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HR's Hand in Productivity

Few HR leaders attempt to take responsibility for their workforce's productivity.

By John Sullivan


routinely ask HR leaders around the world, "Do you see increasing productivity of your workforce as a primary part of your job, and do you compare your results with those of your worldwide competitors?" The response of most leaders is the same: bewilderment, a long pause, a blank stare. It continues to amaze me that HR leaders do not recognize that every business function, whether it be marketing, finance, production or HR, is in the productivity business. That means continually getting more out of every dollar you spend on the resources that you control.

Workforce productivity is in the news: I am highlighting this issue because workforce productivity is in the news on a daily basis. Corporate giants like Ford, Kraft, Hewlett-Packard, United Airlines and General Motors are being pounded by analysts because their labor costs are skyrocketing past those of their domestic and foreign competitors.

My point is simple: Despite the constant rants by analysts and CEOs, few HR leaders attempt to take responsibility for their workforce’s productivity. In finance, for example, calculating the productivity of financial investments is a common practice, as in real estate, marketing, manufacturing and supply-chain management. Measuring workforce productivity is not that hard. The most basic measure is simply the cost of the inputs (all salaries, benefits and HR department costs) compared with the value of the outputs (production output value, revenue or profit).

HR must declare itself "captain of the ship": One argument I often hear is that HR does not directly manage the workforce and therefore cannot be held directly responsible for productivity. That argument is weak. Every other corporate function is held accountable when the resources that it manages do not produce adequate results, so why should HR be exempt? HR must declare itself accountable and then design systems that influence, cajole and sell managers and employees so that the productivity levels of the workforce remain competitive.

Cutting costs is easy; managing strategically is hard: Occasionally HR leaders will respond that they do manage the productivity of the workforce by manipulating labor costs. Any accountant can figure out how to shave 10 percent off the budget, but developing systems to maximize the output of all the budgeted pieces requires significant thought and coordination. This, in my estimation, is the true purpose of HR: to increase workforce productivity through activities that increase the other (but most important) side of the ROI equation, which is revenue. If HR leaders can shift their emphasis to driving increases in workforce output without increasing people costs, they will have demonstrated that they can strategically manage the workforce.

Global competition is forcing HR to change: Globalization and economic growth in China, India and Eastern Europe, where labor rates are significantly cheaper than in the United States and Central Europe, will make managing workforce productivity an imperative for organizations that wish to survive. This new imperative means that HR must monitor labor productivity and advise senior management when moving offshore or outsourcing presents an opportunity to better compete. HR must begin to look at what type of work must be done and under what parameters, and then suggest to management what labor type to use and where such labor should be sourced or located. In addition, HR must advise managers when they have too many employees before a wide-scale correction is needed. Labor costs will be a component of the analysis, but they cannot be given more weight than quality, innovation and agility.

I argue that these wake-up calls signal that it is time for the DNA of HR to change. The new HR leader learns from the old slogan "What’s good for General Motors is good for the country." But the lesson learned is a new one: Managing workforce productivity like HR at GM has may be the cause of your organization’s downfall.

John Sullivan is a professor of management at San Francisco State University, where he has taught for more than 30 years.

From India, Delhi
Hi Archana,
Thanks for a good article. I agree with you that HR also should take responsibility and work towards achieving increase in productivity of their work force.
I find it as a new perspective and HR should shift the focus from only managing people.
Cheers !!!

From India, Hyderabad
A very good article. Usually productivity is measured in terms of "ratio of output for input" . Actually in manufacturing industries, the industrial engineering department representatives will be there to help HR to manage this. They monitor the ratio periodically and decide when to apply HR interventions.[even Dr sullivan mentions about mfg sector..where we can see the phenomenon of productivity clearly]
Though this can be done in service industry also, there are many more factors which affect the productivity.. hence the importance is not given to productivity monitoring. Peorformance is sometimes misunderstood for productivity.
We need to bring out more and more norms / systems/white papers on productivity in service sector...

From India, Madras
Hr is absolutely responsible for a company's productivity. Both past CEO's of GE and IBM have emphasized on the fact that a successful organization is only built if there are competent HR managers at the helm.
HR's have to get accountable and take responsibility for their org' productivity and success. This will only help in changing the image that an HR has in our country.
NIce article

From India, Mumbai
Like all good ideas, there is an important element of truth in what John Sullivan says. Make HR Managers responsible for workforce productive. It sounds deceptively simple.

I agree with Professor Sullivan that HR is responsible for “measuring” workforce productivity. However, it is a leap to then say that HR is “responsible” for the level of productivity.

Professor Sullivan argues that “Every other corporate function is held accountable when the resources that it manages do not produce adequate results, so why should HR be exempt?” It’s not quite that simple. When the budget blows out because the CEO decides, against the agreed corporate plan, to by a new CRM system, we don’t blame the Finance Manager. When the level of customer complaints goes through the roof because supervisors insist on going through the back door to employ friends of friends, we don’t blame the Quality Manager.

In these cases, even with the best of intentions, specialist advice and corporate systems in place, people act outside the systems and processes, or even ignore the advice and not set up the appropriate systems in the first place.

The way I look at it, corporate goals such as budget performance, workforce productivity, customer satisfaction, etc, are the responsibility of the executive team – all working together. To my mind, Professor Sullivan’s approach would bring back the organizational silos that we have tried so hard to break down. It would bring back the culture of blame, where we can point to one individual and say, “You’re responsible for quality. It’s your fault”.

We need to recognize the systems nature of organizations and realize that none of us work in isolation – responsible for our little bit. Organizations are complex, with systems, processes and people all reliant on each other to achieve the common objectives of the organization. I could say more about how this would work in practice, but that’s enough for now. We have some interesting articles on how to measure business performance at

Vicki Heath

Human Resources Software and Resources

From Australia, Melbourne
Yes, its true HR shand should be there at improving the productivity.

Friends, though I agree, I have a question to all? How do you measure HRs Productivity in increasing the productivity...motivation, creating hygenic atmosphere..all have been done at the past...however still HR is considered as a Support Function (do you all agree at the core of your hearts or not?)

If being as HR person I am able to increase the workers productivity say in marketing deaprtment, then the increase in output goes straight to the marketing department.same goes for finance as well as IT department.

In the race of getting the recognition, can anyone tell me how will one prove that HR has done it.

If anybody says, that it belongs to the person concerned to recognise the department (HR), then my question is why then are not they recognising in the true manner?

Mr. Sullivan has said the right thing, however if I am not getting the result of my trial then why wil I think in that manner?

Friends, if I am going wrong somewhere, please correct me.


Ankit Banerjee

From India, New Delhi
Dear All,
I'm agree that HR should join the productivity of the organization. HR can be beneficial in 2 ways first is measuring the productivity and second is increasing the productivity through the results of productivity measured.
Now, question is thet how HR can increase the productivity?
Very simple, organizations are working to be productive and concerning departments trying hard for the same, but HR have the ability to identify key area of employees where are they less productive right now and can be productive in future. HR can help this objective by its inherited capability of touching soft corners of employees (feelings) to make them productive for self and ul;timately for organization.

From India, Ahmadabad
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