In October 2022, The Washington Post delivered a stark warning: “U.S. workers have gotten way less productive. No one is sure why.”
This headline marked the onset of a puzzling global phenomenon—the sharpest drop in U.S. worker output since 1947.
The implications of this productivity slump have reverberated across industries worldwide, troubling bosses and economists alike, while sparking intense debates over its causes and solutions.
To shed light on this productivity predicament, the Institute for Corporate Productivity (i4cp) and HRreview embarked on a comprehensive study in the first quarter of 2023. Surveying hundreds of executives from diverse industries worldwide, the i4cp and HRreview aimed to uncover the truth behind this decline.
You can download the whitepaper here.
The global productivity slump
Over the period from the fourth quarter of 2019 to the first quarter of 2023, U.S. labour productivity experienced a sluggish annual growth rate of 1.1 percent. This historical low growth rate, except for a brief period in the early 1980s, has cast a shadow over the nation’s economic landscape.
However, this productivity stagnation is not confined to American soil. Canada faced a productivity decline of 9 percent from 2000 to 2022, dwindling to just 72 percent of the U.S. level. In the UK, the first quarter of 2023 witnessed the weakest annual growth in output per hour worked for both countries since 2013 (excluding the COVID-19 pandemic). Meanwhile, Australia’s Reserve Bank governor, Philip Lowe, declared the country’s largest-ever fall in labour productivity, admitting its enigmatic origins.
This collective crisis has corporate leaders on edge as they grapple with dwindling productivity across their organisations, spanning a diverse range of jobs.
Theories abound regarding the reasons behind this trend:
- Forced Return-to-Office Policies: Mandated returns to the office are purportedly diminishing worker productivity.
- Burnout and “Quiet Quitting”: Employee exhaustion and hidden resignations are potentially eroding efficiency.
- Job Churn Impact: High job turnover is extending the time it takes for new hires to become fully effective.
- Rising Retirement Rates: Increased retirements are leaving gaps in the workforce, lacking replacements.
- Inflation and Interest Rate Worries: Concerns about inflation and potential rate hikes are impacting output.
- Cyclical Fluctuations: Normal productivity ups and downs may be at play.
- Subjective Perception: How productivity is perceived can be subjective and vary widely.
What is the link between organisational trust, productivity and market performance?
Analysing data from their survey of 650 senior leaders in 52 countries, the report discovered striking correlations between organisational trust, productivity, and market performance. Organisations facing poor productivity exhibited commonalities, including a lack of clear communication from leadership about the reasons behind current work models. Respondents from high-performance companies reported stronger trust levels among senior leaders, managers, and employees—three to eleven times higher than those from low-performing companies.
A major point of contention has been the return-to-office policies implemented by various companies. Notably, approximately 2,000 Amazon employees staged a walkout in May 2023 to protest the company’s return-to-office mandate, expressing concerns about a “lack of trust in leadership.” Similarly, Apple employees had previously petitioned for more flexible working arrangements in response to a three-day-a-week in-office policy.
The issue is not limited to the U.S. alone. In Germany, 86 percent of businesses have mandated office returns, causing recruitment challenges and employee turnover due to work-life balance and cultural mismatches. Such global reverberations underscore the magnitude of this productivity crisis.
What does the future look like?
The road ahead requires a delicate balance between productivity and employee well-being.
The search for solutions emphasises trust-building initiatives, manager development, and inclusive cultures as key ingredients to reversing the downward spiral.
As organisations navigate uncharted territories, the intricate link between trust, workplace policies, and productivity comes to the forefront, offering a ray of hope amidst a complex global scenario.
Click here to download the whitepaper by i4cp and HRreview now!
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at the University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.