Its a Mystery

British productivity was growing steadily if slowly in the years before the financial crisis struck but it’s now some 16% below its pre-crisis level. 

The Bank of England has published a paper in their  quarterly bulletin of economic research, examining the competing explanations for the productivity puzzle and has a stab at estimating how much of that 16% shortfall they can account for. At best, the authors suggest they can explain about nine percentage points, but it is clearly a mystery beyond their easy solution.

The bank says errors in measuring output probably account for about two percentage points of the shortfall. A decline in the output of once highly productive sectors, such as oil and finance, might account for another two percentage points.

The paper goes on to suggest that  another three to five percentage points of the shortfall may reflect problems that are the legacy of the financial crisis. These include the idea that damaged banks have struggled to reallocate scarce capital away from “zombie” firms with poor prospects and few customers and towards more productive firms with big ambitions. Cyclical factors—such as idling workers and production lines—probably also account for part of the productivity shortfall, but the authors say it’s hard to say how much.

Perhaps this mystery will unravel over the next few months - the UK certainly has to hope this is a mystery and not an early sign of a real collapse.

Who decides?

Many countries have productivity centres to advise their government of productivity and related issues.

But do they do any good?

Is productivity something that can be shaped and steered by government?

I would say 'YES' from my experience in the UK - but not always in ways that might be expected.

Twenty or thirty years ago, the UK's productivity levels were disastrously low - UK goods were uncompetitive, of poor quality and over priced.

Now, however, UK industry is much better, the economy is growing - and UK goods have a much better reputation.

What happened?

Margaret Thatcher happened!

Like her or loathe her (and there are plenty in both camps), she transformed UK industry - by curbing the power of the unions and de-regulating the economy.

Most national productivity strategies seek to regulate  ... when they should be de-regulating!

Banana Skins

Most of the time we get things right.... at least if we have the skills to accomplish what we set out to do.

Occasionally, though, we slip on a banana skin - and we get something wrong.

A defect in Lean terms (one of the 7 wastes).

It is almost impossible to avoid all defects - though, of course, we try very hard.

What matters is how we deal with our mistakes - how we learn from them.

So, when you spot a mistake - don't assign 'blame', assign 'responsibility'  - for learning the lessons and making improvements.

Where does the answer lie?

I have been in the productivity' business' for longer than I care to remember.

Sometimes, I feel that the longer I am in the business, the less I know - or the less I feel confident to declare.

I started off as a 'work study engineer' - great training, but I soon realised that studying work was only a partial approach. To often, low productivity stems from 'non-work' system inefficiencies that surround the actual work.

So, I started to look at business processes and business systems.

Then I realised that often it wasn't the system that was broken but the culture of the organisation that de-motivated and disengaged the people.

So, where do I now feel that the answer lies?

I think I have worked my way 'up' the organisational structure and feel that change (for the better) has to start at the top with a 'planning and execution system' that stems directly from the organisational mission.  This must define and support 'excellence' and must translate into systems, processes and procedures - and skilled roles and tasks - which build in individual and team responsibility for that excellence, together with performance measures that ensure we remain 'on track' with our plans and targets.

Can I define and design such an organisation and support system?  Emphatically no!  BUT I can facilitate its design and execution by business owners and leaders who share the vision of a skilled, trained, engaged workforce who know and understand their own roles within the overall organisational system.

We need to 'flip' the traditional representation of an organisation structure and see the role of managers and leaders as creating and sharing a vision of excellence and then identifying and removing the barriers that prevent 'front line workers' from creating that excellence.