United effort required to bridge productivity gap
Productivity is one of the greatest challenges facing the county and the UK. But what is it and what can businesses and their leaders do about it, asks STEWART BARNES of Quolux
NOBEL Prize winner Paul Krugman famously said: “Productivity isn’t everything but, in the long run, it is almost everything.”
What does that mean to companies in Gloucestershire and how can businesses begin to address the Productivity Puzzle with its adverse effect on the performance of the UK? Research into productivity performance at county, national and international level suggests a lot of effort is required to improve competitiveness.
While most business people I meet state their businesses are performing well, they are surprised to hear the productivity of Gloucestershire companies is six per cent below the national average – which suggests we can all do better.
Of great concern is the drop in output per worker during the last decade from when Gloucestershire was four per cent above the UK average.
Just as sand slips between fingers, the data confirms that bit by bit performance is ebbing away across the county compared to businesses across the country.
But as it is, small amounts, each and every day, we do not notice it.
Perhaps this provides a first pointer to leaders to discuss productivity in their boardrooms and introduce a way of measuring it.
The picture is no better at the national level where the UK’S productivity is 18 per cent behind the G7 average.
Interestingly, the productivity of an engaged workforce compared to a disengaged workforce is 18 per cent higher.
But with the same research stating that 79 per cent of workers – a whopping 20 million people – are disengaged, a cultural revolution is needed.
So perhaps this provides a second pointer to leaders to create conditions in the workplace to engage staff more.
Worryingly, the UK is
35 per cent behind Germany meaning an average company in
Gloucestershire is 41 per cent behind its direct equivalent in Germany. Delegates on Quolux’s LEAD programme demonstrate a 42 per cent increase in productivity so it is possible to close the gap. Benchmarking sales per employee throws up some interesting statistics. In the UK, average output per person is £147,000. How does that compare against your company’s performance? In Germany, the output per person soars to £335,000. Benchmarking against similar companies in Germany provides an insight into how many millions of pounds of profits can be generated by small and mediumsized enterprises without recruiting more people. A 10-person firm can increase sales by almost £3m and increase profits by £2m and a 25-person firm can increase sales by almost £5m without employing anyone else. Corporation tax generated from more productive SMES could raise £75 billion per annum, enough to pay for almost three-quarters of the annual NHS budget.
Business can be a force for good, making a difference to society by becoming more productive.
So, what will you do differently to play your part in closing the productivity gap?
I am a director of the Centre for Innovation and Productivity at the University of Gloucestershire and we are hosting a Productivity Round Table with an invited small group of local business and public sector leaders to consider how Gloucestershire organisations could work together to tackle the productivity issue.
This can be a game changer for the county, encouraging companies large and small to work together with targeted improvements in the skills agenda.
All companies across the county are encouraged to contribute to the industrial strategy which local enterprise partnership Gfirst LEP is compiling and submitting to the Government.
Quolux sponsors the Lifetime Achievement Award at the Gloucestershire Business Awards.