Brexit means… facing up to the UK’s productivity problem

We all know that Brexit means Brexit, and we are also beginning to see that this also means a much more global UK economy, one where businesses will need to compete actively against more productive economies as well as the less productive (but lower labour cost) developing economies.

Internationally, the USA, Germany, Sweden and Japan have always outstripped us, but a study by the Office for National Statistics shows that, in 2014, our productivity (measured as GDP per hour worked) was also outstripped by Spain (5% higher), Ireland (30%), Belgium (34%) and the Netherlands (45%). Why? What is wrong with UK productivity? After all, this isn’t news – the problem has been one besetting us for decades now.

One reason is certainly a failure to invest adequately in new technology and operating systems; another is the skill levels of UK employees. As David Finegold and David Soskice described the problem nearly 30 years ago (1988: The Failure of Training in Britain: Analysis and Prescription), old fashioned technology requires lower skills, and a supply of lower skilled employees discourages investment in more up to date technology, creating a vicious circle of low productivity. Ultimately, this is a problem that only senior managers can do anything about, by investing more in both technology and skills.

However, this must be accompanied by an expectation that people will work better – not harder or longer, but better. Unfortunately, our approach to performance management (PM) is not up to the task. First line managers, often woefully under-trained themselves, are all too often reluctant to do anything about poor performance, partly because they do not feel they will be backed up by their own managers or by HR managers, who seem to adopt a defensive approach to employment where nothing is done that may risk an Employment Tribunal. Couple this with PM/appraisal systems that are more about box ticking than making judgements about people and there is a prescription for weak supervision and poor performance.

Employers should be expecting much higher standards from their employees and first line managers should be the instrument that they use to achieve this. There need to be clear targets set for productivity improvements each year, targets that stretch people yet are achievable. First line managers should be tasked with making this happen as their primary goal, and they need to feel competent to discuss individual and team performance in ways that highlight the bad as well as the good. Most people want to work well and they believe that they are. They won’t know of any failings unless someone tells them, and pussyfooting about isn’t going to help anyone.

Flash Gordon only had 14 hours to save the earth; we’ve got two years to transform our productivity. Given how little we have done in the last few decades, it is hard to have faith that this will happen. But, if we don’t, there is no way we are going to take advantage of this new world we are entering!