The Productivity Paradox


    I’m really interested in the questions being asked about productivity in outsourcing deals these days. I’ve noticed a pronounced cyclicality in the productivity-related queries from senior executives. 

    To be candid, most of the time we get asked how to measure the effectiveness and efficiency of an organization it’s because someone wants to ward off "the man” who is looking for cost-cutting ammunition.

    Then we seem to enter periods when executives (often, in the same companies) come looking for data on the productivity and performance of their internal-services departments for entirely different reasons – including to help them make the case for greater investments or for changed operating models.   

    The question we hear framed is, “Are our support operations contributing maximum value to our strategy?”  As much as all of us would like there to be a readily available measure of productivity or efficiency, this is a complex topic that demands a fair degree of management judgment.

    Most of our clients look to structure their support operations to meet a future target. They don’t want to organize for yesterday. That’s why measurement requires executives to be involved and vocal through the various possibilities of asset deployment, cost avoidance, return-on-asset strategies, changing workforce demographics, and the like.

    We always give providers this advice: Don’t try to solve yesterday’s problems. Help clients achieve a new vision, because that’s where you will break through and create real value. That means, among other things, evaluating current and projected volumes of work as well as degrees of automation, standardization and rework. It also includes quantifying AND qualifying the potential benefits of scale, transportation of work to lower-cost centers and the availability of specialized marketplace providers.

    Net: Productivity ratios and metrics exist, but they alone won’t provide what the client really wants, which is the answer to the question of how their sourcing relationships can directly contribute to their organization’s strategic agenda.


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