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Productivity, and how to improve it

Sluggish output is a perennial preoccupation for British industries, but what are the reasons for it and is it as bad as we think it is? Here, five business leaders give their views.

Last updated: 24 Aug 2019 7 min read

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The UK’s productivity gap has been a source of concern for many years, and, with Brexit just months away, is perhaps an even hotter topic today. Yet among leaders of medium-sized businesses (MSBs), there’s considerable optimism about the future of productivity, as a new survey by NatWest reveals, with more than half (59%) anticipating productivity growth over the next 12 months.

However, the Mid-market Britain 2018 report also reveals underlying worries, as 41% cite productivity levels as a significant strategic concern, and only a quarter of those selling solely in the domestic market highlight productivity as a strategic priority for their business. Here, five mid-market business leaders offer their views on the barriers to improving this core business metric, and the possible solutions.

Peter Rush, CEO of Formica Group Europe

Manufacturing sector; turnover £150m

“The overriding challenge is transforming the UK business mindset from its current, short-term ‘How can we make a fast buck?’ to one that is long term., Japanese businesses look at 30-year plans and in Germany they think medium to long term. The UK’s embedded short-term culture and relentless focus on immediate profit doesn’t lead to long-term investment in technology and automation, and it damages businesses.

“Two years ago, Formica Group had reached a crossroads: follow a path of managed decline or bring the business up to date. We invested £40m in machinery, people and innovation, and funded new product research – but the real key was changing the company’s culture and mindset. Today, our people are positive and focused on the future.

“What really worked for us was internal benchmarking: identifying and using best practice from other parts of the business worldwide”

“What really worked for us was internal benchmarking: identifying and using best practice from other parts of the business worldwide. Shared knowledge in a global organisation is free – you just have to get people talking about what has been successful.

“Chambers of commerce and other business bodies offer training, networking opportunities and events where business-critical issues will be discussed, but use your contacts book, too. Who do you know who’s an expert in this, or has had similar experiences? These informal routes to find out how other business leaders are handling challenges can be incredibly powerful.”

Paul Mizen, managing director of The Recruit Venture Group

Recruitment sector; turnover £137m

“Every week I’m told that UK productivity is falling behind that of other major nations, yet this is not something we are seeing in recruitment. The key to boosting productivity doesn’t lie in technologies like artificial intelligence (AI) but by getting back to basics, increasing margins and working hard. Taking your eye off the basics does the biggest harm to productivity. Companies can’t afford to get lost in the fog of digital technology. AI has its advantages but it is no silver bullet for resolving productivity issues.

“The key to boosting productivity doesn’t lie in technologies like artificial intelligence but by getting back to basics, increasing margins and working hard”

“In recruitment, the basics can be defined as focusing on what the industry is really about: people, candidates and clients. Businesses need to build robust relationships with these people, and there is no customer relationship management (CRM) system that can replace getting out and connecting with the people in your industry. That’s why I believe that the principle of getting back to basics applies to productivity in any industry that is sales-based. Regardless of whether your commodity is a product or a person, you need good relationships.”

Ian Baxter, founder and chairman of Baxter Freight

Transport sector; turnover £15m

“I have to admit that I struggle to understand how the UK can be lagging major competitors when it comes to productivity. What I see is a business sector where people are hardworking, innovative, entrepreneurial and embracing technology just as much as, or more than, other countries I’ve visited and worked, including Hong Kong, Finland and Germany.

“Where I think there is room for improvement is in the training of our young people. The government should be doing more to encourage and provide a framework for apprenticeships and move away from pushing young people down the university route when that is not meaningful for them.

“One of the biggest productivity challenges for our own industry is our creaking and congested transport infrastructure”

“One of the biggest productivity challenges for our own industry is our creaking and congested transport infrastructure, mainly the road networks. The government could help by investing more in our airports, rail network, including HS2 and the upgrading of other lines, and our roads, many of which are congested even at night and at weekends these days.

“Providing better access to high-speed broadband would make it easier for people to work from home, reducing unnecessary traffic on the roads and allowing more people to make a greater contribution to our economy by being more productive in a way that is practical for them.”

Mark Reeve, chairman of Chalcroft Holdings

Construction sector; turnover £55m

“Productivity for me means getting the most out of a resource in the appropriate amount of time. And, for construction, therein lies the problem. I think in general the construction sector is booming, but productivity has gone backwards, due to a lack of highly skilled people and overstretched resources.

“Added to this is that the fact that the construction industry is renowned for not embracing new technology – for example, there isn’t a great deal of off-site construction or prefabrication. There’s a reason for that. In general construction, if you make a 1% margin, you’re deemed to be doing OK. If you do 3%, it’s exceptional. With margins like that, it’s easy to see why many companies don’t invest in research and development or indeed in skills and training for the long term, and this inevitably has a knock-on effect on productivity.

“I think in general the construction sector is booming, but productivity has gone backwards, due to a lack of highly skilled people and overstretched resources”

“The industry as a whole has to take the lead to show that construction is a very worthy career choice, and the government has to support, and fund, initiatives that reflect this and recognise the value of construction in terms of GDP.

“After all, without the right people with the right skills, how are we going to deliver major infrastructure projects such as HS2?”

Greg Cox, CEO of Quint Group

Fintech sector; turnover £42m

“Business productivity is a complex issue with many influencing factors; however, a crucial one is people. In any business, employees must understand what they should be doing, and have a clear set of specific objectives. They need to believe in those objectives and understand how and why delivering them will benefit both the organisation and themselves.

“The organisation has to provide the structure and support that will allow employees to fulfil their objectives, which is what ultimately leads to strong, collective productivity”

“The organisation also has to provide the structure and support that will allow them to fulfil their objectives, which is what ultimately leads to strong, collective productivity.

“We work with our staff in a collaborative way to set their objectives and engage them with the process. These are finalised by mutual agreement and shared with the employee and relevant stakeholders, which enables the wider organisation to understand individual employees’ objectives and fully support them.”

To read the full report, Mid-market Britain 2018: The View from the Boardroom, click here .

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