For the first time, the DTI has spelled out exactly what it
believes UK employers need to do to make the UK more competitive
More effective people management and greater workplace partnership have been
identified by the Government as two of the major tools for tackling the UK’s
chronic productivity problem.
For the first time ever the DTI has released an official strategy for
driving productivity improvements and spells out some explicit measures and targets
to enable it to achieve this.
The strategy outlines five priority areas that the DTI intends to focus on.
These include helping business to successfully exploit new ideas and the
promotion of open and fair markets at home and abroad. It will also strive to
strengthen regional economies and to forge closer partnerships with key
economic players both at home and abroad. The final strand is the need to
maximise staff potential.
Crucially, it highlights a range of HR issues as central to the solution – citing
management techniques, building skills, high performance workplaces and
partnership as part of the strategy.
The document follows a large-scale study by the DTI, which called in US guru
Michael Porter to investigate why the UK lags so far behind its global
competitors in the productivity stakes.
Focusing on change
Launching the strategy, trade and industry secretary Patricia Hewitt said
that productivity improvements were the key to UK plc becoming more
competitive. She said developments in technology and an aging workforce,
coupled with greater global competition, were making high productivity even
more fundamental to business success.
"This will sharpen the DTI’s focus for the next five years," she
said. "Raising productivity will ensure that Britain really does provide
opportunity and prosperity for all its citizens."
Research shows that productivity in the UK is consistently at lower levels
than its major competitors, with a persistent gap of at least 20 per cent over
the past decade. The UK also invests less than its competitors in both capital
and people. The strategy identifies better qualifications and improved skills
as points of focus.
The document defines the factors that create high performance workplaces,
including modern management practices that develop workforce skills and deploy
Other key elements are good communications that work both upwards and
downwards and foster staff engagement, and a spirit of trust and mutual
commitment to common goals. Examples put forward by the DTI are strong
appraisal systems, teamworking, joint problem-solving and effective information
and consultation structures.
The DTI analysis concludes that the problem in the UK is not that these
practices are unknown, but that they are not applied widely or deeply enough.
Stephen Radley, chief economist at the Engineering Employers’ Federation
(EEF) said the DTI had identified the right areas, but said delivery would be
"Increasing productivity is vital because our competitors are well
ahead. The DTI is also right to talk about moving up the value-added chain in
terms of different ways of working."
However, he said the report ignored the rising costs faced by manufacturers which
the EEF believes is another barrier to productivity.
Essentially the strategy wants business to make use of more innovative
working practices, modern management and strong leadership to build workplace
partnerships where employees feel empowered and motivated. It states that while
the UK has some of the best managers in Europe, the country as a whole suffers
from low levels of enterprise and is slow to adopt modern management
The Work Foundation’s chief economist Rebecca Harding welcomed the strategy
as something that would help business, but warned that some areas would be very
difficult to deliver.
"Each business and each sector has its own view of what high
performance is. I’m enthusiastic about it, but the devil is in the detail. This
is about making organisations more efficient and better places to work, but
that’s a very tricky thing to do," she said. It would also help employers
refine the employment relationship because staff were increasingly acting like
customers in their attitude to work, she added.
The DTI cites diversity, fair treatment at work and work-life balance as the
key components for raising levels of participation, motivation and creativity,
leading to increasing productivity.
The study claims high-performance workplaces have been proved to reduce
turnover and sickness absence as well as improving motivation.
The DTI hopes to drive through the changes by engaging employees and
employers through the skills strategy launched earlier this year as well as by
working closely with the unions.
Richard Exell, a senior policy officer at the TUC, said the unions had been
pointing to the same productivity barriers for the past few years and that
engaging the workforce was the way to remove them.
Crucial role for HR
"Staff can have a huge impact on the strategic direction of a company
and if employers want to build trust they need to work with representative
groups like the unions to maximise employee involvement," said Exell.
He said HR was crucial to developing these modern employment relationships
and warned that simply coercing staff would not generate the involvement or
motivation needed to drive up productivity.
"The idea that commitment can be assumed doesn’t work. It has to be
done on an explicitly mutual basis. Companies expect better productivity, but
there have to be sweeties for everybody at the end of this," he added.
However, Susan Anderson, head of HR policy at the CBI said the DTI was too
pessimistic about the ability of managers and the measures already in place.
"The strategy is unnecessarily gloomy about the situation as many firms
already do these things, but don’t label them in the same way. They’ve
identified the right areas but used loaded terms. Unions aren’t the only way of
communicating with staff," she said.
The strategy also said basic skills must be addressed if there is to be a
dynamic and flexible workforce, as there are seven million adults in the UK
without basic literacy skills. The report estimates that as much as 20 per cent
of the productivity gap with Germany is due to low skills.
Debbie McCallion, HR director at software firm Intentia, said it was
important to increase both management and basic skills to make sure businesses
functioned efficiently, but also so people feel challenged and motivated. The
DTI has also pledged to change the way it operates as a department to drive up
performance and become more business focused.
By Ross Wigham
DTI’s five key priorities to raise UK productivity
1. Transferring knowledge from science base and between
businesses to aid innovation
2. Maximising potential in the workplace increasing value and
3. Extending competitive markets
4. Strengthening regional economies with more autonomy at local
5. Closer partnerships with key economic players in the UK and