Employee productivity is top priority but comes at a cost

A new study from RedThread Research found that companies are increasingly prioritizing short-term employee productivity gains over long-term growth and satisfaction in their performance management practices. This rapid shift is also affecting performance review processes and could hurt retention.

Stacia Garr, co-founder and principal analyst at RedThread, warned of significant challenges ahead. She argued that this push for immediate productivity fails to yield better outcomes, particularly as it sidelines necessary learning and development goals. The report also highlighted a growing trust issue between employees and their organizations due to these changes. The study is based, in part, on a survey of 625 employees and HR managers at organizations of more than 100 people in the U.S. and Europe.

In this Q&A, Garr discusses her findings and their implications for the future of work.

Editor's note: The following has been edited for clarity and length.

Your report indicates that a focus on immediate productivity doesn't necessarily lead to more productive employees. Can you elaborate on the disconnect between the emphasis on productivity and actual productivity outcomes?

Stacia Garr: What we asked employees is, 'What is the primary reason that your organization manages performance?' We saw this significant shift. In the past, it's primarily been things like employee engagement. Productivity jumped up from not being in the top five reasons last year to No. 1 this year.

What we think is happening is that between last year and this year, there has been a lot of pressure on organizations from the top to get greater productivity. That's why we saw a lot of return-to-office pushes in the name of productivity. It seems like everything is in the name of productivity right now.

But when we asked employees how productive they and their organizations were, there was no relationship between those who said 'this is why we manage performance' and their productivity outcomes. We think what's happening is leaders are squeezing the organization for greater productivity. But in general, that is not how we tend to see productivity improve. We tend to see productivity through more indirect influences, not just by saying, 'We're going to be more productive,' or, 'We're going to get rid of all the fat in the organization.'

What is driving the organizational leaders to make productivity their top priority?

Garr: The economy.

How did you come to believe an organization's emphasis on immediate productivity is affecting long-term employee growth and satisfaction as well as hurting productivity to boot?

Garr: We saw a significant decline in the emphasis that organizations were putting on employee development in this study. This is an interesting finding because when we look at some of our other research, particularly focused on learning leaders, they say they're making more investments in learning.

But this study looks at what employees say, not just what HR says, and in the context of how performance is managed. What I think is happening is that employees are saying, 'With this drive to productivity in my day-to-day work, there is not as much of an emphasis on learning and development because I need to be more productive.'

If organizations … do not return to focusing on learning and development, particularly for their high-performing, high-potential employees, we're likely to see those people turn over.

Based on what you found in terms of productivity, what are the potential long-term consequences for organizations?

Garr: We've seen this in other times of economic uncertainty. When people start to feel more confident that there are jobs and opportunities out there, and if they feel like they're not learning and developing, we're likely going to see folks start to move around again.

I'm not predicting something like the Great Resignation after the [COVID-19] pandemic. But I think if organizations continue on this path and do not return to focusing on learning and development, particularly for their high-performing, high-potential employees, we're likely to see those people turn over.

You found a decline in companies encouraging employees to learn and develop skills on a regular basis. Why is that?

Garr: I think this goes back to what I was saying earlier. There's this emphasis on productivity, and it's less about getting the skills needed to develop and move into other parts of the organization. It's much more about just getting the work done.

Everything we're seeing today says that AI and the use of generative AI is going to change jobs considerably. Are organizations investing in that and are most people experimenting with it?

Garr: We've got another study on AI and how it's being used by people. The vast majority are not experimenting with AI despite being told to do so.

Why do you think that is?

Garr: People are being pushed hard on productivity right now. I think among senior executives, there is a sense -- not for all of them -- that AI will be used to augment some jobs and change some jobs, and quite a few jobs will go away. There is enthusiasm about AI among executives, but our data shows that enthusiasm and use of AI is not trickling down to employees.

HR vendors are saying AI is going to increase productivity significantly. Why wouldn't companies want to get their employees using AI if they want to increase productivity?

Garr: I don't know that companies don't want employees using AI. When we interview learning leaders or other talent management leaders, they're enthusiastic about AI. But there's no AI training right now.

What we've said is that AI adoption is extremely uneven. In areas like marketing, AI is being adopted quickly because there's a natural use case for supporting content creation. We are not seeing broad adoption because there aren't necessarily the same easy use cases.

You said employees, based on your survey, feel the performance appraisal process is not fair. What's the root of that?

Garr: We believe the root is how people are being assessed. It changed significantly this year. We saw a significant increase in the percentage of organizations using only manager feedback. The three that changed are self-feedback, performance against business goals and colleague-provided feedback.

The key message is that the way people are being assessed has changed, yet most organizations did not tell employees they were making these changes. Basically, the rules changed, but the organization hasn't been transparent about those changes.

Previously, it would have just been manager feedback that was used to assess employees. How did this new process make performance appraisals seem unfair?

Garr: If the rules on how you're being assessed have changed -- if you go in assuming you'll primarily be assessed by your manager and then it turns out you're also going to be assessed against business goals and by your peers -- but the organization hasn't communicated they're changing how you'll be assessed, that can lead people to feel it's unfair.

The pandemic pendulum regarding the workforce seems to be swinging in the opposite direction. Companies are demanding employees spend more time in the office. They're insisting on more productivity but not necessarily giving employees the tools to accomplish that. They're changing how they evaluate employees without effectively communicating why these changes are better and will lead to better outcomes. What has driven such a dramatic shift in such a short time?

Garr: The clearest thing I can point to has been the economic reset. We had this arms race for talent across 2021 and early 2022. Then, particularly in tech, we saw some significant resets in terms of layoffs. There was a sense that customer demand had shifted back to more pre-pandemic levels, companies had over-hired and supply chain issues had responded to a level of demand that was no longer there.

I think executives felt a need to make a pretty dramatic change. There's been a push from executives to 'get back to normal' -- get people back in the office and get into the rhythms we had before. Largely, companies let performance management slide during the pandemic. In some cases, it was just skipped because things were so weird. I think executives now feel, 'We need to get back to what we were doing. We need data on what people are doing.'

Patrick Thibodeau is an editor at large for TechTarget Editorial who covers HCM and ERP technologies. He's worked for more than two decades as an enterprise IT reporter.