Boosting productivity through incremental gains

The UK will weather the current storm of uncertainty by focusing on collaborative, home-grown and long-lasting improvements. Russell Longmuir, CEO & director general of the British Quality Foundation (BQF), explains how.

Russell Longmuir, CEO & director general, The British Quality Foundation (BQF).
Russell Longmuir, CEO & director general, The British Quality Foundation (BQF).

Recent bellwether reports from the CBI and the National Audit Office, among others, paint a picture that many were expecting to see post-referendum.

Business confidence is at its most pessimistic since 2009 and the prospects for large projects have been put on a knife-edge as planning public sector expenditure is recalibrated to take account of new economic realities.

Added to this is cancellation of expansion or job creation plans in some parts of the UK economy; regrettable, but predictable, by-products of the situation in which we find ourselves.

While the extent to which that pessimistic sentiment translates into a corresponding downturn in fortunes will become clear over time, this is the time for British business to take a hard look at the fundamentals of how it operates, to examine more clearly its capacity to withstand the pressures that are emerging.

Many companies have already realised that looking within can yield an exponential increase in performance and productivity.  And it’s an increase that can be sustained over time.

The traditional model of cutting fat when budgets are tight has been shown to be short-termist in the value it brings, and is largely cancelled out again when markets become brighter and sourcing levels increase again.

Business Graph with arrow showing profits and gains - Incremental Gains
Many individuals and organisations believe that their performance is better than it actually is.

Olympic productivity

As Matthew Syed, former Olympian and author of Black Box Thinking, identifies in his most recent work, incremental improvements lead to marginal gains which, over time, produce very significant changes in performance.

Syed’s approach is premised on the thesis that most individuals and organisations believe that their performance is better than it actually is. Recognising the realities, though, relies upon business leaders being prepared to have their operations examined and weaknesses confronted objectively and independently.

To many, this sounds invasive and uncontrollable; but it’s more readily adopted than many might think.

More than 30,000 companies across Europe have assessed in detail their performance against a continent-wide assessment programme that evaluates the quality, effectiveness and appropriateness of processes, strategies and results, with remarkable gains in return on capital employed and to bottom line financial performance, as well as significant improvements to individual job satisfaction and productivity.

Blue Cartography Of European Union with Business Silhouettes
More than 30,000 companies across Europe have assessed in detail their performance against a continent-wide assessment programme.

It was often the incremental improvements, recorded against a number of the EFQM model’s criteria, which amounted to a big difference in a company’s performance and long-term prospects.  More often than not, too, these incremental gains are home-grown and go straight to the bottom line, meaning the impact is sustained over time.

Some companies that adopted the process saw return on assets boosted by up to 49%, added value per employee up by 24%, and cash flow on investments by up to 14%.  But, most strikingly, some businesses saw net profits more than double over five years.

Incremental gains

Businesses in the UK have on the whole been slower to realise the benefits of such an approach than their continental cousins. This is particularly evident in service industries, where people produce the bulk of a company’s financial performance, though by contrast, a focus on continuous improvement has for years been far more prevalent in traditional sectors; construction, engineering and manufacturing.

Put simply, looking closer to home – operational effectiveness, individual productivity, a fit for purpose and effective growth strategy, and an adaptability to meet the needs of customers –sharpens a business’ focus, it ensures stronger engagement from employees and it produces better results.

MRO Costs Finance Growth Economy Investment incremental Gains
Put simply, looking closer to ensures stronger engagement from employees and it produces better results.

If it sounds obvious, then it’s altogether more surprising that the approach is not more readily adopted.

Government, too, has a role to play. In its renewed focus on industrial strategy, attention must be paid to performance improvement, as a central plank of a wider drive to boost productivity, must be at its core.

Public sector procurement initiatives already rely on the EFQM’s criteria as a guiding light – to a point; but embedding its principles in the expectations it places on suppliers, partners and contractors will serve all parties far better in the long run.

This is a time of unprecedented uncertainty, but there is a way forward. The enlightened leaders that will lead the UK through this period will recognise that the best ways of weathering the storm are often collaborative, home-grown and long-lasting. And in the current market, such a focus will – perhaps literally – pay dividends in the future.