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Why is worker productivity trending downward?

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Employee output hits record low

According to a recent analysis by EY-Parthenon, workplace productivity has reached an all-time low, plummeting by 2.7% during the first quarter of 2023 compared to the same period last year. Gregory Daco, the chief economist at EY-Parthenon, expressed concern over this decline, emphasizing that it marks the fifth consecutive quarter of decreased productivity. Daco’s observations were shared via a tweet.

While remote work has been blamed by many as the main culprit, the situation is more complex than that. Surveys conducted among employees have revealed various factors contributing to reduced productivity, ranging from “notification fatigue” to IT-related challenges. It is evident that multiple elements are at play in this productivity downturn.

In a previous statement to the Society for Human Resource Management, Daco highlighted the persistent sluggishness in economic output despite a robust labor market recovery. The impact of the COVID-19 pandemic remains significant, but it is not the sole disruptor. Kaitlin Kincaid, senior managing director of Keller Augusta, noted that the continuous waves of the pandemic, concerns about a potential recession, widespread layoffs, and rising inflation have all kept workers on edge.

The Morgan Stanley 2023 State of the Workplace study revealed that financial stress affects the work and personal lives of 66% of surveyed employees. Additionally, 83% of HR managers expressed concerns that employees’ financial issues might hinder their productivity.

Jenny von Podewils, co-CEO at Leapsome, stated that workers are feeling exhausted due to the insecurity and constant change they have experienced. This exhaustion has resulted in learning and innovation backlogs. von Podewils drew a parallel to technical debt in companies, where rushing through tasks without addressing gaps or errors leads to eventual strain on the entire system.

Younger workers, in particular, have been negatively impacted by the lack of in-person collaboration and exposure to beneficial situations for learning, von Podewils added. This consistent experience has been missing over the past few years.

To address this issue, managers are encouraged to empathize with the challenges employees have faced and might still be dealing with in their personal and professional lives. Kincaid emphasized the importance of meeting employees where they are, focusing on their overall contribution and well-being. Such an approach fosters engagement, positively influencing productivity and increasing employee retention. Many individuals considering alternative job opportunities are looking for more than just titles and compensation.

Companies that continue to adopt remote or hybrid work arrangements must take the lead in creating environments that promote productivity, without blaming workers for any drops in performance. von Podewils stressed the crucial role of innovation in driving workplace productivity over the past half-century. If organizations fail to intentionally construct work environments that support innovation, these driving factors will be lost.

To determine what is and isn’t working, consistent communication with employees and conducting organization-wide surveys is essential. This approach helps gain a better understanding of employees’ mental health, engagement levels, psychological safety, and their perception of career opportunities and learning. Consequently, organizations can explore initiatives like peer mentorships and mentoring programs to bridge the existing gaps and assess their potential impact.

In summary, addressing the current decline in workplace productivity requires a multifaceted approach. By acknowledging the challenges faced by employees and creating supportive work environments, organizations can rebuild productivity levels and foster growth and innovation.


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