The Unicorn HRO Blog

Reasons for Worker Productivity Decline and what HR can do

Posted Monday, September 26, 2016 by Unicorn HRO

Recent reports have shown that worker productivity has slowed down in recent months.  Since 2007, statistics via the U.S. Department of Labor show that worker productivity has fallen by 1.3%, and for the first two business quarters of 2016, productivity declined around another half a percentage point. This is a concern to many, as businesses are currently engaged in a strong hiring period.  Many fear that if productivity continues to decline, hiring will fall off, and businesses do not want their finances to suffer.  Below are possible reasons for productivity decline, as well as what Human Resources staff can do to address this problem.

Is this just a mismeasurement?

In response to such reports, many have wondered if the Labor Department might be misconstruing the actual situation.  Many have raised the point that the Labor Department’s methodologies for assessing productivity are antiquated and cannot keep up with a faster and more connected economy (a large number of businesses, after all, do their day to day tasks via the internet, while the Department still relies in many ways on “paper reporting”).  Indeed, some have tried to discount the Labor Department’s findings completely, and have instead asserted that productivity could actually be improving.  To make such an assumption, however, would be to be overly optimistic, as other sources support the Department’s findings.

Outdated practices and the lack of innovation

Workers themselves are not the main culprits for productivity decline. Rather, the blame must be placed on companies who use outdated practices in their day-to-day businesses.  Many companies are still using business models that are more in tune with the 20th century than the 21st, and the same can be said for much of their technology.

Since the recession of 2008/9, many businesses have been reluctant to utilize new technologies that could cut into their bottom line.  Despite the fact that new innovations have appeared which could improve productivity, many businesses fear to use any of their capital on funding such innovations, and this has caused productivity to slow down.  This is especially concerning, as businesses are reluctant to engage in new investments, mainly because they see the Federal Government’s continued use of the zero percent interest rate policy as the sign of a weak economy.

Moreover, some say (most notably Robert Gordon of Northwestern University) that even though businesses might utilize new technologies, sometimes such technologies do not necessarily have as much of an effect on improving productivity as people had hoped.

Many employees are leaving the workforce

With Baby Boomers retiring, many companies are losing large amounts of talented employees who have seasoned experience and knowledge of the company and its culture.  This is a bad enough problem for many companies, but things are made worse in that the productivity of the co-workers of the retiring Boomer also declines.  This is because, in many cases, the older, more experienced worker is no longer around to impart his knowledge or share his experience with younger, newer workers that he might have previously trained.     

What HR Staff can do

While there are several reasons given for worker productivity decline, HR staff can nevertheless take action to ameliorate this problem.  Rather than cutting the pay of existing workers, or putting pressure on workers to perform better (which can cause undue stress), HR staff can engage with both workers and management to identify the problems experienced and resolve them in an appropriate manner.  This can be done identifying what technologies can help the company to best improve performance, providing training programs to increase efficiency, and implementing hiring strategies which ensure that the best employees are being recruited.

By identifying the problems of productivity at their respective companies, Human Resources supervisors and employees can then tackle them by using the right tools and resources in order to best resolve matters and prevent further disruption to day-to-day business.

 

 

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