Every business owner understands the importance of productivity, right?
Yes and no, according to research from the University of Gloucestershire.
‘Improving Productivity’ provides a fascinating insight into the critical issue of productivity among small and medium sized businesses (SME) employing between 10 and 250 people.
The study, published in March 2017 by the University’s newly formed Centre for Innovation and Productivity, examines the drivers and barriers for SMEs in the race to increase productivity within their own firms. The research team undertook surveys and in-depth interviews with ten SMEs from a variety of sectors across manufacturing and service industries, eight of whom are LEAD™ Alumni companies.
Why the need for research?
Professor Malcolm Prowle, who led the research, explains its significance. “SMEs are the backbone of the UK economy, employing around 59% of the workforce and contributing half the nation’s GDP. It’s critical for our economy that we support businesses to overcome the obstacles that they identify in this study. Also, SMEs are seen as key to achieving a balanced UK economy and to meeting the challenges of BREXIT.”
In November 2016 the Chancellor launched a £23bn National Productivity Investment Fund to tackle poor productivity, largely through increased investment in infrastructure. But with the UK lagging 30% behind the US, Germany and France, and Gloucestershire falling 8% behind the rest of the UK, how are business leaders themselves tackling the issue on the ground?
This wide-ranging study exposes the complexity of defining and measuring productivity within an individual organisation. Despite a universal acknowledgement among leaders of its importance, many businesses are unsure as to whether their productivity has increased or decreased. Understanding the relationship between productivity, growth and profitability can also be unclear.
Companies see a number of barriers facing them in the pursuit of improved productivity, but these are rarely concerns about macro-issues such as infrastructure, funding and regulation.
The influences on productivity
The research identified ‘primary’ and ‘secondary’ drivers influencing productivity. Primary drivers were those that have a direct impact: operational processes, technology, human resources and information.
Respondents identified that the barriers among SME are more commonly considered to be:
Lack of skills exacerbated by difficulties in recruiting skilled staff
Lack of management time and capacity to effect the necessary changes
Lack of information on which to base decisions
The secondary drivers are those that actually influence the nature and magnitude of the primary drivers, which, in turn, affect company productivity.
These crucial secondary drivers are categorised as intrinsic, extrinsic and organisational cultural factors. The latter includes vision and leadership, strategic focus and a culture of innovation
It’s the concept of secondary drivers that casts new light on the complexity of improving productivity. Many of the business leaders involved in the research were conscious of these more nuanced and less tangible factors. A company culture that values strategy and innovation was considered important by most, as is effective leadership.
“Most companies recognise that the barriers to improving productivity need to be resolved internally,” comments Professor Prowle.
“While government has some key roles to play in terms of developing infrastructure and simplifying regulation, our research suggests that the main thrust to improve productivity must come from within businesses themselves.”
What might be the solution?
“We suggest that there is a need for SMEs to grapple with two agendas,” explains Professor Prowle. “The first concerns technical issues such as the collection of information on productivity or the improvement of operational processes and workspace management.
“The second agenda is ‘softer’ and concerns the development of the SME as an organisation. Of particular importance is the need to develop a strategic focus on productivity improvement and a culture of innovation, which will initiate such improvements.”
Stewart Barnes, Managing Director of QuoLux™, who was involved in the research in his role as Visiting Fellow at the University of Gloucestershire, adds: “There is a compelling rationale for sharing knowledge within the business and academic communities in order to support leaders. This has great relevance for the role of public and private sector leadership development support and for SME, in particular.
“This was evident not only in this research study, but through years of experience supporting owner-managers of SME to grow their firms through equipping them with the skills – and self-belief – to lead, engage and innovate.”
This article first appeared in the QuoLux™ Leading magazine, Issue 1, April 2017