While growth in labor productivity can result from factors such as automation, higher-skilled workers, increased production scales, organizational effectiveness or technological innovation, developed countries like Canada and the United States are experiencing stagnant to declining labor productivity.

This paradox raises the question: Why is productivity falling despite significant investments in technology and resources? And more importantly, what can businesses do to take action and reverse this trend?

Identifying potential causes and actions to counter low employee productivity

While there are numerous reasons for productivity decline, businesses can focus on the following organizational components and take action to influence employee productivity outcomes.

1. Process Optimization

Many processes within organizations are outdated, complex, or redundant. Employees often follow inefficient procedures blindly, leading to red tape that stifles productivity and innovation.

Take Action:

  • Engage employees in identifying areas for improvement.
  • Implement process redesign using best practices and expert insights.
  • Assign process ownership to staff members, making them accountable for continuous process innovation.

2. Relevant Technology

Although businesses invest heavily in technology, much of it is underutilized due to its complexity or irrelevance to actual business needs. Businesses risk overspending on tools that fail to align with strategy or enable operations.

Take Action:

  • Conduct an IT audit to reduce the complexity and duplication in the IT landscape.
  • Align IT investments and spend with strategic priorities: Maintain operations, grow future capabilities and fund innovation.
  • Allow space for experimental projects (innovation) that might fail without disrupting core operations.

3. User Competence and Skills Development

Employees often lack the appropriate skills to adapt to industry changes or leverage new technologies. Companies typically prioritize high-potential employees (HIPOs) for training, while neglecting the broader workforce.

Take Action:

  • Conduct a company-wide skills assessment to create a skills baseline.
  • Align training and development programs with short, medium and long-term business strategies.
  • Implement a robust talent management strategy to up-skill and maintain employee talent for current and future roles.

4. Employee Engagement

Employee engagement levels are alarmingly low, with less than 40% of employees actively engaged in North America. Disengagement often leads to high-performing employees leaving, while underperformers remain to further erode productivity.

Take Action:

  • Measure current engagement levels and identify root causes.
  • Develop targeted programs to revitalize the employee brand experience.
  • Foster excitement around company goals and future growth opportunities.

5. Organizational Effectiveness

Many large corporations suffer from bloated headcounts and duplicated functions. Ineffective structures create inefficiencies, stalling decision-making and impacting overall productivity.

Take Action:

  • Reassess organizational structures to focus on core business functions.
  • Determine optimum head count aligned to business strategies and goals.
  • Reduce unnecessary hierarchies and determine structures to optimize support functions.

6. Culture of Innovation

Companies often struggle to build a culture that encourages innovation. Fear of failure, rigid hierarchies, and outdated processes prevent employees from sharing new ideas. The concept of innovation also differs between organizations, and needs to be clarified.

Take Action:

  • Define what innovation means in the context of your business.
  • Assess the current corporate culture and its barriers to innovation.
  • Implement practical measures, such as cross-functional working groups, business driven demand and budget allocations for experimentation.

7. Rewards and Recognition

Employee performance must be recognized and rewarded, not just through monetary compensation but also with meaningful non-monetary incentives. By increasing focus on recognition, employee engagement will improve.

Take Action:

  • Review how current reward and recognition systems support employee productivity.
  • Implement reward and recognition systems that celebrate and encourage employee contributions.
  • Include flexible benefits, growth opportunities and public recognition programs to boost morale.

8. Dealing with Non-Performance

Non-performance is often ignored, with weak performers transferred across teams instead of being addressed. This undermines team productivity and signals to others that underperformance is acceptable.

Take Action:

  • Implement a clear performance improvement program.
  • Train managers on fair performance management and labour practices.
  • Identify and address non-performance issues to ensure accountability.

Although employee productivity is under pressure, businesses have the necessary tools available to reverse this trend. By aligning organizational components, business can create a working environment that encourages and celebrates high levels of performance by its employees.

Written by: Phil Lotter, Piilo Consulting