Overcoming productivity woes

Posted on 12 Dec 2016 by The Manufacturer

With recent global events putting productivity well and truly back in the spotlight, Keith Armstrong, managing director of Applied Acumen, identifies an effective way forward.

You can’t blame the UK business community for being negative right now. While trying to deal with increased labour costs from government legislation, they find themselves with a weaker pound sending material costs skywards. Then there’s uncertainty reducing investment opportunities as the country waits to see the real impact of the vote to leave the EU.

Keith Armstrong, managing director, Applied Acumen.
Keith Armstrong, managing director, Applied Acumen.

Furthermore, whatever your politics, our democratic representatives have taken it upon themselves to tell us some home truths that we apparently need to learn about exporting, recruiting, remunerating and spending time playing golf. To rub salt in the wound, there’s also a deteriorating public image of business thanks to those who can’t apply basic values.

Added to this are genuine concerns about infrastructure, skill shortages, energy costs, robustness of the banks, unclear or non-existent government policy to name but a few.

Of course, we’re not alone in this. The US election showed the voter rejection of establishment in much the same way seen in Europe, with all the confusion and bitterness clearly on show. What singles out the election of Donald Trump is his intentions on international trade deals and foreign investment which could not only affect the US, but many other nations as well.

Is it time to fasten down the hatches? Well, no.

What next?

Amid this tirade of noise, however, there are some words of sense. Credit where credit is due to Chancellor Philip Hammond for putting productivity at the centre of the agenda. He continued the theme he introduced at the Conservative Party Conference by arguing that being more productive will not only provide a sustainable answer to driving down the deficit with increased tax revenues, but increase workers’ living standards as well.

He is right, of course. Yet the UK’s productivity performance remains a major concern. This isn’t a new subject, but it’s been an issue largely underestimated (at best) or ignored (at worst) by recent governments.

Where we don’t agree is how productivity can be improved. The government points to education, new technologies, automation investment and improved infrastructure as the crucial drivers. You can see the findings of the Fixing the Foundations report from 2015 being wheeled into policy.

No one would argue that this is unwelcome, but the benefits are in the long term and don’t answer the increasing complexity of the modern market. The business waiting for these benefits will be in trouble long before they arrive, if they aren’t already. Also, these challenges are present in nations far more productive than our own, so there’s clearly something else

The CBI’s report on productivity, Unlocking Regional Growth, shows the diverse performance across the UK’s regions. Of course, this doesn’t compare like-with-like as the portfolio of businesses in each region makes a substantial effect on the figures, but the message is there.

The CBI concurs with the government in the reasons behind the figures, but add a telling line of the contribution of “better management practices”, something which lies outside government control. It’s this investment in staff and increasing their productivity, rather than considering the use of cheap labour and materials as an easy option, where the biggest gain will be found.

Piles of Coins on Notes - Shutterstock - Finance Investment - Autumn Statement
Investment in staff and increasing their productivity, rather than considering the use of cheap labour and materials as an easy option, could be where the biggest gain will be found – image courtesy of Shutterstock.

Stephanie Flanders’ article for the RSA Journal, Growing Together, describes the challenges to creating a more inclusive economy. She describes the treasury’s historical reluctance to invest in “human infrastructure” preferring road, rail, broadband and so on. We would suggest that the recent investment in Charlie Mayfield’s work may signal a welcome change.

Haven’t we been here before?

This isn’t entirely new; productivity initiatives have been around some time. Which begs the question, why is productivity still such an issue?

Well, it’s true that not all businesses have carried out such programmes, either internally or with external help; yet there remain two fundamental issues that these programmes miss.

Firstly, the programmes aren’t designed to suit the need. Improvement programmes may have cleverly changed their name, but their content is still the same as it was in the 1980s. They aren’t fit for the fast, complex and ever-changing world of modern business.

Secondly, the programmes forget the most important aspect – staff behaviours. Any programme that ignores behaviours or assumes that these will change by following a standard process will be unsustainable at best, but more likely create irreparable damage.

The challenge lies in developing programmes to not only meet but surpass modern demands. This means breaking away from the pack, but that’s fine, bringing the sustainable productivity improvement in a matter of weeks that others expect in years is worth ruffling some feathers. What’s more, you don’t have to wait for the noise to reduce or the infrastructure to improve.

Improve productivity and cheer yourself up as you watch your people fulfil their potential, that has got to help overcome any negativity.