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January 16th, 2018

The Productivity Puzzle

Productivity Mike Horton (Consultant at Bourton Group LLP) – January 2018

 

There has been much talk in the media lately about productivity. It is increasingly being seen as the key to improving the UK’s economic outlook. The government recently announced £10m of funding to create The Productivity Leadership Group (PLG), a new business led organisation aiming to close the UK’s productivity gap.

Root Cause AnalysisThe assumption that productivity is the answer to our economy’s woes comes primarily from the fact that the UK lags behind most developed nations in this measure – according to a study by McKinsey we are 35% behind Germany, 30% behind the US and 5% behind Italy.

This is a problem begging for root cause analysis, but before we get to that, what is productivity anyway?

What is productivity anyway?

According to businessdictionary.com, Productivity is “a measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs”. Dictionary definition that may be, but with all this talk of inputs and outputs it sounds like it could have come straight from a Lean Six Sigma training slide. Essentially, productivity is a measure of efficiency, the output per period divided by the cost incurred to achieve it. Although they’re not using the terminology, it seems that government ministers at the Treasury, and business leaders in the PLG, are aligning themselves with the theory behind Lean Six Sigma methodology, which has been widely available and used in some businesses in the UK for over 30 years.

It is especially interesting to note the McKinsey report says that “whilst the UK has many well-run businesses, the country also has a long tail of businesses whose productivity is below what is expected of similar companies”. It’s pretty clear which side of that divide companies which have adopted and stuck with business improvement programmes are more likely to be on.

So why the long tail?

Well, while improvement programmes can be incredibly rewarding for businesses and their employees, they are also hard work to roll out.

Business GrowthAs any Black Belt will tell you, one of the main barriers to success with Lean Six Sigma is difficulty getting buy-in from all of a company’s leadership. However many board members welcome improvement methodologies as a means to drive business growth, if there are still one or two who persist with the idea that their knowledge alone is enough, and they can turn things around without expensive interference from outside, that view will always filter down to some extent through the organisation. As it happens, one of the main factors the PLG says is responsible for the productivity problem is poor management practices. They believe that working with companies to improve their management effectiveness is the starting point to solving the productivity puzzle.

Conclusion Productivity

It seems this increasing profile of productivity on the political agenda not only vindicates improvement methodologies like Lean Six Sigma, it also proves they are more vital than ever to the British economy.

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Mike Horton Mike joined Bourton Group last year building on a successful career in performance improvement with Air Products. He is a certified Lean Six Sigma Black Belt with nine years’ experience of leading hard benefit generating projects, across multiple functions of a large organisation. He has delivered numerous Continuous Improvement training courses, and coached colleagues at all stages of the Lean Six Sigma training process.

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