Tackling the productivity puzzle
09 March 2017
We are a hard-working nation. So why is our productivity so poor compared to other developed nations? UK productivity is currently 18% lower than the average for the other G7 nations and lags significantly behind France, Germany and the US.
This ‘productivity puzzle’, as it’s become known, has been a concern for business and for the UK Government, since it emerged after the financial crisis. It’s a perplexing problem that costs the country in lost GDP and businesses in lost revenue. And as we’ve seen in this week’s Budget, it’s high on the Government’s agenda: Chancellor Philip Hammond said that increasing productivity was ‘at the heart’ of his plans.
Tackling the challenge has proved extremely complex. For a start, productivity is an elusive concept and the more complex the organisation, the more complicated it becomes. At the highest level, productivity means how much stuff you can produce for a given level of input, encompassing all of the resources involved in the process. As a Partner in PwC's People and Organisation team however, it’s the people productivity element that interests me the most – because it’s clear that maximising the best levels of performance and productivity from their workforce is a key issue clients are struggling with.
But even once we isolate people productivity, there are many lenses through which it can be viewed. There’s the organisational structure aspect – in other words, do you have the right people in the right place, doing the right things and focused on the right tasks? And then there’s the individual aspect: What is each person’s contribution at work, and how can it be improved? This in itself covers many elements, from reward to career management, to the environment in which people work – which in itself encompasses wellness, the support received at work and even the office infrastructure that surrounds us.
It’s also, critically, about the way in which the organisation makes decisions about its people. Are people decisions made in a sophisticated way, making the best use of data? For example, this might mean comparing the ‘postcode’ data of employees – where they work – with their performance data. How do they feel about where they work? Are they more productive in some places than in others? And in terms of reward – are increases in reward reflected in productivity and performance?
This brings forward one of the the biggest challenges with the people productivity puzzle – how do you measure it. If one individual's sole purpose at work is to make widgets, measuring their productivity is reasonably straightforward but of course, real life is far more complicated. Our experience would suggest that unfortunately there’s no single, magic formula for measuring productivity; but there are some smart ways to estimate it, compare it across an organisation and identify improvements where they occur. At PwC we’re working on a ‘dashboard’ approach that reflects the complex, multi-layered nature of the issue.
Improving productivity is a challenge, which will have to be tackled from several angles at once. At the country-wide level, the Government has announced several initiatives including the UK Productivity Council, which was set up last year to come up with plans to address the productivity gap; its plans include developing productivity ‘hubs’ to share ideas and the development of a benchmarking tool by which companies can assess their levels of productivity in a number of key areas.
At an organisational level, improving productivity requires action from several quarters, from better management and strong leadership to refining the organisational and job structure, and paying careful attention to engagement and wellness. Above all, it takes intelligent use of data analytics to track the many elements that contribute to productivity. It’s not an easy task, but organisations have much to gain from getting it right.