The UK has endured a prolonged productivity crisis. In financial terms the productivity gap is estimated to cost the UK £130bn in output every year. When you consider that we spend an estimated £125bn on the NHS each year in England you get an idea of the scale of our issue.
Is it solvable? I think so. If I look back to the 1960’s Britain enjoyed the best productivity in Europe. It is also worth noting that in 2017 our productivity reached a ten-year high, proving that we can improve things.
There are many reasons why our productivity has fallen over the years –
The Financial Times believes there are 5 key reasons which have attributed to the UK’s reduced productivity.
- Fizz factor! – Best industries fizz less than they did between 1999 and 2007, Britain’s productivity growth was heavily concentrated in industries such as computing, finance and professional services
- Lost momentum – The most productive companies have lost momentum, Britain has always relied on some highly productive companies across multiple industries to drive national improvements in output per hour worked
- Barnacles on the boat – There is a ‘long tail’ of unproductive companies, one core reason for Britain’s stunted productivity growth is a “long tail” of companies with poor levels of output per hour worked
- Regional variances – Many regions don’t have enough productive companies. Every city in the UK has businesses that sell goods and services in their locality, and they tend to be unproductive, according to the Centre for Cities, a think-tank.
- Skills gaps – Low skilled workers are too prevalent, one of the productivity problems often cited by employers is that too many UK workers have inadequate skills.
I would add a few more reasons to our list!
Political will – our politicians and government has been focused on Brexit and not productivity.
We might all be forgiven in thinking our biggest challenge for UK PLC is Brexit, in my view it is productivity. The productivity gap between Britain and our global competitors has widened and places us in a less than optimum competitive position whether we go or stay in Europe. Whilst our politicians wrestle with the machinations of Brexit we need, as business leaders, to get a grip on productivity. The good news is that we can.
IT is pivotal – productivity in IT and the ability of IT to impact productivity across the organisation is now critical.
If we believe the press, we are 20% behind Germany in terms of productivity. 20%! Even the worst predictions of Brexit don’t call out a 20% competitive gap. Our waking moments as business leaders should be on how we close this gap and liberate the potential in our organisations as a result. I also think this should be a key driver for CIO’s and an opportunity for the new CIO to make his or her mark. Why do I believe this? I believe this because IT is so intrinsic to a company performance nowadays that it needs to take centre stage in solving the productivity problem!
Priority and purpose – productivity improvement needs to be an objective for management and a priority. It won’t happen by magic.
My open challenge to you is if you had to achieve 50% more with 50% less resource what would you do differently in IT? If you extend this question to the wider business and ask how IT can help achieve it then you start the right thinking. Useful questions to ask and whilst they seem unreasonable to ask, the idea is to create thinking beyond the ‘work harder’ strategy. What would have to change to achieve this? What critical processes in your business would have to transform? What methods of delivering services would need to be overhauled? What would you invest in? What would stop and what would you do more of? Where would you need different thinking to get you to this target?
Imagine if you achieved this objective or even somewhere near it?