The real key to improving workforce productivity

As companies worldwide attempt to bring employees back to the workplace, many CEOs have cited “improving productivity” as a key reason. For example:

• BlackRock CEO Larry Fink attributed a decrease in productivity to people still working remotely and suggested more people returning to the office would raise productivity and help offset inflation.
• Sundar Pichai, CEO of Alphabet and Google, said that he believes in the long-term benefits of in-person collaboration and productivity and stated, “We firmly believe that in-person, being together, having that sense of community, is super important for whenever you have to solve hard problems, you have to create something new.”
• Jamie Salter, CEO of Authentic Brands Group, said that he believes working from home has led to a decrease in productivity. He opined, “I’ve seen more productivity when people are in the office.”
• Tim Cook, CEO of Apple, wrote in a memo to employees on why they are required to be in the office is that he believes in-person collaboration is crucial for innovation and productivity.

Many other famous CEOs from companies as varied as Disney, Starbucks, Facebook, Morgan Stanley, and Netflix have intimated that they believe remote work hurts productivity.

Their concern is understandable. Productivity has waned recently, and data shows that worker productivity is falling at its fastest rate in four decades. In fact, 2022 was the first year since 1983 when there has been three straight quarters of year-over-year drops in average productivity per worker in the US.

The same phenomenon has affected countries worldwide, and some of this is not new. The International Monetary Fund (IMF) stated that labour productivity growth has been slowing across advanced economies since the mid-2000s, with average annual growth falling to 0.5% recently, compared to 1.8% earlier this century.

But where someone works – even when someone works – is not the culprit. Although many CEOs want full offices again, there is a growing belief that forcing employees back to the workplace is the real culprit, not workplace flexibility.

Most of the policies on remote and hybrid work by the aforementioned CEOs are based on one primary factor:  personal preference. Data typically did not play a role in their decisions. Productivity, innovation, creativity, and collaboration become convenient excuses for doing so, but there is one primary organisational element the data indicates they should focus on first: Culture.

“Healthy cultures are twice as likely to have experienced increased employee productivity, and a healthy culture is the number one predictor of better financial performance, not whether someone is in the office or working remotely.” – Kevin Oakes, CEO, i4cp.

A recent study by the Institute for Corporate Productivity (i4cp) found that, since the start of the pandemic, a significant percentage of the variation among organisations’ employee productivity can be attributed to cultural health. Healthy cultures are twice as likely to have experienced increased employee productivity, and a healthy culture is the number one predictor of better financial performance, not whether someone is in the office or working remotely.

The study, titled Culture Fitness: Healthy Habits of High-Performance Organisations, details the financial and organisational impact a healthy culture—or a toxic culture—can have over time.

Organisations that reported top cultural health reported high market performance six times more often than those who felt their cultures were unfit. And, aside from the impact on the bottom line, there are many other benefits. The fittest cultures were found to have significantly higher employee net promoter scores (eNPS) at a rate of nine times more often than their unfit counterparts and were also 4.5 times more likely to report an increase in employee engagement scores since the onset of the pandemic. Very fit cultures were also four times more likely to have experienced improved retention and three times more likely to have strengthened their ability to attract top talent since 2020.

Unproductive cultures have many things in common, but there is one datapoint that every leader should take note of:  a lack of trust in leadership. Leaders almost always set the cultural tone and, like it or not, they are the stewards of corporate culture. It should be no surprise that in unfit cultures, a lack of faith in senior leaders is reported sixteen times more than in healthy cultures.

If those same CEOs really want to improve productivity, they should look in the mirror and ask themselves what kind of culture they are fostering, and whether the workforce trusts them. That would probably be a much better use of time rather than spending so much energy worrying about who is in the office or not.

About the Author: Kevin Oakes is CEO, i4cp and author of Culture Renovation, 18 Leadership Actions to Build an Unshakeable Company. Join him at HR Tech Festival Asia 2023 on May 11 at 10.45 am (SGT), where he will reveal the productivity secrets of high-performance organisations.