5 Ways To Fix The UK’s Productivity Gap

5 Ways To Fix The UK’s Productivity Gap

While the UK can be proud of many world-leading businesses, it also has a long history of poorly managed and unproductive organisations.

In fact, the results of a decade-long worldwide study carried out by academics at Stanford in 2012/2013, Harvard and the LSE found the UK had more badly managed companies than better-performing competitors.

In light of this, and the UK’s £84bn cost of lost productivity each year, the CMI has launched a manifesto to addresses this competitive weakness and how poor management is contributing.

The Management manifesto is a roadmap for business leaders and professional bodies, to build an internationally competitive economy with a world-class skilled workforce.

Currently the UK is, on average, 18% behind its G7 competitors in average productivity levels and a huge 35 % behind Germany.

The estimated £84bn cost of this is even bigger than the £75bn that the IFS has estimated could be lost every year by 2030 if the UK left the single market, showing how significant the issue of poor management is.

While many assume poor productivity is remedied through investing in technology or infrastructure, the OECD confirmed that the outstanding primary factor in addressing the productivity gap is improving management and leadership.

CMI CEO Ann Francke said: “While election debate focused on winning a great EU trading deal post-Brexit, we risk losing sight of a bigger prize.

Improving management and leadership across the UK and closing the productivity gap could be a bigger financial reward for the UK than maintaining access to the EU’s single market.

Closing that gap will be impossible if so many companies remain choked by outdated management cultures.

We need to radically overhaul business cultures and work in ways that blend better with people’s lives, give people more power to perform, and make flexibility a reality on both sides of the employment relationship.

We have to make sure that our workforce remains diverse, and is equipped with the progressive and practical skills needed to keep British business competitive.

It is therefore vital that any future government puts plugging the skills gap and implementing progressive and inclusive pay policies at the top of its agenda.”

The CMI’s Management Manifesto identifies five key areas where collaborative action is needed to tackle the issues, and highlights actions for employers and the government, as well as their own pledges:

1. Improving productivity through people

In order to close the productivity gap, we must recognise the pivotal role of management and leadership in raising productivity levels. We need a national movement towards replacing ‘accidental managers’ with competent, qualified and confident managers.

In the UK, we are lacking clear data about the quality of management and leadership skills. The CMI therefore supports the development of a National Management Index which would measure and track the nation’s skills base and identify opportunities for improvement.

2. Building Trust Through Better Business Cultures And Governance

The rejection of ‘expert’ views that we saw in the Brexit vote shows the current lack of trust in leadership.

The CMI recommends tackling this with increased transparency from leadership, coupled with creating long-term social purpose rather than myopic management.

Leaders also need to set the standard and call out poor behaviour within the organisation and executive pay should be aligned with the behaviours that sustain trust.

3. Inclusive leadership – Harnessing diversity

Diversity is repeatedly shown to deliver results and reduce the risk of groupthink.

Currently gender diversity still has a long way to go. While women make up 73% of junior managers, only 32% make it to director level.

Future projections show the scale of the challenge: with the economy needing 1.9m new managers by 2024, 1.5m would have to be women in order to achieve gender balance.

The manifesto recommends investing into addressing bias within recruitment and promotion, ensuring diversity both in shortlisted candidates and in assessment panels.

Diversity can also be increased by ensuring that higher-level jobs such as management roles are advertised as flexible by default, (only 9% currently are), and making sure that one in ten apprenticeships are used to support parents returning to work, as well as a ‘silver quota’ for the over-50s.

4. Improving Employability – Better Access and Opportunities For Young People

The UK needs 1.9 million new managers by 2024 yet 65% of employers believe graduates lack the interpersonal skills necessary to manage people.

Equally, School leavers and graduates currently feel uninspired by and detached from the working world.

Employers need to work on engaging young people, and teaching leadership and management skills as early as possible.

This will open up new routes into management and leadership careers, while equipping employers with a far more productive workforce.

The manifesto suggests organisations engage with schools to spark their interest: “Businesses need to take the time to show their work in a favourable way to young people.”

The school-to-work syllabus being developed by the CMI includes recognition of team leadership skills and work readiness, and will help young people making the leap from education to work.

5. The age of apprenticeships – New Routes to Get into and Go Far in Management

A seismic change in the perception of apprenticeships is a must.

Apprenticeships are often seen as restricted to lower-level programmes for new starters, but many are high-level and offer real opportunities both to young people and to those already in work.

Likewise, they benefit employers, with 71% of apprentices remaining with the same employer after joining, and their employers see a productivity increase of £214 per week on average.

The Apprenticeship Levy is a huge opportunity to support employer investment in skills and will address the UK’s long-standing productivity crisis.

The manifesto calls on the government to improve access to funding, and to work with partners to improve awareness among young people, parents, employers and existing employees about the available opportunities.

Francke added: “Complex challenges demand collaborative answers, so our Management Manifesto is not a simplistic shopping list of actions that managers demand from the next Government.

It’s a roadmap for employers and for bodies like CMI to work together for change.”

These 5 pledges have the potential to go a long way in improving the productivity of British firms, but are they enough to bring the UK into line with EU counterparts?

How will your business focus on improving productivity and competitive advantage in light of Brexit and the split from the EU?

Does your organisation already invest into hiring for, developing and supporting a high-performance management culture?

Share your own thoughts about the new CMI Manifesto in the comments!

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