Friday, April 6, 2012

The Hidden Key to Productivity

Every company worries in some way about how to make people more productive. To do this, most companies normally focus on two things: training – building knowledge and skills, and technology. No doubt this does yield returns. However, there is something else, perhaps even more powerful, that is largely ignored.

Productivity is how much you produce or create within a given period of time. Therefore, it has an implicit rate component to it. This means how productive we are depends on how fast and how effectively we act. Our knowledge and skills certainly play into how effectively we act and technology can speed it all up. The other hidden component, however, is how fast and effectively information travels through an organisation every day. Information about who else is doing what, information on resources in the company and the larger ecosystem, information on happenings in the market and about customers – the general buzz and chatter. If you don’t know about something, you can’t incorporate it into your planning or decision-making. You can’t act on it. This is true not just for companies but for societal productivity and progress in general. Still, the value of how information flows through the company seems sort of intangible. Just how valuable might it be to employee productivity? How do you put a number on it?

Some folks in Boston from Massachusetts Institute of Technology and Boston University in the U.S. tried to do just that.

In a study titled ‘Productivity Effects of Information Diffusion in Networks’, Sinan Aral, Erik Brynjolfsson and Marshall W. Van Alstyne asked the question:

Does better access to information predict an individual's ability to complete projects or generate revenue?

They did their study in a medium sized recruiting firm and looked at how news about events and discussions spread through email within the company over a 10 month period. And the answer to the question: Access to information strongly predicts project completion and revenue generation. Some of the things they found out were:

• Each additional ten words seen were associated with an additional one per cent of one project completed.
• Greater mean rank (i.e. the rank order in the news chain among co-workers) and longer average times to receive words (how long it took to hear about it) were associated with fewer projects completed, holding constant traditional demographic and human capital variables.
• And, amazingly, an additional ‘word seen’ was associated with about $70 of additional revenue generated (that’s Rs. 3000 per word over a 10 month period).

So, their conclusion:
Access to information diffusing in the network is a much stronger predictor of productivity than traditional human capital variables such as education or industry experience.

From an organisational perspective, this means that if information could be made to flow more easily and effectively among people, it would have profound effects on productivity. What are some ways to make it happen?

Some companies have begun worrying about this and solutions range from how office buildings are architected to internal social network platforms. Companies are looking for designs for buildings that force people across departments to cross paths frequently and come together in common spaces, or with a lot of glass so that people have visibility into what’s going on in other rooms and places. Did you catch that bit on the white board as you walked by? What are they up to?

Social networking platforms such as Yammer and Chatter are like facebook for companies. Employees can get on and post about their activities and what they are working on. This is especially helpful for organizations such as mine, which have distributed field operations. At Madura Microfinance we have close to 200 branch locations, largely in small towns and rural areas. Typically in such a structure, flow of information occurs only in two directions from top to bottom or bottom to top. There is very little opportunity for information to travel laterally. At Madura we signed up for Yammer and had to take on the task of translating it into Tamil to make it a platform that met our bilingual needs. With just a little training we had rural branch managers ‘yammering’ about their activities with self-help groups, issues arising in the field, local events and industry news providing a steady stream of news on the goings on in the organization.

The bigger question is, how can you track how well information is flowing or ‘diffusing’ in your organization and how it relates to productivity? If you can’t measure it and track it, you can’t know how effectively you are impacting it with your interventions. While there aren’t easy off the shelf methods or software products to help you (yet) there are certainly ways it can be done. You could, for instance, measure at regular intervals the probabilities of whether someone in one part of the organization has heard about an event or happening in another to see how it changes over time. You could also go through this exercise before and after an intervention such as introducing a new communication platform to see what its impact on information diffusion has been.

As living organisms, how information travels through our neural networks is at the core of what we are capable of doing and what we actually do. In the future, when we talk about organisational structure, perhaps we will mean something different. Not who reports to whom but how information networks of the company are structured. And we might add new words such as organisational dynamics to our common business lexicon to describe how information flows on these networks. I predict that eventually, it will become essential to understand and track organisational dynamics, so that we can engineer our organisations for more spectacular outcomes.

And the same principle holds for society at large. If society has better information dynamics it will produce more productive organizations; and more productive organizations make for a more productive society.


  1. Hidden Cost of "more" Information
    I agree with you point that better information infrastructure improves productivity. But one real world concern is in this internet era, one is usually burdened with too much of information which often leads to indecision. We've too many "report generators". At the click of button, we can get information about so many things, but fail to get sense of what it is as the quantity of information is just HUGE. and it's just exponentially increasing. We have too many social/business online or off-line "networks" that actually causes people to waste lot of time instead of doing some real work. I remember a study that said in an organization that 83% of engineers considered social networks such as twitter at workplace as just distraction when the work needs focus.

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