Can We Have Too Much Productivity Improvement?

From airlines to professional services, is improvement in productivity always a good thing, especially right now? Is it the ultimate answer for foundering economies? Or will it increase the ranks of the unemployed? You decide.
by James Heskett

Summing Up

There was a wide divergence of opinion on this month's column. A surprising number of respondents concluded that an economy could suffer, at least in the short-run, from too much productivity improvement. But many suggested that the source matters, particularly if the improvement comes as the result of exporting jobs to China, India, and other developing economies. Still others argued that the issue relates to end objectives, not the means, of achieving greater productivity.

Jim Noon characterized the first point of view. He wrote, "The inevitable trap with ever-increasing productivity is the need [for] ever-increasing consumption. Unfortunately unemployed workers don't consume much of anything." Garry Emmons reminded me that "We examined this issue with HBS profs in a February 1999 HBS Bulletin article. ("Too Much of a Good Thing?" See It does seem to be a problem, and getting more serious." Alejandro Ocana suggested that "productivity improvement [should mean], 'How much more can we do with the people and resources that we already have?' and not 'How can we make more with less?'"

The rise of the global economy and the Internet were cited by some as being responsible for the current dilemma. John van Heteren paraphrased several respondents when he opined that "I believe that the existing definition in your article was not conceived in the Internet age ... in a global economy, productivity improvements improve life somewhere in the globe, but not necessarily in the U.S.A." Bill Donohue wrote that "In the 20's ... the root cause may perhaps have been the massive building of low cost assembly line-based industrial enterprises ... We have a similar yet different situation today, as China and to a lesser extent India are providing huge capacity additions to the global markets."

Still others suggested that the benefits to society of productivity increases might depend on what they are used for. As Sean Allen pointed out, "This may be similar to the question of whether or not too much money is a good or bad thing... it depends upon what you do with the money."

An equally strong set of voices doubted whether an economy could have too much productivity. Chris Walker summed up many of these views by commenting, "... the business community must have faith that markets will once again bring labor back into equilibrium... the alternative of suppressing advances in efficiency is not within the realm of reason." Amy Savin commented, "I believe that increases in productivity are ultimately good for the economy and the vast majority of its members. The process is not a smooth one."

The questions remain. Does productivity improvement hurt more than it helps? Or is this a transitory condition, peculiar to selected times and places? Will the old view that productivity has to be good have to be revisited, at least on a "local" or national basis, in the light of the development of the global economy and the Internet? What do you think?

Original Article

We tend to think of improvement in the productivity of labor and capital like safety; one can't have too much of it. But is that always the case? Is the U.S. in fact experiencing untimely increases in productivity now?

These thoughts were triggered by several disparate and clearly unscientific "data" points. First, the buzz at a seminar of professional service managers in which I was involved last month was the potential for "gain sharing" the benefits of such things as process improvements and the export of increasingly highly-skilled jobs, among others, with clients. The rationale was that the resulting increasingly lower fees would lock out competitors for client relationships and create the opportunity for new business "wins."

As if to suggest that this phenomenon was not limited to the U.S., I read of Ryanair's plan to share the fruits of increased productivity with the passengers on its flights throughout Europe by reducing fares annually over the next several years. And then last week we learned that U.S. unemployment had risen to the highest rate in nine years.

Economists assure us that productivity (the ratio of product and service outputs to labor and capital inputs) improvements are good for all of us, whether we are employed (and thus factored into the statistic) or not (which the statistic ignores). It makes living more affordable for everyone. But can we have too much of it, especially when there is insufficient demand for the resulting output?

Given the economic challenges facing the world's economies, does productivity improvement at a time like this contribute to the downward price spiral so feared by economists from Alan Greenspan on down? Will it add to the ranks of the unemployed with attendant social and psychological costs, costs not factored into productivity calculations? Or does it provide the ultimate answer to foundering economies on which the world pins so many hopes? What do you think?

    • Saurabh Dwivedy
    • Senior Software Engineer, Patni Computers India

    I'd like to ask if this is as big an issue as some folks are making it out to be. In my experience, organizations are more likely to be grappling with problems of nonproductivity than ruminating on reaping gains. And companies like G.E., which after a period of trial and error have successfully transformed themselves into leaders having redoubtable productivity footprints, have never complained about the profits becoming too much to handle. In fact, for them increased productivity provides that very crucial plank from which to jump off and diversify into newer and newer areas.

    • Anonymous

    There was very likely a similar conversation when the first factory was built. One thing is certain: The global market economy means there is a new criteria for equilibrium. If the U.S. won't be Rome anymore, well, it's been a nice ride.

    • Harry-David Gauvin
    • Project Manager, Queensland Government, Australia

    Professor Heskett defines productivity as the "ratio of product and service outputs to labor and capital inputs." Productivity improvement is never a problem as long as one takes a proper and holistic view of this definition. Many of the other respondents have citied examples that show a common misunderstanding of the concept. They complain about the decreased service standards (lack of a parking attendant, or customers being rushed) that have occurred in the name of 'productivity.' If both sides of the ratio have decreased, then the ratio of productivity is unchanged. The trick is to provide better results with the same inputs, or the same results with less.

    Assuming that the above is adhered to, I am concerned at the level of adherence to left-wing fallacy even among HBS readers. If a company can produce the same results with fewer people then why should it keep them? Such a suggestion is tantamount to saying that companies should put on more people to sit around in their coffee rooms doing nothing, just to reduce unemployment. Never mind that in a free enterprise system these people could be gainfully applying their time to other productive purposes... .

    • Rick Rector
    • Vice President/Publisher, United Publications

    Productivity improvements can certainly be overdone. Managers need time to think, plan, strategize. With the emphasis on productivity, management these days spends more and more time "doing" to the long-term detriment of the organization. Tom DeMarco in his book, Slack: Getting Past Burnout, Busywork, and the Myth of Total Efficiency, makes an excellent argument for more downtime, considered by many the antithesis of productivity.

    • Michael Andretti
    • IT Consultant

    Readers who criticize productivity miss the point Ninety percent of economic growth comes from productivity. Too much productivity means too much economic growth. Productivity growth contributes to rising standards of living—higher income per capita.

    In the long run, productivity creates more jobs than it eliminates—benefits exceed costs. There is no limit to productivity improvement—someone will always figure out how to do things faster and cheaper Slowing productivity is not in the best interest of a nation. Slowing economic growth limits the ability to achieve maximum employment—since high growth is required to reduce national unemployment.

    • Andrea Grocott
    • Training Manager, State Street

    From the position of organising and delivering training in a large financial services company, I observe the drive for greater productivity and feel the effects of the results. Let me explain. No one disputes the need to have a highly trained competent workforce, yet time after time delegates are not allowed to attend scheduled courses because they cannot be spared. You see there is no longer any budgeted time for training and development. Managers feel they don't have time to do all the "people" things they should do—like set objectives and perform appraisals. Managers also say they don't have time to think about their own development, let alone that of their staff.

    The net effect of all of this is a workforce with low morale and a feeling that an individual is just a number that no one cares about. There is also a feeling of increased pressure, and a feeling that managers are less empowered than they used to be because decisions are imposed from on high.

    I would argue that the drive for increased productivity has indeed gone too far and is not necessarily increasing the bottom line once all the costs of illness/absenteeism/staff turnover are taken into account. People are our greatest asset and they need to be given the chance to meet their own career aspirations as well as assist the company to achieve its goals.

    • Zbigniew Becker
    • International Projects Co-ordinator, The Academy of European Integration, Szczecin, Poland

    Taken out of its social context, productivity for the sole sake of itself almost always leads to creating more problems than it solves. The question is not whether to increase productivity (both in an isolated microeconomic sense and in a bit larger macroeconomic aspect), but rather what for and at what cost. Introducing high technology, thereby dramatically increasing microeconomic productivity in a country of severe and chronic unemployment, ought to be seen as insanity; but is the former all that more rare than the latter?

    • Flavius Chircu
    • freelancer

    One could see any one of your three scenarios coming to fruition. The first one (productivity improvement at a downward price spiral) is less likely because Greenspan and the likes can still take care of it.

    The second one (dislodged workers at increased social costs) has been around for a while; it's only that now it may well enter a new phase where tech workers feel the brunt the way, say, manufacturers did a few decades back.

    In the capitalist theories, your third scenario (the ultimate answer to foundering economies) is what always follows such periods of crisis. The only condition though, I may add, is that these economies should be faithful to their capitalist origins.

    To all these I would add a fourth (however implausible) scenario: What if the U.S. liberalized the immigration of a qualified workforce while doing something about education at home?

    • Stephen Elliott
    • CFO, an American law firm

    I think a good definition of productivity must take into account customer perceptions. If the customer thinks you are asking him to work without pay for you (as is increasingly the case), you are in big trouble!

    For example, measuring productivity based on the amount of human time spent per customer often degenerates into:

    "How soon will the customer quit trying to get through the automatic answering system to a real human being?" (Justified by "We're not getting so many calls anymore, so the customers must be more satisfied, and look! We've cut costs.")

    "How soon will support staff learn that they need to subtly cut calls short (whether they have finished helping the customer or not) in order to meet their productivity number?"

    Clearly many companies think that they are getting more productive when all they are doing is infuriating their customer base. This is counterproductive in the not-very-long run.

    Between real jobs, I worked in a few well-known Internet call centers briefly, a few years ago, "for the experience," and I know first-hand about how high the pressure is to get the customer off the phone after a few minutes, whether one is finished with the job or not, simply to meet the numbers.

    And we all have a great deal of experience with endless lists of options from which we must choose in order to get through to a real human being, and then, after waiting on hold listening to "music," being cut off and having to start over again from the beginning!

    Someone, somewhere, undoubtedly thinks this is productivity improvement. I think it is analogous to throwing garbage in the street for someone else to clean up.

    • Anonymous

    Productivity gains can be achieved by outsourcing some of the work to foreign countries, taking the advantage of the still-huge difference in salaries between developed countries and undeveloped ones. But this won't do any good for the local ones, and the same will happen to the foreign ones when the outsourced job is moved to another, cheaper country.

    Productivity increments at the expense of people is just insane in the long run. How good can it be to say that productivity is much better when you now have to work ten hours/day and next year, maybe eleven hours/day, to justify not moving the job somewhere else?

    As you say, productivity is not taking into account many other factors. It is increasing, but at what cost? Who knows?

    • Michael Taye

    Is too much productivity bad in the face of falling demand? Yes, if it leads to rising unemployment and the inability of the government or the Fed to facilitate the necessary structural changes. Because of price-wage rigidities, there will always be painful adjustment. Increased productivity only adds to the pain, but this pain is only short-term.

    I think the more important issue about productivity that all the statistics and econometric and economic models do not address is this fundamental question:

    Is productivity a means to an end (better quality of life) or an end in itself? If we can set the premise correctly, then the issue of too much productivity becomes a non-issue as it correlates directly to the achievement of happiness and fulfillment. Can we have too much joy and happiness?

    • M. A. Mateen
    • DGM (Audit & Control ), Berger Paints India Limited—Rajdoot Division

    Productivity improvement is a relative term. It can be company/industry/economy specific. We need to also differentiate between inefficiency and productivity improvement.

    In my opinion, for a country like India, where the main issue is unemployment and therefore low disposable income, too much emphasis on productivity improvement may harm the economy and would therefore have social and psychological costs.

    Striking a balance between productivity and the well-being of society is a real challenge currently faced by many governments in the world.

    • John Ferrari
    • Owner, Affinia Hospitality

    Yes and no.

    These things—like most—have a life cycle. Right now companies don't want to spend money, and this forces companies to look for ways to save money. Thus they cut back on service and install automated phone attendants. The company that puts it in saves money, but for the company that is calling, it costs money since it is usually less productive for the person doing the calling. Then a new company will spring up whose core competency is "human voice."

    I see it in my industry. Companies want cheaper hotel rates, so we cut back on services offered in the price. (we cut people and buy fewer outside items.) Then the employees who travel a lot revolt and the companies open up their pocketbooks and DEMAND more service.

    • Jim Noon
    • CEO, WebBuildBoston.Com

    When I was in the advertising business, I produced a lot of ads for high tech products that were labor saving, and was always tempted to dramatize the benefit of the product by showing with a lengthening unemployment line. The inevitable trap with ever-increasing productivity is the need for ever increasing consumption. Unfortunately unemployed workers don't consume much of anything.

    • Mark Montgomery
    • Founding Partner, Initium Capital

    As usual, the core of the debate is shaped by defining the terms.

    If we use the broader definition to include productivity of society, and measure success by major objectives, then no there is no limit to productivity. This broad definition would surely need to include employment levels and sustainable economics, the curing of diseases, educational/knowledge achievement, and quality of life. Alas, we are all people....

    It seems to me that the best argument for increased productivity is to lterally save the planet, without which the facts on the ground don't look promising long term.

    Reasonable questions might include: How has increased productivity led to cures for major disease(a mixed bag due to related issues within major R&D centers), population control, lowering of crime, etc.?

    Looking at productivity through the lens of an individual company is quite different than for the entire world. Any issue beyond the individual company or industry is one of public policy. That is where the real challenge lies because we all live within an increasingly global economy in an IT-dominated world, but we are still attempting to live by antiquated nationalist structures developed slowly over centuries, with mountains of trade and currency policies that have shaped the lives of all people everywhere.

    Reform can only take place at a pace that does not threaten the global economy, but it also must happen quickly enough to achieve the same.

    Bottom line is that I'm afraid we will be living with more protectionism in the U.S. in the future, unless of course someone discovers a brilliant alternative that has evaded the best and brightest to date.

    • Bill Donohue
    • Manager, System Engineering, Virginia's Manufacturing Extension Partnership

    Productivity in combination with the profit motive has raised the standard of living globally (ex. Africa) to levels never before seen. The information age has changed the resources available for distribution of goods and services, enabling the efficient sourcing of labor that is in many cases well educated, and in all cases very economical on a cost per labor hour basis. Investments in container ports in combination with trailer train and trucking resources have reduced barriers to entry for global companies resulting in landing goods at low cost in the US, and Europe.

    In the 20's many point to banking miscues as the root cause for the global depression. While they were in a position to dampen the effect, the root cause may perhaps have been the massive building of low cost assembly line based industrial enterprises, many in the US, that flooded markets with goods as labor hours per unit was reduced dramatically. In combination with rapid agricultural mechanization, deflation set in.

    We have a similar yet different situation today, as China and to a lesser extent India are providing huge capacity additions to the global markets. These additions are financed by Western economies, but produce at a much higher labor hours per unit cost, as productivity and environmental controls are not required based on standard of living deltas that are huge. In many cases US and European companies are providing materials to these countries at costs lower than charged to Western economies, in effect subsidizing these markets through Western division profits. The net result is cash outflows for Western economies that over the long haul, cannot be sustained. Western Standards of living will ultimately fall. The middle class could be an endangered specie.

    Our economy and competitiveness is dependent on value being added through out our employment sectors. There has never been a more critical time for the US to focus on productivity, and fair trade, with ensuing reinvestment in technology for the next generation. Without such gains, and a level playing field, our status as the world's only superpower will be relatively short lived.

    • John van Heteren
    • Manager, System Engineering, InVision

    I believe that the economic definition of the word "productivity" needs to be revisited. I believe that the existing definition in your article was not conceived in the Internet age, where the back-office labor can occur in one country (such as India) and the service outputs in another (such as the U.S.). Some economists have expressed concern about what appears to be a "jobless recovery" in 2003. I think the record shows that there are plenty of new jobs--they just happen to be in Bangalore, India. So, in a global economy, productivity improvements improve life somewhere in the globe, but not necessarily in the U.S.A.

    • Mary Richardson
    • Consultant, WorkLife Resources

    I think there is an assumption that increased productivity means that any individual has to do more and must maintain his or her current work hours. A potential outcome could be keeping the same number of people employed, performing more efficiently, and working fewer hours. What kind of impact would that have on the society as a whole? Would people be able to spend more time volunteering in their children's classrooms? Would stress levels decrease? Would workplaces become more enjoyable? Would health and safety costs decrease? Let's review our assumptions on the outcomes carefully—there is a potential for a new emergent paradigm here, and we should be exploring it in a more creative manner.

    • Garry Emmons
    • Senior Associate Editor, HBS Bulletin

    Increased productivity, combined with readily and globally available technology, combined with the developing world's longing to industrialize, all suggest that overcapacity may become a chronic problem, not just a business cycle event. We examined this issue with HBS profs in a February 1999 HBS Bulletin article. ("Too Much of a Good Thing?" See It does seem to be a problem, and getting more serious. I didn't dare use the word "deflation" back then regarding the United States for fear of being dismissed as hopelessly alarmist. Look how things have changed.

    • Anonymous

    It all depends on how you define productivity. Savings for one group but detriment for another are just a math calculation. Take this simple example: We used to have a carpark attendant in our nearby shopping center. For productivity's sake (i.e., to save some money), the management decided to replace him with an automatic system.

    For the users, it is more inconvenient. And the parking tenant is now on welfare, therefore costing something to society. As to the savings, I was told the system has a five-year pay-back. I don't even know if you would call that productivity. From one angle, yes ... but the total impact to society is negative.

    • Lyle Pirnie
    • Director of Logistics, IBM's Microelectronics Division

    I don't think it's possible to have too much productivity improvement. "Reengineering" is a healthy process by which redundancies are eliminated and non-essential tasks are pared. It's incumbent upon employees to keep their skills current.

    • Sean C. Allen
    • Marketing, Dow Corning Corporation

    Too much productivity? Good or bad? This may become similar to the question of whether or not too much money is a good or bad thing. Personally, I do not think so but it depends upon what you do with the money. Increased productivity does allow for product and service improvements, cost reductions, or increased flexibility; but it also carries with it a responsibility to use this "currency" wisely.

    I suggest this be used towards ensuring that those who provide the productivity gains are well rewarded and that new wealth is used to improve working conditions for all. Sounds strange coming from a staunch Republican, but the difference between theory and reality, when it comes to rapid increases in productivity, can often mean real pain for thousands.

    • Anonymous

    As Professor Heskett rightly points out, the mindless pursuit of productivity is contributing today to our problems. Productivity improvement without commensurate increased demand leads to deflation—which we all agree is bad. Demand cannot increase in an environment when people are losing or fear losing their jobs.

    We talk about people as assets, but we treat them as costs and will continue to eliminate them in the pursuit of higher productivity. An economic system that does not serve people first is not sustainable.

    • Paul Deis
    • Consultant, Essex of Oak Park, Inc.

    You have your finger on the key—the tremendous excess capacity in just about every business and industry: more supply than demand.

    The paradigm upon which all of our thinking for decades has been based is the idea that shortages, limitations of supply, of product, skills, information, everything, are natural and normal. Now, however, we have created an abundance—an easy availability of everything.

    So, this excess of supply at every level has undermined the whole system by which people are paid more than survival wages, which depends on the relative shortage (greater demand than supply) of what they know and can do. When you project this into the future, with globalization especially, it's not a pretty picture.

    I've been a management consultant for over twenty years and have watched this trend in a conscious way since about 1990, as the globalization trend gathered momentum. Everyone assumes that the U.S. will always be THE market, customers for the whole world; but what will our people do to earn money above survival levels? We're running out of the ability to sustain spending by going into debt, refinancing our homes, and cashing in IRAs and annuities.

    Trade with China is a one-way street, for example. We buy stuff from them. Their people are not paid enough to ever buy anything from us, with their wage caps. Where does this lead? I don't think anyone is really thinking much about these life-determining issues.

    Thanks for the opportunity to comment, and keep up the good work!

    • Chris Waller
    • VP, Acquisitions / Partner, Garrett Development Corp.

    Theoretically, the efficient market should enable labor markets and demand to adjust in the long term to increases in productivity and lower demand for labor. Throughout most of business history, this theory has held somewhat true. However, automated high technology for process improvements in combination with the Internet have vastly accelerated productivity gains within a relatively short timespan of only the past several years. Certainly, this phenomenon has had some impact on current unemployment rates, although the leading causes are terrorism attacks and downturns in the high-tech, Internet, and airline industries.

    Such advances in productivity cannot continue at the rate of the past several years. The business community must have faith that markets will once again bring labor back into equilibrium. Certainly, some social programs for retraining in certain industries may be necessary, but the alternative of suppressing advances in efficiency is not within the realm of reason.

    • Anonymous

    First one has to ask, "What is productivity?"

    Is it speed?

    Is it knowledge?

    Is it experience?

    Is it innovation?

    Is it relationships?

    Is it ethics?

    Is it values?

    Is it price?

    In truth, productivity is all of the above.

    Productivity without one or more of the above eventually fails.

    • Scott Huntley
    • Manager, Customer Administration, CNF, Inc.

    Productivity improvement may not be good for all, but it is good and essential for the ongoing vitality of corporations. ...

    The FUD (fear, uncertainty, and doubt) that Ephraim Schwartz mentioned in his article on the Oracle takeover bid for PeopleSoft ("Oracle Plays Hardball with PeopleSoft," InfoWorld, June 20, 2003), which employees face in this age of unbridled and unabated change management, is an outgrowth of the evolutionary vortex of process improvement demands that corporations place at every employee's doorstep.

    Comply, execute brilliantly, and you may be out of a job in the not-too-distant future. Fail to comply, resist, and you are much likelier to be out of a job even sooner. On the other hand, "to the victor go the spoils" stills rings true on occasion, and those who are fortunate enough to remain "on the team" after a process improvement/redesign initiative runs its course are often touted as the newest heroes in the organization. However, they are doing more with less and feel even less secure as a result, despite the accolades they may temporarily enjoy.

    Too much productivity? With survival at stake, how can we say there is such a thing? But for the individual, it's a sharp, double-edged sword that cuts not only the fat, but also the tendons of loyalty and performance they once felt had securely held them to their employer.

    • Amy Savin
    • President, Savin Management Group

    I believe that increases in productivity are ultimately good for the economy and the vast majority of its members. The process is not a smooth one. Unfortunately, there is pain along the way for those who lose their jobs as a result of the changes. In the end, however, I believe the standard of living of the majority rises as a result of productivity.

    • Anonymous

    As long as the productivity you speak of produces a high-quality result focused on exceeding the true needs of the customers in the marketplace, I don't believe it is bad because it creates more demand (a bigger pie) ... at least for the organizations that are responsible.

    For me it is the process of natural selection in the marketplace. Quantum leaps are nothing new, business history is full of similar situations, and the holistic marketplace has always shifted and adjusted. I think we have a long way to go before productivity gets to the point where everyone is at Six Sigma. There is always the bleeding edge and there are laggards that take ten years to catch up. There will probably be fewer laggards in the future, but is that a bad thing?

    • C.J. Cullinane

    If "productivity" increases at the cost of research and development, training, and service to the customer, it is not a real increase of productivity; it is just cost cutting.

    A true increase in productivity will lead to growth and improvement, but will also have a social cost unless we gain the new skills needed to function in the new arena.

    • Anonymous

    Ryanair's plan will fail unless it also shares the fruits of increased productivity with the employees to maintain the increase. The downward price spiral and many other disruptive social and psychological consequences are inevitable as science and technology make progress while economic thought marches in place.

    The ultimate answer lies in the alignment of economic practice with the science and technology progress. Progress in behavioral economics will point the way.

    • B. V. Krishnamurthy
    • Executive Vice-President and Professor of Strategy, Alliance Business Academy, Bangalore, India

    The problem may not be with productivity improvement itself as much as the mismatches in the elements which go into productivity measurements.

    Let us consider two examples. First, a fully automated factory which employs only a few people and produces large quantities of a high-value product. This is no longer in the realm of imagination. The people productivity of this factory would be enormous; the customers might benefit too from lower prices; and yet the societal costs of such a venture would be enormous, too. In fact, taken to its logical conclusion, if every enterprise were to attempt such a business model, there might be chaos and even anarchy in society.

    Second, a low-cost labor economy that produces huge quantities of mass consumption products and markets them at ridiculously low prices: this ia a reality today. This may sound attractive in the short-term, but might be catastrophic due to its potential to create social convulsions, perhaps even a revolution, in the long term.

    A major reason for the imbalances could be the proliferation of technology for its own sake. How many of us can really use the processing capacity of a 3.2 GHz microprocessor? Does it really matter whether a car can zoom from 0 to 100 mph in 11 seconds?

    Obviously, we may not have right or wrong answers to these questions. However, the collective wisdom of humankind must seriously ponder this and strive to strike a balance between productivity improvements of any kind and enhancing the quality of life for EVERYONE. We just cannot afford to think in compartmentalized isolation of any one section of society. The doctrine of the greatest good for the largest number must guide our actions in every field. Therein might be an answer to the dilemmas we face today.

    • Alejandro Ocaña
    • Business Consultant

    In Mexico, productivity in the housing construction industry has been growing due to both administration staffs and workers, but this is the result of eliminating or firing thousands of employees. ... so I think that productivity improvement [should mean], "How much more can we do with the people and resources that we already have?" and not "How can we make more with less?"

    • John Apen
    • Editor, Manheim Auto Auctions

    Productivity gains are a blessing in societies with clamoring, expanding markets of affluent consumers. They are a disaster in societies with soaring populations or increasing unemployment, both leading to diminishing per capita incomes. ...

    In a stagnant market economy or a society where growing populations surpass per capita income growth, there is no demand for increased goods or services. The paramount need is for jobs. Productivity improvements lead to more unemployment and the death spiral of more goods competing in a diminishing market.

    Henry Ford realized this eighty years ago, when his assembly lines increased productivity to an unprecedented level. By raising wages, he attempted to create demand in a society experiencing reduced employment because of incredible productivity improvements.

    Currently, we seem to be allocating all the fruits of productivity improvements to the "capitalist" class and ignoring the need to share these gains with the people who will create demand. Henry is spinning in his grave as we embark on a "trickle down" path, ignoring middle class consumers: those who should be sharing the benefits of productivity improvement, but are instead harvesting the bitter fruit of productivity improvements: unemployment.

    • Shahab
    • Senior Manager, NASSCOM

    It will be a difficult for businesses across the world to determine the threshold limit of productivity. Technology and the service improvements lead from innovation of one product/service to another, which will keep generating a chain of services.

    • Christopher Strang
    • CEO, Agon Trask Media

    There is the story of the farmer who fed his mule 10 percent sawdust to cut down on the price of feed. He kept increasing the percentage until, finally, the mule died. The irony was, the farmer was surprised and shocked.

    • Anonymous

    As long as you do not trade off on product/service quality and reliability and customer and employee safety, I would conclude that continuous productivity improvement is a good thing. In the short run, it leads to dislocations (individual income and employment upsets), but in the longer run it contributes to general economic success.

    The key question, particularly in a prolonged recession like this one, is, how do you help individuals make it through these dislocations? Unemployment insurance, retraining, and job advertising and recruiting systems are a few of the obvious "structural helpers" to get through both normal and abnormal dislocations.

    • Charlie Girardi
    • Senior Buyer, MB Tractor & Equipment

    We risk losing customers when we become too productive. Productivity is extremely important in every business, but when you ignore or rush the people you are trying to serve, you counteract productivity. When you are dealing with servicing people's needs, it is more important to focus on those people and build stronger relationships with them, than miss opportunities because you were not tending to their needs and were just thinking of the next person in line.