Can small businesses solve the UK’s ‘productivity puzzle’?

According to the OECD’s 2017 figures, productivity in the UK is around 20–25% lower than in the US, France and Germany. The so-called British ‘productivity puzzle’ is, well, a real puzzle.

The past years of economic slowdown have played a big part in this head-scratcher – and continued uncertainty around Brexit isn’t helping. Then there are issues around how well business resources (such as people and production capacity) are being managed – and employee absenteeism (whether that’s through genuine sick leave, or ‘skiving’ or slacking off) is also commonly seen as part of the problem. Certainly in large organisations, the opportunities for a bit of ‘professional idleness’ may be endless. But what about our small businesses? Are they better placed to manage productivity?

Fewer places to hide

Encouragingly, the number of UK startups rose to a record level in 2017. Received wisdom is that for a company to survive an economic downturn, or times of political and economic uncertainty, then they have to cut back any excess and focus on efficiency. So, with more small businesses than ever, does this mean that SMEs and owner-managed businesses are running lean and fit?

In one way, yes. Blatant skiving and slacking off is less prevalent in smaller businesses, not just because there are ‘fewer places to hide’ but also because the nature of the relationship between owner-manager and employee is that much closer. A report last month confirmed that absenteeism is indeed on the wane, with the number of sick days taken in the UK reaching an all-time low in 2017. We must therefore look elsewhere if we’re to solve this productivity puzzle.

In my experience, where smaller businesses typically lose opportunities to improve productivity are through under-investment in technology and under-developed processes for people and performance management.

Boosting productivity in smaller businesses

There’s an understandable caution about investing in new technology during uncertain times, when finance is perceived as (and sometimes is) difficult to obtain. However, a well-thought-through business case can be persuasive for raising finance, and for you as the business owner, it can give you the confidence to take that step forward. Henchards regularly works with owner-managed businesses to build such investment plans.

Even without investing in new technology, there is a lot small businesses can do in terms of people management. Developing yourself to be more effective at recruiting, leading teams and creating a high-performance company is an extremely effective way of improving productivity. Many owners haven’t enjoyed the opportunity of being trained in leadership, and this is another key area of our support, mentoring and advising owners to better lead their teams.

Finally, there’s the issue of capacity management and good old-fashioned supply and demand. In other words, if you’ve got spare capacity, how can you increase demand by bringing in new business, or reduce the capacity to match the level of business you are getting? This can be a difficult thing for owner-managers to assess. An external, independent perspective can make a huge difference and be the catalyst for decisive action.

Whatever your current situation, Henchards can help you unearth exciting opportunities to improve productivity, whether it’s through investing in new technology, developing your leadership skills, managing capacity, or a combination of all three. Contact us today for a conversation.