The Intentional Organisation - Issue #35 - Again on Performance and Productivity

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Working on the Intentional Organisation concept, I found it is vital to revisit the concepts of Productivity and Performance, as these are entangled with the concepts of Design in an organisational context.

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Last year, one of the issues of this newsletter was titled “Getting Things Done” and focused on the curious aspect of many of my mentoring efforts being focused on the question “how do I get more done at work?”

I introduced an important distinction that we need to make between productivity and Performance.

Way too often, we see these words used interchangeably, resulting in adding to the confusion. There’s so much written on personal productivity that we can quickly end up thinking we can start functioning as machines, solely focusing on optimising time spent rather than looking at the quality of what we produce.

This also substantially affects Organisation Design because we want to make sure that our organisations produce results. So what should then our focus be?

One of the objectives of organisational design is to ensure the organisation can provide a replicable set of activities aligned with its strategy and operating model to deliver its products or services. The efficiency of this design is traditionally analysed in terms of productivity, as what you would expect is an increase in output over time while keeping the input steady.

This is easily traceable in the standard way of looking at productivity through the following generic formula.

The above assumes that productivity is the product of the relationship between Output and Input. For example, in the case of a retail store, it can be given by the relationship between Net Sales (output) and the Labour cost invested to achieve that output.

Because companies rarely have clear strategies to increase output, they often intervene in the input to keep the productivity levels optimal. Continuing the example, this is why cost-cutting efforts are so often seen in retail.

However, productivity can be seen differently: not as a resulting KPI but rather as a constructive factor, a multiplier of our input.

This is how I see Organisation Design efforts playing their game, in trying to optimise conditions to ensure the level of Productivity increases constantly. How? Right-sizing jobs, having proper communication systems, providing suitable competency models, adequate reward mechanisms, the appropriate service levels, etc. Work-Design becomes particularly powerful in this context, as it allows the creation of a framework for reaching increased productivity levels. If the level of P increases, I can also increase the level of Inputs, still gaining more outputs.

Here comes the concept of Performance, which looks not just at efficiency but especially at effectiveness in reaching a result. The individuals can get results within the productivity framework we have created. Thus, through individual and team performance, the system’s Productivity is achieved.

Let’s give an example. Imagine Organisation Alfa having two teams of software developers. Both have the same number of people and cost the same to the company. They are responsible for two distinct product lines. Team A is thoroughly optimised in working; members rarely work overtime. They always respect deadlines, with great respect for internal processes, delivering results fully in line with the expected outcome.

Instead, Team B is more creative and less organised; they sometimes end up doing long hours of work debating the best solution to the problem, often missing interim deadlines, and delivering their project at the last minute. Usually, they do, however, over-deliver, often with one or two features not initially requested but that made sense during the path of work.

How do we evaluate Team A and Team B in terms of Productivity? If we look at money as the input, their Productivity is probably the same. However, let’s look at the time spent. It might be that the productivity level of Team B could be slightly lower (especially if the additional features presented cannot be “estimated” in terms of impact on the outcome).

What about Performance? Both teams perform well, in line with objectives, with the second one probably ending being more effective than efficient.

Now the question is, do you want to have more Teams A or Teams B?

When I have posed the question, I tend to receive different answers depending on personality. For example, team B seems more energetic from the description, so it captures the fantasy of more creative people. On the other hand, team A attracts more those with a process-oriented approach. Some also have the feeling that Team A is focused on completing its tasks, whereas Team B can go beyond the goal assigned.

The reality is that teams rarely hit precisely the same results. A strict focus on traditional Productivity tends to stifle innovation, lower creativity and, over time, might create issues with the underlying Performance.

Adopting the more intentional approach to Productivity already raises benefits because you create an organisation where increased Performance is seen as a positive feature of the system itself.

But how do you then create an organisation that genuinely promotes Performance and not just Productivity? This is the conundrum of most discussions on Performance Management Systems and Processes that exist, as they often mix the two concepts. I will come back to this in the next issue of this newsletter.

Both Performance and Productivity need to be on the agenda of OD experts. I’m sure some of you have noticed that I have been speaking of Productivity at the organisation level and Performance talking about individuals and teams. It was not an incident. The reason is that I’m also referring to two different groups of reasoning from a system analysis perspective.

Should we be interested also in individual Productivity? Taylor tried to break up tasks in the most minute action to increase personal Productivity. But with intellectual activity, this is simply impossible. Thus it doesn’t make sense to work in that direction.

Should we then look at the organisation’s overall performance? This sounds like a more exciting endeavour, but it is more complex. Why? Because it drives the need to investigate the concept of Value and Sustainability that the organisation needs to define for itself. A topic we have seen as part of the definition of the Organisation Evolution Framework definition. And a case for another chapter in this fascinating journey.

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