think I understood makes interesting reading – maybe the rest does too!

As the coronavirus continues its march around the world, governments have turned to proven public health measures, such as social distancing, to physically disrupt the contagion. Yet, doing so has severed the flow of goods and people, stalled economies, and is in the process of delivering a global recession. Economic contagion is now spreading as fast as the disease itself.

This didn’t look plausible even a few weeks ago. As the virus began to spread, politicians, policy makers, and markets, informed by the pattern of historical outbreaks, looked on while the early (and thus more effective and less costly) window for social distancing closed. Now, much further along the disease trajectory, the economic costs are much higher, and predicting the path ahead has become nearly impossible, as multiple dimensions of the crisis are unprecedented and unknowable.

In this uncharted territory, naming a global recession adds little clarity beyond setting the expectation of negative growth. Pressing questions include the path of the shock and recovery, whether economies will be able to return to their pre-shock output levels and growth rates, and whether there will be any structural legacy from the coronavirus crisis.

Darker outlook, less visibility

The window for social distancing — the only known approach to effectively address the disease — is short. In Hubei province it was missed, but the rest of China made sure not to miss it. In Italy the window was missed, and then the rest of Europe missed it too. In the U.S., still constrained by insufficient testing, the early window was also missed. As the disease proliferates, social-distancing measures will have to be enacted more broadly and for longer to achieve the same effect, choking economic activity in the process.

Another wave of infections remains a real possibility, meaning that even countries that acted relatively quickly are still at risk every time they nudge their economies back to work. Indeed, we have seen some resurgence of the virus in Singapore and Hong Kong. In that sense, only history will tell if their early and aggressive responses paid off.

At present, the economic outlook for late actors looks bleak, having caught politicians, policy makers, and financial markets off guard. What happened in the last four weeks was not part of the risk calculation. Forecasts won’t help much here. For example, consensus estimates for initial unemployment claims in the U.S. were around 1.6 million this week, but the figure came in at 3.28 million — an historically unprecedented figure, about five times greater than the largest weekly increase in the global financial crisis. Notoriously unreliable at the best of times, forecasts look especially dubious now as there are simply too many unknowable aspects:

  • The virus’ properties are not fully understood and could change.
  • The role of asymptomatic patients is still imperfectly understood.
  • The true rates of infection and immunity are therefore uncertain, especially where testing is limited.
  • Policy responses will be uneven, often delayed, and there will be missteps.
  • The reactions of firms and households are uncertain.

Perhaps the only certainty is that any attempt at a definitive forecast will fail. However, we think examining various scenarios still adds value in this environment of limited visibility.

Examining the shape of the shock

The concept of a recession is binary and blunt. All it says is that expectations have flipped from positive to negative growth, at least for two consecutive quarters.

We think the bigger scenario question revolves around the shape of the shock — what we call “shock geometry” — and its structural legacy. What drives the economic impact path of a shock, and where does Covid-19 fit in?

To illustrate, consider how the same shock —the 2008 global financial crisis — led to recessions with vastly different progressions and recoveries in three sample countries:

      • V-shape. In 2008, Canada avoided a banking crisis: Credit continued to flow, and capital formation was not as significantly disrupted. Avoiding a deeper collapse helped keep labor in place and prevented skill atrophy. GDP dropped but substantially climbed back to its pre-growth path. This is typical of a classic “V-shape” shock, where output is displaced but growth eventually rebounds to its old path.
      • U-shape. The Unites States had a markedly different path. Growth dropped precipitously and never rebounded to its pre-crisis path. Note that the growth rate recovered (the slopes are the same), but the gap between the old and new path remains large, representing a one-off damage to the economy’s supply side, and indefinitely lost output. This was driven by a deep banking crisis that disrupted credit intermediation. As the recession dragged on, it did more damage to the labor supply and productivity. The U.S. in 2008 is a classic “U-shape” — a much more costly version than Canada’s V-shape.
      • L-shape. Greece is the third example and by far the worst shape — not only has the country never recovered its prior output path, but also its growth rate has declined. The distance between old and new path is widening, with lost output continuously growing. This means the crisis has left lasting structural damage to the economy’s supply side. Capital inputs, labor inputs, and productivity are repeatedly damaged. Greece can be seen as an example of L-shape, by far the most pernicious shape.

 

So, what drives “shock geometry” as shown above? The key determinant is the shock’s ability to damage an economy’s supply side, and more specifically, capital formation. When credit intermediation is disrupted and the capital stock doesn’t grow, recovery is slow, workers exit the workforce, skills are lost, productivity is down. The shock becomes structural.

V, U, L shocks can come in different intensities. A V-shaped path may be shallow or deep. A U-shape may come with a deep drop to a new growth path or a small one.

Where does the coronavirus shock fit in so far? The intensity of the shock will be determined by the underlying virus properties, policy responses, as well as consumer and corporate behavior in the face of adversity. But the shape of the shock is determined by the virus’ capacity to damage economies’ supply side, particularly capital formation. At this point, both a deep V-shape and a U are plausible. The battle ahead is to prevent a clear U trajectory.

Understand the damage mechanisms

Keeping the geometries above in mind, this leads to two questions about the Covid-19 shock:

  • What is the mechanism for damage to the supply side?
  • What is the policy response to prevent such damage?

Classically, financial crises cripple an economy’s supply side. There is a long history of such crisis, and policy makers have learned much about dealing with them. But coronavirus extends liquidity and capital problems to the real economy — and does so at unprecedented scale. As though the twin risk of financial and real liquidity shocks were not enough, they are also interrelated, raising the stakes.

Let’s look in more detail at the two paths for Covid-19 to deliver structural damage in a U-shaped scenario:

  • Financial system risks. The unprecedented Covid-19 shock has already generated stress in capital markets, triggering a forceful response from central banks. If liquidity problems persist and real economy problems lead to write-downs, capital problems can arise. While from a policy perspective we may know the solutions, bailouts and recapitalization of banks are politically controversial. In the case of a financial crisis, capital formation would take a huge hit, driving a prolonged slump with damage to labor and productivity as well.
  • Extended real economy “freeze.” The truly unprecedented possibility. Months of social distancing could disrupt capital formation and ultimately labor participation and productivity growth. Unlike financial crises, an extended freeze of this magnitude damaging the supply side would be new territory for policy makers.

The financial and real economy risks are interrelated in two ways: First, a prolonged Covid-19 crisis could drive up the number of real economy bankruptcies, which makes it even harder for the financial system to manage. Meanwhile, a financial crisis would starve the real economy of credit.

It is fair to say the risk profile of the Covid-19 crisis is particularly threatening. While there is a policy playbook for dealing with financial crises, no such thing exists for a large-scale real economy freeze. There is no off-the-shelf cure for liquidity problems of entire real economies.

It is important to recognise that none of the shock scenarios outlined above will be inevitable, linear, or uniform across geographies. Countries will have considerably different experiences for two reasons: the structural resilience of economies to absorb such shocks — call it destiny — and the capacity of medical researchers and policy makers to respond in new ways to an unprecedented challenge — call it innovation. Can they create novel interventions, at unprecedented speed, that will break the intractable and unattractive trade-off between lost lives and creating economic misery?

On the medical side: It’s clear that a vaccine would reduce the need for social distancing and thus relax the policy’s choke-hold on the global economy. But timelines are likely long, and so the focus may well have to be on incremental innovation within the confines of existing solutions.

Examples of such innovation may be found across the entire medical spectrum: on the therapeutic end, existing treatments may prove effective in fighting the disease. Several dozen existing treatments are currently being evaluated. On the other end of the spectrum, organisational innovation will be needed to free up capacity to meet the demand for resources, such as the optimal mobilisation of medical professionals, repurposing of spaces for treatment, and changes to triaging medical care to prioritize the Covid-19 crisis.

On the economic side: In the U.S., politicians have passed a $2 trillion stimulus package to soften the blow of the coronavirus crisis. But policy innovation also will have to occur. For example, central banks operate so-called “discount windows” that provide unlimited short-term finance to ensure liquidity problems don’t break the banking system. What is needed now, today, is a “real economy discount window” that can also deliver unlimited liquidity to sound households and firms.

The emerging policy landscape includes many worthwhile ideas. Among those are “bridge loans” that offer zero-interest loans to households and firms for the duration of the crisis and a generous repayment period; a moratorium on mortgage payments for residential and commercial borrowers; or using bank regulators to lean on banks to provide finance and to rework terms on existing loans. Such policy innovation could have meaningful impact in softening the virus’ impact on economies’ supply side. Yet it also needs agile and efficient execution.

We think there is a chance for innovation to prevent a full-blown U-shape, keeping the shock’s path closer to a deep V-shape than would otherwise be possible. But the battle is underway, and without innovation the odds are not in favor of the less damaging V-shaped scenario.


Philipp Carlsson-Szlezak is a partner and managing director in BCG’s New York office and chief economist of BCG.

Martin Reeves is a senior partner and managing director in the San Francisco office of BCG and chairman of the BCG Henderson Institute, BCG’s think tank on management and strategy.

Paul Swartz is a director and senior economist in the BCG Henderson Institute, based in BCG’s New York office.

CV-19 kick starts new mentalist era

CV-19 naturally dominates the news at present – it’s all ‘doom and gloom’ as we wonder if the damned invisible bug will ‘get us’ or not

We’re told there are computer models (so they must be right?) being used by experts to determine their advice on what we all should do, the aim being to slow the spread of the bug so the capacity of the NHS to provide intensive care is not exceeded – but the experts clearly don’t have a formula which offers an exact picture of what’s happening, or likely to happen, so my guess is they must be playing all sorts of ‘what if’ games with the limited info they do have

And, whilst current forecasts suggest the UK peak could be 2-3 weeks away (i.e. around mid-end April), it could be many more weeks before it falls to zero and an ‘all clear’ is sounded – with the potential for rebounds if we ‘unlock’ too early

We can only hope that some bright spark, somewhere in the world, has a serendipitous moment and, Fleming-like, produces a panacea vaccine for CV-19 and any other variants further down the line – then we can get back to focusing on the other ‘biggest peace-time issue’ facing all nations – PRODUCTIVITY

As a start, trying to be positive and counter the doom and gloom, consider what good news CV-19 might have brought in its wake

A few ‘top-of-head’ thoughts include:

  • A huge kick-start to the new 21c mentalist world taking over from the old 20c materialist world – currently, we’re at a global watershed
  • A massive change in attitude towards our fellow men and women, locally, nationally and internationally – less greed, less ‘I’m alright Jack’ attitudes and less worship of money and fame – more kindness, more caring for others and more appreciation of what really matters in life
  • A quantum leap, at long last, in the use of technology for home working – far less commuting, far less pollution, far less expensive office space needed, far more productive hours per employee, far better employee motivation through a better work/ social life balance
  • A giant leap towards Keynes’ 15 hour week, and far less working 50+ hour weeks, suddenly seems more likely in the next few years – underpinned by most of the current dull, dirty or dangerous work plus much junior and middle-management work being done by robots and AI (Artificial Intelligence) instead – it’s results that count, not hours input
  • A massive change in the way we buy and sell goods and services – far more home deliveries and dealing over the internet – far less need for high street shops and branches
  • Far less business travel needed to ‘press flesh’ at meetings and seal deals – video-conferencing is already becoming the norm for many
  • And there’s undoubtedly many others which will affect our standard of living and quality of lives

 

MORE GOOD NEWS

One good example of a company gearing up for this new 21c mentalist world is Tata Steel, one of the top global steel companies

The other day, it was announced that Tata Steel had been selected for the 2020 honours list for ‘Excellence in Knowledge Management’ by the Houston (US)-based American Productivity & Quality Centre (APQC).

The annual award recognises Tata Steel’s global standard in systems and processes created and practised for its KM (Knowledge Management) capabilities.

The quality of KM is a critical discipline that decides an organisation’s ability to create, share, use, and manage knowledge and information – more importantly, it is also a measure of the organisation’s ability to retain and leverage knowledge and information that may otherwise be lost when employees change jobs.

Avneesh Gupta, Vice President, Tata Steel, said: ‘Knowledge and information are important assets in any organisation, and like physical and financial assets, requires conscious management – it is imperative to enable structured and quality knowledge management practices to drive business continuity and excellence.

We are proud to receive the recognition of excellence from APQC. This recognition will further motivate us in our continued pursuit to strengthen the management of organisational knowledge, steering us ahead towards creating a passion for learning.’

Dr. Carla O’Dell, Chairman, CEO, APQC, said: ‘All of the award winners generate impactful results through sustainable knowledge management programs.’

Founded in 1977 by business leader and innovator Jack Grayson, APQC, a non-profit organisation, is the world’s foremost authority in benchmarking, best practices, process and performance improvement and knowledge management.

APQC provides information, data, and insights for organisations to work smarter, faster, and with greater confidence. They provide independent, unbiased, and validated research & data to their more than 550 members in 45 industries worldwide. Their members have exclusive access to the world’s largest set of benchmark data, with more than two million data points.

In my view, having visited the APQC at their Houston HQ, they are a model for all other NPCs (National Productivity Centres) to emulate

N.B. Most G7 and G20 nations are wise enough to have set up their own NPC – the glaring exception is the UK!

 

 

Covid -19 should make ‘working from home’ the norm

A flash of insight from New Zealand
Go to any technology website right now, and you’ll see headlines about Google now holding job interviews on Hangouts.

Or IBM stopping all domestic travel for meetings.

Or Twitter encouraging all of its employees to work from home to prevent spreading the virus.

David Court says working from home improves productivity – but will allowing staff to work from home hurt their businesses?
It shouldn’t do.
The vast majority of office workers only need two physical things to “remote work”: a laptop and an internet connection – the only difference will be whether they’re using Slack, or Google Hangouts, or Microsoft Teams to chat, share files and have video meetings and spread gossip – and, to be honest, it doesn’t matter which one they choose, they all do the same thing.

 

“I know this because a few years ago, when I was still working in London and managing a team of eight journalists, my former employer deliberately moved to an office that had fewer desks than it had employees, thus forcing us to adopt a system where several members of the team were always working from home. It was a shrewd business move as the company saved vast amounts on its city centre rent”.

“Fortunately, my employer made another shrewd business move the previous year by introducing the excellent communication tool, Slack – think of it as a professional version of Whatsapp – the place where everyone said “morning” to their colleagues. It was also the place where files were shared, video meetings where held, and importantly, office gossip was spread”.

And finally, at the end of the day, it was the place where everyone said: “that’s me for the day, speak to you tomorrow”.

Without this one piece of software, where 99% of our work conversations were organically happening even in the office, I’m not sure we could have made it work.

From an employee’s perspective, there are obvious perks. There’s no commute. You get to wear comfy pants, or even your pyjamas, for the entire day. You suddenly have all the time in the world to do your laundry. And your lunches improve tenfold.

In Japan some businesses are closing or asking their employees or work from home as coronavirus cases continue to grow
Best of all, if you’re anything like me, you’ll accidentally fall asleep at least once during the afternoon too.
Bliss!

 

What’s even more surprising: you become more productive than ever. That job that you used to stretch out for an entire morning will only take an hour at home.

Better still, the quality of your work didn’t suffer. The opposite. The lack of office distractions, you simply mute Slack when you’re busy, means you’re able to dedicate your full attention to the task in hand.

Surprisingly, remote working worked from a management perspective too. You continued to give your team their daily and weekly tasks, as usual. And your team continues to get them done, as usual.

Overall productivity, rightly, becomes the thing that matters most.

All of the above, I imagine, is what Microsoft, Google, IBM and Twitter (and maybe your company too) will be experiencing in the next couple of weeks (and more).

Andrew Neel adds his pennyworth

So why hasn’t working from home been adopted more? Surely, companies would jump at the chance to save money from city centre office real estate?

Perhaps it’s because of something Steve Jobs once said: “There’s a temptation in our networked age to think that ideas can be developed by email and iChat. That’s crazy. Creativity comes from spontaneous meetings, from random discussions.”

It’s hard to argue with that. I agree that creativity and business need to be face-to-face (at least to some degree).

However, I’d also wager that if companies are forced to implement remote working strategies in the coming weeks, they’ll soon find out that remote working (to some degree) is very doable.

They’ll also see an improvement in employee morale and productivity, and they might even be able to save some money on office space too.

A pandemic positive!

Hamza Mudassar, writing in ‘Entrepreneur’, believes the global Covid-19 pandemic currently raging  around the world ‘will shape businesses for decades to come’

Black swan events, such as economic recessions and pandemics, change the trajectory of governments, economies and businesses — altering the course of history.

The Black Death in the 1300s broke the long-ingrained feudal system in Europe and replaced it with the more modern employment contract.

A mere three centuries later, a deep economic recession — thanks to the 100-year war between England and France — kick-started a major innovation drive that radically improved agricultural productivity.

Fast forward to more recent times, the SARS pandemic of 2002-2004 catalyzed the meteoric growth of a then-small ecommerce company called Ali Baba and helped establish it at the forefront of retail in Asia. This growth was fueled by underlying anxiety around traveling and human contact, similar to what we see today with Covid-19.

The financial crises of 2008 also produced its own disruptive side effects. Airbnb and Uber shot up in popularity across the west as the subprime crises meant lower savings and income for the masses, forcing people to share assets in the form of spare rooms and car rides in order to cover for the deficit. Doubling down on this trend, videogame business models rapidly changed as well, with 2011 seeing the rise of the free-to-play business model, thanks to Nexon in Asia and King in the west.

With Covid-19, we are already seeing early signs of a shift in how consumers and businesses behave.

Remote working is being encouraged by tech and non-tech companies alike, airline profitability is getting impacted by low seat occupancy, supply chains are getting disrupted globally and retail stores are running out of ibuprofen, dry goods and toilet paper en masse.

Some of these changes are direct, short-term responses to the crises and will revert to regular levels once Covid-19 is contained.

However, some of these shifts will continue on, creating a long-term digital disruption that will shape businesses for decades to come.

The three dimensions of impact

Pandemics have a direct impact on biological, psychological and economic dimensions. Its intensity varies depending on the mortality and morbidity rate of the pathogen at hand, as well as the time it takes for it to spread.

For Covid-19, the biological impact has been quick to escalate and has been the hardest-hitting for the elderly.

The psychological impact can be observed in stock markets across the world – investors are underconfident about the future as the information on the spread of Covid-19 and its impact on global productivity is at best incomplete and at worse, incorrect.

The global population is also facing psychological impact, with low morale and increased isolation as human contact and freedom to travel are getting heavily curtailed.

Last, but definitely not the least, the economic impact has been significant. In the short term, the supply of various essential products has been disrupted and the demand for various products and services have dropped off. If this continues, Covid-19 could very well affect global GDP negatively.

Longer-term innovation and changes in trends will come about as consumers and businesses try earnestly to normalize the impact on psychological and economic dimensions — provided containment is reached and the biological impact is resolved.

Studying over 50 startups that gained scale around the times of global crises via the lens of this framework clears the mist:

  • To start off, a recession usually brings about an acceleration in business model change, driving down costs to serve and prices.
  • On the other hand, pandemics tend to enable entirely new categories of businesses.
  • It also becomes quite clear that both pandemics and recessions are accelerants to innovation versus being direct causes of it i.e. these startups and business ideas were around but gained popularity at a faster rate thanks to a certain black swan event.

 

With these learnings and frameworks in mind, below are three macro innovations we can expect to stick around post-Covid-19.

Supply chains will merge into resilient ecosystems

Global supply chains have long been geared towards keeping quality relatively constant while driving lower costs at every step. This has resulted in significant concentration risk in terms of geographies and vendors for most companies.

For example, China scaling down due to Covid-19, and creating knock-on supply impacts we are seeing today, has exposed the lack of resilience in this approach. There is a sharp need for a more distributed, coordinated and trackable supply of components across multiple geographies and vendors while maintaining economies of scale. This would require global platforms to be erected that use sophisticated technologies such as 5G, robotics, IoT and blockchain to help link multiple buyers with multiple vendors reliably across a ‘mesh’ of supply chains. This will also have a knock-on impact on the adoption of self-driving cars and delivery drones as the demand for ecommerce logistics will far outstrip the number of drivers needed to fulfil them. The usual B2B platform suspects such as Amazon and Ali Baba are likely to step up and compete for the ownership of this more sophisticated supply chain ecosystem in the next decade.

Digital bureaucracies will become mainstream

The Covid-19 breakout has caused government bureaucracies to spin into action quicker than ever before.

China broke records by constructing a 645,000 sq. ft hospital in just 10 days in Wuhan. South Korea drove rapid testing of over 200,000 of its citizens and used smartphones to tag the movement of the infected — alerting the non-infected of those movements via real-time updates. All of these efforts, as well as transparency of biological impact, could have been improved if there were more smart cities in the world. According to the latest study by the University of Glasgow, only 27 out of 5,500 large-sized cities are considered leading in this area. As governments learn from the Covid-19 experience, it will shift investment in favour of smart cities as it would be critical to have them in order to better manage the next black swan event. Key players benefiting from this shift in gears would be smart governments, focused companies such as Cisco, Microsoft and Siemens as well as digital city startups across Europe and the US.

Mental health support will be provided at scale, digitally

It is straight forward to predict that the Covid-19 is going to be an accelerant for remote working as well as online education.

What is harder to figure out is what will happen once a majority of the knowledge workforce needs to work together remotely, indefinitely.

It is likely that this shift will impact morale, productivity and mental health of workers throughout the globe, and businesses need to prepare for it.

For companies looking to add the human touch digitally to their workplace, the choices are limited today — with Humu, a startup by ex-google HR chief Laszlo Bock, being in pole position to capitalise on this.

A handful of other tech companies, such as Github and Automattic, which run predominantly on a remote collaboration model can also choose to productise their insights and capabilities in order to help other companies cope.

For individuals working remotely, things are looking much better. Several mental health startups such as Braive and Moment Pebble can double down on solving the problem of isolation while business networking apps such as Ripple can help solve the mentoring and development challenges that come with being a remote worker.

A post-coronavirus world

Covid-19 is a terrible shock to the global economy as well as to the thousands of individuals and families it has affected.

Companies in the immediate term need to ensure that the health and safety of its workers, partners and suppliers come first.

Over the longer term, Covid-19 has irrevocably changed the way businesses will compete over the next decade.

Firms that choose to capitalise on these underlying changes will succeed and the ones that don’t will get disrupted.

Financial data can be ‘dangerously misleading’

This is a transcript of a second broadcast interview of UK economist Ed Smythe by the USA’s Real News Network

GREGORY WILPERT: Welcome to the Real News Network. I’m Gregory Wilpert, joining you from Quito, Ecuador. The Bank of England has raised interest rates in the UK for the first time in a decade. The official bank rate has been lifted from 0.25% to 0.5%, representing the first increase since July 2007. Bank of England governor, Mark Carney, defended the move as necessary to respond to rising inflation

MARK CARNEY: Effectively, what the bank has decided is to take our foot a little off the accelerator. The economy is growing a little faster than its speed limit. That speed limit has come down over the years since the crisis, for a variety of reasons. We’ve got unemployment at a 42 year low. More people in work than ever before. We’re seeing the first signs of wages starting to pick up, but most importantly for those watching, that real income squeeze, which has been hitting households over the course of this year, the worst is ending. It’s starting to turn now. Still, even with this rate move, we’re still providing a lot of support to the economy.

GREGORY WILPERT: Joining us today to discuss what all this means for everyday British residents is Ed Smythe. Ed is an economist and researcher at the financial research organisation, Positive Money. He worked for nine years in asset management, and as an equity analyst and micro economist. Welcome back to the Real News, Ed

ED SMYTHE: Thank you for having me back

GREGORY WILPERT: Can you briefly describe to us what this decision to raise interest rates will mean, and who we can expect the winners and losers to be as a result of the rate rise?

ED SMYTHE: Well it’s worth understanding this is a very small 0.25% interest change which will benefit, to some extent, those people who have deposit accounts if the banks pass this through. It’s quite likely that they won’t do so. The people who will lose will obviously be those people on variable rate mortgages, who will see them reset, or people who are on fixed rate mortgages, who will see them reset over the next couple of years

  1. Financial measures

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There’s certainly winners and there’s losers. And there’s also a case for taking a step back to think about what’s going to be the effect on the micro economic conditions, in terms of the ability for consumers to take on debt, and also for businesses to invest. It’s worth thinking about this effect, not just in terms of winners and losers, but how it will drive the economy going forward

GREGORY WILPERT: So the Bank of England governor, Mark Carney, said during the interview, “What we have been doing since the Brexit referendum is our utmost to support jobs and activity in this economy.” But is it true that the only options were to either keep interest rates where they were or to raise them? Were there other options, in other words?

ED SMYTHE: Well, as it stands, the Bank of England is sticking very much within its conventional thought-set, to the extent it’s used quantitative easing to push down interest rates at the long end of the curve. We argued that effectively it’s got  itself into a situation where it’s facing these incredibly tough choices. If it leaves interest rates where they are, you’ll continue to drive the economy on rising debt or rising asset prices, feeding into a household deficit, which is the highest it’s been in over 100 years, or if you raise them, you risk bringing the whole deck of cards down, to the extent that that debt then becomes vulnerable or asset prices come down. So what we’re saying is that you need a radically new tool, a tool which is overt monetary financing to enable banks, the central bank, to create money, a certain amount of creditably constrained money, which goes directly to government, so that they can boost spending in a sustainable and fair fashion

GREGORY WILPERT: I mean, what kind of tool are we talking about? Can you give us a little bit more detail?

ED SMYTHE: M4 – we sometimes call it ‘QE for people’ – Is the policy whereby the central bank could produce 60 to 70 billion pounds worth every year to purchase zero interest perpetual bonds from the government, and it would enable the government to then deliver that spending into the economy to deliver jobs, etc., and to spend it on the things that we actually need, like health care, education, and infrastructure. And boost the productive capacity of the economy

GREGORY WILPERT: Let’s take a look now at the issue of inequality because that’s been one of the major issues that you’ve also been concerned with. Last year, Mark Carney argued that inequality in the UK was actually declining and that the poorest people in Britain saw the greatest gains and wealth as a result of the other kind of quantitative easing that they had been implementing.

  1. Financial measures

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However, recently you wrote an article entitled ‘The Bank of England’s Depiction of Inequality Data is Dangerously Misleading.’ Explain to us what your concerns are, with regard to how the Bank of England is speaking about inequality in the UK

ED SMYTHE: This was a 2016 speech by Mark Carney where the governor set out to talk some hard truths, to talk about some of the issues that people have been talking about, inequality and its relation to the policies of QE. Now he presented a chart in this, which talked about the fact that the lowest quintile in terms of those who own wealth, the lowest 20% had gained the most over the period from 2006 to 2008, to 2012 to 2014. On a percentage change basis, they’d seen their wealth go up 43% and all quintiles have benefited. What we did was we looked at the underlying data to see what were the absolute numbers for each of the different quintiles. What we found was quite disturbing because the lowest quintile, although they had the highest percentage increase, actually had an absolute increase of only £1,600, so they went from minus £3,800 to minus £2,200. They were still in debt at the end of this period. If you said the top quintile, the top 20%, they saw their assets go from £980,000 to £1.3 million, so an increase of £320,000, or 189 times that of the poorest quintile in society. The idea that this can be presented as a chart in which the poorest have gained most, we do think is dangerously misleading. And the real consequences of this are that when Mark Carney says it’s important that the government takes fiscal steps to offset the effects on monetary policy and how it has affected wealth inequalities, it’s very difficult to do so if the government isn’t being presented with its data in an accurate fashion. And also, Mark Carney would do well to perhaps come out with some suggestions about what sort of fiscal policy he would have in mind to help redress such big swings between the top quintile and the bottom quintile of wealth

GREGORY WILPERT: Let’s just quickly take this back again to the issue of the interest rate rise. What effect would the interest rate rise have on inequality in this context?

 

 

 

 

 

 

  1. Financial measures

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ED SMYTHE: Obviously the danger is if the interest rate does trigger a reduction in investment at a time when business uncertainty is already rising with the negotiations in Brussels. If it does have an impact on the ability for consumers and students to take on extra debt going forward, it does mean that it will put the brakes on the economy at a time when the economy and real wages are already struggling. And it potentially creates the conditions for the next financial crisis, or at least front-loads the timing of that crisis. Then the implications to inequality are very significant indeed. If that doesn’t happen, we’re back to the original starting conversation – there are some people who will be highly leveraged with variable rate mortgages, who will suffer, and in fact it’s more likely that the banks will not pass this on. So few depositors will actually see their interest rates rise to see a benefit here

GREGORY WILPERT: Okay. Well we’ll continue to keep an eye on this situation with regard to the economy, and we’ll probably get back to you. We were speaking to Ed Smythe, an economist and researcher at the financial research organisation, Positive Money. Thanks again, Ed, for having joined us today

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Important trends for SME productivity

All business managers want their teams to get more done in less time – this means there needs to be a focus on prioritising efficient workflows while remaining consistently effective.
According to therealtimereport.com, there are some important business productivity trends that all business owners and their teams need to be aware of :

1. The Rise of AI

Already, artificial intelligence (AI) is improving productivity in a wide range of sectors. AI is no longer something that you read about in technology reviews – it has a very real presence in the workplace.

Every business should be looking at AI in terms of:

  • Virtual assistants
  • Administrative tasks
  • Data processing
  • Customer service

 

As AI continues to become increasingly sophisticated, aspects like voice recognition will only grow more useful for the brands that want to maximise their productivity by freeing up man-hours for more valuable actions.

2. The Best Cutting-Edge Tools

Today’s business owners have a vast array of beneficial tools available that can make productivity gains easier to achieve.

The hardest task is assessing which of the latest technologies and software options are most suited to your business model.

When areas like ‘project management’ can quickly become ever more complicated after even a single meeting, it’s essential that those managers and owners that want to prioritise productivity have access to the best project management tools available.

Fail to make use of the right tools and your productivity will fall behind those competitors that are using them.

3. A Shift to Single-Tasking

In the 80s, employees were sought who claimed to be experts at multitasking. It’s easy to see why this was considered a skill worth focusing on since it suggests that more tasks get done in less time.

However, single-tasking is quickly becoming the norm. Now, you will be just as likely to request some dedicated offline time so that you can focus on a specific task, and that’s good news for productivity.

Multiple studies have shown that multitasking is not an effective work strategy, and single-tasking looks like being one of the most important business buzzwords in the 2020s.

4. The Remote Worker

If there’s one business trend that’s stood out over the last five years, it’s the growing number of remote workers.This trend is going nowhere, and that means productivity needs to be looked at more closely when it comes to the employees that aren’t in the office.

However, research consistently shows that remote workers are more productive than their office-bound counterparts.

That means remote working could be the key to a more productive workspace, seemingly at odds with the very concept of the traditional workspace.

Overall

Productivity needs to be the goal for everyone that owns their own business or runs a busy department.

If you want to get more from your teams, keep up to date with the latest trends and adopt those that match your work environment.

Make use of the best trends, and your productivity will soar.

 

Capitalism or Communism?

Communism has been defined as a system where:

  • People work according to their ability and receive according to their needs
  • All big decisions are made at the centre
  • All data is processed at the centre

 

Capitalism, on the other hand, is an alternative where:

  • People are free to buy/ sell/ invest in whatever they like
  • They can make their own decisions
  • Good choices soon follow – mistakes are soon spotted and corrected
  • National data is made available to all

 

Matthew Parris in The Times made the distinction clearer:

  • Free market competition is thought by some to be wasteful
  • Competition fragments provision, duplicates services in one area, forgoes economies of scale, creates uneven provision across the country, creates an invidious incentive to outperform comrades and siphons off money to profiteering shareholders
  • Co-ordination, collaboration and co-operation are needed across all sectors
  • Different materials which are delivered by different suppliers to get a cheaper deal must be stopped – as must all performance-related bonuses
  • The state should match supply to forecast demand – it can do this better!
  • And set fair prices, fair wages and agreed standards for quality
  • Hence communism failed

 

And given “productivity is the guts of capitalism” according to Warren Buffett, capitalist supreme, it’s interesting that Deng Xiaoping, communist leader of the People’s Republic of China, also said: “without high productivity, socialism is nothing but a boast”

 

N.B. QUOTE:

The problem with socialism is that you eventually run out of other people’s money – Maggie Thatcher

Universal Credit conflicts

In a new report, presented to the House of Lords Economic Affairs Committee, researchers argue Universal Credit should focus on supporting people into decent and productive work where their skills and capabilities will be developed and used effectively.

A ‘work first, then work more’ approach facilitated by Universal Credit, which is focused on placing conditions on individual workers, fails to consider long-standing issues of poor work quality and management practices, the research says.

Lead author Dr Katy Jones – senior research associate at Manchester Metropolitan University’s Centre for Decent Work and Productivity – said: “The DWP (Department for Work and Pensions) claims that Universal Credit will help ‘business to grow’ and ‘improve productivity’, but how this will be achieved is unclear.

“At a time of low unemployment, but also low productivity, the key challenge for policymakers is not moving people into work, but ensuring that, where appropriate, Universal Credit claimants are supported into decent and productive jobs where their skills and capabilities will be developed and utilised.”

The report, funded by the Productivity Insights Network, also explains how current policies fail to address the needs of unemployed workers and appear to be in conflict with broader policy agendas focussed on improving productivity and the quality of work in the UK.

Researchers spoke to 12 employers, including SMEs and large corporations across a range of sectors, to gather their understanding on the nature of work and productivity as well as their views on the potential introduction of ‘in-work conditionality’ (IWC) to welfare claimants on a low income.

Under this new policy, working social-security claimants may be expected to increase their pay by searching for and applying for additional work or taking on extra hours.

Concerns from employers are outlined in the report ‘Universal Credit and In-Work Conditionality – a productive turn?’

One employer, a soft play centre for children, told researchers: “We love it when people want to progress in the business, but there aren’t so many managerial positions that we have here, so it’s difficult to really progress that far…unless we give somebody extra responsibilities, they’re all on a very similar wage.”

Employers interviewed in the report also expressed concerns about the impact of the new policy on workers themselves.

Another employer, a housing association, said: “It’s not about the process or the ticking of a box. It’s actually about the career management of that person to help them grow into something else…helping them find the right work, rather than just any work.”

The full report is available online at the Productivity Insights Network.

P.S. If you think the above is critical, look at what Professor John Seddon of Vanguard Consultants says about Universal Credit, and what he has been saying ever since the project started – essentially ‘it will take far longer than expected, its design is such that it will never work well, and it will cost far far more than planned’ – each of which has come true, with the project continually being extended and the costs already ‘through the roof’

Following the wrong stars?

 

“The lacklustre level of productivity growth in the UK, commonly measured as the level of output per hour worked, has been evident ever since the financial crisis in 2008/09 and has, as of yet, shown so signs of coming to an end”
So claimed an article by Eleanor Stevenson, written for Ebury Partners UK Ltd, where she proved her point with the following two charts, saying they ‘best highlight what has been dubbed the UK’s productivity crisis
Figure 1: Output per worker & output per hour 
Her conclusion – The traditional measures of output per worker and output per hour worked both remain very weak (around 0.1% year-on-year growth)

Figure 2: UK Labour Productivity vs. trend line

Like most others, her conclusions were:
  • The upward trend witnessed in total UK productivity prior to the financial crisis had been pretty consistent since the data began in 1960
  • Since then, however, this upward trend has clearly flattened
  • Had the pre-crisis trend (between 1985 – 2007) continued, UK productivity would be approximately 17-18% higher than it currently is

 

 

Note that Stevenson, again like most others, takes the official statistics to be ‘gospel truth’, painting a true and fair picture of the overall health of the UK economy

But what if these statistics are fundamentally flawed – what if they don’t paint the correct picture – what if they even miss much of it?

For example, consider both the national outputs and inputs used which determine national productivity levels:

  • Outputs – GDP is widely known to be seriously flawed – much national output is not counted – other outputs are miscounted – and the outputs of free public sector services are included by valuing them at cost, so the more profligate they are, the greater the assumed value of their outputs
  • Inputs – Labour numbers or hours worked are easily countable and so measured – however, capital and material inputs are not – hence we are only offered national labour productivity statistics as if they were a proxy for national productivity levels – this may have been acceptable once, when labour dominated input costs but, as Paul Krugman might say,  it’s no longer ‘almost everything’

 

So the above graphs are very probably giving us the wrong impression of what’s been happening in the UK economy

In particular:

  • As national outputs become cheaper and/ or better at supplying all our needs, wants and likes, so we demand less new stuff at less cost to replace old stuff – so GDP growth is bound to slow down, even fall, unless there’s additional, completely new stuff coming down the line, something which many experts think is no longer happening – hence, SoLs (Standards of Living) are said to have stalled also
  • However, much of the new stuff on offer is free, albeit highly valued by all – this means it goes uncounted by GDP so SoLs appear significantly less than actual – efforts by some economists to put a value on such freebies and so increase GDP are, to date, limited to asking a sample of people what they would pay to avoid losing access to the likes of Facebook, Twitter or What’s app
  • In many ways, SoL is an old-fashioned way of assessing the success of any economy – it’s largely determined by all the tangible stuff people could and can afford
  • But QoL (Quality of Living) has been coming up fast on the rails in recent times with many considering QoL already to be of equal importance
  • But there’s no generally accepted formula for quantifying QoL of any nation at any one time

 

So we’re all left with having to accept GDP per capita and GDP per labourforce-numbers as the main measures for national wealth and productivity

So the doom and gloom currently being peddled by just about every economic expert or commentator, not just Stevenson above, is plain wrong – misleading even

So national economic policies and investment plans, based on such ‘sand’, will be lucky to be effective

We’re currently measuring G7 economies using old-world error-prone measures – our leaders and their advisers thus have only a partial picture – one which will become more and more unrepresentative of the total picture

We need better stars for our wise men to follow

 

 

Mavericks don’t fit straitjackets

Recall what the great Steve Jobs said: “Think differently” when giving reasons for the global success of Apple

Then consider the spat between Finn Russell, the supremely talented Scotland fly-half and Gregor Townsend, the current Scotland rugby team manager and ex-fly-half, which was reported on in the Sunday Times by ex-England fly-half, Stuart Barnes

Russell has been dropped from the Scottish team for ‘not following team protocols’

Barnes says:

  • “Townsend is now part of  the joyless corporate world that turns pleasure into pain with overly structured game plans subsuming individual talent”
  • “Russell is that rarest of rugby beasts – a free thinker – and so a threat to the game-plan-gurus who change rugby into the robotic process it has become”

 

Without Russell, Scotland monopolised possession at the start of their latest international against England but could not score

Barnes is convinced that Russell would have made all the difference with his ability to ‘play what he sees’ versus the rigid structure that Eddy Jones, the England coach, requires his team to follow

Russell says: “I need to do what makes me happy and makes me play my best rugby” – he also praises his French club, Racing 92, saying: “They treat you like an adult”

This implies Townsend runs a rugby kindergarten whereas the previous Scotland coach, Vern Cotter: “Had a very simple game plan but you could play anything off it”

Others will see that as ‘dangerously hedonistic’ despite there  being nothing better for team morale than a happy group of players – and nothing worse than a band of blokes just keeping their heads down

Russell’s vision of the looser plan has to be the brighter one – one which can excel as well as entertain

Barnes goes on to liken Russell’s attitude to that of the great American jazz musician, Miles Davis: “He knew the notes he needed to hit to give his tune shape – musical annotations from which he could drift into the floating free form of jazz  that made him into a musician like few others”

Barnes concludes that:

  • “The globalisation of the planet, in a corporate as well as sporting sense, has made everything familiar, safe, almost sanitised – the greater the assets the coach can call upon, the less the freedom of the player is recognised – the deification of the coach has become the downsizing of the playmaker”
  • “Progress is not linear in any walk of life”
  • “We think we are moving into a brave new world with the sort of statistical obsession Russell castigates – instead, we are coaching our way into a dark age where a smile and the ability to do something sizzling is no longer welcome”

 

Let Steve Jobs have the last word on this issue: “It’s better to be a pirate than join the navy”

 

Piketty tackles inequality

Thomas Piketty, the French economist ‘rock star’, has just published a new tome – Capital and Ideology – a mere 1,100 pages of it

David Smith reported in the Sunday Times that ‘it looks at inequality regimes over time’

Key points Piketty makes include: “Every human society must justify its inequalities” – but notes that the UK and USA have not done so – apparently, inequality there is  much higher than 40 years ago yet economic growth per head has halved

He has little truck with the argument that  entrepreneurs who have built businesses deserve different treatment from those who only run them – and proposes a 5% wealth tax because billionaire entrepreneurs succeed  as a result of the efforts of many, including the state – as evidence, he cites Bill Gates as not having invented the computer by himself

As for overpaid CEOs, he thinks governments that reduced top taxes helped to create the problem – when top taxes were high, there was no incentive for top execs to earn so much – now the average UK CEO earns (gets paid) some 120 times the average income

Piketty’s simple formula for higher income taxes would be:

  • People earning half the average income would pay just 10% in tax
  • This would rise to 40% for those on twice the average
  • Then up to 60%, 70% and eventually 90%

 

And for wealth taxes, they would be based on property values and follow a similar schedule

He recognises this could be a recipe for a tidal wave of wealth leaving the UK – a wave that he would stop by imposing an ‘exit tax’

But what of the property-rich but income-poor who might be crippled by such a wealth tax?

“The tax would have to treat them differently and making sure the gains are not just as a result of inflation”

However, he menacingly adds: “A large property holding is an indicator of a large wealth holding”

Overall, he says: “These taxes would provide a basic income for everybody and an endowment for young people entering adulthood” – a policy, Smith says, which is ‘conspicuous by its lack of success in trials to date’

The problem here is many of our leaders/ decision-makers take this guy’s views seriously

 

Inherited inequality

The following extracts were taken from an Audrey Pollnow review of ‘The Meritocracy Trap: How America’s Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite’ by Daniel Markovits

Markovits, a professor of law at Yale, argues that a system that once promoted social mobility has created a self-perpetuating class of elites – in particular:

  • Elite workers now earn far more than middle-class workers than was true mid-last-­century
  • Workers paid in the top 1% are far more likely to come from wealthy families

 

Whilst some say this shows that meritocracy has not been pursued aggressively enough, and the children of the wealthy hold high-paying jobs simply because they’re well-connected, Markovits counters that the individuals who hold these top jobs typically are compensated for the economic value they provide

The problem is super-productive workers are produced by super-intensive educations – through the time and money their parents invest in their education at home and elsewhere

Those who succeed amass the resources/ funds needed to educate and so raise the next generation of meritocrats – their kids

Research shows that, whether through direct parental spending or access to well-funded or well-endowed schools, the children of the rich receive a more expensive education

Hence, we shouldn’t be surprised when the children of the well-to-do are really the most qualified for admission to elite universities

Markovits concludes:Meritocracy is pernicious – like aristocracy, it prevents upward social mobility – but unlike aristocracy, it claims that everyone gets the social position he deserves”

The claim that the people at the top have earned their status is bad for the middle-people who, thanks to technological and economic changes, are often underemployed, and whom many elites regard with contempt rather than noblesse oblige

Markovits argues that one’s class reflects one’s worth, that elite life is meaningful and middle-class life mediocre

But meritocracy isn’t all that good for elites, either

Because elite work is very competitive, the rich now work more hours per week than anyone else – in fact, they typically spend more time working than they would like to – however, unlike the rich of yore who collected rents on the assets they inherited, the rich of today inherit an expensive education which they can translate into wealth and status only by exploiting themselves – and the latter takes a toll on them such as high rates of anxiety, depression and suicides

And the enslaved elites work too hard not because they are forced to but because they value extreme effort – they have been told throughout their lives that they are the anointed, the best and the brightest, cut out to do great things – unsurprisingly, this becomes a central part of their identity – for them, work is not merely a way of supporting their families – it’s also their vocation, the way they perform their identity

Conclusions:

  1. There’s no doubt, it’s better to be rich than poor – richness gives one more freedom to do what one wants to do – poverty can be a major worry and constraint on life
  2. But the more money one has, after a certain level the less happy people seem to be
  3. Indeed, one sees more happy-smiley faces, kindness and generosity amongst the abject poor, perhaps because they know they’re all in the same boat and not forever comparing themselves with others who might be better off – visit the slums of Jakarta, Mombasa or Havana for good examples
  4. So maybe we should doubt the pressures for ladder-climbing after all?
  5. Maybe the route to happiness is a UBI – Universal Basic Income – as recommended by some economists

 

 

Process productivity decided by humans

By Tommy Weir, for Gulf News and author of “Leadership Dubai Style”

When it comes to boosting productivity, people immediately point to the need for process improvement, automation or outsourcing, whilst overlooking the most important factor of all – the human worker
Indeed, many companies are happy to splash cash on technologies and strategies that promise process gains, yet they baulk at the idea of investing in the productivity of their people, even though that is precisely where the need for improvement lies
Consider the common shortcomings we endured on a recent trip to New York – it was 11a.m. when we arrived, too early to check-in to our Marriott hotel, but we wanted to drop our bags and pre-check- in to confirm our reserved room type (two rooms, each capable of accommodating two adults and one child) – with mission accomplished, we headed out to enjoy the day – we also received a mid-afternoon phone call stating that our rooms were ready
Great news
Only that wasn’t to be – the rooms we had reserved were not available – instead, we had been allocated two rooms, each with one king-size bed and neither with sufficient space for roll-away beds
“We’re fully booked tonight and can’t change your rooms,” said a rushed employee – minutes later, this escalated to the manager who started our conversation by saying that I should have informed them of our requirements in advance!
Poor customer service aside, the display of incompetence was astounding – not only had I stated our requirements in the reservation, I had also sent a follow-up note directly to the hotel and reiterated it face-to-face that very morning
Some might call this a failure of processes, but to me it was a classic case of poor human productivity
What shouldn’t have even been a problem in the first place took three employees two long hours to resolve – had they been productive, they wouldn’t have wasted their time, or ours – this is a good example of what UK consultancy Vanguard Consultants call Failure Demand
And the blunders didn’t end there
The next morning, I woke early and decided to get some work done before my wife and kids surfaced – slipping out of the hotel, I made my way to Starbucks but, when I arrived, their doors were firmly shut – they should have opened at 6 a.m., and I was right on time, so I joined other early risers braving the cold for a pre-dawn caffeine shot, and waited
Soon, a line had formed and the owner of the neighbouring mini-mart strolled over and asked: “What time do they open?” feigning concern – “Ten minutes ago,” I replied sarcastically – “Well, I have coffee inside,” he announced, pointing to his store – with that, the Starbucks line gratefully filed into his minimart
Clever guy
Was Starbucks’ failure to open at 6 a.m. a process breakdown? – No
Like the Marriott hotel booking debacle, the mistake was down to the employees, whom I had watched through the window as they prepared for opening, apparently oblivious – or indifferent – to the time

 

BIF drains, not lines, national coffers

The following are extracts from ‘Divested’ by Ken-Hou Lin and Megan Tobias Neely

They claim the BIF – Banking Insurance Finance – sector is draining, not lining, developed nations’ coffers

For proof, they look to the USA’s experience

Until the 1970s, the financial sector accounted for a mere 15% of all US corporate profits:

  • Banks took deposits from households and corporations and loaned those funds to homebuyers and businessmen – most of their revenue was generated by interest, by paying depositors lower interest rates than they charged borrowers – they made profits in the “spread” between the rates:
    • They also issued and collected cheques to facilitate payments
    • And they provided space in their vaults to safeguard valuable items
  • Insurance companies received premiums from their customers and paid out when costly incidents occurred

Since then, the financial sector has tripled, accounting for 45% of all US corporate profits – these profits arose from increasingly complex fee-based products such as securitisation, derivatives trading, fund and wealth management, card services, M&As – most of which take place between financial institutions, not individuals or companies – hence they remain opaque to the general public

At the same time, wealth inequality has soared – compensation for corporate executives and those working on Wall Street rose rapidly whilst mass layoffs became a common business practice instead of a last resort

The result is the top 0.1% of U.S. households now own more than 20% of the entire nation’s wealth

And non-interest revenue – from non-traditional banking activities – has risen from less than 10% of all revenue in the early 1980s to more than 35% in the early 2000s – for example, just before the 2008 financial crisis:

  • JPMorgan Chase earned $52 billion in interest income but almost $94 billion in non-interest income – half was generated from activities such as investment banking and venture capital, a quarter from trading
  • Bank of America earned about 47% of its total income from non-interest sources, including deposit fees and credit card services

This new banking model has led to a significant transfer of national resources into the financial sector, not only for corporate profits but also its elite employees’ compensation

Related industries, such as legal services and accounting, have also benefited from this boom

However, many now question whether these non-interest activities actually create value commensurate with their costs – excessive returns without corresponding benefits?

Consider the historical capital-labour relationship

 

For most of the 20th century, labour was considered a crucial driver of American prosperity – its role, however, has been marginalised as corporations increasingly attend to the demands of the stock market

To maximise returns to shareholders, American firms have adopted wide-ranging cost-cutting strategies, from automation to offshoring and outsourcing – downsizing and benefit reductions are common ways that companies trim the cost of their domestic workforce

Many of these strategies are advocated by financial institutions, which earn handsome fees from mergers and acquisitions, spin-offs and other corporate restructuring

As non-financial firms expanded their operations to become lenders and traders, they came to earn a growing share of their profits from interest and dividends – intensified foreign competition in the 1970s, combined with deregulated interest rates in the 1980s, drove this diversion, with large U.S. non-finance firms shifting investments from production to financial assets – instead of targeting the consumers of their manufacturing or retail products to raise profits and reward workers, these firms extended their financial arms into leasing, lending, and mortgage markets to raise profits and reward shareholders

As American corporations shifted their focus from productive to financial activities, purchasing financial instruments instead of stores, plants, and machinery, labour no longer represented a crucial component in the generation of profits, and the workers who performed productive tasks became devalued

In addition to marginalising labour, the rise of finance pushed economic uncertainties traditionally pooled at the firm level down to individuals:

  • Prior to the 1980s, large American corporations often operated in multiple product markets, hedging the risk of an unforeseen downturn in any particular market – lasting employment contracts afforded workers promotion opportunities, health, pension and other benefits, unaffected by the risks the company absorbed
  • Since the 1980s, fund managers have instead pressured conglomerates to specialise only in their most profitable activities, pooling risk at the fund level, not at the firm level

Consequently, American firms have become far more vulnerable to sudden economic downturns

To cope with this increased risk, financial professionals advised corporations to reconfigure their employment relationships from permanent arrangements to ones that emphasise flexibility — the firm’s flexibility, not the employees’:

  • Workers were seen as independent agents rather than members or stakeholders of the firm
  • As more and more firms adopted contingent employment arrangements, workers were promised low minimum hours but required to be available whenever summoned
  • Their compensation shifted, too, from a fair-wage model that sustains long-term employment to one that ties wages and employment to profits – should their portion of the company lag in profits, their job, not just their compensation, is on the line
  • Retirement benefits were also transformed from guarantees of financial security to ones dependent on the performance of financial markets

 

This model mostly benefits high-wage workers who can afford the fluctuations, but many low-wage workers, not knowing how many hours they will work and how much pay they will receive, are forced to borrow to meet their short-term needs

Retirement has also become risky for many – it no longer depends on age but financial status – many middle-class families have had to cash out their retirement accounts to cover emergency expenses – many others fear they cannot afford to exit the workforce when the time comes – and these are the lucky ones

  • The abundance of credit provides affluent families the opportunity to invest or meet short-term financial needs at low cost
  • At the same time, middle-income households carry increasingly heavy debt burdens, curtailing their ability to invest and save
  • And low-income households are either denied credit or face enormously high borrowing rates from pay-day loan companies that go beyond preventing savings to imprison the impoverished in a cycle of debt payments – unable to pay the bills on their debts, an increasing number of families have become insolvent, owning less than they owe

 

The credit market has thus emerged as a regressive system of redistribution benefiting the rich and devastating the poor

Taken together, the rising inequality in developed economies, not just the USA, is not a “natural” result of economic growth but reflects how developed economies currently are organised and resources distributed


The puzzle to persist?

According to Valentina Romei, writing in the Financial Times, the last decade  saw living standards in the UK grow at their slowest rate since the second world war

She says: “The jobs bonanza, and the economy’s performance as a whole, was undermined by weak productivity, which grew at its slowest level in 60 years”

She supports this view about the last decade by making four points

1. Per capita output was less than half the postwar level 

  • Growth in per capita output, the biggest driver of increased living standards, averaged less than half the rate of the postwar period
  • Perhaps we’re not increasing the value added (and so prices paid) per worker or hour worked – due to most growth being in low value-adding sectors such as retail

 

2. Uninterrupted but sluggish expansion

  • The UK enjoyed uninterrupted economic (GDP) growth
  • However, it was slow, with an annual average of 1.8%
  • This was far below the overall average of 2.4% in the 40 years to 1990

 

3. A decade of booming jobs

  • The UK experienced a jobs boom in the 2010s, with employment growing at the fastest rate of any of the last six decades
  • The number of hours worked also rose at the fastest rate over the same period
  • But this employment boom hid poor quality jobs and is unlikely to be sustainable

 

4. Productivity growth slowed to a crawl

  • The UK’s sluggish economic expansion in the 2010s was largely the result of more people being in work, rather than greater efficiency, resulting in the slowest productivity growth of any decade since the second world war
  • According to the IMF, the output per person employed in the UK grew at an annual rate of 0.6% in the 2010s, compared with 1.1% in the previous decade and more than 2% in any other post world war decade
  • Poor productivity growth undermines employers’ ability to pay their workers more, which would allow living standards to rise

 

Conclusion

Richard Davies, fellow at the London School of Economics, concludes: “The story will not change in 2020 – the most important economic puzzle of our time, the flat-lining of output per hour for over a decade, will remain the government’s key challenge”

Billionaires reveal their secrets

An interesting piece by Jade Scipioni in a CNBC news piece ‘Beyond the Valley’

There are some 2,600 billionaires in the world — and more than two-thirds are self-made

A few have of the latter have shared lessons on life and how they found success

Warren Buffett, worth some $80 billion – Invest in yourself:

  • By far the best investment you can make is in yourself: 
    • The best way to do that is by first learning to communicate better, both in writing and in person, as it will increase your value by at least 50%
    • If you can’t communicate to somebody, it’s like winking at a girl in the dark – nothing happens
    • You have to be able to get forth your ideas
  • Start taking care of your body and your mind when you are still young:
    • You get exactly one mind and one body in this world, and you can’t start taking care of it when you’re 50
    • By that time, you’ll rust it out, if you haven’t done anything – so it’s just hugely important
    • And if you invest in yourself, nobody can take it away from you
  • If you get to be 65 or more, and the people you want to love you actually do love you, you’re a success

Jeff Bezos, worth some $111 billion – Change your mind:

  • Bezos started building Amazon by selling books out of his Seattle garage in 1994
  • It is crucial to be open and willing to change your mind.
  • They have the same data set that they had at the beginning, but they wake up and reanalyse things all the time and they come to a new conclusion and then they change their mind
  • People who typically win in life have worked hard to recognise what beliefs or biases they hold and actively try to look for evidence that disconfirms them
  • This allows you and your business to be more creative, flexible and ultimately more successful

Bill Gates, worth some $113 billion – Surround yourself with the right people

  • A lot could go to one’s head when you have tens of billions in the bank
  • Gates stays humble by doing normal things like washing the dishes after dinner each night and driving his kids to school in the morning
  • He also surrounds himself with people who keep his ego in check, including his wife, Melinda, his three children and his best friend, fellow billionaire Warren Buffett.
  • If I come back and I look like I’m all puffed up, they cut me down to size a little bit

Jack Ma, worth $46 billion – Anybody can be successful if you try hard

  • Jack Ma grew up in China and was rejected from 30 jobs before being introduced to the internet in 1995
  • With no marketing or legal skills, knowledge of technology or money, he started the Alibaba e-commerce group in his apartment
  • We had almost nothing, but we believed in the future,” Ma said
  • The three keys to success are to think differently, never give up and use the skills that you have currently
  • If everybody agrees, then there is no opportunity – to be successful it’s essential to think about things that no one is thinking about yet
  • Ma was also rejected by Harvard (he applied 10 times) and says that you can’t let rejection stop you
  • Of course, you are not happy when people say ‘no’ – so have a good sleep, wake up and try again
  • And use what skills you have – in his case he was good at customer service
  • “I only know about people”
  • “When you spend time on the people you serve, when they’re happy — you win!”

AI promises huge productivity gains for financial services

In an article by Donna FuscaldoArtificial intelligence) will bring lots of gains to the financial services industry, whether it’s through automating processes or adding more convenience for their customers.
But now we can quantify just how big of an enhancement AI will have on the bottom line for financial services companies around the globe. According to consulting firm Accenture it’s $140 billion. That’s in productivity gains and cost savings by 2025, all because of artificial intelligence and augmented technology.

Accenture recently studied the changing face of the workforce as disruptive technologies become more prevalent in companies around the world. The consulting firm found around 50% of tasks in the financial services industry could be augmented with technology by 2025, which will result in a big increase in productivity – for example:

  • AI could aid financial advisors in making real-time stock picks
  • Or help loan underwriters better gauge the risk of borrowers
  • Or it could enable banks to offer customised products based on an individual’s personal finance habits

 

Banks are expected to generate $59 billion in productivity gains by augmenting skills with technology while insurance companies can expect to generate $37 billion in gains and capital markets companies are forecast to realize $21 billion in productivity increases.

While financial services companies have already seen big boosts in productivity and efficiency thanks to automating data entry, processing, and account reconciliation there’s room to do more. Accenture said anywhere from 7% to 10% of tasks within banks, insurers, and capital market firms could be automated savings banks $12 billion, insurers $7 billion and investment firms $4 billion.
With all this augmenting and automating going on it also means the face of financial services firms’ workforce has to change. As it stands there’s a dearth of workers skilled in these advanced technologies making it hard to find talent. As more companies embrace AI, data analytics and machine learning, it’s only going to get tougher to find top talent.
At the same time, many companies lack a clear plan to prepare their workforce for roles in which technology and humans work side by side. Without those transformations, companies will never achieve the billions of dollars in productivity gains that Accenture says is available to them.

“There’s a new era ahead for financial firms that see the value of combining human ingenuity and personal touch with technology efficiency and precision to create new sources of growth,” said Cathinka Wahlstrom, who leads Accenture’s Financial Services practice in North America when announcing the research results. “This isn’t about cutting costs to improve the bottom line, it’s about embracing technology to transform the workforce.”

The scarcity of workers who possess data analytics, cybersecurity, and AI skills can’t be met by recruiting more people. It has to be solved by reskilling existing employees so they can deliver value to the enterprise almost immediately, argues Accenture. By automating some job functions the employee can be redirected to focus on high-value work whether that’s building customer relationships or coming up with new products or services. It’s not that computers will replace workers, it’s that computers will work alongside them.

“Traditionally companies have said OK we will recruit more people but what we’re saying in this report is you can’t just go get more people. There aren’t enough people with the skills,” said Bridie Fanning, Accenture’s talent & organisation practice lead for financial services.  “They are much better off if they reskill their people and get them the training they need.”

2020 foresight for fossil-free energy

A report by Kelsey Warner in The National says that, over the next 10 years, the Middle East’s biggest export could become the sun, not oil, thanks to new technology that turns solar power into fuel

A new Bill Gates-backed clean energy company, Heliogen, based in Lancaster, California, has concentrated solar energy to exceed 1,500°C – at that temperature, they can split water molecules to make 100% fossil-free fuels such as hydrogen

And in addition to creating green fuel, the technology can also replace fossil fuels in the production of cement, steel and petrochemicals, dramatically reducing greenhouse gas emissions

“I’m so excited that it’s actually possible,” Bill Gross, founder and chief executive of Heliogen, told The National

“The decade of the 2020s is going to be a decade where we make or break it”

Although concentrated solar power has been used before, it has never reached the temperature required to make cement or steel – indeed, cement alone accounts for 7% of global carbon dioxide emissions, according to the International Energy Agency

The task ahead is convincing industrial energy producers to replace their old methods with this new alternative – and high on the list is the Middle East

Gross said: “They have the money, the land, the sun, and the will – they also talk of their vision for how they want to transform their economy – they will still be making fuel, but it will be fuel that didn’t come from digging – it will be fuel that came out of the air, from water and air”

Gross calculates that Saudi Arabia could fully replace its oil exports with green solar-generated hydrogen if it commits just 4% of its land – some 1,000 square kilometres – and invests $400 billion in developing a concentrated solar park.

The fact that Heliogen has solid financial backing from Bill Gates means they can potentially survive the so-called valley of death period between having a technical prototype and a system that is commercially ready for the market

Nevertheless, Gross says: “We’re picking the first customer now – it’s probably going to be a mining or minerals company in the Mojave Desert [in California] where I can show it on a big enough scale that Saudi Arabia can copy”

“Accelerating clean energy innovation needs to be a priority” says Espen Mehlum, head of energy at the World Economic Forum – “Clean-tech development is too slow and many technologies are needed to meet the global climate targets”

Gross echoes that sentiment: “It makes me more optimistic because I feel there is a technological solution to greenhouse gas emissions” – “It makes me nervous that we won’t adopt it fast enough”

The Heliogen team is made up of 20 scientists and engineers, mainly from Caltech and MIT (Massachusetts Institute of Technology), who have been working for several years to combine mechanical engineering with massive strides in computer science and computing power

Heliogen uses computer software to align a large array of mirrors extremely accurately to reflect sunlight on to a single target – the amount of computing power needed to assess and capture the maximum amount of solar energy possible in real-time was not commercially feasible five years ago – but now it is

According to Gross: “This is so big I can’t do it all myself”

“I just want to show people there’s a way – I hope people steal this idea”

Wasted time at school

Government sanctioned waste has a lot to answer for

Ministers might bang on about the importance of productivity improvement but their thinking seems restricted to vital investment in infrastructure, R&D and skills training

Drive around any town mid-afternoon and see streams of kids walking home from school – and wonder what they do when they get back home, often to an empty home – homework, maybe, but not for long – or play some records, but again not for long

In fact, many change into casual clothes and go out again to meet their chums, play games or hang around on street corners

They’ve got bags of stored-up energy which needs to be released – they seek some fun, excitement even – many channel this energy into positive activities – however, some get up to mischief, join gangs and indulge in petty crime or worse, not least because they’re bored and have nothing else to do

Meanwhile, at the same time, all their expensive school facilities lie empty – available but unused – for example, playing areas/ fields for different sports and kids to compete against each other or other schools , gymnasiums for exercise and fitness training, rooms and instruments for kids to learn to play chess, the piano or guitar , or form pop bands, orchestras or choirs

Overall, costs are not reduced by tipping the kids out onto the streets at 2-3 p.m. – their grey cells may be too tired to absorb more prescribed knowledge by then but why not keep them back until much later (6 p.m. say) and convert the school into something akin to a youth club after their lessons have finished – in their free time, most kids prefer to be with chums their own age anyway

And this could be done without asking current teachers to work longer hours – old boys and girls who had recently left the school could be recruited as relatively inexpensive teachers’ assistants to lead/ supervise/ referee/ train groups of the kids using all the school’s facilities – this would be a formalised work experience for them

Huge benefits to society as a whole would accrue if such a simple policy was adopted, including:

  • Expensive child-care costs for many families would be decimated at a stroke
  • Many more parents, especially those with valuable experience, would be released to join the national labour force – currently, there’s a looming shortage in all developed nations
  • Kids would enjoy a broader education by learning stuff outside the narrow curriculum
  • Kids would also be better prepared for competing in the big wide world after leaving school
  • Petty crime would fall
  • Many kids would be deterred from lives of crime
  • Fewer kids would drift into using or selling drugs, not least because ‘county lines’ recruitment would become more difficult

Indeed, years ago, youth clubs took on much of this role, but far too many of them have since been disbanded, for one reason or another

So one has to ask why the government does not implement such changes – the penalty costs of the current waste of existing school facilities must surely be in the £ billions

It’s yet another open goal for ministers to consider when chasing national productivity improvement

 

 

 

Productivity crisis fixed?

The Times has announced a project to be run by the strangely named ‘Be the Business’, a government sponsored initiative aimed at solving the productivity crisis said to be afflicting the nation

100 big companies, including Amazon, Aviva, BAE systems, British Land, Cisco, Google and Rolls Royce, ‘will promise to boost UK productivity by encouraging greater adoption of tech skills among their suppliers and offering mentor programmes for managers’

The rationale for this venture seems to be as follows, with our first reactions attached:

  • Current ONS statistics on GDP and national productivity are accurate and useful – they’re not – such stats prompt no action by individual businesses and are meaningless to individual citizens – and some say they’re ‘dangerously misleading’ for government ministers when policy-making
  • ‘Economic growth across the country is stalling’ says Charlie Mayfield, also boss of the the retailer John Lewis, much in the news recently for underperforming – actually, current mis-measurement of GDP is such that the UK may even be performing well – nobody truly knows!
  • ‘Productivity has barely improved over the last decade’ so the impact on the economy and our standard of living has been ‘severe’ –  whilst a social inequality gap still exists in the UK, the rich v poor ratio has continued to fall dramatically – most now have an acceptable standard of living and have moved on to seeking a better quality of life – national measures need to recognise this change
  • Small firms and the self-employed form the UK’s ‘long-tail’ of poor performers – the implication is that all big firms in any sector are best performers employing best managers who use best methods – this was not my experience and is clearly not so
  • If the ‘long tail’ acquire more tech skills and mentoring from the big boys (their customers) quantum leaps in productivity and revenue/ profits/ tax-take will result – many of the big boys fail to make big improvements when trying latest fads (aka tech skills?) such as Lean or Agile – they ignore the huge benefits on offer from truly putting their customers first, identifying and cutting causes of waste and making better use of existing resources –  and such actions don’t need any outside support (from consultants or the big boys’ surplus managers) or ‘best practice’ transfers, just internal enthusiasm and common-sense

 

All up, we hope we’re wrong about this latest venture – indeed, we hope it makes a big quantifiable difference for many people and businesses in the near future

At present, however, it seems to be yet another initiative that enjoys an initial fanfare of publicity and hope but lacks the beef to follow

 

 

More recognition of ‘consumer surpli’

A splendid article by Diane Coyle, Professor of Public Policy at the University of Cambridge and contributor to www.project-syndicate.org, has just been posted by the East African Business Week – it’s entitledRethinking Productivity’ and helps explain much of the current productivity puzzle supposedly afflicting many developed nations, including the UK

The word “productivity” typically calls to mind industrial assembly lines pumping out cars or washing machines, breakfast cereal or shoes.

The word may also conjure images of crops being harvested, livestock being butchered, or houses being built. It is less likely to elicit thoughts of haircuts, streaming television, or mortgages.

Yet nowadays, it is largely these kinds of intangible goods and services that define economies.

Many economists equate “total factor productivity” with technological progress. Northwestern University’s Robert Gordon, for example, predicts that productivity growth will continue to slow – as it has done in most developed economies since the mid-2000s –because today’s digital innovations are, in his view, less transformative than earlier advances like the flush toilet, radio, and the internal combustion engine.

But, today, about four out of every five dollars spent in the leading OECD economies purchase services or intangible goods.

This “dematerialisation” of economies – which I observed in the 1990s, and which figures like digital economy expert Andrew McAfee have lately been exploring – is complicating our understanding of productivity.

In fact, in much of today’s global economy, even the production of tangible goods is shaped by a growing number of intangible factors.

As Seth Lloyd of the Santa Fe Institute has pointed out, a farmer hedging against bad weather or disease now operates largely in the realm of ideas.

Whereas in the past, farmers would “insure” against the failure of one type of crop by planting others or raising livestock – that is, through physical diversification – today they do so largely by applying agricultural science, like testing soil and assessing climate conditions, or even by participating in options markets.

Such intangibles – in addition to new technologies, such as irrigation – produce the discrepancies McAfee observes in crop tonnage produced from the same amounts of inputs.

Still, when it comes to agriculture, the end result is easily quantifiable. That is not the case for many other modern productivity-boosting innovations.

In a recent presentation, Leonard Nakamura of the Federal Reserve Bank of Philadelphia offered several examples, including energy-efficient buildings, lane-keep-assist and parking sensors in automobiles, and GPS navigation.

Innovations in health-care treatment also qualify. For example, using the cancer drug Avastin to treat macular degeneration is far less expensive than using Lucentis, one of the drugs originally approved for that purpose.

In theory, the effects of some of these innovations on productivity could be quantified through quality-adjusted pricing. Cars with sensors that facilitate parking and improve road safety might be discounted, resulting in a higher “real” measured output for cars.

But, in practice, such adjustments pose a significant statistical challenge, owing to the pervasiveness of the underlying technologies. Consider GPS navigation: how do you quality-adjust for the use of apps like Waze or Google Maps?

When it comes to medical, legal, and other professional services, quantifying productivity is even trickier. One approach focuses on outcomes – say, a longer career (thanks to better health care) or higher profits (thanks to management consultants).

But these improvements cannot be traced back to a single factor. Doctors and hospitals are essential to extend people’s healthy lives, but so are living conditions, diet and exercise, social connections, and even having a pet. Luck – for example, not being exposed to a disease outbreak – also plays a role.

Some of my University of Cambridge colleagues are working to deepen our understanding of these dynamics by examining the connections between social capital and productivity.

This approach – which reflects a shift toward a broader view of productivity – is a step in the right direction.

This conclusion seems to be borne out by history. As Corinna Schlombs of the Rochester Institute of Technology shows in her new book ‘Productivity Machines’, in the twentieth century, one of the key differences between the approach of American industrialists and productivity experts and that of their European counterparts was that the latter were more likely to view productivity in purely technical terms.

After World War II, during the Marshall Plan era, Americans showed visiting European workers and industrialists new ways to organise production. (The assembly line is as much an idea as a technology.)

Moreover, they touted America’s more egalitarian social dynamics, including its public school system and broad civic involvement. The recognition that “soft” innovations were at least as important as “hard” technologies, Schlombs suggests, was the decisive factor behind America’s superior productivity.

So perhaps today’s pervasive productivity slowdown should not be blamed solely on an unsupportive macroeconomic environment, let alone on inadequate technological innovation. (Software engineers and biomedical researchers would scoff at the latter notion.) Social and cultural contexts that are fragmented, unequal, or otherwise problematic may also be playing a role.

 

Wasting time is not wasted time

Rest periods, R & R, tea breaks, lunch breaks and most meetings – call them what you will – are essential for brawn workers’ muscles to recover – they couldn’t work at full speed for a solid eight hours – just as Usain Bolt couldn’t run full pelt over 400 metres compared with 100 metres

But times have changed – brawnwork no longer dominates the world of work – brainwork has taken over, at least in developed nations

However, brainworkers also need rest breaks, so their brain cells can recover, be re-energised and think creatively

For them, it’s not time inputs and tasks completed versus target that matter – it’s results – results in meeting customers’ needs well, whether those customers are external and paying for the services offered or internal, further down the line, and needing their outputs RFT (Right First Time) so they can complete their work too

Brawnworkers are never expected to be able to work flat out for the whole eight hours of their shift – the same applies to brainworkers, only even more so – if in any doubt,  remember how exhausted you felt after concentrating for just three hours trying to complete an  exam paper

However, one forever reads of organisations forbidding their employees to use their iPhones whilst at work – we say let them – allow them to use Facebook or Whatsapp for as long as they like, chit-chatting to their chums – it helps resuscitate their grey cells

Indeed, let them spend their time at work however they want – even offering them the options of working flexi-time or from home part-time

But let them know they are  accountable for the results their customers, and so you, expect

More often than not, managers are surprised by the increases in productivity and morale that follow

 

National inputs also ‘seriously flawed’

Official measures of GDP are said to be ‘seriously flawed’

Now, a report by the OECD (Organisation for Economic Co-operation and Development) and the Centre for Cities think tank claims ‘millions more people are unemployed than official statistics suggest’

Worse still: “The joblessness rate could be three times higher than thought” because some three million people who are able and keen to work are being excluded from the register by being classified as economically inactive i.e. not in work, nor looking for work

The official unemployment rate     =      Total number of people out of work

Total economically active population

Given the current official UK unemployment total is at an apparent record low of 1.3 million (4.6%), then adding  another 3 miilion somewhat spoils this government claim, increasing the unemployment rate to 13.2%

The report thus calls on the government to increase investment in skills for people who have been out of the labour market for a long time – albeit without saying by how much and in what skills

In response, the ONS (Office for National Statistics) which produces the official unemployment statistics said:

  • Its headline figures are based on internationally agreed definitions
  • If they were widened, it would stop being a measure of spare employment capacity (i.e. precisely what the 3m are)

 

Conclusion:

  • With the above huge discrepancy bewteen the official and actual unemployed figures, one can only wonder about the validity of the ONS’s official national (labour) input and so productivity statistics produced each quarter
  • National GDP output measurement is already said to be ‘seriously flawed’
  • Now, the same seems to apply to national labour inputs

 

At last, official recognition of the ‘GDP gap’

Yian Mui reports on CNBC that the US Federal Reserve wants to know what the internet is worth to you.

He says the answer could help the central bank solve one of the most puzzling paradoxes of the modern economy: The current expansion is the longest in history, yet productivity gains are weak and GDP growth, while steady, is far from stellar.

In a speech this week, Fed Chairman Jerome Powell raised the possibility that the problem is with the data itself. GDP measures the value of products and services that are bought and sold. But many of the greatest technological innovations of the internet age are free. Search engines, e-mail, GPS, even Facebook — the official economic statistics are not designed to capture the benefits they generate for businesses and consumers.

“Good decisions require good data, but the data in hand are seldom as good as we would like,” Powell said.

Instead, Powell cited recent work by MIT economist Erik Brynjolfsson, one of the leading academics on the intersection of technology and the economy. In a paper with Avinash Collis of the National Bureau of Economic Research and Felix Eggers of the University of Groningen in the Netherlands, the authors conducted massive surveys to estimate the monetary value that users place on the tools of modern life.

The results?

  • The median user would need about $48 to give up Facebook for one month
  • The median price of giving up video streaming services like YouTube for a year is $1,173
  • To stop using search engines, consumers would need a median $17,530, making it the most valuable digital service.

 

The authors also conducted more limited surveys with students in Europe on other popular platforms:

  • One month of Snapchat was valued at about 2.17 euros
  • LinkedIn was just 1.52 euros
  • WhatsApp would require a whopping 536 euros
  • Twitter, however, was valued at zero euros

“Over time, we’re spending more and more of our waking hours interacting with the internet or using those services on our mobile phones,” Brynjolfsson told CNBC – “A bigger share of our economy is being missed by GDP.”

Brynjolfsson is advocating an entirely new measure of economic health that calculates benefit rather than output. He calls it GDP-B and estimates that the welfare gains from Facebook alone would have added 0.05 to 0.11 percentage points to its annual growth.

“What we really care about if we want to know how well off people are is the consumer surplus — how much benefit you get — not how much you actually pay,” Brynjolfsson said.

Inside the Fed, a separate effort is underway to value the digital economy.

Powell also highlighted research by David Byrne and Carol Corrado that uses the volume of data transmitted through broadband, cable and WiFi to estimate the value of online products and services. Their analysis shows that GDP would have been half a percentage point higher over a decade if the full scope of the digital economy had been incorporated.

“The highly visible innovations in consumer content delivery raises the question of whether existing national accounts are missing consequential growth in output and income associated with content delivered to consumers via their use of digital platforms,” the authors say in their paper.

Powell delivered his speech at an annual convention of economists, where the theme was integrating old and new economies. At one point, Powell even waxed philosophical.

“How should we value the luxury of never needing to ask for directions?” he asked. “Or the peace and tranquility afforded by speedy resolution of those contentious arguments over the trivia of the moment?”

The answers to those questions may not be far off.

Conclusions:

  • Given we’ve been banging on about this significant GDP gap for quite some time, how satisfying to find that the big boys not only have recognised it but also seem to be doing something about it
  • Sadly, however, national economic policies will continue to be decided using the current dismal measures which only relate to the old materialist/ tangible world – so those policies may, or may not, be the right ones for the new material plus mental world we now live in

New UK ‘Productivity Institute’

Productivity of UK businesses is set to be supercharged with £88 million in new government investment announced the Department for Business, Energy & Industrial Strategy:

  • £88 million new government investment to help close the productivity gap between UK and major world economies and turbocharge British businesses
  • investment will help power the next generation supercomputers which could improve business efficiencies, including providing up-to-the-minute weather forecasts
  • funding will help kickstart the UK’s largest and most ambitious productivity institute, helping examine how to boost productivity levels across the country

Levels of productivity across certain sectors in UK manufacturing, like aerospace, are among the highest in Europe, but overall UK productivity still lags behind major global economies and certain sectors, including chemicals and textiles, find it harder to grow.

By adopting new technologies and more efficient business practices, the productivity of businesses, particularly small ones, could be increased. This will help them to scale up and expand into new markets – boosting competition and ultimately benefiting consumers with lower prices or better quality products and services.

£43 million in government investment will support top researchers and analysts to explore how to turbocharge UK productivity levels through a new ambitious productivity institute; tackling barriers such as productivity imbalances between sectors and regions, poor management practices and skills investment.

Experts will work closely with businesses to power the UK towards a more competitive and resilient economy, as well as the public sector and policymakers, aiming to deliver benefits for both businesses and consumers. Increased productivity can drive up wages, lower prices of products and improve working conditions.

The announcement comes as ministers visit new infrastructure projects across the country to highlight government investment in connectivity. Infrastructure is one of the 5 foundations of productivity highlighted in the Industrial Strategy and the Prime Minister has been clear that this government will level up infrastructure across the country with new road and rail investment and full fibre broadband.

Business Secretary Andrea Leadsom said:

  • Productivity matters – if we produce more, we can earn more, as individuals and as a society.
  • Today’s investment will allow us to develop pioneering software to harness the power of supercomputers and create a state-of-the-art Productivity Institute.

A further £45 million will be specifically invested by the government into the development of cutting-edge supercomputer software, set to transform whole sectors from agriculture and advanced aerospace to Formula One and pharmaceuticals with hyper-accurate weather predictions – helping them plan come rain or shine and in turn boost their productivity.

Involving the Met Office, this radical development could mean businesses will receive up-to-the-minute weather forecasts, so they are not ‘caught in the rain’ and can focus on delivering their products and services effectively and efficiently. This knowledge could help farmers protect crops for consistent food supplies, help airports keep flights running – and businesses can foresee the impact on infrastructure that cause downtime like flooding, for example.

With the potential to provide more accurate predictions, supercomputers are helping businesses plan methodically. Research software engineers and scientists will work together to futureproof the UK against the fast-moving changes in supercomputer designs, pushing the boundaries of science and preventing compatibility issues or lags – which could pose a threat to disciplines such as weather and climate prediction, to complex aircraft design and drug development.

Named ‘ExCALIBUR’, the project will ensure the UK can meet the scientific and engineering challenges of the future with maximum efficiency and safeguard future industry productivity.

Met Office Director of Meteorological Science, Simon Vosper, said: “The ExCALIBUR project will establish a national capability in scientific computer software that mirror the real world, accelerating advances in a wide range of important areas that rely on cutting edge computer technology: from climate prediction to drug research and nuclear fusion”.

Professor Jennifer Rubin, Executive Chair of ESRC (Economic and Social Research Council), said:

  • Raising productivity is arguably the greatest economic challenge of our time, and is needed to increase wages and living standards, and to ensure benefits can be spread across sectors and regions.
  • This significant investment in understanding what will drive improvements in productivity is an important opportunity for research to make a contribution to improving quality of life and economic performance.

The £88 million funding forms part of the government’s Strategic Priorities Fund (SPF), and follows the government reaffirming its commitment to invest at least 2.4% of GDP in R&D by 2027. The government has made making boosting productivity and increasing earning power a priority – making the most of untapped potential right across the UK.

Notes

1. About the Strategic Priorities Fund:

  • the SPF supports high quality multidisciplinary research and development priorities
  • this is the second wave of funding
  • the SPF Wave 2 total programme funding allocation is £496.8 million

 

2. About the programmes:

  • Transforming Productivity: National Institute of Excellence (ESRC)
  • ESRC with Innovate UK HMT, BEIS, DWP and MHCLG
  • Funding requested: £42.2 million over 6 years.

 

Location(s): This funding is to create an institute that creates a national capability for productivity.

HEIs, Institutes, PSREs will be able to bid for funding.

The location of the Institute and any partners will be announced following a competitive process.

This SPF will invest in an ambitious, strategically driven, world class institute to provide a systematic understanding of what is required to solve the UK’s productivity challenges.

The institute will provide a convening hub for wider research as well as undertaking its own research, bespoke analysis and evaluations.

The Institute will also design and test interventions: translating findings and scaling-up solutions in collaboration with business and policy-makers.

The institute will be driven by high profile leaders; combining permanent academic researchers and analysts with seconded world-leading experts, drawing in outstanding fellows from relevant research, public and private sector organisations with an interest in understanding and improving productivity.

The project will be delivered with £30 million funding for the Productivity Institute and £11 million for open research calls.

Fast-moving advances in supercomputer architectures will render current scientific simulation codes redundant. This poses a significant threat across a range of disciplines from weather and climate prediction, through complex aircraft design and drug development, to frontier science fields including cosmology. The UK must harness the power of those advances in architecture to meet the scientific and engineering challenges facing society and mitigate the risk of this threat.

Present approaches to scientific computing are not adequate to that task.

ExCALIBUR will design cutting-edge algorithms and software for the efficient solution of scientific problems on future generation supercomputers.  A multidisciplinary cohort of research software engineers and scientists will work together to future-proof the UK against the fast-moving changes in supercomputer designs.

This will be delivered through knowledge integration activity between software engineers (£0.75 million), a scoping workshop to establish high priority use cases which will be developed through a mixture of open calls, commissioned research and single tenders (£5-7 million each), a second wave of use cases (~£2 million each), funding for disciplines with emerging requirements for high-performance algorithms (£3 million), cross-cutting research activities to drive impact (£10 million) and capital funds to develop proof-of-concept systems with new computer architectures in partnership with industry (£4.5 million).

Conclusions:

  • We have been banging on for decades about the need for a well-funded UKPC (UK Productivity Centre), albeit independent of government, not reliant on funds from it – and run by people with a track record of success with major productivity improvement and drawn from board rooms, trade unions and academia
  • The above announcement started off well but increasingly lost me as management-speak took over
  • It’s also seemingly driven by the belief that UK productivity levels are dire compared to other G7 nations – i.e. a belief that UK official statistics are accurate when they’re woefully not
  • Last, it’s unclear just how the above institute might interact with the existing PLG (Productivity Leadership Group), PIN (Productivity Insights Network) and other well-meaning national initiatives to improve productivity
  • Hopefully it will morph into a phoenix UKPC
  • We shall see

Productivity stagnant despite global stimulus

Mark John reports that economies around the world have failed to boost productivity levels despite $10 trillion of central bank stimulus unleashed since the global financial crisis of a decade ago, according to the WEF (World Economic Forum) think tank.

Productivity, a measure of an economy’s ability to generate growth, has become of a matter of increasing concern among policy-makers around the world as headline growth rates remain weak and fears emerge of a new economic slow-down.

Publishing its annual index of competitiveness based on an aggregate of some 103 indicators (so it will be anyone’s guess which have the most impact!) the WEF urged countries to use fiscal policy and other incentives to boost research and development, workforce skills and infrastructure.

“What is of greatest concern today is the reduced ability of governments and central banks to use monetary policy to stimulate economic growth,” WEF managing board member and report author Saadia Zahidi said –

“This makes it all the more important that competitiveness-enhancing policies are adopted that are able to boost productivity, encourage social mobility and reduce income inequality,” she added.

The WEF, which hosts the annual Davos meeting of business and political leaders, compiles its index by aggregating findings from its own surveys and other sources such as the World Bank and United Nations bodies.

Highlighting some of the trends captured by the report, the WEF noted in particular that technological innovation was racing ahead of workforce skills in many countries and urged governments to focus on labor and education policies.

Citing the threat of rising protectionism, the OECD (Organisation for Economic Cooperation and Development) said last month the global economy could be entering a new, lasting low-growth phase – it estimated global growth this year of 2.9%, the lowest since the 2008-09 crisis.

Reflections:

  • The WEF is the self-appointed world leading economic think tank 
  • Nevertheless, they continue with their blinkered view that economic performance can only be measured from the suppliers’ perspective, clocking up their tangible outputs and inputs – the old material world dominated by the agricultural and manufacturing sectors
  • It seems the apparent failure of $10 trillion stimulus to boost apparent productivity levels causes none of them to stop and think: “Are we looking at the right picture nowadays?”
  • Imagine if they realised the economic world is at a watershed, moving from a material to mental world – a world where service sectors now dominate developed economies – a world where productivity at organisation and national level should be measured by how well one meets customers’ needs (material and mental) whilst minimising all costly inputs, not just labour
  • Then, they might find that output/ demand for material stuff has indeed started to level off as many people in the developed world consider they have ‘enough’, no matter how much stimulus is being pumped in – but demand for more new mental stuff is growing rapidly so, overall, demand is growing apace
  • It’s just that the WEF, with its 103 indicators, plus all other economists/ experts it seems, plus all their governments, don’t seem to haven’t spotted this
  • So the policies needed to boost productivity for the benefit of all are unlikely to be the policies currently followed
  • ‘What larks’! 

A National ‘Balanced Scorecard’

All nations – governments and their electorates – need a National Balanced SCorecard (NBSC) of performance measures – a set of cardinals they each can monitor which covers all important factors affecting their standard of living (SoL) and quality of lives (QoL)

The  NBSC would be a mix of measures – some absolute, some subjective – much as medal winners at the Olympics are determined either by being clearly longer/ faster/ higher or in the view of expert  judges in  their discipline e.g. gymnastics, boxing, synchronised swimming or diving

At present, government ministers have to navigate their economies based on just two bald statistics – GDP and national (labour) productivity, produced just quarterly

But no skipper, navigating his boat through dangerous waters, would rely on such a paucity of measures to decide a safe course and speed – to be in good control, he would use a set of measures – not too many or he might get confused, not too few or he might miss something important – and no crew would be happy if they knew their skipper relied on so little whilst ignoring them completely

Back on land, the same thinking applies – people want to know whether factors important to their lives are getting better or worse,  whether they’re getting good value for their taxes paid, whether their government and its managers are doing a good job and spending their money wisely

Sadly, lack of transparency at national level prevails:

  • The ONS (Office for National Statistics) produce the above two statistics – but even they are said to be ‘seriously flawed’
  • And, whilst the OBR (Office for Budget Responsibility) checks government budgets and borrowing, it does little on  how they spend the money – hence, there’s little to prevent the government spending what it wants, where it wants, perhaps unwisely
  • Overall, there’s no regular national performance scorecard issued – electorates have to suffice with a few select crumbs of information once every four or five years when general elections are held, but they are invariably biassed, not balanced – for the rest of the time, the electorates’ views are (seemingly) mostly ignored

 

So what factors need to be covered by an NBSC recognising that there are two distinct economic worlds out there, working in parallel?

If in any doubt, ponder why 86% of Americans already feel ‘what matters in life matters more than more stuff’ – the two are:

  • An old world of tangibles satisfying our material and physical needs
  • A new world of intangibles satisfying our mental needs

_____________________________________________________________________________________________________________________

THE MATERIAL WORLD – for tangibles

  • Prosperity:
    • Current measure = GDP/ capita
    • It counts revenue, whether profitable or not, and ignores the value of fixed and current national assets
    • It’s therefore a flawed, useless measure – something better is needed
  • National output (versus income?):
    • Current measure = GDP
    • GDP is known to be seriously flawed – much national effort is uncounted or miscounted – much is estimated and so prone to error
    • Something better is needed, which includes a credible assessment of the intangible value people now get from much that is offered them
  • National inputs:
    • Current measure = Labour hours or numbers
      • Need to account for skills and experience inputs too
      • And need them broken down by sector
    • Re labour inputs, also need:
      • Average hours worked per annum
      • Average wage/ employment cost per sector
      • % unemployed
    • Capex is also ignored – it needs to be broken down by spend on:
      • Plant/ equipment – (% GDP)
      • R&D
      • Infrastructure
      • Energy supply
  • National productivity:
    • Current measure = GDP/ Labour hours or numbers input
    • This gives only part of the picture
    • It ignores the ever-increasing value of capital input
  • Poverty v Inequality index
    • Measures of both are needed
  • Housing index:
    • A measure is needed reflecting shortages and building rates

_______________________________________________________________________________________________________________

THE MENTAL WORLD – for intangibles

  • National Health index – NHI – covering:
    • Length and quality of lives
    • Quality of healthcare experienced from NHS
  • National Knowledge Index – NKI – covering:
    • Overall education levels attained
    • Quality of education experienced
    • Investment in R&D, IP, patents, broadband infrastructure
    • Accumulated knowledge, skills and experience
  • National Crime index – NCI – covering feelings of safety and security re:
    • Defence
    • Terrorism
    • Effectiveness of police/ prison/ legal systems
  • Establishment and institutional index – covering:
    • ‘Faith in Government’
    • The degree of trust affecting transactions and the provision of public goods
  • Environment index – covering:
    • The positive value of renewable resources provided by nature e.g. clean air, mountains, moorlands, open seas – the natural environment:
      • Currently fresh water and air are either cheap, or free – but we cannot live without either
      • What if they were priced with the underlying value to each of us
      • Compare water to a diamond – a lump of carbon only, and no life saver
      • For years, too much money has chased too few assets
      • So prices alone do not paint the full picture
    • The penalty costs of modern day polluters – greenhouse gas emissions, plastic rubbish in the oceans, kids ignored when young so they become criminals – who currently pay nothing towards future clean-up costs – or those destroying habitats which prevent flooding, absorb/capture carbon dioxide or provide recreation

______________________________________________________________________________________________________________________

A set of measures covering the above factors would force ministers to ‘do something’ where action was needed most – they’d be well aware of the biggest issues affecting their electorates, whether things were getting better or worse, where they needed to ‘do something’ fast

And the electorate would be able to monitor their progress

Conclusions:

  • The principal aim of any government should be to grow the national wealth pie first (the Tories’ main aim?), then distribute it more equitably and improve public services (the Labour party’s main aim?) so all enjoy better lives than before
  • At present, most electorates have far too little information on how well their governments are spending their tax money – worse, most of the information they do get is ‘seriously flawed’ so big improvements are needed there straightaway
  • The proposed NBSC should be devised and collected by an independent survey organisation – Ipsos Mori for example
  • The problem will be government inertia if and when it comes to commissioning such an agency to collect and publish their findings for all to see – a ‘can of worms’ may then be opened for any sitting government
  • And there lies the rub!

Beware ‘snooptech’

Ben Gallagher, co-founder of B+A, a management consultancy, raised an interesting slant on new digital possibilities

‘Snooptech’, as the Telegraph reported recently, is a £2.7billion industry

The increasing sophistication of digital tools, as well as the continued stagnancy of productivity in the UK, has created a market for technology whose sole purpose is to allow companies to watch their staff and track their movements

These tools promise an alarming degree of scrutiny: there are tools which let companies record and monitor calls, emails, even keystrokes – while they might be created or used with the aim of increasing productivity, there are arguments that highlight that the unintended negative consequences of such a move might far outweigh the benefits.

First, these practices raise questions about ownership – if a business is recording everything its staff does, then in effect it is claiming the right to possess that information – and yet, at best obscured with legal language and buried deep in an employment contract, the terms of this arrangement are unlikely to be clear to the member of staff in question – the standard by which staff are being held is therefore an invisible one, and if this were not bad enough for the average employee, it’s especially concerning for creatives, who may not realise that even their half-formed ideas or earliest creative expressions, possibly not even committed to paper, could belong to someone else.

Trust is granular – it’s made up of a multitude of small acts that build up over time – this is a process that you can’t force or hasten, and it’s a natural outcome in a business that hires carefully and gives its workers autonomy within their respective roles

Of course, identifying the ‘right’ level of autonomy is a never-ending project, involving setting boundaries and then enabling team members to grow to fill them until the right relationship is reached – but business culture is like that — complex, fluid and naturally evolving in certain conditions – its intricacy and difficulty in building is proportionate to its importance

Healthy workplace cultures are also diverse – only by bringing together people with different ways of seeing, doing and being can you have the creative tension needed to arrive at new ideas – and with diversity in people comes diversity in how, where and when they are most effective – one person’s five minutes at the coffee machine is different to another’s – it’s there, while having a conversation with a colleague, that a lightbulb might go off in one person’s head – for another, that five minutes supplies the time away from the screen they need to come back to their work with renewed enthusiasm and determination

The risk with productivity tracking is that it won’t allow for personalisation of metrics – to track everyone according to the same or similar standards is to ignore the valuable differences between team members — in essence, the individuality of each person you have taken time and effort to employ – you could quickly find yourself one step removed from commodifying staff entirely, treating them like machines whose behaviour is managed with homogenised guidelines that reflect the predictable middle ground for all, rather than the brilliance of each

Finally, ‘Snooptech’ implies a number of more general qualities which should be considered catastrophic for a business in the long term, and undesirable in any person, group or institution

By defining ‘optimal’ workplace behaviour, a business assumes perfect knowledge – it’s a fundamentally close-minded approach, suggesting that the business already has the information it needs to govern the working lives of its workforce in the best possible way

There’s a real arrogance, even delusion in this – it implies that each person couldn’t possibly know which ways of working are best for them, and that there is nothing to gain by empowering them to work in that way. – but it also closes the door on creativity, which by definition is a venturing-out into the unknown – new ideas give vitality to businesses without them, they grow stale.

If the goal of all this is truly to improve efficiency, then the businesses that have embraced ‘snooptech’ suffer from short-sightedness – in the long term, there is no way that a business can thrive in a culture of paranoia such as that brought about by the enthusiastic use of workplace surveillance

Ultimately, and as many highly successful businesses are starting to recognise, those who are given permission to manage their time and their energy, to form relationships with their co-workers, and to express themselves creatively enjoy their work and work harder as a result – they work because they’re engaged, but they also work for those around them – it sometimes seems that in our relentless march to productivity, productivity, productivity, we’re actually heading in the wrong direction.

 

BoE powerless in UK productivity crisis

Tim Wallace in the Daily Telegraph reports Mark Carney, Governor of the BoE – Bank of England – saying: “Britain’s economy has a new, lower speed limit”

Growth can only get to even modest levels before inflation takes off whereupon ‘we must ease our foot off the accelerator’

Ben Broadbent, one of Carney’s deputies, claims: “Productivity growth has slowed in just about every advanced economy, but it has been more severe in this country than in others”

Apparently, poor investment and poor productivity growth is ‘ the biggest part of the story’ – oh, and Brexit has had an impact too

As we all know, the BoE has few clubs in its bag – bank rate manipulation is one used to drive the economy further and get it out of trouble

For the past decade, extremely low interest rates have been used to prop up demand – it keeps mortgage bills down, encourages savers to spend rather than earn measly returns – and, theoretically, businesses can fund investments more cheaply

But it has failed with business investment

Carney says we had much spare capacity in the past so lack of investment didn’t have much impact on the ‘speed limit’ of the economy

But now, labour supply and capacity is near its limit – production capacity also – so productive investment is certainly needed

One’s left hoping for the best and keeping one’s fingers crossed

After all, what are central bankers paid for?

Three Factors Of Successful Companies

Kweilin Ellingrud, a senior partner at McKinsey & Co, contributed the following interesting article to Forbes magazine

 

It’s been 12 years since the last recession, when the World Bank estimates that global GDP fell by 1.7%. But some companies were better prepared than others: their revenues didn’t fall as far and, as the recession ended, they recovered more quickly than their peers. Looking at what these organisations did differently, and learning lessons from their experiences can help leaders prepare for the unexpected—whatever the source of turbulence.

According to a recent study of more than 1,000 large, publicly-traded companies, three factors made the biggest difference before, during, and after the downturn:

  • Increasing productivity levels—and, crucially, making the improvements stick
  • Improving balance sheets through a combination of decreasing debt and cutting operating costs
  • Being smart with M&A activity—both in divesting underperforming businesses and in buying promising ones from other companies

 

The combination allowed some businesses not only to boost earnings by an average of 10% in the darkest year of 2009, but also to build on that advantage over the coming decade. This is what we mean by “resilience”: a company’s ability to generate an economic profit through cyclical and structural changes in supply and demand, balanced on twin pillars of flexibility and productivity. After 10 years, total return to shareholders for this resilient group had outperformed their non-resilient competitors by about 150%.

Given the volatility of the current economic environment, achieving resilience will require a new, flexible approach to operations. This approach applies next-generation levers such as digitisation, analytics, and automation, and integrates them to cut across silos and sustain the impact. The result helps businesses respond not only to the fast pace of change but also to an ageing workforce, increasingly regionalised value chains and rising consumer demand for fast delivery and mass customisation. Together, these forces make adaptability and responsiveness more valuable than ever before.

During previous downturns, resilient companies drove higher productivity to help protect margins. In our new digital age, digital and analytics tools allow organisations to dial production levels up or down to match demand, building a new and important factor of flexibility. It requires a focus on the success measures that really matter—defining what it means to win the day at the individual, team, business unit, and company levels. It also requires a management system that works across all levels of the organisation, empowering the employees closest to the work to inform the development of digital processes—and aligning incentives accordingly.

Companies can increase their readiness for the unexpected by making structural, strategic, and operating decisions that improve performance. Even in good economic times these are helpful actions to take, as they ensure an organisation is ready, whatever storms may come their way.

The auto industry’s performance is a good demonstration of the effect of different levels of preparedness for a downtown. During the 2007 recession globally, vehicle production dropped by nearly 16% in 2008 and 2009, and in North America vehicle production dropped by over 43%. It was not just auto manufacturers who suffered in terms of profitability, the whole value chain was impacted—several major auto OEMs and up to half of all North American auto suppliers were in severe financial distress. Bankruptcies spiked, and government support was critical to helping the industry recover.

In recent times automakers around the world have been significantly reducing their operating costs and increasing flexibility. Organisations that take actions such as these will be better positioned to cope with economically challenging times in the future.

Companies should act now, when the economy is stronger, so that they can adjust quickly to a changing environment. Automation, digitisation, and analytics are changing industries faster than ever before, and the pace of change is only accelerating. And with political flux and trade disputes on the rise, economic disruption becomes more a question of “when” than “if.”

What was “good enough” five or ten years ago will no longer do. To pivot in time, businesses need to be lighter on their feet and quicker in their reflexes. By understanding where your operations are rigid or slow today, you can take practical steps to become more resilient tomorrow—and perform much better over time

Organisation productivity measurement

Professor Jillian MacBryde from the University of Strathclyde says: “When manufacturers talk about productivity, they’re not talking about the same thing as the economists and politicians – they’re not even talking about the same thing when you go from company to company”

Such is the current fog enshrouding the productivity of UK businesses

The set of performance measures managers need depends on the level they’re’re at – organisation, process or task level – each set should cover the following areas and be focused on the few important areas under their control viz:

  • Financial results
  • Customers’ ratings on what’s offered them
  • Productivity levels
  • Team motivation levels
  • Corporate knowledge levels – within heads and files

 

Sadly, most managers, whatever their level, don’t have such a comprehensive set – many of their performance jig-saw pieces are missing, often leaving them dangerously exposed – they might have 100% of the financial information they need, many even too much, but only some 20% of the rest 

Hence, when it comes to productivity and measurement of whether they’re getting the most out of assets in their charge, most lack anything useful

But, if they don’t measure their productivity levels, they’ll be very lucky to improve them – it’s a major reason why the UK is said to suffer a long tail of under-performing businesses in most sectors, public and private

So what are the most important measures – the cardinals?

  • FINANCIAL RESULTS:
    • Cardinals = Revenue,  Costs and  % Profitability per product
    • Comments:
      • The great Arnold Weinstock of GEC fame used six financial measures:
        • RoCE = % Profits/ Capital Employed (CE) = Capital productivity
        • RoS = % Profits/ Sales = Sales productivity
        • Asset turn = Sales/ Assets (CE) = Capital productivity
        • Stockturn = Total cost of sales/ Total stock value = Sales productivity
        • Sales/ Employee cost = Labour productivity 
        • Profit/ Employee cost = Labour productivity

 

  • CUSTOMER RATINGS = Effectiveness
    • Cardinals = Rating of Price, Quality and Service levels received
    • Comments:
      • At organisation level, it’s vital that senior managers regularly monitor external customers’ ratings of the price, quality and service levels offered them – NOT what they think of what they offer them – many are surprised by the results – too many simply rely on skimpy analyses of customer complaints, warranty claims and/ or replacements needed
      • At process/ task levels, some end up serving external customers – most have internal customers who also need to be satisfied – they’re the guys next down the line to whom they pass work, and those guys don’t want to receive shoddy work which causes them problems and delay – hence, measures and systems should be in place to prevent such events regularly happening

 

  • PRODUCTIVITY of costly input resources
    • Cardinals = Productivity & Waste levels of costly resources i.e. Labour, Materials, Capital
    • Comments:
      • At organisation level, the productivity ratios = Total output/ Total input – but this is meaningless given many different outputs and inputs can be involved
      • Even partial productivity ratios – one type of output/ one type of input  e.g. cars/ man hour – are less than useful when output involves many different models of car and most production is achieved by robots, machines (i.e. capex), not humans
      • Efficiency, another productivity measure = How well total capacity is used = Actual net volume output/ Maximum output possible – this lets managers know their % scope to improve – but few know the capacity of a whole organisation, especially when they comprise many different inputs and outputs, entry and exit points – hence, this measure is only useful at process or task levels
      • Waste of outputs and inputs usually incurs huge but unrealised cost penalties
        • Output waste has four possible causes – each one can severely reduce gross output volume:
          • % rejects v regulations
          • % rejects v specifications
          • % rework v specifications
          • % returns from customers
        • Inputs waste = % actual gross input used/ minimum needed:
          • A% = % Available for work versus labour absent/ material stock-outs/ machines broken down
          • U% = % Utilised on productive work versus idle or wasting time
          • E% = % Efficiency when working, perhaps working slowly, below expectations

 

  • MOTIVATION of teams
    • Cardinal = A motivation index derived from surveying 10 factors most important to the team
    • Comments:
      • An organisations is a ‘team of teams’
      • The mood of those teams can have a major impact on customer satisfaction and productivity levels
      • Hence, managers should regularly monitor the mood of their team and act when necessary and not just occasionally notice high absenteeism or sickness rates
      • Organisation-wide employee surveys should identify where specific problems may lie – and, once held, employees expect the results to be fed back to them, and action to be taken if necessary

 

  • CORPORATE KNOWLEDGE
    • Cardinal = An index combining subjective assessments of important knowledge held ‘in heads’ or ‘in files’ which is readily available to the team 
    • Comments:
      • Corporate knowledge covers that needed to ‘keep the show on the road’ and also come up with new ideas for better ways of doing things
      • The availability, utilisation and efficiency of this vital input resource has become increasingly important to most organisations
      • Nevertheless, unlike other costly input resources, most managers have no measures to control it and so have to rely on gut-feel alone
      • Hence recruitment and training efforts are starved of knowing where serious gaps arise

 

CONCLUSIONS:

  • Most managers, whatever their level, find it difficult to distil the few cardinal performance measures they need from the blizzards out there available to them
  • This is one big reason why there remains enormous potential to make big productivity improvements in all sectors, public and private – even in so-called vanguard or beacon organisations
  • Managers should stop using dubious measures simply because there’s no others available
  • Instead, they should find measures which put them in good control – otherwise, they’ll continue to be flying blind with inevitable results

Mentalism overtaking Materialism

According to official statistics, the GDPs of all G7 developed nations have been trending flat, even downward, over the last decade and more

The big question is whether, at the turn of the century, the G7 reached a watershed between their old 20th century materialist economies and the new 21st century mentalist economies – the former focused on the production of tangible stuff, the improvement of our SoL (Standard of Living) and the minimising of the negatives of life – the latter focuses on intangibles, the creation of stuff which improves our QoL (Quality of Living) and maximises the positives of our life

Consider how outputs and inputs have changed over this period

OUTPUTS

The problem here is our official bean-counters have no appropriate measures for the new mentalism world and continue to collect statistics appropriate only to the old materialist world – one where GDP either clocked the private sector’s output of tangible stuff which had a price, or the public sector’s costs which were assumed to be the value of their output

Manufacturing dominated economies (80% plus) for most of the 20th century and output value was relatively easy to count – GDP totals were thus assumed to paint a reasonably accurate picture of the state of entire developed economies 

However, by the end of the 20th century, major changes had occurred – manufacturing’s share of developed economies fell to around 20% and has continued to trend downwards – at the same time, ‘relatively-difficult-to-measure’ service sectors grew to over 80%

Now we’re well into the new 21st century – instead of just buying stuff which helps remove the chores of life and makes our lives more comfortable, many of us now have ‘enough‘ – we don’t need another car, house or pair of shoes – we just replace them when worn out – there’s nothing fundamentally new to buy to add to them now most have an iPhone – so we’ve moved on to seek ‘higher level’ things which we enjoy doing such as socialising with friends and family, playing games and sports, developing hobbies or being entertained

The problem is such latter ‘higher things’, whilst valued highly by us are often available for free and hence are not clocked by the official GDP bean-counters

Inevitably, some geek has come up with a new collective noun for all this new stuff – consumer surpli – aka unmeasurable intangibles i.e. the extras, including freebies, on offer to customers by the likes of Google, Skype and Facebook to attract valuable personal preference information from us which they sell on to companies seeking to target those of us most likely to buy from them – and such consumer surpli comprise an ever-increasing proportion of the value created by national economies but are also totally missed by their GDP numbers

The same change in values has already occurred with private businesses – if in any doubt, note how the most valuable companies nowadays are ones which are tangibles poor Coca Cola, Apple or Google for example – overall, some 80% of stock market values are now based on intangible assets, so the financial markets and investors are already up to speed

Sadly, at present, we’re stuck with official GDP data which presents a gloomy failing picture for most developed nations – in particular:

  • We knew the base data was already seriously flawed, being so full of errors, assumptions and forecasts – now we know much that we value is being ignored
  • We also know G7 experts, economists and media all announce there is a productivity puzzle because their GDP and productivity (GDP/ Labour) growth has apparently stalled over the last decade or so
  • And yet government ministers are reliant on these statistics to decide their economic policies and different ways to tax us
  • The consumer surplus is the biggest economic elephant in their room

 

G7 bean-counters thus must at least recognise the failings of their current measures and gear up for these fundamental economic changes

INPUTS

And it’s not just outputs where big changes have occurred

Once, most people went to work for the pay alone – work was a chore they had to do, something they would not do if not paid – and most work was brawnwork, few opportunities were available for brainwork

Now, already, quite the reverse applies – most brawnwork that was dirty, dangerous, dull or repetitive has been automated with robots, AI  or computer software – most has been replaced by more interesting jobs involving considerable, if not total, brainwork:

  • Brawnwork required numbers of workers ‘clocking-in’ for numbers of hours on the factory floor or in the office – such numbers were easily countable and thus controllable by local managers 
  • Brainwork is different, and far less controllable – it requires individuals to produce results by deadlines – it requires problem solving, creativity, analysis skills and decisiveness – it thus requires individuals who are well trained but also motivated, ’employee engagement’ being the buzzword for the latter

 

Indeed, modern managers have become increasingly concerned to maximise employee engagement to boost overall productivity levels – they do this also to maximise staff retention, especially of staff they cannot afford to lose, and so minimise the extra costs of recruitment, training and short term work disruption

Essentially, this means:

  • Re job design – they seek to inject more interest, variety, control and responsibility into jobs – to make them seem more like hobbies, something they’d want to do for no pay, and even work endlessly at – even get people to look forward to Monday mornings, not dread them
  • Re individuals – they show genuine interest in their staff, talking face-to-face with them often – they also train them not only so they are more efficient at their work but become more promotable and can climb ladders

 

We’re not there yet – the following describes the current situation in most organisations:

  • Being seen in the office working long hours is deemed essential for holding on to a job – input hours still rate more than results achieved with most managers – presenteeism still outweighs individual productivity 
  • Over 90% would not do their job if they were not paid
  • Most don’t enjoy what they do and would resign immediately if they won the lottery
  • Most don’t rate their immediate boss
  • Most would love to run their own business and be their own boss

 

But changes to working conditions are increasingly being made or considered, including the following: 

  • Flexi-time working, working from home, four day working weeks
  • Dress-down days
  • Gig work – zero hours contracts (some people prefer this, some do not)
  • Appointing mentors
  • Free healthcare insurance, gyms, yoga classes, massage parlours
  • Office games rooms, nap rooms, healthy lunches

 

Such changes all have a part to play but more radical change is needed, addressing the following issues:

  • How to make jobs become paid hobbies – just as many footballers would continue to play, even if not paid
  • How to allow people to work from wherever they want, whenever they want
  • How to let people feel they are their own boss 
  • How to make work feel like being a member of a social club – a place to meet and chat with lots of different like-minded chums

 

CONCLUSIONS:

  • G7 economies are changing big-time at present but official statisticians are not noticing
  • Hence, official ‘doom and gloom’ economic pictures do not paint the real world out there
  • Modern managers can no longer manage their troops using old ‘command and control’ methods – they must ensure their troops enjoy their work if they are to get the best results out of them 

A new ISC rides to the rescue

Puzzle no more about dormant national productivity – the cavalry have arrived in the form of Andy Haldane, chief economist of the BoE (Bank of England) who is to chair the government’s new ISC – Industrial Strategy Council – it’s another quango of sorts for a select few of our great and good to deal with a nagging problem that nobody seems able to resolve

Despite most experts bemoaning the UK’s lack of significant productivity improvement over the last decade, Andy claims: “The UK’s macroeconomic performance has improved dramatically since 1992 when the UK was forced out of the EU’s ERM (Exchange Rate Mechanism)” – furthermore: “The UK is now, arguably, an established Premier League team”

Then another surprise

Apparently this is  all due to “inflation targeting” by his chums at the BoE rather than the government’s efforts which: “Frequently adopted and abandoned different industrial strategies as well as other schemes to raise Britain’s productivity”

Note the role of UK managers at the coal-face merit no mention yet it is they (in our view) who determine some 80% of national productivity levels achieved – Governments can only influence the other 20% by complementing the private sector via their taxation policies and investment in education, healthcare, low-income housing, R&D and infrastructure

Why such influence by organisation level managers?

Because workers in all sectors, public or private, soon settle down to a rate of work they’re comfortable with whatever the systems and processes they’re required to follow – and it’s those systems and processes that determine most of the productivity levels achieved, both at organisation and hence national level – indeed, the famous management guru Dr Edwards Deming went so far as to claim it was systems which determined as much as 94% of an organisation’s productivity level – and the people with the power over and sole responsibility for those systems and processes are organisation managers, not their employees

Undeterred,  Andy goes on to say the ISC will provide: “An independent body to evaluate progress and develop appropriate measures of success” which suggests he has doubts about the current official data available (we wish him well)

However, to kick off his ISC reign, Andy tells us he has identified three productivity gaps facing the UK – sadly,  they’re all based on the rich, albeit flawed, trove of national statistics available to him – viz:

  • Inequality between the country’s highest and lowest performing areas/ regions
  • Lower labour productivity than other large rich countries
  • A slowdown in productivity growth since the 2008 financial crisis

 

Such claims may or may not be true to a greater or lesser extent – the data on which they’re based is so full of errors, forecasts and assumptions that we’re not talking here about 1% or even 5% error margins – our guestimate is it’s more likely to be in the 30% to 50% range

And if that were not bad enough, what would Andy and his new colleagues be prompted to recommend to whom on the basis of such claims – by the sound of it, he’d be focussing on possible changes to Government policies whilst continuing his successful BoE action, and thus restricting himself and his council to a mere 20% of the problem causes

One can only hope that the value of the ISC will itself be determined by some significant improvement in some acceptably accurate measures of national productivity – and disbanded if found to be yet another ‘kicking the can down the road’ initiative

Conclusion:

Beware all economist geeks bearing their advice and solutions

Currently, we are very cynical about Andy’s prospects with the ISC

At work but not working

According to the CEBR (Centre for Ecoomics and Business Research) UK businesses don’t know how to maximise their human capital despite the vast majority being ‘concerned’ or more about their people productivity – indeed, a survey they conducted found that:

    • Some two thirds have not looked at ways to boost employee well-being and so motivation levels
    • Some 60% have not looked at improving business processes and decision-making
    • Some 70% have not invested in technology to automate repetitive tasks

 

But, important as such initiatives are, a bigger source of ‘human capital improvement’ they should all address is the huge waste of employee time when at work – plenty of studies show that, most of the time, people are busy at work but ‘are they productive during that time?’

At present, most managers still equate long hours at work with dedication, commitment and loyalty

This is why, in the early days of Microsoft, Bill Gates memorised employee license plates: “I knew everyone’s licence plates so I could look out in the parking lot and see when people came in, and when they left”

But this attitude is ineffective nowadays, as Gates soon realised – what matters is results, not hours worked

This particularly applies to brainworkers as they steadily replace brawnworkers in workplaces – the former are people who have to use their brains more than their hands to complete their work – people whose outputs and results are less easily countable and often subjectively measured

Brainworkers can look extremely busy when they’re actually unproductive

Indeed, one recent study claims most employees only work about three hours a day – they fill the rest of the time following Parkinson’s Law and surfing, chatting or complaining about being overloaded whilst accomplishing very little – they’re at work but not working

Hence, the increasing calls for most to work only six hours a day or four days a week – or flexitime working, often from home – all  in the expectation of producing much the same if not more and better output

The problem with this is most managers would feel a loss of control over their charges – they find hours input are easily countable and so controllable,  whilst results are less so – hence many managers stick with their old ‘command and control’ ways and manage by time inputs mainly

Fortunately, more enlightened managers recognise their need to move with the times – actions they are taking include:

  • Hiring people they can trust – then trusting them – and this is usually reciprocated
  • Setting expectations and targets for each of the people in their charge – expectations of each team member include not only deliverables on time and of acceptable quality but also coming up with new improvement ideas and helping each other
  • Letting their people decide when they work, where – they know they will be judged on what they get done so they plan accordingly but this allows them to manage their work/ life balance requirements better – an important motivation factor nowadays
  • Not endlessly contacting individuals when not in the office, unless absolutely essential – most problems/ thoughts can wait until tomorrow or later

 

Better results inevitably follow – and all started by the manager managing differently

 

Further UK education needs

“The new prime minister will have to rise to the skills and productivity challenge, and make sure that everyone, no matter where they come from, can get a chance to have a great job”, says Anne Milton, UK Minister for Skills and Apprenticeships

The following is an article she wrote in FEWeek

I want the next prime minister to make sure the work on technical and vocational education continues to be a priority and that we build on what we have already achieved.

Significant progress has been made on our technical education reforms: the first T-levels are on track to be rolled out in 2020; the first Institutes of Technology will launch later this year; and we continue to see more people starting on apprenticeships.

I want the progress we have made to be a step change in how FE (Further Education) is viewed in this country. People are finally waking up to the need for a rebalance between FE and HE. There is much more recognition of the huge impact our further education sector plays in supporting more people to gain the skills they need to get a good job, get on the path to great careers – and for the country, boosting productivity.

This week we published the findings from our review of level 4 and 5 qualifications – or Higher Technical Qualifications – and we launched new proposals to make sure more people and employers can take advantage of them in the future.

All the evidence from our review highlights that higher technical skills (the type that many level 4 or 5 qualifications can provide) are increasingly in demand from employers, but the uptake remains worryingly low. Only 1 in 10 adults in England have studied for a qualification at this level, despite the prospect of better wages and job prospects.

The skills our economy needs now and in the future are not always aligned with the qualifications on offer and we need to make sure that we change that. Young people need to be better informed when it comes to studying for jobs and careers in key sectors such as science, technology and engineering.

Some of this is about all of us continuing to bang the drum about the benefits of technical education. We need to dispel the intellectual snobbery that still exists which dissuades some students from choosing this route in favour of a traditional academic option.

There is no overnight fix for changing the way technical and vocational education is seen by the public, but we can make sure that the qualifications and options that are available are high-quality, are valued by students, parents and employers and ultimately get more people on a path to a good, well-paid job.

That is at the heart of everything we are doing – from the introduction of new T-levels, our reforms to apprenticeships, as well as consulting on changes to post-16 qualifications at level 3 and below, and our new level 4 and 5 proposal. It is all about providing a choice of high-quality options as well as logical, clear training routes that everyone can understand.

These are once-in-a-generation reforms and while I don’t imagine that we are going to get everything right at the first time of asking, if we want to make a success of them in the long term, we need a strong sustainable and coherent technical education system. This will help unlock untapped potential and boost our economy.

The new prime minister will have to rise to this challenge if we are to have the skills we need to increase productivity and make sure that everyone, no matter where they come from can get a chance to have a great job and fulfilling life. This will be critical to the future prosperity of individuals and the country as a whole.

Conclusion: “Well said, ma’am, as far as it goes