Definition And Components Of Productivity Business Essay

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The essential factors of knowledge work are listed in Table 1. They are divided into four groups. The inputs are divided into organisational and personal inputs, according to whether the organisation can affect them or not. Personal input factors are such, which affect the worker but necessarily are not observable to other people.

Table 1 Drivers of knowledge work productivity.





- Human capital

- Innovative potential

- Organisational standards, practices and routines

- Information systems

- Quality of information

- Networks

- Time allocation

- Working environment

- Aim


- Motivation

- Job satisfaction

- Personal network

- Affairs in personal life

- Physical fit

- Organisation of work

- Division of tasks

- Organisation of decision making

- Clarity of job descriptions

- Teamwork

- Knowledge sharing

- Delays and waiting

- Ability to affect own work

- Innovations

- Quality

- Utilisation of innovations

- Time-efficiency

- Fulfilment of customer's expectations

All the drivers of knowledge work productivity presented in the table will be examined in detail in the following four chapters.

Organisational input factors

Already the terms knowledge-intensive organisation and knowledge workers highlight the fact that human capital of employees is the most important input. Their ability to convert previous knowledge and experiences into new solutions forms the base for organisations' operation. It is, in fact, what pure knowledge-intensive organisations are selling. Essential are not only the knowledge reserves of the workers, but also what they are able to do with them. (Drucker 1999, p. 84)

Characteristic to knowledge work is also the element of learning. For example a person working in product development has to be able to observe his research subject and to learn from it, as well as to be able to apply the things he learns into new products. To a certain point, also a knowledge worker's productivity can be increased by education, but above all, as Polanyi (1966) states it, most of the exploitable human capital is tacit in nature and is formed through experience rather than learned from books (according to Nonaka and Takeuchi 1995, pp. 59-61). Because human memory is limited, it is relevant that workers can share their information and knowledge with each other - learn themselves but also teach others (Drucker 1999, pp. 84).

Learning and the ability to create new things are also highlighted when the organisation's objective is to innovate. Organisation's innovativeness can be defined as an ability to maintain existing success factors at the same time, when new solutions are made in order to ensure competitive advantage also in future (Pöyhönen 2004, Ståhle et al. 2004, p. 13). The innovative potential is basically in the employees, but it can be brought about by different managerial actions. It requires at least an implication from the management that innovative behaviour is what is expected from the employee. Innovativeness appears as worker's ability to create new solutions and not just relying on existing practises and models.

On the other hand, sharing of information is important when we think about information used in work process. This includes not only information that is gathered from the customer but 6

also information, which already exists in the organisation but is not specifically "owned" by certain employee. Just as in manual work, waiting and searching for resources hinders productivity of a knowledge worker - their resources are only immaterial in nature and it might be more difficult to pay attention to the time used in looking for information. It often is a part of the work to look for adequate new information. However, it is not productive that employees should spend time looking for information that already exists but is too difficult to find. Although information systems are nowadays used by virtually all companies, and are therefore seen more as a tool instead of a resource, their importance in information sharing is undeniable. Especially important is the worker's ability to exploit them in their work and that information systems support the way an organisation answers to its customer's needs. (Ståhle et al. 2004, p. 78) Information systems are, however, quite useless if the quality of information they include is low - information is, for example, wrong or incomplete. Knowledge workers make decisions based on the information available, and if it is unsatisfactory, outcome of the process can be poor in quality or even totally unusable for the customer.

Information should not be shared only between the workers within organisation, but also with all interest groups. Organisational networks are a part of intellectual capital. An organisation can enforce some networks (customers, subcontractors, distributors, research partners etc.; Edvinsson and Malone 1997, p. 11) and provide its employees with sufficient means to attain information needed in their work. Insufficient networks can result in a deficit of information, which will evidently lead to inability to answer to customers' needs and loss of competitive advantage.

Although knowledge work is distinctively described as something, where the workers themselves decide, how they manage their tasks (Pepitone 2002 refers to the amount of discretion required), in every organization there are certain standards, routines and practices that have come about in the course of time. They are based on mental models that the members share, and often reflect the values, norms, beliefs and myths of the organisation (Juuti 2003 and Schein 1987 according to Ståhle et al. 2004. p. 82). These standards can either support working or hinder it. Anyhow, they do exist and should not be neglected when examining productivity. Castells (2000) has argued, that standardisation of work processes intensifies also knowledge work especially when there is interaction between different actors of the process (see also McKenzie and van Winkelen 2004, p. 40). On the other hand both Jackson (1999) and Blom et al. (2001) have emphasised the ability of a knowledge-intensive organisation to utilise new practices to concentrate on allowing employees to determine their own approaches.

Time used in production is a rather complex input factor. Traditionally, productivity is seen increased if the output has been produced in shorter time period. This often happens also in knowledge work: when the workers learn how to do things and have more experience to which they can relate new problems they can perform similar tasks faster than before. However, there is a limit for how much time used can be decreased before the quality of work is eroded. In knowledge work, "quality is the essence of the output" (Drucker 1999, p. 84). Also, if a worker has too much time or too little work to do, his productivity can suffer. The key issue is to find the right balance.

Working environment and its effect on productivity has been researched rather extensively. It is also the area, where subjective productivity measurement has been mostly used. Lighting, air conditioning, cleaning, heating, noise controlling as well as office layouts are known to affect productivity (see for example Seppänen 2004 or Oseland and Bartlett 1999). Working environment at its worst prevents employees from doing their job and its best can contribute to innovative atmosphere (Davenport et al. 2002; Ståhle et al. 2004, pp. 78-82) Working environment includes not only physical facilities but also the psychological atmosphere and the organisational culture. They can actually be even more important in knowledge work, as

for example acceptance of new ideas (Kanter 1987, p. 181), common language (DeSimone and Hatsopoulos 1995: Von Krogh 1998), values and goals (West 1990) as well as approval of different people and taking failures as part of innovative work are known to support innovative atmosphere in organisations (in Ståhle et al. 2004, pp. 82-95).

But above all, even if the workers of knowledge-intensive organisation have all the other inputs described - human capital, knowledge and experiences, information systems, perfect working environment etc. - not much can be done with it, if they do not know what they are pursuing for. The clear aim of working is the essential for succeeding. As Drucker (1999, p. 84) puts it, the productivity assessment in knowledge work should always be based on the questions "What is the worker's actual task?" instead of "How should the work be done?". Therefore, in order to be able to fulfil their task, knowledge workers should be clearly aware what it is that the organisation wants them to do, and this should always be the first input to any process.

Personal input factors

As stated before, the productivity of knowledge workers can be highly influenced by their personal feelings. Of the personal inputs, employee's motivation is the most important. According to Amabile (1998, pp. 78-79) the people's internal motivation determines, into what they invest their competences - not management's wishes or the money given to them. Even though management can try to motivate people, it is mostly themselves, who determine the level of motivation and dedication towards working. Management can only provide circumstances, in which motivation can flourish (Nicholson 2003).

Motivation can also have a great influence on job satisfaction. If a people are motivated, they are likely to also get internal satisfaction from working because they find it fun, interesting, exciting and demanding. If instead the motivation is exogenous, mainly brought about by payment in money or by fulfilment of external targets, knowledge worker may do the work, but the quality may suffer. (Ståhle et al. 2004, p. 69)

Network creation can be supported by the organisation, but to a large part they are often formed in informal situations. These personal networks are relationships that are not necessarily connected to organisation but to the knowledge worker himself. The more and better network the worker has the more the network supports his knowledge sharing with interest groups and improves his productivity. Howell (2005, p. 113) has even concluded, that the crucial difference between more and less innovative workers is in the way they use informal selling channels - i.e. the more they use hallway conversations, one-on one appeals to superiors or peers or private meetings in addition to formal selling channels.

What is often ignored in productivity analyses is the affect employees' personal life has on their ability to work. However, health problems or other negative personal issues affect especially knowledge workers, whose performance is highly dependent on their ability to concentrate. Even if a person is not absent from work, he might be unable to perform or his productivity might be weakened (Meerding et al. 2005).

Process factors

Most knowledge workers, however independent their tasks are, operate as a part of a larger entity. In order to improve co-operation between these different actors, organisation of work has to be emphasised. Although it is stated above that the knowledge workers need only to know what is the outcome they are aiming at and the rest should be based on own judgement, at least in large organisations the projects are so extensive that they require

team work. Often projects are divided into smaller subprojects that connect to each other only in certain junctions. Through careful organisation it can be ensured that the separate processes communicate and work together. Essential is also the division of tasks, which refers to allocating different task so that everything gets done and that everyone knows, who is responsible for which part (i.e. clarity of job description). Also knowledge about how different processes relate to each other is important. These are factors familiar from management of manual work (Drucker 1999, pp. 80-82), but succeeding in them can often be easily measured by asking from employees. If there is unclarity about division of tasks, some of them might be neglected or done twice.

Allowing workers to concentrate on capitalising their core competences can also increase productivity. Teamwork is often characteristics to knowledge work and is based on knowledge sharing. (e.g. Drucker 1999) Every team should consist of such people, who together possess all the qualities needed (Sipilä 1999, pp. 26-27) and who can use their competences to complement each other.

The workers' awareness of the different phases requires also that attention should be paid to organisation of decision-making. If knowledge workers are given a certain task but not the power to make decisions about issues concerning it or at least clear insight of who is responsible for it, they cannot act on it.

The knowledge workers ability to affect the organisation of work is emphasised both in the literature (Jackson 1999, Blom et al. 2001) and in the interviews taken during this research. Even though in large organisations it might be difficult to impose such big responsibilities to employees, it seems that the more they can themselves arrange their work the smoother and more productive it is. When an outsider cannot see how the work is done, he is unlikely to be able to direct it most efficiently.

Delays and waiting refer to situations where a worker cannot pursue his work because he has to wait for others to act. These kinds of situations are equivalent to stoppages in industrial work - the performance is delayed due to reasons beyond the worker's control. Waiting lowers productivity and measures that indicate waiting times can be used to detect bottlenecks and they can be acted on. Unnecessary waiting can be caused by failures in scheduling or be a sign of productivity problems in stages before the measured one. Also customers can cause delays by their actions.

Output factors

Even though output factors can mostly be observed by an outsider and therefore it would be possible to find objective measures, knowledge workers can often best analyse their own work process. If one wants to take into account also the intangible aspects of knowledge work outputs, actually the only other possibility would be to ask customers - also a subjective measure. There are several factors, which can implicate problems in productivity.

Since most knowledge work aims at creating new solutions to customer's need, the ability to create innovations is essential. Also the organisations potential of utilising the innovations made, whether they are new products or new ways of executing certain phases of work, can denote its productivity. It is an example of how knowledge-intensive organisations should evaluate the outcomes of their operations as well as ensure that the profitable ideas are further developed into cash flow. (See e.g. McKenzie and van Winkelen 2004, pp. 28-31.)

As Drucker (1999) has stated, quality defines the applicability of the output of knowledge worker. Especially, when the time allocated for the task is limited, workers are often the best judges of the quality they perform. Knowledge work can often be a trade-off between quality 9

and quantity - even the lower-quality outcome can be used, but the person who made it might know that it could be better. The satisfaction with own work's quality can also reflect to the inner satisfaction, and therefore it is suitable to consider it as a driver of productivity.

Closely related to quality is the ability to fulfil customer's expectations. If they are not fulfilled, customers will eventually find a better supplier who listens more carefully to them (see e.g. Kaplan and Norton 1996, pp. 63-91). Usually the customer is an outsider, but sometimes it can be also another actor (unit, process, task) inside the organisation. The workers often know quite well what is expected from them and whether they have been able to answer to these expectations. Control of this factor also enables management to see whether the workers have noticed the shortcomings perceived in other situations (e.g. customer feedback).

Often used in measurement is the time-efficiency of knowledge work. Research and development projects, pure knowledge work, are well known for the fact that they often overrun the time allocated to them (Reichelt and Lyneis 1999). This can be interpreted as a sign of a decrease in productivity. When the problems occur in the stages that observable to customers, they are easily identified. However, there might be stages during the work process where only workers themselves notice delays. Therefore, it is justifiable to use also subjective measures.

Although we can define the inputs and the outputs of knowledge-work, it is often rather difficult to measure them in quantities. Therefore we need to approach them through other, indirect measures. Even if some of the output factors could be constructed using objective data, bringing this information together with input and process factors offers a possibility to search for connections between cause and effect.