InformationWeek

Alan Chwick, chief financial officer of TCM Integrated Systems, an IT services firm, says his company's enterprise clients mostly do a poor job measuring worker productivity. "It's one thing to measure how many widgets factory workers can produce in a day," says Chwick. "It's much harder to measure the productivity of paper pushers."

InformationWeek Research's study concludes that productivity is a key part of management's view of its return on technology investments. And 94% of the respondents say enhancing productivity is an important factor in purchasing IT products and services. But pinning down the specifics isn't easy. "It's not all gravy," says Ed Yardeni, chief economist and global investment strategist at Deutsche Bank Securities in New York. "IT is a difficult toolset because it changes so quickly and there's a learning curve," he says.

For Alliance Benefits & Compensation, initial training in the company's scheduling software took about a day, says CEO Rob Cohen. "Payback in terms of productivity was only a matter of weeks," he says. The company has no formal productivity measurement of its workers, Cohen says, and its conclusions are based primarily on "observations" of employee performance, etc.

How much time must pass before managers are ready to evaluate whether productivity is rising because of a new technology investment? According to the InformationWeek Research survey, almost all companies attempt to appraise the return on investment within six months of implementing new technology. Still, because of the learning curve and other negatives involved with some technologies, the return as well as the impact on productivity may take longer, experts say. "Some new technologies can be counterproductive if they can't communicate or work with existing technologies," says Yardeni. This frequently is the case for companies that adopt "bleeding-edge" technologies, he says.

At General Motors Corp., deployments of some new technologies that require intensive employee training or reengineered business processes can take "six months minimum, sometimes a year to a year-and-a-half" to affect productivity, says Kirk Gutmann, GM information officer, develop product, who oversees the IT for GM's vehicle design and development organization. However, investments related to making GM's infrastructure faster have an almost immediate impact, he says. That includes faster computers and networks that led to throughput rates improving 40% to 50%--better than the 30% to 40% GM had anticipated, Gutmann says.

Those improvements reduce what GM calls "red-light time," or the time employees must wait while their computers calculate or retrieve the information they request. Cutting the red-light time for engineers helps them become more productive because they get the answers to complex computations faster, allowing them to proceed through their work more efficiently, Gutmann says.

"IT can improve the productivity of any industry," says Deutsche Bank's Yardeni. "But at the end of the day, it's more a matter of how an industry uses IT to improve productivity."

The "how" has to do with adjusting business practices to support new technology, according to InformationWeek Research. A majority of survey respondents say management policy and technology implementation are responsible for improved worker output. Interestingly, a slightly higher percentage of business executives--rather than IT executives--acknowledged this key practice. Only 30% of surveyed executives report technology alone has given their companies a productivity boost. And management policy isn't so effective when implemented alone--only 16% of respondents report company decisions having the biggest impact on productivity.

At GM, "people, process, and technology are a three-legged stool," says Gutmann. It's a combination of all those things that affects productivity, he says. "There has to be a readiness by workers to use a new technology." Technology can allow workers to do their jobs in a different and improved way, and that requires a change in processes as well as support from management and the company overall.

One management policy that's helping IT's effectiveness is buy-in from the top. "Organizations with management who recognize the value that IT can have for the business are the ones that will do the best in increasing productivity through IT," says Tom Lesica, CIO at retailer J. Crew in New York. "IT can play as strategic a role in launching a new marketing plan as it can in building a new plant. But it has to have support from management because processes and workflow change along with the implementation of IT."

Weirton Steel has seen a dramatic productivity gain over the past 10 years, and attributes much of it to investments in IT. The $1.3 billion company produces more steel now with 4,300 employees than it did five years ago with 8,800 workers. Using an annual steel industry measure of the number of worker hours it takes to produce a ton of steel, Weirton has improved from 6.5 worker hours in 1990 to about 1.3 today.

Weirton CEO Richard Riederer says the productivity gains are directly related to the increased technology investments over the past decade. Since Riederer joined the company as CFO in 1989, Weirton has spent $900 million on new capital equipment. About 20% of that has gone to factory-floor and back-office IT, including $25 million in the past two years.

"I've always believed that IT is what drives reengineering and business-process changes," Riederer says. "Rather than bringing in a change agent or guru, IT is a lot more effective at pushing changes in job functions and business processes. For us, the payback has been very good." For example, new Oracle applications for functions such as general ledger, order entry, and pricing have helped Weirton redefine many white-collar job functions and streamline processes, Riederer says.