The productivity imperative

Productivity has been described by the Treasury as ‘the challenge of our time’. This was true pre-Brexit and its importance seems unlikely to diminish in the changing landscape.

In this the penultimate article in the series Leading Change in a post-Brexit world, Stewart Barnes, Managing Director of QuoLux, believes that now more than ever we must understand what productivity looks like within our own businesses.

Productivity refers to the amount of effort and resource we put in, in order to get value out – or, the ‘output’ per unit of ‘input’. The UK has been falling further behind in measures of productivity, with UK workers producing 20% less per hour than workers in the G7 countries, on average. In Gloucestershire, productivity lags behind the UK average.

“It’s critical that we drive up productivity here in Gloucestershire,” says Barnes. “It matters for individual businesses, affecting their profitability and competitiveness. And collectively, the county’s productivity shapes the opportunities for prosperity in our communities.

“To get a grip on it, we must first understand and measure productivity within our own business. Then apply some ‘levers’ for improvement.”

While measuring output per unit of input may seem quite straight forward on a factory line, in a service-led business this can seem harder to pin down.

Barnes notes, “Being more productive where you make most money sounds obvious, but it isn’t! You need to understand where you make most money for your hour of work, making Gross Profit per hour the single most important measure in your business. Ask yourself, how productive is your business?”

It’s a question for all firms to consider, particularly the small and medium sized companies (SMEs) employing from 10 to 249 people which make up 11% of Gloucestershire businesses who employ almost a third of the county’s working population. “This is a subject of great interest to professors and researchers from the University of Gloucestershire,” says Barnes, “so in my role as Visiting Fellow I’ve connected them with several local businesses who are examining how to improve productivity within their firms.

“While the detail will be unique to each company, there are some key ‘levers’ that will contribute to productivity for every firm. Positive employee engagement is integral to the performances people deliver, and their rates of productivity.

“Developing an employee engagement strategy – or refreshing one that’s been in place for a while – should be a priority in your pursuit of increased productivity.”

 Recent figures demonstrate just how great this imperative is:

  • Only 29% of the UK’s workforce is engaged, putting us ninth in the world’s leading economies
  • 20 million UK workers are not actively engaged
  • 58% of staff are disengaged within six months of starting work – are people that you have employed recently become disengaged under your leadership?
  • 68% of staff have had no feedback from their bosses in the last six months
  • Catching up with the Netherlands on engagement would lead to an effective GDP improvement of £26bn pa

As workforces experience the highs and lows of the Change Curve (see /campaigns/brexit) it’s vital to build and maintain engagement, to ensure productivity doesn’t drop.

“As ever, the solution lies in effective leadership, widely acknowledged as the key to driving growth and productivity in SME. My book LEADing Small Business outlines this connection with leadership development, drawing upon the experiences of more than 2,000 owner-managers of SME, including scores of Gloucestershire leaders.

“It’s an absolute necessity for us to improve management and leadership capabilities in order to increase productivity.”

QuoLux sponsors the Lifetime Achievement category in the Gloucestershire Echo and Gloucester Citizen Business Awards.

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