APQC’s founder, Jack Grayson, believed that true productivity encompasses both effectiveness and efficiency: “Efficiency measures if you are doing things right. Effectiveness concerns itself with whether you are doing the right things.”
We have spent decades focusing on one half of the equation: efficiency. Often because efficiency measures are tangible and consequently easier to measure (e.g., costs, cycle times, headcounts, throughput). Organizations struggle with efficacy measures—such as value creation and quality—which creates a vicious cycle that reinforces the focus on efficiency.
To make matters more complicated, these measures aren’t a good fit for the ever-growing population of knowledge workers.
Where We Go Wrong with Knowledge Workers
In 2019, the world reached more than 1 billion knowledge workers. The simplest definition of a knowledge worker is someone who applies theoretical or analytical knowledge for a living.
The crux of growth in knowledge workers is that our current norms of measurement and productivity were developed in a manufacturing or manual task-oriented mindset. According to Peter Drucker, productivity for knowledge workers needs a different set of considerations. There are six factors that determine knowledge worker productivity:
- Knowledge-worker productivity demands that we ask the question: “What is the task?”
- It demands that we impose the responsibility for productivity on individual knowledge workers themselves. Knowledge workers must manage themselves. They must have autonomy.
- Continuing innovation must be part of the work, the task, and the responsibility of knowledge workers.
- Knowledge work requires continuous learning on the part of the knowledge worker, but equally continuous teaching on the part of the knowledge worker.
- Productivity of the knowledge worker is not—at least not primarily— a matter of the quantity of output. Quality is at least as important.
- Finally, knowledge-worker productivity requires that the knowledge worker is both seen and treated as an “asset” rather than a “cost.”
Two of those factors are particularly important as we rethink measurement and productivity. First, the relationship and balance of efficiency (output) and effectiveness (quality). Second, the view of knowledge workers as an asset, rather than a cost. Both concepts counter the idea that productivity is a matter of throughput or quantity.
Better Mix of Measures
As illustrated with supply chains throughout the pandemic, solely focusing on measures of efficiency result in overly lean processes that easily fall apart under stress. Additionally, the growing number of knowledge workers require quality or effectiveness measures of productivity to accurately track the value they provide to organizations.
Organizations must ensure performance measurement includes a balanced perspective of productivity—which means a mix of efficiency and efficacy measures.
- Efficiency—captures the throughput of an individual or process. The most common measure of efficiency is output to input divided by costs. Related measures include employee or FTE hours, cycle times, and costs.
- Effectiveness—captures the accomplishment of an objective or desired result (in other words, the value, quality, or outcome of the process). Related measures include conversion rates, customer retention, or first pass yield.
But how do organizations measure effectiveness?
There are also several approaches, such as balanced score cards and measure selection criteria, that help organizations ensure their measures mix and productivity management include both effectiveness and efficiency measures.
Five Ways to Rebalance the Equation
Building a better mix of measures is one step to balancing the productivity equation. We also need to re-examine how we manage our employees and our processes for establishing the norms and behaviors necessary to integrate effectiveness into how employees think and act. APQC recommends the following actions.
- Use Communications. One way to understand ingrain effectiveness is through regular check-in meetings between managers and employees. These conversations provide an opportunity to discuss accomplishments, progress of action items, problem solving, or recent changes in priorities or context on what could affect current progress.
- Empower Employees. While micromanagement is tempting, it can also hinder performance. Instead, managers can use the six R’s: respect, results, reason, resources, room, and reinforcement to drive better productivity.
- Streamline Processes. Complex processes make performance management ungainly, which can cause organizations to rely on the simplicity of efficiency measures to manage their productivity. Instead, organizations can streamline their processes to focus attention on critical work and manage its value.
- Extend Methods to Look at Process Value. Process and performance teams have recently started to integrate additional methodologies like customer journey mapping and design thinking to move beyond incremental improvements and focus on whether their processes are driving desired results.
- Use Frameworks and Benchmarks. Process frameworks and benchmarking help organizations understand what good looks like. They also provide context for streamlining activities, measure selection, and comparatives for decision making.
However, this only scratches the surface of how measures, processes, and knowledge drive or impede productivity. Consequently, we are conducting a study that looks at personal productivity to understand what makes knowledge workers productive and what are the best fit practices and measures for understanding and managing work.
Please take a few minutes to share your thoughts on productivity. As a token of appreciation, you will receive a copy of the survey report. Individual responses will be kept confidential according to APQC's Benchmarking Code of Conduct.
For more process and performance management research and insights, follow me on twitter at @hlykehogland or connect with me on LinkedIn.