Companies are preventing the productivity increase Wall Street so desperately wants

It’s been 20 years since computers so fundamentally increased corporate productivity that business leaders and Capitol Hill spoke in almost poetic terms about the extraordinary change that was taking place. That very rapid corporate adoption of information technology led to talk about a new industrial revolution – Alan Greenspan even spoke about the “productivity miracle” that was happening.

That talk has since been tempered as the deep recession and financial and housing crises reduced that late 1990s productivity explosion to average levels by the mid-2000s. Now executives are looking for a new holy grail of productivity, that is, the next big thing that will transform their companies into the revenue and profit powerhouses investors are seeking.

{mosads}The irony is that (in a plot twist worthy of a summer Hollywood blockbuster) many of these companies have had that “next big thing” in their grasp all along. They’ve just had policies in place that have prevented them from realizing what was right in front of them.

Unlike the 1990s when deep pockets were required, this time executives just need to dig deep to change their corporate culture. It’s time for what CEB is calling the “one-company” culture, which requires senior executives and staff to work cooperatively for the company as a whole rather than just for themselves or for their individual division or business unit.

This is not theory, conjecture, or wishful thinking. Our research shows that companies that implement a one-company culture gain a substantial $16,400 in revenues and $2,500 in profit annually, per employee. In other words, both revenues and earnings increase when a corporation focuses on effective collaboration and rewards company-wide accomplishments rather than individual performance.

This will be quite a shock to the many companies that in recent years have consistently done just the opposite, giving the biggest promotions and largest bonuses based on individual performance. By contrast, our study conclusively demonstrates that the most profitable and highest-producing corporations in the future will be those that reward employees for working cooperatively.

Simply stated, the era of the star individual contributor that created the corporate equivalent of rock stars, super chefs and athlete all-stars must now come to end for the next great advance in corporate productivity to take hold.

Overcoming the Employee Performance Paradox

Leaders will also be shocked when they learn that 75 percent of employees report that their company’s culture and practices prevent them from effectively collaborating with others. In other words, their companies’ own policies are cutting into profits.

We found that there are four organizational barriers that prevent employees from being effective in the collaborative work environment that is needed to boost productivity significantly.

For example, the “competition paradox” happens when companies need their employees to cooperate but still force them to compete against each other for promotions, pay raises and opportunities.

There’s also the “empowerment paradox,” where companies say they want to give employees more freedom to make decisions but still insist on directing their day-to-day and minute-by-minute activities.

The “collaboration paradox” occurs when companies want their employees to collaborate more, which sometimes slows output, but also insist they work faster.

Finally, there’s the “motivation paradox,” where employees want to be financially rewarded for contributing but, because those financial rewards are based solely on their individual performance, actually diminish their motivation to help others.

 The upside is, the changes needed to create what we call “enterprise contributors” and take advantage of the next big thing in productivity are very doable. Companies need to focus on employees who initiate change rather than just respond to it, can see beyond their own job requirements to understand the personal characteristics and work flow of the people with whom they work, and see beyond the formal organization chart to understand informal power and authority.

Again, this is not just theory. Companies like Juniper Networks, Cisco, and LEGO have already adopted these cultural changes and are reaping the rewards. In fact, in a recent earnings call GE CEO Jeff Immelt indicated that these sorts of approaches were able to pull out $250 million dollars of structural costs for the company.  ExxonMobil has also seen benefits from these strategies in their Research & Development function.  Recent analysis here shows that they have been able to quadruple the number of successful product innovations by expanding the number of collaborative relationships that their scientists have.

As was the case in the 1990s when there were early and late adopters to the changes that pushed corporate productivity to previously unimaginable levels, some companies will move quickly to put a one-company culture in place and reward their enterprise contributors. Those companies that don’t grasp the importance of these changes will do so at their, and the economy’s, peril. Policy makers need to see these changes and factor them into their thinking.

Kropp leads the Human Resources practice at CEB, a global best-practices advisory company..