Devil's Advocate: Productivity gains

What has research taught us about continually improving business operations? Martin Brampton realises if the truth is all that simple...

Research is a wonderful enterprise. Although it often sets out to answer a question, the best research frequently throws up further interesting problems. A recent publication on productivity by the Economic Journal (issue 113) succeeded in this way.

Disney, Haskel and Heden set out to decide whether increased productivity came from internal change or through the Darwinian selection of companies. They examined no less than 140,000 firms across the years from 1980 to 1992. Their conclusion is interesting enough in itself. It was that the vast majority of productivity gains come entirely from shutting unproductive installations and opening new ones.

This seems to outdo my scepticism about productivity improvement through automation quite considerably and with a more solid research base. Productivity, they say, does not change at individual installations, whether they are single establishment companies or the branches of multi-establishment companies. The gains come from closing the inefficient.

Yet this is the point at which I want to start asking more questions that so far go unanswered. While I have long had misgivings about how many office automation projects would really yield benefits, I find it hard to assume nothing can be achieved. Is it really the case that however much we attempt to modify processes, we are wasting our time in an established operation?

Perhaps I can offer a wholly untested theory to make the research results at least a little less bleak. There are good reasons for supposing that organisations actually deteriorate if left to themselves. Examples of this abound and it is evident that even companies that seem like top performers find it impossible to stay in front forever.

Human beings naturally become complacent in a stable situation. That leads not to static performance but to deteriorating performance. Left to itself, devoid of outside pressures, the organisations goes into a steady downward slide. Discretion suggests that I should avoid citing examples but no doubt you can provide your own.

A few years back, there was dramatic confirmation of a similar point of view, when it was fashionable for long established companies to create completely new versions of themselves. A classic example was Prudential Assurance building Egg from scratch, rather than growing it as a division within the existing company.

All this suggests that the organisations that appear to be jogging along with static levels of productivity are really in a state of constant change merely to stand still. The management consultants are needed, almost regardless of the merit of their fashionable theories, as generators of change. And IT is left with some hope if we suppose that creative projects can at least combat the natural tendency to stagnation.

Nonetheless, the research strongly suggests that if we want to achieve significant improvement in productivity, then we must shut down establishments. The research does not tell us whether the results come from changing the work force or changing the infrastructure it uses. That is another of the intriguing questions that are opened up.

Shutting establishments has a human cost, though. There has been much talk of people adapting to serial careers involving dramatic change from time to time. As yet, there is little support to make this a viable route for many people. If it is to be applied on a larger scale, we need companies to take a more positive attitude towards employees who are seeking to adapt their skills between radically different environments. We also need a more flexible education system.

So perhaps, while we continue with research into the fresh questions that have arisen, we should resist too rigorous application of the current results. While a more vigorous employment of Darwinian principles might seem to offer large productivity gains, it might equally well create disruption that we are not prepared to handle. The politicians should take note, though, and look to moving much faster towards support structures that will permit people to cope with frequent change.

** Martin Brampton is a director and founder of Black Sheep Research (www.black-sheep-research.co.uk ), an independent consultancy providing research, writing and speaking services on a wide range of business and technology subjects. Martin was previously a director at Bloor Research, and has worked with IT as a user and analyst for over 20 years. He can be contacted at silicon@black-sheep-research.co.uk.

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