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People management: solving the UK productivity problem?

Published 29th November 2016 by Melissa Farrington
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Autumn Statement 2016: productivity hits the headlines

Britain has a long-standing productivity problem that’s getting worse and the government is trying to tackle it.

There are many causes of low UK productivity and most of Chancellor Philip Hammond’s new £23bn fund to raise productivity - announced in the 2016 Autumn Statement - has been earmarked for traditional solutions such as physical and digital infrastructure, science and innovation and new homes. But Hammond also announced £13m in funding to support organisations to improve management skills, a crucial investment because of the importance of robust people management to organisational productivity.

UK productivity: does people management make a difference?

In fact, John van Reenen of the London School of Economics has blamed poor management for half the productivity gap between Britain and the US. After interviewing 14,000 employees across the globe, he rated the standard of British management as “significantly below” leading countries.

Our own study researched almost 9000 companies and found that poor people management costs public companies in the UK £84bn in efficiency losses. The Organisation for Economic Co-operation and Development (OECD) has said that poor people management is the key cause of the UK’s significant productivity gap with its G7 competitors. And yet, many organisations just don’t take people management seriously enough.

The Chartered Management Institute (CMI) has long been calling for the professionalisation of managers and has rightly criticised our national culture of ‘accidental managers’ - those promoted solely for technical competence but without the skills necessary to manage people effectively. Ann Francke, the CMI’s CEO, believes that four out of five UK managers can be classed as ‘accidental.’

In our journey to tackle the nation’s productivity problem properly, it’s impossible to overstate the importance of how we manage, organise, inspire, lead and coach the millions of employees who contribute directly to our nation’s performance. How the new £13m fund is invested remains to be seen but in the meantime, productivity is an organisational imperative and there are proven ways organisations can improve people management to help bolster productivity.

How to fix productivity with people management

Investors in People research identified six key areas where investment in people management makes a difference. In fact, adopting three or more of these approaches can boost performance by between 107% and 111%, depending on organisation size.

  • Developing strong and inspiring leaders: an organisational commitment to build confident and effective leadership at all levels, with the skills necessary to drive a culture of motivation, commitment and accountability.
  • A clear set of strong values: creating and committing to values that are true to the organisation and its culture, embedded within day-to-day working practices, role modelled by senior leaders and aligned with organisational objectives.
  • Recognising and rewarding performance: fair financial and non-financial compensation that is linked to individual, team and organisational performance, as well as non-financial recognition that is timely and occurs in both public and private.
  • The structure of work: well-designed job roles that make work clear, interesting and straightforward, allowing employees to build their own paths to productivity, as well as collaborative and clear organisational working arrangements.
  • Delivering continuous improvement: empowering individuals and teams to make improvements to existing processes and ideas in order to become more efficient, productive and innovative over time.
  • Adoption of sustainable practices: creating organisational structures that are designed for regular improvement and adaptive to change, as well as mindsets and attitudes that recognise the constant external and internal forces of changes organisations are subject to.

During his Autumn Statement, the chancellor said “it takes a German worker four days to produce what we make in five.”

It’s crucial the UK becomes more productive to remain competitive on the global stage, boost wages, improve satisfaction at work, enhance wealth distribution and improve our country’s social wellbeing. Improving people management is a proven method to increase efficiency within an organisation, and ultimately directly impact the UK’s economic health.