April issue 2015

By | Business | Economy | Published 4 years ago

“The man without a purpose is a man who drifts at the mercy of random feelings or unidentified urges and is capable of any evil, because he is totally out of control of his own life. In order to be in control of your life, you have to have a purpose — a productive purpose … The man who has no purpose, but has to act, acts to destroy others. That is not the same thing as a productive or creative purpose.”

— Ayn Rand

Labour productivity is typically defined in a cut -and-dried manner: output per man hour. But there are layers of meaning to that definition as we enter the third industrial revolution and find ourselves in a world awash with alienated young adults. There are the typical scarce resources of the first and second industrial revolutions, the usual suspects — of labour, land, capital and commodities, but now we have an upstart. The new entrant, that of data or information, is not exactly scarce, but needs to be factored in as the Fifth Element to our modern economy. We will leave the need for a new definition of productivity to future articles but for now, we are thinking along the lines of digital information as a new form of capital and the need for measures on its return, turnover and efficient allocation.

There is a psychological dimension to labour productivity that goes beyond a mere statistic. We are witness globally to the unintended consequences of the wealth gap and the strains that come from a lost generation of youth that have no productive outlet.

Ayn Rand’s quote is evidence that this is not a new phenomenon, and that perhaps we can never solve the problem, but we would like to fashion this article as an open letter to Pakistan. We hope to challenge ourselves and others to take small steps towards making this country a leader in the Muslim world for starters, and eventually the world at large, with a rapid ascent in productivity.

An Asian Development Bank report dated August 2014 ranked Pakistan 23 out of 24 countries in their Creative Productivity Index (CPI), an index that measures the creative and innovative potential of economies. The only country we beat was Cambodia. The report mentioned Pakistan’s inability to create a competitive business environment as well as little incentive for companies to innovate. The key word here is “incentive.”  This is the challenge for all of us in setting up the proper environment to motivate and educate our staff in the workplace.

If we need more of a reminder of where we fit in globally, the World Economic Forum Global Competitiveness Report 2014-2015 ranked Pakistan 129 out of 144 countries. Just for some perspective, Nigeria came in at 127 and Libya at 126.

Lastly, Pakistan has seen no productivity improvement since the end of the global Great Recession and during the same period US productivity rose over 10 per cent. This stagnation must be reversed.

The chart below is from a government article from the Pakistan Bureau of Statistics.

The good news is it can only get better from here. There are complex trends that act on productivity trends such as education and demographics, but it might be most beneficial to approach it from an organisational core.

To begin with, how do we overcome organisational inertia?

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Presently, we find a complete lack of accountability as the productivity drags within most companies in Pakistan. Each day millions of hours of potentially productive time is laid to waste. This is not merely anecdotal: we have lost some talented graduates from Pakistan’s finest schools because of a lack of desire to focus on work. They have no incentive given the country’s standard structure of seniority in both, the public and private sectors.  Imagine your only option is to work at companies which are built with no incentives other than standard timelines, such as in two years you are slotted for XYZ promotion. The incentive is to spend your life sitting and waiting for things of little meaning, while having no real impact on the world or even your company for that matter. The correlation for upwards mobility is with time instead of accomplishment. That is not only a waste of productivity, but also a waste of time.

One finds themselves as part of a corporate bureaucracy where people wait for upcoming promotions. This becomes a festering cycle as young employees with the newest tools become systematically inept managers.  The problem is endemic, to the point where even state-owned enterprises and government offices exhibit this culture to an extreme and are also the most resistant to change.

Companies cannot be run purely based on seniority; they must be run on merit and results. Incentives must be structured in a similar manner where there are tracking mechanisms for different time periods and employees are incentivised accordingly. Senior executives need to take bold steps but organisational inertia makes it unlikely. The first step in changing an economy may need to start with one industry or perhaps with the new generation of entrepreneurs who are innovative at the core.

We have to learn that a culture of accountability is a culture of ownership. In our organisation, for example, management can track what each employee is doing in real time and we can track deliverables by the day, week, and month against targets which have been clearly outlined. Similarly, each department has similar transparency within their respective departments. This creates a healthy sense of accountability for the individual, department, and organisation as a whole. The result is a culture of ownership for one’s own efforts and an ability to see the measurable impact of each team member’s contribution to the organisation. When the people around you take pride in their work, it is infectious.

Essentially we must start creating incentives in the workplace. If Pakistan’s young graduates are given environments where mobility is purely dependent on merit, and they are given well-deserved incentives frequently as rewards for their accomplishments, the entire work culture would change. We have seen it change. Mobility within an organisation should be based on measurable results.

We must change it one company at a time. Employees must demand that their work is recognised and tracked systematically, managers must implement the tracking systems, and management must assure that all movement within the organisation is purely merit-based. When giving out promotions, there must be hard data.

Now imagine if there was a systematic way to track the deliverables across state-owned enterprises, ministries and the like. What if in a few years there was a centralised database where taxpayers could see the productivity of each government employee and department on a real time basis?  What if the public could see how many hours an employee worked each month and their deliverables?

These concepts are necessary to discuss with the recognition that government bureaucracy is in an entirely different orbit of inertia. The mindset will need to accept change, but the sooner these ideas are introduced and become part of the national conversation, change becomes feasible. The information will become instantly available once the trigger point is reached.

The private sector needs to implement these processes right now as the incentive structure is present immediately for shareholders. While the public sector does not have the incentive structure for this, if the private sector implements it, the public sector will eventually have no choice. Once it starts, it will not stop, but for that to happen we need to get the ball rolling now. The potential for economic improvement is enormous.

The apathy we witness is a disease and it has spread to the youth. We can stop this. We must stop it one company at a time.  One must think of it as trickle-up economics. Business is not very different from politics, and when the public sector begins to be run around principles of accountability, the benefits will eventually rise up and help reverse the entropy of the state.

This article was originally published in Newsline’s April  2015 issue.

Nadir Hassan is a Pakistan-based journalist and assistant editor at Newsline.