Typically the focus is on labor productivity, with the post-war results nothing short of phenomenal. Total U.S. labor productivity doubled from the end of WW II to the mid 70’s, and has doubled again since then (wages are a different matter, keeping pace with productivity through the oil shock of 1973-74, but then stagnating in the four decades since). Narrowing the focus just to manufacturing productivity in the United States, real manufacturing output per worker roughly doubled during the 30-year post-war period ending in the mid 70’s, then doubled again in just the next 20 years to the late 90’s, and has doubled even once more in the last 15 years.
But what about the productivity of the other factors of production, of raw materials, capital and management? As for raw materials, you could say that the oil shock of 1973-74 changed everything. Per capital steel consumption abruptly leveled off and has been on a slow decline in the developed world since the mid 70’s. The same holds true for oil and most of the other basic raw materials as conservation, reduction and recycling took hold. The developed world has been trending “green” ever since it was forced to sit in those long gas lines that awful winter.
I will have to leave any discussion of the productivity of capital for another time, as its behavior since the dot.com bust and repeal of Glass-Steagall in 1999-00 would best be described as schizophrenic. Still, its steady post-war increase up through 1999 would seem to be in accord with the overall labor and raw material trends.
That leaves us with the fourth of the four factors or production – management. A cursory review of the literature shows no significant studies of management productivity. It would appear that it’s never been measured by anyone, perhaps not even operationally defined. But that doesn’t mean we can’t speculate. What would you say – has management productivity increased over the past 35 years? In line with labor productivity?
One thing I do know is that like everything else, management has gotten more complex. First there’s the product technology, and then there’s the infrastructure technology. What we make has gotten more complex (computer controlled, fuel-injected engines, anyone, or microwave ovens?) and the information technology we use to keep track of our operations has gotten more complex as well. And now with more remote and telecommuting employees, basic supervision hasn’t gotten any easier either.
But if we were somehow measuring output per manager, would that metric be getting any better? Span of control probably hasn’t changed much in 50 years. Productivity gains in the service industries has significantly lagged the manufacturing sector (another good story for another time). And who hasn’t heard stories and case studies of ‘bloated management’ structures being trimmed, flattened or decimated by the new sheriff in town.
As I made the subject of my very first “official” Value Alley post, “Stuck in the Middle”, it is middle management that has the most difficult management job. It’s here that the resources of the company meet the needs of the customer, and yet they are often ill equipped and poorly supported and trained for this role, divorced from the centers of power and strategy, and burdened with high expectations and stretch targets.
What are we doing to help them, and by extension, help our respective organizations? What are we doing to improve management productivity? While there are surely a dozen or more areas we could dissect and focus in on, here are four themes that I would make my initial priority.
- A robust BI platform. Attack your BI initiatives with the same determination you devote to operational automation. Do they have everything they need on the dashboard? And by everything, I mean everything automatically loaded and available. Not 8 out of 9, with the ninth requiring manual input from an offline spreadsheet. The manual steps are productivity killers. Spreadsheets are fine in the domain of the finance or operations analyst, but suck the life out of management productivity.
- Data integration. Upstream and downstream. Cross functional. Internal and external. Vendors and channels and customers. NO SILOES! If management needs to compare costs with shipments and inventory by territory and customer, and needs to get into five different systems or siloes to do that, you’re doing it wrong.
- Process management. As I discussed in my early “Stuck in the Middle” post, process is the realm of middle management – process design, process management, process monitoring. Process is what enables repeatable value creation. Analytic support for process modeling, simulation and decision management is key to improved process management productivity in a complex environment.
- Workforce Analytics. It’s 9:00 a.m. Monday morning; do you know where your employees are? As I pointed out in this post, “Strategic Workforce Planning”, you probably have more system and IT resources invested in tracking office supplies and spare parts than you do in managing your critical human resources. For most businesses, employee-related expenses (salaries, benefits, taxes, training) represent the single largest cost category. Workforce management is the one area that has adapted the least to a business environment of increased productivity and complexity.
Truthfully, though, it’s that last one, people management, that makes improving overall management productivity such a hard nut to crack. Just last week I was advising a young grad student in the biological sciences, a friend of my son, on her desire to follow that up with an MBA (it’s a pleasant surprise when your college-age children not only accept your advice, but recommend you to their friends). What I told her was that “of the three primary elements to be “managed” – people, technology and money – people are by far the most difficult component. As you get older and progress in your career and move upward and take on more and more responsibility, the biggest, toughest challenges you will face will have nothing at all to do with your science, with your technology, or with your cash flow. The biggest challenge will be the people. And the most important classes you will have taken will turn out not to have been calculus or biochemistry or corporate finance, but psychology, sociology, anthropology, philosophy and literature. It will become WAY more important to understand the motivations of Iago or Yossarian than to be able to calculate the genetic variation of micro-ecosystems across time.” Shakespeare and Freud on your dashboard (or at the very least, in your core skill set).
By Leo Sadovy, EPM Channel Contributor, from: http://blogs.sas.com/content/valuealley/2014/05/20/management-productivity/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+ValueAlley+%28Value+Alley%29
Leo Sadovy handles marketing for Performance Management at SAS, which includes the areas of budgeting, planning and forecasting, activity-based management, strategy management, and workforce analytics, and advocates for SAS’ best-in-class analytics capability into the office of finance across all industry sectors. Before joining SAS, he spent seven years as Vice-President of Finance for Business Operations for a North American division of Fujitsu, managing a team focused on commercial operations, customer and alliance partnerships, strategic planning, process management, and continuous improvement. During his 13-year tenure at Fujitsu, Leo developed and implemented the ROI model and processes used in all internal investment decisions—and also held senior management positions in finance and marketing.Prior to Fujitsu, Sadovy was with Digital Equipment Corporation for eight years in sales and financial management. He started his management career in laser optics fabrication for Spectra-Physics and later moved into a finance position at the General Dynamics F-16 fighter plant in Fort Worth, Texas.He has an MBA in Finance and a Bachelor’s degree in Marketing. He and his wife Ellen live in North Carolina with their three college-age children, and among his unique life experiences he can count a run for U.S. Congress and two singing performances at Carnegie Hall.See Leo’s articles on EPM Channel here.