The case for productivity over efficiency

Michael Mankins is Partner at Bain & Company. Michael leads the firm’s Organisation Design, Corporate Strategy and Transformation efforts. Much of his work has focused on the strategic and organisational initiatives that drive performance and long-term value.

He is co-author of: Time, Talent, Energy: Overcome Organizational Drag and Unleash Your Team’s Productive Power.

Why should business leaders prioritize workplace productivity over efficiency?

Michael: Many leaders think of productivity and efficiency as being synonyms.  But a productivity mindset is very different from an efficiency mindset. 

Efficiency is about producing the same output, with less input.  It’s about reducing the denominator – most typically, labour hours – at a faster rate than the numerator, unit production.  Efficiency is about “trimming fat” and “reducing waste” – both very admirable objectives.

Productivity, by contrast, is about producing more output, with the same input.  It’s about removing obstacles to production so that the numerator increases at a faster rate than the denominator. Productivity requires simplifying work and focusing only on those tasks most critical to satisfying customers and fuelling growth.

As we emerge from the COVID pandemic, companies will once again be searching for avenues for growth and profitability. Improving productivity will be essential to identifying and capitalizing on these new growth opportunities.  In fact, an excessive focus on efficiency can inadvertently result in cutting essential fuel for growth – namely, the critical talent and capabilities required to satisfy more customers.

What impact is the pandemic driven shift to remote working likely to have on workforce productivity both in the short-term and long-term?

Michael: Our research suggests that Shelter-In-Place and Work-From-Home restrictions spawned by COVID-19 have widened the productivity gap between the best companies – those in the top quartile of our research sample – and the rest (the average of the remaining three quartiles). 

Those companies that were collaborating effectively before the pandemic have found ways to productively utilise the additional time most employees have been able to devote to work each week.  Furthermore, remote work has enabled a company’s most productive employees to engage in a wider number of topics and initiatives than they had previously been able to support – multiplying the impact that these individuals have on company performance.  And, finally, the best companies have found ways to continue to engage and inspire their teams, encouraging employees to bring more of their discretionary energy to the work that they do. 

Most companies have seen productivity fall during the pandemic. Ineffective collaboration has resulted in more time being devoted to internal meetings – with the average company seeing the total time wasted on internal meetings increase by three per cent or more.  Many of these same companies have seen their best performing employees leave the workforce – unable to balance the needs of work and family and feeling insufficiently supported by their employers.  Finally, the distance created by remote work has led employee engagement at many firms to fall precipitously during lockdown.  The combined effect of all this: productivity at most companies has fallen by five per cent or more when compared to pre-COVID levels.

Our research suggests that prior to the pandemic, the best companies were 40 per cent more productive than the rest.  However, the current environment has widened this productivity gap.  We now estimate that the best companies are 50 per cent more productive than the rest.  Unless leaders take specific actions to reduce organisational drag in their companies, this gap is likely to persist for many years.

How can businesses drive more effective collaboration between teams in the current environment?

Michael: In our experience, most employees come to work every day wanting to be productive.  But, too often, the organisation drags them down.  Complex processes and procedures waste time and limit productivity. Unclear roles and responsibilities mean that too many people are required to make decisions (or, worse, no one is empowered to make them).  Finally, a culture that confuses “inclusion” with “collaboration” further limits the productivity of an organisation’s best talent.

Organisational drag has intensified for most organisations under COVID.  The total organisational time consumed by corporate bureaucracy has increased with remote work – largely due to the number of meetings increasing and the total number of attendees per meeting also increasing. Accordingly, the current environment requires extra vigilance when it comes to organisational drag.

Leaders must identify the sources of “organisational drag” in their company.  They must seek to simply process and eliminate unnecessary procedures. They must clarify roles and responsibilities – ensuring that only those individuals required to make a decision are involved in making it (and not one person more). And they should take a critical eye to their company’s culture.  They must themselves be a role model for the right behaviours – delegating authority for decisions, when appropriate, and limiting the number of attendees to most meetings. 

What can businesses do to better bridge the growing productivity gap you have observed?

Michael: Complexity is the silent killer of workforce productivity and, therefore, of growth and profitability.  Unnecessarily complex processes waste scarce time and talent. They also make attracting new, difference-making talent more difficult.  So, if we were to give most executives one piece of advice it would be: “simplify, simplify, simplify”.

As important, however, is the deployment of star talent.  An organisation’s best talent is many multiples more productive than average. The best companies recognise this and seek to put their difference making talent in roles where they can make the biggest difference on performance. This requires the identification of business-critical roles – that is, the five per cent of roles that explain 95 per cent of a company’s ability to devise and execute its strategy. It requires a willingness to concentrate a company’s best talent in these roles. And it demands that a company’s best leaders be put in charge of its best teams. Concentrating great talent in this way creates a “force multiplier” on performance.

Finally, employee engagement and inspiration has never been more important.  An engaged employee is 45 per cent more productive than a merely satisfied worker.  And an inspired employee – one that is deeply connected to the mission of the company and/or its leaders – is 55 per cent more productive than an engaged employee (or 125 per cent more productive than a satisfied worker). Investments in employee engagement and inspiration, in our experience, pay very high dividends in terms of workforce productivity for the very best companies.

What role does effective feedback have to play in improving workplace productivity, including in a remote working environment?

Michael: Feedback is always important to employee development – and, ultimately, to productivity.  It is not more – or less – important in a remote working environment.  However, feedback does need to be more intentional in a remote work environment.  After all, supervisors cannot rely on routine “hallway chats” to share ideas and insights or provide counsel on development priorities.  Companies that have open, honest and direct communication regarding expectations and performance help employees get better.  Feedback doesn’t have to be more elaborate in the current working environment, but it does need to be more planned and more explicit.