Chinese Scholars Offer Ancient Management Lessons to Cure Low Productivity Growth

Since the 1990s, advanced countries have seen low productivity growth, something that also afflicted developing countries in the wake of the global financial crisis of 2008. With the emergence of the coronavirus disease (COVID-19) pandemic since the start of 2020, the situation has only worsened.

COVID-19 has led to long periods of lockdown contributing to weakened demand, investment, trade, and income losses. Companies have faced mounting debt and many are being wound down. In addition, disruptions to education have had an adverse impact on human capital resources.

Low productivity is everyone’s concern. It determines income and output growth, and ultimately living standards. As Paul Krugman famously puts it: “A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker [productivity]”.

Policymakers and economists also worry about low productivity because of its impact on financial stability (higher debt-to-gross domestic product ratio) and social stability (less funds available to spend on social protection and address inequality).

In the face of this, much effort is expended on studying the causes of and solutions to low productivity. Global trade slowdown, weak capital investment, credit crunch, fading information and communications technology boom, aging, social unrest, natural disasters, and pandemics have all shared some blame.

To address the COVID-19 impacts for example, policies must provide adequate assistance to the health care system, coupled with monetary, fiscal, financial, and social support.

Something else is happening at work

These causes (and solutions) seem reasonable intellectually and at the macro level, but at the individual or organizational level, something else seems to be happening.

Polls by Gallup find only 15% of global employees are engaged at work—meaning 85% are not engaged or even disengaged! The polls were taken before the pandemic, but the added stress and pressures associated with COVID-19 would have worsened worker disengagement.

Low work engagement is bad news for organizations. Research by Gallup and others find disengaged or unhappy employees tend to have a higher rate of absenteeism; lower productivity; and low level of wellbeing, customer service, and work quality, which inevitably lead to lower firm profitability.

What is striking is that managers play a key role in workers’ disengagement. Gallup finds if workers are disengaged at a workplace, there is a more than two-thirds chance that it is due to bad managers.

Forgotten advice

Anyone looking back at ancient Chinese history might find these findings familiar. Evidence on how bad ministers (managers) ruined the country (organization) and advice on how to choose good managers can be found in “The Compilation of Books and Writings on the Important Governing Principles” (Qunshu Zhiyao), which was compiled under the instruction of Emperor Taizong (626-649 AD) of the Tang Dynasty.

To ancient Chinese scholars, personal characteristics—values a person upholds—are the very foundation of a good person. Therefore, by promoting the virtuous, an organization establishes the foundation of good governance. The first order of business of a leader then is to promote virtuous people, without which the leader will never be able to rest easy.

The scholars’ work is so detailed that they even identify, name, and describe the characteristics of six virtuous and unvirtuous types of manager. Virtuous managers are sagely (have foresight and take preventive measures), good, loyal, wise, honorable, and forthright (outspoken and forthright, unafraid to point out the faults of the organization). Unvirtuous managers are incompetent (work for money and have no interest in the job), flattering, treacherous, slandering, crooked, and vicious (work behind the scenes, stir up trouble and unrest).

In addition, the scholars provide farsighted advice on hiring virtuous managers. Although accepted today, the scholars then already recommended the hiring of able and virtuous people regardless of their social status and relationships with a leader, even if they are foes. What is more profound and unheard of even today is the idea that a person who nominates a candidate is accountable for their selection.

The scholars’ advice is also nuanced—depending on a candidate’s background. For example, if the candidate is prominent and prosperous, assess the people they employ or recommend whether they are good, able, and willing to work together harmoniously. If the candidate is a non-achiever and in despair, observe the tasks they are willing or unwilling to do. A non-achiever may be so because they refuse to take on tasks. If the candidate is rich, check whether they are generous. If they are poor, check whether they refuse ill-gotten gains.

Further, to test whether the candidate is greedy or self-serving examine the circumstances of their previous positions. The virtuous and able would be reluctant to take up a post, but once they did, they would be willing to step down if necessary. The greedy would be very willing to take up a post but refuse to step down regardless of circumstances.

Economists and policymakers have long dominated the productivity debate, but if employees are not happy and disengaged at work, do those macro ideas matter? If organizations do not care or know how to hire the right managers, there will be no escape from what ancient Chinese scholars and more modern commentators have long warned: “those who do not know history are destined to repeat it”.