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Written by Pete Wilkinson

Last updated 15 February 2022 ·

Solving the UK's Productivity Puzzle

Productivity measures the rate at which work converts to the output of goods and services, essentially what keeps an economy going. In the past, productivity has increased over time, although it’s not unusual for there to be cyclical peaks and troughs. Overall, more goods and services have been produced per hour worked.

However, since the financial crisis first struck in 2008, the UK’s workforce is simply not improving its level of productivity as quickly as it was beforehand. In 2010, productivity levels began flat-lining, leaving experts puzzled about what was happening. This slowdown in productivity levels has become known as “The Productivity Puzzle.”

Britain has been stumped by this productivity puzzle for more than a decade. Whilst some other European countries have also experienced a similar trend; Italy, France, Germany, and the US are all showing higher productivity levels than the UK.

A graph showing UK productivity output per hour and worker where, after a steady upward trend since the mid-nineties, output plateaus around 2008The chart above tells us that although we are producing more goods and services each year, our speed of progress is much slower than before. Basically, our workforce has become less efficient and less effective.

Potential causes

Various factors have been blamed for this downturn in productivity levels. One argument is that low wage growth has encouraged companies to hire more staff. At the same time, the lower cost of workers means companies have invested less in R&D and technology. Together, these two factors lead to a lower output per worker, per hour. Meanwhile, more recently, political uncertainty such as Brexit and the Covid-19 pandemic, has meant companies are distracted, uncertain of the future and unwilling to commit to large investments.

The burning question on everyone’s lips is what can we, as a business community, do to get back on track and become more effective to really accelerate results?

Some ideas to turn things around

While this may seem like a huge issue to solve overnight, the answer lies in each individual business making a real effort to turn things around within their workforce.

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. Five actions to get started

Here are five simple actions you can take to improve the overall effectiveness, output and productivity of your teams:

1. Clarify the business purpose and vision

Set clear goals that are aligned with the overall business strategy. Communicate these goals throughout all teams in your business so everyone becomes aware of what you are aiming for and how they can positively impact achieving that. Once everyone is fully focused and aware of the vision, they begin pulling in the same direction. Productivity and effectiveness will increase, and your teams will achieve more in the same number of hours worked.

2. Check-in regularly

Set an effective cadence for meetings and 121s that works for you and your employees. You may need to test this to ensure each meeting positively affects motivation and productivity, rather than wasting time. Be mindful of how often you meet with your teams and how long each meeting really needs to be. An effective meeting schedule should boost everyone and keep them on the right track.

3. Focus on improving employee engagement

According to research, only 48% of UK employees are actually engaged at work (Qualtrics report), so it’s no wonder productivity levels are suffering. Take some time out to really think about how you could inspire and motivate your employees. What‘s their ‘why’? Employee engagement has a huge impact on business performance. Consider how you could make improvements to your company culture that would increase engagement levels such as new tools, apps, training, benefits, flexible working, or introduce some internal task-focused campaigns to improve morale.

4. Communication matters

One of the most common challenges many businesses face, especially those with distributed teams, is achieving and maintaining effective communication. Not only day-to-day discussions but ensuring employees are kept up to date and correctly informed of key business priorities, challenges being faced, progress being made. When employees are considered and invited to contribute to wider business decisions, it makes them feel valued and works wonders for engagement. Regular two-way dialogue about the past, present and future will help the team work for the common good. Learn how estate agency business Nock Deighton improved their communication across 9 regional offices to achieve better team alignment, engagement and increased productivity.

5. Measure and reward

It is vital to set up an effective way to measure productivity levels and allow you to identify top performers in your business so you can see your efforts paying off. Launching an employee recognition scheme can help make positive shifts in team culture and encourage healthy internal competition, highlighting the most ambitious team players.

The tool to make all this happen

Set yourself up with an easy way to track current productivity and performance levels so you can measure the increase once you begin to implement some of these actions.

There are many performance management tools available. The Reclaro 1-3-5® OKR software is very simple to use and tracks productivity and performance levels combining the award-winning 1-3-5® business planning methodology with the popular goal-setting framework of OKRs (Objectives and Key Results). It allows you to see instantly how everyone in your business is performing towards your strategic objectives and business vision at any time through an arrangement of colour coded percentage dials. It means you can see exactly how your workforce is performing in relation to your goals and objectives, allowing excellent behaviour to be rewarded and development areas to be addressed and improved to achieve results faster.

To find out more about how you can improve productivity levels within your business, please email me directly at pete@reclaro.com, and I will be happy to help.

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