HR needs to be at the forefront of driving productivity in organisations. Anyone disagree with that? Not likely, especially in this post global financial crisis era where HR more than ever needs to demonstrate its bottom line contribution to business performance. Yet despite general acknowledgement of the importance of increasing organisational productivity, I wonder how many HR professionals can articulate what it means and how HR can help? And if we don't really understand productivity how can we truly influence organisational performance?
Most people in HR haven't studied much in the way of economics and accounting and the concept of productivity, and its practical application in the workplace can be complex and nebulous.
In fact the vast majority of HR related articles about productivity focus almost exclusively on individual efficiency at work - better time management, how to manage your email more effectively, saying no to pointless meetings etc.
Yes, individual productivity at work is an area in which HR should be involved, but of itself is insufficient as HR's contribution to productivity growth. But there is no point increasing an individual's productivity by say 10 percent if they are focusing on the wrong things in the first place - that's not a productivity gain.
So what is productivity? It is simply the ratio of outputs to inputs and can be measured at the individual, company, state, country etc level. Productivity tends to be more easily measured in traditional work environments such as manufacturing firms where inputs (e.g. labour, machinery, materials etc) and outputs (numbers of widgets produced) are quite tangible.
So generally speaking, organisational productivity can be increased by either producing more with the same amount of inputs, or the same with fewer inputs.
In the heady days of strong economic growth prior to the GFC many organisations took their eye off productivity. They allowed costs to increase because in many cases revenue was growing much faster than expenses. All of a sudden, when shocks hit our financial systems across the world and many companies' revenues fell fast and hard, CEOs rightly responded by cutting costs - thereby maintaining organisational productivity or limiting its decline.
However, while necessary at times, cutting costs is not a long term nor sustainable strategy for driving organisational productivity growth - as an organisation invariably runs out of areas to trim and risks impacting its longer-term viability if it cuts too hard.
But in the modern economy, growth in service industry businesses and employment is outpacing that of traditional manufacturing and older economy sectors. So the perplexing question is how to measure outputs for those businesses that don't produce widgets?
What exactly is an output at a tech start up, management consulting firm or any type of firm that relies heavily upon knowledge, ideas, innovation and professional expertise to produce current and future revenues (which after all, is what determines the value of any company)? So herein lies the challenge, or perhaps the opportunity for HR.
Rather than trying to define what an output is for knowledge reliant companies, it is more informative to focus on what will determine winning companies over the long term. It will generally be those which come up with innovative new ideas that can be commercialised. It will also be companies that find faster and less costly means of producing a product or delivering a service which is relatively commoditised, as it means that they can sell at the most competitive price in the market or take more profits than competitors. The development and application of technology is likely a critical factor in both those areas.
Enter HR. Productivity is our domain and here is why. People are the key to productivity.
Companies with the best talent will be the most successful. Recruiting and then developing the talent is critical.
Collaboration across organisations is required to generate and harness ideas and bring them to fruition. HR should drive and facilitate it. Untapped opportunities for collaboration must cost large businesses plenty every year.
People focusing on the right work and outcomes is imperative - HR needs to shape job and organisational design to drive this and ensure the work design is agile to meet changing business needs.
Leadership remains critical to driving business success especially in rapidly changing and ambiguous operating environments. Developing and supporting leaders to thrive in that context is an important role for HR.
These areas don't each necessarily lend themselves to quantitative measures nor necessarily produce clear results in the short-term - that doesn't mean they aren't important (quite the opposite). But organisations which aren't investing in these aspects or that are planning only 6 months to a year ahead will invariably be surpassed by competitors who are doing it.
It's HR's role to meet the short term needs of the business in driving productivity but also to keep the company's executives focused on building the people and organisational capability which will see it succeed in the long run. And sustained success is the ultimate productivity.