Five ways for manufacturers to solve the ‘productivity puzzle’

The ‘productivity puzzle’ and the ‘productivity gap’ are two phrases you may have heard quite a bit over the last few months.

While there is no doubt the UK economy is growing, there are concerns at the highest levels of government about the quality of that growth. In other words productivity, the value of output per hour worked, is not where it should be.

According to economists, the increases in national output since the economy bottomed out in 2009 have been largely the result of a bigger population and an increase in the workforce. The argument goes that, so far, we have not seen the usual pickup in productivity that normally accompanies an economic recovery.

There are fears that the length of the recession and downturn, and the lack of investment this spawned, has severely dented UK productivity and, hence, it has not recovered as quickly as it did following previous recessions. It’s one of the reasons chancellor George Osborne says he will publish a productivity plan in the coming weeks ahead of the summer budget in July.

So what can manufacturing companies do themselves to boost productivity within their own business? Here’s some thoughts on how businesses can use a range of tax incentives, business support and employee relations initiatives to boost productivity.

Renew ageing plant and machinery

One of the reasons for our low productivity in the UK is thought to be that we’ve spent less than our European peers on plant and machinery. Companies have run their assets into the ground, rather than replacing them with new and better equipment. Instead, they have used cheap and plentiful labour, rather than increased capital, to expand output. With the shake-up in the banking sector leading to greater availability of funding, and generous (for the time being) capital allowances, now could be the time for manufacturers to steal a march on their competitors by investing in ailing infrastructure.

Invest in training and skills

The quality of the workforce is another key to increasing productivity, yet George Osborne pointed out recently that the UK is “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”. There is an opportunity for businesses to increase their productivity by improving the knowledge and skills of their staff, as well as improving their recruitment and selection processes. With a range of business support programmes focussed on skills, many of them subsidised by government schemes, now could be the perfect time to assess what skills and knowledge could take your business to the next level.

Strive for greater employee engagement

A happy workforce is a more motivated workforce, or so the old adage goes. Achieving better employee engagement and loyalty can bring major gains in output and quality. Look at ways to reach out and build better relationships with staff. It may be something as simple as creating an employee forum where staff ideas can be heard and acted upon, communicating more regular on company issues, or introducing a staff rewards scheme.

Find ways to work smarter not harder

This has a tendency to be one of those annoying management phrases, but when you actually boil it down, it make perfect sense. Focusing more energy on the more profitable work, finding small improvements to work processes, or reducing waste, are all examples of a ‘smarter not harder’ mentality.

Look towards lean

It goes without saying that a less wasteful business is a more productive business. Most manufacturers will be familiar with lean principles, but how many actually practice them? By committing to introducing a lean culture, your business will be able to achieve more with less. Going lean doesn’t necessarily mean bringing a group of external management consultants, it’s more about having the will to realise a vision and getting staff engaged to work towards a common goal. It’s often achieved through incremental changes over time, rather than being something that happens overnight.

If you would like to discuss this issue in more detail or you would like to speak with a member of our team, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with your local representative.