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CBI: Better people management could help solve UK productivity crisis

May 20
Tags: UK: London
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The UK’s well-documented productivity crisis could be countered by businesses improving how they engage with staff, according to a new report from the Confederation of British Industry (CBI). 

It’s no secret that the UK has long had a productivity problem, with UK productivity growth currently lagging 16% behind the G7. Indeed, the last decade has seen labour productivity growth stalling at a lower rate than at any time in the 20th Century. And the CBI analysis warns that the country is missing out on billions as a result. 

According to the CBI report - entitled ‘Great Job: Solving the productivity puzzle through the power of people - the UK could add some £110 billion to the economy simply by improving people management practices within British firms. 

As the CBI explains, the reasons for the UK’s productivity failures are “complex and deep-seated”, but one factor is that UK businesses have not kept up with their international peers on the people management front. Indeed, the report revealed that UK businesses perform either at or below the average for other companies in the EMEA area on almost 80% of good people practice indicators. 

The report and toolkit, which was produced with analytic and research support from McKinsey & Co, aims to help businesses make small people management improvements for big returns when it comes to productivity. It revealed that businesses that take their management practices from the lowest level to the UK median can increase their productivity by 19%. 

According to the research, UK companies are aware that effectively leading, engaging, and developing their staff is vital, and indeed, many organisations are already adept at doing so. 

The CBI now plans to step up and highlight the actions businesses across the country can take to improve further, and has recommended that - given the huge economic prize at stake - businesses and the government should unite to accelerate productivity progress. 

It recommends three main tactics for the government:

  • Making businesses want to win at people management by kick-starting a race to the top, in the form of new charters, kitemarks, or a competition. 
  • Giving businesses more opportunities to benchmark their performance when it comes to people management, and to learn from others’ success
  • Creating strong incentives for firms to enable more staff to have a shared stake in the success of the business

For businesses, the CBI recommends:

  • Setting people management targets and making them as important as commercial targets
  • Making the Board accountable for such targets and communicating openly with employees and the public about business performance
  • Linking line managers’ reward strategy with their people management performance

Carolyn Fairbairn, CBI Director-General, warned that often senior leaders can underestimate the value of establishing good people practices as a priority, while overestimating their performance in this area. 

“Improving productivity is not about people working harder or longer,” she explained. “It’s about ingraining the kind of management practices that raise performance across the business. Putting people management targets on an equal footing with commercial targets, for example, is a powerful means of concentrating minds.”

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