Friday, October 10, 2008

Productivity and the Fallacy of Composition

The Fallacy of Composition is a fundamental law that underlies much of economics and many social interactions.

The Fallacy of Composition in action;
A Farmer adopts a new product that gives him a competitive advantage. There is a cost associated with the product but that is outweighed by the benefits he derives from it in additional revenue.

Word soon gets around and in time all farms have adopted the same product, pay the same cost and subsequently there is no relative advantage. The net result of this process is that the farming industry has acquired an extra cost element that must be borne by each and every Farmer in order to maintain profitability. This must then be paid for by cutting costs elsewhere.

This scenario is very real and can be detected everywhere if we choose to look for it. In the case of agriculture this contributed to the inexorable rise of the intensive farming techniques that led to BSE.

An area where the Fallacy of Compositon applies is in productivity and overtime.

This article on the Lost Garden entitled the Rules of Productivity consists of a detailed and well referenced presentation about, among other things, the negative effects of excessive overtime in a team.

We are social animals and subsequently success relies on effective communications. In a business environment communication stops at 50 feet. Have you ever worked in a large office building where the people at the other end of the floor were virtually unknown to you? I'm sure that many of us have. We only have a limited time and capacity for communication and we need to focus that communication on those people from whom we can obtain the greatest benefit.

When we are engaged on a personal crusade to fix bugs, bring in new sales or change the world we tend to spend as much time as we think is necessary in order to achieve our goals. Individually it seems as though we achieve more but the reality is that our communications fail and so despite working harder we often work against the goals of the team. Often the goals of the team are sublimated to the achievement of personal goals and the team stops being a team and becomes a collection of individuals. This process is doomed to failure.

"Just one more push!" Becomes a death march after six weeks and the recovery period lengthens resulting in a defecit of productivity that simply burning more midnight oil cannot overcome.

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