Leading Off: Get a move on productivity: A leader’s guide

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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

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Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

Productivity plays a critical role in history—most human progress wouldn’t have been possible without this basic measure of output relative to input. But defining productivity is becoming more complex as hybrid work and automation transform what gets produced, when, and how. Tangible output is still important, but so are employee well-being, social connections, and collaboration; hard work is still important, but too much of it can be counterproductive. The sluggish productivity growth that global economies have been mired in for years needs leaders to jump-start it. McKinsey senior partner Kweilin Ellingrud points out that “robust productivity performance remains one of the fundamental components of a healthy economy and broad-based prosperity.”

AN IDEA

An image linking to the web page “How to revive US productivity” on McKinsey.com.

Boosting US productivity is a big deal

“Productivity is the way that we collectively get wealthier,” says McKinsey partner Charles Atkins. “We really have to get more productive by generating more output with each hour that we work, which is really quite a simple insight.” But despite advances in technology—a vital enabler of productivity—US productivity growth has averaged just 1.4 percent since 2005. Our research shows that returning that growth rate to its historical average of 2.2 percent could add as much as $10 trillion to the economy and alleviate problems such as workforce shortages, debt, inflation, and the cost of energy. A good starting point for CEOs may be to prepare to develop and compete for talent, suggests McKinsey senior partner Olivia White . “Labor markets are going to be tight in some form for the foreseeable future. . . . The second broad thing is that digital transformations are important. Commit to that transformation with real goals and shared accountability.”

A BIG NUMBER

1.9

That’s the number of percentage points by which productivity growth has declined across advanced economies since the mid-2000s, according to McKinsey research. One reason may be that the effects of digitization have not yet materialized at scale: for example, Europe may be operating at only 12 percent of digital potential and the US at 18 percent. The digital innovations that companies implement “do not yet have a direct and immediate impact on output and productivity growth,” observe McKinsey senior partner Jonathan Woetzel and colleagues. “As a result, we may be experiencing a renewal of the Solow Paradox of the 1980s, with the digital age around us but not yet visible in the productivity statistics.”

A QUOTE

“You could imagine a world in which burnout becomes a standard metric on an operational dashboard.”

That’s McKinsey partner Erica Coe in a podcast on r eviving personal productivity at a time of widespread employee burnout. The COVID-19 pandemic worsened existing behavioral-health issues that may diminish performance and productivity. Companies would be better equipped to intervene if they could measure the signs of burnout early on, suggests Coe: “There are . . . a number of ways to get a standardized measurement of burnout and then to measure that alongside other key performance metrics, such as financial metrics, safety, equality, and employee turnover.”

A SPOTLIGHT INTERVIEW

An image linking to the web page “An approach to boosting US labor productivity” on McKinsey.com.

Technology and productivity are inextricably linked. So it’s no surprise that the technology now making headlines, generative AI, almost has a “gold rush mentality around it,” says America Online cofounder and venture capitalist Steve Case in this discussion with McKinsey leaders and industry executives. McKinsey senior partner and North America managing partner Asutosh Padhi cautions that “human judgment is still critical” in applying generative-AI technologies. “What they provide is something that’s complementary,” he says. “This is technology that can enhance or build upon people’s skill sets. Employers must rethink how they are leveraging technology and provide the right training and tools. There’s a reimagination opportunity there that could be a huge boon for productivity.”

CAT AND MOUSE

Many organizations no longer define productivity in terms of an on-site 9-to-5 workday, with the boss keeping a strict eye on things. But today’s remote and hybrid workplaces may pressure employees into enacting “productivity theater,” whereby they try to show supervisors how busy they are by using various hacks—for example, “mouse jigglers” can move mice around continuously to prevent computers from becoming inactive. Tracking productivity through employee surveillance can be controversial and unethical. Instead, creating a positive employee experience by fostering trust and engagement may be a better way for leaders to enhance productivity.

Lead productively.

— Edited by Rama Ramaswami, senior editor, New York

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