Current headlines in business magazines about the lowered growth forecast and the threat of recession currently seem to be attracting less attention in the public debate than strikes.
Why are productivity and growth so important for our prosperity? When I was dealing with this question, Josef Ackermann, former CEO of Deutsche Bank, is currently presenting his memoirs. In the ARD talk with Sandra Maischberger he said, among other things, with regard to Germany:
- “Personal responsibility and willingness to perform have declined.” According to Ackermann, he heard a young lady on television talking about a 20 or 30 hour week.
- “When I came to Germany, I met young people who were incredibly enthusiastic. And that has been somewhat lost.” People are even trying – Ackermann continues – to get welfare from the state. “And I think we have to rethink that.”
- “In order to finance the dramatic, epochal challenges, more economic growth is needed. Only with more economic growth can we generate more income and thus finance the costs we have.”
These statements remind me of a McKinsey publication in which the necessary priorities for CEOs in 2024 are discussed. In addition to geopolitical issues and the energy transition, it deals with generative AI, the path to growth, and the role of middle managers.
Based on the ARD talk and the McKinsey publication, I would like to contribute three ideas into the discussion on the question “Why are productivity and growth so important for our prosperity?”:
- Growth and prosperity are also a question of culture
- Generative AI as an economic booster
- 4-day working week, health and productivity
Growth and prosperity are also a question of culture
Current studies particularly shed light on a “culture from the middle”.
One result of the study “Führungsbarometer: Die strategische Rolle des mittleren Managements” is: The commitment level of middle managers is crucial. “While 86 percent of companies with a high level of commitment stated that their middle managers responded independently to changes in the market, only 31 percent of those with a low level of commitment did so.”
One of the findings of the study by Spencer Harrison and Kristie Rogers is that a company can only harness the power of culture if managers and team leaders actively build it. Mid-level managers can both support the overall values of the organization (big-c culture) and enrich the everyday experiences (small-c culture) of their team members (see slide 2 in the attached presentation).
I wholeheartedly agree with these findings; especially when it comes to strategy projects during implementation! Middle managers can accelerate the execution of corporate strategy by translating ideas between hierarchical levels and solving problems with data.
This is also one of the key messages of the book “Power to the Middle” by McKinsey authors Bill Schaninger, Ph.D., Bryan Hancock and Emily Field (see slide 3 in the attached presentation).
I have already discussed the correlation between culture and company success in detail in an earlier article; unfortunatelly only in German.
Generative AI as an economic booster
This second impulse builds directly on the first. Based on decades of research on the qualities of effective leadership, Rasmus Hougaard, Jacqueline Carter and Robert Stembridge identified opportunities and risks of AI-powered management, as well as unique human skills that leaders should focus on improving (see slide 4 in the attached presentation).
According to a recent press release from strategy& Generative AI could trigger a GDP boost of up to 220 billion euros in Germany. This would correspond to economic growth of 0.4 percent to 0.7 percent per year. The biggest winners from the new technology are those industry sectors in which large amounts of data are collected and processed.
In September 2023 I published about Generative AI (GAI) in HR. Cross-references to McKinsey and BCG contributions contained therein underline possible productivity increases. AI high performers focus less on cost reduction; instead on innovation and therefore growth!
The i4CP authors Kevin Oakes, Mollie Lombardi and Kevin Martin investigated the importance of mutual trust in order to achieve productivity increases and growth (see slide 5 in the attached presentation). Generative AI is an important driver here (see slide 6 in the attached presentation).
4-day working week, health and productivity
The third impulse is also about managers; particularly those who create workplaces that prioritize physical, mental, social and spiritual health. This is the result of a current study by the McKinsey Health Institute (see slide 7 in the attached presentation). Employees who had positive work experiences reported better holistic health, were more innovative at work, and had improved work performance.
How the 4-day working week fits into this is not yet clearly proven:
- Benjamin Laker, who has been working on the 4-day working week for several years, outlined the results of a British study in an article. This came to the conclusion that 92 percent of the 61 companies that took part in the pilot project plan to continue the 4-day working week. The expected effects of the 4-day working week on health therefore appear to be true. The effects on productivity, on the other hand, are vague because no data was collected in this regard!
- I find Josh Bersin’s research interesting: Firstly, there is a non-linear relationship between hours worked and productivity; with every additional hour someone works, productivity decreases. Longer working hours are also associated with an increase in errors and workplace accidents, as well as a decrease in employee well-being indicators such as satisfaction and engagement.
Companies must therefore undertake a comprehensive reorganization of work in order to reduce working hours while maintaining business results. This means streamlining processes, removing administrative burdens and prioritizing high-impact work. This could be achieved with greater digitalization and the integration of generative AI.
However, the training hours would have to be expanded. In an article, Lynda Gratton outlines three challenges posed by the emergence of new working models that put pressure on traditional learning models.
Closing remarks
The German government and the EU Commission lowered their forecasts to just 0.2 and 0.3 percent economic growth in 2024. Major institutes such as Ifo also lowered their forecasts. This year the gross domestic product (GDP) will hardly grow, if at all.
The impulses outlined in this article are intended to stimulate discussion and commentary.
Corporate culture influences how employees perceive their working environment and how they engage with the company. A positive corporate culture can help employees to be more motivated, productive and to identify better with the company.
Culture can be seen as the nervous system of an organization. One of the most important tasks of the HR department is to analyze the aspects of culture that enable or hinder performance.
If Germany wants to remain an economic heavyweight, then AI champions must be attracted and retained in Germany through access to talent, digital infrastructure, an attractive investment environment and other incentives.
Initial research into the 4-day working week seem to indicate that employee wellbeing and retention are improved, while business results are largely maintained. However, Germany needs a significant boost in productivity and growth to maintain prosperity.
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