From Ford to Google, management’s perennial pursuit for higher productivity
Productivity in current media and recent history
In a recent company all hands, Google’s CEO Sundar Pitchai announced “Simplicity Sprint”. The central context being, “There are real concerns that our productivity as a whole is not where it needs to be for the head count we have.” He asked employees to help “create a culture that is more mission-focused, more focused on our products, more customer focused. We should think about how we can minimize distractions and really raise the bar on both product excellence and productivity.”
As the era of “free money” comes to an end, tighter monetary policies means financial volatility and economic uncertainty. To prepare for this environment, the focus has dramatically shifted towards cost control, and productivity increase. Google is hardly the only company who has been recently vocal about productivity concerns. Mark Zuckerberg also “turned up the heat” at Meta, saying “Realistically, there are probably a bunch of people at the company who shouldn’t be here,” Zuckerberg said on the June 30th call, according to a recording obtained by The Verge. “And part of my hope by raising expectations and having more aggressive goals, and just kind of turning up the heat a little bit, is that I think some of you might just say that this place isn’t for you. And that self-selection is okay with me.”
There is a stark contrast in Sundar’s approach which appears inclusive vs. Zuckerberg who may be risking a fear based culture - but the choice is words aside, management’s concern about productivity is hardly new. While Henry Ford certainly didn’t invent an automobile, he certainly gifted mankind with accessibility to an affordable car. His chief innovation is centered around, well, productivity.
“Henry Ford combined interchangeable parts with subdivided labor and fluid movement of materials to create his moving assembly line in 1913. The resulting productivity gains and price cuts led manufacturers of every type to adopt Ford’s innovative production methods.” - The Henry Ford Digital Collections
Finally, below is a quote from High Output Management, which is considered a Bible by many in high-tech.
"As a middle manager, you are in effect a chief executive of an organization yourself… As a micro CEO, you can improve your own and your group's performance and productivity, whether or not the rest of the company follows suit." - Andy Grove, CEO and Co-founder of Intel
The Changing World Order
In The Changing World Order: Why Nations Succeed and Fail, Ray Dalio, the founder of investment firm Bridgewater Associates, demystifies the timeless cycles through which nations rise and fall. There are three major forces which have defined the modern (The Dutch, The British Empire, The rise of the US, and China) economy.
Productivity growth, which is measured as a percentage of GDP, grows over time as knowledge, technology, and innovations help to raise our productivity and living standards.
Short-Term Debt Cycle
Usually lasting 5-8 years, the short-term debt cycle is a repeating pattern that occurs as credit expands and contracts.
Long-Term Debt Cycle
Usually lasting 75-100 years, the long-term debt cycle usually ends in a period of extreme deleveraging, where global debt is unsustainable and asset prices fall.
Considering this pattern is bound to repeat itself, in many ways, we’re fighting the inevitable, but Ray Dalio offers a few simple and easy to implement rules to slow the eventual decline.
Don’t have debt rise faster than income
Don’t have income rise faster than productivity
Do all that you can to raise productivity
What’s interesting is that two out of the three rules focus on productivity - not entirely surprising, as (a) it’s what matters the most in a competitive environments over a long period of time, and (b) it’s an element that’s largely under our control.
This is where things start to become tricky. Ford operated in the world where most of the work was manual work. It’s much easier to measure productivity of manual work. There are standardized metrics, relevant across companies and industries, and tough to game. The rise of knowledge workers has made both the measurement and focus on productivity a very complex problem - especially in high tech institutions.
One of the most popular software engineering productivity metrics in Merge Request (MR) Rate.This is, not without controversy, though, as the Gitlab blog itself suggests, “First of all, one metric never tells the full story. One of the challenges we faced as we hyper focused on this metric was being biased to the number given by the metric rather than truly understanding the story surrounding the metric. For example, a team with a high MR Rate could be shipping quantity over quality. By the MR Rate measurement alone, the organization could unintentionally exemplify teams with unstable features.”
In fact, no matter what metrics you design (or how many), without considering the full context, it’s easy to game and hence make it a meaningless exercise for everyone involved. The context is what managers bring to the table. E.g. Not all software engineering work may even translate to MR. What’s more? You may end up winning the battle of a certain productivity metric increase, but lose a war by failing to deliver the value to the customers.
If you abstract away the technical complexities, for any business to be healthy, they need to generate sufficient free cash flow to thrive in this market with uncertain outlook. This comes down to two simple metrics that are rather easy to commute and measure, (1) generate more revenue, and (2) reduce more costs. The complexity here lies in tying these financial metrics to your day-to-day work. This is exactly where strategy meets execution.
Good leadership will look into ways to increase focus time, reduce conflicts, enable asynchronous work especially in geographically distributed teams, invest in the right tools and processes, reduce meeting times, foster stronger team camaraderie, set up ambitious goals, accelerate decision-making, and drive transparent communication with frequent inputs from engineers along the way to scale the productivity of the organization in a sustainable fashion.