We Demand Productivity !!

Many years ago we were preparing for the annual wage negotiations and had received the customary list of ‘demands’ from the union.  It was, as was usual for the time and perhaps is still fairly common today, a ‘laundry list’ of everything from an ‘across the board’ salary increase that equated to at least forty percent in basic wage costs, to additional leave, housing, transport and laundry allowances, a forty-hour working week and additional leave.

I presented the union ‘demands’ (we were fortunate in eventually managing to get the union to present them as ‘proposals’ as opposed to ‘demands’) to our new MD.  He was determined to make a big impression on our business and our industry (he did both in a big way) and immediately wanted to know what we intended to ‘demand’ in return.  When asked what he would like to ‘demand’, he growled “productivity of course” and looked at me as though to say “what am I paying this idiot for”.

Of course, South Africa was and still continues to be ranked amongst the bottom-rung countries in global productivity surveys.  And in a low margin retail business employee productivity is paramount if one is to achieve and maintain any kind of competitive edge.  So it made sense that an employer should ‘demand’ higher levels of productivity in return for these outrageous union demands.  Or did it?

The look I got when I replied that I didn’t think we should be ‘demanding’ productivity in a wage negotiation seemed to indicate that I would enjoy a fairly short career with our new MD.  However, fortunately he asked why and took the time to listen to my reasoning.

It is, of course, quite common to negotiate wage increases or, more specifically, incentives based on productivity – additional amounts to be paid if predetermined production or productivity targets are achieved.  However, there is ample evidence to demonstrate that employees will freely volunteer their best productive efforts when they work in an environment which makes them feel that they and their contributions are genuinely recognised and valued. 

My reply to the MD was simply that the productivity of employees is mostly a function of good management.  It is management’s responsibility to ensure that the appropriate calibre of employee is hired (and retained), that they are properly trained and developed, and that they are appropriately motivated and directed through good leadership and performance coaching.  In a sense, to merely ‘demand’ productivity could be considered to be an abrogation of our managerial and leadership responsibility.

It is frequently argued that workers in this part of the world have a different (less productive) work ethic than those in other parts of the world.  There is possibly some basis to this assertion and Malcolm Gladwell, in his book ‘Outliers’, provides interesting insight suggesting that some people of particular ethnic origins are genetically disposed to having an inherently more productive work ethic.

Notwithstanding this, we have to operate businesses with the resources that are available.  There is ample evidence to demonstrate that the more competent the managers are in their leadership role the more productive their employees and the business will be.

Of course, when talking of labour productivity one usually thinks first of employees working harder - enabling employers to employ fewer people to do the work.  However, productivity (simply defined as the output produced by a specified quantity of inputs) has a much broader meaning.  In economic or accounting terms it is the amount of profit produced by a business with the assets it has at its disposal.

It is obvious that the better employees are at their jobs and the more motivated, committed and energised that they are, the better is the business’ chances of producing higher outputs.  In the retail industry, in addition to contributing to higher sales by providing great customer service, employees can play a very significant part in increasing profitability by, for example, also ensuring that goods are correctly priced and that losses (shrinkage) resulting from damages and theft are minimised.

When my colleague John Raddall, founder of Quanta Consulting, talks about using employee potential, he is not referring to what employees could possibly do or become in the future.  He is instead referring to whether employees apply themselves on a daily basis to finding new or innovative ways to do things better, no matter how small the improvement may appear to be.  Collectively these small (and often surprisingly large) improvements will add up to and result in significant improvements in profitability – and thus productivity.  But it will come as no surprise that this will rarely happen unless the environment (or context) is conducive to empowering employees to develop and use their potential.  And it will also come as no surprise that it is the management that has the ability – and responsibility – to create and maintain such an environment.

It is an unfortunate fact that many, if not the majority, of employees (at both management and non-management levels) in most companies feel that their potential is not fully applied or utilised.  Imagine what a waste this is!  Raddall describes tapping employees’ full potential as “the closest thing you’ll get to a free lunch”.  Get the environment right and your employees will freely give you as much as they can of their potential – their commitment, diligence, ideas and productive effort.

So how do we get the ‘free lunch’?  The answer is simply to ensure that our managers are, at the very least, competent in fundamental leadership and people management skills.  This must not be misconstrued as becoming ‘soft’.  The best managers get consistently great results because they set extremely high standards, expectations and goals.  However, they are also highly skilled at choosing the right employees, at coaching and helping them to develop and use their knowledge and capabilities, and motivating and energising them to want to do their best and continually improve.

Unfortunately, possessing such leadership and people management skills is something that itself requires practice and coaching.  And it is another unfortunate fact that most managers do not apply themselves to the extent that they should, if at all, in developing these behavioural skills by deliberately practicing them with frequent repetition.

In his book ‘Talent Is Overrated’, Geoff Colvin offers compelling argument suggesting that certain physiological differences aside, any talent is really the result of ‘nurture’ and not ‘nature’.  In a remarkable overlap of thinking, he and Gladwell in ‘Outliers’ explain how top performers identify and deliberately practice the skills that are required to get them to the top and keep them there.  Colvin in particular explains how this applies to people in business as well as in sport and music for example.  He also notes the importance of coaches or mentors in providing feedback to help one to identify and address the skills deficiencies that need attention.  It is stressed that mastery in a field or discipline can really only be achieved when we continually force ourselves to go beyond our ‘comfort zone’ and strive for increasingly higher limits of performance.

How many managers do you know who prepare for a performance coaching discussion with a subordinate by practicing what they want to say and how to say it – using a colleague to role play the scenario and help identify how the discussion could be handled more effectively.  The sad fact is that very few mangers do this – it is easy to spot those that do.  The result is that such discussions are completely ineffective more often than not.  Worse still, in many cases they do more harm than good as the employee is left directionless or unmotivated and de-energised, or all of the above.

So should we demand productivity?  Yes, of course we should, but probably not as part of a collective wage negotiation and ‘demand’ may be an inappropriate term.  Shareholders certainly have a right to expect productivity and managers have a responsibility to create an environment in which employees are able and willing to volunteer their best productive efforts in pursuit of the organisational goals.  Businesses will be much more successful in achieving this if managers are required to develop their managerial and leadership competence through deliberate, planned, repetitive practice of key skills.

Those companies that get it right will undoubtedly get to enjoy that ‘free lunch’, together with the resultant sustainable achievement of superior levels of profitability and productivity.

And the really good news!  Those same companies are able, as good corporate citizens, to pay their employees wages above the industry average and still achieve a lower than average cost base.  What a competitive advantage that is!