LR Question 13 Explanation
QUESTION TEXT: Consultant: The dramatic improvements in productivity achieved…
QUESTION TYPE: Paradox
PARADOX: The industrial revolution increased productivity by centralizing decision making. But recently, a bunch of already productive companies have increased their productivity by decreasing centralization.
ANALYSIS: The paradox is that centralization seems to both help and hurt productivity. We need to explain why certain companies improved productivity by decentralizing.
The industrial revolution was 200 years ago. It’s possible that we’ve begun to reach the limits of centralization.
___________
- This is just a fact about most companies. This doesn’t explain how some other companies managed to improve their productivity through decentralization.
- Great – those employees must be happy! But this doesn’t explain why decentralization worked.
- Robots don’t explain decentralization. Maybe robots require central control.
- The stimulus was very specific. It talked about already productive companies i.e. those that had already learned the lessons of the industrial revolution and centralized. We need to explain why some of those companies improved productivity by decentralizing.
In other words, who cares about the companies mentioned in this answer choice? They’re not the companies that we’re talking about. - CORRECT. This explains it. The companies in question are already productive. This answer says that those productive companies can
only become even more productive if they decentralize a bit and give employees influence.
More Resources for Paradox Questions
- Intro Course lesson: This intro course lesson covers Paradox questions.
- Mastery Seminar lesson: This LR Mastery seminar lesson covers paradox questions.
I had it down to B/E pretty quickly, but I chose B) as correct, because it feels reasonable to assume that happier workers are more productive workers, which would explain the productivity increase.
The reason I ruled out E, was that “giving greater influence in decision making and in how they do their work” =/= innovative ideas solicited by individuals about how they do their work
For E to be true would require the assumption that you need to give greater influence in decision making and in how you do your work to be able to come up with innovative ideas on how to do your work, but obviously this isn’t necessarily true. maybe it helps foster these ideas, but its not a necessity.
While similarly, B) would require you assume that happier people are more productive, this feels more intuitive than E.
Hi! Let’s break down the paradox first. The paradox is that the Industrial Revolution saw productivity gains due to standardization and centralization. Yet, some modern companies who are already productive have improved productivity by doing the opposite (giving employees more influence over decision-making). So what this question is asking us to do is resolve why centralization worked before, yet now it’s the opposite.
That’s the issue with B: it doesn’t explain why decentralization specifically leads to increased productivity whereas before the opposite was the case. B suggests that increased job satisfaction is an additional benefit of giving more control, but it doesn’t help us answer the paradox. So all we have is an alternative advantage, but this isn’t what the question is asking us to do.
E is correct because it explains that the increased productivity in already productive companies results from management applying innovative ideas solicited from employees. This resolves the paradox because it shows that decentralization doesn’t contradict efficiency – it provides a new mechanism for productivity growth.
In terms of your concern about the wording, it’s a very reasonable inference that if employees are given more influence in decision-making, this logically creates an environment where they can contribute innovative ideas. Therefore, E provides the best explanation for the observed trend and resolves the paradox.
TLDR: E directly explains how decentralization leads to productivity gains for already highly productive companies, whereas B gives us an alternative advantage of decentralization without explaining the paradox. Hopefully that helps, let me know if you still have questions!
So, the way I looked at answer (e) being correct was …. I thought it spun around the concept of giving individuals influence, by showing that its contributions to management applications make it a process that is actually continuing to contribute to centralization after all. In this way, it is not as decentralizing a force as we thought, and it can resolve the conflict. Does this work?
I actually did not think about it in terms of firms reaching their productive capacity from centralization – when I read the explanation, it seemed like a great way to look at it, but seemed beyond the logical assumptions I would have made during the test.
Thanks for your help!
That reasoning does also support E: it shows the decentralization really has a centralization component as well. I’m not sure if it would have been sufficient on its own, but it certainly helps.