Increasing Productivity – impossible, or merely elusive?
“Productivity is not everything, but in the long run it is almost everything” Paul Krugman.
Productivity has been a continuing concern for Governments and Business Leaders alike for a long time. Not only has this not been solved; the gap is growing wider. According to the Office for National Statistics (ONS), whilst we saw a 0.9% rise in the 3 months to September 2017, the 10-year rolling average shows that Britain’s performance has been the weakest since official records began.
In the period since the credit crunch, we have all become used to regarding increases of less than 1% in economic growth data as a success indicator. However, it is hardly a cause for celebration and more a sign of our gloomy resignation. It should come as no surprise therefore that productivity is failing to keep even its own modest pace. As defined by the OECD, GDP per hour worked is a measure of labour productivity. It measures how efficiently labour input is combined with other factors of production and used in the production process.
Martin Wolf of the FT said recently “The good news is that productivity levels are so low, relative to the UK’s peers, that the potential for improvement is large. The bad news is that the UK is falling further behind”.
Don’t blame us – we’re British
It is a long-term UK problem and is not shared by the other major economies, such as the US, France & Germany whose economies all outstrip ours in productivity. Richard Heys of the Office for National Statistics calls poor productivity “the key economic issue of our age”.
Disappointingly, there is also little consensus on the root cause(s) of such an appalling legacy. Some are cyclical, and others are more persistent underlying reasons, but the following are the main contenders:
- Labour hoarding – this is a regular complaint. Unemployment is at a 42-year low, which looks good on paper and is heartening for those in employment. However, firms are maintaining labour levels in anticipation of a hoped-for upturn and there is considerable slack and low utilisation.
- Strength of the labour market – due to a long period of low wage growth (now easing a little), it is comparatively cheap to hire and retain more staff than firms need now. This, it is claimed, has led to higher employment than is desirable or even realistic.
- Under-investment – this is also a legacy or hangover from the credit crunch. Because of the crisis, labour costs reduced but the cost of capital increased, which led to a prolonged period of low or no investment whilst firms merely kept pace through stockpiling workers, often on a temporary or short-term basis.
- Zombie businesses being kept afloat – the long term low cost of borrowing and tightened regulations has perhaps led to low-productivity businesses being nursed along when they might otherwise have gone under through so-called “creative destruction”. This policy position may have led to greater continuing employment but at very low productivity levels when the resources involved could have been invested elsewhere in more dynamic areas.
- Slow/low innovation – It is believed that the more recent emphasis on innovation being focused on technology will be shorter lived than earlier bursts of innovation and that the potential for this type will not have the same impact as over the last two centuries. This would help to explain why other developed nations have also seen slowing productivity, despite it being less acute than the UK.
Tea break’s over – now get back to work
So, how do we tackle such a thorny, legacy problem? Predictably, given there is little consensus on the causes, there is similarly, little common ground on potential solutions. Does that mean increasing productivity is a lost cause? Probably not, given Martin Wolf’s conclusion that we are so far behind, we have huge potential for improvement.
However, knowing what the problem is and identifying solutions or even first steps towards them are two very different things. Being pessimistic & giving up won’t fix the problem but some cautious realism may light our path a little.
Recent discussion and writing tends to concentrate on two possibilities:
- Investment in technology and
- Adapting or improving our workplaces
As outlined above, it is unlikely that investment in technology by itself will create the degree of impact that we need for breakthrough in productivity. However, changes in the way that we buy and use technology at work is leading to improved outputs and lower costs, with the move to agile working and the increased use of flexible, digital platforms as opposed to more traditional, fixed workstations.
The trend for more open, flexible workspaces is already driving those changes in technology as well as creating more dynamic and creative environments to work in.
High Productivity Toolkit
In order to assist clients in improving their productivity, we have developed a diagnostic tool that examines and challenges our current practices. It looks at productivity in two areas:
- Personal Productivity – what could we improve about our own habits, practices and routines?
- Workplace Productivity – how do our workplaces influence & impact on the way we work and what could we do to improve them?
If you would like us to review your own, or your workplace’s productivity (or both), please contact us at email@example.com
Martin Wolf has this to say of our national productivity challenges and I think this also has much to say about individual and corporate ambition.
“So long as the UK underinvests in physical and human capital, it seems sure to remain a laggard.”
So, let’s not be laggards and act now to raise the bar on productivity.
Unlocking the potential of your team
We are delighted to say that the EQ Discovery Process diagnostic tool has been a great success and we have been fortunate enough to use it with several of our clients in recognising and improving their emotional intelligence as well as highlighting their teams’ development needs. As you may know, EQ is a major differentiator in hiring people and in distinguishing what makes us successful in senior roles. Some studies put this (EQ) as high as 85% of the reason why people succeed in complex or challenging senior roles.
Our clients have found the EQ Discovery Process incredibly useful for unlocking their often-untapped potential and offering them the opportunity to tailor their development pathway to better suit their (and their organisation’s) requirements. By uncovering your hidden strengths, the tool helps you to understand your thinking style and make better informed decisions by finding a balance of each of the three key schools of thought: Practical, Empathetic and Systemic.
Making some finite adjustments to your EQ could trigger some major developmental advantages for you. If you think that this could benefit you, or you would like to develop talented individuals within your organisation, please get in touch with us at firstname.lastname@example.org to arrange a discussion or contact us to try out the test yourself.
Open Courses for Autumn 2018
Practical training skills, designed for future managers and leaders. This highly interactive 2 -day programme provides the essential skills and management tools, to transition effectively into a more senior role.
Personal Influence & Impact (Pi2)
High impact influencing skills’ training for leaders, managers and high potential individuals.
“Well worthwhile, challenging but necessary.” Catriona Scott, Finance and Corporate Services/Projects Director, SCDI