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The Brutal Truth About UK Productivity

2 years ago

I have just read an interesting article in the Financial Times on the topic of UK productivity. UK workers are significantly less productive that their counterparts in France, Germany and the US, and are less productive than they were in 2007, when the financial crisis hit. This lack of improvement in productivity will hamper the expansion of the UK economy.

The FT article suggested that there are 4 reasons for the UK’s lack of increased productivity over the last 10 years. The reasons put forward to explain this stagnation are:

  1. A lack of investment in technology;
  2. Productivity is being measured wrongly;
  3. Existence of too many so-called “Zombie companies”;
  4. An unproductive workforce.

While I am not going to disagree with any of these, my experience of seeing and working with companies over the last 10 years would suggest that while (1) and (2) might be contributory factors, they are not the key issue.  Points (3) and (4) are totally right, but the FT are looking at the outcomes, and not the reasons for poor productivity.

For me, the biggest factor impacting on productivity in the UK is the lack of investment in management skills.  There are too many companies out there, whether they be “Zombies” or not, who are being managed by people with no formal training in how to manage properly.

Are your managers too busy to improve?

Here is how you can tell if this is an issue in your business. Do a quick survey of your management team and ask them the last management book they read, or course they went on.  My guess is the response is not going to be very positive. When you ask them why they haven’t invested in becoming better managers, they will normally respond with the fact that they are too busy.

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Call us on 02380 560833

And therein lies the issue with the UK productivity.  Everybody is so busy running around looking busy that nobody can see the fact that they are unproductive.  I recently went into one organisation where they had carried out a job review for every one of their 120 team members, as their numbers were showing a drop in productivity.  This review uncovered the fact that there were 4 people – 3% of the workforce – who did not actually have a Job to do!

4 employees who did not have an actual job?

Yes, that is right – they came to work each day, sat at a computer for 8 hours and did nothing but browse the internet.  When asked why, they said nobody was managing them so they thought it was OK and they were a “stand by” in case things got busy.  This is just crazy, and while you have to question the mentality of people thinking this way, you have to look at the managers and wonder, what the hell were they doing?

Perversely, I think that the root of this problem comes down the UK’s brilliant work ethic.  We’re great at getting stuff done.  Compare us to the rest of Europe, and only the Germans work as hard, but the thing that separates them from us is the fact that they are far more organised and regimented.  While this may have its drawbacks in areas such as creativity and flexibility, it does a lot for productivity.

Our work ethic is both our biggest strength and weakness

So what can we do to get our country back to the top of the productivity table?  Well, the first thing to realise is that actually, you are not doing it for any altruistic reason.  It’s all down to your company’s culture and profits.  Apart from your investment in training, there is no cost in up-skilling your managers, and every % improvement in productivity goes straight on to the company’s bottom line.

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Call us on 02380 560833

Here’s an example – let’s take a £2m company with a £750k labour bill, 15% cost of sales and 10% net profit.  A 10% improvement in productivity across the board will result in a £200k increase in sales and a £170k increase in gross and net profit.  Just think – your bottom line profit would increase from £200k to £370k – that’s an incredible 85% increase in net profit!  Focusing on achieving this increase in profit without the improvement in productivity would mean sales would have to have risen by £1.7m, and this would cost a hell of a lot more in sales and marketing. investment.

So let’s stop kidding ourselves that poor productivity is due to any other reason than lack of investment in our managers.  As well as improving productivity, investing in your management team will also make them more motivated and help you to recruit and retain the best people for your business. Give your managers the time and the training to be the best they can be, and they will give you the best Return on Investment you have ever seen.

If you are struggling to find time to improve then make time and come to our Time Mastery Workshop – details HERE, or give us a call on 02380 560833.

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