Productivity in the big picture

[rockstar.esq]

It occurred to me today that the word "productivity" has (at least) three accepted meanings, each of which is driven by the observers perspective.

To the worker, productivity is the rate of work getting done.  For example "John installed twenty lights today"

To the manager, productivity is the effectiveness of work getting done for example "Our lighting crew has completed 60% of the work with half of the schedule remaining"

In the big picture, productivity is the rate of change in the effectiveness of work getting done. For example "We increased our revenue by 2.5% without hiring more people."

Back when I was an apprentice, we were expected to make production on our assignments.  We were often given a specific amount of material to install in our working day.  All of our scrap went into an individual bucket.  Anyone who had an excess of material or scrap at the end of the working day better have a good explanation ready.  Falling behind attracted attention which brought instruction and correction in mostly equal measure.

On larger jobs it was common to see managers comparing the progress between crews.  The affected foremen running said crews faced a similar fate for falling behind.

Managers likewise, face comparisons made by the companies ownership.  This approach brings mixed results which reinforce just about everyone's complaint with employee-management relations. 

Recently I read some articles talking about how productivity is at an all time low.  This is one of the most common explanations for why wages have been largely stagnant for so long.  Delving deeper into the article, I realized that employers are citing a flat rate of improved effectiveness as "low productivity".  It's not that workers aren't getting things done, it's that they're not getting more stuff done than they have in the past. 

On the surface, that sounds like business owners focusing on "the stick" rather than the "carrot".  At some point, simply yelling at people to go faster is bound to max out the improvement. Now it would be easy to suggest that the grand answer to greater productivity is investment.  Yet I see lots of evidence that companies aren't making capital investments (tools, equipment, etc,).  So they're neither raising wages, nor improving their tools, yet the stock market is setting records.  What gives?

I think I have part of the answer.

Businesses are shifting away from competition.  I see evidence of this all the time in my local construction market.  General Contractors (GC) that routinely invite "the whole subcontractor market" to bid on cattle-call projects aren't winning much.  Yet a drive around town will reveal their banner on projects I wasn't invited to bid on. A particularly common practice is for the GC's estimator to conduct all the bids for lost cause cattle-call nonsense, and mostly pointless conceptual projects.  Once they've got an actual client on the line, the project is handed off to a Project Manager (PM) who conducts the bidding from there.  These PM's are often hidden behind impenetrable bureaucracy where they are free to act with impunity and without transparency.

Getting back to the management level view of productivity, the PM's have every incentive to avoid changes that could hurt their performance numbers.  Since they're not competing to win the work, low prices aren't a big concern.  In fact, this situation allows them to leverage the opportunity against a select group of subcontractors to demand lower risk for the status quo.  This approach can range from great professionalism to outright collusion.  "On paper" the PM is consistently delivering successful projects at the same price.  Thus we hear business owners complaining about how "worker productivity is flat".  Yet these projects are more profitable which helps to explain how it's possible for their stock to rise while "productivity" falls.

Transparency is a tremendous threat to these hidden markets.  If clients knew that PM's weren't actually getting competitive pricing, they would withdraw from the negotiated agreement.  If market-leading subs gain access to the hidden PM's they can expose high prices, thereby driving a wedge in longstanding "relationships".  Exposing the process also stands to reveal the "secret" behind a PM's success.  For many PM's, that wouldn't be flattering.

Transparency is a threat to the business owner as well.  It's convenient to blame stagnant wages on low worker productivity.  How good would it sounds to admit that they're increasing profitability by avoiding competition?  They could claim they're pursuing better clients, but all that really means is that they're targeting clients with higher budgets and lower scrutiny?  Business owners would also stand to lose "plausible deny-ability" of their PM's actions.  At a bare minimum, industry "best practices" are being studiously avoided because they provide insufficient opportunity for graft. 

Oddly enough, there are situations where transparency is a threat to the client as well. Roadwork is an excellent example of this.  So long as the client isn't a municipality, a road can be built in a remarkably short time.  I worked for a firm that regularly paved all the streets in a one hectare neighborhood in less time than the city took to pave 100 linear feet.  The city used the same road design, materials, and vendor supplying the labor as well as the materials.  Roads provide a convenient problem for elected officials to solve. The longer it takes, the longer they can point to the progress being made on their watch.  So long as nobody realizes that it's an artificial delay, the public is mollified.  Please don't get me wrong.  When the paving company showed up, they were hard at it to get the job done.  Paving is hard work.  The city just made sure they didn't show up for months and months on end.  Yet the city would have traffic control set up for the whole time.  In my time with that company, no less than four separate cities did things the same way.  

There's a big interstate expansion slated to begin out here that's supposed to take 10 years to add one lane in each direction for 15 miles.  That's 21.698 feet per day.  I looked it up one time, but the single best day of production on the transcontinental railroad was something like 13 miles.  13 Miles of track in one day working with hand tools must have been some kind of awesome to witness!  That being said, it just doesn't sound possible that in 2017 we can only get 21.698 feet per day using modern equipment.