Article Summary
-
Why poor productivity is often rooted in disengagement, not lack of effort or time.
-
How culture, clarity and trust drive real performance gains beyond superficial metrics.
-
What leaders and HR teams can do to create performance environments, not just performance targets
The UK’s productivity story remains stubbornly flat. Annual productivity growth of around 2% before the 2007 global financial crisis has fallen to some 0.5% on average, leaving economists searching for answers to a problem that technology alone has not solved.1
A major cross-institution study – spanning the London School of Economics, Harvard, Stanford and the Federal Reserve Bank of New York – finds that management quality is a key driver of international productivity gaps. Differences in management practices account for roughly one-fifth of the gap, with another quarter shaped by how well firms move management capability to where it creates most value.2
If productivity is about doing more with less then we’ve spent too long looking at the “more” and not enough at the “less” – the hidden human factors that make performance sustainable. In a world where the pace of change is relentless, productivity now depends less on efficiency and more on how leaders manage change itself.
The missing piece in the productivity puzzle
For two decades the UK’s productivity debate has centred on technology and capital investment. Yet economists like Nicholas Bloom and John Van Reenen at the LSE have repeatedly shown that management capability is the critical missing ingredient. Their studies of thousands of firms across 35 countries found that better-managed organisations achieve higher output, stronger profitability and faster growth – regardless of size, sector or technology base.3
Meanwhile, the OECD finds the skills and diversity of the workforce and of managers – what it calls ‘the human side of businesses’ – account on average for about one third of the labour productivity gap between firms at the productivity “frontier” (the top 10% within each detailed industry) and medium performers at the 40-60 percentile of the productivity distribution.4
This is echoed in Investors in People’s Finding the Frequency research, which shows that the human side of change is eroding performance. Half of employees and 80% of HR leaders reported more change in 2025 than in previous years. But the quality of how that change is led and supported varies widely. Only 22% of employees said they feel energised and ready for it and just 14% of middle managers share that confidence.
When energy drains so does productivity. The whitepaper found that 39% of employees feel more stressed, 28% feel less motivated and one in three say constant change has worsened their work–life balance. Those are the hidden productivity costs of poorly managed transformation – the disengagement, fatigue and confusion that quietly erode focus and performance long before the numbers show it.
Finding the Frequency
How to build change-ready cultures that accept and embrace transformation
Find out the real impact transformation is having on individuals and organisational performance – and what levers leaders need to pull to create change-ready over change-resistant cultures.
Energy is the new efficiency
Traditional productivity thinking prioritises efficiency: how quickly or cheaply something gets done. But in an environment of constant change efficiency without energy becomes a liability. People can only absorb so much restructuring, system implementation or shifting target-setting before enthusiasm fades.
As resilience expert Charlie Cannon says in Finding the Frequency: “We are not robots. When people try to operate at 100% energy and effort all year round, energy drops and we enter a survival state. In that state we cannot react well to change.” A tired organisation cannot be a productive one.
The leaders who sustain productivity are those who protect energy as fiercely as they pursue efficiency. That means pacing transformation, building recovery time into project cycles and creating the psychological safety for people to question, challenge and reset. The best-managed organisations recognise that energy and productivity are inseparable. Energy is not a soft metric; it is the currency of sustained performance.
The role of management quality
High-quality management is consistently the strongest differentiator between high- and low-productivity firms. Yet a lack of investment in managers creates a cascading effect. Managers under pressure revert to command-and-control habits, reducing autonomy and stifling the innovation that drives performance. In Finding the Frequency 31% of middle managers worried that communication during change would be poor and 41% wanted more support from senior leaders. These are warning signs of a management infrastructure at risk.
The solution lies not in more technology but in better coaching, communication and clarity. When managers understand how to translate strategic goals into team-level meaning, productivity gains follow naturally.
The evidence from Bloom and Van Reenen’s LSE work shows that firms with structured goal-setting, regular feedback and people-focused performance management outperform those without by a wide margin.
Structure that supports, not strains
How work is designed matters as much as how it’s managed. Finding the Frequency found that nearly half of employees (44%) associate change with increased workload or pressure, suggesting that productivity efforts often overload rather than optimise.
The We Invest in People framework, offers a clear alternative: design roles to deliver organisational goals while creating interesting, autonomous work. This ensures people spend more time on value-adding activity and less on duplication or bureaucracy.
A firm’s innovation approach, its business practices and its people strategy all shape how quickly it adopts advanced technologies. Firms that prioritise improving product quality and invest in developing their workforce – through ongoing training and targeted recruitment – tend to see stronger productivity growth.5
Similarly, when organisations create clear accountability, streamline decision-making and empower people to act, productivity accelerates. When they layer on new systems without redesigning how work happens, it stalls.
Rethinking productivity through the people lens
As our Finding the Frequency research discovered, energy and productivity are not separate problems. Most HR leaders (86%) are worried about change-related fatigue or burnout in their workforce and they are seeing the effects. More than half report productivity challenges (56%) or an increase in complaints and feedback (53%) linked to ongoing change. Nearly half (45%) have noticed a drop in morale, while others point to rising turnover (38%) and higher absence levels (30%).
Productivity is not just an economic measure but is a human one. The UK’s flatlining output tells a story of under-managed change rather than under-investment in technology. The evidence from Investors in People, the LSE and countless others is unambiguous: the quality of management determines the quality of performance.
When leaders focus on how people are led, supported and recognised they unlock the latent energy that fuels innovation and efficiency alike. In the language of the We Invest in People framework, managing performance, structuring work and recognising high performance are not just HR processes but national productivity strategies.
The path to a more productive Britain runs not through machines or metrics but through people who are clear, involved and trusted to deliver change that lasts.
Leadership checklist – are your people practices driving or draining productivity?
Use this quick diagnostic to explore where management and culture may be limiting performance.
- Clarity: Are individual and team objectives directly connected to organisational goals and do people understand them?
- Energy: Are workloads and change programmes paced to sustain energy rather than exhaust it?
- Autonomy: Do people have authority to make decisions within their roles or are they waiting for sign-off?
- Capability: Are managers trained and supported to coach, communicate and manage performance effectively?
- Recognition: Do leaders celebrate collaborative progress and adaptive behaviour as much as outcomes?
- Structure: Are roles designed to avoid duplication and bureaucracy, enabling people to focus on value creation?
- Feedback: Is there a regular rhythm for two-way communication and learning from change?
- Trust: Do employees believe that leadership decisions align with organisational values and fairness?
Conclusion
When we focus on what drives people, we drive performance. Productivity is shaped by the culture people work in, not just the hours they put in.
Organisations that invest in wellbeing, connection, and clarity see stronger, more sustainable results. It’s time to shift the focus from pushing harder to enabling better. Productivity will follow.
Sources
- Low growth: The economy’s biggest challenge, https://commonslibrary.parliament.uk/low-growth-the-economys-biggest-challenge
- Management and Firm Dynamism, Nicholas Bloom, Jonathan S. Hartley, Raffaella Sadun, Rachel Schuh, John Van Reenen April 28, 2025 https://www.hbs.edu/ris/Publication%20Files/25-052_8070dd69-2e62-415b-a658-109d5c3d62b4.pdf
- World Management Survey https://worldmanagementsurvey.org
- The Global Forum on Productivity at 10 – Past and Future Perspectives on Reviving Productivity Growth https://www.oecd.org/en/publications/the-global-forum-on-productivity-at-10_ca7295d9-en/full-report/the-human-side-of-productivity-uncovering-the-role-of-skills-and-diversity-for-firm-productivity_81569e88.html
- OECD, The Economic Impactof IICTMEASUREMENT, EVIDENCE AND IMPLICATIONS
