The question of poor British economic productivity is finally coming into focus, finds Patrick Woodman
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Productivity has long been of interest to wonkish policymakers. Until recently, though, it has remained under the radar of most managers. Times are changing. Successive chancellors here in the UK have spoken more loudly about the challenge. Highly regarded John Lewis supremo Charlie Mayfield is establishing a new publicly funded body to focus on employer action. There’s growing recognition of the cost of low productivity, and the potential prizes
for improving it.
Those problems have not evolved overnight. Before the great financial crash, UK productivity was doing ‘okay’ – growing with the economy in the early 2000s, not as quickly as might be hoped, but at passable rates. In the wake of the crash, the focus was on the short term: on economic survival, and recovery. But as that recovery has proved to be slow and relatively weak, the debate has shifted back to productivity.
The data brings home the scale of the challenge. UK productivity lags some 18% behind the G7 average, with a gap of over 30% to both Germany and the US. Official data in April 2017 revealed a welcome uptick in productivity growth, yet rates remain below the 1994-2007 average.
One of the most important, but least discussed, aspects of this so-called productivity puzzle is the question of people: the skills they bring to work, and how they are applied. Looked at this way, managers and leaders are one of the most pivotal groups for any organization’s productivity. Yet they are the occupational group least likely to get training. Only one in five is qualified in management (even if they have other specialist or technical training). Those same people are taking major decisions that shape their organizations’ performance. Decisions that affect their team’s skills and opportunities to learn, their enthusiasm, dedication and loyalty.
The macroeconomic evidence doesn’t look great for managers. In fact, the quality of management and leadership has been pinpointed by OECD analysis as one of the biggest factors holding back productivity growth. Investors in People has calculated that poor management costs UK employers £84 billion annually.
Leaders have to ask: do our people have the skills for us to grow in the next five to ten years? What action is needed to make sure they do? For many this is an area of significant challenges. Nine in ten employers participating in the CMI/XpertHR National Management Salary survey in 2016 reported difficulties in recruiting the right people, up over ten points since 2014, with skills shortages cited as the main reason.
And there’s substantial concern about the impact of Brexit on the availability of skills, as Theresa May’s intention to end free movement becomes clear. Nearly seven in ten managers (67%) surveyed by CMI said they are pessimistic about their employers’ ability to attract EU workers in the future, and 44% say uncertainty of the future status of current employees who are EU nationals will affect their organization.
One of the biggest pieces in solving the UK productivity puzzle could prove to be the Apprenticeship Levy that launched this spring. Wrongly dismissed by some critics as another employer tax, it is better seen as a skills investment fund, and one that could have radical effects on employer training and development activity. Policy has created an employer-led, rather than provider-led, system, with a focus on professional-level skills in much-needed areas like computing, engineering, management and leadership.
Already, numerous employers across diverse sectors – including Serco, Nestlé, Civil Service Learning, Pizza Hut, KFC, Barclays, Boots, and a host of SMEs – are running trailblazing management apprenticeship programmes. They recognize the long-term value to their businesses of having employees equipped to manage and lead in the future.
Investment to bring on the next generation of home-grown managers through higher-level apprenticeships will be more than repaid by the productivity gains they deliver.
Patrick Woodman is head of external affairs at the Chartered Management Institute