How does the UK improve its productivity?

10 Second Synopsis

Increased productivity is desirable. Workers could work fewer hours for the same result. Or they could be paid more, and the firm earn more and get more in profits, in a given time worked. Government and industry bodies desperately want to improve. But how? It's a poorly understood subject and few want to grasp the real problem. Here's an argument that gets to the crux.

How does the UK improve its productivity?It’s a fact. The productivity of workers in the UK is significantly lower than that of workers in other Western countries. We’re not talking workers just in manufacturing or in retail or any other single sector. And we’re not talking workers alone, allowing managers to be excused. It’s everyone, everywhere!

It’s been this way now for a good number of years and successive governments have failed to tackle the problem.

But how does the UK improve its productivity? This article answers this big, complex question.

Young People

On the one hand, the Blair government set the target for 50% of young people to university. Then the Coalition pushed apprenticeships to give the other 50% a means to develop. This is being pushed again by David Cameron’s Government. And now we’ve howls from graduates doing non-graduate work and from apprentices in poor quality placements.

On the other hand, it’s much publicised that young people just don’t have the skills that business needs. Many firms, like the mobile phone firm O2, suggest that young people should learn to code and pursue ‘digital’ careers. Other, more die-hard managers, plead for core skills like the ability to count, listen, write and articulate. These managers seek a broad understanding to form the basis for further learning in a career.

Teachers also pipe up, saying that if only they were left to decide what to teach their pupils, they’d make better progress. Certainly something’s needed. We see even that added value from schools (the popular education metric) falls below our mainland-European competitors.

Unions

And TUC general secretary Frances O’Grady believes that the problem arises because “the UK is still not creating enough quality jobs”. This begs the question about whether we’d be able to fill these quality jobs if they were created. Most managers comment that recruiting good staff to fill the jobs that we have got is hugely difficult. Perhaps we should remind Frances O’Grady that the trade union negotiating stance throughout the second half the last century was to offer ‘productivity improvement’ in return for increased pay. These productivity deals suggested that union members could improve their productivity at a stroke – if only it were so.

So what the heck is going on?

Defining Productivity

To understand the problem, we’ve got to understand what productivity is, and on what it depends.

Productivity, at the worker level, is the relative measure of a worker’s output for a given unit of input. Workers put in effort and there’s an outcome for the firm. It might be the number of coffees made in an hour, the number of home visits in a day or the number of tyres changed on customers’ cars. There are established standard measurements that permit productivity to be assessed and compared between countries. Increased productivity is desirable because it suggests increased turnover per worker, lower resources used for the same outcome and increased profits; all considered desirable for an economy. At an economy level, it’s a matter of scaling up the worker level to define productivity as the ratio of Gross Domestic Product (the measure of economic output) to total hours worked in the economy during a given period.

This definition does assume that workers are not sitting on their hands with little work to do. It assumes that they are working at capacity. If they are laid off on full pay, or attending work but have less than a full day’s work to do, this will skew their productivity since they will work full hours but produce less than a full work. This situation occurs in a weak economy and adds a significant complexity to the discussion, introducing consumer demand. To focus on the supply side, this article assumes that workers are working at capacity but just not that effectively.

Increasing the productivity of a worker workign at capacity seldom means just working harder.

people matter in the care sectorA worker can generate output if they have the ability to perform in their job. They are thwarted and their productivity is reduced if the tools they use and the organisational culture and structure act to reduce that performance. Today, tools are synonymous with technology. Technology allows workers to do more with less – to be more productive. So, for high productivity, firms need to provide the right tools and the right environment. Those are a function, correspondingly, of investments made in tools and in manager competence.

A worker’s performance depends on their intelligence, their competence and their motivation. Intelligence should be viewed in light of the complexity of the job, and workers should be selected considering the intelligence needed by the role. Managers don’t need everyone in every job to be rocket scientists – they just need folk able to excel in their job. Competence is a function of the worker’s education and subsequent training. And motivation comes from the job the worker does and the input and leadership provided by their manager.

There’s not much that an individual worker can do about his or her intelligence. They get most of that from their parents – though education in the formative years at school and college/university plays a part in improving what’s known as ‘crystalised intelligence’.

Competence

Competence involves investment. At its simplest, competence can be defined by what a worker knows, understands and can do. It’s their skills and their knowledge. And that can be built upon significantly by education, training, development and experience. It’s here perhaps where the die-hards say we need focus on core topics like science, technology, English and maths – to act as foundation for worker competence development.

But who’s to invest? Or is it about personal striving? Is investment personal? Paul Mason, writing in The Guardian, suggests that ethnic minority kids are moving ahead of white British kids in schools because their parents and community emphasise striving. As ‘disadvantaged’, he argues, they have a reason to strive. They understand Benjamin Franklin’s comment that investment in learning always pays the best return.

Motivation is substantially in the hands of managers. The greatest motivator is the job the worker does. If the job’s designed well, the worker will do well in it. The manager designs the job done and then inputs leadership and other tactics to add to that job-related motivation.

So we’ve hit some key points here. But there’s more.

Intelligence

Firstly, research shows that there’s little difference in intelligence between people in Western nations. So arguably, we start from the same point as our French and German cousins. Bizarrely, there is evidence that intelligence is slightly lower in Afro-Caribbean folk and higher in those from the Far East. So it seems that striving can make up for lower intelligence? If that’s so, education, training and development are key to productivity.

Secondly, Frances O’Grady is partly right in calling for more “quality jobs”. If jobs are designed right, they motivate. But job design is in the hands of the manager. Unfortunately, fewer than 20% of managers have been trained. Arguably, few would therefore engage in formal job design, arriving at quality jobs more by accident than by design. This is perhaps highlighted by the documentary many years ago showing the difference between German and British workers. When their machines stopped the British workers waited for a maintenance technician to come. The German workers opened the machine and fixed it. By any measure, the Germans had a higher quality job, more likely to motivate.

There’s just no substitute for manager and worker training.

Short Term Focus

Thirdly, with its focus on finance, the UK economy has become focussed on the short term. Unlike our German cousins, British investors expect returns in a couple of years. This is characterised by the low average time that a venture capital firm expects to hold shares. In that time, the firm has to generate profit for shareholders. Under such rules, there’s nothing left for investment in worker training and in tools and plant. So arguably UK firms just don’t invest enough.

And finally, firms seem reluctant to employ. Perhaps it’s short-termism that makes managers disinclined to make commitments. Firms today are using contract workers instead of making long-term commitments to employ and grow competence. So when contracts end, firms are dispensing with workers at one competence level to recruit more contractors later at a higher level as technology advances. Of course, this soon leaves a glut of low skill workers at the bottom of the labour market and none at the top where firms need them.

Contractors engage in an economic arrangement with firms – they work when they get paid. Employees, on the other hand, commit in return for a guaranteed wage. Arguably, increased productivity needs commitment. So unless firms employ, they won’t get high productivity.

And there are now about five million self-employed workers, and unless they are investing in their own competence, no one is training and developing that worker group.

So what’s the answer?

How does the UK improve its productivity?

Using the simple equation from John Purcell at Bath University, performance is a function of a person’s ability, motivation and opportunity.

competence and flow in work doneProductivity, as an output from the work system, depends on performance and the environment at the firm. That environment and the necessary motivation need management and investment.

So the UK’s problem stems first from poor investment in tools, plant and training and this possibly comes from our short-term focus. That must change.

Second, poor productivity comes from lack of management training. There’s an army of lightly trained business coaches with little business experience out there vying to work with managers. Whilst it can be good for owners of small firms to have s a friend to talk to, there’s no substitute for the competent manager.

And somehow, parents need to instil a renewed striving in their kids – the workers of the future. It’s one thing to expect greatness, but our younger generations won’t gain unless the country can respond with opportunity so it’s ‘chicken and egg’. Workers, therefore, must break the vicious cycle and put in the effort needed to improve their abilities.

The Last Word

So there we have it. The UK needs increased striving and education and more investment in both employees and tools to get increased productivity. And owners, managers, workers, government and educators must all do their bit. It’s a big project and the sooner we get started, the better.

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