From insights come answers.

A series of articles from the Insider Pro team, in which we examine relevant topics and examples of current challenges that we see in our work with a huge range of organisations, across many sectors.

The productivity puzzle - can you solve it in 2024?

Posted by Jeremy Bowley
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The productivity puzzle in the UK is a longstanding challenge, one that seems resistant to both quick fixes and seismic shifts in economic policy. While technological advancements, government interventions, and investment strategies are often heralded as silver bullets, the real solution lies deeper within the fabric of how businesses operate and strategize.  We need productivity growth to make sure that we can grow as a nation and deal with the global inflation we have experienced in the last year.
The Current Productivity Landscape
Recent statistics paint a grim picture of UK productivity, lagging significantly behind other G7 nations. This is not a new problem, but it has been exacerbated by a confluence of recent geopolitical and economic upheavals—from Brexit and the COVID-19 pandemic to the ongoing effects of the War in Ukraine and the Middle East, and fluctuating interest rates. The broader economic and political climates have undeniably influenced the UK's productivity, creating an environment of uncertainty and reactive policymaking. For instance, Brexit alone has reshaped trade, labour markets, and regulatory frameworks, disrupting established business operations and supply chains.


Source: House of Commons Library. Productivity: Key Economic Indicators

Historical Context
However, the UK has faced and surmounted significant challenges before. The post-war rebuilding efforts, the Cold War, and the economic crises of the 1970s, including the Winter of Discontent, all presented substantial hurdles. This historical resilience suggests that while external factors do impact productivity, they are not insurmountable barriers.  There has however been a decline in productivity growth over the past 50 years, from an average 2.1% per annum between the years 1975 - 2006, to 0.2% between 2007 - 2019.  The pandemic years of course led to a further decline and we are struggling to turn this around even now in 2024.
The Limits of Conventional Solutions
In the face of these challenges, there is a rush to look to technology, increased investment, or changes in tax policy as panaceas. Indeed, technological innovation has the power to transform industries, making processes faster and more efficient. However, as seen in various sectors, technology alone cannot spur productivity if the workforce is not skilled enough to leverage these new tools effectively, or if organisational structures do not adapt to new operational paradigms.  The recent collapse in the e-passport system at our borders, led to a very unproductive few hours whilst border forces appeared powerless to manage efficiently without the technology.

Similarly, while government policies on investment incentives or tax relief can provide temporary boosts, they often fail to address underlying systemic issues. For example, significant investment has flowed into digital infrastructure and startup ecosystems, yet productivity growth remains tepid. The reason? These investments are not always aligned with a coherent strategy that addresses the specific needs of businesses or the economy at large.  The Government funded UK Productivity Commission set up by the National Institute for Economic and Social research has noted a North/South divide with London performing well but cities in the Midlands and North of England, suffering from poor communications and investment in skills.  Lagging sectors include manufacturing, Finance, Insurance and Communications technology.

What else could be drivers?  Ross Clark, writing in the Spectator last September had some good ideas.  Did the plentiful availability of Eastern European labour replace any incentive for investment in automation? Did the Equality Act of 2010 make it harder to recruit and manage the productivity performance of the workforce? Is the post-pandemic pattern of increased working from home, focus on work-life balance and mental health awareness, also contributing to our challenges in increasing productivity?

Rethinking Productivity Growth
This brings us to a crucial realization: the challenge of productivity is fundamentally a thinking issue. It's about how we design our business propositions and our work processes. Productivity growth is less about what tools we have and more about how we use them. It is about leadership vision, management practices, and organizational culture—factors that determine how effectively resources are utilized and how well employees are engaged.

True productivity enhancement comes from within the organization. It involves rethinking how tasks are allocated, how teams are structured, and how outcomes are measured. It requires a shift from traditional hierarchies towards more agile, collaborative work environments that empower employees and foster a culture of continuous improvement.

In conclusion, while external factors like economic policies, global crises, and technological changes influence productivity, the core of the issue lies in how businesses strategize and operate. The UK's productivity challenge is not just an economic puzzle to be solved by policymakers but a call to action for business leaders across the nation. The path to higher productivity is paved with smarter work designs and more innovative business models.
Some practical, fairly easy things you can do, right now:
  1. Reduce the number of meetings your team is involved in - evaluate the necessity of every meeting.
  2. Invest time in making sure everyone, at all levels, understands the 3 most important things the team will deliver, each quarter.
  3. Focus half a day a week on getting your team together in one room, to agree who is doing what and what they are not doing. Follow up each week to review activity.
  4. Use Whatsapp within small groups to communicate quickly - include urgent information, and lots of good news to help motivation and a sense of healthy competition.  
  5. Meanwhile, encourage people to speak to each other 1-2-1, to iron out issues and clarify who is doing what.

In this era of unprecedented change, the UK has the opportunity to redefine its productivity narrative, building on its historical resilience and forward-thinking leadership. The solution lies not in the hands of government alone but within the corridors of businesses across the country.

It is time for a strategic re-think of how we work and grow.

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Topics: Disruptive Procurement, Procurement People, Best Practice, Supply Chain Management