You would have struggled not to hear the word ‘productivity’ over the last few months. The recent ‘Industrial Strategy: building a Britain fit for the future’ white paper published by BEIS in November 2017 mentioned it no less than 175 times! In April this year, Mark Carney, Governor of the Bank of England, joined a group of UK business leaders in setting out ways to help firms improve their productivity. Usefully for all of us, these business leaders have launched an industry-led movement – Be the Business – to share insights and best practice in order to galvanise action across all sectors and all business sizes. As Tony Danker, Chief Executive, puts it, “This is a moment we cannot miss. For every business to raise its game and in turn transform our competitiveness as a nation.”

So, what is all the fuss about and how do small to medium-sized enterprises (SMEs) improve their productivity?

Firstly, productivity is simply a measure of business performance – output divided by input. The Office for National Statistics (ONS) tends to use UK labour productivity, as measured by output per hour. To get technical for a moment, you can use output per job or worker, but since this might change over time, say a lower average working week, output per hour is probably a safer bet. The key issue is not really productivity but our productivity relative to other nations and how this changes over time. This is when it starts to get interesting, depending on your view point, and the words challenge and dilemma bubble up.

Since the financial crisis, UK productivity has almost been static and is lagging behind our competitors and, to make matters worse, this is happening at a time when technological advances should be impacting positively on productivity. We are trailing behind Germany, France, US and Italy. So, perhaps productivity really does matter and we are facing a significant productivity challenge.

Secondly, and thankfully, help is at hand. Not only has Be the Business been formed, it has been hard at work developing a number of initiatives. Of particular relevance to SMEs is the Productivity through People programme. A unique collaboration between industry and academia, Productivity through People is an innovative 12-month programme for leaders within SMEs, wishing to “work on the business, not in the business”. By sharing critical insights for success regarding people, leadership, communications, innovation and ultimately productivity, the objective is to create a high-performance workplace with a fully engaged workforce.

Lancaster University Management School was delighted to help co-create the first pilot Productivity through People programme, which ran successfully in the North West of England in 2016/17. This drew directly on two decades of delivering SMEs growth and regional development programmes and our Centre for Productivity and Efficiency. Uniquely, the programme is industry-led giving delegates of smaller firms privileged insights from world-leading companies with tailored site visits to BAE Systems, Rolls-Royce and Siemens. As Andrew Peters, Managing Director of Siemens’ digital factory at Congleton, one of the NW site visits, recommended, “get an authentic, external perspective on your business, prioritise employee engagement and don’t overload senior managers.”

The first cohort of over 20 growth-orientated leaders in small and medium businesses graduated in December 2017. Many reflected positively on the 12-month experience and the impact on their businesses:

  • Chris Mayne, Operations Director at Forsberg Services – producer of high precision navigation solutions, says the company changed at a faster rate in the 12 months following the programme than in the previous six years. He believes getting employees engaged and empowered has resulted in morale and engagement improving across the company.
  • Bronwen Bamber, Product Development Manager at Butlers Farmhouse Cheeses – a family business dedicated to making the very best handmade British farmhouse cheeses, says being a great place to work improves productivity. She believes getting staff on board at the earliest stage of product development has helped her to deliver faster, and more efficiently.
  • Chris Blade, Managing Director of Cumbria Crystal – the last producer of completely hand-blown and hand-cut, luxury English crystal in the UK, says introducing a number of affordable, incremental changes and improvements has made a big difference to his firm’s productivity. Since participating in the pilot, Cumbria Crystal has doubled turnover and more than tripled gross margin.

Of course, a single pilot is not going to impact much on UK productivity. The challenge now is to learn by evaluating the first cohort, sharing best practice and helping to build a movement of universities delivering Productivity through People across the regions. With the University of Bath and the University of Strathclyde also delivering Productivity through People we are beginning to make some progress!

By Professor Nigel Lockett, Lancaster University Management School (LUMS)

Professor Lockett is Professor of Entrepreneurship at Lancaster University Management School and Academic Led for the Productivity through People programme in the North West of England.