How to address the UK's 'Productivity Challenge' amongst G7 nations.
It is well documented that the UK suffers from a serious and long-standing productivity gap. The Office of National Statistics (ONS) estimates that, on average, Germany, France and the USA are about a third more productive than the UK.This gap currently stands at 36 percentage points behind Germany, 30 points behind the US and France and 10 points behind Italy.
“Our competitors seem to have a better grasp of productivity and give it a higher priority than the UK. It is more embedded in their consciousness.”
The Government appreciates that poor productivity has been a feature of the UK economy for decades. We have compensated for this with low salaries and long working hours. In November 2016, the Government announced it was establishing a UK Productivity Council to encourage and support UK businesses to improve performance output and to start to change workforce behaviour.
The Council’s Chair, Sir Charlie Mayfield, also Chair of the John Lewis Partnership, commented, “For many, ‘productivity’ is the language of economists, but it’s also critical to a healthy heartbeat for the economy, for wages and for competitiveness”. We welcome this initiative.
I was invited as a keynote speaker to the recent 18th World Productivity Congress in the Kingdom of Bahrain, which brought together experts on productivity science development shaping future organisational strategies from across the globe.
What struck me was that our competitors seem to have a better grasp of productivity and give it more priority than the UK. It is more embedded in their consciousness.
There is plenty for the new UK Productivity Council to do and to change our understanding and approach to productivity. As well as innovation and capital and technological investment, skills development is one of the most important factors for improving productivity.
So what skills do we need to improve productivity and economic output? I propose that we focus and group them into three areas; technical, employability and management skills.
The technical focus is about giving people the knowledge, skills and competencies needed to perform the critical tasks in one or more job roles. We cannot just do this at the beginning of a person’s career; they need to have their skills constantly updated through continuous professional development (CPD) so they can successfully utilise new technology, new materials and revised ways of working.
The employability focus is a very broad spectrum encompassing all the general skills needed for any job such as literacy, numeracy, communications, time management, team working and innovation. Importantly, it also covers flexibility as well as the ability to adapt and learn new things so that the person can keep up to date with change in their sector. As the UN’s WHO research shows, it is essential that we realise that physical and mental health are additional key factors affecting a person’s productive abilities. This is another ‘employability’ skill.
Lastly, turning to management skills, the traditional approach to management development is to teach people about finance, HR, communications, marketing, organisational development, innovation and self-awareness. We have embodied this into our new Trailblazer management apprenticeships standards. Whilst all this is important, it is not enough to ensure that we have the type of managers who can make step-changes in productivity improvement. For that, managers need to understand the techniques and tools for identifying how to improve productivity as well as the leadership, influencing and negotiation skills to bring the workforce with them. In this respect, they need to be able to successfully manage and deliver tangible, measurable change through productivity improvement programmes (PIP).
If we can improve the UK’s skills in all these three areas, then we will establish a workforce which is motivated, productive, can adapt to change and is socially mobile.
NOCN has been engaged in the reform of apprenticeships (Trailblazers) for the last three years. Our observation is that, although recently there has been some comments made about productivity, it is not truly embedded in a way that will help us close a 30% productivity gap in the next five years.
We need to start to adapt what we are doing on the reform of apprenticeships, ‘T Levels’ (Sainsbury’s Review), improving English and maths qualifications, and employability skills, to ensure that the skills and educational reforms can contribute to closing this productivity gap.
Furthermore, we need to bring the thinking of the Government’s new Institute for Apprenticeships together with that of the Productivity Council.
Graham Hasting-Evans, Group Managing Director, NOCN