By Dr. Anastasia Michailidou Kamenou
, Ph.D. in Civil Engineering (NTUA/PK), MBA (CIIM), Economics (EPKY), EFQM Assessor

Whenever the discussion turns to the productivity of a business, a sector of the economy, or even a country’s entire economy, attention is focused almost exclusively on workers. In fact, the goal of increasing productivity is often used as an argument for keeping wages frozen. Unfortunately, the public debate implies that productivity is primarily the responsibility of those who perform the work.

This approach is flawed. Workers are undoubtedly one of the factors contributing to productivity. But they are not the most important one. One need only look at the evolution of global production and productivity over the last two hundred years. Productivity has increased more than in any other period in human history. If this increase were primarily due to workers, we would have to accept that, within two centuries, people have become many times smarter, harder-working, or more capable than their ancestors. No one, however, can argue that.

What has changed is the way work has been organized. New management methods were developed, better processes were designed, new technologies were utilized, more resources were invested in training, innovation was fostered, and organizations were created that could more effectively harness the potential of their people.

This insight found one of its most comprehensive expressions about three decades ago with the creation of the European Foundation for Quality Management (EFQM – efqm.org), which is now used by thousands of public and private organizations around the world as one of the most important frameworks for evaluating and continuously improving management.  In Cyprus, Cyta is perhaps the only organization to have been recognized based on this model.

The first major innovation of the EFQM is that, in order to define excellence and quality management, it begins long before the results are achieved, by identifying the factors that drive them.  For this reason, the model distinguishes between two broad categories of criteria. The first concerns the factors that determine an organization’s ability to perform—the so-called Enablers.  We could call them “Results-Generating Factors.” These include leadership, strategy, people, partnerships, resources, and processes. The second aspect concerns the results achieved by the organization, such as customer satisfaction, employee satisfaction, contribution to society, and, of course, business results, including productivity. In other words, the former create the latter. Let’s take a closer look at how Enablers contribute to productivity. 

Excellent leadership in an organization striving for business excellence has the mission of creating a shared vision and a common purpose, so that all efforts converge in the same direction. When this is achieved, internal conflicts are reduced, conflicting decisions are avoided, decision-making is accelerated, and the waste of time and resources is minimized. Productivity increases because the organization’s energy is not scattered but concentrated where value is created.

The strategy of an excellent organization lays the foundation for decision-making. At the heart of strategy are the so-called trade-offs, the choices: what we should do and, equally important, what we should not do. This limits the waste caused by spreading efforts too thin and increases the efficiency of every available resource.   In every organization, time, capital, human resources, and managerial attention are limited. Strategy determines where these resources should be invested and, just as importantly, which activities should be abandoned. Productivity does not increase when we try to do more or do everything, but when we consciously choose what creates real value

People are always a factor in creating productive capacity. We agree wholeheartedly with this. Their knowledge, skills, experience, and creativity constitute the most important productive capital of any organization. However, in order to have productive people, leadership (we come back to leadership again) must ensure their continuous development, place them in positions where they can best utilize their potential, and grant them the autonomy to make decisions and solve problems without unnecessary dependencies. An organization that invests in its people does not simply acquire better employees; it increases its overall capacity to generate greater value.

Partnerships and resources create a multiplier effect. No organization operates in isolation. Access to knowledge, technology, information, funding, reliable partners, and modern infrastructure allows the organization to tap into potential that extends beyond its own boundaries. In this way, the same effort can produce significantly greater results.

There is an extensive body of literature on processes that documents their contribution to increased productivity. Methods such as Business Process Reengineering and Kaizen are just two of the best-known approaches to continuous improvement. Every product or service is the result of a sequence of actions. The simpler, clearer, and more efficient the processes are, the less time is spent on waiting, corrections, repetitions, and unnecessary approvals. Simplification, standardization, digitization, and continuous improvement of processes enable an organization to produce more, faster, and with fewer errors. It is no coincidence that the greatest increases in productivity in history did not result from intensifying labor, but from improving the way work is organized and performed.

So far, we have examined productivity at the organizational level. The truly interesting question, however, is whether the same logic can be applied at the level of an entire economy. In my opinion, the answer is yes.

A national economy is nothing more than the sum of thousands of organizations—businesses, public services, universities, hospitals, and other institutions—that operate within a common institutional and administrative framework. If we extend the EFQM framework to the level of the economy, we find that a country’s overall productivity does not simply result from the sum of the productivity of its individual organizations. It depends to a large extent on the quality of the environment in which they operate and collaborate. An effective institutional and administrative framework not only increases the productivity of each organization individually. It also reduces friction between them, such as delays, bureaucracy, coordination failures, and disruptions in supply chains and their mutual transactions. In this way, the overall productivity of the economy becomes greater than the simple sum of the productivity of the individual organizations.

This leads, in my opinion, to a broader conclusion. Just as every organization has its own Enablers, so too does every economy have its own. The quality of public administration, institutions, the justice system, infrastructure, education, and the regulatory framework constitute the economy’s Enablers. Just as in the EFQM, so too at the national level, it is their quality that shapes the results.

Today, public debate focuses almost exclusively on outcome indicators. We discuss GDP growth, unemployment, inflation, public debt, or budget surpluses and the productivity of economic sectors. All these indicators are necessary. However, they reflect only the outcome. They do not explain why these outcomes occurred, nor do they allow us to assess whether an economy’s positive trajectory is based on sound fundamentals or on temporary circumstances.

Perhaps, then, the time has come to supplement traditional economic indicators with a second category of indicators: those that measure the factors that drive productivity. Indicators that assess the quality of public administration, the effectiveness of institutions, the speed of decision-making and implementation, the quality of legislation, the development of human capital, innovation, digital transformation, infrastructure, and the continuous improvement of processes.

Such an approach would not only tell us where an economy stands today; it would also show us where it is headed. It would reveal, in a timely manner, the weaknesses that, if left unaddressed, will later lead to low growth, reduced competitiveness, and a decline in prosperity.

Perhaps, ultimately, the biggest mistake in the public debate is that we constantly look to workers for the causes of low productivity, while its most significant drivers lie much higher up: in the way organizations are managed and in the way a country is governed. As long as we insist on measuring only the results, we will continue to discuss the consequences rather than the causes. But if we begin to systematically measure and improve the factors that produce these results, then we will not only increase productivity. We will create more competitive businesses, a stronger economy, and, ultimately, greater prosperity for everyone.

Productivity does not start with the employee. It starts with leadership.