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May 22

CBI rides to the rescue

Having exchanged pleasant words about my new book Productivity Knowhow with the CBI’s Director General, Carolyn Fairbairn, and members of her team, I chanced upon a report they had written: FROM OSTRICH TO MAGPIE 

In it, they:  “Set out to find new ways to tackle the striking variation in productivity that exists between UK firms given they cause variations in the wages, opportunities and living standards of people across the country”

It seems de rigueur for some of our leaders to unearth snazzy metaphors which, they think, illuminate their business ideas and help make them memorable

Only last week Ben Broadbent, Deputy Governor of the Bank of England, wittily called the UK economy ‘menopausal’, meaning past its productive peak – he subsequently had to apologise for offending swathes of the population

Now we’re asked to consider ostriches versus magpies:

  • The ostrich ‘sticks to what it knows’ – they do lay very big eggs, they do not bury their heads in the sand, but ‘sticks etc.’ is a new one on me

  • The magpie ‘has the skill and will to find and adopt readily available technologies and management best practices proven to lift productivity and pay’ – such abilities would make them rare birds indeed, except they’re commonplace, struggle against no competition and voraciously eat the chicks and eggs of birds we love, especially songbirds

An executive summary then kicks off by claiming:

  • Many (?) UK businesses suffer from a ‘failure to adopt’ new technology and management best practices that leads to big disparities in productivity and pay – straightaway, one wonders how they measured these ‘big disparities’ given no organisation can measure its overall productivity sensibly

  • Too few (?) businesses take up the technologies and management practices employed by those leading the way – repeating the first point?

  • Identifying the key areas for improving adoption offers a golden opportunity to raise the UK’s competitiveness – although such adoption might ignore far bigger productivity improvement potential elsewhere in the organisation 

  • Working together, government and business can create more ‘Magpies’ and fewer ‘Ostriches’, tackling inequality and improving jobs – government has a dreadful record when it comes to leading/ running/ sponsoring productivity improvement action within businesses e.g. the Best Value Performance Indicator and Inspection initiative

With rising concern, one reads on about CBI Analyses undertaken and conclusions drawn:

  • Apparently, they had ‘previously explored productivity differences between regions and nations, and found that better transport links, investment in education and skills and improved business practices would help’ – motherhood and apple pie come to mind

  • ‘Low take-up of readily available technologies and management best practices is driving the UK’s productivity problem’ – but :

    • Copying best practice is easier said than done

    • All the learning curve experience that goes into one organisation getting to that ‘best practice’ position is unknown to the copier’s workforce

    • Fully successful implementation is probably impossible, just as I can read a book on how to play golf by the great Arnold Palmer but never play anything like him

    • And there’s a vast number  of firms (the majority of SMEs?) who have little interest in anything other than maintaining their status quo e.g. local traders, corner shops

  • ‘Once innovations are created, they are not being taken up as quickly as they should be – addressing the key drivers of adoption will help the rest raise their productivity towards the best’ – competition factors will restrict much diffusion of best practice – best secrets are kept secret in the private sector – so best beware stuff in the public domain

  • ‘The proportion of UK firms adopting cloud computing was nearly 30% below Europe’s best performers’ – one questions whether this statistic really is the best measure available to reflect an organisation’s digital technology performance – and what % usage by all parts of any organisation is needed for it to count as a user?

  • ‘UK businesses under-perform on the adoption of effective management and leadership styles’ – just a wishy-washy throw-away line which could mean anything

  • ‘The UK has relatively more low-productivity forms (69% of workforce) than say France (65%) or Germany (60%)’ – just don’t ask how this is all measured

  • If lots of companies did a little bit better the economic benefits would be huge a claim of £100bn benefits to the UK from ‘adopting’ alone – which might well be of the right order given my estimates (in Productivity Knowhow) of total productivity benefits open to the UK are for £300bn every year

  • The % of businesses with websites, internet trading capabilities, CRM and ERP systems in the UK today is still below levels in Denmark in 2009 – since when did Denmark in 2009 become a benchmark?

  • Finally, UK pluses and minuses for successful ‘adoption’ are summarised:

    • Pluses – Integration with global value chains, labour market mobility, external collaboration

    • Minuses – Getting more firms exporting, embedding skills and processes, visionary management and leadership, securing capital for investment and allocating it effectively

    • Some of the above are obvious, some obtuse to me at least

CBI recommendations:

We are told: “Acting on the CBI’s recommendations will help Ostrich businesses to look around and transform their performance” by:

  • Making innovation diffusion a central theme of the UK’s Industrial Strategy, identifying accountable bodies and including measurable targets

  • The government setting up innovation diffusion pilots to test different types of on-the-ground support for businesses – a list of their relevant past successes would be interesting

  • Linking future LEP (Local Enterprise Partnership) funding to improving adoption – who on the donor’s side would be able to judge what’s a good investment for any firm?

  • Running a campaign on the ‘five technologies all companies could adopt’ – just five, and what are they?

  • Create a ‘TripAdvisor-style e-platform for assessing technology and business support – imagine all the unbiassed comments flooding in from all the vested interests, positive and negative

Omissions:

If the above is the CBI’s answer to solving the UK’s productivity problems, ask why there’s:

  • No mention of the need for good corporate plans so all employees know where they’re heading

  • No mention of the need for good performance measures, and targets, so all can monitor progress and see rocks ahead

  • No mention of how to conduct good analyses to determine where best to act and invest to most effect

  • No mention of the best productivity improvement action to take e.g, first, cut waste, then make better use of existing resources, and only then consider investing in new gear and ways – n.b. the wheelbarrow is still the most efficient conveyor belt for many organisations

  • Always a headlong rush into adopting latest and often costliest fad solutions before considering more needy areas or much cheaper, more effective alternatives – most latest IT fads are not GPTs (General Purpose Technologies, like electricity or micro-computers) to be employed everywhere – most are horses for courses, some much better than others for any one firm

  • And no mention of the practical problems (and so deterrents) found when trying to copy best practices established by others

Despite such productivity gaps, the CBI claims to be the voice of business in the land, albeit others like the FSB (Federation of Small Businesses) and IoD (Institute of Directors) might argue – they’re leaders as well as reflectors of business opinion

But what would any CEO of any organisation, large or small, in any sector, public as well as private, be prompted to do by the above analyses and recommendations – just wait whilst the government and CBI got its act together?

To be fair to Carolyn, she does say in the report: “While the eyes of the business world can often be on the ‘next big thing’ in cutting-edge technology, too many firms are missing out on what’s right under their nose” – but then the report immediately moves back on to making magpies out of ostriches by its solution of adopting new technology and best practices

So what does the UK really need to solve its national productivity problems?

  • The government’s role is to create the best environment for the private sector to compete – covering infrastructure, education and skills, employment legislation, R&D investment, support for links between universities and business – and not to steer specific firms towards specific technology and best practices – that is for the firms alone to decide

  • HMG should establish a UKPC (UK Productivity Centre) along the lines of the APQC (American Productivity and Quality Center) – ready and inexpensive access to the UKPC should be available to all managers at all levels – n.b. every major developed nation has something similar, except the UK!

  • Plus a host of practical actions for both organisations and governments, too long for here but detailed in Productivity Knowhow 

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