Solving the productivity puzzle
The US economist Paul Krugman famously said: ‘Productivity isn’t everything, but in the long run it is almost everything.’ That’s why the UK’s ‘productivity puzzle’ is of such concern. Official figures show that productivity in the UK has stagnated since the financial crisis and remains stubbornly below that of other developed nations.
This matters, very much, for businesses and for the country as a whole. The government is certainly taking productivity very seriously – improving productivity is a key element of its industrial strategy and it’s given its full backing to “Be the Business” a government endorsed movement providing practical tools to assist businesses be the best they can be and the brainchild of the Productivity Leadership Group , a group of business leaders tasked in 2015 with how to raise business productivity in the UK.
Productivity is a complicated beast that encompasses many elements, and as the Productivity Leadership Group’s chair, Sir Charlie Mayfield, says, the routes to improving productivity are many and varied – but they all depend on leadership and ‘enduring action on the ground’.
We are at the front line of that fight, helping businesses explore and identify ways of improving their output-to-input ratio. Within that, my own interest is one vital aspect – finding ways to improve the productivity of a workforce.
Nothing to do with productivity is simple and workforce productivity is a good illustration of that. For example, it’s tempting to assume that to create a productive team you just need to find your most brilliant people, put them together and give them what they need. But as research (summarised in this excellent TED talk) has shown, collecting the best and brightest together can be counter-productive because competition to be the best gets in the way. In fact, collaboration, social connectedness and empathy are all critical elements of productive teamwork. It’s what happens between people that really counts.
We know that leadership and business-level management practices play a central role in workforce productivity. But we also believe that the impact of the individual is vital – of course their skills but also their engagement, their wellbeing, their digital literacy, even their interaction with the workplace environment.
There’s no one-size-fits-all answer to improving workplace productivity. Just as each business is unique, so is the productivity framework that works best for them.
Of course, to understand productivity you need to be able to measure it, and we’ve also made great strides in this notoriously tricky area. Human Capital ROI is a cornerstone metric of our PwC Saratoga database and plays an important role in understanding workforce productivity, combining in a single index all the major components of P&L performance with the size and cost of the workforce effectively incorporating all of the primary business drivers where opportunities for improvement can be explored and targeted.
Improving the UK’s productivity needs to be a collective effort, at both company and national level. But it’s great news that the national conversation is a priority; every business stands to reap the rewards.