Productivity in the UK has been tracking below major comparable countries for years and is getting worse. The finger of blame is pointing firmly at a lack of investment across several different aspects of businesses as the root cause of the UK’s productivity problems.
The challenge to improve productivity seems like an insurmountable problem, but by tackling it from the ground up, every team can make a positive contribution.
It doesn’t need a huge investment to start to improve productivity. Through understanding what is damaging productivity, everyone can start to make change happen. Focusing on having the correct processes in place; having engaged, trained people and providing appropriate tools to do the job well are the first steps to improved productivity.
“Productivity is the only way to raise living standards” – Rishi Sunak
UK productivity has fallen by 0.7% in the first quarter of 2022 in comparison to the previous quarter, according to the Office for National Statistics (ONS).
In the same week that statistic was revealed, Rishi Sunak, then UK Chancellor of the Exchequer, called on business leaders to play their part in pulling the UK back into economic growth and stability. Against a background of high levels of inflation and low levels of unemployment, his speech at the Confederation of British Industry’s annual dinner was clear: “Productivity is the only way to raise living standards”.
He went on to talk about the need to increase investment, particularly in skills and innovation which are the foundations required to sustainably increase productivity and hence drive economic growth.
What is productivity?
Simply put, the productivity rate is how much output can be produced for a given amount of input. This applies to products and services: to output a product you need the inputs of raw materials and the means of production. To output a service, you need the inputs of service deliverers and the means of delivery.
Productivity is measured in Gross Domestic Product (GDP) per hour worked. GDP is in effect a measure of value added i.e., how much value did a worker add to the output product or service in an hour of work. In this measure the UK has lagged behind France, Germany, and USA for the past 40 years, and behind the G7 since 2010.
Why is productivity important?
In the UK and other well-developed economies, there is not a surplus of new inputs (people, land, materials, capital, and enterprise) available to deliver more output. Therefore, it needs an increase in the amount of output derived from the same input to increase the productivity rate.
Growth of productivity is also lower in the UK, less than half of that in those other countries since the economic crisis 12 years ago. The same report, for the Resolution Foundation, an independent British think tank, describes the UK productivity performance as ‘dire’.
What causes poor productivity?
A wide range of studies and reports over many years identify the same issue as the root cause of the UK’s productivity problems, namely a lack of investment in:
- Processes/management – slow adoption of good management practice, and these practices not filtering through to the least well performing businesses where they are needed the most.
- Ideas – without research and development, the subsequent new product development and then commercialisation, businesses go stale and lose sales.
- Education, training, skills in the workforce – no one can add high levels of value if they are not able to do their job to a high standard.
- Capital items – siloed and elderly IT systems or manufacturing kit held together by string and hope absorb time. Maintaining and managing them doesn’t add value, it decreases productivity.
How can you increase productivity in an organisation?
You may recognise some of those root causes from your own organisation or industry. These are happening at a macro level. Unless you are running a large organisation or creating financial and government policy, it could feel that you can’t have any influence on these directly, but you can.
Improvement in productivity can happen at individual, team, department, organisation, or inter-organisational levels. To increase output, we need the inputs and the conversion of those inputs to outputs to happen in a more effective and efficient way.
What does that mean for productivity in your organisation?
A lot of organisations talk about working smarter to increase output; many simply say, ‘we need to get better organised’, and it is usually said after a mishap has occurred. Whichever expression is used, it’s often said without much thought going into what is required and how that change is to be delivered.
Each organisation and its managers need to unpack ‘working smarter’ to understand what it means in their specific context. Statements like ‘we need to be better at scheduling work’ or ‘to focus on managing our digital assets more effectively’ need to be accompanied by a deep dive into what that means for those involved and what it takes to make that happen.
Working smarter is about being smart enough to look at what is damaging to productivity; what is needed to improve productivity and putting an agreed plan in place to make the change.
When thinking about this at team or department level, start by identifying what is damaging productivity. Examples could be:
- Producing multiple, slightly different reports for various boards.
- Having to re-produce or re-send work because it has been misplaced.
- Chasing around to find out if something has been done, or to remind people to do it.
- Having to manually shift data between temperamental IT systems.
- Meetings where no one has looked at the pre-read or done their actions from last time.
These activities take up time without adding value, and drain energy from all those that experience them, making them doubly damaging. To improve productivity, these need to go. But they cannot be eradicated until there are new, productivity enhancing ways of working to replace them.
Make the change
Productivity increases when there is clarity over objectives; responsibilities are with those who are trained or skilled at delivering them and processes are understood and adhered to across the organisation. Whatever tools are used to deliver outputs, from laptops to plant, they need to be fit for purpose and in good working order.
This breaks down in to three pillars of organisation for consideration:
- The correct processes.
- Engaged people.
- The tools to do the job.
The correct processes
The correct process for the situation is one that delivers the desired output/outcome in an effective and efficient way.
Realism is important, putting an unrealistic/unachievable process in place just turns people off. In this situation productivity gets worse as people wrestle with unwieldy processes or they start to operate makeshift, uncontrolled processes, which means no one has an overall view of what is going on.
If you are reviewing a current process, start by documenting it. Then talk to everyone involved in it, ask them if what you have documented is really what happens and why it does or does not work. If there are problems, name and detail them. A specified problem can be addressed in a way that a generic cry of ‘the process doesn’t work’ cannot. Similarly, if you are creating a new process, start with the steps you think are involved, then talk to those who will be involved to get their input into the what, when, how and who.
There is a substantial body of research produced over many years that shows when people have input and control over their work, they are more motivated, deliver better results and are more productive. It is essential to get buy-in to the processes you want to implement. There is no point in having the best process in the world if no one follows it.
Bring the people who do the work into the discussion about ‘working smarter’ at an early stage. Those who are doing the work will have a good view on what is working and where the problems occur. It’s highly likely they will already have ideas for improvement.
Watch out for those who want to dwell in the past, moaning about how it is now and why it was better 20 years ago. Don’t just shut them down, let them say what they need to say, then ask for their help make it better.
Inadequate training and skills are detrimental to productivity so identify the skills gaps. If someone needs training, mentoring, and/or support to make their contribution, then do something about it. Ignoring it will not help productivity and could cause demotivation and disengagement, worsening productivity.
Tools to do the job
There is an old saying that poor workers always blame their tools. In a workplace looking to increase productivity, the ‘blame the tools’ excuse needs to be nullified. The tools, whatever they are, need to be:
- Fit for purpose.
- In good working order.
- Accessible to all those who need them to do their job.
This holds true no matter what the tools of your trade are. Wi-fi that only works 50% of the time, machinery that breaks down regularly or IT systems that don’t integrate are all detrimental to productivity.
Being realistic, very few have carte blanche to purchase all or even most of the tools on their wish list, so think about what would make the most difference. Consider what is affordable in the short term or consider if an existing tool can be repurposed. Putting in place a stop-gap tool will enable you to demonstrate that a productivity improvement can be delivered so providing evidence for making your case for investment.
Ideally, choose modular or sectional tools as these will make it easier to add more capability for continued improvement.
Remember the previous point, if you bring in a new tool, make sure everyone who needs to be is trained to an appropriate level.
At Cheetah Transformation we regularly encounter organisations taking the first steps to increase their productivity, even if they may not recognise that description of themselves.
As Smartsheet consultants, delivering new ways of working to many businesses on the Smartsheet platform, we know it is not just about the tool. The starting point is developing clear, agreed processes, and identifying responsibilities.
Once this is agreed, people and teams around the business need to be brought on board to the change at the appropriate time.
Good management practices are critical at this point, all the stakeholders need to understand the benefits and the change that is going to happen. Once this is all in place, then the transition to new ways of working can begin.
This is an overview of a large and complex subject. If you would like to discuss how Cheetah Transformation could help your organisation improve its productivity, then please get in touch with us.
- ONS, UK Productivity Flash Report Estimate: January to March 2022. Released 17th May 2022.
- Rishi Sunak, https://www.gov.uk/government/speeches/chancellor-rishi-sunak-speech-at-cbi-annual-dinner, 20th May 22.
- Begg, D. & Ward, D. (2009), Economics for Business, 3rd Edition, McGraw-Hill.
- OECD, Compendium of Productivity Indicators. Published July 2021.
- Oliveria-Cuhha, J., Kozler, J., Shah, P., Thwaites, G., Valero, A. Business Time: How ready are UK firms for the decisive decade? The Economy Enquiry, May 21.