Recognising the Counterfactual

When we make changes to (try to) improve productivity, we subsequently measure results and assess impact.  (Or we should if we want to evaluate our own performance and impact.)

However, in many complex situations, we cannot be clear that what we have done has resulted in the changes we observe.  What would have happened if we had not intervened?  This is the ‘counterfactual’.  How do we measure it – so we know the true impact of our changes?  Well, often, of course, we can’t.  But sometimes we can extrapolate from observations we made earlier – and make an informed (and hopefully intelligent) ‘guess’ at what might have happened.  

Sometimes, we might have a ‘parallel’ situation elsewhere we can continue to observe (rather like a ‘control group’).

The important point is to realise that in complex situations,we have to be careful about assuming (or claiming) that all change has resulted from our actions. Otherwise we can over- or under-estimate the impact we have … and subsequent decisions might be based on this imperfect – and incorrect – knowledge.

In control?

In my recent discussions with PAPA (the Pan African Productivity Association), the topic of the Ebola virus came up.  Just as Africa seems to have recovered from the great HIV/Aids crisis (having largely got the ‘epidemic’ under control), the continent is hit by another great health problem – likely to have severe implications for those economies where the virus is rampant. 

The developed world is only just starting to see this as a global concern rather than as a ‘local’ African problem – and we might now start to see real resources going into research into both containment and cure.

Situations where we lack control are real drains on productivity.  We have to do what we can to help Africa take control of this situation or the whole continent – and then the rest of us – will suffer.

A Balanced Report

Well, I’m here in Mauritius and I’ve been having an interesting time.

I spent a few days with the Board of PAPA (the Pan African Productivity Association) discussing the productivity status and opportunities in Africa. Many of the productivity centres and champions are working under a range of funding, cultural and political constraints but there was consensus about some of the big challenges and around some of the necessary infrastructure elements that need to be put in place to underpin productivity development.

This is something we should all watch with interest – Africa’s productivity is important to us all in terms of helping the world solve the 3 great problems of food security, energy availability and universal access to fresh, clean water.

I was then fortunate enough to attend a session led by the great Robert Kaplan, one of the creators of the Balanced Scorecard concept and model. Amongst other things, it was interesting to see the development of the model from measurement scorecard to strategic planning catalyst. Robert gave several examples of companies that have deployed Balanced Scorecard and used it to transform their understanding of the business and shape its future.

Importantly he cited the use of the Scorecard to support strategy execution and evaluation as key to longer-term success. My biggest, single ‘takeaway’ message was that ”Strategy is important, but execution is what delivers.”

Tomorrow, I am flying home – to more mundane (but no less important) issues, concerns, projects and activities.

Something in the air

The ‘something in the air’ i refer to in the blog title is … ME.  As you are reading this, I should be in the air (if I’m not waiting at an airport terminal) en route to Mauritius.

Those of you who follow this blog know that I make this trip regularly – I have been advising Mauritius on its national productivity strategy, working with the lovely people at the National Productivity & Competitiveness Council (NPCC) – one of the members of our Confederation.

This one is a ‘special’ visit for two reasons.

First, I shall be giving a keynote presentation to a meeting of the Pan African Productivity Association and I am keen to hear their views on Africa’s productivity future – and see how well they chime with my own.

Secondly, while I am there, NPCC have invited the great Robert Kaplan (of Balanced Scorecard fame) to give one of their occasional productivity days with a world-class ‘guru’.  I shall get to listen to Robert – and meet him subsequently.

Its not often you get a chance to meet one of your ‘heroes’  - so this is quite exciting for me 

And, of course, to do all of this in Mauritius makes it all even more special.  Sometimes you just have to say, “Lucky Me!”.

If I wake up from this dream, I’ll give you a report next week.

Is Big Data Useful?

Big Data in ‘in’ – its a fashionable topic, its ‘cool’ and exciting.  But is it useful?

What are the applications where it will ‘make a difference’ – on a global level.

Well, I’ve been doing some work in Agri-business recently…. and one useful trend has been to make data available (on yields, prices and so on to farmers so they can take better-informed decisions about when and how to harvest and sell what they produce.

Now, however, big data is moving up that value chain – by offering information to farmers – on soil condition, on weather patterns, on past production, on competitors’ production.

How do we get the data?  Well, farmers give it to us – it is anonymised – so they can share the data pool … and experiments are starting to send out drones to observe directly what is happening.  It starts out being small data but soon grow – especially when you do this over several regions.

So, big data can be useful – like most other fields, it just needs someone to work out how to exploit it for commercial gain.  When that gain has social benefits (in terms of giving farmers information which helps them negotiate better with the ‘middlemen’ taking produce for processing…. so much the better.

Do the measures matter?

I have been doing a little work recently in relation to productivity and performance measures.  The thought struck me after trying to construct appropriate measures for a particular organisation in a particular situation that the measures we use are not as important as the fact that we use measures to track progress against strategy and ensure we remain ‘on mission’.

Of course the measures must demonstrate progress in the right direction for our key success factors – but remember the Pareto effect – we can probably get 80% of the effectiveness of a measurement regime with 20% of the effort.

i am not advocating ‘abdication’ – just careful use of resources and broad targeting rather than surgical precision.  Get people moving against plans – in broadly the right directions and with some momentum and motivation – and the detailed results will look after themselves.

Communicate

I was looking at a PowerPoint presentation the other day (not one of mine) and I thought “What a great job this person has done of making a complex issue understandable.”   

It reminded me that we often have two important, overlapping roles – acting as technical experts to solve problems and make improvements … and acting as teachers and mentors to persuade others that our technical assessment is sound and offers real benefits.  Where we have different groups of stakeholders with different viewpoints and concerns, this can be the more challenging role

So, take a break from developing those technical skills and concentrate on your communication skills – both listening and teaching. It might be of more benefit in the longer-term.

Forget the mystery

A number of you sent me comments to try and unpick the (UK) productivity mystery I referred to in last week’s post.  Some of these were backed up by serious analysis.

Yet, after reading them all (which i did – gladly) I remain confused – and the mystery remains unresolved.

It just made me glad I can dip in and out of these sets of national statistics; I would hate to be responsible for creating them – or validating them.

My admiration is immense for the guys (and gals, I assume) who beaver away to give us these benchmarks.

And I am reminded why we benchmark performance anyway – it is to create dialogue and discussion which can lead to improvement.

So, last week’s mystery is not a problem – as long as the great and the good don’t spend too long attempting to unravel the mystery when they should be focused on creating a better, more productive future.

The UK Mystery

British productivity was growing steadily if slowly in the years before the financial crisis struck but it’s now some 16% below its pre-crisis level.

The Bank of England has published a paper in their  quarterly bulletin of economic research, examining the competing explanations for the productivity puzzle and has a stab at estimating how much of that 16% shortfall they can account for. At best, the authors suggest they can explain about nine percentage points, but it is clearly a mystery beyond their easy solution.

The bank says errors in measuring output probably account for about two percentage points of the shortfall. A decline in the output of once highly productive sectors, such as oil and finance, might account for another two percentage points.

The paper goes on to suggest that  another three to five percentage points of the shortfall may reflect problems that are the legacy of the financial crisis. These include the idea that damaged banks have struggled to reallocate scarce capital away from “zombie” firms with poor prospects and few customers and towards more productive firms with big ambitions. Cyclical factors—such as idling workers and production lines—probably also account for part of the productivity shortfall, but the authors say it’s hard to say how much.

Perhaps this mystery will unravel over the next few months – the UK certainly has to hope this is a mystery and not an early sign of a real collapse.

Governments need to get it right

Many countries have productivity centres to advise their government of productivity and related issues.

But do they do any good?

Is productivity something that can be shaped and steered by government?

I would say ‘YES’ from my experience in the UK – but not always in ways that might be expected.

Twenty or thirty years ago, the UK’s productivity levels were disastrously low – UK goods were uncompetitive, of poor quality and over priced.

Now, however, UK industry is much better, the economy is growing – and UK goods have a much better reputation.

What happened?

Margaret Thatcher happened!

Like her or loathe her (and there are plenty in both camps), she transformed UK industry – by curbing the power of the unions and de-regulating the economy.

Most national productivity strategies seek to regulate  … when they should be de-regulating!