The Productivity Paradox

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The Productivity Paradox
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Paul Attewell Information Technology and the
Productivity Challenge

• Productivity output (goods and services) divided
  by inputs (labor, capital, materials) to produce
  that output
• Increased productivity would mean that price of
  goods should go down, standard of living should
  go up.
• This is what happened during the industrial
  revolution

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Attewell (cont. 1)

• Why has productivity not increased with the
  advent and popularization of the computer?
• Researchers have come up with the following 4
  arguments
• 1. takes a long time for business to become
  acquainted with new technology.
• 2. Did not invest enough to really see the
  benefits.

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Attewell (cont. 2)

• 3. May be due to chosen metrics. Measurement
  problems!
• 4. forces within the economy absorb the potential
  productivity gains (Attewells view)
• Brynjolfsson and Hitt (1993) In the nineties,
  there began to be a serious payoff from IT
  investment but it began to taper off

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Attewell( part 3)

• Forces that absorb potential productivity gains
• 1. Formalization of Communication
• Indexicality tendency of people to not
  elaborate. Straight and to the point.
• Email has a low tendency of indexicality when
  compared to face-to-face or phone communication
  (i.e. people tend to elaborate with emails)
• IT investment has tended towards email

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Attewell (cont. 4)

• 2. Quality/Quantity trade off
• Often, time saved by software (ex. MS Word) is
  used to enhance the appearance or aesthetic
  aspects.
• Pentland (1989) IRS study showed that although
  auditors thought they were doing a better job
  with a computer, neither quality nor quantity
  were increased, the opposite actually occurred

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Attewell (cont. 5)

• 3. Volume of work Expands with Computerization
• Because information is ready available and easy
  to manipulate, more information is expected.
• CAD makes design and drafting easy, but because
  of this many more drafts are expected.

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Attewell (cont. 6)

• 4. Information and the managerial taste for
  control
• Information available to managers number of
  units per hour per employee, break downs in cash
  flow, anomalies in sales patterns/earnings. This
  info is easy to obtain with modern DB and
  transaction processing
• Weill (1988) Informational IT constitutes 56 of
  total IT investment within one manufacturing
  industry.

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Attewell (part. 7)

• W. Edwards Deming To manage one must lead. To
  lead one must understand the work that he and his
  people are responsible for management by
  numerical goal is an attempt to manage without
  knowledge of what to do, and in fact is usually
  management by fear
• Where computerization has dominated, managers
  have increased, not clerical workers.

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Attewell (cont. 8)

• 5. Competition vs. Productivity
• Company expands to increase profit, but does not
  improve productivity
• Redistribute market share, not creating more
  wealth with less inputs
• American Hospital Supply Inc. installed
  order-entry terminals in the hospitals. This
  created incredible customer loyalty, but did not
  improve productivity.

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Attewell (cont. 9)

• This causes other companies to follow suit or not
  survive (ex ATM machines)
• 6. Interorganizational Processes
• Jacques Ellul (1954) new technologies create
  needs which only more of that technology can
  fulfill sounds a lot like McDermot
• We demand new technologies because of the
  technologies which exist.

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Attewell (cont. 10)

• Goal displacement We dont see increase in
  productivity because we try to increase other
  forces in the economy.
• Should we use a different metric?