Tuesday, March 1, 2011

Productivity Reset - No Such Thing as a Free Lunch

(The following post was written by Larry Clark.  Larry is a senior corporate executive with extensive experience in Corporate Talent, Strategy & Development)  
The office has been a bit crazy for most folks since, well, about 2008. The shedding of costs by just about everyone has put more work and stress on those lucky soldiers who have maintained their steady paychecks. And I guess we were willing to deal with it because the alternative was looming large. Better to be over-worked than unemployed.

But there's a new kind of pain hitting the average worker now that isn't caused by "unfavorable business conditions." Bunches of companies are posting solid - sometimes record-breaking - quarterly earnings again. And in spite of all the Washington rhetoric, the federal government is still spending like crazy. Sure, some industries are still hurting, but where there's a rising tide, why does the average workday make it seem like we're in a bigger crisis than before?

Because of something leaders are calling a productivity reset. That's code for a dangerous leadership mindset that gets short-term gain but long-term trouble. Quite simply, it means using the current headcount level in your organization, post-layoffs, as the baseline for how many people you need to cover the same amount of work as you had pre-layoff. You've reset the baseline for productivity higher, covering more workload with fewer people - permanently.clip_image002

The stats tell the story. You can see in the chart from the US Bureau of Labor Statistics, showing the year-over-year change in productivity. We’ve had significant increases since 2006, with the exception of 2008 (when the economy tanked, productivity grew more slowly, and actually stayed flat in manufacturing). But since 2008, the shedding of the workforce led to – no surprise – big increases in productivity. Because business is back, but jobs are not – at least not yet.

So, looking at the numbers, it might seem like the plan is working – fewer workers, more revenue, better productivity. So what’s the problem?

The problem is, the dam is getting ready to break. Like dot-com boom "new economy" thinking, Productivity Reset is a nonsensical, alluring concept that whispers to leaders that they can get something for nothing - over-driving your headlights at the expense of your people. Its proponents swear it works for two main reasons, but both are flawed. First, they say the workforce post-layoffs has adapted, figuring out ways to increase its productivity because it had to for survival. Second, there must have been at least a little headcount bloat in there somewhere, what with some low performers and a few extra roles scattered about that no one really misses much…

They say the best lies have just enough truth in them to make them credible. This is just such a case. But it's still a lie - and we're telling it to ourselves to see if we can make the new math work.

So let's call it what it is - bad management. On an economic upswing (especially a drawn-out version like we're in right now in the states), leaders charged up with new visions of a rosy, growing future drive new initiatives with renewed leadership vigor - but with a lingering fear of things going in the toilet again. So, we ask people to step up and drive to the new future, but it's an unfunded mandate.

How will this play out? We're already seeing it. Top performers, who are always in demand regardless of economic conditions, suddenly have lots of options that they're beginning to explore. Churn among high-potential workers is peaking again. And their departures stress remaining organizations to make up the losses and ramp new people. Battlefield promotions to fill gaps creates chaos. And the no-room-for-error situation created by the productivity reset means that critical initiatives will fall over.

So no matter what the new "collective wisdom" is trying to sell us about a Productivity Reset, the old school wisdom is winning out. Apparently, there's still no such thing as a free lunch.

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