Given that SMEs are responsible for 60% of private sector employment in the UK, how can small businesses improve their productivity?
Earlier this year the Governor for the Bank of England, Mark Carney, stated that the UK’s GDP is lagging behind other developed nations, where productivity currently stands at a fifth lower than the G7 average. This has resulted in weak growth in pay and living standards – despite a 2.8% growth rate and the highest employment levels ever recorded.
Whilst the global economic crisis and subsequent recession have played a role, the blame for the UK’s productivity problems cannot be wholly placed there. A number of industry bodies have highlighted the shortage of skilled staff as key to the UK’s productivity problem. According to the CIPD, by international standards, the UK has a high proportion of people in low skilled and low paid jobs and an equally high degree of over-qualification, with many employees unable to use the skills they have because of poor leadership, poor people management practices, inadequate work organisation and poor job design.
A major obstacle is usually getting companies to view increasing productivity as a priority. A recent report published by the CIPD, “Productivity: Getting the Best out of People”, found that only 41% of businesses considered increasing productivity to be a current priority, while 33% of businesses did not measure productivity at all.
The challenge for UK businesses is to recognise the ‘added value’ of a highly skilled workforce and to harness and maximise the potential of their employees. This can be achieved by a thorough overhaul of a business’ HR including:
- Reviewing recruitment and selection practices to ensure people who have the right attitude and can demonstrate the right behaviours, as well as skills, are selected.
- Identifying the standards of performance expected from each role and communicating this to the workforce.
- Introducing regular and rigorous performance management tools which assess not only performance against the required standards but also how employees do their role and interact with others.
- Review of training to ensure that all employees have the capability to meet the standards expected of them. Today there are many ways to train staff which are cost-effective – there are also grants available for SMEs in some sectors and for some levels of employee.
- Enhancing the people management skills of front-line managers – they are not only responsible for managing their people, they must engage with them too, creating or maintaining an environment that is conducive to a productive workforce.
Ensure that employees who are productive and reflect the right culture and attitudes are rewarded. This does not always have to be with money – less formal, non-cash rewards are often valued and remembered more.