Are investors the problem?

Over the last 5 years – in fact since the great recession hit – many companies seem to have concentrated on short term gains – and have rewarded their CEOs with generous bonuses  for producing them.   This is in response to a real or imagined investor need for quick results and dividends – to offset money they might previously have received in interest payments on part of their capital.

So, the CEO gets his/her bonus; the company makes profits; the investor receives dividends.  What’s not to like?

Well, this is a recipe for declining productivity – or at least non-rising productivity.  Money is going out in these term payments instead of being invested in infrastructure, new capital equipment and new technologies.  It is those kinds of investment that replace labour with capital and drive up labour productivity.  It is those kinds of investment that have not been made in recent years.

Now, as I said earlier, I am not sure whether the investor pressure for short term gains and immediate dividends is real or imagined – but perhaps we should find out.  If investors would accept a longer term view, we could start to make those transformational investments and all would gain in that longer term.

Ask your employees.

Does your boss enhance, or detract from, your productivity?

If you ask this question of employees, you might expect them to answer ‘enhance’ – but they rarely do.

Too many people see their boss as ‘interfering’ or ‘meddling’, confusing rather than directing them.

Does this say something about the employees – and their perceptions versus expectations – or about the bosses 

This is not clear.  Probably a bit of both.  It certainly means that most bosses need to think about how they relate to, and engage with, their employees.  If employees feel their productivity is lowered, it probably is .. indirectly rather than directly, perhaps, but lowered nevertheless.

A new reality?

I ‘ve written quite a few times in the last year about low productivity figures – across all developed nations.  I’ve even offered advice on occasions about what might be done to improve the figures – as have better men – and certainly better thinkers – than me.

But the figures stubbornly refuse to rise.

I’ve also tried to explain this – by suggesting amongst other things that we fail to capture the economic benefit of much i-activity.  If someone writes an app and gives it away for free , does it contribute to economic activity – directly or indirectly?

Perhaps we have to get used to lower productivity growth – and accept it as the new normal. Perhaps we can then start to havre intelligent conversations about employment, about wages, about interest rates and so forth.  Or do we just keep on hoping and praying for a recovery – retaining our old thinking in the face of the overwhelming evidence that things have changed?

Correlation? Causation?

Two recent sets of figures from the USA raise a question of ‘connectivity’/  Labour productivity refuses to rise – and investment in plant and equipment has declined over the last 10 years.  These can probably be correlated but is there a causal relationship? 

Well, I can’t prove anything but let’s just say that labour productivity rises most quickly when capital is substituted for labour.

Work with the new reality

Most developed countries have experienced lower rates of productivity development since the great recession – and nobody seems to know why.

However, it does seem as though these low growth rates might be with us for some time.

For any one country, this means that the key is to simply have a higher growth rate than your near competitors – and stop worrying about the absolute figure.

Low productivity growth can still create a successful economy – and actually helps employment levels.

So, accept the new reality – and work within it.

 

Do you need a long view?

Most of us want to help our organisations be productive – but we also want to be kind to the environment .  Can these aims be reconciled?

Well, yes! – but sometimes it depends on the timeframe you are looking at.

Take agriculture as an example.

Using pesticides and fertilisers can increase yield (increasing productivity) – but over a long period may have a detrimental effect on the soil leading to lower yields in that longer-term.

So, if you have a problem about conflicting aims, try to look at the big picture and look at it over an extended period before tasking your decision as to what to prioritise.

Achieve balance, Improve performance

Work-life balance is important.  If ‘work’ takes over, you end up stressed and ineffective.  If ‘life’ rakes over, you fail to achieve,

So, how do we achieve ‘balance’?

Well, here’s a simple tip.

When you create your ToDo list and prioritise tasks, make sure you create entries for both sides – the work and the life – and treat them with equal seriousness.  Assess importance and urgency of both – and think carefully about success criteria.   If you don’t achieve the ‘life’ goals, consider yourself to have failed.

In effect, you are creating a work-life balanced scorecard. And, as you improve your balance, you will find your work achievements rise.

Minimum Wage is bad for productivity

In the UK, as in quite a few other countries, there is a minimum wage set by government.  In  the UK, this has recently risen fuelled by the introduction of what is called the National Living Wage.

(We will ignore, for now, any discussion on whether this means it was impossible to live on the previous minimum wage.)

The use of these legal impositions on wage rates suggests a low wage economy – and in many sectors – social care, retail, as two examples, this is true.

The problem with low wage economies is that they mitigate against increased productivuty.

Real productivity gains often arise from the substitution of labour by capital – taking away inefficient manual work or assisting it with technology.  In a low wage economy, there is little incentive for firms to make such investments. Why take the risk?

This is one reason why countries like the UK are finding it so hard to climb out of the great economic depression.

Be Physical

AI (Artificial Intelligence) is making good progress and we have seen computers doing very well at strategy games like Chess and Go.

AI is ideal for situations where a large quantity of data has to be processed as the basis of a ‘logical’ decision.  This applies in strategy games, and in commercial activities such as stock and commodity trading.

So computers can play chess.  But they can’t easily pick up the chess pieces.  They are much less adept physically than ‘mentally’.

This means that as the next generation of schoolkids start to look for jobs, a number of what are currently high paid jobs might be being performed by computers.

Those kids should look to become plumbers, gardeners or carpenters – working physically and flexibly.

Will this result in a redistribution of wealth from knowledge workers to manual workers? That remains to be seen. But the manual workers might have work – and feel engaged and rewarded by that work.

Not Good Enough

The UK Engineering Employers Federation (EEF) suggests the productivity picture might finally be starting to change.

The EEF recently unveiled some mixed findings. On the positive front, its report – Productivity: the state of the manufacturing nation – revealed that over six in ten UK manufacturers (64%) achieved productivity growth in the past two years, while 57% expect to make further gains in the next two. It also points out that manufacturing’s productivity growth outpaced the service sector and the UK economy as a whole in the two decades to 2014, suggesting that, while the manufacturing sector might not have the size and critical mass it once had, it is an altogether leaner animal than in days gone by.

However, the key message from the EEF would appear to be that manufacturers cannot rest on their laurels – indeed, almost half of manufacturers (49%) questioned by said the UK manufacturing’s productivity lags behind competitor nations.

So, reasonable progress but the report card suggests “Could do better”