Why labor productivity will set a new performance frontier for the chemical industry

In the last 15 years, chemical companies have invested up to 6% of their annual revenues in new technology, new equipment and continuous improvement. However, labor productivity (calculated as revenue/FTE) remains disappointingly low. In fact, it’s risen by <1% per year since 2008, according to a new research study?I recently conducted with my Accenture colleagues.

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In the same timeframe, other asset-intensive industries have achieved up to 6X greater improvements in labor productivity. So where are chemical companies going wrong? And how can they do better?

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To answer these questions, let’s take a closer look at the investments companies have been making. Typically, when chemical companies build new facilities, they replicate existing plant designs and organization charts. And when they invest in digital programs, they usually don’t reinvent or restructure roles.

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These actions have serious consequences. Say, for example, a new technology offers the potential to automate 20% of a role. If the work isn’t reorganized, the people in the role will do something else with the time gained. But if the company combines roles, it can free one FTE position for every five workers.

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This example shows that adjusting work processes, methods and roles is essential to driving maximum value from the technologies that chemical companies already have, and the ones they implement in the future.

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Reorganizing work to adapt to tech advancements is going to become even more important, as around 30% of the chemical industry’s employees are due to retire within the next decade or so, student enrollment in key disciplines is declining, and gen AI will potentially affect 31% of working hours in the chemical industry through automation or augmentation.

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Ultimately, as experienced employees retire and the talent pool shrinks, it won’t be possible for chemical companies with stagnant labor productivity to thrive—and especially to capitalize on rising sustainability-related demand. Increasing labor productivity will be essential to driving growth and prospering in the next chapter of the chemical industry. Companies that don’t act now risk getting left behind.

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I hope you will read the full study?, “Cracking the labor productivity conundrum,” and I look forward to discussing this important topic with you.