The Productivity Paradox

Facing the Challenges of Achieving Both Efficiency & Future Greatness

Yesterday I had lunch with a good friend and former strategy colleague who, along with a past coworker of his, launched a boutique consultancy a few months prior. I noted how confident, happy and healthy he seemed and commented that the company must be developing well. Also sensitive to the knowledge of how demanding both consulting and entrepreneurship are, I inquired about his work-life balance. “I’m working the same amount of hours each week that I was when I worked for an ad agency,” he replied. “The difference is that there is no fat. It is 100% productive time, so we accomplish so much more.”

You can most likely imagine my envy.

Every corner of modern corporate culture is permeated with the bloated operational reality of status meetings, conference reports and other time wasting, overly communicative tasks. Not meaning to be flippant, I told my friend it’s easy to operate so productively when the company’s payroll tops out at two employees. He agreed but also asserted that there was a strong commitment he and his partner have made to that culture, no matter how big they grow; from the moment they decided to team up, they wanted to function fast and lean in order to truly focus on delivering great work for clients. I immediately began to wonder if you could scale such a mindset and with a large staff, spread across multiple geographies, institute an operational practice that increased productivity and even the quality of the work by, well, let’s be honest, decreasing bullshit.

With that question in mind, let’s take a step back for a moment. A couple months ago, I was introduced to the concept of “organizational debt” when I read this excellent blog post by Steve Blank. Blank relates what he calls organizational debt to technical debt, a longstanding concept in software development. Technical debt is accrued by companies when they deploy code that is known to have errors and then “paid back” when those errors are resolved and the code is stabilized and re-deployed. Similarly, organizational debt accrues when companies build process and add staff to “just get it done.” To pay back organizational debt, leaders have to make difficult decisions about the direction of their company, the value of certain employees’ skills and the needs of further growing and building the company. Unlike technical debt, tackling organizational debt often requires facing down emotional choices with a human cost attached to them.

Now let’s add one more interesting factor to this growing quest for operational nirvana. I currently work with (or have worked with and still keep in touch with) a number of clients employed at large, Fortune 100 companies, across an array of categories, from retail, to financial services, to CPG, et cetera. In my observation, every single company, in every business category is intensely focused on bottom-line financial management. To simplify the situation slightly, while companies, particularly publicly traded ones, must continually achieve top-line growth, there is increasing pressure to produce “shareholder value,” which means aggressively managing cost structures and increasing bottom-line profitability.

I credit private equity for the general movement; PE money has flooded the post-recession economy, fueled by historically low interest rates. Companies like 3G Capital have introduced cost-management principles like “zero-based budgeting.” You would expect, with this trend well underway for the past few years, that productivity would be increasing dramatically, where in fact, it has fallen in the U.S. for the past three straight quarters. I have to underscore the importance of the tension between these two opposing trajectories, as the desire to trim costs has become so incredibly pervasive, even with evidence to the contrary that companies are actually improving their productivity. So many organizations have become nearly obsessive with eliminating waste, given the tremendous scrutiny to reduce costs. However, without the ability to invest back in the best tools, staffing and resources to impact success, companies stifle their potential.

So we have my friend and his small, but incredibly productive (and I’m certain soon-to-be-growing) start-up. We have Mr. Plant’s concept of organizational debt, which too many companies ignore or aren’t truly cognizant of. Finally, we have this global macro-trend of intense cost-cutting and bottom-line focus with, at the very least, a questionable outcome. I would contend these are all related pieces of a more holistic journey to produce an effective operational corporate model for the 21st century. They also reveal three big principles I believe every company must embrace in order to perform at an optimal level.

1. Commit to Ideals: Michael Jordan didn’t lead his team to six championships because he considered it to be a fun, casual exercise. He and the rest of the team focused their entire physical and mental being on winning, game after game, season after season. My former colleague and his partner understand that operating so effectively requires commitment from the very beginning. Any team must understand what to prioritize and how to organize around what it deems most important.
2. Attract, Coach and Reward the Right Talent: A friend and former client is a high-level executive at a large durables company with a long, storied heritage. He confided that he felt they were being out-innovated by an overseas competitor and wondered how they could accelerate their own innovation efforts. I pointed out that the culture of their competitor, in their native land, attracts the finest talent. Children grow up dreaming of working for this company, and therefore they are staffed with the brightest minds of the region, all of whom are driven with a confidence that they are on the best team. This is one key aspect of resolving organizational debt: companies must attract and retain tremendous talent — but also the right talent. This also means removing non-performers or those whose skills simply aren’t a part of the future vision.
3. Eliminate Waste to Fund the Future: Managing corporate finances to ensure maximum operating profit has always been expected of any responsible company. It’s table stakes. The reduced costs, however, should ultimately help fund advancements into the future. Any company’s competitive advantage will not exist for long if it’s starved of further investment. Many companies have stripped themselves of their strengths over time in a bid to be financially competitive. Making the hard choices of resolving operational debt means reducing costs, yes, but leveraging savings to afford maximum future opportunities.

Above all, there is something that connects all three of these principles and is as necessary as anything. You can see it in my friend with his new business. You can surely see it in any successful business leader. Passion.

Unwavering passion for the team and its mission must be infused into every activity. Passion in itself may not make us all 100% productive, but it can certainly help filter out so much of the minutiae and waste in our routines.