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More for Less: Salvation or Hollow Rhetoric?

George Blair  19-01-2017

How important is productivity?

When organisations find themselves in financial difficulties, the usual response is to demand “more for less”.  In two words: improve productivity.  This is a laudable goal.  After all:

“Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” Paul Krugman, The Age of Diminishing Expectations (Krugman, 1994)

This is equally true for organisations as whole economies.  It is very easy to say, but how easy is it to achieve?  For instance, according to The Economist, “the French could take Friday off and still produce more than Britons do in a week. Confounding stereotypes, Italians are 9% more productive.  A British employee produces a fifth less than a French one, but he or she is more than a third cheaper to hire”. (Wilson, 2015)  The Bank of England estimated that output per hour is around 16 percentage points lower than it should be if productivity had grown at its pre-crisis pace. (Business).

Why is our productivity so low? 

Before we answer that question, we need to understand why many determined attempts to improve productivity fail.  This suggests that we are not looking for one simple solution, rather a combination of carefully thought through and integrated approaches.   The reasons put forward for our low productivity are:

  • Cheap labour has resulted in hand car washes replacing many car-washing machines.  Many of the hand car-washes are said to not pay national insurance or VAT and to employ East Europeans on a cash-in-hand basis (the Eastern Europeans clean up: Number of sites has halved in 15 years as hand-wash businesses boom , 2015).
  • Lack of long-term company investment.  This exacerbated by the prevalence of quarterly reporting which focuses on short-term results, although there is no legal requirement to report so frequently.   
  • Lack of infrastructure investment, on roads, railways, broadband, energy, housing and NHS IT 
  • Cut backs in university research
  • Low levels of skill.  George Osborne recently noted that “we’re one of only three OECD countries where the skills of our 16-to-24-year-olds are no better than our 55-to-65-year-olds (Elliot, 2015)
  • Survival of zombie firms, kept afloat by low interest rates and lenient lenders
  • There are some examples of lower than average productivity in the public sector.  For instance, London Underground performs lower than the average of the Western European and North American metros, however between 2012/13 and 2013/14 it improved on this metric by two per cent.  (Stretton, 2015)

Where do we go wrong?

Attempts to improve productivity usually entail just cutting staff budgets in the hope that fewer staff will do the same amount of work.  This is often achieved by working longer hours, rather than improving how work is done through greater efficiency and effectiveness.  Staff burn out, higher rates of attrition and lower quality output are often the consequences

What drives productivity?

So that we can achieve sustainable productivity improvement, it is necessary to understand the different factors that influence it, as shown in Figure 1.

Figure 1: Productivity Drivers

Source: George Blair

The eight factors and the issues that they raise are designed to stimulate a review of your organisation and to guide you in where your priorities are likely to be.  We cover them in depth in our More for Less our one-day workshop.

The Toyota case study

Toyota is a great productivity champion, which is why it is the world’s best-selling car manufacturer.  It has spawned shelves of books about its production system, more widely known as lean manufacturing or lean thinking in the service sector.

Toyota’s prime objectives are (Toyota Production System):

  • To provide the customer with the highest quality vehicles, at lowest possible cost, in a timely manner with the shortest possible lead times.
  • To provide members with work satisfaction, job security and fair treatment.

The first objectives would be a surprise to no one, but what about the second?  It means that Toyota is very, very reluctant to make staff redundant.  This makes business sense, as they rely on their staff to constantly improve productivity.  Why would they, if it led to them collecting their P45s?  Staff are multi-skilled, which gives the company the flexibility to respond to the rapid market changes.

Just-in-time working is a central feature.  Customer demand stimulates production of a vehicle. In turn the production of the vehicle stimulates production and delivery of the necessary parts and so on.

Staff have a crucial role in eliminating waste by constantly improving working processes. This is because inherent inefficiencies or problems in any procedure will always be most apparent to those closest to the process.  One example of waste is poorly designed workplaces where time is wasted when staff walk around to pick up supplies or to go to different machines. 

Toyota staff exercise a high level of responsibility and can stop a production line, if they notice quality problems.  They also monitor their own performance on readily visible notice boards.  The role of the manager becomes one of coach and consultant.   For instance, they follow the flow of activity and ask why things are done as they are, in a respectful manner. 

This is just a start – why not come to our one-day More for Less programme to improve your organisation’s productivity Wednesday, 26 March, 2017, 10.15 - 4.00 pm? 

Author: George Blair - 07768 193859

To find out about the excellent HR Society programmes contact Gemma Jones - gemma@hrsociety.co.uk

Works Cited

Business. (n.d.). Retrieved July 13, 2016, from BBC: http://www.bbc.co.uk/news/business-31602582

Elliot, L. (2015, May 24). Will George Osborne's productivity plan help make Britain a world-beater? The Guardian.

Krugman, P. (1990). The Age of Diminishing Expoectations. Cambridge MA : The MIT Press.

the Eastern Europeans clean up: Number of sites has halved in 15 years as hand-wash businesses boom . (2015, December 15 ). MailOnline. Retrieved January 9, 2017, from Daily Mail: http://www.dailymail.co.uk/news/article-3360199/Number-automatic-car-wash-sites-halved-15-years-hand-wash-businesses-boom.html#ixzz4VH7fCZ1B

Toyota Production System. (n.d.). Retrieved November 1, 2016, from Toyota: http://www.toyota.com.au/toyota/company/operations/toyota-production-system

Wilson, S. (2015). Why are we so unproductive? The Economist.

                                                                                                                                                 

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