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UK Productivity: Why the Chancellor and the rest of us might be missing a competitive trick

Re-Shaping Britain’s Economy
Amongst the post budget discussions about National Living Wages and welfare cuts, was an explicit and implicit argument that organisations / businesses were going to pay for all this by becoming more productive and therefore more profitable.

Indeed one ‘Tory insider’ quoted on the Today programme said the budget ‘was a kick up the backside for lazy businesses to get more productive!’ Osborne himself accused businesses of frankly have taken a free ride by not training their own workforce.

This is unfair. If productivity is the answer to us becoming a ‘high wage,  low benefit, low tax economy’,  I am increasingly convinced that there are features of our decision making culture which need to change and this is true of both UK organisations and government. It can be argued that our leadership decision making is simply not as effective as that of several of our competitors and it is this, as much as anything else, that impacts on our relative poor performance on productivity.

The Productivity Puzzle
What has become known as the productivity puzzle has become a central challenge for the UK economy.  All in all, British workers produce on average 30% less than workers in Germany, France and USA.  And although the economy overall is gaining ground this is not reflected in the rates of improvement in productivity which lag behind those of our competitors. Productivity is getting relatively worse and this will impact upon living standards and life experience as a whole. Declining relative productivity moves the UK overall towards a low-cost, low-wage economy with all the social implications that such a trend would bring.

The Bank of England, and perhaps the Chancellor’s view, of this puzzle is that a key lever for improving productivity should be increasing levels of capital investment and also a better focus on where that investment is made. The argument is made that if we spend more nationally and organisationally on infrastructure, technology and skills development, productivity should rise.

UK Leadership Decision Making
Assuming the economists are right, will this be enough?  Not even economists think this – for capital availability, history has shown, does not always lead to investment. At this the spirits of ‘confidence’ and ‘sentiment’ are invoked – and we all join hands and hope for their return. But what if these things are just side-effects of something deeper; such as the way we go about making significant and strategic decisions.

With the interminable wait for another runway to serve the south east of England as an example, it can be argued that the culture of leadership in the UK could be perhaps one of the most significant inhibitors of productivity. It seems that decision making in the UK can be complex, overly-political and often expedient rather than effective.  Where this is true there will be a dramatic impact upon efficiency; cost, time spent, resource utilisation etc. which block attempts to improve productivity. So, given that the links between leadership and productivity have long been explored and established through psychological and management research we should start to bring a greater rigour and focus on the impact of this culture on the UK economy.

How We Compare
It could be that our competitors are overall better at it. Researchers such as Richard D Lewis, author of ‘When Cultures Collide, Leading across Cultures, have shown there are important national differences in leadership styles and the approaches to decision making, and taking, that flow from them.

Specifically we should question whether the UK leadership culture has the ‘decisiveness’ (enabled through a clarity of process, disciplined thinking and consensus building characteristic of other more productive nations) to enable the timely and effective investment decisions that will power UK productivity?  And if this is not the case, can the UK Government role model the leadership though which the cultural shift might be driven?

 

Comments on this Post

Jamie Garner on 14th July 2015

Steve - good article that lays out an interesting angle in what many have been commenting about recently. Where I think that you have highlighted an opportunity to bring more rigor into decision making is connected to a parallel discussion about the use of data (big data, little data - in fact data of all sizes and structures!) and building a better body of evidence around which decisions can be made more effectively. This is never better illustrated in the gap between how decisions are made by organisations about their workforce or people in direct or indirect employment and the accessibility of data to actually improve the quality of those decisions. Sufficient data now exists for most organisations in their own systems, and given advances in cost effective technology, it could be more readily accessed by decision makers than ever before. The need to educate business leaders in what to look for (what questions to ask), and how then to use existing and developing 'analytics' skills to generate the evidence based insight that informs effective commercial decision making is a critical next step

Steve Carter on 13th July 2015

Precisely Nick I think it is the mix of consensus and discipline that is often missing - the somewhat cussed approach of UK thinking may be great for innovation but hinders the delivery of that idea effectively

Nick Owen on 11th July 2015

Thanks Steve, your comments triggered a few thoughts for me. Research (e.g. (Trompenaars/Lewis et al) and experience indeed indicate that the French and German cultures are much more 'communal' than the more 'individualistic' cultures of say the UK and Italy. In the former, business is seen as having an obligation to serve the wider community; in the latter to serve the leadership and shareholders. While this is necessarily a generalisation, and there are a number of enlightened UK organisations, it does suggest why an average worker in the UK might not be so inclined to be as productive as his or her French or German counterpart. What's in it for me? is a powerful (de)motivator. The French and German workers sense that wealth creation and distribution extends far beyond the bottom line and includes social, cultural, psycho-logical, emotional, and spiritual wealth just as much as material wealth. Clarity of process and consensus, as you rightly mention Steve, are also products of more sophisticated and complex cultural approaches based on many factors and which strive to engage the many rather than the few. As an example the UK's outmoded first past the post political system actively inhibits any meaningful opportunity to grapple with real consensus in an increasingly complex society. The work of various developmental psychologists points ways forward here (Torbert, Cooke-Greuter, Kegan, Barrett et al) and in particular Frederic Laloux's recent book 'Reinventing Organisations' has caused quite a stir. A key point they make is that today's complex and emerging world calls for more complex and emerging approaches where participation is of the essence. Finally, your 'decisiveness' model of clarity, disciplined thinking, and consensus reminded of a long standing, tried and tested model that's been around in the theatre for many years. It's called rehearsal and was around long before Otto Scharmer called it U-Theory. The point is to be decisive when you think you've got a viable model based on the consensual, pragmatic, reflective, active rehearsal process. Put it on stage (performance) and continue adjusting and improving it once it's up and running. And if it doesn't work, pull the plug asap and try something else. Is there a point I'm trying to make? I guess it's that we need to bear in mind and address the overall context (culture) in which we operate if any content change is to have a chance of success. Which I think is exactly the point Steve was making

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