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Organisations will fail to boost their productivity unless they prioritise greater investment in workforce development and agile working practices, according to new research by the Chartered Institute of Personnel and Development.
Its new report, Productivity: Getting the Best out of People, explores the factors that help to explain why some businesses have higher productivity than others and finds that there are clear links between productivity and how people are managed at work.
The report highlights how a clear focus on improving performance can help businesses get the best out of their people. It finds that performance tends to be higher in businesses where there is a focus on higher quality products or services rather than only on low cost and where workplace culture is clearly aligned with the future direction of the business. Investment in workforce training and an intelligent approach to the implementation of ‘smart’ or agile working practices also had a positive impact, said the report.
The CIPD is calling on the Government to demonstrate its commitment to raising productivity by prioritising investment in vocational and further education and skills funding and by taking a leading role in the drive to improve workplace management.
Peter Cheese, CIPD Chief Executive, said: “Productivity starts with people. Our flexible labour market’s ability to create jobs has exceeded expectations, but our report shows that increasing headcount is now the most common way that businesses respond to increasing demand. This has worked well to date and has boosted employment, but the labour supply is already starting to tighten and productivity has not been improving. We need a shift in focus towards increasing the value generated by the workforce and how work is organised. This will require a renewed focus on the way people are managed and developed to deliver ‘smarter’, more productive working.”
Mark Beatson, CIPD Chief Economist and author of the report, added: “Productivity in the UK is noticeably low, especially when compared to other developed economies. The reasons behind the UK’s poor performance are deep-rooted and complex. Government investment is vital to increasing productivity, but it needs to be broad-based. Big investments in infrastructure like HS2 will not be enough on their own. Decisions over how we fund vocational and further education and support small businesses to raise their game and get more out of their people are just as critical to our future prosperity as investments in transport, infrastructure and technology and need to be given more attention by Government and businesses.”
Despite ongoing productivity concerns, the CIPD’s report found that only 41% of businesses consider increasing productivity to be a current priority. A third do not currently have any measures of productivity in place and understanding of the term ‘productivity’ itself is patchy – in practice, it is often confused for performance.
The report says that the quality of management and people practices within an organisation, management-employee relations, trust and employee engagement can all have an impact on an organisation’s productivity yet they have received very little attention from Government. It says that in part this is because these issues fall between the gaps of departmental responsibility and thinking and because they are seen as ‘soft’ issues, best dealt with by individual companies. The CIPD welcomes the Chancellor’s intention to put productivity at the heart of next week’s Budget, but warns this could be a missed opportunity unless there is a strong focus on workplace productivity and a more joined-up approach across the relevant major government departments.
The CIPD makes various recommendations, for instance, calling on the government to give higher priority in its spending decisions to “investments in human capital that enhance the UK’s future productivity”.
It calls on businesses to:
– Ensure their product and service strategies and their organisational culture support the future direction of the business
– Invest in developing people and provide the tools and support they need to perform to the best of their abilities: this includes well-designed jobs, agile working practices and technology that releases individual creativity rather than constrains it
– Keep their management practices up to date and fit for purpose and ensure that management at all levels are trained to implement them effectively
– Involve the entire workforce in a continuous search for ways to improve business performance because it says “employees are often the best source of ideas about how to do their job better”. It adds: “This will only happen when management and employees trust each other and when employees believe their ideas will be taken seriously and benefit employees as well as the bottom line.”