Gain from productivity improvements
How to solve UK Productivity Crisis?
There is a lot of talks currently about productivity or rather the lack of it in the UK. And rightly so. Recently, the economic think tank; The Resolution Foundation, said that “the UK is on course for its longest fall in living standards since records began more than 60 years ago, with real disposable incomes now set to fall for 19 successive quarters.”
I was reading an article by Liam Halligan in The Sunday Telegraph this weekend entitled “We must solve this productivity puzzle”. In this interesting article, Liam Halligan suggests a kind explanation for low UK productivity being the significant downward change in the proportion of the UK economy working in manufacturing from a third 40 years ago to less than a fifth today. Actually, in proposing this explanation he may have stumbled across part of the solution to his puzzle.
The fact that 80% of the economy is in non-manufacturing sectors is not an excuse for low productivity but a major opportunity for these sectors to learn from the manufacturing industry which has, on the whole, made major gains in productivity in the fight for survival faced with stiff global competition over the past 30 years. Now, it’s time for other sectors to catch up.
In manufacturing, processes are understood and documented, value and non-value adding activities are clearly identified and the focus is on increasing the proportion of value-adding activities through standardisation, continuous improvement and Lean Manufacturing methodologies. In service functions, processes are seldom documented or standardised in fact the need for such rigour is often ridiculed – people know how to do their jobs don’t they? As a result, a lack of measurement and failure to clearly separate out value adding activities means much waste is hidden within this unproductive economy.
So, it’s time for the service sector and service functions within businesses to improve their productivity by learning from our manufacturing industry. Functions and processes need to be understood, need to be analysed to identify where the value is being added and where waste is being institutionally accepted. Measures which focus on Quality, Value and Delivery need to be introduced across all functions and Lean techniques adopted to eliminate waste. If you can see the waste then you can start to eliminate it. But there’s one more key ingredient.
Perhaps the second key ingredient is more important. The pursuit of Excellence. High productivity is not about a set of tools and techniques instead it is a mindset. It requires a paradigm shift in approach and business leadership. The paradigm shift required is a relentless quest to eliminate all waste from the process with a vision of the perfect state were all activities add value to the customer product or service.
In the manufacturing sector, managing daily performance is a way of life, a basic expectation and the means to continuous improvement of the process and productivity. In service sectors and functions a lack of willingness to measure the performance of invisible processes is the acceptance of poor performance. So why is this allowed to continue? Perhaps, low productivity in the service sector is governed by the laws of supply and demand which in this case are strongly influenced by our national culture.
We are a nation which doesn’t really like to complain, we are therefore happy to accept less than perfect service. Out of what we perceive to be politeness, we would rather be delayed or inconvenienced than face the awkwardness of telling someone that we are unhappy with the service or better, how to improve the service. We are a nation that believes that everyone is doing their best, we are all in this together mentality and therefore, it would be rude to complain.
There needs to be greater awareness of what constitutes low productivity and a willingness to openly share opportunities for improvement without the fear of being labelled Mr Grumpy.
So as consumers, we are also responsible for low productivity. We need to change our mindset to one where challenging less than perfect service is the norm. It is providing useful feedback to allow the business to improve its processes which are in everyone’s interest and not a personal attack on the individual providing the service.
There are two key ingredients required to solve the productivity puzzle; eliminate the waste from our invisible processes and be prepared to challenge non-value adding activity.
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