Solving the UK's productivity puzzle

Britain has been stumped by a productivity puzzle for more than a decade. Since the financial crisis first struck, the UK’s workforce is simply not improving its level of productivity as quickly as it was before 2008.

A graph showing UK productivity output per hour and worker where, after a steady upward trend since the mid-nineties, output plateaus around 2008

What the chart above tells us is that although we are producing more goods and services each year, our speed of progress is much slower than before. Basically, our workforce is less efficient and less effective.

This has been blamed on various factors. One argument is that low wage growth has encouraged companies to take on more staff. At the same, the lower cost of people means companies have invested less in R&D and technology. Together, these two factors lead to a lower output per hour and per worker. Meanwhile, political uncertainty such as “the B word” has meant companies are distracted, uncertain of the future and unwilling to commit to large investments.

The question is what can we as a business community do to become more efficient and effective?

While this may seem like a macroeconomic issue, the answer lies in each company.

The decision over whether to spend money on labour or invest in capital remains a strategic conundrum for executive teams. But there are tactical solutions too. Here are just five simple things we can do each day to improve the effectiveness – and output – of our workforce.

  1. Set goals aligned with the company’s strategy. If everyone is pulling in the same direction, you’ll hit your targets sooner.
  2. Check in regularly. Set a good cadence for meetings and 121s – that means being mindful about how often you meet and how long the meetings should be. A good meeting schedule keeps everyone on the right tracks.
  3. Improve engagement. Only 48% of British employees feel engaged with their company (Source: Qualtrics). Think about ways in which you can get your team motivated and motoring. The right tools and apps, training, office perks and flexible working are all ways of making your team’s working lives more enjoyable and engaging.
  4. Communication matters. Most companies are rubbish at internal communication. Regular two-way dialogue about the past, present and future will help get the team working for the common good.
  5. Measure and reward. Use tools that help you see how your workforce is performing in relation to your goals. But remember to stay positive – some people might see this as a stick, but you should use it as a carrot and reward excellent behaviour.

Posted by Pete Wilkinson

Last updated: 20 January 2020

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