Are people the missing piece of the productivity puzzle?

As the ultimate driver of our long term living standards, I think we should be asking more questions about why productivity growth is one-tenth of what it was 40 years ago.

One of the most interesting aspects of productivity to emerge over the last half-century is the seemingly broken relationship between technology advancement and growth in productivity.

Upon researching this concept, I became fascinated by a particular debate that revolves around the “Solow Computer Paradox”. The paradox suggests that as technology advances, growth in labor productivity actually falls. This relationship is signposted by an infamous statement made by Robert Solow in 1987 - "The computer age is everywhere, except in the productivity statistics". I believe this statement is relevant to what we have experienced over the past 20 years.

Statistics show minimal labour productivity growth whilst computer processing power continues to grow rapidly, doubling every two years in accordance with Moores Law (a good proxy for technological progress):

In light of these statistics, it's interesting to consider the role human capital will have to play in our digital future. As we race towards industry 4.0 and scramble to expand our investment in digital capabilities, I wonder how much of our untapped potential to boost productivity actually lies within the individuals that leverage the technology to produce results. Perhaps the idea of supplementing our tremendous investment in technology with an equal emphasis on the development of people, should be brought to the forefront.

Id like to explore some of the opportunities we have to enhance productivity by looking at the various components of employee performance and how we can maximise human potential.

Engagement

Engagement is a pre-requisite for even average performance and around the world engagement statistics are dire. "Across 142 countries, 13% of employees are engaged in their jobs, while 63% are not engaged and 24% are actively disengaged"- Gallup.

This simply means that whatever potential individuals have inside them, they certainly aren't giving their all in the current environment. Regardless of industry or sector, discretionary effort among employees remains elusive. High discretionary effort sits at just 15% of all workers globally according to a 2019 Gartner survey, the lowest measure since 2014. This is a huge lost opportunity considering how impactful an engaged and motivated employee can be. The Harvard Business Review reported in 2017 that an employee who is “inspired” by their work is up to 125% more productive than an employee who is just “satisfied” (and this isn’t even taking into account the unsatisfied ones!). At a company level this has a significant impact, companies with engaged employees are 202% more effective. If we look at the stats across a whole country, this effect is huge; it has been estimated by Gallup that disengaged employees cost the U.S. $483 to $605 billion per year in lost productivity.

There appears to be a lot of room to move when it comes to creating a stimulating environment for the tech enabled workforce, and a lot to be gained if we can do so.

Variation in performance

Beyond employee engagement, its interesting to consider why productivity varies so much between people and explore the factors that we can leverage to influence individual performance.

If we hold employee engagement constant, the capacity for work that requires high cognitive load and creative output is still widely variable among the workforce. When we compare individuals to one another, studies have shown top performers to be 800% more effective when it comes to completing complex tasks. There is a large gap between high performers and those who appear to be less capable. So how do we start to bridge this gap and allow everyone to function at their peak? To do this we must look past fixed variables such as genetic variance and innate talents, the opportunity lies with factors that individuals can actively influence.

To demonstrate this possibility we will compare how individuals perform across a range of different psychophysiological states (mood, energy level, mindset etc.). When our body and mind are functioning in an optimal way, our creativity and value add output goes through the roof. A 10 year study on the neuroscience of performance suggests that individuals are 500% more productive when they are in a "flow state". This is a state that can be cultivated with concrete actionable steps such as goal setting and optimising health. Studies looking at the impact of mood on performance also paint a clear picture. A team at University of Oxford’s Sa?d Business School demonstrated that when employees were happier, they worked faster, adhered to their tasks with less guidance and achieved far more through the day. An individual who is in a positive state will produce more value for a business and be more satisfied while doing it. On the other end of the spectrum, negative states are bad for people and bad for business. The statistics speak for themselves, unhealthy mental states such as stress cost the US economy $500 billion a year according to the American Psychological Association.

So can we shift the dial on our physical and mental states to unlock additional productivity?

An opportunity to optimise performance

The answer is yes. Many aspects of our psychophysiological state can be changed to help us become more productive and fulfilled (obviously there are some factors out of our control but we can move the dial significantly). In his groundbreaking book "The Secret Science of Brilliant Leaders" Dr. Alan Watkins discusses how our physiology can be manipulated to achieve better mental performance and better outcomes at work. He focuses on how changing the relationship we have with our body can enhance energy levels, reduce stress and improve emotional intelligence. He discusses this in a Ted Talk where he demonstrates the direct impact our HRV (an important marker of our physiological health) has on our cognition, creativity, communication and problem solving. Those with healthier nervous systems are infinitely more effective at producing results under pressure. We can very easily optimise our physiology by monitoring our HRV, and maintain nervous system health with exercise, stretching, breathing techniques, adequate sleep, precision nutrition and so much more.

All this evidence suggests that if we focus on increasing engagement and invest in the potential of human capital with as much vigour as we invest in tech, the results could be phenomenal. In this context, this famous quote comes to mind- "5% of employees deliver 95% of the value in a business". Or the Pareto principle that suggests "20% of workers produce 80% of the productive output". It's incredible to think about what could be achieved within business and our broader society if we expand that 5% or 20%. This insight is particularly relevant if we take a "Carol Dweck" view of human potential, understanding that neuroscience is beginning to prove that the ability of individuals to grow and change over time is almost limitless when they are supported by the right environment.

With all this considered, I am curious about the opportunities that lie ahead. What happens when we pair our rapidly expanding technological capabilities with people that are empowered to reach their peak?

As we seek to deploy new physical machines we must also seek to fully understand the human machine, and explore how we can tap into the full scope of creativity, intelligence and problem solving that lies within every individual. Only then can we benefit from the full force of productivity growth and the enhanced living standards this growth inevitably brings.