How to break out of the low pay, low productivity cycle

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Despite the good news around ?employment figures, the UK still seems to be stuck in ?a low pay, low ?productivity cycle.

While there are political skirmishes about the minimum wage, the Living Wage and the need to see higher real wage growth before people will start to feel the recovery, the debate about low productivity remains unsophisticated.

Of course productivity is important for all stakeholders – employers, ?employees and governments. For ?employers, productivity is crucial for survival in the face of global competition. For employees it is important for job ?security and real wage growth. For ?governments enhanced productivity is ?important for sustainable growth, ?keeping unemployment low, maximising tax revenues and for providing the means for a social safety net.

In the long run, the answer to the ?conundrums posed by low productivity probably doesn’t lie in a filing cabinet in HM Treasury, but in the way that real people are managed, motivated and ?deployed in the thousands of workplaces up and down the UK.
In the global economy, the answer lies in the strategic use of human resources as a source of competitive advantage and a driver of productivity growth.

Yet most discussions of productivity focus on such factors as technological change, the ICT revolution and efficiency gains from trade liberalisation and the number of graduates in the workforce.

There are two challenges posed by the focus on ?average incomes as a measure of productivity.

First, in the 21st century, the goal must be to create higher productivity through better work rather than through more work or more intense working. National income per employee or per hour worked means looking at the added value that people produce through their work.

This is a definition of ?productivity that can all too often lead to a control and ?command style of management with a focus on tough talk, ?driving costs down and output up whatever the price. But this is hardly compatible with the desire to improve performance through employee engagement and discretionary effort.

Second, businesses do not operate in isolation but are ?incorporated into networks and supply chains upon which they are dependent for their competitive success. The GDP per employee measure of productivity tells us little about company level performance and the role of great leadership, teamworking, ?innovative job design, flexible working, career development and participative work ?cultures in driving ?high performance.

While productivity data using this ?approach can be ?examined at a sectoral level or by size of business, it is very hard to extract meaningful ?metrics on where improvements can be made at the level of the employer in ?the interests of closing the national ?productivity gap.

My research on high-performance work cultures shows hierarchy, tight performance management and target-driven approaches get trumped by ?more permissive, high trust, high ?involvement and autonomy-oriented working practices, especially – but not only – in ‘knowledge-based’ businesses.

But as long as the productivity debate is dominated by economists it will also be dominated by a focus on metrics and measurement. We need HR professionals to tell an equally compelling story about how enlightened, high performance leadership and working practices can have a sustainable impact on work ?productivity without holding any ‘feet to the fire’.

Stephen Bevan is director of the Centre for Workforce Effectiveness at The Work Foundation 

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