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Abstract

Government policy emphasises five ‘drivers’ of productivity: competition, enterprise, innovation, investment and skills and each of these has been the subject of major programmes of reform (HM Treasury, 2006). Despite this, and notwithstanding some improvement, UK productivity in terms of output per hour worked continues to lag the performance of other major economies, most notably France, Germany and the US.

This report outlines this ‘productivity paradox’ and addresses why UK productivity performance continues to disappoint despite major changes over the past twenty five years. Our core argument is that, while Government policy stresses two aspects of context (macro-economic management and the regulatory environment), the key to productivity remains what happens inside the firm and this is something of a ‘black box’. The further benefits that may be achieved from pulling levers that impact on the inputs to, and context of, operation are limited. The priority now is to link the external (macro) to the internal (micro) in a more coherent effort to support firms. The report focuses on two areas that are central to how inputs to firms are combined and utilised: skills and work organisation.

There are two key messages:
1 Skills can only make a substantive contribution to productivity performance if they are effectively deployed in the firm. Supply-side skills policies are not sufficient.
2 Attention to the ‘black box’ of productive performance requires a local focus on the specific mechanisms and processes involved in the translation of inputs into productive activity.

These represent very significant challenges for policymakers and those actively engaged in supporting firms in their efforts to improve. The final section of the report identifies some important principles in moving forward. These include:
1 Policy must better balance its supply-side emphasis (the ‘push’ of skills and ‘best practice’ models) with practices that meet individual firm needs for specific and targeted assistance.
2 Policy interventions at the workplace need to develop support for firm level adaptive learning and find ways to promote this.

The overarching theme is that policy approaches that rely on universal solutions are naïve. Instead we need a more nuanced policy and practice discourse that encourages new ways of thinking and takes into account the circumstances facing firms operating in different contexts and at different levels of maturity. To address the UK’s productivity paradox, policymakers, managers, employees and their various representative bodies have to work constructively and collaboratively to meet the local and specific productivity and performance challenges facing individual firms.

Publication Type:	Report
Additional Information:	© 2006 Advanced Institute of Management Research
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Departments:	Bayes Business School > Management

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