- Spurring productivity growth would help companies overcome challenges from workforce shortages, high debt, persistent inflation and the transition to green energy while boosting U.S. gross national product this decade by as much as $10 trillion, McKinsey said.
- “We really have to get more productive by generating more output with each hour that we work,” according to McKinsey partner Charles Atkins. Rather than take a long-term approach to improving labor productivity, “we very often get lost in the day-to-day of the business cycle of employment and unemployment,” he said in a report.
- C-suite executives should consider boosting productivity at their companies by competing for talent, speeding digital transformation and, during the green transition, finding a balance between energy affordability and efficiency, McKinsey said.
Labor productivity during the first quarter shrunk at a 2.1% annual rate compared with the fourth quarter of 2022, the Labor Department reported on June 1.
Productivity during the first quarter fell 0.8% compared with the same period last year. The “decline is the first time the four-quarter change series has remained negative for five consecutive quarters” since collection of the data began in 1948, according to the Labor Department.
“If the U.S. economy were a car, the engine has been sputtering for a while,” McKinsey said. “In the past 15 years, productivity growth has averaged just 1.4%, even as incredible advances in digital technology put a supercomputer in every pocket.”
CFOs and their C-suite colleagues can boost a company’s productivity by taking three steps, McKinsey said, including:
“Prepare for the future war for talent.” Companies in hiring should focus on experience rather than on credentials, while emphasizing job training and rotation programs “that build your talent bench,” McKinsey said.
Expanding programs for child care, elder care and parental leave would also help retain top talent, McKinsey said.
Such benefits ensure “you’re not de facto excluding people with talent from the workforce, so you are able to get the most out of everybody,” McKinsey Global Institute Director Olivia White said.
Speed digital transformation. Companies should create bold goals and set clear accountability as they reinvent themselves with the newest technology, McKinsey said. They need to complement their move to digital technology by using research and development to “reimagine core business operations.”
“Make sure that your investments aren’t just in technology, but that you’re investing in the research and development and intangibles that actually allow you to create business operations that are designed around your goals,” White said. “Make the technology serve your goals, rather than the other way around.”
Balance energy affordability and productivity. Companies should consider recasting their capital allocation to allow for a rapid embrace of green technology as it becomes more widely available, McKinsey said. C-suite executives should also give business units and employees time to adjust by setting long-term plans for transition to net-zero emissions.
“A lot of these transitions will actually mean that people have to work in new ways,” White said.