David Cameron told British businesses earlier this month to offer their employees a pay rise. His rational for this piece of advice was that the economy is improving: employment is increasing, basic costs are static or falling and generally organisations have a nice platform from which to operate.
There was one slight snag to the prime minister’s argument, though. It’s true a lot of indicators are positive, but a critical one, at least where pay is concerned, is that the productivity of organisations has been scraping along the floor for years and years.
Productivity – the average economic output per worker within an organisation – is important because unless it increases, unless companies continually produce more good stuff from individuals, they won’t create the wealth needed to top up salaries.
HR professionals agree with businesses that this is a big deal. Responding to Mr Cameron’s demands, Ben Willmott, head of public policy at the Chartered Institute of Personnel and Development, says the prime minister should take a closer look at what’s dragging wages down.
“Yes, costs are falling and it’s cheaper to do business, but productivity growth is still stalling,” he says. “Simply asking businesses to improve pay without examining the factors contributing to our poor productivity fails to address the underlying cause of low wage growth.”
Mr Willmott has some views of his own on how to increase the productivity of workers. We must invest in our “human capital”, he says, as well as infrastructure and technology. But what specifically does he mean by that?
Good managers can inspire the people under them, not just with back-patting and incentives, but by communicating clear messages from higher up the command chain and articulating an obvious path to achieving important business targets.
Qais Al-Khonji, an Omani serial entrepreneur who has spent several years in the UK, says the key to a productive workforce is providing conditions in which people actually want to do their job.
Research by Raconteur and Google revealed that ‘better leaders’ is seen as the single biggest factor which could provide a boost to organisations
People don’t need flowery messages of support, he says, they just need to understand a connection between their role and key objectives; that and the autonomy to see projects to fruition without being questioned or assessed at every turn.
“A good way to keep people interested and motivated at work is handing them responsibility for a job they enjoy doing,” he says. “If you give people a job they love and they have some decision-making freedom then productivity takes care of itself.
“You don’t need to spend large amounts of money on incentives for people, just make it so they really want to come to work in the morning and productivity will take care of itself.”
Of the top five ways to increase productivity cited by bosses in the Raconteur/Google research, four relate to improving conditions for employees. Professional development, flexible working patterns and better engagement with staff all ranked highly, with technology the only “non-people” method of bettering things.
All of these factors stem from the top. Strong leaders with a mature understanding of how to get the best from their people will invest in the right areas, and kick-start a philosophy of support and encouragement that trickles down through their organisation.
Hari Mann, a strategy specialist at Ashridge Business School, argues that technology has fuelled productivity increases of between 2 and 3 per cent in recent years, a factor that also helped tiny businesses become productive enough to compete with more established players.
But today that effect is levelling off, says Dr Mann, and businesses must look to their people and smarter working practices for renewed impetus.
“Productivity increases in the last two decades were fuelled primarily through advances in technology; we are now having to look at how we can develop and gain from higher productivity through the skills and the people we have,” he says.
“The crisis we face is caused by a lack of appropriate skills. Have we developed the right structures in our education system and have we encouraged firms to spend enough on the development of their employees?”
Cost is a significant brake on organisations’ investment in essential skills. When economic conditions are bleak, cash is scarce; when the economy picks up, as it is doing now, it’s arguably too late. The horse has not just bolted, but skipped county.
However, Stephen Pierce, Hitachi Europe’s chief HR officer, argues that financial considerations should only form a small part of the equation. More important than investing a lot, he says, is figuring out the link between what skills will be needed in future and how organisations can meet those needs.
Productivity increases in the last two decades were fuelled primarily through advances in technology
“Our staff have to be able to work successfully in a volatile, uncertain and complex environment, and we need the right people in the right roles who are equipped with the expertise and experience they need for success,” he says.
“But there is no ‘right’ amount for businesses to invest and successful talent management takes many forms with different levels of cost. Rather than focusing only on money, we need to understand the gap between the skills we have today and those we will need for the future, and then to plan and prioritise actions to bridge the gap.”
In fact, investment doesn’t have to involve money at all. Time spent developing productive ideas to increase understanding between levels of command works too. The outlay here is diverting salaries from core jobs to new team-building tasks, but no extra money is required.
Technology company Fujitsu has adopted the idea of connecting people within the organisation for the purposes of better clarity and understanding. Rachel Rose, head of talent management at Fujitsu UK and Ireland, says it is paying dividends.
“Something we have found key to managing our talent pool is providing active senior-level support from the chief executive and executive board as part of a mentoring scheme,” she says. “Each board member mentors three or four employees. This investment is hugely appreciated by the mentees and is then paid forward from the senior team to junior team members, from juniors to graduates, our grads through to apprentices.
“Now what is great to see is this is filtering back up. We have younger members of our company who are digital mentors to some of the older employees, passing on their skills. The exposure to a diverse range of activities inside and out of the business gives employees a breadth of experience and increased knowledge with which to apply in their work.
“The more rounded our employees are, the more experience they can bring to their clients. As such we assist our talent pool to join non-executive boards, become trustees for charities and pair our graduates with ‘buddies’ in our global offices.”
Such a fluid approach is harder to achieve in large businesses than it is in small ones, but the positive impact of board members taking a direct interest in employees on the first rungs of the career ladder is likewise all the more powerful.
UK productivity is a problem and ever-better technologies alone are not enough to stoke the fires. Bosses must get with the programme, invest in skills, of course, but also allocate time and energy to “soft” solutions as well.
Even in this technologically driven business environment, the destiny of an organisation, whether it thrives or falls apart, remains in the hands of its people.