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The IT Productivity Paradox

Ethan Dreyfuss, Andrew Gadson, Tyler Riding, Arthur Wang

Organizational Linkages and the Productivity Paradox

Many of the key contributors to the productivity paradox include measurement issues, distribution of wealth issues, and lagging issues. Although these theories themselves provide excellent explanations that help to explain the paradox, it is sometimes useful to take a step back and look at what we are actually trying to do. Perhaps instead of productivity, we should be looking at the wide array of areas within an organization that are affected by information technology. One frame work that should be considered is the theory of organizational linkages throughout a company.

What Is An Organizational Linkage

According to book Organizational Linkages: Understanding the Productivity Paradox compiled by Douglas H. Harris, a linkage is defined to be “a change (or hypothesized change) in the performance of one work unit as the result of a change in the performance of another.” One example they provide is when new computer-based workstations are provided to individuals and there is a 10 percent increase in individual productivity. The question then becomes what will be the overall productivity gain (if any) of the work group as a whole, or even of the entire organization? In order to examine these broad interactions between different levels of an organization, it may be better to define productivity under the model of organizational performance.

The Organizational Performance Model

In this model, productivity is only one of seven closely related and interdependent criteria of organizational performance. The others are effectiveness, efficiency, profitability, quality, quality of work life, and innovation.

Effectiveness deals with the output of an organizational system. It is the actual output versus the expected output.

Efficiency deals with the input side of the system. It is a measurement of the resources that are consumed to the resources that were expected to be consumed.

Productivity is the relationship between the output of an organizational system and the costs to create those outputs.

Quality of Work Life
This is measured in terms of the positive responses of the people in the company to things such as their job, pay, benefits, work culture, coworkers, etc.

This is the ability to successfully respond to changes in the internal and external environment or an organizational system.

Profitibility is a simple measurement between the relationship of revenues and costs.

Quality is seen throughout the entire system. It is measured in terms of five key issues: (1) selection and management of upstream provider systems, (2) incoming quality assurance, (3) in-process quality management, (4) outgoing quality assurance, and (5)the continued proactive and reactive assurance that the system is meeting all of the needs, requirements, expectations, specifications, and desires of its customers.


When viewed in this light, productivity is only one of several key aspects of an organization that should be considered. Furthermore, once a deeper understanding of the organizational linkages that span multiple levels of an organization's hierarchy is achieved, the productivity paradox can be eliminated. This can be done as organizations can better create an environment where the introduction of new technology will result in increased overall production of the organization once the expected gains in individual productivity are reached.

One of the keys to understanding the paradox is the common attempt to invest in a single intervention, such as technology, at a single level in the organization, the individual... Changing a single aspect of an organization almost never results in a substantial change in organizational performance.  Organizations are too complex, their performance is too multidetermined, and their inertia is too great for a single innovation at the individual level to have a substantial impact on organizational performance.
-Douglas H. Harris, Organizational Linkages: Understanding the Productivity Paradox