Modern practices needed throughout economy

Mar 27, 2005 Management, Sunday Nation

“If you want to go east”, a famous Indian sage used to say, “you mustn’t go west.” Underlying this deceptively simple aphorism is the realisation that we often profess to have certain goals, yet all our actions work in entirely the opposite direction. In a week when an international UN study has ranked us 11th from bottom in terms of attractiveness to foreign investors, we would do well to dwell on the sage’s words.

When the Narc government came in with a roar two long years ago, it set itself the noble goals of zero-tolerance of corruption, better governance, beefing up security and upgrading infrastructure. Yet, according to investor perceptions, those are precisely the things that are still keeping them away. On paper, a lot is claimed to be happening; on the ground, the story is very different. We talk east and walk west.

Failing to link our actions to our words is one of the fundamental reasons why change and development don’t happen in this country. To see this, let us focus this week on our human capital problem. Everyone will tell you that our people are our most vital resource and our greatest asset, that a rising standard of living for wananchi is every politician’s dream, that a good, secure job for every Kenyan is the ultimate goal. Every leader can repeat this from every rooftop until the cows come home nauseated: the reality is that our actions are taking us in the opposite direction.

What kind of human capital do we actually have in this country? We are often told that our well-educated workforce is a great boon to investors. But look at the reality on the ground. Average wage earnings in this country are no better than around Shs. 20,000 per month. Real earnings, after taking inflation into account, are even lower, and have stayed stagnant for several years. This in itself disguises the fact that the vast majority of employees earn far less than even this meagre average, while a very small group enjoys high and ever rising wages.

Clearly, we will not deliver higher standards of living to our people while average wages stay stuck at these levels. So why are they stuck? To understand this, we must put ourselves in the minds of the employers. You pay your staff in accordance with what value they deliver to the organisation. It’s as simple as that. Pay stagnates because value delivery stagnates. Which brings us back to the underlying issue of productivity. Employees are not interesting in themselves; they are vehicles to deliver outputs for the organisation. Whatever those outputs might be, an employee who delivers them effectively and efficiently is the bee’s knees – and sooner or later will have to be rewarded handsomely. Employees who don’t will sink without trace. That is the law of the market.

Productivity drives wages. If productivity were improving dramatically in the economy, no one would be able to keep pay levels down. So at what level is our productivity today? Look around. Look at the time it takes for a gang of workers to dig a simple trench. Two will dig, two others will watch and a fifth will “supervise”. Days can be spent in this process. How long does it take for a government clerk to look at a file? For a private company to return a customer’s call or provide a quotation? Be prepared to learn meditation while you wait.

At the Likoni ferry in Mombasa last week, two notable incidents occurred. In one, a truck was so overloaded that it simply snapped in two while negotiating the ramp. A few days later, another truck managed to somehow miss the ferry altogether and drive into the sea. It only hurts when we laugh. In both cases, delays of several hours were inflicted on all users of the ferry. We have a long way to go before we have a high-performing, productive workforce in this country.

Enough of the prognosis; what should be done? For one answer, we must literally look east. The Indian government announced in this year’s budget a special 1 billion-rupee (Shs. 1.7 billion) package for just one educational institution: the Indian Institute of Science (IISC). This institute has produced Nobel prizewinners in the past, and currently has 1,200 students working on PhD programmes. Its stated aim is to become an Indian Oxford or Harvard. The government largesse is a mere bonus: IISC manages to raise plenty of funds independently, notably from the private sector that sees great benefits in such support. It is producing the winners who will power scientific research and applications in the future.

Giving priority to education is evidently one thing we are missing here. But that is a long-term panacea, aimed at future generations. More immediately, the productivity problem lies with two groups: employers and employees. Let’s rap the knuckles of employers first, with a sobering fact: the vast majority of Kenyan organisations are still organised like old-fashioned family trading firms: a dominant leader insisting on eyeball control of every transaction; little automation; outdated processes and controls; and an army of under-utilised workers chosen for their cheapness whose only job is to follow barked-out orders. What productivity leaps are we to expect here?

Real productivity growth will happen when enough firms learn to organise their processes and manage their workforces like the best companies do – and provide the training that delivers results. No employee, no matter how talented, can be highly productive when forced to live with unwieldy processes and outmoded practices. We have a few entities in this country whose processes and practices stand comparison with the best in the world; but they are few and far between.

What of employees themselves? What do we say of the complacency that so many exhibit in agreeing to be shepherded like sheep and spending a lifetime in dead-end jobs? Who is the loser when you sit around waiting for your wages to go up yet your productivity is stagnant? Why are more workers not willing to spend their own time and money in upgrading their skills, rather than waiting for employers, the government or donors to do it for them?

International studies suggest that education, on-the-job training and technologically enabled work processes are the drivers of better productivity, and in turn, of higher wages and standards of living. The answers are all within our grasp, yet we seem stuck in the business models of colonial days: a few “bwanas” ruling the roost and calling the shots, and a mindless army of unskilled, untrained and, of course, lowly paid workers slaving away to no particular effect. The days of Africa competing as a low-wage, low-cost investment destination are long gone. We will not build a modern knowledge economy by “creating” 500,000 jua kali jobs every year.

A final thought: the IISC was founded nearly 100 years ago by J. N. Tata, an Indian industrialist and philanthropist. His initial endowment set it on its way to world-class status. Would any of our remarkably rich tycoons care to follow his example, and give Kenyans the gift of knowledge?