NOTE: This article is a part one of two contributions regarding The Secrets of Productive Workplaces. This article scrutinises what productivity is and how it’s measured, and the second uses these insights and recent research about the effects of technology change on work and jobs to describe key features of productive workplaces – with an eye to the future. The second contribution is available here.

To uncover the secrets of productive workplaces, we first need to squash some myths. The first myth is distinguishing between productivity and efficiency.

Terry Moran, an esteemed and experienced public servant and Head of Australian and State Government Departments, introduced a special Productivity edition of the Public Administration Today magazine arguing that productivity and efficiency are often wrongly used as interchangeable.

He identifies useful distinctions between “… the traditional sense of doing the most work with the fewest resources, to a measure of how well we are allocating resources to the right places, to a more dynamic sense of being able to use new technologies and adopt new ways of operating.” Moran especially emphasises the significance of this last definition, given the next wave of the digital revolution being set to dramatically reshape the nature of many workplaces.

Another set of myths involve the official measures of productivity and what’s missing from them.

The standard measure of productivity, put simply, is the rate of output per unit of input. Productivity compares the growth in the output of goods and services with the growth of inputs, mainly labour and capital. The productivity of workplaces depends on a combination of workers, machines and money.

Economist Ross Gittins puts it this way: “The main thing causing an increase in multi-factor productivity is technological advance – the invention of better machines plus improved ways of running businesses. But also improvements in ‘human capital’, the rising education and skill of the workforce.”

But, Gittins, among others, points out there are fundamental flaws in what is actually measured. Gittins notes that one key problem for economists measuring productivity is that they can’t distinguish between more machines and better machines. So their productivity measurement, in fact, excludes much of the technological advance essential to productivity performance which they are purporting to capture.

Other articles in the special Productivity edition of Public Administration Today detail further limitations to the standard approach to the measurement of productivity.

An article on ‘Authentic Productivity’ by Agarwal et al makes the case that standard measures of productivity focus on short-run economic growth at the expense of sustainable productivity growth and social wellbeing. Productivity measurement, for example, does not count or compensate for significant negative external effects of production, such as waste and environmental degradation.

Another article based on Moira Scerri’s doctoral thesis, ‘ Defining new measures of productivity for service and network based firms’, introduces four new dimensions on which to measure and understand the dynamics of how productivity works to enhance economic and social value.

Scerri presents productivity measures operating not just as physical and tangible outputs and inputs, but interacting in different ways across four distinct planes: geography, information technology, business, and social.

The geographic dimension of productivity is described as ’place’ or ‘space’, where human capital and resources are created, used and transformed, either physically or virtually. ‘Place’ is more than just for the production of outputs, but a concept associated with identity, community and shared purpose.

Investments and adoption of information technology are a lead indicator for anticipated increases in productivity, as they enable new capabilities, business models and methods of customer engagement.

The business dimension of productivity covers not only exchanges and transactions, but business connections, relationships and collaborations. Productivity is affected by changes in how businesses operate and are structured, concepts of co-working spaces and virtual teams, and cross-industry collaboration and open source business problem-solving.

New social dimensions – defined as connections and interactions between two or more people – can encompass business or personal areas of interest and relate to the productivity potential of the contemporary rise in social networking. Enhanced communication flows, knowledge-sharing, and cross-functional work are all aspects of the social dimension of productivity.

Scerri offers a networking perspective of how these four dimensions can interact and work to create productivity gains in workplaces. Networking effects play a significant role in productivity on a number of fronts: transport infrastructure for movement of physical goods and the operation of supply chains; information technology for electronic data interchange vital for trading hubs and new markets; business, supplier and customer networks that enhance competition and customer service; financial flows that make income and costs transparent for better decision-making; and formal dialogue and communications providing flows of intangible inputs and outputs, such as ideas sharing and joint learning.

A concerted effort is needed to explore and introduce these new measures of productivity and apply them to workplaces to increase overall national prosperity and wellbeing.

REFERENCES

Institute of Public Administration of Australia (2015), Public Administration Today, edition 43 on Productivity, July-September 2015.

Ross Gittins, The top secret good news on productivity, The Sydney Morning Herald, July 25-26, 2015.