The Productivity Puzzle: Where Do Management Consultants Fit?

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November 30, 2018

The ‘productivity puzzle’, you may think, is best left to policymakers to solve. However, Andy Haldane, the Bank of England’s Chief Economist, has recently suggested otherwise.

The productivity problem is a pressing challenge for the UK macroeconomy. British business leaders found that what it takes the average German worker to produce in 4 working days, it takes 5 for a Brit. Whilst this may rightly raise eyebrows of being ‘politely’ described as lazy, it has significant repercussions for economic wellbeing as well as business operations.

So, what have consultants got to do with this? Surely, this is a policy issue solved by policy tools?

Albeit its supposed irrelevance to the industry, Andy Haldane threw some curious and surprising facts on this in June. For instance, that ‘’only 13% of companies [who] had adopted’’ computer, internet, website, e-purchases and e-sales as technologies by 2015. Additionally, UK workforce management skills were lower than those in the US, resulting in poor information and best practice sharing. These have significantly impacted and stagnated productivity in the UK, which is why real wages for workers have decreased since the financial crash of 2007.

Given the increasing role of technology in the workplace, the roll out and adoption of these technologies is necessary to build client capability. For instance, in our work with a public sector client, North Highland identified the need to simplify service provision from several suppliers with overlapping services, update technological hardware as well as reducing the reliance of its IT functions on several third parties, creating irregular and varied IT usage across the organisation. The simplification and alignment resulted in several millions of pounds of savings over the remaining life of the contracts. ​Hence, this project showcases the scope of improvement in various organisations to not only increase efficiency savings, but also ensure that the client is utilising all basic aspects of IT practices well. Whilst we rightly focus on the rollout of more complex technology such as AI and the use of data to make a business’s smarter, it is recognised in consulting circles, that some firms need to get their basics in order. Get that right, and we are on our way to solving the productivity puzzle.

Assessing the UK from a macroeconomic perspective, there is a lack of technological diffusion across businesses, when simultaneously, UK businesses are leading pioneers in innovation. There is a lack of institutional infrastructure to support businesses, when the UK has one of the most business friendly environments in the world. Last, but not least, we have a workforce that requires upskilling in areas of management and sharing best practice.

Whereas initiatives are currently being run to solve the ‘puzzle,’ a great contributor to it is consultancies who deliver operational excellence at businesses by encouraging best practice, viewing new legislation as an opportunity rather than a disruptor, and recognising the upskilling of the workforce as critical in the survival of operations. Although, consultancies and the BoE seem to be singing from the same hymn sheet, there is a need for cooperation and recognition of the industry in policy circles to get the ball really rolling.

So, what can you already do as a business to help?

  1. Engage with your employees: As business owners, discussing pain points and inefficiencies that exist in your business can often be identified by having discussions with employees. They are on the ground day-in, day-out and will always have views on what can be improved and what needs revision.
  2. Adapt best practice: Surprisingly, numerous firms do not venture out of their comfort zones and see the potential of adapting best practice. They tend to view them as threats rather than potential ways to improve. For example, if a competitor is using automated processes for its resource deployment and these in turn are enabling significant efficiency savings, then whilst investing in infrastructure to provide such mechanism may be an upfront cost, it can have significant longer terms benefits.
  3. Get involved in business forums: The UK, has Chambers of Commerce at local levels. These are hubs through which businesses in regions meet and discuss ideas and issues. Not only are these great for business support but can also be good means to know industry insights and best practices.
  4. Make use of what is already out there: A rise in productivity is often associated with business growth. If you are thinking of expanding your business by exporting, the government has funding and support mechanisms in place to assist you. Additionally, engaging with organisations such Catapult, who are specifically dedicated to improving productivity and making use of its research, can give an insight into industry challenges and means to improve.

By adopting the above strategies and focusing on efficiencies, organizations can solve the productivity puzzle without relying on policymakers.

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