The productivity shell-game

24 comments on “The productivity shell-game ”

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1. Ari 1

   7 July 2009 at 11:18 am

   Good post, don’t see much to add. 🙂
2. Maynard J 2

   7 July 2009 at 11:21 am

   That comment was in response to this exchange:

   “Grant Robertson: Does the Minister accept that imposing a pay freeze will actually make it harder to provide the smarter, better public services that he wants, because it will be harder to retain and recruit skilled staff in areas of essential need where there is international demand, such as that for nurses and social workers?

   Hon BILL ENGLISH: The member is showing how completely out of touch the Labour Party is with the real world. The fact is that turnover rates in the public sector have dropped to historical lows, and it is going to be necessary to ensure that any pay increases are met with productivity gains. Productivity in the public sector over the last 7 or 8 years has been appalling. That will have to change, because if it does not change we will not be able to offer the range of services that the public deserve.”

   I was wondering what measures Bill English used to work out that productivity in the public sector over the last 7 or 8 years has been appalling.
3. snoozer 3

   7 July 2009 at 11:41 am

   Isn’t it weird how John Maynard Keynes and Maynard James Keenan have such similiar names?
4. Edosan 4

   7 July 2009 at 12:04 pm

   Snoozer, are you saying that John Maynard Keynes was named after Maynard James Keenan?
   • snoozer 4.1

     7 July 2009 at 3:10 pm

     That’s what I’m implying.

     Think about it. If your name was Keynes and your son was going to grow up to be one of the greatest economists of all time, wouldn’t you name him in a way that resembles the name of one of metal’s greatest vocalists?
5. sally 5

   7 July 2009 at 12:05 pm

   What Ari said – great post.
6. r0b 6

   7 July 2009 at 12:13 pm

   Good stuff. I have always had difficulty interpreting the concept of “productivity”. Right wingers seem to use it as a kind of general purpose excuse for keeping wages down – “wages can only increase if productivity increases” – but what does that mean if productivity cannot be defined or measured?

   In short, I’m hoping someone who understands and believes in the concept will step up in this thread and try to answer some of the questions that you raise and convince us that (beyond the manufacture of countable widgets) productivity is a meaningful and measurable concept in the real world.
7. Ianmac 7

   7 July 2009 at 1:49 pm

   Good post.
   Remember the beaurocrats are wasteful bludgers like those on the dole! Lets get rid of both and thus the frontline staff will blossom.
   Hey! How about a growth industry in faux patients? We could have teams of fit and healthy people who for a small fee say about $50 a time, we could front up as “patients” at A&E and could get processed in 60 seconds flat and thus produce stats which show that Tony has worked miracles! Brilliant. What would these teams be called? Ummm?
   • Pascal's bookie 7.1

     7 July 2009 at 2:09 pm

     Producitivity Oriented Teams Engaging Medicine’s Key Industry Nodes. ?
     • Ianmac 7.1.1

       7 July 2009 at 2:18 pm

       POTEMKIN. Good!
       How about: Productivity Orientated Key Engaging Industry Needs Fun ?
8. Maggie 8

   7 July 2009 at 2:04 pm

   In an earlier life I was involved in dealing with the finance industry when the banking gurus became obsessed with the “pay for perfoirmance” concept for branch staff.

   It was hilarious watching them trying to explain how performance and productivity could be measured for people whose major role was customer service. If you normally smiled at customers once every five minutes, would you get a bonus if you smiled TWICE every five minutes?

   Of course all the “targets” quickly became sales targets. If you were a smart seller of products customers neither needed nor wanted, you got the money, if your strength was in providing service rather than a glib sales patter, then you missed out.

   The whole game descended into farce when one of the major banks, with not a glimmer of a smile, proposed setting sales targets for superannuation products to staff working in a bank branch on the campus of a major university.

   If you couldn’t sell superannuation to a student whose main financial preoccupation was seeing if he could squeeze enough dosh out of his bank account to get pissed on Friday nights you were considered to be a poor performer.
9. Mike Collins 9

   7 July 2009 at 2:22 pm

   Increasing productivity does not necessarily mean more outputs at the end of the day, just more outputs per inputs. It is possible to deliver more while still being less productive.

   Taking health as an example, billions of extra dollars (inputs) were pumped in over the term of the Labour govt for some, but disproportionately smaller, increase in outputs (such as reduction of real waiting lists). This consequently massively reduced productivity. Now that doesn’t mean it is the fault of frontline staff at all, but this needs to be taken in context when discussing pay rounds in a recession and limited resources – ie where are the priorities? Paying the staff more, or delivering better return for taxpayers?

   I don’t accept that staff have no control over their productivity though. Staff can impact on productivity in a number of ways. Working faster or more diligently is one way but generally not the best way to achieve large productivity gains. Process improvements, cutting out unnecessary admin etc can all have a profound impact on productivity. A good employer will encourage their employees to be part of a process of continual improvement for productivity’s sake. After all it is those at the front lines that know where the delays come from, tap into that knowledge. In that respect, public sector staff can play a big part themselves in increasing productivity – by continually pointing out to their managers what the barriers to doing their job more effectively are, thus allowing their managers to work on removing those impediments.

   The private sector organisation I work for actively encourages these discussions, and celebrates suggestions for efficiency gains. The thing is, if you have a culture that you can’t change – you won’t.
   • Draco T Bastard 9.1

     7 July 2009 at 4:32 pm

     And you think that the public sector doesn’t?
10. Mike Collins 10

    7 July 2009 at 4:45 pm

    I’m not sure Draco – I don’t work in the public sector. However I wouldn’t mind betting that, just like the private sector, not all public sector entities would encourage this sort of discussion.

    The main point of my comment however was to answer an appeal from others above where they ask what productivity (gains) mean in the public sector. I was hoping to have demonstrated what they could look like. As well as discussing the simple yet complicated subject of productivity itself as I understand it, as some people mentioned they have trouble with the concept.
11. Jasper 11

    7 July 2009 at 4:49 pm

    You can’t measure productivity when it’s a public service. Simple as that. Public Services are there for the public. Where should throughput/output come into it?

    The health issue is a wonderful fallacy. In the time that Labour were in government, the average admission rates of hospitals remained the same, but people were staying there for longer. Why? Older people who were frail..

    It’s going to be the same story in the next 15 years. More money thrown at health, but no real change happening due to the increase of pensioners choosing to make up ailments in order to actually get a bed, someone to check on them, and heating. All things that they can’t afford at home due to the likes of Bridgecorp taking their life savings.
    • Mike Collins 11.1

      7 July 2009 at 5:07 pm

      That sort of cynical answer is not very constructive Jasper and would tend to suggest a closed mind to the discussion.*

      Consider the following real life example of improved productivity gains. This was mentioned internally in a bank in the last couple of years and the staff member who suggested the change celebrated.

      The credit card operations team dealt with credit card applications, and upgrade applications to existing credit card plans (sent out as invitations by the bank). They used to manually type in the details of each application taking about 2-5 mins per application. Now this was double handling – as the bank already had the details on file from which to generate the invitation in the first place. One bright spark thought there had to be a better way and suggested barcoding on the invitation letters – with a scanner quickly being able to retrieve the details. As you can imagine this saved hundreds of man hours of data entry each year, freeing the staff up for other activities.

      Note I am sketchy on the details of the story but the essence remains. Basically if you have the right culture, and seek to improve processes or the way you work, then you can improve productivity. I am yet to come across any person or organisation that is beyond improvement.

      Saying that the public sector shouldn’t be held to productivity gains is a cop out for those that are adverse to change.

      * Edit – it appears you have taken down/amended your original comment.
      • Maggie 11.1.1

        8 July 2009 at 9:41 am

        Mike, your credit card operations example simply demonstrates that it is possible to achieve productivity gains in many back room operations by working smarter.

        But attempting to do that with the front line staff who have direct contact with the public, is much more difficult.

        Call centres try to do it by measuring the time an operator takes to answer a call and to deal with a call, in the mistaken view that quicker is always better.

        The banks found it impossible to measure objectively standards of service, in fact they weren’t interested. What they could measure, and wanted to measure, was sales, and that is what they focussed upon.
12. Mike Collins 12

    7 July 2009 at 5:22 pm

    “You can’t measure productivity when it’s a public service. Simple as that. Public Services are there for the public. Where should throughput/output come into it?”

    Sure you can – you just don’t know how.

    A simple way of analysing how to achieve productivity gains would go like follows (and obviously this would be a lot more rigorous in pratice):

    1. Identify what you want more of ie. more elective surgery.
    2. Identify what is holding you back from delivering on that outcome ie. Form filling before and after operations takes up 50% of clinician’s time.
    3. Identify via cost-benefit analysis whether the form filling is necessary for the clinician to undertake, if this could be undertaken by a lower paid underling, or scrapped entirely.
    4. Implement solutions identified in 3. or move on satisfied that best practice is currently being implemented, but mindful that things could change in the future presenting new opportunities for improvement.

    Just because a service is termed a “public service” it doesn’t mean it shouldn’t be measured by what it delivers. In fact I would say that this is more important in the public service than an equivalent in the private sector (private hospitals for example). At least with the private sector, inefficiencies will be reflected in price and/or service and the customer has an opportunity to take his or her business elsewhere. The taxpayer who funds this public service deserves to know that they are getting value for money – especially in a recession.
    • Maynard J 12.1

      7 July 2009 at 6:00 pm

      A couple of short points Mike.

      1- yes you can often increase individual productivity and make those quick wins. They usually save a few minutes of an iterative process and get the individual who thought of it gets a pat on the back and a good story to tell at their next job interview.

      1a- They are rarely the type of gains that win people pay rises or attract the attention of a hostile employer/government.

      1b- to really increase productivity you need expertise; you need to free the operational staff from their daily tasks if you want them to do it (or provide SME input) or you need a dedicated team to do it. In the private sector, this dedicated team is usually a project team. In the public sector these teams are the bonfire candidates referred to as ‘the bureaucracy’.

      2- there is a difference between calling for increased productivity and demanding pay increases are related to it. One is a good idea and can lead to efficient practices and innovation. The other leads to reduced service, lowered standards and dangerous shortcuts.

      Sure, some form of performance measure is needed as it is a key factor in accountability. What is very important is that the performance measure does not degrade performance itself – and this is the case when you go for a productivity/sales target type of measure.

      Be wary of the upshot of that culture of change, especially the negative one English is promoting.

      3- your example for a doctor is an example where there is an obvious saving. Most would not be so clear and, as my original comment was to point out – to get anything meaninful you need that bureaucracy again.

      3a- after that productivity gain you suggested, would you still decide whether the doctors who have benfitted from that gain get a pay rise based on the number of operations they do? Or the ‘quality’ of them? Or another measure? And how will you know that there are no other fators affecting that productivity?

      What people are after here is not how you raise productivity, but how you define it and how you measure it.

      Another thought: You remember what a problem with the public service was in the late 1990s? No one knew what it did, or what they would be eligible for, what services it could provide. What would remedy that? Communications experts. FF to 2008 and what have we got? Too many ‘spin doctors’ (communications advisors), apparently. Just another example of how improving productivity is spun in a negative light.

      Apply the same thought experiment to other areas of the public service and you will get the same results: policy analysts would be a classic example. Somewhat ironically, National just spent an election attacking the very areas it thinks it needs now.

      edit…er…so much for ‘short’ points! 😛
13. Galeandra 13

    7 July 2009 at 9:17 pm

    “The fact is that turnover rates in the public sector have dropped to historical lows, and it is going to be necessary to ensure that any pay increases are met with productivity gains. Productivity in the public sector over the last 7 or 8 years has been appalling. That will have to change, because if it does not change we will not be able to offer the range of services that the public deserve.’

    I think English’s comments are simply a replay of the ‘bloated bureaucracy’ propaganda run over the last electoral cycle, and as much to do with tickling the breast feathers of the Joe Averages who bought that line, as with reducing wage expectations in general. With apologies to Willy S, he’s ‘beat(ing) the dog t’affright the imperious lion.’

    I have to say I thought better of him than these comments show. Of course, hard cop may become more appealing to the electorate as times get tougher, and soft cop Jonkey’s bland reassurances wear thin. Maybe his phoenix will rise again out of bureaucratic scorched earth.
14. Mike Collins 14

    8 July 2009 at 10:43 am

    Maggie, refer to my comment at 5.22pm 7/7 as to how it is possible to improve processes to ensure frontline staff are, well, at the frontlines. The key thing to process improvement is wanting to change for the better, and being encouraged to think and contribute to changes. That’s what my example was meant to show (staff initiated productivity changes). At the end of the day, it is those at the frontlines that know their job best – and what the barriers are to achieving the priorities of their roles.

    I have recently gone through the same exercise with my employer. I am a frontline staff member at a bank and I wholeheartedly dispute your comment that banks don’t care about providing and objectively measuring service. It is part of our mission statement to delight customers and there are a number of strategic initiatives in place to achieve and measure this. Net promoter score is a way of measuring the trends, benchmarked against competitors for example. This is taken very very seriously. After all, the only difference, that will make a difference, when there is no difference, is service.

    At the end of the day banks, like any other viable institution need to make a profit. Achieving sales is part of that, and rightly so should be measured and be a core component of roles. However more and more businesses, banks included, are waking up to the fact that in order to be successful in returning profit you must have a happy and satisfied customer base. Especially in a competitive environment. Why else have we seen the reversal of wholesale branch closures and an actual net increase in bank branches?
    • Maynard J 14.1

      8 July 2009 at 11:37 am

      Why do sales people always try to pressure people in to buying things? I almost universally dismiss sales staff and avoid customer-facing situations because I know the person will try to sell me something because of their target, not because of my needs.

      Remember that it might be more profitable to annoy a few but pressure the weaker into sales, rather than be nice to all.

      Goes both ways – and you do not get to shop around with the public service.
15. Mike Collins 15

    8 July 2009 at 12:00 pm

    “Why do sales people always try to pressure people in to buying things? I almost universally dismiss sales staff and avoid customer-facing situations because I know the person will try to sell me something because of their target, not because of my needs.

    Remember that it might be more profitable to annoy a few but pressure the weaker into sales, rather than be nice to all.”

    I find that a needs based sales approach is more effective. If I can’t provide something that meets someones needs, saves them money, or provides efficiency gains, then I will tell them upfront. People appreciate that and (hopefully) as a result respect your advice. And yes I do have sales targets.
16. randal 16

    8 July 2009 at 2:03 pm

    all good stuff folks.
    but this is just going to be a one term administration.
    New Zealand cannot function properly when it is being thrashed by robber barons.

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