The Nobel Prize winning economist, Paul Krugman, once famously said: ‘Productivity isn’t everything, but in the long run it is almost everything’. He then clarified that the output per worker and the ability to increase it are critical to nations’ living standards and how it can be realistically improved. How does that sound today, 27 years later and in the context of defining events like Brexit, COVID-19 pandemic, technology advancement and the movement towards sustainability?
To answer that question, CIMA’s latest research report Tackling the UK Productivity Puzzle explores the wicked problems of productivity. It touches on a wide range of themes – from clearly illustrating the scale of UK’s underperformance (see CIMA Productivity Video) to exploring the drivers and barriers to productivity, and what published research and our members say about it.
As always, our focus is on the practical side – understanding the productivity puzzle on both micro and macro levels and highlighting specific actions that can be taken to improve productivity. Here is a debrief of our findings and recommended action points.
- 1. Defining and Measuring Productivity is not Straightforward
93% of members surveyed admit they face challenges with tracking productivity, particularly when it comes to attributing value to intangible aspects of investments, resources and products. Assessing productivity of customers, supplier and employee relationships is tricky. That is why, next year, CIMA will be doing more to support members on the complex issue of how productivity is defined and tracked in organisations. We will be establishing and promoting existing best practices and creating forums for idea exchange and designing new initiatives to help our members with enhancing productivity within their organisations.
- 2. The Role of Management Accountants
When discussing productivity with our members, it became obvious that management accountants are uniquely positioned to help their organisations, when it comes to productivity improvements. The combination of technical skills and leadership, strategic thinking, business partnership and digital skills equips them to engage proactively and set the productivity strategy of their organisation. By initiating discussions to establish specific barriers and affordances, CIMA members will highlight factors of productivity improvements, specific to and actionable in their organisations.
- 3. Drivers and Barrier
New technologies have been singled out by CIMA members as the most impactful productivity factor, followed by hybrid working and accumulation of knowledge, sharing of ideas and know-how. The most significant blockage to productivity is the lack of skills, including management and leadership. Hence, businesses need to routinely re-skill people, improve management practices, competitiveness and promote a positive culture of collaboration, care and wellbeing. The UK government could support businesses to achieve that by looking at policies, such as mandated time for training and a rebuttable right to retrain.
- 4. Productivity and Knowledge Capital
Every dollar spent on R&D pays off four times in the long run, proving that there is a direct link between research and productivity. Therefore, we insist that the UK Government meets its commitment to increase its spending on R&D. UK universities should continue producing highly cited publications, but need to improve translational research, which will help businesses apply research to improve their organisation.
- 5. The Government
Overall to help meet the challenge of the UK productivity puzzle we have called on the government to create a Productivity Commission that draws on experience from Australia, New Zealand and South Africa, who all have such commissions. Ultimately, this commission will aim to improve productivity in every region of the U.K., making sure that the U.K. is leading the OECD countries, when it comes to productivity.
This Commission should have similar independence like the Office of Budget Responsibility or Bank of England and hold the government’s feet to the fire to improve productivity.
Another step we believe the government should introduce is a holistic strategy to improve productivity. The government will then be measured against this when it comes to analysing whether UK productivity has improved, and public policies are effective.
You can read the report here:
Or watch a LinkedIn live that talks about the report in more detail here: