Economics of Human Resources: Productivity and Efficiency

How Productivity and Efficiency are the Root of HR Decision Making

• Who does not like productive employees who can get the work accomplished in less time than others and hence, be able to take on other tasks?

• Further, who does not like to be productive especially if they are on contract to a company and hence, are paid according to how efficient they are?

• Moreover, which manager does not like his or her employees to add more value through efficiency?

• Finally, which organization does not reward its productive employees over less productive ones?

These are the questions that Human Resources (HR) managers and the managers in organizations confront when they have to decide on hiring, firing, and rewarding employees.

Indeed, with technology becoming all pervasive and ubiquitous, employees are realizing that if they have to retain their jobs, they have to ramp up on their productivity. They are also realizing that competition from freelancers and contract workers who can do more in less time and also are cheap to the organization because the firms do not have to take care of other benefits except basic salary means that the full time employees in many organizations are feeling the heat.

How Productivity and Efficiency Work in the Real World

Before we proceed further, let us look at how efficiency and productivity play out in the workplace. Some employees get work done in lesser time when compared to their peers.

For instance, if a particular employee takes 10 hours to do the task which other employees perform only in 15 to 20 hours, the former would be looked upon favorably by the managers because this employee can be made to work on more tasks in the time saved.

Further, if a particular employee increases the value added to the organization by taking initiatives such as designing tools for increased efficiency, he or she is adding more value than the others and hence, he or she would be rewarded accordingly.

Apart from this, if a particular employee takes fewer breaks as well as does not browse the web and check Facebook all the time, then the organization is likely to view these employees as more valuable assets when compared to the others. Indeed, the chances of these employees being fired are lesser or even nonexistent when economic conditions worsen.

As can be seen in the way many companies across the world are retaining their top performers and letting go of the ones who are less efficient and productive, it is clear that the workplace of the future would be dominated by the ultra productive and ultra efficient workforce.

The Impact of Technology

No discussion on productivity and efficiency is complete without discussing the role of technology. Just as machines replaced workers in the mass manufacturing assembly lines and just as computers replaced even the most highly skilled employees in the past, now it is the combination of advanced computers and robots to replace the knowledge workers.

The fact that the knowledge workers or the workers who were employed in the services sector felt that by virtue of adding more value than the earlier workers whom they replaced, they were secure is now being questioned.

As the AI (Artificial Intelligence) algorithm based computers and robots are being introduced into firms, it is no longer the case that even the most valued adding employees can take their jobs for granted.

Moore’s Law and Exponential Change

The point here is that technology follows the Moore’s law wherein the pace of change is such that the trends that are visible now would be replaced by newer trends within a time period of one to two years.

Therefore, what the professionals who are already working and those aspiring to enter the corporate world have to remember that in times when dizzying change is the norm, it pays to improve and enhance one’s skills on a continuous basis so that they are not left behind in the rat race with the changing trends.

Further, the fact that organizations are always looking to cut costs and boost profits means that one cannot expect charity from their managers and their organizations.

Emerging Threat from the Temps and the Casuals

We have discussed how workers are threatened by more productive colleagues as well as threatened by technology. Another emerging threat to full time employees is from the growing army of freelancers and contractual employees.

As mentioned earlier, organizations do not have pay these workers anything more than the basic cost as healthcare, social security, and paid leave do not apply to them. This means that more and more, HR managers would be apt to shift to freelancers and contractual employees over full time workers. This also means that in the future, the existing workforce would be facing and confronting all these trends at the same time which would indeed be exhausting to contemplate.

Protecting oneself from being replaced

If what has been discussed so far sounds alarmist and gloomy, we would suggest talking to older workers and those retired who in their times have had to confront computers and outsourcing replacing their jobs.

Further, we would also suggest considering the waves of change that have happened in the corporate world wherein the first casualties of any change were the slow moving who were simply replaced with the faster and more agile newer entrants.

The lesson for aspiring workers and the existing workforce is not to be tensed up or feel alarmed but look for ways and means to augment their productivity in addition to learning new skills or methods to add value by contributing in other areas than the regular work.

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