This report draws from a study being conducted by William Massy and Andrea Wilger for the Consortium for Policy Research in Education (CPRE). The study examines how academic departments work in order to identify organizational incentives that can improve productivity. The brief offers some definitions of productivity in higher education and discusses reasons why institutions of higher education should stress increasing productivity while maintaining costs as a policy goal and key strategy. Also discussed are causes for apparent declines in higher education productivity, and possible steps for improvement. In treating the question of productivity declines the brief notes that until recently, colleges focused on improving quality by obtaining increased resources, not on finding better ways to use the resources already available to them. Now, however, institutions are being held accountable for the productive use of the resources they have. Reasons for this change are discussed, and the causes of productivity decline are examined in terms of four categories: the cost disease, the growth force, the administrative lattice, and the academic ratchet. The paper treats each of these processes in detail, arguing among other things that the administrative structure has grown dramatically at higher education institutions, that consensus management has made higher education administration less efficient, and that the current structure of faculty duties regarding teaching versus research, and scholarship has problems. A final section suggests that institutions improve productivity through (1) refocused institutional mission; (2) purposefully shaped priorities; (3) attacking administrative and support service productivity head-on; and (4) reform of academic departments. Information on the CPRE is included. (Contains 15 references.) (JB)