How business can solve the productivity puzzle

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The productivity problem won't solve itself, and businesses need to play an important role

Say ‘productivity’ to many business professionals, perhaps even senior leaders, and it may be that you’re greeted with a somewhat blank expression. Indeed a recent CIPD report, Productivity: getting the best out of people, found that even among those firms measuring productivity, many are likely to be measuring business performance in a more general sense, not productivity.

Businesses are much more used to discussing things in terms of profit margins and costs, which you could argue is absolutely fine. But some would point to how worrying such unfamiliarity with the concept of productivity is.

Talking about ‘productivity’ and the various external and internal factors affecting it would help companies engage in a wider debate and benchmark themselves against others in the UK and globally, says Cary Cooper, professor of organisational psychology at Manchester Business School. In this way people might start to realise that their own output isn’t as healthy as they thought.

LSE research economist on productivity and innovation Anna Valero adds that talking in terms of productivity could help businesses realise the crucial role that employees’ day-to-day actions play in the equipment, wider infrastructure, education and investment mix.

“Businesses talk about profit margins but not necessarily about how productive each worker is and how to make them more productive. If they did then they’d see their profits starting to rise.”

It is this people element that has become increasingly vaunted as the biggest contributing factor that businesses have control over. The CMI Management 2020 report, which interviewed MPs, CEOs and academics, found that at the end of each interview session when people were asked to pick the one thing most important to boosting productivity, all pointed towards managers with better soft skills.

“Of course things like having up-to-date technology are important. If you’re a manufacturing country that’s absolutely fundamental,” qualifies Cooper. “But in the UK we’re mostly a service industry now so what is more important is the people management skills.”

So the case for HR professionals to be heavily involved in helping to solve the productivity puzzle is clear to see. “There’s enormous scope for HR both in terms of the narrower people remit but also with the bigger role,” says CIPD chief economist Mark Beatson.

So just what areas should HR professionals, alongside their organisations, be seeking to address? Here are just a few ideas:

Management

As outlined above, good management has risen to the very top of the productivity agenda.

Cooper says companies would do well to remember that managers are responsible not only for managing employees but engaging them too: “I think what’s important, and the missing piece that HR never really looks at, is how managers behave in terms of whether they try to encourage people and manage them by praise and reward or with fault-finding. It’s all about creating a wellbeing environment where people love coming to work.”

He adds: “I suspect our productivity would be dramatically enhanced, at least in the knowledge-based part of our economy, by just either training the people we have in managerial roles or selecting them on their social, interpersonal skills in the first place.”

Flexible working

Another issue impacting the wellbeing of workers, and in turn their productivity, is the UK’s long working hours culture, says Cooper. This also damages productivity through commuting time cutting into time actually spent being productive, he says. “We have the longest working hours in the G7, other than in the US,” he says. “And nine to five, if you take the US’s low annual leave allowances into account, we have longer working hours.”

Valero points to a culture of presenteeism: “A lot of companies have cultures focused on people being at their desks, and I think it should be more about getting things done because then people work more effectively.

“The comparison that’s always made is with France. There, people have lunch breaks and leave early but when they’re at work they really focus on the task.”

Digital technology

The way we guide people’s use of digital technology has a huge impact on wellbeing, says Cooper. We need to be careful that greater availability of remote working technologies don’t simply oblige people to work longer hours, he says.

“The evidence is if you consistently work long hours you get ill,” says Cooper. “Some companies are closing their servers over the weekend and I think that’s a great idea.

“But the problem isn’t just that we’re online 24/7,” he continues, “but that we copy everyone into everything to cover our backsides, so we end up overloaded.

“I say to people ‘what did you do today?’ And they say ‘thank goodness I finished going through all my emails’, and I say ‘but that’s not producing a product or a service, that’s a vehicle to get information.’

“I suggest people don’t send an email to people in the same team. Otherwise you just overload people and you’re not building up a team.”

Matching culture to business

Creating the right workplace culture also has huge implications for employees’ sense of wellbeing and drive.

Beatson says people often make the mistake of assuming there’s a one-size-fits-all here. But what the organisation’s recent Productivity: getting the best out of people report found, was that of four cultural types – family (a firm held together by loyalty and tradition), structured (where procedures govern what people do), dynamic (an entrepreneurial, creative and risk-taking place to work), and results-orientated (where people are competitive and work towards goals) – none were associated with a superior or inferior level of performance.

More important was: ‘Whether or not managers think the prevailing culture is the right one for where the business will be in five years’ time’, according to the report. “You can be bureaucratic and successful. The problem is if you’re bureaucratic and you need to be more innovative for example,” explains Beatson.

Emphasis on innovation

Which brings us to innovation, a key differentiator for those companies streaking ahead in the productivity stakes.

“If you look historically at Britain we do have a culture of great inventors. So it does exist in the UK, we’re just not very good at translating that to the way we manage business,” says Norman Pickavance, head of brand and culture at Grant Thornton.

A key factor here is diversity, he adds. “If you have a homogenous workforce without different perspectives being brought to bear and your talent management processes are reinforcing more of the same, innovation will suffer,” he says, explaining that both immigration policy but also a company’s own diversity agenda play a part.

Another factor of course, is the link between universities and business, which government can only do so much to foster. “Businesses themselves need to find a way of collaborating with other businesses and universities,” says Duncan Brown, senior manager at UKCES.

Emphasis on the long term

This drive for more innovation would be greatly aided by a generally less short-termist approach on the part of UK business, says Pickavance.

A shift in companies’ financial models would help, he says: “If you look at the West Coast in the US they’re very much orientated around stock-based schemes and getting shares when you start. So people have a stake in the future of the firms.”

Employing staff on a more permanent basis would also help, he adds, as would longer-term reward mechanisms.

“Executive pay is very focused on short-term time horizons, notable by the fact we call long-term pay incentives something over three years,” says Pickavance, adding: “Over the last decade we’ve seen the growth of zero-hours contracts and what I would call a kind of disposable workforce. So you’re unlikely to see people challenging the boss and trying new ways of doing things. People are just keeping their heads down to make sure they’re employed on the next shift.”

There’s also an argument to say that once you’ve got these workers on full-time contracts, paying them more will actually encourage them to be more productive. Whereas some would claim wages can’t go up until productivity does, others would turn this on its head.

“You can pay more at the start and get the increased productivity that covers the additional cost,” says CBI director for employment and skills Neil Carberry.

Better measurement of the human element

For many, the one thing that will really ensure all of the above, is businesses starting to measure the people element of their organisations as routinely as the financial.

“If you say ‘what gets measured gets done’, it’s no surprise really that we might better utilise our talent if we measure that use,” says Brown, who advocates as a first step in any company boosting its productivity, them taking a talent audit and seeing how people could be better utilised.

Measuring the effectiveness of L&D, health and wellbeing strategies and engagement initiatives might sound tricky, but a growing number of companies are doing it. And while it isn’t easy, the future of the UK depends on us cracking the people piece of the productivity puzzle.

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