The UK productivity paradox

Ronan Copeland at Docusign explores the reasons that investment in technology is not translating into time savings

Goldman Sachs estimates productivity will grow by 1.5% because of the adoption of GenAI alone. McKinsey is even more bullish, suggesting AI and automation technologies will usher in the next “productivity frontier”.

But while the potential for digitalisation to transform work and worker productivity is undoubtedly seismic, the reality is that the road to transformation will be far from smooth. Goldman Sachs hinted as much with its newsletter titled ’Gen AI: Too much spend, too little benefit?’

And recently, a report suggests digital transformation has actually stalled across Europe, along with productivity. New data from Docusign’s 2024 Digital Maturity Report shows that British firms are increasing their investment in digital transformation despite challenging economic conditions, but this still hasn’t translated into improved productivity or digital maturity.

Putting a figure on this problem, there’s a potential £275m+ productivity black hole at stake. This calculation was made based on the fact those surveyed report wasting nearly two working days every week - nearly 13 hours - on low or no-value tasks. In fact, this wasted time rose from 2023, despite businesses having increased their digital investments to find desperately needed efficiencies.

The research shows this productivity and efficiency paradox as not only less than ideal for employers, but also as a Catch-22 for workers. Though technology investment is increasing, workers find themselves wasting more time on manual processes than last year.

Worse, more than in 2023 are considering leaving their roles due to a desire to abandon the legacy ways of working they are stuck in. Illustrating the point, while fewer than half of organisations (47%) see themselves as digitally mature, 84% of workers believe that they are - hence their dissatisfaction with the status quo.

Just under half (42%) of staff want to allocate more time to training on and experimenting with digital tools with AI and other new digital tools that could improve their day-to-day work and save them time, but they can’t find that time while they are still being held back by manual, repetitive, low-value tasks.

Catch-22

“There was only one catch and that was Catch-22”. Workers and their businesses are both stuck in this productivity Catch-22. So why is increased digital investment failing to spurn productivity? Well, technology’s impact on productivity is far from linear.

One answer, initially called out in the IT productivity ‘paradox theory’, is around the natural lag between implementation and easy use, and measurable outcomes from technology adoption. Then there are the different interpretations of what it means to be digitally mature. Perhaps one of the most compelling answers to come out of this report is that only 11% have assigned an AI lead to coordinate their efforts.

To be fair, companies are taking steps. 44% are allowing staff to upskill and 34% are offering workers the chance to retrain. There’s also been a large (42%) increase in the number of businesses focusing on using tools such as Chat GPT to increase efficiencies in order to close skills gaps.

And in the next twelve months, 35% of companies plan to invest more in AI and machine learning. But while organisations recognise the potential for AI to improve cost efficiencies (33%) and employee productivity (29%), only 43% actually feel a high level of AI readiness.

Many companies are more concerned about AI-related risks, such as security (35%) and data protection concerns (34%), than the opportunities, but doesn’t help find their way out of the productivity paradox. What they must do is find secure and compliant productivity uses which avoid known areas of risk.

Making progress to higher digital maturity

For most companies, the lead factors driving digitisation are improvement of day-to-day work for employees and driving operational productivity and efficiency (both 29%). The barriers holding back digitisation efforts include resource-based barriers such as insufficient budget (26%) and lack of time (24%).

Yet, as we’ve outlined, companies are taking progressive steps to digitise key business functions, particularly those relating to employee management. They should. Successful investors can point to gains. Digital maturity links directly to overall business success, with McKinsey research showing that those who are digital leaders in their sectors generate 50% more revenue than their less digitally mature peers.

The reality is that the talent shortage is having an even greater material impact on businesses than last year. This has been intensified by widespread skills gaps, perceived not just by individuals but their organisations. Thus, the productivity challenge also presents a major threat to employee satisfaction and talent retention. The burden of repetitive tasks and a desire to abandon legacy ways of working is a major factor causing 41% (up from 33%) of UK respondents to consider leaving their companies.

Experienced people are also not easy to come by. 72% of business decision-makers report a skills gap when it comes to technology talent, creeping up from 69%. Skills gaps around AI (63%), data analytics (62%) and security (61%) are the most areas where organisations lack the expertise to drive strategic results. Of those reporting this talent shortage, 53% say that it is materially impacting their business.

Coming back to that productivity paradox, this stops 54% of respondents from experimenting with innovative technologies that could help alleviate their challenges in the first place.

Laying the paradox to rest

The data shows that to capitalise on AI’s potential and bridge the gap between what staff want from work and the realities of their roles - which are currently making people consider leaving - companies must urgently focus on up- and re-skilling. Doing so can help tackle some of the disconnect between technology investment, digital maturity, productivity and the critical people delivering business value.

The data suggests that for better digital experiences, simpler digital tools and workflows that maintain a user’s ‘flow’ is important. Tools must be matched to the user’s work environment to reduce tension between vision and the execution in use.

Organisations are encouraged to optimise their business models to truly operate digitally-first. Outdated processes and business models must be transformed to leverage technologies to streamline daily operations, minimise wasted resources, and bolster productivity. An essential early step is establishing a governance programme that qualifies how new technologies can be used, how, and by whom. Risk management frameworks like ISO/IEC42001 can act as guardrails to navigate these waters the first time.

When starting, prioritise core functions. Identify and invest in areas for direct competitive advantage and customer value. Prioritise essential business functions to ensure digital initiatives align with strategic goals.

Assign projects based on skill. To be able to innovate at speed, it’s necessary to match transformation tasks with the right talent. Aim to enhance the rate at which work gets done, and the quality of the outcomes, together.

Transformation projects need a robust plan to develop them across the business if they are to be sustainable and successful. Invest in scalable infrastructure, standardise processes, and encourage a culture of continuous improvement. Communicate and share learnings to help teams replicate success.

For any transformation approach to be scalable, it must also be secure. Particularly when it comes to supply chains, organisations must carefully select their fourth-party vendors and/or seek assurances about the security of their suppliers. With most SaaS technology providers utilising other digital providers within their offerings, it’s imperative that organisations go beyond a single-vendor view and understand the security and risk implications across these complex supply chains.

Finally, measure business impact. Fundamental to adopting a digital first approach is continuously monitoring impact across the business. Determine business goals and KPIs, collect data from project management systems, gather customer feedback, and evaluate progress against industry benchmarks. Whatever data is gathered it should inform future projects.

Overall, the data points to the fact that successful transformations don’t happen overnight – they are built over a period of iteration and improvement. Organisations looking to defeat the productivity paradox must focus their attention and take greater care to invest, transform, and benefit, step by step.

Ronan Copeland is Group VP and General Manager, EMEA, at Docusign

Main image courtesy of iStockPhoto.com and Rawf8