4 ways to improve the UK's awful productivity: A message for George Osborne
22 February 2016 -
New official figures show the gap between UK productivity and other world economic powers has widened to its worst level since modern records began. What can Chancellor George Osborne do to address the problem?
Employment levels in the UK have reached record levels and there are currently more job vacancies than ever before.
But despite these positive signs, the country is still failing to address our shockingly low productivity, a problem that’s dogged UK plc for years.
The latest official figures reveal the true depth of the issue, with the UK falling even further behind other world economic powers as the productivity gap worsens to its worst level since modern records began in 1990.
It will be a worrying revelation for Chancellor George Osborne, who made improving the country’s productivity one of his main economic aims when the Conservatives came to power.
In its latest numbers, the Office for National Statistics (ONS) said that output per hour worked in the UK was 18 percentage points below the average for the remaining six members of the G7 group of industrial nations in 2014.
A one percentage point increase on the previous year, the gap between the productivity levels of the UK and its peers Canada, France, Germany, Italy, Japan, UK and USA was the widest since 1991.
Labour productivity measures the amount of economic output that is produced by a unit of labour input, and the latest report shows that UK labour productivity trails behind the US in all sub-sectors, while comparisons with other European countries are more mixed.
The UK’s output per hour in manufacturing is estimated to be above that of Italy, and UK output per worker is a little higher than equivalent estimates for Germany and France.
In financial services and for private non-financial services, however, the ONS outlines that the UK’s productivity trails France and Italy as well as the US.
Four ways to drive up productivity
While Britain’s wider economy is undoubtedly under pressure, there are a number of growing businesses across the country that are boosting productivity through a combination of inventive business structures, unique and innovative products, and outstanding management.
1. Highlight best practice
Published in November 2015, the Pro50 list of the UK’s productivity champions (published in CMI’s Professional Manager magazine) highlighted FeverTree, ISG Fit Out and Newssolutions as case studies of outstanding management-led productivity in action.
In these companies, inspirational leadership and a dedication to management best practice contribute to positive productivity levels.
“For a long time, economists have ignored management,” said Professor John Van Reenen, director of the Centre for Economic Performance at the London School of Economics and Political Science. “These management practices are of the kind that lead to more output from what you are already using. They don’t need a lot of money to be spent on new technology or expensive buildings. They’re about taking what you’ve got and using it efficiently.
2. Focus on management
Similarly, CMI’s Quality Of Working Life (QOWL) research (released in January 2016) showed that effective line management boosts productivity by up to 30%. CMI chief executive Ann Francke advises that bosses get a grip of productivity at their firm by communicating clearly about expectations, giving constructive, timely feedback and focusing on outcomes, not face time, by attempting to make staff happier and healthier through flexible working methods to get the best out of them.
3. Reduce stress levels
The QOWL study also found that the higher a manager’s stress level, the more unproductive they become – only 12% of the 1,574 managers surveyed reported being 100% productive and 15% said their personal productivity level was below 70%.
The lead author of the research, CMI companion Sir Professor Cary Cooper, explained that companies are suffering from low productivity as a result of overworked and overstressed staff not performing to the fullest.
Finding that “stress-free” managers reported productivity levels of more than 90%, Professor Cooper concluded that empowerment of staff and the training of competent managers were also key to reviving productivity.
4. Invest in development
With almost half (48%) of UK managers admitting to not receiving any form of training during the last 12 months, according to the UK Commission for Employment and Skills (UKCES), management training can teach individuals to improve their softer skills and the overall quality of management in an organisation.
“The thing that is causing people to get ill at work and adversely affect their quality of working life is line managers who are not socially and interpersonally skilled – they don’t have the soft skills that are needed,” Professor Cooper said. “The more socially skilled managers we have, the more they will recognise when people have unmanageable workloads, unrealistic deadlines or are showing signs of stress and currently we don’t have enough of them.”
CMI director of strategy Petra Wilton added: “Our research also shows that those who do develop their managers see up to 23% improvements in organisational performance.
“Chartered Managers on average add more that £391,000 of value to their employers. Employers must now take advantage of programmes like the Chartered Manager Degree Apprenticeship to grow their own talent if the UK is ever to rise from the bottom of the G7 rankings on productivity.”
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