3.2.3Mismanagement

This hypothesis suggests that the true cost of information technology capital is higher than the market price (P1 in Figure 3.1). For instance, there are hidden costs associated with the purchase of a computer. When managers make investment decisions, they may not account for these costs. Hence, the true marginal cost of a computer is actually higher than the expected return to investment, making the return to computer investment lower than the competitive rate. This partly explains why computers may appear “unproductive.”

These hidden costs are numerous. For instance, Chapman (1996) cited a study from Software Business Technology Accounting Systems of San Rafael California. It showed that workers spend on average 5.1 hours per week “futzing” with their computer. The term “futzing” refers to trivial actions such as loading or changing software, organizing the hard disk, tweaking the interface or trying out new features of the computer. This study estimated the actual price of hardware and software equipment to represent only 21% of the true cost, which is evaluated at $13,000. Hidden costs are mostly due to administration, technical support, and “futzing.”

Powell (2000) also mentioned the importance of “futzing.” He noticed that frequent computer crashes often forced employees to do the work twice. Powell (2000) also considered that computers were often used for trivial and unnecessary tasks:

‘It’s been said of the guillotine that once such an efficient method of execution was devised, it seemed to demand victims. There seems to be a similar implied imperative in the office that computers be used as much as possible to justify their expense. Instead of using computers to do the same amount of work in less time, we use them to do more work in the same amount of time. [...] Rather than simply using computers to generate, store, access, and manipulate the data we actually need, we use them to generate more data than we can possibly digest, simply because we can.’

It is important to mention other typical wastes of time due to information technologies, such as is playing games on computers (originally made for getting familiar with using the mouse), checking e-mail or surfing the Internet. This activity has been well-reported through different computer use surveys from the Bureau of Census, although it remains difficult to measure.

A study from Pentland (1989) surveyed the effects of recent use of laptops by 1,000 U.S. Internal Revenue Agents. Pentland found that the time spent to complete a tax audit actually increased, even if agents’ self esteem improved because they felt more professional using a laptop. Roach (1998) sustained that information technology indeed made employees working longer, and productivity gains come not from working longer but delivering more value-added per hour of work. In fact, longer hours of work are typical in the service sector. Then, if it is true that output is underestimated by measurement techniques (mismeasurement hypothesis), labor hours input is also underestimated and therefore the ratio of those two variables, which defines productivity, should not be underestimated. Therefore Roach, sustaining the productivity paradox, estimated that two hypotheses attempting to explain the productivity paradox (mismeasurment and mismanagement) actually cancel one another out. The next section describes the hypothesis of complementarity, which underscores the necessity of efficient work organization internal to the firm using IT.