From the Dark Side of Productivity, Part 1 of 2

Due to the nature of what we do as a fulfillment consulting firm, we spend much of our time helping clients improve productivity and reduce costs. We must be ever mindful of the negative side — the “dark side” — of productivity projects. That’s what happens if we don’t take the human factor into account. As someone with 30 years of experience in industrial engineering, I can tell you there’s no way to achieve long-term success in a re-engineering project without considering the effect it’ll have on people.

This week, in the first installment of a two-part series on the negative side effects associated with productivity projects, I’ll reference a retailer’s productivity project gone bad, as well as look back at how an industry expert viewed productivity.

Two recent articles in The Wall Street Journal serve as stark reminders of this reality. The first, “Retailers Reprogram Workers in Efficiency Push” (Sept. 10, 2008) described installations of workforce management software at Ann Taylor Stores Corp. and other retailers. The article pointed out that workforce management systems are “sweeping the industry as retailers fight to improve productivity and cut payroll costs.” Some workers aren’t happy about the trend, the report said, because the systems leave them with shorter shifts, make it difficult to schedule their lives and “unleash Darwinian forces on the sales floor that damage morale.”

The Ann Taylor system tracks the usual productivity metrics: average sales per hour, units sold and dollars per transaction. The system schedules the most productive people during the busiest hours and, because it awards more productive salespeople with favorable hours, it gives employees an incentive to persuade shoppers to buy things. That’s worked, as far as the overall economic goals are concerned. The chain’s director of store operations said it’s helped turn more store browsers into buyers. But the article also noted that it’s resulted in the loss of some veteran salespeople who had developed long-term relationships with customers.

By focusing strictly on metrics that could be easily measured, the system actually penalized associates whose selling style depended on longer interactions with customers, even though such relationships often assured continued customer loyalty. Others found their hours cut back to the point where they could no longer afford to make the trip to work.

During busy times, the formerly congenial staff began competing for customers, sometimes stealing them away from one another. While productivity did increase, perhaps the most surprising, unintended result of the system was that this story, with all its unflattering aspects, was splashed across page A1 of The Wall Street Journal.

Ironically, just a few days before that story appeared, the publication carried a remembrance of Michael Hammer, often called the “Father of Re-Engineering,” who passed away at age 60 on Sept. 4. The article noted that Hammer, author of the 1993 business best-seller, “Reengineering the Corporation: A Manifesto for Business Revolution,” was a remarkably successful and influential consultant. He revolutionized many businesses. Among his achievements, he helped Schneider National cut the time it took to complete a job bid from two weeks to two days, and he helped Royal Dutch Shell improve reliability and reduce costs by focusing attention on refinery safety and efficiency. He was recognized and lauded by Time and Forbes, and commanded huge consulting and lecture fees as a result.

Yet Hammer also had second thoughts. In a 1996 interview, he admitted that he and other re-engineering proponents hadn’t paid enough attention to people. “I wasn’t smart enough about that,” he admitted. “I was reflecting my engineering background and was insufficiently appreciative of the human dimension. I’ve learned that’s critical.”

Because of that early omission, the article notes that “re-engineering had a dark side, as the streamlining of processes often went hand in hand with reductions in workers. Often the term became jargon for mass layoffs.”

Next week, in the final part of this two-part series highlighting the negative side effects associated with productivity projects, I provide several takeaway tips your catalog/multichannel company can learn from to improve productivity and cut costs.

Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory and benchmarking. Learn more online at http://www.fcbco.com.