The future hinges on productivity

Last week, Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation and Chairman and Chief Executive of Emirates airline and Group, challenged a group of business leaders on what will make Dubai even better.

While moderating a session on "The future of Dubai — 2015" we picked up on his challenge and the esteemed panellists concluded that two elements are necessary: increased private investment and improved productivity.

The mention of productivity, especially, caught my attention and left me wondering, is there a fast-acting pill for productivity improvement?

Simply defined, productivity is a measurement of output. It is a ratio to measure how well an organisation, industry or country converts input resources (labour, materials, machines, etc.) into goods and services. One of the more relevant productivity measures for the region is labour productivity, which is typically measured as output per labour hour.

The successful management of the productivity process is ultimately the key to survival for any organisation. Therefore, it should be the concern of all leaders, managers and employees.

Managerial quality

There are enormous debates about the factors driving productivity. But the common theme that emerges is that the quality of managers plays a significant role in determining output.

In the 1970s, US productivity growth fell compared to the preceding decade and this trend remained until around the turn of the century. The slowdown in the US roughly corresponds to the entry of the baby boom generation into the workforce.

Dartmouth College research credits the management style of the baby boomers for roughly 20 per cent of observed productivity slowdown.

According to Dartmouth's research on US productivity, an examination of census data shows that the entrance of the baby boomers into the workforce caused significant changes in the age structure of management. The number of workers per manager rose for existing managers — reducing their effectiveness — and some workers were prematurely drawn into the ranks of management and called upon to manage at earlier ages than in previous generations.

So, with all other things being the same, more talented managers will produce more output. What does this mean in the region?

If we are to compare the US workforce in the 1970s with today's workforces in the region, there are two parallel themes: a young workforce (youth bulge) and noteworthy demographic shifts.

In the Dartmouth study, they found that an influx of young workers lowers the overall quality of management and total factor productivity. Do you think the same holds true here? A massively younger workforce means the average age of managers drops and this typically lowers the labour productivity per hour as they are still maturing into effectiveness in their role.

Baby boomers

If the entry of the baby boomers into the workforce was considered a demographic change in the US, what term would be used to describe a workforce that has more nationalities than the United Nations has member countries? Demographic change on steroids?

The channel through which demographic change will impact productivity is management quality.

As business in the region is moving past laying down the infrastructure to increasing productivity, you need to concentrate on the quality of management. This will have positive effects on productivity.

- Dr Tommy Weir is Vice-President of Leadership Solutions at Kenexa.