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Productivity – a workforce or management problem or a combination of the two?

Posted on 12th September 2016 by Alexis Outram

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The Bank of England Inflation Report included a downgrading in their forecast for productivity, the output for man hours for the UK Economy.

The UK has perhaps shamefully fallen well behind its peers in terms of productivity. Even prior to  the financial crisis productivity lagged behind our counterparts; a situation which rather than improve in more recent times as we experience recovery has actually deteriorated, with productivity levels now 16% lower than it would have been if the  pre-recession trend had continued.  The Bank of England’s view of our productivity going forward does not look any better; in fact their inflation report reveals that the forecast for productivity has been revised downward again.

Why then are we deemed to be less productive and why is it becoming more of a trend?

There are a number of reasons which include the growing number of what might be termed uneconomical even ‘zombie’ businesses, which survive merely because they service debt or just make enough.  Such businesses have come about through a combination of low interest rates, the absence of a sharp up-turn in the economy and the general tendency by the financial institutions not to be overbearing but more supportive towards struggling business.

We have seen a growing proportion of lower skilled employers in the workforce, which has had a negative effect on output and as such workers tend to be less productive.

Since 2008 spending and activity focused around workforce and skills development has been subject to cuts by many businesses. The impact of a significant lack of investment in workforce development over a prolonged period of time is now beginning to show, with lower rates of productivity and economic output.

Equally the general trend has been to reduce and in some cases not make investment in aspects of production and business process, especially in technology and ICT.  The effect is seen in out of date and increasingly slow working practices and reduced productivity.

In terms of the workforce, it seems that there are many businesses who’s poor recruitment, selection and in house training and development has given rise to a less than effective workforce; a situation further compounded by  role ambiguity between what the employer wants from their workers and vice versa.

It is also increasingly the case that whilst many businesses face new and changing customer demands their working practices and business processes have not changed to reflect this. In some cases,  given relatively long periods of no or very low levels of pay awards, little investment in the business and a lack of vision for the future, workers are feeling less valued and consequently less motivated.

Whilst many businesses have looked to reduce operating costs to maintain or enhance operating margins, many have also experienced creeping increases in overheads, whether it is the increase of cost replacing like for like kit and new machinery or just simply to meet new rafts of compliance.

It could also be said, with generally benign trading conditions, many businesses either don’t have the desire, vision or skills to improve their business productivity. Equally such businesses tend to fail to attract the more skilled more demanding employees that are looking for employment. It is more likely than not such businesses are prone to loss of its more skilled, valuable and productive staff to those businesses that have more drive, flair and  provide for skills and workforce development.,

We can see then, that there is no single answer to the UK’s lack of productivity. However, that apart there must be more that business leaders and managers can do to improve productivity.

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