Is this the REAL reason why productivity is falling?

It's likely that high employee turnover is the real culprit

The last few months have seen an increasing volume of concern around productivity levels of remote work.

What is productivity? By strict definition it is the amount of work performed by each unit of a person’s time (work per person hour), but it’s often taken to mean the amount of work people get done in their jobs.* Last week a report from a think tank, The Centre for Cities, added to the voices claiming that homeworking is killing productivity.

The report said that public transport usage is currently only at a fraction of pre-pandemic levels and the average office workers was spending 2.3 days in the office. It sets about attributing this decline in office time with the economic difficulties that cities are experiencing. It’s a strange report, not least because it admits, ‘There is no strong evidence either way to provide any insight on what has happened to productivity since 2020’. But what the report is describing isn’t productivity, it is the economic activity of city centres. For illustration in the midst of the first lockdown in April 2020 there was no economic activity in city centres, but that doesn’t mean that productivity was zero.

If we’re serious about productivity then this report is a red herring. Yes, there is reason to worry about the health of city centre ecosystems but ordering millions of workers to make a daily commute to keep Pret bustling isn’t a way to boost productivity, if anything lumbering them with an hour of unproductive commuting time each day is a productivity drain, a relic of the way we used to work.

That’s why, in comparison, my discussion with Professor Zeynep Ton this week was so enlightening. Unlike the likes of the Centre for Cities, or the OpenAI boss, Sam Altman, or the remote working billionaire, Ton has data.

If you want to understand why productivity is falling, we need to look first at high levels of employee turnover. If we want to solve productivity issues the first step needs to be to lower the resignation rate.

We all know well when people quit their jobs a period of unproductivity commences: bosses and colleagues need to cover the work of the person leaving, the recruitment process takes unproductive attention and new starters take months to ramp up. As Ton says, ‘high employee turnover is ruinous for productivity’.

At one stage in Ton's new book, The Case For Good Jobs, she says something that speaks painful truth:

'Companies that operate with high turnover tend to rely largely on computerised training. You might spend ten hours and go through all the modules without paying any attention and be paid for learning almost nothing'.

Zeynep Ton is a professor of operations at MIT. She studies supply chains and how business can operate most profitability. It was while she was conducting her research that she encountered a fundamental truth, ‘so many of the problems related to inventory happened in the last ten yards of the supply chain’. Meaning the issue happened in the store. ‘When I looked into why these problems happened all the time, I met the human side of operations’.

Ton’s work showed her that high employee turnover was ruinous because it created chaos,

Listen now to Zeynep Ton explaining productivity - and how creating jobs that workers want to do is the most important action any firm can take:

*This is an important distinction, if the average working day has been extended by out of hours emails, by rights this lengthening of the day should see a decline in productivity - as the same amount is produced in more time.

2021 Sir Martin Sorrell: I’m going to get rid of my offices and spend more on staff

2023 Sir Martin Sorrell: Hybrid working is destroying civilisation

(At the time he was challenged on this and doubled down on it…) He does admit he feels he got it wrong initially.

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• Some parts of the press is still trying to drive everyone back to the office. Here’s The Times saying that you need to be in the office to avoid robots stealing your job (An utterly bizarre argument. There has been some dazzling AI in the last week but none of it screams ‘get me to the open plan floor space’. It all sounds like the sort of argument that a CEO who still prints out his emails might make)

• The moral case for working less - a report of someone who explored whether working less would lead to a happier life