Philip Hammond has used today’s 2017 Spring Budget to announce a series of spending measures aimed at boosting UK productivity, saying that “combatting the productivity challenge is at the heart of the Government’s plan”.
According to the Office for National Statistics (ONS) productivity is a widely used measure of economic performance capturing how much output is produced by a set of given inputs, such as capital or labour. Labour productivity, which is defined as the ratio of output (such as gross value added) divided by the labour input used to create it, is one of the most widely used measures of economic performance of a nation or an area. A higher level of productivity means that a higher level of output is being produced per unit of labour input, and is seen as critical to a well performing economy.
It’s about getting more out of less, basically.
In its latest assessment, the ONS finds that the regions of the north and midlands of England (North East, North West, Yorkshire and the Humber, East Midlands and West Midlands) had productivity levels between 10% to 15% below the UK average in 2016 compared to London where productivity levels were 32% above the UK average, highlighting that there are significant regional and sub-regional differences in productivity.
UK productivity is also lower than many of its global neighbours. Compared to the rest of the G7 advanced economies, for instance, output per hour worked in the UK was 18% below average and output per worker 19% below average in 2015.
Economies with higher productivity are generally more competitive, and unless the UK closes the productivity gap, it will find it hard to keep up with its international rivals.
The Chancellor proposes spending more money on education, skills and infrastructure to help boost productivity, all of which is welcome, but employers can do a lot for themselves simply by improving their sustainability and CSR performance.
Improved sustainability and CSR lead to a more engaged and productive workforce
There is no single factor that can be blamed for low productivity: sub-par education and training don’t help, and nor does poor management.
Good leadership, on the other hand, can make a big difference – and organisations with good leaders tend to have employees that are more engaged, feel more fulfilled and, as a consequence, work harder and are absent less often.
Taking a strong lead on sustainability and CSR, in particular, has been found to significantly improve productivity.
When people feel that theirs and their employers’ values are aligned, evidence shows that they become more productive, and more engaged in the company’s success. According to a 2013 meta-analysis of 1.4 million employees conducted by Gallup, organisations with a high level of engagement report 22% higher productivity. They also report 48% fewer safety incidents and 41% fewer quality incidents (defects) all of which help to avoid the sort of downtime that reduces productivity.
A more motivated and engaged workforce, that feels valued, is much more likely to stay in post rather than seek out opportunities elsewhere. For instance, a survey of 1,007 workers in 2011 found that 49% of UK employees said they were more likely to stay with an employer that encourages its workforce to donate time or raise money for charity within working hours.
A direct consequence of a more content and stable workforce is the reduction in recruitment and training costs that it can lead to by lowering staff turnover.
So, whilst you wait for the Chancellor’s promised spending measures to cut through, why not start improving your sustainability and CSR performance to boost productivity? It doesn’t have to be overly burdensome and complex.