Workforce Productivity: Why we’re working more and producing less
June 20, 2023
Recently I was reading through a report by McKinsey, and I learned that productivity growth in the US has averaged a meager 1.4% over the past 15 years, with the rest of the world experiencing similar slowdowns. This struck me as strange considering the deluge of digital tools that have been introduced to the workplace over the same time period. Speaking of strange… the US added 311,000 jobs last month and is still experiencing unemployment rates close to 50-year lows (3.6%) despite slowing economic growth, high inflation, and soon-to-be even higher interest rates. What gives? If employees are working more and producing less, what can we do to reverse this concerning trend both now and in the future?
There are a wide variety of hypotheses that attempt to explain why workforce productivity has suffered recently, but I am going to focus on one so we can explore possible solutions.
My speculation is simple: people are tired, and there are not enough of them. Another McKinsey report suggests that nearly half (48%) of people are abandoning their jobs for entirely new industries. During the height of the pandemic, healthcare organizations experienced 30%+ turnover as nurses clearly communicated they were burned out and bolting. Today in the US there are approximately 6 million unemployed and 11 million job openings. I am no mathematician, but a shortage of 5 million seems like a pretty significant problem. And if all that is not enough, the labor participation rate is also down from 67% in the 90s to 62.1% as of January.
So now what? I would argue that the tactics needed to address our exhausted employees are the same ones that will lure the elderly and others back to work. These plans and policies all focus on the same thing: worker well-being. To be clear, this is not another wellness program that offers yoga classes or discounts on health insurance premiums for participating in health screenings. I am talking about foundational shifts in how work is structured, executed, and measured by giving people flexibility, freedom, and control. In other words, we need to redesign almost everything.
Henry Ford was a pioneer in this way of thinking and astonished many when he adopted a five-day, 40-hour work week back in the 1920s. His reasoning was not necessarily altruistic, he believed that his people would be more productive if they spent less time at the factory each day, and had more time for leisure each week. He also made it a point to break the work down into manageable elements, and was quoted as saying “nothing is particularly hard when you divide it into small jobs”.
Almost 100 years later, a recent report by Deloitte suggests we may be witnessing the “end of jobs” as organizations would be better served by hiring people with transferable skills that allow them to be productive and efficient in a constantly changing environment. In short, maybe we should focus on doing less with less.
Today, most companies have adopted a hybrid environment that allows at least some remote work and flexible scheduling , a number of industries are experimenting with distributed authority and self-management structures, and several governments and organizations have been piloting the 4-day week (with remarkable results including an increase in productivity). Technology including AI and other advanced capabilities will undoubtedly play an oversized role in boosting employee retention, empowering contemporary companies and their workforce in the future.
Leading organizations invest 2.6 times more in technology and make it a point to free up their top performers to address their biggest challenges. Whether or not you want to join them is up to you.
There are a wide variety of hypotheses that attempt to explain why workforce productivity has suffered recently, but I am going to focus on one so we can explore possible solutions.
My speculation is simple: people are tired, and there are not enough of them. Another McKinsey report suggests that nearly half (48%) of people are abandoning their jobs for entirely new industries. During the height of the pandemic, healthcare organizations experienced 30%+ turnover as nurses clearly communicated they were burned out and bolting. Today in the US there are approximately 6 million unemployed and 11 million job openings. I am no mathematician, but a shortage of 5 million seems like a pretty significant problem. And if all that is not enough, the labor participation rate is also down from 67% in the 90s to 62.1% as of January.
So now what? I would argue that the tactics needed to address our exhausted employees are the same ones that will lure the elderly and others back to work. These plans and policies all focus on the same thing: worker well-being. To be clear, this is not another wellness program that offers yoga classes or discounts on health insurance premiums for participating in health screenings. I am talking about foundational shifts in how work is structured, executed, and measured by giving people flexibility, freedom, and control. In other words, we need to redesign almost everything.
Henry Ford was a pioneer in this way of thinking and astonished many when he adopted a five-day, 40-hour work week back in the 1920s. His reasoning was not necessarily altruistic, he believed that his people would be more productive if they spent less time at the factory each day, and had more time for leisure each week. He also made it a point to break the work down into manageable elements, and was quoted as saying “nothing is particularly hard when you divide it into small jobs”.
Almost 100 years later, a recent report by Deloitte suggests we may be witnessing the “end of jobs” as organizations would be better served by hiring people with transferable skills that allow them to be productive and efficient in a constantly changing environment. In short, maybe we should focus on doing less with less.
Today, most companies have adopted a hybrid environment that allows at least some remote work and flexible scheduling , a number of industries are experimenting with distributed authority and self-management structures, and several governments and organizations have been piloting the 4-day week (with remarkable results including an increase in productivity). Technology including AI and other advanced capabilities will undoubtedly play an oversized role in boosting employee retention, empowering contemporary companies and their workforce in the future.
Leading organizations invest 2.6 times more in technology and make it a point to free up their top performers to address their biggest challenges. Whether or not you want to join them is up to you.