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Productivity Is a Higher Priority, but Which Initiatives Really Work?

In the good times, your organization probably doesn't worry about productivity quite as much. It's important but not necessarily crucial. After all, in the good times, your organization's cash flow is positive and, as a manager, you're probably more concerned with hiring and retention than with getting the most out of every worker and team.

When times get tougher, however, productivity tends to become an overriding priority. Your organization has to get the most out of every resource, even while cutting nonessential costs. Maybe there are hiring freezes, maybe even layoffs. Very likely, there's intensified scrutiny of what's being produced and spent in every department, with the goal of making the whole organization both more efficient and effective.

It's not sexy, just critical.

So, it wasn't surprising to find that a majority (59%) of companies responding to a new Institute for Corporate Productivity survey reported that, compared with the previous year, their organization's "emphasis on improving employee productivity and efficiency" has increased, whereas only 4% said it had decreased.

But awareness that you need to place greater emphasis on productivity is not the same as knowing exactly which productivity-enhancement practices are most effective. To learn more about such practices, the May 2008 survey, to which there were 305 respondents, asked questions about 16 factors that have the potential to raise productivity. Of those 16 factors, the five that were viewed as having the biggest impact on productivity were corporate culture, leadership, compensation and benefit programs, training and development, and performance management. These represent the collective and, perhaps, conventional wisdom on how best to boost productivity.

We tried, through an analysis of the data, to discover the primary differences between average and highly productive companies. We asked respondents three questions that provide an indication of their organization's productivity and then compared the responses of those organizations to the average responses of all organizations. The analysis found that the most productive organizations furthest outstripped the average ones in four areas:

• The culture of the organization
• Leadership
• Employee engagement practices
• Employee health/wellness programs

Seventy-nine percent of the most productive organizations say that, to a high or very high degree, the cultures of their organizations help raise employee productivity. There's good news and bad news here. The good news is that every corporate culture is unique, so to the degree that an organization's culture helps raise worker productivity, it retains a unique advantage in this area. The bad news is that it's not easy to influence and benchmark cultures, making it difficult for aspiring companies to imitate "high-productivity cultures" in order to boost productivity.

But there is one good place to begin any culture-change initiative, and that's with leadership. Seventy-six percent of highly productive companies said that, to a high or very high extent, leadership in their companies raises productivity (compared with 48% of all respondents). Therefore, leadership development programs that teach managers how to measure and boost productivity among their direct reports would seem to be an excellent strategy for companies to pursue.

Such leadership development must, however, be undertaken with care. Leaders who do little but crunch numbers and push productivity quotas are less likely to be successful over the long haul. That's because employee engagement is crucial. Whereas just 31% of average respondents said their organizations use engagement practices to a high or very high extent to boost productivity, 59% of highly productive organizations said they do. Engagement means that workers are mentally and emotionally invested in their work and in contributing to their employer's success. Such employees are usually satisfied with their work and speak positively about their employers. Therefore, simply urging employees to work harder or longer is unlikely to be a good productivity strategy over the long term.

The fourth area where highly productive companies put much greater emphasis than average firms is that of employee health and wellness. This finding may be interpreted in several ways, suggests Jay Jamrog, the Institute for Corporate Productivity's senior vice president of research. It could be an anomaly that will not be supported by future studies, or such health programs could be an exceptionally useful engagement tool.

"People like to work for organizations that send strong signals that they care for their employees. These particular programs may be sending those signals more than most other types of initiatives do," Jamrog noted. It's also possible that such programs actually boost the physical and mental well-being of workers, leading to higher rates of work productivity. Exploring these different possibilities seems like a fruitful subject for future research. If future studies support these findings, then such programs could turn out to be an underutilized or poorly recognized strategy for boosting productivity.

Another difference between highly productive and average organizations is in how they tend to measure productivity. The survey asked respondents about the various ways in which they gauge productivity and found that output per work group was the most widely utilized metric, followed by revenue per employee, output per person, output per hour and profits per employee. Highly productive organizations were not only more likely to use most productivity measures of all types, they tended to place nearly the same emphasis on output per person as they did on output per work group. Correlation is not causation, but these findings suggest two possibilities: (1) that applying such metrics leads to higher productivity levels because what gets measured gets done, and (2) that organizations should look at both individual and group productivity metrics if they want to have success in this area.

The survey also asked about specific tools companies use to track productivity. The most widely used tool for all respondents was accounting software, used by 32% of respondents to a high or very high degree. It was followed by time-tracking applications, project management applications, and balance sheets, in that order. It was interesting to note that highly productive organizations were most likely to point to balance sheets, followed by accounting software. Of course, balance sheets are often produced by such software, but the finding suggests that highly productive organizations are more likely to tie productivity to bottom-line factors such as assets, liabilities, and equity.

While these productivity issues need further and ongoing investigation, this study does show that organizations are placing greater emphasis on productivity in today's challenging times. It also suggests that companies that want to boost productivity should consider doing more to measure and track productivity as well as focus on specific organizational factors, including culture, leadership, employee engagement, and, quite possibly, health and wellness initiatives.