How to Overcome Productivity Growth Stagnation in the Developed World
Discussing our theory on how to significantly boost productivity levels in a very much underutilised way.
There are 3 main areas to today’s article:
1. The core drivers of productivity growth.
2. Productivity growth stagnation in developed world economies.
3. Our solution to boost productivity growth.
PART 1 - The Core Drivers of Productivity Growth.
There are 3 factors that go into productivity growth:
1. Technological advancement.
2. Capital investment.
3. Education and experience of the workforce.
Productivity growth matters for many reasons. But the one that pretty much everyone would be particularly interested in is WAGE GROWTH. All else being equal, the more productive a workforce is within a company, the more output the business creates with the same amount of inputs. Which means that companies can justify paying employees more money (that doesn’t always happen in reality…but they are in a position to afford to do so should they wish).
PART 2 - Productivity Growth Stagnation in Developed World Economies
As you can see from the below chart, productivity growth has been in long-term decline over many decades (shown by the purple trend line I’ve overlaid). Furthermore, since 2008, for the four countries shown, productivity growth has flatlined and has struggled to get above 1% p.a, barr brief periods.
This long-term decline and subsequent stagnation, includes a period where computers were implemented at scale, and then the breakneck technological advancement of the past two decades.
Barr the financial crisis, the world has been awash with capital for a long time, and since 2009, capital has been INCREDIBLY cheap, with interest rates at or near zero.
The world continues to educate. The number of people in the workforce with degrees, and advanced degrees is at the highest level ever (see chart).
Those who graduate from high school have also greatly expanded in numbers (see chart).
In addition to this, the access to information and learning is the best it’s ever been. People now have the ability to learn about a whole array of different topics and professions, via platforms such as YouTube, Udemy, and Teachable (amongst many others). By many metrics, the world is getting smarter.
So this raises the questions:
1. Why is this happening?
2. What can be done about it?
I’m not going to attempt to answer the first one here, but I will share some insight into what I strongly believe can be done to contribute to the solution.
What is this solution? It revolves around the RIGHT type of education.
Whilst the education system could do with an overhaul, I’m not saying to completely tear up what is currently being done. But rather to augment and overlay very much under-utilised (and incredibly powerful) methods on top.
PART 3 - Our Solution to Boost Productivity Growth - Human Performance Upgrades
Technology has always been a core driver of productivity growth and the true benefits of these take time to filter down and take hold. So hopefully many of the amazing developments that have occurred, and that will continue to occur for some time yet, will eventually translate into productivity growth increases.
However, we believe there is a major growth opportunity via cognitive, psychological and emotional intelligence advancements. Becoming more aware, productive, effective and skilled INTERNALLY.
It’s a largely untapped opportunity in the mainstream and at Peak Vantage, we are striving to become a part of changing this and helping the world to benefit from it.
The amount of performance & productivity loss from the below is truly monumental:
- Adverse mental wellbeing.
- Poor or sub optimal physical wellbeing.
- Low EQ (emotional intelligence).
- Lack of meaningful self-awareness.
- Sub optimal communication (both between employees and between leaders and employees).
- Mental leakage.
- Not having enough internal and external mechanisms to become, and remain, focused and clear.
- Not having enough internal and external mechanisms that facilitate high performance.
Performance and productivity are not the only areas to suffer. Other adverse impacts occur within a business such as:
- Culture not being at the high impact level it could be.
- Lower employee engagement.
- Lower employee happiness.
- Higher sickness rates.
- Reduced loyalty and commitment.
- Weak connection and cohesion of teams.
- Higher staff turnover, recruitment and retraining expenses
-> All of this leads to financial results that are significantly impaired relative to the levels business could achieve.
A study involved nearly 2,000 office workers by Voucher Cloud has shown on average a person is only productive for a little under two and a half hours out of an eight-hour working day. That is crazy!
Employees are often the largest proportion of a company’s cost base. By taking steps to increase long-term performance of employees, the value-add in financial terms can be significant. An example - for a company with annual employee costs of £10m, a 10-30% increase in performance & productivity = £1-3m in value-add per annum.
Whilst this level of productivity increase may sound high (especially given the context of the actual productivity growth data in the graph from earlier), we make use of the Marginal Accumulated Gains concept (high volumes of micro advances) which supports individuals in becoming the best they can be.
A similar philosophy is why Team GB's cycling team soared from pretty average on the global stage, to a dominant powerhouse for many years (other countries now apply similar approaches and thus have caught up). Our proprietary 1-2-1 coaching & consulting frameworks, and our digital learning frameworks, are built around this MAGs concept.
Companies often talk a good game regarding initiatives to improve areas such as productivity, mental wellbeing, physical wellbeing, employee engagement, etc. But surprisingly few actually implement MEANINGFUL plans or take ACTION, to get the desired future outcome.
The opportunity for companies to do not only the right thing (by looking after their people in a deeper and more thoughtful way), but also to greatly improve their financial results, is monumental.
Those who take meaningful action will gain all the wonderful benefits spoken about…those who talk but don’t act, will not. The time to plant the seeds and water the soil, is now.
Written by: Dan Gayle – Peak Vantage CEO.