Is Worker Productivity Declining?


The Wall Street Journal recently reported that future interest rate increases might be deferred based on steadily declining worker productivity over the past decade (see article here). The chart at right points a dire picture of what has happened to US worker productivity over that period.

Couple of points to clarify … average worker productivity has improved by an average of about 2 percent from 1975 through 2016; the past decade is an atypical period of decline. Enormous gains were achieved from technology innovation launched during the late 1990s through the early 2000s; those periods of high increases are now leveling off.

So what is really happening with worker productivity? Should we be worried? The slowdown in recent quarters has likely been reinforced by weak business investment in new equipment, software and facilities. The global financial crisis clearly has impacted these investments, as we are not yet  completely out of the global economic crisis that began back in 2007-2008.

Given these declines, companies now face new challenges when seeking to improve their worker’s productivity.

It’s Time for A New Approach

One of my favorite expressions is the definition of insanity: Doing the same thing and expecting different results. Managers pursuing the same productivity improvement strategy while expecting different results fall into this definition. Now is the time to rethink how productivity can be improved, which starts with examining how it can be measured.

First, let’s take a look at what has changed over the past decade, to then better understand what might be causing a steadily declining rate of worker productivity gains.

The Changing Work Environment

During the mid- to late-1990s, several new worker productivity tools were introduced or came of age, including the Internet and the Personal Computer or PC. While these tools came with a learning curve and the resulting need to invest in new education, the performance improvements that followed were significant. Better collaboration and communication between workers – especially those separated by widely distributed geographies – has been widely documented. Online distribution models were adopted resulting in significantly expanded distribution models and new levels of efficiency and sales productivity.

At the same time, the Internet has given workers considerable flexibility on where to work, including from home, on the beach, from a plane or just about any other location. A detailed discussion on this topic can be read here “Are Remote Workers Productive?

Those working in the office are likely to work in a different environment too, when compared to 20 years ago. Many workplaces now feature open spaces and smaller, and often shared, workstations. The strategy behind this move was likely to promote collaboration, as well as to save some money on office rent. The reality is that many more distractions now exist, making it harder to stay focused.

Social media is another significant factor that has impacted today’s working environment. Most employees are on at least one social network, which has created a virtual environment to stay current with personal (and work) activities. While some employers block access to Facebook or Twitter on their corporate networks, nothing can be done to stop access from a mobile phone. The same is true with how workers now access news. Today, it is possible to get a news update from anywhere, at any time – another distraction that can potentially hurt worker productivity.

How will visibility impact your business?