News about the stagnant levels of productivity growth in the UK are increasingly common. Certainly, the Bank of England and the Government are preoccupied with the so-called ‘productivity puzzle’, with productivity slowdown in the UK more severe than in other advanced economies. At the same time, and despite these recurring headlines, very few businesses seem particularly concerned with the issues of productivity.
So what is productivity and why does it matter?
In simplest terms, productivity is a measure of the value produced per hour by the average worker – in essence, productivity reflects how smartly we work. Labour productivity is one of the most widely used measures of economic performance, with higher levels of productivity relating to higher levels of output per unit of labour. Productivity growth, therefore, is the ability to generate more output from the same levels of input. While productivity is not easy to measure, it is still the best overall index of living standards and prosperity.
The UK faces different problems to most other advanced economies because of its economic geography, with some of the widest variations in productivity between regions and cities any country globally. Perhaps predictably, levels of productivity are more than 70 per cent above the UK average in London whereas less than 200 miles away in Wales productivity is only 70 per cent of the UK average.
Analysis from the Office of National Statistics has previously found levels of productivity in Sheffield (South Yorkshire) to be the lowest of the 13 largest city regions in the UK, which is particularly interesting given the devolution of power as discussed in the previous issue. For Sheffield and the City region the challenge of raising levels of productivity is very real, and demands a targeted approach to address weak levels of productivity in the region. In short, we need to raise the productivity of the Sheffield City Region if it is to deliver growth as part of the Northern Powerhouse.
Making Sheffield smarter
Most SMEs are concerned with profitability and occasional business growth, and while not the same as productivity, the issues are related. The productivity puzzle is complex and multi-faceted, shaped by factors such as investment and technology to skills, work and wellbeing, although exactly how these factors affect productivity is still an open question. In the Sheffield City Region making SMEs smarter is a particularly important piece of the puzzle in raising productivity.
SMEs tend to be less productive than their larger counter parts, although there is often scope to be more productive. The challenge is often in identifying what steps can made and then how to best go about implementing them. The starting points for many SMEs is a process of self-reflection, and can start with reviewing operational processes; ensuring that employee both are appropriately skilled and deployed; making sure that the technology and tools are right for the business; and that recognising the management and leadership team in setting the vision and ambition of the business.
It is often the case that many SMEs are so absorbed by doing business that they do not have the time to embark on the business planning to ensure their future competitiveness – but this is time well spent. The newly established national Productivity Insights Network, led by Sheffield University Management School is funded by the Economic and Social Research Council to change the tone of debate, by identifying robust insights and practical steps to working with partners from academia, industry, government and charities.
Original post: https://unltdbusiness.com/if-you-ask-me-the-productivity-puzzle/