The issue of the UK’s productivity has recently hit the headlines with the release of a report by the Chancellor Fixing Foundations: Creating a more prosperous nation. The plan focused on two key areas: encouraging long-term investment and promoting a ‘dynamic economy’. Some of the key points were higher pay, lower welfare society and a highly skilled workforce. It coincided with the Governor of the Bank of England initiating a debate about the alleged failure of the British economy to become more productive.
Economic Context
The UK’s productivity, (gross domestic product per worker), is currently a fifth lower than the G7 average. What this means more specifically is that while the UK’s economy seems to be recovering with a 2.8% growth rate and the highest employment levels ever recorded, its GDP is lagging seriously behind other developed nations. While employment has consistently increased over the last two years, output per hour is still nearly 2% lower than it was when the recession started in early 2008, and the productivity gap with our major competitors has increased. As a result growth in pay and living standards is also still weak. The Government’s intention to substantially increase and rename the minimum wage will be a major challenge to many employers even if it only affects a small number of staff. The UK’s productivity problems cannot be wholly attributed to the downturn. What we are facing instead is a complex history of underperformance in this area, with many inter-related factors playing their part.
Much of the debate about how to boost the UK’s productivity and competitiveness has focused on big capital investments such as HS2 and a potential third runway for Heathrow and there is, of course, no doubt that infrastructure investment is important. However, investment in the UK’s human capital – the knowledge and skills people have and how effectively these are deployed and put to use in workplaces across the country – is equally critical. So what can employers can do in their own workplaces? In that respect I would agree with an ACAS publication which states that to improve the UK’s productivity, organisations need to rely less on economics textbooks and think more about real life and the role of good employment relations in boosting productivity.
ACAS Report
The publication demonstrates that without attention to work organisation and job design, employees will be unable ‘to deploy the full range of their skills to productive effect or to engage in many forms of workplace innovation’. It also recommends employers to have ‘clear and easily understood workplace policies in key areas of employment relations such as discipline, grievance, equality and absence’, backed up with ‘better communications that put people at their heart’.
ACAS has identified seven levers for workplace productivity. Its comprehensive new report, Productivity: Getting the Best out of People explains how workplaces can unlock their potential to be more productive, through:
- Well designed work: jobs and work should be organised in ways that increase efficiency and make the most of people’s skills. The two key ingredients are discretion and autonomy, i.e. having some degree of control over the way jobs are done. Employees should be clear about their job role and have the ability to influence the way their job is done.
- Skilled Managers: Managers with the confidence and training to manage and lead effectively. This means being able to motivate, communicate up and down the organisation and handle difficult situations. This is partly about good selection but also needs effective training as not all these skills come naturally. It is also about managing change skilfully.
- Managing conflict effectively: systems in place to reduce the likelihood of problems arising and to deal with problems at every stage. Prevention is better than cure as is responding quickly to deal with conflict early. If employers can manage change well then there is likely to be much less resistance and the positive outcomes expected can be met. Good employers encourage informal conflict resolution to find win-win solutions.
- Clarity about rights and responsibilities: a working environment where everyone understands their rights and responsibilities. This is not just about complying with the law; good policies reflect organisational culture and values and can have a positive impact on motivation and morale. They reflect what is sometimes called the ‘psychological contract’ at work. Good policies provide the foundation to build expectations and norms of behaviour.
- Fairness: employees who feel valued and treated fairly. This is potentially a difficult issue as it can be very subjective and means going beyond the law. It is bound up with employees feeling that their well-being is taken into account which is strongly correlated with job satisfaction, commitment and loyalty.
- Strong employee voice: informed employees who can contribute and are listened to. By this they mean good communication either directly via one-to one meetings or team meetings or indirectly via some form of consultation arrangement(s). Effective communications can be particularly beneficial in times of change. For leaders this means listening as much as talking.
- High trust: relationships based on trust, with employers sharing information at the earliest opportunity. This is directly related to employee engagement which is essential if employees are going to add discretionary effort. It is key to resolving conflict. Their top tips for building trust are; being open and honest, walking the floor for direct communication and asking people how they would solve problems (then taking appropriate action).
All of the above sounds quite simple and easy but all seven levers are not widely utilised, or, organisations get no more than four of these factors right. Good employee relations means creating an environment which delivers what people want at work. They want to feel good about who they are, what they do and where they work.
Productivity and Workplace Culture
In our experience, performance tends to be better in businesses where there is a focus on higher quality products or services rather than on low cost and where the workplace culture is clearly aligned with the future direction of the business. Investment in workforce training and an intelligent approach to the implementation of ‘smart’ or agile working practices also has a positive impact.
The quality of management and people practices within an organisation, trust and employee engagement can all have an impact on an organisation’s productivity yet they have received very little attention from Government. This is partly due to the fact that such issues fall between the gaps of Government departmental responsibility and thinking but it’s also because they are seen as ‘soft’ issues, best dealt with by individual employers.
Management Skills
One of the big problems faced by employers is managing change and the stress which change and other factors can introduce into the workplace .A report from strategic consultancy Lansons, Britain At Work, confirms that workplace stress and a lack of work-life balance is still a problem for the UK’s ‘over-engaged’ employees.
The study, consisting of two online surveys of over 2,000 UK workers, reveals that a quarter of those surveyed say they are apathetic about their jobs. This finding contrasts with the stories of the over-worked workforce we have become accustomed to, but could explain some of the reasons for the UK’s low productivity.
It appears that many of us are either too engaged, leading to burnout and stress, or not engaged enough, leading to apathy and low productivity. While 63% report positive relationships with their Line Managers, it is true to say that communication between employees and Managers could still be better.
When 44% of workers reported feeling that their Manager does not actively communicate openly and honestly with them, and 40% feel that their achievements are not recognised, we have a problem. It means that we ought to recruit Managers with good social, interpersonal skills who are capable of managing and building relationships. Ultimately this is the responsibility of business leaders in relation to recruitment, training and setting a good example. We need to invest in the right management skills if we are to see any dramatic improvements in the UK’s productivity.
Management Improvement
Managing the employment relationship rests heavily on the shoulders of Line Managers, but their competence in this area is seriously neglected. Government and indeed employers do not invest much in the undervalued area of soft skills or other management development and this is a mistake. There are numerous things they can do to help create the right economic and operating conditions for business’s productivity rates to thrive. However, we should not however rely on Government and in any event employers large or small should focus on productivity as key to the future. We would advocate the following:
- Communicate well and regularly with your workforce.
- Build trust and confidence based on mutual respect.
- Use your employees to help boost productivity.
- Focus on what is right rather than what you can get away with.
- Educate your workforce about the market you work in and how they can impact on your business success.
The Three R’s
An alternative way of looking at the issue is to go back to basics with the three R’s.
Reward goes well beyond monetary rewards; which is just one way of showing gratitude for good work. Reward your people as well as you can afford and this will help build engagement and retain a happy, well-motivated workforce. .Recognition in any appropriate form is equally important in terms of setting a positive culture and building morale.
Responsibility means showing your employees that you trust them by giving them responsibilities that empower them and that allow them to grow and feel an important part of the organisation. Encourage them to gain new skills, competencies and capacities by internal recruitment if possible and by promoting employees at appropriate times.
Respect is essential to engagement. Employees need to know they are respected as people and that their contributions are appreciated. If you treat their work lightly or fail to acknowledge them they will either leave or switch off. This does not mean that their behaviours or output is always respected-but the respect you hold for that individual and their unique talents should always be clear.
Successful employers do not plan their business operations without a sound budget and financial plan so the same approach should be adopted for another important asset, its people. Having a plan to achieve positive employee relations is we believe as important as having a sound financial plan. Putting the employee relationship at the top of your list of priorities will allow you to improve productivity and create a competitive advantage.
Our annual training programme always includes soft skills people management training and for clients some places are free and yet many clients fail to send any one on the courses. When we ask why we are usually told that staff cannot be spared. Taking such a short term view to management development will never help an organisation to grow in the long term and is likely to have a detrimental effect on productivity as well.
Our Consultants would be pleased to advise you on any element of the issues arising from this newsletter.
