3 remedies for solving the UK's productivity gap
With UK productivity in the doldrums, Professional Manager takes a look at measures Chancellor George Osborne can take to boost performance in UK PlcMatt Scott
The UK’s poor productivity is a well-known and vexing conundrum.
The remaining members of the G7 are reporting productivity levels that are an average of 18 percentage points ahead of the UK; only Japan reports lower levels.
This productivity deficit, compared with G7 nations, represents the widest gap in productivity since modern records began in 1990. OECD analysis of the UK’s productivity plight pins the blame squarely on leadership and management skills.
The challenge of improving these vital skills is becoming ever more urgent. The latest data shows that the UK labour force will need as many as 1.9 million new managers by 2024 as the economy grows and to offset the impact of retirement among the current generation of leaders.
It adds up to a strong national case for investment in the UK’s management and leadership skills, not least through the new management and leadership apprenticeships.
So what other solutions are being mooted?
Ditch quarterly reporting
The Investment Association (IA) is the latest organisation to publish a productivity plan
Its primary recommendation is to scrap quarterly reporting to focus on longer-term strategy. Other key recommendations include: improved reporting of intangible assets; easier access to funding for small to medium-sized startups; and a longer-term approach to incentives and investment strategies.
Commercial secretary to the Treasury, Lord O’Neill, who delivered the keynote speech at the IA report’s launch, said: “Long-term investment is crucial to our plans to boost productivity. We need investors who are willing to back businesses that take this approach, whether it’s building a new factory or creating a new product.
“That is why [this] report is a significant step in the right direction, because it shows that investors are taking action to encourage the kind of long-term investment that we need.”
Unilever chief executive and CMI Gold Medal winner Paul Polman famously dropped quarterly reporting as one of his first acts when he took over as CEO.
“People asked how I did it,” he told Professional Manager. “I just did it. In fact, I did it on my first day as I figured they couldn’t fire me on the first day they’d hired me.”
Andrew Ninian, the IA’s director of corporate governance, said the proposals demonstrate how committed the investment community is to helping business improve productivity.
“Productivity improvements can help drive economic growth, and require UK businesses to invest for the long term,” he said. “The [IA report] outlines how we, as investors, can play a fundamental role to help improve UK productivity and support long-term investment. It seeks to deliver ambitious and achievable remedies to the ills of some of the most serious causes of short-term thinking.
“The investment industry remains steadfast in its commitment to play its part in fixing the UK productivity puzzle.”
Address the ‘always on’ culture
Research from CMI has found that an ‘always on’ work culture of ever increasing hours and rocketing stress levels is one of the driving forces behind the UK’s poor productivity.
Of the 1,574 managers surveyed in the 2016 Quality of Working Life report, the vast majority (77%) work at least one additional hour each day, adding up to an extra 29 days over the course of a year, cancelling out managers’ annual leave entitlement (28 days on average).
And 10% of those surveyed said they work an extra three hours every day – the equivalent of working a 15-month year. In total, 92% of respondents said they work more than their contracted hours.
Those working long hours are more than three times as likely to feel stressed than those working no additional hours.
CMI Companion Professor Sir Cary Cooper, a lead author of the CMI report, said the findings lead him to fear for the UK economy: “The long-hours culture is very worrying. We are seventh in the G7 and 17th in the G20 on productivity per capita. Germany is one of the top in the world for productivity per capita – and its average hours of work are 35, among the world’s lowest.”
CMI chief executive Ann Francke said that a lack of professional management is to blame for excessive working, with ‘accidental managers’ unequipped to balance the needs of their team with the needs of the organisation.
“There’s nothing wrong with hard graft, but only if you’re well supported,” she said. “Accidental managers who lack the professional skills to deal with the causes of burnout are a threat to their health and others’ at work.
Productivity will also continue to suffer unless employers train managers to prevent overwork and strike a work-life balance.”
The Quality of Working Life survey also found that more open, empowering management styles are connected to lower levels of stress, higher job satisfaction and greater personal productivity.
The worst management styles generate up to four times more stress than the best: as many as 28% of those whose line managers are secretive or suspicious report that they often feel stressed – compared with just 7% of those whose managers are empowering.
Listen to workers
Research from think tank The Smith Institute found that 68% of employees say they are working harder than two years ago, but less than half (49%) say they are being more productive in their work.
Paul Hackett, director of The Smith Institute, said the results show that businesses need to do more to focus on the human element of productivity and engage better with workers: “All the focus is on short term cost savings, robotics and system change. These factors obviously have a role to play, but a big part of the answer lies with the workforce itself.”
He added: “Our survey shows that employees not only understand the need for productivity improvements, but want to share in the benefits. Their frustration is being ignored.”
Of the 7,454 workers surveyed, more than a quarter said their employer does not listen to their suggestions for productivity or efficiency improvements in the workplace.
Hackett said this is evidence that too many managers are failing to properly engage with their staff: “Management is all too often not properly engaging the workforce and failing to offer the right incentives and rewards,” he said. “We need a new deal on productivity at work that is people based and values employees’ voices.”