Productivity Challenges in the Knowledge Economy

Recently, Google announced a productivity improvement crusade. This is not unexpected. Google appears to be following the steps of many tech companies that went from boom to bust pretty quickly. It is noteworthy that they all had similar strategies and roadmaps, as many of them would become deliriously successful (read: obscenely profitable), then stagnate, and then (all but) disappear.

Do names like Worldcom, Nortel, Nokia, Ericsson ring any bells? … And did I mention Google?

Do names like Worldcom, Nortel, Nokia, Ericsson ring any bells?
… And did I mention Google?

Those tech giants have gone through an extremely wealthy period followed by bankruptcy or a deathlike decline. While dominating their market niche largely due to their near-monopoly status, they have publicly bragged about their innovation, employee satisfaction, and more recently, diversity and inclusion, which have allegedly been the main reason for their stellar profitability and growth. But then, one day, it was over. All within one generation’s lifespan.

Those knowledge-intensive giants have demonstrated the same management mistakes:

• They measure knowledge work with KPIs that were acceptable from the Pyramids to the early Ford factories – but not in the knowledge economy
• Likewise, knowledge workers – and they constitute well over fifty percent of the entire staff in hi-tech – may often be selected for anything but their ability to acquire and apply knowledge continuously
• Financially successful periods in their history led to blurring the purpose of the company, while the genuine goals and values of the company “leadership” continued to diverge from the goals of the frontline employees.

These underlying problems are then exacerbated by questionable HR policies (implemented by HR professionals who in turn were hired under the influence of the same policies) and lead to more intense internal contradictions that no one will want to acknowledge. These tensions lead to a loss of trust within the company and lay the foundation for stagnation.

Then the layoffs begin, all in line with the business “culture” inherited from Ancient Egypt and translated into the modern language of shareholder value by Milton Friedman.

Today, if a knowledge organization selects its workers for anything but the ability to acquire and apply knowledge, it is doomed to stay with sub-par staff.

If you measure productivity as outputs over inputs, and if the company fails to increase the outputs, the next logical step is to cut the inputs. In the knowledge economy, it means firing the people who actually create value. This is the start of a vicious circle, the beginning of the end. Some businesses prolong this stage by falsifying the output increase by employing creative accounting. But none of them ever managed to hide their fraudulent practices for a long time.

Sundar Pichai noted just recently that “big companies, particularly, fail because they stumble internally.” Apparently, he was thinking about his Google/Alphabet future. If you follow Google’s success story and if this is not the first tech success story you are following, then this acute déjà vu feeling must be haunting you already.

Sundar Pichai has been with Google throughout the entire stagnation phase and became CEO after all the milestone events of the last 20 years that have set Google’s roadmap… No! In fact, he was directly involved in the most recent one: he fired the author of the ten-page manifesto criticizing the company’s diversity policies.

But overall, Sundar Pichai is right: Google’s problems are, of course, internal. The company is stumbling but not because “how vibrant this market is.” Their homemade “performance improvement projects” (Oxygen and Aristotle) had all the typical characteristics of an employee-engagement activity contrived by an unreasonably successful organization.

As are their outputs, worth millions of man-hours.

Project Oxygen (2008) was set up to answer the question “What makes a manager?” That question had been answered years before and in a very popular and succinct form by Danie Goleman; Oxygen just translated it into “business speak” and created multiple reports and PowerPoints.

Project Aristotle that followed in 2016 was a step in the right direction: it focused on teams, not on Manager. However, its output – “the five effectiveness pillars” – is yet another regurgitation of what’s been known to the external specialists for over a decade before Google. Check out The Five Dysfunctions of a Team, 2002, by Patrick Lencioni – and you will see that the principal difference of Google’s “findings” was the name of the first “pillar”: Lencioni called it TRUST, which is still more appropriate while Google has already begun curtseying to wake culture and hence called it “psychological safety”.

Yielding to the woke crowd was the end of the beginning for Google.

Yielding to the woke crowd was the end of the beginning for Google. It became obvious during the commotion around James Damore’s manifesto for which he was fired by Pichai in 2017. I do not want to get into the details here, but in case you have doubts – read the original of the letter: Damore used science and common sense and did not “prioritize the right thing.”

Obviously, the manifesto was not politically correct, not for the echo chamber that Google has become. But let’s give Google credit: it is not the only echo chamber. I remember casually mentioning the “Manifesto” to a developer from Shopify – and was shocked to hear that he “did not read the letter, and would never talk about it at work.” Speaking about similarities in hi-tech, Shopify has already laid off 10 percent of its workforce.

Also during Pichai’s reign, the “creative 20%” slack was tacitly abandoned. Which in the case of a knowledge-based business is suicidal. (Yes, and quite a few businesses make this mistake, with similar results).

Perhaps, Google’s ‘20% rule’ indicated how much time one should spend learning new skills. Depriving knowledge workers of this opportunity does more harm than good and does not provide even short-term benefits.

Still, Pichai seems to have pledged to make the company 20 percent more productive. For that purpose, he will have to lay off 15 percent of the workforce. But promising “blood in the streets” as the motivation to boost performance is akin to “the beatings will continue until morale improves” methodology, and will not produce sustainable results.

Promising “blood in the streets” as the motivation to boost performance is akin to “the beatings will continue until morale improves” methodology

And how do lay-offs align with the first effectiveness pillar discovered by Google  – “psychological safety”?

To be continued.

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