Over the last two years, the UK has failed to get a grip on productivity and the gap between the UK and other large, mature economies is widening. The Bank of England recently confirmed that the UK’s labour output per hour is predicted to grow just 0.2 per cent in 2019, down from 0.8 in 2017 and 0.5 in 2018.
Brexit-related uncertainty is not the only reason cited for Britain being the only large advanced economy likely to see a decline in productivity growth this year. Poor management practices and lack of investment in skills are among the other factors to blame for this confusing situation whereby the UK has relative high employment compared to France, but French workers produce the same in four days that the UK produces in five.
Part of the solution appears to be improving the business support given to SMEs. A recent BEIS Select Committee inquiry into industrial strategy concluded that business support for SMEs needs to be improved. It noted that “The UK’s productivity problems cannot be tackled unless more small and medium- sized firms raise their ambitions and improve how they manage and develop people. The evidence suggests they are unlikely to be able to do this on their own and require much better support”.
Back in November 2017, the Government’s White Paper “Building a Britain fit for the future” set out the UK’s industrial strategy and part of this was to seek to “increase productivity in SMEs through a range of policies including encouraging the adoption of modern business practices”.
In its Small Business & Productivity Inquiry which was submitted to the House of Commons BEIS committee, the CIPD stated “People management capability is vital for SME productivity and growth” and Jon Boys, CIPD labour market economist, commented that “There is more evidence and more voices speaking about the role of structured management practices and in particular people management practices [in raising productivity].”
His view is echoed by the Chief economist at The Bank of England who agrees that a lack of management quality is the probable explanation for the UK’s low productivity companies and that there are likely to be potentially high returns for companies able to improve the quality of their management.
How can businesses increase productivity?
So, what are the drivers for productivity and how can you raise productivity while sustaining quality? We know that positive experiences drive productivity, but employers and employees can have different views on what’s important, so it is essential to understand what motivates your employees. What has been shown is that flexibility and appreciation at work are critical to driving productivity and that being valued and recognized are the most important aspect of employees’ day-today employment experience.
The Government certainly believes that flexibility is instrumental in increasing UK productivity and was concerned that the number of employees using formal flexible working arrangements – such as part-time working, term-time working, compressed hours and job-sharing – had not increased since 2010. This was despite the right to request flexible working being extended to all employees in 2014.
Benefits of Flexible Working
To help to combat any negative assumptions about flexible working, The Flexible Working Task Force launched a campaign in January 2019 to increase the uptake of flexible working. The task force is highlighting the business benefits of flexible working which include:
- Improving productivity by increasing employee motivation
- Addressing skill and labour shortages by making work more accessible to older people and those with caring responsibilities, for example
- Boosting job satisfaction, engagement and well-being, while also helping to reduce sickness absence
- Helping organisations to retain staff, particularly those with caring responsibilities
- Creating more diverse workforces which reduces the gender pay gap by giving more opportunities for women to progress into senior roles.
Peter Cheese, CIPD chief executive and co-chair of the Flexible Working Task Force, said:
“Providing more flexible opportunities for how, when and where people work should be part of every organisation’s strategy to attract and retain the talent and skills they need”.
Kelly Tolhurst, business minister, said:
“Working flexibly helps people to balance their work and home lives and is vital in creating an inclusive economy and diverse workforce. It also gives employers access to a wider pool of talent and enables better matching of applicants and jobs”.
The Government is considering making it a duty for employers to consider whether a job can be done flexibly, and to make that clear when advertising a vacancy.
Please contact the Alcumus PSM HR team for further advice on the above, by emailing [email protected] or call us on 01484 439930.
Alcumus PSM (People & Safety Management) specialises in human resources (HR) and health and safety (H&S) consulting for small and medium-sized enterprises.
Written by Sally Grundy, Senior HR Consultant