Time tracking to bankruptcy

Many companies and organizations continue to measure time taken to complete defined activities and continue to use that as a proxy for productivity. When the end output is well defined and has low uncertainty in quality and quantity, such measurements may provide reasonable estimate of productivity. However, if the end product is not a tangible good or it shows significant uncertainty in quality, the time taken to complete the activity that aids in its production is not necessarily related to productivity.

For example, consider a car manufacturer who produces a tangible good (cars) with clearly measurable quantity output. Intuition may tell us that employees’ time spent inside the factory is a good proxy for the company’s profits (and hence the productivity of the employee). But this is not necessarily so. If the quality of the automobile has a significant impact on the buying habits of existing and future customers, it is not the production quantity that is related to profitability – it is the quality of products. Hence, measuring raw time spent inside the factory (that is related to quantity of production) is not useful in measuring productivity.

Similarly, if the company is producing intangible goods such as information (pharmaceuticals, hi-technology), measuring time of employees is not useful to manage the company better. Status-quo managers, some of them growing up in the industrial era and some others educated in the process-centric institutions and consulting firms may not only waste valuable resources by implementing time tracking systems but also create wrong signals on how to manage the company better. It is the implementation of such antiquated ideas of productivity measurement and management that is driving many large companies to the brink of disaster. Unless shareholders understand this and promptly remove such managers from these companies, the end outcomes will likely become more predictable.