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The link between low productivity and poor management

Institute for Employment Studies research reveals a clear link between low productivity and bad management practice

There have been rumblings for some time that UK management and leadership might not be as good as it could be. That suspicion, combined with a deep-rooted belief that management and leadership is important for organisational performance, has caused successive governments to ponder what they can do to improve it.

In contrast, organisations themselves have never taken quite the same interest, which has meant there has never been fertile ground for any coherent action. That may be about to change: the productivity leadership groups called by Charlie Mayfield in 2015 are exploring some of the key factors inhibiting UK productivity, including management and leadership.

To complement this work the Institute for Employment Studies was asked to explain the evidence for any link between management, leadership and productivity, and to uncover effective ways of achieving improvement. It is startling that up until relatively recently there was no large-scale rigorous evidence that convincingly linked management practice to organisational performance.

That has changed, with a steady stream of work from Nick Bloom and John Van Reenen to relate the quality of management practices to a wide range of organisational performance measures. Their research has shown that regardless of country, size of organisation, or sector, the quality of management practices correlates positively with business performance.

Their work also shows that longstanding concerns over low levels of UK productivity might be partly explained by the behaviours of our managers. The UK comes out behind the top performers (the US, Canada, Japan, Germany and Sweden) and this lag is in large part because a greater proportion of our workplaces have relatively poor management practices. What’s more, the evidence comes with a kick in the tail: when asked to self-assess the quality of management and leadership within organisations there is no correlation whatsoever with the measured reality. So no wonder organisations have never shown much enthusiasm for the government’s attempts to improve practices – they don’t see the need, and if they do they believe the problem lies elsewhere.

Other research also shows how management and leadership are important factors in workplace innovation and how they are embedded in high-performance working practices – a coherent approach to people management to enhance autonomy and engagement, which successive researchers have also linked to better organisational performance. This strongly suggests that managers and leaders create the conditions for organisations to innovate and to fully utilise the skills and enthusiasm of their workforces.

Encouragingly the evidence suggests that improvement does not only have to be achieved through the adoption of complex and coherent people management cultures and systems, which many have struggled to implement. A more prosaic set of management practices to improve how the organisation manages people and operations can make a significant difference.

There just remains the small problem of blissful ignorance. Opening organisational eyes and horizons can be helped by networking with peers, exploring what those exposed to the fiercest competition are up to, and taking a closer look at those management practices to make sure they really are up to snuff.

Penny Tamkin is director of employer research and consultancy at the Institute for Employment Studies