Henry Mintzberg wrote a blog post titled Productive and Destructive Productivity (26 March 2015).

« I came to the conclusion that there are two kinds of productivity, one productive, the other destructive. The problem is that economists can’t tell the difference. »

« Economists measure the ratio of production outputs to labor inputs, and when that looks good, they declare an economy to be productive. The assumption is that workers have been better trained, superior machinery has been purchased, improved practices have been introduced in company operations, and so on. »

« While economists study statistics in the air, companies engage in practices on the ground. As I shall discuss in a later TWOG (about the soft underbelly of hard data), statistics can be dangerous when their users don’t understand where they have come from. Consider this not-quite-hypothetical example. »

« You are the CEO of a manufacturing company, determined to make it the most productive one around. Here’s what to do: fire everybody in the factory and ship customer orders from stock. »

« There are other ways to realize this kind of productivity, which are less likely to be noticed, let alone measured, by accountants, economists, and stock market analysts: cut research, reduce maintenance, diminish product quality. All save money immediately even if they trash the company eventually. »

Add up all these schemes by so many companies and you have an economy that is running out of stock. And a society that is running out of time. »

« Why, then, do such companies survive? Well, if their competitors are doing the same thing, there’s no problem. (An awful lot of companies are doing the same thing.) And if they are not doing the same thing, then these companies can use their new found money to buy these competitors—imagine all the productivity that can be squeezed out of them. Apparently monopolies are productive too. »

«And when such companies run out of such gimmicks to make themselves more productive, they can turn to a whole host of political activities—for example, lobbying governments and bribing politicians to enact legislation that can save them from their own productivity. »

« Thus do productive companies survive while productive societies collapse. »

Henry Mintzberg is the author of:

Managers Not MBAs (2004 – 500 pages)

Simply Managing: What Managers Do – and Can Do Better (2013 – 208 pages)

The Rise and Fall of Strategic Planning (2013 – 480 pages)

Bedtime Stories for Managers (2019 – 200 pages)

Understanding Organizations…Finally! (2023)

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