ACCORDING TO THE BANK OF ENGLAND’S CHIEF ECONOMIST, BRITAIN NEEDS TO IMPROVE THE QUALITY OF ITS MANAGERS IF IT IS TO BE COMPETITIVE ON THE GLOBAL STAGE.
Andy Haldane, chief economist and executive director of monetary analysis and statistics at the Bank of England, is the latest to tackle this age-old problem “Productivity growth has consistently under-performed relative to expectations, since at least the global financial crisis,” he said. “This tale of productivity disappointment, in forecasting and in performance, has been extensively debated and analysed over recent years. Some have called it the “productivity puzzle”.
Poor productivity appears to be a problem for the UK Plc with a long line of politicians, economists, academics, business leaders and management thinkers all trying to solve the problem.
Each year that passes, and as each new turning point in productivity has failed to materialise, the mystery has deepened. Haldane suggests that one of the reasons for the UK’s poor productivity is that it is the result of management failings, citing the work of two prominent economists, Nicholas Bloom and John Van Reenen as evidence.
Research has shown that poor practices are most pronounced in sectors where competition is weak and in family-owned firms where management control rests with the eldest son.
There is a statistically significant link between the quality of firms’ management processes and practices and their productivity. And the effect is large. A one standard deviation improvement in the quality of management raises productivity by, on average, around 10%. This suggests potentially high returns to policies which improve the quality of management within companies. Therefore a shift here could mean a huge impact on the bottom line.
Placement of blame on bad managers for the UK’s productivity crisis may seem harsh, but there is some truth in this assertion. Petra Wilton, director of strategy and external affairs at CMI, said “Poor management currently costs our economy £84bn each year, and Britain lags other countries when it comes to people skills. If we want to transform the UK into a globally competitive economic power capable of thriving post-Brexit, we must invest heavily in the main cause of our productivity crisis – poor management and leadership”.
Did you know that four out of five British bosses are 'accidental managers' who've never been trained, and only one in five companies invest in training their managers. As a result the UK currently has an estimated 2.4 million untrained managers, and not enough employers are investing in developing leadership and management skills.
With Article 50 in motion it’s more important than ever that we fix the UK’s long-standing productivity puzzle. Investing in apprenticeships to boost management talent, as well as technical skills, is a vital part. We also need better home-grown leaders, and more of them, to close this productivity gap. Better people skills will also help to raise trust in business, create greater diversity and improve employee engagement - all of which, in turn, will boost productivity. Training is no longer a ‘nice to have’, it’s a must.
Companies need to shine a light on the poor practices that are currently limiting their productivity so that they can then take remedial action to improve their management capabilities, and their productivity through appropriate training.