Outsourcing and the Productivity Myth

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JoAnn Hackos, PhD
CIDM Director
www.infomanagementcenter.com

Productivity increases have been making the news for several months. The workers employed by US companies are more productive than ever, we are told. Productivity is at an all-time high and is largely responsible for higher profits. Many information developers can attest to the productivity gains they’ve been asked to make for the good of the company profits. With staff layoffs, fewer people are left to do the same work. Fewer people producing the same output equals a productivity increase.

I would argue, however, that the productivity claims are a myth. No real productivity gains have been made, that is, if we look more carefully at the definition of productivity in relationship to activities associated with research and development (R&D).

Productivity is simple enough at the level of a basic equation. Just divide the company revenues by the expenses attributable to information development and other R&D-related activities.

R&D productivity = Revenues/R&D labor expenses

Lower expenses equal greater productivity, especially in the continued absence of revenue increases.

The word productivity, while easy to calculate, is something of a misnomer. It implies for most of us an improvement of sorts. “She is more productive than anyone else I know”—to quote what people sometimes say about me. I think they mean that to be a compliment. Yet, productivity as we have come to know it in today’s workplace is not positive at all. It represents a lowering rather than a raising of quality.

Here’s why productivity measures are increasing in US companies:

  • More layoffs with the same work to be done by fewer staff members
  • Much lower labor costs based on offshore outsourcing
  • Hidden labor costs through reallocating outsourcing expenses outside the labor budget

We’re getting more productivity out of American workers strictly through a numbers game, not by any genuine measure that accounts for quality.

In an article on “What high tech can learn from slow-growth industries,” Janiaki Akella, James M. Manyika, and Roger P. Roberts (The McKinsey Quarterly, 2003, Number 4) write that R&D productivity is best measured through an evaluation of the idea-to-market process. This process measures “how efficiently a company can understand its customers’ needs and translate them into product requirements and concepts.” A productive R&D effort goes from an idea about serving the customer into a delivered product faster than it ever did before. Product quality is enhanced, customers are better satisfied, time-to-market ratios are improved—all through increased efficiency of effort. That’s real productivity, not manufactured productivity numbers.

Outstanding information developers have long been interested in real R&D productivity. They stand in the forefront of efforts to better understand product users and serve their needs for learning and using products effectively. In service of idea-to-market processes, information developers focus on interface usability and minimalized documents. They offer embedded help and e-learning opportunities. They find ways to get closer to the customers and enhance the service and support provided after the sale. They are thoroughly focused on the support activities that make companies’ products more valuable in the customers’ workplace.

But the very people dedicated to serving customer needs have been laid off; their jobs outsourced to untrained and ill-experienced individuals whose primary attraction is their low cost. We hear too many stories of companies that have eliminated usability teams, cut back on information developers who have become expert in customer requirements, and transferred innovative time- and cost-saving technologies, developed by information developers, offshore to people who have no idea how to maintain them.

I don’t think we’re experiencing a genuine productivity gain today; we’re just rearranging the equation. Until companies get back into the business of increasing revenues rather than reducing costs, we aren’t likely to find opportunities for genuine increased productivity any time soon.

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