IT & Productivity: Does It Matter?

Continuing the debate about the strategic value of IT, The McKinsey Quarterly weighs in with a piece surveying research conducted with the London School of Economics that chalks up improved productivity to better management, period, end of story—without regard to IT investment.  The methodology was to rank 100 companies on a scale of 0 to 5 on three criteria:  (a) lean manufacturing [not relevant to law firms, but a proxy for lean operations]; (b) performance management, which sets clear goals and rewards people who advance them [extremely relevant]; and (c) talent management, which "attracts and develops high-caliber people" [need I say, extremely relevant].

McKinsey found that a one-point improvement on this 0-5 scale measuring "total factor productivity" (an unfortunate term from microeconomics meaning, essentially, the efficiency of capital and labor inputs) was worth a 25% increase in headcount:  In other words, raising your score by 20% on these criteria gives you a productivity boost equal to being 25% larger--without the overhead, training, headaches, etc., involved in an expansion of that scale.

By contrast, the total factor productivity of companies in the top quartile of IT deployment, vs. those in the bottom quartiler, was 4%, with zero impact on profitability.

Bottom Line:  Manage, manage, manage; and deploy IT while you're at it, of course.