Despite uplifting economic reports, recent research indicates that pre-recession productivity was 7.4% lower than its true potential because of insufficient “business dynamism” and remains problematic.
Myriad theories attempt to explain this; inefficient use of plant and buildings, inadequate skilled labour, infrastructure deficits and low investment levels. Others lay blame at the door of the 2008 “crash”, arguing it led to an economic “survival of the fittest” as less efficient operations fell away; not a universal theory, as many highly productive businesses fell also. Growth since has brought patchy investment, the sweating of assets and a workforce experiencing falling real terms wages.
The UK appears to have plumped for a low wage/lower productivity economy, whereas France appears to favour better wages and conditions, while tolerating higher unemployment levels.
Improving productivity, estimates suggest, would yield just short of £100bn to the economy annually, making productivity an important goal where we need perhaps to review our culture and think the unthinkable in terms of what actually creates a productive workforce.
Working in businesses to improve thinking processes and asking difficult questions, I find organisations can get into “self-talk”, convincing themselves their processes and practices are best because they are time-honoured and got them through troubled times. Many rarely spend time reflecting and appear stuck in a pattern laid down since 2008, when many businesses’ survival practices became the norm. Surprisingly, many businesses still maintain that defensive, risk and investment-averse mindset notwithstanding known difficulties accessing finance for more progressively-minded bosses.
A lot is down to people factors. Quite large companies employ intermediaries to provide labour to reduce wage costs. It is a strange assumption that paying a middleman and a workforce at a lower cost will provide greater productivity than direct employment.
These issues will never produce a motivated workforce in a participative and contributory relationship born of solid contract and ethical business practice.
Insecure, devalued, underpaid workers simply are not productive, their ownership, their involvement in processes, the contribution to identifying areas of potential efficiency and appropriate levels of reward for their contribution are essential in a healthy, dynamic, evolving environment.
It’s not sufficient to talk of “employee engagement” policies. The ownership of workforces, understanding their vital contribution to a company is something that needs to be a daily leadership practice, born of an ideology intrinsic to organisational culture. Too many persist with the old X-Y perception of staff, assuming primarily low levels of ownership requiring more stick than carrot!
Finally, government must develop sensible strategies that equitably favour the entire large and small business economy. This means ending the “business on benefits”, piecemeal approach to business support that seems to prevail in this country and implementing sensible robust measures that allow business growth. People perhaps also need a living, not minimum wage.
The solutions aren’t simple, we must embrace the complexity of this phenomenon. It’s not for government to parachute in soundbite-inspired ideas. A healthy, vibrant debate across the business community with an appropriate diversity of approach is needed to forge effective ways of addressing this vital issue.
David Cliff is Managing Director of Gedanken and Chairman of the Institute of Directors’ Northern Sector Group.