Understanding How Business Leaders Contribute to the UK 'Productivity Problem'

Written by EO Executives on Dec 07, 2018

Business Leader

Understanding How Business Leaders Contribute to the UK 'Productivity Problem'- An Exclusive Interview with Interim Operations Expert, Paul Dakin

In case you have missed it, the 10th anniversary of the Lehman Brothers Bank collapse recently occurred that signalled the 2008/09 financial crash. This has led lot of soul searching about UK productivity puzzle which comprises the zero growth of productivity within the British economy since the crash & its current low levels relative to other nations.

On a macro level productivity is hard to understand, but the one thing that can be agreed on is that productivity puts the life into living standards. History makes this very clear. Since the start of the industrial revolution pay & living standards have increased 15-fold since 1750. It is no coincidence that the UK experience since 2008 has been more painful with the “lost decade” & counting since 2008 resulting in a flat-lining/reduction in living standards.

But why has UK relative productivity performance been so poor?

To understand this further, EO Executives to the opportunity to speak with Interim Operations Expert, Paul Dakin. With a background in managing large complex industrial sites and the practical implementation of Lean based business transformation processes within PLC, SME & private equity enterprises, we thought Paul was the ideal person to speak to.PD

Our aim was to uncover some key insights and developments around why business productivity and growth in the UK has been so poor, what factors have contributed to this and what can be done to overcome this.

There are clues in a speech given in June 18 by the Bank of England Chief Economist Andy Haldane in “The UK Productivity Problem: Hub No Spokes” The speech mainly dealt with macro issues such as innovation, connectivity, research & development & rate of business start-up. Significantly it also zeroed in on the capability of British management in a relatively large UK rump of low productivity performing companies compared to America, Germany & France.

My experience echo’s Haldane’s comments. A lot of companies I have been involved with have money leaking out of them like a bucket shot full of holes. In all cases they had a market for their products and the capability to meet that demand.  In every case the resulting productivity degradation lay with business leaderships who had problems recognising the root causes of the problem. Willing employees battling business systems not fit for purpose. Leadership blaming each failure on the workforce when it is consequence of the natural variation of the business systems that the leadership themselves are responsible for. Leadership not understanding the basics of people engagement.

This begs a second question of why this weak leadership is a particular UK problem? The principles of good management are stunningly simple. Best practice has existed since the philosophy of W. Edwards Deming formed the basis of the Japanese manufacturing hegemony from the early 1970’s through Toyota, Sony et al! There are a myriad number of LinkedIn posts on the failure Lean transformation work. So why cannot company leadership see this? A framework to maybe understand this lies in two compatible lines of thinking summarised in “The Curse of the Accidental Manager” and “The Costs of Ego” Both are worth looking up in detail.

In 2015 the CMI (Chartered Management Institute) coined the term “The Curse of The Accidental Manager”. The argument runs that highly skilled workers are rewarded by being promoted to a managerial position but not given any further guidance. They are thrown in at the deep end with no training from delivery to directing. This is the world of the accidental manager. On top of untrained managers there is the simple problem of unsuitable people being promoted to leadership positions. The Peter Principle is a factor here, but too few senior managers lack the key qualities described in “The Costs of Ego” (Wolf Management Consultants). This describes executives who do not listen, explore alternatives and push through their decisions by edict rather than the relevance of their idea. To build a high performing company its leadership need to understand that they do not know all the answers. They need to exhibit a level of humility where openness and progress are embraced, where curiosity drives innovation and veracity exposes the truths hidden by habitual behaviour and comfort zones.

Enlightened curious business leadership is key to productivity growth. I have worked with such leadership and the results have been stunning. In one plastics-based business, a £35M turn-over has been more than doubled in less than 8 years driving a five-fold increase in market capitalisation. Over the same period a similar sized plastics-based business was bedevilled with leadership that operated a blame culture which masked the true problems of the business resulting in a long-term decline. Both had the capability to meet market demand. The leadership of the former has secured its future, the leadership of the latter has since been changed but its future is still uncertain.

What next? 

We would be interested in hearing from individuals on what their thoughts are around this subject- so please leave your comments below. In the meantime, we welcome you to connect with Paul Dakin directly on LinkedIn here

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