Productivity is often misunderstood. Many accuse bosses of trying to force staff to work harder. So, why do we so often hear that one of the UK’s primary economic challenges is stagnant productivity? What does it mean? Why is it a problem? Why is it perceived so negatively? How do we combat it? What tools are available to improve it? What are the benefits? Read on as we deep-dive into how to unlock productivity through business change.
Productivity is an economic problem
Firstly, to understand productivity, we have to define it. A common definition is the output of goods and services and the time taken to produce it. This implies that economically at least, productivity is driven by a need to reduce the hours worked to produce each unit of output. The UK Government defines labour productivity as the amount of output (Gross Value Added) per worker per hour worked. Secondly, we need to understand why this is one of the UK’s main economic challenges. Back in 2019, the UK Government estimated that if the UK’s approximately six million small and medium-sized businesses matched the productivity of Germany, it would add up to £100bn to our economy.[i]
Ultimately, this ‘productivity gap’ is one of the reasons for low economic growth over the last 20 years. By one estimate, the underlying UK growth rate is somewhere in the region of 1.25-1.5%. This also contrasts with the G20 average growth rate of 5.5% from 1990-2007[ii].
Why is productivity a problem?
Stagnant productivity can act as a drag on living standards and erodes earning power. Furthermore, if we are to fund an ageing population and support our public services, an increase in productivity is one lever we have available. For owners and leaders in small to medium-businesses, it means having access to the networks, skills and talent necessary to support change.
Unfortunately, a lack of a joined-up industrial strategy and repeatedly ‘kicking the can down the road’ has left the productivity problem unsolved. After all, if companies make ‘enough’ money, why push to improve productivity?
Why is productivity perceived so negatively?
In general, productivity is emotive. To some, the underlying message is that you need to work harder. It is more typically associated with the right rather than the left in politics. However, this misses the point entirely. The UK Government cannot afford future pension payments and public sector expenditure unless it earns more. Unfortunately for us, it typically does this through either tax revenue or increased productivity.
In summary, it is in all of our best interests to unlock productivity. Crucially, it doesn’t always mean working harder. Sometimes, the answers involve technology or software to automate and better co-ordinate what you do or to help you produce more in less time. Other times it involves successfully identifying, enabling and delivering change and transformation. And that’s the point. Here lies the leadership and skills gap to unlock productivity.
So, let’s look at what businesses can do about it.
How do we unlock productivity?
First of all, businesses need to realise that productivity is a challenge for them. Secondly, they need to assess the costs and benefits of change and solutions to enable it. Thirdly, they need to connect with and understand the business support environment to identify the advice, services and technology required to deliver change. Fourthly, businesses need to enact and embed the change across the business to realise the benefits.
It is also necessary to identify any skills and leadership gaps. If the skills and leadership attributes already exist, those people need to be ‘freed up’ and operate cross-functionally to deliver a large-scale change or transformation programme.
If you would like to know more, check out this related article on changes and transformation.
What tools are available to unlock productivity and business performance?
This is one of the biggest challenges in delivering productivity improvement. Once you understand the problem and have a strategy to move forward, you also need to identify the support and tools required. Ultimately, the scope of advice and services is as broad as the technology and software available. So, how do you go about making improvements?
To assist, it is helpful to understand some of the techniques that Think Beyond uses. Here are 10 examples of Business Performance Management (BPM) methodologies:
- Lean Six Sigma
- Total Quality Management (TQM)
- Continuous Improvement (CI)
- Activity Based Costing (ABC)
- Business Process Reengineering (BPR)
- Overhead Value Analysis (OVA)
- Value For Money (VFM)
- Agile Marketing
- Business Process Automation (BPA)
- Business Process Outsourcing (BPO)
What are the benefits of unlocking higher productivity?
The benefits of higher productivity are multiple. For the economy as a whole, it means higher output, earnings and living standards and enables more opportunity to create social value. For the Government, it means a lowering of the Public Sector Borrowing Requirement (PSBR) and eventually the national debt. As for business, it means more production, better quality, more competitiveness and higher profits to reinvest. Finally, for employees, it can mean working with new tools and technologies, reduced manual labour, more rewarding roles and less working hours.
The true test for any successful transformation is communication. So, it is key to spell out the rationale, roles and returns. If your business is increasing hours, shifts or overtime but reducing breaks, training or headcount, it may be that it needs external support.
Finding support to unlock productivity
Think Beyond is a business and marketing consultancy. We offer value add solutions to marketers and the C-Suite to find new opportunities and accelerate business performance. We do this through our research, plan and change services to enable accelerated time to value. So, if you are reviewing your productivity, why not get in touch.
To discuss productivity, change and transformation, simply call 01565 632206 to book an appointment. Alternatively, why not email sales@think-beyond.co.uk or just leave a few details on our website for a call back.
Finally, find out more about our change and transformation offerings.
[i] HM Business Productivity Review November 2019
[ii] IMF G20 Leader’s Summit 2016