Developing a work approach that is adequate to the challenges ahead
a world moving toward new and different futureS

New-productivity challenge (by Peter Drucker)

This is a working draft. It is also an attention directing tool.

Below are some notes from chapter 13 of Peter Drucker's Managing for the Future. They are rough but enough to decide whether to pursue further time investment. This topic needs to be viewed within the context of organization evolution and change management.

Find "productivity" in the contents of Peter Drucker's work for more "bread crumbs."

• 13. The New Productivity Challenge

  • The productivity of the newly dominant groups in the work force, knowledge workers and service workers, will be the biggest and toughest challenge facing managers in the developed countries for decades to come

  • Productivity in making and moving things—in manufacturing, farming, mining, construction, and transportation—has increased at an annual rate of 3 to 4 percent compound for the last 125 years—for a 45-fold expansion in overall productivity in the developed countries

  • On this productivity explosion rests all the increases in these countries in both the standard of living and the quality of life

  • Productivity has become the "wealth of nations."

  • Rising productivity was something so totally unprecedented that there was no term for it in any language.

  • But in the developed countries the productivity revolution is over

  • There are simply not enough people employed making and moving things for their productivity to be decisive

  • They now account for no more than a fifth of the work force in a developed economy—only thirty years ago they were still a near—majority

  • The first thing we have learned—and it came as a rude shock—is that capital cannot be substituted for labor (i.e., for people) in knowledge and service work

  • Nor does new technology by itself generate higher productivity in such work

  • In making and moving things, capital and technology are factors of production, to use the economist's term

  • In knowledge and service work, they are tools of production

  • Whether they help productivity or harm it depends on what people do with them, on the purpose to which they are being put, for instance, or on the skill of the user

  • Still, in making and moving things Working Smarter is but one key to increased productivity. In knowledge and service work it is the key.

  • Working Smarter means, however, very different things in knowledge and service work from what it means in making and moving things

  • Working Smarter, whether called scientific management, industrial engineering, human relations, efficiency engineering, or task study (the modest term Frederic W. Taylor himself favored—has been the main force behind the productivity explosion

  • it never occurred to him to ask: "What is the task? Why do it?" All he asked was "How is it done?"

  • Human Relations. But, like Taylor, he never asked, "What is the task? Why do it?"

  • In making and moving things the task is always taken for granted.

  • But the first question in increasing productivity in knowledge and service work has to be: What is the task? What do we try to accomplish? Why do it at all?

  • The easiest—but perhaps also the greatest—increases in productivity in such work come from redefining the task, and especially from eliminating what needs not be done

  • [On this, see also Chapter 27: "Permanent Cost Cutting," ]

  • These are all examples of service work. In knowledge work, however, defining the task and getting rid of what needs not be done are even more necessary and produce even greater results

  • But now the planning people—still about the same number—work through only three questions for each of the company's businesses: What market standing does it need to maintain leadership? What innovative performance does it need to support the needed market standing? What rate of return is the minimum needed to earn the cost of capital?

  • And then the planning people together with the operating executives in each business work out broad strategy guidelines to attain these goals under different assumptions regarding economic conditions

  • they have become the "flight plans" that guide the company's businesses and its senior executives

  • IV

    • The people at the very top can sometimes concentrate themselves, though far too few even try

    • But the people who actually do most of the knowledge and service work in organizations—engineers, teachers, salespeople, nurses, middle managers in general—carry a steadily growing load of busy work, additional activities that contribute little or no value and that have little or nothing to do with what these people are qualified and paid for

    • To do this requires that we ask in respect to every knowledge and service job: "What do we pay for?" "What value is this job supposed to add?" The answer is not always obvious or uncontroversial.

    • Eventually knowledge work and service work may turn out to be like work making and moving things—that is, "just work," to use an old Scientific Management slogan. At least this is the position of the more radical proponents of Artificial Intelligence, Taylor's true children or grandchildren

    • But for the time being, knowledge and service jobs must not be treated as just work

      • They cannot be assumed to be homogeneous

      • They must be treated as falling into a number of distinct categories—probably three

      • Each requires different analysis and different organization

      • In making and moving things the focus in increasing productivity is on work

      • In knowledge and service work it has to be on performance

        • To be specific

          • for some jobs in knowledge and service work performance means quality

            • One example is the research lab, in which quantity—that is, the number of results—is quite secondary to their quality

            • One new drug generating annual sales of $500 million and dominating the market for a decade is infinitely more valuable than twenty "me-too" drugs each with annual sales of $20 or $30 million

            • The same holds for basic policy or for strategic decisions

            • But it also applies to much less grandiose work—the physician's diagnosis, for instance, or packaging design, or editing a magazine

          • Then there is a wide range of knowledge and service jobs in which quality and quantity together constitute performance

            • The salesperson's performance on the department store floor is one example

              • A "satisfied customer" is a qualitative statement, and indeed not so easy to define

              • But it is as important as the amounts on the sales tickets, or the quantity of output

            • In architectural design quality largely defines performance

              • In the draftsman's work quality is an integral part of performance

              • But so is quantity

            • And the same applies to the engineer; to the sales rep in the local stockbroker's office; to the medical technologist; to the branch manager of the local bank; to the reporter, to the nurse; to the claims adjuster for the automotive insurer—in fact, to a vast range of knowledge and service jobs

            • Performance in them is always both, quantity and quality

            • To increase productivity in these jobs therefore always requires work on both

          • Finally, there are a good many jobs—filing, handling death claims in the life insurance office, making beds in the hospital—in which performance is similar to performance in making and moving things

            • Quality is a condition and a restraint

            • It is external rather than in itself performance

            • It has to be built into the process

            • But once this has been done, performance is largely defined by quantity—e.g., the number of minutes it takes to make a hospital bed the prescribed way

            • These jobs are, in effect, "production jobs" even though they do not result in making and moving things

      • Thus increasing productivity in knowledge and service work requires thinking through into which category of performance a given job belongs

      • Only then do we know what we should be working on

      • Only then can we decide what needs to be analyzed, what needs to be improved, what needs to be changed

      • For only then do we know what productivity means in a specific knowledge or service job

  • VI

    • There is more to increasing productivity in knowledge work and service work than defining the task, concentrating on the task, and defining performance

    • We do not yet know how to analyze the process in jobs in which performance predominantly means quality

    • We need to ask instead, "What works?"

    • For jobs in which performance means both quality and quantity, we need to do both: ask what works and analyze the process step by step and operation by operation

    • In production work we need to define the quality standards and build them into the process, but the actual productivity improvement then comes through fairly conventional industrial engineering, that is, through task analysis followed by putting together the individual simple operations into a complete "job."

    • But the three steps outlined above will by themselves produce substantial productivity increases—perhaps most of what can be attained at any one time

    • They need to be worked through again and again—maybe every three or five years, and certainly whenever we change work or its organization

    • But then, according to all the experience we have, the resulting productivity increases will equal, if not exceed, whatever Industrial Engineering, Scientific Management, or Human Relations ever achieved in making and moving things

    • In other words, they should by themselves give us the "productivity revolution" we need in knowledge and service work

    • But on one condition only: that we actually apply what we have learned since World War II about increasing productivity in making and moving things:

    • the work has to be done in partnership with the people who hold the knowledge and service jobs, the people who are to become more productive

    • The goal has to be to build responsibility for productivity and performance into every knowledge and service job regardless of level, difficulty, or skill.

    • Two more lessons that neither Taylor nor Mayo knew: increased productivity needs continuous learning

    • It is not enough to redesign the job and then to train the worker in the new way of doing it—which is what Taylor did and taught

    • That's when learning begins, and it never ends. Indeed, as the Japanese can teach us—it came out of their ancient tradition of Zen learning—the greatest benefit of training is not in learning the new

    • It is to do better what we already do well

    • And equally important, an insight of the last few years: knowledge people and service people learn the most when they teach.

    • The best way to improve the productivity of the star salesperson is for him or her to present "the secrets of my success" at a sales convention

    • The best way for the surgeon to improve his or her performance is to give a talk about it at the county medical society

    • The best way for a nurse to improve her performance is to teach her fellow nurses

    • It is often being said that in the information age every enterprise has to become a learning institution. It also has to become a teaching institution

  • Conclusion

    • Developed economies face economic stagnation if they do not raise the productivity of knowledge and service work

    • And when farmers are down to a mere 3 percent of the employed population, as they are in the U.S. and Japan—and in most of Western Europe as well—even record increases in their productivity such as the 4 to 5 percent the U.S. boasts of add virtually nothing to the country's overall productivity, its wealth, its competitiveness

    • Raising the productivity of knowledge and service work must therefore be an economic priority for developed countries

    • Whichever country first succeeds in satisfying it will economically dominate the twenty-first century

    • And the key is raising the productivity of knowledge work, on all levels

    • But the need to raise the productivity of service work may be even greater

    • It is a social priority in developed countries

    • Unless it is met, the developed world faces increasing social tensions, increasing polarization, increasing radicalization

    • It may ultimately face a new class war

    • To obtain major productivity increases in production-type service work usually requires contracting out such work to a firm that has no other business, understands this work, respects it, and offers opportunities for advancement for low-skill service workers e.g., to become its local or regional manager

    • The organizations in which this work is being done—e.g., the hospital in which the people work who make the beds, or the college whose students they feed—neither understand such work nor respect it enough to devote to it the time and hard work needed to make it productive, no matter how much they pay for it

    • The task is known and doable, but the urgency is great.

    • To raise the productivity of service work cannot be done by governmental action or by politics altogether

    • It is the task of managers and executives in businesses and nonprofit organizations

    • It is, in fact, the first social responsibility of management in the knowledge society