2006 – how to increase productivity without
There we were, worrying about
how we might work harder to plug the productivity
gap between the UK and its biggest competitors
and all the time the answer was in a wave of an
Thinking, like most of us, perhaps,
that the key to greater productivity was to speed
up the company treadmill, it warmed the cockles
of my heart when the Office for National Statistics
announced last week that it had found a quick
and snappy answer in the way it calculated business
investment in software.
Not only did it find another
£10.5bn of investment in 2003, it found
billions more in other years too going back to
1992. This means that those graphs showing UK
productivity trailing that of France, US, Germany
and that of the G7, have not changed their pecking
order, but have bunched together just a little
The three successive labour Governments
under Tony Blair have been obsessed with raising
UK productivity, using economic indicators as
the stick that beats us all in to trying harder.
Instinctively we know that the
biggest productivity gains must lie in technology.
The sort of software that perform hitherto complex
tasks almost instantly or deliver a document by
email that once took days by post, is saving billions
of pounds. So software investment has to make
a difference. It was just that, previously, our
statisticians had not realised how much.
This unexpected statistical boost
came on the same day that I saw a report claiming
that poor performance among employees was costing
some medium-sized to large British companies £32m
a year. My first reaction is that this figure
looks a little shaky. To clear up any misunderstanding
I should point out that the figure is based on
an “average” employer of 9,100 people,
each earning on average £22,000 a year.
These averages were drawn from a survey of 796
companies carried out on behalf of Personnel Today
and Chiumento, a human resources consultancy.
Among other things, the research
asked respondents to rate employees on a four
point scale of effectiveness – outstanding,
excellent, good and poor. The average respective
percentages came out as 10 per cent outstanding,
21 per cent excellent, 53 per cent good and 16
per cent poor. The £32m is 16 per cent of
the average wage bill of £198m for those
in the survey. I should add that spread across
all companies in the UK this so-called “burden
on UK businesses” runs in to trillions of
pounds. This seems an even shakier claim.
A glance at the figures should
be enough to spot the flaws in these calculations.
The first is that it assumes that some individuals
are being paid £22,000 a year for doing
nothing. While every employer has those it might
categorise as slackers, few of these people do
nothing at all. Indeed, some people would do more
if they if they could, but the nature of their
job does not allow it.
How do you make a security guard
more productive, for example? The security guard
is a “just in case” sort of employee.
One way is to give the employee more discretionary
training so they double up as a first-aider, for
example, although the more non-security duties
they get, the less they may be in a position to
keep an eye on things. Yet another way may be
to revise the way you think about security.
A problem with this kind of survey
is that it seems to assume there is an optimum
performance level for all businesses. Not one
of us, not me, not you, not even Michael Johnson
(the fastest man in history based on his average
time over 200 metres) can perform at our best
every minute of the day. We can try to do our
best but there will be times when one job works
better than another.
Then there are the jobs we do.
How do we evaluate their worth? A large company
may be making some sugar-based liquid that amounts
to little more than a waste of energy and a fleeting
taste sensation. How does that benefit the world
apart from creating jobs and converting earned
wealth in to earned profits for the company and
One finding from the research
- that bad management is blamed more than poor
work for underperformance – is indicative
of the way the productivity debate has been undermined
The research also showed that
perceptions of poorer productivity and performance
in the public sector remain, not without justification.
If the job for life concept survives anywhere
it has to be in those public sector backwaters
where any sense of accountability is to some remote
ministry dependent, not on the market, but on
the Treasury. The public sector never goes out
Business, meanwhile, never seems
to tire of worrying about costs. Not a week goes
by without a piece of research that shows the
cost to business of absenteeism, energy wastage,
organisational inefficiencies, stock inventory,
machine downtime, underutilisation of office space,
the list goes on and on. People, these days, tend
to be the biggest cost, so they attract most of
Chiumento concluded that: “It’s
time to get tough on poor performers.” But
what does “getting tough” mean? Does
it mean kicking some up the backside and sacking
others? Does it mean paying people less or making
them redundant when you find out that their work
can be done cheaper in India?
Doug Crawford, Chiumento’s
head of employee engagement, says that what is
really needed is a different expectation of managers.
“If we’re going to break out of the
schizophrenic approach that looks at get rid of
slackers we need to change the role of the manager
fundamentally to that of enabler,”
As Mr Crawford points out, many
employees fail to give of their best because they
lack the training they need or they have a poor
understanding of what is expected of them. “Managers
tend to get put in their position because of their
technical competence, not because they know how
to get the best out of people,” he says.
Sometimes, however, a managerial
job involves admitting that people, even at their
best, cannot always outperform machines. After
two decades moving operations overseas to save
on labour costs a number of Japanese manufacturers
have begun to repatriate production in automated
plants. Employees are used sparingly so that only
highly trained technical staff do the specialised
work that cannot be undertaken by machines. Increasingly
sophisticated robotised lines are taking over
the work once done by manual assembly. The machine
tool-maker, Yamazaki Mazak, for example, is installing
robot assembly lines that can run continuously
without supervision for up to 72 hours.
Performance will continue to be the number
one concern of people management. But productivity improvement
is about a far more sophisticated approach to the work of
production than simply working harder. Sometimes it’s
about managing unnecessary work out of the workplace. On
the evidence of last week’s figures, it could even
be regarded as a moveable feast, earned at the stroke of
an economist’s pen.