A panel formed by The Work Foundation to tackle the issue of low productivity in the UK has led to the creation of a High Performance Index, a practical yardstick businesses can measure themselves against to raise their game. By Nic Paton
For years, politicians, business leaders and HR professionals have wrung their hands in despair over the UK’s productivity issue. Why is it that, despite working some of the longest hours in Europe, British firms still lag behind their counterparts on the Continent and in the US when it comes to high performance?
Certainly, in some respects, UK firms are starting to make a better fist of things, at least when compared with Europe. In his Budget last April, Chancellor Gordon Brown said the gap per head with Germany had narrowed to just 4 per cent. Against France it was still 16 per cent, but had fallen significantly.
But compared with the US, the gap is still as wide as ever, estimated to be between 20 and 30 per cent by Brown, and largely caused by a lack of innovation and investment in research and development.
The latest organisation to grasp this nettle has been the Work Foundation. Last autumn, it brought together a panel of six leading organisations – AstraZeneca, Eversheds, Lloyds TSB, Manpower, Microsoft and Tesco, plus a representative from Unison – to form what it called the Work and Enterprise Panel of Inquiry.
The panel’s conclusions, The Missing Link: from productivity to performance, have been extensively reported in Personnel Today (see box). But as one key finding is that people’s contributions make a difference between high and low performance, it is worth taking a closer look at what lessons the panel has for HR. While solutions aplenty have been mooted for this issue, Work Foundation chief economist Rebecca Harding argues that the panel differs by providing a clear road map for companies and HR.
“In a sense, the message is not a new one,” she says. “What is new is the fact that we have put some numbers behind it. It is now possible to show that if people are managed properly across the five areas of the high performance index, it will have a massive impact on the various areas of performance.”
Rhetorically, nearly all organisations agree on the need for proactive, consensual people management techniques, and most would see this as a key element in promoting high performance and productivity. But in tough economic times the temptation is always just to circle the wagons and get rid of the soft management stuff when, in fact, you should be doing the opposite.
“The HR function is absolutely critical. All too often in lower performing organisations, HR is really an internal regulator, assessing procedures and processes. Where HR should be going is towards the transformational end,” Harding adds.
The Work Foundation is not the only one to have come to this conclusion. The Department of Trade and Industry identified HR as having a central role to play in improving the UK’s competitiveness in its first ever productivity strategy. Similarly, the development of frontline managers and team leaders was identified by the Chartered Institute of Personnel and Development in December as being a critical factor in improving organisational commitment, staff satisfaction and performance.
“The critical issue for HR is not so much the production of the policies, it is about stimulating appropriate behaviours – especially those of frontline managers. It is their actions which drive people to behave in a way that encourages high performance,” says John Purcell, professor of human resource management at Bath University.
Team leaders and their superiors are the management layers that firms need to work on, he adds, in terms of selection, training and development, rewards and support. “HR people do not think enough about the consequences that follow from the policies they implement. It is about bringing policies to life,” Purcell argues.
Manpower was closely involved with a similar panel inquiry 10 years ago, says non-executive director Keith Faulkner, who sat on both panels. While many of the findings then were not that different to what is being argued today, the difference now is that organisations are becoming more attuned and appreciative of the idea of building a stakeholder approach, rather than simply going for short-term bottom line return and shareholder gain.
In Manpower’s case, there has been a very deliberate push to be inclusive, particularly on aspects such as creativity and innovation, and in developing over-arching values that can then be adapted to local environments.
“We have put some effort into employee surveys to make sure we understand how we are perceived, how the firm measures up and where we are succeeding in people management,” he says.
The attitude of senior management is, of course, crucial. If the MD never visits the shopfloor, never participates in forums or is never available for questioning or criticism, then the completely wrong message will be sent out.
Faulkner is also managing director of Working Links, which specialises in putting long-term unemployed and disadvantaged people back into work and which has grown from 200 to 700 staff in three-and-a-half years.
The lessons from the study, particularly the benefits of stakeholder versus shareholder value, can just as easily be applied to small and medium-sized enterprises as larger businesses, he argues.
“If you are beginning a business with venture capital and have that person looking over your shoulder, you have to be able to demonstrate that you are not just doing a good job, but that you are going to create value in the long-term,” he says. “It’s about more than just having a hand-to-mouth approach.”
HR too often makes the mistake of getting all excited about the metrics it is working with, and forgetting about whether they are actually having an impact on the business, says Steve Newhall, UK managing director of consultancy DDI. “HR tends to take on the role of educator, when what the business often wants is HR to prove its worth as a teacher,” he says.
The main thing for businesses to remember, whether large or small, is that there is no quick fix or single blueprint to improving productivity, says Andy Scott, director of international competitiveness at the CBI. “If you integrate all the different elements, they will together deliver higher performance,” he says.
“You need to form a framework, with milestones against which you can measure your performance.”
Case study
Steve Harvey, senior director of people and culture, Microsoft
As part of the Work Foundation study, Microsoft UK looked at how mobile technology might impact on productivity. It rolled out some of the latest mobile technologies, including mobile phones with wireless e-mail access, tablet PCs and broadband internet connections at home, to a cross-section of staff.
Benefits that emerged over time were having constant access to up-to-date contacts, calendars and information, as well as improved information handling, more creative and co-operative working and better work-life balance.
Steve Harvey, Microsoft’s senior director of people and culture, argues that if HR professionals want to be high performers, it is critical they take a long, hard look at what they are doing and how effective they are within their own function.
It is also important to make sure people have the right sort of training and skills to do the job they are good at. This may mean very basic things, such as how to run meetings effectively or manage virtual teams – but giving people a lead at this level can make a huge difference.
“You can have the best leaders in the world, but if the rest of the guys do not know how to do their jobs, it makes no difference,” Harvey says.
“Companies that are really high performers generally have very good HR practices – it is a real strategic asset. It is very easy for HR to focus totally on its own excellence, rather than making sure HR is at the wider business table,” he explains.
Finally, it’s vital to be able to take a step back and think about where it is you want to go, he says. “Raise your head above the day-to-day noise and think about what you are trying to do and what you want your business to be. If you can raise your game two or three levels, where could you be?”
The High Performance Index
The panel listened to oral evidence sessions, interviewed almost 20 FTSE 250 chief executives, took case study data from 30 organisations and polled 1,000 companies.
From this research, it drew up a High Performance Index, arguing that productivity needed to be seen more as part of a broader performance picture. The index identifies five key areas that businesses need to manage across, which all affect performance: customers and markets; shareholders and governance systems (including finance and investment); stakeholders (suppliers, customers, people, community); HR practices and creativity; and innovation management.
At a macro level, the panel argues that better productivity is not so much about efficiency, as effectiveness. Too much time is spent ‘sweating’ assets, while too little emphasis is placed on working smarter, rather than harder.
Further investment in plant and equipment is certainly vital, but the key to unlocking performance is the manner in which people are led, managed and engaged around the five areas of the index.
At a cultural level, too many firms still have a ‘them and us’ mentality, with staff suspecting managers of a hidden agenda, managers suspecting the Government of something similar, and unions suspicious of both.
At a business level, high performance requires an integrated approach, rather than cherry picking objectives. This means companies need to build constant change, flexibility and responsiveness into every part of their business.
The key factor is the contribution of people, it suggests, plus an ability to adapt and aspire.
“Integrating the five areas can only be achieved by a workforce that sees the bigger picture and is enabled and motivated to act, with middle managers able to translate the strategy into workforce goals,” it argues.
By answering 14 questions across the five core areas, companies can find out where they lie on the index, and then take steps to fill any gaps.
Firms that do all this can expect to see 2.5 per cent extra growth, 2.5 per cent more sales per employee, 1 per cent more profitability and 17.5 per cent growth in terms of exports as a percentage of sales.
There can also be a 6 per cent increase in an organisation’s ability to perform at the technological cutting edge. And companies that fare well on the index can be up to 42 per cent more productive than those at the bottom.
Key actions that need to be taken:
- Measuring the ‘spaces in-between’ as a strategic diagnostic – in other words, using a combination of yardsticks (business performance, customer feedback, employee surveys and leadership measures) to identify strategic gaps
- Focusing on the customer
- Innovating and taking risks
- Managing the outside as well as the inside – for example, swapping personnel with local universities, and having long-term strategic dialogues with investment analysts
- Managing people to liberate and incentivise effort, commitment and creativity.
Case study
Clare Chapman, hr director, Tesco
HR needs to move away from a purist mentality if it is going to play a central part in promoting a high-performance working environment, argues HR director of Tesco, Clare Chapman.
For the supermarket chain, where the customer is of critical importance, the report clearly highlights the need to focus on customers and staff together. “It absolutely should be the case that organisations are able to focus on the customers while ensuring there is a workplace where delivery of staff expectations is central to the business,” Chapman explains.
Consistently putting customers and staff first may sound easy, says Chapman, but in fact it is extraordinarily difficult, and requires immense flexibility and an ability to move at great speed.
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It is often a question of honing priorities and ensuring the message and the response are both clear and simple, she argues. “Engaging with staff is such an enormous difficulty, in terms of productivity, that it almost ought to be a core competence. You really need to look at what the drivers of loyalty for both customers and staff are,” she says. “For instance, our stores with the best morale also tend to be the ones with the highest customer survey results.”
What the Work Foundation study gives organisations is a kitemark to show this is not all just instinct. It provides the cold, hard facts to illustrate how you will see measurable improvements in performance and productivity if you engage your staff, she adds.
