Productivity: The Holy Grail of Workplace Strategy

The opening scene of Monty Python’s “The Meaning of Life” shows a group of older office workers chained to their desks as their office is transformed into a pirate ship. The workers, who are comedically lashed by young task masters to row faster, ultimately revolt until the ship falls off the edge of a flat Earth.

Unlike Monty Python’s sketch, worker productivity is no joke. It is the holy grail (another Monty Python classic) of workplace strategy.

Economic wonks will know that from a macro standpoint, productivity is “output” divided by “total hours worked.” Most people believe that U.S. productivity has skyrocketed with all the modern technology, automation and other tools that make work “easier.” Productivity growth has slowed since 1974 (except for a brief period in the late 1990s) and in the past several years has had periods of decline. At 1.1% from 2009 to 2017, annual productivity growth has been the slowest of any business cycle since at least 1947.

Like all good business managers, we at CBRE like to measure things following the old Peter Drucker rule of “if it isn’t countable, it doesn’t count.” One of the areas we measure most is workplace strategy, where our recommendations on site selection, workplace design and other commercial real estate considerations aid our clients in making some of the most consequential decisions for their businesses.

Our measurements inform our clients’ real estate decisions on everything from apps that lessen the amount of time for an employee to get a cup of coffee in the morning to booking a conference room or arranging for a safety officer to walk workers to their cars late at night. We know which parts of the office that employees spend the most time in, so we can shorten distances between critical work areas and common areas for employees to have more positive interactions with one another and to collaborate. In short, workplace strategy is a science and we can measure almost every workplace component to foster more efficiency.

Based on multiple surveys, client meetings, exit interviews and other factors, we also know that modern workplace design makes most employees happier and more collaborative. The workplace has become an important tool to attract and retain the scarcest thing in the marketplace today—highly talented, highly motivated employees. All these factors theoretically should make a company more productive. One academic study that attempts to prove this is titled  “Happiness and Productivity” by Andrew J Oswald, Eugenio Proto and Daniel Sgroi from the University of Warwick. This study, not surprisingly, found that “happiness makes people more productive” (more output with similar or higher quality), but this was done in a controlled environment (a lab) with rote/routine tasks. Another study by Bill Wheaton of CBRE Econometric Advisors concludes that companies that spend more money on workplace strategy are more productive at the enterprise level (more profitable), but doesn’t address how to measure productivity at the workplace level.

Objective measurements of productivity remain elusive. While many of our clients tell us that productivity considerations always come first, based on our occupier surveys most of them focus on efficiency factors (using less resources) and not productivity factors (getting more out of existing resources). Though often used interchangeably, the terms “productivity” and “efficiency” are very different. We too often emphasize efficiency factors because they are easier to measure and hope they make people more productive.

What we are not doing (and at this point may be unable to do) is measuring actual productivity gains from workplace strategy. We are sniffing around it using survey proxies such as feelings of “happiness,” “collaboration” and what makes it easier to attract and retain talent. All of these may be true, but unlike efficiency factors, which measure objectively down to the penny, our productivity factors are all too subjective and, in many cases, may be flawed by survey bias. Who isn’t going to say in a survey that being happy in the workplace makes them better at their jobs? Furthermore, studies have shown that happiness (or life satisfaction) peaks early and late in life and craters in people’s late 40s and early 50s.   Are we really measuring happiness if we don’t take these age distinctions into account?

It’s well worth reading a Harvard Business Review article titled “Great Companies Obsess Over Productivity, Not Efficiency.” Given how productivity has slowed in the broader economy, it is even more important that we maximize workplace productivity and pursue better ways to measure it. As data analytics are perfecting everything from stock trading to baseball strategy, the workplace is not far behind. In short, workplace efficiency will have declining impact before long, so we need to now focus on productivity factors to provide maximum value to our clients.

The search for meaningful measurements of productivity may be an unattainable holy grail and perhaps happiness, collaboration, talent acquisition and worker retention are enough. Are these proxies so inextricably linked with productivity that there is no difference between them after all? Some of you may ask, do I have a suggestion on how to better measure productivity than through surveys? The short answer is no, but I’m thinking about it and I’m asking you to do the same. In the continuing search for the holy grail of workplace productivity, we shouldn’t be satisfied with surveys and lab studies. We should apply the same level of rigor we do to workplace efficiency analysis.

By Spencer Levy, Chairman & Senior Economic Advisor, Americas Research, CBRE.