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Center for Effective Organizations

Working Paper

Knowledge Work and Teams: Analyzing Labor Productivity When Tasks are Interdependent

A. Levenson, September, 2006

Economic research on organizations traditionally focuses on three different levels of aggregation: (a) the business unit or establishment, (b) sub-units that have easily-identified output metrics, such as manufacturing lines within a plant, and (c) individual workers. Yet there is another level of aggregation that is important for understanding productivity at the different levels, and which has been largely ignored by economists: groups or teams of workers. A main reason for the inattention is measurement: when individual tasks are interdependent and quantifiable output metrics are absent, it is difficult to objectively evaluate groups. Yet groups are the organizing logic behind many complex production processes, and thus must be studied to fully understand productivity at higher levels of aggregation. This paper provides a comprehensive look at the issues surrounding the economic analysis of group-level processes and productivity.

The first part reviews the economic and behavioral science literatures on group processes and effectiveness, identifying the measurements that are best-suited for inclusion in economic models. Particular attention is paid to issues surrounding the economic analysis of groups engaged in interdependent knowledge work. To illustrate the empirical issues, the second part of the paper provides an in-depth case study of geographically distributed software development using data from a multinational technology company with operations in the United States, Europe and Asia. The analysis is an exhibit of the kind of multi-level analysis needed to undertake a comprehensive treatment of individuals? contributions to groups, and groups? contribution to unit- and firm-level productivity.

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