Should Your Business Be Less Productive?

In service businesses, increased productivity does not always translate into higher profits. Here’s why.

Ming-Hui Huang and Roland T. Rust

March 18, 2014

Many contemporary businesses are on a quest for productivity gains. They seek to maintain quality and quantity of output at ever-decreasing cost, yielding higher profitability. As advanced economies move more into the service sector, that means many managers devote a lot of attention to designing automated processes that reduce the need for people — typically their most expensive resource.

Sometimes, this works spectacularly well. Alaska Airlines, an innovator in streamlining the passenger experience, deployed a new check-in system at Anchorage International ...